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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, 1999

                         COMMISSION FILE NUMBER 1-13603

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

                DELAWARE                                76-0329620
(State of Incorporation or Organization) (I.R.S. Employer Identification Number)


                               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, 2028         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

                                     PART I

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<S>    <C>                                                                                                             <C>
ITEMS  1.     Business and Properties....................................................................................1
  AND  2.
ITEM   3.     Legal Proceedings.........................................................................................10
ITEM   4.     Submission of Matters to a Vote of Security Holders.......................................................10

                                                      PART II

ITEM   5.     Market for Registrant's Common Equity and Related Partnership Interest Matters............................10
ITEM   6.     Selected Financial Data...................................................................................11
ITEM   7.     Management's Discussion and Analysis of Financial Condition and Results of Operations.....................12
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
interest and Texas Eastern Products Pipeline Company (the "Company" or "General
Partner") owns a 1.0101% general partner interest in the Partnership. The
General Partner performs all management and operating functions required for the
Partnership.

         In June 1997, Duke Energy Corporation ("Duke Energy") was formed
through a merger between PanEnergy Corp ("PanEnergy") and Duke Power Company.
The Company, previously a wholly-owned subsidiary of PanEnergy, became an
indirect wholly-owned subsidiary of Duke Energy on the date of the merger.

         The Partnership is one of the largest pipeline common carriers of
refined petroleum products and LPGs in the United States. The Partnership owns
and operates an approximate 4,300-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 business depends in large part on (i) the level of
demand for refined petroleum products and LPGs in the geographic locations
served by it and (ii) 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 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.

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; sale of product inventory; fractionation of natural gas
liquids (effective March 31, 1998); 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.


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         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 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.

         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:


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<TABLE>
<CAPTION>


                                                                       PRODUCT DELIVERIES (MMBBLS)
                                                                        YEARS ENDED DECEMBER 31,
                                                                      ------------------------------
                                                                        1999       1998       1997
                                                                      -------    -------    -------
Refined Products Transportation:
<S>           <C>                                                        <C>        <C>        <C>
      Central (1)..................................................      67.7       71.5       69.4
      Midwest (2)..................................................      37.9       34.8       29.9
      Ohio and Kentucky............................................      27.0       24.2       20.7
                                                                      -------    -------    -------
          Subtotal.................................................     132.6      130.5      120.0
                                                                      -------    -------    -------
LPGs Mainline Transportation:
      Central, Midwest and Kentucky (1)(2).........................      22.9       18.5       23.8
      Ohio and Northeast (3).......................................      14.7       13.5       18.2
                                                                      -------    -------    -------
          Subtotal.................................................      37.6       32.0       42.0
                                                                      -------    -------    -------
Mont Belvieu Operations:
      LPGs                                                               28.5       25.1       27.8
                                                                      -------    -------    -------

          Total Product Deliveries.................................     198.7      187.6      189.8
                                                                      =======    =======    =======
</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.

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


<TABLE>
<CAPTION>


                                                                       PRODUCT DELIVERIES (MMBBLS)
                                                                         YEARS ENDED DECEMBER 31,
                                                                      -------------------------------
                                                                       1999       1998        1997
                                                                      -------    -------     -------
Refined Products Transportation:
<S>                                                                      <C>        <C>         <C>
      Gasoline ...................................................       71.6       74.0        66.8
      Jet Fuels ..................................................       26.9       23.8        22.4
      Middle Distillates (1) .....................................       28.4       26.1        24.0
      MTBE/Toluene ...............................................        5.7        6.6         6.8
                                                                      -------    -------     -------
          Subtotal ...............................................      132.6      130.5       120.0
                                                                      -------    -------     -------
LPGs Mainline Transportation:
      Propane ....................................................       30.8       25.5        34.7
      Butanes ....................................................        6.8        6.5         7.3
                                                                      -------    -------     -------
          Subtotal ...............................................       37.6       32.0        42.0
                                                                      -------    -------     -------
Mont Belvieu Operations:
      LPGs .......................................................       28.5       25.1        27.8
                                                                      -------    -------     -------
          Total Product Deliveries ...............................      198.7      187.6       189.8
                                                                      =======    =======     =======
</TABLE>

----------------
(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



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to Partnership-owned terminals, connecting pipelines and customer-owned
terminals. 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.

         Effective January 1, 1996, the Clean Air Act Amendments of 1990
mandated the use of reformulated gasolines in nine metropolitan areas of the
United States, including the Houston and Chicago areas served by the System. A
portion of the reformulated and oxygenated gasolines includes methyl tertiary
butyl ether ("MTBE") as a major blending component. Effective July 1, 1999, the
Partnership canceled its tariff for deliveries of MTBE into the Chicago market
area due to 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. The
Partnership continues to transport MTBE to its marine terminal near Beaumont,
Texas.

     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 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 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 33 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.

     Product Sales and Other

         The Partnership also derives revenue from the sale of product
inventory, terminaling activities and other ancillary services associated with
the transportation and storage of refined petroleum products and LPGs. Since
March 31, 1998, operations also include fractionation of NGLs.


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<PAGE>   7


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 (i)
retail service stations, (ii) truck stops, (iii) agricultural enterprises, (iv)
refineries, and (v) military and commercial jet fuel users.

         Propane shippers 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, 1999, the Partnership had approximately 140 customers.
Transportation revenues (and percentage of total revenues) attributable to the
top 10 shippers were $105 million (46%), $90 million (42%), and $85 million
(38%) for the years ended December 31, 1999, 1998 and 1997, respectively. During
1999 and 1998, billings to Marathon Ashland, LLC, a major integrated oil
company, accounted for approximately 10% of the Partnership's revenues. During
1997, no single customer accounted for 10% or greater of the Partnership's total
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.

         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 $69.3 million for the
year ended December 31, 1999. This amount includes capitalized interest of $2.1
million. Approximately $43.8 million of spending was used for



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on-going construction of three new pipelines between the Partnership's terminal
in Mont Belvieu, Texas and Port Arthur, Texas. The project includes three
12-inch diameter common-carrier pipelines and associated facilities. Each
pipeline will be approximately 70 miles in length. Upon completion, the new
pipelines will transport ethylene, propylene and natural gasoline. The cost of
this project is expected to total approximately $75 million. The Partnership has
entered into an agreement for turnkey construction of the pipelines and related
facilities and has separately entered into agreements for guaranteed throughput
commitments. The anticipated commencement date is the fourth quarter of 2000. Of
the remaining $23.4 million of capital expenditures during 1999, approximately
$22.1 million of spending related to life-cycle replacements and upgrading
current facilities, and approximately $1.3 million related to revenue-generating
projects.

         The Partnership estimates that capital expenditures for 2000 will be
approximately $57 million (which includes $4 million of capitalized interest).
Approximately $31 million is expected to be used to complete construction of the
three new pipelines between Mont Belvieu and Port Arthur and approximately
$8 million will be used to replace six pipelines under the Houston Ship Channel
as required by the United States Army Corp of Engineers for the deepening of the
channel. Substantially all remaining expenditures are expected 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").

         In May 1999, the Partnership filed an application with the FERC to
charge Market Based Rates for substantially all refined products transportation
tariffs. Such application is currently under review by the FERC. The FERC
approved a request of the Partnership waiving the requirement to adjust refined
products transportation tariffs pursuant to the PPI Index while its Market Based
Rates application is under review. Under the PPI Index, refined products
transportation rates in effect on June 30, 1999 would have been reduced by
approximately 1.83% effective July 1, 1999. If any portion of the Market Based
Rates application is denied by the FERC, the Partnership has agreed to refund,
with interest, amounts collected after June 30, 1999, under the tariff rates in
excess of the PPI Index. As a result of the refund obligation potential, the
Partnership has deferred all revenue recognition of rates charged in excess of
the PPI Index. At December 31, 1999, the amount deferred for possible rate
refunds, including interest, totaled approximately $0.8 million.

         In July 1999, certain shippers filed protests with the FERC on the
Partnership's application for Market Based Rates in four destination markets.
The Partnership believes it will prevail in a competitive market determination
in those destination markets under protest.

         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.


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<PAGE>   9


         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 effect 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.

     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.


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<PAGE>   10

     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 all 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 eight facilities.

     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



                                       8
<PAGE>   11

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 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 $0.8 million at December 31, 1999 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 Hazardous Liquid Pipeline Safety
Act of 1979 ("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 Partnership believes it is in material compliance with HLPSA requirements.

