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                          SAN JUAN BASIN ROYALTY TRUST

                          1999 annual report & form 10k


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                          SAN JUAN BASIN ROYALTY TRUST

  post office box 2604 o fort worth, texas 76113 o 817-884-4630 o www.sjbrt.com

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                                    [IMAGE]


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SAN JUAN BASIN ROYALTY TRUST
Bank One, Texas, N.A., Trustee
Post Office Box 2604
Fort Worth, Texas 76113
817-884-4630
www.sjbrt.com
sjbrt@mail.bankone.com

AUDITORS
Deloitte & Touche LLP
Fort Worth, Texas

LEGAL COUNSEL
Vinson & Elkins L.L.P.
Dallas, Texas

TAX COUNSEL
Winstead Sechrest & Minick, P.C.
Houston, Texas

TRANSFER AGENT
Harris Trust & Savings Bank
311 West Monroe Street, 11th Floor
Chicago, Illinois 60606

For questions about distribution checks,
address changes and transfer procedures,
call 312-360-5300.

[RECYCLE ICON] Printed on recycled paper
<PAGE>   5
                                    THE TRUST



The principal asset of the San Juan Basin Royalty Trust (the "Trust") consists
of a 75% net overriding royalty interest carved out of certain of Southland
Royalty Company's ("Southland Royalty") oil and gas leasehold and royalty
interests in the San Juan Basin of northwestern New Mexico.



UNITS OF BENEFICIAL INTEREST

The Units of Beneficial Interest of the Trust ("Units") are traded on the New
York Stock Exchange under the symbol "SJT." At April 12, 2000, the latest
practicable date, the sale price of a Unit was $9.9375. From January 1, 1998, to
December 31, 1999, quarterly high and low sales prices and the aggregate amount
of monthly distributions per Unit paid each quarter were as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------

                                                              Distributions
1999                           High              Low              Paid
----                        --------           -------        -------------
<S>                         <C>                <C>            <C>
First Quarter..........     $ 6.8750           $5.3125        $  .145721
Second Quarter.........       8.3125            6.3125           .127528
Third Quarter..........       9.2500            7.5000           .166611
Fourth Quarter.........      10.3750            7.8125           .242322
                                                              ----------
    Total for 1999                                            $  .682182
                                                              ==========


1998
----
First Quarter.........      $ 9.3750           $7.1875        $  .245489
Second Quarter........        8.8750            7.3125           .137462
Third Quarter.........        7.7500            5.1875           .132248
Fourth Quarter........        6.8750            5.1250           .119840
                                                              ----------
    Total for 1998                                            $  .635039
                                                              ==========

--------------------------------------------------------------------------------
</TABLE>


At December 31, 1999, 46,608,796 Units outstanding were held by 2,245 Unit
holders of record. The following table presents information relating to the
distribution of ownership Units:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------

                                         Number of
Type of Unit Holders                    Unit Holders         Units Held
--------------------                    ------------         ----------
<S>                                     <C>                  <C>
Individuals........................         1,962             3,353,918
Fiduciaries........................           222               661,550
Institutions.......................            42             1,960,148
Brokers, Dealers and Nominees......             5            40,463,558
Corporations and Partnerships......             3               113,292
Miscellaneous......................            11                56,330
                                            -----            ----------
    Total                                   2,245            46,608,796
                                            =====            ==========

--------------------------------------------------------------------------------
</TABLE>



                                        1
<PAGE>   6


                                 To Unit Holders

     We are pleased to present the 1999 Annual Report of the San Juan Basin
Royalty 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. The Form 10-K contains important information concerning
the Underlying Properties, including the oil and gas reserves attributable to
the net overriding royalty interest owned by the Trust. Production figures
provided in this letter and in the Trustee's Discussion and Analysis are based
on information provided by Burlington Resources Oil & Gas Company ("BROG"). o
The Trust was established in November 1980 by Trust Indenture between Southland
Royalty and The Fort Worth National Bank. Pursuant to the Indenture, Southland
Royalty conveyed to the Trust a 75% net overriding royalty interest (equivalent
to a net profits interest) carved out of Southland Royalty's oil and gas
leasehold and royalty interests in the San Juan Basin of northwestern New
Mexico. This net overriding royalty interest (the "Royalty") is the principal
asset of the Trust. The Form 10-K contains important information concerning,
among other things, the oil and gas reserves attributable to the Royalty and the
properties from which the Royalty was carved. o Under the Trust Indenture, Bank
One, Texas, N.A. (successor trustee) as Trustee, has the primary function of
collecting monthly net proceeds ("Royalty Income") attributable to the Royalty
and making the monthly distributions to the Unit holders after deducting
administrative expenses and any amounts necessary for cash reserves. Income
distributed to Unit holders for the year 1999 was $31,795,667 or $.682182 per
Unit. This distributable income consisted of Royalty Income of $32,626,966 plus
interest income of $65,029, less administrative expenses of $896,328. o In
September 1988, the Trust was advised by Southland Royalty and its affiliate
Meridian Oil, Inc. ("MOI"), both of which were subsidiaries of Burlington
Resources, Inc., that they had initiated a drilling program in the San Juan
Basin of northwestern New Mexico involving development of Fruitland Coal Seam
gas reserves on properties in which the Trust owns an interest. For more
information on the coal seam drilling program and the related Federal income tax
credit associated with gas produced from coal seam wells drilled before January
1, 1993, please see the "Description of the Properties" section of this Annual
Report. o On January 2, 1996, Southland Royalty was merged with and became a
wholly owned subsidiary of MOI. Subsequent to the merger, MOI changed its name
to Burlington Resources Oil & Gas Company. o Information about the Trust's
estimated proved reserves of gas, including coal seam gas, and of oil as well as
the present value of net revenues discounted at 10% can be found in Item 2 of
the accompanying Form 10-K. o Royalty Income is generally considered portfolio
income under the passive loss rules enacted by the Tax Reform Act of 1986.
Therefore, 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. o 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. o For
readers' convenience, a glossary which contains definitions will be found on
page four. Please visit our Web site at www.sjbrt.com to access news releases,
reports, SEC filings and tax information.

