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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                         COMMISSION FILE NUMBER 1-13603

                TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP
             (Exact name of Registrant as specified in its charter)

<TABLE>
<S>                                           <C>
                DELAWARE                                      76-0329620
(State of Incorporation or Organization)      (I.R.S. Employer Identification Number)
</TABLE>

                               2929 ALLEN PARKWAY
                                  P.O. BOX 2521
                            HOUSTON, TEXAS 77252-2521
          (Address of principal executive offices, including zip code)

                                 (713) 759-3636
              (Registrant's telephone number, including area code)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:


                                                  NAME OF EACH EXCHANGE ON
         TITLE OF EACH CLASS                          WHICH REGISTERED
         -------------------                          ----------------
6.45% Senior Notes, due January 15, 2008           New York Stock Exchange
7.51% Senior Notes, due January 15, 2008           New York Stock Exchange

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


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve 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. [ ]


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                               TABLE OF CONTENTS
<TABLE>
<S>                                                                                                          <C>
                                                       PART I

  ITEMS 1.       Business and Properties.......................................................................1
    AND 2.
   ITEM 3.       Legal Proceedings............................................................................11
   ITEM 4.       Submission of Matters to a Vote of Security Holders..........................................11

                                                      PART II

   ITEM 5.       Market for Registrant's Common Equity and Related Partnership Interest Matters...............12
   ITEM 6.       Selected Financial Data......................................................................12
   ITEM 7.       Management's Discussion and Analysis of Financial Condition and Results of Operations........13
   ITEM 7A.      Quantitative and Qualitative Disclosures About Market Risks..................................19
   ITEM 8.       Financial Statements and Supplementary Data..................................................20
   ITEM 9.       Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.........20

                                                     PART III

  ITEM 10.       Directors and Executive Officers of the Registrant...........................................20
  ITEM 11.       Executive Compensation.......................................................................20
  ITEM 12.       Security Ownership of Certain Beneficial Owners and Management...............................20
  ITEM 13.       Certain Relationships and Related Transactions...............................................20

                                                     PART IV

  ITEM 14.       Exhibits, Financial Statement Schedules and Reports on Form 8-K..............................21
</TABLE>


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ITEMS 1 AND 2. BUSINESS AND PROPERTIES

GENERAL

         TE Products Pipeline Company, Limited Partnership (the "Partnership"),
a Delaware limited partnership, was formed in March 1990. TEPPCO Partners, L.P.
(the "Parent Partnership") owns a 98.9899% interest as the sole limited partner.
On March 31, 2000, Texas Eastern Products Pipeline Company, a Delaware
corporation and general partner of the Partnership, was converted into Texas
Eastern Products Pipeline Company, LLC (the "Company" or "General Partner"), a
Delaware limited liability company. Additionally on March 31, 2000, Duke Energy
Corporation ("Duke Energy"), contributed its ownership of the General Partner to
Duke Energy Field Services, LP ("DEFS"). DEFS is a joint venture between Duke
Energy and Phillips Petroleum Company. Duke Energy holds a majority interest in
DEFS.

         The Company, an indirect wholly-owned subsidiary of DEFS, owns a
1.0101% general partner interest in the Partnership. The Company, as general
partner, performs all management and operating functions required for the
Partnership pursuant to the Agreement of Limited Partnership of TE Products
Pipeline Company, Limited Partnership ("the Partnership Agreement"). The General
Partner is reimbursed by the Partnership for all reasonable direct and indirect
expenses incurred in managing the Partnership.

         The Partnership is one of the largest pipeline common carriers of
refined petroleum products and liquified petroleum gases ("LPGs") in the United
States. The Partnership owns and operates an approximate 4,500-mile pipeline
system (together with the receiving, storage and terminaling facilities
mentioned below, the "Pipeline System" or "Pipeline" or "System") extending from
southeast Texas through the central and midwestern United States to the
northeastern United States. The Pipeline System includes delivery terminals for
outloading product to other pipelines, tank trucks, rail cars or barges, as well
as substantial storage capacity at Mont Belvieu, Texas, the largest LPGs storage
complex in the United States, and at other locations. The Partnership also owns
two marine receiving terminals, one near Beaumont, Texas, and the other at
Providence, Rhode Island. The Providence terminal is not physically connected to
the Pipeline. As an interstate common carrier, the Pipeline System offers
interstate transportation services, pursuant to tariffs filed with the Federal
Energy Regulatory Commission ("FERC"), to any shipper of refined petroleum
products and LPGs who requests such services, provided that the products
tendered for transportation satisfy the conditions and specifications contained
in the applicable tariff. In addition to the revenues received by the Pipeline
System from its interstate tariffs, it also receives revenues from the shuttling
of LPGs between refinery and petrochemical facilities on the upper Texas Gulf
Coast and ancillary transportation, storage and marketing services at key points
along the System. Substantially all the petroleum products transported and
stored in the Pipeline System are owned by the Partnership's customers.
Petroleum products are received at terminals located principally on the southern
end of the Pipeline System, stored, scheduled into the Pipeline in accordance
with customer nominations and shipped to delivery terminals for ultimate
delivery to the final distributor (e.g., gas stations and retail propane
distribution centers) or to other pipelines. Pipelines are generally the lowest
cost method for intermediate and long-haul overland transportation of petroleum
products. The Pipeline System is the only pipeline that transports LPGs to the
Northeast.

         The Partnership's strategy is to improve service in its current
markets, maintain the integrity of its pipeline systems and pursue a growth
strategy that is balanced between internal projects and targeted acquisitions.
The Partnership intends to leverage the advantages inherent in its pipeline
systems to maintain its status as the incremental provider of choice in its
market area. The Partnership also intends to grow by acquiring assets, from both
third parties and affiliates, which complement existing businesses. The Company
routinely evaluates opportunities to acquire assets and businesses that will
complement existing operations with a view to increasing earnings and cash
available for distribution. Additional acquisitions may be funded with
borrowings under credit facilities, borrowings from the Parent Partnership, the
issuance of debt in the capital markets and cash flow from operations.

         The Partnership's business depends in large part on the level of demand
for refined petroleum products and LPGs in the geographic locations served by it
and the ability and willingness of customers having access to the Pipeline
System to supply such demand by deliveries through the System. The Partnership
cannot predict the impact of future fuel conservation measures, alternate fuel
requirements, governmental regulation, technological

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advances in fuel economy and energy-generation devices, all of which could
reduce the demand for refined petroleum products and LPGs in the areas served by
the Partnership.

         In August 2000, the Partnership announced the execution of definitive
agreements with CMS Energy Corporation and Marathon Ashland Petroleum LLC to
form Centennial Pipeline, LLC ("Centennial"). Centennial will own and operate an
interstate refined petroleum products pipeline extending from the upper Texas
Gulf Coast to Illinois. Each participant will own a one-third interest in
Centennial.

         Centennial will build a 74-mile, 24-inch diameter pipeline connecting
the Partnership's facility in Beaumont, Texas, with the start of an existing
720-mile, 26-inch diameter pipeline extending from Longville, Louisiana, to
Bourbon, Illinois. The pipeline will pass through portions of Texas, Louisiana,
Arkansas, Mississippi, Tennessee, Kentucky and Illinois. CMS Panhandle Pipe Line
Companies, which owns the existing 720-mile pipeline, has made a filing with the
FERC to take the line out of natural gas service as part of the regulatory
process. Conversion of the pipeline to refined products service is expected to
be completed in early 2002. The Centennial Pipeline will intersect the
Partnership's existing mainline near Creal Springs, Illinois, where a new two
million barrel refined petroleum products storage terminal will be built.

OPERATIONS

         The Partnership conducts business and owns properties located in 13
states. Operations consist of interstate transportation, storage and terminaling
of petroleum products; short-haul shuttle transportation of LPGs at the Mont
Belvieu, Texas complex; intrastate transportation of petrochemicals;
fractionation of natural gas liquids and other ancillary services. Products are
transported in liquid form from the upper Texas Gulf Coast through two parallel
underground pipelines that extend to Seymour, Indiana. From Seymour, segments of
the Pipeline System extend to the Chicago, Illinois; Lima, Ohio; Selkirk, New
York; and Philadelphia, Pennsylvania, areas. The Pipeline System east of
Todhunter, Ohio, is dedicated solely to LPGs transportation and storage
services.

         The Pipeline System includes 30 storage facilities with an aggregate
storage capacity of 13 million barrels of refined petroleum products and 38
million barrels of LPGs, including storage capacity leased to outside parties.
The Pipeline System makes deliveries to customers at 53 locations including 18
Partnership owned truck racks, rail car facilities and marine facilities.
Deliveries to other pipelines occur at various facilities owned by the
Partnership or by third parties.

PIPELINE SYSTEM

         The Pipeline System is comprised of a 20-inch diameter line extending
in a generally northeasterly direction from Baytown, Texas (located
approximately 30 miles east of Houston), to a point in southwest Ohio near
Lebanon and Todhunter. A second line, which also originates at Baytown, is 16
inches in diameter until it reaches Beaumont, Texas, at which point it reduces
to a 14-inch diameter line. This second line extends along the same path as the
20-inch diameter line to the Pipeline System's terminal in El Dorado, Arkansas,
before continuing as a 16-inch diameter line to Seymour, Indiana. The Pipeline
System also has smaller diameter lines that extend laterally from El Dorado to
Helena and Arkansas City, Arkansas, from Tyler, Texas, to El Dorado and from
McRae, Arkansas, to West Memphis, Arkansas. The lines from El Dorado to Helena
and Arkansas City have 10-inch diameters. The line from Tyler to El Dorado
varies in diameter from 8 inches to 10 inches. The line from McRae to West
Memphis has a 12-inch diameter. The Pipeline System also includes a 14-inch
diameter line from Seymour, Indiana, to Chicago, Illinois, and a 10-inch
diameter line running from Lebanon to Lima, Ohio. This 10-inch diameter pipeline
connects to the Buckeye Pipe Line Company system that serves, among others,
markets in Michigan and eastern Ohio. Also, the Pipeline System has a 6-inch
diameter pipeline connection to the Greater Cincinnati/Northern Kentucky
International Airport and a 8-inch diameter pipeline connection to the George
Bush Intercontinental Airport, Houston. In addition, there are numerous smaller
diameter lines associated with the gathering and distribution system.

         The Pipeline System continues eastward from Todhunter, Ohio, to
Greensburg, Pennsylvania, at which point it branches into two segments, one
ending in Selkirk, New York (near Albany), and the other ending at Marcus Hook,
Pennsylvania (near Philadelphia). The Pipeline east of Todhunter and ending in
Selkirk is an 8-inch diameter


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line, whereas the line starting at Greensburg and ending at Marcus Hook varies
in diameter from 6 inches to 8 inches. East of Todhunter, Ohio, the Partnership
transports only LPGs through the Pipeline.

         During 2000, the Partnership completed construction of three new
pipelines between the Partnership's terminal in Mont Belvieu, Texas and Port
Arthur, Texas. Each pipeline has a 12-inch diameter and is approximately 70
miles in length. The new pipelines will transport ethylene, propylene and
natural gasoline.

         The Pipeline System has been constructed and is in general compliance
with applicable federal, state and local laws and regulations, and accepted
industry standards and practices. The Partnership performs regular maintenance
on all the facilities of the Pipeline System and has an ongoing process of
inspecting segments of the Pipeline System and making repairs and replacements
when necessary or appropriate. In addition, the Partnership conducts periodic
air patrols of the Pipeline System to monitor pipeline integrity and third-party
right of way encroachments.

MAJOR MARKETS

         The Pipeline System's major operations are the transportation, storage
and terminaling of refined petroleum products and LPGs along its mainline
system, and the storage and short-haul transportation of LPGs associated with
its Mont Belvieu operations. Product deliveries, in millions of barrels (MMBbls)
on a regional basis, over the last three years were as follows:

<TABLE>
<CAPTION>
                                               PRODUCT DELIVERIES (MMBbls)
                                                YEARS ENDED DECEMBER 31,
                                               --------------------------
                                                  2000     1999    1998
                                                  -----   -----   -----
<S>                                               <C>     <C>     <C>
Refined Products Transportation:
      Central (1) .............................    63.4    67.7    71.5
      Midwest (2) .............................    36.7    37.9    34.8
      Ohio and Kentucky .......................    28.0    27.0    24.2
                                                  -----   -----   -----
         Subtotal .............................   128.1   132.6   130.5
                                                  -----   -----   -----
LPGs Mainline Transportation:
      Central, Midwest and Kentucky (1)(2) ....    23.4    22.9    18.5
      Ohio and Northeast (3) ..................    16.2    14.7    13.5
                                                  -----   -----   -----
         Subtotal .............................    39.6    37.6    32.0
                                                  -----   -----   -----
Mont Belvieu Operations:
      LPGs ....................................    27.2    28.5    25.1
                                                  -----   -----   -----
         Total Product Deliveries .............   194.9   198.7   187.6
                                                  =====   =====   =====
</TABLE>


----------
(1)  Arkansas, Louisiana, Missouri and Texas.

(2)  Illinois and Indiana.

(3)  New York and Pennsylvania.

         The mix of products delivered varies seasonally, with gasoline demand
generally stronger in the spring and summer months and LPGs demand generally
stronger in the fall and winter months. Weather and economic conditions in the
geographic areas served by the Pipeline System also affect the demand for and
the mix of the products delivered.


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         Refined products and LPGs deliveries over the last three years were as
follows:

<TABLE>
<CAPTION>
                                       PRODUCT DELIVERIES (MMBbls)
                                          YEARS ENDED DECEMBER 31,
                                       --------------------------
                                           2000    1999    1998
                                          -----   -----   -----
<S>                                        <C>     <C>     <C>
Refined Products Transportation:
     Gasoline .........................    67.8    71.6    74.0
      Jet Fuels .......................    28.1    26.9    23.8
      Middle Distillates (1) ..........    26.6    28.4    26.1
      MTBE/Toluene ....................     5.6     5.7     6.6
                                          -----   -----   -----
          Subtotal ....................   128.1   132.6   130.5
                                          -----   -----   -----
LPGs Mainline Transportation:
      Propane .........................    33.1    30.8    25.5
      Butanes .........................     6.5     6.8     6.5
                                          -----   -----   -----
          Subtotal ....................    39.6    37.6    32.0
                                          -----   -----   -----
Mont Belvieu Operations:
      LPGs ............................    27.2    28.5    25.1
                                          -----   -----   -----
          Total Product Deliveries ....   194.9   198.7   187.6
                                          =====   =====   =====
</TABLE>

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(1)  Primarily diesel fuel, heating oil and other middle distillates.

      Refined Petroleum Products Transportation

         The Pipeline System transports refined petroleum products from the
upper Texas Gulf Coast, eastern Texas and southern Arkansas to the Central and
Midwest regions of the United States with deliveries in Texas, Louisiana,
Arkansas, Missouri, Illinois, Kentucky, Indiana and Ohio. At these points,
refined petroleum products are delivered to Partnership-owned terminals,
connecting pipelines and customer-owned terminals. The Partnership canceled its
tariff for deliveries of methyl tertiary butyl ether ("MTBE") into the Chicago
market area on July 1, 1999, and will cancel contract deliveries of MTBE at its
marine terminal near Beaumont, Texas, effective April 22, 2001. Governmental
regulation, technological advances in fuel economy, energy generation devices
and future fuel conservation measures could reduce the demand for refined
petroleum products in the market areas we serve.

         The volume of refined petroleum products transported by the Pipeline
System is directly affected by the demand for such products in the geographic
regions the System serves. Such market demand varies based upon the different
end uses to which the refined products deliveries are applied. Demand for
gasoline, which accounts for a substantial portion of the volume of refined
products transported through the Pipeline System, depends upon price, prevailing
economic conditions and demographic changes in the markets served. Demand for
refined products used in agricultural operations is affected by weather
conditions, government policy and crop prices. Demand for jet fuel depends upon
prevailing economic conditions and military usage.

         Market prices for refined petroleum products affect the demand in the
markets served by the Partnership. Therefore, quantities and mix of products
transported may vary. Transportation tariffs of refined petroleum products vary
among specific product types. As a result, market price volatility may affect
transportation revenues from period to period.

      LPGs Mainline Transportation

         The Pipeline System transports LPGs from the upper Texas Gulf Coast to
the Central, Midwest and Northeast regions of the United States. The Pipeline
System east of Todhunter, Ohio, is devoted solely to the transportation of LPGs.
Since LPGs demand is generally stronger in the winter months, the Pipeline
System often operates at or near capacity during such time. Propane deliveries
are generally sensitive to the weather and meaningful year-to-year variations
have occurred and will likely continue to occur.

         The Partnership's ability to serve markets in the Northeast is enhanced
by its propane import terminal at Providence, Rhode Island. This facility
includes a 400,000-barrel refrigerated storage tank along with ship

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unloading and truck loading facilities. Although the terminal is operated by the
Partnership, the utilization of the terminal is committed by contract to a major
propane marketer through April 30, 2001. In February 2001, the Company signed an
agreement with DEFS whereby propane received at the Providence terminal will be
marketed by DEFS, beginning May 2001.

      Mont Belvieu LPGs Storage and Pipeline Shuttle

         A key aspect of the Pipeline System's LPGs business is its storage and
pipeline asset base in the Mont Belvieu, Texas, complex serving the
fractionation, refining and petrochemical industries. The complex is the largest
of its kind in the United States and provides substantial capacity and
flexibility in the transportation, terminaling and storage of natural gas
liquids, LPGs, petrochemicals and olefins.