         The Partnership is also subject to the requirements of the federal
Occupational Safety and Health Act ("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 industry and regulatory safety standards such as
those described above. Such expenditures cannot be



                                       9
<PAGE>   12

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, 1999, the General Partner had 757 employees.

ITEM 3. LEGAL PROCEEDINGS

TOXIC TORT LITIGATION - SEYMOUR, INDIANA

         In the fall of 1999, the Company and the Partnership became involved in
a lawsuit 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), plaintiffs contend, among other things,
that the Company and other defendants stored and disposed of toxic and hazardous
substances and hazardous wastes in such a manner which caused the materials to
be released into the air, soil and water. They further contend that such release
caused damages to the plaintiffs. In their Complaint, 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. Furthermore, the plaintiffs are seeking compensatory, punitive and
treble damages. The Company has filed an Answer to the Complaint, denying the
allegations, as well as various other motions. This case is in the early stages
of discovery and is not covered by insurance. The Company is defending itself
vigorously against this lawsuit. The Partnership cannot estimate the loss, if
any, associated with this pending lawsuit.

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, operations or
cash flows.

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

         NONE

                                    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 owns a 1.0101%
general partner interest in the Partnership. There is no established public
trading market for the Partnership ownership interests.


                                       10
<PAGE>   13

         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,
                                                               -----------------------------------------------------------
                                                                 1999         1998         1997        1996         1995
                                                               --------     --------     --------    --------     --------
                                                                                      (IN THOUSANDS)

INCOME STATEMENT DATA:
   Operating revenues:
<S>                                                            <C>          <C>          <C>         <C>          <C>
      Transportation -- refined products.....................  $123,004     $119,854     $107,304    $ 98,641     $ 96,190
      Transportation -- LPGs.................................    67,701       60,902       79,371      80,219       70,576
      Mont Belvieu operations................................    12,849       10,880       12,815      11,811       13,570
      Other..................................................    26,716       20,147       22,603      25,354       23,380
                                                               --------     --------     --------    --------     --------
       Total operating revenues..............................   230,270      211,783      222,093     216,025      203,716
   Operating expenses........................................   113,768      107,102      106,771     105,182      103,938
   Depreciation and amortization.............................    27,109       26,040       23,772      23,409       23,286
                                                               --------     --------     --------    --------     --------
   Operating income..........................................    89,393       78,641       91,550      87,434       76,492
   Interest expense -- net...................................   (29,212)     (28,982)     (32,229)    (33,534)     (34,987)
   Other income -- net.......................................     1,671        2,873        2,604       5,346        5,689
                                                               --------     --------     --------    --------     --------
   Income before extraordinary item..........................    61,852       52,532       61,925      59,246       47,194
    Extraordinary loss on debt extinguishment (1)............        --      (73,509)          --          --           --
                                                               --------     --------     --------    --------     --------
   Net income (loss).........................................  $ 61,852     $(20,977)    $ 61,925    $ 59,246     $ 47,194
                                                               ========     ========     ========    ========     ========
BALANCE SHEET DATA (AT PERIOD END):
   Property, plant and equipment -- net......................  $611,695     $567,566     $567,681    $561,068     $533,470
   Total assets..............................................   724,216      696,486      673,909     671,241      669,915
   Long-term debt (net of current maturities)................   452,753      427,722      309,512     326,512      339,512
   Partners' capital.........................................   228,229      228,140      306,060     293,274      279,202
CASH FLOW DATA:
   Net cash from operations..................................  $ 89,803     $ 83,915     $ 83,604    $ 86,121     $ 78,456
   Capital expenditures......................................   (69,322)     (22,710)     (32,931)    (51,264)     (25,967)
   Cash investments -- net...................................     3,040        2,357       18,860       4,148        6,527
   Distributions.............................................   (61,608)     (56,774)     (49,042)    (45,174)     (40,342)
</TABLE>

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

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


                                       11
<PAGE>   14






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 1999, 1998 and 1997 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 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.
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, 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 for the year would have been $52.5 million for 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.

         For the year ended December 31, 1998, the Partnership reported a net
loss of $21.0 million. The net loss included an extraordinary loss for early
extinguishment of debt of $73.5 million. Excluding the extraordinary loss, net
income for the year would have been $52.5 million, compared with net income of
$61.9 million for 1997. The $9.4 million decrease in income before loss on debt
extinguishment resulted primarily from a $12.9 million decrease in operating
income, partially offset by a $3.2 million decrease in interest expense, net of
capitalized interest.

   Volume and average tariff information for 1999, 1998 and 1997 is presented
below:

<TABLE>
<CAPTION>
                                                                                             PERCENTAGE
                                                                                              INCREASE
                                                      YEARS ENDED DECEMBER 31,               (DECREASE)
                                                  ---------------------------------        ----------------
                                                    1999        1998         1997          1999        1998
                                                  -------      -------      -------        ----        ----
                                                          (IN THOUSANDS, EXCEPT TARIFF INFORMATION)
<S>                                              <C>           <C>          <C>            <C>         <C>
Volumes Delivered
   Refined products..........................     132,642      130,467      119,971           2%          9%
   LPGs......................................      37,575       32,048       41,991          17%        (24)%
   Mont Belvieu operations...................      28,535       25,072       27,869          14%        (10)%
                                                  -------      -------      -------        ----        ----
      Total..................................     198,752      187,587      189,831           6%         (1)%
                                                  =======      =======      =======        ====        ====

Average Tariff per Barrel

   Refined products..........................       $0.93        $0.92        $0.89           1%          3%
   LPGs......................................        1.80         1.90         1.89          (5)%         1%
   Mont Belvieu operations...................        0.16         0.16         0.15          --           7%
      Average system tariff per barrel.......       $0.98        $0.98        $1.00          --          (2)%
                                                  =======      =======      =======        ====        ====
</TABLE>



                                       12
<PAGE>   15

    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 a $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 feed stock
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 Producer Price Index for finished
goods less 1% ("PPI Index"), effective July 1, 1999. The Partnership has
deferred recognition of approximately $0.8 million of revenue 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 $6.8 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 feed stock 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 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 post retirement benefit
accruals; and increased outside services for pipeline


                                       13
<PAGE>   16


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.

   1998 Compared to 1997

         Operating revenues for the year ended 1998 decreased 5% to $211.8
million from $222.1 million for the year ended 1997. This $10.3 million decrease
resulted from an $18.5 million decrease in LPGs transportation revenues, a $2.5
million decrease in other operating revenues and a $1.9 million decrease in
revenues generated from Mont Belvieu operations, partially offset by a $12.6
million increase in refined products transportation revenues.

         Refined products transportation revenues increased $12.6 million for
the year ended December 31, 1998, compared with the prior year, as a result of
the 9% increase in volumes delivered and a 3% increase in the refined products
average tariff per barrel. The 9% increase in volumes delivered in 1998 was
attributable to (i) favorable Midwest price differentials for motor fuel,
distillate, jet fuel and natural gasoline; and (ii) the full-period impact of
capacity expansions of the mainline System between El Dorado, Arkansas, and
Seymour, Indiana, the Ark-La-Tex System between Shreveport, Louisiana, and El
Dorado, and the connection to the Colonial pipeline at Beaumont, Texas. The 3%
increase in the refined products average tariff per barrel reflects new tariff
structures for volumes transported on the expanded portion of the Ark-La-Tex
system and barrels originating from the pipeline connection with Colonial's
pipeline.

         LPGs transportation revenues decreased $18.5 million for the year ended
December 31, 1998, compared with the prior year, due to a 24% decrease in
volumes delivered, partially offset by a 1% increase in the LPGs average tariff
per barrel. Propane revenues decreased $16.7 million, or 25%, from the prior
year primarily due to decreased propane deliveries in the Midwest and Northeast
market areas attributable to warmer winter and spring weather during 1998 and
unfavorable differentials versus competing Canadian product. Butane revenues
decreased $1.7 million, or 13%, from the prior year due primarily to unfavorable
blending economics in the Midwest and termination of a throughput agreement
during the second quarter of 1998. Decreased petrochemical demand along the
upper Texas Gulf Coast resulted in a 32% decrease in short-haul propane
deliveries. The 1% increase in the LPGs average tariff per barrel resulted from
an increase in 1998 of the ratio of long-haul to short-haul propane deliveries.

