SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year ended 12/31/98
Commission File Number 2-77085
SOUTHWARD VENTURES DEPOSITARY TRUST
(Exact name of registrant as specified in its charter)
FLORIDA 59-6737200
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
c/o Gino J. DiMarco, Trustee
2499 GLADES ROAD, SUITE 203, BOCA RATON, FLORIDA 33431
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (561) 347-8663
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act:
UNITS OF BENEFICIAL INTEREST
(Title of Class)
Name of each exchange on which registered: 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 12 months (or for such shorter period that the Registrant
was required to file such report(s), 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, and will not be contained, to the best of
the Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K ( X )
State the aggregate market value of the voting securities held by non-
affiliates of the Trust on December 31, 1998.
$862,050 (includes 1889 post-exchange units to be issued
upon submission for exchange)
<PAGE>
PART I
ITEM 1. BUSINESS
The Trust, through its nominee, E. Dawson Roberts, owns unencumbered legal
title to the Great Harbour Cay properties described below. The Great Harbour Cay
properties are located in the Berry Island Group of the northwest Bahamas. Great
Harbour Cay is approximately sixty miles from Nassau, seventy-five miles from
Freeport, and one hundred and sixty miles from Miami, Florida. The Great Harbour
Cay properties include:
Fee Simple Lots: both single and multi-family.
Approximately 390 platted building sites ready for construction. Approximately
300 platted building sites needing reclamation and/or improvements
Commercial Acreage: approximately 40 acres at various locations
Building Sites for approximately fifty 1 or 2-story oceanfront villas (approx.
700 sq.ft. each)
Great Harbour Cay Clubhouse Complex: 25,000 sq.ft. originally designed for the
resort registration center; restaurant, bar, shops, pool, meeting rooms and
golf cart storage (needs to be totally renovated)
Golf Course: 18 holes of which 9 are presently maintained (under lease)
Golf Course Storage Building and golf course maintenance building
Tennis Courts: 4 courts (under lease)
Airport: with hard surface landing strip of 5,000 feet, with customs and
immigration buildings
Commercial Buildings adjacent to airport; boutiques and motor pool.
Links Apartment Building: 2-story, 8-unit apartment building (under lease)
Beach and Sailing Club: Five and a half acres, adaptable as a hotel site
(partially under lease)
Warehouse (under lease)
35 miles of paved roads
Miscellaneous equipment.
As of August, 1996, the Trust consented to a ten-year lease (hereinafter
"the Lease") of the marina, warehouse and fuel dock areas, the airport and the
Links Apartments with Great
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Harbour Management, Limited, an affiliated and control party. The Lease includes
the Links Apartments and the airport on Great Harbour Cay in addition to those
properties previously held by HBL Marina Limited. Great Harbour Management
Limited is a Bahamian company which is beneficially owned by the four adult
children of T. D. Fender, who was an affiliated party who owned one hundred
percent (100%) of Southward Acquisition Corporation until that company was
voluntarily dissolved on December 17, 1998. On December 14, 1998, Southward
Acquisition Corporation sold to Pentelle Investments Inc., subject to a stock
pledge and escrow agreement, its 21,103 units which represented 73.44% of the
post-exchange units of beneficial interest of the Trust which are to be
outstanding upon completion of the exchange.
The Lease may be terminated by the Trustee at any time upon thirty (30)
days written notice of the sale of all or any portion of the leased properties.
It requires annual rent in the amount of $60,000. The rent provision in the
Lease provides for rent of $72,000 per annum for the third through fourth years
of the Lease term and $84,000 per annum for the remaining six years of the Lease
term. The rent is due on the first of every month with the exception that during
the first four months of the Lease, no rent was paid in exchange for substantial
repairs performed by Great Harbour Management Limited on the properties subject
to the Lease. Additionally, Great Harbour Management Limited is responsible for
payment of all real estate taxes and other assessments on the leased properties;
for repairing and maintaining the properties; for providing insurance and all
necessary licenses; and for operating the various facilities subject to the
Lease during specific business hours.
It is not known if the rental payments and fees that are received by the
Trust are equivalent to that which would have been received as fair market value
from an unaffiliated third party since no competitive offers were made by any
third parties.
During 1998, the Trust sold five single family residential lots for the
aggregate purchase price of Three Hundred and Thirty-Seven Thousand Dollars
($337,000).
LEASES
The Trust has leased on a month to month basis four tennis courts, the golf
course and the roads on Great Harbour Cay to the Great Harbour Cay Property
Owners Association and HBL Marina Limited to provide for their maintenance.
Two of the apartments located in the "Links Apartments" situated on Great
Harbour Cay are occupied on a rent free basis by Bahamian Customs and Bahamian
Immigration. The other apartments located in the "Links Apartments" and the six
retail spaces at the airport are included as of August 1, 1996, in the Lease
with Great Harbour Management Limited described above.
TRUSTEE. Effective January 1, 1990, Gino J. DiMarco was appointed successor
Trustee by a majority in interest of the beneficiaries of the Trust. The
Trustee's telephone number is (561) 347-8663.
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The assets of the Trust are held by the Trustee as the agent, trustee, and
depository of and for distribution to the shareholders of Southward Ventures,
Inc. (the "Company") in accordance with and pursuant to the terms of the
Shareholders' Depositary Agreement, as amended (the "Agreement"). The Trust will
terminate on October 20, 2001, unless sooner terminated by fifty-one percent
(51%) in interest of the Trust Certificate Holders.
The Agreement provided for the Company's stock to be deemed canceled and
redeemed upon the Company's filing its Articles of Dissolution with the
Secretary of State of Florida. The Articles of Dissolution were filed on May 13,
1982. Trust Certificates were issued to shareholders of the Company in exchange
for the common stock they held in the Company on the basis of one unit of
beneficial interest in the Trust for each issued and outstanding share of stock.
In 1994 the Agreement was modified to reflect the June 30, 1994 termination
of the program whereby 1982 stockholders of Southward Ventures, Inc. could
exchange their canceled shares of that dissolved corporation for units of
beneficial interest in Southward Ventures Depositary Trust. As of June 30, 1994,
there were 42,940 shares of Southward Ventures, Inc. which had not been
exchanged for units of beneficial interest in the Trust during the twelve year
period that the exchange program was in effect.
All future requests for exchanges will be considered on a case by case
basis in the discretion of the Trustee.
As the result of an amendment effective October 1, 1997 to the Agreement,
each unit holder of record as of October 31, 1997 will receive one unit of
beneficial interest in exchange for each 110 units held as of the record date.
No trust certificates for fractional units will be issued and in lieu thereof,
"cash in lieu" checks will be computed on the basis of $1.00 per unit
outstanding on the record date prior to giving effect to the above reduction of
outstanding units. The $1.00 valuation was based upon an appraisal of the
Trust's real estate holdings on Great Harbour Cay, Berry Islands, Bahamas. Said
valuation was not based upon the then current over-the-counter market price of
approximately $.30 to $.35 per unit. Upon completion of the issuance of the
replacement Trust Certificates reflecting the reduction of the authorized Units
to 28,735 Units, all previously issued Trust Certificates will be deemed
cancelled and redeemed as of October 31, 1997 without further action of the
Trust.
