<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
                   For the fiscal year ended December 31, 2002

                                       OR

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

             For the transition period from _________ to __________

                         Commission File Number 1-12474
                                                -------

                           TORCH ENERGY ROYALTY TRUST
             (Exact Name of Registrant as Specified in Its Charter)

                   Delaware                                 74-6411424
        (State or Other Jurisdiction of                  (I.R.S. Employer
         Incorporation or Organization)                 Identification No.)

              Rodney Square North
1100 North Market Street, Wilmington, Delaware                19890
   (Address of Principal Executive Offices)                 (Zip Code)

       Registrant's telephone number, including area code: (302) 651-8775

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

     Title of each class              Name of each exchange on which registered
     -------------------              -----------------------------------------
Units of Beneficial Interest                    New York Stock Exchange

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

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                               YES   X     NO _____
                                   -----

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).

                               YES _____   NO   X
                                              -----

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).

The aggregate market values of outstanding units of beneficial interest of the
registrant held by non-affiliates of the registrant at March 3, 2003 and June
28, 2002 were approximately $49.2 million and $30.1 million, respectively.

<PAGE>

                           Torch Energy Royalty Trust

                           Annual Report on Form 10-K
                   For the fiscal year ended December 31, 2002

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                         Page
                                                                                        Number
                                                                                        ------
<S>                                                                                     <C>
PART I

         Item 1.   Business ...........................................................      3
         Item 2.   Properties .........................................................      9
         Item 3.   Legal Proceedings ..................................................     12
         Item 4.   Submission of Matters to a Vote of Unitholders .....................     12

PART II

         Item 5.   Market for Registrant's Units and Related Unitholder Matters ......      13
         Item 6.   Selected Financial Data ...........................................      13
         Item 7.   Discussion and Analysis of Financial Condition and Results of
                   Operations ........................................................      14
         Item 7a.  Quantitative and Qualitative Disclosures About
                   Market Risk .......................................................      18
         Item 8.   Financial Statements and Supplementary Data .......................      19
         Item 9.   Changes in and Disagreements with Accountants on Accounting
                   and Financial Disclosure ..........................................      32

PART III

         Item 10.  Directors and Executive Officers of the Registrant ................      32
         Item 11.  Executive Compensation ............................................      32
         Item 12.  Security Ownership of Certain Beneficial Owners and Management ....      32
         Item 13.  Certain Relationships and Related Transactions ....................      33
         Item 14.  Controls and Procedures ...........................................      34

PART IV

         Item 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K ...      35

            ---    Signatures
</TABLE>

                                        2

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                           Torch Energy Royalty Trust

                                     PART I

Item 1.  Business

This document includes "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. All statements other than statements of
historical facts included in this document, including without limitation,
statements under "Discussion and Analysis of Financial Condition and Results of
Operations" regarding the financial position, estimated quantities and net
present values of reserves of the Torch Energy Royalty Trust ("Trust") and
statements that include the words "believe", "expects", "anticipates",
"intends", "estimates", "projects", "target", "goal", "plans", "objectives",
"should" or similar expressions or variations are forward-looking statements.
Torch Energy Advisors Incorporated ("Torch") and the Trust can give no
assurances that the assumptions upon which these statements are based will prove
to be correct. Important factors that could cause actual results to differ
materially from Torch's expectations ("Cautionary Statements") are disclosed
under "Risk Factors" elsewhere in this document. All subsequent written and oral
forward-looking statements attributable to the Trust or persons acting on its
behalf are expressly qualified by the Cautionary Statements.

General

The Trust was formed effective October 1, 1993 under the Delaware Business Trust
Act pursuant to a trust agreement ("Trust Agreement") among Wilmington Trust
Company, as trustee ("Trustee"), Torch Royalty Company ("TRC") and Velasco Gas
Company Ltd. ("Velasco") as owners of certain oil and gas properties
("Underlying Properties") and Torch as grantor. TRC and Velasco created net
profits interests ("Net Profits Interests") and conveyed such interests to
Torch. Torch conveyed the Net Profits Interests to the Trust in exchange for an
aggregate of 8,600,000 units of beneficial interest ("Units"). Such Units were
sold to the public through various underwriters in November 1993. Pursuant to an
administrative services agreement ("Administrative Services Agreement"), Torch
provides accounting, bookkeeping, informational and other services related to
the Net Profits Interest.

The Trust will terminate upon the first to occur of (i) an affirmative vote of
the holders of not less than 66-2/3% of the outstanding Units to liquidate the
Trust; (ii) such time as the ratio of the cash amounts received by the Trust
from the Net Profits Interests to administrative costs of the Trust is less than
1.2 to 1.0 for three consecutive quarters; (iii) March 1 of any year if it is
determined based on a reserve report as of December 31 of the prior year that
the present value of estimated pre-tax future net cash flows, discounted at 10%,
of proved reserves attributable to the Net Profits Interests is equal to or less
than $25.0 million; or (iv) December 31, 2012. As of March 31, 2003, the Trust
has not terminated as none of the aforementioned events have occurred. (See
"Termination of Trust" disclosure on page 9 for additional information.) Upon
termination of the Trust, the remaining assets of the Trust will be sold and the
proceeds therefrom (after expenses) will be distributed to the unitholders
("Unitholders"). The sole purpose of the Trust is to hold the Net Profits
Interests, to receive payments from TRC and Velasco, and to make payments to
Unitholders. The Trust does not conduct any business activity.

TRC and Velasco, as owners of the Underlying Properties subject to and burdened
by the Net Profits Interests, contracted to sell the oil and gas production from
such properties to Torch Energy Marketing Inc. ("TEMI"), a subsidiary of Torch,
under a purchase contract ("Purchase Contract"). TRC and Velasco receive
payments reflecting the proceeds of oil and gas sold and aggregate these
payments, deduct applicable costs and make payments to the Trustee each quarter
for the amounts due to the Trust. Unitholders receive quarterly cash
distributions relating to oil and gas produced and sold from the Underlying
Properties. Because no additional properties will be contributed to the Trust,
the assets of the

                                        3

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                           Torch Energy Royalty Trust

Trust deplete over time and a portion of each cash distribution made by the
Trust is analogous to a return of capital.

The Underlying Properties constitute working interests in the Chalkley Field in
Louisiana ("Chalkley Field"), the Robinson's Bend Field in the Black Warrior
Basin in Alabama ("Robinson's Bend Field"), fields that produce from the Cotton
Valley formations in Texas ("Cotton Valley Fields") and fields that produce from
the Austin Chalk formation in Texas ("Austin Chalk Fields"). The Underlying
Properties represent interests in all productive formations from 100 feet below
the deepest productive formation in each field to the surface when the Trust was
formed. The Trust therefore has no interest in deeper productive formations.

Sales of coal seam and tight sands gas attributable to the Net Profits Interests
prior to January 1, 2003 resulted in Unitholders receiving quarterly allocations
of tax credits under Section 29 of the Internal Revenue Code of 1986 ("Section
29 Credit"). In 2002, 2001 and 2000, the Section 29 Credit available for
production from qualifying coal seam properties was approximately $1.09, $1.08
and $1.06, respectively, for each MMBtu of gas produced and sold. This rate was
adjusted annually for inflation. The Section 29 Credit available for production
from qualifying tight sands properties is approximately $0.52 for each MMBtu of
gas produced and sold and such amount was not adjusted for inflation.

Separate conveyances ("Conveyances") were used to transfer the Net Profits
Interests in each state. Net proceeds ("Net Proceeds"), generally defined as
gross revenues received from the sale of production attributable to the
Underlying Properties during any period less property, production, severance and
similar taxes, and development, operating, and certain other costs (excluding
operating and development costs from the Robinson's Bend Field until January 1,
2003), are calculated separately for each Conveyance. If, during any period,
costs and expenses deducted in calculating Net Proceeds exceed gross proceeds
under a Conveyance, neither the Trust nor Unitholders are liable to pay such
excess directly, but the Trust will receive no payments for distribution to
Unitholders with respect to such Conveyance until future gross proceeds exceed
future costs and expenses plus the cumulative excess of such costs and expenses
not previously recouped by TRC and Velasco plus interest thereon. Because
development and operating costs generally are deducted in computing Net
Proceeds, such costs will affect the amounts paid to the Trust from the Net
Profits Interests. The complete definitions of Net Proceeds are set forth in the
Conveyances.

Marketing Arrangements

In connection with the formation of the Trust, TRC, Velasco and TEMI entered
into the Purchase Contract, which expires upon the termination of the Trust.
Under the Purchase Contract, TEMI is obligated to purchase all net production
attributable to the Underlying Properties for an index price for oil and gas
("Index Price"), less certain gathering, treating and transportation charges,
which are calculated monthly. The Index Price equals the average spot market
prices of oil and gas ("Average Market Prices") at the four locations where TEMI
sells production.

The Purchase Contract also provides that the minimum price paid by TEMI for gas
production is $1.70 per MMBtu ("Minimum Price"). When TEMI pays a purchase price
based on the Minimum Price it receives price credits ("Price Credits"), equal to
the difference between the Index Price and the Minimum Price, that it is
entitled to deduct in determining the purchase price when the Index Price for
gas exceeds the Minimum Price. In addition, if the Index Price for gas exceeds
$2.10 per MMBtu ("Sharing Price"), TEMI is entitled to deduct 50% of such excess
("Price Differential") in determining the purchase price. Beginning January 1,
2002, TEMI has an annual option to discontinue the Minimum Price commitment.
However, if TEMI discontinues the Minimum Price commitment, it will no longer be
entitled to deduct the Price Differential in calculating the purchase price and
will forfeit all accrued Price Credits.

                                        4

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                           Torch Energy Royalty Trust

Additionally, if TEMI continues the Minimum Price commitment, the Minimum Price
and the Sharing Price will be adjusted for inflation based on the Producer Price
Index on January 1 of each year commencing January 1, 2002. As TEMI did not
exercise its option to discontinue the Minimum Price Commitment, the Minimum
Price in 2003 and 2002, adjusted for inflation, is approximately $1.71 per MMBtu
for each year. The Sharing Price in 2003 and 2002, adjusted for inflation, is
approximately $2.11 per MMBtu and $2.12 per MMBtu, respectively.

Gas production is purchased at the wellhead. Therefore, Net Proceeds do not
include any amounts received in connection with extracting natural gas liquids
from such production at gas processing or treating facilities.

Gathering, Treating and Transportation Arrangements

The Purchase Contract entitles TEMI to deduct certain gas gathering, treating
and transportation fees in calculating the purchase price for gas in the
Robinson's Bend, Austin Chalk and Cotton Valley Fields. The amounts that may be
deducted in calculating the purchase price for such gas are set forth in the
Purchase Contract and are not affected by the actual costs incurred by TEMI to
gather, treat and transport gas. For the Robinson's Bend Field, TEMI is entitled
to deduct a gathering, treating and transportation fee of $0.260 per MMBtu
adjusted for inflation ($0.289, $0.286, and $0.283 per MMBtu for 2002, 2001, and
2000 respectfully), plus fuel usage equal to 5% of revenues, payable to Bahia
Gas Gathering, Ltd. ("Bahia"), an affiliate of Torch, pursuant to a gas
gathering agreement. Additionally, a fee of $.05 per MMBtu, representing a
gathering fee payable to a non-affiliate of Torch, is deducted in calculating
the purchase price for production from 68 of the 394 wells in the Robinson's
Bend Field. TEMI deducts $0.38 per MMBtu plus 17% of revenues in calculating the
purchase price for production from the Austin Chalk Fields as a fee to gather,
treat and transport gas production. TEMI deducts from the purchase price for gas
for production attributable to certain wells in the Cotton Valley Fields a
transportation fee of $0.045 per MMBtu. During the years ended December 31,
2002, 2001 and 2000, gathering, treating and transportation fees charged to the
Trust by TEMI, attributable to production during the twelve months ended
September 30, 2002, 2001 and 2000 in the Robinson's Bend, Austin Chalk and
Cotton Valley Fields, totaled $1.0 million, $1.4 million and $1.3 million,
respectively. No amounts for gathering, treating or transportation are deducted
in calculating the purchase price from the Chalkley Field.

