NORTH
EUROPEAN OIL ROYALTY TRUST
Suite
19A, 43 West Front Street
Red
Bank, New Jersey 07701
______________
NOTICE
OF ANNUAL MEETING OF UNIT OWNERS
February
13, 2008
To
the Unit Owners of
NORTH
EUROPEAN OIL ROYALTY TRUST:
NOTICE
IS
HEREBY GIVEN that the Annual Meeting of Unit Owners of NORTH EUROPEAN OIL
ROYALTY TRUST (the "Trust"), pursuant to Article 14 of its Agreement of Trust
will be held on Wednesday, February 13, 2008, at 1:00 P.M., in The Breakfast
Room, Seventh Floor, at The University Club, 1 West 54th Street, New York,
New
York 10019 (corner of Fifth Avenue; entrance on 54th Street) for the following
purposes:
|
|
(1)
|
To
elect five persons as Trustees to serve until the next annual meeting
of
unit owners or until their respective successors are duly elected
and
qualified.
|
|
|
(2)
|
To
amend the North European Oil Royalty Trust Agreement of Trust (the
“Trust
Agreement”) to clarify that units of beneficial interest in the Trust may
be issued in uncertificated (book entry)
form.
|
|
|
(3)
|
To
amend the Trust Agreement to provide that the Trust shall have
a perpetual
life.
|
|
|
(4)
|
To
transact such other business as may properly come before the
meeting.
|
The
transfer books of the Trust will not be closed. Only unit owners of
record as of the close of business on January 2, 2008 will be entitled to
notice
of and to vote at the annual meeting.
BY
ORDER
OF THE TRUSTEES:
| |
ROBERT
P. ADELMAN
|
| |
Managing
Trustee
|
January
10, 2008
______________
If
you plan to attend the meeting, please note that The University Club has
a dress
code. Gentlemen are required to wear a jacket and tie, and ladies are required
to wear business attire. The University Club does not make
exceptions.
If
you do not expect to be present in person, you are urged to sign and return
the
enclosed proxy in the enclosed postage-paid envelope as soon as
possible.
NORTH
EUROPEAN OIL ROYALTY TRUST
Suite
19A, 43 West Front Street
Red
Bank, New Jersey 07701
(732)
741-4008
______________
PROXY
STATEMENT
This
proxy statement is furnished in connection with the solicitation of proxies
by
the Trustees of NORTH EUROPEAN OIL ROYALTY TRUST (the "Trust") to be used
at the
Annual Meeting of Unit Owners to be held on Wednesday, February 13, 2008
and any
adjournment or adjournments thereof for the purposes set forth in the
accompanying notice of annual meeting. Only unit owners of record at the
close
of business on January 2, 2008 will be entitled to vote at such meeting.
Proxies
properly executed and received in time to be presented at the meeting will be
voted as specified in such proxies. If no instructions are specified in such
proxies, units of beneficial interest in the Trust ("units") will be voted
for
the election of the Trustees, for the approval of amendments to the Trust
Agreement to clarify that units of beneficial interest in the Trust may be
issued in uncertificated (book entry) form and for the approval of amendments
to
the Trust Agreement to provide that the Trust shall have a perpetual
life. The Trustees do not know of any matters, other than as
described in the Notice of Annual Meeting of Unit Owners, which are to come
before the annual meeting. If any other matters are properly presented at
the
annual meeting for action, the persons named in the enclosed form of proxy
and
acting thereunder will have the discretion to vote on such matters in accordance
with their best judgment.
Any
proxy
may be revoked at any time prior to its being exercised by filing with the
Managing Trustee, at the address of the Trust above, written notice of such
revocation or a duly executed proxy bearing a later date, or by attending
and
voting in person at the annual meeting. Owners of units registered in the
name
of a nominee (e.g. units held by brokers in "street name") who wish to vote
in
person at the annual meeting should contact the nominee to obtain appropriate
authority to vote such units at the annual meeting. Attendance at the annual
meeting will not in and of itself constitute revocation of a proxy. This
proxy
statement and the proxy included herewith are being mailed to unit owners
on or
about January 10, 2008.
The
Trust
was formed on September 10, 1975, pursuant to a vote of the shareholders
of
North European Oil Company, a predecessor corporate entity. There
were 9,190,590 units of the Trust outstanding on January 2, 2008. This number
of
units represents all authorized units. Each unit owner is entitled to one
vote
for each unit he or she holds or represents. Any number of units represented
in
person or by proxy will constitute a quorum for all purposes at the annual
meeting.
The
affirmative vote of a majority of units represented in person or by proxy
at the
annual meeting is required to elect any person a Trustee of the
Trust. The affirmative vote of a majority of the outstanding units is
required to approve the proposed amendments to the Trust
Agreement. With regard to the election of Trustees, votes may be cast
in favor of all nominees or withheld with respect to all or certain nominees;
votes that are withheld will be counted as present for purposes of the election
of Trustees and, thus, will have the same effect as a vote “against” such
election. A unit owner may also abstain from voting on the
approval of the amendments to the Trust Agreement. Because these amendments
require the affirmative vote of a majority of the outstanding units, such
abstentions will have the same effect as a vote “against” such
amendments.