         Revenues generated from Mont Belvieu operations decreased $1.9 million
for the year ended December 31, 1998, compared with the prior year, primarily
due to lower storage revenue, lower product receipt charges and decreased
propane dehydration fees. Additionally, Mont Belvieu shuttle deliveries
decreased 10% during the year ended 1998, compared with the prior year, due to
lower petrochemical and refinery demand for LPGs along the



                                       14
<PAGE>   17

upper Texas Gulf Coast. The decrease in the Mont Belvieu shuttle deliveries was
largely offset by a 7% increase in the average tariff per barrel attributable to
a lower percentage in 1998 of contract deliveries, which generally carry lower
tariffs.

         Other operating revenues decreased $2.5 million during the year ended
December 31, 1998, compared with 1997, primarily due to decreased product
inventory volumes sold, unfavorable product location exchange differentials
incurred to position system inventory, lower amounts of butane received in the
Midwest for summer storage and decreased terminaling revenues. These decreases
were partially offset by $5.5 million of operating revenues from the
fractionator facilities acquired on March 31, 1998.

         Costs and expenses increased $2.6 million during the year ended
December 31, 1998, compared with the prior year, due to a $3.7 million increase
in operating, general and administrative expenses and a $2.3 million increase in
depreciation and amortization charges, partially offset by a $3.0 million
decrease in operating fuel and power expense and a $0.4 million decrease in
taxes - other than income. The increase in operating, general and administrative
expenses was primarily attributable to $3.4 million of expense to write down the
book-value of product inventory to market-value, credits of $3.0 million
recorded during 1997 for insurance recovery of past litigation costs related to
the Seymour terminal, a $0.9 million increase in expenses related to Year 2000
activities, $0.6 million of expense related to the fractionator facilities
acquired on March 31, 1998, and increased product measurement losses. These
increases in operating, general and administrative expenses were partially
offset by expenses recorded for environmental remediation at the Partnership's
Seymour, Indiana, terminal in the third quarter of 1997, and lower supplies and
services related to pipeline operations and maintenance. 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. Operating fuel and power expense decreased from the
prior year due primarily to increased mainline pumping efficiencies, lower
long-haul LPGs volumes and lower summer peak power rates in Arkansas.

         Interest expense decreased $3.9 million during the year ended December
31, 1998, compared with 1997, as a result of the repayment on January 27, 1998
of the remaining $326.5 million principal balance of the First Mortgage Notes,
partially offset by interest expense on the $390.0 million principal amount of
the Senior Notes issued on January 27, 1998, and interest expense on the $38.0
million term-loan used to finance the purchase of the fractionation assets on
March 31, 1998. The weighted average interest rate of the $326.5 million
principal amount of the First Mortgage Notes was 10.09%, compared with the
weighted average interest rate of the $390.0 million principal amount of the
Senior Notes of 7.02%. The interest rate on the $38.0 million term loan is
6.53%. Interest capitalized decreased $0.7 million from the prior year as a
result of lower construction balances related to capital projects.

         Other income - net increased during the year ended December 31, 1998,
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 a $0.5 million loss on the sale of
non-carrier assets in August 1997. These factors were partially offset by lower
interest income earned on cash investments in 1998.

FINANCIAL CONDITION AND LIQUIDITY

         Net cash from operations for the year ended December 31, 1999, totaled
$89.8 million, 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. This compares with cash flows from operations of $83.9 million
for the year ended 1998, which was comprised primarily 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 for the year ended December 31, 1997
totaled $83.6 million, which was comprised of $85.7 million of income before
charges for depreciation and amortization, partially offset by $2.1 million used
for working capital changes. Net cash from operations includes interest payments
of $30.7 million, $27.0 million and $33.6 million for each of the years ended
1999, 1998 and 1997, respectively.


                                       15
<PAGE>   18


         The Partnership routinely invests excess cash in liquid investments as
part of its cash management program. Investments of cash in discounted
commercial paper and Eurodollar time deposits with original maturities at date
of purchase of 90 days or less are included in cash and cash equivalents.
Short-term investments of cash consist of investment-grade corporate notes with
maturities during 2000. Long-term investments are comprised of investment-grade
corporate notes with varying maturities between 2001 and 2004. Interest income
earned on all investments is included in cash from operations. Cash flows from
investing activities included proceeds from investments of $6.3 million, $3.1
million and $25.0 million for each of the years ended 1999, 1998 and 1997,
respectively. Cash flows from investing activities also included additional
investments of $3.2 million, $0.7 million and $6.2 million for each of the years
ended 1999, 1998 and 1997, respectively. Cash balances related to the investment
of cash and proceeds from the investment of cash were $30.0 million, $46.5
million and $56.1 million for the years ended December 31, 1999, 1998 and 1997,
respectively.

         Capital expenditures for the year ended December 31, 1999, totaled
$69.3 million, which included $43.8 million of spending for on-going
construction of three new pipelines between the Partnership's terminal in Mont
Belvieu, Texas and Port Arthur, Texas. The project includes three 12-inch
diameter common-carrier pipelines and associated facilities. Each pipeline will
be approximately 70 miles in length. Upon completion, the new pipelines will
transport ethylene, propylene and natural gasoline. The cost of this project is
expected to total approximately $75 million. The Partnership has entered into an
agreement for turnkey construction of the pipelines and related facilities and
has separately entered into agreements for guaranteed throughput commitments.
The anticipated commencement date is the fourth quarter of 2000. 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. Cash flows used in
investing activities for the year ended December 31, 1997 included $32.9 million
of capital expenditures, partially offset by $1.4 million received from the sale
of non-carrier assets and $1.0 million of insurance proceeds related to the
replacement value of a 20-inch diameter auxiliary pipeline at the Red River in
central Louisiana, which was damaged in 1994 and subsequently removed from
service.

         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, 1999, 1998 and 1997,
cash distributions totaled $61.6 million, $56.8 million and $49.0 million,
respectively. The distribution increases reflect the Partnership's success in
improving cash flow levels. On February 4, 2000, the Partnership paid a cash
distribution of $16.1 million for the quarter ended December 31, 1999.

         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 repayment of the First Mortgage Notes and the issuance of the
Senior Notes reduced the level of cash required for debt service until 2008. 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 (i)



                                       16
<PAGE>   19

the creation of liens securing indebtedness and (ii) sale and leaseback
transactions. However, the indenture does not limit the Partnership's ability to
incur additional indebtedness.

         In connection with the purchase of the fractionation assets from DEFS
as of March 31, 1998, TEPPCO Colorado received a $38 million bank loan from
SunTrust Bank. Proceeds from the loan were received on April 21, 1998. The loan
bears interest at a rate of 6.53%, which is payable quarterly. The principal
balance of the loan is payable in full on April 21, 2001. The Partnership is
guarantor on the loan.

         On May 17, 1999, the Partnership entered into a $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. The loan
agreement has a term of five years. SunTrust Bank is the administrator of the
loan. At December 31, 1999, $25 million has been borrowed under the term loan
agreement. Principal will be paid quarterly beginning in 2001. The interest rate
for the $75 million term loan is based on the borrower's option of either
SunTrust Bank's prime rate, the federal funds rate or LIBOR rate in effect at
the time of the borrowings and is adjusted monthly, bimonthly, quarterly or
semi-annually. Interest is payable quarterly from the time of borrowing. The
current interest rate for amounts outstanding under the term loan is 7.27%.
Commitment fees for the term loan agreement totaled approximately $78,000 for
the period from May 17, 1999 through December 31, 1999.

         On May 17, 1999, the Partnership entered into a five-year $25 million
revolving credit agreement. SunTrust Bank is the administrative agent. The
interest rate is based on the borrower's option of either SunTrust Bank's prime
rate, the federal funds rate or LIBOR rate in effect at the time of the
borrowings and is payable quarterly. Interest rates are adjusted monthly,
bimonthly, quarterly or semi-annually. The Partnership has not made any
borrowings under this revolving credit facility. Commitment fees for the
revolving credit agreement totaled approximately $83,000 for the period from
May 17, 1999 through December 31, 1999.

         Each of the loan agreements with SunTrust Bank discussed above contains
restrictive financial covenants that require the Partnership to maintain a
minimum level of partners' capital as well as debt-to-earnings, interest
coverage and capital expenditure coverage ratios. At December 31, 1999, the
Partnership was in compliance with all financial covenants related to these loan
agreements.

