<PAGE>

================================================================================

                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, 2000
                                                -------------

                                      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           (I.R.S. Employer
       incorporation or organization)          Identification No.)

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

                                (877) 228-5084
                               ----------------
             (Registrant's telephone number, including area code)

                                     NONE
                                    ------
  (Former name, former address and former fiscal year, if change since last
                                    report)


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

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

                        Outstanding as of July 3, 2000
                      ----------------------------------
                                   6,000,000

===============================================================================
<PAGE>

CROSS TIMBERS ROYALTY TRUST

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
------------------------------------------------------


           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 June 30, 2000 and December 31, 1999........................  6

           Condensed Statements of Distributable Income
             for the Three and Six Months Ended June 30, 2000 and 1999.....  7

           Condensed Statements of Changes in Trust Corpus
             for the Three and Six Months Ended June  30, 2000 and 1999....  8

           Notes to Condensed Financial Statements.........................  9

Item 2.    Trustee's Discussion and Analysis............................... 12

Item 3.    Quantitative and Qualitative Disclosures about Market Risk...... 15

PART II.   OTHER INFORMATION

  Item 6.  Exhibits and Reports on Form 8-K................................ 16

           Signatures...................................................... 17

                                                                               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)

Bcf                       Billion cubic feet (of natural gas)

Mcf                       Thousand cubic feet (of natural gas)

MMBtu                     One million British Thermal Units, a common energy
                          measurement

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              Gross proceeds received by Cross Timbers Oil Company
                          from sale of production from the underlying
                          properties, less applicable costs

royalty income            Net proceeds, multiplied by the net profits percentage
                          of 75% or 90%, that is paid to the trust

royalty interest          A nonoperating interest in an oil and gas property
(and overriding           that provides the owner a specified share of
royalty interest)         production without any production or development costs

royalty trust interests   Defined net profits interests that were conveyed 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
                          conveyed. 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.

working interest          An operating interest in an oil and gas property that
                          provides the owner a specified share of production
                          that is subject to all production and development
                          costs

                                                                               3
<PAGE>

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, 2000, and the
distributable income and changes in trust corpus for the three- and six-month
periods ended June 30, 2000 and 1999, 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 June 30, 2000 and the
related condensed statements of distributable income and changes in trust corpus
for the three- and six-month periods ended June 30, 2000 and 1999.  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
auditing standards generally accepted in the 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.

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

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 auditing standards generally
accepted in the United States, the statement of assets, liabilities and trust
corpus of the Cross Timbers Royalty Trust as of December 31, 1999 included in
the trust's 1999 annual report on Form 10-K, and in our report dated March 8,
2000, 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, 1999 is fairly stated in all
material respects in relation to the statement of assets, liabilities and trust
corpus included in the trust's 1999 annual report on Form 10-K from which it has
been derived.



ARTHUR ANDERSEN LLP

Fort Worth, Texas
July 5, 2000

                                                                               5
<PAGE>

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

Condensed Statements of Assets, Liabilities and Trust Corpus
<TABLE>
<CAPTION>


                                                           June 30,    December 31,
                                                             2000          1999
                                                         -----------   ------------
                                                         (Unaudited)
<S>                                                      <C>           <C>
ASSETS

Cash and short-term investments........................  $   839,395    $   912,164

Interest to be received................................        2,537          1,840

Net profits interests in oil and gas properties - net..   31,983,302     33,005,334
                                                         -----------   ------------

                                                         $32,825,234    $33,919,338
                                                         ===========   ============


LIABILITIES AND TRUST CORPUS

Distribution payable to unitholders....................  $   841,932    $   914,004

Trust corpus (6,000,000 units of beneficial interest
  authorized and outstanding)..........................   31,983,302     33,005,334
                                                         -----------   ------------

                                                         $32,825,234    $33,919,338
                                                         ===========   ============

</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             Six Months Ended
                                                                    June 30                      June 30
                                                           ----------------------        ----------------------
                                                               2000       1999               2000       1999
                                                           ----------  ----------        ----------  ----------
<S>                                                       <C>         <C>               <C>         <C>
Royalty income...................................          $2,477,134  $1,213,539        $4,830,014  $2,693,394

Interest income..................................               5,919       1,771             9,868       3,799
                                                           ----------  ----------        ----------  ----------

Total income.....................................           2,483,053   1,215,310         4,839,882   2,697,193

