-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RF4/hHZtBVdCnI/mp/Nd5PU7F+UcyZpfXEqfe9V72F/wWXdBvdJJ+c6C3Xsnk2ha ADumYT4XLZxOoAfvn5a4zA== 0000072633-05-000008.txt : 20050309 0000072633-05-000008.hdr.sgml : 20050309 20050309121302 ACCESSION NUMBER: 0000072633-05-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050131 FILED AS OF DATE: 20050309 DATE AS OF CHANGE: 20050309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH EUROPEAN OIL ROYALTY TRUST CENTRAL INDEX KEY: 0000072633 STANDARD INDUSTRIAL CLASSIFICATION: OIL ROYALTY TRADERS [6792] IRS NUMBER: 222084119 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08245 FILM NUMBER: 05668598 BUSINESS ADDRESS: STREET 1: P O BOX 456 STREET 2: 43 WEST FRONT STREET SUITE 19-A CITY: RED BANK STATE: NJ ZIP: 07701 BUSINESS PHONE: 7327414008 MAIL ADDRESS: STREET 1: P O BOX 456 STREET 2: 43 WEST FRONT STREET SUITE 19-A CITY: RED BANK STATE: NJ ZIP: 07701 10-Q 1 tenq1q05.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended January 31, 2005 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to ___________ . Commission file number 1-8245 NORTH EUROPEAN OIL ROYALTY TRUST ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 22-2084119 ----------------------- -------------------------- (State of organization) (I.R.S. Employer I.D. No.) Suite 19A, 43 West Front Street, Red Bank, New Jersey 07701 ------------------------------------------------------------- (Address of principal executive offices) (732) 741-4008 ---------------------------------------------------- (Registrant's telephone number, including area code) 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 an accelerated filer (as defined in Rule 126-2 of the Exchange Act). Yes X No ----- ----- Class Outstanding at January 31, 2005 - ----- ------------------------------- Units of Beneficial Interest 8,933,316 -2- PART I -- FINANCIAL INFORMATION ------------------------------- Item 1. Financial Statements -------------------- STATEMENTS OF REVENUE COLLECTED AND EXPENSES PAID (NOTE 1) ----------------------------------------------------------- FOR THE THREE MONTHS ENDED JANUARY 31, 2005 AND 2004 ----------------------------------------------------- 2005 2004 -------------- ------------- (unaudited) German gas, oil and sulfur royalties received $ 5,154,811 $ 4,360,730 ----------- ----------- Interest income 5,320 6,393 ----------- ----------- Trust expenses ( 325,017) ( 233,010) ----------- ----------- Net income on a cash basis $ 4,835,114 $ 4,134,113 =========== =========== Net income per unit on a cash basis $ .54 $ .46 ====== ====== Cash distributions paid or to be paid: Distributions per unit to be paid to unit owners $ .54 $ .46 ====== ====== STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS (NOTE 1) ----------------------------------------------------------- JANUARY 31, 2005 AND OCTOBER 31, 2004 ------------------------------------- 2005 2004 -------------- ------------- (unaudited) Current assets - - Cash and cash equivalents (Note 1) $ 4,901,508 $ 3,014,386 Producing gas and oil royalty rights, net of amortization (Notes 1 and 2) 1 1 ----------- ----------- Total Assets $ 4,901,509 $ 3,014,387 =========== =========== Current liabilities - - Cash distributions payable to unit owners $ 4,823,991 $ 2,947,992 Contingent liability (Note 3) Trust corpus (Notes 1 and 2) 1 1 Undistributed earnings 77,517 66,394 ----------- ----------- Total Liabilities and Trust Corpus $ 4,901,509 $ 3,014,387 =========== =========== The accompanying notes to financial statements should be read in conjunction with these statements. -3- STATEMENTS OF CHANGES IN CASH AND CASH EQUIVALENTS (NOTE 1) ----------------------------------------------------------- FOR THE THREE MONTHS ENDED JANUARY 31, 2005 AND 2004 ---------------------------------------------------- 2005 2004 -------------- ------------- (unaudited) Sources of cash and cash equivalents: German gas, oil and sulfur royalties $ 5,154,811 $ 4,360,730 Interest income 5,320 6,393 ----------- ----------- $ 5,160,131 $ 4,367,123 =========== =========== Uses of cash and cash equivalents: Payment of Trust expenses 325,017 233,010 Distributions and dividends paid (Note 3) 2,947,992 4,019,156 ----------- ----------- 3,273,009 4,252,166 ----------- ----------- Net increase in cash and cash equivalents during the period 1,887,122 114,957 Cash and cash equivalents, beginning of period 3,014,386 4,063,766 ----------- ----------- Cash and cash equivalents, end of period $ 4,901,508 $ 4,178,723 =========== =========== STATEMENTS OF UNDISTRIBUTED EARNINGS (NOTE 1) --------------------------------------------- FOR THE THREE MONTHS ENDED JANUARY 31, 2005 AND 2004 ---------------------------------------------------- 2005 2004 ------------- ------------- (unaudited) Balance, beginning of period $ 66,394 $ 44,630 Net income on a cash basis 4,835,114 4,134,113 ----------- ----------- 4,901,508 4,178,743 ----------- ----------- Less: Current year distributions paid or to be paid to unit owners (Note 3) 4,823,991 4,108,470 ----------- ----------- 4,823,991 4,108,470 ----------- ----------- Balance, end of period $ 77,517 $ 70,273 =========== =========== The accompanying notes to financial statements should be read in conjunction with these statements. -4- NORTH EUROPEAN OIL ROYALTY TRUST -------------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- (Unaudited) ----------- (1) Summary of significant accounting policies: ------------------------------------------- Basis of accounting - ------------------- The accompanying financial statements present financial statement balances and financial results on a cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States ("GAAP basis"). Cash basis financial statements report income when cash is received and expenses when cash is paid. GAAP basis financial statements report income as earned and expenses as incurred, without regard to receipts or payments. The sole exception to the use of the cash basis of accounting is the accrual for distributions to be paid to unit owners (those distributions approved by the Trustees for the Trust). The Trust's distributable income represents royalty income received by the Trust during the period plus