<PAGE>   1
                                                                      EXHIBIT 13


                                  [COVER PAGE]

                       [PERMIAN BASIN ROYALTY TRUST LOGO]

           PERMIAN BASIN ROYALTY TRUST ANNUAL REPORT & FORM 10-K 1999
<PAGE>   2



                           [MAP OF COUNTIES IN TEXAS]


               TEXAS ROYALTY PROPERTIES ARE LOCATED IN 35 TEXAS COUNTIES.
               WADDELL RANCH PROPERTIES ARE LOCATED IN CRANE COUNTY.


<PAGE>   3

THE TRUST

The Permian Basin Royalty Trust's (the "Trust") principal assets are comprised
of a 75% net overriding royalty interest carved out by Southland Royalty Company
("Southland") from its fee mineral interest in the Waddell Ranch properties in
Crane County, Texas ("Waddell Ranch properties"), and a 95% net overriding
royalty interest carved out by Southland from its major producing royalty
properties in Texas ("Texas Royalty properties"). The interests out of which the
Trust's net overriding royalty interests were carved were in all cases less than
100%. The Trust's net overriding royalty interests represent burdens against the
properties in favor of the Trust without regard to ownership of the properties
from which the overriding royalty interests were carved. The net overriding
royalties above are collectively referred to as "Royalties."

         The Trust has been advised that effective January 1, 1996, Southland
was merged with and into Meridian Oil Inc. ("Meridian"), a Delaware corporation,
with Meridian being the surviving corporation. Meridian succeeded to the
ownership of all the assets, has the rights, powers, and privileges, and assumed
all of the liabilities and obligations of Southland. Effective July 11, 1996,
Meridian changed its name to Burlington Resources Oil & Gas Company ("BROG").
Any reference to BROG hereafter may be construed to be a reference to Meridian
and Southland also. Further, BROG notified the Trust that, on February 14, 1997,
the Texas Royalty properties that are subject to the Net Overriding Royalty
Conveyance dated November 1, 1980 ("Texas Royalty Conveyance"), were sold to
Riverhill Energy Corporation ("Riverhill Energy") of Midland, Texas.

UNITS OF BENEFICIAL INTEREST

Units of Beneficial Interest ("Units") of the Trust are traded on the New York
Stock Exchange with the symbol PBT. Quarterly high and low sales prices and the
aggregate amount of monthly distributions paid each quarter during the Trust's
two most recent years were as follows:

<TABLE>
<CAPTION>
                                                                   DISTRIBUTIONS
1999                           HIGH                 LOW                PAID
----                           ----                 ---            -------------
<S>                           <C>                <C>                <C>
First Quarter...............  $ 4.500            $ 3.875            $  .035064
Second Quarter..............    4.563              3.938               .082509
Third Quarter...............    5.938              4.063               .127116
Fourth Quarter..............    5.875              4.938               .151628
                                                                    ----------
    Total for 1999..........                                        $  .396317
                                                                    ==========

1998
----
First Quarter...............  $ 5.188            $ 4.125            $  .110267
Second Quarter..............    4.875              4.188               .031283
Third Quarter...............    4.500              3.563               .050578
Fourth Quarter..............    5.250              3.500               .031315
                                                                    ----------
    Total for 1998..........                                        $  .223443
                                                                    ==========
</TABLE>

Approximately 2,182 Unit holders of record held the 46,608,796 Units of the
Trust at December 31, 1999. Distribution of ownership of Units is presented in
the following table:

                                                                               1
<PAGE>   4

TO UNIT HOLDERS

We are pleased to present the twentieth Annual Report of the Trust. The report
includes a copy of the Trust's Annual Report on Form 10-K to the Securities and
Exchange Commission for the year ended December 31, 1999, without exhibits. Both
the report and accompanying Form 10-K contain important information concerning
the Trust's properties, including the oil and gas reserves attributable to the
Royalties owned by the Trust. Production figures, drilling activity and certain
other information included in this report have been provided to the Trust by
BROG, formerly Meridian and Southland.

         As more particularly explained in the Notes to the Financial Statements
appearing in this report and in Item 1 of the accompanying Form 10-K, Bank of
America, N.A., as Trustee, has the primary function under the Trust Indenture of
collecting the monthly net proceeds attributable to the Royalties and making
monthly distributions to the Unit holders, after deducting Trust administrative
expenses and any amounts necessary for cash reserves.

         Royalty income received by the Trustee for the year ended December 31,
1999, was $18,799,659 and interest income earned for the same period was
$27,331. General and administrative expenses amounted to $335,148. A total of
$18,471,842 or $.396317 per Unit was distributed to Unit holders during 1999. A
discussion of factors affecting the distributions for 1999 may be found in the
Trustee's Discussion and Analysis section of this report and the accompanying
Form 10-K.

         As of December 31, 1999, the Trust's proved reserves were estimated at
9,630,573 Bbls of oil and 28,632,302 Mcf of gas. The estimated future net
revenues from proved reserves at December 31, 1999, amount to $298,794,300 or
$6.41 per Unit. The present value of estimated future net revenues discounted at
10% at December 31, 1999, was $154,213,900 or $3.31 per Unit. The computation of
future net revenues is made following guidelines prescribed by the Financial
Accounting Standards Board (explained in Item 2 of the accompanying Form 10-K)
based on year-end prices and costs.

         As has been previously reported, Southland has advised the Trust that
it became operator of record of the Waddell Ranch properties on May 1, 1991.
Meridian, as successor by merger, became the operator of record. Meridian
changed its name to Burlington Resources Oil & Gas Company in 1996. All field,
technical and accounting operations, however, have been carried out by Coastal
Management Corporation ("CMC") and Riverhill Capital Corporation ("Riverhill
Capital"), but remain under the direction of BROG.

         As was previously reported, in February 1997, BROG sold its interest in
the Texas Royalty properties that are subject to the Texas Royalty Conveyance to
Riverhill Energy, which at the time was a wholly-owned subsidiary of Riverhill
Capital and an affiliate of CMC. Subsequently, the Trustee was advised that
Schlumberger Technology Corporation ("STC") acquired all of the shares of
Riverhill Capital. The Trustee has been advised that, as part of this
transaction, ownership of Riverhill Energy's interests in the Texas Royalty
properties referenced above remain in Riverhill Energy, which was owned by the
former shareholders of Riverhill Capital. CMC will continue to perform all
accounting operations pertaining to the Texas Royalty properties under the
direction of Riverhill Energy.

         The Omnibus Budget Reconciliation Act of 1990 allows percentage
depletion on proven properties acquired after October 11, 1990. For Units
acquired after such date, Unit holders would normally compute both percentage
depletion and cost depletion from each property, and claim the larger amount as
a deduction on their income tax returns. However, the Trustee and its
accountants have estimated the percentage depletion for January through December
1999, and it appears that cost depletion will exceed percentage depletion for
all Unit holders. Therefore, the Trust will not provide percentage depletion
factors for 1999.

         Royalty income is generally considered portfolio income under the
passive loss rules enacted by the Tax Reform Act of 1986. Therefore, in general,
it appears that Unit holders should not consider the taxable income from the
Trust to be passive income in determining net passive income or loss. Unit
holders should consult their tax advisors for further information.

         Unit holders of record will continue to receive an individualized tax
information letter for each of the quarters ending March 31, June 30 and
September 30, 2000, and for the year ending December 31, 2000. Unit holders
owning Units in nominee name may obtain monthly tax information from the Trustee
upon request.

Bank of America, N.A.

By: /s/ RON E. HOOPER
Ron E. Hooper
Vice President


2
<PAGE>   5

DESCRIPTION OF THE PROPERTIES

The net overriding royalty interests held by the Trust are carved out of
high-quality producing oil and gas properties located primarily in West Texas. A
production index for oil and gas properties is the number of years derived by
dividing remaining reserves by current production. The production index for the
Trust properties based on the reserve report prepared by independent petroleum
engineers as of December 31, 1999, is approximately 9.7 years.

         The net overriding royalty interest in the Waddell Ranch properties is
the largest asset of the Trust. The mineral interests in the Waddell Ranch, from
which such net overriding royalty interest was carved, vary from 37.5% to 50.0%
in 78,175 gross (34,205 net) acres, containing 834 gross (344 net) productive
oil wells, 160 gross (67 net) productive gas wells and 347 gross (137 net)
injection wells. The Texas Royalty properties, out of which the other net
overriding royalty was carved, are located in 33 counties across Texas. The
Texas Royalty properties consist of approximately 125 separate royalty interests
containing approximately 303,000 gross (51,000 net) producing acres.
Approximately 44% of the future net revenues discounted at 10% attributable to
Texas Royalty properties are located in the Wasson and Yates fields.

WADDELL RANCH

Six major fields on the Waddell Ranch account for more than 90% of the total
production. In the six fields, there are 12 producing zones ranging in depth
from 2,800 to 10,600 feet. Most prolific of these zones are the Grayburg and San
Andres, which produce from depths between 2,800 and 3,400 feet. Productive from
the San Andres are the Sand Hills (Judkins) gas field and the Sand Hills
(McKnight) oil field.

         The Dune and Waddell oil fields are productive from both the Grayburg
and San Andres formations. The Sand Hills (Tubb) oil fields produce from the
Tubb formation at depths averaging 4,300 feet, and the University Waddell
(Devonian) oil field is productive from the Devonian formation between 8,400 and
9,200 feet.

         All of the major oil fields on the Waddell Ranch are currently being
water flooded. Engineering studies and 3-D seismic evaluations on these fields
indicate the potential for increased production through infill drilling,
modifications of existing water flood techniques, installation of larger
capacity pumping equipment and tertiary recovery projects. Capital expenditures
for remedial and maintenance activities during 1999 totaled approximately $1.1
million.

         BROG has informed the Trustee that the 2000 capital expenditures budget
should total approximately $14,440,000, of which $5,076,000 is attributable to
the drilling program and $9,364,000 to workovers and recompletions.

COMPUTATION OF ROYALTY INCOME RECEIVED BY THE TRUST

The Trust's royalty income is computed as a percentage of the net profit from
the operation of the properties in which the Trust owns net overriding royalty
interests. The percentages of net profits are 75% and 95% in the cases of the
Waddell Ranch properties and the Texas Royalty properties, respectively. Royalty
income received by the Trust for the five years ended December 31, 1999, was
computed as shown in the table on the next page.


