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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---



FORM 10-Q



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



| | For the quarterly period ended September 30, 2003
| | -------------------------------------------------



OR



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



Commission File Number: 1-10982



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Cross Timbers Royalty Trust

(Exact name of registrant as specified in its charter)



|Texas                             |  | 75-6415930         
|--------------------------------- |  | -------------------
|(State or other jurisdiction      |  | (I.R.S. Employer   
|of incorporation or organization) |  | Identification No.)



|Bank of America, N.A., P.O. Box 830650, Dallas, Texas |  | 75283-0650
|----------------------------------------------------- |  | ----------
|(Address of principal executive offices)              |  | (Zip Code)



(877) 228-5084

(Registrants telephone number, including area code)



NONE

(Former name, former address and former fiscal year, if change since last report)



---



Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements
for the past 90 days. Yes  x  No ̈



Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the ExchangeAct).

Yes ̈No  x



Indicate the number of units of beneficial interest outstanding, as of the latest practicable date:



|Outstanding as of October 1, 2003
|---------------------------------
|6,000,000                        

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CROSS TIMBERS ROYALTY TRUST



FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003



TABLE OF CONTENTS



|         |  |                                                                                                                 |  | Page
|-------- |  | --------------------------------------------------------------------------------------------------------------- |  | ----
|         |  | Glossary of Terms                                                                                               |  | 3   
|         |  |                                                                                                                
|PART I.  |  | FINANCIAL INFORMATION                                                                                           |  |     
|         |  |                                                                                                                
|Item 1.  |  | Financial Statements                                                                                            |  | 4   
|         |  |                                                                                                                
|         |  | Independent Accountants Review Report                                                                          |  | 5   
|         |  |                                                                                                                
|         |  | Condensed Statements of Assets, Liabilities and Trust Corpus at September 30, 2003 and December 31, 2002        |  | 6   
|         |  |                                                                                                                
|         |  | Condensed Statements of Distributable Income for the Three and Nine Months Ended September 30, 2003 and 2002    |  | 7   
|         |  |                                                                                                                
|         |  | Condensed Statements of Changes in Trust Corpus for the Three and Nine Months Ended September 30, 2003 and 2002 |  | 8   
|         |  |                                                                                                                
|         |  | Notes to Condensed Financial Statements                                                                         |  | 9   
|         |  |                                                                                                                
|Item 2.  |  | Trustees Discussion and Analysis                                                                               |  | 11  
|         |  |                                                                                                                
|Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                                                      |  | 17  
|         |  |                                                                                                                
|Item 4.  |  | Controls and Procedures                                                                                         |  | 17  
|         |  |                                                                                                                
|PART II. |  | OTHER INFORMATION                                                                                               |  |     
|         |  |                                                                                                                
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                                                |  | 18  
|         |  |                                                                                                                
|         |  | Signatures                                                                                                      |  | 19  



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CROSS TIMBERS ROYALTY TRUST



GLOSSARY OF TERMS



The following are definitions
of significant terms used in this Form 10-Q:



|Bbl                                                |  | Barrel (of oil)                                                                                                                                                                                                                                                                                                                                
|-------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                   | 
|Mcf                                                |  | Thousand cubic feet (of natural gas)                                                                                                                                                                                                                                                                                                           
|                                                   | 
|MMBtu                                              |  | One million British Thermal Units, a common energy measurement                                                                                                                                                                                                                                                                                 
|                                                   | 
|net proceeds                                       |  | Gross proceeds received by XTO Energy from sale of production from the underlying properties, less applicable costs, as defined in the net profits interest
conveyances                                                                                                                                                                        
|                                                   | 
|net profits income                                 |  | Net proceeds multiplied by the applicable net profits percentage of 75% or 90% and paid to the trust by XTO Energy. Net profits income is referred to as royalty
income for income tax purposes.                                                                                                                                           
|                                                   | 
|net profits interest                               |  | An interest in an oil and gas property measured by net profits from the sale of production, rather than a specific portion of production. The following defined net profits interests
were conveyed to the trust from the underlying properties:                                                                                               
|                                                   | 
|                                                   |  | 90% net profits interests  interests that entitle the trust to receive 90% of the net proceeds from the underlying properties that are royalty or overriding royalty
interests in Texas, Oklahoma and New Mexico                                                                                                                              
|                                                   | 
|                                                   |  | 75% net profits interests  interests that entitle the trust to receive 75% of the net proceeds from the underlying properties that are working interests in Texas and
Oklahoma                                                                                                                                                                
|                                                   | 
|royalty interest (and
overriding royalty interest) |  | A nonoperating interest in an oil and gas property that provides the owner a specified share of production without any production or development costs                                                                                                                                                                                         
|                                                   | 
|underlying properties                              |  | XTO Energys interest in certain oil and gas properties from which the net profits interests were conveyed. The underlying properties include royalty and overriding royalty
interests in producing and nonproducing properties in Texas, Oklahoma and New Mexico, and working interests in producing properties located in Texas and Oklahoma.
|                                                   | 
|working interest                                   |  | An operating interest in an oil and gas property that provides the owner a specified share of production that is subject to all production and development costs                                                                                                                                                                               



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CROSS TIMBERS ROYALTY TRUST



PART I - FINANCIAL INFORMATION



|Item 1. |  | Financial Statements.
|------- |  | ---------------------



The condensed financial statements included herein are presented, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to such rules and regulations, although the trustee believes that the disclosures are adequate to make the information
presented not misleading. These condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in the trusts latest Annual Report on Form 10-K. In the opinion of the trustee, all
adjustments, consisting only of normal recurring adjustments, necessary to present fairly the assets, liabilities and trust corpus of the Cross Timbers Royalty Trust at September 30, 2003, and the distributable income and changes in trust corpus for
the three- and nine-month periods ended September 30, 2003 and 2002, have been included. Distributable income for such interim periods is not necessarily indicative of distributable income for the full year.



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INDEPENDENT ACCOUNTANTS REVIEW REPORT



Bank of America, N.A., as Trustee

for the Cross Timbers Royalty Trust:



We have reviewed the accompanying condensed statement of assets, liabilities and trust corpus
of the Cross Timbers Royalty Trust as of September 30, 2003 and the related condensed statements of distributable income and changes in trust corpus for the three- and nine-month periods ended September 30, 2003 and 2002. These condensed financial
statements are the responsibility of the trustee.



We conducted our review in
accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons
responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.



The accompanying condensed financial statements are prepared on a modified cash basis as described in Note 1 which is a comprehensive basis of accounting other than accounting principles generally accepted in the
United States of America.



Based on our review, we are not aware of any
material modifications that should be made to the condensed financial statements referred to above for them to be in conformity with the basis of accounting described in Note 1.



We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the statement of
assets, liabilities and trust corpus of the Cross Timbers Royalty Trust as of December 31, 2002, and the related statements of distributable income and changes in trust corpus for the year then ended (not presented herein), included in the
trusts 2002 Annual Report on Form 10-K, and in our report dated March 14, 2003, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed statement of assets,
liabilities and trust corpus as of December 31, 2002 is fairly stated, in all material respects, in relation to the statement of assets, liabilities and trust corpus included in the trusts 2002 Annual Report on Form 10-K from which it has been
derived.



KPMG LLP



Dallas, Texas

October 15, 2003



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Condensed Statements of Assets, Liabilities and Trust Corpus