The number of pre-October 31, 1997 exchange units of beneficial interest
outstanding as of December 31, 1998 was 217,393 and the number of post-October
31, 1997 units of beneficial interest outstanding as of December 31, 1998 was
26,846. Although the exchange program was terminated during August, 1998, an
effort has been undertaken to locate numerous unitholders whose addresses were
no longer current. As those unitholders are located, they are now being provided
with the opportunity to complete the exchange.
Until February 5, 1990, the Agreement provided that the Trust cash would be
distributed semi-annually after payment, and reserves for expenses, liabilities
and obligations of the Trust. To date,
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one distribution was made in October, 1984. At this time, it is not contemplated
that any additional cash distribution dates will be set during 1999.
LINES OF BUSINESS
Until February 5, 1990, the Trust did not engage in active business
operations of any kind. Until February 5, 1990 the only remaining purpose and
activity of the Trust was to receive the proceeds from the sale or lease of the
Great Harbour Cay properties; pay the liabilities of Southward Ventures, Inc.
after its liquidation (none of which are now known to be remaining); and
distribute the remaining cash, after expenses of the Trust, to the Trust
Certificate Holders. Future revenues of the Trust are contingent upon the lease
and sale of the Great Harbour Cay properties; to a minimal extent, interest
earned on the Trust's remaining funds; and monthly rental payments received
pursuant to the Great Harbour Management Limited Lease.
EMPLOYEES
The Trust is administered by the Trustee, pursuant to the terms of the
Shareholders' Depositary Agreement, as amended. Until December 31, 1989, the
Trust had a consulting agreement with Southward Ventures, Inc.'s former
President, Gino J. DiMarco. The consulting contract with Gino J. DiMarco was
terminated on December 31, 1989 upon his appointment as Successor Trustee,
effective January 1, 1990. In addition to the Trustee, the Trust has one full
time secretary for the Trust's operations in Boca Raton, Florida and one part
time employee on Great Harbour Cay.
SHAREHOLDERS' DEPOSITARY AGREEMENT
The registered owners of all Trust Certificates are entitled to
participation, according to the number of their Units, in the rights and
benefits under the Trust created by the Depositary Agreement.
Until the Depositary Agreement was amended on February 5, 1990, the
Agreement provided that the Trust cash would be distributed semi-annually by
paying to the Trust Certificate Holders of record, pro-rata their respective
interests in all Trust cash left after the payment, or reserves for, expenses,
liabilities and obligations of the Trust.
The terms of the Depositary Agreement limit the institution of litigation by
Trust Certificate Holders. It imposes the requirement that Trust Certificate
Holders waive their right to institute any legal action against any other party
other than the Trustee with respect to the Trust corpus or any agreements
relating to the Trust corpus unless and until holders of fifty-one percent (51%)
in interest of Trust Certificate Holders have made written request upon the
Trustee to institute such action and the Trustee has failed to act accordingly.
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<PAGE>
Until the Depositary Agreement was amended on February 5, 1990, the
Agreement provided that without consent of Trust Certificate Holders the Trustee
is empowered to (a) collect and receive any and all money and other property of
whatsoever kind or nature due to or owing or belonging to the Trust and to give
full discharge and acquittance therefor; (b) perform any act authorized,
permitted, or required under the Utility Purchase and Sale Agreement or any
other instruments relating to or forming a part of the Trust Estate whether in
the nature of an approval, consent, demand, or notice thereunder or otherwise,
unless such act would require the consent of the holders of the Trust
Certificates in accordance with the express provisions of the Depositary
Agreement; and (c) sell, transfer, assign or otherwise dispose of any part of
the Trust Estate, excepting the interest of the Trust Estate in the Utility
Purchase and Sale Agreement, for cash or other considerations. With the consent
of at least 51% in interest of the Trust Certificate Holders the Trustee was
empowered to (a) amend the Utility Purchase and Sale Agreement or any other
instruments relating to or forming a part of the Trust Estate, when in the
opinion of counsel for the Depositary any such amendment is advisable or
necessary to preserve the Trust Estate, and (b) amend the Depositary Agreement
in any manner whatever, provided that no such amendment diminished the rights of
Trust Certificate Holders thereunder. The Utility Purchase and Sale Agreement
was terminated in 1984 in conjunction with the Prepayment Settlement Agreement
entered into at that time with Palm Beach County and thus, is no longer an asset
of the Trust.
The Depositary Agreement further provides that the Depositary shall not be
liable with respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the holders of not less than a
majority in interest of the Trust Certificates at the time outstanding relating
to the time, method and place of conducting any proceeding for any remedy
available to the Depositary, or exercise any trust or power conferred upon the
Depositary under the Depositary Agreement.
There is no specific requirement for Trust Certificate Holder meetings.
However, such meetings may be called by the Trustee or convened upon the written
request to the Trustee by at least fifteen percent (15%) of the holders in
interest of the Trust units.
AMENDMENTS TO SHAREHOLDERS' DEPOSITARY AGREEMENT
Effective February 5, 1990, Gino J. DiMarco as Trustee of the Trust, and
Southward Acquisition Corporation as majority in interest Trust Certificate
Holder, amended the Shareholders, Depositary Agreement dated May 13, 1982
(hereinafter "1982 Agreement").
The amendment affected the following provisions of the 1982 Agreement:
1. Section 5.6 of Article V has been modified to remove the obligation of
the Trustee to make distributions to Certificate Holders at any specified time.
2. Section 5.6 of Article V has been modified to reflect December 31 as
the end of the Trust's fiscal year (which has been in effect for accounting
purposes since 1982).
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3. Section 6.1 Article VI has been modified to change the purpose of the
Trust to now permit the Trust to engage in any and all lawful activities.
4. Section 6.3 of Article VI has been modified to remove the restrictions
on investment of funds. The Trustee is now empowered to hold, deposit, or invest
money in any fashion the Trustee shall deem advisable.
5. Section 7.2 of Article VII has been modified to delete those provisions
which pertain to those agreements relating to the sale of the Utility System.
6. Section 7.3 of Article VII has been replaced with a new provision that
requires the Trustee to obtain the consent of at least 51% in interest of the
Trust Certificate Holders to:
a. Mortgage, encumber, sell, transfer, or otherwise dispose of the
Trust's interest in the Great Harbour Cay properties. However, transfers are
permitted for the purpose of holding title.
b. Amend any instrument relating or forming part of the Trust
Estate.
c. Amend the 1982 Agreement.
d. Borrow money and to pledge or mortgage as security for loans
all or any part of the Trust Estate.
7. The Compensation Schedule as defined in Section 10.1 of Article X has
been replaced to reflect the current Trustee's compensation arrangement.
