ESBD_563856_1790723388615_Investment Policy BRA 2026 03 30 Approved.pdf

Exhibit A

BRAZOS RIVER AUTHORITY

INVESTMENT POLICY

Revised and Adopted:

March 30, 2026

INVESTMENT POLICY

TABLE OF CONTENTS

PREFACE

I. PURPOSE

II. INVESTMENT OBJECTIVES

III. DESIGNATION OF AUTHORITY AND RESPONSIBILITY

IV. AUTHORIZED INVESTMENTS

V. PORTFOLIO STRATEGY AND CONTROLS

VI. COLLATERALIZATION

VII. SAFEKEEPING

VIII. BROKER/DEALERS AND INVESTMENT ADVISERS

IX. STANDARD OF CARE

X. REPORTING

XI. ETHICS AND CONFLICTS OF INTEREST

APPENDICES

A. Investment Strategy Statement

B. Approved Broker/Dealer List

C. Approved Training Sources

PREFACE

It is the policy of the Brazos River Authority (BRA) that, giving due regard to the safety and risk of investment, all available funds shall be invested in conformance with State and Federal Regulations, applicable Bond Resolution requirements, adopted Investment Policy, and adopted Investment Strategy.

Effective cash management is recognized as essential to good fiscal management. Aggressive cash management and effective investment strategy development will be pursued to take advantage of interest earnings as viable and material revenue to all BRA funds. The BRA’s portfolio shall be designed and managed in a manner responsive to the public trust and consistent with this Policy.

I. PURPOSE

A. Formal Adoption This Investment Policy is reviewed and adopted annually by the Brazos River Authority

Board of Directors (the “Board”) in accordance with Chapter 2256, Texas Government Code, the Public Funds Investment Act (the “Act”).

B. Scope This Investment Policy applies to all of the investment activities of the Brazos River

Authority, excluding the Employee Retirement Trust and the deferred compensation plan.

This Policy establishes guidelines for those who can invest BRA funds, how BRA funds will be invested, and when and how a regular review of investments will be made. In addition to this Policy, bond funds and other borrowings shall be managed by their governing resolution and all applicable State and Federal Law.

C. Investment Strategy

In conjunction with the annual Policy review, the Board shall review the separate written investment strategy for each of the BRA’s funds. The Investment Strategy Statement must describe the investment objectives for each particular fund according to the following priorities:

1) investment suitability,

2) preservation and safety of principal,

3) liquidity,

4) marketability prior to maturity of each investment,

5) diversification, and

6) yield.

D. Review and Amendment This Policy and Strategy Statement shall be reviewed and adopted annually by the Board.

Amendments must be approved and adopted by the Board. The Board shall adopt a resolution stating that it has reviewed the Policy and Investment Strategy Statement and that the written instrument so adopted shall record any changes made to either the Policy or Investment Strategy Statement.

II. INVESTMENT OBJECTIVES

The BRA shall seek to control the risks in the portfolio. All risk shall be controlled by investing only in the highest credit quality types of investments as defined in the Policy; by qualifying the broker/dealers and financial institutions with whom the BRA will transact; by collateralization as required by law; and through portfolio diversification by maturity and type.

A. Safety of Principal

The primary objective of all investment activity is the preservation of capital and the safety of principal in the overall portfolio. Each investment transaction shall seek to ensure first that capital losses are avoided, whether from issuer defaults or erosion of market value.

B. Maintenance of Adequate Liquidity

The investment portfolio will remain sufficiently liquid to meet the cash flow requirements that might be reasonably anticipated. Liquidity shall be achieved by: 1) maintaining minimum cash equivalent balances, 2) matching investment maturities with forecasted cash flow requirements, 3) investing in securities with active secondary markets, 4) utilizing certificates of deposit with early redemption options, and 5) maintaining appropriate portfolio diversification.

C. Diversification

The portfolio shall be diversified to minimize market and credit risk in any particular sector and shall be diversified by maturity to stabilize interest income throughout market cycles.

D. Public Trust

Investment Officers shall seek to act responsibly as custodians of the public trust.

Investment Officers shall avoid any transaction that might impair public confidence in the BRA’s ability to govern effectively.

E. Yield

The investment portfolio will be actively managed to take advantage of market opportunities.