In
the
event of a broker non-vote with respect to any issue coming before the annual
meeting, such nonvoting units will not be deemed present and entitled to
vote as
to that issue for purposes of determining the total number of units represented
in person or by proxy. A “broker non-vote” occurs if a broker or
other nominee who is entitled to vote units on behalf of a record owner has
not
received instructions with respect
to
a
particular item to be voted on, and the broker or nominee does not otherwise
have discretionary authority to vote on that matter. Under the rules
of the New York Stock Exchange (“NYSE”), brokers may vote a client’s proxy in
their own discretion on certain items even without instructions from the
beneficial owner, but may not vote a client’s proxy without voting instructions
on “non-discretionary” items. The election of Trustees and the
approval of amendments to the Trust Agreement are considered “discretionary”
items.
The
Trustees do not expect that the cost of soliciting proxies will exceed the
amount normally expended for a proxy solicitation for an election of directors
or trustees and all such costs will be borne by the Trust. In addition to
the
use of the mail, some proxies may be solicited personally by the Trustees
without additional compensation. The Trustees may reimburse persons holding
units in their names or in the names of their nominees for their expenses
in
sending the soliciting materials to their principals.
ELECTION
OF TRUSTEES
(Item
1 on Proxy Card)
The
persons named in the accompanying proxy intend to vote for the election of
the
five individuals named below to serve until the next annual meeting of unit
owners, or until their successors have been duly elected and qualified. All
of
the nominees are presently serving as Trustees. The Trustees are
informed that all nominees are willing to serve, but if any such person shall
decline or shall become unable to serve as a Trustee for any reason, votes
will
be cast instead for a substitute nominee, if any, designated by the present
Trustees, or, if none is so designated prior to election, said votes will
be
cast according to the judgment of the person or persons voting the
proxy.
Nominees
for Election as Trustees
The
following sets forth certain information about the nominees for election
as
Trustees:
Robert
P. Adelman, 77, is a director or trustee of various profit and
non-profit companies. Mr. Adelman has been a Trustee since 1987.
Samuel
M. Eisenstat, 67, an attorney, currently serves as the Chief
Executive Officer of Abjac Energy Corp. Mr. Eisenstat serves as a director
or
trustee of a number of open and closed end funds managed by AIG SunAmerica
Asset
Management Corp. Mr. Eisenstat has been a Trustee since
1996.
Lawrence
A. Kobrin, 74, is senior counsel with the law firm of Cahill Gordon
& Reindel LLP, a position he has held since January 1, 2007. Prior
to such
time, Mr. Kobrin was a partner at Cahill Gordon & Reindel LLP, a position he
held since 1984. Cahill Gordon & Reindel LLP serves as counsel to
the Trust. Mr. Kobrin has been a Trustee since 2006.
Willard
B. Taylor, 67, has been a partner with the law firm of Sullivan and
Cromwell, LLP, a position he has held for the period from 1972 through 2007.
Mr.
Taylor has been a Trustee since 1974 and also served as a director of North
European Oil Company from 1970 to 1972.
Rosalie
J. Wolf, 66, is Managing Partner of Botanica Capital Partners LLC, a
position she has held since 2004. From 2001-2003, Ms. Wolf was a managing
director and senior advisor of Offit Hall Capital Management LLC (and
predecessor entity). From 1994-2000, Ms. Wolf was the Treasurer and Chief
Investment Officer of The Rockefeller Foundation. Ms. Wolf has been a
Trustee since 2001.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Unit
Ownership of Trustees and Executive Officers
The
following table sets forth the number of units beneficially owned as of December
3, 2007 by each Trustee and nominee for Trustee, the individual named in
the
summary compensation table set forth below under “Executive Compensation,” and
all Trustees and executive officers as a group.
| |
Number
of
|
|
| |
Shares
|
Percentage
|
| |
Beneficially
|
Beneficially
|
|
Name
and Position of Beneficial Owner
|
Owned
|
Owned
(1)
|
|
Robert
P. Adelman, Managing Trustee
|
7,000
|
*
|
|
Samuel
M. Eisenstat, Trustee
|
5,000
|
*
|
|
Lawrence
A. Kobrin, Trustee (2)
|
1,500
|
*
|
|
Willard
B. Taylor, Trustee
|
6,619
|
*
|
|
Rosalie
J. Wolf, Trustee
|
2,000
|
*
|
|
John
R. Van Kirk, Managing Director (3)
|
7,551
|
*
|
|
All
Trustees and executive officers as a group (6 persons)
|
29,670
|
*
|
_________________
*
Less
than one percent
|
(1)
|
Percentage
computations are based upon all outstanding units. Percentage computations
for each Trustee and the Managing Director include units deemed
to be
owned indirectly even when beneficial ownership has been disclaimed
as set
forth in note (2).
|
|
(2)
|
Includes
500 units owned by Mr. Kobrin’s wife, in which units he disclaims
beneficial interest.
|
|
(3)
|
Mr.
Van Kirk, 55, has been the Managing Director of the Trust since
1990.
Mr.