interest income less any expenses incurred by the Trust, all on a cash basis. In the opinion of the Trustees, the use of the cash basis provides a more meaningful presentation to unit owners of the results of operations of the Trust. Producing gas and oil royalty rights - --------------------- The rights to certain gas and oil royalties in Germany were transferred to the Trust at their net book value by North European Oil Company (the "Company") (see Note 2). The net book value of the royalty rights has been reduced to one dollar ($1) in view of the fact that the remaining net book value of royalty rights is de minimis relative to annual royalties received and distributed by the Trust and does not bear any meaningful relationship to the fair value of such rights or the actual amount of proved producing reserves. Federal income taxes - ------------------------------ The Trust, as a grantor trust, is exempt from federal income taxes under a private letter ruling issued by the Internal Revenue Service. Cash and cash equivalents - ------------------------- Included in cash and cash equivalents are amounts deposited in bank accounts and amounts invested in certificates of deposit and U. S. Treasury bills with maturities of three months or less from the date of purchase. -5- Net income per unit on the cash basis - ------------------- Net income per unit on the cash basis is based upon the number of units outstanding at the end of the period (see Note 3). As of January 31, 2005 and 2004, there were 8,933,316 and 8,931,414 units of beneficial interest outstanding, respectively. (2) Formation of the Trust: ----------------------- The Trust was formed on September 10, 1975. As of September 30, 1975, the Company was liquidated and the remaining assets and liabilities of the Company, including its royalty rights, were transferred to the Trust. The Trust on behalf of the owners of beneficial interest in the Trust holds overriding royalty rights covering gas and oil production in certain concessions or leases in the Federal Republic of Germany. These rights are held under contracts with local German exploration and development subsidiaries of ExxonMobil Corp. and the Royal Dutch/Shell Group of Companies. Under these contracts, the Trust receives various percentage royalties on the proceeds of the sales of certain products from the areas involved. At the present time, royalties are received for sales of gas well gas, oil well gas, crude oil, distillate and sulfur. (3) Contingent liability: --------------------- The Trust serves as fiduciary for certain unlocated or unknown shareholders of the Trust's corporate predecessors North European Oil Corporation (the "Corporation") and North European Oil Company. From the liquidation of the Company to October 31, 2004, 723,260 Trust units were issued in exchange for Corporate or Company shares and dividends of $355,166 and distributions of $4,319,084 were paid to former unlocated Corporation and Company shareholders. For the three month period ended January 31, 2005, there were 6 units issued in exchanges and $265.40 in distributions were paid to former unlocated Corporation and Company shareholders. On February 26, 1996 the settlement of litigation between the Trust and the Delaware State Escheator ("Delaware Escheator") was approved by the Delaware Court of Chancery. As of that date, there were a total of 875,748 authorized but unissued units representing the unexchanged shares of the Trust's corporate predecessors. Out of this total 760,560 units were subject to the settlement. Under the settlement 380,280 units were issued to the Delaware Escheator on April 17, 1996. Of the Trust units remaining to be issued to the Delaware Escheator, approximately 50% (190,128 units) had been issued to the Delaware Escheator as of June 30, 2000 and the remaining balance will be issued by June 30, 2005. Through June 30, 2000 claims by unlocated or unknown shareholders of the Trust's corporate predecessors for units and past dividends and distributions thereon ("subsequent claims") were paid by the Delaware Escheator and the Trust on a 50:50 basis. From July 1, 2000 to June 30, 2005 subsequent claims will be paid by the Delaware Escheator and the Trust on a 75:25 basis. Any subsequent claims will reduce the number of units to be issued to the Delaware Escheator in 2005. Following the -6- final issuance of units to the Delaware Escheator in 2005, the Trust's contingent liability for past dividends and distributions attributable to all unexchanged Corporation and Company shares subject to the settlement will be completely eliminated. Under the terms of the settlement, the maximum liability of the Delaware Escheator for subsequent claims is limited to the value of the units received, plus current distributions on units retained, less the Delaware Escheator's share of subsequent claims. As of the receipt of the February 2005 distribution, the maximum liability of the Delaware Escheator will be $13,752,245. As of the record date for the February distribution, the Delaware Escheator continues to own 35,995 units of the 570,408 units previously issued to it as part of the settlement. In addition to the agreement reached with the Delaware Escheator, on December 4, 2001 the Trust reached a parallel agreement with the Administrator of Unclaimed Property, Office of the New York State Comptroller (the "New York Administrator") covering units for which owners were unlocated but for whom New York state addresses were shown in predecessor corporation records. The New York Settlement Agreement (the "Settlement Agreement") covers 89,220 units attributable to stock ownership by unlocated shareholders of predecessor corporate entities. Of the units covered by the Settlement Agreement, 44,610 were issued to the New York Administrator on December 21, 2001 and the balance of 44,610 will be issued on or before June 30, 2005. The Settlement Agreement provides for processing of claims in the period until June 30, 2005 and the sharing on a 50:50 basis of any costs relating to any claims which are allowed. Any subsequent claims will reduce the number of units to be issued to the New York Administrator in 2005. Following the final