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2019 Trophy Club MUD No. 1 Series 2019 Water and Sewer System Revenue Bonds
1. 2. $7,080,000 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019 TRANSCRIPT INDEX General Certificate Certified Copy of District Resolution Authorizing Application to Texas Commission on Environment Quality for Approval of Project and Bonds 3. Certified Copy of Texas Commission on Environmental Quality Order Approving Project and Bonds 4. Official Notice of Sale 5. Preliminary Official Statement 6. Affidavits of Publication of Notice of Sale of Bonds 7. Copy of Accepted Bid 8. Certified Copy of District's Order Authorizing the Issuance and Sale of the Bonds 9. Copy of Executed Paying Agent/Registrar Agreement 10. Copy of Executed Escrow Agreement with Signature Identification and Authority Certificate 11. Signature Identification and No -Litigation Certificate with Instruction Letter to the Attorney General from District's President 12. Initial Bond 13. Copy of Final Official Statement 14. Debt Service Schedule 15. Certified Public Accountant Certificate 16. Certificate of President and General Manager 17. Bond Review Board Certificate 18. Insurance Policy and Commitment 19. Rating Letter 20. Attorney General's Opinion 21. Comptroller's Certificate 22. Federal Tax Certificate 23. Form 8038-G 24. Opinion of Bond Counsel 25. Reliance Letter of Bond Counsel 26. Closing Memorandum GENERAL CERTIFICATE We, the undersigned President and Secretary, respectively, of the Board of Directors of Trophy Club Municipal Utility District No. 1 (the "District"), do hereby execute and deliver this certificate for the benefit of the Attorney General of the State of Texas and all other persons interested in the District's $7,080,000 Water and Sewer System Revenue Bonds, Series 2019 (the "Bonds"), now in the process of issuance. We certify the following: 1. That the the District is a conservation and reclamation district, a body corporate and politic and governmental agency of the State of Texas, created as a municipal utility district pursuant to Article 16, Section 59, of the Texas Constitution by Order of the Texas Water Commission, the predecessor in interest to the Texas Natural Resource Conservation Commission (collectively, the "Commission"), and the District operates pursuant to Chapters 49 and 54 of the Texas Water Code, as amended (the "Act") and was the successor by merger and consolidation of Trophy Club Municipal Utility District No. 1 ("Prior MUD I") and Trophy Club Municipal Utility District No. 2 ("Prior MUD 2" and collectively with Prior MUD 1, the "Prior MUDs") by consolidation election of May 9, 2009 (the "Consolidation Election"). 2. That the Board of Directors is composed of the following persons, each of whom serves in the capacity indicated: Gregory Wilson William C. Rose Stephen J. Flynn Kelly Castonguay Mark A. Chapman President Vice President Secretary/Treasurer Director Director 3. That there has been no property excluded from the District since the District submitted its transcript for the District's $4,635,000 Water and Sewer System Revenue Bonds, Series 2016. 4. That there has been no property annexed to the District since the District submitted its transcript for the District's $4,635,000 Water and Sewer System Revenue Bonds, Series 2016. 5. Save and except for the pledge of the income and revenues of the District's Water and Sewer System (the "System") to the payment of the (a) principal of and interest to become due with respect to the outstanding "$9,230,000 Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2015", dated February 1, 2015 and "$4,635,000 Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2016" dated October 1, 2016, (hereinafter collectively called the "Outstanding Obligations"); and (b) water supply contract with the City of Fort Worth, Texas, said income and revenues of said System have not been pledged or hypothecated in any other manner or for any other purpose; and the Outstanding Obligations, the Bonds and the above mentioned contract evidence the only liens, encumbrances or indebtedness of said System or against the income and revenues of such System. 6. The District is not in default as to any covenant, condition, obligation or requirement contained in the resolution authorizing the issuance of the Outstanding Obligations; and there is on hand in the Interest and Sinking Fund created for the payment and security of the Outstanding Obligations the amount now required to be deposited therein. 7. Attached as Exhibit A is a true and correct statement of the revenues derived by the District from the ownership and operations of the System for the fiscal years of the District therein indicated. 8. The District secures its water from four wells and pursuant to a water supply contract with the City of Fort Worth, Texas. 9. As of the date hereof, no question is pending and no proceedings of any nature have been instituted in any manner questioning the District's right and title to its utility properties or its authority to operate the same. 10. The current monthly rates and charges for services provided by the System are reflected in Exhibit B attached hereto and incorporated herein by reference as a part of this certificate for all purposes. 11. No municipal consents are required for the issuance of the Bonds because the Town of Trophy Club and the Town of Westlake were incorporated after the creation of the District. 12. That the Board of Directors of the District has never adopted or given notice of the adoption of a resolution limiting the District's indebtedness. 13. That none of the proceeds to be derived from the sale of the Bonds will be used for the purchase, acquisition, or installation of any fire fighting equipment or facilities, fire engines, fire stations, fire hoses, or any other fire fighting equipment of any kind. 14. That the District has complied with the Voting Rights Act of 1965, as amended, and the Texas Election Code, as amended. 15. That all meetings of the Board of Directors of the District have been open to the public and notice of the time, place, and subject of each meeting as required by Chapter 551, Government Code, as amended, and Chapter 49, Texas Water Code, as amended. 16. That the data required by Sections 49.191 - 49.194, Texas Water Code, has heretofore been furnished to the Texas Commission on Environmental Quality. 17. That the Texas Commission on Environmental Quality has not notified the District of the receipt of any motion to overturn its Order approving the Bonds, and has not extended the time for filing such motion. 18. That the District has not defaulted on, and is not now in default on, any of the covenants or requirements of the resolution authorizing the issuance of the Bonds. 19. That the net effective interest rate of the transaction is 3.297901%. 20. That the District has made all disclosure filings and acknowledgements required by Section 2252.908, Texas Government Code, and the rules of the Texas Ethics Commission related to said provision, with respect to the contracts contained within this transcript of proceedings. 21. That the District has complied in all respects with the competitive, sealed requirements of Section 49.183 of the Water Code in connection with the advertising, sale and award of the Bonds. 22. That the District has not entered into and will not enter into a contract with a counterparty that is a company, as defined by Texas Government Code §§ 2270.001(2), 808.001 (2), 2252.151(1), 2270.0001(2), identified on a list prepared and published by the Comptroller of the State of Texas pursuant to Sections 2270.0201 and 2252.153 of the Government Code. WITNESS OUR HANDS the Stephen J. lynn Secretary/Treasurer, oltuyiN O • � G• AN. •O— •0= ///�// I I 1 D1 \\\\\ oa of Directors day of (YN(j('6/N , 2019. ciregory Wilson President, Board of Directors Exhibit A REVENUE Ad valorem property taxes Water and wastewater charges Utility Fees Inspection and tap fees Interest earned Debt proceeds Transfers In Proceeds from Sale of Assets Capital Lease Financing Miscellaneous and other Total revenue EXPENDITURES Administrative Water operations Wastewater operations Wastewater collection system Information systems Contribution to Trophy Club Fire Dept Capital outlay Transfers Out and Debt Service Total expenditures Excess (deficiency) of revenues over (under) expenditures Total active retail water and/or wastewater connections TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 TS1-7 COMPARATIVE SCHEDULES OF REVENUES AND EXPENDITURES -FIVE YEARS GENERAL FUND SEPTEMBER 30, 2018 2018 $ 1,197,949 9,286,714 8,000 61,283 797,834 15,400 358,600 245,392 $ 11,971,172 $ 1,275,394 3,173,225 1,026,693 625,637 665,773 1,522,582 $ 8,289,304 $ 3,681,868 3,284 2017 $ 1,105,820 8,632,747 7,200 18,940 3,550 233,282 $ 10,001,539 Amounts 2016 $ 1,371,247 6,729,926 55,200 11,325 12,652 8,034 90,935 265,667 $ 8,544,986 2015 $ 1,419,548 6,138, 766 239,200 11,375 6,117 1,074,337 46,750 807,316 240,591 $ 9,984,000 2014 2018 $ 1,340,502 10.0% 5,730,872 77.6% 331,200 0.0% 10,725 0.1% 6,071 0.5% - 0.0% 6.7% - 0.1% 3.0% 202,481 2.0% $ 7,621,851 100.0% $ 1,150,421 $ 1,388,715 $ 1,672,123 $ 1,779,470 10.7% 2,994,623 3,078,429 3,151,532 3,031,672 26.5% 1,061,896 1,089,257 864,305 621,108 8.6% - - - 185,561 0.0% - - - - 0.0% 625,083 1,010,938 928,610 879,830 5.2% 744,828 1,713,885 1,755,603 990,311 5.6% 1,529,319 1,182,760 656,984 993,450 12.7% $ 8,106,170 $ 9,463,984 $ 9,029,157 $ 8,481,402 69.2% $ 1,895,369 $ (918,998) $ 954,843 $ (859,551) 30.8% 3,244 3,422 56 3,376 3,140 Percent of total revenue 2017 2016 2015 2014 11.1% 16.0% 14.2% 17.6% 86.3% 78.8% 61.5% 75.2% 0.0% 0.6% 2.4% 4.3% 0.1% 0.1% 0.1% 0.1% 0.2% 0.1% 0.1% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 10.8% 0.0% 0.0% 1.1% 0.5% 0.0% 0.0% 0.0% 8.1% 0.0% 2.3% 3.1% 2.4% 2.7% 100.0% 100.0% 100.0% 100.0% 11.5% 16.3% 16.7% 23.3% 29.9% 36.0% 31.6% 39.8% 10.6% 12.7% 8.7% 8.1% 0.0% 0.0% 0.0% 2.4% 0.0% 0.0% 0.0% 0.0% 6.2% 11.8% 9.3% 11.5% 7.4% 20.1% 17.6% 13.0% 15.3% 13.8% 6.6% 13.0% 81.0% 110.8% 90.4% 111.3% 19.0% -10.8% 9.6% -11.3% TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 TSI -7 COMPARATIVE SCHEDULES OF REVENUES AND EXPENDITURES -FIVE YEARS (Continued) DEBT SERVICE FUND SEPTEMBER 30, 2018 Amounts Percentage REVENUE 2018 2017 2016 2015 2014 2018 2017 2016 2015 2014 Ad valorem property taxes $ 679,678 $ 675,944 $ 666,225 $ 468,194 $ 386,992 32.5% 32.4% 42.3% 48.8% 62.4% Penalties and interest 2,010 2,294 4,010 2,021 2,676 0.1% 0.1% 0.3% 0.2% 0.4% Intergovernmental 1,390,151 1,402,170 902,259 465,409 230,804 66.4% 67.1% 57.3% 48.5% 37.2% Interest earned 21,903 8,174 2,564 13,976 97 1.0% 0.4% 0.2% 1.5% 0.0% Miscellaneous and other - - - 9,573 - 0.0% 0.0% 0.0% 1.0% 0.0% Total revenue 2,093,742 2,088,582 1,575,058 959,173 620,569 100.0% 100.0% 100.0% 100.0% 100.0% EXPENDITURES Principal retirement 1,315,000 1,265,000 895,000 440,000 425,000 62.8% 60.6% 56.8% 45.9% 68.5% Interest and fiscal charges 569,530 581,844 552,220 422,722 198,695 27.2% 27.9% 35.1% 44.1% 32.0% Bond admin fees 2,950 2,548 2,150 - 0.1% 0.1% 0.0% 0.0% 0.0% Total expenditures 1,887,480 1,849,392 1,449,370 862,722 623,695 90.1% 88.5% 91.9% 89.9% 100.5% Excess (deficiency) of revenues over (under) expenditures $ 206,262 $ 239,190 $ 125,688 $ 96,451 $ (3,126) 9.9% 11.5% 8.1% 10.1% -0.5% 57 Exhibit B Rate Order No. 2018-0917A Rate Order RATE ORDER TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 ORDER NO. 2018-0917A AN ORDER ESTABLISHING POLICIES, PROCEDURES, AND RATES FOR WATER AND SEWER SERVICE; PROVIDING FEES FOR CONNECTION, RECONNECTION, INSPECTION, ACCURACY READINGS, AND RETURNED CHECKS; REQUIRING DEPOSITS FOR SERVICE; PROVIDING A PENALTY FOR DELINQUENT PAYMENTS; AND CONTAINING OTHER PROVISIONS RELATING TO THE SUBJECT. WHEREAS, Trophy Club Municipal Utility District No. 1 (the "District") is the owner and/or operator of a water and sewer system designed to serve present and future inhabitants within the District and the Trophy Club Development; and WHEREAS, the District's most recent Rate Order was adopted on March 20, 2018 (Order No 2018-0320A), and additional modifications are needed. The District desires to establish all of its rate policies in a single new Rate Order; and WHEREAS, the Board of Directors of the District has carefully considered the terms of this Rate Order No. 2018-0917A and is of the opinion that the following conditions and provisions should be established as the policies, procedures, and rates for obtaining service from the District's water and sewer system. THEREFORE, IT IS ORDERED BY THE BOARD OF DIRECTORS OF TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 THAT: ARTICLE I TAP FEES AND CONNECTION POLICY Section 1.01. Initiation of Water and Sanitary Sewer Connections. Each person desiring a water and sanitary sewer service connection to the District's System shall be required to pay such fees as set forth in this Order. No service shall be established or re-established until such fees are paid. All service connections are subject to all other rules, regulations, and policies of the District. A. Certification of System. Connections shall not be made to the District's System or portions of the System until the District's engineer or District staff has certified that the System or applicable portion thereof is operable and meets all regulatory requirements. B. Backflow Prevention. No water connections from any public drinking water supply system shall be allowed to any residential or commercial establishment where an actual or potential contamination hazard exists unless the public water facilities are protected from contamination. 1 of 17 Rate Order No. 2018-0917A Rate Order At any residential or commercial establishment where an actual or potential contamination hazard exists, protection shall be required in the form of a backflow prevention assembly. The type of assembly required shall be specified by the District. The existence of potential contamination hazards without installation having been made of the means of control and prevention as set out in the preceding paragraph; or, the same having been installed, there is a failure to properly maintain the same, shall be considered sufficient grounds for immediate termination of water service. Service can be restored only when the health hazard no longer exists, or when the health hazard has been isolated from the public water system in accordance with the foregoing requirements. All backflow prevention assemblies that are required according to this section shall be tested upon installation by a recognized backflow prevention assembly tester and certified to be operating within specifications. Backflow prevention assemblies that are installed to provide protection against health hazards must also be tested and certified to be operating within specifications at least annually by a recognized backflow prevention assembly tester. The Customer shall, at his expense, properly install, test, and maintain any backflow prevention device required by this Rate Order. Copies of all testing and maintenance records shall be provided to the District within ten (10) days after maintenance and/or testing is performed. If the Customer fails to comply with the terms of this Order, the District shall, at its option, either terminate service to the property or properly install, test, and maintain an appropriate backflow prevention device at the service connection at the expense of the Customer. Any expenses associated with the enforcement of this agreement shall be billed to the Customer. C. Availability of Access/Obstructions. By application for connection to the District's System, the Customer shall be deemed to be granting to the District and its representatives a right of ingress and egress to and from the meter or point of service for such installation, maintenance and repair as the District, in its judgment, may deem reasonably necessary. The Customer shall also be deemed to be granting to the District and its representatives a right of ingress and egress to the Customer's property, including the exterior of the Customer's premises, for the purpose of performing the inspections and completing the Customer's Service Inspection Certifications required by the District's rules and regulations. Taps and connections will not be made when, in the opinion of the District, building materials or other debris obstructs the work area or the work area is not completed or finished to grade. When sidewalks, driveways or other improvements have been constructed prior to application for service, such application shall be construed and accepted as the Customer's waiver of a claim for any damages to such improvements resulting from the reasonable actions of the District in installation of the connection. 2 of 17 Rate Order No. 2018-0917A Rate Order Section 1.02. Residential Fire Lines. Connections. and Fees. A residence of at least six -thousand (6,000) square feet but less than eight -thousand (8,000) square feet shall have installed on its one -inch (1") water service line, for fire protection, a one -inch (1") U -branch, with a separate meter and meter -box. The cost of installation, including parts, equipment, and labor shall be eight -hundred dollars ($800.00), payable at the time of permitting. A residence of eight -thousand (8,000) square feet or greater, in addition to its regular one - inch (1") water service line, shall have installed a separate one -and one-half (1 '/2 ") water service line for fire protection with its own meter and meter -box. The cost of connection and installation of the fire line and meter shall be either one thousand six hundred dollars ($1,600.00) if the home is on the same side of the street as the waterline; or, if it is on the opposite side of the street from the waterline, necessitating boring, then the charge shall be two thousand nine hundred seventy five dollars ($2,975.00), payable at the time of permitting to the District. Section 1.03. Connections by District. All Connections to the District's water and sewer system shall be made with written approval of the District and in accordance with the District's Plumbing Code and its rules and regulations. No person except the General Manager or his/her authorized agent shall be permitted to tap or make any connection to the mains or distribution piping of the District's water system, or make any repairs, additions to, or alterations in any meter, box, tap, pipe, cock or other fixture connected with the water system or any manhole, main, trunk or appurtenance of the District's sanitary sewer system. No sewer connection shall be covered in the ground and no house lead shall be covered in the ground before it has been inspected and approved by a licensed plumbing inspector with jurisdiction of the site. Section 1.04. Water and Sewer Tan Fees. Fees for water and sewer taps performed by the District are as follows: Water Service Taps: Size Fee for Tap Bore (if applicable) up to 1" Tap $1,200.00 $3,000.00 2" Tap $1,800.00 $3,500.00 3" Tap 1 $4,500.00 $5,000.00 4" Tap _ 1 $5,500.00 $5,000.00 6" Tap $6,500.00 $6,500.00 8" Tap $7,500.00 $7,000.00 10" Tap $8,500.00 $8,500.00 Sewer Service Taps: Actual cost plus 10%. An estimate will be provided prior to work being performed. 3 of 17 Rate Order No. 2018-0917A Rate Order When water taps have been made by someone other than the District personnel, there is an installation/inspection fee of fifty dollars ($50.00) plus the cost of the appropriate meter. Section 1.05. Inspections and Fees. Fees for permits and for plumbing inspections (other than for sewer and backflow inspections referred to below in subparagraphs A and B) should be paid to the city or town in which the property is located or to the District if the property is not located within a city or town. A. Sewer Inspection and Fees. Sewer connections and house service lines shall be inspected by the District. An inspection fee of one -hundred -fifty dollars ($150.00) shall be paid to the District for each connection to the District sanitary sewer system. Installations that fail to conform at any time to the rules and regulations shall be disconnected. Any customer whose connection is disconnected for such failure shall be notified as to the basis for such disconnection. After noted deficiencies have been corrected, a re -inspection shall be made upon payment to the District of a re- inspection fee of twenty-five dollars ($25.00), plus payment by the customer of all outstanding charges. If subsequent re -inspections are required before the sewer connection and service lines are in compliance with the rules and regulations, a re- inspection fee of twenty-five dollars ($25.00) shall be paid to the District for each subsequent re -inspection. Inspections by the District requested after regular business hours will be charged at a minimum of one -hundred dollars ($100.00). B. Backflow Inspections. Backflow installations (residential and commercial) that require annual inspections must have a certified Backflow Technician perform the testing and submit the report annually to the District. C. Swimming Pool Discharge into Sanitary Sewer System. New swimming pools permitted on or after June 24, 2005, shall have all backwash and/or drainage from said pool discharge into the sanitary sewer system. Owners of pools built or permitted prior to July 1, 2005 are not required to retrofit the pool equipment and tie into the sanitary sewer. However, swimming pool backwash and drainage must drain to grassy areas and is not permitted to flow into the storm drain system, creeks, or other waterways. For swimming pools discharging to the sanitary sewer system, an indirect connection shall be made by means of an air break, discharging into a tailpiece installed a minimum of six inches (6") (or 152 mm) above adjacent grade. The tailpiece shall be connected to a minimum three-inch (3" or 76mm) p -trap not less than twelve inches (12" or 304 mm) below grade which discharges into the yard cleanout riser. Backwash systems shall not flow onto neighboring properties or into the storm sewer. The tie-in and inspection fee shall be seventy-five dollars ($75.00) to be paid at the time of issuance of the pool permit. 4 of 17 Rate Order No. 2018-0917A Rate Order Section 1.06 Temporary Water Service -Construction Meters. A. Construction Meters. The District shall be authorized to make a temporary connection to any fire hydrant or flushing valve upon request for temporary water service. All temporary service shall be metered and billed to the temporary customer as provided herein. All unauthorized withdrawal of water from flushing valves, fire hydrants, or other appurtenances of the District's System is prohibited. B. Application and Deposit. Each temporary customer desiring temporary water service shall be required to execute an application for such temporary service and shall provide a minimum -security deposit of one -thousand -seven -hundred - seventy -five dollars ($1,775.00) for a three-inch (3") meter and RPZ; one -thousand - four -hundred -twenty-five dollars ($1,425.00) for a smaller meter and smaller RPZ. The deposit shall be made by cashier's check or money order payable to the District. The deposit shall be used by the District to secure the payment for temporary water supplied by the District, the installation fee, and the cost of repair of any damages caused by the temporary customer. The balance of the security deposit, if any, shall be refunded after disconnection from the District's System. C. Construction Meter Fees and Rates. Construction meters will be charged the same monthly rates (base fee and volumetric rate) for water as commercial accounts as set forth in Article II of this Rate Order. D. Temporary Construction Meter Use and Billing. Construction meters can be rented by filing an application at the District office and payment of all required deposits. Upon approval of the application, a temporary meter and RPZ will be provided to the applicant. Installation on any fire hydrant or flush valve must be approved by the District and District meters may only be used within the District's service area. The location of installation must be indicated on the application and cannot be relocated unless notification is provided to and approved by the District in advance. Temporary meters may only be rented for a period of ninety (90) days and extensions may be approved upon request and approval. Failure to return a temporary meter or request a usage extension by the due date will result in repossession of the meter and forfeiture of the deposit. Upon return of a temporary construction meter, an inspection of the meter and RPZ will be performed. Any and all damages to the meter and/or RPZ will be charged to the customer and deducted from the deposit. If the deposit does not cover the total amount of damages, the balance will be billed to the customer and payment must be received by the due date. Failure to pay all charges due will result in suspension of rental privileges until payment in full and may result in collection procedures. E. Return of Temporary Meter at District Request. The District reserves the right to request the return of a temporary construction meter at any time determined 5 of 17 Rate Order No. 2018-0917A Rate Order necessary by the District. Should Stage 2 Drought Restrictions or more stringent restrictions be implemented, all temporary construction meters must be returned within three (3) business days of notification by the District. Failure to promptly return the temporary meter within three business days will result in repossession of the meter and forfeiture of the deposit. Should District personnel be unable to locate the temporary meter for repossession, theft charges will be filed against the meter holder with local law enforcement. Section 1.07 Service Outside the District. The rates and charges stated in this Rate Order are for services to customers and property located within the boundaries of the District. Any service to a customer or property located outside the boundaries of the District shall be granted only upon approval by the Board of Directors of the District. Out of District customers will pay the adopted rates for in district customers plus 15% for both water and sewer base and volumetric rates. For the purpose of customer classification, Trophy Club Park at Lake Grapevine is considered "in -district" and subject to all rates and service provisions related to in -district customers. Section 1.08 Service to New Development and Extension of Facilities. A. New Service Connections and Extension of Facilities. New service connections and extension of facilities must be constructed and installed in accordance with the District's Rules Governing New Service Connections and Extension of Facilities as approved through separate Resolution by the Board of Directors. Applicants for Non -Standard Service must submit all required information and pay all fees prior to conveyance of facilities and service commencement. B. Application Fee for Non -Standard Service. Upon request for non-standard service an application fee of $150 must be submitted. C. Design of Facilities. All water and wastewater facilities to be constructed to extend service to new developments must be designed by a professional engineer licensed in the State of Texas at the applicant's expense. The District must approve the plans and specifications prior to the commencement of construction. At the time of plan review submittal, the applicant must provide payment to the District in the amount of $2,500.00 as deposit for review of each set of plans and specifications reviewed by the District's engineer. The actual final fee for plan review by the District's engineer shall be provided to the applicant upon approval of the plans. If there is a balance due over the $2,500 paid by the applicant at submittal, the balance due shall be paid by the applicant prior to receiving District approval of plans and specifications. District construction plans and specifications shall be strictly adhered to, but the District reserves the right to change order any specifications, due to unforeseen circumstances during the design or construction of the proposed facilities, or as otherwise authorized by applicable laws, to better facilitate the operation of the facility. All expenses and costs associated with a change order shall be charged to the 6 of 17 Rate Order No. 2018-0917A Rate Order applicant. Service to new developments is subject to available capacity in the District's water and wastewater systems. All new potential developments must seek written approval from the General Manager that capacity is available to serve and may be required to install offsite improvements if capacity is not available with current system infrastructure. D. Inspection Fees. The District will inspect all infrastructure during construction. Inspection fees of $100 per lot must be paid to the District prior to a notice to proceed being issued. A minimum of $500 for inspection fees is required if less than five (5) lots are to be developed. Section 1.09 Water Meter Fees. METER SIZE WATER METER FEE 5/8" $257 1" $343 1-1/2" $725 2" Quoted at Time of Purchase 3" Quoted at Time of Purchase 4" Quoted at Time of Purchase 6" Quoted at Time of Purchase 8" Quoted at Time of Purchase 10" Quoted at Time of Purchase Fees must be received by the District before any connection is installed. A customer seeking service through an oversized connection line or from a meter larger than a one -inch (1") standard meter shall follow the District's policy for new development as outlined in Section 1.07 above. Should approval be granted by the District, the customer agrees to pay the water and sewer rates as outlined in Article II of this Rate Order. Section 1.10. Fort Worth Impact Fee. Each customer requesting an initial connection, shall also pay to the District the applicable City of Fort Worth Impact Fee. Section 1.11. Title to Facilities. Title to all water meters, water and sewer taps, and all other appurtenances, including meter boxes, shall lie in the District. 7 of 17 Rate Order No. 2018-0917A Rate Order ARTICLE II SERVICE RATES Section 2.01. Water Service Rates. The following monthly rates for water service shall be in effect for each separate connection within the District. The base rate for each connection (meter) is calculated upon meter size and will be charged for each residential and commercial meter: (1) Water Rates BASE RATES: METER SIZE MONTHLY BASE RATE 5/8" & 3/4" $17.15 1" $32.23 1.5" $56.94 2" $86.58 3" $155.76 4" $254.59 6" $501.64 VOLUMETRIC RATES: Gallons Used 0 to 6,000 6,001 to 17,000 17,001 to 25,000 25,001 to 50,000 50,001+ (2) Multi -Unit Buildinas. Rate per 1000 gallons $3.96 $4.61 $5.34 $6.20 $7.21 Each multi -unit building (apartments, townhomes, business complex, etc.) served by a single 5/8" meter or 1" meter shall be billed the base rate for the meter size servicing the building multiplied by the number of units in the building or complex. 8 of 17 Rate Order No. 2018-0917A Rate Order Section 2.02. Sewer Service Rates. The following monthly rates for the collection and disposal of sewage shall be in effect for each separate connection within the District: Residential Sewer Rates: The District uses winter averaging for the purpose of calculating sewer charges on utility bills. The sewer charges are based on average water consumption for three months (December, January and February billing). The average consumption will be analyzed annually and take effect the first of April each year. New customers will be assigned a default value user charge that is equal to the average winter water use for all residential customers. The winter average used for new residential customer is 7,000 gallons. Any resident filling a pool due to maintenance or construction during the averaging months may request that the water used be subtracted from the usage of the month the water was used. A resident with a water leak during the averaging months may request a reduction in the sewer usage calculation. Requests must be in writing to the General Manager and have documentation showing maintenance, construction or repairs as applicable to the issue. The General Manager or a duly authorized representative may adjust the metered water usage in determining the winter average. To assist in establishing winter averaging sewer rates, Customers are encouraged to submit requests for sewer average reductions no later than March 15th. A. Residential Sewer Rates: Effective October 1, 2018 Base Rate: 0 to 4,000 4,001 to 8,000 8,001 to 12,000 12,000+ $ 20.60 $ 3.24 $ 4.60 $ 6.56 $ 9.32 B. Commercial Sewer Rates: Effective October 1, 2018 Base Rate: $ 20.60 Volumetric Rate: $ 6.30/1,000 gallons *Commercial sewer usage is billed based on actual water usage per month C. Multi -Unit Buildings. Each multi -unit building (apartments, townhomes, business complex, etc.) shall be billed the base rate for each meter servicing the building and sewer usage will be 9 of 17 Rate Order No. 2018-0917A Rate Order billed based on actual water usage per month. Section 2.03 Effluent Charge. The effluent from the District's wastewater treatment plant will be sold pursuant to separate contracts entered into with the District and approved by its Board of Directors. Section 2.04. Master Meter (Cooling Tower Calculation). The water usage from the master meter reading minus the reading from the "Blow Down" meter equals the "evaporation." Water usage less "evaporation" equals sewer usage for billing purposes. Section 2.06. Regulatory Assessment. Pursuant to Section 5.235, Texas Water Code, and 30 TAC 291.76, the District shall collect and pay an annual regulatory assessment fee to the Texas Commission on Environmental Quality ("TCEQ") in the amount required by law on the total charges for retail water and sewer service billed to its customers annually. The regulatory assessment fee will be detailed separately on customer bills. Section 2.07. No Reduced Rates or Free Service. All customers receiving water and/or sewer service from the District shall be subject to the provisions of this Order and shall be charged the rates established in this Order. No reduced rate or free service shall be furnished to any customer whether such user be a charitable or eleemosynary institution, a political subdivision, or municipal corporation; provided, however, this provision shall not prohibit the District from establishing reasonable classifications of customers. ARTICLE III SERVICE POLICY Section 3.01. Security Deposits. Security deposits shall be required as follows: A. Builder's Deposit. A seventy-five dollar ($75.00) security deposit shall be required of builders for each tap made by the District for such service connection, payable at or prior to the time that such tap is made, and the security deposit is refundable to the builder when the account is later transferred to an owner if that account and all other accounts of the builder are current at the time of the transfer; but, if that account or any other account of the same builder is not current at the time of such transfer to an owner, then the security deposit shall be applied against the outstanding balance of the builder's account(s) at the time of such transfer. The District shall deduct from the deposit the cost to repair any damage caused to the District's property by the builder or the builder's employees, contractors, subcontractors or agents and shall deduct any delinquent water and sewer service bills of the builder. In the event any amounts are deducted from the builder's deposit, it will be incumbent on the builder to reinstate the original amount of the deposit, and failure to do so will result in the suspension of any additional water taps for the builder. 10 of 17 Rate Order No. 2018-0917A Rate Order B. Residential Owners. A security deposit of seventy-five ($75.00) shall be required from each residential owner customer for a single-family home connected to the District's system. Upon discontinuation of service, the deposit shall be applied against amounts due, including disconnection fees. C. Commercial Deposits COMMERCIAL DEPOSITS METER SIZE WATER SEWER 3/" $75 $60 1" $100 $100 1.5" $250 $200 2" $500 $320 3" $1,000 $700 4" $1,800 $1,200 6" $3,750 $2,500 8" $5,400 $3,600 D. Residential Lessees. A security deposit of one -hundred -fifty dollars ($150.00) shall be required from each residential lessee customer for a single-family home. Upon discontinuation of service, the deposit shall be applied against amounts due, including any disconnection fees. E. Construction Meters. See Section 1.06 above. F. Other customers. A security deposit equal to two (2) months estimated average monthly water and sewer bill shall be required of all other customers including commercial and multi -unit accounts. G. Deposits. The District does not pay interest on deposits. The interest drawn by the District on customer deposits is returned into the operating budget of the water/sewer fund to help in providing the lowest possible water and sewer rates for our customers. Section 3.02. Billing Procedures. All accounts shall be billed in accordance with the following: A. Due Date and Delinquency. Charges for water and sewer service shall be billed monthly. Payment shall be due on or before the twentieth (20th) day of the month in the month in which the bill was received. Unless payment is received on or before the twentieth (20th) day of the month, such account shall be considered delinquent. If the due date falls on a holiday or weekend, the due date for payment purposes shall 11 of 17 Rate Order No. 2018-0917A Rate Order be the next working day after the due date. The District shall charge a penalty on past due accounts calculated at the rate of fifteen percent (15%) per month on water and sewer charges. The rates for water and sewer service shall depend upon the type of user and upon whether the water used has been chemically treated, as provided in this Rate Order. All accounts not paid by the due date shall be deemed delinquent and failure to make payment thereafter may result in the termination of water and sewer service. B. Notice and Appeal. Prior to termination of service, a customer who is delinquent in payment shall be sent a notice that service will be discontinued on or after the fifteenth (15th) day after the date of such notice unless payment in full is received before by such day disconnection is scheduled. Notice shall be sent by first class United States mail and shall inform the customer of the amount of the delinquent bill, the date service will be disconnected if payment is not made, and of the customer's right to contest, explain, or correct the charges, services, or disconnection. Service shall not be disconnected where a customer has informed the District of his or her desire to contest or explain the bill. If the customer appears before the Board, the Board shall hear and consider the matter and inform the customer of the Board's determination by sending written notice to the customer by first class United States mail stating whether or not service will be disconnected. In the event of a service is disconnected more than two (2) times per calendar year (January through December) for non-payment, an additional Security Deposit of $150.00 will be required for Residential homeowners and $150.00 for Lessees to restore service in addition to a $50.00 service fee, and afterhours re -connection charges if applicable, and any outstanding balance in Arrears will need to be brought current. As set out above in Section 3.01. If payment is not received prior to the date that disconnection has been scheduled, a service charge of $50.00 dollars will be added to the account. Reconnections made outside of the District's normal business hours at the customer's request will be charged at an additional after hour's fee of one -hundred dollars ($100.00). C. Business Hours. For purposes of assessing the foregoing charges, "normal" or "regular" business hours shall mean only the hours between 8 a.m. and 5 p.m., Monday through Friday. All other times, including District holidays, are outside of the District's normal business hours and will result in the higher charge. D. Returned Checks and Bank Drafts. A twenty -five -dollar ($25.00) charge will be charged to the customer's account for any check or ACH bank draft returned by the bank. Any amounts due on an account which have been paid with a check or ACH bank draft that has been returned by the bank must be paid in full by cash, cashier's check or money order, including all late charges and returned check charges, within ten (10) days from the day the District mails notice to the customer or otherwise notifies the customer that the check or ACH bank draft has been returned by the bank. 12 of 17 Rate Order No. 2018-0917A Rate Order E. Same -Day Service. An additional charge of twenty-five dollars ($25.00) shall be made when a customer requests same-day service. As an example, this charge will be implemented upon request by a customer for same-day service to start or terminate water and sewer service or to perform re -reads the same day as requested. F. Accuracy Reading Fee. A meter accuracy reading fee in the amount of ten dollars ($10.00) shall be charged to a customer by the District for each meter accuracy reading made by the District for such customer when the original reading appears to be accurate. If the original meter reading appears to be in error, no fee will be charged. Each customer will be allowed one accuracy meter reading per calendar year at no charge. **Should a customer request that a meter be removed, and bench tested by an outside source, then a fee of one -hundred -twenty-five dollars ($125.00) will be charged to the customer. If the meter fails to meet American Water Works Association standards for in-service meters, then the customer will be given a credit offsetting the amount of the charge. httrs://www, awwa.ora/publications/iournal-awwa/abstract/articleid/34055179.asax G. Meter Data Logging Fee. Each customer will be allowed one data log at no - cost per fiscal year. A fee of twenty-five dollars ($25.00) shall be charged to a customer by the District for each meter data logging service performed thereafter. Meter data logging service can only be provided during regular business hours. Section 3.03. Entitlement. Water and sewer service shall be provided to customers in accordance with all TCEQ rules covering minimum water and sewer standards. Section 3.04. Unauthorized and Extraordinary Waste. The rates established herein are applicable for Domestic Waste as defined herein. Customers proposing to generate other types of waste will be assessed additional charges as established by the District. Section 3.05. Damage to District Facilities. A. Damage to Meter and Appurtenances. No person other than a duly authorized agent of the District shall tamper with or in any way interfere with a meter, meter box, service line or other water and/or sewer system appurtenance. The District reserves the right, immediately and without notice, to remove the meter or disconnect water service to any customer whose meter has been tampered with and to assess repair charges to the customer, plus a damage fee not to exceed five -thousand dollars ($5,000.00), plus any applicable charge for same day service. The District also reserves the right to file civil and/or criminal charges against any person or entity tampering with the District's public water system and/or sewer system. 13 of 17 Rate Order No. 2018-0917A Rate Order B. Repair. It shall be the responsibility of each customer to maintain the sewer line including the tap, from the point of connection to the District's sewer system and to the building served. It is the responsibility of the customer to maintain and repair the water service line from the point of connection to the District's water meter. The District reserves the right to repair any damage to the District's System and appurtenances without prior notice and to assess against any customer such penalties as are provided by law and such penalties provided for in this Rate Order in addition to those charges necessary to repair the portion of the System so damaged. C. Video. If at any time a resident/customer wishes to have the District video their sewer line to help the resident determine the condition of their sewer line, the fee will be one -hundred -fifty dollars ($150.00) payable to the District assessed on the next month's bill. Section 3.06. Easements. Before service is established to any customer, the person requesting such service shall grant an easement of ingress and egress to and from the meter(s) for such maintenance and repair as the District, in its judgment, may deem necessary. Section 3.07. Required Service. No service will be provided by the District unless the customer agrees to receive both water and sewer service, except that permanent irrigation only meters may receive water service only. Irrigation meters cannot be connected to any building plumbing. Section 3.08. Additional Charges. In all cases where services are performed and equipment or supplies are furnished to a party or entity not within the District, the charge to said party or entity shall be the District's cost of providing such services, equipment and/or supplies, plus fifteen percent (15%). This shall not apply to services, equipment and/or supplies furnished by the District under an existing Interlocal Agreement. ARTICLE IV INDUSTRIAL WASTE Section 4.01. Industrial Waste Policy. The following policy regarding industrial waste shall be effective: A. Definition. "Industrial waste" shall mean the water -borne solids, liquids, and/or gaseous wastes (including Cooling Water), resulting from any industrial, manufacturing, trade, business, commercial, or food processing operation or process, or from the development of any natural resource, or any mixture of such solids, liquids, or wastes with water or domestic sewage. The Clean Water Act of 1977, as amended, and the General Pretreatment Regulations contained in 40 C.F.R. 403 14 of 17 Rate Order No. 2018-0917A Rate Order contain the requirements for user's discharge of industrial waste into wastewater facilities. B. Industrial Waste Discharge, Charges, and Rates. If any customer of the District's sanitary sewer system proposes to discharge industrial waste into such system, the Board of Directors of the District shall request the recommendation of the District Engineer and shall establish rates and charges to provide for an equitable assessment of costs whereby such rates and charges for discharges of industrial waste correspond to the cost of waste treatment, taking into account the volume and strength of the industrial, domestic, commercial waste, and all other waste discharges treated and techniques of the treatment required. Such rates shall be an equitable system of cost recovery which is sufficient to produce revenues, in proportion to the percentage of industrial wastes proportionately relative to the total waste Toad to be treated by the District for the operation and maintenance of the treatment works, for the amortization of the District's indebtedness for the cost as may be necessary to assure adequate waste treatment on a continuing basis. C. Pretreatment. The Board of Directors of the District shall rely upon the recommendation of the District Engineer and shall require pretreatment of any industrial waste that would otherwise be detrimental to the treatment works or to its proper and efficient operation and maintenance or will otherwise prevent the entry of such industrial waste into the treatment plant. ARTICLE V ENFORCEMENT/CIVIL PENALTIES Section 5.01. Enforcement. A. Civil Penalties. The Board hereby imposes the following civil penalties for breach of any rule of the District: The violator shall pay the District twice the costs the District has sustained due to the violation up to ten -thousand dollars ($10,000.00). A penalty under this Section is in addition to any other penalty provided by the laws of this State and may be enforced by complaints filed in the appropriate court of jurisdiction in the county in which the District's principal office or meeting place is located. If the District prevails in any suit to enforce its rules, it may, in the same action, recover any reasonable fees for attorneys, expert witnesses, and other costs incurred by the District before the court. The court shall fix the amount of the attorneys' fees. B. Liability for Costs. Any person violating any of the provisions of this Order and/or the rules and regulations governing water and sanitary sewer facilities, service lines, and connections shall become liable to the District for any expense, loss or 15 of 17 Rate Order No. 2018-0917A Rate Order damage occasioned by the District by reason of such violation, and enforcement thereof shall be in accordance with Paragraph A of Section 5.01 of this Order. Section 5.02. Non -waiver. The failure on the part of the District to enforce any section, clause, sentence, or provision of this Order shall not constitute a waiver of the right of the District later to enforce any section, clause, sentence, or provision of this Order. Section 5.03. Appeal. Any determination by the District of any dispute regarding the terms and provisions of this order may be appealed to the Board of Directors of the District, which shall conduct a hearing on the matter. The District shall provide the customer with information regarding appeals and hearing procedures upon the customer's request. ARTICLE VI MISCELLANEOUS Section 6.01. Amendments. The Board of the District has and specifically reserves the right to change, alter or amend any rate or provision of this Order at any time. Section 6.02. Severabilitv. The provisions of this Order are severable, and if any provision or part of this Order or the application thereof to any person or circumstance shall ever be held by any court of competent jurisdiction to be invalid or unconstitutional for any reason, the remainder of this Order and application of such provision or part of this Order shall not be affected thereby. ARTICLE VII REPEAL OF PREVIOUS ORDERS This Rate Order shall be known as the "2018-0917A Rate Order" (Order No. 2018-0917A) of the District. All previous Orders adopted by the Board of Directors pertaining to the subject matter hereof are each hereby repealed in their entirety as of the effective date hereof. ARTICLE VIII EFFECTIVE DATE This Order shall be effective on October 1, 2018. 16 of 17 Rate Order No. 2018-0917A Rate Order ARTICLE IX PUBLIC MEETING It is hereby found that the meeting at which this Order is adopted is open to the public as required by law, and that public notice of the time, place, and subject matter of said meeting and of the proposed adoption of this Order was given as required by law. ADOPTED AND APPROVED this 17th day of September 2018. Gregor (Nilson, President Board of Directors William C. Rose,yiee-President Board of Directors 2.09o,0/Q Laude Slaght, District ecru 17 of 17 .10.4:k RA 411.j.1.470/Ct Zf • = "C.•� j42.1_'•• TEXAsd ////-"81111i �1/ Q� STR ;`\\\\\` rlllll CERTIFICATE FOR RESOLUTION THE STATE OF TEXAS COUNTIES OF DENTON AND TARRANT I, the undersigned officer of the Board of Directors of Trophy Club Municipal Utility District No. 1 hereby certify as follows: 1. The Board of Directors of Trophy Club Municipal Utility District No. 1 convened in a regular meeting on the 19th day of December, 2017, and the roll was called of the duly constituted members of the Board, to wit: Kevin R. Carr President Greg Wilson Vice President William C. Rose Secretary -Treasurer Jim Thomas Director Jim Hase Director All members of the Board were present except - , thus constituting a quorum. Whereupon, among other business, the following was transacted at such meeting: A RESOLUTION AUTHORIZING APPLICATION TO THE TEXAS COMMISSION ON ENVIRONMENTAL QUALITY FOR APPROVAL OF PROJECT AND BONDS was introduced for the consideration of the Board. It was then duly moved and seconded that the Resolution be adopted, and, after due discussion, the motion, carrying with it the adoption of the Resolution, prevailed and carried by the following vote: Ayes: 3 Nays: 2 Abstentions: 0 2. A true, full and correct copy of the aforesaid Resolution adopted at the meeting described in the above and foregoing paragraph is attached to and follows this certificate; the Resolution has been duly recorded in the Board's minutes of the meeting; the persons named in the above and foregoing paragraph are the duly chosen, qualified and acting members of the Board as indicated therein; each of the members of the Board was duly and sufficiently notified officially and personally, in advance, of the time, place and purpose of the aforesaid meeting, and that the Resolution would be introduced and considered for adoption at the meeting; and each of the members consented, in advance, to the holding of the meeting for such purpose; the meeting was open to the public as required by law; and public notice of the time, place and subject of the meeting was given as required by Chapter 551, Texas Government Code, as amended. SIGNED AND SEALED the 19th day of December, 2017. William C. Ros-, Secretary Board of Directors RESOLUTION NO. 2017-1219B TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 A RESOLUTION AUTHORIZING APPLICATION TO THE TEXAS COMM][SSION ON ENVIRONMENTAL QUALITY FOR APPROVAL OF PROJECT AND BONDS WHEREAS, Trophy Club Municipal Utility District No. 1 (the "District") is a conservation and reclamation district of the State of Texas created and operating pursuant to Article 16, Section 59 of the Texas Constitution and Chapters 49 and 54, Texas Water Code, as amended; WHEREAS, Section 54.501 of the Texas Water Code authorizes a municipal utility district to issue its bonds for the purpose of purchasing, constructing, acquiring, owning, operating, repairing, improving, or extending any district works, improvements, facilities, plants, equipment, and appliances needed to accomplish the purposes of the district, including works, improvements, facilities, plants, equipment, and appliances needed to provide a waterworks system; WHEREAS, Section 54.503(2) of the Texas Water Code authorizes the board of directors of a municipal utility district to provide for the payment of principal of and interest and redemption price on the bonds by pledging all or any part of the designated revenues to result from the ownership or operation of the district's works, improvements, facilities, plants, equipment, and appliances; WHEREAS, in accordance with the foregoing statutory authority, the Board of Directors of the District desires to issue up to $7,200,000 in revenue bonds (the "Bonds") for the construction of certain water transmission line improvements and related appurtenances to the District's waterworks system and wastewater system (collectively, the "Project") as generally identified in Exhibit "A" attached hereto more specifically described in the Engineering Report prepared by CP&Y Incorporated; WHEREAS, Section 49.181 of the Texas Water Code requires the District, when it desires to issue bonds, to submit in writing to the Texas Commission on Environmental Quality (the "Commission") an application for investigation of the project and of the issuance of the bonds to finance the project, together with a copy of the engineering report, data, profiles, maps, plans, and specifications prepared in connection therewith; and WHEREAS, the Board of Directors desires to secure the approval and consent of the Commission for the Project, which is more completely described in the Engineering Report submitted in connection with this application, and to the issuance of the Bonds. NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1: Section 1. The President and Secretary of the Board of Directors of the District, the District's attorneys, and the District's engineers are hereby authorized and directed as follows: (a) To make application to the Commission for an investigation and report upon the feasibility of the Project; and (b) To request the Commission to approve the Bonds of the District in the principal amount not to exceed $7,200,000 bearing interest at a net effective interest rate not to exceed the maximum legal limit in effect at the time of issuance. Section 2. By this application, the District assures the Commission that it will abide by the terms and conditions prescribed in connection with the Commission's approval of the Project. Section 3. The District's engineering consultant is authorized and directed to prepare an Engineering Report in the form required by the Commission and to submit same to the Commission in support of this application together with a copy of the data, profiles, maps, plans and specifications prepared in connection with such report. Section 4. The President and Secretary of the Board of Directors, the District's General Manager, the District's engineering consultants, the District's legal counsel, and the District's Financial Advisor are authorized and directed to do any and all things necessary and proper in connection with this application, including the filing of this application with the Commission. Section 5. A certified copy of this Resolution shall constitute an application and request on behalf of the District to the Commission pursuant to Section 49.181, Texas Water Code, for approval of the Project and the issuance of the Bonds. Section 6. The Board hereby authorizes the District's engineering consultant to request the Commission for expedited review and approval of the District's application in accordance with Sections 293.42 and 293.43 of the Commission rules. Section 7. The Board of Directors hereby approves the payment of all filing fees to the Commission that may be applicable to the application and requests that are the subject of this Resolution. RESOLVED, PASSED AND APPROVED THIS 19th DAY OF DECEMBER, 2017. ATTEST: TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 Kevin R. Carr, President Board of Directors i iam C. Ro Secretary -- • u� ," • f/ f� � i iT9,\ `a°\�� <,\\,711////. Board of Directors Exhibit "A" Description of Project 1. Water transmission line improvements and related appurtenances to increase the water supply available to the District's eastern elevated storage tank located on T.W. King Road 2. To fund costs relating to construction of the wastewater treatment plant facility improvement project. TEXAS COMMISSION ON ENVIRONMENTAL QUALITY THE STATE OF TEXAS RAVIS IHEREBY CER'GOFY`THHAATTHSIISSATRUAND CORRECT COPY OF A TEXAS COMMISSION ON ENVIRONMENTAL QUALITY DOCUMENT, WHICH IS FILED IN THE PERMANENT RECORDS Noy ,14 2018 OF THE COMMISSION. GIVEN UNDER MY HAND AND THE SEAL OF OFFICE ON( � G 1 CHIEF CLERK AN ORDER APPROVING AN ENGINEERING PROJECT TEXAS COMMISB!ON iikkJJ EN' RONMENTALQUALRY AND THE ISSUANCE OF $7,200,000 IN REVENUE BONDS FOR TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 An application by Trophy Club Municipal Utility District No. 1 (the "District") was presented to the Executive Director of the Texas Commission on Environmental Quality (TCEQ) for consideration of approval pursuant to TEx. WATER CODE §§5.122 and 49.181. The District requests approval of an engineering project and issuance of $7,200,000 in bonds to finance: water line improvements and wastewater treatment plant (WWTP) improvements supplemental costs. The TCEQ has jurisdiction to consider this matter, and the following Findings of Fact and Conclusions of Law are appropriate after examining the application and supporting docnnmentation. FINDINGS OF FACT 1. The District filed an application with the TCEQ on August 21, 2018, for approval of a proposed engineering project and the issuance of $7,200,000 in bonds. 2. The Executive Director has investigated the District. 3. The application and accompanying documents have been examined. A memorandum was prepared on the project dated October 26, 2018, a copy of which is attached and made a part hereof. 4. The District's project and issuance of $7,200,000 in bonds at a maximum net effective interest rate of 5.16% to finance the project should be approved. 5. The District should be directed to properly escrow a total of $3,846,120 ($3,205,100 in construction plus $641,020 in contingencies) for the water line extensions pending TCEQ approval, which is contingent upon the TCEQ District Section's receipt of plans and specifications approved by all authorities having jurisdiction and recorded easements evidencing District ownership/access to the site; or if only evidence of recorded easements evidencing District ownership/access to the site are provided to the TCEQ, then use of the funds will be subject to District board receipt of plans and specifications approved by all entities with jurisdiction. The District should further be directed to place these funds in one or more authorized financial institutions of the District's choice and provide the TCEQ with a certified copy of the executed escrow agreement(s) between the District and the financial institution(s) stating that the funds, excluding interest earnings, cannot be withdrawn for District use except by written authorization from the TCEQ. The District should be allowed, from time to time, in accordance with good money management practices, to transfer these funds, or parts thereof, from one financial institution to another, provided the funds are not released to the District until the stated conditions are met and the District maintains current agreements with financial institutions in which funds are held stating the conditions for release. 6. The District should be advised that the legal, fiscal agent, and engineering fees have not been evaluated to determine whether these fees are reasonable or competitive. These fees are included as presented in the engineering report. 7: ,,The Disttict should be directed that any surplus bond proceeds resulting from the sale of bonds at a:lower interest rate than that proposed shall be shown as a contingency line item in the Official Statement and the use of such funds shall be subject to approval pursuant toTCEQ Miles :on`surplus funds. CONCLUSIONS OF LAW 1. The TCEQ has jurisdiction to consider the engineering report and bond application pursuant to TEX. WATER CODE §49.181. 2. The Executive Director of the TCEQ has investigated the District, and the TCEQ has found it legally organized and feasible. 3. The Districts Section's memorandum, dated October 26, 2018, on this engineering project and bond issue should be adopted as the written TCEQ project report in compliance with TEX. WATER CODE §49.181(d). NOW THEREFORE, BE IT ORDERED BY THE TEXAS COMMISSION ON ENVIRONMENTAL QUALITY that the Districts Section's memorandum dated October 26, 2018, on this engineering project and bond issue is adopted as the written TCEQ project report. Pursuant to TEX. WATER CODE §49.181, the engineering project for Trophy Club Municipal Utility District No. 1 is hereby approved together with the issuance of $7,200,000 in bonds at a maximum net effective interest rate of 5.16%. The District should be directed to properly escrow a total of $3,846,120 ($3,205,100 in construction plus $641,020 in contingencies) for the water line extensions pending TCEQ approval, which is contingent upon the TCEQ District Section's receipt of plans and specifications approved by all authorities having jurisdiction and recorded easements evidencing District ownership/access to the site; or if only evidence of recorded easements evidencing District ownership/access to the site are provided to the TCEQ, then use of the funds will be subject to District board receipt of plans and specifications approved by all entities with jurisdiction. The District should further be directed to place these funds in one or more authorized financial institutions of the District's choice and provide the TCEQ with a certified copy of the executed escrow agreement(s) between the District and the financial institution(s) stating that the funds, excluding interest earnings, cannot be withdrawn for District use except by written authorization from the TCEQ. The District should be allowed, from time to time, in accordance with good money management practices, to transfer these funds, or parts thereof, from one financial institution to another, provided the funds are not released to the District until the stated conditions are met and the District maintains current agreements with financial institutions in which funds are held stating the conditions for release. The District is advised that the legal, fiscal agent, and engineering fees have not been evaluated to determine whether these fees are reasonable or competitive. These fees are included as presented in the engineering report. The District is directed that any surplus bond proceeds resulting from the sale of bonds at a lower interest rate than that proposed shall be shown as a contingency line item in the Official Statement and the use of such funds shall be subject to approval pursuant to TCEQ rules on surplus funds. The approval of the sale of these bonds herein shall be valid for one year from the date of this Order unless extended by written authorization of the TCEQ. BE IT FURTHER ORDERED that pursuant to TEX. WATER CODE §5.701, the District shall pay to the TCEQ 0.25% of the principal amount of bonds actually issued not later than the seventh (7th) business day after receipt of the bond proceeds. The fees shall be paid by check payable to the Texas Commission on Environmental Quality. 2 BE IT FURTHER ORDERED that to enable the TCEQ to carry out the responsibilities imposed by TEx. WATER CODE §§49.181-182, the District shall (1) furnish the Districts Section copies of all bond issue project construction documentation outlined under 30 TEx. ADMIN. CODE §293.62, including detailed progress reports and as -built plans required by TEx. WATER CODE §49.277(b), which have not already been submitted; (2) notify the Districts Section and obtain approval of the TCEQ for any substantial alterations in the engineering project approved herein before making such alterations; and (3) ensure, as required by TEx. WATER CODE §49.277(b), that all construction financed with the proceeds from the sale of bonds is completed by the construction contractor according to the plans and specifications contracted. BE IT FURTHER ORDERED that failure of said District to comply with all applicable laws and with provisions of this Order shall subject the District and its directors to all penalties that are provided by law and shall further be considered by the TCEQ as grounds for refusal to approve other bonds of the District. The Chief Clerk of the TCEQ is directed to forward the District a copy of this Order. If any provision, sentence, clause, or phrase of this Order is for any reason held to be invalid, the invalidity of any portion shall not affect the validity of the remaining portions of the Order. Issue Date: November 6, 2018 3 Texas Commission on Environmental Quality TECHNICAL MEMORANDUM Chris S. Ulmann, P.E., Manager Districts Section Thru: �1. otikandy Waclawczyk, Leader 01 Districts Bond Team From: Mi' Anand Patel io(LG((UDistricts Bond Team Date: October 26, 2018 Subject: Trophy Club Municipal Utility District No. 1; Application for Approva1i f $ 7,200,000 Revenue Bonds, Seventh Issue, 5.16% Net Effective Interest date, ..; Series 2018; Pursuant to Texas Water Code Section 49.181. TCEQ Internal Control No. D-08212018-017 (TC) CN: 600678536 RN: 101241248 A. GENERAL INFORMATION The Texas Commission on Environmental Quality (TCEQ) received an application from Trophy Club Municipal Utility District No. 1 (District) requesting approval for the issuance of $7,200,000 in revenue bonds to finance the District's share of the following projects: 1. Water line improvements and 2. Wastewater treatment plant (WWTP) improvements supplemental costs. The District is not proposing to fund internal utilities with this bond issue. According to the materials provided, the District currently serves 5,000 ESFCs (revised from the previous bond issue) on approximately 2,688 acres. B. ECONOMIC ANALYSIS Tax Rate Analysis The economic feasibility of this bond issue is based on no -growth to the existing 5,000 ESFCs and secured by revenue earned by the District from its customers. A market study has not been provided and is not required since the feasibility is based on no -growth. The annual debt service requirement for the proposed bond amount of $7,200,000 and any existing debt averages $983,855 for the 30 -year life of the District's revenue debt. The District's financial advisor submitted a cash flow schedule considering the requested $ 7,200,000 bond issue, no capitalized interest, a bond interest rate of 5%, 3% bond discount, and the existing revenue debt of $836,059. The cash flow schedule provided indicates $2,816,802 ($8,895,719 in revenue less $6,078,917 in expenses) being available for the District's current and proposed debt service requirements. Chris S. Ulmann, P.E., Manager October 26, 2018 Page 2 A TCEQ Districts Section financial analyst has reviewed the financial information submitted and concluded that operating revenues generated by the District are expected to be sufficient for operating expenses and the projected annual debt service. Therefore, no revenue from taxes are included in this application. C. ENGINEERING ANALYSIS Water Supply The District's source of water is treated surface water from the City of Fort Worth pursuant to a "Contract for water service between the City of Fort Worth, Texas, and Trophy Club Municipal Utility District No. 1" dated September 16, 2010 and it will be in effect through September 30, 2031. The District also owns four water supply wells. The combined producing capacity of the four wells is approximately 800,000 gpd. The District's existing and proposed water supply facilities appear adequate to serve the 5,000 ESFCs upon which the engineering feasibility of this bond issue is based. Wastewater Treatment Wastewater treatment for the District is provided by the District's. 1.75 million gallons per day wastewater treatment plant. Under TPDES Permit No. WQ0011593001, the plant is authorized to treat average daily flow of 1.75 million gallons per day. The permit allows for the treated effluent to be discharged to the local golf course for irrigation or to Lake Grapevine. Based on the indicated flow factor of 300 gallons per day per ESFC, the District's 1.75 million gallons per day plant can serve 5,833 ESFCs. Additional funds for the improvements to WWTP are being funded in this bond application. The District's wastewater capacity appears adequate to serve the existing 5,000 ESFCs upon which the engineering feasibility of this bond issue is based. Storm Water Drainage Storm water from the district generally drains through underground lines and swales, which eventually outfall into Lake Grapevine through various surface streams. Purchase of Existing Facilities and/or Assumption of Contracts None. Facilities to Be Constructed Estimated Amt. Subj. to Distr. Project Status Cost Contrib. Water Line Improvements Design $3,205,100 $3,205,100 WWTP Improvements Supplemental Costs In Progress $13,926,728"' $13,926,728 ") $591,728 (2) Notes: (1) Represents $13,335,000 approved in the previous bond issue, plus the additional $591,728 requested in the proposed bond issue, for supplemental costs including $366,228 requested for additional construction, plus $25,500 requested for possible outstanding change orders for saw Chris S. Ulmann, P.E., Manager October 26, 2018 Page 3 cutting concrete, guide rail extensions, and additional concrete paving, plus $200,000 requested for installation of foam removal system. (2) Represents remaining construction costs as explained above. Various construction contract documents, payment documents, and approved plans and specifications have not been provided for water line improvements project. Plans and specifications were reviewed for WWTP improvements supplemental costs project in a previous bond issue. D. SUMMARY OF COSTS Construction Costs A. Developer Contribution Items None B. District Items 1. Water Line Improvements 2. WWTP Improvements Supplemental Costs 3. Contingencies (20.13% of Item No. 1 - 2) 4. Engineering (37.61% of Item No. 1 - 2) 5. Geotechnical Testing for Item No. 2 6. Permit fees for Item No. 2 7. Right of Way and Easement Acquisition for Item No. 1 Total District Items TOTAL CONSTRUCTION COSTS (93.06% of BIR) Non -Construction Costs A. Legal Fees B. Fiscal Agent Fees C. Bond Discount (3%) D. Bond Issuance Expenses E. Bond Application Report F. Attorney General Fee (0.1%) G. TCEQ Bond Issulance Fee (0.25%) TOTAL NON -CONSTRUCTION COSTS TOTAL BOND ISSUE REQUIREMENT District's Share 0 3,205,100 591,728 764,205 (" 1,427,879 (2) 50,000 92,038 567.950 (3) 6,698,900 6,698,900 100,400 '4) 76,000 ''' 216,000 58,500 25,000 7,200 18.000 $ 50L100 $ 7,200,000 Notes: (1) Represents total of $641,020 requested for Item No. 1, plus $123,185 requested for Item No. 2. (2) Represents total of $541,308 requested for Item No. 1, plus $886,571 requested for Item No. 2 ($327,577 for field observations, plus $386,679 for construction administration, plus $172,315 for additional inspection). (3) Represents total of $105,950 for easement acquisition services (approximately 7 easements), plus $462,000 for purchase of the easements (total easement area of approximately 46,200 SF at $10/square foot). (4) Represents a total of $100,400 requested including $84,000 pursuant to the contract provided (2.5% of bond amount up to $1,000,000, plus 2% of bond amount between $1,000,000 and $2,000,000, plus 0.75% of bond amount over $2,000,000), plus $14,400 for special tax counsel, plus $2,000 for escrow release counsel. (5) Represents total of $76,000 requested pursuant to the contract provided (1.5% of bond amount up to $3,000,000, plus 1% of bond amount between $3,000,000 and $5,000,000, plus 0.5% of bond amount over $ 5,000,000). Chris S. Ulmann, P.E., Manager October 26, 2018 Page 4 E. SPECIAL CONSIDERATIONS 1. Waiver of the Market Study Reauirement The District has requested a waiver of the market study requirement associated with this bond issue [30 TAC Section 293.59(k)(10)]. Since the feasibility of this bond issue is based on no - growth, a market study is not required and granting a waiver is not necessary. 2. Escrow Reauirements/Use of Funds The cost summary includes funds for projects or facilities for which additional documentation is required and has not been provided. Therefore, the District should properly escrow a total of $3,846,120 ($3,205,100 construction costs plus $641,020 contingency) for the water line improvements project pending TCEQ approval, which is contingent upon the TCEQ District Section's receipt of plans and specifications approved by all authorities with jurisdiction and recorded easements evidencing District ownership/access to the site; or if only evidence of recorded easements evidencing District ownership/access to the site are provided to the TCEQ, then use of the funds will be subject to District board receipt of plans and specifications approved by all entities with jurisdiction. F. CONCLUSIONS 1. Voter authorization is not required for the proposed revenue bond issuance. Based on the review of financial information submitted, operating revenues appear to be sufficient for operating expenses and the District's current and proposed revenue debt. 2. Based on the review of the engineering report and supporting documents, the bond issue is considered feasible and meets the criteria established by the TCEQ's economic feasibility rules, 30 TAC Section 293.59. 3. The recommendations are made under authority delegated by the Executive Director of the TCEQ. G. RECOMMENDATIONS 1. Approve the bond issue in the amount of $7,200,000 in accordance with the recommended summary of costs, at a maximum net effective interest rate of 5.16%. 2. Direct the District's board to ensure that system revenue is adequate to meet operating expenses and debt service requirements on revenue debt. 3. Direct the District to properly escrow a total of $3,846,120 ($3,205,100 construction costs plus $641,020 contingency) for the water line improvements project pending TCEQ approval, which is contingent upon the TCEQ District Section's receipt of plans and specifications approved by all authorities with jurisdiction and recorded easements evidencing District ownership/access to the site; or if only evidence of recorded easements evidencing District ownership/access to the site are provided to the TCEQ, then use of the funds will be subject to District board receipt of plans and specifications approved by all entities with jurisdiction. 4. Standard recommendations regarding consultant fees, surplus proceeds, time of approval, and bond proceeds fee apply. This Official Notice of Sale does not alone constitute an invitation for bids but is merely notice of sale of the Bonds described herein. The invitation for bids on such Bonds is being made by means of this Official Notice of Sale, the Official Bid Form and the Preliminary Official Statement. OFFICIAL NOTICE OF SALE $7,200,000* TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (A Political Subdivision of the State of Texas Located in Denton and Tarrant Counties) WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019 Dated: March 11, 2019 BONDS OFFERED FOR SALE AT COMPETITIVE BID: The Board of Directors (the "Board") of Trophy Club Municipal Utility District No. 1 (the "District" or "Issuer") is offering for sale at competitive bid $7,200,000* Water and Sewer System Revenue Bonds, Series 2019 (the "Bonds"). Bidders must submit bids for the Bonds electronically by Internet as described below in "BIDS BY INTERNET'. BIDS BY INTERNET: Interested bidders may, at their option and risk, submit their bid by electronic media, as described below, by 11:00 A.M., Central time, on March 18, 2019. Bidders submitting a bid by internet shall not be required to submit signed Official Bid Forms prior to the award. Any prospective bidder that intends to submit an electronic bid must submit its electronic bid via the facilities of the i -Deal, LLC Parity System ("PARITY") and should, as a courtesy, register with PARITY by 9:00 A.M., Central time, on March 18, 2019 indicating their intent to submit a bid by Internet. Any prospective bidder that intends to submit an electronic bid must submit its electronic bid via the facilities of PARITY. In the event of a malfunction in the electronic bidding process, bidders may submit their bids by email to Afriedman@samcocapital.com. Bids received after the scheduled time for their receipt will not be accepted. The official time for the receipt of bids shall be the time maintained by PARITY. All electronic bids shall be deemed to incorporate the provisions of this Official Notice of Sale, the Official Bid Form, and the Preliminary Official Statement. To the extent that any instructions or directions set forth in PARITY conflict with this Official Notice of Sale, the terms of this Official Notice of Sale shall control. For further information about the PARITY System, potential bidders may contact i -Deal LLC at 1359 Broadway, 2nd Floor, New York, New York 10018. Telephone 212-849-5021. An electronic bid made through the facilities of PARITY shall be deemed an irrevocable offer to purchase the Bonds on the terms provided in this Official Notice of Sale, and shall be binding upon the bidder as if made by a signed, sealed bid delivered to the Issuer. The Issuer shall not be responsible for any malfunction or mistake made by, or as a result of the use of PARITY, the use of such facilities being the sole risk of the prospective bidder. BIDS BY FACSIMILE: BIDS BY FACSIMILE WILL NOT BE ACCEPTED. BIDS BY TELEPHONE: BIDS BY TELEPHONE WILL NOT BE ACCEPTED. PLACE AND TIME OF BID OPENING: The bids for the Bonds will be publicly opened and reviewed at the Dallas offices of SAMCO Capital Markets, Inc., 1700 Pacific Ave., Suite 2000, Dallas, Texas 75201, at 11:00 A.M., Central time, on Monday, March 18, 2019. AWARD AND SALE OF THE BONDS: At a regular meeting to commence at 6:30 P.M., Central time, on Monday, March 18, 2019, the Board of Directors will take action to reject all bids or award the sale of the Bonds pursuant to an order (the "Order" or "Bond Order"). The Issuer reserves the right to reject any or all bids and to waive any irregularities, except time of filing. * Preliminary, subject to change. See `ADJUSTMENT OF INITIAL PRINCIPAL AMOUNTS" herein. THE BONDS DESCRIPTION OF CERTAIN TERMS OF THE BONDS: The Bonds will be dated March 15, 2019 (the "Dated Date") and interest on the Bonds shall accrue from the Dated Date and will be payable on March 1, 2020, and on each September 1 and March 1 thereafter until maturity or prior redemption. The Bonds will be issued as fully -registered obligations in book -entry form only and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository (the "Securities Depository"). Book -entry interests in the Bonds will be made available for purchase in the principal amount of $5,000 or any integral multiple thereof within a stated maturity. Purchasers of the Bonds ("Beneficial Owners") will not receive physical delivery of certificates representing their interest in the Bonds purchased. So long as DTC or its nominee is the registered owner of the Bonds, the principal of and interest on the Bonds will be payable by the Paying Agent/Registrar, initially BOKF, NA, Dallas, Texas, to the Securities Depository, which will in turn remit such principal and interest to its Participants, which will in turn remit such principal and interest to the Beneficial Owners of the Bonds. (See "BOOK - ENTRY -ONLY SYSTEM" in the Preliminary Official Statement.) MATURITY SCHEDULE The Bonds will be stated to mature on September 1 in each of the following years in the following amounts: Stated Principal Stated Principal Maturity Amount* Maturity Amount* 2021 $105,000 2036* $ 235,000 2022 115,000 2037* 250,000 2023 120,000 2038* 265,000 2024 125,000 2039* 280,000 2025 130,000 2040* 295,000 2026 140,000 2041* 310,000 2027 145,000 2042* 325,000 2028 155,000 2043* 345,000 2029* 165,000 2044* 365,000 2030* 175,000 2045* 385,000 2031* 180,000 2046* 405,000 2032* 190,000 2047* 430,000 2033* 200,000 2048* 450,000 2034* 215,000 2049* 475,000 2035* 225,000 OPTIONAL REDEMPTION: The Issuer reserves the right to redeem the Bonds maturing on and after September 1, 2029, on September 1, 2028, or any date thereafter, in whole or in part, in principal amounts of $5,000 or any integral multiple thereof, at the redemption price of par plus accrued interest as further described herein. (See "THE BONDS - Optional Redemption Provisions" in the Preliminary Official Statement.) SERIAL BONDS AND/OR TERM BONDS: Bidders may provide that all of the Bonds be issued as serial maturities or may provide that any two or more consecutive annual principal amounts for maturities 2029 through 2049 be combined into one or more term Bonds ("Term Bonds"). MANDATORY SINKING FUND REDEMPTION: If the successful bidder designates principal amounts to be combined into one or more Term Bonds, each such Term Bond will be subject to mandatory sinking fund redemption commencing on September 1 of the first year which has been combined to form such Term Bond and continuing on September 1 in each year thereafter until the stated maturity date of that Term Bond. The amount redeemed in any year will be equal to the principal amount for such year set forth in the table under the caption "MATURITY SCHEDULE" on page ii of the Notice of Sale. Bonds to be redeemed in any year by mandatory sinking fund redemption will be redeemed at par and will be selected by lot from among the Bonds then subject to such mandatory sinking fund redemption. The principal amount of the Term Bonds of a stated maturity required to be redeemed pursuant to the operation of such mandatory redemption provisions may be reduced, at the option of the District, by the principal amount of Term Bonds of like stated maturity which, at least 45 days prior to a mandatory redemption date, (1) shall have been acquired by the District and delivered to the Paying Agent/Registrar for cancellation, or (2) shall have been redeemed pursuant to the optional redemption provisions set forth above and not theretofore credited against a mandatory redemption requirement. The Final Official Statement will incorporate the mandatory redemption provisions for the Bonds in the event the successful bidder elects to convert serial maturities into one or more Term Bonds. * Preliminary, subject to change. See `ADJUSTMENT OF INITIAL PRINCIPAL AMOUNTS" herein. AUTHORITY FOR ISSUANCE: The Bonds are being issued pursuant to the terms and provisions of an order of the Board of Directors of the District and in accordance with the Constitution and general laws of the State of Texas (the "State"), including particularly Article XVI, Section 59 of the Texas Constitution and Texas Water Code, Chapters 49 and 54, as amended, and an approving order of the Texas Commission on Environmental Quality issued on November 6, 2018. (See "THE BONDS - Authority for Issuance" in the Preliminary Official Statement.) PAYING AGENT/REGISTRAR: The initial Paying Agent/Registrar for the Bonds is BOKF, NA, Dallas, Texas. In the Bond Order, the District covenants to provide a Paying Agent/Registrar at all times while the Bonds are outstanding, and any Paying Agent/Registrar selected by the District shall be a commercial bank, trust company, financial institution or other entity qualified and authorized to serve in such capacity and perform the duties and services of Paying Agent/Registrar. The Paying Agent/Registrar will maintain the Security Register containing the names and addresses of the registered owners of the Bonds. In the Bond Order the District retains the right to replace the Paying Agent/Registrar. If the Paying Agent/Registrar is replaced by the Issuer, such Paying Agent/Registrar, promptly upon the appointment of a successor, is required to deliver the Security Register to the successor Paying Agent/Registrar. In the event there is a change in the Paying Agent/Registrar, the District has agreed to notify each registered owner of the Bonds then outstanding by United States mail, first-class postage prepaid, at the address in the Security Register, stating the effective date of the change and the mailing address of the successor Paying Agent/Registrar. BOOK -ENTRY -ONLY SYSTEM: The District intends to utilize the Book -Entry -Only System of DTC, with respect to the issuance of the Bonds. (See "BOOK -ENTRY -ONLY SYSTEM" in the Preliminary Official Statement.) PRELIMINARY OFFICIAL STATEMENT AND OTHER TERMS AND COVENANTS IN THE ORDER: Further details regarding the Bonds and certain covenants of the District contained in the Bond Order are set forth in the Preliminary Official Statement to which reference is made for all purposes. CONDITIONS OF SALE TYPES OF BIDS AND INTEREST RATES: The Bonds will be sold in one block, on an "All or None" basis, and at a price that produces a dollar price not less than 97% of their par value, plus a bidders premium not to exceed $5,000, plus accrued interest from the Dated Date (defined herein) of the Bonds. Bidders are invited to name the rate(s) of interest to be borne by the Bonds, provided that each rate bid must be in a multiple of 1/8 of 1% or 1/20 of 1% and the net effective interest for the Bonds (calculated in the manner required by Chapter 1204, as amended, Texas Government Code) must not exceed 15%. The highest rate bid may not exceed the lowest rate bid by more than 300 basis points (or 3% in rate). No limitation is imposed upon bidders as to the number of rates or changes which may be used. All Bonds of one stated maturity must bear one and the same rate. No bids involving supplemental interest rates will be considered. BASIS OF AWARD: For the purpose of awarding the sale of the Bonds, the interest cost of each bid will be computed by determining, at the interest rate or rates specified therein, the total dollar value of all interest on the Bonds from the date thereof to their respective maturities and adding thereto the dollar amount of the discount bid, if any, or subtracting therefrom the dollar amount of the premium bid, if any. Subject to the District's right to reject any or all bids, the Bonds will be awarded to the bidder whose bid, under the above computation, produces the lowest net effective interest rate to the District subject to compliance with Texas Government Code § 2252.908. In the event of mathematical discrepancies between the interest rate or rates and the interest cost determined therefrom, as both appear on the OFFICIAL BID FORM, the bid will be solely governed by the interest rates shown in the OFFICIAL BID FORM. ESTABLISHING THE ISSUE PRICE FOR THE BONDS The Issuer intends to rely on Treasury Regulation section 1.148-1(f)(3)(i) (defining "competitive sale" for purposes of establishing the issue price of municipal bonds), which require, among other things, that the Issuer receives bids from at least three underwriters of municipal bonds who have established industry reputations for underwriting new issuances of municipal bonds (the "Competitive Sale Requirement"). If the Competitive Sale Requirement is satisfied, the winning bidder must complete, execute, and deliver the Issue Price Certificate described below to the Issuer or SAMCO Capital Markets, Inc. (the "Issuer's Municipal Advisor") at least five (5) business days before the closing date. If the Competitive Sale Requirement is not satisfied, the winning bidder will be required to complete, execute, and deliver the Issue Price Certificate to the Issuer or the Issuer's Municipal Advisor within five (5) business days of the date on which the 10% Test (as defined below) is satisfied with respect to each of the maturities of the Bonds, other than Hold - the -Price Maturities (as described below). In the event that the bidding process does not satisfy the Competitive Sale Requirement, each bidder shall designate whether any maturity is a "Hold -the -Price Maturity" by checking the appropriate column in the attached Official Bid Form. Such designation shall be provided to the Issuer's Municipal Advisor not later than 3 p.m. CDT on the date of the bid opening. Such designation shall in no way change the prices bid for the Bonds. With respect to each maturity so designated as a Hold -the -Price Maturity, the winning bidder agrees, on behalf of each Underwriter participating in the purchase of the Bonds, that each Underwriter will neither offer nor sell any Hold -the -Price Maturity to any person at a price that is higher than the initial offering price to the Public during the period starting on the Sale Date and ending on the earlier of (1) the close of the fifth (5th) iii business day after the Sale Date, or (2) the date on which the Underwriters have sold at least 10% of that maturity of the Bonds to the Public at a price that is no higher than the initial offering price to the Public. The winning bidder shall promptly advise the Issuer when the Underwriters have sold 10% of a Hold -the -Price Maturity to the Public at a price that is no higher than the initial offering price to the Public, if that occurs prior to the close of the fifth (5th) business day after the Sale Date. In the event that the bidding process does not satisfy the Competitive Sale Requirement, the winning bidder agrees to promptly report to the Issuer the prices at which at least 10% of each maturity of the Bonds other than a Hold -the -Price Maturity have been sold to the Public. That reporting obligation shall continue until 10% of each such maturity is sold to the Public, whether or not the Closing Date has occurred. By submitting a bid, each bidder confirms that: (i) any agreement among underwriters, any selling group agreement and each retail distribution agreement (to which the bidder is a party) relating to the initial sale of the Bonds to the Public, together with the related pricing wires, contains or will contain language obligating each Underwriter, each dealer who is a member of the selling group, and each broker-dealer that is a party to such retail distribution agreement, as applicable, (A) to report the prices at which it sells to the Public the unsold Bonds of each maturity allotted to it until either all Bonds have been sold or it is notified by the winning bidder that the 10% Test has been satisfied as to the Bonds of that maturity, (B) to promptly notify the winning bidder of any sales of Bonds that, to its knowledge, are made to a purchaser who is a Related Party to an Underwriter, and (C) to acknowledge that, unless otherwise advised by the underwriter, dealer or broker-dealer, the winning bidder will assume that based on such agreement each order submitted by the underwriter, dealer or broker-dealer is a sale to the Public; and (ii) any agreement among underwriters relating to the initial sale of the Bonds to the Public, together with the related pricing wires, contains or will contain language obligating each Underwriter that is a party to a retail distribution agreement to be employed in connection with the initial sale of the Bonds to the Public to require each broker-dealer that is a party to such retail distribution agreement to report the prices at which it sells to the Public the unsold Bonds of each maturity allotted to it until it is notified by the winning bidder or such Underwriter that either the 10% Test has been satisfied as to the Bonds of that maturity or all Bonds of that maturity have been sold to the Public, if and for so long as directed by the winning bidder or such Underwriter and as set forth in the related pricing wire. In order to provide the Issuer with information that enables it to comply with certain requirements of the Internal Revenue Code of 1986, as amended relating to the exclusion of interest on the Bonds from the gross income of their owners, the winning bidder will be required to complete, execute, and deliver to the Issuer or to the Issuer's Municipal Advisor, within the required period (provided below), a certification as to the Bonds' "issue price" substantially in the form and to the effect as the applicable form attached hereto or accompanying this Notice of Sale (the "Issue Price Certificate"). In the event the winning bidder will not reoffer any maturity of the Bonds for sale to the Public (as defined herein) by the Closing Date, the Issue Price Certificate may be modified in a manner approved by the Issuer. Each bidder, by submitting its bid, agrees to complete, execute, and timely deliver the applicable Issue Price Certificate, if its bid is accepted by the Issuer. It will be the responsibility of the winning bidder to institute such syndicate reporting requirements, to make such investigation, or otherwise to ascertain such facts necessary to enable it to make such certification with reasonable certainty. Any questions concerning such certification should be directed to Bond Counsel (identified in the Preliminary Official Statement). For purposes of this section of this Notice of Sale: (i) "Public" means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a Related Party to an Underwriter, (ii) "Underwriter" means (A) any person that agrees pursuant to a written contract with the Issuer (or with the lead Underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public), (iii) "Related Party" means any two or more persons (including an individual, trust, estate, partnership, association, company, or corporation) that are subject, directly or indirectly, to (i) more than 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other), and (iv) "Sale Date" means the date that the Bonds are awarded by the Issuer to the winning bidder. All actions to be taken by the Issuer under this Notice of Sale to establish the issue price of the Bonds may be taken on behalf of the Issuer by the Issuer's Municipal Advisor, and any notice or report to be provided to the Issuer may be provided to the Issuer's Municipal Advisor. The Issuer will consider any bid submitted pursuant to this Notice of Sale to be a firm offer for the purchase of the Bonds, as specified in the bid and, if so stated, in the Official Bid Form. iv GOOD FAITH DEPOSIT: A bank cashier's check payable to the order of "Trophy Club Municipal Utility District No. 1" in the amount of $144,000 which is 2% of the par value of the Bonds (the "Good Faith Deposit") is required. The Good Faith Deposit of the Purchaser will be retained uncashed by the Issuer until the Bonds are delivered, and at that time it will be returned to the Purchaser of the Bonds. The above mentioned Good Faith Deposit may accompany the bid, or it may be submitted separately; however, if submitted separately, it shall be made available to the Issuer prior to the opening of the bids and shall be accompanied by instructions from the bank on which it is drawn which will authorize its use as a Good Faith Deposit by the Purchaser who shall be named in such instructions. No interest will be paid or allowed on any Good Faith Deposit. The checks accompanying all other bids will be returned immediately after the bids are opened and the award of the sale of the Bonds has been made. ADDITIONAL CONDITION OF AWARD — DISCLOSURE OF INTERESTED PARTY FORM: Described hereinafter is a new obligation of the District to receive information from the winning bidder if the bidder is not a publicly traded business entity or a wholly owned subsidiary of a publicly traded business entity (a "Privately Held Bidder"). Effective January 1, 2018, pursuant to Texas Government Code Section 2252.908 (the "Interested Party Disclosure Act"), the District may not award the Bonds to a winning bidder which is a Privately Held Bidder unless such party submits a Certificate of Interested Parties Form 1295 (the "Disclosure Form") to the District as prescribed by the Texas Ethics Commission ("TEC"). In the event that a Privately Held Bidder's bid for the Bonds is the best bid received, the District, acting through its financial advisor, will promptly notify the winning Privately Held Bidder. That notification will serve as the District's conditional verbal acceptance of the bid, and will obligate the winning Privately Held Bidder to establish (unless such winning Privately Held Bidder has previously so established) an account with the TEC, and promptly file a completed Disclosure Form, as described below, in order to allow the District to complete the award. Compliance with Law Prohibiting Contracts with Companies that Boycott Israel and Certain Companies Engaged in Business with Iran, Sudan, or Foreign Terrorist Organizations. Pursuant to Chapter 2270, Texas Government Code, the District will not award the Bonds to a bidder unless the bidder verifies that, at the time of execution and delivery of its bid and, except to the extent otherwise required by applicable federal law, to the date of the delivery of the Bonds, neither the bidder nor any syndicate member listed on the Official Bid Form, nor any wholly owned subsidiary, majority-owned subsidiary, parent company or affiliate of the same, boycotts or will boycott Israel. The terms "boycotts Israel" and "boycott Israel" as used in this paragraph have the meanings assigned to the term "boycott Israel" in Section 808.001 of the Texas Government Code, as amended. Such verification is included in the Official Bid Form attached to this Notice of Sale. Further, by submission of a bid, and as a condition of the award and delivery of the Bonds, the bidder must represent that, pursuant to Section 2252.152 of the Texas Government Code, and except to the extent otherwise required or permitted by or under federal law, neither the bidder, nor any wholly owned subsidiary, majority-owned subsidiary, parent company or affiliate of the bidder (i) engages in business with Iran, Sudan, or foreign terrorist organization as defined in Section 2252.151(2), Texas Government Code or (ii) is a company listed by the Texas Comptroller of Public Accounts under Sections 2270.0201 or 2252.153 of the Texas Government Code. At the request of the District, the bidder agrees to execute further written certification as may be necessary or convenient for the District to establish compliance with these laws. Process for completing the Disclosure Form. Reference should be made to the Disclosure Form, the rules of the TEC with respect to the Disclosure Form (the "Disclosure Rules") and the Interested Party Disclosure Act. Instructional information regarding such matters are set forth at https://www.ethics.state.tx.us/whatsnew/elf_info_form1295.htm. For purposes of completing the Disclosure Form a Privately Held Bidder will need the following information: (a) item 2 – name of governmental entity: Trophy Club Municipal Utility District No. 1 and (b) item 3 – the identification number assigned to this contract by the Trophy Club Municipal Utility District No. 1: "Water and Sewer System Revenue Bonds, Series 2019", and a description of the services to be provided under the contract: "Purchase Trophy Club Municipal Utility District No. 1 Revenue Bonds, Series 2019". The Interested Party Disclosure Act and the Disclosure Rules require a non -publicly traded business entity contracting with the District to complete the form at the TEC Internet "portal" that may be accessed at the url set forth above. The executed Disclosure Form must be sent by email, to the District's financial advisor at Afriedmanna samcocaoital.com, as soon as possible following the notification of conditional verbal acceptance and prior to the final written award. Upon receipt of the final written award, the winning bidder must submit a PDF version of the Disclosure Form to Bond Counsel at tcorbettnmcleanhowardlaw.com. Following the award of the Bonds, the District will acknowledge receipt of the completed Disclosure Form through the TEC website, as required by the law. Preparations for completion, and the significance of, the reported information. In accordance with the Interested Party Disclosure Act, the information reported by the winning Privately Held Bidder must be declared by an authorized agent of the Privately Held Winning Bidder. No exceptions may be made to that requirement. The Interested Party Disclosure Act and the Disclosure Form provides that such acknowledgment is made "under penalty of perjury." Consequently, a winning Privately Held Bidder should take appropriate steps prior to completion of the Disclosure Form to familiarize itself with the Interested Party Disclosure Act, the Disclosure Rules and the Disclosure Form. Time will be of the essence in submitting the form to the District, and no final award will be made by the District regarding the sale of the Bonds until a completed Disclosure Form is received. If applicable, the District reserves the right to reject any bid that does not satisfy the requirement of a completed Disclosure Form, as described herein. Neither the District nor its consultants have the ability to verify the information included in a Disclosure Form, and neither party has an obligation nor undertakes responsibility for advising any bidder with respect to (1) the bidder's obligation to submit the Disclosure Form or (2) the proper completion of the Disclosure Form. Consequently, an entity intending to bid on the Bonds should consult its own advisors to the extent it deems necessary and be prepared to submit the completed form, if required, promptly upon notification from the District that its bid is the conditional winning bid. Instructional videos on logging in and creating a certificate are provided on the TEC's website at https://www.ethics.state.tx.us/whatsnew/elf info form1295.htm. ADDITIONAL CONDITION OF AWARD – COMPLIANCE WITH H.B. 89 AND S.B 252, 85TH TEXAS LEGISLATURE:. To the extent the sale of the Bonds that is the subject of this Notice of Sale constitutes a contract for goods or services within the meaning v of Section 2270.002 of the Texas Government Code, each bidder, through submittal of an executed Official Bid Form, verifies that it does not boycott Israel and will not boycott Israel through the term of the agreement set forth in the Official Bid Form. For purposes of this verification, "boycott Israel" has the meaning ascribed to such term by Chapter 808 of the Texas Government Code. Each bidder, through submittal of the executed Official Bid Form, acknowledges that it is not a company (as defined in Section 2270.0001(2), Texas Government Code) which is on a list prepared and maintained by the Comptroller of Public Accounts of the State of Texas under Sections 2270.0201 or 2252.153, Texas Government Code. IMPACT OF BIDDING SYNDICATE ON AWARD: For purposes of contracting for the sale of the Bonds, the entity signing the bid form as Purchaser shall be solely responsible for the payment of the purchase price of the Bonds. The Purchaser may serve as a syndicate manager and contract under a separate agreement with other syndicate members. However, the District is not a party to that agreement and any information provided regarding syndicate managers would be for informational purposes only. OFFICIAL STATEMENT To assist the Initial Purchaser in complying with Rule 15c2-12 (the "Rule") of the United States Securities and Exchange Commission ("SEC"), the Issuer and the Initial Purchaser contract and agree, by the submission and acceptance of the winning bid, as follows: COMPLIANCE WITH THE RULE: The Issuer has approved and authorized distribution of the accompanying Preliminary Official Statement for dissemination to potential purchasers of the Bonds, but does not presently intend to prepare any other document or version thereof for such purpose, except as described below. Accordingly, the Issuer deems the accompanying Preliminary Official Statement to be final as of its date, within the meaning of the Rule, except for information relating to the offering prices, interest rates, final debt service schedule, selling compensation, identity of the Purchaser and other similar information, terms and provisions to be specified in the competitive bidding process. The Initial Purchaser shall be responsible for promptly informing the Issuer of the initial offering yields of the Bonds. Thereafter, the Issuer will complete and authorize distribution of the Final Official Statement identifying the Initial Purchaser and containing such omitted information. The Issuer does not intend to amend or supplement the Preliminary Official Statement otherwise, except to take into account certain subsequent events, if any, as described below. By delivering the Final Official Statement or any amendment or supplement thereto in the requested quantity to the Initial Purchaser on or after the sale date, the Issuer intends the same to be final as of such date, within the meaning of the Rule. Notwithstanding the foregoing, the Issuer makes no representation concerning the absence of material misstatements or omissions from the Preliminary Official Statement, except only as and to the extent under "CERTIFICATION OF THE OFFICIAL STATEMENT" as described below. To the best knowledge and belief of the Issuer, the Preliminary Official Statement contains information, including financial information or operating data, concerning every entity, enterprise, fund, account, or person that is material to an evaluation of the offering of the Bonds. CONTINUING DISCLOSURE AGREEMENT: The District will agree in the Bond Order to provide certain periodic information and notices of material events in accordance with the Rule, as described in the Preliminary Official Statement under "CONTINUING DISCLOSURE OF INFORMATION." The Initial Purchaser's obligation to accept and pay for the Bonds is conditioned upon delivery to the Initial Purchaser or its agent of a certified copy of the Bond Order containing the agreement described under such heading. COMPLIANCE WITH PRIOR UNDERTAKINGS: During the last five years, the Issuer has complied in all material respects with its previous continuing disclosure agreements made pursuant to the Rule. FINAL OFFICIAL STATEMENT: The Issuer will furnish to the Purchaser, within seven (7) business days after the sale date, an aggregate maximum of fifty (50) copies of the Final Official Statement (and 50 copies of any addenda, supplement or amendment thereto), together with information regarding interest rates and other terms relating to the reoffering of the Bonds, in accordance with the Rule. The Issuer agrees to provide, or cause to be provided, to the Purchaser the Preliminary Official Statement and the Official Statement and any amendments or supplements thereto in such printed or electronic format as may be required for the Purchaser to comply with the Rule and the rules of the Municipal Securities Rulemaking Board (the "MSRB"). The Issuer consents to the distribution of such documents in electronic format. The Purchaser may arrange at its own expense to have the Final Official Statement reproduced and printed if it requires more than 50 copies and may also arrange, at its own expense and responsibility, for completion and perfection of the first or cover page of the Final Official Statement so as to reflect interest rates and other terms and information related to the reoffering of the Bonds. The Purchaser will be responsible for providing information concerning the Issuer and the Bonds to subsequent purchasers of the Bonds, and the Issuer will undertake no responsibility for providing such information other than to make the Final Official Statement available to the Purchaser as provided herein. The Issuer's obligation to supplement the Final Official Statement to correct representations determined to be materially misleading, after the date of the Final Official Statement, shall terminate upon 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 the MSRB, but in no case less than 25 days after the "end of the underwriting period" for the Bonds. The Purchaser by submitting a bid for the Bonds agrees to promptly file the Official Statement with the MSRB. Unless otherwise notified in writing by the Purchaser, the Issuer can assume that the "end of the underwriting period" for purposes of the Rule is the date of the initial delivery of the Bonds to the Purchaser. vi CHANGES TO OFFICIAL STATEMENT: If, subsequent to the date of the Final Official Statement, the Issuer learns, through the ordinary course of business and without undertaking any investigation or examination for such purposes, or is notified by the Initial Purchaser of any adverse event which causes the Final Official Statement to be materially misleading, and unless the Initial Purchaser elects to terminate its obligation to purchase the Bonds, as described below under "DELIVERY AND ACCOMPANYING DOCUMENTS - CONDITIONS TO DELIVERY," the Issuer will promptly prepare and supply to the Initial Purchaser an appropriate amendment or supplement to the Final Official Statement satisfactory to the Initial Purchaser; provided, however, that the obligation of the Issuer to do so will terminate on the date specified under "FINAL OFFICIAL STATEMENT" above. CERTIFICATION OF THE OFFICIAL STATEMENT: At the time of payment for and delivery of the Initial Bonds, the Initial Purchaser will be furnished a certificate, executed by proper officials of the Issuer, acting in their official capacity, in the form specified in the Official Statement under the heading "OTHER PERTINENT INFORMATION — Certification of the Official Statement." The Preliminary Official Statement and Official Notice of Sale will be approved as to form and content and the use thereof in the offering of the Bonds will be authorized, ratified and approved by the District on the date of sale, and the Initial Purchaser will be furnished, upon request, at the time of payment for and the delivery of the Bonds, a certified copy of such approval, duly executed by the proper officials of the Issuer. DELIVERY AND ACCOMPANYING DOCUMENTS INITIAL DELIVERY OF INITIAL BOND: Initial Delivery will be accomplished by the issuance of one fully registered Bond, in the aggregate principal amount of $7,200,000*, payable to the Purchaser (the "Initial Bond"), signed by the President and Secretary of the Board, by their manual or facsimile signatures, approved by the Attorney General, and registered and manually signed by the Comptroller of Public Accounts. Initial Delivery will be at the designated office of the Paying Agent/Registrar. Upon delivery of the Initial Bond, it shall be immediately canceled and one definitive certificate for each maturity in the aggregate principal amount of $7,200,000* payable to Cede & Co. will be delivered to DTC in connection with DTC's Book -Entry -Only System. Payment for the Bonds must be made in immediately available funds for unconditional credit to the District, or as otherwise directed by the District. The Purchaser will be given six business days' notice of the time fixed for delivery of the Bonds. It is anticipated that the delivery of the Initial Bond can be made on or about April 23, 2019, but if for any reason the District is unable to make delivery by May 23, 2019, then the District shall immediately contact the Purchaser and offer to allow the Purchaser to extend his obligation to take up and pay for the Bonds an additional 30 days. If the Purchaser does not elect to extend its offer within six days thereafter, then its Good Faith Deposit will be returned, and both the District and the Purchaser shall be relieved of any further obligation. In no event shall the District be liable for any damages by reason of its failure to deliver the Bonds, provided that such failure is due to circumstances beyond the District's reasonable control. DTC DEFINITIVE BONDS: The Bonds will be issued in book -entry -only form. Cede & Co. is the nominee for DTC. All references herein and in the Official Statement to the holders or registered owners of the Bonds shall mean Cede & Co. and not the beneficial owners of the Bonds. Purchases of beneficial interests in the Bonds will be made in book -entry form in the denomination of $5,000 principal amounts or any integral multiple thereof. Under certain limited circumstances, there may be a cessation of the immobilization of the Bonds at DTC, or another securities depository, in which case, such beneficial interests would become exchangeable for definitive printed obligations of like principal amount. CUSIP NUMBERS: It is anticipated that CUSIP identification numbers will be printed on the Bonds, but neither the failure to print such number on any Certificate nor any error with respect thereto shall constitute cause for a failure or refusal by the Initial Purchaser to accept delivery of and pay for the Bonds in accordance with the terms of the Official Bid Form and this Official Notice of Sale. All expenses in relation to the printing of CUSIP numbers on the Bonds shall be paid by the Issuer; however, the CUSIP Service Bureau's charge for the assignment of the numbers shall be paid by the Initial Purchaser. CONDITIONS TO DELIVERY: The obligation to take up and pay for the Bonds is subject to the following conditions: the issuance of an approving opinion of the Attorney General of Texas, the Initial Purchaser's receipt of the legal opinion of Bond Counsel and the no -litigation certificate, and the non-occurrence of the events described below under the caption "NO MATERIAL ADVERSE CHANGE," all as described below. In addition, if the Issuer fails to comply with its obligations described under "OFFICIAL STATEMENT" above, the Initial Purchaser may terminate its contract to purchase the Bonds by delivering written notice to the Issuer within five (5) days thereafter. NO MATERIAL ADVERSE CHANGE: The obligations of the Initial Purchaser to take up and pay for the Bonds, and of the Issuer to deliver the Bonds to the Initial Purchaser, are subject to the condition that, up to the time of delivery of and receipt of payment for the Bonds, there shall have been no material adverse change in the affairs of the Issuer subsequent to the date of sale from that set forth in the Official Statement, as it may have been finalized, supplemented or amended through the date of delivery. LEGAL OPINIONS: The Bonds are offered when, as and if issued, subject to the approval of certain legal matters by the Attorney General of the State of Texas and Bond Counsel (see discussion "OTHER PERTINENT INFORMATION - Legal Opinions and No -Litigation Certificate" in the Official Statement). * Preliminary, subject to change. vii CHANGE IN TAX-EXEMPT STATUS: At any time before the Bonds are tendered for initial delivery to the Initial Purchaser, the Initial Purchaser may withdraw its bid if the interest on obligations such as the Bonds shall be declared to be includable in the gross income, as defined in section 61 of the Code, of the owners thereof for federal income tax purposes, either by Treasury regulations, by ruling or administrative guidance of the Internal Revenue Service, by a decision of any federal court, or by the terms of any federal income tax legislation enacted subsequent to the date of this Official Notice of Sale. GENERAL CONSIDERATIONS RATING: A bond rating application has been made to S&P Global Ratings, a division of S&P Global Inc. ("S&P"). Currently the District has an S&P underlying rating of "AA" on its outstanding general obligation debt. An explanation of the significance of such rating, when received, may be obtained from S&P. A rating reflects only the view of such company at the time the rating is given, and the Issuer makes no representations as to the appropriateness of the rating. There is no assurance that such a rating will continue for any given period of time, or that it will not be revised downward or withdrawn entirely by the company assigning such rating if, in the judgment of such company, circumstances so warrant. Any such downward revision or withdrawal of the rating may have an adverse effect on the market price of the Bonds. SALE OF ADDITIONAL DEBT: The District does not anticipate the issuance of additional debt within the next twelve months. REGISTRATION AND QUALIFICATION OF BONDS FOR SALE: No registration statement relating to the Bonds has been filed with the SEC under the Securities Act of 1933, as amended, in reliance upon exemptions provided in such Act. The Bonds have not been approved or disapproved by the SEC, nor has the SEC passed upon the accuracy or adequacy of the Official Statement. Any representation to the contrary is a criminal offense. The Bonds have not been registered or qualified under the Securities Act of Texas in reliance upon exemptions contained therein, nor have the Bonds been registered or qualified under the securities acts of any other jurisdiction. The Issuer assumes no responsibility for registration or qualification of the Bonds under the securities laws of any jurisdiction in which the Bonds may be sold, assigned, pledged, hypothecated 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. It is the obligation of the Purchaser to register or qualify sale of the Bonds under the securities laws of any jurisdiction which so requires. The Issuer agrees to cooperate, at the Purchaser's written request and expense and within reasonable limits, in registering or qualifying the Bonds, or in obtaining an exemption from registration or qualification in any state where such action is necessary, but in no instance will the District be required to execute a special or general consent to service of process in any state that the Bonds are offered for sale. ADDITIONAL COPIES: Subject to the limitations described under "OFFICIAL STATEMENT" herein, additional copies of this Official Notice of Sale, the Official Bid Form, and the Preliminary Official Statement may be obtained from SAMCO Capital Markets, Inc., 1700 Pacific Ave., Suite 2000, Dallas, Texas 75201, Attention: Peggy Kilborn (214-765-1440, pkilborn@samcocapital.com). On the date of the sale, the District will, in the Order awarding the sale of the Bonds, approve the form and content of the Final Official Statement, and any addenda, supplement or amendment thereto, and authorize its further use in the reoffering of the Bonds by the Purchaser. ATTEST: Mr. Stephen J. Flynn Secretary/Treasurer, Board of Directors Trophy Club Municipal Utility District No. 1 viii Mr. Gregory Wilson President, Board of Directors Trophy Club Municipal Utility District No. 1 SALE, OFFICIAL BID FORM AND PRELIMINARY OFFICIAL STATEMENT $7,200,000* TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (A Political Subdivision of the State of Texas Located in Denton and Tarrant Counties) Designated by the District as "QUALIFIED TAX-EXEMPT OBLIGATIONS" WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019 Bids due Monday, March 18, 2019 at 11:00 A.M. Central Standard Time *Preliminary, subject to change. See "THE BONDS — ADJUSTMENT OF PRINCIPAL AMOUNT AND MATURITY SCHEDULE FOR THE BONDS" IN THE OFFICIAL NOTICE OF SALE. (this page intentionally left blank) NEW ISSUE — BOOK -ENTRY -ONLY Ratings: S&P: "Applied For" (See "RATING" herein) PRELIMINARY OFFICIAL STATEMENT Dated: March 11, 2019 In the opinion of Bond Counsel, interest on the Bonds is 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 MATTERS" herein including the alternative minimum tax on corporations. The District will designate the Bonds as "Qualified Tax -Exempt Obligations" See "TAX MATTERS - Qualified Tax -Exempt Obligations for Financial Institutions" herein. $7,200,000* TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (A Political Subdivision of the State of Texas Located in Denton and Tarrant Counties) WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019 Dated Date: March 15, 2019 Due: September 1, as shown on Page ii The Trophy Club Municipal Utility District No. 1 (the "District" or "Issuer") $7,200,000* Water and Sewer System Revenue Bonds, Series 2019 (the "Bonds") are being issued pursuant to the terms and provisions of an order (the "Order") of the Board of Directors of the District (the "Board") and in accordance with the Constitution and general laws of the State of Texas (the "State"), including particularly Article XVI, Section 59 of the Texas Constitution and Texas Water Code, Chapters 49 and 54, as amended, and an approving order of the Texas Commission on Environmental Quality issued on November 6, 2018. (See "THE BONDS - Authority for Issuance" herein.) The Bonds, when issued, will constitute special obligations of the District, payable, both as to principal and interest, solely from and secured by a first lien on and pledge of the Net Revenues of the District's water and sewer system (the "System"). The Net Revenues consist of the gross revenues of the System, less maintenance and operation expenses of the System. Depreciation and payments into and out of funds for the Bonds and Additional Parity Obligations shall never be considered expenses of maintenance and operation. Additionally, the District has established a reserve fund (the "Reserve Fund") pledged to the payment of the Bonds and any Additional Parity Obligations and is required to maintain an amount in the Reserve Fund equal to average annual debt service requirements on the Parity Revenue Obligations (see "SELECTED PROVISIONS OF THE ORDER"). The Bonds do not constitute a general obligation of the District, and the holders of the Bonds shall not have the right to demand payment thereof from any funds raised or to be raised by taxation. None of the State of Texas, Denton or Tarrant Counties, Texas nor any political subdivision or municipality, other than the District shall be obligated to pay the principal of or interest on the Bonds. (See "THE BONDS — Security for Payment" herein.) THE BONDS ARE SUBJECT TO SPECIAL INVESTMENT CONSIDERATIONS DESCRIBED HEREIN. (See "INVESTMENT CONSIDERATIONS" herein.) Bond purchasers are encouraged to read this entire Preliminary Official Statement prior to making an investment decision. Interest on the Bonds will accrue from March 15, 2019 (the "Dated Date") and is payable March 1, 2020, and each September 1 and March 1 thereafter until the earlier of maturity or redemption, and will be calculated on the basis of a 360 -day year of twelve 30 -day months. The Bonds will be issued in fully registered form only, without coupons, in denominations of $5,000 or any integral multiple thereof, and when issued, will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company ("DTC"), New York, New York, acting as securities depository for the Bonds until DTC resigns or is discharged. The Bonds initially will be available to purchasers in book -entry form only. Purchasers of the Bonds ("Beneficial Owners") will not receive physical delivery of certificates representing their interest in the Bonds purchased. So long as Cede & Co., as the paying agent to DTC, is the registered owner of the Bonds, principal of and interest on the Bonds will be payable by the paying agent to DTC, which will be solely responsible for making such payment to the Beneficial Owners of the Bonds. The initial paying agent/registrar for the Bonds shall be BOKF, NA, Dallas, Texas (the "Paying Agent"). Proceeds from the sale of the Bonds are being used for (i) acquiring, constructing and equipping improvements to the District's wastewater treatment facilities and constructing water transmission line improvements, and (ii) pay the costs related to the issuance of the Bonds. (See "THE BONDS — Use of Bond Proceeds" herein.) The District reserves the right to redeem, prior to maturity, in integral multiples of $5,000, those Bonds maturing on and after September 1, 2029, in whole or from time to time in part, on September 1, 2028, and on any date thereafter at a price of par plus accrued interest from the most recent interest payment date to the date fixed for redemption. (See "THE BONDS — Optional Redemption" herein.) After requesting competitive bids for purchase of the Bonds, the District will accept the lowest bid to purchase the Bonds, bearing interest rates as shown on page ii herein, at a price of % of par plus a cash premium of $ plus accrued interest to the date of delivery, resulting in a net interest cost rate to the District of %. STATED MATURITY SCHEDULE (See Page ii) The Bonds are offered for delivery, when, as and if issued and received by the initial purchaser (the "Purchaser) and subject to the approving opinion of the Attorney General of the State of Texas and the approval of certain legal matters by McLean and Howard, L.L.P., Austin, Texas, Bond Counsel. Delivery of the Bonds through DTC in Dallas, Texas is expected on or about April 23, 2019. Bids Due: Monday, March 18, 2019 at 11:00 A.M., Central Standard Time Preliminary, subject to change. STATED MATURITY SCHEDULE (Due September 1) Base CUSIP — 897061 (a) Stated Principal Rate Yield CUSIP Maturity Amount* f %) (%) Suffix(a) 2021 $ 105,000 2022 115,000 2023 120,000 2024 125,000 2025 130,000 2026 140,000 2027 145,000 2028 155,000 2029 165,000 2030 175,000 2031 180,000 2032 190,000 2033 200,000 2034 215,000 2035 225,000 2036 235,000 2037 250,000 2038 265,000 2039 280,000 2040 295,000 2041 310,000 2042 325,000 2043 345,000 2044 365,000 2045 385,000 2046 405,000 2047 430,000 2048 450,000 2049 475,000 The District reserves the right to redeem, prior to maturity, in integral multiples of $5,000, those Bonds maturing on and after September 1, 2029, in whole or from time to time in part, on September 1, 2028, and on any date thereafter at a price of par plus accrued interest from the most recent interest payment date to the date fixed for redemption. (See "THE BONDS — Optional Redemption" herein.) (a) CUSP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by S&P Capital IQ on behalf of The American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. Neither the District nor the Financial Advisor is responsible for the selection or the correctness of the CUSIP numbers set forth herein. Preliminary; subject to change. TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 Name Mr. Gregory Wilson Mr. Bill Rose Mr. Steve Flynn Ms. Kelly Castonguay Mr. Mark Chapman BOARD OF DIRECTORS Position President Vice President Secretary / Treasurer Director Director DISTRICT PERSONNEL AND ADVISORS Two Year Term Expires May 2020 2020 2022 2022 2022 General Manager Mr. John Carman Trophy Club, Texas Finance Manager Mr. Steven Krolczyk Trophy Club, Texas Operations Manager Mr. Mike McMahon Trophy Club, Texas Attorneys for the District/Bond Counsel Tony Corbett McLean and Howard, L.L.P. Austin, Texas Financial Advisor SAMCO Capital Markets, Inc. Dallas, Texas Independent Auditors Lafollett and Abbott PLLC Tom Bean, Texas Tax Assessor - Collector Denton County, Texas Tarrant County, Texas Chief Appraiser Denton County, Texas Tarrant County, Texas For Additional Information Please Contact: Mr. Steven Krolczyk Finance Manager Trophy Club Municipal Utility District 100 Municipal Drive Trophy Club, Texas 76262 (682) 831-4600 skrolczvk antcmud.ora Mr. Andrew Friedman Managing Director SAMCO Capital Markets, Inc. 1700 Pacific Avenue, Suite 2000 Dallas, Texas 75201 (214) 765-1413 afriedman(a)samcocaoital.com TABLE OF CONTENTS OFFICIAL STATEMENT 1 INTRODUCTION 1 THE BONDS 1 General 1 Description of the Bonds 1 Use of Bond Proceeds 2 Authority for Issuance 2 Texas Commission on Environmental Quality Approval 2 Payment Record 3 Redemption Provisions 3 Termination of Book -Entry -Only System 4 Defeasance of Outstanding Bonds 4 Paying Agent/Registrar 5 Record Date 5 Tax Covenants 5 SOURCES AND USES OF FUNDS 5 SECURITY FOR THE BONDS 5 Net Revenues 6 Reserve Fund 6 Rate Covenant 7 Issuance of Additional Bonds 7 Bondholders' Remedies 7 RATING 8 BOOK -ENTRY -ONLY SYSTEM 8 Use of Certain Terms in Other Sections of this Official Statement 9 INVESTMENT CONSIDERATIONS 9 General 9 Approval of the Bonds 9 Consolidation 9 Abolition 10 Alteration of Boundaries 10 Registered Owners' Remedies and Bankruptcy Limitations10 Continuing Compliance with Certain Covenants 11 Future Debt 11 Future and Proposed Legislation 11 THE DISTRICT 11 Creation of the District 11 Governance 11 Employees 11 General 11 Location 12 Population 12 Shopping and Commercial Facilities 12 Fire Protection 12 Police Protection 12 Schools 12 Recreational Opportunities 12 Status of Development of the District 13 Public Improvement District Description 13 THE DISTRICTS SYSTEM 13 Description of the Water System 13 Description of the Wastewater System 13 INVESTMENT AUTHORITY AND INVESTMENT PRACTICES OF THE DISTRICT 13 Current Investments 15 LEGAL MATTERS 15 Legal Opinions 15 No -Litigation Certificate 16 No Material Adverse Change 16 TAX MATTERS 16 Tax Exemption 16 Tax Accounting Treatment of Discount and Premium on Certain Bonds 17 Qualified Tax -Exempt Obligations for Financial Institutions 17 CONTINUING DISCLOSURE OF INFORMATION 18 Annual Reports 18 Notice of Certain Events 18 Availability of Information from MSRB 18 Limitations and Amendments 18 Compliance with Prior Agreements 19 FINANCIAL ADVISOR 19 OFFICIAL STATEMENT 19 Updating the Official Statement During Underwriting Period 19 Forward -Looking Statements Disclaimer 19 OTHER MATTERS 20 Registration and Qualification of Bonds for Sale 20 Certification as to Official Statement 20 Concluding Statement 21 Financial Information of the Issuer Selected Provisions of the Order Form of Legal Opinion of Bond Counsel Excerpts from the District's Audited Financial Statements for the Year Ended September 30, 2018 Appendix A Appendix B Appendix C Appendix D The cover page, subsequent pages hereof and the schedules and appendices attached hereto, are part of this Official Statement. iv USE OF INFORMATION IN THE OFFICIAL STATEMENT For purposes of compliance with Rule 15c2-12 of the Securities Exchange Commission (the "Rule"), this document constitutes a preliminary official statement of the Issuer with respect to the Certificates that has been deemed "final" by the Issuer as of its date except for the omission of no more than the information permitted by the Rule. This Official Statement, which includes the cover page and the Appendices hereto, does not constitute an offer to sell or the solicitation of an offer to buy in any jurisdiction to any person to whom it is unlawful to make such offer, solicitation or sale. No dealer, broker, salesperson or other person has been authorized to give information or to make any representation other than those contained in this Official Statement, and, if given or made, such other information must not be relied upon. Certain information set forth herein has been provided by sources other than the District that the District believes to be reliable, but the District makes no representation as to the accuracy of such information. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of the Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District or other matters described herein since the date hereof. See "CONTINUING DISCLOSURE OF INFORMATION" for a description of the District's undertaking to provide certain information on a continuing basis. NEITHER THE DISTRICT NOR ITS FINANCIAL ADVISOR MAKES ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT REGARDING THE DEPOSITORY TRUST COMPANY ("DTC") OR ITS BOOK -ENTRY -ONLY SYSTEM, AS SUCH INFORMATION HAS BEEN PROVIDED BY DTC. THE CERTIFICATES ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE CERTIFICATES IN ACCORDANCE WITH 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. THIS OFFICIAL STATEMENT CONTAINS "FORWARD-LOOKING" STATEMENTS WITHIN THE MEANING OF SECTION 21e OF THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS MAY INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE AND ACHIEVEMENTS TO BE DIFFERENT FROM THE FUTURE RESULTS, PERFORMANCE AND ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD- LOOKING STATEMENTS. INVESTORS ARE CAUTIONED THAT THE ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS. SALE AND DISTRIBUTION OF THE BONDS Award of the Bonds After requesting competitive bids for the Bonds, the District accepted the bid resulting in the lowest net effective interest rate, which bid was tendered by (the "Underwriter") bearing the interest rates shown on the cover page hereof, at a price of % of the par value thereof plus accrued interest to the date of delivery which resulted in a net effective interest rate of %, as calculated pursuant to Chapter 1204 of the Texas Government Code, as amended (the IBA method). Issue Prices and Marketability The delivery of the Bonds is conditioned upon the receipt by the District of a certificate executed and delivered by the Initial Purchaser on or before the date of delivery of the Bonds stating the prices at which a substantial amount of the Bonds of each maturity has been sold to the public. For this purpose, the term "public" shall not include any person who is a bond house, broker or similar person acting in the capacity of underwriter or wholesaler. Otherwise, the District has no understanding with the Initial Purchaser regarding the reoffering yields or prices of the Bonds. Information concerning reoffering yields or prices is the responsibility of the Initial Purchaser. The prices and other terms with respect to the offering and sale of the Bonds may be changed from time -to time by the Initial Purchaser after the Bonds are released for sale, and the Bonds may be offered and sold at prices other than the initial offering prices, including sales to dealers who may sell the Bonds into investment accounts. In connection with the offering of the Bonds, the Initial Purchaser may over - allot or effect transactions which stabilize or maintain the market prices or the Bonds at levels above those which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The District has no control over trading of the Bonds in the secondary market. Moreover, there is no guarantee that a secondary market will be made in the Bonds. In such a secondary market, the difference between the bid and asked price of utility district bonds may be of comparable maturity and quality issued by more traditional bonds of such entities are more generally bought, sold or traded in the secondary market. INVESTMENT 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. v (this page intentionally left blank) SELECTED DATA FROM THE OFFICIAL STATEMENT 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 Issuer The Bonds Security for Payment Trophy Club Municipal Utility District No. 1 (the "District" or "Issue") is a political subdivision of the State of Texas located in Denton and Tarrant Counties, Texas. The District was created as a municipal utility district pursuant to Chapters 49 and 54 of the Texas Water Code and is a conservation and reclamation district in accordance with Article XVI, Section 59 of the Texas Constitution. The District has also adopted a fire protection plan under Section 50.055 of the Texas Water Code, now codified as Subchapter L of Chapter 49 of the Texas Water Code, pursuant to the Order of the Texas Water Commission of August 22, 1983. In July of 2009, documentation was submitted to the Texas Commission on Environmental Quality ("TCEQ") regarding the consolidation of Trophy Club Municipal Utility District Nos. 1 and 2 as of a May 9, 2009 election. (See "THE DISTRICT" herein.) The Bonds are being issued pursuant to the terms and provisions of an order (the "Order") of the Board of Directors of the District (the "Board") and in accordance with the Constitution and general laws of the State of Texas (the "State"), including particularly Article XVI, Section 59 of the Texas Constitution and Texas Water Code, Chapters 49 and 54, as amended, and an approving order of the Texas Commission on Environmental Quality issued on November 6, 2018. (See "THE BONDS - Authority for Issuance" herein.) The Bonds, when issued, will constitute special obligations of the District, payable, both as to principal and interest, solely from and secured by a first lien on and pledge of the Net Revenues of the District's water and sewer system (the "System"). The Net Revenues consist of the gross revenues of the System, less maintenance and operation expenses of the System. Depreciation and payments into and out of funds for the Bonds and Additional Parity Obligations shall never be considered expenses of maintenance and operation. Additionally, the District has established a reserve fund (the "Reserve Fund") pledged to the payment of the Bonds and Additional Parity Obligations and is required to maintain an amount in the Reserve Fund equal to average annual debt service requirements on the Parity Revenue Obligations (see "SELECTED PROVISIONS OF THE ORDER"). The Bonds do not constitute a general obligation of the District, and the holders of the Bonds shall not have the right to demand payment thereof from any funds raised or to be raised by taxation. None of the State of Texas, Denton or Tarrant Counties, Texas nor any political subdivision or municipality, other than the District shall be obligated to pay the principal of or interest on the Bonds. (See "THE BONDS —Security for Payment" herein.) Paying Agent/Registrar The initial Paying Agent/Registrar for the Bonds is BOKF, NA, Dallas, Texas. Description Optional Redemption Tax Matters Use of Proceeds *Preliminary; subject to change The Bonds in the aggregate principal amount of $7,200,000* mature on September 1 of each year in the amounts as set forth on page ii of this Official Statement. Interest accrues from March 15, 2019 (the "Dated Date") at the rates per annum set forth page ii hereof and is payable March 1, 2020 and each September 1 and March 1 thereafter until maturity or earlier redemption. The Bonds are offered in fully registered form in integral multiples of $5,000 for any one maturity. (See "THE BONDS - General Description" herein.) Bonds maturing on and after September 1, 2029 are subject to redemption in whole, or from time to time in part at the option of the District prior to their maturity dates on September 1, 2028, or on any date thereafter, at par plus accrued interest from the most recent interest payment date to the date of redemption. (See "THE BONDS - Optional Redemption" herein.) In the opinion of Bond Counsel, the interest on the Bonds will be excludable from gross income of the owners thereof for purposes of federal income taxation under existing law subject to matters discussed herein under "TAX MATTERS" including the alternative minimum tax on corporations. (See "TAX MATTERS" and Appendix C - "Form of Legal Opinion of Bond Counsel" herein.) Proceeds from the sale of the Bonds will be used to (i) make improvements to the District's wastewater treatment facilities and to construct water transmission line improvements, and (ii) pay the costs related to the issuance of the Bonds. (See "THE BONDS — Use of Bond Proceeds" herein.) vi Ratings Qualified Tax Exempt Obligations Book -Entry -Only System An application has been made to S&P Global Ratings ("S&P") for a rating on the Bonds. (See "RATINGS" herein.) The Issuer will designate the Bonds as "Qualified Tax -Exempt Obligations" for financial institutions. (See "TAX MATTERS - Qualified Tax -Exempt Obligations for Financial Institutions" herein.) 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 Bonds. (See `BOOK -ENTRY -ONLY SYSTEM" herein.) Future Bond Issues Currently the District has no plans to issue additional debt within the next twelve months. Payment Record The Issuer has never defaulted in the timely payment of principal of or interest on its revenue indebtedness. Delivery When issued, anticipated on or about April 23, 2019. Legality Delivery of the Bonds is subject to the approval by the Attorney General of the State of Texas and the rendering of an opinion as to legality by McLean and Howard, L.L.P., Bond Counsel, Austin, Texas. (The remainder of this page has intentionally been left blank.] vii OFFICIAL STATEMENT relating to $7,200,000* TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (A Political Subdivision of the State of Texas Located in Denton and Tarrant Counties, Texas) WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019 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 $7,200,000* Water and Sewer System Revenue Bonds, Series 2019 (the "Bonds"). The Bonds are being issued pursuant to the terms and provisions of an order (the "Order") of the Board of Directors of the District (the "Board") and in accordance with the Constitution and general laws of the State of Texas (the "State"), including particularly Article XVI, Section 59 of the Texas Constitution and Texas Water Code, Chapters 49 and 54, as amended, and an approving order of the Texas Commission on Environmental Quality issued on November 6, 2018, and will constitute special obligations of the District, payable, both as to principal and interest, solely from and secured by a first lien on and pledge of the Net Revenues of the District's water and sewer system (the "System"). Unless otherwise indicated, capitalized terms used in this Official Statement have the same meaning assigned to such terms in the Order. Included in this Official Statement are descriptions of the Bonds, the Order, 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 Financial Advisor. THE BONDS General The Order authorizes the issuance and sale of the Bonds and prescribes the terms, conditions and provisions for payment of the principal of and interest on the Bonds by the District. Set forth below is a description of the Bonds and a summary of certain provisions of the Order. Capitalized terms in such summary are used as defined in the Order. Such summary is not a complete description of the entire Order and is qualified by reference to the Order, copies of which are available from the District or the Financial Advisor. (See "APPENDIX B - SELECTED PROVISIONS OF THE ORDER" herein.) Description of the Bonds The $7,200,000* Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019 will bear interest from March 15, 2019 (the "Dated Date") and will mature on September 1 of the years and in the principal amounts set forth on page ii hereof. Interest on the Bonds is payable March 1, 2020, and each September 1 and March 1 thereafter until the earlier of maturity or redemption, and will be calculated on the basis of a 360 -day year of twelve 30 -day months. The Bonds will be issued in fully registered form only, without coupons, in denominations of $5,000 or any integral multiple thereof. The initial paying agent for the Bonds shall be BOKF, NA, Dallas, Texas ("Paying Agent"). The principal of and interest on the Bonds shall be payable without exchange or collection charges, in any coin or currency of the United States of America which, on the date of payment, is legal tender for the payment of debt due the United States of America. If the specified date for any payment of principal (or Redemption Price) of or interest on the Bonds is a Saturday, Sunday, or legal holiday or equivalent for banking institutions generally in the city in which Designated Payment / Transfer Office of the Paying Agent is located, such payment may be made on the next succeeding day which is not one of the foregoing days without additional interest and with the same force and effect as if made on the specified date for such payment. Initially, the Bonds will be registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book -Entry -Only System described herein. No physical delivery of the Bonds will be made to the beneficial owners. Principal of and interest on the Bonds will be payable by the Paying Agent to Cede & Co., which will distribute the amounts paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds. (See "BOOK—ENTRY-ONLY SYSTEM" HEREIN.) 