Van Kirk’s units are all pledged as security in a margin account he
maintains.
|
Other
Unit Ownership
No
person
known to the Trust owns beneficially more than 5% of the Trust’s
units.
AMENDMENTS
TO TRUST AGREEMENT
(Items
2 and 3 on Proxy Card)
The
Trust
is asking the unit owners to approve two sets of amendments to the Trust
Agreement. The first set of amendments, which is listed as Item 2 on
the enclosed proxy card, clarifies that units of beneficial interest in the
Trust may be issued in uncertificated (book entry) form. The second
set of amendments, which is listed as Item 3 on the enclosed proxy card,
provides that the Trust shall have a perpetual life.
Uncertificated
Units
On
August
8, 2006, the NYSE received approval from the SEC for certain rules relating
to
direct registration system (“DRS”) eligibility of listed securities. The rules
require all securities listed on the NYSE (subject to certain exceptions
not
applicable to the Trust) to be eligible for inclusion in a DRS by January
1,
2008. To be eligible for inclusion in a DRS, an issuer’s charter and bylaws need
to permit the issuance of uncertificated securities. In the case of the Trust,
those documents are the Trust Agreement and the Trustees’
Regulations. The Trustees’ Regulations have been previously amended
to permit the issuance of uncertificated units. The current version of the
Trust
Agreement does not specifically reference the concept of uncertificated units.
However, Section 3.3 of the Trust Agreement does provide that “Certificates
shall be in such form as the Trustees may from time to time find necessary
or
desirable.” The Trustees have determined, based on that provision,
that units may be issued in uncertificated form. Although eligible to
participate, the Trustees have not made a determination to participate in
a DRS.
However, the Trustees will consider this issue from time to time.
For
the
avoidance of doubt, the Trustees believe that the Trust Agreement should
be
amended as follows to clarify that units of beneficial interest in the Trust
may
be issued in uncertificated form:
1.
Section 2.2 of the Trust Agreement shall be amended and restated in its entirety
to read as follows:
“SECTION
2.2. Certificate
or Certificates shall mean any Certificate or Certificates, as the
case may be, issued under this Agreement. Notwithstanding anything to
the contrary in this Agreement, in lieu of issuing Certificates in physical
form, ownership of Units may be evidenced by book entry or otherwise in
uncertificated form. If Units are evidenced by book entry or in uncertificated
form, all references in this Agreement to Certificates shall be deemed to
include references to the Units as evidenced by book entry or other
uncertificated form, and references to the issuance of Certificates shall
include references to the registration of the owner of a Unit and the issuance
of any confirmation thereof that may be deemed appropriate by the Trustees
or
required by law.”
2.
Section 2.3 of the Trust Agreement shall be amended and restated in its entirety
to read as follows:
“SECTION
2.3. Certificate
Holder, or any similar terms, shall mean the registered owner of a
Unit, whether held in certificated or uncertificated form, as shown by the
registration books maintained by the Trustees.
3
Section
3.1 of the Trust Agreement shall be amended by replacing the first three
sentences thereof with the following:
“If
Units
are to be evidenced by physical Certificates, the form of such Certificates
shall be determined by Trustees from time to time. The Trustees shall
forthwith issue any physical Certificates as directed by
the
Company. The number of Units represented by any physical Certificate
shall be designated on said Certificate.”
4.
Section 3.3 of the Trust Agreement shall be amended and restated in its entirety
to read as follows:
“SECTION
3.3. Form
and Execution. The Units shall be evidenced in such form (including
uncertificated form) as the Trustees may from time to time find necessary
or
desirable. All Units in certificated form shall be executed by the
manual or facsimile signatures of the Managing Trustee and one other
Trustee.”
5.
Section 3.4 of the Trust Agreement shall be amended and restated in its entirety
to read as follows:
“SECTION
3.4. Registration
of Certificates. The Trustees shall cause to be kept, at a place or
places within or without the State of Delaware, books (either in paper or
electronic form or such other form as the Trustees may from time to time
find
necessary or desirable) for the registration and transfer of Units (herein
sometimes called the “register”); and, upon presentation for such purpose of a
Certificate or of an instruction to transfer an uncertificated Unit, the
Trustees shall, under such reasonable regulations as they may prescribe,
cause
to be registered or transferred therein, any of such Units. Certificate Holders
or their duly authorized representatives shall have the right, upon reasonable
prior written notice to the Trustees, and in accordance with reasonable
regulations prescribed by the Trustees, to inspect and make copies of the
register.”
6
Section
3.5 of the Trust Agreement shall be amended and restated in its entirety
to read
as follows:
“SECTION
3.5. Transfer
of Certificates. The Certificates and the interest
represented thereby (but no fractional part of a single Unit thereof) may
be
transferred by the holder thereof in person or by a duly authorized agent
or
attorney, or by the properly appointed legal representative of the holder,
(x)
in the case of a Certificate in certificated form, upon the surrender of
the
Certificate, duly executed for transfer, to the Trustees with directions
that
such transfer be made and recorded in the register of the Trustees, and (y)
in
the case of a Unit evidenced in uncertificated form, upon the delivery of
a
transfer instruction, and in each case upon the delivery of such other documents
as the Trustees may reasonably require and upon the payment of the reasonable
transfer charges, if any, established by the Trustees for the purpose of
reimbursing the Trustees for the expenses incident thereto. Until any
such transfer is recorded in the register of the Trustees, the Trustees may
treat the holder of record of any Certificate as the owner thereof for all
purposes and shall not be charged with notice of any claim or demand to such
Certificate or the interest of any other person. The ownership and registration
of the Certificates may be in any form which applicable law permits, subject
to
the reasonable regulation thereof by the Trustees.”
