PUTNAM COUNTY TOBACCO ASSET SECURITIZATION CORP.

40 GLENEIDA AVENUE

CARMEL, NY 10512

NOTICE OF ANNUAL MEETING:

THE PUTNAM COUNTY TOBACCO ASSET SECURITIZATION CORP.

ANNUAL MEETING WILL BE HELD AT 40 GLENEIDA AVENUE, 3RD

FLOOR, CARMEL, NY 10512, ON OCTOBER 28, 2019 at 5:30 P.M.

AGENDA

PUTNAMTASCANNUAL MEETINGOCTOBER 28,2019

1. APPROVAL PRIOR YEAR ANNUAL MEETING MINUTES

2. ACCEPTANCE BOARD MEMBER RESIGNATION - TRACEY WALSH

3. APPOINTMENT NEW BOARD MEMBER

4. REVIEW AND ACCEPTANCE OF INDEPENDENT AUDITORS REPORT

5. REVIEW AND APPROVAL OF 2020 BUDGET

6. AUTHORIZATION OF TREASURER TO PROCURE DIRECTORS AND

OFFICERS LIABILITY INSURANCE & INDEPENDENT AUDIT

SERVICES

7. REVIEW AND APPROVAL WHISTLE BLOWER POLICY

8. OTHER BUSINESS

9. ADJOURNMENT

Putnam County Tobacco Asset Securitization Corporation

Minutes of Annual Meeting

October 25, 2018

Putnam County Tobacco Asset Securitization Corporation (PTASC) Secretary/Treasurer William J. Carlin,Jr.called the meeting to order at 6:05 pm. Presentwere BoardMembers MaryEllen Odell, Ginny Nacerino,William J.Carlin, Jr., and TraceyWalsh.

The Board reviewed the Mission Statement of PTASCand agreed that no changeswere necessaryto bemade to the mission statement.

The Board reviewed the minutes of the October 10, 2017 meeting. After discussion in which the Boardwas advised that notice of the annual meeting and agendawas posted on the PTSACwebsite, MaryEllenOdell made the motion to approve these minutes, seconded by Ginny Nacerino, approved unanimously.

The Board reviewed and accepted the resignation of Independent Board Member Robert Bickford. GinnyNacerino made the motion, seconded by Joseph Castellano, to accept the resignation and gratefullyacknowledge the many years of volunteer service provided by Robert Bickford. The motion was approvedunanimously.

The Board reviewed amotion made byJosephCastellano,seconded by Ginny Nacerino, appointing TraceyWalsh, of Carmel NY, the Independent Board member to replace Robert Bickford., providing a $ 250training stipend. The motion was approved unanimously.

Secretary/Treasurer Carlin reviewed with the Board the Independent Audit of the 2017 FinancialStatements. It was noted that the opinion was "clean" and included no comments for further action.Ginny Nacerinomade a motion to accept the Independent Auditors report, seconded by MaryEllen Odell,approved unanimously.

Secretary/Treasurer Carlin presented a proposed budget for 2019. After discussion, it was noted that thebudget is largely unchanged from 2018. JosephCastellanomade the motion adopt the budget, secondedby Ginny Nacerino, approved unanimously.

After discussion,JosephCastellano proposed, seconded byTraceyWalsh and approved unanimously, thatthe Board authorize the Secretary/Treasurer to seek proposals through the Spain Agency, PutnamCounty's broker of record, for Directors and Officers liability insurance for 2019 and directed theSecretary/ Treasurer to secure an insurance binder with the insurance company offering the bestproposal.

After discussion,JosephCastellano proposed, seconded byTraceyWalsh and approved unanimously, thatthe Board authorize the Secretary/Treasurer to contract with PFK O'Connor Davies for the 2019Independent Audit. William Carlin noted that this firm audits the Putnam County financial statementsand sincethe PTASCis a component unit of PutnamCounty for financial statement presentation purposesit was to the PTASCadvantage to use the same Independent audit firm.

There being no other business before the Board, the meeting adjourned at 5:05pm.

Respectfully Submitted,

William J. Carlin Jr.