Bank One, Texas, N.A., Trustee



By: /s/ LEE ANN ANDERSON
Lee Ann Anderson
Vice President

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                                     [IMAGE]


indian paintbrush


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                                GLOSSARY OF TERMS



AGGREGATE MONTHLY DISTRIBUTION: An amount paid to Unit holders equal to the
royalty income received by the Trustee during a calendar month plus interest,
less the general and administrative expenses of the Trust, adjusted by any
changes in cash reserves.

BBL: Barrel, generally 42 U.S. gallons measured at 60 (degrees) F.

BCF: Billion cubic feet.

BROG: Burlington Resources Oil & Gas Company.

BTU: British thermal unit; the amount of heat necessary to raise the temperature
of one pound of water one degree Fahrenheit.

COAL SEAM WELL: A well completed to a coal deposit found to contain and emit
natural gas.

COMMINGLED WELL: A well which produces from two or more formations through a
common well casing and a single tubing string.

CONVENTIONAL WELL: A well completed to a formation historically found to contain
deposits of oil or gas (for example, in the San Juan Basin, the Pictured Cliffs,
Dakota and Mesaverde formations) and operated in the conventional manner.

DEPLETION: The exhaustion of a petroleum reservoir; the reduction in value of a
wasting asset by removing minerals; for tax purposes, the removal and sale of
minerals from a mineral deposit.

DISTRIBUTABLE INCOME: An amount paid to Unit holders equal to the royalty income
received by the Trustee during a given period plus interest, less the general
and administrative expenses of the Trust, adjusted by any changes in cash
reserves.

DUAL COMPLETION: The completion of a well into two separate producing formations
at different depths, generally through one string of pipe, inside of which is a
smaller string of pipe producing from the other formation.

ESTIMATED FUTURE NET REVENUES: An estimate 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; sometimes referred to as
"estimated future net cash flows."

GRANTOR TRUST: A trust (or portion thereof) with respect to which the grantor or
an assignee of the grantor, rather than the trust, is treated as the owner of
the trust properties and is taxed directly on the trust income for Federal
income tax purposes under Sections 671 through 679 of the Internal Revenue Code.

GROSS ACRES OR WELLS: The interests of all persons owning interests in such
acres or wells.

GROSS PROCEEDS: The amount received by BROG (or any subsequent owner of the
interests from which the Royalty was carved) from the sale of the production
attributable to such interests.

LEASE OPERATING EXPENSES: Expenses incurred in the operation of a producing
property as apportioned among the several parties in interest.

MCF: 1,000 cubic feet; the standard unit for measuring the volume of natural
gas.

MMBTU: One million British thermal units.

MULTIPLE COMPLETION WELL: A well which produces simultaneously through separate
tubing strings from two or more producing horizons or alternatively from each.

NET ACRES OR WELLS: The interests of BROG (from which the Royalty was carved) in
such acres or wells.

NET OVERRIDING ROYALTY INTEREST: A share of gross production from a property,
measured by net profits from operation of the property and carved out of the
working interest, i.e., a net profits interest.

NET PROCEEDS: The excess of gross proceeds received by BROG during a particular
period over production costs for such period.

PRESENT VALUE OF ESTIMATED FUTURE NET REVENUES: A computation using the
estimated future net revenues (as defined above) and a discount rate of 10%.

PRODUCTION COSTS: Costs incurred on an accrual basis by BROG in operating the
Underlying Properties, including both capital and non-capital costs and
including, for example, development drilling, production and processing costs,
applicable taxes and operating charges.

PROVED DEVELOPED RESERVES: Those proved reserves which can be expected to be
recovered through existing wells with existing equipment and operating methods.

PROVED RESERVES: 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 UNDEVELOPED RESERVES: 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.

RECAVITATED WELL: A coal seam well, the production from which has been enhanced
or extended by the enlargement of the cavity within the coal deposit to which
the well has been completed.

RECOMPLETED WELL: A well completed by drilling a separate well-bore from an
existing casing in order to reach the same reservoir, or re-drilling the same
well bore to reach a new reservoir after production from the original reservoir
has been abandoned.

ROYALTY: The principal asset of the Trust; the 75% net overriding royalty
interest conveyed to the Trust on November 3, 1980, by Southland Royalty
Company, the predecessor to BROG, which was carved out of certain oil and gas
working and royalty interest owned by it in the San Juan Basin.

