<PAGE>   1

================================================================================

                                  United States

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

            [ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                                       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 1-14380

                           CITGO PETROLEUM CORPORATION
             (Exact name of registrant as specified in its charter)


           DELAWARE                                      73-1173881
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

         ONE WARREN PLACE, 6100 SOUTH YALE AVENUE, TULSA, OKLAHOMA 74136
               (Address of principal executive office) (Zip Code)

                                 (918) 495-4000
              (Registrant's telephone number, including area code)

                                      N.A.
         (Former name, former address and former fiscal year, if changed
                               since last report)

           Securities registered pursuant to Section 12(b) of the Act:

         Title of Each Class         Name of each Exchange on which registered
         -------------------         -----------------------------------------
   7 7/8% SENIOR NOTES, DUE 2006         NEW YORK STOCK EXCHANGE, INC.

        Securities registered pursuant to Section 12(g) of the Act: NONE

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

The registrant meets the conditions set forth in General Instruction (I)(1)(a)
and (b) of Form 10-K and is therefore omitting (i) the information otherwise
required by Item 601 of Regulation S-K relating to a list of subsidiaries of the
registrant as permitted by General Instruction (I)(2)(b), (ii) certain
information otherwise required by Item 10 of Form 10-K relating to Directors and
Executive Officers as permitted by General Instruction (I)(2)(c) and (iii)
certain information otherwise required by Item 11 of Form 10-K relating to
executive compensation as permitted by General Instruction (I)(2)(c).

              Disclosure of delinquent filers pursuant to Item 405
                        of Regulation S-K: NOT APPLICABLE

        Aggregate market value of the voting stock held by non-affiliates
                        of the registrant: NOT APPLICABLE

  Indicate the number of shares outstanding of each of the issuer's classes of
                common stock, as of the latest practicable date.

   COMMON STOCK, $1.00 PAR VALUE                           1,000
   -----------------------------                           -----
             (Class)                         (outstanding at February 29, 2000)

                    DOCUMENTS INCORPORATED BY REFERENCE: None

================================================================================

<PAGE>   2


CITGO PETROLEUM CORPORATION

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

TABLE OF CONTENTS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                                      PAGE
<S>           <C>                                                                                     <C>
FACTORS AFFECTING FORWARD LOOKING STATEMENTS.............................................................1

PART I.

Items 1. and 2.  Business and Properties.................................................................2
Item 3.       Legal Proceedings.........................................................................13
Item 4.       Submission of Matters to a Vote of Security Holders.......................................14

PART II.

Item 5.       Market for Registrant's Common Equity and Related Stockholder Matters.....................15
Item 6.       Selected Financial Data...................................................................15
Item 7.       Management's Discussion and Analysis of Financial Condition and
              Results of Operations.....................................................................16
Item 7A.      Quantitative and Qualitative Disclosures about Market Risk................................22
Item 8.       Financial Statements and Supplementary Data...............................................24
Item 9.       Changes in and Disagreements with Accountants on Accounting and Financial
              Disclosure................................................................................24

PART III.

Item 10.      Directors and Executive Officers of the Registrant........................................24
Item 11.      Executive Compensation....................................................................24
Item 12.      Security Ownership of Certain Beneficial Owners and Management............................24
Item 13.      Certain Relationships and Related Transactions............................................24

PART IV.

Item 14.      Exhibits, Financial Statements and Reports on Form 8-K....................................26
</TABLE>



<PAGE>   3


                  FACTORS AFFECTING FORWARD LOOKING STATEMENTS

         This Annual Report on Form 10-K contains certain "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Specifically, all statements under the captions "Items 1 and 2 - Business and
Properties" and "Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations" relating to Year 2000 matters, capital
expenditures and investments related to environmental compliance and strategic
planning, purchasing patterns of refined products and capital resources
available to the Company (as defined herein) are forward looking statements. In
addition, when used in this document, the words "anticipate", "estimate",
"prospect" and similar expressions are used to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties, such
as increased inflation, continued access to capital markets and commercial bank
financing on favorable terms, increases in regulatory burdens, changes in prices
or demand for the Company's products as a result of competitive actions or
economic factors and changes in the cost of crude oil, feedstocks, blending
components or refined products. Such statements are also subject to the risks of
increased costs in related technologies and such technologies producing
anticipated results. Should one or more of these risks or uncertainties, among
others, materialize, actual results may vary materially from those estimated,
anticipated or projected. Although CITGO believes that the expectations
reflected by such forward looking statements are reasonable based on information
currently available to the Company, no assurances can be given that such
expectations will prove to have been correct.

                                        1

<PAGE>   4


                                     PART I

ITEMS 1. AND 2. BUSINESS AND PROPERTIES

OVERVIEW

         CITGO Petroleum Corporation ("CITGO" or the "Company") is a direct
wholly-owned operating subsidiary of PDV America, Inc. ("PDV America"), a
wholly-owned subsidiary of PDV Holding, Inc. The Company's ultimate parent is
Petroleos de Venezuela, S.A. ("PDVSA", which may also be used herein to refer to
one or more of its subsidiaries), the national oil company of the Bolivarian
Republic of Venezuela. CITGO and its subsidiaries are engaged in the refining,
marketing and transportation of petroleum products including gasoline, diesel
fuel, jet fuel, petrochemicals, lubricants, asphalt and refined waxes, mainly
within the continental United States east of the Rocky Mountains.

         CITGO's transportation fuel customers include primarily CITGO branded
wholesale marketers, convenience stores and airlines located mainly east of the
Rocky Mountains. Asphalt is principally marketed to independent paving
contractors on the East Coast of the United States. Lubricants are sold,
principally in the United States, to independent marketers, mass marketers and
industrial customers. Petrochemical feedstocks and industrial products are sold
to various manufacturers and industrial companies throughout the United States.
Petroleum coke is sold primarily in international markets.

COMPETITIVE NATURE OF THE PETROLEUM REFINING BUSINESS

         The petroleum refining industry is cyclical and highly volatile,
reflecting capital intensity with high fixed and low variable costs. Petroleum
industry operations and profitability are influenced by a large number of
factors, over some of which individual petroleum refining and marketing
companies have little control. Governmental regulations and policies,
particularly in the areas of taxation, energy and the environment, have a
significant impact on petroleum activities, regulating how companies conduct
their operations and formulate their products. The U.S. petroleum refining
industry has entered a period of consolidation in which a number of former
competitors have combined their operations. Demand for crude oil and its
products is largely driven by the health of local and worldwide economies,
although weather patterns and taxation relative to other energy sources also
play significant parts. Generally, U.S. refiners compete for sales on the basis
of price and brand image and, in some areas, product quality.

                                        2

<PAGE>   5



REFINING

         CITGO's aggregate net interest in rated crude oil refining capacity is
691 thousand barrels per day ("MBPD"). The following table shows the capacity of
each U.S. refinery in which CITGO holds an interest and CITGO's share of such
capacity as of December 31, 1999.

<TABLE>
<CAPTION>

                                                                                        TOTAL         NET
                                                                                       RATED        CITGO
                                                                                       CRUDE      OWNERSHIP
                                                                            CITGO     REFINING    IN REFINING
                                                         OWNER             INTEREST   CAPACITY     CAPACITY
                                                     --------------        --------   --------    -----------
                                                                             (%)       (MBPD)       (MBPD)
LOCATION
<S>                                                  <C>                     <C>          <C>          <C>
   Lake Charles, LA                                      CITGO               100          320          320
   Corpus Christi, TX                                    CITGO               100          150          150
   Paulsboro, NJ                                         CITGO               100           84           84
   Savannah, GA                                          CITGO               100           28           28
   Houston, TX (1)                                   LYONDELL-CITGO           41          265          109
                                                                                      -------   ----------
      Total Rated Refining Capacity as of
         December 31, 1999                                                                847          691
                                                                                      =======   ==========
</TABLE>

---------------------------
(1)  Initial interest acquired on July 1, 1993. CITGO has a one-time option,
     exercisable after January 1, 2000 but not later than September 30, 2000, to
     increase for an additional investment, its participation interest up to a
     maximum of 50%. See "CITGO--Refining--LYONDELL-CITGO". See also "Factors
     Affecting Forward Looking Statements".

                                        3

<PAGE>   6


The following table shows CITGO's aggregate interest in refining capacity,
refinery input and product yield for the three years in the period ended
December 31, 1999.

                          CITGO REFINERY PRODUCTION (1)

<TABLE>
<CAPTION>

                                                                   YEAR ENDED DECEMBER 31,
                                                       ------------------------------------------------
                                                         1999(2)           1998 (2)          1997(3)
                                                       -------------     -------------     ------------
                                                            (MBPD, EXCEPT AS OTHERWISE INDICATED)
<S>                                                    <C>      <C>      <C>      <C>      <C>     <C>
RATED REFINING CAPACITY AT YEAR END                    691               691               693
Refinery Input

     Crude oil                                         607       82%     615       81%     548      79%
     Other feedstocks                                  129       18%     144       19%     143      21%
                                                       ---      ---      ---      ---      ---     ---
         Total                                         736      100%     759      100%     691     100%
                                                       ===      ===      ===      ===      ===     ===
Product Yield
     Light fuels
         Gasoline                                      317       43%     334       43%     309      44%
         Jet fuel                                       70        9%      66        9%      66       9%
         Diesel/#2 fuel                                136       18%     134       17%     112      16%
     Asphalt                                            42        6%      45        6%      42       6%
     Petrochemicals and industrial products            179       24%     193       25%     174      25%
                                                       ---      ---      ---      ---      ---     ---
         Total                                         744      100%     772      100%     703     100%
                                                       ===      ===      ===      ===      ===     ===
UTILIZATION OF RATED REFINING CAPACITY                           88%               89%              79%
</TABLE>

-------------------------------
(1) Includes all of CITGO refinery production, except as otherwise noted.

(2) Includes a weighted average of 41.25% of the Houston refinery for 1999 and
    1998.

(3) Includes a weighted average of 34.44% of the Houston refinery for 1997.

         CITGO produces its light fuels and petrochemicals primarily through its
Lake Charles and Corpus Christi refineries. Asphalt refining operations are
carried out through CITGO's Paulsboro and Savannah refineries. CITGO also owns
an interest in and obtains refined products from a refinery in Houston.

         Lake Charles, Louisiana Refinery. This refinery has a rated refining
capacity of 320 MBPD and is capable of processing large volumes of heavy crude
oil into a flexible slate of refined products, including significant quantities
of high-octane unleaded gasoline and reformulated gasoline. The Lake Charles
refinery has a Solomon Process Complexity Rating of 17.6 (as compared to an
average of 13.6 for U.S. refineries in the most recently available Solomon
Associates, Inc. survey). The Solomon Process Complexity Rating is an industry
measure of a refinery's ability to produce higher value products. A higher
Solomon Process Complexity Rating indicates a greater capability to produce such
products.

                                        4

<PAGE>   7



The following table shows the rated refining capacity, refinery input and
product yield at the Lake Charles refinery for the three years in the period
ended December 31, 1999.

                        LAKE CHARLES REFINERY PRODUCTION

<TABLE>
<CAPTION>

                                                                    YEAR ENDED DECEMBER 31,
                                                       -------------------------------------------------
                                                           1999              1998              1997
                                                       ------------      ------------      -------------
                                                            (MBPD, EXCEPT AS OTHERWISE INDICATED)
<S>                                                    <C>      <C>      <C>      <C>      <C>     <C>
RATED REFINING CAPACITY AT YEAR END                    320               320               320
Refinery Input
     Crude oil                                         298       89%     288       84%     291      88%
     Other feedstocks                                   36       11%      54       16%      40      12%
                                                       ---      ---      ---      ---      ---     ---
          Total                                        334      100%     342      100%     331     100%
                                                       ===      ===      ===      ===      ===     ===

Product Yield
     Light fuels
          Gasoline                                     171       50%     187       54%     177      52%
          Jet fuel                                      63       18%      59       17%      60      18%
          Diesel/#2 fuel                                53       16%      47       13%      45      13%
     Petrochemicals and industrial products             54       16%      55       16%      56      17%
                                                       ---      ---      ---      ---      ---     ---
          Total                                        341      100%     348      100%     338     100%
                                                       ===      ===      ===      ===      ===     ===
UTILIZATION OF RATED REFINING CAPACITY                           93%               90%              91%
</TABLE>

         Approximately 33%, 66% and 63% of the total crude runs at the Lake
Charles refinery, in the years 1999, 1998 and 1997, respectively, consisted of
crude oil with an average API gravity of 24 degrees or less. Due to the complex
processing required to refine such crude oil, the Lake Charles refinery's
economic crude oil throughput capacity is approximately 290 MBPD, which is
approximately 91% of its rated capacity of 320 MBPD. The volume of heavy crude
oil available to CITGO in 1999 was less than in previous years. As a result, the
crude oil slate refined in 1999 was lighter. (See "Items 1. and 2. Business and
Properties--Crude Oil and Refined Product Purchases").

         The Lake Charles refinery's Gulf Coast location provides it with access
to crude oil deliveries from multiple sources; imported crude oil and feedstock
supplies are delivered by ship directly to the Lake Charles refinery, while
domestic crude oil supplies are delivered by pipeline and barge. In addition,
the refinery is connected by pipelines to the Louisiana Offshore Oil Port and to
terminal facilities in the Houston area through which it can receive crude oil
deliveries if the Lake Charles docks are temporarily inaccessible. For delivery
of refined products, the refinery is connected through the Lake Charles Pipeline
directly to the Colonial and Explorer Pipelines, which are the major refined
product pipelines supplying the northeast and midwest regions of the United
States, respectively. The refinery also uses adjacent terminals and docks, which
provide access for ocean tankers and barges to load refined products for
shipment.

         The Lake Charles refinery's main petrochemical products are propylene
and benzene. Industrial products include sulphur, residual fuels and petroleum
coke.

         Located adjacent to the Lake Charles refinery is a lubricants refinery
operated by CITGO and owned by Cit-Con Oil Corporation ("Cit-Con"), which is

owned 65% by CITGO and 35% by Conoco, Inc. ("Conoco"). Primarily because of its
specific design, the Cit-Con refinery produces high quality oils and waxes, and
is one of the few in the industry designed as a stand-alone lubricants refinery.

                                        5

<PAGE>   8


Feedstocks are supplied 65% from CITGO's Lake Charles refinery and 35% from
Conoco's Lake Charles refinery. Finished refined products are shared on the same
pro rata basis by CITGO and Conoco.

         Corpus Christi, Texas Refinery. The Corpus Christi refinery is an
efficient and highly complex facility, capable of processing high volumes of
heavy crude oil into a flexible slate of refined products, with a Solomon
Process Complexity Rating of 16.7 (as compared to an average 13.6 for U.S.
refineries in the most recently available Solomon Associates, Inc. survey). This
refinery complex consists of the East and West Plants, located within five miles
of each other.

         The following table shows rated refining capacity, refinery input and
product yield at the Corpus Christi refinery for the three years in the period
ended December 31, 1999.


                       CORPUS CHRISTI REFINERY PRODUCTION

<TABLE>
<CAPTION>

                                                                    YEAR ENDED DECEMBER 31,
                                                       -------------------------------------------------
                                                           1999              1998              1997
                                                       -------------     -------------     -------------
                                                             (MBPD, EXCEPT AS OTHERWISE INDICATED)
<S>                                                    <C>      <C>      <C>      <C>      <C>     <C>
RATED REFINING CAPACITY AT YEAR END                    150               150               150
Refinery Input

     Crude oil                                         148       70%     152       71%     115      59%
     Other feedstocks                                   62       30%      61       29%      79      41%
                                                       ---      ---      ---      ---      ---     ---
          Total                                        210      100%     213      100%     194     100%
                                                       ===      ===      ===      ===      ===     ===
Product Yield
     Light fuels
          Gasoline                                      96       46%      97       46%      93      48%
          Diesel/#2 fuel                                55       27%      58       27%      45      23%
     Petrochemicals and industrial products             56       27%      57       27%      56      29%
                                                       ---      ---      ---      ---      ---     ---
          Total                                        207      100%     212      100%     194     100%
                                                       ===      ===      ===      ===      ===     ===
UTILIZATION OF RATED REFINING CAPACITY                           99%              101%              77%
</TABLE>

         Corpus Christi crude runs during 1999 and 1998 consisted of 81% and
100%, respectively, heavy sour Venezuelan crude. The average API gravity of the
composite crude slate run at the Corpus Christi refinery is approximately
24 degrees. Crude oil supplies are delivered directly to the Corpus Christi
refinery through the Port of Corpus Christi. The relatively low utilization of
rated refining capacity in 1997 is a result of a major turnaround in that year.

         CITGO operates the West Plant under a sublease agreement (the
"Sublease") from Union Pacific Corporation ("Union Pacific"). The basic term of
the Sublease ends on January 1, 2004, but CITGO may renew the Sublease for
successive renewal terms through January 31, 2011. CITGO has the right to
purchase the West Plant from Union Pacific at the end of the basic term, the end
of any renewal term, or on January 31, 2011 at a nominal price.

         The Corpus Christi refinery's main petrochemical products include
cumene, cyclohexane, methyl tertiary butyl ether ("MTBE") and aromatics
(including benzene, toluene and xylene). The Company produces a significant
quantity of cumene, an important petrochemical product used in the engineered
plastics industry.





                                        6

<PAGE>   9



         LYONDELL-CITGO Refining LP. Subsidiaries of CITGO and Lyondell Chemical
Company ("Lyondell") are partners in LYONDELL-CITGO Refining LP
("LYONDELL-CITGO"), which owns and operates a sophisticated 265 MBPD refinery
previously owned by Lyondell and located on the ship channel in Houston, Texas.
At December 31, 1999, CITGO's investment in LYONDELL-CITGO was $560 million. In
addition, at December 31, 1999, CITGO held notes receivable from LYONDELL-CITGO
of $28 million. (See Consolidated Financial Statements of CITGO -- Note 3 in
Item 14a). A substantial amount of the crude oil processed by this refinery is
supplied by PDVSA under a long-term crude oil supply agreement through the year
2017. CITGO purchases substantially all of the gasoline, diesel and jet fuel
produced at this refinery under a long-term contract. (See Consolidated
Financial Statements of CITGO -- Notes 3 and 4 in Item 14a).

CRUDE OIL AND REFINED PRODUCT PURCHASES

         CITGO owns no crude oil reserves or production facilities, and must
therefore rely on purchases of crude oil and feedstocks for its refinery
operations. In addition, because CITGO's refinery operations do not produce
sufficient refined products to meet the demands of its branded marketers, CITGO
purchases refined products, primarily gasoline, from other refiners, including
LYONDELL-CITGO, PDV Midwest Refining, L.L.C. ("PDVMR"), Chalmette Refining,
L.L.C. ("Chalmette") and Hovensa, L.L.C. ("HOVENSA"). (See "Item 13. Certain
Relationships and Related Transactions").

         Crude Oil Purchases. The following chart shows CITGO's purchases of
crude oil for the three years in the period ended December 31, 1999:


                            CITGO Crude Oil Purchases

<TABLE>
<CAPTION>

                     LAKE CHARLES, LA       CORPUS CHRISTI, TX        PAULSBORO, NJ            SAVANNAH, GA
                   --------------------     -------------------    --------------------     --------------------
                   1999    1998    1997     1999   1998    1997    1999    1998    1997     1999    1998    1997
                   ----    ----    ----     ----   ----    ----    ----    ----    ----     ----    ----    ----
                           (MBPD)                 (MBPD)                  (MBPD)                   (MBPD)
<S>                <C>     <C>     <C>      <C>    <C>     <C>     <C>     <C>     <C>      <C>     <C>     <C>
SUPPLIERS
PDVSA               104     134     130      118    153     117      42      52      49       19      17      14
PEMEX                54      51      61       14     --      --      --      --      --       --      --      --
Occidental           --      20      40       --     --      --      --      --      --       --      --      --
Other sources       142      88      57       15     --      --      --      --      --       --      --      --
                   ----    ----    ----     ----   ----    ----    ----    ----    ----     ----    ----    ----
     Total          300     293     288      147    153     117      42      52      49       19      17      14
                   ====    ====    ====     ====   ====    ====    ====    ====    ====     ====    ====    ====
</TABLE>

         CITGO's largest supplier of crude oil is PDVSA. CITGO has entered into
long-term crude oil supply agreements with PDVSA with respect to the crude oil
requirements for each of CITGO's refineries. The following table shows the base
and incremental volumes of crude oil contracted for delivery and the volumes of
crude oil actually delivered under these contracts in the three years ended
December 31, 1999.


