<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549



                                   FORM 10-Q



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


               For the Quarterly Period Ended September 30, 1997
                                              ------------------


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



                          CROSS TIMBERS ROYALTY TRUST



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


                      NationsBank of Texas, N.A., Trustee
                                 P.O. Box 1317
                         Fort Worth, Texas 76101-1317

                         Telephone Number 817/390-6592



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

Number of units of beneficial interest outstanding at October 15, 1997: 
6,000,000
---------

                                  Page 1 of 16
<PAGE>
 
CROSS TIMBERS ROYALTY TRUST

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



Item 1.  Financial Statements.

The condensed financial statements included herein are presented, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in annual
financial statements have been condensed or omitted pursuant to such rules and
regulations, although the Trustee believes that the disclosures are adequate to
make the information presented not misleading.  These condensed financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the Trust's latest annual report on Form 10-K.  In the
opinion of the Trustee, all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the assets, liabilities and trust
corpus of the Cross Timbers Royalty Trust at September 30, 1997, and the
distributable income and changes in trust corpus for the three and nine-month
periods ended September 30, 1997 and 1996, have been included.  Distributable
income for such interim periods is not necessarily indicative of the
distributable income for the full year.

Arthur Andersen LLP, independent certified public accountants, have made a
limited review of the condensed financial statements as of September 30, 1997,
and for the three and nine-month periods ended September 30, 1997 and 1996
included herein.

                                                                               2
<PAGE>
 
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



NationsBank of Texas, N.A., as Trustee
 for the Cross Timbers Royalty Trust:

We have reviewed the accompanying condensed statement of assets, liabilities and
trust corpus of the Cross Timbers Royalty Trust as of September 30, 1997 and the
related condensed statements of distributable income and changes in trust corpus
for the three and nine-month periods ended September 30, 1997 and 1996.  These
financial statements are the responsibility of the Trustee.

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

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

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

We have previously audited, in accordance with generally accepted auditing
standards, the statement of assets, liabilities and trust corpus of the Cross
Timbers Royalty Trust as of December 31, 1996 included in the Trust's 1996
annual report on Form 10-K, and in our report dated March 13, 1997, 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, 1996 is fairly stated in all material respects in
relation to the statement of assets, liabilities and trust corpus included in
the Trust's 1996 annual report on Form 10-K from which it has been derived.



ARTHUR ANDERSEN LLP

Fort Worth, Texas
October 8, 1997

                                                                               3
<PAGE>
 
CROSS TIMBERS ROYALTY TRUST
--------------------------------------------------------------------------------
CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS

<TABLE>
<CAPTION>
 
 
                                                   SEPTEMBER 30,   DECEMBER 31,
                                                        1997           1996
                                                   -------------   ------------
                                                    (Unaudited)
<S>                                                <C>             <C>
 
ASSETS
 
Cash and short-term investments..................    $   568,419    $ 1,376,687
 
Interest to be received..........................          1,005          1,924
 
Net overriding royalty interests in oil and gas
  properties - net (Note 1)......................     38,768,008     41,337,673
                                                     -----------    -----------
 
                                                     $39,337,432    $42,716,284
                                                     ===========    ===========
 
 
LIABILITIES AND TRUST CORPUS
 
Distribution payable to Unit holders.............    $   569,424    $ 1,378,611
 
Trust corpus (6,000,000 Units of beneficial
  interest authorized and outstanding)...........     38,768,008     41,337,673
                                                     -----------    -----------
 
                                                     $39,337,432    $42,716,284
                                                     ===========    ===========
 
</TABLE>



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

                                                                               4
<PAGE>
 
CROSS TIMBERS ROYALTY TRUST
--------------------------------------------------------------------------------

CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (Unaudited)

<TABLE>
<CAPTION>
 
                                          THREE MONTHS ENDED       NINE MONTHS ENDED 
                                             SEPTEMBER 30,           SEPTEMBER 30,  
                                        ----------------------  ----------------------
                                           1997        1996        1997        1996
                                        ----------  ----------  ----------  ----------  
<S>                                     <C>         <C>         <C>         <C>         
 
Royalty income.......................   $2,158,987  $1,873,196  $8,526,022  $5,341,840
                                    