         In March 2000, the Partnership, CMS Energy Corporation and Marathon
Ashland Petroleum LLC announced an agreement to form a limited liability
company that will own and operate an interstate refined petroleum products
pipeline extending from the upper Texas Gulf Coast to Illinois. Each of the
companies will own a one-third interest in the limited liability company. The
Partnership's participation in this joint venture will replace its previously
announced expansion plan to construct a new pipeline parallel to the
Partnership's two existing pipelines from Beaumont, Texas, to Little Rock,
Arkansas.

         The limited liability company will build a 70-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, which has been named
Centennial Pipeline, will pass through portions of seven states--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 by the end of 2001. The Centennial Pipeline
will intersect the Partnership's existing mainline near Lick Creek, Illinois,
where a new two million barrel refined petroleum products storage terminal
will be built.

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, 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 $0.8 million at December 31, 1999 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.


                                       17
<PAGE>   20

     Year 2000 Issues

         In 1997, the Company initiated a program to prepare the Partnership's
process controls and business computer systems for the "Year 2000" issue.
Process controls are the automated equipment including hardware and software
systems which run operational activities. Business computer systems are the
computer hardware and software used by the Partnership. The Partnership incurred
approximately $5.3 million of expense from 1997 through 1999 related to the Year
2000 issue. The Partnership did not encounter any critical system application or
hardware failures during the date roll over to the Year 2000, and has not
experienced any disruptions of business activities as a result of Year 2000
failures encountered by customers, suppliers and service providers.

      Market and Regulatory Environment

         Tariff 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").

         During June 1997, the Partnership filed rate increases on selective
refined products tariffs and LPGs tariffs, averaging 1.7%. These rate increases
became effective July 1, 1997 without suspension or refund obligation. On July
1, 1998, general rate decreases of 0.62% for both refined products tariffs and
LPGs tariffs became effective. The rate decreases were calculated pursuant to
the index methodology promulgated by the FERC.

         In May 1999, the Partnership filed an application with the FERC to
charge Market Based Rates for substantially all refined products transportation
tariffs. Such application is currently under review by the FERC. The FERC
approved a request of the Partnership waiving the requirement to adjust refined
products transportation tariffs pursuant to the PPI Index while its Market Based
Rates application is under review. Under the PPI Index, refined products
transportation rates in effect on June 30, 1999 would have been reduced by
approximately 1.83% effective July 1, 1999. If any portion of the Market Based
Rates application is denied by the FERC, the Partnership has agreed to refund,
with interest, amounts collected after June 30, 1999, under the tariff rates in
excess of the PPI Index. As a result of the refund obligation potential, the
Partnership has deferred all revenue recognition of rates charged in excess of
the PPI Index. At December 31, 1999, the amount deferred for possible rate
refunds, including interest, totaled approximately $0.8 million.

         In July 1999, certain shippers filed protests with the FERC on the
Partnership's application for Market Based Rates in four destination markets.
The Partnership believes it will prevail in a competitive market determination
in those destination markets under protest.

         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 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.


                                       18
<PAGE>   21

     Other

         In February 2000, the Partnership and Louis Dreyfus Plastics
Corporation ("Louis Dreyfus") announced a joint development alliance whereby the
Partnership's Mont Belvieu petroleum liquids storage and transportation shuttle
system assets will be marketed by Louis Dreyfus. The alliance will expand
services to the upper Texas Gulf Coast energy marketplace. The alliance is a
service-oriented, fee-based venture with no commodity trading.

         In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
standards for and disclosures of derivative instruments and hedging activities.
In July 1999, the FASB issued SFAS No. 137 to delay the effective date of SFAS
No. 133 until fiscal years beginning after June 15, 2000. The Partnership
expects to adopt this standard effective January 1, 2001. The Partnership has
not determined the impact of this statement on its financial condition and
results of operations.

         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 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
interest rates and commodity prices as discussed below. The Partnership has no
foreign exchange risks.

         At December 31, 1999, 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 Notes").
Additionally, the Partnership had a $38 million bank loan outstanding from
SunTrust Bank. The SunTrust loan bears interest at a fixed rate of 6.53% and is
payable in full in April 2001. At December 31, 1999, the estimated fair value of
the Senior Notes and the SunTrust loan was approximately $356.0 million and
$38.1 million, respectively.

         At December 31, 1999, the Partnership had $25 million outstanding under
a variable interest rate term loan. The interest rate for this credit facility
is based on the borrower's option of either SunTrust Bank's prime rate, the
federal funds rate or LIBOR rate in effect at the time of the borrowings and is
adjusted monthly, bimonthly, quarterly or semi-annually. Utilizing the balances
of variable interest rate debt outstanding at December 31, 1999, and assuming
market interest rates increase 1%, the potential annual increase in interest
expense is approximately $0.3 million.


                                       19
<PAGE>   22


         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, 1999, there were
no outstanding futures contracts.

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

      NONE

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The Partnership does not have directors or officers. Set forth below is
certain information concerning the directors and executive officers of the
General Partner. All directors of the General Partner are elected annually by
Duke Energy. 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

         TEPPCO Partners, L.P. (the "Parent Partnership") owns a 98.9899%
interest as the sole limited partner interest and Texas Eastern Products
Pipeline Company 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 $1.8 million in 1999.

         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, the Company


                                       20
<PAGE>   23

received 2,500,000 Deferred Participation Interests ("DPIs"). Effective April 1,
1994, the DPIs began participating in distributions of cash and allocations of
profit and loss of the 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:

                EXHIBIT
                NUMBER                         DESCRIPTION
                -------                        -----------

                  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



                                       21
<PAGE>   24
                         (Commission File No. 1-10403) for the year ended
                         December 31, 1995 and incorporated herein by
                         reference).

                  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  Credit Agreement between TEPPCO Colorado, LLC, SunTrust
                         Bank, Atlanta, and Certain Lenders, dated April 21,
                         1998 (Filed as Exhibit 10.15 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).

                  10.15  First Amendment to Credit Agreement between TEPPCO
                         Colorado, LLC, SunTrust Bank, Atlanta, and Certain
                         Lenders, effective June 29, 1998 (Filed as Exhibit
                         10.15 to Form 10-Q of TEPPCO Partners, L.P. (Commission
                         File No. 1-10403) for the quarter ended June 30, 1998
                         and incorporated herein by reference).

                  10.16  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).

                  10.17  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).

                  10.18  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).

                  10.19  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).

                  10.20  Credit Agreement between TE Products Pipeline Company,
                         Limited Partnership, SunTrust Bank, Atlanta, and
                         Certain Lenders, dated May 17, 1999 (Filed as Exhibit


                                       22
<PAGE>   25
                         10.26 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).

                  10.21  Second Amendment to Credit Agreement between TEPPCO
                         Colorado, LLC, SunTrust Bank, Atlanta, and Certain
                         Lenders, effective May 17, 1999 (Filed as Exhibit 10.28
                         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).

                  10.22  Texas Eastern Products Pipeline Company Nonemployee
                         Directors Unit Accumulation Plan, effective April 1,
                         1999 (Filed as Exhibit 10.30 to Form 10-Q of TEPPCO
                         Partners, L.P. (Commission File No. 1-10403) for the
                         quarter ended September 30, 1999 and incorporated
                         herein by reference).

                  10.23  Texas Eastern Products Pipeline Company Nonemployee
                         Directors Deferred Compensation Plan, effective
                         November 1, 1999 (Filed as Exhibit 10.31 to Form 10-Q
                         of TEPPCO Partners, L.P. (Commission File No. 1-10403)
                         for the quarter ended September 30, 1999 and
                         incorporated herein by reference).


                  10.24  Texas Eastern Products Pipeline Company Phantom Unit
                         Retention Plan, effective August 25, 1999 (Filed as
                         Exhibit 10.32 to Form 10-Q of TEPPCO Partners, L.P.
                         (Commission File No. 1-10403) for the quarter ended
                         September 30, 1999 and incorporated herein by
                         reference).

                  *24    Powers of Attorney.

                  *27    Financial Data Schedule as of and for the year ended
                         December 31, 1999.

