<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549



                                   Form 10-Q



               Quarterly Report Pursuant to Section 13 or 15(d)
                    of the Securities Exchange Act of 1934


               For the Quarterly Period Ended September 30, 1999
                                              ------------------


                          Commission File No. 1-10982
                                              -------



                          CROSS TIMBERS ROYALTY TRUST



               Texas                              I.R.S. No. 75-6415930


                             Bank of America, N.A.
                                P.O. Box 830650
                           Dallas, Texas 75283-0650

                         Telephone Number 877/228-5084



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 and (2) has been subject to such filing requirements for
the past 90 days.  Yes    X     No
                       -------     -------

Number of units of beneficial interest outstanding at November 1, 1999:
6,000,000
---------
<PAGE>

CROSS TIMBERS ROYALTY TRUST

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
-----------------------------------------------------------


           TABLE OF CONTENTS



                                                                            Page
                                                                            ----

           Glossary of Terms................................................  3


PART I.    FINANCIAL INFORMATION

 Item 1.   Financial Statements.............................................  4

           Report of Independent Public Accountants.........................  5

           Condensed Statements of Assets, Liabilities and Trust Corpus
           at September 30, 1999 and December 31, 1998......................  6

           Condensed Statements of Distributable Income
           for the Three and Nine Months Ended September 30, 1999
           and 1998.........................................................  7

           Condensed Statements of Changes in Trust Corpus
           for the Three and Nine Months Ended September  30, 1999
           and 1998.........................................................  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

PART II.   OTHER INFORMATION

 Item 6.   Exhibits and Reports on Form 8-K................................. 17

           Signatures....................................................... 18

                                                                               2
<PAGE>

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 gas)

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.

net proceeds             Amount received by Cross Timbers Oil from sale of
                         production from the underlying properties, less
                         applicable costs.

royalty trust interests  Defined net profits interests that were carved from the
                         underlying properties and entitle the trust to receive
                         for each of the following:

                                90% royalty trust interests - 90% of the net
                                proceeds from the underlying properties, which
                                are royalty and overriding royalty interests in
                                Texas, Oklahoma and New Mexico.

                                75% royalty trust interests - 75% of the net
                                proceeds from the underlying properties, which
                                are working interests in Texas and Oklahoma.

underlying properties   Cross Timbers Oil's interest in certain oil and gas
                        properties from which the royalty trust interests were
                        carved. The underlying properties include royalty and
                        overriding royalty interests in producing and non-
                        producing properties in Texas, Oklahoma and New Mexico,
                        and working interests in producing properties located in
                        Texas and Oklahoma.

                                                                               3
<PAGE>

CROSS TIMBERS ROYALTY TRUST

PART I - FINANCIAL STATEMENTS
-----------------------------



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, 1999, and the
distributable income and changes in trust corpus for the three and nine-month
periods ended September 30, 1999 and 1998, have been included.  Distributable
income for such interim periods is not necessarily indicative of the
distributable income for the full year.

                                                                               4
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



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, 1999 and the
related condensed statements of distributable income and changes in trust corpus
for the three and nine-month periods ended September 30, 1999 and 1998.  These
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 in accordance with
generally accepted auditing standards, 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 generally accepted accounting principles.

Based on our review, we are not aware of any material modifications that should
be made to the 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 generally accepted auditing
standards, the statement of assets, liabilities and trust corpus of the Cross
Timbers Royalty Trust as of December 31, 1998 included in the trust's 1998
annual report on Form 10-K, and in our report dated March 16, 1999, we expressed
an unqualified opinion on that statement.  In our opinion, the information set
forth in the accompanying condensed statement of assets, liabilities and trust
corpus as of December 31, 1998 is fairly stated in all material respects in
relation to the statement of assets, liabilities and trust corpus included in
the trust's 1998 annual report on Form 10-K from which it has been derived.



