##### 








---



##### 



The Trust
   Units of Beneficial Interest
  Sales PriceDistributions2007
    
    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
 1




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##### 



Distributions2006
    
    High
    
    
    Low
    
    
    PaidFirst Quarter
    
    $
    16.91
    
    
    $
    14.05
    
    
    $
    .400354Second Quarter
    
    
    16.93
    
    
    
    14.35
    
    
    
    .297034Third Quarter
    
    
    17.00
    
    
    
    15.25
    
    
    
    .398559Fourth Quarter
    
    
    16.68
    
    
    
    15.23
    
    
    
    .314135Total for 2006
    
    
    
    
    
    
    
    
    
    $
    1.410082
   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




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##### 



Computation of Royalty Income Received by the Trust
  6




---



##### 



Year Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Waddell
    
    
    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 Sales
From the Underlying Properties:Oil Proceeds
    
    $
    51,897,859
    
    
    $
    20,651,675
    
    
    $
    51,185,185
    
    
    $
    21,301,642
    
    
    $
    43,967,934
    
    
    $
    17,415,261
    
    
    $
    32,078,721
    
    
    $
    12,296,982
    
    
    $
    24,418,227
    
    
    $
    9,454,914Gas Proceeds
    
    
    41,997,463
    
    
    
    5,275,253
    
    
    
    40,386,375
    
    
    
    5,780,321
    
    
    
    37,531,266
    
    
    
    5,050,206
    
    
    
    28,746,318
    
    
    
    3,970,231
    
    
    
    25,255,338
    
    
    
    3,606,615Total
    
    
    93,895,322
    
    
    
    25,926,928
    
    
    
    91,571,560
    
    
    
    27,081,963
    
    
    
    81,499,200
    
    
    
    22,465,467
    
    
    
    60,825,039
    
    
    
    16,267,213
    
    
    
    49,673,565
    
    
    
    13,061,529Less:Severance TaxOil
    
    
    2,241,791
    
    
    
    779,513
    
    
    
    2,219,552
    
    
    
    760,043
    
    
    
    1,806,281
    
    
    
    675,609
    
    
    
    1,366,942
    
    
    
    457,308
    
    
    
    1,045,413
    
    
    
    350,440Gas
    
    
    2,474,922
    
    
    
    337,861
    
    
    
    2,587,606
    
    
    
    378,513
    
    
    
    2,319,699
    
    
    
    325,044
    
    
    
    1,702,937
    
    
    
    262,673
    
    
    
    1,632,642
    
    
    
    228,928Other
    
    
    169,151
    
    
    
    159,926
    
    
    
    42,695
    
    
    
    -0-
    
    
    
    42,505
    
    
    
    
    
    
    
    42,763
    
    
    
    252,906
    
    
    
    26,850
    
    
    
    Lease Operating Expense and Property TaxOil and Gas
    
    
    15,854,987
    
    
    
    1,579,946
    
    
    
    13,932,289
    
    
    
    1,454,993
    
    
    
    12,191,168
    
    
    
    963,563
    
    
    
    9,391,083
    
    
    
    894,383
    
    
    
    10,540,850
    
    
    
    823,331Capital Expenditures
    
    
    11,198,975
    
    
    
    
    
    
    
    15,265,143
    
    
    
    
    
    
    
    7,151,598
    
    
    
    
    
    
    
    6,539,015
    
    
    
    
    
    
    
    7,734,224
    
    
    
    Total
    
    
    31,939,826
    
    
    
    2,857,246
    
    
    
    34,047,285
    
    
    
    2,593,549
    
    
    
    23,511,251
    
    
    
    1,964,216
    
    
    
    19,042,740
    
    
    
    1,867,270
    
    
    
    20,979,979
    
    
    
    1,402,699Net Profits
    
    
    61,955,496
    
    
    
    23,069,682
    
    
    
    57,524,275
    
    
    
    24,488,414
    
    
    
    57,987,949
    
    
    
    20,501,251
    
    
    
    41,782,299
    
    
    
    14,399,943
    
    
    
    28,693,586
    
    
    
