<PAGE>

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                   FORM 10-K

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

(MARK ONE)
[X]          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

                                       OR

[ ]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

                         COMMISSION FILE NUMBER: 1-8518

                               LL&E ROYALTY TRUST
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<Table>
<S>                                                         <C>
                           TEXAS                                                   76-6007940
               (STATE OR OTHER JURISDICTION                           (I.R.S. EMPLOYER IDENTIFICATION NO.)
             OF INCORPORATION OR ORGANIZATION)

               JPMORGAN CHASE BANK, TRUSTEE
               INSTITUTIONAL TRUST SERVICES
                        700 LAVACA
                       AUSTIN, TEXAS                                                 78701
         (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                                  (ZIP CODE)
</Table>

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-800-852-1422

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

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

        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

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

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

     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes     .  No   X  .
                                      -----     ------

     As of June 30, 2003, 18,991,304 Units of Beneficial Interest were
outstanding, and the aggregate market value of Units (based upon the closing
price of the Units on the New York Stock Exchange as reported in The Wall Street
Journal) held by nonaffiliates was approximately $58,683,000.

     As of March 24, 2004, 18,991,304 Units of Beneficial Interest in LL&E
Royalty Trust.

                   DOCUMENTS INCORPORATED BY REFERENCE:  NONE

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

                               TABLE OF CONTENTS

<Table>
<Caption>
                                                               PAGE
                                                              NUMBER
                                                              ------
<S>                                                           <C>
                           PART I
ITEM  1     -- Business.....................................     1
     Introduction...........................................     1
     Terms and Operation of the Trust.......................     2
          Creation and Operation of the Trust...............     2
          Terms of the Conveyances..........................     2
          The Partnership...................................     4
          Receipts and Payments.............................     4
          Liabilities and Contingency Reserves..............     4
          Duration and Termination of the Trust.............     5
          Status of the Trust...............................     6
     The Royalties..........................................     6
          Overriding Royalties..............................     6
          Fee Lands Royalties...............................     8
          Analysis of the Working Interest Owner's
          Calculation of the Royalties......................     8
     The Units..............................................     9
          Distributions and Income Computations.............     9
          Transfer of Units.................................    10
          Periodic Reports..................................    10
          Possible Requirement That Units Be Divested.......    10
          Liability of Unit Holders.........................    11
          Voting by Unit Holders............................    12
          Certain State Law Considerations..................    12
     The Properties.........................................    12
          General...........................................    12
          Description of Productive Properties..............    13
          Description of the Fee Lands......................    14
     Oil and Gas Sales from the Productive Properties.......    15
          Oil Sales.........................................    15
          Gas and Liquids Sales.............................    15
     Exploration and Development Activities.................    16
          Productive Properties.............................    16
          Fee Lands.........................................    16
     Estimates of Petroleum Engineers.......................    16
          September 30, 2003 Estimates......................    16
          Certain Factors Affecting Estimates...............    17
     Industry Conditions and Regulation.....................    25
          Industry Conditions...............................    25
          Regulation........................................    25
     Tax Considerations to Owners of Units..................    25
          Federal Income Tax Considerations.................    25
          IDC Recapture Income to the Company on
          Distribution......................................    33
          Backup Withholding................................    34
          Information Return Filing Requirements............    34
          State Tax Considerations..........................    34
          Severance Taxes...................................    36
          Ad Valorem Taxes..................................    37
          Available Information.............................    37
</Table>
<PAGE>

<Table>
<Caption>
                                                               PAGE
                                                              NUMBER
                                                              ------
<S>                                                           <C>
ITEM  2   -- Properties......................................    37
ITEM  3   -- Legal Proceedings...............................    37
ITEM  4   -- Submission of Matters to a Vote of Unit
             Holders.........................................    37

                              PART II
ITEM  5   -- Market for the Registrant's Common Equity,
             Related Unit Holder Matters and Issuer Purchases
             of Equity Securities............................    37
ITEM  6   -- Selected Financial Data.........................    38
ITEM  7   -- Management's Discussion and Analysis of
             Financial Condition and Results of Operation....    38
ITEM  7A  -- Quantitative and Qualitative Disclosures about
             Market Risk.....................................    41
ITEM  8   -- Financial Statements and Supplementary Data.....    42
ITEM  9   -- Changes in and Disagreements with Accountants on
             Accounting and Financial Disclosure.............    50
ITEM  9A  -- Controls and Procedures.........................    50

                              PART III
ITEM  10  -- Directors and Executive Officers of the
             Registrant......................................    51
ITEM  11  -- Executive Compensation..........................    51
ITEM  12  -- Security Ownership of Certain Beneficial
             Owners, Management and Related Unit Holder
             Matters.........................................    51
ITEM  13  -- Certain Relationships and Related
             Transactions....................................    52
ITEM  14  -- Principal Accountant Fees and Services..........    52

                              PART IV
ITEM  15  -- Exhibits, Financial Statement Schedules, and
             Reports on Form 8-K.............................    53
SIGNATURE....................................................    54
</Table>

     Statements, other than historical facts, contained in this Annual Report on
Form 10-K, including statements of estimated oil and gas production and
reserves, drilling plans, future cash flows, anticipated capital expenditures
and Working Interest Owner strategies, plans and objectives, are "forward
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Although the Working Interest Owner has advised the Trust that it
believes that its forward looking statements are based on reasonable
assumptions, it cautions that such statements are subject to a wide range of
risks and uncertainties incident to the exploration for, development and
marketing of oil and gas, and it can give no assurance that its estimates and
expectations will be realized. Important factors that could cause actual results
to differ materially from the forward looking statements include, but are not
limited to, changes in production volumes, worldwide demand, and commodity
prices for petroleum natural resources; the timing and extent of the Working
Interest Owner's success in developing and producing oil and gas reserves; risks
incident to the drilling and operation of oil and gas wells; future production
and development costs; the effect of existing and future laws, governmental
regulations and the political and economic climate of the United States; and
conditions in the capital markets. Other risk factors are discussed elsewhere in
this Form 10-K, including those risk factors described under the heading
"Duration and Termination of the Trust."

                                        ii
<PAGE>

                                    PART  I
ITEM 1.  BUSINESS
                                  INTRODUCTION

     LL&E Royalty Trust (the "Trust") was created under the laws of the State of
Texas on June 28, 1983 pursuant to a Trust Agreement (the "Trust Agreement")
between The Louisiana Land and Exploration Company (the "Company") and First
City National Bank of Houston. Effective February 13, 1993, JPMorgan Chase Bank,
formerly Texas Commerce Bank National Association acquired from the Federal
Deposit Insurance Corporation (the "FDIC"), as receiver for New First City,
Texas -- Houston, N.A., substantially all of the assets of New First City,
Texas -- Houston N.A., which previously had acquired all of the assets of First
City, Texas -- Houston, N.A. after that institution was closed by action of the
FDIC on October 30, 1992. JPMorgan Chase Bank now serves as Trustee of the
Trust. The Trustee's offices are located at 700 Lavaca, Austin, Texas 78701, and
its telephone number is 1-800-852-1422. The Company is also referred to herein
as the "Working Interest Owner" in its capacity as the owner of the working
interests in the Properties referred to below. The term "Working Interest Owner"
includes the successors and assigns of such working interests, although at
present, no such assignments have been made. On October 22, 1997, the
shareholders of the Company approved a definitive agreement to merge with
Burlington Resources Inc. ("BR"). Effective on that date, the Company became a
wholly-owned subsidiary of BR. The merger has had no significant effects on the
Trust. Upon creation of the Trust, the Company conveyed to the Trust (a) net
overriding royalty interests (equivalent to net profits interests) (the
"Overriding Royalties") in certain productive oil and gas properties located in
Alabama, Florida and Texas and in federal waters offshore Louisiana (the
"Productive Properties") and (b) 3% royalty interests (the "Fee Lands
Royalties") in certain of the Company's then unleased, undeveloped south
Louisiana fee lands (the "Fee Lands"). The Productive Properties and the Fee
Lands are collectively referred to herein as the "Properties". Title to the
Overriding Royalties and the Fee Lands Royalties (collectively referred to
herein as the "Royalties") is held by a partnership (the "Partnership") of which
the Trust and the Company are the only partners, holding a 99% and a 1%
interest, respectively. The Royalties are the only assets of the Partnership.
The term "Royalties" reflects the Partnership interest of the Trust, and
references to specific amounts of Royalties are references to the Trust's
interest in the Overriding Royalties or Fee Lands Royalties held by the
Partnership. The instruments of conveyance which transferred the Royalties to
the Trust and subsequently to the Partnership are collectively referred to
herein as the "Conveyances". The Trust is passive, with the Trustee having only
such powers as are necessary for collection and distribution of the revenues
resulting from the Royalties, the payment of Trust liabilities and the
conservation and protection of the Trust estate.

     Units of Beneficial Interest (the "Units") in the Trust were distributed by
the Company to holders of record of its capital stock on June 22, 1983 on the
basis of one Unit for each two shares of capital stock owned on such date. Each
of the Units evidences an undivided interest in the Trust, which owns a 99%
interest in the Partnership, which holds title to the Royalties. The Unit
holders participate in the revenues resulting from the Royalties. See "Tax
Considerations to Owners of Units -- Federal Income Tax Considerations".

     The Units are not an interest in or obligation of the Working Interest
Owner or of the other operators of the Properties. However, the ultimate value
of the Royalties will be dependent, in part, upon the ability of the operators
of the Properties to operate them successfully. There is no requirement that the
Working Interest Owner expend any specific amounts with respect to the
Properties. The Working Interest Owner is free to transfer its interest
(burdened by the Royalties) to third parties. In certain limited cases the
Working Interest Owner will be permitted to farm out interests in the Productive
Properties and to reduce the Overriding Royalties proportionately. The Working
Interest Owner does not have any obligation to produce any specific amounts of
oil and gas from any of the Properties. Upon termination or abandonment of any
lease the Overriding Royalties relating thereto will be extinguished. The amount
of revenues attributable to the Overriding Royalties may be affected by
operating agreements, and the amount of revenues attributable to the Royalties
may be affected by unitization and pooling arrangements. The value of the
Royalties is also subject to all the risks associated with oil and gas
operations and to the costs of comprehensive regulation by governmental
authorities. See "Industry Conditions and Regulation".
<PAGE>

     The Trustee has no responsibility relating to the operation of the
Productive Properties or Fee Lands. The information in this Annual Report on
Form 10-K relating to the characteristics of and operations on the Productive
Properties and Fee Lands, the calculation of the payments made with respect to
the Royalties and certain other matters has been furnished to the Trustee by the
Working Interest Owner.

                        TERMS AND OPERATION OF THE TRUST

CREATION AND OPERATION OF THE TRUST

     Pursuant to the Conveyances, the Overriding Royalties and Fee Lands
Royalties were conveyed to the Trust and were then immediately assigned to the
Partnership, which was formed to hold the Royalties. See "Terms and Operation of
the Trust -- The Partnership". The Royalties are the only asset of the Trust,
other than cash being held for the payment of expenses and liabilities and for
distribution to the Unit holders. The Trustee of the Trust is JPMorgan Chase
Bank.

     The Trustee holds the Royalties pursuant to the terms of the Trust
Agreement. The Trust Agreement may be amended by a vote of Unit holders owning a
majority of the Units with concurrence of the Trustee, but no provision of the
Trust Agreement may be amended (unless consented to by 100% of the Unit holders)
in a manner which would (a) permit the Trustee to engage in business or
investment activities on behalf of the Trust, (b) alter the rights of the Unit
holders among themselves, (c) alter the number of Units, (d) reduce or delay the
distribution of the Monthly Income Amounts (defined hereinafter) to Unit
holders, (e) adversely affect the characterization of the Trust as an express
trust under the Texas Trust Code, (f) authorize the distribution to Unit holders
of record of any assets other than cash or other personal property or (g) alter
the voting requirements as provided in the Trust Agreement. In no event may the
Trust Agreement be amended in a manner that would jeopardize the continued
applicability of any Internal Revenue Service ruling letter or any opinion of
counsel described in "Tax Considerations to Owners of Units -- Federal Income
Tax Considerations -- Rulings and Tax Opinion Regarding Distribution".

     The Trustee may resign and may be removed by a vote of Unit holders owning
a majority of the Units. If the Trustee resigns, a successor trustee will be
appointed, which must be a national bank meeting certain requirements, including
having capital, surplus and undivided profits of at least $100 million.

     The Trust has no employees; administrative functions of the Trust are
performed by the Trustee. The Conveyances provide that the Working Interest
Owner will maintain books and records sufficient to determine the amounts
payable under the Royalties.

TERMS OF THE CONVEYANCES

     The discussion herein of the Conveyances is intended to be a general
summary of certain of the provisions of the Conveyances, forms of which are on
file with the Securities and Exchange Commission and are incorporated by
reference as exhibits to this Annual Report on Form 10-K. The discussion herein
is qualified in its entirety by reference to the relevant provisions of such
forms of the Conveyances.

     The Conveyances impose on the Working Interest Owner no contractual
obligation to drill any wells or to maintain operations or production once
established. However, the Conveyances of Overriding Royalty Interests do
obligate the Working Interest Owner to conduct and carry on the development,
maintenance and operation of the Productive Properties with reasonable and
prudent business judgment and in accordance with good oil and gas field
practices, or, where the Working Interest Owner is not the operator, to use
reasonable efforts to cause the operator to do so. Actual drilling operations
depend on whether geological and geophysical evaluations indicate that drilling
will be prudent. There is no requirement that the Working Interest Owner expend
any specific amounts with respect to the Properties, and it is free to transfer
its interests (burdened by the Royalties) to third parties. The Working Interest
Owner does not have any obligation to produce any specific amounts of oil and
gas from any of the Properties and it has the right to abandon its interest in
any well or lease. Upon termination of any lease, the Overriding Royalties
relating thereto will be extinguished.

                                        2
<PAGE>

     Uncertainties or controversies may arise from time to time with respect to
the correct sales prices that may be charged by the Working Interest Owner for
oil and gas produced from the Properties. The Conveyances provide that amounts
received by the Working Interest Owner that may be subject to any such
uncertainty or controversy and otherwise payable to the Trust may, at the option
of the Working Interest Owner under certain circumstances, be deposited in
escrow with an escrow agent, which may be JPMorgan Chase Bank, and will not be
payable with respect to the Royalties until the matter is resolved. The Working
Interest Owner may place other amounts in escrow under certain circumstances.
Amounts owing to the Trust and paid to the Working Interest Owner by the escrow
agent upon final resolution of any such matter will be delivered to the Trustee
on the next succeeding Monthly Record Date (defined below) and distributed to
the record holders of Units as of that Monthly Record Date. The provisions of
the Conveyances that provide for escrow accounts permit the Working Interest
Owner to elect, under certain circumstances, to calculate and pay amounts
attributable to the Royalties, without establishing actual escrow accounts, in
amounts equal to the amounts that would have been paid had actual escrow
accounts been established.

     The Conveyances provide that under certain circumstances the Working
Interest Owner may place all or a portion of the revenues which would otherwise
accrue to the Royalties in an escrow account rather than treating such revenues
as Gross Proceeds. In particular, with respect to any Productive Property, if,
at the end of any month, (a) the aggregate estimated future Gross Proceeds (as
defined in the Conveyances), as estimated by independent petroleum engineers in
their most current report, is less than (b) the sum of (i) estimated future
Production Costs (as defined in the Conveyances), as estimated by the Working
Interest Owner, excluding certain costs, and (ii) 400% of the aggregate
estimated future Special Costs (as defined in the Conveyances), the Working
Interest Owner may escrow an amount equal to a certain percentage (the
calculation of which is described below) of the revenues which would otherwise
constitute Gross Proceeds. The phrase "Gross Proceeds", as used in the
Conveyances, and subject to certain exceptions, means, on an accrual accounting
method, the amount recorded as revenues by the Working Interest Owner from the
sale of oil, gas and certain other hydrocarbons from a given Productive
Property. The phrase "Production Costs", as used in the Conveyances, includes
lease operating expenses, overhead and taxes. The phrase "Special Costs", as
used in the Conveyances, includes, among other things: (a) the aggregate
estimated cost of plugging and abandoning wells and dismantling platforms on
such Productive Property, and (b) estimated future capital expenditures. The
amount the Working Interest Owner may place in escrow with respect to any
Productive Property in any month may not exceed Gross Proceeds for that month
multiplied by 250% of the aggregate estimated future Special Costs divided by
the aggregate estimated future Gross Proceeds for that Property. Further, if the
total amount so escrowed exceeds 125% of the aggregate estimated future Special
Costs for the particular Productive Property, no additional amounts may be
escrowed until the escrowed funds are less than 125% of such amount.

     Based on the escrow provisions described above, the Working Interest Owner
has escrowed $4,543,402 for the Jay Field property and $2,600,000 for the South
Pass 89 property, 50% of which would otherwise have been distributable to the
Trust. In addition, the Working Interest Owner has escrowed $3,000,000 from the
Offshore Louisiana property, 90% of which would otherwise have been
distributable to the Trust. The Working Interest Owner's estimates of total
Special Costs are $13,300,000 for Jay Field, $1,900,000 for South Pass 89 and
$2,300,000 for Offshore Louisiana. As described above, the Conveyances prohibit
the Working Interest Owner from escrowing additional funds for estimated future
Special Costs with respect to a particular Productive Property once the amount
escrowed exceeds 125% of the aggregate estimated future Special Costs for that
property. The Conveyances permit the Working Interest Owner to release funds
from any of the Special Cost escrows at any time if it determines in its sole
discretion that there no longer exists a need for escrowing all or any portion
of such funds. However, the Working Interest Owner is not required to do so. The
Working Interest Owner has informed the Trustee that it does not intend to
release any of the excess escrowed funds at this time. At present, the Working
Interest Owner is not escrowing additional proceeds from any of the Productive
Properties, however, the Working Interest Owner has advised the Trustee that
based on the September 30, 2003 reserve report included in this Annual Report on
Form 10-K, the Working Interest Owner is permitted to place additional funds in
escrow from the Jay Field and South Pass 89 properties. The Working Interest
Owner has advised the Trustee that it intends to continue to monitor all
relevant facts and circumstances to evaluate the necessity of escrowing
additional funds as described above. The Working
                                        3
<PAGE>

Interest Owner is under no obligation to give any advance notice to the Trustee
or the Unit holders in the event it determines that additional funds should be
escrowed. If the Working Interest Owner begins to escrow additional funds, the
Royalties paid to the Trust would be reduced and the reduction could be
significant.

     In the event that the Working Interest Owner is required to pay any refunds
or interest (including any payment made pursuant to settlements entered into by
the Working Interest Owner in good faith) as a result of overcharges with
respect to which Royalties have already been paid, neither the Trustee nor the
Unit holders are expected to be obligated to return to the Working Interest
Owner any payments previously received. However, the amount of any such refunds
or interest would reduce future payments attributable to the Royalties. Holders
of Units may, as a result of the procedures described above and under
"Liabilities and Contingency Reserves" below, receive distributions of amounts
that otherwise would have been distributed to former holders if such amounts had
not been held in escrow or reserves, or, conversely, may have their
distributions reduced as a result of controversies about amounts that may be
collected by the Working Interest Owner or as a result of the establishment of
escrow accounts or reserves for contingencies.

     See Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation -- Results of Operations.

THE PARTNERSHIP

     Title to the Royalties is held by a partnership of which the Trust and the
Company are the only partners. The Partnership was formed solely for the purpose
of owning the Royalties, and its only functions are the ownership of such
interests and the related receipt of funds, payment of expenses, disbursement of
revenues from the Royalties and preparation of certain reports to the Trustee.

RECEIPTS AND PAYMENTS

     The terms of the Trust Agreement, the Conveyances and the partnership
agreement between the Trust and the Company (the "Partnership Agreement")
provide that the Working Interest Owner will use its best efforts to make
payments to the Partnership, the Partnership will make payments to the Trust,
and the Trust and Partnership will use reasonable efforts to pay expenses, only
on the Monthly Record Date (defined as the close of business on the fifth day of
the month unless such fifth day is not a business day, in which case it will be
the next business day following the fifth day) for each Monthly Period (defined
as the period which commences on the day following a Monthly Record Date and
continuing through and including the succeeding Monthly Record Date). For
taxable years beginning on or after January 1, 1987, the Partnership has been
required to use the accrual method of accounting, and thus the portion of the
Trust's income attributable to the Partnership and reported to the Unit holders
is likewise on the accrual basis. Consequently, the Unit holder required to
recognize income and expense for a Monthly Period may not be the Unit holder
entitled to the Monthly Income Amount. See "Tax Considerations to Owners of
Units -- Federal Income Tax Considerations -- Tax Consequences of Owning
Units -- Accounting for Income and Deductions".

LIABILITIES AND CONTINGENCY RESERVES

     Because of the passive nature of the Trust assets and the restrictions on
the power of the Trustee to incur obligations, the only liabilities that the
Trust typically incurs are for routine administrative expenses, such as
Trustee's fees and accounting, engineering, legal and other professional fees.
The costs and expenses of the Trust may increase or decrease in future years,
depending on the volume of trading of the Units, the amount of revenues paid to
the Trust and increases or decreases in accounting, engineering, legal and other
professional fees and other factors. Substantial federal income tax liabilities
would result if the Internal Revenue Service were to revoke or change its
position on its ruling that neither the Trust nor the Partnership is taxable as
a corporation and such revocation or change were not judicially reversed. See
"Tax Considerations to Owners of Units -- Federal Income Tax
Considerations -- Rulings and Tax Opinion Regarding Distribution".

     The Trust Agreement and the Partnership Agreement provide that the Trustee
or the Partnership may establish cash contingency reserves in the event that (a)
either (i) a claim is asserted against or is likely to be asserted against the
Trust or the Partnership, whichever is the case, and the Trustee has received an
opinion of
                                        4
<PAGE>

counsel stating that the claim has a reasonable probability of succeeding or
(ii) a claim against the Trust or the Partnership, whichever is the case, has
been successful but is not currently due and payable, and (b) the amount or
probable amount of such claim is such that it cannot be satisfied out of monthly
income from the Royalties. Such reserves will be deposited in
noninterest-bearing accounts, except that such contingency reserves will be
placed in certificates of deposit or United States government securities
maturing on the next Monthly Record Date if the Trustee or the Partnership,
whichever is the case, has received an opinion of counsel to the effect that
such action will not jeopardize the tax treatment of the Trust or Partnership as
a trust or partnership, respectively, and not as an association taxable as a
corporation. Assuming that the Trust is classified for tax purposes as a grantor
trust and the Partnership is classified for tax purposes as a partnership (see
"Tax Considerations to Owners of Units -- Federal Income Tax
Considerations -- Tax Consequences of Owning Units"), if such reserves are
established, the amounts placed in reserve will be taxable to the Unit holders
when received by the Partnership, even though they are not distributed to Unit
holders at that time. If cash contingency reserves are established and placed in
interest-bearing accounts as described above, the Trustee will furnish reports
annually to all Unit holders of record on the applicable Monthly Record Dates
containing information sufficient to enable Unit holders to calculate their
share of taxable income (on either a cash or accrual basis) attributable to any
interest earned on the reserves.

