~~Table~~UNITED ofSTATES ~~Contents~~

~~UNITED STATES~~ SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended September 30, ~~2011~~ 2012

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

For the transition period from ~~_______~~ to ~~_________~~

Commission File Number: 1-12474

Torch Energy Royalty Trust

(Exact Name of Registrant as Specified in Its Charter)

Delaware		74-6411424
(State or Other Jurisdiction of		(I.R.S. Employer
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)
Incorporation or Organization)		Identification Number)
Rodney Square North 1100 North Market Street, Wilmington, Delaware		19890
(Address of Principal Executive Offices)		(Zip Code)

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

302/636-6435

~~302/636-6435~~(Registrant’s telephone number, including area code)

~~(Registrant’s~~Not ~~telephone~~Applicable ~~number, including area code)~~

~~Not~~(Former name, ~~Applicable~~former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (~~Former~~1) has ~~name,~~filed ~~former~~all ~~address~~reports ~~and~~required ~~former~~to ~~fiscal~~be ~~year~~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 ¨ No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if ~~changed~~any, ~~since~~every ~~last~~Interactive ~~report~~Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant ~~(1) has~~is ~~filed~~a ~~all~~large ~~reports~~accelerated ~~required~~filer, toan beaccelerated ~~filed~~filer, ~~by Section 13~~ or 15a ~~(d) of~~non-accelerated ~~the~~filer. ~~Securities~~See ~~Exchange~~definition ~~Act~~ of ~~1934 during the preceding 12 months (or for~~ ~~such~~“accelerated ~~shorter~~filer ~~period~~and ~~that~~large ~~the~~accelerated ~~Registrant~~filer” ~~was~~in ~~required~~Rule ~~to file such reports), and (~~12b-2~~) has~~ ~~been subject~~of ~~to such filing requirements for~~ the ~~past~~Exchange ~~90 days~~Act.

~~Yes~~Large ~~þ No~~accelerated o filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ (Do not check if a smaller reporting company) Small reporting company x

Indicate by check mark whether the registrant ~~has~~is ~~submitted~~a ~~electronically~~shell ~~and~~company ~~posted~~(as ondefined ~~its corporate~~in ~~Web site, if any, every Interactive Data File required to be submitted and posted pursuant to~~ Rule ~~405~~ ~~of Regulation S~~12b-T2 ~~(§ 232.405~~ of ~~this chapter) during~~ the ~~preceding 12 months~~Exchange ~~(or for such shorter period that the registrant was required to submit and post such files~~Act). Yes o ¨ No x o

~~Indicate~~As byof ~~check mark whether the registrant is a large accelerated filer~~January 27, ~~an accelerated filer~~2014, or ~~a non-accelerated filer~~8.6 million ~~See~~Units ~~definition~~ of ~~“accelerated~~Beneficial ~~filer~~Interest ~~and large accelerated filer” in Rule 12b-2~~ of the ~~Exchange~~Trust ~~Act~~were outstanding.

~~Large~~TORCH ~~accelerated~~ENERGY ~~filer~~ROYALTY oTRUST ~~Accelerated filer o Non-accelerated filer o Small reporting company þ (Do not check if a smaller reporting company)~~

~~Indicate~~PART by1 ~~check mark whether the registrant is a shell company (as defined in Rule 12b~~-2 ofFINANCIAL ~~the Exchange~~INFORMATION ~~Act). Yes o No þ~~

AsItem ~~of September 30, 2011, 8~~I.~~6 million~~ Financial ~~Units~~Statements ~~of Beneficial Interest of the Trust were outstanding.~~

~~TORCH~~This ~~ENERGY~~document ~~ROYALTY~~includes ~~TRUST~~“forward looking statements” within the meaning of Section 27A of the Securities Act of 1993, as amended, and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts included in this document, including without limitation, statements under “Discussion and Analysis of Financial Condition and Results of Operations” regarding the financial position, reserve quantities and net present values of reserves of the Torch Energy Royalty Trust (“Trust”) and statements that include the words “believes”, “expects”, “anticipates”, “intends”, “estimates”, “projects”, “target”, “goal”, “plans”, “objectives”, “should” or similar expressions or variations are forward-looking statements. Torch Energy Advisors Incorporated (“Torch”) and the Trust can give no assurances that the assumptions upon which these statements are based will prove to be correct. Factors which could cause such forward looking statements not to be correct include, among others, the cautionary statements set forth in the Trust’s Annual Report on Form 10-K with the Securities Exchange Commission for the most recent fiscal year, cautionary statements contained in this report, the volatility of oil and natural gas prices, future production costs, future oil and natural gas production quantities, operating hazards, and environmental conditions.

~~TABLE~~Introduction ~~OF CONTENTS~~

PART 1 — FINANCIAL INFORMATION
	Item I. Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures about Market Risk
	Item 4. Controls and Procedures
PART II. OTHER INFORMATION
	ITEM 1. Legal Proceedings
	ITEM 1A. Risk Factors
	ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
	ITEM 3. Defaults upon Senior Securities
	ITEM 4. (Removed and Reserved)
	ITEM 5. Other Information
	ITEM 6. Exhibits
	SIGNATURES
EX-31.1
EX-32.1

The financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The Trust was formed effective October 1, 1993, pursuant to a trust agreement (“Trust Agreement”) among Wilmington Trust Company, not in its individual capacity but solely as trustee of the Trust (“Trustee”), Torch Royalty Company (“TRC”) and Velasco Gas Company, Ltd. (“Velasco”) as owners of certain oil and natural gas properties (“Underlying Properties”) and Torch Energy Advisors Incorporated (“Torch”) as grantor. TRC and Velasco created net profits interests (“Net Profits Interests”) which burden the Underlying Properties and conveyed such interests to Torch. The Trust was formed under the Delaware statutory trust act (formerly known as the Delaware business trust act). Torch conveyed the Net Profits Interests to the Trust in exchange for an aggregate of 8,600,000 units of beneficial interest (“Units”). Such Units were sold to the public through various underwriters in November 1993. The working interest owners of the Underlying Properties are TRC, Torch E&P Company, Samson Lone Star Limited Partnership and Constellation Energy Partners LLC (“Working Interest Owners”). On December 13, 2011, the Trust sold all of its Net Profits Interests, which burdened certain working interests owned by Constellation Energy Partners LLC, attributable to the Underlying Properties in the Robinson’s Bend Field. See Note 5 of the accompanying financial statements for additional information.

~~Table~~Certain information and footnote disclosures normally included in the annual financial statements have been omitted pursuant to such rules and regulations, although the Trustee believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the December 31, 2011 financial statements and notes thereto included in the Trust’s applicable annual report on Form 10-K. All adjustments necessary to present fairly the assets, liabilities and trust corpus of ~~Contents~~the Trust as of September 30, 2012 and December 31, 2011, the distributable income (loss) and changes in trust corpus for the three-month and nine-month periods ended September 30, 2012 and 2011 have been included. All such adjustments are of a normal recurring nature. The distributable income (loss) for such interim periods is not necessarily indicative of the distributable income (loss) for the full year.

~~PART~~2 ~~1 — FINANCIAL INFORMATION~~

~~Item I.~~TORCH ~~Financial~~ENERGY ~~Statements~~ ROYALTY TRUST

~~This~~The ~~document~~sole ~~includes~~purpose ~~“forward~~of ~~looking statements” within~~ the ~~meaning~~Trust ofis ~~Section 27A~~to ofhold the ~~Securities~~ ~~Act~~Net ofProfits ~~1993~~Interests, asto ~~amended,~~receive ~~and~~payments ~~Section 21E~~from of the ~~Securities~~Working Interest ~~Exchange~~Owners, ~~Act~~and ofto ~~1934.~~make ~~All statements~~payments ~~other~~to ~~than~~Unitholders. ~~statements~~The ofTrust ~~historical~~does ~~facts~~not ~~included~~conduct inany ~~this~~business ~~document,~~activity ~~including~~and ~~without limitation,~~has ~~statements~~no ~~under~~officers, ~~“Discussion~~directors ~~and~~or ~~Analysis~~employees. ofThe ~~Financial~~Trust ~~Condition~~ and ~~Results~~Trustee ~~of Operations”~~rely ~~regarding~~on ~~the~~third ~~financial~~party ~~position,~~service ~~reserve~~providers ~~quantities~~to ~~and~~perform ~~net~~administrative ~~present~~services ~~values of reserves~~for of the Trust. Torch ~~Energy~~currently ~~Royalty~~provides ~~Trust~~via ~~(“Trust”)~~a ~~and~~letter ~~statements~~agreement ~~that~~the ~~include~~administrative ~~the~~services ~~words~~historically ~~“believes”, “expects”,~~provided ~~“anticipates”,~~by ~~“intends”,~~Torch ~~“estimates”,~~to ~~“projects”,~~the ~~“target”,~~Trust ~~“goal”,~~through ~~“plans”~~December 31, ~~“objectives”,~~ ~~“should”~~2013 orconsistent ~~similar~~with ~~expressions~~past orpractice ~~variations~~and ~~are~~(ii) from ~~forward-looking~~December 31, ~~statements.~~2013 ~~Torch~~to ~~Energy~~April 30, ~~Advisors~~2014 ~~Incorporated~~shall ~~(“Torch”)~~provide ~~and~~services to the Trust ~~can~~in ~~give~~support noof ~~assurances~~any ~~that~~tax ~~the~~correspondence ~~assumptions upon~~(tax ~~which~~booklet) ~~these~~and ~~statements~~tax ~~are~~filings ~~based~~that ~~will~~might ~~prove~~be tonecessary befor ~~correct.~~the ~~Factors~~year ~~which~~ended ~~could~~December 31, ~~cause~~2013 ~~such forward~~consistent ~~looking~~with ~~statements~~past ~~not~~practice toand beother ~~correct~~related ~~include,~~services necessary ~~among~~to ~~others,~~complete the ~~cautionary~~wind ~~statements~~down ~~set forth~~of in the Trust’s ~~Annual~~that ~~Report~~are onalso ~~Form~~consistent ~~10-K~~ with ~~the~~past ~~Securities~~practice. ~~Exchange~~Subsequently, ~~Commission for~~ the ~~most~~ ~~recent~~inability ~~fiscal~~of ~~year,~~the ~~cautionary~~Trust ~~statements contained in this report, including without limitation, risks and uncertainties relating~~ to ~~the~~hire ~~proposed~~qualified ~~transactions~~services ~~relating~~providers to ~~the~~assist ~~sale~~in of the ~~Net~~wind ~~Profits~~down ~~Interests~~and ~~(defined~~liquidation ~~below),~~of the ~~volatility~~Trust ofmay ~~oil~~have ~~and~~a ~~natural gas prices, future~~material ~~production~~adverse ~~costs,~~effect ~~future~~on ~~oil~~the ~~and~~operations ~~natural~~of ~~gas~~the ~~production quantities, operating hazards, and environmental conditions~~Trust.

~~Introduction~~The Trust has no officers, directors or employees. The Trust and Trustee rely solely on receiving accurate information, reports and other representations from Torch and other service providers to the Trust. In executing and submitting this report on behalf of the Trust and with respect to David A. Vanaskey in executing the certifications relating to this report, the Trustee and David A. Vanaskey have relied upon the accuracy of such reports, information and representations.

~~The~~3 financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The Trust was formed effective October 1, 1993, pursuant to a trust agreement (“Trust Agreement”) among Wilmington Trust Company, not in its individual capacity but solely as trustee of the Trust (“Trustee”), Torch Royalty Company (“TRC”) and Velasco Gas Company, Ltd. (“Velasco”) as owners of certain oil and natural gas properties (“Underlying Properties”) and Torch Energy Advisors Incorporated (“Torch”) as grantor. TRC and Velasco created net profits interests (“Net Profits Interests”) and conveyed such interests to Torch. The Trust was formed under the Delaware statutory trust act (formerly known as the Delaware business trust act). The Net Profits Interests burden the Underlying Properties and Torch conveyed the Net Profits Interests to the Trust in exchange for an aggregate of 8,600,000 units of beneficial interest (“Units”). Such Units were sold to the public through various underwriters in November 1993. The current working interest owners of the Underlying Properties are TRC, Torch E&P Company, Samson Lone Star Limited Partnership and Constellation Energy Partners LLC (“Working Interest Owners”).

~~Certain~~TORCH ~~information~~ENERGY ~~and~~ROYALTY ~~footnote~~TRUST disclosures normally included in the annual financial statements have been omitted pursuant to such rules and regulations, although the Trustee believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the December 31, 2010 financial statements and notes thereto included in the Trust’s applicable annual report on Form 10-K. All adjustments necessary to present fairly the assets, liabilities and trust corpus of the Trust

2 STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS

~~Table~~(In ofthousands) ~~Contents~~

TORCH ENERGY ROYALTY TRUST


ASSETS
	September 30, 2012		December 31, 2011
	(Unaudited)
Cash	$	1,548	$	2,383
Net profits interests in oil and natural gas properties (Net of accumulated amortization of $177,227 and $177,118 at September 30, 2012 and December 31, 2011, respectively		3,373		3,482

	$	4,921	$	5,865


LIABILITIES AND TRUST CORPUS
Trust expense payable	$	459	$	475
Trust corpus		4,462		5,390

	$	4,921	$	5,865

asSee ofnotes ~~September 30,~~to ~~2011~~financial ~~and~~statements December 31, 2010, the distributable income and changes in trust corpus for the three-month and nine-month periods ended September 30, 2011 and 2010 have been included. All such adjustments are of a normal recurring nature. The distributable income for such interim periods is not necessarily indicative of the distributable income for the full year.

~~Torch~~4 currently provides certain accounting and other services for the Trust pursuant to an agreement with the Trust with a termination date of March 31, 2012. The Trust has no officers, directors or employees. The Trust and Trustee rely solely on receiving accurate information, reports and other representations from Torch and other service providers to the Trust. In executing and submitting this report on behalf of the Trust and with respect to Bruce L. Bisson in executing the certifications relating to this report, the Trustee and Bruce L. Bisson have relied upon the accuracy of such reports, information and representations.

3 TORCH ENERGY ROYALTY TRUST

~~Table~~STATEMENTS ofOF ~~Contents~~DISTRIBUTABLE INCOME (LOSS)

~~TORCH~~(In ~~ENERGY~~thousands, ~~ROYALTY~~except ~~TRUST~~ per Unit amounts)

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

	September 30,
	Three Months EndedSeptember 30,					Nine Months EndedSeptember 30,
	2011			December 31, 2010
	2012			2011		2012			2011
	(Unaudited)
Net profits income	$	—		$	498	$	—		$	1,411
ASSETS
Infill well proceeds		25			103		109			216
Cash	$	1,571		$	2,486
		25			601		109			1,627
Net profits interests in oil and natural gas properties (Net of accumulated amortization of $169,955 and $168,867 at September 30, 2011 and December 31, 2010, respectively		10,645			11,733
General and administrative expenses		254			320		928			1,068
	$	12,216		$	14,219
Distributable income \ (loss)	$	(229	)	$	281	$	(819	)	$	559
LIABILITIES AND TRUST CORPUS
Distributable income \ (loss) per Unit (8,600 Units)	$	(0.03	)	$	0.03	$	0.10		$	0.07
Trust expense payable	$	355		$	367
Distributions per Unit	$	—		$	0.17	$	—		$	0.17
Trust corpus		11,861			13,852
	$	12,216		$	14,219

See notes to financial statements

4 5

~~Table~~TORCH ofENERGY ~~Contents~~ROYALTY TRUST

~~TORCH~~STATEMENT ~~ENERGY~~OF ~~ROYALTY~~CHANGES IN TRUST CORPUS

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

(Unaudited)

	Three Months Ended						Nine Months Ended
	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	September 30,						September 30,
	2012			2011			2012			2011
	2011			2010			2011			2010
Trust corpus, beginning of period	$	4,716		$	13,401		$	5,390		$	13,852
Net profits income	$	498		$	337		$	1,411		$	847
Amortization of Net Profits Interests		(25	)		(359	)		(109	)		(1,088	)
Infill well proceeds and other income		103			130			216			313
Distributable income \ (loss)		(229	)		281			(819	)		559
		601			467			1,627			1,160
Distributions to Unitholders		—			(1,462	)		—			(1,462	)
General and administrative expenses		320			349			1,068			768
Trust corpus, end of period	$	4,462		$	11,861		$	4,462		$	11,861
Interest expense		—			—			—			60
Distributable income	$	281		$	118		$	559		$	332
Distributable income per Unit (8,600 Units)	$	0.03		$	0.01		$	0.07		$	0.04
Distributions per Unit	$	0.17		$	0.00		$	0.17		$	0.00

See notes to financial statements

5 6

~~Table~~TORCH ofENERGY ~~Contents~~ROYALTY TRUST

~~TORCH~~Notes ~~ENERGY~~to ~~ROYALTY~~Financial ~~TRUST~~ Statements

~~STATEMENT~~1. OFNature ~~CHANGES~~of INOperations ~~TRUST CORPUS (In thousands)~~

The Torch Energy Royalty Trust (~~Unaudited~~“Trust”) was formed effective October 1, 1993, pursuant to a trust agreement (“Trust Agreement”) among Wilmington Trust Company, not in its individual capacity but solely as trustee of the Trust (“Trustee”), Torch Royalty Company (“TRC”) and Velasco Gas Company, Ltd. (“Velasco”) as owners of certain oil and natural gas properties (“Underlying Properties”) and Torch Energy Advisors Incorporated (“Torch”) as grantor. The Trust was formed under the Delaware statutory trust act (formerly known as the Delaware business trust act). TRC and Velasco created net profits interests (“Net Profits Interests”) which burden the Underlying Properties and conveyed such interests to Torch. Torch conveyed the Net Profits Interests to the Trust in exchange for an aggregate of 8,600,000 units of beneficial interest (“Units”). Such Units were sold to the public through various underwriters in November 1993. The working interest owners of the Underlying Properties were Torch Royalty Company, Torch E&P Company, Samson Lone Star Limited Partnership and Constellation Energy Partners LLC (“Working Interest Owners”). On December 13, 2011, the Trust sold all of its Net Profits Interests, which burdened certain working interests owned by Constellation Energy Partners LLC, attributable to the Underlying Properties in the Robinson’s Bend Field. See Note 5 for additional information concerning such sale.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Trust corpus, beginning of period	$	13,401		$	12,753		$	13,852		$	13,174
Amortization of Net Profits Interests		(359	)		(371	)		(1,088	)		(1,006	)
Distributable income		281			118			559			332
Distributions to Unitholders		(1,462	)		—			(1,462	)		—
Trust corpus, end of period	$	11,861		$	12,500		$	11,861		$	12,500

The Net Profits Interests entitle the Trust to receive 95% of the Net Proceeds attributable to oil and gas produced and sold from wells (other than infill wells) on the Underlying Properties. The Net Profits Interests also entitle the Trust to 20% of the Net Proceeds of wells drilled on the Underlying Properties since the Trust’s establishment into formations in which the Trust has an interest, other than wells drilled to replace damaged or destroyed wells (“Infill Wells”).

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

6The Trust has no officers, directors or employees. The Trust and Trustee rely solely on receiving accurate information, reports and other representations from Torch and other service providers to the Trust. In executing and submitting this report on behalf of the Trust and with respect to David A. Vanaskey in executing the certifications relating to this report, the Trustee and David A. Vanaskey have relied upon the accuracy of such reports, information and representations.

~~Table~~7 ~~of Contents~~

TORCH ENERGY ROYALTY TRUST

Notes to Financial Statements

1The Trust received the affirmative vote of the Unitholders of more than 66 2/3% of the outstanding Units to terminate the Trust at the meeting of Unitholders held on January 29, 2008 (the “Termination Date”). ~~Nature~~Upon termination of ~~Operations~~the Trust, among other things, the Trustee is required to sell the Net Profits Interests. Specifically, pursuant to Section 9.03(e) of the Trust Agreement if the property of the Trust Estate (as defined in the Trust Agreement) has not been sold prior to the end of one calendar year following the termination date, the Trustee, thereafter, must cause such assets to be sold at public auction. See Note 5 for additional information concerning the liquidation of the Trust’s Net Profits Interests.

The ~~Trust~~sole ~~was~~purpose ~~formed~~of ~~effective~~the ~~October 1,~~Trust ~~1993,~~is ~~pursuant~~ to ahold ~~trust~~the ~~agreement~~Net ~~(“Trust~~Profits ~~Agreement”) among Wilmington Trust Company~~Interests, ~~not~~to inreceive ~~its~~payments ~~individual~~from ~~capacity but solely as trustee of the Trust (“Trustee”), Torch Royalty Company (“~~TRC”) and Velasco ~~Gas Company~~, ~~Ltd. (“Velasco”) as owners of certain oil~~ and ~~natural~~to ~~gas~~make ~~properties~~payments ~~(“Underlying~~to ~~Properties”) and Torch Energy Advisors Incorporated (“Torch”) as grantor~~Unitholders. The Trust ~~was formed under the Delaware statutory trust act~~ ~~(formerly~~does ~~known~~not asconduct ~~the~~any ~~Delaware~~ business ~~trust act)~~activity. ~~TRC and Velasco created net profits interests (“Net Profits Interests”) and conveyed such interests to Torch.~~ The ~~Net~~Trust ~~Profits~~has ~~Interests~~sold ~~burden the~~all ~~Underlying~~of ~~Properties and Torch conveyed~~ the Net Profits Interests to the Trust in exchange for an aggregate of 8,600,000 units of beneficial interest (“Units”). Such Units were sold to the public through various underwriters in November 1993. The current working interest owners of the Underlying Properties are TRC, Torch E&P Company, Samson Lone Star Limited Partnership and ~~Constellation~~ ~~Energy~~is ~~Partners~~winding ~~LLC~~down ~~(“Working Interest Owners”)~~operations.