SECTION 29 TAX CREDIT: A Federal income tax credit available under Section 29 of
the Internal Revenue Code for producing coal seam gas (and other nonconventional
fuels) from wells drilled prior to January 1, 1993, and for production from
wells drilled after December 31, 1979, but prior to January 1, 1993, to a
formation beneath a qualifying coal seam formation, which are later completed
into such formation.

SPOT PRICE: The price paid for gas, oil or oil products sold under contracts for
the purchase and sale of such minerals on a short-term basis.

UNDERLYING PROPERTIES: The working interests and royalty interests in the San
Juan Basin of northwest New Mexico owned by Southland Royalty Company, the
predecessor to BROG, out of which the Royalty was carved.

UNITS OF BENEFICIAL INTEREST: The units of ownership of the Trust, equal to the
number of shares of common stock of Southland Royalty Company outstanding at the
close of business on November 3, 1980.

WORKING INTEREST: The operating interest under an oil and gas lease.



                                        4
<PAGE>   9

                          DESCRIPTION OF THE PROPERTIES

    The working interests and the royalty interests in the San Juan Basin from
which the Trust's net overriding royalty interest was carved (the "Underlying
Properties") are located in San Juan, Rio Arriba and Sandoval Counties of
northwestern New Mexico. The Underlying Properties contain 151,900 gross
(119,000 net) producing acres and 1,204 gross (897 net) producing wells,
including dual completions. "Gross" acres or wells, for purposes of this
discussion, means the entire ownership interest of all parties in such
properties, and BROG's interest therein is referred to as the "net" acres or
wells.

    The Underlying Properties have historically produced gas primarily from
conventional wells drilled to three major formations: the Pictured Cliffs, the
Mesaverde and the Dakota, ranging in depth from 1,500 to 8,000 feet. The
characteristics of these reservoirs result in the wells having very long
productive lives. A production index for oil and gas properties is the number of
years derived by dividing remaining reserves by current production. Based upon
the reserve report prepared by independent petroleum engineers as of December
31, 1999, the production index for the San Juan Basin properties is estimated to
be approximately 11 years. The production index is subject to change from year
to year based on reserve revisions and production levels. Among the factors
considered by engineers in estimating remaining reserves of natural gas is the
current sales price for gas. As the sales price increases, the producer can
justify expending higher lifting costs and therefore reasonably expect to
recover more of the known reserves. Accordingly, as gas prices rise the
production index increases and vice versa.

    In 1998, BROG announced that the New Mexico Oil Conservation Division
approved plans for 80-acre infill drilling of the Mesaverde Formation in the San
Juan Basin. The Mesaverde Formation was originally developed in the 1950s on
320-acre spacing, with infill drilling initiated in the early 1970s on 160-acre
spacing. In 1994, BROG undertook an extensive study of the Mesaverde Formation.
Results indicated that downspaced drilling (infill drilling) on 80-acre spacing
could significantly increase recoverable gas reserves in this massive reservoir.
A pilot program began in 1997 and was expanded in 1998 to include two additional
areas.

    During 1988, a drilling program was initiated involving development of
Fruitland Coal gas reserves. Wells drilled in the Fruitland Coal range in depth
from 2,500 to 3,500 feet, generally on 320-acre spacing. BROG has informed the
Trustee that there is an application pending in New Mexico for approval of
160-acre infill drilling in the Fruitland Coal.

    The process of removing coal seam gas is often referred to as degasification
or desorption. Millions of years ago, natural gas was generated in the process
of coal formation and adsorbed into the coal. Water later filled the natural
fracture system. When the water is removed from the natural fracture system,
reservoir pressure is lowered and the gas desorbs from the coal. The desorbed
gas then flows through the fracture system and is produced at the well bore. The
volume of formation water production typically declines with time and the gas
production may increase for a period of time before starting to decline. In
order to dispose of the formation water, surface facilities including pumping
units are required, which results in the cost of a completed well being as much
as $500,000. During 1999, these coal seam wells produced a total of
approximately 14,439,628 MMBtu of gas from the Underlying Properties, which was
sold at an average price of $1.58 per MMBtu.

    Production from coal seam wells drilled prior to January 1, 1993, qualifies
for Federal income tax credits through 2002. For 1999 the credit was
approximately $1.04 per MMBtu. During 1999, potential Section 29 tax credits of
approximately $.163594 per Unit were generated for Trust Unit holders from
production from coal seam wells.

    During 1999, BROG incurred approximately $10.5 million of capital
expenditures for the drilling and completion of 71 gross (7.22 net) conventional
wells, recompletion of 4 gross (1.36 net) conventional wells, drilling and
completion of 3 gross (.93 net) coal seam wells, recompletion of 1 gross
(.54 net) coal seam well and recavitation of 10 gross (.07 net) coal seam wells.
There were 53 gross (20.14 net) conventional wells, 25 gross (3.77 net)
conventional well recompletions, 3 gross (.39 net) coal seam wells, 7 gross
(.79 net) coal seam recompletions and 38 gross (.75 net) coal seam recavitations
in progress as of December 31, 1999.

    During 1998, BROG incurred approximately $12.8 million of capital
expenditures for the drilling and completion of 36 gross (11.89 net)
conventional wells, recompletion of 25 gross (13.8 net) conventional wells,
2 gross (.08 net) coal seam well recompletions, and 37 gross (2.28 net) coal
seam well recavitations.

