<PAGE>   1

================================================================================
                       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, 1996

                                       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 1-8033
                          PERMIAN BASIN ROYALTY TRUST

   (Exact Name of Registrant as Specified in the Permian Basin Royalty Trust
                                   Indenture)

<TABLE>
<S>                                            <C>
                    TEXAS                                        75-6280532
       (State or Other Jurisdiction of                        (I.R.S. Employer
        Incorporation or Organization)                      Identification No.)
          NATIONSBANK OF TEXAS, N.A.
               TRUST DEPARTMENT
                P.O. BOX 1317
              FORT WORTH, TEXAS                                    76101
   (Address of Principal Executive Offices)                      (Zip Code)
</TABLE>

                                 (817) 390-6905
              (Registrant's Telephone Number, Including Area Code)

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

<TABLE>
<CAPTION>
             TITLE OF EACH CLASS                 NAME OF EACH EXCHANGE ON WHICH REGISTERED
             -------------------                 -----------------------------------------
<C>                                            <C>
         UNITS OF BENEFICIAL INTEREST                     NEW YORK STOCK EXCHANGE
</TABLE>

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

     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  X    No
                                               ---      ---
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

     At March 18, 1997, there were 46,608,796 Units of Beneficial Interest of
the Trust outstanding with an aggregate market value on that date of
$198,087,383.

                      DOCUMENTS INCORPORATED BY REFERENCE

     "Units of Beneficial Interest" at page 2; "Trustee's Discussion and
Analysis for the Three-Year Period Ended December 31, 1996" at pages 8 through
11; "Results of the 4th Quarters of 1996 and 1995" at page 12; and "Statements
of Assets, Liabilities and Trust Corpus," "Statements of Distributable Income,"
"Statements of Changes in Trust Corpus," "Notes to Financial Statements" and
"Independent Auditors' Report" at page 13 et seq., in registrant's Annual Report
to security holders for fiscal year ended December 31, 1996 are incorporated
herein by reference for Item 5 (Market for Units of the Trust and Related
Security Holder Matters), Item 7 (Management's Discussion and Analysis of
Financial Condition and Results of Operation) and Item 8 (Financial Statements
and Supplementary Data) of Part II of this Report.
================================================================================
<PAGE>   2

                                     PART I

ITEM 1. BUSINESS

     The Permian Basin Royalty Trust (the "Trust") is an express trust created
under the laws of the state of Texas by the "Permian Basin Royalty Trust
Indenture" (the "Trust Indenture") entered into on November 3, 1980, between
Southland Royalty Company ("Southland Royalty") and The First National Bank of
Fort Worth, as Trustee. NationsBank of Texas, N.A. (formerly known as NCNB Texas
National Bank), a banking association organized under the laws of the United
States, as the successor of The First National Bank of Fort Worth, is now the
Trustee of the Trust. The principal office of the Trust (sometimes referred to
herein as the "Registrant") is located at 500 West Seventh Street, Fort Worth,
Texas (telephone number 817/390-6905).

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

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

     The Royalties were carved out of and now burden those properties and
interests as are more particularly described under "Item 2. PROPERTIES" herein.

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

     In 1985, Southland Royalty became a wholly-owned subsidiary of Burlington
Northern Inc. ("BNI"). In 1988, BNI transferred its natural resource operations
to Burlington Resources Inc. ("BRI") as a result of which Southland Royalty
became a wholly-owned indirect subsidiary of BRI. As a result of these
transactions, El Paso Natural Gas Company ("El Paso") also became an indirect
subsidiary of BRI. In March 1992, El Paso completed an initial public offering
of 5,750,000 newly issued shares of El Paso common stock, thereby decreasing
BRI's ownership of El Paso to approximately eighty-five percent (85%). On June
30, 1992, BRI distributed all of the shares of El Paso common stock owned by BRI
to BRI's stockholders of record as of June 15, 1992. See "Pricing Information"
under "Item 2. PROPERTIES" herein.

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

     The term "net proceeds" as used in the above conveyance means the excess of
"gross proceeds" received by BROG during a particular period over "production
costs" for such period. "Gross proceeds" means the amount received by BROG (or
any subsequent owner of the interests from which the Royalties were carved) from
the sale of the production attributable to the properties and interests from
which the Royalties were carved, subject to certain adjustments. "Production
costs" means, generally, costs incurred on an accrual basis in operating the
properties and interests out of which the Royalties were carved, including both
capital and non-capital costs; for example, development drilling, production and
processing costs, applicable taxes, and

                                        1
<PAGE>   3

operating charges. If production costs exceed gross proceeds in any month, the
excess is recovered out of future gross proceeds prior to the making of further
payment to the Trust, but the Trust is not liable for any production costs or
liabilities attributable to these properties and interests or the minerals
produced therefrom. If at any time the Trust receives more than the amount due
from the Royalties, it shall not be obligated to return such overpayment, but
the amounts payable to it for any subsequent period shall be reduced by such
amount, plus interest, at a rate specified in the conveyance.

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

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

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

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

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

ITEM 2. PROPERTIES

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

     The following information in Item 2 is based upon data and information
furnished to the Trustee by Southland Royalty or BROG.