         The Partnership has approximately 36 million barrels of LPGs storage
capacity, including storage capacity leased to outside parties, at the Mont
Belvieu complex. The Partnership's Mont Belvieu short-haul transportation
shuttle system, consisting of a complex system of pipelines and interconnects,
ties Mont Belvieu to virtually every refinery and petrochemical facility on the
upper Texas Gulf Coast.

         In February 2000, the Partnership and Louis Dreyfus Plastics
Corporation ("Louis Dreyfus") announced a joint development alliance whereby the
Partnership's Mont Belvieu LPGs storage and transportation shuttle system
services are jointly marketed by Louis Dreyfus and the Partnership. The purpose
of the alliance is to expand services to the upper Texas Gulf Coast energy
marketplace by increasing throughput and the mix of products handled through the
existing system and establishing new receipt and delivery connections. The
Partnership operates the facilities for the alliance. The alliance is a
service-oriented, fee-based venture with no commodity trading activity.

      Product Sales and Other

         The Partnership also derives revenue from the sale of product
inventory, terminaling activities, other ancillary services associated with the
transportation and storage of refined petroleum products and LPGs, and the
fractionation of NGLs.

CUSTOMERS

         The Pipeline System's customers for the transportation of refined
petroleum products include major integrated oil companies, independent oil
companies and wholesalers. End markets for these deliveries are primarily retail
service stations, truck stops, agricultural enterprises, refineries, and
military and commercial jet fuel users.

         Propane customers include wholesalers and retailers who, in turn, sell
to commercial, industrial, agricultural and residential heating customers, as
well as utilities who use propane as a fuel source. Refineries constitute the
Partnership's major customers for butane and isobutane, which are used as a
blend stock for gasolines and as a feed stock for alkylation units,
respectively.

         At December 31, 2000, the Partnership had approximately 140 customers.
Transportation revenues (and percentage of total revenues) attributable to the
top 10 customers were $102 million (43%), $105 million (46%), and $90 million
(42%) for the years ended December 31, 2000, 1999 and 1998, respectively. During
2000, billings to Marathon Ashland Petroleum, LLC, a major integrated oil
company, accounted for approximately 10% of the Partnership's revenues. Loss of
a business relationship with a significant customer could have an adverse affect
on the consolidated financial position, results of operations and liquidity of
the Partnership.

COMPETITION

         The Pipeline System conducts operations without the benefit of
exclusive franchises from government entities. Interstate common carrier
transportation services are provided through the System pursuant to tariffs
filed with the FERC.


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<PAGE>   8

         Because pipelines are generally the lowest cost method for intermediate
and long-haul overland movement of refined petroleum products and LPGs, the
Pipeline System's most significant competitors (other than indigenous production
in its markets) are pipelines in the areas where the Pipeline System delivers
products. Competition among common carrier pipelines is based primarily on
transportation charges, quality of customer service and proximity to end users.
The General Partner believes the Partnership is competitive with other pipelines
serving the same markets; however, comparison of different pipelines is
difficult due to varying product mix and operations.

         Trucks, barges and railroads competitively deliver products in some of
the areas served by the Pipeline System. Trucking costs, however, render that
mode of transportation less competitive for longer hauls or larger volumes.
Barge fees for the transportation of refined products are generally lower than
the Partnership's tariffs. The Partnership faces competition from rail movements
of LPGs in several geographic areas. The most significant area is the Northeast,
where rail movements of propane from Sarnia, Canada, compete with propane moved
on the Pipeline System.

TITLE TO PROPERTIES

         The Partnership believes it has satisfactory title to all of its
assets. Such properties are subject to liabilities in certain cases, such as
customary interests generally contracted in connection with acquisition of the
properties, liens for taxes not yet due, easements, restrictions, and other
minor encumbrances. The Partnership believes none of these liabilities
materially affects the value of such properties or the Partnership's interest
therein or will materially interfere with their use in the operation of the
Partnership's business.

CAPITAL EXPENDITURES

         Capital expenditures by the Partnership totaled $56.5 million for the
year ended December 31, 2000. This amount includes capitalized interest of $4.6
million. Approximately $29.9 million was used to complete construction of three
new pipelines between the Partnership's terminal in Mont Belvieu, Texas and Port
Arthur, Texas. The project included three 12-inch diameter common-carrier
pipelines and associated facilities. Each pipeline is approximately 70 miles in
length. The new pipelines will transport ethylene, propylene and natural
gasoline. The Partnership has entered into a twenty-year agreement for
guaranteed throughput commitments that total approximately $0.9 million per
month, which began in November 2000. The cost of this project totaled
approximately $73.7 million. Of the remaining $22.0 million of capital
expenditures during 2000, approximately $15.4 million of spending related to
life-cycle replacements and upgrading current facilities, and approximately $6.6
million of spending related to other pipeline expansion projects and
revenue-generating projects.

         The Partnership estimates that capital expenditures, excluding
acquisitions, for 2001 will be approximately $72.6 million (which includes $2.9
million of capitalized interest). Approximately $43 million is expected to be
used to expand the Partnership's capacity to support the receipt connection
point at Beaumont, Texas, and delivery location at Creal Springs, Illinois, with
Centennial. The timing of these expenditures is dependent on the FERC ruling on
the abandonment filing by CMS Panhandle Pipe Line Company. Approximately
one-half of the remaining expenditures are expected to be used in
revenue-generating projects, with the remaining amount to be used for life-cycle
replacements and upgrading current facilities.

REGULATION

         The Partnership's interstate common carrier pipeline operations are
subject to rate regulation by the FERC under the Interstate Commerce Act
("ICA"), the Energy Policy Act of 1992 ("Act") and rules and orders promulgated
pursuant thereto. FERC regulation requires that interstate oil pipeline rates be
posted publicly and that these rates be "just and reasonable" and
nondiscriminatory.

         Rates of interstate oil pipeline companies, like the Partnership, are
currently regulated by the FERC primarily through an index methodology, whereby
a pipeline is allowed to change its rates based on the change from year to year
in the Producer Price Index for finished goods less 1% ("PPI Index"). In the
alternative, interstate oil pipeline companies may elect to support rate filings
by using a cost-of-service methodology, competitive market showings ("Market
Based Rates") or agreements between shippers and the oil pipeline company that
the rate is acceptable ("Settlement Rates").


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<PAGE>   9


         On May 11, 1999, the Partnership filed an application with the FERC
requesting permission to charge market-based rates for substantially all refined
products transportation tariffs. Along with its application for market-based
rates, the Partnership filed a petition for waiver, pending the FERC's
determination on its application for market-based rates, of the requirements
that would otherwise have been imposed by the FERC's regulations requiring the
Partnership to reduce its rates in conformity with the PPI Index. On June 30,
1999, FERC granted the waiver stating that it was temporary in nature and that
the Partnership would be required to make refunds, with interest, of all amounts
collected under rates in excess of the PPI Index ceiling level after July 1,
1999, if the Partnership's application for market-based rates were ultimately
denied. As a result of the refund obligation potential, the Partnership has
deferred all revenue recognition of rates charged in excess of the PPI Index. As
of December 31, 2000, the amount deferred for possible rate refund, including
interest totaled approximately $2.3 million.

         On July 31, 2000, the FERC issued an order granting the Partnership
market-based rates in certain markets and set for hearing the Partnership's
application for market-based rates in the Little Rock, Arkansas;
Shreveport-Arcadia, Louisiana; Cincinnati-Dayton, Ohio and Memphis, Tennessee,
destination markets and the Shreveport, Louisiana, origin market. The FERC also
directed the FERC trial staff to convene a conference to explore the facts and
issues regarding the Western Gulf Coast origin market. After the matter was set
for hearing, the Partnership and the protesting shippers entered into a
settlement agreement resolving their respective differences. On January 9, 2001,
the presiding Administrative Law Judge assigned to the hearing determined that
the offer of settlement provided resolution of issues set for hearing in the
Partnership pending case in a fair and reasonable manner and in the public
interest and certified the offer of settlement and recommended it to the FERC
for approval. The certification of the settlement is currently before the FERC.
The Partnership believes that the Administrative Law Judge's decision in this
matter will be upheld by the FERC.

         The settlement, if it is approved by FERC, will require the Partnership
to withdraw the application for market-based rates to the Little Rock, Arkansas,
destination market and the Arcadia, Louisiana, destination in the
Shreveport-Arcadia, Louisiana, destination market. The Partnership also has
agreed to recalculate rates to these destination markets to conform with the PPI
Index from July 1, 1999 and make appropriate refunds. The refund obligation
under the proposed settlement as of December 31, 2000 would be $0.8 million.

         Effective July 1, 1999, the Partnership established Settlement Rates
with certain shippers of LPGs under which the rates in effect on June 30, 1999,
would not be adjusted for a period of either two or three years. Other LPGs
transportation tariff rates were reduced pursuant to the PPI Index
(approximately 1.83%), effective July 1, 1999.

         In a 1995 decision involving an unrelated oil pipeline limited
partnership, the FERC partially disallowed the inclusion of income taxes in that
partnership's cost of service. In another FERC proceeding involving a different
oil pipeline limited partnership, the FERC held that the oil pipeline limited
partnership may not claim an income tax allowance for income attributable to
non-corporate limited partners, both individuals and other entities. These FERC
decisions do not affect the Partnership's current rates and rate structure
because the Partnership does not use the cost of service methodology to support
its rates. However, the FERC decisions might become relevant to the Partnership
should it (i) elect in the future to use the cost-of-service methodology or (ii)
be required to use such methodology to defend its indexed rates against a
shipper protest alleging that an indexed rate increase substantially exceeds
actual cost increases. Should such circumstances arise, there can be no
assurance with respect to the effect of such precedents on the Partnership's
rates in view of the uncertainties involved in this issue.

ENVIRONMENTAL MATTERS

         The operations of the Partnership are subject to federal, state and
local laws and regulations relating to protection of the environment. Although
the Partnership believes its operations are in material compliance with
applicable environmental regulations, risks of significant costs and liabilities
are inherent in pipeline operations, and there can be no assurance that
significant costs and liabilities will not be incurred. Moreover, it is possible
that other developments, such as increasingly strict environmental laws and
regulations and enforcement policies thereunder, and claims for damages to
property or persons resulting from its operations, could result in substantial
costs and liabilities to the Partnership.


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<PAGE>   10

      Water

         The Federal Water Pollution Control Act of 1972, as renamed and amended
as the Clean Water Act ("CWA"), imposes strict controls against the discharge of
oil and its derivatives into navigable waters. The CWA provides penalties for
any discharges of petroleum products in reportable quantities and imposes
substantial potential liability for the costs of removing an oil or hazardous
substance spill. State laws for the control of water pollution also provide
varying civil and criminal penalties and liabilities in the case of a release of
petroleum or its derivatives in surface waters or into the groundwater. Spill
prevention control and countermeasure requirements of federal laws require
appropriate containment berms and similar structures to help prevent the
contamination of navigable waters in the event of a petroleum tank spill,
rupture or leak.

         Contamination resulting from spills or release of refined petroleum
products is an inherent risk within the petroleum pipeline industry. To the
extent that groundwater contamination requiring remediation exists along the
Pipeline System as a result of past operations, the Partnership believes any
such contamination could be controlled or remedied without having a material
adverse effect on the financial condition of the Partnership, but such costs are
site specific, and there can be no assurance that the effect will not be
material in the aggregate.

         The primary federal law for oil spill liability is the Oil Pollution
Act of 1990 ("OPA"), which addresses three principal areas of oil pollution --
prevention, containment and cleanup, and liability. It applies to vessels,
offshore platforms, and onshore facilities, including terminals, pipelines and
transfer facilities. In order to handle, store or transport oil, shore
facilities are required to file oil spill response plans with the appropriate
agency being either the United States Coast Guard, the United States Department
of Transportation Office of Pipeline Safety ("OPS") or the Environmental
Protection Agency ("EPA"). Numerous states have enacted laws similar to OPA.
Under OPA and similar state laws, responsible parties for a regulated facility
from which oil is discharged may be liable for removal costs and natural
resources damages. The General Partner believes that the Partnership is in
material compliance with regulations pursuant to OPA and similar state laws.

         The EPA has adopted regulations that require the Partnership to have
permits in order to discharge certain storm water run-off. Storm water discharge
permits may also be required by certain states in which the Partnership
operates. Such permits may require the Partnership to monitor and sample the
effluent. The General Partner believes that the Partnership is in material
compliance with effluent limitations at existing facilities.

      Air Emissions

         The operations of the Partnership are subject to the federal Clean Air
Act and comparable state and local statutes. The Clean Air Act Amendments of
1990 (the "Clean Air Act") will require most industrial operations in the United
States to incur future capital expenditures in order to meet the air emission
control standards that are to be developed and implemented by the EPA and state
environmental agencies during the next decade. Pursuant to the Clean Air Act,
any Partnership facilities that emit volatile organic compounds or nitrogen
oxides and are located in ozone non-attainment areas will face increasingly
stringent regulations, including requirements that certain sources install the
reasonably available control technology. The EPA is also required to promulgate
new regulations governing the emissions of hazardous air pollutants. Some of the
Partnership's facilities are included within the categories of hazardous air
pollutant sources which will be affected by these regulations. The Partnership
does not anticipate that changes currently required by the Clean Air Act
hazardous air pollutant regulations will have a material adverse effect on the
Partnership.

         The Clean Air Act also introduced the new concept of federal operating
permits for major sources of air emissions. Under this program, one federal
operating permit (a "Title V" permit) is issued. The permit acts as an umbrella
that includes other federal, state and local preconstruction and/or operating
permit provisions, emission standards, grandfathered rates, and record keeping,
reporting, and monitoring requirements in a single document. The federal
operating permit is the tool that the public and regulatory agencies use to
review and enforce a site's compliance with all aspects of clean air regulation
at the federal, state and local level. The Partnership has completed
applications for all twelve facilities for which such regulations apply and has
received the final permit for nine facilities.


                                       8
<PAGE>   11


      Risk Management Plans

         The Partnership is also subject to the Environmental Protection
Agency's Risk Management Plan ("RMP") regulations at certain locations. This
regulation is intended to work with the Occupational Safety and Health Act
("OSHA") Process Safety Management regulation (see "Safety Regulation"
following) to minimize the offsite consequences of catastrophic releases. The
regulation requires a regulated source, in excess of threshold quantities,
develop and implement a risk management program that includes a five-year
accident history, an offsite consequence analyses, a prevention program and an
emergency response program. The General Partner believes the Partnership is in
material compliance with the RMP regulations and that the operating expenses of
the RMP regulations will not have a material adverse impact on the Partnership's
financial position or results of operations.

      Solid Waste

         The Partnership generates hazardous and non-hazardous solid wastes that
are subject to requirements of the federal Resource Conservation and Recovery
Act ("RCRA") and comparable state statutes. Amendments to RCRA require the EPA
to promulgate regulations banning the land disposal of all hazardous wastes
unless the wastes meet certain treatment standards or the land-disposal method
meets certain waste containment criteria. In 1990, the EPA issued the Toxicity
Characteristic Leaching Procedure, which substantially expanded the number of
materials defined as hazardous waste. Certain wastewater and other wastes
generated from the Partnership's business activities previously classified as
nonhazardous are now classified as hazardous due to the presence of dissolved
aromatic compounds. The Partnership utilizes waste minimization and recycling
processes and has installed pre-treatment facilities to reduce the volume of its
hazardous waste. The Partnership currently has three permitted on-site waste
water treatment facilities. Operating expenses of these facilities have not had
a material adverse effect on the financial position or results of operations of
the Partnership.

      Superfund

         The Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), also known as "Superfund," imposes liability, without regard to
fault or the legality of the original act, on certain classes of persons who
contributed to the release of a "hazardous substance" into the environment.
These persons include the owner or operator of a facility and companies that
disposed or arranged for the disposal of the hazardous substances found at a
facility. CERCLA also authorizes the EPA and, in some instances, third parties
to take actions in response to threats to the public health or the environment
and to seek to recover from the responsible classes of persons the costs they
incur. In the course of its ordinary operations, the Pipeline System generates
wastes that may fall within CERCLA's definition of a "hazardous substance."
Should a disposal facility previously used by the Partnership require clean up
in the future, the Partnership may be responsible under CERCLA for all or part
of the costs required to clean up sites at which such wastes have been disposed.

         The Company was notified by the EPA in the fall of 1998 that it might
have potential liability for waste material allegedly disposed by the Company at
the Casmalia Disposal Site in Santa Barbara County, California. The EPA has
offered the Company a de minimus settlement offer of $0.3 million to settle
liability associated with the Company's alleged involvement. The Company
believes based on the information furnished by the EPA that it has been
erroneously named as an entity that disposed of waste material at the Casmalia
Disposal Site. The Company intends to continue to vigorously pursue dismissal
from this matter.

         In December 1999, the Company was notified by EPA of potential
liability for alleged waste disposal at Container Recycling, Inc., located in
Kansas City, Kansas. The Company was also asked to respond to an EPA Information
Request. The Company's response has been filed with the EPA Region VII office.
Based on information the Company has received from the EPA, as well as through
its internal investigations, the Company intends to pursue dismissal from this
matter.

      Other Environmental Proceedings

         The Partnership and the Indiana Department of Environmental Management
("IDEM") have entered into an Agreed Order that will ultimately result in a
remediation program for any on-site and off-site groundwater contamination
attributable to the Partnership's operations at the Seymour, Indiana, terminal.
A Feasibility Study, which includes the Partnership's proposed remediation
program, has been approved by IDEM. IDEM is expected to

                                       9
<PAGE>   12

issue a Record of Decision formally approving the remediation program. After the
Record of Decision has been issued, the Partnership will enter into an Agreed
Order for the continued operation and maintenance of the program. The
Partnership has accrued $0.6 million at December 31, 2000, for future costs of
the remediation program for the Seymour terminal. In the opinion of the Company,
the completion of the remediation program will not have a material adverse
impact on the Partnership's financial condition, results of operations or
liquidity.