                                                                               3
<PAGE>   6

<TABLE>
<CAPTION>
                                                                          Year Ended December 31,
                                                      1999                          1998                           1997
                                          ----------------------------  -----------------------------  ----------------------------
Gross Proceeds of Sales                      Waddell         Texas        Waddell           Texas        Waddell          Texas
From Properties From                          Ranch         Royalty        Ranch           Royalty        Ranch          Royalty
Which the Net Overriding                   Properties      Properties    Properties       Properties    Properties      Properties
Royalties Were Carved :                   ------------    ------------  ------------     ------------  ------------    ------------

<S>                                       <C>             <C>           <C>              <C>           <C>             <C>
   Oil Proceeds ........................  $ 18,667,382    $  5,261,863  $ 18,821,076     $  5,404,598  $ 27,099,891    $  8,427,062
   Gas Proceeds ........................    12,794,695       1,760,499    13,769,872        1,880,571    17,105,677       2,318,393
   Other Payments(a) ...................            --              --            --          540,543            --              --
                                          ------------    ------------  ------------     ------------  ------------    ------------
         Total .........................    31,462,077       7,022,362    32,590,948        7,825,712    44,205,568      10,745,455
                                          ------------    ------------  ------------     ------------  ------------    ------------
Less:
   Severance Tax
      Oil ..............................       726,944         186,846       725,100          196,770     1,037,862         320,447
      Gas ..............................       773,689          77,379    (1,299,730)         104,759     1,232,298         135,717
      Other ............................        44,839          16,000            --               --            --              --
   Lease Operating Expense
   and Property Tax
      Oil and Gas ......................     9,687,476         525,035    14,096,881          790,246    12,239,689         597,508
      Other Payments ...................       132,166         180,000                                       50,297
   Capital Expenditures ................     1,052,769              --    15,874,193               --    11,789,849              --
                                          ------------    ------------  ------------     ------------  ------------    ------------
         Total .........................    12,417,883         985,260    29,396,444        1,091,775    26,349,995       1,053,672
                                          ------------    ------------  ------------     ------------  ------------    ------------
   Net Profits .........................    19,044,194       6,037,102     3,194,504        6,733,937    17,855,573       9,691,783
   Net Overriding
      Royalty Interest .................            75%             95%           75%              95%           75%             95%
                                          ------------    ------------  ------------     ------------  ------------    ------------
Royalty Income .........................    14,284,146       5,735,247     2,395,878        6,397,240    13,391,679       9,207,194
Negative Revenues (b) ..................     1,218,732              --     1,218,732               --            --              --
Litigation Settlement (c) ..............            --              --       766,051               --            --              --
                                          ------------    ------------  ------------     ------------  ------------    ------------
Total Royalty Income for Distribution ..  $ 13,064,414    $  5,735,247  $  4,380,661     $  6,397,240  $ 13,391,679    $  9,207,194
                                          ============    ============  ============     ============  ============    ============

<CAPTION>
                                                            Year Ended December 31,

                                                       1996                           1995
                                           ----------------------------    ----------------------------
Gross Proceeds of Sales                      Waddell          Texas          Waddell          Texas
From Properties From                          Ranch          Royalty          Ranch          Royalty
Which the Net Overriding                    Properties      Properties      Properties      Properties
Royalties Were Carved:                     ------------    ------------    ------------    ------------

<S>                                        <C>             <C>             <C>             <C>
   Oil Proceeds .........................   $ 26,720,538    $  8,249,254    $ 20,714,309    $  6,924,595
   Gas Proceeds .........................     14,056,885       1,898,423      10,707,104       1,284,464
   Other Payments(a) ....................             --              --              --              --
                                            ------------    ------------    ------------    ------------
         Total ..........................     40,777,423      10,147,677      31,421,413       8,209,059
                                            ------------    ------------    ------------    ------------
Less:
   Severance Tax
      Oil ...............................      1,103,059         315,491         874,011         277,759
      Gas ...............................      1,041,208         114,812         761,787          88,206
      Other .............................         63,954          24,970              --              --
   Lease Operating Expense
   and Property Tax
      Oil and Gas .......................     12,209,663       1,637,143      11,096,563       1,657,225
      Other Payments ....................
   Capital Expenditures .................      9,989,064              --      10,504,989              --
                                            ------------    ------------    ------------    ------------
         Total ..........................     24,406,948       2,092,416      23,237,350       2,023,190
                                            ------------    ------------    ------------    ------------
   Net Profits ..........................     16,370,475       8,055,261       8,184,063       6,185,869
   Net Overriding
      Royalty Interest ..................             75%             95%             75%             95%
                                            ------------    ------------    ------------    ------------
Royalty Income ..........................     12,277,856       7,652,498       6,138,047       5,876,576
Negative Revenues (b) ...................             --              --              --              --
Litigation Settlement (c) ...............             --              --              --              --
                                            ------------    ------------    ------------    ------------
Total Royalty Income for Distribution ...   $ 12,277,856    $  7,652,498    $  6,138,047    $  5,876,576
                                            ============    ============    ============    ============


</TABLE>

(a) The Trust received funds in 1998 from BROG which represented the Trust's
portion of amounts that had been previously held in suspense by BROG relating to
the Texas Royalty properties. The Trustee was advised that these amounts relate
to revenues received by BROG prior to the conveyance of its interest in the
Texas Royalty properties to Riverhill Energy in February 1997.

(b) In calculating Trust royalty income for the months of June through December
1998, costs exceeded revenues for the Waddell Ranch properties underlying the
Waddell Ranch Net Overriding Royalty Conveyance dated effective November 1, 1980
("Waddell Ranch Conveyance"), by $1,218,732. Pursuant to the Waddell Ranch
Conveyance, excess costs plus accrued interest must be recovered from future net
proceeds relating to the underlying Waddell Ranch properties before the
properties can again contribute to Trust royalty income. Cumulative excess
amounts were fully recovered in February 1999.

(c) The Trust received its portion of settlement proceeds totaling $766,051 from
a class-action lawsuit. For further information on the class action, see the
section hereof entitled "Results of the Fourth Quarters of 1999 and 1998,"
contained herein.



4

<PAGE>   7

DISCUSSION AND ANALYSIS

TRUSTEE'S DISCUSSION AND ANALYSIS FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31,
1999

Royalty income received by the Trust for the three-year period ended December
31, 1999, is reported in the following table:

<TABLE>
<CAPTION>
                                           Year Ended December 31,
                                 -----------------------------------------
ROYALTIES                            1999           1998           1997
---------                        -----------    -----------    -----------
<S>                              <C>            <C>            <C>
Total Revenue ................   $18,799,659    $10,777,901    $22,598,873
                                         100%           100%           100%
Oil Revenue ..................    12,202,034      5,788,953     15,582,132
                                          65%            54%            69%
Gas Revenue ..................     6,597,626      3,709,381      7,016,741
                                          35%            34%            31%
Other Payments ...............            --        513,516             --
                                          --              5%            --
Litigation Payment ...........            --        766,051             --
                                          --              7%            --
Total Revenue/Unit ...........   $   .403350    $   .231242    $   .484863
</TABLE>

Royalty income of the Trust for the calendar year is associated with actual oil
and gas production for the period November of the prior year through October of
the current year. Oil and gas sales for 1999, 1998 and 1997 for the Royalties
and the properties from which the Royalties were carved, excluding portions
attributable to the adjustments discussed hereafter, are presented in the
following table:

<TABLE>
<CAPTION>
                                            Year Ended December 31,
                                 ------------------------------------------
ROYALTIES                             1999           1998           1997
---------                        ------------   ------------   ------------
<S>                              <C>            <C>            <C>
Oil Sales (Bbls) .............        909,352        457,010        817,792
Gas Sales (Mcf) ..............      3,464,208      1,432,949      2,716,755

PROPERTIES FROM WHICH THE
-------------------------
 ROYALTIES WERE CARVED
 ---------------------

Oil

Total Oil Sales (Bbls) .......      1,674,898      1,909,702      1,826,019
Average Per Day (Bbls) .......          4,589          5,232          5,003
Average Price/Bbl ............   $      14.29   $      12.69   $      19.46

Gas

Total Gas Sales (Mcf) ........      6,907,167      7,373,436      7,355,162
Average Per Day (Mcf) ........         18,924         20,201         20,151
Average Price/Mcf ............   $       2.11   $       2.12   $       2.64
</TABLE>

The average price of oil increased from 1998 to 1999 as the posted price
fluctuated. In 1999, oil prices climbed to decade record highs. In 1998, the
average price of oil remained relatively unchanged. The average price of gas
remained stable from 1998 to 1999.

         Since the oil and gas sales attributable to the Royalties are based on
an allocation formula that is dependent on such factors as price and cost
(including capital expenditures), the production amounts do not provide a
meaningful comparison. As discussed below, during 1998, there were certain
months in which costs exceeded revenues on the Waddell Ranch properties. As a
result, no royalty income was received for those months. Production attributable
to the Trust is calculated based on net royalty income. As there was no royalty
income, no production was reported for the Waddell Ranch properties at the Trust
level for those months. Production at the Trust level for the Waddell Ranch
properties was not recorded again until February 1999 when the cumulative excess
amounts had been recovered. Oil production decreased approximately 12.3% from
1998 to 1999 primarily due to a decrease in capital expenditures as a result of
lower oil prices in early 1999. Total gas sales decreased approximately 6.3%
from 1998 to 1999 primarily due to a decrease in capital expenditures.



                                                                               5
<PAGE>   8

DISCUSSION AND ANALYSIS, CONTINUED

         In the calculation of royalty income for the months of June through
December 1998, costs exceeded revenues for the Waddell Ranch properties by
$1,218,732. This impacted the January 1999 distributions to Unit holders.
Pursuant to the Waddell Ranch Conveyance, excess costs plus accrued interest
must be recovered from future net proceeds relating to the underlying Waddell
Ranch properties before they could again contribute to Trust royalty income.
Increased capital expenditures and declining oil and gas prices contributed to
this situation. Subsequently, in February 1999, BROG and CMC notified the
Trustee that revenues exceeded the cumulative excess costs by $22,506 and that
the underlying Waddell Ranch properties were again contributing to Trust royalty
income and production.

         Total capital expenditures in 1999 used in the net overriding royalty
calculation were approximately $1.1 million compared to $15.9 million in 1998
and $11.8 million in 1997. During 1999, there were 6 gross (3.625 net) wells
drilled on the Waddell Ranch properties. At December 31, 1999, there were 3
gross (1.625 net) wells in progress on the Waddell Ranch properties.

         In 1999, lease operating expense and property taxes on the Waddell
Ranch properties amounted to approximately $9.8 million, which is a decrease of
approximately $4.3 million from 1998. This decrease is due primarily to the
reduced activities of management for 1999.

         The Trustee has been advised by BROG that for the period August 1,
1993, through June 30, 2000, the oil from the Waddell Ranch is being sold under
a competitive bid to a third party.

         During 1999, the monthly royalty receipts were invested by the Trustee
in U.S. Treasury securities until the monthly distribution date, and earned
interest totaled $27,331. Interest income for 1998 and 1997 was $27,825 and
$42,665, respectively. The decrease in interest income from 1997 to 1999 can be
attributed to a decline in interest rates and reduced amount of funds available
for a lesser period of time.

         General and administrative expenses in 1999 were $355,148 compared to
$391,344 in 1998 and $451,423 in 1997. The decrease in general and
administrative expenses from 1997 to 1999 is primarily due to higher
administrative, accounting and legal fees incurred in 1997 and 1998 and cost
reduction efforts implemented by the Trustee.

         For Trust year 2000 compliance considerations, see Item 7 of the
accompanying Form 10-K.

         Distributable income for 1999 was $18,471,842 or $.396317 per Unit.

         Distributable income for 1998 was $10,414,382 or $.223443 per Unit.

         Distributable income for 1997 was $22,190,115 or $.476092 per Unit.