1 Use of Bond Proceeds Proceeds from the sale of the Bonds are being used to (i) make improvements to the District's wastewater treatment facilities and to construct water transmission line improvements, and (ii) pay the costs related to the issuance of the Bonds. Construction Costs District's Share a. Developer Contribution Items None $ 0 b. District Items 1. Water Line Improvements $ 3,205,100 2. WWTP Improvements Supplemental Costs 591,728 3. Contingencies (20.13% of Item No. 1-2) 764,205 4. Engineering (37.61% of Item No. 1-2 1,427,879 5. Geotechnical Testing for Item No. 2 50,000 6. Permit fees for Item No. 2 92,038 7. Right of Way and Easement Acquisition for Item No. 1 567.950 Total District Items $ 6,698,900 TOTAL CONSTRUCTION COSTS (93.06% of BIR) $ 6,698,900 II. Non -Construction Costs a. Legal Fees b. Fiscal Agent Fees c. Bond Discount (3%) d. Bond lssuance Expenses e. Bond application Report f. Attorney General Fee (0.1%) g. TCEQ Bond Issuance Fee (0.25%) Total Non -Construction Costs $ 100,400 76,000 216,000 58,500 25,000 7,200 18.000 501.100 TOTAL BOND ISSUE REQUIREMENT $ 7,200,000 Notes: (1) (2) (3) (4) (5) (3) (4) (5) Represents total of $641,020 requested for Item No. 1, plus $123,185 requested for Item No. 2. Represents total of $541,308 requested for Item No. 1, plus $886,571 requested for Item No. 2 ($327,577 for field observations, plus $386,679 for construction administration, plus $172,315 for additional inspection). Represents total of $105,950 for easement acquisition services (approximately 7 easements), plus $462,000 for purchase of the easements (total easement area of approximately 46,200 SF at $10/square foot). Represents a total of $100,400 requested including $84,000 pursuant to the contract provided (2.5% of bond amount up to $1,000,000, plus 2% of bond amount between $1,000,000 and $2,000,000; plus 0.75% of bond amount over $2,000,000), plus $14,400 for special tax counsel, plus $2,000 for escrow release counsel. Represents total of $76,000 requested pursuant to the contract provided (1.5% of bond amount up to $3,000,000, plus 1% of bond amount between $3,000,000 and $5,000,000, plus 0.5% of bond amount over $5,000,000). Authority for Issuance The Bonds are issued pursuant to the terms and provisions of an order (the "Order") of the Board of Directors of the District (the "Board") and in accordance with the Constitution and general laws of the State of Texas (the "State"), including particularly Article XVI, Section 59 of the Texas Constitution and Texas Water Code, Chapters 49 and 54, as amended, and an approving order of the Texas Commission on Environmental Quality issued on November 6, 2018. Texas Commission on Environmental Quality Approval On November 6, 2018, the Texas Commission on Environmental Quality ("TCEQ") issued a Commission Order ("TCEQ Order") approving the project and the issuance of the Bonds. The approval order included the following information: Pursuant to TEX. WATER CODE Section 49.181, the engineering project for Trophy Club Municipal Utility District No. 1 of Denton and Tarrant Counties is hereby approved together with the issuance of $7,200,000* in bonds at a maximum net effective interest rate of 5.16%. The District should be directed to properly escrow a total of $3,846,120 ($3,205,100 in construction plus $641,020 in contingencies) for the water line extensions pending TCEQ approval, which is contingent upon the TCEQ District Section's receipt of plans and specifications approved by all authorities having jurisdiction and recorded easements evidencing District ownership/access 2 to the site; or if only evidence of recorded easements evidencing District ownership/access to the site are provided to the TCEQ, then use of the funds will be subject to District board receipt of plans and specifications approved by all entities with jurisdiction. The District should further be directed to place these funds in one or more authorized financial institutions of the Districts choice and provide the TCEQ with a certified copy of the executed escrow agreement(s) between the District and the financial institution(s) stating that the funds, excluding interest earnings, cannot be withdrawn for District use except by written authorization from the TCEQ. The District should be allowed, from time to time, in accordance with good money management practices, to transfer these funds, or parts thereof, from one financial institution to another, provided the funds are not released to the District until the stated conditions are met and the District maintains current agreements with financial institutions in which funds are held stating the conditions for release. The District is advised that the legal, fiscal agent, and engineering fees have not been evaluated to determine whether these fees are reasonable or competitive. These fees are included as presented in the engineering report. The District is directed that any surplus bond proceeds resulting from the sale of bonds at a lower interest rate than that proposed shall be shown as a contingency line item in the Official Statement and the use of such funds shall be subject to approval pursuant to TCEQ rules on surplus funds. The approval of the sale of these bonds herein shall be valid for one year from the date of this Order unless extended by written authorization of the TCEQ. BE IT FURTHER ORDERED that pursuant to TEX. WATER CODE §5.701, the District shall pay to the TCEQ 0.25% of the principal amount of bonds actually issued not later than the seventh (7th) business day after receipt of the bond proceeds. The fees shall be paid by check payable to the Texas Commission on Environmental Quality. The TCEQ further ordered, to enable the TCEQ to carry out the responsibilities imposed by Texas Water Code Sections 49.181- 182, that the District shall: (1) furnish the TCEQ copies of all bond issue project construction documentation outlined under Title 30 of the Texas Administrative Code, Section 293.62, including detailed progress reports and as -built plans required by Texas Water code Section 49.277(b), which have not already been submitted; (2) notify the Utilities and Districts Section of the TCEQ and obtain approval of the TCEQ for any substantial alterations in the engineering project approved herein before making such alterations; and (3) ensure, as required by Texas Water Code Section 49.277(b), that all construction financed with the proceeds from the sale of bonds is completed by the construction contractor according to the plans and specifications contracted. Payment Record The District has never defaulted on the timely payment of principal of and interest on its revenue indebtedness. Redemption Provisions Optional Redemption: The Bonds maturing on or after September 1, 2029, are subject to redemption prior to maturity at the option of the District, in whole or from time to time in part, on September 1, 2028, and on any date thereafter, at a redemption price equal to the principal amount thereof plus accrued interest from the most recent interest payment date to the date fixed for redemption. Notice of Redemption: Not less than thirty (30) days prior to a redemption date for the Bonds, the District shall cause a notice of such redemption to be sent by United States mail, first-class postage prepaid, to the registered owners of each Bond or a portion thereof to be redeemed at its address as it appeared on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing of such notice. With respect to any optional redemption of the Bonds, unless certain prerequisites to such redemption required by the Order have been met and money sufficient to pay the principal of and premium, if any, and interest on the Bonds to be redeemed will have been received by the Paying Agent/Registrar prior to the giving of such notice of redemption, such notice will state that said redemption may, at the option of the Issuer, be conditional upon the satisfaction of such prerequisites and receipt of such money by the Paying Agent/Registrar on or prior to the date fixed for such redemption or upon any prerequisite set forth in such notice of redemption. If a conditional notice of redemption is given and such prerequisites to the redemption are not fulfilled, such notice will be of no force and effect, the Issuer will not redeem such Bonds, and the Paying Agent/Registrar will give notice in the manner in which the notice of redemption was given, to the effect that such Bonds have not been redeemed. ANY NOTICE OF REDEMPTION SO MAILED TO THE REGISTERED OWNERS WILL BE DEEMED TO HAVE BEEN DULY GIVEN IRRESPECTIVE OF WHETHER RECEIVED BY ANY HOLDER OF THE BONDS, AND, SUBJECT TO PROVISION FOR PAYMENT OF THE REDEMPTION PRICE HAVING BEEN MADE, AND ANY PRECONDITIONS STATED IN THE NOTICE OF REDEMPTION HAVING BEEN SATISFIED INTEREST ON THE REDEEMED BONDS SHALL CEASE TO ACCRUE FROM AND AFTER SUCH REDEMPTION DATE NOTWITHSTANDING THAT A BOND HAS NOT BEEN PRESENTED FOR PAYMENT. By the date fixed for any such redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the required redemption price for the Bonds or portions thereof which are to be so redeemed. If such notice of redemption is given and if due provision for such payment is made, all as provided above, the Bonds or portion thereof which are to be redeemed thereby automatically shall be treated as redeemed prior to their scheduled maturities, and they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price from the Paying Agent/Registrar out of the funds provided for such payment. The Paying Agent/Registrar and the Issuer, so long as a Book -Entry -Only System is used for the Bonds, will send any notice of redemption, notice of proposed amendment to the Bonds or other notices with respect to the Bonds only to DTC. Any failure by DTC to advise any DTC participant, or of any DTC participant or indirect participant to notify the Beneficial Owner, will not affect the validity of the redemption of the Bonds called for redemption or any other action premised on any such notice. Redemption of portions of the Bonds by the Issuer 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 DTC participants and indirect participants may implement a redemption of 3 such Bonds from the Beneficial Owners. Any such selection of Bonds to be redeemed will not be governed by the Order and will not be conducted by the Issuer or the Paying Agent/Registrar. Neither the Issuer nor the Paying Agent/Registrar 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 DTC participants, indirect participants, or Beneficial Owners of the selection of portions of the Bonds for redemption. (See "BOOK -ENTRY -ONLY SYSTEM" herein.) Termination of Book -Entry -Only System The District is initially utilizing the book -entry -only system of the DTC. (See "BOOK -ENTRY -ONLY SYSTEM" herein.) In the event that the Book -Entry -Only System is discontinued by DTC or the District, the following provisions will be applicable to the Bonds. Payment: Principal of the Bonds will be payable at maturity or redemption 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 Agent/Registrar in St. Paul, Minnesota (the "Designated Payment/Transfer 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 Payment/Transfer 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. Initially, the only registered owner of the Bonds will be CEDE & CO. as nominee of DTC. (See "BOOK -ENTRY -ONLY SYSTEM" herein.) Registration: 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 Agent/Registrar at the Designated Payment/Transfer Office. A Bond also may be exchanged for a Bond or Bonds of like maturity and interest and having a like aggregate principal amount, upon presentation and surrender at the Designated Payment/Transfer 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 Agent. 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 Paying Agent/Registrar to the registered owner, at the Designated Payment/Transfer Office of the Paying Agent/Registrar or by United States mail, first-class, postage prepaid. To the extent possible, new Bonds issued in an exchange or 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 and the denominations of $5,000 or any integral multiple thereof. (See "BOOK -ENTRY -ONLY SYSTEM" herein for a description of the system to be initially utilized in regard to ownership and transferability of the Bonds.) Limitations on Transfer 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 with respect to any Bond called for redemption, in whole or in part, within forty-five (45) days of the date fixed for redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of a Bond. Replacement 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. Defeasance of Outstanding Bonds The Order provides for the defeasance of the Bonds when payment of the principal of and premium, if any, on Bonds, plus interest thereon to the due date thereof (whether such due date be by reason of maturity, or otherwise), is provided by irrevocably depositing with the Paying Agent/Registrar, or an authorized escrow agent, in trust (1) money sufficient to make such payment or (2) Government Securities, certified by an independent public accounting firm of national reputation to mature as to principal and 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 Bonds. The Order provides that "Government 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, (3) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that are rated 4 as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent and (4) any other then authorized securities or obligations under applicable Texas state law that may be used to defease obligations such as the Bonds. There is no assurance that the current law will not be changed in a manner which would permit investments other than those described above to be made with amounts deposited to defease the Bonds. Because the Order does not contractually limit such investments, registered owners will be deemed to have consented to defeasance with such other investments, notwithstanding the fact that such investments may not be of the same investment quality as those currently permitted under State law. There is no assurance that any particular rating for U.S. Treasury securities used as Government Securities or the rating for any other Government Security will be maintained at any particular rating category. The District has additionally reserved the right, subject to satisfying the requirements of (1) and (2) above, to substitute other Government Securities for the Government 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 initiate proceedings to take any action amending the terms of the Bonds are extinguished. Paying Agent/Registrar Principal of and semiannual interest on the Bonds will be paid by BOKF, NA, Dallas, Texas, the initial Paying Agent/Registrar (the "Paying Agent"). The Paying Agent must be a bank, trust company, financial institution or other entity duly qualified and equally authorized to serve and perform the duties as paying agent and registrar for the Bonds. Provision is made in the Order for the District to replace the Paying Agent by a resolution 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 agent/registrar selected by the District shall be subject to the same qualification requirements as the Paying Agent. The successor paying agent/registrar, if any, shall be determined by the Board of Directors and written notice thereof, specifying the name and address of such successor paying agent/registrar will be sent by the District or the successor paying agent/registrar 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 day of the month preceding such interest payment date. 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, the manner in which the proceeds of the Bonds are to be invested, the periodic calculation and payment to the United States of arbitrage profits from the investment of proceeds, and the reporting of certain information to the United States Treasury. The District may cease to comply with any such covenant if it has received a written 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 of interest on the Bonds under Section 103 of the Code. SOURCES AND USES OF FUNDS The proceeds from the sale of the Bonds will be applied approximately as follows: Sources of Funds Par Amount Accrued Interest Original Issue Premium Total Sources of Funds Uses of Funds Deposit to the Construction Fund Cost of Issuance Accrued Interest Deposit to Interest & Sinking Fund Underwriter's Discount Total Uses of Funds SECURITY FOR THE BONDS The Bonds The following summary of the provisions of the Order that describe the security for the Bonds is qualified by reference to the Order, excerpts of which are included in Appendix B "SELECTED PROVISIONS OF THE ORDER." 5 Net Revenues The District has pledged the Net Revenues to secure the payment of the Bonds, the Outstanding Obligations shown below, and any Additional Bonds (as defined below) and has reserved the right, subject to certain conditions, to pledge the Net Revenues to secure additional parity obligations ("Additional Parity Obligations") from time to time in the future (see "SECURITY FOR THE BONDS — Issuance of Additional Bonds"). The Order defines "Net Revenues" as all of the revenues of every kind and nature received through the operation of the System, less the expenses of operation and maintenance paid thereof, including salaries, labor, materials, repairs and extensions necessary to render efficient service; provided, however, that only such repairs and extensions as in the judgment of the Board, reasonably and fairly exercised, are necessary to keep the System in operation and render adequate service to the District and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair the security of the Bonds or the Additional Parity Obligations shall be deducted in determining Net Revenues. Depreciation and payments into and out of funds for the Outstanding Obligations, the Bonds and any Additional Parity Obligations shall never be considered expenses of maintenance and operation. Additionally, the District has established a reserve fund (the "Reserve Fund") pledged to pay principal of or interest on the Bonds and Additional Parity Obligations and covenants to maintain an amount equal to the Required Reserve, as described below (see "SELECTED PROVISIONS OF THE ORDER"). The District has not covenanted or obligated itself to pay the Bonds from monies raised or to be raised from taxation. The District has Outstanding Obligations secured by and payable from Net Revenues on parity with the Bonds as follows: Dated Date Outstanding Amount Issue Description 02-01-15 $8,280,000 Water & Sewer System Revenue Bonds, Series 2015 10-01-16 $4,230,000 Water & Sewer System Revenue Bonds, Series 2016 Reserve Fund In the Order, the District covenants to accumulate and maintain a reserve for the payment of the Bonds and Additional Parity Obligations (the Required Reserve) equal to the lesser of (i) the Average Annual Debt Service Requirements (calculated on a Fiscal Year basis and determined as of the date of issuance of the Bonds or the most recently issued series of Additional Parity Obligations then Outstanding, or at the option of the District, at the end of each fiscal year) for the Bonds and Additional Parity Obligations or (ii) the maximum amount in a reasonably required reserve fund for the Bonds and Additional Parity Obligations from time to time that can be invested without restriction as to yield pursuant to section 148 of the Internal Revenue Code of 1986, as amended (the Reserve Fund), which Fund or account shall be maintained at an official depository of the District. All funds deposited into the Reserve Fund (excluding surplus funds which include earnings and income derived or received from deposits or investments which will be transferred to the Revenue Fund during such period as there is on deposit in the Reserve Fund the Required Reserve) shall be used solely for the payment of the principal of and interest on the Parity Revenue Obligations, when and to the extent other funds available for such purposes are insufficient, and, in addition, may be used to retire the last stated maturity or interest on the Bonds or Additional Parity Obligations. Upon issuance of the Bonds, the total amount required to be accumulated and maintained in the Reserve Fund is hereby determined to be $398,763* (the Required Reserve), which is equal to not less than the Average Annual Debt Service for the Bonds, and on or before the 1st day of the month next following the month the Bonds are delivered to the Purchasers and on or before the 1st day of each following month, the District shall cause to be deposited to the Reserve Fund from the Pledged Revenues an amount equal to at least one -sixtieth (1/60th) of the Required Reserve. After the Required Reserve has been fully accumulated and while the total amount on deposit in the Reserve Fund is in excess of the Required Reserve, no monthly deposits shall be required to be made to the Reserve Fund. As and when Additional Parity Bonds are delivered or incurred, the Required Reserve shall be increased, if required, to an amount calculated in the manner provided in the first paragraph of this Section. Any additional amount required to be maintained in the Reserve Fund shall be so accumulated by the deposit of the necessary amount of the proceeds of the issue or other lawfully available funds in the Reserve Fund immediately after the delivery of the then proposed Additional Parity Bonds, or, at the option of the District, by the deposit of monthly installments, made on or before the 1st day of each month following the month of delivery of the then proposed Additional Parity Bonds, of not less than 1/60th of the additional amount to be maintained in the Reserve Fund by reason of the issuance of the Additional Parity Bonds then being issued (or 1/60th of the balance of the additional amount not deposited immediately in cash), thereby ensuring the accumulation of the appropriate Required Reserve. When and so long as the cash and investments in the Reserve Fund equal the Required Reserve, no deposits need be made to the credit of the Reserve Fund; but, if and when the Reserve Fund at any time contains less than the Required Reserve (other than as the result of the issuance of Additional Parity Bonds as provided in the preceding paragraph), the District covenants and agrees to cure the deficiency in the Required Reserve by resuming the Required Reserve Fund Deposits to said Fund or account from the Pledged Revenues, or any other lawfully available funds, such monthly deposits to be in amounts equal to not less than 1/60th of the Required Reserve covenanted by the District to be maintained in the Reserve Fund with any such deficiency payments being made on or before the 1st day of each month until the Required Reserve has been fully restored. The District further covenants and agrees that, subject only to the prior payments to be made to the Bond Fund, the Pledged Revenues shall be applied and appropriated and used to establish and maintain the Required Reserve and to cure any deficiency in such amounts as required by the terms of the Order and any other order pertaining to the issuance of Additional Parity Bonds. *Preliminary; subject to change. 6 During such time as the Reserve Fund contains the Required Reserve, the District may, at its option, withdraw all surplus funds in the Reserve Fund in excess of the Required Reserve and deposit such surplus in the Revenue Fund, unless such surplus funds represent proceeds of the Bonds, then such surplus will be transferred to the Bond Fund. The District hereby designates its Depository as the custodian of the Reserve Fund. The District, at its option and consistent with the provisions of the Order, may, to the extent permitted by then -applicable law, fund the Reserve Fund at the Required Reserve by purchasing an insurance policy that will unconditionally obligate the insurance company or other entity to pay all, or any part thereof, of the Required Reserve in the event funds on deposit in the Interest and Sinking Fund are not sufficient to pay the debt service requirements on the Parity Revenue Obligations. All orders adopted after the date hereof authorizing the issuance of Additional Parity Bonds shall contain a provision to this effect. In the event an insurance policy issued to satisfy all or part of the District's obligation with respect to the Reserve Fund causes the amount then on deposit in the Reserve Fund to exceed the Required Reserve, the District may transfer such excess amount to any fund or account established for the payment of or security for the Parity Revenue Obligations (including any escrow established for the final payment of any such obligations pursuant to Chapter 1207, as amended, Texas Government Code) or use such excess amount for any lawful purpose now or hereafter provided by law. Rate Covenant The District will at all times collect for services rendered by the System such amounts as will be at least sufficient to pay all expenses of operation and maintenance, and to provide Net Revenues equal to 1.10 times the amount that is sufficient to pay the scheduled principal of and interest on the Parity Revenue Obligations, plus one times the amount (if any) required to be deposited in any reserve or contingency fund or account created for the payment and security of the Parity Revenue Obligations. Issuance of Additional Bonds The District expressly reserves and shall hereafter have the right to issue in one or more installments such other bonds as provided below. Such Bonds may be payable from and equally secured by a pledge of and first lien on the Net Revenues, to the same extent as pledged and in all things on a parity with the lien of these Bonds. The District expressly reserves and shall hereafter have the right to issue in one or more installments the following: (1) Additional Bonds. The District expressly reserves the right to issue Additional Bonds payable solely from the Net Revenues of the System, for the purpose of completing, repairing, improving, extending, enlarging, or replacing the System, or refund bonds or other obligations issued in connection with the System, and such bonds may be payable form and equally secured by a first lien on and pledge of said Net Revenues on a parity with the pledge thereof for these Bonds. Provided, however, that before the District can issue Additional Bonds payable solely from the Net Revenues of the System, an independent certified public accountant shall certify that the Net Earnings of the System for the last completed fiscal year or a 12 consecutive calendar month period ending no more than 90 days preceding the adoption of the order authorizing the Additional Bonds shall have been not less than 1.20 times the average annual debt service requirements of the Outstanding Obligations, the Bonds and any Additional Parity Obligations. Additionally, in connection with the issuance of Additional Parity Obligations, the President of the Board and the General Manager shall sign a written certificate to the effect that the District is not in default as to any covenant, condition or obligation in connection with the Outstanding Obligations, the Bonds and Additional Parity Obligations and the bond orders authorizing the same and the Interest and Sinking Fund and the Reserve Fund each contain the amount then required to be therein. At such time as the Outstanding Bonds are no longer outstanding, the Accountant, in making a determination of the Net Earnings, may take into consideration a change in the rates and charges for services and facilities afforded by the System that became effective at least sixty (60) days prior to the last day of the period for which Net Earnings are determined and, for purposes of satisfying the above Net Earnings test, make a pro forma determination of the Net Earnings of the System for the period of time covered by his certification or opinion based on such change in rates and charges being in effect for the entire period covered by the Accountant's certificate or opinion. (2) Inferior Lien Bonds. The District also reserves the right to issue inferior lien bonds and to pledge the Net Revenues of the System, to the payment thereof, such pledge to be subordinate in all respects to the lien of these Bonds and the Outstanding Bonds and any Additional Bonds. Bondholders' Remedies The Order provides that, in addition to all other rights and remedies of any Registered Owners provided by the laws of the State of Texas, 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 Registered 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 Registered Owner. Specifically, the Order does not provide for the appointment of a trustee to protect and enforce the interests of the Registered 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 Registered Owners and may prove time consuming, costly and difficult to enforce. 7 Statutory language authorizing local governments such as the District to sue and be sued does not waive the local government's sovereign immunity from suits for money damages, so that in the absence of other waivers of such immunity by the Texas Legislature, a default by the District in its covenants in the Order may not be reduced to a judgment for money damages. The Bonds are not secured by an interest in any improvements or any other property of the District. 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 Registered 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 Registered Owners may be delayed, reduced or otherwise affected or limited by federal bankruptcy laws or other similar laws affecting the rights of creditors of a political subdivision or by a state statute reasonably required to attain an important public purpose. See "INVESTMENT CONSIDERATIONS — Registered Owners' Remedies and Bankruptcy Limitations." RATING Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business ("S&P") has assigned a rating of "AA-" to the Bonds. Currently the District has no underlying rating on its revenue debt. An explanation of the significance of a rating may be obtained from S&P. The rating reflects only the 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 any 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. BOOK -ENTRY -ONLY SYSTEM This section describes how ownership of the Bonds is to be transferred and how the principal of, premium, if any, and interest on the Bonds are to be paid to and credited by the Depository Trust Company while the Bonds are registered in its nominee's name. The information in this section concerning DTC and the Book -Entry -Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The District and the Purchaser believe the source of such information to be reliable, but take no responsibility for the accuracy or completeness thereof. The District and the Purchaser cannot and do not give any assurance the (1) DTC will distribute payments of debt service on the Bonds, or redemption or other notices, to DTC Participant, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Bonds), or redemption or other notices, to the Beneficial Owners (hereinafter defined), or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. DTC will act as securities depository for the Bonds. The Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered certificate will be issued for each maturity of the Bonds, in the aggregate principal amount of each maturity, and will be deposited with DTC. DTC, the world's largest depository, is a limited -purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation", within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non -U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book -entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of certificated securities. Direct Participants include both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has an S&P Global Ratings rating of "AA+". The DTC Rules applicable to its Participants are on file with the SEC. 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 Bonds ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Bonds representing their ownership interests in 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 8 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the Record Date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Issuer or the Paying Agent/Registrar, on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC nor its nominee, the Paying Agent/Registrar, or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or the Paying Agent/Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of the Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Issuer or the Paying Agent/Registrar. Under such circumstances, in the event that a successor securities depository is not obtained, physical Bonds are required to be printed and delivered to DTC Participants or the Beneficial Owners, as the case may be. The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that the Issuer and the Purchasers believe to be reliable, but the Issuer, the Financial Advisors and the Purchasers take no responsibility for the accuracy thereof. Use of Certain Terms in Other Sections of this Official Statement In the event that the Book -Entry -Only System is discontinued by DTC or the use of the Book -Entry -Only System is discontinued by the District, printed certificates representing the Bonds will be issued to the holders and the Bonds will be subject to transfer, exchange and registration provisions as set forth in the Ordinance and summarized under "REGISTRATION, TRANSFER AND EXCHANGE — Future Registration". INVESTMENT CONSIDERATIONS General The Bonds are special limited obligations of the District and are not obligations of the Town of Trophy Club, the Town of Westlake, the State of Texas, Denton County, Tarrant County, or any other political subdivision except the District. Payment of the principal of and interest on the Bonds depends upon the ability of the District to collect amounts sufficient to pay all expenses of operation and maintenance of the System, and to provide Net Revenues which will be adequate to pay promptly all of the principal of and interest on the Additional Parity Obligations and to make all deposits required to be made into the Reserve Fund and any other funds established by the Order or any other order authorizing the issuance of Additional Parity Obligations. The District has not covenanted or obligated itself to pay the Bonds from monies raised or to be raised from taxation. Approval of the Bonds The Attorney General of Texas must approve the legality of the Bonds prior to their delivery. The Attorney General of Texas does not pass upon or guarantee the quality of the Bonds as an investment, nor does he pass upon the adequacy or accuracy of the information contained in this Official Statement. Consolidation A district (such as the District) has the legal authority to consolidate with other municipal utility districts and, in connection therewith, to provide for the consolidation of its assets, such as its water and wastewater systems with the assets of the district(s) with which it is consolidating, as well as its liabilities (which would include the Bonds and other outstanding obligations of the District). The District 9 is the resulting entity from a consolidation in May 2009 of Prior MUD 1 and Prior MUD 2 (see "THE DISTRICT"). No representation is made whether the District will consolidate again in the future with any other district. Abolition Under Texas law, if a municipal utility district is located wholly in two or more municipalities, the district may be abolished by agreement among the district and all of the municipalities in which the district is located. The abolition agreement must provide for the distribution among the municipalities of the property and other assets of the district and for the pro rata assumption by the municipalities of all the debts, liabilities, and obligations of the abolished district. When the pro rata share of any district bonds or other obligations payable in whole or in part from property taxes has been assumed by the municipality, the governing body of the municipality is required to levy and collect taxes on all taxable property in the municipality to pay the principal of and interest on its share as the principal and interest become due and payable. If the abolished municipal utility district has outstanding bonds or other obligations payable in whole or in part from the net revenue from the operation of the district utility system or property, the affected municipalities are required take over and operate the system or property through a board of trustees. The municipalities are required to apply the net revenue from the operation of the system or property to the payment of outstanding revenue bonds or other obligations as if the district had not been abolished. The system or property is required to be operated in that manner until all the revenue bonds or obligations are retired in full by payment or by the refunding of the bonds or other obligations into municipal obligations. When all the revenue bonds and other obligations are retired in full, the property and other assets of the district are distributed among the municipalities as described above. On the distribution, the board of trustees is dissolved. The District is located wholly within the municipalities of the Town of Westlake and the Town of Trophy Club. The Town of Westlake has recently proposed that it, the Town of Trophy Club and the District enter into an agreement to abolish the District with the District's assets and liabilities assumed by the two municipalities. The Board of Directors of the District has rejected that proposal and stated that the District currently intends to continue to operate as a municipal utility district. As described above, the District would have to separately agree to any abolition of the District. No representation is made concerning the ability of the Town of Trophy Club and the Town of Westlake to make debt service payments on the Bonds should abolition occur at some point in thefuture. Alteration of Boundaries In certain circumstances, under Texas law the District may alter its boundaries to: 1) upon satisfying certain conditions, annex additional territory; and 2) exclude land subject to taxation within the District that is not served by District facilities if the District simultaneously annexes land of equal acreage and value that may be practicably served by District facilities. No representation is made concerning the likelihood that the District would effect any change in its boundaries. Registered Owners' Remedies and Bankruptcy Limitations If the District defaults in the payment of principal, interest or redemption price on the Bonds when due, or if it fails to make payments into any fund or funds created in the Bond Resolution or defaults in the observation or performance of any other covenants, conditions or obligations set forth in the Bond Resolution, the Registered Owners have the statutory right of a writ of mandamus issued by a court of competent jurisdiction requiring the District and its officials to observe and perform the covenants, obligations or conditions prescribed in the Bond Resolution. Except for mandamus, the Bond Resolution does not specifically provide for remedies to protect and enforce the interests of the Registered Owners. There is no acceleration of maturity of the Bonds in the event of default and, consequently, the remedy of mandamus may have to be relied upon from year to year. Further, there is no trust indenture or trustee, and all legal actions to enforce such remedies would have to be undertaken at the initiative of, and be financed by, the Registered Owners. Statutory language authorizing local governments such as the District to sue and be sued does not waive the local government's sovereign immunity from suits for money damages, so that in the absence of other waivers of such immunity by the Texas Legislature, a default by the District in its covenants in the Bond Resolution may not be reduced to a judgment for money damages. If such a judgment against the District were obtained, it could not be enforced by direct levy and execution against the District's property. Further, the Registered Owners cannot themselves foreclose on property within the District or sell property within the District to enforce the tax lien on taxable property to pay the principal of and interest on the Bonds. The enforceability of the rights and remedies of the Registered Owners may further be limited by a State of Texas statute reasonably required to attain an important public purpose or 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. Subject to the requirements of Texas law discussed below, a political subdivision such as the District may voluntarily file a petition for relief from creditors under Chapter 9 of the Federal Bankruptcy Code, 11 U.S.C. Sections 901-946. The filing of such petition would automatically stay the enforcement of Registered Owner's remedies, including mandamus. The automatic stay would remain in effect until the federal bankruptcy judge hearing the case dismisses the petition, enters an order granting relief from the stay or otherwise allows creditors to proceed against the petitioning political subdivision. A political subdivision such as the District may qualify as a debtor eligible to proceed in a Chapter 9 case only if it (1) is authorized to file for federal bankruptcy protection by applicable state law, (2) is insolvent or unable to meet its debts as they mature, (3) desires to effect a plan to adjust such debts and (4) has either obtained the agreement of or negotiated in good faith with its creditors or is unable to negotiate with its creditors because negotiation is impracticable. Special districts such as the District must obtain the approval of the TCEQ as a condition to seeking relief under the Federal Bankruptcy Code. The TCEQ is required to investigate the financial condition of a financially troubled district and authorize such district to proceed under federal bankruptcy law only if such district has fully exercised its rights and powers under Texas law and remains unable to meet its debts and other obligations as they mature. 10 Notwithstanding noncompliance by a district with Texas law requirements, the District could file a voluntary bankruptcy petition under Chapter 9, thereby invoking the protection of the automatic stay until the bankruptcy court, after a hearing, dismisses the petition. A federal bankruptcy court is a court of equity and federal bankruptcy judges have considerable discretion in the conduct of bankruptcy proceedings and in making the decision of whether to grant the petitioning District relief from its creditors. While such a decision might be appealable, the concomitant delay and loss of remedies to the Registered Owner could potentially and adversely impair the value of the Registered Owner's claim. Continuing Compliance with Certain Covenants The Order contains covenants by the District intended to preserve the exclusion 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 Currently the District has no plans to issue additional debt within the next twelve months. Future and Proposed Legislation Tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the federal or state level, may adversely affect the tax-exempt status of interest on the Bonds under federal or state law and could affect the market price or marketability of the Bonds. Any such proposal could limit the value of certain deductions and exclusions, including the exclusion for tax-exempt interest. The likelihood of any such proposal being enacted cannot be predicted. Prospective purchasers of the Bonds should consult their own tax advisors regarding the foregoing matters. THE DISTRICT Creation of the District The District was created by the consolidation of two prior municipal utility districts, being Trophy Club Municipal Utility District No. 1 ("Prior MUD 1") and Trophy Club Municipal Utility District No. 2 ("Prior MUD 2" and collectively with Prior MUD 1, the "Prior MUDs"). Prior MUD 1 was created as Denton County Municipal Utility District No. 1 by order of the Texas Water Rights Commission (the "Commission") on March 4, 1975 for the purpose of providing water and sewer facilities and other authorized services to the area within the territory of Prior MUD 1. The name of Prior MUD 1 was changed to Trophy Club Municipal Utility District No. 1 on April 1, 1983. Prior MUD 2 was created as a result of the consolidation of Denton County Municipal Utility District No. 2 and Denton County Municipal Utility District No. 3, which were created by the Texas Commission on Environmental Quality ("TCEQ") for the purpose of providing water, sewer and drainage facilities and other authorized services to the area. The creation of Prior MUD 2 was confirmed by its electorate at an election held on August 9, 1980. On January 26, 2009, the Boards of the Prior MUDs entered into an agreement to consolidate the Prior MUDs into a single Municipal Utility District covering the territory of the Prior MUDs, subject to the approval of the consolidation by the voters at an election held for that purpose. On May 9, 2009, the voters approved the consolidation and the District became the Trophy Club Municipal Utility District No. 1. Pursuant to the consolidation agreement, the District assumed the outstanding bonds, notes and other obligations of the Prior MUDs and the authorized but unissued bonds, taxes and other obligations of the Prior MUDs and became authorized to levy a uniform tax on all taxable property within the District. The functions performed by the District include supplying water for municipal purposes; collecting, transporting, processing and disposing of wastes; establishing, operating and maintaining a fire department; and performing other functions permitted by municipal utility districts under the Texas Water Code. Governance The District is governed by a board of directors which has control over and management supervision of all affairs of the District. There are five elected directors that serve four-year staggered terms. The District and all similar districts are subject to the continuing supervision and filing requirements of the TCEQ, including the preparation and filing of an annual independent audit report. All District facility plans are submitted to the TCEQ for review and approval. Employees The District has seventeen (17) full-time employees for water and wastewater services. The District is required to pay 50% of the costs incurred by the Town (hereinafter defined) for salary, benefits and other compensation of employees who provide firefighting and emergency medical services to both the District and the Town. The District's liabilities under the Agreement for Fire Personnel, including pension benefits, do not have a substantial impact on the District's finances. General The area in the District is locally known as "Trophy Club." It is a residential and mixed-use development consisting of approximately 2,283.5 acres in the Town of Trophy Club, and approximately 468 acres in Town of Westlake (Solana). Of the developed acres within the District, there are approximately 3046 existing households, 136 apartment units, 42 townhouses and 1,444 homes in the Trophy Club PID (the Trophy Club Development"). 11 Location The District is located in southern Denton County and northern Tarrant County partially within the Town of Trophy Club (the "Town") 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 miles from downtown Dallas, 25 miles from downtown Fort Worth, 17 miles from Denton, 8 miles from Grapevine and 14 miles from the Dallas -Fort Worth International Airport. Major highways connecting these population 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 According to District officials, the current population of the District is estimated to be approximately 8,529 (3,046 occupied homes times 2.8 persons per household) and the current population of the entire Town of Trophy Club, the District and the Trophy Club PID No. 1 (the "Trophy Club Development") is estimated at 12,572 (4,490 occupied homes times 2.8 persons per household). Topography and Drainage The land within the District has a gradual slope from the southeast to the northwest toward Marshall Creek, and from the west to the east toward Marshall Creek. 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 approximately 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 flood 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 shopping center within the District has a major grocery store chain, a bank, a major drug store chain, several service businesses, multiple food outlets, beauty shop, and a dry-cleaners. Additionally, there are several more businesses and professional offices located in the District, at the primary entrance to the Town of Trophy Club, and a few restaurants and hotels sitting off the 114 Highway. There are additional shopping facilities in Roanoke, about two (2) miles west of the District and numerous shopping facilities in Southlake about five (5) miles east of the District 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 from the District. Fire Protection The District operates its Fire Department (the "Department") with an engine, a Quint, a brush truck and two support vehicles. Currently the Department is staffed with fifteen (15) full-time professional firefighter/paramedic, fourteen (14) part-time professional Firefighter/EMTs and 4 certified volunteers. Operations under the Department include fire suppression, fire prevention, emergency management, investigation/enforcement and emergency medical response. Police Protection Twenty -four-hour security is provided by the Town of Trophy Club Police Department. Schools The Town is served by the Northwest Independent School District (the "School District" or "Northwest ISD"). Northwest ISD covers approximately 234 square miles in Denton, Wise and Tarrant Counties. In addition to serving the Town, the School District also serves the communities of Aurora, Fairview, Haslet, Justin, Newark, Northlake, Rhome, Roanoke, Trophy Club, Avondale, Drop, Fairview, Marshall Creek and Northlake. Northwest ISD is comprised of 17 elementary schools, 5 middle schools 4 high schools and 2 special schools. The School District serves a 2018-19 estimated enrollment of 24,271. Recreational Opportunities Recreational opportunities in Trophy Club are afforded by Lake Grapevine and its surrounding parks, which lie two miles north and east of the District. The Town has several community parks, including facilities for soccer, baseball, softball, basketball, tennis, a competitive swimming pool and playground amenities. The Town also operates an 877 acre Corps of Engineers park, which features 100 acres of motorized trails, as well as many passive recreational opportunities such as fishing, hiking and picnicking. 12 Status of Development of the District The District is a mature district with approximately 10 acres undeveloped throughout the Town of Trophy Club besides a new development, PD 30, started in 2018. PD 30 has approximately 26.5 acres in the development and is comprised of 36 townhomes, 236 apartments, and various commercial establishments. There is substantial land left for commercial development in the Solana complex, which is located within the Town of Westlake. Status of Business / Commercial Development Solana business complex ("Solana"), a 900 -acre tract located in the District and the Town of Westlake, has approximately 230 acres available for additional development. The existing 14 building campus style office development was originally owned by Los Angeles based Maguire Thomas Partners and IBM Corporation. In September 2014, the Maguire Thomas Partners properties in Solana were sold to BRE Solana LLC (Tarrant Appraisal District lists this taxpayer as 5 Village Circle Holding, LP. Multiple other commercial developments are under construction from restaurant row, retail corner, and others in the undeveloped property in Solana which were approved by the Town of Westlake in 2013. The District cannot predict the impact that any future development may have on the District's financial condition. Public Improvement District Description Trophy Club PID No. 1 (the "PID") consists of approximately 609.683 acres of land generally to the north of Oakmont Drive, Oak Hill Drive and the Quorum Condominiums, east of the Lakes Subdivision and Parkview Drive, south of the Corps of Engineer's property, and west of the Town's eastern limit. The PID is located entirely within the Town limits but outside the District. A master- planned residential community (the "Property") is under construction in the PID and has reached buildout with 1,444 residential connections. located within the Property, which Property is zoned to permit such use pursuant to the PID Zoning. As of September 30, 2014, 1,173 homes have been completed and are occupied and an additional 63 homes have been permitted and are currently under construction. The PID is projected to build out as early as 2017. The District provides emergency and fire protection services to the PID, and the PID pays the District an assessment for such services through a calculated tax rate. The District also provides water and sewer service for the PID. The total billed for PID water and sewer at the end of fiscal year 2018 was $1,578,783. THE DISTRICT'S SYSTEM The following information describes generally the water and wastewater systems for the District. Description of the Water System Sources of Water Supply: The present water supply is provided from two sources: (i) four ground wells which provide approximately 800,000 gallons per day, and (ii) a 21 -inch water line which can deliver 10,000,000 gallons per day of treated water from the City of Fort Worth facilities. Currently the District has a contract with the City of Fort Worth, which expires September 30, 2031, for unlimited water services. Current maximum usage is approximately 7,310,000 gallons per day (of which 6,510,000 is Fort Worth water). These sources, when combined, provide water which complies with the quality requirements of the TCEQ and needs only chlorination at the District's water plant facility. Water Plant Facility: The present facility provides 900,000 gallons elevated and 6,000,000 gallons ground storage with pumping/chlorination capacity of 10,000,000 gallons per day. Description of the Wastewater System Wastewater Treatment Plant Facility: The wastewater treatment plant system has a permitted treatment/discharge capacity of 1,750,000 gallons per day from the TCEQ under TPDES Permit No. 11593-001. The District's discharge permit was renewed in December 2017. Although the permit authorizes the discharge of wastewater to the adjacent tributary leading to Lake Grapevine, the plant effluent is mostly pumped to various holding ponds within the community of Trophy Club and is re -used for irrigating the golf course. The District had previously issued GO and Rev Bonds for a combined $14,995,000 approved by the Texas Commission on Environmental Quality ('TCEQ"). Even though the WWTP project is behind the original construction schedule due to various delays, the project is nearly 99% completion by the end of January 2019. The WWTP project is anticipated to run approximately $1,900,000 over budget, and the District is seeking to finance the overrun as part of the $7,200,000 revenue bond issuance in addition to the water system improvements. 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. Under Texas law, the District is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities, including letters of credit; (2) direct obligations 13 of the State of Texas or its agencies and instrumentalities; (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States; (4) other obligations, 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, including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States; (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 and share certificates meeting the requirements of the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code, as amended) (i) that are issued by or through an institution that has its main office or a branch office in Texas and are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance 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; or (ii) where (a) the funds are invested by the District through (I) a broker that has its main office or a branch office in the State of Texas and is selected from a list adopted by the District as required by law or (II) a depository institution that has its main office or a branch office in the State of Texas that is selected by the District; (b) the broker or the depository institution selected by the District arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions, wherever located, for the account of the District; (c) the full amount of the principal and accrued interest of each of the certificates of deposit is insured by the United States or an instrumentality of the United States, and (d) the District appoints the depository institution selected under (a) above, a custodian as described by Section 2257.041(d) of the Texas Government Code, or a clearing broker-dealer registered with the Securities and Exchange Commission and operating pursuant to Securities and Exchange Commission Rule 15c3-3 (17 C.F.R. Section 240.15c3-3) as custodian for the District with respect to the certificates of deposit; (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by a combination of cash and obligations described in clause (1) which are pledged to the District, held in the District's name, and deposited at the time the investment is made with the District or with a third party selected and approved by the District and are placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in the State; (9) securities lending programs if (i) the securities loaned under the program are 100% collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (6) above, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than "A" or its equivalent or (c) cash invested in obligations described in clauses (1) through (6) above, clauses (11) through (13) below, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the District, held in the District's name and deposited at the time the investment is made with the District or a third party designated by the District; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State of Texas; and (iv) the agreement to lend securities has a term of one year or less; (10) certain bankers' acceptances with the remaining term of 270 days or Tess, if the short-term obligations of the accepting bank or its parent are rated at least "A-1" or "P-1" or the equivalent by at least one nationally recognized credit rating agency; (11) commercial paper with a stated maturity of 270 days or less that is rated at least "A-1" or "P-1" or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank; (12) no-load money market mutual funds registered with and regulated by the United States Securities and Exchange Commission that have a dollar weighted average stated maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share; and, (13) no-load mutual funds registered with the United States Securities and Exchange Commission that have an average weighted maturity of less than two years, invest exclusively in obligations described in 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 nationally recognized rating service. The District may also contract with an investment management firm registered under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board to provide for the investment and management of its public funds or other funds under its control for a term up to two years, but the District retains ultimate responsibility 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, methods to monitor the market price of investments acquired with public funds, a requirement for settlement of all transactions, except investment pool funds and mutual funds, on a delivery versus payment basis, and procedures to monitor rating changes in investments acquired with public funds and the liquidation of such investments consistent with the Public Funds Investment Act. All District funds must be invested consistent with a formally adopted "Investment 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 14 of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and 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 probable safety of capital and the 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, the ending market value and the fully accrued interest for the reporting period of each pooled fund group, (4) the book value and market value of each separately listed asset at the 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 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 State law, the District is additionally required to: (1) annually review its adopted policies and strategies; (2) adopt by written instrument a rule, order, ordinance or resolution stating that it has reviewed its investment policy and investment strategies and records any changes made to either its investment policy or investment strategy in the respective rule, order, ordinance or resolution; (3) require any investment officers with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the Board of Directors; (4) require the qualified representative of firms offering to engage in an investment transaction with the District to: (a) receive and review the District's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude investment transactions conducted between the District and the business organization that are not authorized by the District's investment policy (except to the extent that this authorization is dependent on an analysis of the makeup of the District's entire portfolio or requires an interpretation of subjective investment standards), and (c) deliver a written statement in a form acceptable to the District and the business organization attesting to these requirements; (5) perform an annual audit of the management controls on investments and adherence to the District's investment policy; (6) provide specific investment training for the Treasurer, chief financial officer and investment officers; (7) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse purchase agreement; (8) restrict the investment in no-load mutual funds in the aggregate to no more than 15% of the District's monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service; (9) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements; and (10) at least annually review, revise and adopt a list of qualified brokers that are authorized to engage in investment transactions with the District. Current Investments As of September 30, 2018 (Audited) the District's funds were invested in the District's bank accounts and TexPool as shown in the table that follows. The District does not currently own, nor does it anticipate the inclusion of long-term securities or derivative products in its portfolio. Prosperity Bank Account- General Fund Prosperity Bank Money Market Account- Improvement Reserves TexPool - General Fund (Includes Operating Fund/Fire Dept./Reserves for Future Asset Replacement) TexPool - Debt Service Escrow- Capital Projects Fund $ 1,641,684.00 983,515.00 4,368,107.00 682,345.00 767,358.00 $ 8,443,009.00 The Texas State Comptroller of Public Accounts exercises oversight responsibility over the Texas Local Government Investment Pool ("TexPool"). Oversight includes the ability to significantly influence operations, designation of management and accountability for fiscal matters. Additionally, the State Comptroller has established an advisory board composed both of participants in TexPool and of the other persons who do not have a business relationship with TexPool. The advisory Board members review the investment policy and management fee structure. Finally, TexPool is rated AAA by S&P. TexPool operates in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. As such, TexPool uses amortized cost to report net assets and share prices since that amount approximates fair value. LEGAL MATTERS Legal Opinions Issuance of the Bonds is subject to the approving legal opinion of the Attorney General of Texas to the effect that the initial Bonds are valid and binding obligations of the District and based upon examination of a transcript of the proceedings incident to authorization and issuance of the Bonds, the approving legal opinion of McLean and Howard, L.L.P., ("Bond Counsel") to the effect that the Bonds are valid and binding obligations of the District payable from the sources and enforceable in accordance with the terms and conditions described therein, except to the extent that the enforceability thereof may be affected by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors' rights or the exercise of judicial discretion in accordance with general principles 15 of equity. Bond Counsel's legal opinion will also address the matters described below under "TAX MATTERS - Tax Exemption." Such opinions will express no opinion with respect to the sufficiency of the security for or the marketability of the Bonds. In its capacity as Bond Counsel, McLean and Howard, L.L.P. has reviewed the information describing the Bonds in the Official Statement to verify that such description conforms to the provisions of the Order. The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of the Bonds are based upon a percentage of Bonds actually issued, sold and delivered, and therefore, such fees are contingent upon the sale and delivery of the Bonds. The legal opinion to be delivered concurrently with the delivery of the Bonds expresses the professional judgment of the attorney rendering the opinion as to the legal issue explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of 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. Though it represents the financial Advisor and certain entities that may bid on the Bonds from time to time in matters unrelated to the issuance of the Bonds, Bond Counsel has been engaged by and only represents the District in connection with the issuance of the Bonds. No -Litigation Certificate The District will furnish to the Initial Purchaser a certificate, dated as of the date of delivery of the Bonds, executed by both the President and Secretary of the Board, to the effect that no litigation of any nature, except as disclosed in this Official Statement, has been filed or is then pending or threatened, either in state or federal courts, contesting or attacking the Bonds; restraining or enjoining the issuance, execution or delivery of the Bonds; affecting the provisions made for the payment of or security for the Bonds; in any manner questioning the authority or proceedings for the issuance, execution, or delivery of the Bonds; or affecting the validity of the Bonds. No Material Adverse Change The obligations of the Initial Purchaser to take and pay for the Bonds, and of the District to deliver the Bonds, are subject to the condition that, up to the time of delivery of and receipt of payment for the Bonds, there shall have been no material adverse change in the condition (financial or otherwise) of the District from that set forth or contemplated in the Official Statement. TAX MATTERS Tax Exemption The delivery of the Bonds is subject to the opinion of Bond Counsel to the effect that interest on the Bonds for federal income tax purposes (1) will be excludable from gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date of such opinion (the "Code"), pursuant to section 103 of the Code and existing regulations, published rulings, and court decisions, and (2) will not be included in computing the alternative minimum taxable income of the owners thereof who are individuals or, except as hereinafter described, corporations. A form of Bond Counsel's opinion is reproduced as Appendix C. The statutes, regulations, rulings, and court decisions on which such opinion is based are subject to change. Interest on the Bonds owned by a corporation will be included in such corporation's adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporation, other than an S corporation, a qualified mutual fund, a real estate investment trust, a real estate mortgage investment conduit, or a financial asset securitization investment trust ("FASIT"). A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by Section 55 of the Code will be computed. In rendering the foregoing opinions, Bond Counsel will rely upon representations and certifications of the District made in a certificate dated the date of delivery of the Bonds pertaining to the use, expenditure, and investment of the proceeds of the Bonds and will assume continuing compliance by the District with the provisions of the Order subsequent to the issuance of the Bonds. The Order contains covenants by the District with respect to, among other matters, the use of the proceeds of the Bonds and the facilities financed therewith by persons other than state or local governmental units, the manner in which the proceeds of the Bonds are to be invested, the periodic calculation and payment to the United States Treasury of arbitrage "profits" from the investment of proceeds, and the reporting of certain information to the United States Treasury. Failure to comply with any of these covenants may cause interest on the Bonds to be includable in the gross income of the owners thereof from the date of the issuance of the Bonds. Bond Counsel's opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the District described above. No ruling has been sought from the Internal Revenue Service (the "IRS") with respect to the matters addressed in the opinion of Bond Counsel, and Bond Counsel's opinion is not binding on the IRS. The IRS has an ongoing program of auditing the tax-exempt status of the interest on tax-exempt obligations. If an audit of the Bonds is commenced, under current procedures the IRS is likely to treat the District as the "taxpayer," and the owners of the Bonds would have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest on the Bonds, the District may have different or conflicting interests from the owners of the Bonds. Public awareness of any future audit of the Bonds could adversely affect the value and liquidity of the Bonds during the pendency of the audit, regardless of its ultimate outcome. Except as described above, Bond Counsel expresses no other opinion with respect to any other federal, state or local tax consequences under present law, or proposed legislation, resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Bonds. Prospective purchasers of the Bonds should be aware that the ownership of tax-exempt obligations such as the Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, 16 property and casualty insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, owners of an interest in a FASIT, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Prospective purchasers should consult their own tax advisors as to the applicability of these consequences to their particular circumstances. Existing law may change to reduce or eliminate the benefit to bondholders of the exclusion of interest on the Bonds from gross income for federal income tax purposes. Any proposed legislation or administrative action, whether or not taken, could also affect the value and marketability of the Bonds. Prospective purchasers of the Bonds should consult with their own tax advisors with respect to any proposed or future changes in tax law. Tax Accounting Treatment of Discount and Premium on Certain Bonds The initial public offering price of certain Bonds (the "Discount Bonds") may be less than the amount payable on such Bonds at maturity. An amount equal to the difference between the initial public offering price of a Discount Bond (assuming that a substantial amount of the Discount Bonds of that maturity are sold to the public at such price) and the amount payable at maturity constitutes original issue discount to the initial purchaser of such Discount Bond. A portion of such original issue discount allocable to the holding period of such Discount Bond by the initial purchaser will, upon the disposition of such Discount Bond (including by reason of its payment at maturity), be treated as interest excludable from gross income, rather than as taxable gain, for federal income tax purposes, on the same terms and conditions as those for other interest on the Bonds described above under "Tax Exemption." Such interest is considered to be accrued actuarially in accordance with the constant interest method over the life of a Discount Bond, taking into account the semiannual compounding of accrued interest, at the yield to maturity on such Discount Bond and generally will be allocated to an initial purchaser in a different amount from the amount of the payment denominated as interest actually received by the initial purchaser during the tax year. However, such interest may be required to be taken into account in determining the alternative minimum taxable income of a corporation, for purposes of calculating a corporation's alternative minimum tax imposed by Section 55 of the Code, and the amount of the branch profits tax applicable to certain foreign corporations doing business in the United States, even though there will not be a corresponding cash payment. In addition, the accrual of such interest may result in certain other collateral federal income tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, S corporations with subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, owners of an interest in a FASIT, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Moreover, in the event of the redemption, sale or other taxable disposition of a Discount Bond by the initial owner prior to maturity, the amount realized by such owner in excess of the basis of such 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 Discount Bond was held) is includable in gross income. Owners of Discount Bonds should consult with their own tax advisors with respect to the determination of accrued original issue discount on Discount Bonds for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of Discount Bonds. It is possible that, under applicable provisions governing determination of state and local income taxes, accrued interest on Discount Bonds may be deemed to be received in the year of accrual even though there will not be a corresponding cash payment. The initial public offering price of certain Bonds (the "Premium Bonds") may be greater than the amount payable on such Bonds at maturity. An amount equal to the difference between the initial public offering price of a Premium Bond (assuming that a substantial amount of the Premium Bonds of that maturity are sold to the public at such price) and the amount payable at maturity constitutes premium to the initial purchaser of such Premium Bonds. The basis for federal income tax purposes of a Premium Bond in the hands of such initial purchaser must be reduced each year by the amortizable bond premium, although no federal income tax deduction is allowed as a result of such reduction in basis for amortizable bond premium. Such reduction in basis will increase the amount of any gain (or decrease the amount of any loss) to be recognized for federal income tax purposes upon a sale or other taxable disposition of a Premium Bond. The amount of premium which is amortizable each year by an initial purchaser is determined by using such purchaser's yield to maturity. Purchasers of the Premium Bonds should consult with their own tax advisors with respect to the determination of amortizable bond premium on Premium Bonds for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of Premium Bonds. Qualified Tax -Exempt Obligations for Financial Institutions Section 265 of the Code provides, in general, that interest expense to acquire or carry tax-exempt obligations is not deductible from the gross income of the owner of such obligations. In addition, section 265 of the Code generally disallows 100% of any deduction for interest expense which is incurred by "financial institutions" described in such section and is allocable, as computed in such section, to tax-exempt interest on obligations acquired after August 7, 1986. Section 265(b) of the Code provides an exception to this interest disallowance rule for interest expense allocable to tax-exempt obligations (other than private activity bonds that are not qualified 501(c)(3) bonds) which are designated by an issuer as "qualified tax-exempt obligations." An issuer may designate obligations as "qualified tax-exempt obligations" only if the amount of the issue of which they are a part, when added to the amount of all other tax-exempt obligations (other than private activity bonds that are not qualified 501(c)(3) obligations and other than certain 17 refunding bonds) issued or reasonably anticipated to be issued by the issuer during the same calendar year, does not exceed $10,000,000. The District will designate the Bonds as "qualified tax-exempt obligations" and has certified its expectation that the above- described $10,000,000 ceiling will not be exceeded. Accordingly, it is anticipated that financial institutions which purchase the Bonds will not be subject to the 100% disallowance of interest expense allocable to interest on the Bonds under section 265(b) of the Code. However, the deduction for interest expense incurred by a financial institution which is allocable to the interest on the Bonds will be reduced by 20% pursuant to section 291 of the Code. CONTINUING DISCLOSURE OF INFORMATION In the Order, the Issuer has made the following agreement for the benefit of the holders and beneficial owners of each of the Bonds. The Issuer is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds. Under the agreement, the Issuer will be obligated to provide certain updated financial information and operating data annually, and timely notice of certain specified events, to the Municipal Securities Rulemaking Board (the "MSRB"). Annual Reports The Issuer will provide certain updated financial information and operating data to the MSRB. The District will provide all quantitative financial information and operating data with respect to the District of the general type included in this Official Statement. The information to be updated includes Tables 1, 2, 3, 4, 5, 8, 9 and 10 of Appendix A, and the annual audited financial statements of the District. The Issuer will update and provide this information within six months after the end of each fiscal year ending in and after 2019. The financial information to be provided may be set forth in full in one or more documents or may be included by specific reference to any document available to the public on the MSRB's Internet Website or filed with the SEC, as permitted by SEC Rule 15c2-12 (the "Rule"). The updated information will include audited financial statements for the Issuer, if the Issuer commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the Issuer will provide unaudited financial statements by the required time and audited financial statements when and if such audited financial statements become available. Any such financial statements will be prepared in accordance with the accounting principles described in Appendix D or such other accounting principles as the Issuer may be required to employ from time to time pursuant to State law or regulation. 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 Issuer changes its fiscal year. If the Issuer changes its fiscal year, it will notify the MSRB of the change. Notice of Certain Events The Issuer will provide timely notices of certain events to the MSRB, but in no event will such notices be provided to the MSRB in excess of ten business days after the occurrence of an event. The Issuer will provide notice of any of the following events with respect to the Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (7) modifications to rights of Beneficial Owners of the Bonds, if material; (8) bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the Issuer or other obligated person within the meaning of CFR § 240.15c2-12 (the "Rule"); (13) consummation of a merger, consolidation, or acquisition involving the Issuer or other obligated person within the meaning of the Rule or the sale of all or substantially all of the assets of the Issuer or other obligated person within the meaning of the Rule, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of an definitive agreement relating to any such actions, other than pursuant to its terms, if material; (14) appointment of a successor or additional trustee or the change of name of a trustee, if material; (15) incurrence of a financial obligation of the obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the obligated person, any of which affect security holders, if material; and (16) default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the obligated person, any of which reflect financial difficulties. The terms "financial obligation" and "material" when used in this paragraph shall have the meanings ascribed to them under federal securities laws. Availability of Information from MSRB The Issuer has agreed to provide the foregoing financial information and operating data only as described above. Investors will be able to access continuing disclosure information filed with the MSRB free of charge at www.emma.msrb.org. Limitations and Amendments The Issuer has agreed to update information and to provide notices of certain specified events only as described above. The Issuer 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 Issuer makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Bonds 18 at any future date. The Issuer 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 Issuer to comply with its agreement. The Issuer 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 Issuer, 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 Issuer (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the beneficial owners of the Bonds. The Issuer 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 Issuer 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 For the last five years, the District has complied in all material respects with its previous continuing disclosure agreements made in accordance with the Rule. FINANCIAL ADVISOR SAMCO Capital Markets, Inc. is employed as a Financial Advisor to the Issuer in connection with the issuance of the Bonds. In this capacity, the Financial Advisor has compiled certain data relating to the Bonds and has assisted in drafting 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 Issuer to determine the accuracy or completeness of this Official Statement. Because of its limited participation, the Financial Advisor assumes no responsibility for the accuracy or completeness of any of the information contained herein. The fees for the Financial Advisor are contingent upon the issuance, sale and delivery of the Bonds. The Financial Advisor has provided the following sentence for inclusion in this Official Statement. The Financial Advisor has reviewed the information in this Official Statement in accordance with its responsibilities to the Issuer and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. OFFICIAL STATEMENT Updating the Official Statement During Underwriting Period If, subsequent to the date of the Official Statement to and including the date the Initial Purchaser is no longer required to provide an Official Statement to potential customers who request the same pursuant to Rule 15c2-12 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 the MSRB, but in no case less than 25 days after the "end of the underwriting period"), the District learns or is notified by the Initial Purchaser 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 Initial Purchaser a supplement to the Official Statement which corrects such representation to the reasonable satisfaction of the Initial Purchaser. (See "DELIVERY OF THE BONDS AND ACCOMPANYING DOCUMENTS" in the Official Notice of Sale herein.) The obligation of the District to update or change the Official Statement will terminate 25 days after the date the District delivers the Bonds to the Initial Purchaser (the "end of the underwriting period" within the meaning of the Rule), unless the Initial Purchaser provides written notice to the District that less than all of the Bonds have been sold to ultimate customers on or before such date, in which case the obligation to update or change the Official Statement will extend for an additional period of time of 25 days after all of the Bonds have been sold to ultimate customers (but no longer than 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 the MSRB, but in no case less than 25 days after the "end of the underwriting period" for the Bonds). In the event the Initial Purchaser provides written notice to the District that less than all of the Bonds have been sold to ultimate customers, the Initial Purchaser agrees to notify the District in writing following the occurrence of the "end of the underwriting period" as defined in the Rule. 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. 19 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 Official Statement will prove to be accurate. OTHER MATTERS Legal Investment and Eligibility to Secure Public Funds in Texas Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Bonds are negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking fund of municipalities or other political subdivisions or public agencies of the State of Texas. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Bonds are legal investments for state banks, savings banks, trust companies with at least $1 million of capital and savings and loan associations. The Bonds are eligible to secure deposits of any public funds of the state, its agencies and political subdivisions, and are legal security for those deposits to the extent of their market value. For political subdivisions in Texas which have adopted investment policies and guidelines in accordance with the Public Funds Investment Act (Texas Government Code, Chapter 2256), the Bonds may have to be assigned a rating of "A" or its equivalent as to investment quality by a national rating agency before such obligations are eligible investments for sinking funds and other public funds. (See "RATINGS" herein.) No representation is made that the Bonds will be acceptable to public entities to secure their deposits or acceptable to such institutions for investment purposes. The District has made no investigation of other laws, rules, regulations or investment criteria which might apply to any such persons or entities or which might otherwise limit the suitability of the Bonds for any of the foregoing purposes or limit the authority of such persons or entities to purchase or invest in the Bonds for such purposes. The District has not made any review of the laws in other states to determine whether the Bonds are legal investments for various institutions in those states. 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. Financial Advisor SAMCO Capital Markets, Inc. is employed as the Financial Advisor to the Issuer in connection with the issuance of the Bonds. In this capacity, the Financial Advisor has compiled certain data relating to the Bonds and has assisted in drafting 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 Issuer to determine the accuracy or completeness of this Official Statement. Because of its limited participation, the Financial Advisor assumes no responsibility for the accuracy or completeness of any of the information contained herein. The fees for Financial Advisor are contingent upon the issuance, sale and delivery of the Bonds. Winning Bidder On March 18, 2019, it is expected that the Bonds will be awarded to an underwriter or group of underwriters managed by (the "Purchaser") through a competitive bid process, or the District will reject all bids in accordance with the provisions of the Official Notice of Sale. The initial reoffering yields will be supplied to the District by the Purchaser. The initial reoffering yields shown on page ii of the Official Statement will produce compensation to the Purchaser of approximately Certification as to Official Statement At the time of payment for and delivery of the Bonds, the Purchaser will be furnished a certificate executed by the proper officials of the District acting in their official capacity, to the effect that: (a) the descriptions and statements of or pertaining to the District contained in its Official Statement relating to the Bonds, and any addenda, supplement or amendment thereto, on the date of such Official Statement, on the date of the sale of said Bonds, and on the date of the delivery, were and are true and correct in all material respects; (b) insofar as the District and its affairs, including its financial affairs, are concerned, such Official Statement did not and does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to 20 make the statement therein, in the light of the circumstances under which they were made, not misleading; (c) to the best of their knowledge, insofar as the descriptions and statements, including financial data, or pertaining to entities, other than the District and its activities, contained in such Official Statement are concerned, such statements and data have been obtained from sources which the District believes to be reliable and the District has no reason to believe that they are untrue in any material respect; and (d) there has been no material adverse change in the financial condition of the District since September 30, 2018, the date of the last audited financial statements of the Issuer provided in the Preliminary Official Statement for the Bonds. The Official Statement will be approved as to form and content and the use thereof in the offering of the Bonds will be authorized, ratified and approved by the Board on the date of sale, and the Purchasers will be furnished, upon request, at the time of payment for and the delivery of the Bonds, a certified copy of such approval, duly executed by the proper officials of the Issuer. Concluding Statement The financial data and other information contained in this Official Statement have been obtained from the District's records, audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and orders contained in this Official Statement are made subject to all of the provisions of such statues, documents and orders. 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 all respects. This Official Statement will be approved by the Board of the Issuer for distribution in accordance with the provisions of the Rule. Secretary/Treasurer, Board of Directors Trophy Club Municipal Utility District No. 1 21 President, Board of Directors Trophy Club Municipal Utility District No. 1 (this page intentionally left blank) APPENDIX A FINANCIAL INFORMATION OF THE ISSUER (This appendix contains quantitative 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.) (this page intentionally left blank) FINANCIAL INFORMATION OF THE ISSUER REVENUE BOND DEBT DATA TABLE 1 Revenue Bond Debt Principal Outstanding: (As of September 30, 2018) Waterworks and Sewer System Revenue Bonds, Series 2015 Waterworks and Sewer System Revenue Bonds, Series 2016 Water and Sewer System Revenue Bonds, Series 2019 (the "Bonds") Total Revenue Debt Principal Outstanding *Preliminary, subject to change. $ 8,280,000 4,230,000 7,200,000 * $ 19,710,000 CONDENSED WATER AND SEWER SYSTEM OPERATING STATEMENT TABLE 2 Fiscal Year Ending September 30 2018 2017 2016 2015 2014 Ooeratina Revenues(a) Water and Wastewater Charges $ 9,286,714 (b) $ 8,632,747 $ 6,729,926 $ 6,138,766 $ 5,730,872 Investment Income 61,283 18,940 12,652 6,117 6,071 Other Revenues and Fees 57,864 136,863 120,867 211,321 203,206 Total Operating Revenues $ 9,405,861 $ 8,788,550 $ 6,863,445 $ 6,356,204 $ 5,940,149 Ooeratina Expenses(c) Operating and Maintenance Expenses $ 5,284,818 $ 5,056,094 $ 5,176,084 $ 5,163,671 $ 4,840,819 Total Operating Expenses $ 5,284,818 $ 5,056,094 $ 5,176,084 $ 5,163,671 $ 4,840,819 Net Revenues Available for Debt Service $ 4,121,043 $ 3,732,456 $ 1687,361 $ 1,192,533 $ 1,099,330 Supplemental Utility Fees $ $ - $ 55,200 (d) $ 239,200 (d) $ 331,200 (d) Active Customer Count : Water Sewer 4,723 (e) 4,728 (e) 4,683 4,779 4,688 4,784 (a) Includes water and sewer revenues and excludes ad valorem property tax revenues. 4,704 4,339 4,710 4,344 (b) Audited 2018 Operating Revenues reflect an increase in water & sewer rates, effective April 1, 2018. (See Water & Sewer Rates - Table 10.) t°I Excludes depreciation, capital outlays, fire service expenses and ad valorem property tax -related expenses. (d) Supplemental Utility Fees are generated under the terms of a contract with the Town of Trophy Club to serve homes in the Public Improvement District (PID) and are based on a one time per new home permit charge of $2,300, for a total of 1,407 homes. The total of 1,407 Utility Fees collected was completed in January 2016. tel Customer count includes 1,444 wholesale connections served by the District through a wholesale agreement with the Town of Trophy Club. Sources: The Issuer's Comprehensive Annual Financial Reports and Other Information from the Issuer. DEBT SERVICE COVERAGE Fiscal Year Ended September 30, 2018 (Audited) Net Revenues Available for Debt Service Following the Issuance of the Bonds: TABLE 3 $ 4,121,043 Average Annual Principal and Interest Requirements (2019-2049) $ 989,171.26 4.17 X Coverage of Average Requirements from FY 2018 Net System Revenues Maximum Principal and Interest Requirements (2020) Coverage of Maximum Requirements from FY 2018 Net System Revenues A-1 1,451,962.50 2.84 X OTHER OBLIGATIONS TABLE 4 Principal Interest Average Outstanding Year of Rate Final Annual Original Unaudited Description Issue Payable Maturity Payment Amount as of 9-30-18 Capital Lease Fire Truck 2014 2.50% 2022 $ 127,149 $ 1,057,316 $ 463,561 (a) Notes Payable: Total Other Obligations $ 463,561 (a) The District paid $250,000 in a down payment on October 23, 2014. The Capital Lease calls for seven additional annual payments of $127,149 scheduled for fiscal years 2016 through 2022. The Capital Lease/Fire Truck is paid from Fire Tax Revenue. FUND BALANCES TABLE 5 (As of September 30, 2018 Audited) Water and Sewer Operating Fund (Unassigned) $ 7,254,013 Water and Sewer Operating Fund (Assigned / Non -Spendable Prepaids) 1,510,481 Water and Sewer Capital Projects Fund (1,091,510) Revenue Bond Interest and Sinking Fund 22,145 Revenue Bond Reserve Fund 606,910 Reserve Fund for Replacement of Infrastructure 596,426 Total $ 8,898,465 Source: The Issuer A-2 REVENUE BOND DEBT SERVICE REQUIREMENTS TABLE 6 Revenue The Bonds* Fiscal Year Debt Service Combined Ending 9-30 Outstanding Prinicpal Interest Total Debt Service* 2019 $ 872,338.50 $ - $ $ - $ 872,338.50 2020 873,362.50 578,600.00 578,600.00 1,451,962.50 2021 874,036.00 105,000.00 396,000.00 501,000.00 1,375,036.00 2022 879,402.00 115,000.00 390,225.00 505,225.00 1,384,627.00 2023 879,376.00 120,000.00 383,900.00 503,900.00 1,383,276.00 2024 883,952.00 125,000.00 377,300.00 502,300.00 1,386,252.00 2025 893,030.00 130,000.00 370,425.00 500,425.00 1,393,455.00 2026 890,475.00 140,000.00 363,275.00 503,275.00 1,393,750.00 2027 896,387.50 145,000.00 355,575.00 500,575.00 1,396,962.50 2028 896,499.50 155,000.00 347,600.00 502,600.00 1,399,099.50 2029 904,781.50 165,000.00 339,075.00 504,075.00 1,408,856.50 2030 906,808.50 175,000.00 330,000.00 505,000.00 1,411,808.50 2031 911,690.50 180,000.00 320,375.00 500,375.00 1,412,065.50 2032 915,661.00 190,000.00 310,475.00 500,475.00 1,416,136.00 2033 913,836.00 200,000.00 300,025.00 500,025.00 1,413,861.00 2034 926,286.00 215,000.00 289,025.00 504,025.00 1,430,311.00 2035 926,737.50 225,000.00 277,200.00 502,200.00 1,428,937.50 2036 275,724.00 235,000.00 264,825.00 499,825.00 775,549.00 2037 250,000.00 251,900.00 501,900.00 501,900.00 2038 265,000.00 238,150.00 503,150.00 503,150.00 2039 280,000.00 223,575.00 503,575.00 503,575.00 2040 295,000.00 208,175.00 503,175.00 503,175.00 2041 310,000.00 191,950.00 501,950.00 501,950.00 2042 325,000.00 174,900.00 499,900.00 499,900.00 2043 345,000.00 157,025.00 502,025.00 502,025.00 2044 365,000.00 138,050.00 503,050.00 503,050.00 2045 385,000.00 117,975.00 502,975.00 502,975.00 2046 405,000.00 96,800.00 501,800.00 501,800.00 2047 430,000.00 74,525.00 504,525.00 504,525.00 2048 450,000.00 50,875.00 500,875.00 500,875.00 2049 475,000.00 26,125.00 501,125.00 501,125.00 $15,520,384.00 $ 7,200,000.00 $ 7,943,925.00 $15,143,925.00 $ 30,664,309.00 * Preliminary; subject to change. A-3 PRINCIPAL REPAYMENT SCHEDULE TABLE 7 Bonds Percent of Fiscal Year Outstanding The Total Unpaid at Principal Ending 9-30 Revenue Debt Bonds Debt End of Year Retired (%) 2019 $ 595,000 $ $ 595,000 $ 19,115,000 3.02% 2020 605,000 605,000 18,510,000 6.09% 2021 615,000 105,000 720,000 17,790,000 9.74% 2022 630,000 115,000 745,000 17,045,000 13.52% 2023 640,000 120,000 760,000 16,285,000 17.38% 2024 655,000 125,000 780,000 15,505,000 21.33% 2025 675,000 130,000 805,000 14,700,000 25.42% 2026 685,000 140,000 825,000 13,875,000 29.60% 2027 705,000 145,000 850,000 13,025,000 33.92% 2028 720,000 155,000 875,000 12,150,000 38.36% 2029 745,000 165,000 910,000 11,240,000 42.97% 2030 765,000 175,000 940,000 10,300,000 47.74% 2031 790,000 180,000 970,000 9,330,000 52.66% 2032 815,000 190,000 1,005,000 8,325,000 57.76% 2033 835,000 200,000 1,035,000 7,290,000 63.01% 2034 870,000 215,000 1,085,000 6,205,000 68.52% 2035 895,000 225,000 1,120,000 5,085,000 74.20% 2036 270,000 235,000 505,000 4,580,000 76.76% 2037 - 250,000 250,000 4,330,000 78.03% 2038 265,000 265,000 4,065,000 79.38% 2039 280,000 280,000 3,785,000 80.80% 2040 295,000 295,000 3,490,000 82.29% 2041 310,000 310,000 3,180,000 83.87% 2042 - 325,000 325,000 2,855,000 85.51% 2043 - 345,000 345,000 2,510,000 87.27% 2044 - 365,000 365,000 2,145,000 89.12% 2045 385,000 385,000 1,760,000 91.07% 2046 405,000 405,000 1,355,000 93.13% 2047 - 430,000 430,000 925,000 95.31% 2048 450,000 450,000 475,000 97.59% 2049 - 475,000 475,000 100.00% $ 12,510,000 $ 7,200,000 $ 19,710,000 $251,230,000 * Preliminary; subject to change. A-4 HISTORICAL PRODUCTION AND CONSUMPTION DATA TABLE 8 Fiscal Year Ended September 30 2018 2017 2016 2015 2014 Production: Gallons pumped into System ( in 000 gallons) 955,151 940,027 894,859 902,398 937,819 Usage: Water Active Meter Count 4,723 4,683 4,779 4,704 4,339 Total Gallons Billed (in 000 gallons) 884,662 855,792 830,653 818,827 888,962 Water Accountability Ratio 92.62% 91.04% 92.83% 90.74% 94.79% Total Water Sales ($$) $ 6,009,610 $ 5,822,785 $ 4,210,866 $ 3,781,229 $ 3,461,337 Average Monthly Usage Per User in Gallons 15,867 15,283 17,000 17,000 17,000 Average Monthly Bill Per User ($$) $ 106.33 $ 103.44 $ 73.43 $ 66.99 $ 66.47 Percentage Water Loss in System 7.38% 8.52% 7.17% 9.26% 5.21% Source: The Issuer's annual audit reports (statistical information section) and the Issuer. PRINCIPAL WATERISEWER CUSTOMERS TABLE 9 (As of September 30, 2018) Average Monthly Consumption Average Name of Customer In Gallons Monthly Bill Maguire Thomas/BRE Solana LLC 5,055,417 $ 35,645 Town of Trophy Club 2,453,667 18,762 Marriott -Solana 1,868,333 12,510 HMC Solana LLC 1,693,750 11,998 The Vineyards at Trophy Club 1,302,667 8,543 Byron Nelson High School 958,417 7,706 Clubcorp Golf of Texas, LP 948,000 6,292 Value Place Hotel 894,333 5,966 Armore II -Quorum, LLC 642,667 4,584 Trophy Club Lodging LTD 660,750 4,418 Total 16,478,001 $ 116,424 Principal water/sewer customers for 2018 represent 14.85% of the District's total annual revenue. Source: Issuer A-5 WATER AND SEWER RATES TABLE 10 Water Base Rates Meter Size 5/8" & 3/4" 1" 1.5" 2" 3" 4" 6" Monthly Base Rate $ 17.15 32.23 56.94 86.58 155.76 254.59 501.64 Sewer Base and Volumetric Rates Residential Commercial Water Base Rates Meter Size 5/8" & 3/4" 1" 1.5" 2" 3" 4" 6" $ 20.60 $ 20.60 Monthly Base Rate $ 17.15 32.23 56.94 86.58 155.76 254.59 501.64 Sewer Base and Volumetric Rates Residential $ 17.50 Current Rates Effective October 1, 2018 Water Volumetric Rates Gallons 0 to 6,000 6,001 to 17,000 17,001 to 25,000 25,001 to 50,000 50,001 and Over 0 to 4,000 4,001 to 8,000 8,001 to 12,000 12,000 plus All Previous Rates Effective April 1, 2017 Rates per 1,000 Gallons Over Base $ 3.96 4.61 5.34 6.20 7.21 $ 3.24 4.60 6.56 9.32 $ 6.30 Water Volumetric Rates Gallons 0 to 6,000 6,001 to 17,000 17,001 to 25,000 25,001 to 50,000 50,001 and Over 0 to 4,000 4,001 to 8,000 8,001 to 12,000 12,000 plus Commercial $ 17.50 $4.89/1,000 gallons A-6 Rates per 1,000 Gallons Over Base $ 3.96 4.61 5.34 6.20 7.21 $ 2.84 4.03 5.74 8.16 APPENDIX B SELECTED PROVISIONS OF THE ORDER (this page intentionally left blank) EXCERPTS FROM THE BOND ORDER The following are excerpts of certain provisions of the Order to be adopted by the Board of Directors authorizing the issuance of the Bonds. Such excerpts do not purport to be complete and reference should be made to the Resolution for the entirety thereof. Copies of the Order are available upon request to the District or the District 's Bond Counsel. Section 2.1 Definitions. For all purposes of this Order, unless the context requires a different meaning or except as otherwise expressly provided, the following terms shall have the meanings assigned to them below: "Additional Parity Obligations" means revenue bonds or other evidences of indebtedness which the District reserves the right to issue or enter into, as the case may be, in the future in accordance with the terms and conditions provided in Section 10.1 hereof and which are equally and ratably secured by a lien on and pledge of the Pledged Revenues. "Authorized Investments" shall mean all direct or indirect obligations of the United States or one of its agencies, the State, any county, city, school district or other political subdivision of the State and certificates of deposit of state or national banks or savings and loan associations within the State; provided that any such certificates of deposit are secured by direct or indirect obligations of the United States or one of its agencies having a market value equal to the face amount of such certificate of deposit to the extent any portion of the face amount is not insured by the Federal Deposit Insurance Corporation. "Average Annual Debt Service Requirements" means that average amount which, at the time of computation, will be required to pay the Debt Service Requirement on all outstanding Bonds and Additional Parity Obligations when due (either at Stated Maturity or mandatory redemption) and derived by dividing the total of such Debt Service Requirement by the number of Fiscal Years then remaining before Stated Maturity of such Bonds and Additional Parity Obligations. For purposes of this definition, a fractional period of a Fiscal Year shall be treated as an entire Fiscal Year. Capitalized interest payments provided from bond proceeds and accrued interest on the Parity Revenue Obligations be excluded in making the aforementioned computation. "Bonds" shall mean the Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019 issued and delivered pursuant to this Order and all substitute Bonds and Bonds exchanged therefor, as well as all other substitute bonds and replacement bonds issued pursuant hereto, and the term "Bond" shall mean any of the Bonds. "Bond Date" shall mean March 15, 2019. "Bondholder" or "Holder" when used with respect to any Bond shall mean the Person in whose name such Bond is registered on the Register. "Business Day" means any day which is not a Saturday, Sunday or a day on which the Paying Agent/Registrar is authorized by law or executive order to remain closed or a legal holiday. "Closing Date" shall mean the date on which the Bonds are initially authenticated and delivered to the Purchaser against payment therefor which shall also be the date the Definitive Bonds are delivered in exchange for the Initial Bond. "Code" shall mean the Internal Revenue Code of 1986, as amended by any amendments thereto enacted prior to the Closing Date. "Commission" means the Texas Commission on Environmental Quality. "Construction Fund" means the Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019, Construction Fund established by Section 9.1 of this Order. "Debt Service Requirements" means as of any particular date of computation, with respect to any obligations and with respect to any period, the aggregate of the amounts to be paid or set aside by the District as of such date or in such period for the payment of the principal of, premium, if any, and interest (to the extent not capitalized) on such obligations; assuming, in the case of obligations without a fixed numerical rate, that such obligations bear interest calculated by assuming (i) that the interest rate for every 12 -month period on such bonds is equal to the rate of interest reported in the most recently published edition of The Bond Buyer (or its successor) at the time of calculation as the "Revenue Bond Index" or, if such Revenue Bond Index is no longer being maintained by The Bond Buyer (or its successor) at the time of calculation, such interest rate shall be assumed to be 80% of the rate of interest then being paid on United States Treasury obligations of like maturity and (ii) that the principal of such bonds is amortized such that annual debt service is substantially level over the remaining stated life of such bonds, and further assuming in the case of obligations required to be redeemed or prepaid as to principal prior to Stated Maturity, the principal amounts thereof will be redeemed prior to Stated Maturity in accordance with the mandatory redemption provisions applicable thereto. "Definitive Bonds" shall mean the Initial Bond, as may be transferred and converted into or exchanged for fully registered Bonds in the denomination of $5,000 or any integral multiple of $5,000 in excess thereof. "Depository Bank" means any financial institution duly designated by the Board of Directors of the District to serve as a depository for funds controlled by the Board of Directors of the District. "District" shall mean Trophy Club Municipal Utility District No. 1. "Escrow Agent" shall have the meaning set forth in Section 8.1 hereof. "Escrow Agreement" shall mean the agreement between the District and the Escrow Agent referred to in Section 8.1 hereof. "Event of Default" means any event of default as provided in Section 15.1 hereof. "Existing Obligations" means the Outstanding Series 2015 Bonds and the Series 2016 Bonds. "Fiscal Year" means the twelve month accounting period used by the District in connection with the operation of the System which may be any twelve consecutive month period established by the District. "Governmental Obligations" (i) direct noncallable obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, (ii) noncallable obligations of an agency or instrumentality of the United States, including obligations unconditionally guaranteed or insured by the agency or instrumentality and on the date of their acquisition or purchase by the District are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, (iii) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and on the date of their acquisition or purchase by the District, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent and (iv) any other then authorized securities or obligations under applicable law that may be used to defease obligations such as the Bonds. "Gross Proceeds" means any proceeds as defined in Section 1.148-1(b) of the Regulations, and any replacement proceeds as defined in Section 1.148-1(c) of the Regulations, of the Bonds. "Gross Revenues" means all income, receipts and revenues of every nature derived or received from the operation and ownership (excluding refundable meter deposits, restricted gifts and grants in aid of construction) of the System, including earnings and income derived from the investment or deposit of moneys in any special funds or accounts created and established for the payment and security of the Parity Revenue Obligations. "Initial Bond" shall mean the Bond authorized to be issued hereunder which has the registration certificate, executed on behalf of the Comptroller of Public Accounts of the State of Texas, as contemplated by Section 3.5(d) hereof. "Interest and Sinking Fund" means the fund created or affirmed by Section 9.1 of this Order. "Interest Payment Date" shall mean with respect to any installment of interest on any Bond the date specified in such Bond as the fixed date on which any such installment of interest is due and payable. "Maintenance and Operating Expenses" means all current expenses of operating and maintaining the System, including all salaries, labor, materials, repairs and extensions necessary to render efficient service; provided, however, that only such repairs and extensions, as in the judgment of the Board of Directors, reasonably and fairly exercised, are necessary to maintain the operations and render adequate service to the District and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair obligations payable from Net Revenues shall be deducted in determining "Net Revenues". Depreciation charges shall not be considered Maintenance and Operating Expenses. Maintenance and Operating Expenses shall include payments under contracts for the purchase of water supply or other materials, goods, services, or facilities for the System to the extent authorized by law and the provisions of such contract. "Maturity Date" or "Maturity" when used with respect to any Bond shall mean the date on which the principal of such Bond becomes due and payable as therein provided, whether at the Stated Maturity, by call for redemption or otherwise. "Net Earnings" shall have the meaning assigned to such term in Section 10.1. "Net Revenues" and "Net Revenues of the System" mean all of the revenues of every kind and nature received through the operation of the System, less Maintenance and Operating Expenses, including salaries, labor, materials, repairs and extensions necessary to render efficient service; provided, however, that only such repairs and extensions as in the judgment of the Board, reasonably and fairly exercised, are necessary to keep the System in operation and render adequate service to the District and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair the security of the Bond or the Additional Parity Obligations shall be deducted in determining "Net Revenues". "Order" shall mean this order authorizing the issuance of the Bonds. "Outstanding" shall mean, with respect to Bonds or Parity Revenue Obligations means, as of the date of determination, all Bonds theretofore issued and delivered, except: (1) those Bonds or Parity Revenue Obligations cancelled by the Paying Agent/Registrar or delivered to the Paying Agent/Registrar for cancellation; (2) those Bonds or Parity Revenue Obligations paid or deemed to be paid in accordance with the provisions of Section 17.1 hereof, or substantially similar provisions with respect to Parity Revenue Obligations; and (3) those Bonds or Parity Revenue Obligations that have been mutilated, destroyed, lost, or stolen and replacement Bonds have been registered and delivered in lieu thereof as provided in Section 3.10 hereof or similar provisions with respect to Parity Revenue Obligations. "Parity Revenue Obligations" means, collectively, the Bonds, the Existing Obligations, and any Additional Parity Obligations. "Paying Agent/Registrar Agreement" shall mean the agreement between the District and the Paying Agent/Registrar referred to in Section 5.2 pursuant to which the Paying Agent/Registrar will perform the duties required hereunder. "Paying Agent/Registrar" shall mean BOKF, NA, Dallas, Texas, until a successor Paying Agent/Registrar shall have been appointed pursuant to the applicable provisions of this Order, and thereafter "Paying Agent/Registrar" shall mean such successor Paying Agent/Registrar. "Person" shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof. "Place of Payment" shall mean the designated office of the Paying Agent/Registrar in Dallas, Texas. "Pledged Revenues" shall mean the Net Revenues of the District's System. "Predecessor Bonds" of any particular Bond shall mean every previous Bond evidencing all or a portion of the same debt as that evidenced by such particular Bond, and, for purposes of this definition, any Bond registered and delivered under Section 3.10 in lieu of a mutilated, lost, destroyed or stolen Bond shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Bond. "Project" shall mean the design and construction of water transmission line improvements and acquisition of related real property interests, and the design and construction of improvements to the District's wastewater treatment facilities. "Purchaser" shall mean "Record Date" for the interest payable on any Interest Payment Date shall mean the close of business on the fifteenth day of the month preceding such Interest Payment Date. "Redemption Date" when used with respect to any Bond to be redeemed shall mean the date fixed for such redemption pursuant to the terms of this Order. "Redemption Price" when used with respect to any Bond to be redeemed shall mean the price at which such Bond is to be redeemed pursuant to the terms of this Order, excluding installments of interest, the Interest Payment Date for which is on or before the Redemption Date. "Register" shall have the meaning stated in Section 3.7 hereof. "Regulations" shall mean the temporary or final Income Tax Regulations applicable to the Bonds issued pursuant to sections 103 and 141 through 150 of the Code. Any reference to a section of the Regulations shall also refer to any successor provision to such section hereafter promulgated by the Internal Revenue Service pursuant to sections 103 and 141 through 150 of the Code and applicable to the Bonds. "Representation Letter" shall mean the Letter of Representations between the District and the DTC. "Required Reserve" shall mean the amount which is equal to the Average Annual Debt Service of the Outstanding Parity Revenue Obligations. "Reserve Fund" means the fund created or affirmed by Section 9.1 of this Order. "Revenue Fund" means the Trophy Club Municipal Utility District No. 1 Revenue Fund heretofore created and affirmed by Section 9.1 of this Order. "Rule" shall mean SEC Rule 15c2-12, as amended from time to time. "Series 2015 Bonds" shall mean the $9,230,000 Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2015. "Series 2015 Order" shall mean the order of the District that authorized the issuance of the Series 2015 Bonds. "Series 2016 Bonds" shall mean the $4,635,000 Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2016. "Series 2016 Order" shall mean the order of the District that authorized the issuance of the Series 2016 Bonds. "Special Payment Date" shall have the meaning stated in Section 3.4 hereof. "Special Record Date" shall have the meaning stated in Section 3.4 hereof. "Stated Maturity" when used with respect to any Bond shall mean the date specified in such Bond as the fixed date on which the principal of such Bond is due and payable. "Subordinate Lien Obligations" means the bonds permitted to be issued by the District pursuant to Section 10.3 of this Order. "System" means the District's water and sewer system, including all present and future extensions, additions, replacements and improvements thereto. Section 9.1 Creation of Funds. The following funds are hereby created or affirmed: (i) "Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019, Revenue Fund" (herein called the "Revenue Fund") is hereby affirmed; (ii) "Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019, Reserve Fund" (herein called the "Reserve Fund") is hereby created; and (iii) "Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019, Interest and Sinking Fund" (herein called the "Interest and Sinking Fund") is hereby created for the purpose of providing funds to pay the principal of, premium, if any, and interest on the Parity Revenue Obligations as the same become due and payable; and (iv) "Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019, Construction Fund" (herein called the "Construction Fund") is hereby created. The District covenants and agrees that all revenues derived from the operation of the System shall be kept separate from other funds of the District. Section 9.2 Revenue Fund. A Revenue Fund has previously been established on the books of the District in connection with the District's Existing Obligations. All Gross Revenues of every nature received from the operation and ownership of the System shall be deposited as collected into the Revenue Fund, and the reasonable, necessary, and proper Maintenance and Operation Expenses of the System shall be paid from the Revenue Fund. The revenues of the System not actually required to pay said expenses shall be deposited from the Revenue Fund into the interest and sinking funds as provided in the orders or resolutions authorizing the Parity Revenue Obligations and the Reserve Fund to the extent provided hereunder for the Bonds and in any order authorizing the issuance of Additional Parity Obligations. Any Net Revenues remaining in the Revenue Fund after satisfying the foregoing payments, or making adequate and sufficient provision for the payment thereof, may be appropriated and used for any other District purpose now or hereafter permitted by law. Section 9.3 Interest and Sinkinn Fund. (a) Net Revenues of the System shall be deposited to the credit of the Interest and Sinking Fund at such times and in such amounts as necessary for the timely payment of the principal of and interest on the Bonds. (b) Money on deposit in the Interest and Sinking Fund shall be used to pay the principal of and interest on the Bonds as such become due and payable. Section 9.4 Reserve Fund. (a) To accumulate and maintain a reserve for the payment of the Bonds and Additional Parity Obligations (the Required Reserve) equal to the lesser of (i) the Average Annual Debt Service Requirements (calculated on a Fiscal Year basis and determined as of the date of issuance of the Bonds, the most recently issued series of Additional Parity Obligations then Outstanding or, at the option of the District, at the end of each Fiscal Year) for the Bonds and Additional Parity Obligations or (ii) the maximum amount in a reasonably required reserve fund for the Bonds and Additional Parity Obligations, from time to time that can be invested without restriction as to yield pursuant to section 148 of the Code (as defined in Section 13.1), the District agrees to maintain the Reserve Fund at an official depository of the District. All funds deposited into the Reserve Fund (excluding surplus funds which include earnings and income derived or received from deposits or investments which will be transferred to the Revenue Fund during such period as there is on deposit in the Reserve Fund the Required Reserve) shall be used solely for the payment of the principal of and interest on the Bonds and Additional Parity Obligations, when and to the extent other funds available for such purposes are insufficient, and, in addition, may be used to retire the last stated maturity or interest on the Bonds or Additional Parity Obligations. (b) Upon issuance of the Bonds, the total amount required to be accumulated and maintained in the Reserve Fund is hereby determined to be $ (the "Required Reserve"), which is equal to not less than the Average Annual Debt Service for the Bonds and the Existing Obligations, and on or before the 1 st day of the month next following the month the Bonds are delivered to the Purchaser and on or before the 1 st day of each following month, the District shall cause to be deposited to the Reserve Fund from the Net Revenues of the System an amount equal to at least one -sixtieth (1/60th) of the Required Reserve. After the Required Reserve has been fully accumulated and while the total amount on deposit in the Reserve Fund is in excess of the Required Reserve, no monthly deposits shall be required to be made to the Reserve Fund. (c) As and when Additional Parity Obligations are delivered or incurred, the Required Reserve shall be increased, if required, to an amount calculated in the manner provided in the first paragraph of this Section. Any additional amount required to be maintained in the Reserve Fund shall be so accumulated by the deposit of the necessary amount of the proceeds of the issue or other lawfully available funds in the Reserve Fund immediately after the delivery of the then proposed Additional Parity Obligations, or, at the option of the District, by the deposit of monthly installments, made on or before the 1 st day of each month following the month of delivery of the then proposed Additional Parity Obligations, of not less than 1/60th of the additional amount to be maintained in the Reserve Fund by reason of the issuance of the Additional Parity Obligations then being issued (or 1/60th of the balance of the additional amount not deposited immediately in cash), thereby ensuring the accumulation of the appropriate Required Reserve. (d) When and so long as the cash and investments in the Reserve Fund equal the Required Reserve, no deposits need be made to the credit of the Reserve Fund; but, if and when the Reserve Fund at any time contains less than the Required Reserve (other than as the result of the issuance of Additional Parity Obligations as provided in the preceding paragraph), the District covenants and agrees to cure the deficiency in the Required Reserve by resuming monthly deposits to said Fund or account from the Net Revenues, or any other lawfully available funds, such monthly deposits to be in amounts equal to not less than 1/60th of the Required Reserve covenanted by the District to be maintained in the Reserve Fund with any such deficiency payments being made on or before the 1st day of each month until the Required Reserve has been fully restored. The District further covenants and agrees that, subject only to the prior payments to be made to the Interest and Sinking Fund, the Net Revenues shall be applied and appropriated and used to establish and maintain the Required Reserve and to cure any deficiency in such amounts as required by the terms of this Order and any other order or resolution pertaining to the issuance of Additional Parity Obligations. (e) During such time as the Reserve Fund contains the Required Reserve, the District may, at its option, withdraw all surplus funds in the Reserve Fund in excess of the Required Reserve and deposit such surplus in the System Fund, unless such surplus funds represent proceeds of the Bonds, then such surplus will be transferred to the Interest and Sinking Fund. Section 9.5 Construction Fund. (a) Money on deposit in the Construction Fund, including investment earnings thereof, shall be used for the Project. (b) All amounts remaining in the Construction Fund after the accomplishment of the Project, including investment earnings of the Construction Fund, shall be deposited into the Interest and Sinking Fund, unless a change in applicable law permits or authorizes all or any part of such funds to be used for other purposes. Section 9.6 Deficiencies: Excess Revenues. (a) If on any occasion there shall not be sufficient Gross Revenues to make the required deposits into the Interest and Sinking Fund or Reserve Fund, then such deficiency shall be cured as soon as possible from the next available Gross Revenues, or from any other sources available for such purpose. (b) Subject to making the required deposits to the Interest and Sinking Fund and the Reserve Fund when and as required by any order or resolution relating to authorizing the issuance of Parity Revenue Obligations, the excess Gross Revenues may be used by the District for any lawful purpose related to the System. Section 9.7 Investments- Security of Funds. (a) All moneys on deposit in the funds referred to in this Order shall be secured in the manner and to the fullest extent required by the laws of the State of Texas for the security of public funds, and moneys on deposit in such funds shall be used only for the purposes permitted by this Order. (b) Investments. (i) Money in the funds established by this Order, at the option of the District, may be invested in such securities or obligations as permitted under applicable law. (ii) Any securities or obligations in which money is so invested shall be kept and held in trust for the benefit of the Owners and shall be sold and the proceeds of sale shall be timely applied to the making of all payments required to be made from the fund from which the investment was made. (c) Investment Income. Interest and income derived from investment of any fund created by this Order shall be credited to such fund. Section 9.8 Contributions in Aid of Construction Any moneys that may be received by the District that shall represent contributions in aid of construction shall be deposited in a separate account at the Depository Bank. Such contributions shall not be considered as part of the Gross Revenues of the System. Payments from such bank account shall be made only for the purposes for which the contributions were made, including any refunds that may become due to any contributor. Section 10.1 Additional Prior Lien Obligations. (a) The District reserves the right to issue notes, bonds and other obligations which, when duly authorized and issued in compliance with law and the terms and conditions hereinafter appearing, shall be on a parity with the Parity Revenue Obligations, payable from and equally and ratably secured by a first lien on - and pledge of the Net Revenues of the System; and the Parity Revenue Obligations shall in all respects be of equal dignity. The Additional Parity Obligations may be issued in one or more installments, provided, however, that none shall be issued unless and until the following conditions have been met: (b) A certificate is executed by the General Manager of the District and the President of the Board to the effect that no default exists in connection with any of the covenants or requirements of the Order or orders or resolutions authorizing the issuance of the Bonds and all then outstanding Parity Revenue Obligations; (c) A certificate is executed by the General Manager of the District and the President of the Board to the effect that the Interest and Sinking Fund and Reserve Fund contains the amount of money then required to be on deposit therein; and (d) A certificate is executed by a Certified Public Accountant to the effect that, in his opinion, the Net Earnings of the System either for the last complete fiscal year of the District, or for any twelve consecutive calendar month period ending not more than 90 days prior to the passage of the Order authorizing the issuance of such Additional Parity Obligations, were at least 1.25 times the average annual principal and interest requirements for the then outstanding Parity Revenue Obligations and the Additional Parity Obligations then proposed to be issued. The Accountant, in making a determination of the Net Earnings, may take into consideration a change in the rates and charges for services and facilities afforded by the System that became effective at least sixty (60) days prior to the Last day of the period for which Net Earnings are determined and, for purposes of satisfying the above Net Earnings test, make pro forma determination of the Net Earnings of the System for the period of time covered by his certification or opinion based on such change in rates and charges being in effect for the entire period covered by the Accountant's certificate or opinion. PROVIDED, that the term "Net Earnings of the System" shall mean all of the Net Revenues of the System, except that in calculating Net Revenues there shall not be deducted as an expense of operation and maintenance any charge or disbursement for repairs or extensions which, under standard accounting practice, should be charged to capital expenditures; and PROVIDED FURTHER, that it shall not be necessary for the District to meet the above requirements to issue Additional Parity Obligations if the District obtains the written consent of all of the holders of all outstanding Parity Revenue Obligations. Section 10.2 Refunding Bonds. The District reserves the right to issue refunding bonds to refund all or any part of the Parity Revenue Obligations (pursuant to any law then available) upon such terms and conditions as the Board of Directors of the District may deem to be in the best interest of the District and its inhabitants, and if less than all such Parity Revenue Obligations then outstanding are refunded, the conditions precedent prescribed (for the issuance of Additional Parity Obligations) in Section 10.1 shall be satisfied and the accountant's certificate or opinion required in Section 10.1 shall give effect to the Debt Service of the proposed refunding bonds (and shall not give effect to the Debt Service of the Parity Revenue Obligations being refunded following their cancellation or provision being made for their payment). Section 10.3 Obligations of Inferior Lien and Pledge. The District hereby reserves the right to issue Subordinate Lien Obligations payable from and secured by a lien on and pledge of the System revenues, junior and subordinate in rank and dignity to the lien and pledge securing the payment of the Parity Revenue Obligations, as may be authorized by the laws of the State of Texas. Section 11.1 Pledge of Revenues. (a) The Parity Revenue Obligations, including the Bonds, and the interest thereon, and any and all other amounts payable thereunder, are and shall be secured by and payable from a first Iien on and pledge of the Net Revenues of the System (with the exception of those in excess of the amounts required to establish and maintain the Interest and Sinking Fund hereinafter provided); and the revenues herein pledged are further pledged to the establishment and maintenance of the Interest and Sinking Fund hereinafter provided. (b) The Bonds are special obligations of the District secured by and payable from a first lien on and pledge of the Net Revenues of the System, as provided in this Order, and is not a charge on the property of the District or on taxes levied by the District. No part of the obligation evidenced by the Bonds, whether principal, interest or other obligation, shall ever be paid from taxes levied or collected by the District. (c) Chapter 1208, Texas Government Code applies to the issuance of the Bond and the pledge of the Net Revenues granted by the District under Section 11.1(a) of this Order, and such pledge, therefore, is valid, effective, and perfected. If Texas law is amended at any time while the Bonds are Outstanding and unpaid such that the pledge of the revenues granted by the District under Section 11.1(a) above is to be subject to the filing requirements of Chapter 9, Texas Business and Commerce Code, then in order to preserve to the registered owners of the Bonds the perfection of the security interest in said pledge, the District agrees to take such measures as it determines are reasonable and necessary under Texas law to comply with the applicable provisions of Chapter 9, Business and Commerce Code and enable a filing to perfect the security interest in said pledge to occur. Section 11.2 Payment of Bonds and Performance of Obligations. The District covenants to pay promptly the principal of and interest on the Bonds as the same become due and payable, whether at maturity or by prior redemption, in accordance with the terms of the Bonds and this Order, and to keep and perform faithfully all of its covenants, undertakings and agreements contained in this Order, or in any Bond executed, authenticated and delivered hereunder. Section 12.1 Representations and Covenants as to Payment. (a) While the Bonds are Outstanding and unpaid, there shall be made available to the Paying Agent/Registrar, out of the Interest and Sinking Fund and Reserve Fund, if necessary, money sufficient to pay the interest on and the principal of the Bonds, as applicable, as will accrue or mature on each applicable Interest Payment Date. (b) The District will faithfully perform at all times any and all covenants, undertakings, stipulations, and provisions contained in this Order and in the Bonds; the District will promptly pay or cause to be paid the principal of, interest on, and premium, if any, with respect to, the Bonds on due dates and at the places and manner prescribed in such Bonds; and the District will, at the times and in the manner prescribed by this Order, deposit or cause to be deposited the amounts of money specified by this Order. (c) The District is duly authorized under the laws of the State of Texas to issue the Bonds; all action on its part for the creation and issuance of the Bond has been duly and effectively taken; and the Bonds in the hands of the Owners thereof is and will be valid and enforceable obligations of the District in accordance with their terms. (d) The District will at all times collect for services rendered by the System such amounts as will be at least sufficient to pay all Maintenance and Operation Expenses, and to provide Net Revenues equal to 1.10 times the amount that is sufficient to pay the scheduled principal of and interest on the Parity Revenue Obligations, plus one times the amount (if any) required to be deposited in any reserve or contingency fund or account created for the payment and security of the Parity Revenue Obligations. (e) If the System should become legally liable for any other indebtedness, the District shall fix, maintain, charge and collect additional rates and services rendered by the System, sufficient to establish and maintain funds for the payment hereof. Section 15.1 Events of Default. Each of the following occurrences or events for the purpose of this Order is hereby declared to be an Event of Default: (a) the failure to make payment of the principal of or interest on any of the Bonds when the same becomes due and payable; (b) default in the performance or observance of any other covenant, agreement, or obligation of the District and the continuation thereof for a period of 30 days after notice of such default is given by any Bondholder to the District; or (c) the District files for protection under the federal Bankruptcy Code or other similar state or federal statute. Section 15.2 Remedies for Default. (a) Upon the happening of any Event of Default or the default in the performance or observance of any other covenant, agreement, or obligation of the District, then any Bondholder or an authorized representative thereof, including but not limited to, a trustee or trustees therefor, may proceed against the District for the purpose of protecting and enforcing the rights of the Bondholders under this Order, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of the Bondholders hereunder or any combination of such remedies. (b) All such proceedings shall be instituted and maintained for the equal benefit of all Bondholders. Section 15.3 Remedies Not Exclusive. (a) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under the Bonds or now or hereafter existing at law or in equity; provided, however, that notwithstanding any other provision of this Order, the right to accelerate the debt evidenced by the Bonds shall not be available as a remedy under this Order. (b) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver of any other available remedy. Section 17.1 Defeasance. (a) If the District shall pay or cause to be paid, or there shall otherwise be paid to the Bondholders, the principal of and interest on the Bonds, at the times and in the manner stipulated in this Order, then the pledge of Pledged Revenues under this Order and all covenants, agreements, and other obligations of the District to the Bondholders shall thereupon cease, terminate, and become void and be discharged and satisfied, and the Paying Agent/Registrar shall pay over or deliver all money held by it under this Order to the District. (b) Bonds or interest installments for the payment of which money shall have been set aside and shall be held in trust by the Paying Agent/Registrar or with any other bank or trust company which has agreed to hold the same for such purpose (through deposit by the District of funds for such payment or otherwise) at the Stated Maturity thereof shall be deemed to have been paid within the meaning and with the effect expressed above in this Section. All Existing Obligations shall be deemed to have been paid, prior to their Stated Maturity, within the meaning and with the effect expressed above in this Section, if there shall have been deposited with the Paying Agent/Registrar either (a) money in an amount which shall be sufficient to make such payment, (b) Governmental Obligations certified by an independent public accounting firm of national reputation to be of such maturities and interest payment dates and to bear such interest as will, without further investment or reinvestment of either the principal amount thereof or the interest earnings therefrom, be sufficient to make such payment, or (c) a combination of money and Governmental Obligations together so certified to be sufficient to make such payment, provided that all the expenses pertaining to the Bonds with respect to which such deposit is made shall have been paid or the payment thereof provided for to the satisfaction of the Paying Agent/ Registrar (and to such other bank or trust company). Section 18.5 Amendments. (a) This Order shall constitute a contract with the Bondholders entered into upon the initial purchase of the Bonds, shall be binding on the District and its successors and assigns whether or not so expressed, and shall not be amended or repealed by the District so long as any Bond remains outstanding except as permitted in this Section. (b) The District may, without the consent of or notice to any Bondholder, from time to time and at any time amend this Order in any manner that the District determines is not detrimental to the interests of the Bondholders, for the purpose of the curing of any ambiguity, inconsistency, or formal defect or omission herein or therein. In addition, the District may amend, add to, or rescind any of the provisions of this Order; except that, notwithstanding the foregoing, without the consent of the Holders of all of the affected outstanding Bonds, no such amendment, addition, or rescission shall (1) change the Stated Maturity of the Bonds or any Interest Payment Date for an installment of interest thereon, reduce the principal amount thereof, the Redemption Price therefor, or the rate of interest thereon, change the place or places at, or the coin or currency in, which any Bond or the interest thereon is payable, or in any other way modify the terms or sources of payment of the principal of or interest on the Bonds, (2) give any preference to any Bond over any other Bond, or (3) modify any of the provisions of this Section, except to provide that certain other provisions of this Order cannot be modified or waived without the consent of the Holder of each Bond affected thereby. (c) Any consent to any amendment hereof by the Bondholder shall bind every future Holder of the same Bond and the Holder of every Bond issued upon transfer or in lieu thereof or in exchange therefor, in respect of anything done or suffered to be done by the District in reliance thereon, whether or not notation of such action is made upon such Bond. (d) Any rating agency rating the Bonds must receive notice of each amendment and a copy thereof at least 15 days in advance of its execution or adoption. Section 18.6 Notice to Bondholders. Except as may be otherwise provided in this Order, where this Order provides for notice to Bondholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Bondholder, at the address of such Bondholder as it appears in the Register. Neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder of Bonds shall affect the sufficiency of such notice with respect to all other Bondholders. Wherever this Order provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event with respect to which such notice is given, and such waiver shall be the equivalent of such notice. Waivers of notice by Bondholders shall be filed with the District, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. (this page intentionally left blank) APPENDIX C FORM OF LEGAL OPINION OF BOND COUNSEL (this page intentionally left blank) MCLEAN & HOWARD, L.L.P. BARTON OAKS PLAZA, BUILDING II 901 SOUTH MOPAC ExPY., SUITE 225 AUSTIN, TEXAS 78746 (512) 328-2008 [An opinion in substantially the following form will be delivered by McLean & Howard, L.L.P, Bond Counsel, upon the delivery of the Bonds, assuming no material changes in facts or law.] April 23, 2019 We have acted as Bond Counsel for Trophy Club Municipal Utility District No. 1 (the "District") in connection with the issuance of bonds (the "Bonds") by the District described as follows: TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019, dated March 15, 2019, in the aggregate principal amount of $7,200,000, bearing interest at the rate set forth in the Order authorizing the issuance of the bonds (the "Bond Order"), with such interest payable on March 1 and September 1 of each year, commencing March 1, 2020 until maturity or prior redemption, and maturing serially on September 1 in each year from 2021 through 2049. The Bonds are redeemable, in whole or in part, maturing on or after September 1, 2029 are subject to optional redemption prior to stated maturity on September 1, 2028 or on any date thereafter, at a price of the par value thereof plus accrued interest to the date of redemption, in the manner provided in the Bond Order. Additionally, the Bonds maturing on September 1, , , and are subject to mandatory redemption prior to maturity at the times and in the amounts provided in the Bond Order. The Bonds are registered as to both principal and interest and are transferable, registrable, and payable in the manner provided in the Bond Order. The District has reserved the right in the Bond Order to issue additional bonds payable from the Pledged Revenues of the District's water and wastewater system with any such pledge being on a parity with the pledge to pay the Bonds. The District has also reserved the right to issue subordinate lien bonds, special project bonds and refunding bonds. Reference is made to the Bond Order for a complete description of the District's right to issue additional bonds. The Bonds are obligations solely of the District and are not the obligations of the State of Texas or any other political subdivision or agency. The District's obligations with respect to the Bonds are subject to limitation by applicable federal bankruptcy laws and other laws which may from time to time affect the rights of creditors of political subdivisions. IN OUR CAPACITY AS BOND COUNSEL, we have examined a transcript of certified proceedings pertaining to the Bonds which contains certified copies of certain proceedings of the Board of Directors of the District, customary certificates of officers, agents and representatives of the District and other certified showings related to the authorization and issuance of the Bonds. We have also examined the executed Initial Bond No. T-1. We have not investigated or verified original proceedings, records, data or other material, but have relied solely upon certificates Page 2 executed by officers, directors, agents and representatives of the District. We have assumed no responsibility with respect to the financial condition of the District or the reporting or disclosure thereof in connection with the sale of the Bonds. BASED ON SAID EXAMINATION, IT IS OUR OPINION that, under the applicable laws of the United States of America and the State of Texas in force and effect on the date hereof: 1. The Bonds have been duly authorized by the District and, when issued in compliance with the provisions of the Bond Order, are valid, legally binding and enforceable obligations of the District and, together with the outstanding and unpaid "Parity Revenue Obligations" (identified and defined in the Bond Order), are payable solely from and equally and ratably secured by a first lien on and pledge of the certain net revenues of the District's water and wastewater system (the "Pledged Revenues") as provided in the Bond Order. 2. Pursuant to section 103 of the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), and existing regulations, published rulings, and court decisions thereunder, and assuming continuing compliance after the date hereof by the District with the provisions of the Bond Order relating to sections 141 through 150 of the Code, interest on the Bonds for federal income tax purposes (a) will be excludable from the gross income, as defined in section 61 of the Code, of the owners thereof, and (b) will not be included in computing the alternative minimum taxable income of individuals or, except as hereinafter described, corporations. Interest on the Bonds owned by a corporation will be included in such corporation's adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporations, other than an S corporation, a qualified mutual fund, a real estate mortgage investment conduit, a real estate investment trust, or a financial asset securitization investment trust ("FASIT"). A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by section 55 of the Code will be computed. WE EXPRESS NO OPINION with respect to any other federal, state, or local tax consequences under present law or any proposed legislation resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Bonds. Ownership of tax-exempt obligations such as the Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, owners of an interest in a FASIT, individual recipients of Social Security or Railroad retirement benefits, individuals otherwise qualifying for the earned income tax credit, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. OUR OPINIONS ARE BASED on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty or update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service; rather, such opinions represent our legal judgment based upon our review of existing law Page 3 that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. Respectfully yours, (this page intentionally left blank) APPENDIX D EXCERPTS FROM THE DISTRICT'S AUDITED FINANCIAL STATEMENTS (Independent Auditor's Report, Management's Discussion and Analysis, 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.) (this page intentionally left blank) TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2018 (this page intentionally left blank) CONTENTS FINANCIAL SECTION Page ANNUAL FILING AFFIDAVIT i INDEPENDENT AUDITOR'S REPORT 1 MANAGEMENT'S DISCUSSION AND ANALYSIS (unaudited) 3 BASIC FINANCIAL STATEMENTS Government -Wide Financial Statements Statement of Net Position 11 Statement of Activities 12 Fund Financial Statements Governmental Funds Balance Sheet 13 Reconciliation of the Governmental Funds Balance Sheet To Statement of Net Position 14 Statement of Revenues, Expenditures and Changes in Fund Balances 15 Reconciliation of the Statement of Revenues, Expenditures And Changes in Fund Balances of Governmental Funds To the Statement of Activities 16 Notes to Basic Financial Statements 17 REQUIRED SUPPLEMENTARY INFORMATION Budgetary Comparison Schedule — General Fund 42 Schedule of Changes in Net Pension Liability and Related Ratios — Last Ten Years 43 Schedules of TCDRS Pension Contributions — Last Ten Years 44 Schedules of TCDRS OPEB Contributions — Last Ten Years 45 Schedule of Changes in Net OPEB Liability and Related Ratios — Last Ten Years.. 