Secretary/Treasurer

Financial Statements

Putnam County Tobacco AssetSecuritization Corporation

(A Blended Component Unit of theCounty of Putnam, New York)

Year Ended December 31,2018

~PKfVOCONNOR

DAVIESACCOUNTANTS AND ADVISORS

Independent Auditors' Report

The Board of Directors of the Putnam CountyTobacco Asset Securitization Corporation

Report on the Financial Statements

We have audited the accompanying financial statements of the PutnamCounty Tobacco Asset SecuritizationCorporation ("PTASC"), a blended component unit of the County of Putnam, New York, as of and for the yearended December 31,2018, and the related notes to the financial statements.

Management's Responsibility for the Financial Statements

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

Auditors'Responsib/llty

Our responsibility is to express an opinion on these financial statements based on our audit. We conductedour audit in accordance with auditing standards generally accepted in the United States of America and thestandards applicable to financial audits contained in Government Auditing Standards, issued by theComptroller General of the United States. Those standards require that we plan and perform the audit toobtain 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 thefinancial statements. The procedures selected depend on the auditors' judgment, including the assessmentof the risks of material misstatement of the financial statements, whether due to fraud or error. In makingthose risk assessments, the auditor considers internal control relevant to the PTASC's preparation and fairpresentation of the financial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the PTASC's internalcontrol. Accordingly, we express no such opinion. An audit also includes evaluating the appropriatenessofaccounting 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 ouraudit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financialposition of the PTAse as of December 31,2018, and the changes in financial position and cash flows thereoffor the year then ended in accordance with accounting prlnclplss generally accepted in the United States ofAmerica.

PKF O'CONNOR DAVIES, LLP500 Mamaroneck Avenue, Harrison. NY 10528 I Tel: 914.381.8900 I Fax: 914.381.8910 I www.pkfod.comPKF O'COllnor Davies. lLP is a member firm of the PKF Intemationallimited network of legally Independent flrms and dOGSnot accept any responsibility or liabilitytor the actions or inactlon5 on the part of any other individual member firm or flrms.

Emphasis ofMatters

We draw attention to Note 1 in the notes to financial statements that indicates that these financial statementspresent only the PTASC and do not purport to, and do not present fairly the financial position of the County ofPutnam,NewYork as of December 31, 2018 and the changes in financial position and cash flows for the yearthen ended in conformity with accounting principles generally accepted in the United States of America. Ouropinion is not modifiedwith respect to this matter.

We further draw attention to Note 4 in the notes to financial statements which discusses that the onlysignificant resource of the PTASe is the right to receive tobacco revenues. A reduction in these revenueswould affect debt service coverage on the bonds. If the reduction were material, it could impair the ability ofthe PTASC to make turbo redemption payments or even its ability to make planned structured principalpayments as they are due. As a result, actual payments may not conform to either the turbo redemptionmaturitiesor the planned structured principal payments schedules. Our opinion is not modifiedwith respect tothis matter.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that Management'sDiscussionand Analysis be presented to supplement the financial statements. Such information,although nota part of the financial statements, is required by the Governmental Accounting Standards Board, whoconsiders it to be an essential part of financial reporting for placing the financial statements in an appropriateoperational, economic or historical context. We have applied certain limited procedures to the requiredsupplementary information in accordance with auditing standards generally accepted in the United States ofAmerica, which consisted of inquiries of management about the methods of preparing the information andcomparing the information for consistency with management's responses to our inquiries, the financialstatements and other knowledge we obtained during our audit of the financial statements. We do not expressan opinion or provideany assurance on the information because the limited procedures do not provideus withsufficient evidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standards

In accordancewith Govemment Auditing Standards,we have also issued our report dated March 12, 2019 onour considerationof the PTASe's internal control over financial reportingand on our tests of its compliancewithcertain provisionsof laws, regulations, contracts and grant agreementsand other matters. The purposeof thatreport is to describe the scope of our testing of internal control over financial reporting and complianceand theresults of that testing, and not to provide an opinion on the effectivenessof the PTASC's internal control overfinancial reporting or on compliance. That report is an integral part of an audit performed In accordancewithGovernment Auditing Standards in considering the PTASC's internal control over financial reporting andcompliance.

PI(F ~'~ lxwiu. LJ_/}PKF O'Connor Davies, LLPHarrison, NewYorkMarch 12,2019

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Putnam County Tobacco AssetSecuritization Corporation

(A Blended Component Unit of the County of Putnam, New York)Management's Discussion and Analysis (MD&A)

December 31,2018

Introduction

As management of the Putnam County Tobacco Asset Securitization Corporation (-PTASC"), we offerreaders of the PTASC's financial statements this narrative overview and analysis of the financialactivities of the PTASC for the fiscal year ended December 31, 2018. It should be read in conjunctionwith the financial statements, which immediately follow this section, to enhance understanding of thePTASC's financial performance.

