brazos river authorityaddendum no. 1 brazos river authority july 11, 2019 addendum no. 1 defined...

Addendum No. 1

Brazos River Authority

July 11, 2019

Addendum No. 1 DEFINED BENEFIT RETIREMENT PLAN CUSTODIAN TRUSTEE

RFP No. 19-07-1119

It is the responsibility of the Respondent to assure and guarantee by acknowledging the receipt of this Addendum in the Proposal that the Respondent has received the Addendum in its entirety, and that the Respondent accepts all conditions contained herein.

Insert: Attached are the most recent BRA Audited Financial Statement, Actuarial Valuation, and Quarterly Investment Report.

Sincerely,

Clarissa Cabrera, CTPM, CTCM Purchasing Manager, Administrative Services

4600 Cobbs Drive ● Waco, Texas 76710 254 761 3123

Retirement Plan for Employees of Brazos River Authority

Financial Statements and

Independent Auditor’s Report

February 28, 2018 and 2017

RETIREMENT PLAN FOR EMPLOYEES OF BRAZOS RIVER AUTHORITY

TABLE OF CONTENTS

Page FINANCIAL SECTION: Independent Auditor’s Report 1 Management’s Discussion and Analysis (Unaudited) 3 Financial Statements Statements of Fiduciary Net Position 7 Statements of Changes in Fiduciary Net Position 8 Notes to Financial Statements

A. Description of Plan 9 B. Significant Accounting Policies 11 C. Investments 12 D. Net Pension Liability 18 E. Tax Status 20 F. Plan Termination 21

REQUIRED SUPPLEMENTARY INFORMATION: Schedule of Changes in the BRA’s Net Pension Liability (Unaudited) 22 Schedule of the BRA’s Net Pension Liability and Related Ratios (Unaudited) 23 Schedule of the BRA’s Contributions (Unaudited) 24 Schedule of Investment Returns (Unaudited) 25

Financial Section

1

Independent Auditor’s Report To the Retirement Committee Retirement Plan for Employees of Brazos River Authority Report on the Financial Statements We have audited the accompanying statements of fiduciary net position of the Retirement Plan for Employees of Brazos River Authority (the Plan) as of February 28, 2018 and 2017, the statements of changes in fiduciary net position for the years then ended, and the related notes to the financial statements, which collectively comprise the Plan’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 controls 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 an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the fiduciary net position of the Plan as of February 28, 2018 and 2017, and the changes in fiduciary net position for the years then ended, in accordance with accounting principles generally accepted in the United States of America.

2

Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require the management’s discussion and analysis—unaudited, schedule of changes in the BRA’s net pension liability—unaudited, schedule of the BRA’s net pension liability and related ratios—unaudited, schedule of the BRA’s contributions—unaudited, schedule of investment returns—unaudited, and notes to required supplementary information—unaudited, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the 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 financial statements and other knowledge we obtained during our audit of the 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.

Austin, Texas August 23, 2018

Management’s Discussion & Analysis

3


MANAGEMENT’S DISCUSSION AND ANALYSIS

(Unaudited)

February 28, 2018 and 2017 The management’s discussion and analysis for the Retirement Plan for Employees of Brazos River Authority (the “Plan”) provides a narrative overview of the financial activities and funding conditions for the fiscal years ended February 28, 2018 and 2017. OVERVIEW OF THE FINANCIAL STATEMENTS The discussion and analysis is intended to serve as an introduction to the Plan’s financial statements. The financial section consists of the Plan’s basic financial statements, notes to the financial statements, and required supplementary information. The Plan’s Financial Statements The Plan’s basic financial statements are a statement of fiduciary net position that provides information about the fair value and composition of plan assets, plan liabilities, and plan net position; and a statement of changes in fiduciary net position that provides information about the year-to-year changes in fiduciary net position. On July 16, 2007 the Board of Directors (BOD) of the Brazos River Authority (BRA) approved an adoption to freeze the plan as of September 30, 2007. Beginning October 1, 2007, all existing employees, and any employee hired after that date, transitioned to and became members of the Texas County and District Retirement System (TCDRS). TCDRS is a statewide agent multiple-employer public employee retirement system consisting of 735 nontraditional defined benefit pension plans. The notes to the financial statements include a brief plan description and a summary of significant accounting policies. Additionally, the notes to the financial statements contain information about the plan, including contributions, investment concentrations, valuations and risks.

Condensed Financial Information

Condensed Financial Information February 28, 2018 February 28, 2017 February 29, 2016 Fiduciary net position Total Assets $ 20,698,509 $ 20,645,347 $ 18,734,016 Total Liabilities (263,710) (7,371) (7,245) Total fiduciary net position $ 20,434,799 $ 20,637,976 $ 18,726,771 Change in net position Net investment income/(loss) $ 1,255,630 $ 2,972,010 $ (2,200,950) Employer’s Contributions 1,018,208 911,424 826,368 Benefits paid to participants (2,392,969) (1,891,765) (1,713,349) Administrative expenses (84,045) (80,464) (80,599) Net increase/(decrease) in fiduciary net position (203,177) 1,911,205 (3,168,530) Total net position restricted for pensions at beginning of the year 20,637,976 18,726,771 21,895,301 Total net position restricted for pensions at end of year $ 20,434,799 $ 20,637,976 $ 18,726,771

4



(Unaudited)

February 28, 2018 and 2017 Financial Highlights ● Fiduciary net position reported in the financial statements is $20,434,799 for the fiscal year reported. This

compares to the previous years when fiduciary net position reported was $20,637,976 in 2017 and $18,726,771 in 2016. These assets are held in trust to pay pension benefits to employees.

● The Plan’s investment policy target mixture is as follows; the equity funds have an allowable range of 15%-40%

for domestic large cap, 7.5%-12.5% for domestic small/mid cap and 12.5%-17.5% for international funds; The fixed income funds have an allowable range of 15%-40%; The Master Limited Partnerships (MLPs) have an allowable range of 0%-15%; Real Estate Investment Trusts (REITs) have an allowable range of 0%-15%; and Private Equity investments have an allowable range of 0%-10%. The cash equivalents have a maximum range of 10%. The Plan’s asset allocation at February 28, 2018 and 2017 was as follows:

Cash Equivalents

0%

Fixed Income

22%

Domestic Large Cap

31%

Domestic Small/Mid

Cap10%

International Funds16%

REITS9%

MLPs10%

Private Equity

Partnerships2%

As of 2/28/2018

Cash Equivalents

2%

Fixed Income

23%

Domestic Large Cap

30%

Domestic Small/Mid

Cap12%

International Funds14%

REITS13%

MLP's5%

Private Equity

Partnerships1%

As of 2/28/2017

5



(Unaudited)

February 28, 2018 and 2017 ● During the plan years ended February 28, 2018 and 2017 the employer made an annual recommended

contribution of $1,018,208 and $911,424, respectively. See Note A in the accompanying financial statements. ● As 2017 came to an end, the economy appeared to be on a strong footing with consumer spending, production

ramping up and the job market continuing to improve. The stock market closed 2017 at record highs and as of December 31, 2017 and the Plan had a 12.23% total rate of return. During February 2018, the market experience two 1,000-point sell-off days in the final month of the Plan year. Investors had been fearing that inflation will push the Feds into raising rates more quickly than anticipated. Consequently, the pension fund experienced a decrease in returns when compared to prior year. The return on the domestic equity portion of the portfolio was 12.53% which was lower than the benchmarks. The return on the fixed income portion of the portfolio was 4.78% vs. the Barclays Intermediate index being .10%. The return on the international portion of the portfolio was 16.75% vs. the MSCI AC World EX USA index being 22.18%. The return on the REITS portion of the portfolio was -7.12% vs. the Wilshire US REIT Index being -9.97%. The return on the MLP’s portion of the portfolio was -13.74% vs the Alerian MLP Index being -15.22%.

● The Plan’s past performance for the last three years are as follows: (reported in a full 12 month period, gross of

fees).

Current Year Year Two Year ThreeTotal Plan 6.46% 16.39% -10.42%Domestic Equity 12.53% 19.69% -8.41%International Equity 16.75% 11.74% -15.38%Fixed Income 4.78% 4.87% 2.01%REITS -7.12% 16.55% -4.19%MLP's -13.74% 46.28% -44.66%

-60.00%

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

Percentages %

Comparative Performances for the Plan and by Fund

6

Retirement Plan for Employees of


MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited)


Current Environment There were 346 employees participating in the Plan as of the beginning of the year valuation date, March 1, 2017 compared to 349 as of the beginning of year valuation date March 1, 2016. Future Outlook and Currently Known Facts The Plan’s actuary has developed a recommended contribution for fiscal year 2019 of $1,137,903. There are no other currently known facts, decisions or conditions known to management. Contacting the Plan’s Administrator This financial report is designed to provide our participants and stakeholders with a general overview of the Plan’s financial activities. If you have questions about this report or need additional financial information, contact the Human Resources Manager at 254-761-3104.

Financial Statements

7


STATEMENTS OF FIDUCIARY NET POSITION


2018 2017 Assets Investments: Mutual funds - equities $8,550,888 $8,790,941 Mutual funds – fixed income 3,258,897 3,618,585 Mutual funds – international funds 3,255,489 2,918,499 Mutual funds – REIT 1,935,287 2,652,032 Mutual funds – MLPs 1,909,752 1,006,400 Limited partnership – hedge fund 1,160,602 1,099,214 Limited partnership 575,039 228,679 Cash equivalents 52,530 330,846 Total investments 20,698,484 20,645,196 Accrued interest 25 151 Total assets 20,698,509 20,645,347 Liabilities Benefits payable 256,298 - Administrative expenses payable 7,412 7,371 Total liabilities 263,710 7,371 Net position restricted for pensions $20,434,799 $20,637,976

The accompanying notes are an integral part of these financial statements.

8


STATEMENTS OF CHANGES IN FIDUCIARY NET POSITION

Years Ended February 28, 2018 and 2017

2018 2017 Additions Investment income: Interest $ 374 $ 935 Dividends 407,083 342,706 Net appreciation in fair value of investments 848,173 2,628,369 Net investment income 1,255,630 2,972,010 Employer’s contributions 1,018,208 911,424 Total additions 2,273,838 3,883,434 Deductions Benefits paid to participants 2,392,970 1,891,765 Administrative expenses 84,045 80,464 Total deductions 2,477,015 1,972,229 Net increase / (decrease) in net position (203,177) 1,911,205 Total net position restricted for pensions at beginning of the year 20,637,976 18,726,771 Total net position restricted for pensions at end of year $20,434,799 $20,637,976

The accompanying notes are an integral part of these financial statements.