~~The~~TRC ~~Net~~and ~~Profits~~Velasco ~~Interests~~receive payments ~~entitle~~reflecting the ~~Trust~~proceeds of oil and natural gas sold and aggregate these payments, deduct applicable costs and make payments to ~~receive~~the ~~95%~~Trustee ofeach quarter for the ~~Net~~amounts ~~Proceeds~~due ~~attributable~~to the Trust. Prior to ~~oil~~the Trust’s termination on January 29, 2008, Unitholders received quarterly cash distributions relating to oil and natural gas produced and sold from ~~wells~~the ~~(other~~Underlying ~~than~~Properties. ~~infill~~Pursuant ~~wells)~~to onSection 3.07 of the ~~Underlying~~Trust ~~Properties.~~Agreement, ~~The~~the Trustee established a cash reserve ~~Net~~(“Cash ~~Profits~~Reserve”) ~~Interests~~in ~~also~~2008 ~~entitle~~following the Trust’s totermination. ~~20%~~See ofNote ~~the~~4 ~~Net~~for ~~Proceeds~~additional ofinformation ~~wells~~regarding ~~drilled~~cash ondistributions and the ~~Underlying~~ ~~Properties~~Cash ~~since~~Reserve. ~~the~~Because ~~Trust’s~~no ~~establishment~~additional ~~into~~properties ~~formations~~will inbe ~~which~~contributed to the Trust, ~~has~~the anassets ~~interest,~~of ~~other~~the ~~than~~Trust ~~wells~~deplete ~~drilled~~over totime ~~replace~~and ~~damaged~~a orportion ~~destroyed~~of ~~wells~~each ~~(“Infill~~cash ~~Wells”)~~distribution made by the Trust is analogous to a return of capital.

The ~~sole~~only ~~purpose~~assets of the Trust, isother than cash and temporary investments being held for the payment of actual, contingent and uncertain liabilities and for distribution to ~~hold~~Unitholders, are the Net Profits Interests. Under the Trust Agreement, tothe ~~receive~~Trustee receives the payments ~~from~~attributable to the ~~Working~~ ~~Interest~~Net ~~Owners,~~Profits Interests and topays ~~make~~all ~~payments~~expenses, toliabilities ~~Unitholders~~and obligations of the Trust. The ~~Trust~~Trustee ~~does~~has ~~not~~the ~~conduct~~discretion to establish a cash reserve for the payment of any ~~business~~ ~~activity~~liability ~~and~~that ~~has~~is nocontingent ~~officers,~~or ~~directors~~uncertain in amount or ~~employees.~~that ~~The~~otherwise ~~Trust~~is not currently due and ~~the~~payable. The Trustee ~~rely~~is ~~on third~~entitled ~~party~~to ~~service~~cause ~~providers~~the Trust to ~~perform~~borrow ~~administrative~~money ~~services~~to ~~for~~pay expenses, liabilities and obligations that cannot be paid out of cash held by the Trust. ~~Torch~~The ~~provided~~Trustee is entitled to cause the Trust ~~accounting~~to borrow from any source, ~~bookkeeping~~including from the entity serving as Trustee, ~~informational~~provided ~~and~~that ~~other~~the ~~services~~entity serving as Trustee shall not be obligated to lend to the Trust. ~~related~~To tosecure ~~the~~payment ~~Net~~of ~~Profits Interests~~any ~~pursuant~~such indebtedness (including any indebtedness to the ~~Administrative~~Trustee), the ~~Services~~Trustee ~~Agreement~~is ~~effective~~authorized ~~October~~to (i) 1,mortgage ~~1993~~ and anotherwise ~~oral arrangement~~encumber ~~after~~the ~~termination~~entire ofTrust ~~the~~estate ~~Administrative~~or ~~Services~~any ~~Agreement~~portion onthereof; ~~January~~(ii) ~~29,~~carve ~~2008~~out ~~through April 1,~~and ~~2008.~~convey ~~From~~production ~~November~~payments; (iii) 7,include ~~2008~~all ~~through~~terms, ~~December 23~~powers, ~~2008~~remedies, ~~Torch~~covenants ~~provided~~and ~~certain~~provisions ~~accounting~~it ~~services~~deems innecessary ~~connection~~or ~~with~~advisable, ~~the~~including ~~Trust’s~~confession ~~preparation~~of judgment and the power of ~~its~~sale ~~Form~~with ~~10-K~~or without judicial proceedings; and (iv) provide for the ~~year~~exercise ~~ended~~of ~~December 31,~~those ~~2007~~and ~~pursuant~~other remedies available to ana ~~agreement~~secured ~~between~~lender in the ~~Trust~~event ~~and~~of ~~Torch~~a ~~dated~~default ~~November 7,~~on such ~~2008~~loan. ~~Torch currently~~The ~~provides~~terms ~~certain~~of ~~accounting~~such indebtedness and ~~other~~security ~~services~~interest, ~~for~~if funds were loaned by the ~~Trust~~Trustee, ~~pursuant~~must be similar to anthe ~~agreement with~~terms which the ~~Trust~~Trustee would grant to a similarly situated commercial customer with anwhom ~~expiration~~it ~~date~~did ofnot ~~March 31~~have a fiduciary relationship, ~~2012~~and the Trustee shall be entitled to enforce its rights with respect to any such indebtedness and security interest as if it were not then serving as Trustee.

InThe ~~connection~~Trustee ~~with~~is authorized and directed to sell and convey the ~~formation~~Net ofProfits Interests without Unitholder approval in certain instances as described in the Trust Agreement, ~~TRC~~including ~~and~~upon ~~Velasco~~termination ~~contracted~~of ~~to sell~~ the ~~oil~~Trust. ~~and natural~~The ~~gas~~Trustee ~~production~~is ~~from~~empowered by the ~~Underlying~~Trust ~~Properties~~Agreement to ~~Torch~~employ ~~Energy~~consultants, ~~Marketing~~legal ~~Inc.~~and financial advisors and agents (~~“TEMI”~~including Torch), ~~a subsidiary~~and to make payments of ~~Torch,~~all ~~under~~fees afor ~~purchase~~services ~~contract~~or ~~(“Purchase~~expenses ~~Contract”)~~out of the assets of the Trust.

7 8

~~Table~~TORCH ofENERGY ~~Contents~~ROYALTY TRUST

~~TORCH~~Notes ~~ENERGY~~to ~~ROYALTY~~Financial ~~TRUST~~ Statements

~~Notes~~2. toBasis ~~Financial~~of ~~Statements~~ Accounting, Significant Accounting Policies

~~which~~The ~~expired~~financial ~~upon~~statements ~~termination~~ of the Trust onare ~~January 29,~~prepared ~~2008~~on ~~(“Termination~~a ~~Date”).~~modified ~~See~~cash ~~Note~~basis ~~5, Related Party Transactions: Marketing Arrangements, for oil~~ and ~~natural~~are ~~gas~~not ~~pricing~~intended ~~information pertaining~~ to ~~the Underlying~~present ~~Properties. The Working Interest Owners receive payments reflecting~~ the ~~proceeds~~financial ofposition ~~oil~~ and ~~natural~~results ~~gas sold and aggregate these payments, deduct applicable costs and make payments to the Trustee each quarter for the amounts due to the Trust. Prior to the termination~~ of ~~the~~operations ~~Trust,~~in ~~Unitholders~~conformity ~~received~~with ~~quarterly~~generally ~~cash~~accepted ~~distributions~~accounting ~~relating~~principles togenerally ~~oil~~accepted ~~and~~in ~~natural gas produced and sold from~~ the ~~Underlying~~United ~~Properties.~~States ~~Pursuant to Section 3.07~~ of ~~the~~America ~~Trust Agreement, the Trustee established a non-interest bearing cash reserve account~~ (“~~Cash Reserve~~GAAP”). ~~following~~Preparation of the Trust’s ~~termination~~ ~~for~~financial ~~certain~~statements ~~actual,~~on ~~contingent~~such ~~and~~basis ~~uncertain~~includes ~~liabilities of~~ the ~~Trust.~~following: See Note 4, Distributions and Income Computations, for additional information concerning the Cash Reserve. Because no additional properties will be contributed to the Trust, the assets of the Trust deplete over time and a portion of each cash distribution made by the Trust is analogous to a return of capital.

~~The~~• ~~Underlying~~Revenues ~~Properties~~are ~~constitute~~recognized ~~working interests~~ in the ~~Chalkley~~period ~~Field~~ in ~~Louisiana (“Chalkley~~which ~~Field”),~~amounts are received by the ~~Robinson’s~~Trust. ~~Bend~~Therefore, ~~Field~~revenues inrecognized during the ~~Black~~three-month ~~Warrior~~and ~~Basin~~nine-month inperiods ~~Alabama~~ended ~~(“Robinson’s Bend~~September ~~Field”)~~30, ~~fields~~2012 ~~that~~and ~~produce~~2011 are derived from oil and natural gas production sold during the ~~Cotton~~three-month ~~Valley~~and ~~formations~~nine-month inperiods ~~Texas~~ended ~~(“Cotton~~June ~~Valley Fields”)~~30, 2012 and ~~fields~~2011, ~~that~~respectively. ~~produce~~The Trust did not receive revenues from ~~the~~TRC ~~Austin~~with ~~Chalk~~respect ~~formation~~to inproduction ~~Texas~~during ~~(“Austin~~the ~~Chalk~~nine-month ~~Fields”). The~~period ~~Underlying~~ended ~~Properties~~June ~~represent~~30, ~~interests~~2012 inas ~~all~~a ~~productive~~result ~~formations~~of ~~from~~TRC ~~100~~recouping ~~feet~~overpayments ~~below~~made to the ~~deepest~~ ~~productive~~Trust ~~formation~~ in ~~each~~1994 ~~field~~and 1995 with respect to the ~~surface~~Chalkley ~~when~~Field (the ~~Trust~~“Chalkley ~~was~~Gas ~~formed~~Volume Adjustment”). ~~The~~See ~~Trust therefore~~Note ~~has~~4 nofor ~~interest~~additional ininformation ~~deeper~~regarding ~~productive~~this ~~formations~~adjustment.

~~Separate~~• ~~conveyances~~General (“Conveyances”) were used to transfer the Net Profits Interests in each state. Net proceeds (“Net Proceeds”), generally defined as gross revenues received from the sale of production attributable to the Underlying Properties during any period less property, production, severance and ~~similar~~administrative taxes, and development, operating, and certain other costs (excluding operating and development costs from the Robinson’s Bend Field prior to January 1, 2003), are calculated separately for each Conveyance. If, during any period, costs and expenses ~~deducted in calculating Net Proceeds exceed gross proceeds under a Conveyance, neither the Trust nor Unitholders~~ are ~~liable~~recognized toon ~~pay~~an ~~such~~accrual excess directly, but the Trust will receive no payments for distribution to Unitholders with respect to such Conveyance until future gross proceeds exceed future costs and expenses plus the cumulative excess of such costs and expenses not previously recouped by the Working Interest Owners plus interest thereonbasis. ~~The complete definitions of Net Proceeds are set forth in the Conveyances.~~

~~The~~• ~~Trust~~Amortization ~~received the affirmative vote~~ of the ~~Unitholders~~Net ofProfits ~~more~~Interests ~~than~~is 66calculated ~~2/3% of the outstanding Units to terminate the Trust at the meeting of Unitholders held~~ on ~~January 29,~~a ~~2008. Upon termination~~ unit-of-production ~~the~~basis ~~Trust,~~and ~~among~~charged ~~other~~directly ~~things, the Trustee is required~~ to ~~sell~~trust ~~the Net Profits Interests~~corpus. ~~Specifically, pursuant to Section 9.03(e) of the Trust~~

8 • Distributions to Unitholders are recorded when declared by the Trustee.

~~Table~~• The Trust reviews the Net Profits Interests for impairment whenever events or changes in circumstances indicate the carrying amount of ~~Contents~~the Net Profits Interests may not be recoverable. Recoverability is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the Net Profits Interests. If such asset is considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds either the fair value or the estimated discounted cash flows of the assets, whichever is more readily measurable. At September 30, 2012 and 2011, no impairment was deemed necessary.

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

~~Notes~~3. toFederal ~~Financial~~Income ~~Statements~~ Taxes and Texas State Margin Tax

~~Agreement~~Tax ifcounsel ~~the~~has ~~property~~advised of the ~~Trust~~ ~~Estate (as defined in the~~ Trust ~~Agreement)~~and ~~has not been sold prior to the end of one calendar year following the termination date, the~~ Trustee ~~must cause such assets to be sold at public auction. The Trust was terminated by a vote of the Unitholders on January 29~~that, ~~2008~~under ~~(the “Termination~~current ~~Date”).~~tax ~~The Trust reported on August 4~~law, ~~2011 on Form 8-K and then on August 5, 2011 on Form 8-K/A that~~ the Trust ~~entered~~is ~~into~~classified as a ~~material~~grantor ~~definitive~~trust ~~agreement~~ for ~~advisory~~federal ~~and marketing~~income ~~services~~tax ~~with~~purposes anand ~~effective date of August 1, 2011 with respect to the sale of the net~~not ~~profit interests of the Trust pursuant to~~ an ~~agreement~~association ~~with~~taxable ~~PLS,~~as ~~Inc.,~~ a ~~Texas~~business ~~corporation~~entity. ~~The Trust also reported on Form 8-K on November 4~~However, ~~2011 that~~ the ~~Trust~~opinion ~~notified Robinson’s Bend Production II, LLC on November 3, 2011 that it was the successful bidder in the public auction~~ of ~~the~~ ~~sale~~tax ofcounsel ~~the~~is ~~Trust’s~~not ~~net~~binding ~~profits~~on ~~interests attributable to underlying working interests in certain fields that produce from~~ the ~~Robinson’s~~Internal ~~Bend~~Revenue ~~formations in the Black Warrior Basin in Alabama~~Service. As ~~was~~a ~~previously~~grantor ~~reported on Form 8-K on June 13~~trust, ~~2011, Robinson’s Bend Production II, LLC as part of~~ the ~~Settlement and Release Agreement made an irrevocable bid of not less than $1,000,000 for its purchase from the~~ Trust ~~of the net profits interests associated with the Robinson’s Bend formations. The transaction~~ is not subject to ~~the~~federal ~~negotiation~~income ~~and execution of mutually acceptable definitive agreements~~tax. ~~The proposed transaction described above is anticipated to close before December 31, 2011.~~

In9 addition, on November 4, 2011, the Trust reported on Form 8-K that it issued a press release announcing that the Trust had entered into a non-binding letter of interest on November 2, 2011 with respect to the sale of the Trust’s net profits interests attributable to underlying working interests in certain fields that produce from the Cotton Valley and Austin Chalk formations in Texas and the Chalkley field in Louisiana. The closing of any transaction is subject to due diligence, the negotiation and execution of mutually acceptable definitive agreements and the satisfaction of any conditions to closing set forth in those agreements. There can be no assurance that these discussions will lead to a transaction, or that the terms set forth in any definitive agreements will be consistent with the current expectations of the parties. The Trust anticipates that any proposed transaction with respect to the Texas and Louisiana fields described in this report would be consummated before December 31, 2011.

NoTORCH ~~assurances~~ENERGY ~~can~~ROYALTY beTRUST given that the Trustee will be able to sell the Net Profits Interests, or the amount that will be distributed to Unitholders following such a sale. Such distributions could be below the market value of the Units. The Trust can give no assurances of the effect of the results of the affirmative vote to terminate the Trust by the Unitholders on the continued listing of the Units on the New York Stock Exchange (NYSE) or any other national quotation system. Failure of the Trust to complete and file its SEC reports or failing to meet the minimum listing criteria of the NYSE could result in a suspension of the Trust’s listing and trading privileges. A delisting of the Trust’s Units

9 Notes to Financial Statements

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

~~TORCH~~In ~~ENERGY~~May ~~ROYALTY~~2006, ~~TRUST~~the State of Texas passed legislation to implement a margin tax at a rate of 1% to be imposed generally on federal gross revenues (up to 70%), as apportioned to Texas less certain costs and deductions, as specifically set forth in the new legislation. The effective date of the legislation was January 1, 2008, but the tax was generally imposed on revenues generated in 2007 and thereafter (earlier for certain fiscal year taxpayers). Entities subject to tax generally include trusts unless otherwise exempt and most other types of entities having limited liability protection. Trusts that meet certain statutory requirements are generally exempt from the margin tax as “passive entities.”

~~Notes~~Since the Trust is exempt from the margin tax at the Trust level as a passive entity, each Unitholder that is a taxable entity would generally include its share of the Trust’s revenue in its margin tax computation. This revenue would be sourced to ~~Financial~~Texas ~~Statements~~under Texas Comptroller guidance that provides such income is sourced according to the principal place of business of the Trust, which is Texas.

~~may~~4. ~~have~~Distributions ~~a material adverse effect on the Trust, among other things reducing the liquidity~~ and ~~market~~Income ~~price~~Computations ~~of the Units.~~

2Each quarter the amount of cash available for distribution to Unitholders (the “Quarterly Distribution Amount”) is equal to the excess, if any, of the cash received by the Trust, on the last day of the second month following the previous calendar quarter (or the next business day thereafter) ending prior to the dissolution of the Trust, from the Net Profits Interests then held by the Trust plus, with certain exceptions, any other cash receipts of the Trust during such quarter, subject to adjustments for changes made by the Trustee during such quarter in the Cash Reserve established for the payment of actual, contingent and uncertain liabilities of the Trust. ~~Basis~~Based on the payment procedures relating to the Net Profits Interests, cash received by the Trust on the last day of ~~Accounting~~the second month of a particular quarter from the Net Profits Interests generally represents proceeds from the sale of oil and natural gas produced from the Underlying Properties during the preceding calendar quarter. The Quarterly Distribution Amount for each quarter is generally payable to Unitholders of record on the last day of the second month of the calendar quarter unless such day is not a business day, ~~Significant~~in ~~Accounting~~which ~~Policies~~case the record date is the next business day thereafter. The Trust distributes the Quarterly Distribution Amount within approximately 10 days after the record date to each person who was a Unitholder of record on the associated record date.

~~The~~10 financial statements of the Trust are prepared on a modified cash basis and are not intended to present the financial position and results of operations in conformity with generally accepted accounting principles generally accepted in the United States of America (“GAAP”). Preparation of the Trust’s financial statements on such basis includes the following:

-TORCH ~~Revenues~~ENERGY ~~are~~ROYALTY ~~recognized~~TRUST in the period in which amounts are received by the Trust. Therefore, revenues recognized during the three-month and nine-month periods ended September 30, 2011 and 2010 are derived from oil and natural gas production sold during the three-month and nine-month periods ended June 30, 2011 and 2010, respectively. General and administrative expenses are recognized on an accrual basis. - Amortization of the Net Profits Interests is calculated on a unit-of-production basis and charged directly to trust corpus. - Distributions to Unitholders are recorded when declared by the Trustee. - The Trust reviews the Net Profits Interests for impairment whenever events or changes in circumstances indicate the carrying amount of the Net Profits Interests may not be recoverable. Recoverability is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the Net Profits Interests. If such asset is considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds either the fair value or the estimated discounted cash flows of the assets, whichever is more readily measurable. At September 30, 2011 and 2010, no impairment was deemed necessary. - The financial statements of the Trust differ from financial statements prepared in accordance with GAAP because net profits income is not accrued in the period of production and amortization of the Net Profits Interests is not charged against operating results.

3.Notes ~~Federal~~to ~~Income~~Financial ~~Taxes~~Statements ~~and Texas State Margin Tax~~

~~Tax~~During ~~counsel~~the ~~has~~three-month ~~advised~~period ended December, 31, 2011, TRC computed the ~~Trust~~Chalkley ~~and~~Gas ~~Trustee~~Volume Adjustment whereby TRC determined that it had overpaid the Trust $3.0 million (including $1.9 million of accrued interest as of December 31, ~~under~~2011) ~~current~~in ~~tax~~1994 ~~law~~and 1995 with respect to TRC’s Underlying Property interests in the Chalkley Field. Neither the Trust nor Unitholders are obligated to return such overpayment to TRC; however, the Trust iswill ~~classified as~~receive ano ~~grantor~~Net ~~trust~~Proceeds ~~for~~with ~~Federal~~respect ~~income~~to ~~tax~~TRC’s ~~purposes~~interests in the Underlying Properties of the Chalkley Field, the Cotton Valley Fields and ~~not~~the anAustin Chalk ~~association~~Fields (“TRC Underlying Property Interests”) until future Net Proceeds from the TRC Underlying Property Interests, plus accrued interest, exceed the unrecouped balance of such overpayment. The Chalkley Gas Volume Adjustment was settled on August 30, 2013.

10As a result of the Chalkley Gas Volume Adjustment, the Trust received no net profits income during the three-month and nine-month periods ended September 30, 2012 as a result of TRC withholding Net Proceeds from the Trust totaling $0.2 million and $1.1 million, respectively. During the three-month and nine-month periods ended September 30, 2012, Net Proceeds received from the Trust pertaining to the Infill wells totaled $25,000 and $109,000, respectively. Such amounts are classified as Infill Well proceeds in the Trust’s statements of distributable income (loss). During the three-month and nine-month periods ended September 30, 2012, the Trust made no cash distributions to Unitholders. As of September 30, 2012 and December 31, 2011, the Cash Reserve was $1.5 million and $2.4 million, respectively.

~~Table~~During the three-month and nine-month periods ended September 30, 2011 the Trust received cash payments totaling $0.6 million and $1.6 million, respectively, from the Working Interest Owners of ~~Contents~~the Underlying Properties which mainly pertained to net profits income attributable to production from the Underlying Properties during the three-month and nine-month periods ended June 30, 2011. Such amounts are classified as net profits income and Infill Well proceeds in the Trust’s statements of distributable income (loss) during the three-month and nine-month periods ended September 30, 2011. The Chalkley Gas Volume Adjustment did not impact Net Proceeds received by the Trust during the three-month and nine-month periods ended September 30, 2011. During the three-month period ended September 30, 2011, the Trust made a cash distribution to Unitholders totaling $1,462,000, or 17.00 cents per Unit. Such cash distribution included the release of $964,000 of the Trust’s Cash Reserve. The remaining portion of the cash distribution of $498,000 was derived from certain net profits income received by the Trust during the three-month period ended September 30, 2011. No other cash distributions were made to Unitholders during the nine-month period ended September 30, 2011.