PRODUCING ACREAGE, WELLS AND DRILLING

     Waddell Ranch Properties. The Waddell Ranch properties consist of 78,175
gross (34,205 net) producing acres. A majority of the proved reserves are
attributable to six fields: Dune, Sand Hills (Judkins), Sand Hills

                                        2
<PAGE>   4

(McKnight), Sand Hills (Tubb), University-Waddell (Devonian) and Waddell. At
December 31, 1996, the Waddell Ranch properties contained 871 gross (359.51 net)
productive oil wells, 152 gross (64.54 net) productive gas wells and 310 gross
(125.44 net) injection wells.

     Effective May 1, 1991, Chevron USA, Inc. ("Chevron") resigned as operator
of the Waddell Ranch properties. Southland Royalty was named the operator of
record. BROG is now operator of record. All field, technical and accounting
operations have been contracted by an agreement between the working interest
owners and Coastal Management Corporation ("CMC") but remain under the direction
of BROG.

     The Waddell Ranch properties are mature producing properties, and all of
the major oil fields are currently being waterflooded. Proved reserves and
estimated future net revenues attributable to the properties are included in the
reserve reports summarized below. BROG does not own the full working interest in
any of the tracts constituting the Waddell Ranch properties and, therefore,
implementation of any development programs will require approvals of other
working interest holders as well as BROG. In addition, implementation of any
development programs will be dependent upon oil and gas prices currently being
received and anticipated to be received in the future. During 1996 there were 22
gross (8.375 net) oil wells drilled on the Waddell Ranch Properties. At December
31, 1996 there were no wells in progress on the Waddell Ranch Properties. During
1995 there were 32 gross (14.075 net) oil wells drilled on the Waddell Ranch
properties. At December 31, 1995 there were 3 gross (.8 net) wells in progress
on the Waddell Ranch properties. During 1994 there were 22 gross (9.875 net)
wells drilled on the Waddell Ranch properties. At December 31, 1994 there were
no wells in progress on the Waddell Ranch properties. During 1993 there were 15
gross (6.75 net) wells drilled on the Waddell Ranch properties. At December 31,
1993 there were 4 gross (2 net) wells in progress on the Waddell Ranch
properties.

     BROG has advised the Trust that the total amount of capital expenditures
for 1996 with regard to the Waddell Ranch properties totalled $9,989,064.
Capital expenditures include the cost of the 1996 drilling program and remedial
and maintenance activities. BROG has advised the Trust that the capital
expenditures budget for 1997 totals $11,835,000, of which $5,203,000 is
attributable to the 1997 drilling program, $5,051,000 to workovers and
recompletions and $1,581,000 to facility upgrades and replacements. The Trustee
has also been advised that $220,000 of capital expenditures were not accrued in
1996 and will be included in the royalty calculations in 1997. Accordingly,
there is an estimated 18% increase in capital expenditures for 1997 as compared
with the 1996 capital expenditures.

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

     Approximately $1.3 million in ad valorem taxes related to 1991 through 1994
for the Texas Royalty properties that Southland Royalty did not previously
charge to gross proceeds attributable to the Trust was charged to the Trust over
12 months beginning March 1995. Such amount was charged by deducting $87,000 per
month from gross proceeds attributable to the Texas Royalty properties in
calculating royalty income from such properties. To the extent charges were made
to gross proceeds, the amount of funds available for distribution to Unit
holders was reduced.

     In the fourth quarter of 1996, BROG notified the Trust that, pursuant to an
ongoing divestiture program, BROG intended to sell its interests in the Texas
Royalty properties that are subject to the Net Overriding Royalty Conveyance to
the Trust dated effective November 1, 1980 ("Conveyance"). A Purchase and Sale
Agreement was executed between BROG and Riverhill Energy Corporation
("Riverhill"), a wholly owned subsidiary of Riverhill Capital Corporation and an
affiliate of CMC. CMC currently conducts all field, technical and accounting
operations on behalf of BROG with regard to the Waddell Ranch properties.
Riverhill is a privately owned Texas corporation with offices in Bryan and
Midland, Texas. The Trustee was advised by BROG that the transaction closed on
February 14, 1997. The Trustee has been further informed by

                                        3
<PAGE>   5

BROG that, as required by the Conveyance, Riverhill has succeeded to all of the
requirements upon and the responsibilities of BROG under the Conveyance with
regard to the Texas Royalty properties. BROG and Riverhill have further advised
the Trustee that all accounting operations pertaining to the Texas Royalty
properties will be performed by CMC under the direction of Riverhill. BROG had
indicated to the Trustee that BROG will work together with CMC and Riverhill in
an effort to assure that various administrative functions and reporting
requirements assumed by Riverhill are met. The Trustee has been advised that
independent auditors representing Riverhill and CMC will be Arthur Andersen.

