===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-K
-----------------------
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File Number: 333-91014-01
TREASURE ISLAND ROYALTY TRUST
(Exact name of registrant as specified in its charter)
TEXAS 02-6148888
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
WACHOVIA BANK, NATIONAL ASSOCIATION 77057
AS TRUSTEE OF THE TREASURE ISLAND ROYALTY TRUST (Zip Code)
CORPORATE TRUST DEPARTMENT
5847 SAN FELIPE, SUITE 1050
HOUSTON, TEXAS
(Address of principal executive office)
(713) 278-4320
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act. Yes [ ] No [X]
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 the 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. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The aggregate market value of the trust units held by non-affiliates of the
registrant was approximately $23,668,785 as of June 30, 2005.
As of March 21, 2006, there were 42,574,298 trust units outstanding.
Documents Incorporated by Reference: None.
================================================================================
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business.............................................................................. 1
Creation and Purpose of the Trust.................................................. 1
Treasure Island.................................................................... 1
Current Drilling Activities........................................................ 1
Overriding Royalty Interests....................................................... 2
Distributions...................................................................... 2
Disposition of Overriding Royalty Interests........................................ 3
Duration of the Trust.............................................................. 3
The Trustee........................................................................ 4
Item 1A. Risk Factors.......................................................................... 4
Item 1B. Unresolved Staff Comments............................................................. 6
Item 2. Properties............................................................................ 6
Item 3. Legal Proceedings..................................................................... 7
Item 4. Submission of Matters to a Vote of Unitholders........................................ 7
PART II
Item 5. Market for the Registrant's Units and Related Unitholder Matters...................... 7
Item 6. Selected Financial Data............................................................... 8
Item 7. Trustee's Discussion and Analysis of Financial Condition and Results of Operations.... 8
Overview........................................................................... 8
Liquidity and Capital Resources.................................................... 8
Results of Operations.............................................................. 8
Item 7A. Quantitative and Qualitative Disclosures about Market Risk............................ 9
Item 8. Financial Statements and Supplementary Data........................................... 9
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.. 15
Item 9A. Controls and Procedures............................................................... 15
PART III
Item 10. Directors and Executive Officers of the Registrant.................................... 15
Item 11. Executive Compensation................................................................ 15
Item 12. Unit Ownership of Certain Beneficial Owners and Management............................ 16
Item 13. Certain Relationships and Related Transactions........................................ 16
Item 14. Principal Accountant Fees and Services................................................ 16
Item 15. Exhibits and Financial Statement Schedules............................................ 16
PART I
ITEM 1. BUSINESS
Treasure Island Royalty Trust was established in connection with Newfield
Exploration Company's November 2002 acquisition of EEX Corporation to provide
the shareholders of EEX with the option to receive an interest in an exploration
concept being pursued by EEX prior to the acquisition. The concept, referred to
as "Treasure Island," targets "ultra deep" prospects in the shallow waters of
the Gulf of Mexico. The trust owns, or has the right to receive, overriding
royalty interests to be paid from Newfield's (or its transferees') interest in
any future production that may be achieved from horizons below specified depths
in the Treasure Island area.
Treasure Island remains an exploration concept and there are no proved
reserves or production currently associated with the royalty interests. The
first well to test the Treasure Island concept, "Blackbeard West," was spud in
early February 2005 and is currently expected to take up to 18 months to drill.
CREATION AND PURPOSE OF THE TRUST
The trust was created under the laws of the State of Texas pursuant to a
trust agreement entered into in June 2002 between Newfield, as grantor, and
several employees of Newfield, as trustees. The beneficial interest in the trust
is divided into 42,574,298 trust units, each of which represents an equal
undivided portion of the trust. At the time of Newfield's acquisition of EEX,
Newfield and Wachovia Bank, National Association, as successor trustee, entered
into an amended and restated trust agreement with respect to the trust and the
trust issued all 42,574,298 trust units to Newfield. Newfield subsequently
transferred all of the trust units to the holders of EEX stock who elected to
receive trust units as a portion of their consideration in the acquisition.
The sole purpose of the trust is to hold non-expense bearing overriding
royalty interests in any future production from a specified area. The royalty
interests are passive in nature. The trustee of the trust and the trust's
unitholders have no control over, or responsibility for any costs related to,
drilling, development or operations. Neither Newfield nor any other operator of
Treasure Island properties has any contractual commitment to the trust to
conduct drilling on the properties or to maintain its ownership interest in any
of the properties.
TREASURE ISLAND
"Treasure Island" refers to a concept developed to explore for oil and gas
in "ultra deep" horizons below a salt weld typically found at 18,000, but
sometimes as deep as 22,200, feet true vertical depth in the federal Outer
Continental Shelf of the Gulf of Mexico. The Treasure Island area covers
horizons below specified depths in 116 lease blocks located offshore Louisiana
in the South Timbalier, Ship Shoal, South Marsh Island and Eugene Island areas.
The specified depth or depths for each of the blocks vary and were agreed upon
by EEX and Newfield prior to Newfield's acquisition of EEX. The depths do not
correspond exactly to the location of the base of the salt weld in all cases.
Treasure Island exploratory wells require significant lead time to plan
and drill and are very expensive and technically challenging because of the
depth of the targeted horizons and expected harsh conditions such as high
temperature and pressure. The dry hole cost of a well is likely to be more than
$100 million. Because of these risks and high drilling costs, Newfield does not
currently anticipate drilling any Treasure Island wells without one or more
partners to carry all or a substantial portion of the drilling costs.
Newfield is discussing potential transactions with respect to several
other prospects with third parties. However, Newfield may be unable to timely
reach agreement with any of these parties.
