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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 June 30, 2012

OR



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

Commission File Number: 1-10982





Cross Timbers
Royalty Trust

(Exact name of registrant as specified in its charter)







|                                                                                     |  |                                     
|------------------------------------------------------------------------------------ |  | ------------------------------------
|Texas                                                                                |  | 75-6415930                          
|(State or other jurisdiction of
incorporation or organization)                       |  | (I.R.S. Employer Identification No.)
|                                                                                     | 
|U.S. Trust, Bank of America Private Wealth Management 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive 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 is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and
smaller reporting company in Rule 12b-2 of the Exchange Act (check one):



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  | x
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule
12b-2).    Yes   ̈    No  x

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

Outstanding as of July 1, 2012

6,000,000









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CROSS TIMBERS ROYALTY TRUST

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2012

TABLE OF CONTENTS



|         |  |                                                                                                           |  |      |    | 
|-------- |  | --------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                                           |  | Page |   
|         |  | Glossary of Terms                                                                                         |  |      | 3  | 
|         |  |                                                                                                          
|PART I.  |  | FINANCIAL INFORMATION                                                                                     |  |      |    | 
|         |  |                                                                                                          
|Item 1.  |  | Financial Statements                                                                                      |  |      | 4  | 
|         |  |                                                                                                          
|         |  | Report of Independent Registered Public Accounting Firm                                                   |  |      | 5  | 
|         |  |                                                                                                          
|         |  | Condensed Statements of Assets, Liabilities and Trust Corpus at June 30, 2012 and December 31,
2011       |  |      | 6  | 
|         |  |                                                                                                          
|         |  | Condensed Statements of Distributable Income for the Three and Six Months Ended June 30, 2012 and
2011    |  |      | 7  | 
|         |  |                                                                                                          
|         |  | Condensed Statements of Changes in Trust Corpus for the Three and Six Months Ended June 30, 2012 and
2011 |  |      | 8  | 
|         |  |                                                                                                          
|         |  | Notes to Condensed Financial Statements                                                                   |  |      | 9  | 
|         |  |                                                                                                          
|Item 2.  |  | Trustees Discussion and Analysis                                                                         |  |      | 12 | 
|         |  |                                                                                                          
|Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                                                |  |      | 16 | 
|         |  |                                                                                                          
|Item 4.  |  | Controls and Procedures                                                                                   |  |      | 17 | 
|         |  |                                                                                                          
|PART II. |  | OTHER INFORMATION                                                                                         |  |      |    | 
|         |  |                                                                                                          
|Item 1A. |  | Risk Factors                                                                                              |  |      | 17 | 
|         |  |                                                                                                          
|Item 6.  |  | Exhibits                                                                                                  |  |      | 17 | 
|         |  |                                                                                                          
|         |  | Signatures                                                                                                |  |      | 18 | 



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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%, which is 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 expense 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 expense 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 June 30, 2012, and the distributable income and changes in trust corpus for the three- and six-month
periods ended June 30, 2012 and 2011, have been included. Distributable income for such interim periods is not necessarily indicative of distributable income for the full year. The condensed financial statements as of June 30, 2012, and
for the three-month and six-month periods ended June 30, 2012 and 2011 have been subjected to a review by PricewaterhouseCoopers LLP, the Trusts independent registered public accounting firm, whose report is included herein.



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Report of Independent Registered Public Accounting Firm

To the Unitholders of Cross Timbers Royalty Trust and

Bank of America, N.A., Trustee:

We have reviewed the accompanying condensed statement of assets,
liabilities and trust corpus of Cross Timbers Royalty Trust (the Trust) as of June 30, 2012, and the related condensed statements of distributable income and changes in trust corpus for the three-month and six-month periods ended
June 30, 2012 and 2011. These interim financial statements are the responsibility of the Trustee.

We conducted our review in accordance
with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), 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.

As described in Note 1, these financial statements
were prepared on the modified cash basis of accounting, 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 accompanying condensed interim financial statements for them to be in conformity with the basis of accounting
described in Note 1.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the statement of assets, liabilities and trust corpus as of December 31, 2011, and the related statements of distributable income and changes in trust corpus for the year then ended (not presented herein), and in our report dated
February 29, 2012, 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, 2011 is
fairly stated in all material respects in relation to the statement of assets, liabilities and trust corpus from which it has been derived.

