SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K/A
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended October 31, 2001 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) (IRS Employer Identification Number)
Suite 19A, 43 West Front Street, Red Bank, N.J. 07701
---------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: 732-741-4008
---------------------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ---------------------------- -----------------------------------------
Units of Beneficial Interest New York Stock Exchange
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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
- 2 -
As of December 31, 2001, 8,931,414 units of beneficial interest of the
Registrant were outstanding, and the aggregate market value of outstanding
units of beneficial interest of the Registrant, which may be voted, held by
non-affiliates of the Registrant was approximately $174,007,453 on such
date. (The Trustees and the Managing Director are the only persons deemed
to be affiliates of the Registrant.)
Documents Incorporated by Reference
-----------------------------------
Items 10, 11, 12 and 13 of Part III have been partially or wholly omitted
from this report and the information required to be contained therein is
incorporated by reference from the Registrant's definitive proxy statement,
dated January 10, 2002, for the annual meeting to be held on
February 13, 2002.
- 3 -
Item 8. Financial Statements and Supplementary Data
--------------------------------------------
NORTH EUROPEAN OIL ROYALTY TRUST
--------------------------------
INDEX TO FINANCIAL STATEMENTS
------------------------------
Page Number
-----------
Report of Independent Public Accountants F-1
Financial Statements:
Statements of Assets, Liabilities and
Trust Corpus as of October 31, 2001 and 2000 F-2
Statements of Income and Expenses on a Cash Basis
for the Years Ended October 31, 2001, 2000 and 1999 F-3
Statements of Undistributed Earnings
for the Years Ended October 31, 2001, 2000 and 1999 F-4
Statements of Changes in Cash and Cash Equivalents
for the Years Ended October 31, 2001, 2000 and 1999 F-5
Notes to Financial Statements F-6 - F-10
Schedules are omitted because they are not applicable or not required or
because the required information is included in the financial statements or
notes thereto.
- 4 -
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To North European Oil Royalty Trust:
We have audited the accompanying statements of assets, liabilities and trust
corpus of North European Oil Royalty Trust as of October 31, 2001 and 2000
and the related statements of income and expenses on a cash basis,
undistributed earnings and changes in cash and cash equivalents for each of
the three years in the period ended October 31, 2001. These financial
statements are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
The accounts of the Trust are maintained on the 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).
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets, liabilities and trust corpus of North
European Oil Royalty Trust as of October 31, 2001 and 2000, and its income
and expenses, undistributed earnings and changes in cash and cash equivalents
for each of the three years in the period ended October 31, 2001, all on 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
Roseland, New Jersey
November 8, 2001 (except with respect to Note 4
as to which the date is December 4, 2001)
F-1
- 5 -
NORTH EUROPEAN OIL ROYALTY TRUST
--------------------------------
STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS (NOTE 1)
-----------------------------------------------------------
OCTOBER 31, 2001 AND 2000
-------------------------
ASSETS 2001 2000
------ ------------ ------------
Current Assets --
Cash and cash equivalents (Note 1) $5,391,320 $2,946,596
Producing gas and oil
royalty rights (Note 1) 1 1
------------ ------------
$5,391,321 $2,946,597
============ ============
LIABILITIES AND TRUST CORPUS
----------------------------
Current liabilities --
Cash distributions payable
to unit owners, paid
November 2001 and 2000 $5,332,083 $2,932,645
Contingent liability (Note 3)
Trust corpus (Notes 1 and 2) 1 1
Undistributed earnings (Note 1) 59,237 13,951
------------ ------------
$5,391,321 $2,946,597
============ ============
The accompanying notes to financial statements
are an integral part of these statements.