                                        7
<PAGE>   10

                   CITGO CRUDE OIL SUPPLY CONTRACTS WITH PDVSA

<TABLE>
<CAPTION>

                                                             VOLUMES OF
                                                        CRUDE OIL PURCHASED
                                 CONTRACT CRUDE          FOR THE YEAR ENDED
                                   OIL VOLUME                DECEMBER 31,        CONTRACT
                               ----------------------   ---------------------   EXPIRATION
                               BASE   INCREMENTAL (1)   1999    1998     1997      DATE
                               ----   ---------------   ----    ----     ----     ------
                                  (MBPD)                       (MBPD)             (YEAR)
<S>                            <C>    <C>               <C>     <C>      <C>      <C>
LOCATION
Lake Charles, LA(2)             120        50           101(3)  121      115      2006
Corpus Christi, TX(2)           130        --           108(3)  128      125      2012
Paulsboro, NJ(2)                 30        --            22(3)   35       35      2010
Savannah, GA(2)                  12        --            11(3)   12       12      2013
Houston, TX (4)                 200        --           173     223      216      2017
</TABLE>


(1)  The supply agreement for the Lake Charles refinery gives PDVSA the right to
     sell to CITGO incremental volumes up to the maximum amount specified in the
     table, subject to certain restrictions relating to the type of crude oil to
     be supplied, refining capacity and other operational considerations at the
     refinery.

(2)  Volumes purchased as shown on this table do not equal purchases from
     PDVSA (shown in the previous table) as a result of transfers between
     refineries of contract crude purchases included here and spot purchases
     which are included in the previous table.

(3)  The crude supply contracts include force majeure clauses that have been
     exercised. Exercise of these clauses requires that the Company locate
     alternative sources of supply for its crude oil requirements, and such
     action resulted in higher crude oil costs.

(4)  CITGO acquired a participation interest in LYONDELL-CITGO, the owner of the
     Houston refinery, on July 1, 1993. In connection with such transaction,
     LYONDELL-CITGO entered into a long-term crude oil supply agreement with
     PDVSA that provided for delivery volumes of 135 MBPD until the completion
     of a refinery enhancement project at which time the delivery volumes
     increased to a range that extends from 200 MBPD to 230 MBPD.

         These crude oil supply agreements require PDVSA to supply minimum
quantities of crude oil and other feedstocks to CITGO for a fixed period,
usually 20 to 25 years. The supply agreements differ somewhat for each entity
and each CITGO refinery but generally incorporate formula prices based on the
market value of a slate of refined products deemed to be produced for each
particular grade of crude oil or feedstock, less (i) certain deemed refining
costs; (ii) certain actual costs, including transportation charges, import
duties and taxes; and (iii) a deemed margin, which varies according to the grade
of crude oil or feedstock delivered. Under each supply agreement, deemed margins
and deemed costs are adjusted periodically by a formula primarily based on the
rate of inflation. Because deemed operating costs and the slate of refined
products deemed to be produced for a given barrel of crude oil or other
feedstock do not necessarily reflect the actual costs and yields in any period,
the actual refining margin earned by a purchaser under the various supply
agreements will vary depending on, among other things the efficiency with which
such purchaser conducts its operations during such period.

         These crude supply agreements contain force majeure provisions which
entitle the supplier to reduce the quantity of crude oil and feedstocks
delivered under the crude supply agreements under specified circumstances. As of
December 31, 1999, PDVSA deliveries of crude oil to CITGO were less than
contractual base volumes due to PDVSA declaration of force majeure pursuant to
all of the long-term crude oil supply contracts related to CITGO's refineries.
Therefore, the Company has been required to use alternative sources of crude
oil. As a result, CITGO estimates that crude oil costs for the year ended
December 31, 1999 were higher by $55 million from what would have otherwise been
the case. It is not possible to forecast the future financial impacts of these
reductions in crude oil deliveries on

                                        8

<PAGE>   11
CITGO's costs because the correlation between crude oil and refined product
prices is not constant over time. Additionally, because of among other things,
changes in crude oil economics, the duration of force majeure cannot be
forecasted.

         These contracts also contain provisions which entitle the supplier to
reduce the quantity of crude oil and feedstocks delivered under the crude supply
agreements and oblige the supplier to pay CITGO the deemed margin under that
contract for each barrel of reduced crude oil and feedstocks. During the second
half of 1999, PDVSA did not deliver naphtha pursuant to one of the contracts and
made contractually specified deemed margin payments in lieu thereof. The
financial effect was an increase in costs by $4 million from what would have
otherwise been the case.

         Prior to 1995, certain costs were used in the CITGO supply agreement
formulas, aggregating approximately $70 million per year, which were to cease
being deductible after 1996. Commencing in the third quarter of 1995, a portion
of such deductions was deferred from 1995 and 1996 to the years 1997 through
1999. The effect of the adjustments to the original modifications was to reduce
the cost of crude oil purchased from PDVSA by approximately $21 million in 1999,
$25 million in 1998 and $25 million in 1997, as compared to the original
modification and without giving effect to any other factors that may affect the
amount payable for crude oil under these agreements.

         Most of the crude oil and feedstocks purchased by CITGO from PDVSA are
delivered on tankers owned by PDV Marina, S.A., a wholly-owned subsidiary of
PDVSA. In 1999, 91% of the PDVSA contract crude oil delivered to the Lake
Charles and Corpus Christi refineries was delivered on tankers operated by this
PDVSA subsidiary.

         CITGO purchases additional crude oil under a 90-day evergreen agreement
with an affiliate of Petroleos Mexicanos ("PEMEX"). CITGO's refineries are
particularly well suited to refine PEMEX's Maya heavy, sour crude oil, which is
similar in many respects to several types of Venezuelan crude oil.

         CITGO was a party to a contract with an affiliate of Occidental
Petroleum Corporation ("Occidental") for the purchase of light, sweet crude oil
to produce lubricants. This contract expired on August 31, 1998. CITGO also
purchases sweet crude oil under long-standing relationships with numerous other
producers.

         Refined Product Purchases. CITGO is required to purchase refined
products to supplement the production of the Lake Charles and Corpus Christi
refineries in order to meet demand of CITGO's marketing network. During 1999,
CITGO's shortage in gasoline production approximated 344 MBPD. However, due to
logistical needs, timing differences and product grade imbalances, CITGO
purchased approximately 691 MBPD of gasoline and sold into the spot market, or
to refined product traders or other refineries approximately 245 MBPD of
gasoline. The following table shows CITGO's purchases of refined products for
the three years in the period ended December 31, 1999.

                         CITGO REFINED PRODUCT PURCHASES

<TABLE>
<CAPTION>

                                YEAR ENDED DECEMBER 31,
                              --------------------------
                               1999      1998       1997
                              -----      ----       ----
                                        (MBPD)
<S>                           <C>        <C>        <C>
LIGHT FUELS
     Gasoline                   691       581       518
     Jet fuel                    77        69        74
     Diesel/ #2 fuel            279       208       190
                              -----      ----      ----
         Total                1,047       858       782
                              =====      ====      ====
</TABLE>


                                        9

<PAGE>   12


         As of December 31, 1999, CITGO purchased substantially all of the
gasoline, diesel and jet fuel produced at the LYONDELL-CITGO refinery under a
long-term contract which extends through the year 2017. LYONDELL-CITGO was a
major supplier in 1999 providing CITGO with 117 MBPD of gasoline, 68 MBPD of
diesel/#2 fuel and 18 MBPD of jet fuel. See "--Refining--LYONDELL-CITGO".

         As of May 1, 1997, CITGO began purchasing, under a contract with a
sixty-month term, substantially all of the refined products produced at the
PDVMR refinery. During the period ended December 31, 1999, the PDVMR refinery,
located in Lemont, Illinois, provided CITGO with 84 MBPD of gasoline, 38 MBPD of
diesel/#2 fuel and 2 MBPD of jet fuel.

         An affiliate of PDVSA acquired a 50% equity interest in a refinery in
Chalmette, Louisiana ("Chalmette") in October 1997 and has assigned to CITGO its
option to purchase up to 50% of the refined products produced at the refinery
through December 31, 2000. CITGO acquired approximately 66 MBPD of refined
products from the refinery during 1999, approximately one-half of which was
gasoline.

         In October 1998 an affiliate of PDVSA acquired a 50% equity interest in
HOVENSA (a joint venture that owns and operates a refinery in St. Croix, U.S.
Virgin Islands) and has the right under a product sales agreement to assign
periodically to CITGO, or other related parties, its option to purchase 50% of
the refined products produced by HOVENSA (less a certain portion of such
products that HOVENSA will market directly in the local and Caribbean markets).
In addition, under the product sales agreement, the PDVSA affiliate has
appointed CITGO as its agent in designating which of its affiliates shall from
time to time take deliveries of the refined products available to it. The
product sales agreement will be in effect for the life of the joint venture,
subject to termination events based on default or mutual agreement. Pursuant to
the above arrangement, CITGO acquired approximately 118 MBPD of refined products
from the refinery during 1999, approximately one-half of which was gasoline.

MARKETING

         CITGO's major products are light fuels (including gasoline, jet fuel,
and diesel fuel), industrial products and petrochemicals, asphalt, lubricants
and waxes. The following table shows revenues and volumes of each of these
product categories for the three years in the period ended December 31, 1999.


                CITGO REFINED PRODUCT SALES REVENUES AND VOLUMES


<TABLE>
<CAPTION>

                                                         YEAR ENDED DECEMBER 31,                 YEAR ENDED DECEMBER 31,
                                                ------------------------------------       --------------------------------
                                                   1999         1998         1997           1999         1998         1997
                                                ----------   ----------   ----------       ------       ------       ------
                                                            ($ IN MILLIONS)                          (MM GALLONS)
<S>                                             <C>          <C>          <C>              <C>          <C>          <C>
LIGHT FUELS
    Gasoline                                    $    7,691   $    6,252   $    7,754       13,115       13,241       11,953
    Jet fuel                                         1,129          828        1,183        2,198        1,919        2,000
    Diesel / #2 fuel                                 2,501        1,945        2,439        5,057        4,795        4,288
ASPHALT                                                338          300          398          753          774          749
PETROCHEMICALS AND INDUSTRIAL PRODUCTS               1,024          937        1,172        2,063        2,440        1,940
LUBRICANTS AND WAXES                                   482          441          467          285          230          239
                                                ----------   ----------   ----------       ------       ------       ------
      Total                                     $   13,165   $   10,703   $   13,413       23,471       23,399       21,169
                                                ==========   ==========   ==========       ======       ======       ======
</TABLE>

         Light Fuels. Gasoline sales accounted for 58% of CITGO's refined
product sales in the years 1999, 1998 and 1997. CITGO markets CITGO branded
gasoline through approximately 13,500 independently owned and operated CITGO
branded retail outlets (including 11,471 branded retail outlets owned and
operated by approximately 816 independent marketers and 2,027 7-Eleven(TM)
convenience stores) located

                                       10
<PAGE>   13


throughout the United States, primarily east of the Rocky Mountains. CITGO
purchases gasoline to supply its marketing network, as the gasoline production
from the Lake Charles and Corpus Christi refineries was only equivalent to
approximately 45%, 48% and 47% of the volume of CITGO branded gasoline sold in
1999, 1998 and 1997, respectively. See "--Crude Oil and Refined Product
Purchases -- Refined Product Purchases".

         CITGO's strategy is to enhance the value of the CITGO brand in order to
obtain premium pricing for its products by appealing to consumer preference for
quality petroleum products and services. This is accomplished through a
commitment to quality, dependability and customer service to its independent
marketers, which constitute CITGO's primary distribution channel.

         Sales to independent branded marketers typically are made under
contracts that range from three to seven years. Sales to 7-Eleven(TM)
convenience stores are made under a contract that extends through the year 2006.
Under this contract, CITGO arranges all transportation and delivery of motor
fuels and handles all product ordering. CITGO also acts as processing agent for
the purpose of facilitating and implementing orders and purchases from
third-party suppliers. CITGO receives a processing fee for such services.

         CITGO markets jet fuel directly to airline customers at 27 airports,
including such major hub cities as Atlanta, Chicago, Dallas/Fort Worth, New York
and Miami.

         CITGO's delivery of light fuels to its customers is accomplished in
part through 50 refined product terminals located throughout CITGO's primary
market territory. Of these terminals, 38 are wholly-owned by CITGO and 12 are
jointly owned. Fourteen of CITGO's product terminals have waterborne docking
facilities, which greatly enhance the flexibility of CITGO's logistical system.
In addition, CITGO operates and delivers refined products from seven terminals
owned by PDVMR in the Midwest. Refined product terminals owned or operated by
CITGO provide a total storage capacity of approximately 22 million barrels.
Also, CITGO has active exchange relationships with over 300 other refined
product terminals, providing flexibility and timely response capability to meet
distribution needs.

         Petrochemicals and Industrial Products. CITGO sells petrochemicals in
bulk to a variety of U.S. manufacturers as raw material for finished goods. The
majority of CITGO's cumene production is sold to Mount Vernon Phenol Plant
Partnership ("MVPPP"), a joint venture phenol production plant in which CITGO is
a limited partner. The phenol plant produces phenol and acetone for sale
primarily to the principal partner in the phenol plant for the production of
plastics. Sulphur is sold to the U.S. and international fertilizer industries;
cycle oils are sold for feedstock processing and blending; natural gas liquids
are sold to the U.S. fuel and petrochemical industry; petroleum coke is sold
primarily in international markets, through a joint venture, for use as kiln and
boiler fuel; and residual fuel blendstocks are sold to a variety of fuel oil
blenders.

         Asphalt. CITGO markets asphalt through 15 terminals located along the
East Coast, from Savannah, Georgia to Albany, New York. Asphalt is sold
primarily to independent contractors for use in the construction and resurfacing
of roadways. Demand for asphalt in the Northeastern U.S. peaks in the summer
months.

         Lubricants and Waxes. CITGO markets many different types, grades and
container sizes of lubricants and wax products, with the bulk of sales
consisting of automotive oil and lubricants and industrial lubricants. Other
major lubricant products include 2-cycle engine oil and automatic transmission
fluid.

PIPELINE OPERATIONS

         CITGO owns and operates 142 miles of crude oil pipeline systems and
approximately 1,021 miles of products pipeline systems. CITGO also has equity
interests in two crude oil pipeline companies with a total of approximately
1,929 miles of pipeline plus equity interests in five refined product pipeline
companies with a total

                                       11

<PAGE>   14


of approximately 8,437 miles of pipeline. CITGO's pipeline interests provide it
with access to substantial refinery feedstocks and reliable transportation to
refined product markets, as well as cash flows from dividends. One of the
refined product pipelines in which CITGO has an interest, Colonial Pipeline, is
the largest refined product pipeline in the United States, transporting refined
products from the Gulf Coast to the mid-Atlantic and eastern seaboard states.

EMPLOYEES

         CITGO and its subsidiaries have a total of approximately 4,200
employees, approximately 1,700 of who are covered by 15 union contracts.
Approximately 1,600 of the union employees are employed in refining operations.
The remaining union employees are located primarily at a lubricant plant and
various refined product terminals.

ENVIRONMENT AND SAFETY

         Environment

         Beginning in 1994, the U.S. refining industry was required to comply
with stringent product specifications under the 1990 Clean Air Act ("CAA")
Amendments for reformulated gasoline and low sulphur diesel fuel which
necessitated additional capital and operating expenditures, and altered
significantly the U.S. refining industry and the return realized on refinery
investments. In addition, numerous other factors affect the Company's plans with
respect to environmental compliance and related expenditures. See "Factors
Affecting Forward Looking Statements".

         CITGO is subject to various federal, state and local environmental laws
and regulations which may require CITGO to take action to correct or improve the
effects on the environment of prior disposal or release of petroleum substances
by CITGO or other parties. Management believes the Company is in compliance with
these laws and regulations in all material aspects. Maintaining compliance with
environmental laws and regulations in the future could require significant
capital expenditures and additional operating costs.

         In 1992, the Company reached an agreement with a state agency to cease
usage of certain surface impoundments at the Company's Lake Charles refinery by
1994. A mutually acceptable closure plan was filed with the state in 1993. The
Company and its former owner are participating in the closure and sharing the
related costs based on estimated contributions of waste and ownership periods.
The remediation commenced in December 1993. In 1997, the Company presented a
proposal to a state agency revising the 1993 closure plan. In 1998 and 2000, the
Company submitted further revisions as requested by the state agency. A ruling
on the proposal, as amended, is expected in 2000 with final closure to begin in
2002.

         In 1992, an agreement was reached between the Company and its former
owner concerning a number of environmental issues. The agreement consisted, in
part, of payments to the Company totaling $46 million. The former owner will
continue to share the costs of certain specific environmental remediation and
certain tort liability actions based on ownership periods and specific terms of
the agreement.

         The Texas Natural Resources Conservation Commission ("TNRCC") conducted
an environmental compliance review at the Corpus Christi refinery in the first
and second quarters of 1998. In January 1999, the TNRCC issued the Company a
Notice of Violation ("NOV") arising from this review and in October 1999
proposed fines of approximately $1.6 million related to the NOV. Most of the
alleged violations refer to recordkeeping and reporting issues, failure to meet
required emission levels, and failure to properly monitor emissions. TNRCC
issued the Company another NOV in December 1999 based on its 1999 audit which
cites items similar to those cited earlier and the agency has tentatively
suggested that the two audits should be combined for resolution. The Company
intends to vigorously protest the alleged violations and proposed fines.

                                       12

<PAGE>   15


         In June 1999, CITGO and numerous other industrial companies received
notice from the U.S. Environmental Protection Agency, ("EPA") that the EPA
believes these companies have contributed to contamination in the Calcasieu
Estuary, in the proximity of Lake Charles, Calcasieu Parish, Louisiana and are
Potentially Responsible Parties ("PRPs") under the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA"). The EPA made a demand for
payment of its past investigation costs from CITGO and other PRPs and advised it
intends to conduct a Remedial Investigation/Feasibility Study ("RI/FS") under
its CERCLA authority. CITGO and other PRPs may be potentially responsible for
the costs of the RI/FS. CITGO disagrees with the EPA's allegations and intends
to contest this matter.

         In October 1999, the EPA issued a NOV to CITGO for violations of
federal regulations regarding reformulated gasoline found during a May 1998
inspection at CITGO's Braintree, Massachusetts terminal and recommended a
penalty of $218,500. The Company intends to vigorously contest the alleged
violations and proposed fines.

         Based on currently available information, including the continuing
participation of former owners in remediation actions and indemnification
agreements with third parties, CITGO management believes that its accruals are
sufficient to address its environmental obligations. Conditions which require
additional expenditures may exist with respect to various Company sites
including, but not limited to, CITGO's operating refinery complexes, closed
refineries, service station sites and crude oil and petroleum product storage
terminals. The amount of such future expenditures, if any, is indeterminable.

         Increasingly stringent regulatory provisions periodically require
additional capital expenditures. During 1999, CITGO spent approximately $81
million for environmental and regulatory capital improvements in its operations.
Management currently estimates that CITGO will spend approximately $350 million
for environmental and regulatory capital projects over the five-year period
2000-2004. These estimates may vary due to a variety of factors. See "Item 7 --
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources". See also "Factors Affecting
Forward Looking Statements".

         Safety

         Due to the nature of petroleum refining and distribution, CITGO is
subject to stringent occupational health and safety laws and regulations. CITGO
maintains comprehensive safety, training and maintenance programs. CITGO
believes that it is in substantial compliance with occupational health and
safety laws.

ITEM 3.   LEGAL PROCEEDINGS

         Various lawsuits and claims arising in the ordinary course of business
are pending against the Company. The Company records accruals for potential
losses when, in management's opinion, such losses are probable and reasonably
estimable. If known lawsuits and claims were to be determined in a manner
adverse to the Company, and in amounts greater than the Company's accruals, then
such determinations could have a material adverse effect on the Company's
results of operations in a given reporting period. However, in management's
opinion the ultimate resolution of these lawsuits and claims will not exceed, by
a material amount, the amount of the accruals and the insurance coverage
available to the Company. This opinion is based upon management's and counsel's
current assessment of these lawsuits and claims. The most significant lawsuits
and claims are discussed below.

         The case brought in the United States District Court for the Northern
District of Illinois by the Oil Chemical & Atomic Workers, Local 7-517 against
UNO-VEN, CITGO, PDVSA, PDV America, and UNOCAL pursuant to Section 301 of the
Labor Management Relations Act ("LMRA") resulted in the Court's ruling in favor
of all defendants on Motions for Summary Judgment in June 1998; this ruling was
affirmed on appeal and the case is now terminated.

                                       13

<PAGE>   16


         In May 1997, an explosion and fire occurred at CITGO's Corpus Christi
refinery. No serious personal injuries were reported. CITGO received
approximately 7,500 individual claims for personal injury and property damage
related to the above noted incident. Approximately 1,300 of these claims have
been resolved for amounts which individually and collectively were not material.
There are presently seventeen lawsuits filed on behalf of approximately 9,000
individuals arising out of this incident in federal and state courts in Corpus
Christi alleging property damages, personal injury and punitive damages. A trial
of one of the federal court lawsuits in October 1998 involving ten bellwether
plaintiffs, out of approximately 400 plaintiffs, resulted in a verdict for
CITGO. The remaining plaintiffs in this case have agreed to settle for an
immaterial amount.