         The Partnership received a compliance order from the Louisiana
Department of Environmental Quality ("DEQ") during 1994 relative to potential
environmental contamination at the Partnership's Arcadia, Louisiana, facility,
which may be attributable to the operations of the Partnership and adjacent
petroleum terminals of other companies. The Partnership and all adjacent
terminals have been assigned to the Groundwater Division of DEQ, in which a
consolidated plan will be developed. The Partnership has finalized a negotiated
Compliance Order with DEQ that will allow the Partnership to continue with a
remediation plan similar to the one previously agreed to by DEQ and implemented
by the Company. In the opinion of the General Partner, the completion of the
remediation program being proposed by the Partnership will not have a future
material adverse impact on the Partnership.

SAFETY REGULATION

         The Partnership is subject to regulation by the United States
Department of Transportation ("DOT") under the Accountable Pipeline and Safety
Partnership Act of 1996, sometimes referred to as the Hazardous Liquid Pipeline
Safety Act ("HLPSA"), and comparable state statutes relating to the design,
installation, testing, construction, operation, replacement and management of
its pipeline facilities. HLPSA covers petroleum and petroleum products and
requires any entity that owns or operates pipeline facilities to comply with
such regulations, to permit access to and copying of records and to make certain
reports and provide information as required by the Secretary of Transportation.
The HLPSA is scheduled to be reauthorized in 2001. The Partnership does not
expect the legislation changes to have a material impact on its financial
condition, results of operations or liquidity.

         The Partnership is subject to the OPS regulation requiring
qualification of pipeline personnel. The regulation requires pipeline operators
to develop and maintain a written qualification program for individuals
performing covered tasks on pipeline facilities. The intent of this regulation
is to ensure a qualified work force and to reduce the probability and
consequence of incidents caused by human error. The regulation establishes
qualification requirements for individuals performing covered tasks, and amends
certain training requirements in existing regulations. A written qualification
program must be completed by April 27, 2001, and individuals performing a
covered task must be qualified by October 28, 2002.

         The Partnership is also subject to the OPS regulation for High
Consequence Areas ("HCA"). This regulation specifies how to assess, evaluate,
repair and validate the integrity of pipeline segments that could impact
populated areas, areas unusually sensitive to environmental damage and
commercially navigable waterways, in the event of a release. The pipeline
segments that could impact HCA's must be identified by December 31, 2001. The
regulation requires an integrity management program that utilizes internal
pipeline inspection, pressure testing, or other equally effective means to
assess the integrity of pipeline segments in HCA's. An integrity management
program must be completed by March 31, 2002. The initial integrity tests in
HCA's start with a seven-year cycle on March 31, 2001, with all subsequent
inspections conducted on a five-year cycle. The program requires periodic review
of pipeline segments in HCA's to ensure adequate preventative and mitigative
measures exist. Through this program the Partnership will evaluate a range of
threats to each pipeline segment's integrity by analyzing available information
about the pipeline segment and consequences of a failure in a HCA. The
regulation requires prompt action to address integrity issues raised by the
assessment and analysis. The Partnership does not anticipate that implementation
of these regulations will have a material adverse effect on the Partnership.

         The Partnership is also subject to the requirements of the federal OSHA
and comparable state statutes. The Partnership believes it is in material
compliance with OSHA and state requirements, including general industry
standards, record keeping requirements and monitoring of occupational exposures.

         The OSHA hazard communication standard, the EPA community right-to-know
regulations under Title III of the federal Superfund Amendment and
Reauthorization Act, and comparable state statutes require the Partnership to
organize and disclose information about the hazardous materials used in its
operations. Certain parts of this information must be reported to employees,
state and local governmental authorities, and local citizens upon request. In
general, the Partnership expects to increase its expenditures during the next
decade to comply with higher

                                       10
<PAGE>   13

industry and regulatory safety standards such as those described above. Such
expenditures cannot be accurately estimated at this time, although the General
Partner does not believe that they will have a future material adverse impact on
the Partnership.

         The Partnership is subject to OSHA Process Safety Management ("PSM")
regulations which are designed to prevent or minimize the consequences of
catastrophic releases of toxic, reactive, flammable or explosive chemicals.
These regulations apply to any process which involves a chemical at or above the
specified thresholds or any process which involves a flammable liquid or gas, as
defined in the regulations, stored on-site in one location, in a quantity of
10,000 pounds or more. The Partnership utilizes certain covered processes and
maintains storage of LPGs in pressurized tanks, caverns and wells, in excess of
10,000 pounds at various locations. Flammable liquids stored in atmospheric
tanks below their normal boiling point without benefit of chilling or
refrigeration are exempt. The Partnership believes it is in material compliance
with the PSM regulations.

EMPLOYEES

         The Partnership does not have any employees, officers or directors. The
General Partner is responsible for the management of the Partnership. As of
December 31, 2000, the General Partner had 798 employees.

ITEM 3.  LEGAL PROCEEDINGS

TOXIC TORT LITIGATION - SEYMOUR, INDIANA

         In the fall of 1999 and on December 1, 2000, the Company and the
Partnership were named as defendants in two separate lawsuits in Jackson County
Circuit Court, Jackson County, Indiana, in Ryan E. McCleery and Marcia S.
McCleery, et al. v. Texas Eastern Corporation, et al. (including the Company and
Partnership) and Gilbert Richards and Jean Richards v. Texas Eastern
Corporation, et. al. In both cases plaintiffs contend, among other things, that
the Company and other defendants stored and disposed of toxic and hazardous
substances and hazardous wastes in a manner that caused the materials to be
released into the air, soil and water. They further contend that the release
caused damages to the plaintiffs. In their Complaints, the plaintiffs allege
strict liability for both personal injury and property damage together with
gross negligence, continuing nuisance, trespass, criminal mischief and loss of
consortium. The plaintiffs are seeking compensatory, punitive and treble
damages. The Company has filed an Answer to both complaints, denying the
allegations, as well as various other motions. These cases are in the early
stages of discovery and are not covered by insurance. The Company is defending
itself vigorously against the lawsuits. The Partnership cannot estimate the
loss, if any, associated with these pending lawsuits.

OTHER LITIGATION

         In addition to the litigation discussed above, the Partnership has
been, in the ordinary course of business, a defendant in various lawsuits and a
party to various other legal proceedings, some of which are covered in whole or
in part by insurance. The General Partner believes that the outcome of such
lawsuits and other proceedings will not individually or in the aggregate have a
material adverse effect on the Partnership's financial condition, results of
operations or cash flows.

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

         NONE


                                       11
<PAGE>   14

                                     PART II

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

         TEPPCO Partners, L.P. owns a 98.9899% interest as the sole limited
partner interest and Texas Eastern Products Pipeline Company, LLC owns a 1.0101%
general partner interest in the Partnership. There is no established public
trading market for the Partnership ownership interests.

         The Partnership makes quarterly cash distributions of its Available
Cash, as defined by the Partnership Agreements. Available Cash consists
generally of all cash receipts less cash disbursements and cash reserves
necessary for working capital, anticipated capital expenditures and
contingencies the General Partner deems appropriate and necessary.

         The Partnership is a limited partnership that is not subject to federal
income tax. Instead, the partners are required to report their allocable share
of the Partnership's income, gain, loss, deduction and credit, regardless of
whether the Partnership makes distributions.

ITEM 6.  SELECTED FINANCIAL DATA

         The following tables set forth, for the periods and at the dates
indicated, selected consolidated financial and operating data for the
Partnership. The financial data was derived from the consolidated financial
statements of the Partnership and should be read in conjunction with the
Partnership's audited consolidated financial statements included in the Index to
Financial Statements on page F-1 of this report. See also Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
                                                                        YEARS ENDED DECEMBER 31,
                                                     -------------------------------------------------------------
                                                        2000         1999        1998         1997         1996
                                                     ---------    ---------    ---------    ---------    ---------
                                                                            (IN THOUSANDS)
<S>                                                  <C>          <C>          <C>          <C>          <C>
INCOME STATEMENT DATA:
   Operating revenues:
     Transportation -- refined products ..........   $ 119,331    $ 123,004    $ 119,854    $ 107,304    $  98,641
     Transportation -- LPGs ......................      73,896       67,701       60,902       79,371       80,219
     Mont Belvieu operations .....................      13,334       12,849       10,880       12,815       11,811
     Other .......................................      30,126       26,716       20,147       22,603       25,354
                                                     ---------    ---------    ---------    ---------    ---------
     Total operating revenues ....................     236,687      230,270      211,783      222,093      216,025
   Operating expenses ............................     118,945      113,768      107,102      106,771      105,182
   Depreciation and amortization .................      27,743       27,109       26,040       23,772       23,409
                                                     ---------    ---------    ---------    ---------    ---------
     Operating income ............................      89,999       89,393       78,641       91,550       87,434
   Interest expense -- net .......................     (30,573)     (29,212)     (28,982)     (32,229)     (33,534)
   Other income -- net ...........................       1,888        1,671        2,873        2,604        5,346
                                                     ---------    ---------    ---------    ---------    ---------
     Income before extraordinary item ............      61,314       61,852       52,532       61,925       59,246
   Extraordinary loss on debt extinguishment(1)...          --           --      (73,509)          --           --
                                                     ---------    ---------    ---------    ---------    ---------
     Net income (loss) ...........................   $  61,314    $  61,852    $ (20,977)   $  61,925    $  59,246
                                                     =========    =========    =========    =========    =========
BALANCE SHEET DATA (AT PERIOD END):
   Property, plant and equipment -- net ..........   $ 642,381    $ 611,695    $ 567,566    $ 567,681    $ 561,068
   Total assets ..................................     755,507      724,216      696,486      673,909      671,241
   Long-term debt (net of current maturities) ....     469,540      452,753      427,722      309,512      326,512
   Partners' capital .............................     234,915      228,229      228,140      306,060      293,274
CASH FLOW DATA:
   Net cash from operations ......................   $  93,450    $  89,803    $  83,915    $  83,604    $  86,121
   Capital expenditures ..........................     (56,516)     (69,322)     (22,710)     (32,931)     (51,264)
   Distributions .................................     (70,767)     (61,608)     (56,774)     (49,042)     (45,174)
</TABLE>

----------
(1)  Extraordinary item reflects the loss related to the early extinguishment
     of the First Mortgage Notes on January 27, 1998.


                                       12
<PAGE>   15

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

GENERAL

         The following information is provided to facilitate increased
understanding of the 2000, 1999 and 1998 consolidated financial statements and
accompanying notes of the Partnership included in the Index to Financial
Statements on page F-1 of this report. Material period-to-period variances in
the consolidated statements of income are discussed under "Results of
Operations." The "Financial Condition and Liquidity" section analyzes cash flows
and financial position. Discussion included in "Other Matters" addresses key
trends, future plans and contingencies. Throughout these discussions, management
addresses items that are reasonably likely to materially affect future liquidity
or earnings.

         The Partnership is involved in the transportation, storage and
terminaling of petroleum products and LPGs, intrastate transportation of
petrochemicals and the fractionation of NGLs. Revenues are derived from the
transportation of refined products and LPGs, the storage and short-haul shuttle
transportation of LPGs at the Mont Belvieu, Texas, complex, sale of product
inventory and other ancillary services. Labor and electric power costs comprise
the two largest operating expense items of the Partnership. Higher natural gas
prices increase the cost of electricity used to power pump stations on the
Pipeline System. Operations are somewhat seasonal with higher revenues generally
realized during the first and fourth quarters of each year. Refined products
volumes are generally higher during the second and third quarters because of
greater demand for gasolines during the spring and summer driving seasons. LPGs
volumes are generally higher from November through March due to higher demand in
the Northeast for propane, a major fuel for residential heating.

RESULTS OF OPERATIONS

         For the year ended December 31, 2000, the Partnership reported net
income of $61.3 million, compared with $61.9 million for the year ended December
31, 1999. The $0.6 million decrease in income resulted primarily from a $5.8
million increase in costs and expenses and a $1.4 million increase in interest
expense (net of capitalized interest), partially offset by a $6.4 million
increase in operating revenues.

         For the year ended December 31, 1999, the Partnership reported net
income of $61.9 million, compared with a net loss of $21.0 million for year
ended December 31, 1998. The net loss in 1998 included an extraordinary charge
of $73.5 million for early extinguishment of debt. Excluding the extraordinary
loss, net income would have been $52.5 million for the year ended December 31,
1998. The $9.4 million increase in income before the loss on debt extinguishment
resulted primarily from a $18.5 million increase in operating revenues,
partially offset by a $7.7 million increase in costs and expenses and a $1.2
million decrease in other income - net.

         Volume and average tariff information for 2000, 1999 and 1998 is
presented below:

<TABLE>
<CAPTION>
                                                                                           PERCENTAGE
                                                                                            INCREASE
                                                       YEARS ENDED DECEMBER 31,            (DECREASE)
                                              --------------------------------------    ---------------
                                                  2000         1999          1998        2000      1999
                                              -----------   -----------   -----------   -----     -----
                                             (IN THOUSANDS, EXCEPT TARIFF INFORMATION)
<S>                                           <C>           <C>           <C>          <C>      <C>
Volumes Delivered
    Refined products ......................       128,151       132,642       130,467      (3%)       2%
    LPGs ..................................        39,633        37,575        32,048       5%       17%
    Mont Belvieu operations ...............        27,159        28,535        25,072      (5%)      14%
                                              -----------   -----------   -----------   -----     -----
      Total ...............................       194,943       198,752       187,587      (2%)       6%
                                              ===========   ===========   ===========   =====     =====
Average Tariff per Barrel
    Refined products ......................   $      0.93   $      0.93   $      0.92      --         1%
    LPGs ..................................          1.86          1.80          1.90       3%       (5%)
    Mont Belvieu operations ...............          0.16          0.16          0.16      --        --
      Average system tariff per barrel ....   $      1.01   $      0.98   $      0.98       3%       --
                                              ===========   ===========   ===========   =====     =====
</TABLE>


                                       13
<PAGE>   16

      2000 Compared to 1999

         Operating revenues for the year ended 2000 increased 3% to $236.7
million from $230.3 million for the year ended 1999. This $6.4 million increase
resulted from a $6.2 million increase in LPGs transportation revenues, a $3.4
million increase in other operating revenues and a $0.5 million increase in
revenues generated from Mont Belvieu operations. These increases were partially
offset by a $3.7 million decrease in refined products transportation revenues.

         Refined products transportation revenues decreased $3.7 million for the
year ended December 31, 2000, compared with the prior year, as a result of a 3%
decrease in total refined products volumes delivered. Motor fuel volumes
delivered decreased by 2.5 million barrels and distillate volumes delivered
decreased by 1.8 million barrels due primarily to a local refinery expansion in
the West Memphis market and unfavorable price differentials in the Midwest
market area. Natural gasoline volumes delivered declined 1.3 million barrels due
primarily to the expiration of a contract in late 1999 for deliveries to the
Chicago area, along with unfavorable processing and blending economics in the
Chicago market area. These decreases were primarily offset by a 1.2 million
barrel increase in jet fuel volumes delivered due to continued strong demand in
the Chicago market area and at the Cincinnati airport that is supplied by the
Partnership. The Partnership deferred recognition of approximately $1.5 million
of revenue during the year ended December 31, 2000, with respect to potential
refund obligations for rates charged in excess of the PPI Index while its
application for Market Based Rates is under review by FERC. See further
discussion regarding Market Based Rates included in "Other Matters - Market and
Regulatory Environment."

         LPGs transportation revenues increased $6.2 million for the year ended
December 31, 2000, compared with the prior year, due to a 5% increase in volumes
delivered and a 3% increase in the average LPGs tariff per barrel. Colder winter
weather during the first and fourth quarters of 2000, coupled with lower
customer storage levels contributed to a 1.2 million barrel increase in propane
volumes delivered in the Northeast market area and a 0.9 million barrel increase
in propane volumes delivered in the Midwest market area. Increased refinery
demand in the Northeast market area resulted in a 0.2 million barrel increase in
butane volumes delivered. The larger percentage of long-haul deliveries during
2000 resulted in a 3% increase in the average LPGs tariff per barrel.

         Revenues generated from Mont Belvieu operations increased $0.5 million
for the year ended December 31, 2000, compared with the prior year, primarily
due to increased brine handling fees and higher storage revenue.

         Other operating revenues increased $3.4 million during the year ended
December 31, 2000, compared with 1999, primarily due to $1.8 million of
deficiency revenue recognized in the fourth quarter of 2000 related to the
beginning of a 20-year contract for petrochemical deliveries at Port Arthur,
Texas, and a $0.5 million increase in gains on the sale of product inventory
attributable to higher market prices in 2000. The additional increases resulted
from increased refined products terminaling revenue and increased custody
transfer services at Mont Belvieu facilities.