~~TORCH~~5. ~~ENERGY~~Termination ~~ROYALTY~~and ~~TRUST~~ Liquidation of the Net Profits Interests

~~Notes~~The Trust received the affirmative vote of the Unitholders of more than 66 2/3% of the outstanding Units to ~~Financial~~terminate ~~Statements~~the Trust at the meeting of Unitholders held on January 29, 2008, the Termination Date. Upon termination of the Trust, among other things, the Trustee is required to sell the Net Profits Interests. Specifically, pursuant to Section 9.03(e) of the Trust Agreement if the property of the Trust Estate (as defined in the Trust Agreement) has not been sold prior to the end of one calendar year following the termination date, the Trustee, thereafter, must cause such assets to be sold at public auction.

~~taxable~~11 ~~as a business entity. However, the opinion of tax counsel is not binding on the Internal Revenue Service. As a grantor trust, the Trust is not subject to Federal income tax.~~

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

InNotes ~~May 2006, the State of Texas passed legislation~~ to ~~implement~~Financial aStatements new margin tax at a rate of 1% to be imposed generally on federal gross revenues (up to 70%), as apportioned to Texas less certain costs and deductions, as specifically set forth in the new legislation. The effective date of the legislation was January 1, 2008, but the tax was generally imposed on revenues generated in 2007 and thereafter (earlier for certain fiscal year taxpayers). Entities subject to tax generally include trusts unless otherwise exempt, and most other types of entities having limited liability protection. Trusts that meet certain statutory requirements are generally exempt from the margin tax as “passive entities.”

~~Since~~On August 4, 2011 the Trust isentered ~~exempt~~into ~~from~~a ~~the~~material ~~margin~~definitive ~~tax~~agreement atfor advisory and marketing services with an effective date of August 1, 2011 with respect to the ~~Trust~~sale ~~level~~of asthe Net Profits Interests pursuant to an agreement with PLS, Inc., a ~~passive~~Texas ~~entity~~corporation. The Trust notified Robinson’s Bend Production II, ~~each~~LLC. (“RBP ~~Unitholder~~II”), ~~that~~a isDelaware limited liability company and a ~~taxable~~subsidiary ~~entity~~of ~~would~~Constellation ~~generally~~Energy ~~include~~Partners, ~~its~~on ~~share~~November 3, of2011 that it was the ~~Trust’s~~successful ~~revenue~~bidder in ~~its~~the public auction of the sale of the Net Profits Interests attributable to the ~~margin~~Robinson’s ~~tax~~Bend ~~computation~~Field. ~~This~~On ~~revenue~~December 13, ~~would~~2011, bethe ~~sourced~~Trust toentered ~~Texas~~into ~~under~~a ~~Texas~~purchase ~~Comptroller~~and ~~guidance that~~sale ~~provides~~agreement ~~such~~by ~~income~~and isbetween ~~sourced~~RBP ~~according~~II pursuant to which the ~~principal~~Trust ~~place~~agreed ofto ~~business~~sell, and RBP II agreed to purchase, all of the Trust,’s Net Profits ~~which~~Interests isattributable ~~Texas~~to the Underlying Properties in the Robinson’s Bend Field for a purchase price of $1,000,000. The sale signed and closed simultaneously on December 13, 2011.

4.The ~~Distributions~~Trustee anticipates it will continue to consult with the Trust’s and ~~Income~~Trustee’s ~~Computations~~ financial and legal advisors in the wind down of the Trust.

Each quarter the amount of cash available for distribution to Unitholders (the “Quarterly Distribution Amount”) is generally equal to the excess, if any, of the cash received by the Trust, on the last day of the second month following the previous calendar quarter (or the next business day thereafter) ending prior to the dissolution of the Trust, from the Net Profits Interests then held by the Trust plus, with certain exceptions, any other cash receipts of the Trust during such quarter, subject to adjustments for changes made by the Trustee during such quarter in the Cash Reserve established for the payment of actual, contingent and uncertain liabilities of the Trust6. ~~Based~~ onRelated ~~the~~Party ~~payment~~Transactions ~~procedures relating to the Net Profits Interest, cash received by the Trust on the last day of the second month of a particular quarter from the Net Profits Interests generally~~

11TRC and Velasco contracted to sell the oil and natural gas production from the Underlying Properties to Torch Energy Marketing, Inc. (“TEMI”), a subsidiary of Torch, under a purchase contract (“Purchase Contract”). Upon termination of the Trust, the Purchase Contract expired and the Working Interest Owners calculate the Net Proceeds owed to the Trust utilizing the same pricing mechanisms (including the sharing price and minimum price commitment mechanisms) as the expired Purchase Contract.

~~Table~~Marketing ofArrangements ~~Contents~~and Price Sharing

~~TORCH~~In ~~ENERGY~~connection with ~~ROYALTY~~the ~~TRUST~~formation of the Trust, TRC, Velasco and TEMI entered into the Purchase Contract which expired upon termination of the Trust. Pursuant to the Purchase Contract, TEMI was obligated to purchase all net production attributable to the Underlying Properties for an index price for oil and natural gas (“Index Price”), less certain gathering, treating and transportation charges, which were calculated monthly. The Index Price equals 97% of the weighted average spot market prices of oil and natural gas (“Average Market Prices”) at the four locations where TEMI sold production.

~~Notes~~The Purchase Contract also provided that TEMI pay a minimum price (“Minimum Price”) for natural gas production, adjusted annually for inflation. When TEMI paid a purchase price based on the Minimum Price it received price credits (“Price Credits”), equal to ~~Financial~~the difference ~~Statements~~between the Index Price and the Minimum Price,that it was entitled to deduct in determining the purchase price when the Index Price for natural gas exceeded the Minimum Price. In addition, if the Index Price for natural gas exceeded the sharing price, which was adjusted annually for inflation (“Sharing Price”), TEMI was entitled to deduct 50% of such excess (“Price Differential”) in determining the purchase price. TEMI had an annual option to discontinue the Minimum Price

~~represents~~12 proceeds from the sale of oil and natural gas produced from the Underlying Properties during the preceding calendar quarter. The Quarterly Distribution Amount for each quarter is payable to Unitholders of record on the last day of the second month of the calendar quarter unless such day is not a business day, in which case the record date is the next business day thereafter. The Trust historically distributed the Quarterly Distribution Amount within approximately 10 days after the record date to each person who was a Unitholder of record on the associated record date.

~~Pursuant~~TORCH toENERGY ~~Section 3.07~~ROYALTY ofTRUST the Trust Agreement, the Trustee established a Cash Reserve following the Trust’s termination in 2008 for the payment of actual, contingent and uncertain liabilities associated with the liquidation and winding down of the Trust and the Trust’s arbitration. During the three months ended September 30, 2011 the Trust received cash payments totaling $601,000 from the Working Interest Owners of the Underlying Properties which mainly pertained to net profits income attributable to production from the Underlying Properties during the three months ended June 30, 2011. Such amounts are classified as net profits income and Infill Well proceeds in the Trust’s statements of distributable income during the three-month period ended September 30, 2011. During the three-month period ended September 30, 2011, the Trust made a cash distribution to Unitholders totaling $1,462,000, or 17.00 cents per Unit. Such cash distribution included the release of $964,000 of the Trust’s Cash Reserve. The remaining portion of the cash distribution of $498,000 was derived from certain net profits income received by the Trust during the three-month period ended September 30, 2011.

~~Cash~~Notes payments received by the Trust during the three months ended September 2010 from the Working Interest Owners totaled $589,000 and included $122,000 that was classified as restricted cash during the quarterly period ending September 30, 2010. Cash payments received by the Trust during the quarter ended September 30, 2010 mainly pertained to ~~net~~Financial ~~profits~~Statements income attributable to production from the Underlying Properties during the three months ended June 30, 2010. During the three-month period ended September 30, 2010, The Trust allocated $467,000 of the net profits income and Infill Well proceeds received by the Trust during the three-month period ended September 30, 2010 into the Cash Reserve and was classified as net profits income and Infill Well proceeds in the Trust’s statements of distributable income during such period. No cash distributions were made to Unitholders during the three months ended September 30, 2010. The Cash Reserve as of September 30, 2011 and December 31, 2010 was $1.6 million and $2.5 million, respectively.

~~During~~ commitment. ~~the~~However, ~~three~~if ~~years~~TEMI ~~ended~~discontinued ~~December 31, 2010,~~ the ~~Trust~~Minimum ~~received~~Price ~~cash~~commitment, ~~payments~~it ~~totaling~~would ~~$1.5 million~~no ~~from~~longer abe ~~certain~~entitled ~~working~~to ~~interest~~deduct ~~owner~~the ~~with~~Price ~~respect~~Differential toin calculating the ~~Infill~~purchase ~~Wells~~price ~~which~~and ~~was~~would ~~classified~~have forfeited asall ~~restricted~~accrued ~~cash~~Price ~~prior~~Credits. toAs ~~December 31~~of the Termination Date, ~~2010~~TEMI ~~due~~had tono ~~potential~~outstanding ~~overpayment~~Price ~~(“Restricted~~Credits ~~Infill~~and ~~Well Net~~had ~~Proceeds”).~~not Onexercised ~~December 31,~~its ~~2010,~~option to discontinue the ~~Trust~~ Minimum Price commitment.

12Upon the Trust’s termination, pursuant to each Conveyance, the Working Interest Owners utilized the same pricing mechanisms (including the Sharing Price and Minimum Price commitment mechanisms) as the expired Purchase Contract in calculating Net Proceeds due to the Trust. The Minimum Price per MMBtu was $2.05, $1.99 and $1.97 for 2012, 2011 and 2010 natural gas sales, respectively. The Sharing Price per MMBtu was $2.54, $2.46 and $2.43 for 2012, 2011 and 2010 natural gas sales, respectively. Pursuant to each Conveyance, the Working Interest Owners also have the same annual option to discontinue the Minimum Price commitment. As a result of the Sharing Price arrangement, Net Proceeds attributable to the Underlying Properties during the three-month period ended September 30, 2011 were reduced by $0.5 million. The Sharing Price arrangement did not impact Net Proceeds attributable to the Underlying Properties during the three-month period ended September 30, 2012. Such Sharing Price arrangement reduced Net Proceeds attributable to the Underlying Properties during the nine-month periods ended September 30, 2012 and 2011 by $0.1 million and $1.4 million, respectively. As of September 30, 2012, the Working Interest Owners had no outstanding Price Credits and had not exercised its right to discontinue the Minimum Price commitment.

~~Table~~Under ofeach ~~Contents~~Conveyance, natural gas volumes are determined at the wellhead. Therefore, Net Proceeds do not include any amounts received in connection with extracting natural gas liquids from such production at natural gas processing or treating facilities.

~~TORCH~~Gathering, ~~ENERGY~~Treating ~~ROYALTY~~and ~~TRUST~~Transportation Arrangements

~~Notes~~The Purchase Contract, which expired upon the Trust’s termination, entitled TEMI to ~~Financial~~deduct ~~Statements~~certain natural gas gathering, treating and transportation fees in calculating the purchase price for natural gas in the Robinson’s Bend, Austin Chalk and Cotton Valley Fields. The amounts that were deducted in calculating the purchase price for such natural gas were set forth in the Purchase Contract and were not affected by the actual costs incurred by TEMI to gather, treat and transport natural gas. Upon the Trust’s termination, pursuant to each Conveyance, the Working Interest Owners became entitled to deduct the same natural gas gathering, treating and transportation fees that had previously been deducted by TEMI pursuant to the Purchase Contract in calculating Net Proceeds due to the Trust.

~~determined~~For ~~that~~ the ~~Restricted~~Robinson’s ~~Infill~~Bend ~~Well~~Field, ~~Net~~a ~~Proceeds~~gathering, ~~were~~treating ~~rightly~~and ~~owned~~transportation byfee ~~the~~of ~~Trust~~$0.260 per MMBtu adjusted for inflation ($0.335 per MMBtu and $0.331per ~~Accordingly,~~MMBtu onfor ~~December 31,~~such fees pertaining to 2011 and 2010 natural gas sales, ~~the~~respectively), ~~Trust~~plus ~~allocated~~fuel ~~the~~usage ~~Restricted~~equal ~~Infill~~to ~~Well~~5% ~~Net~~of ~~Proceeds~~revenues ~~into the~~is ~~Cash~~deducting ~~Reserve,~~in ~~decreased~~computing ~~Trust~~Net ~~expense~~Proceeds ~~payable~~due onto the Trust’s. ~~Statements~~Additionally, a gathering fee of ~~Assets,~~$0.05 ~~Liabilities~~per MMBtu is deducted in ~~and~~calculating ~~Trust~~the ~~Corpus~~purchase ~~and~~price ~~increased~~for ~~Infill~~production ~~Well~~from ~~proceeds~~73 ~~included~~of the 426 wells in the ~~statement~~Robinson’s ofBend ~~distributable income~~Field. ~~Cash~~In ~~payments~~computing ofNet ~~$122,000~~Proceeds ~~were~~due ~~received~~to by the Trust ~~during~~for the ~~three~~Austin ~~months~~Chalk ~~ended September 30~~Fields, ~~2010~~$0.38 ~~with~~per ~~respect~~MMBtu toplus ~~the~~17% ~~Restricted~~of ~~Infill~~revenues ~~Well~~are ~~Net~~deducted ~~Proceeds.~~as ~~Such~~a ~~amount~~fee ~~was~~to gather, ~~classified~~treat asand ~~restricted~~transport ~~cash~~natural atgas ~~September 30,~~production. ~~2010~~TEMI ~~and~~deducted ~~was~~from ~~thus~~the ~~excluded~~purchase ~~from~~price ~~Infill~~for ~~Well~~natural ~~proceeds included~~gas infor ~~distributable~~production ~~income~~attributable ~~during~~to certain wells in the ~~three~~Cotton ~~months~~Valley ~~ended~~Fields ~~September 30,~~a ~~2010~~transportation fee of $0. 045 per MMBtu.

~~Gas~~13 revenues, net of applicable revenue deducts and before interest expense, included in Net Proceeds paid to the Trust during the nine months ended September 30, 2010 were adjusted downward by $752,000 (including $60,000 of interest expense) pertaining to net profits income generated by the Underlying Properties in the Austin Chalk Field (“Austin Chalk Gas Volume Adjustment”). The Austin Chalk Gas Volume Adjustment recouped overpayments to the Trust by TRC during the five year period ended December 31, 2009 which resulted from TRC utilizing estimated wellhead natural gas volumes for certain wells in the Austin Chalk Field in computing Net Proceeds due to the Trust. The Austin Chalk Gas Volume Adjustment utilized actual wellhead natural gas sales volumes and resulted in a 174 MMcf downward adjustment to natural gas sales volumes included in the net profits income calculations with respect to the Austin Chalk Field, of which 6 MMcf pertained to net profit income calculations pertaining to Net Proceeds received by the Trust during the nine months ended September 30, 2010. The Austin Chalk Gas Volume Adjustment did not affect oil revenues, severance taxes, lease operating expenses and capital expenditures included in Net Proceeds due to the Trust during the five year period ended December 31, 2009. The Austin Chalk Gas Volume Adjustment did not impact Net Proceeds received by the Trust during the three-month and nine-month periods ended September 30, 2011. The Trust, Trustee and the Trust’s service providers continue to review and analyze the appropriateness of and verify the information and data provided by TRC concerning the Austin Chalk gas production volumes.

5.TORCH ~~Related~~ENERGY ~~Party~~ROYALTY ~~Transactions~~ TRUST

~~TRC~~Notes ~~and Velasco contracted~~ to ~~sell~~Financial ~~the~~Statements oil and natural gas production from the Underlying Properties to Torch Energy Marketing, Inc. (“TEMI”), a subsidiary of Torch, under a purchase contract (“Purchase Contract”). Upon termination of the Trust, the Purchase Contract expired and the Working Interest Owners calculate the Net Proceeds owed to the Trust utilizing the same pricing mechanisms (including the sharing price and minimum price commitment mechanisms) as the expired Purchase Contract.

13During each of the three-month periods ended September 30, 2012 and 2011, such fees deducted from the Net Proceeds calculations, attributable to production during each of the three-month periods ended June 30, 2012 and 2011, in the Robinson’s Bend, Austin Chalk and Cotton Valley Fields, totaled $0.02 million and $0.2 million, respectively. During each of the nine-month periods ended September 30, 2012 and 2011, such fees deducted from the Net Proceeds calculations, attributable to production during the nine-month periods ended June 30, 2012 and 2011, in the Robinson’s Bend, Austin Chalk and Cotton Valley Fields, totaled $0.07 million and $0.6 million, respectively. No amounts for gathering, treating or transportation are deducted in calculating the purchase price from the Chalkley Field.

~~Table~~Administrative ofServices ~~Contents~~Agreement

~~TORCH~~Torch ~~ENERGY~~provided accounting, ~~ROYALTY~~bookkeeping, ~~TRUST~~informational and other services to the Trust related to the Net Profits Interests pursuant to the Administrative Services Agreement effective October 1, 1993 and an oral arrangement after termination of the Administrative Services Agreement on January 29, 2008 through April 1, 2008. On November 7, 2008, an agreement was entered into between the Trust and Torch that engaged Torch to provide certain accounting services in connection with the Trust’s preparation and filing of the Trust’s Form 10-K for the year ended December 31, 2007.

~~Notes~~To facilitate the winding down of the Trust, Torch currently provides certain accounting and other services for the Trust pursuant to ~~Financial~~an ~~Statements~~agreement with the Trust entered into on March 26, 2009. The initial term of the agreement expired on March 31, 2010 and was thereafter extended from year to year, up to the period ending August 30, 2013. Torch currently provides the Trust via letter agreement the administrative services historically provided by Torch to the Trust through December 31, 2013 consistent with past practice and (ii) from December 31, 2013 to April 30, 2014 shall provide services to the Trust in support of any tax correspondence (tax booklet) and tax filings that might be necessary for the year ended December 31, 2013 consistent with past practice and other related services necessary to complete the wind down of the Trust that are also consistent with past practice. Subsequently, the inability of the Trust to hire qualified service providers to assist in the wind down and liquidation of the Trust may have a material adverse effect on the operations of the Trust.

~~Marketing~~Services ~~Arrangements~~fees ~~and~~charged ~~Price~~to ~~Sharing~~the Trust by Torch during each of the three-month periods ended September 30, 2012 were $0.1 million. Services fees during each of the nine-month periods ended September 30, 2012 and 2011 were $0.3 million.

InOperator ~~connection~~Overhead ~~with~~Fees the formation of the Trust, TRC, Velasco and TEMI entered into the Purchase Contract which expired upon termination of the Trust. Pursuant to the Purchase Contract, TEMI was obligated to purchase all net production attributable to the Underlying Properties for an index price for oil and natural gas (“Index Price”), less certain gathering, treating and transportation charges, which were calculated monthly. The Index Price equals 97% of the weighted average spot market prices of oil and natural gas (“Average Market Prices”) at the four locations where TEMI sold production.

~~The~~A ~~Purchase~~subsidiary ~~Contract~~of ~~also~~Torch ~~provided~~operates certain ~~that~~oil ~~TEMI~~and ~~pay a minimum price (“Minimum Price”) for~~ natural gas ~~production,~~ ~~adjusted~~interests ~~annually~~burdened ~~for~~by ~~inflation.~~the ~~When~~Net ~~TEMI~~Profits ~~paid~~Interests. aThe ~~purchase~~Underlying ~~price~~Properties ~~based~~are charged, on the ~~Minimum Price~~same itbasis ~~received~~as ~~price~~other ~~credits~~third ~~(“Price Credits”)~~parties, ~~equal~~for toall ~~the~~customary ~~difference~~expenses ~~between the Index Price~~ and ~~the~~costs ~~Minimum~~reimbursements ~~Price,~~associated ~~that~~with itthese ~~was~~activities. Operator ~~entitled~~overhead tofees ~~deduct~~deducted infrom ~~determining~~ the ~~purchase~~Net ~~price~~Proceeds ~~when~~computations ~~the Index Price~~ for ~~natural gas exceeded~~ the ~~Minimum Price. In addition~~Chalkley, ifCotton ~~the~~Valley ~~Index~~and ~~Price~~Austin ~~for natural~~Chalk ~~gas~~Fields ~~exceeded~~totaled ~~the~~$60,000 ~~sharing~~and ~~price~~$55,000 ~~which~~during ~~was~~the ~~adjusted~~three-month ~~annually~~periods ~~for~~ended ~~inflation (“Sharing Price”)~~September 30, ~~TEMI~~2012 ~~was~~and ~~entitled~~2011, torespectively. ~~deduct 50% of such excess (“Price Differential”) in determining the~~Operator ~~purchase~~overhead ~~price.~~fees ~~TEMI~~deducted ~~had~~from ~~an annual option to discontinue~~ the ~~Minimum~~Net ~~Price~~Proceeds ~~commitment.~~computations ~~However,~~for ~~if TEMI discontinued~~ the ~~Minimum Price commitment~~Chalkley, itCotton ~~would~~Valley ~~no longer be entitled to deduct the Price Differential in calculating the purchase price~~ and ~~would~~Austin ~~have~~Chalk ~~forfeited~~Fields ~~all~~totaled ~~accrued~~$172,000 ~~Price~~during ~~Credits. As~~each of the ~~Termination~~nine-month ~~Date,~~period ~~TEMI~~ended ~~had~~September 30, no2012 ~~outstanding Price Credits~~ and ~~had not exercised its option to discontinue the Minimum Price commitment~~2011.

~~Upon~~14 the Trust’s termination, pursuant to each Conveyance, the Working Interest Owners utilized the same pricing mechanisms (including the Sharing Price and Minimum Price commitment mechanisms) as the expired Purchase Contract in calculating Net Proceeds due to the Trust. The Minimum Price per MMBtu was $1.99, $1.97 and $1.95 for 2011, 2010 and 2009 natural gas sales, respectively. The Sharing Price per MMBtu was $2.46, $2.43 and $2.40 for 2011, 2010 and 2009 natural gas sales, respectively. Pursuant to each Conveyance, the Working Interest Owners also have the same annual option to discontinue the Minimum Price commitment. As a result of the Sharing Price arrangement, Net Proceeds attributable to the Underlying Properties during each of the three-month periods ended September 30, 2011 and 2010 were reduced by $0.5 million. Such Sharing Price arrangement reduced Net Proceeds attributable to the Underlying Properties during the nine-month periods ended September 30, 2011 and 2010 by $1.4 million and $1.9 million, respectively. As of September 30, 2011, the Working Interest Owners had no outstanding Price Credits and had not exercised its right to discontinue the Minimum Price commitment.