46 INDIVIDUAL SCHEDULES AND OTHER SUPPLEMENTARY INFORMATION REQUIRED BY TEXAS COMMISSION ON ENVIRONMENTAL QUALITY (TCEQ) TSI -1 Service and Rates 47 TSI -2 General Fund Expenditures and Other Financing Uses 49 TSI -3 Temporary Investments 50 TSI -4 Taxes Levied and Receivable 51 TSI -5 Long -Term Debt Service Requirements — By Year 52 TSI -6 Changes in Long -Term Bonded Debt 55 TSI -7 Comparative Schedules of Revenues and Expenditures — Five Years 56 TSI -8 Board Members, Key Personnel, and Consultants 58 REPORTS REQUIRED BY GOVERNMENTAL AUDITING STANDARDS Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 60 THE STATE OF TEXAS } COUNTY OF DENTON } 1, ANNUAL FILING AFFIDAVIT Gregory Wilson (Name of Duly Authorized District Representative) Of the Trophy Club Municipal Utility District No. 1 (Name of District) Hereby swear, or affirm, that the district named above has reviewed and approved at a meeting of the Board of Directors of the District on the 21st day of January, 2019, its annual audit report for the fiscal year or period ended September 30, 2018 and that copies of the annual audit report have been filed in the district office, located at 100 Municipal Drive, Trophy Club, Texas, 76262. The annual filing affidavit and the attached copy of the audit report are being submitted to the Texas Commission on the Environmental Quality in satisfaction of the annual filing requirements of Texas Water Code Section 49.19;x. Date: January 21 , 2019 By: nature of District Representative) Gregory Wilson, President, Board of Directors (Typed Name & Title of above District Representative) Sworn to and subscribed to before me this LAURIE SLA6H1 -6s Notor/Public, State cf Texas Comm. Expires 01-19-2020 Notary ID 128720534 My Commission Expires On: . VJ 0 Notary Public in the State of Texas aPt. day of _al(1).0(U , jCj . (Signature of ' otary) and Abbott PLLC Certified Public Accountants INDEPENDENT AUDITOR'S REPORT To the Board of Directors Trophy Club Municipal Utility District No. 1 Trophy Club, Texas Susan LaFollett, CPA — Partner Rod Abbott, CPA — Partner Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Trophy Club Municipal Utility District No. 1 (the "District"), as of and for the year ended September 30, 2018, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 1 LaFollett and Abbott PLLC PO Box 717 • Tom Bean, TX • 75489 903-546-6975 • www. lafollettcpa.com Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Trophy Club Municipal Utility District No. 1, as of September 30, 2018, and the respective changes in financial position, for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, budgetary comparisons, and retirement system funding information on pages 3- 10 and 42-46 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Trophy Club Municipal Utility District No. 1's basic financial statements. The accompanying individual schedules and other supplementary information on pages 47-59 are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying individual schedules and other supplementary information are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the accompanying individual schedules and other supplementary information are fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 21, 2019, on our consideration of Trophy Club Municipal Utility District No. 1's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Trophy Club Municipal Utility District No. 1's internal control over financial reporting and compliance. awl. Olhe Pat. Tom Bean, Texas January 21, 2019 2 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS September 30, 2018 Trophy Club Municipal Utility District No. 1, Texas (the "District") Management's Discussion and Analysis (MD&A) is a narrative overview and analysis designed to provide the reader a means to identify and understand the financial activity of the District and changes in the District's financial position during the fiscal year ended September 30, 2018. The Management's Discussion and Analysis is supplemental to, and should be considered along with, the District's financial statements. Financial Highlights At the close of the fiscal year, the assets and deferred outflows of the District exceeded its liabilities and deferred inflows by $27,028,375. Of this amount, $7,688,389 is unrestricted net position and may be used to meet the District's ongoing commitments. The District's net position increased by $4,118,127 during 2018 (page 12). A significant contributor to this result was actual General Fund expenditures being $2,478,357 less than budgeted, with the most favorable budget variances being for water department, capital outlays, and fire protection expenditures (page 42). At the end of the fiscal year, the District's governmental type funds reported a combined fund balance of $8,355,328. As of September 30, 2018, the unassigned fund balance of the General Fund was $7,254,013. Long-term debt activity for the District included debt principal repayments totaling $1,427,381. Overview of the Financial Statements The MD&A is intended to introduce the reader to the District's basic financial statements, which are comprised of three components: 1. Government -Wide Financial Statements, 2. Fund Financial Statements, and 3. Notes to Basic Financial Statements. The report also contains other required supplementary information in addition to the basic financial statements. Government -Wide Financial Statements — the government -wide financial statements are designed to provide the reader with a general overview of the District's finances in a way that is comparable with financial statements from the private sector. The government -wide financial statements consist of two statements: 1. The Statement of Net Position — (Page 11) this statement presents information on all of the District's assets, deferred inflows, deferred outflows, liabilities, and net position. The net position is the difference between assets plus deferred outflows less deferred inflows plus liabilities. Over an extended period, the increase or decrease in net position will serve as a good indicator of whether the financial position of the District is improving or deteriorating. 3 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS September 30, 2018 Overview of the Financial Statements — continued 2. The Statement of Activities — (Page 12) gives information showing how the District's net position has changed during the fiscal year. All revenues and expenses are reported on the full accrual basis. Fund Financial Statements - Fund financial statements provide detailed information about the most important funds and not about the District as a whole as in the government -wide financial statements. The District uses fund accounting to demonstrate compliance with finance related legal requirements which can be categorized as governmental fund activities. Governmental Funds — All of the District's activities are reported in governmental funds. They are used to account for those functions known as governmental activities. But unlike government -wide financial statements, governmental fund financial statements focus on how monies flow into and out of those funds and their resulting balances at the end of the fiscal year. Statements of governmental funds provide a detailed short-term view of the District's general government operations and the basic services it provides. Such information can be useful in evaluating a government' s short-term financing requirements. The District maintains three governmental funds. Information is presented separately in the Governmental Fund Balance Sheet and in the Governmental Fund Statement of Revenues, Expenditures and Changes in Fund Balances for the General Fund, Debt Service Fund and Capital Projects Fund. The District adopts annual appropriated budgets for the General Fund and Debt Service Funds. A budgetary comparison statement is provided for each annually budgeted fund to demonstrate compliance with its budget. Notes to the Basic Financial Statements — The notes provide additional information that is essential to a full understanding of the data presented in the government -wide and fund financial statements. The notes to the basic financial statements can be found on pages 17-41. 4 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS September 30, 2018 Government -wide Financial Analysis The Management's Discussion and Analysis highlights the information provided in both the Statement of Net Position and Statement of Activities in the government -wide financial statements. It may serve over an extended period of time, as a useful indicator of the District's financial position. At the end of the fiscal year, the District's assets and deferred outflows exceeded liabilities and deferred inflows by $27,028,375. Of this amount, $18,657,642 (69%) reflects the District's investment in capital assets (e.g., land, buildings, machinery and equipment, net of accumulated depreciation), less any related outstanding debt used to acquire those assets and $682,344 (2.5%) restricted for debt service. Table 1 Condensed Statements of Net Position Current and other Capital assets Total assets Deferred outflows Total deferred outflows Long-term liabilities Other liabilities Total liabilities Deferred inflows Total deferred inflows Net Position: Net investment in capital assets Restricted for capital projects Restricted for debt service Restricted for other Unrestricted Total Net Position Governmental Activities 2018 $ 10,096,851 40,816,044 50,912,895 71,774 71,774 20,465,047 3,452,401 23,917,448 38,846 38,846 18,657,642 682,344 7,688,389 $ 27,028,375 5 Governmental Activities 2017 $ 13,619,882 35,396,802 49,016,684 126,894 126,894 21,816,627 4,384,519 26,201,146 21,292 21,292 12,152,794 5,178,262 476,082 35,316 5,078,686 $ 22,921,140 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS September 30, 2018 Government -wide Financial Analysis - continued District operational analysis — The following table provides a summary analysis of the District's consolidated operations for the fiscal years ended September 30, 2018 and 2017. Governmental activities have increased the District's net position by $4,118,127 which amounts to a 18% increase in net position for the year ended September 30, 2018. Table 2 Changes in Net Position Governmental Governmental Activities Activities 2018 2017 Revenue: Program revenue Charges for services $ 9,308,951 $ 8,743,566 Grants and Contributions General Revenue Ad valorem taxes 1,878,557 1,785,407 Unrestricted investment earnings 112,040 20,864 Contributions not restricted to specific programs 195,528 54,791 Gain on sale of asset 9,477 1,906 Miscellaneous 80,627 108,799 Total Revenue 11,585,180 10,715,333 Expenses: Water & Wastewater operations 4,602,955 4,494,439 General government and other 1,595,960 1,637,102 Fire 698,845 702,943 Interest charges 569,293 584,186 Total Expenses 7,467,053 7,418,670 Increase in net position $ 4,118,127 $ 3,296,663 6 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS September 30, 2018 Financial analysis of the District's funds Governmental Funds - the main focus of the District's governmental funds is to provide information on the flow of monies to and from the funds, and to note the unassigned fund balance, which is a good indicator of resources available for spending in the near term. The information derived from these funds is highly useful in assessing the District's financial requirements. The unassigned fund balance may serve as a useful measure of the District's net resources available for use at the fiscal year-end. At the end of the fiscal year, the District's governmental funds reported combined ending fund balances of $8,355,328, of which 73.8%, or $6,162,503, is unassigned and available to the District for future spending. General Fund budgetary highlights Revenue: Revenues were $292,522 (2.6%) less than budgeted • Water charges were $393,758 (5.9%) less than budgeted. Expenditures: Expenditures were $1,991,731 (22.4%) less than budgeted • Water operations expenditures were $718,241 (18.5%) less than budgeted. • Capital Outlay expenditures were $979,566 (59.5%) less than budgeted. Capital Asset and Debt Administration The District's investment in capital assets for its governmental activities as of September 30, 2018 amounted to $40,816,042, net of accumulated depreciation. This represents a broad range of capital assets including, but not limited to land, buildings, improvements, machinery and equipment, vehicles, water, wastewater treatment, and wastewater collection systems. Capital assets increased 15.3% during 2018 primarily due to $5 9 million of new construction in progress for the water and wastewater system. Additional information about capital assets may be found in Note 5 in the notes to financial statements. 7 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS September 30, 2018 Debt administration Long -Term Liabilities — at the end of the current fiscal year, the District had $22,102,537 of general obligation bonds, revenue bonds, notes payable, capital leases, and accrued compensated absences, which is a decrease of 4.6% from the previous fiscal year. Of this amount, $22,073,430 is backed by the full faith and credit of the District. Table 3 Outstanding Debt at Year-end Revenue bonds General obligation bonds Capital lease obligations Compensated absences Total $ $ Governmental Activities 2018 12,510,000 8,725,000 838,430 29,107 22,102,537 Economic factors and next year's budgets and rates: Governmental Activities 2017 $ 13,100,000 9,450,000 590,710 32,306 $ 23,173,016 General Fund fiscal year 2019 budgetary highlights: Revenue: The District's 2019 operational revenue budget reflects a decrease of $485,669 from the amended 2018 budget, and a decrease of $284,675 when compared to actual accrued in 2018. • Water revenue is budgeted to increase from $6,035,804 for actual accrued in fiscal year 2018 to $6,599,484 for budgeted fiscal year 2019 for a total projected increase of $563,680. • Sewer revenue is budgeted to increase from $3,035,824 for actual accrued in fiscal year 2018 to $3,412,665 for budgeted fiscal year 2019 for a total projected increase of $376,841. • Property tax revenue is budgeted to increase by $42,208 for Fire and decrease by $13,717 for the MUD netting an overall increase for tax revenue by $28,491 due to property value, even though the District's overall tax rate decreased for fiscal year 2019 from the overall tax rate for fiscal year 2018. 8 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS September 30, 2018 Expenses: The District's 2019 operational expense budget reflects a decrease of $289,353 from the amended 2018 budget, and an increase of $2,847,305 compared to the actual spending fiscal 2018. • The primary reason for the difference in actual spending in 2018 to 2019 budget is attributable to reduced or deferred expenses. The most significant factors when comparing actual spending to projected budget are; wholesale water purchases increasing expenses by $755,901 due to above average rainfall in 2018, capital outlay increase by $397,227 due to capital improvement projects deferred or overlapping in 2018, short- term debt increase $153,685 due to new assets being added in fiscal year 2019, and overall salary increase by $197,929 due to unfilled budgeted positions that are budgeted to be filled in 2019. Overall: The District's 2019 operational budget is anticipated to have expenses of $10,271,365 and revenues of $10,613,202. Debt Service Fund 2019 budgetary highlights: • The District's Debt Service Fund is budgeted to decrease from $2,093,741 in actual fiscal year 2018 to $2,089,126 budgeted for fiscal year 2019. This is a total decrease of $4,615. • Property tax revenues for the Debt Service Fund are budgeted to increase from $681,687 in actual fiscal year 2018 to $690,975 budgeted for fiscal year 2019. This is a total increase of $9,288 due to an increase in valuations and a reduction in the debt service tax rate. Overall: The District's consolidated budgeted revenue decreased from $14,718,243 in fiscal year 2018 to $14,495,168 in fiscal year 2019. Resulting in a total decrease of 1.52%. The District's consolidated budgeted expenses decreased from $14,000,357 in fiscal year 2018 to $13,960,551 in fiscal year 2019. Resulting in a total decrease of 0.28%. Water and Sewer rates were both increased by the Board on October 1, 2017 to start fiscal year 2018. Sewer base and volumetric rates were both increased for residential and commercial customers by the District's Board of Directors, with an effective date of October 1, 2018. The sewer charges are calculated based on the average water consumption for three months, December, January, and February billing Water base and volumetric rates were not changed. 9 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS September 30, 2018 There are two legal matters that were not completed in fiscal year 2018. The first is potential litigation with the contractor constructing the upgrade to the wastewater treatment facility. This project is substantially complete, and the District has a potential claim for liquidated damages to be settled through negotiation at the end of the project, or if that fails, binding arbitration. The second legal matter relates to an unauthorized easement encroachment. The technical aspects of this case are settled. The remaining dispute is related to legal representation expenses incurred by the plaintiff. Requests for information This financial report is designed to provide a general overview of the District's consolidated finances for all interested parties. Questions concerning any of the information in this report or requests for additional information should be directed to the Trophy Club Municipal Utility District No. 1, Finance Manager, 100 Municipal Drive, Trophy Club, Texas 76262. 10 BASIC FINANCIAL STATEMENTS TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 STATEMENT OF NET POSITION SEPTEMBER 30, 2018 Governmental Activities ASSETS Cash and cash equivalents $ 2,993,981 Pooled investments 4,368,107 Restricted pooled investments 1,442,546 Receivables Accounts receivable, net 1,131,679 Taxes 26,454 Due from other governments 2,072 Prepaids 70,512 Net pension asset 61,500 Non -depreciable capital assets: Land 648,178 Construction in progress 20,002,236 Water rights 796,145 Depreciable capital assets: (net) Buildings and other improvements 2,930,259 Machinery, vehicles, and other equipment 2,025,579 Water system 14,393,913 Organization costs 19,734 TOTAL ASSETS 50,912,895 DEFERRED OUTFLOWS OF RESOURCES Pension and other post employment benefits TOTAL DEFERRED OUTFLOWS OF RESOURCES LIABILITIES 71,774 71,774 Accounts payable 1,295,338 Accrued liabilities 45,741 Accrued interest payable 59,415 Customer deposits 312,490 Net OPEB liability 16,955 Noncurrent liabilities: Debt due within one year 1,564,224 Debt due in more than one year 20,623,285 TOTAL LIABILITIES 23,917,448 DEFERRED INFLOWS OF RESOURCES Pension and other post employment benefits TOTAL DEFERRED INFLOWS OF RESOURCES NET POSITION 38,846 38,846 Net investment in capital assets 18,657,642 Restricted for debt service 682,344 Unrestricted 7,688,3 89 TOTAL NET POSITION $ 27,028,375 The notes to financial the statements are an integral part of this statement. 11 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30, 2018 Program Activities Governmental Activities Water operations General government Wastewater operations Fire Interest on long term debt Non -Departmental Wastewater collection system Directors Total governmental activities Expenses $ 3,385,244 1,395,655 1,149,853 698,845 569,293 190,494 67,858 9,811 Governmental Activities Program Revenues Operating Charges for Grants and Services Contributions $ 6,169,279 $ 22,237 3,117,435 $ 7,467,053 $ 9,308,951 $ Capital Grants and Contributions General Revenues: Ad valorem taxes Miscellaneous Contributions not restricted to specific programs Investment income Gain on sale of assets Total general revenues Change in net position Net Position - beginning of year Prior period adjustments Net Position - end of year The notes to the financial statements are an integral part of this statement. 12 Net (Expenses) Revenue and Changes in Net Assets Governmental Activities $ 2,784,035 (1,373,418) 1,967,582 (698,845) (569,293) (190,494) (67,858) (9,811) $ 1,841,898 1,878,557 80,627 195,528 112,040 9,477 2,276,229 4,118,127 22,921,140 (10,892) $ 27,028,375 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 BALANCE SHEET GOVERNMENTAL FUNDS September 30, 2018 General Fund ASSETS Debt Capital Total Fund Fund Funds Assets Cash and cash equivalents $ 2,986,825 $ 7,156 $ - $ 2,993,981 Pooled investments 4,368,107 - 4,368,107 Restricted investments - 675,188 767,358 1,442,546 Receivables: Accounts receivables, net 1,131,679 1,131,679 Taxes 16,952 9,502 26,454 Due from other governments 2,072 - - 2,072 Due from other funds 1,051,130 - - 1,051,130 Prepaids 70,512 - 70,512 TOTAL ASSETS $ 9,627,277 $ 691,846 $ 767,358 $ 11,086,481 LIABILITIES, DEFERRED INFLOWS, AND FUND BALANCES Liabilities Accounts payable $ 487,600 $ $ 807,738 $ 1,295,338 Accrued liabilities 45,741 - 45,741 Customer deposits 312,490 - 312,490 Due to other funds - 1,051,130 1,051,130 Total liabilities 845,831 1,858,868 2,704,699 Deferred Inflows of Resources Unavailable revenues - property taxes 16,952 9,502 - 26,454 Total deferred inflows of resources 16,952 9,502 26,454 Fund Balances Non -spendable prepaids 70,512 - 70,512 Restricted -Debt service - 682,344 - 682,344 Assigned -Capital outlays 1,439,969 1,439,969 Unassigned 7,254,013 (1,091,510) 6,162,503 Total fund balances 8,764,494 682,344 (1,091,510) 8,355,328 TOTAL LIABILITIES, DEFERRED INFLOWS, AND FUND BALANCES $ 9,627,277 $ 691,846 $ 767,358 $ 11,086,481 The notes to financial statements are an integral part of this statement. 13 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO STATEMENT OF NET POSITION SEPTEMBER 30, 2018 Total fund balances - governmental funds $ 8,355,328 Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not current fmancial resources and, therefore, are not reported in the governmental funds balance sheet. 40,816,044 Net pension asset is not a financial resource; therefore, it is not reported in the 61,500 governmental funds. Net OPEB liability is not a financial resource; therefore, it is not reported in the governmental funds. (16,955) Unavailable tax revenues that are reported as deferred inflows of resources in the governmental funds balance sheet is recognized as revenue in the government -wide financial statements. 26,454 TCDRS contributions are not current financial resources/burden; therefore they are not reported in the governmental funds. The net of these amounts is: 71,774 Interest payable on long term debt does not require current financial resources; therefore interest payable is not reported as a liability in the governmental funds balance sheet. (59,415) Unamortized pension investment gains/losses are not current financial resources/burden; therefore they are not reported in the governmental funds. The net of these amounts is: (38,846) Accrued compensated absences do not require the use of current financial resources; therefore accrued vacation is not reported as a liability in the governmental funds balance sheet. (29,107) Long-term liabilities, including bonds payable are not due and payable in the current period and, therefore, are not reported in the fund financial statements. (22,158,402) Net position of governmental activities $ 27,028,375 The notes to the financial statements are an integral part of this statement. 14 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Revenues: Water and wastewater charges Taxes Miscellaneous Intergovernmental revenues Investment income Oversize meter reimbursements Inspection and tap fees Total Revenues: Expenditures Water Wastewater Adminstration Fire Non -Departmental Board of directors Capital outlay Debt Service Principal Interest and fiscal charges Bond administrative fees Total Expenditures: Excess (deficiency) of revenues over (under) expenditures Other Financing Sources (Uses) Transfers in Proceeds from sale of assets Capital lease issuance cost Capital lease issuance Transfers out Total Other Financing Sources (Uses): Net change in fund balance Fund Balances - beginning of year Fund Balances - end of year Debt Service General Fund Fund $ 9,286,714 $ 1,197,949 6 35,627 195,528 61,283 14,237 8,000 10,799,338 703,591 Capital Projects Fund Total Governmental Funds $ $ 81,688 45,000 21,903 28,854 3,173,225 1,026,693 1,075,089 625,637 190,494 9,811 665,773 112,381 20,050 6,899,153 1,315,000 569,530 2,950 73,854 5,545,792 1,887,480 5,545,792 3,900,185 (1,183,889) (5,471,938) 797,834 1,390,151 15,400 (1,500) 360,100 (1,390,151) (218,317) (797,834) 1,390,151 (797,834) 3,681,868 206,262 (6,269,772) 5,082,626 $ 8,764,494 $ 476,082 5,178,262 682,344 $ (1,091,510) The notes to financial statements are an integral part of this statement. 15 9,286,714 1,879,637 80,627 195,528 112,040 14,237 8,000 11,576,783 3,173,225 1,026,693 1,075,089 625,637 190,494 9,811 6,211,565 1,427,381 589,580 2,950 14,332,425 (2,755,642) 2,187,985 15,400 (1,500) 360,100 (2,187,985) 374,000 (2,381,642) 10,736,970 $ 8,355,328 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 RECONCILIATION OF THE STATEMENT OF REVENUES EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30, 2018 Net change in fund balances - total governmental funds $ (2,381,642) Amounts reported for governmental activities in the Statement of Activities are different because: Depreciation expense on capital assets reported in the Statement of Activities does not require the use of current financial resources, therefore, depreciation expense is not reported as expenditures in the governmental funds. (786,400) Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the costs of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount of capital assets recorded in the current period. 6,211,565 Debt principal payments reduces long-term liabilities in the Statement of Net Position, but it is recorded as an expenditure in the governmental funds. 1,427,381 Governmental funds report new debt issuances as other financing sources. However, these amounts are removed and recognized as new long term debt on the Statement of Net Position. Governmental funds report the effects of debt premiums, and debt discounts, when debt is first issued, whereas the amounts are deferred and amortized in the Statement of Activities. Governmental funds recognize the full amount of proceeds received for sale of disposed assets, but net book values of the assets are factored in to calculating a gain on sold assets for the government -wide financial statements. Various other reclassifications and eliminations are necessary to convert from the modified accrual basis of accounting to accrual basis of accounting. These include recognizing the change in unavailable revenues, pension and OPEB expense, and other items. The net effect of these reclassifications is to decrease net position. Current year changes in accrued interest payable do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds. (360,100) 18,325 (5,923) (7,041) 1,962 Change in net position of governmental activities $ 4,118,127 The notes to the financial statements are an integral part of this statement. 16 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. General Statement Denton County Municipal Utility District No. 1 (the District) was created by the Texas Water Rights Commission (later known as Texas Commission on Environmental Quality (TCEQ)) on March 4, 1975 and confirmed by the electorate of the District at a confirmation election on October 7, 1975. The Board of Director's held its first meeting on April 24, 1975. The Bonds were first sold on June 8, 1976. The District operates pursuant to Article XVI, Chapter 59 of the Texas Constitution and Chapter 54 of the Texas Water Code, as amended. Effective April 1, 1983, the District's name was officially changed by order from Denton County Municipal Utility District No. 1 to Trophy Club Municipal Utility District No. 1. On May 9, 2009, citizens voted to consolidate the District and Trophy Club Municipal Utility District No. 2 (MUD2). As a result, the District reports consolidated activity and balances for the District and the entities formerly known as MUD2 and the Trophy Club Master District Joint Venture (a joint venture of MUD1 and MUD2). The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for the District. The fmancial statements of the District have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to government units. B. Financial Reporting Entity As required by accounting principles generally accepted in the United States of America, these financial statements include the activities of the District and any organizations for which the District is financially accountable or for which the nature and significance of their relationship with the District are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The definition of the reporting entity is based primarily on the notion of financial accountability. A primary government is financially accountable for the organizations that make up its legal entity. It is also financially accountable for legally separate organizations if its officials appoint a voting majority of an organization's governing body and either it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or to impose specific financial burdens on, the primary government. A primary government may also be financially accountable for governmental organizations that are fiscally dependent on it. A primary government has the ability to impose its will on an organization if it can significantly influence the programs, projects, or activities of, or the level of services performed or provided by, the organization. A financial benefit or burden relationship exists if the primary government (a) is entitled to the organization's resources; (b) is legally obligated or has otherwise assumed the obligation to finance the deficits of, or provide financial support to, the organization; or (c) is obligated in some manner for the debt of the organization. Some organizations are included as component units because of their fiscal dependency on the primary government. An organization is fiscally dependent on the primary government if it is unable to adopt its budget, levy taxes, set 17 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED rates or charges, or issue bonded debt without approval by the primary government. Accordingly, the District has no component units. C. Government -Wide and Fund Financial Statements The government -wide financial statements (the Statement of Net Position and the Statement of Activities) report information on all of the activities of the District, except for fiduciary funds. The effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. The activities of the District are comprised only of governmental activities. The Statement of Activities demonstrates the degree to which the direct expenses of a given program are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific program. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given program and 2) operating or capital grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Taxes and other items not properly included among program revenues are reported instead as general revenues. Fund Financial Statements The District segregates transactions related to certain functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. These statements are required to present each major fund in a separate column on the fund financial statements. For fiscal year 2018, the major funds are the General Fund, Capital Projects Fund, and the Debt Service Fund. Governmental funds are those funds through which most governmental functions typically are financed. The measurement focus of governmental funds is on the sources, uses and balance of current financial resources. The District has presented the following governmental funds: General Fund The General Fund is the main operating fund of the District. This fund is used to account for all financial resources not accounted for in other funds. All general tax revenues and other receipts that are not restricted by law or contractual agreement to some other fund are accounted for in this fund. General operating expenditures, fixed charges and capital improvement costs that are not paid through other funds are paid from the General Fund. Debt Service Fund The Debt Service Fund is used to account for resources accumulated and payments made for principal and interest on the long-term debt of governmental funds. 18 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED Capital Projects Fund The Capital Projects Fund is used to account for funds received and expended for the acquisition and construction of infrastructure and other capital assets. D. Measurement Focus and Basis of Accounting Measurement focus refers to what is being measured; basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied. The government -wide statements are reported using the economic resources measurement focus and the accrual basis of accounting. The economic resources measurement focus means all assets and liabilities (whether current or non-current) are included on the Statement of Net Position and the operating statements present increases (revenues) and decreases (expenses) in net total position. Under the accrual basis of accounting, revenues are recognized when earned. Expenses are recognized at the time the liability is incurred. Governmental fund financial statements are reported using the current financial resources measurement focus and are accounted for using the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual; i.e., when they become both measurable and available. "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The District considers receivables collected within sixty days after year-end to be available and recognizes them as revenues of the current year. Expenditures are recorded when the related fund liability is incurred. However, debt service expenditures are recorded only when payment is due. The revenues susceptible to accrual are interest income and ad valorem taxes. All other governmental fund revenues are recognized when received. E. Cash and Investments The District's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments of three months or less from the date of acquisition. 19 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED The District's investment policy requires that all monies be deposited with the authorized District depository or 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, (B) 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 (1), pledged with third party selected or approved by the District, and placed through a primary government securities dealer. All investments are recorded at fair value based on quoted market prices. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties. F. Capital Assets Capital assets, which include property, plant, and equipment, are reported in the government -wide financial statements. All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated assets are valued at their fair market value on the date donated. Repairs and maintenance are recorded as expenses. Renewals and betterments are capitalized. Interest has not been capitalized during the construction period on property, plant and equipment. Assets capitalized have an original cost of $5,000 or more and over one year of useful life. Depreciation has been calculated on each class of depreciable property using the straight-line method. Estimated useful lives are as follows: Buildings 50 Years Improvements other than buildings 15 - 30 Years Machinery and equipment 5 - 15 Years Vehicles 6 - 12 Years Water and wastewater systems 30 - 65 Years 20 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED G. Accumulated Vacation Time Employees earn vacation pay based upon seniority that accrues at various rates up to a maximum four weeks per year. Upon termination, employees will be paid for their unused earned vacation. The District records a liability for the value of these compensated absences. H. Organizational Costs The District, in conformance with requirements of the TCEQ, capitalized costs incurred in the creation of the District. The TCEQ requires capitalization of organizational costs for the construction period, 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. The District amortizes the organizational costs using the straight-line method over a period of 22 to 45 years. I. Net Position Net position represents the difference between assets and liabilities. Net position invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvements of those assets, and adding back unspent proceeds. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislations adopted by the District or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. J. Estimates In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities, and the reported amounts of revenue and expenses/expenditures. Actual results could differ from those estimates. K. Fund Balances Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions (GASB 54) defines the different types of fund balances that a governmental entity must use for financial reporting purposes in the fund financial statements for governmental type funds. It does not apply for the government -wide financial statements. 21 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED GASB 54 requires the fund balance amounts to be properly reported within one of the following fund balance categories: Nonspendable - such as fund balance associated with inventories, prepaids, long-term loans and notes receivable, and property held for resale (unless the proceeds are restricted, committed, or assigned), Restricted - fund balance category includes amounts that can be spent only for the specific purposes stipulated by constitution, external resource providers, or through enabling legislation, Committed - fund balance classification includes amounts that can be used only for the specific purposes determined by a formal action of the Board of Directors (the District's highest level of decision-making authority), Assigned - fund balance classifications are assigned by the District Manager with the intentions to be used by the government for specific purposes but do not meet the criteria to be classified as restricted or committed, and Unassigned - fund balance is the residual classification for the District's General Fund and includes all spendable amounts not contained in the other classifications, and other fund's that have total negative fund balances. NOTE 2. CASH AND INVESTMENTS The funds of the District must be deposited and invested under the terms of a contract, contents of which are set out in the Depository Contract Law. The depository bank places approved pledged securities for safekeeping and trust with the District's agent bank in an amount sufficient to protect District funds on a day-to-day basis during the period of the contract. The pledge of approved securities is waived only to the extent of the depository bank's dollar amount of Federal Deposit Insurance Corporation (FDIC) insurance. At September 30, 2018, the carrying amount of the District's deposits (cash, certificates of deposit, and non -pooled savings accounts) was $2,632,956 and the bank balance was $3,224,980. The District's cash deposits at September 30, 2018, and during the year then ended were entirely covered by FDIC insurance, pledged securities, or by a letter of credit pledged by the District's agent bank in the District's name. 22 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 2. CASH AND INVESTMENTS — CONTINUED The Public Funds Investment Act (Government Code Chapter 2256) contains specific provisions in the areas of investment practices, management reports and establishment of appropriate policies. Among other things, it requires the District to adopt, implement, and publicize an investment policy. That policy must address the following areas; (1) safety of principal and liquidity, (2) portfolio diversification, (3) allowable investments, (4) acceptable risk levels, (5) expected rates of return, (6) maximum allowable stated maturity of portfolio investments, (7) maximum average dollar -weighted maturity, allowed based on the stated maturity date for the portfolio, (8) investment staff quality and capabilities, and (9) bid solicitation preferences for certificates of deposit. Statutes and the District's investment policy authorized the District to invest in the following investments as summarized below: Maximum Maximum Authorized Maximum Percentage Investment Investment Type Maturity of Portfolio In One Issuer U.S. Treasury Obligations 2 years 50% NA U.S. Agencies Securities 2 years 50% NA State of Texas Securities 2 years 50% NA Certificates of Deposits 2 years 90% NA Money Market 2 years 90% NA Investment pools 2 years 90% NA The Act also requires the District to have independent auditors perform test procedures related to investment practices as provided by the Act. The District is in substantial compliance with the requirements of the Act and with local policies. Cash and investments as of September 30, 2018 are classified in the accompanying financial statements as follows: Primary Government: Cash and cash equivalents $ 2,993,981 Pooled Investments 4,368,107 Restricted pooled investments 1,442,546 Total cash and investments $ 8,804,634 23 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 2. CASH AND INVESTMENTS — CONTINUED Cash and investments as of September 30, 2018 consist of the following: Petty Cash $ 600 Deposits with financial institutions 2,632,356 Restricted Pooled Investments 1,803,571 Unrestricted Texpool Investments 4,368,107 Total cash, certificate of deposit, and pooled investments $ 8,804,634 Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the District manages its exposure to interest rate risk is by investing mainly in investment pools which purchase a combination of shorter term investments with an average maturity of less than 60 days thus reducing the interest rate risk. The District monitors the interest rate risk inherent in its portfolio by measuring the weighted average maturity of its portfolio. The District has no specific limitations with respect to this metric. As of September 30, 2018, the District had the following investment: Weighted Average Investment Type Amount Maturity TexPool $ 6,171,678 30 days Total Investments $ 6,171,678 As of September 30, 2018, the District did not invest in any securities which are highly sensitive to interest rate fluctuations. Disclosures Relating to Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the Public Funds Investment Act, the District's investment policy, or debt agreements, and the actual rating as of year-end for each investment type. 24 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 2. CASH AND INVESTMENTS — CONTINUED Minimum Rating as Legal of Year Investment Type Amount Rating End TexPool $ 6,171,678 AAAm AAAm Total Investments $ 6,171,678 Concentration of Credit Risk As of September 30, 2018, other than external investment pools, the District did not have 5% or more of its investments with one issuer. Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The Public Funds Investment Act and the District's investment policy have the following provision for deposits: They require that a financial institution secure deposits made by state or local governmental units by either 1) pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit), or 2) an irrevocable standby letter of credit with the District named as the beneficiary. The market value of pledged securities in the collateral pool or the value of the letter of credit must equal at least the bank balance less FDIC insurance at all times. Investment in State Investment Pools The District is a voluntary participant in TexPool. The State Comptroller of Public Accounts exercises responsibility over TexPool. This oversight includes the ability to significantly influence operations, designation of management, and accountability for fiscal matters. Additionally, the State Comptroller has established an advisory board composed of both participants in TexPool and other persons who do not have a business relationship with TexPool. TexPool operates in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. TexPool uses amortized costs rather than market value to report net assets to compute share prices. Accordingly, the fair value of the position in TexPool is the same as the value of TexPool shares. 25 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 3. ACCOUNTS RECEIVABLE Receivables as of year-end, including the applicable allowances for uncollectible accounts, are as follows: Accounts Receivable: MUD water $ 570,746 MUD sewer 277,334 Unbilled receivables 143,997 Refuse (as agent for Town ofTrophy Club) 73,081 Storm drainage (as agent for Town ofTrophy Club) 51,411 Refuse tax (as agent for Town ofTrophy Club) 6,281 Miscellaneous 2,993 PID Surcharge (as agent for Town ofTrophy Club) 17,887 1,143,730 Allowance for uncollectible accounts (12,051) Total (net) $ 1,131,679 Due from Other Governments: Town ofTrophy Club $ 2,072 NOTE 4. INTERFUND TRANSFERS Transfers between funds during the year are as follows: Transfer In Transfer Out Amount Purpose General Fund Capital Projects $ 797,834 Reimburse GF for Phase 1 of the Fort Worth Water Main Project Debt Service General Fund 218,954 Transfer for the fire station bond payment Debt Service General Fund 122,043 Transfer of PID surcharge Debt Service General Fund 925,818 Assist with revenue bond payments Debt Service General Fund 123,336 Transfer to assist with the bond reserve payment. Total $ 2,187,985 26 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 5. CAPITAL ASSETS Capital asset activity for the year ended September 30, 2018, was as follows: Governmental Activities: Capital assets - Non -Depreciable Land Construction in progress Water rights Total capital assets not being depreciated Capital assets - Depreciable Buildings Improvements other than buildings Machinery and equipment Organization costs Vehicles Water system Wastewater treatment system Wastewater collection system Total capital assets being depreciated Less accumulated depreciation for: Buildings Improvements other than buildings Machinery and equipment Organization costs Vehicles Water system Wastewater treatment system Wastewater collection system Total accumulated depreciation Governmental activities capital assets, net Beginning Balances $ 648,178 14,127,488 796,145 15,571,811 3,479,008 324,334 1,809,967 2,331,300 2,384,649 12,218,223 5,663,320 4,410,351 32,621,152 (529,537) (256,787) (886,789) (2,304,293) (1,128,731) (3,828,100) (2,333,243) (1,528,683) (12,796,163) $ 35,396,800 27 Retirements/ Ending Additions Transfers Balance 5,932,219 $ - $ 648,178 (57,472) 20,002,235 796,145 5,932,219 (57,472) 21,446,558 - 57,900 60,390 (42,110) 144,765 24,768 16,037 5,415 58,154 (30,611) 3,479,008 324,334 1,867,867 2,331,300 2,402,929 12,387,756 5,684,772 4,437,894 279,346 15,362 32,915,860 (75,277) (604,814) (11,482) (268,269) (116,694) (1,003,483) (7,273) (2,311,566) (149,191) 36,187 (1,241,735) (214,968) (4,043,068) (138,444) (2,471,687) (73,071) - (1,601,754) (786,400) 36,187 (13,546,376) $ 5,425,165 $ (5,923) $ 40,816,042 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 5. CAPITAL ASSETS - CONTINUED Depreciation expense was charged as direct expense to programs of the primary government as follows: General govemment Water operations Wastewater operations Fire department Wastewater collection systems Total depreciation expense NOTE 6. LONG-TERM DEBT $ 314,121 210,380 120,833 73,208 67,858 $ 786,400 At September 30, 2018, the District's long-term debt payable consisted of the following: Description Tax and revenue bonds: Improvements Refunding Refunding Improvements Improvements Improvements Capital lease payable: Capital lease obligations Capital lease obligations Interest Year Average Rate of Final Annual Original Payable Issue Maturity Payment Amount 3.50-5.00% 2010 2031 $ 148,205 $2,000,000 2.00-3.00% 2012 2023 251,373 2,355,000 2.00-3.50% 2013 2023 224,734 1,905,000 1.50-3.50% 2015 2034 199,898 5,765,000 2.00-3.25% 2015 2035 305,174 9,230,000 0.53-2.12% 2016 2036 275,259 4,635,000 2.50% 2015 2.95% 2018 28 Outstanding 9/30/2018 $ 1,490,000 1,170,000 1,020,000 5,045,000 8,280,000 4,230,000 $ 21,235,000 2022 $ 127,149 $1,057,316 $ 478,330 2023 78,456 360,100 360,100 $ 838,430 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 6. LONG-TERM DEBT - CONTINUED The following is a summary of long-term debt transactions of the District for the year ended September 30, 2018: Governmental Activities: Tax, revenue, and refunding bonds Deferred loss on refunding Premium on bonding Capital lease obligations Compensated absences Total Governmental Activities Long-term Liabilities Beginning Balance $ 22,550,000 $ (5,197) 108,496 22,653,299 590,711 590,711 32,306 32,306 $ 23,276,316 Ending Additions Reductions Balance $ (1,315,000) 866 (19,192) (1,333,326) $ 21,235,000 (4,331) 89,304 21,319,973 360,100 (112,381) 838,430 360,100 (112,381) 838,430 (3,199) 29,107 (3,199) 29,107 $ 360,100 $ (1,448,906) $ 22,187,510 Due Within One Year $ 1,350,000 1,350,000 185,117 185,117 29,107 29,107 $ 1,564,224 The annual requirements to amortize all debt outstanding as of September 30, 2018, are as follows: Year Ending September 30, 2019 2020 2021 2022 2023 2024-2028 2029-2033 2034-2036 Principal $ 1,350,000 1,370,000 1,410,000 1,450,000 1,490,000 5,565,000 6,165,000 2,435,000 Total $ 21,235,000 29 Interest Total $ 543,397 $ 1,893,397 516,220 1,886,220 486,681 1,896,681 455,372 1,905,372 421,446 1,911,446 1,672,427 7,237,427 891,885 7,056,885 107,748 2,542,748 $ 5,095,176 $ 26,330,176 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 6. LONG-TERM DEBT — CONTINUED Capital lease obligations: Year Ending September 30, Principal Interest Total 2019 $ 185,117 $ 21,550 $ 206,667 2020 189,028 16,592 205,620 2021 193,027 11,532 204,558 2022 197,114 6,366 203,480 2023 74,144 1,094 75,238 Total $ 838,430 $ 57,133 $ 895,563 Tax and Revenue Bonds Tax and revenue 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 sanitary sewer system. The outstanding bonds are callable for redemption prior to maturity at the option of the District as follows: Series 2010 - All maturities from 2021 to 2025 are callable in principal increments of $5,000 on or after September 1, 2020 at par plus unpaid accrued interest to the fixed date for redemptions. Series 2012 - All maturities from 2021 to 2023 are callable in principal increments of $5,000 on or after September 1, 2020 at par plus unpaid accrued interest to the fixed date for redemptions. Series 2013 — The Series 2013 bonds are not callable prior to their stated maturity. Series 2014 — All maturities from 2024 to 2034 are callable in principal increments of $5,000 on or after September 1, 2025 at par plus unpaid accrued interest to the fixed date for redemptions. Series 2015 — All maturities from 2025 to 2035 are callable in principal increments of $5,000 on or after September 1, 2025 at par plus unpaid accrued interest to the fixed date for redemptions. Series 2016 — All maturities from 2028 to 2036 are callable in principal increments of $5,000 on or after September 1, 2027 at par plus unpaid interest to the fixed date for redemptions. Contractual obligations and notes payable are liquidated from the General Fund. Tax and revenue bonds are liquidated from the Debt Service Fund. The provisions of the bond resolutions relating to debt service requirements have been met, and the cash allocated for these purposes was sufficient to meet debt service requirements for the year ended September 30, 2018. 30 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 7. PROPERTY TAXES 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 all property within the Appraisal District on the basis of 100% of its appraised value and is prohibited 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 $0.25 per $100 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. Property taxes are recorded as receivables when levied. Following is information regarding the 2018 tax levies: Adjusted taxable values $ 1,555,617,669 0 & M and Fire tax levy $0.076580/$100 1,191,292 I & S tax levy $0.043630/$100 678,716 Total tax levy $0.120210/$100 $ 1,870,008 NOTE 8. FUND BALANCE CLASSIFICATIONS The District authorized the District Manager to designate certain fund balances as assigned. Excluding unassigned fund balances, the following describes the District's fund balance classifications at September 30, 2018: Non -Spendable Fund Balances The District's $70,512 non -spendable fund balance represents expenses prepaid at fiscal year-end. Assigned Fund Balances The District assigned a total of $1,439,969 of General Fund balances for the following future capital outlays: $963,543 for wastewater system improvements, $408,621 for vehicles, and $67,805 for other improvements. 31 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 9. 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 District is exposed. Any losses reported but unsettled or incurred and not reported, are believed to be insignificant to the District's basic financial statements. Additionally, the District must operate in compliance with rules and regulations mandated for public water supply systems by federal and state governments. The District is subject to compliance oversight by the Texas Commission on Environmental Quality (TCEQ). NOTE 10. DUE TO AND FROM OTHER FUNDS During the course of operations, the District has activity between funds for various purposes. Any residual balances outstanding at year end are reported as due from/to other funds. While these balances are reported in fund financial statements, balances between the funds included in governmental activities (i.e., the governmental funds) are eliminated for the Statement of Net Position presentation. Due to: Capital Projects Due from: General Fund Fund Total General Fund $ $ 45,000 $ 45,000 Capital Projects Fund 1,096,130 1,096,130 Total $ 1,096,130 $ 45,000 $ 1,141,130 NOTE 11. RETIREMENT PLAN Introduction The funding policy governs how the Texas County & District Retirement System (TCDRS) determines the employer contributions required to ensure that benefits provided to TCDRS members are funded in a reasonable and equitable manner. The goals of TCDRS' funding policy are to fully fund benefits over the course of employees' careers to ensure intergenerational equity, and to balance rate and benefit stability with the need for the plan funding to be reflective of current plan conditions. This policy documents the current funding policies in effect for the Dec. 31, 2017 actuarial valuation as established by state law, administrative rule and action by the TCDRS Board of Trustees (the board). The policy serves as a comprehensive funding overview and complies with the GASB reporting requirements for an agent multiple -employer plan. 32 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. RETIREMENT PLAN (CONTINUED) TCDRS Funding Overview TCDRS is a model for responsible, disciplined funding. TCDRS does not receive any state funding. As an agent, multiple -employer plan, each participating employer in the system funds its plan independently. A combination of three elements funds each employer's plan: employee deposits, employer contributions and investment income. • The deposit rate for employees is 7% of compensation, as adopted by the employer' s governing body. • Participating employers are required to contribute at actuarially determined rates to ensure adequate funding for each employer's plan. Employer contribution rates are determined annually and approved by the TCDRS Board of Trustees. • Investment income funds a large part of the benefits employees earn. Pursuant to state law, employers participating in the system must pay 100% of their actuarially determined required contributions on an annual basis. Each employer has the opportunity to make additional contributions in excess of its annual required contribution rate either by adopting an elected rate that is higher than the required rate or by making additional contributions on an ad hoc basis. Employers may make additional contributions to pay down their liabilities faster, pre -fund benefit enhancements and/or buffer against future adverse experience. In addition, employers annually review their plans and may adjust benefits and costs based on their local needs and budgets. Although accrued benefits may not be reduced, employers may reduce future benefit accruals and immediately reduce costs. Methodology for Determining Employer Contribution Rates The board hires independent outside consulting actuaries to conduct an annual valuation to measure the funding status and to determine the required employer contribution rate for each employer plan. In order to calculate the employer contribution rate, the actuary does the following: • Studies each employer's adopted plan of benefits and the profile of its plan participants, and uses assumptions established by the board to estimate future benefit payments. • Discounts the estimate of future benefit payments to the present based on the long-term rate of investment return to determine the present value of future benefits. • Compares the present value of future benefits with the plan's assets to determine the difference that needs to be funded based on the funding policy. The valuation of each employer plan is based on the system funding policy and the assets, benefits and participant profile of each participating employer plan. The four key components in the determination of employer contribution rates are: the actuarial cost method, amortization policy, the asset valuation method and the actuarial assumptions. 33 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. RETIREMENT PLAN (CONTINUED) Actuarial Cost Method TCDRS has adopted the replacement life entry age cost method, a conservative cost method and an industry standard. The goal of this cost method is to fund benefits in an orderly manner for each participant over his or her career so that sufficient funds are accumulated by the time benefit payments begin. Under this approach, benefits are funded in advance as a level percentage of pay. This portion of the contribution rate is called the normal cost rate and generally remains stable from year to year. Amortization Policy The portion of the contribution rate that funds any remaining unfunded amounts for benefits that are not covered by the normal cost is called the unfunded actuarial accrued liability (UAAL) rate. UAAL amounts occur when benefit enhancements are adopted that have not been funded in advance, or when actual investment or demographic experience varies from the actuarial assumptions (actuarial gains and losses). UAAL amounts are amortized on a level -percentage -of -covered -payroll basis over a closed period with a layered approach. The closed periods ensure all unfunded liabilities are financed over no more than 20 years from the time they occur. Each year new layers are established to amortize changes in the UAAL due to actuarial gains or losses, as well as any plan benefit changes elected by an employer for that year. Benefit enhancements are amortized over a 15 -year closed period. All other changes in the UAAL are amortized over 20 -year closed periods. These amortization periods are generally more conservative than those of most other public retirement plans and are stricter than the minimum amortization period required under state law. For newly participating districts that have five or fewer employees who are all within five years of retirement eligibility, any initial UAAL and any subsequent adoption of prior service credits are amortized over a five-year closed amortization period. This ensures that benefits are appropriately funded over the current generation of employees. Notwithstanding the layered approach, the total UAAL payment may not be less than the required payment obtained by amortizing the entire UAAL over a 20 -year period. If a plan is overfunded, the overfunded actuarial accrued liability (OAAL) is calculated annually using a 30 -year open amortization period. Asset Valuation Method When determining the actuarial value of assets used for measuring a plan's funded status, TCDRS smooths each year's actuarial investment gains and losses and recognizes them over a five-year period to better reflect the system's long-term investment horizons and to keep employer contribution rates more stable. As actuarial asset investment gains and losses are recognized, they become part of the actuarial gains and losses for the year and are funded according to the amortization policy. The five-year period helps stabilize employer rates while still ensuring that rates are reflective of current market conditions. 34 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. RETIREMENT PLAN (CONTINUED) In addition, the board has the ability to set aside reserves from investment earnings that are used to help offset future negative economic cycles. These reserves are held separately and are not counted as part of a participating employer's plan assets until they are passed through to employers when determined necessary by the board. Reserves help maintain rate stability for employers. In addition, reserves ensure that employers do not adopt benefit increases based on a temporarily lower plan cost at a high point in a market cycle and, conversely, are not as pressured to immediately reduce benefit levels during a low point in a market cycle. Actuarial Assumptions Demographic and economic assumptions are used to estimate employer liabilities and to determine the amount of funding required from employer contributions as opposed to investment earnings. These assumptions reflect a long-term perspective of 30 years or more. Examples of key economic assumptions include long-term investment return, long-term inflation and annual payroll increase. Demographic assumptions are the actuary's best estimate of what will happen to TCDRS members and retirees. Examples of demographic assumptions are employment termination rates, retirement rates and retiree mortality rates. A complete listing of all actuarial assumptions can be found in the annual system- wide valuation report. Oversight The board has established review policies to ensure that actuarial assumptions are appropriate and that the methodology for determining employer contribution rates is being correctly applied. Review of Actuarial Assumptions TCDRS' actuarial assumptions are periodically reviewed and revised as deemed necessary to reflect best estimates of future experience. Every four years, the TCDRS consulting actuary conducts an investigation of experience. TCDRS assumptions are compared to plan experience and future expectations, and changes to the assumptions are recommended as needed. The board adopts actuarial assumptions to be used in the valuation based on the results of this study. An actuarial audit of every investigation of experience is required and must be performed by an independent auditing actuary to review the consulting actuary's analysis, conclusions and recommendations for accuracy, appropriateness and reasonableness. These audits alternate between a peer review and a full replication audit of the investigation of experience. In a peer review audit of the investigation, the reviewing actuary uses the raw results of the investigation for demographic assumptions as calculated by the consulting actuary to test the conclusions and recommendations. In addition, the reviewing actuary independently analyzes economic assumptions to test the results and recommendations of the consulting actuary. The reviewing actuary also examines the consulting actuary's methods and assumptions for reasonableness and internal consistency. In a full replication audit of the investigation, in addition to performing all of the steps of a peer review, the auditing actuary fully replicates the calculation of the investigation's raw results. 35 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. RETIREMENT PLAN (CONTINUED) Review of Employer Contribution Rates In order to test accuracy and ensure that the actuarial methods and assumptions are being correctly applied, an audit of the valuation is required every four years. These audits are conducted by an independent reviewing actuary and alternate between a peer review and a full replication audit of the valuation. In the peer review audit of the valuation, the actuary uses a sample of participant data and TCDRS plans to test the results of the valuation. The reviewing actuary also examines the consulting actuary's methods and assumptions for reasonableness and internal consistency. In a full replication audit of the valuation, the auditing actuary performs all the steps of a peer review audit but instead of analyzing sample data and plans, the auditing actuary fully replicates the original actuarial valuation. Review and Modification of Funding Policy The board will review this policy on a regular basis and may modify this policy at its discretion. Modifications to the policy may be submitted for consideration to the board by staff and/or outside consulting actuaries as circumstances warrant. Long -Term Expected Rate of Return The long-term expected rate of return on TCDRS assets is determined by adding expected inflation to expected long-term real returns, and reflecting expected volatility and correlation. The capital market assumptions and information shown below are provided by TCDRS' investment consultant, Cliffwater LLC. The numbers shown are based on January 2017 information for a 7-10 year time horizon. Note that the valuation assumption for long-term expected return is re -assessed at a minimum of every four years, and is set based on a 30 -year time horizon; the most recent analysis was performed in 2013. See Milliman's TCDRS Investigation of Experience report for the period January 1, 2009 — December 31, 2012 for more details. 36 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. RETIREMENT PLAN (CONTINUED) Asset Class US Equities Private Equity Global Equities International Equities- Developed International Equities- Emerging Investment -Grade Bonds Strategic Credit Direct Lending Distressed Debt REIT Equities Master Limited Partnerships (MLPs) Private Real Estate Partnerships Hedge Funds Total Contributions Benchmark Dow Jones U.S. Total Stock Market Index Cambridge Associates Global Private Equity & Venture Capital Index MSCI World (net) Index MSCI World Ex USA (net) MSCI EM Emerging Markets (net) Index Barclays Capital Aggregate Bond Index FTSE High -Yield Cash -Pay Capped Index S&P/LSTA Leveraged Loan Index Cambridge Associates Distressed Securities Index 67% FTSE NAREIT Equity REITs Index + 33% FRSE EPRA/NAREIT Global Real Estate Index Alerian MLP Index Cambridge Associates Real Estate Index Hedge Fund Research, Inc. (HFRI) Fund of Funds Composite Index TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 SCHEDULE OF CONTRIBUTIONS Last 10 Calendar Years (will ultimately be displayed) 2017 2016 2015 Actuarially Determined Contribution $ 102,802 97,875 97,043 Contributions in relation to the actuarially determined contribution $ 102,802 97,875 97,043 Contribution deficiency (excess) $ Target Geometric Real Allocation Rate of Return 11.50% 4.55% 16.00% 7.55% Covered employee payroll $ 1,140,976 1,119,822 1,116,721 Contributions as a percentage of covered employee payroll 9.0% 8.5% 8.7% 37 1.50% 4.85% 11.00% 4.55% 8.00% 5.55% 3.00% 0.75% 8.00% 4.12% 10.00% 8.06% 2.00% 4.05% 2.00% 4.05% 3.00% 6.00% 6.00% 6.25% 18.00% 4.10% 100.00% 2014 2013 93,694 84,476 93,694 198,219 (113,743) 1,068,342 963,243 8.8% 20.6% TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. RETIREMENT PLAN (CONTINUED) Deferred Inflows/Outflows of Resources At September 30, 2018, the District reported deferred inflows and outflows of resources are as follows: Deferred Inflows/Outflows of Resources Deferred Inflows Deferred Outflows of Resources of Resources Differences between expected and actual experience $ 38,571 $ Changes of assumptions - 9,779 Net difference between projected and actual earnings 8,670 Contributions made subsequent to measurement date N/A 73,343 Amounts currently reported as deferred outflows of resources and deferred inflows of resources related to pensions, excluding contributions made subsequent to the measurement date, will be recognized in pension expense as follows: Net deferred outflows (inflows) of resources 2018 $ (181) 2019 (2,187) 2020 (13,966) 2021 (16,075) 2022 (5,053) Thereafter Total $ (37,462) 38 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. RETIREMENT PLAN (CONTINUED) Valuation Timing: NOTES TO SCHEDULE OF CONTRIBUTIONS Actuarially determined contribution rates are calculated as of December 31, two years prior to the end of the fiscal year in which the contributions are reported Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Asset Valuation Method Inflation Salary Increases Investment Rate of Retum Cost -of -Living Adjustments Retirement Age Turnover Mortality: Deposting members Service retirees, beneficiaries and non - depositing members Disabled retirees Other Information: Notes Entry Age Normal 5 Year smoothed market 2.75% Varies by age and service. 4.9% average over career including inflat: 8.00% Cost -of -Living Adjustments for Trophy Club Municipal Utility District No 1 are not considered to be substantively automatic under GASB 68. Therefore, no assumption for future cost -of - living adjustment is included in the GASB calculations. No assumption for future cost -of -living adjustments is included in the funding valuation. Members who are eligible for service retirement are assumed to commence receiving benefit payments based on age. The average age at service retirement for recent retirees is 61. The rates vary by length of service, entry -age group (age at hire) and sex The RP -2000 Active Employee Mortality Table for males with a two-year set -forward and the RP -2000 Active Employee Mortality Table for females with a four-year setback, both projected to 2014 with scale AA and then projected with 110% of the MP -2014 Ultimate scale after that. The Rp-2000 Combined Mortality Table with the projection scale AA and then projected with 110% of the MP -2014 Ultimate scale after that, with a one-year set -forward for males and no age adjustment for females. RP -2000 Disabled Mortality Table projected to 2014 with scale AA and then projected with 110% of the MP -2014 Ultimate scale after that, with no age age adjustment for males and a two-year set - forward for females. There were no benefit changes during the year. 39 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 12. OTHER POST EMPLOYMENT BENEFITS Trophy Club Municipal Utility District No 1 participates in the retiree Group Term Life program for the Texas County & District Retirement System (TCDRS), which is a statewide, multiple -employer, public employee retirement system. A brief description of benefit terms: All full- and part-time non -temporary employees participate in the plan, regardless of the number of hours they work in a year and are eligible for the TCDRS pension plan. Only employers that have elected participation in the retiree Group Term Life program are included in the OPEB plan. The plan provides a $5,000 post-retirement death benefit to beneficiaries of service retirees and disability retirees of employers that have elected participation in the retiree GTL program. The OPEB benefit is a fixed $5,000 lump -sum benefit. No future increases are assumed in the $5,000 benefit amount. Benefit terms are established under the TCDRS Act. Participation in the retiree GTL program is optional and the employer may elect to opt out of (or opt into) coverage as of Jan. 1 each year. Membership information is shown in the chart below. Inactive employees or beneficiaries currently receiving benefits 1 Inactive employees entitled to but not yet receiving benefits 5 Active employees 18 Total: 24 Contributions made to the retiree GTL Program are held in the GTL Fund. The GTL fund does not meet the requirements of a trust under Paragraph 4b of GASB 75, as the assets of the GTL fund can be used to pay active GTL benefits which are not part of the OPEB plan. Benefit terms are established under the TCDRS Act. Participation in the retiree GTL program is optional and the employer may elect to opt out of (or opt into) coverage as of Jan. 1 each year. The district's contribution rate for the retiree GTL program is calculated annually on an actuarial basis, and is equal to the cost of providing a one-year death benefit equal to $5,000. 40 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 12. OTHER POST EMPLOYMENT BENEFITS (CONTINUED) Deferred Inflows/Outflows of Resources At September 30, 2018, the District reported deferred inflows and outflows of resources are as follows: Deferred Inflows/Outflows of Resources Deferred Inflows Deferred Outflows of Resources of Resources Differences between expected and actual experience $ 275 $ - Changes of assumptions - 811 Contributions made subsequent to measurement date N/A $ 1,888 Amounts currently reported as deferred outflows of resources and deferred inflows of resources related to OPEB benefits, excluding contributions made subsequent to the measurement date, will be recognized in OPEB expense as follows: Net deferred outflows (inflows) of resources 2018 $ 89 2019 89 2020 89 2021 89 2022 90 Thereafter 90 Total $ 536 NOTE 13. PRIOR PERIOD RESTATEMENTS Governmental Governmental Fund Types Activities Net Position - beginning $ 22,921,140 Implementation of GASB Statement 75 (10,892) Net position - beginning as adjusted $ 22,910,248 NOTE 14. SUBSEQUENT EVENTS The District has evaluated all events and transactions that occurred after September 30, 2018 up through audit report date, which is the date the financial statements were issued. The District has no subsequent events to disclose. 41 REQUIRED SUPPLEMENTARY INFORMATION TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 GENERAL FUND BUDGETARY COMPARISON SCHEDULE (BUDGETARY BASIS) YEAR ENDED SEPTEMBER 30, 2018 Revenues Water charges Wastewater charges Taxes Miscellaneous Intergovernmental revenues Oversize meter reimbursements Investment income Inspection and tap fees Total revenues Expenditures: Water operations Wastewater operations Administration Fire Non-Deparhnental Directors Capital Outlay Debt Service Total expenditures Excess of revenues over expenditures Other financing sources (uses): Transfers out Transfers in Capital Lease Issuance Cost Capital Lease Issuance Proceeds from Sale of Assets Total other financing sources (uses) Net change in fund balance Fund Balances - beginning of year Fund Balances - end of year Budgeted amounts Original Final Actual $ 6,651,648 $ 6,644,648 2,976,365 2,976,365 1,175,783 1,175,783 23,046 33,046 187,839 187,839 18,179 18,179 12,000 50,000 6,000 6,000 11,050,860 11,091,860 4,200,897 3,891,767 1,300,782 1,195,782 1,214,111 1,204,111 637,010 637,010 176,746 176,746 12,980 12,980 1,370,339 1,645,339 127,149 127,149 9,040,014 8,890,884 2,010,847 2,200,977 (1,790,150) (2,534,662) 796,145 2,000 15,400 (1,788,150) (1,723,117) 222,697 477,860 5,082,626 5,082,626 $ 5,305,323 $ 5,560,486 $ 6,250,890 3,035,824 1,197,949 35,627 195,528 14,237 61,283 8,000 10,799,338 3,173,225 1,026,693 1,075,089 625,637 190,494 9,811 665,773 132,431 6,899,153 3,900,185 (1,390,151) 797,834 (1,500) 360,100 15,400 (218,317) Variance with Final Budget $ (393,758) 59,459 22,166 2,581 7,689 (3,942) 11,283 2,000 (292,522) 718,542 169,089 129,022 11,373 (13,748) 3,169 979,566 (5,282) 1,991,731 1,699,208 1,144,511 1,689 (1,500) 360,100 1,504,800 3,681,868 3,204,008 5,082,626 $ 8,764,494 $ 3,204,008 Notes to Required Supplementary Information: The District annual budgets are approved on the budgetary basis. The Board also approves all revisions and appropriations which lapse at each fiscal year-end. 42 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 SCHEDULES OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS Last 10 Years (will ultimately be displayed) 2017 2016 2015 2014 Total pension liability Service Cost $ 176,975 $ 200,990 $ 150,689 $ 170,600 Interest (on the Total Pension Liability) 83,553 57,230 41,351 27,449 Changes of benefit terms (22,086) Difference between expected and actual experience (25,170) (9,790) (11,320) (7,057) Change of assumptions 5,971 7,686 Benefit payments (1,695) (2,091) (1,902) (3,156) Net Change in Total Pension Liability 239,634 246,339 164,418 187,836 Total Pension Liability - Beginning 855,377 609,038 444,620 256,784 Total Pension Liability - Ending (a) $ 1,095,011 $ 855,377 $ 609,038 $ 444,620 Plan Fiduciary Net Position Contributions - Employer $ 102,802 $ 95,185 $ 97,043 $ 93,694 Contributions - Employee 79,868 78,388 78,171 74,784 Net Investment Income 126,587 46,440 (15,011) 18,561 Benefit payments (1,695) (2,091) (1,902) (3,156) Administrative Expense (769) (505) (394) (285) Other 2,418 19,889 (47) (21) Net Change in Plan Fiduciary Net Position 309,211 237,306 157,860 183,577 Plan Fiduciary Net Position - Beginning 847,300 609,994 452,134 268,557 Plan Fiduciary Net Position - Ending (b) $ 1,156,511 $ 847,300 $ 609,994 $ 452,134 Net Pension Liability - Ending (a) - (b) $ (61,500) $ 8,077 $ (956) $ (7,514) Plan Fiduciary Net Position as a Percentage of Total Pension Liability 105.62% 99.06% 100.16% 101.69% Covered Employee Payroll $ 1,140,976 $ 1,119,822 $ 1,116,721 1,068,342 Net Pension Liability as a Percentage of Covered Employee Payroll -5.39% 0.72% -0.09% Notes to Schedule: GASB 68 requires 10 fiscal years of data to be provided in this schedule. The employer will be required to build this schedule over the next 10 year period. 43 -0.70% TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 SCHEDULE OF PENSION CONTRIBUTIONS Last 10 Calendar Years (will ultimately be displayed) 2017 2016 2015 2014 2013 Actuarially Determined Contribution $ 102,802 97,875 97,043 93,694 84,476 Contributions in relation to the actuarially determined contribution $ 102,802 97,875 97,043 93,694 198,219 Contribution deficiency (excess) $ - - (113,743) Covered employee payroll $ 1,140,976 1,119,822 1,116,721 1,068,342 963,243 Contributions as a percentage of covered employee payroll 9.0% 8.5% 8.7% 8.8% 20.6% Valuation Timing: NOTES TO SCHEDULE OF PENSION CONTRIBUTIONS Actuarially determined contribution rates are calculated as of December 31, two years prior to the end of the fiscal year in which the contributions are reported Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Entry Age Normal Asset Valuation Method 5 Year smoothed market Inflation 2.75% Salary Increases Varies by age and service. 4.9% average over career including inf Investment Rate of Return 8.00% Cost -of -Living Adjustments Cost -of -Living Adjustments for Trophy Club Municipal Utility District No 1 are not considered to be substantively automatic under GASB 68. Therefore, no assumption for future cost -of - living adjustment is included in the GASB calculations. No assumption for future cost -of -living adjustments is included in the funding valuation. Retirement Age Members who are eligible for service retirement are assumed to commence receiving benefit payments based on age. The average age at service retirement for recent retirees is 61. Turnover The rates vary by length of service, entry -age group (age at hire) and sex. Mortality: Deposting members Service retirees, beneficiaries and non - depositing members Disabled retirees Other Information: Notes The RP -2000 Active Employee Mortality Table for males with a two-year set -forward and the RP -2000 Active Employee Mortality Table for females with a four-year setback, both projected to 2014 with scale AA and then projected with 110% of the MP -2014 Ultimate scale after that. The Rp-2000 Combined Mortality Table with the projection scale AA and then projected with 110% of the MP -2014 Ultimate scale after that, with a one-year set -forward for males and no age adjustment for females. RP -2000 Disabled Mortality Table projected to 2014 with scale AA and then projected with 110% of the MP -2014 Ultimate scale after that, with no age age adjustment for males and a two- year set -forward for females. There were no benefit changes during the year. 44 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 SCHEDULE OF OPEB CONTRIBUTIONS Last 10 Calendar Years (will ultimately be displayed) Actuarially Determined Contribution Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) Covered employee payroll Contributions as a percentage of covered employee payroll Valuation Timing: 2017 $ 2,673 2,673 $ 1,140,976 0.2% NOTES TO SCHEDULE OF CONTRIBUTIONS Actuarially determined contribution rates are calculated on a calendar year basis as of December 31, two years prior to the end of the fiscal year in which the contributions are reported. Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Entry Age Normal Inflation Does not apply Salary Increases Does not apply Investment Rate of Return Cost -of -Living Adjustments Retirement Age Mortality: Depositing members Service retirees, beneficiaries and non - depositing members Disabled retirees Other Information: Notes 3.44% Does not apply. Members who are eligible for service retirement are assumed to commence receiving benefit payments based on age. The average age at service retirement for recent retirees is 61. 90% of the RP -2014 Active Employee Mortality Table for males and 90% of the RP -2014 Active Employee Mortality Table for females, projected with 110% of the MP -2014 Ultimate scale after 2014. 130% of the RP -2014 Healthy Annuitant Mortality Table for males and 110% of the RP -2014 Healthy Annuitant Mortality Table for females, both projected with 110% of the MP -2014 Ultimate scale after 2014. 130% of the RP -2014 Disabled Annuitant Mortality Table for males and 115% of the RP -2014 Disabled Annuitant Mortality Table for females, both projected with 110% of the MP -2014 Ultimate scale after 2014 There were no benefit changes during the year. 45 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 SCHEDULES OF CHANGES IN NET OPEB LIABILITY AND RELATED RATIOS Last 10 Years (will ultimately be displayed) 2017 Total OPEB liability Service Cost $ 2,889 Interest (on the Total OPEB Liability) 595 Effect of plan changes Effect of assumption changes or inputs 946 Effect of economic/demographic (gains) or losses (321) Benefit payments Net Change in Total OPEB Liability 4,109 Total OPEB Liability - Beginning 12,846 Total OPEB Liability - Ending (a) $ 16,955 Pensionable Covered Payroll $ 1,140,976 Net OPEB Liability as a Percentage of Covered Employee Payroll 1.49% Notes to Schedule: This schedule is presented to illustrate the requirement to show information for 10 years. However, recalculations of prior years are not reported in accordance with the standards of GASB 74/75, they should not be shown here. Therefore, we have shown only years for which the new GASB statements have been implemented. 46 INDIVIDUAL SCHEDULES AND OTHER SUPPLEMENTARY INFORMATION REQUIRED BY TEXAS COMMISSION ON ENVIRONMENTAL QUALITY (TCEQ) TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 TSI -1 SERVICES AND RATES SEPTEMBER 30, 2018 1. Services provided by the District: a) Retail Water b) Retail Wastewater c) Wholesale Water d) Wholesale Wastewater Treatment e) Fire Protection f) Irrigation g) Participates in regional system and/or wastewater service (other than emergency interconnect) 2. Retail service providers: Current Rates Water Base Rates Residential and Commercial Meter Size 5/8" 1" 1.5" 2" 3" 4" 6" Base Rate $17.15 $32.23 $56.94 $86.58 $155.76 $254.59 $501.64 Sewer Base Fee Base Rate $19.60 Residential* Water Volumetric Rates Rates per 1,000 $3.96 $4.61 $5.34 $6.20 $7.21 Gallons 0 to 6,000 6,001 to 17,000 17,001 to 25,000 25,001 to 50,000 50,001 + Sewer Volumetric Rates Rates per 1,000 $3.18 $4.51 $6.43 $9.14 Gallons 0 to 4,000 4,001 to 8,000 8,001 to 12,000 12,000 + Commercial** $19.60 $5.92 1,000 + *Effective October 1, 2016 Winter Averaging for Sewer Rates were adopted for Residential Customers. Residential sewer rates each year are based on average water usuage for the months of December, January, and February. Effective April 1, 2018 the above rates were adopted for all residential sewer customers. **Commercial sewer usage is billed based on actual water usage per month NOTE: all rates noted above were amended effective April 1, 2018. District employs winter averaging for wastewater usage? Yes ***Total water and wastewater charges per 10,000 gallons usage (including surcharges) effective April 1, 2018 (based on 5/8" & 3/4") First 10,000 gallons used 10,000 $ Next 10,000 gallons used 20,000 $ Next 10,000 gallons used 30,000 $ Next 10,000 gallons used 40,000 $ Next 10,000 gallons used 50,000 $ Next 10,000 gallons used and subsequent 60,000 $ 122.57 170.86 228.56 290.56 352.56 424.66 *** The above sewer calculations are based on a Winter Average of 10,000 gallons per month. 47 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 TSI -1 SERVICES AND RATES SEPTEMBER 30, 2018 b) Retail service providers: number of retail water and/or wastewater" connections within the District as of the fiscal year end. Provide actual numbers and single family equivalents (ESFC). Meter Size Connections ESFC Active Total Active Factor ESFC's Unmetered - - 1.0 - Less than 3/4" 2,499.0 2,491.0 1.0 2,491.0 1" 623.0 622.0 2.5 1,555.0 1 1/2" 28.0 27.0 5.0 135.0 2" 92.0 84.0 8.0 672.0 3" 37.0 37.0 15.0 555.0 4" 15.0 15.0 25.0 375.0 6" 3.0 3.0 50.0 150.0 8" - - 80.0 - 10" - - 115.0 - Total Water 3,297.0 3,279.0 5,933.0 Total Wastewater 2,304.0 3,284.0 1.0 3,284.0 * Number of connections relates to water service if provided. Otherwise, the number of wastewater connections should be provided. Note: Total water connections does not include Fire Lines or Portable meters Note: "inactive" means that water and wastewater connections were made, but service is not being provided. Note: District provides wholesale services to the Town of Trophy Club through 1,444 connections 3. Total water consumption (in thousands) during the fiscal year: Gallons pumped into the system 955,151 Gallons billed to customers 884,662 Water accountability ratio 92.62% 4. Standby Fees: Does the District assess standby fees? No For the most recent fiscal year, FY2018: Debt Service Operations and Maintenance Total Total Percentage Levy Collected Collected $ 678,716 $ 677,052 99.8% $ 1,191,292 $ 1,188,371 99.8% Have standby fees been levied in accordance with Water Code Section 49.231, thereby constituting a lien on property? No 5. Location of District: Counties in which District is located: Denton Tarrant Is the District located entirely in one county? No Is the District located within a city? Partially Cities in which District is located: Town of Trophy Club Town of Westlake Is District located within a city's extra territorial jurisdiction (ETJ)? Unknown ETJ's in which District is located: Unknown Is the Board membership appointed by an office outside the District? No 48 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 TSI -2 General Fund Expenditures and Other Financing Uses Year End September 30, 2018 Current Year Prior Year 2018 2017 Administrative $ 1,275,394 $ 1,150,421 Water Operations $ 3,173,225 $ 2,994,623 Wastewater Operations $ 1,026,693 $ 1,061,896 Wastewater Collection Systems * 0 * 0 Contribution to Trophy Club Fire Dept $ 625,637 $ 625,083 Capital Outlay $ 665,773 $ 744,828 Transfers Out and Debt Service $ 1,524,082 $ 1,529,319 Total Expenditures $ 8,290,804 $ 8,106,170 * In FY 2015 Wastewater Operations and Wastewater Collection Systems were merged together. Number of employees employed by the District: Full time Equivalents (FTEs) 17 Part time 0 ** The Town of Trophy Club handles the operations of the Fire Department based on an Interlocal Agreement with Trophy Club Municipal Utility District No.1 effective 10/1/16. The MUD reimburses the annual Town's Fire Budget in equal monthly payments. 49 17 0 Funds TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 CONSOLIDATED TSI -3 TEMPORARY INVESTMENTS September 30, 2018 Identification Number General Fund Bank of the West Closed General Fund TexPool 613300002 Debt Service Fund TexPool 613300003 Debt Service -Revenue Bond Texpool Revenue Bond Reserve Texpool 613300013 613300014 Capital Projects Tax Bond Construction Texpool 613300011 Capital Projects Revenue Bond Construction Texpool Capital Projects SWIFT Revenue Bond Construction Texpool SWIFT Revenue Bond Debt Service Texpool Closed 613300012 613300015 613300017 SWIFT Revenue Bond Escrow Account Bank of Texas BOKF 82-1747-01-1 Vaccon Capital Lease -8076 Escrow Account UMB 147404.1 Interest Maturity Rate Date 0.250 Demand $ (Money Market) 2.1244 Demand 2.1244 Demand 2.1244 Demand 2.1244 Demand 2.1244 Demand 2.1244 Demand 2.1244 Demand 2.1244 Demand 1.560 Demand 1.700 Demand Balance Accrued Interest End of Year End of Year $ 4,368,107 $ 48,716 Paid monthly Paid daily Paid daily $ 19,562 Paid daily $ 606,910 Paid daily Paid daily Paid daily Paid daily $ 2,584 Paid daily $ 767,358 Paid daily $ 361,026 Paid daily Total - All Funds $ 6,174,262 50 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 TSI -4 TAXES LEVIED AND RECEIVABLE SEPTEMBER 30, 2018 General Fund Debt Operations Fire Total Service Total Taxes receivable beginning of year $ 1,662 $ 15,752 $ 17,414 $ 10,120 $ 27,534 2017 tax levy 116,591 1,017,196 1,133,787 645,946 1,779,733 Total to be accounted for 118,253 1,032,948 1,151,201 656,066 1,807,267 Less collections and adjustments: Current year (116,364) (1,014,497) (1,130,862) (644,287) (1,775,149) Prior years (244) (3,142) (3,387) ( 2,278) (5,665) Total to be accounted for (116,609) (1,017,640) (1,134,248) (646,565) (1,780,813) Taxes receivable, end of year $ 1,644 $ 15,308 $ 16,952 $ 9,501 $ 26,454 Taxes receivable by year 1996 and prior $ - $ - $ - $ - $ 1997 $ 2 $ 15 $ 17 $ 54 $ 71 1998 $ 2 $ 16 $ 18 $ 50 $ 69 1999 $ 2 $ 17 $ 20 $ 39 $ 59 2000 $ 2 $ 12 $ 15 $ 44 $ 59 2001 $ 2 $ 13 $ 16 $ 43 $ 59 2002 $ 2 $ 22 $ 25 $ 49 $ 74 2003 $ 24 $ 42 $ 66 $ 44 $ 110 2004 $ 5 $ 43 $ 48 $ 62 $ 110 2005 $ 12 $ 40 $ 52 $ 58 $ 110 2006 $ 50 $ 233 $ 284 $ 360 $ 644 2007 $ 42 $ 404 $ 446 $ 494 $ 940 2008 $ 72 $ 564 $ 635 $ 458 $ 1,093 2009 $ 184 $ 740 $ 924 $ 466 $ 1,390 2010 $ 136 $ 1,693 $ 1,829 $ 1,192 $ 3,021 2011 $ 138 $ 1,525 $ 1,663 $ 780 $ 2,443 2012 $ 146 $ 1,533 $ 1,679 $ 287 $ 1,967 2013 $ 150 $ 1,398 $ 1,548 $ 587 $ 2,135 2014 $ 263 $ 1,369 $ 1,632 $ 731 $ 2,363 2015 $ 91 $ 1,387 $ 1,478 $ 1,041 $ 2,519 2016 $ 91 $ 1,542 $ 1,633 $ 1,002 $ 2,635 2017 $ 301 $ 2,620 $ 2,921 $ 1,664 $ 4,585 $ 1,718 $ 15,230 $ 16,948 $ 9,507 $ 26,454 F/Y F/Y F/Y F/Y F/Y Property valuations (in 000's) 17/18 16/17 15/16 14/15 13/14 Land $ 620,210 $ 562,280 $ 497,482 $ 474,068 $ 439,499 Improvements 908,581 798,401 719,295 630,249 573,454 Personal property 105,783 99,772 71,096 80,605 95,598 Exemptions (82,556) (57,745) (57,305) (52,617) (45,150) $ 1,552,018 $ 1,402,708 $ 1,230,568 $ 1,132,305 $ 1,063,401 Tax rate per $100 valuation Operations 0.007880 0.004380 0.004720 0.014860 0.009350 Fire department 0.068700 0.074450 0.072220 0.077270 0.087380 Debt service 0.043630 0.048390 0.054200 0.041260 0.036660 Tax rate per $100 valuation 0.120210 0.127220 0.131140 0.133390 0.133390 Tax levy: $ 1,870,008 $ 1,779,098 $ 2,000,874 $ 1,870,728 $ 1,726,648 Percent of taxes collected to taxes levied 99.75% 99.60% 99.70% 98.91% 99.42% 51 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 TSI -5 LONG-TERM DEBT SERVICE REQUIREMENTS - BY YEARS SEPTEMBER 30, 2018 All Bonded Debt Series Due During Fiscal Principal Due Interest Due Years Ending 1 -Sep Mar 1/ Sep 1 Total 2019 1,350,000 543,398 1,893,398 2020 1,370,000 516,221 1,886,221 2021 1,410,000 486,682 1,896,682 2022 1,450,000 455,373 1,905,373 2023 1,490,000 421,447 1,911,447 2024 1,055,000 384,448 1,439,448 2025 1,085,000 360,776 1,445,776 2026 1,105,000 336,246 1,441,246 2027 1,145, 000 309,818 1,454, 818 2028 1,175,000 281,143 1,456,143 2029 1,215,000 250,027 1,465,027 2030 1,250,000 216,334 1,466,334 2031 1,295,000 179,054 1,474,054 2032 1,185,000 140,162 1,325,162 2033 1,220,000 106,312 1,326,312 2034 1,270,000 70,287 1,340,287 2035 895,000 31,737 926,737 2036 270,000 5,724 275,724 $ 21,235,000 $ 5,095,186 $ 26,330,186 General Obligation Bonds - Series 2010 (Fire Station) ($2,000,000) Due During Fiscal Principal Due Interest Due Years Ending 1 -Sep Mar 1/ Sep 1 Total 2019 85,000 62,883 147,883 2020 90,000 59,908 149,908 2021 95,000 56,758 151,758 2022 100,000 53,433 153,433 2023 105,000 48,433 153,433 2024 110,000 43,183 153,183 2025 115,000 37,683 152,683 2026 115,000 33,083 148,083 2027 125,000 28,368 153,368 2028 130,000 23,243 153,243 2029 135,000 17,783 152,783 2030 140,000 12,113 152,113 2031 145,000 6,163 151,163 $ 1,490,000 $ 483,034 $ 1,973,034 52 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 TSI -5 LONG-TERM DEBT SERVICE REQUIREMENTS - BY YEARS SEPTEMBER 30, 2018 Due During Fiscal Years Ending 2019 2020 2021 2022 2023 Due During Fiscal Years Ending 2019 2020 2021 2022 2023 Due During Fiscal Years Ending 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 General Obligation Bonds - Series 2012 (2,355,000) Principal Due 1 -Sep 225,000 225,000 230,000 240,000 250,000 $ 1,170,000 Interest Due Mar 1/ Sep 1 33,976 28,350 21,600 14,700 7,500 $ 106,126 General Obligation Bonds - Series 2013 (1,905,000) Principal Due 1 -Sep 195,000 195,000 205,000 210,000 215,000 $ 1,020,000 Interest Due Mar 1/ Sep 1 31,675 25,825 19,975 13,825 7,525 $ 98,825 General Obligation Bonds - Series 2014 (5,765,000) Principal Due 1 -Sep 250,000 255,000 265,000 270,000 280,000 290,000 295,000 305,000 315,000 325,000 335,000 345,000 360,000 370,000 385,000 400,000 $ 5,045,000 Total 258,976 253,350 251,600 254,700 257,500 $ 1,276,126 Total 226,675 220,825 224,975 223,825 222,525 $ 1,118,825 Interest Due Mar 1/ Sep 1 Total 137,525 387,525 133,775 388,775 129,313 394,313 124,013 394,013 118,613 398,613 112,313 402,313 105,063 400,063 97,688 402,688 90,063 405,063 81,400 406,400 72,463 407,463 62,413 407,413 51,200 411,200 39,500 409,500 27,475 412,475 14,000 414,000 $ 1,396,813 $ 6,441,813 53 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 TSI -5 LONG-TERM DEBT SERVICE REQUIREMENTS - BY YEARS SEPTEMBER 30, 2018 Due During Fiscal Years Ending 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Due During Fiscal Years Ending 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Revenue Bonds - Series 2015 (9,230,000) Principal Due 1 -Sep 380,000 390,000 400,000 410,000 420,000 435,000 450,000 460,000 475,000 490,000 510,000 525,000 545,000 565,000 585,000 610,000 630,000 $ 8,280,000 Interest Due Mar 1/ Sep 1 Total 215,838 595,838 208,238 598,238 200,438 600,438 192,438 602,438 184,238 604,238 175,838 610,838 167,138 617,138 157,013 617,013 145,513 620,513 133,638 623,638 120,163 630,163 106,138 631,138 90,388 635,388 74,038 639,038 57,088 642,088 39,538 649,538 20,475 650,475 $ 2,288,150 $ 10,568,150 Revenue Bonds - Series 2016 (4,635,000) Principal Due Interest Due 1 -Sep Mar 1/ Sep 1 Total 215,000 61,501 276,501 215,000 60,125 275,125 215,000 58,599 273,599 220,000 56,965 276,965 220,000 55,139 275,139 220,000 53,115 273,115 225,000 50,893 275,893 225,000 48,463 273,463 230,000 45,875 275,875 230,000 42,862 272,862 235,000 39,619 274,619 240,000 35,671 275,671 245,000 31,303 276,303 250,000 26,624 276,624 250,000 21,749 271,749 260,000 16,749 276,749 265,000 11,262 276,262 270,000 5,724 275,724 $ 4,230,000 $ 722,238 $ 4,952,238 54 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 TSI -6 CHANGES IN LONG-TERM BONDED DEBT SEPTEMBER 30, 2018 Series 2010 Series 2012 Series 2013 Series 2014 Series 2015 Series 2016 GO Bonds GO Bonds GO Bonds GO Bonds Revenue Bonds Revenue Bonds Total Interest rate 3.50-5.00% 2.00-3.00% 2.00-3.50% 1.50-3.50% 2.0-3.25% 0.53-2.12% Date interest payable 3/1 & 9/1 3/1 & 9/1 3/1 & 9/1 3/1 & 9/1 3/1 & 9/1 3/1 & 9/1 Maturity date 9/1/2031 9/1/2023 9/1/2023 9/1/2034 9/1/2035 9/1/2036 Bonds outstanding at beginning of year $ 1,575,000 $ 1,380,000 $ 1,205,000 $ 5,290,000 $ 8,655,000 $ 4,445,000 $ 22,550,000 Retirements of principal $ 85,000 $ 210,000 $ 185,000 $ 245,000 $ 375,000 $ 215,000 $ 1,315,000 Bonds outstanding at end of fiscal year $ 1,490,000 $ 1,170,000 $ 1,020,000 $ 5,045,000 $ 8,280,000 $ 4,230,000 $ 21,235,000 Retirements of interest $ 65,858 $ 39,225 $ 37,225 $ 141,200 $ 223,338 $ 62,685 $ 569,530 Paying agent's name & city: The Bank of New The Bank of New The Bank of New The Bank of TX The Bank of TX The Bank of TX York Mellon York Mellon York Mellon Corporate Trust Corporate Trust Corporate Trust Newark, NJ Newark, NJ Newark, NJ Austin, TX Austin, TX Austin, TX General Obligation Bond Authority Bonds Amount authorized by voters $ 29,094,217 Amount issued $ 29,090,000 Remaining to be issued $ 4,217 The general obligation bonds were authorized on October 7, 1975 Debt Service Fund cash and cash equivalents balance as of September 30, 2018: Average annual debt service payment (principal & interest) for remaining term of debt. 55 $ 682,344 $ 1,893,397 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 TS1-7 COMPARATIVE SCHEDULES OF REVENUES AND EXPENDITURES -FIVE YEARS GENERAL FUND SEPTEMBER 30, 2018 Amounts Percent of total revenue REVENUE 2018 2017 2016 2015 2014 2018 2017 2016 2015 2014 Ad valorem property taxes $ 1,197,949 $ 1,105,820 $ 1,371,247 $ 1,419,548 $ 1,340,502 10.0% 11.1% 16.0% 14.2% 17.6% Water and wastewater charges 9,286,714 8,632,747 6,729,926 6,138,766 5,730,872 77.6% 86.3% 78.8% 61.5% 75.2% Utility Fees - - 55,200 239,200 331,200 0.0% 0.0% 0.6% 2.4% 4.3% Inspection and tap fees 8,000 7,200 11,325 11,375 10,725 0.1% 0.1% 0.1% 0.1% 0.1% Interest earned 61,283 18,940 12,652 6,117 6,071 0.5% 0.2% 0.1% 0.1% 0.1% Debt proceeds - 0.0% 0.0% 0.0% 0.0% 0.0% Transfers In 797,834 - 8,034 1,074,337 6.7% 0.0% 0.1% 10.8% 0.0% Proceeds from Sale of Assets 15,400 3,550 90,935 46,750 0.1% 0.0% 1.1% 0.5% 0.0% Capital Lease Financing 358,600 807,316 3.0% 0.0% 0.0% 8.1% 0.0% Miscellaneous and other 245,392 233,282 265,667 240,591 202,481 2.0% 2.3% 3.1% 2.4% 2.7% Total revenue $ 11,971,172 $ 10,001,539 $ 8,544,986 $ 9,984,000 $ 7,621,851 100.0% 100.0% 100.0% 100.0% 100.0% EXPENDITURES Administrative $ 1,275,394 $ 1,150,421 $ 1,388,715 $ 1,672,123 $ 1,779,470 10.7% 11.5% 16.3% 16.7% 23.3% Water operations 3,173,225 2,994,623 3,078,429 3,151,532 3,031,672 26.5% 29.9% 36.0% 31.6% 39.8% Wastewater operations 1,026,693 1,061,896 1,089,257 864,305 621,108 8.6% 10.6% 12.7% 8.7% 8.1% Wastewater collection system - - - 185,561 0.0% 0.0% 0.0% 0.0% 2.4% Information systems - - - 0.0% 0.0% 0.0% 0.0% 0.0% Contribution to Trophy Club Fire Dept 625,637 625,083 1,010,938 928,610 879,830 5.2% 6.2% 11.8% 9.3% 11.5% Capital outlay 665,773 744,828 1,713,885 1,755,603 990,311 5.6% 7.4% 20.1% 17.6% 13.0% Transfers Out and Debt Service 1,522,582 1,529,319 1,182,760 656,984 993,450 12.7% 15.3% 13.8% 6.6% 13.0% Total expenditures $ 8,289,304 $ 8,106,170 $ 9,463,984 $ 9,029,157 $ 8,481,402 69.2% 81.0% 110.8% 90.4% 111.3% Excess (deficiency) of revenues over(under)expenditures $ 3,681,868 $ 1,895,369 $ (918,998) $ 954,843 $ (859,551) 30.8% 19.0% -10.8% 9.6% -11.3% Total active retail water and/or wastewater connections 3,284 3,244 3,422 56 3,376 3,140 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 TSI -7 COMPARATIVE SCHEDULES OF REVENUES AND EXPENDITURES -FIVE YEARS (Continued) DEBT SERVICE FUND SEPTEMBER 30, 2018 Amounts Percentage REVENUE 2018 2017 2016 2015 2014 2018 2017 2016 2015 2014 Ad valorem property taxes $ 679,678 $ 675,944 $ 666,225 $ 468,194 $ 386,992 32.5% 32.4% 42.3% 48.8% 62.4% Penalties and interest 2,010 2,294 4,010 2,021 2,676 0.1% 0.1% 0.3% 0.2% 0.4% Intergovernmental 1,390,151 1,402,170 902,259 465,409 230,804 66.4% 67.1% 57.3% 48.5% 37.2% Interest earned 21,903 8,174 2,564 13,976 97 1.0% 0.4% 0.2% 1.5% 0.0% Miscellaneous and other - 9,573 0.0% 0.0% 0.0% 1.0% 0.0% Total revenue 2,093,742 2,088,582 1,575,058 959,173 620,569 100.0% 100.0% 100.0% 100.0% 100.0% EXPENDITURES Principal retirement 1,315,000 1,265,000 895,000 440,000 425,000 62.8% 60.6% 56.8% 45.9% 68.5% Interest and fiscal charges 569,530 581,844 552,220 422,722 198,695 27.2% 27.9% 35.1% 44.1% 32.0% Bond admin fees 2,950 2,548 2,150 - 0.1% 0.1% 0.0% 0.0% 0.0% Total expenditures 1,887,480 1,849,392 1,449,370 862,722 623,695 90.1% 88.5% 91.9% 89.9% 100.5% Excess (deficiency) of revenues over (under) expenditures $ 206,262 $ 239,190 $ 125,688 $ 96,451 $ (3,126) 9.9% 11.5% 8.1% 10.1% -0.5% 57 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 CONSOLIDATED TSI -8 BOARD MEMBERS, KEY PERSONNEL AND CONSULTANTS September 30, 2018 Complete District Mailing Address: 100 Municipal Drive, Trophy Club, Texas 76262 District Business Telephone Number: Metro (682) 831-4600 Limit of Fees of Office that a Director may receive during a fiscal year: $0 (Set by Board Resolution) Name and Address Board Members: Term of Office Fees of Expense Title Elected/Expires Office Paid Reimbursements at or Date Hired FY18 FY18 Year End Gregory Wilson 2013 Churchill Downs Lane Trophy Club, TX 76262 05/16-05/20 $ $ 915 President William Rose 219 Inverness Drive Trophy Club, TX 76262 05/16-05/20 $ $ 951 Vice -President Steve Flynn 417 Ramsey Trail Trophy Club, TX 76262 05/18-05/22 $ $ 949 Secretary/Treasurer Kelly Castonguay 402 Parkview Drive Trophy Club, TX 76262 05/18-5/22 $ $ 1,039 Director Mark Chapman 197 Durango Dr Trophy Club, TX 76262 05/18-05/22 $ - $ Director 58 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 TSI -8 BOARD MEMBERS, KEY PERSONNEL AND CONSULTANTS (Continued) SEPTEMBER 30, 2018 Name and Address Key Personnel: Term of Office Fees of Title Elected/Expires Office Paid at or Date Hired FY18 Year End Carman Consulting LLC. 2600 Museum Way Fort Worth, Texas 8/1/2017 $ 147,857 General Manager Consultants/Legal: Denton Central Appraisal District P.O. Box 2816 Denton, TX 76202 4/1/1981 $ 8,047 Appraiser Tarrant Appraisal District 2500 Handley-Ederville Rd. Fort Worth, TX 76262 10/1/2007 $ 2,648 Appraiser LaFollett & Abbott PLLC P.O. Box 717 Tom Bean, TX 75489 10/1/2010 $ 25,659 Auditors CP&Y/The Wallace Group P.O. Box 22007 Waco, TX 76702 5/1/2012 $ 364,267 Engineers Halff Associates, Inc. P.O. Box 678316 Dallas, TX 75267-8316 1/1/2017 $ 215,794 Engineers The AL Law Group 12400 W. Highway 71, Suite 350-150 Austin, TX 78738 9/4/2017 $ 21,797 Legal Counsel McLean & Howard, L.L.P. 901 S. Mopac Expressway Building 2, Suite 225 Austin, TX 78746 3/1/2017 $ 70,044 Legal/Bond Counsel DuBois Bryant Campbell LLP 303 Colorado, Suite 2300 Austin, TX 78701 5/18/2017 $ 12,070 Legal Counsel Whitaker Chalk Swindle & Schwartz PLLC 301 Commerce St, Suite 3500 Fort Worth, TX 76102-4186 4/30/2018 $ 81,087 Legal Counsel New Gen Strategies & Solutions 1300 E. Lookout Dr. Suite 100 Richardson, TX 75082 7/1/2013 $ 5,825 Water Consultant 59 REPORTS REQUIRED BY GOVERNMENTAL AUDITING STANDARDS tt and Abbott PLLC Certified Public Accountants Susan LaFollett, CPA— Partner Rod Abbott, CPA— Partner INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors Trophy Club Municipal Utility District No. 1 Trophy Club, Texas We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Trophy Club Municipal Utility District No. 1 (the District), as of and for the year ended September 30, 2018, and the related notes to the financial statements, which collectively comprise the District's basic financial statements, and have issued our report thereon dated January 21, 2019. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we do not express an opinion on the effectiveness of the District's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. 60 LaFollett and Abbott PLLC PO Box 717 • Tom Bean, TX • 75489 903-546-6975 • www.Iafollettcpa.com Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the District's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. /Is 'eAw10medt aLt. Tom Bean, Texas January 21, 2019 61 (this page intentionally left blank) Financial Advisory Services Provided By: SAMCO Capital Account# Star-Telegramo Arlington Citizen -Journal I The Keller Citizen 1 La Estrella Mansfield News -Mirror 1 Star -Telegram Northeast I Weatherford Star -Telegram star-telegram.com 1 808 Throckmorton St. 1 Ft Worth, Tx. 76102.63151800.776.7827 AFFIDAVIT OF PUBLICATION Ad Number Identification , , 0004105785 $7200000 TROPHY CLUB Attention: Lauren Hughes MCLEAN HOWARD LAW 901 SOUTH MOPAC EXPY STE 225 AUSTIN, TX 78746 $7,000 TROPHY CLUB MUNLCIPAL UTILITY DISTRICT NO. 1 {A ipoiltical :subdivision of the State of Texas located in -Den- ton and Tarrant. Counties, Texas) WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019 Selling: Menday, March 13, 2019 Bids due 11:00 a.m. Central Stand- ard Time ("CST") Mace and Time a Award: Thv Dis- trict will consider the award of the sale of the Bonds on March 1S, 2019 at 6:30 P.M.,C.S.T., at the District's Office, 100:Munic- ipal Drive, Trophy Club, Texas 76262, Each bidder must deliver a bank Cashier's Check in the amount of $144,000, payable to the order of Trophy Club Munici- pal Utility District No_ 1, as a good faith deposit to the Dis- trict's Financial Advisor, An- drew T. Friedman, SAMCO Capi- tal Markets,Inc., 1700 Pacific Ave„ Suite 2000, Dallas, Texas 75201, by 11:00 A.M. C.S.T. on or before the date of the sale. Address of the Bids Delivered in Person: Sealer/ %written bids. plainly marked '"Bid far Bonds" should be addressed to the Board of Directors of Trophy Club Municipal Utility District Nb. 1, and delivered to Andrew T. Friedman, SAMCO Capital Markets- Inc., 1700 Pacific Ave., Suite 2000, Dallas, Texas 75201, by 11:00 A.M., C.S.T. on March 18, 2019. All bids must be sign- ed and submitted on the 'Offi- cial BIO Forel". Electronic Bidding Procedures: Any prospective bidder that intends to submit an electronic bid must submit its electronic bid through the facilities of the !pre° Holdings LLC, PARITY System by 11:00 A.M_, C.S.T,, an IVIarch 18, 2019. as described in the '^Official Notice of Sate" de- scribed below. Information: The Bonds are more completely described in the 'Of- ficial Notice of Sale", 'Official Bid Form' and the "'Preliminary Official statement" for the Bonds which rnav be obtained from Andrew T. Friedman, SAMCO Capital Markets Inc.,. 1700 Pacific Avo_, Suite 2000,. Dailas, Texas 75201, Financial Advisor to the District. All bidders must submit a SIGNED OFFICIAL BID FORM prior to the time of sale, which is 11:00 A.M., C,S.T. on March 1.L 2019, to Andrew T. Friedman SAMCO Capital Markets, Inc, i.700 Pa- cific Ave., Suite 2000, Dallas, Texas 75201, in accordance with the Official Notice of Sate. The bidder whose bid Is the Twinning bid in accordance with the Offi- cial Notice of Sale will be rroti- fl d immediately. The District reserves the right to reject any or all bids for the Bands and to waive any and all irregularities except time of fll- MUNICIPAL UNICIPAL UTILITI $7,200,000. . TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (A political subdivision the eoTexas located of Den- ton " and Tarrant 'Counties, Texas) WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019 Selling: Monday, March 18, 2019 Bids due 11:00 a.m. Central Stand- ard Time ("CST") Place and Time of Award: The Dis- trict will consider the award of the sale of the Bonds on March 18, 2019 at 6:30 P.M.,C.S.T., at the District's Office, 100 Munic- ipal`Drive, Trophy Club, Texas 76262. Each bidder must deliver a bank Cashier's Check in the amount of $144,000, payable to the order of Trophy Club Munici- pal Utility District No, 1, as a good faith deposit to the Dis- trict's Financial Advisor, An- drew T. Friedman, SAMCO Capi- tal Markets, Inc., 1700 Pacific Ave,, Suite 2000, Dallas, Texas 75201, by 11:00 A.M., C.S.T. on or before the date of the sale. Address of the Bids Delivered in Person: Sealed written bids, plainly marked `Bid for Bonds" should be addressed to the Board of Directors of Trophy Club Municipal Utility District No. 1, and delivered to Andrew T. Friedman, SAMCO Capital Markets, Inc., 1700 Pacific Ave., Suite 2000, Dallas, Texas 75201, by 11:00 A.M., C.S.T.' on March 18,`2019, All bids must be sign- ed and submitted on the "Offi- cial Bid Form". Electronic' Bidding Procedures: Any prospective bidder that intends to submit an electronic bid must submit its electronic bid through the facilities of the tpreo Holdings LLC, PARITY System by 11:00 A.M., C.S.T., on March 18, 2019 as described in the "Official Notice of Sale" de- scribed below. Information: The Bonds are more completely described in the "Of- ficial Notice of Sale`, "Official Bid Form" and the "Preliminary Official Statement" for the Bonds which may be obtained from Andrew T. Friedman,. SAMCO Capital Markets, Inc., 1700 Pacific Ave., Suite 2000, Dallas, Texas 75201, Financial Advisor to the District. All bidders must submit a SiGNED OFFICIAL BID FORM prior to the time of sale, which is 11:00 A.M., C.S.T. on March 18, 2019, to Andrew T. Friedman, SAMCO Capital Markets, Inc., 1700 Pa- cific Ave., Suite 2000, Dallas, Texas 75201, in accordance with the Official Notice of Sale: The bidder whose bid is the winning bid in accordance with the Offi- cial. Notice of Sale will be noti- fied immediately. The District reserves the right to reject any or all bids for the Bonds and to waive any and all irregularities except time of'fil- ing. This notice does not consti- tute an offer to sell the Bonds a..t r„oroi., nntira^ of sate of PD Amount ( Cols 51,874.19 1 THE STATE OF TEXAS County of Tarrant Depth 101.00 Li Before me, a Notary Public in and for said County and State, this day personally appeared CHRISTINE LOPEZ, Bid and Legal Coordinator for the Star -Telegram, published by the Star -Telegram, Inc. at Fort Worth, in Tarrant County, Texas; and who, after being duly sworn, did depose and say that the attached clipping of an advertisement was published in the above named paper on the listed dates: 1 Insertion(s) Published On: February 28, 2019 (Principal Clerk) SUBSCRIBED AND SWORN TO BEFORE ME, THIS 1st day of March in the year of 2019 Votary Public - AD =o�' *. LIZBEi'HAILEEN CORDER() :*E My Notary ID # 131868068 >F of t.* Expires January 25, 2023 Account # Ad Number 718230 0004105785 Attention: Lauren Hughes MCLEAN HOWARD LAW 901 SOUTH MOPAC EXPY STE 225 AUSTIN, TX 78746 At-NUJ/AV' I ur ruDLm•rt Milli Identification $7,200,000 TROPHY CLUB MUNICIPAL UTILIT! $7,200,000 TROPHY CLUB MUNICIPAL LJTItITY DISTRICT NO, 1 (A political subdivision of the State of Texas located in Den- ton and Tarrant Counties, Texas) WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019 Sailing: Monday, March 18, 2019 Bids due 11:00 a.m- Central Stand- ard Time ("CST") Place and Time of Award: Tura Dis- trict ivtrict will consider the award of the sale of the Bands on March 113, 2019 at 6:30 P.M.,C.S.T., at the District's Office, 100 Munk- ipal Drive, Trophy Club, Texas 7t5Zi52. Each bidder must deliver a bank Cashier's Check in the amount of $144,004, payable to the order of Trophy Club Munici- pal Utility Distrl€t No_ 1, as a good faith deposit to the Dis- tricts Financial Advisor, An- drew T. Friedman, SAMCO Capi- tal Markets, Inc., 1700 Pacific Ave., Suite 2000, Dallas, Texas 75201, by 11.00 A.M., C.S.T. on or before the date of the sale. Address of the Bids Delivered in Person: Sealed written blds. plainly marked '"Bid for Bonds" should be addressed to the Board of directors of Trophy Club Municipal utility District No, 1, and delivered to Andrew T. Friedman, SAMCO Capital Markets, Inc., 1300 Pacific Ave-, Suite 2000, Dallas, Texas 75201, by 11:00 A.M.„C.S.T. an hoards !8, 2019_ All bids must be sign- ed and submitted on the "Offi- cial Bio Foam'. Electronic Bidding Procedures: Any prospective bidder that intends to submit an electronk Did must submit its electronic bid through the facilities of the tpreo Holdings LLC, PARITY System by 11:00 AM., C.S.T., an March 18, 2019. as described in the "Official Notice of Sale~ &- scribed below. Information: The Bonds are more completely -described in the "Of- ficial Notice of Sale', "Official Bid Form" and the "Preliminary official Statement" for the Bonds which may be obtained from Andrew 'T. Friedman, SAMCO Capital Markets, Inc., 1700 Pacific Ave-, Suite 2000, Dallas, Texas 75201, Financial Advisor to the District. All bidders rsiwrst submit a SIGNED OFFICIAL BID FORM prior to the time of sate, which is 11:00 C.S.T, on March 18, 2019. to Andrew T. Friedman SAMCO Ca ital Markets, Inc., 1700 Pa - cif c AVG?, Suite 2060, Dana:., Texas 75201, in accordance with the Official Notice of Sale. The bidder whose bid Is. the winning bid in accordance with the Offi- cial Notice of Sale will be noti- fied 'Immediately oti-fied'Immediately The District reserves the right to reject any or all bids for the Bands and to waive any and ail Irregularities except time of fil- $7,200,000 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (A Statle tof calTexaslocsated inn of Dene ton and Tarrant Counties, Texas) WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019 Selling: Monday, March 18, 2019 Bids due 11:00 a.m. Central Stand- ard Time ("CST") Place and Time of Award: The Dis- trict will consider the award of the sale of the Bonds on March 18, 2019 at 6:30 P:M„C.S.T., at the District's Office, 100 Munic- ipal Drive, Trophy Club, Texas 76262. Each bidder must deliver a bank Cashier's Check in the amount of $144,000, payable to the order of Trophy Club Munici- pal Utility District No. 1, as a good faith deposit to the Dis- trict's Financial _ Advisor, An- drew T. Friedman, SAMCO Capi- tal Markets, Inc., 1700 Pacific Ave. Suite 2000, Dallas, Texas 75201, by 11:00 A.M., C.S.T. on or before the date of the sale. Address of the Bids Delivered in Person: Sealed written bids, plainly should bekaddre adarked "Bid dressed to tr oonthe Board of Directors of Trophy Club Municipal Utility District No. 1, and delivered to Andrew T. Friedman, SAMCO Capital Markets, Inc., 1700 Pacific Ave., Suite 2000, Dallas, Texas 75201, by 11:00 A.M., C.S.T. on March 18, 2019. All bids must be sign- ed and submitted on the "Offi- cial Bid Form". Electronic Bidding Procedures: Any prospective bidder that intends to submit an electronic bid must submit its electronic bid through the facilities of the Ipreo Holdings LLC, PARITY System by 11:00 A.M., C.S.T., on March 18, 2019 as described in the"Official Notice of Sale" de- scribed below. Information: The Bonds are more completely described in the "Of- ficial Notice of Sale", "Official Bid Form" and the "Preliminary Official Statement" for the Bonds which may be obtained from Andrew T. Friedman, SAMCO Capital Markets, Inc., 1700 Pacific Ave., Suite 2000, Dallas, Texas 75201, Financial Advisor to the District. All bidders must submit a SIGNED OFFICIAL BID FORM prior to the time of sale, which is 11:00 A.M., C.S.T. on March 18, 2019, to Andrew T. Friedman, SAMCO Capital Markets, Inc., 1700 Pa- cific Ave., Suite 2000, Dallas, Texas 75201, .in accordance with the Official Notice of Sale. The bidder whose bid is the winning bid in accordance with the Offi- cial -Notice of Sale will be noti- fied immediately. The District reserves the right to reject any or all bids for the Bonds and to waive any and all irregularities except time of fil- ing. This notice does not consti- tute an offer to sell the Bonds but is merely notice of sale of the Bonds as required by law.' The offer to sell the Bonds will be made only by means of the "Official Notice of Sale", the "P- reliminary Official Statement" and the "Official Bid Form" for the Bonds. This Notice of Sale supersedes and replaces any previously publish- ed Notice of Sale for the Bonds. Board of Directors Trophy Club Mu- nicipal Utility District No. 1 Board of Directors Trophy Club Municipal Utility Dis- trict No. 1 i"=,,,e_mirgeemnum LEGAL NOTICE PO Amount Cols $1,874.19 1 THE STATE OF TEXAS County of Tarrant Depth 101.00 Li Before me, a Notary Public in and for said County and State, this day personally appeared CHRISTINE LOPEZ, Bid and Legal Coordinator for the Star -Telegram, published by the Star -Telegram, Inc. at Fort Worth, in Tarrant County, Texas; and who, after being duly sworn, did depose and say that the attached clipping of an advertisement was published in the above named paper on the listed dates: 1 Insertion(s) Published On: February 28, 2019 (Principal Clerk) SUBSCRIBED AND SWORN TO BEFORE ME, THIS lst day of March in the year of 2019 LIZBETH AILEEN CORDER() 3 =* *- My Notary ID # 131868068 ";F 6. <*!t Expires January 25, 2023 114Y. IMS 1.1k/ l/lk' UUe3 l U' LUI I3U1' tute an offer to sell the Bonds but is merely notice of sale of the Bonds as required by late. The offer to sell the Songs will be made only by means of the "ficial Notice of Sale", the 'P- reliminary QFficiai :Statement" and"the Official Bid Form" for . the Bonds:' This Notice of. Sales .supersedes- IMO roplaces any _previously publish- e'd Notice of Sale for the Bonds. Hoard of Director* Trophy Club Mu- nkipal Utility Dlstritt No. 1 Board of Directors Trophy Club Municipal Utility Dis- trict No. 1,. LEGAL (NOTICE X THE STATE OF TEXAS X X X COUNTY OF TRAVIS X X Before me, the undersigned authority, on this date personally appeared Barbara Dewey, who, having been by me duly sworn, upon her oath deposes and says; That she is editor of TEXAS BOND REPORTER, an official publication of Municipal Advisory Council of Texas, and is authorized to make this affidavit. The attached is a true and correct copy of NOTICE OF SALE - TROPHY CLUB MUD # 1 $7,200,000 W & SS Rev Bds Ser 2019 was published in the TEXAS BOND REPORTER on the following date(s), to wit: March 01, 2019. Sworn to and subscribed before me this the 1st day of March A.D. 2019 Notary Public in d for the State of Texas My commission expires: 10/13/2022 $7,200,000 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (A political subdivision of the State of Texas located in Denton and Tarrant Counties, Texas) WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019 Selling: Monday, March 18, 2019 Bids due 11:00 a.m. Central Standard Time ("CST") Place and Time of Award: The District will consider the award of the sale of the Bonds on March 18, 2019 at 6:30 P.M.,C.S.T., at the District's Office, 100 Municipal Drive, Trophy Club, Texas 76262. Each bidder must deliver a bank Cashier's Check in the amount of $144,000, payable to the order of Trophy Club Municipal Utility District No. 1, as a good faith deposit to the District's Financial Advisor, Andrew T. Friedman, SAMCO Capital Markets, Inc., 1700 Pacific Ave., Suite 2000, Dallas, Texas 75201, by 11:00 A.M., C.S.T. on or before the date of the sale. Address of the Bids Delivered in Person: Sealed written bids, plainly marked "Bid for Bonds" should be addressed to the Board of Directors of Trophy Club Municipal Utility District No. 1, and delivered to Andrew T. Friedman, SAMCO Capital Markets, Inc., 1700 Pacific Ave., Suite 2000, Dallas, Texas 75201, by 11:00 A.M., C.S.T. on March 18, 2019. All bids must be signed and submitted on the "Official Bid Form". Electronic Bidding Procedures: Any prospective bidder that intends to submit an electronic bid must submit its electronic bid through the facilities of the Ipreo Holdings LLC, PARITY System by 11:00 A.M., C.S.T., on March 18, 2019 as described in the "Official Notice of Sale" described below. Information: The Bonds are more completely described in the "Official Notice of Sale", "Official Bid Form" and the "Preliminary Official Statement" for the Bonds which may be obtained from Andrew T. Friedman, SAMCO Capital Markets, Inc., 1700 Pacific Ave., Suite 2000, Dallas, Texas 75201, Financial Advisor to the District. All bidders must submit a SIGNED OFFICIAL BID FORM prior to the time of sale, which is 11:00 A.M., C.S.T. on March 18, 2019, to Andrew T. Friedman, SAMCO Capital Markets, Inc., 1700 Pacific Ave., Suite 2000, Dallas, Texas 75201, in accordance with the Official Notice of Sale. The bidder whose bid is the winning bid in accordance with the Official Notice of Sale will be notified immediately. The District reserves the right to reject any or all bids for the Bonds and to waive any and all irregularities except time of filing. This notice does not constitute an offer to sell the Bonds but is merely notice of sale of the Bonds as required by law. The offer to sell the Bonds will be made only by means of the "Official Notice of Sale", the "Preliminary Official Statement" and the "Official Bid Form" for the Bonds. This Notice of Sale supersedes and replaces any previously published Notice of Sale for the Bonds. Board of Directors Trophy Club Municipal Utility District No. 1 Board of Directors Trophy Club Municipal Utility District No. 1 LEGAL NOTICE Page 226 TEXAS BOND REPORTER March 1, 2019 OFFICIAL BID FORM Honorable Board President and Board Trophy Club Municipal Utility District No. 1 100 Municipal Dr. Trophy Club, Texas 76262 Ladies and Gentlemen: March 18, 2019 Reference is made to your Official Notice of Sale and Preliminary Official Statement dated March 11, 2019 of $7,080,000 Trophy Club Municipal Utility District No. 1, Water and Sewer System Revenue Bonds, Series 2019, both of which constitute a part hereof. For said legally issued Bonds, we wit pay you $6,984,501.81 plus accrued interest from their Dated Date to the date of delivery to us, for Bonds maturing September 1 and bearing interest as follows: Stated Principal Interest ! Stated Principal Interest Stated Principal Interest Matuj y Amount Rate i Maturity Amount Rate Maturity Amount Rate 2021 $ 155,000 3.000% � 2031 $ 210,000 3.000% 2041 $ 285,000 3.250% 202.2 160,000 3.000% E 2032 215,000 3.000% i 2042 290,000 3.250% 2023 165,000 3.000% I' 2033 220,000 3.000% 2043 300,000 3.250% 2024 170,000 3.000% 2034 230,000 3.000% 2044 310,000 3.250% 2025 175,000 3.000% 2035 235,000 3.000% 2045 320,000 3.375% 2026 180,000 3.000% 2036 245,000 3.000% 2046 330,000 3.375% 2027 185,000 3.000% 2037 250,000 3.000% " 2047 345,000 3.375% 2028 190,000 3.000% 2038 255,000 3.125% 2048 355,000 3.375% 2029 195,000 3.000% 2039 265,000 3.125% . 2049 365,000 3.500% 2030 205,000 3.000% , 2040 275,000 3.250% • Of the principal maturities set forth in the table above, we have created term bonds as indicated in the following table (which may include multiple term bonds, one term bond or no term bonds if none is indicated). For those years which have been combined into a term bond, the principal amount shown in the table above will be the mandatory sinking fund redemption amounts in such years except that the amount shown in the year of the term bond maturity date will mature in such year. The term bonds created are as follows: Term Bond Maturity Date September 1 Year of First Principal Amount Interest Mandatory Redemption of Term Bond Rate Our calculation (which is not part of this bid) of the Net Interest Cost in accordance with the above bid is: NET INTEREST COST 3.297901 ADJUSTMENT OF INITIAL PRINCIPAL AMOUNTS: The District reserves the right to increase or decrease the principal (maturity) amount of any maturity of the Bonds, including the elimination of a maturity or maturities; provided, however, that the aggregate principal (denominational) amount of the Bonds shall not exceed $7,200,000. Notice of any such changes shall be given to the successful bidder as soon as practicable following the notification of award, as described below, and this Notice of Sale may be amended at the sole discretion of the District to reflect such increase or decrease. The District will attempt to maintain total per bond underwriter spread when adiustina maturities. No such adiustment will have the effect of alterina the basis upon which the best bid is determined. The successful bidder may not withdraw its bids or change the rates bid or any initial reoffering prices as a result of any changes made to the principal (denominational) amounts. By its acceptance of this bid, we understand the District will provide the copies of the Final Official Statement and of any amendments or supplements thereto in accordance with the Official Notice of Sale, and will cooperate to permit the undersigned to comply with Rule 15c2-12 of the United States Securities and Exchange Commission. The Purchaser by submitting this bid for the Bonds agrees to promptly file the Official Statement when received from the District with the Municipal Securities Rulemaking Board. The Initial Certificate shall be registered in the name of IFS Securities (Syndicate Manager), which will upon payment for the Bonds, be canceled by the Paying Agent/Registrar. The Bonds will then be registered in the name of Cede & Co. (DTC's partnership nominee), under the Book -Entry -Only System. We will advise DTC of registration instructions at least five business days prior to the date set for Initial Delivery. Cashier's Check of the Frost Bank, Austin, Texas, in the amount of $144,000 which represents our Good Faith Deposit (is attached hereto) or (has been made available to you prior to the opening of this bid), and is submitted in accordance with the terms as set forth in the Official Notice of Sale. Upon delivery of the Bonds, said check shall be returned to the Initial Purchaser. We agree to accept delivery of the Initial Bond(s) through DTC and make payment for the Initial Bond(s) in immediately available funds at BOKF, NA, Dallas, Texas, no later than 10:00 A.M., Central time, on April 23, 2019, or thereafter on the date the initial Certificate(s) are tendered for delivery, pursuant to the terms set forth in the Official Notice of Sale. Through submittal of this executed Official Bid Form, the undersigned verifies that it does not and will not "boycott Israel" and is not a company on the Texas Comptroller's list concerning the same prepared and maintained thereby under applicable Texas law, all as more fully provided in the Official Notice of Sale under the heading "CONDITIONS OF THE SALE -- ADDITIONAL CONDITION OF AWARD - COMPLIANCE WITH H.B. 89 AND S.B. 252, 85TH TEXAS LEGISLATURE". The undersigned agrees to the provisions of the Official Notice of Sale under the subcaption "CONDITIONS OF SALE — ESTABLISHMENT OF ISSUE PRICE" and, as evidence thereof, agrees to complete, execute and deliver to the District by the date of delivery of the Bonds, a certificate relating to the "issue price of the Bonds in the form and to the effect attached to or accompanying the Official Notice of Sale, with such changes thereto as may be acceptable to or required by the Bond Counsel for the Issuer (as provided under "CONDITIONS OF SALE- ESTABLISHMENT OF ISSUE PRICE" in the Official Notice of Sale. For purposes of contracting for the sale of the Bonds, the entity signing the bid form as Purchaser shall be solely responsible for the payment of the purchase price of the Bonds. The Purchaser may serve as a syndicate manager and contract under a separate agreement with other syndicate members. However, the District is not a party to that agreement and any information provided regarding syndicate managers would be for informational purposes only. Upon notification of conditional verbal acceptance, the undersigned will complete an electronic form of the Certificate of Interested Parties Form 1295 (the "Disclosure Form") through the Texas Ethics Commission's (the "TEC") electronic portal and the resulting certified Disclosure Form that is generated by the TEC's electronic portal will be printed, signed, notarized and sent by email to the District's financial advisor at Afriedmantct�.samcocapitaLcom and Bond Counsel at t ri cleanhowardiaw,com. The undersigned understands that the failure to provide the certified Disclosure Form will prohibit the District from providing final written award of the enclosed bid. Respectfully submitted, By: ? ( L! Underwriter's uthorized epresentative ACCEPTANCE CLAUSE THE ABOVE AND FOREGOING BID IS IN ALL THINGS HEREBY ACCEPTED this 18 day of March 2019, by the Trophy Club Municipal Utility District No. 1. ATTEST: Secretary0-44-) /Freasurer rd o Directors "trophy Club Munighpal ility District No. 1 President, Board of r . rs Trophy Club Municipal Utility District No. 1 CERTIFICATE FOR ORDER THE STATE OF TEXAS COUNTIES OF DENTON AND TARRANT § I, the undersigned officer of the Board of Directors of Trophy Club Municipal Utility District No. 1 hereby certify as follows: 1. The Board of Directors of Trophy Club Municipal Utility District No. 1 convened in a regular meeting on March 18, 2019 at the regular meeting place inside the boundaries of the District, and the roll was called of the duly constituted officers and members of the Board, to -wit: Gregory Wilson President William C. Rose Vice President Stephen J. Flynn Secretary/Treasurer Kelly Castonguay Director Mark A. Chapman Director and all of said persons were present except Director Chapman, thus constituting a quorum. Whereupon, among other business, the following was transacted at the meeting: a written ORDER AUTHORIZING THE ISSUANCE OF $7,080,000 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019; PRESCRIBING THE TERMS AND PROVISIONS THEREOF; MAKING PROVISION FOR THE PAYMENT OF THE INTEREST THEREON AND THE PRINCIPAL THEREOF; AUTHORIZING THE SALE OF THE BONDS; APPROVING A PAYING AGENT/REGISTRAR AGREEMENT, ESCROW AGREEMENT AND PRELIMINARY OFFICIAL STATEMENT; AND CONTAINING OTHER PROVISIONS RELATING TO THE SUBJECT was introduced for the consideration of the Board. It was then duly moved and seconded that the Order be adopted; and, after due discussion, the motion, carrying with it the adoption of the Order, prevailed and carried by the following vote: Ayes: 3 Nays: 1 Abstentions: 0 (2) That a true, full and correct copy of the aforesaid Order was adopted at the meeting described in the above and foregoing paragraph is attached to and follows this certificate; that the Order has been duly recorded in the Board's minutes of the meeting; that the persons named in the above and foregoing paragraph are the duly chosen, qualified and acting officers and members of the Board as indicated therein; that each of the officers and members of the Board was duly and sufficiently notified officially and personally, in advance, of the time, place and purpose of the aforesaid meeting, that the Order would be introduced and considered for adoption at the meeting, and each of the officers and members consented, in advance, to the holding of the meeting for such purpose; that the meeting was open to the public as required by law; and that public notice of the time, place and subject of the meeting was given as required by Chapter 551, Texas Government Code, and Section 49.063, Texas Water Code. SIGNED AND SEALED on this f day of N 1 r i rs Secretary/Tre ii , 2019. urer, Boar Direc ers ORDER AUTHORIZING THE ISSUANCE OF $7,080,000 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019; PRESCRIBING THE TERMS AND PROVISIONS THEREOF; MAKING PROVISION FOR THE PAYMENT OF THE INTEREST THEREON AND THE PRINCIPAL THEREOF; AUTHORIZING THE SALE OF THE BONDS; APPROVING A PAYING AGENT/REGISTRAR AGREEMENT, ESCROW AGREEMENT AND PRELIMINARY OFFICIAL STATEMENT; AND CONTAINING OTHER PROVISIONS RELATING TO THE SUBJECT Adopted: March 18, 2019 iii ORDER NO. 2019-0318B ORDER AUTHORIZING THE ISSUANCE OF $7,080,000 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019; PRESCRIBING THE TERMS AND PROVISIONS THEREOF; MAKING PROVISION FOR THE PAYMENT OF THE INTEREST THEREON AND THE PRINCIPAL THEREOF; AUTHORIZING THE SALE OF THE BONDS; APPROVING A PAYING AGENT/REGISTRAR AGREEMENT, ESCROW AGREEMENT AND PRELIMINARY OFFICIAL STATEMENT; AND CONTAINING OTHER PROVISIONS RELATING TO THE SUBJECT THE STATE OF TEXAS COUNTIES OF DENTON AND TARRANT § § § § ARTICLE I STATUTORY AUTHORITY, RECITALS AND FINDINGS WHEREAS, Trophy Club Municipal Utility District No. 1 (the "District") is a conservation and reclamation district, a body corporate and politic and governmental agency of the State of Texas, created as a municipal utility district pursuant to Article 16, Section 59, of the Texas Constitution by order of the Texas Commission on Environmental Quality ("TCEQ"), the successor in interest to the Texas Water Commission (collectively, the "Commission"), and the District operates pursuant to Chapters 49 and 54 of the Texas Water Code, as amended (the "Act"); and WHEREAS, the District is authorized under the Act to issue its revenue bonds for the purpose of purchasing, constructing, acquiring, owning, operating, repairing, improving, or extending inside or outside its boundaries any District works, improvements, facilities, plants, equipment, and appliances consistent with the purposes for which the District exists, including to provide a waterworks system, sanitary sewer system, drainage system and water quality system for the District, or to make payment of sums due or to become due under contracts for such purposes; WHEREAS, the Board deems it to be in the best interests of the District to authorize the issuance of its Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019, in an original principal amount of $7,080,000 (the "Bonds") pursuant to the authorization set forth in the Act for the purposes hereinafter provided. IT IS, THEREFORE, ORDERED BY THE BOARD OF DIRECTORS OF TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 THAT: 1 ARTICLE II DEFINITIONS, FINDINGS AND INTERPRETATION Section 2.1 Definitions. For all purposes of this Order, unless the context requires a different meaning or except as otherwise expressly provided, the following terms shall have the meanings assigned to them below: "Additional Parity Obligations" means revenue bonds or other evidences of indebtedness which the District reserves the right to issue or enter into, as the case may be, in the future in accordance with the terms and conditions provided in Section 10.1 hereof and which are equally and ratably secured by a lien on and pledge of the Pledged Revenues. "Authorized Investments" shall mean all direct or indirect obligations of the United States or one of its agencies, the State, any county, city, school district or other political subdivision of the State and certificates of deposit of state or national banks or savings and loan associations within the State; provided that any such certificates of deposit are secured by direct or indirect obligations of the United States or one of its agencies having a market value equal to the face amount of such certificate of deposit to the extent any portion of the face amount is not insured by the Federal Deposit Insurance Corporation. "Average Annual Debt Service Requirements" means that average amount which, at the time of computation, will be required to pay the Debt Service Requirement on all outstanding Bonds and Additional Parity Obligations when due (either at Stated Maturity or mandatory redemption) and derived by dividing the total of such Debt Service Requirement by the number of Fiscal Years then remaining before Stated Maturity of such Bonds and Additional Parity Obligations. For purposes of this definition, a fractional period of a Fiscal Year shall be treated as an entire Fiscal Year. Capitalized interest payments provided from bond proceeds and accrued interest on the Parity Revenue Obligations be excluded in making the aforementioned computation. "Bonds" shall mean the Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019 issued and delivered pursuant to this Order and all substitute Bonds and Bonds exchanged therefor, as well as all other substitute bonds and replacement bonds issued pursuant hereto, and the term "Bond" shall mean any of the Bonds. "Bond Date" shall mean March 15, 2019. "Bondholder" or "Holder" when used with respect to any Bond shall mean the Person in whose name such Bond is registered on the Register. "Business Day" means any day which is not a Saturday, Sunday or a day on which the Paying Agent/Registrar is authorized by law or executive order to remain closed or a legal holiday. "Closing Date" shall mean the date on which the Bonds are initially authenticated and delivered to the Purchaser against payment therefor which shall also be the date the Definitive Bonds are delivered in exchange for the Initial Bond. "Code" shall mean the Internal Revenue Code of 1986, as amended by any amendments thereto enacted prior to the Closing Date. "Commission" means the Texas Commission on Environmental Quality. 2 "Construction Fund" means the Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019, Construction Fund established by Section 9.1 of this Order. "Debt Service Requirements" means as of any particular date of computation, with respect to any obligations and with respect to any period, the aggregate of the amounts to be paid or set aside by the District as of such date or in such period for the payment of the principal of, premium, if any, and interest (to the extent not capitalized) on such obligations; assuming, in the case of obligations without a fixed numerical rate, that such obligations bear interest calculated by assuming (i) that the interest rate for every 12 -month period on such bonds is equal to the rate of interest reported in the most recently published edition of The Bond Buyer (or its successor) at the time of calculation as the "Revenue Bond Index" or, if such Revenue Bond Index is no longer being maintained by The Bond Buyer (or its successor) at the time of calculation, such interest rate shall be assumed to be 80% of the rate of interest then being paid on United States Treasury obligations of like maturity and (ii) that the principal of such bonds is amortized such that annual debt service is substantially level over the remaining stated life of such bonds, and further assuming in the case of obligations required to be redeemed or prepaid as to principal prior to Stated Maturity, the principal amounts thereof will be redeemed prior to Stated Maturity in accordance with the mandatory redemption provisions applicable thereto. "Definitive Bonds" shall mean the Initial Bond, as may be transferred and converted into or exchanged for fully registered Bonds in the denomination of $5,000 or any integral multiple of $5,000 in excess thereof. "Depository Bank" means any financial institution duly designated by the Board of Directors of the District to serve as a depository for funds controlled by the Board of Directors of the District. "District" shall mean Trophy Club Municipal Utility District No. 1. "Escrow Agent" shall have the meaning set forth in Section 8.1 hereof. "Escrow Agreement" shall mean the agreement between the District and the Escrow Agent referred to in Section 8.1 hereof. "Event of Default" means any event of default as provided in Section 15.1 hereof. "Existing Obligations" means the Outstanding Series 2015 Bonds and the Series 2016 Bonds. "Fiscal Year" means the twelve month accounting period used by the District in connection with the operation of the System which may be any twelve consecutive month period established by the District. "Governmental Obligations" (i) direct noncallable obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, (ii) noncallable obligations of an agency or instrumentality of the United States, including obligations unconditionally guaranteed or insured by the agency or instrumentality and on the date of their acquisition or purchase by the District are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, (iii) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and on the date of their acquisition or purchase by the District, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent and (iv) any other then authorized securities or 3 obligations under applicable law that may be used to defease obligations such as the Bonds. "Gross Proceeds" means any proceeds as defined in Section 1.148-1(b) of the Regulations, and any replacement proceeds as defined in Section 1.148-1(c) of the Regulations, of the Bonds. "Gross Revenues" means all income, receipts and revenues of every nature derived or received from the operation and ownership (excluding refundable meter deposits, restricted gifts and grants in aid of construction) of the System, including earnings and income derived from the investment or deposit of moneys in any special funds or accounts created and established for the payment and security of the Parity Revenue Obligations. "Initial Bond" shall mean the Bond authorized to be issued hereunder which has the registration certificate, executed on behalf of the Comptroller of Public Accounts of the State of Texas, as contemplated by Section 3.5(d) hereof. "Interest and Sinking Fund" means the fund created or affirmed by Section 9.1 of this Order. "Interest Payment Date" shall mean with respect to any installment of interest on any Bond the date specified in such Bond as the fixed date on which any such installment of interest is due and payable. "Maintenance and Operating Expenses" means all current expenses of operating and maintaining the System, including all salaries, labor, materials, repairs and extensions necessary to render efficient service; provided, however, that only such repairs and extensions, as in the judgment of the Board of Directors, reasonably and fairly exercised, are necessary to maintain the operations and render adequate service to the District and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair obligations payable from Net Revenues shall be deducted in determining "Net Revenues". Depreciation charges shall not be considered Maintenance and Operating Expenses. Maintenance and Operating Expenses shall include payments under contracts for the purchase of water supply or other materials, goods, services, or facilities for the System to the extent authorized by law and the provisions of such contract. "Maturity Date" or "Maturity" when used with respect to any Bond shall mean the date on which the principal of such Bond becomes due and payable as therein provided, whether at the Stated Maturity, by call for redemption or otherwise. "Net Earnings" shall have the meaning assigned to such term in Section 10.1. "Net Revenues" and "Net Revenues of the System" mean all of the revenues of every kind and nature received through the operation of the System, less Maintenance and Operating Expenses, including salaries, labor, materials, repairs and extensions necessary to render efficient service; provided, however, that only such repairs and extensions as in the judgment of the Board, reasonably and fairly exercised, are necessary to keep the System in operation and render adequate service to the District and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair the security of the Bond or the Additional Parity Obligations shall be deducted in determining "Net Revenues". "Order" shall mean this order authorizing the issuance of the Bonds. "Outstanding" shall mean, with respect to Bonds or Parity Revenue Obligations means, as of the 4 date of deteimunation, all Bonds theretofore issued and delivered, except: (1) those Bonds or Parity Revenue Obligations cancelled by the Paying Agent/Registrar or delivered to the Paying Agent/Registrar for cancellation; (2) those Bonds or Parity Revenue Obligations paid or deemed to be paid in accordance with the provisions of Section 17.1 hereof, or substantially similar provisions with respect to Parity Revenue Obligations; and (3) those Bonds or Parity Revenue Obligations that have been mutilated, destroyed, lost, or stolen and replacement Bonds have been registered and delivered in lieu thereof as provided in Section 3.10 hereof or similar provisions with respect to Parity Revenue Obligations. "Parity Revenue Obligations" means, collectively, the Bonds, the Existing Obligations, and any Additional Parity Obligations. "Paying Agent/Registrar Agreement" shall mean the agreement between the District and the Paying Agent/Registrar referred to in Section 5.2 pursuant to which the Paying Agent/Registrar will perform the duties required hereunder. "Paying Agent/Registrar" shall mean BOKF, NA, Dallas, Texas, until a successor Paying Agent/Registrar shall have been appointed pursuant to the applicable provisions of this Order, and thereafter "Paying Agent/Registrar" shall mean such successor Paying Agent/Registrar. "Person" shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof. "Place of Payment" shall mean the designated office of the Paying Agent/Registrar in Dallas, Texas. "Pledged Revenues" shall mean the Net Revenues of the District's System. "Predecessor Bonds" of any particular Bond shall mean every previous Bond evidencing all or a portion of the same debt as that evidenced by such particular Bond, and, for purposes of this definition, any Bond registered and delivered under Section 3.10 in lieu of a mutilated, lost, destroyed or stolen Bond shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Bond. "Project" shall mean the design and construction of water transmission line improvements and acquisition of related real property interests, and the design and construction of improvements to the District's wastewater treatment facilities. "Purchaser" shall mean IFS Securities, Inc., Atlanta, Ga. "Record Date" for the interest payable on any Interest Payment Date shall mean the close of business on the fifteenth day of the month preceding such Interest Payment Date. "Redemption Date" when used with respect to any Bond to be redeemed shall mean the date fixed for such redemption pursuant to the terms of this Order. 5 "Redemption Price" when used with respect to any Bond to be redeemed shall mean the price at which such Bond is to be redeemed pursuant to the terms of this Order, excluding installments of interest, the Interest Payment Date for which is on or before the Redemption Date. "Register" shall have the meaning stated in Section 3.7 hereof. "Regulations" shall mean the temporary or final Income Tax Regulations applicable to the Bonds issued pursuant to sections 103 and 141 through 150 of the Code. Any reference to a section of the Regulations shall also refer to any successor provision to such section hereafter promulgated by the Internal Revenue Service pursuant to sections 103 and 141 through 150 of the Code and applicable to the Bonds. "Representation Letter" shall mean the Letter of Representations between the District and the DTC. "Required Reserve" shall mean the amount which is equal to the Average Annual Debt Service of the Outstanding Parity Revenue Obligations. "Reserve Fund" means the fund created or affirmed by Section 9.1 of this Order. "Revenue Fund" means the Trophy Club Municipal Utility District No. 1 Revenue Fund heretofore created and affirmed by Section 9.1 of this Order. "Rule" shall mean SEC Rule 15c2-12, as amended from time to time. "Series 2015 Bonds" shall mean the $9,230,000 Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2015. "Series 2015 Order" shall mean the order of the District that authorized the issuance of the Series 2015 Bonds. "Series 2016 Bonds" shall mean the $4,635,000 Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2016. "Series 2016 Order" shall mean the order of the District that authorized the issuance of the Series 2016 Bonds. "Special Payment Date" shall have the meaning stated in Section 3.4 hereof. "Special Record Date" shall have the meaning stated in Section 3.4 hereof. "Stated Maturity" when used with respect to any Bond shall mean the date specified in such Bond as the fixed date on which the principal of such Bond is due and payable. "Subordinate Lien Obligations" means the bonds permitted to be issued by the District pursuant to Section 10.3 of this Order. "System" means the District's water and sewer system, including all present and future extensions, additions, replacements and improvements thereto. "TCEQ" means the Texas Commission on Environmental Quality. 