III. DESIGNATION OF AUTHORITY AND RESPONSIBILITY

1. Authority to Invest

Board of Directors

(a) The Board may contract with an investment management firm, registered under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.), to provide for the investment and management of the funds of the BRA. The original contract will be for a term no longer than two (2) years. Renewal or extension of the contract must be by resolution of the Board.

(b) The Board may join by resolution in a Texas investment pool qualified under Government Code 2256.016 for the investment and management of the funds of the BRA.

(c) The Board shall designate Investment Officers as defined by the Act. The Chief Financial Officer, the Cash and Debt Manager, and the Controller are designated as the “Investment Officers” of the BRA.

Investment Officers Investment Officers are authorized to deposit, withdraw, invest, transfer, execute documentation, and otherwise manage BRA funds according to this Policy.

2. Responsibility Board of Directors The Board shall annually review and adopt the Investment Policy and Investment

Strategies. The resolution adopting the Policy will state that the Board has reviewed the Investment Policy and Investment Strategy Statement and that the written instrument so adopted shall record any changes made to either the Investment Policy or Investment Strategy Statement.

Investment Officers

(a) The Investment Officers shall attend at least 10 hours of investment training within twelve months of assuming these duties and within each subsequent two-year period that begins on the first day of the BRA’s fiscal year and consists of the two consecutive fiscal years after that date. The instruction shall relate to investment responsibilities under this Policy. Each training session must be provided by an independent source approved by the Board. The trainings are intended to ensure the quality and capability of investment management in compliance with PFIA.

(b) The Investment Officers or such other positions as approved by the General Manager/CEO are designated as Authorized Representatives to transact business with any local government investment pools used by the BRA.

(c) The Investment Officers shall perform their duties in accordance with the adopted Investment Policy and internal procedures. Investment Officers acting in good faith and in accordance with these policies and procedures shall be relieved of personal liability in the management of the portfolio provided that deviations from expectations for a specific investment's credit risk or market price change or portfolio shifts are reported in a timely manner and that appropriate action is taken to control adverse market effects.

(d) The designated Investment Officers shall adhere to the Brazos River Authority Personnel Policies Manual. Additionally, all Investment Officers shall file with the Texas Ethics Commission and the Board a statement disclosing any personal business relationship (as described in Section 2256.005(i) of the Act) with a business organization offering to engage in an investment transaction with the BRA or any relationship within the second degree by affinity or consanguinity to an individual seeking to sell investments to or engage in investment transactions with the BRA.

IV. AUTHORIZED INVESTMENTS

The investments listed below are authorized and further defined by the Act as eligible investments for the BRA. The purchase of specific issues may at times be restricted or prohibited by the Board. No additional types of investments are authorized until this Investment Policy is amended and the amended Policy is adopted by the Board. BRA is not required to liquidate investments that were authorized investments at the time of purchase. BRA funds governed by this Policy may be invested in:

1. Obligations of the United States or its agencies and instrumentalities (including the

Federal Home Loan Banks and letters of credit issued by U.S. agencies), excluding principal-only and interest-only mortgage backed securities, collateralized mortgage obligations with a stated maturity over ten years, and real estate mortgage investment conduits. The maximum stated maturity shall be three years for operating funds and five years for repair and replacement and reserve funds.

2. Direct obligations of the State of Texas, or its agencies and instrumentalities. Maximum stated maturity shall be three years.

3. Other obligations, the principal and interest on which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities, including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States. Maximum stated maturity shall be three years.

4. Obligations of states, agencies, counties, cities, and other political subdivisions of any

State having been rated as to investment quality by a nationally recognized investment rating firm and having received a rating of not less than “A” or its equivalent. Maximum stated maturity shall be three years.

5. Fully collateralized repurchase agreements having a defined termination date, placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in Texas, and secured by a combination of cash and obligations of the U.S. Government, its agencies or instrumentalities to include mortgage backed securities, pledged with a third party selected or approved by the BRA, and maintaining a market value of 102% of principal and interest. The term includes direct security repurchase agreements and reverse repurchase agreements in which the reinvestment security shall not mature later than the reverse. All BRA repurchase agreement transactions shall be governed by a signed Master Repurchase Agreement, or similar agreement. Maximum stated maturity shall be 90 days except for flex repurchase agreements used for bond funds, which shall be matched to the expenditure plan of the bonds.