         A class action lawsuit is pending in Corpus Christi, Texas state court
against CITGO and other operators and owners of nearby industrial facilities
which claims damages for reduced value of residential properties located in the
vicinity of the industrial facilities as a result of air, soil and groundwater
contamination. CITGO has contracted to purchase all of the 275 properties
included in the lawsuit which are in an area adjacent to CITGO's Corpus Christi
refinery and settle the property damage claims relating to these properties.
Related to this purchase, $15.7 million was expensed in 1997. The trial judge
recently ruled, over CITGO's objections, that a settlement agreement CITGO
entered into in September 1997 and subsequently withdrew from, which provided
for settlement of the remaining property damage claims for $5 million is
enforceable. CITGO believes this ruling is erroneous and will appeal. The trial
against CITGO of these remaining claims has been postponed indefinitely. Two
related personal injury and wrongful death lawsuits were filed against the same
defendants in 1996, one of which is scheduled for trial in 2000. A trial date
for the other case has not been set.

         Litigation is pending in federal court in Lake Charles, Louisiana,
against CITGO by a number of current and former Lake Charles refinery employees
and applicants asserting claims of racial discrimination in connection with
CITGO's employment practices. The first trial in this case, which involved two
plaintiffs, began in October 1999 and resulted in verdicts for the Company. The
Court granted the Company's motion for summary judgment with respect to another
group of claims; an appeal of this ruling is expected. Trials of the remaining
cases are currently stayed.

         CITGO is among defendants to lawsuits in California, North Carolina and
New York alleging contamination of water supplies by methyl tertiary butyl ether
("MTBE"), a component of gasoline. The action in California was filed in
November 1998 by the South Tahoe Public Utility District and CITGO was added as
a defendant in February 1999. The North Carolina case, filed in January 1999,
and the New York case, filed in January 2000 are putative class actions on
behalf of owners of water wells and other drinking water supplies in the state.
All of these actions allege that MTBE poses public health risks. Both actions
seek damages as well as remediation of the alleged contamination. These matters
are in early stages of discovery. CITGO has denied all of the allegations and is
pursuing its defenses.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Not Applicable.

                                       14

<PAGE>   17



                                     PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Company's common stock is not publicly traded. All of the Company's
common stock is held by PDV America, a Delaware corporation whose ultimate
parent is PDVSA. In 1999, CITGO declared and paid dividends of $15 million to
PDV America.


ITEM 6.   SELECTED FINANCIAL DATA

         The following table sets forth certain selected historical consolidated
financial and operating data of CITGO as of the end of and for each of the five
years in the period ended December 31, 1999. The following table should be read
in conjunction with the consolidated financial statements of CITGO as of
December 31, 1999 and 1998, and for each of the three years in the period ended
December 31, 1999, included in "Item 8. Financial Statements and Supplementary
Data".


<TABLE>
<CAPTION>

                                                                                YEAR ENDED DECEMBER 31,
                                                          -----------------------------------------------------------------
                                                             1999           1998         1997        1996        1995(1)
                                                          ----------    ----------   ----------   ----------   ------------
                                                                                (DOLLARS IN MILLIONS)
<S>                                                       <C>           <C>          <C>          <C>          <C>
INCOME STATEMENT DATA
    Sales                                                 $   13,317    $   10,912   $   13,591   $   12,952   $   10,522
    Equity in earnings of affiliates                              21            77           64           21           34
    Net revenues                                              13,322        10,981       13,645       12,969       10,553
    Income before extraordinary gain                             146           194          207          127          136
    Extraordinary gain(2)                                         --            --           --           --            4
    Net income                                                   146           194          207          127          140
    Other comprehensive income (loss)                             (3)           --           --           --           --
    Comprehensive income                                         143           194          207          127          140
RATIO OF EARNINGS TO FIXED CHARGES (3)                          3.47  X       3.92 X       3.21 X       2.45 X        2.71 X
BALANCE SHEET DATA
    Total assets                                          $    5,907    $    5,254   $    5,412   $    5,630   $    4,924
    Long-term debt (excluding current portion)(4)              1,478         1,361        1,275        1,599        1,301
    Total debt (5)                                             1,557         1,460        1,386        1,759        1,432
    Shareholder's equity                                       1,964         1,846        2,081        1,870        1,732
</TABLE>

---------------------------

(1) Includes operations of Cato Oil & Grease since May 1, 1995.

(2)  Represents extraordinary gain for the early extinguishment of debt (net of
     related income tax provision of $2 million) in 1995.

(3)  For the purpose of calculating the ratio of earnings to fixed charges,
     "earnings" consist of income before income taxes and cumulative effect of
     accounting changes plus fixed charges (excluding capitalized interest),
     amortization of previously capitalized interest and certain adjustments to
     equity in income of affiliates. "Fixed charges" include interest expense,
     capitalized interest, amortization of debt issuance costs and a portion of
     operating lease rent expense deemed to be representative of interest.

(4)  Includes long-term debt to third parties and capital lease obligations.

(5)  Includes short-term bank loans, current portion of capital lease
     obligations and long-term debt, long-term debt and capital lease
     obligations.


                                       15

<PAGE>   18



ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

OVERVIEW

         The following discussion of the financial condition and results of
operations of CITGO should be read in conjunction with the consolidated
financial statements of CITGO included elsewhere herein.

         Petroleum industry operations and profitability are influenced by a
large number of factors, some of which individual petroleum refining and
marketing companies cannot entirely control. Governmental regulations and
policies, particularly in the areas of taxation, energy and the environment,
have a significant impact on petroleum activities, regulating how companies
conduct their operations and formulate their products, and, in some cases,
limiting their profits directly. Demand for crude oil and refined products is
largely driven by the condition of local and worldwide economies, although
weather patterns and taxation relative to other energy sources also play a
significant part. CITGO's consolidated operating results are affected by these
industry-specific factors and by company-specific factors, such as the success
of marketing programs and refinery operations.

         The earnings and cash flows of companies engaged in the refining and
marketing business in the United States are primarily dependent upon producing
and selling quantities of refined products at margins sufficient to cover fixed
and variable costs. The refining and marketing business is characterized by high
fixed costs resulting from the significant capital outlays associated with
refineries, terminals and related facilities. This business is also
characterized by substantial fluctuations in variable costs, particularly costs
of crude oil, feedstocks and blending components, and in the prices realized for
refined products. Crude oil and refined products are commodities whose price
levels are determined by market forces beyond the control of CITGO.

         In general, prices for refined products are significantly influenced by
the price of crude oil, feedstocks and blending components. Although an increase
or decrease in the price for crude oil, feedstocks and blending components
generally results in a corresponding increase or decrease in prices for refined
products, generally there is a lag in the realization of the corresponding
increase or decrease in prices for refined products. The effect of changes in
crude oil prices on CITGO's consolidated operating results therefore depends in
part on how quickly refined product prices adjust to reflect these changes. A
substantial or prolonged increase in crude oil prices without a corresponding
increase in refined product prices, or a substantial or prolonged decrease in
refined product prices without a corresponding decrease in crude oil prices, or
a substantial or prolonged decrease in demand for refined products could have a
significant negative effect on the Company's earnings and cash flows. CITGO
purchases a significant amount of its crude oil requirements from PDVSA under
long-term supply agreements (expiring in the years 2006 through 2013).  This
supply represented approximately 48% of the crude oil processed in refineries
operated by CITGO in the year ended December 31, 1999. The crude supply
contracts include force majeure clauses that have been exercised. The exercise
of these clauses requires that the Company use alternative sources of supply for
its crude oil requirements, and such action resulted in higher crude costs. (See
Items 1. and 2. Business and Properties--Crude Oil and Refined Product
Purchases). CITGO also purchases significant volumes of refined products to
supplement the production from its refineries to meet marketing demands and to
resolve logistical issues. CITGO's earnings and cash flows are also affected by
the cyclical nature of petrochemical prices. As a result of the factors
described above, the earnings and cash flows of CITGO may experience substantial
fluctuations. Inflation was not a significant factor in the operations of CITGO
during the three years ended December 31, 1999.

                                       16
<PAGE>   19


         The following table summarizes the sources of CITGO's sales revenues
and volumes.

                        CITGO SALES REVENUES AND VOLUMES

<TABLE>
<CAPTION>

                                                       YEAR ENDED DECEMBER 31,                  YEAR ENDED DECEMBER 31,
                                                ------------------------------------       --------------------------------
                                                   1999         1998         1997           1999         1998         1997
                                                ----------   ----------   ----------       ------       ------       ------
                                                           ($ IN MILLIONS)                           (MM GALLONS)
<S>                                             <C>          <C>          <C>              <C>          <C>          <C>
Gasoline                                        $    7,691   $    6,252   $    7,754       13,115       13,241       11,953
Jet fuel                                             1,129          828        1,183        2,198        1,919        2,000
Diesel / #2 fuel                                     2,501        1,945        2,439        5,057        4,795        4,288
Asphalt                                                338          300          398          753          774          749
Petrochemicals and industrial products               1,024          937        1,172        2,063        2,440        1,940
Lubricants and waxes                                   482          441          467          285          230          239
                                                ----------   ----------   ----------       ------       ------       ------
          Total refined product sales           $   13,165   $   10,703   $   13,413       23,471       23,399       21,169
Other sales                                            152          209          178           --           --           --
                                                ----------   ----------   ----------       ------       ------       ------
          Total sales                           $   13,317   $   10,912   $   13,591       23,471       23,399       21,169
                                                ==========   ==========   ==========       ======       ======       ======
</TABLE>

         The following table summarizes CITGO's cost of sales and operating
expenses.

                   CITGO COST OF SALES AND OPERATING EXPENSES

<TABLE>
<CAPTION>

                                                                        YEAR ENDED DECEMBER 31,
                                                                      1999          1998          1997
                                                                     -------       -------       -------
                                                                              ($ IN MILLIONS)
<S>                                                                  <C>           <C>           <C>
Crude oil                                                            $ 2,855       $ 1,928       $ 2,917
Refined products                                                       7,828         6,078         7,634
Intermediate feedstocks                                                  883           826         1,152
Refining and manufacturing costs                                         816           767           793
Other operating costs and expenses and inventory changes                 415           741           524
                                                                     -------       -------       -------
       Total cost of sales and operating expenses                    $12,797       $10,340       $13,020
                                                                     =======       =======       =======
</TABLE>

RESULTS OF OPERATIONS -- 1999 COMPARED TO 1998

         Sales revenues and volumes. Sales increased $2,405 million,
representing a 22% increase from 1998 to 1999. This was due to an increase in
average sales price of 22% while sales volume remained flat. (See CITGO Sales
Revenues and Volumes table above.)

         Equity in earnings of affiliates. Equity in earnings of affiliates
decreased by approximately $56 million, or 73% from $77 million in 1998 to $21
million in 1999. The decrease was primarily due to the change in the earnings of
LYONDELL-CITGO, CITGO's share of which decreased $58 million, from $59 million
in 1998 to $1 million in 1999. The decrease in LYONDELL-CITGO earnings was due
primarily to reduced processing of extra heavy crude oil as a result of lower
allocations and deliveries and a less favorable mix of extra heavy Venezuelan
crude oil by PDVSA, partially offset by increased processing of spot crude;
costs and lower operating rates related to outages of a coker unit and a fluid
catalytic cracker unit; and a charge related to LYONDELL-CITGO's renegotiated
labor agreement.

         Other income (expense). Other income (expense) was $(17) million for
the year ended December 31, 1999 as compared to $(8) million for the same period
in 1998. The difference was primarily due to: (1) a $3

                                       17

<PAGE>   20



million gain on the sale of Petro-Chemical Transport in 1998 and (2) in
September 1999, CITGO's interest in the Texas New Mexico Pipeline was sold for a
loss of $(2) million.

         Cost of sales and operating expenses. Cost of sales and operating
expenses increased by $2,457 million, or 24%, from 1999 to 1998. (See CITGO Cost
of Sales and Operating Expenses table above.)

         CITGO purchases refined products to supplement the production from its
refineries to meet marketing demands and resolve logistical issues. The refined
product purchases represented 61% and 59% of cost of sales for the years 1999
and 1998, respectively. These refined product purchases included purchases from
LYONDELL-CITGO, PDVMR, Chalmette and HOVENSA. CITGO estimates that margins on
purchased products, on average, are lower than margins on produced products due
to the fact that CITGO can only receive the marketing portion of the total
margin received on the produced refined products. However, purchased products
are not segregated from CITGO produced products and margins may vary due to
market conditions and other factors beyond the Company's control. As such, it is
difficult to measure the effects on profitability of changes in volumes of
purchased products. In the near term, other than normal refinery turnaround
maintenance, CITGO does not anticipate operational actions or market conditions
which might cause a material change in anticipated purchased product
requirements; however, there could be events beyond the control of CITGO which
impact the volume of refined products purchased. See also "Factors Affecting
Forward Looking Statements".

         As a result of the invocation of the force majeure clause in its crude
oil supply contracts, CITGO estimates that the cost of crude oil purchased in
1999 increased by $55 million from what would have otherwise been the case.

         Gross margin. The gross margin for 1999 was $520 million, or 3.9%,
compared to $572 million, or 5.2%, for 1998. In 1999, the revenue per gallon
component increased approximately 22% while the cost per gallon component
increased approximately 23%. As a result, the gross margin decreased
approximately two-tenths of a cent on a per gallon basis in 1999 compared to
1998.

         Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $22 million, or 9% in 1999, as a result of
the Company's efforts to reduce such expenses and to a reduction in employee
incentive compensation costs.

         Income taxes. CITGO's provision for income taxes in 1999 was $62
million, representing an effective tax rate of 30%. In 1998, CITGO's provision
for income taxes was $103 million, representing an effective tax rate of 35%.
The effective tax rate for the current year is unusually low due to a favorable
resolution in the second quarter of 1999 of a significant tax issue in the last
Internal Revenue Service audit. During the years under audit, deferred taxes
were recorded for certain environmental expenses deducted in the tax returns
pending final determination by the Internal Revenue Service. The deductions
were allowed on audit and, accordingly, the deferred tax liability of
approximately $11 million was reversed with a corresponding benefit to tax
expense.

                                       18

<PAGE>   21


RESULTS OF OPERATIONS -- 1998 COMPARED TO 1997

         Sales revenues and volumes. Sales decreased by $2,679 million,
representing a 20% decrease from 1997 to 1998. This was due to a decrease in
average sales price of 28% partially offset by an increase in sales volumes of
11%. (See CITGO Sales Revenue and Volumes table above.)

         Equity in earnings (losses) of affiliates. Equity in earnings of
affiliates increased by approximately $13 million, or 20% from $64 million in
1997 to $77 million in 1998. This increase was due primarily to a $14 million
increase in CITGO's equity in earnings of LYONDELL-CITGO as a result of the
change in CITGO's interest in LYONDELL-CITGO which increased from approximately
13% at December 31, 1996 to approximately 42% on April 1, 1997 and the
improvement in LYONDELL-CITGO's operations since completion of its refinery
enhancement project during the first quarter of 1997 (See Consolidated Financial
Statements of CITGO -- Note 3 in Item 14a).

         Cost of sales and operating expenses. Cost of sales and operating
expenses decreased by $2,680 million, or 21% from 1997 to 1998. (See CITGO Cost
of Sales and Operating Expenses table above.)

         CITGO purchases refined products to supplement the production from its
refineries to meet marketing demands and resolve logistical issues. The refined
product purchases represented 59% of cost of sales for the years 1998 and 1997.
These refined product purchases included purchases from LYONDELL-CITGO, PDVMR,
Chalmette and HOVENSA. CITGO estimates that margins on purchased products, on
average, are lower than margins on produced products due to the fact that CITGO
can only receive the marketing portion of the total margin received on the
produced refined products. However, purchased products are not segregated from
CITGO produced products and margins may vary due to market conditions and other
factors beyond the Company's control. As such, it is difficult to measure the
effects on profitability of changes in volumes of purchased products. (See also
"Factors Affecting Forward Looking Statements").

         Gross margin. The gross margin in 1998 was $572 million, which was
essentially unchanged from 1997. This occurred because a sales volume increase
of approximately 11% was sufficient to offset the 9% erosion of gross margin on
a per gallon basis which included a lower of cost of market adjustment of $159
million.

         Selling, general and administrative expenses. Selling, general and
administrative expenses increased $42 million, or 21% in 1998. The increase was
due primarily to salary and related burden allocations as well as increases in
advertising expense and depreciation.

         Interest expense. Interest expense decreased $25.6 million from 1997 to
1998. The decrease was primarily due to the decrease in average debt outstanding
related to a decrease in working capital requirements and the deferral of a
significant 1998 excise tax payment. Also the average interest rate decreased
due to a decrease in key rates and replacement of higher rate debt with lower
rate debt.

         Income taxes. CITGO's provision for income taxes in 1998 was $103
million, representing an effective tax rate of 35%. In 1997, CITGO's provision
for income taxes was $91 million, representing an effective tax rate of 31%. The
relatively low rate in 1997 was due primarily to the favorable resolution of a
significant tax issue with the Internal Revenue Service in the second quarter of
1997. The resolution resulted in the reduction of a tax accrual previously
established related to this matter. The decrease was partially offset by the
recording of a valuation allowance related to a capital loss carryforward. In
1998 the effective tax rate decreased slightly compared to the 1996 rate due to
a decrease in state taxes.

                                       19

<PAGE>   22



LIQUIDITY AND CAPITAL RESOURCES

         For the year ended December 31, 1999, CITGO's net cash provided by
operating activities totaled approximately $217 million, primarily reflecting
$146 million of net income, $234 million of depreciation and amortization and
the net effect of other items of $(163) million. The more significant changes in
other items included the increase in accounts receivable, including receivables
from affiliates, of approximately $483 million, the increase in inventories of
approximately $234 million, the increase in accounts payable and other current
liabilities, including payables to affiliates, of approximately $457 million and
the increase of other assets of approximately $59 million.

         Net cash used in investing activities in 1999 totaled $234 million
consisting primarily of capital expenditures of $227 million and loans to
LYONDELL-CITGO of $25 million.

         During the same period, consolidated net cash provided by financing
activities totaled approximately $82 million comprised primarily of $180 million
of proceeds from revolving bank loans, offset by net repayments of other debt of
$83 million and a $15 million dividend paid to PDV America.

         CITGO currently estimates that its capital expenditures for the years
2000 through 2004 will total approximately $1.3 billion. These include:


          CITGO ESTIMATED CAPITAL EXPENDITURES - 2000 THROUGH 2004 (1)

<TABLE>


<S>                                     <C>
Strategic                             $   598 million
Maintenance                               388 million
Regulatory / Environmental                348 million
                                      ---------------
     Total                            $ 1,334 million
                                      ===============
</TABLE>

---------------

(1)  These estimates may change as future regulatory events unfold. See "Factors
     Affecting Forward Looking Statements".

         As of December 31, 1999, the company and its subsidiaries had an
aggregate of $1,455 million of indebtedness outstanding that matures on various
dates through the year 2028. As of December 31, 1999, the Company's contractual
commitments to make principal payments on this indebtedness were $47 million,
$47 million and $36 million for 2000, 2001 and 2002, respectively. The Company's
bank credit facility consists of a $400 million, five year, revolving bank loan
and a $150 million, 364 day, revolving bank loan, both of which are unsecured
and have various borrowing maturities, of which $345 million was outstanding at
December 31, 1999. Cit-Con has a separate credit agreement under which $14
million was outstanding at December 31, 1999. The Company's other principal
indebtedness consists of (i) $200 million in senior notes issued in 1996, (ii)
$260 million in senior notes issued pursuant to a master shelf agreement with an
insurance company, (iii) $137 million in senior notes issued in 1991, (iv) $306
million in obligations related to tax exempt bonds issued by various
governmental units, and (v) $178 million in obligations related to taxable bonds
issued by a governmental unit. (See Consolidated Financial Statements of CITGO
-- Note 9 and 10 in Item 14a.)

         As of December 31, 1999, capital resources available to CITGO included
cash provided by operations, available borrowing capacity of $205 million under
CITGO's revolving credit facility and $184 million in unused availability under
uncommitted short-term borrowing facilities with various banks. Additionally,
the remaining $400 million from CITGO's shelf registration with the Securities
and Exchange Commission for $600 million of debt securities may be offered and
sold from time to time. CITGO believes that it has sufficient capital resources
to carry out planned capital spending programs, including regulatory

                                       20

<PAGE>   23


and environmental projects in the near term, and to meet currently anticipated
future obligations as they arise. CITGO periodically evaluates other sources of
capital in the marketplace and anticipates long-term capital requirements will
be satisfied with current capital resources and future financing arrangements,
including the issuance of debt securities. The Company's ability to obtain such
financing will depend on numerous factors, including market conditions and the
perceived creditworthiness of the Company at that time. See "Factors Affecting
Forward Looking Statements".