NOTES TO FINANCIAL STATEMENTS


9

NOTE A - DESCRIPTION OF PLAN

The following description of the Retirement Plan for Employees of Brazos River Authority (the “Plan”) provides only general information. Participants should refer to the plan agreement for a more complete description of the Plan’s provisions. General The Plan, a single employer plan, was established in 1959 by the Brazos River Authority (“BRA”), a governmental agency of the State of Texas, and was amended and restated effective September 1, 1997. Prior to the revision, the Plan was exclusively a defined benefit structure. Effective September 1, 1997, the Plan changed to a combination defined benefit and defined contribution structure (Internal Revenue Code (“Code”) Section 401 (a) plan) for all eligible employees who first become participants (or who re-enter plan participation) on or after September 1, 1997. Employees who were active plan participants on August 31, 1997, made a one-time irrevocable election to choose either to remain under the benefit provisions of the prior plan as it existed August 31, 1997, or to have benefits determined under the new benefit provisions effective September 1, 1997. On July 16, 2007 the Board of Directors (“BOD”) of the BRA approved a resolution to freeze the plan as of September 30, 2007. The resolution amended the Plan by closing the Plan to new entrants, freezing benefit accrual service credits and limiting compensation and service contributions to the defined contribution component of the Plan. On October 18, 2010 the BOD of the BRA approved a resolution to amend and restate substantially the form of the Plan effective November 30, 2010. The resolution spun-off the defined contribution portion into its own plan Defined Contribution Plan for Employees of BRA (“Defined Contribution Plan”) and at the same time made effective November 30, 2010 the termination of the Defined Contribution Plan. The Plan is administered by a Retirement Committee that is made up of five members selected from the BOD of the BRA and three members selected from employees of the BRA. All members are appointed by the Presiding Office of the BOD and ratified by the BOD. The Plan has a fiscal year-end of the last day in February. Participation in the Plan as of the beginning of year valuation dates, March 1, 2017 and 2016 is composed of the following: Group 2017 2016 Retirees and beneficiaries currently receiving benefits 129 119 Deferred beneficiaries 3 3 Terminated plan members entitled to but not yet receiving benefits 113 116 Active plan members 101 111 346 349 Contributions The BRA’s employees are not required or allowed to contribute to the Plan. The BRA intends to make, but does not guarantee, annual contributions in amounts at least equal to the amounts that would be required to meet the minimum funding requirements of Section 412 of the Code. The actuarial valuations for the Plan for the valuation date of March 1, 2018 and March 1, 2017 were performed by Arthur J. Gallagher & Co. A copy of the assumptions used and methods of determining the required contribution for the fiscal years commencing September 1, 2018 and 2017 can be obtained by contacting the Human Resources Manager at 254-761-3104. The BRA made the recommended contributions for the Plan years ending February 28, 2018 and 2017.


NOTES TO FINANCIAL STATEMENTS - CONTINUED


10

NOTE A - DESCRIPTION OF PLAN - Continued

Eligibility and Vesting For all prior Plan-electing participants, the vesting schedule shall be as follows: Vesting Years of Vesting Service Percentage Less than 15 0% 15 or more 100% This is provided, however, that a prior Plan-electing participant’s vesting percentage shall be 100% upon the attainment of (i) normal retirement age of 65 years or (ii) age 45 plus the completion of five years of vesting service as defined. For all other participants, the vesting schedule shall be as follows: Vesting Years of Vesting Service Percentage Less than 5 0% 5 or more 100% Payment of Benefits The Plan provides pension, disability and death benefits. The Plan’s normal retirement age is 65. A participant may retire after reaching both the age of 55 and completing 15 years of service or after both attaining age 62 and completing 10 years of service. Pension benefits are based on the participant’s final average monthly compensation and credited service. Final average monthly compensation is defined as the participant’s average monthly rate of basic compensation during whichever five successive calendar years out of the last ten calendar years immediately preceding the participant’s termination date, provides the highest average monthly rate of compensation for the participant. Provided, however, compensation for calendar years beginning on or after January 1, 2008 shall not be included in the determination of average monthly compensation.

Retirement benefits begin on the participant’s normal or early retirement date and normally continue for the participant’s lifetime under the following options: (1) Monthly income payable throughout the lifetime of the participant with a specified guaranteed number of monthly payments with such guaranteed number, if any, being a multiple of 60; (2) Monthly income payable throughout the lifetime of the participant with a reduced percentage of such initial monthly income continuing after his death for the remaining lifetime, if any, of his joint pensioner; such reduced percentage shall be selected from three stated percentages; (3) Monthly income payable throughout the joint lifetime of the participant and his joint pensioner reducing to a percentage of such initial monthly income upon the death of either the participant or his joint pensioner and such reduced amount payable for the remaining lifetime, if any, of the survivor; such reduced percentage shall be selected from three percentages; (4) Monthly income payable throughout the lifetime of the participant with 100 percent of such monthly income continuing after his death for the remaining lifetime, if any, of his joint pensioner; (5) Monthly income payable for a specified guaranteed number of months for 120, 180 or 240 payments; (6) A combination of Option 5 with Option 2, Option 3 or Option 4; or (7) A single, lump sum payment. A single, lump sum payment, however, is not payable if the lump sum payment is greater than $10,000.




11

NOTE A - DESCRIPTION OF PLAN - Continued For early retirement and termination benefits, the age 65 retirement benefit is considered to accrue on a pro rata basis over service with the BRA For retirement before age 62, the accrued retirement income is reduced by an actuarial reduction factor to account for the younger age of retirement and earlier commencement of retirement income payments. A late retirement benefit is available for participants that continue service beyond normal retirement age. Benefits provided for on the delayed retirement date will not be less than the actuarial equivalent of the benefit the participant would have received had they retired on their normal retirement date.

NOTE B - SIGNIFICANT ACCOUNTING POLICIES

Valuation of Investments Investments are carried at fair value. Fair value is the price that would be received to sell an asset in an orderly transaction between market participants. The Plan values mutual funds at fair value based on quoted market prices per share of the fund. Purchases and sales of investments are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. The Plan values investments in limited partnerships based on the partnership’s net asset value (NAV) of the underlying securities and the Plan’s percentage of units owned in each such fund. The NAV of each fund is based on fair value reported by the fund managers based on the audited financial statements of each fund at the end its reporting period and any subsequent contributions, distributions, withdrawals or changes in fair value through the Plan’s fiscal year end.

Basis of Accounting The financial statements are prepared using the economic resources measurement focus and the accrual basis of accounting. Contributions are recognized when earned, and benefit amounts are recognized when due and payable under the terms of the Plan. Risk and Uncertainties The Plan utilizes various investment instruments. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and, that such changes could materially affect the amounts reported in the statements of fiduciary net position and the statements of changes in fiduciary net position.

Related Party Transactions During the years ended February 28, 2018 and 2017 there were no related party transactions other than the employer contributions. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of net position restricted for pensions and changes therein. Actual results could differ from those estimates.




12

NOTE C - INVESTMENTS Investment Policy The investment policy’s objectives are to insulate the Plan’s assets against deterioration of purchasing power caused by inflation and over time provide, at a minimum, the Plan’s actuarially assumed rate of return of the Plan’s assets and provide an acceptable lever of volatility in both long and short-term periods. The Plan’s investment decisions are made by the investment managers following guidelines established by the Committee. The Plan’s investment consultant will generally be responsible for the following:

• Assist in the development and on-going review of the investment policy, asset allocation strategy and performance of the investment managers,

• Conduct investment manager searches when requested by the Committee, • Monitor the performance of the Investment Manager(s) to provide the Committee with the ability to

determine the progress toward the investment objectives, • Communicate matters of policy, manager research and manager performance to the Committee, and • Act as liaison between the Committee and any outside investment managers, consultants, or other

advisors in receiving and responding to inquiries, referrals and solicitations. The Retirement Committee will generally be responsible for the following:

• Adopting and executing the Plan’s investment policy, • Establishing appropriate investment objectives, • Hiring of trustees, investment consultants, managers and other service providers whose expertise is

deemed by the Committee to be appropriate and necessary, • Monitoring of performance and compliance with this policy by investment managers and other

service providers who have been given responsibility over the Plan’s assets, and • Revising the investment policy to reflect changing conditions within the Plan, or to refine the policy

in order to make it more effective.

The investment managers are responsible for determining investment strategy and implementing security selection within the policy and guideline limitations.




13

NOTE C - INVESTMENTS - Continued Investment Policy Target Allocation There were no changes to the target allocation during the current fiscal year. The following was the Committee’s adopted targeted mixture of asset allocation policy as of the Plan years ended February 28, 2018 and 2017.

Asset Class Minimum Maximum Target Total Public Equities 40% 70% 50%

Domestic Large Cap Equity 15% 40% 25% Domestic Sm/Mid Cap Equity 7.5% 12.5% 10% International Equity 12.5% 17.5% 15% Total Fixed Income 15% 40% 25% Other Alternative Investments Master Limited Partnerships 0% 15% 10% Real Estate Investment Trusts 0% 15% 10% Private Equity Partnerships 0% 10% 5%

Investments The Plan categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level one inputs are unadjusted quoted prices in active markets for identical assets; Level two inputs are significant other observable inputs other than quoted market prices included in Level one that are observable directly or indirectly; Level three inputs are unobservable inputs representing the Plan’s own assumptions about the assumptions a market participant would use in valuing the investment. The Plan’s investments in mutual funds are classified as level one investments based on quoted market prices. Alternative investments are valued at fair value, determined by the NAV of the partnership shares.




14

NOTE C - INVESTMENTS - Continued

The following table summarizes the inputs used as of February 28, 2018: Fair Value Measurements Using

2/28/2018

Quoted Prices in Active

Markets for Identical Assets

(Level 1)

Significant Other

Observable Inputs

(Level 2)

Significant Unobservable

Inputs (Level 3) Investments by fair value level Equity Securities Mutual funds - equities $8,550,888 $8,550,888 - - Mutual funds – international funds 3,255,489 3,255,489 - - Mutual funds - REIT 1,935,287 1,935,287 - - Mutual funds - MLPs 1,909,752 1,909,752 - - Total equity securities 15,651,416 15,651,416 - - Fixed Income Securities Mutual funds – fixed income 3,258,897 3,258,897 - - Total investments by fair value level 18,910,313 $18,910,313 - - Limited partnership – hedge fund fixed income strategy

1,160,602

Limited partnership 575,039 Total investments measured at NAV 1,735,641

Total investments measured at fair value $20,645,954




15

NOTE C - INVESTMENTS - Continued The following table summarizes the inputs used as of February 28, 2017: Fair Value Measurements Using

2/28/2017

Quoted Prices in Active

Markets for Identical Assets

(Level 1)

Significant Other

Observable Inputs

(Level 2)

Significant Unobservable

Inputs (Level 3) Investments by fair value level Equity Securities Mutual funds - equities $8,790,941 $8,790,941 - - Mutual funds – international funds 2,918,499 2,918,499 - - Mutual funds - REIT 2,652,032 2,652,032 - - Mutual funds - MLPs 1,006,400 1,006,400 - - Total equity securities 15,367,872 15,367,872 - - Fixed Income Securities Mutual funds – fixed income 3,618,585 3,618,585 - - Total investments by fair value level 18,986,457 $18,986,457 - - Limited partnership – hedge fund fixed income strategy

1,099,214

Limited partnership 228,679 Total investments measured at NAV 1,327,893

Total investments measured at fair value $20,314,350

The carrying value for investments measured at NAV as of February 28, 2018 are as follows: Investments Measured at Net Asset Value

Carrying Value

Unfunded Commitments

Redemption Frequency

Redemption Notice Period

Limited partnership – hedge fund fixed income strategy 1

1,160,602

None

Semi-annually

90 days

Limited partnership2 575,039 $925,462 Semi-annually 90 days Total investments measured at NAV $ 1,735,641

The carrying value for investments measured at NAV as of February 28, 2017 are as follows: Investments Measured at Net Asset Value

Carrying Value

Unfunded Commitments

Redemption Frequency

Redemption Notice Period

Limited partnership – hedge fund fixed income strategy 1

1,099,214

None

Semi-annually

90 days

Limited partnership2 228,679 $1,275,000 Semi-annually 90 days Total investments measured at NAV $ 1,327,893