PricewaterhouseCoopers LLP

Dallas, TX

July 24, 2012



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CROSS TIMBERS ROYALTY TRUST

Condensed Statements of Assets, Liabilities and Trust Corpus



|                                                                                 |  |              |            |  |                  |   |            | 
|-------------------------------------------------------------------------------- |  | ------------ | ---------- |  | ---------------- | - | ---------- | 
|                                                                                 |  | June 30,2012 |            |  | December 31,2011 |  
|                                                                                 |  | (Unaudited)  |            |  |                  |  
|ASSETS                                                                           |  |              |            |  |                  |   |            | 
|                                                                                 |  |             
|Cash and short-term investments                                                  |  | $            | 1,275,486  |  |                  | $ | 1,213,231  | 
|                                                                                 |  |             
|Interest to be received                                                          |  |              | 24         |  |                  |   | 29         | 
|                                                                                 |  |             
|Net profits interests in oil and gas propertiesnet (Note 1)                     |  |              | 12,975,405 |  |                  |   | 13,415,740 | 
|                                                                                 |  |              |            |  |                  |   |            | 
|                                                                                 |  | $            | 14,250,915 |  |                  | $ | 14,629,000 | 
|                                                                                 |  |              |            |  |                  |   |            | 
|LIABILITIES AND TRUST CORPUS                                                     |  |              |            |  |                  |   |            | 
|                                                                                 |  |             
|Distribution payable to unitholders                                              |  | $            | 1,275,510  |  |                  | $ | 1,213,260  | 
|                                                                                 |  |             
|Trust corpus (6,000,000 units of beneficial interest authorized and outstanding) |  |              | 12,975,405 |  |                  |   | 13,415,740 | 
|                                                                                 |  |              |            |  |                  |   |            | 
|                                                                                 |  | $            | 14,250,915 |  |                  | $ | 14,629,000 | 
|                                                                                 |  |              |            |  |                  |   |            | 

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



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CROSS TIMBERS ROYALTY TRUST

Condensed Statements of Distributable Income(Unaudited)



|                                                |  |                           |           |  |                         |   |           |      |  |   |           |  |  |   |           | 
|----------------------------------------------- |  | ------------------------- | --------- |  | ----------------------- | - | --------- | ---- |  | - | --------- |  |  | - | --------- | 
|                                                |  | Three Months EndedJune 30 |           |  | Six Months
EndedJune 30 |  
|                                                |  | 2012                      |           |  | 2011                    |   |           | 2012 |  |   | 2011      | 
|Net profits income                              |  | $                         | 3,961,296 |  |                         | $ | 4,569,004 |      |  | $ | 8,338,276 |  |  | $ | 8,919,857 | 
|                                                |  |                           |           | 
|Interest income                                 |  |                           | 76        |  |                         |   | 49        |      |  |   | 162       |  |  |   | 143       | 
|                                                |  |                           |           |  |                         |   |           |      |  |   |           |  |  |   |           | 
|Total income                                    |  |                           | 3,961,372 |  |                         |   | 4,569,053 |      |  |   | 8,338,438 |  |  |   | 8,920,000 | 
|                                                |  |                           |           | 
|Administration expense                          |  |                           | 138,130   |  |                         |   | 138,923   |      |  |   | 265,972   |  |  |   | 265,696   | 
|                                                |  |                           |           |  |                         |   |           |      |  |   |           |  |  |   |           | 
|Distributable income                            |  | $                         | 3,823,242 |  |                         | $ | 4,430,130 |      |  | $ | 8,072,466 |  |  | $ | 8,654,304 | 
|                                                |  |                           |           |  |                         |   |           |      |  |   |           |  |  |   |           | 
|Distributable income per unit (6,000,000 units) |  | $                         | 0.637207  |  |                         | $ | 0.738355  |      |  | $ | 1.345411  |  |  | $ | 1.442384  | 
|                                                |  |                           |           |  |                         |   |           |      |  |   |           |  |  |   |           | 

