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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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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, 2006

OR

 ̈TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

Commission File Number: 1-10982



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Cross Timbers Royalty Trust

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Texas                                                          |  | 75-6415930                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer 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 changed since last report)

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated
filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ̈Accelerated filer     x     Non-accelerated filer ̈

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

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

Outstanding as of July 1, 2006

6,000,000

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CROSS TIMBERS ROYALTY TRUST

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006



|         |  |                                                                                                           |  |     
|-------- |  | --------------------------------------------------------------------------------------------------------- |  | ----
|         |  | 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, 2006 and December 31, 2005       |  | 6   
|         |  |                                                                                                          
|         |  | Condensed Statements of Distributable Income for the Three and Six Months Ended June 30, 2006 and 2005    |  | 7   
|         |  |                                                                                                          
|         |  | Condensed Statements of Changes in Trust Corpus for the Three and Six Months Ended June 30, 2006 and 2005 |  | 8   
|         |  |                                                                                                          
|         |  | Notes to Condensed Financial Statements                                                                   |  | 9   
|         |  |                                                                                                          
|Item 2.  |  | Trustees Discussion and Analysis                                                                         |  | 11  
|         |  |                                                                                                          
|Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                                                |  | 16  
|         |  |                                                                                                          
|Item 4.  |  | Controls and Procedures                                                                                   |  | 16  
|         |  |                                                                                                          
|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, 2006, and the distributable income and changes in trust corpus for the three- and six-month periods ended June 30, 2006 and 2005, have been included. Distributable income for such interim periods is not
necessarily indicative of distributable income for the full year.



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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, 2006 and the related condensed statements of
distributable income and changes in trust corpus for the three- and six-month periods ended June 30, 2006 and 2005. These condensed financial statements are the responsibility of the trustee.

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

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

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

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the statement of assets,
liabilities and trust corpus of the Cross Timbers Royalty Trust as of December 31, 2005, and the related statements of distributable income and changes in trust corpus for the year then ended (not presented herein), included in the trusts
2005 Annual Report on Form 10-K, and in our report dated March 16, 2006, 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, 2005 is fairly stated, in all material respects, in relation to the statement of assets, liabilities and trust corpus included in the trusts 2005 Annual Report on Form 10-K from which it has been
derived.

KPMG LLP

Dallas, Texas

July 27, 2006



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CROSS TIMBERS ROYALTY TRUST

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Condensed Statements of Assets, Liabilities
and Trust Corpus



|                                                                                 |  |               |             |                  |   |           
|-------------------------------------------------------------------------------- |  | ------------- | ----------- | ---------------- | - | ----------
|                                                                                 |  | June 30, 2006 |             | December 31,2005
|ASSETS                                                                           |  |               | (Unaudited) |                  |   |           
|                                                                                 |  |              
|Cash and short-term investments                                                  |  | $             | 1,768,243   |                  | $ | 2,111,521 
|                                                                                 |  |              
|Interest to be received                                                          |  |               | 2,645       |                  |   | 2,489     
|                                                                                 |  |              
|Net profits interests in oil and gas propertiesnet (Note 1)                     |  |               | 20,452,368  |                  |   | 21,204,723
|                                                                                 |  |               |             |                  |   |           
|                                                                                 |  | $             | 22,223,256  |                  | $ | 23,318,733
|                                                                                 |  |               |             |                  |   |           
|                                                                                 |  |              
|LIABILITIES AND TRUST CORPUS                                                     |  |               |             |                  |   |           
|                                                                                 |  |              
|Distribution payable to unitholders                                              |  | $             | 1,770,888   |                  | $ | 2,114,010 
|                                                                                 |  |              
|Trust corpus (6,000,000 units of beneficial interest authorized and outstanding) |  |               | 20,452,368  |                  |   | 21,204,723
|                                                                                 |  |               |             |                  |   |           
|                                                                                 |  | $             | 22,223,256  |                  | $ | 23,318,733
|                                                                                 |  |               |             |                  |   |           

