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<SEC-DOCUMENT>0000950134-03-004950.txt : 20030331
<SEC-HEADER>0000950134-03-004950.hdr.sgml : 20030331
<ACCEPTANCE-DATETIME>20030331101712
ACCESSION NUMBER:		0000950134-03-004950
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20021231
FILED AS OF DATE:		20030331

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PERMIAN BASIN ROYALTY TRUST
		CENTRAL INDEX KEY:			0000319654
		STANDARD INDUSTRIAL CLASSIFICATION:	OIL ROYALTY TRADERS [6792]
		IRS NUMBER:				756280532
		STATE OF INCORPORATION:			TX
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-08033
		FILM NUMBER:		03627619

	BUSINESS ADDRESS:	
		STREET 1:		BANK OF AMERICA N A TRUST DEPARTMENT
		STREET 2:		P O BOX 1317 NK OF TEXAS NA TRUST DEPT
		CITY:			FT WORTH
		STATE:			TX
		ZIP:			76102
		BUSINESS PHONE:		8173906905

	MAIL ADDRESS:	
		STREET 1:		1300 SUMMIT AVENUE SUITE 300
		CITY:			FORTH WORTH
		STATE:			TX
		ZIP:			76102
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>d04339e10vk.txt
<DESCRIPTION>FORM 10-K
<TEXT>
<PAGE>
================================================================================

                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, 2002

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                          COMMISSION FILE NUMBER 1-8033

                           PERMIAN BASIN ROYALTY TRUST
                  (EXACT NAME OF REGISTRANT AS SPECIFIED IN THE
                     PERMIAN BASIN ROYALTY TRUST INDENTURE)

<Table>
<S>                                                                     <C>
            Texas                                                                     75-6280532
(State or Other Jurisdiction of   -----------------------------------    (I.R.S. Employer Identification No.)
Incorporation or Organization)
</Table>

                              Bank of America, N.A.
                                Trust Department
                                 P.O. Box 830650
                               Dallas, Texas 75202
                    (Address of Principal Executive Offices;
                                    Zip Code)


              (Registrant's Telephone Number, Including Area Code)
                                 (214) 209-2400

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                                    NAME OF EACH EXCHANGE ON
             TITLE OF EACH CLASS                        WHICH REGISTERED
             -------------------                        ----------------
         Units of Beneficial Interest               New York Stock Exchange


        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]

         Indicate by check mark whether the registrant is an accelerated filed
(as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [ ] No
[X]

         The aggregate market value of the registrant's units of beneficial
interest outstanding (based on the closing sale price on the New York Stock
Exchange) held by non-affiliates of the registrant as of the last business day
of the registrant's most recently completed second fiscal quarter was
approximately $73,943,659.85.

         At March 21, 2003, there were 46,608,796 Units of Beneficial Interest
of the Trust outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

         "Units of Beneficial Interest" at page 1; "Trustee's Discussion and
Analysis for the Three-Year Period Ended December 31, 2002" at pages 7 through
10; "Results of the 4th Quarters of 2002 and 2001" at page 9; and "Statements of
Assets, Liabilities and Trust Corpus," "Statements of Distributable Income,"
"Statements of Changes in Trust Corpus," "Notes to Financial Statements" and
"Independent Auditors' Report" at page 11 et seq., in registrant's Annual Report
to security holders for fiscal year ended December 31, 2002 are incorporated
herein by reference for Item 5, Item 7 and Item 8 of Part II of this Report.


================================================================================
<PAGE>

                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                                               Page
                                                                                                               ----
<S>                                                                                                            <C>
PART I............................................................................................................1
         ITEM 1.  Business........................................................................................1
                  Website/SEC Filings.............................................................................3
         ITEM 2.  Properties......................................................................................3
                  PRODUCING ACREAGE, WELLS AND DRILLING...........................................................3
                  OIL AND GAS PRODUCTION..........................................................................4
                  PRICING INFORMATION.............................................................................5
                  OIL AND GAS RESERVES............................................................................5
                  REGULATION......................................................................................8
                           Federal Natural Gas Regulation.........................................................8
                           State Regulation.......................................................................9
                           Other Regulation.......................................................................9
         Item 3.  Legal Proceedings...............................................................................9
         Item 4.  Submission of Matters to a Vote of Security Holders.............................................9

PART II...........................................................................................................9
         Item 5.  Market for Units of the Trust and Related Security Holder Matters...............................9
         Item 6.  Selected Financial Data.........................................................................9
         Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operation...........10
         Item 7A.  Quantitative and Qualitative Disclosures about Market Risk....................................10
         Item 8.  Financial Statements and Supplementary Data....................................................10
         Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........10

PART III.........................................................................................................10
         Item 10. Directors and Executive Officers of the Registrant.............................................10
         Item 11. Executive Compensation.........................................................................11
         Item 12. Security Ownership of Certain Beneficial Owners and Management.................................11
         Item 13. Certain Relationships and Related Transactions ................................................12
         Item 14. Controls and Procedures........................................................................12

PART IV..........................................................................................................13
         Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K................................13
</Table>


                                       ii

<PAGE>

                           FORWARD LOOKING INFORMATION

         Certain information included in this report contains, and other
materials filed or to be filed by the Trust with the Securities and Exchange
Commission (as well as information included in oral statements or other written
statements made or to be made by the Trust) may contain or include, forward
looking statements within the meaning of Section 21E of the Securities Exchange
Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as
amended. Such forward looking statements may be or may concern, among other
things, capital expenditures, drilling activity, development activities,
production efforts and volumes, hydrocarbon prices and the results thereof, and
regulatory matters. 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 such as actual oil and gas
prices and the recoverability of reserves, capital expenditures, general
economic conditions, actions and policies of petroleum-producing nations and
other changes in the domestic and international energy markets. Such forward
looking statements generally are accompanied by words such as "estimate,"
"expect," "anticipate," "goal," "should," "assume," "believe," or other words
that convey the uncertainty of future events or outcomes.


                                     PART I

ITEM 1.       BUSINESS

         The Permian Basin Royalty Trust (the "Trust") is an express trust
created under the laws of the state of Texas by the Permian Basin Royalty Trust
Indenture (the "Trust Indenture") entered into on November 3, 1980, between
Southland Royalty Company ("Southland Royalty") and The First National Bank of
Fort Worth, as Trustee. Bank of America, N.A., a banking association organized
under the laws of the United States, as the successor of The First National Bank
of Fort Worth, is now the Trustee of the Trust. The principal office of the
Trust (sometimes referred to herein as the "Registrant") is located at 901 Main
Street, Dallas, Texas (telephone number 214/209-2400).

         On October 23, 1980, the stockholders of Southland Royalty approved and
authorized that company's conveyance of net overriding royalty interests
(equivalent to net profits interests) to the Trust for the benefit of the
stockholders of Southland Royalty of record at the close of business on the date
of the conveyance consisting of a 75% net overriding royalty interest carved out
of that company's fee mineral interests in the Waddell Ranch properties in Crane
County, Texas and a 95% net overriding royalty interest carved out of that
company's major producing royalty properties in Texas. The conveyance of these
interests (the "Royalties") was made on November 3, 1980, effective as to
production from and after November 1, 1980 at 7:00 a.m. The properties and
interests from which the Royalties were carved and which the Royalties now
burden are collectively referred to herein as the "Underlying Properties." The
Underlying Properties are more particularly described under "Item 2. Properties"
herein.

         The function of the Trustee is to collect the income attributable to
the Royalties, to pay all expenses and charges of the Trust, and then distribute
the remaining available income to the Unit holders. The Trust is not empowered
to carry on any business activity and has no employees, all administrative
functions being performed by the Trustee.

         The Royalties constitute the principal asset of the Trust and the
beneficial interests in the Royalties are divided into that number of Units of
Beneficial Interest (the "Units") of the Trust equal to the number of shares of
the common stock of Southland Royalty outstanding as of the close of business on
November 3, 1980. Each stockholder of Southland Royalty of record at the close
of business on November 3, 1980, received one Unit for each share of the common
stock of Southland Royalty then held.

       In 1985, Southland Royalty became a wholly-owned subsidiary of Burlington
Northern Inc. ("BNI"). In 1988, BNI transferred its natural resource operations
to Burlington Resources Inc. ("BRI") as a result of which Southland Royalty
became a wholly-owned indirect subsidiary of BRI. As a result of these
transactions, El Paso Natural Gas Company ("El Paso") also became an indirect
subsidiary of BRI. In March 1992, El Paso completed an initial public offering
of 5,750,000



                                       1
<PAGE>


newly issued shares of El Paso common stock, thereby decreasing BRI's ownership
of El Paso to approximately eighty-five percent (85%). On June 30, 1992, BRI
distributed all of the shares of El Paso common stock owned by BRI to BRI's
stockholders of record as of June 15, 1992. See "Pricing Information" under
"ITEM 2. Properties" herein.

         Effective January 1, 1996, Southland Royalty, a wholly-owned subsidiary
of Meridian Oil Inc. ("MOI") was merged with and into MOI, by which action the
separate corporate existence of Southland Royalty ceased and MOI survived and
succeeded to the ownership of all of the assets of Southland Royalty and has
assumed all of its rights, powers and privileges, and all of its liabilities and
obligations. In 1996, MOI changed its name to Burlington Resources Oil & Gas
Company ("BROG").

         The term "net proceeds" as used in the above described conveyance means
the excess of "gross proceeds" received by BROG during a particular period over
"production costs" for such period. "Gross proceeds" means the amount received
by BROG (or any subsequent owner of the Underlying Properties) from the sale of
the production attributable to the Underlying Properties, subject to certain
adjustments. "Production costs" means, generally, costs incurred on an accrual
basis in operating the Underlying Properties, including both capital and
non-capital costs; for example, development drilling, production and processing
costs, applicable taxes, and operating charges. If production costs exceed gross
proceeds in any month, the excess is recovered out of future gross proceeds
prior to the making of further payment to the Trust, but the Trust is not liable
for any production costs or liabilities attributable to these properties and
interests or the minerals produced therefrom. If at any time the Trust receives
more than the amount due from the Royalties, it shall not be obligated to return
such overpayment, but the amounts payable to it for any subsequent period shall
be reduced by such overpaid amount, plus interest, at a rate specified in the
conveyance.

         To the extent it has the legal right to do so, BROG is responsible for
marketing the production from such properties and interests, either under
existing sales contracts or under future arrangements at the best prices and on
the best terms it shall deem reasonably obtainable in the circumstances. BROG
also has the obligation to maintain books and records sufficient to determine
the amounts payable to the Trustee. BROG, however, can sell its interests in the
Underlying Properties.

         Proceeds from production in the first month are generally received by
BROG in the second month, the net proceeds attributable to the Royalties are
paid by BROG to the Trustee in the third month and distribution by the Trustee
to the Unit holders is made in the fourth month. The identity of Unit holders
entitled to a distribution will generally be determined as of the last business
day of each calendar month (the "monthly record date"). The amount of each
monthly distribution will generally be determined and announced ten days before
the monthly record date. Unit holders of record as of the monthly record date
will be entitled to receive the calculated monthly distribution amount for each
month on or before ten business days after the monthly record date. The
aggregate monthly distribution amount is the excess of (i) net 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 net increase in cash
reserves for contingent liabilities.

         Cash held by the Trustee as a reserve for liabilities or contingencies
(which reserves may be established by the Trustee in its discretion) or pending
distribution is placed, at the Trustee's discretion, in obligations issued by
(or unconditionally guaranteed by) the United States or any agency thereof,
repurchase agreements secured by obligations issued by the United States or any
agency thereof, or certificates of deposit of banks having a capital surplus and
undivided profits in excess of $50,000,000, subject, in each case, to certain
other qualifying conditions.

         The income to the Trust attributable to the Royalties is not subject in
material respects to seasonal factors nor in any manner related to or dependent
upon patents, licenses, franchises or concessions. The Trust conducts no
research activities. The Trust has no employees since all administrative
functions are performed by the Trustee.