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



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CROSS TIMBERS ROYALTY TRUST

Condensed Statements of Changes in Trust Corpus(Unaudited)



|                                      |  |                           |            |   |                         |   |            |      |  |   |            |   |  |   |            |  
|------------------------------------- |  | ------------------------- | ---------- | - | ----------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                      |  | Three Months
EndedJune 30 |            |   | Six Months
EndedJune 30 |  
|                                      |  | 2012                      |            |   | 2011                    |   |            | 2012 |  |   | 2011       |  
|Trust corpus, beginning of period     |  | $                         | 13,188,818 |   |                         | $ | 14,241,961 |      |  | $ | 13,415,740 |   |  | $ | 14,521,347 |  
|                                      |  |                           |            |  
|Amortization of net profits interests |  |                           | (213,413   | ) |                         |   | (282,703   | )    |  |   | (440,335   | ) |  |   | (562,089   | )
|                                      |  |                           |            |  
|Distributable income                  |  |                           | 3,823,242  |   |                         |   | 4,430,130  |      |  |   | 8,072,466  |   |  |   | 8,654,304  |  
|                                      |  |                           |            |  
|Distributions declared                |  |                           | (3,823,242 | ) |                         |   | (4,430,130 | )    |  |   | (8,072,466 | ) |  |   | (8,654,304 | )
|                                      |  |                           |            |   |                         |   |            |      |  |   |            |   |  |   |            |  
|Trust corpus, end of period           |  | $                         | 12,975,405 |   |                         | $ | 13,959,258 |      |  | $ | 12,975,405 |   |  | $ | 13,959,258 |  
|                                      |  |                           |            |   |                         |   |            |      |  |   |            |   |  |   |            |  

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



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CROSS TIMBERS ROYALTY TRUST

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 U.S. generally accepted accounting principles (GAAP):



| |  |  | Net profits income recorded for a month is the amount computed and paid by XTO Energy Inc., the owner of the underlying properties, to Bank of America,
N.A., as trustee for the trust. XTO Energy is a wholly owned subsidiary of Exxon Mobil Corporation. Net profits income consists of net proceeds received by XTO Energy 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 production expense or development costs. For the 75% net profits
interests, costs deducted in the calculation of net proceeds include production expense, development costs, applicable taxes, transportation, marketing and legal costs, 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 U.S. 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 by the trustee for contingencies which would not be recorded under U.S. GAAP. This
comprehensive basis of accounting other than U.S. GAAP corresponds to the accounting permitted for royalty trusts by the U.S. Securities and Exchange Commission, as specified by Staff Accounting Bulletin Topic 12:E, Financial Statements of Royalty
Trusts.

Most accounting pronouncements apply to entities whose financial statements are prepared in accordance with U.S. GAAP,
directing such entities to accrue or defer revenues and expenses in a period other than when such revenues were received or expenses were paid. Because the trusts financial statements are prepared on the modified cash basis, as described
above, most accounting pronouncements are not applicable to the trusts financial statements.



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The initial carrying value of the net profits interests of $61,100,449 represents XTO
Energys historical net book value for the interests 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 $48,125,044 as of June 30, 2012 and $47,684,709 as of December 31, 2011.

2. Federal Income Taxes

For federal income tax purposes, the trust constitutes a fixed investment trust that is taxed as a grantor trust. A
grantor trust is not subject to tax at the trust level. The unitholders are considered to own the trusts income and principal as though no trust were in existence. The income of the trust is deemed to have been received or accrued by each
unitholder at the time such income is received or accrued by the trust and not when distributed by the trust.

Because the
trust is a grantor trust for federal tax purposes, each unitholder is taxed directly on his proportionate share of income, deductions and credits of the trust consistent with each such unitholders taxable year and method of accounting and
without regard to the taxable year or method of accounting employed by the trust. The income of the trust consists primarily of a specified share of the net profits from the sale of oil and natural gas produced from the underlying properties. During
the first six months of 2012, the trust incurred administration expenses and earned interest income on funds held for distribution and for the cash reserve maintained for the payment of contingent and future obligations of the trust.