|                                                                                 |  | September 30,2003 |            | December 31,2002
|-------------------------------------------------------------------------------- |  | ----------------- | ---------- | ----------------
|ASSETS                                                                           |  | (Unaudited)       |            |                 
|Cash and short-term investments                                                  |  | $                 | 1,131,104  |                 
|                                                                                 |  |                  
|Interest to be received                                                          |  |                   | 376        |                 
|                                                                                 |  |                  
|Net profits interests in oil and gas propertiesnet (Note 1)                     |  |                   | 25,196,602 |                 
|                                                                                 |  |                   |            |                 
|                                                                                 |  | $                 | 26,328,082 |                 
|                                                                                 |  |                   |            |                 
|LIABILITIES AND TRUST CORPUS                                                     |  |                   |            |                 
|                                                                                 |  |                  
|Distribution payable to unitholders                                              |  | $                 | 1,131,480  |                 
|                                                                                 |  |                  
|Trust corpus (6,000,000 units of beneficial interest authorized and outstanding) |  |                   | 25,196,602 |                 
|                                                                                 |  |                   |            |                 
|                                                                                 |  |                  
|                                                                                 |  | $                 | 26,328,082 |                 
|                                                                                 |  |                   |            |                 



The accompanying notes
to condensed financial statements is an integral part of these statements.



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CROSS TIMBERS ROYALTY TRUST

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Condensed Statements of Distributable Income(Unaudited)



|                                                |  | Three Months EndedSeptember 30 |           | Nine Months Ended September 30
|----------------------------------------------- |  | ------------------------------ | --------- | ------------------------------
|                                                |  | 2003                           |           | 2002                          
|Net profits income                              |  | $                              | 3,122,116 |                               
|                                                |  |                                |           |                               
|Interest income                                 |  |                                | 953       |                               
|                                                |  |                                |           |                               
|                                                |  |                                |           |                               
|Total income                                    |  |                                | 3,123,069 |                               
|                                                |  |                                |           |                               
|Administration expense                          |  |                                | 53,457    |                               
|                                                |  |                                |           |                               
|Distributable income                            |  | $                              | 3,069,612 |                               
|                                                |  |                                |           |                               
|Distributable income per unit (6,000,000 units) |  | $                              | 0.511602  |                               
|                                                |  |                                |           |                               



The accompanying notes
to condensed financial statements is an integral part of these statements.



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CROSS TIMBERS ROYALTY TRUST

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Condensed Statements of Changes in Trust Corpus(Unaudited)



|                                      |  | Three Months Ended September 30 |            |   | Nine Months Ended September 30 |  
|------------------------------------- |  | ------------------------------- | ---------- | - | ------------------------------ | -
|                                      |  | 2003                            |            |   | 2002                           |  
|Trust corpus, beginning of period     |  | $                               | 25,612,459 |   |                                | $
|Amortization of net profits interests |  |                                 | (415,857   | ) |                                |  
|Distributable income                  |  |                                 | 3,069,612  |   |                                |  
|Distributions declared                |  |                                 | (3,069,612 | ) |                                |  
|                                      |  |                                 |            |   |                                |  
|Trust corpus, end of period           |  | $                               | 25,196,602 |   |                                | $
|                                      |  |                                 |            |   |                                |  



The accompanying notes
to condensed financial statements is an integral part of these statements.



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CROSS TIMBERS ROYALTY TRUST

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Notes to Condensed Financial Statements (Unaudited)



|1. | Basis of Accounting
|-- | -------------------



The financial statements of Cross Timbers Royalty Trust are prepared on the following basis and are not intended to present financial position and results
of operations in conformity with generally accepted accounting principles (GAAP):



| | - | Net profits income recorded for a month is the amount computed and paid by the interest owner, XTO Energy Inc., to Bank of America, N.A., as trustee for the trust. Net profits
income consists of net proceeds received by XTO Energy Inc. from the underlying properties in the prior month, multiplied by net profit percentages of 90% for the 90% net profits interests, and 75% for the 75% net profits interests.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Costs deducted in the calculation of net
proceeds for the 90% net profits interests generally include applicable taxes, transportation, marketing and legal costs, and do not include other production and development costs. For the 75% net profits interests, costs deducted in the calculation
of net proceeds include production expenses, development costs, applicable taxes, operating charges and other costs.