OIL AND GAS PRODUCTION

     The Trust recognizes production during the month in which the related
distribution is received. Production of oil and gas and related average sales
prices attributable to the Royalties for the three years ended December 31,
1996, excluding portions attributable to the adjustments discussed below, were
as follows:

<TABLE>
<CAPTION>
                                           WADDELL                           TEXAS
                                            RANCH                           ROYALTY
                                         PROPERTIES                       PROPERTIES                          TOTAL
                              ---------------------------------   ---------------------------   ---------------------------------
                                1996        1995        1994       1996      1995      1994       1996        1995        1994
                              ---------   ---------   ---------   -------   -------   -------   ---------   ---------   ---------
<S>                           <C>         <C>         <C>         <C>       <C>       <C>       <C>         <C>         <C>
Production
  Oil (barrels).............    418,991     262,221     260,536   352,833   330,922   400,573     771,824     593,143     661,109
  Gas (Mcf).................  1,915,649   1,289,005   1,366,386   724,732   616,294   731,832   2,640,381   1,905,299   2,098,218
Average Price
  Oil/barrel................     $19.97      $16.84      $16.01    $18.32    $15.71    $13.84      $19.55      $16.55      $14.69
  Gas/Mcf...................     $ 2.20      $ 1.59      $ 1.70    $ 2.04    $ 1.55    $ 1.73      $ 2.18      $ 1.58      $ 1.71
</TABLE>

     As a result of an issue raised by the Trustee during March 1994 regarding
potential underpayments of royalty income by Southland Royalty from the Texas
Royalty properties beginning January 1991, the March 1994 royalty income
included a payment by Southland Royalty of $2.9 million, or $.062261 per Unit.
Further net revisions resulted in additional payments to the Trust by Southland
Royalty of approximately $221,000 and $133,000 in the quarters ended June 30,
1994, and September 30, 1994, respectively. The payments made by Southland
Royalty were estimates of previous underpayments of royalty income to the Trust
and were subject to revision as additional investigation of such underpayments
was performed by BROG and the Trustee. The Trustee engaged its independent
accountants and independent petroleum engineers to review certain information
underlying such payments previously received from BROG, and has determined that
the amounts are reasonable.

     In accordance with the terms of the conveyances which conveyed the
Royalties to the Trust, to the extent it has the legal right to do so, Southland
Royalty had, and now BROG has, the obligation for marketing the production from
the properties from which the Trust's Royalties were carved, at the best prices
and on the best terms it deems reasonably obtainable in the circumstances. In
accordance with the conveyances, the Trustee gave notice to Southland Royalty of
the reservation of the Trust's right to question certain lease expenses and the
adequacy of prices obtained by Southland Royalty for oil production during the
period commencing May 1, 1991, and any further resulting or ancillary claims
which may exist as a consequence of the foregoing claims as to adequacy of
pricing.

     On January 3, 1994, the dispute between the Trustee and Southland Royalty
regarding the adequacy of prices obtained by Southland Royalty for oil
production during the period May 1991 through February 1993, was resolved. As a
result of the settlement of such dispute, Southland Royalty agreed to pay the
Trust $850,000 or $.0182369 per Unit. Such payment to the Trust was made on
January 31, 1994, and was included in distributions made to Unit holders of
record on January 31, 1994. The Trust has been advised by BROG that for the
period August 1, 1993 through June 30, 1997, the oil from the Waddell Ranch
properties is being sold under a competitive bid to independent third parties.

PRICING INFORMATION

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

                                        4
<PAGE>   6

     Oil. The Trustee has been advised by BROG that for the period August 1,
1993 through June 30, 1997, the oil from the Waddell Ranch properties is being
sold under a competitive bid to independent third parties.

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

OIL AND GAS RESERVES

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

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

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

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

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

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

     The independent petroleum engineers' reports as to the proved oil and gas
reserves attributable to the Royalties conveyed to the Trust were obtained from
Cawley, Gillespie & Associates, Inc. The following table presents a
reconciliation of proved reserve quantities from December 31, 1993 through
December 31, 1996 (in thousands):

<TABLE>
<CAPTION>
                                                                  WADDELL
                                                                   RANCH         TEXAS ROYALTY
                                                                PROPERTIES        PROPERTIES           TOTAL
                                                              ---------------   ---------------   ---------------
                                                               OIL      GAS      OIL      GAS      OIL      GAS
                                                              (BBLS)   (MCF)    (BBLS)   (MCF)    (BBLS)   (MCF)
                                                              ------   ------   ------   ------   ------   ------
<S>                                                           <C>      <C>      <C>      <C>      <C>      <C>
December 31, 1993...........................................   5,535   24,638   4,940     4,789   10,475   29,427
Extensions, discoveries and other additions.................     -0-      -0-     -0-       -0-      -0-      -0-
Revisions of previous estimates.............................     763    1,808     333       888    1,096    2,696
Production..................................................    (261)  (1,366)   (570)     (852)    (831)  (2,218)
                                                               -----   ------   -----     -----   ------   ------
December 31, 1994...........................................   6,037   25,080   4,703     4,825   10,740   29,905
Extensions, discoveries and other additions.................      49       28     -0-       -0-       49       28
Revisions of previous estimates.............................     128    1,024     205       664      333    1,688
Production..................................................    (262)  (1,289)   (331)     (616)    (593)  (1,905)
                                                               -----   ------   -----     -----   ------   ------
December 31, 1995...........................................   5,952   24,843   4,577     4,873   10,529   29,716
Extensions, discoveries and other additions.................      24       24     -0-       -0-       24       24
Revisions of previous estimates.............................   1,746   11,560     448       642    2,194   12,202
Production..................................................    (419)  (1,916)   (353)     (725)    (772)  (2,641)
                                                               -----   ------   -----     -----   ------   ------
December 31, 1996...........................................   7,303   34,511   4,672     4,790   11,975   39,301
                                                               =====   ======   =====     =====   ======   ======
</TABLE>