         Costs and expenses increased $5.8 million during the year ended
December 31, 2000, compared with the prior year, due to a $2.9 million increase
in operating, general and administrative expenses, a $2.3 million increase in
operating fuel and power expense and a $0.6 million increase in depreciation and
amortization charges. The increase in operating, general and administrative
expenses was primarily attributable to $0.9 million of expense recognized in the
first quarter of 2000 to write-off project evaluation costs, a $2.3 million
increase in general and administrative supplies and services, a $1.5 million
increase in legal services, a $1.0 million increase in pipeline operations and
maintenance expenses, a $0.7 million increase in labor related expenses and a
$0.3 million increase in product measurement losses. The write-off of project
evaluation costs resulted from the announcement in March 2000 of the
Partnership's abandonment of its plan to construct a pipeline from Beaumont,
Texas, to Little Rock, Arkansas, in favor of participation in the Centennial
joint venture. These increases in operating, general and administrative expenses
were partially offset by a $3.9 million decrease in expenses associated with
Year 2000 activities incurred in 1999. The increase in operating fuel and power
expense from the prior year resulted primarily from higher fuel prices charged
by electric utilities in 2000. Depreciation and amortization expense increased
as a result of $0.3 million in depreciation expense related to the completion of
the petrochemical pipelines and other capital additions placed in service
throughout 2000.


                                       14
<PAGE>   17

         Interest expense increased $3.8 million during the year ended December
31, 2000, compared with 1999, as a result of borrowings under a term loan to
finance construction of the petrochemical pipelines between Mont Belvieu and
Port Arthur, Texas. Additionally, amortization of debt issue costs increased
$0.8 million during the year ended December 31, 2000. The increase in interest
expense was offset by increased interest capitalized of $2.4 million during the
year ended December 31, 2000, as a result of higher balances associated with
construction of the petrochemical pipelines.

         Other income - net increased $0.2 million during the year ended
December 31, 2000, compared with the prior year, as a result of gains on the
sale of right-of-way easements during the second quarter of 2000, coupled with
increased interest income earned on cash investments in 2000.

      1999 Compared to 1998

         Operating revenues for the year ended 1999 increased 9% to $230.3
million from $211.8 million for the year ended 1998. This $18.5 million increase
resulted from an $3.1 million increase in refined products transportation
revenues, a $6.8 million increase in LPGs transportation revenues, a $2.0
million increase in revenues generated from Mont Belvieu operations and a $6.6
million increase in other operating revenues.

         Refined products transportation revenues increased $3.1 million for the
year ended December 31, 1999, compared with the prior year, as a result of a 2%
increase in total refined products volumes delivered and a 1% increase in the
refined products average tariff per barrel. Strong economic demand coupled with
lower refinery production resulted in a 3.1 million barrel increase in jet fuel
volumes delivered and a 2.3 million barrel increase in distillate volumes
delivered. Jet fuel volumes delivered also benefited as a result of new military
supply agreements that became effective in the fourth quarter of 1998. These
increases were partially offset by a 1.8 million barrel decrease in motor fuel
volumes delivered due to unfavorable Midwest price differentials and reduced
refinery production received into the Ark-La-Tex system and a 0.6 million barrel
decrease in natural gasoline volumes delivered attributable to lower feedstock
and blending demand. Additionally, MTBE volumes delivered decreased 0.9 million
barrels as a result of the Partnership canceling its tariffs to Midwest
destinations, effective July 1, 1999. This action was taken with the consent of
MTBE shippers as a result of lower demand for MTBE transportation caused by
changing blending economics, and resulted in increased pipeline capacity and
tankage available for other products. The 1% increase in the refined products
average tariff per barrel was primarily attributable to a higher percentage of
long-haul distillate volumes delivered in the Midwest, partially offset by the
1.83% general tariff reduction pursuant to the PPI Index, effective July 1,
1999. The Partnership has deferred recognition of approximately $0.8 million of
revenue in 1999, with respect to potential refund obligations for rates charged
in excess of the PPI Index while its application for Market Based Rates is under
review by FERC.

         LPGs transportation revenues increased $6.8 million for the year ended
December 31, 1999, compared with the prior year, due to a 17% increase in
volumes delivered, partially offset by a 5% decrease in the average LPGs tariff
per barrel. Propane volumes delivered in the Northeast increased 14% from the
prior year primarily due to colder winter weather during the first and fourth
quarters of 1999. Propane deliveries in the Midwest market area and the upper
Texas Gulf Coast increased 19% and 44%, respectively, from the prior year
primarily due to increased petrochemical feedstock demand. The 5% decrease in
the average LPGs tariff per barrel resulted from the larger percentage of
short-haul barrels during 1999, coupled with the reduction in tariffs rates
pursuant to the PPI Index, effective July 1, 1999.

         Revenues generated from Mont Belvieu operations increased $2.0 million
for the year ended December 31, 1999, compared with the prior year, primarily
due to higher storage revenue and increased petrochemical and refinery demand
for shuttle deliveries of LPGs along the upper Texas Gulf Coast.

         Other operating revenues increased $6.6 million during the year ended
December 31, 1999, compared with 1998, primarily due to a $3.6 million increase
in gains on the sale of product inventory, a $1.8 million increase in operating
revenues from the fractionator facilities acquired on March 31, 1998, and lower
exchange losses incurred to position product in the Midwest market area.

         Costs and expenses increased $7.7 million during the year ended
December 31, 1999, compared with the prior year, due to a $3.4 million increase
in operating, general and administrative expenses, a $2.7 million increase in
operating fuel and power expense, a $1.1 million increase in depreciation and
amortization charges, and a $0.5

                                       15
<PAGE>   18

million increase in taxes - other than income. The increase in operating,
general and administrative expenses was primarily attributable to a $2.8 million
increase in expenses associated with Year 2000 activities; a $1.5 million
increase in rental fees from higher volume through the connection from Colonial
Pipeline at Beaumont; a $1.5 million increase in labor related expenses
attributable to merit increases and increased incentive compensation accruals,
partially offset by lower postretirement benefit accruals; and increased outside
services for pipeline maintenance. These increases in operating, general and
administrative expenses were partially offset by $3.4 million of expense
recorded in 1998 to write down the book-value of product inventory to
market-value, and lower product measurement losses. The increase in operating
fuel and power expense from the prior year resulted from increased pipeline
throughput. Depreciation and amortization expense increased as a result of
amortization of the value assigned to the Fractionation Agreement beginning on
March 31, 1998, and capital additions placed in service. The increase in taxes -
other than income was primarily due to a higher property base in 1999 and
credits recorded during 1998 for the over accrual of previous years' property
taxes.

         Interest expense increased $1.6 million during the year ended December
31, 1999, compared with 1998. Approximately $0.6 million of the increase was
attributable to a full year of interest expense in 1999 on the $38 million
term-loan used to finance the purchase of the fractionation assets on March 31,
1998. The remaining increase resulted from $25 million of borrowings during the
second quarter of 1999 against the term loan to finance construction of the
pipelines between Mont Belvieu and Port Arthur, Texas. Capitalized interest
increased during 1999, compared with 1998, as a result of higher balances
associated with construction-in-progress of the new pipelines between Mont
Belvieu and Port Arthur.

         Other income - net decreased $1.2 million during the year ended
December 31, 1999, compared with the prior year, as a result of a $0.4 million
gain on the sale of non-carrier assets in June 1998, and lower interest income
earned on cash investments in 1999.

FINANCIAL CONDITION AND LIQUIDITY

         Net cash from operations for the year ended December 31, 2000, totaled
$93.5 million, comprised primarily of $89.1 million of income before charges for
depreciation and amortization, and $4.4 million of cash provided by working
capital changes. This compares with cash flows from operations of $89.8 million
for the year ended 1999, which was comprised primarily of $89.0 million of
income before charges for depreciation and amortization, and $0.8 million of
cash provided by working capital changes. Net cash from operations for the year
ended December 31, 1998 totaled $83.9 million, which was comprised of $78.6
million of income before extraordinary loss on early extinguishment of debt and
charges for depreciation and amortization, and $5.3 million of cash provided
from working capital changes. Net cash from operations includes interest
payments of $29.0 million, $28.6 million and $26.2 million for each of the years
ended 2000, 1999 and 1998, respectively.

         Capital expenditures by the Partnership totaled $56.5 million for the
year ended December 31, 2000. This amount includes capitalized interest of $4.6
million. Approximately $29.9 million was used to complete construction of three
new pipelines between the Partnership's terminal in Mont Belvieu, Texas and Port
Arthur, Texas. Cash flows used in investing activities also included $5.0
million of cash contributions for the Partnership's interest in the Centennial
joint venture. Cash flows used in investing activities for the year ended
December 31, 1999, included $69.3 million of capital expenditures, with $43.8
million used for construction of the three pipelines between the Partnership's
terminal in Mont Belvieu, Texas and Port Arthur, Texas mentioned above. Cash
flows used in investing activities for the year ended December 31, 1998 included
$40.0 million for the purchase price of the fractionation assets and related
intangible assets and $22.7 million of capital expenditures, partially offset by
$0.5 million received from the sale of non-carrier assets.

         On January 27, 1998, the Partnership completed the issuance of $180
million principal amount of 6.45% Senior Notes due 2008, and $210 million
principal amount of 7.51% Senior Notes due 2028 (collectively the "Senior
Notes"). The 6.45% Senior Notes due 2008 are not subject to redemption prior to
January 15, 2008. The 7.51% Senior Notes due 2028 may be redeemed at any time
after January 15, 2008, at the option of the Partnership, in whole or in part,
at a premium. Net proceeds from the issuance of the Senior Notes totaled
approximately $386 million and was used to repay in full the $61.0 million
principal amount of the 9.60% Series A First Mortgage Notes, due 2000, and the
$265.5 million principal amount of the 10.20% Series B First Mortgage Notes, due
2010. The premium for the early redemption of the First Mortgage Notes totaled
$70.1 million. The Partnership recorded

                                       16
<PAGE>   19

an extraordinary charge of $73.5 million during the first quarter of 1998, which
represents the redemption premium of $70.1 million and unamortized debt issue
costs related to the First Mortgage Notes of $3.4 million.

         The Senior Notes do not have sinking fund requirements. Interest on the
Senior Notes is payable semiannually in arrears on January 15 and July 15 of
each year. The Senior Notes are unsecured obligations of the Partnership and
will rank on a parity with all other unsecured and unsubordinated indebtedness
of the Partnership. The indenture governing the Senior Notes contains covenants,
including, but not limited to, covenants limiting the creation of liens securing
indebtedness and sale and leaseback transactions. However, the indenture does
not limit the Partnership's ability to incur additional indebtedness.

         On July 14, 2000, the Parent Partnership entered into a $75 million
term loan and a $475 million revolving credit facility. On July 21, 2000, the
Parent Partnership borrowed $75 million under the term loan and $340 million
under the revolving credit facility. The funds were used to refinance existing
credit facilities, other than the Senior Notes, and to finance the acquisition
of assets from ARCO Pipe Line Company ("ARCO"), a wholly-owned subsidiary of
Atlantic Richfield Company, for $322.6 million. The acquired assets are held
through TCTM, L.P. (the "Crude Oil OLP"), a 98.9899% owned entity of the Parent
Partnership. The term loan was repaid by the Parent Partnership on October 25,
2000. The revolving credit facility has a three year maturity. The interest rate
is based on the Parent Partnership's option of either the lender's base rate
plus a spread, or LIBOR plus a spread in effect at the time of borrowings. The
revolving credit facility contains restrictive financial covenants that require
the Parent Partnership to maintain a minimum level of partners' capital as well
as maximum debt-to-EBITDA (earnings before interest expense, income tax expense
and depreciation and amortization expense) and minimum fixed charge coverage
ratios.

         At December 31, 2000, note payable, Parent Partnership represents an
intercompany note payable of $79.8 million payable to the Parent Partnership to
cover the debt service requirements for amounts paid on behalf of the
Partnership. The note payable, Parent Partnership bears interest at a variable
rate based in part on the effective yield of the Parent Partnership's credit
facilities described above. The weighted average interest rate on the note
payable, Parent Partnership at December 31, 2000, was 10.3%.

         The Partnership makes quarterly cash distributions of all of its
Available Cash, generally defined as consolidated cash receipts less
consolidated cash disbursements and cash reserves established by the general
partner in its sole discretion or as required by the terms of the Notes.
Generally, distributions are made 98.9899% to the Parent Partnership and 1.0101%
to the general partner. For the years ended December 31, 2000, 1999 and 1998,
cash distributions totaled $70.8 million, $61.6 million and $56.8 million,
respectively. The distribution increases reflect the Partnership's success in
improving cash flow levels. On February 2, 2001, the Partnership paid a cash
distribution of $19.5 million for the quarter ended December 31, 2000.

OTHER MATTERS

      Regulatory and Environmental

         The operations of the Partnership are subject to federal, state and
local laws and regulations relating to protection of the environment. Although
the Partnership believes the operations of the Pipeline System are in material
compliance with applicable environmental regulations, risks of significant costs
and liabilities are inherent in pipeline operations, and there can be no
assurance that significant costs and liabilities will not be incurred. Moreover,
it is possible that other developments, such as increasingly strict
environmental laws and regulations and enforcement policies thereunder, and
claims for damages to property or persons resulting from the operations of the
Pipeline System, could result in substantial costs and liabilities to the
Partnership. The Partnership does not anticipate that changes in environmental
laws and regulations will have a material adverse effect on its financial
position, results of operations or cash flows in the near term.

         The Partnership and the Indiana Department of Environmental Management
("IDEM") have entered into an Agreed Order that will ultimately result in a
remediation program for any on-site and off-site groundwater contamination
attributable to the Partnership's operations at the Seymour, Indiana, terminal.
A Feasibility Study, which includes the Partnership's proposed remediation
program, has been approved by IDEM. IDEM is expected to issue a Record of
Decision formally approving the remediation program. After the Record of
Decision has been issued, the Partnership will enter into an Agreed Order for
the continued operation and maintenance of the program.


                                       17
<PAGE>   20

The Partnership has accrued $0.6 million at December 31, 2000, for future costs
of the remediation program for the Seymour terminal. In the opinion of the
Company, the completion of the remediation program will not have a material
adverse impact on the Partnership's financial condition, results of operations
or liquidity.

         The Partnership received a compliance order from the Louisiana
Department of Environmental Quality ("DEQ") during 1994 relative to potential
environmental contamination at the Partnership's Arcadia, Louisiana, facility,
which may be attributable to the operations of the Partnership and adjacent
petroleum terminals of other companies. The Partnership and all adjacent
terminals have been assigned to the Groundwater Division of DEQ, in which a
consolidated plan will be developed. The Partnership has finalized a negotiated
Compliance Order with DEQ that will allow the Partnership to continue with a
remediation plan similar to the one previously agreed to by DEQ and implemented
by the Company. In the opinion of the General Partner, the completion of the
remediation program being proposed by the Partnership will not have a future
material adverse impact on the Partnership.

      Market and Regulatory Environment

         Rates of interstate oil pipeline companies are currently regulated by
the FERC, primarily through an index methodology, whereby a pipeline company is
allowed to change its rates based on the change from year to year in the
Producer Price Index for finished goods less 1% ("PPI Index"). In the
alternative, interstate oil pipeline companies may elect to support rate filings
by using a cost-of-service methodology, competitive market showings ("Market
Based Rates") or agreements between shippers and the oil pipeline company that
the rate is acceptable ("Settlement Rates").

         On May 11, 1999, the Partnership filed an application with the FERC
requesting permission to charge market-based rates for substantially all refined
products transportation tariffs. Along with its application for market-based
rates, the Partnership filed a petition for waiver pending the FERC's
determination on its application for market-based rates, of the requirements
that would otherwise have been imposed by the FERC's regulations requiring the
Partnership to reduce its rates in conformity with the PPI Index. On June 30,
1999, the FERC granted the waiver stating that it was temporary in nature and
that the Partnership would be required to make refunds, with interest, of all
amounts collected under rates in excess of the PPI Index ceiling level after
July 1, 1999, if the Partnership's application for market-based rates was
ultimately denied. As a result of the refund obligation potential, the
Partnership has deferred all revenue recognition of rates charged in excess of
the PPI Index. On December 31, 2000, the amount deferred for possible rate
refund, including interest totaled approximately $2.3 million.

         On July 31, 2000, the FERC issued an order granting the Partnership
market-based rates in certain markets and set for hearing the Partnership's
application for market-based rates in the Little Rock, Arkansas;
Shreveport-Arcadia, Louisiana; Cincinnati-Dayton, Ohio; and Memphis, Tennessee,
destination markets and the Shreveport, Louisiana, origin market. The FERC also
directed the FERC trial staff to convene a conference to explore the facts and
issues regarding the Western Gulf Coast origin market. After the matter was set
for hearing, the Partnership and the protesting shippers entered into a
settlement agreement resolving their respective differences. On January 9, 2001,
the presiding Administrative Law Judge assigned to the hearing determined that
the offer of settlement provided resolution of issues set for hearing in the
Partnership pending case in a fair and reasonable manner and in the public
interest and certified the offer of settlement and recommended it to the FERC
for approval. The certification of the settlement is currently before the FERC.
The Partnership believes that the Administrative Law Judge's decision in this
matter will be upheld by the FERC.

         The settlement, if it is approved by FERC, will require the Partnership
to withdraw the application for market-based rates to the Little Rock, Arkansas,
destination market and the Arcadia, Louisiana, destination in the
Shreveport-Arcadia, Louisiana, destination market. The Partnership also has
agreed to recalculate rates to these destination markets to conform with the PPI
Index from July 1, 1999, and make appropriate refunds. The refund obligation
under the proposed settlement as of December 31, 2000, would be $0.8 million.

