<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13, OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: March 5, 1999
(Date of earliest event reported)
Commission File Number 1-14373
INSIGNIA FINANCIAL GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 56-2084290
(State of Incorporation) (I.R.S. Employer Identification No.)
200 PARK AVENUE, NEW YORK, NEW YORK 10166
(Address of Principal Executive Officers) (Zip Code)
(212) 984-8000
(Registrant's Telephone Number, Including Area Code)
<PAGE>
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Report on Form 8-K dated March 5,
1999 and filed on March 18, 1999 as set forth in the pages attached hereto:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
(i) Financial Statements for St. Quintin London Partnership Group
and St. Quintin Manchester Partnership for the year ended
August 31, 1998, together with Independent Auditors Reports
(b) Unaudited Pro Forma Condensed Consolidated Financial Statements
(c) Exhibits - The following are furnished as exhibits to this report:
Exhibit No.
10.1 Agreement for the sale and Purchase of Shares in the
Capital of St. Quintin Holdings Limited, dated March 5,
1999, by and among the Vendors listed therein and Insignia
Financial Group, Inc. *
23.1 Consent of Independent Chartered Accountants
99.1 Press release dated March 5, 1999. *
* - Previously filed.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
INSIGNIA FINANCIAL GROUP, INC.
By:
--------------------------------
Adam B. Gilbert
Executive Vice President
DATE: May 19, 1999
<PAGE>
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
ST QUINTIN
LONDON PARTNERSHIP GROUP
REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31ST AUGUST 1998
PREPARED FOR US SEC FILING PURPOSES ONLY
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP GROUP
INDEX
31ST AUGUST 1998
Page No
-------
Approval of Accounts 1
Auditors Report 2
Consolidated Profit and Loss Account 3
Division of Profit 4
Balance Sheets 5
Consolidated Cashflow Statement 6
Notes to the Accounts 7
PREPARED FOR US SEC FILING PURPOSES ONLY
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP GROUP
APPROVAL OF ACCOUNTS
FOR THE YEAR ENDED 31ST AUGUST 1998
We approve the attached Accounts on pages 3 to 23 :
M K STEPHENS J R ARDLEY
M A MIKULIN R W G EVANS
P BENJAMIN K BRAMLEY
C J R TOLLAST M H BRODTMAN
J M H B KENT M D SAMWORTH
P E GRANT C P LACEY
G HALMAN P J DAMESICK
P C M BEARDWOOD
Date: 18 May 1999
1
<PAGE>
ACCOUNTANTS' REPORT ON THE ACCOUNTS OF
ST QUINTIN LONDON PARTNERSHIP GROUP
FOR THE YEAR ENDED 31 AUGUST 1998
REPORT OF THE AUDITORS TO THE PARTNERS OF ST QUINTIN
We have audited the accounts of St Quintin which are set out on pages 3 to 23.
The accounts have been prepared under the accounting policies set out on pages
7 and 8.
RESPECTIVE RESPONSIBILITIES
The partners are responsible for keeping the accounting records of the
partnership and preparing partnership accounts on the basis set out in the
partnership agreement.
It is our responsibility to report whether the 31 August 1998 accounts represent
a true and fair view in accordance with the accounting policies stated and to
list instances where the accounting policies are not in accordance with UK GAAP.
BASIS OF OPINION
We conducted our audit in accordance with Audit Standards issued by the Auditing
Practices Board. An audit includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the financial statements. It also
includes an assessment of the significant estimates and judgements made by the
partners in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the circumstances of St Quintin
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion, the financial statements give a true and fair view of the state
of the group's and the partnership's affairs as at 31 August 1998 and of the
group's profit for the year then ended and, except for the omission of 31 August
1997 comparatives, have been properly prepared in accordance with the accounting
policies stated and the partnership agreement
BDO STOY HAYWARD
Chartered Accountants
London
Date : 18 May 1999
PREPARED FOR US SEC FILING PURPOSES ONLY
2
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP GROUP
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31ST AUGUST 1998
<TABLE>
<CAPTION>
NOTE 1998
---- ----
(pound) (pound)
<S> <C> <C> <C>
TURNOVER 2 23,488,156
WORK IN PROGRESS 265,493
-----------
23,753,649
LESS: EXPENDITURE
Depreciation 191,120
Other operating charges 19,747,210
-----------
19,938,330
-----------
OPERATING PROFIT 3 3,815,319
Income from interest in associated 220,422
undertakings
Interest receivable 474,520
Interest payable 4 13,886
------
460,634
-----------
PROFIT ON ORDINARY ACTIVITIES BEFORE 4,496,375
TAXATION
Taxation 5 219,973
-----------
PROFIT ON ORDINARY ACTIVITIES AFTER
TAXATION - TRANSFERRED TO DIVISION
OF PROFIT PAGE 4 (pound)4,276,402
-----------
</TABLE>
All amounts relate to continuing activities
All recognised gains and losses are included in the profit and loss account.
The notes on pages 7 to 23 form part of these financial statements
There are no material differences between the net profit reported above under UK
GAAP to that which would be reported under US GAAP.
3
<PAGE>
PREPARED FOR US SEC FILING PURPOSES ONLY
ST QUINTIN
LONDON PARTNERSHIP GROUP
DIVISION OF PROFIT FOR THE YEAR ENDED 31ST AUGUST 1998
<TABLE>
<CAPTION>
GROUP
----------------------------------------------------------------------------
POINTS INTEREST SHARE OF SHARE OF REMAINDER OF TOTAL
ON CAPITAL FIRST SECOND PROFIT
TRANCHE TRANCHE
----------------------------------------------------------------------------
(pound) (pound) (pound) (pound) (pound)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
M K Stephens 20 11,400 16,250 59,050 72,905 159,605
P C M Beardwood 70 11,400 16,250 206,678 76,501 310,829
M A Mikulin 20 10,450 16,250 59,050 21,845 107,595
J R Ardley 100 11,875 26,250 295,255 184,089 517,469
P Benjamin 70 11,875 16,250 206,679 76,501 311,305
R W G Evans 90 11,875 16,250 265,731 151,777 445,633
C J R Tollast 90 10,450 16,250 265,731 146,427 438,858
K Bramley 60 7,838 16,250 177,154 102,967 304,209
J M H B Kent 55 7,125 16,250 162,391 100,156 285,922
M K Brodtman 90 7,125 16,250 265,731 162,473 451,579
P E Grant 90 7,125 16,250 265,731 87,649 376,755
G Halman 50 3,800 - 147,628 108,089 259,517
M D Samworth 35 2,850 16,250 103,340 99,704 222,144
C P Lacey 25 267 11,250 73,814 82,601 167,932
P J Damesick 15 267 6,250 44,288 29,730 80,535
- ---------------------------------------------------------------------------------------------------
TOTAL 880 115,722 222,500 2,598,251 1,503,414 4,439,887
Corporate
subsidiaries
profit/(loss) reserve
(428,978)
Work in progress
movement *
265,493
--------
(pound)4,276,402
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Work in progress has been accounted for in order to comply with SSAP 9. Work
in progress movements are not distributed to the partners until they are
realised.