Interest income......................        3,550       2,510      13,065       7,380
                                        ----------  ----------  ----------  ----------
                                    
Total income.........................    2,162,537   1,875,706   8,539,087   5,349,220
                                    
Administration expense...............       44,404      80,507     134,780     169,603
                                        ----------  ----------  ----------  ----------
                                    
Distributable income.................   $2,118,133  $1,795,199  $8,404,307  $5,179,617
                                        ==========  ==========  ==========  ==========
                                    
Distributable income per Unit       
   (6,000,000 Units).................   $  .353022  $  .299200  $ 1.400717  $  .863271
                                        ==========  ==========  ==========  ==========
 
</TABLE>



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

                                                                               5
<PAGE>
 
CROSS TIMBERS ROYALTY TRUST
--------------------------------------------------------------------------------

CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (Unaudited)

<TABLE>
<CAPTION>
 
 
                                                THREE MONTHS ENDED           NINE MONTHS ENDED 
                                                   SEPTEMBER 30,               SEPTEMBER 30,  
                                            -------------------------   -------------------------
                                                1997          1996          1997          1996
                                            -----------   -----------   -----------   -----------  
<S>                                         <C>           <C>           <C>           <C>         
 
Trust Corpus, beginning of period........   $39,507,766   $43,469,423   $41,337,673   $45,118,209
                                                                                      
Amortization of net overriding                                                        
  royalty interests......................      (739,758)     (872,453)   (2,569,665)   (2,521,239)
                                                                                      
Distributable income.....................     2,118,133     1,795,199     8,404,307     5,179,617
                                                                                      
Distributions declared...................    (2,118,133)   (1,795,199)   (8,404,307)   (5,179,617)
                                            -----------   -----------   -----------   -----------
                                                                                      
Trust Corpus, end of period..............   $38,768,008   $42,596,970   $38,768,008   $42,596,970
                                            ===========   ===========   ===========   ===========
 
</TABLE>


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

                                                                               6
<PAGE>
 
CROSS TIMBERS ROYALTY TRUST
--------------------------------------------------------------------------------
NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)



1.  BASIS OF ACCOUNTING

    The financial statements of the Cross Timbers Royalty Trust ("the 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 ("Cross Timbers Oil"), to
      NationsBank of Texas, N.A. ("Trustee"), as Trustee for the Trust. Royalty
      income consists of the amounts received by Cross Timbers Oil from the sale
      of production less applicable costs ("net proceeds") from the properties
      underlying the net overriding royalty interests ("Royalty Trust
      Interests") conveyed to the Trust. Net proceeds are multiplied by net
      profit percentages of 90% in the case of Royalty Trust Interests carved
      from certain royalty interests in New Mexico, Oklahoma and Texas ("90%
      Royalty Trust Interests") and 75% in the case of Royalty Trust Interests
      carved from seven working interest properties in Oklahoma and Texas ("75%
      Royalty Trust Interests").

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

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

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

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

    - Distributions to Unit holders 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 the net book value from the historical
    accounting records (successful efforts method) of predecessors to Cross
    Timbers Oil on February 12, 1991, the creation date of the Trust.
    Amortization of the Royalty Trust Interests is calculated on a unit-of-
    production

                                                                               7
<PAGE>
 
    basis and is charged directly to trust corpus. Accumulated amortization as
    of September 30, 1997 and December 31, 1996 is $22,332,441 and $19,762,776,
    respectively.


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 Unit holders 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 Unit
    holders 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
    $1.03 per MMBtu for 1996, is recalculated annually based on each year's
    qualified production through the year 2002. Such credit, based on the Unit
    holder's pro rata share of qualifying production, may not reduce his regular
    tax liability (after the foreign tax credit and certain other non-refundable
    credits) below his tentative minimum tax. Any part of the Section 29 credit
    not allowed for the tax year solely because of this limitation is subject to
    certain carryover provisions. Unit holders should consult their tax advisors
    regarding use of this credit and other Trust tax compliance matters.

