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<SEC-DOCUMENT>0000950134-01-002471.txt : 20010323
<SEC-HEADER>0000950134-01-002471.hdr.sgml : 20010323
ACCESSION NUMBER:		0000950134-01-002471
CONFORMED SUBMISSION TYPE:	10-K405
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20001231
FILED AS OF DATE:		20010322

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SABINE ROYALTY TRUST
		CENTRAL INDEX KEY:			0000710752
		STANDARD INDUSTRIAL CLASSIFICATION:	OIL ROYALTY TRADERS [6792]
		IRS NUMBER:				756297143
		STATE OF INCORPORATION:			TX
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K405
		SEC ACT:		
		SEC FILE NUMBER:	001-08424
		FILM NUMBER:		1576259

	BUSINESS ADDRESS:	
		STREET 1:		PO BOX 830650
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75283-0650
		BUSINESS PHONE:		2145082400

	MAIL ADDRESS:	
		STREET 1:		PO BOX 830650
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75283-0650
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>d84722e10-k405.txt
<DESCRIPTION>FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 2000
<TEXT>

<PAGE>   1

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934
                FOR THE TRANSITION PERIOD FROM        TO
                         COMMISSION FILE NUMBER: 1-8424

                              SABINE ROYALTY TRUST
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                            <C>
                    TEXAS                                        75-6297143
         (State or other jurisdiction                         (I.R.S. Employer
      of incorporation or organization)                     Identification No.)

                TRUST DIVISION
            BANK OF AMERICA, N.A.
            BANK OF AMERICA PLAZA
                  17TH FLOOR
               901 MAIN STREET
                DALLAS, TEXAS                                      75202
   (Address of principal executive offices)                      (Zip Code)
</TABLE>

       Registrant's telephone number, including area code: (214) 209-2400

Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
                                                           NAME OF EACH EXCHANGE
             TITLE OF EACH CLASS                            ON WHICH REGISTERED
             -------------------                            -------------------
<S>                                            <C>
         Units of Beneficial Interest                     New York Stock Exchange
</TABLE>

Securities registered pursuant to Section 12(g) of the Act: NONE

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]   No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     At March 1, 2001, there were 14,579,345 units of beneficial interest
outstanding and the aggregate market value of such units (based on the closing
sale price on the New York Stock Exchange) held by non-affiliates of the
registrant was approximately $301,792,442.

                      DOCUMENTS INCORPORATED BY REFERENCE
                                      None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>   2

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           PAGE
                                                                           ----
<S>         <C>                                                            <C>
                                 PART I
Item 1.     Business....................................................     1
            Description of the Trust....................................     1
            Assets of the Trust.........................................     2
            Liabilities of the Trust....................................     2
            Duties and Limited Powers of Trustee........................     2
            Liabilities of Trustee......................................     3
            Duration of Trust...........................................     3
            Voting Rights of Unit Holders...............................     3
            Description of Units........................................     4
            Distributions of Net Income.................................     4
            Transfer....................................................     4
            Reports to Unit Holders.....................................     5
            Liability of Unit Holders...................................     5
            Possible Divestiture of Units...............................     5
            Federal Taxation............................................     6
            State Law and Tax Considerations............................     7
            Regulation and Prices.......................................     8
            Regulation..................................................     8
            Prices......................................................    10
Item 2.     Properties..................................................    10
            Title.......................................................    11
            Reserves....................................................    11
Item 3.     Legal Proceedings...........................................    16
Item 4.     Submission of Matters to a Vote of Security Holders.........    16

                                PART II

Item 5.     Market for Registrant's Common Equity and Related
            Stockholder Matters.........................................    16
Item 6.     Selected Financial Data.....................................    17
Item 7.     Trustee's Discussion and Analysis of Financial Condition and
            Results of Operations.......................................    17
Item 7A.    Quantitative and Qualitative Disclosures About Market
            Risk........................................................    18
Item 8.     Financial Statements and Supplementary Data.................    19
Item 9.     Changes in and Disagreements with Accountants on Accounting
            and Financial Disclosure....................................    30

                                PART III

Item 10.    Directors and Executive Officers of the Registrant..........    30
Item 11.    Executive Compensation......................................    30
Item 12.    Security Ownership of Certain Beneficial Owners and
            Management..................................................    30
Item 13.    Certain Relationships and Related Transactions..............    30

                                PART IV

Item 14.    Exhibits, Financial Statement Schedules and Reports on Form
            8-K.........................................................    31
</TABLE>

                                        i
<PAGE>   3

                                     PART I

ITEM 1. BUSINESS.

                            DESCRIPTION OF THE TRUST

     Sabine Royalty Trust (the "Trust") is an express trust formed under the
laws of the State of Texas by the Sabine Corporation Royalty Trust Agreement
(the "Trust Agreement") made and entered into effective as of December 31, 1982,
between Sabine Corporation, as trustor, and InterFirst Bank Dallas, N.A.
("InterFirst"), as trustee. The current trustee of the Trust is Bank of America,
N.A. (as successor to NationsBank, N.A.) ("Bank of America"). In accordance with
the successor trustee provisions of the Trust Agreement, Bank of America, as
trustee of the Trust (the "Trustee"), is subject to all the terms and conditions
of the Trust Agreement. The principal office of the Trust (sometimes referred to
herein as the "Registrant") is located at Bank of America Plaza, 17th Floor, 901
Main Street, Dallas, Texas 75202. The telephone number of the Trust is (214)
209-2400.

     On November 12, 1982, the shareholders of Sabine Corporation approved and
authorized Sabine Corporation's transfer of royalty and mineral interests,
including landowner's royalties, overriding royalty interests, minerals (other
than executive rights, bonuses and delay rentals), production payments and any
other similar, nonparticipatory interest, in certain producing and proved
undeveloped oil and gas properties located in Florida, Louisiana, Mississippi,
New Mexico, Oklahoma and Texas (the "Royalty Properties") to the Trust. The
conveyances of the Royalty Properties to the Trust were effective with respect
to production as of 7:00 a.m. (local time) on January 1, 1983.

     In order to avoid uncertainty under Louisiana law as to the legality of the
Trustee's holding record title to the Royalty Properties located in that state,
title to such properties is held by a separate trust formed under the laws of
Louisiana, the sole beneficiary of which is the Trust. Sabine Louisiana Royalty
Trust is a passive entity, with the trustee thereof, Hibernia National Bank in
New Orleans, having only such powers as are necessary for the collection of and
distribution of revenues from and the protection of the Royalty Properties
located in Louisiana and the payment of liabilities of Sabine Louisiana Royalty
Trust. A separate trust also was established to hold record title to the Royalty
Properties located in Florida. Legislation was adopted in Florida in 1992 that
eliminated the provision of Florida law that prohibited the Trustee from holding
record title to the Royalty Properties located in that state. In November 1993,
record title to the Royalty Properties held by the trustee of Sabine Florida
Land Trust was transferred to the Trustee. As used herein, the term "Royalty
Properties" includes the Royalty Properties held directly by the Trust and the
Royalty Properties located in Louisiana and Florida that are or were held
indirectly through the Trust's ownership of 100 percent beneficial interest of
Sabine Louisiana Royalty Trust and Sabine Florida Land Trust. In discussing the
Trust, this report disregards the technical ownership formalities described in
this paragraph, which have no effect on the tax or accounting treatment of the
Royalty Properties, since the observance thereof would significantly complicate
the information presented herein without any corresponding benefit to Unit
holders.

     Certificates evidencing units of beneficial interest (the "Units") in the
Trust were mailed on December 31, 1982 to the shareholders of Sabine Corporation
of record on December 23, 1982, on the basis of one Unit for each outstanding
share of common stock of Sabine Corporation. The Units are listed and traded on
the New York Stock Exchange under the symbol "SBR".

     In May 1988, Sabine Corporation was acquired by Pacific Enterprises, a
California corporation. Through a series of mergers, Sabine Corporation was
merged into Pacific Enterprises Oil Company (USA) ("Pacific (USA)"), a
California corporation and a wholly owned subsidiary of Pacific Enterprises,
effective January 1, 1990. This acquisition and the subsequent mergers had no
effect on the Units. Pacific (USA), as successor to Sabine Corporation, assumed
by operation of law all of Sabine Corporation's rights and obligations with
respect to the Trust. References herein to Pacific (USA) shall be deemed to
include Sabine Corporation where appropriate.

                                        1
<PAGE>   4

     In connection with the transfer of the Royalty Properties to the Trust upon
its formation, Sabine Corporation had reserved to itself all executive rights,
including rights to execute leases and to receive bonuses and delay rentals. In
January 1993, Pacific (USA) completed the sale of substantially all of Pacific
(USA)'s producing oil and gas assets to Hunt Oil Company. The sale did not
include the executive rights relating to the Royalty Properties, and Pacific
(USA)'s ownership of such rights was not affected by the sale.

     The following summaries of certain provisions of the Trust Agreement are
qualified in their entirety by reference to the Trust Agreement itself, which is
an exhibit to the Form 10-K and available upon request from the Trustee. The
definitions, formulas, accounting procedures and other terms governing the Trust
are complex and extensive and no attempt has been made below to describe all
such provisions. Capitalized terms not otherwise defined herein are used with
the meanings ascribed to them in the Trust Agreement.

ASSETS OF THE TRUST

     The Royalty Properties are the only assets of the Trust, other than cash
being held for the payment of expenses and liabilities and for distribution to
the Unit holders. Pending such payment of expenses and distribution to Unit
holders, cash may be invested by the Trustee only in certificates of deposit,
United States government securities or repurchase agreements secured by United
States government securities. See "Duties and Limited Powers of Trustee" below.

LIABILITIES OF THE TRUST

     Because of the passive nature of the Trust's assets and the restrictions on
the power of the Trustee to incur obligations, it is anticipated that the only
liabilities the Trust will incur are those for routine administrative expenses,
such as insurance and trustee's fees, and accounting, engineering, legal and
other professional fees. The total general and administrative expenses of the
Trust for 2000 were $1,525,548 of which, pursuant to the terms of the Trust
Agreement, $251,246 was paid to Bank of America, as Trustee, and $753,747 was
paid to Bank of America, as escrow agent.

DUTIES AND LIMITED POWERS OF TRUSTEE

     The duties of the Trustee are specified in the Trust Agreement and by the
laws of the State of Texas. The basic function of the Trustee is to collect
income from the Trust properties, to pay out of the Trust's income and assets
all expenses, charges and obligations, and to pay available income to Unit
holders. Since Pacific (USA) has retained the executive rights with respect to
the minerals included in the Royalty Properties and the right to receive any
future bonus payments or delay rentals resulting from leases with respect to
such minerals, the Trustee is not required to make any investment or operating
decision with respect to the Royalty Properties.

     The Trust has no employees. Administrative functions of the Trust are
performed by the Trustee.

     The Trustee has the discretion to establish a cash reserve for the payment
of any liability that is contingent or uncertain in amount or that otherwise is
not currently due and payable. The Trustee has the power to borrow funds
required to pay liabilities of the Trust as they become due and pledge or
otherwise encumber the Trust's properties if it determines that the cash on hand
is insufficient to pay such liabilities. Borrowings must be repaid in full
before any further distributions are made to Unit holders. All distributable
income of the Trust is distributed on a monthly basis. The Trustee is required
to invest any cash being held by it for distribution on the next Distribution
Date or as a reserve for liabilities in certificates of deposit, United States
government securities or repurchase agreements secured by United States
government securities. The Trustee furnishes Unit holders with periodic reports.
See "Item 1 -- Description of Units -- Reports to Unit Holders".

     The Trust Agreement grants the Trustee only such rights and powers as are
necessary to achieve the purposes of the Trust. The Trust Agreement prohibits
the Trustee from engaging in any business, commercial or, with certain
exceptions, investment activity of any kind and from using any portion of the

                                        2
<PAGE>   5

assets of the Trust to acquire any oil and gas lease, royalty or other mineral
interest other than the Royalty Properties. The Trustee may sell Trust
properties only as authorized by a vote of the Unit holders, or when necessary
to provide for the payment of specific liabilities of the Trust then due or upon
termination of the Trust. Pledges or other encumbrances to secure borrowings are
permitted without the authorization of Unit holders if the Trustee determines
such action is advisable. Any sale of Trust properties must be for cash unless
otherwise authorized by the Unit holders or unless the properties are being sold
to provide for the payment of specific liabilities of the Trust then due, and
the Trustee is obligated to distribute the available net proceeds of any such
sale to the Unit holders.

LIABILITIES OF TRUSTEE

     The Trustee is to be indemnified out of the assets of the Trust for any
liability, expense, claim, damage or other loss incurred by it in the
performance of its duties unless such loss results from its negligence, bad
faith or fraud or from its expenses in carrying out such duties exceeding the
compensation and reimbursement it is entitled to under the Trust Agreement. The
Trustee can be reimbursed out of the Trust assets for any liability imposed upon
the Trustee for its failure to ensure that the Trust's liabilities are
satisfiable only out of Trust assets. In no event will the Trustee be deemed to
have acted negligently, fraudulently or in bad faith if it takes or suffers
action in good faith in reliance upon and in accordance with the advice of
parties considered to be qualified as experts on the matters submitted to them.
The Trustee is not entitled to indemnification from Unit holders except in
certain limited circumstances related to the replacement of mutilated,
destroyed, lost or stolen certificates. See "Item 1 -- Description of Units --
Liability of Unit Holders".

DURATION OF TRUST

     The Trust is irrevocable and Pacific (USA) has no power to terminate the
Trust or, except with respect to certain corrective amendments, to alter or
amend the terms of the Trust Agreement. The Trust will exist until it is
terminated by (i) two successive fiscal years in which the Trust's gross
revenues from the Royalty Properties are less than $2,000,000 per year, (ii) a
vote of Unit holders as described below under "Voting Rights of Unit Holders" or
(iii) operation of provisions of the Trust Agreement intended to permit
compliance by the Trust with the "rule against perpetuities". Upon the
termination of the Trust, the Trustee will continue to act in such capacity
until all the assets of the Trust are distributed. The Trustee will sell all
Trust properties for cash (unless the Unit holders authorize the sale for a
specified non-cash consideration, in which event the Trustee may, but is not
obligated to, consummate such non-cash sale) in one or more sales and, after
satisfying all existing liabilities and establishing adequate reserves for the
payment of contingent liabilities, will distribute all available proceeds to the
Unit holders.

VOTING RIGHTS OF UNIT HOLDERS

     Although Unit holders possess certain voting rights, their voting rights
are not comparable to those of shareholders of a corporation. For example, there
is no requirement for annual meetings of Unit holders or for annual or other
periodic re-election of the Trustee.

     The Trust Agreement may be amended by the affirmative vote of a majority of
the outstanding Units at any duly called meeting of Unit holders. However, no
such amendment may alter the relative rights of Unit holders unless approved by
the affirmative vote of 100 percent of the Unit holders and by the Trustee. In
addition, certain special voting requirements can be amended only if such
amendment is approved by the holders of at least 80 percent of the outstanding
Units and by the Trustee.

     Removal of the Trustee requires the affirmative vote of the holders of a
majority of the Units represented at a duly called meeting of Unit holders. In
the event of a vacancy in the position of Trustee or if the Trustee has given
notice of its intention to resign, a successor trustee of the Trust may be
appointed by similar voting approval of the Unit holders.

                                        3
<PAGE>   6

     The sale of all or any part of the assets of the Trust must be authorized
by the affirmative vote of the holders of a majority of the outstanding Units.
However, the Trustee may, without a vote of the Unit holders, sell all or any
part of the Trust assets upon termination of the Trust or otherwise if necessary
to provide for the payment of specific liabilities of the Trust then due. The
Trust can be terminated by the Unit holders only if the termination is approved
by the holders of a majority of the outstanding Units.

     Meetings of Unit holders may be called by the Trustee at any time at its
discretion and must be called by the Trustee at the written request of holders
of not less than 10 percent of the then outstanding Units. The presence of a
majority of the outstanding Units is necessary to constitute a quorum and Unit
holders may vote in person or by proxy.

     Notice of any meeting of Unit holders must be given not more than 60 nor
less than 20 days prior to the date of such meeting. The notice must state the
purposes of the meeting and no other matter may be presented or acted upon at
the meeting.

                              DESCRIPTION OF UNITS

     Each Unit represents an equal undivided share of beneficial interest in the
Trust and is evidenced by a transferable certificate issued by the Trustee. Each
Unit entitles its holder to the same rights as the holder of any other Unit, and
the Trust has no other authorized or outstanding class of equity security. At
March 1, 2001, there were 14,579,345 Units outstanding.

     The Trust may not issue additional Units unless such issuance is approved
by the holders of at least 80 percent of the outstanding Units and by the
Trustee. Under limited circumstances, Units may be redeemed by the Trust and
canceled. See "Possible Divestiture of Units" below.

DISTRIBUTIONS OF NET INCOME

     The identity of Unit holders entitled to receive distributions of Trust
income and the amounts thereof are determined as of each Monthly Record Date.
Unit holders of record as of the Monthly Record Date (the 15th day of each
calendar month except in limited circumstances) are entitled to have distributed
to them the calculated Monthly Income Amount for the related Monthly Period no
later than 10 business days after the Monthly Record Date. The Monthly Income
Amount is the excess of (i) revenues from the Trust properties plus any decrease
in cash reserves previously established for contingent liabilities and any other
cash receipts of the Trust over (ii) the expenses and payments of liabilities of
the Trust plus any increase in cash reserves for contingent liabilities.

TRANSFER

     Units are transferable on the records of the Trustee upon surrender of any
certificate in proper form for transfer and compliance with such reasonable
regulations as the Trustee may prescribe. No service charge is made to the
transferor or transferee for any transfer of a Unit, but the Trustee may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in relation to such transfer. Until any such transfer, the Trustee may
conclusively treat the holder of a Unit shown by its records as the owner of
that Unit for all purposes. Any such transfer of a Unit will, as to the Trustee,
vest in the transferee all rights of the transferor at the date of transfer,
except that the transfer of a Unit after the Monthly Record Date for a
distribution will not transfer the right of the transferor to such distribution.

     The transfer of Units by gift and the transfer of Units held by a
decedent's estate, and distributions from the Trust in respect thereof, may be
restricted under applicable state law. See "Item 1 -- State Law and Tax
Considerations".

     Mellon Investor Services LLC serves as transfer agent and registrar for the
Units.

                                        4
<PAGE>   7

REPORTS TO UNIT HOLDERS

     As promptly as practicable following the end of each fiscal year, the
Trustee mails to each person who was a Unit holder on any Monthly Record Date
during such fiscal year, a report showing in reasonable detail on a cash basis
the receipts and disbursements and income and expenses of the Trust for federal
and state tax purposes for each Monthly Period during such fiscal year and
containing sufficient information to enable Unit holders to make all
calculations necessary for federal and state tax purposes. As promptly as
practicable following the end of each of the first three fiscal quarters of each
year, the Trustee mails a report for such fiscal quarter showing in reasonable
detail on a cash basis the assets and liabilities, receipts and disbursements,
and income and expenses of the Trust for such fiscal quarter to Unit holders of
record on the last Monthly Record Date immediately preceding the mailing
thereof. Within 120 days following the end of each fiscal year, or such shorter
period as may be required by the New York Stock Exchange, the Trustee mails to
Unit holders of record on the last Monthly Record Date immediately preceding the
mailing thereof, an annual report containing audited financial statements of the
Trust and an audited statement of fees and expenses paid by the Trust to Bank of
America, as Trustee and escrow agent. See "Federal Taxation" below.

     Each Unit holder and his or her duly authorized agent has the right, during
reasonable business hours at his or her own expense, to examine and make audits
of the Trust and the records of the Trustee, including lists of Unit holders,
for any proper purpose in reference thereto.

LIABILITY OF UNIT HOLDERS

     As regards the Unit holders, the Trustee, in engaging in any activity or
transaction that results or could result in any kind of liability, will be fully
liable if the Trustee fails to take reasonable steps necessary to ensure that
such liability is satisfiable only out of the Trust assets (even if the assets
are inadequate to satisfy the liability) and in no event out of amounts
distributed to, or other assets owned by, Unit holders. However, the Trust might
be held to constitute a "joint stock company" under Texas law, which is
unsettled on this point, and therefore a Unit holder may be jointly and
severally liable for any liability of the Trust if the satisfaction of such
liability was not contractually limited to the assets of the Trust and the
assets of both the Trust and the Trustee are not adequate to satisfy such
liability. In view of the substantial value and passive nature of the Trust
assets, the restrictions on the power of the Trustee to incur liabilities and
the required financial net worth of any trustee of the Trust, the imposition of
any liability on a Unit holder is believed to be extremely unlikely.

POSSIBLE DIVESTITURE OF UNITS

     The Trust Agreement imposes no restrictions based on nationality or other
status of the persons or entities which are eligible to hold Units. However, the
Trust Agreement provides that if at any time the Trust or the Trustee is named a
party in any judicial or administrative proceeding seeking the cancellation or
forfeiture of any property in which the Trust has an interest because of the
nationality, or any other status, of any one or more Unit holders, the following
procedure will be applicable:

          1. The Trustee will give written notice to each holder whose
     nationality or other status is an issue in the proceeding of the existence
     of such controversy. The notice will contain a reasonable summary of such
     controversy and will constitute a demand to each such holder that he or she
     dispose of his or her Units within 30 days to a party not of the
     nationality or other status at issue in the proceeding described in the
     notice.

          2. If any holder fails to dispose of his or her Units in accordance
     with such notice, the Trustee shall have the preemptive right to redeem and
     shall redeem, at any time during the 90-day period following the
     termination of the 30-day period specified in the notice, any Unit not so
     transferred for a cash price equal to the closing price of the Units on the
     stock exchange on which the Units are then listed or, in the absence of any
     such listing, the mean between the closing bid and asked prices for the

                                        5
<PAGE>   8

     Units in the over-the-counter market, as of the last business day prior to
     the expiration of the 30-day period stated in the notice.

          3. The Trustee shall cancel any Unit acquired in accordance with the
     foregoing procedures.

          4. The Trustee may, in its sole discretion, cause the Trust to borrow
     any amount required to redeem Units.

                                FEDERAL TAXATION

     In May 1983, the Internal Revenue Service (the "Service") ruled that the
Trust would be classified as a grantor trust for federal income tax purposes and
not as an association taxable as a corporation. Accordingly, the income and
deductions of the Trust are reportable directly by Unit holders for federal
income tax purposes. The Service also ruled that Unit holders would be entitled
to deduct cost depletion with respect to their investment in the Trust and that
the transfer of a Unit in the Trust would be considered to be a transfer of a
proportionate part of the properties held by the Trust.

     Transferees of Units transferred after October 11, 1990 may be eligible to
use the percentage depletion deduction on oil and gas income thereafter
attributable to such Units, if the percentage depletion deduction would exceed
cost depletion. However, no Unit holders were eligible to claim percentage
depletion deductions for 1990 or any subsequent year because cost depletion has
exceeded percentage depletion.

     If a taxpayer disposes of any "section 1254 property" (certain oil, gas,
geothermal or other mineral property), and if the adjusted basis of such
property includes adjustments for deductions for depletion under section 611 of
the Internal Revenue Code (the "Code"), the taxpayer generally must recapture
the amount deducted for depletion in ordinary income (to the extent of gain
realized on the disposition of the property). This depletion recapture rule
applies to any disposition of property that was placed in service by the
taxpayer after December 31, 1986. Detailed rules set forth in Sections 1.1254-1
through 1.1254-6 of the United States Treasury regulations govern dispositions
of property after March 13, 1995. The Service will likely take the position that
a Unit holder who purchases a Unit subsequent to December 31, 1986 must
recapture depletion upon the disposition of that Unit.

     In order to facilitate creation of the Trust and to avoid the
administrative expense and inconvenience of daily reporting to Unit holders by
the Trustee, the conveyances by Sabine Corporation of the Royalty Properties
located in five of the six states provided for the execution of an escrow
agreement by Sabine Corporation and InterFirst (the initial trustee of the
Trust), in its capacities as trustee of the Trust and as escrow agent. The
conveyances by Sabine Corporation of the Royalty Properties located in Louisiana
provided for the execution of a substantially identical escrow agreement by
Sabine Corporation and Hibernia National Bank in New Orleans, in the capacities
of escrow agent and of trustee of Sabine Louisiana Royalty Trust.

     Pursuant to the terms of the escrow agreements and the conveyances of the
Royalty Properties, the proceeds of production from the Royalty Properties for
each calendar month, and interest thereon, are collected by the escrow agents
and are paid to and received by the Trust only on the next Monthly Record Date.
The escrow agents have agreed to endeavor to assure that they incur and pay
expenses and fees for each calendar month only on the next Monthly Record Date.
The Trust Agreement also provides that the Trustee is to endeavor to assure that
income of the Trust will be accrued and received and expenses of the Trust will
be incurred and paid only on each Monthly Record Date.

     Assuming that the escrow arrangement is recognized for federal income tax
purposes and that the Trustee and the escrow agents are able to control the
timing of income and expenses, as stated above, cash and accrual basis Unit
holders should be treated as realizing income only on each Monthly Record Date.
The Trustee and the escrow agents may not be able to cause third party expenses
to be incurred on each Monthly Record Date in all instances. Cash basis Unit
holders, however, should be treated as having paid all expenses and fees only
when such expenses and fees are actually paid. Even if the escrow arrangement is

                                        6
<PAGE>   9

recognized for federal income tax purposes, however, accrual basis Unit holders
might be considered to have accrued expenses when such expenses are incurred
rather than on each Monthly Record Date when paid.

     No ruling was requested from the Service with respect to the effect of the
escrow arrangement. Due to the absence of direct authority and the factual
nature of the characterization of the relationship among the escrow agent,
Pacific (USA) and the Trust, no opinion has been expressed by legal counsel with
respect to the tax consequences of the escrow arrangement. In the absence of the
escrow arrangement, the Unit holders would be deemed to receive or accrue income
from production from the Royalty Properties (and interest income) on a daily
basis, in accordance with their method of accounting, as the proceeds from
production and interest thereon were received or accrued by the Trust. If the
escrow arrangement is recognized, the income from the Royalty Properties for a
calendar month and interest income thereon will be taxed to the holder of the
Unit on the next Monthly Record Date without regard to the ownership of the Unit
prior to that date. The Trustee is treating the escrow arrangement as effective
for tax purposes and has furnished tax information to Unit holders on that
basis.