16


1Limited Partnership – Hedge fund – PIMCO Tactical Opportunities Offshore Fund, LP The Fund invests all or substantially all of its assets in PIMCO Tactical Opportunities Master Fund Ltd. The Fund’s and the Master Fund’s investment objective is to seek returns by investing principally in (or otherwise gaining exposure to) performing, stressed or distressed securities and loans of any type and with any sector across the global fixed income markets. 2Limited Partnership –LBC Credit Partners IV, LP The Partnership was established to provide a high degree of current income primarily through the origination and management of a diversified portfolio of privately negotiated, secured, high-yielding loans to middle-market corporate borrowers, cash flow loans, unsecured mezzanine loans, broadly syndicated corporate loans, equity participations, corporate leases, debtor-in-possession loans, loan pools and bonds traded in the primary and secondary markets. A comparison of original cost to fair value at the end of February is as follows: 2018 2017 Fair Value Cost Fair Value Cost Total Public Equities: Equities-Large Cap Equity $ 6,391,237 $ 5,544,328 $ 6,301,249 $ 5,209,925 Equities-Sm/Mid Cap Equity 2,159,651 1,672,205 2,489,692 2,024,759 International Equity 3,255,489 2,619,752 2,918,499 2,539,598 Fixed Income Strategies: Hedge Fund Fixed Income Funds

1,160,602 3,258,897

943,509

3,365,731

1,099,214 3,618,585

917,516

3,686,668 Other Alternative Investments: Master Limited Partnership 1,909,752 2,467,877 1,006,400 1,208,526 Real Estate Investment Trust 1,935,287 2,257,349 2,652,032 2,644,268 Private Equity Partnerships 575,039 565,199 228,679 225,000 Cash Equivalents 52,530 52,530 330,846 330,846 $ 20,698,484 $ 19,488,480 $20,645,196 $ 18,787,106

Rate of Return and Risk For the years ended February 28, 2018, and 2017 the annual money-weighted rate of return on the Plan investments, net of pension plan investment expense, was +6% and +15.8%, respectively. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amount actually invested. The Plan’s investments are subject to various risks that have the potential to result in losses. These risks are custodial credit risk, credit risk, concentration of credit risk, interest rate risk, and foreign currency risk. Each risk is described in detail on the following pages. Custodial Credit Risk Custodial credit risk for investments is the risk that in the event of a failure of a counter party to a transaction, the Plan will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. Investment securities are exposed to custodial risk if the securities are uninsured, are not registered in the name of the Plan and are held by the counterparty, its trust or agent, but not in the Plan’s name. The Plan has no investment policy regarding custodial credit risk. The Plan is not exposed to custodial credit risk because all securities are held by the Plan’s custodian in the Plan’s name.




17

NOTE C - INVESTMENTS – Continued Concentration of Credit Risk Concentration of credit risk is defined as the risk of loss attributed to the magnitude of a government’s investment in a single issuer. The Plan’s investment policy states that all investment managers have full discretion in the management of those assets of the Plan allocated to the investment manager(s), subject to prospectus or the overall investment guidelines set by the Committee. Those prospectus state that manager(s) shall not purchase common stock or securities convertible into stock of any issuer if the purchase would cause the portfolio’s assets to reach five percent (5%) of the outstanding voting stock; or more than ten percent (10%) in market value of all outstanding securities of a single issuer. Since it is the policy of the Plan to employ multiple managers with different investment strategies and styles, the single issuer concentrations are further reduced. Securities issued by or backed by the full faith and credit of the U.S. Government and mutual funds are not subject to concentration of credit risk. There were no investments in any one issuer in excess of 5% of plan investments at February 28, 2018 or 2017. However, the following were investments in any one organization that represent 5% or more of fiduciary net position at February 28, 2018 and 2017 (other than those issued or guaranteed by the U.S. Government):

Security Name Classification FYE 2018 Fair

Value >5% FYE 2017 Fair

Value >5% BBH Core Select Fund Equities-large cap $6,391,237 $6,301,249 Cohen & Steers Realty REIT’s $1,935,287 $2,652,032 Diamond Hill Fund Equities-small cap $1,059,932 $1,260,772 Harbor International Fund International fund $3,255,489 $2,918,499 Metropolitan West Fund Fixed Income $1,778,016 $2,174,443 Vanguard Short Term Fund Fixed Income $1,480,881 $1,444,142 Vanguard Midcap Fund Equities-small cap $1,099,719 $1,228,920

Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment. The Plan investment policy manages foreign currency risk by limiting investments in foreign companies to 17.5% of the Plan’s assets, and employing investment managers that select companies whose results are not necessarily tied to the currency of their country of origin. All of the Plan’s investments are US dollar denominations and thus are not subject to foreign currency risk. Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligation. The Plan investment policy manages credit risk by limiting investments in equities and fixed income securities to those determined as creditworthy by the investment managers and listed as investment grade by nationally recognized rating agencies. Furthermore, the Plan restricts, and is monitored by the Investment Consultant, equity transactions involving:

Common stock in non-public corporations, Short sales of any type, Letter stock, and Buying or selling on margin.




18


As of February 28, 2018 and 2017, the credit ratings for mutual funds in fixed income securities were as follows:

Security Name FYE 2018 Credit

Rating FYE 2017

Credit Rating Metropolitan West Fund A A Vanguard Short Term Fund A A

Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of investments. The Plan is exposed to minimal interest rate risk, since more than 80% of the fixed income allocation of the plan has an average maturity of less than 4 years, and is benchmarked to the BC Intermediate Government Credit index BC US Credit 1-5 Year Index. The Plan’s investment in the Metropolitan West Intermediate Bond fund has a dollar-weighted average maturity expected to range from three to seven years. The average duration of this fund was approximately 3.3 years and 3.7 years at February 28, 2018 and 2017, respectively. The Plan’s investment in the Vanguard Short-Term Investment Grade Admiral Bond fund has a dollar-weighted average maturity expected to range from one to four years. The average duration of this fund was approximately 2.7 years and 2.6 years at February 28, 2018 and 2017, respectively.

NOTE D - NET PENSION LIABILITY The status of the BRA’s net pension liability for the two most recent actuarial valuation dates as of February 28, 2018 and 2017 are as follows:

Actuarial Valuation

Date

Total Pension Liability

(a)

Plan Fiduciary Net

Position (b)

BRA’s Net Pension Liability (a – b)

Plan Fiduciary Net Position as a % of the Total

Pension Liability (b/a)

Feb. 28, 2018 $ 31,145,443 $ 20,434,799 $10,710,644 65.61% Feb. 28, 2017 $ 30,722,087 $ 20,637,976 $ 10,084,111 67.18%




19

NOTE D - NET PENSION LIABILITY - Continued Long-Term Expected Rate of Return

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimated ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the Plan’s target asset allocation as of February 28, 2018 and 2017 (see the discussion of the Plan’s investment policy) are summarized in the following table:

Asset Class February 28, 2018 February 28, 2017 Domestic Equities 7.50% 7.50% International equity 8.50% 8.50% Domestic Fixed income 2.50% 2.50% Master limited partnerships 7.50% 7.50% Real estate investment trusts 4.50% 4.50% Private equity partnerships 7.80% 7.80% Cash 0.00% 0.00%

Discount Rate The discount rate used to measure the total pension liability was 6.5 percent. The projection of cash flows used to determine the discount rate assumed the contributions from the BRA will meet the minimum funding requirements as supplied by the actuarially determined computation. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity in the Discount Rate The following presents the net pension liability of the Plan as of February 28, 2018 and 2017 calculated using the discount rate of 6.5 percent, as well as what the Plan’s net pension liability would be if it were calculated using a discount rate that is 1- percentage point lower or 1-percentage point higher than the current rate:

Brazos River Authority’s Net Pension Liability 1% Decrease Current Discount 1% Increase (5.5%) Rate (6.5%) (7.5%)

February 28, 2018 $13,853,812 $10,710,644 $8,034,641 February 28, 2017 $13,272,084 $10,084,111 $7,373,411




20

NOTE D - NET PENSION LIABILITY - Continued

Actuarial Assumptions Additional information as of the two most recent actuarial valuation dates as of March 1, 2018 and 2017 are as follows:

2018 2017 Actuarial cost method Entry Age Entry Age Payroll growth rate for amortization N/A N/A Remaining amortization period N/A N/A Actuarial Assumptions: Investment rate of return 6.5%* 6.5%* Projected salary increase N/A** N/A** Cost-of-living adjustments N/A** N/A** *Includes inflation at 3.5% 3.5%

** Not applicable due to the amendment to freeze the Plan in 2007. The schedules of the BRA’s net pension liability, presented as required supplementary information (“RSI”) following the notes to the financial statements, present multiyear trend information about whether the actuarial values of plan assets are increasing or decreasing over time relative to the plan fiduciary net position. The projection of benefits for financial reporting purposes does not explicitly incorporate the potential effects of legal or contractual funding limitations. Effective May 18, 2015, the Retirement Committee voted and approved the change in the mortality table used in the actuaries’ assumptions. The new mortality table is the RP2000 Combined Healthy Mortality Table, Fully Generational with Scale AA, set forward one year for males.

NOTE E - TAX STATUS

The Internal Revenue Service has determined and informed the BRA by a letter dated April 16, 2012, that the Plan and related trust are designed in accordance with applicable sections of the Code and therefore, tax exempt. The Plan’s Retirement Committee believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the Code and therefore, tax exempt.




21

NOTE F - PLAN TERMINATION

The BRA may terminate the Plan at any time. In the event the Plan terminates, the Plan’s net position held in trust shall be allocated among the participants and beneficiaries of the Plan in accordance with the following procedure:

(a) The plan administrator shall determine the date of distribution and the asset value to be distributed, after

taking into account the expenses of such distribution, and shall have a final accounting and allocation of plan assets performed as of the date of distribution;

(b) The plan administrator shall determine the method of distribution of the asset value, on the basis that the amount required to provide any given benefit shall mean the actuarially equivalent single sum value of the accrued benefit on the date of the termination for the plan for each participant or other person entitled to benefits under the plan;

(c) The plan administrator shall direct the trustee to make distributions to persons in the amounts and manner determined above, or in accordance with applicable regulatory or other guidance, as of the distribution date.

Required Supplementary Information

22


SCHEDULE OF CHANGES IN THE BRA’S NET PENSION LIABILTY (Unaudited)

Last Ten Fiscal Years *

2018 2017 2016 2015

Total pension liability

Service cost $ 76,016 $ 105,788 $ 127,126 $ - Interest 1,933,528 1,891,624 1,901,930 1,765,095 Differences between expected and actual experience 550,484 689,326 228,217 637,863 Change of assumptions - - ***(593,331) **1,259,465 Benefit payment, including refunds of member contributions (2,136,672) (1,891,765) (1,713,349) (1,656,340) Net change in total pension liability $ 423,356 $ 794,973 $ (49,407) $ 2,006,083 Total pension liability – beginning 30,722,087 29,927,114 29,976,521 27,970,438 Total pension liability – ending (a) $31,145,443 $ 30,722,087 $ 29,927,114 $ 29,976,521 Plan fiduciary net position Employer contributions $ 1,018,208 $ 911,424 $ 826,368 $ 682,436 Net investment income/(loss) 1,255,630 2,972,010 (2,200,950) 1,226,445 Benefit payment, including refunds of member contributions (2,392,970) (1,891,765) (1,713,349) (1,656,340) Administrative expenses (84,045) (80,464) (80,599) (78,782) Net change in plan fiduciary net pension $ (203,177) $ 1,911,205 $ (3,168,530) $ 173,759 Plan fiduciary net position – beginning $ 20,637,976 $ 18,726,771 $ 21,895,301 $ 21,721,542 Plan fiduciary net position – ending (b) $ 20,434,799 $ 20,637,976 $ 18,726,771 $ 21,895,301 BRA’s net pension liability – (a) – (b) $ 10,710,644 $ 10,084,111 $ 11,200,343 $ 8,081,220

Note to Schedule: * Fiscal year 2015 was the 1st year of implementation of GASB 67, therefore only four years are shown. **Effective May 18, 2015, the Retirement Committee of the BRA voted and approved the change in the mortality table used in the Actuaries

assumptions. As a result of this change the BRA’s net pension liability increased significantly. ***In 2016 the Plan implemented the GASB Statement No. 67 requirement for recognition of service costs for frozen plans.