    Based on 1997 qualifying sales volumes and the factors used in the
    calculation of the 1996 coal seam tax credit, the credit for the quarter and
    nine months ended September 30, 1997 is estimated to be $.054 and $.158 per
    Unit, respectively. The actual coal seam tax credit for the quarter and nine
    months ended September 30, 1996 was $.046 and $.148, respectively. Final
    1997 coal seam tax credit data will be provided to Unit holders with year-
    end tax information.


3.  CROSS TIMBERS OIL COMPANY

    As of October 15, 1997, Cross Timbers Oil owned 22.1% of the outstanding
    Trust Units.


4.  LITIGATION

    In May and July 1997, Cross Timbers Oil received suspended revenues related
    to a lawsuit settlement. See Item I of Part II, "Legal Proceedings."

                                                                               8
<PAGE>
 
Item 2.  Trustee's Discussion and Analysis.

Three Months Ended September 30, 1997 and 1996
----------------------------------------------

For the quarter ended September 30, 1997, royalty income was $2,158,987 compared
with $1,873,196 for the third quarter of 1996.  This 15% increase in royalty
income is primarily the result of higher gas prices and lawsuit settlement
proceeds of $268,000 received during the quarter.

After considering interest income of $3,550 and administration expense of
$44,404, distributable income for the quarter ended September 30, 1997 was
$2,118,133, or $.353022 per Unit of beneficial interest. Distributions of
$.110818, $.147300 and $.094904 per Unit were made to Unit holders of record on
July 31, August 29 and September 30, 1997, respectively.  For the quarter ended
September 30, 1996, distributable income was $1,795,199, or $.299200 per Unit.

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:  1) oil and gas sales volumes, 2) oil and gas
sales prices and 3) costs deducted in the calculation of royalty income.
Because properties underlying the 90% Royalty Trust Interests are royalty and
overriding royalty interests, they generally bear no costs other than production
and property taxes, related legal costs, and marketing and 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.

Volumes

Oil sales volumes decreased 2% from third quarter 1996 to 1997 primarily because
of natural production decline.  Third quarter gas sales volumes increased 22%
from 1996 to 1997.  This increase is primarily the result of 219,000 Mcf
attributed to suspended revenues received in a lawsuit settlement.  See Item I
of Part II, "Legal Proceedings."

Prices

The average oil price for third quarter 1997 was $17.35 per barrel, a decrease
of 7% from the third quarter 1996 average price of $18.61.

The average gas sales price for the third quarter of 1997 was $1.72 per Mcf, an
increase of 14% from the 1996 average price of $1.51 per Mcf.   San Juan Basin
gas prices significantly improved over these periods because of increased demand
in California, as well as expanded markets provided by eastward bound pipeline
capacity from the San Juan Basin.

Costs

Costs deducted in the calculation of third quarter 1997 royalty income (see
"Calculation of Royalty Income") increased 7% or $89,890 from total costs for
third quarter 1996.  This was the result of a 53% or $125,707 increase in
production and property taxes,  partially offset by a 10% or $29,961 decrease in
development costs and a 1% or $5,856 decrease in production expenses.  Increased
production and property taxes were the result of a $78,000 increase in estimated
property taxes and increased production taxes related to higher oil and gas
revenues, while decreased development costs were caused by a decline in drilling
activity on the underlying working interest properties.

                                                                               9
<PAGE>
 
Nine Months Ended September 30, 1997 and 1996
---------------------------------------------

For the nine months ended September 30, 1997, royalty income was $8,526,022
compared with $5,341,840 for the same 1996 period.  Higher oil and gas prices
and lawsuit settlement proceeds of $733,000 were the primary reasons for this
60% increase in royalty income.

After considering interest income of $13,065 and administration expense of
$134,780, distributable income for the nine months ended September 30, 1997 was
$8,404,307, or $1.400717 per Unit of beneficial interest. For the nine months
ended September 30, 1996, distributable income was $5,179,617, or $.863271 per
Unit.

Volumes

Oil sales volumes for the first nine months of 1997 decreased 4% from the
comparable 1996 period, primarily because of natural production decline.  Gas
sales volumes increased 20% from the first nine months of 1996 to 1997.  The
increase in gas sales volumes is primarily the result of 636,000 Mcf attributed
to suspended revenues received in a lawsuit settlement, partially offset by
natural decline in production.  See Item I of Part II, "Legal Proceedings."