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



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CROSS TIMBERS ROYALTY TRUST

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Condensed
Statements of Distributable Income (Unaudited)



|                                                |  |                           |           |                          |   |           |  |      |            |  |   |          
|----------------------------------------------- |  | ------------------------- | --------- | ------------------------ | - | --------- |  | ---- | ---------- |  | - | ---------
|                                                |  | Three Months EndedJune 30 |           | Six Months Ended June 30
|                                                |  | 2006                      |           | 2005                     |   | 2006      |  | 2005
|Net profits income                              |  | $                         | 5,216,449 |                          | $ | 4,589,164 |  | $    | 12,365,700 |  | $ | 9,051,260
|                                                |  |                           |           |                         
|Interest income                                 |  |                           | 10,859    |                          |   | 4,302     |  |      | 26,141     |  |   | 7,821    
|                                                |  |                           |           |                          |   |           |  |      |            |  |   |          
|                                                |  |                           |           |                         
|Total income                                    |  |                           | 5,227,308 |                          |   | 4,593,466 |  |      | 12,391,841 |  |   | 9,059,081
|                                                |  |                           |           |                         
|Administration expense                          |  |                           | 163,134   |                          |   | 139,618   |  |      | 275,915    |  |   | 264,689  
|                                                |  |                           |           |                          |   |           |  |      |            |  |   |          
|                                                |  |                           |           |                         
|Distributable income                            |  | $                         | 5,064,174 |                          | $ | 4,453,848 |  | $    | 12,115,926 |  | $ | 8,794,392
|                                                |  |                           |           |                          |   |           |  |      |            |  |   |          
|                                                |  |                           |           |                         
|Distributable income per unit (6,000,000 units) |  | $                         | 0.844029  |                          | $ | 0.742308  |  | $    | 2.019321   |  | $ | 1.465732 
|                                                |  |                           |           |                          |   |           |  |      |            |  |   |          

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



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CROSS TIMBERS ROYALTY TRUST

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Condensed
Statements of Changes in Trust Corpus(Unaudited)



|                                      |  |                            |            |   |                          |   |            |      |  |   |             |   |  |   |            |  
|------------------------------------- |  | -------------------------- | ---------- | - | ------------------------ | - | ---------- | ---- |  | - | ----------- | - |  | - | ---------- | -
|                                      |  | Three Months Ended June 30 |            |   | Six Months Ended June 30 |  
|                                      |  | 2006                       |            |   | 2005                     |   |            | 2006 |  |   | 2005        |  
|Trust corpus, beginning of period     |  | $                          | 20,778,749 |   |                          | $ | 22,411,018 |      |  | $ | 21,204,723  |   |  | $ | 22,847,694 |  
|                                      |  |                            |            |  
|Amortization of net profits interests |  |                            | (326,381   | ) |                          |   | (443,720   | )    |  |   | (752,355    | ) |  |   | (880,396   | )
|                                      |  |                            |            |  
|Distributable income                  |  |                            | 5,064,174  |   |                          |   | 4,453,848  |      |  |   | 12,115,926  |   |  |   | 8,794,392  |  
|                                      |  |                            |            |  
|Distributions declared                |  |                            | (5,064,174 | ) |                          |   | (4,453,848 | )    |  |   | (12,115,926 | ) |  |   | (8,794,392 | )
|                                      |  |                            |            |   |                          |   |            |      |  |   |             |   |  |   |            |  
|                                      |  |                            |            |  
|Trust corpus, end of period           |  | $                          | 20,452,368 |   |                          | $ | 21,967,298 |      |  | $ | 20,452,368  |   |  | $ | 21,967,298 |  
|                                      |  |                            |            |   |                          |   |            |      |  |   |             |   |  |   |            |  

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



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CROSS TIMBERS ROYALTY TRUST

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Notes to
Condensed Financial Statements(Unaudited)



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

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



| | - | Net profits income recorded for a month is the amount computed and paid by XTO Energy Inc., the owner of the underlying properties, to Bank of America, N.A., as
trustee for the trust. 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 GAAP because revenues are recognized when received
rather than accrued in the month of production, expenses are recognized when paid rather than when incurred, and certain cash reserves may be established for contingencies which would not be accrued under GAAP. This comprehensive basis of accounting
other than 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 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



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on the modified cash basis, as described above, most accounting pronouncements are not applicable to the trusts financial statements.