F-2
- 6 -
NORTH EUROPEAN OIL ROYALTY TRUST
--------------------------------
STATEMENTS OF INCOME AND EXPENSES ON A CASH BASIS (NOTE 1)
----------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31, 2001, 2000 AND 1999
---------------------------------------------------
2001 2000 1999
------------ ------------ ------------
German gas, sulfur and
oil royalties
received $22,453,630 $14,155,028 $10,667,478
Interest income 137,305 96,460 70,026
Trust expenses (684,111) (583,226) ( 569,081)
------------ ------------ ------------
Net income on
a cash basis $21,906,824 $13,668,262 $10,168,423
============ ============ ============
Net income per unit
on a cash basis $2.47 $1.54 $1.17
======= ======= =======
Cash distributions paid
or to be paid:
Dividends and
distributions per
unit paid or to be
paid to former unlocated
shareholders (Note 3) $0.00 $0.00 $0.00
Distributions per unit
paid or to be paid to
unit owners (Note 4) 2.46 1.56 1.17
------- ------- -------
$2.46 $1.56 $1.17
======= ======= =======
The accompanying notes to financial statements
are an integral part of these statements.
F-3
- 7 -
NORTH EUROPEAN OIL ROYALTY TRUST
--------------------------------
STATEMENTS OF UNDISTRIBUTED EARNINGS (NOTE 1)
---------------------------------------------
FOR THE YEARS ENDED OCTOBER 31, 2001, 2000 AND 1999
---------------------------------------------------
2001 2000 1999
------------ ------------ ------------
Balance,
beginning of year $ 13,951 $ 58,044 $ 69,998
Reimbursement for prior
payment of past dividends
and distributions 0 0 1,017
Net income on
a cash basis 21,906,824 13,668,262 10,168,423
------------ ------------ ------------
21,920,775 13,726,306 10,239,438
------------ ------------ ------------
Less:
Dividends and
distributions paid
to former unlocated
shareholders (Note 3) 0 1,043 6,318
Current year
distributions paid
or to be paid to unit
owners (Note 4) 21,861,538 13,711,312 10,175,076
------------ ------------ ------------
21,861,538 13,712,355 10,181,394
------------ ------------ ------------
Balance, end of year $ 59,237 $ 13,951 $ 58,044
============ ============ ============
The accompanying notes to financial statements
are an integral part of these statements.
F-4
- 8 -
NORTH EUROPEAN OIL ROYALTY TRUST
--------------------------------
STATEMENTS OF CHANGES IN CASH AND CASH EQUIVALENTS (NOTE 1)
-----------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31, 2001, 2000 AND 1999
---------------------------------------------------
2001 2000 1999
------------ ------------ ------------
Sources of cash and
cash equivalents:
German gas, sulfur and
oil royalties received $22,453,630 $14,155,028 $10,667,478
Interest income 137,305 96,460 70,026
Reimbursement for prior
payment of past dividends
and distributions 0 0 1,017
------------ ------------ ------------
22,590,935 14,251,488 10,738,521
Uses of cash and
cash equivalents:
Payment of Trust
expenses 684,111 583,226 569,081
Distributions and
dividends paid
(Note 3) 19,462,100 13,040,838 10,616,169
------------ ------------ ------------
20,146,211 13,624,064 11,185,250
------------ ------------ ------------
Net increase (decrease)
in cash and cash
equivalents
during the year 2,444,724 627,424 ( 446,729)
Cash and cash
equivalents,
beginning of year 2,946,596 2,319,172 2,765,901
------------ ------------ ------------
Cash and cash
equivalents,
end of year $ 5,391,320 $2,946,596 $ 2,319,172
============ ============ ============
The accompanying notes to financial statements
are an integral part of these statements.
F-5
- 9 -
NORTH EUROPEAN OIL ROYALTY TRUST
--------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
OCTOBER 31, 2001, 2000 AND 1999
-------------------------------
(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 of accounting with the exception of 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.
Use of Estimates -
------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements. Actual results may differ
from those estimates.
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.
F-6
- 10 -
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 from the
date of purchase.
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
October 31, 2001, 2000 and 1999, there were 8,886,804, 8,886,804
and 8,696,646 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 Exxon Mobil Corp. and
the Royal Dutch Group. 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, 2000,
721,364 Trust units were issued in exchange for Corporate or Company
shares and dividends of $354,101 and distributions of $4,236,544
were paid to former unlocated Corporation and Company shareholders.
For the year ended October 31, 2001, no units were issued in
F-7
- 11 -
exchanges and no dividends and no 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 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. Pursuant to the Court approved
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) have 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 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 November, 2001 distribution, the maximum liability of
the Delaware Escheator will be $11,638,204.