ARTHUR ANDERSEN LLP

Fort Worth, Texas
November 4, 1999

                                                                               5
<PAGE>

CROSS TIMBERS ROYALTY TRUST
--------------------------------------------------------------------------------

Condensed Statements of Assets, Liabilities and Trust Corpus

<TABLE>
<CAPTION>


                                               September 30,   December 31,
                                                    1999           1998
                                               --------------  ------------
                                                (Unaudited)
<S>                                            <C>             <C>

ASSETS

Cash and short-term investments..............    $   546,542    $   528,758

Interest to be received......................          1,078            781

Net profits interests in oil and gas
  properties - net (Note 1)..................     34,422,975     36,024,941
                                                 -----------   ------------

                                                 $34,970,595    $36,554,480
                                                 ===========   ============


LIABILITIES AND TRUST CORPUS

Distribution payable to unitholders..........    $   547,620    $   529,539

Trust corpus (6,000,000 units of beneficial
  interest authorized and outstanding).......     34,422,975     36,024,941
                                                 -----------   ------------

                                                 $34,970,595    $36,554,480
                                                 ===========   ============

</TABLE>



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

                                                                               6
<PAGE>

CROSS TIMBERS ROYALTY TRUST
--------------------------------------------------------------------------------

Condensed Statements of Distributable Income (Unaudited)

<TABLE>
<CAPTION>


                                          Three Months Ended       Nine Months Ended
                                             September 30,           September 30,
                                        ----------------------  ----------------------
                                           1999        1998        1999        1998
                                        ----------  ----------  ----------  ----------
<S>                                     <C>         <C>         <C>         <C>
Royalty income.................         $1,696,721  $1,672,455  $4,390,115  $5,662,228

Interest income................              2,876       2,596       6,675       8,908
                                        ----------  ----------  ----------  ----------

Total income...................          1,699,597   1,675,051   4,396,790   5,671,136

Administration expense.........             41,545      37,763     126,975     131,480
                                        ----------  ----------  ----------  ----------

Distributable income...........         $1,658,052  $1,637,288  $4,269,815  $5,539,656
                                        ==========  ==========  ==========  ==========

Distributable income per unit
   (6,000,000 units)...........         $ 0.276342  $ 0.272882  $ 0.711637  $ 0.923276
                                        ==========  ==========  ==========  ==========
</TABLE>



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

                                                                               7
<PAGE>

CROSS TIMBERS ROYALTY TRUST
--------------------------------------------------------------------------------

Condensed Statements of Changes in Trust Corpus (Unaudited)

<TABLE>
<CAPTION>


                                                Three Months Ended          Nine Months Ended
                                                   September 30,              September 30,
                                            --------------------------  -------------------------
                                                1999          1998          1999          1998
                                            -----------   -----------   -----------   -----------
<S>                                         <C>           <C>           <C>           <C>

Trust corpus, beginning of period..         $35,183,110   $36,921,936   $36,024,941   $38,104,367

Amortization of net profits
    interests......................            (760,135)     (486,814)   (1,601,966)   (1,669,245)

Distributable income...............           1,658,052     1,637,288     4,269,815     5,539,656

Distributions declared.............          (1,658,052)   (1,637,288)   (4,269,815)   (5,539,656)
                                            -----------   -----------   -----------   -----------

Trust corpus, end of period........         $34,422,975   $36,435,122   $34,422,975   $36,435,122
                                            ===========   ===========   ===========   ===========

</TABLE>


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

                                                                               8
<PAGE>

CROSS TIMBERS ROYALTY TRUST
--------------------------------------------------------------------------------

Notes to Condensed Financial Statements (Unaudited)


1.   Basis of Accounting

     The financial statements of the Cross Timbers Royalty Trust are prepared on
     the following basis:

     -    Royalty income recorded for a month is the amount computed and paid by
          the interest owner, Cross Timbers Oil Company, to Bank of America,
          N.A., as trustee for the trust. Royalty income consists of net
          proceeds received by Cross Timbers Oil from the underlying properties
          in the prior month, multiplied by net profit percentages of 90% for
          the 90% royalty trust interests, and 75% for the 75% royalty trust
          interests.

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

     -    Royalty income is computed separately for each of five conveyances
          under which the royalty trust interests were conveyed to the trust. If
          monthly costs exceed revenues for any conveyance, such excess costs
          cannot reduce royalty income from other conveyances, but are carried
          forward with accrued interest to be recovered from future net proceeds
          of that conveyance. See Note 3.