     If at any time the cash available to the Trust or the Partnership is not
sufficient to pay liabilities that have become due, the Trustee or the
Partnership, respectively, may borrow funds on a secured or an unsecured basis
to pay such liabilities. Except for borrowings to purchase Units as described
under "The Units -- Possible Requirement That Units Be Divested", neither the
Trustee nor the Partnership may borrow an amount that at the time of borrowing
exceeds 50% of the estimated revenues of the Trust or the Partnership,
respectively, during the immediately following six Monthly Periods. Generally,
such borrowing must be repaid before any further Trust or Partnership
distributions, whichever is the case, can be made.

     The Trust Agreement requires the Trustee to receive all income and proceeds
of the Royalties and to pay all expenses, charges, liabilities and obligations
of the Trust. See "The Units -- Distributions and Income Computations". The
Trustee submits reports to the Unit holders as described under "The
Units -- Periodic Reports". The Trust Agreement gives the Trustee only such
rights and powers as are necessary and proper for the conservation and
protection of the Royalties and prohibits the Trustee from entering into or
engaging in any business or investment activity on behalf of the Trust.

     Except as described under "The Units -- Liability of Unit Holders", the
Trustee will be indemnified out of the Trust assets for any liability, expense,
claim, damage or other loss incurred in performing its duties, unless resulting
from its negligence, bad faith or fraud. In no event will the Trustee be deemed
to have acted negligently, fraudulently or in bad faith if it takes action or
suffers action to be taken in good faith in reliance upon and in accordance with
the advice of parties (including its own employees) considered to be qualified
as experts on the matters submitted to them. Neither the Trust, the Trustee, the
Partnership nor the Working Interest Owner will be entitled to indemnification
from the Unit holders. To the extent not inconsistent with the Trust Agreement,
the Trustee has been relieved from certain liabilities otherwise imposed by the
Texas Trust Act, as amended by the Texas Trust Code (the "Texas Trust Code").

DURATION AND TERMINATION OF THE TRUST

     Unless sooner terminated, the Trust will continue until such time as its
net revenues for each of two successive years are less than $5 million per year
(the "Termination Threshold"). Net revenues are calculated as royalty revenues
after administrative expenses of the Trust and as if the Trust had received its
pro rata portion of any amounts being withheld by the Working Interest Owners or
the Partnership under escrow arrangements or to make refund payments pursuant to
the Conveyance (the Trust's pro rata portion of escrowed amounts relating to the
future dismantlement of platforms are included in the net revenue calculation
for this purpose). The Trust may be terminated at any time by a vote of Unit
holders owning a majority of the Units. Upon the termination of the Trust, the
Trustee will sell the assets of the Trust for cash (unless authorized by the
holders of a majority of the Units to sell such assets for non-cash
consideration) upon such terms as the Trustee, in its sole discretion, deems to
be in the best interests of the Unit holders. After paying or making provision
for all liabilities of the Trust, the Trustee will distribute all cash then held
by
                                        5
<PAGE>

it in its capacity as Trustee. After the termination of the Trust, the Trustee
will continue to act as Trustee for purposes of liquidating and winding up the
affairs of the Trust. See "Status of the Trust".

STATUS OF THE TRUST

     The Trust Agreement provides that the Trust will terminate in the event
that the net revenues fall below $5 million for two successive years. As a
result of lower oil and natural gas prices, lower production volumes and
increased expenditures for the drilling of the McDavid Lands 37-5 well on the
Jay Field property, net revenues of $2.1 million received by the Trust in 2002
fell below the Termination Threshold. Therefore, if net revenues for 2003 fell
below the $5 million Termination Threshold, the Trust would be required to
terminate effective December 31, 2003. The Trust's net revenues for the year
ended December 31, 2003 were $7.9 million. As the Trust's 2003 net revenues are
above the Termination Threshold for 2003, the Trust did not terminate on
December 31, 2003.

     If the Trust's net revenues for two successive years falls below $5 million
(calculated in accordance with the provisions of the Trust Agreement), the
Trustee will be required to sell the assets of the Trust for cash unless a
majority of the Unit holders approve a sale for specified non-cash consideration
consisting of personal property, in which case the Trustee may, but will not be
required to, attempt to consummate any such transaction approved by a majority
of the Unit holders. In any case, any sale will be on terms that the Trustee, in
its sole discretion, determines to be in the best interests of Unit holders.
Upon any sale, the Trustee will distribute the proceeds to the Unit holders as
promptly as practicable after paying all then existing liabilities of the Trust,
including fees of the Trustee, and, if necessary, setting up reserves in amounts
the Trustee deems appropriate to provide for payment of contingent liabilities.

     If any asset required to be sold has not been sold within three years after
the termination of the Trust, the Trustee will cause the asset to be sold at
public auction to the highest cash bidder. Except in connection with any
proposed non-cash sale as described above, no approval of the Unit holders will
be required or solicited in connection with the sale of the Trust's assets after
termination of the Trust.

     See Item 7 -- Management's Discussion and Analysis of Financial Condition
and Results of Operation.

                                 THE ROYALTIES

     The manner of calculating the payments attributable to the Royalties is set
forth in the Conveyances, forms of which are on file with the Securities and
Exchange Commission and are incorporated by reference as exhibits to this Annual
Report on Form 10-K. The description herein of the manner of calculating those
payments is qualified in its entirety by the detailed terms of the Conveyances.

OVERRIDING ROYALTIES

     For the purposes of computing Net Proceeds (as defined in the Conveyances),
the Productive Properties have been grouped geographically into three groups of
leases, each of which has been defined as a separate "Property". These groups
are designated herein as the "Jay Field", "South Pass 89", and "Offshore
Louisiana". See "The Properties -- Description of Productive Properties". The
Overriding Royalties consist of overriding royalty interests (equivalent to net
profits interests) equal to various percentages of the Net Proceeds, as defined,
from the production of oil, gas and other hydrocarbons from the Productive
Properties. Net Proceeds are computed on a Property-by-Property (i.e., lease
group) basis and consist of the aggregate proceeds to the Working Interest Owner
from the sale of oil, gas and other hydrocarbons from each of the Productive
Properties ("Gross Proceeds") less "Production Costs", which include primarily
(a) all direct costs, charges and expenses incurred by the Working Interest
Owner in exploration, production, development and other operations on the
Productive Properties (including secondary and tertiary recovery operations),
including abandonment costs; (b) all applicable taxes, including severance, ad
valorem and windfall profit taxes, but excluding income taxes; (c) all operating
charges directly associated with the Productive Properties; (d) an allowance for
costs, computed on a current basis at a rate equal to JPMorgan Chase Bank's
prime rate plus 1/2% per annum on the average amounts by which, and for only so
long as, costs and expenses for any

                                        6
<PAGE>

Productive Property have exceeded the proceeds of production from such
Productive Property; (e) amounts paid by the Working Interest Owner as refunds
of excess sales prices on previous sales; and (f) applicable charges for certain
overhead expenses. The Working Interest Owner's estimates of total Special Costs
are $13,300,000 for Jay Field, $1,900,000 for South Pass 89 and $2,300,000 for
Offshore Louisiana. The Working Interest Owner has escrowed $4,543,402 for the
Jay Field property, $2,600,000 for the South Pass 89 property and $3,000,000 for
the Offshore Louisiana property. The Conveyances prohibit the Working Interest
Owner from escrowing additional funds for estimated future Special Costs with
respect to a particular Productive Property once the amount escrowed exceeds
125% of the aggregate estimated future Special Costs for that Property. The
Conveyances permit the Working Interest Owner to release funds from any of the
Special Costs escrows at any time if it determines in its sole discretion that
there no longer exists a need for escrowing all or any portion of such funds.
However, the Working Interest Owner is not required to do so. The Working
Interest Owner has informed the Trustee that it does not intend to release any
of the excess escrowed funds at this time.

     If operating and other costs exceed net revenues from a Productive Property
for any month, the excess will be recovered by the Working Interest Owner out of
future production from such Productive Property prior to making further payments
attributable to the Royalties with respect to such Productive Property, but
neither the Trust, the Trustee, the Partnership, nor any Unit holder will be
liable for any such costs or liabilities, nor will they be obligated to return
any income from the Royalties received during any prior period. However, any
such excess costs or overpayment of Royalties will reduce future payments of
Royalties.

     Although crude oil production from Jay Field has a low sulphur content, gas
production from the field has a high content of sulphur which is removed prior
to processing and marketing such production. Although sulphur removed as a
by-product is sold by the Working Interest Owner, the removal of the sulphur is
essential to the marketing of the gas produced. For the purpose of computing Net
Proceeds, all proceeds to the Working Interest Owner from the sale of sulphur
extracted from Jay Field production and all direct costs and an allocated
portion of other costs associated with such extraction are excluded from the
calculations.

     The Trust owns Overriding Royalties expressed as various percentages of Net
Proceeds. The Overriding Royalties with respect to Jay Field and South Pass 89
are equal to 50% of the Net Proceeds attributable to such properties. In years
prior to 1986, the Overriding Royalties were equal to percentages of Net
Proceeds that varied from 20% to 48%. The Overriding Royalties with respect to
Offshore Louisiana is (and has been since the inception of the Trust) equal to
90% of the Net Proceeds attributable to such properties.

     The amount of revenues attributable to the Overriding Royalties from any
well may be increased or reduced as a result of future pooling and unitization
agreements, extinguished or suspended as a result of "nonconsent" provisions of
present or future operating agreements between the Working Interest Owner and
other working interest owners or extinguished as a result of the expiration of
oil and gas leases. Since the Overriding Royalties were conveyed out of the
Working Interest Owner's working interests, if the Working Interest Owner's
right to revenues is adjusted, extinguished or suspended, the Trust's right to
revenues will also be adjusted, extinguished or suspended.

     The Conveyances provide that the Working Interest Owner has the right to
approve unitization and pooling arrangements without the consent of the owners
of Units or the Trustee. Pooling and unitization refer to the joining together
of separate leases, or portions thereof, in a single unit, with the owners of
the interests in each separate lease sharing, depending on their interests, in
the production and costs attributable to the operations of the entire unit.

     Since Overriding Royalty revenues are based upon Net Proceeds, determined
after deducting various costs, the amount of such revenues is directly affected
by numerous factors, including governmental regulation, prices received for
production, increases in operating and capital costs and certain taxes and
curtailment of purchases by the purchasers of production from the Productive
Properties. In addition, since capital expenditures are deducted for purposes of
computing Net Proceeds, there may be substantial periods during which there will
be no Net Proceeds from a Productive Property because of such capital
expenditures, and therefore no Overriding Royalty revenues from such Productive
Property during such period. The amount of the revenues attributable to the
Overriding Royalties may also decrease materially from time to time as a
                                        7
<PAGE>

consequence of the occurrence of events that are risks incident to the
exploration for and production of oil and gas, including blowouts, cratering,
fires, drilling and production difficulties, environmental pollution problems,
and, with respect to Offshore Louisiana and South Pass 89, risks incident to the
offshore exploration for and production of oil and gas, including those related
to adverse weather and seas. Although any losses or liabilities resulting from
any such events would not require the Trust or Unit holders to repay funds
previously received, they would reduce any amounts payable thereafter with
respect to the Overriding Royalties.

FEE LANDS ROYALTIES

     The Fee Lands Royalties consist of royalty interests equal to a 3% interest
in the future gross oil, gas and other hydrocarbon production, if any, from the
Fee Lands, unburdened by the expense of drilling, completion, development,
operating and other costs incident to production. The Fee Lands consist of
approximately 22,000 gross acres in south Louisiana, only approximately 4,300 of
which were leased at December 31, 2003. See "The Properties -- Description of
the Fee Lands" and "Exploration and Development Activities -- Fee Lands".

ANALYSIS OF THE WORKING INTEREST OWNER'S CALCULATION OF THE ROYALTIES

     The following unaudited schedules summarize the Working Interest Owner's
calculation of the amounts paid to the Trust with respect to the Trust's royalty
interests for (i) the quarter ended December 31, 2003 (applicable to production
from July 2003 through September 2003) and (ii) the year ended December 31, 2003
(applicable to production from October 2002 through September 2003):

                        QUARTER ENDED DECEMBER 31, 2003

<Table>
<Caption>
                                                             SOUTH       OFFSHORE
                                               JAY FIELD    PASS 89     LOUISIANA       TOTAL
                                              -----------   --------    ----------   -----------
<S>                                           <C>           <C>         <C>          <C>
Revenues:
  Liquids...................................  $ 5,037,421   $273,112    $  303,733   $ 5,614,266
  Natural gas...............................      104,003      5,890     2,291,149     2,401,042
                                              -----------   --------    ----------   -----------
                                              $ 5,141,424   $279,002    $2,594,882   $ 8,015,308
Production costs and expenses(1)............   (2,618,645)   (74,875)     (352,621)   (3,046,141)
Capital expenditures........................   (1,209,952)       (43)       93,194    (1,116,801)
                                              -----------   --------    ----------   -----------
                                               (3,828,597)   (74,918)     (259,427)   (4,162,942)
Net Proceeds................................  $ 1,312,827   $204,084    $2,335,455   $ 3,852,366
                                              ===========   ========    ==========   ===========
Overriding Royalties paid to the Trust(2)...  $   656,414   $101,455    $2,101,910   $ 2,859,779
                                              ===========   ========    ==========
Fee Lands Royalties...............................................................        48,815
                                                                                     -----------
Royalties paid to the Trust.......................................................   $ 2,908,594
                                                                                     ===========
</Table>

                                        8
<PAGE>

                          YEAR ENDED DECEMBER 31, 2003

<Table>
<Caption>
                                                            SOUTH       OFFSHORE
                                            JAY FIELD      PASS 89      LOUISIANA       TOTAL
                                           ------------   ----------   -----------   ------------
<S>                                        <C>            <C>          <C>           <C>
Revenues:
  Liquids................................  $ 20,138,749   $  902,475   $ 1,089,382   $ 22,130,606
  Natural gas............................       570,147      542,233     9,084,975     10,197,355
                                           ------------   ----------   -----------   ------------
                                           $ 20,708,896   $1,444,708   $10,174,357   $ 32,327,961
Production costs and expenses(1).........   (10,271,120)    (452,956)   (1,254,039)   (11,978,115)
Capital expenditures.....................    (4,322,657)     (79,404)   (1,594,434)    (5,996,495)
                                           ------------   ----------   -----------   ------------
                                            (14,593,777)    (532,360)   (2,848,473)   (17,974,610)
Net Proceeds.............................  $  6,115,119   $  912,348   $ 7,325,884   $ 14,353,351
                                           ============   ==========   ===========   ============
Overriding Royalties paid to the
  Trust(2)...............................  $  1,328,929   $  463,105   $ 6,593,297   $  8,385,331
                                           ============   ==========   ===========
Fee Lands Royalties...............................................................        110,710
                                                                                     ------------
Royalties paid to the Trust.......................................................   $  8,496,041
                                                                                     ============
</Table>

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

(1) Interest earned on funds escrowed for future dismantlement costs are
    reported as a reduction of production costs and expenses. Interest earned
    for the quarter and year ended December 31, 2003 was approximately $81,127
    and $339,012, respectively. Pursuant to the terms of the Trust Conveyances,
    interest earned on the escrowed funds for any month will be calculated at an
    interest rate equal to 80 percent of the median between the Prime Rate at
    the end of such month and the Prime Rate at the end of the preceding month.

(2) As a result of excess production costs being incurred in one monthly
    operating period and then being recovered in a subsequent monthly operating
    period(s), the Overriding Royalties paid to the Trust may not agree to the
    Trust's royalty interest in the Net Proceeds. The 2003 royalty income for
    the Jay Field and South Pass 89 properties have been reduced by $3,457,264
    and $10,295, respectively of excess production costs arising in 2002. The
    South Pass 89 property has excess production costs of $24,156, as of
    December 31, 2003.

                                   THE UNITS

DISTRIBUTIONS AND INCOME COMPUTATIONS

     Distributions of available revenues to Unit holders are made monthly. Each
payment is made with respect to the preceding Monthly Period of the Trust. The
Trustee determines for each Monthly Period the Monthly Income Amount available
for distribution for such Monthly Period. The Monthly Income Amount for each
Monthly Period is payable to Unit holders of record on the Monthly Record Date
on which such Monthly Period ends and is distributed by the Trustee as soon as
practicable but not later than ten days following such Monthly Record Date (the
"Monthly Payment Date"). Under the terms of the Trust Agreement, the Trustee is
prohibited from investing funds received on each Monthly Record Date pending
disbursement to holders of Units. As a consequence, the Trustee may hold
substantial balances between the Monthly Record Date and the Monthly Payment
Date in each month, and JPMorgan Chase Bank has the use of these balances during
such periods.

     Promptly after receipt of the required information, and if practicable
within 90 days of the close of each year, the net taxable income of the Trust
for federal income tax purposes for each Monthly Period ending in such year will
be reported by the Trustee to the Unit holders of record to whom the Monthly
Income Amounts were distributed. The Trustee mailed such reports to Unit holders
in March 2003. If, as anticipated, the Unit holders are owners of interests in a
grantor trust and the Partnership is a partnership for federal income tax
purposes, Unit holders will recognize income for federal income tax purposes in
the Monthly Period when income is recognized by the Partnership. Because the
Partnership has converted to the accrual method of accounting as mandated by the
Tax Reform Act of 1986 (the "1986 Act"), Unit holders are required to
                                        9
<PAGE>

recognize income in certain circumstances prior to receiving cash distributions.
See "Tax Considerations to Owners of Units -- Federal Income Tax
Considerations -- Accounting for Income and Deductions".

TRANSFER OF UNITS

     Units are transferable on the records of JPMorgan Chase Bank, as transfer
agent and registrar, upon the surrender of any certificate in proper form for
transfer as required by JPMorgan Chase Bank, Service charges are paid as an
administrative expense of the Trust, and no service charge is made directly to
Unit holders for any transfer. Until any such transfer, the Trustee may treat
the owner of any Unit as shown by the records of the transfer agent and
registrar as the owner thereof and will not be charged with notice of any claim
or demand respecting such Unit or the interest represented thereby by any other
party. A transfer of a Unit after the Monthly Record Date for any Monthly Period
does not transfer to the transferee the right to the Monthly Income Amount for
such Monthly Period. See "Tax Considerations to Owners of Units -- Federal
Income Tax Considerations -- Tax Consequences of Owning Units -- Sale of Units"
for a discussion of certain federal income tax effects of the transfer of Units.
Texas law governs matters affecting title, ownership, warranty and transfer of
the certificates.

PERIODIC REPORTS

     Promptly after receipt of the required information from the Working
Interest Owner, and if practicable within 60 days following the end of each of
the first three fiscal quarters of each year, the Trustee mails to each Unit
holder of record who was such on the last Monthly Record Date in such quarter a
report indicating, among other things, the distributions and revenues
attributable to the Trust for such quarter. Promptly after receipt of the
required information, and if practicable within 90 days after the end of the
Trust's fiscal year (which is the calendar year), the Trustee mails to each Unit
holder who received a Monthly Income Amount for any Monthly Period ending in
such year a report that shows in reasonable detail the receipts and
disbursements, and, for state and federal tax purposes, the income and expenses
of the Trust, as well as sufficient information to permit a calculation of any
depletion deduction for each Monthly Period (or portion thereof, if any) during
the year. Promptly after receipt of the required information, and if practical
within 120 days following the end of each year, the Trustee mails to all Unit
holders of record an annual report containing audited financial statements of
the Trust and a summary oil and gas reserve report with respect to the Trust's
interests in the Properties. The Trustee mails to Unit holders such other
reports and files such returns for federal and state income tax purposes as are
required to comply with applicable laws, to comply with the rules of the New
York Stock Exchange and to permit each Unit holder to calculate his share of the
income and deductions of the Trust. See "Tax Considerations to Owners of
Units -- Federal Income Tax Considerations -- Tax Consequences of Owning
Units -- Reports". However, under the Trust Agreement no duty is imposed on the
Trustee to secure, file or disseminate information to which it is not expressly
afforded access under the terms of the Trust Agreement or the Conveyances or
which it is unable to obtain with reasonable effort and expense.

     Under the Trust Agreement, the Trustee has the sole responsibility for
filing all periodic reports and other materials required by law, including the
Securities Exchange Act of 1934 and the rules and regulations thereunder, and by
any securities exchange on which the Units are listed. The cost of preparing and
filing such materials is borne by the Trust.

POSSIBLE REQUIREMENT THAT UNITS BE DIVESTED

     The Trust Agreement imposes no restrictions based on nationality or other
status of the persons or other entities which are eligible to hold Units.
However, the Trust Agreement provides that (a) if at any time the Trust or the
Trustee is named a party in any judicial or administrative proceeding that seeks
the cancellation or forfeiture of any property constituting part of the Trust
corpus because of the nationality, or any other status under the laws of the
United States or any political subdivision thereof, of any one or more holders
of Units, or (b) if at any time the Trustee in its reasonable discretion
determines that such a proceeding is threatened or

                                        10
<PAGE>

likely to be asserted and the Trustee has received an opinion of counsel stating
that the party asserting or likely to assert the claim has a reasonable
probability of succeeding, the following procedures will be applicable:

          (i) The Trustee may give written notice ("Notice") to each record
     owner of Units regarding the existence of such controversy. The Notice will
     contain a reasonable summary of such controversy, will include materials
     that will permit an owner of Units promptly to confirm or deny to the
     Trustee that such owner is a person whose nationality or other status is or
     would be an issue in such a proceeding ("Ineligible Holder") and will
     constitute a demand to each Ineligible Holder that he dispose of his Units
     to a party not of a nationality or other status at issue in the proceeding
     described in the Notice within 30 days after the date of the Notice.

