<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
- ---
1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996.
------------------
___ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
COMMISSION FILE NUMBER: 0-16835 (FORMERLY 33-12125)
---------------------------
SOUTHEAST ACQUISITIONS I, L.P.
-------------------------------
(Name of issuer in its charter)
<TABLE>
<S> <C>
Delaware 23-2454443
- -------------------------------- ----------------------------------------------
(State of incorporation or (IRS Employer Identification
organization) Number)
</TABLE>
<TABLE>
<S> <C>
250 King of Prussia Road, Radnor, Pennsylvania 19087
- ---------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone no., including area code: (610) 964-7234
- ------------------------------------------------------------
</TABLE>
Securities registered pursuant to Section 12(b) of the Act.
<TABLE>
<S> <C>
Name of each exchange
Title of each Class on which registered
------------------- ------------------------
None Not Applicable
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units $1,000 Per Unit
-----------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past (90) days. Yes X No
---- ----
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
is not contained in this form, and no disclosure will be contained, to the best
of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. X
--------
<PAGE> 2
SOUTHEAST ACQUISITIONS I, L.P.
FORM 10-K
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ITEM
- ----
PART I
- ------
Item 1. Business
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Material Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Trademarks and Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
PART II
- -------
Item 5. Market for the Partnership's Units of Limited
Partnership Interest and Related Security
Holder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C> <C>
PART III
- --------
Item 10. Directors and Executive Officers of the . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 12. Security Ownership of Certain Beneficial
Owners and Management
(a) Security Ownership of Certain
Beneficial owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Security Ownership of Management . . . . . . . . . . . . . . . . . . . . . . 10
(c) Changes in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . 11
PART IV
- -------
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
3
<PAGE> 4
PART I
ITEM 1. BUSINESS
Background
Southeast Acquisitions I, L.P. (the "Partnership") was formed
on December 5, 1986, as a Delaware limited partnership. On January 2, 1987,
the Partnership acquired 202.72 acres of unimproved land (the "Property") near
Columbia, South Carolina. The Partnership's primary business objective is to
realize appreciation in the value of the Property by holding the Property for
investment and eventual sale, although there is no assurance that this will be
attained. The Partnership is scheduled to terminate on December 31, 1997.
The Partnership's public offering of 4,225 units of limited
partnership interest ("Units") commenced on May 14, 1987 and terminated on June
5, 1987. As of the close of the offering, the Partnership had raised
$4,225,000 through the sale of 4,225 Units.
The Partnership has been marketing the Property and expects
that it will dispose of the Property as conditions warrant. The Property may
be sold in a single sale or divided into parcels which will be sold separately.
The timing and manner of sale will be determined by Southeast Acquisitions,
Inc., the General Partner of the Partnership. The General Partner has the
right to sell Property, or portions thereof, without the consent of the
Limited Partners. However, the Limited Partners must consent to the sale of
all, or substantially all, of the Property if the net proceeds of the sale will
not be sufficient to return the Limited Partners' Adjusted Capital
Contributions plus the 10% Cumulative Annual Return.
Given that there have been very few large tract sales in this
Columbia sub-market, and those few that occurred during the past three years
were for prices well below what smaller size parcels were receiving, the
General Partner adopted a strategy in late 1995 to sell smaller parcels.
During 1996 there was only one party with whom serious discussions were held
regarding a ten acre parcel. These discussions did not result in a sale.
The General Partner believes that the Partnership's cash
reserves will be sufficient to last for at least three more years assuming no
significant increases in expenses. However, if the reserves are exhausted and
the Partnership is unable to borrow funds, the Partnership may have to sell the
Property on unfavorable terms.
To facilitate the sale of smaller parcels, the Partnership
may be required to construct a stub road into the Property off Killian Road.
The Partnership entered into a timber contract in 1996 that required the
timber company to locate one of their timber roads in the likely location for
the stub road. The location of the timber road should reduce the cost of the
stub road construction in the event a stub road is necessary. The General
Partner has neither determined to construct, nor have sales of the Property
required the construction of, a stub road as of this date.
4
<PAGE> 5
Material Recent Developments
None
Employees
The Partnership presently has no employees. The General
Partner manages and controls the affairs of the Partnership. (See Part III,
Item 10, Directors and Executive Officers of the Partnership).
