KIEWIT ROYALTY TRUST

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

Basis of Presentation

The accompanying condensed financial statements have been prepared in accordance with the instructions for Form 10-Q and do not necessarily include all of the information and footnotes required by U.S. generally accepted accounting principles (GAAP) for complete financial statements. In the opinion of U.S. Bank National Association, as sole trustee of the Trust (the "Trustee"), all adjustments necessary for a fair presentation have been included. For further information, refer to the financial statements and footnotes included in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2019.2020.

Summary of Significant Accounting Policies

(a)       Basis of Accounting:

The condensed financial statements of the Trust, as prepared on the modified cash basis, reflect the Trust's assets, liabilities, trust corpus, and distributable income as follows:

1.       Royalty income and interest income are recognized in the month in which amounts are received by the Trust.

2.       Trust expenses, consisting principally of routine general and administrative costs, include payments made during the accounting period.

3.       Reserves for liabilities that are contingent or uncertain in amount may also be established if considered necessary.

4.       Net royalty and overriding royalty interests that are producing properties are amortized using the unit-of-production method. This amortization is shown as a reduction of Trust corpus.

5.       Distributions to Unit Holders are recognized when declared by the Trustee.

6.       Production withholding taxes withheld from Unit Holder distributions and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from royalty income in the condensed statement of distributable income.

These condensed statements differ from financial statements prepared in accordance with GAAP and were prepared on the modified cash basis of reporting, which is considered to be the most meaningful because Distributions to Unit Holders are based on net cash receipts. This comprehensive basis of accounting, other than GAAP, corresponds to the accounting permitted for royalty trusts by the U.S. Securities and Exchange Commission as specified by Staff Accounting Bulletin Topic 12E, Financial Statements of Royalty Trusts.

The condensed financial statements of the Trust differ from financial statements prepared in conformity with United States generally accepted accounting principles (GAAP) because of the following:

(b)       Cash and Cash Equivalents:

The Trust considers all highly liquid financial instruments with original maturities of three months or less when purchased to be cash equivalents.

(c)       Related Party:

The Trust was organized to provide an efficient, orderly and practical means of administering the income received from royalty interests and is administered by the Trustee. Pursuant to the terms of the Trust Indenture, the Trust pays the Trustee an annual fee of $100,000. The Trustee may adjust this fee annually in its sole discretion. The Trust pays a Trustee fee of $25,000 per quarter as long as the Trust has sufficient royalty income to make such payments.

(d)       Impact of COVID-19:

On March 11, 2020 the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. To date, the Trust has had limited impact from COVID-19 on its financial results and results of operations although theThe Trust cannot reasonably estimate the length or severity of this pandemic, and whether COVID-19 will have anythe Trust currently cannot anticipate the impact on its financial results or results of operations for fiscal 2021. Further, the pandemic has had a significant impact on the coal industry and the Trust in future periods.is heavily reliant on revenue from coal mines.

(e)       Subsequent Events:

In April 2021, the Trust received a payment from the Decker mine in the amount of $44,874. This royalty payment was anticipated to be paid to the Trust in the first quarter; however, due to the pending bankruptcy of the mine’s owner, there was a delay in the payment as such payment was required to be approved by the bankruptcy court. In addition, the Trust does not anticipate receiving any additional royalty payments from the Decker mine in the near future.

(e)Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  While the Trust reported income for the periods presented, the Trust receives substantially all of its royalty payments from the Decker Mine, which filed for bankruptcy in December 2020. Decker curtailed mining operations subsequent to the bankruptcy and ceased its mining operations in March 2021. Other than the potential impact of COVID-19, we have evaluatedroyalty payments from the mines, the Trust activitydoes not have any other established source of revenues sufficient to cover its operating costs. As a result, the Trust projects that it will not have sufficient cash on hand to meet its obligations as they become due within one year of the date that the financial statements are issued. These conditions, among others, raise substantial doubt about the Trust’s ability to continue as a going concern. To alleviate the identified conditions, the Trust intends to implement certain plans, including filing a proof of claim in the bankruptcy court for the royalty income from Decker Mine, establishing a reserve for cash received to cover future expenses, and haveexploring options to monetize the royalty interests. However, these plans are subject to legal approvals and market conditions, and there is no assurance that the Trust’s plans are probable of being implemented. As a result, the Trust has concluded that there are no material subsequent events requiring additional disclosure or recognition in these condensedmanagement’s plans do not alleviate substantial doubt regarding the Trust’s ability to continue as a going concern. The Trust’s financial statements.statements currently do not include any adjustments that might result from the outcome of any uncertainly as to the Trust’s ability to continue as a going concern.

Item 2. Trustee’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview.

Kiewit Royalty Trust (the "Trust") is a royalty trust with royalty and overriding royalty interests in certain coal leases. The Trust was formed for the purposes of administering the income received from such coal leases and distributing such income (together with interest earned thereon, if any, less payment of or provision for obligations) to the holders of the units of beneficial interest.