                                        5
<PAGE>   7

     The production volumes for 1994 for the Texas Royalty properties include
volumes associated with the Other Payments received during 1994. See discussion
of Other Payments in Note 8 in the Notes to Financial Statements of the Trust's
Annual Report to security holders for the year ended December 31, 1996.

     Estimated quantities of proved developed reserves of crude oil and natural
gas as of December 31, 1996, 1995 and 1994 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                              CRUDE OIL    NATURAL GAS
                                                               (BBLS)         (MCF)
                                                              ---------    -----------
<S>                                                           <C>          <C>
1996........................................................    10,154          32,008
1995........................................................     9,061          23,467
1994........................................................     9,465          24,172
</TABLE>

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

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

     The 1996, 1995 and 1994 change in the standardized measure of discounted
future net cash flows related to future royalty income from proved reserves
discounted at 10% is as follows (in thousands):

<TABLE>
<CAPTION>
                                      WADDELL RANCH PROPERTIES      TEXAS ROYALTY PROPERTIES                 TOTAL
                                    ----------------------------   ---------------------------   ------------------------------
                                      1996      1995      1994      1996      1995      1994       1996       1995       1994
                                    --------   -------   -------   -------   -------   -------   --------   --------   --------
<S>                                 <C>        <C>       <C>       <C>       <C>       <C>       <C>        <C>        <C>
January 1.........................  $ 74,070   $64,730   $55,544   $36,324   $33,660   $27,842   $110,394   $ 98,390   $ 83,386
Extensions, discoveries and other
  additions.......................       447       457       -0-       -0-       -0-       -0-        447        457        -0-
Accretion of discount.............     7,407     6,473     5,554     3,632     3,366     2,784     11,039      9,839      8,338
Revisions of prior year estimates,
  changes in price and other......    80,524     8,548    10,612    20,153     5,175    12,701    100,677     13,723     23,313
Royalty income....................   (12,278)   (6,138)   (6,980)   (7,652)   (5,877)   (9,667)   (19,930)   (12,015)   (16,647)
                                    --------   -------   -------   -------   -------   -------   --------   --------   --------
December 31.......................  $150,170   $74,070   $64,730   $52,457   $36,324   $33,660   $202,627   $110,394   $ 98,390
                                    ========   =======   =======   =======   =======   =======   ========   ========   ========
</TABLE>

     Oil and gas prices of $23.88 and $22.32 per barrel and $4.00 and $2.64 per
Mcf were used to determine the estimated future net revenues from the Waddell
Ranch properties and the Texas Royalty properties at December 31, 1996. The
extension, discoveries and other additions for the Waddell Ranch properties are
reserves added as a result of remedial activity in the Waddell Ellenberger
Field. The upward revision of the estimated oil and gas reserves and the related
increase in the discounted future net cash flow for the Waddell Ranch properties
was due to the increase in oil and gas prices from 1995 to 1996, as well as
production response from drilling and remedial activity. The largest increase in
oil reserves due to drilling and remedial activity occurred in the Waddell
Field. The revisions in the oil and gas reserves and related discounted cash
flow for the Texas Royalty properties are mainly due to the increase in oil and
gas prices at December 31, 1996.

     Oil and gas prices of $18.02 and $16.19 per barrel and $1.94 and $1.75 per
Mcf were used to determine the estimated future net revenues from the Waddell
Ranch properties and the Texas Royalty properties at December 31, 1995. The
extension, discoveries and other additions for the Waddell Ranch properties are
proved undeveloped reserves related to field extension development for the
Waddell Field. The upward revisions of both reserves and discounted future net
cash flows for the Waddell Ranch properties are due to the increases in oil
prices as well as production response from drilling and remedial activities on
the Dune Field, Sand Hills (Judkins) Field, Sand Hills (Tubb) Field and the
Waddell Field. The upward revisions of reserves

                                        6
<PAGE>   8

and discounted future net cash flows for the Texas Royalty properties are due to
the increase in oil prices at December 31, 1995.

     Oil and gas prices of $15.60 and $14.50 per barrel and $1.87 and $1.75 per
Mcf were used to determine the estimated future net revenues from the Waddell
Ranch properties and the Texas Royalty properties at December 31, 1994. The
upward revision of the estimated oil reserves and the related increase in the
discounted future net cash flow for the Waddell Ranch properties was primarily
due to the increase in oil prices from 1993 to 1994. The upward revision of the
estimated gas reserves for the Waddell Ranch properties was primarily due to the
production response resulting from remedial work performed during 1994. The
adjustment in the oil and gas reserves and the related discounted cash flow for
the Texas Royalty properties are due to a revision in the estimate based on
revised net production data received from Southland Royalty.