Competition
The General Partner believes that there is significant direct
competition within a five mile radius of the Property. The Property consists
of 202.72 acres of undeveloped land situated in the southwest quadrant of the
intersection of Interstate 77 ("I-77") and Killian Road. Killian Road is one
of only three interchanges with I-77 in the Columbia standard metropolitan
statistical area.
Undeveloped land intended for industrial use is abundant in
northern Richland County. The South Carolina Department of Commerce has
provided information on approximately 5,000 acres of available industrial sites
in the I-77 Business Corridor within five miles of the Partnership's Property.
The properties in the area having the largest potential effect on the market
for industrial sites are the Barnett site, the IBM site, the Sony site and
Northpoint Business Park.
Absorption of industrial sites by end users has been slow
along the I-77 Business Corridor.
Trademarks and Patents
The Partnership has no trademarks or patents.
ITEM 2. PROPERTY
5
<PAGE> 6
Other than the 202.72 acres of undeveloped land discussed
above, the Partnership owns no other properties.
During 1996, Management of the General Partner commissioned an
appraisal of the Property in an ongoing effort to assess its current market
value and the best ways to market and sell the Property.
The appraiser evaluated a bulk sale of the Property which
resulted in a current value of $2,800,000 ($13,800 per acre).
The findings of the appraiser have been supported by the
information gathered as a result of the General Partner's conversations and
meetings with the appraiser, brokers, developers in the area and the South
Carolina Department of Commerce.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not directly a party to, nor is the
Partnership's Property directly the subject of, any material legal proceedings.
However, on November 6, 1992, the Commonwealth Court of Pennsylvania issued an
order placing The Fidelity Mutual Life Insurance Company ("Fidelity Mutual"),
the indirect parent of the General Partner of the Partnership, into
rehabilitation under the control and authority of the Pennsylvania Insurance
commissioner pursuant to the provisions of the Pennsylvania Insurance
Department Act, 40 P.S . Section 221.1 et seq. The Partnership is not a direct
party to the order, but ownership of the stock of (and consequently control of)
the General Partner is vested in the Insurance Commissioner pursuant to the
order.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during
the fiscal year ended December 31, 1996.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S UNITS OF LIMITED PARTNERSHIP
INTEREST AND RELATED SECURITY HOLDER MATTERS
There is no established public trading market for the Units
and it is not anticipated that any will develop in the future. The Partnership
commenced an offering to the public on May 14, 1987 of 4,225 Units of limited
partnership interests. The offering of $4,225,000 was fully subscribed and
terminated on June 5, 1987. As of December 31, 1996, there were 214 limited
partners in the Partnership.
ITEM 6. SELECTED FINANCIAL DATA
6
<PAGE> 7
<TABLE>
<CAPTION>
For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended
December 31 December 31 December 31 December 31 December 31
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating
Revenues $56,856 $ 1,952 $ 2,032 $ 3,282 $ 4,640
Net (Loss) $(954,284)* $(6,520) $(17,089) $(21,080) $(18,082)
Net (Loss) per
Unit of
Limited
Interest $(225.87) $(1.54) $(4.04) $(4.99) $(4.28)
</TABLE>
<TABLE>
<CAPTION>
December 31 December 31 December 31 December 31 December 31
1996 1995 1994 1993 1992
---- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C>
Total Assets $2,611,596* $3,564,268 $3,572,614 $3,590,840 $3,634,391
Long Term
Obligations None None None None None
Cash Distributions
Declared per Unit
of Limited
Partnership
Interest None None None None None
</TABLE>
* Includes a provision for loss on land of $996,645.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Background
The Partnership was formed to acquire and realize appreciation
in the Property by holding it for investment and eventual sale. However, there
can be no assurance that the Partnership's objectives will be realized.
Results of Operations
The Partnership had no operations from the date of its
formation on December 5, 1986 until January 2, 1987 when it acquired the
Property. Since its acquisition of the Property, the
7
<PAGE> 8
Partnership offered and sold 4,225 Units of limited partnership interests and
obtained the rezoning of the Property, but has had no other significant
operations.
The Partnership's activities for fiscal year 1996 were
primarily focused on selling the Property. During 1996, the Partnership
received proceeds from the sale of timber totaling $54,000. Revenues for 1996
also consisted of interest income of $2,656 and partnership transfer fees of
$200. Expenses for 1996 consisted of general and administrative costs of
$14,020, insurance of $184 and real estate taxes of $291. The increase in the
general and administrative costs during 1996 is primarily the result of the
$2,500 cost of the appraisal commissioned on the Property and legal fees
associated with the preparation of investor communications.