          (ii) If any Ineligible Holder fails to dispose of his Units, as
     required by the Notice, within 30 days after the date of the Notice, the
     Trustee will have the right to purchase and will purchase, during the 90
     days following the termination of the 30-day period specified in the
     Notice, any Unit not so transferred at a cash price equal to the closing
     price of the Units on the largest stock exchange on which the Units are
     then listed or, in the absence of any such listing, in the over-the-counter
     market, on the last business day prior to the expiration of the 30-day
     period stated in the Notice. The procedures for any such purchase are more
     fully described in the Trust Agreement.

          (iii) The Trustee shall cancel any Units acquired in accordance with
     the foregoing procedures, thereby increasing the proportionate interest in
     the Trust of other holders of Units.

          (iv) The Trustee may, in its sole discretion, borrow any amounts
     required to purchase Units in accordance with the procedures described
     above. Such borrowings would be repaid from revenues to the Trust before
     any subsequent distribution to Unit holders would be made.

LIABILITY OF UNIT HOLDERS

     The Trust is intended to be an "express trust" created under the Texas
Trust Code. Under Texas law, beneficiaries of an express trust are not
personally liable for the obligations of the Trust, even if the assets of the
Trust are insufficient to discharge its obligations. If the Trust were held not
to constitute an express trust, it is possible that the holders of Units would
be jointly and severally liable for the obligations of the Trust as would
general partners of a partnership. The Trustee may incur liabilities that cannot
be contractually limited, such as tort liability or federal income tax
liability, in the event the Trust is treated as an association taxable as a
corporation. Under current judicial decisions the Federal Energy Regulatory
Commission (the "FERC") is not considered to be empowered to compel refunds from
overriding royalty interest owners with respect to gas price overcharges.
However, future laws, regulations or judicial decisions might permit the FERC or
other governmental agencies to require such refunds by overriding royalty
interest owners or to create filing, reporting or certification obligations for
the Trustee or the Unit holders. Moreover, other parties, such as oil or gas
purchasers, may be able to instigate private lawsuits or other legal action to
compel refunds from overriding royalty interest owners with respect to oil or
gas pricing overcharges. The Working Interest Owner has agreed that it will not
seek to recover from the Unit holders the amount of any refunds it is required
to make except out of future revenues payable to the Trust. See "Terms and
Operation of the Trust -- Terms of the Conveyances" for a description of
agreements relating to the method of handling refunds. The Trustee will be fully
liable to the Unit holders if the Trustee incurs any liability without taking
steps reasonably necessary to ensure that such liability will be satisfiable
only out of the Trust assets (regardless of whether the assets are adequate to
satisfy the liability) and in no event out of amounts distributed to, or other
assets owned by, Unit holders. However, the Trustee will not be liable to the
owners of Units for state or federal income taxes or for refunds, fines,
penalties or interest relating to oil or gas pricing overcharges under state or
federal price controls. The Trustee will be indemnified out of the Trust assets,
to the extent that the Trustee's actions do not constitute negligence, bad faith
or fraud, or are based on good faith reliance upon an expert. In weighing the
possible exposure to liability in the event the Trust were not classified as an
"express trust", each Unit holder should consider (a) the passive nature of the
Trust assets, (b) the restrictions on the power of the Trustee to incur
liabilities on behalf of the Trust and (c) the limited activities to be
conducted by the Trustee.

                                        11
<PAGE>

VOTING BY UNIT HOLDERS

     Each Unit is entitled to one vote on any matter submitted to Unit holders.
Meetings of Unit holders may be called at any time by the Trustee and must be
called by the Trustee at the written request of Unit holders owning at least 10%
of the Units. Unit holders may vote in person or by proxy. A majority of Unit
holders is required to constitute a quorum. Except as otherwise provided in the
Trust Agreement, any action by the Unit holders requires the concurrence of the
Trustee and the affirmative vote of Unit holders owning a majority of the Units
represented at the meeting, in person or by proxy. The Trustee and the Working
Interest Owner may solicit and vote proxies.

     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 reelection of the Trustee. To date, no matter has been submitted to a
vote of the Unit holders.

CERTAIN STATE LAW CONSIDERATIONS

     It is anticipated that the Units will be treated for certain state law
purposes essentially the same as other securities, that is, as interests in
intangible personal property rather than as interests in real property. However,
there is a possibility that a Unit holder could be treated as owning an interest
in real property. In that event, the tax, probate, devolution of title and
administration laws of Louisiana, Florida and Alabama applicable to real
property may apply to the Units, even if held by a person who is not a resident
or domiciliary thereof. Application of such laws would make inheritance and
related matters with respect to the Units substantially more onerous than they
would be if the Units are treated as interests in intangible personal property.
In any event the ownership of Units and realization of income from the Royalties
by a Unit holder may subject such Unit holder to state or local income or other
taxation in the state of the Unit holder's residence or domicile. Unit holders
should consult their legal and tax advisors regarding the applicability of these
considerations to their individual circumstances. See "Tax Consideration to
Owners of Units -- State Tax Considerations".

                                 THE PROPERTIES

GENERAL

     The Trustee has no responsibility relating to the operation of the
Productive Properties or Fee Lands. The information in this Annual Report on
Form 10-K relating to the characteristics of, operations on, and sales from the
Productive Properties and Fee Lands and certain other matters has been furnished
to the Trustee by the Working Interest Owner. The Working Interest Owner is not
the operator of the Jay Field, South Pass 89 or Offshore Louisiana Properties.

     The Overriding Royalties were carved out of interests (primarily working
interests) owned by the Working Interest Owner at the time of the creation of
the Trust. References herein to "net" wells and acres refer to the interest of
the Working Interest Owner (from which the Royalties were carved) in the "gross"
wells or acres. References to the percentage of the working interest owned by
the Working Interest Owner are references to the working interest out of which
the Overriding Royalties were carved. For example, a reference to a "20% working
interest" in a well or lease that is included in a Productive Property indicates
that the Trust's Overriding Royalties burden 20% of the working interest in the
well or lease. That 20% working interest is also subject to landowners'
royalties and may be subject to other overriding royalty interests and other
burdens that are considered prior to calculation of the amounts payable with
respect to the Overriding Royalties. Since the amounts and nature of such
burdens vary from lease to lease, the information presented herein regarding the
Working Interest Owner's percentage of the working interest in wells or leases
cannot be used to calculate precisely the Trust's interest in any particular
well or lease. In addition, (a) because operating and capital costs are taken
into consideration in calculating the amounts payable with respect to the
Overriding Royalties and because prices for oil and gas may vary from field to
field, information regarding results of well tests or gross quantities of
production from a given well cannot be used to compute the Trust's interest and
(b) because the Productive Properties consist of multiple leases and, in some
cases, multiple
                                        12
<PAGE>

fields, the interest of the Working Interest Owner in any given well or lease
may not be indicative of its interest (or the Trust's interest) in an entire
Productive Property.

DESCRIPTION OF PRODUCTIVE PROPERTIES

     Certain information, as of December 31, 2003, regarding the Productive
Properties is set forth in the table below. The Productive Properties include
leases (or portions thereof) owned by the Working Interest Owner on which
productive formations are located and, in certain cases, adjacent leases (or
portions thereof) owned by the Working Interest Owner which are either included
in pooling arrangements or which are held by delay rentals. The leases were
grouped into three groups, with each constituting a separate "Property" for
purposes of computing the Overriding Royalties under the Conveyances. The
numbers of net acres and net wells in the table below represent amounts net to
the Working Interest Owner as of December 31, 2003.

<Table>
<Caption>
                                                                        PRODUCTIVE WELLS(1)
         PRODUCTIVE                                               -------------------------------
     PROPERTY AND YEAR                             ACRES               OIL               GAS
          IN WHICH                           -----------------    --------------    -------------
    PRODUCTION COMMENCED       LOCATION       GROSS      NET      GROSS     NET     GROSS    NET
    --------------------       --------      -------    ------    -----    -----    -----    ----
<S>                           <C>            <C>        <C>       <C>      <C>      <C>      <C>
Jay Field (1970)(2).........  Onshore        184,472(3) 62,150(3)   90     30.60      1       .34
                              Alabama
                              and Florida
South Pass 89 (1982)........  Offshore         5,000     1,250      15      3.75      2       .50
                              Louisiana
Offshore Louisiana
(1968)(4)...................  Offshore        17,500     3,708      12(5)   1.50     29(5)   6.01
                              Louisiana
                                             -------    ------     ---     -----     --      ----
                                             206,972    67,108     117     35.85     32      6.85
                                             =======    ======     ===     =====     ==      ====
</Table>

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

(1) Represent producing wells and wells capable of production. Net wells reflect
    the Working Interest Owner's working interest ownership. Gross and net wells
    exclude injection wells.

(2) Includes interests in 23 leases which are a part of the Jay Field Unit
    created by a unit agreement among ExxonMobil (the operator) and others. The
    Jay Field is made up of 177 different tracts of land. Portions of certain
    leases are located outside of the Jay Field Unit. The Overriding Royalties
    from the Jay Field burden only the portions of such leases included within
    the Jay Field Unit and owned by the Working Interest Owner as of June 28,
    1983. In addition, certain minor interests of the Company in the Jay Field
    are not included in the Jay Field Productive Property. The information in
    the table above relates only to the portion of the Jay Field included in the
    Jay Field Productive Property.

(3) Gross acres reflect aggregate porosity acre-feet in producing formations in
    the Jay Field, and net acres reflect the Working Interest Owner's ownership
    interest in the producing formations as determined volumetrically for
    purposes of the unit agreement relating to the Jay Field.

(4) Includes four federal leases or federal units (as applicable) with
    designations, initial production dates and percentage ownership of the
    Working Interest Owner as follows:

<Table>
<Caption>
                                                                PERCENTAGE
                                                              OF THE WORKING
                                                              INTEREST OWNED
DESIGNATION AND INITIAL                                       BY THE WORKING
    PRODUCTION DATE                                           INTEREST OWNER
-----------------------                                       --------------
<S>                                                           <C>
East Cameron 195 Unit (1971)................................      33.33%
East Cameron 336, South Addition (1983).....................      20%
Eugene Island 261 (1979)....................................      20%
South Marsh Island 76, South Addition (1968)................      25%
Vermilion 331, South Addition (1977)........................      12.5%
</Table>

                                        13
<PAGE>

    During the Fourth Quarter of 2001, the Working Interest Owner assigned its
    ownership in any future wells or existing well work activity at East Cameron
    336 to other owners, but retained its share of the plugging and abandonment
    liability.

(5) Gross wells at Offshore Louisiana include one dual completion gas well. A
    well with multiple completions is counted as one well.

DESCRIPTION OF THE FEE LANDS

     The Fee Lands originally subject to the Fee Lands Royalties consisted of
approximately 400,000 acres of undeveloped lands owned in fee by the Working
Interest Owner in south Louisiana that were not subject to oil and gas leases as
of the effective date of the Conveyances with respect to the Fee Lands
Royalties. The Fee Lands constituted a substantial portion of all of the land
owned in fee by the Working Interest Owner in south Louisiana at the time of the
Conveyances but excluded (a) the Working Interest Owner's property subject to
oil and gas leases or productive lands owned by the Working Interest Owner as of
such date, (b) beds and bottoms of navigable waters and (c) certain other minor
parcels of land. The Working Interest Owner has developed very limited portions
of the Fee Lands, and could, but has no obligation to, elect to develop certain
additional portions of the Fee Lands itself.

     Under Louisiana law, mineral royalties, in general, will terminate, in the
absence of production, after the lapse of ten consecutive years from the date of
conveyance. However, the production of any mineral included in the Conveyances
(including that obtained through testing a shut-in well proved to be capable of
producing in paying quantities) before the lapse of ten years will, except as
hereinafter provided with respect to production obtained from a unit, maintain
the Royalties in existence for so long as such production continues without
cessation, and for a period of ten years thereafter, as to all of the lands
affected thereby that are contiguous to the land burdened by the Royalties from
which such production is obtained. Tracts of land are rendered noncontiguous by
intervening tracts owned by third parties or not covered by the Conveyances,
including navigable bodies of water, that divide and separate the lands burdened
by the Royalties. Parcels of land that meet only at a corner are likewise
noncontiguous. The Fee Lands contain both contiguous and noncontiguous tracts.
In the case of production from a unit, the Royalties will be maintained with
respect to the whole of the body of land contiguous to the production so long as
such production continues without cessation, and for a period of ten years
thereafter, if the unit well is situated on land burdened by the Royalties; but
if the unit well is on land other than that burdened by the Royalties,
production maintains the Royalties only with respect to that portion of the land
included in the unit. If all or a portion of the tract of land burdened by the
Royalties is included within a unit on which there already exists a shut-in well
capable of producing in paying quantities located on other lands within the
unit, the ten-year period for termination of the Royalties in the absence of
production would begin anew on the effective date of the order or act creating
the unit, and production within the ten-year period would maintain the Royalties
only with respect to the acreage subject to the Royalties included in the unit.
A unit is an area within which all owners of mineral rights share in production
therefrom. It may be created by agreement or by the Louisiana Department of
Conservation. The Trust receives minimal revenues related to production from
wells drilled on Fee Lands acreage as well as from certain units that include
small portions of the lands burdened by the Fee Lands Royalties. Since the
producing wells on unitized acreage are located on property other than that
burdened by the Fee Lands Royalties, such production could serve to maintain the
Fee Lands Royalties beyond the initial ten year period only as to the lands
included within said Units.

     Consequently, most of the Fee Lands Royalties in the original Fee Lands
terminated in June 1993. The Trust never received any revenues from the tracts
as to which the Fee Lands Royalties terminated and such termination did not
affect tracts from which the Trust is receiving revenues. However, the Trust
will not be entitled to receive any revenues in the future from the tracts as to
which the Fee Lands Royalties terminated. Subsequent to the June 1993
termination, the Fee Lands consist of approximately 22,000 gross acres,
approximately 4,300 acres of which were under lease as of December 31, 2003.

                                        14
<PAGE>

                OIL AND GAS SALES FROM THE PRODUCTIVE PROPERTIES

OIL SALES

     In addition to crude oil sold to third parties, crude oil from South Pass
89 is sold to an affiliate which sells it to third parties at "spot" prices. For
purposes of computing the payments attributable to the Overriding Royalties, Net
Proceeds include the proceeds from the sales by the affiliate after deduction of
applicable transportation costs.

     Prior to the sale of the Working Interest Owner's Mobile, Alabama refinery
in July 1996, substantially all of the crude oil from the Jay Field was used as
feedstock for said refinery. The Working Interest Owner treats, for internal and
landowners' royalty purposes, Jay Field crude as sold at the wellhead at the
Exxon posted field price. This treatment is also utilized for purposes of
computing Net Proceeds.

GAS AND LIQUIDS SALES

     Natural gas from the Productive Properties is sold to an affiliate, which
transports the offshore gas onshore, and sells that gas to third parties at
market prices under contracts typical of those prevailing in the industry.

     The Working Interest Owner generally retained the right to revenue from
liquids contained in the gas sold offshore Louisiana. Depending upon the prices
prevailing from time to time for natural gas relative to those for gas liquids,
all or a portion of such gas is processed at plants located onshore Louisiana to
remove the liquids. Both these liquids and the liquids available at the tailgate
of the Jay Field processing plant are sold by an affiliate to third parties,
some of which is transported by the affiliate prior to the sale. Propane and
virtually all of the other liquids are sold by the affiliate at published "spot"
prices. Natural gas is settled by the Operator on a percent of proceeds basis.

     For purposes of computing the payments attributable to the Overriding
Royalties, Net Proceeds include the proceeds from the natural gas and liquids
sales by the affiliate after deduction of applicable transportation and
processing costs.

     Due to the state of the gas industry and the marketing strategies used by
different purchasers and producers, it is not uncommon for certain working
interest owners in a property to be overproduced and to have delivered more gas
than such owner was entitled to sell, leaving the other working interest owners
underproduced. As a result, an imbalance may develop between the various working
interest owners regarding the amount of gas to which each is entitled and the
amount each actually takes and sells. The Working Interest Owner uses the
"entitlement" method of recording gas production, which results in revenues
being recognized on the Working Interest Owner's share of production regardless
of which party's purchaser has actually taken and paid for the gas. The Working
Interest Owner makes distributions to the Trust based upon its entitled share of
production at the relevant contractual prices. The Working Interest Owner's
actual receipts depend on the price it receives when the imbalances are
reconciled, adjustments to the Working Interest Owner's recorded revenues have
been made in the past and may be made in the future. To the extent that any such
adjustments decrease the revenues recorded by the Working Interest Owner because
gas prices were lower at the time the Working Interest Owner's gas was actually
delivered than when the revenues were originally recorded, or for other reasons,
future distributions to the Trust would be reduced.

     The laws and regulations governing the prices which the Working Interest
Owner receives from the sale of oil and gas from the Productive Properties and
the taxes paid with respect to the production are complex, often ambiguous and
subject to alteration, often with retroactive effect. If the Working Interest
Owner does not properly interpret the applicable law or regulations in a manner
consistent with later determinations and interpretations of regulatory
authorities or of the courts, the Working Interest Owner may be required to
refund amounts previously collected plus interest, which may be substantial if a
long period passes between the time of the overcharge and the determination that
a refund is required. See "Terms and Operation of the Trust -- Terms of the
Conveyances" for information regarding the effect of any refunds on Unit
holders.

                                        15
<PAGE>

                     EXPLORATION AND DEVELOPMENT ACTIVITIES

PRODUCTIVE PROPERTIES

     The following is a summary of the Working Interest Owner's net drilling
activities on the Productive Properties for the years ended December 31, 2001,
2002 and 2003:

<Table>
<Caption>
                                                                     NET WELLS
                                                               ----------------------
                                                                OIL      GAS     DRY
        2001                                                   -----    -----    ----
<S>                                                            <C>      <C>      <C>
     Exploratory............................................      --    0.250      --
     Development............................................      --       --      --

        2002
     Exploratory............................................      --       --      --
     Development............................................   0.340       --      --

        2003
     Exploratory............................................      --       --      --
     Development............................................   0.200       --      --
</Table>

     The following are the significant activities by the Working Interest Owner
on the Productive Properties during 2003:

  Jay Field

     Capital expenditures totaled approximately $4.3 million in 2003, primarily
to related to nitrogen purchases for injections and capital workovers.

  South Pass 89

     Capital expenditures of approximately $79 thousand were incurred in 2003,
primarily for platform facility work.

  Offshore Louisiana

     Capital expenditures of approximately $1.6 million were incurred in 2003,
primarily for capital workovers at Eugene Island 261 and the sidetrack at Eugene
Island 261 A-13.

FEE LANDS

     Approximately 4,300 acres of the south Louisiana Fee Lands subject to the
Trust's 3% royalty interest were under lease as of December 31, 2003. One well
was drilled on the Fee Lands in 2003.

                        ESTIMATES OF PETROLEUM ENGINEERS

SEPTEMBER 30, 2003 ESTIMATES

     Estimates of the proved oil and gas reserves and estimates of the future
net revenues from the proved oil and gas reserves attributable to the Properties
as of September 30, 2003 have been made by Miller and Lents, Ltd. ("Miller and
Lents"). Based on such estimates, Miller and Lents has also calculated the
present value of the estimated future net revenues to the Trust and the imputed
reserves attributable to the Trust as of September 30, 2003. A copy of Miller
and Lents' letter, dated March 11, 2004, setting forth such estimates is
reproduced below.

                                        16
<PAGE>

     As explained in the letter, the estimates of future net revenues from
proved reserves and the present value of such future net revenues were
calculated based on criteria prescribed by the Securities and Exchange
Commission (the "SEC") and were based upon prices and costs represented by the
Working Interest Owner to be in effect as of September 30, 2003; the present
value was based on a discount factor of 10% per year.

     According to the Miller and Lents letter, the estimated future net revenues
to the Trust from total proved reserves as of September 30, 2003 were
approximately $77.3 million, and the present value of such future net revenues
was approximately $38.8 million. (The estimates as of September 30, 2002, were
$85.9 million and $42.2 million, respectively, before giving effect to
approximately $7.9 million in distributions during 2003.)

     The estimates of future net revenues as of September 30, 2003 reflect a 10
percent decrease in future net revenues, and an 8 percent decrease in the
present value of future net revenues from those estimated as of September 30,
2002, after adjusting those 2002 estimates for the estimated distributions
related to the twelve months of production ended September 30, 2003. The
decrease in 2003 estimated future net revenues attributable to the Trust from
the 2002 estimates was primarily attributable to Jay Field, where this estimate
decreased by approximately $12 million. In addition, the estimated future net
revenues related to South Pass 89 decreased by approximately $1.5 million. These
decreases were partially offset by an approximate $4.3 million increase
attributed to Offshore Louisiana and a $633 thousand increase attributed to the
Fee lands. The estimated decrease in the Jay Field and South Pass 89 is
primarily attributable to natural production decline.

CERTAIN FACTORS AFFECTING ESTIMATES

     Because the Royalties on the Properties (other than the Fee Lands) are
"net" overriding royalty interests (often referred to as net profits interests),
estimates of future net revenues to the Trust are affected by a number of
factors in addition to the engineering, well performance and other data taken
into consideration by petroleum engineers in estimating the quantity and nature
of gross oil and gas reserves in the ground. Such other factors include oil and
gas prices (the changes in which have materially affected the estimates of
future net revenues to the Trust in recent years), projections of operating and
capital costs, and the Working Interest Owner's evaluation of the economic
feasibility of conducting additional operations. Decreases in the price
estimates used in the preparation of the Miller and Lents report would decrease
the estimates of the reserves as well as the estimates of the future net
revenues to the Trust and of the discounted value of those future net revenues,
and these decreases could be significant.