6
<PAGE>   9

RESULTS OF THE FOURTH QUARTERS OF 1999 AND 1998

Royalty income received by the Trust for the fourth quarter of 1999 amounted to
$7,100,864 or $.152350 per Unit. For the fourth quarter of 1998, the Trust
received royalty income of $1,519,089 or $.032592 per Unit. Interest income for
the fourth quarter of 1999 amounted to $12,509 compared to $7,915 for the fourth
quarter of 1998. The increase in interest income can be attributed primarily to
an increase in funds available for investment. General and administrative
expenses totaled $46,173 for the fourth quarter of 1999 compared to $67,452 for
the fourth quarter of 1998. The decrease in general and administrative expenses
is primarily due to cost reduction efforts implemented by the Trustee.

         As has been previously reported, the Trustee was notified in the third
quarter of 1996 of the settlement of a class-action lawsuit pending in the 270th
District Court of Harris County, Texas (the "Court") styled Caroline Altheide
and Langdon Harrison vs. Meridian Oil Inc., Meridian Oil Holding Inc., Meridian
Oil Trading Inc., Meridian Oil Production Inc., Southland Royalty Company, El
Paso Production Company, Meridian Oil Hydrocarbons Inc., Meridian Oil Gathering
Inc., Meridian Oil Services Inc., and Edward Parker ("Class Action"), in which
the Trust was a class member. The judgment approving the settlement of the Class
Action was the subject of an appeal. The Trustee was advised that such appeal
was dismissed and in October 1998, the Trust's portion of such settlement
proceeds, in the amount of $766,051, was received by the Trustee. The proceeds
were subsequently distributed with the regular monthly Trust distribution on
November 16, 1998, to the Trust's Unit holders of record on October 31, 1998.
The settlement proceeds are not reflected as Trust production in 1998 or prior
years.

         Royalty income for the Trust for the fourth quarter is associated with
actual oil and gas production during August through October from the properties
from which the Trust's net overriding royalty interests were carved. Oil and gas
sales attributable to the Royalties and the properties from which the Royalties
were carved for the quarter and the comparable period for 1998 are as follows:

<TABLE>
<CAPTION>
Fourth Quarter                        1999         1998
--------------                     ----------   ----------
<S>                                <C>          <C>
ROYALTIES

Oil Sales (Bbls) ...............      235,216      104,863
Gas Sales (Mcf) ................      946,780      219,336
</TABLE>


<TABLE>
<CAPTION>
Fourth Quarter                        1999         1998
--------------                     ----------   ----------
<S>                                <C>          <C>
PROPERTIES FROM WHICH
THE ROYALTIES WERE CARVED

Total Oil Sales (Bbls) .........      379,585      504,089
Average Per Day (Bbls) .........        4,126        5,479
Average Price/Bbls .............   $    20.47   $    11.16
Total Gas Sales (Mcf) ..........    1,623,387    1,948,424
Average Per Day (Mcf) ..........       17,646       21,179
Average Price/Mcf ..............   $     2.79   $     1.85
</TABLE>


         The posted price of oil increased for the fourth quarter of 1999
compared to the fourth quarter of 1998, resulting in an average price per barrel
of $20.47 compared to $11.16 in the same period of 1998. The average price of
gas increased for the fourth quarter of 1999 compared to the same period in
1998, resulting in an average price per Mcf of $2.79 compared to $1.85 in the
fourth quarter of 1998.

         Since the oil and gas sales attributable to the Royalties are based on
an allocation formula that is dependent on such factors as price and cost
(including capital expenditures), the production amounts do not provide a
meaningful comparison. During the fourth quarter of 1998, costs exceeded
revenues on the Waddell Ranch properties. As a result of this, no royalty income
was received for those three months as well as in the previous four months.
Production attributable to the Trust is calculated based on net royalty income.
As there was no royalty income, no production was reported for the Waddell Ranch
properties at the Trust level for those months. Production at the Trust level
for the Waddell Ranch properties was not recorded again until February 1999 when
the cumulative excess amounts had been recovered. The Trustee was advised that
oil sales decreased in 1999 compared to the same period in 1998 primarily due to
decreased capital expenditures. Gas sales from the properties from which the
Royalties were carved decreased in the fourth quarter of 1999 compared to the
same period in 1998 due to a decrease in capital expenditures.

         The Trust has been advised that there were 6 gross (3.65 net) wells
drilled and completed during the three months ended December 31, 1999, and there
were 3 gross (1.625 net) wells in progress.




                                                                               7
<PAGE>   10
PERMIAN BASIN ROYALTY TRUST

STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
ASSETS                                                          1999         1998
------                                                       ----------   ----------
<S>                                                          <C>          <C>
Cash and Short-term Investments ..........................   $2,415,245   $  525,193
Net Overriding Royalty Interests in Producing Oil and
   Gas Properties - Net (Notes 2 and 3) ..................    2,889,978    3,336,583
                                                             ----------   ----------
                                                             $5,305,223   $3,861,776
                                                             ==========   ==========
LIABILITIES AND TRUST CORPUS
----------------------------
Distribution Payable to Unit Holders .....................   $2,415,245   $  525,193
Trust Corpus - 46,608,796 Units of Beneficial Interest
   Authorized and Outstanding ............................    2,889,978    3,336,583
                                                             ----------   ----------
                                                             $5,305,223   $3,861,776
                                                             ==========   ==========
</TABLE>

STATEMENTS OF DISTRIBUTABLE INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                              1999            1998            1997
                                                          ------------    ------------    ------------
<S>                                                       <C>             <C>             <C>
Royalty Income (Notes 2 and 3) ........................   $ 18,799,659    $ 10,777,901    $ 22,598,873
Interest Income .......................................         27,331          27,825          42,665
                                                          ------------    ------------    ------------
                                                            18,826,990      10,805,726      22,641,538
Expenditures - General and Administrative .............        355,148         391,344         451,423
                                                          ------------    ------------    ------------
Distributable Income ..................................   $ 18,471,842    $ 10,414,382    $ 22,190,115
                                                          ============    ============    ============
Distributable Income per Unit (46,608,796 Units) ......   $    .396317    $    .223443    $    .476092
                                                          ============    ============    ============
</TABLE>

STATEMENTS OF CHANGES IN TRUST CORPUS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                              1999            1998            1997
                                                          ------------    ------------    ------------
<S>                                                       <C>             <C>             <C>
Trust Corpus, Beginning of Period .....................   $  3,336,583    $  3,496,594    $  3,760,939
Amortization of Net Overriding Royalty Interests
   (Notes 2 and 3) ....................................       (446,605)       (160,011)       (264,345)
Distributable Income ..................................     18,471,842      10,414,382      22,190,115
Distributions Declared ................................    (18,471,842)    (10,414,382)    (22,190,115)
                                                          ============    ============    ============
Trust Corpus, End of Period ...........................   $  2,889,978    $  3,336,583    $  3,496,594
                                                          ============    ============    ============
</TABLE>

The accompanying Notes to Financial Statements are an integral part of these
statements.


8
<PAGE>   11
NOTES TO FINANCIAL STATEMENTS

1. TRUST ORGANIZATION AND PROVISIONS

The Permian Basin Royalty Trust ("Trust") was established as of November 1,
1980. Bank of America, N.A. ("Trustee") is Trustee for the Trust. Southland
Royalty Company ("Southland") conveyed to the Trust (1) a 75% net overriding
royalty in Southland's fee mineral interest in the Waddell Ranch in Crane
County, Texas ("Waddell Ranch properties") and (2) a 95% net overriding royalty
carved out of Southland's major producing royalty properties in Texas ("Texas
Royalty properties"). The net overriding royalties above are collectively
referred to as "Royalties."

         On November 3, 1980, Units of Beneficial Interest ("Units") in the
Trust were distributed to the Trustee for the benefit of Southland shareholders
of record as of November 3, 1980, who received one Unit in the Trust for each
share of Southland common stock held. The Units are traded on the New York Stock
Exchange.

         The terms of the Trust Indenture provide, among other things, that:

o the Trust shall not engage in any business or commercial activity of any kind
or acquire any assets other than those initially conveyed to the Trust;

o the Trustee may not sell all or any part of the Royalties unless approved by
holders of 75% of all Units outstanding in which case the sale must be for cash
and the proceeds promptly distributed;

o the Trustee may establish a cash reserve for the payment of any liability
which is contingent or uncertain in amount;

o the Trustee is authorized to borrow funds to pay liabilities of the Trust; and

o the Trustee will make monthly cash distributions to Unit holders (see Note 2).

2. NET OVERRIDING ROYALTY INTERESTS AND DISTRIBUTION TO UNIT HOLDERS

The amounts to be distributed to Unit holders ("Monthly Distribution Amounts")
are determined on a monthly basis. The Monthly Distribution Amount is an amount
equal to the sum of cash received by the Trustee during a calendar month
attributable to the Royalties, any reduction in cash reserves and any other cash
receipts of the Trust, including interest, reduced by the sum of liabilities
paid and any increase in cash reserves. If the Monthly Distribution Amount for
any monthly period is a negative number, then the distribution will be zero for
such month. To the extent the distribution amount is a negative number, that
amount will be carried forward and deducted from future monthly distributions
until the cumulative distribution calculation becomes a positive number, at
which time a distribution will be made. Unit holders of record will be entitled
to receive the calculated Monthly Distribution Amount for each month on or
before ten business days after the monthly record date, which is generally the
last business day of each calendar month.

         The cash received by the Trustee consists of the amounts received by
owners of the interest burdened by the Royalties from the sale of production
less the sum of applicable taxes, accrued production costs, development and
drilling costs, operating charges and other costs and deductions, multiplied by
75% in the case of the Waddell Ranch properties and 95% in the case of the Texas
Royalty properties.

         The initial carrying value of the Royalties ($10,975,216) represented
Southland's historical net book value at the date of the transfer to the Trust.
Accumulated amortization as of December 31, 1999 and 1998, aggregated $8,085,238
and $7,638,633, respectively.

3. BASIS OF ACCOUNTING

The financial statements of the Trust are prepared on the following basis:

o Royalty income recorded is the amount computed and paid by the working
interest owner to the Trustee on behalf of the Trust.

o Trust expenses recorded are based on liabilities paid and cash reserves
established out of cash received or borrowed funds for liabilities and
contingencies.

o Distributions to Unit holders are recorded when declared by the Trustee.

         The financial statements of the Trust differ from financial statements
prepared in accordance with generally accepted accounting principles ("GAAP")
because revenues are not accrued in the month of production and certain cash
reserves may be established for contingencies which would not be accrued in
financial statements prepared in accordance with GAAP. Amortization of the
Royalties calculated on a unit-of-production basis is charged directly to trust
corpus.

4. FEDERAL INCOME TAX

For Federal income tax purposes, the Trust constitutes a fixed investment trust
which is taxed as a grantor trust. A grantor trust is not subject to tax at the
trust level. The Unit holders are considered to own the Trust's income and
principal as though no trust were in existence. The income of the Trust is
deemed to have been received or accrued by each Unit holder at the time such
income is received or accrued by the Trust rather than when distributed by the
Trust.

         The Royalties constitute "economic interests" in oil and gas properties
for Federal income tax purposes. Unit holders must report their share of the
revenues of the Trust as ordinary income from oil and gas royalties and are
entitled to claim depletion with respect to such income.



                                                                               9
<PAGE>   12

         The Trust has on file technical advice memoranda confirming the tax
treatment described above.