issuance of units to the New York Administrator in 2005, the Trust's contingent liability for past dividends and distributions attributable to all unexchanged Corporation and Company shares subject to the Settlement Agreement will be completely eliminated. Under the terms of the Settlement Agreement, the maximum liability of the New York Administrator for subsequent claims is limited to the value of the units received, plus current distributions on units retained, less the New York Administrator's share of subsequent claims. As of the receipt of the February 2005 distribution, the maximum liability of the New York Administrator will be $1,104,544. As of the record date for the February distribution, the New York Administrator continues to own all of the 44,610 units previously issued to it as part of the settlement. Under the Trust Agreement, as deemed amended by the February 26, 1996 Delaware Court Order, the Trust is not required to make payments of arrearages of Company dividends or Trust distributions with respect to units issued or to be issued to the Delaware Escheator or the New York Administrator. As of January 31, 2005, there remained a total of 253,200 units that could be issued to unlocated or unknown Corporation and Company shareholders. Of this total, 234,732 units are subject to the settlements and remain to be issued to the Delaware Escheator or the New York Administrator. If all shares represented by the units already issued as well as the units remaining to be issued were presented for exchange, $485,958 in dividends and $31,169,425 in distributions would be payable. In the opinion of the Trustees, based in part on the history of exchanges during the last ten fiscal years, the maximum liability of the Delaware Escheator and the New York Administrator would not be less than their respective share of any -7- subsequent claims. In any event, the Trust's contingent liability for all claims for arrearages will be eliminated in 2005. (4) Related party transactions: --------------------------- John R. Van Kirk, the Managing Director of the Trust, provides office space and office services to the Trust at cost. During the first quarter of fiscal 2005 the Trust reimbursed him a total of $5,007.31 for such office space and office services. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. ------------------------------------------------- The Trust is a passive fixed investment trust which holds overriding royalty rights, receives income under those rights from certain operating companies, pays its expenses and distributes the remaining net funds to its unit owners. The Trust does not engage in any business or extractive operations of any kind in the areas over which it holds royalty rights and is precluded from any such involvement by the Trust Agreement. There are no requirements, therefore, for capital resources with which to make capital expenditures or investments in order to continue the receipt of royalty revenues by the Trust. Seasonal demand factors affect the income from royalty rights insofar as they relate to energy demands and increases or decreases in prices, but on average they are not material to the regular annual income received under the royalty rights. The operating companies, subsidiaries of ExxonMobil Corp. and the Royal Dutch/Shell Group of Companies, pay monthly royalties to the Trust based on their sales of natural gas, sulfur and oil. The Oldenburg concession is the primary area from which these products are extracted and provides nearly 100% of all the royalties received by the Trust. Natural gas provides approximately 98% of the total royalties. Within the Oldenburg concession there are two overriding royalty rates in effect on sales of natural gas. The Trust receives a 4% royalty from the western portion of the concession. The Trust also receives a 0.6667% royalty (adjusted to account for an agreed portion of costs), which covers the entire concession. The royalties are initially paid in Euros and are converted into U.S. dollars at the then current Euro/dollar exchange rate just prior to their transfer from Germany. The gas that is produced by the operating companies from the Oldenburg concession is sold to various distributors under long term contracts which delineate, among other provisions, the timing, manner, volume and price of the gas sold. Although the Trust itself does not have access to the specific sales contracts under which the Oldenburg gas is sold, a third party contractor, retained by the Trust, examines these contracts periodically. For the Trust there are two elements of these contracts that are significant. The first element is the utilization of the price of light heating oil in Germany as the primary pricing factor in many of these contracts. The price of light heating oil in Germany is affected by the price of oil expressed in dollars on the international market. The second element is a three to six month delay before changes in pricing factors are translated into changes in the price of gas. Since Germany must import a -8- large percentage of its energy requirements, the U.S. dollar price of oil on the international market has a significant, although delayed, impact on the price of gas. A strong Euro would tend to reduce the cost of oil being imported into Germany and likely result in a lower price for light heating oil. This lower price would likely impact the price of gas after the three to six month delay and possibly result in a reduction in the amount of royalties paid to the Trust in Germany. However, a strong Euro would also result in an increase in the amount of royalties received when the royalties, originally received in Euros, are converted into dollars and transferred to the Trust's bank account in the U.S. A weak Euro would have the opposite effect. However, it is important to note that the price of imported oil and the Euro/dollar relationship are only two of the numerous factors that can affect the price of light heating oil and through it the price of gas. Net Trust income for the first quarter of fiscal 2005 was $4,835,114 as compared to $4,134,113 for the first quarter of fiscal 2004. This level of income permitted a distribution of 54 cents per