    11,658,830Net Overriding Royalty Interest
    
    
    75
    %
    
    
    95
    %
    
    
    75
    %
    
    
    95
    %
    
    
    75
    %
    
    
    95
    %
    
    
    75
    %
    
    
    95
    %
    
    
    75
    %
    
    
    95
    %Royalty Income
    
    
    46,466,622
    
    
    
    21,916,198
    
    
    
    43,143,206
    
    
    
    23,263,993
    
    
    
    43,490,961
    
    
    
    19,476,189
    
    
    
    31,336,724
    
    
    
    13,679,946
    
    
    
    21,520,190
    
    
    
    11,075,888Total Royalty Income for Distribution
    
    
    46,466,622
    
    
    
    21,916,198
    
    
    $
    43,143,206
    
    
    $
    23,263,993
    
    
    $
    43,490,961
    
    
    $
    19,476,189
    
    
    $
    31,336,724
    
    
    $
    13,679,946
    
    
    $
    21,520,190
    
    
    $
    11,075,888
 7




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##### 



Discussion and Analysis
 Trustees Discussion and Analysis for the Three-Year Period Ended December 31, 2007
    st
      8




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##### 



Year Ended December 31,2007
    
    2006
    
    2005RoyaltiesTotal Revenue
    
    $
    68,382,820
    
    
    $
    66,407,199
    
    
    $
    62,967,150100
    %
    
    
    100
    %
    
    
    100
    %Oil Revenue
    
    
    42,116,916
    
    
    
    42,729,342
    
    
    
    38,924,57962
    %
    
    
    64
    %
    
    
    62
    %Gas Revenue
    
    
    26,265,904
    
    
    
    23,677,857
    
    
    
    24,042,57138
    %
    
    
    36
    %
    
    
    38
    %Total Revenue/Unit
    
    $
    1.467166
    
    
    $
    1.424775
    
    
    $
    1.35097
  Year Ended December 31,2007
    
    2006
    
    2005RoyaltiesOil Sales (Bbls)
    
    
    740,878
    
    
    
    749,949
    
    
    
    827,275Gas Sales (Mcf)
    
    
    3,477,898
    
    
    
    3,154,791
    
    
    
    3,608,778Underlying PropertiesOilTotal Oil Sales (Bbls)
    
    
    1,190,270
    
    
    
    1,221,165
    
    
    
    1,258,584Average Per Day (Bbls)
    
    
    3,261
    
    
    
    3,346
    
    
    
    3,448Average Price/Bbl
    
    $
    60.95
    
    
    $
    59.36
    
    
    $
    48.77
 9




---



##### 



Year Ended December 31,Royalties
    
    2007
    
    2006
    
    2005GasTotal Gas Sales (Mcf).
    
    
    6,407,845
    
    
    
    5,973,188
    
    
    
    6,132,716Average Per Day (Mcf)
    
    
    17,556
    
    
    
    16,365
    
    
    
    16,802Average Price/Mcf
    
    
    7.38
    
    
    $
    7.73
    
    
    $
    6.94
           10




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##### 



Results of the Fourth Quarters of 2007 and 2006
   Fourth Quarter2007
    
    2006RoyaltiesOil Sales (Bbls)
    
    
    216,314
    
    
    
    175,356Gas Sales (Mcf)
    
    
    1,066,321
    
    
    
    734,754Underlying PropertiesTotal Oil Sales (Bbls)
    
    
    308,546
    
    
    
    308,453Average Per Day (Bbls)
    
    
    3,354
    
    
    
    3,353Average Price/Bbls
    
    
    73.93
    
    
    $
    59.14Total Gas Sales (Mcf)
    
    
    1,644,198
    
    
    
    1,578,248Average Per Day (Mcf)
    
    
    17,872
    
    
    
    17,155Average Price/Mcf
    
    
    7.56
    
    
    $
    6.83
   11




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##### 



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
    
    $
    8,173,207
    
    
    $
    8,173,207
    
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    $
    8,173,207
    
    
    $
    8,173,207
    
    
    
    0
    
    
    
    0
    
    
    