Duration
of Trust
The
current version of the Trust Agreement provides that the life of the Trust
is
capped at 21 years following the death of the survivor of the persons named
in
Exhibit D to the Trust Agreement. As a result of changes to
Delaware law relating to trust life, the Trustees are proposing to amend
the
Trust Agreement to eliminate this cap and provide that the life of the Trust
would be in perpetuity, except as may be limited by applicable law. This
amendment only relates to the normal term of the Trust set forth in the Trust
Agreement and it does not affect any of the other termination provisions
in the
Trust Agreement, such as (1) earlier termination because of diminished
royalties, (2) termination by unit owners and (3) termination upon sales
of the
trust estate. The Trust Agreement would be amended as follows:
1.
Section 4.3 of the Agreement of Trust shall be amended and restated in its
entirety to read as follows:
“SECTION
4.3. Normal
Term. The trust is established to continue in perpetuity, provided
that in the event the duration of this trust is necessarily limited by the
applicable laws of the State of Delaware or any other state to a term which
is
shorter than the term hereinabove set forth and a court of competent
jurisdiction has finally determined that such shorter term must be used and
the
laws of such state must be applied in determining the duration of this trust,
then and in such event this trust shall continue for the maximum period
permitted under the laws of said state for the duration of this
trust.”
2.
Exhibit D to the Agreement of Trust shall be deleted in its
entirety.
Recommendations
The
Trustees believe that the clarification and extension would be in the best
interests of the unit owners and permit the Trust to fully conform to present
laws. As a result and for the other reasons discussed above, the
Trustees recommend a vote “FOR”
approval of both sets of amendments to the Trust Agreement. Each set
of amendments is a separate item on the enclosed proxy card and unit owners
may
vote differently on the two items.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
There
is
only one executive officer of the Trust, its Managing Director. The
Compensation Committee is responsible for recommending to the Trustees for
approval all aspects of the compensation of the Managing Director. The
compensation of the Trustees is primarily set by the Trust Agreement, but
the
Compensation Committee is responsible for recommending to the Trustees for
approval any additional compensation to Trustees for serving in roles such
as
the Managing Trustee, a committee chair or the clerk of the
Trustees. See “—Trustee Compensation” below. The
Compensation Committee has not historically retained any compensation
consultants to assist it in this process.
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 engaging in
such
activities by the Trust Agreement. As a result, the Trust’s financial results
are determined primarily by factors not within the control of its executive
or
the Trustees, including energy prices in Europe, currency exchange rates,
energy
supply contracts and the operating companies’ production and sales levels. The
Compensation Committee believes that the time required and the level of skill
with which the Managing Director handles the administrative and financial
affairs of the Trust, rather than the Trust’s financial results, are the
significant factors in determining his compensation.
In
setting the annual compensation of the Managing Director, the Compensation
Committee considers the historic level of compensation paid to the Managing
Director and, as noted above, the time required and the level of skill with
which the Managing Director handles the administrative and financial affairs
of
the Trust. In addition, in the case of the current Managing Director
(who has served in this role since 1990), the Compensation Committee takes
into
account the value of his continued performance and knowledge of the Trust,
which
he has gained over many years.
Historically,
the compensation package for the Managing Director has consisted of a base
salary and, on occasion, a cash bonus. No long-term incentive compensation
has
been paid and, as a result of the format of the Trust, no equity-based
compensation can be made available.
Recently,
the Trust has established a savings incentive match plan for employees (SIMPLE
IRA) that is available to all employees of the Trust, including the Managing
Director. The Trustees have authorized the making of contributions by
the Trust to the accounts of employees, on a matching basis, of up to 3%
of cash
compensation paid to each such employee.
Although
the Trust does not engage in any formal benchmarking, as a means of testing
its
judgment, the Committee has, from time to time, explored the costs of alternate
or substitute performance of the management functions by a corporate service
firm or similar entity and found that the fees to be charged by such entities
to
perform these functions would be more costly to the Trust and the unit
owners.
The
Trust
does not maintain any severance or change of control plans or any employment
contracts. As a result, the Managing Director is not entitled to
receive any severance or other benefits in the case of a termination event
or a
change of control. The Trust does have any formal unit ownership requirements
or
guidelines.
For
calendar 2007, the Managing Director received a bonus of $5,000, which was
paid
in January 2007 and an increase of $5,000 in his annual base compensation.
For
calendar 2008, the Managing Director’s annual base compensation remained fixed
at $105,000 and he was scheduled to receive a bonus of $7,500 in January
2008.
Compensation
Committee Report
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis (which is set forth above) with management. Based on this review
and discussions, the Compensation Committee recommended to the Trustees that
the
Compensation Discussion and Analysis be included in this Proxy
Statement.
