---



##### 



The Trust
   Units of Beneficial Interest
  Sales Price
    
    
    Distributions2008
    
    High
    
    
    Low
    
    
    PaidFirst Quarter
    
    $
    23.15
    
    
    $
    15.25
    
    
    $
    .560051Second Quarter
    
    
    27.80
    
    
    
    20.75
    
    
    
    .577627Third Quarter
    
    
    27.40
    
    
    
    20.05
    
    
    
    .760315Fourth Quarter
    
    
    23.89
    
    
    
    12.47
    
    
    
    .493363Total for 2008
    
    
    
    
    
    
    
    
    
    $
    2.391356
 1




---



##### 



Sales Price
    
    
    Distributions2007
    
    High
    
    
    Low
    
    
    PaidFirst Quarter
    
    $
    16.14
    
    
    $
    11.35
    
    
    $
    .291984Second Quarter
    
    
    14.85
    
    
    
    12.95
    
    
    
    .281583Third Quarter
    
    
    15.50
    
    
    
    12.90
    
    
    
    .384680Fourth Quarter
    
    
    16.12
    
    
    
    14.33
    
    
    
    .492530Total for 2007
    
    
    
    
    
    
    
    
    
    $
    1.450777
   To Unit Holders
    2




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##### 



3




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##### 



Bank of America, N.A., TrusteeBy:
    /s/ Ron E. HooperRon E. HooperSenior Vice President 4




---



##### 



Description of the Properties
        5




---



##### 



Computation of Royalty Income Received by the Trust
  6




---



##### 



Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Waddell
    
    
    Texas
    
    
    Waddell
    
    
    Texas
    
    
    Waddell
    
    
    Texas
    
    
    Waddell
    
    
    Texas
    
    
    Waddell
    
    
    TexasRanch
    
    
    Royalty
    
    
    Ranch
    
    
    Royalty
    
    
    Ranch
    
    
    Royalty
    
    
    Ranch
    
    
    Royalty
    
    
    Ranch
    
    
    RoyaltyProperties
    
    
    Properties
    
    
    Properties
    
    
    Properties
    
    
    Properties
    
    
    Properties
    
    
    Properties
    
    
    Properties
    
    
    Properties
    
    
    PropertiesGross Proceeds of SalesFrom the Underlying Properties:Oil Proceeds
    
    $
    78,716,086
    
    
    $
    34,112,890
    
    
    $
    51,897,859
    
    
    $
    20,651,675
    
    
    $
    51,185,185
    
    
    $
    21,301,642
    
    
    $
    43,967,934
    
    
    $
    17,415,261
    
    
    $
    32,078,721
    
    
    $
    12,296,982Gas Proceeds
    
    
    54,694,736
    
    
    
    7,831,734
    
    
    
    41,997,463
    
    
    
    5,275,253
    
    
    
    40,386,375
    
    
    
    5,780,321
    
    
    
    37,531,266
    
    
    
    5,050,206
    
    
    
    28,746,318
    
    
    
    3,970,231Total
    
    
    133,410,822
    
    
    
    41,944,624
    
    
    
    93,895,322
    
    
    
    25,926,928
    
    
    
    91,571,560
    
    
    
    27,081,963
    
    
    
    81,499,200
    
    
    
    22,465,467
    
    
    
    60,825,039
    
    
    
    16,267,213Less:Severance TaxOil
    
    
    3,365,962
    
    
    
    1,301,428
    
    
    
    2,241,791
    
    
    
    779,513
    
    
    
    2,219,552
    
    
    
    760,043
    
    
    
    1,806,281
    
    
    
    675,609
    
    
    
    1,366,942
    
    
    
    457,308Gas
    
    
    3,172,496
    
    
    
    511,315
    
    
    
    2,474,922
    
    
    
    337,861
    
    
    
    2,587,606
    
    
    
    378,513
    
    
    
    2,319,699
    
    
    
    325,044
    
    
    
    1,702,937
    
    
    
    262,673Other
    
    
    290,737
    
    
    
    0
    
    
    
    169,151
    
    
    
    159,926
    
    
    