    0
 12




---



##### 



Internal ControlIntegrated Framework
 DELOITTE & TOUCHE LLP
 
 13




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##### 



PERMIAN BASIN ROYALTY TRUST
FINANCIAL STATEMENTS
 STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
DECEMBER 31, 2007 AND 2006
 2007
    
    
    2006ASSETSCash and Short-term Investments
    
    $
    8,173,207
    
    
    $
    5,135,136Net Overriding Royalty Interests in Producing Oil and
Gas Properties  Net (Notes 2 and 3)
    
    
    1,293,935
    
    
    
    1,439,214$
    9,467,142
    
    
    $
    6,574,350LIABILITIES AND TRUST CORPUSDistribution Payable to Unit Holders
    
    $
    8,173,207
    
    
    $
    5,135,136Trust Corpus  46,608,796 Units of Beneficial Interest
Authorized and Outstanding
    
    
    1,293,935
    
    
    
    1,439,214$
    9,467,142
    
    
    $
    6,574,350
 STATEMENTS OF DISTRIBUTABLE INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 2007
 2007
    
    
    2006
    
    
    2005Royalty Income (Notes 2 and 3)
    
    $
    68,382,820
    
    
    $
    66,407,199
    
    
    $
    62,967,150Interest Income
    
    
    125,338
    
    
    
    133,648
    
    
    
    63,90968,508,158
    
    
    
    66,540,847
    
    
    
    63,031,059Expenditures  General and
Administrative
    
    
    888,928
    
    
    
    825,478
    
    
    
    763,390Distributable Income
    
    $
    67,619,230
    
    
    $
    65,715,369
    
    
    $
    62,267,669Distributable Income per Unit
(46,608,796 Units)
    
    $
    1.450777
    
    
    $
    1.410082
    
    
    $
    1.335964
 14




---



##### 



STATEMENTS OF CHANGES IN TRUST CORPUS
FOR THE THREE YEARS ENDED DECEMBER 31, 2007
 2007
    
    
    2006
    
    
    2005Trust Corpus, Beginning of Period
    
    $
    1,439,214
    
    
    $
    1,610,630
    
    
    $
    1,795,267Amortization of Net Overriding
Royalty Interests
(Notes 2 and 3)
    
    
    (145,279
    )
    
    
    (171,416
    )
    
    
    (184,637
    )Distributable Income
    
    
    67,619,230
    
    
    
    65,715,369
    
    
    
    62,267,669Distributions Declared
    
    
    (67,619,230
    )
    
    
    (65,715,369
    )
    
    
    (62,267,669
    )Trust Corpus, End of Period
    
    $
    1,293,935
    
    
    $
    1,439,214
    
    
    $
    1,610,630
  15




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##### 



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
 Accounting for Certain Hybrid Financial
Instruments  an amendment of FASB Statements No. 133 Accounting for Derivative Instruments and No.
140 Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
 17




---



##### 



Accounting for Servicing of Financial Assets  an
amendment of FASB Statements No. 140 Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
 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




---



##### 



5.
    
    Federal Income Tax
     19




---



##### 



6.
    
    Significant Customers
  7.
    
    Proved Oil and Gas Reserves (Unaudited)
  8.
    
    Quarterly Schedule of Distributable Income (Unaudited)
  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
 20




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##### 



DistributableIncome andRoyalty
    
    
    Distributable
    
    
    Distribution2006
    
    Income
    
    
    Income
    
    
    Per UnitFirst Quarter
    
    $
    18,918
    
    
    $
    18,653
    
    
    $
    .400354Second Quarter
    
    
    14,041
    
    
    
    13,844
    
    
    
    .297034Third Quarter
    
    
    18,697
    
    
    
    18,576
    
    
    
    .398559Fourth Quarter
    
    
    14,751
    
    
    
    14,642
    
    
    
    .314135Total
    
    $
    66,407
    
    
    $
    65,715
    
    
    $
    1.410082
 9. SUBSEQUENT EVENTS
  Monthly Record Date
    
    Payment Date
    
    Distribution per UnitJanuary 31, 2008
    
    February 14, 2008
    
    $
    .184212February 29, 2008
    
    March 14, 2008
    
    $
    .193032
 10. STATE TAX CONSIDERATIONS
   21




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#####