Under the Trust Agreement as deemed amended by the February 26, 1996
Order of the Delaware Court of Chancery, 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. As of October 31, 2001, there remained a total
of 303,786 units that could be issued to unlocated or unknown
Corporation and Company shareholders. Of this total, 190,122 units
are subject to the settlement and remain to be issued to the
Delaware Escheator. If all shares, represented by the units already
issued as well as the units remaining to be issued, were presented
for exchange, $487,023 in dividends and $29,889,710 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 would be adequate to
cover the Delaware Escheator's share of any subsequent claims. In any
event, the Trust's contingent liability for such claims will be
eliminated in 2005.
F-8
- 12 -
(4) Subsequent Event:
-----------------
In implementation of the provisions of the order of the Delaware Court
of Chancery dated February 26, 1996 (the "Delaware Order"), and
reported on Form 8-K filed February 26, 1996, on December 4, 2001,
the Trust and the Administrator of Unclaimed Property, Office of the
New York State Comptroller (the "New York Administrator") entered
into a Settlement Agreement covering Units for which owners were
unlocated but New York state addresses were shown in predecessor
corporation records. The New York 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 would be
issued to the New York Administrator prior to December 31, 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 of any costs relating to
any claims which are allowed. After June 30, 2005, under the
Delaware Order, no payments will be required for arrearages in
dividends or distributions to allowed claims and the existing
contingent liability concerning them will be eliminated.
The 44,610 Units issued now will receive regular distributions of Trust
royalty income. Their issuance results in a de minimis reduction
(amounting to 0.502%) in Trust distributions to existing owners.
Management of the Trust intends to continue the implementation program
permitted by the Delaware Order with other states, but the impact of
any such implementation will be minimal in view of the limited
numbers of addresses listed in each of the other states.
F-9
- 13 -
(5) Quarterly results (unaudited):
------------------------------
The table below summarizes the quarterly results and distributions of
the Trust for the years ended October 31, 2001 and 2000.
Fiscal 2001 by Quarter and Year
-------------------------------------------------------------
First Second Third Fourth Year
---------- ---------- ---------- ---------- -------------
Royalties
received $6,441,960 $5,574,374 $4,983,996 $5,453,300 $22,453,630
Net income on
a cash basis 6,322,861 5,395,154 4,870,571 5,318,238 21,906,824
Net income
per unit on
a cash basis .71 .61 .55 .60 2.47
Current year cash
distributions
paid or
to be paid 6,309,631 5,420,950 4,798,874 5,332,083 21,861,538
Current year cash
distributions
per unit .71 .61 .54 .60 2.46
Fiscal 2000 by Quarter and Year
-------------------------------------------------------------
First Second Third Fourth Year
---------- ---------- ---------- ---------- -------------
Royalties
received $3,499,675 $3,682,978 $3,966,769 $3,005,606 $14,155,028
Net income on
a cash basis 3,366,006 3,541,412 3,866,073 2,894,771 13,668,262
Net income
per unit on
a cash basis .39 .41 .43 .33 1.54
Current year cash
distributions
paid or
to be paid 3,391,704 3,565,637 3,821,326 2,932,645 13,711,312
Current year cash
distributions
per unit .39 .41 .43 .33 1.56
F-10
- 14 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Trust has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
NORTH EUROPEAN OIL ROYALTY TRUST
Dated: February 14, 2002 By: /s/ John H. Van Kirk
-------------------------
John H. Van Kirk,
Managing Trustee
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Dated: February 14, 2002 /s/ John H. Van Kirk
--------------------------------
John H. Van Kirk, Trustee
Dated: February 14, 2002 /s/ Robert P. Adelman
--------------------------------
Robert P. Adelman, Trustee
Dated: February 14, 2002 /s/ Samuel M. Eisenstat
--------------------------------
Samuel M. Eisenstat, Trustee
Dated: February 14, 2002 /s/ Willard B. Taylor
--------------------------------
Willard B. Taylor, Trustee
Dated: February 14, 2002 /s/ Rosalie J. Wolf
--------------------------------
Rosalie J. Wolf, Trustee