8. Section 13.5 of Article XIII has been modified to provide that at any
meeting, a majority in interest of the Trust Certificates will constitute a
quorum.
Effective February 5, 1991, Gino J. DiMarco as Trustee of the Trust, and
Southward Acquisition Corporation as majority in interest Trust Certificate
Holder, amended the 1982 Agreement to provide that the Trustee's compensation
was increased to $45,600 per annum.
Effective June 30, 1994, the 1982 Agreement was amended to provide that the
Trust's authorized number of outstanding units of beneficial interest was
3,176,906. Subsequently, the Trustee authorized the issuance of 113 additional
units of beneficial interest as a new issue in response to former stockholders'
requests to exchange common stock for units of beneficial interest.
Effective October 31, 1997, the 1982 Agreement was again amended to provide
for the reduction of outstanding units of beneficial interest. The reduction was
from 3,177,019 units to 28,735 units.
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<PAGE>
ITEM 2. PROPERTIES
The Trust does not own any properties for its administrative operations. The
Trust's offices are located at 2900 High Ridge Road, Boynton Beach, Florida
33426. The Trust has leased approximately 1,500 square feet of office space at
this location on a month to month basis for $400 per month. Effective January 1,
1999, the Trust has been advised that the rent is being increased to $500.00 per
month. On March 31, 1999 the Trust re-located to 2499 Glades Road, Suite 203,
Boca Raton, Florida 33431 where it has leased 288 square feet of office space on
a month to month basis for $500.00 per month. The Trustee believes these
facilities will continue to be adequate for the Trust's operations.
SUBSIDIARIES
The Trust owns one hundred (100%) percent of the outstanding capital shares
of Southward Ventures, Limited, a Bahamian corporation. Southward Ventures
Limited has no active business operation, has no assets, and Bahamian counsel
has been instructed to file those documents necessary to dissolve it.
ITEM 3. LEGAL PROCEEDINGS
There is one litigation matter which has been pending since 1993 to which
the Trust is a party. The appeal of Case No. CL 93-7363 AE, GINO J. DIMARCO AS
TRUSTEE OF SOUTHWARD VENTURES DEPOSITARY TRUST VS. M. PHILLIP CARNES was denied
by the 4th District Court of Appeals, Florida on February 26, 1999. It pertained
to an adverse judgment which was entered with regard to a claim of the Trust for
damages arising from the alleged conversion and civil theft of computer hardware
and software and/or funds for the purchase of same. The case has now been
remanded to the lower court to determine the defendant's claim for an award of
court costs and attorney's fees since the defendant was the prevailing party in
the lower court proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Southward Venture's Inc. common stock was traded in the over-the-counter
market until the voluntary dissolution of Southward Ventures, Inc., and
currently the Trust's Trust Certificates are being traded in the same market.
The primary market maker for the Trust's units of beneficial interest has
advised that during 1996 and until October 31, 1997, the bid and asked prices
were 1/4 and 5/8, respectively, with very limited trades. Since November 1,
1997, after the implementation of the 110 to 1 reduction of outstanding units,
the bid and asked prices were $30.00 and $35.00, respectively, and again there
has been very limited trades. No variation is available for the high and low
prices. Such over-the-counter market quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
As of December 31, 1998, the Trust had 371 holders of pre-exchange units of
beneficial interest and 145 holders of post-exchange units of beneficial
interest.
Southward Ventures, Inc. paid no cash dividends during the last two fiscal
years prior to its liquidation. The Trust made one distribution on October 15,
1984 of $2.70 per unit.
Since December 14, 1998, Pentelle Investments Inc. has owned majority
control of the units of beneficial interest in the Trust.
ITEM 6. SELECTED FINANCIAL DATA
SUMMARY OF FINANCIAL INFORMATION
SOUTHWARD VENTURES DEPOSITARY TRUST
<TABLE>
<CAPTION>
Selected Statement 1998 1997 1996 1995 1994
----------------------------------------------------------------------------------------
of operations Data:
<S> <C> <C> <C> <C> <C>
Revenues $434,298 $428,712 $530,125 $237,582 $207,595
Net Income (1oss) $ 86,633 $ 74,916 ($21,326) ($30,623) ($52,773)
Net Income (loss) per
trust unit (1) $ 3.09 $2.61 ($.74) ($1.07) ($1.84)
Total Assets $872,074 $800,659 $747,628 $1,577,559 $1,604,646
</TABLE>
See Notes to Financial Statements for Designated Years.
(1) Retroactively application to reflect 1997 reduction of units
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ITEM 7. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SOUTHWARD VENTURES DEPOSITARY TRUST
Until February 5, 1990, the Trust was not an operating entity. Its only
remaining purpose was to receive the proceeds from the lease and sale of the
Great Harbour Cay properties; to pay the liabilities of Southward Ventures, Inc.
(none of which are known to remain); and distribute such funds less expenses to
the Trust Certificate Holders. At this time, Pentelle Investments Inc. and
Pristine Resorts Limited are currently formulating plans for the future
development of the remaining Great Harbour Cay properties.
PROPERTY TAX LIABILITY. The Trust has been advised by the Ministry of
Finance of the Commonwealth of the Bahamas that the property taxes pertaining to
the lots located on Great Harbour Cay were not included in a prior settlement
that was understood to encompass all of the Trust's properties on Great Harbour
Cay. Accordingly, Bahamian real property taxes on these lots has become a
liability of the Trust in an amount which is now undetermined. No resolution of
this issue has been reached with the Bahamian Ministry of Finance.
LIQUIDITY. Future revenue of the Trust will come from the proceeds of the
sale and lease of the Great Harbour Cay properties; from the monthly rental
payments on the Great Harbour Management Limited lease; and to a minimal extent,
from interest on its remaining cash assets. All other assets of the Trust have
been liquidated.
CAPITAL RESOURCES. The Trust has no material commitments for capital
expenditures.
RESULTS OF OPERATIONS.
REVENUES
During 1998, revenues from the sale of real estate increased to $350,586
versus $345,000 in 1997. Rental income remained $83,712 in both 1997 and in
1998. There has been no other rental income since 1996 as the result of the
Trust's lease arrangement with Great Harbour Management Limited that became
effective August 1, 1996. The $5,000 per month rental payments has resulted in a
reduction of cash flow for the Trust from the marina, the airport, and the Links
Apartments since 1996.
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COSTS & EXPENSES
In 1998, there was a small increase in costs and expenses due to an increase
in the selling expenses associated with the lot sales. Due to the August 1, 1996
lease with Great Harbour Management Limited, no operating expenses were incurred
with regard to the marina and fuel facility. However, significant capital
improvement costs were incurred as the result of a compromise agreement to the
August 1, 1996 lease that was reached in April, 1998, that resulted in the
waiving of certain accounts receivable due to the Trust and expenditures by the
Trust in the aggregate amount of $66,828.92 for capital improvements to the
leased properties. As of April 9, 1998, the lease was amended and as a result,
the Trust expended $97,640.00 for capital improvements to the leased properties
during 1998.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements for the year ended December 31, 1998 are attached hereto
and indexed as Rider 8(a).