         The classification of the Trust's income for purposes of the passive
loss rules may be important to a Unit holder. As a result of the Tax Reform Act
of 1986, royalty income will generally be treated as portfolio income and will
not offset passive losses.

5. SIGNIFICANT CUSTOMERS

Information as to significant purchasers of oil and gas production attributable
to the Trust's economic interests is included in Item 2 of the Trust's Annual
Report on Form 10-K which is included in this report.

6. PROVED OIL AND GAS RESERVES (UNAUDITED)

Proved oil and gas reserve information is included in Item 2 of the Trust's
Annual Report on Form 10-K which is included in this report.

7. QUARTERLY SCHEDULE OF DISTRIBUTABLE INCOME (UNAUDITED)

The following is a summary of the unaudited quarterly schedule of distributable
income for the two years ended December 31, 1999 (in thousands, except per Unit
amounts):

<TABLE>
<CAPTION>
                                                   Distributable
                                                    Income and
                        Royalty     Distributable  Distribution
1999                    Income         Income        Per Unit
----                 ------------   -------------  -------------
<S>                  <C>            <C>            <C>
First Quarter.....   $      1,776   $      1,634   $    .035064
Second Quarter....          3,957          3,846        .082509
Third Quarter.....          5,966          5,925        .127116
Fourth Quarter....          7,101          7,067        .151628
                     ------------   ------------   ------------
   Total .........   $     18,800   $     18,472   $    .396317
                     ============   ============   ============

1998
----
First Quarter.....   $      5,253   $      5,139   $    .110267
Second Quarter....          1,600          1,458        .031283
Third Quarter.....          2,406          2,357        .050578
Fourth Quarter....          1,519          1,460        .031315
                     ------------   ------------   ------------
   Total .........   $     10,778   $     10,414   $    .223443
                     ============   ============   ============
</TABLE>



10
<PAGE>   13

INDEPENDENT AUDITORS' REPORT

BANK OF AMERICA, N.A., AS TRUSTEE FOR THE PERMIAN BASIN ROYALTY TRUST:

We have audited the accompanying statements of assets, liabilities and trust
corpus of the Permian Basin Royalty Trust as of December 31, 1999 and 1998, and
the related statements of distributable income and changes in trust corpus for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Trustee. 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 the
Trustee, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

         As described in Note 3 to the financial statements, these financial
statements were prepared on a modified cash basis, which is a comprehensive
basis of accounting other than generally accepted accounting principles.

         In our opinion, such financial statements present fairly, in all
material respects, the assets, liabilities and trust corpus of the Permian Basin
Royalty Trust as of December 31, 1999 and 1998, and the distributable income and
changes in trust corpus for each of the three years in the period ended December
31, 1999, on the basis of accounting described in Note 3.


/s/ DELOITTE & TOUCHE LLP

Deloitte & Touche LLP
Fort Worth, Texas
March 24, 2000

                                                                              11
<PAGE>   14




                                        PERMIAN BASIN ROYALTY TRUST
                                        901 Main Street, Suite 1700
                                        P.O. Box 830650
                                        Dallas, Texas 75202
                                        Bank of America, N.A., Trustee

                                        AUDITORS
                                        Deloitte & Touche LLP
                                        Fort Worth, Texas

                                        LEGAL COUNSEL
                                        Wallach & Moore, P.C.
                                        Fort Worth, Texas

                                        TAX COUNSEL
                                        Winstead, Sechrist Minick
                                        Houston, Texas

                                        TRANSFER AGENT
                                        ChaseMellon Shareholder Services, L.L.C.
                                        Ridgefield Park, New Jersey


<PAGE>   15
                                  [BACK COVER]


                       [PERMIAN BASIN ROYALTY TRUST LOGO]


                                                     PERMIAN BASIN ROYALTY TRUST
                                                     901 MAIN STREET, SUITE 1700
                                                          POST OFFICE BOX 830650
                                                             DALLAS, TEXAS 75202
<PAGE>   16

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ---------------------
                                   FORM 10-K
(Mark One)
[X]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES 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 1-8033
                          PERMIAN BASIN ROYALTY TRUST

   (Exact Name of Registrant as Specified in the Permian Basin Royalty Trust
                                   Indenture)

<TABLE>
<S>                                            <C>
                    TEXAS                                        75-6280532
       (State or Other Jurisdiction of                        (I.R.S. Employer
        Incorporation or Organization)                      Identification No.)

            BANK OF AMERICA, N.A.
               TRUST DEPARTMENT
               P.O. BOX 830650
                DALLAS, TEXAS                                      75283
   (Address of Principal Executive Offices)                      (Zip Code)
</TABLE>

                                 (214) 209-2400
              (Registrant's Telephone Number, Including Area Code)

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

<TABLE>
<CAPTION>
             TITLE OF EACH CLASS                 NAME OF EACH EXCHANGE ON WHICH REGISTERED
             -------------------                 -----------------------------------------
<S>                                            <C>
         UNITS OF BENEFICIAL INTEREST                     NEW YORK STOCK EXCHANGE
</TABLE>

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

     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  X  No
                                               ---    ---

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

     At March 10, 2000, there were 46,608,796 Units of Beneficial Interest of
the Trust outstanding with an aggregate market value on that date of
$221,391,781.

                      DOCUMENTS INCORPORATED BY REFERENCE

     "Units of Beneficial Interest" at page 1; "Trustee's Discussion and
Analysis for the Three-Year Period Ended December 31, 1999" at pages 5 through
6; "Results of the 4th Quarters of 1999 and 1998" at page 7; and "Statements of
Assets, Liabilities and Trust Corpus," "Statements of Distributable Income,"
"Statements of Changes in Trust Corpus," "Notes to Financial Statements" and
"Independent Auditors' Report" at page 8 et seq., in registrant's Annual Report
to security holders for fiscal year ended December 31, 1999 are incorporated
herein by reference for Item 5 (Market for Units of the Trust and Related
Security Holder Matters), Item 7 (Management's Discussion and Analysis of
Financial Condition and Results of Operation) and Item 8 (Financial Statements
and Supplementary Data) of Part II of this Report.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   17

FORWARD LOOKING INFORMATION

     Certain information included in this report contains, and other materials
filed or to be filed by the Trust with the Securities and Exchange Commission
(as well as information included in oral statements or other written statements
made or to be made by the Trust) may contain or include, forward looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and Section 27A of the Securities Act of 1933, as amended.
Such forward looking statements may be or may concern, among other things,
capital expenditures, drilling activity, development activities, production
efforts and volumes, hydrocarbon prices and the results thereof, and regulatory
matters. Although the Trustee believes that the expectations reflected in such
forward looking statements are reasonable, such expectations are subject to
numerous risks and uncertainties and the Trustee can give no assurance that they
will prove correct. There are many factors, none of which is within the
Trustee's control, that may cause such expectations not to be realized,
including, among other things, factors such as actual oil and gas prices and the
recoverability of reserves, capital expenditures, general economic conditions,
actions and policies of petroleum-producing nations and other changes in the
domestic and international energy markets. Such forward looking statements
generally are accompanied by words such as "estimate," "expect," "anticipate,"
"goal," "should," "assume," "believe," or other words that convey the
uncertainty of future events or outcomes.

                                     PART I

ITEM 1. BUSINESS

     The Permian Basin Royalty Trust (the "Trust") is an express trust created
under the laws of the state of Texas by the "Permian Basin Royalty Trust
Indenture" (the "Trust Indenture") entered into on November 3, 1980, between
Southland Royalty Company ("Southland Royalty") and The First National Bank of
Fort Worth, as Trustee. Bank of America, N.A. (formerly known as NationsBank,
N.A., NationsBank of Texas, N.A. and NCNB Texas National Bank), a banking
association organized under the laws of the United States, as the successor of
The First National Bank of Fort Worth, is now the Trustee of the Trust. The
principal office of the Trust (sometimes referred to herein as the "Registrant")
is located at 901 Main Street, Dallas, Texas (telephone number 214/209-2400).

     On October 23, 1980, the stockholders of Southland Royalty approved and
authorized that company's conveyance of net overriding royalty interests
(equivalent to net profits interests) to the Trust for the benefit of the
stockholders of Southland Royalty of record at the close of business on the date
of the conveyance consisting of a 75% net overriding royalty interest carved out
of that company's fee mineral interests in the Waddell Ranch properties in Crane
County, Texas and a 95% net overriding royalty interest carved out of that
company's major producing royalty properties in Texas. The conveyance of these
interests (the "Royalties") was made on November 3, 1980, effective as to
production from and after November 1, 1980 at 7:00 a.m.

     The function of the Trustee is to collect the income attributable to the
Royalties, to pay all expenses and charges of the Trust, and then distribute the
remaining available income to the Unit holders. The Trust is not empowered to
carry on any business activity and has no employees, all administrative
functions being performed by the Trustee.

     The Royalties were carved out of and now burden those properties and
interests as are more particularly described under "Item 2. PROPERTIES" herein.

     The Royalties constitute the principal asset of the Trust and the
beneficial interests in the Royalties are divided into that number of Units of
Beneficial Interest (the "Units") of the Trust equal to the number of shares of
the common stock of Southland Royalty outstanding as of the close of business on
November 3, 1980. Each stockholder of Southland Royalty of record at the close
of business on November 3, 1980, received one Unit for each share of the common
stock of Southland Royalty then held.

     In 1985, Southland Royalty became a wholly-owned subsidiary of Burlington
Northern Inc. ("BNI"). In 1988, BNI transferred its natural resource operations
to Burlington Resources Inc. ("BRI") as a result of which Southland Royalty
became a wholly-owned indirect subsidiary of BRI. As a result of these
transactions,

                                        1
<PAGE>   18

El Paso Natural Gas Company ("El Paso") also became an indirect subsidiary of
BRI. In March 1992, El Paso completed an initial public offering of 5,750,000
newly issued shares of El Paso common stock, thereby decreasing BRI's ownership
of El Paso to approximately eighty-five percent (85%). On June 30, 1992, BRI
distributed all of the shares of El Paso common stock owned by BRI to BRI's
stockholders of record as of June 15, 1992. See "Pricing Information" under
"Item 2. PROPERTIES" herein.

     Effective January 1, 1996, Southland Royalty, a wholly-owned subsidiary of
Meridian Oil Inc. ("MOI") was merged with and into MOI, by which action the
separate corporate existence of Southland Royalty ceased and MOI survived and
succeeded to the ownership of all of the assets, has the rights, powers and
privileges and assumed all of the liabilities and obligations of Southland
Royalty. In 1996, MOI changed its name to Burlington Resources Oil & Gas Company
("BROG").

     The term "net proceeds" as used in the above conveyance means the excess of
"gross proceeds" received by BROG during a particular period over "production
costs" for such period. "Gross proceeds" means the amount received by BROG (or
any subsequent owner of the interests from which the Royalties were carved) from
the sale of the production attributable to the properties and interests from
which the Royalties were carved, subject to certain adjustments. "Production
costs" means, generally, costs incurred on an accrual basis in operating the
properties and interests out of which the Royalties were carved, including both
capital and non-capital costs; for example, development drilling, production and
processing costs, applicable taxes, and operating charges. If production costs
exceed gross proceeds in any month, the excess is recovered out of future gross
proceeds prior to the making of further payment to the Trust, but the Trust is
not liable for any production costs or liabilities attributable to these
properties and interests or the minerals produced therefrom. If at any time the
Trust receives more than the amount due from the Royalties, it shall not be
obligated to return such overpayment, but the amounts payable to it for any
subsequent period shall be reduced by such amount, plus interest, at a rate
specified in the conveyance.