     -    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 financial statements
     prepared in accordance with generally accepted accounting principles
     ("GAAP") because revenues are not 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 royalty trust
     interests ($61,100,449) represents Cross Timbers Oil's historical net book
     value on February 12, 1991, the creation date of the trust. Amortization of
     the royalty trust interests is calculated on a unit-of-production basis and
     is charged directly to trust corpus. Accumulated amortization was
     $26,677,474 as of September 30, 1999 and $25,075,508 as of December 31,
     1998.

                                                                               9
<PAGE>

2.   Federal Income Taxes

     Tax counsel has advised the trust that, under current tax laws, the trust
     will be classified as a grantor trust for federal income tax purposes and
     therefore is not subject to taxation at the trust level. However, the
     opinion of tax counsel is not binding on the Internal Revenue Service.

     The unitholders are considered, for federal income tax purposes, 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 the
     unitholders at the time such income is received or accrued by the trust,
     rather than when distributed by the trust.

     Cross Timbers Oil has advised the trustee that the trust receives royalty
     income from coal seam gas wells. Production from coal seam gas wells
     drilled after December 31, 1979, and prior to January 1, 1993, qualifies
     for the federal income tax credit for producing nonconventional fuels under
     Section 29 of the Internal Revenue Code. This tax credit, which was
     approximately $1.05 per MMBtu for 1998, is recalculated annually based on
     each year's qualified production through the year 2002. Such credit, based
     on the unitholder's pro rata share of qualifying production, may not reduce
     his regular tax liability (after the foreign tax credit and certain other
     non-refundable credits) below his tentative minimum tax. Any part of the
     Section 29 credit not allowed for the tax year solely because of this
     limitation is subject to certain carryover provisions. Unitholders should
     consult their tax advisors regarding use of this credit and other trust tax
     compliance matters.

     Based on 1999 qualifying sales volumes and the factors used in the
     calculation of the 1998 coal seam tax credit, the credit is estimated to be
     $0.042 per unit for the quarter and $0.127 per unit for the nine months
     ended September 30, 1999. The actual coal seam tax credit was $0.044 per
     unit for third quarter 1998 and $0.126 per unit for the nine months ended
     September 30, 1998. Final 1999 coal seam tax credit data will be provided
     to unitholders with year-end tax information.


3.   Excess Costs

     Cross Timbers Oil has advised the trustee that costs exceeded revenues from
     the underlying properties of the 75% royalty trust interests during the
     three and nine months ended September 30, 1999 and 1998. The following is a
     summary of changes in excess costs by conveyance during these periods.
<TABLE>
<CAPTION>

                                                Three Months Ended September 30,
                                            -----------------------------------------
                                                     1999                 1998
                                            ---------------------  ------------------
                                              Texas     Oklahoma    Texas    Oklahoma
                                            ----------  ---------  --------  --------
<S>                                         <C>         <C>        <C>       <C>

     Cumulative excess costs and accrued
      interest - beginning of period......  $ 757,604   $ 14,215   $144,740  $      -
     Excess costs.........................     34,760     34,345    210,876    10,067
     Recovery of excess costs.............    (82,609)   (14,305)         -         -
     Interest.............................     14,819         90      4,765        46
                                            ---------   --------   --------   -------

     Cumulative excess costs and
      accrued interest - end of period....  $ 724,574   $ 34,345   $360,381   $10,113
                                            =========   ========   ========   =======

     Net to trust (75%)...................  $ 543,431   $ 25,759   $270,286   $ 7,585
                                            =========   ========   ========   =======
</TABLE>


                                                                              10
<PAGE>

<TABLE>
<CAPTION>
                                                 Nine Months Ended September 30,
                                            -----------------------------------------
                                                     1999                 1998
                                            ---------------------  ------------------
                                              Texas     Oklahoma    Texas    Oklahoma
                                            ----------  ---------  --------  --------
<S>                                         <C>         <C>        <C>       <C>
     Cumulative excess costs and accrued
      interest - beginning of period......  $ 519,817   $      -   $      -  $      -
     Excess costs.........................    327,318    105,471    354,276    10,067
     Recovery of excess costs.............   (165,734)   (72,312)         -         -
     Interest.............................     43,173      1,186      6,105        46
                                            ---------   --------   --------   -------