6 "TCEQ Order" means the Order adopted by TCEQ dated November 6, 2018 approving the Project and issuance of the Bonds by the District. Section 2.2 Findings. The declarations, determinations and findings declared, made and found in the preamble to this Order are hereby adopted, restated and made a part of the operative provisions hereof. Section 2.3 Table of Contents, Titles and Headings. The table of contents, titles and headings of the Articles and Sections of this Order have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof and shall never be considered or given any effect in construing this Order or any provision hereof or in ascertaining intent, if any question of intent should arise. Section 2.4 Interpretation. (a) Unless the context requires otherwise, words of the masculine gender shall be construed to include correlative words of the feminine and neuter genders and vice versa, and words of the singular number shall be construed to include correlative words of the plural number and vice versa. (b) This Order and all the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein to sustain the validity of this Order. ARTICLE III AUTHORIZATION; GENERAL TERMS AND PROVISIONS REGARDING THE BONDS Section 3.1 Authorization and Purpose. The District's Bonds to be designated "Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019" are hereby authorized to be issued and delivered in accordance with the Constitution and laws of the State of Texas, particularly Section 59 of Article XVI of the Constitution of Texas and Chapters 49 and 54 of the Texas Water Code, as amended. The Bonds shall be issued in the aggregate principal amount of SEVEN MILLION EIGHTY THOUSAND AND NO/100 DOLLARS ($7,080,000) for the purpose of paying the costs of issuing the Bonds and financing the costs of the Project, all under and in strict conformity with the Constitution and laws of the State of Texas. Section 3.2 Dates, Numbers and Denomination. The Bonds shall be dated the Bond Date. The Bonds shall be numbered R-1 upward and shall be in denominations of principal equal to $5,000 or any integral multiples thereof. Section 3.3 Interest Rates and Maturity of the Bonds. (a) The Bonds shall mature on September 1 in each of the years and in the amounts, respectively, set forth below. Such bonds shall bear interest from the Bond Date at the following per annum rates: MATURITY SCHEDULE STATED PRINCIPAL INTEREST MATURITY AMOUNT ($) RATE (%) 2021 155,000 3.000 7 2022 160,000 3.000 2023 165,000 3.000 2024 170,000 3.000 2025 175,000 3.000 2026 180,000 3.000 2027 185,000 3.000 2028 190,000 3.000 2029 195,000 3.000 2030 205,000 3.000 2031 210,000 3.000 2032 215,000 3.000 2033 220,000 3.000 2034 230,000 3.000 2035 235,000 3.000 2036 245,000 3.000 2037 250,000 3.000 2038 255,000 3.125 2039 265,000 3.125 2040 275,000 3.250 2041 285,000 3.250 2042 290,000 3.250 2043 300,000 3.250 2044 310,000 3.250 2045 320,000 3.375 2046 330,000 3.375 2047 345,000 3.375 2048 355,000 3.375 2049 365,000 3.500 (b) Said interest shall be calculated on the basis of a 360 -day year composed of twelve 30 -day months and shall be payable semi-annually on March 1 and September 1 of each year, commencing March 1, 2020, until maturity or redemption of the pertinent Bond. Section 3.4 Medium. Method and Place of Payment. (a) The District will duly and punctually pay the principal of and interest on the Bonds in accordance with their terms in lawful money of the United States of America and shall deposit with the Paying Agent/Registrar on or before each Interest Payment Date funds sufficient to pay the principal of and interest on the Bonds then due, as provided in this Section. (b) Interest on the Bonds shall be paid to the Holders thereof as shown in the Register at the close of business on the Record Date by check (dated as of the Interest Payment Date) and sent by the Paying Agent/Registrar to the person entitled to such payment, first class United States mail, postage 8 prepaid, to the address of such person as it appears in the Register, or by such other customary banking arrangements acceptable to the Paying Agent/Registrar and the person to whom interest is paid; provided, however, that such person shall bear all risk and expense of such other customary banking arrangement. (c) The principal of each Bond shall be paid to the Bondholder on the due date (whether at the Stated Maturity or the date of prior redemption thereof) upon presentation and surrender of such Bond at the Place of Payment. (d) If the specified date for any payment of principal (or Redemption Price) of or interest on the Bonds shall be a Saturday, Sunday, or legal holiday or equivalent (other than a moratorium) for banking institutions generally in the city in which the Place of Payment is located, such payment may be made on the next succeeding day which is not one of the foregoing days without additional interest and with the same force and effect as if made on the specified date for such payment. (e) In the event of nonpayment of interest on a Bond on an Interest Payment Date and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the District. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "Special Payment Date" that shall be fifteen (15) days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each Holder of a Bond appearing on the books of the Paying Agent/Registrar at the close of business on the last business day of the month next preceding the date of mailing of such notice. (f) Unclaimed payments shall be segregated in a special escrow account and held in trust, uninvested by the Paying Agent/Registrar, for the account of the Holder of the Bonds to which the unclaimed payments pertain. Subject to Title 6 of the Texas Property Code, payments remaining unclaimed by the Holders entitled thereto for three years after the applicable payment or redemption date shall be applied to the next payment or payments on the Bonds thereafter coming due and, to the extent any such money remains after the retirement of all outstanding Bonds, shall be paid to the District to be used for any lawful purpose related to the System. Thereafter, neither the District, the Paying Agent/Registrar nor any other person shall be liable or responsible to any Holders of such Bonds for any further payment of such unclaimed moneys or on account of any such Bonds, subject to Title 6 of the Texas Property Code. Section 3.5 Execution and Registration of Bonds. (a) The Bonds shall be executed on behalf of the District by the President and Secretary/Treasurer of the Board, by their manual or facsimile signatures, and the official seal of the District shall be impressed or placed in facsimile thereon. Such facsimile signatures on the Bonds shall have the same effect as if each of the Bonds had been signed manually and in person by each of said officers, and such facsimile seal on the Bonds shall have the same effect as if the official seal of the District had been manually impressed upon each of the Bonds. (b) In the event that any officer of the District whose manual or facsimile signature appears on the Bonds ceases to be such officer before the authentication of such Bonds or before the delivery thereof, such manual or facsimile signature nevertheless shall be valid and sufficient for all purposes as if such officer had remained in such office. (c) Except as provided below, no Bond shall be valid or obligatory for any purpose or be entitled to any security or benefit of this Order unless and until there appears thereon the Certificate of Paying Agent/Registrar substantially in the form provided herein, duly authenticated by manual execution 9 by an officer or duly authorized signatory of the Paying Agent/Registrar. It shall not be required that the same officer or authorized signatory of the Paying Agent/Registrar sign the Certificate of Paying Agent/Registrar on all of the Bonds. In lieu of the executed Certificate of Paying Agent/Registrar described above, the Initial Bond delivered at the Closing Date shall have attached thereto the Comptroller's Registration Certificate substantially in the form provided herein, manually executed by the Comptroller of Public Accounts of the State of Texas, or by his duly authorized agent, which Certificate shall be evidence that the Bond has been duly approved by the Attorney General of the State of Texas, that it is a valid and binding obligation of the District and that it has been registered by the Comptroller of Public Accounts of the State of Texas. (d) On the Closing Date, one Initial Bond to be number T-1, payable in stated installments to the Purchaser or its designee, manually signed by the President and Secretary/Treasurer of the Board, approved by the Attorney General and registered and manually signed by the Comptroller of Public Accounts, will be delivered to the Purchaser or its designee. Upon payment for the Initial Bond, the Paying Agent/Registrar shall cancel the Initial Bond and deliver to the Purchaser or its designee one registered Definitive Bond for each year of maturity of the Bonds in the aggregate principal amount of all Bonds for such maturity, registered in the name of Cede & Co., as nominee of DTC. Section 3.6 Ownership. (a) The District, the Paying Agent/Registrar and any other person may treat the person in whose name any Bond is registered as the absolute Holder of such Bond for the purpose of making and receiving payment of the principal thereof and redemption premium, if any, thereon, for the further purpose of making and receiving payment of the interest thereon and for all other purposes (except interest will be paid to the person in whose name such bond is registered on the Record Date or Special Record Date, as applicable), whether or not such Bond is overdue and neither the District nor the Paying Agent/Registrar shall be bound by any notice or knowledge to the contrary. (b) All payments made to the Holder of a Bond shall be valid and effectual and shall discharge the liability of the District and the Paying Agent/Registrar upon such Bond to the extent of the sum paid. Section 3.7 Registration, Transfer and Exchange. (a) So long as any Bonds remain outstanding, the District shall cause the Paying Agent/Registrar to keep at the Place of Payment a register (the "Register") in which, subject to such reasonable regulations as it may prescribe, the Paying Agent/Registrar shall provide for the registration and transfer of Bonds in accordance with this Order. (b) The ownership of a Bond may be transferred only upon the presentation and surrender of the Bond at the Place of Payment with such endorsement or other evidence of transfer as is acceptable to the Paying Agent/Registrar. No transfer of any Bond shall be effective until entered in the Register. (c) The Bonds shall be exchangeable upon the presentation and surrender thereof at the Place of Payment for a Bond or Bonds of the same maturity and interest rate and in any denomination or denominations of any integral multiple of $5,000 and in an aggregate principal amount equal to the unpaid principal amount of the Bonds presented for exchange. The Paying Agent/Registrar is hereby authorized to authenticate and deliver Bonds exchanged for other Bonds in accordance with this Section. (d) Each exchange Bond delivered by the Paying Agent/Registrar in accordance with this Section shall constitute an original contractual obligation of the District and shall be entitled to the benefits 10 and security of this Order to the same extent as the Bond or Bonds in lieu of which such exchange Bond is delivered. (e) No service charge shall be made to the Holder for the initial registration, subsequent transfer, or exchange for a different denomination of any of the Bonds. The Paying Agent/Registrar, however, may require the Holder to pay a sum sufficient to cover any tax or other governmental charge that is authorized to be imposed in connection with the registration, transfer or exchange of a Bond. (f) Neither the District nor the Paying Agent/Registrar shall be required to issue, transfer, or exchange any Bond called for redemption, in whole or in part, where such redemption is scheduled to occur within 45 calendar days after the transfer or exchange date; provided, however, such limitation shall not be applicable to an exchange by the Holder of the uncalled principal balance of a Bond. Section 3.8 Cancellation. All Bonds paid or redeemed before scheduled maturity in accordance with this Order, and all Bonds in lieu of which exchange Bonds or replacement Bonds are authenticated and delivered in accordance with this Order, shall be canceled and proper records shall be made regarding such payment, redemption, exchange or replacement. The Paying Agent/Registrar shall then return such canceled Bonds to the District or may in accordance with law destroy such canceled Bonds and periodically furnish the District with certificates of destruction of such Bonds. Section 3.9 Temporary Bonds. (a) Following the delivery and registration of the Initial Bond and pending the preparation of Definitive Bonds, the proper officers of the District may execute and, upon the District's request, the Paying Agent/Registrar shall authenticate and deliver, one or more temporary Bonds that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any denomination, substantially of the tenor of the Definitive Bonds in lieu of which they are delivered, without coupons and with such appropriate insertions, omissions, substitutions and other variations as the officers of the District executing such temporary Bonds may determine, as evidenced by their signing of such temporary Bonds. (b) Until exchanged for Bonds in definitive form, such Bonds in temporary form shall be entitled to the benefit and security of this Order. (c) The District, without unreasonable delay, shall prepare, execute and deliver to the Paying Agent/Registrar the Bonds in definitive form; thereupon, upon the presentation and surrender of the Bonds in temporary form to the Paying Agent/Registrar, the Paying Agent/Registrar shall cancel the Bonds in temporary form and shall authenticate and deliver in exchange therefor Bonds of the same maturity and series, in definitive form, in the authorized denomination and in the same aggregate principal amount, as the Bonds in temporary form surrendered. Such exchange shall be made without the making of any charge therefor to any Holder. Section 3.10 Replacement Bonds. (a) Upon the presentation and surrender to the Paying Agent/Registrar of a mutilated Bond, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a replacement Bond of like tenor and principal amount, bearing a number not contemporaneously outstanding. The District or the Paying Agent/Registrar may require the Holder of such Bond to pay a sum sufficient to cover any tax or other governmental charge that is authorized to be imposed in connection therewith and any other expenses connected therewith. 11 (b) In the event that any Bond is lost, apparently destroyed or wrongfully taken, the Paying Agent/Registrar, pursuant to the applicable laws of the State of Texas and in the absence of notice or knowledge that such Bond has been acquired by a bona fide purchaser, shall authenticate and deliver a replacement Bond of like tenor and principal amount, bearing a number not contemporaneously outstanding, provided that the Holder first: (i) furnishes to the Paying Agent/Registrar satisfactory evidence of his or her ownership of and the circumstances of the loss, destruction or theft of such Bond; (ii) furnishes such security or indemnity as may be required by the Paying Agent/Registrar to save it and the District harmless; (iii) pays all expenses and charges in connection therewith, including, but not limited to, printing costs, legal fees, fees of the Paying Agent/Registrar and any tax or other governmental charge that is authorized to be imposed; and (iv) satisfies any other reasonable requirements imposed by the District and the Paying Agent/Registrar. (c) If, after the delivery of such replacement Bond, a bona fide purchaser of the original Bond in lieu of which such replacement Bond was issued presents for payment such original Bond, the District and the Paying Agent/Registrar shall be entitled to recover such replacement Bond from the person to whom it was delivered or any person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the District or the Paying Agent/Registrar in connection therewith. (d) In the event that any such mutilated, lost, apparently destroyed or wrongfully taken Bond has become or is about to become due and payable, the Paying Agent/Registrar, in its discretion, instead of issuing a replacement Bond, may pay such Bond if it has become due and payable or may pay such Bond when it becomes due and payable. (e) Each replacement Bond delivered in accordance with this Section shall constitute an original additional contractual obligation of the District and shall be entitled to the benefits and security of this Order to the same extent as the Bond or Bonds in lieu of which such replacement Bond is delivered. Section 3.11 Book -Entry Only System. (a) The Initial Bond shall be issued in the form of a single fully registered Bond for the entire issue amount of $7,080,000 in the principal amounts for each year and bearing interest at the rates shown in Section 3.3, and delivered at the principal payment office of the Paying Agent/Registrar, and after payment therefor by the Purchaser, shall be canceled and Exchange Bonds for each maturity shall be exchangeable by the Paying Agent/Registrar for Exchange Bonds registered in the name of Cede & Co., as nominee of the Depository Trust Company ("DTC") as agent for the Purchaser. The Exchange Bonds shall be delivered in denominations of $5,000 or any integral multiple thereof for any one maturity in accordance with DTC's Book -Entry -Only System. (b) With respect to Bonds registered in the name of Cede & Co., as nominee of DTC, the District and the Paying Agent/Registrar shall have no responsibility or obligation to any securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations on whose behalf DTC was created to hold securities to facilitate the clearance and settlement of securities transactions among DTC participants (the "DTC Participant") or to any person on behalf of whom such a DTC Participant holds 12 an interest in the Bonds. Without limiting the immediately preceding sentence, the District and the Paying Agent/Registrar shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant or any other person, other than a Holder, as shown on the Register, of any notice with respect to the Bonds, including any notice of redemption, or (iii) the payment to any DTC Participant or any person, other than a Holder, as shown in the Register of any amount with respect to principal or interest on the Bonds. Notwithstanding any other provision of this Order to the contrary, but to the extent permitted by law, the District and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose name each Bond is registered in the Register as the absolute owner of such Bond for the purpose of payment of principal and interest, with respect to such Bond, for the purposes of registering transfers with respect to such Bond, and for all other purposes of registering transfers with respect to such Bonds, and for all other purposes whatsoever. The Paying Agent/Registrar shall pay all principal and interest on the Bonds only to or upon the order of the respective Holders, as shown in the Register, as provided in this Order, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the District's obligations with respect to payment of principal and interest on the Bonds to the extent of the sum or sums so paid. No person other than a Holder, as shown in the Register, shall receive a Bond certificate evidencing the obligation of the District to make payments of principal and interest pursuant to this Order. Upon delivery by DTC to the Paying Agent/Registrar of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions of this Order with respect to interest checks being mailed to the Holder at the close of business on the Record Date the word "Cede & Co." in this Order shall refer to such new nominee of DTC. Section 3.12 Successor Securities Depository: Transfer Outside Book -Entry Onlv System. In the event that the District determines to discontinue the book -entry system through DTC or successor or DTC determines to discontinue providing its services with respect to the Bonds, the District shall either (i) appoint a successor securities depository, qualified to act as such under Section 17(a) of the Securities and Exchange Act of 1934, as amended, notify DTC and DTC Participants of the appointment of such successor securities depository and transfer one or more separate Bonds to such successor securities depository or (ii) notify DTC and DTC Participants of the availability through DTC of Bonds and transfer one or more separate Bonds to DTC Participants having Bonds credited to their DTC accounts. In such event, the Bonds shall no longer be restricted to being registered in the Register in the name of Cede & Co., as nominee of DTC, but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names Holders transferring or exchanging Bonds shall designate, in accordance with the provisions of this Order. Section 3.13 Payments to Cede & Co. Notwithstanding any other provision of this Order to the contrary, so long as any Bonds are registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of, premium, if any, and interest on such Bonds and all notices with respect to such Bonds, shall be made and given, respectively, in the manner provided in the Representation Letter. ARTICLE IV REDEMPTION OF BONDS BEFORE MATURITY Section 4.1 Limitation on Redemption. The Bonds shall be subject to redemption before their scheduled maturity only as provided in this Article. Section 4.2 Optional Redemption. (a) The District reserves the option to redeem the Bonds maturing on and after September 1, 2029, in whole or in part, in inverse order of maturity and by lot (or by any other customary method that 13 results in a random selection) within a maturity, before their respective scheduled maturity dates, on September 1, 2028, or any date thereafter, at a price equal to the principal amount thereof, plus accrued interest to the Redemption Date. (b) The District, at least 45 days before the Redemption Date (unless a shorter period shall be satisfactory to the Paying Agent/Registrar), shall notify the Paying Agent/Registrar of such Redemption Date and of the principal amount of Bonds to be redeemed. (c) The exercise by the District of its option to redeem Bonds shall be evidenced by an order or resolution of the Board entered into its minutes. Section 4.3 Partial Redemption. (a) A portion of a single Bond of a denomination greater than $5,000 may be redeemed, but only in a principal amount equal to $5,000 or any integral multiple thereof. If Bonds are to be partially redeemed, the Paying Agent/Registrar shall assign a separate number for each $5,000 portion of the Bonds subject to redemption and select the portion or portions of the Bonds to be redeemed by lot or by any other customary method that results in a random selection. (b) Upon surrender of any Bond for redemption in part, the Paying Agent/Registrar, in accordance with the provisions of this Order, shall authenticate and deliver an exchange Bond or Bonds in an aggregate principal amount equal to the unredeemed portion of the Bond so surrendered, such exchange being without charge. (c) The Paying Agent/Registrar shall promptly notify the District in writing of the Bonds selected for redemption and, in the case of any Bond selected for partial redemption, the principal amount thereof to be redeemed. Section 4.4 Notice of Redemption to Bondholders. (a) Notice of the redemption shall be mailed by the Paying Agent/Registrar in the name and at the expense of the District not less than 30 days prior to the Redemption Date, to each Holder of Bonds to be redeemed, and to DTC. The notice of redemption shall either (i) explicitly state that the proposed redemption is conditioned on there being on deposit on the Redemption Date sufficient funds to pay the Redemption Price of the Bonds to be redeemed, or (ii) be sent only if sufficient funds to pay the Redemption Price of the Bonds to be redeemed is on deposit. The notice of redemption shall state: 1. the Redemption Date, 2. the Redemption Price, 3. the principal amount, the identification (by Bond and CUSIP number, Stated Maturity, interest rate and Bond Date of the Bonds) and, in the case of partial redemption, the respective principal amounts of the Bonds to be redeemed, 4. that on the Redemption Date the Redemption Price of each of the Bonds to be redeemed will become due and payable and that interest thereon shall cease to accrue from and after said date, and 5. that the Bonds to be redeemed are to be surrendered for the payment of the Redemption Price at the office of the Paying Agent/Registrar, and the address of such Paying Agent/Registrar. (b) The Paying Agent/Registrar shall give written notice of redemption, by registered mail, overnight delivery, or other comparably secure means, not less than 30 days prior to the Redemption Date, to each registered securities depository (and to each national information service that disseminates 14 redemption notices) known to the Paying Agent/Registrar, but neither the failure to give such notice nor any defect therein shall affect the sufficiency of notice given to Bondholders as hereinabove stated. The Paying Agent/Registrar may provide written notice of redemption to DTC by facsimile. Section 4.5 Payment Upon Redemption. (a) Before or on each Redemption Date, the Paying Agent/Registrar shall make provision for the payment of the Bonds to be redeemed on such date by setting aside and holding in trust an amount received by the Paying Agent/Registrar sufficient to pay the principal of and accrued interest on such Bonds. (b) Upon presentation and surrender of any Bond called for redemption at the designated office of the Paying Agent/Registrar, on or after the date fixed for redemption, the Paying Agent/Registrar shall pay the principal of, redemption premium, if any, and accrued interest on such Bond from the moneys set aside for such purpose. Section 4.6 Effect of Redemption. (a) Notice of redemption having been given as provided in Section 4.4 of this Order, the Bonds or portions thereof called for redemption shall become due and payable on the date fixed for redemption and, unless the District defaults in the payment of the principal thereof or accrued interest thereon, such Bonds or portions of such Bonds shall cease to bear interest from and after the date fixed for redemption, whether or not such Bonds are presented and surrendered for payment on such date. (b) If any Bond or portion thereof called for redemption is not so paid upon presentation and surrender thereof for redemption, such Bond or portion thereof shall continue to bear interest at the rate stated on the Bond until paid or until due provision is made for the payment of same. Section 4.7 Lapse of Payment. Money set aside for the redemption of Bonds and remaining unclaimed by the Holders thereof shall be subject to the provisions of Section 3.4(0. ARTICLE V PAYING AGENT/REGISTRAR Section 5.1 Appointment of Paving Aaent/Reaistrar. The District shall at all times maintain a paying agent/registrar ("Paying Agent/Registrar") meeting the qualifications herein described, for the performance of the duties hereunder. BOKF, NA, Dallas, Texas, is hereby appointed Paying Agent/Registrar for such purposes. Section 5.2 Approval of Paving Aeent/Reeistrar Agreement. The Paying Agent/Registrar Agreement by and between the District and BOKF, NA, Dallas, Texas ("Paying Agent/Registrar Agreement") in substantially the form and substance attached hereto as Exhibit "A" is hereby approved and the President or Vice President of the Board is hereby authorized and directed to complete, amend, modify, and execute the Paying Agent/Registrar Agreement, as necessary, and the Secretary/Treasurer is authorized and directed to attest such agreement. By accepting the appointment as Paying Agent/Registrar and executing the Paying Agent/Registrar Agreement, the Paying Agent/Registrar is deemed to have agreed to the provisions of this Order and that it will perform the duties and functions of Paying Agent/Registrar prescribed hereby. Section 5.3 Qualifications of Paving Agent/Registrar. Every Paying Agent/Registrar appointed hereunder shall be a commercial bank, trust company organized under the laws of the State of Texas, or other entity duly qualified and legally authorized to serve as, and perform the duties and services of, paying agent and registrar for the Bonds. 15 Section 5.4 Maintaining Paving Agent/Registrar. (a) At all times while any Bonds are outstanding, the District will maintain a Paying Agent/Registrar that is qualified under Section 5.3 of this Order. (b) If the Paying Agent/Registrar resigns or otherwise ceases to serve as such, the District will promptly appoint a replacement. Section 5.5 Termination of Paving Agent/Registrar. (a) The District reserves the right to appoint a successor Paying Agent/Registrar by (i) filing with the Person then performing such functions a certified copy of a resolution or order giving forty-five (45) days' notice of the termination of the agreement and appointing a successor; and (ii) causing not less than forty-five (45) days' notice to be given to each Bondholder, specifying the substitution of another Paying Agent/Registrar, the effective date thereof and the address of such successor, but no termination shall become effective until such successor shall have accepted the duties of the Paying Agent/Registrar hereunder by written instrument. (b) If a Paying Agent/Registrar is replaced, such Paying Agent/Registrar, promptly upon the appointment of the successor, will deliver the Register (or a copy thereof) and all other pertinent books and records relating to the Bonds to the successor Paying Agent/Registrar. ARTICLE VI FORM OF THE BONDS Section 6.1 Form Generally. (a) The Bonds, including the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the Certificate of the Paying Agent/Register and the Assignment to appear on each of the Bonds, (i) shall be substantially in the form set forth in this Article with such appropriate insertions, omissions, substitutions and other variations as are permitted or required by this Order, and (ii) may have such letters, numbers, or other marks of identification (including identifying numbers and letters of the Committee on Uniform Securities Identification Procedures of the American Bankers Association) and such legends and endorsements (including any reproduction of an opinion of counsel) thereon as, consistently herewith, may be determined by the District or by the officers executing such Bonds, as evidenced by their execution thereof. Any portion of the text of any Bonds may be set forth on the reverse side thereof, with an appropriate reference thereto on the face of the Bonds. (b) The Definitive Bonds shall be typewritten, printed, lithographed, or engraved and may be produced by any combination of these methods or produced in any other similar manner, all as determined by the officers executing such Bonds, as evidenced by their execution thereof. The Initial Bond submitted to the Attorney General of the State of Texas may be typewritten and photocopied or otherwise reproduced. Section 6.2 Form of the Bonds. The form of the Bonds, including the form of the Registration Certificate of the Comptroller of Public Accounts of the State of Texas (which shall only appear on the 16 Initial Bond), the form of Certificate of the Paying Agent/Registrar, and the form of Assignment appearing on the Bonds shall be substantially as follows: (a) Form of Bond. REGISTERED REGISTERED No. $ UNITED STATES OF AMERICA STATE OF TEXAS COUNTIES OF DENTON AND TARRANT TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 WATER AND SEWER SYSTEM REVENUE BOND SERIES 2019 INTEREST: MATURITY CLOSING BOND CUSIP RATE: DATE: DATE: DATE: NUMBER: April 23, 2019 March 15, 2019 Trophy Club Municipal Utility District No. 1 (the "District"), in the Counties of Denton and Tarrant, State of Texas, for value received, hereby promises to pay to or registered assigns, on the Maturity Date specified above, the sum of DOLLARS unless this Bond shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a 360 -day year of twelve 30 -day months, such interest to be paid semiannually on March 1 and September 1 of each year, commencing March 1, 2020. The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas, or such other location designated by the Paying Agent/Registrar (the "Place of Payment"), of the Paying Agent/Registrar executing the registration certificate appearing hereon or, with respect to a successor paying agent/registrar, at the Place of Payment of such successor. Interest on this Bond is payable by check dated as of the interest payment date, mailed by the Paying Agent/Registrar to the registered Holder at the address shown on the registration books kept by the Paying Agent/Registrar, or by such other customary banking arrangements acceptable to the Paying Agent/Registrar and the person to whom interest is to be paid; provided, however, that such person shall bear all risk and expense of such other customary banking arrangements. For the purpose of the payment of interest on this Bond, the registered Holder shall be the person in whose name this Bond is registered at the close of business on the "Record Date," which shall be the fifteenth (15`h) day of the month next preceding such interest payment date. In the event of a nonpayment of interest on a scheduled payment date and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying 17 Agent/Registrar, if and when funds for the payment of such interest have been received from the District. Notice of the Special Record Date and of the special payment date of the past due interest ("Special Payment Date"), which shall be 15 days after the Special Record Date, shall be sent at least five business days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each Holder of a Bond appearing on the books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. If the date for the payment of the principal of or interest on this Bond shall be a Saturday, Sunday, legal holiday, or day on which banking institutions in the city where the Place of Payment is located are required or authorized by law or executive order to close, 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 have the same force and effect as if made on the original date payment was due and no additional interest shall be due by reason of nonpayment on the date on which such payment is otherwise stated to be due and payable. This Bond is one of a series of fully registered bonds specified in the title hereof and issued in the aggregate principal amount of $7,080,000 (herein referred to as the "Bonds"), issued pursuant to a certain order of the District (the "Order") for the purposes of: (i) funding the design and construction of certain water transmission line improvements and acquisition of related real property interests, (ii) funding the costs of acquisition, design and construction of improvements to the District's wastewater treatment facilities; and (ii) paying the costs related to the issuance of the Bonds. This Bond and all the Bonds of the series of which it is a part constitute special obligations of the District and, together with certain outstanding revenue obligations heretofore issued by the District, are payable as to both principal and interest solely from and equally secured by a first lien on the Pledged Revenues (as defined in the Order) of the District's System (as defined in the Order). Reference is hereby made to the Order for a more complete statement of the covenants and provisions securing the payment of this Bond and the series of which it is one. The District expressly reserves the right to issue further and additional revenue obligations equally secured by a parity lien on the Pledged Revenues of the System, provided, however, that any and all such additional parity obligations may be issued only in accordance with and subject to the covenants, conditions, limitations and restrictions relating thereto which are set out and contained in the Order and to which reference is hereby made for more complete and full particulars. The District reserves the option to redeem the Bonds maturing on and after September 1, 2029, in whole or in part, in inverse order of maturity and by lot (or by any other customary method that results in a random selection) within a maturity, before their respective scheduled maturity dates, on September 1, 2028, or any date thereafter, at a price equal to the principal amount thereof, plus accrued interest to the Redemption Date. If less than all of the Bonds are to be redeemed, the District shall redeem the Bonds in inverse order of Stated Maturity in integral multiples of $5,000 and shall direct the Paying Agent/Registrar to call by lot the Bonds, or portions thereof, within such maturity and in such principal amounts, for redemption. Notice of such redemption or redemptions shall be given by first class mail postage prepaid, not less than 30 days before the date fixed for redemption, to the registered Holder of each of the Bonds to be redeemed in whole or in part. Notice having been so given, the Bonds or portions thereof designated for redemption shall become due and payable on the redemption date specified in such notice; from and after such date, notwithstanding that any of the Bonds or portions thereof so called for redemption shall not have been surrendered for payment, interest on such Bonds or portions thereof shall cease to accrue. 18 As provided in the Order and subject to certain limitations therein set forth, this Bond is transferable upon surrender of this Bond for transfer at the Place of Payment with such endorsement or other evidence of transfer as is acceptable to the Paying Agent/Registrar; thereupon, one or more new fully registered Bonds of the same stated maturity, of authorized denominations, bearing the same rate of interest and for the same aggregate principal amount will be issued to the designated transferee or transferees. Neither the District nor the Paying Agent/Registrar shall be required to issue, transfer, or exchange any Bond called for redemption where such redemption is scheduled to occur within 45 calendar days of the transfer or exchange date; provided, however, such limitation shall not be applicable to an exchange by the registered Holder of the uncalled principal balance of a Bond. The District, the Paying Agent/Registrar and any other person may treat the person in whose name this Bond is registered as the Holder hereof for the purpose of receiving payment as herein provided (except interest shall be paid to the person in whose name this Bond is registered on the Record Date or Special Record Date, as applicable) and for all other purposes, whether or not this Bond is overdue, and neither the District nor the Paying Agent/Registrar shall be affected by notice to the contrary. IT IS HEREBY CERTIFIED AND RECITED that the issuance of this Bond and the series of which it is a part is duly authorized by law; that all acts, conditions and things required to be done precedent to and in the issuance of the Bonds have been properly done and performed and have happened in regular and due time, form and manner, as required by law. 1N WITNESS WHEREOF, the District has caused this Bond to be duly executed under its official seal. Secretary/Treasurer, Board of Directors President, Board of Directors Trophy Club Municipal Utility District No. 1 Trophy Club Municipal Utility District No. 1 [SEAL] (b) Form of Comptroller's Registration Certificate. The following Comptroller's Registration Certificate may be deleted from the Definitive Bonds if such certificate on the Initial Bond is fully executed. OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS OF THE STATE OF TEXAS REGISTER NO. I hereby certify that there is on file and of record in my office a certificate of the Attorney General of the State of Texas to the effect that this Bond has been examined by him as required by law, that he finds that it has been issued in confonnity with the Constitution and laws of the State of Texas, that it is a valid and binding obligation of Trophy Club Municipal Utility District No. 1, and that this Bond has this day been registered by me. Witness my hand and seal of office at Austin, Texas, this day of , 2019. 19 [SEAL] Comptroller of Public Accounts of the State of Texas (c) Form of Certificate of Paying Agent/Registrar. The following Certificate of Paying Agent/Registrar may be deleted from the Initial Bond if the executed Comptroller's Registration Certificate appears thereon. CERTIFICATE OF PAYING AGENT/REGISTRAR It is hereby certified that this Bond has been delivered pursuant to the Bond Order described in the text of this Bond, in exchange for or in replacement of a bond, bonds, or a portion of a bond approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas, Date of Authentication: Authorized Signature (d) BOKF, NA, Dallas, Texas By: Form of Assignment. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (print or typewrite name, address and zip code of transferee): (Social Security or other identifying number: ) the within Bond and all rights hereunder and hereby irrevocably constitutes and appoints attorney to transfer the within Bond on the books kept for registration hereof, with full power of substitution in the premises. Date: NOTICE. The signature on this Assignment must correspond with the name of the registered owner as it appears on the face of the within Bond in every particular 20 and must be guaranteed in a manner acceptable to the Paying Agent/Registrar. Signature Guaranteed: (e) The Initial Bond shall be in the form set forth in paragraphs (a) through (d) of this Section, except for the following alterations: (1) immediately under the name of the Bond, the headings "Interest Rate," "Maturity Date" shall be completed with the words "As Shown Below" and the heading "CUSIP No." deleted. (2) in the first paragraph of the Bond, the words "on the Maturity Date specified above, the sum of DOLLARS" shall be deleted and the following will be inserted: "on September 1 in each of the years, in the principal amounts and bearing interest at the per annum rates set forth in the following schedule: (Information to be inserted from schedule in Section 3.3 of this Order) (3) in the second paragraph of the Bond, an additional sentence shall be added to the paragraph as follows: "The initial Paying Agent/Registrar is BOKF, NA, Dallas, Texas."; and (4)the Initial Bond shall be numbered T-1. Section 6.3 CUSIP Registration. The President of the Board may secure the printing of identification numbers on the Bonds through the CUSIP Service Bureau Division of Standard and Poors Corporation, New York, New York. Section 6.4 Legal Opinion. The approving opinion of Bond Counsel, McLean & Howard, L.L.P., may be printed on the back of the Bonds with the certification of the Secretary/Treasurer of the Board which may be executed in facsimile. ARTICLE VII SALE AND DELIVERY OF BONDS Section 7.1 Sale of Bonds: Approval of Official Statement. (a) Sale of the Bonds is hereby awarded the Purchaser at a price of $6,984,501.81, plus accrued interest, subject to the unqualified approving opinion as to the legality of the Bonds of the Attorney General of the State of Texas and of bond counsel for the District and provided that the Initial Bond shall be delivered to the Purchaser. It is hereby found and declared that the price paid by the Purchaser produces the lowest net effective interest rate and is the most advantageous price reasonably available to the District. The President of the Board of Directors and all other officers, agents and representatives of the District are 21 hereby authorized to do any and all things necessary or desirable to provide for the issuance and delivery of the Bonds. (b) The form and use of the Preliminary Official Statement in connection with the offering and sale of the Bonds is hereby ratified, confirmed and approved in all respects. The President and Secretary of the Board are authorized and directed to manually execute and deliver for and on behalf of the District copies of said Official Statement in final form as may be required by the Purchaser, and such Official Statement in the final form and content manually executed by any one or more of said officials shall be deemed to be approved by the Board of Directors and constitute the Official Statement authorized for distribution and use by the Purchaser. (c) Upon the registration of all of the Bonds, the Comptroller of Public Accounts of the State of Texas is authorized and instructed to deliver all of the Bonds to McLean & Howard, L.L.P., or pursuant to such firm's order, for delivery to the Purchaser or to the District's depository. (d) The obligation of the Purchaser to accept delivery of the Bonds is subject to the Purchaser being furnished with the final, approving opinion of McLean & Howard, L.L.P., Bond Counsel for the District, which opinion shall be dated and delivered the Closing Date. Section 7.2 Control and Delivery of Bonds. (a) The President of the Board is hereby authorized to have control of the Initial Bond and all necessary records and proceedings pertaining thereto pending investigation, examination and approval of the Attorney General of the State of Texas, registration by the Comptroller of Public Accounts of the State and registration with, and initial exchange or transfer by, the Paying Agent/Registrar. (b) After registration by the Comptroller of Public Accounts, delivery of the Bonds shall be made to the initial purchaser thereof under and subject to the general supervision and direction of the President of the Board, against receipt by the District of all amounts due to the District under the terms of sale. ARTICLE VIII DEPOSIT OF PROCEEDS Section 8.1 Deposit of Proceeds and Accrued Interest. The proceeds from the sale of Bonds shall be deposited in accordance with the terms of this Article. Moneys received from the Purchaser representing accrued interest on the Bonds from the Bond Date to the date of their actual delivery shall be deposited into the Interest and Sinking Fund. Section 8.2 Escrowed Funds: Approval of Escrow Aereement. Concurrently with the initial delivery of the Bonds and in accordance with the TCEQ Order, the District shall deposit proceeds of the Bonds in an amount equal to $3,846,120 into an escrow fund (the "Escrow Fund") established with BOKF, NA (the "Escrow Agent") pursuant to an Escrow Agreement between the District and the Escrow Agent, in substantially the form attached hereto as Exhibit "B". The Escrow Agent qualifies as a designated state depository or other properly chartered and authorized institution in accordance with Chapter 2256, Texas Government Code, and Chapter 2257, Texas Government Code. The Escrow Agreement, which will govern the disbursement of proceeds of the Bonds upon approval of the TCEQ, is hereby approved in substantially final form, and the President, Vice President, Secretary/Treasurer and General Manager each are hereby authorized, for and on behalf of the District, to approve any changes in the Escrow Agreement from the form attached hereto and to execute the Escrow Agreement in final form. All funds 22 on deposit in the Escrow Fund which are approved by TCEQ to be transferred to the District in order to pay eligible Project costs shall be deposited by the District into the Construction Fund. Section 8.3 Construction Fund. . After making provision for the payment of costs issuing the Bonds, the remaining proceeds from the sale of the Bonds shall be deposited into the Construction Fund. Funds on deposit in the Construction Fund (i) may be invested from time to time in the manner authorized by applicable law, including the Public Funds Investment Act; and (ii) shall be continuously secured by a valid pledge of direct obligations of the United States of America or other collateral meeting the requirements of the Public Funds Collateral Act, Chapter 2257, Texas Government Code, as amended. ARTICLE IX FUNDS; FLOW OF FUNDS; INVESTMENTS Section 9.1 Creation of Funds. (a) The following funds are hereby created or affirmed: (i) "Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019, Revenue Fund" (herein called the "Revenue Fund") is hereby affirmed; (ii) "Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019, Reserve Fund" (herein called the "Reserve Fund") is hereby created; and (iii) "Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019, Interest and Sinking Fund" (herein called the "Interest and Sinking Fund") is hereby created for the purpose of providing funds to pay the principal of, premium, if any, and interest on the Parity Revenue Obligations as the same become due and payable; and (iv) "Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019, Construction Fund" (herein called the "Construction Fund") is hereby created. (b) The District covenants and agrees that all revenues derived from the operation of the System shall be kept separate from other funds of the District. Section 9.2 Revenue Fund. A Revenue Fund has previously been established on the books of the District in connection with the District's Existing Obligations. All Gross Revenues of every nature received from the operation and ownership of the System shall be deposited as collected into the Revenue Fund, and the reasonable, necessary, and proper Maintenance and Operation Expenses of the System shall be paid from the Revenue Fund. The revenues of the System not actually required to pay said expenses shall be deposited from the Revenue Fund into the interest and sinking funds as provided in the orders or resolutions authorizing the Parity Revenue Obligations and the Reserve Fund to the extent provided hereunder for the Bonds and in any order authorizing the issuance of Additional Parity Obligations. Any Net Revenues remaining in the Revenue Fund after satisfying the foregoing payments, or making adequate and sufficient provision for the payment thereof, may be appropriated and used for any other District purpose now or hereafter permitted by law. Section 9.3 Interest and Sinking Fund. (a) The District shall deposit or cause to be deposited into the Interest and Sinking Fund accrued interest on the Bonds from the Bond Date to the date of their delivery 23 (b) Net Revenues of the System shall be deposited to the credit of the Interest and Sinking Fund at such times and in such amounts as necessary for the timely payment of the principal of and interest on the Bonds. (c) Money on deposit in the Interest and Sinking Fund shall be used to pay the principal of and interest on the Bonds as such become due and payable. Section 9.4 Reserve Fund. (a) To accumulate and maintain a reserve for the payment of the Bonds and Additional Parity Obligations (the Required Reserve) equal to the lesser of (i) the Average Annual Debt Service Requirements (calculated on a Fiscal Year basis and determined as of the date of issuance of the Bonds, the most recently issued series of Additional Parity Obligations then Outstanding or, at the option of the District, at the end of each Fiscal Year) for the Bonds and Additional Parity Obligations or (ii) the maximum amount in a reasonably required reserve fund for the Bonds and Additional Parity Obligations, from time to time that can be invested without restriction as to yield pursuant to section 148 of the Code (as defined in Section 13.1), the District agrees to maintain the Reserve Fund at an official depository of the District. All funds deposited into the Reserve Fund (excluding surplus funds which include earnings and income derived or received from deposits or investments which will be transferred to the Revenue Fund during such period as there is on deposit in the Reserve Fund the Required Reserve) shall be used solely for the payment of the principal of and interest on the Bonds and Additional Parity Obligations, when and to the extent other funds available for such purposes are insufficient, and, in addition, may be used to retire the last stated maturity or interest on the Bonds or Additional Parity Obligations. (b) Upon issuance of the Bonds, the total amount required to be accumulated and maintained in the Reserve Fund is hereby deteiiiiined to be $865,843 (the "Required Reserve"), which is equal to not less than the Average Annual Debt Service for the Bonds and the Existing Obligations, and on or before the 1st day of the month next following the month the Bonds are delivered to the Purchaser and on or before the 1st day of each following month, the District shall cause to be deposited to the Reserve Fund from the Net Revenues of the System an amount equal to at least one -sixtieth (1/60th) of the Required Reserve. After the Required Reserve has been fully accumulated and while the total amount on deposit in the Reserve Fund is in excess of the Required Reserve, no monthly deposits shall be required to be made to the Reserve Fund. (c) As and when Additional Parity Obligations are delivered or incurred, the Required Reserve shall be increased, if required, to an amount calculated in the manner provided in the first paragraph of this Section. Any additional amount required to be maintained in the Reserve Fund shall be so accumulated by the deposit of the necessary amount of the proceeds of the issue or other lawfully available funds in the Reserve Fund immediately after the delivery of the then proposed Additional Parity Obligations, or, at the option of the District, by the deposit of monthly installments, made on or before the 1st day of each month following the month of delivery of the then proposed Additional Parity Obligations, of not less than 1/60th of the additional amount to be maintained in the Reserve Fund by reason of the issuance of the Additional Parity Obligations then being issued (or 1/60th of the balance of the additional amount not deposited immediately in cash), thereby ensuring the accumulation of the appropriate Required Reserve. (d) When and so long as the cash and investments in the Reserve Fund equal the Required Reserve, no deposits need be made to the credit of the Reserve Fund; but, if and when the Reserve Fund at any time contains less than the Required Reserve (other than as the result of the issuance of Additional Parity Obligations as provided in the preceding paragraph), the District covenants and agrees to cure the deficiency in the Required Reserve by resuming monthly deposits to said Fund or account from the Net Revenues, or any other lawfully available funds, such monthly deposits to be in amounts equal to not less 24 than 1 /60th of the Required Reserve covenanted by the District to be maintained in the Reserve Fund with any such deficiency payments being made on or before the 1st day of each month until the Required Reserve has been fully restored. The District further covenants and agrees that, subject only to the prior payments to be made to the Interest and Sinking Fund, the Net Revenues shall be applied and appropriated and used to establish and maintain the Required Reserve and to cure any deficiency in such amounts as required by the terms of this Order and any other order or resolution pertaining to the issuance of Additional Parity Obligations. (e) During such time as the Reserve Fund contains the Required Reserve, the District may, at its option, withdraw all surplus funds in the Reserve Fund in excess of the Required Reserve and deposit such surplus in the System Fund, unless such surplus funds represent proceeds of the Bonds, then such surplus will be transferred to the Interest and Sinking Fund. Section 9.5 Construction Fund. (a) Money on deposit in the Construction Fund, including investment earnings thereof, shall be used for the Project. (b) All amounts remaining in the Construction Fund after the accomplishment of the Project, including investment earnings of the Construction Fund, shall be deposited into the Interest and Sinking Fund, unless a change in applicable law permits or authorizes all or any part of such funds to be used for other purposes. Section 9.6 Deficiencies: Excess Revenues. (a) If on any occasion there shall not be sufficient Gross Revenues to make the required deposits into the Interest and Sinking Fund or Reserve Fund, then such deficiency shall be cured as soon as possible from the next available Gross Revenues, or from any other sources available for such purpose. (b) Subject to making the required deposits to the Interest and Sinking Fund and the Reserve Fund when and as required by any order or resolution relating to authorizing the issuance of Parity Revenue Obligations, the excess Gross Revenues may be used by the District for any lawful purpose related to the System. Section 9.7 Investments- Security of Funds. (a) All moneys on deposit in the funds referred to in this Order shall be secured in the manner and to the fullest extent required by the laws of the State of Texas for the security of public funds, and moneys on deposit in such funds shall be used only for the purposes permitted by this Order. (b) Investments. (i) Money in the funds established by this Order, at the option of the District, may be invested in such securities or obligations as peiuiitted under applicable law. (ii) Any securities or obligations in which money is so invested shall be kept and held in trust for the benefit of the Owners and shall be sold and the proceeds of sale shall be 25 timely applied to the making of all payments required to be made from the fund from which the investment was made. (c) Investment Income. Interest and income derived from investment of any fund created by this Order shall be credited to such fund. Section 9.8 Contributions in Aid of Construction Any moneys that may be received by the District that shall represent contributions in aid of construction shall be deposited in a separate account at the Depository Bank. Such contributions shall not be considered as part of the Gross Revenues of the System. Payments from such bank account shall be made only for the purposes for which the contributions were made, including any refunds that may become due to any contributor. ARTICLE X ADDITIONAL BONDS AND REFUNDING BONDS Section 10.1 Additional Parity Obligations. The District reserves the right to issue notes, bonds and other obligations which, when duly authorized and issued in compliance with law and the terms and conditions hereinafter appearing, shall be on a parity with the Parity Revenue Obligations, payable from and equally and ratably secured by a first lien on• and pledge of the Net Revenues of the System; and the Parity Revenue Obligations shall in all respects be of equal dignity. The Additional Parity Obligations may be issued in one or more installments, provided, however, that none shall be issued unless and until the following conditions have been met: (a) A certificate is executed by the General Manager of the District and the President of the Board to the effect that no default exists in connection with any of the covenants or requirements of the Order or orders or resolutions authorizing the issuance of the Bonds and all then outstanding Parity Revenue Obligations; (b) A certificate is executed by the General Manager of the District and the President of the Board to the effect that the Interest and Sinking Fund and Reserve Fund contains the amount of money then required to be on deposit therein; and (c) A certificate is executed by a Certified Public Accountant to the effect that, in his opinion, the Net Earnings of the System either for the last complete fiscal year of the District, or for any twelve consecutive calendar month period ending not more than 90 days prior to the passage of the Order authorizing the issuance of such Additional Parity Obligations, were at least 1.25 times the average annual principal and interest requirements for the then outstanding Parity Revenue Obligations and the Additional Parity Obligations then proposed to be issued. The Accountant, in making a determination of the Net Earnings, may take into consideration a change in the rates and charges for services and facilities afforded by the System that became effective at least sixty (60) days prior to the last day of the period for which Net Earnings are determined and, for purposes of satisfying the above Net Earnings test, make pro forma determination of the Net Earnings of the System for the period of time covered by his certification or opinion based on such change in rates and charges being in effect for the entire period covered by the Accountant's certificate or opinion. PROVIDED, that the term "Net Earnings of the System" shall mean all of the Net Revenues of the System, except that in calculating Net Revenues there shall not be deducted as an expense of operation and maintenance any charge or disbursement for repairs or extensions which, under standard accounting practice, should be charged to capital expenditures; and PROVIDED FURTHER, that it shall not be 26 necessary for the District to meet the above requirements to issue Additional Parity Obligations if the District obtains the written consent of all of the holders of all outstanding Parity Revenue Obligations. Section 10.2 Refunding Bonds. The District reserves the right to issue refunding bonds to refund all or any part of the Parity Revenue Obligations (pursuant to any law then available) upon such terms and conditions as the Board of Directors of the District may deem to be in the best interest of the District and its inhabitants, and if less than all such Parity Revenue Obligations then outstanding are refunded, the conditions precedent prescribed (for the issuance of Additional Parity Obligations) in Section 10.1 shall be satisfied and the accountant's certificate or opinion required in Section 10.1 shall give effect to the Debt Service of the proposed refunding bonds (and shall not give effect to the Debt Service of the Parity Revenue Obligations being refunded following their cancellation or provision being made for their payment). Section 10.3 Obligations of Inferior Lien and Pledge. The District hereby reserves the right to issue Subordinate Lien Obligations payable from and secured by a lien on and pledge of the System revenues, junior and subordinate in rank and dignity to the lien and pledge securing the payment of the Parity Revenue Obligations, as may be authorized by the laws of the State of Texas. ARTICLE XI SECURITY FOR THE BONDS AND ANY ADDITIONAL BONDS Section 11.1 Pledge of Revenues. (a) The Parity Revenue Obligations, including the Bonds, and the interest thereon, and any and all other amounts payable thereunder, are and shall be secured by and payable from a first lien on and pledge of the Net Revenues of the System (with the exception of those in excess of the amounts required to establish and maintain the Interest and Sinking Fund hereinafter provided); and the revenues herein pledged are further pledged to the establishment and maintenance of the Interest and Sinking Fund hereinafter provided. (b) The Bonds are special obligations of the District secured by and payable from a first lien on and pledge of the Net Revenues of the System, as provided in this Order, and is not a charge on the property of the District or on taxes levied by the District. No part of the obligation evidenced by the Bonds, whether principal, interest or other obligation, shall ever be paid from taxes levied or collected by the District. (c) Chapter 1208, Texas Government Code applies to the issuance of the Bond and the pledge of the Net Revenues granted by the District under Section 11.1(a) of this Order, and such pledge, therefore, is valid, effective, and perfected. If Texas law is amended at any time while the Bonds are Outstanding and unpaid such that the pledge of the revenues granted by the District under Section 11.1(a) above is to be subject to the filing requirements of Chapter 9, Texas Business and Commerce Code, then in order to preserve to the registered owners of the Bonds the perfection of the security interest in said pledge, the District agrees to take such measures as it determines are reasonable and necessary under Texas law to comply with the applicable provisions of Chapter 9, Business and Commerce Code and enable a filing to perfect the security interest in said pledge to occur. Section 11.2 Payment of Bonds and Performance of Obligations. The District covenants to pay promptly the principal of and interest on the Bonds as the same become due and payable, whether at maturity or by prior redemption, in accordance with the terms of the Bonds and this Order, and to keep and 27 perform faithfully all of its covenants, undertakings and agreements contained in this Order, or in any Bond executed, authenticated and delivered hereunder. ARTICLE XII PARTICULAR REPRESENTATIONS AND COVENANTS Section 12.1 Representations and Covenants as to Payment. (a) While the Bonds • are Outstanding and unpaid, there shall be made available to the Paying Agent/Registrar, out of the Interest and Sinking Fund and Reserve Fund, if necessary, money sufficient to pay the interest on and the principal of the Bonds, as applicable, as will accrue or mature on each applicable Interest Payment Date. (b) The District will faithfully perform at all times any and all covenants, undertakings, stipulations, and provisions contained in this Order and in the Bonds; the District will promptly pay or cause to be paid the principal of, interest on, and premium, if any, with respect to, the Bonds on due dates and at the places and manner prescribed in such Bonds; and the District will, at the times and in the manner prescribed by this Order, deposit or cause to be deposited the amounts of money specified by this Order. (c) The District is duly authorized under the laws of the State of Texas to issue the Bonds; all action on its part for the creation and issuance of the Bond has been duly and effectively taken; and the Bonds in the hands of the Owners thereof is and will be valid and enforceable obligations of the District in accordance with their terms. (d) The District will at all times collect for services rendered by the System such amounts as will be at least sufficient to pay all Maintenance and Operation Expenses, and to provide Net Revenues equal to 1.10 times the amount that is sufficient to pay the scheduled principal of and interest on the Parity Revenue Obligations, plus one times the amount (if any) required to be deposited in any reserve or contingency fund or account created for the payment and security of the Parity Revenue Obligations. (e) If the System should become legally liable for any other indebtedness, the District shall fix, maintain, charge and collect additional rates and services rendered by the System, sufficient to establish and maintain funds for the payment hereof. ARTICLE XIII TAX EXEMPTION Section 13.1 Covenants. The District covenants to take any action necessary to assure, or refrain from any action which would adversely affect, the treatment of the Bonds as obligations described in section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation. In furtherance thereof, the District covenants as follows: (1) to take any action to assure that no more than 10 percent of the proceeds of the Bonds or the projects financed therewith (less amounts deposited to a reserve fund, if any) are used for any "private business use," as defined in section 141(b)(6) of the Code or, if more than 10 percent of the proceeds or the projects financed therewith are so used, such amounts, whether or not received by the District, with respect to such private business use, do not, under the terms of this Order or any underlying arrangement, directly or indirectly, secure or provide for the payment of 28 more than 10 percent of the debt service on the Bonds, in contravention of section 141(b)(2) of the Code; (2) to take any action to assure that in the event that the "private business use" described in subsection (1) hereof exceeds 5 percent of the proceeds of the Bonds or the projects financed therewith (less amounts deposited into a reserve fund, if any) then the amount in excess of 5 percent is used for a "private business use" which is "related" and not "disproportionate," within the meaning of section 141(b)(3) of the Code, to the governmental use; (3) to take any action to assure that no amount which is greater than the lesser of $5,000,000, or 5 percent of the proceeds of the Bonds (less amounts deposited into a reserve fund, if any) is directly or indirectly used to finance loans to persons, other than state or local governmental units, in contravention of section 141(c) of the Code; (4) to refrain from taking any action which would otherwise result in the Bonds being treated as "private activity bonds" within the meaning of section 141(b) of the Code; (5) to refrain from taking any action that would result in the Bonds being "federally guaranteed" within the meaning of section 149(b) of the Code; (6) to refrain from using any portion of the proceeds of the Bonds, directly or indirectly, to acquire or to replace funds which were used, directly or indirectly, to acquire investment property (as defined in section 148(b)(2) of the Code) which produces a materially higher yield over the term of the Bonds, other than investment property acquired with -- (A) proceeds of the Bonds invested for a reasonable temporary period of 3 years or less or, in the case of a current refunding bond, for a period of 90 days or less until such proceeds are needed for the purpose for which the bonds are issued, (B) amounts invested in a bona fide debt service fund, within the meaning of section 1.148-1(b) of the Treasury Regulations, and (C) amounts deposited in any reasonably required reserve or replacement fund to the extent such amounts do not exceed 10 percent of the proceeds of the Bonds; (7) to otherwise restrict the use of the proceeds of the Bonds or amounts treated as proceeds of the Bonds, as may be necessary, so that the Bonds do not otherwise contravene the requirements of section 148 of the Code (relating to arbitrage); (8) to refrain from using the proceeds of the Bonds or proceeds of any prior bonds to pay debt service on another issue more than 90 days after the date of issue of the Bonds in contravention of the requirements of section 149(d) of the Code (relating to advance refundings); and (9) to pay to the United States of America at least once during each five-year period (beginning on the date of delivery of the Bonds) an amount that is at least equal to 90 percent of the "Excess Earnings," within the meaning of section 148(f) of the Code and to pay to the United States of America, not later than 60 days after the Bonds have been paid in full, 100 percent of the amount then required to be paid as a result of Excess Earnings under section 148(0 of the Code. Section 13.2 Rebate Fund. In order to facilitate compliance with the above covenant (8), a "Rebate Fund" is hereby established by the District for the sole benefit of the United States of America, and such 29 fund shall not be subject to the claim of any other person, including without limitation the bondholders. The Rebate Fund is established for the additional purpose of compliance with section 148 of the Code. Section 13.3 Proceeds. The District understands that the term "proceeds" includes "disposition proceeds" as defined in the Treasury Regulations and, in the case of refunding bonds, transferred proceeds (if any) and proceeds of the refunded bonds expended prior to the date of issuance of the Bonds. It is the understanding of the District that the covenants contained herein are intended to assure compliance with the Code and any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto. In the event that regulations or rulings are hereafter promulgated which modify or expand provisions of the Code, as applicable to the Bonds, the District will not be required to comply with any covenant contained herein to the extent that such failure to comply, in the opinion of nationally recognized bond counsel, will not adversely affect the exemption from federal income taxation of interest on the Bonds under section 103 of the Code. In the event that regulations or rulings are hereafter promulgated which impose additional requirements which are applicable to the Bonds, the District agrees to comply with the additional requirements to the extent necessary, in the opinion of nationally recognized bond counsel, to preserve the exemption from federal income taxation of interest on the Bonds under section 103 of the Code. In furtherance of such intention, the District hereby authorizes and directs the President to execute any documents, certificates or reports required by the Code and to make such elections, on behalf of the District, which may be permitted by the Code as are consistent with the purpose for the issuance of the Bonds. Section 13.4 Allocation of. and Limitation on Expenditures for the Proiect. The District covenants to account for the expenditure of sale proceeds and investment earnings to be used for the purposes described in Section 1 of this Order (the "Project") on its books and records in accordance with the requirements of the Internal Revenue Code. The District recognizes that in order for the proceeds to be considered used for the reimbursement of costs, the proceeds must be allocated to expenditures within 18 months of the later of the date that (1) the expenditure is made, or (2) the Project is completed; but in no event later than three years after the date on which the original expenditure is paid. The foregoing notwithstanding, the District recognizes that in order for proceeds to be expended under the Internal Revenue Code, the sale proceeds or investment earnings must be expended no more than 60 days after the earlier of (1) the fifth anniversary of the delivery of the Bonds, or (2) the date the Bonds are retired. The District agrees to obtain the advice of nationally -recognized bond counsel if such expenditure fails to comply with the foregoing to assure that such expenditure will not adversely affect the tax-exempt status of the Bonds. For purposes hereof, the issuer shall not be obligated to comply with this covenant if it obtains an opinion that such failure to comply will not adversely affect Section 13.5 Disposition of Proiect. The District covenants that the property constituting the Project will not be sold or otherwise disposed in a transaction resulting in the receipt by the District of cash or other compensation, unless any action taken in connection with such disposition will not adversely affect the tax- exempt status of the Bonds. For purpose of the foregoing, the District may rely on an opinion of nationally - recognized bond counsel that the action taken in connection with such sale or other disposition will not adversely affect the tax-exempt status of the Bonds. For purposes of the foregoing, the portion of the property comprising personal property and disposed in the ordinary course shall not be treated as a transaction resulting in the receipt of cash or other compensation. For purposes hereof, the District shall not be obligated to comply with this covenant if it obtains an opinion that such failure to comply will not adversely affect the excludability for federal income tax purposes from gross income of the interest. Section 13.6 Designation as Qualified Tax -Exempt Bonds. The District hereby designates the Bonds as "qualified tax-exempt bonds" as defined in section 265(b)(3) of the Code. In furtherance of such designation, the District represents, covenants and warrants the following: (a) that during the calendar year in which the Bonds are issued, the District (including any subordinate entities) has not designated nor will 30 designate bonds, which when aggregated with the Bonds, will result in more than $10,000,000 of "qualified tax-exempt bonds" being issued; (b) that the District reasonably anticipates that the amount of tax-exempt obligations issued, during the calendar year in which the Bonds are issued, by the District (or any subordinate entities) will not exceed $10,000,000; and, (c) that the District will take such action or refrain from such action as necessary, and as more particularly set forth in this Section, in order that the Bonds will not be considered "private activity bonds" within the meaning of section 141 of the Code.. ARTICLE XIV CONTINUING DISCLOSURE OF FINANCIAL INFORMATION Section 14.1 Annual Reports. (a) The District shall provide annually to the MSRB, within six months after the end of each fiscal year ending in or after 2019, financial information and operating data with respect to the District, of the general type included in the Official Statement. The information to be updated includes Tables 1, 2, 3, 4, 5, 8, 9 and 10 of Appendix A of the Official Statement, and the annual audited financial statements of the District. Any financial statements so to be provided shall be (i) prepared in accordance with generally accepted auditing standards or such other accounting principles as the District may be required to employ from time to time pursuant to State law or regulation and (ii) audited, if the audit is completed within the period during which they must be provided. If the audit of such financial statements is not complete within such period, then the District shall provide unaudited financial statements for the applicable fiscal year to the MSRB within such six month period and audited financial statements when the audit report on such statements becomes available. (b) If the District changes its fiscal year, it will notify the MSRB of the change (and of the date of the new fiscal year end) prior to the next date by which the District otherwise would be required to provide financial information and operating data pursuant to this Section. (c) The financial information and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any document that is available to the public on the MSRB's internet website or filed with the SEC. Section 14.2 Material Event Notices. (i) The District shall notify the MSRB in an electronic format prescribed by the MSRB, in a timely manner not in excess of ten business days after the occurrence of the event, of any of the following events with respect to the Bonds: 1. Principal and interest payment delinquencies; 2. Non-payment related defaults, if material; 3. Unscheduled draws on debt service reserves reflecting financial difficulties; 4. Unscheduled draws on credit enhancements reflecting financial difficulties; 5. Substitution of credit or liquidity providers, or their failure to perform; 6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; 7. Modifications to rights of Beneficial Owners of the Bonds, if material; 8. Bond calls, if material, and tender offers; 9. Defeasances; 31 10. Release, substitution, or sale of property securing repayment of the Bonds, if material; 11. Rating changes; 12. Bankruptcy, insolvency, receivership or similar event of the District or other obligated person within the meaning of CFR § 240.15c2-12 (the "Rule"); 13. Consummation of a merger, consolidation, or acquisition involving the District or other obligated person within the meaning of the Rule or the sale of all or substantially all of the assets of the District or other obligated person within the meaning of the Rule, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of an definitive agreement relating to any such actions, other than pursuant to its terms, if material; 14. Appointment of a successor or additional trustee or the change of name of a trustee, if material; 15. Incurrence of a financial obligation of the obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the obligated person, any of which affect security holders, if material; and 16. Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the obligated person, any of which reflect financial difficulties. The terms "financial obligation" and "material" when used in this paragraph shall have the meanings ascribed to them under federal securities laws. (ii) The District shall notify the MSRB in an electronic format prescribed by the MSRB, in a timely manner, of any failure by the District to provide financial information or operating data in accordance with this Section 14.2 of this Order by the time required by this Section. Section 14.3 Limitations, Disclaimers and Amendments. (a) The District shall be obligated to observe and perform the covenants specified in this Article for so long as, but only for so long as, the District remains an "obligated person" with respect to the Bonds within the meaning of the Rule, except that the District in any event will give notice of any deposit made in accordance with Texas law that causes the Bonds no longer to be outstanding. (b) The provisions of this Section are for the sole benefit of the Bondholders and nothing in this Article, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The District undertakes to provide only the financial information, operating data, financial statements and notices which it has expressly agreed to provide pursuant to this Article and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the District's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Article or otherwise, except as expressly provided herein. The District does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Bonds at any future date. (c) UNDER NO CIRCUMSTANCES SHALL THE DISTRICT BE LIABLE TO A BONDHOLDER OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE DISTRICT, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS SECTION. EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. (d) No default by the District in observing or performing its obligations under this Article shall comprise a breach of or default under the Order for purposes of any other provision of this Order. Nothing 32 in this Article is intended or shall act to disclaim, waive, or otherwise limit the duties of the District under federal and state securities laws. (e) Notwithstanding any other provision within this Order, the provisions of this Article may be amended by the District from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, or status or type of operations of the District, if (1) the agreement, as so amended, would have permitted an underwriter to purchase or sell Bonds in the original primary offering in compliance with the Rule, taking into account such amendment as well as such changed circumstances, and (2) a person unaffiliated with the District (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the Bondholders. If any such amendment is made, the District will include in its next annual update an explanation in narrative form of the reasons for the change and its impact on the type of operating data or financial information being provided. ARTICLE XV DEFAULT AND REMEDIES Section 15.1 Events of Default. Each of the following occurrences or events for the purpose of this Order is hereby declared to be an Event of Default: (a) the failure to make payment of the principal of or interest on any of the Bonds when the same becomes due and payable; (b) default in the performance or observance of any other covenant, agreement, or obligation of the District and the continuation thereof for a period of 30 days after notice of such default is given by any Bondholder to the District; or (c) the District files for protection under the federal Bankruptcy Code or other similar state or federal statute. Section 15.2 Remedies for Default. (a) Upon the happening of any Event of Default or the default in the performance or observance of any other covenant, agreement, or obligation of the District, then any Bondholder or an authorized representative thereof, including but not limited to, a trustee or trustees therefor, may proceed against the District for the purpose of protecting and enforcing the rights of the Bondholders under this Order, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of the Bondholders hereunder or any combination of such remedies. (b) All such proceedings shall be instituted and maintained for the equal benefit of all Bondholders. Section 15.3 Remedies Not Exclusive. (a) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under the Bonds or now or hereafter existing at law or in equity; provided, however, that notwithstanding any other provision of this Order, the right to accelerate the debt evidenced by the Bonds shall not be available as a remedy under this Order. 33 (b) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver of any other available remedy. ARTICLE XVI DISTRICT OFFICERS' DUTIES Section 16.1 District Officers' Duties. (a) The President and Secretary/Treasurer of the Board of Directors of the District are hereby instructed and directed to do any and all things necessary in reference to the installation, completion and maintenance of the District's plants, facilities and improvements and to make monies available for the payment of the Bonds in the manner provided by law. (b) The President of the Board of Directors of the District shall submit the Bonds, the record of the proceedings authorizing the issuance of the Bonds and any and all other necessary orders, certificates and records to the Attorney General of the State of Texas for his investigation. After obtaining the approval of the Attorney General, the President of the Board of Directors shall cause the Bonds to be registered by the Comptroller of Public Accounts of the State of Texas. (c) The President and Secretary/Treasurer of the Board of Directors are authorized to do any and all things proper and necessary to carry out the intent of this Order. ARTICLE XVII DISCHARGE Section 17.1 Defeasance. (a) If the District shall pay or cause to be paid, or there shall otherwise be paid to the Bondholders, the principal of and interest on the Bonds, at the times and in the manner stipulated in this Order, then the pledge of Pledged Revenues under this Order and all covenants, agreements, and other obligations of the District to the Bondholders shall thereupon cease, terminate, and become void and be discharged and satisfied, and the Paying Agent/Registrar shall pay over or deliver all money held by it under this Order to the District. (b) Bonds or interest installments for the payment of which money shall have been set aside and shall be held in trust by the Paying Agent/Registrar or with any other bank or trust company which has agreed to hold the same for such purpose (through deposit by the District of funds for such payment or otherwise) at the Stated Maturity thereof shall be deemed to have been paid within the meaning and with the effect expressed above in this Section. All Existing Obligations shall be deemed to have been paid, prior to their Stated Maturity, within the meaning and with the effect expressed above in this Section, if there shall have been deposited with the Paying Agent/Registrar either (a) money in an amount which shall be sufficient to make such payment, (b) Governmental Obligations certified by an independent public accounting firm of national reputation to be of such maturities and interest payment dates and to bear such interest as will, without further investment or reinvestment of either the principal amount thereof or the interest earnings therefrom, be sufficient to make such payment, or (c) a combination of money and Governmental Obligations together so certified to be sufficient to make such payment, provided that all the expenses pertaining to the Bonds with respect to which such deposit is made shall have been paid or the payment thereof provided for to the satisfaction of the Paying Agent/ Registrar (and to such other bank or trust company). ARTICLE XVIII 34 MISCELLANEOUS Section 18.1 District's Successors and Assigns. Whenever in this Order the District is named and referred to, it shall be deemed to include its successors and assigns, and all covenants and agreements in this Order by or on behalf of the District, except as otherwise provided herein, shall bind and inure to the benefit of its successors and assigns whether or not so expressed. Section 18.2 Benefits of Order Provisions. Nothing in this Order or in the Bonds, expressed or implied, shall give or be construed to give any person, firm or corporation, other than the District, the Paying Agent/Registrar and the Bondholders any legal or equitable right or claim under or in respect of this Order, or under any covenant, condition or provision herein contained, all the covenants, conditions and provisions contained in this Order or in the Bonds being for the sole benefit of the District, the Paying Agent/Registrar and the Bondholders. Section 18.3 Severability Clause. If any word, phrase, clause, sentence, paragraph, Section or other part of this Order, or the application thereof to any person or circumstance, shall ever be held to be invalid or unconstitutional by any court of competent jurisdiction, the remainder of this Order and the application of such word, phrase, clause, sentence, paragraph, Section or other part of this Order to any other persons or circumstances shall not be affected thereby. Section 18.4 Open Meeting. It is hereby officially found and determined that the meeting at which this Order was adopted was open to the public, and public notice of the time, place and purpose of said meeting was properly given, all as required by Chapter 551, Texas Government Code, and Section 49.063, Texas Water Code, as amended. Section 18.5 Amendments. (a) This Order shall constitute a contract with the Bondholders entered into upon the initial purchase of the Bonds, shall be binding on the District and its successors and assigns whether or not so expressed, and shall not be amended or repealed by the District so long as any Bond remains outstanding except as permitted in this Section. (b) The District may, without the consent of or notice to any Bondholder, from time to time and at any time amend this Order in any manner that the District determines is not detrimental to the interests of the Bondholders, for the purpose of the curing of any ambiguity, inconsistency, or formal defect or omission herein or therein. In addition, the District may amend, add to, or rescind any of the provisions of this Order; except that, notwithstanding the foregoing, without the consent of the Holders of all of the affected outstanding Bonds, no such amendment, addition, or rescission shall (1) change the Stated Maturity of the Bonds or any Interest Payment Date for an installment of interest thereon, reduce the principal amount thereof, the Redemption Price therefor, or the rate of interest thereon, change the place or places at, or the coin or currency in, which any Bond or the interest thereon is payable, or in any other way modify the terms or sources of payment of the principal of or interest on the Bonds, (2) give any preference to any Bond over any other Bond, or (3) modify any of the provisions of this Section, except to provide that certain other provisions of this Order cannot be modified or waived without the consent of the Holder of each Bond affected thereby. (c) Any consent to any amendment hereof by the Bondholder shall bind every future Holder of the same Bond and the Holder of every Bond issued upon transfer or in lieu thereof or in exchange therefor, in respect of anything done or suffered to be done by the District in reliance thereon, whether or not notation of such action is made upon such Bond. 35 (d) Any rating agency rating the Bonds must receive notice of each amendment and a copy thereof at least 15 days in advance of its execution or adoption. Section 18.6 Notice to Bondholders. Except as may be otherwise provided in this Order, where this Order provides for notice to Bondholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Bondholder, at the address of such Bondholder as it appears in the Register. Neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder of Bonds shall affect the sufficiency of such notice with respect to all other Bondholders. Wherever this Order provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event with respect to which such notice is given, and such waiver shall be the equivalent of such notice. Waivers of notice by Bondholders shall be filed with the District, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. ARTICLE XIX EFFECTIVENESS Section 19.1 Effectiveness. This Order shall take effect and be in force from and after its passage and approval. PASSED AND APPROVED on this 18th day of March, 2019. [Remainder of this page intentionally left blank.] 36 President, Board of Directors ATTEST: Secretary/Treaser,\T3oard of Directors Exhibit "A Paying Agent/Registrar Agreement Exhibit Page A-1 PAYING AGENT/REGISTRAR AGREEMENT THIS AGREEMENT (the "Agreement"), is entered into as of March 18, 2019, by and between Trophy Club Municipal Utility District No. 1 (the "Issuer") and BOKF, NA, Dallas, Texas (the "Bank") a national banking association duly organized and operating under the laws of the United States of America. WHEREAS, the Issuer has duly authorized and provided for the issuance of its $7,080,000 Water and Sewer System Revenue Bonds, Series 2019 ("the Bonds"), such to be issued in fully registered form only as to the payment of principal and interest thereon; and WHEREAS, the Bonds are scheduled to be delivered to the initial purchasers thereof on or about April 23, 2019; and WHEREAS, the Issuer has selected the Bank to serve as Paying Agent/Registrar in connection with the payment of the principal of, premium, if any, and interest on the Bonds and with respect to the registration, transfer, and exchange thereof by the registered owners thereof; and WHEREAS, the Bank has agreed to serve in such capacities for and on behalf of the Issuer and has full power and authority to perform and serve as Paying Agent/Registrar for the Bonds; NOW, THEREFORE, it is mutually agreed as follows: ARTICLE ONE APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR SECTION 1.01. APPOINTMENT. The Issuer hereby appoints the Bank to serve as Paying Agent with respect to the Bonds. As Paying Agent for the Bonds, the Bank shall be responsible for paying on behalf of the Issuer the principal, premium (if any), and interest on the Bonds as the same become due and payable to the registered owners thereof, all in accordance with this Agreement and the "Order" (hereinafter defined). The Issuer hereby appoints the Bank as Registrar with respect to the Bonds. As Registrar for the Bonds, the Bank shall keep and maintain for and on behalf of the Issuer books and records as to the ownership of said Bonds and with respect to the transfer and exchange thereof as provided herein and in the Order, a copy of which books and records shall be maintained at the office of the Bank located in the State of Texas or shall be available to be accessed from such office located in the State of Texas. 1 The Bank hereby accepts its appointment, and agrees to serve as the Paying Agent and Registrar for the Bonds. SECTION 1.02. COMPENSATION. As compensation for the Bank's services as Paying Agent/Registrar, the Issuer hereby agrees to pay the Bank the fees and amounts set forth in Schedule A attached hereto for the first year of this Agreement and thereafter the fees and amounts set forth in the Bank's current fee schedule then in effect for services as Paying Agent/Registrar for municipalities, which shall be supplied to the Issuer on or before 90 days prior to the close of the Fiscal Year of the Issuer, and shall be effective upon the first day of the following Fiscal Year. In addition, the Issuer agrees to reimburse the Bank upon its request for all reasonable expenses, disbursements and advances incurred or made by the Bank in accordance with any of the provisions hereof (including the reasonable compensation and the expenses and disbursements of its agents and counsel). ARTICLE TWO DEFINITIONS SECTION 2.01. DEFINITIONS: For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: "Acceleration Date" on any Security means, if applicable, the date on and after which the principal or any or all installments of interest, or both, are due and payable on any Security which has become accelerated pursuant to the terms of the Security. "Bank Office" means the office of the Bank as follows: BOKF, NA, 5956 Sherry Lane, Ste. #1201, Dallas, Texas 75225. The Bank will notify the Issuer in writing of any change in location of the Bank Office. "Collected Funds" Funds immediately available to the Paying Agent as of the due date of such funds. "Date of Issue" is March 15, 2019. "Delivery Date" is on or about April 23, 2019. "Depository" is DTC. "Fiscal Year" is the twelve month -period beginning on October 1 of each year and ending on September 30 of the following year. "Holder" and "Security Holder" each means the Person in whose name a Security is registered in the Security Register. 2 "Issuer Request" and "Issuer Order" means a written request or Order signed in the name of the Issuer by the Treasurer or his or her designee. "Legal Holiday" means a day on which the Bank is required or authorized to be closed. "Order" means the Order of the governing body of the Issuer pursuant to which the Bonds are issued. "Payment Dates" are March 1 and September 1 of each year beginning March 1, 2020. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision of a government. "Predecessor Bonds" of any particular Security means every previous Security evidencing all or a portion of the same obligation as that evidenced by such particular Security (and, for the purposes of this definition, any mutilated, lost, destroyed, or stolen Security for which a replacement Security has been registered and delivered in lieu thereof pursuant to Section 4.06 hereof and the Order). "Record Date" for the interest payable on any Interest Payment Date shall mean the close of business on the fifteenth day of the month preceding such Interest Payment Date. "Redemption Date" when used with respect to any Security to be redeemed means the date fixed for such redemption pursuant to the terms of the Order. "Responsible Officer" when used with respect to the Bank means the Chairman or Vice - Chairman of the Board of Directors, the Chairman or Vice-chairman of the Executive Committee of the Board of Directors, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Security" means any one of the Individual Bonds of the Issuer's $7,080,000 Water and Sewer System Revenue Bonds, Series 2019. "Security Register" means a register maintained by the Bank on behalf of the Issuer providing for the registration and transfer of the Bonds. "Stated Maturity" means the date specified in the Order the principal of a Security is scheduled to be due and payable. 3 SECTION 2.02 OTHER DEFINITIONS. The terms "Bank," "Issuer," and "Bonds (Security)" have the meanings assigned to them in the recital paragraphs of this Agreement. The term "Paying Agent/Registrar" refers to the Bank in the performance of the duties and functions of this Agreement. ARTICLE THREE PAYING AGENT SECTION 3.01 DUTIES OF PAYING AGENT. (a) As Paying Agent, the Bank shall, provided adequate Collected Funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the principal of each Security at its Stated Maturity, Redemption Date, or Acceleration Date, to the Holder upon surrender of the Security to the Bank at its corporate trust operations office located in Dallas, Texas. (b) As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the interest on each Security when due, by computing the amount of interest to be paid each Holder and preparing and sending checks by United States Mail, first class, postage prepaid, on each payment date, to the Holders of the Bonds (or their Predecessor Bonds) on the respective Record Date, to the address appearing on the Security Registrar or by such other method, acceptable to the Bank, requested in writing by the Holder at the Holder's risk and expense. The Issuer shall pay all charges from Depositories for untimely payments, provided however, the Bank also agrees to abide by the Depository requirement for same day wire transfer of funds for debt service payment. SECTION 3.02 PAYMENT DATES. Provided adequate collected funds are provided to it no later than 10:00 a.m. on the payment date, the Issuer hereby instructs the Bank to pay the principal and interest on the Bonds on the dates specified in the Order. ARTICLE FOUR REGISTRAR SECTION 4.01 SECURITY REGISTER — TRANSFERS AND EXCHANGES. The Bank agrees to keep and maintain for and on behalf of the Issuer at the Bank Office books and records (herein sometimes referred to as the "Security Register") for recording the names and addresses of the Holders of the Bonds, the transfer, exchange, and replacement of the Bonds, and the payment of the principal of and interest on the Bonds to the Holders and containing such other information as may be reasonably required by the issuer and subject to such reasonable regulations as the Issuer and the Bank may prescribe. All transfers, exchanges, and replacement of Bonds shall be noted in the Security Register. The Bank agrees further to keep and maintain a copy of 4 the Security Register at its office located in the State of Texas or provides for such Security Register to be available to be accessed from such office located in the State of Texas. Every Security surrendered for transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer, the signature on which has been guaranteed by an officer of a federal or state bank or a member of the National Association of Bonds Dealers, in form satisfactory to the Bank, duly executed by the Holder thereof or his agent duly authorized in writing. The Bank may request any supporting documentation it feels necessary to affect a registration, transfer, or exchange of the Bonds. To the extent possible and under reasonable circumstances, the Bank agrees that, in relation to an exchange or transfer of Bonds, the exchange or transfer by the Holders thereof will be completed and new Bonds delivered to the Holder or the assignee of the Holder in not more than three business days after the receipt of the Bonds to be cancelled in an exchange or transfer and the written instrument of transfer or request for exchange duly executed by the Holder, or his duly authorized agent, in form and manner satisfactory to the Paying Agent/Registrar. SECTION 4.02 BONDS The Issuer shall provide an adequate inventory of printed Bonds to facilitate transfers or exchanges thereof. The Bank covenants that the inventory of printed Bonds will be kept in safekeeping pending their use, and reasonable care will be exercised by the Bank in maintaining such Bonds in safekeeping, which shall be not less than the care maintained by the Bank for debt Bonds of other political subdivisions or corporations for which it serves as registrar, or that is maintained for its own Bonds. SECTION 4.03 FORM OF SECURITY REGISTER. The Bank, as Registrar, will maintain the Security Register relating to the registration, payment, transfer, and exchange of the Bonds in accordance with the Bank's general practices and procedures in effect from time to time. The Bank shall not be obligated to maintain such Security Register in any form other than those which the Bank has currently available and currently utilizes at the time. The Security Register may be maintained in written form or in any other form capable of being converted into written form within a reasonable time. SECTION 4.04 LIST OF SECURITY HOLDERS. The Bank will provide the Issuer at any time requested by the Issuer, upon payment of the required fee, a copy of the information contained in the Security Register. The Issuer may also inspect the information contained in the Security Register at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank to provide an up-to-date listing or to convert the information into written form. Unless required by law, the Bank will not release or disclose the contents of the Security Register to any person other than to, or at the written request of, an authorized officer or employee 5 of the Issuer, except upon receipt of a court order or as otherwise required by law. Upon receipt of a court order and prior to the release or disclosure of the contents of the Security Register, the Bank will notify the Issuer so that the Issuer may contest the court order or such release or disclosure of the contents of the Security Register. SECTION 4.05 CANCELLED BONDS. The Agent will retain and destroy cancelled and matured Bonds upon expiration of the appropriate retention period. SECTION 4.06 MUTILATED, DESTROYED, LOST, OR STOLEN BONDS. The Issuer hereby instructs the Bank, subject to the applicable provisions of the Order, to deliver and issue Bonds in exchange for or in lieu of mutilated, destroyed, lost, or stolen Bonds as long as the same does not result in an over issuance. In case any Security shall be mutilated, or destroyed, lost, or stolen, the Bank, in its discretion, may execute and deliver a replacement Security of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Security, or in lieu of and in substitution for such destroyed, lost, or stolen Security, only after (i) the filing by the Holder thereof with the Bank of evidence satisfactory to the Bank of the destruction, loss, or theft of such Security, and of the authenticity of the ownership thereof and (ii) the furnishing to the Bank of indemnification in an amount satisfactory to hold the Issuer and the Bank harmless. All expenses and charges associated with such indemnity and with the preparation, execution, and delivery of a replacement Security shall be borne by the Holder of the Security mutilated, or destroyed, lost, or stolen. SECTION 4.07 TRANSACTION INFORMATION TO ISSUER. The Bank will, within a reasonable time after receipt of written request from the Issuer, furnish the Issuer information as to the Bonds it has paid pursuant to Section 3.01, Bonds it has delivered upon the transfer or exchange of any Bonds pursuant to Section 4.01, and Bonds it has delivered in exchange for or in lieu of mutilated, destroyed, lost, or stolen Bonds pursuant to Section 4.06. ARTICLE FIVE THE BANK SECTION 5.01 DUTIES OF BANK. The Bank undertakes to perform the duties set forth herein and in the Order and agrees to use reasonable care in the performance thereof. SECTION 5.02 RELIANCE ON DOCUMENTS, ETC. (a) The Bank may conclusively rely, as to the truth of the statements and correctness of the opinions expressed therein, on certificates or opinions furnished to the Bank. (b) The Bank shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Bank was negligent in ascertaining the pertinent facts. 6 (c) No provision of this Agreement shall require the Bank to expend or risk its own funds or otherwise incur any financial liability for performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is not assured to it. (d) The Bank may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, resolution, bond, note, security, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. Without limiting the generality of the foregoing statement, the Bank need not examine the ownership of any Bonds, but is protected in acting upon receipt of Bonds containing an endorsement or instruction of transfer or power of transfer which appears on its face to be signed by the Holder or an agent of the Holder. The Bank shall not be bound to make any investigation into the facts or matters stated in a resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, Bond Order, bond, note security or other paper document supplied by Issuer. (e) The Bank may consult with counsel, and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection with respect to any action taken, suffered, or omitted by it hereunder in good faith and in reliance thereon. (f) (g) The Bank may exercise any of the powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys of the Bank. The Bank is also authorized to transfer funds relating to the closing and initial delivery of the securities in the manner disclosed in the closing memorandum as prepared by the Issuer, Issuer's financial advisor or other agents. The Bank may act on a facsimile or e-mail transmission of the closing memorandum acknowledged by the Issuer, Issuer's financial advisor or other agents as the final closing memorandum. The Bank shall not be liable for any losses, costs or expenses arising directly or indirectly from the Bank's reliance upon and compliance with such instructions. SECTION 5.03 RECITALS OF ISSUER. The recitals contained herein with respect to the Issuer and in the Bonds shall be taken as the statements of the Issuer, and the Bank assumes no responsibility for their correctness. The Bank shall in no event be liable to the Issuer, and Holder or Holders of any Security, or any other Person for any amount due on any Security from its own funds. 7 SECTION 5.04 MAY HOLD BONDS. The Bank, in its individual or any other capacity, may become the owner or pledgee of Bonds and may otherwise deal with the Issuer with the same rights it would have if it were not the Paying Agent/Registrar, or any other agent. SECTION 5.05 MONEY HELD BY BANK. The Bank shall deposit any money received from the Issuer into a Paying Agent account to be held for the payment of the Bonds, with such money in the account that exceeds the deposit insurance, available to the Issuer, provided by the Federal Deposit Insurance Corporation to be fully collateralized with Bonds or obligations that are eligible under the laws of the State of Texas, to secure and be pledged as collateral for accounts until the principal and interest on such Bonds have been presented for payment and paid to the owner thereof. Payments made from such account shall be made by check drawn on such account. All funds at any time and from time to time provided to or held by the Bank hereunder shall be deemed, construed, and considered for all purposes as being provided to or held by the Bank in a Paying Agent capacity for the benefit of the Security Holders. The Bank acknowledges, covenants, and represents that it is acting herein in as agent in relation to such funds, and is not accepting, holding, administering, or applying such funds as a banking depository, but solely as agent for and on behalf of the Security Holders. The Holders shall be entitled to the same preferred claim and first lien on the funds so provided as are enjoyed by the beneficiaries of trust funds generally. The funds provided to the Bank hereunder shall not be subject to warrants, drafts, or checks drawn by the Issuer and, except as expressly provided herein, shall not be subject to compromise, setoff, or other charge or diminution by the Bank. The Bank shall be under no liability for interest on any money received by it hereunder. Subject to the unclaimed property laws and any provisions in the Order to the contrary, any money deposited with the Bank for the payment of the principal, premium (if any), or interest on any Security and remaining unclaimed for three years after final maturity of the Security has become due and payable will be paid by the Bank to the Issuer, and the Holder of such Security shall thereafter look only to the Issuer for payment thereof, and all liability of the Bank with respect to such money shall thereupon cease. SECTION 5.06 INDEMNIFICATION To the extent permitted by law, the Issuer agrees to indemnify the Bank for, and hold it harmless against, any loss, liability, or expense incurred without negligence or bad faith on its part, arising out of or in connection with its acceptance or administration of its duties hereunder, including the cost and expense against any claim or liability in connection with the exercise or performance of any of its powers or duties under this Agreement. SECTION 5.07 INTERPLEADER. The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim, demand, or controversy over its person as well as funds on deposit, in either a Federal or State District Court located in any County in the State of Texas where either the Bank Office or the administrative offices of the Issuer is located, and agree that service of process to Banks Interpleader by certified or registered mail, return receipt requested, to the address referred to in Section 6.03 of this Agreement shall constitute adequate service. The 8 Issuer and the Bank further agree that the Bank has the right to file a Bill of Interpleader in any court of competent jurisdiction to determine the rights of any Person claiming any interest herein. Notwithstanding anything in this Agreement to the contrary, the District is not agreeing to adjudication of any claims in any court that is outside of the state of Texas. SECTION 5.08. DEPOSITORY TRUST COMPANY SERVICES. It is hereby represented and warranted that, in the event the Bonds are otherwise qualified and accepted for "Depository Trust Company" services or equivalent depository trust services by other organizations, the Bank has the capability and, to the extent within its control, will comply with the "Operational Arrangements," effective from time to time, which establishes requirements for Bonds to be eligible for such type depository trust services, including, but not limited to, requirements for the timeliness of payments and funds availability, transfer turnaround time, and notification of redemptions and calls. Operational Arrangements shall govern over any other inconsistent provision. ARTICLE SIX MISCELLANEOUS PROVISIONS SECTION 6.01. AMENDMENT. This Agreement may be amended only by an agreement in writing signed by both of the parties hereto. SECTION 6.02. ASSIGNMENT. This Agreement may not be assigned by either party without the prior written consent of the other. SECTION 6.03. NOTICES. Any request, demand, authorization, direction, notice, consent, waiver, or other document provided or permitted hereby to be given or furnished to the Issuer or the Bank shall be mailed or delivered to the Issuer or the Bank, respectively, at the addresses shown on the signature page of this Agreement. SECTION 6.04. EFFECT OF HEADINGS. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. SECTION 6.05. SUCCESSORS AND ASSIGNS. All covenants and agreements herein by the Issuer shall bind its successors and assigns, whether so expressed or not. SECTION 6.06. SEVERABILITY. In case any provision herein shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 6.07. BENEFITS OF AGREEMENT. Nothing herein, express or implied, shall give to any Person, other that the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy, or claim hereunder. 9 SECTION 6.08. ENTIRE AGREEMENT. This Agreement and the Order constitute the entire agreement between the parties hereto relative to the Bank acting as Paying Agent/Registrar and if any conflict exists between his Agreement and the Order, the Order shall govern. SECTION 6.09. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. SECTION 6.10. TERMINATION. This Agreement will terminate on the date of final payment of the principal of interest on the Bonds to the Holders thereof or may be earlier terminated by either party upon 60 days written notice; provided, however, an early termination of this Agreement by either party shall not be effective until (a) a successor Paying Agent/Registrar has been appointed by the Issuer and such appointment accepted and (b) notice has been give to the Holders of the Bonds of the appointment of a successor Paying Agent/Registrar. Furthermore, the Bank and Issuer mutually agree that the effective date of an early termination of this Agreement shall not occur at any time which would disrupt, delay, or otherwise adversely affect the payment of the Bonds. Upon an early termination of this Agreement, the Bank agrees to promptly transfer and deliver the Security Register (or a copy thereof), together with other pertinent books and records relating to the Bonds, to the Successor Paying Agent/Registrar designated and appointed by the Issuer. The provisions of Article Five shall survive and remain in full force and effect following the termination of this Agreement. SECTION 6.11 GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the laws of the State of Texas. SECTION 6.12 SUCCESSOR PAYING AGENT. Any corporation or association into which the Paying Agent may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its trust business and assets as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which it is a party, shall be and become successor Paying Agent hereunder and vested with all of the powers, discretion's, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding. SECTION 6.13 ADDITIONAL REOUIREMENTS. (a) The Paying Agent represents and warrants, for purposes of Chapter 2270 of the Texas Government Code, that at the time of execution and delivery of this Agreement, neither the Paying Agent, nor any wholly owned subsidiary, majority-owned subsidiary, parent company or affiliate of the Paying Agent, is a company that boycotts Israel. The Paying Agent agrees that, except to 10 the extent otherwise required by applicable federal law, including, without limitation, 50 U.S.C. Section 4607, neither the Paying Agent, nor any wholly-owned subsidiary, majority-owned subsidiary, parent company, or affiliate of the Paying Agent, will boycott Israel during the term of this Agreement. The terms "company," "boycotts Israel" and "boycott Israel" as used in this clause (A) have the meanings assigned to the terms in Section 808.001 of the Texas Government Code. (b) The Paying Agent represents and warrants, for purposes of Subchapter F of Chapter 2252 of the Texas Government Code, that at the time of execution and delivery of this Agreement neither the Paying Agent, nor any wholly owned subsidiary, majority-owned subsidiary, parent company or affiliate of the Paying Agent, (i) engages in business with Iran, Sudan or any foreign terrorist organization as described in Chapters 806 or 807 of the Texas Government Code, or Subchapter F of Chapter 2252 of the Texas Government Code, or (ii) is a company listed by the Texas Comptroller under Sections 806.051, 807.051 or 2252.153 of the Texas Government Code. The term "company" as used in this clause (B) has the meaning assigned to the term in Section 2270.001(2) of the Texas Government Code. The term "foreign terrorist organization" as used in this clause (B) has the meaning assigned to such term in Section 2252.151 of the Texas Government Code. 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Address of Issuer: Trophy Club Municipal Utility District No. 1 100 Municipal Drive Trophy Club, Texas 76262 ISSUER: TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 By Printed Name: Gregory Wilson Title: President, Board of Directors 12 BOKF, NA, Dallas, Texas By Printed Name: Address: 5956 Sherry Lane, Suite 1201 Dallas, Texas 75225 Exhibit B Form of Escrow Agreement ESCROW AGREEMENT This Escrow Agreement (the "Escrow Agreement") dated March 18, 2019, is made and entered into by and between Trophy Club Municipal Utility District No. 1 (the "District"), a conservation and reclamation district created and operating under the provisions of Art. XVI, Sec. 59, of the Texas Constitution and Chapters 49 and 65, Texas Water Code, and BOKF, NA, Dallas, Texas (the "Escrow Agent") as escrow agent. WHEREAS, the District is in the process of issuing its $7,080,000 Water and Sewer System Revenue Bonds, Series 2019, (the "Bonds"); WHEREAS, the District has established at BOKF, NA, Dallas, Texas, a construction fund account to receive the proceeds of the payment for the Bonds (the "Construction Fund"); WHEREAS, the proceeds of the Bonds shall be utilized to pay the costs of issuance of the Bonds and to pay the costs of the "Project," as defined in that certain Order dated March 18, 2019 adopted by the Board of Directors of the District authorizing the issuance of the Bonds (the "Bond Order"); and WHEREAS, the District desires the Escrow Agent to accept delivery of the proceeds of sale of the Bonds into escrow in the Construction Fund pending use of same by the District and to act on behalf of the District for purposes of investing said proceeds and, subject to approval by the Texas Commission on Environmental Quality ("TCEQ"), delivering same to the District for use by the District; NOW, THEREFORE, in consideration of the mutual undertakings, promises and agreement herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the District and the Escrow Agent agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATIONS Section 1.01. Definitions. Unless otherwise expressly provided or unless the context clearly requires otherwise, the following terms shall have the respective meanings specified below for all purposes of this Escrow Agreement: "Bond Order" shall mean the District's order dated March 18, 2019, authorizing the issuance, sale and delivery of the Bonds. "Bonds" shall mean the $7,080,000 Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019. 1 "Construction Fund" shall mean the construction fund established by the District to receive the proceeds of the payment for the Bonds delivered to the Purchaser. "District" shall mean Trophy Club Municipal Utility District No. 1. "Escrow Agent" shall mean BOKF, NA, Dallas, Texas, in its capacity as Escrow Agent hereunder, and any successor or assign in such capacity. "Escrow Agreement" shall mean this Escrow Agreement. "Purchaser" shall mean IFS Securities, Inc., Atlanta, GA, or its successors or assigns. Section 1.02. Interpretations. The titles and headings of the articles and sections of the Escrow Agreement have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict the terms hereof. This Escrow Agreement and all of the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to achieve the intended purpose of providing for the sale and delivery of the Bonds to the Purchaser. All capitalized terms used herein shall have the meanings set forth in Section 1.01 hereof or, if not set forth in said section, the meanings provided in the Bond Order. ARTICLE II DELIVERY OF BONDS INTO ESCROW Section 2.01. Delivery of Portion of Proceeds of Bonds Into Escrow. The District shall cause to be delivered to the Escrow Agent the proceeds of sale of the Bonds (less amounts to pay costs of issuance) after issuance of the Bonds by the District, approval by the Attorney General of Texas and registration with the Comptroller of the State of Texas, and sale to the Purchaser. The Escrow Agent agrees to accept delivery of that portion of the proceeds of the Bonds in accordance with the terms of the order of the Texas Commission on Environmental Quality ("TCEQ") dated November 6, 2018, approving issuance of the Bonds (the "TCEQ Order") and this Escrow Agreement subject to receipt at the time of delivery of such proceeds (or any portion thereof) to the District of a letter from the TCEQ or its designee authorizing the release of such proceeds (or portion thereof) to the District. Section 2.02. Delivery of Bonds and Receipt of Payment Therefor. Escrow Agent agrees to retain custody of the proceeds of the Bonds pending their delivery to the District. Escrow Agent agrees to invest the proceeds in Authorized Investments as that term is defined in the District's order authorizing issuance of the Bonds (the "Bond Order") and as directed by the District. All investment earnings shall accrue to the Construction Fund. Section 2.03. Delivery of Proceeds of Bonds to District. The proceeds of the Bonds, together with all investment earnings thereon, shall be held in the Construction Fund pursuant to 2 this Escrow Agreement and delivered to the District by the Escrow Agent subject to the following: The proceeds (or any portion thereof) of the Bonds shall be paid to the District only upon receipt by the Escrow Agent of a written request from the District for such payment, accompanied by a written approval from the TCEQ or its designee authorizing or approving the payment of such proceeds (or any portion thereof) to the District. ARTICLE III RECORDS Section 3.01. Records. The Escrow Agent shall keep books of record and accounts in which complete and correct entries shall be made of all transactions relating to the receipt and disbursement of the proceeds of sale of the Bonds and the delivery thereof ARTICLE IV CONCERNING THE ESCROW AGENT Section 4.01. Representations of Escrow Agent. The Escrow Agent hereby represents that it has all necessary power and authority to enter into this Escrow Agreement and undertake the obligations and responsibilities imposed upon it herein, and that it will carry out all of its obligations hereunder. Section 4.02. Limitation on Liability. The Escrow Agent shall not be liable for any action taken or not taken by it in good faith in the exercise of reasonable care and believed by it to be within the discretion or power conferred upon it by this Escrow Agreement, nor shall the Escrow Agent be responsible for the consequences of any error of judgment; and the Escrow Agent shall not be answerable except for its own neglect or default, nor for any loss unless the same shall have been through its negligence or want of good faith. Unless it is otherwise specifically provided herein, the Escrow Agent has no duty to determine or inquire into the happening or occurrence of any event or contingency or the performance or failure of performance of the District with respect to arrangements or contracts with others, with the Escrow Agent's sole duty hereunder being to safeguard the proceeds of the Bonds and to invest and deliver the same in accordance with this Escrow Agreement. If, however, the Escrow Agent is called upon by the terms of this Escrow Agreement to determine the occurrence of any event or contingency, the Escrow Agent shall be obligated, in making such determination, only to exercise reasonable care and diligence, and in the event of error in making such determination the Escrow Agent shall be liable only for its own misconduct or its negligence. In determining the occurrence of any such event or contingency the Escrow Agent may request from the District or any other person such reasonable additional evidence as the 3 Escrow Agent in its discretion may deem necessary to determine any fact relating to this occurrence of such event or contingency, and in this connection may make inquiries of, and consult with the District, among others, at any time. No provision of this Agreement shall require the Bank to expend or risk its own funds or otherwise incur any financial liability for performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is not assured to it. To the extent permitted by law, the Issuer agrees to indemnify the Bank for, and hold it harmless against, any loss, liability, or expense incurred without negligence or bad faith on its part, arising out of or in connection with its acceptance or administration of its duties hereunder, including the cost and expense against any claim or liability in connection with the exercise or performance of any of its powers or duties under this Agreement. Section 4.03. Compensation. The District will pay the Escrow Agent, as a fee for performing the services hereunder and for all expenses incurred or to be incurred by the Escrow Agent in the administration of this Escrow Agreement, the amount set forth on Exhibit "A" attached hereto. If the Escrow Agent is requested to perform any extraordinary services hereunder, the District hereby agrees to pay reasonable fees to the Escrow Agent for such extraordinary services and to reimburse the Escrow Agent for all expense incurred by the Escrow Agent in performing such extraordinary services. It is expressly provided that the Escrow Agent shall look only to the District for the payment of such additional fees and reimbursement of such additional expenses. The Escrow Agent hereby agrees that in no event shall it ever assert any claim or lien against the proceeds of the sale of the Bonds for any fees for its services, whether regular, additional or extraordinary, as Escrow Agent, or in any other capacity, or for reimbursement for any of its expenses. ARTICLE V MISCELLANEOUS Section 5.01. Notices. Any notice, authorization, request, or demand required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when mailed by registered or certified mail, postage prepaid, addressed as follows: To the Escrow Agent: BOKF, NA 5956 Sherry Lane, Suite 1201 Dallas, Texas 75225 To the District: 4 Trophy Club Municipal Utility District No. 1 100 Municipal Drive Trophy Club, Texas 76262 The United States Post Office registered or certified mail receipt showing delivery of the aforesaid shall be conclusive evidence of the date and fact of delivery. Any party hereto may change the address to which notices are to be delivered by giving to the other party not less than ten days prior notice thereof. Section 5.02. Termination of Escrow Agent's Obligations. Upon the taking by the Escrow Agent of all the actions as described herein, the Escrow Agent shall have no further obligations or responsibilities hereunder to the District, the Purchaser or to any other person or persons in connection with this Escrow Agreement. Section 5.03. Binding Agreement. This Escrow Agreement shall be binding upon the District and the Escrow Agent and their respective successors and legal representatives, and shall inure solely to the benefit of the holders of the Purchaser, the District, the Escrow Agent and their respective successors and legal representatives. Section 5.04. Severability . If any one or more of the provisions contained in this Escrow Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Escrow Agreement, but this Escrow Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. Section 5.05. Governing Law. This Escrow Agreement shall be governed exclusively by the provisions hereof and by the applicable laws of the State of Texas. Section 5.06. Time of Essence. Time shall be of the essence in the performance of obligations from time to time imposed upon the Escrow Agent by this Escrow Agreement. Section 5.07. Additional Requirements. (a) The Escrow Agent represents and warrants, for purposes of Chapter 2270 of the Texas Government Code, that at the time of execution and delivery of this Agreement, neither the Escrow Agent, nor any wholly owned subsidiary, majority-owned subsidiary, parent company or affiliate of the Escrow Agent, is a company, as defined by Section 808.001 (2) of the Texas Government Code, that boycotts Israel. The Escrow Agent agrees that, except to the extent otherwise required by applicable federal law, including, without limitation, 50 U.S.C. Section 4607, neither the Escrow Agent, nor any wholly-owned subsidiary, majority-owned subsidiary, parent company, or affiliate of the Escrow Agent, will boycott Israel during the term of this Agreement. The terms "boycotts Israel" and "boycott Israel" as used in this clause (A) has the 5 meaning assigned to the term "boycott Israel" in Section 808.001 of the Texas Government Code. (b) The Escrow Agent represents and warrants, for purposes of Subchapter F of Chapter 2252 of the Texas Government Code, that at the time of execution and delivery of this Agreement neither the Escrow Agent, nor any wholly owned subsidiary, majority-owned subsidiary, parent company or affiliate of the Escrow Agent, is a company that (i) engages in business with Iran, Sudan or any foreign terrorist organization as described in Chapters 806 or 807 of the Texas Government Code, or Subchapter F of Chapter 2252 of the Texas Government Code, or (ii) is a company listed by the Texas Comptroller under Sections 806.051, 807.051 or 2252.153 of the Texas Government Code. The term "foreign terrorist organization" as used in this clause (B) has the meaning assigned to such term in Section 2252.151 of the Texas Government Code. The term "company" as used in this clause (B) has the meaning assigned to the term in Section 2270.001(2) of the Texas Government Code. Executed and effective as of , 2019. 6 Address of the District: Trophy Club Municipal Utility District No. 1 100 Municipal Drive Trophy Club, Texas 76262 (SEAL) TROPHY CLUB MUNICIPAL UTILITY DISTRICT No. 1 By Printed Name: Title: President, Board of Directors 7 BOKF, NA, Dallas, Texas By Printed Name: Address: 5956 Sherry Lane, Suite 1201 Dallas, Texas 75225 8 Exhibit A Fee Schedule 9 PAYING AGENT/REGISTRAR AGREEMENT THIS AGREEMENT (the "Agreement"), is entered into as of March 18, 2019, by and between Trophy Club Municipal Utility District No. 1 (the "Issuer") and BOKF, NA, Dallas, Texas (the "Bank") a national banking association duly organized and operating under the laws of the United States of America. WHEREAS, the Issuer has duly authorized and provided for the issuance of its $7,080,000 Water and Sewer System Revenue Bonds, Series 2019 ("the Bonds"), such to be issued in fully registered form only as to the payment of principal and interest thereon; and WHEREAS, the Bonds are scheduled to be delivered to the initial purchasers thereof on or about April 23, 2019; and WHEREAS, the Issuer has selected the Bank to serve as Paying Agent/Registrar in connection with the payment of the principal of, premium, if any, and interest on the Bonds and with respect to the registration, transfer, and exchange thereof by the registered owners thereof; and WHEREAS, the Bank has agreed to serve in such capacities for and on behalf of the Issuer and has full power and authority to perform and serve as Paying Agent/Registrar for the Bonds; NOW, THEREFORE, it is mutually agreed as follows: ARTICLE ONE APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR SECTION 1.01. APPOINTMENT. The Issuer hereby appoints the Bank to serve as Paying Agent with respect to the Bonds. As Paying Agent for the Bonds, the Bank shall be responsible for paying on behalf of the Issuer the principal, premium (if any), and interest on the Bonds as the same become due and payable to the registered owners thereof, all in accordance with this Agreement and the "Order" (hereinafter defined). The Issuer hereby appoints the Bank as Registrar with respect to the Bonds. As Registrar for the Bonds, the Bank shall keep and maintain for and on behalf of the Issuer books and records as to the ownership of said Bonds and with respect to the transfer and exchange thereof as provided herein and in the Order, a copy of which books and records shall be maintained at the office of the Bank located in the State of Texas or shall be available to be accessed from such office located in the State of Texas. 1 The Bank hereby accepts its appointment, and agrees to serve as the Paying Agent and Registrar for the Bonds. SECTION 1.02. COMPENSATION. As compensation for the Bank's services as Paying Agent/Registrar, the Issuer hereby agrees to pay the Bank the fees and amounts set forth in Schedule A attached hereto for the first year of this Agreement and thereafter the fees and amounts set forth in the Bank's current fee schedule then in effect for services as Paying Agent/Registrar for municipalities, which shall be supplied to the Issuer on or before 90 days prior to the close of the Fiscal Year of the Issuer, and shall be effective upon the first day of the following Fiscal Year. In addition, the Issuer agrees to reimburse the Bank upon its request for all reasonable expenses, disbursements and advances incurred or made by the Bank in accordance with any of the provisions hereof (including the reasonable compensation and the expenses and disbursements of its agents and counsel). ARTICLE TWO DEFINITIONS SECTION 2.01. DEFINITIONS: For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: "Acceleration Date" on any Security means, if applicable, the date on and after which the principal or any or all installments of interest, or both, are due and payable on any Security which has become accelerated pursuant to the terms of the Security. "Bank Office" means the office of the Bank as follows: BOKF, NA, 5956 Sherry Lane, Ste. #1201, Dallas, Texas 75225. The Bank will notify the Issuer in writing of any change in location of the Bank Office. "Collected Funds" Funds immediately available to the Paying Agent as of the due date of such funds. "Date of Issue" is March 15, 2019. "Delivery Date" is on or about April 23, 2019. "Depository" is DTC. "Fiscal Year" is the twelve month -period beginning on October 1 of each year and ending on September 30 of the following year. "Holder" and "Security Holder" each means the Person in whose name a Security is registered in the Security Register. 2 "Issuer Request" and "Issuer Order" means a written request or Order signed in the name of the Issuer by the Treasurer or his or her designee. "Legal Holiday" means a day on which the Bank is required or authorized to be closed. "Order" means the Order of the governing body of the Issuer pursuant to which the Bonds are issued. "Payment Dates" are March 1 and September 1 of each year beginning March 1, 2020. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision of a government. "Predecessor Bonds" of any particular Security means every previous Security evidencing all or a portion of the same obligation as that evidenced by such particular Security (and, for the purposes of this definition, any mutilated, lost, destroyed, or stolen Security for which a replacement Security has been registered and delivered in lieu thereof pursuant to Section 4.06 hereof and the Order). "Record Date" for the interest payable on any Interest Payment Date shall mean the close of business on the fifteenth day of the month preceding such Interest Payment Date. "Redemption Date" when used with respect to any Security to be redeemed means the date fixed for such redemption pursuant to the terms of the Order. "Responsible Officer" when used with respect to the Bank means the Chairman or Vice - Chairman of the Board of Directors, the Chairman or Vice-chairman of the Executive Committee of the Board of Directors, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Security" means any one of the Individual Bonds of the Issuer's $7,080,000 Water and Sewer System Revenue Bonds, Series 2019. "Security Register" means a register maintained by the Bank on behalf of the Issuer providing for the registration and transfer of the Bonds. "Stated Maturity" means the date specified in the Order the principal of a Security is scheduled to be due and payable. 3 SECTION 2.02 OTHER DEFINITIONS. The terms "Bank," "Issuer," and "Bonds (Security)" have the meanings assigned to them in the recital paragraphs of this Agreement. The term "Paying Agent/Registrar" refers to the Bank in the performance of the duties and functions of this Agreement. ARTICLE THREE PAYING AGENT SECTION 3.01 DUTIES OF PAYING AGENT. (a) As Paying Agent, the Bank shall, provided adequate Collected Funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the principal of each Security at its Stated Maturity, Redemption Date, or Acceleration Date, to the Holder upon surrender of the Security to the Bank at its corporate trust operations office located in Dallas, Texas. (b) As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the interest on each Security when due, by computing the amount of interest to be paid each Holder and preparing and sending checks by United States Mail, first class, postage prepaid, on each payment date, to the Holders of the Bonds (or their Predecessor Bonds) on the respective Record Date, to the address appearing on the Security Registrar or by such other method, acceptable to the Bank, requested in writing by the Holder at the Holder's risk and expense. The Issuer shall pay all charges from Depositories for untimely payments, provided however, the Bank also agrees to abide by the Depository requirement for same day wire transfer of funds for debt service payment. SECTION 3.02 PAYMENT DATES. Provided adequate collected funds are provided to it no later than 10:00 a.m. on the payment date, the Issuer hereby instructs the Bank to pay the principal and interest on the Bonds on the dates specified in the Order. ARTICLE FOUR REGISTRAR SECTION 4.01 SECURITY REGISTER — TRANSFERS AND EXCHANGES. The Bank agrees to keep and maintain for and on behalf of the Issuer at the Bank Office books and records (herein sometimes referred to as the "Security Register") for recording the names and addresses of the Holders of the Bonds, the transfer, exchange, and replacement of the Bonds, and the payment of the principal of and interest on the Bonds to the Holders and containing such other information as may be reasonably required by the issuer and subject to such reasonable regulations as the Issuer and the Bank may prescribe. All transfers, exchanges, and replacement of Bonds shall be noted in the Security Register. The Bank agrees further to keep and maintain a copy of 4 the Security Register at its office located in the State of Texas or provides for such Security Register to be available to be accessed from such office located in the State of Texas. Every Security surrendered for transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer, the signature on which has been guaranteed by an officer of a federal or state bank or a member of the National Association of Bonds Dealers, in form satisfactory to the Bank, duly executed by the Holder thereof or his agent duly authorized in writing. The Bank may request any supporting documentation it feels necessary to affect a registration, transfer, or exchange of the Bonds. To the extent possible and under reasonable circumstances, the Bank agrees that, in relation to an exchange or transfer of Bonds, the exchange or transfer by the Holders thereof will be completed and new Bonds delivered to the Holder or the assignee of the Holder in not more than three business days after the receipt of the Bonds to be cancelled in an exchange or transfer and the written instrument of transfer or request for exchange duly executed by the Holder, or his duly authorized agent, in form and manner satisfactory to the Paying Agent/Registrar. SECTION 4.02 BONDS The Issuer shall provide an adequate inventory of printed Bonds to facilitate transfers or exchanges thereof. The Bank covenants that the inventory of printed Bonds will be kept in safekeeping pending their use, and reasonable care will be exercised by the Bank in maintaining such Bonds in safekeeping, which shall be not less than the care maintained by the Bank for debt Bonds of other political subdivisions or corporations for which it serves as registrar, or that is maintained for its own Bonds. SECTION 4.03 FORM OF SECURITY REGISTER. The Bank, as Registrar, will maintain the Security Register relating to the registration, payment, transfer, and exchange of the Bonds in accordance with the Bank's general practices and procedures in effect from time to time. The Bank shall not be obligated to maintain such Security Register in any form other than those which the Bank has currently available and currently utilizes at the time. The Security Register may be maintained in written form or in any other form capable of being converted into written form within a reasonable time. SECTION 4.04 LIST OF SECURITY HOLDERS. The Bank will provide the Issuer at any time requested by the Issuer, upon payment of the required fee, a copy of the information contained in the Security Register. The Issuer may also inspect the information contained in the Security Register at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank to provide an up-to-date listing or to convert the information into written form. Unless required by law, the Bank will not release or disclose the contents of the Security Register to any person other than to, or at the written request of, an authorized officer or employee 5 of the Issuer, except upon receipt of a court order or as otherwise required by law. Upon receipt of a court order and prior to the release or disclosure of the contents of the Security Register, the Bank will notify the Issuer so that the Issuer may contest the court order or such release or disclosure of the contents of the Security Register. SECTION 4.05 CANCELLED BONDS. The Agent will retain and destroy cancelled and matured Bonds upon expiration of the appropriate retention period. SECTION 4.06 MUTILATED, DESTROYED, LOST, OR STOLEN BONDS. The Issuer hereby instructs the Bank, subject to the applicable provisions of the Order, to deliver and issue Bonds in exchange for or in lieu of mutilated, destroyed, lost, or stolen Bonds as long as the same does not result in an over issuance. In case any Security shall be mutilated, or destroyed, lost, or stolen, the Bank, in its discretion, may execute and deliver a replacement Security of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Security, or in lieu of and in substitution for such destroyed, lost, or stolen Security, only after (i) the filing by the Holder thereof with the Bank of evidence satisfactory to the Bank of the destruction, loss, or theft of such Security, and of the authenticity of the ownership thereof and (ii) the furnishing to the Bank of indemnification in an amount satisfactory to hold the Issuer and the Bank harmless. All expenses and charges associated with such indemnity and with the preparation, execution, and delivery of a replacement Security shall be borne by the Holder of the Security mutilated, or destroyed, lost, or stolen. SECTION 4.07 TRANSACTION INFORMATION TO ISSUER. The Bank will, within a reasonable time after receipt of written request from the Issuer, furnish the Issuer information as to the Bonds it has paid pursuant to Section 3.01, Bonds it has delivered upon the transfer or exchange of any Bonds pursuant to Section 4.01, and Bonds it has delivered in exchange for or in lieu of mutilated, destroyed, lost, or stolen Bonds pursuant to Section 4.06. ARTICLE FIVE THE BANK SECTION 5.01 DUTIES OF BANK. The Bank undertakes to perform the duties set forth herein and in the Order and agrees to use reasonable care in the performance thereof. SECTION 5.02 RELIANCE ON DOCUMENTS, ETC. (a) The Bank may conclusively rely, as to the truth of the statements and correctness of the opinions expressed therein, on certificates or opinions furnished to the Bank. (b) The Bank shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Bank was negligent in ascertaining the pertinent facts. 