<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1999
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: 1-11608
WILLIAMS COAL SEAM GAS ROYALTY TRUST
(Exact name of registrant as specified in its charter)
Delaware 75-6437433
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
Trust Division
Bank of America
901 Main Street
12th Floor
Dallas, Texas 75202
(Address of principal executive offices)
(Zip code)
(214) 209-2400
(Registrant's telephone number, including area code)
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
--- ---
Number of units of beneficial interest outstanding at November 1, 1999:
9,700,000.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The financial statements included herein have been prepared by Bank of
America, N.A., as successor to NationsBank, N.A., as Trustee (the "Trustee") of
Williams Coal Seam Gas Royalty Trust (the "Trust"), pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in annual financial statements have been
condensed or omitted pursuant to such rules and regulations, although the
Trustee believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and notes
thereto incorporated by reference in the Trust's Annual Report on Form 10-K for
the year ended December 31, 1998 (the "1998 Annual Report"). The December 31,
1998 balance sheet is derived from the audited balance sheet of that date. In
the opinion of the Trustee, all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the assets, liabilities and trust
corpus of the Trust as of September 30, 1999, the distributable income for the
three-month and nine-month periods ended September 30, 1999 and 1998, and the
changes in trust corpus for the nine-month periods ended September 30, 1999 and
1998, have been included. The distributable income for such interim periods is
not necessarily indicative of the distributable income for the full year.
The financial statements as of September 30, 1999 and for the
three-month and nine-month periods ended September 30, 1999 and 1998 included
herein have been reviewed by Ernst & Young LLP, independent public accountants,
as stated in their report appearing herein.
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<PAGE> 3
Independent Accountants' Review Report
Bank of America, N.A.,
as Trustee of Williams Coal Seam Gas Royalty Trust
We have reviewed the accompanying condensed statement of assets, liabilities and
trust corpus of the Williams Coal Seam Gas Royalty Trust as of September 30,
1999, and the related condensed statements of distributable income for the
three-month and nine-month periods ended September 30, 1999 and 1998 and the
statements of changes in trust corpus for the nine month periods ended September
30, 1999 and 1998. These financial statements are the responsibility of the
Trustee.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
As described in Note 2 to the financial statements, these financial statements
have been prepared on a modified cash basis of accounting, which is a
comprehensive basis of accounting other than generally accepted accounting
principles.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed financial statements referred to above for
them to be in conformity with the basis of accounting described in Note 2.
We have previously audited, in accordance with generally accepted auditing
standards, the statement of assets, liabilities and trust corpus of the Williams
Coal Seam Gas Royalty Trust as of December 31, 1998, and the related statements
of distributable income and changes in trust corpus for the year then ended (not
presented herein) and in our report dated March 26, 1999, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed statement of assets,
liabilities and trust corpus as of December 31, 1998, is fairly stated, in all
material respects, in relation to the statement of assets, liabilities and trust
corpus from which it has been derived.
Ernst & Young LLP
Tulsa, Oklahoma
November 11, 1999
3
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WILLIAMS COAL SEAM GAS ROYALTY TRUST
CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
(UNAUDITED)
-------------- --------------
<S> <C> <C>
ASSETS
Current Assets -
cash and cash equivalents $ 98,822 $ 80,599
Royalty interests in oil
and gas properties
(less accumulated
amortization of
$97,955,690 at
September 30, 1999
and $88,783,924 at
December 31, 1998) 40,610,973 49,782,739
-------------- --------------
TOTAL ASSETS $ 40,709,795 $ 49,863,338
============== ==============
LIABILITIES AND TRUST CORPUS
Current Liabilities -
trust expenses payable $ 69,780 $ 93,986
Trust corpus -
9,700,000 units of
beneficial interest
authorized and
outstanding 40,640,015 49,769,352
-------------- --------------
TOTAL LIABILITIES
AND TRUST CORPUS $ 40,709,795 $ 49,863,338
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
WILLIAMS COAL SEAM GAS ROYALTY TRUST
CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
September 30, 1999 September 30, 1998
------------------- -------------------
<S> <C> <C>
Royalty income $ 2,431,301 $ 4,761,508
Interest income 7,020 15,577
------------------- -------------------
2,438,321 4,777,085
General and administrative
expenses (107,896) (88,972)
------------------- -------------------
Distributable income $ 2,330,425 $ 4,688,113
=================== ===================
Distributable income
per unit
(9,700,000 units) $ .24 $ .48
=================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
WILLIAMS COAL SEAM GAS ROYALTY TRUST
CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
September 30, 1999 September 30, 1998
------------------- -------------------
<S> <C> <C>
Royalty income $ 9,457,966 $ 13,221,630
Interest income 28,224 45,378
------------------- -------------------
9,486,190 13,267,008
General and administrative
expenses (422,572) (478,807)
------------------- -------------------
Distributable income $ 9,063,618 $ 12,288,201
=================== ===================
Distributable income
per unit
(9,700,000 units) $ .93 $ 1.31
=================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
WILLIAMS COAL SEAM GAS ROYALTY TRUST
CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
September 30, 1999 September 30, 1998
------------------- -------------------
<S> <C> <C>
Trust corpus, $ 49,769,352 $ 61,271,700
beginning of period
Amortization of royalty
interests (9,171,766) (8,942,864)
Distributable income 9,063,618 12,788,201
Distributions to unitholders (9,021,189) (12,707,007)
------------------- -------------------
Trust corpus, end
of period $ 40,640,015 $ 52,410,030
=================== ===================
Distributions per unit
(9,700,000 units) $ .93 $ 1.31
=================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
WILLIAMS COAL SEAM GAS ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. TRUST ORGANIZATION AND PROVISIONS
Williams Coal Seam Gas Royalty Trust (the "Trust") was formed as a
Delaware business trust pursuant to the terms of the Trust Agreement of Williams
Coal Seam Gas Royalty Trust (as amended, the "Trust Agreement") entered into
effective as of December 1, 1992 by and among Williams Production Company, a
Delaware corporation ("WPC"), as trustor, The Williams Companies, Inc., a
Delaware corporation ("Williams"), and Bank of America, N.A., as successor to
NationsBank, N.A., a national banking association (the "Trustee"), and Chemical
Bank Delaware, a Delaware banking corporation (the "Delaware Trustee"), as
trustees. The trustees are independent financial institutions.
