##### 








---



##### 



The Trust
   Units of Beneficial Interest
  Sales Price
    
    
    Distributions2006
    
    High
    
    
    Low
    
    
    PaidFirst Quarter
    
    $
    16.91
    
    
    $
    14.05
    
    
    $
    .400354Second Quarter
    
    
    16.93
    
    
    
    14.35
    
    
    
    .297034Third Quarter
    
    
    17.00
    
    
    
    15.25
    
    
    
    .398559Fourth Quarter
    
    
    16.68
    
    
    
    15.23
    
    
    
    .314135Total for 2006
    
    
    
    
    
    
    
    
    
    $
    1.410082
 1




---



##### 



Sales Price
    
    
    Distributions2005
    
    High
    
    
    Low
    
    
    PaidFirst Quarter
    
    $
    15.57
    
    
    $
    12.13
    
    
    $
    .284149Second Quarter
    
    
    15.50
    
    
    
    10.75
    
    
    
    .268627Third Quarter
    
    
    17.23
    
    
    
    14.73
    
    
    
    .340939Fourth Quarter
    
    
    17.15
    
    
    
    15.00
    
    
    
    .442249Total for 2005
    
    
    
    
    
    
    
    
    
    $
    1.335964
   To Unit Holders
     2




---



##### 



Bank of America, N.A., TrusteeBy:
    /s/ Ron E. HooperRon E. HooperSenior Vice President 3




---



##### 



Description of the Properties
        4




---



##### 



Computation of Royalty Income Received by the Trust
  5




---



##### 



Year Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Waddell
    
    
    Texas
    
    
    Waddell
    
    
    Texas
    
    
    Waddell
    
    
    Texas
    
    
    Waddell
    
    
    Texas
    
    
    Waddell
    
    
    TexasdRanch
    
    
    Royalty
    
    
    Ranch
    
    
    Royalty
    
    
    Ranch
    
    
    Royalty
    
    
    Ranch
    
    
    Royalty
    
    
    Ranch
    
    
    RoyaltyProperties
    
    
    Properties
    
    
    Properties
    
    
    Properties
    
    
    Properties
    
    
    Properties
    
    
    Properties
    
    
    Properties
    
    
    Properties
    
    
    PropertiesGross Proceeds
of Sales From the Underlying
Properties:Oil Proceeds
    
    $
    51,185,185
    
    
    $
    21,301,642
    
    
    $
    43,967,934
    
    
    $
    17,415,261
    
    
    $
    32,078,721
    
    
    $
    12,296,982
    
    
    $
    24,418,227
    
    
    $
    9,454,914
    
    
    $
    20,543,224
    
    
    $
    7,785,749Gas Proceeds
    
    
    40,386,375
    
    
    
    5,780,321
    
    
    
    37,531,266
    
    
    
    5,050,206
    
    
    
    28,746,318
    
    
    
    3,970,231
    
    
    
    25,255,338
    
    
    
    3,606,615
    
    
    
    14,861,094
    
    
    
    2,245,648Total
    
    
    91,571,560
    
    
    
    27,081,963
    
    
    
    81,499,200
    
    
    
    22,465,467
    
    
    
    60,825,039
    
    
    
    16,267,213
    
    
    
    49,673,565
    
    
    
    13,061,529
    
    
    
    35,404,318
    
    
    
    10,031,397Less:Severance TaxOil
    
    
    2,219,552
    
    
    
    760,043
    
    
    
    1,806,281
    
    
    
    675,609
    
    
    
    1,366,942
    
    
    
    457,308
    
    
    
    1,045,413
    
    
    
    350,440
    
    
    
    863,299
    
    
    
    302,665Gas
    
    
    2,587,606
    
    
    
    378,513
    
    
    
    2,319,699
    
    
    
    325,044
    
    
    
    1,702,937
    
    
    
    262,673
    
    
    
    1,632,642
    
    
    
    228,928
    
    
    
    813,581
    
    
    
    159,431Other
    
    
    42,695
    
    
    