Bond proceeds may be invested in a single flex repurchase agreement if the General Manager/CEO and the Chief Financial Officer determine that such an investment is necessary (a) to comply with Federal arbitrage restrictions, (b) to facilitate arbitrage record-keeping, calculations and expenditure draws, or (c) to lock in advantageous yields.

6. Financial institution deposits with state and national banks and savings banks with a main office or branch office in Texas that are:

a. guaranteed or insured by the Federal Deposit Insurance Corporation (FDIC), or its successor; the National Credit Union Share Insurance Fund (NCUSIF), or its successor; or secured in a manner allowed in Section VI. COLLATERALIZATION;

b. issued in a manner consistent with the Act that distributes the deposit amongst multiple financial institutions to effectively provide FDIC insurance for the entire deposit;

c. executed through a depository institution or approved broker that has its main office or a branch office in Texas that meets the requirements of the Act;

d. secured by collateral that is held in a depository institution that is selected by the BRA or with a clearing broker-dealer that is registered with the Securities and Exchange Commission and operating pursuant to Securities and Exchange Commission Rule 15c3-3 [17C.F.R., Section 240,15c3-3] as custodian for the BRA with respect to the certificates of deposit issued for the account of the BRA, and

e. limited in maximum stated maturity to three years.

7. No-load, AAA-rated, government money market mutual funds registered with and regulated by the Securities and Exchange Commission, whose investment objectives include seeking to maintain a stable net asset value of $1.0000 per share. The BRA may not invest funds under its control in an amount that exceeds 10% of the total assets of any individual money market mutual fund.

8. Constant dollar Local Government Investment Pools as defined in Section 2256.016 of the Act provided that investment in the particular pool has been specifically authorized by resolution of the Board.

9. Local Government Investment Pools not structured as money market mutual funds but as mutual funds and which do not strive to maintain a $1.0000 share value.

Participation shall be dependent upon Board review and authorization.

V. PORTFOLIO STRATEGY AND CONTROLS

The Chief Financial Officer shall develop and maintain internal controls and procedures to reduce risk and maintain the integrity of the portfolio.

1. Delivery versus Payment

The purchase and sale of all individual securities and repurchase agreements shall be executed on a “delivery versus payment” (DVP) basis through an approved Safekeeping Agent. By so doing, BRA funds are not released until the BRA has received, through the Safekeeping Agent, the securities purchased.

2. Competitive Environment

BRA requires a competitive environment for all individual security purchases and sales, financial institution certificates of deposit and money market accounts, and money market mutual fund selections.

3. Diversification by Investment Type Diversification by investment type shall be established by the following maximum percentages of investment type to the total BRA investment portfolio, at time of purchase:

Maximum

a. U.S. Treasury Bills/Notes/Bonds 90%

b. U. S. Agencies & Instrumentalities 90%

c. States, Agencies, Counties, Cities, & Other 50% Limit per issuer ............................................... 5%

d. Financial Institution Deposits ........................... 100%

e. Authorized Local Government Investment Pools 75% Limit per pool ........................................... 50%

f. Money Market Mutual Funds 75% Limit per fund .......................................... 50%

g. Repurchase Agreements 50% (excluding bond proceeds)

4. Maturity Controls by Fund Type To minimize risk of loss due to interest rate fluctuations, investment maturities will not exceed the anticipated cash flow requirements of the funds. The BRA may commingle funds for investment purposes while recognizing the needs of individual funds within the portfolio. The Investment Officers/Adviser will monitor the average days to maturity level and make changes as appropriate considering conditions, portfolio structure, and cash flow requirements.

Maturity guidelines by fund are as follows:

a. Current Operating Funds The dollar weighted average days to maturity for the operating fund portfolio shall be less than 365 days and the maximum allowable maturity shall be three years.

b. Bond Proceeds The investment maturity of bond proceeds (excluding reserve and debt service funds) shall generally be limited to the anticipated cash flow requirement or the “temporary period,” as defined by Federal tax law.

c. Repair and Replacement Funds The investment maturity of repair and replacement funds shall generally be limited to the anticipated cash flow requirement according to the budgeted project schedule. The maximum maturity shall not exceed five years and the maximum dollar-weighted average maturity of the fund shall not exceed two years.

d. Debt Service Funds Debt Service Funds shall be invested to ensure adequate funding for each consecutive debt service payment. The Investment Officers shall invest in such a manner as not to exceed an “unfunded” debt service date with the maturity of any investment. An unfunded debt service date is defined as a coupon or principal payment date that does not have cash or maturing investments available to satisfy said payment. The maximum dollar weighted average maturity of such funds shall be one year.

e. Bond Reserve Funds Maturity limitation shall generally not exceed the call provisions of the Bond

Resolution and shall not exceed the final maturity of the bond issue. The maximum dollar weighted average maturity of such funds shall be three years.

f. Operating Reserve Funds The anticipated cash requirements of other BRA funds will govern the appropriate maturity mix. Appropriate portfolio strategy shall be determined based on market conditions, Policy compliance, BRA financial condition, and risk/return constraints.