PREPARED FOR US SEC FILING PURPOSES ONLY
4
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP
BALANCE SHEET AS AT 31ST AUGUST 1998
<TABLE>
<CAPTION>
Note GROUP PARTNERSHIP
---- 1998 1998
---- ----
(pound) (pound)
<S> <C> <C> <C> <C> <C>
CAPITAL EMPLOYED
FIXED ASSETS 6 655,053 -
FIXED ASSET INVESTMENTS 7 82 82
INVESTMENTS IN SUBSIDIARY 8 16,250 27,834
UNDERTAKINGS
INTEREST IN ASSOCIATED UNDERTAKING 1,993 -
------------ ------------
673,378 27,916
CURRENT ASSETS
Work in progress 9 1,126,314 1,007,867
Debtors 10 10,400,109 15,531,153
Cash at bank and in hand 7,640,942 6,210,941
------------ ------------
19,167,365 22,749,961
CREDITORS: AMOUNTS FALLING DUE 11 12,483,123 17,176,755
WITHIN ONE YEAR
------------ ------------
NET CURRENT ASSETS 6,684,242 5,573,206
------------ ------------
(pound)7,357,620 (pound)5,601,122
------------ ------------
FINANCED BY
PARTNERS' INTERESTS
Capital Accounts 12 1,262,500 1,262,500
Distribution Accounts 13 4,851,377 3,238,622
------------ ------------
6,113,877 4,501,122
OTHER AMOUNTS FALLING DUE AFTER 14 143,743 -
MORE THAN ONE YEAR
BANK LOAN - UNSECURED AND
REPAYABLE ON DEMAND 1,100,000 1,100,000
------------ ------------
(pound)7,357,620 (pound)5,601,122
------------ ------------
</TABLE>
The notes on pages 7 to 23 form part of these financial statements
There are no material differences between the partners' interests reported above
under UK GAAP to that which would be reported under US GAAP.
PREPARED FOR US SEC FILING PURPOSES ONLY
5
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP GROUP
CONSOLIDATED CASHFLOW STATEMENT FOR THE YEAR ENDED 31ST AUGUST 1998
<TABLE>
<CAPTION>
NOTE GROUP
1998
(pound) (pound)
<S> <C> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES 20 4,378,441
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE
Interest received 474,520
Dividends received from associates 153,780
Interest paid (13,886)
-------
NET CASH INFLOW FROM RETURNS ON
INVESTMENT AND SERVICING OF FINANCE 614,414
TAXATION
Tax paid (228,586)
Income tax paid on behalf of Partnership (529,291)
-------
(757,877)
CAPITAL EXPENDITURE
Purchase of tangible fixed assets (467,562)
Sale of tangible fixed assets 3,476
-------
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE (464,086)
-------
NET CASH INFLOW BEFORE FINANCING 3,770,862
FINANCING
Capital element of finance lease repayments
repayments (116,046)
Partnership drawings in the year (1,212,758)
Repaid to former partners (356,941)
Introduction of new capital 50,000
-------
(1,635,745)
-------
INCREASE IN CASH 21 2,135,147
</TABLE>
PREPARED FOR US SEC FILING PURPOSES ONLY
6
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP GROUP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998
1. ACCOUNTING POLICIES
The accounts have been prepared under the historical cost convention
and follow generally accepted accounting principles. The principal
accounting policies are:-
Basis of consolidation
The group financial statements incorporate the results of St Quintin -
London Partnership and its subsidiary undertakings using the
acquisition method of accounting.
Any goodwill arising on consolidation is written off directly against
reserves.
The results of the following associated and subsidiary undertakings
have not been included in the group financial statements under the
equity method of accounting as required by Financial Reporting Standard
2. In the opinion of the partners the results are not considered to be
material.
Company %
Shareholding
St Quintin Europe Limited 57
St Quintin Portugal- Consultores de Investimentos Lda 20
St Quintin Portugal -Mediacao de Imoveis Lda 20
EAA Srl. (Liquidated September 1996) 25
Income
Income is recognised on a fees rendered basis.
Taxation on partnerships
Taxation is provided for in full for each partner's share of
partnership profits at the appropriate rate of Income Tax.
Depreciation
Tangible fixed assets are depreciated over their expected useful lives on
the straight line basis using the following rates per annum.
Short leasehold properties -20%
Furniture, fixtures, fittings and equipment -20%-33%
Motor vehicles -25%
7
<PAGE>
PREPARED FOR US SEC FILING PURPOSES ONLY
ST QUINTIN
LONDON PARTNERSHIP GROUP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998
(continued)
1. ACCOUNTING POLICIES (Continued)
Work in progress
Work in progress is valued at the lower of cost and net realisable value.
Cost comprises staff salary costs and direct expenses together with an
appropriate proportion of overheads. Net realisable value is based on
estimated selling price less further costs to completion.
Deferred taxation
Provision is made for deferred taxation, using the liability method, in
respect of timing differences except where the tax is unlikely to become
payable in the foreseeable future.
Leased assets
Assets purchased under finance leases have been capitalised and are
depreciated in accordance with the group's depreciation policy. The capital
element of future payments is included in the balance sheet as obligations
under finance leases. Interest is charged over the period of the lease on a
reducing balance basis. The rental costs payable under operating leases are
charged against profits on a straight line basis over the period of the
lease.
VALUATION OF INVESTMENT
Investments held as fixed assets are stated at cost less any provision for a
permanent diminution in value.
8 PENSION COSTS
The group operates two pension schemes, a defined benefit scheme and a
defined contribution scheme. Contributions to the defined benefit pension
scheme are charged to the profit and loss account so as to spread the cost
of providing pensions over employees' working lives with the group. Any
difference between pension costs charged and amounts funded are shown either
as a pension provision or as a prepayment as appropriate.
Contributions to the defined contributions scheme are charged to the profit
and loss account as they become payable in accordance with the scheme rules.
9 CASH FLOW STATEMENT
The Partnership has taken advantage of the exemption permitted under FRS 1
not to produce a cash flow statement as a consolidated cash flow statement
is contained in these financial statements
PREPARED FOR US SEC FILING PURPOSES ONLY
8
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP GROUP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998
(continued)
2 ANALYSIS OF GROUP TURNOVER
<TABLE>
<CAPTION>
1998
(pound)
<S> <C> <C>
Class of business
Fee income from partnerships 18,978,184
Management services 4,043,530
Insurance agency 48,834
Surveying services 417,608
-----------
23,488,156
===========
Geographical area
United Kingdom 23,070,548
Channel Islands and Isle of Man 417,608
-----------
23,488,156
===========
3 Group operating profit
1998
(pound)
The group operating profit is stated after charging:
Auditors' remuneration
- audit services 69,678
- non audit services 26,977
Operating lease rentals:
- plant and machinery 375,055
- land and buildings 2,083,975
Depreciation of tangible fixed assets:
- owned assets 152,907
- assets purchased under finance leases 38,213
===========
</TABLE>
Operating (loss)/profit includes profit on the sale of fixed assets of
(pound)3,476 (1997 - (pound)4,833), loss on the disposal of investments of
(pound)Nil (1997 - (pound)137,961) and loans written off of (pound)Nil
(1997 - (pound)188,622).