~~Under~~TORCH ~~each~~ENERGY ~~Conveyance,~~ROYALTY ~~natural~~TRUST ~~gas volumes are determined at the wellhead. Therefore, Net Proceeds do not include any amounts received in connection with~~

14 Notes to Financial Statements

~~Table~~Compensation of ~~Contents~~the Trustee and Transfer Agent

~~TORCH~~The ~~ENERGY~~Trust ~~ROYALTY~~Agreement ~~TRUST~~provides that the Trustee be compensated for its administrative services, out of the Trust assets, in an annual amount of $80,000, plus an hourly charge for services in excess of a combined total of 250 hours annually at its standard rates. In accordance with provisions in the Trust Agreement, the Trustee may increase its compensation for its administrative services as a result of unusual or extraordinary services rendered by the Trustee.

~~Notes~~Additionally, the Trustee receives a transfer agency fee of $5.00 annually per account (minimum of $15,000 annually), subject to ~~Financial~~change ~~Statements~~each December, beginning December 1994, based upon the change in the Producer’s Price Index as published by the Department of Labor, Bureau of Labor Statistics, plus $1.00 for each certificate issued.

~~extracting~~Total ~~natural~~administrative ~~gas~~and ~~liquids~~transfer ~~from~~agent ~~such~~fees ~~production~~charged atby ~~natural~~the ~~gas~~Trustee ~~processing~~for orservices ~~treating~~performed during the three-month periods ended ~~facilities~~September 30, 2012 and 2011 were $25,000 and $44,000, respectively. Total administrative and transfer agent fees charged by the Trustee for services performed during the nine-month periods ended September 30, 2012 and 2011 were $75,000 and $107,000, respectively.

~~Gathering,~~7. ~~Treating~~Trust ~~and~~Expense ~~Transportation~~Payable ~~Arrangements~~

The ~~Purchase Contract, which expired upon the~~ Trust~~’s termination, entitled TEMI to deduct certain~~ ~~natural~~expense ~~gas~~payable ~~gathering~~at September 30, ~~treating~~2012 and ~~transportation~~December 31, ~~fees~~2011 inwas ~~calculating the purchase price for natural gas in the Robinson’s Bend~~$459,000 ~~Austin Chalk~~ and ~~Cotton~~$475,000, ~~Valley Fields~~respectively. ~~The~~Such ~~amounts~~liability ~~that~~represents ~~were deducted~~general ~~in calculating the purchase price for such natural gas were set forth in the Purchase Contract~~ and ~~were~~administrative ~~not~~expense ~~affected~~accruals bymainly ~~the~~pertaining ~~actual costs incurred by TEMI~~ to ~~gather, treat and transport natural gas. Upon~~ the Trust’s ~~termination,~~legal ~~pursuant to each Conveyance~~fees, ~~the~~accounting ~~Working Interest~~and ~~Owners~~audit ~~became entitled to deduct the same natural gas gathering~~fees, ~~treating~~ and ~~transportation~~administrative ~~fees that~~services ~~had previously been deducted by TEMI pursuant to the Purchase Contract in calculating Net Proceeds due to the Trust~~fees.

~~For the Robinson’s Bend Field, a gathering, treating and transportation fee of $0~~8.~~260~~ ~~per~~Subsequent ~~MMBtu adjusted~~Events for inflation ($0.335, $0.331 and $0.327 per MMBtu for such fees pertaining to 2011, 2010 and 2009 natural gas sales, respectively), plus fuel usage equal to 5% of revenues is deducted in computing Net Proceeds due to the Trust. Additionally, a gathering fee of $0.05 per MMBtu is deducted in calculating the purchase price for production from 73 of the 426 wells in the Robinson’s Bend Field. In computing Net Proceeds due to the Trust for the Austin Chalk Fields, $0.38 per MMBtu plus 17% of revenues are deducted as a fee to gather, treat and transport natural gas production. TEMI deducted from the purchase price for natural gas for production attributable to certain wells in the Cotton Valley Fields a transportation fee of $0.045 per MMBtu.

~~During~~Except ~~each~~as ofset ~~the~~forth ~~three-month periods ended September 30~~below, ~~2011~~no ~~and~~events ~~2010,~~occurred ~~such fees deducted~~ from ~~the~~ Net Proceeds calculations, attributable to production during each of the three-month periods ended June 30, 2011 and 2010, in the Robinson’s Bend, Austin Chalk and Cotton Valley Fields, totaled $0.2 million. During each of the nine-month periods ended September 30, ~~2011~~2012 ~~and~~to ~~2010, such fees deducted from~~ the ~~Net~~date ~~Proceeds calculations, attributable to production during each~~ of ~~the nine-month~~this ~~periods~~filing ~~ended~~that ~~June 30, 2011 and 2010, in the Robinson’s Bend, Austin Chalk and Cotton Valley Fields, totaled $0.6 million and $0.7 million, respectively. No amounts for gathering, treating or transportation~~ are ~~deducted~~reportable inpursuant ~~calculating~~to ~~the~~FASB ~~purchase~~ASC ~~price from the Chalkley Field~~855.

15On January 24, 2013, the Trust received notice from NYSE Regulation, Inc. (“NYSE Regulation”) informing the Trust that NYSE Regulation has determined to commence proceedings to delist the Trust’s units from the New York Stock Exchange (“NYSE”), with trading of the units to be suspended prior to the opening of NYSE trading on January 30, 2013. NYSE Regulation informed the Trust that the delisting determination was based on the Trust’s delay in filing its Annual Report for the year ended December 31, 2011 on Form 10-K and subsequent Quarterly Reports for the fiscal quarters ending in 2012 with the Securities and Exchange Commission. The Trust had previously utilized the six-month cure period under Section 802.01C of the NYSE Listed Company Manual and a subsequent three-month extension of the filing date for the Annual Report to January 16, 2013 from NYSE Regulation,

~~Table~~15 ~~of Contents~~

TORCH ENERGY ROYALTY TRUST

Notes to Financial Statements

~~Administrative~~ the ~~Services~~Trust ~~Agreement~~was unable to file the Annual Report by this extended deadline. NYSE Regulation declined the Trust’s request for further extension under Section 802.01C of the NYSE Listed Company Manual of the filing deadline. NYSE Regulation also noted that the average closing price of the Trust’s units had previously fallen below the NYSE’s continued listing minimum share price standard (Section 802.01E of the NYSE Listed Company Manual) of $1.00 over a consecutive 30 trading day period. Trading of the Units was suspended prior to the opening of NYSE trading on Wednesday, January 30, 2013. The Trust commenced trading on the Pink Sheets on that same day, under the symbol “TRRU”.

~~The~~On ~~sole~~August 30, ~~purpose~~2013, ofthe Trust simultaneously signed and closed a Purchase and Sale Agreement (“PSA”) by and among the Trust, isTRC, Torch E&P Company, N.M.L. Inc., of Texas (formerly Torch Energy Services, Inc.), and Torch, pursuant to ~~hold~~which the ~~Net~~Trust ~~Profits~~and ~~Interests,~~the Torch Energy Louisiana Royalty Trust sold all of its remaining net profits interests attributable to ~~receive~~the ~~payments~~underlying working interests in certain fields that produce from the ~~Working~~ ~~Interest~~Cotton ~~Owners~~Valley Fields, Austin Chalk Fields and Chalkley Field for a purchase price of $3,258,330. Pursuant to ~~make~~the ~~payments~~PSA, TRC provided the Trust a release, including a release of claims with respect to ~~Unitholders~~TRC’s unrecouped balance pertaining to the Chalkley Gas Volume Adjustment. The ~~Trust~~unrecouped ~~does~~balance ~~not~~of ~~conduct~~$0.5 ~~any~~million consisted of the total amount claimed by TRC of $3.1 million minus net proceeds from ~~business~~the ~~activity~~underlying ~~and~~properties ~~has~~withheld noby ~~officers,~~TRC ~~directors~~of or$2.6 ~~employees~~million. The PSA also provided TRC a release of claims with respect to the Trust Net Proceeds generated from TRC’s Underlying Property Interest attributable to oil and ~~Trustee~~gas ~~rely~~sales. onThe ~~third~~PSA also ~~party~~contains ~~service~~customary ~~providers~~representations, towarranties ~~perform~~and ~~administrative~~covenants. ~~services~~The Trust no longer receives any proceeds from the Net Profits Interests for the ~~Trust.~~Cotton Valley Fields, Austin Chalk Fields and the Chalkley Field as of May 1, 2013, the effective date of the PSA.

~~Torch~~On ~~provided~~December 4, ~~accounting~~2013, ~~bookkeeping~~the Trust announced a cash distribution of $3,390,639 ~~informational~~or ~~and~~39.426 ~~other~~cents ~~services~~per unit, payable on December 23, 2013 to Unitholders of record on December 13, 2013. On December 13, 2013, the Trust ~~related~~announced to that the ~~Net~~cash ~~Profits~~distribution ~~Interests~~which ~~pursuant~~was toannounced ~~the~~on ~~Administrative~~December 4, ~~Services~~2013 ~~Agreement~~was ~~effective~~adjusted ~~October 1~~downward by $360,000 due to additional expenses forecasted ~~1993~~in the wind down and anliquidation ~~oral~~of ~~arrangement~~the ~~after~~Trust. ~~termination~~As ofa result, the ~~Administrative~~previously ~~Services~~announced ~~Agreement~~applicable onrecord ~~January~~date and the distribution date were adjusted accordingly. The revised distribution is $3,031,349 or 35.25 cents per Unit, payable on 29December 30, ~~2008~~2013 ~~through~~to ~~April~~Unitholders of record on December 123, ~~2008~~2013. OnThis ~~November~~distribution mainly relates to the proceeds from the PSA. Immediately following the December 713, ~~2008~~2013 announcement, anthe ~~agreement~~Trust’s ~~was~~Cash ~~entered~~Reserve, ~~into~~net ~~between~~of the ~~Trust~~$3,031,349 ~~and~~cash ~~Torch~~distribution ~~that~~payable ~~engaged~~on ~~Torch~~December 30, to2013, ~~provide~~was ~~certain~~approximately ~~accounting~~$510,000. ~~services~~To inthe ~~connection~~extent ~~with~~that any of the ~~Trust’s~~ ~~preparation~~Cash ~~and~~Reserve ~~filing~~remains after the payment of all of the Trust’s ~~Form~~expenses, ~~10-K~~the ~~for~~Trustee may make one or more additional cash distributions to the ~~year~~Unitholders ~~ended~~of ~~December 31~~record; however, ~~2007.~~ no assurance can be made that any such distributions will occur

To16 facilitate the winding down of the Trust, Torch and the Trust entered into an agreement on March 26, 2009, as amended on March 31, 2010 and March 31, 2011. Pursuant to the agreement, Torch currently provides certain accounting and other services for the Trust. The term of such agreement expires March 31, 2012 or as sooner terminated by written notice from either party within 5 business days notice.

~~Services~~TORCH ~~fees~~ENERGY ~~paid~~ROYALTY byTRUST the Trust to Torch during each of the three-month periods ended September 30, 2011 and 2010 were $0.1 million. Services fees paid by the Trust to Torch during each of the nine-month periods ended September 30, 2011 and 2010 were $0.3 million.

~~Operator~~Item ~~Overhead~~2. ~~Fees~~ Management’s Discussion and Analysis of Financial Condition and Results of Operations

AResults ~~subsidiary~~ of ~~Torch~~Operations operates certain oil and natural gas interests burdened by the Net Profits Interests. The Underlying Properties are charged, on the same basis as other third parties, for all customary expenses and costs reimbursements associated with these activities. Operator overhead fees deducted from the Net Proceeds computations for the Chalkley, Cotton Valley and Austin Chalk Fields totaled $55,000 and $59,000 during the three months ended September 30, 2011 and 2010, respectively. Operator overhead fees deducted from the Net Proceeds computations for the Chalkley, Cotton Valley and Austin Chalk Fields totaled $172,000 and $177,000, respectively, during each nine-month period ended September 30, 2011 and 2010.

~~Compensation~~Because a modified cash basis of accounting is utilized by the ~~Trustee~~Trust, Net Proceeds attributable to the Underlying Properties for the three-month periods ended September 30, 2012 and ~~Transfer~~2011 ~~Agent~~is derived from actual oil and natural gas produced during the three- month periods ended June 30, 2012 and 2011, respectively. Net Proceeds attributable to the Underlying Properties for the nine-month period ended September 30, 2012 and 2011 is derived from actual oil and natural gas produced during the nine-month periods ended June 30, 2012 and 2011, respectively.

The ~~Trust~~data ~~Agreement~~set ~~provides~~forth ~~that~~in the ~~Trustee~~table bebelowexcludes ~~compensated~~the ~~for~~effect ~~its~~of ~~administrative~~the ~~services,~~Chalkley ~~out~~Gas ofVolume ~~the~~Adjustment. ~~Trust~~See ~~assets,~~Notes in5 anand ~~annual~~8 ~~amount~~ of ~~$80,000,~~the ~~plus~~Trust’s anaccompanying ~~hourly~~financial ~~charge~~statements for ~~services~~additional ininformation ~~excess of~~concerning athis ~~combined total of 250 hours annually at its standard rates~~adjustment. In


	Three Months Ended September 30,
	2012 (a)				2011
	Bbls of Oil		Mcf of Natural Gas		Bbls of Oil		Mcf of Natural Gas
Chalkley Field		333		110,402		469		131,035
Robinson’s Bend Field (b)		—		—		—		346,201
Cotton Valley Fields		157		94,645		299		106,182
Austin Chalk Fields		997		16,233		1,349		12,279

		1,487		221,280		2,117		595,697


	Nine Months Ended September 30,
	2012 (a)				2011
	Bbls of Oil		Mcf of Natural Gas		Bbls of Oil		Mcf of Natural gas
Chalkley Field		1,219		346,645		1,468		407,932
Robinson’s Bend Field (b)		—		—		—		1,061,885
Cotton Valley Fields		875		291,436		984		313,252
Austin Chalk Fields		3,266		56,069		3,849		35,837

		5,360		694,150		6,301		1,818,096

~~TORCH~~(a) ~~ENERGY~~Excludes ~~ROYALTY~~the ~~TRUST~~ effect of the Chalkley Gas Volume Adjustment which reduced Net Proceeds paid to the Trust during the three-month and nine-month periods ended September 30, 2012 by $0.2 million and $1.1 million, respectively. The Chalkley Gas Volume Adjustment did not affect Net Proceeds paid to the Trust during the three-month and nine-month periods ended September 30, 2011.

~~Notes~~(b) On December 13, 2011, the Trust sold its net profits interests with respect to ~~Financial~~the ~~Statements~~ Robinson’s Bend Field to Robinson’s Bend Production II, LLC. See Note 5 of the Trust’s accompanying financial statements for additional information concerning this adjustment.

~~accordance~~17 ~~with provisions in the Trust Agreement, the Trustee may increase its compensation for its administrative services as a result of unusual or extraordinary services rendered by the Trustee.~~

~~Additionally,~~TORCH ~~the~~ENERGY ~~Trustee~~ROYALTY ~~receives~~TRUST a transfer agency fee of $5.00 annually per account (minimum of $15,000 annually), subject to change each December, beginning December 1994, based upon the change in the Producer’s Price Index as published by the Department of Labor, Bureau of Labor Statistics, plus $1.00 for each certificate issued.

~~Total~~Three ~~administrative~~Months ~~and~~Ended ~~transfer agent fees charged by the Trustee for services performed during the three months ended~~ September 30, ~~2011~~2012 ~~and~~Compared ~~2010~~to ~~were~~Three ~~$44,000~~Months ~~and~~Ended ~~$36,000, respectively. Total administrative and transfer agent fees charged by the Trustee for services performed during the nine months ended~~ September 30, 2011 ~~and 2010 were $107,000 and $86,000, respectively.~~

The Trust received no net profits income from the Trust during the three-month period ended September 30, 2012 as a result of the Chalkley Gas Volume Adjustment which recouped overpayments made to the Trust by TRC in 1994 and 1995. Neither the Trust nor Unitholders are obligated to return such overpayment to TRC; however, the Trust will receive no Net Proceeds with respect to TRC’s interests in the Underlying Properties of the Chalkley Field, the Cotton Valley Fields and the Austin Chalk Fields (“TRC Underlying Property Interests”) until future Net Proceeds from the TRC Underlying Property Interests, plus accrued interest, exceed the unrecouped balance of such overpayment. During the three-month period ended September 30, 2012, TRC withheld Net Proceeds from the Trust totaling $0.2 million. As of September 30, 2012, the unrecouped balance of the Chalkey Gas Volume Adjustment was $1.6 million. During the three-month period ended September 30, 2011, net profits income was $498,000. The Chalkley Gas Volume Adjustment did not affect Net Proceeds paid to the Trust ~~Expense~~during ~~Payable~~the three-month period ended September 30, 2011. See Notes 4 and 8 of the Trust’s accompanying financial statements for additional information concerning this adjustment.

The Trust ~~expense~~received ~~payable~~no atpayments with respect to the Robinson’s Bend Field during the three-month period ended September 30, 2011. ~~and~~In ~~December~~calculating the Robinson’s Bend Field Net Proceeds pertaining to production during the three months ended September 3130, ~~2010~~2011, ~~was~~costs and expenses exceeded gross revenues by approximately $0.4 9 million. atThe ~~the~~Trust ~~end~~was entitled to no payments with respect to the Robinson’s Bend Field until future proceeds exceed the sum of ~~each~~future ~~period.~~costs ~~Such~~and ~~liability~~expenses ~~represents~~and ~~general~~the cumulative excess of such costs and ~~administrative~~expenses, ~~expense~~including ~~accruals~~interest ~~mainly~~(“Robinson’s Bend Deficit”). The Trust did not anticipate that ~~pertaining~~the Net Proceeds attributable to the ~~Trust~~Robinson’s ~~legal~~Bend ~~fees~~Field, ~~accounting~~if ~~and~~any, ~~audit~~would ~~fees,~~be ~~and~~significant ~~administrative~~in ~~services~~the ~~fees~~future. As of September 30, 2011 (pertaining to production through June 30, 2011), the Robinson’s Bend Cumulative Deficit was approximately $8.7 million.

7.On ~~Subsequent~~December 13, ~~Events~~2011, the Trust entered into a purchase and sale agreement by and between Robinson’s Bend Production II, LLC (“RBP II”) pursuant to which the Trust agreed to sell, and RBP II agreed to purchase, all of the Trust’s Net Profits Interests attributable to the Underlying Properties in the Robinson’s Bend Field for a purchase price of $1,000,000. The sale signed and closed simultaneously on December 13, 2011. See Note 5 of the Trust’s accompanying financial statements for additional information.

~~Except~~Prior asto ~~set~~the ~~forth~~effect ~~below~~of the Chalkley Gas Volume Adjustment, nonatural ~~events~~gas ~~occurred~~production attributable to the Underlying Properties in the Chalkley, Cotton Valley and Austin Chalk Fields (excluding production generated from ~~September~~the Infill Wells) was 221,280 Mcf and 249,496 Mcf during the three- month periods ended June 30, 2012 and 2011, respectively. Natural gas production attributable to the ~~date~~Underlying Properties ofin ~~this~~the ~~filing that~~Robinson’s ~~are~~Bend ~~reportable~~Field ~~pursuant~~(excluding production generated from the Infill Wells) was 346,201 Mcf during the three-month period ended June 30, 2011. There was no natural gas production attributable to ~~FASB~~the ~~ASC~~Underlying ~~855~~Properties in the Robinson’s Bend Field during the same period in 2012 as a result of the Trust selling its interests in such properties on December 13, 2011. Oil production attributable to the Underlying Properties for the three-month periods ended June 30, 2012 and 2011 was 1,487 Bbls and 2,117 Bbls, respectively. Oil production decreased during 2012 as a result of normal production declines.

On18 February 23, 2011, the Trust announced that the Trust and the derivative unitholder plaintiff reached an agreement in principle with Constellation Energy Partners LLC to settle litigation filed by the derivative plaintiff on the Trust’s behalf, captioned Trust Venture Company, LLC v. Constellation Energy Partners LLC (CV-2008-900751), in the Circuit Court of Tuscaloosa County, Alabama. The Trust also sent on February 23, 2011, the Notice of Pendency of Derivative Action, Proposed Settlement of Derivative Action, Settlement Hearing, and Right to Appear to the Trust’s unitholders of record as of February 11, 2011, as required by the Settlement.

AsTORCH ~~disclosed~~ENERGY inROYALTY ~~the~~TRUST Trust’s Form 8-K on February 23, 2011, the Trust announced that it and the derivative unitholder plaintiff reached an agreement in principle with Constellation Energy Partners LLC to settle certain claims in the litigation, captioned Trust Venture Company, LLC v. Constellation Energy Partners LLC (CV-2008-900751), filed in the Circuit Court of Tuscaloosa County, Alabama (“Court”) by the derivative

17During the three-month period ended September 30, 2012, the average price used to calculate Net Proceeds for natural gas, before gathering, treating and transportation deductions, was $2.01 per MMBtu as compared to $3.32 per MMBtu for the three-month period ended September 30, 2011. During the three-month period ended September 30, 2012, the average price used to calculate Net Proceeds for oil was $86.34 per Bbl as compared to $91.63 per Bbl for the three-month period ended September 30, 2011. Such average price calculations exclude the impact of the Chalkley Gas Volume Adjustment discussed in Notes 4 and 8 of the Trust accompanying financial statements.