     As indicated above, estimates of future net revenues attributable to the
Trust are based in part on estimates of quantities of proved oil and gas
reserves to be produced in the future. It should be emphasized that there can be
no assurance that the quantities of oil and gas classified as proved reserves
will ultimately be recovered. Because estimating proved reserves is not an exact
science, the potential for significant revisions, either upward or downward, in
estimates of proved reserves is high. Such revisions have occurred in the past
with respect to the Productive Properties and, with respect to certain
Productive Properties, have been material in relation to the reserves assigned
to such Productive Properties. Reserve estimates are based on many judgmental
factors, and the accuracy of reserve estimates depends on the quantity and
quality of geological data, production performance data and reservoir
engineering data as well as the skill and judgment of the petroleum engineer in
interpreting such data. The process of estimating reserves involves continual
revisions of estimates (usually on an annual basis) as additional information is
made available through drilling, testing, reservoir studies and acquiring
historical pressure and production data. When a new reservoir is discovered,
proved reserves are determined primarily by volumetric analysis, using limited
reservoir data (porosity, net pay thickness, water saturation, permeability and
estimated extent of the productive area) indicated by the discovery well to
estimate reserves over an underground area that may cover many acres. As a well
is produced and the reservoir pressure declines, production volumes
(hydrocarbons and water) and other factors are generally monitored and recorded
so that the proved reserves can be periodically reestimated following sufficient
intervals of production history. In addition, the drilling of development wells
can provide additional reservoir data, including information regarding the areal
extent of the reservoir. As reservoir history is accumulated, the historical
information is incorporated into volumetric calculations or extrapolated

                                        17
<PAGE>

production performance plots to refine the reserve estimate. Consequently, the
accuracy of the reserve estimate generally improves with additional production
history.

     Estimates of both the volume of, and future net revenues from, any
specified reserves are of necessity based on assumptions with respect to
anticipated market demand and prices obtainable for production from the
particular reservoir and with respect to the costs and expenses incurred in
developing and producing those reserves. A decline in price will reduce the
estimated future revenues to the Trust. A reduction in volume of sales from
those estimated, as a result of curtailments or otherwise, delays the receipt of
revenues and reduces the present value of future net revenues from the property.
Similarly, changes in the timing and amounts of future capital expenditures can
also affect the revenues and the present value. Consequently, reserve, net
revenue and present value estimates made in the future may differ materially
from those contained herein as a result of conditions in the oil and gas
industry and general economic conditions.

     The independent engineers' estimated net revenues have been determined on
the basis of when the oil or gas is estimated to be produced. However, the
payments with respect to the Royalties are received by the Trustee approximately
65 days after the end of the month in which the sales of oil and gas are
recorded as revenues by the Working Interest Owner, and the distribution of
income from the Royalties to holders of Units (net of Trust expenses) occurs
approximately 75 days after the end of such month. The estimated net revenues in
Miller and Lents' letter have not been reduced for costs and expenses of the
Trust, which are expected to be approximately $700 thousand for the twelve
months ending September 30, 2004. The costs and expenses of the Trust may
increase or decrease in future years, depending on the amount of revenues from
the Royalties, increases or decreases in accounting, engineering, legal and
other professional fees and other factors.

     In estimating future net revenues to the Trust, Miller and Lents has only
considered capital expenditures associated with the production and development
of estimated proved reserves. Based on that assumption, as of September 30,
2003, the Working Interest Owner has estimated the capital expenditures for
production and development of only the proved reserves would be approximately
$17.5 million for the period from October 1, 2003 through September 30, 2004. No
assurance can be given that the level of capital expenditures included in this
estimate will result in the discovery of additional reserves or the successful
development of reserves now classified as proved undeveloped. Amounts of future
net revenues estimated for any given period do not take into account the
possible effect of current or possible future market conditions relating to the
price of oil and gas and other factors discussed below.

     In making its estimates, Miller and Lents used price and cost assumptions
as described in the Miller and Lents letter. These assumptions are assumptions
only, and there can be no assurance that actual prices and costs in the future
will not be materially different from those assumed. Prices of oil and gas and
related costs have varied dramatically in recent years and are impossible to
predict with certainty. As a result, and because of other inherent uncertainties
in estimating oil and gas reserves and in forecasting production levels, prices
and costs, neither the Trustee nor Miller and Lents nor the Working Interest
Owner can predict what actual revenues to the Trust will be in the future. See
"Industry Conditions and Regulation".

     Pursuant to Statement of Financial Accounting Standards No. 69, the Trust
is required to include as supplementary information estimates (which are
unaudited) of quantities of proved oil and gas reserves attributable to the
Trust. The Miller and Lents letter includes such estimates, prepared on the
basis described therein. The quantities imputed to the Trust are calculated by
multiplying Miller and Lents' estimated net reserves of the Working Interest
Owner (prior to taking into consideration the Trust's interests) by the ratio of
Miller and Lents' estimated future net revenues to the Trust to Miller and
Lents' estimated future gross revenues to the Working Interest Owner prior to
taking into consideration the Trust's interests. Because the quantities are
calculated in this manner, factors other than gross oil and gas reserves in the
ground (such as changes in prices and costs, excesses of capital expenditures
over amounts used in preparing estimates, as described in the preceding
paragraphs, and other factors) will affect the quantities shown as estimated oil
and gas reserves imputed to the Trust.

                                        18
<PAGE>

                       (MILLER AND LENTS LTD LETTERHEAD)

                                 March 11, 2004

JPMorgan Chase Bank, Trustee
LL&E Royalty Trust
700 Lavaca, 5(th) Floor
Austin, TX 78701-3102

                                          Re:  LL&E Royalty Trust
                                               As of September 30, 2003
Gentlemen:

     We estimated the proved reserves and the future net revenues attributable
to working and royalty interests owned by Burlington Resources Inc. (the
"Company") in certain properties associated with the LL&E Royalty Trust (the
"Trust") interest.

     The estimated proved imputed reserves and future net revenues, discounted
at 10 percent per annum, net to the interests owned by the Trust and without
consideration of the Trust Termination Clause, as of September 30, 2003, are as
follows:

<Table>
<Caption>
                             Net Proved Imputed Reserves and Revenues(1)
                    --------------------------------------------------------------
                        Crude Oil,                                 Net Revenues
                      Condensate, and     Natural   Future Net   Discounted at 10%
                    Natural Gas Liquids    Gas,     Revenues,        Per Year,
 Reserve Category         MBbls.           MMcf         M$              M$
------------------  -------------------   -------   ----------   -----------------
<S>                 <C>                   <C>       <C>          <C>
Proved Developed           2,501           4,753      77,337          38,811
Proved Undeveloped             0               0           0               0
                           -----           -----      ------          ------
  Total Proved             2,501           4,753      77,337          38,811
                           =====           =====      ======          ======
</Table>

(1) The Trust will terminate in the event the total amount of cash received per
    year by the Trust falls below certain levels. Accordingly, it would be
    possible for the Trust to terminate even though some of the Trust properties
    have remaining productive lives. See "Duration and Termination of the Trust"
    on page 5 of Form 10-K.

     The above figures are based on estimates from the Trust economic model that
is attached to this report.

     The Trust owns, indirectly through a partnership with the Company, (a) net
overriding royalty interests equivalent to net profits interests (the
"Overriding Royalties") in certain productive oil and gas properties located in
Alabama, Florida, and federal waters Offshore Louisiana (the "Working Interest
Properties") and (b) royalty interests (the "Royalties") in certain productive
oil and gas properties located on the Company's South Louisiana fee lands (the
"Fee Lands") acreage. We estimated the imputed reserves using the formulas

                                        19
<PAGE>
                            (MILLER AND LENTS, LTD.)

JPMorgan Chase Bank, Trustee                                      March 11, 2004
LL&E Royalty Trust                                                       Page  2

and criteria specified by the Company, as described in following paragraphs, and
estimated the future net revenues to the Trust in accordance with the
definitions contained in the Securities and Exchange Commission Regulation S-X,
Rule 4-10(a) as shown in the Appendix.

     Gas volumes for each property are stated at the pressure and temperature
bases appropriate for the sales contract or state regulatory authority;
therefore, some of the aggregated totals may be stated at a mixed pressure base.

     The table below shows summary projections of the estimated undiscounted net
revenues to the Trust:

<Table>
<Caption>
                 Estimated Net Revenues to the Trust(1)
                 --------------------------------------
For Production   From Proved   From Proved   From Total
During the 12     Developed    Undeveloped     Proved
 Months Ended     Reserves,     Reserves,    Reserves,
 September 30        M$            M$            M$
--------------   -----------   -----------   ----------
<S>              <C>           <C>           <C>
       2004         6,653           --          6,653
       2005         3,955           --          3,955
       2006         4,215           --          4,215
       2007         4,777           --          4,777
       2008         5,101           --          5,101
       2009         5,325           --          5,325
  Remainder        47,311           --         47,311
                   ------         ----         ------
      Total        77,337            0         77,337
                   ======         ====         ======
</Table>

(1) The Trust will terminate in the event the total amount of cash received per
    year by the Trust falls below certain levels. Accordingly, it would be
    possible for the Trust to terminate even though some of the Trust properties
    have remaining productive lives. See "Duration and Termination of the Trust"
    on page 5 of Form 10-K.

     The estimated future net revenues to the Trust from proved reserves of the
Working Interest Properties and Fee Lands have been determined on the basis of
when the oil or gas attributable to the Overriding Royalties or the Royalties is
estimated to be produced. However, the distribution of the Net Proceeds to the
Trust will occur approximately 65 days after the end of the month in which the
sales of oil and gas from the productive properties and the Fee Lands are
recorded as revenues by the Company. Therefore, the estimated future net
revenues to the Trust from proved reserves for a 12-month period beginning
October 1 correspond to estimated distributions to the Trust during the
following calendar year. The amounts in the table above reflect those estimates
of the disbursements to the Trust.

                                        20
<PAGE>
                            (MILLER AND LENTS, LTD.)

JPMorgan Chase Bank, Trustee                                      March 11, 2004
LL&E Royalty Trust                                                       Page  3

     The following table sets forth the total estimated undiscounted future net
revenues to be disbursed to the Trust from estimated proved reserves for each of
the Working Interest Properties and the Fee Lands:

<Table>
<Caption>
                                       Last Year of
                    Estimated Future    Estimated
                    Net Revenues to      Economic
                       The Trust,        Life of
     Property            M$(1)           Reserves
------------------  ----------------   ------------
<S>                 <C>                <C>
Jay Field                65,930            2031
South Pass 89               211            2006
Offshore Louisiana       10,441            2013
Fee Lands                   755            2011
                         ------
  Total                  77,337
                         ======
</Table>

(1) The Trust will terminate in the event the total amount of cash received per
    year by the Trust falls below certain levels. Accordingly, it would be
    possible for the Trust to terminate even though some of the Trust properties
    have remaining productive lives. See "Duration and Termination of the Trust"
    on page 5 of Form 10-K.

     For the purposes of computing the future net revenues to the Trust, the
Working Interest Properties have been combined geographically into three groups
of leases designated as the "Jay Field", "South Pass 89", and "Offshore
Louisiana". The "Fort Worth Basin" group was sold prior to September 30, 1997
and is not included in this report. The Company has conveyed Overriding
Royalties to the Trust expressed as various percentages of Net Proceeds from
these Working Interest Properties and has also conveyed to the Trust three
percent royalty interest in the Fee Lands. The table below sets forth the
percentage of Net Proceeds attributable to the Overriding Royalties for each
Working Interest Property:

<Table>
<Caption>
                                Percentage of Net Proceeds
Working Interest Property  Attributable to Overriding Royalties
-------------------------  ------------------------------------
<S>                        <C>
Jay Field                                   50
South Pass 89                               50
Offshore Louisiana                          90
</Table>

     The Overriding Royalties owned by the Trust are equivalent to net profits
interests of varying percentages, as shown above, of the Net Proceeds from the
sale of production of oil, gas, and other hydrocarbons from the Working Interest
Properties. Net Proceeds have been computed on a property-by-property basis and
consist of the revenues recorded by the Company from the sale of oil, gas, and
other hydrocarbons from each of the Working Interest Properties less (a) all
direct costs, charges, and expenses incurred by the Company in production,
development, and other operations on the Working Interest Properties (including
secondary and tertiary recovery operations), and for dismantlement and
abandonment costs where applicable; (b) all applicable taxes (including
severance and ad valorem) excluding income taxes; (c) all operating charges
directly associated with the Working Interest Properties; (d) applicable charges
for certain overhead expenses; and (e) other charges specified in the Trust
documents. Administrative expenses of the Trust have not been deducted in
determining the net revenues in the foregoing tables. The current estimates of
the future

                                        21
<PAGE>
                            (MILLER AND LENTS, LTD.)

JPMorgan Chase Bank, Trustee                                      March 11, 2004
LL&E Royalty Trust                                                       Page  4

dismantlement costs to the Company's working interest are $1.9 million for South
Pass 89, $13.3 million for the Jay Field, and $2.3 million for the Offshore
Louisiana properties. As of September 30, 2003, the South Pass 89 and the
Offshore Louisiana properties' estimated abandonment costs were fully escrowed.
The Jay Field escrow balance is $4.5 million, leaving an additional $8.8 million
attributable to the Company's working interest to be escrowed in the future.

     Excess production costs will result to the Company's working interest in
the event that the costs, charges, and expenses attributable to a Working
Interest Property exceed the revenues received from the sale of oil, gas, and
other hydrocarbons produced from such property ("Excess Production Costs").
Pursuant to the provisions of the Trust documents, the Company is allowed to
recover such costs from future Net Proceeds. Excess production costs to the
Company's working interest as of September 30, 2003 were $24,156 for South Pass
89 Field.

     The estimated future net revenues have been determined, pursuant to the
methods prescribed by the Securities and Exchange Commission, by applying the
product prices for oil, gas, condensate, and natural gas liquids as of September
30, 2003, to the estimated future production of oil and gas reserves over the
economic life of the reserves and assuming continuation of current economic
conditions. Surface and well equipment salvage values and well plugging and
field abandonment costs have been considered in the projections computing Net
Proceeds for all properties. Future cost estimates, if any, for the restoration
of producing properties to satisfy environmental standards were not deducted
from future revenues as such estimates are beyond the scope of this assignment.

     The reserve estimates and production rate projections used to forecast
future net revenues and imputed reserves attributable to the Trust are based on
geologic and engineering studies, with corresponding rate projections made
consistent with current producing rates and performance of comparable wells.
Where sufficient data were available, oil and gas reserves were estimated by
extrapolation of established historical performance trends. Reserves for the
remaining properties were estimated by volumetric calculations or by analogy to
similar properties. Estimated reserves for the Jay Field property are forecasted
based on analysis of historical production volumes and decline rates while
incorporating the well workover program initiated in 2003. This program has
improved field production. Additional capital is budgeted by the Company over
the next two years to continue the workover program with the associated
production benefit included in the estimate of future production. In addition,
the operator of Jay Field and the Company have indicated that significant
capital will likely be spent over the next four years to improve tangible and
intangible field facilities. This capital is also build into the forecast of
future costs associated with the Company interest.

     Net reserves, as used herein, are reserves net to the Company or imputed to
the Trust after taking into account existing third party interests and landowner
royalties. Portions of the properties are pooled or unitized, and the reserve
estimates herein are based on existing pooling and unitization arrangements.

     The imputed estimated proved reserves attributable to the Trust were
calculated for each of the three groups of Working Interest Properties and the
Fee Lands by multiplying the respective net proved reserves of the Company by
the ratio of the estimated future net revenues of the Trust to the estimated
future gross revenues of the Company prior to consideration of the Trust, as
follows:

<Table>
<S>                        <C>    <C>                    <C>    <C>
                                  Estimated future
                                  net revenues to the
Imputed proved reserves           Trust                         Estimated net proved
to the Trust (expressed     =     -------------------     X     reserves of the Company
in barrels or Mcf)                Estimated future              (barrels or Mcf)
                                  gross revenues
                                  to the Company(2)
</Table>

                                        22
<PAGE>
                            (MILLER AND LENTS, LTD.)

JPMorgan Chase Bank, Trustee                                      March 11, 2004
LL&E Royalty Trust                                                       Page  5

        (2) Prior to subtraction of all costs (including Jay Field fuel and
            severance taxes) and the costs attributable to the Trust.

     As the imputed estimated proved reserves of the Trust are calculated using
estimated future net revenues, future changes in the product pricing assumptions
on which the revenue estimates are based would result in corresponding changes
in the Trust's imputed estimated proved reserves.

     The evaluations presented in this report, with the exceptions of those
parameters specified by others, reflect our informed judgments based on accepted
standards of professional investigation but are subject to those generally
recognized uncertainties associated with the interpretation of geological,
geophysical, and engineering information. Government policies and market
conditions different from those employed in this study may cause the total
quantity of oil or gas to be recovered, actual production rates, prices
received, or operating and capital costs to vary from those presented in this
report. Minor precision inconsistencies in subtotals or totals may arise in the
report due to the truncation or rounding of aggregated values.

     The extent and character of ownership, reversions, test, production, and
other data which were furnished by the Company have been accepted as
represented. Operating costs and estimated capital expenditures furnished by the
Company were reviewed for reasonableness. No field inspections or well tests
were conducted by Miller and Lents, Ltd. personnel in conjunction with this
study. We did not verify or determine the extent, character, obligations,
status, or liabilities, if any, arising from any gas imbalances or any current
or possible future environmental liabilities that might be applicable.

     Miller and Lents, Ltd. is an independent oil and gas consulting firm. No
director, officer, or key employee of Miller and Lents, Ltd. has any financial
ownership in Burlington Resources Inc., the LL&E Royalty Trust, or any
affiliate. Our compensation for the required investigations and preparation of
this report is not contingent on the results obtained and reported, and we have
not performed other work that would affect our objectivity. Preparation of this
report was supervised by an officer of the firm who is a professionally
qualified and licensed Professional Engineer in the State of Texas with more
than 20 years of relevant experience in the estimation, assessment, and
evaluation of oil and gas reserves

                                          Very truly yours,

                                          MILLER AND LENTS, LTD.

                                          By /s/ CHRISTOPHER A. BUTTA
                                            ------------------------------------
                                            Christopher A. Butta
                                            Senior Vice President

CAB/psh

                                        23
<PAGE>

                                                                        Appendix
                          PROVED RESERVES DEFINITIONS
                               IN ACCORDANCE WITH
               SECURITIES AND EXCHANGE COMMISSION REGULATION S-X

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 costs 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.

     1.  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.

     2.  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 reservoirs provides
         support for the engineering analysis on which the project or program
         was based.

     3.  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.

          d.  Crude oil, natural gas, and natural gas liquids, that may be
              recovered from oil shales, coal, gilsonite, and other such
              sources.

     Depending upon their status of development, proved reserves are subdivided
into proved developed reserves and proved undeveloped reserves.

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 OIL AND GAS 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.

                                        24
<PAGE>

                       INDUSTRY CONDITIONS AND REGULATION

INDUSTRY CONDITIONS

     The availability of a ready market for oil and gas depends upon numerous
factors beyond the Working Interest Owner's control, including the production of
crude oil and gas by others, crude oil imports, the marketing of competitive
fuels, the proximity and capacity of oil and gas pipelines, the availability of
treatment facilities, the regulation of allowable production by governmental
authorities and the regulation by the FERC and various state agencies of the
transportation and marketing of natural gas transported or sold in interstate
commerce. Because of the mechanics of the Royalties, changes in Net Proceeds due
to any of the factors above are typically not reflected in the amounts payable
to the Trust until the third month after the oil and gas sales are recorded or
the related costs are incurred.

REGULATION

     The production of oil and gas in the United States is affected by many
state and federal regulations with respect to allowable rates of production,
marketing and environmental matters. Future regulations could change allowable
rates of production or the manner in which oil and gas operations may be
lawfully conducted.

     The Working Interest Owner's oil and gas activities on the Productive
Properties are subject to existing federal, state and local laws and regulations
relating to health, safety, environmental quality and pollution control. The
Working Interest Owner has advised the Trustee that it believes that its
operations and facilities are in general compliance with applicable health,
safety, and environmental laws and regulations. However, events in recent years
have heightened environmental concerns about the oil and gas industry generally,
and about offshore operations in particular. Oil and gas operations are subject
to extensive governmental regulation, including regulations that may in certain
circumstances impose absolute liability upon lessees for the cost of cleaning up
pollutants and for pollution damages resulting from their operations, and that
may require lessees to suspend or cease operations in affected areas. Although
the Working Interest Owner has advised the Trustee that current environmental
regulation has not had a material adverse effect on the Working Interest Owner's
method of operations, the effects of changes in environmental law, such as
stricter environmental regulation and enforcement policies, cannot be predicted.

                     TAX CONSIDERATIONS TO OWNERS OF UNITS

FEDERAL INCOME TAX CONSIDERATIONS

INTRODUCTION

     The following summary discusses the federal income tax consequences
attendant to the acquisition, ownership and disposition of Units. However, for
the following reasons, no assurance can be given that the tax treatment
described in this summary will be available. First, administrative and judicial
interpretations of recent changes in the tax law affecting these matters are
nonexistent or insufficient to provide definitive guidance as to the proper tax
treatment of certain items. Second, certain of the tax consequences described
herein are not subject to clear resolution under present law and the existing
administrative and judicial interpretations thereof. Third, the laws or
regulations affecting these matters are subject to new interpretations, by the
Internal Revenue Service (the "Service") or by the courts, which could adversely
affect Unit holders.

     Because the federal income tax consequences of the acquisition, ownership
and disposition of Units are highly complex, this discussion is merely a summary
and does not purport to provide detailed tax information to Unit holders or to
function as a substitute for careful tax planning and analysis. All Unit holders
are urged to consult their own tax advisors regarding the effects on their
personal tax situations of acquiring, owning, and disposing of Units.

                                        25
<PAGE>

RULINGS AND TAX OPINION REGARDING DISTRIBUTION

     The following information concerning the Company's ruling requests to the
Service regarding the federal income tax consequences of the creation and
distribution of Units to the Company's shareholders (the "Distribution") and the
operation of the Partnership and the Trust has been provided by the Company. The
Company has received the following requested rulings from the Service:

          1.  The Trust will be classified as a trust and not as an association
     taxable as a corporation.

          2.  The Trust will be characterized as a "grantor" trust as to the
     Unit holders and not as a "nongrantor" trust (a "simple" or "complex"
     trust).

          3.  The Partnership will be classified as a partnership and not as an
     association taxable as a corporation.

          4.  The transfer of a Unit will be considered to be the transfer of
     the proportionate part of the Partnership interest attributable to such
     Unit.

          5.  Each Unit holder will be entitled to deduct cost depletion (or
     percentage depletion if greater than cost depletion and if otherwise
     allowable) with respect to his pro rata interest in the Royalties computed
     by reference to such Unit holder's basis in the Units.