Cumulative excess costs and
      accrued interest - end of period....  $ 724,574   $ 34,345   $360,381   $10,113
                                            =========   ========   ========   =======

     Net to trust (75%)...................  $ 543,431   $ 25,759   $270,286   $ 7,585
                                            =========   ========   ========   =======

</TABLE>

     Excess costs and accrued interest for each conveyance must be fully
     recovered from the respective future net proceeds of the 75% royalty trust
     interests before they can again contribute to trust royalty income. Excess
     costs and accrued interest from the Oklahoma 75% royalty trust interests
     were fully recovered in October 1999. See Item 2, "Trustee's Discussion and
     Analysis - Costs."


4.   Cross Timbers Oil Company

     On June 16, 1998, the trust and Cross Timbers Oil filed a registration
     statement with the Securities and Exchange Commission to sell 1,360,000
     units (22.7% of outstanding units) held by Cross Timbers Oil. As Cross
     Timbers Oil stated in a related news release, the filing was made in
     anticipation of better commodity prices and any sale is dependent on an
     improved market for oil and gas equities. The trust did not participate in
     Cross Timbers Oil's decisions to acquire or sell units and will not receive
     any of the proceeds in the event of such sale.

                                                                              11
<PAGE>

Item 2.  Trustee's Discussion and Analysis.

Distributable Income

Quarter

For the quarter ended September 30, 1999, royalty income was $1,696,721 compared
with $1,672,455 for the third quarter of 1998.  This 1% increase in royalty
income is primarily the result of higher oil and gas prices, largely offset by
lower oil and gas production and excess cost recovery.  See "Royalty Income"
below.

After considering interest income of $2,876 and administration expense of
$41,545, distributable income for the quarter ended September 30, 1999 was
$1,658,052, or $0.276342 per unit of beneficial interest.  For the quarter ended
September 30, 1998, distributable income was $1,637,288, or $0.272882 per unit.
Distributions to unitholders for the quarter ended September 30, 1999 were:
<TABLE>
<CAPTION>

                                                      Distribution
                 Record Date         Payment Date       per Unit
            --------------------  ------------------  ------------
            <S>                   <C>                 <C>
            July 30, 1999         August 13, 1999       $0.076045
            August 31, 1999       September 15, 1999     0.109027
            September 30, 1999    October 15, 1999       0.091270
                                                        ---------

                                                        $0.276342
                                                        =========
</TABLE>

Nine Months

For the nine months ended September 30, 1999, royalty income was $4,390,115
compared with $5,662,228 for the same 1998 period.  Lower oil and gas production
and lower product prices were the primary reasons for this 22% decrease in
royalty income.  See "Royalty Income" below.

After considering interest income of $6,675 and administration expense of
$126,975, distributable income for the nine months ended September 30, 1999 was
$4,269,815, or $0.711637 per unit of beneficial interest. For the nine months
ended September 30, 1998, distributable income was $5,539,656, or $0.923276 per
unit.

Royalty Income

Royalty income is recorded when received by the trust, which is the month
following receipt by Cross Timbers Oil, and generally two months after oil
production and three months after gas production.  Royalty 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 royalty income.

Because properties underlying the 90% royalty trust interests are royalty and
overriding royalty interests, they generally bear no costs other than production
and property taxes, related legal costs, and marketing and

                                                                              12
<PAGE>

transportation charges. In addition to these costs, the 75% royalty trust
interests are subject to production and development costs, since the properties
underlying the 75% royalty trust interests are working interests.

The following are variances in prices, volumes and costs for the underlying
properties:
<TABLE>
<CAPTION>

                                                Three Months                               Nine Months
                                            Ended September 30 (a)                   Ended September 30 (a)
                                           ------------------------   Increase     -------------------------   Increase
                                               1999         1998      (Decrease)       1999         1998      (Decrease)
                                           -----------  -----------  -----------   ------------  -----------  -----------
<S>                                        <C>          <C>          <C>           <C>           <C>          <C>
Sales Volumes
   Oil (Bbls)                                  79,435       96,020         (17%)       254,301      297,770         (15%)
   Average per day                                863        1,044         (17%)           932        1,091         (15%)