PREPARED FOR US SEC FILING PURPOSES ONLY
9
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP GROUP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998
(continued)
<TABLE>
<CAPTION>
1998
4 INTEREST PAYABLE (pound)
<S> <C>
Finance lease charges 13,396
Other interest 490
-------
13,886
-------
5 TAXATION
UK corporation tax based on profits on ordinary
activities for the year 54,052
Overprovision in respect of prior years (2,685)
Income tax in respect of subsidiary undertakings incorporated in the
Isle of Man and Channel Islands 103,203
Interest in tax charge of associated undertakings 65,403
-------
219,973
=======
</TABLE>
PREPARED FOR US SEC FILING PURPOSES ONLY
10
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP GROUP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998
(continued)
6 TANGIBLE ASSETS
<TABLE>
<CAPTION>
FURNITURE,
SHORT FIXTURES,
LEASEHOLD FITTINGS AND MOTOR
GROUP PROPERTIES EQUIPMENT VEHICLES TOTAL
(pound) (pound) (pound) (pound)
<S> <C> <C> <C> <C>
Cost
At 1 September 1997 1,743,157 4,039,130 25,013 5,807,300
Additions 37,434 468,341 - 505,775
Disposals - - (5,500) (5,500)
-------- -------- ------- --------
At 31 August 1998 1,780,591 4,507,471 19,513 6,307,575
-------- -------- ------- --------
Depreciation
At 1 September 1997 1,740,305 3,705,386 21,211 5,466,902
Charge for the year 475 189,653 992 191,120
Disposals - - (5,500) (5,500)
-------- -------- ------- --------
At 31 August 1998 1,740,780 3,895,039 16,703 5,652,522
-------- -------- ------- --------
Net book value
At 31 August 1998 39,811 612,432 2,810 655,053
======== ======== ======= ========
At 31 August 1997 2,852 333,744 3,802 340,398
======== ======== ======= ========
</TABLE>
The net book value of fixed assets held by the group is(pound)131,713
(1997 -(pound)173,632) in respect of assets held under finance leases.
7 FIXED ASSET INVESTMENTS
<TABLE>
<CAPTION>
1998
Cost
(pound)
<S> <C>
Estates and General Investments p.l.c.-
500 Ordinary Shares of 20p each
(Market value(pound)930) 72
Investment Property Databank - Shares 10
82
</TABLE>
PREPARED FOR US SEC FILING PURPOSES ONLY
11
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP GROUP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998
(continued)
8 INVESTMENTS IN SUBSIDIARY UNDERTAKINGS
<TABLE>
<CAPTION>
1998
Cost
(pound)
<S> <C>
St Quintin (Management Services) Limited -
1,000 Ordinary Shares at(pound)1 each * 1,000
St Quintin - Leeds Partnership Capital 250
St Quintin Property Finance Limited -
10,000 Ordinary Shares of(pound)1 each 10,000
St Quintin Europe Limited -
16,250 Ordinary Shares of(pound)1 each 16,250
Reith Lambert Ltd -
334 Ordinary Shares of(pound)1 each 334
(pound)27,834
</TABLE>
Note: Subsequent to the date of these accounts St Quintin Europe Ltd
has been put into liquidation and the shares are regarded as worthless.
The cost will be written off in the next accounting period.
o THE SUBSIDIARY UNDERTAKINGS OF ST QUINTIN (MANAGEMENT SERVICES) LIMITED ARE
AS FOLLOW:
o
<TABLE>
<CAPTION>
PrincipalCountry of Shareholding Name
activity registration Class of share %
<S> <C> <C> <C> <C>
St Quintin (an unlimited Insurance agency England Ordinary 100
Company)
St Quintin Facility Managers Provision of staff England Ordinary 100
Limited to manage
Property
St Quintin Channel Islands Surveying Jersey Ordinary 100
Limited services
</TABLE>
PREPARED FOR US SEC FILING PURPOSES ONLY
12
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP GROUP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998
(continued)
8 INVESTMENTS IN SUBSIDIARY UNDERTAKINGS (Continued)
<TABLE>
<CAPTION>
PrincipalCountry of Shareholding Name
activity registration Class of share %
<S> <C> <C> <C> <C> <C>
Subsidiary undertakings of
St Quintin Channel Islands
Limited:
St Quintin Jersey Limited Surveying Jersey Ordinary 100
Services
St Quintin Investments Inc Dormant USA Ordinary 100
St Quintin Holdings Inc Dormant USA Ordinary 100
Subsidiary undertaking of
St Quintin Jersey Limited
St Quintin Isle of Man Surveying Isle of Man Ordinary 100
Limited services
Associated undertakings of
St Quintin Jersey Limited
St Quintin Portugal - Surveying Portugal Ordinary 20
Consultores de Investimentos services
Lda.
St Quintin Portugal - Surveying Portugal Ordinary 20
Mediacao de Imoveis Lda. Services
EAA Srl. Surveying Italy Ordinary 25
Services
9 WORK IN PROGRESS
GROUP PARTNERSHIP
1998 1998
(pound)
(POUND)
Work in progress 1,126,314 1,007,867
</TABLE>
PREPARED FOR US SEC FILING ONLY
13
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP GROUP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998
(continued)
10 DEBTORS
<TABLE>
<CAPTION>
GROUP PARTNERSHIP
1998 1998
(pound) (pound)
<S> <C> <C>
Trade debtors 3,163,888 2,537,735
Amounts owed by subsidiary undertakings - 12,673,160
Other debtors 6,187,782 142,806
Prepayments & accrued income 1,048,439 177,452
---------- ----------
10,400,109 15,531,153
========== ==========
</TABLE>
11 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
GROUP PARTNERSHIP
1998 1998
(pound) (pound)
<S> <C> <C>
Trade creditors 456,475 -
Amounts owed by subsidiary undertakings - 8,648,897
Corporation tax 178,738 -
Income tax (see note 12) 2,181,254 1,956,832
Other taxes and social security 746,996 -
Other creditors 6,311,715 6,142,154
Due to former partners 246,241 116,131
Accruals 2,293,673 312,741
Obligations under finance leases 68,031 -
---------- ----------
12,483,123 17,176,755
========== ==========
</TABLE>
PREPARED FOR US SEC FILING PURPOSES ONLY
14
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP GROUP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998
(continued)
12 INCOME TAX
The profits for this year will form the basis of the self-assessment for
1997/98. The provision made against these profits has been charged to
Partners' Distribution Accounts as follows:
-------------------------------------------------------------
GROUP PROVSION PARTNERSHIP
PROVISION
(pound) (pound)
M K Stephens 63,841 60,725
P C M Beardwood 124,331 113,428
M A Mikulin 43,038 39,923
J R Ardley 206,988 188,300
P Benjamin 124,522 113,619
R W G Evans 178,253 162,012
C J R Tollast 175,543 159,525
K Bramley 121,683 104,282
J M H B Kent 114,369 104,136
M H Brodtman 180,632 163,946
P E Grant 150,702 137,128
G Halman 103,807 93,796
M D Samworth 88,858 80,850
C P Lacey 67,173 60,949
P J Damesick 32,214 29,323
---------- ----------
1,775,954 1,611,942
Less: tax withheld 38,911 38,911
from
dividend
---------- ----------
1,737,043 1,573,031
Balance earlier years 444,211 383,801
---------- ----------
CURRENT TAXATION (pound)2,181,254 (pound)1,956,832
-------------------------------------------------------------
The income tax provided for 1998-99 is that due on the profits for the
year ended 31 August 1998 - current year basis. Whilst the liability
attaches to the individual partners, and is not a joint and several
liability of all of them, the total sum has been deducted from the
respective shares of profit in accordance with Clause 11 (7) of the
Partnership Deed, and the liability will be paid by the firm.
