##### Table of Contents









UNITED STATES



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,
    2004                                             
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from           to                                             

Commission File Number: 1-8424

Sabine Royalty Trust

(Exact name of registrant as specified in its
charter)


|                                                                                                                                                                    |  |                                         
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------
|Texas                                                                                                                                                               |  | 75-6297143                              
|(State or other jurisdiction
    of incorporation or organization)                                                                                                  |  | (I.R.S. Employer
    Identification No.)
|Trust Division
    Bank of America, N.A.
    Bank of America Plaza
    17th Floor
    901 Main Street
    Dallas, Texas(Address of principal executive
    offices) |  | 75202(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  
|Title of Each Class          |  | on 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 o

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 filer (as defined
in Rule 12b-2 of the Securities and Exchange Act of
1934). Yes x   No o

The aggregate
market value of units of beneficial interest of the registrant
(based on the closing sale price on the New York Stock Exchange
as of the last business day of its most recently completed
second fiscal quarter) held by non-affiliates of the registrant
was approximately $498 million.

At March 4,
2005, there were 14,579,345 units of beneficial interest
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None










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TABLE OF CONTENTS

|                                        |  |                                                                                                                         |  |      |    | 
|--------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                        |  |                                                                                                                         |  | Page
|                                        |  |                                                                                                                         |  |     
|PART I                                 
|Item 1.                                 |  | Business                                                                                                                |  |      | 1  | 
|                                        |  | Description of the Trust                                                                                                |  |      | 1  | 
|                                        |  | Assets of the
    Trust                                                                                                 |  |      | 2  | 
|                                        |  | Liabilities of
    the Trust                                                                                            |  |      | 2  | 
|                                        |  | Duties and
    Limited Powers of Trustee                                                                                |  |      | 2  | 
|                                        |  | Liabilities of
    Trustee                                                                                              |  |      | 3  | 
|                                        |  | Duration of
    Trust                                                                                                   |  |      | 3  | 
|                                        |  | Voting Rights of
    Unit Holders                                                                                       |  |      | 3  | 
|                                        |  | Description of Units                                                                                                    |  |      | 4  | 
|                                        |  | Distributions of
    Net Income                                                                                         |  |      | 4  | 
|                                        |  | Transfer                                                                                                                |  |      | 4  | 
|                                        |  | Reports to Unit
    Holders                                                                                             |  |      | 5  | 
|                                        |  | Liability of
    Unit Holders                                                                                           |  |      | 5  | 
|                                        |  | Possible
    Divestiture of Units                                                                                       |  |      | 5  | 
|                                        |  | Federal Taxation                                                                                                        |  |      | 6  | 
|                                        |  | State Tax Considerations                                                                                                |  |      | 8  | 
|                                        |  | Regulation and Prices                                                                                                   |  |      | 9  | 
|                                        |  | Regulation                                                                                                              |  |      | 9  | 
|                                        |  | Prices                                                                                                                  |  |      | 9  | 
|Item 2.                                 |  | Properties                                                                                                              |  |      | 10 | 
|                                        |  | Title                                                                                                                   |  |      | 11 | 
|                                        |  | Reserves                                                                                                                |  |      | 11 | 
|Item 3.                                 |  | Legal Proceedings                                                                                                       |  |      | 16 | 
|Item 4.                                 |  | Submission of Matters to a
    Vote of Security Holders                                                                 |  |      | 16 | 
|PART II                                
|Item 5.                                 |  | Market for Registrants
    Common Equity and Related Stockholder Matters and Issuer
    Purchases of Equity Securities |  |      | 17 | 
|Item 6.                                 |  | Selected Financial Data                                                                                                 |  |      | 17 | 
|Item 7.                                 |  | Trustees Discussion
    and Analysis of Financial Condition and Results of Operations                                  |  |      | 17 | 
|Item 7A.                                |  | Quantitative and Qualitative
    Disclosures About Market Risk                                                          |  |      | 21 | 
|Item 8.                                 |  | Financial Statements and
    Supplementary Data                                                                         |  |      | 22 | 
|Item 9.                                 |  | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure                                |  |      | 34 | 
|Item 9A.                                |  | Controls and Procedures                                                                                                 |  |      | 34 | 
|Item 9B.                                |  | Other Information                                                                                                       |  |      | 35 | 
|PART III                               
|Item 10.                                |  | Directors and Executive
    Officers of the Registrant                                                                  |  |      | 35 | 
|Item 11.                                |  | Executive Compensation                                                                                                  |  |      | 35 | 
|Item 12.                                |  | Security Ownership of
    Certain Beneficial Owners and Management                                                      |  |      | 35 | 
|Item 13.                                |  | Certain Relationships and
    Related Transactions                                                                      |  |      | 35 | 
|Item 14.                                |  | Principal Accounting Fees
    and Services                                                                              |  |      | 35 | 
|PART IV                                
|Item 15.                                |  | Exhibits, Financial
    Statement Schedules                                                                             |  |      | 36 | 
|Consent of DeGolyer and MacNaughton    
|Rule 13a-14(a)(15d-14(a)) Certification
|Certification Pursuant to Section 906  
|Report dated February 10, 2005         



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PART I



Item 1. Business.




DESCRIPTION OF THE TRUST


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

The Trust maintains an Internet website, and as a
result, reports such as its annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on
Form 8-K, and amendments to such reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended will now be made available at
http://www.sbr-sabineroyalty.com as soon as reasonably
practicable after such information is electronically filed with
or furnished to the SEC.

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

In order to avoid uncertainty under Louisiana law
as to the legality of the Trustees holding record title to
the Royalty Properties located in that state, title to such
properties has historically been held by a separate trust formed
under the laws of Louisiana, the sole beneficiary of which was
the Trust. Sabine Louisiana Royalty Trust was a passive entity,
with the trustee thereof, Hibernia National Bank in
New Orleans, having only such powers as were necessary for
the collection of and distribution of revenues from and the
protection of the Royalty Properties located in Louisiana and
the payment of liabilities of Sabine Louisiana Royalty Trust. On
December 31, 2001, Bank of America, N.A. assumed the duties
as Trustee of the Sabine Louisiana Royalty Trust, since
Louisiana law now permits an out-of-state bank to act in this
capacity. A separate trust also was established to hold record
title to the Royalty Properties located in Florida. Legislation
was adopted in Florida in 1992 that eliminated the provision of
Florida law that prohibited the Trustee from holding record
title to the Royalty Properties located in that state. In
November 1993, record title to the Royalty Properties held
by the trustee of Sabine Florida Land Trust was transferred to
the Trustee. As used herein, the term Royalty
Properties includes the Royalty Properties held directly
by the Trust and the Royalty Properties located in Louisiana and
Florida that were held indirectly through the Trusts
ownership of 100 percent beneficial interest of Sabine
Louisiana Royalty Trust and Sabine Florida Land Trust. In
discussing the Trust, this report disregards the technical
ownership formalities described in this paragraph, which have no
effect on the tax or accounting treatment of the Royalty
Properties, since the observance thereof would significantly
complicate the information presented herein without any
corresponding benefit to Unit holders.

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

In May 1988, Sabine Corporation was acquired by
Pacific Enterprises, a California corporation. Through a series
of mergers, Sabine Corporation was merged into Pacific
Enterprises Oil Company (USA)

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(Pacific (USA)), a California
corporation and a wholly owned subsidiary of Pacific
Enterprises, effective January 1, 1990. This acquisition
and the subsequent mergers had no effect on the Units. Pacific
(USA), as successor to Sabine Corporation, assumed by operation
of law all of Sabine Corporations rights and obligations
with respect to the Trust. References herein to Pacific
(USA) shall be deemed to include Sabine Corporation where
appropriate.


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

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




Assets of the Trust

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




Liabilities of the Trust

Because of the passive nature of the Trusts
assets and the restrictions on the power of the Trustee to incur
obligations, it is anticipated that the only liabilities the
Trust will incur are those for routine administrative expenses,
such as insurance and trustees fees, and accounting,
engineering, legal and other professional fees. The total
general and administrative expenses of the Trust for 2004 were
$1,801,824 of which, pursuant to the terms of the Trust
Agreement, $291,480 was paid to Bank of America, as Trustee, and
$874,438 was paid to Bank of America, as escrow agent.




Duties and Limited Powers of Trustee

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

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

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

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The Trust Agreement grants the Trustee only such
rights and powers as are necessary to achieve the purposes of
the Trust. The Trust Agreement prohibits the Trustee from
engaging in any business, commercial or, with certain
exceptions, investment activity of any kind and from using any
portion of the assets of the Trust to acquire any oil and gas
lease, royalty or other mineral interest other than the Royalty
Properties. The Trustee may sell Trust properties only as
authorized by a vote of the Unit holders, or when necessary to
provide for the payment of specific liabilities of the Trust
then due or upon termination of the Trust. Pledges or other
encumbrances to secure borrowings are permitted without the
authorization of Unit holders if the Trustee determines such
action is advisable. Any sale of Trust properties must be for
cash unless otherwise authorized by the Unit holders or unless
the properties are being sold to provide for the payment of
specific liabilities of the Trust then due, and the Trustee is
obligated to distribute the available net proceeds of any such
sale to the Unit holders.




Liabilities of Trustee

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




Duration of Trust

The Trust is irrevocable and Pacific (USA) has no
power to terminate the Trust or, except with respect to certain
corrective amendments, to alter or amend the terms of the Trust
Agreement. The Trust will exist until it is terminated by
(i) two successive fiscal years in which the Trusts
gross revenues from the Royalty Properties are less than
$2,000,000 per year, (ii) a vote of Unit holders as
described below under Voting Rights of Unit Holders
or (iii) operation of provisions of the Trust Agreement
intended to permit compliance by the Trust with the rule
against perpetuities. Legislation that was introduced in
the 2003 Texas legislature to repeal the rule against
perpetuities failed to pass. The Texas legislature meets
again for its regular session in 2005, and it is not known
whether a proposal to repeal the rule against
perpetuities will be introduced during this legislative
session.

Upon the termination of the Trust, the Trustee
will continue to act in such capacity until all the assets of
the Trust are distributed. The Trustee will sell all Trust
properties for cash (unless the Unit holders authorize the sale
for a specified non-cash consideration, in which event the
Trustee may, but is not obligated to, consummate such non-cash
sale) in one or more sales and, after satisfying all existing
liabilities and establishing adequate reserves for the payment
of contingent liabilities, will distribute all available
proceeds to the Unit holders.




Voting Rights of Unit Holders

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

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

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

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

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

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




DESCRIPTION OF UNITS

Each Unit represents an equal undivided share of
beneficial interest in the Trust and is evidenced by a
transferable certificate issued by the Trustee. Each Unit
entitles its holder to the same rights as the holder of any
other Unit, and the Trust has no other authorized or outstanding
class of equity security. At March 4, 2005, there were
14,579,345 Units outstanding.