The net profits interests constitute economic interests in oil and gas properties for federal tax purposes. Each unitholder is
entitled to amortize the cost of the units through cost depletion over the life of the net profits interests or, if greater, through percentage depletion equal to 15 percent of gross income. Unlike cost depletion, percentage depletion is not limited
to a unitholders depletable tax basis in the units. Rather, a unitholder is entitled to a percentage depletion deduction as long as the applicable underlying properties generate gross income. Unitholders may compute both percentage depletion
and cost depletion from each property and claim the larger amount as a deduction on their income tax returns.

If a taxpayer
disposes of any Section 1254 property (certain oil, gas, geothermal or other mineral property), and the adjusted basis of such property includes adjustments for depletion deductions under Section 611 of the Internal Revenue Code,
the taxpayer generally must recapture the amount deducted for depletion as ordinary income (to the extent of gain realized on the disposition of the property). This depletion recapture rule applies to any disposition of property that was placed in
service by the taxpayer after December 31, 1986. Detailed rules set forth in Sections 1.1254-1 through 1.1254-6 of the U.S. Treasury Regulations govern dispositions of property after March 13, 1995. The Internal Revenue Service likely will
take the position that a unitholder must recapture depletion upon the disposition of a unit.

Interest and net profits income
attributable to ownership of units and any gain on the sale thereof are considered portfolio income, and not income from a passive activity, to the extent a unitholder acquires and holds units as an investment and not in the ordinary
course of a trade or business. Therefore, interest and net profits income attributable to ownership of units generally may not be offset by losses from any passive activities.



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Some trust units are held by middlemen, as such term is broadly defined in U.S. Treasury
Regulations (and includes custodians, nominees, certain joint owners, and brokers holding an interest for a customer in street name, collectively referred to herein as middlemen). Therefore, the trustee considers the trust to be a
non-mortgage widely held fixed investment trust (WHFIT) for U.S. federal income tax purposes. U.S. Trust, Bank of America Private Wealth Management, EIN: 56-0906609, Post Office Box 830650, Dallas, Texas, 75283-0650, telephone number
1-877-228-5084, email address trustee@crosstimberstrust.com, is the representative of the trust that will provide tax information in accordance with applicable U.S. Treasury Regulations governing the information reporting requirements of the trust
as a WHFIT. Tax information is also posted by the trustee at www.crosstimberstrust.com. Notwithstanding the foregoing, the middlemen holding trust units on behalf of unitholders, and not the trustee of the trust, are solely responsible for
complying with the information reporting requirements under the U.S. Treasury Regulations with respect to such trust units, including the issuance of IRS Forms 1099 and certain written tax statements. Unitholders whose trust units are held by
middlemen should consult with such middlemen regarding the information that will be reported to them by the middlemen with respect to the trust units.

Unitholders should consult their tax advisors regarding trust tax compliance matters.

3.
State Taxes

All revenues from the trust are from sources within Texas, Oklahoma or New Mexico. Because it distributes all
of its net income to unitholders, the trust has not been taxed at the trust level in New Mexico or Oklahoma. While the trust has not owed tax, the trustee is required to file a return with Oklahoma reflecting the income and deductions of the trust
attributable to properties located in that state, along with a schedule that includes information regarding distributions to unitholders. Texas does not impose a state income tax, so no part of the trusts income will be subject to income tax
at the trust level in Texas. Oklahoma and New Mexico tax the income of nonresidents from real property located within those states, and the trust has been advised by counsel that those states will each tax nonresidents on income from the net profits
interests located in those states. Oklahoma and New Mexico also impose a corporate income tax that may apply to unitholders organized as corporations (subject to certain exceptions for S corporations and limited liability companies, depending on
their treatment for federal tax purposes).