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

         (b) Reports on Form 8-K filed during the quarter ended December 31,
             1999: 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 as General Partner

                                    By: /s/ CHARLES H. LEONARD
                                       -----------------------------------------
                                                  Charles H. Leonard,
                                         Senior Vice President, Chief Financial
                                                 Officer and Treasurer
DATED: March 10, 2000

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

<TABLE>
<CAPTION>


     SIGNATURE                                 TITLE                                  DATE
     ---------                                 -----                                  ----

<S>                     <C>                                                      <C>
 WILLIAM L. THACKER*    Chairman of the Board, President and Chief Executive     March 10, 2000
--------------------     Officer of Texas Eastern Products Pipeline Company
 William L. Thacker

 CHARLES H. LEONARD      Senior Vice President, Chief Financial Officer and      March 10, 2000
--------------------    Treasurer of Texas Eastern Products Pipeline Company
 Charles H. Leonard         (Principal Accounting and Financial Officer)

  FRED J. FOWLER*                Vice Chairman of the Board of Texas             March 10, 2000
--------------------              Eastern Products Pipeline Company
  Fred J. Fowler

   MILTON CARROLL*                    Director of Texas Eastern                  March 10, 2000
--------------------                  Products Pipeline Company
   Milton Carroll

   CARL D. CLAY*                      Director of Texas Eastern                  March 10, 2000
--------------------                  Products Pipeline Company
   Carl D. Clay

   DERRILL CODY*                      Director of Texas Eastern                  March 10, 2000
--------------------                  Products Pipeline Company
   Derrill Cody

 JOHN P. DESBARRES*                   Director of Texas Eastern                  March 10, 2000
--------------------                  Products Pipeline Company
 John P. DesBarres

    JIM W. MOGG*                      Director of Texas Eastern                  March 10, 2000
--------------------                  Products Pipeline Company
    Jim W. Mogg

 RICHARD J. OSBORNE*                  Director of Texas Eastern                  March 10, 2000
--------------------                  Products Pipeline Company
 Richard J. Osborne

    RUTH G. SHAW*                     Director of Texas Eastern                  March 10, 2000
--------------------                  Products Pipeline Company
    Ruth G. Shaw
</TABLE>

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

         By:        /s/ CHARLES H. LEONARD
            --------------------------------------
            (Charles H. Leonard, Attorney-in-Fact)


                                       24
<PAGE>   27


                        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, 1999 and 1998 .............................................   F-3

Consolidated Statements of Income for the years ended December 31, 1999, 1998 and 1997 ...................   F-4

Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997 ...............   F-5

Consolidated Statements of Partners' Capital for the years ended December 31, 1999,
    1998 and 1997 ........................................................................................   F-6

Notes to Consolidated Financial Statements ...............................................................   F-7
</TABLE>

                                      F-1
<PAGE>   28

                          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, 1999 and 1998,
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, 1999.
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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion, 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, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999 in conformity with generally accepted
accounting principles.




                                                          KPMG LLP




Houston, Texas
January 14, 2000


                                      F-2
<PAGE>   29


                TE PRODUCTS PIPELINE COMPANY LIMITED PARTNERSHIP

                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>


                                                                                              DECEMBER 31,
                                                                                       ---------------------------
                                                                                          1999            1998
                                                                                       ----------     -----------
                                       ASSETS
<S>                                                                                    <C>            <C>
Current assets:
   Cash and cash equivalents ....................................................      $    23,267     $    36,723
   Short-term investments .......................................................            1,475           3,269
   Accounts receivable, trade ...................................................           22,425          17,740
   Inventories ..................................................................            8,451          13,392
   Other ........................................................................            2,633           1,509
                                                                                       -----------     -----------
           Total current assets .................................................           58,251          72,633
                                                                                       -----------     -----------
Property, plant and equipment, at cost (Net of accumulated depreciation
   and amortization of $214,044 and $192,960) ...................................          611,695         567,566
Investments .....................................................................            5,242           6,490
Intangible assets ...............................................................           34,926          36,842
Advances to limited partner .....................................................            2,354           1,989
Other assets ....................................................................           11,748          10,966
                                                                                       -----------     -----------
           Total assets .........................................................      $   724,216     $   696,486
                                                                                       ===========     ===========


                          LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
   Accounts payable and accrued liabilities .....................................      $     7,413     $     8,513
   Accounts payable, general partner ............................................            3,817           2,815
   Accrued interest .............................................................           13,265          13,039
   Other accrued taxes ..........................................................            6,370           5,878
   Other ........................................................................            9,298           6,974
                                                                                       -----------     -----------
           Total current liabilities ............................................           40,163          37,219
                                                                                       -----------     -----------
Senior Notes ....................................................................          389,753         389,722
Other long term debt ............................................................           63,000          38,000
Other liabilities and deferred credits ..........................................            3,071           3,405
Partners' capital:
   General partner's interest ...................................................            2,309           2,306
   Limited partner's interest ...................................................          225,920         225,834
                                                                                       -----------     -----------
           Total partners' capital ..............................................          228,229         228,140
                                                                                       -----------     -----------
Commitments and contingencies
           Total liabilities and partners' capital ..............................      $   724,216     $   696,486
                                                                                       ===========     ===========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.


                                       F-3
<PAGE>   30


                TE PRODUCTS PIPELINE COMPANY LIMITED PARTNERSHIP

                        CONSOLIDATED STATEMENTS OF INCOME
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                     YEARS ENDED DECEMBER 31,
                                                                            ----------------------------------------
                                                                              1999            1998           1997
                                                                            --------        --------        --------
<S>                                                                        <C>             <C>             <C>
Operating revenues:
   Transportation -- Refined products ................................      $123,004        $119,854        $107,304
   Transportation -- LPGs ............................................        67,701          60,902          79,371
   Mont Belvieu operations ...........................................        12,849          10,880          12,815
   Other .............................................................        26,716          20,147          22,603
                                                                            --------        --------        --------
           Total operating revenues ..................................       230,270         211,783         222,093
                                                                            --------        --------        --------

Costs and expenses:
   Operating, general and administrative .............................        74,124          70,695          66,982
   Operating fuel and power ..........................................        29,864          27,131          30,151
   Depreciation and amortization  ....................................        27,109          26,040          23,772
   Taxes -- other than income taxes ..................................         9,780           9,276           9,638
                                                                            --------        --------        --------
           Total costs and expenses ..................................       140,877         133,142         130,543
                                                                            --------        --------        --------
           Operating income ..........................................        89,393          78,641          91,550
Interest expense .....................................................       (31,345)        (29,777)        (33,707)
Interest capitalized .................................................         2,133             795           1,478
Other income -- net ..................................................         1,671           2,873           2,604
                                                                            --------        --------        --------
           Income before loss on debt extinguishment .................        61,852          52,532          61,925
Extraordinary loss on debt extinguishment ............................            --         (73,509)             --
                                                                            --------        --------        --------
          Net income (loss) ..........................................      $ 61,852        $(20,977)       $ 61,925
                                                                            ========        ========        ========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.



                                       F-4
<PAGE>   31

                TE PRODUCTS PIPELINE COMPANY LIMITED PARTNERSHIP

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                             YEARS ENDED DECEMBER 31,
                                                                        -----------------------------------
                                                                          1999         1998         1997
                                                                        ---------    ---------    ---------
<S>                                                                     <C>          <C>          <C>
Cash flows from operating activities:
   Net income (loss) ...............................................    $  61,852    $ (20,977)   $  61,925
   Adjustments to reconcile net income to cash provided by
     operating activities:
      Depreciation and amortization ................................       27,109       26,040       23,772
      Extraordinary loss on early extinguishment of debt ...........           --       73,509           --
      Loss (gain) on sale of property, plant and equipment .........           --         (356)         467
      Equity in loss of affiliate ..................................          393          189           --
      Decrease (increase) in accounts receivable ...................       (4,685)       2,086       (1,500)
      Decrease (increase) in inventories ...........................        4,941        1,799       (2,180)
      Decrease (increase) in other current assets ..................       (1,124)       2,664         (802)
      Increase in accounts payable and accrued expenses ............        2,944          344        2,322
      Other ........................................................       (1,627)      (1,383)        (400)
                                                                        ---------    ---------    ---------
           Net cash provided by operating activities                       89,803       83,915       83,604
                                                                        ---------    ---------    ---------

Cash flows from investing activities:
   Proceeds from cash investments ..................................        6,275        3,105       25,040
   Purchases of cash investments ...................................       (3,235)        (748)      (6,180)
   Insurance proceeds related to damaged assets ....................           --           --        1,046
   Purchase of fractionator assets and related intangible assets ...           --      (40,000)          --
   Proceeds from the sale of property, plant and equipment .........           --          525        1,377
   Capital expenditures ............................................      (69,322)     (22,710)     (32,931)
                                                                        ---------    ---------    ---------
           Net cash used in investing activities ...................      (66,282)     (59,828)     (11,648)
                                                                        ---------    ---------    ---------

Cash flows from financing activities:
   Principal payment, First Mortgage Notes .........................           --     (326,512)     (13,000)
   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           --
   Advances to limited partner .....................................         (369)      (1,989)          --
   Distributions ...................................................      (61,608)     (56,774)     (49,042)
                                                                        ---------    ---------    ---------
           Net cash used in financing activities ...................      (36,977)     (31,325)     (62,042)
                                                                        ---------    ---------    ---------

Net increase (decrease) in cash and cash equivalents ...............      (13,456)      (7,238)       9,914
Cash and cash equivalents at beginning of period ...................       36,723       43,961       34,047
                                                                        ---------    ---------    ---------
Cash and cash equivalents at end of period .........................    $  23,267    $  36,723    $  43,961
                                                                        =========    =========    =========

Supplemental disclosure of cash flows:
   Interest paid during the year (net of capitalized interest) .....    $  28,573    $  26,179    $  32,084
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.