The initial carrying value of the net profits interests of $61,100,449 represents XTO Energys historical net book value on
February 12, 1991, the creation date of the trust. Amortization of the net profits interests is calculated on a unit-of-production basis and is charged directly to trust corpus. Accumulated amortization was $40,648,081 as of June 30, 2006
and $39,895,726 as of December 31, 2005.



|2. | Contingencies
|-- | -------------

Several states have enacted legislation to require state income tax withholding from nonresident recipients of oil and gas proceeds. After consultation with its state tax counsel, XTO Energy has advised the trustee that it believes the
trust is not subject to these withholding requirements. However, regulations are subject to change by the various states, which could change this conclusion. Should the trust be required to withhold state taxes, distributions to the unitholders
would be reduced by the required amount, subject to the unitholders right to file a state tax return to claim any refund due.

In May 2006, the State of Texas passed legislation to implement a new margin tax of 1% to be imposed on revenues less certain costs, as specified in the legislation, generated from Texas activities beginning in 2007. Entities subject to the
tax generally include trusts, unless otherwise exempt, and various other types of entities. Trusts that meet statutory requirements are generally exempt from the margin tax as passive entities; however, there is currently no clear
authority that the trust meets requirements for the margin tax exemption as a passive entity. Additional legislative action or issuance of applicable administrative rules by the state comptroller will be necessary to determine if the trust is
exempt. Approximately 30% of the trusts net profits income is generated from underlying properties in Texas.



|3. | XTO Energy Inc.
|-- | ---------------

In January 2006, XTO Energy announced that it will consider selling the underlying properties. Any sale is dependent upon XTO Energys ability to structure a tax-efficient transaction and receive sufficient consideration from a buyer
it deems to be qualified.



|4. | Reversion Agreement
|-- | -------------------

Certain of the properties underlying the 90% net profits interests are subject to a reversion agreement between XTO Energy and an unrelated third party. The agreement calls for XTO Energy to transfer 25% of its
interest in those properties to the third party when net amounts received by XTO Energy from the properties subject to the agreement equal the purchase price of the properties plus a 1% per month return on the unrecouped purchase price, known
as payout. At the time payout occurs and the 25% interest is transferred to the third party, net proceeds payable to the trust and trust distributions to unitholders will be reduced. Based on recent prices and sales volumes, XTO Energy has informed
the trustee that payout is likely to occur this year, which will thereafter reduce monthly distributions by approximately 5%. Anticipated payout has recently been accelerated by higher product prices and increased development of properties subject
to the reversion agreement. Changes in product prices and sales volumes significantly affect when payout occurs.



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Item 2. Trustees Discussion and Analysis.

The following discussion should be read in conjunction
with the trustees discussion and analysis contained in the trusts 2005 annual report, as well as the condensed financial statements and notes thereto included in this quarterly report on Form 10-Q. The trusts Annual Report on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are available on the trusts web site at www.crosstimberstrust.com.

Distributable Income

Quarter

For the quarter ended June 30, 2006, net profits income was $5,216,449 compared to $4,589,164 for second quarter 2005. This 14% increase in net profits income is the result of higher oil and gas prices, partially
offset by decreased oil and gas sales volumes and increased production expense. See Net Profits Income on the following page.

After considering interest income of $10,859 and administration expense of $163,134, distributable income for the quarter ended June 30, 2006 was $5,064,174, or $0.844029 per unit of beneficial interest. Administration expense for the
quarter increased 17% from the prior year quarter primarily because of the timing of expenditures. For second quarter 2005, distributable income was $4,453,848, or $0.742308 per unit. Distributions to unitholders for the quarter ended June 30,
2006 were:



|               |  |               |  |                      
|-------------- |  | ------------- |  | ---------------------
|Record Date    |  | Payment Date  |  | Distribution per Unit
|April 28, 2006 |  | May 12, 2006  |  | $0.304247            
|May 31, 2006   |  | June 14, 2006 |  | 0.244634             
|June 30, 2006  |  | July 17, 2006 |  | 0.295148             
|               |  |               |  |                      
|               |  |               |  | $0.844029            
|               |  |               |  |                      
|               |  |               |  |                      

Six Months

For the six months ended June 30, 2006, net profits income was $12,365,700 compared to $9,051,260 for the same 2005 period. This 37% increase in net profits income is the result of higher oil and gas prices and
increased gas sales volumes, partially offset by increased production expense. See Net Profits Income on the following page.