     The Service might take the position that the escrow arrangement should be
ignored for tax purposes. In such case, the Trustee could be required to report
the proceeds from production and interest income thereon to the Unit holders on
a daily basis resulting in a substantial increase in the administrative expense
of the Trust. In the event of a transfer of a Unit, the income and the depletion
deduction attributable to the Royalty Properties for the period up to the date
of transfer would be allocated to the transferor, and the income and depletion
deduction attributable to the Royalty Properties on and after the date of
transfer would be allocated to the transferee, even though the transferee was
the holder of the Unit on the next Monthly Record Date and, therefore, would be
entitled to the monthly income distribution. Thus, if the escrow arrangement is
not recognized, a mismatching of such income and deduction could occur between a
transferor and a transferee upon the transfer of a Unit.

     Unit holders of record on each Monthly Record Date are entitled to receive
monthly distributions. See "Description of Units -- Distributions of Net Income"
above. The terms of the escrow agreements and the Trust Agreement, as described
above, seek to assure that taxable income attributable to such distributions
will be reported by the Unit holder who receives such distributions, assuming
that such holder is the holder of record on the Monthly Record Date. In certain
circumstances, however, a Unit holder may be required to report taxable income
attributable to his or her Units but the Unit holder will not receive the
distribution attributable to such income. For example, if the Trustee
establishes a reserve or borrows money to satisfy debts and liabilities of the
Trust, income used to establish such reserve or to repay such loan will be
reported by the Unit holder, even though such income is not distributed to the
Unit holder.

     Interest and royalty income attributable to ownership of Units and any gain
on the sale thereof are considered portfolio income, and not income from a
"passive activity," and therefore generally may not be offset by losses from any
passive activities.

     Individuals may deduct "miscellaneous itemized deductions" (including, in
general, investment expenses) only to the extent that such expenses exceed two
percent of the individual's adjusted gross income. Although the Trustee believes
that no portion of a Unit holder's share of administrative expenses of the Trust
is subject to the floor, it is possible that the Service could take such a
position.

     The foregoing summary is not exhaustive, and many other provisions of the
federal tax laws may affect individual Unit holders. Each Unit holder should
consult his or her personal tax adviser with respect to the effects of his or
her ownership of Units on his or her personal tax situation.

                        STATE LAW AND TAX CONSIDERATIONS

     The following is intended as a brief summary of certain information
regarding state income taxes and other state law matters affecting the Trust and
the Unit holders. Unit holders are urged to consult their own legal and tax
advisers with respect to these matters.
                                        7
<PAGE>   10

     Texas. Texas does not impose an income tax. Therefore, no part of the
income produced by the Trust is subject to an income tax in Texas. However,
corporations and limited liability companies doing business in Texas are subject
to the Texas franchise tax, which includes a calculation based upon the
company's taxable income for federal income tax purposes (or comparable amounts,
in the case of limited liability companies). It is currently unclear whether the
ownership of Units would be sufficient to subject a corporate Unit holder who is
not otherwise doing business in Texas to the franchise tax. Under certain
circumstances, Texas inheritance tax may be applicable to property in Texas
(including intangible personal property such as the Units) of both resident and
nonresident decedents.

     Louisiana. Units held by residents of Louisiana, to the extent that they
represent a proportionate share of mineral royalties from mineral interests
located in Louisiana, are subject to Louisiana inheritance and other taxes and
probate, community property, forced heirship and other rules. Units held of
record by a person who was not domiciled in Louisiana at the date of death
generally are not subject to Louisiana inheritance taxes or probate, community
property or forced heirship rules, and Units transferred inter vivos by
non-domiciliaries of Louisiana generally are not subject to Louisiana gift tax.
Income of the Units attributable to interests located in Louisiana will, subject
to applicable minimum filing requirements, be subject to Louisiana income tax,
and the Trustee is required to file with Louisiana a return reflecting the
income of the Trust attributable to mineral interests located in Louisiana.

     Florida, Mississippi, New Mexico and Oklahoma. Florida imposes an income
tax on resident and nonresident corporations but not individuals. Mississippi,
New Mexico and Oklahoma each impose an income tax applicable to both resident
and nonresident individuals and corporations which will be applicable to royalty
income allocable to a Unit holder from properties located within that state.
Although the Trust may be required to file information returns with taxing
authorities in those states and provide copies of such returns to the Unit
holders, the Trust should be considered a grantor trust for state income tax
purposes and the Royalty Properties that are located in such states should be
considered economic interests in minerals for state income tax purposes.

     Generally, the state income tax in these states is computed as a percentage
of taxable income attributable to the particular state. Furthermore, even though
there are variances from state to state, taxable income for state purposes is
often computed in a manner similar to the computation of taxable income for
federal income tax purposes. Some of these states give credit for taxes paid by
their residents on income from sources in other states. In certain of these
states, a Unit holder is required to file a state income tax return if income is
attributable to the Unit holder even though no tax is owed.

                             REGULATION AND PRICES

REGULATION

  General

     Exploration for and production and sale of oil and gas are extensively
regulated at the national, state and local levels. Oil and gas development and
production activities are subject to various state laws and regulations (and
orders of regulatory bodies pursuant thereto) governing a wide variety of
matters, including allowable rates of production, marketing, pricing, prevention
of waste, and pollution and protection of the environment. These laws,
regulations and orders may restrict the rate of oil and gas production below the
rate that would otherwise exist in the absence of such laws, regulations and
orders.

     Laws affecting the oil and gas industry are under constant review for
amendment or expansion, frequently increasing the regulatory burden. Numerous
governmental departments and agencies are authorized by statute to issue and
have issued rules and regulations binding on the oil and gas industry which
often are difficult and costly to comply with and which carry substantial
penalties for the failure to comply.

                                        8
<PAGE>   11

  Natural Gas

     On January 1, 1993, pursuant to the Natural Gas Wellhead Decontrol Act of
1989, the maximum lawful prices prescribed for the sale of natural gas under the
Natural Gas Policy Act of 1978 were eliminated. Consequently, prices for the
sale of natural gas, like the sale of other commodities, are governed by the
marketplace and the provisions of applicable gas sales contracts.

     The Federal Energy Regulatory Commission ("FERC") has taken significant
steps in the implementation of a policy to restructure the natural gas pipeline
industry to promote full competition in the sales of natural gas, so that all
natural gas suppliers, including pipelines, can compete equally for sales
customers. This policy, set forth principally in Order 636, issued on April 8,
1992, and its progeny, is being implemented largely through restructuring
proceedings for each pipeline. The effects of this policy and Order 636, if any,
are now presumably fully reflected in the natural gas markets.

     There are many other statutes, rules, regulations and orders that affect
the pricing or transportation of natural gas. Some of the provisions are and
will be subject to court or administrative review. Consequently, uncertainty as
to the ultimate impact of these regulatory provisions on the prices and
production of natural gas from the Royalty Properties is expected to continue
for the foreseeable future.

  Environmental Regulation

     General. Activities on the Royalty Properties are subject to existing
federal, state and local laws (including case law), rules and regulations
governing health, safety, environmental quality and pollution control. It is
anticipated that, absent the occurrence of an extraordinary event, compliance
with existing federal, state and local laws, rules and regulations regulating
health, safety, the release of materials into the environment or otherwise
relating to the protection of the environment will not have a material adverse
effect upon the Trust or Unit holders. The Trustee cannot predict what effect
additional regulation or legislation, enforcement policies thereunder, and
claims for damages to property, employees, other persons and the environment
resulting from operations on the Royalty Properties could have on the Trust or
Unit holders. Even if the Trust were not directly liable for costs or expenses
related to these matters, increased costs of compliance could result in wells
being plugged and abandoned earlier in their productive lives, with a resulting
loss of reserves and revenues to the Trust.

     Superfund. The Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), also known as the "superfund" law, imposes liability,
regardless of fault or the legality of the original conduct, on certain classes
of persons that contributed to the release of a "hazardous substance" into the
environment. These persons include the current or previous owner and operator of
a site and companies that disposed, or arranged for the disposal, of the
hazardous substance found at a site. CERCLA also authorizes the Environmental
Protection Agency and, in some cases, private parties to take actions in
response to threats to the public health or the environment and to seek recovery
from such responsible classes of persons of the costs of such action. In the
course of operations, the working interest owner and/or the operator of Royalty
Properties may have generated and may generate wastes that may fall within
CERCLA's definition of "hazardous substances". The operator of the Royalty
Properties or the working interest owners may be responsible under CERCLA for
all or part of the costs to clean up sites at which such substances have been
disposed. Although the Trust is not the operator of any Royalty Properties, or
the owner of any working interest, its ownership of royalty interests could
cause it to be responsible for all or part of such costs to the extent CERCLA
imposes responsibility on parties as "owners".

     Solid and Hazardous Waste. The Royalty Properties have produced oil and/or
gas for many years, and, although the Trust has no knowledge of the procedures
followed by the operators of the Royalty Properties in this regard, hydrocarbons
or other solid or hazardous wastes may have been disposed or released on or
under the Royalty Properties by the current or previous operators. Federal,
state and local laws applicable to oil- and gas-related wastes and properties
have become increasingly more stringent. Under these laws, removal or
remediation of previously disposed wastes or property contamination could be
required.
                                        9
<PAGE>   12

PRICES

  Oil

     Crude oil prices are affected by a variety of factors. Since domestic crude
oil price controls were lifted in 1981, the principal factors influencing the
prices received by producers of domestic crude oil have been the pricing and
production of the members of the Organization of Petroleum Exporting Countries
("OPEC").

     The Trust's average per barrel oil price increased from $15.50 in 1999 to
$23.86 in 2000. The Trustee believes that the higher average price per barrel of
crude oil realized by the Trust in 2000 can be attributed to a substantial
worldwide increase in oil prices that continued throughout 2000.

  Natural Gas

     Substantial competition in the natural gas marketplace continued in 2000.
In addition, competition with alternative fuels persists. Natural gas prices,
which once were determined largely by governmental regulations, are now being
generally governed by the marketplace. The average price received by the Trust
in 2000 on natural gas volumes sold of $2.85 per Mcf represented an increase
from the $1.88 per Mcf received in 1999, due largely to a relatively harsh
winter and decreasing levels of gas in storage.

     FERC is the federal agency responsible for implementing regulations
governing the natural gas industry. The current policy of FERC is designed to
promote increased competition among gas industry participants. Accordingly,
Order 636 and various other orders have been proposed and implemented to
encourage nondiscriminatory open-access transportation by interstate pipelines,
to provide for the release of natural gas dedicated to long-term contracts but
not required by pipelines to meet near-term system supply needs, and to provide
for the unbundling of pipeline services so that such services may also be
furnished by nonpipeline suppliers on a competitive basis. Certain of these
orders have been or will be challenged in the courts, and no prediction can be
made regarding the future impact on the industry of FERC's current or proposed
regulations.

ITEM 2. PROPERTIES.

     The assets of the Registrant consist principally of the Royalty Properties,
which constitute interests in gross production of oil, gas and other minerals
free of the costs of production. The Royalty Properties consist of royalty and
mineral interests, including landowner's royalties, overriding royalty
interests, minerals (other than executive rights, bonuses and delay rentals),
production payments and any other similar, nonparticipatory interest, in certain
producing and proved undeveloped oil and gas properties located in Florida,
Louisiana, Mississippi, New Mexico, Oklahoma and Texas. These properties are
represented by approximately 5,400 tracts of land. Approximately 2,950 of the
tracts are in Oklahoma, 1,750 in Texas, 330 in Louisiana, 200 in New Mexico, 150
in Mississippi and 12 in Florida.

     The following table summarizes total developed and proved undeveloped
acreage represented by the Royalty Properties at December 31, 2000.

<TABLE>
<CAPTION>
                                                     MINERAL AND ROYALTY
                                                 ---------------------------
STATE                                            GROSS ACRES       NET ACRES
- -----                                            -----------       ---------
<S>                                              <C>               <C>
Florida....................................           5,448             697
Louisiana..................................         244,391          23,682
Mississippi................................          75,489           9,713
New Mexico.................................         112,294           9,141
Oklahoma...................................         381,538          67,558
Texas......................................       1,273,132         105,760
                                                  ---------         -------
          Total............................       2,092,292         216,551
                                                  =========         =======
</TABLE>

                                        10
<PAGE>   13

     Detailed information concerning the number of wells on royalty properties
is not generally available to the owner of royalty interests. Consequently, the
Registrant does not have an accurate count of the number of wells located on the
Royalty Properties and cannot readily obtain such information.

TITLE

     The conveyances of the Royalty Properties to the Trust covered the royalty
and mineral properties located in the six states that were vested in Sabine
Corporation on the effective date of the conveyances and that were subject to
existing oil, gas and other mineral leases other than properties specifically
excluded in the conveyances. Since Sabine Corporation may not have had available
to it as a royalty owner information as to whether specific lands in which it
owned a royalty interest were subject to an existing lease, minimal amounts of
nonproducing royalty properties may also have been conveyed to the Trust. Sabine
Corporation did not warrant title to the Royalty Properties either expressly or
by implication.

RESERVES

     The Registrant has obtained from DeGolyer and MacNaughton, independent
petroleum engineering consultants, a study of the proved oil and gas reserves
attributable as of January 1, 2001 to the Royalty Properties. The following
letter report summarizes such reserve study and sets forth information as to the
assumptions, qualifications, procedures and other matters relating to such
reserve study. See Note 8 of the Notes to Financial Statements in Item 8 hereof
for additional information regarding the proved oil and gas reserves of the
Trust.

                                        11
<PAGE>   14

                            DEGOLYER AND MACNAUGHTON
                       4925 GREENVILLE AVENUE, SUITE 400
                               ONE ENERGY SQUARE
                              DALLAS, TEXAS 75206

                                 March 14, 2001

Bank of America, N.A.
P.O. Box 830650
Dallas, Texas 75283-0650

Gentlemen:

     Pursuant to your request, we have prepared estimates of the extent and
value of the proved crude oil, condensate, natural gas liquids (NGL), and
natural gas reserves, as of January 1, 2001, of certain royalty interests owned
by Sabine Royalty Trust (the Trust). The properties appraised consist of
royalties located in Florida, Louisiana, Mississippi, New Mexico, Oklahoma, and
Texas. Bank of America, N.A. (Bank of America) acts as trustee of the Trust.

     Information used in the preparation of this report was obtained from Bank
of America, from records on file with the appropriate regulatory agencies, and
from public sources. Additionally, this information includes data supplied by
Petroleum Information/Dwights LLC; Copyright 1999-2000 Petroleum
Information/Dwights LLC. During this investigation, we consulted freely with
officers and employees of Bank of America and were given access to such
accounts, records, geological and engineering reports, and other data as were
desired for examination. In the preparation of this report we have relied,
without independent verification, upon information furnished by Bank of America
with respect to property interests owned by the Trust, production from such
properties, current prices for production, agreements relating to current and
future operations and sale of production, and various other information and data
that were accepted as represented. It was not considered necessary to make a
field examination of the physical condition and operation of the properties in
which the Trust owns interests.

     Our reserves estimates are based on a detailed study of the properties and
were prepared by the use of standard geological and engineering methods
generally accepted by the petroleum industry. The method or combination of
methods used in the analysis of each reservoir was tempered by experience with
similar reservoirs, consideration of the stage of development, and the quality
and completeness of basic data. The trust owns several thousand royalty
interests. In view of the limited information available to a royalty owner and
the small reserves attributable to many of these interests, certain of them
representing approximately 51 percent of the total reserves of the properties
included herein were summarized by state or field and worked in total rather
than being appraised individually. Historical records of net production and
revenue and experience with similar properties were used in analyzing these
properties.

     Reserves estimated in this report are expressed as gross and net reserves.
Gross reserves are defined as the total estimated petroleum to be produced from
these properties after December 31, 2000. Net reserves are defined as that
portion of the gross reserves attributable to the interests owned by the Trust
after deducting royalties and other interests held by others. Gas volumes shown
herein are sales gas volumes and are expressed at a temperature base of 60
degrees Fahrenheit and at the legal pressure bases of the states in which the
interests are located. Sales gas is defined as the total gas to be produced from
the reservoirs, measured at the point of delivery, after reduction for fuel
usage, flare, and shrinkage resulting from field separations and processing.
Condensate reserves estimated herein are those to be obtained from normal
separator recovery. NGL reserves are those attributed to the leasehold interests
according to processing agreements.

     Petroleum reserves included in this report are classified as proved and are
judged to be economically producible in future years from known reservoirs under
existing economic and operating conditions and assuming continuation of current
regulatory practices using conventional production methods and

                                        12
<PAGE>   15

equipment. In the analyses of production-decline curves, reserves were estimated
only to the limit of economic rates of production under existing economic and
operating conditions using prices and costs as of the date the estimate is made,
including consideration of changes in existing prices provided only by
contractual arrangements but not including escalations based upon future
conditions. The petroleum reserves are classified as follows:

          Proved -- Reserves that have been proved to a high degree of certainty
     by analysis of the producing history of a reservoir and/or volumetric
     analysis of adequate geological and engineering data. Commercial
     productivity has been established by actual production, successful testing,
     or in certain cases by favorable core analyses and electrical-log
     interpretation when the producing characteristics of the formation are
     known from nearby fields. Volumetrically, the structure, areal extent,
     volume, and characteristics of the reservoir are well defined by a
     reasonable interpretation of adequate subsurface well control and by known
     continuity of hydrocarbon-saturated material above known fluid contacts, if
     any, or above the lowest known structural occurrence of hydrocarbons.

          Developed -- Reserves that are recoverable from existing wells with
     current operating methods and expenses.

          Developed reserves include both producing and nonproducing reserves.
     Estimates of producing reserves assume recovery by existing wells producing
     from present completion intervals with normal operating methods and
     expenses. Developed nonproducing reserves are in reservoirs behind the
     casing or at minor depths below the producing zone and are considered
     proved by production from other wells in the field, by successful
     drill-stem tests, or by core analyses from the particular zones.
     Nonproducing reserves require only moderate expenses to be brought into
     production.

          Undeveloped -- Reserves that are recoverable from additional wells yet
     to be drilled.

          Undeveloped reserves are those considered proved for production by
     reasonable geological interpretation of adequate subsurface control in
     reservoirs that are producing or proved by other wells but are not
     recoverable from existing wells. This classification of reserves requires
     drilling of additional wells, major deepening of existing wells, or
     installation of enhanced recovery or other facilities.

     Reserves recoverable by enhanced recovery methods, such as injection of
external fluids to provide energy not inherent in the reservoirs, may be
classified as proved developed or proved undeveloped reserves depending upon the
extent to which such enhanced recovery methods are in operation. These reserves
are considered to be proved only in cases where a successful fluid-injected
program is in operation, a pilot program indicates successful fluid injection,
or information is available concerning the successful application of such
methods in the same reservoir and it is reasonably certain that the program will
be implemented.

     The development status shown herein represents the status application on
January 1, 2001. In the preparation of this study, data available from wells
drilled on the appraised properties through December 31, 2000, were used in
estimating gross ultimate recovery. When applicable, gross production estimated
to January 1, 2001, was deducted from gross ultimate recovery to arrive at the
estimates of gross reserves as of January 1, 2001. In some fields, this required
that the production rates be estimated for up to 3 months since production data
were available only through September 2000.

     Future oil, condensate, NGL, and gas producing rates estimated for this
report are based on production rates considering the most recent figures
available. The rates used for future production are rates that we feel are
within the capacity of the well or reservoir to produce. This information has
been considered in arriving at the rates projected.

                                        13
<PAGE>   16

     Net proved reserves, as of January 1, 2001, attributable to the Trust from
the properties appraised are estimated in barrels (bbl) or thousands of cubic
feet (Mcf) as follows:

<TABLE>
<CAPTION>
                                           PROVED DEVELOPED        PROVED UNDEVELOPED
                                               RESERVES                 RESERVES
                                       ------------------------   ---------------------
                                          OIL,                       OIL,
                                       CONDENSATE,     SALES      CONDENSATE,    SALES
                                         AND NGL        GAS         AND NGL       GAS
STATE                                     (bbl)        (Mcf)         (bbl)       (Mcf)
- -----                                  -----------   ----------   -----------   -------
<S>                                    <C>           <C>          <C>           <C>
Florida..............................      88,753        62,773          0            0
Louisiana............................     164,241     1,841,410          0            0
Mississippi..........................     112,961     3,735,378          0            0
New Mexico...........................     429,006     3,801,641          0            0
Oklahoma.............................     626,541    10,933,355          0            0
Texas................................   4,124,267    17,959,208      5,877      142,321
                                        ---------    ----------      -----      -------
          Total......................   5,545,769    38,333,765      5,877      142,321
</TABLE>

     Revenue values in this report are expressed in terms of estimated future
net revenue and present worth of future net revenue. These values are based on
the continuation of prices in effect on December 31, 2000. Future gross revenue
is defined as that revenue to be realized from the production and sale of the
estimated net reserves. Future net revenue is calculated by deducting estimated
severance and ad valorem taxes from the future gross revenue. Present worth of
future net revenue is calculated by discounting the future net revenue at the
arbitrary rate of 10 percent per year compounded monthly over the expected
period of realization.

     Revenue values in this report were estimated using the initial prices and
costs provided by Bank of America. Future prices were estimated using guidelines
established by the Securities and Exchange Commission (SEC) and the Financial
Accounting Standards Board (FASB). The initial and future prices used in this
report are adjusted to prices on January 1, 2001, based on receipts by the Trust
in December 2000. The assumptions used for estimating future prices and costs
are as follows:

  Oil, Condensate, Natural Gas Liquids, and Natural Gas Prices

     Oil, condensate, natural gas liquids, and natural gas prices based on
receipts by the Trust in December 2000 were furnished by Bank of America. These
prices are adjusted to posted prices as of January 1, 2001, and are held
constant for the lives of the properties.

     A projection of the estimated future net revenue from the properties
appraised, as of January 1, 2001, based on the aforementioned assumptions
concerning prices and costs is summarized as follows:

<TABLE>
<CAPTION>
YEAR                                                    FUTURE NET
ENDING                                                    REVENUE
DECEMBER 31,                                                ($)
- ------------                                            -----------
<S>                                                     <C>
2001.................................................    56,072,147
2002.................................................    47,369,553
2003.................................................    40,536,444
                                                        -----------
Subtotal.............................................   143,978,144
Remaining............................................   306,515,670
                                                        -----------
Total................................................   450,493,814
</TABLE>

     The present worth of future net revenue, as of January 1, 2001, is
estimated to be $248,572,482.

     Estimates of oil, condensate, NGL, and gas reserves and future net revenue
should be regarded only as estimates that may change as further production
history and additional information become available. Not only are such reserves
and revenue estimates based on that information which is currently available,
but such

                                        14
<PAGE>   17

estimates are also subject to the uncertainties inherent in the application of
judgmental factors in interpreting such information.

     In our opinion, the information relating to estimated proved reserves,
estimated future net revenue from proved reserves, and present worth of
estimated future net revenue from proved reserves of oil, condensate, natural
gas liquids, and gas contained in this report has been prepared in accordance
with Paragraphs 10-13, 15 and 30(a)-(b) of Statement of Financial Accounting
Standards No. 69 (November 1982) of the FASB and Rules 4-10(a) (1)-(13) of
Regulation S-X and Rule 302(b) of Regulation S-K of the SEC; provided, however,
(i) certain estimated data have not been provided with respect to changes in
reserves information, (ii) future income tax expenses have not been taken into
account in estimating the future net revenue and present worth values set forth
herein, and (iii) at the request of Bank of America and because of the limited
availability of data, proved reserves, future net revenue therefrom, and the
present worth thereof for certain royalty interests accounting for approximately
51 percent of the Trust's total proved reserves have been estimated in the
aggregate by state or field rather than on a property-by-property basis using
net production and revenue data and our general knowledge of producing
characteristics in the geographic areas in which such interests are located.

     To the extent the above-enumerated rules, regulations, and statements
require determinations of an accounting or legal nature or information beyond
the scope of our report, we are necessarily unable to express an opinion as to
whether the above-described information is in accordance therewith or sufficient
therefor.

                                            Submitted,

                                            DeGOLYER and MacNAUGHTON

                             ---------------------

     There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production and timing of
development. The preceding reserve data in the letter regarding the study
represent estimates only and should not be construed to be exact. The estimated
present worth of future net revenue amounts shown by the study should not be
construed as the current fair market value of the estimated oil and gas reserves
since a market value determination would include many additional factors.

     Reserve estimates may be adjusted from time to time as more accurate
information on the volume or recoverability of existing reserves becomes
available. Actual reserve quantities do not change, however, except through
production. The Trust continues to own only the Royalty Properties that were
initially transferred to the Trust at the time of its creation and is prohibited
by the Trust Agreement from acquiring additional oil and gas interests.

     The future net revenue shown by the study has not been reduced for
administrative costs and expenses of the Trust in future years. The costs and
expenses of the Trust may increase in future years, depending on the amount of
income from the Royalty Properties, increases in the Trustee's and escrow
agents' fees and expenses, accounting, engineering, legal and other professional
fees, and other factors. It is expected that the costs and expenses of the Trust
in 2001 will be approximately $1,650,000.

     The present worth of future net revenue of the Trust's proved developed
reserves increased from $105,512,400 at January 1, 2000 to $248,572,482. This
increase resulted primarily from an increase in the oil and gas prices used in
the calculation of such amount, from $21.24 per barrel of oil and $2.50 per Mcf
of gas at January 1, 2000 to $25.27 per barrel of oil and $9.16 per Mcf of gas
at January 1, 2001.

                                        15
<PAGE>   18

     Subsequent to year end, the price of both oil and gas continued to
fluctuate, giving rise to a correlating adjustment of the respective
standardized measure of discounted future net cash flows. As of March 1, 2001,
published oil prices were approximately $27.62 per barrel, which compared to
$25.27 per barrel, used to calculate the above information, would result in a
larger standardized measure of discounted future net cash flows for oil. As of
March 1, 2001, published gas prices were approximately $5.22 per Mcf. The use of
such price, as compared to $9.16 per Mcf, which was used to calculate the above
information, would result in a smaller standardized measure of discounted future
net cash flows for gas.

     The volatile nature of the world energy markets makes it difficult to
estimate future prices of oil and gas. The prices obtained for oil and gas
depend upon numerous factors, including the domestic and foreign supply of oil
and gas and the price of foreign imports, market demand, the price and
availability of alternative fuels, the availability of pipeline capacity and the
effect of governmental regulations.

ITEM 3. LEGAL PROCEEDINGS.

     There are no material pending legal proceedings to which the Registrant is
a party or of which any of its property is the subject.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     Not applicable.