PREPARED FOR US SEC FILING PURPOSES ONLY
15
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP GROUP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998
(continued)
13 CAPITAL ACCOUNTS
(a)
-------------------------------------------------------------------------
BALANCE AT INTRODUCED BALANCE AT
1.9.97 DURING THE 31.8.98
YEAR
(pound) (pound) (pound)
M K Stephens 120,000 120,000
P C M Beardwood 120,000 120,000
M A Mikulin 110,000 110,000
J R Ardley 125,000 125,000
P Benjamin 125,000 125,000
R W G Evans 125,000 125,000
C J R Tollast 110,000 110,000
K Bramley 82,500 82,500
J M H B Kent 75,000 75,000
M H Brodtman 75,000 75,000
P E Grant 75,000 75,000
G Halman 40,000 40,000
M D Samworth 30,000 30,000
C P Lacey - 25,000 25,000
P J Damesick - 25,000 25,000
--------- ------ ---------
1,212,500 50,000 1,262,500
-----------------------------------------------------------------------
(b)
The Partners are entitled to interest at 9.5% per annum (2% over the
base rate at 31st August 1998) on capital standing to their credit at
31st August 1997, together with apportioned interest on any capital
introduced during the year.
PREPARED FOR US SEC FILING PURPOSES ONLY
16
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998
(continued)
14 DISTRIBUTION ACCOUNTS
a. Current Partners
SUMMARY OF PARTNERS DISTRIBUTION
<TABLE>
<CAPTION>
-----------------------------------------------------------------
GROUP BALANCE SHARE OF INCOME TAX DRAWINGS BALANCE
1.9.97 PROFIT 1997/98 31.8.98
-----------------------------------------------------------------
(pound) (pound) (pound) (pound) (pound)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
M K Stephens 99,720 159,605 63,841 97,446 98,038
P C M Beardwood 134,217 310,829 124,331 123,456 197,259
M A Mikulin 93,358 107,595 43,038 80,884 77,031
J R Ardley 146,938 517,469 206,988 170,710 286,709
P Benjamin 112,045 311,305 124,522 102,746 196,082
R W G Evans 125,003 445,633 178,253 123,483 268,900
C J R Tollast 98,468 438,858 175,543 101,552 260,231
K Bramley 66,796 304,209 121,683 65,654 183,668
J M H B Kent 39,571 285,922 114,369 53,020 158,104
M H Brodtman 83,355 451,579 180,632 100,166 254,136
P E Grant 69,625 376,755 150,702 86,806 208,872
G Halman 43,424 259,517 103,807 49,851 149,283
M D Samworth 8,063 222,144 88,858 38,416 102,933
C P Lacey - 167,932 67,173 12,284 88,475
P J Damesick - 80,535 32,214 6,284 42,037
- ----------------------------------------------------------------------------------------
1,120,583 4,439,887 1,775,954 1,212,758 2,571,758
Corporate 1,582,283 (428,978) 1,153,305
subsidiaries
profit/loss) reserve
Work in progress* 1,126,314
4,851,377
- ----------------------------------------------------------------------------------------
</TABLE>
PREPARED FOR US SEC FILING PURPOSES ONLY
17
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP GROUP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998
(continued)
14 DISTRIBUTION ACCOUNTS (CONTINUED)
a. Current Partners
<TABLE>
<CAPTION>
-----------------------------------------------------------------
PARTNERSHIP BALANCE SHARE OF INCOME TAX DRAWINGS BALANCE
1.9.97 PROFIT 1997/98 31.8.98
-----------------------------------------------------------------
(pound) (pound) (pound) (pound) (pound)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
M K Stephens 67,750 151,814 60,725 82,328 76,511
P C M Beardwood 102,079 283,571 113,428 106,630 165,592
M A Mikulin 68,197 99,808 39,923 68,772 59,310
J R Ardley 109,295 470,749 188,300 146,235 245,509
P Benjamin 82,317 284,047 113,619 85,666 167,079
R W G Evans 93,001 405,031 162,012 104,129 231,891
C J R Tollast 73,695 398,812 159,525 84,556 228,426
K Bramley 45,040 260,706 104,282 42,975 158,489
J M H B Kent 23,112 260,340 104,136 41,636 137,680
M H Brodtman 65,887 409,865 163,946 83,573 228,233
P E Grant 53,131 342,821 137,128 71,187 187,637
G Halman 35,803 234,489 93,796 41,064 135,432
M D Samworth 4,380 202,124 80,850 33,527 92,127
C P Lacey - 152,372 60,949 12,284 79,139
P J Damesick - 73,307 29,323 6,284 37,700
- ----------------------------------------------------------------------------------------
823,687 4,029,856 1,611,942 1,010,846 2,230,755
Work in progress* 1,007,867
3,238,622
- ----------------------------------------------------------------------------------------
</TABLE>
* Work in progress has been accounted for in order to comply with SSAP 9. Work
in progress movements are not distributed to the partners until they are
realised.