| | - | Net profits income is computed separately for each of five conveyances under which the net profits interests were conveyed to the trust. If monthly costs exceed revenues for any
conveyance, such excess costs must be recovered, with accrued interest, from future net proceeds of that conveyance and cannot reduce net proceeds from the other conveyances.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Interest income, interest to be received and distribution payable to unitholders include interest to be earned from the monthly record date (last business day of the month) through
the date of the next distribution to unitholders.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Trust expenses are recorded based on liabilities paid and cash reserves established by the trustee for liabilities and contingencies.
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| | - | Distributions to unitholders are recorded when declared by the trustee.
| | - | -----------------------------------------------------------------------



The financial statements of the trust differ from those prepared in conformity with GAAP because revenues are recognized when received rather than accrued
in the month of production, expenses are recognized when paid rather than when incurred, and certain cash reserves may be established for contingencies which would not be accrued under GAAP.



The initial carrying value of the net profits interests of $61,100,449
represents XTO Energys historical net book value on February 12, 1991, the creation date of the trust. Amortization of the net profits interests is calculated on a unit-of-production basis and is charged directly to trust corpus. Accumulated
amortization was $35,903,847 as of September 30, 2003 and $34,543,916 as of December 31, 2002.





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|2. | XTO Energy Inc.
|-- | ---------------



On September 18, 2003, XTO Energy distributed all of the 1,360,000 trust units it owned as a dividend to its common stockholders. As of this date, XTO
Energy is not a unitholder of the trust.



|3. | Contingencies
|-- | -------------



Several states have enacted legislation to require state income tax withholding from nonresident royalty owners. After consultation with legal counsel,
XTO Energy has advised the trustee that it believes the trust is not subject to these withholding requirements. However, final regulations have not been issued. In the event it is determined that the trust is required to withhold state taxes,
distributions to the unitholders would be reduced by the required amount, subject to the unitholders right to file a state tax return to claim any refund due.



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|Item 2. |  | Trustees Discussion and Analysis.
|------- |  | ----------------------------------



The following discussion should be read in conjunction with the trustees discussion and analysis contained in the trusts 2002 annual report, as well as the
condensed financial statements and notes thereto included in this quarterly report on Form 10-Q. The trusts Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are
available on the trusts web site at www.crosstimberstrust.com.



Distributable Income



Quarter



For the quarter ended September 30, 2003, net profits income was $3,122,116 compared to
$2,526,363 for third quarter 2002. This 24% increase in net profits income is the result of higher gas prices. See Net Profits Income on the following page.



After considering interest income of $953 and administration expense of $53,457, distributable income for the quarter ended September 30,
2003 was $3,069,612, or $0.511602 per unit of beneficial interest. Administration expense for the quarter increased 60% from the prior year quarter primarily because of the timing of expenditures. For third quarter 2002, distributable income was
$2,494,434, or $0.415739 per unit. Distributions to unitholders for the quarter ended September 30, 2003 were:



|Record Date        |  | Payment Date       |  | Distribution per Unit
|------------------ |  | ------------------ |  | ---------------------
|July 31, 2003      |  | August 14, 2003    |  | $                    
|August 29, 2003    |  | September 15, 2003 |  |                      
|September 30, 2003 |  | October 15, 2003   |  |                      
|                   |  |                    |  |                      
|                   |  |                    |  | $                    
|                   |  |                    |  |                      



Nine Months



For the nine months ended September 30, 2003, net profits income was $9,539,904 compared to
$6,222,032 for the same 2002 period. This 53% increase in net profits income is the result of higher oil and gas prices. See Net Profits Income on the following page.



After considering interest income of $3,347 and administration expense of $210,275, distributable income for the nine months ended September
30, 2003 was $9,332,976, or $1.555496 per unit of beneficial interest. Administration expense for the first nine months of 2003 increased 4% from the comparable 2002 period. For the nine months ended September 30, 2002, distributable income was
$6,022,728, or $1.003788 per unit.