         BROG has advised the Trustee that it believes that comparable revenues
could be obtained in the event of a change in purchasers of production.


                                       2
<PAGE>

WEBSITE/SEC FILINGS

         Our Internet address is http://www.pbt-permianbasintrust.com. You can
review the filings the Trust has made with respect to its annual reports on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934. We shall post these reports as soon as
reasonably practicable after we electronically file them with, or furnish them
to the SEC.

ITEM 2.       PROPERTIES

         The net overriding royalties conveyed to the Trust include: (1) a 75%
net overriding royalty carved out of BROG's (as successor to Southland Royalty)
fee mineral interests in the Waddell Ranch in Crane County, Texas (the "Waddell
Ranch properties"); and (2) a 95% net overriding royalty carved out of BROG's
(as successor to Southland Royalty) major producing royalty interests in Texas
(the "Texas Royalty properties"). The net overriding royalty for the Texas
Royalty properties is subject to the provisions of the lease agreements under
which such royalties were created. References below to "net" wells and acres are
to the interests of BROG (from which the Royalties were carved) in the "gross"
wells and acres.

         The following information under this ITEM 2 is based upon data and
information furnished to the Trustee by BROG.

                      PRODUCING ACREAGE, WELLS AND DRILLING

         Waddell Ranch Properties. The Waddell Ranch properties consist of
78,175 gross (34,205 net) producing acres. A majority of the proved reserves are
attributable to six fields: Dune, Sand Hills (Judkins), Sand Hills (McKnight),
Sand Hills (Tubb), University-Waddell (Devonian) and Waddell. At December 31,
2002, the Waddell Ranch properties contained 765 gross (339 net) productive oil
wells, 184 gross (88 net) productive gas wells and 324 gross (141 net) injection
wells.

         BROG is operator of record of the Waddell Ranch properties. All field,
technical and accounting operations have been contracted by an agreement between
the working interest owners and Coastal Management Corporation ("CMC") but
remain under the direction of BROG.

         The Waddell Ranch properties are mature producing properties, and all
of the major oil fields are currently being waterflooded for the purpose of
facilitating enhanced recovery. Proved reserves and estimated future net
revenues attributable to the properties are included in the reserve reports
summarized below. BROG does not own the full working interest in any of the
tracts constituting the Waddell Ranch properties and, therefore, implementation
of any development programs will require approvals of other working interest
holders as well as BROG. In addition, implementation of any development programs
will be dependent upon oil and gas prices currently being received and
anticipated to be received in the future. There were 4 gross (1.75 net) wells
drilled and completed on the Waddell Ranch properties during 2002. At December
31, 2002 there were no wells in progress on the Waddell Ranch properties. During
2001 there were 11 gross (.76 net) wells drilled and completed on the Waddell
Ranch properties. At December 31, 2001 there were 8 gross (3.75 net) wells in
progress on the Waddell Ranch properties. During 2000 there were no wells
drilled on the Waddell Ranch properties. At December 31, 2000 there were 10
gross (4.88 net) wells in progress on the Waddell Ranch properties.

         BROG has advised the Trustee that the total amount of capital
expenditures for 2002 with regard to the Waddell Ranch properties totalled $9.9
million. Capital expenditures include the cost of remedial and maintenance
activities. This amount spent is approximately $.1 million less than the
budgeted amount projected by BROG for 2002. BROG has advised the Trustee that
the capital expenditures budget for 2003 totals approximately $10.0 million, of
which




                                       3
<PAGE>

approximately $1.1 is attributable to the 2003 drilling program, and $8.9
million to workovers and recompletions. Accordingly, there is a minor increase
in capital expenditures for 2003 as compared with the 2002 capital expenditures.

         Texas Royalty Properties. The Texas Royalty properties consist of
royalty interests in mature producing oil fields, such as Yates, Wasson, Sand
Hills, East Texas, Kelly-Snyder, Panhandle Regular, N. Cowden, Todd, Keystone,
Kermit, McElroy, Howard-Glasscock, Seminole and others. The Texas Royalty
properties contain approximately 303,000 gross (approximately 51,000 net)
producing acres. Detailed information concerning the number of wells on royalty
properties is not generally available to the owners of royalty interests.
Consequently, an accurate count of the number of wells located on the Texas
Royalty properties cannot readily be obtained.

         In February 1997, BROG sold its interests in the Texas Royalty
properties that are subject to the Net Overriding Royalty Conveyance to the
Trust dated effective November 1, 1980 ("Texas Royalty Conveyance") to Riverhill
Energy Corporation ("Riverhill Energy"), which was then a wholly-owned
subsidiary of Riverhill Capital Corporation ("Riverhill Capital") and an
affiliate of CMC. At the time of such sale, Riverhill Capital was a privately
owned Texas corporation with offices in Bryan and Midland, Texas. The Trustee
was informed by BROG that, as required by the Texas Royalty Conveyance,
Riverhill Energy succeeded to all of the requirements upon and the
responsibilities of BROG under the Texas Royalty Conveyance with regard to the
Texas Royalty properties. BROG and Riverhill Energy further advised the Trustee
that all accounting operations pertaining to the Texas Royalty properties were
being performed by CMC under the direction of Riverhill Energy. BROG indicated
to the Trustee that BROG will work together with CMC and Riverhill Energy in an
effort to assure that various administrative functions and reporting
requirements assumed by Riverhill Energy are met. The Trustee has been advised
that independent auditors representing Riverhill Energy and CMC are
PriceWaterhouseCoopers.

         The Trustee has been advised that in the first quarter of 1998
Schlumberger Technology Corporation ("Schlumberger"), acquired all of the shares
of stock of Riverhill Capital. Prior to such acquisition by Schlumberger, CMC
and Riverhill Energy were wholly-owned subsidiaries of Riverhill Capital. The
Trustee has further been advised that in connection with Schlumberger's
acquisition of Riverhill Capital, the shareholders of Riverhill Capital acquired
ownership of all of the shares of stock of Riverhill Energy. Thus, the ownership
in the Texas Royalty properties referenced above remained in Riverhill Energy,
the stock ownership of which was acquired by the former shareholders of
Riverhill Capital. Accounting operations pertaining to the Texas Royalty
properties are being performed by CMC under the direction of Riverhill Energy.
CMC also currently conducts all field, technical and accounting operations on
behalf of BROG with regard to the Waddell Ranch properties.

         Well Count and Acreage Summary. The following table shows as of
December 31, 2002, the gross and net producing wells and acres for the Company
Interests. The net wells and acres are determined by multiplying the gross wells
or acres by the Company Interests Owner's working interest in the wells or
acres. There is very little undeveloped Acreage held by the Trust, and all this
is held by production.

<Table>
<Caption>
                                          NUMBER OF
                                            WELLS                          ACRES
                                    ---------------------           --------------------
                                    GROSS             NET           GROSS           NET
                                    -----             ---           ------        ------
<S>                                 <C>               <C>           <C>           <C>
Company Interests.............      1,273             568           76,992        33,276
</Table>

                             OIL AND GAS PRODUCTION

         The Trust recognizes production during the month in which the related
distribution is received. Production of oil and gas attributable to the
Royalties and the Underlying Properties and the related average sales prices
attributable to the Underlying Properties for the three years ended December 31,
2002, excluding portions attributable to the adjustments discussed below, were
as follows:

                                       4
<PAGE>

<Table>
<Caption>
                                     WADDELL RANCH                       TEXAS ROYALTY
                                       PROPERTIES                          PROPERTIES                            TOTAL
                           ---------------------------------   ---------------------------------   ---------------------------------
                              2002        2001        2000        2002        2001        2000        2002        2001        2000
                           ---------   ---------   ---------   ---------   ---------   ---------   ---------   ---------   ---------
<S>                        <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
ROYALTIES:

   Production

   Oil (barrels) .......     426,719     577,243     584,269     301,594     363,959     335,160     728,313     941,202     919,429

   Gas (Mcf) ...........   2,440,678   3,109,734   2,654,731     751,497     765,852     691,714   3,192,175   3,875,586   3,346,445

UNDERLYING PROPERTIES:

   Production

   Oil (barrels) .......     922,766   1,032,678   1,119,835     350,157     402,305     366,275   1,272,923   1,434,983   1,486,110

   Gas (Mcf) ...........   5,310,364   5,572,143   5,134,829     878,651     869,155     755,194   6,189,015   6,441,298   5,890,023

   Average Price

   Oil/barrel ..........   $   22.44   $   25.64   $   28.28   $   22.12   $   23.68   $   26.58   $   22.31   $   24.88   $   27.66

   Gas/Mcf .............   $    2.80   $    4.68   $    3.65   $    2.55   $    4.34   $    3.58   $    2.74   $    4.70   $    3.63
</Table>

         Since the oil and gas sales attributable to the Royalties are based on
an allocation formula that is dependent on such factors as price and cost
(including capital expenditures), production amounts do not necessarily provide
a meaningful comparison.

                                PRODUCTION COST

         Waddell Ranch total lease operating expense for 2002 was $22.318
million gross and $7.703 million net. The lease operating expense increased 5%
from 2001 to 2002 primarily because of the increase in well maintenance
operations and abandonment of shut in non-economic wellbores. Waddell Ranch
lifting cost on a barrel of oil equivalent (BOE) basis was $5.20/bbl. The
lifting cost on a barrel of total fluid produced (BTF) basis was $.41/bbl.

                               PRICING INFORMATION

         Reference is made to "Regulation" for information as to federal
regulation of prices of natural gas. The following paragraphs provide
information regarding sales of oil and gas from the Waddell Ranch properties. As
a royalty owner, BROG is not furnished detailed information regarding sales of
oil and gas from the Texas Royalty properties.

         Oil. The Trustee has been advised by BROG that for the period August 1,
1993 through June 30, 2003, the oil from the Waddell Ranch properties is being
sold under a competitive bid to independent third parties.

         Gas. The gas produced from the Waddell Ranch properties is processed
through a natural gas processing plant and sold at the tailgate of the plant.
Plant products are marketed by Burlington Resources Hydrocarbons Inc., an
indirect subsidiary of BRI. The processor of the gas (Warren Petroleum Company,
L.P.) receives 15% of the liquids and residue gas as a fee for gathering,
compression, treating and processing the gas.

                              OIL AND GAS RESERVES

         The following are definitions adopted by the Securities and Exchange
Commission ("SEC") and the Financial Accounting Standards Board which are
applicable to terms used within this Item:

         "Proved reserves" are those estimated quantities of crude oil, natural
gas and natural gas liquids, which, upon analysis of geological and engineering
data, appear with reasonable certainty to be recoverable in the future from
known oil and gas reservoirs under existing economic and operating conditions.

         "Proved developed reserves" are those proved reserves which can be
expected to be recovered through existing wells with existing equipment and
operating methods.

         "Proved undeveloped reserves" are those proved reserves which are
expected to be recovered from new wells on undrilled acreage, or from existing
wells where a relatively major expenditure is required.

         "Estimated future net revenues" are computed by applying current prices
of oil and gas (with consideration of price changes only to the extent provided
by contractual arrangements and allowed by federal regulation) to estimated
future production of proved oil and gas reserves as of the date of the latest
balance sheet presented, less estimated future expenditures (based on current
costs) to be incurred in developing and producing the proved reserves, and
assuming continuation of existing economic conditions.



                                       5
<PAGE>

         "Estimated future net revenues" are sometimes referred to herein as
"estimated future net cash flows."

         "Present value of estimated future net revenues" is computed using the
estimated future net revenues and a discount factor of 10%.