                                      F-5
<PAGE>   32

                TE PRODUCTS PIPELINE COMPANY LIMITED PARTNERSHIP

                  CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                         GENERAL      LIMITED
                                                        PARTNER'S    PARTNER'S
                                                        INTEREST     INTERESTS      TOTAL
                                                        ---------    ---------    --------

<S>                                                     <C>          <C>          <C>
Partners' capital at December 31, 1996 ............         2,963      290,311      293,274
    1997 net income allocation ....................           625       61,300       61,925
    1997 cash distributions .......................          (495)     (48,547)     (49,042)
    Option exercises, net of Unit repurchases .....            --          (97)         (97)
                                                        ---------    ---------    ---------
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
                                                        =========    =========    =========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.



                                       F-6
<PAGE>   33

                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
interest and Texas Eastern Products Pipeline Company (the "Company" or "General
Partner") 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.

         On June 18, 1997, PanEnergy Corp ("PanEnergy") and Duke Power Company
completed a previously announced merger. At closing, the combined companies
became Duke Energy Corporation ("Duke Energy"). The Company, previously a
wholly-owned subsidiary of PanEnergy, became an indirect wholly-owned subsidiary
of Duke Energy on the date of the merger.

         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, the Company
received 2,500,000 Deferred Participation Interests ("DPIs"). Effective April 1,
1994, the DPIs began participating in distributions of cash and allocations of
profit and loss of the Partnership.

         Effective March 31, 1998, TEPPCO Colorado, LLC ("TEPPCO Colorado"), a
wholly owned subsidiary of the Partnership, purchased two fractionation
facilities located in Weld County, Colorado, from Duke Energy Field Services,
Inc. ("DEFS"), a wholly-owned subsidiary of Duke Energy. The transaction totaled
approximately $40 million and was accounted for under the purchase method of
accounting.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

         The financial statements include the accounts of the Partnership and
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 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



                                       F-7
<PAGE>   34

                TE PRODUCTS PIPELINE COMPANY LIMITED PARTNERSHIP
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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, the uncertainty
of potential recoveries from third parties 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 and intrastate transportation, storage and terminaling of petroleum
products. 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 net of product cost 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, 1999, 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 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.


                                       F-8
<PAGE>   35

                TE PRODUCTS PIPELINE COMPANY LIMITED PARTNERSHIP

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)


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 7.01%, 7.02% and 10.09% for 1999, 1998 and 1997, 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,
1999 and 1998, the Partnership's reported amount of net assets for financial
reporting purposes exceeded its tax basis by approximately $232 million and $227
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
items, minimum pension liability adjustments and unrealized gains and losses on
certain investments to be reported in a financial statement. As of December 31,
1999, 1998, and 1997, the Partnership's comprehensive income (loss) equaled its
reported income (loss).

NEW ACCOUNTING PRONOUNCEMENTS

         In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
This statement establishes standards for and disclosures of derivative
instruments and hedging activities. In July 1999, the FASB issued SFAS No. 137
to delay the effective date of SFAS No. 133 until fiscal years beginning after
June 15, 2000. The Partnership expects to adopt this standard effective January
1, 2001. The Partnership has not determined the impact of this statement on its
financial condition and results of operations.

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).


                                       F-9
<PAGE>   36


                TE PRODUCTS PIPELINE COMPANY LIMITED PARTNERSHIP

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

         For 1999, 1998 and 1997, direct expenses incurred by the general
partner in the amount of $38.8 million, $37.4 million and $38.2 million,
respectively, were charged to the Partnership. Substantially all such costs
related to payroll and payroll related expenses, which included $1.5 million,
$1.0 million and $1.8 million of expense for incentive compensation plans for
each of the years ended 1999, 1998 and 1997, respectively.

         For 1999, 1998 and 1997, expenses for administrative service and
overhead allocated to the Partnership by the general partner (including Duke
Energy and its affiliates) amounted to $1.8 million, $2.5 million and $2.7
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, TEPPCO
Colorado 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
$7.3 million for the year ended December 31, 1999, 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 $0.8 million for the year
ended December 31, 1999, and $0.7 million from April 1, 1998 through December
31, 1998.

NOTE 4. INVESTMENTS

SHORT-TERM INVESTMENTS

         The Partnership routinely invests cash in liquid short-term investments
as part of its cash management program. Investments with maturities at date of
purchase of 90-days or less are considered cash and cash equivalents. All
short-term investments are classified as held-to-maturity securities and are
stated at amortized cost. At December 31, 1999 and 1998, short-term investments
consisted of $1.5 million and $3.3 million, respectively, of investment-grade
corporate notes, with maturities at such date of less than one-year. The
aggregate fair value of such securities approximates amortized cost at December
31, 1999 and 1998.

LONG-TERM INVESTMENTS

         At December 31, 1999 and 1998, the Partnership had $5.2 million and
$6.5 million, respectively, invested in investment-grade corporate notes, which
have varying maturities until 2004. These securities are classified as
held-to-maturity securities and are stated at amortized cost. The aggregate fair
value of such securities approximates amortized cost at December 31, 1999 and
1998.


                                      F-10
<PAGE>   37

                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,
                                                             -------------------------
                                                               1999             1998
                                                             --------         --------
                                                                  (IN THOUSANDS)
<S>                                                          <C>              <C>
Gasolines ..........................................         $3,270           $ 4,224
Propane ............................................            223             1,503
Butanes ............................................            605             1,654
Fuel Oil ...........................................            386               564
Other products .....................................            613             1,781
Materials and supplies .............................          3,354             3,666
                                                             ------           -------
           Total ...................................         $8,451           $13,392
                                                             ======           =======
</TABLE>

         The costs of inventories were lower than market values at December 31,
1999 and 1998.

NOTE 6. PROPERTY, PLANT AND EQUIPMENT

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

<TABLE>
<CAPTION>

                                                                                                            DECEMBER 31,
                                                                                                       ----------------------
                                                                                                         1999          1998
                                                                                                       --------      --------
                                                                                                             (IN THOUSANDS)
<S>                                                                                                    <C>           <C>
Land and right of way ..............................................................................   $ 33,589      $ 33,512
Line pipe and fittings .............................................................................    447,830       447,785
Storage tanks ......................................................................................     99,975        95,584
Buildings and improvements .........................................................................      7,230         6,825
Machinery and equipment ............................................................................    154,573       150,833
Construction work in progress ......................................................................     82,542        25,987
                                                                                                       --------      --------
           Total property, plant and equipment .....................................................   $825,739      $760,526
           Less accumulated depreciation and amortization ..........................................    214,044       192,960
                                                                                                       --------      --------
                Net property, plant and equipment ..................................................   $611,695      $567,566
                                                                                                       ========      ========
</TABLE>

         Depreciation and amortization expense on property, plant and equipment
was $25.2 million, $24.6 million and $23.8 million for the years ended December
31, 1999, 1998 and 1997, 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 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.


                                      F-11
<PAGE>   38

                TE PRODUCTS PIPELINE COMPANY LIMITED PARTNERSHIP

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)


         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 (i) the creation of liens
securing indebtedness and (ii) sale and leaseback transactions. However, the
indenture does not limit the Partnership's ability to incur additional
indebtedness.