Net Profits Interests

The Net Profits Interests entitle the Trust to receive 95% of the Net Proceeds
attributable to oil and gas produced and sold from wells (other than infill
wells) on the Underlying Properties. In calculating Net Proceeds from the
Robinson's Bend Field, operating and development costs incurred prior to January
1, 2003 are not deducted. In addition, the amounts paid to the Trust from the
Robinson's Bend Field during any calendar quarter are subject to a volume
limitation ("Volume Limitation") equal to the gross proceeds from the sale of
912.5 MMcf of gas, less property, production, severance and related taxes. The
Robinson's Bend Field production attributable to the Trust did not meet the
Volume Limitation during the three years ended December 31, 2002 and is not
expected to do so in the future.

The Net Profits Interests also entitle the Trust to 20% of the Net Proceeds of
wells drilled on the Underlying Properties since the Trust's establishment into
formations in which the Trust has an interest, other than wells drilled to
replace damaged or destroyed wells ("Infill Wells"). Infill Well Net Proceeds
represent the aggregate gross revenues received from Infill Wells less the
aggregate amount of the following Infill Well costs: i) property, production,
severance and similar taxes; ii) development costs; iii) operating costs; and
iv) interest on the recovered portion, if any, of the foregoing costs computed
at a rate of interest announced publicly by Citibank, N.A. in New York as its
base rate.

                                        5

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                           Torch Energy Royalty Trust

Effective April 1, 2000, Torch sold its interest in eight Infill Wells and its
approximate 5% interest in the Cotton Valley Field to Samson Lone Star Limited
Partnership ("Samson"). The properties were conveyed subject to the terms and
conditions of the Trust Agreement. The Trust's Net Profit Interest and Trust
Corpus were not impacted by the sale.

Torch Affiliates' Robinson's Bend Field Sale

On January 8, 2003, Torch and certain of its subsidiaries and subsidiaries of
Torchmark Corporation, including Velasco, sold all of their oil and gas
interests in the Robinson's Bend Field to Everlast Energy LLC ("Everlast").
Everlast assumed operations of the properties and the water disposal and
gathering facilities. The sale included the Robinson's Bend Field working
interests, which are burdened by the Trust's Net Profits Interests, and the
water disposal and gathering systems. This transaction did not alter the Trust's
Net Profits Interest in the Robinson's Bend Field. Additionally, this
transaction did not alter Torch's obligation to administer the Trust and to
handle the distribution of the Trust's cash distributions.


                                  RISK FACTORS

Volatility of Oil and Gas Prices

The Trust's cash distributions, operating results and the value of the Net
Profits Interest are substantially dependent on prices of gas and, to a lesser
extent, oil. Prices for oil and gas are subject to large fluctuations in
response to relatively minor changes in the supply of and demand for oil and
gas, market uncertainty and a variety of additional factors beyond the control
of Torch. These factors include weather conditions in the United States, the
condition of the United States economy, the actions of the Organization of
Petroleum Exporting Countries, governmental regulation, political stability in
the Middle East and elsewhere, the risk of war and terrorist actions, the
foreign supply of oil and gas, the price of foreign imports and the availability
of alternate fuel sources. Any substantial and extended decline in the price of
oil and gas would have an adverse effect on the Trust's revenues, cash
distributions and value of the Net Profits Interests.

Uncertainty of Estimates of Reserves and Future Net Cash Flows

Estimates of economically recoverable oil and gas reserves and of future net
cash flows are based upon a number of variable factors and assumptions, all of
which are to some degree speculative and may vary considerably from actual
results. Therefore, actual production, revenues, taxes and development and
operation expenditures may not occur as estimated. Future results of the Trust
will depend upon the ability of the owners of the Underlying Properties to
develop, produce and sell their oil and natural gas reserves. The reserve data
included herein are estimates only and are subject to many uncertainties. Actual
quantities of oil and natural gas may differ considerably from the amounts set
forth herein. In addition, different reserve engineers may make different
estimates of reserve quantities and cash flows based upon the same available
data. The present value, discounted at 10%, of future net cash flows from proved
reserves attributable to the Net Profits Interests does not represent the fair
market value of the proved reserves, or the price at which the Net Profits
Interests could be sold. A determination of fair market value would involve
consideration of many factors in addition to the present value, discounted at
10%. An impairment loss is recognized when the net carrying value of the Net
Profits Interests exceeds its fair market value. No impairment loss was
recognized during the three years ended December 31, 2002.

                                        6

<PAGE>

                           Torch Energy Royalty Trust

Operating Risks

Cash payments to the Trust are derived from the production and sale of oil and
gas, which operations are subject to risk inherent in such activities, such as
blowouts, cratering, explosions, uncontrollable flows of oil, gas or well
fluids, fires, pollution and other environmental risks. These risks could result
in substantial losses which are deducted in calculating the Net Proceeds paid to
the Trust due to injury and loss of life, severe damage to and destruction of
property and equipment, pollution and other environmental damage and suspension
of operations.

Competition and Markets

The Trust's distributions are dependent on gas production and prices and, to a
lesser extent, oil production and prices from the Underlying Properties. The gas
industry is highly competitive in all of its phases. In marketing production
from the Underlying Properties, TEMI encounters competition from major gas
companies, independent gas concerns, and individual producers and operators.
Many of these competitors have greater financial and other resources than TEMI.
Competition may also be presented by alternative fuel sources, including heating
oil and other fossil fuels.

Market prices are typically volatile as a result of uncertainties caused by
world events. Demand for natural gas production has historically been seasonal
in nature, and prices for gas fluctuate accordingly. Such price fluctuations
will directly impact Trust distributions, estimated reserve attributable to the
Trust and estimated future net revenues from Trust reserves.

Regulation of Natural Gas

The production, transportation and sale of natural gas from the Underlying
Properties are subject to Federal and state governmental regulation, including
regulation of tariffs charged by pipelines, taxes, the prevention of waste, the
conservation of gas, pollution controls and various other matters. The United
States has governmental power to impose pollution control measures.

Federal Regulation

The Underlying Properties will be subject to the jurisdiction of FERC with
respect to various aspects of gas operations including the marketing and
production of gas. The Natural Gas Act and the Natural Gas Policy Act
(collectively, the "Acts") mandate Federal regulation of interstate
transportation of gas. The Natural Gas Wellhead Decontrol Act of 1989 terminated
wellhead price controls on all domestic gas on January 1, 1993. Numerous
questions have been raised concerning the interpretation and implementation of
several significant provisions of the Acts and of the regulations and policies
promulgated by FERC thereunder. A number of lawsuits and administrative
proceedings have been instituted which challenge the validity of regulations
implementing the Acts. In addition, FERC currently has under consideration
various policies and proposals that may affect the marketing of gas under new
and existing contracts. Accordingly, Torch is unable to predict the impact of
any such government regulation.

In the past, Congress has been very active in the area of gas regulation.
Recently enacted legislation repeals incremental pricing requirements and gas
use restraints previously applicable. At the present time, it is impossible to
predict what proposals, if any, might actually be enacted by Congress or the
various state legislatures and what effect, if any, such proposals might have on
the Underlying Properties and the Trust.

                                        7

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                           Torch Energy Royalty Trust

State Regulation

Many state jurisdictions have at times imposed limitations on the production of
gas by restricting the rate of flow for gas wells below their actual capacity to
produce and by imposing acreage limitations for the drilling of a well. States
may also impose additional regulations of these matters. Most states regulate
the production of gas, including requirements for obtaining drilling permits,
the method of developing new fields, provisions for the unitization or pooling
of gas properties, the spacing, operation, plugging and abandonment of wells and
the prevention of waste of gas resources. The rate of production may be
regulated and the maximum daily production allowable from gas wells may be
established on a market demand or conservation basis or both.

Environmental Regulation

Activities on the Underlying Properties are subject to existing Federal, state
and local laws, rules and regulations relating to the protection of public
health and welfare, safety and the environment, including, without limitation,
laws regulating the release of materials into the environment and laws
protecting areas of particular environmental concern. It is anticipated that,
absent the occurrence of an unanticipated event, compliance with these laws will
not have a material adverse effect upon the Trust or Unitholders. Torch has
informed the Trust that it cannot predict what effect future regulation or
legislation, enforcement policies thereunder, and claims for damages to
property, employees, other persons and the environment resulting from operations
on the Underlying Properties could have on the Trust or Unitholders. However,
pursuant to the terms of the Conveyances, any costs or expenses incurred by TRC
or Velasco in connection with environmental liabilities, to the extent arising
out of or relating to activities occurring on, or in connection with, or
conditions existing on or under, the Underlying Properties before October 1,
1993, will be borne by TRC or Velasco and not the Trust and will not be deducted
in calculating Net Proceeds and will, therefore, not reduce amounts payable to
the Trust.

Following December 31, 2002, Net Proceeds Attributable to the Robinson's Bend
Field Will Decrease

Prior to December 31, 2002, lease operating expenses were not deducted in
calculating the Net Proceeds payable to the Trust from the Robinson's Bend
Field. After 2002, lease operating expenses will be deducted in calculating Net
Proceeds. As a result, Net Proceeds paid to the Trust are expected to decrease
substantially. In 2002, lease operating expense in the Robinson's Bend Field was
$5.6 million. Because lease operating expenses for the Robinson's Bend Field
during 2002 exceeded Net Proceeds paid to the Trust from the Robinson's Bend
Field, deduction of lease operating expenses in 2002 would have reduced the Net
Proceeds paid to the Trust attributable to the Robinson's Bend Field to zero and
amounts paid to the Trust in 2002 would have been reduced from $8.7 million to
$4.9 million, or $1.01 to $0.57 per Unit. Torch currently estimates that if
average gas prices in 2003 are below $4.80 per MMBtu as settled on the New York
Mercantile Exchange ("NYMEX"), lease operating expenses will exceed Net
Proceeds. Such gas price estimate utilizes the historical costs to operate the
Robinson's Bend Field during the year ended December 31, 2002. Actual operating
costs, among other factors, will impact the future Net Proceeds attributable to
the Robinson's Bend Field, if any, paid to the Trust. Approximately $4.5 million
of the $5.6 million of the lease operating expenses for 2002 were paid to Torch
and its affiliates pursuant to a water disposal contract and operating
agreements covering the wells in the Robinson's Bend Field. On January 8, 2003,
certain Torch afffiliates' sold their interest in the Robinson's Bend Field to
Everlast. See "Torch Affiliates' Robinson's Bend Field Sale" disclosure on page
6 for additional information.