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




Distributions of Net Income

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




Transfer

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

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

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

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Reports to Unit Holders

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

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




Liability of Unit Holders

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




Possible Divestiture of Units

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



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. The Trustee will give written notice to
    each holder whose nationality or other status is an issue in the
    proceeding of the existence of such controversy. The notice will
    contain a reasonable summary of such controversy and will
    constitute a demand to each such holder that he or she dispose
    of his or her Units within 30 days to a party not of the
    nationality or other status at issue in the proceeding described
    in the notice.                                                                                                                                                                                                                             
|
| | 2. If any holder fails to dispose of his or
    her Units in accordance with such notice, the Trustee shall have
    the preemptive right to redeem and shall redeem, at any time
    during the 90-day period following the termination of the 30-day
    period specified in the notice, any Unit not so transferred for
    a cash price equal to the closing price of the Units on the
    stock exchange on which the Units are then listed or, in the
    absence of any such listing, the mean between the closing bid
    and asked prices for the Units in the over-the-counter market,
    as of the last business day prior to the expiration of the
    30-day period stated in the notice.

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| |                                                                                                               
| | --------------------------------------------------------------------------------------------------------------
| | 3. The Trustee shall cancel any Unit
    acquired in accordance with the foregoing procedures.                
|
| | 4. The Trustee may, in its sole discretion,
    cause the Trust to borrow any amount required to redeem Units.




FEDERAL TAXATION

THE TAX CONSEQUENCES TO A UNIT HOLDER OF THE
OWNERSHIP AND SALE OF UNITS WILL DEPEND IN PART ON THE UNIT
HOLDERS TAX CIRCUMSTANCES. EACH UNIT HOLDER SHOULD
THEREFORE CONSULT THE UNIT HOLDERS TAX ADVISOR ABOUT THE
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES TO THE UNIT HOLDER OF
THE OWNERSHIP OF UNITS.

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

Transferees of Units transferred after
October 11, 1990, may be eligible to use the percentage
depletion deduction on oil and gas income thereafter
attributable to such Units, if the percentage depletion
deduction would exceed cost depletion. A Unit holder generally
would not have claimed percentage depletion deductions for 1990
or any subsequent year because cost depletion generally has
exceeded percentage depletion.

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

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

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

Assuming that the escrow arrangement is
recognized for federal income tax purposes and that the Trustee,
as escrow agent, is able to control the timing of income and
expenses, as stated above, cash and accrual basis Unit holders
should be treated as realizing income only on each Monthly
Record Date. The

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Trustee, as escrow agent, may not be able to
cause third party expenses to be incurred on each Monthly Record
Date in all instances. Cash basis Unit holders, however, should
be treated as having paid all expenses and fees only when such
expenses and fees are actually paid. Even if the escrow
arrangement is recognized for federal income tax purposes,
however, accrual basis Unit holders might be considered to have
accrued expenses when such expenses are incurred rather than on
each Monthly Record Date when paid.


No ruling was requested from the Service with
respect to the effect of the escrow arrangements when
established. Due to the absence of direct authority and the
factual nature of the characterization of the relationship among
the escrow agents, Pacific (USA) and the Trust, no opinion was
expressed by legal counsel with respect to the tax consequences
of the escrow arrangement. If the escrow arrangement is
recognized, the income from the Royalty Properties for a
calendar month and interest income thereon will be taxed to the
holder of the Unit on the next Monthly Record Date without
regard to the ownership of the Unit prior to that date. The
Trustee is treating the escrow arrangement as effective for tax
purposes and furnishes tax information to Unit holders on that
basis.

The Service might take the position that the
escrow arrangement should be ignored for federal tax purposes.
In such case, the Trustee could be required to report the
proceeds from production and interest income thereon to the Unit
holders on a daily basis, in accordance with their method of
accounting, as the proceeds from production and interest thereon
were received or accrued by the escrow agent. Such reporting
could impact who is taxed on the production and interest income
and result in a substantial increase in the administrative
expenses of the Trust. In the event of a transfer of a Unit, the
income and the depletion deduction attributable to the Royalty
Properties for the period up to the date of transfer would be
allocated to the transferor, and the income and depletion
deduction attributable to the Royalty Properties on and after
the date of transfer would be allocated to the transferee. Such
allocation would be required even though the transferee was the
holder of the Unit on the next Monthly Record Date and,
therefore, would be entitled to the monthly income distribution.
Thus, if the escrow arrangement is not recognized, a mismatching
of the monthly income distribution and the Unit holders
taxable income and deductions could occur between a transferor
and a transferee upon the transfer of a Unit.

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

Interest and royalty income attributable to
ownership of Units and any gain on the sale thereof are
considered portfolio income, and not income from a passive
activity, to the extent a Unit holder acquires and holds
Units as an investment and did not acquire them in the ordinary
course of a trade or business. Therefore, interest and royalty
income attributable to ownership of Units generally may not be
offset by losses from any passive activities.

Individuals may deduct miscellaneous
itemized deductions (including, in general, investment
expenses) only to the extent that such expenses exceed
2 percent of the individuals adjusted gross income.
Although there are exceptions to the 2 percent limitation,
authority suggests that no exceptions apply to expenses passed
through from a grantor trust, like the Trust.

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

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STATE TAX CONSIDERATIONS

THE FOLLOWING IS INTENDED AS A BRIEF SUMMARY
OF CERTAIN INFORMATION REGARDING STATE INCOME TAXES AND OTHER
STATE TAX MATTERS AFFECTING THE TRUST AND THE UNIT HOLDERS. UNIT
HOLDERS SHOULD CONSULT THE UNIT HOLDERS TAX ADVISOR
REGARDING STATE INCOME TAX FILING AND COMPLIANCE
MATTERS.

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

Louisiana.The
Trustee is required to file with Louisiana a return reflecting
the income of the Trust attributable to mineral interests
located in Louisiana. Both Louisiana resident and non-resident
Unit holders may be subject to the Louisiana personal, corporate
and/or franchise tax as certain income and expenses from the
Trust are from sources within Louisiana. Units held by residents
of Louisiana, to the extent that they represent a proportionate
share of mineral royalties from mineral interests located in
Louisiana, are subject to Louisiana inheritance and other taxes
and probate, community property, forced heirship and other
rules. For deaths occurring after June 30, 2004, no
Louisiana inheritance tax is due and no inheritance tax return
is required if certain requirements are met. Special rules apply
for deaths occurring between July 1, 2004, and
January 1, 2005. Units held of record by a person who was
not domiciled in Louisiana at the date of death generally are
not subject to Louisiana inheritance taxes or probate, community
property or forced heirship rules, and Units transferred inter
vivos by non-domiciliaries of Louisiana generally are not
subject to Louisiana gift tax.

Florida, Mississippi, New Mexico and Oklahoma.Florida does not have a personal
income tax. Florida imposes an income tax on resident and
nonresident corporations (except for S corporations not
subject to the built-in gains tax or passive investment income
tax), which will be applicable to royalty income allocable to a
corporate Unit holder from properties located within Florida.
Mississippi, New Mexico and Oklahoma each impose an income tax
applicable to both resident and nonresident individuals and
corporations (subject to certain exceptions for
S corporations), which will be applicable to royalty income
allocable to a Unit holder from properties located within these
states. Although the Trust may be required to file information
returns with taxing authorities in those states and provide
copies of such returns to the Unit holders, the Trust should be
considered a grantor trust for state income tax purposes and the
Royalty Properties that are located in such states should be
considered economic interests in minerals for state income tax
purposes.

Generally, the state income tax due by
nonresidents in all of the aforementioned states is computed as
a percentage of taxable income attributable to the particular
state. By contrast, residents are taxed on their taxable income
from all sources, wherever earned. Furthermore, even though
state laws vary, taxable income for state purposes is often
computed in a manner similar to the computation of taxable
income for federal income tax purposes. Some of these states
give credit for taxes paid to other states by their residents on
income from sources in those other states. In certain of these
states, a Unit holder is required to file a state income tax
return if income is attributable to the Unit holder even though
no tax is owed.

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REGULATION AND PRICES




Regulation

General

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

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

Natural
Gas

Prices for the sale of natural gas, like the sale
of other commodities, are governed by the marketplace and the
provisions of applicable gas sales contracts. The Federal Energy
Regulatory Commission (FERC), which principally is
responsible for regulating interstate transportation and the
sale of natural gas, has taken significant steps in the
implementation of a policy to restructure the natural gas
pipeline industry to promote full competition in the sales of
natural gas, so that all natural gas suppliers, including
pipelines, can compete equally for sales customers. This policy
has been implemented largely through restructuring proceedings
and is subject to continuing refinement. The effects of this
policy are now presumably fully reflected in the natural gas
markets. The current policy of FERC continues to promote
increased competition among gas industry participants.
Accordingly, Order 636 and various other orders have been
proposed and implemented to encourage nondiscriminatory
open-access transportation by interstate pipelines and to
provide for the unbundling of pipeline services so that such
services may also be furnished by nonpipeline suppliers on a
competitive basis.

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




Prices

Oil

The Trusts average per barrel oil price
increased from $26.17 in 2003 to $33.78 in 2004. The Trustee
believes that the international instability coupled with a more
favorable economic outlook led to the increase in the price of
oil. The price of domestic oil in major part is set by OPEC.
Consequently, crude oil market prices are not predictable or
completely subject to normal free market forces.

Natural
Gas

Natural gas prices, which once were determined
largely by governmental regulations, are now being governed by
the marketplace. Substantial competition in the natural gas
marketplace continues. In addition, competition with alternative
fuels persists. The average price received by the Trust in 2004
on natural gas volumes sold of $4.80 per Mcf represented an
increase from the $4.39 per Mcf received in 2003, due
largely to international instability and cooler weather in the
fall and early winter.

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Environmental
Regulation

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

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

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




Item 2. Properties.

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

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The following table summarizes total developed
and proved undeveloped acreage represented by the Royalty
Properties at December 31, 2004.

|            |       |                     |           |           |  |  |         |         | 
|----------- | ----- | ------------------- | --------- | --------- |  |  | ------- | ------- | 
|            |       |                    
|            |       | Mineral and Royalty
|            |       |                    
|State       |       | Gross Acres         |           | Net Acres
|            |       |                     |           |          
|Florida     |       |                     | 5,448     |           |  |  | 697     |        
|Louisiana   |       |                     | 244,391   |           |  |  | 23,682  |        
|Mississippi |       |                     | 75,489    |           |  |  | 9,713   |        
|New Mexico  |       |                     | 112,294   |           |  |  | 9,141   |        
|Oklahoma    |       |                     | 381,538   |           |  |  | 67,558  |        
|Texas       |       |                     | 1,273,132 |           |  |  | 105,760 |        
|            |       |                     |           |           |  |  |         |        
|            | Total |                     |           | 2,092,292 |  |  |         | 216,551 | 
|            |       |                     |           |           |  |  |         |        

Detailed information concerning the number of
wells on royalty properties is not generally available to the
owner of royalty interests. Consequently, the Registrant does
not have information that would be disclosed by a company with
oil and gas operations, such as an accurate count of the number
of wells located on the Royalty Properties, the number of
exploratory or development wells drilled on the Royalty
Properties during the periods presented by this report, or the
number of wells in process or other present activities on the
Royalty Properties, and the Registrant cannot readily obtain
such information.