Financial Highlights

.:. On the statement of net position, the liabilities of the PTASC exceeded its assets and deferredoutflows of resources at the close of the most recent fiscal year, resulting in a deficit of$16,364,851. The deficit was increased by $250,662, due to the shortfall of the amount recognizedfor Tobacco Settlement Revenues ("TSR's") of $969,450 less operating expenses of $59,834 andnon-operating net interest expense of $1,160,278 .

•:. The Governmental Accounting Standards Board ("GASB") issued Technical Bulletin 2004-1,"tobecco Settlement Recognition and Financial Reporting Entity Issues", as amended and/orsuperseded by GASB Statement No. 48, "Sales and Pledges of Receivables and FutureRevenues and Intra-Entity Transfers of Assets and Future Revenues", which clarified certain assetand revenue recognition criteria. Prior to the issuance of this guidance, the PTASC hadrecognized as a receivable/revenue the present value of the future tobacco revenue stream. Thenew guidance required a reversal of this position, in that it promulgated that TSR's and the relatedasset only be recognized when the event giving rise to recognition (i.e, the shipment of cigarettes)occurs. Because annual TSR payments are based on cigarette sales from the preceding calendaryear, the PTASC was prohibited from recognizing this future revenue stream as a receivable.Accordingly, the only revenue recognition allowed was for TSR payments to be received in theimmediately succeeding fiscal year, as these payments were based on cigarette shipments in theyear under audit. This had the effect of deferring revenue recognition, which results in the deficitposition reflected on the statement of net position. Over time, as TSR payments are received andthe bonded indebtedness is retired, the deficit will be reduced.

Financial Statements

The statement of net position presents information on the PTASC's assets, deferred outflows ofresources, liabilities and deferred inflows of resources with the difference reported as net position. Thestatement of revenues, expenses and changes in net position presents information showing how thePTASC's net position changed during the most recent fiscal year. All changes in net position are reportedas soon as the underlying event giving rise to the change occurs, regardless of the timing of related cashffows. Thus, revenues and expenses are reported in this statement for some items that will only result incash flows in future fiscal periods (for example, accounts receivable and accrued interest payable).

The notes to financial statements provide additional information that is essential to a full understanding ofthe data provided in the statement of net position and the statement of revenues, expenses and changesin net position. The notes to financial statements are located beginning on page 8 of this report.

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Financial Analysis

Net position decreased by $250,662 in 2018, compared with a decrease of $402,039 in 2017, adifference of $151,377. Tobacco settlement revenues increased $154,396 in 2018, interest expenseincreased $7,617 and operating expenses increased $10,002.

Debt Administration

At the end of the current fiscal year, the PTASC had total gross bonded debt outstanding of $22,525,423.PTASC was able to make a principal payment of $130,000, and to date has made principal payments of$2,910,000.

Additional information on the PTASC's long-term debt can be found in Note 3 in the notes to financialstatements.

Economic Factors

The bonds are payable only from the assets of the PTASC. PTAse's only source of funds for paymentson the bonds is the collections of TSR's and amounts on deposit in pledged accounts (i.e. liquidity anddebt service reserve accounts) pursuant to the indenture. If a participating manufacturer becomes adebtor in a bankruptcy case and defaults in making payments or cigarette consumption declines, fundsavailable to PTASC to pay bondholders may be reduced or eliminated.

Requests for Information

This financial report is designed to provide a general overview of the PTASC's finances for all those withan interest in those finances. Questions and comments concerning any of the information provided in thisreport should be addressed to Mr. William J. Carlin, Treasurer, Putnam County, Carmel, New York10512.