 Gas (Mcf)...................                 935,338      964,888          (3%)     2,669,952    2,727,394          (2%)
   Average per day                             10,278       10,603          (3%)         9,780        9,990          (2%)

Sales Prices
 Oil (per Bbl)...............                  $16.34       $11.69          40%         $12.91       $13.65          (5%)
 Gas (per Mcf)...............                   $2.02        $1.85           9%          $1.85        $2.09         (11%)

Revenues
 Oil sales...................              $1,297,628   $1,122,379          16%     $3,283,489   $4,065,830         (19%)
 Gas sales...................               1,885,097    1,785,186           6%      4,936,099    5,690,993         (13%)
                                           ----------   ----------                  ----------   ----------
   Total Revenues                           3,182,725    2,907,565           9%      8,219,588    9,756,823         (16%)
                                           ----------   ----------                  ----------   ----------

Costs
 Taxes, transportation
  and other                                   478,595      292,290          64%      1,107,696      967,692          14%
 Production expense (b)......                 599,642      661,429          (9%)     1,795,597    2,004,130         (10%)
 Development costs...........                 175,132      314,699         (44%)       616,157      792,981         (22%)
 Excess costs................                 (69,105)    (220,943)        (69%)      (432,789)    (364,343)         19%
   Recovery of excess costs                    96,915            -           -         238,047            -           -
                                           ----------   ----------                  ----------   ----------
   Total Costs                              1,281,179    1,047,475          22%      3,324,708    3,400,460          (2%)
                                           ----------   ----------                  ----------   ----------

Net Proceeds                               $1,901,546   $1,860,090           2%     $4,894,880   $6,356,363         (23%)
                                           ==========   ==========                  ==========   ==========
Royalty Income                             $1,696,721   $1,672,455           1%     $4,390,115   $5,662,228         (22%)
                                           ==========   ==========                  ==========   ==========

</TABLE>

(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)  Includes an overhead fee which is deducted and retained by Cross Timbers
     Oil. This fee is currently $22,684 per month and is subject to adjustments
     each May based on an oil and gas industry index.

The following are explanations of significant variances:

Sales Volumes

Oil
Decreased oil volumes in third quarter 1999 primarily resulted from timing of
cash receipts.  The nine-month oil volume fluctuation was primarily the result
of mechanical complications on one of the underlying Oklahoma working interest
properties which caused a decline of 19,900 Bbls.  The remaining nine-month
decline is primarily because of the timing of cash receipts.

                                                                              13
<PAGE>

Gas
Decreased gas sales volumes were primarily related to the timing of cash
receipts.

Sales Prices

Oil
During December 1998, the average posted West Texas Intermediate crude oil price
fell to $8.00, the lowest level since 1978.  Oil prices began to climb in March
1999 following news of further agreed production cuts by OPEC and other oil
producers.

The average posted West Texas Intermediate oil price for August through October
1999 (related to royalty income to be received by the trust in fourth quarter
1999) was $19.79, a 69% increase from the comparable 1998 price of $11.71.  The
average posted West Texas Intermediate oil price for October was $19.91.

Gas
Gas prices for third quarter 1999 were higher than in third quarter 1998
primarily because of purchaser deductions which were netted in the gas price in
1998.  As of 1999, these purchaser deductions are included in taxes,
transportation and other costs.

Gas prices for the nine months of 1999, which are related to October 1998
through June 1999 production, were lower because of an abnormally warm winter
throughout the United States during the first four months of the year.  San Juan
Basin gas prices, in particular, were lower because of an abundance of
hydroelectric energy in West Coast markets following a winter with unusually
high precipitation.  The average San Juan Basin index gas price for July through
September 1999 (related to royalty income to be received by the trust in fourth
quarter 1999) was $2.31, a 33% increase from the comparable 1998 price.

Costs

Taxes
Taxes, transportation and other for the quarter increased because of
approximately $200,000 in purchaser deductions for gathering and compression
charges which had previously been netted in the gas sales price. For the nine
months ended September 30, 1999, approximately $425,000 in purchaser deductions
have been recorded which were largely offset by lower production taxes related
to lower oil and gas revenues.

Development

Development costs declined significantly in 1999 as the carbon dioxide injection
project on one of the underlying Texas working interest properties neared
completion in the third quarter.