6 (c) No provision of this Agreement shall require the Bank to expend or risk its own funds or otherwise incur any financial liability for performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is not assured to it. (d) The Bank may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, resolution, bond, note, security, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. Without limiting the generality of the foregoing statement, the Bank need not examine the ownership of any Bonds, but is protected in acting upon receipt of Bonds containing an endorsement or instruction of transfer or power of transfer which appears on its face to be signed by the Holder or an agent of the Holder. The Bank shall not be bound to make any investigation into the facts or matters stated in a resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, Bond Order, bond, note security or other paper document supplied by Issuer. (e) The Bank may consult with counsel, and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection with respect to any action taken, suffered, or omitted by it hereunder in good faith and in reliance thereon. (f) The Bank may exercise any of the powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys of the Bank. (g) The Bank is also authorized to transfer funds relating to the closing and initial delivery of the securities in the manner disclosed in the closing memorandum as prepared by the Issuer, Issuer's financial advisor or other agents. The Bank may act on a facsimile or e-mail transmission of the closing memorandum acknowledged by the Issuer, Issuer's financial advisor or other agents as the final closing memorandum. The Bank shall not be liable for any losses, costs or expenses arising directly or indirectly from the Bank's reliance upon and compliance with such instructions. SECTION 5.03 RECITALS OF ISSUER. The recitals contained herein with respect to the Issuer and in the Bonds shall be taken as the statements of the Issuer, and the Bank assumes no responsibility for their correctness. The Bank shall in no event be liable to the Issuer, and Holder or Holders of any Security, or any other Person for any amount due on any Security from its own funds. 7 SECTION 5.04 MAY HOLD BONDS. The Bank, in its individual or any other capacity, may become the owner or pledgee of Bonds and may otherwise deal with the Issuer with the same rights it would have if it were not the Paying Agent/Registrar, or any other agent. SECTION 5.05 MONEY HELD BY BANK. The Bank shall deposit any money received from the Issuer into a Paying Agent account to be held for the payment of the Bonds, with such money in the account that exceeds the deposit insurance, available to the Issuer, provided by the Federal Deposit Insurance Corporation to be fully collateralized with Bonds or obligations that are eligible under the laws of the State of Texas, to secure and be pledged as collateral for accounts until the principal and interest on such Bonds have been presented for payment and paid to the owner thereof. Payments made from such account shall be made by check drawn on such account. All funds at any time and from time to time provided to or held by the Bank hereunder shall be deemed, construed, and considered for all purposes as being provided to or held by the Bank in a Paying Agent capacity for the benefit of the Security Holders. The Bank acknowledges, covenants, and represents that it is acting herein in as agent in relation to such funds, and is not accepting, holding, administering, or applying such funds as a banking depository, but solely as agent for and on behalf of the Security Holders. The Holders shall be entitled to the same preferred claim and first lien on the funds so provided as are enjoyed by the beneficiaries of trust funds generally. The funds provided to the Bank hereunder shall not be subject to warrants, drafts, or checks drawn by the Issuer and, except as expressly provided herein, shall not be subject to compromise, setoff, or other charge or diminution by the Bank. The Bank shall be under no liability for interest on any money received by it hereunder. Subject to the unclaimed property laws and any provisions in the Order to the contrary, any money deposited with the Bank for the payment of the principal, premium (if any), or interest on any Security and remaining unclaimed for three years after final maturity of the Security has become due and payable will be paid by the Bank to the Issuer, and the Holder of such Security shall thereafter look only to the Issuer for payment thereof, and all liability of the Bank with respect to such money shall thereupon cease. SECTION 5.06 INDEMNIFICATION To the extent permitted by law, the Issuer agrees to indemnify the Bank for, and hold it harmless against, any loss, liability, or expense incurred without negligence or bad faith on its part, arising out of or in connection with its acceptance or administration of its duties hereunder, including the cost and expense against any claim or liability in connection with the exercise or performance of any of its powers or duties under this Agreement. SECTION 5.07 INTERPLEADER. The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim, demand, or controversy over its person as well as funds on deposit, in either a Federal or State District Court located in any County in the State of Texas where either the Bank Office or the administrative offices of the Issuer is located, and agree that service of process to Banks Interpleader by certified or registered mail, return receipt requested, to the address referred to in Section 6.03 of this Agreement shall constitute adequate service. The 8 Issuer and the Bank further agree that the Bank has the right to file a Bill of Interpleader in any court of competent jurisdiction to determine the rights of any Person claiming any interest herein. Notwithstanding anything in this Agreement to the contrary, the District is not agreeing to adjudication of any claims in any court that is outside of the state of Texas. SECTION 5.08. DEPOSITORY TRUST COMPANY SERVICES. It is hereby represented and warranted that, in the event the Bonds are otherwise qualified and accepted for "Depository Trust Company" services or equivalent depository trust services by other organizations, the Bank has the capability and, to the extent within its control, will comply with the "Operational Arrangements," effective from time to time, which establishes requirements for Bonds to be eligible for such type depository trust services, including, but not limited to, requirements for the timeliness of payments and funds availability, transfer turnaround time, and notification of redemptions and calls. Operational Arrangements shall govern over any other inconsistent provision. ARTICLE SIX MISCELLANEOUS PROVISIONS SECTION 6.01. AMENDMENT. This Agreement may be amended only by an agreement in writing signed by both of the parties hereto. SECTION 6.02. ASSIGNMENT. This Agreement may not be assigned by either party without the prior written consent of the other. SECTION 6.03. NOTICES. Any request, demand, authorization, direction, notice, consent, waiver, or other document provided or permitted hereby to be given or furnished to the Issuer or the Bank shall be mailed or delivered to the Issuer or the Bank, respectively, at the addresses shown on the signature page of this Agreement. SECTION 6.04. EFFECT OF HEADINGS. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. SECTION 6.05. SUCCESSORS AND ASSIGNS. All covenants and agreements herein by the Issuer shall bind its successors and assigns, whether so expressed or not. SECTION 6.06. SEVERABILITY. In case any provision herein shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 6.07. BENEFITS OF AGREEMENT. Nothing herein, express or implied, shall give to any Person, other that the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy, or claim hereunder. 9 SECTION 6.08. ENTIRE AGREEMENT. This Agreement and the Order constitute the entire agreement between the parties hereto relative to the Bank acting as Paying Agent/Registrar and if any conflict exists between his Agreement and the Order, the Order shall govern. SECTION 6.09. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. SECTION 6.10. TERMINATION. This Agreement will terminate on the date of final payment of the principal of interest on the Bonds to the Holders thereof or may be earlier terminated by either party upon 60 days written notice; provided, however, an early termination of this Agreement by either party shall not be effective until (a) a successor Paying Agent/Registrar has been appointed by the Issuer and such appointment accepted and (b) notice has been give to the Holders of the Bonds of the appointment of a successor Paying Agent/Registrar. Furthermore, the Bank and Issuer mutually agree that the effective date of an early termination of this Agreement shall not occur at any time which would disrupt, delay, or otherwise adversely affect the payment of the Bonds. Upon an early termination of this Agreement, the Bank agrees to promptly transfer and deliver the Security Register (or a copy thereof), together with other pertinent books and records relating to the Bonds, to the Successor Paying Agent/Registrar designated and appointed by the Issuer. The provisions of Article Five shall survive and remain in full force and effect following the termination of this Agreement. SECTION 6.11 GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the laws of the State of Texas. SECTION 6.12 SUCCESSOR PAYING AGENT. Any corporation or association into which the Paying Agent may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its trust business and assets as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which it is a party, shall be and become successor Paying Agent hereunder and vested with all of the powers, discretion's, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding. SECTION 6.13 ADDITIONAL REQUIREMENTS. (a) The Paying Agent represents and warrants, for purposes of Chapter 2270 of the Texas Government Code, that at the time of execution and delivery of this Agreement, neither the Paying Agent, nor any wholly owned subsidiary, majority-owned subsidiary, parent company or affiliate of the Paying Agent, is a company that boycotts Israel. The Paying Agent agrees that, except to 10 the extent otherwise required by applicable federal law, including, without limitation, 50 U.S.C. Section 4607, neither the Paying Agent, nor any wholly-owned subsidiary, majority-owned subsidiary, parent company, or affiliate of the Paying Agent, will boycott Israel during the term of this Agreement. The terms "company," "boycotts Israel" and "boycott Israel" as used in this clause (A) have the meanings assigned to the terms in Section 808.001 of the Texas Government Code. (b) The Paying Agent represents and warrants, for purposes of Subchapter F of Chapter 2252 of the Texas Government Code, that at the time of execution and delivery of this Agreement neither the Paying Agent, nor any wholly owned subsidiary, majority-owned subsidiary, parent company or affiliate of the Paying Agent, (i) engages in business with Iran, Sudan or any foreign terrorist organization as described in Chapters 806 or 807 of the Texas Government Code, or Subchapter F of Chapter 2252 of the Texas Government Code, or (ii) is a company listed by the Texas Comptroller under Sections 806.051, 807.051 or 2252.153 of the Texas Government Code. The term "company" as used in this clause (B) has the meaning assigned to the term in Section 2270.001(2) of the Texas Government Code. The term "foreign terrorist organization" as used in this clause (B) has the meaning assigned to such term in Section 2252.151 of the Texas Government Code. 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Address of Issuer: Trophy Club Municipal Utility District No. 1 100 Municipal Drive Trophy Club, Texas 76262 ISSUER: TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 By Printed Name: Gregory Wilson Title: President, Board of Directors 12 BOKF, NA, Dallas, Texas By r 1-, Printed Name: Tony HongfOi Address: 5956 Sherry Lane, Suite 1201 Dallas, Texas 75225 8 BOK FINANCIAL Services provided by BOKF, NA Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019 PAYING AGENT/REGISTRAR Schedule of Fees Acceptance Fee: WAIVED Annual Administration Fee: $400.00 Invoiced semi-annually at $200.00 w/Debt Service For ordinary administration services by Paying Agent /Registrar — includes daily routine account management and processing in accordance with the agreement. Float credit received by the bank for receiving funds that remain uninvested are deemed part of the Paying Agent's compensation. Call or Redemption of Bonds At Cost Cost includes distribution to holders of record, redemption processing and notification through DTC. Any and all publication expenses including Bond Buyer, Regional and Financial Periodicals for the call notice will be billed to the Issuer at cost. Charges for performing extraordinary or other services not contemplated at the time of the execution of the transaction or not specifically covered elsewhere in this schedule will be determined by appraisal in the amounts commensurate with the service provided. Counsel fees, if ever retained as a result of a default, or other extraordinary occurrences on behalf of the bondholders or Bank of Texas, will be billed at cost. Services not included in this Fee Schedule, but deemed necessary or desirable by you, may be subject to additional charges. Our proposal is subject in all aspects to review and acceptance of the final financing documents which sets forth our duties and responsibilities. Erin Fitzpatrick Vice President Tel: 972.892.9972 efitzpatrick@bokf. cam BOK Financial Corporate Trust Services 5956 Sherry Lane, Suite 1201 Dallas, TX 75225 ESCROW AGREEMENT This Escrow Agreement (the "Escrow Agreement") dated March 18, 2019, is made and entered into by and between Trophy Club Municipal Utility District No. 1 (the "District"), a conservation and reclamation district created and operating under the provisions of Art. XVI, Sec. 59, of the Texas Constitution and Chapters 49 and 65, Texas Water Code, and BOKF, NA, Dallas, Texas (the "Escrow Agent") as escrow agent. WHEREAS, the District is in the process of issuing its $7,080,000 Water and Sewer System Revenue Bonds, Series 2019, (the "Bonds"); WHEREAS, the District has established at BOKF, NA, Dallas, Texas, a construction fund account to receive the proceeds of the payment for the Bonds (the "Construction Fund"); WHEREAS, the proceeds of the Bonds shall be utilized to pay the costs of issuance of the Bonds and to pay the costs of the "Project," as defined in that certain Order dated March 18, 2019 adopted by the Board of Directors of the District authorizing the issuance of the Bonds (the "Bond Order"); and WHEREAS, the District desires the Escrow Agent to accept delivery of the proceeds of sale of the Bonds into escrow in the Construction Fund pending use of same by the District and to act on behalf of the District for purposes of investing said proceeds and, subject to approval by the Texas Commission on Environmental Quality ("TCEQ"), delivering same to the District for use by the District; NOW, THEREFORE, in consideration of the mutual undertakings, promises and agreement herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the District and the Escrow Agent agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATIONS Section 1.01. Definitions. Unless otherwise expressly provided or unless the context clearly requires otherwise, the following terms shall have the respective meanings specified below for all purposes of this Escrow Agreement: "Bond Order" shall mean the District's order dated March 18, 2019, authorizing the issuance, sale and delivery of the Bonds. "Bonds" shall mean the $7,080,000 Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019. 1 "Construction Fund" shall mean the construction fund established by the District to receive the proceeds of the payment for the Bonds delivered to the Purchaser. "District" shall mean Trophy Club Municipal Utility District No. 1. "Escrow Agent" shall mean BOKF, NA, Dallas, Texas, in its capacity as Escrow Agent hereunder, and any successor or assign in such capacity. "Escrow Agreement" shall mean this Escrow Agreement. "Purchaser" shall mean IFS Securities, Inc., Atlanta, GA, or its successors or assigns. Section 1.02. Interpretations. The titles and headings of the articles and sections of the Escrow Agreement have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict the terms hereof. This Escrow Agreement and all of the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to achieve the intended purpose of providing for the sale and delivery of the Bonds to the Purchaser. All capitalized terms used herein shall have the meanings set forth in Section 1.01 hereof or, if not set forth in said section, the meanings provided in the Bond Order. ARTICLE II DELIVERY OF BONDS INTO ESCROW Section 2.01. Delivery of Portion of Proceeds of Bonds Into Escrow. The District shall cause to be delivered to the Escrow Agent the proceeds of sale of the Bonds (less amounts to pay costs of issuance) after issuance of the Bonds by the District, approval by the Attorney General of Texas and registration with the Comptroller of the State of Texas, and sale to the Purchaser. The Escrow Agent agrees to accept delivery of that portion of the proceeds of the Bonds in accordance with the terms of the order of the Texas Commission on Environmental Quality ("TCEQ") dated November 6, 2018, approving issuance of the Bonds (the "TCEQ Order") and this Escrow Agreement subject to receipt at the time of delivery of such proceeds (or any portion thereof) to the District of a letter from the TCEQ or its designee authorizing the release of such proceeds (or portion thereof) to the District. Section 2.02. Delivery of Bonds and Receipt of Payment Therefor. Escrow Agent agrees to retain custody of the proceeds of the Bonds pending their delivery to the District. Escrow Agent agrees to invest the proceeds in Authorized Investments as that term is defined in the District's order authorizing issuance of the Bonds (the "Bond Order") and as directed by the District. All investment earnings shall accrue to the Construction Fund. Section 2.03. Delivery of Proceeds of Bonds to District. The proceeds of the Bonds, together with all investment earnings thereon, shall be held in the Construction Fund pursuant to 2 this Escrow Agreement and delivered to the District by the Escrow Agent subject to the following: The proceeds (or any portion thereof) of the Bonds shall be paid to the District only upon receipt by the Escrow Agent of a written request from the District for such payment, accompanied by a written approval from the TCEQ or its designee authorizing or approving the payment of such proceeds (or any portion thereof) to the District. ARTICLE III RECORDS Section 3.01. Records. The Escrow Agent shall keep books of record and accounts in which complete and correct entries shall be made of all transactions relating to the receipt and disbursement of the proceeds of sale of the Bonds and the delivery thereof. ARTICLE IV CONCERNING THE ESCROW AGENT Section 4.01. Representations of Escrow Agent. The Escrow Agent hereby represents that it has all necessary power and authority to enter into this Escrow Agreement and undertake the obligations and responsibilities imposed upon it herein, and that it will carry out all of its obligations hereunder. Section 4.02. Limitation on Liability. The Escrow Agent shall not be liable for any action taken or not taken by it in good faith in the exercise of reasonable care and believed by it to be within the discretion or power conferred upon it by this Escrow Agreement, nor shall the Escrow Agent be responsible for the consequences of any error of judgment; and the Escrow Agent shall not be answerable except for its own neglect or default, nor for any loss unless the same shall have been through its negligence or want of good faith. Unless it is otherwise specifically provided herein, the Escrow Agent has no duty to determine or inquire into the happening or occurrence of any event or contingency or the performance or failure of performance of the District with respect to arrangements or contracts with others, with the Escrow Agent's sole duty hereunder being to safeguard the proceeds of the Bonds and to invest and deliver the same in accordance with this Escrow Agreement. If, however, the Escrow Agent is called upon by the terms of this Escrow Agreement to determine the occurrence of any event or contingency, the Escrow Agent shall be obligated, in making such determination, only to exercise reasonable care and diligence, and in the event of error in making such determination the Escrow Agent shall be liable only for its own misconduct or its negligence. In determining the occurrence of any such event or contingency the Escrow Agent may request from the District or any other person such reasonable additional evidence as the 3 Escrow Agent in its discretion may deem necessary to determine any fact relating to this occurrence of such event or contingency, and in this connection may make inquiries of, and consult with the District, among others, at any time. No provision of this Agreement shall require the Bank to expend or risk its own funds or otherwise incur any financial liability for performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is not assured to it. To the extent permitted by law, the Issuer agrees to indemnify the Bank for, and hold it harmless against, any loss, liability, or expense incurred without negligence or bad faith on its part, arising out of or in connection with its acceptance or administration of its duties hereunder, including the cost and expense against any claim or liability in connection with the exercise or performance of any of its powers or duties under this Agreement. Section 4.03. Compensation. The District will pay the Escrow Agent, as a fee for performing the services hereunder and for all expenses incurred or to be incurred by the Escrow Agent in the administration of this Escrow Agreement, the amount set forth on Exhibit "A" attached hereto. If the Escrow Agent is requested to perform any extraordinary services hereunder, the District hereby agrees to pay reasonable fees to the Escrow Agent for such extraordinary services and to reimburse the Escrow Agent for all expense incurred by the Escrow Agent in performing such extraordinary services. It is expressly provided that the Escrow Agent shall look only to the District for the payment of such additional fees and reimbursement of such additional expenses. The Escrow Agent hereby agrees that in no event shall it ever assert any claim or lien against the proceeds of the sale of the Bonds for any fees for its services, whether regular, additional or extraordinary, as Escrow Agent, or in any other capacity, or for reimbursement for any of its expenses. ARTICLE V MISCELLANEOUS Section 5.01. Notices. Any notice, authorization, request, or demand required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when mailed by registered or certified mail, postage prepaid, addressed as follows: To the Escrow Agent: BOKF, NA 5956 Sherry Lane, Suite 1201 Dallas, Texas 75225 To the District: 4 Trophy Club Municipal Utility District No. 1 100 Municipal Drive Trophy Club, Texas 76262 The United States Post Office registered or certified mail receipt showing delivery of the aforesaid shall be conclusive evidence of the date and fact of delivery. Any party hereto may change the address to which notices are to be delivered by giving to the other party not less than ten days prior notice thereof. Section 5.02. Termination of Escrow Agent's Obligations. Upon the taking by the Escrow Agent of all the actions as described herein, the Escrow Agent shall have no further obligations or responsibilities hereunder to the District, the Purchaser or to any other person or persons in connection with this Escrow Agreement. Section 5.03. Binding Agreement. This Escrow Agreement shall be binding upon the District and the Escrow Agent and their respective successors and legal representatives, and shall inure solely to the benefit of the holders of the Purchaser, the District, the Escrow Agent and their respective successors and legal representatives. Section 5.04. Severability . If any one or more of the provisions contained in this Escrow Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Escrow Agreement, but this Escrow Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. Section 5.05. Governing Law. This Escrow Agreement shall be governed exclusively by the provisions hereof and by the applicable laws of the State of Texas. Section 5.06. Time of Essence. Time shall be of the essence in the performance of obligations from time to time imposed upon the Escrow Agent by this Escrow Agreement. Section 5.07. Additional Requirements. (a) The Escrow Agent represents and warrants, for purposes of Chapter 2270 of the Texas Government Code, that at the time of execution and delivery of this Agreement, neither the Escrow Agent, nor any wholly owned subsidiary, majority-owned subsidiary, parent company or affiliate of the Escrow Agent, is a company, as defined by Section 808.001 (2) of the Texas Government Code, that boycotts Israel. The Escrow Agent agrees that, except to the extent otherwise required by applicable federal law, including, without limitation, 50 U.S.C. Section 4607, neither the Escrow Agent, nor any wholly-owned subsidiary, majority-owned subsidiary, parent company, or affiliate of the Escrow Agent, will boycott Israel during the term of this Agreement. The terms "boycotts Israel" and "boycott Israel" as used in this clause (A) has the 5 meaning assigned to the term "boycott Israel" in Section 808.001 of the Texas Government Code. (b) The Escrow Agent represents and warrants, for purposes of Subchapter F of Chapter 2252 of the Texas Government Code, that at the time of execution and delivery of this Agreement neither the Escrow Agent, nor any wholly owned subsidiary, majority-owned subsidiary, parent company or affiliate of the Escrow Agent, is a company that (i) engages in business with Iran, Sudan or any foreign terrorist organization as described in Chapters 806 or 807 of the Texas Government Code, or Subchapter F of Chapter 2252 of the Texas Government Code, or (ii) is a company listed by the Texas Comptroller under Sections 806.051, 807.051 or 2252.153 of the Texas Government Code. The term "foreign terrorist organization" as used in this clause (B) has the meaning assigned to such term in Section 2252.151 of the Texas Government Code. The term "company" as used in this clause (B) has the meaning assigned to the term in Section 2270.001(2) of the Texas Government Code. Executed and effective as of 0,r'(_. A,Th 1 , 2019. 6 TROPHY CLUB MUNICIPAL UTILITY DISTRICT No. 1 By Printed Name: 4 4, Title: President, Board of Directors Address of the District: Trophy Club Municipal Utility District No. 1 100 Municipal Drive Trophy Club, Texas 76262 :iLi1iJlllh/////// .Zc = •W Z iC:•Oy• • • /;•.rEXAS,.• \. ///4)�11�, "Gel. x111 7 BOKF, NA, Dallas, Texas By (_/-, Printed Name: ony Hongno Address: 5956 Sherry Lane, Suite 1201 Dallas, Texas 75225 8 BOK FINANCIAL Services provided by BOKF, NA Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019 Texas Commission on Environmental Quality Escrow Account ESCROW AGENT FEE SCHEDULE Acceptance Fee: No Charge One Time Escrow Account Setup/Administration Fee: $400.00* For ordinary administrative services by Escrow Agent — includes daily routine account management; investment transactions; cash transaction processing (including wire and check processing); monitoring claim notices pursuant to the agreement; disbursement of funds in accordance with the agreement; and online access to trust account statements. This fee is payable in advance, with the first installment due at the time of Escrow Agreement funding/execution. Fee is based on the following assumptions: • Number of Escrow Accounts to be established: One (i) • Number of Deposits to Escrow Account: One (i) • Number of Withdrawals from the Escrow Fund: Various • Cash Funds will be invested in a BOK Financial Money Market Fund Charges for performing extraordinary or other services not contemplated at the time of the execution of the transaction or not specifically covered elsewhere in this schedule will be determined by appraisal in the amounts commensurate with the service provided. Services not included in this Fee Schedule, but deemed necessary or desirable by you, may be subject to additional charges based on a mutually agreed upon fee schedule. Our proposal is subject in all aspects to review and acceptance of the final financing documents which sets forth our duties and responsibilities. *If funds are invested outside the BOK Financial Money Market Funds an additional fee may be accessed on an annual basis to act as custodian. SIGNATURE IDENTIFICATION AND AUTHORITY CERTIFICATE OF BOKF, NA I, the undersigned, Anthony Orozco , do hereby certify that: 1. I am a duly elected and acting Officer am duly authorized to execute this certificate on its behalf. of BOKF, NA (the "Bank"), and I 2. That certain Escrow Agreement between Trophy Club Municipal Utility District No. 1 and the Bank, dated as of March 18, 2019 (the "Agreement") relating to the Water and Sewer System Revenue Bonds, Series 2019, was duly executed on behalf of the Bank by Tonv Honenoi , at the time of executing was and is now duly elected and acting as an authorized officer of the Bank and authorized to execute, attest, and deliver the Agreement as evidenced by the Secretary's Certificate contained in Exhibit "A". The Secretary's Certificate contained in Exhibit "A" is duly adopted and is in full force and effect as of this date. There follows the name, office and true and correct signature of the aforesaid officer: Name Office Signature Tonv Hongnoi Alice President WITNESS my hand this l% Zot . Name: Title: fficer BOKF, NATIONAL ASSOCIATION SECRETARY'S CERTIFICATE October 19, 2012 The undersigned hereby certifies as follows: 1. That I am the duly elected Secretary of BOKF, NA, a national banking association. 2. That the following is a full, true, and correct copy of a Resolution unanimously adopted at a meeting of the Board of Directors of BOKF, NA on January 25, 2011, and it is still in full force and effect and has not been rescinded or modified: RESOLVED, that the senior fiduciary officer of BOKF, NA shall be responsible for the day-to-day executive management of BOKF, NA. Trust Officers appointed from time to time by the Board of Directors and appointed Trust Committees shall have the authority to execute, on behalf of BOKF, NA contracts, documents, or papers pertaining to the performance of the fiduciary powers of BOKF, NA and, if necessary, to cause the seal of the organization to be affixed thereto; and the senior fiduciary officer of BOKF, NA shall designate those Trust Officers and staff members who are authorized and empowered, having established the limits of such authority, to purchase or otherwise acquire, sell, assign, transfer and deliver all shares of stocks, bonds, debentures, notes, real estate, evidence of indebtedness; deeds, conveyances, contracts, including oil and gas interests of all kinds and of contracts for the development thereof, and toexecute mortgage, and releases of mortgage, on any and all property or securities now or hereafter standing in the name of the organization in any fiduciary capacity, and to make, execute, and deliver, any and all written instruments necessary orproperto effectuate the authority here delegated. FURTHER RESOLVED,. All other officers and agents designated by the Board of Directors and assigned to the Wealth Management Division shall, under the supervision of the senior fiduciary officer, perform any duties as may be required of such last named officer or agent, and may exercise any of the powers and authorities by this Resolution vested in him/her. DATED this 19th day of October, 2012. ��0 8 ottaiK�,to°'i, � j.•. By: BOKF, NATIONAL ASSOCIATION Frederic Dorwart, Secretary State of Oklahoma County of Tulsa This Secretary's Certificate was acknowledged before me on this 19`h day of October, 2012 by Frederic Dorwart, Secretary of BOKF, NA; on behalf of BOKF, NA. [SEAL] RACl€1 CROFT Weary Public SOW of Omno na Caron Won I12003327 ExpYas: Awl os. 2018 iia,{ :tA Notary Public V My commission expires: `I. /5 I My commission number: 2 cC; S ? 2, BOKF, NATIONAL ASSOCIATION CERTIFICATION AS OF APRIL 5, 2013 WHEREAS, there has been no change in the Resolution dated January 25, 2011 and certified by the duly elected Secretary of BOKF, National Association on October 19, 2012; and WHEREAS, it remains the responsibility of the senior fiduciary officer of BOKF, NA to designate those officers who are authorized and empowered, having established the limits of such authority, to purchase or otherwise acquire, sell, assign, transfer, and deliver all shares of stocks, bonds, debentures, notes, real estate, evidence of indebtedness, deeds, conveyances, contracts, including oil and gas interest of all kinds, and contracts for the development thereof, and to execute mortgage, and release of mortgage, on any and all property or services now or hereafter standing in the name of the organization in any fiduciary capacity, and to make, execute, and deliver, any and all written instruments necessary or proper to effectuate the authority delegated; and, IN WITNESS WHEREOF, the undersigned as the senior fiduciary officer of BOKF, National Association hereby attests that the Board Resolution dated January 25, 2011 and the Secretary's Certificate dated October 19, 2012 remain in full force and effect, and the attached list of designated and authorized officers are empowered to act on behalf of BOKF, National Association. Barry C. Rooker Senior Fiduciary Officer BOKF, National Association NAME TITLE Kathy McQuiston Vice President Vice President Vice President Vice President Vice President Caresse Tankersley Erin Fitzpatrick Tony Hongnoi Biddel Tekeste Anthony Orozco Officer BOKF, NA WEALTH MANAGEMENT DIVISION AUTHORIZED SIGNATURES AND INITIALS Sorted by: (1) Location; (2) Department; (3) Name SIGNATURE i1A4IV-cifivoo& INITIALS LOCATION (AZ, KS, MO, Dept. Mgr's OK, NE, NM, 600024642 Approval DEPARTMENT TX) Trust Funds (initials) ,� / Corporate 't L►"-' "'u Trust Corporate Trust Corporate Trust Corporate Trust Corporate Trust Corporate Trust a TX -Dallas TX -Dallas TX -Dallas TX -Dallas TX -Dallas TX -Dallas Legend: EVP = Executive Vice President SVP = Senior Vice President VP = Vice President AVP = Assistant Vice President CIO = Chief Investment Officer STO = Senior Trust Officer TO = Trust Officer TOO = Trust Operations Officer Division Manager TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 100 Municipal Drive Trophy Club, Texas 76262 Office of the Attorney General State of Texas Public Finance Division 7th Floor William P. Clements Building 300 West 15th Street Austin, Texas 78701 Re: Trophy Club Municipal Utility District No. 1 $7,080,000 Water and Sewer System Revenue Bonds, Series 2019 Ladies and Gentlemen: The above -referenced bonds are being sent to you for approval, and we enclose one executed but undated Signature Identification and No -Litigation Certificate. Upon approval of the bonds, you are authorized and respectfully requested to insert the date in such certificate, which date is to be the same as your approval date. If any litigation should develop before you have approved the bonds, we will notify you at once by telephone. With this assurance you can rely upon the absence of litigation at the time that you approve the bonds unless we advise you to the contrary. After you have approved the bonds, please deliver them to the Comptroller of Public Accounts of Texas for registration. Very truly yours, President, Board of Directors Enclosure SIGNATURE IDENTIFICATION AND NO -LITIGATION CERTIFICATE We, the undersigned, of TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (the "Issuer"), hereby certify as follows: (a) This certificate is executed and delivered with reference to $7,080,000 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019 (the "Bonds"), dated as of March 15, 2019. (b) Each of us signed the Bonds by causing facsimiles of our manual signatures or our manual signatures to be printed or lithographed on each of the Bonds, and if by facsimile, we hereby adopt said facsimile, as our own, respectively, and declare that said facsimile signatures constitute our signatures the same as if we had manually signed each of the Bonds. (c) The Bonds are substantially in the form, and each of them has been duly executed and signed in the manner, prescribed in the order authorizing the issuance thereof. (d) At the time we so executed and signed the Bonds we were, and at the time of executing this certificate we are, the duly chosen, qualified, and acting officers indicate therein, and authorized to execute and sign the same. (e) No litigation of any nature has been filed or is now pending to restrain or enjoin the issuance or delivery of any of the Bonds, or which would affect the provision made for their payment or security, or in any manner questioning the proceedings or authority concerning the issuance of the Bonds, the collection of revenues of the District's Water and Sewer System (the "System"), or the imposition of rates and charges with respect to the System, pledged to pay the principal of and interest on the Bonds or that would otherwise adversely affect in a material manner the financial condition of the Issuer to pay the principal of and interest on the Bonds; and that neither the corporate existence or boundaries of the Issuer nor the right to hold office of any member of the governing body of the Issuer or any other elected or appointed officer of the Issuer is being contested or otherwise questioned, and that so far as we know and believe no such litigation is threatened. (f) Neither the corporate existence nor the boundaries of the Issuer is being contested; no litigation has been filed or is now pending which would affect the authority of the officers of the Issuer to issue, execute, sign, and deliver any of the Bonds; and no authority or proceedings for the issuance of any of the Bonds have been repealed, revoked, or rescinded. (g) We have caused the official seal of the Issuer to be impressed, or printed, or lithographed on each of the Bonds; and said seal on each of the Bonds has been duly adopted as, and is hereby declared to be, the official seal of the Issuer. EXECUTED and delivered this rix t 4► , 2019. SIGNATURES TI LE OF SFFICE resident, Board of Directors Secretary/Treasurer, Board of Directors BEFORE ME, a notary public, on this day personally appeared Gregory Wilson, President of Trophy Club Municipal Utility District No. 1, known to me to be the person whose name is subscribed above and who signed the same in my presence. I hereby certify that the signature of said person is genuine. Given under my hand and seal of office this �� day of (`',,r , 2019. ij � Notary/4j Public, Stat f Texas Printed Name: c, J h J - My Commission Expires: / -/4 � [SEAL] BEFORE ME, a notary public, on this day personally appeared Stephen J. Flynn, Secretary/Treasurer of Trophy Club Municipal Utility District No. 1, known to me to be the person whose name is subscribed above and who signed the same in my presence. I hereby certify that the signature of said person is genuine. Given under my hand and seal of office this M-\/'-' day of m«rte , 2019. Notary Public, State'bf Texas Printed Name: , 'ai i Z My Commission Expires: /-/4-c3r [SEAL] OPY REGISTERED REGISTERED No. T-1 $7,080,000 UNITED STATES OF AMERICA STATE OF TEXAS COUNTIES OF DENTON AND TARRANT TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 WATER AND SEWER SYSTEM REVENUE BOND SERIES 2019 INTEREST: MATURITY CLOSING BOND RATE: DATE: DATE: DATE: As Shown Below As Shown Below April 23, 2019 March 15, 2019 Trophy Club Municipal Utility District No. 1 (the "District"), in the Counties of Denton and Tarrant, State of Texas, for value received, hereby promises to pay to IFS SECURITIES, INC. or registered assigns, on September 1 in each of the years, in the principal amounts and bearing interest at the per annum rates set forth in the following schedule: MATURITY SCHEDULE STATED PRINCIPAL INTEREST MATURITY AMOUNT ($) RATE (%) 2021 155,000 3.000 2022 160,000 3.000 2023 165,000 3.000 2024 170,000 3.000 2025 175,000 3.000 2026 180,000 3.000 2027 185,000 3.000 2028 190,000 3.000 2029 195,000 3.000 2030 205,000 3.000 2031 210,000 3.000 2032 215,000 3.000 2033 220,000 3.000 2034 230,000 3.000 2035 235,000 3.000 2036 245,000 3.000 2037 250,000 3.000 2038 255,000 3.125 2039 265,000 3.125 2040 275,000 3.250 2041 285,000 3.250 2042 290,000 3.250 2043 300,000 3.250 2044 310,000 3.250 2045 320,000 3.375 2046 330,000 3.375 2047 345,000 3.375 2048 355,000 3.375 2049 365,000 3.500 unless this Bond shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a 360 -day year of twelve 30 -day months, such interest to be paid semiannually on March 1 and September 1 of each year, commencing March 1, 2020. The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas, or such other location designated by the Paying Agent/Registrar (the "Place of Payment"), of the Paying Agent/Registrar executing the registration certificate appearing hereon or, with respect to a successor paying agent/registrar, at the Place of Payment of such successor. Interest on this Bond is payable by check dated as of the interest payment date, mailed by the Paying Agent/Registrar to the registered Holder at the address shown on the registration books kept by the Paying Agent/Registrar, or by such other customary banking arrangements acceptable to the Paying Agent/Registrar and the person to whom interest is to be paid; provided, however, that such person shall bear all risk and expense of such other customary banking arrangements. For the purpose of the payment of interest on this Bond, the registered Holder shall be the person in whose name this Bond is registered at the close of business on the "Record Date," which shall be the fifteenth (15th) day of the month next preceding such interest payment date. The initial Paying Agent/Registrar is BOKF, NA, Dallas, Texas. In the event of a nonpayment of interest on a scheduled payment date and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the District. Notice of the Special Record Date and of the special payment date of the past due interest ("Special Payment Date"), which shall be 15 days after the Special Record Date, shall be sent at least five business days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each Holder of a Bond appearing on the books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. If the date for the payment of the principal of or interest on this Bond shall be a Saturday, Sunday, legal holiday, or day on which banking institutions in the city where the Place of Payment is located are required or authorized by law or executive order to close, 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 have the same force and effect as if made on the original date payment was due and no additional interest shall be due by reason of nonpayment on the date on which such payment is otherwise stated to be due and payable. This Bond is one of a series of fully registered bonds specified in the title hereof and issued in the aggregate principal amount of $7,080,000 (herein referred to as the "Bonds"), issued pursuant to a certain order of the District (the "Order") for the purposes of: (i) funding the design and construction of certain water transmission line improvements and acquisition of related real property interests, (ii) funding the costs of acquisition, design and construction of improvements to the District's wastewater treatment facilities; and (ii) paying the costs related to the issuance of the Bonds. This Bond and all the Bonds of the series of which it is a part constitute special obligations of the District and, together with certain outstanding revenue obligations heretofore issued by the District, are payable as to both principal and interest solely from and equally secured by a first lien on the Pledged Revenues (as defined in the Order) of the District's System (as defined in the Order). Reference is hereby made to the Order for a more complete statement of the covenants and provisions securing the payment of this Bond and the series of which it is one. The District expressly reserves the right to issue further and additional revenue obligations equally secured by a parity lien on the Pledged Revenues of the System, provided, however, that any and all such additional parity obligations may be issued only in accordance with and subject to the covenants, conditions, limitations and restrictions relating thereto which are set out and contained in the Order and to which reference is hereby made for more complete and full particulars. The District reserves the option to redeem the Bonds maturing on and after September 1, 2029, in whole or in part, in inverse order of maturity and by lot (or by any other customary method that results in a random selection) within a maturity, before their respective scheduled maturity dates, on September 1, 2028, or any date thereafter, at a price equal to the principal amount thereof, plus accrued interest to the Redemption Date. If less than all of the Bonds are to be redeemed, the District shall redeem the Bonds in inverse order of Stated Maturity in integral multiples of $5,000 and shall direct the Paying Agent/Registrar to call by lot the Bonds, or portions thereof, within such maturity and in such principal amounts, for redemption. Notice of such redemption or redemptions shall be given by first class mail postage prepaid, not less than 30 days before the date fixed for redemption, to the registered Holder of each of the Bonds to be redeemed in whole or in part. Notice having been so given, the Bonds or portions thereof designated for redemption shall become due and payable on the redemption date specified in such notice; from and after such date, notwithstanding that any of the Bonds or portions thereof so called for redemption shall not have been surrendered for payment, interest on such Bonds or portions thereof shall cease to accrue. As provided in the Order and subject to certain limitations therein set forth, this Bond is transferable upon surrender of this Bond for transfer at the Place of Payment with such endorsement or other evidence of transfer as is acceptable to the Paying Agent/Registrar; thereupon, one or more new fully registered Bonds of the same stated maturity, of authorized denominations, bearing the same rate of interest and for the same aggregate principal amount will be issued to the designated transferee or transferees. Neither the District nor the Paying Agent/Registrar shall be required to issue, transfer, or exchange any Bond called for redemption where such redemption is scheduled to occur within 45 calendar days of the transfer or exchange date; provided, however, such limitation shall not be applicable to an exchange by the registered Holder of the uncalled principal balance of a Bond. The District, the Paying Agent/Registrar and any other person may treat the person in whose name this Bond is registered as the Holder hereof for the purpose of receiving payment as herein provided (except interest shall be paid to the person in whose name this Bond is registered on the Record Date or Special Record Date, as applicable) and for all other purposes, whether or not this Bond is overdue, and neither the District nor the Paying Agent/Registrar shall be affected by notice to the contrary. IT IS HEREBY CERTIFIED AND RECITED that the issuance of this Bond and the series of which it is a part is duly authorized by law; that all acts, conditions and things required to be done precedent to and in the issuance of the Bonds have been properly done and performed and have happened in regular and due time, form and manner, as required by law. IN WITNESS WHEREOF, the District has caused this Bond to be duly executed under its official seal. Secretary/Treasurer, :.. . ofD`rectors Trophy Club Municip. ity District No. 1 [ t_UB 1, "/ -.0 • .ORRgti) :CSO 00 • 9t' •� C. .ZZ. . 1.1.1 y• �G'O -' 4� %ij •. •TEXAS ••401‘ /,, 11 IR 1\� \\\\\\\ Prelant, Board of Directors Trophy Club Municipal Utility District No. 1 OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS OF THE STATE OF TEXAS REGISTER NO. I hereby certify that there is on file and of record in my office a certificate of the Attorney General of the State of Texas to the effect that this Bond has been examined by him as required by law, that he finds that it has been issued in conformity with the Constitution and laws of the State of Texas, that it is a valid and binding obligation of Trophy Club Municipal Utility District No. 1, and that this Bond has this day been registered by me. [SEAL] Witness my hand and seal of office at Austin, Texas, this APR 1 8 2019 day of , 2019. Comptroller of Public Account of the State of Texas ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (print or typewrite name, address and zip code of transferee): (Social Security or other identifying number: ) the within Bond and all rights hereunder and hereby irrevocably constitutes and appoints attorney to transfer the within Bond on the books kept for registration hereof, with full power of substitution in the premises. Date: NOTICE. The signature on this Assignment must correspond with the name of the registered owner as it appears on the face of the within Bond in every particular and must be guaranteed in a manner acceptable to the Paying Agent/Registrar. Signature Guaranteed: STATEMENT OF INSURANCE Build America Mutual Assurance Company ("BAM"), New York, New York, has delivered its municipal bond insurance policy (the "Policy") with respect to the scheduled payments due of principal of and interest on this Bond to BOKF, NA, Dallas, Texas, or its successor, as paying agent for the Bonds (the "Paying Agent"). Said Policy is on file and available for inspection at the principal office of the Paying Agent and a copy thereof may be obtained from BAM or the Paying Agent. All payments required to be made under the Policy shall be made in accordance with the provisions thereof. By its purchase of these Bonds, the owner acknowledges and consents (i) to the subrogation and all other rights of BAM as more fully set forth in the Policy and (ii) that upon the occurrence and continuance of a default or an event of default under the Resolution or this Bond, BAM shall be deemed to be the sole owner of the Bonds for all purposes and shall be entitled to control and direct the enforcement of all rights and remedies granted to the owners of the Bonds or the trustee, paying agent, registrar or similar agent for the benefit of such owners under the Ordinance, at law or in equity. NEW ISSUE — BOOK -ENTRY -ONLY OFFICIAL STATEMENT Dated: March 18, 2019 Ratings: S&P: "AA" (Insured) S&P: "AA-" (Underlying) (See "RATING" and "BOND INSURANCE" herein) In the opinion of Bond Counsel, interest on the Bonds is 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 MATTERS" herein including the altemative minimum tax. The District has desianated the Bonds as "Qualified Tax-Exemot Obliaations" See "TAX MATTERS - Qualified Tax -Exempt Obligations for Financial Institutions" herein. $7,080,000 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (A Political Subdivision of the State of Texas Located in Denton and Tarrant Counties) WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019 Dated Date: March 15, 2019 Due: September 1, as shown on Page ii The Trophy Club Municipal Utility District No. 1 (the "District" or "Issuer") $7,080,000 Water and Sewer System Revenue Bonds, Series 2019 (the "Bonds") are being issued pursuant to the terms and provisions of an order (the "Order") of the Board of Directors of the District (the "Board") and in accordance with the Constitution and general laws of the State of Texas (the "State"), including particularly Article XVI, Section 59 of the Texas Constitution and Texas Water Code, Chapters 49 and 54, as amended, and an approving order of the Texas Commission on Environmental Quality issued on November 6, 2018. (See "THE BONDS - Authority for Issuance" herein.) The Bonds, when issued, will constitute special obligations of the District, payable, both as to principal and interest, solely from and secured by a first lien on and pledge of the Net Revenues of the District's water and sewer system (the "System"). The Net Revenues consist of the gross revenues of the System, less maintenance and operation expenses of the System. Depreciation and payments into and out of funds for the Bonds and Additional Parity Obligations shall never be considered expenses of maintenance and operation. Additionally, the District has established a reserve fund (the "Reserve Fund") pledged to the payment of the Bonds and any Additional Parity Obligations and is required to maintain an amount in the Reserve Fund equal to average annual debt service requirements on the Parity Revenue Obligations (see "SELECTED PROVISIONS OF THE ORDER"). The Bonds do not constitute a general obligation of the District, and the holders of the Bonds shall not have the right to demand payment thereof from any funds raised or to be raised by taxation. None of the State of Texas, Denton or Tarrant Counties, Texas nor any political subdivision or municipality, other than the District shall be obligated to pay the principal of or interest on the Bonds. (See "THE BONDS — Security for Payment" herein.) THE BONDS ARE SUBJECT TO SPECIAL INVESTMENT CONSIDERATIONS DESCRIBED HEREIN. (See "INVESTMENT CONSIDERATIONS" herein.) Bond purchasers are encouraged to read this entire Preliminary Official Statement prior to making an investment decision. Interest on the Bonds will accrue from March 15, 2019 (the "Dated Date") and is payable March 1, 2020, and each September 1 and March 1 thereafter until the earlier of maturity or redemption, and will be calculated on the basis of a 360 -day year of twelve 30 -day months. The Bonds will be issued in fully registered form only, without coupons, in denominations of $5,000 or any integral multiple thereof, and when issued, will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company ("DTC"), New York, New York, acting as securities depository for the Bonds until DTC resigns or is discharged. The Bonds initially will be available to purchasers in book -entry form only. Purchasers of the Bonds ("Beneficial Owners") will not receive physical delivery of certificates representing their interest in the Bonds purchased. So long as Cede & Co., as the paying agent to DTC, is the registered owner of the Bonds, principal of and interest on the Bonds will be payable by the paying agent to DTC, which will be solely responsible for making such payment to the Beneficial Owners of the Bonds. The initial paying agent/registrar for the Bonds shall be BOKF, NA, Dallas, Texas (the "Paying Agent"). Proceeds from the sale of the Bonds are being used for (i) acquiring, constructing and equipping improvements to the District's wastewater treatment facilities and constructing water transmission line improvements, and (ii) pay the costs related to the issuance of the Bonds. (See "THE BONDS — Use of Bond Proceeds" herein.) The District reserves the right to redeem, prior to maturity, in integral multiples of $5,000, those Bonds maturing on and after September 1, 2029, in whole or from time to time in part, on September 1, 2028, and on any date thereafter at a price of par plus accrued interest from the most recent interest payment date to the date fixed for redemption. (See "THE BONDS — Optional Redemption" herein.) After requesting competitive bids for purchase of the Bonds, the District accepted the lowest bid to purchase the Bonds, bearing interest rates as shown on page ii herein, at a price of 100.059662% of par plus accrued interest to the date of delivery, resulting in a net interest cost rate to the District of 3.297901%. The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the Bonds by BUILD AMERICA MUTUAL ASSURANCE COMPANY. See "BOND INSURANCE" herein. BAM BUIL" ."ERICA MUTUAL STATED MATURITY SCHEDULE (See Page ii) The Bonds are offered for delivery, when, as and if issued and received by IFS Securities (the "Purchaser') and subject to the approving opinion of the Attorney General of the State of Texas and the approval of certain legal matters by McLean and Howard, L.L.P., Austin, Texas, Bond Counsel. Delivery of the Bonds through DTC in Dallas, Texas is expected on or about April 23, 2019. STATED MATURITY SCHEDULE (Due September 1) Base CUSIP — 897061 (a) Stated Principal CUSIP Maturity Amount Rate (%1 Yield (%1 Suffix(a) 2021 $ 155,000 3.000 1.770 BS5 2022 160,000 3.000 1.800 BT3 2023 165,000 3.000 1.840 BUO 2024 170,000 3.000 1.900 BV8 2025 175,000 3.000 1.950 BW6 2026 180,000 3.000 2.050 BX4 2027 185,000 3.000 2.150 BY2 2028 190,000 3.000 2.250 BZ9 2029 195,000 3.000 2.450(b) CA3 2030 205,000 3.000 2.550(b) CBI 2031 210,000 3.000 2.650(b) CC9 2032 215,000 3.000 2.750(b) CD7 2033 220,000 3.000 2.830(b) CE5 2034 230,000 3.000 2.900(b) CF2 2035 235,000 3.000 3.020 CGO 2036 245,000 3.000 3.080 CH8 2037 250,000 3.000 3.150 CJ4 2038 255,000 3.125 3.210 CK1 2039 265,000 3.125 3.290 CL9 2040 275,000 3.250 3.350 CM7 2041 285,000 3.250 3.400 CN5 2042 290,000 3.250 3.420 CPO 2043 300,000 3.250 3.440 CQ8 2044 310,000 3.250 3.470 CR6 2045 320,000 3.375 3.500 CS4 2046 330,000 3.375 3.520 CT2 2047 345,000 3.375 3.540 CU9 2048 355,000 3.375 3.570 CV7 2049 365,000 3.500 3.600 CW5 The District reserves the right to redeem, prior to maturity, in integral multiples of $5,000, those Bonds maturing on and after September 1, 2029, in whole or from time to time in part, on September 1, 2028, and on any date thereafter at a price of par plus accrued interest from the most recent interest payment date to the date fixed for redemption. (See "THE BONDS — Optional Redemption" herein.) (a) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by S&P Capital IQ on behalf of The American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. Neither the District nor the Financial Advisor is responsible for the selection or the correctness of the CUSIP numbers set forth herein. (b) Yield is calculated to first call date September 1, 2028. ii TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 Name Mr. Gregory Wilson Mr. Bill Rose Mr. Steve Flynn Ms. Kelly Castonguay Mr. Mark Chapman BOARD OF DIRECTORS Position President Vice President Secretary / Treasurer Director Director DISTRICT PERSONNEL AND ADVISORS Two Year Term Expires May 2020 2020 2022 2022 2022 General Manager Mr. John Carman Trophy Club, Texas Finance Manager Mr. Steven Krolczyk Trophy Club, Texas Operations Manager Mr. Mike McMahon Trophy Club, Texas Attorneys for the District/Bond Counsel Tony Corbett McLean and Howard, L.L.P. Austin, Texas Financial Advisor SAMCO Capital Markets, Inc. Dallas, Texas Independent Auditors Lafollett and Abbott PLLC Tom Bean, Texas Tax Assessor - Collector Denton County, Texas Tarrant County, Texas Chief Appraiser Denton County, Texas Tarrant County, Texas For Additional Information Please Contact: Mr. Steven Krolczyk Finance Manager Trophy Club Municipal Utility District 100 Municipal Drive Trophy Club, Texas 76262 (682) 831-4600 skrolczvktcmud.orq Mr. Andrew Friedman Managing Director SAMCO Capital Markets, Inc. 1700 Pacific Avenue, Suite 2000 Dallas, Texas 75201 (214) 765-1413 afriedman(c samcocaoital.com TABLE OF CONTENTS OFFICIAL STATEMENT 1 INTRODUCTION 1 THE BONDS 1 General 1 Description of the Bonds 1 Use of Bond Proceeds 2 Authority for Issuance 2 Texas Commission on Environmental Quality Approval 2 Payment Record 3 Redemption Provisions 3 Termination of Book -Entry -Only System 4 Defeasance of Outstanding Bonds 4 Paying Agent/Registrar 5 Record Date 5 Tax Covenants 5 SOURCES AND USES OF FUNDS 5 SECURITY FOR THE BONDS 6 Net Revenues 6 Reserve Fund 6 Rate Covenant 7 Issuance of Additional Bonds 7 Bondholders' Remedies 7 RATING 8 BOND INSURANCE 8 BOND INSURANCE POLICY 8 BUILD AMERICA MUTUAL ASSURANCE COMPANY 8 BOOK -ENTRY -ONLY SYSTEM 9 Use of Certain Terms in Other Sections of this Official Statement 10 INVESTMENT CONSIDERATIONS 11 General 11 Approval of the Bonds 11 Consolidation 11 Abolition 11 Alteration of Boundaries 11 Registered Owners' Remedies and Bankruptcy Limitations11 Continuing Compliance with Certain Covenants 12 Future Debt 12 Future and Proposed Legislation 12 THE DISTRICT 12 Creation of the District 12 Governance 13 Employees 13 General 13 Location 13 Population 13 Topography and Drainage Shopping and Commercial Facilities Fire Protection Police Protection Schools Recreational Opportunities Status of Development of the District Public Improvement District Description THE DISTRICT'S SYSTEM Description of the Water System Description of the Wastewater System INVESTMENT AUTHORITY AND INVESTMENT PRACTICES OF THE DISTRICT Current Investments LEGAL MATTERS Legal Opinions No -Litigation Certificate No Material Adverse Change TAX MATTERS Tax Exemption Tax Accounting Treatment of Discount and Premium on Certain Bonds 18 Qualified Tax -Exempt Obligations for Financial Institutions 19 CONTINUING DISCLOSURE OF INFORMATION 19 Annual Reports 19 Notice of Certain Events 19 Availability of Information from MSRB 20 Limitations and Amendments 20 Compliance with Prior Agreements 20 FINANCIAL ADVISOR 20 OFFICIAL STATEMENT 21 Updating the Official Statement During Underwriting Period 13 13 14 14 14 14 14 14 14 14 15 15 17 17 17 17 17 18 18 21 Forward -Looking Statements Disclaimer 21 OTHER MATTERS 21 Legal Investment and Eligibility to Secure Public Funds in Texas 21 Registration and Qualification of Bonds for Sale 21 Financial Advisor 22 Winning Bidder 22 Certification as to Official Statement 22 Concluding Statement 22 Financial Information of the Issuer Selected Provisions of the Order Form of Legal Opinion of Bond Counsel Excerpts from the District's Audited Financial Statements for the Year Ended September 30, 2018 Specimen Municipal Bond Insurance Policy Appendix A Appendix B Appendix C Appendix D Appendix E The cover page, subsequent pages hereof and the schedules and appendices attached hereto, are part of this Official Statement. iv USE OF INFORMATION IN THE OFFICIAL STATEMENT This Official Statement, which includes the cover page and the Appendices hereto, does not constitute an offer to sell or the solicitation of an offer to buy in any jurisdiction to any person to whom it is unlawful to make such offer, solicitation or sale. No dealer, broker, salesperson or other person has been authorized to give information or to make any representation other than those contained in this Official Statement, and, if given or made, such other information must not be relied upon. Certain information set forth herein has been provided by sources other than the District that the District believes to be reliable, but the District makes no representation as to the accuracy of such information. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of the Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District or other matters described herein since the date hereof. See "CONTINUING DISCLOSURE OF INFORMATION" for a description of the District's undertaking to provide certain information on a continuing basis. NEITHER THE DISTRICT NOR ITS FINANCIAL ADVISOR MAKES ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT REGARDING THE DEPOSITORY TRUST COMPANY ("DTC") OR ITS BOOK -ENTRY -ONLY SYSTEM, AS SUCH INFORMATION HAS BEEN PROVIDED BY DTC. Build America Mutual Assurance Company ("BAM") makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding BAM, supplied by BAM and presented under the heading "Bond Insurance" and "Exhibit E - Specimen Municipal Bond Insurance Policy". THE CERTIFICATES ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE CERTIFICATES IN ACCORDANCE WITH 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. THIS OFFICIAL STATEMENT CONTAINS "FORWARD-LOOKING" STATEMENTS WITHIN THE MEANING OF SECTION 21e OF THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS MAY INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE AND ACHIEVEMENTS TO BE DIFFERENT FROM THE FUTURE RESULTS, PERFORMANCE AND ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD- LOOKING STATEMENTS. INVESTORS ARE CAUTIONED THAT THE ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS. SALE AND DISTRIBUTION OF THE BONDS Award of the Bonds After requesting competitive bids for the Bonds, the District accepted the bid resulting in the lowest net effective interest rate, which bid was tendered by IFS Securities (the "Underwriter") bearing the interest rates shown on the cover page hereof, at a price of 100.059662% of the par value thereof plus accrued interest to the date of delivery which resulted in a net effective interest rate of 3,297901%, as calculated pursuant to Chapter 1204 of the Texas Government Code, as amended (the IBA method). Issue Prices and Marketability The delivery of the Bonds is conditioned upon the receipt by the District of a certificate executed and delivered by the Initial Purchaser on or before the date of delivery of the Bonds stating the prices at which a substantial amount of the Bonds of each maturity has been sold to the public. For this purpose, the term "public" shall not include any person who is a bond house, broker or similar person acting in the capacity of underwriter or wholesaler. Otherwise, the District has no understanding with the Initial Purchaser regarding the reoffering yields or prices of the Bonds. Information concerning reoffering yields or prices is the responsibility of the Initial Purchaser. The prices and other terms with respect to the offering and sale of the Bonds may be changed from time -to time by the Initial Purchaser after the Bonds are released for sale, and the Bonds may be offered and sold at prices other than the initial offering prices, including sales to dealers who may sell the Bonds into investment accounts. In connection with the offering of the Bonds, the Initial Purchaser may over - allot or effect transactions which stabilize or maintain the market prices or the Bonds at levels above those which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The District has no control over trading of the Bonds in the secondary market. Moreover, there is no guarantee that a secondary market will be made in the Bonds. In such a secondary market, the difference between the bid and asked price of utility district bonds may be of comparable maturity and quality issued by more traditional bonds of such entities are more generally bought, sold or traded in the secondary market. INVESTMENT 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. v SELECTED DATA FROM THE OFFICIAL STATEMENT 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 Issuer The Bonds Security for Payment Trophy Club Municipal Utility District No. 1 (the "District" or "Issuer") is a political subdivision of the State of Texas located in Denton and Tarrant Counties, Texas. The District was created as a municipal utility district pursuant to Chapters 49 and 54 of the Texas Water Code and is a conservation and reclamation district in accordance with Article XVI, Section 59 of the Texas Constitution. The District has also adopted a fire protection plan under Section 50.055 of the Texas Water Code, now codified as Subchapter L of Chapter 49 of the Texas Water Code, pursuant to the Order of the Texas Water Commission of August 22, 1983. In July of 2009, documentation was submitted to the Texas Commission on Environmental Quality ("TCEQ") regarding the consolidation of Trophy Club Municipal Utility District Nos. 1 and 2 as of a May 9, 2009 election. (See "THE DISTRICT" herein.) The Bonds are being issued pursuant to the terms and provisions of an order (the "Order") of the Board of Directors of the District (the "Board") and in accordance with the Constitution and general laws of the State of Texas (the "State"), including particularly Article XVI, Section 59 of the Texas Constitution and Texas Water Code, Chapters 49 and 54, as amended, and an approving order of the Texas Commission on Environmental Quality issued on November 6, 2018. (See "THE BONDS - Authority for Issuance" herein.) The Bonds, when issued, will constitute special obligations of the District, payable, both as to principal and interest, solely from and secured by a first lien on and pledge of the Net Revenues of the District's water and sewer system (the "System"). The Net Revenues consist of the gross revenues of the System, less maintenance and operation expenses of the System. Depreciation and payments into and out of funds for the Bonds and Additional Parity Obligations shall never be considered expenses of maintenance and operation. Additionally, the District has established a reserve fund (the "Reserve Fund") pledged to the payment of the Bonds and Additional Parity Obligations and is required to maintain an amount in the Reserve Fund equal to average annual debt service requirements on the Parity Revenue Obligations (see "SELECTED PROVISIONS OF THE ORDER"). The Bonds do not constitute a general obligation of the District, and the holders of the Bonds shall not have the right to demand payment thereof from any funds raised or to be raised by taxation. None of the State of Texas, Denton or Tarrant Counties, Texas nor any political subdivision or municipality, other than the District shall be obligated to pay the principal of or interest on the Bonds. (See "THE BONDS —Security for Payment" herein.) Paying Agent/Registrar The initial Paying Agent/Registrar for the Bonds is BOKF, NA, Dallas, Texas. Description Optional Redemption Tax Matters Use of Proceeds The Bonds in the aggregate principal amount of $7,080,000 mature on September 1 of each year in the amounts as set forth on page ii of this Official Statement. Interest accrues from March 15, 2019 (the "Dated Date") at the rates per annum set forth page ii hereof and is payable March 1, 2020 and each September 1 and March 1 thereafter until maturity or earlier redemption. The Bonds are offered in fully registered form in integral multiples of $5,000 for any one maturity. (See "THE BONDS - General Description" herein.) Bonds maturing on and after September 1, 2029 are subject to redemption in whole, or from time to time in part at the option of the District prior to their maturity dates on September 1, 2028, or on any date thereafter, at par plus accrued interest from the most recent interest payment date to the date of redemption. (See "THE BONDS - Optional Redemption" herein.) In the opinion of Bond Counsel, the interest on the Bonds will be excludable from gross income of the owners thereof for purposes of federal income taxation under existing law subject to matters discussed herein under "TAX MATTERS" including the altemative minimum tax on corporations. (See "TAX MATTERS" and Appendix C - "Form of Legal Opinion of Bond Counsel" herein.) Proceeds from the sale of the Bonds will be used to (i) make improvements to the District's wastewater treatment facilities and to construct water transmission line improvements, and (ii) pay the costs related to the issuance of the Bonds. (See "THE BONDS — Use of Bond Proceeds" herein.) vi Ratings Qualified Tax Exempt Obligations S&P Global Ratings ("S&P") has assigned a rating of "AA-" to the Bonds with an understanding that concurrently with the delivery of the Bonds, a municipal bond insurance policy will be issued by BAM. An explanation of the significance of such rating may be obtained from the rating agency. (See "RATING" herein.) The Issuer has designated the Bonds as "Qualified Tax -Exempt Obligations" for financial institutions. (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 Bonds. (See "BOOK -ENTRY -ONLY SYSTEM" herein.) Future Bond Issues Currently the District has no plans to issue additional debt within the next twelve months. Payment Record The Issuer has never defaulted in the timely payment of principal of or interest on its revenue indebtedness. Delivery When issued, anticipated on or about April 23, 2019. Legality Delivery of the Bonds is subject to the approval by the Attorney General of the State of Texas and the rendering of an opinion as to legality by McLean and Howard, L.L.P., Bond Counsel, Austin, Texas. (The remainder of this page has intentionally been left blank.] vii (this page intentionally left blank) OFFICIAL STATEMENT relating to $7,080,000 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 (A Political Subdivision of the State of Texas Located in Denton and Tarrant Counties, Texas) WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019 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 $7,080,000 Water and Sewer System Revenue Bonds, Series 2019 (the "Bonds"). The Bonds are being issued pursuant to the ten -ns and provisions of an order (the "Order") of the Board of Directors of the District (the "Board") and in accordance with the Constitution and general laws of the State of Texas (the "State"), including particularly Article XVI, Section 59 of the Texas Constitution and Texas Water Code, Chapters 49 and 54, as amended, and an approving order of the Texas Commission on Environmental Quality issued on November 6, 2018, and will constitute special obligations of the District, payable, both as to principal and interest, solely from and secured by a first lien on and pledge of the Net Revenues of the District's water and sewer system (the "System"). Unless otherwise indicated, capitalized terms used in this Official Statement have the same meaning assigned to such terms in the Order. Included in this Official Statement are descriptions of the Bonds, the Order, 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 Financial Advisor. THE BONDS General The Order authorizes the issuance and sale of the Bonds and prescribes the terms, conditions and provisions for payment of the principal of and interest on the Bonds by the District. Set forth below is a description of the Bonds and a summary of certain provisions of the Order. Capitalized terms in such summary are used as defined in the Order. Such summary is not a complete description of the entire Order and is qualified by reference to the Order, copies of which are available from the District or the Financial Advisor. (See "APPENDIX B - SELECTED PROVISIONS OF THE ORDER" herein.) Description of the Bonds The $7,080,000 Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019 will bear interest from March 15, 2019 (the "Dated Date") and will mature on September 1 of the years and in the principal amounts set forth on page ii hereof. Interest on the Bonds is payable March 1, 2020, and each September 1 and March 1 thereafter until the earlier of maturity or redemption, and will be calculated on the basis of a 360 -day year of twelve 30 -day months. The Bonds will be issued in fully registered form only, without coupons, in denominations of $5,000 or any integral multiple thereof. The initial paying agent for the Bonds shall be BOKF, NA, Dallas, Texas ("Paying Agent"). The principal of and interest on the Bonds shall be payable without exchange or collection charges, in any coin or currency of the United States of America which, on the date of payment, is legal tender for the payment of debt due the United States of America. If the specified date for any payment of principal (or Redemption Price) of or interest on the Bonds is a Saturday, Sunday, or legal holiday or equivalent for banking institutions generally in the city in which Designated Payment / Transfer Office of the Paying Agent is located, such payment may be made on the next succeeding day which is not one of the foregoing days without additional interest and with the same force and effect as if made on the specified date for such payment. Initially, the Bonds will be registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book -Entry -Only System described herein. No physical delivery of the Bonds will be made to the beneficial owners. Principal of and interest on the Bonds will be payable by the Paying Agent to Cede & Co., which will distribute the amounts paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds. (See "BOOK—ENTRY-ONLY SYSTEM" HEREIN.) 1 Use of Bond Proceeds Proceeds from the sale of the Bonds are being used to (i) make improvements to the District's wastewater treatment facilities and to construct water transmission line improvements, and (ii) pay the costs related to the issuance of the Bonds. Construction Costs District's Share a. Developer Contribution Items None $ 0 b. District Items 1. Water Line Improvements $ 3,205,100 2. WWTP Improvements Supplemental Costs 591,728 3. Contingencies (20.13% of Item No. 1-2) 764,205 4. Engineering (37.61% of Item No. 1-2 1,427,879 5. Geotechnical Testing for Item No. 2 50,000 6. Permit fees for Item No. 2 92,038 7. Right of Way and Easement Acquisition for Item No. 1 567.950 Total District Items $ 6,698,900 TOTAL CONSTRUCTION COSTS (93.06% of BIR) $ 6,698,900 II. Non -Construction Costs a. Legal Fees b. Fiscal Agent Fees c. Bond Discount d. Bond Issuance Expenses e. Bond application Report f. Attorney General Fee (0.1%) g. TCEQ Bond Issuance Fee (0.25%) h. Accrued Interest i. Surplus Bond Proceeds Total Non -Construction Costs TOTAL BOND ISSUE REQUIREMENT Notes: (1) (2) (3) (4) (5) $ 100,400.00 76,000.00 99, 722.29 58, 500.00 25, 000.00 7,080.00 17.700.00 (4.224.10) 921.81 381.100 $ 7,080,000.00 (3) (4) (5) Represents total of $641,020 requested for Item No. 1, plus $123,185 requested for Item No. 2. Represents total of $541,308 requested for Item No. 1, plus $886,571 requested for Item No. 2 ($327,577 for field observations, plus $386,679 for construction administration, plus $172,315 for additional inspection). Represents total of $105,950 for easement acquisition services (approximately 7 easements), plus $462,000 for purchase of the easements (total easement area of approximately 46,200 SF at $10/square foot). Represents a total of $100,400 requested including $84,000 pursuant to the contract provided (2.5% of bond amount up to $1,000,000, plus 2% of bond amount between $1,000,000 and $2,000,000; plus 0.75% of bond amount over $2,000,000), plus $14,400 for special tax counsel, plus $2,000 for escrow release counsel. Represents total of $76,000 requested pursuant to the contract provided (1.5% of bond amount up to $3,000,000, plus 1% of bond amount between $3,000,000 and $5,000,000, plus 0.5% of bond amount over $5,000,000). Authority for Issuance The Bonds are issued pursuant to the terms and provisions of an order (the "Order") of the Board of Directors of the District (the "Board") and in accordance with the Constitution and general laws of the State of Texas (the "State"), including particularly Article XVI, Section 59 of the Texas Constitution and Texas Water Code, Chapters 49 and 54, as amended, and an approving order of the Texas Commission on Environmental Quality issued on November 6, 2018. Texas Commission on Environmental Quality Approval On November 6, 2018, the Texas Commission on Environmental Quality ("TCEQ") issued a Commission Order ("TCEQ Order") approving the project and the issuance of the Bonds. The approval order included the following information: Pursuant to TEX. WATER CODE Section 49.181, the engineering project for Trophy Club Municipal Utility District No. 1 of Denton and Tarrant Counties is hereby approved together with the issuance of $7,200,000 in bonds at a maximum net effective interest rate of 5.16%. The District should be directed to properly escrow a total of $3,846,120 ($3,205,100 in construction plus $641,020 in 2 contingencies) for the water line extensions pending TCEQ approval, which is contingent upon the TCEQ District Section's receipt of plans and specifications approved by all authorities having jurisdiction and recorded easements evidencing District ownership/access to the site; or if only evidence of recorded easements evidencing District ownership/access to the site are provided to the TCEQ, then use of the funds will be subject to District board receipt of plans and specifications approved by all entities with jurisdiction. The District should further be directed to place these funds in one or more authorized financial institutions of the District's choice and provide the TCEQ with a certified copy of the executed escrow agreement(s) between the District and the financial institution(s) stating that the funds, excluding interest earnings, cannot be withdrawn for District use except by written authorization from the TCEQ. The District should be allowed, from time to time, in accordance with good money management practices, to transfer these funds, or parts thereof, from one financial institution to another, provided the funds are not released to the District until the stated conditions are met and the District maintains current agreements with financial institutions in which funds are held stating the conditions for release. The District is advised that the legal, fiscal agent, and engineering fees have not been evaluated to determine whether these fees are reasonable or competitive. These fees are included as presented in the engineering report. The District is directed that any surplus bond proceeds resulting from the sale of bonds at a lower interest rate than that proposed shall be shown as a contingency line item in the Official Statement and the use of such funds shall be subject to approval pursuant to TCEQ rules on surplus funds. The approval of the sale of these bonds herein shall be valid for one year from the date of this Order unless extended by written authorization of the TCEQ. BE IT FURTHER ORDERED that pursuant to TEX. WATER CODE §5.701, the District shall pay to the TCEQ 0.25% of the principal amount of bonds actually issued not later than the seventh (7th) business day after receipt of the bond proceeds. The fees shall be paid by check payable to the Texas Commission on Environmental Quality. The TCEQ further ordered, to enable the TCEQ to carry out the responsibilities imposed by Texas Water Code Sections 49.181- 182, that the District shall: (1) furnish the TCEQ copies of all bond issue project construction documentation outlined under Title 30 of the Texas Administrative Code, Section 293.62, including detailed progress reports and as -built plans required by Texas Water code Section 49.277(b), which have not already been submitted; (2) notify the Utilities and Districts Section of the TCEQ and obtain approval of the TCEQ for any substantial alterations in the engineering project approved herein before making such alterations; and (3) ensure, as required by Texas Water Code Section 49.277(b), that all construction financed with the proceeds from the sale of bonds is completed by the construction contractor according to the plans and specifications contracted. Payment Record The District has never defaulted on the timely payment of principal of and interest on its revenue indebtedness. Redemption Provisions Optional Redemption: The Bonds maturing on or after September 1, 2029, are subject to redemption prior to maturity at the option of the District, in whole or from time to time in part, on September 1, 2028, and on any date thereafter, at a redemption price equal to the principal amount thereof plus accrued interest from the most recent interest payment date to the date fixed for redemption. Notice of Redemption: Not less than thirty (30) days prior to a redemption date for the Bonds, the District shall cause a notice of such redemption to be sent by United States mail, first-class postage prepaid, to the registered owners of each Bond or a portion thereof to be redeemed at its address as it appeared on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing of such notice. With respect to any optional redemption of the Bonds, unless certain prerequisites to such redemption required by the Order have been met and money sufficient to pay the principal of and premium, if any, and interest on the Bonds to be redeemed will have been received by the Paying Agent/Registrar prior to the giving of such notice of redemption, such notice will state that said redemption may, at the option of the Issuer, be conditional upon the satisfaction of such prerequisites and receipt of such money by the Paying Agent/Registrar on or prior to the date fixed for such redemption or upon any prerequisite set forth in such notice of redemption. If a conditional notice of redemption is given and such prerequisites to the redemption are not fulfilled, such notice will be of no force and effect, the Issuer will not redeem such Bonds, and the Paying Agent/Registrar will give notice in the manner in which the notice of redemption was given, to the effect that such Bonds have not been redeemed. ANY NOTICE OF REDEMPTION SO MAILED TO THE REGISTERED OWNERS WILL BE DEEMED TO HAVE BEEN DULY GIVEN IRRESPECTIVE OF WHETHER RECEIVED BY ANY HOLDER OF THE BONDS, AND, SUBJECT TO PROVISION FOR PAYMENT OF THE REDEMPTION PRICE HAVING BEEN MADE, AND ANY PRECONDITIONS STATED IN THE NOTICE OF REDEMPTION HAVING BEEN SATISFIED INTEREST ON THE REDEEMED BONDS SHALL CEASE TO ACCRUE FROM AND AFTER SUCH REDEMPTION DATE NOTWITHSTANDING THAT A BOND HAS NOT BEEN PRESENTED FOR PAYMENT. By the date fixed for any such redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the required redemption price for the Bonds or portions thereof which are to be so redeemed. If such notice of redemption is given and if due provision for such payment is made, all as provided above, the Bonds or portion thereof which are to be redeemed thereby automatically shall be treated as redeemed prior to their scheduled maturities, and they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price from the Paying Agent/Registrar out of the funds provided for such payment. The Paying Agent/Registrar and the Issuer, so long as a Book -Entry -Only System is used for the Bonds, will send any notice of redemption, notice of proposed amendment to the Bonds or other notices with respect to the Bonds only to DTC. Any failure by DTC to advise any DTC participant, or of any DTC participant or indirect participant to notify the Beneficial Owner, will not affect the validity of the redemption of the Bonds called for redemption or any other action premised on any such notice. Redemption of portions of the Bonds by the Issuer 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 3 rules or other agreements with DTC participants and then DTC participants and indirect participants may implement a redemption of such Bonds from the Beneficial Owners. Any such selection of Bonds to be redeemed will not be governed by the Order and will not be conducted by the Issuer or the Paying Agent/Registrar. Neither the Issuer nor the Paying Agent/Registrar 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 DTC participants, indirect participants, or Beneficial Owners of the selection of portions of the Bonds for redemption. (See "BOOK -ENTRY -ONLY SYSTEM" herein.) Termination of Book -Entry -Only System The District is initially utilizing the book -entry -only system of the DTC. (See "BOOK -ENTRY -ONLY SYSTEM" herein.) In the event that the Book -Entry -Only System is discontinued by DTC or the District, the following provisions will be applicable to the Bonds. Payment: Principal of the Bonds will be payable at maturity or redemption 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 Agent/Registrar in St. Paul, Minnesota (the "Designated Payment/Transfer 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 Payment/Transfer 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 dose, and payment on such date shall for all purposes be deemed to have been made on the original date payment was due. Initially, the only registered owner of the Bonds will be CEDE & CO. as nominee of DTC. (See "BOOK -ENTRY -ONLY SYSTEM" herein.) Reaistration: 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 Agent/Registrar at the Designated Payment/Transfer Office. A Bond also may be exchanged for a Bond or Bonds of like maturity and interest and having a Tike aggregate principal amount, upon presentation and surrender at the Designated Payment/Transfer 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 Agent. 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 Paying Agent/Registrar to the registered owner, at the Designated Payment/Transfer Office of the Paying Agent/Registrar or by United States mail, first-class, postage prepaid. To the extent possible, new Bonds issued in an exchange or 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 and the denominations of $5,000 or any integral multiple thereof. (See `BOOK -ENTRY -ONLY SYSTEM" herein for a description of the system to be initially utilized in regard to ownership and transferability of the Bonds.) Limitations on Transfer 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 with respect to any Bond called for redemption, in whole or in part, within forty-five (45) days of the date fixed for redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of a Bond. Replacement 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, Toss 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. Defeasance of Outstanding Bonds The Order provides for the defeasance of the Bonds when payment of the principal of and premium, if any, on Bonds, plus interest thereon to the due date thereof (whether such due date be by reason of maturity, or otherwise), is provided by irrevocably depositing with the Paying Agent/Registrar, or an authorized escrow agent, in trust (1) money sufficient to make such payment or (2) Government Securities, certified by an independent public accounting firm of national reputation to mature as to principal and 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 Bonds. The Order provides that "Government 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, (3) noncallable obligations 4 of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that are rated as to investment quality by a nationally recognized investment rating firm not Tess than AAA or its equivalent and (4) any other then authorized securities or obligations under applicable Texas state law that may be used to defease obligations such as the Bonds. There is no assurance that the current law will not be changed in a manner which would permit investments other than those described above to be made with amounts deposited to defease the Bonds. Because the Order does not contractually limit such investments, registered owners will be deemed to have consented to defeasance with such other investments, notwithstanding the fact that such investments may not be of the same investment quality as those currently permitted under State law. There is no assurance that any particular rating for U.S. Treasury securities used as Government Securities or the rating for any other Government Security will be maintained at any particular rating category. The District has additionally reserved the right, subject to satisfying the requirements of (1) and (2) above, to substitute other Government Securities for the Government 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 initiate proceedings to take any action amending the terms of the Bonds are extinguished. Paying Agent/Registrar Principal of and semiannual interest on the Bonds will be paid by BOKF, NA, Dallas, Texas, the initial Paying Agent/Registrar (the "Paying Agent). The Paying Agent must be a bank, trust company, financial institution or other entity duly qualified and equally authorized to serve and perform the duties as paying agent and registrar for the Bonds. Provision is made in the Order for the District to replace the Paying Agent by a resolution 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 agent/registrar selected by the District shall be subject to the same qualification requirements as the Paying Agent. The successor paying agent/registrar, if any, shall be determined by the Board of Directors and written notice thereof, specifying the name and address of such successor paying agent/registrar will be sent by the District or the successor paying agent/registrar 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 day of the month preceding such interest payment date. 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, the manner in which the proceeds of the Bonds are to be invested, the periodic calculation and payment to the United States of arbitrage profits from the investment of proceeds, and the reporting of certain information to the United States Treasury. The District may cease to comply with any such covenant if it has received a written 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 of interest on the Bonds under Section 103 of the Code. SOURCES AND USES OF FUNDS The proceeds from the sale of the Bonds will be applied approximately as follows: Sources of Funds Par Amount Accrued Interest Original Issue Premium Total Sources of Funds Uses of Funds Deposit to the Construction Fund Cost of Issuance Accrued Interest and Additional Proceedsdeposited into the interest and sinking fund Underwriter's Discount Total Uses of Funds 5 The Bonds $ 7,080,000.00 23,600.90 4,224.10 $7,107,825.00 $ 6,698,900.00 284,680.00 24 ,522.71 99,722.29 $ 7,107,825.00 SECURITY FOR THE BONDS The following summary of the provisions of the Order that describe the security for the Bonds is qualified by reference to the Order, excerpts of which are included in Appendix B "SELECTED PROVISIONS OF THE ORDER." Net Revenues The District has pledged the Net Revenues to secure the payment of the Bonds, the Outstanding Obligations shown below, and any Additional Bonds (as defined below) and has reserved the right, subject to certain conditions, to pledge the Net Revenues to secure additional parity obligations ("Additional Parity Obligations") from time to time in the future (see "SECURITY FOR THE BONDS — Issuance of Additional Bonds"). The Order defines "Net Revenues" as all of the revenues of every kind and nature received through the operation of the System, less the expenses of operation and maintenance paid thereof, including salaries, labor, materials, repairs and extensions necessary to render efficient service; provided, however, that only such repairs and extensions as in the judgment of the Board, reasonably and fairly exercised, are necessary to keep the System in operation and render adequate service to the District and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair the security of the Bonds or the Additional Parity Obligations shall be deducted in determining Net Revenues. Depreciation and payments into and out of funds for the Outstanding Obligations, the Bonds and any Additional Parity Obligations shall never be considered expenses of maintenance and operation. Additionally, the District has established a reserve fund (the "Reserve Fund") pledged to pay principal of or interest on the Bonds and Additional Parity Obligations and covenants to maintain an amount equal to the Required Reserve, as described below (see "SELECTED PROVISIONS OF THE ORDER"). The District has not covenanted or obligated itself to pay the Bonds from monies raised or to be raised from taxation. The District has Outstanding Obligations secured by and payable from Net Revenues on parity with the Bonds as follows: Dated Date Outstanding Amount Issue Description 02-01-15 $8,280,000 Water & Sewer System Revenue Bonds, Series 2015 10-01-16 $4,230,000 Water & Sewer System Revenue Bonds, Series 2016 Reserve Fund In the Order, the District covenants to accumulate and maintain a reserve for the payment of the Bonds and Additional Parity Obligations (the Required Reserve) equal to the lesser of (i) the Average Annual Debt Service Requirements (calculated on a Fiscal Year basis and determined as of the date of issuance of the Bonds or the most recently issued series of Additional Parity Obligations then Outstanding, or at the option of the District, at the end of each fiscal year) for the Bonds and Additional Parity Obligations or (ii) the maximum amount in a reasonably required reserve fund for the Bonds and Additional Parity Obligations from time to time that can be invested without restriction as to yield pursuant to section 148 of the Internal Revenue Code of 1986, as amended (the Reserve Fund), which Fund or account shall be maintained at an official depository of the District. AH funds deposited into the Reserve Fund (excluding surplus funds which include earnings and income derived or received from deposits or investments which will be transferred to the Revenue Fund during such period as there is on deposit in the Reserve Fund the Required Reserve) shall be used solely for the payment of the principal of and interest on the Parity Revenue Obligations, when and to the extent other funds available for such purposes are insufficient, and, in addition, may be used to retire the last stated maturity or interest on the Bonds or Additional Parity Obligations. Upon issuance of the Bonds, the total amount required to be accumulated and maintained in the Reserve Fund is hereby determined to be $865,843 (the Required Reserve), which is equal to not less than the Average Annual Debt Service for the Bonds, and on or before the 1st day of the month next following the month the Bonds are delivered to the Purchasers and on or before the 1st day of each following month, the District shall cause to be deposited to the Reserve Fund from the Pledged Revenues an amount equal to at least one -sixtieth (1/60th) of the Required Reserve. After the Required Reserve has been fully accumulated and while the total amount on deposit in the Reserve Fund is in excess of the Required Reserve, no monthly deposits shall be required to be made to the Reserve Fund. As and when Additional Parity Bonds are delivered or incurred, the Required Reserve shall be increased, if required, to an amount calculated in the manner provided in the first paragraph of this Section. Any additional amount required to be maintained in the Reserve Fund shall be so accumulated by the deposit of the necessary amount of the proceeds of the issue or other lawfully available funds in the Reserve Fund immediately after the delivery of the then proposed Additional Parity Bonds, or, at the option of the District, by the deposit of monthly installments, made on or before the 1st day of each month following the month of delivery of the then proposed Additional Parity Bonds, of not less than 1/60th of the additional amount to be maintained in the Reserve Fund by reason of the issuance of the Additional Parity Bonds then being issued (or 1/60th of the balance of the additional amount not deposited immediately in cash), thereby ensuring the accumulation of the appropriate Required Reserve. When and so long as the cash and investments in the Reserve Fund equal the Required Reserve, no deposits need be made to the credit of the Reserve Fund; but, if and when the Reserve Fund at any time contains less than the Required Reserve (other than as the result of the issuance of Additional Parity Bonds as provided in the preceding paragraph), the District covenants and agrees to cure the deficiency in the Required Reserve by resuming the Required Reserve Fund Deposits to said Fund or account from the Pledged Revenues, or any other lawfully available funds, such monthly deposits to be in amounts equal to not Tess than 1/60th of the Required Reserve covenanted by the District to be maintained in the Reserve Fund with any such deficiency payments being made on or before the 1st day of each month until the Required Reserve has been fully restored. The District further covenants and agrees that, subject 6 only to the prior payments to be made to the Bond Fund, the Pledged Revenues shall be applied and appropriated and used to establish and maintain the Required Reserve and to cure any deficiency in such amounts as required by the terms of the Order and any other order pertaining to the issuance of Additional Parity Bonds. During such time as the Reserve Fund contains the Required Reserve, the District may, at its option, withdraw all surplus funds in the Reserve Fund in excess of the Required Reserve and deposit such surplus in the Revenue Fund, unless such surplus funds represent proceeds of the Bonds, then such surplus will be transferred to the Bond Fund. The District hereby designates its Depository as the custodian of the Reserve Fund. The District, at its option and consistent with the provisions of the Order, may, to the extent permitted by then -applicable law, fund the Reserve Fund at the Required Reserve by purchasing an insurance policy that will unconditionally obligate the insurance company or other entity to pay all, or any part thereof, of the Required Reserve in the event funds on deposit in the Interest and Sinking Fund are not sufficient to pay the debt service requirements on the Parity Revenue Obligations. AH orders adopted after the date hereof authorizing the issuance of Additional Parity Bonds shall contain a provision to this effect. In the event an insurance policy issued to satisfy all or part of the District's obligation with respect to the Reserve Fund causes the amount then on deposit in the Reserve Fund to exceed the Required Reserve, the District may transfer such excess amount to any fund or account established for the payment of or security for the Parity Revenue Obligations (including any escrow established for the final payment of any such obligations pursuant to Chapter 1207, as amended, Texas Government Code) or use such excess amount for any lawful purpose now or hereafter provided by law. Rate Covenant The District will at all times collect for services rendered by the System such amounts as will be at least sufficient to pay all expenses of operation and maintenance, and to provide Net Revenues equal to 1.10 times the amount that is sufficient to pay the scheduled principal of and interest on the Parity Revenue Obligations, plus one times the amount (if any) required to be deposited in any reserve or contingency fund or account created for the payment and security of the Parity Revenue Obligations. Issuance of Additional Bonds The District expressly reserves and shall hereafter have the right to issue in one or more installments such other bonds as provided below. Such Bonds may be payable from and equally secured by a pledge of and first lien on the Net Revenues, to the same extent as pledged and in all things on a parity with the lien of these Bonds. The District expressly reserves and shall hereafter have the right to issue in one or more installments the following: (1) Additional Bonds. The District expressly reserves the right to issue Additional Bonds payable solely from the Net Revenues of the System, for the purpose of completing, repairing, improving, extending, enlarging, or replacing the System, or refund bonds or other obligations issued in connection with the System, and such bonds may be payable form and equally secured by a first lien on and pledge of said Net Revenues on a parity with the pledge thereof for these Bonds. Provided, however, that before the District can issue Additional Bonds payable solely from the Net Revenues of the System, an independent certified public accountant shall certify that the Net Earnings of the System for the last completed fiscal year or a 12 consecutive calendar month period ending no more than 90 days preceding the adoption of the order authorizing the Additional Bonds shall have been not less than 1.20 times the average annual debt service requirements of the Outstanding Obligations, the Bonds and any Additional Parity Obligations. Additionally, in connection with the issuance of Additional Parity Obligations, the President of the Board and the General Manager shall sign a written certificate to the effect that the District is not in default as to any covenant, condition or obligation in connection with the Outstanding Obligations, the Bonds and Additional Parity Obligations and the bond orders authorizing the same and the Interest and Sinking Fund and the Reserve Fund each contain the amount then required to be therein. At such time as the Outstanding Bonds are no longer outstanding, the Accountant, in making a determination of the Net Earnings, may take into consideration a change in the rates and charges for services and facilities afforded by the System that became effective at least sixty (60) days prior to the last day of the period for which Net Earnings are determined and, for purposes of satisfying the above Net Earnings test, make a pro forma determination of the Net Earnings of the System for the period of time covered by his certification or opinion based on such change in rates and charges being in effect for the entire period covered by the Accountant's certificate or opinion. (2) Inferior Lien Bonds. The District also reserves the right to issue inferior lien bonds and to pledge the Net Revenues of the System, to the payment thereof, such pledge to be subordinate in all respects to the lien of these Bonds and the Outstanding Bonds and any Additional Bonds. Bondholders' Remedies The Order provides that, in addition to all other rights and remedies of any Registered Owners provided by the laws of the State of Texas, 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 Registered 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. 7 The Order provides no additional remedies to a Registered Owner. Specifically, the Order does not provide for the appointment of a trustee to protect and enforce the interests of the Registered 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 Registered Owners and may prove time consuming, costly and difficult to enforce. Statutory language authorizing local governments such as the District to sue and be sued does not waive the local government's sovereign immunity from suits for money damages, so that in the absence of other waivers of such immunity by the Texas Legislature, a default by the District in its covenants in the Order may not be reduced to a judgment for money damages. The Bonds are not secured by an interest in any improvements or any other property of the District. 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 Registered 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 Registered Owners may be delayed, reduced or otherwise affected or limited by federal bankruptcy laws or other similar laws affecting the rights of creditors of a political subdivision or by a state statute reasonably required to attain an important public purpose. See "INVESTMENT CONSIDERATIONS — Registered Owners' Remedies and Bankruptcy Limitations." RATING S&P Global Ratings ("S&P") has assigned a rating of "AA-" to the Bonds. An explanation of the significance of such rating may be obtained from the rating agency. A rating by a rating agency reflects only the view of such company at the time the rating is given, and the Issuer makes no representations as to the appropriateness of the rating. There is no assurance that such a rating will continue for any given period of time, or that it will not be revised downward or withdrawn entirely by the rating agency if, in the judgment of such rating agency, circumstances so warrant. Any such downward revision or withdrawal of the rating may have an adverse effect on the market price of the Bonds. BOND INSURANCE BOND INSURANCE POLICY Concurrently with the issuance of the Bonds, Build America Mutual Assurance Company (BAM") will issue its Municipal Bond Insurance Policy for the Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. BUILD AMERICA MUTUAL ASSURANCE COMPANY BAM is a New York domiciled mutual insurance corporation and is licensed to conduct financial guaranty insurance business in all fifty states of the United States and the District of Columbia. BAM provides credit enhancement products solely to issuers in the U.S. public finance markets. BAM will only insure obligations of states, political subdivisions, integral parts of states or political subdivisions or entities otherwise eligible for the exclusion of income under section 115 of the U.S. Internal Revenue Code of 1986, as amended. No member of BAM is liable for the obligations of BAM. The address of the principal executive offices of BAM is: 200 Liberty Street, 27th Floor, New York, New York 10281, its telephone number is: 212-235-2500, and its website is located at: www.buildamerica.com. BAM is licensed and subject to regulation as a financial guaranty insurance corporation under the laws of the State of New York and in particular Articles 41 and 69 of the New York Insurance Law. BAM's financial strength is rated "AA/Stable" by S&P Global Ratings, a business unit of Standard & Poor's Financial Services LLC ("S&P"). An explanation of the significance of the rating and current reports may be obtained from S&P at www.standardandpoors.com. The rating of BAM should be evaluated independently. The rating reflects the S&P's current assessment of the creditworthiness of BAM and its ability to pay claims on its policies of insurance. The above rating is not a recommendation to buy, sell or hold the Bonds, and such rating is subject to revision or withdrawal at any time by S&P, including withdrawal initiated at the request of BAM in its sole discretion. Any downward revision or withdrawal of the above rating may have an adverse effect on the market price of the Bonds. BAM only guarantees scheduled principal and scheduled interest payments payable by the issuer of the Bonds on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the Policy), and BAM does not guarantee the market price or liquidity of the Bonds, nor does it guarantee that the rating on the Bonds will not be revised or withdrawn. Capitalization of BAM BAM's total admitted assets, total liabilities, and total capital and surplus, as of December 31, 2018 and as prepared in accordance with statutory accounting practices prescribed or permitted by the New York State Department of Financial Services were $526 million, $113 million and $414 million, respectively. BAM is party to a first loss reinsurance treaty that provides first loss protection up to a maximum of 15% of the par amount outstanding for each policy issued by BAM, subject to certain limitations and restrictions. 8 BAM's most recent Statutory Annual Statement, which has been filed with the New York State Insurance Department and posted on BAM's website at www.buildamerica.com, is incorporated herein by reference and may be obtained, without charge, upon request to BAM at its address provided above (Attention: Finance Department). Future financial statements will similarly be made available when published. BAM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding BAM, supplied by BAM and presented under the heading "BOND INSURANCE". Additional Information Available from BAM Credit Insights Videos. For certain BAM-insured issues, BAM produces and posts a brief Credit Insights video that provides a discussion of the obligor and some of the key factors BAM's analysts and credit committee considered when approving the credit for insurance. The Credit Insights videos are easily accessible on BAM's website at buildamerica.com/creditinsights/. (The preceding website address is provided for convenience of reference only. Information available at such address is not incorporated herein by reference.) Credit Profiles. Prior to the pricing of bonds that BAM has been selected to insure, BAM may prepare a pre -sale Credit Profile for those bonds. These pre -sale Credit Profiles provide information about the sector designation (e.g. general obligation, sales tax); a preliminary summary of financial information and key ratios; and demographic and economic data relevant to the obligor, if available. Subsequent to closing, for any offering that includes bonds insured by BAM, any pre -sale Credit Profile will be updated and superseded by a final Credit Profile to include information about the gross par insured by CUSIP, maturity and coupon. BAM pre -sale and final Credit Profiles are easily accessible on BAM's website at buildamerica.com/obligor/. BAM will produce a Credit Profile for all bonds insured by BAM, whether or not a pre -sale Credit Profile has been prepared for such bonds. (The preceding website address is provided for convenience of reference only. Information available at such address is not incorporated herein by reference.) Disclaimers. The Credit Profiles and the Credit Insights videos and the information contained therein are not recommendations to purchase, hold or sell securities or to make any investment decisions. Credit -related and other analyses and statements in the Credit Profiles and the Credit Insights videos are statements of opinion as of the date expressed, and BAM assumes no responsibility to update the content of such material. The Credit Profiles and Credit Insight videos are prepared by BAM; they have not been reviewed or approved by the issuer of or the underwriter for the Bonds, and the issuer and underwriter assume no responsibility for their content. BAM receives compensation (an insurance premium) for the insurance that it is providing with respect to the Bonds. Neither BAM nor any affiliate of BAM has purchased, or committed to purchase, any of the Bonds, whether at the initial offering or otherwise. BOOK -ENTRY -ONLY SYSTEM This section describes how ownership of the Bonds is to be transferred and how the principal of, premium, if any, and interest on the Bonds are to be paid to and credited by the Depository Trust Company while the Bonds are registered in its nominee's name. The information in this section conceming DTC and the Book -Entry -Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The District and the Purchaser believe the source of such information to be reliable, but take no responsibility for the accuracy or completeness thereof. The District and the Purchaser cannot and do not give any assurance the (1) DTC will distribute payments of debt service on the Bonds, or redemption or other notices, to DTC Participant, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Bonds), or redemption or other notices, to the Beneficial Owners (hereinafter defined), or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. DTC will act as securities depository for the Bonds. The Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered certificate will be issued for each maturity of the Bonds, in the aggregate principal amount of each maturity, and will be deposited with DTC. DTC, the world's largest depository, is a limited -purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation", within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non -U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book -entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of certificated securities. Direct Participants include 9 both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has an S&P Global Ratings rating of "AA+". The DTC Rules applicable to its Participants are on file with the SEC. 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 Bonds ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Bonds representing their ownership interests in 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 DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the Record Date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Issuer or the Paying Agent/Registrar, on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC nor its nominee, the Paying Agent/Registrar, or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or the Paying Agent/Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of the Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Issuer or the Paying Agent/Registrar. Under such circumstances, in the event that a successor securities depository is not obtained, physical Bonds are required to be printed and delivered to DTC Participants or the Beneficial Owners, as the case may be. The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that the Issuer and the Purchasers believe to be reliable, but the Issuer, the Financial Advisors and the Purchasers take no responsibility for the accuracy thereof. Use of Certain Terms in Other Sections of this Official Statement In the event that the Book -Entry -Only System is discontinued by DTC or the use of the Book -Entry -Only System is discontinued by the District, printed certificates representing the Bonds will be issued to the holders and the Bonds will be subject to transfer, exchange and registration provisions as set forth in the Ordinance and summarized under "REGISTRATION, TRANSFER AND EXCHANGE — Future Registration". 10 INVESTMENT CONSIDERATIONS General The Bonds are special limited obligations of the District and are not obligations of the Town of Trophy Club, the Town of Westlake, the State of Texas, Denton County, Tarrant County, or any other political subdivision except the District. Payment of the principal of and interest on the Bonds depends upon the ability of the District to collect amounts sufficient to pay all expenses of operation and maintenance of the System, and to provide Net Revenues which will be adequate to pay promptly all of the principal of and interest on the Additional Parity Obligations and to make all deposits required to be made into the Reserve Fund and any other funds established by the Order or any other order authorizing the issuance of Additional Parity Obligations. The District has not covenanted or obligated itself to pay the Bonds from monies raised or to be raised from taxation. Approval of the Bonds The Attorney General of Texas must approve the legality of the Bonds prior to their delivery. The Attorney General of Texas does not pass upon or guarantee the quality of the Bonds as an investment, nor does he pass upon the adequacy or accuracy of the information contained in this Official Statement. Consolidation A district (such as the District) has the legal authority to consolidate with other municipal utility districts and, in connection therewith, to provide for the consolidation of its assets, such as its water and wastewater systems with the assets of the district(s) with which it is consolidating, as well as its liabilities (which would include the Bonds and other outstanding obligations of the District). The District is the resulting entity from a consolidation in May 2009 of Prior MUD 1 and Prior MUD 2 (see "THE DISTRICT"). No representation is made whether the District will consolidate again in the future with any other district. Abolition Under Texas law, if a municipal utility district is located wholly in two or more municipalities, the district may be abolished by agreement among the district and all of the municipalities in which the district is located. The abolition agreement must provide for the distribution among the municipalities of the property and other assets of the district and for the pro rata assumption by the municipalities of all the debts, liabilities, and obligations of the abolished district. When the pro rata share of any district bonds or other obligations payable in whole or in part from property taxes has been assumed by the municipality, the governing body of the municipality is required to levy and collect taxes on all taxable property in the municipality to pay the principal of and interest on its share as the principal and interest become due and payable. If the abolished municipal utility district has outstanding bonds or other obligations payable in whole or in part from the net revenue from the operation of the district utility system or property, the affected municipalities are required take over and operate the system or property through a board of trustees. The municipalities are required to apply the net revenue from the operation of the system or property to the payment of outstanding revenue bonds or other obligations as if the district had not been abolished. The system or property is required to be operated in that manner until all the revenue bonds or obligations are retired in full by payment or by the refunding of the bonds or other obligations into municipal obligations. When all the revenue bonds and other obligations are retired in full, the property and other assets of the district are distributed among the municipalities as described above. On the distribution, the board of trustees is dissolved. The District is located wholly within the municipalities of the Town of Westlake and the Town of Trophy Club. The Town of Westlake has recently proposed that it, the Town of Trophy Club and the District enter into an agreement to abolish the District with the District's assets and liabilities assumed by the two municipalities. The Board of Directors of the District has rejected that proposal and stated that the District currently intends to continue to operate as a municipal utility district. As described above, the District would have to separately agree to any abolition of the District. No representation is made concerning the ability of the Town of Trophy Club and the Town of Westlake to make debt service payments on the Bonds should abolition occur at some point in the future. Alteration of Boundaries In certain circumstances, under Texas law the District may alter its boundaries to: 1) upon satisfying certain conditions, annex additional territory; and 2) exclude land subject to taxation within the District that is not served by District facilities if the District simultaneously annexes land of equal acreage and value that may be practicably served by District facilities. No representation is made concerning the likelihood that the District would effect any change in its boundaries. Registered Owners' Remedies and Bankruptcy Limitations If the District defaults in the payment of principal, interest or redemption price on the Bonds when due, or if it fails to make payments into any fund or funds created in the Bond Resolution or defaults in the observation or performance of any other covenants, conditions or obligations set forth in the Bond Resolution, the Registered Owners have the statutory right of a writ of mandamus issued by a court of competent jurisdiction requiring the District and its officials to observe and perform the covenants, obligations or conditions prescribed in the Bond Resolution. Except for mandamus, the Bond Resolution does not specifically provide for remedies to protect and enforce the interests of the Registered Owners. There is no acceleration of maturity of the Bonds in the event of default and, 11 consequently, the remedy of mandamus may have to be relied upon from year to year. Further, there is no trust indenture or trustee, and all legal actions to enforce such remedies would have to be undertaken at the initiative of, and be financed by, the Registered Owners. Statutory language authorizing local governments such as the District to sue and be sued does not waive the local government's sovereign immunity from suits for money damages, so that in the absence of other waivers of such immunity by the Texas Legislature, a default by the District in its covenants in the Bond Resolution may not be reduced to a judgment for money damages. If such a judgment against the District were obtained, it could not be enforced by direct levy and execution against the District's property. Further, the Registered Owners cannot themselves foreclose on property within the District or sell property within the District to enforce the tax lien on taxable property to pay the principal of and interest on the Bonds. The enforceability of the rights and remedies of the Registered Owners may further be limited by a State of Texas statute reasonably required to attain an important public purpose or 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. Subject to the requirements of Texas law discussed below, a political subdivision such as the District may voluntarily file a petition for relief from creditors under Chapter 9 of the Federal Bankruptcy Code, 11 U.S.C. Sections 901-946. The filing of such petition would automatically stay the enforcement of Registered Owner's remedies, including mandamus. The automatic stay would remain in effect until the federal bankruptcy judge hearing the case dismisses the petition, enters an order granting relief from the stay or otherwise allows creditors to proceed against the petitioning political subdivision. A political subdivision such as the District may qualify as a debtor eligible to proceed in a Chapter 9 case only if it (1) is authorized to file for federal bankruptcy protection by applicable state law, (2) is insolvent or unable to meet its debts as they mature, (3) desires to effect a plan to adjust such debts and (4) has either obtained the agreement of or negotiated in good faith with its creditors or is unable to negotiate with its creditors because negotiation is impracticable. Special districts such as the District must obtain the approval of the TCEQ as a condition to seeking relief under the Federal Bankruptcy Code. The TCEQ is required to investigate the financial condition of a financially troubled district and authorize such district to proceed under federal bankruptcy law only if such district has fully exercised its rights and powers under Texas law and remains unable to meet its debts and other obligations as they mature. Notwithstanding noncompliance by a district with Texas law requirements, the District could file a voluntary bankruptcy petition under Chapter 9, thereby invoking the protection of the automatic stay until the bankruptcy court, after a hearing, dismisses the petition. A federal bankruptcy court is a court of equity and federal bankruptcy judges have considerable discretion in the conduct of bankruptcy proceedings and in making the decision of whether to grant the petitioning District relief from its creditors. While such a decision might be appealable, the concomitant delay and loss of remedies to the Registered Owner could potentially and adversely impair the value of the Registered Owner's claim. Continuing Compliance with Certain Covenants The Order contains covenants by the District intended to preserve the exclusion 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 Currently the District has no plans to issue additional debt within the next twelve months. Future and Proposed Legislation Tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the federal or state level, may adversely affect the tax-exempt status of interest on the Bonds under federal or state law and could affect the market price or marketability of the Bonds. Any such proposal could limit the value of certain deductions and exclusions, including the exclusion for tax-exempt interest. The likelihood of any such proposal being enacted cannot be predicted. Prospective purchasers of the Bonds should consult their own tax advisors regarding the foregoing matters. THE DISTRICT Creation of the District The District was created by the consolidation of two prior municipal utility districts, being Trophy Club Municipal Utility District No. 1 ("Prior MUD 1") and Trophy Club Municipal Utility District No. 2 ("Prior MUD 2" and collectively with Prior MUD 1, the "Prior MUDs"). Prior MUD 1 was created as Denton County Municipal Utility District No. 1 by order of the Texas Water Rights Commission (the "Commission") on March 4, 1975 for the purpose of providing water and sewer facilities and other authorized services to the area within the territory of Prior MUD 1. The name of Prior MUD 1 was changed to Trophy Club Municipal Utility District No. 1 on April 1, 1983. Prior MUD 2 was created as a result of the consolidation of Denton County Municipal Utility District No. 2 and Denton County Municipal Utility District No. 3, which were created by the Texas Commission on Environmental Quality ("TCEQ") for the purpose of providing water, sewer and drainage facilities and other authorized services to the area. The creation of Prior MUD 2 was confirmed by its electorate at an election held on August 9, 1980. On January 26, 2009, the Boards of the Prior MUDs entered into an agreement to consolidate the Prior MUDs into a single Municipal Utility District covering the territory of the Prior MUDs, subject to the approval of the consolidation by the voters at an election held for that purpose. On May 9, 2009, the voters approved the consolidation and the District became the Trophy Club Municipal Utility 12 District No. 1. Pursuant to the consolidation agreement, the District assumed the outstanding bonds, notes and other obligations of the Prior MUDs and the authorized but unissued bonds, taxes and other obligations of the Prior MUDs and became authorized to levy a uniform tax on all taxable property within the District. The functions performed by the District include supplying water for municipal purposes; collecting, transporting, processing and disposing of wastes; establishing, operating and maintaining a fire department; and performing other functions permitted by municipal utility districts under the Texas Water Code. Governance The District is governed by a board of directors which has control over and management supervision of all affairs of the District. There are five elected directors that serve four-year staggered terms. The District and all similar districts are subject to the continuing supervision and filing requirements of the TCEQ, including the preparation and filing of an annual independent audit report. All District facility plans are submitted to the TCEQ for review and approval. Employees The District has seventeen (17) full-time employees for water and wastewater services. The District is required to pay 50% of the costs incurred by the Town (hereinafter defined) for salary, benefits and other compensation of employees who provide firefighting and emergency medical services to both the District and the Town. The District's liabilities under the Agreement for Fire Personnel, including pension benefits, do not have a substantial impact on the District's finances. General The area in the District is locally known as "Trophy Club." It is a residential and mixed-use development consisting of approximately 2,283.5 acres in the Town of Trophy Club, and approximately 468 acres in Town of Westlake (Solana). Of the developed acres within the District, there are approximately 3046 existing households, 136 apartment units, 42 townhouses and 1,444 homes in the Trophy Club PID (the Trophy Club Development"). Location The District is located in southern Denton County and northern Tarrant County partially within the Town of Trophy Club (the "Town") 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 miles from downtown Dallas, 25 miles from downtown Fort Worth, 17 miles from Denton, 8 miles from Grapevine and 14 miles from the Dallas -Fort Worth International Airport. Major highways connecting these population 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 According to District officials, the current population of the District is estimated to be approximately 8,529 (3,046 occupied homes times 2.8 persons per household) and the current population of the entire Town of Trophy Club, the District and the Trophy Club PID No. 1 (the "Trophy Club Development") is estimated at 12,572 (4,490 occupied homes times 2.8 persons per household). Topography and Drainage The land within the District has a gradual slope from the southeast to the northwest toward Marshall Creek, and from the west to the east toward Marshall Creek. 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 approximately 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 flood 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 shopping center within the District has a major grocery store chain, a bank, a major drug store chain, several service businesses, multiple food outlets, beauty shop, and a dry-cleaners. Additionally, there are several more businesses and professional offices located in the District, at the primary entrance to the Town of Trophy Club, and a few restaurants and hotels sitting off the 114 Highway. There are additional shopping facilities in Roanoke, about two (2) miles west of the District and numerous shopping facilities in Southlake about five (5) miles east of the District 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 from the District. 13 Fire Protection The District operates its Fire Department (the "Department") with an engine, a Quint, a brush truck and two support vehicles. Currently the Department is staffed with fifteen (15) full-time professional firefighter/paramedic, fourteen (14) part-time professional Firefighter/EMTs and 4 certified volunteers. Operations under the Department include fire suppression, fire prevention, emergency management, investigation/enforcement and emergency medical response. Police Protection Twenty -four-hour security is provided by the Town of Trophy Club Police Department, Schools The Town is served by the Northwest Independent School District (the "School District" or "Northwest ISD"). Northwest ISD covers approximately 234 square miles in Denton, Wise and Tarrant Counties. In addition to serving the Town, the School District also serves the communities of Aurora, Fairview, Haslet, Justin, Newark, Northlake, Rhome, Roanoke, Trophy Club, Avondale, Drop, Fairview, Marshall Creek and Northlake. Northwest ISD is comprised of 17 elementary schools, 5 middle schools 4 high schools and 2 special schools. The School District serves a 2018-19 estimated enrollment of 24,271. Recreational Opportunities Recreational opportunities in Trophy Club are afforded by Lake Grapevine and its surrounding parks, which lie two miles north and east of the District. The Town has several community parks, including facilities for soccer, baseball, softball, basketball, tennis, a competitive swimming pool and playground amenities. The Town also operates an 877 acre Corps of Engineers park, which features 100 acres of motorized trails, as well as many passive recreational opportunities such as fishing, hiking and picnicking. Status of Development of the District The District is a mature district with approximately 10 acres undeveloped throughout the Town of Trophy Club besides a new development, PD 30, started in 2018. PD 30 has approximately 26.5 acres in the development and is comprised of 36 townhomes, 236 apartments, and various commercial establishments. There is substantial land left for commercial development in the Solana complex, which is located within the Town of Westlake. Status of Business / Commercial Development Solana business complex ("Solana"), a 900 -acre tract located in the District and the Town of Westlake, has approximately 230 acres available for additional development. The existing 14 building campus style office development was originally owned by Los Angeles based Maguire Thomas Partners and IBM Corporation. In September 2014, the Maguire Thomas Partners properties in Solana were sold to BRE Solana LLC (Tarrant Appraisal District lists this taxpayer as 5 Village Circle Holding, LP. Multiple other commercial developments are under construction from restaurant row, retail corner, and others in the undeveloped property in Solana which were approved by the Town of Westlake in 2013. The District cannot predict the impact that any future development may have on the District's financial condition. Public Improvement District Description Trophy Club PID No. 1 (the "PID") consists of approximately 609.683 acres of land generally to the north of Oakmont Drive, Oak Hill Drive and the Quorum Condominiums, east of the Lakes Subdivision and Parkview Drive, south of the Corps of Engineer's property, and west of the Town's eastern limit. The PID is located entirely within the Town limits but outside the District. A master- planned residential community (the "Property") is under construction in the PID and has reached buildout with 1,444 residential connections. located within the Property, which Property is zoned to permit such use pursuant to the PID Zoning. As of September 30, 2014, 1,173 homes have been completed and are occupied and an additional 63 homes have been permitted and are currently under construction. The PID is projected to build out as early as 2017. The District provides emergency and fire protection services to the PID, and the PID pays the District an assessment for such services through a calculated tax rate. The District also provides water and sewer service for the PID. The total billed for PID water and sewer at the end of fiscal year 2018 was $1,578,783. THE DISTRICT'S SYSTEM The following information describes generally the water and wastewater systems for the District. Description of the Water System Sources of Water Supply: The present water supply is provided from two sources: (i) four ground wells which provide approximately 800,000 gallons per day, and (ii) a 21 -inch water line which can deliver 10,000,000 gallons per day of treated water from the City of Fort Worth facilities. Currently the District has a contract with the City of Fort Worth, which expires September 30, 2031, for unlimited water services. Current maximum usage is approximately 7,310,000 gallons per day (of which 6,510,000 is Fort Worth water). These 14 sources, when combined, provide water which complies with the quality requirements of the TCEQ and needs only chlorination at the District's water plant facility. Water Plant Facility: The present facility provides 900,000 gallons elevated and 6,000,000 gallons ground storage with pumping/chlorination capacity of 10,000,000 gallons per day. Description of the Wastewater System Wastewater Treatment Plant Facility: The wastewater treatment plant system has a permitted treatment/discharge capacity of 1,750,000 gallons per day from the TCEQ under TPDES Permit No. 11593-001. The District's discharge permit was renewed in December 2017. Although the permit authorizes the discharge of wastewater to the adjacent tributary leading to Lake Grapevine, the plant effluent is mostly pumped to various holding ponds within the community of Trophy Club and is re -used for irrigating the golf course. The District had previously issued GO and Rev Bonds for a combined $14,995,000 approved by the Texas Commission on Environmental Quality ("TCEQ"). Even though the WWTP project is behind the original construction schedule due to various delays, the project is nearly 99% completion by the end of January 2019. The WWTP project is anticipated to run approximately $1,900,000 over budget, and the District is seeking to finance the overrun as part of the $7,080,000 revenue bond issuance in addition to the water system improvements. 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. Under Texas law, the District is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities, including letters of credit; (2) direct obligations of the State of Texas or its agencies and instrumentalities; (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States; (4) other obligations, 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, including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States; (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 and share certificates meeting the requirements of the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code, as amended) (i) that are issued by or through an institution that has its main office or a branch office in Texas and are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance 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; or (ii) where (a) the funds are invested by the District through (I) a broker that has its main office or a branch office in the State of Texas and is selected from a list adopted by the District as required by law or (II) a depository institution that has its main office or a branch office in the State of Texas that is selected by the District; (b) the broker or the depository institution selected by the District arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions, wherever located, for the account of the District; (c) the full amount of the principal and accrued interest of each of the certificates of deposit is insured by the United States or an instrumentality of the United States, and (d) the District appoints the depository institution selected under (a) above, a custodian as described by Section 2257.041(d) of the Texas Government Code, or a clearing broker-dealer registered with the Securities and Exchange Commission and operating pursuant to Securities and Exchange Commission Rule 15c3-3 (17 C.F.R. Section 240.15c3-3) as custodian for the District with respect to the certificates of deposit; (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by a combination of cash and obligations described in clause (1) which are pledged to the District, held in the District's name, and deposited at the time the investment is made with the District or with a third party selected and approved by the District and are placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in the State; (9) securities lending programs if (i) the securities loaned under the program are 100% collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (6) above, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than "A" or its equivalent or (c) cash invested in obligations described in clauses (1) through (6) above, clauses (11) through (13) below, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the District, held in the District's name and deposited at the time the investment is made with the District or a third party designated by the District; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State of Texas; and (iv) the agreement to lend securities has a term of one year or less; (10) 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-1" or "P-1" or the equivalent by at least one nationally recognized credit rating agency; (11) commercial paper with a stated maturity of 270 days or less that is rated at least "A-1" or "P-1" or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank; (12) no-load money market mutual funds registered with and regulated by the United States Securities and Exchange Commission that have a dollar weighted average stated maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share; and, (13) no-load mutual funds registered with the United States Securities and Exchange Commission that have an average 15 weighted maturity of less than two years, invest exclusively in obligations described in 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 nationally recognized rating service. The District may also contract with an investment management firm registered under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board to provide for the investment and management of its public funds or other funds under its control for a term up to two years, but the District retains ultimate responsibility 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, methods to monitor the market price of investments acquired with public funds, a requirement for settlement of all transactions, except investment pool funds and mutual funds, on a delivery versus payment basis, and procedures to monitor rating changes in investments acquired with public funds and the liquidation of such investments consistent with the Public Funds Investment Act. All District funds must be invested consistent with a formally adopted "Investment 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 portfolio, and 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 probable safety of capital and the 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, the ending market value and the fully accrued interest for the reporting period of each pooled fund group, (4) the book value and market value of each separately listed asset at the 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 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 State law, the District is additionally required to: (1) annually review its adopted policies and strategies; (2) adopt by written instrument a rule, order, ordinance or resolution stating that it has reviewed its investment policy and investment strategies and records any changes made to either its investment policy or investment strategy in the respective rule, order, ordinance or resolution; (3) require any investment officers with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the Board of Directors; (4) require the qualified representative of firms offering to engage in an investment transaction with the District to: (a) receive and review the District's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude investment transactions conducted between the District and the business organization that are not authorized by the District's investment policy (except to the extent that this authorization is dependent on an analysis of the makeup of the District's entire portfolio or requires an interpretation of subjective investment standards), and (c) deliver a written statement in a form acceptable to the District and the business organization attesting to these requirements; (5) perform an annual audit of the management controls on investments and adherence to the District's investment policy; (6) provide specific investment training for the Treasurer, chief financial officer and investment officers; (7) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse purchase agreement; (8) restrict the investment in no-load mutual funds in the aggregate to no more than 15% of the District's monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service; (9) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements; and (10) at least annually review, revise and adopt a list of qualified brokers that are authorized to engage in investment transactions with the District. 