-----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, DQeAoxgRu9/0uzvvbkfwfwa1ZKq7XOetwUuDmtPIqSYP3inObuxTxPFlJTB86q3u YGjIrc2vgPVYA83Lm4mMYg== 0000072633-96-000008.txt : 19960314 0000072633-96-000008.hdr.sgml : 19960314 ACCESSION NUMBER: 0000072633-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960131 FILED AS OF DATE: 19960313 SROS: NYSE 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: 96534154 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: 9087414008 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 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, 1996 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) (908) 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 Class Outstanding at January 31, 1996 - ----- ------------------------------- Units of Beneficial Interest 8,314,842 ARTHUR ANDERSEN LLP ACCOUNTANT'S REVIEW REPORT ---------------------------- To North European Oil Royalty Trust: We have reviewed the accompanying statements of assets, liabilities and trust corpus of North European Oil Royalty Trust (the "Trust") as of January 31, 1996 and the related statements of income and expenses on a cash basis for the three months ended January 31, 1996 and 1995, and the related statements of changes in cash and cash equivalents and undistributed earnings for the three months January 31, 1996 and 1995. These financial statements are the responsibility of the Trust's management. The statement of assets, liabilities and trust corpus as of October 31, 1995 of the Trust was maintained on the cash basis rather than the accrual basis of accounting and was audited by us. Our report dated November 8, 1995 indicates the statement did not purport to present, and in our opinion did not present, financial position and results of operations in conformity with generally accepted accounting principles which require the use of the accrual basis of accounting. We have not performed any auditing procedures since that date. 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 conducted 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 accounts of the Trust are maintained on a cash basis of accounting under which income is not recorded until collected instead of when earned, and expenses are recorded when paid instead of when incurred. Thus, the accompanying financial statements are not intended to present financial position and results of operations in conformity with generally accepted accounting principles which require the use of the accrual basis of accounting (see Note 1). Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with the cash basis of accounting. As discussed in Note 3, the Trust has a contingent liability relating to unclaimed units and distributions. No reserves are established or reflected in the financial statements for the possibility that funds would be required to satisfy such claims. /s/ Arthur Andersen LLP ------------------------- ARTHUR ANDERSEN LLP Roseland, New Jersey February 8, 1996 PART I -- FINANCIAL INFORMATION ------------------------------- Item 1. Financial Statements ---------------------------- STATEMENTS OF INCOME AND EXPENSES ON A CASH BASIS (NOTE 1) ----------------------------------------------------------- FOR THE THREE MONTHS ENDED JANUARY 31, 1996 AND 1995 ----------------------------------------------------- 1996 1995 ----------------- ----------------- (unaudited) German gas, oil and sulfur royalties received $ 2,688,592 $ 2,760,129 ----------- ----------- Interest income 20,826 10,298 ----------- ----------- Trust expenses ( 243,157) ( 179,701) ----------- ----------- Net income on a cash basis $ 2,466,261 $ 2,590,726 =========== =========== Net income per unit on a cash basis $ .30 $ .31 ====== ====== Cash distributions paid or to be paid: Dividends and distributions per unit paid to former unlocated shareholders .00 .00 Distributions per unit to be paid to certificate holders $ .29 $ .31 ====== ====== STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS (NOTE 1) ----------------------------------------------------------- JANUARY 31, 1996 AND OCTOBER 31, 1995 ------------------------------------- 1996 1995 ----------------- ----------------- (unaudited) (audited) Current assets - - Cash and cash equivalents (Note 1) $ 2,482,209 $ 2,951,227 Producing gas and oil royalty rights, net of amortization (Notes 1 and 2) 1 1 ----------- ----------- $ 2,482,210 $ 2,951,228 Current liabilities - - Cash distributions payable to certificate holders $ 2,411,304 $ 2,909,894 Contingent liability (Note 3) Trust corpus (Notes 1 and 2) 1 1 Undistributed earnings 70,905 41,333 ----------- ----------- $ 2,482,210 $ 2,951,228 The accompanying accountants' review report and the notes to financial statements should be read in conjunction with these statements. STATEMENTS OF CHANGES IN CASH AND CASH EQUIVALENTS (NOTE 1) ----------------------------------------------------------- FOR THE THREE MONTHS ENDED JANUARY 31, 1996 AND 1995 ---------------------------------------------------- 1996 1995 ----------------- ----------------- (unaudited) Sources of cash and cash equivalents: German gas, oil and sulfur royalties $ 2,688,592 $ 2,760,129 Interest income 20,826 10,298 ----------- ----------- 2,709,418 2,770,427 ----------- ----------- Uses of cash and cash equivalents: Payment of Trust expenses 243,157 179,701 Distributions and dividends paid (Note 3) 2,935,279 1,828,838 ----------- ----------- 3,178,436 2,008,539 ----------- ----------- Net increase(decrease) in cash and cash equivalents during the period ( 469,018) 761,888 Cash and cash equivalents, beginning of period 2,951,227 1,848,273 ----------- ----------- Cash and cash equivalents, end of period $ 2,482,209 $ 2,610,161 =========== =========== STATEMENTS OF UNDISTRIBUTED EARNINGS (NOTE 1) --------------------------------------------- FOR