          6.  Each Royalty will be considered an economic interest in oil and
     gas in place, and each Royalty will constitute a single property within the
     meaning of Section 614(a) of the Internal Revenue Code (the "Code").

          7.  Each Unit holder will be treated as the producer of crude oil
     attributable to his pro rata interest in the Royalties for windfall profit
     tax purposes.

          8.  The steps taken to create the Trust and the Partnership and to
     distribute the Units are properly viewed as a distribution of the Royalties
     by the Company to its stockholders, followed by the stockholders'
     contribution of the Royalties to the Partnership in exchange for interests
     therein, which in turn was followed by the contribution by the stockholders
     of the interests in the Partnership to the Trust in exchange for Units.

     Although the Company requested these rulings prior to the time of the
Distribution, the rulings were issued after the Distribution occurred.
Therefore, the Service could revoke the rulings if it changes its position on
the matters the rulings address.

     These favorable rulings are consistent with a legal opinion the Company
received from tax counsel prior to the Distribution. The opinion of counsel is
not binding on the Service or the courts, and the Service may revoke its
favorable rulings, as mentioned above. If it were to do so, there can be no
assurance that the position of the Service would not be upheld in a judicial
proceeding.

     At the same time the Company requested the rulings described above, the
Company requested a ruling to the effect that it would not recognize gain or
loss upon the transfer of the Royalties to the Trust or upon the Distribution.
The Company subsequently withdrew this request. The Service had indicated to the
Company that, if a ruling had been issued with respect to this issue, it would
have been unfavorable. Tax counsel advised the Company prior to the Distribution
that, because of the lack of direct authority, it was unable to express an
opinion on this issue. See "IDC Recapture Income to the Company on
Distribution".

     No other rulings with respect to the Distribution of the Units have been
requested from the Service and, except as noted below, no opinion of counsel has
been requested or rendered regarding any other tax consequences discussed
herein.

TAX CONSEQUENCES OF OWNING UNITS

     The federal income tax consequences of owning Units depend, in large part,
on (i) the proper classification of the Trust as a trust rather than as an
association taxable as a corporation, (ii) the classification of the Partnership
as a partnership rather than as an association taxable as a corporation, and
(iii) the
                                        26
<PAGE>

categorization of the Trust as a "grantor" trust rather than as a "nongrantor"
trust (a "simple" or "complex" trust). For purposes of this summary it has been
assumed that neither the Trust nor the Partnership will be classified as an
association taxable as a corporation and that the Trust is properly categorized
as a grantor trust, positions consistent with the favorable rulings received by
the Company from the Service regarding these issues. However, as mentioned
above, because the rulings were issued after the Distribution occurred, the
Service could revoke its favorable rulings if it changes its position regarding
these matters.

     The manner in which Unit holders who received their Units in the
Distribution or who acquired their Units before September 7, 1983 have chosen to
report their receipt of such Units may affect the manner in which they report
the receipt of income distributions from the Trust. This summary of the federal
income tax treatment of income distributions from the Trust is based in part on
the assumption that the Unit holders described above have characterized their
receipt of Units as a receipt of interests in a grantor trust owning cash
payment rights and economic interests in oil and gas properties.

     General Features of Grantor Trust Taxation.  An entity which is properly
classifiable as a trust for federal income tax purposes may be treated as
falling into one of three categories: (i) a grantor trust, (ii) a simple trust,
or (iii) a complex trust. Because the existence of a grantor trust is generally
disregarded for federal income tax purposes, a grantor trust is not subject to
tax, and its beneficiaries (the owners of Units in the case of the Trust)
generally are considered for tax purposes to own the assets of the trust
directly. Thus, the owners of Units should be treated as owning the Partnership
interest which the Trust holds, and each owner of a Unit should be treated as a
partner (to the extent of such Unit holder's interest in the Trust) in the
Partnership for federal income tax purposes. Treatment of partners for federal
income tax purposes is discussed below. The Trustee has filed, and anticipates
that it will continue to file, federal income tax returns on the basis that the
Trust is a grantor trust.

     General Features of Partnership Taxation.  An organization which is
properly classifiable as a partnership for federal income tax purposes is not a
taxable entity and incurs no federal income tax liability. Instead, each item of
partnership income, gain, loss, deduction, credit, and tax preference flows
through to the partners, substantially as though the partners had received or
expended such item directly. Each Unit holder is required to take into account
in computing his federal income tax liability his distributive share of all
items of Partnership income, gain, loss, deduction, credit and tax preference
for each taxable year of the Partnership ending with or within his taxable year
based on the Partnership's method of accounting, without regard to the Unit
holder's method of accounting or whether the Unit holder received or will
receive any cash distributions. Consequently, it is possible that in any year a
Unit holder's share of the taxable income of the Partnership (and possibly the
income tax payable by him with respect to such taxable income) may exceed the
cash, if any, actually distributed in such year. See "Accounting for Income and
Deductions", below.

     Special tax rules apply to any "publicly traded partnership", i.e., any
partnership whose capital interests are traded on an established securities
market or are readily tradeable on a secondary market or its substantial
equivalent. Because the transfer of a Unit represents a transfer of an interest
in the Partnership, the Partnership is included in the definition of a publicly
traded partnership. A publicly traded partnership is taxed as a corporation for
federal income tax purposes unless 90 percent or more of its gross income is
from certain qualified passive sources (which include income from oil and gas
activities). Because all of the Partnership's income is derived from the
Royalties, it should not be taxed as a corporation.

     Tax-exempt organizations are subject to tax on their unrelated business
income. Tax-exempt Unit owners should consult their tax advisors to determine if
they are subject to tax on net income attributable to Units in the Trust.

     Depletion Deductions.  The owner of an economic interest in producing oil
and gas properties is entitled to deduct, on his federal income tax return, an
allowance for the greater of cost depletion or (if otherwise allowable)
percentage depletion on each such property. Each Unit owner who acquires Units
by purchase should be entitled, by reason of the Partnership's election under
Section 754 of the Internal Revenue Code of 1986, as amended (the "Code"), to
deduct cost depletion (or, if greater and otherwise available, percentage
depletion) with respect to production from each of the Royalties using his basis
in such Royalties. The amount of deductions based on cost depletion cannot
exceed the total adjusted tax basis of the property. Prior to the
                                        27
<PAGE>

enactment of the Revenue Reconciliation Act of 1990 (the "1990 Act"), only cost
depletion was allowed to a Unit holder with respect to production attributable
to the Royalties carved out of properties which become proven prior to this
acquisition of Units. Under the provisions of the 1990 Act, Unit holders
acquiring their Units after October 11, 1990, may be entitled to deduct an
allowance for percentage depletion if such deduction would otherwise exceed the
allowable deduction for cost depletion, regardless of whether the oil and gas
interest was "proven" at the time of its acquisition. However, in order to take
percentage depletion, the Unit holder must qualify for the "independent
producer" exemption contained in Section 613A(c) of the Code; otherwise, such
owner will be limited to cost depletion.

     Cost depletion for each productive property is calculated by (i) dividing
the adjusted tax basis of the productive property by the total number of units
of production (barrels of oil and thousand cubic feet ("Mcf") of gas) remaining
attributable to the productive property held by the Trust as of the taxable year
and (ii) multiplying the result in (i) by the number of units sold during the
year.

     Section 1254 of the Code provides that for property placed in service by a
taxpayer after December 31, 1986, depletion deductions which reduce the adjusted
basis of such property must be recaptured as ordinary income upon a disposition
of the property. The amount of such recapture is generally limited to the amount
of gain recognized by the taxpayer on such disposition. No oil and gas
properties were placed in service by the Partnership subsequent to 1986.
However, it is unclear whether this recapture provision applies to any portion
of the depletion deduction claimed with respect to the Royalties in the case of
Units acquired after December 31, 1986. The Service has not issued any
regulations or other pronouncements to indicate its interpretation of these
recapture provisions as they affect the transfer of partnership interests.

     The foregoing discussion does not purport to be a complete analysis of the
complex legislation and regulations relating to the availability and calculation
of the depletion deduction for oil and gas properties. Unit holders who desire
further or more specific information with respect to these matters should
consult their own tax advisors.

     Trust Administrative Expenses.  For individuals, miscellaneous itemized
deductions are deductible only to the extent that, in the aggregate, they exceed
2 percent of the Unit holder's adjusted gross income. However, Section 62(a)(4)
of the Code provides that deductions attributable to property held for the
production of royalty income may be deducted in arriving at a taxpayer's
adjusted gross income. Trust administrative expenses are incurred by the Trustee
on behalf of Unit holders in connection with the income from the Royalties
flowing through the Partnership and Trust and, therefore, may be deducted in
arriving at a Unit holder's adjusted gross income. Accordingly, such deductions
should not be subject to the 2 percent floor affecting miscellaneous itemized
deductions.

     Classification of Trust Income.  A taxpayer is limited in his ability to
deduct losses from passive activities against other types of income. As a fixed
investment grantor trust, the Trust is prohibited from engaging in any business
or other investment activity, and it cannot engage in an activity which could be
considered a trade or business activity for passive activity purposes. Temporary
regulations indicate that taxpayers may not treat income from mineral royalties
(other than royalties derived from a trade or business) as earned in the
ordinary course of a trade or business. Therefore, royalty income (such as that
generated by the Trust) which is not attributable to a trade or business is
characterized as "portfolio income" rather than passive activity income under
these rules.

     Unit holders must include Trust income or loss, net of Trust administrative
expenses and cost depletion deductions, in their calculation of net portfolio
income or loss. Because Trust net income or loss is considered portfolio income
or loss, it may not be used to offset a Unit holder's income or losses from
passive activities. The tax laws relating to the various classifications of
income and the tax consequences of these classifications are complex. Unit
holders should consult their tax advisors to determine the impact of these
provisions on their individual tax situations.

     Alternative Minimum Tax for Corporations.  For a corporation, alternative
minimum taxable income is equal to (i) regular taxable income of the
corporation, with certain adjustments, plus (ii) items of tax preference. After
a corporation's alternative minimum taxable income is reduced by an exemption
amount, it

                                        28
<PAGE>

is then multiplied by 20 percent, the alternative minimum tax rate, to yield the
tentative alternative minimum tax. The amount by which this tentative
alternative minimum tax (reduced by any alternative minimum tax foreign tax
credit) exceeds the regular tax is the corporation's alternative minimum tax
liability. The corporate alternative minimum tax provisions insure that
corporate taxpayers pay tax equal to at least 20 percent of their economic
income above the exemption amount. The corporate exemption amount is $40,000,
less 25 percent of the excess of alternative minimum taxable income over
$150,000.

     Alternative Minimum Tax for Noncorporate Taxpayers.  A noncorporate Unit
holder's alternative minimum taxable income is generally equal to (i) his
regular taxable income, with certain adjustments, plus (ii) items of tax
preference. After a noncorporate taxpayer's alternative minimum taxable income
is reduced by an exemption amount, the tentative alternative minimum tax is
generally determined by multiplying this amount by 26 percent for the first
$175,000, and 28 percent of the excess over $175,000. If a noncorporate
taxpayer's income includes long term capital gain income, lower rates of tax are
applicable. The amount by which this tentative minimum tax (reduced by any
alternative minimum tax foreign tax credit) exceeds regular tax is the
noncorporate taxpayer's minimum tax liability. For tax years beginning in
2003-2004, the noncorporate taxpayer's exemption amount is $58,000 in the case
of joint returns or surviving spouses, $40,250 in the case of unmarried
individuals who are not surviving spouses, $29,000 in the case of married
individuals filing separate returns, and $22,500 for estates and trusts. For
married persons filing jointly, the exemption amounts are reduced by 25 percent
of the amount by which their alternative minimum taxable income exceeds $150,000
($112,500 for singles and $75,000 for married taxpayers filing separately,
estates and trusts).

     Because of the complexity of the rules and regulations concerning the
application of the alternative minimum tax, Unit holders should consult their
tax advisors to determine its impact on their tax situations.

     Abandonment Losses.  Unit holders are entitled to claim deductions for
abandonment losses with respect to any Royalties which are determined to be
worthless and are abandoned. Each Unit holder should determine the amount of his
abandonment losses by reference to that amount of his adjusted basis for his
Units attributable to each Royalty which becomes worthless. Any deductions for
abandonment losses allowed to a Unit holder will reduce his basis in each Unit
for purposes of computing gain or loss on any subsequent disposition of Units.
The Trustee will furnish to Unit holders information which will permit
computation of abandonment loss deductions, if any. See "Reports", below. No
such abandonment losses have been realized since the creation of the Trust.

     Taxation of Nonresident Foreign Unit Holders.  Unit holders who are
nonresident alien individuals or foreign corporations (collectively, "Foreign
Taxpayers"), in general, are subject to U.S. tax at the rate of 30% on passive
income such as the gross income produced by the Royalties. In certain
circumstances, the applicable tax rate may be lower as a result of tax treaties.
This tax is applied to the gross income produced by the Royalties, without
taking into account any deductions, such as depletion. The Trustee must withhold
this tax and remit it directly to the United States Treasury.

     The U.S. income (including income from the Trust) of a Foreign Taxpayer
engaged in a trade or business in the United States is, in general, taxable at
the graduated rates applicable to individuals or corporations, if the income is
effectively connected with such trade or business. A Foreign Taxpayer may elect
to treat income from real property, such as the Royalties as effectively
connected with the conduct of a United States trade or business under Section
871 or Section 882 of the Code (or pursuant to any similar provisions of
applicable tax treaties). A Foreign Taxpayer whose Royalty income is effectively
connected with a United States trade or business or who elects to treat it as
such is entitled to claim all deductions, including depletion, with respect to
such income and is exempt from the 30 percent withholding requirement. Such
exemption is claimed for a calendar year by filing, in duplicate, with the
Trustee, Form W-8ECI, Exemption from Withholding Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United States (or a
substitute statement containing the information required by Income Tax
Regulation Section 1.1441-4). The exemption statement must be received by the
Trustee in advance of the royalty payment for which it is intended to apply. A
separate Form W-8ECI (or substitute statement) must be filed with the Trustee
every three years in order to effect an exemption from withholding for that
year's income. Because the application of the withholding Regulations will vary
depending on a holder's particular circumstances, all

                                        29
<PAGE>

holders are urged to consult their own tax advisors regarding the application of
the Regulations to them. Generally, nonresident foreign Unit holders are subject
to a state income tax on income from sources within such state in the same
manner as a citizen or resident of the United States.

     A 30 percent "branch profits tax" is imposed on the after-tax profits of a
U.S. branch of a foreign corporation attributable to its income effectively
connected (or treated as such) with a U.S. trade or business. An income tax
treaty between the U.S. and a foreign country may reduce or eliminate the branch
profits tax only if the foreign corporation is a "qualified resident" of the
foreign country in which it is incorporated.

     Under Section 1446 of the Code, a withholding tax is imposed on
partnerships in an amount equal to the United States tax on effectively
connected taxable income which is properly allocable to a foreign person under
section 704(b) of the Code. The amount of withholding tax is equal to the
highest rate of United States tax to which each foreign partner is subject,
which is currently 38.6 percent for individuals and 35 percent for corporations.
A foreign partner's share of withholding tax paid by a partnership is treated as
distributed to the foreign partner on the earlier of (i) the date the
partnership actually pays the tax to the Service or (ii) the last day of the
partnership's tax year for which the tax is paid. Future regulations may modify
the general rule described above to provide for earlier deemed distributions and
reductions in basis in circumstances such as those involving mid-year
dispositions of partnership interests. The Service is authorized to impose
penalties on a partnership for failure to satisfy withholding tax liabilities.

     Section 6039C of the Code allows the Service to require reporting by
foreign direct owners of United States real property interests. To date no such
reporting requirements have been announced by the Service.

     If a Foreign Taxpayer owns (or has owned during a five-year look-back
period) more than five percent of the outstanding Units, either directly or
through attribution rules under Section 897 of the Code, the Units in the hands
of such a Foreign Taxpayer are treated as United States real property interests.
For such a Foreign Taxpayer, gain or loss from the sale or exchange of Units
will generally be regarded as arising from the sale or exchange of property
effectively connected with the conduct of a United States trade or business.
Therefore, any gain or loss on the sale of Units must be reported to the Service
and appropriate taxes paid.

     Section 1445 of the Code generally provides for withholding at the source
when a United States real property interest is acquired from a Foreign Taxpayer
after December 31, 1984. In general, the amount of withholding is 10 percent of
the amount realized or the disposition by a Foreign Taxpayer. An exemption from
withholding applies in the case of stock regularly traded on an established
securities market. Treasury regulations expand this withholding exemption to
include the acquisition of an interest in a publicly traded partnership or
trust. This exemption will not apply in the case of a Foreign Person
transferring a substantial amount of non-publicly traded interests in publicly
traded partnerships if the transfer is from a single transferor (or related
transferors) in a single transaction (or separate transactions that occur within
three months).

     Foreign Taxpayers that received Units in the original distribution on June
28, 1983 must generally compute their basis in such Units by reference to the
adjusted basis of the corresponding individual property interest in the hands of
the distributing corporation (the Company) before the Distribution, increased by
(i) any gain recognized by the distributing corporation on the Distribution and
(ii) certain taxes paid by the distributee on such Distribution. Foreign
Taxpayers purchasing Units after the Distribution should use their cost of
acquisition as the initial tax basis for such Units.

     The federal income taxation of nonresident alien individuals and foreign
corporations is a highly complex matter which may be affected by many other
considerations. Therefore, nonresident alien individuals or foreign corporations
should consult their tax advisors as to the effects of their ownership of Units.

     Sale of Units.  Generally, a Unit holder will realize gain or loss on the
sale or exchange of Units measured by the difference between the amount realized
on the sale or exchange and his adjusted basis for such Unit at the time of the
sale or exchange. Subject to the recapture provisions contained in Code Section
1254, gain or loss on the sale of Units realized by a holder who is not a
"dealer" with respect to such Units and who held them for more than 12 months
will generally be treated as long-term capital gain or loss, provided the
taxpayer held the Units as a capital asset. Gain constituting Code Section 1254
recapture will be
                                        30
<PAGE>

characterized as ordinary income. For oil and gas properties placed in service
after December 31, 1986, the Code Section 1254 recapture amount will include
depletion deductions which reduced the Unit holder's basis in such property. See
"Depletion Deductions" above.

     The sale of Units should be considered, for tax purposes, as the sale of an
interest in the Partnership. Income allocable to such Units to the date of sale
will be taxable to the selling owner of Units, and the purchaser of Units will
be taxable on income allocable to such Units from the date of purchase forward.
See "Accounting for Income and Deductions", below. Certain information reporting
requirements may apply to the sale of Units. See "Information Return Filing
Requirements", below. The Partnership has made an election under Section 754 of
the Code to allow each subsequent purchaser of Units to take a basis in his
share of the Royalties which reflects his cost basis in the Units (as opposed to
his pro rata share of the Partnership's basis in the Royalties) for purposes of
calculating deductions for depletion and abandonments with respect to such
Royalties.

     The Service has ruled that a partner must maintain a single aggregate
adjusted tax basis in partnership interests acquired in multiple transactions.
Upon a sale of a portion of such aggregate interest, such partner would be
required to allocate his aggregate tax basis between the interest sold and the
interest retained by some equitable apportionment method such as the relative
fair market values of such interests on the date of sale. It is unclear whether
the ruling would apply to owners of publicly traded units of beneficial
interests in a trust (such as the Trust) which owns interests in a partnership
(such as the Partnership). If the ruling is applicable to the Units, such
process of aggregating the tax basis of all Units owned by a Unit holder would
effectively prohibit a Unit holder owning Units which were purchased at
different prices from controlling the timing of the recognition of the inherent
gain or loss in his Units by choosing which Units he will sell. A Unit holder
considering the subsequent purchase of additional Units or the sale of Units
purchased in more than one block should consult his own tax advisor as to the
possible consequences of this ruling.

     The treasury regulations provide that a partner selling a portion of its
interest in a publicly traded partnership may use its actual holding period in
the sold interest if, (i) the ownership interest is divided into identifiable
units with ascertainable holding periods, (ii) the selling partner can identify
the portion of its partnership interest transferred, and (iii) the selling
partner makes the required election.

     A Unit holder whose Units are loaned to a "short seller" to cover a short
sale of Units may be considered as having disposed of those Units. If so, the
Unit holder would no longer be a partner in the Partnership and would likely
recognize gain or loss from the disposition. As a result the Partnership's items
of income and loss would not be recognized by the Unit holder, and any cash
distributions to the Unit holder would constitute ordinary income. The IRS has
announced that it is studying tax issues relating to the tax treatment of short
sales of partnership interests.

     Reports.  The Trustee will furnish to Unit holders of record annual reports
(such as the LL&E Royalty Trust -- 2003 Tax Information package) containing
certain information necessary to permit the computation of federal and state tax
liabilities.

     Audit of Partnership and Trust Returns.  While no federal income tax is
required to be paid by organizations which are classified as partnerships or
grantor trusts, partnerships and grantor trusts must file informational federal
income tax returns which are subject to examination by the Service.

     The Code provides that the tax treatment of "partnership items" is
determined at the partnership level rather than at the partner level. These
rules, which apply to the Partnership, provide in general for partnership level
Service audits and deficiency proceedings or claims for refund in respect of
"partnership items". These rules also provide for the designation of a "tax
matters partner" (the Company, in the case of the Partnership), who has the
power to (i) extend the applicable statute of limitations on assessments of tax
(normally three years) attributable to "partnership items" and (ii) enter into
settlement agreements which will bind other partners unless they specifically
elect not to be bound. Under Treasury regulations, the term "partnership items"
includes, insofar as may be relevant in the case of the Partnership, (i) the
Partnership's aggregate and each partner's distributive share of items of
income, gain, loss, deduction or credit, (ii) items of the Partnership which may
be tax preference items under Section 57(a) of the Code for any partner,

                                        31
<PAGE>

(iii) optional adjustments to the basis of Partnership property pursuant to an
election under Section 754 (including necessary preliminary determinations, such
as the determination of a transferee partner's basis in a Partnership interest)
and (iv) windfall profit tax (for periods when the windfall profit tax was in
effect). Further, a person whose tax is indirectly determined by taking into
account partnership items, such as a Unit holder, is required to notify the
Service if he treats partnership items inconsistently with the treatment on the
partnership return. Failure to notify will allow the Service to assess the
resulting deficiency without further proceedings, and may result in a penalty.
See "Other Possible Penalties". Each Unit holder should consult a tax advisor to
determine the effects of the applicability of these rules to the Partnership.