    By letter dated April 7, 2000, BROG notified the Trust that BROG had
undercharged the Trust for capital expenditures and lease operating charges
related to non-operated properties



                                        5
<PAGE>   10



                          DESCRIPTION OF THE PROPERTIES


since January of 1999. For the 1999 reporting period, these charges were
estimated by BROG to be approximately $1.2 million for lease operating charges
and $0.5 million for capital expenditures. For the 2000 reporting period, these
charges were estimated by BROG to be $0.5 million for lease operating charges
and $140,000 for capital expenditures. As a result, BROG asserts that it has
overpaid the Trust in the aggregate amount of $1.8 million. BROG intends to
deduct these charges from its April and May distributions to the Trust. The
Trust is considering the appropriateness of this proposed means of resolution
and is consulting with its advisors. No assurance can be given as to when and
how this issue will be resolved.

    BROG has advised the Trust that capital projections for 2000 are estimated
to be $20.5 million. Approximately 95% of that amount will be attributable to
conventional projects. Of the 400 planned projects, 57 will be conventional new
drill locations at a cost of approximately $13.7 million, 99 ($5.2 million)
will be attributable to workovers, and 244 of the projects at a cost of $1.6
million will be miscellaneous facilities projects. Twenty-one of the 57 new
drilling projects planned for 2000 are on properties in which BROG owns 100% of
the working interest, so that the Trust's share of planned capital expenditures
is increased as compared to wells in which BROG owns only a partial working
interest.

    The Federal Energy Regulatory Commission is primarily responsible for
federal regulation of natural gas. For a further discussion of gas pricing, gas
purchasers, gas production and regulatory matters affecting gas production see
Item 2, "Properties," in the accompanying Form 10-K.


                                     [MAP]


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<PAGE>   11

                        TRUSTEE'S DISCUSSION AND ANALYSIS


    Distributable income consists of Royalty Income plus interest, less the
general and administrative expenses of the Trust and any changes in cash
reserves established by the Trustee. For the year ended December 31, 1999,
distributable income increased to $31,795,667 from $29,598,402 distributed in
1998. The increase was primarily attributable to slightly higher gas and oil
prices and lower capital expenditures and lease operating expense. Included in
the 1999 distributable income was a payment by Burlington to the Trust in March
1999 of $892,498. After a rupture of the Williams "Trunk S" Pipeline disrupted a
significant flow of gas from BROG properties, BROG filed claims with insurance
carriers and subsequently received payments of its claims. Some of the claims
filed related to properties burdened by the Royalty. The amount of insurance
proceeds applicable to such properties was determined to be $1,189,996, of which
the Trust received 75% or $892,498. Interest income decreased from $68,648 in
1998 to $65,029 in 1999 primarily due to lower interest rates.

    Total gas and oil production from the Underlying Properties for the five
years ended December 31, 1999, were as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
                  1999         1998         1997         1996         1995
               ----------   ----------   ----------   ----------   ----------
<S>            <C>          <C>          <C>          <C>          <C>
Gas - Mcf..... 39,940,175   41,507,353   41,948,567   40,738,422   34,387,190
Mcf per day...    109,425      113,719      114,928      111,307       94,211
Oil - Bbls....     72,223       81,888       89,492       83,552       75,014
Bbls per day..        198          224          245          228          206
-----------------------------------------------------------------------------
</TABLE>

    Since the oil and gas sales attributable to the Royalty are based on an
allocation formula dependent on such factors as price and cost, including
capital expenditures, the aggregate sales amounts from the Underlying Properties
may not provide a meaningful comparison to sales attributable to the Royalty.

    Royalty Income for the calendar year is associated with actual gas and oil
production during the period from November of the preceding year through October
of the current year. Gas and oil sales attributable to the Royalty for the past
five years (excluding the portion attributable to the litigation settlement
proceeds described in Note 5 to the accompanying Financial Statements) are
summarized in the following table:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                                1999             1998             1997             1996             1995
                          --------------   --------------   --------------   --------------   --------------
<S>                       <C>              <C>              <C>              <C>              <C>
Gas - Mcf................     19,527,666       18,904,906       24,236,419       17,927,785       13,331,758
Average Price (per Mcf).. $         1.78   $         1.75   $         2.21   $         1.30   $         1.25
Oil - Bbls...............         35,341           37,067           50,860           36,792           29,424
Average Price (per Bbl).. $        14.41   $        13.55   $        19.35   $        19.64   $        14.43
------------------------------------------------------------------------------------------------------------
</TABLE>

    The fluctuations in annual gas production that have occurred during these
five years generally resulted from changes in the demand for gas during that
time, marketing conditions and production from new wells. Production from the
Underlying Properties is influenced by the line pressure of the gas gathering
systems in the San Juan Basin. Production increased from 1995 to 1996 primarily
due to increased coal seam volumes. As noted above, oil and gas sales
attributable to the Royalty are based on an allocation formula dependent on many
factors, including oil and gas prices and capital expenditures.