CURRENT DRILLING ACTIVITIES
The first well to test the Treasure Island concept, "Blackbeard West," was
spud in early February 2005. The well is being drilled pursuant to agreements
Newfield entered into with Exxon Mobil Corporation, BP Exploration and
Production Inc. and Petrobras America Inc. in May 2004. The well, which has a
proposed depth of
32,000 feet and is currently expected to take up to 18 months to drill, is
operated by ExxonMobil. The well is subject to a 1.25% overriding royalty
interest held by the trust.
OVERRIDING ROYALTY INTERESTS
The overriding royalty interests entitle the trust to a percentage of all
of the oil and gas produced from covered leases at specified production depths
without reduction for drilling, development and operating costs. The proceeds
received by the trust for its portion of any produced oil and gas will be net of
transportation and marketing costs and production and similar taxes. Each
overriding royalty interest will be paid out of Newfield's (or its transferees')
interest in the applicable lease.
In general, a lease block is subject to an overriding royalty interest if
it is located within the Treasure Island area and Newfield owns a working
interest in the lease at any time on or after November 26, 2003 and prior to
November 26, 2007 (this period is referred to as the "grant period"). The
Treasure Island area covers horizons below specified depths in 116 lease blocks
located offshore Louisiana in the South Timbalier, Ship Shoal, South Marsh
Island and Eugene Island areas. The lease blocks included in the Treasure Island
area and the specified depth or depths for each of the blocks, which vary and
range from about 18,000 to more than 22,000 feet, were agreed upon by EEX and
Newfield prior to Newfield's acquisition of EEX.
With respect to a particular lease block located within the Treasure
Island area, the trust will receive 1.25% of all oil and gas production from
below the specified depth or depths for the lease if:
- Newfield owns a working interest in the lease block at any time
during the grant period of at least 25%; and
- at the time of its acquisition, Newfield's interest in the lease
block includes a net revenue interest in the production equal to no
less than its working interest percentage multiplied by 80%.
If Newfield's highest working interest during the grant period is less
than 25%, the percentage of production the trust will receive is equal to 1.25%
multiplied by the result of Newfield's highest working interest percentage
during the grant period divided by 25%. If Newfield's net revenue interest is
less than 80% but more than 70% of its working interest percentage at the time
of acquisition of the interests, the trust's overriding royalty interest is
reduced as described under "Item 2. Properties" below. If Newfield's net revenue
interest is 70% or less of its working interest percentage at the time of
acquisition of the interests, the trust is not entitled to an overriding royalty
interest in production from the lease.
The trust currently holds an interest in 20 lease blocks within the
Treasure Island area. Four of these leases are scheduled to expire in April
2006, six are scheduled to expire in April, May or June 2007 and one is
scheduled to expire in April 2009. The remaining nine leases (all of which will
be beyond their initial terms by April 2006) are being or will be protected from
expiration by currently ongoing or planned activities, including the ongoing
drilling of the Blackbeard West prospect. An overriding royalty interest with
respect to a particular lease block will terminate if the lease expires.
DISTRIBUTIONS
No distributions will be made until the trust receives revenue from the
royalty interests. Each quarter thereafter, the trustee will determine the
amount of cash available for distribution to the trust's unitholders. In
general, available cash equals the cash received by the trust from the royalty
interests and other sources during the quarter over the expenses and other
obligations (including debt) of the trust paid during the quarter and any cash
used during the quarter to establish or increase a reserve for liabilities
payable or potentially payable in the future. However, the cash received by the
trust during the quarter attributable to the royalty interests will not be
reduced by more than 8% for administrative expenses and the repayment of
Newfield loans to pay administrative expenses. Trust unitholders of record as of
the close of business on the last business day of each calendar quarter will
receive a pro rata distribution of the cash available for distribution for that
quarter no later than ten business days after the end of the quarter.
2
If a liability is contingent or uncertain in amount or not yet currently
due and payable, the trustee may create a cash reserve to pay for the liability.
If the trustee determines that cash on hand and cash to be received is
insufficient to cover any extraordinary expenses or liabilities of the trust,
the trustee may borrow funds required to pay those expenses or liabilities. The
trustee may borrow the funds from any person, including Newfield or itself. The
trustee may also encumber the assets of the trust to secure payment of the
indebtedness. If the trustee borrows funds to cover extraordinary expenses or
liabilities, the trust unitholders will not receive distributions until the
borrowed funds are repaid. The trust agreement provides for special borrowing
and repayment procedures with respect to Newfield's funding of ordinary
administrative expenses, which are described below under "Item 7. Trustee's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
DISPOSITION OF OVERRIDING ROYALTY INTERESTS
At the request of Newfield (or its transferee(s)), the trustee must sell
royalty interests that burden interests then in commercial production if
Newfield (or its transferee(s)) proposes to sell the burdened interests to an
unaffiliated third party. The net proceeds from the sale would be allocated to
Newfield (or its transferee(s)) and the trust based upon the relative ownership
percentage of each in the aggregate net revenue interest of Newfield (or its
transferee(s)) and the trust included in the sale. However, the trustee will not
be required to sell any royalty interests if:
- the value of the interests to be sold during any calendar year
exceeds 10% of the value of all royalty interests attributed with
proved reserves; or
- the cumulative value of all royalty interests sold pursuant to such
requests exceeds 25% of the value of all royalty interests
attributed with proved reserves.
In each case, the value of royalty interests will be equal to the discounted
present value of the future net revenues attributable to the proved reserves
attributable to the royalty interests in accordance with the criteria
established by the SEC, as set forth in the most recent reserve report of the
trust.