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Putnam County Tobacco Asset Securitization Corporation(A Blended Component Unit of the County of Putnam, New York)

Statement of Net PositionDecember 31, 2018

ASSETSCurrent assets

Cash and equivalents $ 36,626Tobacco settlement receivable 1,045,520Prepaid expenses 8,586

Total Current Assets 1,090,732

Noncurrent assetsRestricted cash and equivalents 1,208,986

Total Assets 2,299,718

DEFERRED OUTFLOWS OF RESOURCESDeferred loss on refunding bonds 965,000

LIABILITIESCurrent liabilities

Accrued liabilities 69,775Current maturities of bonds payable 295,000

Total Current Liabilities 364,775

Noncurrent liabilitiesBonds payable, net of current maturities 19,264,794

Total Liabilities 19,629,569

NET POSITIONUnrestricted $ ~16,364,851~

See notes to financial statements.

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Putnam County Tobacco Asset Securitization Corporation(A Blended Component Unit of the County of Putnam, New York)

Statement of Revenues, Expenses and Changes in Net PositionYear Ended December 31,2018

OPERATING REVENUESTobacco settlement revenues $ 969,450

OPERATING EXPENSESProfessional feesInsurance expenseAdministrative charges

16,2478,587

35,000

Total Operating Expenses 59,834

Income from Operations 909,616

NON-OPERATING REVENUES (EXPENSES)Interest incomeInterest expense

27,001(1,187,279)

Total Non-Operating Expenses (1,160,278)

Change in Net Position (250,662)

NET POSITIONBeginning of year

End of year

(16,114,189)

$ (16,364,851)

See notes to financial statements.

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Putnam County Tobacco Asset Securitization Corporation(A Blended Component Unit of the County of Putnam, New York)

Statement of Cash FlowsYear Ended December31, 2018

CASH FLOWS FROM OPERATING ACTIVITIESCash received from tobacco settlement revenues $ 988,467Cash paid to vendors ~59,834)

Net Cash from Operating Activities 928,633

CASH FLOWS FROM INVESTING ACTIVITIESInterest income 27,001

CASH FLOWS FROM NON·CAPITAL FINANCING ACTIVITIESRepayment of bonds payable (130,000)

Interest paid ~841,200~

Net Cash from Non-Capital Financing Activities {971 ,200)

Net Change in Cash and Equivalents (15,566)

CASH AND EQUIVALENTSBeginning of year 1,261,178

End of year $ 1,245,612

Cash and equivalents $ 36,626Restricted cash and equivalents 1,208,986

Total Cash and Equivalents $ 1,245,612

RECONCILIATION OF INCOME FROM OPERATIONS TONET CASH FROM OPERATING ACTIVITIES

Income from operationsAdjustments to reconcile income from operations to

net cash from operating activitiesChanges in assets and liabilities

Tobacco settlement receivable

$ 909,616

19,017

Net Cash from Operating Activities $ 928,633

NONCASH INVESTING ACTIVITIESIncrease in bonds payable from amortization of

original issue discount $ 25,564

Increase in bonds payable from accreted interest onSeries 2005 capital appreciation bonds

Decrease in deferred outflows of resources fromamortization of loss on refunding bonds

230,508

90,657

See notes to financial statements.7

L ..

Putnam County Tobacco Asset Securitization Corporation(A Blended Component Unit of the County of Putnam, New York)

Notes to Financial StatementsDecember 31 2018

Note 1 - Nature of Business and Summary of Significant Accounting Policies

Nature of Business

The Putnam County Tobacco Asset Securitization Corporation ("PTASC") is a special purpose,bankruptcy-remote local development corporation. PTASC was organized under the provisions ofSection 1411 of the New York State Not-For-Profit Corporation Law and pursuant to the PublicAuthorities Law of the State of New York. The Board of Directors of PTASC consists of five members;the County of Putnam, New York's ("County") County Executive, the County's Director of Finance, theChairman of the County's Board of Legislators, the Chairman of the Audit and Administration Committeeof the County's Board of Legislators and a fifth director who meets certain requirements of independenceand shall be designated by the other four members.

An agreement among the attorneys general of 46 states and various territories ("Settling States") and thefour largest United States tobacco manufacturers was entered into on November 23, 1998. Theagreement, known as the Master Settlement Agreement ("MSA"),. resolved cigarette smoking-relatedlitigation between the Settling States and U.S. Tobacco manufacturers. Pursuant to the MSA, theSettling States and the participating manufacturers agreed to settle all past, present and future smokingrelated claims in exchange for an agreement by the participating manufacturers to make certainpayments. Under the MSA, the State of New York is entitled to receive approximately 12.76% of theinitial and annual payments. The New York Consent Decree, which was entered into in the SupremeCourt of the State of New York for the County of New York in December 1998, allocated 0.152% of thisState-wide share of the initial and annual payments to the County and the remainder among the State,the City of New York and all other counties within the State.