Texas imposes a franchise tax at a rate of 1% on gross revenues less certain
deductions, as specifically set forth in the Texas franchise tax statutes. Entities subject to tax generally include trusts unless otherwise exempt and most other types of entities that provide limited liability protection. Trusts that receive at
least 90% of their federal gross income from designated passive sources, including royalties from mineral properties and other non-operated mineral interest income, and do not receive more than 10% of their income from operating an active trade or
business generally are exempt from the Texas franchise tax as passive entities. The trust has been exempt from Texas franchise tax as a passive entity. Because the trust has been exempt from Texas franchise tax at the trust
level as a passive entity, each unitholder that is considered a taxable entity under the Texas franchise tax has been required to include its Texas portion of trust revenues in its own Texas franchise tax computation. This revenue has been sourced
to Texas under provisions of the Texas Administrative Code providing that such income is sourced according to the principal place of business of the trust, which is Texas.

Each unitholder should consult his or her own tax advisor regarding state tax requirements, if any, applicable to such persons ownership of trust units.



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4. Contingencies

Several states have enacted legislation requiring state income tax withholding from nonresident recipients of oil and gas proceeds. After consultation with its tax counsel, the trustee believes that it is
not required to withhold on payments made to the unitholders. However, regulations are subject to change by the various states, which could change this conclusion. Should amounts be withheld on payments made to the trust or the unitholders,
distributions to the unitholders would be reduced by the required amount, subject to the filing of a claim for refund by the trust or unitholders for such amount.

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 2011 Annual Report on Form 10-K, 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 June 30, 2012, net profits income was $3,961,296
compared to $4,569,004 for second quarter 2011. This 13% decrease in net profits income is the result of lower gas prices ($0.3 million), increased development costs ($0.2 million) and decreased gas production ($0.1 million). See Net Profits
Income on following page.

After considering interest income of $76 and administration expense of $138,130, distributable income for the
quarter ended June 30, 2012 was $3,823,242, or $0.637207 per unit of beneficial interest. Administrative expense for the quarter decreased $793 from the prior year quarter. For second quarter 2011, distributable income was $4,430,130, or
$0.738355 per unit. Distributions to unitholders for the quarter ended June 30, 2012 were:



|               |  |              |               |  |                      |   |          | 
|-------------- |  | ------------ | ------------- |  | -------------------- | - | -------- | 
|Record Date    |  | Payment Date |               |  | Distributionper Unit |  
|April 30, 2012 |  |              | May 14, 2012  |  |                      | $ | 0.228452 | 
|May 31, 2012   |  |              | June 14, 2012 |  |                      |   | 0.196170 | 
|June 29, 2012  |  |              | July 16, 2012 |  |                      |   | 0.212585 | 
|               |  |              |               |  |                      |   |          | 
|               |  |              |               |  |                      | $ | 0.637207 | 
|               |  |              |               |  |                      |   |          | 



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Six Months

For the six months ended June 30, 2012, net profits income was $8,338,276 compared to $8,919,857 for the same 2011 period. This 7% decrease in net profits income is the result of decreased oil and
gas production ($0.8 million) and increased production expense ($0.4 million), partially offset by higher oil prices ($0.7 million). See Net Profits Income below.

After considering interest income of $162 and administration expense of $265,972, distributable income for the six months ended June 30, 2012 was $8,072,466, or $1.345411 per unit of beneficial
interest. Administrative expense for the six months ended June 30, 2012 increased $276 from the prior year six-month period. For the six months ended June 30, 2011, distributable income was $8,654,304, or $1.442384 per unit.

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, the calculation of net profits income from these interests only includes deductions for production
and property taxes, legal costs, and marketing and transportation charges. In addition to these costs, the calculation of net profits income from the 75% net profits interests includes deductions for production expense and development costs since
the related underlying properties are working interests.