unit which was paid on February 23, 2005 to owners of record as of February 11, 2005. Gross royalty income of $5,154,811 for the quarter ended January 31, 2005 increased by 18.2% from gross royalty income of $4,360,730 received during last year's equivalent period. This royalty income was based on sales of gas, oil and sulfur from the Trust's overriding royalty areas in Germany during the fourth calendar quarter of 2004. In comparison to the first quarter of fiscal 2004, the combination of higher gas prices and higher average exchange rates (applied to the royalty transfers from Germany) more than offset the decline in the volume of gas sales. It appears that the operating companies' efforts to increase gas sales are beginning to have some effect although the volume of gas sales still fell from the prior year's equivalent quarter. Gas sales under the higher royalty rate agreement covering western Oldenburg declined by 4.6% from 18.17 billion cubic feet ("Bcf") to 17.33 Bcf compared to the first quarter of fiscal 2004. Overall gas sales throughout the Oldenburg concession covered under the lower royalty rate agreement declined 5.1% from 46.59 Bcf to 44.21 Bcf compared to the first quarter of fiscal 2004. The decline in gas sales was almost evenly spread through both the eastern and western halves of the Oldenburg concession. For the quarter just ended the average price of gas sold under the higher royalty rate agreement increased 9.9% from 1.1836 Eurocents/Kwh ("Ecents/Kwh") to 1.3010 Ecents/Kwh. For the same period, the average price of gas sold under the lower royalty rate area increased 16.9% from 1.2120 Ecents/Kwh to 1.4169 Ecents/Kwh. The immediate impact of the exchange rates occurs when they are applied to provide the equivalent value in dollars to the royalties paid to the Trust when those royalties are transferred to the U.S. Based on the conversion and transfer of all the royalties during the quarter, the weighted average value for the Euro increased by 7.7% from a dollar equivalent of 1.2269 for the first quarter of fiscal 2004 to 1.3213 for the quarter just ended. If we apply this weighted average value to the average price of gas during the quarter just ended, we can convert the average gas prices into more familiar terms. For the first quarter of fiscal 2005 the average gas price for gas sold under both the higher and lower royalty rate agreements was $5.09/Mcf as compared to $4.18/Mcf for the first quarter of fiscal 2004. With the end of the first quarter of fiscal 2005, quarterly gas sales for western Oldenburg have posted declines in quarterly comparisons for nine consecutive quarters. In a corresponding comparison, overall gas sales -9- for the entire Oldenburg concession have posted quarterly declines for five consecutive quarters and for seven quarters out of the preceding nine. From comments made by the operating companies it appears that the decline in gas sales seems to be directly related to a drop in production capacity, which in turn was caused by a general decline in wellhead pressure. The decline in wellhead pressure is a natural occurrence as wells age and fields mature. Individual wells begin their production cycle with different initial pressure levels and, depending upon the rate at which the gas is withdrawn and the underlying geological structure, the decline in pressure and the amount of recoverable gas will vary from well to well. In an actively operated concession there is a mix of newer and older wells along with an active exploration and drilling program. Prior to 2004, the operating companies have only had a limited drilling program averaging perhaps two wells per year over the prior ten years. It appears that the primary reason behind the limited exploration and drilling program has been the high state royalty imposed on gas sales by the State of Lower Saxony, where the Oldenburg concession is located. The high state royalty consumes a large portion of funds that would otherwise be available for exploration and drilling. Following the merger of Exxon and Mobil in 1999, the newly formed corporation began a worldwide re-evaluation of potential exploration and development in order to decide where best to make future investments. We believe the Trust is seeing the benefits of this analysis with the accelerating drilling program that began in 2004 and continues in 2005. As the additional wells come fully on-line, the mix of new and old wells are anticipated to reach a healthier ratio. The installation of the new compressor systems has helped to increase production capacity on an immediate basis. In the future, the compressors are expected to allow the complete exploitation of the reserves in not only the wells currently connected but additional wells as residual pressures continue to drop over time. It is our hope that the completion of the wells already drilled in 2004 and the drilling efforts planned by the operating companies for 2005 will help return gas sales to the higher levels experienced in prior years and that the operating companies will continue a more active drilling and exploration program in the future. The Trust does not conduct any active business operations and has only limited need of funds for its own administrative services. These funds are used to pay Trustees' fees (computed under the Trust Agreement and based upon a percentage of royalties and interest income received), the remuneration fixed by the Trustees for the Managing Trustee, the Managing Director and the Audit Committee Chairman, expenses associated with the Trustees' meetings, professional fees paid to consultants, legal advisors and auditors, transfer agent fees, and secretarial and other general office expenses. Trust expenses for the first quarter of fiscal 2005 were $325,017, an increase of $92,007 or 39.5% from the prior year. A cumulative bill from Delaware counsel for legal services during 2004 was paid during the first quarter of fiscal 2005. There was no corresponding fee paid in the first quarter of fiscal 2004. Additionally, the Trust's consultant in Germany chose to defer his compensation for fiscal 2004 and the lump sum was paid out during the first quarter of fiscal 2005. The 2005 listing