THE THREE MONTHS ENDED JANUARY 31, 1996 AND 1995 ---------------------------------------------------- 1996 1995 ----------------- ----------------- (unaudited) Balance, beginning of period $ 41,333 $ 19,435 Net income on a cash basis 2,466,261 2,590,726 ----------- ----------- 2,507,594 2,610,161 ----------- ----------- Less: Dividends and distributions paid to former unlocated shareholders (Note 3) 25,385 0 Current year distributions paid or to be paid to certificate holders (Note 3) 2,411,304 2,576,998 ----------- ----------- 2,436,689 2,576,998 ----------- ----------- Balance, end of period $ 70,905 $ 33,163 =========== =========== The accompanying accountants' review report and the notes to financial statements should be read in conjunction with these statements. NORTH EUROPEAN OIL ROYALTY TRUST -------------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- (Unaudited) ----------- (1) Summary of significant accounting policies: ---------------------- Basis of accounting - ------------------- The accounts of North European Oil Royalty Trust (the "Trust") are maintained on a cash basis except for distributions to be paid to certificate holders (those distributions approved by the Trustees for the Trust). In the opinion of the Trustees, the use of the cash basis provides a more meaningful presentation to unit holders 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 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 and state income taxes - ------------------------------ The Trust, as a grantor trust, is exempt from Federal and state 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. 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, 1996 and 1995, there were 8,314,842 and 8,312,898 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. (3) Contingent liability: --------------------- The Trust serves as fiduciary for certain unlocated or unknown shareholders of North European Oil Corporation (the "Corporation") or of North European Oil Company, corporate predecessors. From the liquidation of the Company to October 31, 1995, 718,992 units were issued in exchanges and dividends of $353,230 and distributions of $4,162,423 were paid to former unlocated Corporation and Company shareholders. For the three- month period ended January 31, 1996, 858 units were issued in exchanges and $54 in dividends and $25,331 in distributions were paid to former unlocated Corporation and Company shareholders. As of January 31, 1996, there were 875,748 units that could be issued to unlocated or unknown Corporation and Company shareholders and $488,111 in dividends and $26,108,964 in distributions would be payable if all such shares were exchanged. The amount of such distributions will increase as further distributions of the Trust are made and it is possible that claims by such owners would require substantial payments to a level where reduced or no funds would be available for some period of time for regular distribution payments. On the basis of their experience with such claims, the Trustees believe that it is unlikely that payments for such claimants would be required in substantial amounts in any one period of time. On November 20, 1986, the Escheator for the State of Delaware commenced an action in the Delaware Court of Chancery seeking issuance, under Delaware escheat statutes, of certificates for units of beneficial interest which are issuable in exchange for certain unexchanged Corporate or Company shares as well as unpaid dividends and distributions. Following partial resolution of the suit in 1988, discussions for possible settlement of the proceeding were suggested by representatives for the Escheator. On December 7, 1995, as a result of these discussions, attorneys for the Trust and the Delaware Attorney General representing the Escheator filed a joint petition in the Delaware Chancery Court seeking approval for a settlement of the litigation on negotiated terms. The settlement requires approval of the Court after opportunity for public hearing. The Court has appointed a Solicitor ad litem to represent the interests of the unlocated shareholders. As of January 31, 1996 there were a total of 875,748 authorized but unissued units reflecting the unexchanged shares of the Trust's predecessor corporations. If the proposed settlement is approved, 760,560 units will be issued to the Escheator in three installments as follows: within thirty (30) days after the Court's order approving the settlement becomes final and non-appealable, one-half of these units (380,280) will be issued to the Escheator; subject to reductions for subsequent exchanges, an additional 50% of the remaining units will be issued in the year 2000; and the remainder in the year 2005. As these units are issued and become outstanding, they will be entitled to receive the ordinary distributions of the Trust. Under the terms of the settlement, the Trust would not be required to make payments of arrearages of Company dividends or Trust distributions to the Escheator with respect to the units issued. Claims for the issuance of units and the payment of prior dividends and distributions received before the year 2005 from previously unlocated shareholders would be paid jointly by the Escheator and the Trust under a formula provided in the settlement, with claimant owners entitled to receive both units and arrears payments. Until the final issuance of units in 2005, the Escheator's liability will be limited to the total value of units and distributions it has received. Any claims in excess of this amount will be paid by the Trust. After the final issuance of units in the year 2005, no further payments of arrearages of Company dividends or Trust distributions would be required to be paid to shareholders subject to this settlement and the contingent liability for such possibility described above would no longer be applicable. This settlement also permits the Trust to seek to apply the same or similar settlement procedures to the authorized but unissued units that were not subject to the litigation (115,188) units as of January 31, 1996). Any additional issuances that occur as in the course of subsequent settlements with respect to these units would involve some additional dilution. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. ------------------------------------------------- The Trust is a passive investment trust which holds overriding royalty rights and receives monthly income from the operating companies based on their sales of gas, sulfur and oil. The Trust does not engage in any business activities and has no need of funds beyond the funds available from monthly royalties to cover operating expenses. Accordingly, neither liquidity nor capital resources are pertinent factors in its activities or operations. The 4.8% decline in net Trust income for the quarter ended January 31, 1996 from the prior year's equivalent quarter resulted primarily from two factors. These two factors were a 20% decline in gas sales from the western portion of the Oldenburg concession and an increase in expenses related to the preparation and filing of the joint petition for settlement with the Delaware Court of Chancery and the biennial audit of the operating companies in Germany. Although the impact of the drop in gas sales was mitigated by increases in average prices and exchange rates, the net negative impact on the distribution was equivalent to nearly a 1 cent per unit. Likewise, the increase in expenses was equivalent to over a 3/4 cent decline in income per unit. After rounding, these two factors accounted for the majority of the 2 cent decline in distributions per unit. Despite the large decline in gas sales from western Oldenburg, overall gas sales declined by only 4.4% to 48.5 billion cubic feet for the quarter with gas prices averaging $2.55 per Mcf. For the quarter the average value of the Deutsche mark was equal to 68.9 cents. The increase in interest income resulted both from the increase in funds available for investment and higher interest rates in the U.S. The current Statement of Assets, Liabilities and Trust Corpus of the Trust at January 31, 1996, compared to that at fiscal year end (October 31, 1995), shows a decrease in assets due to lower 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 or currently in litigation, quarterly distributions would be reduced to the extent required to provide funds for such payments. Part II -- OTHER INFORMATION ---------------------------- Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- (a) The annual meeting of Unit Holders was held February 13, 1996. (b) The following persons were re-elected Trustees of the Trust to serve until the 1997 Annual Meeting of Unit Holders: Robert P. Adelman (6,703,308 votes for; 33,301 withheld) Robert J. Castle (6,707,458 votes for; 29,151 withheld) Willard B. Taylor (6,705,268 votes for; 31,341 withheld) John H. Van Kirk (6,707,748 votes for; 28,861 withheld) (c) The designation of the firm of Arthur Andersen & Co. as auditor for the Trust for 1996 fiscal year was ratified with the following vote totals: 6,702,078 votes for; 6,511 votes against and 28,020 abstained. Item 6. Exhibits and Reports on Form 8-K. --------------------------------- (a) Exhibits. None. (b) Reports on Form 8-K. A report on Form 8-K dated December 11, 1995 was filed with the Securities and Exchange Commission reporting the distribution of a press release dated December 7, 1995 and the mailing of a Form of Notice to Owners submitted to the Delaware Court of Chancery on December 7, 1995 for approval and subsequent distribution to owners. The Notice contains the complete text of the Joint Petition for Approval of Settlement of Pending Litigation between the Escheator for the State of Delaware and the Trustees of North European Oil Royalty Trust. A report on Form 8-K dated January 13, 1996 was filed with the Securities and Exchange Commission reporting the mailing of an advisory letter, dated January 8, 1996, to certificate holders concerning cost depletion computations to be made by holders for their personal income tax returns under the Internal Revenue Code. The Form 8-K included as exhibits, the advisory letter and a letter report, dated December 21, 1995, prepared by Ralph E. Davis Associates, Inc. located at 3555 Timmons Lane, Suite #1105 in Houston, Texas, 77027. The Davis report detailed the computations used to derive the cost depletion percentage contained in the advisory letter. A report on Form 8-K dated March 4, 1996 was filed with the Securities and Exchange Commission reporting the distribution of a press release dated February 26, 1996 and the announcement on the same date of the signing by Vice Chancellor Jack B. Jacobs of the Delaware Court of Chancery of the Order Approving the Joint Petition of the Settlement of Pending Litigation between the Escheator for the State of Delaware and the Trustees of North European Oil Royalty Trust. 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: March 11, 1996 EX-27 2
5 This schedule contains summary financial information extracted from the Statements of Assets, Liabilities and Trust Corpus at January 31, 1996 and the Statements of Income and Expenses on a Cash Basis for the Three Months Ended January 31, 1996 and is qualified in its entirety by reference to such financial statements and the accompanying notes. 0000072633 NORTH EUROPEAN OIL ROYALTY TRUST 3-MOS OCT-31-1996 NOV-01-1995 JAN-31-1996 2,482,210 0 0 0 0 2,482,210 0 0 2,482,210 2,411,304 0 0 0 0 70,906 2,482,210 0 2,709,418 0 0 243,157 0 0 0 0 0 0 0 0 2,466,261 .30 .30
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