UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐
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| ☐ | Definitive Proxy Statement | |
| ☒ | Definitive Additional Materials | |
| ☐ | Soliciting Material Pursuant to § 240.14a-12 | |
SAN JUAN BASIN ROYALTY TRUST
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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On November 4, 2016, the San Juan Basin Royalty Trust submitted the following supplemental presentation to representatives of Institutional Shareholder Services Inc.:
| San Juan
Basin Royalty Trust Compass Bank, Trustee
Supplemental Investor Presentation:
Solicitation of Proxies Against
Southwest Bank’s Takeover as Trustee
November 4, 2016
Name Title [telephone] [email] [Month Year] |
 Southwest Bank Misleads on Trust Expenses The Trust’s general and administrative (G&A) expenses increased in recent
quarters not from inefficient management but due to increased audit and legal costs related to the ConocoPhillips litigation. Southwest Bank claims that the Trust’s G&E expenses increased significantly
since Ms. Anderson’s departure, but it fails to tell you that: As disclosed in the Trust’s Form 10-K and 10-Q filings with the SEC, the
increased costs are primarily related to the Trust’s litigation against
Burlington, a subsidiary of ConocoPhillips, which began in 2014
and is scheduled for trial in March 2017. Litigation expenses
have increased this year as the parties prepare for trial, engage
expert witnesses, continue discovery and attend mediation
sessions. These
expenses would have been the same even if Ms. Anderson were still the trust officer. She acknowledges that she would use the same litigation team Compass Bank uses. Compass Bank believes this litigation is worth pursuing. The Trust’s claim is for monetary relief in excess of $12 million.
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 Southwest Bank Misleads on Trust Expenses (cont’d) When litigation expenses are excluded, Trust G&A expenses have been consistent, generally rising in the first quarter (as expenses increase with annual reporting obligations) and falling
again by the end of the year. Ms. Anderson’s departure during the fourth
quarter of 2015 did not impact the Trust’s
G&A expenses.
Note: For a reconciliation of adjusted G&A
expenses to reported G&A
expenses, see the
appendix at the end of this presentation. Adjusted G&A
expenses for 3Q 2016 excludes expenses
incurred in responding to Southwest Bank’s self-interested proxy
campaign. Aside from litigation expenses, increased
G&A expenses since Ms. Anderson’s departure are
primarily attributable to costs of updating SOX compliance
procedures and auditing ConocoPhillips information.
$- $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Total general and administrative expenses Adjusted general and administrative expenses Ms. Anderson leaves Compass Bank 3 |
 Southwest Bank Misleads on Conflicts of Interests Southwest Bank and Ms. Anderson should know that Compass Bank has no conflict of interest. • Southwest Bank claims that Compass Bank has a “demonstrated” conflict of interest because Charles
McMahen, a director of BBVA Compass, also serves as an independent outside director of Enterprise Products Holdings. Affiliates of Enterprise gather and process gas attributable to the Trust’s royalty
properties. • Had Southwest Bank and Ms. Anderson understood how the Trust operates, they would know that there is
no conflict of interest: • Enterprise and its affiliates process gas for ConocoPhillips, not the Trust. The Trust has only an interest
in the net proceeds from ConocoPhillips’ sale of the gas. This is
disclosed in the Trust’s Form 10-K filings.
(1) • ConocoPhillips, as the principal operator of the properties underlying the Trust’s royalty, determines
which service providers to use, negotiates the terms of the contracts with
them, and is a party to the contracts.
• The Trust is NOT a party to any of the purchase, gathering or processing contracts.
• ConocoPhillips entered into a contract with Enterprise in 2011 during Ms. Anderson’s tenure at
Compass Bank. Ms. Anderson reviewed the contract, which will not terminate
until 2026. This is also disclosed
in the Trust’s Form 10-K filings. (1) • Compass Bank reviewed the terms of the 2011 Enterprise contract with a third-party consultant to
confirm that they were fair to the Trust. (2) • Ms. Anderson should understand this. In making this argument, she and Southwest Bank demonstrate
that either they do not understand how the Trust operates or they intend to
mislead unit holders. _________
(1) See the Trust’s annual report on Form 10-K for the year ended December 31, 2015, pages 13-14.
(2) See the Trust’s annual report on Form 10-K for the year ended December 31, 2011, page 9.
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 Southwest Bank Misleads on Conflicts of Interests (cont’d)
Southwest Bank claims that Compass Bank has a conflict of interest because
its parent company holds shares of ConocoPhillips.