         CITGO's debt instruments impose restrictions on CITGO's ability to
incur additional debt, place liens on property, sell or acquire fixed assets,
and make restricted payments, including dividends.

         CITGO is a member of the PDV Holding, Inc. consolidated Federal income
tax return. CITGO has a tax allocation agreement with PDV America, which is
designed to provide PDV America with sufficient cash to pay its consolidated
income tax liabilities. (See Consolidated Financial Statements of CITGO -- Note
1 and Note 4 in Item 14a).

NEW ACCOUNTING STANDARD

         In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). The statement establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives, at fair value,
as either assets or liabilities in the statement of financial position with an
offset either to shareholder's equity and comprehensive income or income
depending upon the classification of the derivative. The company has not
determined the impact on its financial statements that may result from adoption
of SFAS No. 133, which is required no later than January 1, 2001.

IMPENDING ACCOUNTING CHANGE

         The Securities and Exchange Commission ("SEC") has recently indicated
that they intend to issue a summary of their views regarding accounting for
planned major maintenance activities (See Consolidated Financial Statements of
CITGO - Note 1 in Item 14a). Such summary is expected, in part, to defer the
issuance of guidance related to certain aspects of accounting for major
maintenance activities pending completion of a project dealing with a cost
capitalization that will be conducted by the Accounting Standards Executive
Committee ("AcSEC") of the American Institute of Certified Public Accountants.
At December 31, 1999 CITGO had capitalized approximately $80 million of such
costs, all or a portion of which may be required to be written off through an
immediate charge to income as a result of the SEC and/or AcSEC conclusions.
Pending issuance of the SEC summary, CITGO plans to continue its policy of
deferring and amortizing such costs.

YEAR 2000 READINESS

         The inability of computers, software and other equipment using
microprocessors to recognize and properly process data fields containing a
two-digit year is commonly referred to as the Year 2000 issue. Such systems may
be unable to accurately process certain date-based information. To mitigate any
adverse impact this may cause, CITGO established a company wide Year 2000
Project to address the issue of computer programs and embedded computer chips
which may be unable to correctly function with the Year 2000. In addition, CITGO
updated major elements of its information systems by implementing programs
purchased from Systems, Applications and Products in Data Processing ("SAP").
The first phase of SAP implementation, which included the financial reporting
and materials management modules, was brought into production on January 1,
1998. Additional SAP modules including plant maintenance work order and cost
tracking were implemented throughout 1998. The light oils product scheduling,
inventory and billing module and the human resources module were brought into
production on June 1 and July 1, 1999, respectively. The total cost of the SAP
implementation was approximately $125 million, which included software,
hardware, reengineering and change management. Management has determined that
SAP is an appropriate solution to the Year 2000 issue related to the systems for
which SAP was implemented. Such systems comprise approximately 80 percent of
CITGO's total information systems. Remaining business software systems were made
Year 2000 ready through the Year 2000 Project or they were replaced.

         The Company did not experience any significant business disruptions or
malfunctions in its operating or business systems during the transition from
1999 to 2000. Based on operations since January 1, 2000, the Company does not
expect any significant impact to its ongoing business as a result of Year 2000
issues. It is possible, however, that the full impact of the date transition has
not been fully recognized. For example, it is possible that date-related issues
such as quarterly or year-end processing problems may occur. The Company
believes that any such problems are likely to be minor and correctable. In
addition, the Company could still be negatively affected if its customers or
suppliers are adversely affected

                                       21

<PAGE>   24

by similar date-related issues. The Company is currently not aware of any
significant Year 2000 or similar problems that have arisen for its customers and
suppliers.

         Excluding SAP implementation, the Company expended $15 million on Year
2000 readiness efforts through year-end 1999. These expenditures included
identifying and remediating potential Year 2000 problems, and the associated
program administration and labor costs incurred.


ITEM 7 A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Introduction. CITGO has exposure to price fluctuations of crude oil and
refined products as well as fluctuations in interest rates. To manage these
exposures, management has defined certain benchmarks consistent with its
preferred risk profile for the environment in which the Company operates and
finances its assets. CITGO does not attempt to manage the price risk related to
all of its inventories of crude oil and refined products. As a result, at
December 31, 1999, CITGO was exposed to the risk of broad market price declines
with respect to a substantial portion of its crude oil and refined product
inventories. The following disclosures do not attempt to quantify the price risk
associated with such commodity inventories.

         Commodity Instruments. CITGO balances its crude oil and petroleum
product supply / demand and manages a portion of its price risk by entering into
petroleum commodity derivatives. Generally, CITGO's risk management strategies
qualify as hedges, however, certain strategies that CITGO may use on commodity
positions do not qualify as hedges.

                        NON TRADING COMMODITY DERIVATIVES
                       OPEN POSITIONS AT DECEMBER 31, 1999

<TABLE>
<CAPTION>

                                                                MATURITY    NUMBER OF   CONTRACT     MARKET
    COMMODITY                    DERIVATIVE                       DATE      CONTRACTS   VALUE (2)    VALUE
    ---------                    ----------                     --------    ---------   ---------    ------
                                                                                             ($ in millions)
<S>                        <C>                                  <C>         <C>       <C>          <C>
No Lead Gasoline (1)       Futures Purchased                      2000           60   $      1.7   $      1.7
                           Futures Sold                           2000          225   $      6.1   $      6.4
                           Swaps                                  2000          300   $      8.1   $      7.8


Heating Oil (1)            Futures Purchased                      2000          217   $      5.7   $      6.0
                           Futures Purchased                      2001            6   $      0.1   $      0.1
                           Futures Sold                           2000          450   $     12.5   $     12.8
                           Swaps                                  2000          336   $      7.7   $      7.7


Crude Oil (1)              Swaps                                  2000          600   $     13.4   $     14.3


Natural Gas (3)            Futures Purchased                      2000            6   $      0.1   $      0.1
</TABLE>

------------------------

(1)  1,000 barrels per contract
(2)  Weighted average price
(3)  10,000 mmbtu per contract


                       NON TRADING COMMODITY DERIVATIVES
                      OPEN POSITIONS ON DECEMBER 31, 1998

<TABLE>
<CAPTION>


                                             MATURITY        NUMBER OF        CONTRACT       MARKET
COMMODITY                 DERIVATIVE           DATE          CONTRACTS         VALUE(2)       VALUE
---------                 ----------         --------        ---------        ---------      -------
                                                                                  ($ in millions)
<S>                     <C>                  <C>             <C>              <C>            <C>

No Lead Gasoline (1)    Futures Purchased      1999            500             $  8.0        $  8.0



Heating Oil (1)         Futures Purchased      1999            371             $  7.0        $  6.0
                        Futures Sold           1999            110             $  2.0        $  2.0
</TABLE>
--------------------
(1) 1,000 barrels per contract
(2) Weighted average price


         Debt Related Instruments. CITGO has fixed and floating U.S. currency
denominated debt. CITGO uses interest rate swaps to manage its debt portfolio
toward a benchmark of 40 to 60 percent fixed rate debt to total fixed and
floating rate debt. These instruments have the effect of changing the interest
rate with the

                                       22

<PAGE>   25



objective of minimizing CITGO's long-term costs. At December 31, 1999, CITGO's
primary exposures were to U.S. dollar, LIBOR and U.S. Treasury rates.

         For interest rate swaps, the table below presents notional amounts and
interest rates by expected (contractual) maturity dates. Notional amounts are
used to calculate the contractual payments to be exchanged under the contracts.

                      NON TRADING INTEREST RATE DERIVATIVES
                  OPEN POSITIONS AT DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>

                                                                   NOTIONAL
                                                    FIXED         PRINCIPAL
VARIABLE RATE INDEX    EXPIRATION DATE            RATE PAID        AMOUNT
-------------------    ---------------            ---------        ------
                                                               ($ in millions)
<S>                    <C>                        <C>            <C>
One-month LIBOR        May 2000                     6.28%        $       25
J.J. Kenny             May 2000                     4.72%                25
J.J. Kenny             February 2005                5.30%                12
J.J. Kenny             February 2005                5.27%                15
J.J. Kenny             February 2005                5.49%                15
                                                                 ----------
                                                                 $       92
                                                                 ==========
</TABLE>

         The fair value of the interest rate swap agreements in place at
December 31, 1999, based on the estimated amount that CITGO would receive or pay
to terminate the agreements as of that date and taking into account current
interest rates, was an unrealized loss of $1.3 million.

         For debt obligations, the table below presents principal cash flows and
related weighted average interest rates by expected maturity dates. Weighted
average variable rates are based on implied forward rates in the yield curve at
the reporting date.

                                DEBT OBLIGATIONS
                              AT DECEMBER 31, 1999

<TABLE>
<CAPTION>

                                                                                EXPECTED
    EXPECTED            FIXED          AVERAGE FIXED        VARIABLE       AVERAGE VARIABLE
   MATURITIES         RATE DEBT        INTEREST RATE        RATE DEBT        INTEREST RATE
   ----------         ---------        -------------        ---------       ----------------
                   ($ in millions)                      ($ in millions)
<S>                <C>                 <C>              <C>                 <C>
      2000             $    40             9.11%            $     23               5.72%
      2001                  40             9.11%                   7               6.11%
      2002                  36             8.78%                  --               6.22%
      2003                  61             8.79%                 345               6.25%
      2004                  31             8.02%                  16               6.29%
   Thereafter              391             8.02%                 465               6.41%
                       -------             ----             --------               ----
     Total             $   599             8.29%            $    856                6.32%
                       =======             ====             ========               ====
Fair Value             $   582                              $    856
                                                            ========
</TABLE>


                                DEBT OBLIGATIONS
                              AT DECEMBER 31, 1998

<TABLE>
<CAPTION>
                                                                                EXPECTED
    EXPECTED            FIXED          AVERAGE FIXED        VARIABLE       AVERAGE VARIABLE
   MATURITIES         RATE DEBT        INTEREST RATE        RATE DEBT        INTEREST RATE
   ----------         ---------        -------------        ---------      -----------------
                   ($ in millions)                      ($ in millions)
<S>                <C>                 <C>              <C>                 <C>
1999                   $    40             9.11%            $     44               5.01%
2000                        40             9.11%                   7               5.09%
2001                        40             9.11%                   7               5.23%
2002                        36             8.78%                  --                 --
2003                        61             8.79%                 165               5.44%
Thereafter                 422             8.02%                 481               6.00%
                       -------             ----             --------               ----
Total                  $   639             8.34%            $    704               5.79%
                       =======             ====             ========               ====
Fair Value             $   625                              $    704
                       =======                              ========
</TABLE>












                                       23

<PAGE>   26



ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The Consolidated Financial Statements, the Notes to Consolidated
Financial Statements and the Independent Auditors' Report are included in Item
14a of this report. The Quarterly results of Operations are reported in Note 16
of the Notes to Consolidated Financial Statements included in Item 14a.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

         None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The registrant meets the conditions set forth in General Instructions
(I)(1)(a) and (b) of Form 10-K and is therefore omitting certain information
otherwise required by Item 10 of Form 10-K relating to Directors and Executive
Officers as permitted by General Instruction (I)(2)(c).

ITEM 11.  EXECUTIVE COMPENSATION

         The registrant meets the conditions set forth in General Instructions
(I)(1)(a) and (b) of Form 10-K and is therefore omitting certain information
otherwise required by Item 11 of Form 10-K relating to executive compensation as
permitted by General Instruction (I)(2)(c).

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Not applicable.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The majority of the Board of Directors of CITGO are also directors or
executive officers of PDVSA.

         CITGO has entered into several transactions with PDVSA or other
affiliates of PDVSA, including crude oil and feedstock supply agreements,
agreements for the purchase of refined products and transportation agreements.
Under these agreements, CITGO purchased approximately $1.7 billion of crude oil,
feedstocks and refined products at market related prices from PDVSA in 1999. At
December 31, 1999, $178 million was included in CITGO's current payable to
affiliates as a result of its transactions with PDVSA. (See "Items 1. and 2.
Business and Properties -- Crude Oil and Refined Product Purchases").

         LYONDELL-CITGO owns and operates a 265 MBPD refinery in Houston, Texas.
LYONDELL-CITGO was formed in 1993 by subsidiaries of CITGO and Lyondell,
referred to as the owners. CITGO contributed cash during the years 1993 through
1997 for a participation interest and other commitments related to
LYONDELL-CITGO's refinery enhancement project, and Lyondell contributed the
Houston refinery and related assets for the remaining participation interest.
The refinery enhancement project to increase the refinery's heavy crude oil high
conversion capacity was substantially completed at the end of 1996 with an
in-service date of March 1, 1997. The heavy crude oil processed by the Houston
refinery is supplied by PDVSA under a long-term crude oil supply agreement
through the year 2017. Under this agreement, LYONDELL-CITGO purchased
approximately $0.8 billion of crude oil and feedstocks at market related
prices from PDVSA in 1999. CITGO purchases substantially all of the gasoline,
diesel and jet fuel produced at the Houston refinery under a long-term contract.
(See Consolidated Financial Statements of CITGO -- Notes 3 and 4 in Item 14a).

                                       24

<PAGE>   27


         CITGO's participation interest in LYONDELL-CITGO was approximately 41%
at December 31, 1999, in accordance with agreements between the owners
concerning such interest. CITGO has a one-time option exercisable after January
1, 2000 but before September 30, 2000, to increase, for an additional
investment, its participation interest to 50%.

         CITGO loaned $24.6 million and $19.8 million to LYONDELL-CITGO during
1999 and 1998, respectively. The notes bear interest at market rates which were
approximately 6.7% at December 31, 1999 and 1998, and are due July 1, 2003.
Effective December 31, 1999, CITGO converted $32.7 million of these notes to
investments in LYONDELL-CITGO.

         LYONDELL-CITGO has a $450 million credit facility that is due on May 5,
2000. The Owners are currently reviewing financing alternatives to address this
situation. However, there is no agreement on a definitive plan to replace this
facility and LYONDELL-CITGO does not have the funds available to repay the
facility when it becomes due. As a result of this circumstance, CITGO management
conducted a review to determine if its ability to realize the carrying value of
its investment in LYONDELL-CITGO has been impaired. Based upon this review,
CITGO management has determined that no such impairment has occurred.

         CITGO accounts for its investment in LYONDELL-CITGO using the equity
method of accounting and records its share of the net earnings of LYONDELL-CITGO
based on allocations of income agreed to by the owners.

         On May 1, 1997, PDV America and Union Oil Company of California
("Unocal") closed a transaction relating to The UNO-VEN Company ("UNO-VEN"). The
transaction transferred certain assets and liabilities to PDVMR, a subsidiary of
PDV America, in liquidation of PDV America's 50% ownership interest in UNO-VEN.
The assets include a refinery in Lemont, Illinois, as well as product
distribution terminals located in the Midwest. CITGO operates these facilities
and purchases the products produced at the refinery (See Consolidated Financial
Statements of CITGO -- Note 2 in Item 14a). A portion of the crude oil processed
by PDVMR is supplied by PDVSA under a long-term crude supply contract.

         An affiliate of PDVSA acquired a 50% equity interest in Chalmette in
October 1997 and has assigned to CITGO its option to purchase up to 50% of the
refined products produced at the refinery through December 31, 2000 (See
Consolidated Financial Statements of CITGO -- Note 2 in Item 14a). CITGO
acquired approximately 66 MBPD of refined products from the refinery during
1999, approximately one-half of which was gasoline.

         In October 1998 an affiliate of PDVSA acquired a 50% equity interest in
HOVENSA and has the right under a product sales agreement to assign periodically
to CITGO, or other related parties, its option to purchase 50% of the refined
products produced by HOVENSA (less a certain portion of such products that
HOVENSA will market directly in the local and Caribbean markets). In addition,
under the product sales agreement, the PDVSA affiliate has appointed CITGO as
its agent in designating which of its affiliates shall from time to time take
deliveries of the refined products available to it. The product sales agreement
will be in effect for the life of the joint venture, subject to termination
events based on default or mutual agreement (See Consolidated Financial
Statements of CITGO -- Note 2 in Item 14a). Pursuant to the above arrangement,
CITGO acquired approximately 118 MBPD of refined products from the refinery
during 1999, approximately one-half of which was gasoline.

         The purchase agreements with LYONDELL-CITGO, PDVMR, Chalmette and
HOVENSA incorporate various formula prices based on published market prices and
other factors. Such purchases totaled $4.3 and $2.9 billion for 1999 and 1998,
respectively. At December 31, 1999 and 1998, $196 and $64 million, respectively,
were included in payables to affiliates as a result of these transactions.

                                       25
<PAGE>   28


         CITGO had refined product, feedstock, crude oil and other product sales
of $190 and $164 million to affiliates, including LYONDELL-CITGO and MVPPP, in
1999 and 1998, respectively. At December 31, 1999 and 1998, $38 million and $34
million, respectively, were included in Due from affiliates as a result of these
transactions.

         CITGO has guaranteed approximately $101 million of debt of certain
affiliates, including $50 million related to HOVENSA and $11 million related to
Nelson Industrial Steam Company. (See Consolidated Financial Statements of CITGO
-- Note 13 in Item 14a.)

         Under a separate guarantee of rent agreement, PDVSA has guaranteed
payment of rent, stipulated loss value and termination value due under the lease
of the Corpus Christi Refinery West Plant facilities. (See Consolidated
Financial Statements of CITGO -- Note 14 in Item 14a.)

         The Company and PDV America are parties to a tax allocation agreement
that is designed to provide PDV America with sufficient cash to pay its
consolidated income tax liabilities. In 1997, $10 million due from PDV America
to CITGO under this tax allocation agreement for the 1996 tax year was
classified as a noncash dividend. In 1998, $8 million due from CITGO to PDV
America under this agreement for the 1997 tax year was classified as a noncash
contribution of capital. In 1999, $11 million due from PDV America to CITGO
under this agreement for the 1998 tax year was classified as a noncash dividend.
In the event that CITGO should cease to be part of the consolidated federal
income tax return, any amounts included in shareholder's equity under this
agreement are required to be settled between the parties in cash. At December
31, 1999, CITGO has income taxes payable of $24 million included in other
current liabilities. At December 31, 1998, CITGO had income taxes receivable of
$12 million included in prepaid expenses and a $5 million receivable from PDV
America included in due from affiliates.


                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K

a.  CERTAIN DOCUMENTS FILED AS PART OF THIS REPORT

    (1) Financial Statements:

<TABLE>
<CAPTION>
                                                                             Page
                                                                             ----
<S>                                                                          <C>
Independent Auditors' Report                                                 F-1
Consolidated Balance Sheets at December 31, 1999 and 1998                    F-2
Consolidated Statements of Income and Comprehensive Income for
   the years ended December 31, 1999, 1998 and 1997                          F-3
Consolidated Statements of Shareholder's Equity for the years
   ended December 31, 1999, 1998 and 1997                                    F-4
Consolidated Statements of Cash Flows for the years ended
   December 31, 1999, 1998 and 1997                                          F-5
Notes to Consolidated Financial Statements                                   F-7
</TABLE>

    (2) Exhibits:

        The Exhibit Index in part c. below lists the exhibits that are filed as
        part of, or incorporated by reference into, this report.

b.  REPORTS ON FORM 8-K

    NONE.

                                       26

<PAGE>   29


c.  EXHIBITS

Exhibit
Number
-------

   *3.1           Certificate of Incorporation, Certificate of Amendment of
                  Certificate of Incorporation and By-laws of CITGO Petroleum
                  Corporation.

   *4.1           Indenture, dated as of May 1, 1996, between CITGO Petroleum
                  Corporation and the First National Bank of Chicago, relating
                  to the 7 7/8% Senior Notes due 2006 of CITGO Petroleum
                  Corporation.

   *4.2           Form of Senior Note (included in Exhibit 4.1).

  **10.1          Crude Supply Agreement between CITGO Petroleum Corporation and
                  Petroleos de Venezuela, S.A., dated as of September 30, 1986.

  **10.2          Supplemental Crude Supply Agreement dated as of September 30,
                  1986 between CITGO Petroleum Corporation and Petroleos de
                  Venezuela, S.A.

  **10.3          Crude Oil and Feedstock Supply Agreement dated as of March 31,
                  1987 between Champlin Refining Company and Petroleos de
                  Venezuela, S.A.

  **10.4          Supplemental Crude Oil and Feedstock Supply Agreement dated as
                  of March 31, 1987 between Champlin Refining Company and
                  Petroleos de Venezuela, S.A.

  **10.5          Contract for the Purchase/Sale of Boscan Crude Oil dated as of
                  June 2, 1993 between Tradecal, S.A. and CITGO Asphalt Refining
                  Company.

  **10.6          Restated Contract for the Purchase/Sale of Heavy/Extra Heavy
                  Crude Oil dated December 28, 1990 among Maraven, S.A.,
                  Lagoven, S.A. and Seaview Oil Company.

  **10.7          Sublease Agreement dated as of March 31, 1987 between Champlin
                  Petroleum Company, Sublessor, and Champlin Refining Company,
                  Sublessee.

