NORTH EUROPEAN OIL ROYALTY TRUST

NORTH EUROPEAN OIL ROYALTY TRUST is a grantor trust that holds overriding royalty rights for gas and oil production in specific concessions or leases within the Federal Republic of Germany. The Trust's primary function is to collect and distribute these royalty payments to its unit owners. The Trust holds these rights through contracts with local German exploration and development subsidiaries of ExxonMobil Corp. and the Royal Dutch/Shell Group of Companies. Under these agreements, the Trust receives various percentage royalties based on the proceeds from the sales of certain products originating from these areas. Currently, royalties are received from the sales of gas well gas, oil well gas, crude oil, condensate, and sulfur. The royalty rights were transferred to the Trust from North European Oil Company upon its dissolution in September 1975. North European Oil Company was established in 1957 as the successor to North European Oil Corporation. The Trust is managed by Trustees under an Agreement of Trust dated September 10, 1975, as amended. Neither the Trust nor the Trustees engage in active business activities or operations. The Trustees' responsibilities include monitoring, verifying, collecting, holding, investing, and distributing the royalty payments made to the Trust. Under the Trust Agreement, the Trustees make quarterly distributions of the net funds received by the Trust to the unit owners, after setting aside provisions for future anticipated expenses. Funds temporarily held by the Trust before distribution are invested in an interest-bearing money market account. There has been no significant change in the principal operation or purpose of the Trust during the past fiscal year.