         The independent petroleum engineers' reports as to the proved oil and
gas reserves attributable to the Royalties conveyed to the Trust were obtained
from Cawley, Gillespie & Associates, Inc. The following table presents a
reconciliation of proved reserve quantities from January 1, 2000 through
December 31, 2002 (in thousands):

<Table>
<Caption>

                                                              WADDELL RANCH          TEXAS ROYALTY
                                                               PROPERTIES              PROPERTIES                TOTAL
                                                          --------------------    --------------------    --------------------
                                                             OIL         GAS        OIL         GAS         OIL         GAS
                                                           (BBLS)       (Mcf)      (BBLS)      (Mcf)       (BBLS)      (Mcf)
                                                          --------    --------    --------    --------    --------    --------
<S>                                                       <C>        <C>          <C>         <C>         <C>        <C>
January 1, 2000 .......................................      5,486      23,004       4,145       5,628       9,631      28,632
Extensions, discoveries, and other additions ..........        314       1,106           0           0         314       1,106
Revisions of previous estimates .......................      1,095       9,088          97       1,012       1,192      10,099
Production ............................................       (584)     (2,655)       (335)       (692)       (919)     (3,346)
                                                          --------    --------    --------    --------    --------    --------
December 31, 2000 .....................................      6,311      30,543       3,907       5,948      10,218      36,491
Extensions, discoveries, and other additions ..........          0           0           0           0           0           0
Revisions of previous estimates .......................     (1,960)     (7,311)         60         613      (1,900)     (6,698)
Production ............................................       (577)     (3,110)       (364)       (766)       (941)     (3,876)
                                                          --------    --------    --------    --------    --------    --------
December 31, 2001 .....................................      3,774      20,122       3,603       5,795       7,377      25,917
Extensions, discoveries, and other additions ..........          0           0           0           0           0           0
Revisions of previous estimates .......................        700       5,259         138         521         837       5,782
Production ............................................       (427)     (2,441)       (302)       (751)       (728)     (3,192)
                                                          --------    --------    --------    --------    --------    --------
December 31, 2002 .....................................      4,047      22,940       3,439       5,565       7,486      28,507
                                                          ========    ========    ========    ========    ========    ========
</Table>

         Estimated quantities of proved developed reserves of crude oil and
natural gas as of December 31, 2002, 2001 and 2000 were as follows (in
thousands):

<Table>
<Caption>

                                    CRUDE OIL       NATURAL GAS
                                      (BBLS)           (Mcf)
                                    ---------       -----------
<S>                                 <C>             <C>
        December 31, 2002........     6,851            26,927

        December 31, 2001........     6,614            23,280

        December 31, 2000........     8,937            31,665
</Table>

         The Financial Accounting Standards Board requires supplemental
disclosures for oil and gas producers based on a standardized measure of
discounted future net cash flows relating to proved oil and gas reserve
quantities. Under this disclosure, future cash inflows are computed by applying
year-end prices of oil and gas relating to the enterprise's proved reserves to
the year-end quantities of those reserves. Future price changes are only
considered to the extent provided by contractual arrangements in existence at
year end. The standardized measure of discounted future net cash flows is
achieved by using a discount rate of 10% a year to reflect the timing of future
cash flows relating to proved oil and gas reserves.

         Estimates of proved oil and gas reserves are by their very nature
imprecise. Estimates of future net revenue attributable to proved reserves are
sensitive to the unpredictable prices of oil and gas and other variables.





                                       6
<PAGE>

         The 2002, 2001 and 2000 change in the standardized measure of
discounted future net cash flows related to future royalty income from proved
reserves discounted at 10% is as follows (in thousands):

<Table>
<Caption>
                                    WADDELL RANCH                       TEXAS ROYALTY
                                      PROPERTIES                          PROPERTIES                            TOTAL
                          ---------------------------------   ---------------------------------   ---------------------------------
                                2002        2001       2000        2002        2001        2000        2002        2001        2000
                           ---------   ---------  ---------   ---------   ---------   ---------   ---------   ---------   ---------
<S>                        <C>         <C>        <C>         <C>         <C>         <C>         <C>         <C>         <C>
January 1 ...............  $  59,283   $ 214,029  $ 102,088   $  34,519   $  65,784   $  52,126   $  93,802   $ 279,813   $ 154,214
Extensions,
discoveries, and other
additions ...............          0           0     10,281           0           0           0           0           0      10,281
Accretion of discount ...      5,928      21,403     10,209       3,452       6,578       5,213       9,380      27,981      15,422
Revisions of previous
estimates and other .....     67,650    (147,806)   116,353      26,205     (26,370)     19,379      93,855    (174,176)    135,732
Royalty income ..........    (15,627)    (28,343)   (24,902)     (8,204)    (11,473)    (10,934)    (23,831)    (39,816)    (35,836)
                           ---------   ---------  ---------   ---------   ---------   ---------   ---------   ---------   ---------
December 31 .............  $ 117,234   $  59,283  $ 214,029   $  55,972   $  34,519   $  65,784   $ 173,206   $  93,802   $ 279,813
                           =========   =========  =========   =========   =========   =========   =========   =========   =========
</Table>

         Oil and gas prices of $31.88 and $28.95 per barrel and $3.80 and $3.79
per Mcf were used to determine the estimated future net revenues from the
Waddell Ranch properties and the Texas Royalty properties, respectively, at
December 31, 2002. The upward revisions of both reserves and discounted future
net cash flows for the Waddell Ranch properties and the Texas Royalty properties
are due to increase in oil and gas prices from 2001 to 2002.

         Oil and gas prices of $17.05 and $17.62 per barrel and $2.15 and $1.93
per Mcf, respectively, were used to determine the estimated future net revenues
from the Waddell Ranch properties and the Texas Royalty properties,
respectively, at December 31, 2001. The extension, discoveries and other
additions for the Waddell Ranch properties are proved reserves related to the
Waddell (Greyburg) and Running WN (Wolfcamp) fields. The upward revisions of
both reserves and discounted future net cash flows for the Waddell Ranch
properties and the Texas Royalty properties are due to increases in oil and gas
prices from 2000 to 2001.

         Oil and gas prices of $24.65 and $26.46 per barrel and $8.98 and $7.03
per Mcf, respectively, were used to determine the estimated future net revenues
from the Waddell Ranch properties and the Texas Royalty properties at December
31, 2000. The extension, discoveries and other additions for the Waddell Ranch
properties are proved developed producing reserves related to the RM (Clearfork)
field. The upward revisions of both reserves and discounted future net cash
flows for the Waddell Ranch properties and the Texas Royalty properties were due
to increases in oil and gas prices from 1999 to 2000.

         The following presents estimated future net revenue and the present
value of estimated future net revenue, for each of the years ended December 31,
2002, 2001 and 2000 (in thousands except amounts per Unit):

<Table>
<Caption>
                                                  2002                          2001                         2000
                                      ---------------------------------------------------------------------------------------
                                       ESTIMATED        PRESENT       ESTIMATED       PRESENT      ESTIMATED       PRESENT
                                       FUTURE NET      VALUE AT      FUTURE NET      VALUE AT      FUTURE NET      VALUE AT
                                        REVENUE           10%         REVENUE           10%         REVENUE          10%
                                      ------------   ------------   ------------   ------------   ------------   ------------
<S>                                   <C>            <C>            <C>            <C>            <C>            <C>
Total Proved

     Waddell Ranch properties .....   $    204,776   $    117,234   $    102,860   $     59,283   $    405,530   $    214,029

     Texas Royalty properties .....        114,777         55,972         71,482         34,519        138,860         65,784
                                      ------------   ------------   ------------   ------------   ------------   ------------
         Total ....................   $    319,553   $    173,206   $    174,342   $     93,102   $    544,390   $    279,813
                                      ============   ============   ============   ============   ============   ============

Total Proved per Unit .............   $       6.85   $       3.72   $       3.74   $       2.01   $      11.68   $       6.00
                                      ============   ============   ============   ============   ============   ============

Proved Developed

     Waddell Ranch properties .....   $    179,798   $    105,903   $     84,996   $     52,778   $    334,734   $    187,575

     Texas Royalty properties .....        114,777         55,972         71,482         34,519        138,860         65,784
                                      ------------   ------------   ------------   ------------   ------------   ------------
         Total ....................   $    294,575   $    161,875   $    156,478   $     87,297   $    473,594   $    253,359
                                      ============   ============   ============   ============   ============   ============
</Table>




                                       7
<PAGE>

         Reserve quantities and revenues shown in the preceding tables for the
Royalties were estimated from projections of reserves and revenue attributable
to the combined Southland Royalty and Trust interests in the Waddell Ranch
properties and Texas Royalty properties. Reserve quantities attributable to the
Royalties were estimated by allocating to the Royalties a portion of the total
estimated net reserve quantities of the interests, based upon gross revenue less
production taxes. Because the reserve quantities attributable to the Royalties
are estimated using an allocation of the reserves, any changes in prices or
costs will result in changes in the estimated reserve quantities allocated to
the Royalties. Therefore, the reserve quantities estimated will vary if
different future price and cost assumptions occur.

         Proved reserve quantities are estimates based on information available
at the time of preparation and such estimates are subject to change as
additional information becomes available. The reserves actually recovered and
the timing of production of those reserves may be substantially different from
the original estimate. Moreover, the present values shown above should not be
considered as the market values of such oil and gas reserves or the costs that
would be incurred to acquire equivalent reserves. A market value determination
would include many additional factors.

                                   REGULATION

         Many aspects of the production, pricing, transportation and marketing
of crude oil and natural gas are regulated by federal and state agencies.
Legislation affecting the oil and gas industry is under constant review for
amendment or expansion, frequently increasing the regulatory burden on affected
members of the industry.

         Exploration and production operations are subject to various types of
regulation at the federal, state and local levels. Such regulation includes
requiring permits for the drilling of wells, maintaining bonding requirements in
order to drill or operate wells, and regulating the location of wells, the
method of drilling and casing wells, the surface use and restoration of
properties upon which wells are drilled and the plugging and abandonment of
wells. Natural gas and oil operations are also subject to various conservation
laws and regulations that regulate the size of drilling and spacing units or
proration units and the density of wells which may be drilled and unitization or
pooling of oil and gas properties. In addition, state conservation laws
establish maximum allowable production from natural gas and oil wells, generally
prohibit the venting or flaring of natural gas and impose certain requirements
regarding the ratability of production. The effect of these regulations is to
limit the amounts of natural gas and oil that can be produced, potentially raise
prices, and to limit the number of wells or the locations which can be drilled.

FEDERAL NATURAL GAS REGULATION

         The Federal Energy Regulatory Commission (the "FERC") is primarily
responsible for federal regulation of natural gas. The interstate transportation
and sale for resale of natural gas is subject to federal governmental
regulation, including regulation of transportation and storage tariffs and
various other matters, by FERC. Wellhead sales of domestic natural gas are not
subject to regulation. January 1, 1993. Consequently, sales of natural gas may
be made at market prices, subject to applicable contract provisions.

         Sales of natural gas are affected by the availability, terms and cost
of transportation. The price and terms for access to pipeline transportation
remain subject to extensive federal and state regulation. Several major
regulatory changes have been implemented by Congress and the FERC from 1985 to
the present that affect the economics of natural gas production, transportation,
and sales. In addition, the FERC continues to promulgate revisions to various
aspects of the rules and regulations affecting those segments of the natural gas
industry, most notably interstate natural gas transmission companies, that
remain subject to the FERC's jurisdiction. These initiatives may also affect the
intrastate transportation of gas under certain circumstances. The stated purpose
of many of these regulatory changes is to promote competition among the various
sectors of the natural gas industry and these initiatives generally reflect more
light-handed regulation of the natural gas industry. The ultimate impact of the
rules and regulations issued by the FERC since 1985 cannot be predicted. In
addition, many aspects of these regulatory developments have not become final
but are still pending judicial and FERC final decisions.

     New proposals and proceedings that might affect the natural gas industry
are considered from time to time by Congress, the FERC, state regulatory bodies
and the courts. The Trust cannot predict when or if any such proposals might
become effective, or their effect, if any, on the Trust. The natural gas
industry historically has been very heavily




                                       8
<PAGE>

regulated; therefore, there is no assurance that the less stringent regulatory
approach recently pursued by the FERC and Congress will continue.

         Sales of crude oil, condensate and gas liquids are not currently
regulated and are made at market prices. Crude oil prices are affected by a
variety of factors. Since domestic crude 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 Export Countries (OPEC).