13



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##### Table of Contents

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



|                                |  |                              |           |  |          |   |           |                            |  |  |          |    |  |      |            |  |            |   |            |  |  |  |     |   
|------------------------------- |  | ---------------------------- | --------- |  | -------- | - | --------- | -------------------------- |  |  | -------- | -- |  | ---- | ---------- |  | ---------- | - | ---------- |  |  |  | --- | --
|                                |  | Three MonthsEnded June 30(a) |           |  | Increase |   |           | Six MonthsEnded June 30(a) |  |  | Increase |   
|                                |  | 2012                         |           |  | 2011     |   |           | (Decrease)                 |  |  | 2012     |    |  | 2011 |            |  | (Decrease) |  
|Sales Volumes                   |  |                              |           |  |          |   |           |                            |  |  |          |    |  |      |            |  |            |   |            |  |  |  |     |   
|Oil (Bbls) (b)                  |  |                              |           |  |          |   |           |                            |  |  |          |    |  |      |            |  |            |   |            |  |  |  |     |   
|Underlying properties           |  |                              | 46,417    |  |          |   | 46,469    |                            |  |  |         |    |  |      | 95,802     |  |            |   | 99,298     |  |  |  | (4  | %)
|Average per day                 |  |                              | 516       |  |          |   | 522       |                            |  |  | (1       | %) |  |      | 526        |  |            |   | 549        |  |  |  | (4  | %)
|Net profits interests           |  |                              | 22,725    |  |          |   | 26,438    |                            |  |  | (14      | %) |  |      | 48,440     |  |            |   | 55,485     |  |  |  | (13 | %)
|Gas (Mcf) (b)                   |  |                              |           |  |          |   |           |                            |  |  |          |    |  |      |            |  |            |   |            |  |  |  |     |   
|Underlying properties           |  |                              | 430,245   |  |          |   | 451,570   |                            |  |  | (5       | %) |  |      | 834,993    |  |            |   | 920,006    |  |  |  | (9  | %)
|Average per day                 |  |                              | 4,728     |  |          |   | 5,017     |                            |  |  | (6       | %) |  |      | 4,563      |  |            |   | 5,055      |  |  |  | (10 | %)
|Net profits interests           |  |                              | 382,106   |  |          |   | 397,962   |                            |  |  | (4       | %) |  |      | 742,358    |  |            |   | 811,081    |  |  |  | (8  | %)
|                                |  |                              |           |  |          |  
|Average Sales Prices            |  |                              |           |  |          |   |           |                            |  |  |          |    |  |      |            |  |            |   |            |  |  |  |     |   
|Oil (per Bbl)                   |  | $                            | 97.27     |  |          | $ | 93.79     |                            |  |  | 4        | %  |  | $    | 95.28      |  |            | $ | 86.08      |  |  |  | 11  | % 
|Gas (per Mcf)                   |  | $                            | 6.20      |  |          | $ | 7.04      |                            |  |  | (12      | %) |  | $    | 6.79       |  |            | $ | 6.86       |  |  |  | (1  | %)
|                                |  |                              |           |  |          |  
|Revenues                        |  |                              |           |  |          |   |           |                            |  |  |          |    |  |      |            |  |            |   |            |  |  |  |     |   
|Oil sales                       |  | $                            | 4,514,726 |  |          | $ | 4,358,283 |                            |  |  | 4        | %  |  | $    | 9,127,862  |  |            | $ | 8,548,032  |  |  |  | 7   | % 
|Gas sales                       |  |                              | 2,668,248 |  |          |   | 3,177,894 |                            |  |  | (16      | %) |  |      | 5,666,480  |  |            |   | 6,310,969  |  |  |  | (10 | %)
|                                |  |                              |           |  |          |   |           |                            |  |  |          |    |  |      |            |  |            |   |            |  |  |  |     |   
|Total Revenues                  |  |                              | 7,182,974 |  |          |   | 7,536,177 |                            |  |  | (5       | %) |  |      | 14,794,342 |  |            |   | 14,859,001 |  |  |  |    |   
|                                |  |                              |           |  |          |   |           |                            |  |  |          |    |  |      |            |  |            |   |            |  |  |  |     |   
|                                |  |                              |           |  |          |  
|Costs                           |  |                              |           |  |          |   |           |                            |  |  |          |    |  |      |            |  |            |   |            |  |  |  |     |   
|Taxes, transportation and other |  |                              | 926,770   |  |          |   | 1,064,470 |                            |  |  | (13      | %) |  |      | 1,895,972  |  |            |   | 2,018,499  |  |  |  | (6  | %)
|Production expense (c)          |  |                              | 1,270,288 |  |          |   | 1,029,347 |                            |  |  | 23       | %  |  |      | 2,716,425  |  |            |   | 2,153,345  |  |  |  | 26  | % 
|Development costs               |  |                              | 381,521   |  |          |   | 101,311   |                            |  |  | 277      | %  |  |      | 487,350    |  |            |   | 296,003    |  |  |  | 65  | % 
|                                |  |                              |           |  |          |   |           |                            |  |  |          |    |  |      |            |  |            |   |            |  |  |  |     |   
|Total Costs                     |  |                              | 2,578,579 |  |          |   | 2,195,128 |                            |  |  | 17       | %  |  |      | 5,099,747  |  |            |   | 4,467,847  |  |  |  | 14  | % 
|                                |  |                              |           |  |          |   |           |                            |  |  |          |    |  |      |            |  |            |   |            |  |  |  |     |   
|Net Proceeds                    |  | $                            | 4,604,395 |  |          | $ | 5,341,049 |                            |  |  | (14      | %) |  | $    | 9,694,595  |  |            | $ | 10,391,154 |  |  |  | (7  | %)
|                                |  |                              |           |  |          |   |           |                            |  |  |          |    |  |      |            |  |            |   |            |  |  |  |     |   
|Net Profits Income              |  | $                            | 3,961,296 |  |          | $ | 4,569,004 |                            |  |  | (13      | %) |  | $    | 8,338,276  |  |            | $ | 8,919,857  |  |  |  | (7  | %)
|                                |  |                              |           |  |          |   |           |                            |  |  |          |    |  |      |            |  |            |   |            |  |  |  |     |   