During the three month and six month periodsperiod ended June 30, 2020,March 31, 2021, the Trust received a total of $50,936 and $651,673, respectively,$97,261 of royalty and overriding royalty payments net of production expenses.from the Decker Mines. The following table reflects the royalty and overriding royalty payments, net of production expenses, received by the Trust at the following mines:

Decker Mine. Royalty and overriding royalty amounts received by the Trust from the Decker Mine increased to $50,936 during the second quarterfirst three months of 2020,2021, decreased significantly by $503,476, or 84%, to $97,261 as compared to $26,040$600,737 received during the same period in 2019.2020. The Decker Mine includes West Decker and East Decker Mine leases. OfUntil 2021, when the Decker Mines,Mine announced cessation of mining activities, the primary producer currently iswas an East Decker Mine. DuringMine, which in recent years was the six month period ended June 30, 2020, the royalty amounts decreased by $33,339, or approximately 5%, as compared to the same period in 2019. For the first six months of 2020, the Decker Mines sold 1,836,786only lease actively producing. The changes this quarter resulted from fewer tons of coal as comparedproduced due to 1,430,700 tonsthe cession of coal for the first six months of 2019. The changes during the period were the net result of changes in the relative amounts of coal mined, which was a normal result of the execution of a mining plan encompassing several coal leases, and decreasing demand in electricity and lower coal prices resulting from the COVID-19 pandemic.mine operations.

Seasonal fluctuations occur inIn December 2020, Lighthouse Resources, Inc., the relative amountsowner of coal mined under the leases with a majority of the royalty payments being received during the first and third calendar quarters of the year. Earlier this year, the Decker Mine, indicated thatfiled for Chapter 11 bankruptcy, in the United States Bankruptcy Court for the District of Delaware (Case No. 20-13056(JTD)). Lighthouse initially reduced operations at the Decker Mine, and in February 2021, the Decker Mine ceased operations. The Trust is actively monitoring the bankruptcy filings, and is an unsecured creditor in the bankruptcy case. In light of the pending bankruptcy, the Trust is currently uncertain whether it was aheadwill receive additional royalty payments from the Decker Mine or the status of schedule for Spring 2020 and continues to expect to ship its budgeted tons of coal of 3.8 million for 2020.interest in the royalty leases. At this time, no additional royalty payments are anticipated in the near future.

Spring Creek Mine. The Trust did not receive any royalty payments No royalties were received from the Spring Creek Mine during the first sixthree months of 2021 and 2020 or 2019. Royaltiesbecause historically, royalties with respect to this mine are typically were paid by the mine operators on an annual basis during the second half of eachthe calendar year but the timing of the first payment varies, and it can be received at the end of the second quarter or beginning of the third quarter.year. However, it is unknown whether the Trust will receive additional royalties from this mine in the future due to various factors, including the financial struggles of the coal operator, the lack of mining activities in the applicable mines, and the general depletion of coal. Further, the Spring Creek Mine temporarily laid-off workers in Spring 2020 due to the lack of coal demand, resulting from the COVID-19 pandemic, and only recently rehired the workers.

In 2019, the Spring Creek Mine was sold to Navajo Transitional Energy Company (“NTEC”), which is wholly owned by the Navajo Nation, and is currently operating the mine as a contract operator. The mineSince the transition to NTEC, the Mine shut down briefly in October afterand has continued to have operational issues which are unrelated to the Navajo Nation declined to waive sovereign immunityCOVID-19 pandemic. These operational issues, together with general economic issues impacting coal mines, are challenging and make it difficult for the benefit of Montana's Department of Environmental Quality ("MDEQ"). WhileTrust to predict the MDEQ and NTEC have resolved certain issues, the Spring Creek Mine currently is operating although NTEC has yet to secure mining permits and needs to obtain substantial financial assistance for reclamation. The Navajo Nation announced that it will not issue reclamation bonds for the benefit of this project. The long-term status of the mine operations is unknown, and theof this mine. The Trust intends to continue monitoring the new ownership by NTEC and related matters. At this time,NTEC.

It is unknown whether the Trust does not expect that such restructuring will materially impactreceive additional royalties from this mine in the results of operations orfuture due to various factors, including the financial conditionstruggles of the Trust.coal operator, the lack of mining activities in the applicable mines, and the general depletion of coal.

Interest IncomeOther Mines. The Trust generally earns interest on the royalty payments priorIn addition to the distributionDecker Mine and Spring Creek Mine, the Trust also owns rights in lease number 027475 in the Black Butte Mine in Sweetwater County, Wyoming. Such mine is not producing but is active and continues to the Unit Holders.be part of future mining plans.

Interest Income. During the sixthree months ended June 30,March 31, 2021 and March 31, 2020, the Trust earned $496a nominal amount of interest compared to $4,497 of interest earned during the six months ended June 30, 2019. The decrease in interest resulted from the decreasing interest rates.interest.