An appraisal was commissioned in 1996 as the last appraisal
was four years old. The 1996 appraiser determined the fair value for the
Property to be $2,800,000. The prior appraiser had established a value of
$4,055,000. The General Partner reviewed the assumptions and conclusions of
the appraisal and met with the appraiser, numerous local real estate
professionals, the Central Carolina Economic Development Alliance, and the
South Carolina Department of Commerce to confirm the reasonableness of the
appraisal. Based upon the result of these activities, the General Partner
concluded that the 1996 appraisal is a reasonable approximation of the
Property's current market value. As a result, the Partnership adjusted the
carrying value of the Property to reflect its fair value, less estimated
disposition costs, in accordance with generally accepted accounting principals
for land that is held for sale.
The 1996 and 1992 appraisals were prepared using essentially
the same assumptions and methodology, but differ as a result of changing market
conditions. In both cases, there were very few sales in the vicinity to be
used as comparable transactions and there was an abundance of land available
for development. There were a few sales of developed land in the area between
1992 and 1996 that enabled the 1996 appraiser to perform some additional
analysis of the Property's value and this analysis led to the conclusion of the
lower value. During the period between 1992 and 1996, based on management's
knowledge of the limited number of land sales and overall market conditions and
its disposition plans for the Property, there was no reason to conclude that
there had been a diminution in value.
The Partnership's activities for fiscal year 1995 were
primarily focused on selling the Property. Revenues for 1995 consisted of
interest income of $1,727 and partnership transfer fees of $225. Expenses for
1995 consisted primarily of general and administrative costs of $7,977,
insurance of $204, and real estate taxes of $291.
The Partnership's activities for fiscal year 1994 were
primarily focused on selling the Property. Revenues for 1994 consisted of
interest income of $1,657 and partnership transfer fees of $375. Expenses for
1994 consisted primarily of general and administrative costs of $7,653,
management fees of $8,100, insurance of $3,082, and real estate taxes of $286.
Inflation did not have any material impact on operations
during 1996.
8
<PAGE> 9
The General Partner is marketing this property and in March of
1996, the 202.72 acres was designated as part of the State of South Carolina's
Enterprise Zone. This designation is at least partially the result of numerous
conversations with the Department of Commerce over the past year. By being
awarded this designation, it means that special tax and other incentives will
be available to industrial users who locate on the Partnership's property.
Liquidity and Capital Resources
The Partnership has cash reserves of $91,596 at December 31,
1996, which will be used to cover the following estimated annual costs: $13,000
per year for auditing, accounting, tax and other administrative services, $200
per year for insurance and $300 per year for real estate taxes. In the General
Partner's opinion, the Partnership's reserves will be sufficient for an
additional three years. However, if additional expenses are incurred or should
the Partnership decide to construct infrastructure improvements to enhance the
marketability of the Property, the reserves may be inadequate to cover the
Partnership's operating expenses. If the reserves are exhausted, the
Partnership may have to dispose of some of the Property or incur indebtedness
on unfavorable terms.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Partnership's financial statements for the years ended
December 31, 1996 and 1995 together with the report of the Partnership's
independent auditors, Ernst & Young LLP, is included in this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Partnership does not have any directors or officers. The
General Partner manages and controls the affairs of the Partnership and has
responsibility for all aspects of the Partnership's operations. The current
executive officers and directors of the General Partner are identified and
described below. Officers and directors serve until their successors have been
elected.
Arthur W. Mullin, Age 51. Mr. Mullin was elected a Director of
the General Partner in 1993. Mr. Mullin has also served as the President and
Treasurer of the General Partner since 1993. Mr. Mullin, originally retained as
a consultant to Fidelity Mutual in 1993, was appointed Senior Vice President
and Director of Real Estate for Fidelity Mutual the same year and served in that
capacity until 1995. Mr. Mullin resumed his consulting relationship with
Fidelity Mutual in 1995. Mr. Mullin received a B.S. in Political Science and
M.S. in Education from St. Joseph's University.