Administration expense...........................              58,423      43,935           114,456      85,430
                                                           ----------  ----------        ----------  ----------

Distributable income.............................          $2,424,630  $1,171,375        $4,725,426  $2,611,763
                                                           ==========  ==========        ==========  ==========

Distributable income per unit (6,000,000 units)..          $ 0.404105  $ 0.195230        $ 0.787571  $ 0.435295
                                                           ==========  ==========        ==========  ==========

</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           Six Months Ended
                                                       June 30                     June 30
                                              --------------------------  -------------------------
                                                  2000          1999          2000          1999
                                              -----------   -----------   -----------   -----------
<S>                                          <C>           <C>           <C>           <C>
Trust corpus, beginning of period......       $32,507,596   $35,570,963   $33,005,334   $36,024,941

Amortization of net profits interests..          (524,294)     (387,853)   (1,022,032)     (841,831)

Distributable income...................         2,424,630     1,171,375     4,725,426     2,611,763

Distributions declared.................        (2,424,630)   (1,171,375)   (4,725,426)   (2,611,763)
                                              -----------   -----------   -----------   -----------

Trust corpus, end of period............       $31,983,302   $35,183,110   $31,983,302   $35,183,110
                                              ===========   ===========   ===========   ===========

</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.

       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, costs deducted in
       the calculation of net proceeds 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
    $29,117,147 as of June 30, 2000 and $28,095,115 as of December 31, 1999.

                                                                               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
    $1.02 per MMBtu for 1999, 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 the
    unitholder's regular tax liability (after the foreign tax credit and certain
    other nonrefundable 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 2000 qualifying sales volumes and the factors used in the
    calculation of the 1999 coal seam tax credit, the credit is estimated to be
    $0.031 per unit for the quarter ended June 30, 2000 and $0.063 per unit for
    the six months ended June 30, 2000. The actual coal seam tax credit per unit
    was $0.040 for the quarter ended June 30, 1999 and $0.082 for the six months
    ended June 30, 1999. Final 2000 coal seam tax credit data will be provided
    to unitholders with year-end tax information.


3.  Excess Costs

    There are no excess costs remaining to be recovered as of June 30, 2000. The
    following is a summary of changes in excess costs for the 75% royalty trust
    interests by conveyance during the three and six months ended June 30, 2000
    and 1999:

<TABLE>
<CAPTION>

                                                          Three Months Ended June 30         Six Months Ended June 30
                                                      -------------------------------   -------------------------------
                                                         2000            1999              2000            1999
                                                      ---------   -------------------   ---------   -------------------
                                                        Texas       Texas    Oklahoma     Texas      Texas     Oklahoma
                                                      ---------   --------   --------   ---------   --------   --------
<S>                                                  <C>         <C>        <C>        <C>         <C>        <C>
Cumulative excess costs and accrued
  interest - beginning of period.....                 $ 145,871   $808,361   $ 19,301   $ 375,802   $519,817   $      -
Excess costs.........................                         -     16,424     46,777           -    292,558     71,126
Recovery of excess costs and
 accrued interest....................                  (147,203)   (83,125)   (52,814)   (383,836)   (83,125)   (58,007)
Accrued interest.....................                     1,332     15,944        951       8,034     28,354      1,096
                                                      ---------   --------   --------   ---------   --------   --------

Cumulative excess costs and
  accrued interest - end of period...                 $       -   $757,604   $ 14,215   $       -   $757,604   $ 14,215
                                                      =========   ========   ========   =========   ========   ========

Net to trust (75%)...................                 $       -   $568,203   $ 10,661   $       -   $568,203   $ 10,661
                                                      =========   ========   ========   =========   ========   ========
</TABLE>

                                                                              10
<PAGE>

 Any 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 as of
 June 30, 1999 were fully recovered in October 1999 and from the Texas 75%
 royalty trust interest as of June 30, 1999 were fully recovered in May 2000.
 See Item 2, "Trustee's Discussion and Analysis - Costs."

                                                                              11
<PAGE>

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 1999 annual report, as well as
the condensed financial statements and notes thereto included in this quarterly
report on Form 10-Q.

Distributable Income

Quarter

For the quarter ended June 30, 2000, royalty income was $2,477,134 compared to
$1,213,539 for the second quarter of 1999.  This 104% increase in royalty income
is the result of higher oil and gas prices.  Because of higher oil prices, the
remaining excess cost balance for the trust was fully recovered in May 2000 and
the Texas 75% royalty trust interests began to contribute to royalty income for
the first time since March 1998. See "Royalty Income" below.