     Accounting for Income and Deductions.  Since 1987 the Partnership has
utilized the accrual method of accounting for tax purposes. The accrual method
of accounting requires a taxpayer to recognize income at the earlier of the time
the income is received or all events have occurred which fix the right to
receive such income and the amount thereof can be determined with reasonable
accuracy. Deductions are allowable for the taxable year in which all the events
have occurred which establish the fact of liability giving rise to such
deduction and the amount thereof can be determined with reasonable accuracy.

     Because the Trust is treated as a grantor trust with respect to each Unit
holder, the Royalty income of the Trust will be deemed to have been accrued by
each Unit holder on the day the Partnership accrues such income under its method
of accounting and not on the date cash is distributed by the Partnership or the
Trust, regardless of a Unit holder's method of accounting. Income from the Trust
will be taxed to each Unit holder in the taxable year within which the taxable
year of the Partnership ends. Trust administrative expenses are costs incurred
outside of the Partnership and will be recognized by Unit holders consistent
with their method of accounting and without regard to the taxable year and or
accounting method employed by the Partnership or the Trust.

     The Trust makes monthly distributions to Unit holders of record on each
Monthly Record Date on which it has revenues to distribute. Because the
Partnership must use the accrual method of accounting for tax purposes, the
Trust cannot match taxable income of the Partnership with cash distributions
from the Trust. Thus, in certain cases a Unit holder may be required to report
taxable income attributable to his Units, but the Unit holder will not receive
the distribution attributable to such income. This will be true to the extent a
cash distribution from the Partnership paid on any Monthly Record Date is
associated with income accrued by the Partnership prior to such Monthly Record
Date.

     The Trust Agreement and the Partnership Agreement provide that income and
deductions of the Trust and the Partnership during the period ended on each
Monthly Record Date will be allocated to the Unit holders of Record on that
Monthly Record Date. The Code generally requires that items of partnership
income and deduction be allocated among transferors and transferees of
partnership interests, as well as among partners whose interests otherwise vary
during a taxable period, on a daily basis. However, the Conference Committee
Report with respect to the applicable Code provision states that regulations
will provide a convention permitting such allocations to be made on a monthly
basis. Furthermore, relevant legislative history indicates that allocations on a
reasonable basis will be permitted pending adoption of prospective regulations
governing the matter. It is uncertain whether the Service will accept the
allocation method used by the Partnership and the Trust or will require income
and deductions of the Partnership or the Trust to be determined and allocated
daily or based on some other method of proration. If the Service made such a
contention, the judicial response would also be uncertain. The Trustee believes
that the allocation method adopted for the Trust and the Partnership is
reasonable and consistent with the purposes of applicable Code provisions. In
the event regulations are proposed which prescribe a convention which is
inconsistent with the method used by the Trust and the Partnership, the Trustee
intends to offer comments on the proposed regulations and to take other action
it deems appropriate in order to attempt to persuade the Service to adopt a
convention which would enable the Trust and the Partnership to continue to use
the allocation method now in use. In the event such a convention is not
provided, the Service may contend that taxable income or losses should be
allocated among Unit holders in a different manner. If any such contention were
sustained, the Unit holders' respective tax liabilities would be adjusted, and
some could be required to pay additional tax. A Unit holder who transfers or
acquires Units should consult with his tax advisor with regard to the proper
reporting

                                        32
<PAGE>

of income received and expenses paid by the Trust or the Partnership during the
month in which such Units are acquired or transferred.

     Related Tax Effects on Unit Holders.  The ownership of Units may result in
the federal income tax returns of a Unit holder being subject to scrutiny by the
Service. A Unit holder's returns may be examined as a result of an audit of the
Trust or the Partnership, and the Service may make adjustments to such returns
which are unrelated to the Distribution and the ownership of Units.

     The tax classification of the Trust and the Partnership directly affects
the reporting by the Unit holders of the Trust's income and distributions. A
Unit holder who treats the Trust as a grantor trust would pay tax attributable
to the Trust's portion of the Partnership's income and income from other sources
received or accrued (depending on his method of accounting) even though no cash
was distributed by the Trust. If a Unit holder reports income attributable to
the Trust in a manner that is inconsistent with the final determination of the
status of the Trust or the Partnership, such Unit holder may be liable for a
deficiency (including interest) or may be required to file timely a claim for
refund in order to obtain any overpayment of taxes. In addition, any tax
deficiency or refund claim arising out of a Unit holder's reporting of Trust
income could increase the likelihood of an audit of such Unit holder's tax
return.

     Other Possible Penalties.  An owner of a security who receives income in
respect of such interest must report the character and amount of such income,
for federal income tax purposes, in a manner which is consistent with the
federal income tax reports of the entity which was the source of the income. The
consistency requirement is deemed to be waived if the taxpayer files a statement
with the Service identifying the inconsistency. Because of the presence of
"street name" investors and the possible existence of transfer record
inaccuracies, holders of interests which are actively traded in the securities
markets may encounter situations in which it is difficult to comply fully and
accurately with the consistency requirement and other federal tax reporting
requirements. Certain penalties could be assessed against a taxpayer that fails
to comply with such requirements. Because of the complexity of the federal tax
reporting requirements applicable to trusts (such as the Trust) which own
interests in partnerships (such as the Partnership) and because all of the tax
attributes of the Royalties flow through the Partnership and the Trust to the
Unit holders, there is an increased likelihood that Unit holders will violate
the consistency requirement and other reporting requirements regarding their
individual federal income tax returns and the information returns of the Trust
and the Partnership. Any violations of the consistency requirements could lead
to imposition of certain penalties on the Unit holders or other adverse results.
Furthermore, the Trust or the Partnership might be subject to certain penalties
in connection with its furnishing of statements and information to Unit holders
or the government if such statements or information prove to be inaccurate due,
for example, to differences between the transfer agent's records and actual
ownership data. The Code provides reporting requirements designed to facilitate
the transfer of information between partnerships and trusts and owners of
interests therein held by nominees. See "Nominee Reporting Requirements".

IDC RECAPTURE INCOME TO THE COMPANY ON DISTRIBUTION

     As described in prior reports, at the time of the creation of the Trust, a
legal issue existed as to whether the disposition of a royalty carved out of an
operating interest to which intangible drilling and development costs ("IDC")
have been charged was a disposition of "property" for purposes of Section 1254
of the Code. Section 1254 requires a taxpayer to recapture IDC upon the
disposition of an oil and gas property.

     The Company took the position on its tax returns that the distribution of
the Royalties did not trigger Section 1254 recapture. The Service subsequently
audited the Company's federal income tax returns for 1983, the year in which the
Trust was created and in which the Units were distributed, and assessed a
deficiency attributable to the distribution of the Units and recapture of IDC
under Section 1254 of the Code. The Company responded to this formal adjustment
to its tax liability by filing a petition in the United States Tax Court
contesting this deficiency, and in 1989 the Tax Court rendered an opinion
favorable to the Company. The IRS did not appeal the ruling of the Tax Court.
Consequently, the Tax Court's opinion is now final and nonappealable.

                                        33
<PAGE>

BACKUP WITHHOLDING

     The Code's backup withholding system applies to all "reportable payments".
The rate of withholding of tax is 28 percent of all reportable payments. A
reportable payment includes not only reportable interest or dividend payments
but also "other reportable payments". The term "other reportable payment"
includes certain royalty payments. Accordingly, subject to the limitations
discussed below, a Unit holder may be subject to backup withholding with respect
to all or a portion of his distributions from the Trust.

     The Code requires a payor to withhold 28 percent of any reportable payment
if the payee fails to furnish his taxpayer identification number ("TIN") to the
payor in the required manner or to establish an exemption from the requirement
or if the Secretary of the Treasury notifies the payor that the TIN furnished by
the payee is incorrect. Accordingly, a Unit holder may avoid backup withholding
by furnishing his correct TIN to the Trustee of the Trust. Any Unit holder who
does not provide his TIN to the Trustee should consult his tax advisor
concerning the applicability of the backup withholding provisions to his
distributions from the Trust.

     Nominee Reporting Requirements.  The Code imposes reporting requirements on
nominee owners of interests in an estate, trust or partnership. Any person
holding an interest in the Trust as a nominee owner must furnish the Trustee
with specified information about the beneficial owner. In addition, the nominee
owner must forward to the beneficial owner specified information supplied by the
Trustee pertaining to the beneficial owner's interest. Failure to comply with
these requirements may result in the imposition of penalties up to $100,000.
Those persons holding Units for the beneficial ownership of another should
consult with their tax advisors to ensure compliance with the new nominee
reporting requirements.

INFORMATION RETURN FILING REQUIREMENTS

     Under the Code, any partner who sells or exchanges (other than through a
broker) an interest in a partnership holding "unrealized receivables" or certain
inventory within the meaning of Section 751 of the Code is required to notify
the partnership of such transaction within 30 days of the transfer (or, if
earlier, January 15 of the calendar year following the calendar year in which
the exchange occurred). Any such partner who fails to so notify the partnership
may be subject to a $50 penalty for each such failure. Furthermore, the
partnership is required to notify the Service of any sale or exchange (of which
it has notice) of a partnership interest, and to report the name and address of
the transferee and the transferor who were parties to such transaction, along
with all other information required by applicable Treasury regulations. The
partnership must also provide the information to the transferor and the
transferee. If the partnership fails to furnish any such notification, it may be
subjected to a penalty of $50 per failure, up to an annual maximum of $100,000
for the information required to be supplied to the transferor and transferee,
and $250,000 for the information required to be supplied to the Service.

     Depletion deductions subject to recapture under Section 1254 of the Code
(see "Depletion Deductions") constitute "unrealized receivables" within the
meaning of Section 751 of the Code. Accordingly, Unit holders disposing of Units
acquired after December 31, 1986 (other than through a broker) may be required
to notify the Trustee in writing of such disposition and provide the Trustee
with the Unit holder's name, address, taxpayer identification number and the
date of the disposition. Failure to so notify the Trustee may subject a Unit
holder, as well as the Trust and the Partnership, to the above-described
penalties. Without notification from Unit holders, the Trust and Partnership
cannot comply with these reporting requirements because they have no other way
of determining which Units disposed of during the year were acquired by the
transferring Unit holder subsequent to December 31, 1986.

STATE TAX CONSIDERATIONS

     The Royalties burden properties in Louisiana, Florida and Alabama, and the
ownership of the Royalties may subject Unit holders to income and other taxation
in such states, require the filing of returns in such states, or both. A
generalized summary of the relevant tax laws of the states in which the
Royalties are located is contained in the following paragraphs.

                                        34
<PAGE>

  Louisiana

     Louisiana imposes an income tax on all income of resident individuals (but
accords a credit for income taxes paid to other states by Louisiana residents)
and on income derived from Louisiana sources by nonresident individuals. Royalty
income earned from property located within Louisiana is considered income
derived from Louisiana sources for this purpose. Therefore, individual Unit
holders who are not residents of Louisiana are subject to Louisiana income tax
on income from the Royalties allocated to Louisiana. Such nonresident
individuals will be allowed certain deductions and exemptions which are
apportioned to Louisiana based upon the ratio of Louisiana income to federal
adjusted gross income. Relative to individual income tax, effective for tax
years beginning after 1/1/03 the excess itemized deduction is repealed in its
entirety. The income tax rates for individuals range from a low of 2 percent to
a high of 6 percent.

     Louisiana imposes an income tax on all corporations, and other entities
treated as corporations, if they earn or receive income derived from or
attributable to sources within Louisiana. Oil and gas Royalty income, net of
expenses, is generally treated as allocable income in Louisiana (oil and gas
Royalty income is specifically allocated to where the property is located). Gain
or loss on the sale of Units is also considered allocable income and is
allocated to the state in which the Units have business situs (if they have been
so used in connection with the taxpayer's business to acquire a business situs)
or, in the absence of a business situs, to the taxpayer's commercial domicile.
Thus, for corporations, in the absence of a business situs, gain or loss will be
allocated to the corporation's commercial domicile. The income tax rates for
corporations range from a low of 4 percent to a high of 8 percent. For an
individual who is not a resident of Louisiana, in the absence of a business
situs, gain or loss shall be allocated to the nonresident's state of legal
domicile.

     Unit holders are allowed a depletion deduction based on the greater of the
amount determined under the percentage method or cost method. The rate for
computing Louisiana depletion under the percentage method is greater for Unit
holders who are corporations or trusts (22 percent of gross income, but limited
to 50 percent of net income received from the oil and gas property). For
individual Unit holders, allowable depletion will be the same as the amount
allowed for federal income tax purposes.

     Louisiana also imposes a franchise tax on corporations based on the larger
of (i) a corporation's capital (borrowed or contributed) and undistributed
surplus or (ii) the assessed value of all realty and personalty in Louisiana in
the preceding year. The amount subject to Louisiana franchise tax is apportioned
where assets are owned or revenue is earned. Thus, a Unit holder subject to
Louisiana franchise tax would apportion its franchise tax base taking into
account such Unit holder's interest to the extent it is attributable to property
located and revenue generated in Louisiana.

  Florida

     Florida does not impose an income tax on individuals, partnerships or
private trusts. The Trust has received a Technical Assistance Advisement from
the Florida Department of Revenue ("FDR") indicating that the Trust and the
Partnership are not subject to taxation under the Florida Income Tax Code.
However, the Partnership must file an annual information return disclosing
distributive shares of the Working Interest Owner and the Trust.

     Corporations and certain other entities treated as corporations under the
Florida Income Tax Code (such as limited liability companies) are subject to
Florida income tax if they earn or receive income derived from or attributable
to sources within Florida. Both resident and nonresident corporations receiving
income from the Royalties are required to file a Florida corporate return. Such
income may be characterized as either business or nonbusiness income depending
on the taxpayer's circumstances. Business income is apportioned to Florida based
on the corporation's apportionment factor. However, if income from the Royalties
represents nonbusiness income, such income would be allocated, net of related
expenses.

     The Florida corporate income tax is imposed at the annual rate of 5.5
percent on adjusted Federal taxable income allocable or apportionable to
Florida. Any entity subject to the Florida income tax is also subject to the
annual Emergency Excise Tax of 2.2 percent on certain accelerated depreciation
deductions taken on the corporation's federal income tax return. This excise tax
will not apply for any assets placed into service after

                                        35
<PAGE>

1986. In addition, Florida has adopted an alternative minimum tax which may be
applicable to certain Unit holders.

     In computing Florida taxable income, a Unit holder's allowable depletion
deduction will be the same as the amount allowed for federal income tax
purposes.

     Florida also imposes an intangibles tax on individuals, corporations,
partnerships, and fiduciary filers. The intangible base includes notes
receivable, investments, and accounts receivable (less a reasonable allowance
for uncollectible accounts). For individual and corporate intangible tax
returns, the first $250,000 of the taxable intangible base is exempt. The
exemption is $500,000 for married filing jointly. The rate for individuals,
corporations, partnerships, and fiduciary filers is .001. The rate is applied to
the intangible base to determine the intangible tax liability.

  Alabama

     Alabama imposes an income tax on all income of resident individuals (but
allows a credit for income taxes paid to other states by Alabama residents) and
on the income derived from Alabama sources by nonresident individuals. Royalty
income earned from property located within Alabama is considered income derived
from Alabama sources for this purpose. Therefore, individual Unit holders who
are not residents of Alabama are subject to Alabama income tax on income from
the Royalties allocated to Alabama. Such nonresident individuals will be allowed
certain deductions and exemptions which are apportioned to Alabama based upon
the ratio of Alabama income to total gross income. The rates for individuals
range from a low of 2 percent to a high of 5 percent.

     Alabama also imposes an income tax on all corporations and other entities
treated as corporations if they earn or receive income derived from or
attributable to sources within Alabama. Both resident and nonresident
corporations receiving income from the Royalties are required to file an Alabama
corporate return. Such income may be characterized as either business or
nonbusiness income depending on the taxpayer's circumstances. Business income is
apportioned to the state based on the corporation's apportionment factor.
However, if income from the Royalties represents nonbusiness income, such income
would be allocated, net of related expenses. The income tax rate for
corporations is 6.5 percent.

     Individual Unit holders and corporate Unit holders are allowed a depletion
deduction based on the greater of the amount of depletion deducted on their
federal tax returns or an amount equal to 12 percent of gross income from each
property (however such amount shall not exceed 50 percent of the Unit holders
net income).

     In addition to the corporate income tax, Alabama imposes a Business
Privilege Tax. The Privilege Tax is imposed on the net worth of domestic and
foreign corporations, limited liability entities, and disregarded entities. For
the Privilege Tax, net worth is the sum of the corporation's outstanding capital
stock and any additional paid-in-capital, (but without reduction for treasury
stock), and retained earnings. The portion of the net worth subject to the
privilege tax is determined by applying the corporation's Alabama income tax
apportionment factor to the net worth base. The rate is determined by the
entity's federal taxable income in Alabama. The rate ranges from $.25 to $1.75
for each $1,000 of net worth in Alabama. Minimum tax is $100 and maximum tax is
$15,000 for all years after 2000. For financial institutions and insurance
companies, the maximum tax is $3,000,000.

SEVERANCE TAXES

     The Royalties, and consequently the Unit holders, will bear their
proportionate share of severance taxes on the production from the Properties.
Except for a $0.03 per barrel conservation tax on oil which was suspended in
1990, there is no severance tax on production from properties in the federal
offshore domain. Louisiana generally imposes a severance tax of 12.5 percent of
the market value of oil. The gas tax is subject to an annual rate adjustment
each July 1, but to not less than $0.07 per mcf. Florida generally imposes a
severance or production tax of 8 percent of the actual value of oil production
and a tax on gas. The gas tax rate is the gas base rate of $0.171 per mcf times
the gas base rate adjustment. Beginning July 1, 1987, the gas base

                                        36
<PAGE>

rate adjustment is determined by the FDR annually on July 1. Alabama generally
imposes a privilege tax on gas production or severance at the rate of 8 percent
and a conservation tax of 2 percent of the actual value of oil and gas
production (the 2 percent rate is reduced to 1 percent for a period of five
years for certain wells for which the initial permits were obtained between July
1, 1996 and July 1, 2002).

AD VALOREM TAXES

     The Unit holders will bear their proportionate share of ad valorem taxes
assessed on the fair market value of the Royalties in Alabama. The Royalties,
and consequently the Unit holders, will bear their proportionate shares of the
ad valorem taxes on the fair market value of the Jay Field properties located in
Florida. No ad valorem tax is assessed on royalty owners with respect to
properties in Louisiana or the federal offshore leases.

AVAILABLE INFORMATION

     The Trust does not maintain an internet address or a website, and therefore
does not make copies of its reports under the Exchange Act available in that
manner. The Trust's filings under the Exchange Act are available electronically
from the website maintained by the Securities and Exchange Commission at
http://www.sec.gov. The Trust will also provide electronic copies of its recent
filings free of charge upon request to the Trustee, and will provide paper
copies of its recent filings for its costs of reproduction upon request to the
Trustee.

ITEM 2.  PROPERTIES

     Reference is made to "Item 1. Business" for the information required by
this item.

ITEM 3.  LEGAL PROCEEDINGS

     None.

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

     None.

                                    PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED UNIT HOLDER MATTERS
        AND ISSUER PURCHASES OF EQUITY SECURITIES

     The Units are traded on the New York Stock Exchange (ticker symbol LRT).
The table below presents the high and low sales prices for each quarterly period
in the years ended December 31, 2003 and 2002.

     Since the cash distributions to Unit holders result from royalty and
overriding royalty interests, the timing, duration and amount of future cash
distributions will be dependent on the many and varied factors discussed
throughout Part I hereto, which factors are beyond the control of the Trustee.
The cash distributions to Unit holders for each quarterly period in the years
ended December 31, 2003 and 2002 (applicable to production for October 2002
through September 2003 and October 2001 through September 2002) are also
included in the table below.

<Table>
<Caption>
                                             2003 QUARTER ENDED                          2002 QUARTER ENDED
                                  -----------------------------------------   -----------------------------------------
                                  MARCH 31   JUNE 30    SEPT. 30   DEC. 31    MARCH 31   JUNE 30    SEPT. 30   DEC. 31
                                  --------   --------   --------   --------   --------   --------   --------   --------
<S>                               <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Units of Beneficial
  Interest:
  High sales price..............  $  2.80    $   4.02   $  3.79    $   4.84   $  2.81    $   3.01    $ 1.92    $   1.89
  Low sales price...............     1.78        2.21      2.75        3.35      2.01        1.40      1.26        1.33
Distributions per Unit..........  $0.0774    $ 0.0797   $0.1116    $ 0.1463   $0.0404    $ 0.0118    $0.019    $ 0.0382

     The total number of Unit holders of record as of March 8, 2004 was 4,605.
</Table>

                                        37
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

     Reference is made to "Item 1. Business -- Estimates of Petroleum Engineers"
of this Annual Report on Form 10-K.

     The Trust has not reported estimates of proved imputed oil or gas reserves
to any federal authority or agency other than the Securities and Exchange
Commission.

     The following table presents in summary form selected financial information
regarding the Trust.

<Table>
<Caption>
                                                         YEARS ENDED DECEMBER 31,
                                     ----------------------------------------------------------------
                                        2003         2002         2001          2000          1999
                                     ----------   ----------   -----------   -----------   ----------
<S>                                  <C>          <C>          <C>           <C>           <C>
Revenues...........................  $8,496,041   $2,616,241   $12,389,988   $11,827,229   $2,301,156
Cash earnings......................   7,869,942    2,055,121    11,860,132    11,318,002    1,754,106
Cash distributions to Unit
  holders..........................   7,882,218    2,076,828    11,867,057    11,294,643    1,756,268
Cash distributions per Unit........  $   0.4150   $   0.1094   $    0.6249   $    0.5947   $  0.09250
Trust Corpus.......................  $1,909,252   $2,046,528   $ 2,148,235   $ 2,382,160   $2,506,801
</Table>

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

CRITICAL ACCOUNTING POLICIES

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

          (a) Royalties are recorded on a cash basis and are generally received
     by the Trustee in the third month following the month of production of oil
     and gas attributable to the Trust's interest.

          (b) Trust expenses, which include accounting, engineering, legal and
     other professional fees, Trustee's fees and out-of-pocket expenses, are
     recorded on a cash basis.