STATE REGULATION

         The various states regulate the production and sale of oil and natural
gas, including imposing requirements for obtaining drilling permits, the method
of developing new fields, the spacing and operation of wells and the prevention
of waste of oil and gas resources. The rates of production may be regulated and
the maximum daily production allowables from both oil and gas wells may be
established on a market demand or conservation basis, or both.

OTHER REGULATION

         The petroleum industry is also subject to compliance with various other
federal, state and local regulations and laws, including, but not limited to,
environmental protection, occupational safety, resource conservation and equal
employment opportunity. The Trustee does not believe that compliance with these
laws by the operating parties will have any material adverse effect on Unit
holders.

ITEM 3.    LEGAL PROCEEDINGS

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

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

         No matters were submitted to a vote of Unit holders, through the
solicitation of proxies or otherwise, during the fourth quarter ended December
31, 2002.


                                     PART II

ITEM 5.    MARKET FOR UNITS OF THE TRUST AND RELATED SECURITY HOLDER MATTERS

         The information under "Units of Beneficial Interest" at page 1 of the
Trust's Annual Report to security holders for the year ended December 31, 2002,
is herein incorporated by reference.

         The Trust has no equity compensation plans.

ITEM 6.    SELECTED FINANCIAL DATA

<Table>
<Caption>
                                                             FOR THE YEAR ENDED DECEMBER 31,
                                       -------------------------------------------------------------------------
                                           2002           2001            2000           1999           1998
                                       ------------   ------------    ------------   ------------   ------------
<S>                                    <C>            <C>             <C>            <C>            <C>
Royalty income......................   $ 23,830,604   $ 39,816,141    $ 35,835,746   $ 18,799,659   $ 10,777,901

Distributable income................     23,415,406     39,473,395      35,545,141     18,471,842     10,414,382

Distributable income per Unit.......       0.502382       0.846908        0.762627       0.396317       0.223443

Distributions per Unit..............       0.502382       0.846908        0.762627       0.396317       0.223443

Total assets, December 31...........   $  4,543,780   $  4,213,606    $  5,651,376   $  5,305,223   $  3,861,776
</Table>



                                       9
<PAGE>

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATION

         The "Trustee's Discussion and Analysis for the Three Year Period Ended
December 31, 2002" and "Results of the 4th Quarters of 2002 and 2001" at pages 7
through 10 of the Trust's Annual Report to security holders for the year ended
December 31, 2002 is herein incorporated by reference.

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 Unit holders 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 Unit holders 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.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The Financial Statements of the Trust and the notes thereto at page 11
et seq. of the Trust's Annual Report to security holders for the year ended
December 31, 2002, are herein incorporated by reference.

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

         There have been no changes in accountants and no disagreements with
accountants on any matter of accounting principles or practices or financial
statement disclosures during the twenty-four months ended December 31, 2002.


                                    PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

                                     TRUSTEE

         The Trust has no directors or executive officers. The Trustee is a
corporate trustee which may be removed, with or without cause, at a meeting of
the Unit holders, by the affirmative vote of the holders of a majority of all
the Units then outstanding.

             SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Securities Exchange At of 1934 requires the
Trust's directors, officers or beneficial owners of more than ten percent of a
registered class of the Trust's equity securities to file reports of ownership
and changes in ownership with the SEC and to furnish the Trust with copies of
all such reports.

         The Trust has no directors or officers and based solely on its review
of the reports received by it, the Trust believes that during the fiscal year of
2002, no person who was a beneficial owner of more than ten percent the Trust's
Units failed to file on a timely basis any report required by Section 16(a).





                                       10
<PAGE>

ITEM 11.   EXECUTIVE COMPENSATION

         During the years ended December 31, 2002, 2001 and 2000, the Trustee
received total remuneration as follows:

<Table>
<Caption>
              NAME OF INDIVIDUAL OR NUMBER                CAPACITIES IN           CASH
                   OF PERSONS IN GROUP                     WHICH SERVED        COMPENSATION            YEAR
- -----------------------------------------------------     --------------   --------------------       ------
<S>                                                       <C>              <C>                         <C>
Bank of America, N.A ................................        Trustee       $        45,062  (1)        2002

                                                                           $        53,796  (1)        2001

                                                                           $        57,680  (1)        2000
</Table>

(1)    Under the Trust Indenture, the Trustee is entitled to an administrative
       fee for its administrative services, preparation of quarterly and annual
       statements with attention to tax and legal matters of: (i) 1/20 of 1% of
       the first $100 million and (ii) Trustee's standard hourly rate in excess
       of 300 hours annually. The administrative fee is subject to reduction by
       a credit for funds provision.


ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         (a) Security Ownership of Certain Beneficial Owners. The following
table sets forth as of March 1, 2003, information with respect to each person
known to own beneficially more than 5% of the outstanding Units of the Trust
[PLEASE CONFIRM]:

<Table>
<Caption>
                                                     AMOUNT AND NATURE OF
NAME AND ADDRESS                                     BENEFICIAL OWNERSHIP              PERCENT OF CLASS
- --------------------------------------------   ---------------------------------     ----------------------
<S>                                            <C>                                   <C>
Burlington Resources Oil & Gas Company LP(1)           27,577,741 Units                     59.17%
5051 Westheimer, Suite 1400
Houston, Texas 77056-2124

McMorgan & Company(2)                                   5,000,000 Units                     10.73%
One Bush Street, Suite 800
San Francisco, CA  94104
</Table>

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

(1)    This information was provided to the Securities and Exchange Commission
       and to the Trust in a Form 4 dated January 6, 1994, filed with the
       Securities and Exchange Commission by Southland Royalty, a wholly-owned
       subsidiary of BRI, and in Amendment 5 to Schedule 13D and Schedule 13E-3
       dated December 28, 1993, filed with the Securities and Exchange
       Commission by Southland Royalty and BRI. Such Units were reported to be
       owned directly by Southland Royalty, now BROG.

       The Form 4 filed by Southland Royalty and the Schedule 13D and Schedule
       13E-3 filed by Southland Royalty and BRI with the Securities and Exchange
       Commission may be reviewed for more detailed information concerning the
       matters summarized herein.

(2)    This information was provided to the Securities and Exchange Commission
       and to the Trust in a Schedule 13G filed with the Securities and Exchange
       Commission on July 12, 1999 on behalf of McMorgan & Company, an
       investment adviser registered under the Investment Advisers Act of 1940,
       (McMorgan), Thomas Allan Morton ("Morton"), and Terry Allen O'Toole
       ("O'Toole"). Such Schedule 13G reports that McMorgan, Morton, and O'Toole
       have beneficial ownership of such Units. It is reported in such Schedule
       13G that McMorgan, Morton, and O'Toole have sole voting and sole
       dispositive power with regard to such Units. Morton and O'Toole filed in
       their capacities as control persons of McMorgan and disclaimed beneficial
       ownership to such Units involved in such Schedule 13G. The address of
       Morton and O'Toole is One Bush Street, Suite 800, San Francisco,
       California 94104.

       The Schedule 13G filed with the Securities and Exchange Commission on
       behalf of McMorgan, Morton, and O'Toole may be reviewed for more detailed
       information concerning the matters summarized herein.


                                       11
<PAGE>

         (b) Security Ownership of Management. The Trustee does not beneficially
own any securities of the Trust. In various fiduciary capacities, Bank of
America, N.A. owned as of March 1, 2003, an aggregate of 192,621 Units with no
right to vote all of these Units, shared right to vote none of these Units and
sole right to vote none of these Units. Bank of America, N.A., disclaims any
beneficial interests in these Units. The number of Units reflected in this
paragraph includes Units held by all branches of Bank of America, N.A.(1)

         (c) Change In Control. The Trustee knows of no arrangements which may
subsequently result in a change in control of the Trust.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The Trust has no directors or executive officers. See Item 11 for the
remuneration received by the Trustee during the years ended December 31, 2002,
2001 and 2000 and Item 12(b) for information concerning Units owned by Bank of
America, N.A. in various fiduciary capacities.

ITEM 14.   CONTROLS AND PROCEDURES.

         Within the 90 days prior to the date of this report, the trustee
carried out an evaluation of the effectiveness of the design and operation of
the Trust's disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. Based upon that evaluation, the Trustee concluded that the Trust's
disclosure controls and procedures are effective in timely alerting the trustee
to material information relating to the Trust required to be included in the
Trust's periodic filings with the Securities and Exchange Commission. In its
evaluation of disclosure controls and procedures, the trustee has relied, to the
extent considered reasonable, on information provided by Burlington Resources
Oil & Gas Company and River Hill Energy Corporation. No significant changes in
the Trust's internal controls or other factors that could affect these controls
have occurred subsequent to the date of such evaluation.


                                       12
<PAGE>

                                     PART IV

ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

         The following documents are filed as a part of this Report:

1.       Financial Statements

         Included in Part II of this Report by reference to the Annual Report of
the Trust for the year ended December 31, 2002:

                  Independent Auditors' Report

                  Statements of Assets, Liabilities and Trust Corpus at December
                  31, 2002 and 2001

                  Statements of Distributable Income for Each of the Three Years
                  in the Period Ended December 31, 2002

                  Statements of Changes in Trust Corpus for Each of the Three
                  Years in the Period Ended December 31, 2002

                  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
given in the financial statements or notes thereto.

3.       Exhibits

<Table>
<Caption>
        EXHIBIT
        NUMBER                                               EXHIBIT
- ----------------------      -------------------------------------------------------------------------------------
<S>                         <C>
        (4)(a)              --    Permian Basin Royalty Trust Indenture dated November 3, 1980, between Southland
                                  Royalty Company and The First National Bank of Fort Worth (now Bank of America,
                                  N.A.), as Trustee, heretofore filed as Exhibit (4)(a) to the Trust's Annual
                                  Report on Form 10-K to the Securities and Exchange Commission for the fiscal
                                  year ended December 31, 1980, is incorporated herein by reference.*

          (b)               --    Net Overriding Royalty Conveyance (Permian Basin Royalty Trust) from Southland
                                  Royalty Company to The First National Bank of Fort Worth (now Bank of America,
                                  N.A.), as Trustee, dated November 3, 1980 (without Schedules), heretofore filed
                                  as Exhibit (4)(b) to the Trust's Annual Report on Form 10-K to the Securities
                                  and Exchange Commission for the fiscal year ended December 31, 1980, is
                                  incorporated herein by reference.*

          (c)               --    Net Overriding Royalty Conveyance (Permian Basin Royalty Trust -- Waddell Ranch)
                                  from Southland Royalty Company to The First National Bank of Fort Worth (now
                                  Bank of America, N.A.), as Trustee, dated November 3, 1980 (without Schedules),
                                  heretofore filed as Exhibit (4)(c) to the Trust's Annual Report on Form 10-K to
                                  the Securities and Exchange Commission for the fiscal year ended December 31,
                                  1980, is incorporated herein by reference.*

         (13)               --    Registrant's Annual Report to security holders for fiscal year ended December
                                  31, 2002.**
</Table>



                                       13
<PAGE>

<Table>
<S>                         <C>
         (23)               --    Consent of Cawley, Gillespie & Associates, Inc., reservoir engineer.**

        (99.1)              --    Certificate by Bank of America, Trustee of Permian Basin Royalty Trust, dated
                                  March 25, 2003 as required by 10 U.S.C. Section 1350, as adopted pursuant to
                                  Section 906 of the Sarbanes-Oxley Act of 2002.**
</Table>

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

*        A copy of this Exhibit is available to any Unit holder, at the actual
         cost of reproduction, upon written request to the Trustee, Bank of
         America, N.A., P.O. Box 830650, Dallas, Texas 75283-0650.

**       Filed herewith.


                               REPORTS ON FORM 8-K

         During the last quarter of the Trust's fiscal year ended December 31,
2002, there were no reports on Form 8-K filed by the Trust.




                                       14
<PAGE>

                                    SIGNATURE


         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.


                                     PERMIAN BASIN ROYALTY TRUST

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


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

Date: March 25, 2003

               (The Trust has no directors or executive officers.)