Excess Costs

Because of lower development costs and higher oil and gas prices, excess costs
for third quarter 1999 were lower than third quarter 1998.  Excess costs were
higher for the nine-month period because of significant excess costs in the
first quarter of 1999 primarily related to low oil prices and costs of the
carbon dioxide injection project.  See Note 3 to the condensed financial
statements.  Excess costs of $34,345 ($25,759 net to the trust) on the Oklahoma
75% royalty trust interests were recovered in October 1999.

As of September 30, 1999, cumulative excess costs and accrued interest of
$724,574 ($543,431 net to the trust) must be recovered before the Texas 75%
royalty trust interests again contribute to royalty income. The Texas 75%
royalty trust interests are expected to recover approximately $136,000 ($102,000
net to the trust) in excess

                                                                              14
<PAGE>

costs in November 1999. If recent increased oil prices are sustained, it is
expected that this rate of recovery will continue. Because costs exceeded
revenues for all but the first quarter of 1998, the Texas 75% royalty trust
interests only contributed $0.02 per unit to 1998 royalty income, or 1% of total
1998 distributions, as compared with $0.18 per unit, or approximately 10% of
distributions in 1997.

Oil and Gas Sales Volumes for the Royalty Trust Interests

Oil and gas sales volumes are allocated to the royalty trust 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 royalty
trust interests. Therefore, comparative discussion of oil and gas sales volumes
is based on the underlying properties.

Oil and gas sales volumes attributable to the royalty trust interests are as
follows:
<TABLE>
<CAPTION>

                      Three Months Ended    Nine Months Ended
                         September 30,        September 30,
                      ------------------  --------------------
                        1999      1998      1999        1998
                      --------  --------  --------   ---------
<S>                   <C>       <C>       <C>        <C>
  Oil Sales (Bbls)...   24,040   22,000      63,298     81,597

  Gas Sales (Mcf)....  822,978  829,257   2,324,895  2,355,216
</TABLE>

Amortization

Amortization of royalty trust interests, which is directly charged to trust
corpus, increased to $760,135 for third quarter 1999 from $486,814 for the prior
year quarter.  Increased amortization is primarily the result of reduced
estimated reserves at the beginning of 1999 based on lower oil prices.

Year 2000

"Year 2000," or the ability of computer systems to process dates with years
beyond 1999, affects almost all companies and organizations.  Computer systems
that are not Year 2000 compliant by January 1, 2000 may have material adverse
effects on companies and organizations that rely upon those systems.

The trust's timely receipt of royalty income and disbursement of distributable
income to unitholders is largely dependent upon performance of computer systems
and computer-controlled equipment of Cross Timbers Oil, ChaseMellon Shareholder
Services, L.L.C. and other third parties, including property operators, oil and
natural gas purchasers and significant service providers such as electric
utility companies and natural gas plant, pipeline and gathering system
operators.  Since the trust does not use the trustee's computer systems in any
significant capacity, the trustee's Year 2000 compliance will not materially
affect the trust.

Cross Timbers Oil has completed remediation and testing of its significant
computer systems and computer-controlled field equipment.  The remaining less
critical computer systems have been inventoried and assessed.  Functional
solutions and remediation of less critical items is expected to be complete by
the end of December 1999.  Less critical items are components not considered to
be critical for production, safety or sales.  Based on its remediation efforts
and the results of testing to date, Cross Timbers Oil does not believe that
timely modification of its computer systems and computer-controlled equipment
for Year 2000 compliance represents a material risk to the trust.  No costs of
such modifications will be incurred by the trust.