After considering interest income of $5,919 and administration expense of
$58,423, distributable income for the quarter ended June 30, 2000 was
$2,424,630, or $0.404105 per unit of beneficial interest.  For the quarter ended
June 30, 1999, distributable income was $1,171,375, or $0.195230 per unit.
Distributions to unitholders for the quarter ended June 30, 2000 were:
<TABLE>
<CAPTION>

                                                     Distribution
                   Record Date       Payment Date      per Unit
                   --------------    -------------   ------------
                   <S>               <C>             <C>
                   April 28, 2000    May 12, 2000     $ 0.122125
                   May 31, 2000      June 14, 2000      0.141658
                   June 30, 2000     July 17, 2000      0.140322
                                                      ----------

                                                      $ 0.404105
                                                      ==========
</TABLE>

Six Months

For the six months ended June 30, 2000, royalty income was $4,830,014 compared
with $2,693,394 for the same 1999 period.  This 79% increase in royalty income
is because of higher oil and gas prices.  See "Royalty Income" below.

After considering interest income of $9,868 and administration expense of
$114,456, distributable income for the six months ended June 30, 2000 was
$4,725,426, or $0.787571 per unit of beneficial interest.  For the six months
ended June 30, 1999, distributable income was $2,611,763, or $0.435295 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.

                                                                              12
<PAGE>

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 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 is a summary of the calculation of royalty income received by the
trust:

<TABLE>
<CAPTION>

                                          Three Months                           Six Months
                                        Ended June 30 (a)                     Ended June 30 (a)
                                    -----------------------      Increase   ----------------------      Increase
                                       2000         1999        (Decrease)     2000        1999        (Decrease)
                                    ----------   ----------     ----------  ----------  ----------     ----------
<S>                                <C>          <C>             <C>         <C>         <C>            <C>
Sales Volumes
 Oil (Bbls) (b)
  Underlying properties........         81,033       86,866          (7%)       169,492     174,866         (3%)
   Average per day.............            900          976          (8%)           931         966         (4%)
   Royalty trust interests.....         36,737       19,827          85%         72,185      39,258         84%

 Gas (Mcf) (b)
  Underlying properties........        771,057      815,789          (5%)     1,567,071   1,734,614        (10%)
   Average per day.............          8,473        9,064          (7%)         8,563       9,531        (10%)
   Royalty trust interests.....        672,761      708,220          (5%)     1,359,326   1,501,917         (9%)

Average Sales Prices
 Oil (per Bbl).................         $26.86       $12.28         119%         $25.48      $11.36        124%
 Gas (per Mcf).................         $ 2.88       $ 1.79          61%         $ 2.80      $ 1.76         59%

Revenues
 Oil sales.....................     $2,176,883   $1,066,701         104%     $4,317,880  $1,985,861        117%
 Gas sales.....................      2,220,757    1,458,981          52%      4,388,499   3,051,002         44%
                                    ----------   ----------                  ----------  ----------
    Total Revenues.............      4,397,640    2,525,682          74%      8,706,379   5,036,863         73%
                                    ----------   ----------                  ----------  ----------

Costs
 Taxes, transportation
   and other...................        611,211      397,432          54%      1,189,516     629,101         89%
 Production expense (c)........        648,264      625,349           4%      1,241,754   1,195,955          4%
 Development costs.............        134,297       81,786          64%        348,193     441,025        (21%)
 Excess costs..................              -      (63,201)          -               -    (363,684)         -
 Recovery of excess costs
   and accrued interest........        147,203      135,939           8%        383,836     141,132        172%
                                    ----------   ----------                  ----------  ----------
    Total Costs................      1,540,975    1,177,305          31%      3,163,299   2,043,529         55%
                                    ----------   ----------                  ----------  ----------

Net Proceeds...................     $2,856,665   $1,348,377         112%     $5,543,080  $2,993,334         85%
                                    ==========   ==========                  ==========  ==========
Royalty Income.................     $2,477,134   $1,213,539         104%     $4,830,014  $2,693,394         79%
                                    ==========   ==========                  ==========  ==========

</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 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 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.

(c) Includes an overhead fee which is deducted and retained by Cross Timbers
    Oil. This fee is currently $22,570 per month and is subject to adjustment
    each May based on an oil and gas industry index.