fee for the New York Stock Exchange was paid during the first quarter of fiscal 2005, while the 2004 fee was paid during the second quarter of fiscal 2004. Interest income declined, reflecting the reduced funds available for investment and the continuing low interest rates on those funds. -10- The current Statement of Assets, Liabilities and Trust Corpus of the Trust at January 31, 2005 compared to that at fiscal year end (October 31, 2004) shows an increase in assets due to higher royalty receipts during the quarter. As mandated by the Trust Agreement, distributions of income are made on a quarterly basis. These distributions, as determined by the Trustees, constitute substantially all the funds on hand after provision is made for Trust expenses then anticipated. As permitted by the Trust Agreement, no provision is made for the retention of reserve funds of any kind. If funds are required for payments to owners of units not previously presented for issuance, quarterly distributions would be reduced to the extent required to provide funds for such payments. ----------------------------------- This report on Form 10-Q contains forward looking statements concerning business, financial performance and financial condition of the Trust. Many of these statements are based on information provided to the Trust by the operating companies or by consultants using public information sources. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in any forward looking statements. These include uncertainties concerning levels of gas production and gas prices, general economic conditions and currency exchange rates. Actual results and events may vary significantly from those discussed in the forward looking statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk. ---------------------------------------------------------- The Trust does not engage in any trading activities with respect to possible foreign exchange fluctuations. The Trust does not use any financial instruments to hedge against possible risks related to foreign exchange fluctuations. The market risk is negligible because standing instructions at its German bank require the bank to process conversions and transfers of royalty payments as soon as possible following their receipt. Item 4. Controls and Procedures. ----------------------- As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of the Trust's management, which consists of the Managing Trustee and the Managing Director, of the effectiveness of the design and operation of the Trust's disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934. Based upon that evaluation, the Managing Trustee and the Managing Director concluded that the Trust's disclosure controls and procedures were effective, in all material respects, with respect to the recording, processing, summarizing and reporting, within the time periods specified in the Securities and Exchange Commission's rules and forms, of information required to be disclosed by the Trust's management in the reports that are filed or submitted under the Exchange Act. -11- There have been no changes in our internal control over financial reporting identified in connection with the evaluation described above that occurred during the first quarter of fiscal 2005 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. Part II -- OTHER INFORMATION ---------------------------- Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- (a) The Annual Meeting of Unit Owners was held on February 9, 2005. (b) The following persons were elected as Trustees of the Trust to serve until the 2005 Annual Meeting of Unit Owners: Robert P. Adelman (7,519,155 votes for; 112,692 withheld) Samuel M. Eisenstat (7,551,000 votes for; 80,847 withheld) Willard B. Taylor (7,553,447 votes for; 78,400 withheld) John H. Van Kirk (7,355,835 votes for; 276,012 withheld) Rosalie J. Wolf (7,376,183 votes for; 255,664 withheld) Item 5. Other Information. ------------------ There have been no changes to the procedures by which unit owners may recommend nominees for Trustees of the Trust since those disclosed in our proxy statement on Schedule 14A dated January 10, 2005. Item 6. Exhibits. -------- Exhibit 3. Amended and Restated Trustees' Regulations amended as of February 9, 2005 Exhibit 31.1. Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Exhibit 31.2. Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Exhibit 32. Certification of Chief Executive and Chief Financial Officers pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 -12- SIGNATURE --------- 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 hereunto duly authorized. NORTH EUROPEAN OIL ROYALTY TRUST /s/ John R. Van Kirk --------------------------------- John R. Van Kirk Managing Director Dated: February 27, 2004 EX-3 2 x03-0131.txt - 13 - Exhibit 3. NORTH EUROPEAN OIL ROYALTY TRUST AMENDED AND RESTATED TRUSTEES' REGULATIONS February 9, 2005 The following amended and restated regulations were unanimously adopted by the Trustees of North European Oil Royalty Trust (the "Trust"), established under a Trust Agreement (the "Trust Agreement"), made and dated September 10, 1975, as amended: AMENDED AND RESTATED TRUSTEES' REGULATIONS I. TRUSTEES Section 1.01. Managing Trustee; Alternates. ---------------------------- The Managing Trustee shall act as Chairman at all meetings of the Trustees, and shall have the power to appoint committees of the Trustees and to perform all administrative acts on behalf of the Trustees, except to the extent that the Declaration of Trust specifically requires such acts to be performed by a majority or all of the Trustees. In the event that the Managing Trustee shall not be present at any meeting of the Trustees, the Managing Trustee may appoint one of the remaining Trustees to serve as Chairman of the meeting and to perform the other administrative acts mentioned in this Section. In the event that the Managing Trustee shall fail to make such an appointment, the remaining Trustees shall elect one of their number to so act. Section 1.02. Time and Place of Meetings. -------------------------- Meetings of the Trustees shall be held at such place as may be fixed from time to time by the Trustees, or as may be designated