Samuel
M.
Eisenstat, Chairman
Robert
P.
Adelman
Lawrence
A. Kobrin
Willard
B. Taylor
Rosalie
J. Wolf
Summary
Compensation Table
Set
forth
below is a table summarizing the compensation of the Managing Director (the
only
executive officer of the Trust) for fiscal 2007.
| |
|
|
|
All
Other
|
|
| |
|
Salary
($)
|
Bonus
|
Compen-
|
|
|
Name
and Principal Position
|
Year
|
(1)
|
($)
|
sation
($)
|
Total
($)
|
|
John
R. Van Kirk -Managing Director
|
2007
|
$104,167
|
$
5,000
|
$
0
|
$109,167
|
|
|
(1)
|
Mr.
Van Kirk’s salary is determined on a calendar year basis and was $100,000
for calendar 2006 and $105,000 for calendar
2007.
|
Trustee
Compensation
Set
forth
below is a table summarizing the compensation earned by the Trustees during
fiscal 2007.
| |
Fees
Earned or Paid in
|
All
Other
|
|
|
Name
|
Cash
($)
|
Compensation
($)
|
Total
($)
|
|
Robert
P. Adelman -Managing Trustee
|
$
85,383
|
$
0
|
$
85,383
|
|
Samuel
M. Eisenstat -Audit Committee Chairman
|
$
65,383
|
$
0
|
$
65,383
|
|
Lawrence
A. Kobrin -Clerk
|
$
65,383
|
$
0
|
$
65,383
|
|
Willard
B. Taylor -Trustee
|
$
55,383
|
$
0
|
$
55,383
|
|
Rosalie
J. Wolf -Trustee
|
$
55,383
|
$
0
|
$
55,383
|
Under
the
provisions of the Trust Agreement approved by the Delaware Court of Chancery
and
the shareholders of the Trust’s predecessor at the formation of the Trust, each
Trustee receives a yearly fee equal to 0.2% of the gross royalties and interest
received during the year by the Trust. Based upon this formula, each
Trustee earned a fee of $55,382.80 during fiscal 2007. Any
compensation for additional services provided to the Trust is recommended
by the
Compensation Committee for approval by the Trustees with the respective
individual not participating. For fiscal 2007, the Trustees set the
additional compensation for Mr. Adelman for his service as Managing Trustee
at
an annual rate of $30,000. For fiscal 2007, the Trustees set the
additional compensation for Mr. Eisenstat for service as Audit Committee
Chairman at an annual rate of $10,000. For fiscal 2007, the Trustees set
the
additional compensation for Mr. Kobrin for service as clerk of the Trustees
at
an annual rate of $10,000. The Trustees are also reimbursed for
reasonable out-of-pocket expenses incurred in connection with travel and
accommodations for meetings of the Trustees. For fiscal 2007, total
out-of-pocket expenses for all the Trustees were $1,780. The Trustees do
not
receive, either directly or indirectly, securities or property, retirement
or
insurance benefits or personal benefits or other similar forms of
compensation.
TRANSACTIONS
WITH RELATED PERSONS
Transactions
with Related Persons
The
following transactions, although not required to be reported in this proxy
statement, occurred during fiscal 2007.
John
R.
Van Kirk, the Managing Director of the Trust, provides office space and office
services to the Trust at cost. During fiscal 2007, the Trust
reimbursed him a total of $28,381 for such office space and office
services. As of January 1, 2007, Lawrence A. Kobrin, a Trustee of the
Trust, was named Senior Counsel at Cahill Gordon & Reindel LLP which serves
as counsel to the Trust. Prior to such time, Mr. Kobrin was a partner
at Cahill Gordon & Reindel LLP. For fiscal 2007, the Trust paid
Cahill Gordon & Reindel LLP $76,357 for legal services. During
fiscal 2007, John H. Van Kirk, the father of John R. Van Kirk, received $9,000
as the balance of his previously agreed upon salary as Managing Trustee and
$7,500 for his service as Founding Trustee Emeritus.
Review,
Approval or Ratification of Transactions with Related
Persons
The
Trustees have adopted a written policy with respect to transactions with
related
persons (the “Policy”). The Policy is set forth in the Trust’s Code of Conduct
and Business Ethics and is available on the Trust’s website at www.neort.com/ethics.html.
The Policy provides that any proposed Related Person Transaction (as defined
below) be submitted to the Trustees for consideration. In determining
whether or
not
to
approve the transaction, the Policy provides that the Trustees shall consider
all of the relevant facts and circumstances available to the Trustees, including
(if applicable): the benefits to the Trust; the impact on the Related
Person’s (as defined below) independence; the availability of other sources for
comparable products or services; the terms of the transaction; and the terms
available to unrelated third parties or to employees
generally. The Policy provides that the Trustees shall approve
only those Related Person Transactions that are in, or are not inconsistent
with, the best interests of the Trust and its unit owners.
For
purposes of the Policy, a “Related Person Transaction” is a transaction,
arrangement or relationship (or any series of similar transactions, arrangements
or relationships) in which the Trust was, is or will be a participant, and
in
which any Related Person had, has or will have a direct or indirect material
interest.