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     The Units are listed and traded on the New York Stock Exchange under the
symbol "SBR." The following table sets forth the high and low sales prices for
the Units and the aggregate amount of cash distributions paid by the Trust
during the periods indicated.

<TABLE>
<CAPTION>
                                                        SALES PRICE
                                                    --------------------      DISTRIBUTIONS
                                                     HIGH          LOW          PER UNIT
                                                    -------      -------      -------------
<S>                                                 <C>          <C>          <C>
2000
First Quarter.....................................  $15.250      $11.500        $0.52891
Second Quarter....................................   16.063       12.188         0.51714
Third Quarter.....................................   19.375       15.688         0.60540
Fourth Quarter....................................   19.000       16.750         0.62324
1999
First Quarter.....................................  $14.500      $12.063        $0.28353
Second Quarter....................................   15.375       13.063         0.34070
Third Quarter.....................................   14.938       13.875         0.41681
Fourth Quarter....................................   15.125       13.125         0.36592
</TABLE>

     At March 12, 2001, there were 14,579,345 Units outstanding and
approximately 2,880 Unit holders of record.

                                        16
<PAGE>   19

ITEM 6. SELECTED FINANCIAL DATA.

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31               2000          1999          1998          1997          1996
- -----------            -----------   -----------   -----------   -----------   -----------
<S>                    <C>           <C>           <C>           <C>           <C>
Royalty Income.......  $34,407,684   $23,042,432   $24,075,260   $25,688,064   $22,173,492
Distributable
  Income.............   33,122,044    21,725,813    22,941,409    24,499,892    20,972,323
Distributable Income
  per Unit...........         2.27          1.49          1.57          1.68          1.44
Total Assets at Year
  End................    5,239,610     5,474,918     4,766,116     6,936,828     6,868,761
Distributions per
  Unit...............         2.27          1.41          1.65          1.64          1.37
</TABLE>

ITEM 7. TRUSTEE'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

     Sabine Royalty Trust (the "Trust") makes monthly distributions to its Unit
holders of the excess of the preceding month's revenues received over expenses
incurred. Upon receipt, royalty income is invested in short-term investments
until its subsequent distribution. In accordance with the Trust Agreement, the
Trust's only long-term assets consist of royalty interests in producing oil and
gas properties. Although the Trust is permitted to borrow funds if necessary to
continue its operations, borrowings are not anticipated in the foreseeable
future.

     Distributable income consists of royalty income plus interest income plus
any decrease in cash reserves established by the Trustee less general and
administrative expenses of the Trust less any increase in cash reserves
established by the Trustee. The Trust's royalty income represents payments
received during a particular time period for oil and gas production from the
Trust's properties. Because of various factors which influence the timing of the
Trust's receipt of payments, royalty income for any particular time period will
usually include payments for oil and gas produced in prior periods. The price
and volume figures that follow represent the volumes and prices for which the
Trust received payment during 1999 and 2000.

     Net royalty income during 2000 increased approximately $11,365,000, or 49.3
percent, compared to 1999 net royalty income, which had decreased approximately
$1,033,000, or 4.3 percent, from 1998 net royalty income.

     Revenues generated by sales of oil and gas increased in 2000 from 1999 as a
result of higher gas and oil prices and higher oil volumes offset somewhat by a
decrease in natural gas volumes. Gas volumes decreased from 8,709,114 thousand
cubic feet ("Mcf") in 1999 to 7,788,314 Mcf in 2000 after decreasing from
9,119,288 Mcf in 1998. The average price per Mcf of gas received by the Trust
increased from $1.88 per Mcf in 1999 to $2.85 per Mcf in 2000, after decreasing
from $1.96 per Mcf in 1998. The Trustee believes that normal market forces and a
relatively harsh winter during the fourth quarter of 2000 resulted in the higher
gas prices. Revenues also include a cash settlement of $413,000 received in
January, 2000, relating to price adjustments for prior years on a limited number
of producing oil and gas wells.

     Oil volumes sold increased to 610,472 barrels in 2000 from 581,236 barrels
in 1999, having decreased from 629,011 barrels in 1998. The effect of this
volume increase was assisted by a significant increase in the average price per
barrel received by the Trust to $23.86 in 2000 from $15.50 in 1999 and $12.72 in
1998. The effect of volatile world market conditions contributed to the increase
in prices throughout 2000.

     Interest income increased to $240,000 in 2000 from $118,000 in 1999, which
decreased from $163,000 in 1998. Changes in interest income are the result of
changes in interest rates and funds available for investment. General and
administrative expenses increased to $1,526,000 in 2000 compared to $1,435,000
in 1999 due to increases in escrow agent's fees and trustee fees of
approximately $96,000 and $32,000, respectively. General and administrative
costs increased in 1999 to $1,435,000 compared to

                                        17
<PAGE>   20

$1,297,000 in 1998 due to a claim settlement of $49,500 in the first quarter of
1999 and increases of escrow agent's fees and trustee fees of approximately
$69,200 and $23,000, respectively.

FORWARD-LOOKING STATEMENTS

     This Annual Report includes "forward-looking statements" within the meaning
of Section 21E of the Securities Exchange Act of 1934, which are intended to be
covered by the safe harbor created thereby. All statements other than statements
of historical fact included in this Annual Report are forward-looking
statements. Such statements include, without limitation, certain reserve
information and other statements contained in Item 2, "Properties", and certain
statements regarding the Trust's financial position, industry conditions and
other matters contained in this Item 7. Although the Trustee believes that the
expectations reflected in such forward-looking statements are reasonable, such
expectations are subject to numerous risks and uncertainties and the Trustee can
give no assurance that they will prove correct. There are many factors, none of
which is within the Trustee's control, that may cause such expectations not to
be realized, including, among other things, factors identified in this Annual
Report affecting oil and gas prices and the recoverability of reserves, general
economic conditions, actions and policies of petroleum-producing nations and
other changes in the domestic and international energy markets.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     The Trust is a passive entity and other than the Trust's ability to
periodically borrow money as necessary to pay expenses, liabilities and
obligations of the Trust that cannot be paid out of cash held by the Trust, the
Trust is prohibited from engaging in borrowing transactions. The amount of any
such borrowings is unlikely to be material to the Trust. The Trust periodically
holds short term investments acquired with funds held by the Trust pending
distribution to Unitholders and funds held in reserve for the payment of Trust
expenses and liabilities. Because of the short-term nature of these borrowings
and investments and certain limitations upon the types of such investments which
may be held by the Trust, the Trustee believes that the Trust is not subject to
any material interest rate risk. The Trust does not engage in transactions in
foreign currencies which could expose the Trust or Unitholders to any foreign
currency related market risk. The Trust invests in no derivative financial
instruments and has no foreign operations or long-term debt instruments.

                                        18
<PAGE>   21

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                          INDEPENDENT AUDITORS' REPORT

UNIT HOLDERS OF SABINE ROYALTY TRUST AND BANK OF AMERICA, N.A., TRUSTEE:

     We have audited the accompanying statements of assets, liabilities and
trust corpus of Sabine Royalty Trust (the "Trust") as of December 31, 2000 and
1999, and the related statements of distributable income and changes in trust
corpus for each of the three years in the period ended December 31, 2000. These
financial statements are the responsibility of the Trustee. 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 of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     As described in Note 2 to the financial statements, these statements were
prepared on a modified cash basis of accounting, which is a comprehensive basis
of accounting other than accounting principles generally accepted in the United
States of America.

     In our opinion, such financial statements present fairly, in all material
respects, the assets, liabilities and trust corpus of the Trust at December 31,
2000 and 1999, and the distributable income and changes in trust corpus for each
of the three years in the period ended December 31, 2000, on the basis of
accounting described in Note 2.

/s/ DELOITTE & TOUCHE LLP

Dallas, Texas
March 14, 2001

                                        19
<PAGE>   22

                              SABINE ROYALTY TRUST

                              FINANCIAL STATEMENTS

               STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS

<TABLE>
<CAPTION>
                                                                     DECEMBER 31,
                                                              --------------------------
                                                                 2000            1999
                                                              ----------      ----------
<S>                                                           <C>             <C>
ASSETS
Cash and short-term investments.............................  $3,300,333      $3,225,597
Royalty interests in oil and gas properties less accumulated
  amortization of $20,455,908 (2000) and $20,145,864
  (1999)....................................................   1,939,277       2,249,321
                                                              ----------      ----------
Total.......................................................  $5,239,610      $5,474,918
                                                              ==========      ==========

LIABILITIES AND TRUST CORPUS
Trust expenses payable......................................  $  112,396      $  227,531
Other payables (Note 4).....................................     324,514          93,188
Trust corpus (14,579,345 units of beneficial interest
  authorized and outstanding)...............................   4,802,700       5,154,199
                                                              ----------      ----------
Total.......................................................  $5,239,610      $5,474,918
                                                              ==========      ==========
</TABLE>

STATEMENTS OF DISTRIBUTABLE INCOME

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                   ---------------------------------------------
                                                      2000             1999             1998
                                                   -----------      -----------      -----------
<S>                                                <C>              <C>              <C>
Royalty income...................................  $34,407,684      $23,042,432      $24,075,260
Interest income..................................      239,909          118,209          162,884
                                                   -----------      -----------      -----------
Total............................................   34,647,593       23,160,641       24,238,144
General and administrative expenses (Note 6).....    1,525,549        1,434,828        1,296,735
                                                   -----------      -----------      -----------
Distributable income.............................  $33,122,044      $21,725,813      $22,941,409
                                                   ===========      ===========      ===========
Distributable income per unit (Basic and Assuming
  Dilution) (14,579,345 units) (Note 1)..........  $      2.27      $      1.49      $      1.57
                                                   ===========      ===========      ===========
Distributions per unit (Note 3)..................  $      2.27      $      1.41      $      1.65
                                                   ===========      ===========      ===========
</TABLE>

STATEMENTS OF CHANGES IN TRUST CORPUS

<TABLE>
<CAPTION>
                                                     2000              1999              1998
                                                 ------------      ------------      ------------
<S>                                              <C>               <C>               <C>
Trust corpus, beginning of year................  $  5,154,199      $  4,326,145      $  5,940,107
Amortization of royalty interests..............      (310,044)         (384,784)         (445,165)
Distributable income...........................    33,122,044        21,725,813        22,941,409
Distributions to unit holders (Note 3).........   (33,163,499)      (20,512,975)      (24,110,206)
                                                 ------------      ------------      ------------
Trust corpus, end of year......................  $  4,802,700      $  5,154,199      $  4,326,145
                                                 ============      ============      ============
</TABLE>

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

                                        20
<PAGE>   23

                              SABINE ROYALTY TRUST

                         NOTES TO FINANCIAL STATEMENTS

1. TRUST ORGANIZATION AND PROVISIONS

     Sabine Royalty Trust (the "Trust") was established by the Sabine
Corporation Royalty Trust Agreement (the "Trust Agreement"), made and entered
into effective as of December 31, 1982, to receive a distribution from Sabine
Corporation ("Sabine") of royalty and mineral interests, including landowner's
royalties, overriding royalty interests, minerals (other than executive rights,
bonuses and delay rentals), production payments and any other similar,
nonparticipatory interest, in certain producing and proved undeveloped oil and
gas properties located in Florida, Louisiana, Mississippi, New Mexico, Oklahoma
and Texas (the "Royalties").

     Certificates evidencing units of beneficial interest (the "Units") in the
Trust were mailed on December 31, 1982 to Sabine's shareholders of record on
December 23, 1982, on the basis of one Unit for each share of Sabine's
outstanding common stock. In May 1988, Sabine was acquired by Pacific
Enterprises, a California corporation. Through a series of mergers, Sabine was
merged into Pacific Enterprises Oil Company (USA) ("Pacific (USA)"), a
California corporation and a wholly owned subsidiary of Pacific Enterprises,
effective January 1, 1990. This acquisition and the subsequent mergers had no
effect on the Units. Pacific (USA), as successor to Sabine, has assumed by
operation of law all of Sabine's rights and obligations with respect to the
Trust. The Units are listed and traded on the New York Stock Exchange.

     In connection with the transfer of the Royalties to the Trust upon its
formation, Sabine had reserved to itself all executive rights, including rights
to execute leases and to receive bonuses and delay rentals. In January 1993,
Pacific (USA) completed the sale of substantially all its producing oil and gas
assets to a third party. The sale did not include executive rights relating to
the Royalties, and Pacific (USA)'s ownership of such rights was not affected by
the sale.

     Bank of America, N.A. (the "Trustee"), acts as trustee of the Trust. The
terms of the Trust Agreement provide, among other things, that:

     - The Trust shall not engage in any business or commercial activity of any
       kind or acquire assets other than those initially transferred to the
       Trust.

     - The Trustee may not sell all or any part of its assets unless approved by
       the holders of a majority of the outstanding Units in which case the sale
       must be for cash and the proceeds, after satisfying all existing
       liabilities, promptly distributed to Unit holders.

     - The Trustee may establish a cash reserve for the payment of any liability
       that is contingent or uncertain in amount or that otherwise is not
       currently due and payable.

     - The Trustee will use reasonable efforts to cause the Trust and the Unit
       holders to recognize income and expenses on monthly record dates.

     - The Trustee is authorized to borrow funds to pay liabilities of the Trust
       provided that such borrowings are repaid in full before any further
       distributions are made to Unit holders.

     - The Trustee will make monthly cash distributions to Unit holders of
       record on the monthly record date (see Note 3).

     Because of the passive nature of the Trust and the restrictions and
limitations on the powers and activities of the Trustee contained in the Trust
Agreement, the Trustee does not consider any of the officers and employees of
the Trustee to be "officers" or "executive officers" of the Trust as such terms
are defined under applicable rules and regulations adopted under the Securities
Exchange Act of 1934.

     The proceeds of production from the Royalties are receivable from hundreds
of separate payors. In order to facilitate creation of the Trust and to avoid
the administrative expense and inconvenience of daily

                                        21
<PAGE>   24
                              SABINE ROYALTY TRUST

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

reporting to Unit holders, the conveyances by Sabine of the Royalties located in
five of the six states provided for the execution of an escrow agreement by
Sabine and the initial trustee of the Trust, in its capacities as trustee of the
Trust and as escrow agent. The conveyances by Sabine of the Royalties located in
Louisiana provided for the execution of a substantially identical escrow
agreement by Sabine and a Louisiana bank in the capacities of escrow agent and
of trustee under the name of Sabine Louisiana Royalty Trust. Sabine Louisiana
Royalty Trust, the sole beneficiary of which is the Trust, was established in
order to avoid uncertainty under Louisiana law as to the legality of the
Trustee's holding record title to the Royalties located in Louisiana.

     Pursuant to the terms of the escrow agreements and the conveyances of the
properties by Sabine, the proceeds of production from the Royalties for each
calendar month, and interest thereon, are collected by the escrow agents and are
paid to and received by the Trust only on the next monthly record date. The
escrow agents have agreed to endeavor to assure that they incur and pay expenses
and fees for each calendar month only on the next monthly record date. The Trust
Agreement also provides that the Trustee is to endeavor to assure that income of
the Trust will be accrued and received and expenses of the Trust will be
incurred and paid only on each monthly record date. Assuming that the escrow
agreement is recognized for Federal income tax purposes and that the Trustee and
the escrow agents are able to control the timing of income and expenses, as
stated above, cash and accrual basis Unit holders should be treated as realizing
income only on each monthly record date. The Trustee is treating the escrow
agreement as effective for tax purposes. However, for financial reporting
purposes, royalty and interest income are recorded in the calendar month in
which the amounts are received by either the escrow agents or the Trust.

     Distributable income as determined for financial reporting purposes for a
given quarter will not usually equal the sum of distributions made during that
quarter. Distributable income for a given quarter will approximate the sum of
the distributions made during the last two months of such quarter and the first
month of the next quarter.

2. ACCOUNTING POLICIES

BASIS OF ACCOUNTING

     The financial statements of the Trust are prepared on the following basis
and are not intended to present financial position and results of operations in
conformity with accounting principles generally accepted in the United States of
America:

     - Royalty income, net of severance and ad valorem taxes, and interest
       income are recognized in the month in which amounts are received by the
       Trust (see Note 1).

     - Trust expenses, consisting principally of routine general and
       administrative costs, include payments made during the accounting period.
       Expenses are accrued to the extent of amounts that become payable on the
       next monthly record date following the end of the accounting period.
       Reserves for liabilities that are contingent or uncertain in amount may
       also be established if considered necessary.

     - Royalties that are producing properties are amortized using the
       unit-of-production method. This amortization is shown as a reduction of
       Trust corpus.

     - Distributions to Unit holders are recognized when declared by the Trustee
       (see Note 3).

                                        22
<PAGE>   25
                              SABINE ROYALTY TRUST

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     The financial statements of the Trust differ from financial statements
prepared in conformity with accounting principles generally accepted in the
United States of America because of the following:

     - Royalty income is recognized in the month received rather than in the
       month of production.

     - Expenses other than those expected to be paid on the following monthly
       record date are not accrued.

     - Amortization of the Royalties is shown as a reduction to Trust corpus and
       not as a charge to operating results.

     - Reserves may be established for contingencies that would not be recorded
       under generally accepted accounting principles generally accepted in the
       United States of America.

USE OF ESTIMATES

     The preparation of financial statements in conformity with the basis of
accounting described above requires management to make estimates and assumptions
that affect reported amounts of certain assets, liabilities, revenues and
expenses as of and for the reporting periods. Actual results may differ from
such estimates.

IMPAIRMENT

     Trust management routinely reviews its royalty interests in oil and gas
properties for impairment whenever events or circumstances indicate that the
carrying amount of an asset may not be recoverable. If an impairment event
occurs and it is determined that the carrying value of the Trust's royalty
interests may not be recoverable, an impairment will be recognized as measured
by the amount by which the carrying amount of the royalty interests exceeds the
fair value of these assets, which would likely be measured by discounting
projected cash flows.

NEW ACCOUNTING STANDARDS

     The Financial Accounting Standards Board ("FASB") issued, in June 1998,
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities -- Deferral of the
Effective Date of FASB Statement No. 133" and SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities -- an amendment of
FASB Statement No. 133", which establishes accounting and reporting standards
for derivative instruments. These standards were effective for the Trust January
1, 2001. The adoption of these standards had no impact on the financial
statements of the Trust.

DISTRIBUTABLE INCOME PER UNIT

     Basic earnings per Unit is computed by dividing net income by the weighted
average Units outstanding. Earnings per Unit assuming dilution is computed by
dividing net income by the weighted average number of Units and equivalent Units
outstanding. The Trust had no equivalent Units outstanding for any period
presented. Basic and assuming dilution distributable income per Unit are the
same.

FEDERAL INCOME TAXES

     The Internal Revenue Service has ruled that the Trust would be classified
as a grantor trust for Federal income tax purposes and therefore is not subject
to taxation at the trust level. The Unit holders are considered, for Federal
income tax purposes, to own the Trust's income and principal as though no trust

                                        23
<PAGE>   26
                              SABINE ROYALTY TRUST

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

were in existence. Accordingly, no provision for Federal income tax expense has
been made in these financial statements. The income of the Trust will be deemed
to have been received or accrued by each Unit holder at the time such income is
received or accrued by the Trust.

3. DISTRIBUTIONS TO UNIT HOLDERS

     The amount to be distributed to Unit holders ("Monthly Income Amount") is
determined on a monthly basis. The Monthly Income Amount is an amount equal to
the sum of cash received by the Trust during a monthly period (the period
commencing on the day after a monthly record date and continuing through and
including the next succeeding monthly record date) attributable to the
Royalties, any reduction in cash reserves and any other cash receipts of the
Trust, including interest, reduced by the sum of liabilities paid and any
increase in cash reserves. Unit holders of record as of the monthly record date
(the 15th day of each calendar month except in limited circumstances) are
entitled to have distributed to them the calculated Monthly Income Amount for
such month on or before 10 business days after the monthly record date. The
Monthly Income Amount per Unit is declared by the Trust no later than 10 days
prior to the monthly record date.

     The cash received by the Trust is primarily from purchasers of the Trust's
oil and gas production and consists of gross sales of production less applicable
severance taxes. In January, 2000, the Trust received a cash settlement of
approximately $413,000 relating to the price adjustments for prior years on a
limited number of producing oil and gas wells.

4. OTHER PAYABLES

     Other payables consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,                                                    2000       1999
- ------------                                                  --------    -------
<S>                                                           <C>         <C>
Funds due to payors for royalties erroneously forwarded to
  the Trust.................................................  $  1,707    $ 9,261
Royalty receipts in suspense pending verification of
  ownership interest or title...............................  $322,807    $83,927
                                                              --------    -------
          Total.............................................  $324,514    $93,188
                                                              ========    =======
</TABLE>

     The Trustee believes that these amounts represent an ordinary operating
condition of the Trust and that they will be paid or released in the normal
course of business.

5. SUBSEQUENT EVENTS

     Subsequent to December 31, 2000, the Trust declared the following
distributions:

<TABLE>
<CAPTION>
MONTHLY RECORD DATE    PAYMENT DATE     DISTRIBUTION PER UNIT
- -------------------    ------------     ---------------------
<S>                  <C>                <C>
January 16, 2001     January 30, 2001          $.18261
February 15, 2001    February 28, 2001         $.21463
March 15, 2001       March 29, 2001            $.24682
</TABLE>

                                        24
<PAGE>   27
                              SABINE ROYALTY TRUST

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. TRUSTEE'S FEES AND EXPENSES

     Fees and expenses for the years ended December 31, associated with the
Trustee's services for the Trust pursuant to the Trust Agreement, were as
follows:

<TABLE>
<CAPTION>
                                                    2000         1999        1998
                                                 ----------    --------    --------
<S>                                              <C>           <C>         <C>
Trustee's fee..................................  $  251,246    $291,408    $196,546
Escrow agent's fee.............................     753,747     658,234     589,647
                                                 ----------    --------    --------
Total fees and expenses........................  $1,004,993    $877,642    $786,193
                                                 ==========    ========    ========
</TABLE>

7. QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following table sets forth the royalty income, distributable income and
distributable income per Unit of the Trust for each quarter in the years ended
December 31, 2000 and 1999 (in thousands, except per Unit amounts):

<TABLE>
<CAPTION>
CALENDAR                                     ROYALTY     DISTRIBUTABLE     DISTRIBUTABLE
QUARTER                                      INCOME         INCOME        INCOME PER UNIT
- --------                                     -------     -------------    ---------------
<S>                                          <C>         <C>              <C>
2000
  First....................................  $ 8,422        $ 8,072            $0.55
  Second...................................    7,867          7,469             0.51
  Third....................................    8,456          8,184             0.56
  Fourth...................................    9,663          9,397             0.65
                                             -------        -------            -----
                                             $34,408        $33,122            $2.27
                                             =======        =======            =====
1999
  First....................................  $ 5,163        $ 4,812            $0.33
  Second...................................    5,078          4,765             0.33
  Third....................................    6,253          5,982             0.41
  Fourth...................................    6,548          6,167             0.42
                                             -------        -------            -----
                                             $23,042        $21,726            $1.49
                                             =======        =======            =====
</TABLE>

8. SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)

RESERVE QUANTITIES

     Information regarding estimates of the proved oil and gas reserves
attributable to the Trust are based on reports prepared by DeGolyer and
MacNaughton, independent petroleum engineering consultants. Estimates were
prepared in accordance with Statement of Financial Accounting Standards No. 69
and the guidelines established by the Securities and Exchange Commission.

     Oil and gas reserve quantities (all located in the United States) are
estimates based on information available at the time of their preparation. Such
estimates are subject to change as additional information becomes available.
Reserves actually recovered, and the timing of the production of those reserves,
may

                                        25
<PAGE>   28
                              SABINE ROYALTY TRUST

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

differ substantially from original estimates. The following schedule presents
changes in the Trust's total proved reserves (in thousands):

<TABLE>
<CAPTION>
                                                                 OIL        GAS
                                                              (BARRELS)    (Mcf)
                                                              ---------    ------
<S>                                                           <C>          <C>
January 1, 1998.............................................    6,183      34,365
  Revisions of previous statements..........................      656      13,427
  Production................................................     (633)     (8,738)
                                                                -----      ------
December 31, 1998...........................................    6,206      39,054
  Revisions of previous statements..........................      176       6,698
  Production................................................     (631)     (8,960)
                                                                -----      ------
December 31, 1999...........................................    5,751      36,792
  Revisions of previous statements..........................      412       8,927
  Production................................................     (611)     (7,243)
                                                                -----      ------
December 31, 2000...........................................    5,552      38,476
                                                                =====      ======
</TABLE>

     Estimated quantities of proved developed reserves of oil and gas as of the
dates indicated were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                 OIL        GAS
                                                              (BARRELS)    (Mcf)
                                                              ---------    ------
<S>                                                           <C>          <C>
Proved developed reserves:
  January 1, 1998...........................................    6,171      34,288
  December 31, 1998.........................................    6,206      39,054
  December 31, 1999.........................................    5,738      36,665
  December 31, 2000.........................................    5,546      38,334
</TABLE>

DISCLOSURE OF A STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS

     The following is a summary of a standardized measure (in thousands) of
discounted future net cash flows related to the Trust's total proved oil and gas
reserve quantities. Information presented is based upon a valuation of proved
reserves by using discounted cash flows based upon current (at year end) oil and
gas prices ($25.27 per bbl and $9.16 per Mcf, respectively) and severance and ad
valorem taxes, if any, and economic conditions, discounted at the required rate
of 10 percent. As the Trust is not subject to taxation at the trust level, no
provision for income taxes has been made in the following disclosure. The impact
of changes in current prices on reserves could vary significantly from year to
year. Accordingly, the information presented below should not be viewed as an
estimate of the fair market value of the Trust's oil and gas properties nor
should it be viewed as indicative of any trends.