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Net Profits Income



Net profits income is recorded when received by the trust, which is the month following receipt by XTO Energy, and generally two months after oil production and three
months after gas production. Net profits income is generally affected by three major factors:



| |  | oil and gas sales volumes,
| | - | --------------------------



| |  | oil and gas sales prices, and
| | - | -----------------------------



| |  | costs deducted in the calculation of net profits income.
| | - | --------------------------------------------------------



Because properties underlying the 90% net profits interests are royalty and overriding royalty interests, they generally bear no costs other than production and property
taxes, related legal costs, and marketing and transportation charges. In addition to these costs, the 75% net profits interests are subject to production and development costs, since the properties underlying the 75% net profits interests are
working interests.



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The following is a summary of the calculation of net profits income received by the trust:



|                                              |  | Three Months Ended September 30(a) |           | Increase(Decrease) |   | Nine Months Ended September 30(a) |      |       | Increase(Decrease)
|--------------------------------------------- |  | ---------------------------------- | --------- | ------------------ | - | --------------------------------- | ---- | ----- | ------------------
|                                              |  | 2003                               |           | 2002               |   |                                   | 2003 |       | 2002              
|Sales Volumes                                 |  |                                    |           |                    |   |                                   |      |       |                   
|Oil (Bbls) (b)                                |  |                                    |           |                    |   |                                   |      |       |                   
|Underlying properties                         |  |                                    | 68,727    |                    |   | 82,098                            |      | (16%) |                   
|Average per day                               |  |                                    | 747       |                    |   | 892                               |      | (16%) |                   
|Net profits interests                         |  |                                    | 27,906    |                    |   | 35,086                            |      | (20%) |                   
|Gas (Mcf) (b)                                 |  |                                    |           |                    |   |                                   |      |       |                   
|Underlying properties                         |  |                                    | 639,200   |                    |   | 765,149                           |      | (16%) |                   
|Average per day                               |  |                                    | 7,024     |                    |   | 8,408                             |      | (16%) |                   
|Net profits interests                         |  |                                    | 559,565   |                    |   | 666,965                           |      | (16%) |                   
|Average Sales Prices                          |  |                                    |           |                    |   |                                   |      |       |                   
|Oil (per Bbl)                                 |  | $                                  | 27.96     |                    | $ | 24.79                             |      | 13%   |                   
|Gas (per Mcf)                                 |  | $                                  | 5.05      |                    | $ | 3.05                              |      | 66%   |                   
|Revenues                                      |  |                                    |           |                    |   |                                   |      |       |                   
|Oil sales                                     |  | $                                  | 1,921,563 |                    | $ | 2,034,911                         |      | (6%)  |                   
|Gas sales                                     |  |                                    | 3,225,251 |                    |   | 2,333,566                         |      | 38%   |                   
|                                              |  |                                    |           |                    |   |                                   |      |       |                   
|Total Revenues                                |  |                                    | 5,146,814 |                    |   | 4,368,477                         |      | 18%   |                   
|                                              |  |                                    |           |                    |   |                                   |      |       |                   
|Costs                                         |  |                                    |           |                    |   |                                   |      |       |                   
|Taxes, transportation and other               |  |                                    | 682,538   |                    |   | 604,112                           |      | 13%   |                   
|Production expense (c)                        |  |                                    | 884,010   |                    |   | 790,719                           |      | 12%   |                   
|Development costs                             |  |                                    | 27,830    |                    |   | 79,575                            |      | (65%) |                   
|Excess costs                                  |  |                                    |          |                    |   |                                  |      |      |                   
|Recovery of excess costs and accrued interest |  |                                    |          |                    |   |                                  |      |      |                   
|                                              |  |                                    |           |                    |   |                                   |      |       |                   
|Total Costs                                   |  |                                    | 1,594,378 |                    |   | 1,474,406                         |      | 8%    |                   
|                                              |  |                                    |           |                    |   |                                   |      |       |                   
|Net Proceeds                                  |  | $                                  | 3,552,436 |                    | $ | 2,894,071                         |      | 23%   |                   
|                                              |  |                                    |           |                    |   |                                   |      |       |                   
|Net Profits Income                            |  | $                                  | 3,122,116 |                    | $ | 2,526,363                         |      | 24%   |                   
|                                              |  |                                    |           |                    |   |                                   |      |       |                   