INDEX TO FINANCIAL STATEMENTS PAGE
FINANCIAL STATEMENTS:
Independent Auditor's Report 11
Consolidated Balance Sheets at December 31, 1998 and 1997 12
Consolidated Statements of Operations and Trust Certificate
Holders' Equity for the Three Years Ended
December 31, 1998 13
Consolidated Statements for Cash Flows for the Three
Years Ended December 31, 1998 14
Consolidated Notes to Financial Statements 15
All schedules are omitted because they are not applicable or the required
information is presented in the financial statements or notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Trust Certificate Holders of
Southward Ventures Depositary Trust
Boynton Beach, Florida
We have audited the accompanying consolidated balance sheets of Southward
Ventures Depositary Trust as of December 31, 1998 and 1997, and the related
consolidated statements of operations and trust certificate holders' equity and
cash flows for each of the three years in the period ended December 31, 1998.
These financial statements are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principales 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 Southward
Ventures Depositary Trust as of December 31, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998 in conformity with generally accepted accounting
principles.
RACHLIN COHEN & HOLTZ
Miami, Florida
March 30, 1999
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<TABLE>
<CAPTION>
SOUTHWARD VENTURES DEPOSITARY TRUST
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31, 1998 AND 1997
1998 1997
ASSETS
<S> <C> <C>
Cash $ 17,443 $ 42,147
Land and improvements held for development or sale 634,575 641,145
Property & equipment, net 165,016 83,886
Other assets 55,040 33,481
-------------------- --------------------
$ 872,074 $ 800,659
==================== ====================
LIABILITIES AND TRUST CERTIFICATE HOLDERS' EQUITY
Accounts payable and accrued liabilities $ 119,302 $ 104,148
Due to GH Management - 15,000
Note payable to GH Management 20,000 -
Deposits on sales contracts 5,000 40,150
-------------------- --------------------
Total liabilities 144,302 159,298
Commitments
Trust certificate holders' equity 727,772 641,361
-------------------- --------------------
$ 872,074 $ 800,659
==================== ====================
</TABLE>
SEE ACCOMPANYING NOTES.
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<PAGE>
<TABLE>
<CAPTION>
SOUTHWARD VENTURES DEPOSITARY TRUST
STATEMENTS OF OPERATIONS AND TRUST CERTIFICATE HOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
1998 1997 1996
<S> <C> <C> <C>
Revenues:
Real estate sales $ 350,586 $ 345,000 $ 322,000
Interest income - - 19,002
Rental income 83,712 83,712 55,951
Other income - - 129,043
Profit recognized from real estate sales - - 4,129
------------------- ------------------- ------------------
434,298 428,712 530,125
Costs & expenses:
Cost of sales 6,570 6,465 5,609
Selling 47,133 56,038 16,168
General & administrative 52,120 58,303 44,320
Trustee fees 45,600 45,600 45,600
Legal & professional fees 94,794 124,938 63,363
Secretarial & bookkeeping fees 26,144 25,000 24,000
Other operating expenses 53,715 24,634 187,013
Depreciation 16,510 12,818 10,998
------------------- ------------------- ------------------
342,586 353,796 397,071
------------------- ------------------- ------------------
Income before interest expense 91,712 74,916 133,054
Interest expense 3,079 - 7,100
------------------- ------------------- ------------------
Income unusual item 88,633 74,916 125,954
Unusual item:
Loss on cancellation of mortgage note - - ( 147,280)
------------------- ------------------- ------------------
Net income (loss) 88,633 74,916 ( 21,326)
Trust certificate holders' equity, beginning of period 641,361 570,788 592,114
------------------- ------------------- ------------------
Trust certificate holders' equity, before distributions
paid and purchase of fractional units 729,994 645,704 570,788
Purchase of fractional trust units (2,222) (4,343) -
------------------- ------------------- ------------------
Trust certificate holders' equity, end of period $ 727,772 $ 641,361 $ 570,788
=================== =================== ==================
Net income (loss) per trust unit $ 3.09 $ 2.61 $( 0.74)
=================== =================== ==================
Units used in computing net income (loss)
per trust unit 28,735 28,735 28,735
=================== =================== ==================
</TABLE>
SEE ACCOMPANYING NOTES.
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<TABLE>
<CAPTION>
SOUTHWARD VENTURES DEPOSITARY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 88,633 $ 74,916 $(21,326)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 16,510 12,818 10,998
Loss on cancellation of mortgage - - 147,280
Decrease in mortgage note receivable - - 5,290
Net (additions to) reductions of land and improvements
held for development or sale 6,570 (28,910) 5,608
Increase in other assets (23,781) (6,063) (6,965)
Decrease in deferred profit pursuant to the
installment method of accounting - - (4,129)
Increase (decrease) in account payable and
accrued liabilities 15,154 (22,692) 51,247
Decrease in accrued interest payable - - (10,876)
Decrease in net payable to GH Management (15,000) - -
(Decrease) increase in deposits on sales contracts (35,150) 5,150 9,225
-------- -------- ---------
Net cash provided by operating activities 52,936 35,219 186,352
-------- -------- ---------
Cash flows from financing activities:
Purchase of property and equipment (97,640) (17,002) (937)
-------- -------- ---------
Net cash provided by investing activities (97,640) (17,002) (937)
-------- -------- ---------
Cash flows from financing activities:
Proceeds from issuance of demand notes payable
to related parties 420,000 - 20,255
Repayments of demand notes payable to related parties (400,000) - (183,716)
Purchase of fractional trust units - (4,343)
-------- -------- ---------
Net cash (used in) provided by financing activities 20,000 (4,343) (163,461)
-------- -------- ---------
Net (decrease) increase in cash and cash equivalents (24,704) 13,874 21,954
Cash at beginning of period 42,147 28,273 6,319
-------- -------- ---------
Cash at end of period $ 17,443 $ 42,147 $ 28,273
======== ======== =========
Supplemental disclosures of Cash Flow information
Interest paid $ 2,466 - $ 18,328
Non-cash investing and financing activity
Sales of lot for trade of settlement for unpaid legal fees $ 14,089
Sale of lots for trade of truck benefiting GHC development - $ 20,000 -
Assumption of note payable by a related party - - $ 50,792
Purchase of fractional trust units 2,222 - -
</TABLE>
SEE ACCOMPANYING NOTES.