Title

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




Reserves

The Registrant has obtained from DeGolyer and
MacNaughton, independent petroleum engineering consultants, a
study of the proved oil and gas reserves attributable as of
January 1, 2005 to the Royalty Properties. The following
letter report summarizes such reserve study and sets forth
information as to the assumptions, qualifications, procedures
and other matters relating to such reserve study. Because the
only assets of the Trust are the Royalty Properties, the Trustee
believes the reserve study provides useful information for Unit
holders. There are many uncertainties inherent in estimating
quantities and values of proved reserves and in projecting
future rates of production. The reserve data set forth herein,
although prepared by independent petroleum engineers in a manner
customary in the industry, are estimates only, and actual
quantities and values of oil and gas are likely to differ from
the estimated amounts set forth herein. In addition, the reserve
estimates for the Royalty Properties will be affected by future
changes in sales prices for oil and gas produced. See
Note 8 of the Notes to Financial Statements in Item 8
hereof for additional information regarding the proved oil and
gas reserves of the Trust. Other than those filed with the SEC,
our estimated reserves have not been filed with or included in
any reports to any federal agency.

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DEGOLYER AND MACNAUGHTON

4925 GREENVILLE AVENUE, SUITE 400


ONE ENERGY SQUARE


DALLAS, TEXAS 75206


March 2, 2005

Bank of America, N.A.

P. O. Box 830650


Dallas, Texas 75283-0650


Gentlemen:

Pursuant to your request, we have prepared
estimates of the extent and value of the proved crude oil,
condensate, natural gas liquids (NGL), and natural gas reserves,
as of January 1, 2005, of certain royalty interests owned
by Sabine Royalty Trust (the Trust). The properties appraised
consist of royalties located in Florida, Louisiana, Mississippi,
New Mexico, Oklahoma, and Texas. Bank of America, N.A. (Bank of
America) acts as trustee of the Trust.

Information used in the preparation of this
report was obtained from Bank of America, from records on file
with the appropriate regulatory agencies, and from public
sources. Additionally, this information includes data supplied
by Petroleum Information/ Dwights LLC; Copyright 2004 Petroleum
Information/ Dwights LLC. During this investigation, we
consulted freely with officers and employees of Bank of America
and were given access to such accounts, records, geological and
engineering reports, and other data as were desired for
examination. In the preparation of this report we have relied,
without independent verification, upon information furnished by
Bank of America with respect to property interests owned by the
Trust, production from such properties, current prices for
production, agreements relating to current and future operations
and sale of production, and various other information and data
that were accepted as represented. It was not considered
necessary to make a field examination of the physical condition
and operation of the properties in which the Trust owns
interests.

Our reserves estimates are based on a detailed
study of the properties and were prepared by the use of standard
geological and engineering methods generally accepted by the
petroleum industry. The method or combination of methods used in
the analysis of each reservoir was tempered by experience with
similar reservoirs, consideration of the stage of development,
and the quality and completeness of basic data. The Trust owns
several thousand royalty interests. In view of the limited
information available to a royalty owner and the small reserves
volumes attributable to many of these interests, certain of the
reserves representing approximately 44 percent of the total
reserves of the properties included herein were summarized by
state or field and estimated in the aggregate rather than on a
property-by-property basis. Historical records of net production
and revenue and experience with similar properties were used in
evaluating these properties.

Reserves estimated in this report are expressed
as gross and net reserves. Gross reserves are defined as the
total estimated petroleum to be produced from these properties
after December 31, 2004. Net reserves are defined as that
portion of the gross reserves attributable to the interests
owned by the Trust after deducting royalties and other interests
held by others. Gas volumes shown herein are sales gas volumes
and are expressed at a temperature base of 60 degrees Fahrenheit
and at the legal pressure base of the state in which the
interest is located. Sales gas is defined as the total gas to be
produced from the reservoirs, measured at the point of delivery,
after reduction for fuel usage, flare, and shrinkage resulting
from field separation and processing. Condensate reserves
estimated herein are those to be recovered by normal field
separation. NGL reserves are those attributed to the leasehold
interests according to processing agreements.

Petroleum reserves included in this report are
classified by degree of proof as proved and are judged to be
economically producible in future years from known reservoirs
under existing economic and operating conditions and assuming
continuation of current regulatory practices using conventional
production methods and equipment. In the analyses of
production-decline curves, reserves were estimated only to the

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limit of economic rates of production under
existing economic and operating conditions using prices and
expenses as of the date the estimate is made, including
consideration of changes in existing prices provided only by
contractual arrangements but not including escalations based
upon future conditions. Proved reserves classifications used in
this report are in accordance with the reserves definitions of
Rules 410(a) (1)(13) of
Regulation SX of the Securities and Exchange
Commission (SEC) of the United States. The petroleum
reserves are classified as follows:




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Proved oil and gas
    reserves Proved oil and
    gas reserves are the estimated quantities of crude oil, natural
    gas, and natural gas liquids which geological and engineering
    data demonstrate with reasonable certainty to be recoverable in
    future years from known reservoirs under existing economic and
    operating conditions, i.e., prices and expenses as of the date
    the estimate is made. Prices include consideration of changes in
    existing prices provided only by contractual arrangements, but
    not on escalations based upon future conditions.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) Reservoirs are considered proved if
    economic producibility is supported by either actual production
    or conclusive formation test. The area of a reservoir considered
    proved includes (A) that portion delineated by drilling and
    defined by gas-oil and/or oil-water contacts, if any; and
    (B) the immediately adjoining portions not yet drilled, but
    which can be reasonably judged as economically productive on the
    basis of available geological and engineering data. In the
    absence of information on fluid contacts, the lowest known
    structural occurrence of hydrocarbons controls the lower proved
    limit of the reservoir.
|
| | (ii) Reserves which can be produced
    economically through application of improved recovery techniques
    (such as fluid injection) are included in the proved
    classification when successful testing by a pilot project, or
    the operation of an installed program in the reservoir, provides
    support for the engineering analysis on which the project or
    program was based.                                                                                                                                                                                                                                                                               
|
| | (iii) Estimates of proved reserves do not
    include the following: (A) oil that may become available
    from known reservoirs but is classified separately as
    indicated additional reserves; (B) crude oil,
    natural gas, and natural gas liquids, the recovery of which is
    subject to reasonable doubt because of uncertainty as to
    geology, reservoir characteristics, or economic factors;
    (C) crude oil, natural gas, and natural gas liquids, that
    may occur in undrilled prospects; and (D) crude oil,
    natural gas, and natural gas liquids, that may be recovered from
    oil shales, coal, gilsonite, and other such sources.           



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Proved developed oil and gas
    reserves Proved developed
    oil and gas reserves are reserves that can be expected to be
    recovered through existing wells with existing equipment and
    operating methods. Additional oil and gas expected to be
    obtained through the application of fluid injection or other
    improved recovery techniques for supplementing the natural
    forces and mechanisms of primary recovery should be included as
    proved developed reserves only after testing by a
    pilot project or after the operation of an installed program has
    confirmed through production response that increased recovery
    will be achieved.                                                                                                                                                                                                                                                                                                 
|
| | Proved undeveloped
    reserves Proved
    undeveloped oil and gas reserves are reserves that are expected
    to be recovered from new wells on undrilled acreage, or from
    existing wells where a relatively major expenditure is required
    for recompletion. Reserves on undrilled acreage shall be limited
    to those drilling units offsetting productive units that are
    reasonably certain of production when drilled. Proved reserves
    for other undrilled units can be claimed only where it can be
    demonstrated with certainty that there is continuity of
    production from the existing productive formation. Under no
    circumstances should estimates for proved undeveloped reserves
    be attributable to any acreage for which an application of fluid
    injection or other improved recovery technique is contemplated,
    unless such techniques have been proved effective by actual
    tests in the area and in the same reservoir.

The development status shown herein represents
the status applicable on January 1, 2005. In the
preparation of this study, data available from wells drilled on
the appraised properties through October 31, 2004, were
used in estimating gross ultimate recovery. When applicable,
gross production estimated to

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January 1, 2005, was deducted from gross
ultimate recovery to arrive at the estimates of gross reserves
as of January 1, 2005. In some fields, this required that
the production rates be estimated for up to 4 months, since
production data were available only through August 2004.


Estimated net proved reserves, as of
January 1, 2005, attributable to the Trust from the
properties appraised are summarized in thousands of barrels
(Mbbl) or millions of cubic feet (MMcf) as follows:

|            |  |                           |       |                             |  |                  |        |           |  |  |    |  |  |  |    | 
|----------- |  | ------------------------- | ----- | --------------------------- |  | ---------------- | ------ | --------- |  |  | -- |  |  |  | -- | 
|            |  |                           |       |                            
|            |  | Proved Developed Reserves |       | Proved Undeveloped Reserves
|            |  |                           |       |                            
|            |  | Oil, Condensate,          |       |                             |  | Oil, Condensate, |        |          
|            |  | and NGL                   |       | Sales Gas                   |  | and NGL          |        | Sales Gas
|State       |  | (Mbbl)                    |       | (MMcf)                      |  | (Mbbl)           |        | (MMcf)   
|            |  |                           |       |                             |  |                  |        |          
|Florida     |  |                           | 166   |                             |  |                  | 21     |           |  |  | 0  |  |  |  | 0  | 
|Louisiana   |  |                           | 66    |                             |  |                  | 640    |           |  |  | 0  |  |  |  | 0  | 
|Mississippi |  |                           | 111   |                             |  |                  | 2,575  |           |  |  | 13 |  |  |  | 51 | 
|New Mexico  |  |                           | 431   |                             |  |                  | 3,129  |           |  |  | 0  |  |  |  | 0  | 
|Oklahoma    |  |                           | 447   |                             |  |                  | 11,151 |           |  |  | 0  |  |  |  | 0  | 
|Texas       |  |                           | 4,421 |                             |  |                  | 20,034 |           |  |  | 30 |  |  |  | 8  | 
|            |  |                           |       |                             |  |                  |        |           |  |  |    |  |  |  |    | 
|Total       |  |                           | 5,642 |                             |  |                  | 37,550 |           |  |  | 43 |  |  |  | 59 | 

Revenue values in this report are expressed in
terms of estimated future net revenue and present worth of
future net revenue. These values are based on the continuation
of prices in effect on January 1, 2005. Future gross
revenue is defined as that revenue to be realized from the
production and sale of the estimated net reserves. Future net
revenue is calculated by deducting estimated severance and ad
valorem taxes from the future gross revenue. Present worth of
future net revenue is calculated by discounting the future net
revenue at the arbitrary rate of 10 percent per year
compounded monthly over the expected period of realization.