9
<PAGE> 10
William S. Taylor is Director and Vice President of the
General Partner. Mr. Taylor is also an officer and director of various other
subsidiaries of Fidelity Mutual. Mr. Taylor is the Deputy Insurance
Commissioner for Liquidations, Rehabilitations and Special Funds for the
Commonwealth of Pennsylvania. Mr. Taylor has a bachelor's degree in Economics
from Elizabethtown College and a masters degree in Governmental Administration
from the University of Pennsylvania.
James W. Kelican, Jr., CPM, is a Director and Vice President
of the General Partner. Mr. Kelican is also an officer and director of various
other subsidiaries of Fidelity Mutual. Mr. Kelican was appointed Vice
President - Real Estate for Fidelity Mutual in July, 1993 and Senior Vice
President and Director of Real Estate in October 1994. Mr. Kelican has a B.S.
in Business Administration from Drexel University, Philadelphia, Pennsylvania
and has the title of Certified Property Manager from the Institute of Real
Estate Management of the National Association of Realtors.
Robert Bixler is Secretary of the General Partner. Mr. Bixler
is also Secretary of various other subsidiaries of Fidelity Mutual. Mr. Bixler
is a Vice President and Associate Counsel of Fidelity Mutual. Mr. Bixler
received his A.B. degree in Economics from Temple University, and his J.D.
degree from Temple University Law School, Philadelphia, PA. He is a member of
the American Bar Association and the Philadelphia Bar Association.
Margaret Tamasitis is Assistant Secretary of the General
Partner. Ms. Tamasitis is also Assistant Secretary of various other
subsidiaries. Ms. Tamasitis is a Second Vice President of Fidelity Mutual in
the Controller's office and has been with Fidelity Mutual for 26 years. Ms.
Tamasitis received her B.S. degree in Accounting from Temple University,
Philadelphia, PA.
ITEM 11. EXECUTIVE COMPENSATION
During the fiscal year ended December 31, 1996, the
Partnership did not pay compensation to any officers of the General Partner.
Fees which have been paid or are payable to the General Partner are set forth
in Item 13 of this report, "Certain Relationships and Related Transactions".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security Ownership of Certain Beneficial owners
Name and Amount and
Address of Nature of
10
<PAGE> 11
<TABLE>
<CAPTION>
Beneficial Beneficial Percent
Title of Class Owner ownership. of Class
- -------------- ---------- ---------- --------
<S> <C> <C> <C>
Units of Limited Dollar $250,000 5.9%
Partnership General representing
Interest Retirement 250 Units of
Trust Limited
1 Burton Partnership
Hills Blvd. Interest
Suite 210,
Nashville, TN
37215
</TABLE>
As of December 31, 1996, no other person or "group" (as that
term is used in Section 13 (d) (3) of the Securities Exchange Act of 1934) was
known by the Partnership to beneficially own more than five percent of the
Units of the Partnership.
Security Ownership of Management
In 1986, the General Partner contributed $1,000 to the capital
of the Partnership, but it does not own any of the Partnership's outstanding
securities. No individual director or officer of the General Partner nor such
directors or officers as a group, owns any of the Partnership's outstanding
securities. The General Partner owns a general partnership interest which
entitles it to receive 1% of cash distributions until the Limited Partners have
received their cumulative distributions equal to a 10% non-compounded
Cumulative Annual Return of their Adjusted Capital Contribution plus a return
of their Capital Contributions as those terms are defined in the Partnership
Agreement. Thereafter, the General Partner will receive 30% of cash
distributions. The General Partner will share in taxable income to reflect
cash distributions or to the extent there are losses, 1% of such losses.
Changes in Control
There are no arrangements known to the Partnership that would
at any subsequent date result in a change in control of the Partnership.
Although it may involve a change in control, the impact of the rehabilitation of
Fidelity Mutual and the rehabilitation order (described in Part I, Item 3, Legal
Proceedings) on the Partnership or the General Partner cannot be determined at
this time.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since 1987, the Partnership has paid $8,100 annually as an
administration fee to the General Partner. The cumulative amount of such fee
may not exceed $64,800 as provided by the Partnership Agreement, and as of
December 31, 1994, fees charged since inception amount to $64,800.