During 2001, the County sold all of its future rights, title and interest to receive payments under the MSAand the Consent Decree to PTASC, which issued $15,280,000 in Tobacco Settlement Asset-BackedBonds, Series 2000 ("Series 2000"). During 2005, PTASC issued $20,565,798 of Tobacco SettlementAsset-Backed Bonds, Series 2005 A, Band C Term Bonds and Series 2005 D and E CapitalAppreciation Bonds (collectively "Series 2005"), the proceeds of which were used to 1) refund theoutstanding Series 2000 bonds, 2) fund the Liquidity Reserve Account at its required level, 3) pay certaincosts of issuance related to the Series 2005 bonds and 4) provide the County with funds for workingcapital purposes. During 2010, PTASC issued $3,400,000 of Tobacco Settlement Asset-Backed Bonds,Series 2010A Term Bonds, the proceeds of which were used to refund the outstanding Series 2005CTerm Bonds of an equal amount. The remaining Series 2005 and 2010A bonds are payable from andsecured solely from pledged Tobacco Settlement Revenues ("TSR's"). The County, as owner of thebeneficial interest in the Residual Trust which holds the Residual Certificate, will not be entitled to receivepayments on such certificate while PTASC bonds remain outstanding. The debt issued by PTASC tosecuritize these revenues is not considered debt of the County and is secured only by future tobaccosettlement payments.

Entity Definition

Based on the guidance provided by Governmental Accounting Standards Board (-GASB") TechnicalBulletin No. 2004-1, "Tobacco Settlement Recognition and Financial Reporting Entity Issues", asamended anellor superseded by GASB Statement No. 48, "Sales and Pledges of Receivables and FutureRevenues and Intra-Entity Transfers of Assets and Future Revenues", the PTASC is reported as ablended component unit of the County in its financial statements.

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Putnam County Tobacco Asset Securitization Corporation(A Blended Component Unit of the County of Putnam, New York)

Notes to Financial Statements (Continued)December 31 2018

Note 1 - Nature of Business and Summary of Significant Accounting Policies (Continued)

Basis of Presentation

A fund is an independent fiscal and accounting entity with a self-balancing set of accounts whichcomprise its assets, deferred outflows of resources, liabilities, deferred inflows of resources, net position,revenues and expenses. The accounts of the PTASC are maintained on the accrual basis of accounting.Under the accrual basis of accounting, revenues are recorded when earned and expenses are recordedat the time liabilities are incurred.

The accompanying financial statements present only the activities of the PTASe and do not purport to,and do not, present fairly the financial position of the County as of December 31, 2018'and the changesin its financial position for the year then ended in conformity with accounting principles generallyaccepted in the United States of America.

Cash and Equivalents

Cash and equivalents consist of demand deposit accounts, time deposit accounts and short-terminvestments with original maturities of less than three months from the date of acquisition.

Restricted Cash and Equivalents

The terms of the bond indenture provide for the establishment of a liquidity reserve. The reserve hasbeen established at the maximum annual debt service requirements in the current and any future fiscalyear, -assuminq principal is paid in accordance with the requirements of the indenture.

The terms of the bond indenture also provide for the establishment of a trapping account. Following theoccurrence of a trapping event, amounts that otherwise would have been paid on the residual certificateto the County will be deposited in the trapping account and will be restricted to pay interest, requiredplanned structured principal payments and turbo redemption payments, in such order, to the extentcollections or other available amounts are insufficient for such purposes.

Deferred Outflowsllnflows of Resources

In addition to assets, the statement of financial position will sometimes report a separate section fordeferred outflows of resources. This separate financial statement element represents a consumption of netposition that applies to a future period and so will not be recognized as an outflow of resources (expense)until then.

In addition to liabilities, the statement of financial position will sometimes report a separate section fordeferred inflows of resources. This separate financial statement element represents an acquisition of netposition that applies to a future period and so will not be recognized as an inflow of resources (revenue)until that time.

The PTASe has reported deferred outflows of resources of $965,000 for a deferred loss on refundingbonds in the Statement of Net Position. This amount results from the difference in the carrying value of therefunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the lifeof the refunded or refunding debt.