         Effective July 1, 1999, the Partnership established Settlement Rates
with certain shippers of LPGs under which the rates in effect on June 30, 1999,
would not be adjusted for a period of either two or three years. Other LPGs
transportation tariff rates were reduced pursuant to the PPI Index
(approximately 1.83%), effective July 1, 1999. Effective July 1, 1999, the
Partnership canceled its tariff for deliveries of MTBE into the Chicago market
area

                                       18
<PAGE>   21

reflecting reduced demand for transportation of MTBE into such area. The MTBE
tariffs were canceled with the consent of MTBE shippers and resulted in
increased pipeline capacity and tankage available for other products.

         Effective January 1, 2001, the Partnership adopted Statement of
Financial Accounting Standards ("SFAS") No. 133 Accounting for Derivative
Instruments and Hedging Activities, and SFAS No. 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activities, an amendment of FASB
Statement No. 133. These statements establish accounting and reporting standards
requiring that derivative instruments, including certain derivative instruments
embedded in other contracts, be recorded on the balance sheet at fair value as
either assets or liabilities. The accounting for changes in the fair value of a
derivative instrument depends on the intended use and designation of the
derivative at its inception. Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results of the hedged item in
the statement of income, and requires the Partnership to formally document,
designate and assess the effectiveness of the hedge transaction to receive hedge
accounting. For derivatives designated as cash flow hedges, changes in fair
value, to the extent the hedge is effective, are recognized in other
comprehensive income until the hedged item is recognized in earnings. Overall
hedge effectiveness is measured at least quarterly. Any changes in the fair
value of the derivative instrument resulting from hedge ineffectiveness, as
defined by SFAS 133 and measured based on the cumulative changes in the fair
value of the derivative instrument and the cumulative changes in the estimated
future cash flows of the hedged item, are recognized immediately in earnings.
The Partnership makes limited use of derivative instruments. The adoption of
SFAS 133 and SFAS 138 had no material impact on the Partnership.

         The matters discussed herein include "forward-looking statements"
within the meaning of various provisions of the Securities Act of 1933 and the
Securities Exchange Act of 1934. All statements, other than statements of
historical facts, included in this document that address activities, events or
developments that the Partnership expects or anticipates will or may occur in
the future, including such things as estimated future capital expenditures
(including the amount and nature thereof), business strategy and measures to
implement strategy, competitive strengths, goals, expansion and growth of the
Partnership's business and operations, plans, references to future success,
references to intentions as to future matters and other such matters are
forward-looking statements. These statements are based on certain assumptions
and analyses made by the Partnership in light of its experience and its
perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate under the
circumstances. However, whether actual results and developments will conform
with the Partnership's expectations and predictions is subject to a number of
risks and uncertainties, including general economic, market or business
conditions, the opportunities (or lack thereof) that may be presented to and
pursued by the Partnership, competitive actions by other pipeline companies,
changes in laws or regulations, and other factors, many of which are beyond the
control of the Partnership. Consequently, all of the forward-looking statements
made in this document are qualified by these cautionary statements and there can
be no assurance that actual results or developments anticipated by the
Partnership will be realized or, even if substantially realized, that they will
have the expected consequences to or effect on the Partnership or its business
or operations.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

         The Partnership may be exposed to market risk through changes in
commodity prices and interest rates as discussed below. The Partnership has no
foreign exchange risks. Risk management policies have been established by the
Risk Management Committee to monitor and control these market risks. The Risk
Management Committee is comprised of senior executives of the Company.

         The Partnership periodically enters into futures contracts to hedge its
exposure to price risk on product inventory transactions. For derivative
contracts to qualify as a hedge, the price movements in the commodity derivative
must be highly correlated with the underlying hedged commodity. Contracts that
qualify as hedges and held for non-trading purposes are accounted for using the
deferral method of accounting. Under this method, gains and losses are not
recognized until the underlying physical transaction occurs. Deferred gains and
losses related to such instruments are reported in the consolidated balance
sheet as current assets or current liabilities. At December 31, 2000, there were
no outstanding futures contracts.

         At December 31, 2000, the Partnership had outstanding $180 million
principal amount of 6.45% Senior Notes due 2008, and $210 million principal
amount of 7.51% Senior Notes due 2028 (collectively the "Senior

                                       19
<PAGE>   22

Notes"). At December 31, 2000 and 1999, the estimated fair value of the Senior
Notes was approximately $385 million and $356 million, respectively.

         At December 31, 2000, note payable, Parent Partnership represents an
intercompany note payable of $79.8 million payable to the Parent Partnership to
cover the debt service requirements for amounts paid on behalf of the
Partnership. The note payable, Parent Partnership bears interest at a variable
rate based in part on the effective yield of the Parent Partnership's credit
facilities described above. The weighted average interest rate on the note
payable, Parent Partnership at December 31, 2000, was 10.3%. Utilizing the
balance of this variable interest rate debt outstanding at December 31, 2000,
and assuming market interest rates increase 100 basis points, the potential
annual increase in interest expense is approximately $0.8 million.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The consolidated financial statements of the Partnership, together with
the independent auditors' report thereon of KPMG LLP, begin on page F-1 of this
report.

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

         Not Applicable

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The Partnership does not have directors or officers. All directors of
the General Partner are elected annually by DEFS. All officers serve at the
discretion of the directors. The information contained in Item 10 of the Parent
Partnership Form 10-K is incorporated by reference in this report.

ITEM 11. EXECUTIVE COMPENSATION

         The officers of the General Partner manage and operate the
Partnership's business. The Partnership does not directly employ any of the
persons responsible for managing or operating the Partnership's operations, but
instead reimburses the General Partner for the services of such persons. The
information contained in Item 11 of the Parent Partnership Form 10-K is
incorporated by reference in this report.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The Parent Partnership owns a 98.9899% interest as the sole limited
partner interest and the General Partner owns a 1.0101% general partner interest
in the Partnership. Information identifying security ownership of the Parent
Partnership is contained in Item 12 of the Parent Partnership Form 10-K is
incorporated by reference in this report.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The Partnership is managed and controlled by the General Partner
pursuant to the Partnership Agreement. Under the Partnership Agreement, the
General Partner is reimbursed for all direct and indirect expenses it incurs or
payments it makes on behalf of the Partnership. These expenses include salaries,
fees and other compensation and benefit expenses of employees, officers and
directors, insurance, other administrative or overhead expenses and all other
expenses necessary or appropriate to conduct the Partnership's business. The
costs allocated to the Partnership by the General Partner for administrative
services and overhead totaled $0.8 million in 2000.


                                       20
<PAGE>   23

         During 1990, the Parent Partnership completed an initial public
offering of 26,500,000 Units representing Limited Partner Interests ("Limited
Partner Units") at $10 per Unit. In connection with the offering, Duke Energy
received 2,500,000 Deferred Participation Interests ("DPIs") of the Parent
Partnership. Effective April 1, 1994, the DPIs began participating in
distributions of cash and allocations of profit and loss of the Parent
Partnership.

                                     PART IV

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

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

              (1)   Financial Statements: See Index to Financial Statements on
                    page F-1 of this report for financial statements filed as
                    part of this report.

              (2)  Financial Statement Schedules: None

              (3)  Exhibits:

<TABLE>
<CAPTION>
        EXHIBIT
        NUMBER                      DESCRIPTION
        -------                     -----------
<S>               <C>
           3.1    Certificate of Formation of TEPPCO Colorado, LLC (Filed as
                  Exhibit 3.2 to Form 10-Q of TEPPCO Partners, L.P. (Commission
                  File No. 1-10403) for the quarter ended March 31, 1998 and
                  incorporated herein by reference). 3.2 Amended and Restated
                  Agreement of Limited Partnership of TE Products Pipeline
                  Company, Limited Partnership, effective July 21, 1998 (Filed
                  as Exhibit 3.2 to Form 8-K of TEPPCO Partners, L.P.
                  (Commission File No. 1-10403) dated July 21, 1998 and
                  incorporated herein by reference).

           4.1    Form of Indenture between TE Products Pipeline Company,
                  Limited Partnership and The Bank of New York, as Trustee,
                  dated as of January 27, 1998 (Filed as Exhibit 4.3 to TE
                  Products Pipeline Company, Limited Partnership's Registration
                  Statement on Form S-3 (Commission File No. 333-38473) and
                  incorporated herein by reference).

          10.1    Assignment and Assumption Agreement, dated March 24, 1988,
                  between Texas Eastern Transmission Corporation and the Company
                  (Filed as Exhibit 10.8 to the Registration Statement of TEPPCO
                  Partners, L.P. (Commission File No. 33-32203) and incorporated
                  herein by reference).

         +10.2    Texas Eastern Products Pipeline Company 1997 Employee
                  Incentive Compensation Plan executed on July 14, 1997 (Filed
                  as Exhibit 10 to Form 10-Q of TEPPCO Partners, L.P.
                  (Commission File No. 1-10403) for the quarter ended September
                  30, 1997 and incorporated herein by reference).

          10.3    Agreement Regarding Environmental Indemnities and Certain
                  Assets (Filed as Exhibit 10.5 to Form 10-K of TEPPCO Partners,
                  L.P. (Commission File No. 1-10403) for the year ended December
                  31, 1990 and incorporated herein by reference).

         +10.4    Texas Eastern Products Pipeline Company Management Incentive
                  Compensation Plan executed on January 30, 1992 (Filed as
                  Exhibit 10 to Form 10-Q of TEPPCO Partners, L.P. (Commission
                  File No. 1-10403) for the quarter ended March 31, 1992 and
                  incorporated herein by reference).

         +10.5    Texas Eastern Products Pipeline Company Long-Term Incentive
                  Compensation Plan executed on October 31, 1990 (Filed as
                  Exhibit 10.9 to Form 10-K of TEPPCO Partners, L.P. (Commission
                  File No. 1-10403) for the year ended December 31, 1990 and
                  incorporated herein by reference).

         +10.6    Form of Amendment to Texas Eastern Products Pipeline Company
                  Long-Term Incentive Compensation Plan (Filed as Exhibit 10.7
                  to the Partnership's Form 10-K (Commission File No. 1-10403)
                  for the year ended December 31, 1995 and incorporated herein
                  by reference).
</TABLE>

                                       21
<PAGE>   24

<TABLE>
<S>               <C>
         +10.7    Duke Energy Corporation Executive Savings Plan (Filed as
                  Exhibit 10.7 to Form 10-K of TEPPCO Partners, L.P. (Commission
                  File No. 1-10403) for the year ended December 31, 1999 and
                  incorporated herein by reference).

         +10.8    Duke Energy Corporation Executive Cash Balance Plan (Filed as
                  Exhibit 10.8 to Form 10-K of TEPPCO Partners, L.P. (Commission
                  File No. 1-10403) for the year ended December 31, 1999 and
                  incorporated herein by reference).

         +10.9    Duke Energy Corporation Retirement Benefit Equalization Plan
                  (Filed as Exhibit 10.9 to Form 10-K of TEPPCO Partners, L.P.
                  (Commission File No. 1-10403) for the year ended December 31,
                  1999 and incorporated herein by reference).

        +10.10    Employment Agreement with William L. Thacker, Jr. (Filed as
                  Exhibit 10 to Form 10-Q of TEPPCO Partners, L.P. (Commission
                  File No. 1-10403) for the quarter ended September 30, 1992 and
                  incorporated herein by reference).

        +10.11    Texas Eastern Products Pipeline Company 1994 Long Term
                  Incentive Plan executed on March 8, 1994 (Filed as Exhibit
                  10.1 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
                  No. 1-10403) for the quarter ended March 31, 1994 and
                  incorporated herein by reference).

        +10.12    Texas Eastern Products Pipeline Company 1994 Long Term
                  Incentive Plan, Amendment 1, effective January 16, 1995 (Filed
                  as Exhibit 10.12 to Form 10-Q of TEPPCO Partners, L.P.
                  (Commission File No. 1-10403) for the quarter ended June 30,
                  1999 and incorporated herein by reference).

         10.13    Asset Purchase Agreement between Duke Energy Field Services,
                  Inc. and TEPPCO Colorado, LLC, dated March 31, 1998 (Filed as
                  Exhibit 10.14 to Form 10-Q of TEPPCO Partners, L.P.
                  (Commission File No. 1-10403) for the quarter ended March 31,
                  1998 and incorporated herein by reference).

        +10.14    Form of Employment Agreement between the Company and Ernest P.
                  Hagan, Thomas R. Harper, David L. Langley, Charles H. Leonard
                  and James C. Ruth, dated December 1, 1998 (Filed as Exhibit
                  10.20 to Form 10-K of TEPPCO Partners, L.P. (Commission File
                  No. 1-10403) for the year ended December 31, 1998 and
                  incorporated herein by reference).

         10.15    Agreement Between Owner and Contractor between TE Products
                  Pipeline Company, Limited Partnership and Eagleton Engineering
                  Company, dated February 4, 1999 (Filed as Exhibit 10.21 to
                  Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
                  1-10403) for the quarter ended March 31, 1999 and incorporated
                  herein by reference).

         10.16    Services and Transportation Agreement between TE Products
                  Pipeline Company, Limited Partnership and Fina Oil and
                  Chemical Company, BASF Corporation and BASF Fina Petrochemical
                  Limited Partnership, dated February 9, 1999 (Filed as Exhibit
                  10.22 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
                  No. 1-10403) for the quarter ended March 31, 1999 and
                  incorporated herein by reference).

         10.17    Call Option Agreement, dated February 9, 1999 (Filed as
                  Exhibit 10.23 to Form 10-Q of TEPPCO Partners, L.P.
                  (Commission File No. 1-10403) for the quarter ended March 31,
                  1999 and incorporated herein by reference).

         10.18    Credit Agreement between TEPPCO Partners, L.P., SunTrust Bank,
                  and Certain Lenders, dated July 14, 2000 (Filed as Exhibit
                  10.31 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
                  No. 1-10403) for the quarter ended June 30, 2000 and
                  incorporated herein by reference).

        +10.19    Texas Eastern Products Pipeline Company, LLC 2000 Long Term
                  Incentive Plan, Amendment and Restatement, Effective January
                  1, 2000 (Filed as Exhibit 10.28 to Form 10-K of TEPPCO
                  Partners, L.P. (Commission File No. 1-10403) for the year
                  ended December 31, 2000 and incorporated herein by reference).

        +10.20    TEPPCO Supplemental Benefit Plan, effective April 1, 2000
                  (Filed as Exhibit 10.29 to Form 10-K of TEPPCO Partners, L.P.
                  (Commission File No. 1-10403) for the year ended December 31,
                  2000 and incorporated herein by reference).

           *24    Power of Attorney
</TABLE>

----------
*  Filed herewith.

+  A management contract or compensation plan or arrangement.


                                       22
<PAGE>   25

(b)  Reports on Form 8-K filed during the quarter ended December 31, 2000:

     NONE



                                       23
<PAGE>   26


                                   SIGNATURES

     TE Products Pipeline Company, Limited Partnership, pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

                               TE Products Pipeline Company, Limited Partnership
                               -------------------------------------------------
                                                 (Registrant)
                                       (A Delaware Limited Partnership)

                                     By: Texas Eastern Products Pipeline
                                     Company, LLC, as General Partner

                                        By: /s/ WILLIAM L. THACKER
                                            ----------------------
                                              William L. Thacker,
                                     Chairman and Chief Executive Officer

                                        By: /s/ CHARLES H. LEONARD
                                            -----------------------
                                              Charles H. Leonard,
                                     Senior Vice President, Chief Financial
                                              Officer and Treasurer

Dated: March 21, 2001


                                       24
<PAGE>   27


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.

<TABLE>
<CAPTION>
               SIGNATURE                                             TITLE                                       DATE
               ---------                                             -----                                       ----
<S>                                            <C>                                                         <C>
          WILLIAM L. THACKER                       Chairman of the Board and Chief Executive                March 21, 2001
----------------------------------------    Officer of Texas Eastern Products Pipeline Company, LLC
          William L. Thacker

          CHARLES H. LEONARD*                 Senior Vice President, Chief Financial Officer and            March 21, 2001
----------------------------------------   Treasurer of Texas Eastern Products Pipeline Company, LLC
          Charles H. Leonard                     (Principal Accounting and Financial Officer)


             JIM W. MOGG*                             Vice Chairman of the Board of Texas                   March 21, 2001
----------------------------------------            Eastern Products Pipeline Company, LLC
              Jim W. Mogg

            MARK A. BORER*                                 Director of Texas Eastern                        March 21, 2001
----------------------------------------                Products Pipeline Company, LLC
             Mark A. Borer

            MILTON CARROLL*                                Director of Texas Eastern                        March 21, 2001
----------------------------------------                Products Pipeline Company, LLC
            Milton Carroll

             CARL D. CLAY*                                 Director of Texas Eastern                        March 21, 2001
----------------------------------------                Products Pipeline Company, LLC
             Carl D. Clay

             DERRILL CODY*                                 Director of Texas Eastern                        March 21, 2001
----------------------------------------                Products Pipeline Company, LLC
             Derrill Cody

          JOHN P. DESBARRES*                               Director of Texas Eastern                        March 21, 2001
----------------------------------------                Products Pipeline Company, LLC
           John P. DesBarres

            FRED J. FOWLER*                                Director of Texas Eastern                        March 21, 2001
----------------------------------------                Products Pipeline Company, LLC
            Fred J. Fowler

         WILLIAM W. SLAUGHTER*                             Director of Texas Eastern                        March 21, 2001
----------------------------------------                Products Pipeline Company, LLC
         William W. Slaughter
</TABLE>

* Signed on behalf of the Registrant and each of these persons:

By:        /s/ WILLIAM L. THACKER
    ------------------------------------
    (William L. Thacker, Attorney-in-Fact)



                                       25
<PAGE>   28
                        CONSOLIDATED FINANCIAL STATEMENTS
              OF TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                   PAGE
                                                                                                   ----
<S>                                                                                                <C>
Independent Auditors' Report.....................................................................   F-2
Consolidated Balance Sheets as of December 31, 2000 and 1999.....................................   F-3
Consolidated Statements of Income for the years ended December 31, 2000, 1999 and 1998...........   F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998.......   F-5
Consolidated Statements of Partners' Capital for the years ended December 31, 2000,
   1999 and 1998.................................................................................   F-6
Notes to Consolidated Financial Statements.......................................................   F-7
</TABLE>




                                      F-1
<PAGE>   29


                          INDEPENDENT AUDITORS' REPORT

To the Partners of

TE Products Pipeline Company, Limited Partnership:

         We have audited the accompanying consolidated balance sheets of TE
Products Pipeline Company, Limited Partnership as of December 31, 2000 and 1999,
and the related consolidated statements of income, partners' capital, and cash
flows for each of the years in the three-year period ended December 31, 2000.
These consolidated financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of TE Products
Pipeline Company, Limited Partnership as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2000 in conformity with accounting
principles generally accepted in the United States of America.