                                       15
<PAGE>

CERTIFICATION

         I, Ron Hooper, certify that:

         1.       I have reviewed this Annual Report on Form 10-K of Permian
                  Basin Royalty Trust, for which Bank of America, N.A., acts as
                  Trustee;

         2.       Based on my knowledge, this annual report does not contain any
                  untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  annual report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this annual report, fairly
                  present in all material respects the financial condition,
                  distributable income and changes in trust corpus of the
                  registrant as of, and for, the periods presented in this
                  annual report;

         4.       I am responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14), or for causing such procedures to be
                  established and maintained, for the registrant and I have:

                  a)       designed such disclosure controls and procedures, or
                           caused such controls and procedures to be designed,
                           to ensure that material information relating to the
                           registrant, including its consolidated subsidiaries,
                           is made known to me by others within those entities,
                           particularly during the period in which this annual
                           report is being prepared;

                  b)       evaluated the effectiveness of the registrant's
                           disclosure controls and procedures as of a date
                           within 90 days prior to the filing date of this
                           annual report (the "Evaluation Date"); and

                  c)       presented in this annual report my conclusions about
                           the effectiveness of the disclosure controls and
                           procedures based on my evaluation as of the
                           Evaluation Date;

         5.       I have disclosed, based on my most recent evaluation, to the
                  registrant's auditors:

                  a)       all significant deficiencies in the design or
                           operation of internal controls which could adversely
                           affect the registrant's ability to record, process,
                           summarize and report financial data and have
                           identified for the registrant's auditors any material
                           weaknesses in internal controls; and

                  b)       any fraud, whether or not material, that involves
                           persons who have a significant role in the
                           registrant's internal controls; and

         6.       I have indicated in this annual report whether or not there
                  were significant changes in internal controls or in other
                  factors that could significantly affect internal controls
                  subsequent to the date of my most recent evaluation, including
                  any corrective actions with regard to significant deficiencies
                  and material weaknesses.

                  In giving the certifications in paragraphs 4, 5 and 6 above, I
                  have relied to the extent I consider reasonable on information
                  provided to me by Burlington Resources Oil & Gas Company and
                  River Hill Energy Corporation.

Date: March 25, 2003           By: /s/ Ron Hooper
                                   ------------------------------------------
                                   Ron Hooper
                                   Senior Vice President and Administrator
                                   Bank of America, N.A.,




                                       16
<PAGE>
                               INDEX TO EXHIBITS

<Table>
<Caption>
        EXHIBIT
        NUMBER                                               EXHIBIT
- ----------------------      -------------------------------------------------------------------------------------
<S>                         <C>
        (4)(a)              --    Permian Basin Royalty Trust Indenture dated November 3, 1980, between Southland
                                  Royalty Company and The First National Bank of Fort Worth (now Bank of America,
                                  N.A.), as Trustee, heretofore filed as Exhibit (4)(a) to the Trust's Annual
                                  Report on Form 10-K to the Securities and Exchange Commission for the fiscal
                                  year ended December 31, 1980, is incorporated herein by reference.*

          (b)               --    Net Overriding Royalty Conveyance (Permian Basin Royalty Trust) from Southland
                                  Royalty Company to The First National Bank of Fort Worth (now Bank of America,
                                  N.A.), as Trustee, dated November 3, 1980 (without Schedules), heretofore filed
                                  as Exhibit (4)(b) to the Trust's Annual Report on Form 10-K to the Securities
                                  and Exchange Commission for the fiscal year ended December 31, 1980, is
                                  incorporated herein by reference.*

          (c)               --    Net Overriding Royalty Conveyance (Permian Basin Royalty Trust -- Waddell Ranch)
                                  from Southland Royalty Company to The First National Bank of Fort Worth (now
                                  Bank of America, N.A.), as Trustee, dated November 3, 1980 (without Schedules),
                                  heretofore filed as Exhibit (4)(c) to the Trust's Annual Report on Form 10-K to
                                  the Securities and Exchange Commission for the fiscal year ended December 31,
                                  1980, is incorporated herein by reference.*

         (13)               --    Registrant's Annual Report to security holders for fiscal year ended December
                                  31, 2002.**

         (23)               --    Consent of Cawley, Gillespie & Associates, Inc., reservoir engineer.**

        (99.1)              --    Certificate by Bank of America, Trustee of Permian Basin Royalty Trust, dated
                                  March 25, 2003 as required by 10 U.S.C. Section 1350, as adopted pursuant to
                                  Section 906 of the Sarbanes-Oxley Act of 2002.**
</Table>

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

*        A copy of this Exhibit is available to any Unit holder, at the actual
         cost of reproduction, upon written request to the Trustee, Bank of
         America, N.A., P.O. Box 830650, Dallas, Texas 75283-0650.

**       Filed herewith.



                                       17

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>3
<FILENAME>d04339exv13.txt
<DESCRIPTION>ANNUAL REPORT TO SECURITY HOLDERS
<TEXT>
<PAGE>
                                                                      EXHIBIT 13



                          ANNUAL REPORT TO SHAREHOLDERS



                                  [COVER PAGE]

                       [PERMIAN BASIN ROYALTY TRUST LOGO]

           PERMIAN BASIN ROYALTY TRUST ANNUAL REPORT & FORM 10-K 2002




                           [MAP OF COUNTIES IN TEXAS]


           TEXAS ROYALTY PROPERTIES ARE LOCATED IN 35 TEXAS COUNTIES.
              WADDELL RANCH PROPERTIES ARE LOCATED IN CRANE COUNTY.


<PAGE>

THE TRUST

         The Permian Basin Royalty Trust's (the "Trust") principal assets are
comprised of a 75% net overriding royalty interest carved out by Southland
Royalty Company ("Southland") from its fee mineral interest in the Waddell Ranch
properties in Crane County, Texas ("Waddell Ranch properties"), and a 95% net
overriding royalty interest carved out by Southland from its major producing
royalty properties in Texas ("Texas Royalty properties"). The interests out of
which the Trust's net overriding royalty interests were carved were in all cases
less than 100%. The Trust's net overriding royalty interests represent burdens
against the properties in favor of the Trust without regard to ownership of the
properties from which the overriding royalty interests were carved. The net
overriding royalties above are collectively referred to as the "Royalties." The
properties and interests form which the Royalties were carved and which the
Royalties now burden are collectively referred to as the "Underlying
Properties."

         The Trust has been advised that effective January 1, 1996, Southland
was merged with and into Meridian Oil Inc. ("Meridian"), a Delaware corporation,
with Meridian being the surviving corporation. Meridian succeeded to the
ownership of all the assets, has the rights, powers, and privileges, and assumed
all of the liabilities and obligations of Southland. Effective July 11, 1996,
Meridian changed its name to Burlington Resources Oil & Gas Company ("BROG").
Any reference to BROG hereafter for periods prior to the occurrence of the
aforementioned name change or merger should, as applicable, be construed to be a
reference to Meridian or Southland. Further, BROG notified the Trust that, on
February 14, 1997, the Texas Royalty properties that are subject to the Net
Overriding Royalty Conveyance dated November 1, 1980 ("Texas Royalty
Conveyance"), were sold to Riverhill Energy Corporation ("Riverhill Energy") of
Midland, Texas.

UNITS OF BENEFICIAL INTEREST

         Units of Beneficial Interest ("Units") of the Trust are traded on the
New York Stock Exchange with the symbol PBT. Quarterly high and low sales prices
and the aggregate amount of monthly distributions paid each quarter during the
Trust's two most recent years were as follows:

<Table>
<Caption>
                                                            SALES PRICE
                                                      -------------------------
                                                                                          DISTRIBUTIONS
2002                                                     HIGH           LOW                   PAID
                                                      ----------     ----------           -------------
<S>                                                   <C>            <C>                  <C>
First Quarter.....................................    $     5.65     $     4.97           $    .094796

Second Quarter....................................          5.95           5.00                .118491

Third Quarter.....................................          5.35           4.50                .133892

Fourth Quarter....................................          6.40           5.07                .155203
                                                                                          ------------
         Total for 2002...........................                                        $    .502382
                                                                                          ============


2001

First Quarter.....................................    $     6.70     $    5.625           $    .256445

Second Quarter....................................          6.85          5.000                .256094

Third Quarter.....................................          6.53          5.500                .179718

Fourth Quarter....................................          5.95          5.200                .154651
                                                                                          ------------
         Total for 2001...........................                                        $    .846908
                                                                                          ============
</Table>

         Approximately 2,363 Unit holders of record held the 46,608,796 Units of
the Trust at December 31, 2002.



                                       1
<PAGE>

TO UNIT HOLDERS

         We are pleased to present the twenty-third Annual Report of the Trust.
The report includes a copy of the Trust's Annual Report on Form 10-K to the
Securities and Exchange Commission for the year ended December 31, 2002, without
exhibits. Both the report and accompanying Form 10-K contain important
information concerning the Trust's properties, including the oil and gas
reserves attributable to the Royalties owned by the Trust. Production figures,
drilling activity and certain other information included in this report have
been provided to the Trust by BROG (formerly Meridian and Southland).

         As more particularly explained in the Notes to the Financial Statements
appearing in this report and in Item 1 of the accompanying Form 10-K, Bank of
America, N.A., as Trustee, has the primary function under the Trust Indenture of
collecting the monthly net proceeds attributable to the Royalties and making
monthly distributions to the Unit holders, after deducting Trust administrative
expenses and any amounts necessary for cash reserves.

         Royalty income received by the Trustee for the year ended December 31,
2002, was $23,830,604 and interest income earned for the same period was
$17,140. General and administrative expenses amounted to $432,338. A total of
$23,415,406 or $.502382 per Unit, was distributed to Unit holders during 2002. A
discussion of factors affecting the distributions for 2002 may be found in the
Trustee's Discussion and Analysis section of this report and the accompanying
Form 10-K.

         As of December 31, 2002, the Trust's proved reserves were estimated at
7,497,000 Bbls of oil and 28,506,000 Mcf of gas. The estimated future net
revenues from proved reserves at December 31, 2002, amount to $294,576,000 or
$6.32 per Unit. The present value of estimated future net revenues discounted at
10% at December 31, 2002, was $161,875,000 or $3.47 per Unit. The computation of
future net revenues is made following guidelines prescribed by the Financial
Accounting Standards Board (explained in Item 2 of the accompanying Form 10-K)
based on year-end prices and costs.

         As has been previously reported, Southland advised the Trust that it
became operator of record of the Waddell Ranch properties on May 1, 1991.
Meridian, as successor by merger, became the operator of record effective
January 1, 1996. Meridian changed its name to Burlington Resources Oil & Gas
Company in 1996. All field, technical and accounting operations, however, have
been carried out by Schlumberger Technology Corporation ("STC") and Riverhill
Capital Corporation ("Riverhill Capital"), but remain under the direction of
BROG.

         As was previously reported, in February 1997, BROG sold its interest in
the Texas Royalty properties that are subject to the Texas Royalty Conveyance to
Riverhill Energy, which at the time was a wholly-owned subsidiary of Riverhill
Capital and an affiliate of STC. Subsequently, the Trustee was advised that STC
acquired all of the shares of Riverhill Capital. The Trustee has been advised
that, as part of this transaction, ownership of Riverhill Energy's interests in
the Texas Royalty properties referenced above remain in Riverhill Energy, which
was owned by the former shareholders of Riverhill Capital. STC will continue to
perform all accounting operations pertaining to the Texas Royalty properties
under the direction of Riverhill Energy.

         Percentage depletion is allowed on proven properties acquired after
October 11, 1990. For Units acquired after such date, Unit holders would
normally compute both percentage depletion and cost depletion from each
property, and claim the larger amount as a deduction on their income tax
returns. The Trustee and its accountants have estimated the percentage depletion
for January through December 2002, and it appears that cost depletion will
exceed percentage depletion for all Unit holders.

         Royalty income is generally considered portfolio income under the
passive loss rules. Therefore, in general, it appears that Unit holders should
not consider the taxable income from the Trust to be passive income in
determining net passive income or loss. Unit holders should consult their tax
advisors for further information.