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Putnam County Tobacco Asset Securitization Corporation(A Blended Component Unit of the County of Putnam, New York)

Notes to Financial Statements (Continued)December 31 2018

Note 1 ~Nature of Business and Summary of Significant Accounting Policies (Continued)

Tax Status

The PTASC is exempt from federal income tax under Section 501 (a) of the Internal Revenue Code as a501(c)(3) organization.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principlesrequires management to make estimates and assumptions that affect the reported amounts of assets,deferred outflows of resources, liabilities and deferred inflows of resources and disclosures of contingentassets and liabilities at the date of the financial statements. Estimates also affect the reported amountsof revenues and expenses during the reporting period. Actual results could differ from those estimates.

Subsequent Events Evaluation by Management

Management has evaluated subsequent events for disclosure and/or recognition in the financialstatements through the date that the financial statements were available to be issued, which date ;sMarch 12, 2019.

Note 2 • Restricted Cash and Equivalents

Restricted cash and equivalents at December 31, 2018 consisted of the following -

US Treasury Bills $ 1 208.986

Note 3 • Bonds Pavable

PTASC issued bonds on August 25,2005 and June 1, 2010 as follows:

$2,915,000 - Turbo Term Bonds due June 1, 2027 with interest at 6.0% and a projected final TurboRedemption date of June 1, 2019.* Balance due at December 31, 2018 is $5,000.

$3,400,000. - Turbo Term Bonds due June 1, 2041 with interest at 6.25% and a projected final TurboRedemption date of June 1, 2019.* Balance due at December 31,2018 is $3,400,000.

$9,165,000 - Turbo Term Bonds due June 1, 2042 with interest at 5.0% and a projected final TurboRedemption date of June 1, 2024.* Balance due at December 31, 2018 is $9,165,000.

$3,325,000 - Turbo Term Bonds due June 1, 2045 with interest at 5.0% and a projected final TurboRedemption date of June 1, 2026.* Balance due at December 31,2018 is $3,325,000.

$1,988,971 (net of unaccreted amounts of $1,122,020) - Turbo Capital Appreciation Bonds due June 1,2050 with a yield of 5.875% and a projected final Turbo Redemption date of June 1, 2027.*

10

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Putnam County Tobacco Asset Securitization Corporation(A Blended Component Unit of the County of Putnam, New York)

Notes to Financial Statements (Concluded)December 31. 2018

Note 4 - Significant Contingencies

The enforceability of the rights and remedies of the State (and thus the bondholders) and of theobligations of a participating manufacturer under the MSA are subject to the Bankruptcy Code and theother applicable insolvency, moratorium or similar laws relating to or affecting the enforcement ofcreditors' rights. Some of the risks include risks of delay in or reduction of amounts of payment or ofnon-payment under the MSA and the risk that the State (and thus the County and/or PTASC) may bestayed for an extended time from enforcing any rights under the MSA and the Consent Decree or withrespect to the payments owed by the bankrupt participating manufacturer or from commencing legalproceedings against the bankrupt participating manufacturer. As a result, if a participating manufacturerbecomes a debtor in a bankruptcy case and defaults in making payment, funds available to PTASC topay bondholders may be reduced or eliminated.

The bonds are payable only from the assets of PTASC. The bonds are neither legal nor moralobligations of the County or the State of New York, and no recourse may be had thereto for payment ofamounts owing on the bonds. PTASC's only source of funds for payments on the bonds is thecollections and amounts on deposit in pledged accounts pursuant to the indenture. PTASC has notaxing power and no significant assets other than the rights to receive tobacco settlement revenues.

*****

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rePKF'VaCONNOR

DAVIESACCOUNTANTS AND ADVISORS

Report on Internal Control Over Financial Reporting and on Compliance andOther Matters Based on an Audit of Financial Statements Performed in Accordance

With Government Auditing Standards

Independent Auditors' Report

The Board of Directors of the Putnam CountyTobacco Asset Securitization Corporation

We have audited, in accordance with the auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standardsissued by the Comptroller General of the United States, the financial statements of the Putnam CountyTobacco Asset Securitization Corporation ("PTASC") as of and for the year ended December 31,2018,and the related notes to the financial statements and have issued our report thereon dated March 12,2019.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the PTASe's internalcontrol over financial reporting ("internal control") to determine the audit procedures that are appropriatein the circumstances for the purpose of expressing our opinion on the financial statements, but not for thepurpose of expressing an opinion on the effectiveness of the PTASe's internal control. Accordingly, wedo not express an opinion on the effectiveness of the PTASe's internal control.