                                                                KPMG LLP


Houston, Texas
January 18, 2001


                                      F-2
<PAGE>   30



                TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                  DECEMBER 31,
                                                                               -------------------
                                                                                 2000       1999
                                                                               --------   --------
<S>                                                                            <C>        <C>
                                      ASSETS
Current assets:
  Cash and cash equivalents ................................................   $ 15,702   $ 23,267
  Accounts receivable, trade ...............................................     26,182     22,425
  Inventories ..............................................................      8,011      8,451
  Other ....................................................................      4,220      4,108
                                                                               --------   --------
        Total current assets ...............................................     54,115     58,251
                                                                               --------   --------
Property, plant and equipment, at cost (Net of accumulated depreciation
  and amortization of $237,858 and $214,044) ...............................    642,381    611,695
Intangible assets ..........................................................     33,014     34,926
Advances to limited partner ................................................      5,195      2,354
Other assets ...............................................................     20,802     16,990
                                                                               --------   --------
        Total assets .......................................................   $755,507   $724,216
                                                                               ========   ========

                         LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
  Accounts payable and accrued liabilities .................................   $ 12,177   $  7,413
  Accounts payable, general partner ........................................      5,053      3,817
  Accrued interest .........................................................     13,947     13,265
  Other accrued taxes ......................................................      6,565      6,370
  Other ....................................................................      9,319      9,298
                                                                               --------   --------
        Total current liabilities ..........................................     47,061     40,163
                                                                               --------   --------
Senior Notes ...............................................................    389,783    389,753
Other long-term debt .......................................................         --     63,000
Note payable, Parent Partnership ...........................................     79,757         --
Other liabilities and deferred credits .....................................      3,991      3,071
Partners' capital:
  General partner's interest ...............................................      2,383      2,309
  Limited partner's interest ...............................................    232,532    225,920
                                                                               --------   --------
        Total partners' capital ............................................    234,915    228,229
                                                                               --------   --------
Commitments and contingencies

        Total liabilities and partners' capital ............................   $755,507   $724,216
                                                                               ========   ========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.


                                      F-3
<PAGE>   31


                TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

                        CONSOLIDATED STATEMENTS OF INCOME
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                                             -----------------------------------
                                                                2000        1999         1998
                                                             ---------    ---------    ---------
<S>                                                          <C>          <C>          <C>
Operating revenues:
  Transportation -- refined products .....................     119,331      123,004      119,854
  Transportation -- LPGs .................................      73,896       67,701       60,902
  Mont Belvieu operations ................................      13,334       12,849       10,880
  Other ..................................................      30,126       26,716       20,147
                                                             ---------    ---------    ---------
        Total operating revenues .........................     236,687      230,270      211,783
                                                             ---------    ---------    ---------

Costs and expenses:
  Operating, general and administrative ..................      77,041       74,124       70,695
  Operating fuel and power ...............................      32,200       29,864       27,131
  Depreciation and amortization ..........................      27,743       27,109       26,040
  Taxes -- other than income taxes .......................       9,704        9,780        9,276
                                                             ---------    ---------    ---------
        Total costs and expenses .........................     146,688      140,877      133,142
                                                             ---------    ---------    ---------
        Operating income .................................      89,999       89,393       78,641
Interest expense .........................................     (35,132)     (31,345)     (29,777)
Interest capitalized .....................................       4,559        2,133          795
Other income -- net ......................................       1,888        1,671        2,873
                                                             ---------    ---------    ---------
        Income before loss on debt extinguishment ........      61,314       61,852       52,532
Extraordinary loss on debt extinguishment ................          --           --      (73,509)
                                                             ---------    ---------    ---------
        Net income (loss) ................................   $  61,314    $  61,852    $ (20,977)
                                                             =========    =========    =========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.


                                      F-4
<PAGE>   32


                TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                             YEARS ENDED DECEMBER 31,
                                                                       -----------------------------------
                                                                         2000         1999          1998
                                                                       ---------    ---------    ---------
<S>                                                                    <C>          <C>          <C>
Cash flows from operating activities:
  Net income (loss) ................................................   $  61,314    $  61,852    $ (20,977)
  Adjustments to reconcile net income to cash provided by
    operating activities:
    Depreciation and amortization ..................................      27,743       27,109       26,040
    Extraordinary loss on early extinguishment of debt .............          --           --       73,509
    Gain on sale of property, plant and equipment ..................          --           --         (356)
    Equity in loss of affiliate ....................................         176          393          189
    Non cash portion of interest expense ...........................       1,028          310          270
    Decrease (increase) in accounts receivable .....................      (3,757)      (4,685)       2,086
    Decrease in inventories ........................................         440        4,941        1,799
    Decrease (increase) in other current assets ....................         415       (1,124)       2,664
    Increase in accounts payable and accrued expenses ..............       6,898        2,944          344
    Other ..........................................................        (807)      (1,937)      (1,653)
                                                                       ---------    ---------    ---------
         Net cash provided by operating activities .................      93,450       89,803       83,915
                                                                       ---------    ---------    ---------
Cash flows from investing activities:
  Proceeds from cash investments ...................................       3,475        6,275        3,105
  Purchases of cash investments ....................................      (2,000)      (3,235)        (748)
  Purchase of fractionator assets and related intangible assets ....          --           --      (40,000)
  Proceeds from the sale of property, plant and equipment ..........          --           --          525
  Investment in Centennial Pipeline ................................      (5,040)          --           --
  Capital expenditures .............................................     (56,516)     (69,322)     (22,710)
                                                                       ---------    ---------    ---------
         Net cash used in investing activities .....................     (60,081)     (66,282)     (59,828)
                                                                       ---------    ---------    ---------
Cash flows from financing activities:
  Principal payment, First Mortgage Notes ..........................          --           --     (326,512)
  Prepayment premium, First Mortgage Notes .........................          --           --      (70,093)
  Issuance of Senior Notes .........................................          --           --      389,694
  Debt issuance cost, Senior Notes .................................          --           --       (3,651)
  Issuance of term loan ............................................          --       25,000       38,000
  Proceeds from term loan ..........................................     115,377           --           --
  Repayment of term loan ...........................................     (99,027)          --           --
  Advances to limited partner ......................................      (2,841)        (369)      (1,989)
  Equity contribution - General Partner ............................         169           --           --
  Equity contribution - limited partner ............................      16,155           --           --
  Distributions ....................................................     (70,767)     (61,608)     (56,774)
                                                                       ---------    ---------    ---------
         Net cash used in financing activities .....................     (40,934)     (36,977)     (31,325)
                                                                       ---------    ---------    ---------
Net decrease in cash and cash equivalents ..........................      (7,565)     (13,456)      (7,238)
Cash and cash equivalents at beginning of period ...................      23,267       36,723       43,961
                                                                       ---------    ---------    ---------
Cash and cash equivalents at end of period .........................   $  15,702    $  23,267    $  36,723
                                                                       =========    =========    =========
Supplemental disclosure of cash flows:
   Interest paid during the year (net of capitalized interest) .....   $  28,952    $  28,573    $  26,179
</TABLE>


          See accompanying Notes to Consolidated Financial Statements.


                                      F-5
<PAGE>   33


                TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

                  CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                         GENERAL      LIMITED
                                                        PARTNER'S    PARTNER'S
                                                         INTEREST     INTEREST      TOTAL
                                                        ---------    ---------    ---------
<S>                                                     <C>          <C>         <C>
Partners' capital at December 31, 1997 ..............       3,093      302,967      306,060
  1998 net loss allocation ..........................        (213)     (20,764)     (20,977)
  1998 cash distributions ...........................        (574)     (56,200)     (56,774)
  Option exercises, net of Unit repurchases .........          --         (169)        (169)
                                                        ---------    ---------    ---------
Partners' capital at December 31, 1998 ..............       2,306      225,834      228,140
  1999 net income allocation ........................         625       61,227       61,852
  1999 cash distributions ...........................        (622)     (60,986)     (61,608)
  Option exercises, net of Unit repurchases .........          --         (155)        (155)
                                                        ---------    ---------    ---------
Partners' capital at December 31, 1999 ..............       2,309      225,920      228,229
  2000 net income allocation ........................         619       60,695       61,314
  2000 cash distributions ...........................        (714)     (70,053)     (70,767)
  Capital contributions .............................         169       16,155       16,324
  Option exercises, net of Unit repurchases .........          --         (185)        (185)
                                                        ---------    ---------    ---------
Partners' capital at December 31, 2000 ..............   $   2,383    $ 232,532    $ 234,915
                                                        =========    =========    =========
</TABLE>


          See accompanying Notes to Consolidated Financial Statements.

                                      F-6
<PAGE>   34


                TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  PARTNERSHIP ORGANIZATION

         TE Products Pipeline Company, Limited Partnership (the "Partnership"),
a Delaware limited partnership, was formed in March 1990. TEPPCO Partners, L.P.
(the "Parent Partnership") owns a 98.9899% interest as the sole limited partner.
On March 31, 2000, Texas Eastern Products Pipeline Company, a Delaware
corporation and general partner of the Partnership, was converted into Texas
Eastern Products Pipeline Company, LLC (the "Company" or General Partner"), a
Delaware limited liability company. Additionally on March 31, 2000, Duke Energy
Corporation ("Duke Energy"), contributed its ownership of the General Partner to
Duke Energy Field Services, LP ("DEFS"). DEFS is a joint venture between Duke
Energy and Phillips Petroleum Company. Duke Energy holds a majority interest in
DEFS.

         The Company, an indirect wholly-owned subsidiary of DEFS, owns a
1.0101% general partner interest in the Partnership. The Company, as general
partner, performs all management and operating functions required for the
Partnership pursuant to the Agreement of Limited Partnership of TE Products
Pipeline Company, Limited Partnership (the "Partnership Agreement"). The General
Partner is reimbursed by the Partnership for all reasonable direct and indirect
expenses incurred in managing the Partnership.

         At formation, the Parent Partnership completed an initial public
offering of 26,500,000 Units representing Limited Partner Interests ("Limited
Partner Units") at $10 per Unit. In connection with the offering, Duke Energy
received 2,500,000 Deferred Participation Interests ("DPIs") of the Parent
Partnership. Effective April 1, 1994, the DPIs began participating in
distributions of cash and allocations of profit and loss of the Parent
Partnership.


NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

         The financial statements include the accounts of the Partnership and
TEPPCO Colorado, LLC ("TEPPCO Colorado") on a consolidated basis. All
significant intercompany items have been eliminated in consolidation. Certain
amounts from prior years have been reclassified to conform to current
presentation.

USE OF ESTIMATES

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

ENVIRONMENTAL EXPENDITURES

         The Partnership accrues for environmental costs that relate to existing
conditions caused by past operations. Environmental costs include initial site
surveys and environmental studies of potentially contaminated sites, costs for
remediation and restoration of sites determined to be contaminated and ongoing
monitoring costs, as well as fines, damages and other costs, when estimable. The
Partnership's accrued undiscounted environmental liabilities are monitored on a
regular basis by management. Liabilities for environmental costs at a specific
site are initially recorded when the Partnership's liability for


                                      F-7
<PAGE>   35

                TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

such costs, including direct internal and legal costs, is probable and a
reasonable estimate of the associated costs can be made. Adjustments to initial
estimates are recorded, from time to time, to reflect changing circumstances and
estimates based upon additional information developed in subsequent periods.
Estimates of the Partnership's ultimate liabilities associated with
environmental costs are particularly difficult to make with certainty due to the
number of variables involved, including the early stage of investigation at
certain sites, the lengthy time frames required to complete remediation
alternatives available and the evolving nature of environmental laws and
regulations.

BUSINESS SEGMENTS

         The Partnership has one business segment: the transportation, storage
and terminaling of refined products and liquefied petroleum gases ("LPGs"). The
Partnership's interstate transportation operations, including rates charged to
customers, are subject to regulations prescribed by the Federal Energy
Regulatory Commission ("FERC"). Refined products and LPGs are referred to
herein, collectively, as "petroleum products" or "products."

REVENUE RECOGNITION

         Substantially all revenues of the Partnership are derived from
interstate transportation, storage and terminaling of petroleum products;
short-haul shuttle transportation of LPGs at the Mont Belvieu, Texas complex;
intrastate transportation of petrochemicals; fractionation of natural gas
liquids; and other ancillary services. Transportation revenues are recognized as
products are delivered to customers. Storage revenues are recognized upon
receipt of products into storage and upon performance of storage services.
Terminaling revenues are recognized as products are out-loaded. Revenues from
the sale of product inventory are recognized when the products are sold.
Fractionation revenues are recognized ratably over the contract year as products
are transferred to DEFS.

INVENTORIES

         Inventories consist primarily of petroleum products which are valued at
the lower of cost (weighted average cost method) or market. The Partnership
acquires and disposes of various products under exchange agreements. Receivables
and payables arising from these transactions are usually satisfied with products
rather than cash. The net balances of exchange receivables and payables are
valued at weighted average cost and included in inventories.

         The Partnership periodically enters into futures contracts to hedge its
exposure to price risk on product inventory transactions. For derivative
contracts to qualify as a hedge, the price movements in the commodity derivative
must be highly correlated with the underlying hedged commodity. Contracts that
qualify as hedges and held for non-trading purposes are accounted for using the
deferral method of accounting. Under this method, gains and losses are not
recognized until the underlying physical transaction occurs. Deferred gains and
losses related to such instruments are reported in the consolidated balance
sheet as current assets or current liabilities. At December 31, 2000, there were
no outstanding futures contracts.

PROPERTY, PLANT AND EQUIPMENT

         Additions to property, plant and equipment, including major
replacements or betterments, are recorded at cost. Replacements and renewals of
minor items of property are charged to maintenance expense. Depreciation expense
is computed on the straight-line method using rates based upon expected


                                      F-8
<PAGE>   36

                TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

useful lives of various classes of assets (ranging from 2% to 20% per annum).
Upon sale or retirement of properties regulated by the FERC, cost less salvage
is normally charged to accumulated depreciation, and no gain or loss is
recognized.

CAPITALIZATION OF INTEREST

         The Partnership capitalizes interest on borrowed funds related to
capital projects only for periods that activities are in progress to bring these
projects to their intended use. The rate used to capitalize interest on borrowed
funds was 7.45%, 7.01% and 7.02% for 2000, 1999 and 1998, respectively.

INCOME TAXES

         The Partnership is a limited partnership. As a result, the
Partnership's income or loss for federal income tax purposes is included in the
tax return of the partners, and may vary substantially from income or loss
reported for financial reporting purposes. Accordingly, no recognition has been
given to federal income taxes for the Partnership's operations. At December 31,
2000 and 1999, the Partnership's reported amount of net assets for financial
reporting purposes exceeded its tax basis by approximately $236 million and $232
million, respectively.

CASH FLOWS

         For purposes of reporting cash flows, all liquid investments with
maturities at date of purchase of 90-days or less are considered cash
equivalents.

UNIT OPTION PLAN

         The Partnership follows the intrinsic value based method of accounting
for its stock-based compensation plans (see Note 10). Under this method, the
Partnership records no compensation expense for unit options granted when the
exercise price of options granted is equal to the fair market value of the
Limited Partner Units on the date of grant.

COMPREHENSIVE INCOME

         Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income" requires certain items such as foreign currency
translation adjustments, minimum pension liability adjustments and unrealized
gains and losses on certain investments to be reported in a financial statement.
For the years ended December 31, 2000, 1999, and 1998, the Partnership's
comprehensive income (loss) equaled its reported net income (loss).

NEW ACCOUNTING PRONOUNCEMENTS

         Effective January 1, 2001, the Partnership adopted Statement of
Financial Accounting Standards ("SFAS") No. 133 Accounting for Derivative
Instruments and Hedging Activities, and SFAS No. 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activities, an amendment of FASB
Statement No. 133. These statements establish accounting and reporting standards
requiring that derivative instruments, including certain derivative instruments
embedded in other contracts, be recorded on the balance sheet at fair value as
either assets or liabilities. The accounting for changes in the fair value of a
derivative instrument depends on the intended use and designation of the
derivative at its inception.