<TABLE>
<CAPTION>
DECEMBER 31,                                        2000         1999        1998
- ------------                                      ---------    --------    --------
<S>                                               <C>          <C>         <C>
Future net cash inflows.........................  $ 450,494    $196,274    $128,469
Discount of future net cash flows at 10%........   (201,922)    (90,762)    (57,055)
                                                  ---------    --------    --------
Standardized measure of discounted future net
  cash flows....................................  $ 248,572    $105,512    $ 71,414
                                                  =========    ========    ========
</TABLE>

                                        26
<PAGE>   29
                              SABINE ROYALTY TRUST

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     The change in the standardized measure of discounted future net cash flows
for the years ended December 31, 2000, 1999 and 1998 is as follows (in
thousands):

<TABLE>
<CAPTION>
                                                    2000        1999        1998
                                                  --------    --------    --------
<S>                                               <C>         <C>         <C>
Standardized measure of discounted future net
  cash flows, January 1.........................  $105,512    $ 71,414    $104,912
Royalty income, net of severance and ad valorem
  taxes.........................................   (34,408)    (23,042)    (24,075)
Changes in prices, net of related costs.........   119,910      40,434     (35,640)
Revisions of previous estimates and other.......    47,007       9,565      15,726
Accretion of discount...........................    10,551       7,141      10,491
                                                  --------    --------    --------
Standardized measure of discounted future net
  cash flows, December 31,......................  $248,572    $105,512    $ 71,414
                                                  ========    ========    ========
</TABLE>

     Subsequent to year end, both the price of oil and gas continued to
fluctuate, giving rise to a correlating adjustment of the respective
standardized measure of discounted future net cash flows. As of March 1, 2001,
published oil prices were approximately $27.62 per barrel, which compared to
$25.27 per barrel, used to calculate the above information, would result in a
larger standardized measure of discounted future net cash flows for oil. As of
March 1, 2001, published gas prices were approximately $5.22 per Mcf. The use of
such price, as compared to $9.16 per Mcf, which was used to calculate the above
information, would result in a smaller standardized measure of discounted future
net cash flows for gas.

                                        27
<PAGE>   30

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustee on Behalf of Unit Holders of Sabine Royalty Trust:

     We have audited the accompanying Statements of Fees and Expenses (as
defined in Exhibit C to the Sabine Royalty Trust Agreement) paid by Sabine
Royalty Trust to Bank of America, N.A., (the "Trustee"), as trustee and escrow
agent, for the years ended December 31, 2000, 1999 and 1998. These statements
are the responsibility of the Trustee's management. Our responsibility is to
express an opinion on these 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 audits to obtain reasonable assurance about whether the
Statements of Fees and Expenses are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the Statements of Fees and Expenses. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

     As described in Note 3 to the statements, these statements were prepared on
a modified cash basis of accounting, which is a comprehensive basis of
accounting other than accounting principles generally accepted in the United
States of America.

     In our opinion, the Statements of Fees and Expenses referred to above
present fairly, in all material respects, the fees and expenses paid by Sabine
Royalty Trust to Bank of America, N.A., as trustee and escrow agent, for the
years ended December 31, 2000, 1999 and 1998, on the basis of accounting
described in Note 3.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Charlotte, North Carolina
March 13, 2001

                                        28
<PAGE>   31

                        STATEMENTS OF FEES AND EXPENSES
                        PAID BY SABINE ROYALTY TRUST TO
                           BANK OF AMERICA, N.A., AS
                TRUSTEE AND ESCROW AGENT, FOR EACH OF THE THREE
                  YEARS IN THE PERIOD ENDED DECEMBER 31, 2000

<TABLE>
<CAPTION>
                                                            2000         1999        1998
                                                         ----------    --------    --------
<S>                                                      <C>           <C>         <C>
Trustee's fee........................................    $  251,246    $219,408    $196,546
Escrow agent's fee...................................       753,747     658,234     589,647
                                                         ----------    --------    --------
Total fees and expenses paid to Bank of America,
  N.A. ..............................................    $1,004,993    $877,642    $786,193
                                                         ==========    ========    ========
</TABLE>

        The accompanying notes are an integral part of these statements.

NOTES

     1. Sabine Royalty Trust (the "Trust") is an express trust formed under the
laws of Texas by the Sabine Corporation Royalty Trust Agreement (the "Trust
Agreement") made and entered into effective as of December 31, 1982, between
Sabine Corporation ("Sabine"), as trustor, and Bank of America, N.A. (the
"Bank"), as successor trustee (the "Trustee"). Contemporaneously with the
execution of the Trust Agreement, Sabine, the Trustee and the predecessor of the
Bank, as escrow agent (the "Escrow Agent"), entered into an escrow agreement
which establishes an escrow (the "Escrow"). Prior to distribution of units of
beneficial interest (the "Units") in the Trust to Sabine's shareholders, Sabine
transferred to the Trust royalty and mineral interests, including landowner's
royalties, overriding royalty interests, minerals (other than executive rights,
bonuses and delay rentals), production payments and other similar,
non-participatory interests, in certain producing and proved undeveloped oil and
gas properties in six states (the "Royalty Properties").

     In May 1988, Sabine was acquired by Pacific Enterprise ("Pacific"), a
California corporation. Through a series of mergers, Sabine was merged into
Pacific Enterprises Oil Company (USA) ("Pacific (USA)"), a California
corporation and a wholly owned subsidiary of Pacific, effective January 1, 1990.
This acquisition and the subsequent mergers had no effect on the Units. Pacific
(USA), as successor to Sabine, has assumed by operation of law all of Sabine's
rights and obligations with respect to the Trust.

     The compensation agreement under the Trust Agreement provides for a "cost
plus" fee payable to the Bank for all services rendered in its capacities as
Trustee and as Escrow Agent. Generally, the fees payable to the Bank are
calculated by dividing the expenses incurred by the Bank, as Trustee and as
Escrow Agent, solely for services provided by the Bank in the administration of
the Trust and the Escrow by seven-tenths (0.7). Professional and other
noncontributing (out-of-pocket) expenses incurred by the Bank, as Trustee or as
Escrow Agent, as the case may be, in the performance of its duties in the
foregoing capacities are charged to the Trust or the Escrow, as the case may be,
at cost. These expenses do not contribute to the fees payable to the Bank
described above. Annually, the Trustee must estimate Trust and Escrow expenses
contributing to the fee for the forthcoming year and publish this amount in the
Trust's first quarterly report to Unit holders. The Trustee can be penalized by
forfeiture of reimbursement for part of its expenses if such expenses exceed the
estimate. The Trustee also can earn a bonus by administering the Trust for total
costs that are lower than the estimate. The Bank did not earn a bonus for 2000,
1999 or 1998; therefore, none will be taken in 2001 and none was taken in 2000
or 1999.

     2. Escrow Agent's fees and Trustee's fees consist of a profit margin plus
all fully allocated costs incurred by the Bank, as Trustee and as Escrow Agent,
in performing administrative services to the Trust as specified in the Trust
Agreement. Allocated costs do not include any professional and related expenses
to third parties.

                                        29
<PAGE>   32

     All costs incurred by the Bank in its capacities as Trustee and as Escrow
Agent are accumulated in one account. Fees based thereon are allocated between
the Trustee function and the Escrow Agent function according to the actual
administrative services rendered by the Bank in each capacity. Any
determinations by the Bank as to the allocation of the fee between the Trustee
and the Escrow Agent are conclusive and binding on the Unit holders and Pacific
(USA), but in no event does the Bank's allocation affect the aggregate fee
payable to the Bank.

     3. The Statements of Fees and Expenses are prepared on a modified cash
basis, which is a comprehensive basis of accounting other than generally
accepted accounting principles. Trust expenses include payments made during the
accounting period. Expenses are accrued to the extent of amounts that become
payable on the next monthly record date following the end of the accounting
period. These statements differ from statements prepared in conformity with
generally accepted accounting principles because expenses other than those
expected to be paid on the following monthly record date are not accrued.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

     None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The Registrant has no directors or executive officers. The Trustee is a
corporate trustee which may be removed, with or without cause, by the
affirmative vote at a meeting duly called and held of the holders of a majority
of the Units represented at the meeting.

ITEM 11. EXECUTIVE COMPENSATION.

     Not applicable.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     (a) Security Ownership of Certain Beneficial Owners. As of March 15, 2001
there were no Unit holders known to the Trustee to be beneficial owners of more
that 5% of the outstanding Units.

     (b) Security Ownership of Management. The Trust has no directors or
executive officers. Bank of America, N.A., the Trustee, held as of March 1, 2001
an aggregate of 182,061 Units in various fiduciary capacities, and it had sole
voting and investment power with respect to none of such Units.

     (c) Changes in Control. The Trustee knows of no arrangements the operation
of which may at a subsequent date result in a change in control of the
Registrant.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Not applicable.

                                        30
<PAGE>   33

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

     (a) The following documents are filed as a part of this report:

     1. Financial Statements (included in Item 8 of this report)

     Independent Auditors' report

     Statements of Assets, Liabilities and Trust Corpus at December 31, 2000 and
     1999

     Statements of Distributable Income for Each of the Three Years in the
     Period Ended December 31, 2000

     Statements of Changes in Trust Corpus for Each of the Three Years in the
     Period Ended December 31, 2000

     Notes to Financial Statements

     2. Financial Statement Schedules

     Financial statement schedules are omitted because of the absence of
conditions under which they are required or because the required information is
included in the financial statements and notes thereto.

     3. Exhibits

<TABLE>
<C>                      <S>
         (4)(a)*         -- Sabine Corporation Royalty Trust Agreement effective as
                            of December 31, 1982, by and between Sabine Corporation
                            and InterFirst Bank Dallas, N.A., as trustee.
            (b)*         -- Sabine Corporation Louisiana Royalty Trust Agreement
                            effective as of December 31, 1982, by and between Sabine
                            Corporation and Hibernia National Bank in New Orleans, as
                            trustee, and joined in by InterFirst Bank Dallas, N.A.,
                            as trustee.
           (23)          -- Consent of DeGolyer and MacNaughton.
           (99)          -- Report dated March 1, 2001 of the Trustee containing
                            interim tax information for each of the 12 months in the
                            year ending December 31, 2000.
</TABLE>

- ---------------

 * Exhibits 4(a) and 4(b) are incorporated herein by reference to Exhibits 4(a)
   and 4(b), respectively, of the Registrant's Annual Report on Form 10-K for
   the year ended December 31, 1993.

     (b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Registrant during the last quarter of the period covered by this report.

                                        31
<PAGE>   34

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                            SABINE ROYALTY TRUST

                                            BY: BANK OF AMERICA, N.A., Trustee

                                            By:     /s/ RON E. HOOPER
                                              ----------------------------------
                                                Ron E. Hooper
                                                Senior Vice-President

Date: March 22, 2001

            (THE REGISTRANT HAS NO DIRECTORS OR EXECUTIVE OFFICERS.)

                                        32
<PAGE>   35

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                  DESCRIPTION
        -------                                  -----------
<C>                      <S>

         (4)(a)*         -- Sabine Corporation Royalty Trust Agreement effective as
                            of December 31, 1982, by and between Sabine Corporation
                            and InterFirst Bank Dallas, N.A., as trustee.
            (b)*         -- Sabine Corporation Louisiana Royalty Trust Agreement
                            effective as of December 31, 1982, by and between Sabine
                            Corporation and Hibernia National Bank in New Orleans, as
                            trustee, and joined in by InterFirst Bank Dallas, N.A.,
                            as trustee.
           (23)          -- Consent of DeGolyer and MacNaughton.
           (99)          -- Report dated March 1, 2001 of the Trustee containing
                            interim tax information for each of the 12 months in the
                            year ending December 31, 2000.
</TABLE>

- ---------------

 * Exhibits 4(a) and 4(b) are incorporated herein by reference to Exhibits 4(a)
   and 4(b), respectively, of the Registrant's Annual Report on Form 10-K for
   the year ended December 31, 1993.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>2
<FILENAME>d84722ex23.txt
<DESCRIPTION>CONSENT OF DEGOLYER AND MACNAUGHTON
<TEXT>

<PAGE>   1
                                                                      EXHIBIT 23

                           DEGOLYER AND MACNAUGHTON
                       4925 GREENVILLE AVENUE, SUITE 400
                               ONE ENERGY SQUARE
                              DALLAS, TEXAS 75206

                                 March 15, 2001


Sabine Royalty Trust
Bank of America, N.A.
Bank of America Plaza -- 17th Floor
901 Main Street
Dallas, Texas 75202

Gentlemen:

     We hereby consent to the inclusion of our letter report dated March 14,
2000, concerning the reserves and revenue, as of January 1, 2001, of certain
royalty interests owned by Sabine Royalty Trust in the Annual Report on
Form 10-K for the year ended December 31, 2000, of the Sabine Royalty Trust
to be filed with the Securities and Exchange Commission. We also consent to
the references to our firm under "Properties--Reserves" in Item 2 and under
"Supplemental Oil and Gas Information (Unaudited)--Reserve Quantities" in
Item 8 of the Form 10-K.


                                           Very truly yours,

                                           /s/ DEGOLYER AND MACNAUGHTON

                                           DeGOLYER and MacNAUGHTON


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>3
<FILENAME>d84722ex99.txt
<DESCRIPTION>REPORT DATED MARCH 1,2001
<TEXT>

<PAGE>   1
                                                                   EXHIBIT .99


                              SABINE ROYALTY TRUST





                                TAX INFORMATION
                                      2000






         This booklet contains tax information relevant to ownership of Units of
             Sabine Royalty Trust and should be retained.

<PAGE>   2



                              SABINE ROYALTY TRUST

                                  MARCH 1, 2001


TO UNIT HOLDERS:

         This booklet provides 2000 tax information which will allow you to
determine your pro rata share of income and deductions attributable to your
investment in Sabine Royalty Trust (the "Trust "). Each Unit holder is
encouraged to read the entire booklet very carefully.

         The material included in this booklet enables you to compute the
information to be included in your Federal and state income tax returns. This
booklet is the only information source for Unit holders to determine their share
of the items of income and expense of the Trust for the entire 2000 calendar
year. The Trust does not file nor does it furnish a Form 1099 to Unit holders
(except where Federal backup withholding is required). Unit holders should
retain this booklet as part of their tax records.

         The material herein is not intended and should not be construed as
professional tax or legal advice. Unit holders are encouraged to consult their
own tax advisors concerning its use.

Very truly yours,


Sabine Royalty Trust,
By Bank of America, N.A., Trustee
1-800-365-6541

<PAGE>   3



                              SABINE ROYALTY TRUST
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                  Page
                                                                                  ----
<S>  <C>                                                                         <C>
2000 TAX INFORMATION
o Reading the Income and Expense Schedules .....................................    1
o Identifying Which Income and Expense Schedules to Use ........................    1
o Applying the Data From the Income and Expense Schedules ......................    1
o Computing Depletion ..........................................................    1
o Sale or Exchange of Units ....................................................    3
o Classification of Investment .................................................    3
o Nonresident Foreign Unit Holders .............................................    3
o Backup Withholding ...........................................................    3
o State Income Tax .............................................................    3
o Table of 2000 Monthly Record Dates and Cash Distributions Per Unit ...........    4
o Tax Computation Worksheet ....................................................    5
o Supplement to Tax Computation Worksheet ......................................    6
o Tax Information Schedules ....................................................    7
     oo Form 1041, Grantor Trust for Calendar Year 2000 .........................   7
     oo Form 1041, Grantor Trust for January 2000 ...............................   8
     oo Form 1041, Grantor Trust for February 2000 ..............................   9
     oo Form 1041, Grantor Trust for March 2000 .................................  10
     oo Form 1041, Grantor Trust for April 2000 .................................  11
     oo Form 1041, Grantor Trust for May 2000 ...................................  12
     oo Form 1041, Grantor Trust for June 2000 ..................................  13
     oo Form 1041, Grantor Trust for July 2000 ..................................  14
     oo Form 1041, Grantor Trust for August 2000 ................................  15
     oo Form 1041, Grantor Trust for September 2000 .............................  16
     oo Form 1041, Grantor Trust for October 2000 ...............................  17
     oo Form 1041, Grantor Trust for November 2000 ..............................  18
     oo Form 1041, Grantor Trust for December 2000 ..............................  19
     oo Depletion Schedule I ...................................................   20
     oo Depletion Schedule II ..................................................   20
     oo Depletion Schedule III .................................................   21
     oo Depletion Schedule IV ..................................................   21
     oo Depletion Schedule V ...................................................   22
     oo Depletion Schedule VI ..................................................   22
     oo Depletion Schedule VII .................................................   23
     oo Depletion Schedule VIII ................................................   23
     oo Depletion Schedule IX ..................................................   24
     oo Depletion Schedule X ...................................................   24
     oo Depletion Schedule XI ..................................................   25
     oo Depletion Schedule XII .................................................   25
     oo Depletion Schedule XIII ................................................   26
     oo Depletion Schedule XIV .................................................   26
     oo Depletion Schedule XV ..................................................   27
     oo Depletion Schedule XVI .................................................   27
     oo Depletion Schedule XVII ................................................   28
     oo Depletion Schedule XVIII ...............................................   28
     oo Depletion Schedule XIX .................................................   29
     oo Depletion Schedule XX ..................................................   29
o Sample Tax Forms for Individual Unit Holders .................................   30
o Comprehensive Example ........................................................   32
DISCUSSION OF TAX CONSIDERATIONS PERTAINING TO THE OWNERSHIP OF UNITS IN
SABINE ROYALTY TRUST
o Tax Background Information ...................................................  A-1
     oo Effect of Escrow Arrangement ...........................................  A-1
o Depletion ....................................................................  A-2
     oo Cost Depletion .........................................................  A-2
     oo Percentage Depletion ...................................................  A-2
o Nonresident Foreign Unit Holders .............................................  A-3
o Sale or Exchange of Units ....................................................  A-3
o Backup Withholding ...........................................................  A-4
o State Income Tax .............................................................  A-4
</TABLE>




(SRT 2000 TAX)

<PAGE>   4


                              SABINE ROYALTY TRUST
                              2000 TAX INFORMATION



READING THE INCOME AND EXPENSE SCHEDULES

         The accompanying income and expense schedules reflect tax information
attributable to Sabine Royalty Trust (the "Trust") for 2000. This information
has been assembled on a per Unit basis and is expressed in decimal fractions of
one dollar. A cumulative schedule for the twelve months ended December 31, 2000,
and separate noncumulative schedules for the months of January through December
2000 are enclosed. Separate depletion schedules are enclosed which provide the
necessary information for Unit holders to compute cost depletion with respect to
their interests in the Trust.

IDENTIFYING WHICH INCOME AND EXPENSE SCHEDULES TO USE

         Pursuant to the terms of the Trust agreement and the escrow agreement,
the Trust receives income and incurs expenses only on Monthly Record Dates.
Furthermore, only Unit holders of record on Monthly Record Dates are entitled to
cash distributions. On the basis of these agreements, both cash and accrual
basis Unit holders should be considered as realizing income and incurring
expenses only on Monthly Record Dates. Therefore, if you were not the Unit
holder of record of the Units on a specified Monthly Record Date, you should not
use the tax information for the month in which that Monthly Record Date falls. A
table of Monthly Record Dates and cash distributions per Unit is included on
page 4.

         The appropriate schedules to be used by a Unit holder will depend upon
(i) the date the Unit holder became a holder of record of the Units, (ii) if
applicable, the date the Unit holder ceased to be the holder of record of the
Units, and (iii) the tax year end of the Unit holder. For instance, a Unit
holder reporting on the calendar year basis who acquired Units and became a Unit
holder of record on June 15, 2000 and who still owned only those Units on
December 15,2000 must use each of the separate monthly schedules for June
through December 2000, and Depletion Schedule XX for such Units. However, Unit
holders reporting on a calendar year basis who became Unit holders of record
prior to January 18, 2000 and who continued to own only those Units on December
15, 2000, must use only the cumulative schedule for calendar year 2000 and the
appropriate depletion schedule(s).

APPLYING THE DATA FROM THE INCOME AND EXPENSE SCHEDULES

         The tax data, other than depletion, specifically applicable to a Unit
holder may be determined by multiplying the appropriate decimal fractions times
the number of Units owned. Unit holders who must use the separate monthly income
and expense schedules should combine the individual income and expense factors
from the monthly schedules for each month during which the Units were owned on a
Monthly Record Date. For a worksheet approach to computing these decimal
fractions, see the Supplement to Tax Computation Worksheet on page 6.

COMPUTING DEPLETION

         Depletion schedules are included which provide information for Unit
holders to compute cost depletion deductions with respect to their interests in
the Trust. To compute depletion for any taxable period, Unit holders should
multiply the depletion factor indicated on the relevant schedule times their
original tax basis in the respective Unit(s), reduced by the cost depletion that
was allowable as a deduction (whether or not deducted) in prior calendar years
during which they owned the Units. A factor for percentage depletion is not
included, as cost depletion exceeded the percentage depletion calculated.

(SRT 2000 TAX)



                                       1
<PAGE>   5


         Noncorporate Unit holders who acquired Units in the original
distribution from Sabine Corporation ("Sabine ")should use Depletion Schedule I
to compute 2000 depletion on those Units. Corporate Unit holders that acquired
Units in the original distribution from Sabine should use Depletion Schedule II
to compute 2000 depletion on those Units. The proper depletion schedule to be
utilized for Units owned is reflected below.


<TABLE>
<CAPTION>
   DATE(S) UNITS                                 DEPLETION SCHEDULE
   WERE ACQUIRED                                  TO BE UTILIZED
   -------------                                ------------------
<S>                                        <C>
Original Distribution                       See preceding paragraph
Before    12/16/83                          I
12/16/83--12/17/84                          III
12/18/84--12/16/85                          IV
12/17/85--3/17/86                           V
 3/18/86--12/15/86                          VI
12/16/86--12/15/87                          VII
12/16/87--12/15/88                          VIII
12/16/88--12/15/89                          IX
12/16/89--12/17/90                          X
12/18/90--12/16/91                          XI
12/17/91--12/15/92                          XII
12/16/92--12/15/93                          XIII
12/16/93--12/15/94                          XIV
12/16/94--12/15/95                          XV
12/16/95--12/16/96                          XVI
12/17/96--12/15/97                          XVII
12/16/97--12/15/98                          XVIII
12/16/98--12/15/99                          XIX
12/16/99--12/15/00                          XX
12/16/00--12/31/00                          No 2000 depletion allowed
</TABLE>


         As discussed at page A-2 in the back portion of this booklet, the
composite depletion factors are determined on the basis of a weighted average
ratio of current production from each Trust property to the estimated future
production from such property. This method of weighting the depletion factors
permits the presentation of a single depletion factor for all Unit holders
acquiring Units during a period in which there is no substantial change in the
relative fair market values of the Trust properties. Primarily as a result of
the decline in oil prices which occurred during 1986, there was a change in the
relative fair market values of the Trust properties. Accordingly, two mutually
exclusive depletion schedules are included herein reflecting the composite
depletion factors required to compute depletion for Units acquired in 1986. The
proper depletion schedule to use in computing 2000 depletion is dependent upon
the date upon which the Units were acquired as reflected in the preceding
paragraph.

         The amount of depletion attributable to a specific state may be
determined by multiplying the depletion factor indicated for the particular
state times the Federal tax basis in the Unit(s) held, reduced by prior calendar
years' allowable Federal depletion, if any. The Federal and state depletion
factors contained on Depletion Schedule I through Depletion Schedule XIX are
presented on a cumulative basis for 2000. However, the Federal and state
depletion factors contained on Depletion Schedule XX are summarized separately;
and the state factors are presented on a noncumulative basis. If you are using
Depletion Schedule XX for your state income tax return(s), you may either
calculate the applicable state depletion for each month and add the monthly
depletion amounts together, or you may add together the applicable monthly
depletion factors for the relevant state and multiply this created composite
depletion factor times your adjusted basis in your Units. The result should be
the same using either method.

(SRT 2000 TAX)




                                       2
<PAGE>   6


         Different depletion schedules may be required to be used for Units
acquired in different years by a Unit holder. Therefore, Unit holders are
encouraged to maintain records indicating the date of acquisition and the
acquisition price for each Unit or lot of Units acquired.

SALE OR EXCHANGE OF UNITS

         A discussion concerning the tax consequences associated with the sale
or exchange of Units is presented on page A-3 in the back portion of this
booklet.

CLASSIFICATION OF INVESTMENT

         Tax Reform measures enacted in 1986 and 1987 require items of income
and expense to be categorized as "passive," "active" or "portfolio" in nature.
An explanation of the application of these rules to the items of income and
expense reported by the Trust are contained on page A-1 in the back portion of
this booklet.

NONRESIDENT FOREIGN UNIT HOLDERS

         Nonresident alien individual and foreign corporation Unit holders
("Foreign Taxpayer(s)") are subject to special tax rules with respect to their
investments in the Trust. These rules are outlined beginning on page A-3 in the
back portion of this booklet.

BACKUP WITHHOLDING

         Unit holders who have had amounts withheld in 2000 pursuant to the
Federal backup withholding provisions should have received a Form 1099-MISC from
the Trust. The Form 1099-MISC reflects the total Federal income tax withheld
from distributions. The amount reported on the Form 1099-MISC should not be
included as additional income in computing taxable income, as such amount is
already included in the per Unit income items on the income and expense
schedules. The Federal income tax withheld, as reported on the Form
1099-MISC, should be considered as a credit by the Unit holder in computing any
Federal income tax liability. Individual Unit holders should include the amount
of backup withholding on line 57 of page 2 of the 2000 Form 1040. For a further
discussion of backup withholding, see page A-4 in the back portion of this
booklet.

STATE INCOME TAX

         Since the Trust holds royalty interests and receives income that is
attributable to various states, Unit holders may be obligated to file a return
and may have a tax liability in states in addition to their state of residence.
The accompanying schedules have been prepared in such a manner that income and
deductions attributable to the various states may be determined by each Unit
holder. State income tax matters are more fully discussed on page A-4 in the
back portion of this booklet.


(SRT 2000 TAX)


                                       3


<PAGE>   7


TABLE OF 2000 MONTHLY RECORD DATES AND CASH DISTRIBUTIONS PER UNIT

         Unit holders, as reflected in the transfer books of the Trust on a
Monthly Record Date, received the following per Unit cash distributions for
2000. The per Unit cash distributions reflected below have not been reduced by
any taxes that may have been withheld from distributions to Foreign Taxpayers or
from distributions to Unit holders subject to the Federal backup withholding
rules. The distribution checks were dated and mailed on the corresponding Date
Payable.