     The following presents estimated future net revenue and the present value
of estimated future net revenue, for each of the years ended December 31, 1996,
1995 and 1994 (in thousands except amounts per Unit):

<TABLE>
<CAPTION>
                                                     1996                     1995                     1994
                                             ---------------------    ---------------------    ---------------------
                                             ESTIMATED                ESTIMATED                ESTIMATED
                                              FUTURE      PRESENT      FUTURE      PRESENT      FUTURE      PRESENT
                                                NET        VALUE         NET        VALUE         NET        VALUE
                                              REVENUE      AT 10%      REVENUE      AT 10%      REVENUE      AT 10%
                                             ---------    --------    ---------    --------    ---------    --------
<S>                                          <C>          <C>         <C>          <C>         <C>          <C>
Total Proved
  Waddell Ranch properties.................   $294,653    $150,170     $147,068    $ 74,070     $133,373    $ 64,730
  Texas Royalty properties.................    111,181      52,457       78,586      36,324       72,870      33,660
                                              --------    --------     --------    --------     --------    --------
        Total..............................   $405,834    $202,627     $225,654    $110,394     $206,243    $ 98,390
                                              ========    ========     ========    ========     ========    ========
Total Proved Per Unit......................   $   8.71    $   4.35     $   4.84    $   2.37     $   4.42    $   2.11
                                              ========    ========     ========    ========     ========    ========
Proved Developed
  Waddell Ranch properties.................   $226,174    $124,395     $110,611    $ 60,600     $104,470    $ 53,260
  Texas Royalty properties.................    111,181      52,457       78,586      36,324       72,870      33,660
                                              --------    --------     --------    --------     --------    --------
        Total..............................   $337,355    $176,852     $189,197    $ 96,924     $177,340    $ 86,920
                                              ========    ========     ========    ========     ========    ========
</TABLE>

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

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

REGULATION

     Many aspects of the production, pricing and marketing of crude oil and
natural gas are regulated by federal and state agencies. The Federal Energy
Regulatory Commission ("FERC") is primarily responsible for federal regulation
of natural gas.

  Natural Gas Regulation

     The interstate transportation and sale for resale of natural gas is subject
to federal governmental regulation, including regulation of tariffs charged and
various other matters, by FERC. The Natural Gas

                                        7
<PAGE>   9

Wellhead Decontrol Act of 1989 terminated federal price controls on wellhead
sales of domestic natural gas on January 1, 1993.

     In 1992, FERC issued Orders Nos. 636 and 636-A, which generally opened
access to interstate gas pipelines by requiring such pipelines to "unbundle"
their transportation services and allow shippers to choose and pay for only the
services they require, regardless of whether the shipper purchases gas from such
pipelines or from other suppliers. These orders also require upstream pipelines
to permit downstream pipelines to assign upstream capacity to their shippers and
place analogous, unbundled access requirements on the downstream pipelines.
Although these orders should generally have the effect of facilitating the
transportation of gas produced from the properties from which the Royalties were
carved, as well as to facilitate the direct access to end-user markets, the
impact of these orders on marketing production from the properties from which
the Royalties were carved cannot be predicted at this time.

     While natural gas prices are currently unregulated, Congress historically
has been active in the area of natural gas regulation. It is impossible to
predict whether new legislation to regulate natural gas might be proposed, 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
operations of the properties from which the Royalties were carved.

  State Regulation

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

  Other Regulation

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

                                        8
<PAGE>   10

ITEM 3. LEGAL PROCEEDINGS

     The Trustee has been notified of the settlement of a class action lawsuit
pending in the 270th District Court of Harris County, Texas (the "Court") Cause
No. 92-026182 styled Caroline Altheide and Langdon Harrison v. Meridian Oil
Inc., Meridian Oil Holding Inc., Meridian Oil Trading Inc., Meridian Oil
Production Inc., Southland Royalty Company, El Paso Production Company, Meridian
Oil Hydrocarbons Inc., Meridian Oil Gathering Inc., Meridian Oil Services Inc.
and Edward Parker filed in June 1992 ("Class Action"). The defendants in this
lawsuit are collectively referred to herein as "Meridian."

     The members of the class ("Class Members") involved in the Class Action
that was certified by the Court are all persons or entities who (i) at any time
between December 1, 1986 and July 1, 1996 received payments directly from
Meridian, (ii) the payments from Meridian were attributable to interests in
natural gas that was sold at the wellhead to Meridian Oil Trading Inc., and
(iii) the interests were either royalty interests, overriding royalty interests
or interests of a similar nature that burdened the working interests of
Meridian, or working interests in properties operated by Meridian, or royalty
interests, overriding royalty interests or interests of a similar nature that
burdened working interests in properties operated by Meridian. Meridian, the San
Juan Basin Royalty Trust, the Burlington Resources Coal Seam Royalty Trust and
the Commissioner of Public Lands of the New Mexico State Lands Office are not
Class Members.