The Trust was formed to acquire and hold certain net profits interests
(the "Royalty Interests") in proved natural gas properties located in the San
Juan Basin of New Mexico and Colorado (the "Underlying Properties") formerly
owned by WPC. The Trust was initially created effective as of December 1, 1992
with a $100 contribution by WPC. On January 21, 1993, the Royalty Interests were
conveyed to the Trust by WPC pursuant to the Net Profits Conveyance (the
"Conveyance") dated effective as of October 1, 1992 by and among WPC, Williams,
the Trustee and the Delaware Trustee, in consideration for all the 9,700,000
authorized units of beneficial interest in the Trust ("Units"). WPC transferred
its Units by dividend to its parent, Williams, which sold an aggregate of
5,980,000 Units to the public through various underwriters in January and
February 1993 (the "Public Offering"). During the second quarter of 1995
Williams transferred its Units to Williams Holdings of Delaware, Inc. ("WHD"), a
separate holding company for Williams' non regulated businesses. As of July 31,
1999, WHD was merged into Williams; therefore, Williams is now the owner of the
Units formerly held by WHD. Substantially all of the production attributable to
the Underlying Properties is from the Fruitland coal formation and constitutes
"coal seam" gas that entitles the owners of such production, provided certain
requirements are met, to tax credits for Federal income tax purposes pursuant to
Section 29 of the Internal Revenue Code of 1986, as amended. Effective May 1,
1997, WPC transferred the Underlying Properties, subject to and burdened by the
Royalty Interests, to Quatro Finale LLC, a non-affiliated Delaware limited
liability company ("Quatro Finale").
The Trustee has the power to collect and distribute the proceeds
received by the Trust and to pay Trust liabilities and expenses. The Delaware
Trustee has only such powers as are set forth in the Trust Agreement and is not
empowered to otherwise manage or take part in the business of the Trust. The
Royalty Interests are passive in nature and neither the Delaware Trustee nor the
Trustee has any control over or any responsibility relating to the operation of
the Underlying Properties.
The Trust will terminate no later than December 31, 2012, subject to
earlier termination under certain circumstances described in the Trust Agreement
(the "Termination Date"). Cancellation of the Trust will occur on or following
the Termination Date when all Trust assets have been sold and the net proceeds
thereof distributed to Unitholders.
8
<PAGE> 9
The only assets of the Trust, other than cash and cash equivalents being
held for the payment of expenses and liabilities and for distribution to
Unitholders, are the Royalty Interests. The Royalty Interests consist primarily
of a net profits interest (the "NPI") in the Underlying Properties. The NPI
generally entitles the Trust to receive 81 percent of the NPI Net Proceeds, as
defined below, attributable to (i) gas produced and sold from Quatro Finale's
net revenue interests (working interests less lease burdens) in the properties
in which Quatro Finale has a working interest (the "WI Properties") and (ii) the
revenue stream received by Quatro Finale attributable to its 35 percent net
profits interest in 5,348 gross acres in La Plata County, Colorado (the "Farmout
Properties"). The Royalty Interests also include a 20 percent interest in Quatro
Finale's Infill Net Proceeds, as defined below, from the sale of production if
well spacing rules are effectively modified and additional wells are drilled on
producing drilling blocks on the WI Properties (the "Infill Wells") during the
term of the Trust. No Infill Wells have been drilled on the WI Properties to
date. "NPI Net Proceeds" consists generally of the revenue stream received by
Quatro Finale from its 35 percent net profits interest in the Farmout
Properties, plus the aggregate proceeds attributable to Quatro Finale's net
revenue interest, based on the price paid at or in the vicinity of the wellhead
(the "Wellhead"), of gas produced from the WI Properties, less Quatro Finale's
share of certain taxes and costs. "Infill Net Proceeds" consists generally of
the aggregate proceeds, based on the price at the Wellhead, of gas produced from
Quatro Finale's net revenue interest in any Infill Wells less certain taxes and
costs. The NPI percentage is subject to certain future downward adjustments
based on a rate of return computation once cumulative aggregate production
targets are met. Based on current estimates, a downward adjustment of the NPI to
60% is expected by late 2000 or early 2001. The complete definitions of NPI Net
Proceeds and Infill Net Proceeds are set forth in the Conveyance.
2. BASIS OF ACCOUNTING
The financial statements of the Trust are prepared on a modified cash
basis and are not intended to present 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. General and administrative expenses are recognized on an
accrual basis.
Amortization of the Royalty 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
(see Note 4).
The financial statements of the Trust differ from financial statements
prepared in accordance with GAAP because royalty income is not accrued in the
period of production and amortization of the Royalty Interests is not charged
against operating results.
Williams sold an aggregate of 5,980,000 Units of the Trust's authorized
9,700,000 Units in the Public Offering at the offering price of $20 per Unit,
retaining 3,720,000 Units. Subsequently, Williams sold an additional 151,209
Units for $23.50 per Unit. Accordingly, the condensed statements of assets,
liabilities and trust corpus reflect the sale of these Units at the respective
sale
9
<PAGE> 10
prices thereof, as well as the remaining 3,568,791 Units at Williams' historical
cost. During the second quarter of 1995 Williams transferred its Units to WHD, a
separate holding company for Williams' non regulated businesses. As of July 31,
1999, WHD was merged into Williams; therefore, Williams is now the owner of the
Units formerly held by WHD. If Williams, in the future, should sell all or a
portion of its retained Units, at that time, the carrying value on the Trust's
statements of assets, liabilities and trust corpus may again be adjusted from
WHD's historical cost to the subsequent sale price with respect to the Units
sold.