After considering interest income of $26,141 and administration expense of $275,915, distributable income for the six months ended June 30, 2006 was $12,115,926, or $2.019321 per unit of beneficial interest. For the six months ended
June 30, 2005, distributable income was $8,794,392, or $1.465732 per unit.



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Net Profits Income

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



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



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



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

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



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



|                                |  |                               |  |                     |  |                             |      |                     |      |             |  |     
|------------------------------- |  | ----------------------------- |  | ------------------- |  | --------------------------- | ---- | ------------------- | ---- | ----------- |  | ----
|                                |  | Three Months Ended June 30(a) |  | Increase (Decrease) |  | Six Months Ended June 30(a) |      | Increase (Decrease)
|                                |  | 2006                          |  | 2005                |  |                             | 2006 |                     | 2005 |            
|Sales Volumes                   |  |                               |  |                     |  |                             |      |                     |      |             |  |     
|Oil (Bbls) (b)                  |  |                               |  |                     |  |                             |      |                     |      |             |  |     
|Underlying properties           |  | 68,207                        |  | 69,240              |  | (2%)                        |      | 137,029             |      | 137,686     |  | (1%)
|Average per day                 |  | 766                           |  | 778                 |  | (2%)                        |      | 757                 |      | 761         |  | (1%)
|Net profits interests           |  | 36,037                        |  | 38,720              |  | (7%)                        |      | 68,745              |      | 74,391      |  | (8%)
|                                |  |                               |  |                     |  |                            
|Gas (Mcf) (b)                   |  |                               |  |                     |  |                             |      |                     |      |             |  |     
|Underlying properties           |  | 547,119                       |  | 587,848             |  | (7%)                        |      | 1,345,010           |      | 1,192,691   |  | 13% 
|Average per day                 |  | 6,079                         |  | 6,532               |  | (7%)                        |      | 7,390               |      | 6,553       |  | 13% 
|Net profits interests           |  | 478,852                       |  | 516,161             |  | (7%)                        |      | 1,170,936           |      | 1,041,681   |  | 12% 
|                                |  |                               |  |                     |  |                            
|Average Sales Prices            |  |                               |  |                     |  |                             |      |                     |      |             |  |     
|Oil (per Bbl)                   |  | $55.95                        |  | $47.16              |  | 19%                         |      | $55.36              |      | $44.72      |  | 24% 
|Gas (per Mcf)                   |  | $8.45                         |  | $6.78               |  | 25%                         |      | $8.95               |      | $6.87       |  | 30% 
|                                |  |                               |  |                     |  |                            
|Revenues                        |  |                               |  |                     |  |                             |      |                     |      |             |  |     
|Oil sales                       |  | $3,815,929                    |  | $3,265,472          |  | 17%                         |      | $7,586,284          |      | $6,157,053  |  | 23% 
|Gas sales                       |  | 4,624,046                     |  | 3,986,406           |  | 16%                         |      | 12,036,891          |      | 8,194,343   |  | 47% 
|                                |  |                               |  |                     |  |                             |      |                     |      |             |  |     
|Total Revenues                  |  | 8,439,975                     |  | 7,251,878           |  | 16%                         |      | 19,623,175          |      | 14,351,396  |  | 37% 
|                                |  |                               |  |                     |  |                             |      |                     |      |             |  |     
|                                |  |                               |  |                     |  |                            
|Costs                           |  |                               |  |                     |  |                             |      |                     |      |             |  |     
|Taxes, transportation and other |  | 1,168,294                     |  | 1,004,500           |  | 16%                         |      | 2,875,393           |      | 1,964,212   |  | 46% 
|Production expense(c)           |  | 1,147,521                     |  | 823,129             |  | 39%                         |      | 2,205,873           |      | 1,692,056   |  | 30% 
|Development costs               |  | 123,032                       |  | 82,303              |  | 49%                         |      | 382,711             |      | 183,125     |  | 109%
|                                |  |                               |  |                     |  |                             |      |                     |      |             |  |     
|Total Costs                     |  | 2,438,847                     |  | 1,909,932           |  | 28%                         |      | 5,463,977           |      | 3,839,393   |  | 42% 
|                                |  |                               |  |                     |  |                             |      |                     |      |             |  |     
|                                |  |                               |  |                     |  |                            
|Net Proceeds                    |  | $6,001,128                    |  | $5,341,946          |  | 12%                         |      | $14,159,198         |      | $10,512,003 |  | 35% 
|                                |  |                               |  |                     |  |                             |      |                     |      |             |  |     
|                                |  |                               |  |                     |  |                            
|Net Profits Income              |  | $5,216,449                    |  | $4,589,164          |  | 14%                         |      | $12,365,700         |      | $9,051,260  |  | 37% 
|                                |  |                               |  |                     |  |                             |      |                     |      |             |  |     