     In summary, the claims asserted in the Class Action ("Class Claims") are
those asserted in Plaintiffs' Second Amended Original Petition filed in the
Class Action which are based upon the manner in which Meridian calculated
payments to its royalty owners and its joint working interest owners in natural
gas-producing properties. It is alleged that those payments were based on
wellhead prices that were set by a marketing affiliate, rather than upon the net
prices that Meridian received for the gas and liquid components in arm's-length
sales to non-affiliated purchasers. More specifically, such claims are based on
Meridian's conduct in basing its payments to Class Members, for natural gas sold
at the wellhead to Meridian Oil Trading Inc., on wellhead prices that resulted
from one or more of the following:

          (i) Meridian's use of allegedly depressed prices for gas set by
     Meridian Oil Trading Inc.;

          (ii) Meridian's use of allegedly inflated cost factors for
     transportation services set by Meridian Oil Trading Inc.;

          (iii) Meridian's use of allegedly depressed net prices for liquids set
     by Meridian Oil Hydrocarbons Inc.; and

          (iv) Meridian's use of allegedly inflated rates for coal seam
     gathering and treating services set by Meridian Oil Gathering Inc.

     It was alleged that Meridian's conduct violated applicable legal
principles. Meridian denied that its conduct had been unlawful or otherwise
wrongful. The Court has not ruled on the merits of the Class Claims or on
Meridian's defenses to such claims.

     The settlement reached by the parties in the Class Action provides for the
payment of up to $42 million together with interest thereon beginning on July
17, 1996 until the date the settlement checks are initially mailed to the Class
Members participating in the settlement. Such settlement amount is subject to
reduction for certain adjustments such as (i) fees, costs and expenses awarded
by the Court to the Class Counsel (Susman Godfrey L.L.P. and Dick Watt), (ii)
extra compensation awarded by the Court to the named Plaintiffs (Caroline D.
Altheide and Langdon D. Harrison), and (iii) the expense incurred in giving
notice and administering the proposed settlement ("Net Settlement Fund").
Concurrently with Meridian's payment of the Net Settlement Fund to Class Members
who did not timely and validly elect to be excluded from the Class ("Settlement
Class Members"), Meridian is obligated under the settlement to advise its then
current recipients of royalty payments that Meridian intends (i) to commence
calculating royalty payments based upon the net prices received by Meridian from
non-affiliated third parties for natural gas and the liquids extracted
therefrom, and (ii) in calculating royalty payments on gas produced from coal
seam gas wells using the Val Verde Gathering System, to commence using a
deduction for gathering and treating the gas produced from such wells that does
not exceed 75% of the fee charged by Meridian Oil Gathering Inc. for similar

                                        9
<PAGE>   11

services to the five largest (by volume) non-affiliated third-party shippers.
Meridian is not obligated to calculate royalty payments in such method in the
future but, if it changes such method of calculation, it is obligated to provide
notice of such change in method of calculation to the then-current recipients of
royalty payments.

     Of the Net Settlement Fund, (i) 48% thereof will be distributed among Class
Members whose interests bear on "conventional" gas-producing properties
(specifically, gas not gathered on the Val Verde Gathering System) that are
located in Meridian's Farmington operating division (which is roughly
coextensive with the San Juan Basin of New Mexico and Colorado), (ii) 42%
thereof will be distributed among the Class Members whose interests bear on the
coal seam gas producing properties located in Meridian's Farmington operating
division (specifically, gas gathered on the Val Verde Gathering System), and
(iii) 10% thereof will be distributed among those Class Members whose interests
bear on gas-producing properties located in areas other than Meridian's
Farmington operating division. The Trust would fall into the last of these three
classifications. It is estimated that the Trust's share of the Net Settlement
Fund will be between $560,000 and $850,000, the exact amount of which cannot be
determined at this time.

     Upon final judicial approval of the settlement, the settlement provides
that a judgment be entered in the Class Action dismissing the Class Action with
prejudice to its refiling. As a result of the settlement, Settlement Class
Members release and discharge the Released Parties, and each of them, from and
with respect to the Class Claims and such Class Members will not be able to
pursue the Class Claims against the Released Parties. "Released Parties" as used
herein means, severally and collectively, the Defendants and Meridian Oil Inc.
and all Affiliates of Burlington Resources Inc. since December 1, 1986,
collectively, and all past and present agents, employees, officers, directors,
shareholders, representatives, attorneys, predecessors, successors, assigns and
affiliates of each of the Defendants and of Meridian Oil Inc. and all Affiliates
of Burlington Resources Inc. since December 1, 1986, collectively. "Released
Parties" also includes all other persons or entities who are liable or become
liable for the conduct of any person or entity that is identified in the
preceding sentence. "Affiliates" as used herein means Burlington Resources
Inc.'s direct and indirect subsidiaries.

     It was determined by the Trustee that the Trust is part of the Class that
was certified by the Court in the Class Action and that it was in the best
interest of the Trust to elect to remain as part of the Class and share in the
Net Settlement Fund. The Trustee believes that the Class Claims, if true, had
little, if any, detrimental effect on the Trust and the Trust is being
adequately compensated as a result of this settlement.