3. FEDERAL INCOME TAXES
The Trust is a grantor trust for Federal income tax purposes. As a
grantor trust, the Trust is not required to pay Federal or state income taxes.
Accordingly, no provision for income taxes has been made in these financial
statements.
Because the Trust is treated as a grantor trust, and because a
Unitholder is treated as directly owning an interest in the Royalty Interests,
each Unitholder is taxed directly on his per Unit pro rata share of income
attributable to the Royalty Interests consistent with the Unitholder's method of
accounting and without regard to the taxable year or accounting method employed
by the Trust.
Production from coal seam gas wells drilled after December 31, 1979 and
prior to January 1, 1993, qualifies for the Federal income tax credit for
producing nonconventional fuels under Section 29 of the Internal Revenue Code.
This tax credit is calculated annually based on each year's qualified production
through the year 2002. Such credit, based on the Unitholder's pro rata share of
qualifying production, may not reduce his regular tax liability (after the
foreign tax credit and certain other non-refundable credits) below his
alternative minimum tax. Any part of the Section 29 credit not allowed for the
tax year solely because of this limitation is subject to certain carryover
provisions. Each Unitholder should consult his tax advisor regarding Trust tax
compliance matters.
4. DISTRIBUTIONS TO UNITHOLDERS
The Trustee determines for each quarter the amount of cash available for
distribution to Unitholders. Such amount (the "Quarterly Distribution Amount")
is an amount equal to the excess, if any, of the cash received by the Trust, on
or prior to the last day of the month following the end of each calendar quarter
from the Royalty Interests, plus, with certain exceptions, any other cash
receipts of the Trust during such quarter, over the liabilities of the Trust
paid 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.
The Quarterly Distribution Amount for each quarter is payable to
Unitholders of record on the 45th day following the end of such calendar quarter
unless such day is not a business day in which case the record date is the next
business day thereafter. The Trustee distributes the Quarterly Distribution
Amount within 60 days after the end of each calendar quarter to each person who
was a Unitholder of record on the associated record date, together with interest
estimated to be earned on such amount from the date of receipt thereof by the
Trustee to the payment date.
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<PAGE> 11
In addition to the regular quarterly distributions, under certain
circumstances specified in the Trust Agreement (such as upon a purchase price
adjustment, if any, or pursuant to the sale of a Royalty Interest), the Trust
would make a special distribution (a "Special Distribution Amount"). A Special
Distribution Amount would be made when amounts received by the Trust under such
circumstances aggregated in excess of $9,000,000. The record date for a Special
Distribution Amount will be the 15th day following receipt of amounts
aggregating a Special Distribution Amount by the Trust (unless such day is not a
business day in which case the record date will be the next business day
thereafter) unless such day is within 10 days of the record date for a Quarterly
Distribution Amount in which case the record date will be the date as is
established for the next Quarterly Distribution Amount. Distribution to
Unitholders of a Special Distribution Amount will be made no later than 15 days
after the Special Distribution Amount record date.
5. SUBSEQUENT EVENTS
Subsequent to September 30, 1999, the Trust declared the following
distribution:
<TABLE>
<CAPTION>
Quarterly
Record Payment Distribution
Date Date per Unit
--------- ------- ------------
<S> <C> <C>
November 15 November 29 $.277213
</TABLE>
The distribution per unit will increase from $.232301 for the third
quarter of 1999 to $.277213 for the fourth quarter of 1999. The increase in
distributions was primarily the result of lower operating and excess capital
costs and higher payments received associated with the PLA-9 Farmout Properties
partially offset by the expansion of the San Juan 32-9 Unit, reducing the
interest effective retroactive to 1994. Expansions of federal unit acreage can
either increase or decrease the Trust's ownership of particular wells resulting
in potential adjustments of production for prior periods and associated
distributions to unitholders can either increase or decrease. Federal unit
acreage expansions are determined by the commercial value of the property as
valued by the operator and approved by the U.S. Bureau of Land Management (BLM).
Williams Production Company does not operate any wells in these federal acreage
units.
6. CONTINGENCIES
Under the terms of the gas purchase contract entered into by WPC and WPX
Gas Resources Company ("WPX Gas Resources") (formerly known as WFS Gas
Resources, as successor to Williams Gas Marketing Company), as amended (the "Gas
Purchase Contract"), additional revenues may be paid to the Trust to meet the
Minimum Purchase Price provision of 97 percent of $1.75 per MMBtu. This
additional revenue is subject to recoupment by the purchaser from future
revenues received from production commencing after January 1, 1994 when the
applicable index price exceeds the Minimum Purchase Price as long as the Minimum
Purchase Price commitment is in effect. Pursuant to the terms of the Gas
Purchase Contract, a price credit account was established for the purpose of
accounting for such recoupments. The primary term of the Gas Purchase Contract
expired on December 31, 1997, at which time WPX Gas Resources had the option to
discontinue paying the Minimum Purchase Price by giving notice of its election
to pay solely on an index price.
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<PAGE> 12
For each of the contract years January 1, 1998 through December 31, 1998 and
January 1, 1999 through December 31, 1999, WPX Gas Resources did not exercise
this option and the pricing mechanism of the primary term has and will continue
to remain in effect through at least December 31, 1999.