PREPARED FOR US SEC FILING PURPOSES ONLY
18
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP GROUP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998
(continued)
14 DISTRIBUTION ACCOUNTS (CONTINUED)
b. FORMER PARTNERS
GROUP
<TABLE>
<CAPTION>
---------------------------------------------------------------
BALANCE TRANSFERRED REPAID BALANCE
1.9.97 FROM CURRENT 31.8.98
ACCOUNT
---------------------------------------------------------------
(pound) (pound) (pound) (pound)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
T F Wilson 266,455 218,925 47,530
C Wheeler 32,843 6,807 26,036
I V Oddy 20,705 132,093 83,834 68,964
C G C Sayer 89,684 47,345 42,339
S J R Vernon 31,101 31,101
W H Bibby 12,318 12,318
M Waldouck 2,069 2,069
B V C Lamb 12,778 12,778
R Stansfield 773 773
J S Boreham 2,333 2,333
-------- -------- ------- -------
204,604 398,548 356,911 246,241
-----------------------------------------------------------------------------------
</TABLE>
PARTNERSHIP
<TABLE>
<CAPTION>
---------------------------------------------------------------
BALANCE TRANSFERRED REPAID BALANCE
1.9.97 FROM CURRENT 31.8.98
ACCOUNT
---------------------------------------------------------------
(pound) (pound) (pound) (pound)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
T F Wilson 221,448 196,482 24,966
C Wheeler 15,051 6,807 8,244
I V Oddy 132,093 83,834 48,259
C G C Sayer 70,208 47,345 22,863
S J R Vernon 11,492 11,492
W H Bibby 527 527
M Waldouck (1,451) (1,451)
B V C Lamb 547 547
R Stansfield 684 684
-------- -------- ------- -------
97,058 353,541 334,468 116,131
-----------------------------------------------------------------------------------
</TABLE>
PREPARED FOR US SEC FILING PURPOSES ONLY
19
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP GROUP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998
(continued)
<TABLE>
<CAPTION>
GROUP PARTNERSHIP
1998 1998
(pound) (pound)
15 OTHER AMOUNTS FALLING DUE AFTER MORE
THAN ONE YEAR
<S> <C> <C>
Accruals 97,166 -
Obligations under finance leases 46,577 -
--------- ---------
143,743 -
========= =========
Obligations under finance leases fall due as follow:
1 - 2 years 43,004 -
2 - 5 years 3,573 -
--------- ---------
46,577 -
========= =========
Accruals fall due as follow:
1 - 2 years 97,166 -
========= =========
</TABLE>
16 DEFERRED TAXATION
The potential amount of deferred taxation of the group is Nil (1997 -
Nil) and of the company is Nil (1997 - Nil).
17 CAPITAL COMMITMENTS
At 31 August 1998 there were contracts for capital expenditure entered
into by the Group amounting to (pound)383,000 (1997 - (pound)Nil). The
group is committed to ongoing capital investment.
PREPARED FOR US SEC FILING PURPOSES ONLY
20
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP GROUP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998
(continued)
18 OPERATING LEASES
Annual commitments under operating leases were as follows:
<TABLE>
<CAPTION>
1998
LAND AND
BUILDINGS OTHER
(pound) (pound)
<S> <C> <C>
Operating leases which expire:
Within one year 755,490 9,980
In two to five years 21,775 857,355
After five years 1,779,160 1,123,540
--------- ---------
2,556,425 1,990,875
========= =========
</TABLE>
19 Contingent liabilities
There were no material contingent liabilities at 31 August 1998 or 31
August 1997 other than as indicated in note 23.
20 CASH FLOW FROM OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1998
(pound)
Operating profit is reconciled to net cash flow from operating activities
as follows:
<S> <C>
Operating profit 3,815,319
Depreciation 191,120
Profit on sale of tangible fixed assets (3,476)
Decrease in debtors (1,670,888)
Increase in creditors 2,311,859
Increase in stocks (265,493)
---------
Net cash inflow from operating activities 4,378,441
=========
</TABLE>
PREPARED FOR US SEC FILING PURPOSES ONLY
21
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP GROUP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998
(continued)
21 Analysis of changes in net funds
<TABLE>
<CAPTION>
At 1 September CashOther At 31 August
1997 FLOW MOVEMENTS 1998
(pound) (pound) (pound) (pound)
<S> <C> <C> <C> <C>
Cash at bank and in hand 5,474,128 2,149,649 - 7,623,777
Liquid resources 31,667 (14,502) - 17,165
--------- --------- ------- ---------
5,505,795 2,135,147 - 7,640,942
Finance leases (192,440) 116,046 (38,214) (114,608)
Bank loan (1,100,000) (1,110,000)
--------- --------- ------- ---------
4,213,355 2,251,193 (38,214) 6,426,334
========= ========= ======= =========
</TABLE>
22 RELATED PARTY TRANSACTIONS
RWG Evans is a director of Corney & Barrow Wine Bars Limited. During the
year the group supplied services to the value of (pound)40,000 to Corney
& Barrow Wine Bars Limited on normal arms length terms.
Several of the Partners are also Partners in the St Quintin Manchester
Partnership, during the year St Quintin Management Services Limited, a
subsidiary of the St Quintin London Partnership, charged them management
fees on an arms length basis of (pound)1,184,627. At 31 August 1998
(pound)24,823 was due to the St Quintin London Partnership group from St
Quintin Manchester Partnership.
PREPARED FOR US SEC FILING PURPOSES ONLY
22
<PAGE>
ST QUINTIN
LONDON PARTNERSHIP GROUP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998
(continued)
23 PENSION COSTS
The group operates two pension schemes. The largest scheme, which covers
the parent company and the majority of employees, is a defined benefit
scheme providing benefits based on final pensionable pay. The assets of
the scheme are held separately from those of the group, being invested by
a fund manager.
Contributions to the scheme are charged against profit to spread the cost
of pensions over employees' working lives with the company. The
contributions are determined by a qualified actuary on the basis of
triennial valuations using the attained age method. The latest valuation
was carried out at 1 March 1997.
The assumptions which have the most significant effect on the results of
the valuations are those relating to the rate of return on investments
and the rates of increases in salaries and pensions. It was assumed that
the investment return would be 9% per annum, that salary increases would
average 7% per annum and that present pensions increase at 3% per annum
and future pensions at a rate of 4.5%per annum.
At the date of the latest actuarial valuation, the market value of the
assets of the scheme was (pound)10,460,132 and the actuarial value of the
assets was sufficient to cover 99% of the benefits that had accrued to
members, after allowing for expected future increases in earnings. This
deficiency would be eliminated by 1 March 2007 if contributions were at
9.6% of pensionable salaries per annum. Contributions are to be continued
at a level of 14.3% of pensionable salaries per annum.
A subsidiary undertaking also operates a pension scheme, which is a
defined contribution scheme. The assets of this scheme are held
separately from the company. Contributions to this scheme are charged to
the profit and loss account as they become payable in accordance with the
scheme rules.
The pension charge for the year was (pound)430,935 (1997 -
(pound)511,185).
24 POST BALANCE SHEET EVENTS
On 29 January 1999 the group was acquired by St Quintin Holdings (an
unlimited company). On 1 February 1999 St Quintin Holdings re-registered
as a limited company.
Since the year end the ultimate parent company was in negotiations with
Richard Ellis Group Limited.