    -0-
    
    
    
    42,505
    
    
    
    
    
    
    
    42,763
    
    
    
    252,906
    
    
    
    26,850
    
    
    
    
    
    
    
    72,397
    
    
    
    Lease Operating Expense and Property TaxOil and Gas
    
    
    13,932,289
    
    
    
    1,454,993
    
    
    
    12,191,168
    
    
    
    963,563
    
    
    
    9,391,083
    
    
    
    894,383
    
    
    
    10,540,850
    
    
    
    823,331
    
    
    
    9,424,724
    
    
    
    933,646Capital Expenditures
    
    
    15,265,143
    
    
    
    
    
    
    
    7,151,598
    
    
    
    
    
    
    
    6,539,015
    
    
    
    
    
    
    
    7,734,224
    
    
    
    
    
    
    
    3,394,674
    
    
    
    0Total
    
    
    34,047,285
    
    
    
    2,593,549
    
    
    
    23,511,251
    
    
    
    1,964,216
    
    
    
    19,042,740
    
    
    
    1,867,270
    
    
    
    20,979,979
    
    
    
    1,402,699
    
    
    
    14,568,674
    
    
    
    1,395,742Net Profits
    
    
    57,524,275
    
    
    
    24,488,414
    
    
    
    57,987,949
    
    
    
    20,501,251
    
    
    
    41,782,299
    
    
    
    14,399,943
    
    
    
    28,693,586
    
    
    
    11,658,830
    
    
    
    20,835,643
    
    
    
    8,635,655Net Overriding Royalty Interest
    
    
    75
    %
    
    
    95
    %
    
    
    75
    %
    
    
    95
    %
    
    
    75
    %
    
    
    95
    %
    
    
    75
    %
    
    
    95
    %
    
    
    75
    %
    
    
    95
    %Royalty Income
    
    
    43,143,206
    
    
    
    23,263,993
    
    
    
    43,490,961
    
    
    
    19,476,189
    
    
    
    31,336,724
    
    
    
    13,679,946
    
    
    
    21,520,190
    
    
    
    11,075,888
    
    
    
    15,626,732
    
    
    
    8,203,872Total Royalty Income for
Distribution
    
    $
    43,143,206
    
    
    $
    23,263,993
    
    
    $
    43,490,961
    
    
    $
    19,476,189
    
    
    $
    31,336,724
    
    
    $
    13,679,946
    
    
    $
    21,520,190
    
    
    $
    11,075,888
    
    
    $
    15,626,732
    
    
    $
    8,203,872
 6




---



##### 



Discussion and Analysis
 Trustees Discussion and Analysis for the Three-Year Period Ended December 31, 2006
    st
      7




---



##### 



Year Ended December 31,2006
    
    2005
    
    2004RoyaltiesTotal Revenue
    
    $
    66,407,199
    
    
    $
    62,967,150
    
    
    $
    45,016,670100
    %
    
    
    100
    %
    
    
    100
    %Oil Revenue
    
    
    42,729,342
    
    
    
    38,924,579
    
    
    
    27,180,56064
    %
    
    
    62
    %
    
    
    60
    %Gas Revenue
    
    
    23,677,857
    
    
    
    24,042,571
    
    
    
    17,836,11036
    %
    
    
    38
    %
    
    
    40
    %Total Revenue/Unit
    
    $
    1.424775
    
    
    $
    1.35097
    
    
    $
    .965841
  Year Ended December 31,2006
    
    2005
    
    2004RoyaltiesOil Sales (Bbls)
    
    
    749,949
    
    
    
    827,275
    
    
    
    779,052Gas Sales (Mcf)
    
    
    3,154,791
    
    
    
    3,608,778
    
    
    
    3,245,117Underlying PropertiesOilTotal Oil Sales (Bbls)
    
    
    1,221,165
    
    
    
    1,258,584
    
    
    
    1,222,579Average Per Day (Bbls)
    
    
    3,346
    
    
    
    3,448
    
    
    