  **10.8          Operating Agreement dated as of May 1, 1984 among Cit-Con Oil
                  Corporation, CITGO Petroleum Corporation and Conoco, Inc.

  **10.9          Amended and Restated Limited Liability Company Regulations of
                  LYONDELL-CITGO Refining Company, Ltd., dated July 1, 1993.

  **10.10         Contribution Agreement between Lyondell Petrochemical Company
                  and LYONDELL-CITGO Refining Company, Ltd. and Petroleos de
                  Venezuela, S.A.

  **10.11         Crude Oil Supply Agreement between LYONDELL-CITGO Refining
                  Company, Ltd. and Lagoven, S.A. dated as of May 5, 1993.

  **10.12         Supplemental Supply Agreement dated as of May 5, 1993 between
                  LYONDELL-CITGO Refining Company, Ltd. and Petroleos de
                  Venezuela, S.A.

  **10.13         Tax Allocation Agreement dated as of June 24, 1993 among PDV
                  America, Inc., VPHI Midwest, Inc., CITGO Petroleum Corporation
                  and PDV USA, Inc., as amended.

  **10.14         CITGO Credit Facility.

   *10.15(i)      First Amendment to the Second Amended and Restated Senior Term
                  Loan Agreement, by and between CITGO Petroleum Corporation and
                  Bank of America National Trust and Savings Association et al,
                  dated as of February 15, 1994.


                                       27

<PAGE>   30


   *10.15(ii)     Second Amendment to Second Amended and Restated Senior Term
                  Loan Agreement by and among CITGO Petroleum Corporation and
                  Bank of America Illinois et al, dated as of October 21, 1994.

   *10.15(iii)    First Amendment to the Second Amended and Restated Senior
                  Revolving Credit Facility Agreement by and among CITGO
                  Petroleum Corporation and Bank of America National Trust and
                  Savings Association et al, dated as of February 15, 1994.

   *10.15(iv)     Second Amendment to Second Amended and Restated Senior
                  Revolving Credit Facility Agreement by and among CITGO
                  Petroleum Corporation and Bank of America Illinois et al,
                  dated as of October 21, 1994.

   *10.16         Master Shelf Agreement (1994) by and between Prudential
                  Insurance Company of America and CITGO Petroleum Corporation
                  ($100,000,000), dated March 4, 1994.

   *10.17(i)      Letter Agreement by and between the Company and Prudential
                  Insurance Company of America, dated March 4, 1994.

   *10.17(ii)     Letter Amendment No. 1 to Master Shelf Agreement with
                  Prudential Insurance company of America, dated November 14,
                  1994.

  **10.18         CITGO Senior Debt Securities (1991) Agreement.

   *10.19         CITCON Credit Agreement between CITCON Oil Corporation and The
                  Chase Manhattan Bank N.A., as Agent, dated as of April 30,
                  1992.

   *10.20(i)      First Amendment to the CITCON Credit Agreement, between CITCON
                  Oil Corporation and The Chase Manhattan Bank (National
                  Association), dated as of June 30, 1992.

   *10.20(ii)     Second Amendment to the CITCON Credit Agreement, between
                  CITCON Oil Corporation and The Chase Manhattan Bank (National
                  Association), dated as of March 31, 1994.

   *10.20(iii)    Third Amendment to the CITCON Credit Agreement, between CITCON
                  Oil Corporation and The Chase Manhattan Bank (National
                  Association), dated as of June 10, 1994.

 ***10.21         Selling Agency Agreement dated as of October 28, 1997 among
                  CITGO Petroleum Corporation, Salomon Brothers Inc. and Chase
                  Securities Inc.

****10.22         $150,000,000 Credit Agreement dated May 13, 1998.

****10.23         $400,000,000 Credit Agreement dated May 13, 1998.

****10.24         Limited Partnership Agreement of LYONDELL-CITGO Refining LP,
                  dated December 31, 1998.

    12.1          Computation of Ratio of Earnings to Fixed Charges.

    23.1          Consent of Independent Auditors.

    27            Financial Data Schedule (filed electronically only).
-------------
    *  Previously filed in connection with the Registrant's Report on Form 10,
       Registration No. 333-3226.

   **  Incorporated by reference to the Registration Statement on Form F-1 of
       PDV America, Inc. (No. 33-63742).

  ***  Incorporated by reference to the Registrant's Report on Form 8-K filed
       with the Commission on November 18, 1997.

****   Incorporated by reference to the Registrant's Report on Form 10-K filed
       with the Commission on March 17, 1999.

                                       28

<PAGE>   31


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                         CITGO PETROLEUM CORPORATION


                                                /s/  R. M. Bright
                                         -------------------------------------
                                                     R. M. Bright
                                         Controller (Chief Accounting Officer)

Date: March 24, 2000


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 in
the capacities and on the dates indicated.

<TABLE>
<CAPTION>

                Signatures                                        Title                        Date
                ----------                                        -----                        ----
<S>                                                    <C>                                <C>
By       /s/      CARLOS JORDA                         Chairman of the Board and          March 24, 2000
  ------------------------------------------           Director
                  Carlos Jorda


By       /s/      AIRES BARRETO                        Director                           March 24, 2000
  ------------------------------------------
                  Aires Barreto


By       /s/      ALEX CARDENAS                        Director                           March 24, 2000
  ------------------------------------------
                  Alex Cardenas


By       /s/      LUIS CENTENO                         Director                           March 24, 2000
  ------------------------------------------
                  Luis Centeno


By       /s/      DAVID J. TIPPECONNIC                 President, Chief Executive         March 24, 2000
  ------------------------------------------           Officer and Director
                  David J. Tippeconnic


By       /s/      EZRA C. HUNT                         Senior Vice President and          March 24, 2000
  ------------------------------------------           Chief Financial Officer
                  Ezra C. Hunt
</TABLE>

                                       29

<PAGE>   32





INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Shareholder of
   CITGO Petroleum Corporation:

We have audited the accompanying consolidated balance sheets of CITGO Petroleum
Corporation and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of income and comprehensive income, shareholder's equity
and cash flows for each of the three years in the period ended December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of CITGO Petroleum Corporation and
subsidiaries at December 31, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999 in conformity with generally accepted accounting principles.



Deloitte & Touche LLP

Tulsa, Oklahoma
February 11, 2000




                                      F-1
<PAGE>   33



CITGO PETROLEUM CORPORATION

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                                       DECEMBER 31,
                                                                                             -------------------------------
                                                                                                   1999             1998
<S>                                                                                          <C>              <C>
ASSETS

CURRENT ASSETS:
   Cash and cash equivalents                                                                 $      95,780    $      30,338
   Accounts receivable, net                                                                      1,004,268          540,501
   Due from affiliates                                                                              37,860           33,780
   Inventories                                                                                     953,153          719,625
   Deferred income taxes                                                                              --             65,234
   Prepaid expenses and other                                                                        7,136           18,317
                                                                                             -------------    -------------
           Total current assets                                                                  2,098,197        1,407,795

PROPERTY, PLANT AND EQUIPMENT - Net                                                              2,877,305        2,860,427

RESTRICTED CASH                                                                                      3,015            9,436

INVESTMENTS IN AFFILIATES                                                                          734,822          781,481

OTHER ASSETS                                                                                       193,946          195,113
                                                                                             -------------    -------------

                                                                                             $   5,907,285    $   5,254,252
                                                                                             =============    =============

LIABILITIES AND SHAREHOLDER'S EQUITY

CURRENT LIABILITIES:
   Short-term bank loans                                                                     $      16,000    $      37,000
   Accounts payable                                                                                632,295          384,532
   Payables to affiliates                                                                          381,404          141,607
   Taxes other than income                                                                         218,503          219,642
   Other                                                                                           192,579          209,327
   Current portion of long-term debt                                                                47,078           47,078
   Current portion of capital lease obligation                                                      16,356           14,660
                                                                                             -------------    -------------
           Total current liabilities                                                             1,504,215        1,053,846

LONG-TERM DEBT                                                                                   1,392,222        1,259,270

CAPITAL LEASE OBLIGATION                                                                            85,570          101,926

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS                                                        212,871          200,281

OTHER NONCURRENT LIABILITIES                                                                       197,024          219,466

DEFERRED INCOME TAXES                                                                              521,751          543,464

MINORITY INTEREST                                                                                   29,710           29,559

COMMITMENTS AND CONTINGENCIES (NOTE 13)

SHAREHOLDER'S EQUITY:
   Common stock - $1.00 par value, 1,000 shares authorized, issued and outstanding                       1                1
   Additional capital                                                                            1,312,616        1,312,616
   Retained earnings                                                                               654,519          533,823
   Accumulated other comprehensive income                                                           (3,214)            --
                                                                                             -------------    -------------
           Total shareholder's equity                                                            1,963,922        1,846,440
                                                                                             -------------    -------------

                                                                                             $   5,907,285    $   5,254,252
                                                                                             =============    =============
</TABLE>


See notes to consolidated financial statements.





                                      F-2
<PAGE>   34



CITGO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                    1999             1998              1997
<S>                                                            <C>              <C>              <C>
REVENUES:
   Net sales                                                   $  13,127,443    $  10,747,577    $  13,369,808
   Sales to affiliates                                               189,778          164,144          221,495
                                                               -------------    -------------    -------------
                                                                  13,317,221       10,911,721       13,591,303

   Equity in earnings (losses) of affiliates                          21,348           77,105           64,460
   Other income (expense), net                                       (16,511)          (8,185)         (10,535)
                                                               -------------    -------------    -------------
                                                                  13,322,058       10,980,641       13,645,228
                                                               -------------    -------------    -------------

COST OF SALES AND EXPENSES:
   Cost of sales and operating expenses (including
      purchases of $5,947,449, $4,318,958 and
      $4,791,307 from affiliates)                                 12,796,596       10,340,219       13,019,754
   Selling, general and administrative expenses                      220,489          242,496          200,777
   Interest expense, excluding capital lease                          83,933           85,691          109,895
   Capital lease interest charge                                      12,715           14,235           15,597
   Minority interest                                                     151            1,223            1,706
                                                               -------------    -------------    -------------
                                                                  13,113,884       10,683,864       13,347,729
                                                               -------------    -------------    -------------

INCOME BEFORE INCOME TAXES                                           208,174          296,777          297,499

INCOME TAXES                                                          61,690          102,787           90,955
                                                               -------------    -------------    -------------

NET INCOME                                                           146,484          193,990          206,544

OTHER COMPREHENSIVE INCOME -
   Minimum pension liability adjustment, net of deferred
      tax benefit of $2,012                                           (3,214)            --               --
                                                               -------------    -------------    -------------

COMPREHENSIVE INCOME                                           $     143,270    $     193,990    $     206,544
                                                               =============    =============    =============
</TABLE>


See notes to consolidated financial statements.






                                      F-3
<PAGE>   35


CITGO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                                Accumulated
                                                  Common Stock                                     Other           Total
                                                 --------------   Additional       Retained     Comprehensive   Shareholder's
                                                  Shares Amount     Capital        Earnings        Income           Equity

<S>                                              <C>      <C>     <C>           <C>            <C>            <C>
BALANCE, JANUARY 1, 1997                              1   $   1   $ 1,235,009   $   635,326    $      --      $ 1,870,336

   Net income                                      --      --            --         206,544           --          206,544

   Capital contributions received                  --      --          20,000          --             --           20,000

   Noncash dividend paid                           --      --            --         (10,037)          --          (10,037)

   Dividend paid                                   --      --            --          (6,000)                       (6,000)
                                                  -----   -----   -----------   -----------    -----------    -----------

BALANCE, DECEMBER 31, 1997                            1       1     1,255,009       825,833           --        2,080,843

   Net income                                      --      --            --         193,990           --          193,990

   Capital contributions received                  --      --          50,000          --             --           50,000

   Noncash capital contributions
      received                                     --      --           7,607          --             --            7,607

   Dividends paid                                  --      --            --        (486,000)          --         (486,000)
                                                  -----   -----   -----------   -----------    -----------    -----------

BALANCE, DECEMBER 31, 1998                            1       1     1,312,616       533,823           --        1,846,440

   Net income                                      --      --            --         146,484           --          146,484

   Other comprehensive income -
      Minimum pension
      liability adjustment                         --      --            --            --           (3,214)        (3,214)

   Noncash dividend paid                           --      --            --         (10,788)          --          (10,788)

   Dividend paid                                   --      --            --         (15,000)          --          (15,000)
                                                  -----   -----   -----------   -----------    -----------    -----------

BALANCE, DECEMBER 31, 1999                            1   $   1   $ 1,312,616   $   654,519    $    (3,214)   $ 1,963,922
                                                  =====   =====   ===========   ===========    ===========    ===========
</TABLE>


See notes to consolidated financial statements.






                                      F-4
<PAGE>   36



CITGO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                              1999            1998           1997
<S>                                                                      <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                            $   146,484    $   193,990    $   206,544
   Adjustments to reconcile net income to net cash provided by
      operating activities:
      Depreciation and amortization                                          233,747        222,191        210,790
      Provision for losses on accounts receivable                             15,110         13,826         17,827
      Loss (gain) on sale of investments                                       1,616         (2,590)          --
      Deferred income taxes                                                   49,349         59,421         60,617
      Distributions in excess of equity in earnings of affiliates             80,660         44,939         27,282
      Inventory adjustment to market                                            --          159,000           --
      Other adjustments                                                       12,662          2,062          7,997
      Changes in operating assets and liabilities:
         Accounts receivable and due from affiliates                        (482,957)        93,611        332,240
         Inventories                                                        (233,528)       (21,216)       (24,407)
         Prepaid expenses and other current assets                            11,182        (10,481)         4,477
         Accounts payable and other current liabilities                      456,568       (126,290)      (148,608)
         Other assets                                                        (58,759)       (51,879)       (74,709)
         Other liabilities                                                   (14,931)         6,910         27,158
                                                                         -----------    -----------    -----------
           Total adjustments                                                  70,719        389,504        440,664
                                                                         -----------    -----------    -----------
           Net cash provided by operating activities                         217,203        583,494        647,208
                                                                         -----------    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                                                     (227,167)      (199,988)      (243,875)
   Proceeds from sales of property, plant and equipment                       10,524          3,432         12,295
   Decrease (increase) in restricted cash                                      6,421         (2,516)         2,449
   Investments in LYONDELL-CITGO Refining LP                                    --             --          (45,635)
   Loans to LYONDELL-CITGO Refining LP                                       (24,600)       (19,800)       (16,509)
   Proceeds from sale of investments                                           4,980          7,160           --
   Investments in and advances to other affiliates                            (4,212)        (3,247)        (2,442)
                                                                         -----------    -----------    -----------
           Net cash used in investing activities                            (234,054)      (214,959)      (293,717)
                                                                         -----------    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net (repayments of) proceeds from short-term bank loans                   (21,000)        34,000        (50,000)
   Net proceeds from (repayments of) revolving bank loans                    180,000         30,000       (215,000)
   Payments on term bank loan                                                   --          (58,823)       (29,412)
   Payments on private placement senior notes                                (39,935)       (58,686)       (58,685)
   (Payments on) proceeds from taxable bonds                                 (25,000)       100,000           --
   Proceeds from issuance of tax-exempt bonds                                 25,000         47,200           --
   Payments of capital lease obligations                                     (14,660)       (13,140)       (11,778)
   Repayments of other debt                                                   (7,112)        (7,111)        (5,109)
   Capital contributions received                                               --           50,000         20,000
   Dividends paid                                                            (15,000)      (486,000)        (6,000)
                                                                         -----------    -----------    -----------
           Net cash provided by (used in) financing activities                82,293       (362,560)      (355,984)
                                                                         -----------    -----------    -----------

                                                                                                       (Continued)
</TABLE>







                                      F-5
<PAGE>   37



CITGO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                               1999           1998          1997

<S>                                                       <C>            <C>           <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS          $    65,442    $     5,975   $    (2,493)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                 30,338         24,363        26,856
                                                          -----------    -----------   -----------

CASH AND CASH EQUIVALENTS, END OF PERIOD                  $    95,780    $    30,338   $    24,363
                                                          ===========    ===========   ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION:
   Cash paid during the period for:
      Interest, net of amounts capitalized                $    94,907    $    99,872   $   126,879
                                                          ===========    ===========   ===========

      Income taxes, net of refund of $30,488 in 1999      $   (16,428)   $    60,360   $    41,807
                                                          ===========    ===========   ===========

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
   ACTIVITIES -
   Investment in LYONDELL-CITGO Refining LP (Note 3)      $   (32,654)   $      --     $      --
                                                          ===========    ===========   ===========

SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING
   ACTIVITIES:
   Noncash capital contribution                           $      --      $     7,607   $      --
                                                          ===========    ===========   ===========
   Noncash dividend                                       $   (10,788)   $      --     $   (10,037)
                                                          ===========    ===========   ===========

                                                                                       (Concluded)
</TABLE>


See notes to consolidated financial statements.





                                      F-6
<PAGE>   38




CITGO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------


1.   SIGNIFICANT ACCOUNTING POLICIES

     DESCRIPTION OF BUSINESS - CITGO Petroleum Corporation ("CITGO" or the
     "Company") is a subsidiary of PDV America, Inc. ("PDV America"), an
     indirect wholly owned subsidiary of Petroleos de Venezuela, S.A. ("PDVSA"),
     the national oil company of the Bolivarian Republic of Venezuela.

     CITGO manufactures or refines and markets quality transportation fuels as
     well as lubricants, refined waxes, petrochemicals, asphalt and other
     industrial products. CITGO owns and operates two modern, highly complex
     crude oil refineries (Lake Charles, Louisiana, and Corpus Christi, Texas)
     and two asphalt refineries (Paulsboro, New Jersey, and Savannah, Georgia)
     with a combined aggregate rated crude oil refining capacity of 582 thousand
     barrels per day ("MBPD"). CITGO also owns a minority interest in
     LYONDELL-CITGO Refining LP, a limited partnership (formerly a limited
     liability company) that owns and operates a refinery in Houston, Texas,
     with a rated crude oil refining capacity of 265 MBPD. CITGO also operates a
     167 MBPD refinery in Lemont, Illinois, owned by PDV Midwest Refining L.L.C.
     ("PDVMR"), a wholly owned subsidiary of PDV America. CITGO's consolidated
     financial statements also include accounts relating to a 65 percent owned
     lubricant and wax plant, pipelines, and equity interests in pipeline
     companies and petroleum storage terminals.

     CITGO's transportation fuel customers include primarily CITGO branded
     wholesale marketers, convenience stores and airlines located mainly east of
     the Rocky Mountains. Asphalt is generally marketed to independent paving
     contractors on the East Coast of the United States. Lubricants are sold to
     independent marketers, mass marketers and industrial customers.
     Petrochemical feedstocks and industrial products are sold to various
     manufacturers and industrial companies throughout the United States.
     Petroleum coke is sold primarily in international markets.

     PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
     the accounts of CITGO and its subsidiaries (collectively referred to as the
     "Company"). All subsidiaries are wholly owned except for Cit-Con Oil
     Corporation ("Cit-Con"), which is 65 percent owned. All material
     intercompany transactions and accounts have been eliminated.

     The Company's investments in less than majority-owned affiliates are
     accounted for by the equity method. The excess of the carrying value of the
     investments over the equity in the underlying net assets of the affiliates
     is amortized on a straight-line basis over 40 years, which is based upon
     the estimated useful lives of the affiliates' assets.

     ESTIMATES, RISKS AND UNCERTAINTIES - The preparation of financial
     statements in conformity with generally accepted accounting principles
     requires management to make estimates and assumptions that affect the
     reported amounts of assets and liabilities and disclosure of contingent
     assets and liabilities at the date of the financial statements and the
     reported amounts of revenues and expenses during the reporting period.
     Actual results could differ from those estimates.

     CITGO's operations can be influenced by domestic and international
     political, legislative, regulatory and legal environments. In addition,
     significant changes in the prices or availability of crude oil and refined
     products could have a significant impact on CITGO's results of operations
     for any particular year.







                                      F-7
<PAGE>   39


     IMPAIRMENT OF LONG-LIVED ASSETS - The Company periodically evaluates the
     carrying value of long-lived assets to be held and used when events and
     circumstances warrant such a review. The carrying value of a long-lived
     asset is considered impaired when the separately identifiable anticipated
     undiscounted net cash flow from such asset is less than its carrying value.
     In that event, a loss is recognized based on the amount by which the
     carrying value exceeds the fair value of the long-lived asset. Fair value
     is determined primarily using the anticipated net cash flows discounted at
     a rate commensurate with the risk involved. Losses on long-lived assets to
     be disposed of are determined in a similar manner, except that fair values
     are reduced for disposal costs.

     REVENUE RECOGNITION - Revenue from sales of products is recognized upon
     transfer of title, based upon the terms of delivery.