                                        8

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                           Torch Energy Royalty Trust

Termination of the Trust

The Trust will terminate on March 1 of any year after 2002 if it is determined
that the pre-tax future net cash flows, discounted at 10%, attributable to
estimated net proved reserves of the Net Profits Interests on the preceding
December 31 are less than $25.0 million. The pre-tax future net cash flows,
discounted at 10%, attributable to estimated net proved reserves of the Net
Profits Interests as of December 31, 2002 was approximately $40.8 million. Such
reserve report was prepared pursuant to Securities and Exchange Commission
guidelines and utilized an unescalated Purchase Contract price (after gathering,
treating and transportation fees) of $3.42 per Mcf. The computation of the $3.42
per Mcf Purchase Contract price was based on a NYMEX year-end gas price of $4.79
per MMBtu. As the December 31, 2002 reserve value was greater than $25.0
million, the Trust did not terminate on March 1, 2003. Based on oil and gas
reserve estimates at December 31, 2002 prepared by independent reserve
engineers, Torch projects that unless the NYMEX price of natural gas on December
31, 2003 exceeds approximately $2.80 per MMBtu, the Trust will terminate on
March 1, 2004. Torch's natural gas price estimate of $2.80 per MMBtu that
projects the Trust's termination was lowered from previous estimates primarily
due to an increase in Chalkley Field reserves and production rates reflected in
the December 31, 2002 reserve report. Such increase in reserves is mainly a
result of the Chalkley Field's production declining less than forecasted in the
December 31, 2001 reserve report. Future revisions of oil and gas reserve
estimates and operating costs can impact the price estimate per MMBtu that
projects the Trust's termination. Upon termination of the Trust, the Trustee is
required to sell the Net Profits Interests. No assurances can be given that the
Trustee will be able to sell the Net Profits Interests, or the price that will
be distributed to Unitholders following such a sale. Such distributions could be
below the market value of the Units.

The Trust's Website address is www.torchroyalty.com. The Trust provides access
through this Website to its annual report on Form 10-K, quarterly reports on
Form 10-Q and any current reports on Form 8-K, and all amendments to those
reports as soon as reasonably practicable after these reports are filed or
furnished electronically with the Securities and Exchange Commission.

Item 2.  Properties

Description of the Underlying Properties

Chalkley Field. The Underlying Properties in the Chalkley Field, located in
Cameron Parish, Louisiana, include an average 16.2% working interest (12.1% net
revenue interest) in five unitized wells producing from the Miogyp "B"
reservoir. The wells produce from a depth in excess of 14,000 feet. A subsidiary
of ExxonMobil Corporation operates the unitized wells.

Robinson's Bend Field. The Underlying Properties include an average 42.7%
working interest (31.3% net revenue interest) in 394 wells in the Robinson's
Bend Field in the Black Warrior Basin of Alabama. Sales of production of coal
seam gas from the Robinson's Bend Field prior to January 1, 2003 entitle
Unitholders to Section 29 Credits, provided certain requirements are met. The
Section 29 Credit for qualifying coal seam gas production was approximately
$1.09, $1.08 and $1.06 per MMBtu in 2002, 2001 and 2000, respectively. This rate
was adjusted annually for inflation. Prior to January 8, 2003, all of the wells
in the Robinson's Bend Field were operated by an affiliate of Torch. On January
8, 2003, certain Torch affiliates sold all of their oil and gas interests in the
Robinson's Bend Field to Everlast. See "Torch Affiliates' Robinson's Bend Field
Sale" disclosure on page 6 for additional information.

The amounts paid to the Trust from the Robinson's Bend Field in any calendar
quarter are subject to a Volume Limitation equal to the gross proceeds from the
sale of 912.5 MMcf, less property, production, severance and similar taxes, and
development, operating, and certain other costs (excluding operating and
development costs until January 1, 2003). Gross production during 2002, 2001,
and 2000 attributable to distributions from the Underlying Properties in the
Robinson's Bend Field averaged 526 MMcf, 557 MMcf and 595 MMcf per quarter,
respectively, and was therefore 45%, 42% and 38%, respectively, less than the
Volume Limitation for the year.

                                        9

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                           Torch Energy Royalty Trust

In calculating amounts paid to the Trust, lease operating expenses and
development costs in the Robinson's Bend Field are not deducted until after
2002. When these amounts are deducted, the amounts paid to the Trust
attributable to the Robinson's Bend Field are expected to be reduced
substantially.

Cotton Valley Fields. The Underlying Properties include an average 50.2% working
interest (37.6% net revenue interest) in 41 wells in four fields that produce
from the Upper and Lower Cotton Valley formations in Texas. A substantial
portion of the gas produced and sold from the Cotton Valley Fields prior to
January 1, 2003 qualified for the Section 29 Tax Credits for productions of
tight sands gas. The Section 29 Credit for qualifying tight sands gas production
is approximately $0.52 per MMBtu and is not adjusted for inflation. All of the
wells in the Cotton Valley Fields are operated by a subsidiary of Torch.

Austin Chalk Fields. The Underlying Properties include an average of 16.9%
working interest (13.3% net revenue interest) in 90 wells in the Austin Chalk
Fields of Central Texas. Production from these fields is derived primarily from
the highly fractured Austin Chalk formation using horizontal drilling
techniques. A substantial portion of the gas produced and sold from these fields
prior to January 1, 2003 qualified for the Section 29 Credits for tight sands
gas. A subsidiary of Torch operates three wells in the Austin Chalk Fields. The
remaining wells in the Austin Chalk Fields are operated by third parties.

Well Count and Acreage Summary

The following table shows, as of December 31, 2002, the gross and net interest
in oil and gas wells for the Underlying Properties:

                                        Gas Wells               Oil Wells
                                  ---------------------  ----------------------
                                    Gross        Net       Gross          Net
                                  ---------   ---------  ---------    ---------
        Chalkley Field ..........         5          .8         --           --
        Robinson's Bend Field ...       394       168.3         --           --
        Cotton Valley Fields ....        41        20.9         --           --
        Austin Chalk Fields .....        38         7.4         51          8.5
                                  ---------   ---------  ---------    ---------
             Total ..............       478      197.40         51          8.5
                                  =========   =========  =========    =========

The following table shows the gross and net acreage for the Underlying
Properties as of December 31, 2002. A gross acre in the following table refers
to the number of acres in which a working interest is owned directly by the
Trust. The number of net acres is the sum of the fractional ownership of working
interests owned directly by the Trust in the gross acres expressed as a whole
number and percentages thereof. A net acre is deemed to exist when the sum of
fractional ownership of working interests in gross acres equals one.

                                                    Acreage
                                             ---------------------
                                                 Gross      Net
                                             ---------   ---------
                Chalkley Field ...........       2,152         348
                Robinson's Bend Field ....      33,404      14,288
                Cotton Valley Fields .....       4,411       2,606
                Austin Chalk Fields ......      35,439       6,409
                                             ---------   ---------
                     Total ...............      75,406      23,651
                                             =========   =========

                                       10

<PAGE>

                           Torch Energy Royalty Trust

Drilling Activity

The following table sets forth the results of drilling activity for the
Underlying Properties during the three years ended December 31, 2002. Gross
wells, as it applies to wells in the following table, refers to the number of
wells in which a working interest is owned directly by TRC and Velasco ("Gross
Well"). In January 2003, certain Torch affiliates sold their interest in the
Robinson's Bend Field. See "Torch Affiliates' Robinson's Bend Field Sale"
disclosure on page 6 for additional information. A net well ("Net Well")
represents the sum of the fractional ownership working interests in the Gross
Wells expressed as whole numbers and percentages thereof.

All of the wells shown below represent Infill Wells drilled on the Underlying
Properties. Such wells are operated by Samson. The Net Profits Interest entitle
the Trust to 20% of "Infill Net Proceeds." Infill Net Proceeds is defined as
gross proceeds from the sale of production attributable to Infill wells less all
production, drilling and completion costs of such wells. Infill Net Proceeds are
calculated by aggregating the proceeds and costs from Infill Wells on a state by
state basis. Because costs of Infill Wells exceed proceeds of production, the
Trust has not received any Infill Net Proceeds.

                                  Development Wells
      ------------------------------------------------------------------------
                              Gross                             Net
      ---------------------------------------    ------------------------------
                               Dry                              Dry
               Productive     Holes     Total    Productive    Holes     Total
               ----------     -----     -----    ----------    -----     -----
      2002          5           0         5          3.8         0        3.8
      2001          4           0         4          3.5         0        3.5
      2000          0           0         0           0          0         0

There was no other drilling activity on the Underlying Properties during the
three years ended December 31, 2002.

                                       11

<PAGE>

                           Torch Energy Royalty Trust

Oil and Gas Sales Prices and Production Costs

The following table sets forth, for the Underlying Properties, the net
production volumes of gas and oil, the weighted average lifting cost and taxes
per Mcfe deducted in calculating net profits income and the weighted average
sales price per Mcf of gas and Bbl of oil for production attributable to cash
distributions received by Unitholders during the three years ended December 31,
2002 (derived from production during the twelve months ended September 30, 2002,
2001 and 2000, respectively).

<TABLE>
<CAPTION>
                                                          Chalkley, Cotton Valley
                                                          and Austin Chalk Fields
                                                   ----------------------------------
                                                     2002         2001         2000
                                                   --------     --------     --------
<S>                                                <C>          <C>          <C>
Production:
     Gas (MMcf) .................................     3,121        3,664        3,933
     Oil (Mbbl) .................................        26           30           44

Weighted average lifting cost per Mcfe ..........  $    .45     $    .38     $    .34
Weighted average taxes on production per Mcfe ...  $    .20     $    .12     $    .08
Weighted average sales price (b)
     Gas ($/Mcf) ................................  $   2.41     $   3.54     $   2.58
     Oil ($/Bbl) ................................  $  18.56     $  23.16     $  22.76

<CAPTION>
                                                          Robinson's Bend Field
                                                   ----------------------------------
                                                     2002         2001         2000
                                                   --------     --------     --------
<S>                                                <C>          <C>          <C>
Production:
     Gas (MMcf) .................................     2,105        2,228        2,381
     Oil (Mbbl) .................................        --           --           --

Weighted average lifting cost per Mcfe ..........  $     --(a)  $     --(a)  $     --(a)
Weighted average taxes on production per Mcfe ...  $    .10     $    .22     $    .13
Weighted average sales price (b)
     Gas ($/Mcf) ................................  $   1.99     $   2.98     $   2.18
     Oil ($/Bbl) ................................  $     --     $     --     $     --
</TABLE>

(a)  No operating costs will be deducted from the Net Profits Interest in the
     Robinson's Bend Field until January 1, 2003. Average lifting costs per Mcfe
     were $2.69, $2.79, and $2.45, respectively, during 2002, 2001 and 2000, in
     the Robinson's Bend Field.

(b)  Average sales prices are reflective of purchase prices paid by TEMI,
     pursuant to the Purchase Contract, less certain gathering, treating and
     transportation charges.

Item 3.  Legal Proceedings

There are no material pending legal proceedings to which the Trust is a party.


Item 4. Submission of Matters to a Vote of Unitholders

No matter was submitted to the Unitholders for a vote in 2002.