For
purposes of the Policy, a “Related Person” means (1) any person who is, or at
any time since the beginning of the Trust’s last fiscal year was, a Trustee or
executive officer of the Trust or a nominee to become a Trustee of the Trust;
(2) any person who is known to be the beneficial owner of more than 5% of
Trust’s units; and (3) any immediate family member of any of the foregoing
persons, which means any child, stepchild, parent, stepparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-inlaw, brother-in-law,
or
sister-in-law of the Trustee, executive officer, nominee or more than 5%
beneficial owner, and any person (other than a tenant or employee) sharing
the
household of such Trustee, executive officer, nominee or more than 5% beneficial
owner.
AUDIT
COMMITTEE
All
of
the Trustees, with the exception of Lawrence A. Kobrin, constitute the Audit
Committee of the Trustees of North European Oil Royalty Trust. The
Audit Committee meets the definition of an audit committee set forth in Section
3(a)(58)(A) of the Exchange Act. All of the members of the Audit
Committee are “independent” as that term is defined in the rules of the
Securities & Exchange Commission and the applicable listing standards of New
York Stock Exchange. The Trustees have determined that both Robert P.
Adelman and Rosalie J. Wolf are financial experts, as the term is defined
in the
Commission rules. The Audit Committee is chaired by Samuel M.
Eisenstat. The Trustees of North European Oil Royalty Trust have
adopted a written Charter outlining the duties and responsibilities of the
Audit
Committee. Mr. Eisenstat serves on the audit committees of several funds
managed
by AIG Sun America Asset Management Corp. The Trustees have determined that
such
service by Mr. Eisenstat does not impair his ability to effectively serve
on the
Trust’s Audit Committee.
Pursuant
to the Audit Committee Charter and the requirements of the Securities and
Exchange Commission, the Audit Committee has provided the following report
for
inclusion in this proxy statement:
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Report
of the Audit Committee of the Trustees of North European Oil Royalty
Trust
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The
undersigned constitute the members of the Audit Committee. In
connection with the proxy statement in which this report appears
and the
distribution to unit owners of the financial reports for the Trust’s
fiscal year ended October 31, 2007, the Audit Committee reports
as
follows:
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1. The
Audit Committee has reviewed and discussed the audited financial
statements for the Trust for the fiscal year ended October 31,
2007 with
the Managing Director of the Trust, constituting its ongoing
management.
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2. The
Audit Committee has discussed with representatives of Weiser LLP,
the
independent registered public accounting firm of the Trust, the
matters
required to be discussed by the statement on Auditing Standards
No. 61, as
amended (AICPA, Professional
Standards, Vol. 1. AU section 380), as adopted by the Public
Company Accounting Oversight Board in Rule 3200T.
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3. The
Audit Committee has received the written disclosures and the letter
from
Weiser LLP, the independent registered public accounting firm,
required by
Independence Standards Board Standard No. 1 (Independence Standards
Board
Standard No. 1, Independence
Discussions with Audit Committees), as adopted by the Public
Company Accounting Oversight Board in Rule 3600T, and has discussed
with
Weiser LLP their independence.
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4. Based
on the review and discussions described in this report, the Audit
Committee recommended to the Trustees that the audited financial
statements be included in the Trust’s Annual Report on Form 10-K for the
fiscal year ended October 31, 2007 for filing with the Securities
and
Exchange Commission.
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Samuel
M. Eisenstat, Chairman
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Willard
B. Taylor
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Robert
P. Adelman
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Rosalie
J. Wolf
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AUDITOR
MATTERS
A
representative of Weiser LLP is expected to attend the annual meeting and
to be
available to respond to appropriate questions from unit owners. The
representative from Weiser LLP will also have the opportunity to make a
statement at the meeting if he chooses to do so.
Resignation
and Appointment of Independent Auditors
Effective
July 18, 2006 the Audit Committee approved the appointment of Weiser LLP
as the
Trust’s new independent registered public accounting firm replacing Ernst &
Young LLP (“E&Y LLP”). This action was taken primarily to reduce
the Trust’s audit and audit-related expenses.
With
respect to the audit of the Trust’s financial statements for the fiscal year
ended October 31, 2005 and the subsequent interim periods through April 30,
2006
and through the date of dismissal, there were no disagreements with E&Y LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of E&Y LLP, would have caused E&Y LLP to make
reference to the subject matter of the disagreements in connection with its
report. Further, the audit report of E&Y LLP on the financial statements of
the Trust for the year ended October 31, 2005 did not contain an adverse
opinion
or a disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or, except as noted in the following sentence, as to accounting
principles. E&Y LLP noted in its opinion that the Trust’s financial
statements have been prepared on the modified cash basis of accounting, which
is
a comprehensive basis of accounting other than U.S. generally accepted
accounting principles. In the opinion of the Trustees and the Trust’s management
the use of the cash basis provides a more meaningful presentation to unit
owners
of the results of operations of the Trust.