Prices

The average oil price for the first nine months of 1997 was $19.62 per barrel,
an increase of 11% from the comparable 1996 price of $17.72.

The average gas price for the first nine months of 1997 increased to $2.10 per
Mcf, or 46% above the comparable 1996 price of $1.44.  This increase was
primarily caused by significantly higher weather-related prices in November
through February (received by the Trust in February through May).  Also, 1997
San Juan Basin gas prices improved significantly with increased California
demand and additional eastward bound pipeline capacity.

Costs

Costs deducted in the calculation of royalty income for the first nine months of
1997 decreased 3% or $127,711 from total costs for the first nine months of
1996.  This is a result of a 31% or $271,228 decrease in development costs and a
5% or $106,764 decrease in production expenses, partially offset by a 28% or
$250,281 increase in production and property taxes.

The decrease in development costs and production expenses is related to a
decline in drilling activity and the timing of maintenance projects on the
underlying working interest properties.  The increase in production and property
taxes is primarily because of production taxes on increased oil and gas
revenues.

                                                                              10
<PAGE>
 
COMPARATIVE OIL AND GAS SALES

Oil and gas sales attributable to the Underlying Properties and the Royalty
Trust Interests are as follows:
<TABLE>
<CAPTION>
 
                                     Three Months Ended     Nine Months Ended
                                     September 30, (a)      September 30, (a)
                                     ------------------    --------------------
                                       1997       1996       1997        1996
                                     --------  --------    --------    --------
<S>                                  <C>       <C>         <C>         <C>
 
  OIL SALES (Bbls)
 
     Underlying Properties (b)....    107,138   108,949     317,063     328,642
       Average per day............      1,165     1,184       1,161       1,199
       Average price..............     $17.35    $18.61      $19.62      $17.72
                                    
     Royalty Trust Interests (b)..     37,828    43,855     139,154     120,298
                                    
  GAS SALES (Mcf)                   
                                    
     Underlying Properties (b)....  1,108,805   909,771   3,477,971   2,898,179
       Average per day............     12,185     9,997      12,740      10,577
       Average price..............      $1.72     $1.51       $2.10       $1.44
                                    
     Royalty Trust Interests (b)..    969,209   796,495   3,059,986   2,513,267
</TABLE>

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

(b) 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 is based on the Underlying Properties.

                                                                              11
<PAGE>
 
CALCULATION OF ROYALTY INCOME

The following is the calculation of royalty income received by the Trust for the
quarters ended September 30, 1997 and 1996.  See Note 1 to Condensed Financial
Statements.
<TABLE>
<CAPTION>
 
                                          Three Months Ended September 30,
                                  ------------------------------------------------
                                            1997                     1996
                                  -----------------------   ----------------------
                                     90%          75%          90%          75%
                                   Royalty      Royalty      Royalty      Royalty
                                    Trust        Trust        Trust        Trust
                                  Interests    Interests    Interests    Interests
                                  ----------   ----------   ----------   ----------
<S>                               <C>          <C>          <C>          <C>
REVENUES
 Oil sales......................  $  442,405   $1,416,080   $  394,020   $1,632,990
 Gas sales......................   1,868,225       43,197    1,317,897       56,756
                                  ----------   ----------   ----------   ----------
 
  Total.........................   2,310,630    1,459,277    1,711,917    1,689,746
                                  ----------   ----------   ----------   ----------
 
COSTS
 Production and property taxes..     218,980      145,300      127,601      110,972
 Production expenses (a)........         515      662,116        6,684      661,803
 Development costs..............           -      282,574            -      312,535
                                  ----------   ----------   ----------   ----------
 
  Total.........................     219,495    1,089,990      134,285    1,085,310
                                  ----------   ----------   ----------   ----------
 
NET PROCEEDS....................   2,091,135      369,287    1,577,632      604,436
 
Net Profit Percentage...........          90%          75%          90%          75%
                                  ----------   ----------   ----------   ----------
 
ROYALTY INCOME..................  $1,882,022   $  276,965   $1,419,869   $  453,327
                                  ==========   ==========   ==========   ==========
 
</TABLE>

(a) Production expenses for the 75% Royalty Trust Interests include an overhead
    fee which is deducted and retained by Cross Timbers Oil. This fee is
    currently $19,438 per month, or $58,314 per quarter. This overhead fee is
    subject to adjustment each May based on an oil and gas industry index.