|(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 June 30
generally represent oil production for the period February through April and gas production for the period January through March and (2) oil and gas sales for the six-months ended June 30 generally represent oil production for the period
November through April and gas production for the period October through March.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(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
expense and development costs. As product prices change, the trusts share of the production volumes is impacted as the quantity of production to cover expenses in reaching the net profits break-even level changes inversely with price. As such,
the underlying property production volume changes may not correlate with the trusts net profit share of those volumes in any given period. Therefore, comparative discussion of oil and gas sales volumes is based on the underlying properties.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | Production expense is primarily from seven working interest properties in the 75% net profits interest. Six of these properties are not operated by XTO Energy or
ExxonMobil. Production expense includes an overhead charge which is deducted and retained by the operator. As of June 30, 2012, this charge was $33,470 per month (including monthly overhead charges of $4,781 which ExxonMobil deducts as operator
of the Hewitt Unit) and is subject to adjustment each May based on an oil and gas industry index.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

The following are explanations of significant variances on the underlying properties from second quarter
2011 to second quarter 2012 and from the first six months of 2011 to the comparable period in 2012:

Sales Volumes

Oil

Oil sales volumes were relatively
flat for second quarter 2012 as compared with the same 2011 period primarily because natural production decline was offset by the timing of cash receipts. Oil sales volumes decreased 4% for the first six months of 2012 as compared with the same 2011
period primarily because of natural production decline.

Gas

Gas sales volumes decreased 5% for second quarter 2012 as compared with the same 2011 period primarily because of natural production decline, partially offset by the timing of cash receipts. Gas sales
volumes decreased 9% for the first six months of 2012 as compared with the same 2011 period primarily because of natural production decline.

The estimated rate of natural production decline on the underlying oil and gas properties is approximately 6% to 8% a year.

Sales Prices

Oil

The average oil price increased 4% to $97.27 per Bbl for the second quarter and 11% to $95.28 per Bbl for the six-month period. Oil prices are expected to
remain volatile. The second quarter 2012 oil price is primarily related to production from February through April 2012, when the average NYMEX price was $104.01 per Bbl. The average NYMEX price for May and June 2012 was $88.53 per Bbl. At
July 16, 2012, the average NYMEX futures price for the following twelve months was $90.41 per Bbl.

Gas

Gas prices for the second quarter decreased 12% to $6.20 per Mcf and for the six-month period decreased 1% to $6.79 per Mcf. Natural gas prices are
affected by the level of North American production, weather, crude oil and natural gas liquids prices, the U.S. economy, storage levels and import levels of liquefied natural gas. Natural gas prices are expected to remain volatile. The second
quarter 2012 gas price is primarily related to production from January through March 2012, when the average NYMEX price was $2.74 per MMBtu. The average NYMEX price for April through June 2012 was $2.22 per MMBtu. At July 16, 2012, the average
NYMEX futures price for the following twelve months was $3.26 per MMBtu.