Maximum maturity shall not exceed five years and the maximum dollar weighted average maturity shall not exceed three years.

5. Cash Flow Analysis The Investment Officers shall develop a cash flow analysis for all funds recognizing anticipated liabilities and revenues. This cash flow shall be reviewed and updated on no less than an annual basis. The cash flows shall form the basis for investment strategy in each particular fund. The cash flow will be used to determine the appropriate level of liquidity in each fund.

6. Credit Rating Review and Effect of Loss of Required Rating

Not less than quarterly, the Investment Officers will obtain from a reliable source the current credit rating for each held investment that has a PFIA-required minimum rating. Any Authorized Investment that requires a minimum rating does not qualify during the period the investment does not have the minimum rating. The BRA shall take all prudent measures that are consistent with this Policy to liquidate an investment that does not have the minimum rating.

7. Liquidation of Investments An investment may be liquidated (sold or redeemed prior to maturity) to meet unanticipated cash requirements, to re-deploy cash into other investments expected to outperform current holdings, or otherwise to adjust the portfolio. A swap strategy may be utilized if the swap results in an overall positive financial position on a financial horizon analysis basis.

8. Market Value Determination

Market value for each investment shall be determined using the highest bid price at the close of business listed on the Bloomberg Investor Service, the market price as identified by the custodian, or from other independent sources.

9. Performance Standards

The investment portfolio shall be designed with the objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow needs. “Weighted Average Yield to Maturity” shall be the standard for calculating portfolio rate of return.

VI. COLLATERALIZATION

Financial Institution Collateral Consistent with the requirements of the Public Funds Collateral Act (Texas Government

Code 2257), the BRA requires all financial institution deposits to be federally insured, enhanced, or collateralized with eligible securities, as determined by the BRA. Financial institutions (with the exception of the Federal Reserve) serving as BRA depositories will be required to sign a Depository Agreement (Agreement) with the BRA in compliance with Federal regulations. The Agreement shall require compliance with the Act and this Investment Policy, establish an independent custodian for all pledged collateral, define the eligible collateral and the BRA's rights to the collateral in case of default, bankruptcy, or closing, and establish a perfected security interest in compliance with Federal and State regulations, and specifically:

• the Agreement must be in writing;

• the Agreement must be executed by the financial institution and the BRA contemporaneously with the deposit;

• the Agreement must be approved by resolution of the Board or the Designated Committee of the financial institution and a copy of the meeting minutes or resolution reference must be delivered to the BRA; and

• the Agreement must be part of the financial institution’s “official record” continuously since its execution.

Repurchase Agreements (Owned) Collateral

Each counter party to a repurchase transaction is required to execute a form of Master Repurchase Agreement, or similar agreement (Agreement). An executed copy of this Agreement must be on file before any transaction is initiated. All Agreements must be approved by the Chief Financial Officer of the BRA. Purchased Securities, as defined by the Agreement, will be evidenced by safekeeping receipts clearly denoting the ownership by the BRA.

Allowable Collateral

(1) Financial Institution Deposits Eligible securities for collateralization of deposits are:

• Obligations of the U.S. Government, its agencies and instrumentalities including mortgage backed securities which pass the high-risk mortgage obligation test,

• Obligations of states, agencies, counties, cities, and other political subdivisions of any State having been rated as to investment quality by a nationally recognized investment rating firm and having received a rating of not less than “A” or its equivalent.

Letters of Credit issued or guaranteed by the U.S. Government, its agencies and instrumentalities.

Eligible collateral does not include surety bonds.