                                                                              13
<PAGE>

The following are explanations of significant variances from second quarter 1999
to 2000 and from the first six months of 1999 to the comparable period in 2000:

Sales Volumes

Oil
Decreased oil sales volumes are primarily because of the timing of cash
receipts.  Natural production decline was largely offset by increased production
on one of the Texas working interest properties as a result of carbon dioxide
injections.

Gas
Decreased gas sales volumes for the quarter are primarily because of natural
production decline.  Decreased gas volumes for the six-month period are
primarily because of higher natural decline in coal seam gas production and the
timing of cash receipts, partially offset by purchaser volume adjustments.

Sales Prices

Oil
Lower average 1999 prices reflect abnormally low prices resulting from global
excess supply.  After OPEC members and other oil producers agreed to production
cuts in March 1999, oil prices climbed through the remainder of 1999 and first
quarter 2000.  Increased demand in 2000 has more than offset OPEC production
increases in March and June, sustaining higher prices through June 2000.  The
average West Texas Intermediate posted price for June 2000 was $28.79 per Bbl.
Recently, Saudi Arabia proposed additional production increases to reduce prices
closer to its target price of $25.00 per barrel.

Gas
The average gas price increased 61% for the second quarter and 59% for the six-
month period.  Part of the increase for the six-month period is related to
purchaser deductions which were netted in the gas price prior to second quarter
1999.  Since then, these purchaser deductions are included in taxes,
transportation and other costs (see "Costs" below).  Excluding the effect of
this change, gas prices increased 48% for the six-month period.  Gas prices were
lower in 1999 primarily because of the abnormally warm winter of 1998-1999
experienced across the United States that resulted in higher levels of gas in
storage.  Gas prices began to increase in May 1999 and, after declining briefly
at year end, have continued to strengthen in 2000, as gas storage remains lower
than prior year levels.  At July 5, 2000, the average NYMEX price for the
following twelve months was $3.82 per MMBtu.  The trust's recent gas prices have
averaged $0.40 per MMBtu higher than the NYMEX price, primarily because of the
effect of higher natural gas liquids prices.

Costs

Taxes
Taxes, transportation and other increased primarily as a result of increased
taxes on higher oil and gas revenues. Also, beginning in second quarter 1999,
this cost category has included purchaser deductions for gathering and
compression charges. Prior to second quarter 1999, these charges were netted in
the gas sales price. As a result, taxes, transportation and other includes an
increase of $286,000 in purchaser deductions for the six-month period.

                                                                              14
<PAGE>

Development
Lower development costs for the first six months of 2000 reflect completion of
the carbon dioxide injection project on one of the underlying Texas working
interest properties in third quarter 1999.  Carbon dioxide injectant costs for
this property caused second quarter development costs to increase 64%.

Excess costs
Primarily because of higher oil prices, all excess costs and accrued interest
for the Texas 75% royalty trust interests were fully recovered in second quarter
2000.  After almost two years of excess costs and recovery of these costs, the
Texas 75% royalty trust interests again began contributing to trust royalty
income in May 2000.  There are no excess costs remaining to be recovered as of
June 30, 2000. Excess costs occurred in the 1999 periods because of low oil
prices and costs related to the carbon dioxide injection project. See Note 3 to
condensed financial statements.


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 and industry conditions, are
forward-looking statements.  Although Cross Timbers Oil believes that the
expectations reflected in these forward-looking statements are reasonable,
neither Cross Timbers Oil nor the trustee can give any 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, 1999.

                                                                              15
<PAGE>

PART II - OTHER INFORMATION
---------------------------

Items 1 through 5.  Not Applicable.

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

<TABLE>
<CAPTION>

(a)  Exhibits.

       Exhibit Number
       and Description                                                               Page
       ---------------                                                               ----
       <S>     <C>                                                                   <C>
       (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                                18

(b)  Reports on Form 8-K.

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

                                                                              16
<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      /s/   RON E. HOOPER
                                    ------------------------------------
                                               Ron E. Hooper
                                              Vice President



                                 CROSS TIMBERS OIL COMPANY



Date: July 10, 2000              By      /s/  LOUIS G. BALDWIN
                                    ------------------------------------
                                              Louis G. Baldwin
                                       Executive Vice President and
                                         Chief Financial Officer

                                                                              17