The trustee also may sell any of the royalty interests if it determines
that the sale is in the best interests of the trust's unitholders and holders of
at least 60% of all trust units outstanding approve the sale. However, any sale
of all or substantially all of the royalty interests, whether in a single
transaction or series of transactions, requires the approval of holders of at
least 80% of all outstanding trust units.
After satisfying the liabilities and obligations of the trust, the trustee
will distribute to the trust's unitholders the net proceeds from any sale of
royalty interests.
DURATION OF THE TRUST
The trust will terminate if:
- all of the royalty interests are sold;
- cash proceeds received by the trust with respect to the royalty
interests are less than $1,000,000 per year for each of two
successive years after the first full year during which any of the
covered leases produce oil and gas in commercial quantities;
- the trust does not receive any cash proceeds attributable to the
royalty interests at any time prior to the third anniversary of the
date that all covered leases have expired;
- the holders of 80% or more of the outstanding trust units vote in
favor of termination; or
- the trust violates the "rule against perpetuities."
Upon termination of the trust, the trustee will sell all of the trust's assets,
either by private sale or public auction, and then distribute the net proceeds
of the sale to the trust's unitholders.
3
THE TRUSTEE
The duties of the trustee are specified in the trust agreement and by the
laws of Texas. The trustee's principal duties consist of:
- collecting revenue attributable to the royalty interests;
- paying expenses, charges and obligations of the trust from the
trust's revenue and assets;
- distributing available cash to the trust's unitholders;
- investing cash on hand;
- establishing cash reserves;
- borrowing funds under specified circumstances;
- prosecuting, defending or settling any claim of or against the
trustee, the trust or the royalty interests; and
- taking any other action not otherwise prohibited that it deems
necessary or advisable to best achieve the purposes of the trust.
The trustee has no authority to incur any contractual liabilities on
behalf of the trust that are not limited solely to claims against the assets of
the trust. The only assets the trust may acquire are the overriding royalty
interests and the only investment activity the trustee may engage in is the
investment of cash on hand.
The trustee has the right to require any trust unitholder to dispose of
his trust units if an administrative or judicial proceeding seeks to cancel or
forfeit any of the property in which the trust holds an interest because of the
nationality or any other status of a trust unitholder. If a trust unitholder
fails to dispose of his trust units, the trust will be obligated to purchase
them at a price determined in accordance with a formula set forth in the trust
agreement.
The trustee is authorized to agree to modifications of the terms of the
conveyances of the royalty interests to the trust or to settle disputes
involving such conveyances, so long as any modifications or settlements do not
alter the nature of the royalty interests as rights to receive a share of the
oil and gas, or proceeds thereof, from the underlying properties free of any
obligation for drilling, development or operating expenses.
The trustee is entitled to annual compensation of $15,000, plus
reimbursement of its reasonable out-of-pocket expenses incurred in connection
with the administration of the trust. The trustee also is entitled to a fee of
$5,000 upon the termination of the trust. The trustee's compensation is paid out
of the trust's assets.
ITEM 1A. RISK FACTORS
An investment in trust units involves risks. You should carefully
consider, in addition to the other information contained in this report, the
risks described below.
THERE IS NO ESTABLISHED PUBLIC MARKET FOR THE TRUST UNITS, WHICH LIMITS
THEIR MARKET PRICE AND UNITHOLDERS' ABILITY TO SELL THEM FOR THEIR INHERENT
VALUE. Trust units have traded on a limited basis from time to time
over-the-counter under the symbol "TISDZ.PK" on the National Quotation Bureau,
commonly referred to as the "Pink Sheets." This limited trading activity may not
represent a reliable indicator of the market value of the trust units.
THE TRUST MAY NOT RECEIVE ANY ROYALTIES. The only assets of, and sources of
income to, the trust are the royalty interests, which generally entitle the
trust to receive a share of the oil and gas production from the underlying
properties if production is achieved. Treasure Island remains an untested
exploration concept. There is no production and there are no proved reserves
currently associated with the royalty interests. As a result, ultimate
commercialization of any one or more of the currently identified prospects may
never be realized because the prospects are never tested, because oil or gas is
not discovered or, if discovered, because the costs of development make
commercialization uneconomic.
4
Treasure Island exploratory wells require significant lead time to plan
and drill and are very expensive (the dry hole cost of a well is likely to be
more than $100 million) and technically challenging because of the depth of the
targeted horizons and expected harsh conditions such as high temperature and
pressure. The "Blackbeard West" prospect, which was spud in early February 2005,
is expected to take up to 18 months to drill and has a proposed depth of 32,000
feet--making it the deepest well ever drilled in the shallow waters of the Gulf
of Mexico by more than a mile. Because of these risks and high drilling costs,
Newfield does not currently anticipate drilling any Treasure Island wells
without one or more partners to carry all or a substantial portion of the
drilling costs.
The royalty interest with respect to a particular lease block will
terminate if the lease expires. The trust currently holds an interest in 20
lease blocks within the Treasure Island area. Four of these leases are scheduled
to expire in April 2006, six are scheduled to expire in April, May or June 2007
and one is scheduled to expire in April 2009. The remaining nine leases (all of
which will be beyond their initial terms by April 2006) are being or will be
protected from expiration by currently ongoing or planned activities, including
the ongoing drilling of the Blackbeard West prospect. Newfield is discussing
potential transactions with respect to several other prospects with a number of
third parties. However, Newfield may be unable to timely reach agreement with
any of these parties.