During
the Trust’s fiscal year ended October 31, 2005 and the subsequent interim period
through the date of engagement, neither the Trust nor anyone acting on its
behalf consulted with Weiser LLP regarding
(1)
the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered
on
the Trust’s financial statements or (2) any of the matters or events set forth
in Item 304(a)(2)(ii) of Regulation S-K.
Weiser
LLP assumed audit responsibilities for the Trust on July 18, 2006 and has
conducted a review of the financial statements for the Trust’s four quarters of
fiscal 2006 and has performed an audit of the Trust’s 2006 and 2007 fiscal year
financial statements.
Fees
Billed by Independent Auditors
Audit
Fees
For
the
fiscal year ended October 31, 2006, the Trust paid $23,900 to E&Y LLP for
audit services for the first six months of fiscal 2006 and agreed to pay
Weiser
LLP $49,000 for the review of the first three fiscal quarters, the year-end
audit and the attestation to the sufficiency of the Trust’s internal controls to
be performed by Weiser LLP. For the fiscal year ended October 31,
2007, the Trust agreed to pay $54,500 to Weiser LLP for audit services. In
addition, for the fiscal year ended October 31, 2007, additional payments
in the
amount of $8,500 were made to E&Y LLP for transition work with the new
auditor.
Audit-Related
Fees
No
fees
for audit related services were paid in either fiscal 2007 or 2006.
Tax
Fees
No
fees
for tax related services were paid in either fiscal 2007 or 2006.
All
Other Fees
The
Trust
paid Weiser LLP $6,734 for non-audit related services during the fiscal year
ended October 31, 2007 related to the establishment of a SIMPLE IRA for the
Trust’s employees, review and revision of language in the Tax Letter to Unit
Owners and the confirmation of the configuration of a new accounting program
for
the Trust.
At
the
Trust’s direction and as part of its monitoring process, the German affiliate of
Ernst & Young LLP, Ernst & Young AG, reviews the basis for royalty
payments and allowable cost deductions for Mobil Erdgas Erdol GmbH and BEB
Erdgas und Urdol GmbH in Germany on a biennial basis. No fees for these services
were paid during fiscal 2007. The Trust paid $8,042 for these services in
fiscal
2006.
Pre-Approval
Policies
It
is the
policy of the Audit Committee that all audit and non-audit services provided
to
the Trust must be pre-approved by the Audit Committee. All of the
audit and non-audit services described above were pre-approved by the Audit
Committee.
GOVERNANCE
AND NOMINATIONS
Trustee
Independence
With
the
exception of the Lawrence A. Kobrin, none of the Trustees have a financial
relationship with the Trust other than as Trustees under the terms of the
Trust
Agreement. Until December 31, 2006, Mr. Kobrin was a partner of the
law firm of Cahill Gordon & Reindel LLP in New York, New York, a position he
has held since 1984. Cahill Gordon & Reindel LLP has provided legal services
to the Trust since that time. Mr. Kobrin is currently senior counsel to Cahill
Gordon & Reindel LLP. The Trustees have determined that all the current
Trustees are considered independent according to the rules of the New York
Stock
Exchange.
Committees
The
Trustees have designated a standing Audit Committee of the Trustees of North
European Oil Royalty Trust (the “Audit Committee”) and a standing Compensation
Committee of the Trustees of North European Oil Royalty Trust (the “Compensation
Committee”). Samuel M. Eisenstat serves as the Chairman of both
committees and Robert P. Adelman, Willard B. Taylor and Rosalie J. Wolf serve
as
members of both committees. Lawrence A. Kobrin is a member of the Compensation
Committee. The Audit Committee has a charter, but the Compensation
Committee does not.
The
functions of the Audit Committee include reviewing the internal financial
management and control procedures of the Trust, appointing and removing
independent auditors for the Trust, and consulting with the auditors. See
“Audit
Committee.” The functions of the Compensation Committee include recommending to
the Trustees for approval the compensation of the Managing Director, the
compensation
of
Trustees not covered by the Trust Agreement (i.e. additional compensation
to
Trustees for serving in roles such as the Managing Trustee, a committee chair
or
the clerk of the Trustees) and any separate compensation for additional services
as the committee deems necessary. See “Executive
Compensation.”
The
Trustees have not created and do not intend to create a Governance Committee.
It
is the opinion of the Trustees that, since the Trust Agreement and orders
of the
Delaware Court of Chancery provide the framework for governance of the Trust,
no
such Committee is necessary. A copy of the Trust Agreement, as amended, is
on
file with the Securities and Exchange Commission. The Trustees have
not created and do not intend to create a Nominating Committee. See
“—Nominations” below.
Meetings
and Attendance
During
fiscal 2007, the Trustees met nine times. The Trustees, presided over
by the Managing Trustee, met in executive session without management and
had
additional communications as needed during fiscal 2007. During fiscal 2007
the
Audit Committee and the Compensation Committee met formally five times and
six
times, respectively, and each had additional informal meetings and
communications. All of the Trustees attended more than 75% of all of
the meetings of the Trustees and the meetings of the Audit Committee and
the
Compensation Committee (if a member thereof) during fiscal 2007. It is the
expectation of the Trustees that all of the Trustees attend each Annual Meeting
of Unit Owners in person. All of the Trustees attended last year’s Annual
Meeting.