    42,695
    
    
    
    -0-
    
    
    
    42,505
    
    
    
    
    
    
    
    42,763
    
    
    
    252,906Lease Operating Expense and Property TaxOil and Gas
    
    
    16,766,553
    
    
    
    1,352,645
    
    
    
    15,854,987
    
    
    
    1,579,946
    
    
    
    13,932,289
    
    
    
    1,454,993
    
    
    
    12,191,168
    
    
    
    963,563
    
    
    
    9,391,083
    
    
    
    894,383Capital Expenditures
    
    
    9,146,511
    
    
    
    
    
    
    
    11,198,975
    
    
    
    
    
    
    
    15,265,143
    
    
    
    
    
    
    
    7,151,598
    
    
    
    
    
    
    
    6,539,015
    
    
    
    Total
    
    
    32,742,259
    
    
    
    3,165,388
    
    
    
    31,939,826
    
    
    
    2,857,246
    
    
    
    34,047,285
    
    
    
    2,593,549
    
    
    
    23,511,251
    
    
    
    1,964,216
    
    
    
    19,042,740
    
    
    
    1,867,270Net Profits
    
    
    100,668,563
    
    
    
    38,779,236
    
    
    
    61,955,496
    
    
    
    23,069,682
    
    
    
    57,524,275
    
    
    
    24,488,414
    
    
    
    57,987,949
    
    
    
    20,501,251
    
    
    
    41,782,299
    
    
    
    14,399,943Net Overriding Royalty Interest
    
    
    75
    %
    
    
    95
    %
    
    
    75
    %
    
    
    95
    %
    
    
    75
    %
    
    
    95
    %
    
    
    75
    %
    
    
    95
    %
    
    
    75
    %
    
    
    95
    %Royalty Income
    
    
    75,501,422
    
    
    
    36,840,274
    
    
    
    46,466,622
    
    
    
    21,916,198
    
    
    
    43,143,206
    
    
    
    23,263,993
    
    
    
    43,490,961
    
    
    
    19,476,189
    
    
    
    31,336,724
    
    
    
    13,679,946Total Royalty Income for Distribution
    
    
    75,501,422
    
    
    
    36,840,274
    
    
    
    46,466,622
    
    
    
    21,916,198
    
    
    $
    43,143,206
    
    
    $
    23,263,993
    
    
    $
    43,490,961
    
    
    $
    19,476,189
    
    
    $
    31,336,724
    
    
    $
    13,679,946
 7




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##### 



Discussion and Analysis
 Trustees Discussion and Analysis for the Three-Year Period Ended December 31, 2008
    st
       Accounting for
Uncertainty in Income Taxes Accounting for Income
Taxes
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities-Including an amendment of FASB Statement No. 115
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statementsan amendment of Accounting Research Bulletin No. 51
 Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133
 The Hierarchy of Generally Accepted Accounting
Principles. The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles
 8




---



##### 



Year Ended December 31,2008
    
    2007
    
    2006RoyaltiesTotal Revenue
    
    $
    112,341,696
    
    
    $
    68,382,820
    
    
    $
    66,407,199100
    %
    
    
    100
    %
    
    
    100
    %Oil Revenue
    
    
    72,758,958
    
    
    
    42,116,916
    
    
    
    42,729,34265
    %
    
    
    62
    %
    
    
    64
    %Gas Revenue
    
    
    39,582,738
    
    
    
    26,265,904
    
    
    
    23,677,85735
    %
    
    
    38
    %
    
    
    36
    %Total Revenue/Unit
    
    $
    2.410311
    
    
    $
    1.467166
    
    
    $
    1.424778
  Year Ended December 31,2008
    
    2007
    
    2006RoyaltiesOil Sales (Bbls)
    
    
    760,258
    
    
    
    740,878
    
    
    
    749,949Gas Sales (Mcf)
    
    
    3,673,068
    
    
    
    3,477,898
    
    
    
    3,154,791Underlying PropertiesOilTotal Oil Sales (Bbls)
    
    
    1,105,717
    
    
    
    1,190,270
    
    
    