16 Current Investments As of September 30, 2018 (Audited) the District's funds were invested in the District's bank accounts and TexPool as shown in the table that follows. The District does not currently own, nor does it anticipate the inclusion of long-term securities or derivative products in its portfolio. Prosperity Bank Account- General Fund Prosperity Bank Money Market Account- Improvement Reserves TexPool - General Fund (Includes Operating Fund/Fire Dept./Reserves for Future Asset Replacement) TexPool - Debt Service Escrow- Capital Projects Fund $ 1,641,684.00 983,515.00 4,368,107.00 682,345.00 767, 358.00 $ 8,443,009.00 The Texas State Comptroller of Public Accounts exercises oversight responsibility over the Texas Local Government Investment Pool ("TexPool"). Oversight includes the ability to significantly influence operations, designation of management and accountability for fiscal matters. Additionally, the State Comptroller has established an advisory board composed both of participants in TexPool and of the other persons who do not have a business relationship with TexPool. The advisory Board members review the investment policy and management fee structure. Finally, TexPool is rated AAA by S&P. TexPool operates in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. As such, TexPool uses amortized cost to report net assets and share prices since that amount approximates fair value. LEGAL MATTERS Legal Opinions Issuance of the Bonds is subject to the approving legal opinion of the Attorney General of Texas to the effect that the initial Bonds are valid and binding obligations of the District and based upon examination of a transcript of the proceedings incident to authorization and issuance of the Bonds, the approving legal opinion of McLean and Howard, L.L.P., ("Bond Counsel") to the effect that the Bonds are valid and binding obligations of the District payable from the sources and enforceable in accordance with the terms and conditions described therein, except to the extent that the enforceability thereof may be affected by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors' rights or the exercise of judicial discretion in accordance with general principles of equity. Bond Counsel's legal opinion will also address the matters described below under "TAX MATTERS - Tax Exemption." Such opinions will express no opinion with respect to the sufficiency of the security for or the marketability of the Bonds. In its capacity as Bond Counsel, McLean and Howard, L.L.P. has reviewed the information describing the Bonds in the Official Statement to verify that such description conforms to the provisions of the Order. The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of the Bonds are based upon a percentage of Bonds actually issued, sold and delivered, and therefore, such fees are contingent upon the sale and delivery of the Bonds. The legal opinion to be delivered concurrently with the delivery of the Bonds expresses the professional judgment of the attorney rendering the opinion as to the legal issue explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of 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. Though it represents the financial Advisor and certain entities that may bid on the Bonds from time to time in matters unrelated to the issuance of the Bonds, Bond Counsel has been engaged by and only represents the District in connection with the issuance of the Bonds. No -Litigation Certificate The District will furnish to the Initial Purchaser a certificate, dated as of the date of delivery of the Bonds, executed by both the President and Secretary of the Board, to the effect that no litigation of any nature, except as disclosed in this Official Statement, has been filed or is then pending or threatened, either in state or federal courts, contesting or attacking the Bonds; restraining or enjoining the issuance, execution or delivery of the Bonds; affecting the provisions made for the payment of or security for the Bonds; in any manner questioning the authority or proceedings for the issuance, execution, or delivery of the Bonds; or affecting the validity of the Bonds. No Material Adverse Change The obligations of the Initial Purchaser to take and pay for the Bonds, and of the District to deliver the Bonds, are subject to the condition that, up to the time of delivery of and receipt of payment for the Bonds, there shall have been no material adverse change in the condition (financial or otherwise) of the District from that set forth or contemplated in the Official Statement. 17 TAX MATTERS Tax Exemption The delivery of the Bonds is subject to the opinion of Bond Counsel to the effect that interest on the Bonds for federal income tax purposes (1) will be excludable from gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date of such opinion (the "Code"), pursuant to section 103 of the Code and existing regulations, published rulings, and court decisions, and (2) will not be included in computing the alternative minimum taxable income of the owners thereof who are individuals. A form of Bond Counsel's opinion is reproduced as Appendix C. The statutes, regulations, rulings, and court decisions on which such opinion is based are subject to change. In rendering the foregoing opinions, Bond Counsel will rely upon representations and certifications of the District made in a certificate dated the date of delivery of the Bonds pertaining to the use, expenditure, and investment of the proceeds of the Bonds and will assume continuing compliance by the District with the provisions of the Order subsequent to the issuance of the Bonds. The Order contains covenants by the District with respect to, among other matters, the use of the proceeds of the Bonds and the facilities financed therewith by persons other than state or local governmental units, the manner in which the proceeds of the Bonds are to be invested, the periodic calculation and payment to the United States Treasury of arbitrage "profits" from the investment of proceeds, and the reporting of certain information to the United States Treasury. Failure to comply with any of these covenants may cause interest on the Bonds to be includable in the gross income of the owners thereof from the date of the issuance of the Bonds. Bond Counsel's opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the District described above. No ruling has been sought from the Internal Revenue Service (the "IRS") with respect to the matters addressed in the opinion of Bond Counsel, and Bond Counsel's opinion is not binding on the IRS. The IRS has an ongoing program of auditing the tax-exempt status of the interest on tax-exempt obligations. If an audit of the Bonds is commenced, under current procedures the IRS is likely to treat the District as the "taxpayer," and the owners of the Bonds would have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest on the Bonds, the District may have different or conflicting interests from the owners of the Bonds. Public awareness of any future audit of the Bonds could adversely affect the value and liquidity of the Bonds during the pendency of the audit, regardless of its ultimate outcome. Except as described above, Bond Counsel expresses no other opinion with respect to any other federal, state or local tax consequences under present law, or proposed legislation, resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Bonds. Prospective purchasers of the Bonds should be aware that the ownership of tax-exempt obligations such as the Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, taxpayer qualifying for the health insurance premium assistance credit, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, owners of an interest in a FASIT, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Prospective purchasers should consult their own tax advisors as to the applicability of these consequences to their particular circumstances. Existing law may change to reduce or eliminate the benefit to bondholders of the exclusion of interest on the Bonds from gross income for federal income tax purposes. Any proposed legislation or administrative action, whether or not taken, could also affect the value and marketability of the Bonds. Prospective purchasers of the Bonds should consult with their own tax advisors with respect to any proposed or future changes in tax law. Tax Accounting Treatment of Discount and Premium on Certain Bonds The initial public offering price of certain Bonds (the "Discount Bonds") may be less than the amount payable on such Bonds at maturity. An amount equal to the difference between the initial public offering price of a Discount Bond (assuming that a substantial amount of the Discount Bonds of that maturity are sold to the public at such price) and the amount payable at maturity constitutes original issue discount to the initial purchaser of such Discount Bond. A portion of such original issue discount allocable to the holding period of such Discount Bond by the initial purchaser will, upon the disposition of such Discount Bond (including by reason of its payment at maturity), be treated as interest excludable from gross income, rather than as taxable gain, for federal income tax purposes, on the same terms and conditions as those for other interest on the Bonds described above under "Tax Exemption." Such interest is considered to be accrued actuarially in accordance with the constant interest method over the life of a Discount Bond, taking into account the semiannual compounding of accrued interest, at the yield to maturity on such Discount Bond and generally will be allocated to an initial purchaser in a different amount from the amount of the payment denominated as interest actually received by the initial purchaser during the tax year. However, such interest may be required to be taken into account in determining the amount of the branch profits tax applicable to certain foreign corporations doing business in the United States, even though there will not be a corresponding cash payment. In addition, the accrual of such interest may result in certain other collateral federal income tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, S corporations with subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, owners of an interest in a FASIT, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Moreover, in the event of the redemption, sale or other taxable disposition of a Discount Bond by the initial owner prior to maturity, the amount realized by such owner in excess of the basis of such 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 Discount Bond was held) is includable in gross income. 18 Owners of Discount Bonds should consult with their own tax advisors with respect to the determination of accrued original issue discount on Discount Bonds for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of Discount Bonds. It is possible that, under applicable provisions governing determination of state and local income taxes, accrued interest on Discount Bonds may be deemed to be received in the year of accrual even though there will not be a corresponding cash payment. The initial public offering price of certain Bonds (the "Premium Bonds") may be greater than the amount payable on such Bonds at maturity. An amount equal to the difference between the initial public offering price of a Premium Bond (assuming that a substantial amount of the Premium Bonds of that maturity are sold to the public at such price) and the amount payable at maturity constitutes premium to the initial purchaser of such Premium Bonds. The basis for federal income tax purposes of a Premium Bond in the hands of such initial purchaser must be reduced each year by the amortizable bond premium, although no federal income tax deduction is allowed as a result of such reduction in basis for amortizable bond premium. Such reduction in basis will increase the amount of any gain (or decrease the amount of any Toss) to be recognized for federal income tax purposes upon a sale or other taxable disposition of a Premium Bond. The amount of premium which is amortizable each year by an initial purchaser is determined by using such purchaser's yield to maturity. Purchasers of the Premium Bonds should consult with their own tax advisors with respect to the determination of amortizable bond premium on Premium Bonds for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of Premium Bonds. Qualified Tax -Exempt Obligations for Financial Institutions Section 265 of the Code provides, in general, that interest expense to acquire or carry tax-exempt obligations is not deductible from the gross income of the owner of such obligations. In addition, section 265 of the Code generally disallows 100% of any deduction for interest expense which is incurred by "financial institutions" described in such section and is allocable, as computed in such section, to tax-exempt interest on obligations acquired after August 7, 1986. Section 265(b) of the Code provides an exception to this interest disallowance rule for interest expense allocable to tax-exempt obligations (other than private activity bonds that are not qualified 501(c)(3) bonds) which are designated by an issuer as "qualified tax-exempt obligations." An issuer may designate obligations as "qualified tax-exempt obligations" only if the amount of the issue of which they are a part, when added to the amount of all other tax-exempt obligations (other than private activity bonds that are not qualified 501(c)(3) obligations and other than certain refunding bonds) issued or reasonably anticipated to be issued by the issuer during the same calendar year, does not exceed $10,000,000. The District will designate the Bonds as "qualified tax-exempt obligations" and has certified its expectation that the above- described $10,000,000 ceiling will not be exceeded. Accordingly, it is anticipated that financial institutions which purchase the Bonds will not be subject to the 100% disallowance of interest expense allocable to interest on the Bonds under section 265(b) of the Code. However, the deduction for interest expense incurred by a financial institution which is allocable to the interest on the Bonds will be reduced by 20% pursuant to section 291 of the Code. CONTINUING DISCLOSURE OF INFORMATION In the Order, the Issuer has made the following agreement for the benefit of the holders and beneficial owners of each of the Bonds. The Issuer is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds. Under the agreement, the Issuer will be obligated to provide certain updated financial information and operating data annually, and timely notice of certain specified events, to the Municipal Securities Rulemaking Board (the "MSRB"). Annual Reports The Issuer will provide certain updated financial information and operating data to the MSRB. The District will provide all quantitative financial information and operating data with respect to the District of the general type included in this Official Statement. The information to be updated includes Tables 1, 2, 3, 4, 5, 8, 9 and 10 of Appendix A, and the annual audited financial statements of the District. The Issuer will update and provide this information within six months after the end of each fiscal year ending in and after 2019. The financial information to be provided may be set forth in full in one or more documents or may be included by specific reference to any document available to the public on the MSRB's Internet Website or filed with the SEC, as permitted by SEC Rule 15c2-12 (the "Rule"). The updated information will include audited financial statements for the Issuer, if the Issuer commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the Issuer will provide unaudited financial statements by the required time and audited financial statements when and if such audited financial statements become available. Any such financial statements will be prepared in accordance with the accounting principles described in Appendix D or such other accounting principles as the Issuer may be required to employ from time to time pursuant to State law or regulation. 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 Issuer changes its fiscal year. If the Issuer changes its fiscal year, it will notify the MSRB of the change. Notice of Certain Events The Issuer will provide timely notices of certain events to the MSRB, but in no event will such notices be provided to the MSRB in excess of ten business days after the occurrence of an event. The Issuer will provide notice of any of the following events with respect 19 to the Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (7) modifications to rights of Beneficial Owners of the Bonds, if material; (8) bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the Issuer or other obligated person within the meaning of CFR § 240.15c2-12 (the "Rule"); (13) consummation of a merger, consolidation, or acquisition involving the Issuer or other obligated person within the meaning of the Rule or the sale of all or substantially all of the assets of the Issuer or other obligated person within the meaning of the Rule, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of an definitive agreement relating to any such actions, other than pursuant to its terms, if material; (14) appointment of a successor or additional trustee or the change of name of a trustee, if material; (15) incurrence of a financial obligation of the obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the obligated person, any of which affect security holders, if material; and (16) default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the obligated person, any of which reflect financial difficulties. The terms "financial obligation" and "material" when used in this paragraph shall have the meanings ascribed to them under federal securities laws. Availability of Information from MSRB The Issuer has agreed to provide the foregoing financial information and operating data only as described above. Investors will be able to access continuing disclosure information filed with the MSRB free of charge at www.emma.msrb.org. Limitations and Amendments The Issuer has agreed to update information and to provide notices of certain specified events only as described above. The Issuer 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 Issuer 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 Issuer 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 Issuer to comply with its agreement. The Issuer 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 Issuer, 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 Issuer (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the beneficial owners of the Bonds. The Issuer 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 Issuer 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 For the last five years, the District has complied in all material respects with its previous continuing disclosure agreements made in accordance with the Rule. FINANCIAL ADVISOR SAMCO Capital Markets, Inc. is employed as a Financial Advisor to the Issuer in connection with the issuance of the Bonds. In this capacity, the Financial Advisor has compiled certain data relating to the Bonds and has assisted in drafting 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 Issuer to determine the accuracy or completeness of this Official Statement. Because of its limited participation, the Financial Advisor assumes no responsibility for the accuracy or completeness of any of the information contained herein. The fees for the Financial Advisor are contingent upon the issuance, sale and delivery of the Bonds. The Financial Advisor has provided the following sentence for inclusion in this Official Statement. The Financial Advisor has reviewed the information in this Official Statement in accordance with its responsibilities to the Issuer and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. 20 OFFICIAL STATEMENT Updating the Official Statement During Underwriting Period If, subsequent to the date of the Official Statement to and including the date the Initial Purchaser is no longer required to provide an Official Statement to potential customers who request the same pursuant to Rule 15c2-12 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 the MSRB, but in no case less than 25 days after the "end of the underwriting period"), the District learns or is notified by the Initial Purchaser 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 Initial Purchaser a supplement to the Official Statement which corrects such representation to the reasonable satisfaction of the Initial Purchaser. (See "DELIVERY OF THE BONDS AND ACCOMPANYING DOCUMENTS" in the Official Notice of Sale herein.) The obligation of the District to update or change the Official Statement will terminate 25 days after the date the District delivers the Bonds to the Initial Purchaser (the "end of the underwriting period" within the meaning of the Rule), unless the Initial Purchaser provides written notice to the District that less than all of the Bonds have been sold to ultimate customers on or before such date, in which case the obligation to update or change the Official Statement will extend for an additional period of time of 25 days after all of the Bonds have been sold to ultimate customers (but no longer than 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 the MSRB, but in no case less than 25 days after the "end of the underwriting period" for the Bonds). In the event the Initial Purchaser provides written notice to the District that less than all of the Bonds have been sold to ultimate customers, the Initial Purchaser agrees to notify the District in writing following the occurrence of the "end of the underwriting period" as defined in the Rule. 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 Districts 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 Official Statement will prove to be accurate. OTHER MATTERS Legal Investment and Eligibility to Secure Public Funds in Texas Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Bonds are negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking fund of municipalities or other political subdivisions or public agencies of the State of Texas. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Bonds are legal investments for state banks, savings banks, trust companies with at least $1 million of capital and savings and loan associations. The Bonds are eligible to secure deposits of any public funds of the state, its agencies and political subdivisions, and are legal security for those deposits to the extent of their market value. For political subdivisions in Texas which have adopted investment policies and guidelines in accordance with the Public Funds Investment Act (Texas Government Code, Chapter 2256), the Bonds may have to be assigned a rating of "A" or its equivalent as to investment quality by a national rating agency before such obligations are eligible investments for sinking funds and other public funds. (See "RATINGS" herein.) No representation is made that the Bonds will be acceptable to public entities to secure their deposits or acceptable to such institutions for investment purposes. The District has made no investigation of other laws, rules, regulations or investment criteria which might apply to any such persons or entities or which might otherwise limit the suitability of the Bonds for any of the foregoing purposes or limit the authority of such persons or entities to purchase or invest in the Bonds for such purposes. The District has not made any review of the laws in other states to determine whether the Bonds are legal investments for various institutions in those states. 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 21 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. Financial Advisor SAMCO Capital Markets, Inc. is employed as the Financial Advisor to the Issuer in connection with the issuance of the Bonds. In this capacity, the Financial Advisor has compiled certain data relating to the Bonds and has assisted in drafting 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 Issuer to determine the accuracy or completeness of this Official Statement. Because of its limited participation, the Financial Advisor assumes no responsibility for the accuracy or completeness of any of the information contained herein. The fees for Financial Advisor are contingent upon the issuance, sale and delivery of the Bonds. Winning Bidder On March 18, 2019, the Bonds were awarded to IFS Securities (the "Purchaser") through a competitive bid process. The initial reoffering yields were supplied to the District by the Purchaser. The initial reoffering yields shown on page ii of the Official Statement will produce compensation to the Purchaser of approximately $99,722.29. Certification as to Official Statement At the time of payment for and delivery of the Bonds, the Purchaser will be furnished a certificate executed by the proper officials of the District acting in their official capacity, to the effect that: (a) the descriptions and statements of or pertaining to the District contained in its Official Statement relating to the Bonds, and any addenda, supplement or amendment thereto, on the date of such Official Statement, on the date of the sale of said Bonds, and on the date of the delivery, were and are true and correct in all material respects; (b) insofar as the District and its affairs, including its financial affairs, are concerned, such Official Statement did not and does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statement therein, in the Tight of the circumstances under which they were made, not misleading; (c) to the best of their knowledge, insofar as the descriptions and statements, including financial data, or pertaining to entities, other than the District and its activities, contained in such Official Statement are concerned, such statements and data have been obtained from sources which the District believes to be reliable and the District has no reason to believe that they are untrue in any material respect; and (d) there has been no material adverse change in the financial condition of the District since September 30, 2018, the date of the last audited financial statements of the Issuer provided in the Preliminary Official Statement for the Bonds. The Official Statement was approved as to form and content and the use thereof in the offering of the Bonds was authorized, ratified and approved by the Board on the date of sale, and the Purchasers will be furnished, upon request, at the time of payment for and the delivery of the Bonds, a certified copy of such approval, duly executed by the proper officials of the Issuer. Concluding Statement The financial data and other information contained in this Official Statement have been obtained from the District's records, audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and orders contained in this Official Statement are made subject to all of the provisions of such statues, documents and orders. 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 all respects. This Official Statement was approved by the Board of the Issuer for distribution in accordance with the provisions of the Rule. Mr. Steve Flynn Secretary/Treasurer, Board of Directors Trophy Club Municipal Utility District No. 1 22 Mr. Gregory Wilson President, Board of Directors Trophy Club Municipal Utility District No. 1 APPENDIX A FINANCIAL INFORMATION OF THE ISSUER (This appendix contains quantitative 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.) (this page intentionally left blank) FINANCIAL INFORMATION OF THE ISSUER REVENUE BOND DEBT DATA TABLE 1 Revenue Bond Debt Principal Outstanding: (As of September 30, 2018) Waterworks and Sewer System Revenue Bonds, Series 2015 Waterworks and Sewer System Revenue Bonds, Series 2016 Water and Sewer System Revenue Bonds, Series 2019 (the "Bonds") Total Revenue Debt Principal Outstanding $ 8,280,000 4,230,000 7,080,000 $ 19,590,000 CONDENSED WATER AND SEWER SYSTEM OPERATING STATEMENT TABLE 2 Fiscal Year Ending September 30 2018 2017 2016 2015 Ooeratina Revenues(a) Water and Wastewater Charges $ 9,286,714 Investment Income 61,283 Other Revenues and Fees 57,864 Total Operating Revenues $ 9,405,861 Ooeratina Expenses(`) Operating and Maintenance Expenses Total Operating Expenses $ 5,284,818 $ 5,284,818 (b) 2014 $ 8,632,747 $ 6,729,926 $ 6,138,766 $ 5,730,872 18,940 12,652 6,117 6,071 136,863 120,867 211,321 203,206 $ 8,788,550 $ 6,863,445 $ 6,356,204 $ 5,940,149 $ 5,056,094 $ 5,176,084 $ 5,163,671 $ 5,056,094 $ 5,176,084 $ 5,163,671 $ 4,840,819 $ 4,840,819 Net Revenues Available for Debt Service $ 4,121,043 $ 3,732,456 $ 1,687,361 $ 1,192,533 $ 1,099,330 Supplemental Utility Fees $ - $ - $ 55,200 (d) $ 239,200 (d) $ 331,200 (d) Active Customer Count : Water 4,723 (e) 4,683 4,779 4,704 4,339 Sewer 4,728 (e) 4,688 4,784 4,710 4,344 (a) Includes water and sewer revenues and excludes ad valorem property tax revenues. (b) Audited 2018 Operating Revenues reflect an increase in water & sewer rates, effective April 1, 2018. (See Water & Sewer Rates - Table 10.) (c) Excludes depreciation, capital outlays, fire service expenses and ad valorem property tax -related expenses. (d) Supplemental Utility Fees are generated under the terms of a contract with the Town of Trophy Club to serve homes in the Public Improvement District (PID) and are based on a one time per new home permit charge of $2,300, for a total of 1,407 homes. The total of 1,407 Utility Fees collected was completed in January 2016. (e) Customer count includes 1,444 wholesale connections served by the District through a wholesale agreement with the Town of Trophy Club. Sources: The Issuer's Comprehensive Annual Financial Reports and Other Information from the Issuer. DEBT SERVICE COVERAGE Fiscal Year Ended September 30, 2018 (Audited) Net Revenues Available for Debt Service Following the Issuance of the Bonds: TABLE 3 $ 4,121,043 Average Annual Principal and Interest Requirements (2019-2049) $ 989,171.26 Coverage of Average Requirements from FY 2018 Net System Revenues 4.17 X Maximum Principal and Interest Requirements (2020) Coverage of Maximum Requirements from FY 2018 Net System Revenues A-1 1,451,962.50 2.84 X OTHER OBLIGATIONS TABLE 4 Principal Interest Average Outstanding Year of Rate Final Annual Original Unaudited Descriotion Issue Payable Maturity Payment Amount as of 9-30-18 Capital Lease Fire Truck 2014 2.50% 2022 $ 127,149 $ 1,057,316 $ 463,561 (a) Notes Payable: Total Other Obligations $ 463,561 (a) The District paid $250, 000 in a down payment on October 23, 2014. The Capital Lease calls for seven additional annual payments of $127,149 scheduled for fiscal years 2016 through 2022. The Capital Lease/Fire Truck is paid from Fire Tax Revenue. FUND BALANCES TABLE 5 (As of September 30, 2018 Audited) Water and Sewer Operating Fund (Unassigned) $ 7,254,013 Water and Sewer Operating Fund (Assigned / Non -Spendable Prepaids) 1,510,481 Water and Sewer Capital Projects Fund (1,091,510) Revenue Bond Interest and Sinking Fund 22,145 Revenue Bond Reserve Fund 606,910 Reserve Fund for Replacement of Infrastructure 596,426 Total $ 8,898,465 Source: The Issuer A-2 REVENUE BOND DEBT SERVICE REQUIREMENTS TABLE 6 Revenue The Bonds Fiscal Year Debt Service Combined Ending 9-30 Outstanding Prinicpal Interest Total Debt Service 2019 $ 872,338.50 $ $ - $ - $ 872,338.50 2020 873,362.50 326,686.18 326,686.18 1,200,048.68 2021 874,036.00 155,000.00 223,587.50 378,587.50 1,252,623.50 2022 879,402.00 160,000.00 218,937.50 378,937.50 1,258,339.50 2023 879,376.00 165,000.00 214,137.50 379,137.50 1,258,513.50 2024 883, 952.00 170,000.00 209,187.50 379,187.50 1,263,139.50 2025 893,030.00 175,000.00 204,087.50 379,087.50 1,272,117.50 2026 890,475.00 180,000.00 198,837.50 378,837.50 1,269,312.50 2027 896,387.50 185,000.00 193,437.50 378,437.50 1,274,825.00 2028 896,499.50 190,000.00 187,887.50 377,887.50 1,274,387.00 2029 904, 781.50 195, 000.00 182,187.50 377,187.50 1,281,969.00 2030 906,808.50 205,000.00 176,337.50 381,337.50 1,288,146.00 2031 911,690.50 210,000.00 170,187.50 380,187.50 1,291,878.00 2032 915,661.00 215,000.00 163,887.50 378,887.50 1,294,548.50 2033 913,836.00 220,000.00 157,437.50 377,437.50 1,291,273.50 2034 926,286.00 230,000.00 150,837.50 380,837.50 1,307,123.50 2035 926,737.50 235,000.00 143,937.50 378,937.50 1,305,675.00 2036 275,724.00 245,000.00 136,887.50 381,887.50 657,611.50 2037 250,000.00 129,537.50 379,537.50 379,537.50 2038 255,000.00 122,037.50 377,037.50 377,037.50 2039 265,000.00 114,068.76 379,068.76 379,068.76 2040 275,000.00 105,787.50 380,787.50 380,787.50 2041 285,000.00 96,850.00 381,850.00 381,850.00 2042 290,000.00 87,587.50 377,587.50 377,587.50 2043 300,000.00 78,162.50 378,162.50 378,162.50 2044 310,000.00 68,412.50 378,412.50 378,412.50 2045 320,000.00 58,337.50 378,337.50 378,337.50 2046 330,000.00 47,537.50 377,537.50 377,537.50 2047 345,000.00 36,400.00 381,400.00 381,400.00 2048 355,000.00 24,756.26 379,756.26 379,756.26 2049 365,000.00 12,775.00 377,775.00 377,775.00 $15,520,384.00 $ 7,080,000.00 $ 4,240,736.20 $11,320,736.20 $ 26,841,120.20 A-3 PRINCIPAL REPAYMENT SCHEDULE TABLE 7 Bonds Percent of Fiscal Year Outstanding The Total Unpaid at Principal Ending 9-30 Revenue Debt Bonds Debt End of Year Retired (%) 2019 $ 595,000 $ $ 595,000 $ 18,995,000 3.04% 2020 605,000 605,000 18,390,000 6.13% 2021 615,000 155,000 770,000 17,620,000 10.06% 2022 630,000 160,000 790,000 16,830,000 14.09% 2023 640,000 165,000 805,000 16,025,000 18.20% 2024 655,000 170,000 825,000 15,200,000 22.41% 2025 675,000 175,000 850,000 14,350,000 26.75% 2026 685,000 180,000 865,000 13,485,000 31.16% 2027 705,000 185,000 890,000 12,595,000 35.71% 2028 720,000 190,000 910,000 11,685,000 40.35% 2029 745,000 195,000 940,000 10,745,000 45.15% 2030 765,000 205,000 970,000 9,775,000 50.10% 2031 790,000 210,000 1,000,000 8,775,000 55.21% 2032 815,000 215,000 1,030,000 7,745,000 60.46% 2033 835,000 220,000 1,055,000 6,690,000 65.85% 2034 870,000 230,000 1,100,000 5,590,000 71.47% 2035 895,000 235,000 1,130,000 4,460,000 77.23% 2036 270,000 245,000 515,000 3,945,000 79.86% 2037 250,000 250,000 3,695,000 81.14% 2038 255,000 255,000 3,440,000 82.44% 2039 265,000 265,000 3,175,000 83.79% 2040 275,000 275,000 2,900,000 85.20% 2041 285,000 285,000 2,615,000 86.65% 2042 290,000 290,000 2,325,000 88.13% 2043 300,000 300,000 2,025,000 89.66% 2044 310,000 310,000 1,715,000 91.25% 2045 320,000 320,000 1,395,000 92.88% 2046 330,000 330,000 1,065,000 94.56% 2047 345,000 345,000 720,000 96.32% 2048 - 355,000 355,000 365,000 98.14% 2049 365,000 365,000 - 100.00% $ 12,510,000 $ 7,080,000 $ 19,590,000 $238,335,000 A-4 HISTORICAL PRODUCTION AND CONSUMPTION DATA TABLE 8 Fiscal Year Ended September 30 2018 2017 2016 2015 2014 Production: Gallons pumped into System (in 000 gallons) 955,151 940,027 894,859 902,398 937,819 Usage: Water Active Meter Count 4,723 4,683 4,779 4,704 4,339 Total Gallons Billed (in 000 gallons) 884,662 855,792 830,653 818,827 888,962 Water Accountability Ratio 92.62% 91.04% 92.83% 90.74% 94.79% Total Water Sales ($$) $ 6,009,610 $ 5,822,785 $ 4,210,866 $ 3,781,229 $ 3,461,337 Average Monthly Usage Per User in Gallons 15,867 15,283 17,000 17,000 17,000 Average Monthly Bill Per User ($$) $ 106.33 $ 103.44 $ 73.43 $ 66.99 $ 66.47 Percentage Water Loss in System 7.38% 8.52% 7.17% 9.26% 5.21% Source: The Issuer's annual audit reports (statistical information section) and the Issuer. PRINCIPAL WATERISEWER CUSTOMERS TABLE 9 (As of September 30, 2018) Average Monthly Consumption Average Name of Customer In Gallons Monthly Bill Maguire Thomas/BRE Solana LLC 5,055,417 $ 35,645 Town of Trophy Club 2,453,667 18,762 Marriott -Solana 1,868,333 12,510 HMC Solana LLC 1,693,750 11,998 The Vineyards at Trophy Club 1,302,667 8,543 Byron Nelson High School 958,417 7,706 Clubcorp Golf of Texas, LP 948,000 6,292 Value Place Hotel 894,333 5,966 Armore II -Quorum, LLC 642,667 4,584 Trophy Club Lodging LTD 660,750 4,418 Total 16,478,001 $ 116,424 Principal water/sewer customers for 2018 represent 14.85% of the District's total annual revenue. Source: Issuer A-5 WATER AND SEWER RATES TABLE 10 Water Base Rates Meter Size 5/8" & 3/4" 1" 1.5" 2" 3" 4" 6" Monthly Base Rate $ 17.15 32.23 56.94 86.58 155.76 254.59 501.64 Sewer Base and Volumetric Rates Residential Commercial Water Base Rates Meter Size 5/8" & 3/4" 1" 1.5" 2" 3" 4" 6" $ 20.60 $ 20.60 Monthly Base Rate $ 17.15 32.23 56.94 86.58 155.76 254.59 501.64 Sewer Base and Volumetric Rates Residential $ 17.50 Current Rates Effective October 1, 2018 Water Volumetric Rates Gallons O to 6,000 6,001 to 17,000 17,001 to 25,000 25,001 to 50,000 50,001 and Over 0 to 4,000 4,001 to 8,000 8,001 to 12,000 12,000 plus All Previous Rates Effective April 1, 2017 Rates per 1,000 Gallons Over Base $ 3.96 4.61 5.34 6.20 7.21 $ 3.24 4.60 6.56 9.32 $ 6.30 Water Volumetric Rates Gallons 0 to 6,000 6,001 to 17,000 17,001 to 25,000 25,001 to 50,000 50,001 and Over 0 to 4,000 4,001 to 8,000 8,001 to 12,000 12,000 plus Commercial $ 17.50 $4.89/1,000 gallons A-6 Rates per 1,000 Gallons Over Base $ 3.96 4.61 5.34 6.20 7.21 $ 2.84 4.03 5.74 8.16 APPENDIX B SELECTED PROVISIONS OF THE ORDER (this page intentionally left blank) EXCERPTS FROM THE BOND ORDER The following are excerpts of certain provisions of the Order to be adopted by the Board of Directors authorizing the issuance of the Bonds. Such excerpts do not purport to be complete and reference should be made to the Resolution for the entirety thereof. Copies of the Order are available upon request to the District or the District's Bond Counsel. Section 2.1 Definitions. For all purposes of this Order, unless the context requires a different meaning or except as otherwise expressly provided, the following terms shall have the meanings assigned to them below: "Additional Parity Obligations" means revenue bonds or other evidences of indebtedness which the District reserves the right to issue or enter into, as the case may be, in the future in accordance with the terms and conditions provided in Section 10.1 hereof and which are equally and ratably secured by a lien on and pledge of the Pledged Revenues. "Authorized Investments" shall mean all direct or indirect obligations of the United States or one of its agencies, the State, any county, city, school district or other political subdivision of the State and certificates of deposit of state or national banks or savings and loan associations within the State; provided that any such certificates of deposit are secured by direct or indirect obligations of the United States or one of its agencies having a market value equal to the face amount of such certificate of deposit to the extent any portion of the face amount is not insured by the Federal Deposit Insurance Corporation. "Average Annual Debt Service Requirements" means that average amount which, at the time of computation, will be required to pay the Debt Service Requirement on all outstanding Bonds and Additional Parity Obligations when due (either at Stated Maturity or mandatory redemption) and derived by dividing the total of such Debt Service Requirement by the number of Fiscal Years then remaining before Stated Maturity of such Bonds and Additional Parity Obligations. For purposes of this definition, a fractional period of a Fiscal Year shall be treated as an entire Fiscal Year. Capitalized interest payments provided from bond proceeds and accrued interest on the Parity Revenue Obligations be excluded in making the aforementioned computation. "Bonds" shall mean the Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019 issued and delivered pursuant to this Order and all substitute Bonds and Bonds exchanged therefor, as well as all other substitute bonds and replacement bonds issued pursuant hereto, and the term "Bond" shall mean any of the Bonds. "Bond Date" shall mean March 15, 2019. "Bondholder" or "Holder" when used with respect to any Bond shall mean the Person in whose name such Bond is registered on the Register. "Business Day" means any day which is not a Saturday, Sunday or a day on which the Paying Agent/Registrar is authorized by law or executive order to remain closed or a legal holiday. "Closing Date" shall mean the date on which the Bonds are initially authenticated and delivered to the Purchaser against payment therefor which shall also be the date the Definitive Bonds are delivered in exchange for the Initial Bond. "Code" shall mean the Internal Revenue Code of 1986, as amended by any amendments thereto enacted prior to the Closing Date. "Commission" means the Texas Commission on Environmental Quality. "Construction Fund" means the Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019, Construction Fund established by Section 9.1 of this Order. "Debt Service Requirements" means as of any particular date of computation, with respect to any obligations and with respect to any period, the aggregate of the amounts to be paid or set aside by the District as of such date or in such period for the payment of the principal of, premium, if any, and interest (to the extent not capitalized) on such obligations; assuming, in the case of obligations without a fixed numerical rate, that such obligations bear interest calculated by assuming (i) that the interest rate for every 12 -month period on such bonds is equal to the rate of interest reported in the most recently published edition of The Bond Buyer (or its successor) at the time of calculation as the "Revenue Bond Index" or, if such Revenue Bond Index is no longer being maintained by The Bond Buyer (or its successor) at the time of calculation, such interest rate shall be assumed to be 80% of the rate of interest then being paid on United States Treasury obligations of like maturity and (ii) that the principal of such bonds is amortized such that annual debt service is substantially level over the remaining stated life of such bonds, and further assuming in the case of obligations required to be redeemed or prepaid as to principal prior to Stated Maturity, the principal amounts thereof will be redeemed prior to Stated Maturity in accordance with the mandatory redemption provisions applicable thereto. "Definitive Bonds" shall mean the Initial Bond, as may be transferred and converted into or exchanged for fully registered Bonds in the denomination of $5,000 or any integral multiple of $5,000 in excess thereof. "Depository Bank" means any financial institution duly designated by the Board of Directors of the District to serve as a depository for funds controlled by the Board of Directors of the District. "District" shall mean Trophy Club Municipal Utility District No. 1. "Escrow Agent" shall have the meaning set forth in Section 8.1 hereof. "Escrow Agreement" shall mean the agreement between the District and the Escrow Agent referred to in Section 8.1 hereof. "Event of Default" means any event of default as provided in Section 15.1 hereof. "Existing Obligations" means the Outstanding Series 2015 Bonds and the Series 2016 Bonds. "Fiscal Year" means the twelve month accounting period used by the District in connection with the operation of the System which may be any twelve consecutive month period established by the District. "Governmental Obligations" (i) direct noncallable obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, (ii) noncallable obligations of an agency or instrumentality of the United States, including obligations unconditionally guaranteed or insured by the agency or instrumentality and on the date of their acquisition or purchase by the District are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, (iii) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and on the date of their acquisition or purchase by the District, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent and (iv) any other then authorized securities or obligations under applicable law that may be used to defease obligations such as the Bonds. "Gross Proceeds" means any proceeds as defined in Section 1.148-1(b) of the Regulations, and any replacement proceeds as defined in Section 1.148-1(c) of the Regulations, of the Bonds. "Gross Revenues" means all income, receipts and revenues of every nature derived or received from the operation and ownership (excluding refundable meter deposits, restricted gifts and grants in aid of construction) of the System, including earnings and income derived from the investment or deposit of moneys in any special funds or accounts created and established for the payment and security of the Parity Revenue Obligations. "Initial Bond" shall mean the Bond authorized to be issued hereunder which has the registration certificate, executed on behalf of the Comptroller of Public Accounts of the State of Texas, as contemplated by Section 3.5(d) hereof. "Interest and Sinking Fund" means the fund created or affirmed by Section 9.1 of this Order. "Interest Payment Date" shall mean with respect to any installment of interest on any Bond the date specified in such Bond as the fixed date on which any such installment of interest is due and payable. "Maintenance and Operating Expenses" means all current expenses of operating and maintaining the System, including all salaries, labor, materials, repairs and extensions necessary to render efficient service; provided, however, that only such repairs and extensions, as in the judgment of the Board of Directors, reasonably and fairly exercised, are necessary to maintain the operations and render adequate service to the District and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair obligations payable from Net Revenues shall be deducted in determining "Net Revenues". Depreciation charges shall not be considered Maintenance and Operating Expenses. Maintenance and Operating Expenses shall include payments under contracts for the purchase of water supply or other materials, goods, services, or facilities for the System to the extent authorized by law and the provisions of such contract. "Maturity Date" or "Maturity" when used with respect to any Bond shall mean the date on which the principal of such Bond becomes due and payable as therein provided, whether at the Stated Maturity, by call for redemption or otherwise. "Net Earnings" shall have the meaning assigned to such term in Section 10.1. "Net Revenues" and "Net Revenues of the System" mean all of the revenues of every kind and nature received through the operation of the System, less Maintenance and Operating Expenses, including salaries, labor, materials, repairs and extensions necessary to render efficient service; provided, however, that only such repairs and extensions as in the judgment of the Board, reasonably and fairly exercised, are necessary to keep the System in operation and render adequate service to the District and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair the security of the Bond or the Additional Parity Obligations shall be deducted in determining "Net Revenues". "Order' shall mean this order authorizing the issuance of the Bonds. "Outstanding" shall mean, with respect to Bonds or Parity Revenue Obligations means, as of the date of determination, all Bonds theretofore issued and delivered, except: (1) those Bonds or Parity Revenue Obligations cancelled by the Paying Agent/Registrar or delivered to the Paying Agent/Registrar for cancellation; (2) those Bonds or Parity Revenue Obligations paid or deemed to be paid in accordance with the provisions of Section 17.1 hereof, or substantially similar provisions with respect to Parity Revenue Obligations; and (3) those Bonds or Parity Revenue Obligations that have been mutilated, destroyed, lost, or stolen and replacement Bonds have been registered and delivered in lieu thereof as provided in Section 3.10 hereof or similar provisions with respect to Parity Revenue Obligations. "Parity Revenue Obligations" means, collectively, the Bonds, the Existing Obligations, and any Additional Parity Obligations. "Paying Agent/Registrar Agreement" shall mean the agreement between the District and the Paying Agent/Registrar referred to in Section 5.2 pursuant to which the Paying Agent/Registrar will perform the duties required hereunder. "Paying Agent/Registrar" shall mean BOKF, NA, Dallas, Texas, until a successor Paying Agent/Registrar shall have been appointed pursuant to the applicable provisions of this Order, and thereafter "Paying Agent/Registrar" shall mean such successor Paying Agent/Registrar. "Person" shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof. "Place of Payment" shall mean the designated office of the Paying Agent/Registrar in Dallas, Texas. "Pledged Revenues" shall mean the Net Revenues of the District's System. "Predecessor Bonds" of any particular Bond shall mean every previous Bond evidencing all or a portion of the same debt as that evidenced by such particular Bond, and, for purposes of this definition, any Bond registered and delivered under Section 3.10 in lieu of a mutilated, lost, destroyed or stolen Bond shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Bond. "Project" shall mean the design and construction of water transmission line improvements and acquisition of related real property interests, and the design and construction of improvements to the District's wastewater treatment facilities. "Purchaser" shall mean IFS Securities, Inc., Atlanta, Ga. "Record Date" for the interest payable on any Interest Payment Date shall mean the close of business on the fifteenth day of the month preceding such Interest Payment Date. "Redemption Date" when used with respect to any Bond to be redeemed shall mean the date fixed for such redemption pursuant to the terms of this Order. "Redemption Price" when used with respect to any Bond to be redeemed shall mean the price at which such Bond is to be redeemed pursuant to the terms of this Order, excluding installments of interest, the Interest Payment Date for which is on or before the Redemption Date. "Register" shall have the meaning stated in Section 3.7 hereof. "Regulations" shall mean the temporary or final Income Tax Regulations applicable to the Bonds issued pursuant to sections 103 and 141 through 150 of the Code. Any reference to a section of the Regulations shall also refer to any successor provision to such section hereafter promulgated by the Internal Revenue Service pursuant to sections 103 and 141 through 150 of the Code and applicable to the Bonds. "Representation Letter" shall mean the Letter of Representations between the District and the DTC. "Required Reserve" shall mean the amount which is equal to the Average Annual Debt Service of the Outstanding Parity Revenue Obligations. "Reserve Fund" means the fund created or affirmed by Section 9.1 of this Order. "Revenue Fund" means the Trophy Club Municipal Utility District No. 1 Revenue Fund heretofore created and affirmed by Section 9.1 of this Order. "Rule" shall mean SEC Rule 15c2-12, as amended from time to time. "Series 2015 Bonds" shall mean the $9,230,000 Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2015. "Series 2015 Order" shall mean the order of the District that authorized the issuance of the Series 2015 Bonds. "Series 2016 Bonds" shall mean the $4,635,000 Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2016. "Series 2016 Order" shall mean the order of the District that authorized the issuance of the Series 2016 Bonds. "Special Payment Date" shall have the meaning stated in Section 3.4 hereof. "Special Record Date" shall have the meaning stated in Section 3.4 hereof. "Stated Maturity" when used with respect to any Bond shall mean the date specified in such Bond as the fixed date on which the principal of such Bond is due and payable. "Subordinate Lien Obligations" means the bonds permitted to be issued by the District pursuant to Section 10.3 of this Order. "System" means the District's water and sewer system, including all present and future extensions, additions, replacements and improvements thereto. "TCEQ" means the Texas Commission on Environmental Quality. "TCEQ Order" means the Order adopted by TCEQ dated November 6, 2018 approving the Project and issuance of the Bonds by the District. Section 9.1 Creation of Funds. The following funds are hereby created or affirmed: (i) "Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019, Revenue Fund" (herein called the "Revenue Fund") is hereby affirmed; (ii) "Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019, Reserve Fund" (herein called the "Reserve Fund") is hereby created; and (iii) "Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019, Interest and Sinking Fund" (herein called the "Interest and Sinking Fund") is hereby created for the purpose of providing funds to pay the principal of, premium, if any, and interest on the Parity Revenue Obligations as the same become due and payable; and (iv) "Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019, Construction Fund" (herein called the "Construction Fund") is hereby created. The District covenants and agrees that all revenues derived from the operation of the System shall be kept separate from other funds of the District. Section 9.2 Revenue Fund. A Revenue Fund has previously been established on the books of the District in connection with the District's Existing Obligations. All Gross Revenues of every nature received from the operation and ownership of the System shall be deposited as collected into the Revenue Fund, and the reasonable, necessary, and proper Maintenance and Operation Expenses of the System shall be paid from the Revenue Fund. The revenues of the System not actually required to pay said expenses shall be deposited from the Revenue Fund into the interest and sinking funds as provided in the orders or resolutions authorizing the Parity Revenue Obligations and the Reserve Fund to the extent provided hereunder for the Bonds and in any order authorizing the issuance of Additional Parity Obligations. Any Net Revenues remaining in the Revenue Fund after satisfying the foregoing payments, or making adequate and sufficient provision for the payment thereof, may be appropriated and used for any other District purpose now or hereafter permitted by law. Section 9.3 Interest and Sinkina Fund. (a) The District shall deposit or cause to be deposited into the Interest and Sinking Fund accrued interest on the Bonds from the Bond Date to the date of their delivery (b) Net Revenues of the System shall be deposited to the credit of the Interest and Sinking Fund at such times and in such amounts as necessary for the timely payment of the principal of and interest on the Bonds. (c) Money on deposit in the Interest and Sinking Fund shall be used to pay the principal of and interest on the Bonds as such become due and payable. Section 9.4 Reserve Fund. (a) To accumulate and maintain a reserve for the payment of the Bonds and Additional Parity Obligations (the Required Reserve) equal to the lesser of (i) the Average Annual Debt Service Requirements (calculated on a Fiscal Year basis and determined as of the date of issuance of the Bonds, the most recently issued series of Additional Parity Obligations then Outstanding or, at the option of the District, at the end of each Fiscal Year) for the Bonds and Additional Parity Obligations or (ii) the maximum amount in a reasonably required reserve fund for the Bonds and Additional Parity Obligations, from time to time that can be invested without restriction as to yield pursuant to section 148 of the Code (as defined in Section 13.1), the District agrees to maintain the Reserve Fund at an official depository of the District. All funds deposited into the Reserve Fund (excluding surplus funds which include earnings and income derived or received from deposits or investments which will be transferred to the Revenue Fund during such period as there is on deposit in the Reserve Fund the Required Reserve) shall be used solely for the payment of the principal of and interest on the Bonds and Additional Parity Obligations, when and to the extent other funds available for such purposes are insufficient, and, in addition, may be used to retire the last stated maturity or interest on the Bonds or Additional Parity Obligations. (b) Upon issuance of the Bonds, the total amount required to be accumulated and maintained in the Reserve Fund is hereby determined to be $865,843 (the "Required Reserve"), which is equal to not less than the Average Annual Debt Service for the Bonds and the Existing Obligations, and on or before the 1st day of the month next following the month the Bonds are delivered to the Purchaser and on or before the 1st day of each following month, the District shall cause to be deposited to the Reserve Fund from the Net Revenues of the System an amount equal to at least one -sixtieth (1/60th) of the Required Reserve. After the Required Reserve has been fully accumulated and while the total amount on deposit in the Reserve Fund is in excess of the Required Reserve, no monthly deposits shall be required to be made to the Reserve Fund. (c) As and when Additional Parity Obligations are delivered or incurred, the Required Reserve shall be increased, if required, to an amount calculated in the manner provided in the first paragraph of this Section. Any additional amount required to be maintained in the Reserve Fund shall be so accumulated by the deposit of the necessary amount of the proceeds of the issue or other lawfully available funds in the Reserve Fund immediately after the delivery of the then proposed Additional Parity Obligations, or, at the option of the District, by the deposit of monthly installments, made on or before the 1st day of each month following the month of delivery of the then proposed Additional Parity Obligations, of not less than 1/60th of the additional amount to be maintained in the Reserve Fund by reason of the issuance of the Additional Parity Obligations then being issued (or 1/60th of the balance of the additional amount not deposited immediately in cash), thereby ensuring the accumulation of the appropriate Required Reserve. (d) When and so long as the cash and investments in the Reserve Fund equal the Required Reserve, no deposits need be made to the credit of the Reserve Fund; but, if and when the Reserve Fund at any time contains less than the Required Reserve (other than as the result of the issuance of Additional Parity Obligations as provided in the preceding paragraph), the District covenants and agrees to cure the deficiency in the Required Reserve by resuming monthly deposits to said Fund or account from the Net Revenues, or any other lawfully available funds, such monthly deposits to be in amounts equal to not less than 1/60th of the Required Reserve covenanted by the District to be maintained in the Reserve Fund with any such deficiency payments being made on or before the 1st day of each month until the Required Reserve has been fully restored. The District further covenants and agrees that, subject only to the prior payments to be made to the Interest and Sinking Fund, the Net Revenues shall be applied and appropriated and used to establish and maintain the Required Reserve and to cure any deficiency in such amounts as required by the terms of this Order and any other order or resolution pertaining to the issuance of Additional Parity Obligations. (e) During such time as the Reserve Fund contains the Required Reserve, the District may, at its option, withdraw all surplus funds in the Reserve Fund in excess of the Required Reserve and deposit such surplus in the System Fund, unless such surplus funds represent proceeds of the Bonds, then such surplus will be transferred to the Interest and Sinking Fund. Section 9.5 Construction Fund. (a) Money on deposit in the Construction Fund, including investment earnings thereof, shall be used for the Project. (b) All amounts remaining in the Construction Fund after the accomplishment of the Project, including investment earnings of the Construction Fund, shall be deposited into the Interest and Sinking Fund, unless a change in applicable law permits or authorizes all or any part of such funds to be used for other purposes. Section 9.6 Deficiencies: Excess Revenues. (a) If on any occasion there shall not be sufficient Gross Revenues to make the required deposits into the Interest and Sinking Fund or Reserve Fund, then such deficiency shall be cured as soon as possible from the next available Gross Revenues, or from any other sources available for such purpose. (b) Subject to making the required deposits to the Interest and Sinking Fund and the Reserve Fund when and as required by any order or resolution relating to authorizing the issuance of Parity Revenue Obligations, the excess Gross Revenues may be used by the District for any lawful purpose related to the System. Section 9.7 Investments- Security of Funds. (a) All moneys on deposit in the funds referred to in this Order shall be secured in the manner and to the fullest extent required by the laws of the State of Texas for the security of public funds, and moneys on deposit in such funds shall be used only for the purposes permitted by this Order. (b) Investments. (i) Money in the funds established by this Order, at the option of the District, may be invested in such securities or obligations as permitted under applicable law. (ii) Any securities or obligations in which money is so invested shall be kept and held in trust for the benefit of the Owners and shall be sold and the proceeds of sale shall be timely applied to the making of all payments required to be made from the fund from which the investment was made. (c) Investment Income. Interest and income derived from investment of any fund created by this Order shall be credited to such fund. Section 9.8 Contributions in Aid of Construction Any moneys that may be received by the District that shall represent contributions in aid of construction shall be deposited in a separate account at the Depository Bank. Such contributions shall not be considered as part of the Gross Revenues of the System. Payments from such bank account shall be made only for the purposes for which the contributions were made, including any refunds that may become due to any contributor. Section 10.1 Additional Prior Lien Obliaations. (a) The District reserves the right to issue notes, bonds and other obligations which, when duly authorized and issued in compliance with law and the terms and conditions hereinafter appearing, shall be on a parity with the Parity Revenue Obligations, payable from and equally and ratably secured by a first lien on• and pledge of the Net Revenues of the System; and the Parity Revenue Obligations shall in all respects be of equal dignity. The Additional Parity Obligations may be issued in one or more installments, provided, however, that none shall be issued unless and until the following conditions have been met: (b) A certificate is executed by the General Manager of the District and the President of the Board to the effect that no default exists in connection with any of the covenants or requirements of the Order or orders or resolutions authorizing the issuance of the Bonds and all then outstanding Parity Revenue Obligations; (c) A certificate is executed by the General Manager of the District and the President of the Board to the effect that the Interest and Sinking Fund and Reserve Fund contains the amount of money then required to be on deposit therein; and (d) A certificate is executed by a Certified Public Accountant to the effect that, in his opinion, the Net Earnings of the System either for the last complete fiscal year of the District, or for any twelve consecutive calendar month period ending not more than 90 days prior to the passage of the Order authorizing the issuance of such Additional Parity Obligations, were at least 1.25 times the average annual principal and interest requirements for the then outstanding Parity Revenue Obligations and the Additional Parity Obligations then proposed to be issued. The Accountant, in making a determination of the Net Earnings, may take into consideration a change in the rates and charges for services and facilities afforded by the System that became effective at least sixty (60) days prior to the last day of the period for which Net Earnings are determined and, for purposes of satisfying the above Net Earnings test, make pro forma determination of the Net Earnings of the System for the period of time covered by his certification or opinion based on such change in rates and charges being in effect for the entire period covered by the Accountant's certificate or opinion. PROVIDED, that the term "Net Earnings of the System" shall mean all of the Net Revenues of the System, except that in calculating Net Revenues there shall not be deducted as an expense of operation and maintenance any charge or disbursement for repairs or extensions which, under standard accounting practice, should be charged to capital expenditures; and PROVIDED FURTHER, that it shall not be necessary for the District to meet the above requirements to issue Additional Parity Obligations if the District obtains the written consent of all of the holders of all outstanding Parity Revenue Obligations. Section 10.2 Refundina Bonds.The District reserves the right to issue refunding bonds to refund all or any part of the Parity Revenue Obligations (pursuant to any law then available) upon such terms and conditions as the Board of Directors of the District may deem to be in the best interest of the District and its inhabitants, and if Tess than all such Parity Revenue Obligations then outstanding are refunded, the conditions precedent prescribed (for the issuance of Additional Parity Obligations) in Section 10.1 shall be satisfied and the accountant's certificate or opinion required in Section 10.1 shall give effect to the Debt Service of the proposed refunding bonds (and shall not give effect to the Debt Service of the Parity Revenue Obligations being refunded following their cancellation or provision being made for their payment). Section 10.3 Obliaations of Inferior Lien and Pledae. The District hereby reserves the right to issue Subordinate Lien Obligations payable from and secured by a lien on and pledge of the System revenues, junior and subordinate in rank and dignity to the lien and pledge securing the payment of the Parity Revenue Obligations, as may be authorized by the laws of the State of Texas. Section 11.1 Pledae of Revenues. (a) The Parity Revenue Obligations, including the Bonds, and the interest thereon, and any and all other amounts payable thereunder, are and shall be secured by and payable from a first lien on and pledge of the Net Revenues of the System (with the exception of those in excess of the amounts required to establish and maintain the Interest and Sinking Fund hereinafter provided); and the revenues herein pledged are further pledged to the establishment and maintenance of the Interest and Sinking Fund hereinafter provided. (b) The Bonds are special obligations of the District secured by and payable from a first lien on and pledge of the Net Revenues of the System, as provided in this Order, and is not a charge on the property of the District or on taxes levied by the District. No part of the obligation evidenced by the Bonds, whether principal, interest or other obligation, shall ever be paid from taxes levied or collected by the District. (c) Chapter 1208, Texas Government Code applies to the issuance of the Bond and the pledge of the Net Revenues granted by the District under Section 11.1(a) of this Order, and such pledge, therefore, is valid, effective, and perfected. If Texas law is amended at any time while the Bonds are Outstanding and unpaid such that the pledge of the revenues granted by the District under Section 11.1(a) above is to be subject to the filing requirements of Chapter 9, Texas Business and Commerce Code, then in order to preserve to the registered owners of the Bonds the perfection of the security interest in said pledge, the District agrees to take such measures as it determines are reasonable and necessary under Texas law to comply with the applicable provisions of Chapter 9, Business and Commerce Code and enable a filing to perfect the security interest in said pledge to occur. Section 11.2 Payment of Bonds and Performance of Obliaations. The District covenants to pay promptly the principal of and interest on the Bonds as the same become due and payable, whether at maturity or by prior redemption, in accordance with the terms of the Bonds and this Order, and to keep and perform faithfully all of its covenants, undertakings and agreements contained in this Order, or in any Bond executed, authenticated and delivered hereunder. Section 12.1 Representations and Covenants as to Payment. (a) While the Bonds are Outstanding and unpaid, there shall be made available to the Paying Agent/Registrar, out of the Interest and Sinking Fund and Reserve Fund, if necessary, money sufficient to pay the interest on and the principal of the Bonds, as applicable, as will accrue or mature on each applicable Interest Payment Date. (b) The District will faithfully perform at all times any and all covenants, undertakings, stipulations, and provisions contained in this Order and in the Bonds; the District will promptly pay or cause to be paid the principal of, interest on, and premium, if any, with respect to, the Bonds on due dates and at the places and manner prescribed in such Bonds; and the District will, at the times and in the manner prescribed by this Order, deposit or cause to be deposited the amounts of money specified by this Order. (c) The District is duly authorized under the laws of the State of Texas to issue the Bonds; all action on its part for the creation and issuance of the Bond has been duly and effectively taken; and the Bonds in the hands of the Owners thereof is and will be valid and enforceable obligations of the District in accordance with their terms. (d) The District will at all times collect for services rendered by the System such amounts as will be at least sufficient to pay all Maintenance and Operation Expenses, and to provide Net Revenues equal to 1.10 times the amount that is sufficient to pay the scheduled principal of and interest on the Parity Revenue Obligations, plus one times the amount (if any) required to be deposited in any reserve or contingency fund or account created for the payment and security of the Parity Revenue Obligations. (e) If the System should become legally liable for any other indebtedness, the District shall fix, maintain, charge and collect additional rates and services rendered by the System, sufficient to establish and maintain funds for the payment hereof. Section 15.1 Events of Default. Each of the following occurrences or events for the purpose of this Order is hereby declared to be an Event of Default: (a) the failure to make payment of the principal of or interest on any of the Bonds when the same becomes due and payable; (b) default in the performance or observance of any other covenant, agreement, or obligation of the District and the continuation thereof for a period of 30 days after notice of such default is given by any Bondholder to the District; or (c) the District files for protection under the federal Bankruptcy Code or other similar state or federal statute. Section 15.2 Remedies for Default. (a) Upon the happening of any Event of Default or the default in the performance or observance of any other covenant, agreement, or obligation of the District, then any Bondholder or an authorized representative thereof, including but not limited to, a trustee or trustees therefor, may proceed against the District for the purpose of protecting and enforcing the rights of the Bondholders under this Order, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of the Bondholders hereunder or any combination of such remedies. (b) All such proceedings shall be instituted and maintained for the equal benefit of all Bondholders. Section 15.3 Remedies Not Exclusive. (a) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under the Bonds or now or hereafter existing at law or in equity; provided, however, that notwithstanding any other provision of this Order, the right to accelerate the debt evidenced by the Bonds shall not be available as a remedy under this Order. (b) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver of any other available remedy. Section 17.1 Defeasance. (a) If the District shall pay or cause to be paid, or there shall otherwise be paid to the Bondholders, the principal of and interest on the Bonds, at the times and in the manner stipulated in this Order, then the pledge of Pledged Revenues under this Order and all covenants, agreements, and other obligations of the District to the Bondholders shall thereupon cease, terminate, and become void and be discharged and satisfied, and the Paying Agent/Registrar shall pay over or deliver all money held by it under this Order to the District. (b) Bonds or interest installments for the payment of which money shall have been set aside and shall be held in trust by the Paying Agent/Registrar or with any other bank or trust company which has agreed to hold the same for such purpose (through deposit by the District of funds for such payment or otherwise) at the Stated Maturity thereof shall be deemed to have been paid within the meaning and with the effect expressed above in this Section. All Existing Obligations shall be deemed to have been paid, prior to their Stated Maturity, within the meaning and with the effect expressed above in this Section, if there shall have been deposited with the Paying Agent/Registrar either (a) money in an amount which shall be sufficient to make such payment, (b) Governmental Obligations certified by an independent public accounting firm of national reputation to be of such maturities and interest payment dates and to bear such interest as will, without further investment or reinvestment of either the principal amount thereof or the interest earnings therefrom, be sufficient to make such payment, or (c) a combination of money and Governmental Obligations together so certified to be sufficient to make such payment, provided that all the expenses pertaining to the Bonds with respect to which such deposit is made shall have been paid or the payment thereof provided for to the satisfaction of the Paying Agent/ Registrar (and to such other bank or trust company). Section 18.5 Amendments. (a) This Order shall constitute a contract with the Bondholders entered into upon the initial purchase of the Bonds, shall be binding on the District and its successors and assigns whether or not so expressed, and shall not be amended or repealed by the District so long as any Bond remains outstanding except as permitted in this Section. (b) The District may, without the consent of or notice to any Bondholder, from time to time and at any time amend this Order in any manner that the District determines is not detrimental to the interests of the Bondholders, for the purpose of the curing of any ambiguity, inconsistency, or formal defect or omission herein or therein. In addition, the District may amend, add to, or rescind any of the provisions of this Order; except that, notwithstanding the foregoing, without the consent of the Holders of all of the affected outstanding Bonds, no such amendment, addition, or rescission shall (1) change the Stated Maturity of the Bonds or any Interest Payment Date for an installment of interest thereon, reduce the principal amount thereof, the Redemption Price therefor, or the rate of interest thereon, change the place or places at, or the coin or currency in, which any Bond or the interest thereon is payable, or in any other way modify the terms or sources of payment of the principal of or interest on the Bonds, (2) give any preference to any Bond over any other Bond, or (3) modify any of the provisions of this Section, except to provide that certain other provisions of this Order cannot be modified or waived without the consent of the Holder of each Bond affected thereby. (c) Any consent to any amendment hereof by the Bondholder shall bind every future Holder of the same Bond and the Holder of every Bond issued upon transfer or in lieu thereof or in exchange therefor, in respect of anything done or suffered to be done by the District in reliance thereon, whether or not notation of such action is made upon such Bond. (d) Any rating agency rating the Bonds must receive notice of each amendment and a copy thereof at least 15 days in advance of its execution or adoption. Section 18.6 Notice to Bondholders. Except as may be otherwise provided in this Order, where this Order provides for notice to Bondholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Bondholder, at the address of such Bondholder as it appears in the Register. Neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder of Bonds shall affect the sufficiency of such notice with respect to all other Bondholders. Wherever this Order provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event with respect to which such notice is given, and such waiver shall be the equivalent of such notice. Waivers of notice by Bondholders shall be filed with the District, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. APPENDIX C FORM OF LEGAL OPINION OF BOND COUNSEL (this page intentionally left blank) MCLEAN & HOWARD, L.L.P. BARTON OAKS PLAZA, BUILDING II 901 SOUTH MOPAC ExPY., SUITE 225 AUSTIN, TEXAS 78746 (512) 328-2008 April 23, 2019 We have acted as Bond Counsel for Trophy Club Municipal Utility District No. 1 (the "District") in connection with the issuance of bonds (the "Bonds") by the District described as follows: TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019, dated March 15, 2019, in the aggregate principal amount of $7,080,000, bearing interest at the rate set forth in the Order authorizing the issuance of the bonds (the "Bond Order"), with such interest payable on March 1 and September 1 of each year, commencing March 1, 2020 until maturity or prior redemption, and maturing serially on September 1 in each year from 2021 through 2049. The Bonds are redeemable, in whole or in part, maturing on or after September 1, 2029 are subject to optional redemption prior to stated maturity on September 1, 2028 or on any date thereafter, at a price of the par value thereof plus accrued interest to the date of redemption, in the manner provided in the Bond OrderThe Bonds are registered as to both principal and interest and are transferable, registrable, and payable in the manner provided in the Bond Order. The District has reserved the right in the Bond Order to issue additional bonds payable from the Pledged Revenues of the District's water and wastewater system with any such pledge being on a parity with the pledge to pay the Bonds. The District has also reserved the right to issue subordinate lien bonds, special project bonds and refunding bonds. Reference is made to the Bond Order for a complete description of the District's right to issue additional bonds. The Bonds are obligations solely of the District and are not the obligations of the State of Texas or any other political subdivision or agency. The District's obligations with respect to the Bonds are subject to limitation by applicable federal bankruptcy laws and other laws which may from time to time affect the rights of creditors of political subdivisions. IN OUR CAPACITY AS BOND COUNSEL, we have examined a transcript of certified proceedings pertaining to the Bonds which contains certified copies of certain proceedings of the Board of Directors of the District, customary certificates of officers, agents and representatives of the District and other certified showings related to the authorization and issuance of the Bonds. We have also examined the executed Initial Bond No. T-1. We have not investigated or verified original proceedings, records, data or other material, but have relied solely upon certificates executed by officers, directors, agents and representatives of the District. We have assumed no responsibility with respect to the financial condition of the District or the reporting or disclosure thereof in connection with the sale of the Bonds. BASED ON SAID EXAMINATION, IT IS OUR OPINION that, under the applicable laws of the United States of America and the State of Texas in force and effect on the date hereof: Page 2 1. The Bonds have been duly authorized by the District and, when issued in compliance with the provisions of the Bond Order, are valid, legally binding and enforceable obligations of the District and, together with the outstanding and unpaid "Parity Revenue Obligations" (identified and defined in the Bond Order), are payable solely from and equally and ratably secured by a first lien on and pledge of the certain net revenues of the District's water and wastewater system (the "Pledged Revenues") as provided in the Bond Order. 2. Under existing statutes, regulations, published rulings, and court decisions, and assuming continuing compliance after the date hereof by the District with the provisions of the Bond Order relating to sections 103, and 141 through 150 of the Internal Revenue Code of 1986, as amended (the "Code"), interest on the Bonds for federal income tax purposes (a) will be excludable from the gross income, as defined in section 61 of the Code, of the owners thereof, and (b) will not be included in computing the individual alternative minimum taxable income of the owners thereof. . In expressing the aforementioned opinions, we have relied on, certain representations, the accuracy of which we have not independently verified, and assume compliance with certain covenants regarding the use and investment of the proceeds of the Bonds and the use of the property financed therewith. We call your attention to the fact that if such representations are determined to be inaccurate or if the District fails to comply with such covenants, interest on the Bonds may become includable in gross income retroactively to the date of issuance of the Bonds. WE EXPRESS NO OPINION with respect to any other federal, state, or local tax consequences under present law or any proposed legislation resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Bonds. Ownership of tax-exempt obligations such as the Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, foreign corporations subject to the branch profits tax, taxpayers qualifying for the health insurance premium assistance credit, owners of an interest in a FASIT, individual recipients of Social Security or Railroad retirement benefits, individuals otherwise qualifying for the earned income tax credit, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. OUR OPINIONS ARE BASED on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty or update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service (the "Service"); rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. The Service has an ongoing audit program to determine compliance with rules that relate to whether interest on state or local obligations is includable in gross income for federal income tax purposes. No assurance can be given whether or not the Service will commence an audit of the Bonds. If an audit is commenced, in accordance with its Page 3 current published procedures the Service is likely to treat the Issuer as the taxpayer. We observe that the Issuer has covenanted not to take any action, or omit to take any action within its control, that if taken or omitted, respectively, may result in the treatment of interest on the Bonds as includable in gross income for federal income tax purposes. Respectfully yours, (this page intentionally left blank) APPENDIX D EXCERPTS FROM THE DISTRICT'S AUDITED FINANCIAL STATEMENTS (Independent Auditor's Report, Management's Discussion and Analysis, 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.) (this page intentionally left blank) TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2018 (this page intentionally left blank) CONTENTS FINANCIAL SECTION Page ANNUAL FILING AFFIDAVIT INDEPENDENT AUDITOR'S REPORT 1 MANAGEMENT'S DISCUSSION AND ANALYSIS (unaudited) 3 BASIC FINANCIAL STATEMENTS Government -Wide Financial Statements Statement of Net Position 11 Statement of Activities 12 Fund Financial Statements Governmental Funds Balance Sheet 13 Reconciliation of the Governmental Funds Balance Sheet To Statement of Net Position 14 Statement of Revenues, Expenditures and Changes in Fund Balances 15 Reconciliation of the Statement of Revenues, Expenditures And Changes in Fund Balances of Governmental Funds To the Statement of Activities 16 Notes to Basic Financial Statements 17 REQUIRED SUPPLEMENTARY INFORMATION Budgetary Comparison Schedule — General Fund 42 Schedule of Changes in Net Pension Liability and Related Ratios — Last Ten Years 43 Schedules of TCDRS Pension Contributions — Last Ten Years 44 Schedules of TCDRS OPEB Contributions — Last Ten Years 45 Schedule of Changes in Net OPEB Liability and Related Ratios — Last Ten Years.. 46 INDIVIDUAL SCHEDULES AND OTHER SUPPLEMENTARY INFORMATION REQUIRED BY TEXAS COMMISSION ON ENVIRONMENTAL QUALITY (TCEQ) TSI -1 Service and Rates 47 TSI -2 General Fund Expenditures and Other Financing Uses 49 TSI -3 Temporary Investments 50 TSI -4 Taxes Levied and Receivable 51 TSI -5 Long -Term Debt Service Requirements — By Year 52 TSI -6 Changes in Long -Term Bonded Debt 55 TSI -7 Comparative Schedules of Revenues and Expenditures — Five Years 56 TSI -8 Board Members, Key Personnel, and Consultants 58 REPORTS REQUIRED BY GOVERNMENTAL AUDITING STANDARDS Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 60 THE STATE OF TEXAS COUNTY OF DENTON 1, ANNUAL FILING AFFIDAVIT Gregory Wilson (Name of Duly Authorized District Representative) Of the Trophy Club Municipal Utility District No. 1 (Name of District) Hereby swear, or affirm, that the district named above has reviewed and approved at a meeting of the Board of Directors of the District on the 21st day of January, 2019, its annual audit report for the fiscal year or period ended September 30, 2018 and that copies of the annual audit report have been filed in the district office, located at 100 Municipal Drive, Trophy Club, Texas, 76262. The annual filing affidavit and the attached copy of the audit report are being submitted to the Texas Commission on the Environmental Quality in satisfaction of the annual filing requirements of Texas Water Code Section 49.1 Date: January 21 , 2019 By: ( nature of District Representative) Gregory Wilson, President, Board of Directors (Typed Name & Title of above District Representative) Sworn to and subscribed to before me this 04.1` LAURIE Ei.AGNT oia Public. State of Texas. Comm. Expires 01-19-2020 Notary ID 128720534 L day of V b1/1" -20L(, Jba--) (Signature ofotary) My Commission Expires On: TVI ,}!ZY yam! , 2Lb� Notary Public in the State of Texas tt and Abbott PLLC Certified Public Accountants INDEPENDENT AUDITOR'S REPORT To the Board of Directors Trophy Club Municipal Utility District No. 1 Trophy Club, Texas Susan LaFollett, CPA — Partner Rod Abbott, CPA — Partner Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Trophy Club Municipal Utility District No. 1 (the "District"), as of and for the year ended September 30, 2018, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 1 LaFollett and Abbott PLLC PO Box 717 • Tom Bean, TX • 75489 903-546-6975 • www.lafollettcpa.com Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Trophy Club Municipal Utility District No. 1, as of September 30, 2018, and the respective changes in financial position, for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, budgetary comparisons, and retirement system funding information on pages 3- 10 and 42-46 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Trophy Club Municipal Utility District No. 1's basic financial statements. The accompanying individual schedules and other supplementary information on pages 47-59 are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying individual schedules and other supplementary information are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the accompanying individual schedules and other supplementary information are fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 21, 2019, on our consideration of Trophy Club Municipal Utility District No. 1's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Trophy Club Municipal Utility District No. 1's internal control over financial reporting and compliance. Tom Bean, Texas January 21, 2019 2 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS September 30, 2018 Trophy Club Municipal Utility District No. 1, Texas (the "District") Management's Discussion and Analysis (MD&A) is a narrative overview and analysis designed to provide the reader a means to identify and understand the financial activity of the District and changes in the District's financial position during the fiscal year ended September 30, 2018. The Management's Discussion and Analysis is supplemental to, and should be considered along with, the District's financial statements. Financial Highlights At the close of the fiscal year, the assets and deferred outflows of the District exceeded its liabilities and deferred inflows by $27,028,375. Of this amount, $7,688,389 is unrestricted net position and may be used to meet the District's ongoing commitments. The District's net position increased by $4,118,127 during 2018 (page 12). A significant contributor to this result was actual General Fund expenditures being $2,478,357 less than budgeted, with the most favorable budget variances being for water department, capital outlays, and fire protection expenditures (page 42). At the end of the fiscal year, the District's governmental type funds reported a combined fund balance of $8,355,328. As of September 30, 2018, the unassigned fund balance of the General Fund was $7,254,013. Long-term debt activity for the District included debt principal repayments totaling $1,427,381. Overview of the Financial Statements The MD&A is intended to introduce the reader to the District's basic financial statements, which are comprised of three components: 1. Government -Wide Financial Statements, 2. Fund Financial Statements, and 3. Notes to Basic Financial Statements. The report also contains other required supplementary information in addition to the basic financial statements. Government -Wide Financial Statements — the government -wide financial statements are designed to provide the reader with a general overview of the District's finances in a way that is comparable with financial statements from the private sector. The government -wide financial statements consist of two statements: 1. The Statement of Net Position — (Page 11) this statement presents information on all of the District's assets, deferred inflows, deferred outflows, liabilities, and net position. The net position is the difference between assets plus deferred outflows less deferred inflows plus liabilities. Over an extended period, the increase or decrease in net position will serve as a good indicator of whether the financial position of the District is improving or deteriorating. 3 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS September 30, 2018 Overview of the Financial Statements — continued 2. The Statement of Activities — (Page 12) gives information showing how the District's net position has changed during the fiscal year. All revenues and expenses are reported on the full accrual basis. Fund Financial Statements - Fund financial statements provide detailed information about the most important funds and not about the District as a whole as in the government -wide financial statements. The District uses fund accounting to demonstrate compliance with finance related legal requirements which can be categorized as governmental fund activities. Governmental Funds — All of the District's activities are reported in governmental funds. They are used to account for those functions known as governmental activities. But unlike government -wide financial statements, governmental fund financial statements focus on how monies flow into and out of those funds and their resulting balances at the end of the fiscal year. Statements of governmental funds provide a detailed short-term view of the District's general government operations and the basic services it provides. Such information can be useful in evaluating a government's short-term financing requirements. The District maintains three governmental funds. Information is presented separately in the Governmental Fund Balance Sheet and in the Governmental Fund Statement of Revenues, Expenditures and Changes in Fund Balances for the General Fund, Debt Service Fund and Capital Projects Fund. The District adopts annual appropriated budgets for the General Fund and Debt Service Funds. A budgetary comparison statement is provided for each annually budgeted fund to demonstrate compliance with its budget. Notes to the Basic Financial Statements — The notes provide additional information that is essential to a full understanding of the data presented in the government -wide and fund financial statements. The notes to the basic financial statements can be found on pages 17-41. 4 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS September 30, 2018 Government -wide Financial Analysis The Management's Discussion and Analysis highlights the information provided in both the Statement of Net Position and Statement of Activities in the government -wide financial statements. It may serve over an extended period of time, as a useful indicator of the District's financial position. At the end of the fiscal year, the District's assets and deferred outflows exceeded liabilities and deferred inflows by $27,028,375. Of this amount, $18,657,642 (69%) reflects the District's investment in capital assets (e.g., land, buildings, machinery and equipment, net of accumulated depreciation), less any related outstanding debt used to acquire those assets and $682,344 (2.5%) restricted for debt service. Table 1 Condensed Statements of Net Position Governmental Governmental Activities Activities 2018 2017 Current and other $ 10,096,851 $ 13,619,882 Capital assets 40,816,044 35,396,802 Total assets 50,912,895 49,016,684 Deferred outflows 71,774 126,894 Total deferred outflows 71,774 126,894 Long-term liabilities 20,465,047 21,816,627 Other liabilities 3,452,401 4,384,519 Total liabilities 23,917,448 26,201,146 Deferred inflows 38,846 21,292 Total deferred inflows 38,846 21,292 Net Position: Net investment in capital assets 18,657,642 12,152,794 Restricted for capital projects 5,178,262 Restricted for debt service 682,344 476,082 Restricted for other 35,316 Unrestricted 7,688,389 5,078,686 Total Net Position $ 27,028,375 $ 22,921,140 5 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS September 30, 2018 Government -wide Financial Analysis - continued District operational analysis — The following table provides a summary analysis of the District's consolidated operations for the fiscal years ended September 30, 2018 and 2017. Governmental activities have increased the District's net position by $4,118,127 which amounts to a 18% increase in net position for the year ended September 30, 2018. Table 2 Changes in Net Position Revenue: Program revenue Charges for services Grants and Contributions General Revenue Ad valorem taxes Unrestricted investment earnings Contributions not restricted to specific programs Gain on sale of asset Miscellaneous Total Revenue Expenses: Water & Wastewater operations General government and other Fire Interest charges Total Expenses Increase in net position 6 Governmental Activities 2018 Governmental Activities 2017 $ 9,308,951 $ 8,743,566 1,878,557 112,040 195,528 9,477 80,627 11,585,180 4,602,955 1,595,960 698,845 569,293 7,467,053 $ 4,118,127 1,785,407 20,864 54,791 1,906 108,799 10,715,333 4,494,439 1,637,102 702,943 584,186 7,418,670 $ 3,296,663 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS September 30, 2018 Financial analysis of the District's funds Governmental Funds - the main focus of the District's governmental funds is to provide information on the flow of monies to and from the funds, and to note the unassigned fund balance, which is a good indicator of resources available for spending in the near term. The information derived from these funds is highly useful in assessing the District's financial requirements. The unassigned fund balance may serve as a useful measure of the District's net resources available for use at the fiscal year-end. At the end of the fiscal year, the District's governmental funds reported combined ending fund balances of $8,355,328, of which 73.8%, or $6,162,503, is unassigned and available to the District for future spending. General Fund budgetary highlights Revenue: Revenues were $292,522 (2.6%) less than budgeted • Water charges were $393,758 (5.9%) less than budgeted. Expenditures: Expenditures were $1,991,731 (22.4%) less than budgeted • Water operations expenditures were $718,241 (18.5%) less than budgeted. • Capital Outlay expenditures were $979,566 (59.5%) less than budgeted. Capital Asset and Debt Administration The District's investment in capital assets for its governmental activities as of September 30, 2018 amounted to $40,816,042, net of accumulated depreciation. This represents a broad range of capital assets including, but not limited to land, buildings, improvements, machinery and equipment, vehicles, water, wastewater treatment, and wastewater collection systems. Capital assets increased 15.3% during 2018 primarily due to $5.9 million of new construction in progress for the water and wastewater system. Additional information about capital assets may be found in Note 5 in the notes to financial statements. 7 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS September 30, 2018 Debt administration Long -Term Liabilities — at the end of the current fiscal year, the District had $22,102,537 of general obligation bonds, revenue bonds, notes payable, capital leases, and accrued compensated absences, which is a decrease of 4.6% from the previous fiscal year. Of this amount, $22,073,430 is backed by the full faith and credit of the District. Table 3 Outstanding Debt at Year-end Revenue bonds General obligation bonds Capital lease obligations Compensated absences Total $ $ Governmental Activities 2018 12,510,000 $ 8,725,000 838,430 29,107 22,102,537 $ Economic factors and next year's budgets and rates: Governmental Activities 2017 13,100,000 9,450,000 590,710 32,306 23,173,016 General Fund fiscal year 2019 budgetary highlights: Revenue: The District's 2019 operational revenue budget reflects a decrease of $485,669 from the amended 2018 budget, and a decrease of $284,675 when compared to actual accrued in 2018. • Water revenue is budgeted to increase from $6,035,804 for actual accrued in fiscal year 2018 to $6,599,484 for budgeted fiscal year 2019 for a total projected increase of $563,680. • Sewer revenue is budgeted to increase from $3,035,824 for actual accrued in fiscal year 2018 to $3,412,665 for budgeted fiscal year 2019 for a total projected increase of $376,841 • Property tax revenue is budgeted to increase by $42,208 for Fire and decrease by $13,717 for the MUD netting an overall increase for tax revenue by $28,491 due to property value, even though the District's overall tax rate decreased for fiscal year 2019 from the overall tax rate for fiscal year 2018. 8 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS September 30, 2018 Expenses: The District's 2019 operational expense budget reflects a decrease of $289,353 from the amended 2018 budget, and an increase of $2,847,305 compared to the actual spending fiscal 2018. • The primary reason for the difference in actual spending in 2018 to 2019 budget is attributable to reduced or deferred expenses. The most significant factors when comparing actual spending to projected budget are; wholesale water purchases increasing expenses by $755,901 due to above average rainfall in 2018, capital outlay increase by $397,227 due to capital improvement projects deferred or overlapping in 2018, short- term debt increase $153,685 due to new assets being added in fiscal year 2019, and overall salary increase by $197,929 due to unfilled budgeted positions that are budgeted to be filled in 2019. Overall: The District's 2019 operational budget is anticipated to have expenses of $10,271,365 and revenues of $10,613,202. Debt Service Fund 2019 budgetary highlights: • The District's Debt Service Fund is budgeted to decrease from $2,093,741 in actual fiscal year 2018 to $2,089,126 budgeted for fiscal year 2019. This is a total decrease of $4,615. • Property tax revenues for the Debt Service Fund are budgeted to increase from $681,687 in actual fiscal year 2018 to $690,975 budgeted for fiscal year 2019. This is a total increase of $9,288 due to an increase in valuations and a reduction in the debt service tax rate. Overall: The District's consolidated budgeted revenue decreased from $14,718,243 in fiscal year 2018 to $14,495,168 in fiscal year 2019. Resulting in a total decrease of 1.52%. The District's consolidated budgeted expenses decreased from $14,000,357 in fiscal year 2018 to $13,960,551 in fiscal year 2019. Resulting in a total decrease of 0.28%. Water and Sewer rates were both increased by the Board on October 1, 2017 to start fiscal year 2018. Sewer base and volumetric rates were both increased for residential and commercial customers by the District's Board of Directors, with an effective date of October 1, 2018. The sewer charges are calculated based on the average water consumption for three months, December, January, and February billing. Water base and volumetric rates were not changed. 9 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS September 30, 2018 There are two legal matters that were not completed in fiscal year 2018. The first is potential litigation with the contractor constructing the upgrade to the wastewater treatment facility. This project is substantially complete, and the District has a potential claim for liquidated damages to be settled through negotiation at the end of the project, or if that fails, binding arbitration. The second legal matter relates to an unauthorized easement encroachment. The technical aspects of this case are settled. The remaining dispute is related to legal representation expenses incurred by the plaintiff. Requests for information This financial report is designed to provide a general overview of the District's consolidated finances for all interested parties. Questions concerning any of the information in this report or requests for additional information should be directed to the Trophy Club Municipal Utility District No. 1, Finance Manager, 100 Municipal Drive, Trophy Club, Texas 76262. 10 BASIC FINANCIAL STATEMENTS TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 STATEMENT OF NET POSITION SEPTEMBER 30, 2018 Governmental Activities ASSETS Cash and cash equivalents $ 2,993,981 Pooled investments 4,368,107 Restricted pooled investments 1,442,546 Receivables Accounts receivable, net 1,131,679 Taxes 26,454 Due from other governments 2,072 Prepaids 70,512 Net pension asset 61,500 Non -depreciable capital assets: Land 648,178 Construction in progress 20,002,236 Water rights 796,145 Depreciable capital assets: (net) Buildings and other improvements 2,930,259 Machinery, vehicles, and other equipment 2,025,579 Water system 14,393,913 Organization costs 19,734 TOTAL ASSETS 50,912,895 DEFERRED OUTFLOWS OF RESOURCES Pension and other post employment benefits TOTAL DEFERRED OUTFLOWS OF RESOURCES LIABILITIES 71,774 71,774 Accounts payable 1,295,338 Accrued liabilities 45,741 Accrued interest payable 59,415 Customer deposits 312,490 Net OPEB liability 16,955 Noncurrent liabilities: Debt due within one year 1,564,224 Debt due in more than one year 20,623,285 TOTAL LIABILITIES 23,917,448 DEFERRED INFLOWS OF RESOURCES Pension and other post employment benefits TOTAL DEFERRED INFLOWS OF RESOURCES NET POSITION 38,846 38,846 Net investment in capital assets 18,657,642 Restricted for debt service 682,344 Unrestricted 7,688,389 TOTAL NET POSITION $ 27,028,375 The notes to financial the statements are an integral part of this statement. 11 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30, 2018 Program Activities Governmental Activities Water operations General government Wastewater operations Fire Interest on long term debt Non -Departmental Wastewater collection system Directors Total governmental activities Expenses $ 3,385,244 1,395,655 1,149,853 698,845 569,293 190,494 67,858 9,811 Governmental Activities Program Revenues Operating Charges for Grants and Services Contributions $ 6,169,279 22,237 3,117,435 Capital Grants and Contributions $ - $ $ 7,467,053 $ 9,308,951 $ $ General Revenues: Ad valorem taxes Miscellaneous Contributions not restricted to specific programs Investment income Gain on sale of assets Total general revenues Change in net position Net (Expenses) Revenue and Changes in Net Assets Governmental Activities $ 2,784,035 (1,373,418) 1,967,582 (698,845) (569,293) (190,494) (67,858) (9,811) $ 1,841,898 1,878,557 80,627 195,528 112,040 9,477 2,276,229 4,118,127 Net Position - beginning of year 22,921,140 Prior period adjustments (10,892) Net Position - end of year $ 27,028,375 The notes to the financial statements are an integral part of this statement. 12 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 BALANCE SHEET GOVERNMENTAL FUNDS September 30, 2018 Debt Capital Total General Fund Fund Fund Funds ASSETS Assets Cash and cash equivalents $ 2,986,825 $ 7,156 $ $ 2,993,981 Pooled investments 4,368,107 - 4,368,107 Restricted investments - 675,188 767,358 1,442,546 Receivables: Accounts receivables, net 1,131,679 1,131,679 Taxes 16,952 9,502 26,454 Due from other governments 2,072 - 2,072 Due from other funds 1,051,130 1,051,130 Prepaids 70,512 70,512 TOTAL ASSETS $ 9,627,277 $ 691,846 $ 767,358 $ 11,086,481 LIABILITIES, DEFERRED INFLOWS, AND FUND BALANCES Liabilities Accounts payable $ 487,600 $ $ 807,738 $ 1,295,338 Accrued liabilities 45,741 - 45,741 Customer deposits 312,490 312,490 Due to other funds 1,051,130 1,051,130 Total liabilities 845,831 1,858,868 2,704,699 Deferred Inflows of Resources Unavailable revenues - property taxes 16,952 9,502 26,454 Total deferred inflows of resources 16,952 9,502 26,454 Fund Balances Non -spendable prepaids 70,512 70,512 Restricted -Debt service - 682,344 682,344 Assigned -Capital outlays 1,439,969 1,439,969 Unassigned 7,254,013 (1,091,510) 6,162,503 Total fund balances 8,764,494 682,344 (1,091,510) 8,355,328 TOTAL LIABILITIES, DEFERRED INFLOWS, AND FUND BALANCES $ 9,627,277 $ 691,846 $ 767,358 $ 11,086,481 The notes to fmancial statements are an integral part of this statement. 13 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO STATEMENT OF NET POSITION SEPTEMBER 30, 2018 Total fund balances - governmental funds $ 8,355,328 Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not current financial resources and, therefore, are not reported in the governmental funds balance sheet. 40,816,044 Net pension asset is not a financial resource; therefore, it is not reported in the 61,500 governmental funds. Net OPEB liability is not a financial resource; therefore, it is not reported in the governmental funds. (16,955) Unavailable tax revenues that are reported as deferred inflows of resources in the governmental funds balance sheet is recognized as revenue in the government -wide financial statements. 26,454 TCDRS contributions are not current financial resources/burden; therefore they are not reported in the governmental funds. The net of these amounts is: 71,774 Interest payable on long term debt does not require current financial resources; therefore interest payable is not reported as a liability in the governmental funds balance sheet. (59,415) Unamortized pension investment gains/losses are not current financial resources/burden; therefore they are not reported in the governmental funds. The net of these amounts is: (38,846) Accrued compensated absences do not require the use of current financial resources; therefore accrued vacation is not reported as a liability in the governmental funds balance sheet. (29,107) Long-term liabilities, including bonds payable are not due and payable in the current period and, therefore, are not reported in the fund financial statements. (22,158,402) Net position of governmental activities $ 27,028,375 The notes to the financial statements are an integral part of this statement. 14 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Revenues: Water and wastewater charges Taxes Miscellaneous Intergovernmental revenues Investment income Oversize meter reimbursements Inspection and tap fees Total Revenues: Expenditures Water Wastewater Adminstration Fire Non -Departmental Board of directors Capital outlay Debt Service Principal Interest and fiscal charges Bond administrative fees Total Expenditures: Excess (deficiency) of revenues over (under) expenditures Other Financing Sources (Uses) Transfers in Proceeds from sale of assets Capital lease issuance cost Capital lease issuance Transfers out Total Other Financing Sources (Uses): Net change in fund balance Fund Balances - beginning of year Fund Balances - end of year General Fund $ 9,286,714 $ 1,197,949 35,627 195,528 61,283 14,237 8,000 10,799,338 3,173,225 1,026,693 1,075,089 625,637 190,494 9,811 665,773 112,381 20,050 6,899,153 Debt Service Fund Capital Projects Fund Total Governmental Funds $ $ 9,286,714 681,688 1,879,637 45,000 80,627 195,528 21,903 28,854 112,040 14,237 - 8,000 703,591 73,854 11,576,783 3,173,225 - 1,026,693 - 1,075,089 625,637 - 190,494 - 9,811 5,545,792 6,211,565 1,315,000 1,427,381 569,530 589,580 2,950 2,950 1,887,480 5,545,792 14,332,425 3,900,185 (1,183,889) (5,471,938) (2,755,642) 797,834 15,400 (1,500) 360,100 (1,390,151) (218,317) 3,681,868 5,082,626 $ 8,764,494 $ 1,390,151 2,187,985 15,400 (1,500) - 360,100 (797,834) (2,187,985) 1,390,151 (797,834) 374,000 206,262 (6,269,772) (2,381,642) 476,082 5,178,262 10,736,970 682,344 $ (1,091,510) $ 8,355,328 The notes to financial statements are an integral part of this statement. 15 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 RECONCILIATION OF THE STATEMENT OF REVENUES EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30, 2018 Net change in fund balances - total governmental funds $ (2,381,642) Amounts reported for governmental activities in the Statement of Activities are different because: Depreciation expense on capital assets reported in the Statement of Activities does not require the use of current financial resources, therefore, depreciation expense is not reported as expenditures in the governmental funds. Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the costs of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount of capital assets recorded in the current period. (786,400) 6,211,565 Debt principal payments reduces long-term liabilities in the Statement of Net Position, but it is recorded as an expenditure in the governmental funds. 1,427,381 Governmental funds report new debt issuances as other financing sources. However, these amounts are removed and recognized as new long term debt on the Statement of Net Position. Governmental funds report the effects of debt premiums, and debt discounts, when debt is first issued, whereas the amounts are deferred and amortized in the Statement of Activities. Governmental funds recognize the full amount of proceeds received for sale of disposed assets, but net book values of the assets are factored in to calculating a gain on sold assets for the government -wide financial statements. Various other reclassifications and eliminations are necessary to convert from the modified accrual basis of accounting to accrual basis of accounting. These include recognizing the change in unavailable revenues, pension and OPEB expense, and other items. The net effect of these reclassifications is to decrease net position. Current year changes in accrued interest payable do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds. (360,100) 18,325 (5,923) (7,041) 1,962 Change in net position of governmental activities $ 4,118,127 The notes to the financial statements are an integral part of this statement. 16 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. General Statement Denton County Municipal Utility District No. 1 (the District) was created by the Texas Water Rights Commission (later known as Texas Commission on Environmental Quality (TCEQ)) on March 4, 1975 and confirmed by the electorate of the District at a confirmation election on October 7, 1975. The Board of Director's held its first meeting on April 24, 1975. The Bonds were first sold on June 8, 1976. The District operates pursuant to Article XVI, Chapter 59 of the Texas Constitution and Chapter 54 of the Texas Water Code, as amended. Effective April 1, 1983, the District's name was officially changed by order from Denton County Municipal Utility District No. 1 to Trophy Club Municipal Utility District No. 1. On May 9, 2009, citizens voted to consolidate the District and Trophy Club Municipal Utility District No. 2 (MUD2). As a result, the District reports consolidated activity and balances for the District and the entities formerly known as MUD2 and the Trophy Club Master District Joint Venture (a joint venture of MUD1 and MUD2). 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. B. Financial Reporting Entity As required by accounting principles generally accepted in the United States of America, these financial statements include the activities of the District and any organizations for which the District is financially accountable or for which the nature and significance of their relationship with the District are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The definition of the reporting entity is based primarily on the notion of financial accountability. A primary government is financially accountable for the organizations that make up its legal entity. It is also financially accountable for legally separate organizations if its officials appoint a voting majority of an organization's governing body and either it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or to impose specific financial burdens on, the primary government. A primary government may also be financially accountable for governmental organizations that are fiscally dependent on it. A primary government has the ability to impose its will on an organization if it can significantly influence the programs, projects, or activities of, or the level of services performed or provided by, the organization. A financial benefit or burden relationship exists if the primary government (a) is entitled to the organization's resources; (b) is legally obligated or has otherwise assumed the obligation to finance the deficits of, or provide financial support to, the organization; or (c) is obligated in some manner for the debt of the organization. Some organizations are included as component units because of their fiscal dependency on the primary government. An organization is fiscally dependent on the primary government if it is unable to adopt its budget, levy taxes, set 17 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED rates or charges, or issue bonded debt without approval by the primary government. Accordingly, the District has no component units. C. Government -Wide and Fund Financial Statements The government -wide financial statements (the Statement of Net Position and the Statement of Activities) report information on all of the activities of the District, except for fiduciary funds. The effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. The activities of the District are comprised only of governmental activities. The Statement of Activities demonstrates the degree to which the direct expenses of a given program are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific program. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given program and 2) operating or capital grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Taxes and other items not properly included among program revenues are reported instead as general revenues. Fund Financial Statements The District segregates transactions related to certain functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. These statements are required to present each major fund in a separate column on the fund financial statements. For fiscal year 2018, the major funds are the General Fund, Capital Projects Fund, and the Debt Service Fund. Governmental funds are those funds through which most governmental functions typically are financed. The measurement focus of governmental funds is on the sources, uses and balance of current financial resources. The District has presented the following governmental funds: General Fund The General Fund is the main operating fund of the District. This fund is used to account for all financial resources not accounted for in other funds. All general tax revenues and other receipts that are not restricted by law or contractual agreement to some other fund are accounted for in this fund. General operating expenditures, fixed charges and capital improvement costs that are not paid through other funds are paid from the General Fund. Debt Service Fund The Debt Service Fund is used to account for resources accumulated and payments made for principal and interest on the long-term debt of governmental funds. 18 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED Capital Projects Fund The Capital Projects Fund is used to account for funds received and expended for the acquisition and construction of infrastructure and other capital assets. D. Measurement Focus and Basis of Accounting Measurement focus refers to what is being measured; basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied. The government -wide statements are reported using the economic resources measurement focus and the accrual basis of accounting. The economic resources measurement focus means all assets and liabilities (whether current or non-current) are included on the Statement of Net Position and the operating statements present increases (revenues) and decreases (expenses) in net total position. Under the accrual basis of accounting, revenues are recognized when earned. Expenses are recognized at the time the liability is incurred. Governmental fund financial statements are reported using the current financial resources measurement focus and are accounted for using the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual; i.e., when they become both measurable and available. "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The District considers receivables collected within sixty days after year-end to be available and recognizes them as revenues of the current year. Expenditures are recorded when the related fund liability is incurred. However, debt service expenditures are recorded only when payment is due. The revenues susceptible to accrual are interest income and ad valorem taxes. All other governmental fund revenues are recognized when received. E. Cash and Investments The District's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments of three months or less from the date of acquisition. 19 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED The District's investment policy requires that all monies be deposited with the authorized District depository or 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, (B) 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 (1), pledged with third party selected or approved by the District, and placed through a primary government securities dealer. All investments are recorded at fair value based on quoted market prices. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties. F. Capital Assets Capital assets, which include property, plant, and equipment, are reported in the government -wide financial statements. All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated assets are valued at their fair market value on the date donated. Repairs and maintenance are recorded as expenses. Renewals and betterments are capitalized. Interest has not been capitalized during the construction period on property, plant and equipment. Assets capitalized have an original cost of $5,000 or more and over one year of useful life. Depreciation has been calculated on each class of depreciable property using the straight-line method. Estimated useful lives are as follows: Buildings 50 Years Improvements other than buildings 15 - 30 Years Machinery and equipment 5 - 15 Years Vehicles 6 - 12 Years Water and wastewater systems 30 - 65 Years 20 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED G. Accumulated Vacation Time Employees earn vacation pay based upon seniority that accrues at various rates up to a maximum four weeks per year. Upon termination, employees will be paid for their unused earned vacation. The District records a liability for the value of these compensated absences. H. Organizational Costs The District, in conformance with requirements of the TCEQ, capitalized costs incurred in the creation of the District. The TCEQ requires capitalization of organizational costs for the construction period, 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. The District amortizes the organizational costs using the straight-line method over a period of 22 to 45 years. I. Net Position Net position represents the difference between assets and liabilities. Net position invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvements of those assets, and adding back unspent proceeds. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislations adopted by the District or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. J. Estimates In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities, and the reported amounts of revenue and expenses/expenditures. Actual results could differ from those estimates. K. Fund Balances Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions (GASB 54) defines the different types of fund balances that a governmental entity must use for financial reporting purposes in the fund financial statements for governmental type funds. It does not apply for the government -wide financial statements. 21 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED GASB 54 requires the fund balance amounts to be properly reported within one of the following fund balance categories: Nonspendable - such as fund balance associated with inventories, prepaids, long-term loans and notes receivable, and property held for resale (unless the proceeds are restricted, committed, or assigned), Restricted - fund balance category includes amounts that can be spent only for the specific purposes stipulated by constitution, external resource providers, or through enabling legislation, Committed - fund balance classification includes amounts that can be used only for the specific purposes determined by a formal action of the Board of Directors (the District's highest level of decision-making authority), Assigned - fund balance classifications are assigned by the District Manager with the intentions to be used by the government for specific purposes but do not meet the criteria to be classified as restricted or committed, and Unassigned - fund balance is the residual classification for the District's General Fund and includes all spendable amounts not contained in the other classifications, and other fund's that have total negative fund balances. NOTE 2. CASH AND INVESTMENTS The funds of the District must be deposited and invested under the terms of a contract, contents of which are set out in the Depository Contract Law. The depository bank places approved pledged securities for safekeeping and trust with the District's agent bank in an amount sufficient to protect District funds on a day-to-day basis during the period of the contract. The pledge of approved securities is waived only to the extent of the depository bank's dollar amount of Federal Deposit Insurance Corporation (FDIC) insurance. At September 30, 2018, the carrying amount of the District's deposits (cash, certificates of deposit, and non -pooled savings accounts) was $2,632,956 and the bank balance was $3,224,980. The District's cash deposits at September 30, 2018, and during the year then ended were entirely covered by FDIC insurance, pledged securities, or by a letter of credit pledged by the District's agent bank in the District's name. 22 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 2. CASH AND INVESTMENTS — CONTINUED The Public Funds Investment Act (Government Code Chapter 2256) contains specific provisions in the areas of investment practices, management reports and establishment of appropriate policies. Among other things, it requires the District to adopt, implement, and publicize an investment policy. That policy must address the following areas; (1) safety of principal and liquidity, (2) portfolio diversification, (3) allowable investments, (4) acceptable risk levels, (5) expected rates of return, (6) maximum allowable stated maturity of portfolio investments, (7) maximum average dollar -weighted maturity, allowed based on the stated maturity date for the portfolio, (8) investment staff quality and capabilities, and (9) bid solicitation preferences for certificates of deposit. Statutes and the District's investment policy authorized the District to invest in the following investments as summarized below: Maximum Maximum Authorized Maximum Percentage Investment Investment Type Maturity ofPortfolio In One Issuer U.S. Treasury Obligations 2 years 50% NA U.S. Agencies Securities 2 years 50% NA State of Texas Securities 2 years 50% NA Certificates ofDeposits 2 years 90% NA Money Market 2 years 90% NA Investment pools 2 years 90% NA The Act also requires the District to have independent auditors perform test procedures related to investment practices as provided by the Act. The District is in substantial compliance with the requirements of the Act and with local policies. Cash and investments as of September 30, 2018 are classified in the accompanying financial statements as follows: Primary Government: Cash and cash equivalents Pooled Investments Restricted pooled investments Total cash and investments 23 $ 2,993,981 4,368,107 1,442,546 $ 8,804,634 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 2. CASH AND INVESTMENTS — CONTINUED Cash and investments as of September 30, 2018 consist of the following: Petty Cash $ 600 Deposits with financial institutions 2,632,356 Restricted Pooled Investments 1,803,571 Unrestricted Texpool Investments 4,368,107 Total cash, certificate of deposit, and pooled investments $ 8,804,634 Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the District manages its exposure to interest rate risk is by investing mainly in investment pools which purchase a combination of shorter term investments with an average maturity of less than 60 days thus reducing the interest rate risk. The District monitors the interest rate risk inherent in its portfolio by measuring the weighted average maturity of its portfolio. The District has no specific limitations with respect to this metric. As of September 30, 2018, the District had the following investment: Weighted Average Investment Type Amount Maturity TexPool $ 6,171,678 30 days Total Investments $ 6,171,678 As of September 30, 2018, the District did not invest in any securities which are highly sensitive to interest rate fluctuations. Disclosures Relating to Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the Public Funds Investment Act, the District's investment policy, or debt agreements, and the actual rating as of year-end for each investment type. 24 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 2. CASH AND INVESTMENTS — CONTINUED Minimum Rating as Legal of Year Investment Type Amount Rating End TexPool $ 6,171,678 AAAm AAAm Total Investments $ 6,171,678 Concentration of Credit Risk As of September 30, 2018, other than external investment pools, the District did not have 5% or more of its investments with one issuer. Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The Public Funds Investment Act and the District's investment policy have the following provision for deposits: They require that a financial institution secure deposits made by state or local governmental units by either 1) pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit), or 2) an irrevocable standby letter of credit with the District named as the beneficiary. The market value of pledged securities in the collateral pool or the value of the letter of credit must equal at least the bank balance less FDIC insurance at all times. Investment in State Investment Pools The District is a voluntary participant in TexPool. The State Comptroller of Public Accounts exercises responsibility over TexPool. This oversight includes the ability to significantly influence operations, designation of management, and accountability for fiscal matters. Additionally, the State Comptroller has established an advisory board composed of both participants in TexPool and other persons who do not have a business relationship with TexPool. TexPool operates in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. TexPool uses amortized costs rather than market value to report net assets to compute share prices. Accordingly, the fair value of the position in TexPool is the same as the value of TexPool shares. 25 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 3. ACCOUNTS RECEIVABLE Receivables as of year-end, including the applicable allowances for uncollectible accounts, are as follows: Accounts Receivable: MUD water MUD sewer Unbilled receivables Refuse (as agent for Town of Trophy Club) Storm drainage (as agent for Town of Trophy Club) Refuse tax (as agent for Town of Trophy Club) Miscellaneous PID Surcharge (as agent for Town of Trophy Club) $ 570,746 277,334 143,997 73,081 51,411 6,281 2,993 17,887 1,143,730 Allowance for uncollectible accounts (12,051) Total(net) $ 1,131,679 $ 2,072 Due from Other Governments: Town of Trophy Club NOTE 4. INTERFUND TRANSFERS Transfers between funds during the year are as follows: Transfer In Transfer Out Amount General Fund Capital Projects $ 797,834 Debt Service General Fund 218,954 Debt Service General Fund 122,043 Debt Service General Fund 925,818 Debt Service General Fund 123,336 Total $ 2,187,985 Purpose Reimburse GF for Phase 1 ofthe Fort Worth Water Main Project Transfer for the fire station bond payment Transfer of PID surcharge Assist with revenue bond payments Transfer to assist with the bond reserve payment. 26 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 5. CAPITAL ASSETS Capital asset activity for the year ended September 30, 2018, was a Governmental Activities: Capital assets - Non -Depreciable Land Construction in progress Water rights Total capital assets not being depreciated Capital assets - Depreciable Buildings Improvements other than buildings Machinery and equipment Organization costs Vehicles Water system Wastewater treatment system Wastewater collection system Total capital assets being depreciated Less accumulated depreciation for: Buildings Improvements other than buildings Machinery and equipment Organization costs Vehicles Water system Wastewater treatment system Wastewater collection system Total accumulated depreciation Governmental activities capital assets, net Beginning Balances $ 648,178 14,127,488 796,145 15,571,811 3,479,008 324,334 1,809,967 2,331,300 2,384,649 12,218,223 5,663,320 4,410,351 32,621,152 (529,537) (256,787) (886,789) (2,304,293) (1,128,731) (3,828,100) (2,333,243) (1,528,683) (12,796,163) $ 35,396,800 27 s follows: Retirements/ Additions Transfers $ 5,932,219 $ (57,472) 5,932,219 (57,472) 60,390 144,765 16,037 58,154 279,346 57,900 (42,110) 24,768 5,415 (30,611) 15,362 (75,277) (11,482) (116,694) (7,273) (149,191) 36,187 (214,968) (138,444) (73,071) (786,400) 36,187 Ending Balance $ 648,178 20,002,235 796,145 21,446,558 3,479,008 324,334 1,867,867 2,331,300 2,402,929 12,387,756 5,684,772 4,437,894 32,915,860 (604,814) (268,269) (1,003,483) (2,311,566) (1,241,735) (4,043,068) (2,471,687) (1,601,754) (13,546,376) $ 5,425,165 $ (5,923) $ 40,816,042 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 5. CAPITAL ASSETS - CONTINUED Depreciation expense was charged as direct expense to programs of the primary government as follows: General government Water operations Wastewater operations Fire department Wastewater collection systems Total depreciation expense NOTE 6. LONG-TERM DEBT $ 314,121 210,380 120,833 73,208 67,858 $ 786,400 At September 30, 2018, the District's long-term debt payable consisted of the following: Description Tax and revenue bonds: Improvements Refunding Refunding Improvements Improvements Improvements Capital lease payable: Capital lease obligations Capital lease obligations Interest Rate Payable 3.50-5.00% 2.00-3.00% 2.00-3.50% 1.50-3.50% 2.00-3.25% 0.53-2.12% Year of Final Issue Maturity 2010 2012 2013 2015 2015 2016 2.50% 2015 2.95% 2018 28 2031 2023 2023 2034 2035 2036 Average Annual Original Payment Amount $ 148,205 251,373 224,734 199,898 305,174 275,259 $2,000,000 2,355,000 1,905,000 5,765,000 9,230,000 4,635,000 Outstanding 9/30/2018 $ 1,490,000 1,170,000 1,020,000 5,045,000 8,280,000 4,230,000 $ 21,235,000 2022 $ 127,149 $1,057,316 $ 478,330 2023 78,456 360,100 360,100 $ 838,430 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 6. LONG-TERM DEBT - CONTINUED The following is a summary of long-term debt transactions of the District for the year ended September 30, 2018: Governmental Activities: Tax, revenue, and refunding bonds Deferred loss on refinding Premium on bonding Capital lease obligations Compensated absences Beginning Balance Additions $ 22,550,000 $ (5,197) 108,496 22,653,299 590,711 590,711 32,306 32,306 Reductions $ (1,315,000) 866 (19,192) (1,333,326) 360,100 (112,381) 360,100 (112,381) Total Governmental Activities Long-term Liabilities $ 23,276,316 $ 360,100 (3,199) (3,199) $ (1,448,906) Ending Due Within Balance One Year $ 21,235,000 $ 1,350,000 (4,331) 89,304 21,319,973 1,350,000 838,430 185,117 838,430 185,117 29,107 29,107 29,107 29,107 $ 22,187,510 $ 1,564,224 The annual requirements to amortize all debt outstanding as of September 30, 2018, are as follows: Year Ending September 30, 2019 2020 2021 2022 2023 2024-2028 2029-2033 2034-2036 Principal $ 1,350,000 1,370,000 1,410,000 1,450,000 1,490,000 5,565,000 6,165,000 2,435,000 Total $ 21,235,000 29 Interest Total $ 543,397 516,220 486,681 455,372 421,446 1,672,427 891,885 107,748 $ 5,095,176 $ 1,893,397 1,886,220 1,896,681 1,905,372 1,911,446 7,237,427 7,056,885 2,542,748 $ 26,330,176 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 6. LONG-TERM DEBT — CONTINUED Capital lease obligations: Year Ending September 30, Principal Interest Total 2019 $ 185,117 $ 21,550 $ 206,667 2020 189,028 16,592 205,620 2021 193,027 11,532 204,558 2022 197,114 6,366 203,480 2023 74,144 1,094 75,238 Total $ 838,430 $ 57,133 $ 895,563 Tax and Revenue Bonds Tax and revenue 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 sanitary sewer system. The outstanding bonds are callable for redemption prior to maturity at the option of the District as follows: Series 2010 - All maturities from 2021 to 2025 are callable in principal increments of $5,000 on or after September 1, 2020 at par plus unpaid accrued interest to the fixed date for redemptions. Series 2012 - All maturities from 2021 to 2023 are callable in principal increments of $5,000 on or after September 1, 2020 at par plus unpaid accrued interest to the fixed date for redemptions. Series 2013 — The Series 2013 bonds are not callable prior to their stated maturity. Series 2014 — All maturities from 2024 to 2034 are callable in principal increments of $5,000 on or after September 1, 2025 at par plus unpaid accrued interest to the fixed date for redemptions. Series 2015 — All maturities from 2025 to 2035 are callable in principal increments of $5,000 on or after September 1, 2025 at par plus unpaid accrued interest to the fixed date for redemptions. Series 2016 — All maturities from 2028 to 2036 are callable in principal increments of $5,000 on or after September 1, 2027 at par plus unpaid interest to the fixed date for redemptions. Contractual obligations and notes payable are liquidated from the General Fund. Tax and revenue bonds are liquidated from the Debt Service Fund. The provisions of the bond resolutions relating to debt service requirements have been met, and the cash allocated for these purposes was sufficient to meet debt service requirements for the year ended September 30, 2018. 30 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 7. PROPERTY TAXES 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 all property within the Appraisal District on the basis of 100% of its appraised value and is prohibited 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 $0.25 per $100 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. Property taxes are recorded as receivables when levied. Following is information regarding the 2018 tax levies: Adjusted taxable values $ 1,555,617,669 0 & M and Fire tax levy $0.076580/$100 1,191,292 I & S tax levy $0.043630/$100 678,716 Total tax levy $0.120210/$100 $ 1,870,008 NOTE 8. FUND BALANCE CLASSIFICATIONS The District authorized the District Manager to designate certain fund balances as assigned. Excluding unassigned fund balances, the following describes the District's fund balance classifications at September 30, 2018: Non -Spendable Fund Balances The District's $70,512 non -spendable fund balance represents expenses prepaid at fiscal year-end. Assigned Fund Balances The District assigned a total of $1,439,969 of General Fund balances for the following future capital outlays: $963,543 for wastewater system improvements, $408,621 for vehicles, and $67,805 for other improvements. 31 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 9. 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 District is exposed. Any losses reported but unsettled or incurred and not reported, are believed to be insignificant to the District's basic financial statements. Additionally, the District must operate in compliance with rules and regulations mandated for public water supply systems by federal and state governments. The District is subject to compliance oversight by the Texas Commission on Environmental Quality (TCEQ). NOTE 10. DUE TO AND FROM OTHER FUNDS During the course of operations, the District has activity between funds for various purposes. Any residual balances outstanding at year end are reported as due from/to other funds. While these balances are reported in fund financial statements, balances between the funds included in governmental activities (i.e., the governmental funds) are eliminated for the Statement of Net Position presentation. Due to: Capital Projects Due from: General Fund Fund Total General Fund $ $ 45,000 $ 45,000 Capital Projects Fund 1,096,130 1,096,130 Total $ 1,096,130 $ 45,000 $ 1,141,130 NOTE 11. RETIREMENT PLAN Introduction The funding policy governs how the Texas County & District Retirement System (TCDRS) determines the employer contributions required to ensure that benefits provided to TCDRS members are funded in a reasonable and equitable manner. The goals of TCDRS' funding policy are to fully fund benefits over the course of employees' careers to ensure intergenerational equity, and to balance rate and benefit stability with the need for the plan funding to be reflective of current plan conditions. This policy documents the current funding policies in effect for the Dec. 31, 2017 actuarial valuation as established by state law, administrative rule and action by the TCDRS Board of Trustees (the board). The policy serves as a comprehensive funding overview and complies with the GASB reporting requirements for an agent multiple -employer plan. 32 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. RETIREMENT PLAN (CONTINUED) TCDRS Funding Overview TCDRS is a model for responsible, disciplined funding. TCDRS does not receive any state funding. As an agent, multiple -employer plan, each participating employer in the system funds its plan independently. A combination of three elements funds each employer's plan: employee deposits, employer contributions and investment income. • The deposit rate for employees is 7% of compensation, as adopted by the employer's governing body. • Participating employers are required to contribute at actuarially determined rates to ensure adequate funding for each employer's plan. Employer contribution rates are determined annually and approved by the TCDRS Board of Trustees. • Investment income funds a large part of the benefits employees earn. Pursuant to state law, employers participating in the system must pay 100% of their actuarially determined required contributions on an annual basis. Each employer has the opportunity to make additional contributions in excess of its annual required contribution rate either by adopting an elected rate that is higher than the required rate or by making additional contributions on an ad hoc basis. Employers may make additional contributions to pay down their liabilities faster, pre -fund benefit enhancements and/or buffer against future adverse experience. In addition, employers annually review their plans and may adjust benefits and costs based on their local needs and budgets. Although accrued benefits may not be reduced, employers may reduce future benefit accruals and immediately reduce costs. Methodology for Determining Employer Contribution Rates The board hires independent outside consulting actuaries to conduct an annual valuation to measure the funding status and to determine the required employer contribution rate for each employer plan. In order to calculate the employer contribution rate, the actuary does the following: • Studies each employer's adopted plan of benefits and the profile of its plan participants, and uses assumptions established by the board to estimate future benefit payments. • Discounts the estimate of future benefit payments to the present based on the long-term rate of investment return to determine the present value of future benefits. • Compares the present value of future benefits with the plan's assets to determine the difference that needs to be funded based on the funding policy. The valuation of each employer plan is based on the system funding policy and the assets, benefits and participant profile of each participating employer plan. The four key components in the determination of employer contribution rates are: the actuarial cost method, amortization policy, the asset valuation method and the actuarial assumptions. 33 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. RETIREMENT PLAN (CONTINUED) Actuarial Cost Method TCDRS has adopted the replacement life entry age cost method, a conservative cost method and an industry standard. The goal of this cost method is to fund benefits in an orderly manner for each participant over his or her career so that sufficient funds are accumulated by the time benefit payments begin. Under this approach, benefits are funded in advance as a level percentage of pay. This portion of the contribution rate is called the normal cost rate and generally remains stable from year to year. Amortization Policy The portion of the contribution rate that funds any remaining unfunded amounts for benefits that are not covered by the normal cost is called the unfunded actuarial accrued liability (UAAL) rate. UAAL amounts occur when benefit enhancements are adopted that have not been funded in advance, or when actual investment or demographic experience varies from the actuarial assumptions (actuarial gains and losses). UAAL amounts are amortized on a level -percentage -of -covered -payroll basis over a closed period with a layered approach. The closed periods ensure all unfunded liabilities are financed over no more than 20 years from the time they occur. Each year new layers are established to amortize changes in the UAAL due to actuarial gains or losses, as well as any plan benefit changes elected by an employer for that year. Benefit enhancements are amortized over a 15 -year closed period. All other changes in the UAAL are amortized over 20 -year closed periods. These amortization periods are generally more conservative than those of most other public retirement plans and are stricter than the minimum amortization period required under state law. For newly participating districts that have five or fewer employees who are all within five years of retirement eligibility, any initial UAAL and any subsequent adoption of prior service credits are amortized over a five-year closed amortization period. This ensures that benefits are appropriately funded over the current generation of employees. Notwithstanding the layered approach, the total UAAL payment may not be less than the required payment obtained by amortizing the entire UAAL over a 20 -year period. If a plan is overfunded, the overfunded actuarial accrued liability (OAAL) is calculated annually using a 30 -year open amortization period. Asset Valuation Method When determining the actuarial value of assets used for measuring a plan's funded status, TCDRS smooths each year's actuarial investment gains and losses and recognizes them over a five-year period to better reflect the system' s long-term investment horizons and to keep employer contribution rates more stable. As actuarial asset investment gains and losses are recognized, they become part of the actuarial gains and losses for the year and are funded according to the amortization policy. The five-year period helps stabilize employer rates while still ensuring that rates are reflective of current market conditions. 34 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. RETIREMENT PLAN (CONTINUED) In addition, the board has the ability to set aside reserves from investment earnings that are used to help offset future negative economic cycles. These reserves are held separately and are not counted as part of a participating employer's plan assets until they are passed through to employers when determined necessary by the board. Reserves help maintain rate stability for employers. In addition, reserves ensure that employers do not adopt benefit increases based on a temporarily lower plan cost at a high point in a market cycle and, conversely, are not as pressured to immediately reduce benefit levels during a low point in a market cycle. Actuarial Assumptions Demographic and economic assumptions are used to estimate employer liabilities and to determine the amount of funding required from employer contributions as opposed to investment earnings. These assumptions reflect a long-term perspective of 30 years or more. Examples of key economic assumptions include long-term investment return, long-term inflation and annual payroll increase. Demographic assumptions are the actuary's best estimate of what will happen to TCDRS members and retirees. Examples of demographic assumptions are employment termination rates, retirement rates and retiree mortality rates. A complete listing of all actuarial assumptions can be found in the annual system- wide valuation report. Oversight The board has established review policies to ensure that actuarial assumptions are appropriate and that the methodology for determining employer contribution rates is being correctly applied. Review of Actuarial Assumptions TCDRS' actuarial assumptions are periodically reviewed and revised as deemed necessary to reflect best estimates of future experience. Every four years, the TCDRS consulting actuary conducts an investigation of experience. TCDRS assumptions are compared to plan experience and future expectations, and changes to the assumptions are recommended as needed. The board adopts actuarial assumptions to be used in the valuation based on the results of this study. An actuarial audit of every investigation of experience is required and must be performed by an independent auditing actuary to review the consulting actuary's analysis, conclusions and recommendations for accuracy, appropriateness and reasonableness. These audits alternate between a peer review and a full replication audit of the investigation of experience. In a peer review audit of the investigation, the reviewing actuary uses the raw results of the investigation for demographic assumptions as calculated by the consulting actuary to test the conclusions and recommendations. In addition, the reviewing actuary independently analyzes economic assumptions to test the results and recommendations of the consulting actuary. The reviewing actuary also examines the consulting actuary's methods and assumptions for reasonableness and internal consistency. In a full replication audit of the investigation, in addition to performing all of the steps of a peer review, the auditing actuary fully replicates the calculation of the investigation's raw results. 