     SUPPLY AND MARKETING ACTIVITIES - The Company engages in the buying and
     selling of crude oil to supply its refineries. The net results of this
     activity are recorded in cost of sales. The Company also engages in the
     buying and selling of refined products to facilitate the marketing of its
     refined products. The results of this activity are recorded in cost of
     sales and sales.

     Refined product exchange transactions that do not involve the payment or
     receipt of cash are not accounted for as purchases or sales. Any resulting
     volumetric exchange balances are accounted for as inventory in accordance
     with the Company's last-in, first-out ("LIFO") inventory method. Exchanges
     that are settled through payment or receipt of cash are accounted for as
     purchases or sales.

     EXCISE TAXES - The Company collects excise taxes on sales of gasoline and
     other motor fuels. Excise taxes of approximately $3.1 billion, $3 billion,
     and $3.2 billion were collected from customers and paid to various
     governmental entities in 1999, 1998, and 1997, respectively. Excise taxes
     are not included in sales.

     CASH AND CASH EQUIVALENTS - Cash and cash equivalents consist of
     highly-liquid short-term investments and bank deposits with initial
     maturities of three months or less.

     RESTRICTED CASH - Restricted cash represents highly-liquid, short-term
     investments held in trust accounts in accordance with a tax-exempt bond
     agreement. Funds are released solely for financing construction of
     environmental facilities as defined in the bond agreements.

     INVENTORIES - Crude oil and refined product inventories are stated at the
     lower of cost or market and cost is determined using the LIFO method.
     Materials and supplies are valued using the average cost method.

     PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is reported
     at cost, less accumulated depreciation. Depreciation is based upon the
     estimated useful lives of the related assets using the straight-line
     method. Depreciable lives are generally as follows: buildings and
     leaseholds - 10 to 24 years; machinery and equipment - 5 to 24 years; and
     vehicles - 3 to 10 years.

     Upon disposal or retirement of property, plant and equipment, the cost and
     related accumulated depreciation are removed from the accounts and any
     resulting gain or loss is recognized in income.

     The Company capitalizes interest on projects when construction entails
     major expenditures over extended time periods. Such interest is allocated
     to property, plant and equipment and amortized over the estimated useful
     lives of the related assets. Interest capitalized totaled $7 million, $5
     million, and $7 million during 1999, 1998, and 1997, respectively.






                                      F-8
<PAGE>   40




     COMMODITY AND INTEREST RATE DERIVATIVES - The Company uses commodity and
     financial instrument derivatives to manage defined commodity price and
     interest rate risks arising out of the Company's core business activities.
     The Company has only limited involvement with other derivative financial
     instruments and does not use them for trading purposes.

     The Company enters into petroleum futures contracts, options and other over
     the counter commodity derivatives, primarily to hedge a portion of the
     price risk associated with crude oil and refined products. In order for a
     transaction to qualify for hedge accounting, the Company requires that the
     item to be hedged exposes the Company to price risk and that the commodity
     contract reduces that risk and is designated as a hedge. The high
     correlation between price movements of a product and the commodity contract
     in that product is well demonstrated in the petroleum industry and,
     generally, the Company relies on those historical relationships and on
     periodic comparisons of market price changes to price changes of futures
     and options contracts accounted for as hedges. Gains or losses on contracts
     which qualify as hedges are recognized when the related inventory is sold
     or the hedged transaction is consummated. Changes in the market value of
     commodity derivatives which are not hedges are recorded as gains or losses
     in the period in which they occur.

     The Company also enters into various interest rate swap agreements to
     manage its risk related to interest rate changes on its debt. Premiums paid
     for purchased interest rate swap agreements are amortized to interest
     expense over the terms of the agreements. Unamortized premiums are included
     in other assets. The interest rate differentials received or paid by the
     Company related to these agreements are recognized as adjustments to
     interest expense over the term of the agreements. Gains or losses on
     terminated swap agreements are either amortized over the original term of
     the swap agreement if the hedged borrowings remain in place, or are
     recognized immediately if the hedged borrowings are no longer held.

     In June 1998, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standards No. 133, "Accounting for Derivative
     Instruments and Hedging Activities" ("SFAS No. 133"). The statement
     establishes accounting and reporting standards for derivative instruments
     and for hedging activities. It requires that an entity recognize all
     derivatives, at fair value, as either assets or liabilities in the
     statement of financial position with an offset either to shareholder's
     equity and comprehensive income or income depending upon the classification
     of the derivative. The Company has not determined the impact on its
     financial statements that may result from adoption of SFAS No. 133, which
     is required no later than January 1, 2001.

     REFINERY MAINTENANCE - Costs of major refinery turnaround maintenance are
     charged to operations over the estimated period between turnarounds.
     Turnaround periods range approximately from one to seven years. Unamortized
     costs are included in other assets. Amortization of refinery turnaround
     costs is included in depreciation and amortization expense. Amortization
     was $47 million, $47 million, and $49 million for 1999, 1998, and 1997,
     respectively. Ordinary maintenance is expensed as incurred.

     The Securities and Exchange Commission is considering issuing a notice
     which will require companies to expense the non-capital portion of major
     maintenance costs as incurred. The notice will require that any existing
     unamortized non-capital maintenance costs be expensed immediately. The
     Company estimates that the pre-tax charge to income from this change will
     be approximately $80 million. It is likely that this change will be
     required by June 30, 2000 and will be reported as a cumulative effect of an
     accounting change in the consolidated statement of income.

     ENVIRONMENTAL EXPENDITURES - Environmental expenditures that relate to
     current or future revenues are expensed or capitalized as appropriate.
     Expenditures that relate to an existing condition caused by past operations
     and that do not contribute to current or future revenue generation are
     expensed. Liabilities




                                      F-9
<PAGE>   41




     are recorded when environmental assessments and/or cleanups are probable
     and the costs can be reasonably estimated. Environmental liabilities are
     not discounted to their present value. Subsequent adjustments to estimates,
     to the extent required, may be made as more refined information becomes
     available.

     INCOME TAXES - The Company is included in the consolidated U.S. federal
     income tax return filed by PDV Holding, Inc., the direct parent of PDV
     America. The Company's current and deferred income tax expense has been
     computed on a stand-alone basis using an asset and liability approach.

2.   REFINERY AGREEMENTS

     Effective May 1, 1997, CITGO became the operator of a refinery owned by
     PDVMR, a subsidiary of PDV America. CITGO also purchases the products
     produced at the refinery (Note 4).

     An affiliate of PDVSA acquired a 50 percent equity interest in a refinery
     in Chalmette, Louisiana ("Chalmette") in October 1997, and has assigned to
     CITGO its option to purchase up to 50 percent of the refined products
     produced at the refinery through December 31, 2000 (Note 4). CITGO
     exercised this option on November 1, 1997, and acquired approximately 66
     MBPD and 65 MBPD of refined products from the refinery during 1999 and
     1998, respectively, approximately one-half of which was gasoline.

     In October 1998, an affiliate of PDVSA acquired a 50 percent equity
     interest in a joint venture that owns and operates a refinery in St. Croix,
     U.S. Virgin Islands ("HOVENSA") and has the right under a product sales
     agreement to assign periodically to CITGO, or other related parties, its
     option to purchase 50% of the refined products produced by HOVENSA (less a
     certain portion of such products that HOVENSA will market directly in the
     local and Caribbean markets). In addition, under the product sales
     agreement, the PDVSA affiliate has appointed CITGO as its agent in
     designating which of its affiliates shall from time to time take deliveries
     of the refined products available to it. The product sales agreement will
     be in effect for the life of the joint venture, subject to termination
     events based on default or mutual agreement (Note 4). Pursuant to the above
     arrangement, CITGO acquired approximately 118 MBPD and 120 MBPD of refined
     products from HOVENSA during 1999 and 1998, respectively, approximately
     one-half of which was gasoline.

3.   INVESTMENT IN LYONDELL-CITGO REFINING LP

     LYONDELL-CITGO Refining LP ("LYONDELL-CITGO") owns and operates a 265 MBPD
     refinery in Houston, Texas. LYONDELL-CITGO was formed in 1993 by
     subsidiaries of CITGO and Lyondell Chemical Company ("Lyondell"), referred
     to as the Owners. CITGO contributed cash for a participation interest and
     other commitments related to LYONDELL-CITGO's refinery enhancement project
     and Lyondell contributed the Houston refinery and related assets for the
     remaining participation interest. The refinery enhancement project to
     increase the refinery's heavy crude oil high conversion capacity was
     substantially completed at the end of 1996 with an in-service date of March
     1, 1997. The heavy crude oil processed by the Houston refinery is supplied
     by a subsidiary of PDVSA under a long-term crude oil supply contract that
     expires in 2017. In April 1998, the crude oil supplier exercised its
     contractual rights and reduced deliveries of crude oil to LYONDELL-CITGO.
     LYONDELL-CITGO has been required to obtain alternative sources of crude oil
     supply in replacement which has resulted in lower operating margins. CITGO
     purchases substantially all of the refined products produced at the Houston
     refinery under a long-term contract (Note 4).

     CITGO's participation interest in LYONDELL-CITGO was approximately 41% at
     December 31, 1999. CITGO has a one-time option to increase, for an
     additional investment, its participation interest to 50 percent. This
     option may be exercised after January 1, 2000 but not later than September
     30, 2000.




                                      F-10
<PAGE>   42




     CITGO loaned $24.6 million, $19.8 million and $16.5 million to
     LYONDELL-CITGO during 1999, 1998 and 1997, respectively. The notes bear
     interest at market rates which were approximately 6.7%, 5.9% and 5.9% at
     December 31, 1999, 1998 and 1997, and are due July 1, 2003. These notes are
     included in other assets in the accompanying consolidated balance sheets.
     Effective December 31, 1999, CITGO converted $32.7 million of these notes
     to investments in LYONDELL-CITGO.

     CITGO accounts for its investment in LYONDELL-CITGO using the equity method
     of accounting and records its share of the net earnings of LYONDELL-CITGO
     based on allocations of income agreed to by the Owners. Information on
     CITGO's investment in LYONDELL-CITGO follows:

<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                    ---------------------------------------
                                                        1999          1998           1997
                                                                  (000's OMITTED)
<S>                                                 <C>           <C>           <C>
Carrying value of investment                        $   560,227   $   597,373   $   630,060
Notes receivable                                         28,255        36,309        16,509
Participation interest                                       41%           41%           42%
Equity in net income                                $       924   $    58,827   $    44,429
Cash distributions received                              70,724        91,763        64,734

Summary of financial position:
   Current assets                                   $   219,000   $   197,000   $   243,000
   Noncurrent assets                                  1,406,000     1,440,000     1,438,000
   Current liabilities                                  697,000       203,000       293,000
   Noncurrent liabilities                               316,000       785,000       715,000
   Member's equity                                      612,000       649,000       673,000

Summary of operating results:
   Revenue                                          $ 2,571,000   $ 2,055,000   $ 2,697,000
   Gross profit                                         133,000       291,000       255,000
   Net income                                            24,000       169,000       147,000
</TABLE>


     LYONDELL-CITGO has a $450 million credit facility that is due on May 5,
     2000. The Owners are currently reviewing financing alternatives to address
     this situation. However, there is no agreement on a definitive plan to
     replace this facility and LYONDELL-CITGO does not have the funds available
     to repay the facility when it becomes due. As a result of this
     circumstance, CITGO management conducted a review to determine if its
     ability to realize the carrying value of its investment in LYONDELL-CITGO
     has been impaired. Based upon this review, CITGO management has determined
     that no such impairment has occurred.

4.   RELATED PARTY TRANSACTIONS

     The Company purchases approximately one-half of the crude oil processed in
     its refineries from subsidiaries of PDVSA under long-term supply
     agreements. These supply agreements extend through the year 2006 for the
     Lake Charles refinery, 2010 for the Paulsboro refinery, 2012 for the Corpus
     Christi refinery and 2013 for the Savannah refinery. The Company purchased
     $1.7 billion, $1.4 billion, and $2 billion of crude oil, feedstocks and
     other products from wholly owned subsidiaries of PDVSA in 1999, 1998, and
     1997, respectively, under these and other purchase agreements. During 1999,
     PDVSA deliveries of crude oil to CITGO were less than contractual base
     volumes due to the PDVSA declaration of force majeure pursuant to all four
     long-term crude oil supply contracts described above. As a result, the
     Company has been required to obtain alternative sources of crude oil, which
     has resulted in lower operating margins. It is not possible to forecast the
     future financial impacts of these reductions in crude





                                      F-11
<PAGE>   43


     oil deliveries on CITGO's margins because the correlation between crude oil
     and refined product prices is not constant over time and the duration of
     force majeure cannot be predicted.

     Additionally, during the second half of 1999, PDVSA did not deliver naptha
     pursuant to one of the contracts and has made contractually specified
     payments in lieu thereof.

     The crude oil supply contracts incorporate formula prices based on the
     market value of a number of refined products deemed to be produced from
     each particular crude oil, less (i) certain deemed refining costs
     adjustable for inflation, (ii) certain actual costs, including
     transportation charges, import duties and taxes and (iii) a deemed margin,
     which varies according to the grade of crude oil. At December 31, 1999 and
     1998, $178 million and $74 million, respectively, were included in payables
     to affiliates as a result of these transactions.

     The Company also purchases refined products from various other affiliates
     including LYONDELL-CITGO, PDVMR, HOVENSA and Chalmette, under long-term
     contracts. These agreements incorporate various formula prices based on
     published market prices and other factors. Such purchases totaled $4.3
     billion, $2.9 billion, and $2.8 billion for 1999, 1998, and 1997,
     respectively. At December 31, 1999 and 1998, $196 million and $64 million,
     respectively, were included in payables to affiliates as a result of these
     transactions.

     The Company had refined product, feedstock, and other product sales to
     affiliates of $190 million, $164 million, and $221 million, in 1999, 1998,
     and 1997, respectively. The Company's sales of crude oil to affiliates were
     $37 million, $18 million, and $3 million in 1999, 1998, and 1997,
     respectively. At December 31, 1999 and 1998, $38 million and $34 million,
     respectively, were included in due from affiliates as a result of these and
     related transactions.

     Pursuant to the PDVMR operating agreement (Note 2), on May 1, 1997, CITGO
     became the operator of the PDVMR refinery and employed a substantial number
     of employees previously employed by UNO-VEN and as a result, CITGO assumed
     a liability for postretirement benefits other than pensions (Note 11) of
     approximately $27 million related to those employees. A corresponding
     amount due from PDVMR is included in other assets at December 31, 1999 and
     1998, pending final determination of the method of settlement by PDV
     America. CITGO charges PDVMR a management fee which covers various support
     services ($7 million and $8 million in 1999 and 1998, respectively) which
     is included in other income. PDVMR reimburses CITGO for all payroll
     expenses, including pension and benefit costs, related to CITGO employees
     engaged in the operation of the refinery. Such employee costs and the
     related reimbursements ($55 million and $52 million in 1999 and 1998,
     respectively) are not included in CITGO's cost of sales or revenues.

     Under a separate guarantee of rent agreement, PDVSA has guaranteed payment
     of rent, stipulated loss value and terminating value due under the lease of
     the Corpus Christi refinery facilities described in Note 14. The Company
     has also guaranteed debt of certain affiliates (Note 13).

     The Company and PDV America are parties to a tax allocation agreement that
     is designed to provide PDV America with sufficient cash to pay its
     consolidated income tax liabilities. In 1997, $10 million due from PDV
     America to CITGO under this tax allocation agreement for the 1996 tax year
     was classified as a noncash dividend. In 1998, $7.6 million due from CITGO
     to PDV America under this agreement for the 1997 tax year was classified as
     a noncash contribution of capital. In 1999, $10.8 million due from PDV
     America to CITGO under this agreement for the 1998 tax year was classified
     as a noncash dividend. In the event that CITGO should cease to be part of
     the consolidated federal income tax return, any amounts included in
     shareholder's equity under this agreement are required to be settled
     between the parties in cash. At December 31, 1999, CITGO has income taxes
     payable of $24 million included in other current liabilities. At December
     31, 1998, CITGO had income






                                      F-12
<PAGE>   44


     taxes receivable of $12 million included in prepaid expenses and a $5
     million receivable from PDV America included in due from affiliates.

5.   ACCOUNTS RECEIVABLE

<TABLE>
<CAPTION>
                                                         1999           1998
                                                         (000'S OMITTED)

<S>                                                  <C>            <C>
Trade                                                $   905,875    $   487,627
Credit card                                               93,132         47,096
Other                                                     20,808         22,491
                                                     -----------    -----------
                                                       1,019,815        557,214
Allowance for uncollectible accounts                     (15,547)       (16,713)
                                                     -----------    -----------
                                                     $ 1,004,268    $   540,501
                                                     ===========    ===========
</TABLE>



     Sales are made on account, based on pre-approved unsecured credit terms
     established by CITGO management. The Company also has a proprietary credit
     card program which allows retail consumers to purchase fuel and convenience
     items at CITGO branded outlets. Allowances for uncollectible accounts are
     established based on several factors that include, but are not limited to,
     analysis of specific customers, historical trends, current economic
     conditions and other information.

     The Company has two limited purpose subsidiaries, CITGO Funding Corporation
     and CITGO Funding Corporation II, which have non-recourse agreements to
     sell trade accounts and credit card receivables. Under the terms of the
     agreements, new receivables are added to the pool as collections reduce
     previously sold receivables. The amounts sold at any one time are limited
     to a maximum of $125 million of trade accounts receivable and $150 million
     of credit card receivables. These agreements expire on June 22, 2000 and
     May 8, 2000, respectively, and are renewable for successive one-year terms
     by mutual agreement. Fees and expenses of $15.2 million, $16.1 million and
     $5.8 million related to the agreements were recorded as other expense
     during the years ended December 31, 1999, 1998 and 1997, respectively.

6.   INVENTORIES

<TABLE>
<CAPTION>
                                                             1999         1998
                                                                (000'S OMITTED)

<S>                                                        <C>         <C>
Refined product                                            $ 747,620   $ 539,675
Crude oil                                                    150,092     123,927
Materials and supplies                                        55,441      56,023
                                                           ---------   ---------
                                                           $ 953,153   $ 719,625
                                                           =========   =========
</TABLE>

     Inventories at December 31, 1998, were carried at estimated net market
     value which was $159 million lower than historical cost. At December 31,
     1999, estimated net market values exceeded historical cost by approximately
     $350 million, and accordingly, no write-down was necessary.








                                      F-13
<PAGE>   45


7.   PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                          1999            1998
                                                             (000'S OMITTED)

<S>                                                  <C>             <C>
Land                                                 $    112,266    $    107,961
Buildings and leaseholds                                  489,394         490,780
Machinery and equipment                                 3,203,953       2,972,646
Vehicles                                                   24,468          28,913
Construction in process                                   107,599         163,845
                                                     ------------    ------------
                                                        3,937,680       3,764,145
Accumulated depreciation and amortization              (1,060,375)       (903,718)
                                                     ------------    ------------

                                                     $  2,877,305    $  2,860,427
                                                     ============    ============
</TABLE>



     Depreciation expense for 1999, 1998, and 1997 was $187 million, $176
     million, and $161 million, respectively.

     In 1997, the Company incurred property damages from a fire at its Corpus
     Christi, Texas, refinery (Note 13). Other income (expense) for the year
     ended December 31, 1997 includes $9.4 million of gains from insurance
     recoveries related to this event.

     Other income (expense) includes gains and losses on disposals and
     retirements of property, plant and equipment. Such net losses were
     approximately $13 million, $2 million, and $14 million in 1999, 1998, and
     1997, respectively.

8.   INVESTMENTS IN AFFILIATES

     In addition to LYONDELL-CITGO, the Company's investments in affiliates
     consist of equity interests of 6.8 to 50 percent in joint interest
     pipelines and terminals, including a 13.98 percent interest in Colonial
     Pipeline Company; a 49.5 percent partnership interest in Nelson Industrial
     Steam Company ("NISCO"), which is a qualified cogeneration facility; and a
     49 percent partnership interest in Mount Vernon Phenol Plant. The carrying
     value of these investments exceeded the Company's equity in the underlying
     net assets by approximately $143 million and $151 million at December 31,
     1999 and 1998, respectively.

     At December 31, 1999 and 1998, NISCO had a partnership deficit. CITGO's
     share of this deficit, as a general partner, was $60.3 million and $56.5
     million at December 31, 1999 and 1998, respectively, which is included in
     other noncurrent liabilities in the accompanying consolidated balance
     sheets.