14
<PAGE>
SOUTHWARD VENTURES DEPOSITARY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
1. BACKGROUND AND SIGNIFICANT EVENTS
On May 13, 1982, a stockholders' depositary agreement ("Agreement") was
entered into between Southward Ventures, Inc. ("SVI") and First
American Bank. The Agreement created Southward Ventures Depositary
Trust (the "Trust"), also known as Shareholders of Southward Ventures,
Inc. Depositary Trust Agreement whereby the stockholders of SVI
converted shares of SVI stock into trust certificates of the Trust. The
Agreement culminated the liquidation of SVI pursuant to a plan of
complete liquidation and dissolution. All of the remaining assets and
rights to assets of SVI, including any contingent sums due and to
become due, were assigned by SVI to the Trust, subject to the remaining
liabilities and contingent liabilities of SVI. In 1985, the Trust
changed the Trustee from First American Bank ("Predecessor Trustee") to
Horizon Trust Company of Florida, Inc. which became Chemical Trust of
Florida, N.A. as the result of a corporate name change.
Pursuant to the Agreement, the Trustee was obligated to conserve,
protect, and liquidate the Trust's assets and to collect and distribute
the income and proceeds therefrom to the Trust Certificate Holders
after payment of, or provision for, expenses and liabilities. The
Trustee was only able to invest cash funds in interest bearing bank
accounts or obligations of the United States Treasury.
On January 1, 1990, Chemical Trust of Florida, N.A. resigned as Trustee
for the Trust and Mr. Gino DiMarco ("Trustee"), a former President of
SVI, was appointed as Trustee for the Trust. Prior to the resignation
of the prior Trustee, the Trustee rendered consulting services to the
Trust pursuant to an agreement whereby the Trust paid $2,000 per month
plus certain additional costs and expenses.
On February 5, 1990, the Agreement was amended ("Amendment")
principally to remove the obligation of the Trustee to make
distributions on certain dates, permit the Trust to engage in any
lawful activities, remove the restrictions on the investments of funds,
delete those provisions relating to the sale of the Utility System,
provide the Trustee with compensation of $36,000 per year, and to
provide that at any meeting, a majority interest of the trust
certificate holders will constitute a quorum. Additionally, pursuant to
the Amendment, the Trustee is required to obtain consent of at least
51% in interest of the Trust certificate holders to mortgage, encumber,
sell, transfer, or otherwise dispose of the Great Harbour Cay
properties; amend any instrument relating to or forming a part of the
Trust estate; amend the 1982 Agreement; or to borrow money and to
pledge or mortgage as security for the loan all or any part of the
Trust estate. In February 1991, the Agreement was amended to increase
the Trustee's annual compensation from $36,000 to $45,600. As of
September 30, 1995 the Agreement was amended to decrease the total
number of units of beneficial interest and amended again as of October
1, 1997 to further decrease the total number of units of beneficial
interest.
15
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Southward Ventures Depositary
Trust (Trust) include the accounts of the parent company, Trust, and
its wholly-owned inactive subsidiary, Southward Ventures Limited (SVL),
a Bahamian corporation, which is in the process of being voluntarily
dissolved..
REVENUE RECOGNITION FOR REAL ESTATE SALES
In July 1993, the Trust sold the marina and certain other properties
pursuant to the Lease Termination Agreement (Note 10). In accordance
with Statement of Financial Accounting Standards No. 66, "Accounting
for Real Estate Sales", until August 1, 1996, revenue was recognized
under the installment method of accounting. The installment method
apportions each cash receipt and principal payment by the buyer on debt
assumed between cost recovered and profit. Since the marina properties
were repossessed during 1996, revenue is no longer recognized.
REVENUE RECOGNITION FOR RENTAL INCOME
In August 1996, the Trust consented to a ten year operating lease
(Lease) with GHM, a related party (Note 9). The Lease contains a rent
provision that increases the annual lease payment in the third and in
the fifth years of the Lease. In accordance with Statement of Financial
Accounting Standards No. 13, "Accounting for Lease Transactions", the
total value of the amounts due for the ten-year lease period is
amortized on a straight-line basis to determine the annual amount of
rental revenue to be recognized. The difference between the amount of
rent received and the amount recognized amounts to $14,400 in 1998 and
1997, respectively and $6,000 in 1996. These amounts are recorded as a
deferred asset and are included in other assets on the Balance Sheet.
DEPRECIATION
Depreciation is computed using the straight line method over the
estimated useful lives of the assets as follows: buildings and
improvements - 10 to 15 years; machinery and equipment - 5 to 7 years;
and office furniture and equipment, and automobiles - 3 to 5 years.
When assets are retired or otherwise disposed of, the related costs and
accumulated depreciation are removed from the accounts and any related
profit or loss is recognized. Maintenance and repair costs are charged
to expense as incurred, and renewals and improvements are capitalized.
OTHER INCOME
Other income for the year ended December 31, 1996 is comprised
principally of airport landing fees approximating $15,322 and marina
fuel and dockage income of $113,721. The marina related income was
generated when the Trust exercised its right to repossess the marina
due to a default on a mortgage note receivable (Notes 4 and 9). As of
August 1, 1996, the marina and other properties became subject to a
lease agreement between the Trust and GHM, a related party (Note 10).
16
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The taxation of amounts received by the Trust, and ultimately the Trust
certificate holders, depends upon the manner in which the Internal
Revenue Service views certain of the transactions which have occurred.
No advance ruling has been requested from the Internal Revenue Service
as to any of the federal income tax consequences of the transactions,
and no such request is anticipated. If the pass-through aspects of the
Trust are respected by the Internal Revenue Service, then each time the
Trust has taxable income or deductions, the Trust certificate holders
will be deemed to have their pro-rata shares of such taxable income or
deductions.
Accordingly, based on the pass-through aspect, no provision has been
made for income taxes since such taxes, if any, would be the liability
of the Trust certificate holder.
NET INCOME (LOSS) PER TRUST UNIT
Net income or loss per trust unit is based upon the authorized units
which were issued or eligible for issuance during the periods.
FOREIGN CURRENCY TRANSLATION
The Trust's primary functional currency is the U.S. dollar.
Accordingly, the Trust translates monetary assets and liabilities at
exchange rates during the year. Income and expense accounts are
translated at the average rates in effect during the year. Therefore,
translation adjustments and transaction gains or losses are recognized
in income in the year of occurrence.
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 amounts reported in the financial
statements and accompanying notes. Although these estimates are based
on management knowledge of current events and actions it may undertake
in the future, they may ultimately differ from actual results.
3. TRUST ASSETS
LAND AND IMPROVEMENTS HELD FOR DEVELOPMENT OR SALE
In 1986, The Trust obtained title to certain real estate located in
Great Harbour Cay, the Bahamas (the "Island") as a result of a
foreclosure action for non-payment of a mortgage note receivable. The
basis of the real property was determined by allocating the outstanding
balance of the note receivable together with unpaid interest at the
time of foreclosure, in addition to unpaid real estate taxes,
documentary stamps, and other costs incidental to the foreclosure
proceedings to the various real estate holdings based on the relative
fair market values. The total amount of real estate taxes capitalized
to the cost of
17
<PAGE>
3. TRUST ASSETS (CONTINUED)
LAND AND IMPROVEMENTS HELD FOR DEVELOPMENT OR SALE (CONTINUED)
the real estate amounted to $211,575. The total value assigned to the
real estate is not considered to be in excess of net realizable value.