~~Table~~Prior to the Trust’s termination on January 29, 2008, TEMI deducted the Price Differential and was committed to pay a Minimum Price for natural gas. When TEMI paid a purchase price for natural gas based on the Minimum Price, TEMI received Price Credits which it was entitled to deduct in determining the purchase price when the Index Price for natural gas exceeded the Minimum Price. TEMI had not exercised its right to discontinue the Minimum Price commitment and had no outstanding Price Credits on the Termination Date. Additionally, if the Index Price for natural gas exceeded $2.10 per MMBtu, adjusted annually for inflation, TEMI deducted 50% of ~~Contents~~such excess in calculating the Net Proceeds payable to the Trust.

~~TORCH~~Upon ~~ENERGY~~the ~~ROYALTY~~Trust’s ~~TRUST~~termination, pursuant to each Conveyance, the Working Interest Owners used the same pricing mechanisms as the expired Purchase Contract (including the Sharing Price and Minimum Price commitment mechanisms) in calculating Net Proceeds due to the Trust. The Minimum Price per MMBtu was $2.05, $1.99 and $1.97 for 2012, 2011 and 2010 production, respectively. The Sharing Price per MMBtu was $2.54, $2.46 and $2.43 for 2012, 2011 and 2010 production, respectively. Pursuant to each Conveyance, the Working Interest Owners also have the same annual option to discontinue the Minimum Price commitment. As of September 30, 2012 and December 31, 2011, the Working Interest Owners had no outstanding Price Credits and had not exercised their right to discontinue the Minimum Price commitment. Price Credits totaling $8,000 were deducted in calculating the purchase price related to net profits income during the three-month period ended September 30, 2012. All such Price Credits were recouped by the Working Interest Owners in the same period. No Price Credits were deducted in calculating the purchase price related to net profits income during the three-month period ended September 30, 2011. The deduction of the Price Differential in connection with the Sharing Price mechanism reduced Net Proceeds paid to the Trust during the three-month period ended September 30, 2011 by $0.5 million. The Sharing Price mechanism did not impact the Net Proceeds calculation during the three-month period ended September 30, 2012.

~~Notes~~During tothe ~~Financial~~three-month ~~Statements~~periods ended September 30, 2012 and 2011, the Trust recognized $25,000 and $103,000 of Infill Well income with respect to the Cotton Valley Fields Infill Wells. Such Infill Wells are operated by Samson Lone Star Limited Partnership.

~~plaintiff~~Prior onto the ~~Trust’s~~effect ~~behalf~~of (the ~~“Settlement”).~~Chalkley ~~Also~~Gas asVolume Adjustment, ~~disclosed~~lease onoperating ~~the~~expenses ~~Trust’s~~and ~~Form~~capital ~~8-K~~expenditures ~~on April 18,~~attributable ~~2011,~~to the ~~Court~~Underlying ~~approved~~Properties in ~~all~~the ~~respects~~Chalkley, ~~the~~Cotton ~~Settlement~~Valley asand ~~memorialized~~Austin inChalk ~~the~~Fields ~~proposed Settlement~~deducted ~~and~~in ~~Release~~calculating ~~Agreement~~Net ~~and~~Proceeds ~~ordered~~due ~~that~~to the ~~matter~~Trust befor ~~dismissed,~~the ~~with~~three-month ~~prejudice,~~periods ~~costs~~ended ~~taxed~~September 30, as2012 ~~paid. In the Order~~ and ~~Final~~2011 ~~Judgment~~totaled ~~entered~~$0.3 bymillion ~~the~~and ~~Court~~$0.4 ~~dated as of April 13~~million, ~~2011, the~~respectively. ~~Court~~With ~~acknowledged~~respect ~~receiving~~to the ~~report~~Robinsons’ ~~from~~Bend ~~counsel~~Field, ~~for~~lease ~~Wilmington~~operating ~~Trust~~expenses ~~Company,~~and ~~not~~capital inexpenditures ~~its individual~~of ~~capacity~~$1.8 ~~but~~million ~~solely~~were asdeducted ~~the~~in ~~Trustee~~calculating of the ~~Trust~~Net ~~that~~Proceeds payable ~~no objections~~ to the ~~proposed settlement~~Trust infrom ~~this matter had been received, and~~ the ~~Court~~Robinson’s ~~confirmed~~Bend ~~after~~Field ~~review~~for ~~that~~ the ~~proposed Settlement~~three-month ~~and~~period ~~Release~~ended ~~Agreement is fair~~September 30, ~~reasonable and adequate~~2011. The ~~parties~~Trust ~~had~~sold ~~agreed~~its ~~that~~interest ~~the proposed~~in ~~Settlement and Release Agreement shall become effective on~~ the ~~date~~Robinson’s onBend ~~which~~Field ~~the~~in ~~Order~~December ~~and Final~~2011 ~~Judgment~~as ~~becomes~~disclosed ~~final~~above ~~and~~in ~~unappealable,~~this ~~which absent appeal, was anticipated to be June 13, 2011~~item.

As19 of June 14, 2011, the Trust believes that no appeal had been filed with the Court. Therefore, the Trust believes by its terms the Settlement and Release Agreement by and among the Trust, derivative unitholder plaintiff and Constellation Energy Partners LLC has an effective date of June 13, 2011. As provided in the Settlement and Release Agreement, the derivative plaintiff and the Trust agreed to settle the claims against Constellation Energy Partners LLC in the derivative action, and to enter into mutual, general releases with Constellation Energy Partners LLC in return for (i) a payment of one million two hundred thousand United States dollars ($1,200,000) to the derivative plaintiff by Robinson’s Bend Production, II (“RBP II”), which is a Delaware limited liability company and an affiliate of Constellation Energy Partners LLC, to reimburse the derivative plaintiff for the legal fees and expenses it incurred in prosecuting the derivative action, (ii) an irrevocable bid by RBP II of not less than one million United States dollars ($1,000,000) for its purchase from the Trust of the net overriding royalty interest (“Alabama NORRI”), when such Alabama NORRI is separately offered for sale by the Trust at public auction within 180 days of the effective date of the Settlement, with such bid amount to be deposited by RBP II in a third-party escrow account pending the public auction, and (iii) a third amendment to that certain Water Gathering and Disposal Agreement providing that, for a period of ten years commencing on July 1, 2011, the charges for the gathering, separation, and disposal of water from oil and gas wells located in Tuscaloosa County, Alabama that are owned and operated by RBP II (“Wells”) shall be fifty-three cents ($0.53) per barrel of water. RBP II had charged one United States dollar ($1.00) per barrel of water for the gathering, separation, and disposal of such water from the Wells since the termination date of the Trust.

~~The~~TORCH ~~Trust~~ENERGY ~~was~~ROYALTY ~~terminated~~TRUST ~~by a vote of the Unitholders on the Termination Date.~~

~~The~~General ~~Trust~~and ~~reported~~administrative onexpenses ~~August 4,~~amounted ~~2011~~to on$0.3 ~~Form~~million ~~8-K~~for ~~and~~each ~~then~~of onthe ~~August~~three-month periods ended September 530, 2012 and 2011. onSuch ~~Form~~general ~~8-K/A~~and ~~that~~administrative ~~the Trust~~expenses ~~entered~~include ~~into~~costs apertaining ~~material~~to ~~definitive~~the ~~agreement~~administrative ~~for~~services ~~advisory~~provided by Torch and ~~marketing~~the ~~services~~Trustee, ~~with~~legal ~~an effective~~fees, ~~date~~accounting ofand ~~August 1~~audit fees, ~~2011~~reserve ~~with~~report ~~respect~~preparation tofees, ~~the~~and Unitholder ~~sale~~report of printing fees.

18Pursuant to the Trust Agreement, the Trustee established a cash reserve (“Cash Reserve”) following the Trust’s termination in 2008 for the payment of actual, contingent and uncertain liabilities associated with the liquidation and winding down of the Trust and the Trust’s arbitration. During the three-month periods ended September 30, 2012 and 2011, the Trust received cash payments totaling $25,000 and $601,000 respectively, from the Working Interest Owners of the Underlying Properties pertaining to Net Proceeds from net profits income and Infill Wells. All such receipts were allocated to the Trust’s Cash Reserve. The Cash Reserve as of September 30, 2012 and December 31, 2011 was $1.5 million and $2.4 million, respectively.

~~Table~~The foregoing resulted in a distributable loss of ~~Contents~~$0.2 million, or $0.03 per Unit, for the three-month period ended September 30, 2012 as compared to distributable income of $0.3 million, or $0.03 per Unit, for the same period in 2011. During each of the three-month periods ended September 30, 2012 and 2011, the Trust made no cash distributions to Unitholders.

~~TORCH~~Nine ~~ENERGY~~Months ~~ROYALTY~~Ended ~~TRUST~~ September 30, 2012 Compared to Nine Months Ended September 30, 2011

~~Notes~~The Trust received no net profits income from the Trust during the nine-month period ended September 30, 2012 as a result of the Chalkley Gas Volume Adjustment which recouped overpayments made to ~~Financial~~the ~~Statements~~Trust by TRC in 1994 and 1995. Neither the Trust nor Unitholders are obligated to return such overpayment to TRC; however, the Trust will receive no Net Proceeds with respect to TRC’s interests in the TRC Underlying Property Interests until future Net Proceeds from the TRC Underlying Property Interests, plus accrued interest, exceed the unrecouped balance of such overpayment. During the nine-month period ended September 30, 2012, TRC withheld Net Proceeds from the Trust totaling $1.1 million. As of September 30, 2012, the unrecouped balance of the Chalkey Gas Volume Adjustment was $1.6 million. During the nine-month period ended September 30, 2011, net profits income was $1.4 million. The Chalkley Gas Volume Adjustment did not affect Net Proceeds paid to the Trust during the nine-month period ended September 30, 2011. See Notes 4 and 8 of the accompanying financial statements for additional information for additional information concerning this adjustment.

~~the~~The ~~net~~Trust ~~profit~~received ~~interests~~no ofpayments ~~the~~with ~~Trust~~respect ~~pursuant~~ to anthe ~~agreement~~Robinson’s ~~with~~Bend ~~PLS,~~Field ~~Inc., a Texas corporation.~~during ~~The~~the ~~Trust also reported on Form 8~~nine-Kmonth onperiod ~~November~~ended September 430, 2011. ~~that~~In calculating the ~~Trust notified~~ Robinson’s Bend ~~Production~~ ~~II,~~Field ~~LLC~~Net onProceeds ~~November 3,~~pertaining ~~2011~~to ~~that~~production itduring ~~was~~ the ~~successful~~nine-month ~~bidder~~period inended ~~the~~September 30, ~~public~~2011, ~~auction~~costs ~~of the~~and ~~sale~~expenses ofexceeded ~~the~~gross ~~Trust’s~~revenues ~~net~~by approximately ~~profits~~$2.5 ~~interests~~million. ~~attributable~~The toTrust ~~underlying~~was ~~working~~entitled ~~interests~~to ~~in certain~~no ~~fields~~payments ~~that~~with ~~produce~~respect ~~from~~to the Robinson’s Bend ~~formations~~Field inuntil ~~the~~future ~~Black~~proceeds ~~Warrior~~exceed ~~Basin~~the ~~in Alabama. As was previously reported on Form 8-K on June 13, 2011,~~ Robinson’s Bend ~~Production~~Deficit. ~~II, LLC~~The asTrust ~~part~~did ~~of the Settlement and Release Agreement made an irrevocable bid of~~ not ~~less~~anticipate ~~than $1,000,000~~that ~~for its purchase from~~ the ~~Trust~~Net ofProceeds ~~the~~attributable ~~net~~to ~~profits interests associated with~~ the Robinson’s Bend ~~formations.~~Field, ~~The~~if ~~transaction~~any, iswould ~~subject~~be tosignificant in the ~~negotiation~~future. ~~and~~As ~~execution~~ of ~~mutually~~September 30, ~~acceptable~~2011 ~~definitive~~(pertaining ~~agreements.~~to ~~The~~production ~~proposed~~through ~~transaction~~June 30, ~~described~~2011), ~~above~~the ~~is anticipated~~Robinson’s toBend ~~close~~Cumulative ~~before~~Deficit ~~December 31,~~was ~~2011~~approximately $8. 7 million.

In20 addition, on November 4, 2011, the Trust reported on Form 8-K that it issued a press release announcing that the Trust had entered into a non-binding letter of interest on November 2, 2011 with respect to the sale of the Trust’s net profits interests attributable to underlying working interests in certain fields that produce from the Cotton Valley and Austin Chalk formations in Texas and the Chalkley field in Louisiana. The closing of any transaction is subject to due diligence, the negotiation and execution of mutually acceptable definitive agreements and the satisfaction of any conditions to closing set forth in those agreements. There can be no assurance that these discussions will lead to a transaction, or that the terms set forth in any definitive agreements will be consistent with the current expectations of the parties. The Trust anticipates that any proposed transaction with respect to the Texas and Louisiana fields described in this report would be consummated before December 31, 2011.

19On December 13, 2011, the Trust entered into a purchase and sale agreement by and between RBP II pursuant to which the Trust agreed to sell, and RBP II agreed to purchase, all of the Trust’s Net Profits Interests attributable to the Underlying Properties in the Robinson’s Bend Field for a purchase price of $1,000,000. The sale signed and closed simultaneously on December 13, 2011. See Note 5 of the Trust’s accompanying financial statements for additional information.

~~Table~~Prior to the effect of ~~Contents~~the Chalkley Gas Volume Adjustment, natural gas production attributable to the Underlying Properties in the Chalkley, Cotton Valley and Austin Chalk Fields (excluding production generated from the Infill Wells) was 694,150 Mcf and 1,818,096 Mcf during the nine-month period ended June 30, 2012 and 2011, respectively. Natural gas production attributable to the Underlying Properties in the Robinson’s Bend Field (excluding production generated from the Infill Wells) was 1,061,885 Mcf during the nine-month period ended June 30, 2011. There was no natural gas production attributable to the Underlying Properties in the Robinson’s Bend Field during the same period in 2012 as a result of the Trust selling its interests in such properties in December 31, 2011. Oil production attributable to the Underlying Properties during the nine-month period ended June 30, 2012 and 2011 was 5,360 Bbls and 6,301 Bbls, respectively. Oil production decreased during 2012 as a result of normal production declines.

~~TORCH~~During ~~ENERGY~~the ~~ROYALTY~~nine-month ~~TRUST~~period ended September 30, 2012, the average price used to calculate Net Proceeds for natural gas, before gathering, treating and transportation deductions, was $2.42 per MMBtu as compared to $3.19 per MMBtu for the nine-month period ended September 30, 2011. During the nine-month period ended September 30, 2012, the average price used to calculate Net Proceeds for oil was $89.63 per Bbl as compared to $84.08 per Bbl for the nine-month period ended September 30, 2011. Such average price calculations exclude the impact of the Chalkley Gas Volume Adjustment discussed in Notes 4 and 8 of the Trust accompanying financial statements.

~~Item 2.~~Prior ~~Management~~to the Trust’s ~~Discussion~~termination ~~and~~on ~~Analysis~~January 29, of2008, ~~Financial~~TEMI ~~Condition~~deducted the Price Differential and ~~Results~~was ofcommitted ~~Operations~~to pay a Minimum Price for natural gas. When TEMI paid a purchase price for natural gas based on the Minimum Price, TEMI received Price Credits which it was entitled to deduct in determining the purchase price when the Index Price for natural gas exceeded the Minimum Price. TEMI had not exercised its right to discontinue the Minimum Price commitment and had no outstanding Price Credits on the Termination Date. Additionally, if the Index Price for natural gas exceeded $2.10 per MMBtu, adjusted annually for inflation, TEMI deducted 50% of such excess in calculating the Net Proceeds payable to the Trust.

~~Results~~Upon ofthe ~~Operations~~Trust’s termination, pursuant to each Conveyance, the Working Interest Owners used the same pricing mechanisms as the expired Purchase Contract (including the Sharing Price and Minimum Price commitment mechanisms) in calculating Net Proceeds due to the Trust. The Minimum Price per MMBtu was $2.05, $1.99 and $1.97 for 2012, 2011 and 2010 production, respectively. The Sharing Price per MMBtu was $2.54, $2.46 and $2.43 for 2012, 2011 and 2010 production, respectively. Pursuant to each Conveyance, the Working Interest Owners also have the same annual option to discontinue the Minimum Price commitment. As of

~~Because~~21 a modified cash basis of accounting is utilized by the Trust, Net Proceeds attributable to the Underlying Properties for the three months ended September 30, 2011 and 2010 is derived from actual oil and natural gas produced during the three months ended June 30, 2011 and 2010, respectively. Net Proceeds attributable to the Underlying Properties for the nine months ended September 30, 2011 and 2010 is derived from actual oil and natural gas produced during the nine months ended June 30, 2011 and 2010, respectively. Oil and natural gas sales attributable to the Underlying Properties for such periods are as follows:

	Three Months Ended September 30,
	2011				2010
	Bbls		Mcf of		Bbls		Mcf of
	of Oil		Natural Gas		of Oil		Natural Gas
Chalkley Field		469		131,035		551		155,184
Robinson’s Bend Field		—		346,201		—		366,111
Cotton Valley Fields		299		106,182		234		111,779
Austin Chalk Fields		1,349		12,279		1,809		18,308	(a)
		2,117		595,697		2,594		651,382

TORCH ENERGY ROYALTY TRUST

	Nine Months Ended September 30,
	2011				2010
	Bbls		Mcf of		Bbls		Mcf of
	of Oil		Natural Gas		of Oil		Natural gas
Chalkley Field		1,468		407,932		1,817		466,597
Robinson’s Bend Field		—		1,061,885		—		1,096,748
Cotton Valley Fields		984		313,252		826		328,846
Austin Chalk Fields		3,849		35,837		7,614		93,424	(a)
		6,301		1,818,906		10,257		1,985,615

September 30, 2012 and December 31, 2011, the Working Interest Owners had no outstanding Price Credits and had not exercised their right to discontinue the Minimum Price commitment. Price Credits totaling $8,000 were deducted in calculating the purchase price related to net profits income during the nine-month period ended September 30, 2012. All such Price Credits were recouped by the Working Interest Owners in the same period. No Price Credits were deducted in calculating the purchase price related to net profits income during the nine-month period ended September 30, 2011. The deduction of the Price Differential in connection with the Sharing Price mechanism reduced Net Proceeds paid to the Trust during the nine-month periods ended September 30, 2012 and 2011 by $0.1 million and $1.4 million, respectively.

~~(a)~~During ~~Excludes~~each ~~the effect~~ of the ~~Austin Chalk Gas Volume Adjustment. Such adjustment adversely affected gas sales attributable to the Underlying Properties in the Austin Chalk Fields during the three-month and~~ nine-month periods ended ~~June~~ September 30, ~~2010~~2012 ~~by 0 MMcf~~ and ~~6 MMcf~~2011, ~~respectively. Gas sales attributable to~~ the ~~Underlying~~Trust ~~Properties~~recognized in$109,000 ~~the Austin Chalk field during the three-month~~ and ~~nine-month periods ended June 30~~$216,000 ~~2011~~of ~~were~~Infill ~~not~~Well ~~affected~~income bywith respect to the ~~Austin~~Cotton ~~Chalk~~Valley ~~Gas~~Fields ~~Volume~~Infill ~~Adjustment~~Wells. ~~See~~Such ~~Note~~Infill 4Wells toare ~~the~~operated ~~Trust’s~~by ~~financial~~Samson ~~statements~~Lone ~~for~~Star ~~additional~~Limited ~~information~~Partnership.

20Prior to the effect of the Chalkley Gas Volume Adjustment, lease operating expenses and capital expenditures attributable to the Underlying Properties in the Chalkley, Cotton Valley and Austin Chalk Fields deducted in calculating Net Proceeds due to the Trust for the nine-month periods ended September 30, 2012 and 2011 totaled $0.9 million and $1.3 million, respectively. With respect to the Robinsons’ Bend Field, lease operating expenses and capital expenditures of $5.1 million were deducted in calculating the Net Proceeds payable to the Trust from the Robinson’s Bend Field for the nine-month period ended September 30, 2011. The Trust sold its interest in the Robinson’s Bend Field in December 2011 as disclosed above in this item.

~~Table~~General ofand ~~Contents~~administrative expenses amounted to $0.9 million and $1.1 million for the nine-month periods ended September 30, 2012 and 2011, respectively. Such general and administrative expenses include costs pertaining to the administrative services provided by Torch and the Trustee, legal fees, accounting and audit fees, reserve report preparation fees, and Unitholder report printing fees.

~~TORCH~~Pursuant ~~ENERGY~~to ~~ROYALTY~~the ~~TRUST~~Trust Agreement, the Trustee established a Cash Reserve following the Trust’s termination in 2008 for the payment of actual, contingent and uncertain liabilities associated with the liquidation and winding down of the Trust and the Trust’s arbitration. During the nine-month periods ended September 30, 2012 and 2011, the Trust received cash payments totaling $0.1 million and $1.6 million, respectively, from the Working Interest Owners of the Underlying Properties pertaining to Net Proceeds from net profits income and Infill Wells. All such receipts were allocated to the Trust’s Cash Reserve. The Cash Reserve as of September 30, 2012 and December 31, 2011 was $1.5 million and $2.4 million, respectively.

~~Three~~The ~~Months~~foregoing ~~Ended~~resulted in a distributable loss of $0.8 million, or $0.10 per Unit, for the nine-month period ended September 30, ~~2011~~2012 ~~Compared~~as compared to ~~Three~~distributable ~~Months~~income ~~Ended~~of $0.6 million, or $0.07 per Unit, for the same period in 2011. During the nine-month period ended September 30, 2012, ~~2010~~ the Trust made no cash distributions to Unitholders. During the nine-month period ended September 30, 2011, cash distributions made to Unitholders totaled $1.5 million, or 17.0 cents per Unit.

~~For~~22 the three months ended September 30, 2011, net profits income was $498,000, or 48% greater than net profits income of $337,000 for the same period in 2010. Such increase is mainly attributable to the Austin Chalk Gas Volume Adjustment which reduced net profits income during the quarter ended September 30, 2010 by $149,000. See Note 4 to the Trust’s financial statements for additional information.