---

|(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. Changes in any of these factors may result in disproportionate fluctuations in volumes allocated to the net profits interests. Therefore, comparative discussion of oil and gas sales volumes is based on the
underlying properties.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | Includes an overhead charge which is deducted and retained by XTO Energy. As of June 30, 2006, this charge was $27,844 per month (including a monthly
overhead charge of $2,536 which XTO Energy deducts as operator of the Penwell 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
2005 to second quarter 2006 and from the first six months of 2005 to the comparable period in 2006:

Sales Volumes

Oil

Oil sales volumes decreased 2% for second
quarter 2006 and decreased 1% for the first six months of 2006 as compared with the same 2005 periods primarily because natural production decline and prior period volume adjustments in 2006 were largely offset by the timing of cash receipts.

Gas

Gas sales volumes decreased 7%
for second quarter 2006 and increased 13% for the six-month period as compared with the same 2005 periods. Decreased gas sales volumes for the quarter are primarily because of natural production decline. Increased gas sales volumes for the six-month
period are primarily because of 2006 cash receipts from purchasers related to prior period gas sales from new wells, partially offset by natural production decline.

Sales Prices

Oil

The average oil price increased 19% to $55.95 per Bbl for the second quarter and 24% to $55.36 per Bbl for the six-month period. Oil prices were higher for the second quarter and for the six-month period primarily
because of increasing global demand and supply shortage concerns, political instability, reduced production as a result of tropical storms and hurricanes in the Gulf of Mexico in 2005 and inadequate sour crude refining capacity. Declining oil and
gasoline supplies, strong global demand and geopolitical concerns have caused recent oil prices to generally remain at or above $70.00 per Bbl. Because of rising tension in the Middle East, oil prices increased to record levels in July 2006,
exceeding $78.00 per Bbl. The average NYMEX price for May and June 2006 was $70.94 per Bbl. At July 25, 2006, the average NYMEX futures price for the following twelve months was $76.02 per Bbl. Recent trust oil prices have averaged
approximately 10% lower than the NYMEX price.

Gas

Gas prices for the second quarter increased 25% to $8.45 per Mcf and for the six-month period increased 30% to $8.95 per Mcf. Gas prices were higher for the second quarter and for the six-month period primarily
because of increased demand and declining North American production. Prices will continue to be affected by weather, the U.S. economy, the level of North American production, crude oil prices and import levels of liquified natural gas, and are
expected to remain volatile. The second quarter 2006 gas price is primarily related to production from January through March 2006, when the average NYMEX price was $7.91 per MMBtu. A warmer-than-normal winter and increased gas inventories have
caused recent prices to decline. The average NYMEX price for April through June 2006 was $6.66 per MMBtu. At July 25, 2006, the average NYMEX futures price for the following twelve months was $8.55 per MMBtu. Recent trust gas prices have been
approximately 3% higher than the NYMEX price.