Revenue values in this report were estimated
using the initial prices and expenses provided by Bank of
America. Future prices were estimated using guidelines
established by the SEC and the Financial Accounting Standards
Board (FASB). The initial and future prices used in this report
are adjusted to prices on January 1, 2005, based on
receipts by the Trust in December 2004. The assumptions used for
estimating future prices and expenses are as follows:

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



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Oil, condensate, natural gas liquids, and natural
    gas prices, based on receipts by the Trust in December 2004,
    were furnished by Bank of America. These prices were adjusted to
    the NYMEX posted prices for oil of $43.45 per barrel and for gas
    of $6.18 per million British thermal units, and were held
    constant for the lives of the properties. The weighted average
    prices over the lives of the properties were $39.14 per barrel
    of oil and $5.66 per thousand cubic feet.

Expenses



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The properties appraised are royalties.
    Therefore, no operating expenses or capital costs are incurred.
    The expenses reported are primarily severance taxes and ad
    valorem taxes, which are based on historical tax rates furnished
    by Bank of America. Several properties incur additional expenses
    related to transportation, marketing, and/or other expenses that
    are charged to the royalty interests. These expenses are
    reported as transportation expenses. No escalation has been
    applied to the expenses.

14



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##### Table of Contents



A projection of the estimated future net revenue
from the properties appraised, as of January 1, 2005, based
on the aforementioned assumptions concerning prices and expenses
is summarized as follows, expressed in thousands of
dollars (M$):

|            |  |            |         | 
|----------- |  | ---------- | ------- | 
|Year        |  | Future Net
|Ending      |  | Revenue   
|December 31 |  | (M$)      
|            |  |           
|2005        |  |            | 38,353  | 
|2006        |  |            | 33,850  | 
|2007        |  |            | 30,227  | 
|            |  |            |         | 
|Subtotal    |  |            | 102,430 | 
|Remaining   |  |            | 280,422 | 
|            |  |            |         | 
|Total       |  |            | 382,852 | 

The present worth, at a discount rate of
10 percent, of future net revenue, as of January 1,
2005, is estimated to be M$194,229.

Estimates of oil, condensate, NGL, and gas
reserves and future net revenue should be regarded only as
estimates that may change as further production history and
additional information become available. Not only are such
reserves and revenue estimates based on that information which
is currently available, but such estimates are also subject to
the uncertainties inherent in the application of judgmental
factors in interpreting such information.

In our opinion, the information relating to
estimated proved reserves, estimated future net revenue from
proved reserves, and present worth of estimated future net
revenue from proved reserves of oil, condensate, natural gas
liquids, and gas contained in this report has been prepared in
accordance with Paragraphs 1013, 15 and 30(a)(b) of
Statement of Financial Accounting Standards No. 69
(November 1982) of the FASB and Rules 410(a)
(1)(13) of Regulation SX and Rule 302(b)
of Regulation SK of the SEC; provided, however, that
(i) certain estimated data have not been provided with
respect to changes in reserves information, (ii) future
income tax expenses have not been taken into account in
estimating the future net revenue and present worth values set
forth herein, and (iii) at the request of Bank of America
and because of the limited availability of data, proved
reserves, future net revenue therefrom, and the present worth
thereof for certain royalty interests accounting for
approximately 44 percent of the Trusts total proved
reserves have been estimated in the aggregate by state or field
rather than on a property-by-property basis using net production
and revenue data and our general knowledge of producing
characteristics in the geographic areas in which such interests
are located.

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



| |                              
| | -----------------------------
| | Submitted,                   
|
| | DeGOLYER and MacNAUGHTON     
|
| | /s/  Paul J. Szatkowski, P.E.
| |                              
| | Paul J. Szatkowski, P.E.     
| | Senior Vice President        
| | DeGolyer and MacNaughton     

15



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##### Table of Contents





---

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

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

The future net revenue shown by the study has not
been reduced for administrative costs and expenses of the Trust
in future years. The costs and expenses of the Trust may
increase in future years, depending on the amount of income from
the Royalty Properties, increases in the Trustees fees
(including escrow agent fees) and expenses, accounting,
engineering, legal and other professional fees, and other
factors. It is expected that the costs and expenses of the Trust
in 2005 will be approximately $2,150,000.

The present value of future net revenue of the
Trusts proved developed reserves increased from
$168,807,194 at January 1, 2004 to $194,229,373 at
January 1, 2005. This increase resulted primarily from the
gas prices used in the calculation of such amount, from
$5.28 per Mcf of gas at January 1, 2004 to
$5.66 per Mcf of gas at January 1, 2005, as well as an
increase in the price of oil from $29.76 per barrel of oil
at January 1, 2004 to $39.14 per barrel of oil at
January 1, 2005.

Subsequent to year end, the price of both oil and
gas continued to fluctuate, giving rise to a correlating
adjustment of the respective standardized measure of discounted
future net cash flows. As of February 25, 2005, the NYMEX
posted oil price was approximately $50.95 per barrel, which
compared to the posted price of $43.45 per barrel, used to
calculate the worth of future net revenue of the Trusts
proved developed reserves, would result in a larger standardized
measure of discounted future net cash flows for oil. As of
February 25, 2005, the NYMEX posted gas price was
$6.29 per million British thermal units. The use of such
price, as compared to the posted price of $6.18 per million
British thermal units, used to calculate the future net revenue
to the Trusts proved developed reserves would result in a
larger standardized measure of discounted future net cash flows
for gas.

The volatile nature of the world energy markets
makes it difficult to estimate future prices of oil and gas. The
prices obtained for oil and gas depend upon numerous factors,
none of which is within the Trustees control, including
the domestic and foreign supply of oil and gas and the price of
foreign imports, market demand, the price and availability of
alternative fuels, the availability of pipeline capacity,
instability in oil-producing regions and the effect of
governmental regulations.




Item 3. Legal
Proceedings.

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




Item 4. Submission of Matters to
a Vote of Security Holders.

Not applicable.

16



---



##### Table of Contents






PART II




Item 5. Market for
Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities.

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

|               |  |             |       |               |  |          |       |  |  |   |         | 
|-------------- |  | ----------- | ----- | ------------- |  | -------- | ----- |  |  | - | ------- | 
|               |  |             |       |              
|               |  | Sales Price |       |              
|               |  |             |       | Distributions
|2004           |  | High        |       | Low           |  | per Unit
|               |  |             |       |               |  |         
|First Quarter  |  | $           | 32.75 |               |  | $        | 26.40 |  |  | $ | 0.60479 | 
|Second Quarter |  |             | 36.42 |               |  |          | 30.20 |  |  |   | 0.71585 | 
|Third Quarter  |  |             | 40.63 |               |  |          | 33.55 |  |  |   | 0.75767 | 
|Fourth Quarter |  |             | 42.49 |               |  |          | 33.60 |  |  |   | 0.70763 | 

|               |  |             |       |               |  |          |       |  |  |   |         | 
|-------------- |  | ----------- | ----- | ------------- |  | -------- | ----- |  |  | - | ------- | 
|               |  |             |       |              
|               |  | Sales Price |       |              
|               |  |             |       | Distributions
|2003           |  | High        |       | Low           |  | per Unit
|               |  |             |       |               |  |         
|First Quarter  |  | $           | 24.75 |               |  | $        | 19.58 |  |  | $ | 0.45499 | 
|Second Quarter |  |             | 27.80 |               |  |          | 20.52 |  |  |   | 0.80739 | 
|Third Quarter  |  |             | 28.25 |               |  |          | 25.48 |  |  |   | 0.69668 | 
|Fourth Quarter |  |             | 29.40 |               |  |          | 25.81 |  |  |   | 0.56350 | 

At March 4, 2005, there were
14,579,345 Units outstanding and approximately
2,300 Unit holders of record.

The Trust does not maintain any equity
compensation plans.

The Trust did not repurchase any Units during the
period covered by this report.




Item 6. Selected Financial
Data.

|                              |  |      |            |      |  |      |            |      |  |      |            |  |  |   |            |  |  |   |            | 
|----------------------------- |  | ---- | ---------- | ---- |  | ---- | ---------- | ---- |  | ---- | ---------- |  |  | - | ---------- |  |  | - | ---------- | 
|Years Ended December 31       |  | 2004 |            | 2003 |  | 2002 |            | 2001 |  | 2000
|                              |  |      |            |      |  |      |            |      |  |     
|Royalty Income                |  | $    | 42,338,724 |      |  | $    | 38,761,739 |      |  | $    | 28,134,458 |  |  | $ | 44,222,701 |  |  | $ | 34,407,684 | 
|Distributable Income          |  |      | 40,587,685 |      |  |      | 37,060,003 |      |  |      | 26,539,751 |  |  |   | 42,805,378 |  |  |   | 33,122,044 | 
|Distributable Income per Unit |  |      | 2.78       |      |  |      | 2.54       |      |  |      | 1.82       |  |  |   | 2.94       |  |  |   | 2.27       | 
|Total Assets at Year End      |  |      | 4,912,815  |      |  |      | 5,555,045  |      |  |      | 5,391,280  |  |  |   | 5,855,378  |  |  |   | 5,239,610  | 
|Distributions per Unit        |  |      | 2.79       |      |  |      | 2.52       |      |  |      | 1.88       |  |  |   | 2.86       |  |  |   | 2.27       | 




Item 7. Trustees Discussion
and Analysis of Financial Condition and Results of
Operations.

Liquidity and Capital Resources

Sabine Royalty Trust (the Trust)
makes monthly distributions to its Unit holders of the excess of
the preceding months revenues received over expenses
incurred. Upon receipt, royalty income is invested in short-term
investments until its subsequent distribution. In accordance
with the Trust Agreement, the Trusts only long-term assets
consist of royalty interests in producing oil and gas
properties. Although the Trust is permitted to borrow funds if
necessary to continue its operations, borrowings are not
anticipated in the foreseeable future. Accordingly the Trust is
dependent on its operations to generate excess cash flows
utilized in making distributions. These operating cash flows are
largely dependent on such factors as oil and gas prices and
production volumes, which are influenced by many factors beyond
the control of the Trust. As a royalty owner, the Trust does not
have access to certain types of information that would be
disclosed by a company with oil and gas operations. See
Item 2. Properties for a discussion of the
types of information not available to the Trust.

The amount to be distributed to Unit holders
(Monthly Income Amount) is determined on a monthly
basis. The Monthly Income Amount is an amount equal to the sum
of cash received by the Trust during a monthly period (the
period commencing on the day after a monthly record date and
continuing

17



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##### Table of Contents



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


The cash received by the Trust is primarily from
purchasers of the Trusts oil and gas production and
consists of gross sales of production less applicable severance
taxes. In September 2004, the Trust received a refund from the
State of Oklahoma in the amount of $510,271. This refund
represented taxes that were withheld from the proceeds of
production from the Royalties and remitted to the State of
Oklahoma by purchasers. Income taxes are not payable by the
Trust, but are the responsibility of the individual Unit
holders. Therefore the State of Oklahoma refunded the withheld
taxes, and the refund was included in the Trusts October
2004 distribution.