in the call of the meeting. Regular meetings of the Trustees shall be held at such times as the Trustees shall determine, but not less frequently than quarterly. Special meetings of the Trustees shall be held whenever called by the Managing Trustee or by any two other Trustees, at such time and place as may be designated in the notice of the meeting. Any meeting of the Trustees may be held by means of a conference telephone call or other similar means of communication (or by such means of communication as may then be permitted for meetings of corporate boards of directors under the laws of the State of Delaware in force from time to time). Section 1.03. Notice of Meetings. ------------------ At least three (3) days' written notice shall be given of the time and place of any regular or special meeting of the Trustees. Notice may be delivered to each Trustee either personally, by mail, by facsimile telecommunication, electronic mail or by means of other electronic communication. If the notice is sent by mail, it shall be deemed to be - 14 - given when deposited in the mail. If the notice is sent by facsimile telecommunication, it shall be deemed to be given when transmitted. If the notice is sent by electronic mail or by means of other electronic communication, it shall be deemed to be given upon acknowledgment of receipt. The notice of a special meeting shall state the nature of the business to be transacted. Notice of an adjourned meeting need not be given if the time and place of the adjourned meeting and the business to be transacted are announced at the meeting at which such adjournment action is taken. Section 1.04. Quorum. ------ A majority of the Trustees in office shall constitute a quorum, but no action shall be taken by the Trustees unless approved, either at such meeting or in writing thereafter (as provided in Section 1.06), by a majority of the Trustees then holding office. Section 1.05. Waiver of Notice. ---------------- Before or at any special or regular meeting of the Trustees, any Trustee may, in writing, waive notice of such meeting in such a way that it shall be deemed equivalent to the giving of such notice. Attendance (or participation) by a Trustee at any meeting of the Trustees shall be a waiver of notice by such Trustee of the time and place thereof. Section 1.06. Action Without Meeting. ---------------------- Any action that could be taken at a meeting of the Trustees may be taken without a meeting, provided that at least three Trustees shall approve such action in a writing, to be filed in the Record Book. Any Trustee who has not approved such action shall be given notice of such action promptly after said three approvals are obtained. Section 1.07. Record Books. ------------ The Record Books of the Trust, in which all minutes of meetings of the Trustees shall be kept, shall be kept on file at such office as the Trustees may direct. Copies of resolutions not set out in full in the minutes shall also be kept in the Record Book. Section 1.08. Indemnification. --------------- Each person who is or was made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise (hereinafter a "proceeding"), by reason of the fact that such person, or a person of whom such person is the legal representative, is or was a Trustee, officer, employee or agent of the Trust or is or was serving at the request of the Trust, as a trustee, director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise shall be - 15 - indemnified and held harmless by the Trust to the fullest extent authorized by the General Corporation Law of Delaware, as the same exists or may hereafter be amended, against all expense, liability and loss (including attorneys' fees, judgments, fines and amounts paid or to be paid in settlement) actually and reasonably incurred by such person in connection therewith; provided, however, that, except as provided in Section 1.09 with respect to proceedings seeking to enforce rights to indemnification, the Trust shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by a majority of the Trustees. The right to indemnification conferred in this Section 1.08 shall be a contract right and shall include the right to be paid by the Trust for expenses incurred in defending or prosecuting any such proceeding in advance of its final disposition; provided, however, that, if the General Corporation Law of Delaware requires, the payment of such expenses incurred by a Trustee or officer in such person's capacity as a Trustee or officer in advance of the final disposition of a proceeding shall be made only upon delivery to the Trust of an undertaking, by or on behalf of such Trustee or officer, to repay all amounts so advanced if it shall ultimately be determined that such Trustee or officer is not entitled to be indemnified under this Section 1.08 or otherwise. No such indemnification or reimbursement may be made where payment or reimbursement would duplicate a payment or reimbursement made under an insurance policy or by other third party payment, or where the person seeking indemnification or reimbursement was found to have obtained personal profit or advantage to which such person was not legally entitled. Section 1.09. Determination of Rights. ----------------------- The Trustees shall fix and establish from time to time the manner in which determination shall be made on requests for indemnification or reimbursement. The Trustees shall not be required to hold hearings, take evidence, or otherwise examine proofs or documentation and may rely conclusively on opinions of counsel or auditors with respect to any such claim. If a claim under Section 1.08 is not paid in full by the Trust within thirty days after a written claim has been received by the Trust, except in the case of a claim for expenses incurred in defending a proceeding in advance of its final disposition in which case the applicable period shall be ten days, the claimant may at any time thereafter bring suit against the Trust to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. The claimant shall be presumed to be entitled to indemnification under Section 1.08 upon submission of a written claim (and, in an action brought to enforce a claim for an advancement of expenses, where any required undertaking has been tendered to the Trust), and thereafter the Trust shall have the burden of proof to overcome the presumption that the claimant is not so entitled. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Trust) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of Delaware for the Trust to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Trust. Neither the failure of the Trust (including the Trustees or independent legal counsel) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because such person has met the applicable standard of conduct set forth in the General Corporation Law of Delaware, nor an actual - 16 - determination by the Trust (including its Trustees or independent legal counsel) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 1.10. Non-Exclusive Rights. -------------------- The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in these Regulations shall not be exclusive of any other right which any person may have or hereafter acquired under any statute, provision of the Trust Agreement, any other agreement, vote of disinterested Trustees or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office. Section 1.11. Indemnification Agreements. -------------------------- The Trustees may furnish from time to time agreements confirming the rights of any person serving as a Trustee or officer or elected to serve as a Trustee or officer to the indemnification and reimbursement provided in the Trust Agreement, the provisions of law, and these Regulations, but no provision of any such indemnification agreement shall diminish or otherwise restrict the right of any Trustee to indemnification sought under provision of the Trust Agreement, these Regulations or Delaware law. Section 1.12. Committees. ---------- By resolution or resolutions passed by a majority of the Trustees, the Trustees may create and designate various committees, which committees shall have and may exercise the powers of the Trustees in the management of the business or affairs of the Trust to the extent provided in such resolution or resolutions. Any such committee shall meet at such stated times and places or on such call or notice, keep such minutes or other records, make such reports, adopt or follow such rules of procedure and have such quorum as may be prescribed by, or pursuant to, resolution or resolutions of the Trustees; but unless and until any such resolution or resolutions shall have been adopted, any such committee shall adopt its own rules and regulations for the calling and holding of its meetings, the making of reports and the keeping of records. II. PERSONS WHO MAY VOTE CERTIFICATES FOR UNITS OF BENEFICIAL INTEREST Section 2.01. Proxies. ------- All proxies must be in writing and executed by the registered owner or his duly authorized attorney. - 17 - Section 2.02. Certificates Owned by Corporations. ---------------------------------- Certificates registered in the name of a corporation may be voted by an officer of the corporation or by a proxy appointed by an officer or by the board of directors of the corporation, provided notice of such appointment has been given to the Trustee presiding at any meeting at which such Certificates are to be voted. Section 2.03. Certificates Jointly Held. ------------------------- Except as otherwise provided by law and as hereinafter provided in the case of certain fiduciaries, Certificates registered in the name of two or more persons jointly, as tenants in common, or in partnership may be voted by any one or more of such persons, either in person or by proxy. Section 2.04. Certificates Held by Fiduciaries. -------------------------------- Certificates registered in the name of executors, administrators, trustees, or guardians may be voted by a majority of such fiduciaries, either in person or by proxy. Section 2.05. Meeting of Certificate Holders. ------------------------------ Meetings of the Certificate Holders shall be called, held and conducted in the manner provided in Article Fourteen of the Trust Agreement. Section 2.06. Effective Date of Ownership. --------------------------- No person shall be entitled to vote or to authorize anyone as proxy to vote Certificates unless and until Certificates have been issued to such person. Without limiting the foregoing, no person shall be entitled to vote or to authorize anyone as proxy to vote shares or other evidence of ownership in predecessor entities of the Trust unless and until Certificates have been issued to such person to replace such shares or other evidence of ownership in predecessor entities of the Trust as provided in Section 3.10 of the Trust Agreement. III. CERTIFICATES OF UNITS OF BENEFICIAL INTEREST, FORM AND SIGNATURE Section 3.01. Form of Certificates of Beneficial Interest. ------------------------------------------- Each Certificate of Beneficial Interest shall state: (a) that it represents units of beneficial interest in the Trust; (b) the name of the registered owner of the units represented thereby; (c) the number of units which the Certificate represents; and (d) that the registered holder of such Certificates shall be bound by all the provisions of the Trust Agreement and Trustees' Regulations, including any subsequent amendments. - 18 - Section 3.02. Signature. --------- Every Certificate of Units of Beneficial Interest shall be signed by all the Trustees. Such signatures may be facsimile signatures on Certificates containing the manual signature of a person authorized to sign on behalf of a Transfer Agent acting for the Trust. If a Trustee or representative of the Trust shall cease to be such prior to the issuance of a Certificate signed by such Trustee or representative, such Certificate may nevertheless be issued by the Trustees with the same effect as if the Trustee or representative had not ceased to be such at the date of its issuance. IV. EXCULPATION PROVISIONS Section 4.01. Notice of Exculpation. --------------------- As far as practicable, the Trustees shall cause any instrument creating an obligation of the Trust to include the following statement: "This agreement and all documents, agreements, understandings and arrangements relating to this