Correction: Fitch Rates Fort Bend ISD, Texas $68.5MM VRBs 'AAA/AA' Underlying.

AUSTIN, Texas -- (This is an amended version of a press release just issued and contains a corrected rating in the headline.)

Fitch Ratings assigns an 'AAA' rating to the $68,525,587 unlimited tax-adjustable rate and capital appreciation refunding bonds, series 2005, of Fort Bend Independent School District, Texas (the district) based upon a guaranty by the Texas Permanent School Fund (PSF), whose financial strength is rated 'AAA' by Fitch. An underlying 'AA' rating is also assigned to the bonds by Fitch, which are scheduled to sell on April 14 via negotiation to a syndicate managed by UBS Financial Services Inc. Additionally, Fitch affirms the 'AA' underlying rating on the district's outstanding $613.4 million in unlimited tax bonds and $3.8 million in public property finance contractual obligations. The Rating Outlook is Stable.

The $68,525,587 series 2005 bonds will consist of: $1,895,587 unlimited tax capital appreciation refunding bonds, which will accrete from the closing date. Interest will be compounded August 15 and February 15 of each year, and will be payable only upon maturity, and the $66,630,000 unlimited tax adjustable rate refunding bonds, which will initially bear interest at a term rate mode ending on Aug. 15, 2009. The first interest payment date will occur on Aug. 15, 2005 and thereafter each Feb. 15 and Aug. 15. At the end of the initial four-year term rate mode, (the 'Initial Rate Period'), the bonds may be converted to a weekly, monthly, term, or fixed rate mode. Upon conversion to the weekly, monthly, or term rate mode of three years or less Fitch will assign a short-term rating reflecting the liquidity support in the form of a standby bond purchase agreement (SBPA) issued by DEPFA Bank, plc, acting through its New York Agency.

The SBPA is effective at the closing, and upon an interest rate conversion as specified above, will provide for the payment of the purchase price of tendered bonds during the adjustable rate modes in the event the proceeds of a remarketing of the bonds following a tender are insufficient to pay the purchase price. The SBPA is sized to provide for the entire principal amount of the bonds and 184 days of interest at the maximum interest rate of 6% and will expire on May 17, 2012, or upon the occurrence of other events of termination, according to its terms. The remarketing agent for the bonds is UBS Financial Services, Inc. The bonds are expected to be delivered on or about May 17, 2005.

Bondholders are required to tender their bonds for purchase at the end of the Initial Rate Period. Thereafter, holders may optionally tender their bonds with the required prior notice to the tender agent, JPMorgan Chase Bank, National Association. Bonds are also subject to mandatory tender: upon the conversion of the interest rate mode; the interest payment date prior to the liquidity facility expiration date; on the last business day prior to the substitution of a new liquidity facility; or on the business day preceding the termination date of the liquidity facility as stated in the bank's notice of an event of default. Fitch's short-term rating on the bonds will expire upon any expiration or termination of the SBPA.

The bonds are direct obligations of the district, payable from ad valorem taxes levied annually against all taxable property located within the district, without legal limitation as to rate or amount, as well as a guaranty from the Texas PSF. Bond proceeds will be used to refund certain bonds outstanding and pay costs of issuance.

The 'AA' underlying rating reflects Fort Bend Independent School District's (the district) strong financial management practices, solid reserves, strong tax base and enrollment growth, high wealth levels, and substantial state support for operations and capital construction. The rating also reflects the district's debt levels, which remain high overall but are more manageable on a direct basis. Payout remains below average, which is not unusual for a district in a high-growth mode. These credit concerns are mitigated by specific management practices, such as the district's extensive amount of pay-as-you-go capital funding and development of a five-year forecasting model.

The rating also reflects the absence of taxing margin for operations and maintenance (O&M), spurring extensive cost-containment efforts and conservative revenue projections in the development of its annual budgets. Given ongoing operating pressures associated with rapid enrollment growth, the continuance of solid reserves will be integral to maintaining credit quality.

Located in northeastern Fort Bend County, the district is a rapidly growing residential and commercial sector of the Houston metropolitan statistical area (MSA). Along with continuing residential development, particularly in the county's many master-planned communities, expanded high-technology development has supplemented the county's historical base of mineral production, manufacturing, and agriculture. As a result, taxable assessed valuations (TAVs) have risen more than $1 billion annually in each of the past five fiscal years and grown by a compound annual average of 10.8% since fiscal 1998. The tax roll for fiscal 2005 continues that trend with $1.5 billion in TAV growth, which equals an 8.9% jump over the preceding year. The populations of Sugar Land, TX and Fort Bend County have increased 43.1% and 57.2%, respectively, since 1990. County wealth levels are markedly higher than those of the MSA or state.

After voters narrowly rejected a $400 million bond proposal in February 2003, a large majority of voters subsequently approved a $299.9 million authorization in November 2003. The current offering represents a refunding for interest cost savings, and $115 million in bond authorization remains, the entirety of which is expected to be sold in early 2006. Currently 60%-65% built out, the district anticipates reaching a peak enrollment of 100,000 students in about 20 years, requiring additional bond authorization every four years.

After the current offering, direct debt is $1,459 per capita and 2.6% of TAV. With more than $800 million in overlapping debt, attributable to 46 entities (including many municipal utility districts), overall debt is moderately high at $4,509 per capita and 7.8% of TAV. Debt service carrying charges were moderate at less than 11% of general and debt service funds in fiscal 2004. Principal amortization is below average, at 33.4% in 10 years.

Despite a high enrollment growth environment, the district has maintained strong financial operations. After several years of slight decreases in financial margins due to planned drawdowns for one-time capital expenditures, the district's undesignated reserves increased 15.7% of expenditures and transfers out, or 57 days of operating expenditures, in fiscal 2004. District policy is to maintain a fund balance equal to 30-45 days of operations, reduced previously from 45-60 days in response to consistent enrollment pressures. The district engages in substantial pay-as-you-go capital funding, expending more than $50 million in fiscal years 1999-2004.

The district has levied the maximum O&M tax rate allowed under state law, $1.50 per $100 of TAV, for the past five fiscal years. Although no additional taxing margin remains, the district's fiscal 2004 financial results generated a $6.7 million surplus. The fiscal 2005 budget is balanced, which was achieved through extensive cost containment and based on conservative assumptions of revenue growth and future student enrollment. Under the current public school finance system and 2% average daily attendance (ADA) growth, the district projects moderate to large annual drawdowns of its reserves beginning in fiscal 2007, though these are very conservative estimates and actual results have typically outperformed budget.