                                        7

<PAGE>   12





    Royalty Income for the five years ended December 31, 1999, was determined as
shown in the following table:

<TABLE>
<CAPTION>

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

                                           1999             1998           1997            1996            1995
                                      ------------     ------------    ------------    ------------    ------------
<S>                                   <C>              <C>             <C>             <C>             <C>
Gross Proceeds from
the Underlying Properties:
--------------------------
Gas...........................        $ 69,928,312     $ 71,247,501    $ 91,495,060    $ 51,865,730    $ 41,483,305
Oil...........................           1,028,862        1,088,228       1,728,296       1,638,753       1,084,262
Other.........................           1,189,996              -0-             -0-             -0-             -0-
                                      ------------     ------------    ------------    ------------    ------------
    Total.....................        $ 72,147,170     $ 72,335,729    $ 93,223,356    $ 53,504,483    $ 42,570,159
                                      ============     ============    ============    ============    ============

Less Production Costs:
----------------------
Capital Costs.................          10,556,159       12,828,300       7,231,696       7,223,281       6,560,277
Severance Tax - Gas...........           7,180,973        7,341,098       8,989,202       5,654,831       4,694,750
Severance Tax - Oil...........             106,335          117,454         167,844         176,379         115,474
Other.........................             (95,445)          66,892          61,832          59,089             117
Lease Operating Expenses......          10,896,526       11,558,172      10,776,145      11,838,345      10,991,152
                                      ------------     ------------    ------------    ------------    ------------
     Total....................          28,644,548       31,911,916      27,226,719      24,951,925      22,361,770
                                      ------------     ------------    ------------    ------------    ------------
Net Profits...................          43,502,622       40,423,813      65,996,637      28,552,558      20,208,389
Royalty Percentage............                 75%              75%             75%             75%             75%
Royalty Income................        $ 32,626,966     $ 30,317,860    $ 49,497,479    $ 21,414,419    $ 15,156,292
                                      ============     ============    ============    ============    ============
-------------------------------------------------------------------------------------------------------------------
</TABLE>

    The increase in capital costs incurred by BROG on the Underlying Properties
for the year ended December 31, 1998, was primarily attributable to increased
drilling activity. The Royalty Income amount of $21,414,419 for 1996 does not
include the $19,822,005 paid to the Trust on September 30, 1996, in settlement
of the litigation described in Note 5 to the accompanying Financial Statements.
Operating costs in 1997 and 1998 include the impact of the receipt of $250,000
from BROG as an offset to lease operating expense in connection with the
settlement of that litigation. The receipt of the $250,000 from BROG for 1999
was received in January 2000 and distributed to Unit holders in February. The
final $250,000 offset will be made in December 2000. Excluding the impact of the
offset, monthly operating costs in 1999 averaged approximately $880,000, which
is lower than the $965,000 average in 1998. However, BROG has recently notified
the Trustee that the Trust was undercharged for approximately $1.2 million of
lease operating expenses related to non-operated properties since January 1999.
BROG intends to pass these additional charges through to the Trust in April and
May 2000. For additional information on capital expenditures, see "Description
of the Properties."




                                        8
<PAGE>   13


                 RESULTS OF THE FOURTH QUARTERS OF 1999 AND 1998



    Distributable income for the three months ended December 31, 1999, totaled
$11,294,344 ($.242322 per Unit) as compared to $5,585,582 ($.119840 per Unit)
for the quarter ended December 31, 1998. The amount distributed in the fourth
quarter of 1999 was higher than that of 1998 primarily because of higher average
gas and oil prices and lower capital costs.

    Royalty Income of the Trust for the fourth quarter is associated with actual
gas and oil production during August through October of each year. Gas and oil
sales for the quarters ended December 31, 1999 and 1998 were as follows:

<TABLE>
<CAPTION>

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

Underlying Properties                     1999        1998
---------------------                 ----------   -----------
<S>                                   <C>          <C>
Gas - Mcf........................      9,815,852    10,243,360
    Average Price (per Mcf)......     $     2.33   $      1.44
Oil - Bbls.......................         16,866        18,194
    Average Price (per Bbl)......     $    19.37   $     11.50

Attributable to the Royalty
---------------------------
Gas - Mcf........................      5,373,827     4,183,417
Oil - Bbls.......................          9,245         7,361

--------------------------------------------------------------
</TABLE>

    The average price of gas and oil increased in 1999 compared to the prior
year. The average price per barrel of oil during the fourth quarter of 1999 was
$7.87 per Bbl higher than that received in the fourth quarter of 1998 due to
increases in oil prices in world markets generally, including the posted prices
applicable to the Royalty. Gas production decreased slightly primarily due to a
decrease in coal seam production. During the fourth quarter of 1999, coal seam
production from the Underlying Properties averaged 1,342,978 Mcf per month
compared to 1,401,000 Mcf per month during the fourth quarter of 1998.

    Capital costs for the fourth quarter of 1999 totaled $2,565,094 compared to
$2,780,132 during the same period of 1998. The decrease was due to decreased
drilling activity in the fourth quarter of 1999. Operating costs in 1998 include
the impact of the receipt of $250,000 from BROG as an offset to lease operating
expense in connection with the settlement of litigation. The receipt of the
$250,000 from BROG for 1999 was not received by the Trust until January 2000.
Excluding the impact of the offset, lease operating costs for the fourth quarter
of 1999 averaged $971,839 per month in the fourth quarter compared to $1,073,500
per month in the fourth quarter of 1998.



