The Brazos River Authority Waco Texas

BRAZOS RIVER AUTHORITYNOTES TO THE BASIC FINANCIAL STATEMENTSAUGUST 31, 2008 AND 2007 (in thousands)Interest Rate RiskIn order to limit interest and market rate risk from changes in interest rates, the Authority's adoptedInvestment Policy sets a maximum maturity on any investment of three (3) years in operating funds,repair and replacement funds and five (5) years in reserve funds. Bond proceeds are to be matched tothe planned expenditures of the funds. The Policy restricts the dollar weighted average maturity ofoperating funds to less than 365 days. The maximum dollar weighted average maturity for repair andreplacement bond reserve funds are restricted to two years. Operating reserve funds maximum weightedaverage maturity is restricted to three years.Portfolio disclosure as of August 31, 2008:- holdings maturing beyond two years totaled $8,033 or 21.52 % of the Operating Reserve Fundrepresented 10.28 % of the total portfolio- one mortgage backed security holdings had stated maturities of three years and an estimated life ofone year and represented 0.11 % of the Operating Reserves and 0.05 % of the total portfolio- the dollar weighted average maturity of the total portfolio was 351 daysAs of August 31, 2008, the portfolio contained fourteen structured securities and one mortgage backedsecurity as follows:SecurityNote Par Coupon Purchase DateMaturityDate Call Date Structure CusipFairValueStructured Securities Past the Call Date:FHLB $4,000 2.750% 05/07/08 05/07/09 08/07/08 one time call 3133XR2H2 $3,996FHLMC 915 3.000% 07/16/08 07/16/09 10/16/08 one time call 3128X7Q56 913FHLMC 3,000 3.000% 06/16/08 09/16/09 09/16/08 one time call 3128X7ZM9 2,995FHLB 5,000 3.400% 03/12/08 03/12/10 09/12/08 one time call 3133XQ3N0 5,002Discretely Callable Securities:FHLMC 2,000 2.500% 04/21/08 05/15/09 01/21/09 quarterly call 3128X7LD4 1,991FHLB 2,000 2.750% 06/24/08 06/24/09 12/24/08 one time call 3133XRH78 1,996FHLB 1,625 3.050% 08/28/08 08/28/09 11/28/08 quarterly call 3133XS2L1 1,618FHLB 4,550 3.050% 06/23/08 12/23/09 12/23/08 one time call 3133XRGA2 4,547FHLB 2,450 3.000% 05/05/08 02/05/10 02/05/09 one time call 3133XQZ54 2,447FHLB 5,000 3.150% 02/19/08 02/19/10 11/19/08 quarterly call 3133XPKT0 4,995FHLMC 3,000 3.050% 04/28/08 04/28/10 10/28/08 quarterly call 3128X7HZ0 3,002FHLB 5,000 3.000% 03/25/08 03/25/11 12/25/08 quarterly call 3133XQF72 4,988FHLB 3,000 3.000% 05/27/08 05/27/10 11/27/08 quarterly call 3136F9QK2 2,998FHLB 3,000 3.500% 02/14/08 02/14/11 11/14/08 quarterly call 3133XPHZ0 3,003Mortgage Backed Securities:FNMA 40 7.00% 9/1/2005 06/01/11 NA 31371FKA9 42$44,580 $44,53326