                                       12

<PAGE>

                           Torch Energy Royalty Trust

                                     PART II

Item 5.  Market for Registrant's Units and Related Unitholder Matters

The Units are listed and traded on the New York Stock Exchange under the symbol
"TRU." At March 1, 2003, there were 8,600,000 Units outstanding and
approximately 516 Unitholders of record. The following table sets forth, for the
periods indicated, the high and low sales prices per Unit on the New York Stock
Exchange ("NYSE") and the amount of quarterly cash distributions per Unit made
by the Trust:

                                                                     Cash
                                             High        Low     Distributions
                                           --------    --------  -------------

Quarter ended March 31, 2001 ............  $   9.82    $   7.00    $    .56
Quarter ended June 30, 2001 .............  $  14.14    $   7.61    $    .63
Quarter ended September 30, 2001 ........  $  11.14    $   5.41    $    .42
Quarter ended December 31, 2001 .........  $   7.50    $   5.38    $    .28

Quarter ended March 31, 2002 ............  $   7.00    $   5.75    $    .24
Quarter ended June 30, 2002 .............  $   7.10    $   2.70    $    .21
Quarter ended September 30, 2002 ........  $   4.85    $   2.72    $    .28
Quarter ended December 31, 2002 .........  $   5.05    $   3.60    $    .28

On March 3, 2003, the high and low sales price per unit on the NYSE was $5.99
and $5.60, respectively.

Item 6. Selected Financial Data (In thousands, except per Unit amounts)

<TABLE>
<CAPTION>
                                             Year Ended December 31, 2003
                               -------------------------------------------------------
                                 2002        2001        2000        1999       1998
                               --------    --------    --------    --------   --------
<S>                            <C>         <C>         <C>         <C>        <C>
Net profits income ........... $  9,357    $ 16,843    $ 13,243    $ 10,174   $ 13,615
Distributable income ......... $  8,616    $ 16,181    $ 12,674    $  9,511   $ 12,936
Distributions declared ....... $  8,652    $ 16,211    $ 12,668    $  9,520   $ 12,917
Distributable income
  per Unit ................... $   1.00    $   1.88    $   1.47    $   1.11   $   1.50
Distributions per Unit ....... $   1.01    $   1.89    $   1.47    $   1.11   $   1.50
Total assets (at end of
  period ..................... $ 31,265    $ 36,696    $ 44,941    $ 49,143   $ 57,015
</TABLE>

Distributable income of the Trust consists of the excess of net profits income
plus interest income less general and administrative expenses of the Trust. The
Trust recognizes net profits income during the period in which amounts are
received by the Trust.

                                       13

<PAGE>

                           Torch Energy Royalty Trust

Item 7. Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Discussion of Years Ended December 31, 2002, 2001, and 2000

Because a modified cash basis of accounting is utilized by the Trust, Net
Proceeds to the Trust for the years ended December 31, 2002, 2001 and 2000 are
derived from actual oil and gas production from October 1, 2001 through
September 30, 2002, October 1, 2000 through September 30, 2001 and October 1,
1999 through September 30, 2000, respectively. The following tables set forth,
for the Underlying Properties, oil and gas sales attributable to distributions
received by Unitholders during the three years ended December 31, 2002.

                                               Bbls of Oil
                                  --------------------------------------
                                     2002          2001          2000
                                  ----------    ----------    ----------

        Chalkley Field ..........      9,494        12,479        17,032
        Robinson's Bend Field ...         --            --            --
        Cotton Valley Fields ....      3,413         3,059         4,633
        Austin Chalk Fields .....     12,737        14,427        22,309
                                  ----------    ----------    ----------
        Total ...................     25,644        29,965        43,974
                                  ==========    ==========    ==========

                                                Mcf of Gas
                                  --------------------------------------
                                     2002          2001          2000
                                  ----------    ----------    ----------

        Chalkley Field ..........  2,045,016     2,513,448     2,532,663
        Robinson's Bend Field ...  2,104,869     2,228,005     2,381,356
        Cotton Valley Fields ....  1,045,196     1,041,310     1,198,484
        Austin Chalk Fields .....     30,745       109,405       201,524
                                  ----------    ----------    ----------
        Total ...................  5,225,826     5,892,168     6,314,027
                                  ==========    ==========    ==========

For the year ended December 31, 2002, net profits income was $9.4 million, as
compared to $16.8 million and $13.2 million for the same periods in 2001 and
2000, respectively. The decrease in net profits income during 2002 as compared
to 2001 resulted from lower average oil and gas prices paid to the Trust and
normal production declines. The increase in net profits income from 2001 to 2000
was due to higher average oil and gas prices paid to the Trust in 2001 offset
partially by normal production declines.

Gas production attributable to the distributions received by Unitholders during
the year ended December 31, 2002 was 5,225,826 Mcf, as compared to gas
production of 5,892,168 Mcf and 6,314,027 Mcf for the same periods in 2001 and
2000, respectively. Oil production attributable to the Underlying Properties for
the year ended December 31, 2002 was 25,644 Bbls as compared to 29,965 Bbls and
43,974 Bbls for the same periods in 2001 and 2000, respectively.

The average price used to calculate Net Proceeds for gas, before gathering,
treating and transportation deductions, during the year ended December 31, 2002
was $2.37 per MMBtu as compared to $3.47 and $2.56 per MMBtu for the years ended
December 31, 2001 and 2000, respectively. The average price used to calculate
Net Proceeds for oil during the years ended December 31, 2002, 2001 and 2000 was
$18.56, $23.16 and $22.76 per Bbl, respectively. When TEMI pays a purchase price
for gas based on the Minimum Price of $1.70 per MMBtu, TEMI receives Price
Credits which it is entitled to deduct in determining the purchase price when
the Index Price for gas exceeds the Minimum Price. As of

                                       14

<PAGE>

                           Torch Energy Royalty Trust

December 31, 2002, TEMI had no outstanding Price Credits. No Price Credits were
deducted in calculating the purchase price related to distributions during the
three years ended December 31, 2002.

Additionally, if the Index Price for gas exceeds $2.10 per MMBtu adjusted for
inflation commencing January 1, 2002 ($2.12 per MMBtu for 2002 and $2.10 per
MMBtu for 2001 and 2000), TEMI is entitled to deduct 50% of such excess in
calculating the purchase price. Distributions received by Unitholders during the
years ended December 31, 2002, 2001, and 2000 were reduced by $1.6 million, $7.9
million and $2.9 million respectively, as a result of such Sharing Price
arrangement.

Lease operating expenses and capital expenditures deducted in calculating
distributions during the years ended December 31, 2002, 2001 and 2000 totaled
$1.5 million, $1.6 million and $1.7 million, respectively. In accordance with
the Conveyance, no operating or development costs will be deducted in
calculating the Net Proceeds from the Robinson's Bend Field prior to January 1,
2003. Severance tax deducted in calculating distributions during the years ended
December 31, 2002 and 2001 for each period totaled $0.9 million for all four
fields. Severance tax deducted in calculating distributions during the year
ended December 31, 2000 was $0.7 million for all four fields.

General and administrative expenses during each of the years ended December 31,
2002, 2001 and 2000 amounted to $0.7 million, $0.7 million and $0.6 million,
respectively. These expenses primarily relate to administrative services
provided by Torch and the Trustee.

For the year ended December 31, 2002, distributable income was $8.6 million, or
$1.00 per Unit, as compared to $16.2 million, or $1.88 per Unit, and $12.7
million, or $1.47 per Unit, for the same periods in 2001 and 2000, respectively.
Total cash distributions of $8.7 million, or $1.01 per Unit, were made during
the year ended December 31, 2002 as compared to $16.2 million, or $1.89 per
Unit, and $12.7 million, or $1.47 per Unit, for the same periods in 2001 and
2000, respectively. The Section 29 Credits relating to qualifying production
from coal seam and tight sands properties, during the twelve months ended
September 30, 2002, 2001 and 2000, totaled approximately $0.28, $0.29 and $0.31
per Unit, respectively.

                                       15

<PAGE>

                           Torch Energy Royalty Trust

Net profits received by the Trust during the years ended December 31, 2002, 2001
and 2000, derived from production sold during the twelve months ended September
30, 2002, 2001 and 2000, respectively, was computed as shown in the following
table (in thousands):

<TABLE>
<CAPTION>
                                                                    Year Ended December 31,
                              -----------------------------------------------------------------------------------------------------
                                            2002                              2001                               2000
                              --------------------------------- --------------------------------  ---------------------------------
                              Chalkley,                         Chalkley,                         Chalkley,
                               Cotton                            Cotton                            Cotton
                               Valley                            Valley                            Valley
                                and                                and                              and
                               Austin     Robinson's             Austin     Robinson's             Austin     Robinson's
                               Chalk         Bend                 Chalk        Bend                Chalk        Bend
                               Fields       Field        Total   Fields        Field       Total   Fields       Field        Total
                              ---------   ----------    ------- ---------   ----------    ------- ---------   ----------    -------
<S>                           <C>         <C>           <C>     <C>         <C>           <C>     <C>         <C>           <C>
Oil and gas revenues ........ $   7,989   $    4,182            $  13,669   $    6,640            $  11,140   $    5,190
                              ---------   ----------            ---------   ----------            ---------   ----------

Direct operating expenses:
  Lease operating expenses
   and property tax .........     1,464           --(a)             1,452           --(a)             1,424           --(a)
  Severance tax .............       640          215                  453          496                  352          302
                              ---------   ----------            ---------   ----------            ---------   ----------
                                  2,104          215                1,905          496                1,776          302
                              ---------   ----------            ---------   ----------            ---------   ----------

Net proceeds before
   Capital expenditures .....     5,885        3,967               11,764        6,144                9,364        4,888
Capital expenditures ........         3           --                  179           --                  312           --
                              ---------   ----------            ---------   ----------            ---------   ----------
Net proceeds ................     5,882        3,967               11,585        6,144                9,052        4,888
Net profits percentage ......        95%          95%                  95%          95%                  95%          95%
                              ---------   ----------            ---------   ----------            ---------   ----------
Net profits income .......... $   5,588   $    3,769    $ 9,357 $  11,006   $    5,837    $16,843 $   8,599   $    4,644    $13,243
                              =========   ==========    ======= =========   ==========    ======= =========   ==========    =======
</TABLE>

(a) Lease operating expenses are not deducted in calculating Net Proceeds until
January 1, 2003. Lease operating expenses and property taxes (in thousands) were
$5,573, $6,221 and $5,825 during 2002, 2001 and 2000, respectively.

Following December 31, 2002, Net Proceeds Attributable to the Robinson's Bend
Field Will Decrease

Prior to December 31, 2002, lease operating expenses were not deducted in
calculating the Net Proceeds payable to the Trust from the Robinson's Bend
Field. After 2002, lease operating expenses will be deducted in calculating Net
Proceeds. As a result, Net Proceeds paid to the Trust are expected to decrease
substantially following 2002. In 2002, lease operating expenses in the
Robinson's Bend Field were $ 5.6 million. Because lease operating expenses for
the Robinson's Bend Field during 2002 exceeded Net Proceeds paid to the Trust
from the Robinson's Bend Field, deduction of lease operating expenses in 2002
would have reduced the Net Proceeds paid to the Trust attributable to the
Robinson's Bend Field to zero and amounts paid to the Trust in 2002 would have
been reduced from $8.7 million to $4.9 million, or $1.01 to $0.57 per Unit.
Torch currently estimates that if average gas prices in 2003 are below $4.80 per
MMBtu as settled on NYMEX, lease operating expenses will exceed Net Proceeds.
Such gas price estimate utilizes the historical costs to operate the Robinson's
Bend Field during the year ended December 31, 2002. Actual operating costs,
among other factors, will impact the future Net Proceeds attributable to the
Robinson's Bend Field, if any, paid to the Trust. Approximately $4.5 million of
the $5.6 million of the lease operating expenses for 2002 were paid to Torch and
its affiliates pursuant to a water disposal contract and operating agreements
covering the wells in the Robinson's Bend Field.