     Information on the Company's investments, including LYONDELL-CITGO,
follows:

<TABLE>
<CAPTION>
                                                                     December 31,
                                                               -----------------------
                                                                   1999        1998
                                                                    (000's OMITTED)

<S>                                                            <C>          <C>
Company's investments in affiliates (excluding NISCO)          $  734,822   $  781,481
Company's equity in net income of affiliates                       21,348       77,105
Dividends and distributions received from affiliates              102,339      122,044
</TABLE>





                                      F-14
<PAGE>   46





         Selected financial information for the affiliates is summarized as
follows:

<TABLE>
<CAPTION>
                                                                                  December 31,
                                                                  ---------------------------------------------
                                                                     1999             1998             1997
                                                                                (000's OMITTED)
<S>                                                               <C>              <C>               <C>
Summary of financial position:
   Current assets                                                 $  469,101       $  464,047        $  511,848
   Noncurrent assets                                               2,853,786        2,817,165         2,830,568
   Current liabilities                                             1,034,181          670,045           627,296
   Noncurrent liabilities                                          1,681,558        1,934,378         2,025,709

Summary of operating results:
   Revenues                                                       $3,559,451       $3,337,449        $4,076,429
   Gross profit                                                      567,749          757,678           628,559
   Net income                                                        237,906          384,810           371,006
</TABLE>


9.   SHORT-TERM BANK LOANS

     As of December 31, 1999, the Company has established $184 million of
     uncommitted, unsecured, short-term borrowing facilities with various banks.
     Interest rates on these facilities are determined daily based upon the
     federal funds' interest rates, and maturity options vary up to 30 days. The
     weighted average interest rates actually incurred in 1999, 1998, and 1997
     were 5.5 percent, 5.8 percent, and 5.9 percent, respectively. The Company
     had $16 million and $37 million of borrowings outstanding under these
     facilities at December 31, 1999 and 1998, respectively.

10.  LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                                          1999             1998
                                                                              (000's OMITTED)

<S>                                                                 <C>              <C>
Revolving bank loan                                                 $     345,000    $     165,000

Senior Notes $200 million face amount, due 2006 with
   interest rate of 7.875%                                                199,806          199,776

Private Placement Senior Notes, due 2000 to 2006 with
   interest rates from 9.03% to 9.30%                                     136,688          176,623

Master Shelf Agreement Senior Notes, due 2002 to
   2009 with interest rates from 7.17% to 8.94%                           260,000          260,000

Tax Exempt Bonds, due 2004 to 2029 with variable
   and fixed interest rates                                               305,520          275,520

Taxable Bonds, due 2026 to 2028 with variable interest rates              178,000          208,000

Cit-Con bank credit agreement                                              14,286           21,429
                                                                    -------------    -------------
                                                                        1,439,300        1,306,348
Current portion of long-term debt                                         (47,078)         (47,078)
                                                                    -------------    -------------
                                                                    $   1,392,222    $   1,259,270
                                                                    =============    =============
</TABLE>





                                      F-15
<PAGE>   47
      On April 15, 1999, CITGO issued $25 million of tax exempt revenue bonds,
      which are due 2029. The proceeds were used to redeem $25 million of the
      taxable Gulf Coast environmental facilities revenue bonds due 2028.

      REVOLVING BANK LOANS - The Company's credit agreement with various banks
      consists of (i) a $400 million, five-year, revolving bank loan maturing in
      May 2003 and (ii) a $150 million, 364-day, revolving bank loan, both of
      which are unsecured and have various borrowing maturities and interest
      rate options. Interest rates on the revolving bank loans were 7.8 percent
      and 7.5 percent at December 31, 1999 and 1998, respectively.

      SHELF REGISTRATION - In April 1996, the Company filed a registration
      statement with the Securities and Exchange Commission relating to the
      shelf registration of $600 million of debt securities that may be offered
      and sold from time to time. In May 1996, the registration became effective
      and CITGO sold a tranche of debt securities with an aggregate offering
      price of $200 million. On October 28, 1997, the Company entered into a
      Selling Agency Agreement with Salomon Brothers Inc. and Chase Securities
      Inc. providing for the sale of up to an additional $235 million in
      aggregate principal amount of notes in tranches from time to time by the
      Company under the shelf registration. No amounts were sold under this
      agreement as of December 31, 1999.

      PRIVATE PLACEMENT - At December 31, 1999, the Company has outstanding
      approximately $137 million of privately placed, unsecured Senior Notes.
      Principal amounts are payable in annual installments in November and
      interest is payable semi-annually in May and November.

      MASTER SHELF AGREEMENT - At December 31, 1999, the Company has outstanding
      $260 million of privately-placed senior notes under an unsecured Master
      Shelf Agreement with an insurance company. The notes have various fixed
      interest rates and maturities.

      COVENANTS - The various agreements above contain certain covenants that,
      depending upon the level of the Company's capitalization and earnings,
      could impose limitations on the Company's ability to pay dividends, incur
      additional debt, place liens on property, and sell fixed assets. The
      Company was in compliance with the debt covenants at December 31, 1999.

      TAX-EXEMPT BONDS - Through state entities, the Company has issued $74.8
      million of industrial development bonds for certain Lake Charles port
      facilities and pollution control equipment and $231 million of
      environmental revenue bonds to finance a portion of the Company's
      environmental facilities at its Lake Charles and Corpus Christi refineries
      and at the LYONDELL-CITGO refinery. Additional credit support for these
      bonds is provided through letters of credit. The bonds bear interest at
      various floating rates which ranged from 4.5 percent to 6.0 percent at
      December 31, 1999, and 4.1 percent to 6.0 percent at December 31, 1998.

      TAXABLE BONDS - Through state entities, the Company has issued and
      currently outstanding $178 million of taxable environmental revenue bonds
      to finance a portion of the Company's environmental facilities at its Lake
      Charles refinery and at the LYONDELL-CITGO refinery. Such bonds are
      secured by letters of credit and have floating interest rates (6.1 percent
      at December 31, 1999 and 5.3 percent at December 31, 1998). At the option
      of the Company and upon the occurrence of certain specified conditions,
      all or any portion of such taxable bonds may be converted to tax-exempt
      bonds. As of December 31, 1999, $17 million of originally issued taxable
      bonds had been converted to tax exempt bonds.


                                      F-16
<PAGE>   48



      CIT-CON BANK CREDIT AGREEMENT - The Cit-Con bank credit agreement consists
      of a term loan collateralized by throughput agreements of the owner
      companies. The loan contains various interest rate options (weighted
      average effective rates of 7.5 percent and 6.7 percent at December 31,
      1999 and 1998, respectively), and requires quarterly principal payments
      through December 2001.

      DEBT MATURITIES - Future maturities of long-term debt as of December 31,
      1999, are: 2000 - $47.1 million, 2001 - $47.1 million, 2002 - $36.4
      million, 2003 - $406.4 million, 2004 - $47.2 million and $855.1 million
      thereafter.

      INTEREST RATE SWAP AGREEMENTS - The Company has entered into the following
      interest rate swap agreements to reduce the impact of interest rate
      changes on its variable interest rate debt:

<TABLE>
<CAPTION>
                                                                                 NOTIONAL PRINCIPAL AMOUNT
                                                                            --------------------------------
                                   EXPIRATION        FIXED RATE                 1999               1998
         VARIABLE RATE INDEX         DATE               PAID                        (000'S OMITTED)

      <S>                              <C>               <C>               <C>               <C>
      One-month LIBOR              May 2000              6.28%              $      25,000     $       25,000
      J. J. Kenny                  May 2000              4.72%                     25,000             25,000
      J. J. Kenny                  February 2005         5.30%                     12,000             12,000
      J. J. Kenny                  February 2005         5.27%                     15,000             15,000
      J. J. Kenny                  February 2005         5.49%                     15,000             15,000
                                                                            -------------     --------------
                                                                            $      92,000     $       92,000
                                                                            =============     ==============
</TABLE>



      Interest expense includes $1.5 million, $1.0 million, and $0.8 million, in
      1999, 1998, and 1997, respectively, related to the net settlements on
      these agreements.

11.   EMPLOYEE BENEFIT PLANS

      EMPLOYEE SAVINGS - The Company sponsors three qualified defined
      contribution retirement and savings plans covering substantially all
      eligible salaried and hourly employees. Participants make voluntary
      contributions to the plans and the Company makes contributions, including
      matching of employee contributions, based on plan provisions. The Company
      expensed $18 million, $19 million, and $19 million, related to its
      contributions to these plans for the years 1999, 1998, and 1997,
      respectively.

      PENSION BENEFITS - The Company sponsors three qualified noncontributory
      defined benefit pension plans, two covering eligible hourly employees and
      one covering eligible salaried employees. The Company also sponsors three
      nonqualified defined benefit plans for certain eligible employees. The
      qualified plans' assets include corporate securities and shares in a fixed
      income mutual fund, two collective funds and a short-term investment fund.
      The nonqualified plans are not funded.

      The Company's policy is to fund the qualified pension plans in accordance
      with applicable laws and regulations and not to exceed the tax-deductible
      limits. The nonqualified plans are funded as necessary to pay retiree
      benefits. The plan benefits for each of the qualified pension plans are
      primarily based on an employee's years of plan service and compensation as
      defined by each plan.

      POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - In addition to pension
      benefits, the Company also provides certain health care and life insurance
      benefits for eligible salaried and hourly employees at retirement. These
      benefits are subject to deductibles, copayment provisions and other
      limitations and are primarily funded on a pay as you go basis. The Company
      reserves the right to change or to terminate the benefits at any time.


                                      F-17
<PAGE>   49

      The following sets forth the changes in benefit obligations and plan
      assets for the pension and postretirement plans for the years ended
      December 31, 1999 and 1998, and the funded status of such plans reconciled
      with amounts reported in the Company's consolidated balance sheets:

<TABLE>
<CAPTION>

                                                    PENSION BENEFITS          OTHER BENEFITS
                                                 ----------------------    ----------------------
                                                    1999        1998          1999        1998
                                                    (000'S OMITTED)           (000'S OMITTED)
      <S>                                        <C>          <C>          <C>          <C>
      CHANGE IN BENEFIT OBLIGATION:
      Benefit obligation at beginning of year    $ 270,382    $ 233,486    $ 195,928    $ 180,406
      Service cost                                  19,554       17,742        6,922        6,610
      Interest cost                                 17,899       16,058       13,040       12,770
      Actuarial (gain) loss                        (39,996)      11,958      (19,540)       1,631
      Benefits paid                                 (9,136)      (8,862)      (7,318)      (5,489)
                                                 ---------    ---------    ---------    ---------
      Benefit obligation at end of year            258,703      270,382      189,032      195,928
                                                 ---------    ---------    ---------    ---------

      Change in plan assets:
      Fair value of plan assets at
       beginning of year                           254,648      221,261          939          889
      Actual return on plan assets                  28,644       38,139           52           50
      Employer contribution                          1,226        4,110        7,318        5,489
      Benefits paid                                 (9,136)      (8,862)      (7,318)      (5,489)
                                                 ---------    ---------    ---------    ---------
      Fair value of plan assets at end of year     275,382      254,648          991          939
                                                 ---------    ---------    ---------    ---------

      Funded status                                 16,679      (15,734)    (188,041)    (194,989)
      Unrecognized net actuarial gain              (85,606)     (41,146)     (31,431)     (11,896)
      Unrecognized prior service cost                  107          147           --           --
      Net gain at date of adoption                  (1,012)      (1,280)          --           --
                                                  --------     --------     --------     --------

      Net amount recognized                      $ (69,832)   $ (58,013)   $(219,472)   $(206,885)
                                                  ========     ========     ========     ========

      Amounts recognized in the Company's
       consolidated balance sheets consist of:
      Accrued benefit liability                  $ (76,303)   $ (61,991)   $(219,472)   $(206,885)
      Intangible asset                               1,245        3,978           --           --
      Accumulated other comprehensive
       income                                        5,226           --           --           --
                                                 ---------     --------     ---------    --------

      Net amount recognized                      $ (69,832)   $ (58,013)   $(219,472)   $(206,885)
                                                 =========    =========    =========    =========
</TABLE>


<TABLE>
<CAPTION>

                                                                 PENSION BENEFITS            OTHER BENEFITS
                                                             -------------------------   --------------------
                                                                  1999       1998              1999      1998
      <S>                                                          <C>      <C>               <C>      <C>
      WEIGHTED-AVERAGE ASSUMPTIONS
       AS OF DECEMBER 31:
       Discount rate                                                7.75%    6.75%             7.75%   6.75%
       Expected return on plan assets                               9.0 %    9.0 %             6.0 %    6.0%
       Rate of compensation increase                                5.0 %    5.0 %               --      --
</TABLE>




                                      F-18

<PAGE>   50



      For measurement purposes, a 7.0 percent annual rate of increase in the per
      capita cost of covered health care benefits was assumed for 1999. The rate
      was assumed to decrease gradually to 5.5 percent for 2002 and remain at
      that level thereafter.

<TABLE>
<CAPTION>

                                                       PENSION BENEFITS                         OTHER BENEFITS
                                                  ----------------------------------         -----------------------------------
                                                    1999          1998          1997           1999           1998         1997
                                                         (000'S OMITTED)                          (000'S OMITTED)
<S>                                           <C>            <C>          <C>           <C>           <C>           <C>
      Components of net periodic
        benefit cost:
        Service cost                              $ 19,554      $ 17,742      $ 15,759       $  6,922      $  6,610      $  6,786
        Interest cost                               17,899        16,058        14,246         13,040        12,770        12,359
        Expected return on plan assets             (22,531)      (19,660)      (15,453)           (57)          (53)          (47)
        Amortization of prior service cost              40            40            40             --            --            --
        Amortization of net gain at date
           of adoption                                (268)         (268)         (268)            --            --            --
        Recognized net actuarial gain               (1,649)       (1,625)       (1,228)            --        (8,823)      (27,581)
                                                   -------       -------      --------       --------      --------      --------

      Net periodic benefit cost (credit)          $ 13,045      $ 12,287      $ 13,096       $ 19,905      $ 10,504      $ (8,483)
                                                  ========      ========      ========       ========      ========      ========
</TABLE>


      Actuarial gains (or losses) related to the postretirement benefit
      obligation are recognized as a component of net postretirement benefit
      cost by the amount the beginning of year unrecognized net gain (or loss)
      exceeds 7.5 percent of the accumulated postretirement benefit obligation.

      The projected benefit obligation, accumulated benefit obligation, and fair
      value of plan assets for the pension plan with accumulated benefit
      obligations in excess of plan assets were $23.4 million, $22.8 million and
      $-0-, respectively, as of December 31, 1999 and $18.2 million, $17.5
      million and $-0-, respectively, as of December 31, 1998.

      Assumed health care cost trend rates have a significant effect on the
      amounts reported for the health care plans. A one-percentage-point change
      in assumed health care cost trend rates would have the following effects:


<TABLE>
<CAPTION>

                                                                                 1-PERCENTAGE-          1-PERCENTAGE-
                                                                                 POINT INCREASE        POINT DECREASE
<S>                                                                                <C>                   <C>
      Increase (decrease) in total of service and interest cost
       components                                                                  $ 4,252,000           $ (3,505,000)
      Increase (decrease) in postretirement benefit obligation                      34,215,000            (28,971,000)
</TABLE>



     EMPLOYEE SEPARATION PROGRAMS - During 1997, the Company's senior management
      implemented a Transformation Program that resulted in certain personnel
      reductions (the "Separation Programs"). The Company expensed approximately
      $7 million, $8 million and $22 million for the years ended December 31,
      1999, 1998 and 1997, respectively, relating to the Separation Programs.


                                      F-19
<PAGE>   51


12.   INCOME TAXES

      The provisions for income taxes are comprised of the following:

<TABLE>
<CAPTION>

                                                                               1999            1998           1997
                                                                                        (000'S OMITTED)
<S>                                                                          <C>             <C>            <C>
      Current:
      Federal                                                                $ 11,781        $ 40,040       $28,277
      State                                                                       560           3,326         2,061
                                                                             --------        --------       -------
                                                                               12,341          43,366        30,338
      Deferred                                                                 49,349          59,421        60,617
                                                                             --------        --------       -------

                                                                             $ 61,690        $102,787       $90,955
                                                                             ========        ========       =======
</TABLE>


      The federal statutory tax rate differs from the effective tax rate due to
the following:

<TABLE>
<CAPTION>

                                                                                       1999         1998        1997

<S>                                                                                    <C>          <C>        <C>
      Federal statutory tax rate                                                       35.0 %       35.0 %     35.0 %
      State taxes, net of federal benefit                                               2.4 %        1.2 %      2.2 %
      Dividend exclusions                                                              (3.8)%       (2.5)%     (2.6)%
      Tax settlement                                                                   (5.4)%          - %     (5.4)%
      Other                                                                             1.4 %        0.9 %      1.4 %
                                                                                       ----         ----       ----

      Effective tax rate                                                               29.6 %       34.6 %     30.6 %
                                                                                       ====         ====       ====
</TABLE>



      The effective tax rates for 1999 and 1997 were unusually low due primarily
      to the favorable resolution in each of these years with the Internal
      Revenue Service of significant tax issues related to environmental
      expenditures.




                                      F-20
<PAGE>   52


      Deferred income taxes reflect the net tax effects of (i) temporary
      differences between the financial and tax bases of assets and liabilities,
      and (ii) loss and tax credit carryforwards. The tax effects of significant
      items comprising the Company's net deferred tax liability as of December
      31, 1999 and 1998, are as follows:

<TABLE>
<CAPTION>

                                                                                  1999            1998
                                                                                     (000'S OMITTED)
<S>                                                                               <C>          <C>
Deferred tax liabilities:
   Property, plant and equipment                                                  $562,818     $533,432
   Inventories (including, in 1998, the effect of adjustment to market)             87,085       22,638
   Investments in affiliates                                                       121,002      110,192
   Other                                                                            43,055       41,097
                                                                                  --------     --------
                                                                                   813,960      707,359
                                                                                  --------     --------

Deferred tax assets:
   Postretirement benefit obligations                                               77,371       74,331
   Employee benefit accruals                                                        38,893       34,029
   Alternative minimum tax credit carryforwards                                     41,809       31,376
   Net operating loss carryforwards                                                 40,914           --
   Marketing and promotional accruals                                                9,271       12,773
   Other                                                                            81,634       76,620
                                                                                  --------     --------
                                                                                   289,892      229,129
                                                                                  --------     --------

Net deferred tax liability (of which $2,317 is included in current liabilities
   and $65,234 is included in current assets at
   December 31, 1999 and 1998, respectively)                                      $524,068     $478,230
                                                                                  ========     ========
</TABLE>




      At December 31, 1998, the Company had capital loss carryforwards of $6.7
      million. At December 31, 1998, a valuation allowance of $1.0 million was
      established related to that portion of the carryforwards for which it was
      considered more likely than not that the related tax benefits would not be
      realized before expiration.

      During 1999, the Company filed a claim with the IRS to reclassify certain
      losses from capital to ordinary. The Company was successful and was able
      to utilize all capital loss carryforwards in its 1998 tax return.
      Therefore, at December 31, 1999, no capital loss carryforwards exist.

      At December 31, 1999, the Company has a net operating loss carryforward of
      $114.8 million which will expire in 2019.

      The Company's alternative minimum tax credit carryforwards are available
      to offset regular federal income taxes in future years without expiration,
      subject to certain alternative minimum tax limitations.

13.   COMMITMENTS AND CONTINGENCIES

      LITIGATION AND INJURY CLAIMS - Various lawsuits and claims arising in the
      ordinary course of business are pending against the Company. The Company
      records accruals for potential losses when, in management's opinion, such
      losses are probable and reasonably estimable. If known lawsuits and claims
      were to be determined in a manner adverse to the Company, and in amounts
      greater than the Company's accruals, then such determinations could have a
      material adverse effect on the Company's results of operations in a given
      reporting period. However, in management's opinion the ultimate


                                      F-21

<PAGE>   53



      resolution of these lawsuits and claims will not exceed, by a material
      amount, the amount of the accruals and the insurance coverage available to
      the Company. This opinion is based upon management's and counsel's current
      assessment of these lawsuits and claims. The most significant lawsuits and
      claims are discussed below.

      The case brought in the United States District Court for the Northern
      District of Illinois by the Oil Chemical & Atomic Workers, Local 7-517
      against UNO-VEN, CITGO, PDVSA, PDV America, and UNOCAL pursuant to Section
      301 of the Labor Management Relations Act ("LMRA") resulted in the court's
      ruling in favor of all defendants on Motions for Summary Judgment in June,
      1998; this ruling was affirmed on appeal and the case is now terminated.

      In May 1997, an explosion and fire occurred at CITGO's Corpus Christi
      refinery. No serious personal injuries were reported. CITGO received
      approximately 7,500 individual claims for personal injury and property
      damage related to the above noted incident. Approximately 1,300 of these
      claims have been resolved for amounts which individually and collectively
      were not material. There are presently seventeen lawsuits filed on behalf
      of approximately 9,000 individuals arising out of this incident in federal
      and state courts in Corpus Christi alleging property damages, personal
      injury and punitive damages. A trial of one of the federal court lawsuits
      in October 1998 involving ten bellwether plaintiffs, out of approximately
      400 plaintiffs, resulted in a verdict for CITGO. The remaining plaintiffs
      in this case have agreed to settle for an immaterial amount.