                                                                              12
<PAGE>
 
PART II - OTHER INFORMATION
---------------------------


Item 1.  Legal Proceedings.

On May 14, 1997, the Trustee announced the settlement of a lawsuit filed in
December 1991 by Cross Timbers Oil and its predecessor-in-title against Coastal
Oil and Gas Corporation ("Coastal") in the Eleventh Judicial District Court in
San Juan County, New Mexico.  Cross Timbers Oil and its predecessor-in-title
were seeking to recover revenues suspended by Coastal and to obtain a judgment
confirming their interests.  The revenues suspended were attributable to certain
San Juan Basin overriding royalty interests underlying the 90% Royalty Trust
Interests ("subject interests").

As part of the settlement, Coastal agreed to pay the suspended revenues and all
future revenues attributable to the subject interests.  Coastal further agreed
that the subject interests would not be reduced or converted to a cost-bearing
interest as was previously contended.

Cross Timbers Oil has advised the Trustee that on May 7, 1997 it received
revenues suspended by Coastal since the Trust's inception through December 31,
1995.  Accordingly, the Trust received additional royalty income of
approximately $465,000 or $.0775 per Unit that was included in the June Trust
distribution paid on July 15, 1997 to Unit holders of record on June 30, 1997.

Cross Timbers Oil has also advised the Trustee that during July 1997 it received
approximately $268,000 net to the Trust's interest, or $.045 per Unit, for
revenues suspended by Coastal in 1996 and 1997.  After receipt by the Trust in
August, these proceeds were distributed on September 15, 1997 to Unit holders of
record on August 29, 1997.

To facilitate further development of the subject interests, Cross Timbers Oil
has agreed to reduce its overriding royalty interest by one-half on any newly
drilled wells.  This will result in a corresponding reduction in the Trust's net
profits interest in the new wells drilled on the subject interests.
Furthermore, to ensure that production from existing wells is properly
maintained, Cross Timbers Oil has agreed to temporarily reduce its interest in
existing wells under certain circumstances, and to consider reducing its
interest under other circumstances.  Cross Timbers Oil has informed the Trustee
that it believes that such agreed reductions in the subject interests will not
significantly affect estimated future net revenues from the Trust's proved
reserves.

Cross Timbers Oil has also advised the Trustee of the settlement of a previously
filed lawsuit relating to certain Texas properties underlying the 75% Royalty
Trust Interests in which Cross Timbers Oil's working interest is 1.7%.  The
lawsuit was filed in September 1994 in the 125th Judicial District Court of
Harris County, Texas, by the surface owner of lands located in Ector and Andrews
counties, Texas.  The surface owner alleged that oil and gas operations on his
land by various defendant oil and gas operators contaminated the surface and
subsurface water on the land.  Neither the Trust nor Cross Timbers Oil was named
as a party in the suit.  The cost to settle this lawsuit will be approximately
$24,000, net to the Trust, before attorneys' fees and expenses.

Items 2 through 5.   Not applicable.

                                                                              13
<PAGE>
 
Item 6.  Exhibits and Reports on Form 8-K.

(a)  Exhibits.

     Exhibit Number
     and Description                                                        Page
     ---------------                                                        ----

     (4)(a) Cross Timbers Royalty Trust Indenture Amended and Restated on 
            January 13, 1992 by NationsBank of Texas, 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 
            NationsBank of Texas, 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 NationsBank of 
            Texas, 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                          16


(b)  Reports on Form 8-K.

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

                                                                              14
<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 NATIONSBANK OF TEXAS, N.A., TRUSTEE


                                  By               JOE B. GRISSOM       
                                    --------------------------------------------
                                                   Joe  B. Grissom
                                                   Vice President



                                  CROSS TIMBERS OIL COMPANY



Date:  October 17, 1997           By             BENNIE  G. KNIFFEN         
                                    --------------------------------------------
                                                 Bennie G. Kniffen
                                             Senior Vice President and
                                                     Controller

                                                                              15