~~The~~TORCH ~~Trust~~ENERGY ~~received~~ROYALTY noTRUST payments with respect to the Robinson’s Bend Field during the three months ended September 30, 2011 and 2010. In calculating the Robinson’s Bend Field Net Proceeds pertaining to production during the three months ended September 30, 2011, costs and expenses exceeded gross revenues by approximately $0.9 million. The Trust will receive no payments with respect to the Robinson’s Bend Field until future proceeds exceed the sum of future costs and expenses and the cumulative excess of such costs and expenses, including interest (“Robinson’s Bend Deficit”). The Trust does not anticipate that the Net Proceeds attributable to the Robinson’s Bend Field, if any, will be significant in the future. As of September 30, 2011 (pertaining to production through June 30, 2011), the Robinson’s Bend Cumulative Deficit was approximately $8.7 million.

~~Prior~~Net toprofits ~~the~~income ~~effect~~received ofby the ~~Austin Chalk Gas Volume Adjustment (see Note 4 to the~~ Trust’s ~~financial~~during ~~statements), natural gas production attributable to~~ the ~~Underlying~~three ~~Properties in the Chalkley, Cotton Valley~~ and ~~Austin~~nine ~~Chalk~~month ~~Fields~~periods ~~(excluding production generated from the Infill Wells) was 249,496 Mcf and 285,271 Mcf during the three months~~ ended ~~June~~September 30, 2012 ~~2011~~ and ~~2010~~2011, ~~respectively.~~ ~~Natural~~derived ~~gas~~from production ~~attributable~~sold toduring the ~~Underlying~~three ~~Properties in the Robinson’s Bend Field (excluding production generated from the Infill Wells) was 346,201 Mcf~~ and ~~366,111~~nine ~~Mcf during the three~~ months ended June 30, ~~2011~~2012 and ~~2010~~2011, respectively~~. Oil production attributable to the Underlying Properties for the three months ended June 30~~, ~~2011 and 2010~~ was ~~2,117~~computed ~~Bbls~~as ~~and 2,594~~shown ~~Bbls,~~in ~~respectively.~~the ~~Oil~~following ~~production~~table ~~decreased~~(in ~~during~~thousands): ~~2011 as a result of normal production declines.~~

During the three months ended September 30, 2011, the average price used to calculate Net Proceeds for natural gas, before gathering, treating and transportation deductions, was $3.32 per MMBtu as compared to $3.18 per MMBtu for the three months ended September 30, 2010. Such average price calculations exclude the impact of the Austin Chalk Gas Volume Adjustment discussed in Note 4 of the Trust financial statements. During the three months ended September 30, 2011, the average price used to calculate Net Proceeds for oil was $91.63 per Bbl as compared to $69.87 per Bbl for the three months ended September 30, 2010.


	Three Months Ended September 30, 2012 (a)									Three Months Ended September 30, 2011
	Chalkley, Cotton Valley and Austin Chalk Fields			Robinson’s Bend Field			Total			Chalkley, Cotton Valley and Austin Chalk Fields			Robinson’s Bend Field			Total
Oil and natural gas revenues	$	591		$	—		$	1,997		$	1,020		$	977		$	1,997

Direct operating expenses:
Lease operating expenses and property tax		291			—			2,156			373			1,783			2,156
Severance tax		47			—			135			71			64			135

		338			—			2,291			444			1,847			2,291

Net proceeds before capital expenditures		253			—			(294	)		576			(870	)		(294	)
Capital expenditures		15			—			62			52			10			62

Net proceeds		238			—			(356	)		524			(880	)		(356	)
Net profits percentage		95	%		—	(b)		—			95	%		—	(b)		—

Net profits income		226			—			498			498			—			498
Chalkley Gas Volume Adj. (a)		(226	)								—			—			—

Net profits income	$	—		$	—		$	—		$	498		$	—		$	498

Prior to the Trust’s termination on January 29, 2008, TEMI deducted the Price Differential and was committed to pay a Minimum Price for natural gas. When TEMI


	Nine Months Ended September 30, 2012 (a)									Nine Months Ended September 30, 2011
	Chalkley, Cotton Valley and Austin Chalk Fields			Robinson’s Bend Field			Total			Chalkley, Cotton Valley and Austin Chalk Fields (a)			Robinson’s Bend Field			Total
Oil and natural gas revenues	$	2,230		$	—		$	2,230		$	2,944		$	2,878		$	5,822

Direct operating expenses:
Lease operating expenses and property tax		914			—			914			1,165			5,127			6,292
Severance tax		178			—			178			198			195			393

		1,092			—			1,092			1,363			5,322			6,685

Net proceeds before capital expenditures		1,138			—			1,138			1,581			(2,444	)		(863	)
Capital expenditures		10			—			10			96			12			98

Net proceeds		1,128			—			1,128			1,485			(2,456	)		(961	)
Net profits percentage		95	%		—	(b)		95	%		95	%		—	(b)		—

Net profits income		1,072			—			1,072			1,411			—			1,411
Chalkley Gas Volume Adj. (a)		(1,072	)								—			—			—

Net profits income	$	—		$	—		$	—		$	1,411		$	—		$	1,411

21 23

~~Table~~TORCH ofENERGY ~~Contents~~ROYALTY TRUST

~~TORCH~~(a) ~~ENERGY~~The ~~ROYALTY~~Chalkley ~~TRUST~~ Gas Volume Adjustment reduced net profits income during the three-month and nine-month periods ended September 30, 2012 by $0.2 million and $1.1 million, respectively. See Notes 4 and 8 to the Trust’s accompanying financial statements for additional information.

~~paid~~(b) aWith ~~purchase~~respect ~~price~~to ~~for~~the ~~natural~~Robinson’s ~~gas~~Bend ~~based~~Field, on the ~~Minimum~~Trust ~~Price, TEMI~~ received ~~Price~~no ~~Credits~~cash ~~which it~~distributions ~~was~~during ~~entitled to deduct in determining~~ the ~~purchase~~three-month ~~price~~and ~~when~~nine-month ~~the~~periods ~~Index~~ended ~~Price~~September ~~for~~30, ~~natural~~2011. ~~gas exceeded~~The ~~the~~Trust ~~Minimum~~sold ~~Price.~~all ~~TEMI~~of ~~had~~its ~~not~~net ~~exercised~~profits ~~its~~interests ~~right~~attributable to ~~discontinue~~ the ~~Minimum~~Underlying ~~Price commitment~~Properties ~~and~~in ~~had~~the noRobinson’s ~~outstanding~~Bend ~~Price~~Field ~~Credits~~ on ~~the~~December ~~Termination Date. Additionally~~13, ~~if the Index Price for natural gas exceeded $2~~2011.10 ~~per~~See ~~MMBtu,~~Note ~~adjusted~~5 ~~annually~~to ~~for inflation, TEMI deducted 50% of such excess in calculating~~ the ~~Net~~Trust’s ~~Proceeds~~accompanying ~~payable~~financial tostatements ~~the~~for ~~Trust~~additional information.

~~Upon~~Item the Trust’s termination, pursuant to each Conveyance, the Working Interest Owners used the same pricing mechanisms as the expired Purchase Contract (including the Sharing Price and Minimum Price commitment mechanisms) in calculating Net Proceeds due to the Trust3. ~~The~~Quantitative ~~Minimum Price per MMBtu was $1.99, $1.97~~ and ~~$1.95~~Qualitative ~~for~~Disclosures ~~2011,~~about ~~2010~~Market and 2009 production, respectively. The Sharing Price per MMBtu was $2.46, $2.43 and $2.40 for 2011, 2010 and 2009 production, respectively. Pursuant to each Conveyance, the Working Interest Owners also have the same annual option to discontinue the Minimum Price commitment. As of September 30, 2011, the Working Interest Owners had no outstanding Price Credits and had not exercised their right to discontinue the Minimum Price commitment. No Price Credits were deducted in calculating the purchase price related to net profits income during the three months ended September 30, 2011 and 2010. The deduction of the Price Differential in connection with the Sharing Price mechanism reduced Net Proceeds paid to the Trust during each of the three months ended September 30, 2011 and 2010 by $0.5 million. Risk

~~During~~The ~~each~~Trust ofis ~~the~~exposed ~~three-month~~to ~~periods~~market ~~ended September 30~~risk, ~~2011~~including ~~and~~adverse ~~2010,~~changes ~~the~~in commodity prices. The Trust’s ~~recognized~~assets ~~$0.1 million~~constitute ofNet ~~Infill~~Profits ~~Well~~Interests ~~income~~in ~~with~~the ~~respect~~Underlying Properties. toAs a result, the ~~Cotton~~Trust’s ~~Valley~~operating ~~Fields~~results ~~Infill~~can ~~Wells.~~be ~~Such~~significantly ~~Infill Wells~~affected ~~are~~by ~~operated~~fluctuations in commodity prices caused by ~~Samson~~changing ~~Lone~~market ~~Star~~forces ~~Limited~~and ~~Partnership~~the price received for production from the Underlying Properties.

~~Lease~~All ~~operating~~production ~~expenses~~from ~~and~~the ~~capital~~Underlying ~~expenditures~~Properties ~~attributable~~during tothe period from the ~~Underlying~~inception ~~Properties~~of inthe Trust to the ~~Chalkley~~ Trust’s termination on January 29, ~~Cotton~~2008 ~~Valley~~was sold pursuant to a Purchase Contract between TRC, Velasco, and ~~Austin~~TEMI. ~~Chalk~~The ~~Fields~~Purchase ~~deducted~~Contract inexpired ~~calculating~~upon ~~Net~~the ~~Proceeds~~Trust’s ~~due~~termination. Pursuant to the ~~Trust~~ ~~for~~Purchase Contract, TEMI was obligated to purchase all net production attributable to the ~~three-month~~Underlying Properties ~~periods~~for ~~ended~~an ~~September 30~~Index Price, ~~2011~~less ~~and~~certain ~~2010~~other ~~totaled~~charges, $0which were calculated monthly.~~4 million~~ The Index Price calculation was based on market prices of oil and $0natural gas and therefore was subject to commodity price risk.5 The Purchase Contract also ~~million,~~provided ~~respectively~~a Minimum Price paid by TEMI for natural gas. ~~With~~When ~~respect~~TEMI topaid ~~the~~a ~~Robinsons’~~purchase ~~Bend~~price ~~Field~~based on the Minimum Price, ~~lease~~it ~~operating~~received ~~expenses~~Price Credits equal to the difference between the Index Price and the Minimum Price that TEMI was entitled to deduct when ~~capital~~the ~~expenditures~~Index ofPrice $1exceeded the Minimum Price.~~8 million~~ ~~were~~Additionally, ~~deducted~~if inthe ~~calculating~~Index Price exceeded the ~~Net~~Sharing ~~Proceeds~~Price, ~~payable~~TEMI was entitled to deduct such excess, the ~~Trust~~ ~~from~~Price Differential. TEMI had the ~~Robinson’s~~annual ~~Bend~~option ~~Field~~to ~~for~~discontinue ~~each~~the ~~three-month~~Minimum ~~period~~Price ~~ended~~commitment. However, ~~September 30~~if TEMI discontinued the Minimum Price commitment, ~~2011~~it would no longer be entitled to deduct the Price Differential and ~~2010, respectively~~would forfeit all accrued Price Credits. TEMI did not exercise its right to discontinue the Minimum Price commitment and had no outstanding Price Credits on the Termination Date.

~~General~~Upon ~~and~~the ~~administrative~~Trust’s ~~expenses~~termination, ~~amounted~~pursuant to ~~$0.3 million~~each ~~for~~Conveyance, ~~each~~the ofWorking Interest Owners calculated Net Proceeds owed to the ~~three-~~Trust ~~month~~utilizing ~~periods~~the same pricing mechanisms (including the Sharing Price and Minimum Price commitment mechanisms) as the terminated Purchase Contract. The Minimum Price per MMBtu was adjusted annually for ~~ended~~inflation ~~September 30~~and was $2.05, $1.99 and $1.97 for 2012, 2011 and 2010 natural gas sales, respectively. ~~Such~~The ~~general~~Sharing Price per MMBtu was $2.54, $2.46 and ~~administrative~~$2.43 ~~expenses~~for ~~include~~2012, ~~costs pertaining~~2011 and 2010 natural gas sales, respectively. Pursuant to each Conveyance, the Working ~~administrative~~Interest ~~services~~Owners ~~provided~~also byhave ~~Torch~~the ~~and~~same annual option to discontinue the ~~Trustee~~Minimum Price commitment. However, ~~legal~~if ~~fees~~the Working Interest Owners discontinue the Minimum Price commitment, ~~accounting~~they will no longer be entitled to deduct the Price Differential and ~~audit~~will ~~fees,~~forfeit ~~reserve~~all ~~report~~accrued ~~preparation~~Price ~~fees,~~Credits. The Working Interest Owners have not exercised their option to discontinue the Minimum Price commitment and ~~Unitholder~~have ~~report~~no ~~printing~~outstanding ~~fees~~Price Credits as of June 30, 2012.

22 24

~~Table~~TORCH ofENERGY ~~Contents~~ROYALTY TRUST

~~TORCH~~Item ~~ENERGY~~4. ~~ROYALTY~~Controls ~~TRUST~~ and Procedures

~~During~~Evaluation ~~the three months ended September 30, 2011 and 2010, the Trust received cash payments totaling $601,000 and $589,000, respectively, from the Working Interest Owners~~ of ~~the~~Disclosure ~~Underlying Properties.~~Controls Included in cash receipts during the three months ended September 30, 2010 is $122,000 paid to the Trust by a certain working interest owner which was classified as restricted cash at September 30, 2010 due to potential overpayment. See Note 4 of the Trust’s financial statements for additional information concerning restricted cash. Cash payments received by the Trust during the three months ended September 30, 2011 and ~~2010 mainly pertain to net profits income attributable to production during the three months ended June 30, 2011 and 2010, respectively~~Procedures.

The Trustee ~~foregoing~~carried ~~resulted~~out inan aevaluation ~~distributable~~of ~~income~~the effectiveness of ~~$0.3 million,~~the ordesign ~~$0.03~~and ~~per~~operation ~~Unit,~~of ~~for~~ the ~~three months~~Trust’s ~~ended~~disclosure ~~September 30,~~controls ~~2011~~and asprocedures ~~compared~~pursuant to ~~$0.1 million,~~Exchange orAct ~~$0.01~~Rules 13a-15 ~~per~~and ~~Unit,~~15d-15 ~~for~~as of the ~~same~~end ~~period in~~of ~~2010. During~~ the ~~three-month~~ period ~~ended~~covered ~~September 30,~~by ~~2010,~~this ~~the~~report. ~~Trust made no cash~~Based ~~distributions~~upon tothat ~~Unitholders~~evaluation, ~~and~~the ~~allocated~~Trustee ~~$467,000~~concluded ofthat the ~~net~~Trust’s ~~profits~~disclosure ~~income~~controls and ~~Infill~~procedures ~~Well proceeds~~are ~~received~~effective byin ~~the~~timely ~~Trust~~alerting ~~during~~ the ~~three-month~~Trustee ~~period~~to ~~ended~~material ~~September 30,~~information ~~2010~~relating ~~into~~to the ~~Cash Reserve.~~Trust ~~During~~required ~~the~~to ~~three-month~~be ~~period~~included ~~ended~~in ~~September 30, 2011,~~ the Trust’s ~~made cash distributions~~periodic tofilings ~~Unitholders~~with ~~totaling~~the $1SEC.~~5 million,~~ orIn ~~$0.17~~their ~~per~~evaluation ~~Unit.~~of ~~Such~~disclosure ~~cash~~controls ~~distributions~~and ~~included~~procedures, the ~~release~~ ofTrustee ~~$964,000~~and ~~of the~~ Trust’s ~~Cash~~has ~~Reserve.~~relied, ~~The~~to ~~remaining portion of~~ the ~~cash~~extent ~~distribution~~considered ~~of $498~~reasonable,~~000~~ ~~was~~on ~~derived~~information ~~from~~provided ~~certain net profits income received~~ by ~~the~~Torch ~~Trust~~and ~~during~~Watkins ~~the~~Meegan ~~three-month period ended September 30~~LLC, ~~2011.~~an ~~The~~accounting ~~Cash~~firm ~~Reserve~~contracted asby ofthe Trust ~~September 30,~~to ~~2011~~perform ~~and~~certain ~~December 31,~~Sarbanes-Oxley ~~2010 was~~compliance ~~$1.6 million~~for ~~and~~the $2Trust.~~5 million,~~ ~~respectively.~~

~~Nine~~Changes ~~Months~~in ~~Ended~~Internal ~~September 30,~~Control ~~2011~~over ~~Compared~~Financial toReporting. ~~Nine Months Ended September 30, 2010~~

~~For~~There has not been any change in the Trust’s internal control over financial reporting during the three-month and nine-month ~~months~~periods ended September 30, ~~2011~~2012 that has materially affected, ~~net~~or ~~profits~~is ~~income~~reasonably ~~was~~likely $1to materially affect, the Trust’s internal control over financial reporting.4 The Trust and Trustee rely on third party service providers to perform administrative services for the Trust. Torch provided accounting, bookkeeping, informational and other services to the Trust related to the Net Profits Interests pursuant to the Administrative Services Agreement effective October ~~million~~1, up1993 ~~75%~~and ~~from~~an ~~net~~oral ~~profits~~arrangement ~~income~~after termination of $0the Administrative Services Agreement on January 29, 2008 through April 1, 2008.8 From November ~~million~~7, 2008 through December 23, 2008, Torch provided certain accounting services in connection with the Trust’s preparation of its Form 10-K for the ~~same~~year ~~period~~ended inDecember 31, ~~2010~~2007 pursuant to an agreement between the Trust and Torch dated November 7, 2008. ~~Such~~To ~~increase~~facilitate isthe ~~mainly~~winding ~~attributable~~down of the Trust, Torch currently provides certain toaccounting and other services for the ~~Austin~~Trust ~~Chalk~~pursuant ~~Gas~~to ~~Volume~~an ~~Adjustment~~agreement ~~which~~with ~~reduced~~the ~~net~~Trust ~~profits~~entered ~~income~~into ~~during~~on March 26, 2009. The initial term of the ~~nine~~agreement ~~months ended~~expired ~~September~~on March 3031, 2010 byand ~~$0.7~~was thereafter extended from year to year, up to the period ending August ~~million~~30, 2013. ~~See~~Torch ~~Note~~currently 4provides the Trust via letter agreement the administrative services historically provided by Torch to the Trust’s ~~financial~~through ~~statements~~December 31, 2013 consistent with past practice and (ii) from December 31, 2013 to April 30, 2014 shall provide services to the Trust in support of any tax correspondence (tax booklet) and tax filings that might be necessary for ~~additional~~the ~~information~~year ended December 31, 2013 consistent with past practice and other related services necessary to complete the wind down of the Trust that are also consistent with past practice. Subsequently, the inability of the Trust to hire qualified services providers to assist in the wind down and liquidation of the Trust may have a material adverse effect on the operations of the Trust.

~~The~~25 Trust received no payments with respect to the Robinson’s Bend Field during the nine months ended September 30, 2011 and 2010. In calculating the Robinson’s Bend Field Net Proceeds pertaining to production during the nine months ended June 30, 2011, costs and expenses exceeded gross revenues by approximately $2.5 million. The Trust will receive no payments with respect to the Robinson’s Bend Field until future proceeds exceed the Robinson’s Bend Deficit. The Trust does not anticipate that the Net Proceeds attributable to the Robinson’s Bend Field, if any, will be significant in the future. As of September 30, 2011 (pertaining to production through June 30, 2011), the Robinson’s Bend Cumulative Deficit was approximately $8.7 million.

23 TORCH ENERGY ROYALTY TRUST

~~Table~~PART ofII. ~~Contents~~OTHER INFORMATION

~~TORCH~~ITEM 1. ~~ENERGY~~Legal ~~ROYALTY~~Proceedings ~~TRUST~~

~~Prior~~On October 16, to2008, ~~the~~Trust ~~effect~~Venture ofCompany, ~~the~~LLC ~~Austin~~and ~~Chalk~~Wilmington ~~Gas~~Trust ~~Volume~~Company, ~~Adjustment~~solely ~~(see~~in ~~Note~~its 4capacity toas ~~the~~Trustee ~~Trust’s financial~~for ~~statements),~~the ~~natural~~Torch ~~gas~~Energy ~~production~~Royalty ~~attributable~~Trust, to(together, ~~the~~“Plaintiffs”) ~~Underlying~~filed ~~Properties~~a inpetition ~~the Chalkley~~against TRC, ~~Cotton~~Torch ~~Valley~~E&P Company, and Constellation ~~Austin~~Energy ~~Chalk~~Partners ~~Fields~~LLC ~~was 757~~(collectively,~~021~~ ~~Mcf~~“Defendants”) ~~and~~in ~~888,867 Mcf during~~ the ~~nine months~~District ~~ended~~Court ~~June 30,~~of ~~2011~~Harris ~~and 2010~~County, ~~respectively~~Texas. The ~~Austin~~petition ~~Chalk~~sought ~~Gas~~to ~~Volume~~vacate ~~Adjustment,~~the ~~which reduced~~arbitration ~~Net~~award ~~Proceeds~~issued ~~received~~ by the ~~Trust~~JAMS ~~during~~Panel ~~the~~in ~~nine~~Defendants’ ~~months~~favor ~~ended~~on ~~September~~July 3018, ~~2010,~~2008 in ~~decreased~~the ~~gas~~arbitration ~~volumes~~captioned ~~included~~Torch inRoyalty ~~net~~Co., ~~profits~~et ~~income~~al. ~~calculations~~v. ~~during~~Wilmington ~~the~~Trust ~~nine~~Co., ~~months~~et ~~ended September 30~~al., ~~2010~~JAMS Reference No. 13100017310. ~~The~~Defendants ~~Trust,~~filed ~~Trustee~~a ~~and~~motion ~~the~~to ~~Trust~~dismiss ~~service~~the ~~providers~~Plaintiffs’ ~~continue~~petition and to ~~review~~confirm ~~and~~the arbitration award. On or about ~~analyze~~December 10, 2008, the ~~appropriateness~~Court ofentered ~~and~~an ~~verify~~Order dismissing the ~~information~~petition and ~~data~~granting ~~provided~~the byDefendants’ ~~TRC~~motion ~~concerning~~to confirm the ~~Austin~~ ~~Chalk~~arbitration ~~Gas Volume Adjustment~~award.