35 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. RETIREMENT PLAN (CONTINUED) Review of Employer Contribution Rates In order to test accuracy and ensure that the actuarial methods and assumptions are being correctly applied, an audit of the valuation is required every four years. These audits are conducted by an independent reviewing actuary and alternate between a peer review and a full replication audit of the valuation. In the peer review audit of the valuation, the actuary uses a sample of participant data and TCDRS plans to test the results of the valuation. The reviewing actuary also examines the consulting actuary's methods and assumptions for reasonableness and internal consistency. In a full replication audit of the valuation, the auditing actuary performs all the steps of a peer review audit but instead of analyzing sample data and plans, the auditing actuary fully replicates the original actuarial valuation. Review and Modification of Funding Policy The board will review this policy on a regular basis and may modify this policy at its discretion. Modifications to the policy may be submitted for consideration to the board by staff and/or outside consulting actuaries as circumstances warrant. Long -Term Expected Rate of Return The long-term expected rate of return on TCDRS assets is determined by adding expected inflation to expected long-term real returns, and reflecting expected volatility and correlation. The capital market assumptions and information shown below are provided by TCDRS' investment consultant, Cliffwater LLC. The numbers shown are based on January 2017 information for a 7-10 year time horizon. Note that the valuation assumption for long-term expected return is re -assessed at a minimum of every four years, and is set based on a 30 -year time horizon; the most recent analysis was performed in 2013. See Milliman's TCDRS Investigation of Experience report for the period January 1, 2009 — December 31, 2012 for more details. 36 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. RETIREMENT PLAN (CONTINUED) Asset Class US Equities Private Equity Global Equities International Equities- Developed International Equities- Emerging Investment -Grade Bonds Strategic Credit Direct Lending Distressed Debt REIT Equities Master Limited Partnerships (MLPs) Private Real Estate Partnerships Hedge Funds Total Contributions Benchmark Dow Jones U.S. Total Stock Market Index Cambridge Associates Global Private Equity & Venture Capital Index MSCI World (net) Index MSCI World Ex USA (net) MSCI EM Emerging Markets (net) Index Barclays Capital Aggregate Bond Index FTSE High -Yield Cash -Pay Capped Index S&P/LSTA Leveraged Loan Index Cambridge Associates Distressed Securities Index 67% FTSE NAREIT Equity REITs Index + 33% FRSE EPRA/NAREIT Global Real Estate Index Alerian MLP Index Cambridge Associates Real Estate Index Hedge Fund Research, Inc. (H RI) Fund of Funds Composite Index TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 SCHEDULE OF CONTRIBUTIONS Last 10 Calendar Years (will ultimately be displayed) Target Geometric Real Allocation Rate of Return 11.50% 4.55% 16.00% 7.55% 1.50% 4.85% 11.00% 4.55% 8.00% 5.55% 3.00% 0.75% 8.00% 4.12% 10.00% 8.06% 2.00% 4.05% 2.00% 4.05% 3.00% 6.00% 6.00% 6.25% 18.00% 4.10% 100.00% 2017 2016 2015 2014 2013 Actuarially Determined Contribution $ 102,802 97,875 97,043 93,694 84,476 Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) Covered employee payroll Contributions as a percentage of covered employee payroll $ 102,802 97,875 97,043 93,694 198,219 $ (113,743) $ 1,140,976 1,119,822 1,116,721 1,068,342 963,243 9.0% 8.5% 8.7% 8.8% 20.6% 37 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. RETIREMENT PLAN (CONTINUED) Deferred Inflows/Outflows of Resources At September 30, 2018, the District reported deferred inflows and outflows of resources are as follows: Deferred Inflows/Outflows of Resources Deferred Inflows Deferred Outflows of Resources of Resources Differences between expected and actual experience $ 38,571 $ Changes of assumptions - 9,779 Net difference between projected and actual earnings 8,670 - Contributions made subsequent to measurement date N/A 73,343 Amounts currently reported as deferred outflows of resources and deferred inflows of resources related to pensions, excluding contributions made subsequent to the measurement date, will be recognized in pension expense as follows: Net deferred outflows (inflows) of resources 2018 $ (181) 2019 (2,187) 2020 (13,966) 2021 (16,075) 2022 (5,053) Thereafter - Total $ (37,462) 38 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. RETIREMENT PLAN (CONTINUED) Valuation Timing: NOTES TO SCHEDULE OF CONTRIBUTIONS Actuarially determined contribution rates are calculated as of December 31, two years prior to the end of the fiscal year in which the contributions are reported Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Asset Valuation Method Inflation Salary Increases Investment Rate of Retum Cost -of -Living Adjustments Retirement Age Turnover Mortality: Deposting members Service retirees, beneficiaries and non - depositing members Disabled retirees Other Information: Notes Entry Age Normal 5 Year smoothed market 2.75% Varies by age and service. 4.9% average over career including inflat 8.00% Cost -of -Living Adjustments for Trophy Club Municipal Utility District No 1 are not considered to be substantively automatic under GASB 68. Therefore, no assumption for future cost -of - living adjustment is included in the GASB calculations. No assumption for future cost -of -living adjustments is included in the funding valuation. Members who are eligible for service retirement are assumed to commence receiving benefit payments based on age. The average age at service retirement for recent retirees is 61. The rates vary by length of service, entry -age group (age at hire) and sex The RP -2000 Active Employee Mortality Table for males with a two-year set -forward and the RP -2000 Active Employee Mortality Table for females with a four-year setback, both projected to 2014 with scale AA and then projected with 110% ofthe MP -2014 Ultimate scale after that. The Rp-2000 Combined Mortality Table with the projection scale AA and then projected with 110% ofthe MP -2014 Ultimate scale after that, with a one-year set -forward for males and no age adjustment for females. RP -2000 Disabled Mortality Table projected to 2014 with scale AA and then projected with 110% ofthe MP -2014 Ultimate scale after that, with no age age adjustment for males and a two-year set - forward for females. There were no benefit changes during the year. 39 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 12. OTHER POST EMPLOYMENT BENEFITS Trophy Club Municipal Utility District No 1 participates in the retiree Group Term Life program for the Texas County & District Retirement System (TCDRS), which is a statewide, multiple -employer, public employee retirement system. A brief description of benefit terms: All full- and part-time non -temporary employees participate in the plan, regardless of the number of hours they work in a year and are eligible for the TCDRS pension plan. Only employers that have elected participation in the retiree Group Term Life program are included in the OPEB plan. The plan provides a $5,000 post-retirement death benefit to beneficiaries of service retirees and disability retirees of employers that have elected participation in the retiree GTL program. The OPEB benefit is a fixed $5,000 lump -sum benefit. No future increases are assumed in the $5,000 benefit amount. Benefit terms are established under the TCDRS Act. Participation in the retiree GTL program is optional and the employer may elect to opt out of (or opt into) coverage as of Jan. 1 each year. Membership information is shown in the chart below. Inactive employees or beneficiaries currently receiving benefits 1 Inactive employees entitled to but not yet receiving benefits 5 Active employees 18 Total: 24 Contributions made to the retiree GTL Program are held in the GTL Fund. The GTL fund does not meet the requirements of a trust under Paragraph 4b of GASB 75, as the assets of the GTL fund can be used to pay active GTL benefits which are not part of the OPEB plan. Benefit terms are established under the TCDRS Act. Participation in the retiree GTL program is optional and the employer may elect to opt out of (or opt into) coverage as of Jan. 1 each year. The district's contribution rate for the retiree GTL program is calculated annually on an actuarial basis, and is equal to the cost of providing a one-year death benefit equal to $5,000. 40 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 12. OTHER POST EMPLOYMENT BENEFITS (CONTINUED) Deferred Inflows/Outflows of Resources At September 30, 2018, the District reported deferred inflows and outflows of resources are as follows: Deferred Inflows/Outflows of Resources Deferred Inflows Deferred Outflows of Resources of Resources Differences between expected and actual experience $ 275 $ Changes of assumptions 811 Contributions made subsequent to measurement date N/A $ 1,888 Amounts currently reported as deferred outflows of resources and deferred inflows of resources related to OPEB benefits, excluding contributions made subsequent to the measurement date, will be recognized in OPEB expense as follows: Net deferred outflows (inflows) of resources 2018 $ 89 2019 89 2020 89 2021 89 2022 90 Thereafter 90 Total $ 536 NOTE 13. PRIOR PERIOD RESTATEMENTS Governmental Governmental Fund Tvpes Activities Net Position - beginning $ 22,921,140 Implementation of GASB Statement 75 (10,892) Net position - beginning as adjusted $ 22,910,248 NOTE 14. SUBSEQUENT EVENTS The District has evaluated all events and transactions that occurred after September 30, 2018 up through audit report date, which is the date the financial statements were issued. The District has no subsequent events to disclose. 41 REQUIRED SUPPLEMENTARY INFORMATION TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 GENERAL FUND BUDGETARY COMPARISON SCHEDULE (BUDGETARY BASIS) YEAR ENDED SEPTEMBER 30, 2018 Revenues Water charges Wastewater charges Taxes Miscellaneous Intergovernmental revenues Oversize meter reimbursements Investment income Inspection and tap fees Total revenues Expenditures: Water operations Wastewater operations Administration Fire Non -Departmental Directors Capital Outlay Debt Service Total expenditures Excess of revenues over expenditures Other financing sources (uses): Transfers out Transfers in Capital Lease Issuance Cost Capital Lease Issuance Proceeds from Sale of Assets Total other financing sources (uses) Net change in fund balance Fund Balances - beginning of year Fund Balances - end of year Budgeted amounts Original Final $ 6,651,648 2,976,365 1,175,783 23,046 187,839 18,179 12,000 6,000 11,050,860 $ 6,644,648 2,976,365 1,175,783 33,046 187,839 18,179 50,000 6,000 11,091,860 4,200,897 3,891,767 1,300,782 1,195,782 1,214,111 1,204,111 637,010 637,010 176,746 176,746 12,980 12,980 1,370,339 1,645,339 127,149 127,149 9,040,014 8,890,884 2,010,847 2,200,977 (1,790,150) (2,534,662) 796,145 2,000 15,400 (1,788,150) (1,723,117) 222,697 5,082,626 $ 5,305,323 477,860 5,082,626 $ 5,560,486 Variance with Actual Final Budget $ 6,250,890 $ (393,758) 3,035,824 59,459 1,197,949 22,166 35,627 2,581 195,528 7,689 14,237 (3,942) 61,283 11,283 8,000 2,000 10,799,338 (292,522) 3,173,225 718,542 1,026,693 169,089 1,075,089 129,022 625,637 11,373 190,494 (13,748) 9,811 3,169 665,773 979,566 132,431 (5,282) 6,899,153 1,991,731 3,900,185 1,699,208 (1,390,151) 1,144,511 797,834 1,689 (1,500) (1,500) 360,100 360,100 15,400 - (218,317) 1,504,800 3,681,868 3,204,008 5,082,626 $ 8,764,494 $ 3,204,008 Notes to Required Supplementary Information: The District annual budgets are approved on the budgetary basis. The Board also approves all revisions and appropriations which lapse at each fiscal year-end. 42 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 SCHEDULES OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS Last 10 Years (will ultimately be displayed) 2017 2016 2015 2014 Total pension liability Service Cost $ 176,975 $ 200,990 $ 150,689 $ 170,600 Interest (on the Total Pension Liability) 83,553 57,230 41,351 27,449 Changes of benefit terms (22,086) Difference between expected and actual experience (25,170) (9,790) (11,320) (7,057) Change of assumptions 5,971 7,686 Benefit payments (1,695) (2,091) (1,902) (3,156) Net Change in Total Pension Liability 239,634 246,339 164,418 187,836 Total Pension Liability - Beginning 855,377 609,038 444,620 256,784 Total Pension Liability - Ending (a) $ 1,095,011 $ 855,377 $ 609,038 $ 444,620 Plan Fiduciary Net Position Contributions - Employer $ 102,802 $ 95,185 $ 97,043 $ 93,694 Contributions - Employee 79,868 78,388 78,171 74,784 Net Investment Income 126,587 46,440 (15,011) 18,561 Benefit payments (1,695) (2,091) (1,902) (3,156) Administrative Expense (769) (505) (394) (285) Other 2,418 19,889 (47) (21) Net Change in Plan Fiduciary Net Position 309,211 237,306 157,860 183,577 Plan Fiduciary Net Position - Beginning 847,300 609,994 452,134 268,557 Plan Fiduciary Net Position - Ending (b) $ 1,156,511 $ 847,300 $ 609,994 $ 452,134 Net Pension Liability - Ending (a) - (b) $ (61,500) $ 8,077 $ (956) $ (7,514) Plan Fiduciary Net Position as a Percentage of Total Pension Liability 105.62% 99.06% 100.16% 101.69% Covered Employee Payroll $ 1,140,976 $ 1,119,822 $ 1,116,721 1,068,342 Net Pension Liability as a Percentage of Covered Employee Payroll -5.39% 0.72% -0.09% Notes to Schedule: GASB 68 requires 10 fiscal years of data to be provided in this schedule. The employer will be required to build this schedule over the next 10 year period. 43 -0.70% TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 SCHEDULE OF PENSION CONTRIBUTIONS Last 10 Calendar Years (will ultimately be displayed) Actuarially Determined Contribution Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) Covered employee payroll Contributions as a percentage of covered employee payroll Valuation Timing: 2017 2016 2015 2014 2013 $ 102,802 97,875 97,043 93,694 84,476 $ 102,802 97,875 97,043 93,694 $ $ 1,140,976 1,119,822 1,116,721 1,068,342 198,219 (113,743) 963,243 9.0% 8.5% 8.7% 8.8% 20.6% NOTES TO SCHEDULE OF PENSION CONTRIBUTIONS Actuarially determined contribution rates are calculated as of December 31, two years prior to the end of the fiscal year in which the contributions are reported Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Entry Age Normal Asset Valuation Method Inflation Salary Increases Investment Rate of Return Cost -of -Living Adjustments Retirement Age Turnover Mortality: Deposting members Service retirees, beneficiaries and non - depositing members Disabled retirees Other Information: Notes 5 Year smoothed market 2.75% Varies by age and service. 4.9% average over career including int 8.00% Cost -of -Living Adjustments for Trophy Club Municipal Utility District No 1 are not considered to be substantively automatic under GASB 68. Therefore, no assumption for future cost -of - living adjustment is included in the GASB calculations. No assumption for future cost -of -living adjustments is included in the funding valuation. Members who are eligible for service retirement are assumed to commence receiving benefit payments based on age. The average age at service retirement for recent retirees is 61. The rates vary by length of service, entry -age group (age at hire) and sex. The RP -2000 Active Employee Mortality Table for males with a two-year set -forward and the RP -2000 Active Employee Mortality Table for females with a four-year setback, both projected to 2014 with scale AA and then projected with 110% of the MP -2014 Ultimate scale after that. The Rp-2000 Combined Mortality Table with the projection scale AA and then projected with 110% of the MP -2014 Ultimate scale after that, with a one-year set -forward for males and no age adjustment for females. RP -2000 Disabled Mortality Table projected to 2014 with scale AA and then projected with 110% of the MP -2014 Ultimate scale after that, with no age age adjustment for males and a two- year set -forward for females. There were no benefit changes during the year. 44 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 SCHEDULE OF OPEB CONTRIBUTIONS Last 10 Calendar Years (will ultimately be displayed) Actuarially Determined Contribution Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) Covered employee payroll Contributions as a percentage of covered employee payroll NOTES TO Valuation Timing: 2017 $ 2,673 2,673 $ 1,140,976 0.2% SCHEDULE OF CONTRIBUTIONS Actuarially determined contribution rates are calculated on a calendar year basis as of December 31, two years prior to the end of the fiscal year in which the contributions are reported. Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Inflation Salary Increases Investment Rate of Return Cost -of -Living Adjustments Retirement Age Mortality: Depositing members Service retirees, beneficiaries and non - depositing members Disabled retirees Other Information: Notes Entry Age Normal Does not apply Does not apply 3.44% Does not apply. Members who are eligible for service retirement are assumed to commence receiving benefit payments based on age. The average age at service retirement for recent retirees is 61. 90% of the RP -2014 Active Employee Mortality Table for males and 90% of the RP -2014 Active Employee Mortality Table for females, projected with 110% of the MP -2014 Ultimate scale after 2014. 130% of the RP -2014 Healthy Annuitant Mortality Table for males and 110% of the RP -2014 Healthy Annuitant Mortality Table for females, both projected with 110% of the MP -2014 Ultimate scale after 2014. 130% of the RP -2014 Disabled Annuitant Mortality Table for males and 115% of the RP -2014 Disabled Annuitant Mortality Table for females, both projected with 110% of the MP -2014 Ultimate scale after 2014 There were no benefit changes during the year. 45 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 SCHEDULES OF CHANGES IN NET OPEB LIABILITY AND RELATED RATIOS Last 10 Years (will ultimately be displayed) 2017 Total OPEB liability Service Cost $ 2,889 Interest (on the Total OPEB Liability) 595 Effect of plan changes Effect of assumption changes or inputs 946 Effect of economic/demographic (gains) or losses (321) Benefit payments Net Change in Total OPEB Liability 4,109 Total OPEB Liability - Beginning 12,846 Total OPEB Liability - Ending (a) $ 16,955 Pensionable Covered Payroll $ 1,140,976 Net OPEB Liability as a Percentage of Covered Employee Payroll 1.49% Notes to Schedule: This schedule is presented to illustrate the requirement to show information for 10 years. However, recalculations of prior years are not reported in accordance with the standards of GASB 74/75, they should not be shown here. Therefore, we have shown only years for which the new GASB statements have been implemented. 46 INDIVIDUAL SCHEDULES AND OTHER SUPPLEMENTARY INFORMATION REQUIRED BY TEXAS COMMISSION ON ENVIRONMENTAL QUALITY (TCEQ) TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 TSI -1 SERVICES AND RATES SEPTEMBER 30, 2018 1. Services provided by the District: a) Retail Water b) Retail Wastewater c) Wholesale Water d) Wholesale Wastewater Treatment e) Fire Protection f) Irrigation g) Participates in regional system and/or wastewater service (other than emergency interconnect) 2. Retail service providers: Current Rates Water Base Rates Residential and Commercial Meter Size 5/8" 1" 1.5" 2" 3" 4" 6" Base Rate $17.15 $32.23 $56.94 $86.58 $155.76 $254.59 $501.64 Sewer Base Fee Base Rate $19.60 Residential* Commercial** $19.60 Water Volumetric Rates Rates per 1,000 $3.96 $4.61 $5.34 $6.20 $7.21 Gallons O to 6,000 6,001 to 17,000 17,001 to 25,000 25,001 to 50,000 50,001 + Sewer Volumetric Rates Rates per 1,000 $3.18 $4.51 $6.43 $9.14 Gallons 0 to 4,000 4,001 to 8,000 8,001 to 12,000 12,000 + $5.92 1,000 + *Effective October 1, 2016 Winter Averaging for Sewer Rates were adopted for Residential Customers. Residential sewer rates each year are based on average water usuage for the months of December, January, and February. Effective April 1, 2018 the above rates were adopted for all residential sewer customers. **Commercial sewer usage is billed based on actual water usage per month NOTE: all rates noted above were amended effective April 1, 2018. District employs winter averaging for wastewater usage? Yes ***Total water and wastewater charges per 10,000 gallons usage (including surcharges) effective April 1, 2018 (based on 5/8" & 3/4") First 10,000 gallons used 10,000 $ Next 10,000 gallons used 20,000 $ Next 10,000 gallons used 30,000 $ Next 10,000 gallons used 40,000 $ Next 10,000 gallons used 50,000 $ Next 10,000 gallons used and subsequent 60,000 $ 122.57 170.86 228.56 290.56 352.56 424.66 ***The above sewer calculations are based on a Winter Average of 10,000 gallons per month. 47 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 TSI -1 SERVICES AND RATES SEPTEMBER 30, 2018 b) Retail service providers: number of retail water and/or wastewater* connections within the District as of the fiscal year end. Provide actual numbers and single family equivalents (ESFC). Connections ESFC Active Meter Size Total Active Factor ESFC's Unmetered - - 1.0 Less than 3/4" 2,499.0 2,491.0 1.0 2,491.0 1" 623.0 622.0 2.5 1,555.0 1 1/2" 28.0 27.0 5.0 135.0 2" 92.0 84.0 8.0 672.0 3" 37.0 37.0 15.0 555.0 4" 15.0 15.0 25.0 375.0 6" 3.0 3.0 50.0 150.0 8" - - 80.0 10" - - 115.0 Total Water 3,297.0 3,279.0 5,933.0 Total Wastewater 3,304.0 3,284.0 1.0 3,284.0 * Number of connections relates to water service if provided. Otherwise, the number of wastewater connections should be provided. Note: Total water connections does not include Fire Lines or Portable meters Note: "inactive" means that water and wastewater connections were made, but service is not being provided. Note: District provides wholesale services to the Town of Trophy Club through 1,444 connections 3. Total water consumption (in thousands) during the fiscal year: Gallons pumped into the system 955,151 Gallons billed to customers 884,662 Water accountability ratio 92.62% 4. Standby Fees: Does the District assess standby fees? No For the most recent fiscal year, FY2018: Total Total Percentage Levy Collected Collected Debt Service $ 678,716 $ 677,052 99.8% Operations and Maintenance $ 1,191,292 $ 1,188,371 99.8% Have standby fees been levied in accordance with Water Code Section 49.231, thereby constituting a lien on property? No 5. Location of District: Counties in which District is located: Denton Tarrant Is the District located entirely in one county? No Is the District located within a city? Partially Cities in which District is located: Town of Trophy Club Town of Westlake Is District located within a city's extra territorial jurisdiction (ETJ)? Unknown ETJ's in which District is located: Unknown Is the Board membership appointed by an office outside the District? No 48 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 TSI - 2 General Fund Expenditures and Other Financing Uses Year End September 30, 2018 Current Year Prior Year 2018 2017 Administrative $ 1,275,394 $ 1,150,421 Water Operations $ 3,173,225 $ 2,994,623 Wastewater Operations $ 1,026,693 $ 1,061,896 Wastewater Collection Systems * 0 * 0 Contribution to Trophy Club Fire Dept $ 625,637 $ 625,083 Capital Outlay $ 665,773 $ 744,828 Transfers Out and Debt Service $ 1,524,082 $ 1,529,319 Total Expenditures $ 8,290,804 $ 8,106,170 * In FY 2015 Wastewater Operations and Wastewater Collection Systems were merged together. Number of employees employed by the District: Full time Equivalents (FTEs) 17 17 Part time 0 0 ** The Town of Trophy Club handles the operations of the Fire Department based on an Interlocal Agreement with Trophy Club Municipal Utility District No.1 effective 10/1/16. The MUD reimburses the annual Town's Fire Budget in equal monthly payments. 49 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 CONSOLIDATED TSI -3 TEMPORARY INVESTMENTS September 30, 2018 Identification Interest Maturity Balance Accrued Interest Funds Number Rate Date End of Year End of Year General Fund Bank of the West Closed 0.250 Demand $ Paid monthly (Money Market) General Fund TexPool 613300002 2.1244 Demand $ 4,368,107 Paid daily Debt Service Fund TexPool 613300003 2.1244 Demand $ 48,716 Paid daily Debt Service -Revenue Bond Texpool 613300013 2.1244 Demand $ 19,562 Paid daily Revenue Bond Reserve Texpool 613300014 2.1244 Demand $ 606,910 Paid daily Capital Projects Tax Bond Construction Texpool 613300011 2.1244 Demand $ Paid daily Capital Projects Revenue Bond Construction Closed Texpool 613300012 2.1244 Demand $ Paid daily Capital Projects SWIFT Revenue Bond Construction Texpool 613300015 2.1244 Demand Paid daily SWIFT Revenue Bond Debt Service Texpool 613300017 2.1244 Demand $ 2,584 Paid daily SWIFT Revenue Bond Escrow Account Bank of Texas BOKF 82-1747-01-1 1.560 Demand $ 767,358 Paid daily Vaccon Capital Lease -8076 Escrow Account UMB 147404.1 1.700 Demand $ 361,026 Paid daily Total - All Funds $ 6,174,262 50 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 TSI -4 TAXES LEVIED AND RECEIVABLE SEPTEMBER 30, 2018 General Fund Debt Operations Fire Total Service Total Taxes receivable beginning of year $ 1,662 $ 15,752 $ 17,414 $ 10,120 $ 27,534 2017 tax levy 116,591 1,017,196 1,133,787 645,946 1,779,733 Total to be accounted for 118,253 1,032,948 1,151,201 656,066 1,807,267 Less collections and adjustments: Current year (116,364) (1,014,497) (1,130,862) (644,287) (1,775,149) Prior years (244) (3,142) (3,387) ( 2,278) (5,665) Total to be accounted for (116,609) (1,017,640) (1,134,248) (646,565) (1,780,813) Taxes receivable, end of year $ 1,644 $ 15,308 $ 16,952 $ 9,501 $ 26,454 Taxes receivable by year 1996 and prior $ - $ - $ - $ - $ 1997 $ 2 $ 15 $ 17 $ 54 $ 71 1998 $ 2 $ 16 $ 18 $ 50 $ 69 1999 $ 2 $ 17 $ 20 $ 39 $ 59 2000 $ 2 $ 12 $ 15 $ 44 $ 59 2001 $ 2 $ 13 $ 16 $ 43 $ 59 2002 $ 2 $ 22 $ 25 $ 49 $ 74 2003 $ 24 $ 42 $ 66 $ 44 $ 110 2004 $ 5 $ 43 $ 48 $ 62 $ 110 2005 $ 12 $ 40 $ 52 $ 58 $ 110 2006 $ 50 $ 233 $ 284 $ 360 $ 644 2007 $ 42 $ 404 $ 446 $ 494 $ 940 2008 $ 72 $ 564 $ 635 $ 458 $ 1,093 2009 $ 184 $ 740 $ 924 $ 466 $ 1,390 2010 $ 136 $ 1,693 $ 1,829 $ 1,192 $ 3,021 2011 $ 138 $ 1,525 $ 1,663 $ 780 $ 2,443 2012 $ 146 $ 1,533 $ 1,679 $ 287 $ 1,967 2013 $ 150 $ 1,398 $ 1,548 $ 587 $ 2,135 2014 $ 263 $ 1,369 $ 1,632 $ 731 $ 2,363 2015 $ 91 $ 1,387 $ 1,478 $ 1,041 $ 2,519 2016 $ 91 $ 1,542 $ 1,633 $ 1,002 $ 2,635 2017 $ 301 $ 2,620 $ 2,921 $ 1,664 $ 4,585 $ 1,718 $ 15,230 $ 16,948 $ 9,507 $ 26,454 Property valuations (in 000's) F/Y F/Y F/Y F/Y F/Y 17/18 16/17 15/16 14/15 13/14 Land $ 620,210 $ 562,280 $ 497,482 $ 474,068 $ 439,499 Improvements 908,581 798,401 719,295 630,249 573,454 Personal property 105,783 99,772 71,096 80,605 95,598 Exemptions (82,556) (57,745) (57,305) (52,617) (45,150) $ 1,552,018 $ 1,402,708 $ 1,230,568 $ 1,132,305 $ 1,0 3,401 Tax rate per $100 valuation Operations 0.007880 0.004380 0.004720 0.014860 0.009350 Fire department 0.068700 0.074450 0.072220 0.077270 0.087380 Debt service 0.043630 0.048390 0.054200 0.041260 0.036660 Tax rate per $100 valuation 0.120210 0.127220 0.131140 0.133390 0.133390 Tax levy: $ 1,870,008 $ 1,779,098 $ 2,000,874 $ 1,870,728 $ 1,726,648 Percent of taxes collected to taxes levied 99.75% 99.60% 99.70% 98.91 % 99.42% 51 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 TSI -5 LONG-TERM DEBT SERVICE REQUIREMENTS - BY YEARS SEPTEMBER 30, 2018 All Bonded Debt Series Due During Fiscal Principal Due Interest Due Years Ending 1 -Sep Mar 1/ Sep 1 Total 2019 1,350,000 543,398 1,893,398 2020 1,370,000 516,221 1,886,221 2021 1,410,000 486,682 1,896,682 2022 1,450, 000 455,373 1,905,373 2023 1,490, 000 421,447 1,911,447 2024 1,055,000 384,448 1,439,448 2025 1,085,000 360,776 1,445,776 2026 1,105, 000 336,246 1,441,246 2027 1,145, 000 309,818 1,454, 818 2028 1,175,000 281,143 1,456,143 2029 1,215, 000 250,027 1,465, 027 2030 1,250, 000 216,334 1,466, 334 2031 1,295,000 179,054 1,474,054 2032 1,185, 000 140,162 1,325,162 2033 1,220, 000 106,312 1,326, 312 2034 1,270,000 70,287 1,340,287 2035 895,000 31,737 926,737 2036 270,000 5,724 275,724 $ 21, 235, 000 $ 5,095,186 $ 26, 330,186 General Obligation Bonds - Series 2010 (Fire Station) ($2,000,000) Due During Fiscal Principal Due Interest Due Years Ending 1 -Sep Mar 1/ Sep 1 Total 2019 85,000 62,883 147,883 2020 90,000 59,908 149,908 2021 95,000 56,758 151,758 2022 100,000 53,433 153,433 2023 105,000 48,433 153,433 2024 110,000 43,183 153,183 2025 115,000 37,683 152,683 2026 115,000 33,083 148,083 2027 125,000 28,368 153,368 2028 130,000 23,243 153,243 2029 135,000 17,783 152,783 2030 140,000 12,113 152,113 2031 145,000 6,163 151,163 $ 1,490,000 $ 483,034 $ 1,973,034 52 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 TSI -5 LONG-TERM DEBT SERVICE REQUIREMENTS - BY YEARS SEPTEMBER 30, 2018 Due During Fiscal Years Ending 2019 2020 2021 2022 2023 Due During Fiscal Years Ending 2019 2020 2021 2022 2023 Due During Fiscal Years Ending 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 General Obligation Bonds - Series 2012 (2,355,000) Principal Due Interest Due 1 -Sep Mar 1/ Sep 1 225,000 33,976 225,000 28,350 230,000 21,600 240,000 14,700 250,000 7,500 $ 1,170, 000 $ 106,126 General Obligation Bonds - Series 2013 (1,905,000) Principal Due 1 -Sep 195,000 195,000 205,000 210,000 215,000 Interest Due Mar 1/ Sep 1 31,675 25,825 19,975 13,825 7,525 $ 1,020,000 $ 98,825 General Obligation Bonds - Series 2014 (5,765,000) Principal Due 1 -Sep 250,000 255,000 265,000 270,000 280,000 290,000 295,000 305,000 315,000 325,000 335,000 345,000 360,000 370,000 385,000 400,000 Interest Due Mar 1/ Sep 1 137,525 133,775 129,313 124,013 118,613 112,313 105,063 97,688 90,063 81,400 72,463 62,413 51,200 39,500 27,475 14,000 $ 5,045,000 $ 1,396,813 53 Total 258,976 253,350 251,600 254,700 257,500 $ 1,276,126 Total 226,675 220,825 224,975 223,825 222,525 $ 1,118,825 Total 387,525 388,775 394,313 394,013 398,613 402,313 400,063 402,688 405,063 406,400 407,463 407,413 411,200 409,500 412,475 414,000 $ 6,441,813 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO.1 TSI -5 LONG-TERM DEBT SERVICE REQUIREMENTS - BY YEARS SEPTEMBER 30, 2018 Due During Fiscal Years Ending 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Due During Fiscal Years Ending 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Revenue Bonds - Series 2015 (9,230,000) Principal Due 1 -Sep 380,000 390,000 400,000 410,000 420,000 435,000 450,000 460,000 475,000 490,000 510,000 525,000 545,000 565,000 585,000 610,000 630,000 $ 8,280,000 Interest Due Mar 1/ Sep 1 215,838 208,238 200,438 192,438 184,238 175,838 167,138 157,013 145,513 133,638 120,163 106,138 90,388 74,038 57,088 39,538 20,475 $ 2,288,150 Revenue Bonds - Series 2016 (4,635,000) Principal Due 1 -Sep 215,000 215,000 215,000 220,000 220,000 220,000 225,000 225,000 230,000 230,000 235,000 240,000 245,000 250,000 250,000 260,000 265,000 270,000 $ 4,230,000 Interest Due Mar 1/ Sep 1 61,501 60,125 58,599 56,965 55,139 53,115 50,893 48,463 45,875 42,862 39,619 35,671 31,303 26,624 21,749 16,749 11,262 5,724 $ 722,238 54 Total 595,838 598,238 600,438 602,438 604,238 610,838 617,138 617,013 620,513 623,638 630,163 631,138 635,388 639,038 642,088 649,538 650,475 $ 10, 568,150 Total 276,501 275,125 273,599 276,965 275,139 273,115 275,893 273,463 275,875 272,862 274,619 275,671 276,303 276,624 271,749 276,749 276,262 275,724 $ 4,952,238 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 TSI -6 CHANGES IN LONG-TERM BONDED DEBT SEPTEMBER 30, 2018 Series 2010 Series 2012 Series 2013 Series 2014 Series 2015 Series 2016 GO Bonds GO Bonds GO Bonds GO Bonds Revenue Bonds Revenue Bonds Total Interest rate 3.50-5.00% 2.00-3.00% 2.00-3.50% 1.50-3.50% 2.0-3.25% 0.53-2.12% Date interest payable 3/1 & 9/1 3/1 & 9/1 3/1 & 9/1 3/1 & 9/1 3/1 & 9/1 3/1 & 9/1 Maturity date 9/1/2031 9/1/2023 9/1/2023 9/1/2034 9/1/2035 9/1/2036 Bonds outstanding at beginning of year $ 1,575,000 $ 1,380,000 $ 1,205,000 $ 5,290,000 $ 8,655,000 $ 4,445,000 $ 22,550,000 Retirements of principal $ 85,000 $ 210,000 $ 185,000 $ 245,000 $ 375,000 $ 215,000 $ 1,315,000 Bonds outstanding at end of fiscal year $ 1,490,000 $ 1,170,000 $ 1,020,000 $ 5,045,000 $ 8,280,000 $ 4,230,000 $ 21,235,000 Retirements of interest $ 65,858 $ 39,225 $ 37,225 $ 141,200 $ 223,338 $ 62,685 $ 569,530 Paying agent's name & city: The Bank of New The Bank of New The Bank of New The Bank of TX The Bank of TX The Bank of TX York Mellon York Mellon York Mellon Corporate Trust Corporate Trust Corporate Trust Newark, NJ Newark, NJ Newark, NJ Austin, TX Austin, TX Austin, TX General Obligation Bond Authority Bonds Amount authorized by voters $ 29,094,217 Amount issued $ 29,090,000 Remaining to be issued $ 4,217 The general obligation bonds were authorized on October 7, 1975 Debt Service Fund cash and cash equivalents balance as of September 30, 2018: Average annual debt service payment (principal & interest) for remaining term of debt: 55 $ 682,344 $ 1,893,397 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 TS1-7 COMPARATIVE SCHEDULES OF REVENUES AND EXPENDITURES -FIVE YEARS GENERAL FUND SEPTEMBER 30, 2018 Amounts Percent of total revenue REVENUE 2018 2017 2016 2015 2014 2018 2017 2016 2015 2014 Ad valorem property taxes $ 1,197,949 $ 1,105,820 $ 1,371,247 $ 1,419,548 $ 1,340,502 10.0% 11.1% 16.0% 14.2% 17.6% Water and wastewater charges 9,286,714 8,632,747 6,729,926 6,138,766 5,730,872 77.6% 86.3% 78.8% 61.5% 75.2% Utility Fees - 55,200 239,200 331,200 0.0% 0.0% 0.6% 2.4% 4.3% Inspection and tap fees 8,000 7,200 11,325 11,375 10,725 0.1% 0.1% 0.1% 0.1% 0.1% Interest earned 61,283 18,940 12,652 6,117 6,071 0.5% 0.2% 0.1% 0.1% 0.1% Debt proceeds - - - 0.0% 0.0% 0.0% 0.0% 0.0% Transfers In 797,834 8,034 1,074,337 - 6.7% 0.0% 0.1% 10.8% 0.0% Proceeds from Sale of Assets 15,400 3,550 90,935 46,750 0.1% 0.0% 1.1% 0.5% 0.0% Capital Lease Financing 358,600 - 807,316 - 3.0% 0.0% 0.0% 8.1% 0.0% Miscellaneous and other 245,392 233,282 265,667 240,591 202,481 2.0% 2.3% 3.1% 2.4% 2.7% Total revenue $ 11,971,172 $ 10,001,539 $ 8,544,986 $ 9,984,000 $ 7,621,851 100.0% 100.0% 100.0% 100.0% 100.0% EXPENDITURES Administrative $ 1,275,394 $ 1,150,421 $ 1,388,715 $ 1,672,123 $ 1,779,470 10.7% 11.5% 16.3% 16.7% 23.3% Water operations 3,173,225 2,994,623 3,078,429 3,151,532 3,031,672 26.5% 29.9% 36.0% 31.6% 39.8% Wastewater operations 1,026,693 1,061,896 1,089,257 864,305 621,108 8.6% 10.6% 12.7% 8.7% 8.1% Wastewater collection system - 185,561 0.0% 0.0% 0.0% 0.0% 2.4% Information systems - 0.0% 0.0% 0.0% 0.0% 0.0% Contribution to Trophy Club Fire Dept 625,637 625,083 1,010,938 928,610 879,830 5.2% 6.2% 11.8% 9.3% 11.5% Capital outlay 665,773 744,828 1,713,885 1,755,603 990,311 5.6% 7.4% 20.1% 17.6% 13.0% Transfers Out and Debt Service 1,522,582 1,529,319 1,182,760 656,984 993,450 12.7% 15.3% 13.8% 6.6% 13.0% Total expenditures $ 8,289,304 $ 8,106,170 $ 9,463,984 $ 9,029,157 $ 8,481,402 69.2% 81.0% 110.8% 90.4% 111.3% Excess (deficiency) of revenues over (under) expenditures $ 3,681,868 $ 1,895,369 $ (918,998) $ 954,843 $ (859,551) 30.8% 19.0% -10.8% 9.6% -11.3% Total active retail water and/or wastewater connections 3,284 3,244 3,422 3,376 3,140 56 REVENUE Ad valorem property taxes Penalties and interest Intergovernmental Interest earned Miscellaneous and other Total revenue EXPENDITURES Principal retirement Interest and fiscal charges Bond admin fees Total expenditures Excess (deficiency) of revenues over (under) expenditures TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 TSI -7 COMPARATIVE SCHEDULES OF REVENUES AND EXPENDITURES -FIVE YEARS (Continued) DEBT SERVICE FUND SEPTEMBER 30, 2018 2018 2017 $ 679,678 $ 675,944 2,010 2,294 1,390,151 1,402,170 21,903 8,174 2,093,742 2,088,582 1,315,000 569,530 2,950 1,887,480 $ 206,262 1,265,000 581,844 2,548 1,849,392 $ 239,190 Amounts 2016 $ 666,225 4,010 902,259 2,564 1,575,058 895,000 552,220 2,150 1,449,370 Percentage 2015 2014 2018 2017 2016 2015 2014 $ 468,194 $ 386,992 32.5% 32.4% 42.3% 48.8% 62.4% 2,021 2,676 0.1% 0.1% 0.3% 0.2% 0.4% 465,409 230,804 66.4% 67.1% 57.3% 48.5% 37.2% 13,976 97 1.0% 0.4% 0.2% 1.5% 0.0% 9,573 - 0.0% 0.0% 0.0% 1.0% 0.0% 959,173 620,569 100.0% 100.0% 100.0% 100.0% 100.0% 440,000 425,000 62.8% 60.6% 56.8% 45.9% 68.5% 422,722 198,695 27.2% 27.9% 35.1% 44.1% 32.0% - - 0.1% 0.1% 0.0% 0.0% 0.0% 862,722 623,695 90.1% 88.5% 91.9% 89.9% 100.5% $ 125,688 $ 96,451 $ (3,126) 9.9% 11.5% 8.1% 10.1% -0.5% 57 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 CONSOLIDATED TSI -8 BOARD MEMBERS, KEY PERSONNEL AND CONSULTANTS September 30, 2018 Complete District Mailing Address: 100 Municipal Drive, Trophy Club, Texas 76262 District Business Telephone Number: Metro (682) 831-4600 Limit of Fees of Office that a Director may receive during a fiscal year: $0 (Set by Board Resolution) Name and Address Board Members: Term of Office Fees of Expense Title Elected/Expires Office Paid Reimbursements at or Date Hired FY18 FY18 Year End Gregory Wilson 2013 Churchill Downs Lane Trophy Club, TX 76262 05/16-05/20 $ $ 915 President William Rose 219 Inverness Drive Trophy Club, TX 76262 05/16-05/20 $ $ 951 Vice -President Steve Flynn 417 Ramsey Trail Trophy Club, TX 76262 05/18-05/22 $ $ 949 Secretary/Treasurer Kelly Castonguay 402 Parkview Drive Trophy Club, TX 76262 05/18-5/22 $ $ 1,039 Director Mark Chapman 197 Durango Dr Trophy Club, TX 76262 05/18-05/22 $ $ - Director 58 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 TSI -8 BOARD MEMBERS, KEY PERSONNEL AND CONSULTANTS (Continued) SEPTEMBER 30, 2018 Name and Address Key Personnel: Term of Office Fees of Title Elected/Expires Office Paid at or Date Hired FY18 Year End Carman Consulting LLC. 2600 Museum Way Fort Worth, Texas 8/1/2017 $ 147,857 General Manager Consultants/Legal: Denton Central Appraisal District P.O. Box 2816 Denton, TX 76202 4/1/1981 $ 8,047 Appraiser Tarrant Appraisal District 2500 Handley-Ederville Rd. Fort Worth, TX 76262 10/1/2007 $ 2,648 Appraiser LaFollett & Abbott PLLC P.O. Box 717 Tom Bean, TX 75489 10/1/2010 $ 25,659 Auditors CP&Y/The Wallace Group P.O. Box 22007 Waco, TX 76702 5/1/2012 $ 364,267 Engineers Halff Associates, Inc. P.O. Box 678316 Dallas, TX 75267-8316 1/1/2017 $ 215,794 Engineers The AL Law Group 12400 W. Highway 71, Suite 350-150 Austin, TX 78738 9/4/2017 $ 21,797 Legal Counsel McLean & Howard, L.L.P. 901 S. Mopac Expressway Building 2, Suite 225 Austin, TX 78746 3/1/2017 $ 70,044 Legal/Bond Counsel DuBois Bryant Campbell LLP 303 Colorado, Suite 2300 Austin, TX 78701 5/18/2017 $ 12,070 Legal Counsel Whitaker Chalk Swindle & Schwartz PLLC 301 Commerce St, Suite 3500 Fort Worth, TX 76102-4186 4/30/2018 $ 81,087 Legal Counsel New Gen Strategies & Solutions 1300 E. Lookout Dr. Suite 100 Richardson, TX 75082 7/1/2013 $ 5,825 Water Consultant 59 REPORTS REQUIRED BY GOVERNMENTAL AUDITING STANDARDS tt and Abbott PLLC Certified Public Accountants Susan LaFollett, CPA — Partner Rod Abbott, CPA — Partner INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors Trophy Club Municipal Utility District No. 1 Trophy Club, Texas We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Trophy Club Municipal Utility District No. 1 (the District), as of and for the year ended September 30, 2018, and the related notes to the financial statements, which collectively comprise the District's basic financial statements, and have issued our report thereon dated January 21, 2019. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we do not express an opinion on the effectiveness of the District's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. 60 LaFollett and Abbott PLLC PO Box 717 • Tom Bean, TX • 75489 903-546-6975 • www.lafollettcpa.com Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the District's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. yasezafrait ou4 &L' Tom Bean, Texas January 21, 2019 61 (this page intentionally left blank) APPENDIX E SPECIMEN MUNICIPAL BOND INSURANCE POLICY (this page intentionally left blank) _s as* BAM BUILD AMERICA MUTUAL ISSUER: [NAME OF ISSUER] MEMBER: [NAME OF MEMBER] BONDS: $ in aggregate principal amount of [NAME OF TRANSACTION] [and maturing on] MUNICIPAL BOND INSURANCE POLICY Policy No: Effective Date: Risk Premium: $ Member Surplus Contribution: $ Total Insurance Payment: $ BUILD AMERICA MUTUAL ASSURANCE COMPANY ("BAM"). for consideration received. hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or paying agent (the "Paying Agent") for the Bonds named above (as set forth in the documentation providing for the issuance and securing of the Bonds), for the bene lit of the Owners or, at the election of BAM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto). that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer. On the later of the day on which such principal and ' st becomes Due for Payment or the first Business Day following the Business Day on which BAM shall have received Notice of Nonpaymen will disburse (but without duplication in the case of duplicate claims for the same Nonpayment) to or for the benefit of each Owner of thy=Bonds, the face amount of principal of and interest on the Bonds that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by BAM, in a form reasonably satisfactory to it, of (a) evidence of the Owner's right to receive payment of such principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner's rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in BAM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by BAM is incomplete, it shall be deemed not to have been received by BAM for purposes of the preceding sentence, and BAM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, any of whom may submit apt amended Notice of Nonpayment. Upon disbursement under this Policy in respect of a Bond and to the extent of sucha ment, RAM shall beco �` p y the owner of such Bond, any appurtenant coupon to such Bond and right to receipt of payment of principal of or intee on such Bond and stair be fully subrogated to the rights of the Owner, including the Owner's right to receive payments under such Bond. Pavirtent by RAM either to the Trustee or Paying Agent for the benefit of the Owners, or directly to the Owners, on account of any Nonpayment shall discharge the obligation of BAM under this Policy with respect to said Nonpayment. Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. "Business Dau" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's Fiscal Agent (as defined herein) are authorized or required by law or executive order to remain closed. "Due for Payment" means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandato " nkmg a redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandato a � d red nption), acceleration or other advancement of maturity (unless BAM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration) and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any payment made to an Owner by or on behalf of the Issuer of principal or interest that is Due for Payment, which payment has been recovered from such Owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice" means delivery to BAM of a notice of claim and certificate, by certified mail, email or telecopy as set forth on the attached Schedule or other acceptable electronic delivery, in a form satisfactory to BAM, from and signed by an Owner, the Trustee or the Paying Agent, which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount, (d) payment instructions and (e) the date such claimed amount becomes or became Due for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer, the Member or any other person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds. BAM may appoint a fiscal agent (the "Insurer's Fiscal Agent") for purposes of this Policy by giving written notice to the Trustee, the Paying Agent, the Member and the Issuer specifying the name and notice address of the Insurer's Fiscal Agent. From and after the date of receipt of such notice by the Trustee, the Paying Agent, the Member or the Issuer (a) copies of all notices required to be delivered to BAM pursuant to this Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to BAM and shall not be deemed received until received by both and (b) all payments required to be made by BAM under this Policy may be made directly by BAM or by the Insurer's Fiscal Agent on behalf of BAM. The Insurer's Fiscal Agent is the agent of BAM only, and the Insurer's Fiscal Agent shall in no event be liable to the Trustee, Paying Agent or any Owner for any act of the Insurer's Fiscal Agent or any failure of BAM to deposit or cause to be deposited sufficient funds to make payments due under this Policy. To the fullest extent permitted by applicable law, BAM agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to BAM to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy. This Policy may not be canceled or revoked. This Policy sets forth in full the undertaking of BAM and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto. Except to the extent expressly modified by an endorsement hereto, an; prAum paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for pgynent, of Bonds prior to maturity. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUNDSPECIFIED ' TICLE 76 OF THE NEW YORK INSURANCE LAW. THIS POLICY IS ISSUED WITHOUT CONTINGENT MUTUAL LIABILITY FOR A . ,a, 1 NT. In witness whereof, BUILD AMERICA MUTUAL ASSURANCE COMPANY has caused this Policy to be executed on its behalf by its Authorized Officer. BUILD AMERICA MUTUAL ASSURANCE COMPANY By: Authorized Officer Notices (Unless Otherwise Specified by BAM) Email: claim s:u;bui ldamerica.com Address: 200 Liberty Street, 27th floor New York, New York 10281 Telecopy: 212-962-1524 (attention: Claims) (this page intentionally left blank) Financial Advisory Services Provided By: SAMCOCapital SAMCOCaptat BOND DEBT SERVICE Trophy Club MUD #1 Water and Sewer System Revenue Bonds, Series 2019 FINAL NUMBERS Dated Date 03/15/2019 Delivery Date 04/23/2019 Period Annual Ending Principal Coupon Interest Debt Service Debt Service 03/01/2020 214,892.43 214,892.43 09/01/2020 111,793.75 111,793.75 09/30/2020 03/01/2021 111,793.75 111,793.75 09/01/2021 155,000 3.000% 111,793.75 266,793.75 09/30/2021 03/01/2022 109,468.75 109,468.75 09/01/2022 160,000 3.000% 109,468.75 269,468.75 09/30/2022 03/01/2023 107,068.75 107,068.75 09/01/2023 165,000 3.000% 107,068.75 272,068.75 09/30/2023 03/01/2024 104,593.75 104,593.75 09/01/2024 170,000 3.000% 104,593.75 274,593.75 09/30/2024 03/01/2025 102,043.75 102,043.75 09/01/2025 175,000 3.000% 102,043.75 277,043.75 09/30/2025 03/01/2026 99,418.75 99,418.75 09/01/2026 180,000 3.000% 99,418.75 279,418.75 09/30/2026 03/01/2027 96,718.75 96,718.75 09/01/2027 185,000 3.000% 96,718.75 281,718.75 09/30/2027 03/01/2028 93,943.75 93,943.75 09/01/2028 190,000 3.000% 93,943.75 283,943.75 09/30/2028 03/01/2029 91,093.75 91,093.75 09/01/2029 195,000 3.000% 91,093.75 286,093.75 09/30/2029 03/01/2030 88,168.75 88,168.75 09/01/2030 205,000 3.000% 88,168.75 293,168.75 09/30/2030 03/01/2031 85,093.75 85,093.75 09/01/2031 210,000 3.000% 85,093.75 295,093.75 09/30/2031 03/01/2032 81,943.75 81,943.75 09/01/2032 215,000 3.000% 81,943.75 296,943.75 09/30/2032 03/01/2033 78,718.75 78,718.75 09/01/2033 220,000 3.000% 78,718.75 298,718.75 09/30/2033 03/01/2034 75,418.75 75,418.75 09/01/2034 230,000 3.000% 75,418.75 305,418.75 09/30/2034 03/01/2035 71,968.75 71,968.75 09/01/2035 235,000 3.000% 71,968.75 306,968.75 09/30/2035 326,686.18 378,587.50 378,937.50 379,137.50 379,187.50 379,087.50 378,837.50 378,437.50 377,887.50 377,187.50 381,337.50 380,187.50 378,887.50 377,437.50 380,837.50 378,937.50 Mar 18, 2019 11:14 am Prepared by ATF (s:\dbc\Trophy Club MUD #1:TCMUD_1-2019) Page 4 A COCapital BOND DEBT SERVICE Trophy Club MUD #1 Water and Sewer System Revenue Bonds, Series 2019 FINAL NUMBERS Period Annual Ending Principal Coupon Interest Debt Service Debt Service 03/01/2036 68,443.75 68,443.75 09/01/2036 245,000 3.000% 68,443.75 313,443.75 09/30/2036 03/01/2037 64,768.75 64,768.75 09/01/2037 250,000 3.000% 64,768.75 314,768.75 09/30/2037 03/01/2038 61,018.75 61,018.75 09/01/2038 255,000 3.125% 61,018.75 316,018.75 09/30/2038 03/01/2039 57,034.38 57,034.38 09/01/2039 265,000 3.125% 57,034.38 322,034.38 09/30/2039 03/01/2040 52,893.75 52,893.75 09/01/2040 275,000 3.250% 52,893.75 327,893.75 09/30/2040 03/01/2041 48,425.00 48,425.00 09/01/2041 285,000 3.250% 48,425.00 333,425.00 09/30/2041 03/01/2042 43,793.75 43,793.75 09/01/2042 290,000 3.250% 43,793.75 333,793.75 09/30/2042 03/01/2043 39,081.25 39,081.25 09/01/2043 300,000 3.250% 39,081.25 339,081.25 09/30/2043 03/01/2044 34,206.25 34,206.25 09/01/2044 310,000 3.250% 34,206.25 344,206.25 09/30/2044 03/01/2045 29,168.75 29,168.75 09/01/2045 320,000 3.375% 29,168.75 349,168.75 09/30/2045 03/01/2046 23,768.75 23,768.75 09/01/2046 330,000 3.375% 23,768.75 353,768.75 09/30/2046 03/01/2047 18,200.00 18,200.00 09/01/2047 345,000 3.375% 18,200.00 363,200.00 09/30/2047 03/01/2048 12,378.13 12,378.13 09/01/2048 355,000 3.375% 12,378.13 367,378.13 09/30/2048 03/01/2049 6,387.50 6,387.50 09/01/2049 365,000 3.500% 6,387.50 371,387.50 09/30/2049 381,887.50 379,537.50 377,037.50 379,068.76 380,787.50 381,850.00 377,587.50 378,162.50 378,412.50 378,337.50 377,537.50 381,400.00 379,756.26 377,775.00 7,080,000 4,240,736.20 11,320,736.20 11,320,736.20 Mar 18, 2019 11:14 am Prepared by ATF (s:\dbc\Trophy Club MUD #1:TCMUD_1-2019) Page 5 CERTIFICATE OF CERTIFIED PUBLIC ACCOUNTANT STATE OF TEXAS COUNTY OF GRAYSON § § I, Rod Abbott, of the firm of Lafollett and Abbott PLLC, Certified Public Accountants, DO HEREBY CERTIFY AND REPRESENT for the benefit of the Attorney General and all other persons interested in the issuance by Trophy Club Municipal Utility District No. 1 (the "District") of its $7,080,000 Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019 (the "Bonds") that: 1. I am an independent certified public accountant, State of Texas Certificate No. 81707, in good standing. 2. All capitalized terms used in this Certificate have the meanings given to them in the Order adopted by the Board of Directors of the District at its March 18, 2019 meeting authorizing the issuance, sale and delivery of the Bonds (the "Bond Order"); 3. According to the books and records of the District, the Net Earnings of the System for the last complete fiscal year of the District ending September 30, 2018, were at least 1.25 times the average annual principal and interest requirements for the outstanding $9,230,000 Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2015 and $4,635,000 Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2016, and the proposed $7,200,000 Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019. EXECUTED this _12th day of March , 2019. LaFollett and Abbott PLLC, Certified Public Accountants By Name: Rod Abbott THE STATE OF TEXAS COUNTY OF GRAYSON § This instrument was acknowledged before me on the 1} day of \Y\t-\V' L 1 , 2019, by Rod Abbott, on behalf of LaFollett and Abbott PLLC, a professional limited liability company. C\.‘ \ \\ '(A.` 1 v Notary Public, State of Texas CAROL MILAM NOTARY PUBLIC STATE OF TEXAS MY COMM. EXP. 1/9/22 NOTARY ID 12554340-1 CERTIFICATE OF PRESIDENT AND GENERAL MANAGER THE STATE OF TEXAS COUNTIES OF TARRANT AND DENTON § § § We, the undersigned, President of the Board of Directors and General Manager, respectively, of the Trophy Club Municipal Utility District No. 1 (the "District"), do hereby certify with respect to the proposed $7,080,000 Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019 (the "Bonds") that: 1. All capitalized terms used in this Certificate have the meanings given to them in the Order adopted by the Board of Directors of the District at its March 18, 2019 meeting authorizing the issuance, sale and delivery of the Bonds (the "Bond Order"). 2. The District is not in default in connection with any of the covenants or requirements of the Bond Order or orders or resolutions authorizing the issuance of the Bonds and the outstanding "Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2015" dated February 1, 2015 and the outstanding "Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2016" dated October 1, 2016. 3. Payments into the Interest and Sinking Fund and Reserve Fund created and established for the payment and security of all outstanding obligations payable from and secured by a lien on and pledge of the Pledged Revenues have been made and the amounts on deposit in such special funds are the amounts required to be on deposit therein. [Remainder of Page Intentionally Left Blank] EXECUTED this I (day of MAICAA Gregory9Wilson, President Trophy Club Municipal Utility District No. 1 Joni Carman, General Manager Ti-ophy Club Municipal Utility District No. 1 , 2019. OFFICE OF THE ATTORNEY GENERAL PUBLIC FINANCE DIVISION Additional Transcript Requirements Pursuant to Texas Government Code 61202.008 Please submit excel copy of this form to brblgs(a;brb.state.tx.us The following information is to be included in the transcript submitted to the Office of the Attorney General to obtain Attorney General approval of the issuance of bonds or other obligations. This information has been designated by the Bond Review Board as that to be collected pursuant to Texas Government Code §,1202.008. If space is limited, please provide a specific cross-reference to the page in the Final Official Statement. A. Please provide the following information as well as an additional copy of the Final Official Statement. (Provide the requested information on this worksheet. The Bond Review Board does not receive the full transcript): $7,080,000 Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue 1. a. Name of Bond Issue: Bonds, Series 2019. b. Type of Issuer: Governmental Entity List Component/Related Entity/Other 2. a. Total Par Amount: $7,080,000.00 b. New Money Par: $7,080,000.00 c. Refunding Par: N/A d. Dollar Amount of Bond Premium, if any: $424.10 e. Cash Premium (Competitive Sales, usually found in the Initial Purchasers Section), if any: N/A f Dollar Amount of Bond Original Issue Discount, if any: 1 $76,722.29 g. If available, please email the DF2 file to brblgs@brb.state.tx.us. I I 3. Dated Date: 1 3/15/2019 4. Date Interest Accrues from: 3/15/2019 5. Closing Date (expected delivery date, on or about): 4/23/2019 6. First Interest Payment Date: 3/1/2020 7. Maturity Dates, Maturity Amounts, Coupon Rates, Prices or Yields (If no reoffering yield (NRO) indicated, please provide yield separately.): Please see page ii in the Final Official Statement. 8. Call Provisions, including Premiums, if any: The District reserves the right to redeem, prior to maturity, in intergral multiples of $5,000, those Bonds maturing on and after September 1, 2029 in whole or from time to time in part, on September 1, 2028 or any date thereafter at a price of par plus accrued interest from the most recent interest payment date to the date fixed for redembtion. Updated June 2014 9. Mandatory Sinking Fund Redemption Dates: N/A 10. Debt -Service Schedule (Principal and Interest, and Annual Totals, with the Fiscal Year identified): 111. Do the bonds have a specific designation as qualified tax-exempt obligations? Yes See Attachment. 12. Derivative Products (Swaps, Interest Rate Management Agreements, etc.) - List any derivatives associated with financing: None. 113. Pledge: tax (ad valorem, sales, other), revenue, combination: Pledged Revenues Revenue 114. Credit Enhancement (including PSP guarantee): None. Updated June 2014 15. Ratings: Assigned to the issue/Underlying: B. Additional Information 16. Type of Sale: If other please explain Yes. Assigned to this issue Moody's N/A S&P AA - Fitch N/A Other N/A Not Rated 17. Date of Sale: 18. Net effective interest rate pursuant to Government Code Chapter 1204.005: 19. Governmental Purchaser - please name purchaser (i.e. Texas Water Development Board): 20. Refunded Obligations - If applicable, include a schedule of obligations refunded by year, principal amount, and coupon. 21. Cash and Present Value Savings/Loss - If a refunding bond issue, please provide final schedule of cash and present value savings or loss. 22. Cash Defeasances - List all issues and maturities that have been cash defeased since the last issue of public securities approved by the Attorney General. 23. If voter approved - Provide bond election date(s), original amount(s) authorized and current amounts of principal and premium charged against voted authority. 24. Authorized but Unissued - For issues that require the use of voted bond authorization, list all authorized but unissued voted authority available, if any. 25. Upcoming Called Bond Election: Please provide an attached schedule which shows date of election, purpose and amount by proposition. Competitive 3/18/2019 3.297901% N/A N/A N/A None. N/A N/A None. Underlying Updated June 2014 26. CABs and CIBs — If not provided in the OS, please provide the per annum bond interest rates by maturity as shown in the bond order document. If provided in the OS, list the page(s): None. 27. Commercial Paper Authorized - List all commercial paper programs, the amounts authorized and the amounts currently outstanding. None. 28. Population - Provide the most current available population data: 8,5291 29. Federal Program - If the debt is being issued under any direct special government program; name the program and the amount of authority being used: None. 30. If the issuer is an ISD, is any portion of the debt exempt from Texas Education Agency Code 45.0031 (50 -cent Debt test)? N/A Updated June 2014 31. Costs of Issuance - Provide the information below: (If final costs are materially different, please submit changes directly to the Texas Bond Review Board, 512-463-1741 or fax 512-475-4802) Service Firm One -Time Fee Annual Fees (t) Bond Rating: Moody's N/A Standard & Poor's $19,500.00 Fitch N/A Other: N/A Other Costs of Issuance: (2) Financial Advisor Bond Counsel Tax Counsel Issuer Counsel Escrow Agent Disclosure Counsel Paying Agent Trustee TCEQ Bond Application Cost Liquidity Fees Accountant/CPA Printing Attorney General's Fee TCEQ Fee Misc. Costs of Issuance: (3) Total Costs of Issuance: Credit Facility Bond Insurance Underwriting Spread: Takedown Management Fee Underwriter Counsel Spread Expenses Total Underwriting Spread: (4) SAMCO Capital Markets, Inc. McLean & Howard, L.L.P. IBOKF, NA, Dallas, Texas BOKF, NA, Dallas, Texas CP&Y Clements Printing Did Underwriter Pay Rating Fee? No. $23,000.001 $65,136.00 $11,586.29 $76,722.29 $92,063.67 $97,260.00 400.00 $400.00 $25,000.00 $936.33 $7,080.00 $17,700.00 $0.001 $260,340.001 $400.00 $400.00 $0.00 Updated June 2014 Did Underwriter Pay Bond Insurance Fee? Yes Did Underwriter Pay Underwriter Counsel's Fee? N/A (1) Refers to any recurring costs of an issuance including fees for paying agent, remarketing agent, credit provider and other similar services (may be expressed as a formula as appropriate). (2) Include all fees and expenses paid or reimbursed by the issuer. (3) Provide all other costs of issuance and identify the service provider and associated fees. (4) Include all marketing and selling costs including structuring (management) fee, takedown, underwriting risk fee and expenses. UW Participants Firm Updated June 2014 Senior Managing Underwriter IFS Securities, Inc. Other Underwriters Person Completing Form: Name: Anthony S. Corbett Firm: McLean & Howard, L.L.P. Telephone: 512-328-2008 E-mail: tcorbett@mcleanhowardlaw.com The information presented on this form is used by the Texas Bond Review Board for compiling outstanding debt information and related costs of issuance for governmental issuers in Texas. For more information please see http://www.brb.state.tx.us/1;s/1gs.aspx Updated June 2014 aft SA CO Capital BOND DEBT SERVICE Trophy Club MUD #1 Water and Sewer System Revenue Bonds, Series 2019 FINAL NUMBERS Dated Date 03/15/2019 Delivery Date 04/23/2019 Period Annual Ending Principal Coupon Interest Debt Service Debt Service 03/01/2020 214,892.43 214,892.43 09/01/2020 111,793.75 111,793.75 09/30/2020 03/01/2021 111,793.75 111,793.75 09/01/2021 155,000 3.000% 111,793.75 266,793.75 09/30/2021 03/01/2022 109,468.75 109,468.75 09/01/2022 160,000 3.000% 109,468.75 269,468.75 09/30/2022 03/01/2023 107,068.75 107,068.75 09/01/2023 165,000 3.000% 107,068,75 272,068.75 09/30/2023 03/01/2024 104,593.75 104,593.75 09/01/2024 170,000 3.000% 104,593.75 274,593.75 09/30/2024 03/01/2025 102,043.75 102,043.75 09/01/2025 175,000 3.000% 102,043.75 277,043.75 09/30/2025 03/01/2026 99,418.75 99,418.75 09/01/2026 180,000 3.000% 99,418.75 279,418.75 09/30/2026 03/01/2027 96,718.75 96,718.75 09/01/2027 185,000 3.000% 96,718.75 281,718.75 09/30/2027 03/01/2028 93,943.75 93,943.75 09/01/2028 190,000 3.000% 93,943.75 283,943.75 09/30/2028 03/01/2029 91,093.75 91,093.75 09/01/2029 195,000 3.000% 91,093.75 286,093.75 09/30/2029 03/01/2030 88,168.75 88,168.75 09/01/2030 205,000 3.000% 88,168.75 293,168.75 09/30/2030 03/01/2031 85,093.75 85,093.75 09/01/2031 210,000 3.000% 85,093.75 295,093.75 09/30/2031 03/01/2032 81,943.75 81,943.75 09/01/2032 215,000 3.000% 81,943.75 296,943.75 09/30/2032 03/01/2033 78,718.75 78,718.75 09/01/2033 220,000 3.000% 78,718.75 298,718.75 09/30/2033 03/01/2034 75,418.75 75,418.75 09/01/2034 230,000 3.000% 75,418.75 305,418.75 09/30/2034 03/01/2035 71,968.75 71,968.75 09/01/2035 235,000 3.000% 71,968.75 306,968.75 09/30/2035 326,686.18 378,587.50 378,937.50 379,137.50 379,187.50 379,087.50 378,837.50 378,437.50 377,887.50 377,187.50 381,337.50 380,187.50 378,887.50 377,437.50 380,837.50 378,937.50 Mar 18, 2019 11:14 am Prepared by ATF (s:\dbc\Trophy Club MUD #1:TCMUD_1-2019) Page 4 SAMCO Cap+tal BOND DEBT SERVICE Trophy Club MUD #1 Water and Sewer System Revenue Bonds, Series 2019 FINAL NUMBERS Period Annual Ending Principal Coupon Interest Debt Service Debt Service 03/01/2036 68,443.75 68,443.75 09/01/2036 245,000 3.000% 68,443.75 313,443.75 09/30/2036 381,887.50 03/01/2037 64,768.75 64,768.75 09/01/2037 250,000 3.000% 64,768.75 314,768.75 09/30/2037 379,537.50 03/01/2038 61,018.75 61,018.75 09/01/2038 255,000 3.125% 61,018.75 316,018.75 09/30/2038 377,037.50 03/01/2039 57,034.38 57,034.38 09/01/2039 265,000 3.125% 57,034.38 322,034.38 09/30/2039 379,068.76 03/01/2040 52,893.75 52,893.75 09/01/2040 275,000 3.250% 52,893.75 327,893.75 09/30/2040 380,787.50 03/01/2041 48,425.00 48,425.00 09/01/2041 285,000 3.250% 48,425.00 333,425.00 09/30/2041 381,850.00 03/01/2042 43,793.75 43,793.75 09/01/2042 290,000 3.250% 43,793.75 333,793.75 09/30/2042 377,587.50 03/01/2043 39,081.25 39,081.25 09/01/2043 300,000 3.250% 39,081.25 339,081.25 09/30/2043 378,162.50 03/01/2044 34,206.25 34,206.25 09/01/2044 310,000 3.250% 34,206.25 344,206.25 09/30/2044 378,412.50 03/01/2045 29,168.75 29,168.75 09/01/2045 320,000 3.375% 29,168.75 349,168.75 09/30/2045 378,337.50 03/01/2046 23,768.75 23,768.75 09/01/2046 330,000 3.375% 23,768.75 353,768.75 09/30/2046 377,537.50 03/01/2047 18,200.00 18,200.00 09/01/2047 345,000 3.375% 18,200.00 363,200.00 09/30/2047 381,400.00 03/01/2048 12,378.13 12,378.13 09/01/2048 355,000 3.375% 12,378.13 367,378.13 09/30/2048 379,756.26 03/01/2049 6,387.50 6,387.50 09/01/2049 365,000 3.500% 6,387.50 371,387.50 09/30/2049 377,775.00 7,080,000 4,240,736.20 11,320,736.20 11,320,736.20 Mar 18, 2019 11:14 am Prepared by ATF (s:\dbc\Trophy Club MUD #1:TCMUD_1-2019) Page 5 BAM MUNICIPAL BOND INSURANCE POLICY ISSUER: Trophy Club Municipal Utility District No. 1, Policy No: 2019B0129 Texas MEMBER: Trophy Club Municipal Utility District No. 1, Effective Date: April 23, 2019 Texas BONDS: $7,080,000 in aggregate principal amount of Water and Sewer System Revenue Bonds, Series 2019 Risk Premium: Member Surplus Contribution: Total Insurance Payment: $7,080.00 $15,920.00 $23,000.00 BUILD AMERICA MUTUAL ASSURANCE COMPANY ("BAM"), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or paying agent (the "Paying Agent") for the Bonds named above (as set forth in the documentation providing for the issuance and securing of the Bonds), for the benefit of the Owners or, at the election of BAM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer. On the later of the day on which such principal and interest becomes Due for Payment or the first Business Day following the Business Day on which BAM shall have received Notice of Nonpayment, BAM will disburse (but without duplication in the case of duplicate claims for the same Nonpayment) to or for the benefit of each Owner of the Bonds, the face amount of principal of and interest on the Bonds that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by BAM, in a form reasonably satisfactory to it, of (a) evidence of the Owner's right to receive payment of such principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner's rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in BAM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by BAM is incomplete, it shall be deemed not to have been received by BAM for purposes of the preceding sentence, and BAM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, any of whom may submit an amended Notice of Nonpayment. Upon disbursement under this Policy in respect of a Bond and to the extent of such payment, BAM shall become the owner of such Bond, any appurtenant coupon to such Bond and right to receipt of payment of principal of or interest on such Bond and shall be fully subrogated to the rights of the Owner, including the Owner's right to receive payments under such Bond. Payment by BAM either to the Trustee or Paying Agent for the benefit of the Owners, or directly to the Owners, on account of any Nonpayment shall discharge the obligation of BAM under this Policy with respect to said Nonpayment. Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. "Business Day" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's Fiscal Agent (as defined herein) are authorized or required by law or executive order to remain closed. "Due for Payment" means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless BAM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration) and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any payment made to an Owner by or on behalf of the Issuer of principal or interest that is Due for Payment, which payment has been recovered from such Owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice" means delivery to BAM of a notice of claim and certificate, by certified mail, email or telecopy as set forth on the attached Schedule or other acceptable electronic delivery, in a form satisfactory to BAM, from and signed by an Owner, the Trustee or the Paying Agent, which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount, (d) payment instructions and (e) the date such claimed amount becomes or became Due for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer, the Member or any other person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds. BAM may appoint a fiscal agent (the "Insurer's Fiscal Agent") for purposes of this Policy by giving written notice to the Trustee, the Paying Agent, the Member and the Issuer specifying the name and notice address of the Insurer's Fiscal Agent. From and after the date of receipt of such notice by the Trustee, the Paying Agent, the Member or the Issuer (a) copies of all notices required to be delivered to BAM pursuant to this Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to BAM and shall not be deemed received until received by both and (b) all payments required to be made by BAM under this Policy may be made directly by BAM or by the Insurer's Fiscal Agent on behalf of BAM. The Insurer's Fiscal Agent is the agent of BAM only, and the Insurer's Fiscal Agent shall in no event be liable to the Trustee, Paying Agent or any Owner for any act of the Insurer's Fiscal Agent or any failure of BAM to deposit or cause to be deposited sufficient funds to make payments due under this Policy. To the fullest extent permitted by applicable law, BAM agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to BAM to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy. This Policy may not be canceled or revoked. This Policy sets forth in full the undertaking of BAM and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto. Except to the extent expressly modified by an endorsement hereto, any premium paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Bonds prior to maturity. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. THIS POLICY IS ISSUED WITHOUT CONTINGENT MUTUAL LIABILITY FOR ASSESSMENT. IN WITNESS WHEREOF, BUILD AMERICA MUTUAL ASSURANCE COMPANY has caused this Policy to be executed on its behalf by its Authorized Officer. BUILD AMERICA MUTUAL ASSURANCE COMPANY By: Authorized Officer Schedule A Notices (Unless Otherwise Specified by BAM) Email: claims@buildamerica.com Address: 200 Liberty Street, 27th floor New York, New York 10281 Telecopy: 212-962-1524 (attention: Claims) BAM April 23, 2019 Trophy Club Municipal Utility District No. 1 c/o McLean & Howard, L.L.P 901 S. Mopac Expressway, Suite 225 Austin, TX 78746 IFS Securities 444 West Lake Street, 17th floor Chicago, IL 60606 BOKF, NA dba Bank of Texas 5956 Sherry Lane, Suite 1201 Dallas, TX 75225 RE: Policy: 2019B0129 Member: Trophy Club Municipal Utility District No. 1, Texas Bonds: Water and Sewer System Revenue Bonds, Series 2019 Date of the Official Statement: March 18, 2019 Ladies and Gentlemen: I am Counsel of Build America Mutual Assurance Company, a New York mutual insurance company ("BAM"). You have requested my opinion in such capacity as to the matters set forth below in connection with the issuance by BAM of its above -referenced policy (the "Policy"). In that regard, and for purposes of this opinion, I have examined such corporate records, documents and proceedings as I have deemed necessary and appropriate. Based upon the foregoing, I am of the opinion that: 1. BAM is a mutual insurance company duly organized and validly existing under the laws of the State of New York and authorized to transact fmancial guaranty insurance business therein and in the State of Texas. 2. The Policy has been duly authorized, executed and delivered by BAM. 3. The Policy constitutes the valid and binding obligation of BAM, enforceable in accordance with its terms, subject, as to the enforcement of remedies, to bankruptcy, insolvency, reorganization, rehabilitation, moratorium and other similar laws affecting the enforceability of creditors' rights generally applicable in the event of the bankruptcy or insolvency of BAM and to the application of general principles of equity. 4. The issuance of the Policy qualifies the Member as a member of BAM until the Bonds are no longer outstanding. As a member of BAM, the Member is entitled to certain rights and privileges as provided in BAM's charter and by-laws and as may otherwise be provided under New York law. The Policy is non -assessable and creates no contingent mutual liability. In addition, please be advised that I have reviewed the description of the Policy under the caption "BOND INSURANCE" in the official statement related to the above -referenced Bonds (the "Official Statement"). There has not come to my attention any information which would cause me to believe that the description of the Policy, as of the date of the Official Statement or as of the date of this opinion, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Please be advised that except as described above, I express no opinion with respect to any information contained in, or omitted from, the Official Statement. I am a member of the Bar of the State of New York, and do not express any opinion as to any law other than the laws of the State of New York. This letter and the legal opinions herein are intended for the information solely of the addressees hereof and solely for the purposes of the transactions described in the Official Statement and are not to be relied upon by any other person or entity (including, without limitation, any person or entity that acquires bonds from an addressee of this letter.) I do not undertake to advise you of matters that may come to my attention subsequent to the date hereof that may affect the conclusions expressed herein. Very truly yours, BA BAM Policy No.: 201980129 DISCLOSURE, NO DEFAULT AND TAX CERTIFICATE OF BUILD AMERICA MUTUAL ASSURANCE COMPANY BONDS: $7,080,000 in aggregate principal amount of Trophy Club Municipal Utility District No. 1, Texas Water and Sewer System Revenue Bonds, Series 2019 Date of the Official Statement March 18, 2019 The undersigned hereby certifies on behalf of BUILD AMERICA MUTUAL ASSURANCE COMPANY ("BAM"), in connection with the issuance by BAM of its Policy referenced above (the "Policy") in respect of the Bonds referenced above (the "Bonds") that: (i) The information set forth under the caption "BOND INSURANCE -BUILD AMERICA MUTUAL ASSURANCE COMPANY" in the official statement referenced above, relating to the Bonds (the "Official Statement") is true and correct; (ii) BAM is not currently in default nor has BAM ever been in default under any policy or obligation guaranteeing the payment of principal of or interest on an obligation; (iii) The Policy is an unconditional and recourse obligation of BAM (enforceable by or on behalf of the holders of the Bonds) to pay the scheduled principal of and interest on the Bonds when due in the event of Nonpayment by the Issuer (as set forth in the Policy); (iv) The insurance payment (inclusive of the sum of the Risk Premium and the Member Surplus Contribution) (the "Insurance Payment") is solely a charge for the transfer of credit risk and was determined in arm's length negotiations and is required to be paid to BAM as a condition to the issuance of the Policy; (v) BAM will, for federal income tax purposes, treat the Insurance Payment as solely in consideration for the insurance risk it assumes in the Policy and not as consideration for an investment in BAM or its assets; (vi) No portion of such Insurance Payment represents an indirect payment of costs of issuance, including rating agency fees, other than fees paid by BAM to maintain its rating, which, together with all other overhead expenses of BAM, are taken into account in the formulation of its rate structure, or for the provision of additional services by BAM, or represents a direct or indirect payment for any goods or services provided to the Issuer (including the right to receive a dividend), or the direct or indirect payment for a cost, risk or other element that is not customarily borne by insurers of tax-exempt bonds (in transactions in which the guarantor has no involvement other than as a guarantor); (vii) BAM is not providing any services in connection with the Bonds other than providing the Policy, and except for the Insurance Payment, BAM will not use any portion of the Bond proceeds; (viii) Except for payments under the Policy in the case of Nonpayment by the Issuer, there is no obligation to pay any amount of principal or interest on the Bonds by BAM; (ix) (a) BAM has not paid any dividends to date, (b) BAM's Board of Directors has resolved that BAM's priorities for surplus, as it accumulates, will be to preserve capital strength and claims paying resources for the benefit of its members and secondarily to return value by reducing premiums charged for its insurance, and (c) BAM has no current expectation that any dividends will be paid; (x) BAM does not expect that a claim or any other payment will be made on or with respect to the Policy or by BAM to the Issuer; and (xi) Neither the Issuer nor any other Obligor is entitled to a refund of the Insurance Payment for the Policy in the event a Bond is retired before the final maturity date. BAM makes no representation as to the nature of the interest to be paid on the Bonds or the treatment of the Policy under Section 1.148-4(f) of the Income Tax Regulations. BUILD AMERICA MUTUAL ASSURANCE COMPANY By: Dated: April 23, 2019 1„7 Authorized Officer Primary Market Disclosure Certificate Trophy Club Municipal Utility District No. 1, Texas Water and Sewer System Revenue Bonds, Series 2019 (the "Insured Bonds") For the benefit of Trophy Club Municipal Utility District No. 1, Texas (the "Issuer"), and acknowledging that the Issuer will be relying on the contents hereof in addressing certain tax and disclosure items and for other matters, Build America Mutual Assurance Company ("Build America") makes the following representations and warranties as of the date hereof: 1. Neither Build America nor any affiliate of Build America has purchased, or has committed to purchase, any of the Insured Bonds, whether at the initial offering or otherwise; 2. Neither Build America nor any affiliate of Build America has entered into any agreement or understanding regarding the purchase or sale of the Insured Bonds, except for the insurance policies that Build America has provided regarding payments due under the Insured Bonds and the documentation associated with said insurance policies. For the purposes of this certificate, "affiliate of Build America" means a person or entity that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, Build America. April 23, 2019 Build America Mutual Assurance Company By: '‘P'2 Authorized Officer S&P Global Ratings March 20, 2019 Build America Mutual Assurance Company 200 Liberty Street - 27th FL. New York, NY 10281 Attention: Ms. Laura Levenstein, Chief Risk Officer 55 Water Street, 38th Floor New York, NY 10041-0003 tel 212 438-2074 reference no.: 889939 Re: $7,080,000 Trophy Club Municipal Utility District No. 1, Texas, Water and Sewer System Revenue Bonds, Series 2019, dated: March 11, 2019, due: September 1, 2021-2049, (POLICY#2019B0129) Dear Ms. Levenstein: S&P Global Ratings has reviewed the rating on the above -referenced obligations. After such review, we have changed the rating from "AA-" to "AA" on the above obligations. The rating on the above obligations is based on the policy provided by your company. We may adjust the underlying rating and the capital charge as a result of changes in the financial position of the issuer or performance of the collateral, or of amendments to the documents governing the issue, as applicable. With respect to the latter, please notify us of any changes or amendments over the term of the debt. 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No person is intended as a third party beneficiary of any credit rating engagement or of a credit rating when issued. ;4 zr, 1 : Page BAM MUNICIPAL BOND INSURANCE COMMITMENT ISSUER: Trophy Club Municipal Utility District No. 1, Texas MEMBER: Trophy Club Municipal Utility District No. 1, Texas Effective Date: March 18, 2019 Expiration Date: June 15, 2019 BONDS: Water and Sewer System Revenue Bonds, Series 2019 in aggregate principal amount not to exceed $7,080,000 Insurance Payment: $23,000.00 BUILD AMERICA MUTUAL ASSURANCE COMPANY ("BAM") hereby commits, subject to the terms and conditions contained herein or added hereto, to issue its Municipal Bond Insurance Policy (the "Policy") relating to the Bonds referenced above (the "Bonds") issued by or on behalf of the Member. To keep this Commitment in effect after the Expiration Date set forth above, a written request for renewal must be submitted to BAM prior to such Expiration Date. BAM reserves the right to grant or deny a renewal in its sole discretion. THE MUNICIPAL BOND INSURANCE POLICY SHALL BE ISSUED IF THE FOLLOWING CONDITIONS ARE SATISFIED: 1. The documents to be executed and delivered in connection with the issuance and sale of the Bonds (collectively, the "Security Documents"), shall not contain any untrue or misleading statement of a material fact and shall not fail to state a material fact necessary in order to make the information contained therein not misleading. 2. No event shall occur which would permit any underwriter or purchaser of the Bonds, otherwise required, not to be required to underwrite or purchase the Bonds on the date scheduled for the issuance and delivery thereof (the "Closing Date"). 3. As of the Closing Date, there shall have been no material adverse change in, as to or affecting (i) the Member or the Bonds, including, without limitation, the security for the Bonds or (ii) any disclosure document relating to the Bonds (including any financial statements and other information included or incorporated by reference therein) (the "Official Statement"), the Security Documents to be executed and delivered with respect to the Bonds, any project to be financed with the proceeds of the Bonds (if applicable), the legal opinions to be delivered in connection with the issuance and sale of the Bonds, or any other information submitted to BAM with respect to the issuance and sale of the Bonds, including the proposed debt service schedule of the Bonds, from information previously provided to BAM in writing. 4. The applicable Security Documents shall contain the document provisions set forth in Exhibit A hereto and shall be in form and substance acceptable to BAM. No variation shall be permitted therefrom except as specifically approved by BAM in writing prior to the Closing Date. 5. The Bonds shall contain no reference to BAM, the Policy or the insurance evidenced thereby except as may be approved in writing by BAM. BOND PROOFS SHALL BE APPROVED IN WRITING BY BAM PRIOR TO PRINTING. The Bonds shall bear a Statement of Insurance in the form found on BAM's website (www.buildamerica.com) and in Exhibit B hereto entitled "DOCUMENT, PRINTING AND DISCLOSURE INFORMATION FOR PUBLIC FINANCE TRANSACTIONS". 6. The Official Statement shall contain the language provided by BAM and only such other references to BAM as BAM shall supply or approve in writing, and BAM shall be provided with final drafts of any preliminary and final Official Statement at least two business days prior to printing/electronic posting. BAM SHALL BE PROVIDED WITH AN ELECTRONIC COPY OF THE OFFICIAL STATEMENT SEVEN (7) DAYS PRIOR TO CLOSING, unless BAM shall agree in writing to a shorter period. 7. BAM shall be provided with: (a) Copies of all Security Document drafts prepared subsequent to the date of this Commitment (blacklined to reflect all revisions from previously reviewed drafts) for review and approval. Final drafts of such documents shall be provided at least three (3) business days prior to the issuance of the Policy, unless BAM shall agree in writing to a shorter period. Copies of all drafts of the Security Documents shall be delivered to the BAM contacts specified in Exhibit 1. (b) Copies of any consulting reports, feasibility studies, rate reports, engineer's reports or similar expert reports for review and approval, along with any revisions thereto (blacklined to reflect all revisions from previously reviewed drafts). Final drafts of such documents shall be provided at least three (3) business days prior to the issuance of the Policy, unless BAM shall agree in writing to a shorter period. (c) The amortization schedule for, and final maturity date of, the Bonds, which schedule shall be acceptable to BAM. Please be aware that BAM will only insure fixed rate Bonds. (d) A No -Litigation Certificate or a description of any material pending litigation relating to the Member or the Bonds and any opinions BAM shall request in connection therewith. (e) A description of any material change in the Member's financial position from and after the date of the financial statements provided to BAM. (f) Executed copies of all Security Documents, the Official Statement and the various legal opinions delivered in connection with the issuance and sale of the Bonds (which shall be dated the Closing Date and which, except for the opinions of counsel relating to the adequacy of disclosure, shall be addressed to BAM or accompanied by a letter of such counsel permitting BAM to rely on such opinion as if such opinion were addressed to BAM), including, without limitation, the unqualified approving opinion of bond counsel, in form and substance satisfactory to BAM. The foregoing shall be in form and substance acceptable to BAM. (For your information, the form of legal opinion, primary market disclosure certificate and officer's certificate to be delivered by BAM at Closing is attached hereto as Exhibit C.) (g) Evidence of wire transfer in federal funds of an amount equal to the Insurance Payment, unless alternative arrangements for the payment of such amount acceptable to BAM have been made prior to the Closing Date. 8. Bonds must have an underlying, long-term rating of at least: AA- Standard and Poor's NR Moody's Investors Service NR Fitch Ratings 9. Promptly, but in no event more than thirty (30) days after the Closing Date, BAM shall receive two (2) CD-ROMs, which contain the final closing transcript of proceedings or if CD- ROMs are not available, such other electronic form as BAM shall accept. 10. To maintain this commitment until the Expiration Date set forth above, BAM must receive a copy of the signature page of this Commitment fully executed by an authorized officer of the undersigned by the earlier of the date on which the Official Statement containing disclosure language regarding BAM is circulated and ten (10) days after the date of this Commitment. 11. Standard & Poor's Ratings Services will separately present a bill for its fees relating to the Bonds. There is no incremental Standard & Poor's fee for the BAM-Insured rating. Payment of such bill by the Member should be made directly to such rating agency. Payment of the rating fee is not a condition to the release of the Policy by BAM. REPRESENTATION AND AGREEMENT BY BAM (a) BAM is a mutual insurance corporation organized under the laws of, and domiciled in, the State of New York. (b) BAM covenants that it will only insure obligations of states, political subdivisions, an integral part of states or political subdivisions or entities otherwise eligible for the exclusion of income under Section 115 of the Internal Revenue Code of 1986, as amended, or any successor thereto. (c) BAM covenants that it will not seek to convert to a stock insurance corporation. (d) The issuance of the Policy qualifies the Member as a member of BAM until the Bonds are no longer outstanding. As a member of BAM, the Member is entitled to certain rights and privileges as provided in BAM's charter and by-laws and as may otherwise be provided under New York law, including the right to receive dividends if and when declared by BAM's Board of Directors. No dividends have been paid to date, and BAM has no current expectation that any dividends will be paid. (e) The Policy is non -assessable and creates no contingent mutual liability. (1) Refundings. If (1) the Security Documents relating to the Bonds permit a legal defeasance (such that the bonds are no longer treated as outstanding under the Security Documents), (2) refunding bonds ("Refunding Bonds") will be issued for the purpose of legally defeasing such then outstanding BAM-insured Bonds (in this context, the "Refunded Bonds") and (3) upon their issuance (A) such Refunding Bonds have a final maturity date that is not later than the final Maturity Date of the Refunded Bonds, (B) the average annual debt service on the Refunding Bonds does not exceed the average annual debt service on the Refunded Bonds, and (C) the net proceeds of such Refunding Bonds are applied solely towards the legal defeasance of the Refunded Bonds and related costs of issuance, then, if BAM is requested to, and in its sole discretion determines to, offer a municipal bond insurance policy covering the Refunding Bonds (the "Refunding Policy") BAM will credit the then available Member Surplus Contribution for the Refunded Bonds against the insurance payment then charged with respect to the Refunding Bonds (proportionate to the amount of Refunding Bonds insured by BAM). If the Security Documents are silent on the matter of a legal defeasance, BAM may, in its sole and absolute discretion, accept such certificates, opinions and reports from or on behalf of the Member in connection with the issuance of such Refunding Bonds in order to establish to its satisfaction that the Refunding Bonds will be issued to retire the outstanding Refunded Bonds and that the Refunding Bonds comply with the criteria set forth in clause (3) of the preceding sentence for the purpose of determining whether a supplemental Member Surplus Contribution is or is not required to be made at that time. (g) BAM covenants that it will provide notice to the Member (as soon as reasonably possible) of a change in the rating of BAM's financial strength by Standard & Poor's Rating Services. BUILD AMERICA MUTUAL ASSURANCE COMPANY Authorized Officer March 18, 2019 Date AGREED AND ACCEPTED 1. The undersigned agrees and accepts the conditions set forth above and further agrees that (i) if the Bonds (and any of the Bonds to be issued on the same date and for which BAM has issued a commitment) are insured by a policy of municipal bond insurance, such insurance shall be provided by BAM in accordance with the terms of this Commitment; (ii) it has made an independent investigation and decision as to whether to insure the payment when due of the principal of and interest on the Bonds and whether the Policy is appropriate or proper for it based upon its judgment and upon advice from such legal and financial advisers as it has deemed necessary; (iii) BAM has not made, and therefore it is not relying on, any recommendation from BAM that the Bonds be insured or that a Policy be obtained, it being understood and agreed that any communications from BAM (whether written or oral) referring to, containing information about or negotiating the terms and conditions of the Policy, and any related insurance document or the documentation governing the Bonds, do not constitute a recommendation to insure the Bonds or obtain the Policy; (iv) the undersigned acknowledges that BAM has not made any representation, warranty or undertaking, and has not given any assurance or guaranty, in each case, expressed or implied, as to its future financial strength or the rating of BAM's financial strength by the rating agency; (v) the undersigned acknowledges that a credit or claims -paying rating of BAM assigned by a Rating Agency reflects only the views of, and an explanation of the significance of any such rating may be obtained only from, the assigning Rating Agency, any such rating may change or be suspended, placed under review or withdrawn by such Rating Agency if circumstances so warrant, and BAM compensates a Rating Agency to maintain a credit or claims -paying ability rating thereon, but such payment is not in exchange for any specific rating or for a rating within any particular range; (vi) the undersigned acknowledges that BAM may in its sole and absolute discretion at any time request that a Rating Agency withdraw any rating maintained in respect of BAM; and (vii) BAM has made no representation that any dividend will be declared or paid while the Bonds are outstanding, the undersigned has no reason for expecting that any dividend will be declared or paid and the potential receipt of any dividend was not a reason for acquiring the Policy. Notwithstanding anything to the contrary set forth herein, upon issuance of the Policy, the provisions set forth under subparagraphs (ii) through (vii) above and the representations and agreements of BAM shall survive the expiration or termination of this Commitment. Issuer: Trophy Club Municipal Utility District No. 1, Texas Bonds: Water and Sewer System Revenue Bonds, Series 2019 Insurance Payment: $23,000.00 IFS SECURITIES By: Authorized O facer 3/19/19 Date EXHIBIT A DOCUMENT PROVISIONS EXHIBIT A GENERAL REVENUE BOND TRANSACTION DOCUMENT PROVISIONS The following terms and provisions (the "Insurer Provisions") shall be incorporated into the Security Documents. If the Insurer Provisions are attached to any of the Security Document as an exhibit, such Security Document shall include a provision that incorporates by reference the Insurer Provisions directly into the Security Documents. The Insurer Provisions shall control and supersede any conflicting or inconsistent provisions in the Security Documents. 1) Notice and Other Information to be given to BAM. The [Issuer] [Obligor] will provide BAM with all notices and other information it is obligated to provide (i) under its Continuing Disclosure Agreement and (ii) to the holders of Insured Obligations or the Trustee under the Security Documents. The notice address of BAM is: Build America Mutual Assurance Company, 200 Liberty Street, 27th Floor, New York, NY 10281, Attention: Surveillance, Re: Policy No. , Telephone: (212) 235-2500, Telecopier: (212) 235-1542, Email: notices@buildamerica.com. In each case in which notice or other communication refers to an event of default or a claim on the Policy, then a copy of such notice or other communication shall also be sent to the attention of the General Counsel at the same address and at claims@buildamerica.com or at Telecopier: (212) 235-5214 and shall be marked to indicate "URGENT MATERIAL ENCLOSED." 2) Defeasance. The investments in the defeasance escrow relating to Insured Obligation shall be limited to non -callable, direct obligations of the United States of America and securities fully and unconditionally guaranteed as to the timely payment of principal and interest by the United States of America, or as otherwise maybe authorized under State law and approved by BAM. At least (three) 3 Business Days prior to any defeasance with respect to the Insured Obligations, the Issuer shall deliver to BAM draft copies of an escrow agreement, an opinion of bond counsel regarding the validity and enforceability of the escrow agreement and the defeasance of the Insured Obligations and a verification report (a "Verification Report") prepared by a nationally recognized independent financial analyst or firm of certified public accountants regarding the sufficiency of the escrow fund. Such opinion and Verification Report shall be addressed to BAM and shall be in form and substance satisfactory to BAM. In addition, the escrow agreement shall provide that: a) Any substitution of securities following the execution and delivery of the escrow agreement shall require the delivery of a Verification Report, an opinion of bond counsel that such substitution will not adversely affect the exclusion (if interest on the Insured Obligations is excludable) from gross income of the holders of the Insured Obligations of the interest on the Insured Obligations for federal income tax purposes and the prior written consent of BAM, which consent will not be unreasonably withheld. b) The [Issuer] [Obligor] will not exercise any prior optional redemption of Insured Obligations secured by the escrow agreement or any other redemption other than mandatory sinking fund redemptions unless (i) the right to make any such redemption has been expressly reserved in the escrow agreement and such reservation has been disclosed in detail in the official statement for the refunding bonds, and (ii) as a condition to any such redemption there shall be provided to BAM a Verification Report as to the sufficiency of escrow receipts without reinvestment to meet the escrow requirements remaining following any such redemption. c) The [Issuer] [Obligor] shall not amend the escrow agreement or enter into a forward purchase agreement or other agreement with respect to rights in the escrow without the prior written consent of BAM. 3) Trustee and Paving Agent. a) BAM shall receive prior written notice of any name change of the trustee (the "Trustee") or, if applicable, the paying agent (the "Paying Agent") for the Insured Obligations or the resignation or removal of the Trustee or, if applicable, the Paying Agent. Any Trustee must be (A) a national banking association that is supervised by the Office of the Comptroller of the Currency and has at least $250 million of assets, (B) a state -chartered commercial bank that is a member of the Federal Reserve System and has at least $1 billion of assets, or (C) otherwise approved by BAM in writing. b) No removal, resignation or termination of the Trustee or, if applicable, the Paying Agent shall take effect until a successor, meeting the requirements above or acceptable to BAM, shall be qualified and appointed. 4) Amendments, Supplements and Consents. BAM's prior written consent is required for all amendments and supplements to the Security Documents, with the exceptions noted below. The [Issuer] [Obligor] shall send copies of any such amendments or supplements to BAM and the rating agencies which have assigned a rating to the Insured Obligations. a) Consent of BAM. Any amendments or supplements to the Security Documents shall require the prior written consent of BAM with the exception of amendments or supplements: i. To cure any ambiguity or formal defect or omissions or to correct any inconsistent provisions in the transaction documents or in any supplement thereto, or ii. To grant or confer upon the holders of the Insured Obligations any additional rights, remedies, powers, authority or security that may lawfully be granted to or conferred upon the holders of the Insured Obligations, or iii. To add to the conditions, limitations and restrictions on the issuance of bonds or other obligations under the provisions of the Security Documents other conditions, limitations and restrictions thereafter to be observed, or iv. To add to the covenants and agreements of the [Issuer/Obligor] in the Security Documents other covenants and agreements thereafter to be observed by the [Issuer/Obligor] or to surrender any right or power therein reserved to or conferred upon the [Issuer/Obligor]. v. To issue additional parity debt in accordance with the requirements set forth in the Security Documents (unless otherwise specified herein). b) Consent of BAM in Addition to Bondholder Consent. Whenever any Security Document requires the consent of holders of Insured Obligations, BAM's consent shall also be required. In addition, any amendment, supplement, modification to, or waiver of, any of the Security Documents that adversely affects the rights or interests of BAM shall be subject to the prior written consent of BAM. c) Consent of BAM in the Event of Insolvency. Any reorganization or liquidation plan with respect to the Issuer [or Obligor] must be acceptable to BAM. In the event of any reorganization or liquidation of the Issuer [or Obligor], BAM shall have the right to vote on behalf of all holders of the Insured Obligations absent a continuing failure by BAM to make a payment under the Policy. d) Consent of BAM Upon Default. Anything in the Security Documents to the contrary notwithstanding, upon the occurrence and continuance of a default or an event of default, BAM shall be entitled to control and direct the enforcement of all rights and remedies granted to the holders of the Insured Obligations or the Trustee or Paying Agent for the benefit of the holders of the Insured Obligations under any Security Document. No default or event of default may be waived without BAM's written consent. e) BAM as Owner. Upon the occurrence and continuance of a default or an event of default, BAM shall be deemed to be the sole owner of the Insured Obligations for all purposes under the Security Documents, including, without limitations, for purposes of exercising remedies and approving amendments. f) Grace Period for Payment Defaults. No grace period shall be permitted for payment defaults on the Insured Obligations. No grace period for a covenant default shall exceed 30 days without the prior written consent of BAM. g) Special Provisions for Insurer Default. If an Insurer Default shall occur and be continuing, then, notwithstanding anything in paragraphs 4(a) -(e) above to the contrary, (1) if at any time prior to or following an Insurer Default, BAM has made payment under the Policy, to the extent of such payment BAM shall be treated like any other holder of the Insured Obligations for all purposes, including giving of consents, and (2) if BAM has not made any payment under the Policy, BAM shall have no further consent rights until the particular Insurer Default is no longer continuing or BAM makes a payment under the Policy, in which event, the foregoing clause (1) shall control. For purposes of this paragraph, "Insurer Default" means: (A) BAM has failed to make any payment under the Policy when due and owing in accordance with its terms; or (B) BAM shall (i) voluntarily commence any proceeding or file any petition seeking relief under the United States Bankruptcy Code or any other Federal, state or foreign bankruptcy, insolvency or similar law, (ii) consent to the institution of or fail to controvert in a timely and appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official for such party or for a substantial part of its property, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, or (vi) take action for the purpose of effecting any of the foregoing; or (C) any state or federal agency or instrumentality shall order the suspension of payments on the Policy or shall obtain an order or grant approval for the rehabilitation, liquidation, conservation or dissolution of BAM (including without limitation under the New York Insurance Law). 5) Loan/Lease/Financing Agreement. a) The security for the Insured Obligations shall include a pledge and assignment of any agreement with any underlying obligor that is a source of payment for the Insured Obligations (a "Financing Agreement") and a default under any Financing Agreement shall constitute an Event of Default under the Security Documents. In accordance with the foregoing, any such Financing Agreement is hereby pledged and assigned to the Trustee for the benefit of the holders of the Insured Obligations. b) Any payments by the Obligor under the Financing Agreement that will be applied to the payment of debt service on the Insured Obligations shall be made directly to the Trustee at least fifteen (15) days prior to each debt service payment date for the Insured Obligations. 6) BAM As Third Party Beneficiary. BAM is recognized as and shall be deemed to be a third party beneficiary of the Security Documents and may enforce the provisions of the Security Documents as if it were a party thereto. 7) Payment Procedure Under the Policy. In the event that principal and/or interest due on the Insured Obligations shall be paid by BAM pursuant to the Policy, the Insured Obligations shall remain outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by the Issuer, the assignment and pledge of the trust estate and all covenants, agreements and other obligations of the Issuer to the registered owners shall continue to exist and shall run to the benefit of BAM, and BAM shall be subrogated to the rights of such registered owners including, without limitation, any rights that such owners may have in respect of securities law violations arising from the offer and sale of the Insured Obligations. In the event that on the second (2nd) business day prior to any payment date on the Insured Obligations, the Paying Agent or Trustee has not received sufficient moneys to pay all principal of and interest on the Insured Obligations due on such payment date, the Paying Agent or Trustee shall immediately notify BAM or its designee on the same business day by telephone or electronic mail, of the amount of the deficiency. If any deficiency is made up in whole or in part prior to or on the payment date, the Paying Agent or Trustee shall so notify BAM or its designee. In addition, if the Paying Agent or Trustee has notice that any holder of the Insured Obligations has been required to disgorge payments of principal of or interest on the Insured Obligations pursuant to a final, non -appealable order by a court of competent jurisdiction that such payment constitutes an avoidable preference to such holder within the meaning of any applicable bankruptcy law, then the Paying Agent or Trustee shall notify BAM or its designee of such fact by telephone or electronic mail, or by overnight or other delivery service as to which a delivery receipt is signed by a person authorized to accept delivery on behalf of BAM. The Paying Agent or Trustee shall irrevocably be designated, appointed, directed and authorized to act as attorney-in-fact for holders of the Insured Obligations as follows: a) If there is a deficiency in amounts required to pay interest and/or principal on the Insured Obligations, the Paying Agent or Trustee shall (i) execute and deliver to BAM, in form satisfactory to BAM, an instrument appointing BAM as agent and attorney-in-fact for such holders of the Insured Obligations in any legal proceeding related to the payment and assignment to BAM of the claims for interest on the Insured Obligations, (ii) receive as designee of the respective holders (and not as Paying Agent) in accordance with the tenor of the Policy payment from BAM with respect to the claims for interest so assigned, and (iii) disburse the same to such respective holders; and b) If there is a deficiency in amounts required to pay principal of the Insured Obligations, the Paying Agent or Trustee shall (i) execute and deliver to BAM, in form satisfactory to BAM, an instrument appointing BAM as agent and attorney- in-fact for such holder of the Insured Obligations in any legal proceeding related to the payment of such principal and an assignment to BAM of the Insured Obligations surrendered to BAM, (ii) receive as designee of the respective holders (and not as Paying Agent) in accordance with the tenor of the Policy payment therefore from BAM, and (iii) disburse the same to such holders. The Trustee shall designate any portion of payment of principal on Insured Obligations paid by BAM, whether by virtue of mandatory sinking fund redemption, maturity or other advancement of maturity, on its books as a reduction in the principal amount of Insured Obligations registered to the then current holder, whether DTC or its nominee or otherwise, and shall issue a replacement Insured Obligation to BAM, registered in the name directed by BAM, in a principal amount equal to the amount of principal so paid (without regard to authorized denominations); provided that the Trustee's failure to so designate any payment or issue any replacement Insured Obligation shall have no effect on the amount of principal or interest payable by the Issuer on any Insured Obligation or the subrogation or assignment rights of BAM. Payments with respect to claims for interest on and principal of Insured Obligations disbursed by the Paying Agent or Trustee from proceeds of the Policy shall not be considered to discharge the obligation of the Issuer with respect to such Insured Obligations, and BAM shall become the owner of such unpaid Insured Obligations and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of the preceding paragraphs or otherwise. Irrespective of whether any such assignment is executed and delivered, the Issuer[, Obligor] and the Paying Agent and Trustee agree for the benefit of BAM that: a) They recognize that to the extent BAM makes payments directly or indirectly (e.g., by paying through the Paying Agent or Trustee), on account of principal of or interest on the Insured Obligations, BAM will be subrogated to the rights of such holders to receive the amount of such principal and interest from the Issuer/Obligor, with interest thereon, as provided and solely from the sources stated in the Security Documents and the Insured Obligations; and b) They will accordingly pay to BAM the amount of such principal and interest, with interest thereon as provided in the transaction documents and the Insured Obligations, but only from the sources and in the manner provided therein for the payment of principal of and interest on the Insured Obligations to holders, and will otherwise treat BAM as the owner of such rights to the amount of such principal and interest. 8) Additional Payments. The [Issuer] [Obligor] agrees unconditionally that it will pay or reimburse BAM on demand any and all reasonable charges, fees, costs, losses, liabilities and expenses that BAM may pay or incur, including, but not limited to, fees and expenses of BAM's agents, attorneys, accountants, consultants, appraisers and auditors and reasonable costs of investigations, in connection with the administration (including waivers and consents, if any), enforcement, defense, exercise or preservation of any rights and remedies in respect of the Security Documents ("Administrative Costs"). For purposes of the foregoing, costs and expenses shall include a reasonable allocation of compensation and overhead attributable to the time of employees of BAM spent in connection with the actions described in the preceding sentence. The [Issuer] [Obligor] agrees that failure to pay any Administrative Costs on a timely basis will result in the accrual of interest on the unpaid amount at the Late Payment Rate, compounded semi-annually, from the date that payment is first due to BAM until the date BAM is paid in full. Notwithstanding anything herein to the contrary, the [Issuer][Obligor] agrees to pay to BAM (i) a sum equal to the total of all amounts paid by BAM under the Policy ("BAM Policy Payment"); and (ii) interest on such BAM Policy Payments from the date paid by BAM until payment thereof in full by the [Issuer] [Obligor], payable to BAM at the Late Payment Rate per annum (collectively, `BAM Reimbursement Amounts") compounded semi-annually. Notwithstanding anything to the contrary, including without limitation the post default application of revenue provisions, BAM Reimbursement Amounts shall be, and the [Issuer] [Obligor] hereby covenants and agrees that the BAM Reimbursement Amounts are, payable from and secured by a lien on and pledge of the same revenues and other collateral pledged to the Insured Obligations on a parity with debt service due on the Insured Obligations. 9) Debt Service Reserve Fund and Construction Fund. a) The prior written consent of BAM shall be a condition precedent to the deposit of any credit instrument provided in lieu of a cash deposit into the Debt Service Reserve Fund, if any. Amounts on deposit in the Debt Service Reserve Fund shall be applied solely to the payment of debt service due on the Insured Obligations. b) Unless BAM otherwise directs, upon the occurrence and continuance of an Event of Default or an event which with notice or lapse of time would constitute an Event of Default, amounts on deposit in the Construction Fund shall not be disbursed, but shall instead be applied to the payment of debt service or redemption price of the Insured Obligations. 10) Exercise of Rights by BAM. The rights granted to BAM under the Security Documents to request, consent to or direct any action are rights granted to BAM in consideration of its issuance of the Policy. Any exercise by BAM of such rights is merely an exercise of the BAM's contractual rights and shall not be construed or deemed to be taken for the benefit, or on behalf, of the holders of the Insured Obligations and such action does not evidence any position of BAM, affirmative or negative, as to whether the consent of the holders of the Insured Obligations or any other person is required in addition to the consent of BAM. 11) BAM shall be entitled to pay principal or interest on the Insured Obligations that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer (as such terms are defined in the Policy) and any amounts due on the Insured Obligations as a result of acceleration of the maturity thereof in accordance with the Security Documents, whether or not BAM has received a claim upon the Policy. 12) So long as the Insured Obligations are outstanding or any amounts are due and payable to BAM, the [Issuer/Obligor] shall not sell, lease, transfer, encumber or otherwise dispose of the [System] or any material portion thereof, except upon obtaining the prior written consent of BAM. 13) No contract shall be entered into or any action taken by which the rights of BAM or security for or source of payment of the Insured Obligations may be impaired or prejudiced in any material respect except upon obtaining the prior written consent of BAM. 14) If an event of default occurs under any agreement pursuant to which any Obligation of the [Issuer/Obligor] has been incurred or issued and that permits the holder of such Obligation or trustee to accelerate the Obligation or otherwise exercise rights or remedies that are adverse to the interest of the holders of the Insured Obligations or BAM, as BAM may determine in its sole discretion, then an event of default shall be deemed to have occurred under this [Indenture] and the related Security Documents for which BAM or the Trustee, at the direction of BAM, shall be entitle to exercise all available remedies under the Security Documents, at law and in equity. For purposes of the foregoing "Obligation" shall mean any bonds, loans, certificates, installment or lease payments or similar obligations that are payable and/or secured on a parity or subordinate basis to the Insured Obligations. 15) Definitions. "BAM" shall mean Build America Mutual Assurance Company, or any successor thereto. "Insured Obligations" shall mean the [bonds]. "Issuer" shall mean the [Authority]. "Late Payment Rate" means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank, N.A., at its principal office in The City of New York, New York, as its prime or base lending rate ("Prime Rate") (any change in such Prime Rate to be effective on the date such change is announced by JPMorgan Chase Bank, N.A.) plus 3%, and (ii) the then applicable highest rate of interest on the Insured Obligations and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. In the event JPMorgan Chase Bank, N.A., ceases to announce its Prime Rate, the Prime Rate shall be the prime or base lending rate of such other bank, banking association or trust company as BAM, in its sole and absolute discretion, shall designate. Interest at the Late Payment Rate on any amount owing to BAM shall be computed on the basis of the actual number of days elapsed in a year of 360 days. "Obligor" shall mean the [ 1. "Policy" shall mean the Municipal Bond Insurance Policy issued by BAM that guarantees the scheduled payment of principal of and interest on the Insured Obligations when due. "Security Documents" shall mean the resolution, trust agreement, indenture, ordinance, loan agreement, lease agreement, bond, note, certificate and/or any additional or supplemental document executed in connection with the Insured Obligations. EXHIBIT B DOCUMENT, PRINTING AND DISCLOSURE INFORMATION FOR PUBLIC FINANCE TRANSACTIONS BAM BUILD AMERICA MUTUAL ASSURANCE COMPANY DOCUMENT, PRINTING AND DISCLOSURE INFORMATION FOR PUBLIC FINANCE TRANSACTIONS This information is intended for use by bond counsel, the underwriters, financial advisors, printers and preparers of municipal bond offerings that will be insured in whole or in part by Build America Mutual Assurance Company ("BAM"). Prior to any reference to BAM in your marketing efforts, including, but not limited to any preliminary or final Official Statement and any rating agency presentation, in respect of a BAM-insured issue, BAM must receive an executed copy of its Commitment Letter. Blacklined copies of each draft of each transaction document, preliminary and final official statements with Appendices, and bond form(s) should be delivered to BAM for review and comment with reasonable opportunity to submit any comments prior to printing or execution, but in any event not less than three business days prior to execution. Such documents shall be delivered to the BAM attorney working on the transaction. If you are uncertain of the proper person to whom to deliver the documents, please email the documents to: documents@buildamerica.com. Please identify the issuer, obligor and issue name in the subject line of the email. BAM will deliver to Bond Counsel, at the pre-closing for any such municipal bond offering (such offering to the extent insured by BAM, the "Insured Obligations"), assuming the requirements of the Commitment Letter have been met, • an opinion of counsel as to the validity of the policy, • a disclosure, no default and tax certificate of BAM, the executed policy and • other certificates, if any, required in the transaction. Prior to closing, BAM will obtain the rating letter from Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business, relating to any Insured Obligations. Note that any questions with regards to rating agency fees should be directed to the rating agency. INDEX DIRECTORY EXHIBIT NO. Legal Department Directory 1 OFFICIAL STATEMENT BAM Disclosure Information (for inclusion in the Official Statement) 2 Specimen: Municipal Bond Insurance Policy 3 BOND FORM Statement of Insurance (Language for Bond Form) 4 WIRE INSTRUCTIONS Procedures For Premium Payment (including wire -transfer instructions) 5 EXHIBIT 1 BAM DIRECTORY Name TitleTelephone Email BAM ATTORNEYS Jeffrey Fried Deputy 212-235-2514 jfried@buildamerica.com Counsel CLOSING COORDINATORS Patrice James BAM ANALYST Greg Pacifico 212-235-2559 pjames@buildamerica.com 212-235-2523 gpacifico@buildamerica.com EXHIBIT 2 BUILD AMERICA MUTUAL ASSURANCE COMPANY ("BAM") DISCLOSURE INFORMATION (FOR INCLUSION IN THE OFFICIAL STATEMENT) The following are BAM's requirements for printing the preliminary and final official statements: 1. Both the preliminary and final official statements must contain the information set forth in these Exhibits and BAM must be provided with final drafts for its approval and sign off thereon at least two business days prior to the printing thereof; 2. Any changes made to the BAM Disclosure Information for inclusion in the preliminary and final official statements must first be approved by BAM, and 3. BAM must receive an electronic copy of the final official statement seven (7) days prior to closing, unless BAM shall have agreed to some shorter period. TO BE PRINTED ON THE COVER OF THE OFFICIAL STATEMENT: The following language should be used when insuring: 1. THE ENTIRE ISSUE: The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the Bonds by BUILD AMERICA MUTUAL ASSURANCE COMPANY. 2. CAPITAL APPRECIATION BONDS: The scheduled payment of principal of (or, in the case of Capital Appreciation Bonds, the accreted value) and interest on the Bonds when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the Bonds by BUILD AMERICA MUTUAL ASSURANCE COMPANY. 3. PARTIAL MATURITIES (LESS THAN ENTIRE ISSUE): The scheduled payment of principal of and interest on the Bonds maturing on of the years — through , inclusive, with CUSIP #('s) (collectively, the "Insured Bonds"), when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the Insured Bonds by BUILD AMERICA MUTUAL ASSURANCE COMPANY. 4. CERTIFICATES OR NOTES: Change all references from the Bonds to Certificates or Notes wherever necessary, but DO NOT change the reference to the policy from Municipal Bond Insurance Policy. PRINTER'S NOTE: USE BUILD AMERICA MUTUAL ASSURANCE COMPANY LOGO AND INK #PMS BLUE 2736; REDS 199, 201 AND 1817. THE LOGO MAY BE OBTAINED FROM BAM'S WEBSITE WWW.BUILDAMERICA.COM THE LOGO MAY BE OBTAINED FROM BAM'S WEBSITE TO BE PRINTED IN THE BODY OF THE OFFICIAL STATEMENT OR AS AN EXHIBIT USE THE FOLLOWING LANGUAGE WHEN INSURING THE ENTIRE ISSUE: NOTE: The language under the subheading "Bond Insurance Policy" should be modified when insuring Capital Appreciation Bonds, Partial Maturities (less than the entire issue), Certificates and/or Notes. BOND INSURANCE BOND INSURANCE POLICY Concurrently with the issuance of the Bonds, Build America Mutual Assurance Company ("BAM") will issue its Municipal Bond Insurance Policy for the Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. BUILD AMERICA MUTUAL ASSURANCE COMPANY BAM is a New York domiciled mutual insurance corporationand is licensed to conduct financial guaranty insurance business in all fifty states of the United States and the District of Columbia. BAM provides credit enhancement products solely to issuers in the U.S. public finance markets. BAM will only insure obligations of states, political subdivisions, integral parts of states or political subdivisions or entities otherwise eligible for the exclusion of income under section 115 of the U.S. Internal Revenue Code of 1986, as amended. No member of BAM is liable for the obligations of BAM. The address of the principal executive offices of BAM is: 200 Liberty Street, 27th Floor, New York, New York 10281, its telephone number is: 212-235-2500, and its website is located at: www.buildamerica.com. BAM is licensed and subject to regulation as a financial guaranty insurance corporation under the laws of the State of New York and in particular Articles 41 and 69 of the New York Insurance Law. BAM's financial strength is rated "AA/Stable" by S&P Global Ratings, a business unit of Standard & Poor's Financial Services LLC ("S&P"). An explanation of the significance of the rating and current reports may be obtained from S&P at www.standardandnoors.com. The rating of BAM should be evaluated independently. The rating reflects the S&P's current assessment of the creditworthiness of BAM and its ability to pay claims on its policies of insurance. The above rating is not a recommendation to buy, sell or hold the Bonds, and such rating is subject to revision or withdrawal at any time by S&P, including withdrawal initiated at the request of BAM in its sole discretion. Any downward revision or withdrawal of the above rating may have an adverse effect on the market price of the Bonds. BAM only guarantees scheduled principal and scheduled interest payments payable by the issuer of the Bonds on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the Policy), and BAM does not guarantee the market price or liquidity of the Bonds, nor does it guarantee that the rating on the Bonds will not be revised or withdrawn. Capitalization of BAM BAM's total admitted assets, total liabilities, and total capital and surplus, as of December 31, 2018 and as prepared in accordance with statutory accounting practices prescribed or permitted by the New York State Department of Financial Services were $526 million, $113 million and $414 million, respectively. BAM is party to a first loss reinsurance treaty that provides first loss protection up to a maximum of 15% of the par amount outstanding for each policy issued by BAM, subject to certain limitations and restrictions. BAM's most recent Statutory Annual Statement, which has been filed with the New York State Insurance Department and posted on BAM's website at www.buildamerica.com, is incorporated herein by reference and may be obtained, without charge, upon request to BAM at its address provided above (Attention: Finance Department). Future financial statements will similarly be made available when published. BAM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding BAM, supplied by BAM and presented under the heading "BOND INSURANCE". Additional Information Available from BAM Credit Insights Videos. For certain BAM-insured issues, BAM produces and posts a brief Credit Insights video that provides a discussion of the obligor and some of the key factors BAM's analysts and credit committee considered when approving the credit for insurance. The Credit Insights videos are easily accessible on BAM's website at buildamerica.com/creditinsights/. (The preceding website address is provided for convenience of reference only. Information available at such address is not incorporated herein by reference.) Credit Profiles. Prior to the pricing of bonds that BAM has been selected to insure, BAM may prepare a pre -sale Credit Profile for those bonds. These pre -sale Credit Profiles provide information about the sector designation (e.g. general obligation, sales tax); a preliminary summary of financial information and key ratios; and demographic and economic data relevant to the obligor, if available. Subsequent to closing, for any offering that includes bonds insured by BAM, any pre -sale Credit Profile will be updated and superseded by a final Credit Profile to include information about the gross par insured by CUSIP, maturity and coupon. BAM pre -sale and final Credit Profiles are easily accessible on BAM's website at buildamerica.com/obligor/. BAM will produce a Credit Profile for all bonds insured by BAM, whether or not a pre -sale Credit Profile has been prepared for such bonds. (The preceding website address is provided for convenience of reference only. Information available at such address is not incorporated herein by reference.) Disclaimers. The Credit Profiles and the Credit Insights videos and the information contained therein are not recommendations to purchase, hold or sell securities or to make any investment decisions. Credit -related and other analyses and statements in the Credit Profiles and the Credit Insights videos are statements of opinion as of the date expressed, and BAM assumes no responsibility to update the content of such material. The Credit Profiles and Credit Insight videos are prepared by BAM; they have not been reviewed or approved by the issuer of or the underwriter for the Bonds, and the issuer and underwriter assume no responsibility for their content. BAM receives compensation (an insurance premium) for the insurance that it is providing with respect to the Bonds. Neither BAM nor any affiliate of BAM has purchased, or committed to purchase, any of the Bonds, whether at the initial offering or otherwise. The Bond Insurance language for the Official Statement under the subheading "Bond Insurance Policy" should be replaced with the following language when insuring: 1. CAPITAL APPRECIATION BONDS: Concurrently with the issuance of the Bonds, Build America Mutual Assurance Company ("BAM") will issue its Municipal Bond Insurance Policy for the Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of (or, in the case of Capital Appreciation Bonds, the accreted value) and interest on the Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement. 2. PARTIAL MATURITIES (LESS THAN THE ENTIRE ISSUE): Concurrently with the issuance of the Bonds, Build America Mutual Assurance Company ("BAM") will issue its Municipal Bond Insurance Policy (the "Policy") for the Bonds maturing on of the years through , inclusive, with CUSIP #'s (collectively, the "Insured Bonds"). The Policy guarantees the scheduled payment of principal of and interest on the Insured Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement. 3. CERTIFICATES OR NOTES: Change all references from the Bonds to Certificates or Notes wherever necessary, but DO NOT change the reference to the policy from Municipal Bond Insurance Policy. TO BE PRINTED ON THE INSIDE COVER OF OFFICIAL STATEMENT AS PART OF THE DISCLAIMER STATEMENT: Build America Mutual Assurance Company ("BAM") makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding BAM, supplied by BAM and presented under the heading "Bond Insurance" and "Exhibit _ - Specimen Municipal Bond Insurance Policy". EXHIBIT 3 Specimen Municipal Bond Insurance Policy BAM MUNICIPAL BOND INSURANCE POLICY ISSUER: [NAME OF ISSUER] Policy No: MEMBER: [NAME OF MEMBER] BONDS: $ in aggregate principal amount of [NAME OF TRANSACTION] [and maturing on] Effective Date: Pak Risk Premium: $ Member Surplus Contribution: $ Total Insurance Payment: BUILD AMERICA MUTUAL ASSURANCE COMPANY ("BAM"), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or paying agent (the "Paying Agent") for the Bonds named above (as set forth in the documentation providing for the issuance and securing of the Bonds), for the benefit of the Owners or, at the election of BAM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer. On the later of the day on which such principal and interest becomes Due for Payment or the first Business Day following the Business Day on which BAM shall have received Notice of Nonpayment, BAM"will disburse (but without duplication in the case of duplicate claims for the same Nonpayment) to or for the benefit of each Owner of the Bonds, the face amount of principal of and interest on the Bonds that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by BAM, in a form reasonably satisfactory to it, of (a) evidence of the Owner's right to receive payment of such principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner's rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in BAM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by BAM is incomplete, it shall be deemed not to have been received by BAM for purposes of the preceding sentence, and BAM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, any of whom may submit an amended Notice of Nonpayment. Upon disbursement under this Policy in respect of a Bond and to the extent of such payment, BAM shall become the owner of such Bond, any appurtenant coupon to such Bond and right to receipt of payment of principal of or interest on such Bond and shall be fully subrogated to the rights of the Owner, including the Owner's right to receive payments under such Bond. Payment by BAM either to the Trustee or Paying Agent for the benefit of the Owners, or directly to the Owners, on account of any Nonpayment shall discharge the obligation of BAM under this Policy with respect to said Nonpayment. Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. "Business Day" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's Fiscal Agent (as defined herein) are authorized or required by law or executive order to remain closed. "Due for Payment" means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless BAM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration) and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any payment made to an Owner by or on behalf of the Issuer of principal or interest that is Due for Payment, which payment has been recovered from such Owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice" means delivery to BAM of a notice of claim and certificate, by certified mail, email or telecopy as set forth on the attached Schedule or other acceptable electronic delivery, in a form satisfactory to BAM, from and signed by an Owner, the Trustee or the Paying Agent, which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount, (d) payment instructions and (e) the date such claimed amount becomes or became Due for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer, the Member or any other person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds. BAM may appoint a fiscal agent (the "Insurer's Fiscal Agent") for purposes of this Policy by giving written notice to the Trustee, the Paying Agent, the Member and the Issuer specifying the name and notice address of the Insurer's Fiscal Agent. From and after the date of receipt of such notice by the Trustee, the Paying Agent, the Member or the Issuer (a) copies of all notices required to be delivered to BAM pursuant to this Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to BAM and shall not be deemed received until received by both and (b) all payments required to be made by BAM under this Policy may be made directly by BAM or by the Insurer's Fiscal Agent on behalf of BAM. The Insurer's Fiscal Agent is the agent of BAM only, and the Insurer's Fiscal Agent shall in no event be liable to the Trustee, Paying Agent or any Owner for any act of the Insurer's Fiscal Agent or any failure of BAM to deposit or cause to be deposited sufficient funds to make payments due under this Policy. To the fullest extent permitted by applicable law, BAM agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to BAM to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy. This Policy may not be canceled or revoked. This Policy sets forth in full the undertaking of BAM and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto. Except to the extent expressly modified by an endorsement hereto, any premium paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Bonds prior to maturity. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. THIS POLICY IS ISSUED WITHOUT CONTINGENT MUTUAL LIABILITY FOR ASSESSMENT. In witness whereof, BUILD AMERICA MUTUAL ASSURANCE COMPANY has caused this Policy to be executed on its behalf by its Authorized Officer. BUILD AMERICA MUTUAL ASSURANCE COMPANY By: Authorized Officer Notices (Unless Otherwise Specified by BAM) Email: claims(d buildamerica.com Address: 200 Liberty Street, 27th floor New York, New York 10281 Telecopy: 212-962-1524 (attention: Claims) EXHIBIT 4 STATEMENT OF INSURANCE (Language for the Bond Form) This form is not to be included in the Official Statement. The Bonds shall bear a Statement of Insurance in the following form. The following language should be used when insuring 1. THE ENTIRE ISSUE: Build America Mutual Assurance Company ("BAM"), New York, New York, has delivered its municipal bond insurance policy (the "Policy") with respect to the scheduled payments due of principal of and interest on this Bond to {insert name of paying agent or trustee}, {city or county}, {state}, or its successor, [as paying agent for the Bonds (the "Paying Agent")] [as trustee for the Bonds (the "Trustee")]. Said Policy is on file and available for inspection at the principal office of the [Paying Agent] [Trustee] and a copy thereof may be obtained from BAM or the [Paying Agent] [Trustee]. All payments required to be made under the Policy shall be made in accordance with the provisions thereof. By its purchase of these Bonds, the owner acknowledges and consents (i) to the subrogation and all other rights of BAM as more fully set forth in the Policy and (ii) that upon the occurrence and continuance of a default or an event of default under the Resolution or this Bond, BAM shall be deemed to be the sole owner of the Bonds for all purposes and shall be entitled to control and direct the enforcement of all rights and remedies granted to the owners of the Bonds or the trustee, paying agent, registrar or similar agent for the benefit of such owners under the [Resolution/Ordinance/Indenture], at law or in equity. 2. CAPITAL APPRECIATION BONDS: Build America Mutual Assurance Company ("BAM"), New York, New York, has delivered its municipal bond insurance policy (the "Policy") with respect to the scheduled payments due of principal of (or, in the case of Capital Appreciation Bonds, the accreted value) and interest on this Bond to {insert name of paying agent or trustee}, {city or county}, {state}, or its successor, as [paying agent for the Bonds (the "Paying Agent")] as trustee for the Bonds (the "Trustee")]. Said Policy is on file and available for inspection at the principal office of the [Paying Agent] [Trustee] and a copy thereof may be obtained from BAM or the [Paying Agent] [Trustee]. All payments required to be made under the Policy shall be made in accordance with the provisions thereof. By its purchase of these Bonds, the owner acknowledges and consents (i) to the subrogation and all other rights of BAM as more fully set forth in the Policy and (ii) that upon the occurrence and continuance of a default or an event of default under the Resolution or this Bond, BAM shall be deemed to be the sole owner of the Bonds for all purposes and shall be entitled to control and direct the enforcement of all rights and remedies granted to the owners of the Bonds or the trustee, paying agent, registrar or similar agent for the benefit of such owners under the [Resolution/Ordinance/Indenture], at law or in equity. 3. PARTIAL MATURITIES (LESS THAN ENTIRE ISSUE): Build America Mutual Assurance Company ("BAM"), New York, New York, has delivered its municipal bond insurance policy (the "Policy") with respect to the scheduled payments due of principal of and interest on this Bonds maturing on of the years through inclusive (the "Insured Bonds"), to {insert name of paying agent or trustee}, {city or county}, {state}, or its successor, [as paying agent for the Bonds (the "Paying Agent")] [as trustee for the Bonds (the "Trustee")]. Said Policy is on file and available for inspection at the principal office of the [Paying Agent] [Trustee] and a copy thereof may be obtained from BAM or the [Paying Agent] [Trustee]. All payments required to be made under the Policy shall be made in accordance with the provisions thereof By its purchase of these Bonds, the owner acknowledges and consents (i) to the subrogation and all other rights of BAM as more fully set forth in the Policy and (ii) that upon:the occurrence and continuance of a default or an event of default under the Resolution'othisBond, BAM shall be deemed to be the sole owner of the Bonds for all purposes and 'shall be entitled to control and direct the enforcement of all rights and remedies granted to the owners of the Bonds or the trustee, paying agent, registrar or similar agent for the benefit of such owners under the [Resolution/Ordinance/Indenture], at law or in equity. 4. CERTIFICATES OR NOTES: Change all references from the Bonds to Certificates or Notes wherever necessary, but DO NOT change the reference to the policy from Municipal Bond Insurance Policy. EXHIBIT 5 PROCEDURES FOR PREMIUM PAYMENT TO BAM This form is not to be included in the Official Statement. BAM's issuance of its municipal bond insurance policy at bond closing is contingent upon payment and receipt of the premium. NO POLICY MAY BE RELEASED UNTIL PAYMENT OF SUCH AMOUNT HAS BEEN CONFIRMED. Set forth below are the procedures to be followed for confirming the amount of the premium to be paid and for paying such amount: Upon determination of the final debt service schedule, email or fax such schedule to the appropriate BAM Underwriter Greg Pacifico Phone No.: 212-235-2523 Email: gpacifico@buildamerica.com Confirm with the individual in our underwriting department that you are in agreement with respect to par and premium on the transaction prior to the closing date. Payment Date: Date of Delivery of the Insured Bonds. Method of Payment: Wire transfer of Federal Funds. Wire Transfer Instructions: Bank: ABA#: Acct. Name: Account No.: Policy No.: First Republic Bank 321081669 Build America Mutual Assurance Company 80001613703 [To Be Assigned] - (Include in OBI Field) CONFIRMATION OF PREMIUM BAM will accept as confirmation of the premium payment a wire transfer number and the name of the sending bank, to be communicated to the Closing Coordinator on the closing date: Miranda Ganzer Patrice James Claudette Littlejohn Nolan Miller (212) 235-2535 (212) 235-2559 (212) 235-2572 (212) 235-2511 EXHIBIT C BAM LEGAL OPINION AND CERTIFICATE [CLOSING DATE] [ADDRESSEES (ISSUER, UNDERWRITER AND TRUSTEE)] Re: Municipal Bond Insurance Policy No. [POLICY NO.] With Respect to $ [Name of Issuer] (the "Issuer") Bonds, Series (the "Bonds") Ladies and Gentlemen: I am Counsel of Build America Mutual Assurance Company, a New York mutual insurance company ("BAM"). You have requested my opinion in such capacity as to the matters set forth below in connection with the issuance by BAM of its above - referenced policy (the "Policy"). In that regard, and for purposes of this opinion, I have examined such corporate records, documents and proceedings as I have deemed necessary and appropriate. Based upon the foregoing, I am of the opinion that: 1. BAM is a mutual insurance company duly organized and validly existing under the laws of the State of New York and authorized to transact financial guaranty insurance business therein. 2. The Policy has been duly authorized, executed and delivered by BAM. 3. The Policy constitutes the valid and binding obligation of BAM, enforceable in accordance with its terms, subject, as to the enforcement of remedies, to bankruptcy, insolvency, reorganization, rehabilitation, moratorium and other similar laws affecting the enforceability of creditors' rights generally applicable in the event of the bankruptcy or insolvency of BAM and to the application of general principles of equity. 4. The issuance of the Policy qualifies [the Issuer] as a member of BAM until [the Bonds] are no longer outstanding. As a member of BAM, [the Issuer] is entitled to certain rights and privileges as provided in BAM's charter and by-laws and as may otherwise be provided under New York law. The Policy is non -assessable and creates no contingent mutual liability. In addition, please be advised that I have reviewed the description of the Policy under the caption "BOND INSURANCE" in the official statement relating to the above -referenced Bonds dated [DATE] (the "Official Statement"). There has not come to my attention any information which would cause me to believe that the description of the Policy referred to above, as of the date of the Official Statement or as of the date of this opinion, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Please be advised that I express no opinion with respect to any information contained in, or omitted from, "the Official Statement". I am a member of the Bar of the State of New York, and do not express any opinion as to any law other than the laws of the State of New York. This letter and the legal opinions herein are intended for the information solely of the addresses hereof and solely for the purposes of the transactions described in the Official Statement and are not to be relied upon by any other person or entity (including, without limitation, any person or entity that acquires bonds from an addressee of this letter.) I do not undertake to advise you of matters that may come to my attention subsequent to the date hereof that may affect the conclusions expressed herein. Very truly yours, DISCLOSURE, NO DEFAULT AND TAX CERTIFICATE OF BUILD AMERICA MUTUAL ASSURANCE COMPANY The undersigned hereby certifies on behalf of BUILD AMERICA MUTUAL ASSURANCE COMPANY ("BAM"), in connection with the issuance by BAM of its Policy No. [POLICY NO.] (the "Policy") in respect of the [$AMOUNT] [NAME OF TRANSACTION] (the "Bonds") that: (i) The information set forth under the caption "BOND INSURANCE -BUILD AMERICA MUTUAL ASSURANCE COMPANY" in the official statement dated [DATE], relating to the Bonds (the "Official Statement") is true and correct; (ii) BAM is not currently in default nor has BAM ever been in default under any policy or obligation guaranteeing the payment of principal of or interest on an obligation; (iii) The Policy is an unconditional and recourse obligation of BAM (enforceable by or on behalf of the holders of the Bonds) to pay the scheduled principal of and interest on the Bonds when due in the event of Nonpayment by the Issuer (as set forth in the Policy); (iv) The insurance payment (inclusive of the sum of the Risk Premium and the Member Surplus Contribution) (the "Insurance Payment") is solely a charge for the transfer of credit risk and was determined in arm's length negotiations and is required to be paid to BAM as a condition to the issuance of the Policy; (v) BAM will, for federal income tax purposes, treat the Insurance Payment as solely in consideration for the insurance risk it assumes in the Policy and not as consideration for an investment in BAM or its assets; (vi) No portion of such Insurance Payment represents an indirect payment of costs of issuance, including rating agency fees, other than fees paid by BAM to maintain its rating, which, together with all other overhead expenses of BAM, are taken into account in the formulation of its rate structure, or for the provision of additional services by BAM, or represents a direct or indirect payment for any goods or services provided to the Issuer (including the right to receive a dividend), or the direct or indirect payment for a cost, risk or other element that is not customarily borne by insurers of tax-exempt bonds (in transactions in which the guarantor has no involvement other than as a guarantor); (vii) BAM is not providing any services in connection with the Bonds other than providing the Policy, and except for the Insurance Payment, BAM will not use any portion of the Bond proceeds; (viii) Except for payments under the Policy in the case of Nonpayment by the Issuer, there is no obligation to pay any amount of principal or interest on the Bonds by BAM; (ix) (a) BAM has not paid any dividends to date, (b) BAM's Board of Directors has resolved that BAM's priorities for surplus, as it accumulates, will be to preserve capital strength and claims paying resources for the benefit of its members and secondarily to return value by reducing premiums charged for its insurance, and (c) BAM has no current expectation that any dividends will be paid; (x) BAM does not expect that a claim or any other payment will be made on or with respect to the Policy or by BAM to the Issuer; and (xi) Neither the Issuer nor any other Obligor is entitled to a refund of the Insurance Payment for the Policy in the event a Bond is retired before the final maturity date. BAM makes no representation as to the nature of the interest to be paid on the Bonds or the treatment of the Policy under Section 1.148-4(f) of the Income Tax Regulations. BUILD AMERICA MUTUAL ASSURANCE COMPANY Authorized Officer Dated: [CLOSING DATE] Primary Market Disclosure Certificate [Bond Description] (the "Insured Bonds") For the benefit of (the "Issuer"), and acknowledging that the Issuer will be relying on the contents hereof in addressing certain tax and disclosure items and for other matters, Build America Mutual Assurance Company ("Build America") makes the following representations and warranties as of the date hereof: 1. Neither Build America nor any affiliate of Build America has purchased, or has committed to purchase, any of the Insured Bonds, whether at the initial offering or otherwise; 2. Neither Build America nor any affiliate of Build America has entered into any agreement or understanding regarding the purchase or sale of the Insured Bonds, except for the insurance policies that Build America has provided regarding payments due under the Insured Bonds and the documentation associated with said insurance policies. For the purposes of this certificate, "affiliate of Build America" means a person or entity that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, Build America. [dated as of the closing date] Build America Mutual Assurance Company By Authorized Officer B A M BUILD AMERICA MUTUAL =M CREDIT PROFILE For Purchasers of BAM-Insured Bonds Trophy Club Municipal Utility District No. 1, TX, Water and Sewer System Revenue Bonds, Series 2019 Most Recent Update 3/18/2019 Bonds Dated Date 3/15/2019 Use of Proceeds The Bonds are being issued to fund various capital improvements. Bond Security The Bonds are limited obligations of the Issuer and are payable from and secured by a pledge of the net receipts and revenues of Bond Insurance 6 000 4 000 2 000 II the Issuer's system. Investors should refer to the official statement for a full description of the security for the Bonds. Build America Mutual Assurance Company (BAM) has been selected to provide insurance for the Bonds if bond insurance is used. A BAM insurance policy guarantees the scheduled payment of principal and interest when due on obligations that BAM insures. As of the date of this BAM Credit Profile, no decision has been made as to which of the Bonds will be insured (and it is possible that none of the Bonds will carry insurance). Please consult the Official Statement for the Bonds, when it is available, for further information. This BAM Credit Profile is preliminary and subject to change, and will be updated and superseded by a final version if BAM issues an insurance policy for any of the Bonds. Total Customers 1 1 1 7017 2010 2016 201- 4,339 4,704 4,779 4,683 4,344 4,710 4,784 4.688 76 Total Water Customers lb Total Sewer Customers 2013 4.723 4,728 2017 10% Unemployment Rate 2,310 2113 2014 2010 2016 2310 LIMITATIONS ON USE - SEE PAGE 3 • - Denton County -4- State (TX) i US Page 1 of 3 Issuer: Trophy Club Municipal Utility District No. 1 State: TX County: Denton Sector: Water and/or Sewer Utility Employment by Industry - 2017* Demographic & Economic Information* Denton County Description Retail Trade Gov't & Gov't Ent Health Care & Social Assistance Professional & Technical Svcs Accommodation & Food Svcs 'Source: Bureau of Economic Analysis 17000 8 000 I 4000 1 0 Profit Margin 2016 # of People Employed 44,222 37,990 33,840 32,072 31,652 6.864 8.788 246% 42.8% • Total Operating Revenue -6- Profit Margin Revenue Items 98.7% %Total 11.4% 9.8% 8.7% 8.2% 8.1% Population (2017)" Median Household Income (2017)" Poverty Rate (2017)" Unemployment Rate (2017)"' 'As of the date of the Most Recent Update Data for Trophy Club (town) • " Data for Denton (County) 9000 30'> 6 700 As of 2017 As % of State As % of US 139,156 243.9% 241.4% 3.3% 76.7% Unrestricted Net Position as % of Total Net Position 2017 2')18 9.406 18 2,929 5,083 43.8% 4- 84.2% 83.7% 9 Total Net Positron 'n- Unrestricted Net Position as % of Total Net Position Total water Sales Operaen... ! Other Operating Revenue Location Description: The District is located 31 miles northwest of Dallas. Notes 6 4000 2 000 EBIDA 8,764 82.8% 75.0% 90 60 '0 2016 2017 2018 NI 1,688 3,732 4.121 I EBIDA MOO) LIMITATIONS ON USE - SEE PAGE 3 Page 2 of 3 se BAM Trophy Club MUD No. 1, TX Utilization Year 2018 2017 2016 2015 2014 Total Water Customers 4,723 4,683 4,779 4,704 4,339 Total Sewer Customers 4,728 4,688 4,784 4,710 4,344 Total Combined Customers 9,451 9,371 9,563 9,414 8,683 DEBT & UABIUTY ANALYSIS Total Debt (5000) Total Debt / Customer (g) FINANCIAL DATA (5000) Year 19,720 2,087 INFORMATION FROM OFFICIAL STATEMENT/CONTINUING DISCLOSURE Top 5 Combined Customers (% of Revenue) Top Combined Customer (% of Revenue) Top Combined Customer 11.50% 4.65% Maguire Thomas/BRE Solana LLC (Office Complex). 