11
<PAGE> 12
The General Partner will also receive 1% of cash distributions
until the Limited Partners have received (i) cumulative distributions equal to
a 10% Cumulative Annual Return on their Adjusted Capital Contributions plus
(ii) a return of their Capital Contributions (as those terms are defined in the
Partnership Agreement). Thereafter, the General Partner will receive 30% of
cash distributions. During 1996, 1995 and 1994 the General Partner received no
cash distributions.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
<TABLE>
<CAPTION>
(a) Index to Financial Statements Page
----------------------------- ----
<S> <C>
Report of Independent Auditors 1
Balance Sheets 2
Statements of Operations 3
Statements of Partners' Equity/(Deficit) 4
Statements of Cash Flows 5
Notes to Financial Statements 6
Schedules have been omitted because
they are inappropriate, not required, or
the information is included elsewhere in
the financial statements or notes thereto.
</TABLE>
(b) Reports on Form 8-K
1. None
(c) Exhibits (numbered in accordance with Item 601 of Regulation S-K
<TABLE>
<CAPTION>
Exhibit Numbers Description Page Number
- --------------- ----------- -----------
<S> <C> <C>
3.1(a) Certificate of Limited *
Partnership
3.1(b) & (4) Restated Limited Partnership
Agreement **
9 not applicable
11 not applicable
</TABLE>
12
<PAGE> 13
<TABLE>
<S> <C>
12 not applicable
13 not applicable
16 not applicable
18 not applicable
19 not applicable
22 not applicable
23 not applicable
24 not applicable
25 not applicable
28 not applicable
29 not applicable
</TABLE>
- --------------------------------------------------------------------------------
* Incorporated by reference to Exhibit 3.1 filed as part of the
Exhibits to the Partnership's Registration Statement on Form
S-18, Registration No. 33-12125.
** Incorporated by reference to Exhibit 3.2 filed as part of the
Partnership's Registration Statement on Form S-18,
Registration No. 33-12125.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
SOUTHEAST ACQUISITIONS I, L.P.
a Delaware limited partnership
By: SOUTHEAST ACQUISITIONS, INC.,
General Partner
Dated: July 14, 1997 By: /s/ Arthur W. Mullin
-----------------------------
Arthur W. Mullin
President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Arthur W. Mullin
- ---------------------- President, July 14, 1997
Arthur W. Mullin Treasurer,
Director of
Southeast
Acquisitions, Inc.
/s/ William S. Taylor
- ---------------------- Vice President, July 14, 1997
William S. Taylor Director of
Southeast
Acquisitions, Inc.
/s/ James W. Kelican, Jr.
- ------------------------- Vice President, July 14, 1997
James W. Kelican, Jr. Director of
Southeast
Acquisitions, Inc.
</TABLE>
14
<PAGE> 15
Financial Statements
Southeast Acquisitions I, L.P.
Years ended December 31, 1996 and 1995
with Report of Independent Auditors
<PAGE> 16
Southeast Acquisitions I, L.P.
Financial Statements
Years ended December 31, 1996 and 1995
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Audited Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Partners' Equity (Deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
<PAGE> 17
[ERNST & YOUNG LLP LETTERHEAD]
Report of Independent Auditors
To the Partners of
Southeast Acquisitions I, L.P.
We have audited the accompanying balance sheets of Southeast Acquisitions I,
L.P. (a Delaware limited partnership) as of December 31, 1996 and 1995, and the
related statements of operations, partners' equity (deficit), and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Partnership'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 principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Southeast Acquisitions I, L.P.
as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996,
in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
March 7, 1997
1
<PAGE> 18
Southeast Acquisitions I, L.P.
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
-----------------------------------------
<S> <C> <C>
ASSETS
Land, net $ 2,520,000 $ 3,516,645
Cash 91,596 47,623
-----------------------------------------
$ 2,611,596 $ 3,564,268
=========================================
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Accrued expenses $ 8,049 $ 6,437
Partners' equity (deficit):
General (10,162) (619)
Limited (4,225 units authorized, issued and outstanding) 2,613,709 3,558,450
-----------------------------------------
$ 2,611,596 $ 3,564,268
=========================================
</TABLE>
See accompanying notes.
2
<PAGE> 19
Southeast Acquisitions I, L.P.
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
--------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Interest and other income $ 2,856 $ 1,952 $ 2,032
Timber revenue 54,000 - -
--------------------------------------------------------------
56,856 1,952 2,032
Expenses:
General and administrative 14,020 7,977 7,653
Management fee - - 8,100
Insurance 184 204 3,082
Real estate taxes 291 291 286
Provision for loss on land 996,645 - -
--------------------------------------------------------------
1,011,140 8,472 19,121
--------------------------------------------------------------
Net loss:
General partner (9,543) (65) (171)
Limited partners (944,741) (6,455) (16,918)
--------------------------------------------------------------
$ (954,284) $ (6,520) $ (17,089)
==============================================================
Net loss per limited partnership unit $ (225.87) $ (1.54) $ (4.04)
==============================================================
</TABLE>
See accompanying notes.