    3,340Average Price/Bbl
    
    $
    59.36
    
    
    $
    48.77
    
    
    $
    36.30
 8




---



##### 



Year Ended December 31,2006
    
    2005
    
    2004GasTotal Gas
Sales (Mcf)
    
    
    5,973,188
    
    
    
    6,132,716
    
    
    
    5,975,867Average Per Day (Mcf)
    
    
    16,365
    
    
    
    16,802
    
    
    
    16,328Average Price/Mcf
    
    $
    7.73
    
    
    $
    6.94
    
    
    $
    5.47
           9




---



##### 



Results of the Fourth Quarters of 2006 and 2005
   Fourth Quarter2006
    
    2005RoyaltiesOil Sales (Bbls)
    
    
    175,356
    
    
    
    222,071Gas Sales (Mcf)
    
    
    734,754
    
    
    
    991,092Underlying PropertiesTotal Oil Sales (Bbls)
    
    
    308,453
    
    
    
    309,862Average Per Day (Bbls)
    
    
    3,353
    
    
    
    3,368Average Price/Bbls
    
    $
    59.14
    
    
    $
    58.88Total Gas Sales (Mcf)
    
    
    1,578,248
    
    
    
    1,499,863Average Per Day (Mcf)
    
    
    17,155
    
    
    
    16,303Average Price/Mcf
    
    $
    6.83
    
    
    $
    8.70
    10




---



##### 



Off-Balance Sheet Arrangements.
  Tabular Disclosure of Contractual Obligations.
 Payments Due by PeriodContractual
    
    
    
    
    
    Less than 1
    
    1  3
    
    
    
    
    
    More thanObligations
    
    Total
    
    Year
    
    Years
    
    3-5 Years
    
    5 YearsDistribution
payable to Unit
holders
    
    $
    5,135,136
    
    
    $
    5,135,136
    
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    $
    5,135,136
    
    
    $
    5,135,136
    
    
    
    0
    
    
    
    0
    
    
    
    0
 11




---



##### 



PERMIAN BASIN ROYALTY TRUST
FINANCIAL STATEMENTS
 STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
DECEMBER 31, 2006 AND 2005
 2006
    
    
    2005ASSETSCash and Short-term Investments
    
    $
    5,135,136
    
    
    $
    7,264,048Net Overriding Royalty Interests in
Producing Oil and Gas Properties  Net (Notes 2 and 3)
    
    
    1,439,214
    
    
    
    1,610,630$
    6,574,350
    
    
    $
    8,874,678LIABILITIES AND TRUST CORPUSDistribution Payable to Unit Holders
    
    $
    5,135,136
    
    
    $
    7,264,048Trust Corpus  46,608,796 Units of
Beneficial Interest Authorized and Outstanding
    
    
    1,439,214
    
    
    
    1,610,630$
    6,574,350
    
    
    $
    8,874,678
 STATEMENTS OF DISTRIBUTABLE INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 2006
 2006
    
    
    2005
    
    
    2004Royalty Income (Notes 2 and 3)
    
    $
    66,407,199
    
    
    $
    62,967,150
    
    
    $
    45,016,670Interest Income
    
    
    133,648
    
    
    
    63,909
    
    
    
    19,88366,540,847
    
    
    
    63,031,059
    
    
    
    45,036,553Expenditures  General and
Administrative
    
    
    825,478
    
    
    
    763,390
    
    
    
    489,810Distributable Income
    
    $
    65,715,369
    
    
    $
    62,267,669
    
    
    $
    44,546,743Distributable Income per Unit
(46,608,796 Units)
    
    $
    1.410082
    
    
    $
    1.335964
    
    
    $
    .955758
 12




---



##### 



STATEMENTS OF CHANGES IN TRUST CORPUS
FOR THE THREE YEARS ENDED DECEMBER 31, 2006
 2006
    
    
    2005
    
    
    2004Trust Corpus, Beginning of Period
    
    $
    1,610,630
    
    
    $
    1,795,267
    
    
    $
    1,991,594Amortization of Net Overriding
Royalty
Interests
(Notes 2 and 3)
    