During the third quarter of 1999, the applicable index price was above
the Minimum Purchase Price resulting in recoupments against the price credit
account established under the Gas Purchase Contract. WPC estimates that, as of
September 30, 1999, WPX Gas Resources had aggregate price credits in the price
credit account of approximately $10.4 million of which the Trust's 81 percent
interest in Quatro Finale's interest in the WI Properties, represents a
potential offset of $8.4 million against future royalty income otherwise payable
to the Trust. The applicable index price was above the Minimum Purchase Price in
October 1999.
The entitlement of WPX Gas Resources to recoup the price credits means
that if and when the applicable Blanco Hub Spot Price rises above $1.75 per
MMBtu, future royalty income otherwise payable to the Trust would be reduced
until such time as such price credits have been fully recouped. Corresponding
cash distributions to Unitholders would also be reduced.
The Trustee has been advised by WPC that the Minerals Management Service
("MMS"), a subagency of the U.S. Department of the Interior, has from time to
time considered the inclusion of the value of the Section 29 tax credits
attributable to coal seam gas production in the calculation of gross proceeds
for purposes of calculating the royalty that is payable to the MMS. On August
30, 1993, the U.S. Office of the Inspector General (the "OIG") issued an audit
report stating that Section 29 tax credits should be included in the calculation
of gross proceeds and recommending that the MMS pursue collection of additional
royalties with respect to past and future production. On December 8, 1993,
however, the Office of the Solicitor of the U.S. Department of the Interior gave
its opinion to the MMS that the report of the OIG was incorrect and that Section
29 tax credits are not part of gross proceeds for the purpose of Federal royalty
calculations. WPC believes that any such inclusion of the value of Section 29
tax credits for the purposes of calculating royalty payments required to be made
on Federal and Indian lands would be inappropriate since all mineral interest
owners, including royalty owners, are entitled to Section 29 tax credits for
their proportionate share of qualifying coal seam gas production. WPC has
advised the Trustee that it would vigorously oppose any attempt by the MMS to
require the inclusion of the value of Section 29 tax credits in the calculation
of gross proceeds. However, if such regulations were adopted and upheld, royalty
payments would be increased which would decrease NPI Net Proceeds and,
therefore, the amounts payable to the Trust. The reduction in amounts payable to
the Trust would cause a corresponding reduction in associated Section 29 tax
credits available to Unitholders.
The Trustee has also been informed by WPC that the MMS has informed some
San Juan Basin natural gas producers that they have incorrectly deducted certain
costs in the producers' coal bed methane valuations in determining the amounts
due to Federal royalty owners. While WPC believes that their past computations
have been appropriately stated, applying the MMS methodology could result in an
adjustment to amounts previously paid to the Trust of approximately $4,000,000.
SOUTHERN UTE LITIGATION. As previously reported in the Trust's Public
Offering Prospectus and each of the Trust's prior Annual Reports on Form 10-K as
filed with the Securities
12
<PAGE> 13
and Exchange Commission, WPC is a named defendant in a lawsuit (the "Southern
Ute Litigation") brought by the Southern Ute Indian Tribe (the "Tribe") which,
among other things, contests ownership rights in certain coal seam gas producing
properties, including a portion of the Farmout Properties in which Quatro Finale
owns a net profits interest. A portion of the revenues received by WPC (on
behalf of its successor Quatro Finale) with regard to the Farmout Properties is
paid to the Trust as a component of the NPI.
The Tribe filed a lawsuit on December 31, 1991, challenging the legal
rights of WPC and others to extract coal seam gas from certain properties within
the boundaries of Tribal land. In the suit, the Tribe was seeking a declaration
of ownership of the gas seam gas based upon its ownership of the coal resource
and compensation from the producers and the oil and gas estate owners for the
value of the gas allegedly wrongfully taken from the Tribe to date.
Amoco, on behalf of itself, WPC, and the other defendants named in the
lawsuit (the "Defendant Class"), has vigorously defended the lawsuit. On
September 13, 1994, the United States District Court for the District of
Colorado (the "District Court") issued a memorandum opinion and order in the
litigation granting the motion for summary judgement filed by the Defendant
Class on the question of ownership of the coal seam gas. The District Court
ruled that the U.S. Congress, in reserving the coal resource on certain lands
for the Federal government in the Coal Land Acts of 1909 and 1910, did not also
reserve for the government the related coal seam gas. The District Court denied
the Tribe's claim of equitable ownership of the coal seam gas. The Tribe
appealed the order to the United States Court of Appeals for the Tenth Circuit
(the "Court of Appeals"), which issued an opinion dated July 16, 1997 reversing
the District Court and holding that coal seam gas was "an integral component of
coal" and had therefore been vested in the Tribe as owners of the coal resource.
Amoco, as class representative of the Defendant Class, subsequently sought and
obtained a rehearing en banc from the Court of Appeals on the ownership issue.
On July 20, 1998, the en banc court issued a decision upholding the Court of
Appeals opinion finding ownership in the Tribe. Amoco, on behalf of the
Defendant Class, appealed the Court of Appeals' decision to the United States
Supreme Court (the "Supreme Court"), which granted Amoco's petition for
certiorari. The case was argued before the Supreme Court on April 19, 1999, and
on June 7, 1999, the Supreme Court issued a decision in favor of the Defendant
Class. In its 7-1 decision, the Supreme Court ruled that the natural
interpretation of the term "coal" as used at the time of the enactment of the
Coal Land Acts of 1909 and 1910 is not ambiguous and refers only to the "solid
rock substance that was the country's primary energy resource" at the time of
the enactment of the statutes and does not include coal seam gas. The Supreme
Courts' ruling effectively means that the owners of the oil and gas estate,
rather than the holders of rights to the coal resource, have ownership of the
coal seam gas in dispute. As a result of the Supreme Court's decision, the
Southern Ute Litigation no longer represents a substantial challenge to the
ownership rights in the coal seam gas resource claimed by members of the
Defendant Class, including Quatro Finale (as successor to WPC), and the Trust as
the holder of royalty interests on certain leases in question. In addition, the
decision effectively eliminates the Trust's potential liability exposure for the
Tribe's claims for compensation for the value of coal seam gas already
extracted.