(2) Repurchase Agreements Securities bought and sold as part of a repurchase agreement are limited to:

• U.S. Government, Agencies and Instrumentalities obligations, including mortgage backed securities

Collateral Levels

(1) Financial Institution Deposits

The market value of the collateral pledged for deposits must at all times be equal to or greater than 102% of the total value of the deposits (including accrued interest) less the applicable level of FDIC or NCUSIF insurance. The financial institution shall be liable for monitoring and maintaining the collateral and collateral margins at all times. Letters of Credit shall at all times be equal to or greater than 100% of the total value of the deposits (including accrued and anticipated interest) less the applicable level of FDIC or NCUSIF insurance. Non-renewable Letters of Credit shall expire not less than two business days after the anticipated deposit withdrawal.

A repurchase agreement's total book value equals the par value plus accrued interest. The market value of the repurchase agreement’s purchased securities must be maintained at not less than 102% of the total book value of the repurchase agreement at all times.

Collateral Safekeeping All collateral will be held by an independent custodian, outside the holding company of the financial institution or counter party and approved by the BRA.

(1) Safekeeping of Financial Institution Deposits Collateral All collateral securing financial institution deposits must be held by an independent third-party custodian, outside the holding company of the financial institution, approved by and under contract with the BRA, or by the Federal Reserve Bank or a Federal Home Loan Bank.

(2) Safekeeping of Repurchase Agreement Securities

The securities purchased under repurchase agreements must be delivered to an independent third-party custodian as defined by the executed Agreement.

Monitoring Collateral Adequacy

(1) Time and Demand Deposits

The BRA shall require monthly reports with the full description and market value of pledged collateral. The financial institutions will be contractually liable for monitoring and maintaining the required collateralization levels. A report provided directly to the BRA from the custodian is required to confirm pledged collateral positions.

Either the counter party or custodian will be contractually liable for monitoring and maintaining required collateral levels on a daily basis.

Approval of Collateral

The BRA reserves the right to accept or reject any proposed collateral or purchased securities and/or increase the required margin requirement, at its sole discretion.

Collateral Substitution

Collateralized deposits and repurchase agreements often require substitution of collateral.

The substituted securities will fulfill all original margin requirements. Substitution is allowable for all transactions, but should be limited to minimize potential administrative problems and transfer expense. The Investment Officers may limit substitution and take appropriate action if substitution becomes excessive or abusive. Any reduction in collateral shall require prior approval by the Investment Officer(s).

VII. SAFEKEEPING

Safekeeping Agreement

The BRA shall contract with a third-party financial institution(s) for the safekeeping of securities owned by the BRA.

VIII. BROKER/DEALERS AND INVESTMENT ADVISERS

Investment Advisers shall adhere to the spirit, philosophy and specific terms of this Policy and shall invest within the same “Standard of Care.” Investment broker/dealers shall adhere to the spirit, philosophy and specific terms of this Policy and shall avoid recommending or suggesting transactions outside that “Standard of Care.”

A list of the authorized broker/dealers will be approved by the Board no less than annually.

With the approval of the Board, broker/dealers may be added between review periods. The BRA’s depository bank may be an approved broker if perfected delivery versus payment of any transactions is assured.

The Investment Officers will establish criteria to evaluate investment advisers and broker/dealers, including:

a. Adherence to the BRA's policies and strategies

b. Investment performance within accepted risk constraints

c. Responsiveness to the BRA's needs for information and open communication

d. Understanding of the inherent fiduciary responsibility of investing public funds

e. Similarity in philosophy and strategy with the BRA's objectives

f. Membership in the Financial Industry Regulatory Authority (FINRA)

(Broker/Dealers only)

g. Registration with the State Securities Commission

h. Registration with the Securities and Exchange Commission (Advisers)

i. Financial stability based on Annual Financial Statements indicating that the firm is well established and is a going concern

j. Firm history of at least 5 years as a broker/dealer firm or adviser in the State of

Texas

k. Account representative or adviser with at least 5 years of experience in the types of fixed income and money market securities authorized in the Policy and representing the majority of his/her business. Provision of timely transaction confirmations.

Advisers shall provide timely transaction confirmations and independent broker/dealer confirmations.

Monthly reports and quarterly reports will be provided in accordance with the Act and Section X, REPORTING.

Policy Certification Prior to executing any financial transaction with the BRA, any local government investment pool or discretionary investment management firm (“business organization”) offering to sell or engage in an investment transaction shall be presented a written copy of this Investment Policy. Additionally, the authorized representative of the business organization offering to sell or engage in an investment transaction shall execute a written instrument substantially to the effect that the individual working with the BRA has:

1) received and reviewed the BRA’s current Investment Policy, and

2) acknowledged that the business organization has implemented reasonable procedures and controls in an effort to preclude investment transactions conducted between the BRA and the business organization that are not authorized by the BRA’s current Policy.