23


SCHEDULE OF THE BRA’S NET PENSION LIABILITY AND RELATED RATIOS (Unaudited)

Last ten fiscal years *

Actuarial Valuation

Date

Total Pension Liability

(a)

Plan Fiduciary Net

Position (b)

BRA’S Net Pension Liability (a – b)

Plan Fiduciary Net Position as a

% of the Total Pension

Liability (b/a)

Covered Employee

Payroll

BRA’S Net Pension

Liability as a % of Covered

Employee Payroll

Feb. 28, 2018 $ 31,145,443 $ 20,434,799 $10,710,644 65.61% $ 7,405,027 144.64% Feb. 28, 2017 $ 30,722,087 $ 20,637,976 $10,084,111 67.18% $ 7,674,349 131.40% Feb. 29, 2016 $ 29,927,114 $ 18,726,771 $11,200,343 62.57% $ 7,989,938 140.18% Feb. 28, 2015 $ 29,976,521 $ 21,895,301 $ 8,081,220 73.04% $ 7,962,415 101.50%

Note to Schedule: * Fiscal year 2015 was the 1st year of implementation of GASB 67, therefore only four years are shown.

24



SCHEDULE OF THE BRA’S CONTRIBUTIONS (Unaudited)

Year Ended

Actuarially Determined

Contribution (a)

Contributions in Relation to the

Actuarially Determined

Contribution (b)

Contribution Deficiency (Excess)

(b-a)

Covered-Employee Payroll

Contributions as a

Percentage of Covered-Employee

Payroll February 28, 2018 $1,018,208 $1,018,208 - $ 7,405,027 13.75% February 28, 2017 $911,424 $911,424 - $ 7,674,349 11.88% February 29, 2016 $826,368 $826,368 - $ 7,989,938 10.35% February 28, 2015 $682,436 $682,436 - $ 7,962,415 8.57% February 28, 2014 $750,287 $750,287 - $ 7,815,209 9.60% February 28, 2013 $655,971 $655,971 - $ 7,864,785 8.34% February 29, 2012 $302,314 $302,314 - $ 8,406,599 3.60% February 28, 2011 $222,879 $222,879 - $ 9,028,907 2.47% February 28, 2010 $296,283 $296,283 - $ 9,842,617 3.01% February 28, 2009 $ 13,178 $ 12,998 $180 $ 10,356,313 0.01%

Note to Schedule: The comparability of trend information is affected by changes in actuarial assumptions, benefit provisions, actuarial funding methods, accounting policies and other changes. Those changes usually affect trends in contribution requirements and in ratios that use the total pension liability as a factor. Isolated analysis of the dollar amounts of actuarial value of assets, total pension liability, and net pension liability can be misleading. The plan fiduciary net position as a percentage of the total pension liability provides an indication of the Plan’s funding status on a going-concern basis. Analysis of this percentage over time indicates whether the Plan is becoming financially stronger or weaker. Generally, the greater the percentage, the stronger the public employee retirement system is.

Additional information as of the two most recent actuarial valuation dates as of February 28, 2018 and 2017 are as follows:

2018 2017 Actuarial cost method Entry age method Entry age method Payroll growth rate for amortization N/A N/A Remaining amortization period N/A N/A Actuarial Assumptions: Investment rate of return 6.5%* 6.5%* Projected salary increase N/A** N/A** Cost-of-living adjustments N/A** N/A** *Includes inflation at 3.5% 3.5%

** Not applicable due to the amendment to freeze the Plan in 2007.

25



SCHEDULE OF INVESTMENT RETURNS (Unaudited)

Note to schedule: The money-weighted average rate of return expresses investment performance, net of investment expenses, reflecting the estimated effect of the contributions received and the benefits paid during the year.

Fiscal Year Ended Annual Money-Weighted Rate of Return, Net of Investment Expenses

February 28, 2018 6.05% February 28, 2017 15.83% February 29, 2016 -10.7% February 28, 2015 5.35% February 28, 2014 11.80% February 28, 2013 6.78% February 29, 2012 4.03% February 28, 2011 13.87 February 28, 2010 22.96 February 28, 2009 -23.29%


Brazos River Authority Actuarial Valuation

March 1, 2019

© 2019 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. | AJG.COM


Table of Contents

Actuarial Certification 1

Executive Summary 2

Exhibits

▌ Input Information

1. Summary of Plan Provisions 3

2. Census Summary and Reconciliation 7

3. Distribution of Active Participants by Age and Service as of March 1, 2019 9

4. Distribution of Retired Participants by Age and Monthly Benefit as of March 1, 2019 10

5. Reconciliation of Assets 11

6. Historical Market Value of Assets and Rates of Return 12

7. Development of Actuarial Value of Assets 13

8. Actuarial Assumptions and Methods 14

▌ Contribution Information

9. Development of Recommended Contribution 16

10. Development of Contributions under Alternative Assumptions 17

▌ Supplemental Information

11. Accumulated Benefit Liability as of March 1, 2019 18

12. Statement of Accumulated Plan Benefits 19

13. Projected Schedule of Benefit Payments 20

14. Historical Valuation Results 21


1

ACTUARIAL CERTIFICATION March 1, 2019 to February 28, 2020

This actuarial valuation report measured as of March 1, 2019 for the Retirement Plan for Employees of Brazos

River Authority (the “Plan”) was prepared in accordance with Generally Accepted Actuarial Principles and

Practices to determine the annual recommended contribution. Determinations for other purposes may be

significantly different from those contained in this report; the results in this report should not be used for other

purposes.

Our Actuarial Valuation has been conducted with reliance upon Participant information and financial information

provided to us by Brazos River Authority and Wells Fargo Bank. We have reviewed the data provided to us for

general reasonableness but did not audit the data. The accuracy of the information in this report is dependent on

the quality and completeness of the data provided to us. Each assumption not specified by statute or regulations

is reasonable taking into account the experience of the Plan, Plan-specific features, the purpose of the measurement

and reasonable expectations.

The actuarial assumptions used in this report were selected by Brazos River Authority, with the agreement of

Arthur J. Gallagher & Co. In our opinion, the actuarial assumptions used (a) each, and in the aggregate, are

reasonably related to the experience of the Plan and to reasonable expectations, and (b) in the aggregate, represent

our best estimate of anticipated experience under the Plan.

The termination, retirement and mortality assumptions were updated. There were no changes in Plan provisions,

cost allocation procedures, contribution allocation procedures, or methods from the previous measurement. There

were no adjustments of prior measurements or use of approximations which would materially impact the results.

The accrued benefits valued in this report reflect the benefit attribution pattern described by the plan provisions.

Please see Exhibit 8 for a description of all other assumptions and methods.

Future actuarial measurements may differ significantly from the current measurements presented in this report

due to such factors as the following: plan experience differing from that anticipated by the economic or

demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as

part of the natural operation of the methodology used for these measurements (such as the end of an amortization

period or additional cost or contribution requirements based on the Plan’s funded status); and changes in Plan

provisions or applicable law. Due to the limited scope of this engagement, we did not complete an analysis of the

potential range of such future measurements.

To the best of our knowledge, the information contained in this report is complete, accurate and in accordance

with generally accepted actuarial principles as recommended by the American Academy of Actuaries. The actuary

indicated below is an Enrolled Actuary and a Member of the American Academy of Actuaries and meets the

Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained in this

valuation.

Jennifer R. Turk, EA, FSA, MAAA Austin S. Miller

Enrollment Number 17-07346 Actuarial Analyst

May 3, 2019 May 3, 2019

Date Date


2

EXECUTIVE SUMMARY March 1, 2018 and March 1, 2019

The following table highlights the changes since the last Actuarial Valuation:

3/1/18 3/1/19

Percent

Change

Recommended Contributions

Dollar Amount – Beginning of Year $ 1,102,085 $ 1,380,306 25.2%

Dollar Amount – Mid-Year 1,137,903 1,425,166 25.2%

Participants

Active 88 81 (8.0%)

Retired and Beneficiaries 141 150 6.4%

Terminated Vested 110 106 (3.6%)

Transferred Canal Employees 5 4 (20.0%)

Total 344 341 (0.9%)

Assets

Actuarial Value of Assets $ 20,867,108 $ 20,372,827 (2.4%)

Market Value of Assets $ 20,434,799 $ 19,851,827 (2.9%)

Rate of return on Market Value

(net of expenses)

6.3% 3.4%

Accumulated Benefit Liability

Vested $ 31,446,838 $ 33,014,673 5.0%

Total 31,446,838 33,014,673 5.0%

Funding Ratios

Actuarial Value Basis 66% 62%

Market Value Basis 65% 60%

Input Information


3

EXHIBIT 1 Summary of Plan Provisions

This summary has been prepared for valuation purposes only. It outlines the Plan Provisions necessary to perform

the Actuarial Valuation:

Definitions

Accrued Benefit:

Calculated in the same manner as a participant’s Normal Retirement Benefit, but using Compensation and Service

to the determination date prior to the participant’s normal retirement age.

Average Monthly Compensation:

Average monthly Compensation for the five complete and consecutive calendar years out of the last ten that

produce the highest average. Compensation for the 2007 calendar year is included in Average Monthly

Compensation, if applicable, but no compensation after December 31, 2007 is considered for any Plan purposes.

For participants with less than five years of service, the average is determined based on the Compensation for all

years of service prior to 2008 and the actual number of months and portions thereof that the participant received

that Compensation.

Compensation:

An Employee’s total wages for the calendar year ending in the plan year but excluding any bonuses designated

as non-retirement qualifying bonuses.

Early Retirement Date:

First day of the month coincident with or next following either:

attainment of age 55 and completion of 15 years of Vesting Service, or

attainment of age 62 and completion of 10 years of Vesting Service

Effective Date of Plan:

June 1, 1959 (Most recent restatement date is October 25, 2010)

Excess Earnings:

Excess, if any, of Average Monthly Compensation over the monthly average of the Code Section 401(1)(5)(E)

“Covered Compensation” that applies to an individual who attains their Social Security Normal Retirement Age

in the year of a participant’s termination or retirement, to Normal Retirement Age, if earlier, rounded to the nearest

$50. For valuation dates after September 30, 2007, the applicable Covered Compensation amount for participants

who are not past their Normal Retirement Date is $4,300.

Normal Form of Benefit:

Life only annuity


4

EXHIBIT 1 (Continued) Summary of Plan Provisions

Normal Retirement Date:

First day of the month coincident with or next following 65th birthday.

Service:

Service credited for Eligibility, Benefit, and Vesting purposes means the period of full-time employment

measured in years and days / 365. Benefit Service is frozen as of September 30, 2007. Vesting service continues

to accrue after September 30, 2007.

Plan Provisions

Eligibility:

Each employee (who is not a part-time or temporary or who customarily works less than 20 hours a week or 5

months a year) is eligible to participate on the first of the month on or following completion of one year of service.

No employees are allowed to enter or re-enter the plan after September 30, 2007.

Normal Retirement Benefit:

Participants as of August 31, 1997 electing prior plan:

Monthly benefit equal to the greater of:

1.75% of Average Monthly Compensation multiplied by Benefit Service plus 0.52% of Excess

Earnings multiplied by Benefit Service (maximum 35 years), and

2.70% of Average Monthly Compensation multiplied by Benefit Service (maximum 22 years) plus

0.52% of Average Monthly Compensation multiplied by Benefit Service in excess of 22 years

(maximum 6 years) plus 0.52% of Excess Earnings multiplied by Benefit Service (maximum 28

years).

Participants as of August 31, 1997 not electing prior plan:

Monthly benefit equal to 1.0% of Average Monthly Compensation multiplied by Benefit Service, plus the

excess, if any, of:

the amount of Accrued Benefit as of the date of termination that the participant would have received

under the terms in effect on August 31, 1997, over

the sum of the participant’s actual Accrued Benefit plus the monthly income payable at Normal

Retirement Age in the Normal Form which is actuarially equivalent to the participant’s account

balance at termination of employment attributable to both employer and participant contributions.