<TABLE>
<CAPTION>
                                                                 DISTRIBUTION PER
MONTHLY RECORD DATE                       DATE PAYABLE                 UNIT
- -------------------                       ------------           ----------------
<S>                                     <C>                       <C>
January 18,2000                         January 31,2000               $.20049
February 15,2000                        February 29,2000              $.18787
March 15,2000                           March 29,2000                 $.14055
April 17,2000                           April 28,2000                 $.22522
May 15,2000                             May 30,2000                   $.13762
June 15,2000                            June 29,2000                  $.15430
July 17,2000                            July 31,2000                  $.22049
August 15,2000                          August 29,2000                $.14978
September 15,2000                       September 29,2000             $.23513
October 16,2000                         October 30,2000               $.14282
November 15,2000                        November 29,2000              $.25090
December 15,2000                        December 29,2000              $.22952
</TABLE>



(SRT 2000 TAX)




                                       4


<PAGE>   8

                              SABINE ROYALTY TRUST
                           TAX COMPUTATION WORKSHEET

                                      2000

         (RETAIN THIS WORKPAPER AS PART OF YOUR PERMANENT TAX RECORDS)

                                     PART I

                               INCOME AND EXPENSE

<TABLE>
<CAPTION>
                                        A                       B                 C

                                                         AMOUNTS PER UNIT
                                    NUMBER OF            FROM APPROPRIATE
                                   UNITS OWNED             SCHEDULE(S)                               WHERE TO REFLECT ON
ITEM                                 (NOTE 1)                (NOTE 2)            TOTALS            2000 FORM 1040 (NOTE 3)
- ----                               ----------            ----------------        ------            -----------------------
<S>                              <C>               <C>    <C>                 <C>              <C>                  <C>
Gross Royalty Income ..........                     x                     =                    Line 4, Part I,      Schedule E
                                ------------------       ---------------      -------------
Severance Tax .................                     x                     =                    Line 16, Part I,     Schedule E
                                ------------------       ---------------      -------------
Interest Income ................                    x                     =                    Line 1, Part I,      Schedule B
                                ------------------       ---------------      -------------
Administrative Expense .........                    x                     =                    Line 18, Part I,     Schedule E
                                ------------------       ---------------      -------------
</TABLE>


                                    PART II

                            COST DEPLETION (NOTE 4)



<TABLE>
<CAPTION>
                        COST DEPLETION
                      ALLOWABLE IN PRIOR    ADJUSTED BASIS FOR          APPROPRIATE 2000
                        CALENDAR YEARS        COST DEPLETION         COST DEPLETION FACTOR
ORIGINAL BASIS             (NOTE 5)              PURPOSES                   (NOTE 4)               2000 COST DEPLETION*
- --------------        ------------------    ------------------       ---------------------         --------------------
<S>                 <C>                  <C>                     <C>                           <C>
                   -                      =                     x                             =
- ------------------   ---------------           -------------           -------------------         --------------------
</TABLE>


* Reflect cost depletion on 2000 Form 1040, line 20, Part 1, Schedule E
  (Note 3).

                                    PART III

                  COMPUTATION OF GAIN OR (LOSS) FOR UNITS SOLD

<TABLE>
<CAPTION>
                                                             WHERE TO REFLECT ON
NET SALES      ADJUSTED BASIS             GAIN                 2000 FORM 1040
  PRICE           (NOTE 6)               (LOSS)                   (NOTE 3)
- ---------      --------------            ------             -------------------
<S>            <C>                      <C>                 <C>

           -                     =                               Form 4797
- ----------     --------------         -------------
</TABLE>


NOTES
- -----

(1)      In order to correctly calculate total income and expense to be reported
         on your 2000 Federal and, if applicable, state income tax returns, it
         is recommended that you reproduce and complete a separate Tax
         Computation Worksheet for each block of Units acquired at different
         times. Only the total of each item of income and expense obtained by
         adding the separate Tax Computation Worksheet totals, if more than one
         is required, should be reported on your applicable 2000 income tax
         returns.

(2)      If you did not become a Unit holder of record of any Unit(s) or did not
         cease to be a Unit holder of record of any Unit(s) during the period
         from January 18, 2000 through December 15, 2000, then the amounts
         reflected on the cumulative schedule for 2000 should be used to
         complete Part I. If any Units were held of record for only part of the
         period defined above, the Supplement to Tax Computation Worksheet on
         page 6 should be used to derive the income and expense factors to be
         inserted in column B.

(3)      The Trustee believes that individual Unit holders owning the Units as
         an investment should report the amounts determined in this manner. The
         U.S. Corporation Income Tax Return (Form 1120) does not require that
         royalty income and related expenses be separately identified on any
         specific schedules. Note: Schedule D should be utilized to report the
         Sale of Units acquired before January 1, 1987.(See "Sale or Exchange of
         Units" on page A-3.)

(4)      The appropriate depletion schedule(s) to be utilized is generally
         dependent upon the date on which the Units were acquired. See
         "Computing Cost Depletion" on page 1 to determine the proper
         schedule(s) to be used.

(5)      Cost depletion allowable in prior calendar years cannot be computed
         from the schedules contained in this booklet. Depletion schedules
         contained in prior years' Sabine Royalty Trust Tax Information
         Booklet(s) should be used in order to determine the appropriate cost
         depletion amount(s) allowable in prior calendar years.

(6)      The adjusted basis is equal to the cost or other basis of the Unit(s)
         less the cost depletion allowable from the date of acquisition through
         the date of sale (whether or not deducted).


(SRT 2000 TAX)



                                       5




<PAGE>   9

                              SABINE ROYALTY TRUST
                    SUPPLEMENT TO TAX COMPUTATION WORKSHEET

                                      2000

                    FOR UNITS HELD FOR ONLY PART OF THE YEAR

         This worksheet should be used by Unit holders who became holders of
record of Units or ceased to be holders of record of Units during the period
from January 18, 2000 through December 15, 2000. This worksheet is designed to
assist Unit holders in determining the proper income and expense factors to be
used on the Tax Computation Worksheet -- Part I, under the heading entitled
"Amounts Per Unit from Appropriate Schedule(s)". In order to complete this
schedule, Unit holders should insert only the individual income and expense
factors from the monthly schedules (pages 8-19) for each month during which the
Units were owned on a Monthly Record Date. (See page 4 for a list of Monthly
Record Dates).


<TABLE>
<CAPTION>
                                    MONTH(S) DURING WHICH UNITS WERE OWNED ON A MONTHLY RECORD DATE                  CALCULATED
                      ---------------------------------------------------------------------------------------------   FACTOR
                       JANUARY  FEBRUARY  MARCH  APRIL  MAY  JUNE  JULY  AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER   PER UNIT*
                      --------  --------  -----  ----- ----- ----- ----- ------ --------- ------- -------- --------  ----------
<S>                   <C>       <C>       <C>    <C>   <C>   <C>   <C>   <C>    <C>       <C>     <C>      <C>       <C>
Gross Royalty
Income ..............
                      --------  --------  -----  ----- ----- ----- ----- ------ --------- ------- -------- --------  ----------
Severance Tax .......
                      --------  --------  -----  ----- ----- ----- ----- ------ --------- ------- -------- --------  ----------
Interest Income .....
                      --------  --------  -----  ----- ----- ----- ----- ------ --------- ------- -------- --------  ----------
Administrative
Expense .............
                      --------  --------  -----  ----- ----- ----- ----- ------ --------- ------- -------- --------  ----------
</TABLE>


- ----------
*  This column of calculated factors per Unit should be inserted in column B of
   the Income and Expense section (Part I) of the Tax Computation Worksheet on
   page 5.


(SRT 2000 TAX)



                                       6


<PAGE>   10

                                                                 CUMULATIVE 2000


                              SABINE ROYALTY TRUST

                                 EIN 75-6297143
                            FORM 1041, GRANTOR TRUST

                    Federal and State Income Tax Information
                            See Instructions for Use

                                   SECTION I
                          INCOME AND EXPENSE PER UNIT

<TABLE>
<CAPTION>
                                                                                                         OTHER INCOME
                                             ROYALTY INCOME AND EXPENSE                                   AND EXPENSE
                             ---------------------------------------------------------      ------------------------------------
                                                                             NET
                                  GROSS              SEVERANCE             ROYALTY             INTEREST           ADMINISTRATIVE
SOURCE                            INCOME                TAX                PAYMENTS             INCOME                EXPENSE
- ------                       ---------------      ---------------      ---------------      ---------------      ---------------
<S>                          <C>                  <C>                  <C>                  <C>                  <C>
Florida ...............      $       .046268      $       .002751      $       .043517      $             *      $       .003013
Louisiana .............              .223101              .009895              .213206              .000627              .017071
Mississippi ...........              .106133              .004292              .101841                    *              .007220
New Mexico ............              .200114              .018415              .181699                    *              .012785
Oklahoma ..............              .406142              .030340              .375802                    *              .026452
Texas .................             1.604985              .091661             1.513324              .015417              .104253
                             ---------------      ---------------      ---------------      ---------------      ---------------
  TOTAL ...............      $      2.586743      $       .157354      $      2.429389      $       .016044      $       .170794
                             ===============      ===============      ===============      ===============      ===============
</TABLE>


                                   SECTION II
                  RECONCILIATION OF CASH DISTRIBUTIONS PER UNIT

<TABLE>
<CAPTION>
                ITEM                                    AMOUNT
                ----                                    ------
<S>                                                <C>
1. Total Net Royalty Payments ................      $     2.429389
2. Interest Income* ..........................             .016044
3. Administrative Expense ....................            (.170794)
                                                    --------------
4. Cash Distribution Per Unit**  .............      $     2.274639
                                                    ==============
</TABLE>

- ----------
*  Revenue attributable to these states was invested and earned interest income.
   Since the investments were made in Dallas, Texas, and the interest was paid
   there, such interest is included in the Texas interest income.

** Includes amounts withheld by the Trust from distributions to nonresident
   alien individuals and foreign corporations and remitted directly to the
   United States Treasury. This also includes amounts withheld pursuant to the
   backup withholding provisions.


(SRT 2000 TAX)



                                       7




<PAGE>   11
                                                                FOR JANUARY 2000


                              SABINE ROYALTY TRUST

                                 EIN 75-6297143
                            FORM 1041, GRANTOR TRUST

                    Federal and State Income Tax Information
                            See Instructions for Use

                                   SECTION I
                          INCOME AND EXPENSE PER UNIT




<TABLE>
<CAPTION>
                                                                                                         OTHER INCOME
                                             ROYALTY INCOME AND EXPENSE                                   AND EXPENSE
                             ---------------------------------------------------------      ------------------------------------
                                                                             NET
                                  GROSS              SEVERANCE             ROYALTY             INTEREST           ADMINISTRATIVE
SOURCE                            INCOME                TAX                PAYMENTS             INCOME                EXPENSE
- ------                       ---------------      ---------------      ---------------      ---------------      ---------------
<S>                          <C>                  <C>                  <C>                  <C>                  <C>
Florida .............        $       .005526      $       .000400      $       .005126       $            *      $       .000372
Louisiana ...........                .019561              .000792              .018769              .000076              .001608
Mississippi .........                .009347              .000458              .008889                    *              .000629
New Mexico ..........                .015128              .001492              .013636                    *              .001018
Oklahoma ............                .026916              .002042              .024874                    *              .001812
Texas ...............                .155345              .011421              .143924              .001094              .010458
                             ---------------      ---------------      ---------------       --------------      ---------------
    TOTAL ...............    $       .231823      $       .016605      $       .215218       $      .001170      $       .015897
                             ===============      ===============      ===============      ===============      ===============
</TABLE>


                                   SECTION II
                  RECONCILIATION OF CASH DISTRIBUTIONS PER UNIT

<TABLE>
<CAPTION>
                ITEM                                    AMOUNT
                ----                                    ------
<S>                                                <C>
1. Total Net Royalty Payments ...............       $      .215218
2. Interest Income*..........................              .001170
3. Administrative Expense ...................             (.015897)
                                                    --------------
4. Cash Distribution Per Unit**..............       $      .200491
                                                    ==============
</TABLE>

- ----------
*  Revenue attributable to these states was invested and earned interest income.
   Since the investments were made in Dallas, Texas, and the interest was paid
   there, such interest is included in the Texas interest income.

** Includes amounts withheld by the Trust from distributions to nonresident
   alien individuals and foreign corporations and remitted directly to the
   United States Treasury. This also includes amounts withheld pursuant to the
   backup withholding provisions.


(SRT 2000 TAX)


                                       8

<PAGE>   12


                                                             FOR FEBRUARY 2000

                              SABINE ROYALTY TRUST

                                 EIN 75-6297143
                            FORM 1041, GRANTOR TRUST

                    Federal and State Income Tax Information
                            See Instructions for Use

                                   SECTION I
                          INCOME AND EXPENSE PER UNIT

<TABLE>
<CAPTION>
                                                                                                         OTHER INCOME
                                             ROYALTY INCOME AND EXPENSE                                   AND EXPENSE
                             ---------------------------------------------------------      ------------------------------------
                                                                             NET
                                  GROSS              SEVERANCE             ROYALTY             INTEREST           ADMINISTRATIVE
SOURCE                            INCOME                TAX                PAYMENTS             INCOME                EXPENSE
- ------                       ---------------      ---------------      ---------------      ---------------      ---------------
<S>                          <C>                  <C>                  <C>                  <C>                  <C>
Florida ................     $       .002961      $       .000180      $       .002781      $             *      $       .000126
Louisiana ..............             .018840              .000983              .017857              .000059              .001098
Mississippi ............             .008293              .000251              .008042                    *              .000353
New Mexico .............             .009244              .000692              .008552                    *              .000393
Oklahoma ...............             .032309              .002059              .030250                    *              .001375
Texas ..................             .135259              .006801              .128458              .000974              .005757
                             ---------------      ---------------      ---------------       --------------      ---------------
TOTAL ..................     $       .206906      $       .010966      $       .195940       $      .001033      $       .009102
                             ===============      ===============      ===============       ==============      ===============
</TABLE>



                                   SECTION II
                  RECONCILIATION OF CASH DISTRIBUTIONS PER UNIT

<TABLE>
<CAPTION>
                ITEM                                    AMOUNT
                ----                                    ------
<S>                                                <C>
1. Total Net Royalty Payments ...............       $      .195940
2. Interest Income*..........................              .001033
3. Administrative Expense ...................             (.009102)
                                                    --------------
4. Cash Distribution Per Unit**..............       $      .187871
                                                    ==============
</TABLE>

- ----------

*  Revenue attributable to these states was invested and earned interest income.
   Since the investments were made in Dallas, Texas, and the interest was paid
   there, such interest is included in the Texas interest income.

** Includes amounts withheld by the Trust from distributions to nonresident
   alien individuals and foreign corporations and remitted directly to the
   United States Treasury. This also includes amounts withheld pursuant to the
   backup withholding provisions.

(SRT 2000 TAX)


                                       9

<PAGE>   13


                                                                FOR MARCH 2000

                              SABINE ROYALTY TRUST
                                 EIN 75-6297143
                            FORM 1041, GRANTOR TRUST

                    Federal and State Income Tax Information
                            See Instructions for Use

                                   SECTION I
                          INCOME AND EXPENSE PER UNIT

<TABLE>
<CAPTION>
                                                                                                         OTHER INCOME
                                             ROYALTY INCOME AND EXPENSE                                   AND EXPENSE
                             ---------------------------------------------------------      ------------------------------------
                                                                             NET
                                  GROSS              SEVERANCE             ROYALTY             INTEREST           ADMINISTRATIVE
SOURCE                            INCOME                TAX                PAYMENTS             INCOME                EXPENSE
- ------                       ---------------      ---------------      ---------------      ---------------      ---------------
<S>                          <C>                  <C>                  <C>                  <C>                  <C>
Florida ...............      $       .006368      $       .000198      $       .006170      $             *      $       .000277
Louisiana .............              .013179              .000819              .012360              .000040              .000865
Mississippi ...........              .008416              .000337              .008079                    *              .000367
New Mexico ............              .012395              .001280              .011115                    *              .000540
Oklahoma ..............              .026474              .001954              .024520                    *              .001154
Texas .................              .089578              .005128              .084450              .000922              .003903
                             ---------------      ---------------      ---------------       --------------      ---------------
TOTAL .................      $       .156410      $       .009716      $       .146694       $      .000962      $       .007106
                             ===============      ===============      ===============       ==============      ===============
</TABLE>


                                   SECTION II
                  RECONCILIATION OF CASH DISTRIBUTIONS PER UNIT

<TABLE>
<CAPTION>
                ITEM                                    AMOUNT
                ----                                    ------
<S>                                                <C>
1. Total Net Royalty Payments .............         $      .146694
2. Interest Income*........................                .000962
3. Administrative Expense .................               (.007106)
                                                    --------------
4. Cash Distribution Per Unit**............         $      .140550
                                                    ==============
</TABLE>

- ----------

*  Revenue attributable to these states was invested and earned interest income.
   Since the investments were made in Dallas, Texas, and the interest was paid
   there, such interest is included in the Texas interest income.

** Includes amounts withheld by the Trust from distributions to nonresident
   alien individuals and foreign corporations and remitted directly to the
   United States Treasury. This also includes amounts withheld pursuant to the
   backup withholding provisions.

(SRT 2000 TAX)



                                       10


<PAGE>   14


                                                                FOR APRIL 2000


                              SABINE ROYALTY TRUST
                                 EIN 75-6297143
                            FORM 1041, GRANTOR TRUST

                    Federal and State Income Tax Information
                            See Instructions for Use

                                   SECTION I
                          INCOME AND EXPENSE PER UNIT


<TABLE>
<CAPTION>
                                                                                                         OTHER INCOME
                                             ROYALTY INCOME AND EXPENSE                                   AND EXPENSE
                             ---------------------------------------------------------      ------------------------------------
                                                                             NET
                                  GROSS              SEVERANCE             ROYALTY             INTEREST           ADMINISTRATIVE
SOURCE                            INCOME                TAX                PAYMENTS             INCOME                EXPENSE
- ------                       ---------------      ---------------      ---------------      ---------------      ---------------
<S>                          <C>                  <C>                  <C>                  <C>                  <C>
Florida ................     $       .005862      $       .000381      $       .005481      $             *      $       .000258
Louisiana ..............             .022276              .001088              .021188              .000085              .001274
Mississippi ............             .010996              .000475              .010521                    *              .000484
New Mexico .............             .016941              .001550              .015391                    *              .000746
Oklahoma ...............             .037343              .002823              .034520                    *              .001645
Texas ..................             .157541              .009370              .148171              .001209              .006938
                             ---------------      ---------------      ---------------       --------------      ---------------
TOTAL ..................     $       .250959      $       .015687      $       .235272       $      .001294      $       .011345
                             ===============      ===============      ===============       ==============      ===============
</TABLE>


                                   SECTION II
                  RECONCILIATION OF CASH DISTRIBUTIONS PER UNIT

<TABLE>
<CAPTION>
                ITEM                                    AMOUNT
                ----                                    ------
<S>                                                <C>
1. Total Net Royalty Payments ...............       $      .235272
2. Interest Income*..........................              .001294
3. Administrative Expense ...................             (.011345)
                                                    --------------
4. Cash Distribution Per Unit **.............       $      .225221
                                                    ==============
</TABLE>

- ----------

*  Revenue attributable to these states was invested and earned interest income.
   Since the investments were made in Dallas, Texas, and the interest was paid
   there, such interest is included in the Texas interest income.

** Includes amounts withheld by the Trust from distributions to nonresident
   alien individuals and foreign corporations and remitted directly to the
   United States Treasury. This also includes amounts withheld pursuant to the
   backup withholding provisions.


(SRT 2000 TAX)


                                       11

<PAGE>   15

                                                                    FOR MAY 2000


                              SABINE ROYALTY TRUST
                                 EIN 75-6297143
                            FORM 1041, GRANTOR TRUST

                    Federal and State Income Tax Information
                            See Instructions for Use

                                   SECTION I
                          INCOME AND EXPENSE PER UNIT


<TABLE>
<CAPTION>
                                                                                                         OTHER INCOME
                                             ROYALTY INCOME AND EXPENSE                                   AND EXPENSE
                             ---------------------------------------------------------      ------------------------------------
                                                                             NET
                                  GROSS              SEVERANCE             ROYALTY             INTEREST           ADMINISTRATIVE
SOURCE                            INCOME                TAX                PAYMENTS             INCOME                EXPENSE
- ------                       ---------------      ---------------      ---------------      ---------------      ---------------
<S>                          <C>                  <C>                  <C>                  <C>                  <C>
Florida ...............      $       .003328      $       .000219      $       .003109      $             *      $       .000244
Louisiana .............              .009867              .000878              .008989              .000043              .001012
Mississippi ...........              .006847              .000163              .006684                    *              .000501
New Mexico ............              .010307              .000900              .009407                    *              .000755
Oklahoma ..............              .022647              .001650              .020997                    *              .001658
Texas .................              .104833              .005481              .099352              .000888              .007677
                             ---------------      ---------------      ---------------       --------------      ---------------
TOTAL .................      $       .157829      $       .009291      $       .148538       $      .000931      $       .011847
                             ===============      ===============      ===============       ==============      ===============
</TABLE>


                                   SECTION II
                  RECONCILIATION OF CASH DISTRIBUTIONS PER UNIT


<TABLE>
<CAPTION>
                ITEM                                    AMOUNT
                ----                                    ------
<S>                                                <C>
1. Total Net Royalty Payments ..............        $      .148538
2. Interest Income*.........................               .000931
3. Administrative Expense ..................              (.011847)
                                                    --------------
4. Cash Distribution Per Unit**.............        $      .137622
                                                    ==============
</TABLE>

- ----------

*  Revenue attributable to these states was invested and earned interest income.
   Since the investments were made in Dallas, Texas, and the interest was paid
   there, such interest is included in the Texas interest income.

** Includes amounts withheld by the Trust from distributions to nonresident
   alien individuals and foreign corporations and remitted directly to the
   United States Treasury. This also includes amounts withheld pursuant to the
   backup withholding provisions.


(SRT 2000 TAX)


                                       12
<PAGE>   16
                                                                   FOR JUNE 2000

                              SABINE ROYALTY TRUST

                                 EIN 75-6297143
                            FORM 1041, GRANTOR TRUST

                    Federal and State Income Tax Information
                            See Instructions for Use

                                   SECTION I
                          INCOME AND EXPENSE PER UNIT

<TABLE>
<CAPTION>
                                                                          OTHER INCOME
                            ROYALTY INCOME AND EXPENSE                    AND EXPENSE
                       --------------------------------------       -------------------------
                                                       NET
                        GROSS         SEVERANCE      ROYALTY        INTEREST   ADMINISTRATIVE
    SOURCE              INCOME           TAX         PAYMENTS        INCOME        EXPENSE
    ------             --------       ---------      --------       --------   --------------
<S>                    <C>            <C>            <C>            <C>        <C>
Florida ........       $.000386       $.000026       $.000360       $      *       $.000019
Louisiana ......        .022762        .001128        .021634        .000082        .001439
Mississippi ....        .008949        .000501        .008448              *        .000451
New Mexico .....        .012167        .001057        .011110              *        .000613
Oklahoma .......        .035353        .006514        .028839              *        .001781
Texas ..........        .096658        .004772        .091886        .001113        .004869
                       --------       --------       --------       --------       --------
    TOTAL ......       $.176275       $.013998       $.162277       $.001195       $.009172
                       ========       ========       ========       ========       ========
</TABLE>

                                   SECTION II
                 RECONCILIATION OF CASH DISTRIBUTIONS PER UNIT

<TABLE>
<CAPTION>
         ITEM                                               AMOUNT
         ----                                             ----------
<S>                                                       <C>
1. Total Net Royalty Payments .....................       $  .162277

2. Interest Income* ...............................          .001195

3. Administrative Expense .........................         (.009172)
                                                          ----------
4. Cash Distribution Per Unit** ...................       $  .154300
                                                          ==========
</TABLE>

- ----------

*    Revenue attributable to these states was invested and earned interest
     income. Since the investments were made in Dallas, Texas, and the interest
     was paid there, such interest is included in the Texas interest income.

**   Includes amounts withheld by the Trust from distributions to nonresident
     alien individuals and foreign corporations and remitted directly to the
     United States Treasury. This also includes amounts withheld pursuant to the
     backup withholding provisions.

(SRT 2000 TAX)

                                       13

<PAGE>   17

                                                                   FOR JULY 2000

                              SABINE ROYALTY TRUST

                                 EIN 75-6297143
                            FORM 1041, GRANTOR TRUST

                    Federal and State Income Tax Information
                            See Instructions for Use

                                   SECTION I
                          INCOME AND EXPENSE PER UNIT

<TABLE>
<CAPTION>
                                                                          OTHER INCOME
                            ROYALTY INCOME AND EXPENSE                    AND EXPENSE
                       --------------------------------------       -------------------------
                                                       NET
                        GROSS         SEVERANCE      ROYALTY        INTEREST   ADMINISTRATIVE
    SOURCE              INCOME           TAX         PAYMENTS        INCOME        EXPENSE
    ------             --------       ---------      --------       --------   --------------
<S>                    <C>            <C>            <C>            <C>        <C>
Florida ........       $.002711       $ .000191      $.002520       $      *       $.000105
Louisiana ......        .018007         .001013       .016994        .000062        .000990
Mississippi ....        .007224         .000380       .006844              *        .000280
New Mexico .....        .027409         .002887       .024522              *        .001063
Oklahoma .......        .032681         .002344       .030337              *        .001268
Texas ..........        .156177         .008582       .147595        .001379        .006057
                       --------       ---------      --------       --------       --------
    TOTAL ......       $.244209       $ .015397      $.228812       $.001441       $.009763
                       ========       =========      ========       ========       ========
</TABLE>

                                   SECTION II
                 RECONCILIATION OF CASH DISTRIBUTIONS PER UNIT

<TABLE>
<CAPTION>
         ITEM                                              AMOUNT
         ----                                             --------
<S>                                                       <C>
1. Total Net Royalty Payments .....................       $.228812

2. Interest Income* ...............................        .001441

3. Administrative Expense .........................       (.009763)
                                                          --------
4. Cash Distribution Per Unit** ...................       $.220490
                                                          ========
</TABLE>

- ----------

*    Revenue attributable to these states was invested and earned interest
     income. Since the investments were made in Dallas, Texas, and the interest
     was paid there, such interest is included in the Texas interest income.

**   Includes amounts withheld by the Trust from distributions to nonresident
     alien individuals and foreign corporations and remitted directly to the
     United States Treasury. This also includes amounts withheld pursuant to the
     backup withholding provisions.