Results of Operations

Distributable income consists of royalty income
plus interest income plus any decrease in cash reserves
established by the Trustee less general and administrative
expenses of the Trust less any increase in cash reserves
established by the Trustee. The Trusts royalty income
represents payments received during a particular time period for
oil and gas production from the Trusts properties. Because
of various factors which influence the timing of the
Trusts receipt of payments, royalty income for any
particular time period will usually include payments for oil and
gas produced in prior periods. The price and volume figures that
follow represent the volumes and prices for which the Trust
received payment during 2003 and 2004.

Net royalty income during 2004 increased
approximately $3,577,000, or 9.2 percent, compared to 2003
net royalty income, which had increased approximately
$10,627,000, or 37.8 percent, from 2002 net royalty income.

Revenues generated by sales of oil and gas
increased in 2004 from 2003 as a result of higher gas and oil
prices. These increases were tempered by a decreases in both
natural gas and oil volumes. Gas volumes decreased from
6,532,013 thousand cubic feet (Mcf) in 2003 to
6,029,402 Mcf in 2004 after decreasing from
6,691,473 Mcf in 2002. The average price per Mcf of gas
received by the Trust increased from $4.39 per Mcf in 2003
to $4.80 per Mcf in 2004, after increasing from
$2.70 per Mcf in 2002. The Trustee believes that normal
market forces, international instability, and the cooler weather
in late fall and early winter resulted in the higher gas prices.

Oil volumes sold decreased to
525,862 barrels in 2004 from 557,087 barrels in 2003,
having decreased from 573,354 barrels in 2002. The effect
of this volume decrease was offset by an increase in the average
price per barrel received by the Trust to $33.78 in 2004 from
$26.17 in 2003, which was an increase from $21.82 in 2002.
International instability and demand along with cooler weather
in the late fall and early winter led to the increase in price
for 2004.

Interest income increased to $51,000 in 2004 from
$47,000 in 2003, which increased from $43,000 in 2002. Changes
in interest income are the result of changes in interest rates
and funds available for investment. General and administrative
expenses increased to $1,802,000 in 2004 compared to $1,749,000
in 2003 due primarily to increases in professional fees for
Sarbanes-Oxley compliance of approximately $91,000. This
increase in professional fees was offset somewhat by decreases
in fees related to Unit holder information services and tax
reporting services of approximately $24,000 and $15,000,
respectively. General and administrative expenses increased to
$1,749,000 in 2003 compared to $1,638,000 in 2002 due to
increases in professional fees and auditing fees of
approximately $73,000 and $20,000, respectively.

18



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##### Table of Contents



Contractual Obligations

|                                                                      |  |       |   |           |  |           |   |           |  |           |   |  |  |  |   |  |  |  |   | 
|--------------------------------------------------------------------- |  | ----- | - | --------- |  | --------- | - | --------- |  | --------- | - |  |  |  | - |  |  |  | - | 
|                                                                      |  |       |   | Less than |  |           |   |           |  | More than
|Contractual Obligations                                               |  | Total |   | 1 Year    |  | 1-3 Years |   | 3-5 Years |  | 5 Years  
|                                                                      |  |       |   |           |  |           |   |           |  |          
|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 Reflected on the
    Trusts Balance Sheet |  |       | 0 |           |  |           | 0 |           |  |           | 0 |  |  |  | 0 |  |  |  | 0 | 
|                                                                      |  |       |   |           |  |           |   |           |  |           |   |  |  |  |   |  |  |  |   | 
|Total                                                                 |  |       | 0 |           |  |           | 0 |           |  |           | 0 |  |  |  | 0 |  |  |  | 0 | 
|                                                                      |  |       |   |           |  |           |   |           |  |           |   |  |  |  |   |  |  |  |   | 

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.     Basis of
Accounting

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



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Royalty income, net of severance and ad valorem
    taxes, and interest income are recognized in the month in which
    amounts are received by either the escrow agent or the Trust.                                                                                                                                                                                                                                             
|
| |  | Trust expenses, consisting principally of routine
    general and administrative costs, include payments made during
    the accounting period. Expenses are accrued to the extent of
    amounts that become payable on the next monthly record date
    following the end of the accounting period. Reserves for
    liabilities that are contingent or uncertain in amount may also
    be established if considered necessary.
|
| |  | Royalties that are producing properties are
    amortized using the unit-of-production method. This amortization
    is shown as a reduction of Trust corpus.                                                                                                                                                                                                                                                                     
|
| |  | Distributions to Unit holders are recognized when
    declared by the Trustee.                                                                                                                                                                                                                                                                                                                                                    

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



| |   |                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Royalty income is recognized in the month
    received rather than in the month of production.                                                                  
|
| |  | Expenses other than those expected to be paid on
    the following monthly record date are not accrued.                                                         
|
| |  | Amortization of the Royalties is shown as a
    reduction to Trust corpus and not as a charge to operating
    results.                                         
|
| |  | Reserves may be established for contingencies
    that would not be recorded under accounting principles generally
    accepted in the United States of America.

This comprehensive basis of accounting other than
GAAP corresponds to the accounting permitted for royalty trusts
by the U.S. Securities and Exchange Commission, as specified by
Staff Accounting Bulletin Topic 12:E, Financial Statements of
Royalty Trusts.

2.     Revenue
Recognition

Revenues from royalty interests are recognized in
the period in which amounts are received by the Trust or escrow
agent. Royalty income received by the Trust or escrow agent in a
given calendar year will generally reflect the proceeds, on an
entitlements basis, from natural gas produced for the
twelve-month

19



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period ended September 30th in that calendar
year and from oil produced for the twelve-month period ended
October 31st in the same calendar year.


3.     Reserve
Disclosure

Independent petroleum engineers estimate the net
proved reserves attributable to the royalty interests. 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 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. Such reserve estimates are subject to change as
additional information becomes available. The reserves actually
recovered and the timing of production may be substantially
different from the reserve estimates. See Note 8 of the
Notes to Financial Statements in Item 8 hereof for
additional information regarding the proved oil and gas reserves
of the Trust. Other than those filed with the SEC, our estimated
reserves have not been filed with or included in any reports to
any federal agency.

4.     Contingencies

Contingencies related to the Royalty 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
Unit holders. The Trustee is aware of no such items as of
December 31, 2004.

New Accounting Pronouncements

SFAS No. 123R, Accounting for
Stock-Based Compensation was issued in December 2004
and provides new implementation guidance for stock-based
compensation accounting. This Statement is effective for public
entities that do not file as small business issuers 
as of the beginning of the first interim or annual reporting
period that begins after June 15, 2005. The Trust has no
options or other stock-based instruments and accordingly, this
new Standard will have no impact on the financial statements of
the Trust.

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 Royalty Properties. The Trustee has powers to
collect and distribute proceeds received by the Trust and to 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.

Inflation

Prices obtained for oil and gas production depend
upon numerous factors that are beyond the control of the Trust,
including the extent of domestic and foreign production, imports
of foreign oil, market demand, domestic and worldwide economic
and political conditions, storage capacity and government
regulations and tax laws. Prices for both oil and gas have
fluctuated between 2002 and 2004. The following table presents
the weighted average prices received per year by the Trust:

|     |  |         |       |         |  |  |      | 
|---- |  | ------- | ----- | ------- |  |  | ---- | 
|     |  | Oil     |       | Gas    
|     |  | Per BBL |       | Per Mcf
|     |  |         |       |        
|2004 |  |         | 33.78 |         |  |  | 4.80 | 
|2003 |  |         | 26.17 |         |  |  | 4.39 | 
|2002 |  |         | 21.82 |         |  |  | 2.70 | 

Forward-Looking Statements

This Annual Report includes forward-looking
statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, which are intended to be
covered by the safe harbor created thereby. All

20



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##### Table of Contents



statements other than statements of historical
fact included in this Annual Report are forward-looking
statements. Such statements include, without limitation, factors
affecting the price of oil and natural gas contained in
Item 1, Business, certain reserve information
and other statements contained in Item 2,
Properties, and certain statements regarding the
Trusts financial position, industry conditions and other
matters contained in this Item 7. Although the Trustee
believes that the expectations reflected in such forward-looking
statements are reasonable, such expectations are subject to
numerous risks and uncertainties and the Trustee can give no
assurance that they will prove correct. There are many factors,
none of which is within the Trustees control, that may
cause such expectations not to be realized, including, among
other things, factors identified in this Annual Report affecting
oil and gas prices (including, without limitation, the domestic
and foreign supply of oil and gas and the price of foreign
imports, market demand, the price and availability of
alternative fuels, the availability of pipeline capacity,
instability in oil-producing regions and the effect of
governmental regulations) and the recoverability of reserves,
general economic conditions, actions and policies of
petroleum-producing nations and other changes in the domestic
and international energy markets.





Item 7A. Quantitative and Qualitative
Disclosures About Market Risk.

The Trust is a passive entity, and other than the
Trusts ability to periodically borrow money as necessary
to pay expenses, liabilities and obligations of the Trust that
cannot be paid out of cash held by the Trust, the Trust is
prohibited from engaging in borrowing transactions. The amount
of any such borrowings is unlikely to be material to the Trust.
The Trust periodically holds short term investments acquired
with funds held by the Trust pending distribution to 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.

21



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##### Table of Contents






Item 8. Financial Statements and
Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

Unit Holders of Sabine Royalty Trust and

Bank of America, N.A., Trustee


We have audited the accompanying statements of
assets, liabilities and trust corpus of Sabine Royalty Trust
(the Trust) as of December 31, 2004 and 2003,
and the related statements of distributable income and changes
in trust corpus for each of the three years in the period ended
December 31, 2004. 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 the
standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

As described in Note 2 to the financial
statements, these financial statements have been 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, 2004 and 2003,
and the distributable income and changes in trust corpus for
each of the three years in the period ended December 31,
2004, on the basis of accounting described in Note 2.