PREPARED FOR US SEC FILING PURPOSES ONLY
23
<PAGE>
ST QUINTIN
MANCHESTER PARTNERSHIP
REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31ST AUGUST 1998
PREPARED FOR US SEC FILING PURPOSES ONLY
<PAGE>
ST QUINTIN
MANCHESTER PARTNERSHIP
INDEX
31ST AUGUST 1998
- --------------------------------------------------------------------------------
Page No
- --------------------------------------------------------------------------------
Approval of Accounts 1
- --------------------------------------------------------------------------------
Auditors Report 2
- --------------------------------------------------------------------------------
Balance Sheet 3
- --------------------------------------------------------------------------------
Profit and Loss Account 4
- --------------------------------------------------------------------------------
Division of Profit 5
- --------------------------------------------------------------------------------
Notes to the Accounts 6
- --------------------------------------------------------------------------------
PREPARED FOR US SEC FILING PURPOSES ONLY
<PAGE>
ST QUINTIN
MANCHESTER PARTNERSHIP
APPROVAL OF ACCOUNTS
FOR THE YEAR ENDED 31ST AUGUST 1998
We approve the attached Accounts on pages 3 to 8:
R W G EVANS - Chairman
J R ARDLEY - Partner
G HALMAN - Resident Partner
Date: 18 May 1999
PREPARED FOR US SEC FILING PURPOSES ONLY
1
<PAGE>
ACCOUNTANTS' REPORT ON THE ACCOUNTS OF
ST QUINTIN MANCHESTER PARTNERSHIP
FOR THE YEAR ENDED 31 AUGUST 1998
REPORT OF THE AUDITORS TO THE PARTNERS OF ST QUINTIN
We have audited the accounts of St Quintin which are set out on pages 3 to 8.
The accounts have been prepared under the accounting policies set out on page 7.
RESPECTIVE RESPONSIBILITIES
The partners are responsible for keeping the accounting records of the
partnership and preparing partnership accounts on the basis set out in the
partnership agreement.
It is our responsibility to report whether the 31 August 1998 accounts represent
a true and fair view in accordance with the accounting policies stated and to
list instances where the accounting policies are not in accordance with UK GAAP.
BASIS OF OPINION
We conducted our audit in accordance with Audit Standards issued by the Auditing
Practices Board. An audit includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the financial statements. It also
includes an assessment of the significant estimates and judgements made by the
partners in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the circumstances of St Quintin
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion, the financial statements give a true and fair view of the state
of the partnership's affairs as at 31 August 1998 and of its profit for the year
then ended and, except for the omission of 31 August 1997 comparatives, have
been properly prepared in accordance with the accounting policies stated and the
partnership agreement
BDO STOY HAYWARD
Chartered Accountants
London
Date : 18 May 1999
10 PREPARED FOR US SEC FILING PURPOSES ONLY
2
<PAGE>
ST QUINTIN
MANCHESTER PARTNERSHIP
BALANCE SHEET AS AT 31ST AUGUST 1998
<TABLE>
<CAPTION>
Note 1998
---- ----
(pound) (pound)
<S> <C> <C> <C>
CAPITAL EMPLOYED
CURRENT ASSETS
Work in progress 97,942
Sundry Debtors 6,169,142
Cash at Bank 81,145
--------
6,348,229
LESS: CURRENT LIABILITIES
Sundry Creditors 5,926,308
Current Income Tax 2 142,930
Former Partners 3 18,355
--------
6,087,593
---------
NET CURRENT ASSETS (pound) 260,636
---------
FINANCED BY
PARTNERS' INTERESTS
Distribution Accounts 1 260,636
---------
(pound) 260,636
---------
</TABLE>
There are no material differences between the partners' interests reported above
under UK GAAP to that which would be reported under US GAAP
PREPARED FOR US SEC FILING PURPOSES ONLY
3
<PAGE>
ST QUINTIN
MANCHESTER PARTNERSHIP
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31ST AUGUST 1998
<TABLE>
<CAPTION>
1998
----
(pound) (pound)
<S> <C> <C>
FEES RECEIVABLE 1,457,438
WORK IN PROGRESS 31,493
-----------
1,488,931
LESS: EXPENDITURE
Salaries & National Insurance 40,070
Management Charge 1,184,627
Travel & Car Expenses 12,560
Financial 12,511
General Expenses 5,850
------
1,255,618
---------
Net Profit for the year transferred to (pound)233,313
Division of Profit (page 5)
</TABLE>
All recognised gains and losses are included in the profit and loss account.
There are no material differences between the net profit reported above under UK
GAAP to that which would be reported under US GAAP.
PREPARED FOR US SEC FILING PURPOSES ONLY
4
<PAGE>
ST QUINTIN
MANCHESTER PARTNERSHIP
DIVISION OF PROFIT FOR THE YEAR ENDED 31ST AUGUST 1998
The Profits are divided between the Partners in accordance with the Supplemental
Agreement as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
FIRST TRANCHE OF REMAINDER OF TOTAL
PROFIT PROFIT
POINTS SHARE
<S> <C> <C> <C> <C>
M K Stephens 20 2,718 928 3,646
P C M Beardwood 70 9,516 3,243 12,759
M A Mikulin 20 2,718 926 3,644
J R Ardley 100 13,595 8,463 22,058
P Benjamin 70 9,517 3,243 12,760
R W G Evans 90 12,236 6,905 19,141
C J R Tollast 90 12,236 6,632 18,868
K Bramley 60 8,157 4,695 12,852
J M H B Kent 55 7,477 4,599 12,076
M H Brodtman 90 12,236 7,452 19,688
P E Grant 90 12,236 3,622 15,858
G Halman 50 6,798 5,053 11,851
M D Samworth 35 4,758 4,768 9,526
C P Lacey 25 3,399 4,027 7,426
P J Damesick 15 2,039 1,378 3,417
--- ------ ------ ------
880 119,636 65,934 185,570
--- ------ ------
Work in progress movement * 31,493
G Halman - First Tranche 16,250
-------
(pound)233,313
-------
----------------------------------------------------------------------------------
</TABLE>
* Work in progress has been accounted for in order to comply with SSAP
9. Work in progress movements are not distributed to the partners until
they are realised.
PREPARED FOR US SEC FILING PURPOSES ONLY
5
<PAGE>
ST QUINTIN
MANCHESTER PARTNERSHIP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998
1. PARTNERS' DISTRIBUTION ACCOUNTS
<TABLE>
<CAPTION>
---------------------------------------------------------------------
BALANCE SHARE OF INCOME DRAWINGS TRANS- BALANCE
1.9.97 PROFIT TAX FERRED 31.8.98
1998/99 TO
(SEE FORMER
NOTE 2) PARTNERS
---------------------------------------------------------------------
(pound) (pound) (pound) (pound) (pound) (pound)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
T F Wilson 20,032 - - - 20,032 -
M K Stephens 13,068 3,646 1,458 8,530 6,726
P C M Beardwood 14,911 12,759 5,104 10,703 11,863
M A Mikulin 10,496 3,644 1,458 6,935 5,747
J R Ardley 22,182 22,058 8,823 17,401 18,016
P Benjamin 14,966 12,760 5,104 10,488 12,134
R W G Evans 17,235 19,141 7,656 12,757 15,963
C J R Tollast 15,308 18,868 7,547 11,811 14,818
K Bramley 11,565 12,852 5,141 8,688 10,588
J M H B Kent 9,932 12,076 4,830 7,613 9,565
M H Brodtman 15,075 19,688 7,875 12,813 14,075
P E Grant 14,103 15,858 6,343 11,841 11,777
G Halman (see note) 19,060 28,101 11,240 16,645 19,276
M D Samworth 4,804 9,526 3,810 4,880 5,640
C P Lacey - 7,426 2,970 - 4,456
P J Damesick - 3,417 1,367 - 2,050
Work in progress movements* 66,449 31,493 - - 97,942
- --------------------------------------------------------------------------------------------------
269,186 233,313 80,726 141,105 20,032 260,636
- --------------------------------------------------------------------------------------------------
</TABLE>
Note: G Halman's profit share is inclusive of his salary.