                                       2
<PAGE>

         Unit holders of record will continue to receive an individualized tax
information letter for each of the quarters ending March 31, June 30 and
September 30, 2003, and for the year ending December 31, 2003. Unit holders
owning Units in nominee name may obtain monthly tax information from the Trustee
upon request.

                                      Bank of America, N.A., Trustee



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







                                       3
<PAGE>

DESCRIPTION OF THE PROPERTIES

         The net overriding royalty interests held by the Trust are carved out
of high-quality producing oil and gas properties located primarily in West
Texas. A production index for oil and gas properties is the number of years
derived by dividing remaining reserves by current production. The production
index for the Trust properties based on the reserve report prepared by
independent petroleum engineers as of December 31, 2002, is approximately [6.26]
years.

         The net profits/overriding royalty interest in the Waddell Ranch
properties is the largest asset of the Trust. The mineral interests in the
Waddell Ranch, from which such net royalty interests are carved vary from 37.5%
(Trust net interest) to 50% (Trust net interest) in 76,922 gross acres and
33,276 net acres, containing 765 gross (339 net) productive oil wells, 184 gross
(88 net) productive gas wells and 324 gross (141 net) injection wells.

         Six major fields on the Waddell Ranch properties account for more than
90% of the total production. In the six fields, there are 12 producing zones
ranging in depth from 2,800 to 10,600 feet. Most prolific of these zones are the
Grayburg and San Andres, which produce from depths between 2,800 and 3,400 feet.
Productive from the San Andres are the Sand Hills (Judkins) gas field and the
Sand Hills (McKnight) oil field.

         The Dune and Waddell oil fields are productive from both the Grayburg
and San Andres formations. The Sand Hills (Tubb) oil fields produce from the
Tubb formation at depths averaging 4,300 feet, and the University Waddell
(Devonian) oil field is productive from the Devonian formation between 8,400 and
9,200 feet.

         All of the major oil fields on the Waddell Ranch properties are
currently being water flooded. Engineering studies and 3-D seismic evaluations
on these fields indicate the potential for increased production through infill
drilling, modifications of existing water flood techniques, installation of
larger capacity pumping equipment and tertiary recovery projects. Capital
expenditures for remedial and maintenance activities during 2002 totaled
approximately $9.9 million.

         The Texas Royalty properties, out of which the other net overriding
royalty was carved, are located in 33 counties across Texas. The Texas Royalty
properties consist of approximately 125 separate royalty interests containing
approximately 303,000 gross (51,000 net) producing acres. Approximately 41% of
the future net revenues discounted at 10% attributable to Texas Royalty
properties are located in the Wasson and Yates fields.

         BROG has informed the Trustee that the 2003 capital expenditures budget
should total approximately $13.207 million gross of which $1.940 million gross
is attributable to drilling, $9.909 million gross to workovers, and $1.358
million gross to facilities.

COMPUTATION OF ROYALTY INCOME RECEIVED BY THE TRUST

         The Trust's royalty income is computed as a percentage of the net
profit from the operation of the properties in which the Trust owns net
overriding royalty interests. The percentages of net profits are 75% and 95% in
the cases of the Waddell Ranch properties and the Texas Royalty properties,
respectively. Royalty income received by the Trust for the five years ended
December 31, 2002, was computed as shown in the table on the next page.




                                       4
<PAGE>

<Table>
<Caption>
                                                                             YEAR ENDED DECEMBER 31,
                                                 ---------------------------------------------------------------------------------
                                                           2002                        2001                        2000
                                                 -------------------------   -------------------------   -------------------------
                                                   Waddell       Texas        Waddell        Texas        Waddell        Texas
                                                    Ranch       Royalty        Ranch        Royalty        Ranch        Royalty
                                                  Properties   Properties    Properties    Properties    Properties    Properties
                                                 -----------   -----------   -----------   -----------   -----------   -----------
<S>                                              <C>           <C>           <C>           <C>            <C>           <C>
Gross Proceeds of Sales
From the Underlying Properties:

   Oil Proceeds ..............................   $20,543,224   $ 7,785,749   $26,477,679   $ 9,524,586   $31,289,829   $ 9,770,732

   Gas Proceeds ..............................    14,861,094     2,245,648    26,068,379     3,771,184    18,342,926     2,701,298

   Other Payments(a) .........................            --            --            --            --            --            --
                                                 -----------   -----------   -----------   -----------   -----------   -----------
       Total .................................    35,404,318    10,031,397    52,546,058    13,295,770    49,632,755    12,472,030
                                                 -----------   -----------   -----------   -----------   -----------   -----------
Less:

   Severance Tax

       Oil ...................................       863,299       302,665     1,108,968       374,204     1,288,522       373,643

       Gas ...................................       813,581       159,431     1,160,095       239,337     1,189,617       146,512

       Other .................................        72,396            --            --            --        26,991            --

   Lease Operating Expense and Property Tax

       Oil and Gas ...........................     9,424,724       933,646     9,086,468       605,125     9,318,915       442,523

       Other Payments ........................            --            --        50,000            --            --            --

   Capital Expenditures ......................     3,394,674             0     3,350,003            --     4,606,227            --
                                                 -----------   -----------   -----------   -----------   -----------   -----------
            Total ............................    14,568,674     1,395,742    14,755,534     1,218,666    16,430,272       962,678
                                                 -----------   -----------   -----------   -----------   -----------   -----------

   Net Profits ...............................    20,835,643     8,635,655    37,790,525    12,077,104    33,202,483    11,509,352

   Net Overriding Royalty Interest ...........            75%           95%           75%           95%           75%           95%
                                                 -----------   -----------   -----------   -----------   -----------   -----------

Royalty Income ...............................    15,626,732     8,203,852    28,342,893    11,473,248    24,901,862    10,933,884
                                                 -----------   -----------   -----------   -----------   -----------   -----------
   Total Royalty Income for Distribution .....   $15,626,732   $ 8,203,852   $28,342,893   $11,473,248    24,901,862    10,933,884
                                                 ===========   ===========   ===========   ===========   ===========   ===========
</Table>



<Table>
<Caption>
                                                                                  YEAR ENDED DECEMBER 31,
                                                          ---------------------------------------------------------------------
                                                                       1999                                1998
                                                          --------------------------------    ---------------------------------
                                                              Waddell           Texas            Waddell              Texas
                                                               Ranch           Royalty            Ranch              Royalty
                                                            Properties        Properties        Properties         Properties
                                                          --------------    --------------    --------------     --------------
<S>                                                       <C>               <C>               <C>                <C>
Gross Proceeds of Sales
From the Underlying Properties:

   Oil Proceeds .......................................     $18,667,2382    $    5,261,863    $   18,821,076     $    5,404,598

   Gas Proceeds .......................................       12,794,695         1,760,499        13,769,872          1,880,571

   Other Payments(a) ..................................               --                --                --            540,543
                                                          --------------    --------------    --------------     --------------

       Total ..........................................       31,462,077         7,022,362        32,590,948          7,825,712
                                                          --------------    --------------    --------------     --------------

Less:

   Severance Tax

       Oil ............................................          726,944           186,846           725,100            196,770

       Gas ............................................          773,689            77,379        (1,229,730)           104,759

       Other ..........................................           44,839            16,000                --                 --

   Lease Operating Expense and Property Tax

       Oil and Gas ....................................        9,687,476           525,035        14,096,881            790,246

       Other Payments .................................          132,166           180,000                --                 --

   Capital Expenditures ...............................        1,052,769                --        15,874,193                 --
                                                          --------------    --------------    --------------     --------------
</Table>



                                       5
<PAGE>


<Table>
<Caption>
                                                                                  YEAR ENDED DECEMBER 31,
                                                          ---------------------------------------------------------------------
                                                                       1999                                1998
                                                          --------------------------------    ---------------------------------
<S>                                                       <C>               <C>               <C>                <C>

            Total .....................................       12,417,883           985,260        29,396,444          1,091,775
                                                          --------------    --------------    --------------     --------------

   Net Profits ........................................       19,044,194         6,037,102         3,194,504          6,733,937

   Net Overriding Royalty Interest ....................               75%               95%               75%                95%
                                                          --------------    --------------    --------------     --------------


Royalty Income ........................................       14,284,146         5,735,247         2,395,878          6,397,240

Negative Revenue (b) ..................................        1,218,732                --         1,218,732                 --

Litigation Settlement (c) .............................               --                --           766,051                 --
                                                          --------------    --------------    --------------     --------------

   Total Royalty Income for Distribution ..............   $   13,064,414    $    5,735,247    $    4,380,661     $    6,397,240
                                                          ==============    ==============    ==============     ==============
</Table>



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

(a)      The Trust received funds in 1998 from BROG which represented the
         Trust's portion of amounts that had been previously held in suspense by
         BROG relating to the Texas Royalty properties. The Trustee was advised
         that these amounts relate to revenues received by BROG prior to the
         conveyance of its interest in the Texas Royalty properties to Riverhill
         Energy in February 1997.

(b)      In calculating Trust royalty income for the months of June through
         December 1998, costs exceeded revenues for the Waddell Ranch properties
         underlying the Waddell Ranch Net Overriding Royalty Conveyance dated
         effective November 1, 1980 ("Waddell Ranch Conveyance"), by $1,218,732.
         Pursuant to the Waddell Ranch Conveyance, excess costs plus accrued
         interest must be recovered from future net proceeds relating to the
         underlying Waddell Ranch properties before the properties can again
         contribute to Trust royalty income. Cumulative excess amounts were
         fully recovered in February 1999.

(c)      In November 1998, the Trust received its portion of settlement proceeds
         totaling $766,051 from a class-action lawsuit.


                                       6
<PAGE>


DISCUSSION AND ANALYSIS

Trustee's Discussion and Analysis for the Three-Year Period Ended December 31,
2002

Critical Accounting Policies and Estimates

         The trust's financial statements reflect the selection and application
of accounting policies that require the Trust to make significant estimates and
assumptions. The following are some of the more critical judgement areas in the
application of accounting policies that currently affect the Trust's financial
condition and results of operations.

         1.       Revenue Recognition

         Revenues from Royalty Interests are recognized in the period in which
amounts are received by the Trust. Royalty income received by the Trust in a
given calendar year will generally reflect the proceeds, on an entitlements
basis, from natural gas produced for the twelve-month period ended September
30th in that calendar year.

         2.       Reserve Recognition

         Independent petroleum engineers estimate the net proved reserves
attributable to the Royalty Interest. In accordance with Statement of Financial
Standards No. 69, "Disclosures About Oil and Gas Producing Activities,"
estimates of future net revenues from proved reserves have been prepared using
year-end contractual gas prices additional information becomes available. The
reserves actually recovered and the timing of production may be substantially
different from the reserve estimates and related costs. Numerous uncertainties
are inherent in estimating volumes and the value of proved reserves and in
projecting future production rates and the timing of development of
non-producing reserves.

         3.       Contingencies

         Contingencies related to the Underlying Properties that are unfavorably
resolved would generally be reflected by the Trust as reductions to future
royalty income payments to the Trust with corresponding reductions to cash
distributions to Unitholders.

         4.       New Accounting Pronouncements

         SFAS No. 143, "Accounting for Asset Retirement Obligations" was issued
in June 2001, and will be adopted by the Trust on January 1, 2003. This
Statement addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. The effect of adopting SFAS No. 143 will not have a
material impact on the Trust's financial statements.

         SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections" was issued in
April 2002 and is effective for fiscal years beginning after May 15, 2002. This
Statement includes the rescission of FASB Statement No. 4, "Reporting Gains and
Losses from Extinguishment of Debt," and an amendment to FASB Statement No. 13,
"Accounting for Leases," to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. The effect of adopting SFAS No. 145 will not have a
material impact on the Trust's financial statements.

         SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities" was issued in June 2002 and will be effective for exit or disposal
activities subsequent to December 31, 2002. The Trust anticipates no material
impact on its financial statements from the adoption of this accounting
standard.

         SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure, an amendment of FASB Statement No. 123," was issued in December 2002
and provides new transition methods if an entity adopts the fair value based
method of valuing stock-based compensation suggested in SFAS No. 123 "Accounting
for Stock-Based Compensation," as well as requiring additional disclosures in
interim and annual financial statements. The Trust has no options or other
stock-based instruments and accordingly, the impact of this new Standard is not
expected to be material to the financial statements of the Trust.

         FASB Interpretation ("FIN") No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others," requires disclosures beginning with financial
statements ending after December 15, 2002 and requires liability recognition
beginning January 1, 2003. The Trust had no such guarantees outstanding as of
December 31, 2002.

         FIN No. 46, "Consolidation of Variable Interest Entities" was issued in
January 2003. This interpretation of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements," applies immediately to variable interest
entities created after January 31, 2003 and applies to the first period
beginning after June 15, 2003 to entities acquired before February 1, 2003. This
FIN does not affect the Trust as it has no unconsolidated subsidiaries accounted
for under the equity method of accounting.

Liquidity and Capital Resources

         As stipulated in the Trust Agreement, the Trust is intended to be
passive in nature and the Trustee does not have any control over or any
responsibility relating to the operation of the Underlying Properties. The
Trustee has powers to collect and distribute proceeds received by the Trust and
pay Trust liabilities and expenses and its actions have been limited to those
activities. 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. As a result, other
than such borrowings, if any, the Trust has no source of liquidity or capital
resources other than the Royalties.

Results of Operations

         Royalty income received by the Trust for the three-year period ended
December 31, 2002, is reported in the following table:

<Table>
<Caption>
                                              YEAR ENDED DECEMBER 31,
                                  ----------------------------------------------
ROYALTIES                              2002             2001            2000
                                  --------------   --------------  -------------
<S>                               <C>              <C>             <C>
Total Revenue................     $   23,830,604   $   39,816,141  $  35,835,746
                                            100%             100%           100%

Oil Revenue..................         15,013,280       22,466,757     24,901,862
                                             63%              56%            70%

Gas Revenue..................          8,817,324       17,349,384     10,933,884
                                             37%              44%            32%

Total Revenue/Unit...........     $      .511289   $      .854327  $     .768862
                                  ==============   ==============  =============
</Table>



                                       7
<PAGE>

         Royalty income of the Trust for the calendar year is associated with
actual oil and gas production for the period November of the prior year through
October of the current year. Oil and gas sales for 2002, 2001 and 2000 for the
Royalties and the Underlying Properties, excluding portions attributable to the
adjustments discussed hereafter, are presented in the following table:

<Table>
<Caption>

                                                     YEAR ENDED DECEMBER 31,
                                           ------------------------------------------
ROYALTIES                                       2002           2001           2000
                                           ------------   ------------   ------------
<S>                                        <C>            <C>            <C>
Oil Sales (Bbls) .......................        728,313        941,202        919,429

Gas Sales (Mcf) ........................      3,192,175      3,875,586      3,346,445


UNDERLYING PROPERTIES

Oil

         Total Oil Sales (Bbls) ........      1,272,923      1,434,983      1,486,110

         Average Per Day (Bbls) ........          3,489          3,931          4,072

         Average Price/Bbl .............   $      22.31   $      24.88   $      27.66


Gas

         Total Gas Sales (Mcf) .........      6,189,015      6,441,298      5,890,023

         Average Per Day (Mcf) .........         16,956         17,593         16,137

         Average Price/Mcf .............   $       2.74   $       4.70   $       3.63
</Table>

         The average price of oil decreased to $22.21 per barrel in 2002, down
from $24.88 per barrel in 2001. In addition, the average price of gas declined
from $4.70 per Mcf in 2001 to $2.76 per Mcf in 2002.

         Since the oil and gas sales attributable to the Royalties are based on
an allocation formula that is dependent on such factors as price and cost
(including capital expenditures), production amounts do not necessarily provide
a meaningful comparison. Total oil production decreased approximately 11% from
2002 to 2001 primarily due to lower capital expenditures in previous years.
Total gas sales decreased approximately 4% from 2002 to 2001 primarily due to a
decrease in capital expenditures for gas wells.

         Total capital expenditures in 2002 used in the net overriding royalty
calculation were approximately $9.9 million compared to $3.4 million in 2001 and
$4.6 million in 2000. During 2002, there were 4 gross (1.75 net) wells drilled
and completed on the Waddell Ranch properties. At December 31, 2002, there were
no wells in progress on the Waddell Ranch properties.

         In 2002, lease operating expense and property taxes on the Waddell
Ranch properties amounted to approximately $9.4 million, which amount was
approximately the same as in 2001.

         The Trustee has been advised by BROG that for the period August 1,
1993, through June 30, 2003, the oil from the Waddell Ranch was sold under a
competitive bid to a third party.

         During 2002, the monthly royalty receipts were invested by the Trustee
in U.S. Treasury securities until the monthly distribution date, and earned
interest totaled $17,140. Interest income for 2001 and 2000 was $77,977 and
$85,348, respectively.

         General and administrative expenses in 2002 were $432,338 compared to
$420,723 in 2001 and $375,953 in 2000.

         Distributable income for 2002 was $23,415,406, or $.502382 per Unit.

         Distributable income for 2001 was $39,473,395, or $.846908 per Unit.

         Distributable income for 2000 was $35,545,141, or $.762627 per Unit.



                                       8
<PAGE>

RESULTS OF THE FOURTH QUARTERS OF 2002 AND 2001

         Royalty income received by the Trust for the fourth quarter of 2002
amounted to $7,296,142 or $.155203 per Unit. For the fourth quarter of 2001, the
Trust received royalty income of $7,247,490 or $.154651 per Unit. Interest
income for the fourth quarter of 2002 amounted to $4,929 compared to $9,925 for
the fourth quarter of 2001. The decrease in interest income can be attributed
primarily to a decrease in interest rates. General and administrative expenses
totaled $67,256 for the fourth quarter of 2002 compared to $49,388 for the
fourth quarter of 2001.

         Royalty income for the Trust for the fourth quarter is associated with
actual oil and gas production during August through October from the Underlying
Properties. Oil and gas sales attributable to the Royalties and the Underlying
Properties for the quarter and the comparable period for 2001 are as follows:

<Table>
<Caption>
                                                      FOURTH QUARTER
                                                ---------------------------
                                                    2002           2001
                                                ------------   ------------
<S>                                             <C>            <C>
ROYALTIES

         Oil Sales (Bbls) ...................        185,131        226,307

         Gas Sales (Mcf) ....................        874,957        943,738


UNDERLYING PROPERTIES

         Total Oil Sales (Bbls) .............        309,368        350,921

         Average Per Day (Bbls) .............          3,363          3,814

         Average Price/Bbls .................   $      26.53   $      22.52

         Total Gas Sales (Mcf) ..............      1,593,780      1,610,652

         Average Per Day (Mcf) ..............         17,324         17,507

         Average Price/Mcf ..................   $       3.13   $       2.63
</Table>

         The posted price of oil increased for the fourth quarter of 2002
compared to the fourth quarter of 2001, resulting in an average price per barrel
of $26.53 compared to $22.52 in the same period of 2001. The average price of
gas increased for the fourth quarter of 2002 compared to the same period in
2001, resulting in an average price per Mcf of $3.13 compared to $2.63 in the
fourth quarter of 2001.

         The Trustee has been advised that oil sales decreased in 2002 compared
to the same period in 2001 primarily due to decreased capital expenditures in
prior periods and natural production declines. Gas sales from the Underlying
Properties decreased in the fourth quarter of 2002 compared to the same period
in 2001 due to the same factors.

         The Trust has been advised that no wells was drilled and completed
during the three months ended December 31, 2002, and there were no wells in
progress.

OFF-BALANCE SHEET ARRANGEMENTS.

         As stipulated in the Trust Agreement, the Trust is intended to be
passive in nature and the Trustee does not have any control over or any
responsibility relating to the operation of the Underlying Properties. The
Trustee has powers to collect and distribute proceeds received by the Trust and
pay Trust liabilities and expenses and its actions have been limited to those
activities. Therefore, the Trust has not engaged in any off-balance sheet
arrangements.

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS.

<Table>
<Caption>

CONTRACTUAL OBLIGATIONS                 TOTAL                          PAYMENTS DUE BY PERIOD
- -------------------------------------   ------   -------------------------------------------------------------------
                                                   LESS THAN 1                                        MORE THAN 5
                                                      YEAR          1 - 3 YEARS       3-5 YEARS          YEARS
                                        ------   ---------------    -----------       ---------       --------------
<S>                                     <C>      <C>                <C>               <C>             <C>
Long-Term Debt Obligations                0             0                0                0                0

Capital Lease Obligations                 0             0                0                0                0

Operating Lease Obligations               0             0                0                0                0

Purchase Obligations                      0             0                0                0                0

Other Long-Term Liabilities               0             0                0                0                0
Reflected on the Trusts Balance
Sheet under GAAP

Total                                     0             0                0                0                0
</Table>


                                       9
<PAGE>

                           PERMIAN BASIN ROYALTY TRUST
                              FINANCIAL STATEMENTS

               STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
                           DECEMBER 31, 2002 AND 2001

<Table>
<Caption>
ASSETS                                                                     2002            2001
                                                                    ---------------  ----------------
<S>                                                                 <C>              <C>
Cash and Short-term Investments................................     $     2,371,387  $      1,842,420

Net Overriding Royalty Interests in Producing Oil and
         Gas Properties - Net (Notes 2 and 3)..................           2,172,393         2,371,187
                                                                    ---------------  ----------------
                                                                    $     4,543,780  $      4,213,606
                                                                    ===============  ================

LIABILITIES AND TRUST CORPUS

Distribution Payable to Unit Holders ..........................     $     2,371,387  $      1,842,420

Trust Corpus - 46,608,796 Units of Beneficial Interest
         Authorized and Outstanding............................           2,172,393         2,371,187
                                                                    ---------------  ----------------
                                                                    $     4,543,780  $      4,213,606
                                                                    ===============  ================
</Table>


                       STATEMENTS OF DISTRIBUTABLE INCOME
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2002

<Table>
<Caption>
                                                                2002              2001               2000
                                                         ----------------   ----------------   ----------------
<S>                                                      <C>                <C>                <C>
Royalty Income (Notes 2 and 3)......................     $     23,830,604   $     39,816,141   $     35,835,746

Interest Income.....................................               17,140             77,977             85,348
                                                         ----------------   ----------------   ----------------

                                                               23,847,744         39,894,118         35,921,094

Expenditures -- General and Administrative..........              432,338            420,723            375,953
                                                         ----------------   ----------------   ----------------

Distributable Income................................     $     23,415,406   $     39,473,395   $     35,545,141
                                                         ================   ================   ================

Distributable Income per Unit (46,608,796 Units)....     $        .502382   $        .846908   $        .762627
                                                         ================   ================   ================
</Table>

                      STATEMENTS OF CHANGES IN TRUST CORPUS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2002

<Table>
<Caption>
                                                               2002               2001               2000
                                                         ----------------   ---------------    ---------------
<S>                                                      <C>                <C>                <C>
Trust Corpus, Beginning of Period...................     $      2,371,187   $     2,595,254    $     2,889,978

Amortization of Net Overriding Royalty Interests
         (Notes 2 and 3)............................             (198,794)         (224,067)          (294,724)

Distributable Income................................           23,415,406        39,473,395         35,545,141

Distributions Declared..............................          (23,415,406)      (39,473,395)       (35,545,141)
                                                         ----------------   ---------------    ---------------

Trust Corpus, End of Period.........................     $      2,172,393   $     2,371,187    $     2,595,254
                                                         ================   ================   ===============
</Table>

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

                                       10
<PAGE>



                          NOTES TO FINANCIAL STATEMENTS

1.       TRUST ORGANIZATION AND PROVISIONS

         The Permian Basin Royalty Trust ("Trust") was established as of
November 1, 1980. Bank of America, N.A. ("Trustee") is Trustee for the Trust.
Southland Royalty Company ("Southland") conveyed to the Trust (1) a 75% net
overriding royalty in Southland's fee mineral interest in the Waddell Ranch in
Crane County, Texas ("Waddell Ranch properties") and (2) a 95% net overriding
royalty carved out of Southland's major producing royalty properties in Texas
("Texas Royalty properties"). The net overriding royalties above are
collectively referred to as the "Royalties."