5


Participants after August 31, 1997:

Monthly benefit equal to 1.0% of Average Monthly Compensation multiplied by Benefit Service.

Former Canal Division employees:

Monthly benefit based on service, pay, and plan provisions as of July 21, 1988. Participants who transferred

from the Canal Division to Galveston County Water Authority on July 21, 1988, will continue to accrue

Vesting Service as long as they remain employed by Galveston County Water Authority.

Early Retirement Benefit:

Determined in the same way as the Normal Retirement Benefit but based on Service and Average Monthly

Compensation to Early Retirement Date. This benefit is actuarially reduced by the application of two early

retirement reduction factors:

1. 1/2% reduction for each month that a participant’s Early Retirement Date precedes age 62 (Applies to

all portions of a participant’s Normal Retirement Benefit except those listed in (2) below).

2. 2/3% reduction for the first 36 months and 1/3% for each additional month that a participant’s Early

Retirement Date precedes age 65 (Applies to the Normal Retirement Benefit components that involve

Excess Earnings).

Delayed Retirement Benefit:

Determined in the same way as the Normal Retirement Benefit but based on Service and Average Monthly

Compensation to Delayed Retirement Date. The benefit must be at least as great as the actuarial equivalent of

the benefit the participant would have received had s/he retired on his/her Normal Retirement Date. For this

purpose, only interest is used during the deferral period.

Disability Benefit:

Monthly benefit the participant would have been entitled to at his/her Normal Retirement Date had his/her Service

and rate of Compensation continued until his/her Normal Retirement Date, under Plan provisions applicable at

his/her date of termination.

Death Benefit:

In the event of a participant’s death prior to retirement, his/her beneficiary will be entitled to a benefit equal to

the actuarial equivalent of the greater of:

the lump sum value of the participant’s accrued benefit, and

12 (or 30 if a participant had attained age 45 and completed 5 years of service or had attained age 55)

times the participant’s average Monthly Compensation, limited to

100 times the monthly retirement income the participant would have been entitled to at his/her Normal

Retirement Date had his/her Service and rate of Compensation continued until his/her Normal Retirement

Date.


6


Termination Benefit:

Monthly benefit payable at Normal Retirement Date equal to monthly Accrued Benefit at the participant’s date

of termination. Participants must be vested, per the table below, to receive the Termination Benefit

Participant Group Vesting Condition

Prior Plan electing participants Age 45 and 5 years of Vesting Service, or 15

years of Vesting Service

All other participants 5 years of Vesting Service

Participants may elect to receive his/her Termination Benefit prior to his/her Normal Retirement Date if s/he

satisfies the Early Retirement Date conditions, and the benefit would be actuarially reduced.


7

EXHIBIT 2 Census Summary and Reconciliation

3/1/18 3/1/19

Active Participants

Number

Fully Vested 88 81

Non-Vested 0 0

Total 88 81

Average Age 54.9 55.1

Average Vesting Service 19.4 20.2

Average Frozen Monthly Benefit at Normal Retirement $ 617 $ 606

Retired Participants and Beneficiaries

Number 141 150


Average Years Since Retirement 8.9 9.0

Average Monthly Benefit $ 1,302 $ 1,234

Terminated Vested Participants

Number 110 106


Average Monthly Benefit at Normal Retirement $ 463 $ 471

Canal Division Employees

Number 5 4


Average Monthly Benefit at Normal Retirement $ 156 $ 155


8

EXHIBIT 2 (Continued) Census Summary and Reconciliation

The following information provides the reconciliation from March 1, 2018 to March 1, 2019 of Plan Participants.

Actives

Terminated

Vested Retirees

Beneficiaries

Receiving

Benefits

Deferred

Beneficiaries

Transferred

Canal

Employees Total

3/1/2018 Participants 88 104 113 28 6 5 344

New Entrants - - - - - - 0

Rehired - - - - - - 0

Terminated Vested (2) 2 - - - - 0

Terminated Non-Vested - - - - - - 0

Paid-Out Lump Sum - - - - - - 0

Certain Period Expired - - - - - - 0

Retired (4) (5) 10 - - (1) 0

Disabled - - - - - - 0

Died with Beneficiary (1) - (1) 2 - - 0

Died w/o Beneficiary - - - (2) - - (2)

Data Corrections - (2) - - 1 - (1)

3/1/2019 Participants 81 99 122 28 7 4 341


9

EXHIBIT 3 Distribution of Active Participants by Age and Service as of March 1, 2019

21

27

1311

7

1 1

0

5

10

15

20

25

30

0-1 2-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40+

Years of Service

Active Participants by Years of Service as of March 1, 2019

2

4

6

13

16 15

1213

0

2

4

6

8

10

12

14

16

18

0-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+

Age

Active Participants by Age as of March 1, 2019


10

EXHIBIT 4 Distribution of Retired Participants by Age and Monthly Benefit as of March 1, 2019

43

3740

20

10

0

5

10

15

20

25

30

35

40

45

50

<$500 $500-$999 $1,000-$1,999 $2,000-$2,999 $3,000+

Monthly Benefit Amount

Retired Participants and Beneficiaries by Monthly Benefit Amount as of

March 1, 2019

4

9

18

39

30

18

32

0

5

10

15

20

25

30

35

40

45

<55 55-59 60-64 65-69 70-74 75-79 80+

Age

Retired Participants and Beneficiaries by Age as of March 1, 2019


11

EXHIBIT 5 Reconciliation of Assets

1. Beginning balance March 1, 2018 $ 20,434,799

2. Contributions 1,137,903

3. Investment Income

(a) Interest and Dividends $ 526,185

(b) Realized Gains (Losses) 1,729,673

(c) Unrealized Gains (Losses) (1,579,649)

(d) Total Investment Income $ 676,209

4. Benefit Payments (2,260,472)

5. Expenses (136,612)

6. Ending Balance February 28, 2019 $ 19,851,827

7. Year-End Adjustments

(a) Benefits Payable $ 0

(b) Accrued Income 0

(c) Total Adjustments $ 0

8. Market Value of Assets as of March 1, 2019 $ 19,851,827


12

EXHIBIT 6 Historical Market Value of Assets and Rates of Return

22.8%

13.9%

4.0%7.0%

12.1%

5.8%

-10.3%

16.3%

6.3%3.4%

-30%

-20%

-10%

0%

10%

20%

30%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Year Ending

Annual Rate of Return on Assets (prior to expenses)

19.0

20.319.9

20.3

21.721.9

18.7

20.620.4

19.9

$17

$18

$19

$20

$21

$22

$23

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

(in

mil

lio

ns)

March 1 of Year

Historical Market Value of Assets


13

EXHIBIT 7 Development of Actuarial Value of Assets

Determination of Investment Gain/(Loss)

1. Market Value as of March 1, 2018 $ 20,434,799

2. Actual Benefit Payments and Administrative Expenses (2,397,084)

3. Actual Authority Contributions 1,137,903

4. Expected Return at 6.50% 1,287,983

5. Benefits Payable 0

6. Expected Market Value as of February 28, 2019 $ 20,463,601

7. Actual Market Value as of March 1, 2019 19,851,827

8. Asset Gain/(Loss) = (7) – (6) $ (611,774)

Determination of Actuarial Value of Assets

1. Market Value as of March 1, 2019 $ 19,851,827

2. Deferred gains/(losses) on assets since March 1, 2015

(1)

Plan

Year Ending

(2)

Investment

Gain/(Loss)

(3)

Percent

Deferred

(4)

Amount

Deferred

February 28, 2015 (151,782) 0% 0

February 29, 2016 (3,593,193) 20% (718,639)

February 28, 2017 1,788,703 40% 715,481

February 28, 2018 (47,372) 60% (28,423)

February 28, 2019 (611,774) 80% (489,419)

Total (2,615,418) $ (521,000)

3. Preliminary Actuarial Value of Assets as of March 1, 2019: (1) – (2) $ 20,372,827

4. Maximum Actuarial Value of Assets as of March 1, 2019: 120% of (1) $ 23,822,192

5. Actuarial Value of Assets as of March 1, 2019: Minimum of (3) and (4) $ 20,372,827


14

EXHIBIT 8 Actuarial Assumptions and Methods

Actuarial Assumptions

1. Funding Interest Rates 6.5% Compounded Annually, net of expenses 2. GASB 67 Interest Rate 6.5% Compounded Annually, net of expenses

3. Mortality Pub-2010 General table, Fully Generational with Scale MP-2018

See Illustrative Values on following page

4. Retirement age Based on age See Illustrative Values on following page

5. Termination rates Sarason’s T-7 See Illustrative Values on following page

6. Form of payment Retirees Based on optional form elected All others Life only annuity

7. Marital status Percent married 100% Age difference Males assumed to be 3 years older than females 8. Disability incidence Wyatt 1985 Disability Study Class I See Illustrative Values on following page 9. Salary Scale Not applicable

Actuarial Asset Value

Effective March 1, 2009, Market Value with gains and losses smoothed over a 5 year period. Prior to March 1,

2009, all assets were valued at Market Value.

Actuarial Cost Method

Effective March 1, 2009, the funding method changed from the aggregate funding method to the Entry Age

Normal funding method with Unfunded Actuarial Accrued Liability amortized over a closed 30 year period.

Effective March 1, 2012, the funding method changed to a closed 20 year period.

Changes in Assumptions

Effective March 1, 2019 the termination and retirement rates were updated to be more in line with historical

plan experience, based on a study for the 3/1/2012-3/1/2017 period. The mortality table was updated based on

more recent national mortality studies, to the Pub-2010 General table with fully generational improvements

using scale MP-2018.


15

EXHIBIT 8 (Continued) Actuarial Assumptions and Methods

Illustrative Values

Rate of Mortality (EEs)

(per 1,000)

Rate of Disability

(per 1,000)

Rate of Termination

(per 1,000)

Age Male Female Male Female Unisex

25 0.28 0.09 0.38 0.47 96.7

30 0.36 0.15 0.48 0.80 93.0

35 0.47 0.23 0.69 1.36 87.1

40 0.66 0.36 1.17 2.11 77.5

45 0.98 0.56 2.02 3.23 63.5

50 1.49 0.83 3.58 5.33 42.2

55 2.19 1.23 7.22 9.52 15.5

60 3.19 1.86 12.56 11.59 1.5

65 4.68 2.96 17.53 13.58 0.0

Age Rate of

Retirement

55-60 7.0%

61-69 15.0%

70+ 100.0%

Contribution Information


16

EXHIBIT 9 Development of Recommended Contribution

Development of Unfunded Actuarial Accrued Liability 3/1/18 3/1/19

1. Actuarial Accrued Liability

(a) Participants Receiving Benefits $ 21,167,265 $ 22,643,126

(b) Vested Terminated Participants* 4,114,257 4,427,620

(c) Active Participants 6,165,316 5,943,927

(d) Total: (a) + (b) + (c) $ 31,446,838 $ 33,014,673

2. Actuarial Value of Assets (Exhibit 7) 20,867,108 20,372,827

3. Unfunded Actuarial Accrued Liability $ 10,579,730 $ 12,641,846

* Includes vested benefits of Transferred Canal Employees

Development of Recommended Contribution 3/1/18 3/1/19

1. Total Normal Cost $ 0 $ 0

2. Amortization of Unfunded Actuarial Accrued Liability* 1,102,085 1,380,306

3. Recommended Contribution, Beginning of Year: (1) + (2) $ 1,102,085 $ 1,380,306

4. Interest to Mid Year at 6.5% 35,818 44,860

5. Recommended Contribution, Mid Year: (3) + (4) $ 1,137,903 $ 1,425,166

*Amortization period changed from a 30 year closed amortization period as of March 1, 2009 to a 20 year closed

amortization period as of March 1, 2012. As of March 1, 2019 there are 13 years remaining in the amortization

period.