ANY FUTURE DISTRIBUTIONS FROM THE TRUST WILL BE SUBJECT TO FLUCTUATING
PRICES FOR OIL AND GAS. Oil and gas prices fluctuate widely in response to
changes in supply, weather conditions, economic conditions, the price and
availability of alternative fuels and a variety of additional factors. To the
extent there is production of oil and gas associated with the royalty interests,
the royalties that the trust receives from its share of production will be
affected by changes in the prices of oil and gas. As a result, future
distributions from the trust to the holders of the trust units may vary
significantly from quarter to quarter and could be reduced or discontinued. In
addition, lower oil and gas prices may reduce the likelihood that the underlying
properties will be developed or that any oil and gas discovered will be economic
to produce. The volatility of energy prices will make it difficult to estimate
future cash distributions to trust unitholders and the value of the trust units.
These difficulties may have an adverse effect on the value of the trust units.
THE OCCURRENCE OF DRILLING, PRODUCTION OR TRANSPORTATION ACCIDENTS OR
OTHER PROBLEMS AT ANY OF THE UNDERLYING PROPERTIES COULD REDUCE TRUST
DISTRIBUTIONS. Drilling is a high risk activity and the development and
operation of oil and gas properties involves numerous risks. While the trust, as
the owner of overriding royalty interests, should not be responsible for the
costs associated with any accidents or other problems, an accident or other
problem could result in the loss of the trust's portion of oil or gas in
transit, the loss of a productive well and associated reserves or the
interruption of production. Generally, the operator is obligated to undertake
remedial operations only to the extent that such actions would be undertaken by
a prudent operator under similar circumstances in accordance with good oilfield
practices.
THE TRUST WILL BE DEPENDENT ON NEWFIELD FOR FUNDING UNTIL IT HAS REVENUE.
Because none of the underlying properties are at present producing any oil or
gas, the trust has no source of income. Therefore, it must rely on Newfield for
funding to pay its administrative expenses. Any material adverse change in
Newfield's financial condition or results of operations could materially and
adversely affect the trust and the trust unitholders. Newfield has agreed to
make loans to the trust as described below under "Item 7. Trustee's Discussion
and Analysis of Financial Condition and Results of Operations --Liquidity and
Capital Resources."
TRUST UNITHOLDERS HAVE LIMITED VOTING RIGHTS AND THE TRUST HAS NO
INFLUENCE OVER THE OPERATION OR FUTURE DEVELOPMENT OF THE UNDERLYING PROPERTIES.
The voting rights of trust unitholders are more limited than those of
stockholders of most public companies. For example, there is no requirement for
annual meetings of trust unitholders or for an annual or other periodic
re-election of the trustee. The royalty interests are passive in nature. The
trustee of the trust and the trust's unitholders have no control over, or
responsibility for any costs related to, drilling, development or operations.
Neither Newfield nor any other operator of Treasure Island properties has any
contractual commitment to the trust to conduct drilling on the properties.
NEWFIELD'S INTERESTS AND THE INTERESTS OF THE TRUST UNITHOLDERS MAY NOT
ALWAYS BE ALIGNED. Because Newfield has interests in oil and gas properties not
included in the trust, Newfield's interests and the interests of the trust
unitholders may not always be aligned. For example, in setting budgets for
exploration and development expenditures for Newfield's properties, including
the underlying properties, Newfield may make decisions that
5
could adversely affect future production from the underlying properties.
Moreover, Newfield could decide to sell or abandon some or all of the underlying
properties, and that decision may not be in the best interests of the trust
unitholders.
NEWFIELD MAY TRANSFER OR ABANDON UNDERLYING PROPERTIES. Newfield may at
any time transfer all or part of the underlying properties. Trust unitholders
will not be entitled to vote on any transfer, and the trust will not receive any
proceeds of the transfer. Following any such transfer, the underlying properties
will continue to be subject to the overriding royalty interests of the trust,
but the net proceeds from the transferred property will be calculated separately
and paid by the transferee. The transferee is responsible for all of Newfield's
obligations relating to the overriding royalty interests on the portion of the
underlying properties transferred, and Newfield would have no continuing
obligation to the trust for those properties. In addition, subject to the
limitations described above under "Item 1. Business -- Disposition of Overriding
Royalty Interests," at the request of Newfield, the trustee must sell royalty
interests that burden interests then in commercial production if Newfield
proposes to sell the burdened interests to an unaffiliated third party.
TRUST UNITHOLDERS HAVE LIMITED ABILITY TO ENFORCE THEIR RIGHTS. The trust
agreement and Texas trust law permit the trustee and the trust to sue Newfield
or any other owner of the underlying properties to honor the royalty interests.
If the trustee does not take appropriate action to enforce the royalty
interests, the unitholders' recourse would likely be limited to bringing a
lawsuit against the trustee to compel the trustee to take specified actions.
Unitholders probably would not be able to sue Newfield or any other owner of the
underlying properties directly to enforce the trust's rights.
LIMITED LIABILITY OF TRUST UNITHOLDERS IS UNCERTAIN. It is unclear under
Texas law whether a trust unitholder could be held personally liable for the
trust's liabilities if those liabilities exceeded the value of the trust's
assets. While the trustee believes it is highly unlikely that the trust could
incur such excess liabilities, the trust unitholders could be held liable for
their respective pro rata portions of any of such excess liabilities. The
trust's royalty interests are generally not subject to operational and
environmental liabilities and obligations. The trust conducts no active business
that would give rise to other business liabilities. The trustee has limited
ability to incur obligations on behalf of the trust. The trustee has no
authority to incur any contractual liabilities on behalf of the trust that are
not limited solely to claims against the assets of the trust.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The trust's properties will consist solely of the overriding royalty
interests described under "Item 1. Business" above. The trust currently holds an
interest in 20 lease blocks within the Treasure Island area. With respect to a
particular lease block located within the Treasure Island area, the trust will
receive 1.25% of all oil and gas production from below the specified depth or
depths for the lease if:
- Newfield owns a working interest in the lease block at any time
during the grant period of at least 25%; and
- at the time of its acquisition, Newfield's interest in the lease
block includes a net revenue interest equal to no less than its
working interest percentage multiplied by 80%.