15



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##### Table of Contents

Costs

Taxes, Transportation and Other

Taxes, transportation and other decreased 13% for the
second quarter primarily because of decreased gas production taxes and other deductions related to lower gas revenues and decreased property taxes related to the timing of cash expenditures. Taxes, transportation and other decreased 6% for the
six-month period primarily because of decreased gas production taxes and other deductions related to lower gas revenues, partially offset by increased oil production taxes related to higher oil revenues.

Production Expense

Production expense
increased 23% for the second quarter primarily because of increased outside operated and maintenance costs. Production expense increased 26% for the six-month period primarily because of increased maintenance, outside operated and fuel costs,
partially offset by decreased labor costs.

Development

Development costs increased 277% for the second quarter and 65% for the six-month period primarily because of the timing of expenditures and increased activity and costs related to non-operated Texas and
Oklahoma oil properties underlying the 75% net profits interest.

Contingencies

Several states have enacted legislation requiring state income tax withholding from nonresident recipients of oil and gas proceeds. After consultation
with its tax counsel, the trustee believes that it is not required to withhold on payments made to the unitholders. However, regulations are subject to change by the various states, which could change this conclusion. Should amounts be withheld on
payments made to the trust or the unitholders, distributions to the unitholders would be reduced by the required amount, subject to the filing of a claim for refund by the trust or unitholders for such amount.

Forward-Looking Statements

Statements
in this report relating to future plans, predictions, events or conditions are forward-looking statements. 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 and expenses, oil and gas prices and differentials to NYMEX prices, distributions to unitholders and industry and market conditions, are
forward-looking statements that are subject to risks and uncertainties which are detailed in Part I, Item 1A of the trusts Annual Report on Form 10-K for the year ended December 31, 2011, which is incorporated by this reference as
though fully set forth herein. XTO Energy and the trustee assume no duty to update these statements as of any future date.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

There have been no material changes in the trusts
market risks from the information disclosed in Part II, Item 7A of the trusts Annual Report on Form 10-K for the year ended December 31, 2011.



16



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##### Table of Contents

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 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 recording, processing, summarizing and reporting, on a timely
basis, information required to be disclosed by the trust in the reports that it files or submits under the Securities Exchange Act of 1934 and are effective in ensuring that information required to be disclosed by the trust in the reports that it
files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the trustee to allow timely decisions regarding required disclosure. 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.

PART IIOTHER INFORMATION

Item 1.

Not applicable.

Item 1A. Risk Factors.

There have been no material changes in the risk factors disclosed under Part I, Item 1A of the trusts Annual Report on Form
10-K for the year ended December 31, 2011.

Items 2 through 5.

Not applicable.

Item 6. Exhibits.



| | (a) | Exhibits.
| | --- | ---------

Exhibit Number

and Description



| | (31) | Rule 13a-14(a)/15d-14(a) Certification
| | ---- | --------------------------------------



| | (32) | Section 1350 Certification
| | ---- | --------------------------



| | (99) | Items 1A, 7 and 7A to the Annual Report on Form 10-K for Cross Timbers Royalty Trust filed with the Securities and Exchange Commission on February 29, 2012
(incorporated herein by reference)
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



17



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##### Table of Contents

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
|                    |  |  | 
|                    |  |  |  | By                                                            |  | /S/ NANCY G. WILLIS                        
|                    |  |  |  |                                                               |  | Nancy G. Willis                            
|                    |  |  |  |                                                               |  | Vice President                             
|                    |  | 
|                    |  |  |  | EXXON MOBIL CORPORATION                                      
|                    |  |  | 
|Date: July 24, 2012 |  |  |  | By                                                            |  | /S/ JAMES A. HALL                          
|                    |  |  |  |                                                               |  | James A. Hall                              
|                    |  |  |  |                                                               |  | Vice President - Upstream Business Services



18