On January 8, 2003, certain Torch affiliates sold all of their interest in the
Robinson's Bend. This transaction did not alter the Trust Net Profits Interests
in the Robinson's Bend Field. See "Torch Affiliates' Robinson's Bend Field Sale"
on page 6 for additional information.

                                       16

<PAGE>

                           Torch Energy Royalty Trust

Termination of the Trust

The Trust will terminate on March 1 of any year after 2002 if it is determined
that the pre-tax future net cash flows, discounted at 10%, attributable to
estimated net proved reserves of the Net Profits Interests on the preceding
December 31 are less than $25.0 million. The pre-tax future net cash flows,
discounted at 10%, attributable to estimated net proved reserves of the Net
Profits Interests as of December 31, 2002 was approximately $40.8 million. Such
reserve report was prepared pursuant to Securities and Exchange Commission
guidelines and utilized an unescalated Purchase Contract price (after gathering,
treating and transportation fees) of $3.42 per Mcf. The computation of the $3.42
per Mcf Purchase Contract price was based on a NYMEX year-end gas price of $4.79
per MMBtu. As the December 31, 2002 reserve value was greater than $25.0
million, the Trust did not terminate on March 1, 2003. Based on oil and gas
reserve estimates at December 31, 2002 prepared by independent reserve
engineers, Torch projects that unless the NYMEX price of natural gas on December
31, 2003 exceeds approximately $2.80 per MMBtu, the Trust will terminate on
March 1, 2004. Torch's natural gas price estimate of $2.80 per MMBtu that
projects the Trust's termination was lowered from previous estimates primarily
due to an increase in Chalkley Field reserves and production rates reflected in
the December 31, 2002 reserve report. Such increase in reserves is mainly a
result of the Chalkely Field's production declining less than forecasted in the
December 31, 2001 reserve report. Future revisions of oil and gas reserve
estimates and operating costs can impact the price estimate per MMBtu that
projects the Trust's termination. Upon termination of the Trust, the Trustee is
required to sell the Net Profits Interests. No assurances can be given that the
Trustee will be able to sell the Net Profits Interests, or the price that will
be distributed to Unitholders following such a sale. Such distributions could be
below the market value of the Units.

Critical Accounting Policy

Reserve Estimates

The proved reserves of the Trust are estimated quantities of oil and gas which
geological and engineering data demonstrate, with reasonable certainty, to be
recoverable in future years from known reservoirs under existing economic and
operating conditions. The accuracy of any reserve estimate is a function of the
quality of available data, engineering and geological interpretation, and
judgement. For example, estimates are made regarding the amount and timing of
future operating costs, production volumes and severance taxes, all of which may
in fact vary considerably from actual results. In addition, as prices and cost
levels change from year to year, the estimate of proved reserves also change.
Any variance in these assumptions could materially affect the estimated quantity
and value of the Trust's reserves.

Despite the inherent imprecision in these engineering estimates, the reserves
are significant to the potential automatic termination of the Trust if it is
determined that the pre-tax future net cash flows, discounted at 10%,
attributable to the estimated net proved reserves of the Net Profits Interests
are less than $25.0 million. Independent petroleum engineering firms are engaged
to estimate the Trust's proved hydrocarbon liquid and gas reserves.

Modified Cash Basis

The financial statements of the Trust are prepared on a modified cash basis
although financial statements filed with the Securities and Exchange Commission
are normally required to be prepared in accordance with accounting principles
generally accepted in the United States. Since the operations of the Trust are
limited to the distribution of income from the Net Profits Interests, the item
of primary importance to the reader of the financial statements of the Trust is
the amount of cash distributions to the Unitholders for the period reported.

                                       17

<PAGE>

                           Torch Energy Royalty Trust

Item 7a.  Quantitative and Qualitative Disclosures About Market Risk

The Trust is exposed to market risk, including adverse changes in commodity
prices. The Trust's assets constitute Net Profits Interests in the Underlying
Properties. As a result, the Trust's operating results can be significantly
affected by fluctuations in commodity prices caused by changing market forces
and the price received for production from the Underlying Properties.

All production from the Underlying Properties is sold pursuant to a Purchase
Contract between TRC and Velasco, as the owners of the Underlying Properties,
and TEMI. Pursuant to the Purchase Contract, TEMI is obligated to purchase all
net production attributable to the Underlying Properties for an Index Price,
less certain other charges, which are calculated monthly. The Index Price
calculation is based on market prices of oil and gas and therefore is subject to
commodity price risk. The Purchase Contract expires upon termination of the
Trust and provides a Minimum Price of $1.70 per MMBtu paid by TEMI for gas until
December 31, 2001. When TEMI pays a purchase price based on the Minimum Price,
it receives Price Credits equal to the difference between the Index Price and
the Minimum Price that it is entitled to deduct when the Index Price exceeds the
Minimum Price. Additionally, if the Index Price exceeds $2.10 per MMBtu, TEMI is
entitled to deduct such excess, the Price Differential. Beginning January 1,
2002, TEMI has an annual option to discontinue the Minimum Price commitment.
However, if TEMI discontinues the Minimum Price commitment, it will no longer be
entitled to deduct the Price Differential and will forfeit all accrued Price
Credits. Additionally, if TEMI continues the Minimum Price commitment, the
Minimum and the Sharing Price will be increased for inflation based on the
Producer Price Index on January 1 of each year commencing January 1, 2002. As
TEMI has not exercised its option to discontinue the Minimum Price Commitment,
the Minimum Price in 2003 and 2002, adjusted for inflation, is approximately
$1.71 per MMBtu for each year. The Sharing Price in 2003 and 2002, adjusted for
inflation, is approximately $2.11 and $2.12 per MMBtu, respectively.

                                       18

<PAGE>

                           Torch Energy Royalty Trust

Item 8.  Financial Statements and Supplementary Data

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                        Page
                                                                                                       ------
<S>                                                                                                    <C>
Report of Independent Auditors .......................................................................   20
Statements of Assets, Liabilities and Trust Corpus at December 31, 2002 and 2001 .....................   21
Statements of Distributable Income for the Years Ended December 31, 2002, 2001 and 2000 ..............   22
Statements of Changes in Trust Corpus for the Years Ended December 31, 2002, 2001 and 2000 ...........   23
Notes to Financial Statements ........................................................................   24
</TABLE>

                                       19

<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

Wilmington Trust Company
as Trustee of Torch Energy Royalty Trust
and to the Unitholders:

We have audited the accompanying statements of assets, liabilities and trust
corpus of the Torch Energy Royalty Trust (the "Trust") as of December 31, 2002
and 2001 and the related statements of distributable income and changes in trust
corpus for each of the three years in the period ended December 31, 2002. These
financial statements are the responsibility of the Trustee. Our responsibility
is to express an opinion on these financial statements based on our audit.

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

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Trust as of December 31,
2002 and 2001 and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2002 in conformity with the
accounting principles described in Note 2.

\s\ Ernst & Young LLP
---------------------
Houston, Texas
March 25, 2003

                                       20

<PAGE>

                           Torch Energy Royalty Trust

               STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
                                 (In thousands)

                                     ASSETS

<TABLE>
<CAPTION>
                                                              December 31,    December 31,
                                                                 2002             2001
                                                              ------------    ------------
<S>                                                           <C>             <C>
Cash .......................................................  $          2    $          2
Net profits interests in oil and gas properties (net of
   accumulated amortization of $149,337 and $143,906
   at December 31, 2002 and 2001, respectively) ............        31,263          36,694
                                                              ------------    ------------
                                                              $     31,265    $     36,696
                                                              ============    ============


                               LIABILITIES AND TRUST CORPUS


Trust expense payable ......................................  $        221    $        185
Trust corpus ...............................................        31,044          36,511
                                                              ------------    ------------
                                                              $     31,265    $     36,696
                                                              ============    ============
</TABLE>

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

                                       21

<PAGE>

                           Torch Energy Royalty Trust

                       STATEMENTS OF DISTRIBUTABLE INCOME
                     (In thousands, except per Unit amounts)

                                                      Year Ended December 31,
                                                  ------------------------------
                                                    2002       2001       2000
                                                  --------   --------   --------

Net profits income ............................   $  9,357   $ 16,843   $ 13,243

Interest income ...............................          4         20         15
                                                  --------   --------   --------

                                                     9,361     16,863     13,258

General and administrative expenses ...........        745        682        584
                                                  --------   --------   --------

Distributable income ..........................   $  8,616   $ 16,181   $ 12,674
                                                  ========   ========   ========

Distributable income per Unit (8,600 Units) ...   $   1.00   $   1.88   $   1.47
                                                  ========   ========   ========

Distributions per Unit ........................   $   1.01   $   1.89   $   1.47
                                                  ========   ========   ========

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

                                       22

<PAGE>

                           Torch Energy Royalty Trust

                      STATEMENTS OF CHANGES IN TRUST CORPUS
                                 (In thousands)

                                                  Year Ended December 31,
                                               --------------------------------
                                                 2002        2001        2000
                                               --------    --------    --------

Trust corpus, beginning of year ............   $ 36,511    $ 44,783    $ 48,982

Amortization of Net Profits Interests ......     (5,431)     (8,242)     (4,205)

Distributable income .......................      8,616      16,181      12,674

Distributions to Unitholders ...............     (8,652)    (16,211)    (12,668)
                                               --------    --------    --------

Trust Corpus, end of year ..................   $ 31,044    $ 36,511    $ 44,783
                                               ========    ========    ========

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

                                       23

<PAGE>

                           Torch Energy Royalty Trust

                          Notes to Financial Statements

1.  Nature of Operations

The Torch Energy Royalty Trust ("Trust") was formed effective October 1, 1993,
pursuant to a trust agreement ("Trust Agreement") among Wilmington Trust
Company, as trustee ("Trustee"), Torch Royalty Company ("TRC") and Velasco Gas
Company, Ltd. ("Velasco") as owners of certain oil and gas properties
("Underlying Properties") and Torch Energy Advisors Incorporated ("Torch") as
grantor. TRC and Velasco created net profits interests ("Net Profits Interests")
and conveyed such interests to Torch. Torch conveyed the Net Profits Interests
to the Trust in exchange for an aggregate of 8,600,000 units of beneficial
interest ("Units"). Such Units were sold to the public through various
underwriters in November 1993.