If Newfield's highest working interest during the grant period is less
than 25%, the percentage of production the trust is entitled to receive is equal
to 1.25% multiplied by the result of Newfield's highest working interest
percentage during the grant period divided by 25%. If Newfield's net revenue
interest is less than 80% but more than 70% of its working interest percentage
at the time of acquisition of the interests, the trust's overriding royalty
interest is reduced as described below. If Newfield's net revenue interest is
70% or less of its working interest percentage at the time of acquisition of the
interests, the trust is not entitled to an overriding royalty interest in
production from the lease.
6
If Newfield's net revenue interest is at least 74.667% but less than 80%
of its working interest percentage at the time of acquisition of the interests,
the trust's overriding royalty interest is equal to its overriding royalty
interest prior to any reduction associated with Newfield's net revenue interest
multiplied by the result of Newfield's net revenue interest percentage (as a
percentage of its working interest percentage at the time of the acquisition of
the interests) divided by 80%. For example, if Newfield acquired a 20% working
interest and a net revenue interest equal to 75% of its working interest
percentage (a 15% net revenue interest), the trust's overriding royalty interest
would be 0.9375%. The royalty interest is determined by first multiplying 1.25%
by the result of 20% (Newfield's working interest percentage) divided by 25%,
which results in an overriding royalty interest of 1%. The royalty interest is
then further reduced by multiplying 1% by the result of 75% (Newfield's net
revenue interest as a percentage of its working interest percentage) divided by
80%.
If Newfield's net revenue interest is less than 74.667% but greater than
70% of its working interest percentage at the time of acquisition of the
interests, the trust's overriding royalty interest is equal to the lesser of 25%
and such working interest percentage multiplied by the difference between
Newfield's net revenue interest percentage at the time of the acquisition of the
interests and 70%. For example if Newfield acquired a 20% working interest and a
net revenue interest of 72% of its working interest percentage (a 14.4% net
revenue interest), the trust's overriding royalty interest would be 0.4%. The
royalty interest is determined by multiplying 20% (Newfield's working interest
percentage) by 2% (the difference between Newfield's net revenue interest
percentage of 72% (as a percentage of its working interest percentage) and 70%).
However, if Newfield acquired a 50% working interest and a net revenue interest
of 72% of its working interest percentage (a 36% net revenue interest), the
trust's overriding royalty interest would be 0.5% (25% (because Newfield's
working interest percentage is greater than 25%) multiplied by 2% (72% minus
70%)).
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF UNITHOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS AND RELATED UNITHOLDER MATTERS
Currently, there is no established public trading market for the trust
units. Trust units have been traded on a limited basis from time to time
over-the-counter on the National Quotation Bureau, commonly referred to as the
"Pink Sheets," under the symbol "TISDZ.PK" This limited trading activity may not
represent a reliable indicator of the market value of the trust units.
As of March 14, 2006, there were 173 unitholders of record.
No cash distributions have been paid to the trust's unitholders. The
trust's only sources of income are revenue, if any, attributable to the
overriding royalty interests, income from the investment of cash on hand and net
proceeds from the disposition of royalty interests. To date, the trust has
received no revenue and there are no proved reserves or production associated
with the royalty interests. The timing, duration and amount of any future cash
distributions will be dependent on the many and varied factors discussed
throughout Part I of this report.
The trust has no directors, officers or employees and no equity
compensation plans.
7
ITEM 6. SELECTED FINANCIAL DATA
The following table presents in summary form selected financial
information regarding the trust at December 31, 2005, 2004, 2003 and 2002 and
for each of the years in the three-year period ended December 31, 2005 and for
the period from inception of the trust through December 31, 2002.
AT OR FOR THE YEAR OR PERIOD ENDED DECEMBER 31,
----------------------------------------------
2005 2004 2003 2002
------- ------- ------- -------
Revenues.................................. $ -- $ -- $ -- $ --
Net loss.................................. 96,637 91,774 94,819 44,438
Cash distributions to unitholders......... -- -- -- --
Cash distributions per unit............... -- -- -- --
Trust corpus.............................. 835,745 835,745 835,745 835,745
Trust assets.............................. 835,745 835,745 835,745 835,745
Trust liabilities......................... 327,668 231,031 139,257 44,438
Trust accumulated deficit................. 327,668 231,031 139,257 44,438
ITEM 7. TRUSTEE'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
The sole purpose of the trust is to hold overriding royalty interests to
be paid from Newfield's interest in any future production that may be achieved
from horizons below specified depths in the Treasure Island area. The royalty
interests are passive in nature. The trustee of the trust and the trust's
unitholders have no control over, or responsibility for any costs related to,
drilling, development or operations. Neither Newfield nor any other operator of
Treasure Island properties has any contractual commitment to the trust to
conduct drilling on the properties or to maintain its ownership interest in any
of the properties. Treasure Island is an exploration concept and there are no
proved reserves or production currently associated with the royalty interests.
The beneficial interest in the trust is divided into 42,574,298 trust units,
each of which represents an equal undivided portion of the trust.
LIQUIDITY AND CAPITAL RESOURCES
The trust's only sources of income are revenue, if any, attributable to
the overriding royalty interests, income from the investment of cash on hand and
net proceeds from the disposition of royalty interests. Because none of the
properties underlying the royalty interests are at present producing any oil or
gas and the trust has only a very small amount of cash on hand, the trust has no
source of revenue. Therefore, it must rely on Newfield for the funding of its
administrative expenses. Any material adverse change in Newfield's financial
condition or results of operations could materially and adversely affect the
trust and the trust unitholders.