IX. STANDARD OF CARE

The standard of care used by the BRA shall be the “Prudent Person Rule” and shall be applied in the context of managing the overall portfolio within the Policy and applicable legal constraints. The Prudent Person Rule states that:

“Investments shall be made with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived.”

X. REPORTING

Investment performance will be monitored and evaluated by the Investment Officers. The Investment Officers will provide a quarterly comprehensive report signed by all Investment Officers to the Board. This investment report shall be in compliance with the Act and include, at a minimum:

1) detail on each investment position of the BRA,

2) the beginning and ending amortized book and market value,

3) the beginning and ending amortized book and market value for each investment by asset type and fund type,

4) the final stated maturity date of each investment,

5) the fund for which each investment was purchased, if not commingled,

6) the total earnings for the period,

7) the dollar weighted average maturity of the portfolio and its comparison to an accepted benchmark, and

8) a statement of compliance of the investment portfolio with the BRA's Investment

Policy and Strategy and the Act.

Prices used for the calculation of market values will be obtained from independent sources, including the Bloomberg Investor Service or the third-party safekeeping institution.

Review and Audit by Independent Auditor In conjunction with its annual financial audit, the independent auditor shall formally review each quarterly investment report, and shall perform a compliance audit of management controls on investments and adherence to the BRA's Investment Policy and the Investment Strategy Statement. The results shall be reported to the Board by that auditor.

XI. ETHICS AND CONFLICTS OF INTEREST

Investment Officer(s) and employees involved in the investment process shall refrain from personal business activity that would conflict with the proper execution and management of the investment program, or that would impair their ability to make impartial decisions. Investment Officer(s) and employees shall disclose any personal material interests in financial institutions with which BRA conducts business. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. Investment Officer(s) and employees shall refrain from undertaking personal investment transactions with the same individual with which business is conducted on behalf of BRA.

An Investment Officer(s) who has a personal business relationship with an organization seeking to sell an investment to BRA shall file a statement disclosing that personal business interest. An Investment Officer(s) who is related within the second degree by affinity or consanguinity to an individual seeking to sell an investment to BRA shall file a statement disclosing that relationship. A statement required under this subsection must be filed with the Texas Ethics Commission and the Board of Directors.

APPENDIX A

INVESTMENT STRATEGY STATEMENT

It is the policy of the Brazos River Authority (BRA) that, giving due regard to the safety and risk of investment, all funds shall be invested in conformance with applicable State and Federal Regulations, Bond Resolution requirements, and the adopted Investment Policy and Strategy.

In accordance with the Public Funds Investment Act (the “Act”), BRA investment strategies shall address the following priorities (in order of importance):

• Understanding the suitability of the investment to the financial requirements of the BRA;

• Preservation and safety of principal;

• Liquidity;

• Marketability of the investment if the need arises to liquidate the investment prior to maturity;

• Diversification of the investment portfolio; and

• Yield.

Effective investment strategy development coordinates the primary objectives of the BRA's Investment Policy and cash management procedures with investment security risk/return analysis to enhance interest earnings and reduce investment risk. Aggressive cash management will be used to increase the available earnings. Maturity selections shall be based on cash flow analysis and current market conditions to take advantage of interest earnings as viable and material revenue to all BRA funds. The BRA's portfolio shall be designed and managed in a manner responsive to the public trust and consistent with the Investment Policy.

Each major fund type has varying cash flow requirements and liquidity needs. Therefore, specific strategies shall be implemented considering the fund's unique requirements. The BRA may commingle funds for investment purposes while recognizing the needs of individual funds within the portfolio. BRA funds shall be analyzed and invested according to the following major fund types:

a. Current Operating Funds

b. Bond Proceeds

c. Repair and Replacement Funds

d. Debt Service Funds

INVESTMENT STRATEGIES

Investment guidelines by fund-type are as follows:

a. Current Operating Funds Current operating funds require the greatest short-term liquidity of any of the fund types.

Therefore, diversified investment maturities shall provide cash flow based on the anticipated operating needs of the BRA. Short-term investment pools, bank deposits, and money market mutual funds shall provide a liquidity buffer for daily liquidity and may be utilized as a competitive yield alternative to fixed maturity investments. Additionally, securities with active and efficient secondary markets will be used to add liquidity for unanticipated cash requirements.