         At December 31, 1999, the estimated fair value of the Senior Notes was
approximately $356.0 million. 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 from
SunTrust Bank. Proceeds from the loan were received on April 21, 1998. TEPPCO
Colorado paid interest to DEFS at a per annum rate of 5.75% on the amount of the
total purchase price outstanding for the period from March 31, 1998 until April
21, 1998. The SunTrust loan bears interest at a rate of 6.53%, which is payable
quarterly. The principal balance of the loan is payable in full on April 21,
2001. The Partnership is guarantor on the loan. At December 31, 1999, the
estimated fair value of the loan was approximately $38.1 million. 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.

         On May 17, 1999, the Partnership entered into a $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. The loan
agreement has a term of five years. SunTrust Bank is the administrator of the
loan. At December 31, 1999, $25 million was outstanding under the term loan
agreement. Principal will be paid quarterly as follows, with the remaining
principal balance payable on May 17, 2004.

<TABLE>
<CAPTION>


    QUARTERLY PERIODS ENDING   PAYMENT AMOUNT
    ------------------------   --------------
<S>                             <C>
June 2001 through March 2002    $2.50 million
June 2002 through March 2003    $3.75 million
June 2003 through March 2004    $5.00 million
</TABLE>


         The interest rate for the $75 million term loan is based on the
borrower's option of either SunTrust Bank's prime rate, the federal funds rate
or LIBOR rate in effect at the time of the borrowings and is adjusted monthly,
bimonthly, quarterly or semi-annually. Interest is payable quarterly from the
time of borrowing. The interest rate for amounts outstanding under the term loan
at December 31, 1999 was 7.27%. Commitment fees for the term loan totaled
approximately $78,000 for the period from May 17, 1999 through December 31,
1999.

         Both the $38 million term loan and the $75 million term loan with
SunTrust Bank contain restrictive financial covenants that require the
Partnership to maintain a minimum level of partners' capital as well as
debt-to-earnings, interest coverage and capital expenditure coverage ratios. At
December 31, 1999, the Partnership was in compliance with all financial
covenants related to these loan agreements.

WORKING CAPITAL FACILITIES

         On May 17, 1999, the Partnership entered into a five-year $25 million
revolving credit agreement. SunTrust Bank is the administrative agent. The
interest rate is based on the borrower's option of either SunTrust Bank's prime
rate, the federal funds rate or LIBOR rate in effect at the time of the
borrowings and is payable quarterly. Interest rates are adjusted monthly,
bimonthly, quarterly or semi-annually. The Partnership has not made



                                      F-12
<PAGE>   39

                TE PRODUCTS PIPELINE COMPANY LIMITED PARTNERSHIP

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

any borrowings under this revolving credit facility. Commitment fees for the
revolving credit agreement totaled approximately $83,000 for the period from
May 17, 1999 through December 31, 1999.

         The revolving credit agreement with SunTrust Bank contains restrictive
financial covenants that require the Partnership to maintain a minimum level of
partners' capital as well as debt-to-earnings, interest coverage and capital
expenditure coverage ratios. At December 31, 1999, the Partnership was in
compliance with all financial covenants related to these loan agreements.

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.

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, 1999, 1998 and 1997, cash
distributions totaled $61.6 million, $56.8 million and $49.0 million,
respectively. The distribution increases reflect the Partnership's success in
improving cash flow levels. On February 4, 2000, the Partnership paid a cash
distribution of $16.1 million for the quarter ended December 31, 1999.

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 exceed a
threshold. When earnings 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
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:


                                      F-13
<PAGE>   40

                TE PRODUCTS PIPELINE COMPANY LIMITED PARTNERSHIP

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)


<TABLE>
<CAPTION>


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

                                                              OPTIONS           OPTIONS            EXERCISE
                                                            OUTSTANDING       EXERCISABLE           RANGE
                                                            ------------      -------------     ----------------
Limited Partner Unit Options:
  Outstanding at December 31, 1996 ....................           93,298             32,294      $13.81 - $14.34
      Granted .........................................           11,100                --                $21.66
      Became exercisable ..............................             --               37,674      $13.81 - $14.34
      Exercised .......................................          (11,870)           (11,870)     $13.81 - $14.34
                                                            ------------         ----------
  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
                                                            ============         ==========
</TABLE>


         As discussed in Note 2, the Partnership uses the intrinsic value method
for recognizing stock-based expense. The exercise price of all options awarded
under the 1994 LTIP equaled the market price of the Partnership's 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 $37,138, $93,771 and $226,152 during 1997, 1998
and 1999, respectively. Under the provisions of SFAS No. 123, the pro forma
disclosures above include only the effects of Unit options granted by the
Partnership subsequent to December 31, 1994. The disclosures as required by SFAS
123 are not representative of the effects on reported 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, 1998 and 1997 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      1997
                                 -------   -------   -------
<S>                              <C>       <C>       <C>
Risk-free interest rate ......       4.7%      5.5%      6.3%
Dividend yield ...............       7.6%      7.8%      7.2%
Unit price volatility ........        23%       18%       18%
Expected option lives ........   6 years   6 years   5 years
</TABLE>


                                      F-14
<PAGE>   41

                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 1999, 1998 and 1997 was $6.0 million,
$4.4 million and $3.9 million, respectively. The minimum rental payments under
the Partnership's various operating leases for the years 2000 through 2004 are
$4.4 million, $4.0 million, $2.1 million, $1.9 million and $1.8 million,
respectively. Thereafter, payments aggregate $4.1 million through 2007.

         In May 1997, the Partnership completed construction to connect the
pipeline system to Colonial Pipeline Company's ("Colonial") pipeline at
Beaumont, Texas. The Partnership entered into a 10-year capacity lease with
Colonial, whereby the Partnership guaranteed a minimum monthly through-put rate
for the connection. The minimum lease payments related to this agreement are
included in the amounts disclosed above.

NOTE 12. EMPLOYEE BENEFITS

RETIREMENT PLANS

         The Company's employees are included with other affiliates of Duke
Energy in a noncontributory, trustee-administered pension plan. Through December
31, 1998, the plan provided retirement benefits (i) for eligible employees of
certain subsidiaries that are generally based on an employee's years of benefit
accrual service and highest average eligible earnings, and (ii) for eligible
employees of certain other subsidiaries under a cash balance formula. In 1998, a
significant amount of lump sum payouts were made from the plan resulting in a
settlement gain of $10 million. The Company's portion of this gain was $0.6
million. Effective January 1, 1999 the benefit formula for all eligible
employees, was changed to a cash balance formula. Under a cash balance formula,
a plan participant accumulates a retirement benefit based upon a percentage of
current pay, which may vary with age and years of service, and current interest
credits. The components of net pension benefit costs for the years ended
December 31, 1999, 1998 and 1997 were as follows (in thousands):

<TABLE>
<CAPTION>

                                                                    1999        1998        1997
                                                                   -------     -------     -------
<S>                                                                <C>         <C>         <C>
Service cost benefit earned during the year .....................   $ 1,408     $ 1,699     $ 1,509
Interest cost on projected benefit obligation ...................     2,622       2,041       2,359
Expected return on plan assets ..................................    (2,170)     (1,555)     (1,773)
Amortization of prior service cost ..............................        --         (27)        (30)
Amortization of net transition (asset) liability ................        17          (5)         (3)
Recognized net actuarial loss ...................................       286          --          --
Settlement gain .................................................        --        (554)         --
                                                                    -------     -------     -------
      Net pension benefits costs ................................   $ 2,163     $ 1,599     $ 2,062
                                                                    =======     =======     =======

         The assumptions affecting pension expense include:
                                                                     1999        1998        1997
                                                                    -------     -------     -------
Discount rate ....................................................     7.50%       6.75%       7.25%
Salary increase ..................................................     4.50%       4.67%       4.15%
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, $1.4 million and $1.4 million were expensed in 1999, 1998 and 1997,
respectively.


                                      F-15
<PAGE>   42

                TE PRODUCTS PIPELINE COMPANY LIMITED PARTNERSHIP

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

OTHER POSTRETIREMENT BENEFITS


         Duke Energy and most of its subsidiaries provide certain health care
and life insurance benefits for retired employees on a contributory and
non-contributory basis. Employees become eligible for these benefits if they
have met certain age and service requirements at retirement, as defined in the
plans. Under plan amendments effective late 1998 and early 1999, health care
benefits for future retirees were changed to limit employer contributions and
medical coverage.


         Such benefit costs are accrued over the active service period of
employees to the date of full eligibility for the benefits. The net unrecognized
transition obligation, resulting from the implementation of accrual accounting,
is being amortized over approximately 20 years.