         On November 3, 1980, Units of Beneficial Interest ("Units") in the
Trust were distributed to the Trustee for the benefit of Southland shareholders
of record as of November 3, 1980, who received one Unit in the Trust for each
share of Southland common stock held. The Units are traded on the New York Stock
Exchange.

         The terms of the Trust Indenture provide, among other things, that:

         o        the Trust shall not engage in any business or commercial
                  activity of any kind or acquire any assets other than those
                  initially conveyed to the Trust;

         o        the Trustee may not sell all or any part of the Royalties
                  unless approved by holders of 75% of all Units outstanding in
                  which case the sale must be for cash and the proceeds promptly
                  distributed;

         o        the Trustee may establish a cash reserve for the payment of
                  any liability which is contingent or uncertain in amount;

         o        the Trustee is authorized to borrow funds to pay liabilities
                  of the Trust; and

         o        the Trustee will make monthly cash distributions to Unit
                  holders (see Note 2).

2.       NET OVERRIDING ROYALTY INTERESTS AND DISTRIBUTION TO UNIT HOLDERS

         The amounts to be distributed to Unit holders ("Monthly Distribution
Amounts") are determined on a monthly basis. The Monthly Distribution Amount is
an amount equal to the sum of cash received by the Trustee during a calendar
month 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. If the Monthly Distribution
Amount for any monthly period is a negative number, then the distribution will
be zero for such month. To the extent the distribution amount is a negative
number, that amount will be carried forward and deducted from future monthly
distributions until the cumulative distribution calculation becomes a positive
number, at which time a distribution will be made. Unit holders of record will
be entitled to receive the calculated Monthly Distribution Amount for each month
on or before 10 business days after the monthly record date, which is generally
the last business day of each calendar month.



                                       11
<PAGE>

         The cash received by the Trustee consists of the amounts received by
owners of the interest burdened by the Royalties from the sale of production
less the sum of applicable taxes, accrued production costs, development and
drilling costs, operating charges and other costs and deductions, multiplied by
75% in the case of the Waddell Ranch properties and 95% in the case of the Texas
Royalty properties.

         The initial carrying value of the Royalties ($10,975,216) represented
Southland's historical net book value at the date of the transfer to the Trust.
Accumulated amortization as of December 31, 2002 and 2001, aggregated $8,802,823
and $8,604,029, respectively.

3.       BASIS OF ACCOUNTING

         The financial statements of the Trust are prepared on the following
basis:

         o        Royalty income recorded is the amount computed and paid by the
                  working interest owner to the Trustee on behalf of the Trust.

         o        Trust expenses recorded are based on liabilities paid and cash
                  reserves established out of cash received or borrowed funds
                  for liabilities and contingencies.

         o        Distributions to Unit holders are recorded when declared by
                  the Trustee.

         The financial statements of the Trust differ from financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America because revenues are not accrued in the month of
production and certain cash reserves may be established for contingencies which
would not be accrued in financial statements prepared in accordance with
accounting principles generally accepted in the United States of America.
Amortization of the Royalties calculated on a unit-of-production basis is
charged directly to trust corpus.

4.       NEW ACCOUNTING PRONOUNCEMENTS

         SFAS No. 143, "Accounting for Asset Retirement Obligations" was issued
in June 2001, and will be adopted by the Trust on January 1, 2003. This
Statement addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. The effect of adopting SFAS No. 143 will not have a
material impact on the Trust's financial statements.

         SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections" was issued in
April 2002 and is effective for fiscal years beginning after May 15, 2002. This
Statement includes the rescission of FASB Statement No. 4, "Reporting Gains and
Losses from Extinguishment of Debt," and an amendment to FASB Statement No. 13,
"Accounting for Leases," to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. The effect of adopting SFAS No. 145 will not have a
material impact on the Trust's financial statements.

         SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities" was issued in June 2002 and will be effective for exit or disposal
activities subsequent to December 31, 2002. The Trust anticipates no material
impact on its financial statements from the adoption of this accounting
standard.

         SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure, an amendment of FASB Statement No. 123," was issued in December 2002
and provides new transition methods if an entity adopts the fair value based
method of valuing stock-based compensation suggested in SFAS No. 123 "Accounting
for Stock-Based Compensation," as well as requiring additional disclosures in
interim and annual financial statements. The Trust has no options or other
stock-based instruments and accordingly, the impact of this new Standard is not
expected to be material to the financial statements of the Trust.

         FASB Interpretation ("FIN") No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others," requires disclosures beginning with financial
statements ending after December 15,



                                       12
<PAGE>

2002 and requires liability recognition beginning January 1, 2003. The Trust had
no such guarantees outstanding as of December 31, 2002.

         FIN No. 46, "Consolidation of Variable Interest Entities" was issued in
January 2003. This interpretation of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements," applies immediately to variable interest
entities created after January 31, 2003 and applies to the first period
beginning after June 15, 2003 to entities acquired before February 1, 2003. This
FIN does not affect the Trust as it has no unconsolidated subsidiaries accounted
for under the equity method of accounting.

5.       FEDERAL INCOME TAX

         For Federal income tax purposes, the Trust constitutes a fixed
investment trust which is taxed as a grantor trust. A grantor trust is not
subject to tax at the trust level. The Unit holders are considered to own the
Trust's income and principal as though no trust were in existence. The income of
the Trust is deemed to have been received or accrued by each Unit holder at the
time such income is received or accrued by the Trust rather than when
distributed by the Trust.

         The Royalties constitute "economic interests" in oil and gas properties
for Federal income tax purposes. Unit holders must report their share of the
revenues of the Trust as ordinary income from oil and gas royalties and are
entitled to claim depletion with respect to such income.

         The Trust has on file technical advice memoranda confirming the tax
treatment described above.

         The classification of the Trust's income for purposes of the passive
loss rules may be important to a Unit holder. Royalty income generally is
treated as portfolio income and does not offset passive losses.

         Unit holders should consult their tax advisors for further information.

6.       SIGNIFICANT CUSTOMERS

         Information as to significant purchasers of oil and gas production
attributable to the Trust's economic interests is included in Item 2 of the
Trust's Annual Report on Form 10-K which is included in this report.

7.       PROVED OIL AND GAS RESERVES (UNAUDITED)

         Proved oil and gas reserve information is included in Item 2 of the
Trust's Annual Report on Form 10-K which is included in this report.




                                       13
<PAGE>

8.       QUARTERLY SCHEDULE OF DISTRIBUTABLE INCOME (UNAUDITED)

         The following is a summary of the unaudited quarterly schedule of
distributable income for the two years ended December 31, 2002 (in thousands,
except per Unit amounts):

<Table>
<Caption>
                                                                            DISTRIBUTABLE
                                                                             INCOME AND
                                       ROYALTY          DISTRIBUTABLE       DISTRIBUTION
2002                                   INCOME              INCOME             PER UNIT
                                 -----------------   -----------------   -----------------
<S>                              <C>                 <C>                 <C>
First Quarter.................   $           4,574   $           4,418   $         .094796

Second Quarter................               5,654               5,523             .118491

Third Quarter.................               6,306               6,241             .133892

Fourth Quarter................               7,297               7,233             .155203
                                 -----------------   -----------------   -----------------

         Total................   $          23,831   $          23,415   $         .502382
                                 =================   =================   =================
</Table>


<Table>
<Caption>
                                                                            DISTRIBUTABLE
                                                                             INCOME AND
                                       ROYALTY          DISTRIBUTABLE       DISTRIBUTION
2001                                   INCOME              INCOME             PER UNIT
                                 -----------------   -----------------   -----------------
<S>                              <C>                 <C>                 <C>
First Quarter.................   $          12,092   $          11,953   $         .256445

Second Quarter................              12,043              11,936             .256094

Third Quarter.................               8,433               8,376             .179718

Fourth Quarter................               7,247               7,208             .154651
                                 -----------------   -----------------   -----------------

         Total................   $          39,816   $          39,473   $         .846908
                                 =================   =================   =================
</Table>




                                       14
<PAGE>

                          INDEPENDENT AUDITORS' REPORT


BANK OF AMERICA, N.A., AS TRUSTEE FOR THE PERMIAN BASIN ROYALTY TRUST:

         We have audited the accompanying statements of assets, liabilities and
trust corpus of the Permian Basin Royalty Trust (the "Trust") as of December 31,
2002 and 2001, and the related statements of distributable income and changes in
trust corpus for each of the three years in the period ended December 31, 2002.
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 3 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, 2002 and 2001, and the distributable income and changes in trust
corpus for each of the three years in the period ended December 31, 2002, on the
basis of accounting described in Note 3.



         /s/ DELOITTE & TOUCHE LLP
- --------------------------------------------

Deloitte & Touche LLP
Dallas, Texas
March 25, 2003



                                       15
<PAGE>

                                           PERMIAN BASIN ROYALTY TRUST
                                           901 Main Street, Suite 1700
                                           P.O. Box 830650
                                           Dallas, Texas 75202
                                           Bank of America, N.A., Trustee

                                           AUDITORS
                                           Deloitte & Touche LLP
                                           Dallas, Texas

                                           LEGAL COUNSEL
                                           Thompson & Knight L.L.P.
                                           Dallas, Texas

                                           TAX COUNSEL
                                           Winstead, Sechrest Minick
                                           Houston, Texas

                                           TRANSFER AGENT
                                           Mellon Investor Services LLC
                                           Ridgefield Park, New Jersey



                                       16

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>4
<FILENAME>d04339exv23.txt
<DESCRIPTION>CONSENT OF CAWLEY, GILLESPIE & ASSOCIATES, INC.
<TEXT>
<PAGE>
                                                                      EXHIBIT 23

                 CONSENT OF CAWLEY, GILLESPIE & ASSOCIATES INC.


                                  [LETTERHEAD]

                                 March 25, 2003

Permian Basin Royalty Trust
Bank of America, N.A., Trustee
901 Main Street
Dallas, Texas

Gentlemen:

         Cawley, Gillespie & Associates, Inc. hereby consents to the use of the
oil and gas reserve information in the Permian Basin Royalty Trust Securities
and Exchange Commission Form 10-K for the year ending December 31, 2002 and in
the Permian Basin Royalty Trust Annual Report for the year ending December 31,
2002, based on reserve reports dated March 12, 2003 prepared by Cawley,
Gillespie & Associates, Inc.

                                   Submitted,


                                       /s/ CAWLEY, GILLESPIE & ASSOCIATES
                                   ------------------------------------------
                                      CAWLEY, GILLESPIE & ASSOCIATES, INC.



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>5
<FILENAME>d04339exv99w1.txt
<DESCRIPTION>CERTIFICATION PURSUANT TO SECTION 906
<TEXT>
<PAGE>


                                                                    EXHIBIT 99.1


    CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

         In connection with the Annual Report of Williams Coal Seam Royalty
Trust (the "Trust") on Form 10-K for the annual period ended December 31, 2002
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), the undersigned, not in its individual capacity but solely as the
trustee of the Trust, certifies pursuant to 18 U.S.C. 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that to its knowledge:

         (1)      The Report fully complies with the requirements of Section
                  13(a) or 15(d) of the Securities Exchange Act of 1934, as
                  amended; and

         (2)      The information contained in the Report fairly presents, in
                  all material respects, the financial condition and results of
                  operations of the Trust.




                                 BANK OF AMERICA, N.A., TRUSTEE FOR
                                 WILLIAMS COAL SEAM GAS ROYALTY TRUST


Date: March 25, 2003           By:/s/ Ron E. Hooper
                                    ----------------------------------------
                                    Ron E. Hooper,
                                    Senior Vice President, Royalty Management



</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