According to BRA Policy, the dollar-weighted average maturity for the current operating fund portfolio shall be less than 365 days and the maximum allowable maturity shall be three years. The Investment Officers will monitor the average days to maturity on an on-going basis and make changes as appropriate.

b. Bond Proceeds Bond proceeds used for construction programs have reasonably predictable draw down schedules. Therefore, investment maturities shall generally follow the anticipated cash flow requirements. Because of the potential for variance from the anticipated draw down schedule, most securities shall have active and efficient secondary markets. Investment pools, bank deposits, and money market mutual funds may be used to provide readily available funds generally equal to at least one month's anticipated cash flow needs, or a competitive yield alternative for short-term fixed maturity investments. A single flex repurchase agreement may be utilized to address variable cash needs and lock in rates in a declining interest rate environment.

Market conditions and the arbitrage regulations shall be considered in making investments for these funds. Generally, if investment rates exceed the applicable arbitrage yield (producing positive arbitrage earnings) for a specific issue, the BRA is best served by locking in those yields. If the arbitrage yield cannot be exceeded, then existing market conditions will determine the timing and maturity of investments. At no time shall the anticipated expenditure schedule be exceeded in an attempt to bolster yield. An attempt shall be made to avoid negative arbitrage.

c. Repair and Replacement Funds The investment maturity of repair and replacement funds shall generally be limited to the anticipated cash flow requirements according to budgeted project schedules. Market conditions and the anticipated spending schedule shall determine the maximum investment periods. Investments shall be diversified as to maturity and type. Because of the potential for variance from the anticipated draw down schedule most securities shall have active and efficient secondary markets. Investment pools, bank deposits, and money market mutual funds may be used to provide readily available funds generally equal to at least one month's anticipated cash flow needs, or a competitive yield alternative for short-term fixed maturity investments. The Investment Policy restricts the maximum maturity to five years and the dollar-weighted average maturity of the fund to two years.

d. Debt Service Funds Debt service funds shall be invested to ensure adequate funding for each successive debt service payment. The Investment Officers shall invest in such a manner as not to exceed an “unfunded” debt service date with the maturity of any investment. The predictability of each payment reduces the need for liquidity, therefore, market conditions shall determine the relative appropriateness of eligible investments. The maximum dollar weighted average maturity of such funds shall be one year.

Bond reserve funds have no anticipated expenditures. The funds are deposited to provide annual debt service payment protection to the BRA's bond holders. The funds are released to the BRA at the final debt service payment. Maturities shall generally not exceed the call provisions of the bond issue to reduce the investment's liquidity risk if the BRA's bonds are called and the reserve fund liquidated. No investment maturity shall exceed the final maturity of the bond issue. Market conditions and arbitrage regulation compliance determine the advantage of maturity selection. Generally, if investment rates exceed the applicable arbitrage yield (producing positive arbitrage earnings), the BRA is best served by locking in yields. Current market conditions will determine the timing and maturity of investments.

Bond resolution constraints and insurance company restrictions create issue-specific considerations in addition to the Investment Policy. Annual mark-to-market requirements or specific maturity and average life limitations will influence the tolerance for market risk and reduce the opportunity for maturity extension. The maximum maturity shall be five years and a maximum weighted average maturity of three years for these funds.

The operating reserve funds are essentially BRA savings. Reductions are generally not anticipated. Therefore, the predictability of the cash availability in other BRA funds will govern the appropriate maturity mix. The strategy utilizes diversified maturities with a maximum maturity of five years and a maximum weighted maturity of three years.

APPENDIX B

APPROVED BROKER/DEALER LIST

FHN Financial SouthState Securities Corp.

Hilltop Securities SAMCO Capital Markets Multi-Bank Securities, Inc.

Stifel Financial Rice Financial Wells Fargo Securities

APPENDIX C

APPROVED TRAINING SOURCES

Alliance of Texas Treasury Associations County Treasurers’ Association of Texas Council of Governments Government Finance Officers Association Government Finance Officers Association of Texas Government Treasurers’ Organization of Texas Public Risk Management Association Texas Municipal League Texas Water Conservation Association University of North Texas Texas State University Texas Rural Water Association Virtual Learning Concepts