The Trust will terminate upon the first to occur of: (i) an affirmative vote of
the holders of not less than 66-2/3% of the outstanding Units to liquidate the
Trust; (ii) such time as the ratio of the cash amounts received by the Trust
from the Net Profits Interests to administrative costs of the Trust is less than
1.2 to 1.0 for three consecutive quarters; (iii) March 1 of any year if it is
determined based on a reserve report as of December 31 of the prior year that
the present value of estimated pre-tax future net cash flows, discounted at 10%,
of proved reserves attributable to the Net Profits Interests is equal to or less
than $25.0 million; or (iv) December 31, 2012. After termination of the Trust,
the remaining assets of the Trust will be sold, and the proceeds therefrom
(after expenses) will be distributed to the unitholders ("Unitholders"). The
sole purpose of the Trust is to hold the Net Profits Interests, to receive
payments from TRC and Velasco, and to make payments to Unitholders. The Trust
does not conduct any business activity.

TRC and Velasco receive payments reflecting the proceeds of oil and gas sold and
aggregate these payments, deduct applicable costs and make payments to the
Trustee each quarter for the amounts due to the Trust. Unitholders receive
quarterly cash distributions relating to oil and gas produced and sold from the
Underlying Properties. Because no additional properties will be contributed to
the Trust, the assets of the Trust deplete over time and a portion of each cash
distribution made by the Trust is analogous to a return of capital.

The only assets of the Trust, other than cash and temporary investments being
held for the payment of expenses and liabilities and for distribution to
Unitholders, are the Net Profits Interests. Under the Trust Agreement, the
Trustee receives the payments attributable to the Net Profits Interests and pays
all expenses, liabilities and obligations of the Trust. The Trustee has the
discretion to establish a cash reserve for the payment of any liability that is
contingent or uncertain in amount or that otherwise is not currently due and
payable. The Trustee is entitled to cause the Trust to borrow money to pay
expenses, liabilities and obligations that cannot be paid out of cash held by
the Trust. The Trustee is entitled to cause the Trust to borrow from any source,
including from the entity serving as Trustee, provided that the entity serving
as Trustee shall not be obligated to lend to the Trust. To secure payment of any
such indebtedness (including any indebtedness to the Trustee), the Trustee is
authorized to (i) mortgage and otherwise encumber the entire Trust estate or any
portion thereof; (ii) carve out and convey production payments; (iii) include
all terms, powers, remedies, covenants and provisions it deems necessary or
advisable, including confession of judgement and the power of sale with or
without judicial proceedings; and (iv) provide for the exercise of those and
other remedies available to a secured lender in the event of a default on such
loan. The terms of such indebtedness and security interest, if funds were loaned
by the Trustee, must be similar to the terms which the Trustee would grant to a
similarly situated commercial customer with whom it did not have a fiduciary
relationship, and the Trustee shall be entitled to enforce its rights with
respect to any such indebtedness and security interest as if it were not then
serving as Trustee.

                                       24

<PAGE>

                           Torch Energy Royalty Trust

                          Notes to Financial Statements

The Trustee is authorized and directed to sell and convey the Net Profits
Interests without Unitholder approval in certain instances as described in the
Trust Agreement, including upon termination of the Trust. The Trustee is
empowered by the Trust Agreement to employ consultants and agents (including
Torch) and to make payments of all fees for services or expenses out of the
assets of the Trust.

On January 8, 2003, Torch and certain of its subsidiaries and subsidiaries of
Torchmark Corporation sold all of their oil and gas interests in the Robinson's
Bend Field to Everlast Energy LLC ("Everlast"). Everlast assumed operations of
the properties and the water disposal and gathering facilities. The sale
included the Robinson's Bend Field working interests, which are burdened by the
Trust's Net Profits Interests, and the water disposal and gathering systems.
This transaction did not alter the Trust's Net Profits Interest in the
Robinson's Bend Field. Additionally, this transaction did not alter Torch's
obligation to administer the Trust and to handle the distribution of the Trust's
cash distributions.

2. Basis of Accounting

The financial statements of the Trust are prepared on a modified cash basis and
are not intended to present the financial position and results of operations in
conformity with generally accepted accounting principles ("GAAP"). Preparation
of the Trust's financial statements on such basis includes the following:

-  Revenues are recognized in the period in which amounts are received by the
   Trust. Therefore, revenues recognized during the years ended December 31,
   2002, 2001 and 2000 are derived from oil and gas production sold during the
   twelve-month periods ended September 30, 2002, 2001 and 2000, respectively.
   General and administrative expenses are recognized on an accrual basis.

-  Amortization of the Net Profits Interests is calculated on a
   unit-of-production basis and charged directly to trust corpus.

-  Distributions to Unitholders are recorded when declared by the Trustee.

-  An impairment loss is recognized when the net carrying value of the Net
   Profits Interests exceeds its fair market value. No such impairment was
   recorded during the three years ended December 31, 2002.

-  The financial statements of the Trust differ from financial statements
   prepared in accordance with GAAP because net profits income is not accrued in
   the period of production and amortization of the Net Profits Interests is not
   charged against operating results.

In August 2001, the Financial Accounting Standards Board issued SFAS Statement
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS
144") which addresses the reporting for the impairment or disposal of long-lived
assets. The Trust's adoption of Statement 144 in 2002 had no impact on the
Trust's results of operations or financial position.

3. Federal Income Taxes

Tax counsel has advised the Trustee that, under current tax law, the Trust is
classified as a grantor trust for Federal income tax purposes and not an
association taxable as a business entity. However, the opinion of tax counsel is
not binding on the Internal Revenue Service. As a grantor trust, the Trust is
not subject to Federal income tax.

                                       25

<PAGE>

                           Torch Energy Royalty Trust

                          Notes to Financial Statements

Because the Trust is treated as a grantor trust for Federal income tax purposes
and a Unitholder is treated as directly owning an interest in the Net Profits
Interests, each Unitholder is taxed directly on such Unitholder's pro rata share
of income attributable to the Net Profits Interests consistent with the
Unitholder's method of accounting and without regard to the taxable year or
accounting method employed by the Trust. Amounts payable with respect to the Net
Profits Interests are paid to the Trust on the quarterly record date established
for quarterly distributions in respect to each calendar quarter during the term
of the Trust, and the income, deductions and income tax credits relating to
Section 29 Credits resulting from such payments are allocated to the Unitholders
of record on such date.

4. Distributions and Income Computations

Each quarter the amount of cash available for distribution to Unitholders (the
"Quarterly Distribution Amount") is equal to the excess, if any, of the cash
received by the Trust, on the last day of the second month following the
previous calendar quarter (or the next business day thereafter) ending prior to
the dissolution of the Trust, from the Net Profits Interests then held by the
Trust plus, with certain exceptions, any other cash receipts of the Trust during
such quarter, subject to adjustments for changes made by the Trustee during such
quarter in any cash reserves established for the payment of contingent or future
obligations of the Trust. Based on the payment procedures relating to the Net
Profits Interest, cash received by the Trust on the last day of the second month
of a particular quarter from the Net Profits Interests generally represents
proceeds from the sale of oil and gas produced from the Underlying Properties
during the preceding calendar quarter. The Quarterly Distribution Amount for
each quarter is payable to Unitholders of record on the last day of the second
month of the calendar quarter unless such day is not a business day, in which
case the record date is the next business day thereafter. The Trust distributes
the Quarterly Distribution Amount, which is distributed within approximately 10
days after the record date to each person who was a Unitholder of record on the
associated record date.

5. Related Party Transactions

Marketing Arrangements

TRC and Velasco, as owners of the Underlying Properties subject to and burdened
by the Net Profits Interests, contracted to sell the oil and gas production from
such properties to Torch Energy Marketing, Inc. ("TEMI"), a subsidiary of Torch,
under a purchase contract ("Purchase Contract"). Under the Purchase Contract,
TEMI is obligated to purchase all net production attributable to the Underlying
Properties for an index price for oil and gas ("Index Price"), less certain
gathering, treating and transportation charges, which are calculated monthly.
The Index Price equals 97% of the average spot market prices of oil and gas
("Average Market Prices") at the four locations where TEMI sells production.

The Purchase Contract also provides that the minimum price paid by TEMI for gas
production is $1.70 per MMBtu ("Minimum Price"). When TEMI pays a purchase price
based on the Minimum Price it receives price credits ("Price Credits") equal to
the difference between the Index Price and the Minimum Price that it is entitled
to deduct in determining the purchase price when the Index Price for gas exceeds
the Minimum Price. Price Credits are computed on a monthly basis, and as of
December 31, 2002, TEMI had no outstanding Price Credits. No Price Credits were
deducted in calculating the purchase price related to distributions received by
Unitholders during the three years ended December 31, 2002.

                                       26

<PAGE>

                           Torch Energy Royalty Trust

                          Notes to Financial Statements

In addition, if the Index Price for gas exceeds $2.10 per MMBtu ("Sharing
Price"), TEMI is entitled to deduct 50% of such excess ("Price Differential") in
determining the purchase price. Distributions received by Unitholders during the
years ended December 31, 2002, 2001 and 2000 were reduced by $1.6 million, $7.9
million and $2.9 million, respectively, as a result of such Sharing Price
arrangement. Beginning January 1, 2002, TEMI has an annual option to discontinue
the Minimum Price commitment. However, if TEMI discontinues the Minimum Price
commitment, it will no longer be entitled to deduct the Price Differential in
calculating the purchase price and will forfeit all accrued Price Credits. If
TEMI continues the Minimum Price commitment, the Minimum Price and the Sharing
Price will be increased for inflation based on the Producer Price Index on
January 1 of each year commencing January 1, 2002. TEMI has not exercised its
option to discontinue the Minimum Price Commitment. In accordance with the
Purchase Contract, the Minimum Price in 2003 and 2002, adjusted for inflation,
is approximately $1.71 per MMBtu for each year. The Sharing Price in 2003 and
2002, adjusted for inflation, is approximately $2.11 per MMBtu and $2.12 per
MMBtu, respectively.

Gross revenues (before deductions for applicable gathering, treating and
transportation charges) from TEMI included in net profits income for the years
ended December 31, 2002, 2001 and 2000 were $13.2 million, $21.7 million and
$17.7 million, respectively.

Gas production is purchased at the wellhead and, therefore, distributions do not
include any amounts received in connection with extracting natural gas liquids
from such production at gas processing or treating facilities.

Gathering, Treating and Transportation Arrangements

The Purchase Contract entitles TEMI to deduct certain gas gathering, treating
and transportation costs in calculating the purchase price for gas in the
Robinson's Bend, Austin Chalk and Cotton Valley Fields. The amounts that may be
deducted in calculating the purchase price for such gas are set forth in the
Purchase Contract and are not affected by the actual costs incurred by TEMI to
gather, treat and transport gas. In the Robinson's Bend Field, TEMI is entitled
to deduct a gathering, treating and transportation fee of $0.26 per MMBtu
adjusted annually for inflation ($0.289, $0.286 and $0.283 per MMBtu for 2002,
2001 and 2000, plus fuel usage equal to 5% of revenues, payable to Bahia Gas
Gathering, Ltd. ("Bahia"), a subsidiary of Torch, pursuant to a gas gathering
agreement. Additionally, a fee of $0.05 per MMBtu, representing a gathering fee
payable to a non-affiliate of Torch, is deducted in calculating the purchase
price for production from 68 of the 394 wells in the Robinson's Bend Field. TEMI
also deducts $0.38 per MMBtu plus 17% of revenues in calculating the purchase
price for production from the Austin Chalk Fields, as a fee to gather, treat and
transport gas production. TEMI deducts from the purchase price for gas in the
Cotton Valley Fields a transportation fee of $0.045 per MMBtu for production
attributable to certain wells. This transportation fee is paid to a third party.
During the years ended December 31, 2002, 2001 and 2000, such fees charged to
the Trust by TEMI, attributable to production during the twelve months ended
September 30, 2002, 2001 and 2000, in the Robinson's Bend, Austin Chalk and
Cotton Valley Fields, totaled $1.0 million, $1.4 million and $1.3 million,
respectively. No amounts for gathering, treating or transportation are deducted
in calculating the purchase price from the Chalkley Field.