/s/ DELOITTE & TOUCHE LLP

Dallas, Texas

March 14, 2005


22



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##### Table of Contents



SABINE ROYALTY TRUST

FINANCIAL STATEMENTS

Statements of Assets, Liabilities and Trust
Corpus

|                                                                                                                               |  |              |           |      |  |   |           | 
|------------------------------------------------------------------------------------------------------------------------------ |  | ------------ | --------- | ---- |  | - | --------- | 
|                                                                                                                               |  |             
|                                                                                                                               |  | December 31,
|                                                                                                                               |  |             
|                                                                                                                               |  | 2004         |           | 2003
|                                                                                                                               |  |              |           |     
|Assets                                                                                                                         |  |              |           |      |  |   |           | 
|Cash and short-term investments                                                                                                |  | $            | 3,753,282 |      |  | $ | 4,247,094 | 
|Royalty interests in oil and gas properties less
    accumulated amortization of $21,235,652 (2004) and
    $21,087,234 (2003) |  |              | 1,159,533 |      |  |   | 1,307,951 | 
|                                                                                                                               |  |              |           |      |  |   |           | 
|Total                                                                                                                          |  | $            | 4,912,815 |      |  | $ | 5,555,045 | 
|                                                                                                                               |  |              |           |      |  |   |           | 
|Liabilities and Trust Corpus                                                                                                   |  |              |           |      |  |   |           | 
|Trust expenses payable                                                                                                         |  | $            | 249,308   |      |  | $ | 427,982   | 
|Other payables (Note 4)                                                                                                        |  |              | 140,432   |      |  |   | 426,070   | 
|                                                                                                                               |  |              |           |      |  |   |           | 
|Total liabilities                                                                                                              |  |              | 389,740   |      |  |   | 854,052   | 
|Trust Corpus (14,579,345 units of
    beneficial interest authorized and outstanding)                                          |  |              | 4,523,075 |      |  |   | 4,700,993 | 
|                                                                                                                               |  |              |           |      |  |   |           | 
|Total                                                                                                                          |  | $            | 4,912,815 |      |  | $ | 5,555,045 | 
|                                                                                                                               |  |              |           |      |  |   |           | 

Statements of Distributable Income

|                                                                                            |  |                         |            |      |  |      |            |  |  |   |            | 
|------------------------------------------------------------------------------------------- |  | ----------------------- | ---------- | ---- |  | ---- | ---------- |  |  | - | ---------- | 
|                                                                                            |  |                        
|                                                                                            |  | Year Ended December 31,
|                                                                                            |  |                        
|                                                                                            |  | 2004                    |            | 2003 |  | 2002
|                                                                                            |  |                         |            |      |  |     
|Royalty Income                                                                              |  | $                       | 42,338,724 |      |  | $    | 38,761,739 |  |  | $ | 28,134,458 | 
|Interest Income                                                                             |  |                         | 50,785     |      |  |      | 47,417     |  |  |   | 43,337     | 
|                                                                                            |  |                         |            |      |  |      |            |  |  |   |            | 
|Total                                                                                       |  |                         | 42,389,509 |      |  |      | 38,809,156 |  |  |   | 28,177,795 | 
|General and administrative expenses (Note 6)                                                |  |                         | 1,801,824  |      |  |      | 1,749,153  |  |  |   | 1,638,044  | 
|                                                                                            |  |                         |            |      |  |      |            |  |  |   |            | 
|Distributable income                                                                        |  | $                       | 40,587,685 |      |  | $    | 37,060,003 |  |  | $ | 26,539,751 | 
|                                                                                            |  |                         |            |      |  |      |            |  |  |   |            | 
|Distributable income per unit (Basic and Assuming
    Dilution) (14,579,345 units) (Note 1) |  | $                       | 2.78       |      |  | $    | 2.54       |  |  | $ | 1.82       | 
|                                                                                            |  |                         |            |      |  |      |            |  |  |   |            | 
|Distributions per unit (Note 3)                                                             |  | $                       | 2.79       |      |  | $    | 2.52       |  |  | $ | 1.88       | 
|                                                                                            |  |                         |            |      |  |      |            |  |  |   |            | 

Statements of Changes in Trust
Corpus

|                                       |  |      |             |      |  |      |             |   |  |   |             |  
|-------------------------------------- |  | ---- | ----------- | ---- |  | ---- | ----------- | - |  | - | ----------- | -
|                                       |  | 2004 |             | 2003 |  | 2002
|                                       |  |      |             |      |  |     
|Trust corpus, beginning of year        |  | $    | 4,700,993   |      |  | $    | 4,603,219   |   |  | $ | 5,677,097   |  
|Amortization of royalty interests      |  |      | (148,418    | )    |  |      | (184,950    | ) |  |   | (221,506    | )
|Distributable income                   |  |      | 40,587,685  |      |  |      | 37,060,003  |   |  |   | 26,539,751  |  
|Distributions to unit holders (Note 3) |  |      | (40,617,185 | )    |  |      | (36,777,279 | ) |  |   | (27,392,123 | )
|                                       |  |      |             |      |  |      |             |   |  |   |             |  
|Trust corpus, end of year              |  | $    | 4,523,075   |      |  | $    | 4,700,993   |   |  | $ | 4,603,219   |  
|                                       |  |      |             |      |  |      |             |   |  |   |             |  

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

23



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##### Table of Contents



SABINE ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS

1. Trust Organization and
Provisions

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

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

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

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



| |   |                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Trust shall not engage in any business or
    commercial activity of any kind or acquire assets other than
    those initially transferred to the Trust.                                                                                                                           
|
| |  | The Trustee may not sell all or any part of its
    assets unless approved by the holders of a majority of the
    outstanding Units in which case the sale must be for cash and
    the proceeds, after satisfying all existing liabilities,
    promptly distributed to Unit holders.
|
| |  | The Trustee may establish a cash reserve for the
    payment of any liability that is contingent or uncertain in
    amount or that otherwise is not currently due and payable.                                                                                                        
|
| |  | The Trustee will use reasonable efforts to cause
    the Trust and the Unit holders to recognize income and expenses
    on monthly record dates.                                                                                                                                      
|
| |  | The Trustee is authorized to borrow funds to pay
    liabilities of the Trust provided that such borrowings are
    repaid in full before any further distributions are made to Unit
    holders.                                                                                      
|
| |  | The Trustee will make monthly cash distributions
    to Unit holders of record on the monthly record date (see
    Note 3).                                                                                                                                                            

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

The proceeds of production from the Royalties are
receivable from hundreds of separate payors. In order to
facilitate creation of the Trust and to avoid the administrative
expense and inconvenience of daily reporting to Unit holders,
the conveyances by Sabine of the Royalties located in five of
the six states (Florida, Mississippi, New Mexico, Oklahoma, and
Texas) provided for the execution of an escrow agreement by
Sabine and the initial trustee of the Trust, in its capacities
as trustee of the Trust and as escrow

24



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##### Table of Contents



SABINE ROYALTY TRUST


NOTES TO FINANCIAL STATEMENTS 
(Continued)

agent. The conveyances by Sabine of the Royalties
located in Louisiana provided for the execution of a
substantially identical escrow agreement by Sabine and a
Louisiana bank in the capacities of escrow agent and of trustee
under the name of Sabine Louisiana Royalty Trust. Sabine
Louisiana Royalty Trust, the sole beneficiary of which is the
Trust, was established in order to avoid uncertainty under
Louisiana law as to the legality of the Trustees holding
record title to the Royalties located in Louisiana. On
December 31, 2001, Bank of America, N.A. assumed the duties
as Trustee of the Sabine Louisiana Royalty Trust, since
Louisiana law now permits an out-of-state bank to act in this
capacity. Therefore, the trust now only has one escrow agent,
which is the Trustee, and a single escrow agreement.

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

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

2. Accounting Policies

Basis of Accounting

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



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Royalty income, net of severance and ad valorem
    taxes, and interest income are recognized in the month in which
    amounts are received by either the escrow agent or the Trust
    (see Note 1).                                                                                                                                                                                                                            
|
| |  | Trust expenses, consisting principally of routine
    general and administrative costs, include payments made during
    the accounting period. Expenses are accrued to the extent of
    amounts that become payable on the next monthly record date
    following the end of the accounting period. Reserves for
    liabilities that are contingent or uncertain in amount may also
    be established if considered necessary.
|
| |  | Royalties that are producing properties are
    amortized using the unit-of-production method. This amortization
    is shown as a reduction of Trust corpus.                                                                                                                                                                                                                                                                     
|
| |  | Distributions to Unit holders are recognized when
    declared by the Trustee (see Note 3).                                                                                                                                                                                                                                                                                                                                       

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



| |   |                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------
| |  | Royalty income is recognized in the month
    received rather than in the month of production.                         
|
| |  | Expenses other than those expected to be paid on
    the following monthly record date are not accrued.                
|
| |  | Amortization of the Royalties is shown as a
    reduction to Trust corpus and not as a charge to operating
    results.

25



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##### Table of Contents



SABINE ROYALTY TRUST


NOTES TO FINANCIAL STATEMENTS 
(Continued)



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

This comprehensive basis of accounting other than
accounting principles generally accepted in the United States of
America corresponds to the accounting permitted for royalty
trusts by the U.S. Securities and Exchange Commission, as
specified by Staff Accounting Bulletin Topic 12:E, Financial
Statements of Royalty Trusts.

Use of Estimates

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

Impairment

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

New Accounting Standards

SFAS No. 123R, Accounting for
Stock-Based Compensationwas issued in December 2004
and provides new implementation guidance for stock-based
compensation accounting. This Statement is effective for public
entities that do not file as small business issuers 
as of the beginning of the first interim or annual reporting
period that begins after June 15, 2005. The Trust has no
options or other stock-based instruments and accordingly, this
new Standard will have no impact on the financial statements of
the Trust.

Distributable Income Per Unit

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

Federal Income Taxes

The Internal Revenue Service has ruled that the
Trust is classified as a grantor trust for Federal income tax
purposes and therefore is not subject to taxation at the trust
level. The Unit holders are considered, for Federal income tax
purposes, to own the Trusts income and principal as though
no trust were in existence. Accordingly, no provision for
Federal income tax expense has been made in these financial
statements. The income of the Trust will be deemed to have been
received or accrued by each Unit holder at the time such income
is received or accrued by the Trust, which is on the record date
following the end of each month, as discussed above in
Note 1.

3. Distributions to Unit
Holders

The amount to be distributed to Unit holders
(Monthly Income Amount) is determined on a monthly
basis. The Monthly Income Amount is an amount equal to the sum
of cash received by the Trust during a monthly period (the
period commencing on the day after a monthly record date and
continuing

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##### Table of Contents



SABINE ROYALTY TRUST


NOTES TO FINANCIAL STATEMENTS 
(Continued)

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

The cash received by the Trust is primarily from
purchasers of the Trusts oil and gas production and
consists of gross sales of production less applicable severance
taxes. In September 2004, the Trust received a refund from the
State of Oklahoma in the amount of $510,271. This refund
represented taxes that were withheld from the proceeds of
production from the Royalties and remitted to the State of
Oklahoma by purchasers. Income taxes are not payable by the
Trust, but are the responsibility of the individual Unit
holders. Therefore the State of Oklahoma refunded the withheld
taxes, and the refund was included as royalty income in the
Trusts October 2004 distribution.