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##### Table of Contents

Costs

Taxes

Taxes, transportation and other increased 16% for the second quarter and 46% for the six-month period primarily because of increased
production taxes related to higher revenues. In addition, increased taxes, transportation and other for the six-month period were higher because of increased property taxes related to the timing of cash disbursements.

Production Expense

Production expense was 39%
higher for the second quarter and 30% higher for the six-month period primarily because of increased power and fuel, maintenance, overhead and other costs, as well as the timing of projects and cash disbursements.

Development

Development costs increased 49% for the
second quarter and 109% for the six-month period primarily because of increased activity and costs related to properties underlying the 75% net profits interests.

Reversion Agreement

Certain of the properties underlying the 90% net profits interests are subject to a reversion
agreement between XTO Energy and an unrelated third party. The agreement calls for XTO Energy to transfer 25% of its interest in those properties to the third party when net amounts received by XTO Energy from the properties subject to the agreement
equal the purchase price of the properties plus a 1% per month return on the unrecouped purchase price, known as payout. At the time payout occurs and the 25% interest is transferred to the third party, net proceeds payable to the trust and
trust distributions to unitholders will be reduced. Based on recent prices and sales volumes, XTO Energy has informed the trustee that payout is likely to occur this year, which will thereafter reduce monthly distributions by approximately 5%.
Anticipated payout has recently been accelerated by higher product prices and increased development of properties subject to the reversion agreement. Changes in product prices and sales volumes significantly affect when payout occurs.

Forward-Looking Statements

This report on Form 10-Q
includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of
historical fact included in this Form 10-Q including, without limitation, statements regarding the net profits interests, underlying properties, development activities, development, production and other costs and expenses, oil and gas prices and
differentials to NYMEX prices, supply shortages, distributions to unitholders, timing of payout under the reversion agreement 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, 2005, which is incorporated by this reference as though fully set forth herein. Although XTO Energy and the trustee believe that the
expectations reflected in such forward-looking statements are reasonable, neither XTO Energy nor the trustee can give any assurance that such expectations will prove to be correct.



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##### Table of Contents

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

There have been no material changes
in the trusts market risks, as disclosed in Part II, Item 7A of the trusts Annual Report on Form 10-K for the year ended December 31, 2005.

Item 4. Controls and Procedures.

As of the end of the period covered by this report, the trustee carried
out an evaluation of the effectiveness of the design and operation of the trusts disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based upon that evaluation, the trustee concluded that the trusts
disclosure controls and procedures are functioning effectively to ensure that information required to be disclosed in reports filed with the Securities and Exchange Commission is recorded, processed, summarized and reported within the periods
required and that this information is accumulated and communicated to allow timely decisions regarding required disclosures. In its evaluation of disclosure controls and procedures, the trustee has relied, to the extent considered reasonable, on
information provided by XTO Energy. There has not been any change in the trusts internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the
trusts internal control over financial reporting.



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##### Table of Contents

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, 2005.

Items 2 through 5.

Not applicable.

Item 6. Exhibits.

(a) Exhibits.



| |  |                                |  |                                                                                                                                                                                            
| |  | ------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Exhibit Number and Description |  |                                                                                                                                                                                            
| |  |                               
| |  | (15)                           |  | Awareness letter of KPMG LLP                                                                                                                                                               
| |  |                               
| |  | (23)                           |  | Consent of Miller and Lents, Ltd.                                                                                                                                                          
| |  |                               
| |  | (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 March 16, 2006 (incorporated herein
by reference)



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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                                      
|                    |  | 
|                    |  |  |  | XTO ENERGY INC.                  
|                    |  |  | 
|Date: July 28, 2006 |  |  |  | By:                               |  | /S/ LOUIS G. BALDWIN
|                    |  |  |  |                                   |  |                      |  | Louis G. Baldwin                                    
|                    |  |  |  |                                   |  |                      |  | Executive Vice President and Chief Financial Officer



18