(SRT 2000 TAX)

                                       14

<PAGE>   18


                                                                 FOR AUGUST 2000

                              SABINE ROYALTY TRUST

                                 EIN 75-6297143
                            FORM 1041, GRANTOR TRUST

                    Federal and State Income Tax Information
                            See Instructions for Use

                                   SECTION I
                          INCOME AND EXPENSE PER UNIT


<TABLE>
<CAPTION>
                                                                                              OTHER INCOME
                                                   ROYALTY INCOME AND EXPENSE                 AND EXPENSE
                                               -----------------------------------   -----------------------------
                                                                           NET
                                                GROSS      SEVERANCE     ROYALTY      INTEREST      ADMINISTRATIVE
     SOURCE                                     INCOME        TAX        PAYMENTS      INCOME           EXPENSE
     ------                                    --------    ----------   ----------   ----------     --------------
<S>                                            <C>         <C>          <C>          <C>            <C>
Florida ....................................   $.005624    $  .000395   $  .005229   $    *           $  .000265
Louisiana ..................................     016835       .000585      .016250      .000062          .001089
Mississippi ................................     005290       .000211      .005079        *              .000249
New Mexico .................................     016395       .001475      .014920        *              .000773
Oklahoma ...................................     021537       .001569      .019968        *              .001015
Texas ......................................     101524       .006337      .095187      .001259          .004784
                                               --------    ----------   ----------   ----------       ----------
    TOTAL ..................................   $.167205    $  .010572   $  .156633   $  .001321       $  .008175
                                               ========    ==========   ==========   ==========       ==========
</TABLE>

                                   SECTION II
                  RECONCILIATION OF CASH DISTRIBUTIONS PER UNIT

<TABLE>
<CAPTION>
            ITEM                                                                      AMOUNT
            ----                                                                     ---------
<S>                                                                                  <C>
1. Total Net Royalty Payments .....................................................  $ .156633
2. Interest Income*................................................................    .001321
3. Administrative Expense .........................................................   (.008175)
                                                                                     ---------
4. Cash Distribution Per Unit**....................................................  $ .149779
                                                                                     =========
</TABLE>

- ----------

*    Revenue attributable to these states was invested and earned interest
     income. Since the investments were made in Dallas, Texas, and the interest
     was paid there, such interest is included in the Texas interest income.

**   Includes amounts withheld by the Trust from distributions to nonresident
     alien individuals and foreign corporations and remitted directly to the
     United States Treasury. This also includes amounts withheld pursuant to the
     backup withholding provisions.



(SRT 2000 TAX)

                                       15
<PAGE>   19


                                                              FOR SEPTEMBER 2000

                              SABINE ROYALTY TRUST
                                 EIN 75-6297143
                            FORM 1041, GRANTOR TRUST

                    Federal and State Income Tax Information
                            See Instructions for Use

                                   SECTION I
                          INCOME AND EXPENSE PER UNIT

<TABLE>
<CAPTION>
                                                                                              OTHER INCOME
                                                   ROYALTY INCOME AND EXPENSE                 AND EXPENSE
                                               -----------------------------------   -----------------------------
                                                                           NET
                                                GROSS      SEVERANCE     ROYALTY      INTEREST      ADMINISTRATIVE
     SOURCE                                     INCOME        TAX        PAYMENTS      INCOME           EXPENSE
     ------                                    --------    ----------   ----------   ----------     --------------
<S>                                            <C>         <C>          <C>          <C>            <C>
Florida ....................................   $.001313    $  .000066   $  .001247   $   *            $  .000037
Louisiana ..................................    .023549       .000765      .022784      .000051          .000944
Mississippi ................................    .011789       .000526      .011263       *               .000330
New Mexico .................................    .021973       .001928      .020045       *               .000614
Oklahoma ...................................    .044100      (.000382)     .044482       *               .001233
Texas ......................................    .149080       .007969      .141111      .001473          .004168
                                               --------    ----------   ----------   ----------       ----------
    TOTAL ..................................   $.251804    $  .010872   $  .240932   $  .001524       $  .007326
                                               ========    ==========   ==========   ==========       ==========
</TABLE>


                                   SECTION II
                  RECONCILIATION OF CASH DISTRIBUTIONS PER UNIT

<TABLE>
<CAPTION>
          ITEM                                                                        AMOUNT
          ----                                                                       ---------
<S>                                                                                  <C>
1. Total Net Royalty Payments .....................................................  $ .240932
2. Interest Income*................................................................    .001524
3. Administrative Expense .........................................................   (.007326)
                                                                                     ---------
4. Cash Distribution Per Unit**....................................................  $ .235130
                                                                                     =========
</TABLE>

- ----------

*    Revenue attributable to these states was invested and earned interest
     income. Since the investments were made in Dallas, Texas, and the interest
     was paid there, such interest is included in the Texas interest income.

**   Includes amounts withheld by the Trust from distributions to nonresident
     alien individuals and foreign corporations and remitted directly to the
     United States Treasury. This also includes amounts withheld pursuant to the
     backup withholding provisions.

(SRT 2000 TAX)

                                       16

<PAGE>   20


                                                                FOR OCTOBER 2000

                              SABINE ROYALTY TRUST

                                 EIN 75-6297143
                            FORM 1041, GRANTOR TRUST

                    Federal and State Income Tax Information
                            See Instructions for Use

                                   SECTION I
                          INCOME AND EXPENSE PER UNIT


<TABLE>
<CAPTION>
                                                                                              OTHER INCOME
                                                   ROYALTY INCOME AND EXPENSE                 AND EXPENSE
                                               -----------------------------------   -----------------------------
                                                                           NET
                                                GROSS      SEVERANCE     ROYALTY      INTEREST      ADMINISTRATIVE
     SOURCE                                     INCOME        TAX        PAYMENTS      INCOME           EXPENSE
     ------                                    --------    ----------   ----------   ----------     --------------
<S>                                            <C>         <C>          <C>          <C>            <C>
Florida ....................................   $.002609    $  .000189   $  .002420   $    *           $  .000561
Louisiana ..................................    .015656       .000592      .015064      .000087          .003666
Mississippi ................................    .012184       .000631      .011553        *              .002621
New Mexico .................................    .015706       .001537      .014169        *              .003379
Oklahoma ...................................    .033221       .002918      .030303        *              .007147
Texas ......................................    .117611       .007272      .110339      .001566          .025304
                                               --------    ----------   ----------   ----------       ----------
    TOTAL ..................................   $.196987    $  .013139   $  .183848   $  .001653       $  .042678
                                               ========    ==========   ==========   ==========       ==========
</TABLE>

                                   SECTION II
                  RECONCILIATION OF CASH DISTRIBUTIONS PER UNIT

<TABLE>
<CAPTION>
           ITEM                                                                      AMOUNT
           ----                                                                     ---------
<S>                                                                                 <C>
1. Total Net Royalty Payments ..................................................... $ .183848
2. Interest Income*................................................................   .001653
3. Administrative Expense .........................................................  (.042678)
                                                                                    ---------
4. Cash Distribution Per Unit**.................................................... $ .142823
                                                                                    =========
</TABLE>

- ----------

*    Revenue attributable to these states was invested and earned interest
     income. Since the investments were made in Dallas, Texas, and the interest
     was paid there, such interest is included in the Texas interest income.

**   Includes amounts withheld by the Trust from distributions to nonresident
     alien individuals and foreign corporations and remitted directly to the
     United States Treasury. This also includes amounts withheld pursuant to the
     backup withholding provisions.


(SRT 2000 Tax)

                                       17

<PAGE>   21


                                                               FOR NOVEMBER 2000

                              SABINE ROYALTY TRUST

                                 EIN 75-6297143
                            FORM 1041, GRANTOR TRUST

                    Federal and State Income Tax Information
                            See Instructions for Use

                                   SECTION I
                          INCOME AND EXPENSE PER UNIT


<TABLE>
<CAPTION>
                                                                                              OTHER INCOME
                                                   ROYALTY INCOME AND EXPENSE                 AND EXPENSE
                                               -----------------------------------   -----------------------------
                                                                           NET
                                                GROSS      SEVERANCE     ROYALTY      INTEREST      ADMINISTRATIVE
     SOURCE                                     INCOME        TAX        PAYMENTS      INCOME           EXPENSE
     ------                                    --------    ----------   ----------   ----------     --------------
<S>                                            <C>         <C>          <C>          <C>            <C>
Florida .....................................  $.003726    $  .000239   $  .003487   $    *           $  .000104
Louisiana ...................................   .026598       .001145      .025453      .000023          .001035
Mississippi .................................   .010914       .000087      .010827        *              .000306
New Mexico ..................................   .021747       .001954      .019793        *              .000609
Oklahoma ....................................   .048037       .003424      .044613        *              .001346
Texas .......................................   .161689       .008796      .152893      .001740          .004530
                                               --------    ----------   ----------   ----------       ----------
TOTAL .......................................  $.272711    $  .015645   $  .257066   $  .001763       $  .007930
                                               ========    ==========   ==========   ==========       ==========
</TABLE>


                                   SECTION II
                  RECONCILIATION OF CASH DISTRIBUTIONS PER UNIT

<TABLE>
<CAPTION>
           ITEM                                                                       AMOUNT
           ----                                                                      ---------
<S>                                                                                  <C>
1. Total Net Royalty Payments .....................................................  $ .257066
2. Interest Income*................................................................    .001763
3. Administrative Expense .........................................................   (.007930)
                                                                                     ---------
4. Cash Distribution Per Unit **...................................................  $ .250899
                                                                                     =========
</TABLE>

- ----------

*    Revenue attributable to these states was invested and earned interest
     income. Since the investments were made in Dallas, Texas, and the interest
     was paid there, such interest is included in the Texas interest income.

**   Includes amounts withheld by the Trust from distributions to nonresident
     alien individuals and foreign corporations and remitted directly to the
     United States Treasury. This also includes amounts withheld pursuant to the
     backup withholding provisions.


(SRT 2000 TAX)

                                       18

<PAGE>   22

                                                               FOR DECEMBER 2000

                              SABINE ROYALTY TRUST

                                 EIN 75-6297143
                            FORM 1041, GRANTOR TRUST

                    Federal and State Income Tax Information
                            See Instructions for Use

                                   SECTION I
                          INCOME AND EXPENSE PER UNIT

<TABLE>
<CAPTION>
                                                                                              OTHER INCOME
                                                   ROYALTY INCOME AND EXPENSE                 AND EXPENSE
                                               -----------------------------------   -----------------------------
                                                                           NET
                                                GROSS      SEVERANCE     ROYALTY      INTEREST      ADMINISTRATIVE
     SOURCE                                     INCOME        TAX        PAYMENTS      INCOME           EXPENSE
     ------                                    --------    ----------   ----------   ----------     --------------
<S>                                            <C>         <C>          <C>          <C>            <C>
Florida ....................................   $.005854    $  .000267   $  .005587   $   *             $ .000645
Louisiana ..................................    .015971       .000107      .015864      .000013          .002051
Mississippi ................................    .005884       .000272      .005612       *               .000649
New Mexico .................................    .020702       .001663      .019039       *               .002282
Oklahoma ...................................    .045524       .003425      .042099       *               .005018
Texas ......................................    .179690       .009732      .169958      .001800          .019808
                                               --------    ----------   ----------   ----------        ---------
TOTAL ......................................   $.273625    $  .015466   $  .258159   $  .001813        $ .030453
                                               ========    ==========   ==========   ==========        =========
</TABLE>

                                   SECTION II
                  RECONCILIATION OF CASH DISTRIBUTIONS PER UNIT

<TABLE>
<CAPTION>
         ITEM                                               AMOUNT
         ----                                             ----------
<S>                                                       <C>
1. Total Net Royalty Payments ..........................  $  .258159
2. Interest Income*.....................................     .001813
3. Administrative Expense ..............................    (.030453)
                                                          ----------
4. Cash Distribution Per Unit **........................  $  .229519
                                                          ==========
</TABLE>

- ----------

*    Revenue attributable to these states was invested and earned interest
     income. Since the investments were made in Dallas, Texas, and the interest
     was paid there, such interest is included in the Texas interest income.

**   Includes amounts withheld by the Trust from distributions to nonresident
     alien individuals and foreign corporations and remitted directly to the
     United States Treasury. This also includes amounts withheld pursuant to the
     backup withholding provisions.

(SRT 2000 TAX)

                                       19

<PAGE>   23


                              SABINE ROYALTY TRUST

                              DEPLETION SCHEDULE I

         The cumulative depletion factors reflected in Depletion Schedule I
should be used to compute 2000 federal and state depletion amounts attributable
to Units acquired by noncorporate Unit holders in the original distribution from
Sabine Corporation and all other Units purchased in 1983 by any Unit holder for
which the Unit holder was entitled to one or more 1983 monthly distributions.
This schedule should not be used to compute depletion for any other Units owned.
(See the accompanying information for computation instructions.)

<TABLE>
<CAPTION>
                                    LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2000
                   ------------------------------------------------------------------------------------------------------------
                   JANUARY  FEBRUARY  MARCH     APRIL     MAY     JUNE     JULY    AUGUST  SEPTEMBER OCTOBER  NOVEMBER DECEMBER
                   -------- -------- -------- -------- -------- -------- -------- -------- --------- -------- -------- --------
<S>                <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>       <C>      <C>      <C>
FEDERAL
  DEPLETION
  FACTOR .........  .015811  .029806  .039466  .055752  .066909  .080515  .095937  .105656   .119203  .128058  .139875  .155151
                   ======== ======== ======== ======== ======== ======== ======== ======== ========= ======== ======== ========

STATE DEPLETION
  FACTORS
Florida ..........  .000014  .000020  .000046  .000061  .000069  .000070  .000077  .000089   .000092  .000097  .000106  .000123
Louisiana ........  .000351  .000617  .000851  .001288  .001509  .002003  .002321  .002552   .002848  .003032  .003350  .003532
Mississippi ......  .000198  .000332  .000490  .000713  .000839  .000998  .001134  .001217   .001442  .001588  .001709  .001782
New Mexico .......  .000334  .000491  .000752  .001094  .001326  .001632  .002202  .002546   .002911  .003191  .003537  .003848
Oklahoma .........  .001199  .003217  .004691  .006474  .007445  .008738  .010027  .010807   .012365  .013311  .014677  .016216
Texas ............  .013715  .025129  .032636  .046122  .055721  .067074  .080176  .088445   .099545  .106839  .116496  .129650
</TABLE>

                             DEPLETION SCHEDULE II

         The cumulative depletion factors reflected in Depletion Schedule II
should be used to compute 2000 federal and state depletion amounts attributable
to Units acquired in the original distribution from Sabine Corporation by
corporate Unit holders. This schedule should not be used to compute depletion
for any other Units owned. (See the accompanying information for computation
instructions.)

<TABLE>
<CAPTION>
                                    LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2000
                   ------------------------------------------------------------------------------------------------------------
                   JANUARY  FEBRUARY  MARCH     APRIL     MAY     JUNE     JULY    AUGUST  SEPTEMBER OCTOBER  NOVEMBER DECEMBER
                   -------- -------- -------- -------- -------- -------- -------- -------- --------- -------- -------- --------
<S>                <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>       <C>      <C>      <C>
FEDERAL
  DEPLETION
  FACTOR .........  .016386  .031255  .042030  .059539  .071083  .085712  .101599  .111622   .126339  .135900  .148523  .163784
                   ======== ======== ======== ======== ======== ======== ======== ======== ========= ======== ======== ========

STATE DEPLETION
  FACTORS
Florida ..........       --       --       --       --       --       --       --       --        --       --       --       --
Louisiana ........  .000982  .001727  .002383  .003605  .004223  .005607  .006497  .007144   .007972  .008486  .009376  .009886
Mississippi ......  .001074  .001800  .002657  .003866  .004553  .005414  .006150  .006601   .007820  .008612  .009268  .009662
New Mexico .......  .000453  .000666  .001020  .001484  .001798  .002213  .002986  .003453   .003948  .004327  .004796  .005219
Oklahoma .........  .001924  .005162  .007528  .010389  .011948  .014023  .016092  .017344   .019845  .021364  .023556  .026026
Texas ............  .011953  .021900  .028442  .040195  .048561  .058455  .069874  .077080   .086754  .093111  .101527  .112991
</TABLE>


(SRT 2000 TAX)

                                       20
<PAGE>   24


                              SABINE ROYALTY TRUST
                             DEPLETION SCHEDULE III

         The cumulative depletion factors reflected in Depletion Schedule III
should be used to compute 2000 federal and state depletion amounts attributable
to Units purchased for which the Unit holder initially became entitled to
distributions in 1984. This schedule should not be used to compute depletion for
any other Units owned. (See the accompanying information for computation
instructions.

<TABLE>
<CAPTION>
                                         LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2000
                      -------------------------------------------------------------------------------------------------------------
                      JANUARY  FEBRUARY   MARCH   APRIL     MAY      JUNE    JULY    AUGUST  SEPTEMBER  OCTOBER  NOVEMBER  DECEMBER
                      -------  --------  ------- -------  -------  ------- -------  -------  ---------  -------  --------  --------
<S>                   <C>       <C>      <C>     <C>      <C>      <C>     <C>      <C>       <C>       <C>       <C>      <C>
FEDERAL
  DEPLETION
  FACTOR ...........  .014041   .026441  .034961 .049408  .059303  .071412 .085023  .093617   .105586   .113400   .123851  .137363
                      =======   =======  ======= =======  =======  ======= =======  =======   =======   =======   =======  =======
STATE DEPLETION
  FACTORS
Florida ............  .000014   .000020  .000045 .000060  .000068  .000069 .000075  .000087   .000090   .000095   .000103  .000120
Louisiana ..........  .000405   .000712  .000982 .001486  .001741  .002311 .002678  .002945   .003286   .003498   .003865  .004075
Mississippi ........  .000166   .000278  .000411 .000598  .000704  .000837 .000951  .001021   .001210   .001333   .001435  .001496
New Mexico .........  .000199   .000293  .000449 .000653  .000791  .000973 .001313  .001518   .001736   .001903   .002109  .002295
Oklahoma ...........  .000996   .002673  .003898 .005379  .006186  .007260 .008331  .008979   .010274   .011060   .012195  .013474
Texas ..............  .012261   .022465  .029176 .041232  .049813  .059962 .071675  .079067   .088990   .095511   .104144  .115903
</TABLE>

                            DEPLETION SCHEDULE IV

         The cumulative depletion factors reflected in Depletion Schedule IV
should be used to compute 2000 federal and state depletion amounts attributable
to Units purchased for which the Unit holder initially became entitled to
distributions in 1985. This schedule should not be used to compute depletion for
any other Units owned. (See the accompanying information for computation
instructions.)

<TABLE>
<CAPTION>
                                        LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2000
                        -----------------------------------------------------------------------------------------------------------
                        JANUARY  FEBRUARY  MARCH    APRIL     MAY     JUNE     JULY     AUGUST  SEPTEMBER OCTOBER NOVEMBER DECEMBER
                        -------  -------- -------  -------  -------  -------  -------   ------  --------- ------- -------- --------
<S>                     <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>       <C>      <C>      <C>      <C>
FEDERAL
  DEPLETION
  FACTOR ............   .015175  .028501  .037679  .053226  .063924  .076901  .091677  .100986   .113929  .122399  .133661  .148300
                        =======  =======  =======  =======  =======  =======  =======  =======   =======  =======  =======  =======
STATE DEPLETION
  FACTORS
Florida .............   .000013  .000018  .000041  .000055  .000062  .000063  .000069  .000080   .000083  .000088  .000096  .000112
Louisiana ...........   .000253  .000445  .000614  .000929  .001088  .001445  .001674  .001841   .002054  .002186  .002415  .002546
Mississippi .........   .000220  .000369  .000545  .000793  .000934  .001110  .001261  .001353   .001603  .001765  .001899  .001980
New Mexico ..........   .000314  .000462  .000707  .001029  .001247  .001535  .002070  .002393   .002736  .002999  .003324  .003617
Oklahoma ............   .001021  .002740  .003996  .005514  .006341  .007442  .008540  .009205   .010532  .011338  .012501  .013812
Texas ...............   .013354  .024467  .031776  .044906  .054252  .065306  .078063  .086114   .096921  .104023  .113426  .126233
</TABLE>





(SRT 2000 TAX)


                                       21
<PAGE>   25


                              SABINE ROYALTY TRUST

                              DEPLETION SCHEDULE V


The cumulative depletion factors reflected in Depletion Schedule V should be
used to compute 2000 federal and state depletion amounts attributable to Units
purchased for which the Unit holder initially became entitled to distributions
on the January 15, February 17 or March 17, 1986 Monthly Record Date. This
schedule should not be used to compute depletion for any other Units owned.(See
the accompanying information for computation instructions.)

<TABLE>
<CAPTION>
                                       LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2000
                     ---------------------------------------------------------------------------------------------------------------
                     JANUARY  FEBRUARY   MARCH    APRIL     MAY      JUNE    JULY    AUGUST   SEPTEMBER  OCTOBER  NOVEMBER  DECEMBER
                     -------  --------  -------  -------  -------  -------  -------  -------  ---------  -------  --------  --------
<S>                  <C>      <C>       <C>      <C>      <C>      <C>      <C>      <C>       <C>       <C>       <C>      <C>
FEDERAL
  DEPLETION
  FACTOR ..........  .014193  .026622   .035165  .049664  .059672  .071762  .085598  .094311   .106384   .114291   .124801  .138524
                     =======  =======   =======  =======  =======  =======  =======  =======   =======   =======   =======  =======
STATE DEPLETION
FACTORS
Florida ...........  .000014  .000020   .000046  .000062  .000070  .000071  .000078  .000090   .000093   .000098   .000107  .000125
Louisiana .........  .000174  .000306   .000422  .000639  .000749  .000995  .001153  .001268   .001415   .001506   .001664  .001754
Mississippi .......  .000173  .000290   .000428  .000623  .000734  .000873  .000992  .001065   .001261   .001389   .001495  .001558
New Mexico ........  .000306  .000450   .000689  .001002  .001214  .001494  .002015  .002330   .002664   .002920   .003237  .003522
Oklahoma ..........  .000910  .002441   .003560  .004913  .005650  .006631  .007610  .008202   .009385   .010103   .011140  .012308
Texas .............  .012616  .023115   .030020  .042425  .051255  .061698  .073750  .081356   .091566   .098275   .107158  .119257
</TABLE>

                             DEPLETION SCHEDULE VI

         The cumulative depletion factors reflected in Depletion Schedule VI
should be used to compute 2000 federal and state depletion amounts attributable
to Units purchased for which the Unit holder initially became entitled to
distributions after the March 17, 1986 Monthly Record Date and before the
January 15,1987 Monthly Record Date. This schedule should not be used to compute
depletion for any other units owned. (See the accompanying information for
computation instructions.)

<TABLE>
<CAPTION>
                                         LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2000
                      -------------------------------------------------------------------------------------------------------------
                      JANUARY  FEBRUARY   MARCH    APRIL    MAY     JUNE     JULY    AUGUST  SEPTEMBER  OCTOBER  NOVEMBER  DECEMBER
                      -------  --------  -------  -------  ------- ------- -------  -------  ---------  -------  --------  --------
<S>                   <C>      <C>       <C>      <C>      <C>     <C>     <C>      <C>       <C>       <C>      <C>       <C>
FEDERAL
  DEPLETION
  FACTOR ...........  .013051  .024452   .032320  .045659  .054857 .065996 .078753  .086787   .097905   .105192  .114874   .127472
                      =======  =======   =======  =======  ======= ======= =======  =======   =======   =======  =======   =======
STATE DEPLETION
  FACTORS
Florida ............  .000012  .000017   .000039  .000052  .000059 .000060 .000066  .000076   .000079   .000083  .000090   .000105
Louisiana ..........  .000192  .000338   .000467  .000707  .000828 .001099 .001273  .001400   .001562   .001663  .001837   .001937
Mississippi ........  .000168  .000282   .000416  .000605  .000712 .000847 .000962  .001032   .001223   .001347  .001449   .001511
New Mexico .........  .000333  .000490   .000750  .001091  .001322 .001627 .002195  .002538   .002902   .003181  .003526   .003837
Oklahoma ...........  .000827  .002220   .003238  .004468  .005138 .006030 .006920  .007459   .008535   .009188  .010131   .011193
Texas ..............  .011519  .021105   .027410  .038736  .046798 .056333 .067337  .074282   .083604   .089730  .097841   .108889
</TABLE>



(SRT 2000 TAX)


                                       22
<PAGE>   26

                              SABINE ROYALTY TRUST

                             DEPLETION SCHEDULE VII

         The cumulative depletion factors reflected in Depletion Schedule VII
should be used to compute 2000 federal and state depletion amounts attributable
to Units purchased for which the Unit holder initially became entitled to
distributions in 1987. This schedule should not be used to compute depletion for
any other Units owned. (See the accompanying information for computation
instructions.)

<TABLE>
<CAPTION>
                                          LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2000
                      --------------------------------------------------------------------------------------------------------------
                      JANUARY  FEBRUARY  MARCH    APRIL     MAY     JUNE     JULY    AUGUST   SEPTEMBER  OCTOBER  NOVEMBER DECEMBER
                      -------  -------- ------   -------  -------  -------  -------  -------  ---------  -------  -------- ---------
<S>                   <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>        <C>      <C>       <C>
FEDERAL
  DEPLETION
  FACTOR ...........  .014457  .027117  .035872  .050654  .060845  .073152  .087258  .096154  .108453    .116514  .127237   .141235
                      =======  =======  =======  =======  =======  =======  =======  =======  =======    =======  =======   =======
STATE DEPLETION
  FACTORS
Florida ............  .000041  .000058  .000133  .000177  .000199  .000201  .000220  .000254  .000264    .000279  .000304   .000355
Louisiana ..........  .000185  .000326  .000450  .000681  .000798  .001059  .001227  .001349  .001505    .001602  .001770   .001866
Mississippi ........  .000162  .000271  .000400  .000582  .000685  .000815  .000926  .000994  .001178    .001297  .001396   .001455
New Mexico .........  .000338  .000497  .000761  .001107  .001341  .001650  .002226  .002574  .002944    .003227  .003577   .003892
Oklahoma ...........  .000949  .002546  .003713  .005124  .005893  .006917  .007938  .008556  .009790    .010539  .011620   .012838
Texas ..............  .012782  .023419  .030415  .042983  .051929  .062510  .074721  .082427  .092772    .099570  .108570   .120829
</TABLE>

                            DEPLETION SCHEDULE VIII

         The cumulative depletion factors reflected in Depletion Schedule VIII
should be used to compute 2000 federal and state depletion amounts attributable
to Units purchased for which the Unit holder initially became entitled to
distributions in 1988. This schedule should not be used to compute depletion for
any other Units owned. (See the accompanying information for computation
instructions.)