          (c) Amortization of the net overriding royalty interests in productive
     oil and gas properties and the 3% royalty interest in Fee Lands, which is
     calculated on a unit-of-production basis, is charged directly to the Trust
     corpus since the amount does not affect cash earnings. Amortization
     calculated for interim periods is based on the annual reserve study
     prepared by independent petroleum engineers as of September 30 of the
     preceding year. Given the volatility of oil prices, amortization recorded
     in the fourth quarter, based on the current year reserve study, may include
     a significant year-end adjustment that will reflect the impact of price
     changes as well as other reserve revisions. Amortization recorded in the
     fourth quarter was increased by $59 thousand in 2003, increased by $17
     thousand in 2002 and increased by $208 thousand in 2001 as a result of such
     adjustments.

          (d) The initial carrying value of the Trust's royalty interests in oil
     and gas properties represents the Company's cost on a successful efforts
     basis (net of accumulated depreciation, depletion and amortization) at June
     28, 1983 applicable to the interests in the properties transferred to the
     Trust. The unamortized balance at December 31, 2003 is not indicative of
     the fair market value of the interests held by the Trust.

     The preparation of the financial statements requires estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

     While these statements differ from financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America, the cash basis of reporting revenues and expenses is considered to be
the most meaningful because monthly distributions to the Unit holders are based
on net cash receipts.

     The unaudited data included in Item 1 and the financial statements and
notes thereto in Item 8 are an integral part of this discussion and analysis and
should be read in conjunction herewith.

                                        38
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     As stipulated in the Trust Agreement, the Trust is intended to be passive,
and the Trustee's activities are limited to the receipt of revenues attributable
to the Royalties, which revenues are to be distributed currently (after payment
of or provision for Trust expenses and liabilities) to the owners of the Units.
The Trust has no source of liquidity or capital resources other than the
revenue, if any, attributable to the Royalties.

STATUS OF THE TRUST

     The Trust Agreement provides that the Trust will terminate in the event
that the net revenues fall below $5 million for two successive years. As a
result of lower oil and natural gas prices, lower production volumes and
increased expenditures for the drilling of the McDavid Lands 37-5 well on the
Jay Field property, net revenues of $2.1 million received by the Trust in 2002
fell below the Termination Threshold. Therefore, if net revenues for 2003 fell
below the $5 million Termination Threshold, the Trust would be required to
terminate effective December 31, 2003. The Trust's net revenues for the year
ended December 31, 2003 were approximately $7.9 million. As the Trust's 2003 net
revenues are above the Termination Threshold for 2003, the Trust did not
terminate on December 31, 2003.

     If the Trust's net revenues for two successive years fall below $5 million
(calculated in accordance with the provisions of the Trust Agreement), the
Trustee will be required to sell the assets of the Trust for cash unless a
majority of the Unit holders approve a sale for specified non-cash consideration
consisting of personal property, in which case the Trustee may, but will not be
required to, attempt to consummate any such transaction approved by a majority
of the Unit holders. In any case, any sale will be on terms that the Trustee, in
its sole discretion, determines to be in the best interests of Unit holders.
Upon any sale, the Trustee will distribute the proceeds to the Unit holders as
promptly as practicable after paying all then existing liabilities of the Trust,
including fees of the Trustee, and, if necessary, setting up reserves in amounts
the Trustee deems appropriate to provide for payment of contingent liabilities.

     If any asset required to be sold has not been sold within three years after
the termination of the Trust, the Trustee will cause the asset to be sold at
public auction to the highest cash bidder. Except in connection with any
proposed non-cash sale as described above, no approval of the Unit holders will
be required or solicited in connection with the sale of the Trust's assets after
termination of the Trust.

RESULTS OF OPERATIONS

<Table>
<Caption>
                                                       YEARS ENDED DECEMBER 31,
                                                ---------------------------------------
                                                   2003          2002          2001
                                                -----------   -----------   -----------
<S>                                             <C>           <C>           <C>
Royalty Revenues..............................  $ 8,496,041   $ 2,616,241   $12,389,988
Trust administrative expenses.................     (626,099)     (561,120)     (529,856)
                                                -----------   -----------   -----------
Cash earnings.................................  $ 7,869,942   $ 2,055,121   $11,860,132
Changes in undistributed cash.................       12,276        21,707         6,925
                                                -----------   -----------   -----------
Cash distributions............................  $ 7,882,218   $ 2,076,828   $11,867,057
                                                ===========   ===========   ===========
Cash distributions per unit...................  $    0.4150   $    0.1094   $    0.6249
                                                ===========   ===========   ===========
Units outstanding.............................   18,991,304    18,991,304    18,991,304
                                                ===========   ===========   ===========
</Table>

     Revenues are generally received in the third month following the month of
production of oil and gas attributable to the Trust's interest. Both revenues
and expenses are recorded on a cash basis. Accordingly, distributions to Unit
holders for the years ended December 31, 2003, 2002 and 2001 are attributable to
the Working Interest Owner's operations during the twelve-month periods ended
September 30, 2003, 2002 and 2001, respectively.

                                        39
<PAGE>

     Administrative expenses incurred by the Trust increased approximately $65
thousand or 12 percent for the year ended December 31, 2003 as compared to the
year ended December 31, 2002. The increase in 2003 administrative expenses was
primarily a result of increases in accounting and legal fees incurred by the
Trust.

     Distributions to Unit holders for 2003, 2002 and 2001 amounted to
$7,882,218 ($0.4150 per Unit), $2,076,828 ($0.1094 per Unit), and $11,867,057
($0.6249 per Unit), respectively. During these years, the Trust received cash of
$8,496,041, $2,616,241, and $12,389,988, respectively, from the Working Interest
Owner with respect to the Royalties from the Properties.

     The following unaudited schedule provides a summary of the Working Interest
Owner's calculation of the Net Proceeds from the Properties and the Royalties
paid to the Trust for the respective years.

<Table>
<Caption>
                                                              YEARS ENDED DECEMBER 31,
                                                     ------------------------------------------
                                                         2003           2002           2001
                                                     ------------   ------------   ------------
<S>                                                  <C>            <C>            <C>
Net Proceeds:
  Revenues.........................................  $ 32,327,961   $ 26,484,517   $ 40,286,079
  Production costs and expenses....................   (11,978,115)   (13,288,291)   (12,702,119)
  Capital expenditures.............................    (5,996,495)   (11,126,152)    (6,555,572)
                                                     ------------   ------------   ------------
          Net Proceeds.............................  $ 14,353,351   $  2,070,074   $ 21,028,388
                                                     ============   ============   ============
Royalties paid to the Trust:
  Overriding Royalties.............................  $  8,385,331   $  2,582,384   $ 12,180,952
  Fee Lands Royalties..............................       110,710         33,857        209,036
                                                     ------------   ------------   ------------
          Royalties paid to the Trust..............  $  8,496,041   $  2,616,241   $ 12,389,988
                                                     ============   ============   ============
</Table>

     Revenues of the Working Interest Owner with respect to the Productive
Properties increased approximately $5.8 million or 22 percent during the 2003
operating period compared to the same operating period in 2002. Revenues
increased approximately $10.9 million due to an increase in natural gas, natural
gas liquid and crude oil prices and decreased approximately $5.1 million due to
lower production volumes. Revenues decreased approximately $13.8 million in 2002
as compared to the same period in 2001 primarily due to lower natural gas and
crude oil prices coupled with a decrease in production volumes.

     Average natural gas prices received in 2003 increased to $5.43 per thousand
cubic feet ("mcf") from $2.86 per mcf in 2002. Average crude oil prices
increased to $29.50 per barrel in 2003 from $23.51 per barrel in 2002 while
natural gas liquids prices increased to $23.14 per barrel in 2003 from $16.84 in
2002. Average crude oil prices decreased to $23.51 per barrel in 2002 from
$27.78 per barrel in 2001 and natural gas liquids prices increased to $16.84 per
barrel in 2002 from $23.62 in 2001. Average natural gas prices decreased in 2002
to $2.86 per mcf from $5.63 per mcf in 2001.

     Production costs and expenses incurred by the Working Interest Owner on the
Productive Properties decreased approximately $1.3 million or 10 percent during
the 2003 operating period compared to the same operating period in 2002. The
decrease in the 2003 operating period was primarily due to lower lease operating
expenses related to fewer workovers at the Jay Field. Production costs and
expenses increased approximately $0.6 million or 5 percent during the 2002
operating period compared to the same period in 2001. The increase in 2002 was
primarily due to higher lease operating expenses related to workovers at Jay
Field property and lower credits received related to third processing at the
South Pass 89 property.

     Capital expenditures decreased approximately $5.1 million or 46 percent in
the 2003 operating period as compared to 2002. The decrease in 2003 capital
expenditures was primarily due to less drilling activity in 2003 and lower
workovers at the Jay Field property. Capital expenditures increased
approximately $4.6 million or 70 percent in the 2002 operating period compared
to 2001. The increase in 2002 capital expenditures was primarily due to
increased drilling activities at the McDavid Land 37-5 well on the Jay Field
property and the Offshore property at South Marsh Island 76. In addition,
capital expenditures increased in part due to nitrogen purchases for injection
as well as capital workovers performed on the Jay Field property.

                                        40
<PAGE>

     The Trust's Fee Lands Royalties increased approximately $77 thousand or 227
percent in the 2003 operating period compared to the same period in 2002. The
amount of Fee Lands leased as of December 31, 2003 was approximately 4,300 acres
compared to 3,865 acres leased at December 31, 2002.

     The Trustee has been informed by the Working Interest Owner that the
Working Interest Owner has been named as one of many defendants in certain
lawsuits alleging the underpayment of royalties on the production of natural gas
and natural gas liquids through the use of below-market prices, improper
deductions, improper measurement techniques and transactions with affiliated
companies. Plaintiffs in some of the lawsuits allege that the underpayment of
royalties, among other things, resulted in false forms being filed by the
Working Interest Owner with the Minerals Management Service, thereby violating
the civil False Claims Act.

     If the plaintiffs are successful in the matters described above, revenues
to the Trust could decrease. A judgment or settlement could entitle the Working
Interest Owner to reimbursements for past periods attributable to properties
covered by the Trust's interest, which could decrease future royalty payments to
the Trust. The Working Interest Owner has informed the Trustee that at this
time, the Working Interest Owner is not able to reasonably estimate the amount
of any potential loss or settlement allocable to the Trust's interest.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Trust does not engage in any operations, and does not utilize market
risk sensitive instruments, either for trading purposes or for other than
trading purposes. As described in detail elsewhere herein, the Trust's monthly
distributions are highly dependent upon the prices realized from the sale of oil
and natural gas. Oil and natural gas prices can fluctuate widely on a
month-to-month basis in response to a variety of factors that are beyond the
control of the Trust and the Working Interest Owner. Factors that contribute to
price fluctuation include, among others:

     - political conditions worldwide, in particular political disruption, war
       or other armed conflicts in oil producing regions;

     - worldwide economic conditions;

     - weather conditions;

     - the supply and price of foreign natural gas;

     - the level of consumer demand;

     - the price and availability of alternative fuels;

     - the proximity to, and capacity of, transportation facilities; and

     - the effect of worldwide energy conservation measures.

     Moreover, government regulations, such as regulation of natural gas
transportation and price controls, can affect product prices in the long term.

                                        41
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                               LL&E ROYALTY TRUST

                 STATEMENTS OF CASH EARNINGS AND DISTRIBUTIONS

                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

<Table>
<Caption>
                                                           2003          2002          2001
                                                        -----------   -----------   -----------
<S>                                                     <C>           <C>           <C>
Royalty revenues......................................  $ 8,496,041   $ 2,616,241   $12,389,988
Trust administrative expenses.........................     (626,099)     (561,120)     (529,856)
                                                        -----------   -----------   -----------
Cash earnings.........................................  $ 7,869,942   $ 2,055,121   $11,860,132
Changes in undistributed cash.........................       12,276        21,707         6,925
                                                        -----------   -----------   -----------
Cash distributions....................................  $ 7,882,218   $ 2,076,828   $11,867,057
                                                        ===========   ===========   ===========
Cash distributions per unit...........................  $    0.4150   $    0.1094   $    0.6249
                                                        ===========   ===========   ===========
Units outstanding.....................................   18,991,304    18,991,304    18,991,304
                                                        ===========   ===========   ===========
</Table>

                                        42
<PAGE>

               STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS

                           DECEMBER 31, 2003 AND 2002

<Table>
<Caption>
                                                                  2003            2002
                                                              ------------    ------------
<S>                                                           <C>             <C>
                           ASSETS
Cash........................................................  $        252    $     12,528
Net overriding royalty interests in productive oil and gas
  properties and 3% royalty interests in fee lands (notes 2,
  3 and 5)..................................................    76,282,000      76,282,000
Less accumulated amortization (note 3)......................   (74,373,000)    (74,248,000)
                                                              ------------    ------------
     Total assets...........................................  $  1,909,252    $  2,046,528
                                                              ============    ============

                LIABILITIES AND TRUST CORPUS
Trust corpus (18,991,304 Units of Beneficial Interest
  authorized, issued and outstanding).......................  $  1,909,252    $  2,046,528
Contingencies (notes 4, 5 and 6)
                                                              ------------    ------------
     Total liabilities and Trust corpus.....................  $  1,909,252    $  2,046,528
                                                              ============    ============
</Table>

                     STATEMENTS OF CHANGES IN TRUST CORPUS

                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

<Table>
<Caption>
                                                       2003           2002            2001
                                                    -----------    -----------    ------------
<S>                                                 <C>            <C>            <C>
Trust corpus, beginning of period (note 3)........  $ 2,046,528    $ 2,148,235    $  2,382,160
Cash earnings.....................................    7,869,942      2,055,121      11,860,132
Cash distributions................................   (7,882,218)    (2,076,828)    (11,867,057)
Amortization of royalty interests (note 3)........     (125,000)       (80,000)       (227,000)
                                                    -----------    -----------    ------------
Trust corpus, end of period.......................  $ 1,909,252    $ 2,046,528    $  2,148,235
                                                    ===========    ===========    ============
</Table>

                See accompanying notes to financial statements.

                                        43
<PAGE>

                               LL&E ROYALTY TRUST
                         NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 2003, 2002 AND 2001

(1) FORMATION OF THE TRUST

     On June 28, 1983, The Louisiana Land and Exploration Company (herein
Working Interest Owner or Company) created LL&E Royalty Trust (Trust) and
distributed Units of Beneficial Interest (Units) in the Trust to the holders of
record of capital stock of the Company on the basis of one Unit for each two
shares of capital stock held on June 22, 1983. On October 22, 1997, the
shareholders of the Company approved a definitive agreement to merge with
Burlington Resources Inc. ("BR"). Effective on that date, the Company became a
wholly owned subsidiary of BR. The merger has had no significant effects on the
Trust.

     Upon creation of the Trust, the Company conveyed to the Trust (a) net
overriding royalty interests (Overriding Royalties), which are equivalent to net
profits interests, in certain productive oil and gas properties located in
Alabama, Florida, Texas and in federal waters offshore Louisiana (Productive
Properties) and (b) 3% percent royalty interests (Fee Lands Royalties) in
approximately 400,000 acres of the Company's then unleased, undeveloped south
Louisiana fee lands (Fee Lands). The Overriding Royalties and the Fee Lands
Royalties are referred to collectively as the "Royalties." Title to the
Royalties is held by a partnership (Partnership) of which the Trust and the
Company are the only partners, holding 99% and 1% interests, respectively.

     The Trust is passive, with JPMorgan Chase Bank as Trustee, having only such
powers as are necessary for the collection and distribution of revenues
resulting from the Royalties, the payment of Trust liabilities and the
conservation and protection of the Trust estate. The Units are listed on the New
York Stock Exchange (NYSE SYMBOL -- LRT).

STATUS OF THE TRUST

     The Trust Agreement provides that the Trust will terminate in the event
that the net revenues fall below $5 million for two successive years. As a
result of lower oil and natural gas prices, lower production volumes and
increased expenditures for the drilling of the McDavid Lands 37-5 well on the
Jay Field property, net revenues of $2.1 million received by the Trust in 2002
fell below the Termination Threshold. Therefore, if net revenues for 2003 fell
below the $5 million Termination Threshold, the Trust would be required to
terminate effective December 31, 2003. The Trust's net revenues for the year
ended December 31, 2003 were approximately $7.9 million. As the Trust's 2003 net
revenues are above the Termination Threshold for 2003, the Trust did not
terminate on December 31, 2003.

     If the Trust's net revenues for two successive years fall below $5 million
(calculated in accordance with the provisions of the Trust Agreement), the
Trustee will be required to sell the assets of the Trust for cash unless a
majority of the Unit holders approve a sale for specified non-cash consideration
consisting of personal property, in which case the Trustee may, but will not be
required to, attempt to consummate any such transaction approved by a majority
of the Unit holders. In any case, any sale will be on terms that the Trustee, in
its sole discretion, determines to be in the best interests of Unit holders.
Upon any sale, the Trustee will distribute the proceeds to the Unit holders as
promptly as practicable after paying all then existing liabilities of the Trust,
including fees of the Trustee, and, if necessary, setting up reserves in amounts
the Trustee deems appropriate to provide for payment of contingent liabilities.

     If any asset required to be sold has not been sold within three years after
the termination of the Trust, the Trustee will cause the asset to be sold at
public auction to the highest cash bidder. Except in connection with any
proposed non-cash sale as described above, no approval of the Unit holders will
be required or solicited in connection with the sale of the Trust's assets after
termination of the Trust.

                                        44
<PAGE>
                               LL&E ROYALTY TRUST

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(2) NET OVERRIDING ROYALTY INTERESTS AND FEE LANDS ROYALTIES

     The instruments conveying the Overriding Royalties generally provide that
the Working Interest Owner or any successor working interest owner will
calculate and pay to the Trust each month an amount equal to various percentages
of the Net Proceeds (as defined) from the Productive Properties. For purposes of
computing Net Proceeds, the Productive Properties have been grouped
geographically into three groups of leases, each of which has been defined as a
separate "Property". Generally, Net Proceeds will be computed on a
Property-by-Property basis and will consist of the aggregate proceeds to the
Working Interest Owner or any successor working interest owner from the sale of
oil, gas and other hydrocarbons from each of the Productive Properties less: (a)
all direct costs, charges, and expenses incurred by the Working Interest Owner
in exploration, production, development and other operations on the Productive
Properties (including secondary and tertiary recovery operations), including
abandonment costs; (b) all applicable taxes, including severance, ad valorem and
windfall profits taxes, but excluding income taxes except as described in note 4
below; (c) all operating charges directly associated with the Productive
Properties; (d) an allowance for costs if costs and expenses for any Productive
Property have exceeded proceeds of production from such Productive Property; and
(e) charges for certain overhead expenses.

     The Fee Lands Royalties consist of royalty interests equal to a 3% interest
in the future gross oil, gas, and other hydrocarbon production, if any, from
each of the Fee Lands, unburdened by the expense of drilling, completion,
development, operating and other costs incident to production. In June 1993,
pursuant to applicable law, the Fee Lands Royalties terminated as to all tracts
not then held by production or maintained by production from other tracts.
Consequently, at December 31, 2003, the Fee Lands consisted of approximately
22,000 gross acres.

(3) BASIS OF PRESENTATION

CRITICAL ACCOUNTING POLICIES

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

          (a) Royalties are recorded on a cash basis and are generally received
     by the Trustee in the third month following the month of production of oil
     and gas attributable to the Trust's interest.

          (b) Trust expenses, which include accounting, engineering, legal and
     other professional fees, Trustee's fees and out-of-pocket expenses, are
     recorded on a cash basis.

          (c) Amortization of the net overriding royalty interests in productive
     oil and gas properties and the 3% royalty interest in Fee Lands, which is
     calculated on a unit-of-production basis, is charged directly to the Trust
     corpus since the amount does not affect cash earnings. Amortization
     calculated for interim periods is based on the annual reserve study
     prepared by independent petroleum engineers as of September 30 of the
     preceding year. Given the volatility of oil prices, amortization recorded
     in the fourth quarter, based on the current year reserve study, may include
     a significant year-end adjustment that will reflect the impact of price
     changes as well as other reserve revisions. Amortization recorded in the
     fourth quarter was increased by $59 thousand in 2003, increased by $17
     thousand in 2002 and increased by $208 thousand in 2001 as a result of such
     adjustments.

          (d) The initial carrying value of the Trust's royalty interests in oil
     and gas properties represents the Company's cost on a successful efforts
     basis (net of accumulated depreciation, depletion and amortization) at June
     28, 1983 applicable to the interests in the properties transferred to the
     Trust. The unamortized balance at December 31, 2003 is not indicative of
     the fair market value of the interests held by the Trust.

     The preparation of the financial statements requires estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial

                                        45
<PAGE>
                               LL&E ROYALTY TRUST

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

     While these statements differ from financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America, the cash basis of reporting revenues and expenses is considered to be
the most meaningful because monthly distributions to the Unit holders are based
on net cash receipts.

(4) FEDERAL INCOME TAX MATTERS

     In May and June 1983, the Company applied to the Internal Revenue Service
(IRS) for certain rulings, including the following: (a) the Trust will be
classified for federal income tax purposes as a trust and not as an association
taxable as a corporation, (b) the Trust will be characterized as a "grantor"
trust as to the Unit holders and not as a "simple" or "complex" trust (a
"non-grantor" trust), (c) the Partnership will be classified as a partnership
and not as an association taxable as a corporation, (d) the Company will not
recognize gain or loss upon the transfer of the Royalties to the Trust or upon
the distribution of the Units to its stockholders, (e) each Royalty will be
considered an economic interest in oil and gas in place, and each Overriding
Royalty will constitute a single property within the meaning of Section 614(a)
of the Internal Revenue Code (Code), (f) the steps taken to create the Trust and
the Partnership and to distribute the Units would be viewed for federal income
tax purposes as a distribution of the Royalties by the Company to its
stockholders, followed by the contribution of the Royalties by the stockholders
to the Partnership in exchange for interests therein, which in turn was followed
by the contribution by the stockholders of the interests in the Partnership to
the Trust in exchange for Units, and (g) the transfer of a Unit of the Trust
will be considered for federal income tax purposes to be the transfer of the
proportionate part of the Partnership interest attributable to such Unit.