2018 2017 2016 Fiscal Year End 09/30/2018 09/30/2017 09/30/2016 Auditor Opinion Date 01/21/2019 01/16/2018 01/17/2017 STATEMENT OF NET POSITION Unrestricted Net Position Total Net Position 7,254 4,256 2,467 8,764 5,083 2.929 INCOME STATEMENT Total Water Sales Operating Revenue 9,287 8,633 6,730 Total Sewer Sales Operating Revenue 0 0 Total Connection Revenue 0 0 Other Operating Revenue 119 155 134 Total Operating Revenue - 9,406 8,788 6,864 Total Operating Expense 5,285 5,056 5,176 Net Operating income 4,121 '.. s 3,732 1,688 Total Non -Operating Revenue 0 0 Total Non -Operating Expense 0 0 Total Change in Net Position 4,121 3,732 1,688 FINANCIAL RATIOS Cash & Short -Term Investments (Unrestricted) 7,355 4,687 3,247 Days Cash on Hand 508 338 229 EBIDA 4,121 3,732 1,688 Total Debt Service Coverage (As Reported) (x) 4.72 4.27 2.81 Notes Financial data relevant to the Income statement are found in the 05 "Condensed Water and Sewer operating statement Table 2" All Ratios are cakulated using the most recent Financial and Demographic data available. Financial data is not adjusted for restatements in prior years. LIMITATIONS ON USE By using this BAM Credit Profile you agree to the Terms of Use set forth in BAM's website located at )rttox.//hnildamerira rnm/termsnfiisa/ The information contained in this preliminary BAM Credit Profile has been obtained or derived from the issuer and various public sources, is for informational purposes only. may be subject to change, and is provided on an "as is" basis. BAM does not represent that such information is accurate, timely or complete and BAM disclaims any and all liability relating to the information contained herein, in the Official Statement, or in the issuer's continuing disclosure documents. In no event will BAM, its employees or officers be liable to any party for any damages, costs, expenses, legal fees or losses in connection with any use of or reliance on the information contained herein. in the Official Statement or in issuer's continuing disclosure documents, even if advised of the possibility of such damages. The information should not be relied upon and is not a substitute for the skill. judgment or experience of the investor, its management, employees, advisors and/or clients when making investment decisions. BAM does not act as a fiduciary or an advisor (investment, municipal or otherwise) and nothing herein shall be construed as a recommendation or advice given by BAM as to the sale or purchase of any securities. BAM Credit Profiles are produced for purchasers of bonds or other securities insured by BAM, and BAM members, rather than investors generally. The Official Statement will identify the bonds or other securities that are insured by BAM. A BAM Credit Profile is not intended to be an offer to sell or a solicitation of an offer to buy any securities and should not be used or considered as such under any circumstances. Any such offer or solicitation is made only by means of the issuer's Official Statement. ® 2019, Build America Mutual Assurance Company Page 3 of S&P GEabat Ratings March 12, 2019 500 North Akard Street Ross Tower, Suite 3200 Dallas, TX 75201 tel (214) 871-1400 reference no.: 1560009 Trophy Club Municipal Utility District #1 100 Municipal Drive Trophy Club, TX 76262 Attention: Mr. Steven Krolczyk, Finance Manager Re: US$7,200,000 Trophy Club Municipal Utility District NO. 1, Texas, Water And Sewer System Revenue Bonds, Series 2019, dated: March 15, 2019, due: September 01, 2049 Dear Mr. Krolczyk: Pursuant to your request for an S&P Global Ratings rating on the above -referenced obligations, S&P Global Ratings has assigned a rating of "AA-" . S&P Global Ratings views the outlook for this rating as stable. 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No person is intended as a third party beneficiary of any credit rating engagement or of a credit rating when issued. rig >..>. ,4i2;,; 14. S&P Global Ratings RatingsDirect Summary: Trophy Club Municipal Utility District No.1, Texas; Water/Sewer Primary Credit Analyst: John Schulz, Des Moines (1) 303-721-4385; john.schulz@spglobal.com Secondary Contact: Edward R McGlade, New York (1) 212-438-2061; edward.mcglade@spglobal.com Table Of Contents Rationale Outlook WWW.STANDARDANDPOORS COM/RATINGSDIRECT MARCH 12, 2019 1 Summary: Trophy Club Municipal Utility District No.1, Texas; Water/Sewer Credit Profile US$7.2 mil wtr and swr sys rev bnds ser 2019`dtd 03/15/2019 due 09,/01/2049 Long Term Rating Trophy Club Mun Util Dist #1 WTRSWR Long Term Rating Rationale AA -/Stable -/Statile New Affirmed S&P Global Ratings has assigned its 'AA-' long-term rating to Trophy Club Municipal Utility District (MUD) No. 1, Texas' series 2019 water and sewer system revenue bonds. At the same time, S&P Global Ratings affirmed its 'AA-' long-term rating on the district's parity debt. The outlook is stable. The very strong enterprise risk profile reflects our view of the district system's: • Strong economic indicators, as evident with median household median income level at 139% of the national average; • Very low industry risk as a monopolistic service provider of an essential public utility; • Moderate rates based on the average residential bill, with average poverty rates; and • Good operational management assessment (OMA). The very strong financial risk profile reflects our view of the district system's: • Strong all -in debt service coverage (DSC) when looking at the district as a whole; • Good liquidity levels however on low nominal levels; • Limited capital needs following the expansion of the wastewater treatment facility; and • Standard financial management assessment (FMA). The municipal utility district (MUD) will use bond proceeds to make water system capacity improvement projects and cost over runs from the 2016 wastewater treatment facility project. A net revenue pledge of district's water and sewer system secures the series 2019 bonds, which are on parity with the series 2015 and 2016 bonds. The total existing revenue debt is approximately $19.7 million as of fiscal 2018 when including the proposed 2019. We consider bond provisions adequate. They include a 1.2x average annual debt service (MADS) additional bonds test WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MARCH 12, 2019 2 Summary: Trophy Club Municipal Utility District No.1, Texas; Water/Sewer and a 1.1x DSC rate covenant. In addition, the resolution calls for a reserve fund equal to the average annual debt service for the bonds. Enterprise Risk The district spans approximately 2,280 acres in southern Denton County and northern Tarrant County and includes portions of the towns of Trophy Club and Westlake. The population is estimated at 7,800 and residents have good access to employment opportunities throughout the Dallas -Fort Worth metropolitan statistical area (MSA). The MUD also serves the Solana Business Complex. In 2018, there were about 4,723 active water accounts. Income levels in Denton County were 139% of the national average in 2017, which we view as extremely strong, offset by being on the outside MSA and the size of the utility as described in our criteria. For residential customers, the district indicated the average water bill is $98.27 based on roughly a 7,050 -gallon bill. As a percentage of median household effective buying income, the 7,050 -gallon water and sewer bill is about 2.08%, which we consider about average. The county's poverty rate is 13.4%, which we consider average. The district typically reviews its rates annually, maintains rate autonomy, with rate history discussed below in the OMA paragraph. Consistent with "Methodology: Industry Risk," published Nov. 19, 2013, we consider industry risk for the water system to be very low or '1', the most favorable assessment possible on a six- point scale. Based on our OMA we view the water system as a '3' on a six -point scale with '1' being the strongest. An assessment of good, in our view, implies generally good alignment between the system's operational characteristics. The district, which was created in 2009 through the consolidation of two existing utility districts, obtains water from four wells and via a pipeline connected to Fort Worth's water system. The majority of treated water is supplied from Fort Worth under a long-term contract. The contract is set to expire in 2031 and has no limits on the amount of water purchased. Wastewater is treated at a city -owned facility capable of treating 1.75 million gallons per day, which is sufficient for average daily demand and peak demand levels of 0.97 mgd and 1.24 mgd, respectively. Management reviews rates annually as the district last changed water rates in 2016 and has adjusted wastewater rates every year since 2016, with 2016 being the largest rate increase of 25% (combined) to support the series 2015 and 2016, and the lowest 1.7% based on a 6,000 -gallon bill. Financial Risk The district's finances remain stable and generally strong. Like most municipal utility districts in the state, the district charges for water and wastewater service, but also levies a property tax. Property tax revenue, however, are not pledged to the repayment of these bonds. Since pledged revenue are not bifurcated in the audit to see the flow of pledged revenue we choose to look at the entire general fund since tax revenue are not large enough to support fire expenses, non -departmental expenses, and taxed back debt. Additionally, most of the taxed backed debt was issued to support water and sewer capital projects. In our assessment of all -in DSC we allocate debt from the district's water wholesaler based on system demand as a fixed charge or treat it as debt -like in nature. The fixed charge we calculated averaged roughly $2.4 million over the past four years that we remove as an expense and add to debt as described in our criteria. In conclusion, our assessment of all -in DSC will differ from coverage outlined in the bond documents as S&P Global Ratings evaluates utilities financial sustainability to incorporate reoccurring revenue and expenses. In fiscal 2018, the district's all -in DSC was 1.6x, which we consider extremely to very strong. Prior to fiscal 2018, all -in DSC has WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MARCH 12, 2019 3 Summary: Trophy Club Municipal Utility District No.1, Texas; Water/Sewer ranged from 1.02x to 1.6x since 2011. We don't foresee any material changes to the financial picture based on our internal projections when including the series 2019, but an unexpected change in revenue or expenses could alter this assessment. Liquidity has grown over the past three fiscal years to what we view as good, although it is nominally weaker than some peers in the 'AA-' rating category. Unrestricted cash and investments have grown to roughly 513 days' cash on hand or $7.4 million in fiscal 2018 from 137 days or $1.9 million in fiscal 2016. Officials intend to maintain good unrestricted cash going forward and have formal reserve policy that management is in the process of being updated in 2019. The district identified a five-year $1.4 million of capital needs and maintenance projects funded by system revenue with an emphasis on the short-term and projects maintenance projects after fiscal 2019. The district's leverage position is moderate (when incorporating all of its debt with its net position) and, in our opinion, based on a debt -to -capitalization ratio of 56%, including the series 2019. In addition, the district is a part of the Group Term Life program for the Texas County & District Retirement System for its pension plan, and as of 2018 had a 106% net position as a percentage of the total liability. Based on our financial management assessment (FMA), we view the district as a '4' on a six- point scale, with '1' being the strongest. A FMA of standard indicates we deem financial practices good for the size of the utility, but not comprehensive. The district reviews its budget annually and uses and reports to the board. The district does not produce financial projections beyond the annual budget. The district follows an investment policy and reserve policy. Those strengths are partly offset by the absence of financial forecasting or a formal debt management policy. Management also produces annual audited financial statements that comply with generally accepted accounting principles (GAAP). Additionally, the district does not bifurcate pledged funds, which we view as a negative for our transparency assessment of the FMA. Outlook The outlook is stable, reflecting our expectation for net revenue to result in strong debt service coverage and maintenance of good liquidity The MUD's mature status of development will likely limit any significant debt -supported capital needs beyond the wastewater plant expansion. Downside scenario Conversely, if liquidity or all -in DSC is stressed to levels we deem not commensurate with the current rating, we could maintain or lower the rating, depending on the severity. Upside scenario We could raise the rating if polices are codified and utility funds are bifurcated similar to peers at the higher rating category to support the stability and transparency. Additional rate increases do not outpace economic growth. Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. WWW.STANDARDANDPOORS.COM,/RATINGSDIRECT MARCH 12, 2019 4 Summary: Trophy Club Municipal Utility District No.1, Texas; Water/Sewer Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column. 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WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MARCH 12, 2019 6 KEN PAXTON ATTORNEY GENERAL OF TEXAS April 18, 2018 THIS IS TO CERTIFY that Trophy Club Municipal Utility District No. 1 (the "Issuer") has submitted the Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bond, Series 2019 (the "Bond"), in the principal amount of $7,080,000, for approval. The Bond is dated March 15, 2019, numbered T-1 and was authorized by Order No. 2019-0318B of the Issuer passed on March 18. 2019 (the "Order"). The Office of the Attorney General has examined the law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Issuer contained in the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. We express no opinion relating to the official statement or any other offering material relating to the Bond. We have not reviewed and do not approve any contract or lease other than as specifically identified herein. Based on our examination, we are of the opinion, as of the date hereof and under existing law, as follows (capitalized terms, except as herein defined, have the meanings given to them in the Order): (1) The Bond has been issued in accordance with law and is a valid and binding special obligation of the Issuer. (2) The Bond is payable solely form and equally secured by a first lien on the Pledged Revenues of the Issuer's System, as provided in the Order. Therefore, the Bond is approved. No. 65617 Book No. 2019-A MA * See attached Signature Authorization Attorney General of the State of Texas Post Office Box 12548, Austin, Texas 78711-2548 • (512) 463-2100 • www.texasattorneygeneral.gov OFFICE OF THE ATTORNEY GENERAL OF THE STATE OF TEXAS I, KEN PAXTON, Attorney General for the State of Texas, do hereby authorize the employees of the Public Finance Division of the Office of the Attorney General to affix a digital image of my signature, in my capacity as Attorney General, to the opinions issued by this office approving the issuance of public securities by the various public agencies, non-profit corporations, district, entities, bodies politic or corporate, or political subdivisions of this State as required by law, the opinions approving those contracts designated by the Legislature as requiring the approval of the Attorney General, and the obligations, proceedings and credit agreements required by law to be approved by the Attorney General. The authorized digital image of my signature is attached as Exhibit A and is hereby adopted as my own for the purposes set forth herein. This supersedes any prior signature authorizations for the same purpose. The authority granted herein is to be exercised on those occasions when I am unavailable to personally sign said opinions, and upon the condition that the opinions to which the digital image signature is affixed have been approved by an authorized Assistant Attorney General following the completion of the Public Finance Division's review of the transcripts of proceedings to which the opinions relate. Given under my hand and seal of office at Austin, Texas, this the $' day of January, 2015. Attorney General of the State of Texas OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, GLENN HEGAR, Comptroller of Public Accounts of the State of Texas, do hereby certify that the attachment is a true and correct copy of the opinion of the Attorney General approving the: Trophy Club Municipal Utility District No 1 Water and Sewer System Revenue Bond, Series 2019 numbered T-1 , of the denomination of $ 7,080,000, dated March 15, 2019, as authorized by issuer, interest various percent, under and by authority of which said bonds/certificates were registered electronically in the office of the Comptroller, on the 18th day of April 2019, under Registration Number 91773. Given under my hand and seal of office, at Austin, Texas, the 18th day of April 2019. GLENN HEGAR Comptroller of Public Accounts of the State of Texas OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, Melissa Popkoff, 0 Bond Clerk EX Assistant Bond Clerk in the office of the Comptroller of the State of Texas, do hereby certify that, acting under the direction and authority of the Comptroller on the 18th day of April 2019, I signed the name of the Comptroller to the certificate of registration endorsed upon the: Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bond. Series 2019, numbered T-1 , dated March 15. 2019, and that in signing the certificate of registration I used the following signature: IN WITNESS WHEREOF ha - executed this certificate this the 18th day of April 2019. I, Glenn Hegar, Comptroller of Public Accounts of the State of Texas, certify that the person who has signed the above certificate was duly designated and appointed by me under authority vested in me by Chapter 403, Subchapter H, Government Code, with authority to sign my name to all certificates of registration, and/or cancellation of bonds required by law to be registered and/or cancelled by me, and was acting as such on the date first mentioned in this certificate, and that the bonds/certificates described in this certificate have been duly registered in the office of the Comptroller, under Registration Number 91773. GIVEN under my hand and seal of office at Austin, Texas, this the 18th day of April 2019. GLENN HEGAR Comptroller of Public Accounts of the State of Texas FEDERAL TAX CERfII,ICATE 1. In General. 1.1. The undersigned is an authorized representative of the Trophy Club Municipal Utility District No. 1 (the "Issuer"). 1.2. This Certificate is executed for the purpose of establishing the reasonable expectations of the Issuer as to future events regarding the Issuer's Water and Sewer System Revenue Bonds, Series 2019 (the "Bonds"). The Bonds are being issued pursuant to an Order duly adopted by the Issuer (the "Order"). The Order is incorporated herein by reference. 1.3. To the best of the undersigned's knowledge, information and belief, the expectations contained in this Federal Tax Certificate are reasonable. 1.4. The undersigned is an officer of the Issuer delegated with the responsibility, among others, of issuing and delivering the Bonds. 1.5. The undersigned is not aware of any facts or circumstances that would cause him to question the accuracy of the representations made by the Purchaser in the Issue Price Certificate attached hereto as Exhibit "C", and by SAMCO Capital Markets, Inc. (the "Financial Advisor") in Subsection 6.3 of this Certificate and with respect to the Schedules attached hereto as Exhibit "E" and the Certificate of Municipal Advisor attached hereto as Exhibit "D". 2. The Purpose of the Bonds and Useful Lives of Proiects. 2.1. The Bonds are being issued pursuant to the Order (a) to provide for the payment of costs of issuing the Bonds and (b) for the design and construction of water transmission line improvements and acquisition of related real property interests, and the design and construction of improvements to the Issuer's wastewater treatment facilities. (the "Projects") 2.2. The Issuer expects that the aggregate useful lives of the Projects exceed 28 years from the later of the date the Projects are placed in service or the date on which the Bonds are issued. 2.3. All earnings, such as interest and dividends, received from the investment of the proceeds of the Bonds during the period of acquisition and construction of the Projects and not used to pay interest on the Bonds, will be used to pay the costs of the Projects, unless required to be rebated and paid to the United States in accordance with section 148(f) of the Internal Revenue Code of 1986 (the "Code"). The proceeds of the Bonds, together with any investment earnings thereon, are expected not to exceed the amount necessary for the governmental purpose of the Bonds. The Issuer expects that no disposition proceeds will arise in connection with the Projects or the Bonds. 3. Expenditure of Bond Proceeds and Use of Proiects. 3.1. The Issuer will incur, within six months after the date of issue of the Bonds, a binding obligation to commence the Projects, either by entering into contracts for the construction of the Projects or by entering into contracts for architectural or engineering services for such Projects, or contracts for the development, purchase of construction materials, or purchase of equipment, for the Projects, with the amount to be paid under such contracts to be in excess of five percent of the proceeds which are estimated to be used for the cost of the Projects. C:\Users\lhughes\AppData\Local\Microsoft\Windows\INetCache\Content.OutlookUMQ15YK5\Trophy Club MUD No. 1-New$-MHST-ftc- v4.docx 4/17/2019 11:36 AM 3.2. After entering into binding obligations, work on such Projects will proceed promptly with due diligence to completion. 3.3. All original proceeds derived from the sale of the Bonds to be applied to the Projects and all investment earnings thereon (other than any amounts required to be rebated to the United States pursuant to section 148(0 of the Code) will be expended for the Projects no later than a date which is three years after the date of issue of the Bonds. 3.4. The Issuer will account for the expenditure of bond proceeds (including investment earnings thereon) for the purposes described in Section 2 herein on its books and records by allocating such proceeds to expenditures within 18 months of the later of the date that (i) the expenditure is made, or (ii) the purposes for which the Bonds are issued have been accomplished. The foregoing notwithstanding, the Issuer does not expect to expend such sale proceeds more than 60 days after the earlier of (i) the fifth anniversary of the delivery of the Bonds, or (ii) the date the Bonds are retired. 3.5. Only Project costs paid or incurred by the Issuer on or after 60 days prior to the date the Issuer approved the funding of the Projects (the "60 -day period") through its declaration of official intent ("Qualified Costs") will be paid or reimbursed with bond proceeds. For this purpose Qualified Costs also include preliminary expenditures, incurred prior to the 60 -day period before the approval of the Issuer through its declaration of official intent, up to an amount not in excess of 20 percent of the aggregate amount of the Bonds. No Qualified Cost represents the cost of property or land acquired from a related party. 3.6. The Issuer will allocate the Project costs to "capital expenditures". For this purpose, "capital expenditure" means any cost that is properly chargeable to the capital account (or would be so chargeable with a proper election) under general federal income tax principles. For example, costs incurred to acquire, construct or improve land, building and equipment generally are capital expenditures. 3.7. The Issuer will not invest the proceeds prior to such expenditure in any guaranteed investment contract or other nonpurpose investment with a substantially guaranteed yield for a period equal to or greater than four years. 3.8. Other than members of the general public, the Issuer expects that throughout the lesser of the term of the Bonds, or the useful lives of the Projects, the only user of the Projects will be the Issuer or the Issuer's employees and agents. The Issuer will be the manager of the Projects. In no event will the proceeds of the Bonds or facilities financed therewith be used for private business use in an amount greater than $15 million. The Issuer does not expect to enter into long-term sales of output from the Projects and sales of output will be made on the basis of generally -applicable and uniformly applied rates. The Issuer may apply different rates for different classes of customers, including volume purchasers, which are reasonable and customary. 3.9. Except as stated below, the Issuer expects not to sell or otherwise dispose of property constituting the Projects prior to the earlier of the end of such property's useful life or the final maturity of the Bonds. The Order provides that the Issuer will not sell or otherwise dispose of the Projects unless the Issuer receives an opinion of nationally -recognized bond counsel that such sale or other disposition will not adversely affect the tax-exempt status of the Bonds. 3.10. For purposes of Subsection 3.9 hereof, the Issuer has not included the portion of the Projects comprised of personal property that is disposed in the ordinary course at a price that is expected to be less than 25 percent of the original purchase price. The Issuer, upon any disposition of such property, will transfer the receipts from the disposition of such property to the general operating fund and expend such receipts within six months for other governmental programs. 2 4. Yield. 4.1. The issue price of the Bonds included in the Form 8038-G, is based on the Issue Price Certificate attached hereto. As described in the Certificate of Municipal Advisor attached hereto as Exhibit "D", the sale of the Bonds constitutes a "competitive sale" within the meaning of section 1.148-1(f)(3)(i) of the Treasury Regulations. As shown in the Schedules of Financial Advisor attached hereto as Exhibit "E", the Issuer will determine the issue price of the Bonds based on the reasonably expected initial offering prices to the public on the sale date for each maturity of the Bonds, in accordance with section 1.148-1(f)(2)(iii) of the Treasury Regulations. 4.2. The premium paid for bond insurance is solely for the transfer of credit risk for the payment of debt service on the Bonds. The Purchaser has represented, based on its experience, and the market conditions and other facts existing on the date of sale of the Bonds, that the present value of the premium paid for bond insurance for each obligation constituting the Bonds to which such premium is properly allocated and which are insured thereby is less than the present value of the interest reasonably expected to be saved as a result of the insurance on each obligation constituting the Bonds. The premium has been paid to a person which is not a user or related to the user of any proceeds of the Bonds. In determining present value for this purpose, the yield of the Bonds (determined with regard to the payment of the guarantee fee) has been used as the discount rate. 4.3. Other than the qualified guarantee referred to in Subsection 4.2 above, the Issuer has not entered into any qualified guarantee or qualified hedge with respect to the Bonds. The yield on the Bonds will not be affected by subsequent unexpected events, except to the extent provided in section 1.148-4(h)(3) of the Treasury Regulations when and if the Issuer enters into a qualified hedge or into any transaction transferring, waiving or modifying any right that is part of the terms of any bond. The Issuer will consult with nationally recognized bond counsel prior to entering into any of the foregoing transactions. 5. Interest and Sinking Fund. 5.1. A separate and special Interest and Sinking Fund has been created and established, other than as described herein, solely to pay the principal of and interest on the Bonds (the "Bona Fide Debt Service Portion"). The Bona Fide Debt Service Portion constitutes a fund that is used primarily to achieve a proper matching of revenues and debt service within each bond year. Such portion will be completely depleted at least once each year except for an amount not in excess of the greater of (a) one -twelfth of the debt service on the Bonds for the previous year, or (b) the previous year's earnings on such portion of the Interest and Sinking Fund. Amounts deposited in the Interest and Sinking Fund constituting the Bona Fide Debt Service Portion will be spent within a thirteen -month period beginning on the date of deposit, and any amount received from the investment of money held in the Interest and Sinking Fund will be spent within a one-year period beginning on the date of receipt. 5.2. Any money deposited in the Interest and Sinking Fund and any amounts received from the investment thereof that accumulate and remain on hand therein after thirteen months from the date of deposit of any such money or one year after the receipt of any such amounts from the investment thereof shall constitute a separate portion of the Interest and Sinking Fund. The yield on any investments allocable to the portion of the Interest and Sinking Fund exceeding the sum of (a) the Bona Fide Debt Service Portion and (b) an amount equal to the lesser of five percent of the sale and investment proceeds of the Bonds or $100,000 will be restricted to a yield that does not exceed the yield on the Bonds. 6. Reserve Fund. 6.1. Funds on deposit in the Reserve Fund created by the Order are held in trust for the benefit of the holders of the Bonds. If on any interest payment or maturity date, the Interest and Sinking Fund does not 3 contain an amount sufficient to make debt service payments on the Bonds, the Issuer is required to transfer money from the Reserve Fund to the Interest and Sinking Fund in an amount sufficient to make such payments. 6.2. The present value of the investments deposited to the Reserve Fund and allocable to the Bonds that will be invested at a yield higher than the yield on such bonds will not, as of any date, exceed an aggregate amount which equals the lesser of (a) 10 percent of the stated principal amount (or, in the case of a discount, the issue price) of the Bonds, (b) 1.25 of the average annual debt service on the Bonds, or (c) maximum annual debt service on the Bonds. 6.3. Based on the recommendation of the Financial Advisor to the Issuer, the amount deposited to the Reserve Fund, if any, does not exceed that amount which is reasonably prudent to be maintained to secure the timely payment of debt service in the event of periodic fluctuations in revenues of the Issuer. No amounts will be deposited in the Reserve Fund constituting proceeds received from the sale of the Bonds. 7. Revenue Fund. 7.1. The Order creates a Revenue Fund into which certain revenues of the Issuer are deposited. Amounts on deposit in the Revenue Fund are transferred and used in the manner required by the Order. 7.2. Other than moneys in the Revenue Fund that are transferred to the Interest and Sinking Fund, the moneys in the Revenue Fund are reasonably expected not to be used to pay the principal of and interest on the Bonds. There will be no assurance that such moneys will be available to meet debt service if the Issuer encounters financial difficulty. Amounts in the Revenue Fund will be invested without yield restriction. 8. Invested Sinking Fund Proceeds. Replacement Proceeds. 8.1. The Issuer has, in addition to the moneys received from the sale of the Bonds, certain other moneys that are invested in various funds which are pledged for various purposes. These other funds are not available to accomplish the purposes described in Section 2 of this Certificate. 8.2. Other than the Interest and Sinking Fund and the Reserve Fund, there are, and will be, no other funds or accounts established, or to be established, by or on behalf of the Issuer (a) which are reasonably expected to be used, or to generate earnings to be used, to pay debt service on the Bonds, or (b) which are reserved or pledged as collateral for payment of debt service on the Bonds and for which there is reasonable assurance that amounts therein will be available to pay such debt service if the Issuer encounters financial difficulties. Accordingly, there are no other amounts constituting "gross proceeds" of the Bonds, within the meaning of section 148 of the Code. 9. Other Obligations. 9.1. There are no other obligations of the Issuer that (a) are sold at substantially the same time as the Bonds, i.e., within 15 days of the date of sale of the Bonds, (b) are sold pursuant to a common plan of financing with the Bonds, and (c) will be payable from the same source of funds as the Bonds. 9.2. The Issuer (including any of its related entities) has not issued nor does it expect to issue any other tax-exempt obligations during the current calendar year, including certain lease purchase agreements, in an amount which when aggregated with the Bonds would exceed $10,000,000, within the meaning of section 265(b) of the Code. 10. Federal Tax Audit Responsibilities. The Issuer acknowledges that in the event of an examination by the Internal Revenue Service (the "Service") to determine compliance of the Bonds with the provisions of the Code as they relate to tax-exempt 4 obligations, the Issuer will respond, and will direct its agents and assigns to respond, in a commercially reasonable manner to any inquiries from the Service in connection with such an examination. The Issuer understands and agrees that the examination may be subject to public disclosure under applicable Texas law. The Issuer acknowledges that this Certificate, including any attachments, does not constitute an opinion of Bond Counsel as to the proper federal tax or accounting treatment of any specific transaction. 11. Record Retention and Private Business Use. The Issuer has covenanted in the Order that it will comply with the requirements of the Code relating to the exclusion of the interest on the Bonds under section 103 of the Code. The Service has determined that certain materials, records and information should be retained by the issuers of tax-exempt obligations for the purpose of enabling the Service to confirm the exclusion of the interest on such obligations under section 103 of the Code. ACCORDINGLY, THE ISSUER SHALL TAKE STEPS TO ENSURE THAT ALL MATERIALS, RECORDS AND INFORMATION NECESSARY TO CONFIRM THE EXCLUSION OF THE INTEREST ON THE BONDS UNDER SECTION 103 OF THE CODE ARE RETAINED FOR THE PERIOD BEGINNING ON THE ISSUE DATE OF THE BONDS AND ENDING THREE YEARS AFTER THE DATE THE BONDS ARE RETIRED. The Issuer acknowledges receipt of the letter attached hereto as Exhibit "B" which, in part, discusses specific guidance by the Service with respect to the retention of records relating to tax-exempt bond transactions. 12. Rebate to United States. The Issuer has covenanted in the Order that it will comply with the requirements of the Code, including section 148(f) of the Code, relating to the required rebate to the United States. Specifically, the Issuer will take steps to ensure that all earnings on gross proceeds of the Bonds in excess of the yield on the Bonds required to be rebated to the United States will be timely paid to the United States. The Issuer acknowledges receipt of the memorandum attached hereto as Exhibit "A" which discusses regulations promulgated pursuant to section 148(f) of the Code. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 5 DATED as of April 23, 2019. TROPHY CLUB MUNICIPAL UTi1LITY DISTRICT NO. 1 By: 9.2"\ -143\ --- Name: Lce_c. Title: C; 'e.55; Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019 M&H McLEAN & HOWARD, L.L.P_ Real Property Lawyers Exhibit "A" November 1, 2016 ARBITRAGE REBATE REGULATIONS Barton Oaks Plaza, Building II 901 South MoPac Expy I Ste 225 Austin, Texas 78746 phone 512.328.2008 fax 512.328.2409 1\1aa:mcleanhowardlaw.com The arbitrage rebate requirements set forth in section 148(f) of the Internal Revenue Code of 1986 (the "Code") generally provide that in order for interest on any issue of bonds' to be excluded from gross income (i.e., tax-exempt) the issuer must rebate to the United States the sum of, (1) the excess of the amount earned on all "nonpurpose investments" acquired with "gross proceeds" of the issue over the amount which would have been earned if such investments had been invested at a yield equal to the yield on the issue, and (2) the earnings on such excess earnings. On June 18, 1993, the U.S. Treasury Department promulgated regulations relating to the computation of arbitrage rebate and the rebate exceptions. These regulations, which replace the previously -published regulations promulgated on May 15, 1989, and on May 18, 1992, are effective for bonds issued after June 30, 1993, have been amended. This memorandum was prepared by McLean & Howard, L.L.P. with assistance of McCall, Parkhurst & Horton L.L.P. and provides a general discussion of these arbitrage rebate regulations, as amended. This memorandum does not otherwise discuss the general arbitrage regulations, other than as they may incidentally relate to rebate. This memorandum also does not attempt to provide an exhaustive discussion of the arbitrage rebate regulations and should not be considered advice with respect to the arbitrage rebate requirements as applied to any individual or governmental unit or any specific transaction. Any tax advice contained in this memorandum is of a general nature and is not intended to be used, and should not be used, by any person to avoid penalties under the Code. McLean & Howard, L.L.P. remains available to provide legal advice to issuers with respect to the provisions of these tax regulations but recommends that issuers seek competent financial and accounting assistance in calculating the amount of such issuer's rebate liability under section 148(0 of the Code and in making elections to apply the rebate exceptions. Effective Dates The regulations promulgated on June 18, 1993, generally apply to bonds delivered after June 30, 1993, although they do permit an issuer to elect to apply the rules to bonds issued prior to that date. The temporary regulations adopted by the U.S. Treasury Department in 1989 and 1992 incorporated the same effective dates which generally apply for purposes of section 148(0 of the Code. As such, the previous versions of the rebate regulations generally applied to bonds issued between August 1986 and June 30, 1993 (or, with an election, to bonds issued prior to August 15, 1993). The statutory provisions of section 148(0 of the Code, other than the exception for construction issues, apply to all bonds issued after August 15, 1986, (for private activity bonds) and August 31, 1986, (for governmental public purpose bonds). The statutory exception to rebate applicable for construction issues generally applies if such issue is delivered after December 19, 1989. The regulations provide numerous transitional rules for bonds sold prior to July 1, 1993. Moreover, since, under prior law, rules were previously published with respect to industrial development bonds and mortgage revenue bonds, the transitional rules contained in these regulations permit an issuer to elect to apply certain of these rules for computing rebate on pre -1986 bonds. The regulations provide for numerous elections 1 In this memorandum the word "bond" is defined to include any bond, note, certificate, financing lease or other obligation of an issuer. which would permit an issuer to apply the rules (other than 18 -month spending exception) to bonds which were issued prior to July 1, 1993 and remain outstanding on June 30, 1993. Due to the complexity of the regulations, it is impossible to discuss in this memorandum all circumstances for which specific elections are provided. If an issuer prefers to use these final version of rebate regulations in lieu of the computational method stated under prior law (e.g., due to prior redemption) or the regulations, please contact McLean & Howard, L.L.P. for advice as to the availability of such options. Future Value Computation Method The regulations employ an actuarial method for computing the rebate amount based on the future value of the investment receipts (i.e., earnings) and payments. The rebate method employs a two-step computation to determine the amount of the rebate payment. First, the issuer determines the bond yield. Second, the issuer determines the arbitrage rebate amount. The regulations require that the computations be made at the end of each five-year period and upon final maturity of the issue (the "computation dates"). THE FINAL MATURITY DATE WILL ACCELERATE IN CIRCUMSTANCES IN WHICH THE BONDS ARE OPTIONALLY REDEEMED PRIOR TO MATURITY. AS SUCH, IF BONDS ARE REFUNDED OR OTHERWISE REDEEMED, THE REBATE MAY BE DUE EARLIER THAN INITIALLY PROJECTED. In order to accommodate accurate record-keeping and to assure that sufficient amounts will be available for the payment of arbitrage rebate liability, however, we recommend that the computations be performed at least annually. Please refer to other materials provided by McLean & Howard, L.L.P. relating to federal tax rules regarding record retention. Under the future value method, the amount of rebate is determined by compounding the aggregate earnings on all the investments from the date of receipt by the issuer to the computation date. Similarly, a payment for an investment is future valued from the date that the payment is made to the computation date. The receipts and payments are future valued at a discount rate equal to the yield on the bonds. The rebatable arbitrage, as of any computation date, is equal to the excess of the (1) future value of all receipts from investments (i.e., earnings), over (2) the future value of all payments. The following example is provided in the regulations to illustrate how arbitrage rebate is computed under the future value method for a fixed -yield bond: "On January 1, 1994, City A issues a fixed yield issue and invests all the sale proceeds of the issue ($49 million). There are no other gross proceeds. The issue has a yield of 7.0000 percent per year compounded semiannually (computed on a 30 day month/360 day year basis). City A receives amounts from the investment and immediately expends them for the governmental purpose of the issue as follows: Date Amount 2/1/1994 $ 3,000,000 4/1/1994 5,000,000 6/1/1994 14,000,000 9/1/1994 20,000,000 7/1/1995 10,000,000 City A selects a bond year ending on January 1, and thus the first required computation date is January 1, 1999. The rebate amount as of this date is computed by determining the future value of the receipts and the payments for the investment. The compounding interval is each 6 -month (or shorter) period and the 30 day month/360 day year basis is used because these conventions were used to compute yield on the issue. The future value of these amounts, plus the computation credit, as of January 1, 1999, is: Date Receipts (Payments) FY (7.0000 percent) 1/1/1994 ($49,000,000) ($69,119,339) 2/1/1994 3,000,000 4,207,602 4/1/1994 5,000,000 6,932,715 6/1/1994 14,000,000 19,190,277 9/1/1994 20,000,000 26,947,162 1/1/1995 (1,000) (1,317) 7/1/1995 10,000,000 12,722,793 1/1/1996 (1,000) (1,229) Rebate amount (01/01/1999) ,%878.664" General Method for Comnutin2 Yield on Bonds In general, the term "yield," with respect to a bond, means the discount rate that when used in computing the present value of all unconditionally due payments of principal and interest and all of the payments for a qualified guarantee produces an amount equal to the issue price of the bond. The term "issue price" has the same meaning as provided in sections 1273 and 1274 of the Code. That is, if bonds are publicly offered (i.e., sold by the issuer to a bond house, broker or similar person acting in the capacity of underwriter or wholesaler), the issue price of each bond is determined on the basis of the initial offering price to the public (not to the aforementioned intermediaries) at which price a substantial amount of such bond was sold to the public (not to the aforementioned intermediaries). The "issue price" is separately determined for each bond (i.e., maturity) comprising an issue. The regulations also provide varying periods for computing yield on the bonds depending on the method by which the interest payment is determined. Thus, for example, yield on an issue of bonds sold with variable interest rates (i.e., interest rates which are reset periodically based on changes in market) is computed separately for each computation period ending at least on each five-year anniversary of the delivery date that the issue. In effect, yield on a variable yield issue is determined on each computation date by "looking back" at the interest payments for such period. Yield on a fixed interest rate issue (i.e., an issue of bonds the interest rate on which is determined as of the date of the issue) is computed over the entire term of the issue. Issuers of fixed -yield issues generally use the yield computed as of the date of issue for all rebate computations. The yield on fixed -yield issues must be computed by assuming retirements of principal on a call date earlier than the stated maturity date of a bond if (1) the bond is sold at a substantial premium, it may be retired within five years of the date of delivery, and such date is earlier than its scheduled maturity date, or (2) the issue is a stepped -coupon bond. Similarly, recomputation may occur in circumstances in which the issuer or bondholder modify or waive certain terms of, or rights with respect to, the issue or in sophisticated hedging transactions. IN SUCH CIRCUMSTANCES, ISSUERS ARE ADVISED TO CONSULT MCLEAN & HOWARD. L.L.P. TO ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THESE TRANSACTIONS. For purposes of determining the principal or redemption payments on a bond, different rules are used for fixed-rate and variable-rate bonds. The payment is computed separately on each maturity of bonds rather than on the issue as a whole. In certain circumstances, the yield on the bond is determined by assuming that principal on the bond is paid as scheduled and that the bond is retired on the final maturity date for the stated retirement price. For bonds subject to early redemption or stepped -coupon bonds, described above, or for bonds subject to mandatory early redemption, the yield is computed assuming the bonds are paid on the early redemption date for an amount equal to their value. Premiums paid to guarantee the payment of debt service on bonds are taken into account in computing the yield on the bond. Payments for guarantees are taken into account by treating such premiums as the payment of interest on the bonds. This treatment, in effect, raises the yield on the bond, thereby permitting the issuer to recover such fee with excess earnings. The guarantee must be an unconditional obligation of the guarantor enforceable by the bondholder for the payment of principal or interest on the bond or the tender price of a tender bond. The guarantee may be in the form of an insurance policy, surety bond, irrevocable letter or line of credit, or standby purchase agreement. Importantly, the guarantor must be legally entitled to full reimbursement for any payment made on the guarantee either immediately or upon commercially reasonable repayment terms. The guarantor may not be a co -obligor of the bonds or a user of more than 10 percent of the proceeds of the bonds. Payments for the guarantee may not exceed a reasonable charge for the transfer of credit risk. This reasonable charge requirement is not satisfied unless it is reasonably expected that the guarantee will result in a net present value savings on the bond (i.e., the premium does not exceed the present value of the interest savings resulting by virtue of the guarantee). If the guarantee is entered into after June 14, 1989, then any fees charged for the nonguarantee services must be separately stated or the guarantee fee is not recoverable. The regulations also treat certain "hedging" transactions in a manner similar to qualified guarantees. "Hedges" are contracts, e.g., interest rate swaps, futures contracts or options, which are intended to reduce the risk of interest rate fluctuations. Hedges and other financial derivatives are sophisticated and ever -evolving financial products with which a memorandum, such as this, cannot readily deal. IN SUCH CIRCUMSTANCES. ISSUERS ARE ADVISED TO CONSULT MCLEAN & HOWARD. L.L.P. TO ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THESE TRANSACTIONS. Earnines on Nonnurnose Investments The arbitrage rebate provisions apply only to the receipts from the investment of "gross proceeds" in "nonpurpose investments." For this purpose, nonpurpose investments are stock, bonds or other obligations acquired with the gross proceeds of the bonds for the period prior to the expenditure of the gross proceeds for the ultimate purpose. For example, investments deposited to construction funds, reserve funds (including surplus taxes or revenues deposited to sinking funds) or other similar funds are nonpurpose investments. Such investments include only those which are acquired with "gross proceeds." For this purpose, the term "gross proceeds" includes original proceeds received from the sale of the bonds, investment earnings from the investment of such original proceeds, amounts pledged to the payment of debt service on the bonds or amounts actually used to pay debt service on the bonds. The regulations do not provide a sufficient amount of guidance to include an exhaustive list of "gross proceeds" for this purpose; however, it can be assumed that "gross proceeds" represent all amounts received from the sale of bonds, amounts earned as a result of such sale or amounts (including taxes and revenues) which are used to pay, or secure the payment of, debt service for the bonds. The total amount of "gross proceeds" allocated to a bond generally cannot exceed the outstanding principal amount of the bonds. The regulations provide that an investment is allocated to an issue for the period (1) that begins on the date gross proceeds are used to acquire the investment, and (2) that ends on the date such investment ceases to be allocated to the issue. In general, proceeds are allocated to a bond issue until expended for the ultimate purpose for which the bond was issued or for which such proceeds are received (e.g., construction of a bond - financed facility or payment of debt service on the bonds). Deposit of gross proceeds to the general fund of the issuer (or other fund in which they are commingled with revenues or taxes) does not eliminate or ameliorate the Issuer's obligation to compute rebate in most cases. As such, proceeds commingled with the general revenues of the issuer are not "freed -up" from the rebate obligation. An exception to this commingling limitation for bonds, other than private activity bonds, permits "investment earnings" (but not sale proceeds or other types of gross proceeds) to be considered spent when deposited to a commingled fund if those amounts are reasonably expected to be spent within six months. Other than for these amounts, issuers may consider segregating investments in order to more easily compute the amount of such arbitrage earnings by not having to allocate investments. Special rules are provided for purposes of advance refundings. These rules are too complex to discuss in this memorandum. Essentially, the rules relating to refundings, however, do not require that amounts deposited to the escrow fund to defease the prior obligations of the issuer be subject to arbitrage rebate to the extent that the investments deposited to the escrow fund do not have a yield in excess of the yield on the bonds. Any loss resulting from the investment of proceeds in an escrow fund below the yield on the bonds, however, may be recovered by combining those investments with investments deposited to other funds, e.g., reserve or construction funds. The arbitrage regulations also provide an exception to the arbitrage limitations for the investment of bond proceeds in tax-exempt obligations. As such, investment of proceeds in tax exempt bonds eliminates the Issuer's rebate obligation. A caveat; this exception does not apply to gross proceeds derived allocable to a bond, which is not subject to the alternative minimum tax under section 57(a)(5) of the Code, if invested in tax-exempt bonds subject to the alternative minimum tax, i.e., "private activity bonds." Such "AMT -subject" investment is treated as a taxable investment and must comply with the arbitrage rules, including rebate. Earnings from these tax-exempt investments are subject to arbitrage restrictions, including rebate. Similarly, the investment of gross proceeds in certain tax-exempt mutual funds are treated as a direct investment in the tax-exempt obligations deposited in such fund. While issuers may invest in such funds for purposes of avoiding arbitrage rebate, they should be aware that if "private activity bonds" are included in the fund then a portion of the earnings will be subject to arbitrage rebate. Issuers should be prudent in assuring that the funds do not contain private activity bonds. The arbitrage regulations provide a number of instances in which earnings will be imputed to nonpurpose investments. Receipts generally will be imputed to investments that do not bear interest at an arm's-length (i.e., market) interest rate. As such, the regulations adopt a "market price" rule. In effect, this rule prohibits an issuer from investing bond proceeds in investments at a price which is higher than the market price of comparable obligations, in order to reduce the yield. Special rules are included for determining the market price for investment contracts, certificates of deposit and certain U.S. Treasury obligations. For example, to establish the fair market value of investment contracts a bidding process between three qualified bidders must be used. The fair market value of certificates of deposit which bear a fixed interest rate and are subject to an early withdrawal penalty is its purchase price if that price is not less than the yield on comparable U.S. Treasury obligations and is the highest yield available from the institution. In any event, a basic "common sense" rule -of -thumb that can be used to determine whether a fair market value has been paid is to ask whether the general funds of the issuer would be invested at the same yield or at a higher yield. An exception to this market price rule is available for United States Treasury Obligations - State or Local Government Series in which case the purchase price is always the market price. Reimbursement and Working Capital The regulations provide rules for purposes of determining whether gross proceeds are used for working capital and, if so, at what times those proceeds are considered spent. In general, issuers can finance short-term or long-term working capital with tax-exempt bonds. By adopting a "proceeds -spent -last" rule, the regulations also generally require that an issuer actually incur a deficit (i.e., expenditures must exceed receipts) for the computation period (which generally corresponds to the issuer's fiscal year in the case of short-term working capital financing). Also, the regulations permit an operating reserve, but unlike prior regulations the amount of such reserve may not exceed five percent of the issuer's actual working capital expenditures for the prior fiscal year. A change was made to the regulations in 2016 allows issuers to finance the operating reserve with proceeds of a tax-exempt obligation. The regulations generally continue the prior regulations' 13 -month temporary period for short-term working capital financing. Long-term working capital financings are beyond the scope of this memorandum. In the event long- term working capital financing is needed, issuers are advised to consult McLean & Howard, L.L.P. to address the federal income tax consequences of these transactions. Importantly, the regulations contain rules for determining whether proceeds used to reimburse an issuer for costs paid prior to the date of issue of the obligation, in fact, are considered spent at the time of reimbursement. These rules apply to an issuer who uses general revenues for the payment of all or a portion of the costs of a project then uses the proceeds of the bonds to reimburse those general revenues. Failure to comply with these rules would result in the proceeds continuing to be subject to federal income tax restrictions, including rebate. To qualify for reimbursement, a cost must be described in an expression (e.g., resolution, legislative authorization) evidencing the issuer's intent to reimburse which is made no later than 60 days after the payment of the cost. Reimbursement must occur no later than 18 months after the later of (1) the date the cost is paid or (2) the date the project is placed in service. Except for projects requiring an extended construction period or small issuers, in no event can a cost be reimbursed more than three years after the cost is paid. Reimbursement generally is not permitted for working capital; only capital costs, grants and loans may be reimbursed. Moreover, certain anti -abuse rules apply to prevent issuers from avoiding the limitations on refundings. IN CASES INVOLVING WORKING CAPITAL OR REIMBURSEMENT, ISSUERS ARE ADVISED TO CONTACT MCLEAN & HOWARD, L.L.P. TO ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION. Rebate Payments Rebate payments generally are due 60 days after each installment computation date. The interim computation dates occur each fifth anniversary of the issue date. The final computation date is on the latest of (1) the date 60 days after the date the issue of bonds is no longer outstanding, (2) the date eight months after the date of issue for certain short-term obligations (i.e., obligations retired within three years), or (3) the date the issuer no longer reasonably expects any spending exception, discussed below, to apply to the issue. On such payment dates, other than the final payment date, an issuer is required to pay 90 percent of the rebatable arbitrage to the United States. On the final payment date, an issuer is required to pay 100 percent of the remaining rebate liability. Failure to timely pay rebate does not necessarily result in the loss of tax -exemption. Late payments, however, are subject to the payment of interest, and unless waived, a penalty of 50 percent (or, in the case of private activity bonds, other than qualified 501(c)(3) bonds, 100 percent) of the rebate amount which is due. IN SUCH CIRCUMSTANCES, ISSUERS ARE ADVISED TO CONSULT MCLEAN & HOWARD, L.L.P. TO ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THESE TRANSACTIONS. Rebate payments are refundable. The issuer, however, must establish to the satisfaction of the Commissioner of the Internal Revenue Service that the issuer paid an amount in excess of the rebate and that the recovery of the overpayment on that date would not result in additional rebatable arbitrage. An overpayment of less than $5,000 may not be recovered before the final computation date. Alternative Penalty Amount In certain cases, an issuer of a bond the proceeds of which are to be used for construction may elect to pay a penalty, in lieu of rebate. The penalty may be elected in circumstances in which the issuer expects to satisfy the two-year spending exception which is more fully described under the heading "Exceptions to Rebate." The penalty is payable, if at all, within 60 days after the end of each six-month period. This is more often than rebate. The election of the alternative penalty amount would subject an issuer, which fails the two- year spend -out requirements, to the payment of a penalty equal to one and one-half of the excess of the amount of proceeds which was required to be spent during that period over the amount which was actually spent during the period. The penalty has characteristics which distinguish it from arbitrage rebate. First, the penalty would be payable without regard to whether any arbitrage profit is actually earned. Second, the penalty continues to accrue until either (1) the appropriate amount is expended or (2) the issuer elects to terminate the penalty. To be able to terminate the penalty, the issuer must meet specific requirements and, in some instances, must pay an additional penalty equal to three percent of the unexpended proceeds. Exceptions to Rebate The Code and regulations provide certain exceptions to the requirement that the excess investment earnings be rebated to the United States. a. Small Issuers. The first exception provides that if an issuer (together with all subordinate issuers) during a calendar year does not issue tax-exempt bonds2 in an aggregate face amount exceeding $5 million, then the obligations are not subject to rebate. Only issuers with general taxing powers may take advantage of this exception. Subordinate issuers are those issuers which derive their authority to issue bonds from the same issuer, e.g., a city and a health facilities development corporation, or which are controlled by the same issuer, e.g., a state and the board of a public university. In the case of bonds issued for public school capital expenditures, the $5 million cap may be increased to as much as $15 million. For purposes of measuring whether bonds in the calendar year exceed these dollar limits, current refunding bonds can be disregarded if they meet certain structural requirements. Please contact McLean & Howard, L.L.P. for further information. b. Spending Exceptions. Six -Month Exception. The second exception to the rebate requirement is available to all tax-exempt bonds, all of the gross proceeds of which are expended during six months. The six month rule is available to bonds issued after the effective date of the Tax Reform Act of 1986. See the discussion of effective dates on page two. For this purpose, proceeds used for the redemption of bonds (other than proceeds of a refunding bond deposited to an escrow fund to discharge refunded bonds) cannot be taken into account as expended. As such, bonds with excess gross proceeds generally cannot satisfy the second exception unless the amount does not exceed the lesser of five percent or $100,000 and such de minimis amount must be expended within one year. Certain gross proceeds are not subject to the spend -out requirement, including amounts deposited to a bona fide debt service fund, to a reserve fund and amounts which become gross proceeds received from purpose investments. These amounts themselves, however, may be subject to rebate even though the originally expended proceeds were not. The Code provides a special rule for tax and revenue anticipation notes (i.e., obligations issued to pay operating expenses in anticipation of the receipt of taxes and other revenues). Such notes are referred to as TRANs. To determine the timely expenditure of the proceeds of a TRAN, the computation of the "cumulative cash flow deficit" is important. If the "cumulative cash flow deficit" (i.e., the point at which the operating expenditures of the issuer on a cumulative basis exceed the revenues of the issuer during the fiscal year) occurs 2 For this purpose, "private activity bonds" neither are afforded the benefit of this exception nor are taken into account for purposes of determining the amount of bonds issued. within the first six months of the date of issue and must be equal to at least 90 percent of the proceeds of the TRAN, then the notes are deemed to satisfy the exception. This special rule requires, however, that the deficit actually occur, not that the issuer merely have an expectation that the deficit will occur. In lieu of the statutory exception for TRANs, the regulations also provide a second exception. Under this exception, 100 percent of the proceeds must be spent within six months, but before note proceeds can be considered spent, all other available amounts of the issuer must be spent first ("proceeds -spent -last" rule). In determining whether all available amounts are spent, a reasonable working capital reserve equal to five percent of the prior year's expenditures may be set aside and treated as unavailable. 18 -Month Exception. The regulations also establish a non -statutory exception to arbitrage rebate if all of the gross proceeds (including investment earnings) are expended within 18 months after the date of issue. Under this exception, 15 percent of the gross proceeds must be expended within a six-month spending period, 60 percent within a 12 -month spending period and 100 percent within an 18 -month spending period. The rule pen -nits an issuer to rely on its reasonable expectations for computing investment earnings which are included as gross proceeds during the first and second spending period. A reasonable retainage not to exceed five percent of the sale proceeds of the issue is not required to be spent within the 18 -month period but must be expended within 30 months. Rules similar to the six-month exception relate to the definition of gross proceeds. Two Year Exception. Bonds issued after December 19, 1989 (i.e., the effective date of the Omnibus Reconciliation Act of 1989), at least 75 percent of the net proceeds of which are to be used for construction, may be exempted from rebate if the gross proceeds are spent within two years. Bonds more than 25 percent of the proceeds of which are used for acquisition or working capital may not take advantage of this exception. The exception applies only to governmental bonds, qualified 501(c)(3) bonds and private activity bonds for governmentally -owned airports and docks and wharves. The two-year exception requires that at least 10 percent of the available construction proceeds must be expended within six months after the date of issue, 45 percent within 12 months, 75 percent within 18 months and 100 percent within 24 months. The term "available construction proceeds" generally means sale proceeds of the bonds together with investment earnings less amounts deposited to a qualified reserve fund or used to pay costs of issuance. Under this rule, a reasonable retainage not to exceed five percent need not be spent within 24 months but must be spent within 36 months. The two-year rule also provides for numerous elections which must be made not later than the date of issuance of the bonds. Once made, the elections are irrevocable. Certain elections permit an issuer to bifurcate bond issues, thereby treating only a portion of the issue as a qualified construction bond; and, permit an issuer to disregard earnings from reserve funds for purposes of determining "available construction proceeds." Another election permits an issuer to pay the alternative penalty amount discussed above in lieu of rebate if the issuer ultimately fails to satisfy the two-year rule. Issuers should discuss these elections with their financial advisors prior to issuance of the bonds. Of course, McLean & Howard, L.L.P. remains available to assist you by providing legal interpretations thereof. Debt Service Funds. Additionally, an exception to the rebate requirement, whether or not any of the previously discussed exceptions are available, applies for earnings on "bona fide debt service funds." A "bona fide debt service fund" is one in which the amounts are expended within 13 months of the accumulation of such amounts by the issuer. In general, most interest and sinking funds (other than any excess taxes or revenues accumulated therein) satisfy these requirements. For private activity bonds, short term bonds (i.e., have a term of less than five years) or variable rate bonds, the exclusion is available only if the gross earnings in such fund does not exceed $100,000, for the bond year. For other bonds issued after November 11, 1988, no limitation is applied to the gross earnings on such funds for purposes of this exception. Therefore, subject to the foregoing discussion, the issuer is not required to take such amounts into account for purposes of the computation. Conclusion McLean & Howard, L.L.P. hopes that this memorandum will prove to be useful as a general guide to the arbitrage rebate requirements. Again, this memorandum is not intended as an exhaustive discussion nor as specific advice with respect to any specific transaction. We advise our clients to seek competent financial and accounting assistance. M&H McLEAN & HOWARD, L.L.P. Real Property Lawyers Exhibit "B" March 18, 2019 Board of Directors Trophy Club Municipal Utility District No. 1 c/o McLean & Howard, L.L.P. Barton Oaks Plaza, Building II 901 South MoPac Expressway, Suite 225 Austin, Texas 78746 Re: Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019 Ladies and Gentlemen: Barton Oaks Plaza, Building II 901 South MoPac Expy I Ste 225 Austin, Texas 78746 phone 512.328.2008 fax 512.328.2409 \\-w\\:mcleanhov.-ardla\c com As you know, the Trophy Club Municipal Utility District No. 1 (the "Issuer") will issue the captioned bonds in order to provide for the acquisition and construction of the projects. As a result of that issuance, the federal income tax laws impose certain restrictions on the investment and expenditure of amounts to be used for the projects or to be deposited to the interest and sinking fund and the reserve fund for the captioned bonds. The purpose of this letter is to set forth, in somewhat less technical language, those provisions of the tax law which require the timely use of bond proceeds and that investment of these amounts be at a yield which is not higher than the yield on the captioned bonds. For this purpose, please refer to line 21(e) of the Form 8038-G included in the transcript of proceedings for the yield on the captioned bonds. Please note that the Form 8038-G has been prepared based on the information provided by or on your behalf by your financial advisor. Accordingly, while we believe that the information is correct you may wish to have the yield confirmed before your rebate consultant or the paying agent attempt to rely on it. Generally, the federal tax laws provide that, unless excepted, amounts to be used for the projects or to be deposited to the interest and sinking fund and the reserve fund must be invested in obligations the combined yield on which does not exceed the yield on the bonds. Importantly, for purposes of administrative convenience, the bonds, however, have been structured in such a way as to avoid, for the most part, this restriction on investment yield. They also contain certain covenants relating to expenditures of proceeds designed to alert you to unintentional failures to comply with the laws affecting expenditures of proceeds and dispositions of property. First, the sale and investment proceeds to be used for the new money projects may be invested for up to three years without regard to yield. (Such amounts, however, may be subject to rebate.) Thereafter, they must be invested at or below the bond yield. Importantly, expenditure of these proceeds must be accounted in your books and records. Allocations of these expenditures must occur within 18 months of the later of the date paid or the date the projects are completed. The foregoing notwithstanding, the allocation should not occur later than 60 days after the earlier of (1) of five years after the delivery date of the bonds or (2) the date the bonds are retired unless you obtain an opinion of bond counsel. Second, the interest and sinking fund is made up of amounts which are received annually for the payment of current debt service on all the Issuer's outstanding bonds. Any taxes or revenues deposited to the interest and sinking fund which are to be used for the payment of current debt service on the captioned bonds, or any other outstanding bonds, are not subject to yield restriction. By definition, current debt service refers only to debt service to be paid within one year of the date of receipt of these amounts. For the most part, this would be debt service in the current fiscal year. These amounts deposited to the account for current debt service may be invested without regard to any constraint imposed by the federal income tax laws. Third, a portion of the interest and sinking fund is permitted to be invested without regard to yield restriction as a "minor portion." The "minor portion" exception is available for de minimis amounts of taxes or revenues deposited to the interest and sinking fund. The maximum amount that may be invested as part of this account may not exceed the lesser of five percent of the principal amount of the bonds or $100,000. In addition, the reserve fund contains an amount, which although not expended for debt service within the current year, is necessary to ensure that amounts will be sufficient to pay debt service in the event that taxes or revenues are insufficient during that period. This amount represents a reserve against periodic fluctuations in the receipt of taxes and revenues. The Internal Revenue Code permits amounts which are held in reserve for the payment of debt service, in such instances, to be invested without regard to yield restriction if such amounts do not exceed the lesser of (1) 10 percent of the outstanding principal amount of all outstanding bonds, (2) maximum annual debt service on all outstanding bonds, or (3) 125 percent of average annual debt service on all outstanding bonds. Accordingly, you should review the current balance in the interest and sinking fund and the reserve fund in order to determine if such balances exceed the aggregate amounts discussed above. Additionally, in the future it is important that you be aware of these restrictions as additional amounts are deposited to the funds. The amounts in these funds which are subject to yield restriction would only be the amounts which are in excess of, in the case of the interest and sinking fund, the sum of (1) the current debt service account and (2) the "minor portion" account and, in the case of the reserve fund, the amount which is the lesser of the three amounts described above. Moreover, to the extent that additional bonds are issued by the Issuer, whether for new money projects or for refunding, these amounts will change in their proportion. As of January 1, 2018, tax-exempt bonds cannot be issued to advance refund another bond. While certain exceptions may apply, an advance refunding bond is one the proceeds of which are generally used to pay principal, interest or premium on another issue of bonds more than 90 days after the issue date of the refunding bond. The Issuer should not use any proceeds of the bonds for the payment of principal, interest or premium on another issue of bonds without first discussing with Bond Counsel. The Order contains covenants that require the Issuer to comply with the requirements of the federal tax laws relating to the tax-exempt obligations. The Internal Revenue Service (the "Service") has determined that certain materials, records and information should be retained by the issuers of tax-exempt obligations for the purpose of enabling the Service to confirm the exclusion of the interest on such obligations under the Internal Revenue Code. Accordingly, the Issuer should retain such materials, records and information for the period beginning on the issue date of the captioned bonds and ending three years after the date the captioned bonds are retired. Please note this federal tax law standard may vary from state law standards. The material, records and information required to be retained will generally be contained in the transcript of proceedings for the captioned bonds, however, the Issuer should collect and retain additional materials, records and information to ensure the continued compliance with federal tax law requirements. For example, beyond the transcript of proceedings for the bonds, the Issuer should keep schedules evidencing the expenditure of bond proceeds, documents relating to the use of bond -financed property by governmental and any private parties (e.g., leases and management contracts, if any) and schedules pertaining to the investment of bond proceeds. In the event that you have questions relating to record retention, please contact us. The Service also wants some assurance that any failure to comply with the federal tax laws was not due to an issuer's intentional disregard or gross neglect of the responsibilities imposed on it by the federal tax laws. Therefore, to ensure post -issuance compliance, an issuer should consider adopting formalized written guidelines to help the issuer perform diligence reviews at regular intervals. The goal is for issuers to be able to timely identify and resolve violations of the laws necessary to maintain their obligations' tax -favored status. While the federal tax certificate, together with its attachments, may generally provide a basic written guideline when incorporated in an organizations' operations, the extent to which an organization has appropriate written compliance procedures in place is to be determined on a case-by-case basis. Moreover, the Service has indicated that written procedures should identify the personnel that adopted the procedures, the personnel that is responsible for monitoring compliance, the frequency of compliance check activities, the nature of the compliance check activities undertaken, and the date such procedures were originally adopted and subsequently updated, if applicable. The Service has stated that the adoption of such procedures will be a favorable factor that the Service will consider when determining the amount of any penalty to be imposed on an issuer in the event of an unanticipated and non -curable failure to comply with the tax laws. Finally, you should notice that the Order contains a covenant that limits the ability of the Issuer to sell or otherwise dispose of bond -financed property for compensation. Beginning for obligations issued after May 15, 1997 (including certain refunding bonds), or in cases in which an issuer elects to apply new private activity bond regulations, such sale or disposition causes the creation of a class of proceeds referred to as "disposition proceeds." Disposition proceeds, like sale proceeds and investment earnings, are tax -restricted funds. Failure to appropriately account, invest or expend such disposition proceeds would adversely affect the tax-exempt status of the bonds. In the event that you anticipate selling property, even in the ordinary course, please contact us. Obviously, this letter only presents a fundamental discussion of, among other tax rules, the yield restriction rules as applied to amounts deposited to the funds. This letter does not address the rebate consequences with respect to the interest and sinking fund and the reserve fund. You should review the memorandum attached to the Federal Tax Certificate as Exhibit "A" for this purpose. If you have certain concerns with respect to the matters discussed in this letter or wish to ask additional questions with regards to certain limitations imposed, please feel free to contact our firm. Thank you for your consideration and we look forward to our continued relationship. Very truly yours, MCLEAN & HOWARD, L.L.P. Exhibit "C" ISSUE PRICE CERT IHCATE [To be attached hereto] ISSUE PRICE CERTIFICATE The undersigned, as the underwriter or the manager of the syndicate of underwriters ("Purchaser"), with respect to the purchase at competitive sale of the Water and Sewer System Revenue Bonds, Series 2019 issued by the Trophy Club Municipal Utility District No. 1 ("Issuer") in the principal amount of $7,080,000 ("Bonds"), hereby certifies and represents, based on its records and information, as follows: (a) On the first day on which there was a binding contract in writing for the purchase of the Bonds by the Purchaser, the Purchaser's reasonably expected initial offering prices of each maturity of the Bonds with the same credit and payment terms (the "Expected Offering Prices") to a person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter are as set forth in the pricing wire or equivalent communication for the Bonds, as attached to this Certificate as Schedule A. The Expected Offering Prices are the prices for the Bonds used by the Purchaser in formulating its bid to purchase the Bonds. (b) The Purchaser had an equal opportunity to bid to purchase the Bonds and it was not given the opportunity to review other bids that was not equally given to all other bidders (i.e., no last look). (c) The bid submitted by the Purchaser constituted a firm bid to purchase the Bonds. For purposes of this Issue Price Certificate, the term "Underwriter" means (1) (i) a person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, or (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (1)(i) of this paragraph (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public) to participate in the initial sale of the Bonds to the Public, and (2) any person who has more than 50% common ownership, directly or indirectly, with a person described in clause (1) of this paragraph. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Federal Tax Certificate and with respect to compliance with the federal income tax rules affecting the Bonds, by McLean & Howard, L.L.P. in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes and by McCall, Parkhurst & Horton L.L.P. in connection with the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Bonds. Notwithstanding anything set forth herein, the Purchaser is not engaged in the practice of law and makes no representation as to the legal sufficiency of the factual matters set forth herein. EXECUTED and DELIVERED as of this 18th day of March 2019. IFS S curities,�as Purc aser By: 71� wl L Name: Keith Wakefield SCHEDULE A PRICING WIRE OR EQUIVALENT COMMUNICATION (Attached) Issuer, State : TROPHY CLUB MUD #1 -REV, TX Sale Date : 03/18/19 Pricing Stage : NONE Sale Type : COMP Deal Size : $7,080,000 Sec Type : Revenue Federal Tax Status : BQ State Tax Status : NONE Dated Date : 03/15/19 First Coupon Date : 03/01/20 Settle Date: 04/23/19 Accrue From : DATED Moodys (rating/underlying) : NONE / NONE S&P (rating/underlying) : AA / AA - Fitch (rating/underlying) : NONE / NONE Insurance : BAM Program : NONE Maturity Amt(M) Cpn% Yld/Px/NRO Px to YTM BaI(M) Cusip 09/01/21 155.0 3.0001.770/102.824 YTW 1.770 0.0 897061BS5 09/01/22 160.0 3.0001.800/103.889 YTW 1.800 0.0 897061BT3 09/01/23 165.0 3.0001.840/104.832 YTW 1.840 0.0 897061BU0 09/01/24170.0 3.0001.900/105.574 YTW 1.900 0.0 897061BV8 09/01/25 175.0 3.000 1.950/106.246 YTW 1.950 0.0 897061BW6 09/01/26 180.0 3.000 2.050/106.454 YTW 2.050 0.0 897061BX4 09/01/27 185.0 3.000 2.150/106.467 YTW 2.150 0.0 897061BY2 09/01/28 190.0 3.000 2.250/106.293 YTW 2.250 0.0 897061BZ9 09/01/29 195.0 3.000 2.450/104.571 YTW 2.496 0.0 897061CA3 09/01/30 205.0 3.000 2.550/103.722 YTW 2.619 0.0 897061CB1 09/01/31210.0 3.000 2.650/102.881 YTW 2.724 0.0 897061CC9 09/01/32 215.0 3.000 2.750/102.047 YTW 2.815 0.0 897061CD7 09/01/33 220.0 3.000 2.830/101.386 YTW 2.881 0.0 8970610E5 09/01/34 230.0 3.000 2.900/100.812 YTW 2.934 0.0 897061CF2 09/01/35 235.0 3.000 3.020/ 99.741 YTW 3.020 0.0 897061CG0 09/01/36 245.0 3.000 3.080/ 98.928 YTW 3.080 0.0 897061CH8 09/01/37 250.0 3.000 3.150/ 97.918 YTW 3.150 0.0 8970610/4 09/01/38 255.0 3.125 3.210/ 98.779 YTW 3.210 0.0 897061CK1 09/01/39 265.0 3.125 3.290/ 97.563 YTW 3.290 0.0 897061CL9 09/01/40 275.0 3.250 3.350/ 98.480 YTW 3.350 0.0 897061CM7 09/01/41285.0 3.250 3.400/ 97.661 YTW 3.400 0.0 897061CN5 09/01/42 290.0 3.250 3.420/ 97.277 YTW 3.420 0.0 897061CP0 09/01/43 300.0 3.250 3.440/ 96.880 YTW 3.440 0.0 897061CQ8 09/01/44 310.0 3.250 3.470/ 96.307 YTW 3.470 0.0 897061CR6 09/01/45 320.0 3.375 3.500/ 97.856 YTW 3. 09/01/46 330.0 3.375 3.520/ 97.463 YTW 3. 09/01/47 345.0 3.375 3.540/ 97.059 YTW 3. 09/01/48 355.0 3.375 3.570/ 96.467 YTW 3 09/01/49 365.0 3.500 3.600/ 98.159 YTW 3 Spread Table: Maturity Amt(M) Cpn% Spread 09/01/21 155.0 3.000 18.472 09/01/22 160.0 3.000 18.443 09/01/23 165.0 3.000 18.344 09/01/24170.0 3.000 19.408 09/01/25 175.0 3.000 18.561 09/01/26 180.0 3.000 20.903 09/01/27 185.0 3.000 22.966 09/01/28 190.0 3.000 24.280 09/01/29 195.0 3.000 34.235 09/01/30 205.0 3.000 34.019 09/01/31 210.0 3.000 35.845 09/01/32 215.0 3.000 39.007 09/01/33 220.0 3.000 41.967 09/01/34 230.0 3.000 44.508 09/01/35 235.0 3.000 50.169 09/01/36 245.0 3.000 50.487 09/01/37 250.0 3.000 52.057 09/01/38 255.0 3.125 52.891 09/01/39 265.0 3.125 56.289 09/01/40 275.0 3.250 58.734 09/01/41285.0 3.250 61.843 09/01/42 290.0 3.250 62.074 09/01/43 300.0 3.250 62.319 09/01/44 310.0 3.250 64.302 09/01/45 320.0 3.375 66.317 09/01/46 330.0 3.375 67.284 09/01/47 345.0 3.375 68.204 09/01/48 355.0 3.375 69.962 09/01/49 365.0 3.500 72.337 Premium CaII Date : NONE Par CaII Date : 09/01/28 Deal Notes : NONE +1-3126141553 IFS SECURITIES 500 0.0 897061CS4 520 0.0 897061CT2 540 0.0 897061CU9 .570 0.0 897061CV7 .600 0.0 897061CW5 Exhibit "D" CERTIFICATE OF MUNICIPAL ADVISOR The undersigned, on behalf of SAMCO Capital Markets, Inc. (the "Municipal Advisor"), as the municipal advisor to Trophy Club Municipal Utility District No. 1 (the "Issuer") in connection with the issuance of the Issuer's Water and Sewer System Revenue Bonds, Series 2019 in the principal amount of $7,200,000 (the "Bonds"), has acted on behalf of the Issuer in soliciting and receiving bids in connection with the sale of the Bonds in a competitive bidding process in which bids were requested for the purchase of the Bonds at specified written terms, and hereby certifies as set forth below with respect to the bidding process and award of the Bonds. 1. On March 18, 2019 (the "Sale Date") the Issuer entered into a binding contract in writing for the sale of the Bonds. 2. All of the Bonds were offered for sale at specified written terms more particularly described in the Notice of Sale. A copy of the Notice of Sale is included in the Transcript of Proceedings for the Bonds. No modifications have been made to such Notice of Sale. 3. The Municipal Advisor disseminated the Notice of Sale to potential underwriters of the Bonds in a manner that was reasonably designed to reach potential underwriters. The Notice of Sale was disseminated through electronic communications that was widely circulated to potential underwriters by a recognized publisher of municipal bond offering documents or by posting on an internet-based website or other electronic medium that is regularly and widely used by underwriters for such purpose and is widely available to potential underwriters. 4. To the knowledge of the Municipal Advisor, all bidders were offered an equal opportunity to bid to purchase the Bonds so that, for example, if the bidding process afforded any opportunity for bidders to review other bids before providing a bid, no bidder was given an opportunity to review other bids that was not equally given to all other bidders (i.e., no "last -look"). 5. The Issuer received bids from at least three underwriters of municipal bonds that have established industry reputations for underwriting new issuances of municipal bonds. The foregoing statement is based in part on the bidders' representations included in their bid forms which representations, to the knowledge of the Municipal Advisor based upon the Municipal Advisor's experience in acting as the municipal advisor for other municipal issuers, are not inaccurate. 6. The Issuer awarded the Bonds to IFS Securities, Inc. (the "Purchaser"), whose bid was determined to the be the best conforming bid in accordance with the terms set forth in the Notice of Sale, as shown in the bid comparison attached as Attachment A to this Certificate. [Signature page follows] The undersigned understands that the foregoing information will be relied upon (i) by the Issuer with respect to certain of the representations set forth in the Tax Certificate and with respect to compliance with the federal income tax rules affecting the Bonds, (ii) by McLean & Howard, L.L.P. in connection with rendering its opinion that the interest on the Bonds is excludable from gross income for federal income tax purposes and (iii) by McCall, Parkhurst & Horton L.L.P. in connection with the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Bonds. Notwithstanding anything set forth herein, the Municipal Advisor is not engaged in the practice of law and makes no representation as to the legal sufficiency of the factual matters set forth herein. Furthermore, no other person may rely on the representations set forth in this certificate without the prior written consent of the Municipal Advisor. EXECUTED and DELIVERED as of this April 23, 2019. SAMCO CAPITAL MA TS, INC., as Municipal Advisor By: Name: Andrew Friedman ATTACHMENT A BID COMPARISON [To be attached hereto] 3/18/2019 ................................................................. _........................ 11:22:51 a.m. CDST Bid Results PARITY Result Screen Upcoming Calendar Overview Compare T Summary Trophy Club MUD #1 $7,200,000 Water and Sewer System Revenue Bonds, Series 2019 The following bids were submitted using PARITY® and displayed ranked by lowest NIC. Click on the name of each bidder to see the respective bids. Bid Award I. Bidder Name NIC IFS Securitigl Inc. The Baker Group 3.415622 Robert W. Baird & Co.. Inc. j3.456805 Raymond James & Associates Inc. 3.459304- Hutchinson Shockey Erley & Co. 3.491747 SunTrust Robinson Humphrey 3.585708 3.342290 *Awarding the Bonds to a specific bidder will provide you with the Reoffering Prices and Yields. © 1981-2002 i -Deal LLC, All rights reserved, Trademarks https://www.newissuehome.i-deal.com/Parity/asp/main.asp?page=parityResult&customer=TM3&issue_key_no=280396&sec_type=BD 1/1 3/18/2019 Upcoming Calendar Overview Result Excel The Baker Group - Oklahoma City , OK's Bid PARITY Bid Form Trophy Club MUD #1 $7,200,000 Water and Sewer System Revenue Bonds, Series 2019 For the aggregate principal amount of $7,200,000.00, we will pay you $7,190,210.59, plus accrued interest from the date of issue to the date of delivery. The Bonds are to bear interest at the following rate(s): Maturity Date Amount $ Coupon % Yield % Dollar Price 09/01/2021 105M 2.5000 1.8500 : 101.490 09/01/2022 115M 2.5000 1.9000 101.940 09/01/2023 120M 3.0000 1.9500 104.362 09/01/2024 125M 3.0000 2.0000 105.053 09/01/2025. 130M 3.0000 2.1000 105.327 09/01/2026 140 M 3.0000 2.2000 105.403 09/01/2027 145M 3.0000 2.3000 105.291 09/01/2028 155M 3.0000 2.4500 104.571 09/01/2029 09/01/2030 340M 3.0000 2.6000 103.300 09/01/2031 09/01/2032 370M 3.0000 2.8000 101.633 09/01/2033 09/01/2034 415M 3.0000 3.0000 100.000 09/01/2035 09/01/2036 460M 3.0000 3.1000 98.663 09/01/2037 250M 3.0500 3.1500 98.611 09/01/2038 265M 3.1000 3.2000 98.562 09/01/2039 280M 3.2500 3.2500 100.000 09/01/2040 295M 3.2500 3.3000 99.235 09/01/2041310M 3.5000 3.3200 101.434 09/01/2042 325M 3.5000 3.3300 101.353 09/01/2043 345M 3.5000 3.3500 101.193 09/01/2044 09/01/2045 09/01/2046 09/01/7047 09/01/2048 09/01/2049 2,510M 3.6250 3.5500 100.589 Total Interest Cost: $4,923,563.58 Discount: $9,789.41 Net Interest Cost: $4,933,352.99 NIC: 3.415622 Time Last Bid Received On:03/18/2019 10:58:45 CDST This proposal is made subject to all of the terms and conditions of the Official Bid Form, the Official Notice of Sale, and the Preliminary Official Statement, all of which are made a part hereof. Bidder: The Baker Group, Oklahoma City , OK Contact: Eric Fischer Title: Telephone:405--41-5-72 Fax: https://www.newissuehome.i-deal.com/Parity/asp/main.asp?page=parityBidform&customer=TM3&issue_key_no=280396&bid_no=2&sec_type=B D&bi... 1/2 3/18/2019 PARITY Bid Form I Upcoming Calenda7rOverview f Result Excel Hutchinson, Shockey, Erley & Co. - Chicago , IL's Bid Trophy Club MUD #1 $7,200,000 Water and Sewer System Revenue Bonds, Series 2019 :AMITY For the aggregate principal amount of $7,200,000.00, we will pay you $6,984,701.30, plus accrued interest from the date of issue to the date of delivery. The Bonds are to bear interest at the following rate(s): Maturity Date Amount $ Coupon % Yield % Dollar Price 09/01/2021 105M 5.2500 1.9000 107.678 09/01/2022 115M 5.2500 2.0000 110.494 09/01/2023 120M 5.2500 2.1000 113.043 09/01/2024 125M 5.2500 2.2000 115.326 09/01/2025 130M 5.2500 2.3000 117.347 09/01/2026 140M 8 5.2500 2.3500 119.4 ,.. 4 1 09/01/2027 145M 5.2500 2.4000 = 121.458 09/01/2028 155M 5.2500 2.4500 123.280 09/01/2,029 09/01/2030 09/01/2031 09/01/2032 370M 4.0000 2.8500 109.382 09/01/2033 33 09/0112034 415M 4.0000 3.0000 108.101 09/01/2035 09/01/2036 460M 4.0000 3.1000 107.257 09/01/2037 09/01/2038 515M 3.5000 3.5000 100.000 09/01/2039 09/01/2040 575M 09/01/2041 09/01/2042 09/01/2043 980M 09/01/2044 02/01/2045 09/01/2,046 1,155M 3.5000 09/01/2047 09/01/2048 09/01/2049 1,355M Total Interest Cost: Discount: Net Interest Cost: NIC: Time Last Bid Received 340M 5.2500 2.6500 121.415 3.5000 3.6000 98.515 3.5000 3.6500 97.590 3.7500 95.742 2.2500 3.8850 71.000 $4,828,005.83 $215,298.70 $5,043,304.53 3.491747 On:03/18/2019 10:26:40 CDST This proposal is made subject to all of the terms and conditions of the Official Bid Form, the Official Notice of Sale, and the Preliminary Official Statement, all of which are made a part hereof. Bidder: Hutchinson, Shockey, Erley & Co., Chicago , IL Contact: Jim VanMetre Title: Telephone:312-443-1555 Fax: 312-443-7225 https://www.newissuehome.i-deal.com/Parity/asp/main.asp?page=parityBidform&customer=TM3&issue_key_no=280396&bid_no=6&sec_type=BD&bi... 1/2 3/18/2019 PARITY Bid Form Upcoming Calendar Overview Result Excel IFS Securities, Inc. - Atlanta , GA's Bid Trophy Club MUD #1 $7,200,000 Water and Sewer System Revenue Bonds, Series 2019 For the aggregate principal amount of $7,200,000.00, we will pay you $7,063,713.10, plus accrued interest from the date of issue to the date of delivery. The Bonds are to bear interest at the following rate(s): Maturity Date Amount $ Coupon % Yield % Dollar Price 09/01/2021 105M 3.0000 1.7700 102.824 09/01/2022 115M 3.0000 1.8000 103.889 09/01/2023 120M 3.0000 1.8400 104.832 09/01/2024 125M 3.0000 1.9000 105.574 09/01/2025 130M 3.0000 1.9500 106.246 09/01/2026 140M 3.0000 2.0500 106.454 09/01/2027 145M 3.0000 2.1500 106.467 09/01/2028 155M 3.0000 2.2500 106.293 09/01/2029 165M 3.0000 2.4500 104.571 09/01/2030 175M 3.0000 2.5500 103.722 09/01/2031 180M 3.0000 2.6500 102.881 09/01/2032 190M 3.0000 2.7500 102.047 09/01/2033 200M 3.0000 2.8300 101.386 09/01/2034 215M 3.0000 2.9000 100.812 09/01/2035 225M 3.0000 3.0200 99.741 09/01/2036 235M 3.0000 3.0800 98.928 09/01/2037 250M 3.0000 3.1500 97.918 09/01/2038 265M 3.1250 3.2100 98.779 09/01/2039 280M 3.1250 3.2900 97.563 09/01/2040 295M 3.2500 3.3500 98.480 09/01/2041 310M 3.2500 3.4000 97.661 09/01/2042 325M 3.2500 3.4200 97.277 09/01/2043 345M 3.2500 3.4400 96.880 09/01/2044 365M 3.2500 3.4700 96.307 09/01/2045 385M 3.3750 3.5000 97.856 09/01/2046 405M 3.3750 3.5200 97.463 09/01/2047 430M 3.3750 3.5400 97.059 09/01/2048 450M 3.3750 3.5700 _ 96.467 09/01/2049 475M 3.5000 3.6000 98.159 Total Interest Cost: $4,691,150.03 Discount: $136,286.90 Net Interest Cost: $4,827,436.93 NIC: 3.342290 Time Last Bid Received On:03/18/2019 10:56:39 CDST This proposal is made subject to all of the terms and conditions of the Official Bid Form, the Official Notice of Sale, and the Preliminary Official Statement, all of which are made a part hereof. Bidder: IFS Securities, Inc., Atlanta , GA Contact: Kristiaan Sheedy Title: CTO Telephone:470-881-8548 Fax: https://www.newissuehome. i-deal.com/Parity/asp/main.asp?page=parityBidform&customer=TM3&issue_key_no=280396&bid_no=8&sec_type=BD&bi... 1/2 3/18/2019 Upcoming Calendar 1 Overview Result Excel PARITY Bid Form Raymond James & Associates, Inc. - Dallas , TX's Bid �s s E'- � r r' :1 Trophy Club MUD #1 $7,200,000 Water and Sewer System Revenue Bonds, Series 2019 For the aggregate principal amount of $7,200,000.00, we will pay you $7,046,188.55, plus accrued interest from the date of issue to the date of delivery. The Bonds are to bear interest at the following rate(s): Maturity Date Amount $ Coupon % Yield % Dollar Price 09/01/2021 09/01/2022 09/01/2023 09/01/2024 09/01/2025 09/01/2026 09/01/2027 09/01/2028 09/01/2029 09/01/2030 09/01/2031 09/01/2032 09/01/2033 09/01/2034 09/01/2035 09/01/2036 09/01/2037 09/01/2038 105M 115M 120M 125M 130M 140M 145M 155M 165M 175M 180M 190M 200M 215M 225M 235M 250M 265 M 09/01/2039 280M 09/01/2040 295M 09/01/2041 310M 09/01/2042 325M 09/01/2043 345M 09/01/2044 365M 09/01/2045 385M 09/01/2046 405M 09/01/2047 430M 09/01/2048 450M 09/01/2049 475M Total Interest Cost: Discount: Net Interest Cost: NIC: 2.0000 1.7500 100.573 2.0000 1.8500 100.484 2.0000 2.0000 100.000 2.2500 2.1000 100.754 2.2500 2.1500 100.589 2.2500 2.2500 100.000 2.5000 2.3500 101.130 3.0000 2.4500 104.571 3.0000 2.6000 103.300 3.0000 2.7000 102.463 3.0000 2.8000 101.633 3.0000 2.9000 100.812 3.0000 3.0000 100.000 3.0000 3.0500 99.388 3.0000 3.1000 98.722 3.0000 3.1500 98.003 3.2500 3.2500 100.000 3.2500 3.3000 99.286 3.2500 3.3500 98.530 3.3750 3.4500 98.870 3.3750 3.5000 98.069 3.3750 3.5500 97.234 3.5000 3.6000 98.383 3.5000 3.6100 98.179 3.5000 3.6200 97.969 3.5000 3.6300 97.754 3.5000 3.6500 97.360 3.6250 3.6700 99.192 3.6250 3.7000 98.635 $4,842,634.48 $153,811.45 $4,996,445.93 3.459304 Time Last Bid Received On:03/18/2019 10:14:48 CDST This proposal is made subject to all of the terms and conditions of the Official Bid Form, the Official Notice of Sale, and the Preliminary Official Statement, all of which are made a part hereof. Bidder: Raymond James & Associates, Inc., Dallas , TX Contact: Randall Hawkins Title: Te l e p h o n e: 214-36 5-5546 Fax: https://www.newissuehome.i-deal.com/Parity/asp/main.asp?page=parityBidform&customer=TM3&issue_key_no=280396&bid_no=1 &sec_type=BD&bi... 1/2 3/18/2019 PARITY Bid Form Upcoming Calendar Overview Result Excel Robert W. Baird & Co., Inc. - Milwaukee , WI's Bid Trophy Club MUD #1 $7,200,000 Water and Sewer System Revenue Bonds, Series 2019 For the aggregate principal amount of $7,200,000.00, we will pay you $7,083,724.10, plus accrued interest from the date of issue to the date of delivery. The Bonds are to bear interest at the following rate(s): Maturity Date Amount $ Coupon % Yield % Dollar Price 09/01/2021 105M 3.0000 1.7500 102.870 09/01/2022 115M 3.0000 1.8500 103.723 09/01/2023 120M 3.0000 1.9500 104.362 09/01/2024 125M 3.0000 2.0000 105.053 09/01 /2025 130M 3.0000 2.0500 105.632 09/01/2026 140 M 3.0000 2.1500 105.752 09/01/2027 145M 3.0000 2.2500 105.682 09/01/2028 155M 3.0000 2.3500 105.428 09/01/2029 165M 3.0000 2.4500 104.571 09/01/2030 175M 3.0000 2.5500 103.722 09/01/2031 180M 3.0000 2.6500 102.881 09/01/2032 190M 3.0000 2.7500 102.047 09/01/2033 200M 3.0000 2.8500 101.222 09/01/2034 215M 3.0000 3.0000 100.000 09/01/2035 225M 3.0000 3.0500 99.357 09/01/2036 235M 3.1250 3.1500 99.665 09/01/2037 250M 3.2500 3.2500 100.000 09/01/2038 265M 3.2500 3.3000 99.286 09/01/2039 280M 3.2500 3.3500 98.530 09/01/2040 09/01/2041 605M 3.5000 3.5000 100.000 09/01/2042 325M 3.5000 3.5200 99.680 09/01/2043 345M 3.5000 3.5400 99.347 09/01/2044 365M 3.5000 3.5500 99.165 09/01/2045 385M 3.5000 3.5600 98.976 09/0112046 09101/2047 09/01/2048 09/01/2049 1,760M 3.5000 3.6000 98.159 Total Interest Cost: $4,876,559.69 Discount: $116,275.90 Net Interest Cost: $4,992,835.59 NIC: 3.456805 Time Last Bid Received On:03/18/2019 10:49:29 CDST This proposal is made subject to all of the terms and conditions of the Official Bid Form, the Official Notice of Sale, and the Preliminary Official Statement, all of which are made a part hereof. Bidder: Robert W. Baird & Co., Inc., Milwaukee , WI Contact: Peter Anderson Title: Telephone:414-765-7331 Fax: https://www. newissuehome.i-deal.com/Parity/asp/main.asp?page=parityBidform&customer=TM3&issue_key_no=280396&bid_no=4&sec_type=BD&bi... 1/2 3/18/2019 Upcoming Calendar 1 Overview Result Excel PARITY Bid Form SunTrust Robinson Humphrey - Nashville , TN's Bid � j I TY Trophy Club MUD #1 $7,200,000 Water and Sewer System Revenue Bonds, Series 2019 For the aggregate principal amount of $7,200,000 .00, we will pay you $7,087,354.85, plus accrued interest from the date of issue to the date of delivery. The Bonds are to bea Maturity Date 09/01/2021 105M 09/01/2022 115M 09/01/2023 120M 09/01/2024 125M 09/01/2025 130M 09/01/2026 140M 09/01/2027 145M 09/01/2028 155M 09/01/2029 09/01/2030 09/01/21131 09101/2032 09/01/2033 09/01/2034 09/01/2035 09/01/2036 09/01/2037 09/01/2038 09/01/2039 09/01/2940 09/01/2041 09/011242 09/01/2043 09/01/2044 r interest at the following rate(s): Amount $ Coupon % Yield % Dollar Price 4.0000 4.0000 4.0000 4.0000 4.0000 4.0000 4.0000 4.0000 1.9000 2.0000 2.1000 2.1500 2.2500 2.4500 2.6250 2.7500 104.813 106.457 107.866 109.309 110.307 110.372 110.253 110.246 340M 3.0000 3.0000 100.000 370M 3.0000 3.1000 98.910 415M 3.1250 3.1500 99.694 460M 3.2500 3.2500 100.000 515M 3.3750 3.4000 99.644 575M 3.5000 3.5000 100.000 1,345M 09/01/2045. 09/0112046 09/01/2047 09/016)48 09/01/2049 2,145M Total Interest Cost: Discount: Net Interest Cost: NIC: Time Last Bid Received 3.5000 3.6500 97.529 3.6250 3.7500 97.742 $5,066,372.19 $112,645.15 $5,179,017.34 3.585708 On:03/18/2019 10:59:00 CDST This proposal is made subject to all of the terms and conditions of the Official Bid Form, the Official Notice of Sale, and the Preliminary Official Statement, all of which are made a part hereof. Bidder: SunTrust Robinson Humphrey, Nashville , TN Contact: Wayne Mayo Title: Director Telephone:615-748-4436 Fax: 615-748-5952 https://www.newissuehome.i-deal.com/Parity/asp/main.asp?page=parityBidform&customer=TM3&issue_key_no=280396&bid_no=5&sec type=BD&bi... 1/2 Exhibit "E" SCHEDULES OF FINANCIAL ADVISOR [To be attached hereto] SA CO Caprta SOURCES AND USES OF FUNDS Trophy Club MUD #1 Water and Sewer System Revenue Bonds, Series 2019 Callable 9/1/28 at Par Dated Date 03/15/2019 Delivery Date 04/23/2019 Sources: Bond Proceeds: Par Amount Accrued Interest Net Premium Uses: Project Fund Deposits: Escrow Project Fund Escrowed Contingency Fund Project Fund Additional Contingency Fund (Excess COI) 7,080,000.00 23,600.90 4,224.10 7,107,825.00 3,205,100.00 641,020.00 2,852,780.00 25,261.81 6,724,161.81 Other Fund Deposits: Accrued Interest 23,600.90 Cost of Issuance: TCEQ Fee (0.25%) Legal Fees AG Fee Fiscal Agent Fees Bond Issuance Expenses Bond Application Report Costs Underwriter's Discount: Other Underwriter's Discount Other Delivery Date Expenses: Bond Insurance 17,700.00 97,260.00 7,080.00 76,000.00 37,300.00 25,000.00 260,340.00 76,722.29 23,000.00 7,107,825.00 Apr 4, 2019 12:04 pm Prepared by ATF (y:\dbc\Trophy Club MUD #1:TCMUD_1-2019) Page 1 " SA COCapital Bond Component Bond Component: BOND PRICING Trophy Club MUD #1 Water and Sewer System Revenue Bonds, Series 2019 Callable 9/1/28 at Par Maturity Call Call Premium Date Amount Rate Yield Price Date Price (-Discount) 09/01/2021 155,000 3.000% 1.770% 102.824 4,377.20 09/01/2022 160,000 3.000% 1.800% 103.889 6,222.40 09/01/2023 165,000 3.000% 1.840% 104.832 7,972.80 09/01/2024 170,000 3.000% 1.900% 105.574 9,475.80 09/01/2025 175,000 3.000% 1.950% 106.246 10,930.50 09/01/2026 180,000 3.000% 2.050% 106.454 11,617.20 09/01/2027 185,000 3.000% 2.150% 106.467 11,963.95 09/01/2028 190,000 3.000% 2.250% 106.293 11,956.70 09/01/2029 195,000 3.000% 2.450% 104.571 C 09/01/2028 100.000 8,913.45 09/01/2030 205,000 3.000% 2.550% 103.722 C 09/01/2028 100.000 7,630.10 09/01/2031 210,000 3.000% 2.650% 102.881 C 09/01/2028 100.000 6,050.10 09/01/2032 215,000 3.000% 2.750% 102.047 C 09/01/2028 100.000 4,401.05 09/01/2033 220,000 3.000% 2.830% 101.386 C 09/01/2028 100.000 3,049.20 09/01/2034 230,000 3.000% 2.900% 100.812 C 09/01/2028 100.000 1,867.60 09/01/2035 235,000 3.000% 3.020% 99.741 -608.65 09/01/2036 245,000 3.000% 3.080% 98.928 -2,626.40 09/01/2037 250,000 3.000% 3.150% 97.918 -5,205.00 09/01/2038 255,000 3.125% 3.210% 98.779 -3,113.55 09/01/2039 265,000 3.125% 3.290% 97.563 -6,458.05 09/01/2040 275,000 3.250% 3.350% 98.480 -4,180.00 09/01/2041 285,000 3.250% 3.400% 97.661 -6,666.15 09/01/2042 290,000 3.250% 3.420% 97.277 -7,896.70 09/01/2043 300,000 3.250% 3.440% 96.880 -9,360.00 09/01/2044 310,000 3.250% 3.470% 96.307 -11,448.30 09/01/2045 320,000 3.375% 3.500% 97.856 -6,860.80 09/01/2046 330,000 3.375% 3.520% 97.463 -8,372.10 09/01/2047 345,000 3.375% 3.540% 97.059 -10,146.45 09/01/2048 355,000 3.375% 3.570% 96.467 -12,542.15 09/01/2049 365,000 3.500% 3.600% 98.159 -6,719.65 7,080,000 4,224.10 Apr 4, 2019 12:04 pm Prepared by ATF (y:\dbc\Trophy Club MUD #1:TCMUD_1-2019) Page 2 SAMCOCapitaI BOND PRICING Trophy Club MUD #1 Water and Sewer System Revenue Bonds, Series 2019 Callable 9/1/28 at Par Dated Date 03/15/2019 Delivery Date 04/23/2019 First Coupon 03/01/2020 Par Amount 7,080,000.00 Premium 4,224.10 Production Underwriter's Discount Purchase Price Accrued Interest 7,084, 224.10 100.059662% -76,722.29 -1.083648% 7,007,501.81 23,600.90 Net Proceeds 7,031,102.71 98.976014% Apr 4, 2019 12:04 pm Prepared by ATF (y:\dbc\Trophy Club MUD #1:TCMUD_1-2019) Page 3 SACO Capital BOND DEBT SERVICE Trophy Club MUD #1 Water and Sewer System Revenue Bonds, Series 2019 Callable 9/1/28 at Par Dated Date 03/15/2019 Delivery Date 04/23/2019 Period Annual Ending Principal Coupon Interest Debt Service Debt Service 03/01/2020 214,892.43 214,892.43 09/01/2020 111,793.75 111,793.75 09/30/2020 03/01/2021 111,793.75 111,793.75 09/01/2021 155,000 3.000% 111,793.75 266,793.75 09/30/2021 03/01/2022 109,468.75 109,468.75 09/01/2022 160,000 3.000% 109,468.75 269,468.75 09/30/2022 03/01/2023 107,068.75 107,068.75 09/01/2023 165,000 3.000% 107,068.75 272,068.75 09/30/2023 03/01/2024 104,593.75 104,593.75 09/01/2024 170,000 3.000% 104,593.75 274,593.75 09/30/2024 03/01/2025 102,043.75 102,043.75 09/01/2025 175,000 3.000% 102,043.75 277,043.75 09/30/2025 03/01/2026 99,418.75 99,418.75 09/01/2026 180,000 3.000% 99,418.75 279,418.75 09/30/2026 03/01/2027 96,718.75 96,718.75 09/01/2027 185,000 3.000% 96,718.75 281,718.75 09/30/2027 03/01/2028 93,943.75 93,943.75 09/01/2028 190,000 3.000% 93,943.75 283,943.75 09/30/2028 03/01/2029 91,093.75 91,093.75 09/01/2029 195,000 3.000% 91,093.75 286,093.75 09/30/2029 03/01/2030 88,168.75 88,168.75 09/01/2030 205,000 3.000% 88,168.75 293,168.75 09/30/2030 03/01/2031 85,093.75 85,093.75 09/01/2031 210,000 3.000% 85,093.75 295,093.75 09/30/2031 03/01/2032 81,943.75 81,943.75 09/01/2032 215,000 3.000% 81,943.75 296,943.75 09/30/2032 03/01/2033 78,718.75 78,718.75 09/01/2033 220,000 3.000% 78,718.75 298,718.75 09/30/2033 03/01/2034 75,418.75 75,418.75 09/01/2034 230,000 3.000% 75,418.75 305,418.75 09/30/2034 03/01/2035 71,968.75 71,968.75 09/01/2035 235,000 3.000% 71,968.75 306,968.75 09/30/2035 326,686.18 378,587.50 378,937.50 379,137.50 379,187.50 379,087.50 378,837.50 378,437.50 377,887.50 377,187.50 381,337.50 380,187.50 378,887.50 377,437.50 380,837.50 378,937.50 Apr 4, 2019 12:04 pm Prepared by ATF (y:\dbc\Trophy Club MUD #1:TCMUD_1-2019) Page 4 SAMCOCapital BOND DEBT SERVICE Trophy Club MUD #1 Water and Sewer System Revenue Bonds, Series 2019 Callable 9/1/28 at Par Period Annual Ending Principal Coupon Interest Debt Service Debt Service 03/01/2036 68,443.75 68,443.75 09/01/2036 245,000 3.000% 68,443.75 313,443.75 09/30/2036 03/01/2037 64,768.75 64,768.75 09/01/2037 250,000 3.000% 64,768.75 314,768.75 09/30/2037 03/01/2038 61,018.75 61,018.75 09/01/2038 255,000 3.125% 61,018.75 316,018.75 09/30/2038 03/01/2039 57,034.38 57,034.38 09/01/2039 265,000 3.125% 57,034.38 322,034.38 09/30/2039 03/01/2040 52,893.75 52,893.75 09/01/2040 275,000 3.250% 52,893.75 327,893.75 09/30/2040 03/01/2041 48,425.00 48,425.00 09/01/2041 285,000 3.250% 48,425.00 333,425.00 09/30/2041 03/01/2042 43,793.75 43,793.75 09/01/2042 290,000 3.250% 43,793.75 333,793.75 09/30/2042 03/01/2043 39,081.25 39,081.25 09/01/2043 300,000 3.250% 39,081.25 339,081.25 09/30/2043 03/01/2044 34,206.25 34,206.25 09/01/2044 310,000 3.250% 34,206.25 344,206.25 09/30/2044 03/01/2045 29,168.75 29,168.75 09/01/2045 320,000 3.375% 29,168.75 349,168.75 09/30/2045 03/01/2046 23,768.75 23,768.75 09/01/2046 330,000 3.375% 23,768.75 353,768.75 09/30/2046 03/01/2047 18,200.00 18,200.00 09/01/2047 345,000 3.375% 18,200.00 363,200.00 09/30/2047 03/01/2048 12,378.13 12,378.13 09/01/2048 355,000 3.375% 12,378.13 367,378.13 09/30/2048 03/01/2049 6,387.50 6,387.50 09/01/2049 365,000 3.500% 6,387.50 371,387.50 09/30/2049 381,887.50 379,537.50 377,037.50 379,068.76 380,787.50 381,850.00 377,587.50 378,162.50 378,412.50 378,337.50 377,537.50 381,400.00 379,756.26 377,775.00 7,080,000 4,240,736.20 11,320,736.20 11,320,736.20 Apr 4, 2019 12:04 pm Prepared by ATF (y:\dbc\Trophy Club MUD #1:TCMUD 1-2019) Page 5 " SACO Capital BOND SUMMARY STATISTICS Trophy Club MUD #1 Water and Sewer System Revenue Bonds, Series 2019 Callable 9/1/28 at Par Dated Date 03/15/2019 Delivery Date 04/23/2019 First Coupon 03/01/2020 Last Maturity 09/01/2049 Arbitrage Yield 3.230818% True Interest Cost (TIC) 3.310385% Net Interest Cost (NIC) 3.280409% All -In TIC 3.600729% Average Coupon 3.225271% Average Life (years) 18.466 Weighted Average Maturity (years) 18.217 Duration of Issue (years) 13.445 Par Amount 7,080,000.00 Bond Proceeds 7,107,825.00 Total Interest 4,240,736.20 Net Interest 4,313,234.39 Bond Years from Dated Date 131,484,666.67 Bond Years from Delivery Date 130,737,333.33 Total Debt Service 11,320,736.20 Maximum Annual Debt Service 381,887.50 Average Annual Debt Service 372,160.39 Underwriter's Fees (per $1000) Average Takedown Other Fee 10.836482 Total Underwriter's Discount 10.836482 Bid Price 98.976014 Bond Component Bond Component Par Average Average Value Price Coupon Life 7,080,000.00 100.060 3.225% 18.466 7,080,000.00 18.466 Apr 4, 2019 12:04 pm Prepared by ATF (y:\dbc\Trophy Club MUD #1:TCMUD 1-2019) Page 6 SA CO Capita! BOND SUMMARY STATISTICS Trophy Club MUD #1 Water and Sewer System Revenue Bonds, Series 2019 Callable 9/1/28 at Par All -In Arbitrage TIC TIC Yield Par Value 7,080,000.00 7,080,000.00 7,080,000.00 + Accrued Interest 23,600.90 23,600.90 + Premium (Discount) 4,224.10 4,224.10 4,224.10 - Underwriter's Discount -76,722.29 -76,722.29 - Cost of Issuance Expense -260,340.00 - Other Amounts -23,000.00 -23,000.00 -23,000.00 Target Value 6,984,501.81 6,747,762.71 7,084,825.00 Target Date 03/15/2019 04/23/2019 04/23/2019 Yield 3.310385% 3.600729% 3.230818% Apr 4, 2019 12:04 pm Prepared by ATF (y:\dbc\Trophy Club MUD #1:TCMUD 1-2019) Page 7 SAMC} Captal Bond Component Bond Component: FORM 8038 STATISTICS Trophy Club MUD #1 Water and Sewer System Revenue Bonds, Series 2019 Callable 9/1/28 at Par Dated Date 03/15/2019 Delivery Date 04/23/2019 Redemption Date Principal Coupon Price Issue Price at Maturity 09/01/2021 155,000.00 3.000% 102.824 159,377.20 155,000.00 09/01/2022 160,000.00 3.000% 103.889 166,222.40 160,000.00 09/01/2023 165,000.00 3.000% 104.832 172,972.80 165,000.00 09/01/2024 170,000.00 3.000% 105.574 179,475.80 170,000.00 09/01/2025 175,000.00 3.000% 106.246 185,930.50 175,000.00 09/01/2026 180,000.00 3.000% 106.454 191,617.20 180,000.00 09/01/2027 185,000.00 3.000% 106.467 196,963.95 185,000.00 09/01/2028 190,000.00 3.000% 106.293 201,956.70 190,000.00 09/01/2029 195,000.00 3.000% 104.571 203,913.45 195,000.00 09/01/2030 205,000.00 3.000% 103.722 212,630.10 205,000.00 09/01/2031 210,000.00 3.000% 102.881 216,050.10 210,000.00 09/01/2032 215,000.00 3.000% 102.047 219,401.05 215,000.00 09/01/2033 220,000.00 3.000% 101.386 223,049.20 220,000.00 09/01/2034 230,000.00 3.000% 100.812 231,867.60 230,000.00 09/01/2035 235,000.00 3.000% 99.741 234,391.35 235,000.00 09/01/2036 245,000.00 3.000% 98.928 242,373.60 245,000.00 09/01/2037 250,000.00 3.000% 97.918 244,795.00 250,000.00 09/01/2038 255,000.00 3.125% 98.779 251,886.45 255,000.00 09/01/2039 265,000.00 3.125% 97.563 258,541.95 265,000.00 09/01/2040 275,000.00 3.250% 98.480 270,820.00 275,000.00 09/01/2041 285,000.00 3.250% 97.661 278,333.85 285,000.00 09/01/2042 290,000.00 3.250% 97.277 282,103.30 290,000.00 09/01/2043 300,000.00 3.250% 96.880 290,640.00 300,000.00 09/01/2044 310,000.00 3.250% 96.307 298,551.70 310,000.00 09/01/2045 320,000.00 3.375% 97.856 313,139.20 320,000.00 09/01/2046 330,000.00 3.375% 97.463 321,627.90 330,000.00 09/01/2047 345,000.00 3.375% 97.059 334,853.55 345,000.00 09/01/2048 355,000.00 3.375% 96.467 342,457.85 355,000.00 09/01/2049 365,000.00 3.500% 98.159 358,280.35 365,000.00 7,080,000.00 7,084,224.10 7,080,000.00 Stated Weighted Maturity Interest Issue Redemption Average Date Rate Price at Maturity Maturity Yield Final Maturity 09/01/2049 3.500% 358,280.35 365,000.00 Entire Issue 7,084,224.10 7,080,000.00 18.2168 Proceeds used for accrued interest Proceeds used for bond issuance costs (including underwriters' discount) Proceeds used for credit enhancement Proceeds allocated to reasonably required reserve or replacement fund 3.2308% 23,600.90 337,062.29 23,000.00 0.00 Apr 4, 2019 12:04 pm Prepared by ATF (y:\dbc\Trophy Club MUD #1:TCMUD_1-2019) Page 8 SA CO Capital PROOF OF ARBITRAGE YIELD Trophy Club MUD #1 Water and Sewer System Revenue Bonds, Series 2019 Callable 9/1/28 at Par Present Value to 04/23/2019 Date Debt Service @ 3.2308183141% 03/01/2020 214,892.43 209,080.01 09/01/2020 111, 793.75 107,040.80 03/01/2021 111,793.75 105,339.14 09/01/2021 266,793.75 247,393.53 03/01/2022 109,468.75 99,894.89 09/01/2022 269,468.75 241,992.53 03/01/2023 107,068.75 94,623.00 09/01/2023 272,068.75 236,620.88 03/01/2024 104,593.75 89,520.10 09/01/2024 274,593.75 231,284.18 03/01/2025 102,043.75 84,582.81 09/01/2025 277,043.75 225,987.54 03/01/2026 99,418.75 79,807.71 09/01/2026 279,418.75 220,735.68 03/01/2027 96,718.75 75,191.39 09/01/2027 281,718.75 215,532.91 03/01/2028 93,943.75 70,730.41 09/01/2028 893,943.75 662,352.07 03/01/2029 81,943.75 59,749.60 09/01/2029 81,943.75 58,799.74 03/01/2030 81,943.75 57,864.98 09/01/2030 81,943.75 56,945.09 03/01/2031 81,943.75 56,039.81 09/01/2031 81,943.75 55,148.93 03/01/2032 81,943.75 54,272.22 09/01/2032 296,943.75 193,542.50 03/01/2033 78,718.75 50,491.79 09/01/2033 298,718.75 188,558.23 03/01/2034 75,418.75 46,849.26 09/01/2034 305,418.75 186,706.55 03/01/2035 71,968.75 43,296.05 09/01/2035 306,968.75 181,735.13 03/01/2036 68,443.75 39,876.68 09/01/2036 313,443.75 179,715.36 03/01/2037 64,768.75 36,545.30 09/01/2037 314,768.75 174,782.54 03/01/2038 61,018.75 33,343.42 09/01/2038 316,018.75 169,941.78 03/01/2039 57,034.38 30,183.14 09/01/2039 322,034.38 167,714.42 03/01/2040 52,893.75 27,108.97 09/01/2040 327,893.75 165,379.69 03/01/2041 48,425.00 24,035.83 09/01/2041 333,425.00 162,865.10 03/01/2042 43,793.75 21,051.47 09/01/2042 333,793.75 157,902.48 03/01/2043 39,081.25 18,193.64 09/01/2043 339,081.25 155,344.32 03/01/2044 34,206.25 15,421.89 09/01/2044 344,206.25 152,718.35 03/01/2045 29,168.75 12,735.93 Apr 4, 2019 12:04 pm Prepared by ATF (y:\dbc\Trophy Club MUD #1:TCMUD_1-2019) Page 9 SA CO Capital PROOF OF ARBITRAGE YIELD Trophy Club MUD #1 Water and Sewer System Revenue Bonds, Series 2019 Callable 9/1/28 at Par Date Present Value to 04/23/2019 Debt Service @ 3.2308183141% 09/01/2045 349,168.75 150,033.66 03/01/2046 23,768.75 10,050.79 09/01/2046 353,768.75 147,215.54 03/01/2047 18,200.00 7,453.26 09/01/2047 363,200.00 146,372.97 03/01/2048 12,378.13 4,909.20 09/01/2048 367,378.13 143,386.81 03/01/2049 6,387.50 2,453.39 09/01/2049 371,387.50 140,379.61 11,283,686.20 7,084,825.00 Proceeds Summary Delivery date 04/23/2019 Par Value 7,080,000.00 Accrued interest 23,600.90 Premium (Discount) 4,224.10 Arbitrage expenses -23,000.00 Target for yield calculation 7,084,825.00 Apr 4, 2019 12:04 pm Prepared by ATF (y:\dbc\Trophy Club MUD #1:TCMUD_1-2019) Page 10 liwk SACC }CapttaI PROOF OF ARBITRAGE YIELD Trophy Club MUD #1 Water and Sewer System Revenue Bonds, Series 2019 Callable 9/1/28 at Par Assumed Call/Computation Dates for Premium Bonds Bond Maturity Call Call Yield To Component Date Rate Yield Date Price Call/Maturity BOND 09/01/2029 3.000% 2.450% 09/01/2028 100.000 2.4482542% BOND 09/01/2030 3.000% 2.550% 09/01/2028 100.000 2.5481482% BOND 09/01/2031 3.000% 2.650% 09/01/2028 100.000 2.6480251% Reiected Call/Computation Dates for Premium Bonds Bond Maturity Call Call Yield To Increase Component Date Rate Yield Date Price Call/Maturity to Yield BOND 09/01/2029 3.000% 2.450% 2.4944420% 0.0461879% BOND 09/01/2030 3.000% 2.550% 2.6170867% 0.0689385% BOND 09/01/2031 3.000% 2.650% 2.7219972% 0.0739721% Apr 4, 2019 12:04 pm Prepared by ATF (y:\dbc\Trophy Club MUD #1:TCMUD_1-2019) Page 11 Exhibit "0" " F CERI'h'ICA TE OF ELECTION PURSUANT TO SECTION 148(0(4XC) OF THE INTERNAL REVENUE CODE OF 1986 I, the undersigned, being the duly authorized representative of the Trophy Club Municipal Utility District No. 1 (the "Issuer") hereby state that the Issuer elects the provisions of section 148(f)(4)(C) of the Internal Revenue Code of 1986 (the "Code"), relating to the exception to arbitrage rebate for temporary investments, as more specifically designated below, with respect to the Issuer's Water and Sewer System Revenue Bonds, Series 2019 (the "Bonds") which are being issued on the date of delivery of the Bonds. The CUSIP Number for the Bonds is stated on the Form 8038-G filed in connection with the Bonds. The Issuer intends to take action to comply with the two-year temporary investments exception to rebate afforded construction bonds under section 148(f)(4)(C) of the Code or any of the other exceptions available to the Issuer in accordance with section 1.148-7 of the Treasury Regulations. Capitalized terms have the same meaning as defined in the Federal Tax Certificate. 0 1. PENALTY ELECTION. In the event that the Issuer should fail to expend the "available construction proceeds" of the Bonds in accordance with the provisions of section 148(f)(4)(C) of the Code, the Issuer elects, in lieu of rebate, the penalty provisions of section 148(f)(4)(C)(vii)(I) of the Code. 2. RESERVE FUND ELECTION. The Issuer elects to exclude from "available construction proceeds," within the meaning of section 148(f)(4)(C)(vi) of the Code, of the Bonds, earnings on the Reserve Fund in accordance with section 148(f)(4)(C)(vi)(IV) of the Code. ® 3. MULTIPURPOSE ELECTION. The Issuer elects to treat that portion of the Bonds the proceeds of which are to be used for the payment of expenditures for construction, reconstruction or rehabilitation of the Projects, as defined in the instrument authorizing the issuance of the Bonds, in an amount which is currently expected to be equal to $ as a separate issue in accordance with the provisions of section 148(f)(4)(C)(v)(II) of the Code. (Note: This election is not necessary unless less than 75 percent of the proceeds of the Bonds will be used for construction, reconstruction or renovation.) ® 4. ACTUAL FACTS. For purposes of determining compliance with section 148(f)(4)(c) of the Code (other than qualification of the Bonds as a qualified construction issue), the Issuer elects to use actual facts rather than reasonable expectations. 5. NO ELECTION. The Issuer understands that the elections which are adopted as evidenced by the check in the box adjacent to the applicable provision are irrevocable. Further, the Issuer understands that qualification of the Bonds for eligibility for the exclusion from the rebate requirement set forth in section 148(0 of the Code is based on subsequent events and is unaffected by the Issuer's expectations of such events as of the date of delivery of the Bonds. Accordingly. while failure to execute this certificate and to designate the intended election does not preclude aualification. it would preclude the Issuer from the relief afforded by such election. DATED: April 23, 2019 Trophy Club Municipal Uttiliitty�Dis ► ct No. 1 i! `- By: Name: {((9 Title: Y(L Al? ,in A c/o McLean & Howard, L.L.P. Barton Oaks Plaza, Building II 901 South MoPac Expressway, Suite 225 Austin, Texas 78746 Employer I.D. Number: 75-1502727 JCCALL PARKHURST & HORTON May 8, 2019 VIA UPS NEXT DAY AIR #1Z 564 04W NT 9365 8529 Internal Revenue Service Center 1973 North Rulon White Boulevard Ogden, Utah 84201-1000 Re: Information Reporting - Tax -Exempt Bonds Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019 Ladies and Gentlemen: 100 YEARS F°`J'ed on'vO"i -finance since 1919 Pursuant to the requirements of Section 149(e) of the Internal Revenue Code of 1986, enclosed please find an original of Form 8038-G which is hereby submitted to you for the above -captioned bonds issued April 23, 2019. ST: vd Enclosures cc: Mr. Anthony S. Corbett 600 Congress Ave. Suite 1800 Austin, Texas 78701 T 512.478.3805 F 512.472.0871 717 North Harwood Suite 900 Dallas, Texas 75201 T 214.754.9200 F 214.754.9250 Sincerely, McCALL, PARKHURST & HORTON L.L.P. Stefano Taverna Two Allen Center 1200 Smith Street, Suite 1550 Houston, Texas 77002 T 713.980.0500 F 713.980.0510 700 N. St. Mary's Street Suite 1525 San Antonio, Texas 78205 T 210.225.2800 F 210.225.2984 www.mphlegal.com Form 8038-G (Rev. September 2018) Department of the Treasury Internal Revenue Service Part 1 Information Return for Tax -Exempt Governmental Bonds ► Under Internal Revenue Code section 149(e) O. See separate instructions. Caution: If the issue price is under $100, 000, use Form 8038 -GC. ► Go to www.irs.gov/F8038G for instructions and the latest information. Reporting Authority 1 Issuer's name Trophy Club Municipal Utility District No. 1 3a Name of person (other than issuer) with whom the IRS may communicate about this return (see instructions) None 4 Number and street (or P.O. box if mail is not delivered to street address) 100 Municipal Drive 6 City, town, or post office, state, and ZIP code Trophy Club, Texas 76262 8 Name of issue Water and Sewer System Revenue Bonds, Series 2019 10a Name and title of officer or other employee of the issuer whom the IRS may call for more information (see instructions) Room/suite Steven Krolczyk, Finance Manager Part II 11 12 Health and hospital 13 Transportation 14 Public safety 15 Environment (including sewage bonds) 16 Housing 17 Utilities 18 Other. Describe 0- 19a 19a If bonds are TANs or RANs, check only box 19a ► ❑ b If bonds are BANs, check only box 19b ► ❑ 20 If bonds are in the form of a lease or installment sale, check box ► 0 Description of Bonds. Complete for the entire issue for which this form is being filed. OMB No. 1545-0720 If Amended Return, check here ► ❑ 2 Issuer's employer identification number (EIN) 75-1502727 3b Telephone number of other person shown on 3a N/A 5 Report number (For IRS Use Only) 3 7 Date of issue 04/23/2019 9 CUSIP number 897061 CW5 10b Telephone number of officer or other employee shown on 10a Type of Issue (enter the issue price). See the instructions and attach schedule. Education (682) 831-4600 11 12 13 14 15 16 17 18 (a) Final maturity date 21la6 09/01/2049 (b) Issue price (c) Stated redemption price at maturity (d) Weighted average maturity $ 7,084,224 $ 7,080,000 18.21 Uses of Proceeds of Bond Issue (including underwriters` discount) 22 Proceeds used for accrued interest 23 Issue price of entire issue (enter amount from line 21, column (b)) 24 Proceeds used for bond issuance costs (including underwriters' discount) 1 24 25 Proceeds used for credit enhancement 1 25 26 Proceeds allocated to reasonably required reserve or replacement fund 1 26 27 Proceeds used to refund prior tax-exempt bonds. Complete Part V . . 1 27 28 Proceeds used to refund prior taxable bonds. Complete Part V . . . I 28 29 Total (add lines 24 through 28) 30 Nonrefunding proceeds of the issue (subtract line 29 from line 23 and enter amount here) . Description of Refunded Bonds. Complete this part only for refunding bonds. 31 Enter the remaining weighted average maturity of the tax-exempt bonds to be refunded . . 32 Enter the remaining weighted average maturity of the taxable bonds to be refunded . . . 33 Enter the last date on which the refunded tax-exempt bonds will be called (MM/DD/YYYY) . 34 Enter the date(s) the refunded bonds were issued ► (MM/DD/YYYY) For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 63773S years 337,062 23,000 0 0 0 Part V ► ► ► 7,084,224 (e) Yield 3.2308 22 23,601 23 7,084,224 29 360,062 1 30 6,724,162 Not applicable years years Form 8038-G (Rev. 9-2018) Form 8038-G (Rev. 9-2018) Part VI Miscellaneous Trophy Club Municipal Utility District No. 1 EIN: 75-1502727 35 Enter the amount of the state volume cap allocated to the issue under section 141(b)(5) . . . 36a Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract (GIC). See instructions b Enter the final maturity date of the GIC ► (MM/DD/YYYY) c Enter the name of the GIC provider ► 37 Pooled financings: Enter the amount of the proceeds of this issue that are to be used to make loans to other governmental units 38a b c Enter the EIN of the issuer of the master pool bond ► d Enter the name of the issuer of the master pool bond ► 1 35 0 0 Page 2 If this issue is a loan made from the proceeds of another tax-exempt issue, check box ► 0 and enter the following information: Enter the date of the master pool bond ► (MM/DD/YYYY) 39 If the issuer has designated the issue under section 265(b)(3)(B)(i)(III) (small issuer exception), check box ► ❑✓ 40 If the issuer has elected to pay a penalty in lieu of arbitrage rebate, check box ► 0 41a If the issuer has identified a hedge, check here ► 0 and enter the following information: b Name of hedge provider ► c Type of hedge ► d Term of hedge ► 42 If the issuer has superintegrated the hedge, check box ► 0 43 If the issuer has established written procedures to ensure that all nonqualified bonds of this issue are remediated according to the requirements under the Code and Regulations (see instructions), check box ► ❑✓ 44 If the issuer has established written procedures to monitor the requirements of section 148, check box ► ❑✓ 45a If some portion of the proceeds was used to reimburse expenditures, check here ► El and enter the amount of reimbursement ► b Enter the date the official intent was adopted ► (MM/DD/YYYY) Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and be!' f, they are true, correct, and complete. I further declare that I consent to the IRS's disclosure of the issuer's return information, as necessary to proces his return, to the • - -.n that I have authorized above. Signature and Consent Paid Preparer Use Only 2 3 — / ' ' bre a f Wlslon 19e_d2,,d- Type or Signature of issuer's authorized representative Date not a and title Print/Type preparer's name 1Prepar re Stefano Taverna Firm's name ► McCall, Parkurst & Horton L. Firm's address ► 717 N. Harwood, Suite 900, Dallas, TX 75201 igna IttL2-19 4/ I Check ❑ if PTIN self-employed P01067358 75-0799392 214-754-9200 Form 8038-G (Rev. 9-2018) Firm's EIN ► Phone no. MCLEAN & HOWARD, L.L.P. BARTON OAKS PLAZA, BUILDING II 901 SOUTH MOPAC ExPY., SUITE 225 AUSTIN, TEXAS 78746 (512) 328-2008 April 23, 2019 We have acted as Bond Counsel for Trophy Club Municipal Utility District No. 1 (the "District") in connection with the issuance of bonds (the "Bonds") by the District described as follows: TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019, dated March 15, 2019, in the aggregate principal amount of $7,080,000, bearing interest at the rate set forth in the Order authorizing the issuance of the bonds (the "Bond Order"), with such interest payable on March 1 and September 1 of each year, commencing March 1, 2020 until maturity or prior redemption, and maturing serially on September 1 in each year from 2021 through 2049. The Bonds are redeemable, in whole or in part, maturing on or after September 1, 2029 are subject to optional redemption prior to stated maturity on September 1, 2028 or on any date thereafter, at a price of the par value thereof plus accrued interest to the date of redemption, in the manner provided in the Bond OrderThe Bonds are registered as to both principal and interest and are transferable, registrable, and payable in the manner provided in the Bond Order. The District has reserved the right in the Bond Order to issue additional bonds payable from the Pledged Revenues of the District's water and wastewater system with any such pledge being on a parity with the pledge to pay the Bonds. The District has also reserved the right to issue subordinate lien bonds, special project bonds and refunding bonds. Reference is made to the Bond Order for a complete description of the District's right to issue additional bonds. The Bonds are obligations solely of the District and are not the obligations of the State of Texas or any other political subdivision or agency. The District's obligations with respect to the Bonds are subject to limitation by applicable federal bankruptcy laws and other laws which may from time to time affect the rights of creditors of political subdivisions. IN OUR CAPACITY AS BOND COUNSEL, we have examined a transcript of certified proceedings pertaining to the Bonds which contains certified copies of certain proceedings of the Board of Directors of the District, customary certificates of officers, agents and representatives of the District and other certified showings related to the authorization and issuance of the Bonds. We have also examined the executed Initial Bond No. T-1. We have not investigated or verified original proceedings, records, data or other material, but have relied solely upon certificates executed by officers, directors, agents and representatives of the District. We have assumed no responsibility with respect to the financial condition of the District or the reporting or disclosure thereof in connection with the sale of the Bonds. BASED ON SAID EXAMINATION, IT IS OUR OPINION that, under the applicable laws of the United States of America and the State of Texas in force and effect on the date hereof: Page 2 1. The Bonds have been duly authorized by the District and, when issued in compliance with the provisions of the Bond Order, are valid, legally binding and enforceable obligations of the District and, together with the outstanding and unpaid "Parity Revenue Obligations" (identified and defined in the Bond Order), are payable solely from and equally and ratably secured by a first lien on and pledge of the certain net revenues of the District's water and wastewater system (the "Pledged Revenues") as provided in the Bond Order. 2. Under existing statutes, regulations, published rulings, and court decisions, and assuming continuing compliance after the date hereof by the District with the provisions of the Bond Order relating to sections 103, and 141 through 150 of the Internal Revenue Code of 1986, as amended (the "Code"), interest on the Bonds for federal income tax purposes (a) will be excludable from the gross income, as defined in section 61 of the Code, of the owners thereof, and (b) will not be included in computing the individual alternative minimum taxable income of the owners thereof. In expressing the aforementioned opinions, we have relied on, certain representations, the accuracy of which we have not independently verified, and assume compliance with certain covenants regarding the use and investment of the proceeds of the Bonds and the use of the property financed therewith. We call your attention to the fact that if such representations are determined to be inaccurate or if the District fails to comply with such covenants, interest on the Bonds may become includable in gross income retroactively to the date of issuance of the Bonds. WE EXPRESS NO OPINION with respect to any other federal, state, or local tax consequences under present law or any proposed legislation resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Bonds. Ownership of tax-exempt obligations such as the Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, foreign corporations subject to the branch profits tax, taxpayers qualifying for the health insurance premium assistance credit, owners of an interest in a FASIT, individual recipients of Social Security or Railroad retirement benefits, individuals otherwise qualifying for the earned income tax credit, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. OUR OPINIONS ARE BASED on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty or update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service (the "Service"); rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. The Service has an ongoing audit program to determine compliance with rules that relate to whether interest on state or local obligations is includable in gross income for federal income tax purposes. No assurance can be given whether or not the Service will commence an audit of the Bonds. If an audit is commenced, in accordance with its Page 3 current published procedures the Service is likely to treat the Issuer as the taxpayer. We observe that the Issuer has covenanted not to take any action, or omit to take any action within its control, that if taken or omitted, respectively, may result in the treatment of interest on the Bonds as includable in gross income for federal income tax purposes. Respectfully yours, N)0" \4vdckM 1 Uv\> M&H McLEAN & HOWARD, L P. Real Property Lawyers April 23, 2019 Build America Mutual Assurance Company 200 Liberty Street, 27th Floor New York, New York 10281 Barton Oaks Plaza, Building II 901 South MoPac Fxpy Ste 225 Austin, Texas 78746 phone 512.328.2008 fax 512.328.2409 «wvv.mcleanhoy-ardlaw.com We have acted as Bond Counsel for Trophy Club Municipal Utility District No. 1 (the "District") in connection with the issuance of bonds (the "Bonds") by the District described as follows: TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019, dated March 15, 2019 (the "Bonds"), numbered consecutively from R-1 to R-29, both inclusive, in initial denominations equal to the entire principal amount of each scheduled maturity aggregating $7,080,000, maturing on September 1 in each of the years from 2021 through 2049, and bearing interest at the rates per annum specified in the Order of the Board of Directors of Trophy Club Municipal Utility District No. 1 authorizing the issuance of the Bonds. In reference to our opinion relating to the legality and validity of the Bonds, you may rely upon such opinion to the same extent and as fully as if such opinion were addressed to you. Respectfully submitted, Wtc.()tod-- 4ocvc1L'LP SAMCO Captal FINAL CLOSING MEMORANDUM $7,080,000 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2019 (THE "BONDS") Date: April 16, 2019 To: Attached Distribution List From: Andrew T. Friedman SAMCO Capital Markets, Inc. (210) 832-9760 1. The closing time and date for the Bonds is Tuesday, April 23, 2019, at 10:00 A.M. Central Time. A final debt service schedule is attached as Exhibit "A". This transaction will close through DTC's "Fast" Book Entry Only System. 2. IFS Securities (the "Purchaser"), shall wire $23,000.00 on or before 9:00 a.m., Central Time (the "Bond Insurance Premium"), to Build America Mutual Assurance Company ("BAM") for the Insurance Premium on the Bonds. to First Republic Bank, ABA #321081669, Account Name Build America Mutual Assurance Company, Account #80001613703, Policy # 2019B0129. 3. The Purchaser, shall wire $7,008,102.71 to BOKF, NA, Dallas, Texas (the "Paying Agent/Registrar/Escrow Agent"), Wealth Management Account, ABA #103900036, Account #600024642, Account Name: Trophy Club Municipal Utility District No. 1, Water & Sewer System Revenue Bonds, Series 2019 Attn: Caresse Tankersley (214) 987-8886 as follows: Par Amount of the Bonds Plus: Accrued Interest Plus: Net Reoffering Premium Less: Purchaser's Discount and recognizing the payment of the Bond insurance premium in paragraph 2 Total to be wired by the Purchaser $ 7,080,000.00 23,600.90 4,224.10 (99.722.29) $ 7,008,102.71 4. The Paying Agent/Registrar shall retain $800.00 for the first year's Paying Agent fee ($400) / Escrow Agent fee ($400). 5. The Paying Agent/Registrar shall wire $17,700.00 representing the Texas Commission on Environmental Quality's ("TCEQ") fee to Bank of America, ABA#026009593, Acct#006040070607, Acct name: Comptroller of Public Accounts, Reference BPF; Ref: Trophy Club MUD #1 Water and Sewer Revenue Bonds, Series 2019, Attn: Renee Crowder (512) 239-0357. 6. The Paying Agent/Registrar shall internally transfer $3,846,120.00, representing the ($3,205,100.00) Escrow Project Fund Deposit and ($641,020.00) Escrowed Contingency Fund Deposit to BOKF, Dallas, Texas, acting as the Escrow Agent for Trophy Club Municipal Utility District No. 1. Closing Memorandum Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019 7. The Paying Agent/Registrar shall wire Bond proceeds for the District of $2,933,722.71 as follows: State Street Bank and Trust Company Boston MA Pool Name/Number: TexPool/449 Location: 77384 Bank account: 613300018 ABA: 011000028 Participant Name: Trophy Club MUD1 Account Name: Revenue Bond Construction Water and Sewer System 2019 For internal allocation by the District as follows: a) Construction Fund Deposit Construction Funds Surplus Bond Proceeds b) Interest and Sinking Fund Accrued Interest c) General Fund Reimbursement of TCEQ Application Cost Reimbursement of the Attorney General Fee $2,852,780.00 25,261.81 $23,600.90 $25,000.00 7,080.00 8. The Paying Agent/Registrar shall wire $97,260.00, to McLean and Howard, L.L.P. (the "Bond Counsel"), representing the Bond Counsel fee ($83,100.00) and Tax Counsel fee ($14,160.00) to Plains Capital Bank, ABA # 1113-2299-4, Account # 4100030776, Reference: Trophy Club MUD No. 1. 9. The Paying Agent/Registrar/Escrow Agent shall wire $112,500.00 from the proceeds of the Bonds, to SAMCO Capital Markets, Inc. for the fees and expenses associated with the legal authorization and issuance of the Bonds, to Wells Fargo Bank, N.A., San Francisco, Account Name: SAMCO Capital Markets, Inc., Account # 2000019286402, ABA Routing 4121000248, Issue Name: Trophy Club Municipal Utility District No. 1, Water & Sewer System Revenue Bonds, Series 2019, F/C: San Antonio Public Finance II #518.02, Attn: Georgia A. Bosworth (512) 344-7463. 10. In accordance with the Official Notice of Sale, on the date of delivery, the Good Faith Deposit in the amount of $144,000 will be returned to: Mr. Keith Wakefield IFS Securities 3414 Peachtree Rd NE, Suite 1020 Atlanta, GA 30326 Closing Memorandum Trophy Club Municipal Utility District No. 1 Water and Sewer System Revenue Bonds, Series 2019 The Reconciliation of Receipts and Disbursements is as follows: Receipts Par Amount of the Bonds $ 7,080,000.00 Plus: Accrued Interest 23,600.90 Plus: Net Reoffering Premium 4,224.10 Less Purchaser's Discount (Includes Bond Insurance Premium) (99.722.29) Total to be wired by the Purchaser $ 7,008,102.71 Disbursements Deposit to Project Fund Deposit to Escrow Fund (Includes Escrow Construction Fund and Escrowed Contingency Fund) Deposit to Interest and Sinking Fund (Accrued Interest) Reimbursement for TCEQ application cost and AG fee Deposit to First Year's Paying Agent/Registrar Fee (BOKF, NA) Deposit to One Time Escrow Account Setup/Administration Fee (BOKF NA) Deposit to TCEQ Deposit to Bond Counsel Fees and Expenses (McLean & Howard, L.L.P.) Financial Advisor Fees and Expenses Total Disbursements $2,878,041.81 3,846,120.00 23,600.90 32,080.00 400.00 400.00 17,700.00 97,260.00 112, 500.00 $ 7,008,102.71 SA( CO Capital Exhibit A BOND DEBT SERVICE Trophy Club MUD #1 Water and Sewer System Revenue Bonds, Series 2019 Callable 9/1/28 at Par Dated Date 03/15/2019 Delivery Date 04/23/2019 Period Annual Ending Principal Coupon Interest Debt Service Debt Service 03/01/2020 214,892.43 214,892.43 09/01/2020 111,793.75 111,793.75 09/30/2020 03/01/2021 111,793.75 111,793.75 09/01/2021 155,000 3.000% 111,793.75 266,793.75 09/30/2021 03/01/2022 109,468.75 109,468.75 09/01/2022 160,000 3.000% 109,468.75 269,468.75 09/30/2022 03/01/2023 107,068.75 107,068.75 09/01/2023 165,000 3.000% 107,068.75 272,068.75 09/30/2023 03/01/2024 104,593.75 104,593.75 09/01/2024 170,000 3.000% 104,593.75 274,593.75 09/30/2024 03/01/2025 102,043.75 102,043.75 09/01/2025 175,000 3.000% 102,043.75 277,043.75 09/30/2025 03/01/2026 99,418.75 99,418.75 09/01/2026 180,000 3.000% 99,418.75 279,418.75 09/30/2026 03/01/2027 96,718.75 96,718.75 09/01/2027 185,000 3.000% 96,718.75 281,718.75 09/30/2027 03/01/2028 93,943.75 93,943.75 09/01/2028 190,000 3.000% 93,943.75 283,943.75 09/30/2028 03/01/2029 91,093.75 91,093.75 09/01/2029 195,000 3.000% 91,093.75 286,093.75 09/30/2029 03/01/2030 88,168.75 88,168.75 09/01/2030 205,000 3.000% 88,168.75 293,168.75 09/30/2030 03/01/2031 85,093.75 85,093.75 09/01/2031 210,000 3.000% 85,093.75 295,093.75 09/30/2031 03/01/2032 81,943.75 81,943.75 09/01/2032 215,000 3.000% 81,943.75 296,943.75 09/30/2032 03/01/2033 78,718.75 78,718.75 09/01/2033 220,000 3.000% 78,718.75 298,718.75 09/30/2033 03/01/2034 75,418.75 75,418.75 09/01/2034 230,000 3.000% 75,418.75 305,418.75 09/30/2034 03/01/2035 71,968.75 71,968.75 09/01/2035 235,000 3.000% 71,968.75 306,968.75 09/30/2035 326,686.18 378,587.50 378,937.50 379,137.50 379,187.50 379,087.50 378,837.50 378,437.50 377,887.50 377,187.50 381,337.50 380,187.50 378,887.50 377,437.50 380,837.50 378,937.50 Mar 20, 2019 12:09 pm Prepared by ATF (s:\dbc\Trophy Club MUD #1:TCMUD_1-2019) Page 1 SA CO Capital Exhibit A BOND DEBT SERVICE Trophy Club MUD #1 Water and Sewer System Revenue Bonds, Series 2019 Callable 9/1/28 at Par Period Annual Ending Principal Coupon Interest Debt Service Debt Service 03/01/2036 68,443.75 68,443.75 09/01/2036 245,000 3.000% 68,443.75 313,443.75 09/30/2036 03/01/2037 64,768.75 64,768.75 09/01/2037 250,000 3.000% 64,768.75 314,768.75 09/30/2037 03/01/2038 61,018.75 61,018.75 09/01/2038 255,000 3.125% 61,018.75 316,018.75 09/30/2038 03/01/2039 57,034.38 57,034.38 09/01/2039 265,000 3.125% 57,034.38 322,034.38 09/30/2039 03/01/2040 52,893.75 52,893.75 09/01/2040 275,000 3.250% 52,893.75 327,893.75 09/30/2040 03/01/2041 48,425.00 48,425.00 09/01/2041 285,000 3.250% 48,425.00 333,425.00 09/30/2041 03/01/2042 43,793.75 43,793.75 09/01/2042 290,000 3.250% 43,793.75 333,793.75 09/30/2042 03/01/2043 39,081.25 39,081.25 09/01/2043 300,000 3.250% 39,081.25 339,081.25 09/30/2043 03/01/2044 34,206.25 34,206.25 09/01/2044 310,000 3.250% 34,206.25 344,206.25 09/30/2044 03/01/2045 29,168.75 29,168.75 09/01/2045 320,000 3.375% 29,168.75 349,168.75 09/30/2045 03/01/2046 23,768.75 23,768.75 09/01/2046 330,000 3.375% 23,768.75 353,768.75 09/30/2046 03/01/2047 18,200.00 18,200.00 09/01/2047 345,000 3.375% 18,200.00 363,200.00 09/30/2047 03/01/2048 12,378.13 12,378.13 09/01/2048 355,000 3.375% 12,378.13 367,378.13 09/30/2048 03/01/2049 6,387.50 6,387.50 09/01/2049 365,000 3.500% 6,387.50 371,387.50 09/30/2049 381,887.50 379,537.50 377,037.50 379,068.76 380,787.50 381,850.00 377,587.50 378,162.50 378,412.50 378,337.50 377,537.50 381,400.00 379,756.26 377,775.00 7,080,000 4,240,736.20 11,320,736.20 11,320,736.20 Mar 20, 2019 12:09 pm Prepared by ATF (s:\dbc\Trophy Club MUD #1:TCMUD_1-2019) Page 2 $7,080,000 TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 WATER & SEWER REVENUE BONDS, SERIES 2019 DISTRIBUTION LIST April 11, 2019 Issuer Mr. John Carman General Manager Trophy Club Municipal Utility District No. 1 100 Municipal Dr. Trophy Club, Texas 76262 682-831-4600 icarman(tcmud.ora Mr. Steven Krolczyk Finance Director 682-831-4600 skrolczvk(Wtcmud. ora Financial Advisor Mr. Andrew Friedman SAMCO Capital Markets, Inc. 1020 NE Loop 410 San Antonio, Texas 78209 210-832-9760 afriedmanr@samcocaoital.com Ms. Peggy Kilborn SAMCO Capital Markets, Inc. 1700 Pacific Ave., Suite 2000 Dallas, Texas 75201 214-765-1440 okilbomf@samcocaoital.com Bond Counsel Mr. Tony Corbett McLean and Howard, L.L.P. Barton Oak Plaza, Bldg. 11 901 S. MoPac Expressway, Suite 225 Austin, Texas 78746 512-328-2008 tcorbettPmcleanhowardlaw.com Ms. Lauren Hughes 512-328-2008 IhuahesPmcleanhowardlaw. com Paving Agent Registrar Ms. Caresse Tankersley Ms. Erin Fitzpatrick Mr. Tony Hongnoi BOKF, NA Corporate Trust Department 5956 Sherry Lane, Suite 1201 Dallas, TX 75225 214-987-8886 (Caresse) 972-892-9972 (Erin) 972-892-9968 (Tony) CTankerslev@bokf. com Efitzoatrick Jbokf.com thonanoi@bokf.com Purchaser Mr. Keith Wakefield IFS Securities 3414 Peachtree Rd NE, Suite 1020 Atlanta, GA 30326 404-382-5223 keith. wakefield (a�ifssecurities. com Insurance Mr. Calvin Li Build America Mutual 200 Liberty Street, 27th Floor New York, New York 10281 212-235-2566 cli(5 buildamerica.com Rating Agency Standard & Poor's 500 Akard St., Suite 3200 Dallas, TX 75201 Deal #518.02 Tax ID # 75-1502727