Operator Overhead Fees

A subsidiary of Torch operates certain oil and gas interests burdened by the Net
Profits Interests. The Underlying Properties are charged, on the same basis as
other third parties, for all customary expenses and costs reimbursements
associated with these activities. Operator overhead fees deducted from the Net

                                       27

<PAGE>

                           Torch Energy Royalty Trust

                          Notes to Financial Statements

Proceeds computations for the Chalkley, Cotton Valley and Austin Chalk fields
totaled $178,000, $160,000 and $189,000 for the years ended December 31, 2002,
2001 and 2000, respectively. In accordance with the Conveyance, no overhead fees
were deducted in calculating the Net Proceeds from the Robinson Bend properties.

Administrative Services Agreement

Pursuant to the Trust Agreement, Torch and the Trust entered into an
administrative services agreement, effective October 1, 1993. The Trust is
obligated, throughout the term of the Trust, to pay to Torch each quarter an
administrative services fee for accounting, bookkeeping, informational and other
services relating to the Net Profits Interests. The administrative services fee
is $87,500 per calendar quarter commencing October 1, 1993. The amount of the
administrative services fee is adjusted annually, based upon the change in the
Producer's Price Index as published by the Department of Labor, Bureau of Labor
Statistics. Administrative services fees of $389,000, $384,000 and $380,000 were
paid by the Trust to Torch during the three years ended December 31, 2002, 2001
and 2000, respectively.

Compensation of the Trustee and Transfer Agent

The Trust Agreement provides that the Trustee be compensated for its
administrative services, out of the Trust assets, in an annual amount of
$41,000, plus an hourly charge for services in excess of a combined total of 250
hours annually at its standard rate. The Trustee receives a transfer agency fee
of $5.00 annually per account (minimum of $15,000 annually), subject to change
each December, beginning December 1994, based upon the change in the Producer's
Price Index as published by the Department of Labor, Bureau of Labor Statistics,
plus $1.00 for each certificate issued. Total administrative and transfer agent
fees charged by the Trustee were $56,000 in each of the years ended December 31,
2002, 2001 and 2000. The Trustee is also entitled to reimbursement for
out-of-pocket expenses.

6. Supplemental Oil and Gas Information (Unaudited)

Total proved oil and gas reserves attributable to the Net Profits Interests are
primarily based upon reserve reports prepared by T.J. Smith & Company, Inc.,
Ryder Scott Company and H.J. Gruy and Associates ("Independent Reserve
Engineers"). Future net cash flows were computed by applying end-of-period
Purchase Contract prices for oil and gas to estimated future production, less
the estimated future expenditures (based on current costs) to be incurred in
developing and producing the reserves. In accordance with terms of the
Robinson's Bend Field Conveyance, operating and developing costs subsequent to
January 1, 2003 were deducted from the Robinson's Bend Field future net
revenues.

                                       28

<PAGE>

                           Torch Energy Royalty Trust

                          Notes to Financial Statements

Reserve Quantities:

The following table sets forth the estimated total proved and proved developed
oil and gas reserves attributable to the Trust's Net Profits Interests (all
located in the United States) for the years ended December 31, 2002, 2001 and
2000, based on reserve reports prepared by Independent Reserve Engineers. As a
net profits interest does not entitle the Trust to a specific quantity of oil or
gas, but to a portion of oil and gas sufficient to yield a specified portion of
the net proceeds derived therefrom, proved reserves attributable to a net
profits interest are calculated by deducting an amount of oil or gas sufficient,
if sold at the prices used in preparing the reserve estimates for the Underlying
Properties, to pay an amount of applicable future estimated production expenses,
development costs and taxes for such Underlying Properties. The use of this
convention to estimate reserve volumes attributable to the Net Profits Interests
is standard practice in the industry.

Year-end reserves at December 31, 2002 were 18.1 billion cubic feet equivalent
("Bcfe") as compared to year-end 2001 and 2000 reserves of 16.5 Bcfe and 42.7
Bcfe, respectively. In accordance with Securities and Exchange Commission
reporting guidelines, year-end reserves and the related future net revenues
attributable to the Trust's Net Profits Interests are estimated utilizing oil
and gas prices on the last day of the entity's fiscal year. The Trust's gas
reserves were estimated utilizing a Purchase Contract price, after gathering,
treating and transportation fees, of $3.42, $2.31 and $5.49 per Mcf for 2002,
2001 and 2000, respectively. Such Purchase Contract prices were based on the
unescalated oil and gas prices on the last day of the entity's fiscal year as
settled on the New York Mercantile Exchange ("NYMEX"). The NYMEX prices for gas
on December 31, 2002, 2001 and December 2000 were $4.79, $2.57 and $9.77 per
MMBtu, respectively. Revisions of estimated reserves as stated in the table
below during each of the three years ending December 31, 2002 are primarily due
to fluctuations in the aforementioned gas prices.

<TABLE>
<CAPTION>
               Description                             2002                     2001                   2000
-------------------------------------------    ---------------------   ---------------------   ----------------------
                                                 Oil           Gas       Oil           Gas        Oil          Gas
                                                (Mbbl)       (MMcf)     (Mbbl)       (MMcf)     (Mbbl)        (MMcf)
                                               --------     --------   --------     --------   --------      --------
<S>                                            <C>          <C>        <C>          <C>        <C>           <C>
Proved reserves at beginning of year ........        67       16,074        142       41,806        142        27,885
Revisions ...................................        26        5,369        (68)     (21,299)        25        18,978
Extensions and discoveries ..................        --           --         --           --        ---           ---
Production ..................................        (3)      (3,851)        (7)      (4,433)       (25)       (5,057)
                                               --------     --------   --------     --------   --------      --------

Proved reserves at end of year ..............        90       17,592         67       16,074        142        41,806
                                               ========     ========   ========     ========   ========      ========

Proved developed reserves at beginning of
year ........................................        67       16,074        142       41,806        141        27,414
                                               ========     ========   ========     ========   ========      ========

Proved developed reserves at end of year ....        90       17,592         67       16,074        142        41,806
                                               ========     ========   ========     ========   ========      ========
</TABLE>

                                       29

<PAGE>

                           Torch Energy Royalty Trust

                          Notes to Financial Statements

Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil
and Gas Reserves (in thousands):

Estimated future net cash flows from the Net Profits Interests in proved oil and
gas reserves at December 31, 2002, 2001 and 2000 are presented in the following
table:

<TABLE>
<CAPTION>
                                                                              December 31,
                                                                    --------------------------------
                                                                      2002        2001        2000
                                                                    --------    --------    --------
<S>                                                                 <C>         <C>         <C>
Future cash inflows .............................................   $ 97,340    $ 56,762    $356,091
Future costs and expenses .......................................    (34,410)    (19,154)   (141,201)
                                                                    --------    --------    --------
Net future cash flows ...........................................     62,930      37,608     214,890
Discount at 10% for timing of cash flows ........................    (22,092)    (10,028)    (81,301)
                                                                    --------    --------    --------
Present value of future net cash flows for proved reserves ......   $ 40,838    $ 27,580    $133,589
                                                                    ========    ========    ========
</TABLE>

The following table sets forth the changes in the present value of estimated
future net revenues from proved reserves attributable to the Trust's Net Profits
Interests during the years ended December 31, 2002, 2001 and 2000:

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                           --------------------------------
                                                             2002        2001        2000
                                                           --------   ---------    --------
<S>                                                        <C>        <C>          <C>
Balance at beginning of year ............................  $ 27,580   $ 133,589    $ 41,771
Sales of oil and gas produced, net of production costs ..    (9,991)    (14,131)    (15,368)
Accretion to discount ...................................     2,758      13,359       4,177
Extensions and discoveries ..............................        --          --          --
Revision of prior-year estimates, change in prices
    and other ...........................................    20,491    (105,237)    103,009
                                                           --------   ---------    --------
Balance at end of year ..................................  $ 40,838   $  27,580    $133,589
                                                           ========   =========    ========
</TABLE>

Estimates of future net cash flows from proved reserves of gas and oil
condensate were made in accordance with Financial Accounting Standards Board
Statement 69, "Disclosure about Oil and Gas Producing Activities." The Trust has
not filed or included in reports to any other Federal authority or agency any
estimates of proved net oil and gas reserves.

The following table summarizes the estimated Section 29 Credits attributable to
the Trust's Net Profits Interest for qualifying coal seam and tight sand
production at December 31, 2002, 2001 and 2000. Such estimates are based upon
the production estimates set forth in the reserve reports prepared by the
Independent Reserve Engineers. The qualifying tight sands Section 29 Tax Credit
estimate was computed utilizing a rate of approximately $.52 per MMBtu. The
qualifying coal seam Section 29 Tax Credit estimate was computed utilizing a
constant rate of approximately $1.08 and $1.06 per MMBtu for 2001 and 2000,
respectively. As the Section 29 Credits expired December 31, 2002, such credits
have no value as of December 31, 2002.

                                                              December 31,
                                                        ------------------------
                                                         2002     2001     2000
                                                        ------   ------   ------
Undiscounted ........................................   $   --   $2,366   $4,878
                                                        ======   ======   ======
Discounted present value at 10% .....................   $   --   $2,151   $4,241
                                                        ======   ======   ======

                                       30

<PAGE>

                           Torch Energy Royalty Trust

                          Notes to Financial Statements

7.  Quarterly Financial Data (Unaudited - in thousands, except per Unit amounts)

The following table sets forth, for the periods indicated, summarized quarterly
financial data:

                                                                  Distributable
                                      Net Profits  Distributable      Income
                                         Income        Income        Per Unit
                                      -----------  -------------  -------------

Quarter ended March 31, 2002 .......  $     2,233  $       2,058  $         .24
Quarter ended June 30, 2002 ........        1,983          1,810            .21
Quarter ended September 30, 2002 ...        2,586          2,412            .28
Quarter ended December 31, 2002 ....        2,555          2,336            .27
                                      -----------  -------------  -------------
                                      $     9,357  $       8,616  $        1.00
                                      ===========  =============  =============


Quarter ended March 31, 2001 .......  $     4,945  $       4,792  $         .56
Quarter ended June 30, 2001 ........        5,573          5,406            .63
Quarter ended September 30, 2001 ...        3,755          3,590            .42
Quarter ended December 31, 2001 ....        2,570          2,393            .27
                                      -----------  -------------  -------------
                                      $    16,843  $      16,181  $        1.88
                                      ===========  =============  =============

                                       31

<PAGE>

                           Torch Energy Royalty Trust

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

None.

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

The Registrant has no directors or executive officers. The Trustee is a
corporate trustee that may be removed as trustee under the Trust Agreement, with
or without cause, at a meeting duly called and held by the affirmative vote of
Unitholders of not less than a majority of all the Units then outstanding. Any
such removal of the Trustee shall be effective only at such time as a successor
trustee fulfilling the requirements of Section 3807(a) of the Delaware Business
Trust Act has been appointed and has accepted such appointment.