     Subsequent to the distribution of the Units, the IRS ruled favorably on all
requested rulings except (d). Because the Rulings were issued after the
distribution of the Units, however, the rulings could be revoked by the IRS if
it changes its position on the matters they address. If the IRS changed its
position on these issues, challenged the Trust and the Unit holders and was
successful, the result could be adverse.

     The Company withdrew its requested ruling (d) that the Company did not
recognize gain or loss upon the transfer of the Royalties to the Trust or upon
distribution of the Units to its stockholders because the IRS proposed to rule
that the transfer and distribution resulted in the recapture of ordinary income
attributable to intangible drilling and development costs under Section 1254 of
the Code (IDC Recapture Income). Counsel for the Company expressed no opinion on
this issue. The Company and the IRS subsequently litigated the issue, and in
1989 the Tax Court rendered an opinion favorable to the Company. The Tax Court
held that the Company's transfer of the Royalties to the Trust and its
distribution of the Units to its stockholders did not constitute a disposition
of "oil, gas, or geothermal property" within the meaning of Section 1254 of the
Code. Consequently the Company was not required to recognize IDC Recapture
Income on the disposition of the Royalties. The opinion of the Tax Court has
become final and nonappealable.

     These financial statements are prepared on the basis that the Trust will be
treated as a "grantor" trust and the Partnership will be treated as a
partnership for federal income tax purposes. Accordingly, no income taxes are
provided in the financial statements.

(5) DISMANTLEMENT COSTS

     The Working Interest Owner, under the terms of the Trust Conveyances is
permitted to escrow funds from the Productive Properties for estimated future
costs such as dismantlement costs and capital expenditures (the "Special
Costs"). According to the most recent reserve report, included in this Form 10-K
for the year ended December 31, 2003, the total future dismantlement costs to
the Working Interest Owner are

                                        46
<PAGE>
                               LL&E ROYALTY TRUST

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

estimated to be $13,300,000 for the Jay Field, $1,900,000 for the South Pass 89,
and $2,300,000 for the Offshore Louisiana properties. The Trust's interests in
these properties are equivalent to 50% of the Net Proceeds from Jay Field and
South Pass 89 properties and 90% of the Net Proceeds from the Offshore Louisiana
property.

     In February 2000, the Working Interest Owner informed the Trustee that it
had elected at that time not to escrow any additional funds from the Productive
Properties to provide for the Trust's portion of the estimated costs of
dismantling platforms effective with the April 2000 royalty distribution.

     The cumulative escrow balance as of December 31, 2003 was $4,543,402 for
the Jay Field property and $2,600,000 for the South Pass 89 property, 50% of
which would otherwise have been distributable to the Trust. At December 31,
2002, the cumulative escrow balance for the Offshore Louisiana property was
$3,000,000, 90% of which would otherwise have been distributable to the Trust.
The Conveyances prohibit the Working Interest Owner from escrowing additional
funds for estimated future Special Costs with respect to a particular Productive
Property once the amount escrowed exceeds 125% of the aggregate estimated future
Special Costs for that property. The Conveyances permit the Working Interest
Owner to release funds from any of the Special Costs escrows at any time if it
determines in its sole discretion that there no longer exists a need for
escrowing all or any portion of such funds. However, the Working Interest Owner
is not required to do so. The Working Interest Owner has informed the Trustee
that it does not intend to release any of the excess escrowed funds at this
time. At present the Working Interest Owner is not escrowing additional proceeds
from any of the Productive Properties, however, the Working Interest Owner has
advised the Trustee that based on the September 30, 2003 reserve report included
in this Form 10-K, the Working Interest Owner is permitted to place additional
funds in escrow from the Jay Field and South Pass 89 properties.

     The Working Interest Owner has advised the Trustee that it intends to
continue monitoring its estimates of relevant factors in order to evaluate the
necessity of escrowing funds on an ongoing basis. The Working Interest Owner is
under no obligation to give any advance notice to the Trustee or the Unit
holders in the event it determines that additional funds should be escrowed. If
the Working Interest Owner begins to escrow additional funds, the Royalties paid
to the Trust would be reduced, and the reductions could be significant.

(6) SUPPLEMENTAL RESERVE INFORMATION (UNAUDITED)

     Pursuant to Statement of Financial Accounting Standards No. 69, the Trustee
is required to include as supplementary information estimates of quantities of
proved oil and gas reserves and present value of future net revenues
attributable to the Trust. Information regarding estimates of proved oil and gas
reserves imputed to the Trust is based upon reports prepared by Miller and
Lents, Ltd., international oil and gas consultants ("Miller and Lents") as of
September 30, 2003, 2002 and 2001. Reserve quantities imputed to the Trust were
calculated by multiplying estimated proved net reserves (barrels of liquids and
Mcf of gas) of the Working Interest Owner (prior to taking into consideration
the Trust's interests) by the ratio of estimated future net revenues to the
Trust to estimated future gross revenues to the Working Interest Owner prior to
taking into consideration the Trust's interests. Estimates of future net
revenues were prepared in accordance with guidelines established by the
Securities and Exchange Commission and thus were based on prices and costs
represented by the Working Interest Owner to be in effect as of September 30,
2003, 2002 and 2001.

     Accordingly, the tables below presents the quantities of estimated proved
reserves imputed to the Trust's interest and the present value of estimated
future net revenues attributed to such proved reserves. The tables below also
present the changes in the estimated proved reserves imputed to the Trust's
interests and the changes in the present value of estimated future net revenues
attributed to the Trust's interests from September 30, 2000 to September 30,
2001, 2002 and 2003 (of which estimates were prepared by Miller and Lents).
Imputed proved reserves are stated in thousands of barrels of liquids and
millions of cubic feet of natural gas. The estimated future net revenues do not
necessarily represent actual dollar amounts to be paid to the Trust by the
Working Interest Owner. In estimating future net revenues, Miller and Lents took
into

                                        47
<PAGE>
                               LL&E ROYALTY TRUST

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

consideration capital expenditures estimated by the Working Interest Owner to be
necessary to develop proved reserves only. The Working Interest Owner has
informed the Trustee that it has budgeted additional amounts based on the
development of proved reserves and on other projects designed to find and
develop reserves not included in the Miller and Lents reports. In addition, the
estimates should be evaluated in light of the many uncertainties inherent in
estimating oil and gas reserve quantities and in forecasting production levels,
prices and operating costs. See "Item 1. Business -- Estimates of Petroleum
Engineers" for further discussion of the computational aspects of such data and
the uncertainties and other matters which could affect such estimates.

PRESENT VALUE OF ESTIMATED FUTURE NET REVENUES FROM PROVED RESERVES (THOUSANDS
OF DOLLARS)

<Table>
<Caption>
                                                                      SEPTEMBER 30,
                                                              ------------------------------
                                                                2003       2002       2001
                                                              --------   --------   --------
                                                                      (IN THOUSANDS)
<S>                                                           <C>        <C>        <C>
The Trust's proportionate share of future gross proceeds....  $ 89,360   $ 96,927   $106,861
Less the Trust's proportionate share of -
     Future operating costs.................................    (3,251)    (3,422)    (3,582)
     Future capital costs...................................    (8,748)    (4,140)    (4,215)
     Excess production costs................................       (24)    (3,468)      (980)
                                                              --------   --------   --------
Future royalty income.......................................    77,337     85,897     98,084
Discount at 10% per annum...................................   (38,526)   (43,710)   (49,287)
                                                              --------   --------   --------
Standardized measure of future royalty income from proved
  oil and gas reserves......................................  $ 38,811   $ 42,187   $ 48,797
                                                              ========   ========   ========
</Table>

CHANGES IN IMPUTED PROVED RESERVES AND PRESENT VALUE OF ESTIMATED FUTURE NET
REVENUES

<Table>
<Caption>
                                                            IMPUTED             PRESENT VALUE
                                                        PROVED RESERVES           OF FUTURE
                                                      --------------------      NET REVENUES
                                                      LIQUIDS        GAS         (THOUSANDS
                                                      (MBBL)       (MMCF)        OF DOLLARS)
                                                      -------      -------      -------------
<S>                                                   <C>          <C>          <C>
Estimated at September 30, 2000.....................   5,577        14,405        $121,269
     Production.....................................    (310)       (1,135)        (12,390)
     Revisions of estimates(1)......................  (1,465)       (6,280)        (72,209)
     Accretion of discount..........................     n/a           n/a          12,127
                                                      ------       -------        --------
Estimated at September 30, 2001.....................   3,802         6,990        $ 48,797
     Production.....................................     (54)         (219)         (2,616)
     Revisions of estimates(1)......................    (898)       (1,201)         (8,873)
     Accretion of discount..........................     n/a           n/a           4,879
                                                      ------       -------        --------
Estimated at September 30, 2002.....................   2,850         5,570        $ 42,187
                                                      ======       =======        ========
     Production.....................................     (78)       (1,175)       $ (8,496)
     Revisions of estimates(1)......................    (271)          358             901
     Accretion of discount..........................     n/a           n/a           4,219
                                                      ------       -------        --------
Estimated at September 30, 2003.....................   2,501         4,753        $ 38,811
                                                      ======       =======        ========
</Table>

     The computation of the present value of future net revenues relating to
proved reserves at September 30, 2003 was based on spot market prices in effect
as of September 30, 2003, for natural gas of $4.575 per MMBtu, for crude oil of
$29.20 per barrel and $22.62 per barrel for Natural Gas Liquids at the Jay Field
property.
---------------

(1) Revisions of estimates are due to the interaction of a number of factors,
    including: (i) changes in prices being received; (ii) changes in estimates
    of operating, capital and dismantlement costs; (iii) changes in the timing
    and amounts of estimated future production; and (iv) changes in the
    estimated remaining imputed proved reserves.

                                        48
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

JPMorgan Chase Bank, Trustee
and the Unit Holders of LL&E Royalty Trust:

     We have audited the accompanying statements of assets, liabilities and
trust corpus of LL&E Royalty Trust as of December 31, 2003 and 2002, and the
related statements of cash earnings and distributions and changes in trust
corpus for each of the years in the three-year period ended December 31, 2003.
These financial statements are the responsibility of the Trustee. Our
responsibility is to express an opinion on these financial statements based on
our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by the Working Interest Owner, as well as evaluating
the overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.

     As described in Note 3, these financial statements were prepared on the
basis of cash receipts and disbursements as prescribed by the Securities and
Exchange Commission, which is a comprehensive basis of accounting other than
accounting principles generally accepted in the United States of America.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the assets, liabilities and trust corpus of LL&E
Royalty Trust as of December 31, 2003 and 2002, and the cash earnings and
distributions and changes in trust corpus for each of the years in the
three-year period ended December 31, 2003, on the basis of accounting described
in Note 3.

                                            KPMG LLP

Houston, Texas
March 24, 2004

                                        49
<PAGE>

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

     None.

ITEM 9A.  CONTROLS AND PROCEDURES

     (a) The Trust maintains disclosure controls and procedures designed to
ensure that information required to be disclosed by the Trust in reports that it
files or submits under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and regulations. Disclosure controls and
procedures include controls and procedures designed to ensure that information
required to be disclosed by the Trust is accumulated and communicated by the
Working Interest Owner to the Trustee and its employees who participate in the
preparation of the Trust's periodic reports as appropriate to allow timely
decisions regarding required disclosure.

     As of the end of the period covered by this report, the Trustee carried out
an evaluation of the effectiveness of the design and operation of the Trust's
disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(d) or
15d-15(d). Based upon that evaluation, Mike Ulrich, as Trust Officer of the
Trustee, concluded that the disclosure controls and procedures maintained in
effect by the Trustee are effective to ensure timely disclosure and reporting of
all material information required to be disclosed in the reports that the Trust
files or submits under the Exchange Act while noting certain potential
limitations on the effectiveness of the disclosure controls and procedures
relating to the Trust as described herein. The Trustee also believes that the
controls and procedures maintained in effect by Burlington Resources Inc., as
Working Interest Owner and as the Managing General Partner of the Partnership
which holds title to the Royalties, are effective to ensure timely disclosure
and reporting of all material information required to be disclosed, although the
Trustee does not have any way to verify that the controls and procedures
maintained in effect by the Managing General Partner and Working Interest Owner
are adequate for the Trust's purposes. The Managing General Partner and Working
Interest Owner has assured the Trustee that the information it has provided to
the Trustee is accurate in all material respects.

     Due to the nature of the Trust and the Partnership which holds title to the
Royalties, as well as the nature of the underlying Royalties, there may be
inherent weaknesses in the controls and procedures at various levels which may
adversely affect the Trust's ability to identify and disclose and report all
information required to be disclosed and reported. These inherent weaknesses in
disclosure controls and procedures are described below:

          The Working Interest Owner is the Managing General Partner of the
     Partnership, which holds title to the Royalties in which the Trust has an
     interest. The Managing General Partner is responsible under the terms of
     the Partnership Agreement for keeping the books and records of the
     Partnership, and for providing to the Trustee sufficient information
     concerning the Royalties to permit the Trustee to comply with the reporting
     obligations of the Trust under the Exchange Act, and with the requirements
     of the New York Stock Exchange or any other exchange on which the Trust
     Units may be listed. The Partnership Agreement requires the Managing
     General Partner to provide specified information to the Trustee by
     specified dates, and provides that the Managing General Partner will
     indemnify the Trustee, as Trustee of the Trust, against any loss,
     liability, damage or expense incurred by the Trustee or arising out of any
     of the information provided by the Managing General Partner being untimely
     or incorrect or untrue in any material respect. Under the terms of the
     Partnership Agreement the Trustee has no obligation to verify the accuracy
     or completeness of the information provided to the Trustee by the Managing
     General Partner. The information furnished to the Trustee includes most of
     the information relevant to the Trust, including all information relating
     to the Productive Properties burdened by the Royalties, such as operating
     data, data regarding operating and capital expenditures, geological data
     relating to reserves, information regarding environmental and other
     liabilities, the effects of regulatory changes, the number of producing
     wells and acreage, and plans for future operating and capital expenditures.

          The Working Interest Owner is not the operator of the Productive
     Properties; accordingly, it obtains the information that it furnishes to
     the Trustee from the operators of the Productive Properties, each of
                                        50
<PAGE>

     which is a third party over which neither the Working Interest Owner nor
     the Trustee has control. Consequently, both the Trust and the Working
     Interest Owner are dependent upon third parties for information that could
     be material to the Trust or that could be required to be disclosed in the
     Trust's periodic or other filings under the Exchange Act. Under the terms
     of the Trust Agreement, the Trustee is entitled to and does rely upon
     certain experts in good faith, including (i) the independent petroleum
     reserve engineers who prepare the annual imputed reserve report included in
     the Trust's Annual Report on Form 10-K (which reserve report includes
     projected production, operating expenses and capital expenditures), and
     (ii) independent auditors with respect to audits of financial data provided
     by the Managing General Partner and Working Interest Owner. The Trustee
     reviews the information furnished to the Trustee by the Managing General
     Partner and Working Interest Owner, but makes no independent or direct
     verification of the reserve data, the operating data, the financial
     information or other information furnished. Although the Trustee has no
     reason to believe that its reliance upon experts and upon the Managing
     General Partner is unreasonable, this reliance may be viewed as a weakness.

     The Trustee does not intend to expand its responsibilities beyond those
permitted or required by the Trust Agreement and those required by applicable
law.

     (b) Changes in Controls and Procedures.  To the knowledge of the Trustee,
there have been no significant changes in the Trust's internal controls or in
other factors that could significantly affect the Trust's internal controls and
procedures subsequent to the date the Trustee completed its evaluation.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The Registrant, being a trust, has no directors or executive officers. The
Trustee has only such powers as are necessary for the collection and
distribution of revenues from the Royalties, the payment of Trust liabilities
and the conservation and protection of the Royalties.

     The Trust also does not have an audit committee or body serving a similar
function, and does not have an "audit committee financial expert". The Trust has
not adopted a code of ethics, as the Trust has no directors, officers, or
employees. The Trust has not adopted a process by which Unit holders may
communicate with Board Members, as the Trust has no board members or persons
fulfilling a similar function. Unit holders may contact the Trustee at the
following address: 700 Lavaca, Austin, Texas 78701.

ITEM 11.  EXECUTIVE COMPENSATION

     Not applicable.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND
          RELATED UNIT HOLDER MATTERS

     (a) UNIT OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

     Based on filings with the Securities and Exchange Commission, the Trustee
is not aware of any person owning beneficially more than five percent of the
Units as of March 24, 2004.

     (b) UNIT OWNERSHIP OF MANAGEMENT

     The Working Interest Owner owns no Units. JPMorgan Chase Bank as Trustee of
the Trust, owns no Units. JPMorgan Chase Bank in its individual capacity (the
"Bank") also owns no Units. As of March 24, 2004, the Trust Department of the
Bank held no Units in fiduciary accounts. The Trust Department of the Bank
possessed shared voting and investment power regarding some of such Units. The
Bank disclaims beneficial ownership of all such Units.

                                        51
<PAGE>

     (c) CHANGE IN CONTROL

     The Trustee knows of no arrangements, including the pledge of Units of the
Trust, the operation of which may at a subsequent date result in a change in
control of the Trust.

     (d) SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

     The Trust has no equity compensation plans.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     JPMorgan Chase Bank and the Company and its subsidiaries have a number of
banking and trust relationships.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The following table presents fees for professional audit services rendered
by KPMG LLP for the audit of the LL&E Trust financial statements for 2003 and
2002 and fees billed for other services rendered by KPMG LLP.

<Table>
<Caption>
                                                                2003       2002
                                                              --------   --------
<S>                                                           <C>        <C>
Audit fees (1)..............................................  $ 85,250   $ 72,000
Audit related fees..........................................        --         --
Tax fees (2)................................................   100,000    100,000
All other fees..............................................        --         --
                                                              --------   --------
  Total fees................................................  $185,250   $172,000
</Table>

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

(1) Audit fees consist of fees for the audit of the LL&E Trust financial
    statements.

(2) Tax fees consist of fees related to the LL&E Trust's tax information for its
    unit holders.

PRE-APPROVAL POLICIES

     The Trust does not have an audit committee or body performing a similar
function. Approval of services provided by KPMG LLP and of fees relating to such
services is granted by the Trustee.

                                        52
<PAGE>

                                    PART IV

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

     (a) FINANCIAL STATEMENTS

          The following financial statements of the Trust are included in Part
     II, Item 8:

<Table>
<Caption>
                                                                       PAGE
                                                                      NUMBER
                                                                      ------
        <S>                                                           <C>
        Statements of Cash Earnings and Distributions -- Years Ended
          December 31, 2003, 2002 and 2001..........................    43

        Statements of Assets, Liabilities and Trust
          Corpus -- December 31, 2003 and 2002......................    44

        Statements of Changes in Trust Corpus -- Years Ended
          December 31, 2003, 2002 and 2001..........................    44

        Notes to Financial Statements...............................    45

        Independent Auditors' Report................................    49
</Table>

     (b) REPORTS ON FORM 8-K

     Current Reports on Form 8-K were filed with the Securities and Exchange
Commission on October 24, 2003, November 25, 2003 and December 24, 2003.

     (c) EXHIBITS

<Table>
            <S>          <C>  <C>
             4*           --  Trust Agreement for LL&E Royalty Trust, dated as of June 1,
                              1983, between the Company and First City National Bank of
                              Houston, as Trustee.
            28.1*         --  Agreement of General Partnership of LL&E Royalty
                              Partnership.
            28.2*         --  Form of Conveyance of Overriding Royalty Interests for Fort
                              Worth Basin Property.
            28.3*         --  Form of Conveyance of Overriding Royalty Interests for Jay
                              Field (Alabama) Property.
            28.4*         --  Form of Conveyance of Overriding Royalty Interests for Jay
                              Field (Florida) Property.
            28.5*         --  Form of Conveyance of Overriding Royalty Interests for
                              Offshore Louisiana Property.
            28.6*         --  Form of Conveyance of Overriding Royalty Interests for South
                              Pass 89 Property.
            28.7*         --  Form of Royalty Deed.
            31            --  Certification pursuant to Section 302 of the Sarbanes-Oxley
                              Act of 2002
            32            --  Certification pursuant to Section 906 of the Sarbanes-Oxley
                              Act of 2002
</Table>

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

* Incorporated by reference to Exhibits of like designation to Registrant's
  Annual Report on Form 10-K for the period ended December 31, 1983 (Commission
  File No. 1-8518).

     (d) FINANCIAL STATEMENT SCHEDULES

     All financial statement schedules have been omitted because the required
information is either inapplicable or the information is set forth in the
financial statements or related notes.

                                        53
<PAGE>

                                   SIGNATURE

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

                                          LL&E ROYALTY TRUST
                                             (Registrant)

                                          By:  JPMORGAN CHASE BANK, Trustee

Date:  March 24, 2004
                                               By:    /s/ MIKE ULRICH
                                               ---------------------------------
                                                          Mike Ulrich
                                               Vice President and Trust Officer

Note:  Because the registrant is a trust without officers or employees, only the
       signature of an officer of the Trustee is available and has been
       provided.

                                        54
<PAGE>

                               INDEX TO EXHIBITS

<Table>
<Caption>
        EXHIBIT
         NUMBER                                  DESCRIPTION
        -------                                  -----------
<C>                      <S>
           4*            -- Trust Agreement for LL&E Royalty Trust, dated as of June
                            1, 1983, between the Company and First City National Bank
                            of Houston, as Trustee.

           28.1*         -- Agreement of General Partnership of LL&E Royalty
                            Partnership.
           28.2*         -- Form of Conveyance of Overriding Royalty Interests for
                            Fort Worth Basin Property.
           28.3*         -- Form of Conveyance of Overriding Royalty Interests for
                            Jay Field (Alabama) Property.
           28.4*         -- Form of Conveyance of Overriding Royalty Interests for
                            Jay Field (Florida) Property.
           28.5*         -- Form of Conveyance of Overriding Royalty Interests for
                            Offshore Louisiana Property.
           28.6*         -- Form of Conveyance of Overriding Royalty Interests for
                            South Pass 89 Property.
           28.7*         -- Form of Royalty Deed.
           31            -- Certification pursuant to Section 302 of the
                            Sarbanes-Oxley Act of 2002
           32            -- Certification pursuant to Section 906 of the
                            Sarbanes-Oxley Act of 2002
</Table>

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

* Incorporated by reference to Exhibits of like designation to Registrant's
  Annual Report on Form 10-K for the period ended December 31, 1983 (Commission
  File No. 1-8518).