4. Other Payables

Other payables consist of the following:

|                                                                                     |       |      |         |         |  |   |         |         | 
|------------------------------------------------------------------------------------ | ----- | ---- | ------- | ------- |  | - | ------- | ------- | 
|December 31,                                                                         |       | 2004 |         | 2003   
|                                                                                     |       |      |         |        
|Royalty receipts in suspense pending verification
    of ownership interest or title |       | $    | 140,432 |         |  | $ | 426,070 |        
|                                                                                     |       |      |         |         |  |   |         |        
|                                                                                     | Total |      | $       | 140,432 |  |   | $       | 426,070 | 
|                                                                                     |       |      |         |         |  |   |         |        

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

5. Subsequent Events

Subsequent to December 31, 2004, the Trust
declared the following distributions:

|                    |  |                   |  |                       |        | 
|------------------- |  | ----------------- |  | --------------------- | ------ | 
|Monthly Record Date |  | Payment Date      |  | Distribution per Unit
|                    |  |                   |  |                      
|January 18, 2005    |  | January 31, 2005  |  | $                     | .23163 | 
|February 15, 2005   |  | February 28, 2005 |  | $                     | .26140 | 
|March 15, 2005      |  | March 29, 2005    |  | $                     | .20350 | 

6. General and Administrative
Expenses

General and administrative expenses for the years
ended December 31, were as follows:

|                                          |  |      |           |      |  |      |           |  |  |   |           | 
|----------------------------------------- |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|                                          |  | 2004 |           | 2003 |  | 2002
|                                          |  |      |           |      |  |     
|Trustees fee                             |  | $    | 291,480   |      |  | $    | 288,221   |  |  | $ | 284,172   | 
|Escrow agents fee                        |  |      | 874,438   |      |  |      | 864,652   |  |  |   | 852,520   | 
|Professional fees                         |  |      | 264,216   |      |  |      | 182,745   |  |  |   | 144,741   | 
|Unit holders services fees               |  |      | 244,970   |      |  |      | 267,427   |  |  |   | 232,388   | 
|Other                                     |  |      | 126,720   |      |  |      | 146,108   |  |  |   | 124,223   | 
|                                          |  |      |           |      |  |      |           |  |  |   |           | 
|Total General and Administrative Expenses |  |      | 1,801,824 |      |  |      | 1,749,153 |  |  |   | 1,638,044 | 
|                                          |  |      |           |      |  |      |           |  |  |   |           | 

27



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##### Table of Contents



SABINE ROYALTY TRUST


NOTES TO FINANCIAL STATEMENTS 
(Continued)

7. Quarterly Financial Data
(Unaudited)

The following table sets forth the royalty
income, distributable income and distributable income per Unit
of the Trust for each quarter in the years ended
December 31, 2004 and 2003 (in thousands, except
per Unit amounts):

|               |  |         |        |               |  |                 |        |  |  |   |      | 
|-------------- |  | ------- | ------ | ------------- |  | --------------- | ------ |  |  | - | ---- | 
|Calendar       |  | Royalty |        | Distributable |  | Distributable  
|Quarter        |  | Income  |        | Income        |  | Income per Unit
|               |  |         |        |               |  |                
|2004           |  |         |        |               |  |                 |        |  |  |   |      | 
|First Quarter  |  | $       | 9,709  |               |  | $               | 9,233  |  |  | $ | 0.63 | 
|Second Quarter |  |         | 10,376 |               |  |                 | 9,889  |  |  |   | 0.68 | 
|Third Quarter  |  |         | 11,984 |               |  |                 | 11,612 |  |  |   | 0.80 | 
|Fourth Quarter |  |         | 10,270 |               |  |                 | 9,854  |  |  |   | 0.67 | 
|               |  |         |        |               |  |                 |        |  |  |   |      | 
|               |  | $       | 42,339 |               |  | $               | 40,588 |  |  | $ | 2.78 | 
|               |  |         |        |               |  |                 |        |  |  |   |      | 
|2003           |  |         |        |               |  |                 |        |  |  |   |      | 
|First Quarter  |  | $       | 8,562  |               |  | $               | 8,050  |  |  | $ | 0.55 | 
|Second Quarter |  |         | 11,552 |               |  |                 | 11,071 |  |  |   | 0.76 | 
|Third Quarter  |  |         | 9,742  |               |  |                 | 9,381  |  |  |   | 0.64 | 
|Fourth Quarter |  |         | 8,906  |               |  |                 | 8,558  |  |  |   | 0.59 | 
|               |  |         |        |               |  |                 |        |  |  |   |      | 
|               |  | $       | 38,762 |               |  | $               | 37,060 |  |  | $ | 2.54 | 
|               |  |         |        |               |  |                 |        |  |  |   |      | 

8. Supplemental Oil and Gas Information
(Unaudited)

Reserve Quantities

Information regarding estimates of the proved oil
and gas reserves attributable to the Trust are based on reports
prepared by DeGolyer and MacNaughton, independent petroleum
engineering consultants. Estimates were prepared in accordance
with Statement of Financial Accounting Standards No. 69
(SFAS 69) and the guidelines established by the
Securities and Exchange Commission. Certain information required
by SFAS 69 is not presented because that information is not
applicable to the Trust due to its passive nature.

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

28



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##### Table of Contents



SABINE ROYALTY TRUST


NOTES TO FINANCIAL STATEMENTS 
(Continued)

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

|                  |                                 |           |       |       |   |  |        |        |  
|----------------- | ------------------------------- | --------- | ----- | ----- | - |  | ------ | ------ | -
|                  |                                 | Oil       |       | Gas  
|                  |                                 | (Barrels) |       | (Mcf)
|                  |                                 |           |       |      
|January 1, 2002   |                                 |           | 5,430 |       |   |  | 37,489 |       
|                  | Revisions of previous estimates |           |       | 181   |   |  |        | 4,457  |  
|                  | Production                      |           |       | (526  | ) |  |        | (5,614 | )
|                  |                                 |           |       |       |   |  |        |       
|December 31, 2002 |                                 |           | 5,085 |       |   |  | 36,332 |       
|                  | Revisions of previous estimates |           |       | 880   |   |  |        | 6,546  |  
|                  | Production                      |           |       | (481  | ) |  |        | (5,929 | )
|                  |                                 |           |       |       |   |  |        |       
|December 31, 2003 |                                 |           | 5,484 |       |   |  | 36,949 |       
|                  | Revisions of previous estimates |           |       | 664   |   |  |        | 5,586  |  
|                  | Production                      |           |       | (463  | ) |  |        | (4,926 | )
|                  |                                 |           |       |       |   |  |        |       
|December 31, 2004 |                                 |           | 5,685 |       |   |  | 37,609 |       
|                  |                                 |           |       |       |   |  |        |       

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

|                           |                   |           |  |       |  |  |  |        | 
|-------------------------- | ----------------- | --------- |  | ----- |  |  |  | ------ | 
|                           |                   | Oil       |  | Gas  
|                           |                   | (Barrels) |  | (Mcf)
|                           |                   |           |  |      
|Proved developed reserves: |                   |           |  |       |  |  |  |       
|                           | January 1, 2002   |           |  | 5,425 |  |  |  | 37,376 | 
|                           | December 31, 2002 |           |  | 5,067 |  |  |  | 36,239 | 
|                           | December 31, 2003 |           |  | 5,454 |  |  |  | 36,878 | 
|                           | December 31, 2004 |           |  | 5,642 |  |  |  | 37,550 | 

Disclosure of a Standardized Measure of
Discounted Future Net Cash Flows

The following is a summary of a standardized
measure (in thousands) of discounted future net cash flows
related to the Trusts total proved oil and gas reserve
quantities. Information presented is based upon a valuation of
proved reserves by using discounted cash flows based upon
current (at year end) oil and gas prices
($39.14 per bbl and $5.66 per Mcf,
respectively) and severance and ad valorem taxes, if any, and
economic conditions, discounted at the required rate of
10 percent. As the Trust is not subject to taxation at the
trust level, no provision for income taxes has been made in the
following disclosure. The impact of changes in current prices on
reserves could vary significantly from year to year.
Accordingly, the information presented below should not be
viewed as an estimate of the fair market value of the
Trusts oil and gas properties nor should it be viewed as
indicative of any trends.

|                                                               |  |      |          |      |  |      |          |   |  |   |          |  
|-------------------------------------------------------------- |  | ---- | -------- | ---- |  | ---- | -------- | - |  | - | -------- | -
|December 31,                                                   |  | 2004 |          | 2003 |  | 2002
|                                                               |  |      |          |      |  |     
|Future net cash inflows                                        |  | $    | 382,852  |      |  | $    | 324,013  |   |  | $ | 270,513  |  
|Discount of future net cash flows @ 10%                        |  |      | (188,623 | )    |  |      | (155,206 | ) |  |   | (132,058 | )
|                                                               |  |      |          |      |  |      |          |   |  |   |          |  
|Standardized measure of discounted future net
    cash inflows |  | $    | 194,229  |      |  | $    | 168,807  |   |  | $ | 138,455  |  
|                                                               |  |      |          |      |  |      |          |   |  |   |          |  

29



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##### Table of Contents



SABINE ROYALTY TRUST


NOTES TO FINANCIAL STATEMENTS 
(Continued)

The change in the standardized measure of
discounted future net cash flows for the years ended
December 31, 2004, 2003 and 2002 is as follows
(in thousands):

|                                                                           |  |      |         |      |  |      |         |   |  |   |         |  
|-------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                                           |  | 2004 |         | 2003 |  | 2002
|                                                                           |  |      |         |      |  |     
|Standardized measure of discounted future net
    cash flows, January 1,   |  | $    | 168,807 |      |  | $    | 138,455 |   |  | $ | 86,115  |  
|Royalty income, net of severance and ad valorem
    taxes                  |  |      | (42,339 | )    |  |      | (38,762 | ) |  |   | (28,134 | )
|Changes in prices, net of related costs                                    |  |      | 27,440  |      |  |      | 23,279  |   |  |   | 51,026  |  
|Revisions of previous estimates and other                                  |  |      | 23,440  |      |  |      | 31,989  |   |  |   | 20,836  |  
|Accretion of discount                                                      |  |      | 16,881  |      |  |      | 13,846  |   |  |   | 8,612   |  
|                                                                           |  |      |         |      |  |      |         |   |  |   |         |  
|Standardized measure of discounted future net
    cash flows, December 31, |  | $    | 194,229 |      |  | $    | 168,807 |   |  | $ | 138,455 |  
|                                                                           |  |      |         |      |  |      |         |   |  |   |         |  

Subsequent to year end, the price of both oil and
gas continued to fluctuate, giving rise to a correlating
adjustment of the respective standardized measure of discounted
future net cash flows. As of February 25, 2005, the NYMEX
posted oil price was approximately $50.95 per barrel, which
compared to the posted price of $43.45 per barrel, used to
calculate the worth of future net revenue of the Trusts
proved developed reserves, would result in a larger standardized
measure of discounted future net cash flows for oil. As of
February 25, 2005, the NYMEX posted gas price was $6.29 per
million British thermal units. The use of such price, as
compared to the posted price of $6.18 per million British
thermal units, used to calculate the future net revenue of the
Trusts proved developed reserves would result in a larger
standardized measure of discounted future net cash flows for gas.

30



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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

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

We have audited the accompanying Statements of
Fees and Expenses (as defined in Exhibit C to the Sabine
Royalty Trust Agreement) paid by Sabine Royalty Trust to Bank of
America, N.A., (the Trustee), as trustee and
escrow agent, for the years ended December 31, 2004, 2003
and 2002. These statements are the responsibility of the
Trustees management. Our responsibility is to express an
opinion on these statements based on our audits.