    1,221,165Average Per Day (Bbls)
    
    
    3,021
    
    
    
    3,261
    
    
    
    3,346
 9




---



##### 



Year Ended December 31,2008
    
    2007
    
    2006Average Price/Bbl
    
    $
    102.04
    
    
    $
    60.95
    
    
    $
    59.36GasTotal Gas Sales (Mcf)
    
    
    5,927,790
    
    
    
    6,407,845
    
    
    
    5,973,188Average Per Day (Mcf)
    
    
    16,196
    
    
    
    17,556
    
    
    
    16,365Average Price/Mcf
    
    $
    10.55
    
    
    $
    7.38
    
    
    $
    7.73
      10




---



##### 



Results of the Fourth Quarters of 2008 and 2007
   Fourth Quarter2008
    
    2007RoyaltiesOil Sales (Bbls)
    
    
    172,029
    
    
    
    216,314Gas Sales (Mcf)
    
    
    751,593
    
    
    
    1,066,321Underlying PropertiesTotal Oil Sales (Bbls)
    
    
    281,843
    
    
    
    308,546Average Per Day (Bbls)
    
    
    3,064
    
    
    
    3,354Average Price/Bbls
    
    
    96.13
    
    
    
    73.93Total Gas Sales (Mcf)
    
    
    1,438,886
    
    
    
    1,644,198Average Per Day (Mcf)
    
    
    15,640
    
    
    
    17,872Average Price/Mcf
    
    
    8.96
    
    
    
    7.56
 11




---



##### 



Off-Balance Sheet Arrangements.
  Tabular Disclosure of Contractual Obligations.
 Payments Due by PeriodContractual
    
    
    
    
    
    Less than 1
    
    1 - 3
    
    
    
    
    
    More thanObligations
    
    Total
    
    Year
    
    Years
    
    3-5 Years
    
    5 YearsDistribution
payable to Unit
holders
    
    $
    5,147,216
    
    
    $
    5,147,216
    
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    $
    5,147,216
    
    
    $
    5,147,216
    
    
    
    0
    
    
    
    0
    
    
    
    0
 12




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##### 



Internal ControlIntegrated Framework
 DELOITTE & TOUCHE LLP
 
 13




---



##### 



PERMIAN BASIN ROYALTY TRUST
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
DECEMBER 31, 2008 AND 2007
 2008
    
    
    2007ASSETSCash and Short-term Investments
    
    $
    5,147,216
    
    
    $
    8,173,207Net
Overriding Royalty Interests in Producing Oil and Gas Properties  Net (Notes 2 and 3)
    
    
    1,170,793
    
    
    
    1,293,935$
    6,318,009
    
    
    $
    9,467,142LIABILITIES AND TRUST CORPUSDistribution Payable to Unit Holders
    
    $
    5,147,216
    
    
    $
    8,173,207Trust Corpus
 46,608,796 Units of Beneficial Interest Authorized and Outstanding
    
    
    1,170,793
    
    
    
    1,293,935$
    6,318,009
    
    
    $
    9,467,142
 STATEMENTS OF DISTRIBUTABLE INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 2008
 2008
    
    
    2007
    
    
    2006Royalty Income (Notes 2 and 3)
    
    $
    112,341,696
    
    
    $
    68,382,820
    
    
    $
    66,407,199Interest Income
    
    
    90,572
    
    
    
    125,338
    
    
    
    133,648112,432,268
    
    
    
    68,508,158
    
    
    
    66,540,847Expenditures  General and
Administrative
    
    
    973,761
    
    
    
    888,928
    
    
    
    825,478Distributable Income
    
    $
    111,458,507
    
    
    $
    67,619,230
    
    
    $
    65,715,369Distributable Income per Unit
(46,608,796 Units)
    
    $
    2.391356
    
    
    $
    1.450777
    
    
    $
    1.410082
 The accompanying notes to
financial statements are an integral part of these statements. 14