---

|(a) | Because of the interval between time of production and receipt of royalty income by the trust, (1) oil and gas sales for the quarter ended September 30 generally represent
oil production for the period May through July and gas production for the period April through June and (2) oil and gas sales for the nine months ended September 30 generally represent oil production for the period November through July and gas
production for the period October through June.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Oil and gas sales volumes are allocated to the net profits interests based upon a formula that considers oil and gas prices and the total amount of production expenses and
development costs. Changes in any of these factors may result in disproportionate fluctuations in volumes allocated to the net profits interests. Therefore, comparative discussion of oil and gas sales volumes is based on the underlying properties.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | Includes an overhead fee which is deducted and retained by XTO Energy. This fee is currently $22,742 per month and is subject to adjustment each May based on an oil and gas
industry index.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The following are explanations of significant variances from third quarter 2002 to third quarter 2003 and from the first
nine months of 2002 to the comparable period in 2003:



Sales Volumes



Oil



Oil sales volumes decreased 16% for third quarter 2003 and 12% for the nine-month period as compared with the same 2002 periods. Decreased
oil sales volumes are primarily because of natural production decline and timing of cash receipts.



Gas



Gas sales volumes decreased 16%
for third quarter 2003 and 11% for the nine-month period as compared with the same 2002 periods. Decreased gas sales volumes for the quarter are primarily because of natural production decline and timing of cash receipts. Decreased gas sales volumes
for the nine-month period are primarily because of natural production decline, partially offset by timing of cash receipts.



Sales Prices



Oil



The average oil price increased
13% to $27.96 per Bbl for the third quarter and 35% to $28.16 per Bbl for the nine-month period. Because of lower prices, OPEC members agreed to cut daily production by 1.5 million barrels in 2002 to support oil prices affected by weak demand and
excess supply. Oil prices increased during 2002 largely because of OPEC production discipline and rising uncertainty surrounding the Middle East. OPEC members agreed to increase daily oil production 1.5 million barrels beginning February 1, 2003, to
help stabilize a volatile world market. Oil prices have remained relatively high in 2003, however, because of the war in Iraq, slower than anticipated resumption of Iraqi oil exports and unusually low storage levels. OPEC reduced daily oil
production by 2 million barrels beginning June 1, 2003 and, because of the recent fall in oil prices and the concern of increasing production from non-OPEC suppliers, agreed to cut daily oil production by 900,000 barrels beginning November 1, 2003.
The average NYMEX price for August and September 2003 was $30.01 per Bbl. At October 15, 2003, the average NYMEX futures price for the following twelve months was $29.78 per Bbl. Recent trust oil prices have averaged approximately $2.20 per Bbl
lower than the NYMEX price.



Gas



Gas prices for the third quarter increased 66% to $5.05 per Mcf and for the nine-month
period increased 76% to $4.79 per Mcf. The winter of 2001-2002 was one of the warmest on record, resulting in higher than average gas storage levels and lower gas prices in the first nine months of 2002. Prices climbed in fourth quarter 2002 as a
result of low levels of drilling activity, increased industrial demand, colder weather and international instability. With colder than normal weather, record low gas storage levels and continued increasing demand, gas prices were relatively high
during the first five months of 2003. Since May, higher than normal levels of gas have been injected into storage due to diminished demand related to higher prices, resulting in lower natural gas prices. Prices for the remainder of 2003 will be
influenced by weather, possible



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revived demand due to lower prices, the pace of recovery of the domestic economy and increases in North American
production. In any case, natural gas prices are expected to remain volatile. The third quarter 2003 gas price is primarily related to production from April through June 2003, when the average NYMEX price was $5.73. The average NYMEX price for July
through September 2003 was $4.89 per MMBtu. At October 15, 2003, the average NYMEX futures price for the following twelve months was $5.19 per MMBtu. Recent trust gas prices have averaged approximately $0.20 per MMBtu lower than the NYMEX price.