                                        9

<PAGE>   14

                          SAN JUAN BASIN ROYALTY TRUST



<TABLE>
<CAPTION>


Statements of Assets, Liabilities and Trust Corpus
December 31, 1999 and 1998
---------------------------------------------------------------------------------
Assets                                                      1999          1998
------                                                  -----------   -----------
<S>                                                     <C>           <C>
Cash and Short-term Investments....................     $ 3,862,453   $ 2,665,562
Net Overriding Royalty Interests in Producing Oil and
    Gas Properties - Net (Notes 2 and 3)...........      45,186,199    51,088,020
                                                        -----------   -----------
                                                        $49,048,652   $53,753,582
                                                        ===========   ===========

Liabilities and Trust Corpus

Distribution Payable to Unit Holders...............     $ 3,862,453   $ 2,665,562
Trust Corpus - 46,608,796 Units of Beneficial Interest
    Authorized and Outstanding.....................       45,186,199    51,088,020
                                                        -----------   -----------
                                                        $49,048,652   $53,753,582
                                                        ===========   ===========
---------------------------------------------------------------------------------
</TABLE>



<TABLE>
<CAPTION>

Statements of Distributable Income
for the Three Years Ended December 31, 1999
-----------------------------------------------------------------------------------------------------
                                                          1999                1998           1997
                                                       -----------         -----------    -----------
<S>                                                    <C>                 <C>            <C>
Royalty Income (Notes 2, 3 and 5)..................    $32,626,966         $30,317,860    $49,497,479
Interest Income....................................         65,029              68,648         99,403
                                                       -----------         -----------    -----------
                                                        32,691,995          30,386,508     49,596,882
Expenditures - General and Administrative..........        896,328             788,107        947,952
                                                       -----------         -----------    -----------
Distributable Income...............................    $31,795,667         $29,598,402    $48,648,930
                                                       ===========         ===========    ===========
Distributable Income per Unit (46,608,796 Units)...    $   .682182         $   .635039    $  1.043770
                                                       ===========         ===========    ===========
-----------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>

Statements of Changes in Trust Corpus
for the Three Years Ended December 31, 1999
---------------------------------------------------------------------------------------------------
                                                          1999            1998             1997
                                                       ------------     -----------     -----------
<S>                                                    <C>             <C>             <C>
Trust Corpus, Beginning of Period..................    $ 51,088,020    $ 56,119,448    $ 62,808,148
Amortization of Net Overriding Royalty Interest
    (Notes 2 and 3)................................      (5,901,821)     (5,031,428)     (6,668,700)
Distributable Income...............................      31,795,667      29,598,402      48,648,930
Distributions Declared.............................     (31,795,667)    (29,598,402)    (48,648,930)
                                                       ============    ============    ============
Trust Corpus, End of Period........................    $ 45,186,199    $ 51,088,020    $ 56,119,448
                                                       ============    ============    ============
---------------------------------------------------------------------------------------------------
</TABLE>

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

                                       10


<PAGE>   15



                                     [IMAGE]

pear cactus

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                                     [IMAGE]

                                                                  yucca brifolia


<PAGE>   17

           SAN JUAN BASIN ROYALTY TRUST NOTES TO FINANCIAL STATEMENTS



1. TRUST ORGANIZATION AND PROVISIONS

The San Juan Basin Royalty Trust ("Trust") was established as of November 1,
1980. Bank One, Texas, N.A. ("Trustee") is Trustee for the Trust. Southland
Royalty Company ("Southland") conveyed to the Trust a 75% net overriding royalty
interest ("Royalty") in Southland's working interests and royalty interests in
the properties located in the San Juan Basin in northwestern New Mexico out of
which the Royalty was carved (the "Underlying Properties").

    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 Royalty 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 INTEREST 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 Royalty, 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 and such negative 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 the
owner of the interest burdened by the Royalty 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%.

    The initial carrying value of the Royalty ($133,275,528) represented
Southland's historical net book value at the date of the transfer of the Trust.
Accumulated amortization as of December 31, 1999 and 1998 aggregated $88,089,329
and $82,187,508, respectively.


3. BASIS OF ACCOUNTING

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

  o    Royalty income recorded for a month is the amount computed and paid by
       the working interest owner, Burlington Resources Oil & Gas Company
       ("BROG"), to the Trustee for the Trust. Royalty income consists of the
       amounts received by the owner of the interest burdened by the net
       overriding royalty interest from the sale of production less accrued
       production costs, development and drilling costs, applicable taxes,
       operating charges, and other costs and deductions, multiplied by 75%.

  o    Trust expenses recorded are based on liabilities paid and cash reserves
       established from Royalty income for liabilities and contingencies.

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

  o    The conveyance which transferred the overriding royalty interests to the
       Trust provides that any excess of production costs over gross proceeds
       must be recovered from future net profits. 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; certain cash reserves may be
       established for contingencies which would not be accrued in financial
       statements prepared in accordance with GAAP; and amortization of the
       Royalty calculated on a unit-of-production basis is charged directly to
       trust corpus.

                                       13

<PAGE>   18
                          SAN JUAN BASIN ROYALTY TRUST

4. FEDERAL INCOME TAXES

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 Royalty constitutes an "economic interest" 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. The Royalty is treated
as a single property for depletion purposes.