transaction have been negotiated, executed and delivered on behalf of North European Oil Royalty Trust (the "Trust") by the Trustees thereof in their fiduciary capacity under the Declaration of Trust of North European Oil Royalty Trust, dated September 10, 1975, as amended, and not individually, and shall bind only the trust estate of the Trust as defined in the Trust Agreement. No Trustee, employee, agent or Certificate Holder of the Trust shall be bound or held to any personal liability in connection with the obligations of the Trust thereunder and any person or entity dealing with the Trust in connection therewith shall look solely to the trust estate for the payment of any claim thereunder or for the performance thereof." Section 4.02. Exculpation Provisions. ---------------------- Whether or not the notice provided in Section 4.01 is included in any contract, agreement, document or otherwise executed or delivered by or on behalf of the Trust or any of its Trustees, neither the Managing Trustee, nor any Trustee, nor any other person acting or purporting to act on behalf of the Trust shall seek to appoint or impose an obligation upon any assets not included in the Trust estate or create any personal liability in connection with the obligations of the Trust or furnish any assurance of payment or undertaking not limited to the Trust estate. V. ADMINISTRATION Section 5.01. Banking. ------- The Trustees may establish checking and other depository accounts as they shall determine to be necessary or desirable, and may designate the signature or signatures required thereon, and the number of such signatures. Such authorized signatories need not be Trustees. - 19 - Section 5.02. Seal. ---- The Trust shall not have a seal. The Managing Trustee shall, when required, certify the absence of a seal. Section 5.03. Auditors. -------- The Audit Committee of the Trustees shall from time to time, in accordance with the applicable laws, rules and regulations of the Securities and Exchange Commission and the New York Stock Exchange, appoint independent auditors for the affairs of the Trust who shall render reports to the Trustees, the Certificate Holders, and such regulatory agencies as may be appropriate. The Audit Committee of the Trustees may, but need not, provide for ratification and approval of the designation of such auditors at or by the annual meeting of Certificate Holders. VI. INTERPRETATION These regulations are not intended to (a) modify, amend or be inconsistent with, in any manner, the provisions of the Trust Agreement, (b) conflict with or be prohibited by any provision or provisions of the laws of the State of Delaware or (c) be implemented in such manner as may be inconsistent with the terms and conditions of the ruling letters of the Internal Revenue Service issued in connection with the formation of the Trust. Any application, construction, or interpretation of these Regulations shall be made on the foregoing basis. All terms which are defined in the Trust Agreement shall have the same meaning when used herein. VII. DESIGNATION OF CLERK AND CERTIFICATION The Trustees may, from time to time, appoint one or more Clerks. The Clerk(s) may certify as to any action taken by the Trustees and as to the validity of any Certificates signed by the Managing Trustee and any other Trustees which is to serve as written evidence as may be required in the Trust Agreement. VIII. AMENDMENT These regulations may be amended at any regular or special meeting of the Trustees, if notice of the proposed amendment is contained in the notice of the meeting. Amendments to these Regulations may be made by the Trustees without a meeting by written instrument signed by all of the Trustees and filed with the records of the Trust. EX-31 3 x31-0131.txt - 20 - Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, John H. Van Kirk, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of North European Oil Royalty Trust; 2. Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Quarterly Report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; and b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periods covered by this quarterly report based on such evaluation; and d) Disclosed in this quarterly report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and - 21 - 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and to the audit committee of the board of directors (or persons performing the equivalent function): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: February 28, 2005 /s/ John H. Van Kirk ---------------------- John H. Van Kirk Managing Trustee (Chief Executive Officer) - 22 - Exhibit 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, John R. Van Kirk, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of North European Oil Royalty Trust; 2. Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Quarterly Report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; and b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periods covered by this quarterly report based on such evaluation; and d) Disclosed in this quarterly report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and - 23 - 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and to the audit committee of the board of directors (or persons performing the equivalent function): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: February 28, 2005 /s/ John R. Van Kirk ---------------------- John R. Van Kirk Managing Director (Chief Financial Officer) EX-32 4 x32-0131.txt - 24 - Exhibit 32 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chapter 63, Title 18 U.S.C. 1350(a) and (b)), the undersigned hereby certify that the Quarterly Report on Form 10-Q for the period ended January 31, 2005 of North European Oil Royalty Trust ("Trust") fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Report fairly presents, in all material respects, the financial condition and results of operations of the Trust. Dated: February 28, 2005 /s/ John H. Van Kirk --------------------- John H. Van Kirk Managing Trustee (Chief Executive Officer) /s/ John R. Van Kirk --------------------- John R. Van Kirk Managing Director (Chief Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----