Prior to the Supreme Court's decision to hear Amoco's appeal, WPC,
Amoco, and the Tribe announced that they had reached a limited settlement in
principal of the claims asserted against WPC. This settlement was not contingent
upon the final Supreme Court decision. Under the
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<PAGE> 14
proposed settlement, WPC will reacquire title to the Farmout Properties in the
area known as PLA-6 from Quatro Finale, following which WPC will convert that
portion of its net profits interest into a working interest. A portion of WPC's
working interest will then be transferred to the Tribe effective January 1,
1999. In addition, WPC agreed to pay certain capital costs incurred in
connection with the production subject to the net profits interest from the area
known as PLA-9. Effective January 1, 1999, or shortly thereafter, the Tribe will
be paid a portion of the proceeds from the area subject to the net profits
interest known as PLA-9. The Tribe will release WPC from all claims asserted in
the lawsuit. Williams has informed the Trustee that the parties have entered
into a definitive partial settlement agreement and submitted such agreement to
the District Court for approval. The settlement agreement will become binding on
the parties upon approval by the District Court.
Williams has advised the Trustee that it expects future cash
distributions to the Trust to decrease by an insignificant amount as a result of
the above described settlement, assuming such settlement is approved by the
District Court. Trustee does not believe that the ultimate resolution of the
foregoing matter will have a material adverse effect on the Trust Corpus or
distributable income. Unitholders should consult the Trust's 1998 Annual Report
for additional information regarding the Southern Ute Litigation.
7. POSSIBLE NPI PERCENTAGE CHANGE
The NPI generally entitles the Trust to receive 81 percent of the NPI
Net Proceeds. However, at the point that cumulative production from the
Underlying Properties exceeds 178.5 Bcf of gas and the internal rate of return
of the "after tax cash flow per Trust Unit" (as defined in the Conveyance) is
equal to or greater than 12 percent but not more than 14 percent, the percentage
of NPI Net Proceeds payable in respect of the NPI would be reduced to 60
percent. If such level of production is exceeded and such internal rate of
return of the after tax cash flow per Trust Unit exceeds 14 percent, the
percentage of NPI Net Proceeds payable in respect of the NPI would be reduced to
40 percent. WPC has advised the Trustee that the cumulative production from the
Underlying Properties to date has exceeded the 178.5 Bcf threshold. Based upon
projections by WPC, the Trust's independent petroleum engineers, the internal
rate of return is not currently expected to be 12 percent or higher until the
third quarter of 2000, although no assurance can be made that it will not occur
sooner than projected.
Item 2. Trustee's Discussion and Analysis of Financial Condition
and Results of Operations.
The Trust makes quarterly cash distributions to holders of units of
beneficial interest ("Units") in the Trust ("Unitholders"). The only assets of
the Trust, other than cash and cash equivalents being held for the payment of
expenses and liabilities and for distribution to Unitholders, are net profits
interests (the "Royalty Interests") in certain proved coal seam gas properties
located in the San Juan Basin of New Mexico and Colorado (the "Underlying
Properties"). The Royalty Interests owned by the Trust burden the Underlying
Properties, which are owned by Quatro Finale LLC, a non-affiliated Delaware
limited liability company ("Quatro Finale"), and not the Trust.
Distributable income of the Trust consists of the excess of royalty
income plus interest income over the general and administrative expenses of the
Trust. Upon receipt by the Trust, royalty income
14
<PAGE> 15
is invested in short-term investments in accordance with the Trust Agreement (as
defined in Note 1 to the financial statements of the Trust appearing elsewhere
in this Form 10-Q ("Note 1")) until its subsequent distribution to Unitholders.
The amount of distributable income of the Trust for any quarter may
differ from the amount of cash available for distribution to Unitholders in such
quarter due to differences in the treatment of the expenses of the Trust in the
determination of those amounts. The financial statements of the Trust are
prepared on a modified cash basis pursuant to which the expenses of the Trust
are recognized when incurred. Consequently, the reported distributable income of
the Trust for any quarter is determined by deducting from the income received by
the Trust the amount of expenses incurred by the Trust during such quarter. The
amount of cash available for distribution to Unitholders, however, is determined
in accordance with the provisions of the Trust Agreement and reflects the
deduction from the income actually received by the Trust of the amount of
expenses actually paid by the Trust and adjustments for changes in reserves for
unpaid liabilities. See Note 4 to the financial statements of the Trust
appearing elsewhere in this Form 10-Q for additional information regarding the
determination of the amount of cash available for distribution to Unitholders.
Three Months and Nine Months Ended September 30, 1999 Compared to Three Months
and Nine Months Ended September 30, 1998
For the quarter ended September 30, 1999, royalty income received by the
Trust amounted to $2,431,301 as compared to $4,761,508 received for the same
quarter in 1998. For the nine months ended September 30, 1999, royalty income
received by the Trust amounted to $9,457,966 as compared to $13,221,630 received
for the same period in 1998. The decrease in royalty income is primarily due to
lower quantities of gas produced, increased amounts of royalties paid and
capital costs incurred and various expansions of the Federal units within the
Underlying Properties. Interest income for the quarter ended September 30, 1999
was $7,020 compared to $15,577 for the same quarter in 1998. Interest income for
the nine months ended September 30, 1999 was $28,224 compared to $45,378 for the
same period in 1998. This decrease was primarily due to a decrease in the amount
of funds available for investment. General and administrative expenses during
the third quarter of 1999 amounted to $107,896 compared to $88,972 for the same
quarter in 1998. General and administrative expenses during the nine months
ended September 30, 1999 amounted to $422,572 compared to $478,807 for the same
period in 1998.