                                                                              15
<PAGE>

With the exception of approximately 20 overriding royalty interests in the San
Juan Basin, Cross Timbers Oil does not operate any of the underlying properties,
nor does Cross Timbers Oil or any of its affiliates generally purchase
significant production from the underlying properties.  Therefore, the trust's
Year 2000 exposure is primarily dependent upon compliance of ChaseMellon
Shareholder Services, L.L.C., property operators and product purchasers of
significant underlying properties, as well as vendors who supply critical goods
and services to these third parties.  ChaseMellon Shareholder Services, L.L.C.
has notified Cross Timbers Oil that it is Year 2000 compliant.  Cross Timbers
Oil has identified and mailed inquiries to, as well as contacted by phone, oil
and gas purchasers and operators whose Year 2000 compliance could significantly
affect them.  Of those contacted, 11% indicated that they are currently Year
2000 compliant, 78% indicated that they are in the process of remediating non-
compliant systems and 11% have not yet responded to written inquiries.  All
respondents have stated that they will be compliant before January 1, 2000, if
they are not already compliant.  Despite their efforts to assure that such third
parties are Year 2000 compliant, neither the trustee nor Cross Timbers Oil can
provide assurance that all significant third parties will achieve timely Year
2000 compliance.  Such failure to achieve Year 2000 compliance could have a
material adverse impact on timely trust distributions to unitholders.

Cross Timbers Oil is currently identifying appropriate contingency plans in the
event of potential problems resulting from failure of its computer systems on
January 1, 2000.  Contingency plans may include installing backup computer
systems or equipment and temporarily replacing systems or equipment with manual
processes.  No contingency plans have been completed to date; Cross Timbers Oil
expects contingency plans to be complete by November 1999.

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 contained in this "Trustee's Discussion and
Analysis" regarding the royalty trust interests, industry conditions and Year
2000 compliance, are forward looking statements.  Although the trustee and Cross
Timbers Oil believe that the expectations reflected in these forward looking
statements are reasonable, they can give no assurance that such expectations
will prove to be correct.

Item. 3   Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in the trust's market risks, as disclosed in
the trust's Form 10-K for the year ended December 31, 1998.

                                                                              16
<PAGE>

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                                                        Page
     ---------------                                                        ----

     (4)(a)    Cross Timbers Royalty Trust Indenture Amended and Restated
               on January 13, 1992 by NCNB Texas National Bank (now Bank
               of America, N.A.) as trustee, heretofore filed as Exhibit
               3.1 to the trust's Registration Statement No. 33-44385
               filed with the Securities and Exchange Commission on
               February 19, 1992, is incorporated herein by reference.

        (b)    Net Overriding Royalty Conveyance (Cross Timbers Royalty
               Trust, 90% - Texas) from South Timbers Limited Partnership,
               West Timbers Limited Partnership, North Timbers Limited
               Partnership, East Timbers Limited Partnership, Hickory
               Timbers Limited Partnership, and Cross Timbers Partners,
               L.P.  (predecessors of Cross Timbers Oil Company, L.P. which
               subsequently merged into Cross Timbers Oil Company) to NCNB
               Texas National Bank (now Bank of America, N.A.), as trustee,
               dated February 12, 1991 (without Schedules A and B),
               heretofore filed as Exhibit 10.1 to the trust's Registration
               Statement No. 33-44385 filed with the Securities and Exchange
               Commission on February 19, 1992, is incorporated herein by
               reference.

        (c)    Net Overriding Royalty Conveyance (Cross Timbers Royalty
               Trust, 75% - Texas) from South Timbers Limited Partnership,
               West Timbers Limited Partnership, North Timbers Limited
               Partnership, East Timbers Limited Partnership, Hickory
               Timbers Limited Partnership, and Cross Timbers Partners, L.P.
               (predecessors of Cross Timbers Oil Company, L.P. which
               subsequently merged into Cross Timbers Oil Company) to NCNB
               Texas National Bank (now Bank of America, N.A.), as trustee,
               dated February 12, 1991 (without Schedules A and B),
               heretofore filed as Exhibit 10.5 to the trust's Registration
               Statement No. 33-44385 filed with the Securities and Exchange
               Commission on February 19, 1992, is incorporated herein by
               reference.

     (15)      Awareness letter of Arthur Andersen LLP                        19

(b)  Reports on Form 8-K.

     No reports on Form 8-K have been filed during the quarter for which this
report is filed.

                                                                              17
<PAGE>

                                   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         RON E. HOOPER
                                    --------------------------------
                                            Ron E. Hooper
                                            Vice President



                                 CROSS TIMBERS OIL COMPANY



Date: November 12, 1999          By        LOUIS G. BALDWIN
                                    --------------------------------
                                           Louis G. Baldwin
                                       Executive Vice President
                                      and Chief Financial Officer

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