Until the royalty interests begin generating cash proceeds, Newfield has
agreed to make loans from time to time to fund the routine administration of the
trust. In addition, if after such time as the royalty interests commence
generating cash proceeds, 8% of the cash held by the trust at the end of a
calendar quarter is insufficient to cover the administrative expenses of the
trust, Newfield will lend the difference to the trust. Loans from Newfield bear
interest at an annual rate of 8% and are senior unsecured obligations of the
trust. The loans (including accrued interest) will be repaid in quarterly
installments to the extent that 8% of the cash received by the trust in a given
quarter exceeds the administrative expenses of the trust for that quarter. As of
December 31, 2005, the trust had borrowed $246,190 since inception to pay
administrative expenses and had incurred interest of $32,013, none of which had
been repaid.
RESULTS OF OPERATIONS
The trust has had no revenue. The trust incurred $96,637, $91,774 and
$94,819 of administrative and interest expenses in 2005, 2004 and 2003,
respectively. Administrative expense consists primarily of legal, accounting and
trustee fees and printing and mailing costs.
8
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustee and Unitholders of Treasure Island Royalty Trust:
In our opinion, the accompanying balance sheets and the related statements
of loss present fairly, in all material respects, the financial position of
Treasure Island Royalty Trust (the "Trust") at December 31, 2005 and 2004 and
the results of its operations for each of the three years in the period ended
December 31, 2005, in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of the Trustee. Our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform our audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by the Trustee, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As discussed in Notes 3 and 4 to the financial statements, the Trust has a
contractual relationship with, and is dependent for funding on, Newfield
Exploration Company.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
March 21, 2006
9
TREASURE ISLAND ROYALTY TRUST
BALANCE SHEET
AT DECEMBER 31,
------------------------
2005 2004
---------- ----------
Assets
Cash............................................ $ 100 $ 100
Overriding royalty interests in gas properties.. 835,645 835,645
---------- ----------
Total assets........................................ $ 835,745 $ 835,745
========== ==========
Liabilities and trust corpus
Current trust expenses payable.................. $ 49,465 $ 39,300
Loan payable to Newfield........................ 246,190 176,545
Interest payable................................ 32,013 15,186
Commitments and contingencies................... -- --
Trust corpus (42,574,298 units of beneficial
interest authorized and outstanding).......... 835,745 835,745
Accumulated deficit............................. (327,668) (231,031)
---------- ----------
Total liabilities and trust corpus.................. $ 835,745 $ 835,745
========== ==========
The accompanying notes are an integral part of these financial statements.
10
TREASURE ISLAND ROYALTY TRUST
STATEMENT OF LOSS
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004 DECEMBER 31, 2003
----------------- ----------------- -----------------
Royalty income............................... $ -- $ -- $ --
General and administrative expense (Note 3).. 79,810 80,498 90,909
Interest expense............................. 16,827 11,276 3,910
---------- ---------- ----------
Net loss..................................... $ 96,637 $ 91,774 $ 94,819
========== ========== ==========
Distributable income......................... -- -- --
Distributable income per trust unit.......... -- -- --
Outstanding trust units...................... 42,574,298 42,574,298 42,574,298
The accompanying notes are an integral part of these financial statements.
11
TREASURE ISLAND ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS
1. FORMATION AND DURATION OF THE TRUST
Treasure Island Royalty Trust was established in connection with Newfield
Exploration Company's November 2002 acquisition of EEX Corporation to provide
the shareholders of EEX with the option to receive an interest in an exploration
concept being pursued by EEX prior to the acquisition. The concept, referred to
as "Treasure Island," targets "ultra deep" prospects in the shallow waters of
the Gulf of Mexico. The trust owns, or has the right to receive, overriding
royalty interests to be paid from Newfield's (or its transferees') interest in
any future production that may be achieved from horizons below specified depths
in the Treasure Island area. Treasure Island remains an untested exploration
concept. There is no production and there are no proved reserves currently
associated with the royalty interests.
The trust was created under the laws of the State of Texas pursuant to a
trust agreement entered into in June 2002 between Newfield, as grantor, and
several employees of Newfield, as trustees. The beneficial interest in the trust
is divided into 42,574,298 trust units, each of which represents an equal
undivided portion of the trust. At the time of Newfield's acquisition of EEX,
Newfield and Wachovia Bank, National Association, as successor trustee, entered
into an amended and restated trust agreement with respect to the trust and the
trust issued all 42,574,298 trust units to Newfield. Newfield subsequently
transferred all of the trust units to the holders of EEX stock who elected to
receive trust units as a portion of their consideration in the acquisition.
The sole purpose of the trust is to hold non-expense bearing overriding
royalty interests in any future production from a specified area. The royalty
interests are passive in nature. The trustee of the trust and the trust's
unitholders have no control over, or responsibility for any costs related to,
drilling, development or operations. Neither Newfield nor any other operator of
Treasure Island properties has any contractual commitment to the trust to
conduct drilling on the properties or to maintain its ownership interest in any
of the properties.
The trust will terminate if:
- all of the royalty interests are sold;
- cash proceeds received by the trust with respect to the royalty
interests are less than $1,000,000 per year for each of two
successive years after the first full year during which any of the
covered leases produce oil and gas in commercial quantities;
- the trust does not receive any cash proceeds attributable to the
royalty interests at any time prior to the third anniversary of the
date that all covered leases have expired;
- the holders of 80% or more of the outstanding trust units vote in
favor of termination; or
- the trust violates the "rule against perpetuities."
Upon termination of the trust, the trustee will sell all of the trust's assets,
either by private sale or public auction, and then distribute the net proceeds
of the sale to the trust's unitholders.