Costs



Taxes



Taxes, transportation and other increased 13% for the third quarter and 53% for the nine-month period. The third quarter increase is because of higher production taxes
and other deductions related to higher product prices, partially offset by lower property taxes related to the timing of disbursements. The nine-month increase is because of higher production taxes and other deductions related to higher product
prices and increased Texas property taxes related to the timing of disbursements.



Production Expenses



Production expenses were 12% higher for
the third quarter and for the nine-month period primarily because of increased fuel costs related to higher gas prices and timing of maintenance projects.



Development



Development costs decreased 65% for the third quarter and 75% for the nine-month period primarily because of reduced drilling activity on properties underlying the Texas 75% net profits interests.



Excess Costs



During first quarter 2002, costs exceeded revenues by $66,867 ($50,150 net to the trust) for the Texas 75% net profits interests as a result
of lower oil prices. Total excess costs and accrued interest of $67,484 ($50,613 net to the trust) were fully recovered during the third quarter of 2002. There were no excess costs during the remainder of 2002 or in the first nine months of 2003.



Other



On September 18, 2003, XTO Energy distributed all of the 1,360,000 trust units it owned as a dividend to its common stockholders. As of this
date, XTO Energy is not a unitholder of the trust.



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Forward-Looking Statements



This report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this Form 10-Q including, without limitation, statements regarding the net profits interests, underlying
properties, development activities, development, production and other costs, oil and gas prices, and industry and market conditions, are forward-looking statements that are subject to risks and uncertainties which are detailed in Part II, Item 7 of
the trusts Annual Report on Form 10-K for the year ended December 31, 2002, which is incorporated by this reference as though fully set forth herein. Although XTO Energy and the trustee believe that the expectations reflected in such
forward-looking statements are reasonable, neither XTO Energy nor the trustee can give any assurance that such expectations will prove to be correct.



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|Item 3. |  | Quantitative and Qualitative Disclosures about Market Risk.
|------- |  | -----------------------------------------------------------



There have been no material changes in the trusts market risks, as disclosed in Part II, Item 7a of the trusts Annual Report on Form 10-K for the year ended
December 31, 2002.



|Item 4. |  | Controls and Procedures.
|------- |  | ------------------------



As of the end of the period covered by this report, the trustee carried out an evaluation of the effectiveness of the design and operation of the trusts disclosure
controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. 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 Securities and Exchange Commission. In its evaluation of disclosure controls and procedures, the trustee has relied, to the extent considered reasonable, on
information provided by XTO Energy. There has not been any change in the trusts internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the
trusts internal control over financial reporting.



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PART II - OTHER INFORMATION



Items 1 through 5. Not Applicable.



|Item 6. |  | Exhibits and Reports on Form 8-K.
|------- |  | ---------------------------------



(a) Exhibits.



Exhibit Number and Description(15)

Awareness letter of KPMG LLP(31)

Rule 13a-14(a)/15d-14(a) Certification(32)

Section 1350 Certification(99)

Items 7 and 7a to the Annual Report on Form 10-K for Cross Timbers Royalty Trust filed with the Securities and Exchange Commission on March 31, 2003 (incorporated herein by
reference)




(b) Reports on
Form 8-K.



No reports on Form 8-K were filed during the
quarter. The trust furnished two reports on Form 8-K under Item 12 for this period.



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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.



| |  |  |  | CROSS TIMBERS ROYALTY TRUST By BANK OF AMERICA, N.A., TRUSTEE
| |  |  |  | -------------------------------------------------------------
| |  |  |  |                                                              
| |  |  |  |                                                              
| |  |  |  |                                                              





|                       |  |  |  | XTO ENERGY INC.
|---------------------- |  |  |  | ---------------
|                       |  |  | 
|Date: October 17, 2003 |  |  |  | By             
|                       |  |  |  |                



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