Southwest Bank fails to tell you that the shares are held on behalf of bank customers as part of routine trust and investment services. Compass Bank has no pecuniary interest in the shares. Southwest fails to tell you that the number of shares is extremely small, amounting to about 0.003% of the outstanding shares of ConocoPhillips. The fact that Compass Bank has ongoing litigation against ConocoPhillips
to recover underpayment of royalties is further evidence that Compass
Bank has no conflict of interest.
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 Southwest Bank Misleads on Analyst Information Southwest Bank cites to “independent” research by an analyst and claims that the analyst received no response from Compass Bank to a December 2015 inquiry. Southwest Bank fails to tell you that the analyst, McDep, acknowledges in its research reports that it has received compensation from Southwest
Bank for prior research services. (1) Southwest Bank does not disclose the amount paid to the analyst. Southwest Bank fails to tell you that the 2015 “inquiry” was a letter from the “independent” analyst in support of Ms. Anderson’s effort to cause
Compass Bank to resign as trustee in connection with her 2015
departure. The letter did not solicit a response from Compass Bank.
(1) See disclaimer at
http://www.mcdep.com/sjt151021.pdf. 6
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 Southwest Bank Misleads on Time to Vote Southwest Bank claims that Compass Bank is trying to restrict unit holder
voting by allowing 28 days to vote.
Southwest Bank fails to tell you that a voting period of about 30 days is generally recognized as sufficient time to vote. Southwest Bank fails to tell you that it originally sent proxy cards to most unit holders starting on October 14, 2016, effectively giving them 38 days to vote. Southwest Bank fails to tell you that Compass Bank responded to Southwest Bank’s demand for unit holder lists beginning on August 31,
2016. This allowed Southwest Bank to begin contacting unit holders 82
days before the meeting.
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 Appendix – Reconciliation of Trust G&A Expenses Below is a reconciliation of the total G&A expenses reported in the Trust’s filings with the SEC for the quarters indicated, adjusted to exclude audit and legal costs incurred in connection with the
ConocoPhillips litigation and responding to Southwest Bank’s proxy
campaign. (1) Expenses for the third quarter of 2016 include
$88,000 in expenses incurred in responding to Southwest Bank’s proxy campaign. Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Reported G&A Expenses $ 661,738 $ 498,750 $ 401,966 $ 605,982 $ 1,022,436 $ 886,134 $ 499,462 Litigation and Related Expenses(1) $ 174,282 $ 115,732 $ 104,628 $ 168,139 $ 485,572 $ 382,831 $ 219,609 Adjusted G&A Expenses $ 487,456 $ 383,017 $ 297,338 $ 437,843 $ 536,864 $ 503,303 $ 279,852 8 |
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Disclaimer
In response to the demand by Southwest Bank and Robert Lansford, a senior
business development officer at Southwest Bank, the Trust has
called a special meeting and filed with the U.S. Securities and
Exchange Commission (“SEC”) on October 25, 2016, a
definitive proxy statement in connection with the solicitation of proxies from unit holders of the Trust at the special meeting. The Trust will furnish copies of proxy
materials to the unit holders, together with a BLUE proxy card. UNIT HOLDERS
ARE URGED TO READ CAREFULLY THE PROXY STATEMENT AND ANY OTHER
RELEVANT DOCUMENTS FILED WITH THE SEC AS THEY BECOME AVAILABLE
BECAUSE THEY CONTAIN IMPORTANT INFORMATION. These documents,
including the proxy statement (and amendments and supplements
thereto) and other documents filed by the Trust with the SEC,
will be available for no charge on the SEC’s website at
www.sec.gov and at the Trust’s website at www.sjbrt.com. Copies may also be obtained by contacting Kaye Wilke by phone at (866) 809-4553, by email at sjt.us@bbva.com or by mail at San Juan Basin Royalty Trust, c/o Compass Bank, Trust Department, Attn: Investor Relations, 300 W. 7th Street, Suite B, Fort Worth, Texas
76102. Compass Bank, as trustee of the Trust, may be deemed to be a participant in the
solicitation of proxies in connection with the special meeting. Information
regarding Compass Bank’s interests in the Trust by security
holdings and otherwise is set forth in the Trust’s Annual
Report on Form 10-K for the year ended December 31, 2015, and
in the Trust’s subsequent Quarterly Reports on Form 10-Q.
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