<TABLE>
<CAPTION>
                                          LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2000
                      --------------------------------------------------------------------------------------------------------------
                      JANUARY  FEBRUARY  MARCH    APRIL     MAY     JUNE     JULY    AUGUST   SEPTEMBER  OCTOBER  NOVEMBER DECEMBER
                      -------  -------- ------   -------  -------  -------  -------  -------  ---------  -------  -------- ---------
<S>                   <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>        <C>      <C>       <C>
FEDERAL
  DEPLETION
  FACTOR ...........  .014758  .027828  .036898  .052083  .062505  .075116  .089535  .098633  .111263    .119533  .130562   .144912
                      =======  =======  =======  =======  =======  =======  =======  =======  =======    =======  =======   =======
STATE DEPLETION
  FACTORS
Florida ............  .000052  .000074  .000169  .000226  .000255  .000258  .000282  .000326  .000338    .000357  .000389   .000454
Louisiana ..........  .000210  .000369  .000509  .000770  .000902  .001198  .001388  .001526  .001703    .001813  .002003   .002112
Mississippi ........  .000150  .000251  .000371  .000540  .000636  .000756  .000859  .000922  .001092    .001203  .001295   .001350
New Mexico .........  .000346  .000509  .000779  .001134  .001374  .001691  .002282  .002639  .003018    .003308  .003667   .003990
Oklahoma ...........  .001146  .003074  .004483  .006187  .007115  .008350  .009582  .010328  .011817    .012721  .014026   .015496
Texas ..............  .012854  .023551  .030587  .043226  .052223  .062863  .075142  .082892  .093295    .100131  .109182   .121510
</TABLE>



(SRT 2000 TAX)


                                       23
<PAGE>   27

                              SABINE ROYALTY TRUST

                             DEPLETION SCHEDULE IX

The cumulative depletion factors reflected in Depletion Schedule IX should be
used to compute 2000 federal and state depletion amounts attributable to Units
purchased for which the Unit holder initially became entitled to distributions
in 1989. This schedule should not be used to compute depletion for any other
Units owned. (See the accompanying information for computation instructions.)

<TABLE>
<CAPTION>
                                          LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2000
                      --------------------------------------------------------------------------------------------------------------
                      JANUARY  FEBRUARY  MARCH    APRIL     MAY     JUNE     JULY    AUGUST   SEPTEMBER  OCTOBER  NOVEMBER DECEMBER
                      -------  -------- ------   -------  -------  -------  -------  -------  ---------  -------  -------- ---------
<S>                   <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>        <C>      <C>       <C>
FEDERAL
  DEPLETION
  FACTOR ..........   .014550  .027638  .036808  .051916  .062211  .074675  .088876  .097849  .110419    .118636  .129604   .143817
                      =======  =======  =======  =======  =======  =======  =======  =======  =======    =======  =======   =======
STATE DEPLETION
  FACTORS
Florida ...........   .000087  .000124  .000284  .000379  .000427  .000432  .000473  .000547  .000568    .000600  .000654   .000763
Louisiana .........   .000201  .000354  .000488  .000738  .000865  .001148  .001330  .001463  .001633    .001738  .001920   .002024
Mississippi .......   .000200  .000335  .000494  .000719  .000847  .001007  .001144  .001228  .001455    .001602  .001724   .001797
New Mexico ........   .000322  .000473  .000724  .001054  .001277  .001572  .002121  .002452  .002804    .003073  .003406   .003706
Oklahoma ..........   .001385  .003716  .005420  .007480  .008602  .010096  .011586  .012488  .014289    .015382  .016960   .018738
Texas .............   .012355  .022636  .029398  .041546  .050193  .060420  .072222  .079671  .089670    .096241  .104940   .116789
</TABLE>

                              DEPLETION SCHEDULE X

         The cumulative depletion factors reflected in Depletion Schedule X
should be used to compute 2000 federal and state depletion amounts attributable
to Units purchased for which the Unit holder initially became entitled to
distributions in 1990. This schedule should not be used to compute depletion for
any other Units owned. (See the accompanying information for computation
instructions.)

<TABLE>
<CAPTION>
                                          LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2000
                      --------------------------------------------------------------------------------------------------------------
                      JANUARY  FEBRUARY  MARCH    APRIL     MAY     JUNE     JULY    AUGUST   SEPTEMBER  OCTOBER  NOVEMBER DECEMBER
                      -------  -------- ------   -------  -------  -------  -------  -------  ---------  -------  -------- ---------
<S>                   <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>        <C>      <C>       <C>
FEDERAL
  DEPLETION
  FACTOR ...........  .144000  .027295  .036433  .051397  .061578  .073924  .088052  .096995   .109435   .117589  .128488   .142557
                      =======  =======  =======  =======  =======  =======  =======  =======  =======    =======  =======   =======
STATE DEPLETION
  FACTORS
Florida ............  .000120  .000170  .000390  .000520  .000586  .000593  .000649  .000750   .000779   .000823  .000897   .001046
Louisiana ..........  .000246  .000433  .000597  .000903  .001058  .001405  .001628  .001790   .001997   .002126  .002349   .002477
Mississippi ........  .000167  .000280  .000414  .000602  .000709  .000843  .000958  .001028   .001218   .001341  .001443   .001504
New Mexico .........  .000431  .000634  .000970  .001412  .001711  .002105  .002840  .003284   .003755   .004116  .004562   .004964
Oklahoma ...........  .001364  .003660  .005337  .007365  .008470  .009941  .011408  .012296   .014069   .015146  .016700   .018451
Texas ..............  .012072  .022118  .028725  .040595  .049044  .059037  .070569  .077847   .087617   .094037  .102537   .114115
</TABLE>



(SRT 2000 TAX)


                                       24
<PAGE>   28


                              SABINE ROYALTY TRUST

                             DEPLETION SCHEDULE XI

         The cumulative depletion factors reflected in Depletion Schedule XI
should be used to compute 2000 federal and state depletion amounts attributable
to Units purchased for which the Unit holder initially became entitled to
distributions in 1991. This schedule should not be used to compute depletion for
any other Units owned. (See the accompanying information for computation
instructions.)

<TABLE>
<CAPTION>
                                          LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2000
                      --------------------------------------------------------------------------------------------------------------
                      JANUARY  FEBRUARY  MARCH    APRIL     MAY     JUNE     JULY    AUGUST   SEPTEMBER  OCTOBER  NOVEMBER DECEMBER
                      -------  -------- ------   -------  -------  -------  -------  -------  ---------  -------  -------- ---------
<S>                   <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>        <C>      <C>       <C>
FEDERAL
  DEPLETION
  FACTOR ..........   .014276  .026967  .036256  .051197  .061287  .073639  .087994  .097079  .109586   .117834   .128864   .142798
                      =======  =======  =======  =======  =======  =======  =======  =======  =======   =======   =======   =======
STATE DEPLETION
  FACTORS
Florida ...........   .000145  .000205  .000469  .000626  .000705  .000714  .000782  .000904  .000939   .000992   .001081   .001261
Louisiana .........   .000353  .000621  .000857  .001297  .001519  .002017  .002337  .002570  .002868   .003053   .003373   .003556
Mississippi .......   .000158  .000265  .000391  .000568  .000669  .000795  .000903  .000969  .001148   .001264   .001360   .001418
New Mexico ........   .000897  .001319  .002019  .002938  .003560  .004381  .005910  .006833  .007813   .008564   .009493   .010329
Oklahoma ..........   .001464  .003928  .005728  .007905  .009091  .010669  .012243  .013196  .015099   .016254   .017922   .019801
Texas .............   .011259  .020629  .026792  .037863  .045743  .055063  .065819  .072607  .081719   .087707   .095635   .106433
</TABLE>

                             DEPLETION SCHEDULE XII

         The cumulative depletion factors reflected in Depletion Schedule XII
should be used to compute 2000 federal and state depletion amounts attributable
to Units purchased for which the Unit holder initially became entitled to
distributions in 1992. This schedule should not be used to compute depletion for
any other Units owned. (See the accompanying information for computation
instructions.)

<TABLE>
<CAPTION>
                                          LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2000
                      --------------------------------------------------------------------------------------------------------------
                      JANUARY  FEBRUARY  MARCH    APRIL     MAY     JUNE     JULY    AUGUST   SEPTEMBER  OCTOBER  NOVEMBER DECEMBER
                      -------  -------- ------   -------  -------  -------  -------  -------  ---------  -------  -------- ---------
<S>                   <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>        <C>      <C>       <C>
FEDERAL
  DEPLETION
  FACTOR ...........  .014699  .028204  .038002  .053581  .064048  .076850  .091784  .101166   .114332   .122981  .134544   .149113
                      =======  =======  =======  =======  =======  =======  =======  =======   =======   =======  =======   =======
STATE DEPLETION
  FACTORS
Florida ............  .000077  .000109  .000250  .000334  .000376  .000381  .000417  .000482   .000500   .000528  .000575   .000671
Louisiana ..........  .000191  .000336  .000464  .000702  .000822  .001091  .001264  .001390   .001551   .001651  .001824   .001923
Mississippi ........  .000149  .000250  .000369  .000537  .000632  .000751  .000853  .000916   .001085   .001195  .001286   .001341
New Mexico .........  .000987  .001451  .002221  .003232  .003916  .004819  .006501  .007517   .008595   .009421  .010442   .011362
Oklahoma ...........  .001997  .005358  .007814  .010783  .012401  .014554  .016702  .018002   .020598   .022174  .024449   .027012
Texas ..............  .011298  .020700  .026884  .037993  .045901  .055254  .066047  .072859   .082003   .088012  .095968   .106804
</TABLE>



(SRT 2000 TAX)


                                       25
<PAGE>   29



                              SABINE ROYALTY TRUST

                            DEPLETION SCHEDULE XIII

         The cumulative depletion factors reflected in Depletion Schedule XIII
should be used to compute 2000 federal and state depletion amounts attributable
to Units purchased for which the Unit holder initially became entitled to
distributions in 1993. This schedule should not be used to compute depletion for
any other Units owned. (See the accompanying information for computation
instructions.)

<TABLE>
<CAPTION>
                                          LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2000
                      --------------------------------------------------------------------------------------------------------------
                      JANUARY  FEBRUARY  MARCH    APRIL     MAY     JUNE     JULY    AUGUST   SEPTEMBER  OCTOBER  NOVEMBER DECEMBER
                      -------  -------- ------   -------  -------  -------  -------  -------  ---------  -------  -------- ---------
<S>                   <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>        <C>      <C>       <C>
FEDERAL
  DEPLETION
  FACTOR .........    .015073  .028715  .038951  .054956  .065638  .078758  .094051  .103762   .117165   .126015  .137897   .152745
                      =======  =======  =======  =======  =======  =======  =======  =======   =======   =======  =======   =======
STATE DEPLETION
  FACTORS
Florida ...........   .000238  .000338  .000774  .001033  .001164  .001178  .001289  .001490   .001547   .001634  .001780   .002076
Louisiana .........   .000420  .000739  .001019  .001541  .001805  .002396  .002776  .003053   .003407   .003627  .004007   .004225
Mississippi .......   .000158  .000265  .000391  .000569  .000670  .000797  .000905  .000971   .001151   .001268  .001365   .001423
New Mexico ........   .001121  .001648  .002523  .003672  .004449  .005475  .007386  .008540   .009765   .010703  .011864   .012909
Oklahoma ..........   .001948  .005227  .007623  .010520  .012099  .014200  .016296  .017564   .020097   .021635  .023855   .026356
Texas .............   .011188  .020498  .026621  .037621  .045451  .054712  .065399  .072144   .081198   .087148  .095026   .105756
</TABLE>

                             DEPLETION SCHEDULE XIV

         The cumulative depletion factors reflected in Depletion Schedule XIV
should be used to compute 2000 federal and state depletion amounts attributable
to Units purchased for which the Unit holder initially became entitled to
distributions in 1994. This schedule should not be used to compute depletion for
any other Units owned. (See the accompanying information for computation
instructions.)

<TABLE>
<CAPTION>
                                          LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2000
                      --------------------------------------------------------------------------------------------------------------
                      JANUARY  FEBRUARY  MARCH    APRIL     MAY     JUNE     JULY    AUGUST   SEPTEMBER  OCTOBER  NOVEMBER DECEMBER
                      -------  -------- ------   -------  -------  -------  -------  -------  ---------  -------  -------- ---------
<S>                   <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>        <C>      <C>       <C>
FEDERAL
  DEPLETION
  FACTOR .........    .014724  .028130  .038386  .054138  .064543  .077362  .092038  .101477  .114469    .123043  .134640   .149119
                      =======  =======  =======  =======  =======  =======  =======  =======  =======    =======  =======   =======
STATE DEPLETION
  FACTORS
Florida ...........   .000399  .000566  .001297  .001731  .001950  .001974  .002161  .002498  .002594    .002741  .002986   .003482
Louisiana .........   .000631  .001110  .001531  .002316  .002713  .003601  .004172  .004588  .005120    .005450  .006021   .006348
Mississippi .......   .000175  .000293  .000432  .000629  .000741  .000881  .001001  .001074  .001272    .001401  .001508   .001572
New Mexico ........   .000859  .001263  .001933  .002813  .003409  .004195  .005659  .006543  .007482    .008201  .009090   .009891
Oklahoma ..........   .002001  .005369  .007830  .010806  .012427  .014585  .016737  .018040  .020641    .022221  .024501   .027069
Texas .............   .010659  .019529  .025363  .035843  .043303  .052126  .062308  .068734  .077360    .083029  .090534   .100757
</TABLE>



(SRT 2000 TAX)


                                       26
<PAGE>   30


                              SABINE ROYALTY TRUST

                             DEPLETION SCHEDULE XV

         The cumulative depletion factors reflected in Depletion Schedule XV
should be used to compute 2000 federal and state depletion amounts attributable
to Units purchased for which the Unit holder initially became entitled to
distributions in 1995. This schedule should not be used to compute depletion for
any other Units owned. (See the accompanying information for computation
instructions.)

<TABLE>
<CAPTION>
                                          LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2000
                      --------------------------------------------------------------------------------------------------------------
                      January  February  March    April     May     June     July    August   September  October  November December
                      -------  -------- ------   -------  -------  -------  -------  -------  ---------  -------  -------- ---------
<S>                   <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>        <C>      <C>       <C>
FEDERAL
  DEPLETION
  FACTOR ..........   .015048  .028728  .039693  .055839  .066450  .079211  .094060  .103765   .116930   .125681  .137507   .152496
                      =======  =======  =======  =======  =======  =======  =======  =======   =======   =======  =======   =======
STATE DEPLETION
  FACTORS
Florida ...........   .000730  .001035  .002370  .003163  .003563  .003607  .003948  .004563   .004738   .005006  .005453   .006360
Louisiana .........   .000432  .000760  .001049  .001587  .001859  .002468  .002860  .003145   .003509   .003735  .004127   .004351
Mississippi .......   .000236  .000396  .000584  .000850  .001001  .001190  .001352  .001451   .001719   .001893  .002037   .002124
New Mexico ........   .000872  .001282  .001963  .002857  .003462  .004261  .005748  .006646   .007600   .008330  .009233   .010046
Oklahoma ..........   .002165  .005810  .008473  .011693  .013448  .015783  .018112  .019522   .022337   .024046  .026513   .029293
Texas .............   .010613  .019445  .025254  .035689  .043117  .051902  .062040  .068438   .077027   .082671  .090144   .100322
</TABLE>

                             DEPLETION SCHEDULE XVI

         The cumulative depletion factors reflected in Depletion Schedule XVI
should be used to compute 2000 federal and state depletion amounts attributable
to Units purchased for which the Unit holder initially became entitled to
distributions in 1996. This schedule should not be used to compute depletion for
any other Units owned. (See the accompanying information for computation
instructions.)

<TABLE>
<CAPTION>
                                          LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2000
                      --------------------------------------------------------------------------------------------------------------
                      January  February  March    April     May     June     July    August   September  October  November December
                      -------  -------- ------   -------  -------  -------  -------  -------  ---------  -------  -------- ---------
<S>                   <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>        <C>      <C>       <C>
FEDERAL
  DEPLETION
  FACTOR ...........  .014770  .028687  .039767  .055904  .066391  .079151  .093899  .103484   .116732   .125494  .137400   .152284
                      =======  =======  =======  =======  =======  =======  =======  =======   =======   =======  =======   =======
STATE DEPLETION
 FACTORS
Florida ............  .000651  .000923  .002113  .002819  .003176  .003215  .003519  .004067   .004223   .004462  .004861   .005669
Louisiana ..........  .000480  .000844  .001164  .001761  .002063  .002739  .003174  .003490   .003895   .004146  .004581   .004830
Mississippi ........  .000177  .000297  .000438  .000637  .000750  .000892  .001013  .001087   .001288   .001419  .001527   .001592
New Mexico .........  .000938  .001379  .002111  .003072  .003723  .004582  .006181  .007147   .008172   .008957  .009928   .010803
Oklahoma ...........  .002699  .007242  .010561  .014574  .016761  .019672  .022575  .024332   .027841   .029971  .033046   .036510
Texas ..............  .009825  .018002  .023380  .033041  .039918  .048051  .057437  .063361   .071313   .076539  .083457   .092880
</TABLE>



(SRT 2000 TAX)


                                       27
<PAGE>   31


                              SABINE ROYALTY TRUST

                            DEPLETION SCHEDULE XVII

         The cumulative depletion factors reflected in Depletion Schedule XVII
should be used to compute 2000 federal and state depletion amounts attributable
to Units purchased for which the Unit holder initially became entitled to
distributions in 1997. This schedule should not be used to compute depletion for
any other Units owned. (See the accompanying information for computation
instructions.)

<TABLE>
<CAPTION>
                                          LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2000
                      --------------------------------------------------------------------------------------------------------------
                      JANUARY  FEBRUARY  MARCH    APRIL     MAY     JUNE     JULY    AUGUST   SEPTEMBER  OCTOBER  NOVEMBER DECEMBER
                      -------  -------- ------   -------  -------  -------  -------  -------  ---------  -------  -------- ---------
<S>                   <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>        <C>      <C>       <C>
FEDERAL
  DEPLETION
  FACTOR .........    .016284  .031206  .043089  .060675  .072162  .086202  .102297  .112804  .127135    .136630  .149535   .165679
                      =======  =======  =======  =======  =======  =======  =======  =======  =======    =======  =======   =======
STATE DEPLETION
  FACTORS
Florida ..........    .000727  .001031  .002360  .003149  .003547  .003590  .003929  .004541  .004715    .004981  .005426   .006328
Louisiana ........    .000734  .001291  .001781  .002694  .003156  .004190  .004855  .005339  .005958    .006342  .007007   .007388
Mississippi ......    .000218  .000365  .000539  .000784  .000923  .001098  .001247  .001339  .001586    .001747  .001880   .001960
New Mexico .......    .000926  .001361  .002083  .003031  .003673  .004520  .006098  .007051  .008063    .008838  .009796   .010659
Oklahoma .........    .002462  .006606  .009634  .013295  .015290  .017945  .020593  .022196  .025397    .027340  .030145   .033305
Texas ............    .011217  .020552  .026692  .037722  .045573  .054859  .065575  .072338  .081416    .087382  .095281   .106039
</TABLE>

                            DEPLETION SCHEDULE XVIII

         The cumulative depletion factors reflected in Depletion Schedule XVIII
should be used to compute 2000 federal and state depletion amounts attributable
to Units purchased for which the Unit holder initially became entitled to
distributions in 1998. This schedule should not be used to compute depletion for
any other Units owned. (See the accompanying information for computation
instructions.)


<TABLE>
<CAPTION>
                                          LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2000
                      --------------------------------------------------------------------------------------------------------------
                      JANUARY  FEBRUARY  MARCH    APRIL     MAY     JUNE     JULY    AUGUST   SEPTEMBER  OCTOBER  NOVEMBER DECEMBER
                      -------  -------- ------   -------  -------  -------  -------  -------  ---------  -------  -------- ---------
<S>                   <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>        <C>      <C>       <C>
FEDERAL
 DEPLETION
 FACTOR ...........   .016494  .031667  .043618  .061471  .073113  .087448  .103718  .114283   .128918   .138579  .151649   .167857
                      =======  =======  =======  =======  =======  =======  =======  =======   =======   =======  =======   =======

STATE DEPLETION
  FACTORS
Florida ..........    .000626  .000887  .002031  .002710  .003053  .003090  .003382  .003909   .004059   .004288  .004671   .005448
Louisiana ........    .000797  .001402  .001934  .002926  .003428  .004551  .005273  .005798   .006470   .006887  .007609   .008023
Mississippi ......    .000392  .000657  .000970  .001411  .001662  .001976  .002245  .002410   .002855   .003144  .003383   .003527
New Mexico .......    .000883  .001298  .001987  .002891  .003503  .004311  .005816  .006725   .007690   .008429  .009343   .010166
Oklahoma .........    .002523  .006769  .009872  .013624  .015668  .018389  .021102  .022744   .026024   .028015  .030889   .034127
Texas ............    .011273  .020654  .026824  .037909  .045799  .055131  .065900  .072697   .081820   .087816  .095754   .106566
</TABLE>



(SRT 2000 TAX)


                                       28
<PAGE>   32


                              SABINE ROYALTY TRUST

                             DEPLETION SCHEDULE XIX

         The cumulative depletion factors reflected in Depletion Schedule XIX
should be used to compute 2000 federal and state depletion amounts attributable
to Units purchased for which the Unit holder initially became entitled to
distributions in 1999. This schedule should not be used to compute depletion for
any other Units owned. (See the accompanying information for computation
instructions.)

<TABLE>
<CAPTION>
                                          LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2000
                      --------------------------------------------------------------------------------------------------------------
                      JANUARY  FEBRUARY  MARCH    APRIL     MAY     JUNE     JULY    AUGUST   SEPTEMBER  OCTOBER  NOVEMBER DECEMBER
                      -------  -------- ------   -------  -------  -------  -------  -------  ---------  -------  -------- ---------
<S>                   <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>        <C>      <C>       <C>
FEDERAL
  DEPLETION
  FACTOR ..........   .017519  .033205  .045521  .064642  .076883  .093030  .110312  .121539   .137116   .147340  .161356   .177632
                      =======  =======  =======  =======  =======  =======  =======  =======   =======   =======  =======   =======
STATE DEPLETION
  FACTORS
Florida ............  .000429  .000608  .001392  .001858  .002093  .002119  .002319  .002680   .002783   .002940  .003203   .003736
Louisiana ..........  .002305  .004054  .005593  .008462  .009913  .013161  .015249  .016768   .018711   .019917  .022005   .023201
Mississippi ........  .000560  .000939  .001386  .002016  .002374  .002823  .003207  .003442   .004078   .004491  .004833   .005038
New Mexico .........  .001003  .001475  .002258  .003286  .003982  .004900  .006610  .007643   .008740   .009580  .010619   .011554
Oklahoma ...........  .002236  .006000  .008750  .012076  .013888  .016300  .018705  .020161   .023068   .024833  .027381   .030252
Texas ..............  .010986  .020129  .026142  .036944  .044633  .053727  .064222  .070845   .079736   .085579  .093315   .103851
</TABLE>

                              SABINE ROYALTY TRUST

                             DEPLETION SCHEDULE XX

         The cumulative depletion factors reflected in Depletion Schedule XX
should be used to compute 2000 federal and state depletion amounts attributable
to Units purchased for which the Unit holder initially became entitled to
distributions in 2000. This schedule should not be used to compute depletion for
any other Units owned. (See the accompanying information for computation
instructions.)

<TABLE>
<CAPTION>
FIRST MONTH IN
WHICH UNITS WERE
OWNED ON THE
MONTHLY RECORD
DATE IN 2000        JANUARY  FEBRUARY   MARCH    APRIL     MAY      JUNE    JULY    AUGUST   SEPTEMBER  OCTOBER  NOVEMBER  DECEMBER
- ----------------    -------  --------  -------  -------  -------  -------  -------  -------  ---------  -------  --------  --------
<S>                 <C>       <C>      <C>      <C>      <C>      <C>      <C>      <C>       <C>       <C>       <C>       <C>
January ........    .017352   .032758  .045060  .063968  .076086  .091905  .109094  .120235   .135787   .146033   .159886   .175941
February .......         --   .015406  .027708  .046616  .058734  .074553  .091742  .102883   .118435   .128681   .142534   .158589
March ..........         --        --  .012302  .031210  .043328  .059147  .076336  .087477   .103029   .113275   .127128   .143183
April ..........         --        --       --  .018908  .031026  .046845  .064034  .075175   .090727   .100973   .114826   .130881
May ............         --        --       --       --  .012118  .027937  .045126  .056267   .071819   .082065   .095918   .111973
June ...........         --        --       --       --       --  .015819  .033008  .044149   .059701   .069947   .083800   .099855
July ...........         --        --       --       --       --       --  .017189  .028330   .043882   .054128   .067981   .084036
August .........         --        --       --       --       --       --       --  .011141   .026693   .036939   .050792   .066847
September ......         --        --       --       --       --       --       --       --   .015552   .025798   .039651   .055706
October ........         --        --       --       --       --       --       --       --        --   .010246   .024099   .040154
November .......         --        --       --       --       --       --       --       --        --        --   .013853   .029908
December .......         --        --       --       --       --       --       --       --        --        --        --   .016055
</TABLE>


<TABLE>
<CAPTION>
STATE DEPLETION
FACTORS             JANUARY  FEBRUARY   MARCH    APRIL     MAY      JUNE     JULY    AUGUST  SEPTEMBER  OCTOBER  NOVEMBER  DECEMBER
- ---------------     -------  --------  -------  -------  -------  -------  -------  -------  ---------  -------  --------  --------
<S>                 <C>       <C>      <C>      <C>      <C>      <C>      <C>      <C>       <C>       <C>      <C>       <C>
Florida ..........  .000447   .000187  .000817  .000485  .000245  .000027  .000209  .000376   .000107   .000164  .000274   .000555
Louisiana ........  .002008   .001524  .001341  .002499  .001264  .002829  .001819  .001323   .001693   .001051  .001819   .001042
Mississippi ......  .000861   .000582  .000687  .000969  .000551  .000690  .000590  .000362   .000977   .000635  .000526   .000316
New Mexico .......  .001199   .000564  .000935  .001228  .000831  .001097  .002044  .001234   .001310   .001004  .001241   .001118
Oklahoma .........  .002191   .003689  .002695  .003259  .001776  .002363  .002357  .001427   .002849   .001730  .002497   .002813
Texas ............  .010646   .008860  .005827  .010468  .007451  .008813  .010170  .006419   .008616   .005662  .007496   .010211
                    -------   -------  -------  -------  -------  -------  -------  -------   -------   -------  -------   -------
TOTAL ............  .017352   .015406  .012302  .018908  .012118  .015819  .017189  .011141   .015552   .010246  .013853   .016055
                    =======   =======  =======  =======  =======  =======  =======  =======   =======   =======  =======   =======
</TABLE>



(SRT 2000 TAX)


                                       29
<PAGE>   33


                  SAMPLE TAX FORMS FOR INDIVIDUAL UNIT HOLDERS

                           [SAMPLE FORM APPEARS HERE]







                                       30
<PAGE>   34




                  SAMPLE TAX FORMS FOR INDIVIDUAL UNIT HOLDERS

                           [SAMPLE FORM APPEARS HERE]





                                       31



<PAGE>   35

                            COMPREHENSIVE EXAMPLE 1

         The following example illustrates the computations necessary for an
individual to determine income and expense attributable to Units acquired in
March of 1984 and held throughout 2000.