Item 11. Executive Compensation

The following is a description of certain fees and expenses paid or borne by the
Trust, including fees paid to Torch, the Trustee, the Transfer Agent or their
affiliates.

Ongoing Administrative Expenses. The Trust is responsible for paying all legal,
accounting, engineering and stock exchange fees, printing costs and other
administrative and out-of-pocket expenses incurred by or at the direction of the
Trustee in its capacity as Trustee and/or transfer agent.

Compensation of the Trustee and Transfer Agent. The Trust Agreement provides
that the Trustee be compensated for its administrative services, out of the
Trust assets, in an annual amount of $41,000, plus an hourly charge for services
in excess of a combined total of 250 hours annually at its standard rate. The
Trustee receives a transfer agency fee of $5.00 annually per account (minimum of
$15,000 annually), subject to change each December, beginning December 1994,
based upon the change in the Producer's Price Index as published by the
Department of Labor, Bureau of Labor Statistics, plus $1.00 for each certificate
issued. The Trustee is entitled to reimbursement for out-of-pocket expenses.

Fees to Torch. Torch will receive, throughout the term of the Trust, an
administrative services fee for accounting, bookkeeping and informational
services related to the Net Profits Interests as described below in "Item 13 -
Administrative Services Agreement."

Item 12. Security Ownership of Certain Beneficial Owners and Management

As of March 3, 2003, no person or group of persons was known by the Trust to be
the beneficial owner of more than 5% of the Units. The Trust has no officers or
directors. The Trust does not have an "Equity Compensation Plan".

                                       32

<PAGE>

                           Torch Energy Royalty Trust

Item 13. Certain Relationships and Related Transactions

Administrative Services Agreement

Pursuant to the Trust Agreement, Torch and the Trust entered into the
Administrative Services Agreement effective October 1, 1993. The following
summary of certain provisions of the Administrative Services Agreement does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the provisions of the Administrative Services Agreement.

The Trust is obligated, throughout the term of the Trust, to pay to Torch each
quarter an administrative services fee for accounting, bookkeeping,
informational and other services relating to the Net Profits Interests. The
administrative services fee is $87,500 per calendar quarter, adjusted annually,
based upon the change in the Producer's Price Index as published by the
Department of Labor, Bureau of Labor Statistics. Administrative services fees of
$389,000, $384,000 and $380,000 were paid by the Trust to Torch during the years
ended December 31, 2002, 2001 and 2000, respectively.

Marketing Arrangement

TRC and Velasco, as owners of the Underlying Properties subject to and burdened
by the Net Profits Interests, contracted to sell the oil and gas production from
such properties to TEMI under a Purchase Contract. Under the Purchase Contract,
TEMI is obligated to purchase all net production attributable to the Underlying
Properties for an Index Price for oil and gas less certain gathering, treating
and transportation charges, which are calculated monthly. The Purchase Contract
also provides that the Minimum Price paid by TEMI for gas production is $1.70
per MMBtu. When TEMI pays a purchase price based on the Minimum Price, it
receives Price Credits equal to the difference between the Index Price and the
Minimum Price that it is entitled to deduct in determining the purchase price
when the Index Price for gas exceeds the Minimum Price. Price Credits are
computed on a monthly basis, and as of December 31, 2002, TEMI had no
outstanding Price Credits.

In addition, if the Index Price for gas exceeds $2.10 per MMBtu ("Sharing
Price"), TEMI is entitled to deduct 50% of such excess ("Price Differential") in
determining the purchase price. Distributions received by Unitholders during the
years ended December 31, 2002, 2001 and 2000 were reduced by $1.6 million, $7.9
million and $2.9 million, respectively, as a result of such Sharing Price
arrangement. Beginning January 1, 2002, TEMI has an annual option to discontinue
the Minimum Price commitment. However, if TEMI discontinues the Minimum Price
commitment, it will no longer be entitled to deduct the Price Differential in
calculating the purchase price and will forfeit all accrued Price Credits.
Additionally, if TEMI continues the Minimum Price commitment, the Minimum Price
and the Sharing Price will be adjusted for inflation based on the Producer Price
Index on January 1 of each year commencing January 1, 2002. TEMI did not
exercise its option to discontinue the Minimum Price Commitment. In accordance
with the Purchase Contract, the Minimum Price in 2003 and 2002, adjusted for
inflation, is approximately $1.71 per MMBtu for each year. The Sharing Price in
2003 and 2002, adjusted for inflation, is approximately $2.11 and $2.12 per
MMBtu, respectively. TEMI has purchased contracts granting TEMI the right to
sell estimated gas production in excess of the Specified Quantities at a price
intended to limit TEMI's losses in the event the Index Price falls below the
Minimum Price.

Gross revenues (before deductions for applicable gathering, treating and
transportation charges) from TEMI included in net profits income for the years
ended December 31, 2002, 2001 and 2000 were $13.2 million, $21.7 million and
$17.7 million, respectively.

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<PAGE>

                           Torch Energy Royalty Trust

Gathering, Treating and Transportation Arrangements

The Purchase Contract entitles TEMI to deduct certain gas gathering, treating
and transportation costs in calculating the purchase price for gas in the
Robinson's Bend, Austin Chalk and Cotton Valley Fields. The amounts that may be
deducted in calculating the purchase price for such gas are set forth in the
Purchase Contract and are not affected by the actual costs incurred by TEMI to
gather, treat and transport gas. In the Robinson's Bend Field, TEMI is entitled
to deduct a gathering, treating and transportation fee of $0.26 per MMBtu
commencing October 1, 1993 adjusted for inflation ($0.289, $0.286 and $0.283 per
MMBtu for 2002, 2001 and 2000, respectively), plus fuel usage equal to 5% of
revenues, payable to Bahia Gas Gathering, Ltd. ("Bahia"), a subsidiary of Torch,
pursuant to a gas gathering agreement. Additionally, a fee of $0.05 per MMBtu,
representing a gathering fee payable to a non-affiliate of Torch, is deducted in
calculating the purchase price for production from 68 of the 394 wells in the
Robinson's Bend Field. TEMI also deducts $0.38 per MMBtu plus 17% of revenues in
calculating the purchase price for production from the Austin Chalk Fields, as a
fee to gather, treat and transport gas production. TEMI deducts from the
purchase price for gas a transportation fee of $0.045 MMBtu for production
attributable to certain wells in the Cotton Valley Fields. During the years
ended December 31, 2002, 2001 and 2000, gas gathering, treating and
transportation fees charged to the Trust by TEMI, attributable to production
during the twelve months ended September 30, 2002, 2001 and 2000 in the
Robinson's Bend, Austin Chalk and Cotton Valley Fields, totaled $1.0 million,
$1.4 million and $1.3 million, respectively. No amounts for gathering, treating
or transportation are deducted in calculating the purchase price from the
Chalkley Field.

Item 14. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. Based on their evaluation
as of the date within 90 days of the filing date of this Annual Report on Form
10-K, the Trust's trustee has concluded that the Trust's disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities and
Exchange Act of 1934 (the "Exchange Act")) are effective to ensure that
information required to be disclosed by the Trust in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission.

(b) Changes in Internal Controls. There were no significant changes in the
Trust's internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

                                       34

<PAGE>

                           Torch Energy Royalty Trust

                                     PART IV

Item 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

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

    1.  Financial Statements:

        Torch Energy Royalty Trust
          Independent Auditors' Reports
          Statements of Assets, Liabilities and Trust Corpus at December 31,
          2002 and 2001
          Statements of Distributable Income for the Years Ended December 31,
          2002, 2001 and 2000
          Statements of Changes in Trust Corpus for the Years Ended December 31,
          2002, 2001 and 2000
          Notes to Financial Statements

        Torch Energy Advisors Incorporated and Subsidiaries ("Torch")
          Independent Auditors' Report
          Consolidated Balance Sheet of Torch as of December 31, 2002, and 2001
          and the Related
          Consolidated Statements of Operations, Stockholders' Equity and
          Comprehensive Income, and
          Cash Flows for the years ended December 31, 2002, 2001 and 2000
          Notes to Consolidated Financial Statements

    2.  Financial Statement Schedules

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

    3.  Exhibits

    Exhibit
    Number  Exhibit
    ------- -------

    4. -     Instruments of defining the rights of security holders, including
             indentures.
       4.1 - Form of Torch Energy Royalty Trust Agreement.*
       4.2 - Form of Louisiana Trust Agreement.*
       4.3 - Specimen Trust Unit Certificate.*
       4.4 - Designation of Ancillary Trustee.*

    10.-     Material contracts.
      10.1 - Purchase Agreement between TRC, Velasco and TEMI.*
      10.2 - Gas Gathering Agreement between TEMI and Bahia Gas Gathering, Ltd.*
      10.3 - Amendment to Gas Gathering Agreement.*
      10.4 - Water Gathering and Disposal Agreement between Torch Energy
             Associates, Ltd. and Velasco.*
      10.5 - Form of Texas Conveyance.*
      10.6 - Form of Louisiana Conveyance.*
      10.7 - Form of Alabama Conveyance.*
      10.8 - Standby Performance Agreement between Torch and the Trust.*
      10.9 - Amendment to Water Gathering Contract.*

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<PAGE>

                           Torch Energy Royalty Trust

        10.10- First Amendment to Oil and Gas Purchase Contract (previously
               filed on form 10-Q for the quarter ended September 30, 1994).

    23. Consents of experts and counsel.
        23.1 - Consent of T.J. Smith & Company, Inc.
        23.2 - Consent of H.J. Gruy and Associates, Inc.
        23.3 - Consent of Ryder Scott Company

    99. Additional Exhibits.
        99.1   Financial Statements of Torch Energy Advisors Incorporated.
        99.2   Certifications of Wilmington Trust Company pursuant to 18 U.S.C.
               Section 1350, as adopted pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002.

   *    Incorporated by reference from Registration Statements on Form S-1 of
        Torch Energy Advisors Incorporated (Registration No. 33-68688) dated
        November 16, 1993.

(b) Report on Form 8-K:

    None filed during the quarter ended December 31, 2002.

                                       36

<PAGE>

                                   SIGNATURES

Pursuant to the requirements 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.

                                        TORCH ENERGY ROYALTY TRUST

                                        By:  Wilmington Trust Company
                                             Trustee

                                             By: /s/ Bruce L. Bisson
                                                 -------------------------------
                                                 Bruce L. Bisson, Vice President

Date: April 14, 2003

      (The Trust has no employees, directors or executive officers.)


                                       37

<PAGE>

                                 CERTIFICATIONS

I, Bruce L. Bisson, certify that:

          1.  I have reviewed this annual report on Form 10-K of Torch Energy
              Royalty Trust, for which Wilmington Trust Company acts as Trustee;

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

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

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

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

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

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

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

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

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

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

In giving the certifications in paragraphs 4, 5 and 6 above, I have relied to
the extent I consider reasonable on information provided to me by Torch Energy
Advisors Incorporated.

Date: April 14, 2003                                   By: /s/ Bruce L. Bisson
      --------------                                       -------------------
                                                       Bruce L. Bisson
                                                       Vice President
                                                       Wilmington Trust Company

                                       38