17

EXHIBIT 10 Development of Contributions under Alternative Assumptions

2019 CONTRIBUTION BASED ON ALTERNATIVE INTEREST RATE ASSUMPTIONS

7.5%

Investment

Return

Assumption

7.0%

Investment

Return

Assumption

Baseline (6.5%)

Investment

Return

Assumption

6.0%

Investment

Return

Assumption

5.5%

Investment

Return

Assumption

1. Actuarial Accrued Liability $ 30,042,482 $ 31,466,897 $ 33,014,673 $ 34,700,358 $ 36,540,636

2. Actuarial Value of Assets (Exhibit 7) 20,372,827 20,372,827 20,372,827 20,372,827 20,372,827

3. Unfunded Actuarial Accrued Liability:

(1) - (2) $ 9,669,655 $ 11,094,070 $ 12,641,846 $ 14,327,531 $ 16,167,809

4. Total Normal Cost 0 0 0 0 0

5. 13 Year Amortization of Unfunded

Actuarial Accrued Liability 1,106,966 1,240,575 1,380,306 1,526,830 1,680,904

6. Recommended Contribution, Beginning

of Year: (4) + (5) $ 1,106,966 $ 1,240,575 $ 1,380,306 $ 1,526,830 $ 1,680,904

7. Interest to Mid Year at Specified Rate 41,511 43,420 44,860 45,805 46,225

8. Recommended Contribution, Mid Year:

(6) + (7) $ 1,148,477 $ 1,283,995 $ 1,425,166 $ 1,572,635 $ 1,727,129

Amortization charges are created when the plan has an Unfunded Actuarial Accrued Liability (page 16).

Supplemental Information


18

EXHIBIT 11 Accumulated Benefit Liability as of March 1, 2019

A measure of the degree of progress made in funding any plan is a comparison between the liability for benefits

and the assets accumulated to date.

For ongoing plans, these liabilities are determined using the regular valuation assumptions. The following table

shows the actuarial present value of accumulated plan benefits.

No. of

Participants

Plan

Liability

Inactive Participants

Receiving benefits 150 $ 22,643,126

Deferred Vested* 110 $ 4,427,620

Active Participants

Vested 81 $ 5,943,927

Non-Vested 0 $ 0

Total Vested Benefits 341 $ 33,014,673

Total Accrued Benefits 341 $ 33,014,673

*Includes Vested Benefits of Transferred Canal Employees

The ratio of assets to the above liabilities (known as the Funding Ratio) represents the degree to which

accumulated plan benefits have been funded. As of March 1, 2019, the Actuarial Value of Assets was

$20,372,827. The table below outlines the Funding Ratios for both vested and total accrued benefits.

Plan Liability

Funding Ratios

Vested Accrued Benefits 62%

Total Accrued Benefits 62%


19

EXHIBIT 12 Statement of Accumulated Plan Benefits

Actuarial Present Value of Accumulated

Plan Benefits 3/1/18 3/1/19

Vested Benefits

Participants currently

receiving payments

$ 21,167,265 $ 22,643,126

Vested terminated and deferred

beneficiary participants

4,034,260 4,358,869

Transferred Canal Employees 79,997 68,751

Active Participants 6,165,316 5,943,927

Total Vested Benefits $ 31,446,838 $ 33,014,673

Non-Vested Benefits $ 0 $ 0

Total $ 31,446,838 $ 33,014,673

Statement of Changes in Accumulated Plan Benefits

1. Beginning Value, March 1, 2018 $ 31,446,838

2. Increases (Decreases)

(a) Plan amendment $ 0

(b) Change in actuarial assumptions 1,867,871

(c) Benefits accumulated, including experience

gains and losses

(11,300)

(d) Increase for interest due to decrease in

discount period at 6.5%

1,971,736

(e) Benefits paid (2,260,472)

(f) Net increase (decrease) $ 1,567,835

3. Ending Value, March 1, 2019 $ 33,014,673


20

EXHIBIT 13 Projected Schedule of Benefit Payments

Year

Beginning March 1 Total Annual Benefits

Number of

Active Participants

Number Retired &

Deferred Vested

2019 2,358,400 81 259

2020 2,388,178 69 266

2021 2,445,255 63 268

2022 2,459,068 54 271

2023 2,561,006 49 272

2024 2,603,656 44 273

2025 2,622,572 39 272

2026 2,619,523 35 272

2027 2,603,524 31 271

2028 2,617,969 27 270

2029 2,601,146 24 268

2030 2,596,550 21 265

2031 2,552,828 18 262

2032 2,539,427 16 258

2033 2,509,089 14 255

2034 2,473,072 12 250

2035 2,409,521 10 245

2036 2,343,421 8 240

2037 2,254,589 7 234

2038 2,162,984 6 227


21

EXHIBIT 14 Historical Valuation Results

* Includes 14 participants hired after 3/1/2006 who were excluded from the 3/1/2008 valuation.

** Values unknown

*** Prior to 2009, all assets were valued at Market Value. Effective as of March 1, 2009, Actuarial Value is Market Value with gains and losses

smoothed over a 5 year period.

Date

Number of

Participants

Assets Beginning of Year

Recommended

Contribution

Actual

Contribution

Accounting Information

Market

Value

Rate of

Return

Actuarial

Value*** Vested

Liability

Funded

Ratio

2004 344 $ 19,877,854 ** 19,877,854 659,486 659,486 ** **

2005 346 20,287,134 ** 20,287,134 780,379 780,379 19,094,613 106%

2006 366 22,073,145 ** 22,073,145 871,115 871,115 20,527,926 108%

2007 371 23,929,592 10.16% 23,929,592 0 0 21,881,445 109%

2008 373* 22,975,577 1.34% 22,975,577 13,654 12,998 23,114,662 99%

2009 370 16,449,501 (22.64%) 19,739,401 285,574 296,283 22,710,811 87%

2010 367 18,998,609 22.75% 20,943,846 214,823 222,879 23,192,005 90%

2011 365 20,332,382 13.92% 20,342,500 291,387 302,314 23,558,595 86%

2012 360 19,886,106 3.99% 19,775,845 635,323 655,971 27,231,180 73%

2013 356 20,288,366 6.97% 19,332,217 726,670 750,287 27,639,847 70%

2014 351 21,728,957 12.10% 20,626,849 660,955 682,436 27,970,438 74%

2015 351 21,895,301 5.78% 21,358,481 800,356 826,368 29,976,521 71%

2016 349 18,726,771 (10.28%) 21,199,575 882,735 911,424 30,382,378 70%

2017 346 20,637,976 16.33% 21,201,895 986,158 1,018,208 31,077,124 68%

2018 344 20,434,799 6.27% 20,867,108 1,102,085 1,137,903 31,446,838 66%

2019 341 19,851,827 3.41% 20,372,827 1,380,306 TBD 33,014,673 62%

Chief Financial Officer

Cash and Investment Manager

Accounting Manager

These reports were compiled using information provided by the Brazos River Authority. No procedures were performed to test the accuracy or completeness of this information. The market values included in these reports were obtained by Valley View Consulting, L.L.C. from sources believed to be accurate and represent proprietary valuation. Due to market fluctuations these levels are not necessarily reflective of current liquidation values. Yield calculations are not determined using standard performance formulas, are not representative of total return yields and do not account for investment advisor fees.

Brazos River AuthorityQuarterly Investment Report

For the Quarter Ended

February 28, 2019

Prepared by

Valley View Consulting, L.L.C.

The investment portfolio of the Brazos River Authority is in compliance with the Public Funds Investment Act, Governmental Accounting Standards Board Statements No. 31 & 72, and BRA's Investment Policy and Investment Strategy Statements.

Asset Type Book Value Market Value (3) Book Value Market Value (3) Ave. Yield

Demand/Pools/MMMF 18,341,011$ 18,341,011$ 11,491,587$ 11,491,587$ 2.59%Securities/CDs 106,640,675 106,640,675 110,914,127 110,914,127 2.64%Totals 124,981,686$ 124,981,686$ 122,405,715$ 122,405,715$ 2.63%

Total Portfolio 2.63% Total Portfolio 2.55%Average Yield 1 year Treasury Note 2.45% Average Yield 1 year Treasury Note 2.35%

Quarter 775,154$ Fiscal YTD 1,516,153$

(3) Market value analysis was not done on BRA CDs because BRA CDs are direct placed non-negotiable CDs.

(2) Fiscal Year-to-Date Average Yields calculated using quarter end report yields and adjusted book values and does not reflect a total return analysis or account for advisory fees.

Average Yield for Current Quarter (1)

Interest Income

Quarter End Results by Investment Category:

November 30, 2018

Fiscal Year-to-Date Average Yield (2)

(1) Average Yield for Current Quarter is calculated using quarter end report yield and adjusted book values and does not reflect a total return analysis or account for advisory fees.

February 28, 2019

Valley View Consulting, L.L.C.Page 2.

Economic Overview 2/28/2019

The Federal Open Market Committee (FOMC) maintained the Fed Funds target range to 2.25% - 2.50% (Effective Fed Funds are trading +/-2.40%). The official outlook changed radically to almost eliminate the outlook for additional increases during 2019. Gradual FRB portfolio reduction continues by limiting reinvestment of maturing holdings, but that strategy is under discussion. Even with the Federal government shut-down Employment/ Unemployment remain solid with January adding 304k new jobs and a 241k three month average. First estimate fourth quarter GDP registered 2.6% (market estimate was 2.2%). Crude oil remained +/-$55. The Stock Markets continued higher from December lows. Housing strengthened slightly. The mid-maturity yield curve is still sway-backed.

0250500750

1,0001,2501,5001,7502,0002,2502,5002,7503,0003,250

S&P 500

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50US Treasury Historical Yields - Since Nov 2015

Six Month T-Bill Two Year T-Note Ten Year T-Note

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50 Treasury Yield Curves

February 28, 2018 November 30, 2018 February 28, 2019

0.000.501.001.502.002.503.003.504.004.505.005.506.00

US Treasury Historical Yields - Since 2006

Six Month T-Bill Two Year T-Note Ten Year T-Note


Investment Holdings

Coupon/ Maturity Settlement Original Face/ Purchased Book Market Market Life Description Ratings YTM Date Date Par Value Value Value Price Value (3) (days) YieldWells Fargo Disbursement 0.00% 03/01/19 02/28/19 (1,255,933)$ (1,255,933)$ (1,255,933)$ 1.000 (1,255,933)$ 1 0.00%Graham Savings 0.25% 03/01/19 02/28/19 22,322 22,322 22,322 1.000 22,322 1 0.25%Southside Bank MMA 2.58% 03/01/19 02/28/19 5,122,477 5,122,477 5,122,477 1.000 5,122,477 1 2.58%Green Bank MMA 2.56% 03/01/19 02/28/19 67,871 67,871 67,871 1.000 67,871 1 2.56%NexBank MMA 2.65% 03/01/19 02/28/19 6,647,091 6,647,091 6,647,091 1.000 6,647,091 1 2.65%Alliance Bank MMA 1.30% 03/01/19 02/28/19 4,401 4,401 4,401 1.000 4,401 1 1.30%Wells Fargo MMA 2.25% 03/01/19 02/28/19 878,587 878,587 878,587 1.000 878,587 1 2.25%TexPool AAAm 2.40% 03/01/19 02/28/19 4,772 4,772 4,772 1.000 4,772 1 2.40%