                                      F-9
<PAGE>   37

                TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Special accounting for qualifying hedges allows a derivative's gains and losses
to offset related results of the hedged item in the statement of income, and
requires the Partnership to formally document, designate and assess the
effectiveness of the hedge transaction to receive hedge accounting. For
derivatives designated as cash flow hedges, changes in fair value, to the extent
the hedge is effective, are recognized in other comprehensive income until the
hedged item is recognized in earnings. Overall hedge effectiveness is measured
at least quarterly. Any changes in the fair value of the derivative instrument
resulting from hedge ineffectiveness, as defined by SFAS 133 and measured based
on the cumulative changes in the fair value of the derivative instrument and the
cumulative changes in the estimated future cash flows of the hedged item, are
recognized immediately in earnings. The Partnership makes limited use of
derivative instruments. The adoption of SFAS 133 and SFAS 138 had no material
impact on the Partnership.

NOTE 3.  RELATED PARTY TRANSACTIONS

         The Partnership has no employees and is managed by the Company.
Pursuant to the Partnership Agreement, the Company is entitled to reimbursement
of all direct and indirect expenses related to business activities of the
Partnership (see Note 1).

         For 2000, 1999 and 1998, direct expenses incurred by the general
partner in the amount of $39.6 million, $38.8 million and $37.4 million,
respectively, were charged to the Partnership. Substantially all such costs
related to payroll and payroll related expenses, which included $2.1 million,
$1.5 million and $1.0 million of expense for incentive compensation plans for
each of the years ended 2000, 1999 and 1998, respectively.

         For 2000, 1999 and 1998, expenses for administrative service and
overhead allocated to the Partnership by the general partner (including Duke
Energy and its affiliates) amounted to $0.8 million, $1.8 million and $2.5
million, respectively. Such costs incurred by the general partner included
general and administrative costs related to business activities of the
Partnership.

         Effective with the purchase of the fractionation facilities on March
31, 1998, TEPPCO Colorado, a wholly owned subsidiary of the Partnership, and
DEFS entered into a twenty-year Fractionation Agreement, under which TEPPCO
Colorado receives a variable fee for all fractionated volumes delivered to DEFS.
Revenues recognized from the Fractionation Agreement totaled $7.5 million and
$7.3 million for the years ended December 31, 2000 and 1999, respectively, and
$5.5 million from April 1, 1998 through December 31, 1998. TEPPCO Colorado and
DEFS also entered into a Operation and Maintenance Agreement, whereby DEFS
operates and maintains the fractionation facilities. For these services, TEPPCO
Colorado pays DEFS a set volumetric rate for all fractionated volumes delivered
to DEFS. Expenses related to the Operation and Maintenance Agreement totaled
$0.9 million and $0.8 million for the years ended December 31, 2000 and 1999,
respectively, and $0.7 million from April 1, 1998 through December 31, 1998. See
also Note 7 for indebtedness to the Parent Partnership.

NOTE 4.  EQUITY INVESTMENTS

         In August 2000, the Parent Partnership announced the execution of
definitive agreements with CMS Energy Corporation and Marathon Ashland Petroleum
LLC to form Centennial Pipeline, LLC ("Centennial"). Centennial will own and
operate an interstate refined petroleum products pipeline extending from the
upper Texas Gulf Coast to Illinois. Each participant will own a one-third
interest in Centennial. During 2000, the Partnership contributed approximately
$5.0 million for its investment in Centennial. Such amount is included as a
component of other assets balance at December 31, 2000.


                                      F-10
<PAGE>   38

                TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


NOTE 5.  INVENTORIES

         Inventories are valued at the lower of cost (based on weighted average
cost method) or market. The major components of inventories were as follows:

<TABLE>
<CAPTION>
                                DECEMBER 31,
                              ---------------
                               2000     1999
                              ------   ------
                               (IN THOUSANDS)
<S>                           <C>      <C>
Gasolines .................   $3,795   $3,270
Propane ...................       --      223
Butanes ...................      267      605
Fuel oil ..................       82      386
Other products ............      555      613
Materials and supplies ....    3,312    3,354
                              ------   ------
           Total ..........   $8,011   $8,451
                              ======   ======
</TABLE>

         The costs of inventories did not exceed market values at December 31,
2000 and 1999.

NOTE 6.  PROPERTY, PLANT AND EQUIPMENT

         Major categories of property, plant and equipment were as follows:

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                             -------------------
                                                               2000       1999
                                                             --------   --------
                                                               (IN THOUSANDS)
<S>                                                          <C>        <C>
Land and right of way ....................................   $ 33,838   $ 33,589
Line pipe and fittings ...................................    526,431    447,830
Storage tanks ............................................    102,343     99,975
Buildings and improvements ...............................      7,652      7,230
Machinery and equipment ..................................    161,697    154,573
Construction work in progress ............................     48,278     82,542
                                                             --------   --------
       Total property, plant and equipment ...............   $880,239   $825,739
       Less accumulated depreciation and amortization ....    237,858    214,044
                                                             --------   --------
          Net property, plant and equipment ..............   $642,381   $611,695
                                                             ========   ========
</TABLE>

         Depreciation and amortization expense on property, plant and equipment
was $25.8 million, $25.2 million and $24.6 million for the years ended December
31, 2000, 1999 and 1998, respectively.

NOTE 7.  LONG TERM DEBT

SENIOR NOTES

         On January 27, 1998, the Partnership completed the issuance of $180
million principal amount of 6.45% Senior Notes due 2008, and $210 million
principal amount of 7.51% Senior Notes due 2028 (collectively the "Senior
Notes"). The 6.45% Senior Notes due 2008 are not subject to redemption prior to
January 15, 2008. The 7.51% Senior Notes due 2028 may be redeemed at any time
after January 15, 2008, at the option of the Partnership, in whole or in part,
at a premium. Net proceeds from the issuance of the


                                      F-11
<PAGE>   39

                TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Senior Notes totaled approximately $386 million and was used to repay in full
the $61.0 million principal amount of the 9.60% Series A First Mortgage Notes,
due 2000, and the $265.5 million principal amount 10.20% Series B First Mortgage
Notes, due 2010. The premium for the early redemption of the First Mortgage
Notes totaled $70.1 million. The Partnership recorded an extraordinary charge of
$73.5 million during the first quarter of 1998, which represents the redemption
premium of $70.1 million and unamortized debt issue costs related to the First
Mortgage Notes of $3.4 million.

         The Senior Notes do not have sinking fund requirements. Interest on the
Senior Notes is payable semiannually in arrears on January 15 and July 15 of
each year. The Senior Notes are unsecured obligations of the Partnership and
will rank on a parity with all other unsecured and unsubordinated indebtedness
of the Partnership. The indenture governing the Senior Notes contains covenants,
including, but not limited to, covenants limiting the creation of liens securing
indebtedness and sale and leaseback transactions. However, the indenture does
not limit the Partnership's ability to incur additional indebtedness.

         At December 31, 2000 and 1999, the estimated fair value of the Senior
Notes was approximately $385 million and $356 million, respectively. Market
prices for recent transactions and rates currently available to the Partnership
for debt with similar terms and maturities were used to estimate fair value.

OTHER LONG TERM DEBT

         In connection with the purchase of the fractionation assets from DEFS
as of March 31, 1998, TEPPCO Colorado received a $38 million bank loan. The
interest rate on this loan was 6.53%, which was payable quarterly. The original
maturity date was April 21, 2001. This loan was refinanced by the Partnership on
July 21, 2000, through the credit facility discussed below.

         On May 17, 1999, the Partnership entered into a five-year $75 million
term loan agreement to finance construction of three new pipelines between the
Partnership's terminal in Mont Belvieu, Texas and Port Arthur, Texas. This loan
was refinanced by the Partnership on July 21, 2000, through the credit facility
discussed below.

         On May 17, 1999, the Partnership entered into a five-year $25 million
revolving credit agreement. The credit facility was terminated in connection
with the refinancing on July 21, 2000 discussed below. The Partnership did not
make any borrowings under this revolving credit facility.

         On July 14, 2000, the Parent Partnership entered into a $75 million
term loan and a $475 million revolving credit facility. On July 21, 2000, the
Parent Partnership borrowed $75 million under the term loan and $340 million
under the revolving credit facility. The funds were used to refinance existing
credit facilities, other than the Senior Notes, and to finance the acquisition
of assets from ARCO Pipe Line Company ("ARCO"), a wholly-owned subsidiary of
Atlantic Richfield Company, for $322.6 million. The acquired assets are held
through TCTM, L.P. (the "Crude Oil OLP"), a 98.9899% owned entity of the Parent
Partnership. The term loan was repaid by the Parent Partnership on October 25,
2000. The revolving credit facility has a three year maturity. The interest rate
is based on the Parent Partnership's option of either the lender's base rate
plus a spread, or LIBOR plus a spread in effect at the time of borrowings. The
revolving credit facility contains restrictive financial covenants that require
the Parent Partnership to maintain a minimum level of partners' capital as well
as maximum debt-to-EBITDA (earnings before interest expense, income tax expense
and depreciation and amortization expense) and minimum fixed charge coverage
ratios.


                                      F-12
<PAGE>   40

                TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


         At December 31, 2000, note payable, Parent Partnership represents an
intercompany note payable of $79.8 million payable to the Parent Partnership to
cover the debt service requirements for amounts paid on behalf of the
Partnership. The note payable, Parent Partnership bears interest at a variable
rate based in part on the effective yield of the Parent Partnership's credit
facilities described above. The weighted average interest rate on the note
payable, Parent Partnership at December 31, 2000, was 10.3%. At December 31,
2000, accrued interest includes $1.4 million due the Parent Partnership. For
2000, interest costs incurred on the note payable, Parent Partnership totaled
$3.9 million. At December 31, 2000, the carrying value of the note payable,
Parent Partnership approximated its fair value.

NOTE 8.  CONCENTRATIONS OF CREDIT RISK

         The Partnership's primary market areas are located in the Northeast,
Midwest and Southwest regions of the United States. The Partnership has a
concentration of trade receivable balances due from major integrated oil
companies, independent oil companies and other pipelines and wholesalers. These
concentrations of customers may affect the Partnership's overall credit risk in
that the customers may be similarly affected by changes in economic, regulatory
or other factors. The Partnership's customers' historical and future credit
positions are thoroughly analyzed prior to extending credit. The Partnership
manages its exposure to credit risk through credit analysis, credit approvals,
credit limits and monitoring procedures, and for certain transactions may
utilize letters of credit, prepayments and guarantees. During 2000, billings to
Marathon Ashland Petroleum, LLC, a major integrated oil company, accounted for
approximately 10% of the Partnership's revenues.

NOTE 9.  QUARTERLY DISTRIBUTIONS OF AVAILABLE CASH

         The Partnership makes quarterly cash distributions of all of its
Available Cash, generally defined as consolidated cash receipts less
consolidated cash disbursements and cash reserves established by the general
partner in its sole discretion or as required by the terms of the Notes.
Generally, distributions are made 98.9899% to the Parent Partnership and 1.0101%
to the general partner.

         For the years ended December 31, 2000, 1999 and 1998, cash
distributions totaled $70.8 million, $61.6 million and $56.8 million,
respectively. The distribution increases reflect the Partnership's success in
improving cash flow levels. On February 2, 2001, the Partnership paid a cash
distribution of $19.5 million for the quarter ended December 31, 2000.

NOTE 10. UNIT OPTION PLAN

         During 1994, the Company adopted the Texas Eastern Products Pipeline
Company 1994 Long Term Incentive Plan ("1994 LTIP"). The 1994 LTIP provides key
employees with an incentive award whereby a participant is granted an option to
purchase Limited Partner Units together with a stipulated number of Performance
Units. Under the provisions of the 1994 LTIP, no more than one million options
and two million Performance Units may be granted. Each Performance Unit creates
a credit to a participant's Performance Unit account when earnings of the Parent
Partnership exceed a threshold. When earnings of the Parent Partnership for a
calendar year (exclusive of certain special items) exceed the threshold, the
excess amount is credited to the participant's Performance Unit account. The
balance in the account may be used to exercise Limited Partner Unit options
granted in connection with the Performance Units or may be withdrawn two years
after the underlying options expire, usually 10 years from the date of grant.
Under the agreement for such Limited Partner Unit options, the options become
exercisable in equal installments over periods of one, two, and three years from
the date of the grant. Options may also be

                                      F-13
<PAGE>   41

                TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


exercised by normal means once vesting requirements are met. A summary of
Performance Units and Limited Partner Unit options granted under the terms of
the 1994 LTIP is presented below:

<TABLE>
<CAPTION>
                                                   PERFORMANCE    EARNINGS     EXPIRATION
                                                      UNITS       THRESHOLD      YEAR
                                                   -----------    ---------    ----------
<S>                                                <C>           <C>           <C>
Performance Unit Grants:
  1994.......................................         80,000        $ 1.00        2006
  1995 ......................................         70,000        $ 1.25        2007
  1997.......................................         11,000        $1.875        2009
</TABLE>

<TABLE>
<CAPTION>
                                                     OPTIONS        OPTIONS          EXERCISE
                                                   OUTSTANDING    EXERCISABLE          RANGE
                                                   ------------   -----------     ---------------
<S>                                                <C>            <C>             <C>
Limited Partner Unit Options:
 Outstanding at December 31, 1997............          92,528        58,098       $13.81 - $14.34
    Granted..................................         111,000            --                $25.69
    Became exercisable.......................              --        26,993       $13.81 - $21.66
    Exercised................................         (12,732)      (12,732)      $13.81 - $14.34
                                                     --------      --------
 Outstanding at December 31, 1998............         190,796        72,359       $13.81 - $21.66
    Granted..................................         162,000            --                $25.25
    Became exercisable.......................              --        40,737       $21.66 - $25.69
    Exercised................................         (14,000)      (14,000)      $13.81 - $14.34
                                                     --------      --------
 Outstanding at December 31, 1999............         338,796        99,096       $13.81 - $25.69
    Forfeited................................         (28,000)       (4,000)      $25.25 - $25.69
    Became exercisable.......................              --        85,365       $21.66 - $25.69
    Exercised................................         (19,932)      (19,932)      $13.81 - $14.34
                                                     --------      --------
 Outstanding at December 31, 2000............         290,864       160,529       $13.81 - $25.69
                                                     ========      ========
</TABLE>


         As discussed in Note 2, the Partnership uses the intrinsic value method
for recognizing stock-based compensation expense. The exercise price of all
options awarded under the 1994 LTIP equaled the market price of the Limited
Partner Units on the date of grant. Accordingly, no compensation was recognized
at the date of grant. Had compensation expense been determined consistent with
SFAS No. 123 "Accounting for Stock-Based Compensation," compensation expense
related to option grants would have totaled $93,771, $226,152 and $202,634
during 1998, 1999 and 2000, respectively. The disclosures as required by SFAS
123 are not representative of the effects on proforma net income for future
years as options vest over several years and additional awards may be granted in
subsequent years.

         For purposes of determining compensation costs using the provisions of
SFAS 123, the fair value of 1999 and 1998 option grants were determined using
the Black-Scholes option-valuation model. The key input variables used in
valuing the options were:

<TABLE>
<CAPTION>
                                1999       1998
                               -------    -------
<S>                            <C>        <C>
Risk-free interest rate ....       4.7%       5.5%
Dividend yield .............       7.6%       7.8%
Unit price volatility ......        23%        18%
Expected option lives ......   6 years    6 years
</TABLE>

                                      F-14
<PAGE>   42

                TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


NOTE 11. LEASES

         The Partnership utilizes leased assets in several areas of its
operations. Total rental expense during 2000, 1999 and 1998 was $6.3 million,
$6.0 million and $4.4 million, respectively. The minimum rental payments under
the Partnership's various operating leases for the years 2001 through 2005 are
$5.1 million, $4.7 million, $4.4 million, $4.1 million and $3.8 million,
respectively. Thereafter, payments aggregate $3.9 million through 2007.


NOTE 12. EMPLOYEE BENEFITS

RETIREMENT PLANS

         Prior to the transfer of the General Partner interest from Duke Energy
to DEFS on April 1, 2000, the Company's employees participated in the Duke
Energy Retirement Cash Balance Plan, which is a noncontributory,
trustee-administered pension plan. Effective January 1, 1999 the benefit formula
for all eligible employees was a cash balance formula. Under a cash balance
formula, a plan participant accumulates a retirement benefit based upon pay
credits and current interest credits. The pay credits are based on a
participant's salary, age, and service. Prior to January 1, 1999, the benefit
formula for all eligible employees was a final average pay formula. In addition,
certain executive officers participated in the Duke Energy Executive Cash
Balance Plan, which is a noncontributory, nonqualified, defined benefit
retirement plan. The Duke Energy Executive Cash Balance Plan was established to
restore benefit reductions caused by the maximum benefit limitations that apply
to qualified plans.

         Effective April 1, 2000, the Company adopted the TEPPCO Retirement Cash
Balance Plan ("Retirement Cash Balance Plan") and the TEPPCO Supplemental
Benefit Plan ("Supplemental Benefit Plan"). The benefits and provisions of these
plans are substantially identical to the Duke Energy Retirement Cash Balance
Plan and the Duke Energy Executive Cash Balance Plan previously in effect prior
to April 1, 2000.