     To the extent it has the legal right to do so, BROG is responsible for
marketing the production from such properties and interests, either under
existing sales contracts or under future arrangements at the best prices and on
the best terms it shall deem reasonably obtainable in the circumstances. BROG
also has the obligation to maintain books and records sufficient to determine
the amounts payable to the Trustee. BROG, however, can sell its interests in the
properties from which the Royalties were carved.

     Proceeds from production in the first month are generally received by BROG
in the second month, the net proceeds attributable to the Royalties are paid by
BROG to the Trustee in the third month and distribution by the Trustee to the
Unit holders is made in the fourth month. The identity of Unit holders entitled
to a distribution will generally be determined as of the last business day of
each calendar month (the "monthly record date"). The amount of each monthly
distribution will generally be determined and announced ten days before the
monthly record date. Unit holders of record as of the monthly record date will
be entitled to receive the calculated monthly distribution amount for each month
on or before ten business days after the monthly record date. The aggregate
monthly distribution amount is the excess of (i) net revenues from the Trust
properties, plus any decrease in cash reserves previously established for
contingent liabilities and any other cash receipts of the Trust over (ii) the
expenses and payments of liabilities of the Trust plus any net increase in cash
reserves for contingent liabilities.

     Cash held by the Trustee as a reserve for liabilities or contingencies
(which reserves may be established by the Trustee in its discretion) or pending
distribution is placed, at the Trustee's discretion, in obligations issued by
(or unconditionally guaranteed by) the United States or any agency thereof,
repurchase agreements secured by obligations issued by the United States or any
agency thereof, or certificates of deposit of banks having a capital surplus and
undivided profits in excess of $50,000,000, subject, in each case, to certain
other qualifying conditions.

     The income to the Trust attributable to the Royalties is not subject in
material respects to seasonal factors nor in any manner related to or dependent
upon patents, licenses, franchises or concessions. The Trust conducts no
research activities. The Trust has no employees since all administrative
functions are performed by the Trustee.

                                        2
<PAGE>   19

     BROG has advised the Trustee that it believes that comparable revenues
could be obtained in the event of a change in purchasers of production.

ITEM 2. PROPERTIES

     The net overriding royalties conveyed to the Trust include: (1) a 75% net
overriding royalty carved out of Southland Royalty's fee mineral interests in
the Waddell Ranch in Crane County, Texas (the "Waddell Ranch properties"); and
(2) a 95% net overriding royalty carved out of Southland Royalty's major
producing royalty interests in Texas (the "Texas Royalty properties"). The net
overriding royalty for the Texas Royalty properties is subject to the provisions
of the lease agreements under which such royalties were created. References
below to "net" wells and acres are to the interests of Southland Royalty (from
which the Royalties were carved) in the "gross" wells and acres.

     The following information in Item 2 is based upon data and information
furnished to the Trustee by Southland Royalty or BROG.

PRODUCING ACREAGE, WELLS AND DRILLING

     Waddell Ranch Properties. The Waddell Ranch properties consist of 78,175
gross (34,205 net) producing acres. A majority of the proved reserves are
attributable to six fields: Dune, Sand Hills (Judkins), Sand Hills (McKnight),
Sand Hills (Tubb), University-Waddell (Devonian) and Waddell. At December 31,
1999, the Waddell Ranch properties contained 791 gross (327 net) productive oil
wells, 168 gross (70 net) productive gas wells and 350 gross (139 net) injection
wells.

     BROG is operator of record of the Waddell Ranch properties. All field,
technical and accounting operations have been contracted by an agreement between
the working interest owners and Coastal Management Corporation ("CMC") but
remain under the direction of BROG.

     The Waddell Ranch properties are mature producing properties, and all of
the major oil fields are currently being waterflooded. Proved reserves and
estimated future net revenues attributable to the properties are included in the
reserve reports summarized below. BROG does not own the full working interest in
any of the tracts constituting the Waddell Ranch properties and, therefore,
implementation of any development programs will require approvals of other
working interest holders as well as BROG. In addition, implementation of any
development programs will be dependent upon oil and gas prices currently being
received and anticipated to be received in the future. During 1999 there were 6
gross (2.625 net) wells drilled on the Waddell Ranch properties. At December 31,
1999 there were 3 gross (1.375 net) wells in progress on the Waddell Ranch
properties. During 1998 there were 52 gross (22.75 net) wells drilled on the
Waddell Ranch properties. At December 31, 1998 there were 3 gross (1.375 net)
wells in progress on the Waddell Ranch properties. During 1997 there were 23
gross (9.25 net) wells drilled on the Waddell Ranch properties. At December 31,
1997 there were 19 gross (7.875 net) wells in progress on the Waddell Ranch
properties.

     BROG has advised the Trustee that the total amount of capital expenditures
for 1999 with regard to the Waddell Ranch properties totalled $1,052,769.
Capital expenditures include the cost of remedial and maintenance activities.
This amount spent is approximately $5,013,231 less than the budgeted amount
projected by BROG for 1999. BROG has advised the Trustee that the capital
expenditures budget for 2000 totals approximately $14,404,000, of which
approximately $5,076,000 is attributable to the 2000 drilling program, and
$9,364,000 to workovers and recompletions. Accordingly, there is a substantial
increase in capital expenditures for 2000 as compared with the 1999 capital
expenditures.

     Texas Royalty Properties. The Texas Royalty properties consist of royalty
interests in mature producing oil fields, such as Yates, Wasson, Sand Hills,
East Texas, Kelly-Snyder, Panhandle Regular, N. Cowden, Todd, Keystone, Kermit,
McElroy, Howard-Glasscock, Seminole and others. The Texas Royalty properties
contain approximately 303,000 gross (approximately 51,000 net) producing acres.
Detailed information concerning the number of wells on royalty properties is not
generally available to the owners of royalty interests. Consequently, an
accurate count of the number of wells located on the Texas Royalty properties
cannot readily be obtained.

                                        3
<PAGE>   20

     In February 1997, BROG sold its interests in the Texas Royalty properties
that are subject to the Net Overriding Royalty Conveyance to the Trust dated
effective November 1, 1980 ("Texas Royalty Conveyance") to Riverhill Energy
Corporation ("Riverhill Energy"), which was then a wholly-owned subsidiary of
Riverhill Capital Corporation ("Riverhill Capital") and an affiliate of CMC. At
the time of such sale, Riverhill Capital was a privately owned Texas corporation
with offices in Bryan and Midland, Texas. The Trustee was informed by BROG that,
as required by the Texas Royalty Conveyance, Riverhill Energy succeeded to all
of the requirements upon and the responsibilities of BROG under the Texas
Royalty Conveyance with regard to the Texas Royalty properties. BROG and
Riverhill Energy further advised the Trustee that all accounting operations
pertaining to the Texas Royalty properties were being performed by CMC under the
direction of Riverhill Energy. BROG indicated to the Trustee that BROG will work
together with CMC and Riverhill Energy in an effort to assure that various
administrative functions and reporting requirements assumed by Riverhill Energy
are met. The Trustee has been advised that independent auditors representing
Riverhill Energy and CMC are Arthur Andersen LLP.

     The Trustee has been advised that in the first quarter of 1998 Schlumberger
Technology Corporation ("Schlumberger"), acquired all of the shares of stock of
Riverhill Capital. Prior to such acquisition by Schlumberger, CMC and Riverhill
Energy were wholly-owned subsidiaries of Riverhill Capital. The Trustee has
further been advised that in connection with Schlumberger's acquisition of
Riverhill Capital, the shareholders of Riverhill Capital acquired ownership of
all of the shares of stock of Riverhill Energy. Thus, the ownership in the Texas
Royalty properties referenced above remained in Riverhill Energy, the stock
ownership of which was acquired by the former shareholders of Riverhill Capital.
Accounting operations pertaining to the Texas Royalty properties are being
performed by CMC under the direction of Riverhill Energy. CMC also currently
conducts all field, technical and accounting operations on behalf of BROG with
regard to the Waddell Ranch properties.

OIL AND GAS PRODUCTION

     The Trust recognizes production during the month in which the related
distribution is received. Production of oil and gas attributable to the
Royalties and the properties from which the Royalties were carved and the
related average sales prices attributable to the properties from which the
Royalties were carved for the three years ended December 31, 1999, excluding
portions attributable to the adjustments discussed below, were as follows:

<TABLE>
<CAPTION>
                                           WADDELL                           TEXAS
                                            RANCH                           ROYALTY
                                         PROPERTIES                       PROPERTIES                          TOTAL
                              ---------------------------------   ---------------------------   ---------------------------------
                                1999        1998        1997       1999      1998      1997       1999        1998        1997
                              ---------   ---------   ---------   -------   -------   -------   ---------   ---------   ---------
<S>                           <C>         <C>         <C>         <C>       <C>       <C>       <C>         <C>         <C>
ROYALTIES:
  Production
    Oil (barrels)...........    601,148      87,187     426,127   308,204   369,823   391,665     909,352     457,010     817,792
    Gas (Mcf)...............  2,754,393     666,864   1,875,965   709,815   766,085   840,790   3,464,208   1,432,949   2,716,755
PROPERTIES FROM WHICH THE
  ROYALTIES WERE CARVED:
  Production
    Oil (barrels)...........  1,309,396   1,475,258   1,387,056   365,502   434,444   438,963   1,674,898   1,909,702   1,826,019
    Gas (Mcf)...............  6,066,149   6,458,411   6,409,242   841,018   915,025   945,920   6,907,167   7,373,436   7,355,162
  Average Price
    Oil/barrel..............     $14.26      $12.76      $19.54    $14.40    $12.44    $19.20      $14.29      $12.69      $19.46
    Gas/Mcf.................     $ 2.11      $ 2.13      $ 2.67    $ 2.09    $ 2.06    $ 2.45      $ 2.11      $ 2.12      $ 2.64
</TABLE>

     Since the oil and gas sales attributable to the Royalties are based on an
allocation formula that is dependent on such factors as price and cost
(including capital expenditures), the production amounts do not provide a
meaningful comparison.

     In calculating Trust royalty income for the months of June through December
1998, costs exceeded revenues in the Waddell Ranch properties by $1,218,732.
Pursuant to the Waddell Ranch Net Overriding Royalty Conveyance dated effective
November 1, 1980 ("Waddell Ranch Conveyance"), excess costs plus accrued
interest must be recovered from future net proceeds relating to the underlying
Waddell Ranch

                                        4
<PAGE>   21

properties before the properties can again contribute to Trust royalty income.
As a result of this, no royalty income was received for those months. Production
attributable to the Trust is calculated based on net royalty income. As there
was no royalty income, no production was reported for the Waddell Ranch
properties at the Trust level for those months. Production at the Trust level
for the Waddell Ranch properties was not recorded again until February 1999 when
the cumulative excess amounts had been recovered.