Green Bank CD 2.24% 03/12/19 03/12/18 8,135,775 8,135,775 8,135,775 100.000 8,135,775 12 2.26%Lubbock National Bank CD 1.50% 03/20/19 09/20/17 4,086,009 4,086,009 4,086,009 100.000 4,086,009 20 1.51%Green Bank CD 1.50% 04/05/19 10/06/17 5,094,612 5,094,612 5,094,612 100.000 5,094,612 36 1.51%Alliance Bank CD 2.50% 05/15/19 05/15/18 3,097,007 3,097,007 3,097,007 100.000 3,097,007 76 2.52%Alliance Bank CD 1.85% 05/23/19 11/23/17 2,080,307 2,080,307 2,080,307 100.000 2,080,307 84 1.86%LegacyTexas Bank CD 2.25% 06/03/19 03/02/18 2,041,942 2,041,942 2,041,942 100.000 2,041,942 95 2.27%Alliance Bank CD 2.80% 06/28/19 06/29/18 2,058,769 2,058,769 2,058,769 100.000 2,058,769 120 2.83%Green Bank CD 1.55% 07/05/19 10/10/17 2,039,116 2,039,116 2,039,116 100.000 2,039,116 127 1.56%Alliance Bank CD 2.80% 07/12/19 07/13/18 10,141,649 10,141,649 10,141,649 100.000 10,141,649 134 2.83%Alliance Bank CD 2.65% 08/30/19 08/31/18 2,178,346 2,178,346 2,178,346 100.000 2,178,346 183 2.68%Alliance Bank CD 2.70% 09/03/19 06/01/18 1,422,057 1,422,057 1,422,057 100.000 1,422,057 187 2.73%Alliance Bank CD 2.70% 09/11/19 06/08/18 1,114,941 1,114,941 1,114,941 100.000 1,114,941 195 2.73%East West Bank CD 2.79% 09/18/19 09/18/18 15,189,215 15,189,215 15,189,215 100.000 15,189,215 202 2.83%Alliance Bank CD 2.85% 10/03/19 07/03/18 8,115,350 8,115,350 8,115,350 100.000 8,115,350 217 2.88%Alliance Bank CD 2.65% 10/21/19 08/24/18 2,577,300 2,577,300 2,577,300 100.000 2,577,300 235 2.68%Alliance Bank CD 2.54% 10/25/19 04/25/18 4,225,387 4,225,387 4,225,387 100.000 4,225,387 239 2.56%Alliance Bank CD 2.75% 11/25/19 05/24/18 3,087,166 3,087,166 3,087,166 100.000 3,087,166 270 2.78%Alliance Bank CD 2.80% 12/13/19 06/13/18 2,028,175 2,028,175 2,028,175 100.000 2,028,175 288 2.83%East West Bank CD 2.84% 12/18/19 09/18/18 3,038,525 3,038,525 3,038,525 100.000 3,038,525 293 2.88%Green Bank CD 2.90% 01/10/20 10/12/18 5,036,548 5,036,548 5,036,548 100.000 5,036,548 316 2.93%Alliance Bank CD 2.80% 01/24/20 07/25/18 2,071,862 2,071,862 2,071,862 100.000 2,071,862 330 2.83%WallisBank CD 2.95% 02/10/20 11/09/18 2,014,861 2,014,861 2,014,861 100.000 2,014,861 347 2.98%Alliance Bank CD 3.00% 03/13/20 12/14/18 4,500,000 4,500,000 4,500,000 100.000 4,500,000 379 3.03%East West Bank CD 2.89% 03/18/20 09/18/18 3,039,208 3,039,208 3,039,208 100.000 3,039,208 384 2.93%Alliance Bank CD 3.00% 04/24/20 01/24/19 6,000,000 6,000,000 6,000,000 100.000 6,000,000 421 3.03%Alliance Bank CD 2.71% 05/26/20 02/26/19 3,000,000 3,000,000 3,000,000 100.000 3,000,000 453 2.74%Alliance Bank CD 3.05% 06/19/20 12/20/18 3,500,000 3,500,000 3,500,000 100.000 3,500,000 477 3.09%

122,405,715$ 122,405,715$ 122,405,715$ 122,405,715$ 195 2.63% (1) (2)

February 28, 2019

(1) Weighted average life - For purposes of calculating weighted average life bank, pool, and money market investments are assumed to mature the next business day.

(2) Weighted average yield to maturity - The weighted average yield to maturity is based on adjusted book value, realized and unrealized gains/losses and investment advisory fees are not considered. The yield for the reporting month is used for bank, pool, and money market investments.(3) Market value analysis was not done on BRA CDs because BRA CDs are direct placed non-negotiable CDs


$20

$40

$60

$80

$100

$120

$140

Total Portfolio (Millions)

Quarter End Book Value

$0

$10

$20

$30

$40

$50

$60

Book Value Maturity Distribution (Millions)

Maturity Date

Securities/CDs91%

Pools0%

Bank Accounts

9%

Portfolio Composition

0.00

0.50

1.00

1.50

2.00

2.50

3.00Total Portfolio Performance

Rolling One Year Treasury Weighted Average Yield


Book Value Comparison

Coupon/ Maturity Original Face/ Purchase/ Maturity/Call/ Original Face/Description Rating Yield Date Par Value Book Value Adjustment Adjustment Par Value Book ValueWells Fargo Disbursement 0.00% 03/01/19 (364,969)$ (364,969)$ –$ (890,964)$ (1,255,933)$ (1,255,933)$ Graham Savings 0.25% 03/01/19 20,211 20,211 2,111 22,322 22,322 Southside Bank MMA 2.58% 03/01/19 4,145,627 4,145,627 976,850 5,122,477 5,122,477 Green Bank MMA 2.56% 03/01/19 67,324 67,324 547 67,871 67,871NexBank MMA 2.65% 03/01/19 13,582,779 13,582,779 (6,935,688) 6,647,091 6,647,091Alliance Bank MMA 1.30% 03/01/19 11,806 11,806 (7,405) 4,401 4,401Wells Fargo MMA 2.25% 03/01/19 873,490 873,490 5,097 878,587 878,587TexPool AAAm 2.40% 03/01/19 4,744 4,744 28 4,772 4,772Wallis State Bank CD 1.84% 12/14/18 4,618,358 4,618,358 (4,618,358) – – Wallis State Bank CD 1.42% 12/19/18 2,028,552 2,028,552 (2,028,552) – – Alliance Bank CD 1.48% 12/19/18 1,522,324 1,522,324 (1,522,324) – – Wallis State Bank CD 1.58% 01/24/19 2,074,561 2,074,561 (2,074,561) – – Alliance Bank CD 1.45% 02/22/19 1,040,616 1,040,616 (1,040,616) – – LegacyTexas Bank CD 2.20% 02/25/19 2,033,151 2,033,151 (2,033,151) – – Green Bank CD 2.24% 03/12/19 8,090,591 8,090,591 45,183 8,135,775 8,135,775 Lubbock National Bank CD 1.50% 03/20/19 4,070,599 4,070,599 15,410 4,086,009 4,086,009 Green Bank CD 1.50% 04/05/19 5,075,423 5,075,423 19,189 5,094,612 5,094,612 Alliance Bank CD 2.50% 05/15/19 3,077,613 3,077,613 19,393 3,097,007 3,097,007 Alliance Bank CD 1.85% 05/23/19 2,070,651 2,070,651 9,655 2,080,307 2,080,307 LegacyTexas Bank CD 2.25% 06/03/19 2,034,161 2,034,161 7,782 2,041,942 2,041,942 Alliance Bank CD 2.80% 06/28/19 2,044,497 2,044,497 14,272 2,058,769 2,058,769 Green Bank CD 1.55% 07/05/19 2,031,181 2,031,181 7,936 2,039,116 2,039,116 Alliance Bank CD 2.80% 07/12/19 10,070,575 10,070,575 71,073 10,141,649 10,141,649 Alliance Bank CD 2.65% 08/30/19 2,164,205 2,164,205 14,141 2,178,346 2,178,346 Alliance Bank CD 2.70% 09/03/19 1,412,548 1,412,548 9,509 1,422,057 1,422,057 Alliance Bank CD 2.70% 09/11/19 1,107,486 1,107,486 7,455 1,114,941 1,114,941 East West Bank CD 2.79% 09/18/19 15,085,084 15,085,084 104,131 15,189,215 15,189,215 Alliance Bank CD 2.85% 10/03/19 8,057,468 8,057,468 57,881 8,115,350 8,115,350 Alliance Bank CD 2.65% 10/21/19 2,560,199 2,560,199 17,101 2,577,300 2,577,300 Alliance Bank CD 2.54% 10/25/19 4,198,507 4,198,507 26,880 4,225,387 4,225,387 Alliance Bank CD 2.75% 11/25/19 3,065,915 3,065,915 21,251 3,087,166 3,087,166 Alliance Bank CD 2.80% 12/13/19 2,014,115 2,014,115 14,060 2,028,175 2,028,175 East West Bank CD 2.84% 12/18/19 3,017,323 3,017,323 21,203 3,038,525 3,038,525 Green Bank CD 2.90% 01/10/20 5,000,000 5,000,000 36,548 5,036,548 5,036,548 Alliance Bank CD 2.80% 01/24/20 2,057,343 2,057,343 14,520 2,071,862 2,071,862 WallisBank CD 2.95% 02/10/20 2,000,000 2,000,000 14,861 2,014,861 2,014,861 Alliance Bank CD 3.00% 03/13/20 – – 4,500,000 4,500,000 4,500,000 East West Bank CD 2.89% 03/18/20 3,017,628 3,017,628 21,580 3,039,208 3,039,208 Alliance Bank CD 3.00% 04/24/20 – – 6,000,000 6,000,000 6,000,000 Alliance Bank CD 2.71% 05/26/20 – – 3,000,000 3,000,000 3,000,000 Alliance Bank CD 3.05% 06/19/20 – – 3,500,000 3,500,000 3,500,000