OTHER ASSETS
At December 31, 1998, and 1997, other assets consist primarily of a
deferred asset pursuant to the GHM lease agreement (Note 1), and
deposits made with the Registrar and Transfer agent in connection with
the reduction of outstanding units. (Note 8).
4. MORTGAGE NOTE RECEIVABLE
In July 1993, the Trust sold the marina and certain other properties
pursuant to a Lease Termination Agreement that was executed in 1993. As
part of the consideration, the buyer, HBL, issued a promissory note
payable ("Note") that was secured by a purchase money mortgage (Note
8). The Note required monthly payments of $8,098, had a ten-year
amortization, bore interest at the rate of 9% per annum and had a
balloon payment of $639,234 at the end of year ten in 2003. In April
1996, HBL defaulted on the payment provisions of the Note and
thereafter the Trust took possession of the properties. A loss of
$147,280 has been recognized in 1996 (Note 9) as a result of the
default and the re-taking of the properties.
5. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998 and 1997 are comprised of
the following:
1998 1997
Building and improvements $ 310,787 $ 216,962
Machinery and equipment 67,287 67,288
Office furniture and equipment 20,564 16,748
Automobile 5,687 5,687
---------- ----------
404,325 306,685
Less accumulated depreciation (239,309) (222,799)
---------- ----------
$ 165,016 $ 83,886
========== ==========
In 1998 and 1997 various improvements to the Trust property have been
made and charged to the Trust by GHM. These charges comprised costs of
building demolition, electrical upgrades to existing structures and land
clearing.
6. NET PAYABLE TO GREAT HARBOUR MANAGEMENT, LTD.
Great Harbour Management, Ltd., ("GHM"), a Bahamian corporation, is owned
beneficially 100% by the four adult children of T. D. Fender, who was a
related party. T. D. Fender owned 100% of Southward Acquisition
Corporation ("SAC") and SAC owned 73.4% of the beneficial units in the
Trust through December 13, 1998. SAC was voluntarily dissolved on
December 17, 1998.
18
<PAGE>
6. NET PAYABLE TO GREAT HARBOUR MANAGEMENT, LTD. (CONTINUED)
In 1998 and 1997 GHM and other companies under the control of T. D.
Fender (collectively referred to as "Related Companies") performed
various repairs and improvements on the Island for the benefit of the
Trust. These charges totaled approximately $68,968.88 and $53,493 in
1998 and 1997 respectively. Additionally, Related Companies charged the
Trust approximately $6,280 and $13,336 in 1998 and 1997 respectively,
rent for storage of the prefabricated house held for resale and included
in inventory. The amounts charged in 1997 were offset against lease
payments due pursuant to the lease agreement (Note 10) that amounted to
$25,000 and two lots which were valued at $20,000 were exchanged for
three trucks that were titled to GHM. As of December 31, 1997, a net
payable of $15,000 was due to GHM that offset rent payments due under
the lease agreement (Note 10) through March 1998.
7. NOTE PAYABLE
Note payable to Great Harbour Management, Inc. a related party,
interest at 12%, due on demand, $20,000.
8. TRUST CERTIFICATE HOLDERS' EQUITY
Effective October 31, 1997, Gino J. Di Marco, as Trustee of the
Registrant and Southward Acquisition Corporation, as majority in interest
Trust Certificate Holder, amended the Shareholders' Depositary Agreement
dated May 13, 1982 to reduce the number of authorized Units of beneficial
interest to 28,735 units. The presentation of net income or loss per unit
for all years presented was retroactively applied based on 28,735 units.
Each unit holder of record as of October 31, 1997 is entitled to receive
one unit of beneficial interest in exchange for each 110 units held as of
the record date. No trust certificates for fractional units are to be
issued and in lieu thereof, "cash in lieu" checks will be computed on the
basis of $1.00 per unit outstanding on the record date prior to giving
effect to the above reduction of outstanding units. The $1.00 valuation
was based upon an appraisal of the Trust's real estate holding on Great
Harbour Cay, Berry Islands, Bahamas. Said valuation was not based upon
the then current over-the-counter market price of approximately $.30 to
$.35 per unit.
9. REAL ESTATE SALES
Effective November 1987, the Trust consented to a ten-year lease
("Lease") for the marina, fuel facilities, water plant and airport. In
connection with the renegotiated lease, the tenant had an option to
purchase the marina and the airport for $1,250,000 and $500,000,
respectively, through November 1992, and for $1,625,000 and $650,000,
respectively, through November 1997.
In October 1992, the Trust entered into a Lease Termination Agreement
("Agreement") with HBL to exercise the purchase option as to the marina
and certain land located in Tract "YY", Unit 6, of the Island for a
purchase price of $1,010,000. Additionally, the Agreement terminated the
purchase option as to the airport, the warehouse located in Tract 3E and
the balance of the Lease term. With regard to the airport, HBL agreed to
convey the improvements made by HBL at no cost to the Trust.
Pursuant to the Agreement, HBL remitted from time to time the required
deposits totaling $92,500 to the Trust. Additionally, HBL issued a
promissory note payable of $900,000 secured by a purchase money mortgage
to the benefit of the Trust (Note 4). As part of the purchase price, HBL
issued store credits for products and/or services sold on the Island for
$17,500.
19
<PAGE>
9. REAL ESTATE SALES (CONTINUED)
This transaction was accounted for in accordance with Statement of
Financial Accounting Standards No. 66, "Accounting for Real Estate
Sales", whereby certain minimum initial and continuing investment
provisions are required to be met by HBL in order to recognize revenue
by the full accrual accounting method. HBL did not meet the initial
investment provision. Accordingly, the sale was accounted for by the
installment method whereby profit is recognized on the proportion of the
down payment and principal payments received to the total debt assumed
by HBL. Any profit not recognized was deferred until subsequent
principal payments and cash are received.
The deferred profit at December 31, 1996 was calculated as follows:
1996
----
Sales Price $1,010,000
Less: Rent Receivable (119,520)
Deferred asset (81,665)
----------
Adjusted sales price 808,815
Cost of sales 20,614
----------
Gross profit $ 788,201
----------
Gross profit percentage 78.04%
Revenue recognized $ 4,129
----------
Profit deferred $ 690,611
----------
The deferred asset and rent receivable represents the difference between
the aggregate rental income recognized under the prior ten-year HBL
lease agreement on a straight-line basis and the amount of cash received
pursuant to the HBL lease agreement. In July 1993, the HBL lease
agreement was terminated and HBL exercised its purchase option
pertaining to the marina and some ancillary properties. The remaining
balances of the deferred asset and rent receivable reduced the sales
price of the properties sold.