---



##### 



STATEMENTS OF CHANGES IN TRUST CORPUS
FOR THE THREE YEARS ENDED DECEMBER 31, 2008
 2008
    
    
    2007
    
    
    2006Trust Corpus, Beginning of Period
    
    $
    1,293,935
    
    
    $
    1,439,214
    
    
    $
    1,610,630Amortization of Net Overriding
Royalty Interests
(Notes 2 and 3)
    
    
    (123,142
    )
    
    
    (145,279
    )
    
    
    (171,416
    )Distributable Income
    
    
    111,458,507
    
    
    
    67,619,230
    
    
    
    65,715,369Distributions Declared
    
    
    (111,458,507
    )
    
    
    (67,619,230
    )
    
    
    (65,715,369
    )Trust Corpus, End of Period
    
    $
    1,170,793
    
    
    $
    1,293,935
    
    
    $
    1,439,214
  15




---



##### 



NOTES TO FINANCIAL STATEMENTS
 1. Trust Organization and Provisions
    
    
    the Trust shall not engage in any business or commercial activity of any kind or
acquire any assets other than those initially conveyed to the Trust;
    
    the Trustee may not sell all or any part of the Royalties unless approved by
holders of 75% of all Units outstanding in which case the sale must be for cash and
the proceeds promptly distributed;
    
    the Trustee may establish a cash reserve for the payment of any liability which is
contingent or uncertain in amount;
    
    the Trustee is authorized to borrow funds to pay liabilities of the Trust; and
    
    the Trustee will make monthly cash distributions to Unit holders (see Note 2).
 2. Net Overriding Royalty Interests and Distribution to Unit Holders
  16




---



##### 



3. Basis of Accounting
  
    
    Royalty income recorded is the amount computed and paid by the working interest
owner to the Trustee on behalf of the Trust.
    
    Trust expenses recorded are based on liabilities paid and cash reserves established
out of cash received or borrowed funds for liabilities and contingencies.
    
    Distributions to Unit holders are recorded when declared by the Trustee.
  4. New Accounting Pronouncements
 17




---



##### 



Accounting for
Uncertainty in Income Taxes Accounting for Income
Taxes
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities-Including an amendment of FASB Statement No. 115
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statementsan amendment of Accounting Research Bulletin No. 51
 18




---



##### 



Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133
 The Hierarchy of Generally Accepted Accounting
Principles. The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles
 5. Federal Income Tax
   19




---



##### 



www.pbt-permianbasintrust.com
    20




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##### 



6. Proved Oil and Gas Reserves (Unaudited)
  7. Quarterly Schedule of Distributable Income (Unaudited)
  DistributableIncome andRoyalty
    
    
    Distributable
    
    
    Distribution2008
    
    Income
    
    
    Income
    
    
    Per UnitFirst Quarter
    
    $
    26,424
    
    
    $
    26,103
    
    
    $
    .560051Second Quarter
    
    
    27,261
    
    
    
    26,923
    
    
    
    .577627Third Quarter
    
    
    35,552
    
    
    
    35,438
    
    
    
    .760315Fourth Quarter
    
    
    23,105
    
    
    
    22,995
    
    
    
    .493363Total
    
    $
    112,342
    
    
    $
    111,459
    
    
    $
    2.391356
 21




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##### 



DistributableIncome andRoyalty
    
    
    Distributable
    
    
    Distribution2007
    
    Income
    
    
    Income
    
    
    Per UnitFirst Quarter
    
    $
    13,901
    
    
    $
    13,609
    
    
    $
    .291984Second Quarter
    
    
    13,419
    
    
    
    13,124
    
    
    
    .281583Third Quarter
    
    
    18,000
    
    
    
    17,930
    
    
    
    .384680Fourth Quarter
    
    
    23,063
    
    
    
    22,956
    
    
    
    .492530Total
    
    $
    68,383
    
    
    $
    67,619
    
    
    $
    1.450777
 8. SUBSEQUENT EVENTS
  Monthly Record Date
    
    Payment Date
    
    Distribution per UnitJanuary 30, 2009
    
    February 13, 2009
    
    $
    .082862February 27, 2009
    
    March 13, 2009
    
    $
    .043564
 9. STATE TAX CONSIDERATIONS
   22




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#####