     A judgment has been signed by the Court approving the settlement. However,
a Notice of Appeal was filed by San Juan 1990-A, L.P., K&W Gas Partners, L.P.,
MAP 1992-A Partners, L.P. and The Board of Trustees of Leland Stanford Junior
University, Non-Profit Corporation (Stanford University) on February 7, 1997.
One of the conditions set forth in the settlement agreement for the distribution
of settlement proceeds related to the Class Action is that there will be no
distribution of the settlement proceeds unless and until such judgment is no
longer subject to further appeal and, if there is an appeal, not unless and
until such judgment is affirmed or such appeal is dismissed and the time for any
further proceedings in the appellate court of last resort has expired. As a
result of such appeal, no distribution of settlement proceeds has been made to
the Trust and the Trustee does not know if or when the Trust will receive
proceeds of such settlement.

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

     No matters were submitted to a vote of Unit holders, through the
solicitation of proxies or otherwise, during the fourth quarter ended December
31, 1996.

                                       10
<PAGE>   12

                                    PART II

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

     The information under "Units of Beneficial Interest" at page 2 of the
Trust's Annual Report to security holders for the year ended December 31, 1996,
is herein incorporated by reference.

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                    FOR THE YEAR ENDED DECEMBER 31,
                                                -----------------------------------------------------------------------
                                                   1996           1995           1994           1993           1992
                                                -----------    -----------    -----------    -----------    -----------
<S>                                             <C>            <C>            <C>            <C>            <C>
Royalty income................................  $19,930,354    $12,014,623    $16,646,903    $19,407,568    $21,491,861
Distributable income..........................   19,488,574     11,632,463     16,174,570     18,759,882     21,029,750
Distributable income per Unit.................     0.418131       0.249574       0.347027       0.402496       0.451198
Distributions per Unit........................     0.418131       0.249574       0.347027       0.402496       0.451198
Total assets, December 31.....................    5,913,931      5,252,922      6,002,283      6,284,735      6,868,543
</TABLE>

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

     The "Trustee's Discussion and Analysis for the Three-Year Period Ended
December 31, 1996" and "Results of the 4th Quarters of 1996 and 1995" at pages 8
through 12 of the Trust's Annual Report to security holders for the year ended
December 31, 1996 is herein incorporated by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Financial Statements of the Trust and the notes thereto at page 13 et
seq. of the Trust's Annual Report to security holders for the year ended
December 31, 1996, are herein incorporated by reference.

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

     There have been no changes in accountants and no disagreements with
accountants on any matter of accounting principles or practices or financial
statement disclosures during the twenty-four months ended December 31, 1996.

                                       11
<PAGE>   13

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

ITEM 11. EXECUTIVE COMPENSATION

     During the years ended December 31, 1996, 1995 and 1994, the Trustee
received total remuneration as follows:

<TABLE>
<CAPTION>
                 NAME OF INDIVIDUAL                    CAPACITIES
                    OR NUMBER OF                        IN WHICH         CASH
                  PERSONS IN GROUP                       SERVED      COMPENSATION    YEAR
                 ------------------                    ----------    ------------    ----
<S>                                                    <C>           <C>             <C>
NationsBank of Texas, N.A............................   Trustee       $60,708(1)     1994
                                                                      $60,575(1)     1995
                                                                      $65,338(1)     1996
</TABLE>

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

(1) Under the Trust Indenture, the Trustee is entitled to an administrative fee
    for its administrative services, preparation of quarterly and annual
    statements with attention to tax and legal matters of: (i) 1/20 of 1% of the
    first $100 million of annual gross revenue of the Trust and 1/30 of 1% in
    excess of $100 million and (ii) Trustee's standard hourly rate in excess of
    300 hours annually. The administrative fee is subject to reduction by a
    credit for funds provision.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     (a) Security Ownership of Certain Beneficial Owners. The following table
sets forth as of December 31, 1996, information with respect to each person
known to own beneficially more than 5% of the outstanding Units of the Trust:

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

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

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

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

                                       12
<PAGE>   14

     (b) Security Ownership of Management. The Trustee owns beneficially no
securities of the Trust. In various fiduciary capacities, NationsBank of Texas,
N.A. owned as of March 19, 1997, an aggregate of 309,393 Units with no right to
vote 100,000 of these Units, shared right to vote 6,500 of these Units and sole
right to vote 202,893 of these Units. Such Bank disclaims any beneficial
interests in these Units. The number of Units reflected in this paragraph
includes Units held by all branches of NationsBank of Texas, N.A.

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

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The Trust has no directors or executive officers. See Item 11 for the
remuneration received by the Trustee during the years ended December 31, 1996,
1995 and 1994 and Item 12(b) for information concerning Units owned by
NationsBank of Texas, N.A. in various fiduciary capacities.