Trust Expenses. Trust expenses remained consistent at $83,183 forincreased and were $42,446 in the first sixthree months of 2020,2021 as compared to $83,120$25,000 for the same period in 2019.2020. Trust expenses includedgenerally include fees of the Trustee, accountants, attorneys, and other professionals that the Trustee employs in the administration of the Trust. TrustThe increase in expenses slightly increased to $58,183 for the three month period ending June 30, 2020, as compared to $57,173 for the same period in 2019. The royalty income received by the Trust for the three month period ended June 30, 2020 was not sufficient to pay all Trust expenses incurred during such period, so the Trust utilized certain cash reserves to offset the shortfall. The expenses fluctuateresulted from period to period largely because of the timing of when invoices were received and paid as well as additional legal expenses to address the Trust receives invoices and pays its expenses.Decker Mine bankruptcy filing.

Liquidity and Capital Resources. The Trust's primary source of liquidity is the royalty payments. In accordance with the provisions of the Trust Indenture, generally all income received by the Trust, net of Trust expenses and any amounts placed in reserves, is distributed to the Unit Holders on a biannual basis as long as the Trust has sufficient income.basis. At this time, the Trust does not expect thatto make any distributions in the COVID-19 pandemic will materially impactnear future due to the Trust’s liquidity or capital resourcesissues. The Trust has suspended future distribution payments in light of the Trust.substantial reduction in royalty income.

Trust Reserves. The Trust did not establish any trust reserves inDuring the secondfirst quarter of 20202021, the Trust's distributable income was $54,816. Historically, this amount would have been reserved to be paid within 10 days of June 30, which is the Trust's next distribution payment date. However, such amount will be held as a reserve. Because of the uncertainty of the Decker Mine, the Trust intends to temporarily suspend all distribution payments and instead reserve such amounts to cover future expenses. Due to the uncertainty with respect to timing or 2019. amount of future royalty payments, the Trust believes such suspension is in its best interests.

During the first quarter of 2020, the Trust established a reserve in the amount ofTrust's distributable income was $576,223 and during the first quarter of 2019, the Trust established a reservewas paid to Unit Holders in the amount of $634,327. These reserves were established to hold the funds until the next scheduled biannual payment and were paid in the beginning of the third quarter of each year.July 2020. The Trust currently pays biannual distributions within 10 days after June 30 and December 31 of each year to the extent funds are available.

In April 2021, the Trust received a payment from the Decker mine in the amount of $44,874. The Trust intends to reserve this amount as well as any additional royalty payments received to cover future expenses.

Going Concern. The Trust may not have sufficient funding in order to continue to operate. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Trust’s continuation as a going concern is dependent upon continued mining activities and receipt of timely royalty payments form the mines, especially the Decker Mine. Because of the Trust’s limited source of revenues, the recent bankruptcy of the Decker Mine raises substantial doubt about the Trust’s ability to continue as a going concern. The Trust’s financial statements currently do not include any adjustments that might result from the outcome of any uncertainly as to the Trust’s ability to continue as a going concern.

Change in Trust Corpus. During the three- and six-month period ended June 30, 2020,first three months of 2021, the trust corpus remained unchanged.

Off-Balance Sheet Arrangements. As required by the Trust Indenture, the Trust is intended to be passive in nature and the Trustee does not have any control over or any responsibility relating to the operation of the mines under which the Trust has any royalty interests and overriding royalty interests. The Trustee has powers to collect and distribute proceeds received by the Trust and pay Trust liabilities and expenses and its actions have been limited to those activities. As a result, the Trust has not engaged in any off-balance sheet arrangements.

Critical Accounting Policies and Estimates. The Trust's condensed financial statements are prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America, and as such there are no critical accounting policies or estimates.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this Form 10-Q, the officer of the Trustee conducted an evaluation of the Trust's disclosure controls and procedures (as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934). Based upon this evaluation, the officer of the Trustee concluded that the Trust's disclosure controls and procedures were effective in timely alerting her of any material information relating to the Trust that is required to be disclosed by the Trust in the reports it files or submits under the Securities Exchange Act of 1934.

Changes in Internal Control Over Financial Reporting. There were no changes in the Trust's internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) that occurred during the Trust's most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Trust's internal control over financial reporting.

Limitations on Controls. The Trustee does not expect that the Trust's disclosure controls and procedures or the Trust's internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Trust have been detected.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

There are no material legal proceedings to which the Trust is a party.

Item 6. Exhibits.

*              Filed herewith______________________

**           Furnished herewith

***         Furnished herewith. Pursuant to applicable federal securities rules and regulations, the Trust has complied with the reporting obligation relating to the submission of interactive data files in such exhibits. Therefore, the Trust is not subject to liability under any anti-fraud provisions of the federal securities laws if the Trust (i) makes a good faith attempt to comply with the interactive data file submission requirements and (ii) upon becoming aware that any such data file fails to comply with such requirements, promptly amends any noncompliant data file. The Trust is also not subject to the liability and anti-fraud provisions of the federal securities laws if an error or omission in an electronic filing results solely from electronic transmission errors beyond the filer’s control and, upon becoming aware of such error or omission, the filer corrects the error or omission by filing an electronic amendment as soon as reasonably practicable. Users of this data are advised that the interactive data files are furnished and not filed, are not part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Exchange Act, as amended, and otherwise are not subject to liability under those sections.