                  COMPUTATION OF INCOME AND EXPENSE FOR UNITS
                    OWNED ON ALL MONTHLY RECORD DATES IN 2000

                              SABINE ROYALTY TRUST
                           TAX COMPUTATION WORKSHEET

                                      2000

         (RETAIN THIS WORKPAPER AS PART OF YOUR PERMANENT TAX RECORDS)

                                     PART I

                               INCOME AND EXPENSE

<TABLE>
<CAPTION>
                                        A                      B                 C
                                                       AMOUNTS PER UNIT
                                    NUMBER OF          FROM APPROPRIATE
                                   UNITS OWNED            SCHEDULE(S)                           WHERE TO REFLECT ON
ITEM                                (NOTE 1)               (NOTE 2)              TOTALS         2000 FORM 1040 (NOTE 3)
- ----                               -----------         ----------------         -------     ----------------------------
<S>                                    <C>        <C>      <C>             <C>   <C>         <C>
Gross Royalty Income ........          100        X        $2.586743       =     $258.67     Line 4, Part I,   Schedule E
                                       ---                 ---------             -------
Severance Tax ...............          100        X        $ .157354       =     $ 15.73     Line 16, Part I,  Schedule E
                                       ---                 ---------             -------
Interest Income .............          100        X        $ .016044       =     $  1.60     Line 1, Part I,   Schedule B
                                       ---                 ---------             -------
Administrative Expense ......          100        X        $ .170794       =     $ 17.07     Line 18, Part I,  Schedule E
                                       ---                 ---------             -------
</TABLE>

                                    PART II

                            COST DEPLETION (NOTE 4)

<TABLE>
<CAPTION>
                      COST DEPLETION
                    ALLOWABLE IN PRIOR       ADJUSTED BASIS FOR
                      CALENDAR YEARS           COST DEPLETION         APPROPRIATE 2000
ORIGINAL BASIS           (NOTE 5)                 PURPOSES          COST DEPLETION FACTOR      2000 COST DEPLETION*
- --------------      ------------------       ------------------     ---------------------      --------------------
<S>                     <C>                       <C>                      <C>                        <C>
  $2,100.00     -       $1,917.06        =        $182.94        x         .137363          =         $25.12
  ---------             ---------                 -------                  -------                    ------
</TABLE>

* Reflect cost depletion on 2000 Form 1040, line 20, Part 1, Schedule E
  (Note 3).

                                    PART III

                  COMPUTATION OF GAIN OR (LOSS) FOR UNITS SOLD

<TABLE>
<CAPTION>
                                                          WHERE TO REFLECT ON
  NET SALES           ADJUSTED BASIS           GAIN          2000 FORM 1040
    PRICE                (NOTE 6)             (LOSS)            (NOTE 3)
- --------------        --------------          ------      -------------------
<S>                        <C>                  <C>             <C>
Not Applicable   -         --           =       --              Form 4797
- --------------             --                   --
</TABLE>


                        See Page 5 for Applicable Notes.



(SRT 2000 TAX)


                                       32


<PAGE>   36


                            COMPREHENSIVE EXAMPLE 2

         The following example illustrates the computations necessary for an
individual to determine income and expenses and gain or loss on units disposed
of during 2000.

<TABLE>
<CAPTION>
ACQUISITION      UNITS          ORIGINAL      SALES      UNITS        SALES
   DATE         ACQUIRED          BASIS        DATE       SOLD        PRICE
- -----------     --------       ---------     -------     -----      ---------
<S>               <C>          <C>           <C>          <C>       <C>
 03-21-84         100          $2,100.00     04-3-00      100       $1,275.00
</TABLE>

            COMPUTATION OF INCOME AND EXPENSE FOR UNITS SOLD IN 2000

                              SABINE ROYALTY TRUST
                           TAX COMPUTATION WORKSHEET

                                      2000

      (RETAIN THIS WORKPAPER AS PART OF YOUR PERMANENT TAX RECORDS)

                                     PART I

                               INCOME AND EXPENSE

<TABLE>
<CAPTION>
                                        A                      B                 C
                                                       AMOUNTS PER UNIT
                                    NUMBER OF          FROM APPROPRIATE
                                   UNITS OWNED            SCHEDULE(S)                           WHERE TO REFLECT ON
ITEM                                (NOTE 1)               (NOTE 2)              TOTALS         2000 FORM 1040 (NOTE 3)
- ----                               -----------         ----------------         -------     -----------------------------
<S>                                    <C>                 <C>                   <C>         <C>
Gross Royalty Income ..........         100        X        $.595139       =     $59.51      Line 4, Part I,   Schedule E
                                        ---                 --------             ------
Severance Tax .................         100        X        $.037287       =     $ 3.72      Line 16, Part I,  Schedule E
                                        ---                 --------             ------
Interest Income .................       100        X        $.003165       =     $  .31      Line 1, Part I,   Schedule B
                                        ---                 --------             ------
Administrative Expense .........        100        X        $.032105       =     $ 3.21      Line 18, Part I,  Schedule E
                                        ---                 --------             ------
</TABLE>

                                    PART II

                            COST DEPLETION (NOTE 4)

<TABLE>
<CAPTION>
                      COST DEPLETION
                    ALLOWABLE IN PRIOR       ADJUSTED BASIS FOR
                      CALENDAR YEARS           COST DEPLETION         APPROPRIATE 2000
ORIGINAL BASIS           (NOTE 5)                 PURPOSES          COST DEPLETION FACTOR      2000 COST DEPLETION*
- --------------      ------------------       ------------------     ---------------------      --------------------
<S>                     <C>                       <C>                      <C>                        <C>
  $2,100.00     -       $1,917.06        =        $182.94        x         .034961          =         $ 6.40
  ---------             ---------                 -------                  -------                    ------
</TABLE>

*Reflect cost depletion on 2000 Form 1040, line 20, Part 1, Schedule E (Note 3).

                                    PART III

                  COMPUTATION OF GAIN OR (LOSS) FOR UNITS SOLD

<TABLE>
<CAPTION>
                                                          WHERE TO REFLECT ON
  NET SALES           ADJUSTED BASIS            GAIN          2000 FORM 1040
    PRICE                (NOTE 6)              (LOSS)            (NOTE 3)
- --------------        --------------         ---------    -------------------
<S>                        <C>                  <C>            <C>
  $1,275.00      -         $176.54      =    $1,098.46         Form 4797
- --------------             --                ---------
</TABLE>


                        See Page 5 for Applicable Notes.

(SRT 2000 TAX)

                                       33


<PAGE>   37


                            COMPREHENSIVE EXAMPLE 2
                                  (CONTINUED)

                              SABINE ROYALTY TRUST

                    SUPPLEMENT TO TAX COMPUTATION WORKSHEET

                                      2000

                    FOR UNITS HELD FOR ONLY PART OF THE YEAR

         This worksheet should be used by Unit holders who became holders of
record of Units or ceased to be holders of record of Units during the period
from January 18, 2000 through December 15, 2000. This worksheet is designed to
assist Unit holders in determining the proper income and expense factors to be
used on the Tax Computation Worksheet -- Part I, under the heading entitled
"Amounts Per Unit from Appropriate Schedule(s)". In order to complete this
schedule, Unit holders should insert only the individual income and expense
factors from the monthly schedules (pages 8-19) for each month during which the
Units were owned on a Monthly Record Date. (See page 4 for a list of Monthly
Record Dates.)

<TABLE>
<CAPTION>
                                        MONTH(S) DURING WHICH UNITS WERE OWNED ON A MONTHLY RECORD DATE                  CALCULATED
                     -------------------------------------------------------------------------------------------------     FACTOR
                     JANUARY  FEBRUARY  MARCH   APRIL  MAY  JUNE  JULY  AUGUST  SEPTEMBER  OCTOBER  NOVEMBER  DECEMBER    PER UNIT*
                     -------  --------  -----   -----  ---  ----  ----  ------  ---------  -------  --------  --------   ----------
<S>                  <C>       <C>      <C>     <C>    <C>  <C>   <C>   <C>     <C>        <C>      <C>       <C>        <C>
Gross Royalty
  Income ..........  .231823   .206906  .156410    --   --    --    --      --         --       --        --        --    .595139
                     -------   -------  -------   ---  ---   ---   ---     ---        ---      ---       ---       ---    -------
Severance Tax .....  .016605   .010966  .009716    --   --    --    --      --         --       --        --        --    .037287
                     -------   -------  -------   ---  ---   ---   ---     ---        ---      ---       ---       ---    -------
Interest Income ...  .001170   .001033  .000962    --   --    --    --      --         --       --        --        --    .003165
                     -------   -------  -------   ---  ---   ---   ---     ---        ---      ---       ---       ---    -------
Administrative
  Expense .........  .015897   .009102  .007106    --   --    --    --      --         --       --        --        --    .032105
                     -------   -------  -------   ---  ---   ---   ---     ---        ---      ---       ---       ---    -------
</TABLE>

- ----------

* This column of calculated factors per Unit should be inserted in column
  B of the Income and Expense section (Part I) of the Tax Computation
  Worksheet on page 5.



(SRT 2000 TAX)


                                       34

<PAGE>   38


                              SABINE ROYALTY TRUST

               DISCUSSION OF TAX CONSIDERATIONS PERTAINING TO THE
                   OWNERSHIP OF UNITS IN SABINE ROYALTY TRUST


         The tax law requires individuals, estates, trusts, closely held C
corporations and personal service corporations to categorize income and expense
into one of three classes, "active, "portfolio "or "passive", based upon the
nature of the activity and the involvement of the taxpayer in such activity.
Since the Trust is a grantor trust, the Unit holders are deemed to hold the
investment in the royalty interests directly and the proper classification of
the Trust income and expense will be dependent upon the relevant facts and
circumstances of each Unit holder. Generally, income or loss resulting from an
interest in the Trust is properly classified as portfolio and as such can be
reported as directed on the tax computation worksheet (page 5). However,under
certain limited circumstances a different classification may be appropriate;
accordingly Unit holders should consult their tax advisor concerning this
matter.

TAX BACKGROUND INFORMATION

         Sabine received a private letter ruling from the Internal Revenue
Service, dated May 2, 1983 (the "Ruling"), concerning certain tax considerations
relevant to the creation and continued existence of the Trust. Pursuant to the
Ruling, the Trust is classified for Federal income tax purposes as a "grantor
trust" and not as an association taxable as a corporation. A grantor trust is
not subject to Federal income tax. Instead, its beneficiaries (the Unit holders
in the case of the Trust) are generally considered to own the trust's income and
principal as though no trust were in existence. A grantor trust simply files an
information return reflecting all items of income and/or deductions that will be
included in the returns of the beneficiaries. Accordingly,each Unit holder of
the Trust is taxable on his pro rata share of the Trust income and/or
deductions.

         The income received or accrued and deductions paid or incurred by the
Trust are deemed to be received or accrued and paid or incurred, respectively,
by each Unit holder at the same time as the Trust. Thus, the taxable year for
reporting a Unit holder's share of the Trust's income and deductions is
controlled by the Unit holder's taxable year and method of accounting rather
than the taxable year and method of accounting of the Trust. For example, a cash
basis Unit holder should recognize income attributable to his Units as such
income is received by the Trust; and deductions attributable to his Units should
be claimed when such deductions are paid by the Trust.

  Effect of Escrow Arrangement

         The assets of the Trust include royalty and mineral interests in
certain producing and proved undeveloped oil and gas properties (the
"Properties"), which constitute economic interests in gross production of oil,
gas and other minerals free of the costs of production. The Properties are
located in six states and were not carved out of any of Sabine's working
interests in effecting the distribution. In order to facilitate creation of the
Trust and avoid the administrative expense and inconvenience of daily reporting
to Unit holders, the conveyances by Sabine of the Properties located in five of
the six states provided for the execution of an escrow agreement by Sabine, the
Trustee and InterFirst Bank Dallas, N.A., in its capacity as escrow agent. The
conveyances by Sabine of the Properties located in Louisiana provided for the
execution of a substantially identical escrow agreement by Sabine and a
Louisiana bank, in the capacities of escrow agent and of trustee under Sabine
Louisiana Royalty Trust. Sabine Louisiana Royalty Trust, the sole beneficiary of
which is the Trust, was established in order to avoid uncertainty under
Louisiana law as to the legality of the Trustee's holding record title to the
Properties located in Louisiana.


(SRT 2000 TAX)

                                      A-1

<PAGE>   39


         Pursuant to the terms of the escrow agreement and the conveyances of
the Properties by Sabine, the proceeds of production from the Properties for
each calendar month, and interest thereon, are collected by the escrow agents
and are paid to and received by the Trust only on the next Monthly Record Date.
The escrow agents have agreed to endeavor to assure that they incur and pay
expenses for each calendar month only on the Monthly Record Date. The Trust
Agreement also provides that the Trustee is to endeavor to assure that income of
the Trust will be accrued and received and expenses of the Trust will be
incurred and paid only on each Monthly Record Date. Assuming the escrow
arrangement is recognized for Federal income tax purposes and the Trustee and
the escrow agents are able to control the timing of income and expenses, as
stated above, both cash and accrual basis Unit holders will be treated as
realizing income only on each Monthly Record Date. The Trustee is treating the
escrow arrangement as effective for tax purposes and the accompanying tax
information has been presented accordingly.

         If the escrow arrangement is not recognized for Federal income tax
purposes, a mismatching of income and deductions could occur between a
transferor and a transferee upon the sale or exchange of Units. In addition, the
Trustee would be required to report the proceeds from production, interest
income thereon and any deductions to the Unit holders on a daily basis,
resulting in a substantial increase in the administrative expenses of the Trust.

DEPLETION

  Cost Depletion

         Pursuant to the previously mentioned Ruling, each Unit holder is
entitled to deduct cost depletion with respect to his pro rata interest in the
Properties. This cost depletion deduction is computed by reference to the Unit
holder's basis in each of his Units.

         The deduction for cost depletion must be computed by a Unit holder with
respect to each separate property in the Trust. A Unit holder's tax basis in
each separate property generally must be determined at the time each Unit is
acquired by allocating such Unit holder's cost in each Unit among all properties
in the Trust based on their relative fair market values. However, a corporate
Unit holder that acquired Units in the distribution from Sabine must determine
its tax basis in each separate property in the Trust at the time of the
distribution by reference to Sabine's tax basis in each separate property
included in the distribution. The cost depletion deduction attributable to each
separate property is calculated for a taxable year by multiplying the tax basis
of the property times the decimal derived when estimated total equivalent units
of production (barrels of oil and MCF's of gas) expected to be recovered from
the property as of the beginning of the taxable year is divided into the number
of equivalent units produced and sold from such property during the taxable
year. The resulting deduction for cost depletion cannot exceed the adjusted tax
basis in the property. The composite depletion factors presented herein were
derived in a manner that encompasses this separate property concept.

  Percentage Depletion

         Prior to the Revenue Reconciliation Act of 1990, Unit holders were
prohibited from claiming percentage depletion on transferred proven oil and gas
properties. Since substantially all of the properties were "proven properties"
on the date of the original distribution, the percentage depletion deduction
has limited applicability to Unit holders which became Unit holders prior to
October 12, 1990.

         For Unit holders which become Unit owners from transfers of Units
occurring after October 11, 1990, the Revenue Reconciliation Act of 1990 repeals
the prohibition on claiming percentage


(SRT 2000 TAX)


                                      A-2

<PAGE>   40


depletion. A computation of percentage depletion has been made with respect to
the post October 11, 1990 transfers. However, since cost depletion exceeds any
otherwise allocable percentage depletion, percentage depletion factors have not
been presented by reference to the number of units a Unit holder owns.
Percentage depletion will continue to be computed and compared to cost depletion
on an annual basis for applicable transfers occurring after October 11, 1990.

NONRESIDENT FOREIGN UNIT HOLDERS

         Nonresident alien individual and foreign corporation Unit holders
("Foreign Taxpayer(s)"), in general, are subject to tax on the gross income
attributable to the Trust at a rate equal to 30 percent (or the lower rate under
any applicable treaty) without any deductions. This tax is withheld by the Trust
and remitted directly to the United States Treasury. Foreign Taxpayers who have
had tax withheld in 2000 should have received a Form 1042S from the Trust. The
Form 1042S will reflect the total Federal income tax withheld from
distributions. The amount reported on the Form 1042S should not be included as
additional income in computing taxable income, as such amount is already
included in the per Unit income items on the income and expense schedules. The
Federal income tax withheld, as reported on the Form 1042S, should be considered
as a credit by the Unit holder in computing any Federal income tax liability.

         A Foreign Taxpayer holding income producing real property may elect to
treat the income from such real property as effectively connected with the
conduct of a United States trade or business. The income attributable to the
Properties is considered as income produced from real property. Therefore, this
election should be available to Foreign Taxpayers with respect to the taxable
income resulting from the ownership of Units. A Unit holder so electing is
entitled to claim all deductions with respect to such income, but must file a
United States income tax return to claim such deductions. This election once
made is generally irrevocable unless an applicable treaty allows the election to
be made periodically.

         The Foreign Investment in Real Property Tax Act of 1980, as amended
("FIRPTA"), generally treats interests in trusts owning United States real
property as United States real property interests. However, pursuant to
applicable Treasury regulations, Units in Trust, for purposes of FIRPTA only,
are not considered United States real property interests unless they are owned
by a Unit holder having greater than a 5% interest in the Trust.
Additionally, certain reporting provisions are applicable with respect to
Foreign Taxpayers owning a greater than 5% interest in the Trust.

         Generally, income tax is required to be withheld from any proceeds
distributed to Foreign Taxpayers at the rate of 10% of the amount realized by
Foreign Taxpayers upon the sale, exchange or other disposition of a Unit. This
withholding is required only when the FIRPTA provisions apply, as described in
the preceding paragraph. In addition, distributions, if any, that represent the
Foreign Taxpayer's allocable share of gain realized upon the sale, exchange or
other disposition of a United States real property interest by the Trust, will
generally be subject to withholding tax at a 34% rate.

         In order to avoid such withholding when the FIRPTA provisions apply,
Foreign Taxpayers will be required to furnish the applicable withholding agent
with an exemption statement certifying why such withholding is not required.
Foreign Taxpayers are encouraged to consult their own tax advisors concerning
the tax consequences of their investment in the Trust.

SALE OR EXCHANGE OF UNITS

         Generally, a Unit Holder realizes gain or loss upon the sale or
exchange of any Unit measured by the difference between the amount realized from
the sale or exchange and the adjusted tax basis of such Unit. The adjusted tax
basis of a Unit is the original basis of such Unit reduced by depletion

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                                      A-3

<PAGE>   41


deductions allowable (whether deducted or not) with respect to such Unit. Trust
income allocable to such Unit to the date of sale is taxable to the selling Unit
holder. The purchaser of a Unit is taxable on Trust income allocable to such
Unit from the date of purchase forward. For Federal income tax purposes, Trust
income should generally be allocable only to the holder of record of a Unit on
each Monthly Record Date. Gain or loss on the sale of a Unit by a Unit holder
who acquired the Unit(s) prior to January 1, 1987 who is not a "dealer" with
respect to such Unit, who holds it as a capital asset and who has held it for
the required amount of time will, in general, be treated as a long-term capital
gain or loss.

         A Unit holder who is not a dealer who sells a Unit acquired on or after
January 1, 1987 must recapture the depletion deductions taken with respect to
such Unit by recognizing as ordinary income the lesser of (1) the depletion
deductions taken or (2) the amount realized upon the sale less the adjusted
basis of the Unit. Gain in excess of the recaptured depletion deduction will, in
general, be treated as a capital gain.

         Units acquired after 1987 qualifying as capital assets must be owned
more than 1 year to qualify for long-term capital gain or loss treatment.

BACKUP WITHHOLDING

         A payer is required under specified circumstances to withhold tax at
the rate of 31% on "reportable interest or dividend payments" and "other
reportable payments" (including certain oil and gas royalty payments).
Generally, this "backup withholding" is required on payments if the payee has
failed to furnish the payer a taxpayer identification number or if the payer is
notified by the Secretary of the Treasury to withhold taxes on such payments
with respect to the payee.

         Amounts withheld by payers pursuant to the backup withholding
provisions are remitted to the Internal Revenue Service and are considered a
credit against the payee's Federal income tax liability. If the payee does not
incur a Federal income tax liability for the year in which the taxes are
withheld, the payee will be required to file the appropriate income tax return
to claim a refund of the taxes withheld.

STATE INCOME TAX

         Unit holders may be required to file state income tax returns and may
be liable for state income tax as a result of their ownership of Units. The
Properties are located in Florida, Louisiana, Mississippi, New Mexico, Oklahoma
and Texas. The tax information included in this booklet is being presented in a
manner to enable Unit holders to compute the income and deductions of the Trust
attributable to each of these states. Unit holders will need this information to
comply with the state income tax filing requirements in those states imposing a
state income tax. The laws pertaining to income tax in any given state may vary
from those of another state and from those applicable to Federal income tax.
Accordingly, Unit holders are urged to consult their own tax advisors concerning
this matter.

         The Trustee has been informed that certain states have contacted Unit
holders regarding underpayments of the state income tax imposed on the Unit
holders' income from the Trust. Failure by Unit holders to properly report their
state tax liability could result in the direct withholding of state taxes from
Trust distributions. Accordingly, Unit holders are urged to carefully review the
various filing requirements of the states listed below in order to determine if
a current or prior year state income tax liability exists as a result of the
ownership of Units in the Trust.


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<PAGE>   42


         The state of Texas does not impose an individual income tax; therefore,
no part of the income attributable to the Trust will be subject to state income
tax in Texas for individuals. However, corporations (and Limited Liability
Companies) doing business in Texas are subject to the Texas Franchise Tax which
now includes a calculation based on the corporation's taxable income for Federal
income tax purposes. The state of Florida imposes an income tax on resident and
nonresident corporations but not individuals. Each of the other states in which
the Properties are located imposes an income tax applicable to both resident and
nonresident individuals and corporations. Generally, the state income tax in
these states is computed as a percentage of taxable income attributable to the
particular state. Furthermore, even though there are variances from state to
state, taxable income for state purposes is often computed in a manner similar
to the computation of taxable income for Federal income tax purposes.

         All states have not adopted Federal law with respect to the percentage
method of computing depletion nor are such methods consistent among the various
states. It should be noted, however, that cost depletion is allowed by those
states indicated above which impose a state income tax. Included herein is
information to assist you in determining the respective allowable cost depletion
deductions by state.

         The following table reflects calendar year corporate and individual
income tax return due dates for the states in which the Properties are located.
The state income tax return due dates for fiscal year taxpayers will generally
allow the same period of time following the end of their respective fiscal years
as is allowed for calendar year taxpayers. However, the Texas franchise tax
return is generally due for all corporations on May 15.

<TABLE>
<CAPTION>

                     CORPORATE             INDIVIDUAL
STATE                TAXPAYER               TAXPAYER
- -----                ---------             ----------
<S>                  <C>                <C>
Texas                May 15             Not Applicable
Florida              April 1            Not Applicable
Louisiana            April 15           May 15
Mississippi          March 15           April 15
Oklahoma             March 15           April 15
New Mexico           March 15           April 15
</TABLE>


Unit holders should consult their own tax advisors concerning the type of state
income tax returns that may be required and their applicable due dates.


(SRT 2000 TAX)


                                      A-5

<PAGE>   43


Following is a list of names and addresses of the various state taxing
authorities from which you may obtain additional information:


<TABLE>
<S>                 <C>                 <C>
Florida                                 Florida Department of Revenue
                                        5050 W. Tennessee Street, Bldg K
                                        Tallahassee, Florida 32399-0135
                                        (850) 488-6800
                                        www.state.fl.us

New Mexico          Individuals:        State of New Mexico
                                        Taxation and Revenue Department
                                        1200 Saint Francis Drive
                                        P.O. Box 5374
                                        Santa Fe, New Mexico 87509-5374
                                        (505) 827-0945, (505) 827-0830
                                        www.state.nm.us

                    Corporations:       New Mexico Taxation and Revenue Department
                                        Attention: Corporate Income and Franchise Tax
                                        P.O. Box 25127
                                        Santa Fe, New Mexico 87504-5127
                                        (505) 827-0939
                                        www.state.nm.us

Mississippi                             Mississippi State Tax Commission
                                        Bureau of Revenue
                                        P.O. Box 23050
                                        Jackson, Mississippi 39225-3050
                                        (601) 923-7000
                                        www.state.ms.us

Louisiana           Individuals:        Department of Revenue and Taxation
                                        State of Louisiana
                                        P.O. Box 3440
                                        Baton Rouge, Louisiana 70823-3440
                                        (225) 925-4611
                                        www.state.la.us

                    Corporations:       Secretary of Revenue and Taxation
                                        State of Louisiana
                                        P.O. Box 91011
                                        Baton Rouge, Louisiana 70821-9011
                                        (225) 925-4611
                                        www.state.la.us

Oklahoma            Individuals:        Income Tax Division
                                        Connors Bldg.
                                        2501 N. Lincoln Blvd.
                                        Oklahoma City, OK 73194
                                        www.state.ok.us

                    Corporations:       Oklahoma Tax Commission
                                        P.O. Box 26800
                                        Oklahoma City, Oklahoma 73126-0800
                                        (405) 521-3160
                                        www.state.ok.us

Texas                                   Texas Comptroller of Public Accounts
                                        Austin, Texas 78774-0100
                                        (800) 252-5555
                                        www.state.tx.us
</TABLE>



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</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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