Distributable income for the quarter ended September 30, 1999 was
$2,330,425 or $.24 per Unit as compared to $4,688,113 or $.48 per Unit for the
third quarter of 1998. Distributable income for the nine months ended September
30, 1999 was $9,063,619 or $.93 per Unit as compared to $12,788,807 or $1.31 per
Unit for the same period in 1998. This decrease was a result of the factors
stated in the preceding paragraph. A distribution of $.232301 per Unit was made
on August 27, 1999 to Unitholders of record on August 16, 1999.
Because the Trust incurs administrative expenses throughout a quarter
but receives its royalty income only once in a quarter, the Trustee established
in the first quarter of 1993 a cash reserve for the payment of expenses and
liabilities of the Trust. The Trustee thereafter has adjusted the amount of such
reserve in certain quarters as required for the payment of the Trust's expenses
and liabilities,
15
<PAGE> 16
in accordance with the provisions of the Trust Agreement. The Trustee
anticipates that it will maintain for the foreseeable future a cash reserve
which will fluctuate as expenses are paid and royalty income is received.
Royalty income to the Trust is attributable to the sale of depleting
assets. All of the Underlying Properties burdened by the Royalty Interests
consist of producing properties. Accordingly, the proved reserves attributable
to Quatro Finale's interest in the Underlying Properties are expected to decline
substantially during the term of the Trust and a portion of each cash
distribution made by the Trust will, therefore, be analogous to a return of
capital. Accordingly, cash yields attributable to the Units are expected to
decline over the term of the Trust.
Royalty income received by the Trust in a given calendar quarter will
generally reflect the sum of (i) proceeds from the sale of gas produced from the
WI Properties during the preceding calendar quarter, plus (ii) cash received by
Quatro Finale with respect to the Farmout Properties either (a) during the
preceding calendar quarter or (b) if received in sufficient time to be paid to
the Trust, in the month immediately following such calendar quarter.
Accordingly, the royalty income included in distributable income for the quarter
ended September 30, 1999 was based on production volumes and natural gas prices
for the period April through June 1999, as shown in the table below. Due to
delays associated with the receipt of income related to the Farmout Properties,
the Trust's royalty income for the 1999 third quarter reflects estimated
production volumes from the Farmout Properties for the months of March 1999
through May 1999, as shown in the table below. The production volumes included
in the table below are for production attributable to the Underlying Properties,
and not for production attributable to the Trust's Royalty Interests and are net
of the amount of production attributable to Quatro Finale's royalty obligations
to third parties, which is determined by contractual arrangement with such
parties.
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Production (MMBtu)(1)
WI Properties 2,382,417(2) 3,946,609(4)
Farmout Properties 1,236,026(3) 1,379,260(5)
Blanco Hub Spot Price
($/MMBtu)(6) $ 1.86 $ 1.74
Net Wellhead Price
WI Properties ($/MMBtu)(6) $ .98 $ .93
</TABLE>
- -----------------------
(1) Million British Thermal Units.
(2) Includes prior period adjustments of 413,032 MMBtu.
(3) Reflects estimated volumes for March 1999 through May 1999.
(4) Includes prior period adjustments of 297,958 MMBtu.
(5) Reflects March 1998 through May 1998. Includes prior period adjustments
of 47,342 MMBtu.
16
<PAGE> 17
(6) Simple average of estimates for the months included in the period
presented.
Production from the WI Properties is generally sold pursuant to a gas
purchase contract between WPC and WPX Gas Resources Company ("WPX Gas
Resources") (formerly known as WFS Gas Resources, as successor in interest to
Williams Gas Marketing Company) (as amended, the "Gas Purchase Contract"). The
Gas Purchase Contract provides certain protections for WPX Gas Resources in the
form of price credits (for production purchased by WPX Gas Resources on or after
January 1, 1994) and for Unitholders when the applicable Blanco Hub Spot Price
falls below $1.75 per MMBtu and provides certain benefits for WPX Gas Resources
when the Blanco Hub Spot Price exceeds $2.00 per MMBtu. The Gas Purchase
Contract also provides that the price paid for gas by WPX Gas Resources is
reduced by the amount of gathering, processing and certain other costs paid by
WPX Gas Resources.
The initial five-year term ("Primary Term") of the Gas Purchase
Contract expired on December 31, 1997. Following the expiration of the Primary
Term, the Gas Purchase Contract will continue in effect for one or more
consecutive additional one-year terms (each such term a "Contract Year") unless
and until WPX Gas Resources exercises its annual option, exercisable fifteen
days prior to the end of each Contract Year, to discontinue purchasing gas under
the terms of the Gas Purchase Contract and instead purchase gas at a monthly
price equal to the index price of 97 percent of the Blanco Hub Spot Price. For
each of the Contract Years January 1, 1998 through December 31, 1998 and January
1, 1999 through December 31, 1999, WPX Gas Resources did not exercise this
option and the pricing mechanism of the Primary Term therefore has and will
continue to remain in effect through at least December 31, 1999.
The Blanco Hub Spot Price was above $1.75 per MMBtu during the third
quarter of 1999. However, pursuant to the terms of the Gas Purchase Contract,
WPX Gas Resources continued to purchase gas produced from the WI Properties at
the $1.70 minimum purchase price, less certain gathering, processing and
delivery costs paid by WPX Gas Resources, established by the Gas Purchase
Contract; and WPX Gas Resources recouped previously accrued price credits for
each MMBtu of natural gas so purchased equal to the difference between the $1.70
minimum purchase price and the applicable index price (which price is equal to
97 percent of the applicable Blanco Hub Spot Price). WPC estimates that, as of
September 30, 1999, WPX Gas Resources had aggregate price credits of
approximately $10.4 million of which the Trust's 81 percent interest was
approximately $8.4 million. The Blanco Hub Spot Price was above $1.75 per MMBtu
in October 1999.