      A class action lawsuit is pending in Corpus Christi, Texas state court
      against CITGO and other operators and owners of nearby industrial
      facilities which claims damages for reduced value of residential
      properties located in the vicinity of the industrial facilities as a
      result of air, soil and groundwater contamination. CITGO has contracted to
      purchase all of the 275 properties included in the lawsuit which are in an
      area adjacent to CITGO's Corpus Christi refinery and settle the property
      damage claims relating to these properties. Related to this purchase,
      $15.7 million was expensed in 1997. The trial judge recently ruled, over
      CITGO's objections, that a settlement agreement CITGO entered into in
      September 1997 and subsequently withdrew from, which provided for
      settlement of the remaining property damage claims for $5 million is
      enforceable. CITGO believes this ruling is erroneous and will appeal. The
      trial against CITGO of these remaining claims will be postponed
      indefinitely. Two related personal injury and wrongful death lawsuits were
      filed against the same defendants in 1996, one of which is scheduled for
      trial in 2000. A trial date for the other case has not been set.

      Litigation is pending in federal court in Lake Charles, Louisiana, against
      CITGO by a number of current and former Lake Charles refinery employees
      and applicants asserting claims of racial discrimination in connection
      with CITGO's employment practices. The first trial in this case, which
      involved two plaintiffs, began in October 1999 and resulted in verdicts
      for the Company. The Court granted the Company's motion for summary
      judgment with respect to another group of claims; an appeal of this ruling
      is expected. Trials of the remaining cases are currently stayed.

      CITGO is among defendants to lawsuits in California, North Carolina and
      New York alleging contamination of water supplies by methyl tertiary butyl
      ether ("MTBE"), a component of gasoline. The action in California was
      filed in November 1998 by the South Tahoe Public Utility District and
      CITGO was added as a defendant in February 1999. The North Carolina case,
      filed in January 1999, and the New York case, filed in January 2000 are
      putative class actions on behalf of owners of water wells and other
      drinking water supplies in the states. All of these actions allege that
      MTBE poses public health risks. These matters are in early stages of
      discovery. CITGO has denied all of the allegations and is pursuing its
      defenses.

                                      F-22

<PAGE>   54



      ENVIRONMENTAL COMPLIANCE AND REMEDIATION - CITGO is subject to various
      federal, state and local environmental laws and regulations which may
      require CITGO to take action to correct or improve the effects on the
      environment of prior disposal or release of petroleum substances by CITGO
      or other parties. Management believes the Company is in compliance with
      these laws and regulations in all material aspects. Maintaining compliance
      with environmental laws and regulations in the future could require
      significant capital expenditures and additional operating costs.

      In 1992, the Company reached an agreement with a state agency to cease
      usage of certain surface impoundments at the Company's Lake Charles
      refinery by 1994. A mutually acceptable closure plan was filed with the
      state in 1993. The Company and its former owner are participating in the
      closure and sharing the related costs based on estimated contributions of
      waste and ownership periods. The remediation commenced in December 1993.
      In 1997, the Company presented a proposal to a state agency revising the
      1993 closure plan. In 1998, the Company amended its 1997 proposal as
      requested by the state agency. A ruling on the proposal, as amended, is
      expected in 2000 with final closure to begin in 2002.

      In 1992, an agreement was reached between the Company and its former owner
      concerning a number of environmental issues. The agreement consisted, in
      part, of payments to the Company totaling $46 million. The former owner
      will continue to share the costs of certain specific environmental
      remediation and certain tort liability actions based on ownership periods
      and specific terms of the agreement.

      The Texas Natural Resources Conservation Commission ("TNRCC") conducted an
      environmental compliance review at the Corpus Christi refinery in the
      first and second quarters of 1998. In January 1999, the TNRCC issued the
      Company a Notice of Violation ("NOV") arising from this review and in
      October 1999 proposed fines of approximately $1.6 million related to the
      NOV. Most of the alleged violations refer to recordkeeping and reporting
      issues, failure to keep proper records, failure to meet required emission
      levels, and failure to properly monitor emissions. TNRCC issued the
      Company another NOV in December 1999 based on its 1999 audits which cites
      items similar to items cited earlier and the agency has tentatively
      suggested that the two audits should be combined for resolution. The
      Company intends to vigorously protest the alleged violations and proposed
      fines.

      In June 1999, CITGO and numerous other industrial companies received
      notice from the U.S. Environmental Protection Agency ("EPA") that the EPA
      believes these companies have contributed to contamination in the
      Calcasieu Estuary, in the proximity of Lake Charles, Calcasieu Parish,
      Louisiana and are Potentially Responsible Parties ("PRPs") under the
      Comprehensive Environmental Response, Compensation, and Liability Act
      ("CERCLA"). The EPA made a demand for payment of its past investigation
      costs from CITGO and other PRPs and advised it intends to conduct a
      Remedial Investigation/Feasibility Study ("RI/FS") under its CERCLA
      authority. CITGO and other PRPs may be potentially responsible for the
      costs of the RI/FS. CITGO disagrees with the EPA's allegations and intends
      to contest this matter.

      In October 1999, the EPA issued a NOV to CITGO for violations of federal
      regulations regarding reformulated gasoline found during a May 1998
      inspection at CITGO's Braintree, Massachusetts terminal and recommended a
      penalty of $218,500. The Company intends to vigorously contest the
      proposed fines and allegations.

      Based on currently available information, including the continuing
      participation of the former owner in remediation actions, management
      believes its accruals for potential environmental liabilities are
      adequate. Conditions which require additional expenditures may exist with
      respect to various Company


                                      F-23
<PAGE>   55



      sites including, but not limited to, CITGO's operating refinery complexes,
      closed refineries, service station sites and crude oil and petroleum
      product storage terminals. The amount of such future expenditures, if any,
      is indeterminable.

      SUPPLY AGREEMENTS - CITGO purchases the crude oil processed at its
      refineries and also purchases refined products to supplement the
      production from its refineries to meet marketing demands and resolve
      logistical issues. In addition to supply agreements with various
      affiliates (Notes 2 and 4), the Company has various other crude oil,
      refined product and feedstock purchase agreements with unaffiliated
      entities with terms ranging from monthly to annual renewal. The Company
      believes these sources of supply are reliable and adequate for its current
      requirements.

      THROUGHPUT AGREEMENTS - The Company has throughput agreements with certain
      pipeline affiliates (Note 8). These throughput agreements may be used to
      secure obligations of the pipeline affiliates. Under these agreements, the
      Company may be required to provide its pipeline affiliates with additional
      funds through advances against future charges for the shipping of
      petroleum products. The Company currently ships on these pipelines and has
      not been required to advance funds in the past. At December 31, 1999, the
      Company has no fixed and determinable, unconditional purchase obligations
      under these agreements.

      COMMODITY DERIVATIVE ACTIVITY - The Company's commodity derivatives are
      generally entered into through major brokerage houses and traded on
      national exchanges and can be settled in cash or through delivery of the
      commodity. Such contracts generally qualify for hedge accounting and
      correlate to market price movements of crude oil and refined products.
      Resulting gains and losses, therefore, will generally be offset by gains
      and losses on the Company's hedged inventory or future purchases and
      sales. The Company's derivative commodity activity is closely monitored by
      management and contract periods are generally less than 30 days.
      Unrealized and deferred gains and losses on these contracts at December
      31, 1999 and 1998 and the effects of realized gains and losses on cost of
      sales and pretax earnings for 1999, 1998, and 1997 were not material. At
      times during 1998, CITGO entered into commodity derivatives activities
      that were not related to the hedging program discussed above. This
      activity and resulting gains and losses were not material in 1998. There
      was no non-hedging activity in 1999 or 1997.

      OTHER CREDIT AND OFF-BALANCE SHEET RISK INFORMATION AS OF DECEMBER 31,
      1999 - The Company has guaranteed approximately $14 million of debt of
      certain CITGO marketers. Such debt is substantially collateralized by
      assets of these entities. The Company has also guaranteed approximately
      $101 million of debt of certain affiliates, including $50 million related
      to HOVENSA (Note 2) and $11 million related to NISCO (Note 8). The Company
      has outstanding letters of credit totaling approximately $545 million,
      which includes $525 million related to the Company's tax-exempt and
      taxable revenue bonds (Note 10). The Company has also acquired surety
      bonds totaling $40 million primarily due to requirements of various
      government entities. The Company does not expect liabilities to be
      incurred related to such guarantees, letters of credit or surety bonds.

      Neither the Company nor the counterparties are required to collateralize
      their obligations under interest rate swaps or over-the-counter derivative
      commodity agreements. The Company is exposed to credit loss in the event
      of nonperformance by the counterparties to these agreements, but has no
      off-balance sheet risk of accounting loss for the notional amounts. The
      Company does not anticipate nonperformance by the counterparties, which
      consist primarily of major financial institutions.

      Management considers the market risk to the Company related to its
      commodity and interest rate derivatives to be insignificant during the
      periods presented.


                                      F-24
<PAGE>   56



14.   LEASES

      The Company leases certain of its Corpus Christi refinery facilities under
      a capital lease. The basic term of the lease expires on January 1, 2004;
      however, the Company may renew the lease until January 31, 2011, the date
      of its option to purchase the facilities for a nominal amount. Capitalized
      costs included in property, plant and equipment related to the leased
      assets were approximately $209 million at December 31, 1999 and 1998.
      Accumulated amortization related to the leased assets was approximately
      $110 million and $102 million at December 31, 1999 and 1998, respectively.
      Amortization is included in depreciation expense.

      The Company also has various noncancelable operating leases, primarily for
      product storage facilities, office space, computer equipment and vehicles.
      Rent expense on all operating leases totaled $35 million in 1999, $34
      million in 1998, and $39 million in 1997. Future minimum lease payments
      for the capital lease and noncancelable operating leases are as follows:


      <TABLE>
<CAPTION>

                                                                              CAPITAL        OPERATING
                                                                               LEASE           LEASES          TOTAL
       YEAR                                                                                (000'S OMITTED)

     <S>                                                                    <C>             <C>             <C>
      2000                                                                   $ 27,375        $ 34,586        $ 61,961
      2001                                                                     27,375          30,833          58,208
      2002                                                                     27,375          25,311          52,686
      2003                                                                     27,375          18,665          46,040
      2004                                                                      5,000          15,238          20,238
      Thereafter                                                               31,000          26,077          57,077
                                                                             --------       ---------        --------
      Total minimum lease payments                                            145,500        $150,710        $296,210
      Amount representing interest                                            (43,574)      =========        ========
                                                                             --------
      Present value of minimum lease payments                                 101,926
      Current portion                                                          16,356
                                                                             --------

                                                                             $ 85,570
                                                                             ========
</TABLE>

15.   FAIR VALUE INFORMATION

      The following estimated fair value amounts have been determined by the
      Company, using available market information and appropriate valuation
      methodologies. However, considerable judgment is necessarily required in
      interpreting market data to develop the estimates of fair value.
      Accordingly, the estimates presented herein are not necessarily indicative
      of the amounts that the Company could realize in a current market
      exchange. The use of different market assumptions and/or estimation
      methodologies may have a material effect on the estimated fair value
      amounts.


                                      F-25
<PAGE>   57

      The carrying amounts of cash equivalents, restricted cash and
      variable-rate debt approximate fair values. The carrying amounts and
      estimated fair values of the Company's other financial instruments are as
      follows:

<TABLE>
<CAPTION>

                                                          1999                             1998
                                          -------------------------------- ---------------------------------
                                              CARRYING          FAIR            CARRYING          FAIR
                                               AMOUNT           VALUE            AMOUNT           VALUE
                                                   (000'S OMITTED)                  (000'S OMITTED)
<S>                                       <C>             <C>              <C>             <C>
      LIABILITIES:
        Short-term bank loans             $    16,000     $    16,000      $    37,000     $    37,000
        Long-term debt                      1,439,300       1,421,702        1,306,348       1,292,050

      DERIVATIVE AND OFF-BALANCE
       SHEET FINANCIAL INSTRUMENTS -
       UNREALIZED LOSSES:
       Interest rate swap agreements              --           (1,281)             --           (2,983)
       Guarantees of debt                         --             (898)             --             (601)
       Letters of credit                          --           (4,284)             --           (2,896)
       Surety bonds                               --             (159)             --             (147)
</TABLE>


      SHORT-TERM BANK LOANS AND LONG-TERM DEBT - The fair value of short-term
      bank loans and long-term debt is based on interest rates that are
      currently available to the Company for issuance of debt with similar terms
      and remaining maturities.

      INTEREST RATE SWAP AGREEMENTS - The fair value of these agreements is
      based on the estimated amount that the Company would receive or pay to
      terminate the agreements at the reporting dates, taking into account
      current interest rates and the current creditworthiness of the
      counterparties.

      GUARANTEES, LETTERS OF CREDIT AND SURETY BONDS - The estimated fair value
      of contingent guarantees of third-party debt, letters of credit and surety
      bonds is based on fees currently charged for similar one-year agreements
      or on the estimated cost to terminate them or otherwise settle the
      obligations with the counterparties at the reporting dates.

      The fair value estimates presented herein are based on pertinent
      information available to management as of the reporting dates. Although
      management is not aware of any factors that would significantly affect the
      estimated fair value amounts, such amounts have not been comprehensively
      revalued for purposes of these financial statements since that date, and
      current estimates of fair value may differ significantly from the amounts
      presented herein.

                                      F-26
<PAGE>   58

16.   QUARTERLY RESULTS OF OPERATIONS - UNAUDITED

      The following is a summary of the quarterly results of operations for the
      years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>

                                               1ST QTR.       2ND QTR.     3RD QTR.      4TH QTR.
                                                                 (000'S OMITTED)
      1999

<S>                                          <C>           <C>           <C>          <C>
      Sales                                  $ 2,256,466   $ 3,153,238   $ 3,671,547   $ 4,235,970
                                             ===========   ===========   ===========   ===========
      Cost of sales and operating expenses   $ 2,048,612   $ 3,037,583   $ 3,554,336   $ 4,156,065
                                             ===========   ===========   ===========   ===========

      Net income                             $    86,219   $    24,893   $    32,588   $     2,784
                                             ===========   ===========   ===========   ===========
      1998

      Sales                                  $ 2,741,694   $ 2,935,889   $ 2,718,308   $ 2,515,830
                                             ===========   ===========   ===========   ===========
      Cost of sales and operating expenses   $ 2,555,147   $ 2,773,602   $ 2,540,806   $ 2,470,664
                                             ===========   ===========   ===========   ===========

      Net income (loss)                      $    83,396   $    56,480   $    71,310   $   (17,196)
                                             ===========   ===========   ===========   ===========
</TABLE>



                                     ******
                                      F-27
<PAGE>   59

                                 EXHIBIT INDEX
<TABLE>
<CAPTION>

EXHIBIT
NUMBER                        DESCRIPTION
-------                       ------------
<S>               <C>
   *3.1           Certificate of Incorporation, Certificate of Amendment of
                  Certificate of Incorporation and By-laws of CITGO Petroleum
                  Corporation.

   *4.1           Indenture, dated as of May 1, 1996, between CITGO Petroleum
                  Corporation and the First National Bank of Chicago, relating
                  to the 7 7/8% Senior Notes due 2006 of CITGO Petroleum
                  Corporation.

   *4.2           Form of Senior Note (included in Exhibit 4.1).

  **10.1          Crude Supply Agreement between CITGO Petroleum Corporation and
                  Petroleos de Venezuela, S.A., dated as of September 30, 1986.

  **10.2          Supplemental Crude Supply Agreement dated as of September 30,
                  1986 between CITGO Petroleum Corporation and Petroleos de
                  Venezuela, S.A.

  **10.3          Crude Oil and Feedstock Supply Agreement dated as of March 31,
                  1987 between Champlin Refining Company and Petroleos de
                  Venezuela, S.A.

  **10.4          Supplemental Crude Oil and Feedstock Supply Agreement dated as
                  of March 31, 1987 between Champlin Refining Company and
                  Petroleos de Venezuela, S.A.

  **10.5          Contract for the Purchase/Sale of Boscan Crude Oil dated as of
                  June 2, 1993 between Tradecal, S.A. and CITGO Asphalt Refining
                  Company.

  **10.6          Restated Contract for the Purchase/Sale of Heavy/Extra Heavy
                  Crude Oil dated December 28, 1990 among Maraven, S.A.,
                  Lagoven, S.A. and Seaview Oil Company.

  **10.7          Sublease Agreement dated as of March 31, 1987 between Champlin
                  Petroleum Company, Sublessor, and Champlin Refining Company,
                  Sublessee.

  **10.8          Operating Agreement dated as of May 1, 1984 among Cit-Con Oil
                  Corporation, CITGO Petroleum Corporation and Conoco, Inc.

  **10.9          Amended and Restated Limited Liability Company Regulations of
                  LYONDELL-CITGO Refining Company, Ltd., dated July 1, 1993.

  **10.10         Contribution Agreement between Lyondell Petrochemical Company
                  and LYONDELL-CITGO Refining Company, Ltd. and Petroleos de
                  Venezuela, S.A.

  **10.11         Crude Oil Supply Agreement between LYONDELL-CITGO Refining
                  Company, Ltd. and Lagoven, S.A. dated as of May 5, 1993.

  **10.12         Supplemental Supply Agreement dated as of May 5, 1993 between
                  LYONDELL-CITGO Refining Company, Ltd. and Petroleos de
                  Venezuela, S.A.

  **10.13         Tax Allocation Agreement dated as of June 24, 1993 among PDV
                  America, Inc., VPHI Midwest, Inc., CITGO Petroleum Corporation
                  and PDV USA, Inc., as amended.

  **10.14         CITGO Credit Facility.

   *10.15(i)      First Amendment to the Second Amended and Restated Senior Term
                  Loan Agreement, by and between CITGO Petroleum Corporation and
                  Bank of America National Trust and Savings Association et al,
                  dated as of February 15, 1994.
</TABLE>


<PAGE>   60

<TABLE>

<S>               <C>
   *10.15(ii)     Second Amendment to Second Amended and Restated Senior Term
                  Loan Agreement by and among CITGO Petroleum Corporation and
                  Bank of America Illinois et al, dated as of October 21, 1994.

   *10.15(iii)    First Amendment to the Second Amended and Restated Senior
                  Revolving Credit Facility Agreement by and among CITGO
                  Petroleum Corporation and Bank of America National Trust and
                  Savings Association et al, dated as of February 15, 1994.

   *10.15(iv)     Second Amendment to Second Amended and Restated Senior
                  Revolving Credit Facility Agreement by and among CITGO
                  Petroleum Corporation and Bank of America Illinois et al,
                  dated as of October 21, 1994.

   *10.16         Master Shelf Agreement (1994) by and between Prudential
                  Insurance Company of America and CITGO Petroleum Corporation
                  ($100,000,000), dated March 4, 1994.

   *10.17(i)      Letter Agreement by and between the Company and Prudential
                  Insurance Company of America, dated March 4, 1994.

   *10.17(ii)     Letter Amendment No. 1 to Master Shelf Agreement with
                  Prudential Insurance company of America, dated November 14,
                  1994.

  **10.18         CITGO Senior Debt Securities (1991) Agreement.

   *10.19         CITCON Credit Agreement between CITCON Oil Corporation and The
                  Chase Manhattan Bank N.A., as Agent, dated as of April 30,
                  1992.

   *10.20(i)      First Amendment to the CITCON Credit Agreement, between CITCON
                  Oil Corporation and The Chase Manhattan Bank (National
                  Association), dated as of June 30, 1992.

   *10.20(ii)     Second Amendment to the CITCON Credit Agreement, between
                  CITCON Oil Corporation and The Chase Manhattan Bank (National
                  Association), dated as of March 31, 1994.

   *10.20(iii)    Third Amendment to the CITCON Credit Agreement, between CITCON
                  Oil Corporation and The Chase Manhattan Bank (National
                  Association), dated as of June 10, 1994.

 ***10.21         Selling Agency Agreement dated as of October 28, 1997 among
                  CITGO Petroleum Corporation, Salomon Brothers Inc. and Chase
                  Securities Inc.

****10.22         $150,000,000 Credit Agreement dated May 13, 1998.

****10.23         $400,000,000 Credit Agreement dated May 13, 1998.

****10.24         Limited Partnership Agreement of LYONDELL-CITGO Refining LP,
                  dated December 31, 1998.

    12.1          Computation of Ratio of Earnings to Fixed Charges.

    23.1          Consent of Independent Auditors.

    27            Financial Data Schedule (filed electronically only).
-------------
</TABLE>

    *  Previously filed in connection with the Registrant's Report on Form 10,
       Registration No. 333-3226.

   **  Incorporated by reference to the Registration Statement on Form F-1 of
       PDV America, Inc. (No. 33-63742).

  ***  Incorporated by reference to the Registrant's Report on Form 8-K filed
       with the Commission on November 18, 1997.

****   Incorporated by reference to the Registrant's Report on Form 10-K filed
       with the Commission on March 17, 1999.