Code
of Conduct and other Documents
The
Trustees have created a Code of Conduct and Business Ethics. All the
Trustees and the Managing Director have signed the Code of Conduct and Business
Ethics. The Code of Conduct and Business Ethics, the Trustees’ Regulations and
the Trust’s Audit Committee Charter are available on the Trust’s website, www.neort.com.
A copy of any of these documents will be furnished without charge to any
unit
owner who sends a written request to John R. Van Kirk, P.O. Box 456, Red
Bank,
NJ 07701.
Nominations
The
Trustees have not created and do not intend to create a separate Nominating
Committee. The ongoing supervision of the Trust requires continuity
of experience and familiarity with its unique structure. The Trust is precluded
from business activities and would not benefit from the rotation of its member
Trustees. Rotation of the Trustees would, in the opinion of the
Trustees, substantially increase costs and be counter to the best interests
of
the unit owners. Accordingly, absent the retirement, resignation, incapacity
or
death of any Trustee, the Trustees have customarily been re-nominated every
year.
At
such
time as a vacancy occurs in the Trustees by reason of retirement, resignation
or
death of any Trustee, all of the remaining Trustees serve the function of
a
nominating committee and do so pursuant to the provisions of the Trust Agreement
and the orders of the Delaware Court of Chancery.
Any
unit
owner may at any time communicate in writing with either the Managing Trustee,
or the senior Trustee then serving, to make a nomination and such nominee
will
be considered by the Trustees without differentiation as to the source of
the
suggestion. In the event of a vacancy among the Trustees, nominees
would be sought who had the background, experience and competence in those
areas
where the former Trustee was proficient. They would include business
experience in the extractive industries, experience with royalty trust
management and general business and accounting experience.
Compensation
Committee Interlocks and Insider Participation
None.
OTHER
MATTERS
The
Trustees are not aware of any other matter to be presented for action at
the
annual meeting. If any other matter is brought before the meeting, it
is the intention of the persons named in the proxy to vote in accordance
with
their discretion pursuant to the terms of the proxy.
Section
16(a) Beneficial Ownership Reporting Compliance
In
accordance with the Securities Exchange Act of 1934 and rules adopted by
the
Securities and Exchange Commission (the "SEC"), the Trustees, the Managing
Director and persons owning more than 10% of the Trust's units (the "Reporting
Persons") are required to file reports of ownership of, and changes in ownership
of, Trust units with the SEC, the New York Stock Exchange and the
Trust.
Based
solely on a review of such forms furnished to it and written representations
from certain Reporting Persons, the Trust believes that during the fiscal
year
ended October 31, 2007, all filing requirements applicable to the Reporting
Persons have been complied with except for two instances. Lawrence A. Kobrin
inadvertently omitted part of his holdings in his original Form 3 filing
and has
subsequently filed a Form 5 to correct this omission. Additionally, John
H. Van
Kirk, the father of John R. Van Kirk, was the Managing Trustee of the Trust
until October 31, 2006. Although no longer a Trustee, John H. Van
Kirk is still currently required to file reports under Section
16(a). John H. Van Kirk inadvertently filed one late Form 4 with
respect to one transaction.
Communications
Any
unit
owner may communicate with an individual Trustee, or the Trustees as a group,
or
with the Audit Committee Chairman in writing. All such communications will
be
treated in confidence and an appropriate response or action will be taken.
Communications to an individual Trustee or the Trustees as a group may be
sent
to the office of the Trust at P.O. Box 456, Red Bank, NJ 07701 and will be
forwarded to them. Communications to the Audit Committee Chairman may also
be
sent by mail to the office of the Trust, marked “confidential.” The
Managing Director and Audit Committee Chairman can also be reached directly
through the Trust’s website, www.neort.com.
Form
10-K
The
Trust
has filed with the SEC an Annual Report on Form 10-K for the fiscal year
ended
October 31, 2007. A copy of this report will be furnished without charge
to any
unit owner who sends a written request to John R. Van Kirk, Managing Director,
P.O. Box 456, Red Bank, New Jersey 07701. A copy of the report is
also accessible through the Trust’s website, www.neort.com.
Unit
Owner Proposals for the 2009 Annual Meeting
The
2009
Annual Meeting of Unit Owners is tentatively scheduled to be held on February
13, 2009. Any proposals of the unit owners intended to be presented
at the 2009 annual meeting must be received by the Trust by September 12,
2008
for inclusion in the Trust's proxy statement and form of proxy relating to
that
meeting. Any proposals of the unit owners intended to be presented at the
2009
annual meeting that are not to be included in the Trust’s proxy statement and
form or proxy relating to that meeting must be received by the Trust by November
26, 2008. Such proposals should be sent to John R. Van Kirk, Managing
Director, P.O. Box 456, Red Bank, New Jersey 07701. If the date of
the 2009 annual meeting is changed by more than 30 days from February 13,
2009,
unit owners will be advised of such change and of the new dates for submission
of proposals.
Unit
owners are urged to sign and return their proxies without delay.
BY
ORDER
OF THE TRUSTEES:
ROBERT
P.
ADELMAN
Managing
Trustee
January
10, 2008