The entitlement of WPX Gas Resources to recoup the price credits means
that if and when the applicable Blanco Hub Spot Price rises above $1.75 per
MMBtu, future royalty income paid to the Trust would be reduced until such time
as such price credits have been fully recouped. Corresponding cash distributions
to Unitholders would also be reduced.
The information in this Form 10-Q concerning production and prices
relating to the Underlying Properties is based on information prepared and
furnished by WPC to the Trustee. The Trustee has no control over and no
responsibility relating to the operation of the Underlying Properties.
17
<PAGE> 18
Year 2000 Issue
Many existing computer programs use only two digits to identify a year
in the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not corrected,
many computer applications could fail or create erroneous results by or at the
Year 2000. The Year 2000 issue affects virtually all companies and
organizations. If a company or organization does not successfully address its
Year 2000 issues, it may face material adverse consequences. The Trustee
identified its primary system that is vulnerable to the Year 2000 issue: its
General Ledger/Accounts Payable System. This system was replaced and the current
system is Year 2000 compliant. The Trust selected a system that has been
warranted to be Year 2000 compliant and completed the installation of the new
system at the beginning of 1998. The cost of the system was approximately
$6,000. To date the Trustee has incurred no other costs in connection with its
efforts to identify, assess, remediate and test the Trust's systems for Year
2000 compliance.
The Trustee is in the process of identifying and assessing other
information technology ("IT") systems used in connection with the Trust as well
as other systems, for Year 2000 compliance. Non-IT systems are generally more
difficult to assess because they often contain embedded technology that may be
subject to Year 2000 problems. The total cost of the Trustee's Year 2000 efforts
is expected to be approximately $10,000 (including the $6,000 referred to
above), all of which was incurred and paid during the last two quarters of 1998
and the first three quarters of 1999. Of this amount, the Trustee estimates that
$4,000 is attributable to identification and assessment of affected systems and
$6,000 is attributable to remediation (which may include the replacement of
certain noncomplying systems). All of the Trustee's Year 2000 compliance efforts
were completed by the end of the third quarter of 1999.
The Trustee has additionally identified those vendors it believes could
have an impact on its day-to-day operations if their operations were interrupted
as a result of Year 2000 problems. The Trustee has developed a questionnaire
regarding the vendors' Year 2000 status. These vendors, consisting primarily of
energy companies, have been contacted to determine their Year 2000 status. WPC,
which provides extensive accounting services to the Trust, has indicated that
its IT system will be Year 2000 complaint. The Trustee is continuing discussions
with WPC regarding its Year 2000 compliance certification.
The Trustee has no reason to believe that its vendors will not be Year
2000 compliant. In the event the Trustee learns that a vendor's system will not
be Year 2000 compliant, the Trustee will assess the potential risk and develop
contingency plans at that time.
The Trust is a passive entity with no business operations, and the IT
systems employed by the Trustee in connection with its duties on behalf of the
Trust are less extensive than the systems employed by many business entities.
The Trust has no formal IT budget, and the Trustee does not anticipate making
any additional significant capital expenditures relating to the Trustee's IT
systems used in connection with Trust during 1999. Thus, the expenditures made
or expected to be made in connection with the Year 2000 efforts described above
will represent substantially all of the Trustee's IT-related capital
expenditures on behalf of the Trust. These expenses will be or have been paid as
expenses of the Trust.
18
<PAGE> 19
Because the royalty interests held by the Trust are fixed, the Trustee
is dependent upon the third parties (primarily energy companies) that hold
operating interests with respect thereto for the receipt of royalty income.
Thus, if any such third party failed to deliver royalty income, the Trustee
would have available no alternative source for such income. The Trustee believes
that the worst case scenario would be the failure by the Trustee and one or more
third parties who pay royalties to the Trust to identify or remediate Year 2000
problems on a timely basis, which could cause the Trustee to be unable to make
required distributions to Unitholders. Such inability could result in the
incurrence by the Trust of interest charges or other liabilities to Unitholders.
The Trustee believes that in the event of a failure of any of its internal
systems it would be able to replace such systems in a relatively short period of
time, relying on internal resources of Bank of America, N.A., which serves as
the Trustee, although there can be no assurance that such replacement would not
be costly or that it would be completed without resulting in a significant delay
in the distributions to Unitholders. With respect to a failure by a third party
to deliver royalty income on a timely basis, the Trustee believes that it would
have no control over the efforts of such third party to correct the problems,
and significant delays in the receipt of royalty income could result.
The Trust will utilize both internal and external resources to achieve
Year 2000 compliance. The Trustee estimates that its identification and
assessment activities are approximately 95% complete and that its remediation
and testing efforts are approximately 90% complete. It expects that all of its
Year 2000 efforts related to the Trust's internal systems will be completed by
November 30, 1999. However, there can be no guarantee that the Trustee will be
able to identify all potential Year 2000 problems or to fully remediate all Year
2000 problems identified on a timely basis. There also can be no assurance that
the systems of third party vendors on which the Trust relies will be timely
remediated. The failure by the Trustee or any such third party to fully
remediate its Year 2000 problems on a timely basis could have a material adverse
affect on the Trustee's ability to account for and make timely distribution of
the Trust's distributable income.
Forward-Looking Statements
This report on Form 10-Q 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, as amended. All statements
other than statements of historical fact included in this Form 10-Q, including,
without limitation, statements contained in this "Trustee's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the Trust's
financial position and industry conditions, are forward-looking statements.