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

    The Trust began receiving royalty income from coal seam gas wells in 1989.
Under Section 29 of the Internal Revenue code, coal seam gas production from
wells drilled prior to January 1, 1993 (including certain wells recompleted in
coal seam formations thereafter), generally qualifies for the Federal income tax
credit for producing nonconventional fuels if such production and the sale
thereof occurs before January 1, 2003. For 1999, this tax credit will be
approximately $1.04 per MMBtu. For qualifying production of the Trust, each Unit
holder must determine his pro rata share of such production based upon the
number of Units owned during each month of the year and apply the tax credit
against his own income tax liability, but such credit may not reduce his regular
liability (after the foreign tax credit and certain other nonrefundable credits)
below his tentative minimum tax. Section 29 also provides that any amount of
Section 29 credit disallowed for the tax year solely because of this limitation
will increase his credit for prior year minimum tax liability, which may be
carried forward indefinitely as a credit against the taxpayer's regular tax
liability, subject, however, to the limitations described in the preceding
sentence. There is no provision for the carryback or carryforward of the Section
29 credit in any other circumstances.

    The Trustee is provided summary Section 29 tax credit information related to
Trust properties by BROG, which information is then passed along to the Unit
holders. In Nielson-True Partnership, et al. v. Commissioner, a 1997 Tax Court
decision, the court ruled that nonconventional fuel (such a coal seam gas)
produced from a well drilled and completed in an otherwise qualifying formation
prior to December 31, 1992, is not eligible for the Section 29 credit unless the
producer has received an appropriate well category determination from the
Federal Energy Regulatory Commission ("FERC"). On March 23, 1999, the U.S. Court
of Appeals for the 10th Circuit affirmed that decision. Dictum (i.e., language
in the appeals court's decision which is not binding as precedent) even suggests
that, contrary to the clear implication of a 1993 Internal Revenue Service
ruling, lack of such a well category determination may render the Section 29
credit unavailable in respect of production from wells recompleted in a
qualified formation after January 1, 1993, the date that FERC's authority to
render well category determinations ended (so that obtaining the requisite
determination for any such well was impossible). Many producers assert that
wells meeting the definitional requirements applied by FERC in rendering well
category determinations are eligible for the Section 29 credit regardless of
whether a well category determination is actually applied for or received,
particularly for wells recompleted in qualifying formations after January 1,
1993, and additional litigation or other initiatives on this issue are to be
expected. In fact, on December 23, 1999, a petition was filed with the FERC by a
coalition of energy producers seeking reinstatement of the certification
process. By letter dated January 14, 2000, the U.S. Department of Energy
expressed its support of that petition and on January 27, 2000, the FERC issued
notice of proposed rulemaking by which its regulations would be amended to
reinstate certain regulations involving well category determinations for Section
29 tax credits for certain well recompletions commenced after January 1, 1993.

    In some cases the extent to which production from the various coal seam gas
wells in which the Trust holds an interest would qualify for the Section 29
credit under the standards applied in the Nielson-True case is unclear, and the
Trustee has requested that BROG provide clarification and an assessment of the
effects of the foregoing, if any, on the Trust and its Unit holders. Pending
such clarification and assessment, or further developments, or both, however,
the availability of Section 29 credits to Unit holders in respect of some
portion of the Trust's coal seam gas production could be subject to debate and
challenge.

    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
reduce passive losses.


5. LITIGATION SETTLEMENT

On June 4, 1992, the Trustee filed suit (the "Litigation") against MOI and
Southland in New Mexico. The principal asset of the Trust consists of a 75% net
overriding royalty interest carved out of the Underlying Properties. MOI and
Southland were the operators of the Underlying Properties. On January 2, 1996,
Southland was merged with and became a wholly owned sub-

                                       14
<PAGE>   19

                          SAN JUAN BASIN ROYALTY TRUST



sidiary of MOI. Subsequent to the merger, MOI changed its name to Burlington
Resources Oil & Gas Company ("BROG").

    The claims asserted on behalf of the Trust in the lawsuit included breach of
contract, breach of the covenant of good faith and fair dealing, breach of
express good faith duty, constructive fraud, unjust enrichment, prima facie
tort, intentional interference with contract and conspiracy. The relief sought
included compensatory and punitive damages, an accounting and a permanent
injunction relating to the operation of the Trust Properties.

    On September 4, 1996, the Trustee announced the settlement of the
Litigation. The Litigation was dismissed on September 12, 1996. BROG denied and
continues to deny the allegations made against it in the Litigation, but the
parties agreed to settle the Litigation as outlined herein.

    BROG agreed (i) to pay $19,750,000 in cash plus interest earnings thereon
from September 5, 1996, in settlement of underpayment of royalty claims of the
Trust; and (ii) commencing in 1997, to credit the Trust with $250,000 per year
for five years as an offset against lease operating expenses chargeable to the
Trust. BROG also agreed to make certain adjustments that represent cost
reductions favorable to the Trust in the ongoing charges for coal seam gas
gathering and treating on BROG's Val Verde system. Additionally, the Trustee and
BROG established a formal protocol that will provide the Trustee and its
representatives improved access to BROG's books and records applicable to the
Trust Properties.

    Agreement was also reached regarding marketing arrangements for the sale of
gas, oil and natural gas liquids products from the Underlying Properties going
forward as follows:

    1. BROG agreed that contracts for the sale of gas from the Underlying
Properties would require the written approval of an independent gas marketing
consultant acceptable to the Trust. For a discussion of the current contract
covering the sale of gas from the Underlying Properties, see Note 6.