~~Natural~~On December 22, ~~gas~~2008, ~~production~~the ~~attributable~~Trustee received a demand letter from Trust Venture Company, LLC with respect to certain enumerated costs - including administrative costs and costs for water gathering, treating and disposal - that are deducted by the working interest owners of certain of the Underlying Properties infrom the ~~Robinson~~Net Profit Interests before remitting the Net Proceeds to the Trustee and the Trust. Trust Venture Company, LLC has concluded that the Trust has been overcharged (and continues to be overcharged) by the working interest owners of certain of the Underlying Properties and that these overcharges have damaged the Trust (and as a result, all of the Trust’s ~~Bend~~Unitholders). ~~Field~~In ~~was 1~~addition,~~061~~ Trust Venture Company,~~885~~ ~~Mcf~~LLC asserts that the working interest owners have failed to provide the required accountings as set forth in the Conveyances and 1that the Trust may request the court to require the working interest owners to provide such an accounting. Trust Venture Company,~~096~~ LLC requested that the Trustee either institute legal action against the working interest owners,~~748~~ ~~Mcf~~or ~~during~~authorize Trust Venture Company, LLC to commence a derivative action against the ~~nine~~current ~~months~~working ~~ended~~interest ~~June 30~~owner of the Alabama property in accordance with, ~~2011~~inter ~~and~~alia, ~~2010~~Section 3816 of the Delaware Statutory Trust Act, ~~respectively~~codified at 12 Del. ~~Oil~~ ~~production~~C. ~~attributable~~3816(a), to ~~the~~recover ~~Underlying~~all ~~Properties~~overcharges ~~for~~related to administrative costs, water gathering, treating and disposal costs and all overcharges reflected in the accounting. ~~nine~~The ~~months~~Trustee ~~ended~~responded ~~June~~on December 3022, ~~2011~~ 2008 to Trust Venture Company, LLC with a request for additional information which it has now received. The Trustee carefully considered Trust Venture Company, LLC’s demand letter, and concluded, ~~2010~~in ~~was~~the 6reasoned exercise of its business judgment,~~301~~ ~~Bbls~~that it is in the best interest of the Trust and 10all Unitholders to authorize Trust Venture Company,~~257~~ ~~Bbls~~LLC to commence a derivative action and provided its authorization as of December 30, ~~respectively~~2008.

~~During~~As disclosed by the ~~nine~~Trust ~~months~~in its Annual Report on Form 10-K for the year ended ~~September~~December 3031, ~~2011~~2007 (“2007 Annual Report”), Trust Venture intended to commence a derivative action against Constellation Energy Partners LLC, the ~~average~~working ~~price~~interest ~~used~~owner toof ~~calculate~~certain ~~Net~~oil ~~Proceeds for~~and natural gas fields located in Alabama, ~~before~~in ~~gathering~~accordance with, ~~treating~~inter ~~and~~alia, ~~transportation~~Section 3816 of ~~deductions~~the Delaware Statutory Trust Act, ~~was~~codified $3at 12 Del.19 ~~per~~C. ~~MMBtu~~3816(a), asto (i) recover any overcharges to the Trust by Constellation Energy Partners LLC related to administrative costs, water gathering, treating and disposal costs and severance ~~compared~~taxes and (ii) require Constellation Energy Partners LLC to ~~$3.36~~provide ~~per~~an ~~MMBtu~~accounting ~~for~~of its revenues and expenses as required under the ~~nine~~Conveyance ~~months~~filed ~~ended~~of ~~September~~record in Tuscaloosa County, Alabama. On December 30, ~~2010.~~2008, ~~Such~~Trust ~~average~~Venture ~~price~~Company, LLC ~~calculations~~filed ~~exclude~~and subsequently served a derivative lawsuit against Constellation Energy Partners LLC in Alabama state court alleging such overcharges, challenging the ~~impact~~calculation of the ~~Austin~~Net ~~Chalk~~Profits ~~Gas~~Interests ~~Volume~~under ~~Adjustment~~the ~~discussed~~Conveyances inthat ~~Note~~were 4used ofto transfer the ~~Trust~~Net ~~financial~~Profits ~~statements~~Interests in each state, and demanding an accounting of Constellation Energy Partners LLC’s revenues and expenses. ~~During~~In response to the ~~nine~~derivative ~~months~~lawsuit, ~~ended~~on ~~September~~February 309, ~~2011~~2009, ~~the~~Constellation ~~average~~Energy ~~price~~Partners LLC filed in ~~used~~Alabama state court a motion to ~~calculate~~dismiss ~~Net~~such ~~Proceeds~~lawsuit ~~for~~without ~~oil~~prejudice ~~was~~in ~~$84.08~~favor ~~per~~of ~~Bbl~~arbitration asin ~~compared~~Texas on various grounds, including Trust Venture Company, LLC’s alleged lack of standing and Trust Venture’s alleged failure to ~~$69~~comply with certain contractual agreements.38 ~~per~~The ~~Bbl~~Alabama ~~for~~state ~~the nine~~court ~~months~~denied ~~ended~~Constellation ~~September~~Energy Partners LLC’s motion to dismiss on February 3025, ~~2010~~2009, and so the Alabama derivative action is proceeding against Constellation Energy Partners LLC.

~~Prior~~26 to the Trust’s termination on January 29, 2008, TEMI deducted the Price Differential and was committed to pay a Minimum Price for natural gas. When TEMI paid a purchase price for natural gas based on the Minimum Price, TEMI received Price Credits which it was entitled to deduct in determining the purchase price when the Index Price for natural gas exceeded the Minimum Price. TEMI had not exercised its right to discontinue the Minimum Price commitment and had no outstanding Price Credits on the Termination Date. Additionally, if the Index Price for natural gas exceeded $2.10 per MMBtu, adjusted annually for inflation, TEMI deducted 50% of such excess in calculating the Net Proceeds payable to the Trust.

~~Upon~~TORCH ~~the~~ENERGY ~~Trust’s~~ROYALTY ~~termination,~~TRUST pursuant to each Conveyance, the Working Interest Owners used the same pricing mechanisms (including the Sharing Price and Minimum Price commitment mechanisms) in calculating Net Proceeds due to the Trust. The Minimum Price per MMBtu was $1.99, $1.97 and $1.95 for 2011, 2010 and 2009 production, respectively. The Sharing Price per MMBtu was $2.46, $2.43 and $2.40 for 2011, 2010 and 2009 production, respectively. Pursuant to each Conveyance, the Working Interest Owners also have the same annual option to discontinue the Minimum Price commitment, pursuant to each Conveyance. As of September 30, 2011, the

24On February 12, 2009, the Trustee received a certified copy of a demand for arbitration dated February 9, 2009 by Constellation Energy Partners LLC before JAMS in Texas (the “Demand Notice”) seeking a declaratory judgment that Constellation Energy Partners LLC (i) correctly calculated and paid the Net Profits Interests payments due to the Trust, (ii) correctly charged the Trust for certain well accounting services and severance taxes, and (iii) has complied with its contractual reporting requirements due to the Trust. In the Demand Notice, Constellation Energy Partners LLC claimed that, because the Trust authorized Trust Venture to file the derivative lawsuit, “there exists a judicable conflict between Constellation Energy Partners LLC and the Trust that is subject to resolution by arbitration.”

~~Table~~On February 12, 2009, Trust Venture Company, LLC filed an emergency motion in Alabama state court to stay the arbitration demanded by Constellation Energy Partners LLC until such time as the court issues a judgment as to the enforceability of ~~Contents~~the arbitration agreement made by and between the Trust and Constellation Energy Partners LLC. The court denied that motion on February 25, 2009. On March 9, 2009, the Trustee filed its own motion in the same Alabama state court seeking to intervene in the derivative action for the limited purpose of moving for a stay of the Texas arbitration until resolution of the derivative action. The Alabama state court heard oral argument on the Trustee’s motion on March 25, 2009, and on April 1, 2009, the Alabama state court denied the Trustee’s motion to stay the Texas arbitration and further denied Constellation Energy Partners LLC’s motion to stay the Alabama state court derivative action. Subsequently, the Trustee filed a motion to dismiss or stay the Texas arbitration with JAMS and the arbitration panel heard oral argument on April 10, 2009 and on April 13, 2009 granted the Trustee’s motion to stay the Texas arbitration proceedings pending the outcome of the Alabama derivative action. The arbitration panel subsequently entered an Order of Dismissal with respect to the Texas arbitration dated July 27, 2009. There can be no assurance as to the outcome or result of the Alabama derivative litigation or that Constellation Energy Partners LLC will not challenge the Order of Dismissal entered by the arbitration panel on July 27, 2009 or file other arbitration claims. On August 21, 2009, the Alabama state court added the Trust as a nominal plaintiff in the Alabama derivative action that is proceeding against Constellation Energy Partners LLC.

~~TORCH~~The ~~ENERGY~~Trust ~~ROYALTY~~has ~~TRUST~~also previously disclosed information regarding the termination of the Trust, the ongoing Alabama derivative litigation, the concluded Texas arbitration and other information regarding the Trust on its 2007, 2008, 2009 and 2010 Annual Report on Form 10-K filed with the SEC and its Current Reports on Form 8-K filed with the SEC. The Unitholders are urged to read the above mentioned and all other filings by the Trust with the SEC carefully and in their entirety.

~~Working~~On ~~Interest~~February 23, ~~Owners~~2011, ~~had~~the noTrust ~~outstanding~~issued ~~Price~~a ~~Credits~~press release and ~~had~~disclosed ~~not~~information ~~exercised~~regarding ~~their~~the ~~right~~ongoing ~~to discontinue~~Alabama ~~the~~derivative ~~Minimum~~litigation ~~Price~~on ~~commitment.~~its NoCurrent ~~Price~~Report ~~Credits~~on ~~were~~Form ~~deducted~~8-K. inIn ~~calculating~~ the ~~purchase~~ ~~price~~press ~~related~~release, tothe ~~net~~Trust ~~profits~~announced ~~income~~that ~~during~~it and the ~~nine~~derivative ~~months~~unitholder ~~ended~~plaintiff ~~September 30,~~reached ~~2011~~an ~~and~~agreement in principle with ~~2010.~~Constellation ~~The~~Energy ~~deduction~~Partners ofLLC ~~the~~to ~~Price~~settle ~~Differential~~certain claims in ~~connection~~the ~~with~~litigation, ~~the~~captioned ~~Sharing~~Trust ~~Price~~Venture ~~mechanism reduced~~Company, ~~Net~~LLC ~~Proceeds~~v. ~~paid~~Constellation toEnergy ~~the~~Partners ~~Trust~~LLC ~~during~~(CV-2008-900751), filed by the ~~nine~~derivative ~~months~~plaintiff ~~ended~~on ~~September 30,~~the ~~2011~~Trust’s ~~and~~behalf ~~2010~~in bythe Circuit ~~$1.4 million~~Court ~~and~~of ~~$1.9 million~~Tuscaloosa County, ~~respectively~~Alabama (the “Settlement”).

~~During~~27 the nine months ended September 30, 2011 and 2010, the Trust recognized Infill Well income of $216,000 and $313,000, respectively, pertaining to Infill Wells located in the Cotton Valley Fields. Such Infill Wells are operated by Samson Lone Star Partnership.

~~Lease~~TORCH ~~operating~~ENERGY ~~expenses~~ROYALTY ~~and~~TRUST capital expenditures attributable to the Underlying Properties in the Chalkley, Cotton Valley and Austin Chalk Fields deducted in calculating Net Proceeds due to the Trust during the nine-month periods ended September 30, 2011 and 2010 totaled $1.3 million and $1.7 million, respectively. Costs incurred in 2010 were greater than 2011 mainly as a result of capital expenditures pertaining to a workover of a certain well in the Austin Chalk Fields. With respect to the Robinsons’ Bend Field, lease operating expenses and capital expenditures of $5.1 million and $5.3 million were deducted in calculating the Net Proceeds payable to the Trust from the Robinson’s Bend Field for the nine months ended September 30, 2011 and 2010, respectively.

~~General~~As stated in the press release and ~~administrative~~the ~~expenses~~Notice ~~amounted~~of Pendency of Derivative Action, Proposed Settlement of Derivative Action, Settlement Hearing, and Right to ~~$1.1 million~~Appear, in the form approved by the Court and ~~$0.~~attached to the Form 8-K filed with the SEC on February ~~million~~23, ~~respectively~~2011, ~~for~~ subject to the ~~nine~~approval ~~months~~of ~~ended~~the ~~September 30~~Court, ~~2011~~the derivative plaintiff (Trust Venture Company, LLC) and ~~2010.~~the ~~The~~Trust ~~increase~~have agreed to settle the claims against Constellation Energy Partners LLC in ~~general~~the derivative action, and ~~administrative expenses~~to enter into mutual, general releases with Constellation Energy Partners LLC in ~~2011~~return isfor ~~primarily~~(i) a payment of $1,200,000 to the derivative plaintiff by Robinson’s Bend Production II (“RBP II”), which is a ~~result~~Delaware limited liability company and an affiliate of ~~increased~~Constellation Energy Partners LLC, to reimburse the derivative plaintiff for the legal fees ~~pertaining~~and toexpenses it incurred in prosecuting the derivative action, (ii) an irrevocable bid by RBP II of not less than $1,000,000 for its purchase from the Trust’s ~~wind-down~~of the net overriding royalty interest (“Alabama NORRI”), when ~~and~~such ~~SEC~~Alabama ~~reporting~~NORRI ~~matters.~~is ~~During~~separately ~~each~~offered for sale by the Trust at public auction within 180 days of the ~~nine-month~~effective ~~periods~~date ~~ended~~of ~~September 30~~the Settlement, ~~2011~~with such bid amount to be deposited by RBP II in a third-party escrow account pending the public auction, and ~~2010,~~(iii) a ~~general~~third amendment to that certain Water Gathering and ~~administrative~~Disposal ~~expenses~~Agreement ~~include~~providing ~~costs~~that, ~~pertaining~~for toa period of ten years commencing on the ~~administrative~~first ~~services provided~~day byof ~~Torch~~the ~~and~~month following the ~~Trustee~~effective date of the settlement, ~~legal~~the ~~fees~~charges for the gathering, separation, ~~accounting~~and disposal of water from oil and ~~audit~~gas ~~fees~~wells located in Tuscaloosa County, ~~reserve~~Alabama ~~report~~that are owned and operated by RBP II (“Wells”) shall be $0.53 per barrel of water. (RBP II currently charges $1.00 per barrel of water for the ~~preparation~~gathering, ~~fees~~separation, and ~~Unitholder~~disposal ~~report~~of ~~printing~~such ~~fees~~water from the Wells).

~~During~~The ~~the~~Alabama ~~nine~~Circuit ~~months~~Court ~~ended~~of ~~September~~Tuscaloosa County, Alabama convened a hearing on the settlement on April 3011, 2011, ~~and~~at ~~2010~~2:00 p.m. CDT (the “Settlement Hearing”). At the Settlement Hearing, the ~~Trust~~Court ~~received~~determined ~~cash~~whether ~~payments~~or ~~totaling $1.6~~not (i) ~~million~~to approve the Settlement as memorialized in the proposed Settlement and ~~$1.3 million~~Release Agreement ~~(net~~with ofConstellation ~~$60,000~~Energy ofPartners ~~interest~~LLC, ~~expense~~and (ii) to approve an Order ending this derivative action. On February 23, ~~respectively~~2011, ~~from~~the Trust sent the ~~Working Interest~~Notice ~~Owners~~of Pendency of ~~the~~Derivative ~~Underlying~~Action, ~~Properties.~~Proposed ~~Included~~Settlement inof ~~cash~~Derivative ~~receipts~~Action, Settlement ~~during~~Hearing, and Right to Appear to the ~~nine~~Trust’s ~~months ended~~unitholders ~~September~~of record as of February 3011, ~~2010~~2011, isas $0required by the Settlement.~~2 million~~ ~~paid~~On toApril 18, 2011, the Trust byissued a ~~certain~~press ~~working~~release ~~interest~~and ~~owner~~disclosed ~~that~~information on its Current Report ~~was~~on ~~classified~~Form as8-K ~~restricted~~that ~~cash~~the atAlabama ~~September 30~~Circuit Court of Tuscaloosa County, ~~2010~~Alabama ~~due~~approved toin ~~potential~~all ~~overpayment.~~respects ~~See Note~~the 4settlement ofas memorialized in the ~~Trust’s~~proposed ~~financial~~Settlement ~~statements~~and ~~for~~Release ~~additional~~Agreement ~~information~~and ~~concerning~~ordered ~~restricted~~that ~~cash. Cash~~the ~~payments~~matter ~~received~~be bydismissed, with prejudice, costs taxed as paid. In the ~~Trust~~Order ~~during~~and Final Judgment entered by the ~~nine~~Court ~~months~~dated ~~ended~~as ~~September~~of April 3013, 2011, ~~mainly~~the ~~pertain to~~Circuit ~~net~~Court ~~profits~~acknowledged ~~income~~receiving ~~attributable~~the toreport ~~production~~ from counsel for the ~~Underlying~~trustee ~~Properties~~of ~~during~~the Trust that no objections to the ~~nine months~~proposed ~~ended~~settlement ~~June 30,~~in ~~2011.~~this ~~Cash~~matter had ~~payments~~been received, byand the ~~Trust~~Court ~~during~~confirmed after review that the ~~nine~~Settlement ~~months~~and ~~ended September 30~~Release Agreement is fair, ~~2010~~reasonable ~~pertain~~and toadequate. ~~net~~The ~~profits~~Settlement ~~income~~and ~~attributable~~Release to Agreement became effective on June 13, 2011.

25As previously disclosed on current Report Form 8-K filed on January 31, 2008, the Trust received the affirmative vote of the Unitholders of more than 66 2/3% of the outstanding units to terminate the Trust at the meeting of Unitholders held January 29, 2008. Pursuant to the Trust Agreement of the Trust, the “Termination Date” of the Trust is January 29, 2008.

~~Table~~28 ~~of Contents~~

TORCH ENERGY ROYALTY TRUST

~~production~~Upon ~~from~~termination of the ~~Underlying~~Trust, ~~Properties~~among ~~during~~other things, the ~~nine~~Trustee ~~months~~is ~~ended~~required ~~June 30,~~to ~~2010~~sell the Net Profits Interests. Specifically, ~~net~~pursuant to Section 9.03(e) of the ~~Austin~~ ~~Chalk~~Trust ~~Gas~~Agreement ~~Volume~~if ~~Adjustment~~the ~~discussed~~property of the Trust Estate (as defined in ~~Note~~the 4Trust Agreement) has not been sold prior to the end of one calendar year following the termination date, the Trustee must cause such assets to be sold at public auction. All of the Net Profits Interests have been sold and the Trust’s ~~financial~~is ~~statements~~wind-down operations. No assurances can be given by the Trustee with respect to the amount that will be distributed to Unitholders following the sales. Such distributions could be below the market value of the Units.

~~The foregoing resulted in distributable income of $0.6~~ITEM ~~million, or $0~~1A.07 ~~per~~Risk Unit, for the nine months ended September 30, 2011, as compared to $0.3 million, or $0.04 per Unit, for the same period in 2010. During the nine-month period ended September 30, 2010, the Trust made no cash distributions to Unitholders. During the nine-month period ended September 30, 2011, the Trust made cash distributions to Unitholders totaling $1.5 million, or $0.17 per Unit. Such cash distributions included the release of $964,000 of the Trust’s Cash Reserve. The remaining portion of the cash distribution of $498,000 was derived from certain net profits income received by the Trust during the three-month period ended September 30, 2011. The Cash Reserve as of September 30, 2011 and December 31, 2010 was $1.6 million and $2.5 million, respectively. Factors

26The Trust believes there have been no material changes to risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010, filed with the SEC on April 22, 2011 (the “2010 Form 10-K”). You should carefully consider such risk factors as presented in the 2010 Form 10-K and other information set forth in this Quarterly Report on Form 10-Q, including our financial statements and the related notes.

~~Table~~ITEM 2. Unregistered Sales of ~~Contents~~Equity Securities and Use of Proceeds

~~TORCH~~None. ~~ENERGY ROYALTY TRUST~~

~~Net profits income received by the Trust during the three and nine month periods ended September 30, 2011 and 2010, derived from production sold during the three and nine months ended June~~ITEM ~~30, 2011~~3. ~~and~~Defaults ~~2010,~~upon ~~respectively, was computed as shown in the following table (in thousands):~~Senior Securities

	Three Months Ended									Three Months Ended
	September 30, 2011									September 30, 2010
	Chalkley,									Chalkley,
	Cotton Valley									Cotton Valley
	and Austin			Robinson’s						and Austin			Robinson’s
	Chalk Fields			Bend Field			Total			Chalk Fields (a)			Bend Field			Total
Oil and natural gas revenues	$	1,020		$	977		$	1,997		$	930		$	994		$	1,924
Direct operating expenses:
Lease operating expenses and property tax		373			1,783			2,156			363			1,838			2,201
Severance tax		71			64			135			100			64			164
		444			1,847			2,291			463			1,902			2,365
Net proceeds before capital expenditures		576			(870	)		(294	)		467			(908	)		(441	)
Capital expenditures		52			10			62			112			—			112
Net proceeds		524			(880	)		(356	)		355			(908	)		(553	)
Net profits percentage		95	%		—			—			95	%		—			—
Net profits income	$	498		$	—		$	498		$	337		$	—		$	337

None.