         The components of net pension benefits costs for the years ended
December 31, 2000, 1999 and 1998 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                         2000       1999       1998
                                                        -------    -------    -------
<S>                                                     <C>        <C>        <C>
Service cost benefit earned during the year .........   $ 1,630    $ 1,408    $ 1,699
Interest cost on projected benefit obligation .......       764      2,622      2,041
Expected return on plan assets ......................      (640)    (2,170)    (1,555)
Amortization of prior service cost ..................        --         --        (27)
Amortization of net transition (asset) liability ....         4         17         (5)
Recognized net actuarial loss .......................        --        286         --
Settlement gain .....................................        --         --       (554)
                                                        -------    -------    -------
    Net pension benefits costs ......................   $ 1,758    $ 2,163    $ 1,599
                                                        =======    =======    =======
</TABLE>

         The assumptions affecting pension expense include:


                                      F-15
<PAGE>   43

                TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

<TABLE>
<CAPTION>
                                                        2000    1999    1998
                                                        ----    ----    ----
<S>                                                     <C>     <C>     <C>
Discount rate .......................................   7.50%   7.50%   6.75%
Salary increase .....................................   4.50%   4.50%   4.67%
Expected long-term rate of return on plan assets ....   9.25%   9.25%   9.25%
</TABLE>

         Duke Energy also sponsors an employee savings plan which covers
substantially all employees. Plan contributions on behalf of the Company of $1.6
million, $1.6 million and $1.4 million were expensed in 2000, 1999 and 1998,
respectively.

OTHER POSTRETIREMENT BENEFITS

         Prior to April 1, 2000, the Company's employees were provided with
certain health care and life insurance benefits for retired employees on a
contributory and non-contributory basis. Employees became eligible for these
benefits if they had met certain age and service requirements at retirement, as
defined in the plans. As part of the change in ownership, the Company is no
longer responsible for the liability associated with these plans.

<TABLE>
<CAPTION>
                                                                       2000       1999       1998
                                                                      -------    -------    -------
<S>                                                                   <C>        <C>        <C>
Service cost benefit earned during the year .......................   $    39    $   172    $   439
Interest cost on accumulated postretirement benefit obligation ....       134        500        796
Expected return on plan assets ....................................       (85)      (299)      (240)
Amortization of prior service cost ................................       (96)      (384)         3
Amortization of net transition liability ..........................        54        217        202
Recognized net actuarial loss .....................................        --         --        173
                                                                      -------    -------    -------
     Net postretirement benefits costs ............................   $    46    $   206    $ 1,373
                                                                      =======    =======    =======
</TABLE>

The assumptions affecting postretirement benefits expense include:

<TABLE>
<CAPTION>
                                                           2000     1999     1998
                                                          ------   ------   ------

<S>                                                       <C>      <C>      <C>
Discount rate .........................................    7.50%    7.50%    6.75%
Salary increase .......................................    4.50%    4.50%    4.67%
Expected long-term rate of return on 401(h) assets ....    9.25%    9.25%    9.25%
Expected long-term rate of return on RLR assets .......    6.75%    6.75%    6.75%
Expected long-term rate of return on VEBA assets ......    9.25%    9.25%    9.25%
Assumed tax rate ......................................   39.60%   39.60%   39.60%
</TABLE>

NOTE 13.  CONTINGENCIES


TOXIC TORT LITIGATION - SEYMOUR, INDIANA

         In the fall of 1999 and on December 1, 2000, the Company and the
Partnership were named as defendants in two separate lawsuits in Jackson County
Circuit Court, Jackson County, Indiana, in Ryan E. McCleery and Marcia S.
McCleery, et al. v. Texas Eastern Corporation, et al. (including the Company and
Partnership) and Gilbert Richards and Jean Richards v. Texas Eastern
Corporation, et. al. In both cases plaintiffs contend, among other things, that
the Company and other defendants stored and disposed of toxic and hazardous
substances and hazardous wastes in a manner that caused the materials to be
released into


                                      F-16
<PAGE>   44

                TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


the air, soil and water. They further contend that the release caused damages to
the plaintiffs. In their Complaints, the plaintiffs allege strict liability for
both personal injury and property damage together with gross negligence,
continuing nuisance, trespass, criminal mischief and loss of consortium. The
plaintiffs are seeking compensatory, punitive and treble damages. The Company
has filed an Answer to both complaints, denying the allegations, as well as
various other motions. These cases are in the early stages of discovery and are
not covered by insurance. The Company is defending itself vigorously against the
lawsuits. The Partnership cannot estimate the loss, if any, associated with
these pending lawsuits.

         The Partnership is involved in various other claims and legal
proceedings incidental to its business. In the opinion of management, these
claims and legal proceedings will not have a material adverse effect on the
Partnership's consolidated financial position, results of operations or cash
flows.

         The operations of the Partnership are subject to federal, state and
local laws and regulations relating to protection of the environment. Although
the Partnership believes its operations are in material compliance with
applicable environmental regulations, risks of significant costs and liabilities
are inherent in pipeline operations, and there can be no assurance that
significant costs and liabilities will not be incurred. Moreover, it is possible
that other developments, such as increasingly strict environmental laws and
regulations and enforcement policies thereunder, and claims for damages to
property or persons resulting from the operations of the pipeline system, could
result in substantial costs and liabilities to the Partnership. The Partnership
does not anticipate that changes in environmental laws and regulations will have
a material adverse effect on its financial position, results of operations or
cash flows in the near term.

         The Partnership and the Indiana Department of Environmental Management
("IDEM") have entered into an Agreed Order that will ultimately result in a
remediation program for any on-site and off-site groundwater contamination
attributable to the Partnership's operations at the Seymour, Indiana, terminal.
A Feasibility Study, which includes the Partnership's proposed remediation
program, has been approved by IDEM. IDEM is expected to issue a Record of
Decision formally approving the remediation program. After the Record of
Decision has been issued, the Partnership will enter into an Agreed Order for
the continued operation and maintenance of the program. The Partnership has
accrued $0.6 million at December 31, 2000 for future costs of the remediation
program for the Seymour terminal. In the opinion of the Company, the completion
of the remediation program will not have a material adverse impact on the
Partnership's financial condition, results of operations or liquidity.

         The Partnership received a compliance order from the Louisiana
Department of Environmental Quality ("DEQ") during 1994 relative to potential
environmental contamination at the Partnership's Arcadia, Louisiana facility,
which may be attributable to the operations of the Partnership and adjacent
petroleum terminals of other companies. The Partnership and all adjacent
terminals have been assigned to the Groundwater Division of DEQ, in which a
consolidated plan will be developed. The Partnership has finalized a negotiated
Compliance Order with DEQ that will allow the Partnership to continue with a
remediation plan similar to the one previously agreed to by DEQ and implemented
by the Company. In the opinion of the General Partner, the completion of the
remediation program being proposed by the Partnership will not have a future
material adverse impact on the Partnership.

         Rates of interstate oil pipeline companies are currently regulated by
the FERC, primarily through an index methodology, whereby a pipeline company is
allowed to change its rates based on the change from year to year in the
Producer Price Index for finished goods less 1% ("PPI Index"). In the
alternative, interstate oil pipeline companies may elect to support rate filings
by using a cost-of-service methodology, competitive market showings ("Market
Based Rates") or agreements between shippers and the oil pipeline company that
the rate is acceptable ("Settlement Rates").


                                      F-17
<PAGE>   45
                TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


         On May 11, 1999, the Partnership filed an application with the FERC
requesting permission to charge market-based rates for substantially all refined
products transportation tariffs. Along with its application for market-based
rates, the Partnership filed a petition for waiver pending the FERC's
determination on its application for market-based rates, of the requirements
that would otherwise have been imposed by the FERC's regulations requiring the
Partnership to reduce its rates in conformity with the PPI Index. On June 30,
1999, the FERC granted the waiver stating that it was temporary in nature and
that the Partnership would be required to make refunds, with interest, of all
amounts collected under rates in excess of the PPI Index ceiling level after
July 1, 1999, if the Partnership's application for market-based rates was
ultimately denied. As a result of the refund obligation potential, the
Partnership has deferred all revenue recognition of rates charged in excess of
the PPI Index. On December 31, 2000, the amount deferred for possible rate
refund, including interest totaled approximately $2.3 million.

         On July 31, 2000, the FERC issued an order granting the Partnership
market-based rates in certain markets and set for hearing the Partnership's
application for market-based rates in the Little Rock, Arkansas;
Shreveport-Arcadia, Louisiana; Cincinnati-Dayton, Ohio and Memphis, Tennessee
destination markets and the Shreveport, Louisiana origin market. The FERC also
directed the FERC trial staff to convene a conference to explore the facts and
issues regarding the Western Gulf Coast origin market. After the matter was set
for hearing, the Partnership and the protesting shippers entered into a
settlement agreement resolving their respective differences. On January 9, 2001,
the presiding Administrative Law Judge assigned to the hearing determined that
the offer of settlement provided resolution of issues set for hearing in the
Partnership pending case in a fair and reasonable manner and in the public
interest and certified the offer of settlement and recommended it to the FERC
for approval. The certification of the settlement is currently before the FERC.
The Partnership believes that the Administrative Law Judge's decision in this
matter will be upheld by the FERC.

         The settlement, if it is approved by FERC, will require the Partnership
to withdraw the application for market-based rates to the Little Rock, Arkansas
destination market and the Arcadia, Louisiana destination in the
Shreveport-Arcadia, Louisiana destination market. The Partnership also has
agreed to recalculate rates to these destination markets to conform with the PPI
Index from July 1, 1999 and make appropriate refunds. The refund obligation
under the proposed settlement as of December 31, 2000 would be $0.8 million.

         Substantially all of the petroleum products transported and stored by
the Partnership are owned by the Partnership's customers. At December 31, 2000,
the Partnership had approximately 13.2 million barrels of products in its
custody owned by customers. The Partnership is obligated for the transportation,
storage and delivery of such products on behalf of its customers. The
Partnership maintains insurance adequate to cover product losses through
circumstances beyond its control.


                                      F-18
<PAGE>   46

                TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

NOTE 14.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
                           FIRST    SECOND     THIRD    FOURTH
                          QUARTER   QUARTER   QUARTER   QUARTER
                          -------   -------   -------   -------
                         (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S>                       <C>       <C>       <C>       <C>
2000
Operating revenues ....   $63,778   $54,288   $53,110   $65,511
Operating income ......    28,338    17,199    16,707    27,755
Net income ............   $21,640   $10,713   $ 9,219   $19,742

1999
Operating revenues ....   $61,150   $54,225   $53,647   $61,248
Operating income ......    28,198    18,601    17,203    25,391
Net income ............   $21,206   $11,689   $10,263   $18,694
</TABLE>


                                      F-19
<PAGE>   47
                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
        EXHIBIT
        NUMBER                      DESCRIPTION
        -------                     -----------
<S>               <C>
           3.1    Certificate of Formation of TEPPCO Colorado, LLC (Filed as
                  Exhibit 3.2 to Form 10-Q of TEPPCO Partners, L.P. (Commission
                  File No. 1-10403) for the quarter ended March 31, 1998 and
                  incorporated herein by reference). 3.2 Amended and Restated
                  Agreement of Limited Partnership of TE Products Pipeline
                  Company, Limited Partnership, effective July 21, 1998 (Filed
                  as Exhibit 3.2 to Form 8-K of TEPPCO Partners, L.P.
                  (Commission File No. 1-10403) dated July 21, 1998 and
                  incorporated herein by reference).

           4.1    Form of Indenture between TE Products Pipeline Company,
                  Limited Partnership and The Bank of New York, as Trustee,
                  dated as of January 27, 1998 (Filed as Exhibit 4.3 to TE
                  Products Pipeline Company, Limited Partnership's Registration
                  Statement on Form S-3 (Commission File No. 333-38473) and
                  incorporated herein by reference).

          10.1    Assignment and Assumption Agreement, dated March 24, 1988,
                  between Texas Eastern Transmission Corporation and the Company
                  (Filed as Exhibit 10.8 to the Registration Statement of TEPPCO
                  Partners, L.P. (Commission File No. 33-32203) and incorporated
                  herein by reference).

         +10.2    Texas Eastern Products Pipeline Company 1997 Employee
                  Incentive Compensation Plan executed on July 14, 1997 (Filed
                  as Exhibit 10 to Form 10-Q of TEPPCO Partners, L.P.
                  (Commission File No. 1-10403) for the quarter ended September
                  30, 1997 and incorporated herein by reference).

          10.3    Agreement Regarding Environmental Indemnities and Certain
                  Assets (Filed as Exhibit 10.5 to Form 10-K of TEPPCO Partners,
                  L.P. (Commission File No. 1-10403) for the year ended December
                  31, 1990 and incorporated herein by reference).

         +10.4    Texas Eastern Products Pipeline Company Management Incentive
                  Compensation Plan executed on January 30, 1992 (Filed as
                  Exhibit 10 to Form 10-Q of TEPPCO Partners, L.P. (Commission
                  File No. 1-10403) for the quarter ended March 31, 1992 and
                  incorporated herein by reference).

         +10.5    Texas Eastern Products Pipeline Company Long-Term Incentive
                  Compensation Plan executed on October 31, 1990 (Filed as
                  Exhibit 10.9 to Form 10-K of TEPPCO Partners, L.P. (Commission
                  File No. 1-10403) for the year ended December 31, 1990 and
                  incorporated herein by reference).

         +10.6    Form of Amendment to Texas Eastern Products Pipeline Company
                  Long-Term Incentive Compensation Plan (Filed as Exhibit 10.7
                  to the Partnership's Form 10-K (Commission File No. 1-10403)
                  for the year ended December 31, 1995 and incorporated herein
                  by reference).
</TABLE>

<PAGE>   48

<TABLE>
<S>               <C>
         +10.7    Duke Energy Corporation Executive Savings Plan (Filed as
                  Exhibit 10.7 to Form 10-K of TEPPCO Partners, L.P. (Commission
                  File No. 1-10403) for the year ended December 31, 1999 and
                  incorporated herein by reference).

         +10.8    Duke Energy Corporation Executive Cash Balance Plan (Filed as
                  Exhibit 10.8 to Form 10-K of TEPPCO Partners, L.P. (Commission
                  File No. 1-10403) for the year ended December 31, 1999 and
                  incorporated herein by reference).

         +10.9    Duke Energy Corporation Retirement Benefit Equalization Plan
                  (Filed as Exhibit 10.9 to Form 10-K of TEPPCO Partners, L.P.
                  (Commission File No. 1-10403) for the year ended December 31,
                  1999 and incorporated herein by reference).

        +10.10    Employment Agreement with William L. Thacker, Jr. (Filed as
                  Exhibit 10 to Form 10-Q of TEPPCO Partners, L.P. (Commission
                  File No. 1-10403) for the quarter ended September 30, 1992 and
                  incorporated herein by reference).

        +10.11    Texas Eastern Products Pipeline Company 1994 Long Term
                  Incentive Plan executed on March 8, 1994 (Filed as Exhibit
                  10.1 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
                  No. 1-10403) for the quarter ended March 31, 1994 and
                  incorporated herein by reference).

        +10.12    Texas Eastern Products Pipeline Company 1994 Long Term
                  Incentive Plan, Amendment 1, effective January 16, 1995 (Filed
                  as Exhibit 10.12 to Form 10-Q of TEPPCO Partners, L.P.
                  (Commission File No. 1-10403) for the quarter ended June 30,
                  1999 and incorporated herein by reference).

         10.13    Asset Purchase Agreement between Duke Energy Field Services,
                  Inc. and TEPPCO Colorado, LLC, dated March 31, 1998 (Filed as
                  Exhibit 10.14 to Form 10-Q of TEPPCO Partners, L.P.
                  (Commission File No. 1-10403) for the quarter ended March 31,
                  1998 and incorporated herein by reference).

        +10.14    Form of Employment Agreement between the Company and Ernest P.
                  Hagan, Thomas R. Harper, David L. Langley, Charles H. Leonard
                  and James C. Ruth, dated December 1, 1998 (Filed as Exhibit
                  10.20 to Form 10-K of TEPPCO Partners, L.P. (Commission File
                  No. 1-10403) for the year ended December 31, 1998 and
                  incorporated herein by reference).

         10.15    Agreement Between Owner and Contractor between TE Products
                  Pipeline Company, Limited Partnership and Eagleton Engineering
                  Company, dated February 4, 1999 (Filed as Exhibit 10.21 to
                  Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
                  1-10403) for the quarter ended March 31, 1999 and incorporated
                  herein by reference).

         10.16    Services and Transportation Agreement between TE Products
                  Pipeline Company, Limited Partnership and Fina Oil and
                  Chemical Company, BASF Corporation and BASF Fina Petrochemical
                  Limited Partnership, dated February 9, 1999 (Filed as Exhibit
                  10.22 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
                  No. 1-10403) for the quarter ended March 31, 1999 and
                  incorporated herein by reference).

         10.17    Call Option Agreement, dated February 9, 1999 (Filed as
                  Exhibit 10.23 to Form 10-Q of TEPPCO Partners, L.P.
                  (Commission File No. 1-10403) for the quarter ended March 31,
                  1999 and incorporated herein by reference).

         10.18    Credit Agreement between TEPPCO Partners, L.P., SunTrust Bank,
                  and Certain Lenders, dated July 14, 2000 (Filed as Exhibit
                  10.31 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
                  No. 1-10403) for the quarter ended June 30, 2000 and
                  incorporated herein by reference).

        +10.19    Texas Eastern Products Pipeline Company, LLC 2000 Long Term
                  Incentive Plan, Amendment and Restatement, Effective January
                  1, 2000 (Filed as Exhibit 10.28 to Form 10-K of TEPPCO
                  Partners, L.P. (Commission File No. 1-10403) for the year
                  ended December 31, 2000 and incorporated herein by reference).

        +10.20    TEPPCO Supplemental Benefit Plan, effective April 1, 2000
                  (Filed as Exhibit 10.29 to Form 10-K of TEPPCO Partners, L.P.
                  (Commission File No. 1-10403) for the year ended December 31,
                  2000 and incorporated herein by reference).

           *24    Power of Attorney
</TABLE>

----------
*  Filed herewith.

+  A management contract or compensation plan or arrangement.