    2. BROG will continue to market the oil and natural gas liquids from the
Underlying Properties but will remit to the Trust actual proceeds from such
sales. BROG will no longer use posted prices as the basis for calculating
proceeds to the Trust nor make a deduction for marketing fees associated with
sales of oil or natural gas liquids products.

    3. The Trust retained access to BROG's current gas transportation,
gathering, processing and treating agreements with third parties through the
remainder of their primary terms.

    The $19,822,005 settlement proceeds of the Litigation (or $.425285 per Unit
of beneficial interest) was paid to the Trust on September 30 and distributed on
October 15, 1996, to Unit holders of record as of September 30, 1996 (the
"Record Date"). The distribution was taxable to Unit holders as of such Record
Date. This distribution was in addition to the regular monthly distribution on
October 15.

6. CERTAIN CONTRACTS

Effective January 1, 1998, all volumes of Trust gas became subject to the terms
of a Natural Gas Sales and Purchase Contract between BROG and El Paso Energy
Marketing Company ("El Paso"). That contract was for a term of two years through
and including December 31, 1999, and provided for the sale of Trust gas at
prices which fluctuate in accordance with published indices for gas sold in the
San Juan Basin of New Mexico. BROG entered into the contract with El Paso after
soliciting and receiving competitive bids in late 1997 from six major gas
marketing firms to market and/or purchase the Trust gas. BROG has entered into a
contract dated November 10, 1999, for the sale of all volumes of Trust gas to
Duke Energy and Marketing L.L.C. That contract provides for delivery of gas at
various delivery points over a period commencing January 1, 2000, and ending
October 31, 2001, and provides for the sale of Trust gas at prices which
fluctuate in accordance with published indices for gas sold in the San Juan
Basin of New Mexico.

    Confidentiality agreements with purchasers of gas produced from the
Underlying Properties prohibit public disclosure of certain terms and conditions
of gas sales contracts with those entities, including specific pricing terms,
gas receipt points, etc. Such disclosure could compromise the ability to compete
effectively in the marketplace for the sale of gas produced from the Underlying
Properties.

7. GAS IMBALANCE

In February 1999, the Trust's auditors notified the Trust of an apparent gas
imbalance. A gas imbalance occurs where more than one party is entitled to the
economic benefit of the production of natural gas, but the gas is sold for the
account of less than all of the parties. The resulting imbalance may be
corrected by various means including a cash settlement and/or a volume
adjustment whereby an increased percentage of future production is sold for the
account of the underproduced party or parties. The Trust's auditors suggested
that the subject imbalance might relate to the acquisition by BROG's
predecessor, Southland Royalty, of mineral properties which had been operated
under a Joint Operating Agreement between Southland Royalty and Unicon, the
seller of the properties. The Trust made inquiry of BROG concerning the
imbalance and BROG agreed to investigate the records. The Trustee met with BROG
representatives in June 1999 to discuss the investigation, and by correspondence
of September 24, 1999, BROG reported that the imbalance probably related to
problems experienced in the

                                       15

<PAGE>   20
                          SAN JUAN BASIN ROYALTY TRUST

1980s and early 1990s by Southland Royalty and Unicon in their dealings with
Public Service Company of New Mexico. BROG reported that Unicon was flowing gas
to its account while Southland Royalty was not producing and that this created a
gas imbalance. The imbalance was addressed, as between Southland Royalty and
Unicon, by a reduction in the total purchase price for Unicon assets acquired by
Southland Royalty in June 1990. However, there was no payment made to the Trust
at the time of that acquisition.

    BROG proposes to address the imbalance with the Trust based upon the terms
of a Gas Balancing Agreement it indicates was in place between Southland Royalty
and Unicon in connection with the Joint Operating Agreement applicable to the
subject properties and has offered $3,100,000 as a cash settlement. The Trust is
considering the appropriateness of this proposed means of resolution and this
offer and is consulting with its advisors. No assurance can be given as to when
and how this issue will be resolved.

8. 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.

9. 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.


10. 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 unit
amounts):

<TABLE>
<CAPTION>
--------------------------------------------------------------------------

                                                            Distributable
                                                              Income and
                        Royalty         Distributable        Distribution
1999                    Income              Income             Per Unit
----                   --------         -------------       --------------
<S>                   <C>               <C>                 <C>
First Quarter.......   $  7,045          $  6,792            $ .145721
Second Quarter......      6,252             5,944              .127528
Third Quarter.......      7,909             7,766              .166611
Fourth Quarter......     11,421            11,294              .242322
                       --------          --------            ---------
   Total............   $ 32,627          $ 31,796            $ .682182
                       ========          ========            =========

1998
----
First Quarter.......   $ 11,663          $ 11,442            $ .245489
Second Quarter......      6,679             6,407              .137462
Third Quarter.......      6,277             6,164              .132248
Fourth Quarter......      5,699             5,585              .119840
                       --------          --------            ---------
   Total............   $ 30,318          $ 29,598            $ .635039
                       ========          ========            =========

--------------------------------------------------------------------------
</TABLE>


                          INDEPENDENT AUDITOR'S REPORT

Bank One, Texas, N.A. as Trustee for the San Juan Basin Royalty Trust:

    We have audited the accompanying statements of assets, liabilities and trust
corpus of the San Juan Basin Royalty Trust ("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 San Juan 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 & TOUCH LLP


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


                                       16