Although the Trustee believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Southern Ute Litigation. As previously reported in the Trust's Public
Offering Prospectus and each of the Trust's prior Annual Reports on Form 10-K as
filed with the Securities and Exchange Commission, WPC is a named defendant in a
lawsuit (the "Southern Ute Litigation") brought by the Southern Ute Indian Tribe
(the "Tribe") which, among other things, contests
19
<PAGE> 20
ownership rights in certain coal seam gas producing properties, including a
portion of the Farmout Properties in which Quatro Finale owns a net profits
interest. A portion of the revenues received by WPC (on behalf of its successor
Quatro Finale) with regard to the Farmout Properties is paid to the Trust as a
component of the NPI.
The Tribe filed a lawsuit on December 31, 1991, challenging the legal
rights of WPC and others to extract coal seam gas from certain properties within
the boundaries of Tribal land. In the suit, the Tribe was seeking a declaration
of ownership of the gas seam gas based upon its ownership of the coal resource
and compensation from the producers and the oil and gas estate owners for the
value of the gas allegedly wrongfully taken from the Tribe to date.
Amoco, on behalf of itself, WPC, and the other defendants named in the
lawsuit (the "Defendant Class"), has vigorously defended the lawsuit. On
September 13, 1994, the United States District Court for the District of
Colorado (the "District Court") issued a memorandum opinion and order in the
litigation granting the motion for summary judgement filed by the Defendant
Class on the question of ownership of the coal seam gas. The District Court
ruled that the U.S. Congress, in reserving the coal resource on certain lands
for the Federal government in the Coal Land Acts of 1909 and 1910, did not also
reserve for the government the related coal seam gas. The District Court denied
the Tribe's claim of equitable ownership of the coal seam gas. The Tribe
appealed the order to the United States Court of Appeals for the Tenth Circuit
(the "Court of Appeals"), which issued an opinion dated July 16, 1997 reversing
the District Court and holding that coal seam gas was "an integral component of
coal" and had therefore been vested in the Tribe as owners of the coal resource.
Amoco, as class representative of the Defendant Class, subsequently sought and
obtained a rehearing en banc from the Court of Appeals on the ownership issue.
On July 20, 1998, the en banc court issued a decision upholding the Court of
Appeals opinion finding ownership in the Tribe. Amoco, on behalf of the
Defendant Class, appealed the Court of Appeals' decision to the United States
Supreme Court (the "Supreme Court"), which granted Amoco's petition for
certiorari. The case was argued before the Supreme Court on April 19, 1999, and
on June 7, 1999, the Supreme Court issued a decision in favor of the Defendant
Class. In its 7-1 decision, the Supreme Court ruled that the natural
interpretation of the term "coal" as used at the time of the enactment of the
Coal Land Acts of 1909 and 1910 is not ambiguous and refers only to the "solid
rock substance that was the country's primary energy resource" at the time of
the enactment of the statutes and does not include coal seam gas. The Supreme
Courts' ruling effectively means that the owners of the oil and gas estate,
rather than the holders of rights to the coal resource, have ownership of the
coal seam gas in dispute. As a result of the Supreme Court's decision, the
Southern Ute Litigation no longer represents a substantial challenge to the
ownership rights in the coal seam gas resource claimed by members of the
Defendant Class, including Quatro Finale (as successor to WPC), and the Trust as
the holder of royalty interests on certain leases in question. In addition, the
decision effectively eliminates the Trust's potential liability exposure for the
Tribe's claims for compensation for the value of coal seam gas already
extracted.
Prior to the Supreme Court's decision to hear Amoco's appeal, WPC,
Amoco, and the Tribe announced that they had reached a limited settlement in
principal of the claims asserted against WPC. This settlement was not contingent
upon the final Supreme Court decision. Under the proposed settlement, WPC will
reacquire title to the Farmout Properties in the area known as PLA-6 from Quatro
Finale, following which WPC will convert that portion of its net profits
interest into a
20
<PAGE> 21
working interest. A portion of WPC's working interest will then be transferred
to the Tribe effective January 1, 1999. In addition, WPC agreed to pay certain
capital costs incurred in connection with the production subject to the net
profits interest from the area known as PLA-9. Effective January 1, 1999, or
shortly thereafter, the Tribe will be paid a portion of the proceeds from the
area subject to the net profits interest known as PLA-9. The Tribe will release
WPC from all claims asserted in the lawsuit. Williams has informed the Trustee
that the parties have entered into a definitive partial settlement agreement and
submitted such agreement to the District Court for approval. The settlement
agreement will become binding on the parties upon approval by the District
Court.
Williams has advised the Trustee that it expects future cash
distributions to the Trust to decrease by an insignificant amount as a result of
the above described settlement, assuming such settlement is approved by the
District Court. The Trustee does not believe that the ultimate resolution of the
foregoing matter will have a material adverse effect on the Trust Corpus or
distributable income. Unitholders should consult the Trust's 1998 Annual Report
for additional information regarding the Southern Ute Litigation.
Item 3. Quantitative and Quantitative Disclosures About Market Risk.
There have been no material changes in the Trust's market risks, as
disclosed in the Trust's Form 10-K for the year ended December 31, 1998.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit No. Description
----------- -----------
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for
which this report is filed.
21
<PAGE> 22
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.
WILLIAMS COAL SEAM GAS ROYALTY TRUST
By: BANK OF AMERICA, N.A., Trustee
By: /s/ Ron Hooper
------------------------------
Ron Hooper
Vice President and
Administrator
(The Trust has no directors or executive officers.)
Date: November 15, 1999
22
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 98,822
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 98,822
<PP&E> 138,566,663
<DEPRECIATION> 97,955,690
<TOTAL-ASSETS> 40,709,795
<CURRENT-LIABILITIES> 69,781
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 40,640,015
<TOTAL-LIABILITY-AND-EQUITY> 40,709,795
<SALES> 9,457,966
<TOTAL-REVENUES> 9,486,191
<CGS> 0
<TOTAL-COSTS> 422,572
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,063,618
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,063,618
<EPS-BASIC> .93
<EPS-DILUTED> .93
</TABLE>