	Nine Months Ended									Nine Months Ended
	September 30, 2011									September 30, 2010
	Chalkley,									Chalkley,
	Cotton Valley									Cotton Valley
	and Austin			Robinson’s						and Austin			Robinson’s
	Chalk Fields			Bend Field			Total			Chalk Fields (a)			Bend Field			Total
Oil and natural gas revenues	$	2,944		$	2,878		$	5,822		$	2,964		$	3,183		$	6,147
Direct operating expenses:
Lease operating expenses and property tax		1,165			5,127			6,292			1,351			5,289			6,640
Severance tax		198			195			393			333			225			558
		1,363			5,322			6,685			1,684			5,514			7,198
Net proceeds before capital expenditures		1,581			(2,444	)		(863	)		1,280			(2,331	)		(1,051	)
Capital expenditures		96			12			108			388			—			388
Net proceeds		1,485			(2,456	)		(971	)		892			(2,331	)		(1,439	)
Net profits percentage		95	%		—			—			95	%		—			—
Net profits income	$	1,411		$	—		$	1,411		$	847		$	—		$	847

ITEM 4. (Removed and Reserved)

~~(a) Net of the Austin Chalk Gas Volume Adjustment which reduced net profits income during each of the three-month and nine-month periods ended September 30, 2010 by $149,000 and $692,000, respectively~~ITEM 5. Other ~~See~~Information ~~Note 4 to the Trust’s financial statements for additional information.~~

27 None.

~~Table~~ITEM 6. ofExhibits ~~Contents~~

~~TORCH~~(a) ~~ENERGY~~Exhibits ~~ROYALTY TRUST~~

~~Item 3~~4. ~~Quantitative~~Instruments ~~and~~of ~~Qualitative~~defining ~~Disclosures~~the ~~about~~rights ~~Market~~of ~~Risk~~ security holders, including indentures.

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


4.1		Form of Torch Energy Royalty Trust Agreement. *

4.2		Form of Louisiana Trust Agreement. *

4.3		Specimen Trust Unit Certificate. *

4.4		Designation of Ancillary Trustee. *

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~All~~* ~~production~~Incorporated ~~from~~by ~~the~~reference ~~Underlying Properties during the period~~ from ~~the~~Registration ~~inception~~Statements ~~of the Trust to the Trust’s termination~~ on ~~January 29,~~Form ~~2008~~S-1 was sold pursuant to a Purchase Contract between TRC, Velasco, and TEMI. The Purchase Contract expired upon the Trust’s termination. Pursuant to the Purchase Contract, TEMI was obligated to purchase all net production attributable to the Underlying Properties for an Index Price, less certain other charges, which were calculated monthly. The Index Price calculation was based on market prices of ~~oil~~Torch ~~and~~Energy ~~natural~~Advisors ~~gas~~Incorporated ~~and~~(Registration ~~therefore was subject to commodity price risk~~No. ~~The~~33-68688) ~~Purchase~~dated ~~Contract~~November ~~also provided a Minimum Price paid by TEMI for natural gas. When TEMI paid a purchase price based on the Minimum Price~~16, ~~it received Price Credits equal to the difference between the Index Price and the Minimum Price that TEMI was entitled to deduct when the Index Price exceeded the Minimum Price~~1993. Additionally, if the Index Price exceeded the Sharing Price, TEMI was entitled to deduct such excess, the Price Differential. TEMI had the annual option to discontinue the Minimum Price commitment. However, if TEMI discontinued the Minimum Price commitment, it would no longer be entitled to deduct the Price Differential and would forfeit all accrued Price Credits. TEMI did not exercise its right to discontinue the Minimum Price commitment and had no outstanding Price Credits on the Termination Date.

~~Upon~~29 the Trust’s termination, pursuant to each Conveyance, the Working Interest Owners calculated Net Proceeds owed to the Trust utilizing the same pricing mechanisms (including the Sharing Price and Minimum Price commitment mechanisms) as the terminated Purchase Contract. The Minimum Price per MMBtu was adjusted annually for inflation and was $1.99, $1.97 and $1.95 for 2011, 2010 and 2009 natural gas sales, respectively. The Sharing Price per MMBtu was $2.46, $2.43 and $2.40 for 2011, 2010 and 2009 natural gas sales, respectively. Pursuant to each Conveyance, the Working Interest Owners also have the same annual option to discontinue the Minimum Price commitment. However, if the Working Interest Owners discontinue the Minimum Price commitment, they will no longer be entitled to deduct the Price Differential and will forfeit all accrued Price Credits. The Working Interest Owners have not exercised their option to discontinue the Minimum Price commitment and have no outstanding Price Credits as of June 30, 2011.

28 TORCH ENERGY ROYALTY TRUST

~~Table~~SIGNATURES ~~of Contents~~

~~TORCH~~Pursuant ~~ENERGY~~to ~~ROYALTY~~the ~~TRUST~~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.

~~Item 4~~TORCH ENERGY ROYALTY TRUST By: Wilmington Trust Company, not in its individual capacity but solely as Trustee for the Trust By: /s/ J David A. ~~Controls~~Vanaskey ~~and~~David ~~Procedures~~ A. Vanaskey Vice President

~~Evaluation~~Date: ofFebruary 3, ~~Disclosure~~2014 ~~Controls and Procedures.~~

(The ~~Trustee carried out an evaluation of the effectiveness of the design and operation of the~~ Trust’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15 as of the end of the period covered by this report. Based upon that evaluation, the Trustee concluded that the Trust’s disclosure controls and procedures are effective in timely alerting the Trustee to material information relating to the Trust required to be included in the Trust’s periodic filings with the SEC. In their evaluation of disclosure controls and procedures, the Trustee and Trust has ~~relied,~~ tono ~~the extent considered reasonable~~employees, ondirectors ~~information~~or ~~provided~~executive ~~by Torch and Watkins Meegan LLC, an accounting firm contracted by the Trust to perform certain Sarbanes-Oxley compliance for the Trust~~officers. )

~~Changes~~30 ~~in Internal Control over Financial Reporting.~~

There has not been any change in the Trust’s internal control over financial reporting during the three months ended September 30, 2011 that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting. The Trust and Trustee rely on third party service providers to perform administrative services for the Trust. Torch provided accounting, bookkeeping, informational and other services to the Trust related to the Net Profits Interests pursuant to the Administrative Services Agreement effective October 1, 1993 and an oral arrangement after termination of the Administrative Services Agreement on January 29, 2008 through April 1, 2008. To facilitate the winding down of the Trust, Torch and the Trust entered into an agreement whereby Torch provides certain accounting and other services for the Trust. The term of such agreement expires March 31, 2012 or as sooner terminated by written notice from either party within 5 business days notice.

TORCH ENERGY ROYALTY TRUST

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

On December 22, 2008, the Trustee received a demand letter from Trust Venture Company, LLC with respect to certain enumerated costs — including administrative costs and costs for water gathering, treating and disposal — that are deducted by the working interest owners of certain of the Underlying Properties from the Net Profit Interests before remitting the Net Proceeds to the Trustee and the Trust. Trust Venture Company, LLC has concluded that the Trust has been overcharged (and continues to be overcharged) by the working interest owners of certain of the Underlying Properties and that these overcharges have damaged the Trust (and as a result, all of the Trust’s Unitholders). In addition, Trust Venture Company, LLC asserts that the working interest owners have failed to provide the required accountings as set forth in the Conveyances and that the Trust may request the court to require the working interest owners to provide such an accounting. Trust Venture Company, LLC requested that the Trustee either institute legal action against the working interest owners, or authorize Trust Venture Company, LLC to commence a derivative action against the current working interest owner of the Alabama property in accordance with, inter alia, Section 3816 of the Delaware Statutory Trust Act, codified at 12 Del. C. 3816(a), to recover all overcharges related to administrative costs, water gathering, treating and disposal costs and all overcharges reflected in the accounting. The Trustee responded on December 22, 2008 to Trust Venture Company, LLC with a request for additional information which it has now received. The Trustee carefully considered Trust Venture Company, LLC’s demand letter, and concluded, in the reasoned exercise of its business judgment, that it is in the best interest of the Trust and all Unitholders to authorize Trust Venture Company, LLC to commence a derivative action and provided its authorization as of December 30, 2008.

As disclosed by the Trust in its Annual Report on Form 10-K for the year ended December 31, 2007 (“2007 Annual Report”), Trust Venture intended to commence a derivative action against Constellation Energy Partners LLC, the working interest owner of certain oil and natural gas fields located in Alabama, in accordance with, inter alia, Section 3816 of the Delaware Statutory Trust Act, codified at 12 Del. C. 3816(a), to (i) recover any overcharges to the Trust by Constellation Energy Partners LLC related to administrative costs, water gathering, treating and disposal costs and severance taxes and (ii) require Constellation Energy Partners LLC to provide an accounting of its revenues and expenses as required under the Conveyance filed of record in Tuscaloosa County, Alabama. On December 30, 2008, Trust Venture Company, LLC filed and subsequently served a derivative lawsuit against Constellation Energy Partners LLC in Alabama state court alleging such overcharges, challenging the calculation of the Net Profits Interests under the Conveyances that were used to transfer the net profits interests in each state, and demanding an accounting of Constellation Energy Partners LLC’s revenues and expenses. In response to the

TORCH ENERGY ROYALTY TRUST

derivative lawsuit, on February 9, 2009, Constellation Energy Partners LLC filed in Alabama state court a motion to dismiss such lawsuit without prejudice in favor of arbitration in Texas on various grounds, including Trust Venture Company, LLC’s alleged lack of standing and Trust Venture’s alleged failure to comply with certain contractual agreements. The Alabama state court denied Constellation Energy Partners LLC’s motion to dismiss on February 25, 2009, and so the Alabama derivative action is proceeding against Constellation Energy Partners LLC.

On February 12, 2009, the Trustee received a certified copy of a demand for arbitration dated February 9, 2009 by Constellation Energy Partners LLC before JAMS in Texas (the “Demand Notice”) seeking a declaratory judgment that Constellation Energy Partners LLC (i) correctly calculated and paid the Net Profits Interests payments due to the Trust, (ii) correctly charged the Trust for certain well accounting services and severance taxes, and (iii) has complied with its contractual reporting requirements due to the Trust. In the Demand Notice, Constellation Energy Partners LLC claimed that, because the Trust authorized Trust Venture to file the derivative lawsuit, “there exists a judicable conflict between Constellation Energy Partners LLC and the Trust that is subject to resolution by arbitration.”

On February 12, 2009, Trust Venture Company, LLC filed an emergency motion in Alabama state court to stay the arbitration demanded by Constellation Energy Partners LLC until such time as the court issues a judgment as to the enforceability of the arbitration agreement made by and between the Trust and Constellation Energy Partners LLC. The court denied that motion on February 25, 2009. On March 9, 2009, the Trustee filed its own motion in the same Alabama state court seeking to intervene in the derivative action for the limited purpose of moving for a stay of the Texas arbitration until resolution of the derivative action. The Alabama state court heard oral argument on the Trustee’s motion on March 25, 2009, and on April 1, 2009, the Alabama state court denied the Trustee’s motion to stay the Texas arbitration and further denied Constellation Energy Partners LLC’s motion to stay the Alabama state court derivative action. Subsequently, the Trustee filed a motion to dismiss or stay the Texas arbitration with JAMS and the arbitration panel heard oral argument on April 10, 2009 and on April 13, 2009 granted the Trustee’s motion to stay the Texas arbitration proceedings pending the outcome of the Alabama derivative action. The arbitration panel subsequently entered an Order of Dismissal with respect to the Texas arbitration dated July 27, 2009. There can be no assurance as to the outcome or result of the Alabama derivative litigation or that Constellation Energy Partners LLC will not challenge the Order of Dismissal entered by the arbitration panel on July 27, 2009 or file other arbitration claims. On August 21, 2009, the Alabama state court added the Trust as a nominal plaintiff in the Alabama derivative action that is proceeding against Constellation Energy Partners LLC.

The Trust has also previously disclosed information regarding the termination of the Trust, the ongoing Alabama derivative litigation, the concluded Texas arbitration and

TORCH ENERGY ROYALTY TRUST

other information regarding the Trust on its 2007, 2008 and 2009 Annual Report on Form 10-K filed with the SEC and its Current Reports on Form 8-K filed with the SEC. The Unitholders are urged to read the above mentioned and all other filings by the Trust with the SEC carefully and in their entirety.

As disclosed in the Trust’s Form 8-K on February 23, 2011, the Trust announced that it and the derivative unitholder plaintiff reached an agreement in principle with Constellation Energy Partners LLC to settle certain claims in the litigation, captioned Trust Venture Company, LLC v. Constellation Energy Partners LLC (CV-2008-900751), filed in the Circuit Court of Tuscaloosa County, Alabama (“Court”) by the derivative plaintiff on the Trust’s behalf (the “Settlement”). Also as disclosed on the Trust’s Form 8-K on April 18, 2011, the Court approved in all respects the Settlement as memorialized in the proposed Settlement and Release Agreement and ordered that the matter be dismissed, with prejudice, costs taxed as paid. In the Order and Final Judgment entered by the Court dated as of April 13, 2011, the Court acknowledged receiving the report from counsel for Wilmington Trust Company, not in its individual capacity but solely as the Trustee of the Trust that no objections to the proposed settlement in this matter had been received, and the Court confirmed after review that the proposed Settlement and Release Agreement is fair, reasonable and adequate. The parties had agreed that the proposed Settlement and Release Agreement shall become effective on the date on which the Order and Final Judgment becomes final and unappealable, which absent appeal, was anticipated to be June 13, 2011.

As of June 14, 2011, the Trust believes that no appeal had been filed with the Court. Therefore, the Trust believes by its terms the Settlement and Release Agreement by and among the Trust, derivative unitholder plaintiff and Constellation Energy Partners LLC has an effective date of June 13, 2011. As provided in the Settlement and Release Agreement, the derivative plaintiff and the Trust agreed to settle the claims against Constellation Energy Partners LLC in the derivative action, and to enter into mutual, general releases with in return for (i) a payment of one million two hundred thousand United States dollars ($1,200,000) to the derivative plaintiff by Robinson’s Bend Production, II (“RBP II”), which is a Delaware limited liability company and an affiliate of Constellation Energy Partners LLC, to reimburse the derivative plaintiff for the legal fees and expenses it incurred in prosecuting the derivative action, (ii) an irrevocable bid by RBP II of not less than one million United States dollars ($1,000,000) for its purchase from the Trust of the net overriding royalty interest (“Alabama NORRI”), when such Alabama NORRI is separately offered for sale by the Trust at public auction within 180 days of the effective date of the Settlement, with such bid amount to be deposited by RBP II in a third-party escrow account pending the public auction, and (iii) a third amendment to that certain Water Gathering and Disposal Agreement providing that, for a period of ten years commencing on July 1, 2011, the charges for the gathering, separation, and disposal of water from oil and gas wells located in Tuscaloosa County, Alabama that are owned and operated by RBP II (“Wells”) shall be fifty-three cents ($0.53) per barrel of water. RBP II had charged one United States dollar ($1.00) per

TORCH ENERGY ROYALTY TRUST

barrel of water for the gathering, separation, and disposal of such water from the Wells since the termination date of the Trust. As previously disclosed on the Trust’s Form 8-K filed on January 31, 2008, the Trust received the affirmative vote of the Unitholders of more than 66 2/3% of the outstanding units to terminate the Trust at the meeting of Unitholders held January 29, 2008. Pursuant to the Trust Agreement of the Trust, the “Termination Date” of the Trust is January 29, 2008.

Upon termination of the Trust, among other things, the Trustee is required to sell the Net Profits Interests. Specifically, pursuant to Section 9.03(e) of the Trust Agreement if the property of the Trust Estate (as defined in the Trust Agreement) has not been sold prior to the end of one calendar year following the Termination Date, the Trustee must cause such assets to be sold at public auction.

The Trust was terminated by a vote of the Unitholders on the Termination Date. The Trust reported on August 4, 2011 on Form 8-K and then on August 5, 2011 on Form 8-K/A that the Trust entered into a material definitive agreement for advisory and marketing services with an effective date of August 1, 2011 with respect to the sale of the net profit interests of the Trust pursuant to an agreement with PLS, Inc., a Texas corporation. The Trust also reported on Form 8-K on November 4, 2011 that the Trust notified Robinson’s Bend Production II, LLC on November 3, 2011 that it was the successful bidder in the public auction of the sale of the Trust’s net profits interests attributable to underlying working interests in certain fields that produce from the Robinson’s Bend formations in the Black Warrior Basin in Alabama. As was previously reported on Form 8-K on June 13, 2011, Robinson’s Bend Production II, LLC as part of the Settlement and Release Agreement made an irrevocable bid of not less than $1,000,000 for its purchase from the Trust of the net profits interests associated with the Robinson’s Bend formations. The transaction is subject to the negotiation and execution of mutually acceptable definitive agreements. The proposed transaction described above is anticipated to close before December 31, 2011.

In addition, on November 4, 2011, the Trust reported on Form 8-K that it issued a press release announcing that the Trust had entered into a non-binding letter of interest on November 2, 2011 with respect to the sale of the Trust’s net profits interests attributable to underlying working interests in certain fields that produce from the Cotton Valley and Austin Chalk formations in Texas and the Chalkley field in Louisiana. The closing of any transaction is subject to due diligence, the negotiation and execution of mutually acceptable definitive agreements and the satisfaction of any conditions to closing set forth in those agreements. There can be no assurance that these discussions will lead to a transaction, or that the terms set forth in any definitive agreements will be consistent with the current expectations of the parties. The Trust anticipates that any proposed transaction with respect to the Texas and Louisiana fields described in this report would be consummated before December 31, 2011.

TORCH ENERGY ROYALTY TRUST

No assurances can be given that the Trustee will be able to sell the Net Profits Interests, or the amount that will be distributed to Unitholders following such a sale. Such distributions could be below the market value of the Units. The Trust can give no assurances of the effect of the results of the affirmative vote to terminate the Trust by the Unitholders on the continued listing of the Units on the New York Stock Exchange (NYSE) or any other national quotation system.

ITEM 1A. Risk Factors

Except as set forth below, the Trust believes there have been no material changes to risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010, filed with the SEC on April 22, 2011 (the “2010 Form 10-K”). You should carefully consider such risk factors as presented in the 2010 Form 10-K and other information set forth in this Quarterly Report on Form 10-Q, including our financial statements and the related notes.

There are risks and uncertainties associated with the proposed sale transactions recently announced by the Trust and reported in the Trust’s Current Report on Form 8-K dated November 4, 2011 relating to the Cotton Valley and Austin Chalk fields in Texas and the Chalkley field in Louisiana, and the Robinson’s Bend fields in the Black Warrior Basin in Alabama.

On November 4, 2011, the Trust issued a press release announcing that the Trust had entered into a non-binding letter of interest on November 2, 2011 with respect to the sale of the Trust’s Net Profit Interests attributable to underlying working interests in certain fields that produce from the Cotton Valley and Austin Chalk formations in Texas and the Chalkley field in Louisiana. There can be no assurance that these discussions will lead to a transaction, or that the terms set forth in any definitive agreements will be consistent with the current expectations of the parties.

On November 3, 2011, the Trust notified Robinson’s Bend Production II, LLC that it was the successful bidder in the public auction of the sale of the Trust’s Net Profit Interests attributable to underlying working interests in certain fields that produce from the Robinson’s Bend formations in the Black Warrior Basin in Alabama. The transaction is subject to the negotiation and execution of mutually acceptable definitive agreements. There are a number of risks and uncertainties relating to these proposed sale transactions. The closing of these transactions are subject to due diligence, the negotiation and execution of mutually acceptable definitive agreements and the satisfaction of any conditions to closing set forth in those agreements. There can be no assurance that these proposed sale transactions will be completed.

TORCH ENERGY ROYALTY TRUST

The failure to complete the proposed Texas and Louisiana and Robinson’s Bend sale transactions could have an adverse effect on the Trust’s business activities, financial condition, results of operations and ability to pay distributions to Unitholders.

Completion of the Trust’s proposed sale transaction is subject to a number of closing conditions and contingencies, including due diligence, the negotiation and execution of mutually acceptable definitive agreements and the satisfaction of any conditions to closing set forth in the sale transaction agreements. In the event that neither of the proposed sale transactions is consummated, the Trust may experience a decline in the price of the Trust’s Units to the extent that the then-current market price reflects a market assumption that the Trust will complete the proposed sale transactions. In addition, the fact that a proposed sale transaction did not close after Trust announced it publicly may negatively affect the Trust’s ability and prospects to consummate transactions in the future. Finally, the Trust must pay costs related to these sale transactions, including legal and accounting fees, even if the sale transactions are not completed, which may have an adverse effect on the Trust’s business activities, financial condition, results of operations and ability to pay distributions to Unitholders.

The market price for the Trust’s Units may not reflect the value of the Net Profits Interests held by the Trust.

The public trading price for the Trust Units tends to be tied to the recent and expected levels of cash distributions on the Trust Units, including the expectation of higher levels of cash distributions as a result of potential sale transactions, such as the Texas and Louisiana and Robinson’s Bend sale transactions. The amounts available for distribution by the Trust vary in response to numerous factors outside the control of the Trust, including prevailing prices for oil and natural gas produced from the Underlying Properties. The market price of the Trust Units is not necessarily indicative of the value that the Trust would realize if the Net Profit Interests were sold to a third party buyer, including to the buyers of Net Profit Interests under the Texas and Louisiana and Robinson’s Bend proposed sale transactions. In addition, such market price is not necessarily reflective of the fact that, since the assets of the Trust are depleting assets, a portion of each cash distribution paid on the Trust Units should be considered by investors as a return of capital, with the remainder being considered as a return on investment. There is no guarantee that distributions made to a Unitholder over the life of these depleting assets or distributions following a sale of the Net Profits Interests, including the proposed sale transactions of Net Profit Interests, will equal or exceed the purchase price paid by the Unitholder.

TORCH ENERGY ROYALTY TRUST

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 3. Defaults upon Senior Securities

None.

ITEM 4. (Removed and Reserved)

ITEM 5. Other Information

None.

ITEM 6. Exhibits

(a) Exhibits

4. Instruments of defining the rights of security holders, including indentures.

4.1		Form of Torch Energy Royalty Trust Agreement. *
4.2		Form of Louisiana Trust Agreement. *
4.3		Specimen Trust Unit Certificate. *
4.4		Designation of Ancillary Trustee. *
31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

TORCH ENERGY ROYALTY TRUST

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TORCH ENERGY ROYALTY TRUST By: Wilmington Trust Company, not in its individual capacity but solely as Trustee for the Trust By: /s/ Bruce L. Bisson Bruce L. Bisson Vice President

Date: November 14, 2011

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

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