A deficiency in internal control exists when the design or operation of a control does not allowmanagement or employees, in the normal course of performing their assigned functions to prevent, ordetect and correct, misstatements on a timely basis. A material weakness is a deficiency, or acombination of deficiencies, in internal control, such that there is a reasonable possibility that a materialmisstatement of the PTASC's financial statements will not be prevented, or detected and corrected, on atimely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal controlthat is less severe than a material weakness, yet important enough to merit attention by those chargedwith governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of thissection and was not designed to identify all deficiencies in internal control that might be materialweaknesses or significant deficiencies. Given these limitations, during our audit we did not identify anydeficiencies in internal control that we consider to be material weaknesses. However, materialweaknesses may exist that have not been identified.

PKF O'CONNOR DAVIES, LLP500 Mamaroneck-Avenue, Harrison, NY 10528 I Tal: 914.381.8900 I Fax; 914.381.8910 I www.pkfod.com

PKF O'Connor Davies, LLP Is a member firm of the PKF International Limited network of legally Independent firms and does not accept any responsibility or liabilityfor the acnons or inactions on the part of any other individualmember firm or firms.

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Compliance and Other Matters

As part of obtaining reasonable assurance about whether the PTASC's financial statements are free frommaterial misstatement, we performed tests of its compliance with certain provisions of laws, requlaticns,contracts and grant agreements, noncompliance with which could have a direct and rnaterial effect onthe determination of financial statement amounts. However, providing an opinion on compliance withthose provisions was not an objective of our audit, and accordingly, we do not express such ~m opinion.The results of our tests disclosed no instances of noncompliance or other matters that are required to bereported 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 qomplianceand the results of that testing, and not to provide an opinion on the effectiveness of the PTASC;'s internalcontrol or on compliance. This report is an integral part of an audit performed in accordance withGovernment Auditing Standards in considerinq the PTASC's internal control and cemphanceAccordingly, this communication is not suitable for any other purpose.

PKrtf}/~~, LL,oPKF O'Connor Davies, LLPHarrison, New YorkMarch 12, 2019

14

PUTNAM TOBACCO ASSET CORPORATION2020 ADOPTED BUDGET ADOPTED ADOPTED

2019 2020

OPERATING EXPENSE PROCEEDS PER TRUST INDENTURE 52,000 53,000

STANDARD & POOR'S - PERTRUST INDENTURE 500 500FITCH RATINGS- PERTRUST INDENTURE 500 500M& T BANK - PERTRUST INDENTURE 325 325WILMINGTON TRUST - PERTRUST INDENTURE 2,750 2,750BOND LOGISTIX- PERTRUST INDENTURE 4,000 4,000TOTAL EXPENSESPERTRUST INDENTURE 8,075 8,075

TASCCONTROLLED EXPENSES:

EQUIPMENTTRAININGDIRECTORAND OFFICERSLIABILITY INSURANCEINDEPENDENT AUDIT SERVICES

TOTAL TASCCONTROLLED EXPENSES:

250 2509,000 9,5006,500 6,500

15,750 16,250

28,175 28,675REMAINDER: PAYABLETO THE COMMISSIONER OF FINANCETO COVEROFFFICECOSTS, SECRETARY/TREASURERTIME, ETC

WHISTLEBLOWER POLICY

Everydirector, officer, or employee of the Corporation, in performance of their duties shallconduct themselves with honesty and integrity and observe the highest standards ofbusiness and personal ethics as set forth in the Putnam County Code of Ethics.

Each director, officer, or employee is responsible to report any violation of the Code(whether suspected or known) to the Corporation's Independent Director. Reports ofviolationswill be kept confidential to the extent possible. No individual, regardless of theirposition with the Corporation, will be subject to retaliation for making a good faith claimand, any employee who chooses to retaliate against someone who has reported aviolation, shall be subject to disciplinary action which may include termination ofemployment. Regardless, any claim of retaliationwill be taken and treated seriously andirrespective of the outcome of the initial complaint, will be treated as a separate offense.

The Independent Director is responsible for immediately forwarding any claim to theCorporation's counsel who shall investigate and handle the claim in a timely manner.