     In September 1998, the Trust received $1,041,340 from BROG which
represented the Trust's portion of amounts that had been previously held in
suspense by BROG relating to the Texas Royalty properties. The Trustee was
advised that these amounts relate to revenues received by BROG prior to the
conveyance of its interest in the Texas Royalty properties to Riverhill Energy
in February 1997. In October 1998, Riverhill Energy advised the Trustee that an
overpayment of $521,183 with regard to the suspended funds had been made to the
Trust. Pursuant to the Texas Royalty Conveyance, Riverhill Energy offset the
overpayment against royalty income attributable to the Texas Royalty properties
for the months of October and November 1998. The suspense amounts are not
reflected in Trust production or used in calculating average prices in 1998 or
prior years.

     The Trustee was notified in the third quarter of 1996 of the settlement of
a class action lawsuit pending in the 270th District Court of Harris County,
Texas (the "Court") styled Caroline Altheide and Langdon Harrison vs. Meridian
Oil Inc., Meridian Oil Holding Inc., Meridian Oil Trading Inc., Meridian Oil
Production Inc., Southland Royalty Company, El Paso Production Company, Meridian
Oil Hydrocarbons Inc., Meridian Oil Gathering Inc., Meridian Oil Services Inc.
and Edward Parker ("Class Action"), in which the Trust was a class member. The
judgment approving the settlement of the Class Action was the subject of an
appeal. The Trustee was advised that such appeal was dismissed and in October
1998, the Trust's portion of such settlement proceeds, in the amount of $766,051
was received by the Trustee. The proceeds were subsequently distributed with the
regular monthly Trust distribution on November 16, 1998, to the Trust's Unit
holders of record on October 31, 1998. The settlement proceeds are not reflected
in Trust production in 1998 or prior years.

PRICING INFORMATION

     Reference is made to "Regulation" for information as to federal regulation
of prices of natural gas. The following paragraphs provide information regarding
sales of oil and gas from the Waddell Ranch properties. As a royalty owner,
Southland Royalty is not furnished detailed information regarding sales of oil
and gas from the Texas Royalty properties.

     Oil. The Trustee has been advised by BROG that for the period August 1,
1993 through June 30, 2000, the oil from the Waddell Ranch properties is being
sold under a competitive bid to independent third parties.

     Gas. The gas produced from the Waddell Ranch properties is processed
through a natural gas processing plant and sold at the tailgate of the plant.
Plant products are marketed by Burlington Resources Hydrocarbons Inc., an
indirect subsidiary of BRI. The processor of the gas (Warren Petroleum Company,
L.P.) receives 15% of the liquids and residue gas as a fee for gathering,
compression, treating and processing the gas.

OIL AND GAS RESERVES

     The following are definitions adopted by the Securities and Exchange
Commission ("SEC") and the Financial Accounting Standards Board which are
applicable to terms used within this Item:

          "Proved reserves" are those estimated quantities of crude oil, natural
     gas and natural gas liquids, which, upon analysis of geological and
     engineering data, appear with reasonable certainty to be recoverable in the
     future from known oil and gas reservoirs under existing economic and
     operating conditions.

          "Proved developed reserves" are those proved reserves which can be
     expected to be recovered through existing wells with existing equipment and
     operating methods.

                                        5
<PAGE>   22

          "Proved undeveloped reserves" are those proved reserves which are
     expected to be recovered from new wells on undrilled acreage, or from
     existing wells where a relatively major expenditure is required.

          "Estimated future net revenues" are computed by applying current
     prices of oil and gas (with consideration of price changes only to the
     extent provided by contractual arrangements and allowed by federal
     regulation) to estimated future production of proved oil and gas reserves
     as of the date of the latest balance sheet presented, less estimated future
     expenditures (based on current costs) to be incurred in developing and
     producing the proved reserves, and assuming continuation of existing
     economic conditions. "Estimated future net revenues" are sometimes referred
     to herein as "estimated future net cash flows."

          "Present value of estimated future net revenues" is computed using the
     estimated future net revenues and a discount factor of 10%.

     The independent petroleum engineers' reports as to the proved oil and gas
reserves attributable to the Royalties conveyed to the Trust were obtained from
Cawley, Gillespie & Associates, Inc. The following table presents a
reconciliation of proved reserve quantities from December 31, 1996 through
December 31, 1999 (in thousands):

<TABLE>
<CAPTION>
                                                         WADDELL RANCH        TEXAS ROYALTY
                                                           PROPERTIES          PROPERTIES              TOTAL
                                                       ------------------   -----------------   -------------------
                                                         OIL       GAS        OIL       GAS       OIL        GAS
                                                       (BBLS)     (MCF)     (BBLS)     (MCF)     (BBLS)     (MCF)
                                                       -------   --------   -------   -------   --------   --------
<S>                                                    <C>       <C>        <C>       <C>       <C>        <C>
December 31, 1996....................................   7,303     34,511     4,672     4,790     11,975     39,301
Extensions, discoveries and other additions..........      48         52       -0-       -0-         48         52
Revisions of previous estimates......................  (1,902)    (8,512)      161       680     (1,741)    (7,832)
Production...........................................    (426)    (1,876)     (392)     (841)      (818)    (2,717)
                                                       ------     ------     -----     -----     ------     ------
December 31, 1997....................................   5,023     24,175     4,441     4,629      9,464     28,804
Extensions, discoveries and other additions..........      10          4       -0-       -0-         10          4
Revisions of previous estimates......................  (2,231)    (6,123)     (285)      100     (2,516)    (6,023)
Production...........................................     (87)      (667)     (370)     (766)      (457)    (1,433)
                                                       ------     ------     -----     -----     ------     ------
December 31, 1998....................................   2,715     17,389     3,786     3,963      6,501     21,352
Extensions, discoveries and other additions..........      15         49       -0-       -0-         15         49
Revisions of previous estimates......................   3,357      8,320       667     2,375      4,024     10,695
Production...........................................    (601)    (2,754)     (308)     (710)      (909)    (3,464)
                                                       ------     ------     -----     -----     ------     ------
December 31, 1999....................................   5,486     23,004     4,145     5,628      9,631     28,632
                                                       ======     ======     =====     =====     ======     ======
</TABLE>

     Estimated quantities of proved developed reserves of crude oil and natural
gas as of December 31, 1999, 1998 and 1997 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                              CRUDE OIL    NATURAL GAS
                                                               (BBLS)         (MCF)
                                                              ---------    -----------
<S>                                                           <C>          <C>
1999........................................................    8,200        24,248
1998........................................................    5,476        17,444
1997........................................................    8,116        23,054
</TABLE>

     The Financial Accounting Standards Board requires supplemental disclosures
for oil and gas producers based on a standardized measure of discounted future
net cash flows relating to proved oil and gas reserve quantities. Under this
disclosure, future cash inflows are computed by applying year-end prices of oil
and gas relating to the enterprise's proved reserves to the year-end quantities
of those reserves. Future price changes are only considered to the extent
provided by contractual arrangements in existence at year end. The standardized
measure of discounted future net cash flows is achieved by using a discount rate
of 10% a year to reflect the timing of future cash flows relating to proved oil
and gas reserves.

                                        6
<PAGE>   23

     Estimates of proved oil and gas reserves are by their very nature
imprecise. Estimates of future net revenue attributable to proved reserves are
sensitive to the unpredictable prices of oil and gas and other variables.

     The 1999, 1998, and 1997 change in the standardized measure of discounted
future net cash flows related to future royalty income from proved reserves
discounted at 10% is as follows (in thousands):

<TABLE>
<CAPTION>
                                     WADDELL RANCH PROPERTIES       TEXAS ROYALTY PROPERTIES                 TOTAL
                                  ------------------------------   ---------------------------   ------------------------------
                                    1999       1998       1997      1999      1998      1997       1999       1998       1997
                                  --------   --------   --------   -------   -------   -------   --------   --------   --------
<S>                               <C>        <C>        <C>        <C>       <C>       <C>       <C>        <C>        <C>
January 1.......................  $ 25,043   $ 63,179   $150,170   $22,031   $40,956   $52,457   $ 47,074   $104,135   $202,627
Extensions, discoveries and
  other additions...............       226         81        619       -0-       -0-       -0-        226         81        619
Accretion of discount...........     2,504      6,318     15,017     2,203     4,096     5,246      4,707     10,414     20,263
Revisions of prior year
  estimates, changes in price
  and other.....................    88,598    (39,982)   (89,235)   33,627   (16,796)   (7,540)   122,225    (56,778)   (96,775)
Royalty income..................   (14,283)    (4,553)   (13,392)   (5,735)   (6,225)   (9,207)   (20,018)   (10,778)   (22,599)
                                  --------   --------   --------   -------   -------   -------   --------   --------   --------
December 31.....................  $102,088   $ 25,043   $ 63,179   $52,126   $22,031   $40,956   $154,214   $ 47,074   $104,135
                                  ========   ========   ========   =======   =======   =======   ========   ========   ========
</TABLE>

     Oil and gas prices of $24.05 and $24.19 per barrel and $2.74 and $3.18 per
Mcf were used to determine the estimated future net revenues from the Waddell
Ranch properties and the Texas Royalty properties, respectively, at December 31,
1999. The extension, discoveries and other additions for the Waddell Ranch
properties are proved reserves related to the Waddell (Greyburg) and Running WN
(Wolfcamp) fields. The upward revisions of both reserves and discounted future
net cash flows for the Waddell Ranch properties and the Texas Royalty properties
are due to increases in the oil and gas prices from 1998 to 1999.

     Oil and gas prices of $8.56 and $9.96 per barrel and $1.74 and $1.88 per
Mcf were used to determine the estimated future net revenues from the Waddell
Ranch properties and the Texas Royalty properties, respectively, at December 31,
1998. The extension, discoveries and other additions for the Waddell Ranch
properties are proved developed producing reserves related to the RM (Clearfork)
field. The downward revisions of both reserves and discounted future net cash
flows for the Waddell Ranch properties and the Texas Royalty properties were due
to decreases in oil and gas prices from 1997 to 1998.

     Oil and gas prices of $15.79 and $16.75 per barrel and $2.28 and $3.14 per
Mcf were used to determine the estimated future net revenues from the Waddell
Ranch properties and the Texas Royalty properties at December 31, 1997. The
downward revision of the estimated oil reserves and the related decrease in the
discounted future net cash flow for the Waddell Ranch properties was primarily
due to the decrease in oil prices from 1996 to 1997. The downward revision in
the estimated gas reserves for the Waddell Ranch properties was primarily due to
the decrease in gas prices from 1996 to 1997.