2. BASIS OF PRESENTATION
The financial statements of the trust are prepared in conformity with
accounting principles generally accepted in the United States of America.
3. FUNDING OF THE TRUST AND DISTRIBUTIONS
The trust's only sources of income are revenue, if any, attributable to
the overriding royalty interests, income from the investment of cash on hand and
net proceeds from the disposition of royalty interests. Because none of the
underlying properties are at present producing any oil or gas, the trust has no
source of revenue.
12
Therefore, it must rely on Newfield for the funding of its administrative
expenses. Any material adverse change in Newfield's financial condition or
results of operations could materially and adversely affect the trust and the
trust unitholders. Newfield has agreed to make loans from time to time to fund
the routine administration of the trust. In addition, if after such time as the
royalty interests commence generating cash proceeds, 8% of the cash held by the
trust at the end of a calendar quarter is insufficient to cover the
administrative expenses of the trust, Newfield will lend the difference to the
trust. Loans from Newfield will bear interest at an annual rate of 8% and will
be senior unsecured obligations of the trust. The loans will be repaid in
quarterly installments only from the excess, if any, of an amount equal to 8% of
the cash received by the trust in a given quarter over the administrative
expenses of the trust for that quarter.
No distributions will be made until the trust receives revenue from the
royalty interests. Each quarter thereafter, the trustee will determine the
amount of cash available for distribution to the trust's unitholders. In
general, available cash equals the cash received by the trust from the royalty
interests and other sources during the quarter over the expenses and other
obligations (including debt) of the trust paid during the quarter and any cash
used during the quarter to establish or increase a reserve for liabilities
payable or potentially payable in the future. However, the cash received by the
trust during the quarter attributable to the royalty interests will not be
reduced by more than 8% for administrative expenses and the repayment of
Newfield loans to pay administrative expenses. Trust unitholders of record as of
the close of business on the last business day of each calendar quarter will
receive a pro rata distribution of the cash available for distribution for that
quarter no later than ten business days after the end of the quarter.
If a liability is contingent or uncertain in amount or not yet currently
due and payable, the trustee may create a cash reserve to pay for the liability.
If the trustee determines that the cash on hand and the cash to be received is
insufficient to cover any extraordinary expenses or liabilities of the trust,
the trustee may borrow funds required to pay those expenses or liabilities. The
trustee may borrow the funds from any person, including Newfield or itself. The
trustee may also encumber the assets of the trust to secure payment of the
indebtedness. If the trustee borrows funds to cover extraordinary expenses or
liabilities, the trust unitholders will not receive distributions until the
borrowed funds are repaid.
4. DISPOSITION OF OVERRIDING ROYALTY INTERESTS
At the request of Newfield (or its transferee(s)), the trustee must sell
royalty interests that burden interests then in commercial production if
Newfield (or its transferee(s)) proposes to sell the burdened interests to an
unaffiliated third party. The net proceeds from the sale would be allocated to
Newfield (or its transferee(s)) and the trust based upon the relative ownership
percentage of each in the aggregate net revenue interest of Newfield (or its
transferee(s)) and the trust included in the sale. However, the trustee will not
be required to sell any royalty interests if:
- the value of the interests to be sold during any calendar year
exceeds 10% of the value of all royalty interests attributed with
proved reserves; or
- the cumulative value of all royalty interests sold pursuant to such
requests exceeds 25% of the value of all royalty interests
attributed with proved reserves.
In each case, the value of royalty interests will be equal to the
discounted present value of the future net revenues attributable to the proved
reserves attributable to the royalty interests in accordance with the criteria
established by the SEC, as set forth in the most recent reserve report of the
trust.
The trustee also may sell any of the royalty interests if it determines
that the sale is in the best interests of the trust's unitholders and holders of
at least 60% of all trust units outstanding approve the sale. However, any sale
of all or substantially all of the royalty interests, whether in a single
transaction or series of transactions, requires the approval of holders of at
least 80% of all outstanding trust units.
After satisfying the liabilities and obligations of the trust, the trustee
will distribute to the trust's unitholders the net proceeds from any sale of
royalty interests.
13
5. FEDERAL INCOME TAX
Under current law, the trust is taxable as a grantor trust and not as a
business entity, although there is a remote possibility that the Internal
Revenue Service would attempt to treat the trust as a business entity. A grantor
trust is not subject to tax at the trust level. For tax purposes, trust
unitholders are considered to own the trust's income and principal as though no
trust were in existence.
6. TRUST UNITHOLDER VOTING RIGHTS
The voting rights of trust unitholders are more limited than those of
stockholders of most public companies. For example, there is no requirement for
annual meetings of trust unitholders or for an annual or other periodic
re-election of the trustee.
7. TRUSTEE COMPENSATION
The trustee is entitled to annual compensation of $15,000, plus
reimbursement of its reasonable out-of-pocket expenses incurred in connection
with the administration of the trust. The trustee also is entitled to a fee of
$5,000 upon the termination of the trust. The trustee's compensation is paid out
of the trust's assets. The trust accrued an aggregate of $16,166, $16,256 and
$16,504 in 2005, 2004 and 2003, respectively, for fees and reimbursable expenses
of the trustee.
14
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the trustee carried
out an evaluation of the effectiveness of the design and operation of the
trust's disclosure controls and procedures (as defined in Rule 15d-15(e) under
the Securities Exchange Act of 1934). Based upon that evaluation, the trustee
concluded that the trust's disclosure controls and procedures were effective as
of December 31, 2005 in ensuring that material information was accumulated and
communicated to the trustee on a timely basis to allow disclosure as required in
this report. In its evaluation of disclosure controls and procedures, the
trustee has relied, to the extent considered reasonable, on information provided
by Newfield. There has not been any change in the trust's internal controls over
financial reporting during the quarter ended December 31, 2005 that has
materially affected, or is reasonably likely to materially affect, the trust's
internal controls over financial reporting.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The trust has no directors, executive officers or audit committee. The
trustee is a corporate trustee that may be removed, with or without cause, by
the affirmative vote of the holders of a majority of all the units then
outstanding.