                                       13
<PAGE>   15
                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

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

FINANCIAL STATEMENTS

     Included in Part II of this Report by reference to the Annual Report of the
Trust for the year ended December 31, 1996:

          Independent Auditors' Report

          Statements of Assets, Liabilities and Trust Corpus

          Statements of Distributable Income

          Statements of Changes in Trust Corpus

          Notes to Financial Statements

FINANCIAL STATEMENT SCHEDULES

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

EXHIBITS

<TABLE>
<S>                    <C>
           (4)(a)      -- Permian Basin Royalty Trust Indenture dated November 3, 1980, between Southland
                          Royalty Company and The First National Bank of Fort Worth (now NationsBank of Texas,
                          N.A.), as Trustee, heretofore filed as Exhibit (4)(a) to the Trust's Annual Report
                          on Form 10-K to the Securities and Exchange Commission for the fiscal year ended
                          December 31, 1980, is incorporated herein by reference.*
              (b)      -- Net Overriding Royalty Conveyance (Permian Basin Royalty Trust) from Southland
                          Royalty Company to The First National Bank of Fort Worth (now NationsBank of Texas,
                          N.A.), as Trustee, dated November 3, 1980 (without Schedules), heretofore filed as
                          Exhibit (4)(b) to the Trust's Annual Report on Form 10-K to the Securities and
                          Exchange Commission for the fiscal year ended December 31, 1980, is incorporated
                          herein by reference.*
              (c)      -- Net Overriding Royalty Conveyance (Permian Basin Royalty Trust -- Waddell Ranch)
                          from Southland Royalty Company to The First National Bank of Fort Worth (now
                          NationsBank of Texas, N.A.), as Trustee, dated November 3, 1980 (without Schedules),
                          heretofore filed as Exhibit (4)(c) to the Trust's Annual Report on Form 10-K to the
                          Securities and Exchange Commission for the fiscal year ended December 31, 1980, is
                          incorporated herein by reference.*
          (13)         -- Registrant's Annual Report to security holders for fiscal year ended December 31,
                          1996.**
          (23)         -- Consent of Cawley, Gillespie & Associates, Inc., reservoir engineer.**
          (27)         -- Financial Data Schedule.**
</TABLE>

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

 * A copy of this Exhibit is available to any Unit holder, at the actual cost of
   reproduction, upon written request to the Trustee, NationsBank of Texas,
   N.A., P.O. Box 1317, Fort Worth, Texas 76101.

** Filed herewith.

                                       14
<PAGE>   16

REPORTS ON FORM 8-K

     During the last quarter of the Trust's fiscal year ended December 31, 1996,
one report on Form 8-K was filed. Such Form 8-K is dated December 20, 1996 and
reports regarding the status of the litigation settlement discussed in Item 3
hereof and that the judgment appealing the settlement might become the subject
of an appeal and that as a result of such fact, no distribution of settlement
proceeds had been made and that the Trustee did not know if or when the Trust
would receive proceeds of such settlement.

                                       15
<PAGE>   17

                                   SIGNATURE

     PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

                                            NATIONSBANK OF TEXAS, N.A.
                                              TRUSTEE OF THE PERMIAN BASIN
                                              ROYALTY TRUST

                                            By    /s/  ERIC F. HYDEN
                                               -------------------------
                                                       (Eric F. Hyden)
                                                       Vice President

Date: March 28, 1997

              (The Trust has no directors or executive officers.)

                                       16
<PAGE>   18

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
                                                                                       SEQUENTIALLY
        EXHIBIT                                                                          NUMBERED
         NUMBER                                    EXHIBIT                                 PAGE
        -------                                    -------                             ------------
<S>                      <C>                                                           <C>
           (4)(a)        -- Permian Basin Royalty Trust Indenture dated November 3,
                            1980, between Southland Royalty Company and The First
                            National Bank of Fort Worth (now NationsBank of Texas,
                            N.A.), as Trustee, heretofore filed as Exhibit (4)(a) to
                            the Trust's Annual Report on Form 10-K to the Securities
                            and Exchange Commission for the fiscal year ended
                            December 31, 1980, is incorporated herein by reference.*
               (b)       -- Net Overriding Royalty Conveyance (Permian Basin Royalty
                            Trust) from Southland Royalty Company to The First
                            National Bank of Fort Worth (now NationsBank of Texas,
                            N.A.), as Trustee, dated November 3, 1980 (without
                            Schedules), heretofore filed as Exhibit (4)(b) to the
                            Trust's Annual Report on Form 10-K to the Securities and
                            Exchange Commission for the fiscal year ended December
                            31, 1980, is incorporated herein by reference.*
               (c)       -- Net Overriding Royalty Conveyance (Permian Basin Royalty
                            Trust -- Waddell Ranch) from Southland Royalty Company to
                            The First National Bank of Fort Worth (now NationsBank of
                            Texas, N.A.), as Trustee, dated November 3, 1980 (without
                            Schedules), heretofore filed as Exhibit (4)(c) to the
                            Trust's Annual Report on Form 10-K to the Securities and
                            Exchange Commission for the fiscal year ended December
                            31, 1980, is incorporated herein by reference.*
          (13)           -- Registrant's Annual Report to security holders for fiscal
                            year ended December 31, 1996.**
          (23)           -- Consent of Cawley, Gillespie & Associates, Inc.,
                            reservoir engineer.**
          (27)           -- Financial Data Schedule.**
</TABLE>

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

 * A copy of this Exhibit is available to any Unit holder, at the actual cost of
   reproduction, upon written request to the Trustee, NationsBank of Texas,
   N.A., P.O. Box 1317, Fort Worth, Texas 76101.

** Filed herewith.