                                        7
<PAGE>   24

     The following presents estimated future net revenue and the present value
of estimated future net revenue, for each of the years ended December 31, 1999,
1998, and 1997 (in thousands except amounts per Unit):

<TABLE>
<CAPTION>
                                                      1999                     1998                    1997
                                              ---------------------    --------------------    ---------------------
                                              ESTIMATED                ESTIMATED               ESTIMATED
                                               FUTURE      PRESENT      FUTURE      PRESENT     FUTURE      PRESENT
                                                 NET        VALUE         NET        VALUE        NET        VALUE
                                               REVENUE      AT 10%      REVENUE     AT 10%      REVENUE      AT 10%
                                              ---------    --------    ---------    -------    ---------    --------
<S>                                           <C>          <C>         <C>          <C>        <C>          <C>
Total Proved
  Waddell Ranch properties..................  $184,957     $102,088     $50,322     $25,043    $126,924     $ 63,179
  Texas Royalty properties..................   113,838       52,126      43,290      22,031      85,254       40,956
                                              --------     --------     -------     -------    --------     --------
        Total...............................  $297,795     $154,214     $93,612     $47,074    $212,178     $104,135
                                              ========     ========     =======     =======    ========     ========
Total Proved Per Unit.......................  $   6.41     $   3.31     $  2.01     $  1.01    $   4.55     $   2.23
                                              ========     ========     =======     =======    ========     ========
Proved Developed
  Waddell Ranch properties..................  $140,808     $ 85,612     $35,607     $22,032    $ 94,493     $ 55,150
  Texas Royalty properties..................   113,838       52,126      43,290      22,031      85,254       40,956
                                              --------     --------     -------     -------    --------     --------
        Total...............................  $254,646     $137,738     $78,896     $44,063    $179,747     $ 96,106
                                              ========     ========     =======     =======    ========     ========
</TABLE>

     Reserve quantities and revenues shown in the preceding tables for the
Royalties were estimated from projections of reserves and revenue attributable
to the combined Southland Royalty and Trust interests in the Waddell Ranch
properties and Texas Royalty properties. Reserve quantities attributable to the
Royalties were estimated by allocating to the Royalties a portion of the total
estimated net reserve quantities of the interests, based upon gross revenue less
production taxes. Because the reserve quantities attributable to the Royalties
are estimated using an allocation of the reserves, any changes in prices or
costs will result in changes in the estimated reserve quantities allocated to
the Royalties. Therefore, the reserve quantities estimated will vary if
different future price and cost assumptions occur.

     Proved reserve quantities are estimates based on information available at
the time of preparation and such estimates are subject to change as additional
information becomes available. The reserves actually recovered and the timing of
production of those reserves may be substantially different from the original
estimate. Moreover, the present values shown above should not be considered as
the market values of such oil and gas reserves or the costs that would be
incurred to acquire equivalent reserves. A market value determination would
include many additional factors.

REGULATION

     Many aspects of the production, pricing and marketing of crude oil and
natural gas are regulated by federal and state agencies. Legislation affecting
the oil and gas industry is under constant review for amendment or expansion,
frequently increasing the regulatory burden on affected members of the industry.

     Exploration and production operations are subject to various types of
regulation at the federal, state and local levels. Such regulation includes
requiring permits for the drilling of wells, maintaining bonding requirements in
order to drill or operate wells, and regulating the location of wells, the
method of drilling and casing wells, the surface use and restoration of
properties upon which wells are drilled and the plugging and abandonment of
wells. Natural gas and oil operations are also subject to various conservation
laws and regulations that regulate the size of drilling and spacing units or
proration units and the density of wells which may be drilled and unitization or
pooling of oil and gas properties. In addition, state conservation laws
establish maximum allowable production from natural gas and oil wells, generally
prohibit the venting or flaring of natural gas and impose certain requirements
regarding the ratability of production. The effect of these regulations is to
limit the amounts of natural gas and oil that can be produced and to limit the
number of wells or the locations which can be drilled.

                                        8
<PAGE>   25

  Federal Natural Gas Regulation

     The Federal Energy Regulatory Commission (the "FERC") is primarily
responsible for federal regulation of natural gas. The interstate transportation
and sale for resale of natural gas is subject to federal governmental
regulation, including regulation of transportation and storage tariffs and
various other matters, by FERC. The Natural Gas Wellhead Decontrol Act of 1989
("Decontrol Act") terminated federal price controls on wellhead sales of
domestic natural gas on January 1, 1993. Consequently, sales of natural gas may
be made at market prices, subject to applicable contract provisions. The FERC's
jurisdiction over natural gas transportation and storage was unaffected by the
Decontrol Act.

     Sales of natural gas are affected by the availability, terms and cost of
transportation. The price and terms for access to pipeline transportation remain
subject to extensive federal and state regulation. Several major regulatory
changes have been implemented by Congress and the FERC from 1985 to the present
that affect the economics of natural gas production, transportation, and sales.
In addition, the FERC continues to promulgate revisions to various aspects of
the rules and regulations affecting those segments of the natural gas industry,
most notably interstate natural gas transmission companies, that remain subject
to the FERC's jurisdiction. These initiatives may also affect the intrastate
transportation of gas under certain circumstances. The stated purpose of many of
these regulatory changes is to promote competition among the various sectors of
the natural gas industry and these initiatives generally reflect more
light-handed regulation of the natural gas industry. The ultimate impact of the
rules and regulations issued by the FERC since 1985 cannot be predicted. In
addition, many aspects of these regulatory developments have not become final
but are still pending judicial and FERC final decisions.

     Additional proposals and proceedings that might affect the natural gas
industry are considered from time to time by Congress, the FERC, state
regulatory bodies and the courts. The Trust cannot predict when or if any such
proposals might become effective, or their effect, if any, on the Trust. The
natural gas industry historically has been very heavily regulated; therefore,
there is no assurance that the less stringent regulatory approach recently
pursued by the FERC and Congress will continue.

     Sales of crude oil, condensate and gas liquids are not currently regulated
and are made at market prices. Effective as of January 1, 1995, the FERC
implemented regulations establishing an indexing system for transportation rates
for oil that could increase the cost of transporting oil to the purchaser. The
Trust is not able to predict what effect, if any, these regulations will have on
it, but other factors being equal, the regulations may tend to increase
transportation costs or reduce wellhead prices for crude oil.

  State Regulation

     The various states regulate the production and sale of oil and natural gas,
including imposing requirements for obtaining drilling permits, the method of
developing new fields, the spacing and operation of wells and the prevention of
waste of oil and gas resources. The rates of production may be regulated and the
maximum daily production allowables from both oil and gas wells may be
established on a market demand or conservation basis, or both.

  Other Regulation

     The petroleum industry is also subject to compliance with various other
federal, state and local regulations and laws, including, but not limited to,
environmental protection, occupational safety, resource conservation and equal
employment opportunity. The Trustee does not believe that compliance with these
laws by the operating parties will have any material adverse effect on the Unit
holders.

ITEM 3. LEGAL PROCEEDINGS

     Not Applicable.

                                        9
<PAGE>   26

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

     No matters were submitted to a vote of Unit holders, through the
solicitation of proxies or otherwise, during the fourth quarter ended December
31, 1999.

                                    PART II

ITEM 5. MARKET FOR UNITS OF THE TRUST AND RELATED SECURITY HOLDER MATTERS

     The information under "Units of Beneficial Interest" at page 1 of the
Trust's Annual Report to security holders for the year ended December 31, 1999,
is herein incorporated by reference.

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                        FOR THE YEAR ENDED DECEMBER 31,
                                    -----------------------------------------------------------------------
                                       1999           1998           1997           1996           1995
                                    -----------    -----------    -----------    -----------    -----------
<S>                                 <C>            <C>            <C>            <C>            <C>
Royalty income....................  $18,799,659    $10,777,901    $22,598,873    $19,930,354    $12,014,623
Distributable income..............   18,471,842     10,414,382     22,190,115     19,488,574     11,632,463
Distributable income per Unit.....     0.396317       0.223443       0.476092       0.418131       0.249574
Distributions per Unit............     0.396317       0.223443       0.476092       0.418131       0.249574
Total assets, December 31.........    5,305,223      3,861,776      5,220,786      5,913,931      5,252,922
</TABLE>

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

     The "Trustee's Discussion and Analysis for the Three Year Period Ended
December 31, 1999" and "Results of the 4th Quarters of 1999 and 1998" at pages 5
through 7 of the Trust's Annual Report to security holders for the year ended
December 31, 1999 is herein incorporated by reference.

  Year 2000 Issue

     Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the change in the century. If not corrected, many computer
applications could fail or create erroneous results by the Year 2000. The Year
2000 issue affects virtually all companies and organizations. If a company or
organization did not successfully address its Year 2000 issues, it could face
material adverse consequences.

     As the Trust did not directly maintain any systems, the Trust did not incur
any direct costs related to the Year 2000 issue.

     The Trustee identified those vendors it believed could have an impact on
its day-to-day operations if their operations were interrupted as a result of
Year 2000 problems. The Trust made formal inquiries to these vendors requesting
information on their state of readiness for the Year 2000. Through responses
received and other literature reviewed by the Trustee with respect to its
vendors, the Trustee believes that all significant vendors addressed the Year
2000 issue and planned to be and were compliant prior to the Year 2000.

     The Trustee has no reason to believe that its vendors were not Year 2000
compliant on January 1, 2000. In the event the Trustee learns that a vendor's
system was not Year 2000 compliant, the Trustee will assess the potential risk
and develop contingency plans at that time.

     The Trust is a passive entity with no business operations and the
information technology systems ("IT") employed by the Trustee in connection with
its duties on behalf of the Trust are less extensive than the systems employed
by many business entities. The Trust had no formal IT budget and the Trustee did
not make any expenditures relating to the Trustee's IT systems used in
connection with the Trust during 1999.

     Because the royalty interests held by the Trust are fixed, the Trustee is
dependent upon the third parties that hold operating interests with respect
thereto for the receipt of royalty income. Thus, if any such third party failed
to deliver royalty income, the Trustee would have no alternative source for such
income. The

                                       10
<PAGE>   27

Trustee believes that the worst case scenario would be the failure by one or
more of the third parties who pay royalties to the Trust or who make
distributions to Unit holders for the Trust to identify and remediate Year 2000
problems on a timely basis, which could cause the Trustee to be unable to make
required distributions to Unit holders. With respect to a failure by a third
party to deliver royalty income or make distributions to Unit holders on a
timely basis, the Trustee believes that it would have no control over the
efforts of such third party to correct the problems, and significant delays in
the receipt of royalty income and distributions to Unit holders could result.

     The Trustee knows of no Year 2000 problems that have adversely affected the
Trust. However, there can be no guarantee that the Trustee has been able to
identify all Year 2000 problems or can fully remediate all Year 2000 problems
identified on a timely basis. There can be no assurance that the systems of the
Trustee or third party vendors on which the Trust relies will be timely
remediated. The failure by the Trustee or any such third party to fully
remediate its Year 2000 problems on a timely basis could have a material adverse
affect on the Trustee's ability to receive revenue, account for and make timely
distribution of the Trust's distributable income.

     Certain of the statements made above regarding the Trustee's Year 2000
program are forward-looking statements, and there can be no assurance that the
Trustee will be able to achieve Year 2000 compliance in the manner and by the
dates indicated above.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Not Applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Financial Statements of the Trust and the notes thereto at page 8 et
seq. of the Trust's Annual Report to security holders for the year ended
December 31, 1999, are herein incorporated by reference.

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

     There have been no changes in accountants and no disagreements with
accountants on any matter of accounting principles or practices or financial
statement disclosures during the twenty-four months ended December 31, 1999.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The Trust has no directors or executive officers. The Trustee is a
corporate trustee which may be removed, with or without cause, at a meeting of
the Unit holders, by the affirmative vote of the holders of a majority of all
the Units then outstanding.