* Work in progress has been accounted for in order to comply with SSAP 9. Work
in progress movements are not distributed to the partners until they are
realised.
2. TAXATION
The income tax provided for 1998-99 is that due on the profits for the
year ended 31 August 1998 - current year basis. Whilst the liability
attaches to the individual partners, and is not a joint and several
liability of all of them, the total sum has been deducted from the
respective shares of profit in accordance with Clause 11 (7) of the
Partnership Deed, and the liability will be paid by the firm.
The amount charged is shown in the third column in note (1) above. The
balance includes (pound)62,204 which remains unpaid in respect of
1997/98.
PREPARED FOR US SEC FILING PURPOSES ONLY
6
<PAGE>
ST QUINTIN
MANCHESTER PARTNERSHIP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998 (CONTD.)
3. FORMER PARTNERS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
BALANCE TRANSFERRED REPAID BALANCE
1.9.97 FROM CURRENT 31.8.98
ACCOUNT
<S> <C> <C> <C> <C>
S J R Vernon 485 485
C Wheeler 2,183 2,183
I V Oddy 2,667 2,667
P R Stansfield 3,323 3,323
C G C Sayer 4,568 4,568
T F Wilson - 20,032 14,903 5,129
------ ------ ------ ------
13,226 20,032 14,903 18,355
------ ------ ------ ------
-------------------------------------------------------------------------------
</TABLE>
4. ACCOUNTING POLICIES
The accounts have been prepared under the historical cost convention and
follow generally accepted accounting principles. The principal
accounting policies are:-
Income
Income is recognised on a fees rendered basis.
Investments
Investments are carried at their historical cost value.
Interest
Interest is accounted for on a receivable basis.
Taxation
Taxation is provided for in full for each partner's share of partnership
profits at the appropriate rate of Income Tax.
Work in progress
Work in progress is valued at the lower of cost and net realisable
value. Cost comprises staff salary costs and direct expenses together
with an appropriate proportion of overheads. Net realisable value is
based on estimated selling price less further costs to completion.
PREPARED FOR US SEC FILING PURPOSES ONLY
7
<PAGE>
ST QUINTIN
MANCHESTER PARTNERSHIP
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST AUGUST 1998 (CONTD.)
5. RELATED PARTY TRANSACTIONS
During the year, management fees of (pound)1,184,627 were charged by St
Quintin Management Services Limited under normal trading terms. At 31
August 1998 (pound)5,872,879 was owed to St Quintin Management Services
Limited and (pound)5,854,776 was due from St Quintin London Partnership.
8
<PAGE>
(b) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INSIGNIA
FINANCIAL GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On March 5, 1999, Insignia Financial Group, Inc. (the "Company" or
"Insignia") acquired all of the outstanding share capital of St. Quintin
Holdings Limited ("St. Quintin"), a real estate services firm located in the
United Kingdom, from their existing shareholders. St. Quintin, which has offices
in London, Manchester, Leeds, and Jersey, has been merged with Insignia's
existing U.K. subsidiary, Richard Ellis Group Limited ("REGL"), to form Richard
Ellis St. Quintin.
The base purchase price paid for St. Quintin was approximately $32
million. Additional purchase consideration of approximately $12 million is
contingent on the future performance of St. Quintin. The purchase was funded
with borrowings of $24.3 million under the Company's revolving credit facility
(arranged by First Union National Bank and Lehman Brothers involving a syndicate
of nine national and international financial institutions), the issuance of
305,981 shares of Common Stock of the Company and options to purchase 611,962
shares of the Company's Common Stock.
The following Pro Forma Condensed Consolidated Statements of Income for
the three months ended March 31, 1999 and for the year ended December 31, 1998,
give effect to the acquisition of St. Quintin and related borrowings under the
Company's revolving credit facility, as if effected at January 1, 1998.
The pro forma statements have been prepared by management of the
Company and are based on the historical financial statements of Insignia and St.
Quintin, giving effect to the transaction under the purchase method of
accounting and to the assumptions and adjustments in the accompanying Notes to
Unaudited Pro Forma Condensed Consolidated Statements of Income. These pro forma
statements may not be indicative of the actual results that may have occurred if
the combination had been in effect on the dates indicated or which may be
experienced in the future. The pro forma statements should be read in
conjunction with the financial statements and corresponding footnote disclosures
of Insignia included on Form 10-K and Form 10-Q filed with the Securities
Exchange Commission on March 31, 1999 and May 14, 1999, respectively, and of the
St. Quintin partnerships included elsewhere herein.
1
<PAGE>
(b) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIALS (CONTINUED)
INSIGNIA FINANCIAL GROUP, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1999 (In thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Pro Forma Statement of
Insignia St. Quintin Adjustments Income
-------- ----------- ----------- ------
<S> <C> <C> <C> <C>
REVENUES:
Real estate services $114,264 $ 6,281 $ -- $120,545
Property operations 387 -- -- 387
Interest 1,127 78 (78)(a) 1,127
Other -- --- -- --
-------- -------- -------- --------
115,778 6,359 (78) 122,059
-------- -------- -------- --------
COSTS AND EXPENSES:
Real estate services 110,496 8,450 (2,974)(b) 115,972
Property operations 114 -- -- 114
Administrative 1,884 -- -- 1,884
Interest 883 11 248 (c) 1,142
Property interest 116 -- -- 116
Depreciation 1,107 91 -- 1,198
Property depreciation 66 -- -- 66
Amortization of intangibles 5,251 -- 215 (d) 5,466
Merger related expenses 5,533 -- -- 5,533
-------- -------- -------- --------
125,450 8,552 (2,511) 131,491
-------- -------- -------- --------
(9,672) (2,193) 2,433 (9,432)
Equity earnings in real estate ventures 1,562 -- -- 1,562
Minority interests -- -- -- --
-------- -------- -------- --------
(LOSS) INCOME BEFORE INCOME TAXES (8,110) (2,193) 2,433 (7,870)
(Benefit) Provision for income taxes (3,004) -- 104 (e) (2,900)
-------- -------- -------- --------
NET (LOSS) INCOME $ (5,106) $ (2,193) $ 2,329 $ (4,970)
======== ======== ======== ========
Per share amount - assuming dilution $ (0.24) $ (0.23)
======== ========
Weighted average common shares and
assumed conversions 21,542 218 (f) 21,760
======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of Income
2
<PAGE>
(b) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIALS (CONTINUED)
INSIGNIA FINANCIAL GROUP, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1998
(In thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Pro Forma Statement
Insignia St. Quintin Adjustments of Income
-------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Real estate services $507,351 $ 40,035 $ -- $547,386
Interest 3,196 789 (789)(a) 3,196
Other 233 366 599
-------- -------- -------- --------
510,780 41,190 (789) 551,181
-------- -------- -------- --------
COSTS AND EXPENSES:
Real estate services 451,774 32,979 761 (b) 485,514
Administrative 7,232 -- -- 7,232
Interest 1,378 23 1,532 (c) 2,933
Depreciation 3,090 318 -- 3,408
Amortization of intangibles 19,453 -- 1,287 (d) 20,740
Provision for loss on subsidiary 2,300 -- -- 2,300
-------- -------- -------- --------
485,227 33,320 3,580 522,127
-------- -------- -------- --------
25,553 7,870 (4,369) 29,054
Equity losses in real estate ventures (1,896) -- -- (1,896)
Minority interests 371 -- -- 371
-------- -------- -------- --------
INCOME(LOSS) BEFORE INCOME TAXES 24,028 7,870 (4,369) 27,529
Provision for income taxes 12,975 366 893 (e) 14,234
-------- -------- -------- --------
NET INCOME (LOSS) $ 11,053 $ 7,504 $ (5,262) $ 13,295
======== ======== ======== ========
Per share amount - assuming dilution $ 0.50 $ 0.59
======== ========
Weighted average common shares and
Assumed conversions 21,993 612 (f) 22,605
======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of Income
3
<PAGE>
(b) PRO FORMA CONDENSED CONSOLIDATED FINANCIALS (CONTINUED)
INSIGNIA FINANCIAL GROUP, INC.