In April 1996, HBL discontinued payments required under the terms of the
mortgage note receivable and advised the Trust that further payments
would not be made. Accordingly, the Trust exercised its right to re-take
possession of the properties and has recovered possession of the marina
and the other Great Harbour Cay properties encumbered by the purchase
money mortgage in favor of the Trust. Consequently, the properties are
included in land and improvements held for development or sale at
December 31, 1996, and a loss of $147,280 was recognized on the default
and re-taking of the properties and is presented as an unusual item in
the accompanying statement of operations for 1996. As of December 31,
1996, deferred profit is 0 as a result of repossession of the marina
properties.
In 1998, the Trust sold five (5) single family lots for $337,000. The
Trust exchanged one (1) single family lot in settlement for amounts due
for legal services.
In 1997 the Trust sold 3 single-family lots for $300,000 and the Tamboo
Club for $25,000. Additionally, the Trust exchanged two lots for three
trucks that were titled to GHM, a related party. This exchange was
recorded as a sale for $20,000 with a receivable due from GHM. (Note 6).
In 1996 the Trust sold five single family lots for a total of $322,000
20
<PAGE>
10. LEASE OF GREAT HARBOUR CAY PROPERTIES
In August 1996, the Trust consented to a ten-year lease of the marina,
warehouse and fuel dock areas, the airport and Links Apartments with
Great Harbour Management, Ltd., ("GHM"), a related party. The Lease may
be terminated by the Trustee at any time upon thirty (30) days written
notice of the sale of all or any portion of the leased properties.
The Lease requires annual rent in the amount of $60,000 during the first
year, $72,000 per annum for the third through fourth years of the Lease
term and $84,000 per annum for the remaining six years of the Lease
term. The rent is due on the first of every month with the exception
that during the first four months of the Lease, rent was waived in
exchange for substantial repairs performed by GHM on the properties
subject to the Lease. Additionally, GHM is responsible for payment of
all real estate taxes and other assessments on the leased properties;
for repairing and maintaining the properties; for providing all
necessary insurance and licenses; and for operating the various
facilities subject to the Lease during specific business hours. At
December 31, 1997 and subsequently , GHM has not provided insurance for
the Airport.
The monthly rent for August through November, 1996, was recorded and
repair expenses in the same amount were recognized.
11. PRIOR PERIOD ADJUSTMENTS
In 1998, the Trust received from GHM, a related party, a bill for
certain repairs and improvements that were performed on various
properties on the Island. Through negotiation and application of offsets
by the Trust and GHM, the amount of the bill was compromised. Some of
these repairs related to a period before the lease agreement in 1996 and
as such were recorded in the year ended December 31, 1997.
12. COMMITMENTS AND CONTINGENCIES
PENDING LITIGATION
In 1993, the Trust filed a complaint against an individual asserting
claims for conversion and civil theft in relation to computer hardware
and software which was ordered, paid for, but never delivered to the
specified entity. The Trust did not prevail in a jury trial of the civil
theft case. The Trust undertook an appeal of the adverse decision but
the Trust's appeal was not successful
Since the Trust was not successful in that claim, the defendant's
attorneys fees and costs could be assessed against the Trust. In the
opinion of the Trustee, it is not possible at this time to assess the
amount of such fees and costs. However, as the matter has been
vigorously litigated since 1993, these fees and costs could be
substantial and have a material effect on the financial statements. A
Motion to Tax Costs was heard on September 26, 1997. Although the
judgement has not been entered as of this date, it is expected that the
Defendant will be awarded against the Trust approximately $2,634 plus
interest from the date the judgement is signed for costs and an
undetermined amount for attorneys fees.
21
<PAGE>
12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
OFFICE LEASE
On August 1, 1994, the Trust moved its office to Boynton Beach, Florida
and leased space on a month-to-month basis that it shared with
Southward Acquisition Corporation, which was the majority unit holder of
the Trust. T. D. Fender, who was the principal of Southward Acquisition
Corporation was the owner of the building in which the Trust was
leasing its office space. The Trust's portion of the monthly rental was
$400 until December 31, 1998 and $500 per month thereafter. The amount
of annual rent expense to related parties recognized during each of the
years ended December 31, 1998, 1997 and 1996, is $4,800.
The office space in Boynton Beach is on a month to month basis at
$500.00 per month commencing January 1, 1999.
Effective March 31, 1999 the Trust is relocating to 2499 Glades Road,
Suite 203, Boca Raton, Florida 33431. This leased space is on a
month-to-month basis at a rate of $500 per month.
BAHAMIAN REAL PROPERTY TAXES
The Trust has been advised by the Ministry of Finance of the
Commonwealth of the Bahamas that property taxes pertaining to lots
located on Great Harbour Cay were not included in a prior settlement
that was understood to encompass all of the Trusts' properties on Great
Harbour Cay. The Trust does not currently possess sufficient information
to reasonably estimate the amount of liability to be recorded. However,
the Trust believes that based upon future developments and
determinations, it is possible the amount could have a material effect
on the financial statements.
22
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) IDENTIFICATION OF TRUSTEE
The Trust is administered by a single Trustee, Gino J. DiMarco, at 2499 Glades
Road, Boca Raton, Florida 33431.
(b) IDENTIFICATION OF TRUSTEE
POSITIONS AND OFFICES
NAME AGE TERM OF OFFICE HELD WITH THE TRUST
- --------------------------------------------------------------------------------
Gino J. DiMarco 86 January 1990 Trustee
to present
(c) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES/CONSULTANTS
Since January 1, 1990, Mr. Gino J. DiMarco has served as Trustee.
(d) FAMILY RELATIONSHIPS
Not applicable.
(e) BUSINESS EXPERIENCE
GINO J. DIMARCO. Mr. DiMarco is an attorney-at-law admitted to practice in
the State of New York. On January 1, 1979, Mr. DiMarco was elected President of
Southward Ventures, Inc. and its subsidiary, South Palm Beach Utilities Corp.,
and served until the voluntary liquidation of both companies.
(f) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
None.
ITEM 11. EXECUTIVE COMPENSATION
On December 28, 1989, pursuant to Articles 11 and 12 of the Shareholders'
Depositary Agreement dated May 13, 1982, Southward Acquisition Corporation,
acting as a majority of the beneficiaries of the Trust, designated and consented
to the appointment of Gino J. DiMarco as successor Trustee of the Trust
effective January 1, 1990. During 1990, Mr. DiMarco served as
23
<PAGE>
Trustee for a fixed fee of $36,000 per year, with no guaranteed minimum term.
Effective as of February 5, 1991, the Shareholders' Depository Agreement was
amended to increase the Trustee's compensation to $45,600 per annum. The
Shareholders' Depository Agreement provides a minimum four months advance notice
in the event of the Trustee's termination. Mr. DiMarco provides his own local
transportation but is reimbursed by the Trust for out-of-town travel and
reasonable out-of-pocket expenses.
Under the terms of Mr. DiMarco's remuneration agreement, the Trust is
required to establish and maintain its own office and pay its own overhead
operating expenses including but not limited to telephone and secretarial
services.
During 1998, Mr. DiMarco received $45,600 in compensation and $2,775.65 in
reimbursed expenses. A majority of Mr. DiMarco's expense reimbursements were
travel-related to Nassau and Great Harbour Cay, Bahamas.