Because the trust has no employees, it does not have a code of ethics.
Officers, directors and employees of the trustee, Wachovia Bank, National
Association, must comply with the bank's Code of Conduct & Ethics. The code is
available on Wachovia's website at www.wachovia.com under the tab "About
Wachovia -- Investor Relations" and then under the heading "Corporate Governance
- -- Code of Conduct & Ethics."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Securities Exchange Act of 1934 requires persons
who own more than 10% of the trust units to file reports of ownership and
changes in ownership with the SEC. These persons are required by SEC rules to
furnish the trust with copies of all Section 16(a) reports they file. Based
solely on the trustee's review of the copies of such reports received by the
trust, the trustee believes that all such filing requirements were complied with
during the year ended December 31, 2005 except that Richard C. McKenzie, Jr.
should have reported the disposition of 35,000 trust units on July 5, 2005 by no
later than July 7, 2005, but reported the transaction late on July 12, 2005.
ITEM 11. EXECUTIVE COMPENSATION
The trust has no employees. The trustee is entitled to annual
compensation of $15,000, plus reimbursement of its reasonable out-of-pocket
expenses incurred in connection with the administration of the trust. The
trustee also is entitled to a fee of $5,000 upon the termination of the trust.
The trustee's compensation is paid out of the trust's assets.
15
ITEM 12. UNIT OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth beneficial ownership information with
respect to each person known by the trustee to own beneficially 5% or more of
the outstanding trust units as of February 28, 2006. The trust has no directors,
officers or employees and no equity compensation plans. Wachovia Bank, National
Association, the trustee of the trust, owns no units.
BENEFICIAL OWNERSHIP
---------------------
NAME OF BENEFICIAL OWNER UNITS PERCENT
------------------------ ------ -------
Richard C. McKenzie, Jr. (1)............ 16,275,648 38.2%
- ----------
(1) All information in the table above and in this note with respect to
Richard C. McKenzie, Jr. is based solely on the Form 4 he filed with the
SEC on July 12, 2005. Mr. McKenzie's address is 118 John St., Greenwich,
CT 06831.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees for services performed by PricewaterhouseCoopers LLP for the trust
for each of the years in the two-year period ended December 31, 2005 are:
FOR THE YEAR
ENDED DECEMBER 31,
--------------------
2005 2004
------- -------
Audit fees........................................ $22,000 $22,000
Audit-related fees................................ -- --
Tax fees.......................................... -- --
All other fees.................................... -- --
------- -------
$22,000 $22,000
As referenced in Item 10 above, the trust has no audit committee, and as
a result, has no audit committee pre-approval policy with respect to fees paid
to PricewaterhouseCoopers LLP.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Balance Sheet
Statement of Loss
Notes to Financial Statements
FINANCIAL STATEMENT SCHEDULES
Financial statement schedules listed under SEC rules but not included in
this report are omitted because they are not applicable or the required
information is provided in the notes to the financial statements.
16
EXHIBITS
EXHIBIT
NUMBER TITLE
- ------ ------
4.1 Form of Amended and Restated Trust Agreement of the Treasure Island
Royalty Trust by and between Newfield and Wachovia Bank, National
Association, as successor trustee (incorporated by reference to
Exhibit 4.7 to the Registration Statement on Form S-4 filed by
Newfield and the trust with the SEC on June 24, 2002 (File No.
333-91014))
10.1 Form of Master Conveyance of Overriding Royalty Interest between EEX
and Treasure Island Royalty Trust (incorporated by reference to
Exhibit 10.1 to the Registration Statement on Form S-4 filed by
Newfield and the trust with the SEC on September 27, 2002 (File No.
333-91014))
*31.1 Certification of Vice President of Trustee of Treasure Island
Royalty Trust pursuant to 15 U.S.C. Section 7241, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*32.1 Certification of Trustee of Treasure Island Royalty Trust pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
- ----------
* Filed herewith.
SUPPLEMENTAL INFORMATION TO BE FURNISHED
This report will be provided to unitholders. No other annual report or
proxy material will be provided to unitholders.
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.
TREASURE ISLAND ROYALTY TRUST
Date: March 21, 2006 By: Wachovia Bank, National Association, as trustee
By: /s/ Steven A. Finklea
-------------------------------------------------
Steven A. Finklea
Vice President
Note: Because the registrant is a trust without officers or employees, only the
signature of an officer of the trustee of the registrant is available and has
been provided.
18
INDEX TO EXHIBITS
EXHIBIT
NUMBER
- ------
4.1 Form of Amended and Restated Trust Agreement of the Treasure Island
Royalty Trust by and between Newfield and Wachovia Bank, National
Association, as successor trustee (incorporated by reference to
Exhibit 4.7 to the Registration Statement on Form S-4 filed by
Newfield and the trust with the SEC on June 24, 2002 (File No.
333-91014))
10.1 Form of Master Conveyance of Overriding Royalty Interest between EEX
and Treasure Island Royalty Trust (incorporated by reference to
Exhibit 10.1 to the Registration Statement on Form S-4 filed by
Newfield and the trust with the SEC on September 27, 2002 (File No.
333-91014))
*31.1 Certification of Vice President of Trustee of Treasure Island
Royalty Trust pursuant to 15 U.S.C. Section 7241, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*32.1 Certification of Trustee of Treasure Island Royalty Trust pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
- ----------
* Filed herewith.