    
    (171,416
    )
    
    
    (184,637
    )
    
    
    (196,327
    )Distributable Income
    
    
    65,715,369
    
    
    
    62,267,669
    
    
    
    44,546,743Distributions Declared
    
    
    (65,715,369
    )
    
    
    (62,267,669
    )
    
    
    (44,546,743
    )Trust Corpus, End of Period
    
    $
    1,439,214
    
    
    $
    1,610,630
    
    
    $
    1,795,267
  13




---



##### 



NOTES TO FINANCIAL STATEMENTS
 1. Trust Organization and Provisions
    
    
    the Trust shall not engage in any business or commercial activity of any kind or
acquire any assets other than those initially conveyed to the Trust;
    
    the Trustee may not sell all or any part of the Royalties unless approved by
holders of 75% of all Units outstanding in which case the sale must be for cash and
the proceeds promptly distributed;
    
    the Trustee may establish a cash reserve for the payment of any liability which is
contingent or uncertain in amount;
    
    the Trustee is authorized to borrow funds to pay liabilities of the Trust; and
    
    the Trustee will make monthly cash distributions to Unit holders (see Note 2).
 2. Net Overriding Royalty Interests and Distribution to Unit Holders
  14




---



##### 



3. Basis of Accounting
  
    
    Royalty income recorded is the amount computed and paid by the working interest
owner to the Trustee on behalf of the Trust.
    
    Trust expenses recorded are based on liabilities paid and cash reserves established
out of cash received or borrowed funds for liabilities and contingencies.
    
    Distributions to Unit holders are recorded when declared by the Trustee.
  4. New Accounting Pronouncements
  15




---



##### 



Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans an amendment of FASB Statements No. 87, 88, 106 and 132(R).
 Fair Value Measurements.
 The Fair Value Option
for Financial Assets and Financial Liabilities and  Including an amendment of FASB Statement No.
115.
 Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in
the Current Year Financial Statements,
 5. Federal Income Tax
   16




---



##### 



6. Significant Customers
  17




---



##### 



7. Proved Oil and Gas Reserves (Unaudited)
  8. Quarterly Schedule of Distributable Income (Unaudited)
  DistributableIncome andRoyalty
    
    
    Distributable
    
    
    Distribution2006
    
    Income
    
    
    Income
    
    
    Per UnitFirst Quarter
    
    $
    18,918
    
    
    $
    18,653
    
    
    $
    .400354Second Quarter
    
    
    14,041
    
    
    
    13,844
    
    
    
    .297034Third Quarter
    
    
    18,697
    
    
    
    18,576
    
    
    
    .398559Fourth Quarter
    
    
    14,751
    
    
    
    14,642
    
    
    
    .314135Total
    
    $
    66,407
    
    
    $
    65,715
    
    
    $
    1.410082
 DistributableIncome andRoyalty
    
    
    Distributable
    
    
    Distribution2005
    
    Income
    
    
    Income
    
    
    Per UnitFirst Quarter
    
    $
    13,531
    
    
    $
    13,244
    
    
    $
    .284149Second Quarter
    
    
    12,746
    
    
    
    12,521
    
    
    
    .268627Third Quarter
    
    
    15,989
    
    
    
    15,890
    
    
    
    .340939Fourth Quarter
    
    
    20,701
    
    
    
    20,613
    
    
    
    .442249Total
    
    $
    62,697
    
    
    $
    62,268
    
    
    $
    1.335964
 9. SUBSEQUENT EVENTS
  Monthly Record Date
    
    
    Payment Date
    
    Distribution per UnitJanuary 31, 2007
    
    
    February 14, 2007
    
    $
    .101215February 28,
2007
    
    
    March 14, 2007
    
    $
    .090695
 10. STATE TAX CONSIDERATIONS
   18




---



##### 



19




---



##### 



Internal Control  Integrated
Framework




---



#####