SUMMARY COMPENSATION TABLE
<TABLE>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
- --------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
<S> <C> <C> <C> <C> <C> <C>
Other Re- Securities
Name & Annual stricted Under
Principal Compen- Stock lying
Position Year Salary Bonus sation Award(s) Options/
($) ($) ($) ($) SARs(#)
- --------------------------------------------------------------------------------------------------------
Gino J. DiMarco 1998 $45,600 0 0 0 0
1997 $45,600 0 0 0 0
1996 $45,500 0 0 0 0
</TABLE>
LONG TERM COMPENSATION (CONT.)
- -----------------------------
PAYOUTS
- -------
(h) (i)
LTIP All Other
Payments Compensation
($) ($)
0 0
0 0
0 0
DIRECTOR COMPENSATION
Not Applicable
24
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTRACTUAL
ARRANGEMENTS.
The Trustee's entitlement upon termination is four months of compensation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Not Applicable
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Not Applicable
PERFORMANCE GRAPH
Not Applicable
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
As of December 31, 1998 the following persons are known to the Trust who own
of record or beneficially more than five percent (5%) of the Trust's voting
interests.
<TABLE>
TITLE OF NAME AND ADDRESS AMOUNT AND NATURE PERCENT
CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Units of Pentelle Investments Inc. 73.44% (after
Benefi- 6 Hachita Street Shoham 73142 giving effect to all
cial Post Office Box 841 21,103 post-exchange units
Interest Tel Aviv, Israel post-exchange units to be issued upon
Direct and Indirect submission for ex-
change)
</TABLE>
(b) Security Ownership of Management
No Trust Certificates are beneficially or otherwise owned by the Trustee.
(c) Changes in Control
None
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
As of August, 1996, the Trust consented to a ten-year lease of the marina,
warehouse and fuel dock areas, the airport and the Links Apartments with Great
Harbour Management Limited, which was an affiliated and control party. The Lease
includes the Links Apartments and the
25
<PAGE>
airport on Great Harbour Cay in addition to those properties previously held by
HBL Marina Limited. Great Harbour Management Limited is a Bahamian company which
is wholly owned beneficially by the four adult children of T. D. Fender, who was
an affiliated party and who owned one hundred percent (100%) of Southward
Acquisition Corporation. Until December 14, 1998, Southward Acquisition
Corporation owned 21,103 units which represented 73.44% of the post-exchange
units of beneficial interest of the Trust which will be outstanding upon
completion of the exchange.
The Lease may be terminated by the Trustee at any time upon thirty (30)
days written notice of the sale of all or any portion of the leased properties.
It requires annual rent in the amount of $60,000. The rent provision in the
Lease provides for rent of $72,000 per annum for the third through fourth years
of the Lease term and $84,000 per annum for the remaining six years of the Lease
term. The rent is due on the first of every month with the exception that during
the first four months of the Lease, no rent was paid in exchange for substantial
repairs performed by Great Harbour Management Limited on the properties subject
to the Lease. Additionally, Great Harbour Management Limited is responsible for
payment of all real estate taxes and other assessments on the leased properties;
for repairing and maintaining the properties; for providing insurance and all
necessary licenses; and for operating the various facilities subject to the
Lease during specific business hours. It is not known if the rental payments and
fees that are received by the Trust are equivalent to that which would have been
received as fair market value from an unaffiliated third party since no
competitive offers were made by any third parties. As of December 31, 1998, the
rental payments due under the lease were two months in arrears.
During January, 1998 Great Harbour Management Limited, while it was
affiliated and control party, presented the Trust with an invoice for
$100,709.97 for various repairs, capital improvement expenses, and storage
charges for a prefabricated house. The invoice included prior periods starting
in 1995 which had not been previously invoiced to the Trust and which could not
be fully supported by adequate substantiating cost documentation. As a result of
the disputed items and various offsets claimed by each party against the other,
the claims of each party were compromised to both equal $66,828.92. As a result,
the Trust relinquished its claim for an account receivable due from Great
Harbour Management Limited arising from 1996 and 1997 in the amount of
$8,828.97, conveyed two lots in a barter transaction for three trucks that were
titled to Great Harbour Management Limited, and waived collection of rent
payments due from Great Harbour Management Limited for the period August, 1997
through March, 1998. On April 16, 1998, a compromise agreement was executed by
both the Trust and Great Harbour Management Limited settling this dispute.
Subsequently, but retroactively effective as of April 9, 1998 the Trust executed
an amendment to the lease which resulted in the expenditure of an additional
$97,640.00 in 1998 in capital improvements to the leased properties. It has been
agreed that capital improvements shall remain the property of the Trust upon
termination of the lease.
On March 12, 1999 Pentelle Investments Inc., the Trust's controlling
beneficial owner, made a loan to the Trust in the amount of $15,000 for working
capital. This loan is evidenced by a promissory note which is due on demand and
bears interest at the rate of 10% per annum.
26
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) All financial statements and financial statement schedules to be
filed for the year ended December 31, 1998 are hereto and indexed as Rider 8(a).
(b) Form 8-K's
On June 19, 1998, the Trust filed a Form 8-K pertaining to the execution of
a Purchase and Sale Agreement (hereinafter the "Agreement") by Indeco, Inc. and
T. D. Fender, who was the sole shareholder and President of Southward
Acquisition Corporation, which was the majority unitholder of the Trust. On
September 17, 1998, the Trust filed a Form 8-K pertaining to the termination of
that Agreement by Indeco, Inc.. Accordingly, it was reported that the potential
change of control would not occur as a result of that Agreement.
On December 22, 1998, the Trust filed a Form 8-K pertaining to the
execution of a Purchase and Sale Agreement (hereinafter the "Agreement") by
Pentelle Investments Inc. and T.D. Fender, who was the sole shareholder and
President of Southward Acquisition Corporation, which was the majority
unitholder of the Trust. Accordingly, it was reported that a change of control
had occured as a result of the Agreement, but that it was subject to a pledge
and escrow agreement pertaining to full payment of the purchase price.
(c) Exhibits
27.1 Financial Data Schedule
(d) Not applicable.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SOUTHWARD VENTURES DEPOSITARY TRUST
(Registrant)
BY:/s/ GINO J. DIMARCO, TRUSTEE
-------------------------------
Gino J. Dimarco, Trustee
Dated: March 31, 1999
28
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 17,443
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 634,575
<CURRENT-ASSETS> 0
<PP&E> 165,016
<DEPRECIATION> 0
<TOTAL-ASSETS> 872,074
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 872,074
<SALES> 350,586
<TOTAL-REVENUES> 434,298
<CGS> 6,570
<TOTAL-COSTS> 342,586
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 86,633
<INCOME-TAX> 0
<INCOME-CONTINUING> 86,633
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86,633
<EPS-PRIMARY> 3.09
<EPS-DILUTED> 0
</TABLE>