124,981,686$ 124,981,686$ 18,575,647$ (21,151,618)$ 122,405,715$ 122,405,715$

November 30, 2018 February 28, 2019


Market Value Comparison

Coupon/ Maturity Original Face/ Qtr to Qtr Original Face/Description Rating Discount Date Par Value Market Value (1) Change Par Value Market Value (1)Wells Fargo Disbursement 0.00% 03/01/19 (364,969)$ (364,969)$ (890,964)$ (1,255,933)$ (1,255,933)$ Graham Savings 0.25% 03/01/19 20,211 20,211 2,111 22,322 22,322 Southside Bank MMA 2.58% 03/01/19 4,145,627 4,145,627 976,850 5,122,477 5,122,477 Green Bank MMA 2.56% 03/01/19 67,324 67,324 547 67,871 67,871NexBank MMA 2.65% 03/01/19 13,582,779 13,582,779 (6,935,688) 6,647,091 6,647,091Alliance Bank MMA 1.30% 03/01/19 11,806 11,806 (7,405) 4,401 4,401Wells Fargo MMA 2.25% 03/01/19 873,490 873,490 5,097 878,587 878,587TexPool AAAm 2.40% 03/01/19 4,744 4,744 28 4,772 4,772Wallis State Bank CD 1.84% 12/14/18 4,618,358 4,618,358 (4,618,358) – – Wallis State Bank CD 1.42% 12/19/18 2,028,552 2,028,552 (2,028,552) – – Alliance Bank CD 1.48% 12/19/18 1,522,324 1,522,324 (1,522,324) – – Wallis State Bank CD 1.58% 01/24/19 2,074,561 2,074,561 (2,074,561) – – Alliance Bank CD 1.45% 02/22/19 1,040,616 1,040,616 (1,040,616) – – LegacyTexas Bank CD 2.20% 02/25/19 2,033,151 2,033,151 (2,033,151) – – Green Bank CD 2.24% 03/12/19 8,090,591 8,090,591 45,183 8,135,775 8,135,775Lubbock National Bank CD 1.50% 03/20/19 4,070,599 4,070,599 15,410 4,086,009 4,086,009 Green Bank CD 1.50% 04/05/19 5,075,423 5,075,423 19,189 5,094,612 5,094,612 Alliance Bank CD 2.50% 05/15/19 3,077,613 3,077,613 19,393 3,097,007 3,097,007 Alliance Bank CD 1.85% 05/23/19 2,070,651 2,070,651 9,655 2,080,307 2,080,307 LegacyTexas Bank CD 2.25% 06/03/19 2,034,161 2,034,161 7,782 2,041,942 2,041,942 Alliance Bank CD 2.80% 06/28/19 2,044,497 2,044,497 14,272 2,058,769 2,058,769 Green Bank CD 1.55% 07/05/19 2,031,181 2,031,181 7,936 2,039,116 2,039,116 Alliance Bank CD 2.80% 07/12/19 10,070,575 10,070,575 71,073 10,141,649 10,141,649 Alliance Bank CD 2.65% 08/30/19 2,164,205 2,164,205 14,141 2,178,346 2,178,346 Alliance Bank CD 2.70% 09/03/19 1,412,548 1,412,548 9,509 1,422,057 1,422,057 Alliance Bank CD 2.70% 09/11/19 1,107,486 1,107,486 7,455 1,114,941 1,114,941 East West Bank CD 2.79% 09/18/19 15,085,084 15,085,084 104,131 15,189,215 15,189,215 Alliance Bank CD 2.85% 10/03/19 8,057,468 8,057,468 57,881 8,115,350 8,115,350 Alliance Bank CD 2.65% 10/21/19 2,560,199 2,560,199 17,101 2,577,300 2,577,300 Alliance Bank CD 2.54% 10/25/19 4,198,507 4,198,507 26,880 4,225,387 4,225,387 Alliance Bank CD 2.75% 11/25/19 3,065,915 3,065,915 21,251 3,087,166 3,087,166 Alliance Bank CD 2.80% 12/13/19 2,014,115 2,014,115 14,060 2,028,175 2,028,175 East West Bank CD 2.84% 12/18/19 3,017,323 3,017,323 21,203 3,038,525 3,038,525 Green Bank CD 2.90% 01/10/20 5,000,000 5,000,000 36,548 5,036,548 5,036,548 Alliance Bank CD 2.80% 01/24/20 2,057,343 2,057,343 14,520 2,071,862 2,071,862 WallisBank CD 2.95% 02/10/20 2,000,000 2,000,000 14,861 2,014,861 2,014,861 Alliance Bank CD 3.00% 03/13/20 – – 4,500,000 4,500,000 4,500,000 East West Bank CD 2.89% 03/18/20 3,017,628 3,017,628 21,580 3,039,208 3,039,208 Alliance Bank CD 3.00% 04/24/20 – – 6,000,000 6,000,000 6,000,000 Alliance Bank CD 2.71% 05/26/20 – – 3,000,000 3,000,000 3,000,000 Alliance Bank CD 3.05% 06/19/20 – – 3,500,000 3,500,000 3,500,000

124,981,686$ 124,981,686$ (2,575,971)$ 122,405,715$ 122,405,715$

November 30, 2018 February 28, 2019

(1) Market value analysis was not done on BRA CDs because BRA CDs are direct placed non-negotiable CDs


Allocation - Book Value & Market Value (1) February 28, 2019

Description Portfolio TotalCurrent

OperatingOperating Reserve

Bond Reserve Debt Service

Repair and Replacement

Wells Fargo Disbursement (1,255,933)$ (1,255,933)$ –$ –$ –$ –$ Graham Savings 22,322 22,322 – – – – Southside Bank MMA 5,122,477 366,219 3,026,903 453,992 1,267,139 8,223 Green Bank MMA 67,871 – 67,871 – – – NexBank MMA 6,647,091 – 6,647,091 – – – Alliance Bank MMA 4,401 – 4,401 – – – Wells Fargo MMA 878,587 878,587 – – – – TexPool 4,772 4,772 – – – –

03/12/19–Green Bank CD 8,135,775 – 8,135,775 – – – 03/20/19–Lubbock National Bank CD 4,086,009 – 4,086,009 – – – 04/05/19–Green Bank CD 5,094,612 – 5,094,612 – – – 05/15/19–Alliance Bank CD 3,097,007 – 2,702,644 394,362 – – 05/23/19–Alliance Bank CD 2,080,307 – 2,080,307 – – – 06/03/19–LegacyTexas Bank CD 2,041,942 – 1,020,971 – – 1,020,971 06/28/19–Alliance Bank CD 2,058,769 – 2,058,769 – – – 07/05/19–Green Bank CD 2,039,116 – 2,039,116 – – – 07/12/19–Alliance Bank CD 10,141,649 – 9,735,983 – – 405,666 08/30/19–Alliance Bank CD 2,178,346 – 2,178,346 – – – 09/03/19–Alliance Bank CD 1,422,057 – – 1,422,057 – 09/11/19–Alliance Bank CD 1,114,941 – – – – 1,114,941 09/18/19–East West Bank CD 15,189,215 – 15,189,215 – – – 10/03/19–Alliance Bank CD 8,115,350 – 8,115,350 – – – 10/21/19–Alliance Bank CD 2,577,300 2,577,300 – – – – 10/25/19–Alliance Bank CD 4,225,387 – 4,225,387 – – – 11/25/19–Alliance Bank CD 3,087,166 – 3,087,166 – – – 12/13/19–Alliance Bank CD 2,028,175 – 2,028,175 – – – 12/18/19–East West Bank CD 3,038,525 306,891 1,769,435 – – 962,200 01/10/20–Green Bank CD 5,036,548 – 5,036,548 – – – 01/24/20–Alliance Bank CD 2,071,862 – 2,071,862 – – – 02/10/20–WallisBank CD 2,014,861 – 2,014,861 – – – 03/13/20–Alliance Bank CD 4,500,000 – 3,975,000 – – 525,000 03/18/20–East West Bank CD 3,039,208 – 3,039,208 – – – 04/24/20–Alliance Bank CD 6,000,000 – 6,000,000 – – – 05/26/20–Alliance Bank CD 3,000,000 – 3,000,000 – – – 06/19/20–Alliance Bank CD 3,500,000 – 1,975,000 – – 1,525,000

Totals 122,405,715$ 2,900,158$ 110,406,006$ 2,270,411$ 1,267,139$ 5,562,001$

(1) Market value analysis was not done on BRA CDs because BRA CDs are direct placed non-negotiable CDs.


Allocation - Book Value & Market Value (1) November 30, 2018

Description Portfolio TotalCurrent

OperatingOperating Reserve

Bond Reserve Debt Service

Repair and Replacement

Wells Fargo Disbursement (364,969)$ (364,969)$ –$ –$ –$ –$ Graham Savings 20,211 20,211 – – – – Southside Bank MMA 4,145,627 339,695 822,277 451,215 2,422,460 109,980 Green Bank MMA 67,324 – 67,324 – – – NexBank MMA 13,582,779 – 13,582,779 – – – Alliance Bank MMA 11,806 – 11,806 – – – Wells Fargo MMA 873,490 873,490 – – – – TexPool 4,744 4,744 – – – –

12/14/18–WallisBank CD 4,618,358 – 4,111,420 – – 506,938 12/19/18–WallisBank CD 2,028,552 – 2,028,552 – – – 12/19/18–Alliance Bank CD 1,522,324 – – – – 1,522,324 01/24/19–WallisBank CD 2,074,561 – 2,074,561 – – – 02/22/19–Alliance Bank CD 1,040,616 – 1,040,616 – – – 02/25/19–LegacyTexas Bank CD 2,033,151 – 2,033,151 – – – 03/12/19–Green Bank CD 8,090,591 – 8,090,591 – – – 03/20/19–Lubbock National Bank CD 4,070,599 – 4,070,599 – – – 04/05/19–Green Bank CD 5,075,423 – 5,075,423 – – – 05/15/19–Alliance Bank CD 3,077,613 – 2,685,721 391,893 – – 05/23/19–Alliance Bank CD 2,070,651 – 2,070,651 – – – 06/03/19–LegacyTexas Bank CD 2,034,161 – 1,017,080 – – 1,017,080 06/28/19–Alliance Bank CD 2,044,497 – 2,044,497 – – – 07/05/19–Green Bank CD 2,031,181 – 2,031,181 – – – 07/12/19–Alliance Bank CD 10,070,575 – 9,667,752 – – 402,823 08/30/19–Alliance Bank CD 2,164,205 – 2,164,205 – – – 09/03/19–Alliance Bank CD 1,412,548 – – 1,412,548 – 09/11/19–Alliance Bank CD 1,107,486 – – – – 1,107,486 09/18/19–East West Bank CD 15,085,084 – 15,085,084 – – – 10/03/19–Alliance Bank CD 8,057,468 – 8,057,468 – – – 10/21/19–Alliance Bank CD 2,560,199 2,560,199 – – – – 10/25/19–Alliance Bank CD 4,198,507 – 4,198,507 – – – 11/25/19–Alliance Bank CD 3,065,915 – 3,065,915 – – – 12/13/19–Alliance Bank CD 2,014,115 – 2,014,115 – – – 12/18/19–East West Bank CD 3,017,323 304,750 1,757,088 – – 955,485 01/10/20–Green Bank CD 5,000,000 – 5,000,000 – – – 01/24/20–Alliance Bank CD 2,057,343 – 2,057,343 – – – 02/10/20–WallisBank CD 2,000,000 – 2,000,000 – – – 03/18/20–East West Bank CD 3,017,628 – 3,017,628 – – –

Totals 124,981,686$ 3,738,120$ 110,943,334$ 2,255,656$ 2,422,460$ 5,622,117$

(1) Market value analysis was not done on BRA CDs because BRA CDs are direct placed non-negotiable CDs


Days ToFinancial Institution Book Value Maturity

Alliance Bank 61,202,717$ 2.80% 255 50%East West Bank 21,266,948 2.85% 241 17%Graham Savings 22,322 0.25% 1 0%Green Bank 20,373,922 2.17% 105 17%LegacyTexas Bank 2,041,942 2.27% 95 2%Lubbock National Bank 4,086,009 1.51% 20 3%NexBank 6,647,091 2.65% 1 5%Southside Bank 5,122,477 2.58% 1 4%TexPool 4,772 2.40% 1 0%WallisBank 2,014,861 2.98% 347 2%Wells Fargo (377,346) 2.25% 1 0%Totals 122,405,715$ 2.63% 195 100%

% of Portfolio

YTM @ Cost

Alliance Bank 50%

East West Bank 17%

Graham Savings 0%

Green Bank 17%

LegacyTexas Bank 2%

Lubbock National Bank 3%

NexBank 5%

Southside Bank 4%

TexPool 0% WallisBank 2%Wells Fargo 0%

Financial Institution Allocation


Report Abbreviations

CD Certificate of DepositCDARS Certificate of Deposit Account Registry ServiceDemand Demand Deposit Bank AccountsFFCB Federal Farm Credit BankFHLB Federal Home Loan BankFHLMC Federal Home Loan Mortgage CorporationFNMA Federal National Mortgage Association FRMAC Farmer Agricultural Mortgage CorporationFCDN Federal Farm Credit Bank - Discount NoteFHDN Federal Home Loan Bank - Discount NoteFMCDN Federal Home Loan Mortgage Corporation - Discount NoteFNDN Federal National Mortgage Association - Discount NoteFRMDN Farmer Agricultural Mortgage Corporation - Discount NoteFNMA MBS Federal National Mortgage Association - Mortgage Backed SecurityICS Insured Cash SweepMMA Money Market AccountMMMF Money Market Mutual FundNOW Negotiable Order of Withdrawal Account


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