ITEM 11. EXECUTIVE COMPENSATION

     During the years ended December 31, 1999, 1998, and 1997, the Trustee
received total remuneration as follows:

<TABLE>
<CAPTION>
                 NAME OF INDIVIDUAL                    CAPACITIES
                    OR NUMBER OF                        IN WHICH         CASH
                  PERSONS IN GROUP                       SERVED      COMPENSATION    YEAR
                 ------------------                    ----------    ------------    ----
<S>                                                    <C>           <C>             <C>
Bank of America, N.A., formerly NationsBank, N.A.....   Trustee       $44,735(1)     1997
                                                                      $54,761(1)     1998
                                                                      $40,272(1)     1999
</TABLE>

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

(1) Under the Trust Indenture, the Trustee is entitled to an administrative fee
    for its administrative services, preparation of quarterly and annual
    statements with attention to tax and legal matters of: (i) 1/20 of

                                       11
<PAGE>   28

1% of the first $100 million of annual gross revenue of the Trust and 1/30 of 1%
in excess of $100 million and (ii) Trustee's standard hourly rate in excess of
300 hours annually. The administrative fee is subject to reduction by a credit
     for funds provision.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     (a) Security Ownership of Certain Beneficial Owners. The following table
sets forth as of February 22, 2000, information with respect to each person
known to own beneficially more than 5% of the outstanding Units of the Trust:

<TABLE>
<CAPTION>
                                             AMOUNT AND NATURE OF     PERCENT
             NAME AND ADDRESS               BENEFICIAL OWNERSHIP(1)   OF CLASS
             ----------------               -----------------------   --------
<S>                                         <C>                       <C>
Burlington Resources Oil & Gas Company(1)      27,577,741 Units       59.17%
  5051 Westheimer
  Suite 1400
  Houston, Texas 77056-2124

McMorgan & Company(2)                           5,000,000 Units       10.73%
  One Bush Street
  Suite 800
  San Francisco, CA 94104

Alpine Capital, L.P.(3)                         4,260,800 Units         9.1%
  201 Main Street
  Suite 3100
  Fort Worth, TX 76102
</TABLE>

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

(1) This information was provided to the Securities and Exchange Commission and
    to the Trust in a Form 4 dated January 6, 1994, filed with the Securities
    and Exchange Commission by Southland Royalty, a wholly-owned subsidiary of
    BRI, and in Amendment 5 to Schedule 13D and Schedule 13E-3 dated December
    28, 1993, filed with the Securities and Exchange Commission by Southland
    Royalty and BRI. Such Units were reported to be owned directly by Southland
    Royalty, now BROG.

    The Form 4 filed by Southland Royalty and the Schedule 13D and Schedule
    13E-3 filed by Southland Royalty and BRI with the Securities and Exchange
    Commission may be reviewed for more detailed information concerning the
    matters summarized herein.

(2) This information was provided to the Securities and Exchange Commission and
    to the Trust in a Schedule 13G filed with the Securities and Exchange
    Commission on July 12, 1999 on behalf of McMorgan & Company, an investment
    adviser registered under the Investment Advisers Act of 1940, (McMorgan),
    Thomas Allan Morton ("Morton"), and Terry Allen O'Toole ("O'Toole"). Such
    Schedule 13G reports that McMorgan, Morton, and O'Toole have beneficial
    ownership of such Units. It is reported in such Schedule 13G that McMorgan,
    Morton, and O'Toole have sole voting and sole dispositive power with regard
    to such Units. Morton and O'Toole filed in their capacities as control
    persons of McMorgan and disclaimed beneficial ownership to such Units
    involved in such Schedule 13G. The address of Morton and O'Toole is One Bush
    Street, Suite 800, San Francisco, California 94104.

    The Schedule 13G filed with the Securities and Exchange Commission on behalf
    of McMorgan, Morton, and O'Toole may be reviewed for more detailed
    information concerning the matters summarized herein.

(3) This information was provided to the Securities and Exchange Commission and
    to the Trust in a Schedule 13D filed with the Securities and Exchange
    Commission on behalf of Alpine Capital L.P., a Texas limited partnership,
    ("Alpine"), Robert W. Bruce III ("Bruce"), Algenpar, Inc., a Texas
    corporation, ("Algenpar") and J. Taylor Crandall ("Crandall"), on August 6,
    1999, as amended by a Schedule 13D/A filed on October 5, 1999, as further
    amended by a Schedule 13D/A filed December 21, 1999, and as further amended
    by a Schedule 13D/A filed February 25, 2000.

    The Schedule 13D/A filed on February 25, 2000, was filed on behalf of The
    Ann T. and Robert M. Bass Foundation, a Texas non-profit corporation, (the
    "Foundation"), Ann T. Bass ("A. Bass"), and Robert M. Bass ("R. Bass"), in
    addition to Alpine, Bruce, Algenpar, and Crandall and relates to a total of
    4,335,200 Units, of which 4,260,800 Units were acquired by Alpine and
    74,400 Units were acquired by

                                       12
<PAGE>   29

     the Foundation. The source of funds for the Units acquired by Alpine was
     working capital of Alpine. The source of funds for the Units acquired by
     the Foundation was working capital of the Foundation.

     The address of Algenpar and Crandall is 201 Main Street, Suite 3100, Fort
     Worth, Texas 76102. The address of Bruce is 96 Spring Street, South Salem,
     New York 10590. The address of the Foundation and of R. Bass is 201 Main
     Street, Suite 3100, Fort Worth, Texas 76102. The address of A. Bass is 6221
     Westover Drive, Fort Worth, Texas 76107.

     It is reported that Bruce and Algenpar are the two general partners of
     Alpine, and Crandall is the President and sole stockholder of Algenpar. It
     is further reported that, because of these relationships, Bruce, Algenpar,
     and Crandall may be deemed to be beneficial owners of the Units acquired by
     Alpine as set forth in the next paragraph. It is reported that Bruce is a
     principal of The Bruce Management Co., Inc. which has shared investment
     discretion over the Units owned by the Foundation, and that Crandall, A.
     Bass, and R. Bass are directors of the Foundation. It is further reported
     that, because of these relationships, Bruce, Crandall, A. Bass, and R. Bass
     may be deemed to be beneficial owners of the Units acquired by the
     Foundation as set forth in the next paragraph.

     It is reported that as of February 22, 2000, of such 4,335,200 Units, (i)
     Alpine had sole voting and dispositive power with regard to 4,260,800 of
     such Units or 9.1% of the outstanding Units; (ii) the Foundation had sole
     voting and dispositive power with regard to 74,400 of such Units or .2% of
     the outstanding Units; (iii) Bruce and Crandall each shared voting and
     dispositive power with regard to all of such 4,335,200 Units or 9.3% of the
     outstanding Units; (iv) Algenpar had shared voting and dispositive power
     with regard to 4,260,800 of such Units or 9.1% of the outstanding Units;
     and (v) A. Bass and R. Bass each shared voting and dispositive power with
     regard to 74,400 of such Units or .2% of the outstanding Units.

     The Schedule 13D and its amendments filed with the Securities and Exchange
     Commission may be reviewed for more detailed information concerning the
     matters summarized herein.

     (b) Security Ownership of Management. The Trustee owns beneficially no
securities of the Trust. In various fiduciary capacities, Bank of America, N.A.
owned as of March 17, 2000, an aggregate of 249,995 Units with no right to vote
139,196 of these Units, shared right to vote 4,000 of these Units and sole right
to vote 106,799 of these Units. Such Bank disclaims any beneficial interests in
these Units. The number of Units reflected in this paragraph includes Units held
by all branches of Bank of America, N.A.

     (c) Change In Control. The Trustee knows of no arrangements which may
subsequently result in a change in control of the Trust.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The Trust has no directors or executive officers. See Item 11 for the
remuneration received by the Trustee during the years ended December 31, 1999,
1998, and 1997 and Item 12(b) for information concerning Units owned by Bank of
America, N.A. in various fiduciary capacities.

                                       13
<PAGE>   30

                                    PART IV

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

     The following documents are filed as a part of this Report:

FINANCIAL STATEMENTS

     Included in Part II of this Report by reference to the Annual Report of the
Trust for the year ended December 31, 1999:

          Independent Auditors' Report

          Statements of Assets, Liabilities and Trust Corpus

          Statements of Distributable Income

          Statements of Changes in Trust Corpus

          Notes to Financial Statements

FINANCIAL STATEMENT SCHEDULES

     Financial statement schedules are omitted because of the absence of
conditions under which they are required or because the required information is
given in the financial statements or notes thereto.

EXHIBITS

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                  DESCRIPTION
        -------                                  -----------
<C>                      <S>
         (4)(a)          -- Permian Basin Royalty Trust Indenture dated November 3,
                            1980, between Southland Royalty Company and The First
                            National Bank of Fort Worth (now Bank of America, N.A.),
                            as Trustee, heretofore filed as Exhibit (4)(a) to the
                            Trust's Annual Report on Form 10-K to the Securities and
                            Exchange Commission for the fiscal year ended December
                            31, 1980, is incorporated herein by reference.*
            (b)          -- Net Overriding Royalty Conveyance (Permian Basin Royalty
                            Trust) from Southland Royalty Company to The First
                            National Bank of Fort Worth (now Bank of America, N.A.),
                            as Trustee, dated November 3, 1980 (without Schedules),
                            heretofore filed as Exhibit (4)(b) to the Trust's Annual
                            Report on Form 10-K to the Securities and Exchange
                            Commission for the fiscal year ended December 31, 1980,
                            is incorporated herein by reference.*
            (c)          -- Net Overriding Royalty Conveyance (Permian Basin Royalty
                            Trust -- Waddell Ranch) from Southland Royalty Company to
                            The First National Bank of Fort Worth (now Bank of
                            America, N.A.), as Trustee, dated November 3, 1980
                            (without Schedules), heretofore filed as Exhibit (4)(c)
                            to the Trust's Annual Report on Form 10-K to the
                            Securities and Exchange Commission for the fiscal year
                            ended December 31, 1980, is incorporated herein by
                            reference.*
        (13)             -- Registrant's Annual Report to security holders for fiscal
                            year ended December 31, 1999.**
        (23)             -- Consent of Cawley, Gillespie & Associates, Inc.,
                            reservoir engineer.**
        (27)             -- Financial Data Schedule.**
</TABLE>

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

 * A copy of this Exhibit is available to any Unit holder, at the actual cost of
   reproduction, upon written request to the Trustee, Bank of America, N.A.,
   P.O. Box 830650, Dallas, Texas 75283-0650.

** Filed herewith.

                                       14
<PAGE>   31

REPORTS ON FORM 8-K

     During the last quarter of the Trust's fiscal year ended December 31, 1999,
there were no reports on Form 8-K filed by the Trust.

                                       15
<PAGE>   32

                                   SIGNATURE

     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.

                                            BANK OF AMERICA, N.A.
                                              TRUSTEE OF THE PERMIAN BASIN
                                              ROYALTY TRUST

                                            By      /s/ RON E. HOOPER
                                             -----------------------------------
                                                        Ron E. Hooper
                                                       Vice President

Date: March 27, 2000

              (The Trust has no directors or executive officers.)

                                       16