We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the Statements of Fees and Expenses are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
Statements of Fees and Expenses. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

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

In our opinion, the Statements of Fees and
Expenses referred to above present fairly, in all material
respects, the fees and expenses paid by Sabine Royalty Trust to
Bank of America, N.A., as trustee and escrow agent, for the
years ended December 31, 2004, 2003 and 2002, on the basis
of accounting described in Note 3.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP

Charlotte, North Carolina


March 10, 2005


31



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##### Table of Contents



STATEMENTS OF FEES AND EXPENSES

PAID BY SABINE ROYALTY TRUST TO


BANK OF AMERICA, N.A., AS


TRUSTEE AND ESCROW AGENT, FOR EACH OF THE
THREE


YEARS IN THE PERIOD ENDED DECEMBER 31,
2004


|                        |  |      |           |      |  |      |           |  |  |   |           | 
|----------------------- |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|                        |  | 2004 |           | 2003 |  | 2002
|                        |  |      |           |      |  |     
|Trustees fee           |  | $    | 291,480   |      |  | $    | 288,221   |  |  | $ | 284,172   | 
|Escrow agents fee      |  |      | 874,438   |      |  |      | 864,652   |  |  |   | 852,520   | 
|                        |  |      |           |      |  |      |           |  |  |   |           | 
|Total fees and expenses |  | $    | 1,165,918 |      |  | $    | 1,152,873 |  |  | $ | 1,136,692 | 
|                        |  |      |           |      |  |      |           |  |  |   |           | 

The accompanying notes are an integral part of
these statements.

Notes

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

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

The compensation agreement under the Trust
Agreement provides for a cost plus fee payable to
the Bank for all services rendered in its capacities as Trustee
and as Escrow Agent. Generally, the fees payable to the Bank are
calculated by dividing the expenses incurred by the Bank, as
Trustee and as Escrow Agent, solely for services provided by the
Bank in the administration of the Trust and the Escrow by
seven-tenths (0.7). Professional and other noncontributing
(out-of-pocket) expenses incurred by the Bank, as Trustee or as
Escrow Agent, as the case may be, in the performance of its
duties in the foregoing capacities are charged to the Trust or
the Escrow, as the case may be, at cost. These expenses do not
contribute to the fees payable to the Bank described above.
Annually, the Trustee must estimate Trust and Escrow expenses
contributing to the fee for the forthcoming year and publish
this amount in the Trusts first quarterly report to Unit
holders. The Trustee can be penalized by forfeiture of
reimbursement for part of its expenses if such expenses exceed
the estimate. The Trustee also can earn a bonus by administering
the Trust for total costs that are lower than the estimate. The
Bank elected to forgo bonuses earned of $34,082, $22,118 and
$38,308 in 2004, 2003 and 2002, respectively.

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

All costs incurred by the Bank in its capacities
as Trustee and as Escrow Agent are accumulated in one account.
Fees based thereon are allocated between the Trustee function
and the Escrow Agent function

32



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##### Table of Contents



according to the actual administrative services
rendered by the Bank in each capacity. Any determinations by the
Bank as to the allocation of the fee between the Trustee and the
Escrow Agent are conclusive and binding on the Unit holders and
Pacific (USA), but in no event does the Banks allocation
affect the aggregate fee payable to the Bank.


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

This comprehensive basis of accounting other than
accounting principles generally accepted in the United States of
America corresponds to the accounting permitted for royalty
trusts by the U.S. Securities and Exchange Commission, as
specified by Staff Accounting Bulletin Topic 12:E, Financial
Statements of Royalty Trusts.

33



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##### Table of Contents








|        |                                                                                              
|------- | ---------------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with
    Accountants on Accounting and Financial
    Disclosure.

None.






|         |                         
|-------- | ------------------------
|Item 9A. | Controls and Procedures.

Conclusion Regarding the Effectiveness of
Disclosure Controls and Procedures

The Trustee conducted an evaluation of the
Trusts disclosure controls and procedures, as such term is
defined under Rule 13a-15(e) promulgated under the
Securities Exchange Act of 1934, as amended. Based on this
evaluation, the Trustee has concluded that the Trusts
disclosure controls and procedures were effective as of the end
of the period covered by this annual report.

Trustees Report on Internal Control Over
Financial Reporting

As permitted by the Order Under Section 36
of the Securities Exchange Act of 1934 Granting an Exemption
from Specified Provisions of Exchange Act Rules 13a-1 and
15d-1 issued by the SEC on November 30, 2004, the Trustee
will file the Trustees Report on Internal Control Over
Financial Reporting and the related Attestation Report of
Deloitte & Touche LLP, an independent registered public
accounting firm, by April 30, 2005 through an amendment to
this annual report on Form 10-K.

There has not been any change in the Trusts
internal control over financial reporting during the fourth
quarter of 2004 that has materially affected, or is reasonably
likely to materially affect, the Trusts internal control
over financial reporting.

34



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##### Table of Contents








|         |                   
|-------- | ------------------
|Item 9B. | Other Information.

None.




PART III






|         |                                                        
|-------- | -------------------------------------------------------
|Item 10. | Directors and Executive Officers of the
    Registrant.

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

Compliance with Section 16(a) of the Exchange
Act.The Trust has no directors and
officers and knows of no Unit holder that is a beneficial owner
of more than ten percent of the outstanding Units, and is
therefore unaware of any person that failed to report on a
timely basis reports required by Section 16(a) of the
Securities Exchange Act of 1934, as amended.

Code of Ethics.Because the Trust has no employees, it
does not have a code of ethics. Employees of the Trustee, Bank
of America, N.A., must comply with the banks code of
ethics, a copy of which will be made available to Unit holders
without charge, upon request by appointment at Bank of America
Plaza, 17th Floor, 901 Main Street, Dallas, Texas,
75202.

Audit Committee.The
Trust has no directors and therefore has no audit committee or
audit committee financial expert.

Nominating Committee.The Trust has no directors and
therefore has no nominating committee.






|         |                        
|-------- | -----------------------
|Item 11. | Executive Compensation.

Not applicable.






|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management.

(a) Security Ownership of Certain
Beneficial Owners.As of February 25, 2005 there were
no Unit holders known to the Trustee to be beneficial owners of
more that 5% of the outstanding Units.

(b) Security Ownership of Management.The Trust has no directors or executive officers. Bank of
America, N.A., the Trustee, held as of March 3, 2005 an
aggregate of 201,227 Units in various fiduciary capacities,
and it had shared voting and investment power with respect to
23,497 of such Units.

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






|         |                                                    
|-------- | ---------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions.

Not applicable.






|         |                                            
|-------- | -------------------------------------------
|Item 14. | Principal Accounting Fees and
    Services.

Fees for services performed by Deloitte &
Touche LLP for the years ended December 31, 2004 and 2003
are:

|                   |  |      |        |      |  |   |        | 
|------------------ |  | ---- | ------ | ---- |  | - | ------ | 
|                   |  | 2004 |        | 2003
|                   |  |      |        |     
|Audit fees         |  | $    | 84,000 |      |  | $ | 83,000 | 
|Audit-related fees |  | $    | 0      |      |  | $ | 0      | 
|Tax fees           |  | $    | 22,795 |      |  | $ | 37,589 | 
|All other fees     |  | $    | 0      |      |  | $ | 0      | 

As referenced in Item 10, above, the Trust
has no audit committee, and as a result, has no audit committee
pre-approval policy with respect to fees paid to Deloitte &
Touche LLP.

35



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##### Table of Contents






PART IV






|         |                                             
|-------- | --------------------------------------------
|Item 15. | Exhibits, Financial Statement
    Schedules.

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

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



| |                                                                                                            
| | -----------------------------------------------------------------------------------------------------------
| | Report of Independent Registered Public
    Accounting Firm                                                
|
| | Statements of Assets, Liabilities and Trust
    Corpus at December 31, 2004 and 2003                       
|
| | Statements of Distributable Income for Each of
    the Three Years in the Period Ended December 31, 2004   
|
| | Statements of Changes in Trust Corpus for Each of
    the Three Years in the Period Ended December 31, 2004
|
| | Notes to Financial Statements                                                                              

2. Financial Statement Schedules

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

3. Exhibits

| |        |   |  |                                                                                                                                                                                                                                                              
| | ------ | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (4)(a) | * |  |  Sabine Corporation Royalty Trust
    Agreement effective as of December 31, 1982, by and between
    Sabine Corporation and InterFirst Bank Dallas, N.A., as trustee.                                                                                      
| | (b)    | * |  |  Sabine Corporation Louisiana Royalty
    Trust Agreement effective as of December 31, 1982, by and
    between Sabine Corporation and Hibernia National Bank in
    New Orleans, as trustee, and joined in by InterFirst Bank
    Dallas, N.A., as trustee.
| | (23)   |   |  |  Consent of DeGolyer and MacNaughton.                                                                                                                                                                                                                       
| | 31     |   |  |  Rule 13a-14(a)(15d-14(a))
    Certification.                                                                                                                                                                                                               
| | 32     |   |  |  Certification by Bank of America,
    Trustee of Sabine Royalty Trust, dated March 10, 2004 and
    submitted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002 (18 U.S.C. Section 1350).                                                      
| | (99)   |   |  |  Report dated February 10, 2005
    of the Trustee containing interim tax information for each of
    the 12 months in the year ending December 31, 2004.                                                                                                   



---



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

36



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##### Table of Contents



SIGNATURES

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



| |                     
| | --------------------
| | SABINE ROYALTY TRUST



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



| |     |                  
| | --- | -----------------
| | By: | /s/ RON E. HOOPER

| |                      
| | ---------------------
| |                      
| | Ron E. Hooper        
| | Senior Vice-President

Date: March 16, 2005

(The Registrant has no directors or executive
officers.)

37



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##### Table of Contents



INDEX TO EXHIBITS

|        |        |             |  |                                                                                                                                                                                                                                                              
|------- | ------ | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |            
|Number  |        | Description
|        |        |            
|       
|        | (4)(a) | *           |  |  Sabine Corporation Royalty Trust
    Agreement effective as of December 31, 1982, by and between
    Sabine Corporation and InterFirst Bank Dallas, N.A., as trustee.                                                                                      
|        | (b)    | *           |  |  Sabine Corporation Louisiana Royalty
    Trust Agreement effective as of December 31, 1982, by and
    between Sabine Corporation and Hibernia National Bank in
    New Orleans, as trustee, and joined in by InterFirst Bank
    Dallas, N.A., as trustee.
|        | (23)   |             |  |  Consent of DeGolyer and MacNaughton.                                                                                                                                                                                                                       
|        | 31     |             |  |  Rule 13a-14(a)(15d-14(a))
    Certification.                                                                                                                                                                                                               
|        | 32     |             |  |  Certification by Bank of America,
    Trustee of Sabine Royalty Trust, dated March 10, 2004 and
    submitted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002 (18 U.S.C. Section 1350).                                                      
|        | (99)   |             |  |  Report dated February 10, 2005
    of the Trustee containing interim tax information for each of
    the 12 months in the year ending December 31, 2004.                                                                                                   



---



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