ST. QUINTIN HOLDINGS LIMITED CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED AUGUST 31, 1998
(In thousands)
<TABLE>
<CAPTION>
St. Quintin
London St. Quintin
Partnership Manchester St. Quintin St. Quintin
Group Partnership Elimination's Total (pound) Total $
----- ----------- ------------- ------------- -------
<S> <C> <C> <C> <C> <C>
REVENUES:
Real estate services (pound)23,754 (pound) 1,489 (pound)(1,185) (pound)24,058 $40,035
Interest 474 -- -- 474 789
Other 220 -- -- 220 366
------------- ------------- ------------- ------------- -------
24,448 1,489 (1,185) 24,752 41,190
------------- ------------- ------------- ------------- -------
COSTS AND EXPENSES
Real estate services 19,747 1,256 (1,185) 19,818 32,979
Administrative -- -- --
Interest 14 -- -- 14 23
Depreciation 191 -- -- 191 318
Amortization of intangibles -- -- --
------------- ------------- ------------- ------------- -------
19,952 (1,185) (1,185) 20,023 33,320
------------- ------------- ------------- ------------- -------
INCOME BEFORE INCOME TAXES 4,496 233 -- 4,729 7,870
Provision for income taxes 220 -- -- 220 366
------------- ------------- ------------- ------------- -------
NET INCOME (pound) 4,276 (pound) 233 (pound) -- (pound) 4,509 $ 7,504
============= ============= ============= ============= =======
</TABLE>
NOTE: The operating results have been translated from British Pounds at an
exchange rate of $1.6641.
4
<PAGE>
(b) PRO FORMA CONDENSED CONSOLIDATED FINANCIALS (CONTINUED)
INSIGNIA FINANCIAL GROUP, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Income Increase (Decrease)
--------------------------
Three Months Year
Ended Ended
March 31, 1999 December 31, 1998
-------------- -----------------
(In thousands)
<S> <C> <C>
PRO FORMA ADJUSTMENTS
REVENUES
(a) St. Quintin distributed all cash to its owners pursuant to the
purchase agreement. The elimination of interest income is reflected as a $ (78) $ (789)
pro forma adjustment
COSTS AND EXPENSES
(b) Reduction (increase) in real estate services expenses: As part of the St.
Quintin acquisition, an office lease is not to be used and is being
sublet. The applicable rent is removed from real estate services expense 357 1,490
St. Quintin operated as a partnership. A pro forma adjustment is
made to reflect partners salaries on the terms entered into at the (163) (1,436)
time of the acquisition
The St. Quintin bonus plan was modified on the acquisition date to be
consistent with the existing REGL bonus plan. A pro forma
adjustment is made to adjust to the bonus amount as calculated in 2,780 (815)
accordance with this modification
-------- --------
2,974 (761)
-------- --------
(c) Represents (increase) decrease in interest expense: Represents the pro forma
adjustment for interest expense from $24.3
million in borrowings on the Company's revolving credit facility (6% per
annum - a 1/8 of a percent variance in interest rates would result in a
change in pro forma interest of approximately $5,000 and
$30,000 for the periods ended March 31, 1999 and December 31, 1998, (243) (1,458)
respectively)
Interest expense on the present value obligation for the office lease
described in (b) above is reflected as a pro forma adjustment using
a 9% present value discount rate in calculating the liabilities (16) (97)
Represents the pro forma adjustment to eliminate interest expense of
St. Quintin debt retired as a condition to the acquisition 11 23
-------- --------
(248) (1,532)
-------- --------
(d) Represents amortization of purchase price allocated to goodwill (25 yr.) (215) (1,287)
-------- --------
Total cost and expense effect 2,511 (3,580)
-------- --------
(e) Income tax effect (104) (893)
======== ========
Adjustment to net income $ 2,329 $ (5,262)
======== ========
SHARE DATA
(f) Weighted average common shares and assumed conversions: Issuance of 305,981
shares of Insignia Common Stock in connection
with the St. Quintin acquisition 218 306
Potential assumed conversions, with respect to assumed options to purchase
611,962 shares of Insignia Common Stock in connection with
the St. Quintin acquisitions -- 306
-------- --------
218 612
======== ========
</TABLE>
5
<PAGE>
NOTE 1
The financial statements of St. Quintin have been translated using the
following exchange rates: $1.6194 for the statement of income for the three
months ended March 31, 1999 and $1.6641 for the statement of income for the year
ended December 31, 1998. These exchange rates have been determined based on the
estimated average rate for each period.
NOTE 2
The acquisition and subsequent merger of St. Quintin with REGL is expected
to achieve significant operating synergies due primarily to accommodation
savings from subleased excess office space of REGL, in conjunction with, the
elimination of duplicated overhead costs. These synergies, which are not
reflected in the pro forma results presented, are estimated to approximate more
than $3 million annually.
6
<PAGE>
(c) EXHIBITS
INSIGNIA FINANCIAL GROUP, INC.
23.1 Consent of Independent Chartered Accountants
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We hereby consent to the use of our report dated 18 May, 1999 relating to the
financial statements of the St. Quintin Manchester Partnership as at and for the
year ended 31 August, 1998, included in the Form 8-K/A of Insignia Financial
Group, Inc. dated 19 May, 1999.
BDO Stoy Hayward
Chartered Accountants and Registered Auditors
London, U.K.
May 18, 1999
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We hereby consent to the use of our report dated 18 May, 1999 relating to the
financial statements of the St. Quintin London Partnership Group as at and for
the year ended 31 August, 1998, included in the Form 8-K/A of Insignia Financial
Group, Inc. dated 19 May, 1999.
BDO Stoy Hayward
Chartered Accountants and Registered Auditors
London, U.K.
May 18, 1999
7