         Duke Energy is using an investment account under section 401(h) of the
Internal Revenue Code, a retired lives reserve (RLR) and multiple voluntary
employees' beneficiary association (VEBA) trusts under section 501(c)(9) of the
Internal Revenue Code to partially fund post retirement benefits. The 401(h)
vehicles, which provide for tax deductions for contributions and tax-free
accumulation of investment income, partially fund postretirement health care
benefits. The RLR, which has tax attributes similar to 401(h) funding, partially
funds postretirement life insurance obligations. Certain subsidiaries use the
VEBA trusts to partially fund accrued postretirement health care benefits and
fund post retirement life insurance obligations. The components of net
postretirement benefits cost for the years ended December 31, 1999, 1998 and
1997 were as follows (in thousands):

<TABLE>
<CAPTION>

                                                                         1999          1998         1997
                                                                        --------     ---------    ---------
<S>                                                                     <C>           <C>          <C>
Service cost benefit earned during the year .......................      $   172        $  439      $  350
Interest cost on accumulated postretirement benefit obligation ....          500           796         703
Expected return on plan assets ....................................         (299)         (240)       (172)
Amortization of prior service cost ................................         (384)            3           4
Amortization of net transition liability ..........................          217           202         202
Recognized net actuarial loss .....................................           --           173          68
                                                                          ------        ------      ------
      Net postretirement benefits costs ...........................       $  206        $1,373      $1,155
                                                                          ======        ======      ======

              The assumptions affecting postretirement benefits expense include:

                                                                               1999       1998       1997
                                                                              -------    -------    -------
Discount rate ......................................................           7.50%      6.75%      7.25%
Salary increase ....................................................           4.50%      4.67%      4.33%
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>


         For measurement purposes, a 5% weighted average rate of increase in the
per capita cost of covered health care benefits was assumed for 1999. Assumed
health care cost trend rates have a significant effect on the amounts reported
for the health care plans. The below table indicates the effect on the total
service and interest costs component and on the postretirement benefit
obligation of a 1% increase or 1% decrease in the assumed health care cost trend
rates in each future year (in thousands).

<TABLE>

                                                                                     1%            1%
                                                                                  INCREASE      DECREASE
                                                                                  ----------    ----------
<S>                                                                               <C>           <C>
     Effect on total of service and interest cost components  ..............        $  9          $  (8)
     Effect on postretirement benefit obligation ...........................        $128          $(108)
</TABLE>


                                      F-16
<PAGE>   43

                TE PRODUCTS PIPELINE COMPANY LIMITED PARTNERSHIP

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

POSTEMPLOYMENT BENEFITS

         The Partnership accrues expense for certain benefits provided to former
or inactive employees after employment but before retirement. During 1999, 1998
and 1997, the Partnership recorded $0.3 million, $0.5 million and $0.5 million,
respectively, of expense for such benefits.

NOTE 13. CONTINGENCIES

         In the fall of 1999, the Company and the Partnership became involved in
a lawsuit 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), plaintiffs contend, among other things,
that the Company and other defendants stored and disposed of toxic and hazardous
substances and hazardous wastes in such a manner which caused the materials to
be released into the air, soil and water. They further contend that such release
caused damages to the plaintiffs. In their Complaint, 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. Furthermore, the plaintiffs are seeking compensatory, punitive and
treble damages. The Company has filed an Answer to the Complaint, denying the
allegations, as well as various other motions. This case is in the early stages
of discovery and is not covered by insurance. The Company is defending itself
vigorously against this lawsuit. The Partnership cannot estimate the loss, if
any, associated with this pending lawsuit.

         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 or results of operations.

         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, 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 $0.8 million at December 31, 1999 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.

         Tariff 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>   44

                TE PRODUCTS PIPELINE COMPANY LIMITED PARTNERSHIP

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

         In May 1999, the Partnership filed an application with the FERC to
charge Market Based Rates for substantially all refined products transportation
tariffs. Such application is currently under review by the FERC. The FERC
approved a request of the Partnership waiving the requirement to adjust refined
products transportation tariffs pursuant to the PPI Index while its Market Based
Rates application is under review. Under the PPI Index, refined products
transportation rates in effect on June 30, 1999 would have been reduced by
approximately 1.83% effective July 1, 1999. If any portion of the Market Based
Rates application is denied by the FERC, the Partnership has agreed to refund,
with interest, amounts collected after June 30, 1999, under the tariff rates in
excess of the PPI Index. As a result of the refund obligation potential, the
Partnership has deferred all revenue recognition of rates charged in excess of
the PPI Index. At December 31, 1999, the amount deferred for possible rate
refunds, including interest, totaled approximately $0.8 million.

         In July 1999, certain shippers filed protests with the FERC on the
Partnership's application for Market Based Rates in four destination markets.
The Partnership believes it will prevail in a competitive market determination
in those destination markets under protest.

         Substantially all of the petroleum products transported and stored by
the Partnership are owned by its customers. At December 31, 1999, the
Partnership had approximately 12.2 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 it believes to be adequate to cover product losses through
circumstances beyond its control.

NOTE 14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>


                                           FIRST       SECOND     THIRD      FOURTH
                                          QUARTER     QUARTER    QUARTER    QUARTER
                                          -------    ---------  ---------- --------
                                                         (IN THOUSANDS)
<S>                                       <C>          <C>        <C>        <C>
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

1998
Operating revenues .....................  $ 50,205     $51,560    $54,229    $55,789
Operating income .......................    19,514      18,929     19,722     20,476
Income before extraordinary item (1) ...    13,289      12,674     12,864     13,705
Net income (loss) ......................   (60,220)     12,674     12,864     13,705
</TABLE>

--------------
(1)      Extraordinary item reflects the $73.5 million loss related to the early
         extinguishment of the First Mortgage Notes on January 27, 1998.


                                      F-18
<PAGE>   45
                                 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>   46
<TABLE>
<CAPTION>
                EXHIBIT
                NUMBER                        DESCRIPTION
                -------                       -----------
                  <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    Credit Agreement between TEPPCO Colorado, LLC,
                           SunTrust Bank, Atlanta, and Certain Lenders, dated
                           April 21, 1998 (Filed as Exhibit 10.15 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).

                  10.15    First Amendment to Credit Agreement between TEPPCO
                           Colorado, LLC, SunTrust Bank, Atlanta, and Certain
                           Lenders, effective June 29, 1998 (Filed as Exhibit
                           10.15 to Form 10-Q of TEPPCO Partners, L.P.
                           (Commission File No. 1-10403) for the quarter ended
                           June 30, 1998 and incorporated herein by reference).

                  10.16    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).

                  10.17    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).

                  10.18    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).

                  10.19    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).

                  10.20    Credit Agreement between TE Products Pipeline
                           Company, Limited Partnership, SunTrust Bank, Atlanta,
                           and Certain Lenders, dated May 17, 1999 (Filed as
                           Exhibit 10.26 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).

</TABLE>
<PAGE>   47
<TABLE>
<CAPTION>
                EXHIBIT
                NUMBER                        DESCRIPTION
                -------                       -----------
                  <S>      <C>
                  10.21    Second Amendment to Credit Agreement between TEPPCO
                           Colorado, LLC, SunTrust Bank, Atlanta, and Certain
                           Lenders, effective May 17, 1999 (Filed as Exhibit
                           10.28 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).

                  10.22    Texas Eastern Products Pipeline Company Nonemployee
                           Directors Unit Accumulation Plan, effective April 1,
                           1999 (Filed as Exhibit 10.30 to Form 10-Q of TEPPCO
                           Partners, L.P. (Commission File No. 1-10403) for the
                           quarter ended September 30, 1999 and incorporated
                           herein by reference).

                  10.23    Texas Eastern Products Pipeline Company Nonemployee
                           Directors Deferred Compensation Plan, effective
                           November 1, 1999 (Filed as Exhibit 10.31 to Form 10-Q
                           of TEPPCO Partners, L.P. (Commission File No.
                           1-10403) for the quarter ended September 30, 1999 and
                           incorporated herein by reference).


                  10.24    Texas Eastern Products Pipeline Company Phantom Unit
                           Retention Plan, effective August 25, 1999 (Filed as
                           Exhibit 10.32 to Form 10-Q of TEPPCO Partners, L.P.
                           (Commission File No. 1-10403) for the quarter ended
                           September 30, 1999 and incorporated herein by
                           reference).

                  *24      Powers of Attorney.
                  *27      Financial Data Schedule as of and for the year ended
                           December 31, 1999.
</TABLE>

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