3
<PAGE> 20
Southeast Acquisitions I, L.P.
Statements of Partners' Equity (Deficit)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
-----------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1, 1994 $ (383) $ 3,581,823 $ 3,581,440
Net loss (171) (16,918) (17,089)
-----------------------------------------------------------
Balance, December 31, 1994 (554) 3,564,905 3,564,351
Net loss (65) (6,455) (6,520)
-----------------------------------------------------------
Balance, December 31, 1995 (619) 3,558,450 3,557,831
Net loss (9,543) (944,741) (954,284)
-----------------------------------------------------------
Balance, December 31, 1996 $ (10,162) $ 2,613,709 $ 2,603,547
===========================================================
</TABLE>
See accompanying notes.
4
<PAGE> 21
Southeast Acquisitions I, L.P.
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
----------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (954,284) $ (6,520) $ (17,089)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Provision for loss on land 996,645 - -
Changes in operating assets and liabilities:
Accrued expenses 1,612 199 (1,137)
Due to affiliate - (2,025) -
----------------------------------------------------
Net increase (decrease) in cash 43,973 (8,346) (18,226)
Cash, beginning of year 47,623 55,969 74,195
----------------------------------------------------
Cash, end of year $ 91,596 $ 47,623 $ 55,969
====================================================
</TABLE>
See accompanying notes.
5
<PAGE> 22
Southeast Acquisitions I, L.P.
Notes to Financial Statements
December 31, 1996
1. DESCRIPTION OF BUSINESS
Southeast Acquisitions I, L.P. is a Delaware Limited Partnership. The General
Partner (Southeast Acquisitions, Inc.) is an indirect wholly owned subsidiary
of The Fidelity Mutual Life Insurance Company (in Rehabilitation).
Fidelity Mutual Life Insurance Company (the Company) was placed into
Rehabilitation, as defined, by the Commonwealth Court of Pennsylvania on
November 6, 1992 and it remains in Rehabilitation as of the report date. The
General Partner does not at this time expect that the Rehabilitation of the
Company will negatively impact the operation of either the General Partner or
the Partnership. The Company's Rehabilitation Plan, originally filed in 1994,
was amended in January 1995 and again in June 1996.
The Partnership purchased approximately 203 acres of undeveloped land near
Columbia, South Carolina from the General Partner on January 2, 1987. The
Property is being marketed for sale.
Per the Partnership Agreement, the Partnership shall exist for a term ending
December 31, 1997, at which time it shall be dissolved. Management is in the
process of soliciting proxies from the partners to approve an extension of the
term of the Partnership and certain other amendments. If the partners do not
approve the extension, the Partnership Agreement provides for the orderly
liquidation of the Partnership's assets and the subsequent dissolution of the
Partnership.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The Partnership maintains its accounting records on the accrual basis of
accounting.
LAND
Effective January 1, 1996, the Partnership adopted FASB Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of. In accordance with FASB Statement No. 121, land is carried at
the lower of cost or fair value less estimated cost to sell.
6
<PAGE> 23
Southeast Acquisitions I, L.P.
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LAND (CONTINUED)
The carrying value of land, as disclosed on the balance sheet, is shown net of
a valuation allowance of $996,645, which is the result of a write-down in 1996
to fair value, as determined by an independent appraisal, less estimated cost
to sell, which is estimated at 10% of fair value. Prior to 1996, the
Partnership's policy has been to carry land at the lower of cost or fair value.
In accordance with FASB Statement No. 121, the loss is accounted for in
operations.
An appraisal was commissioned in 1996 as the last appraisal was four years old.
The 1996 appraiser determined the fair value for the Property to be $2,800,000.
The prior appraiser had established a value of $4,055,000. The General Partner
reviewed the assumptions and conclusions of the appraisal and met with the
appraiser, numerous local real estate professionals, the Central Carolina
Economic Development Alliance, and the South Carolina Department of Commerce to
confirm the reasonableness of the appraisal. Based upon the result of these
activities, the General Partner concluded that the 1996 appraisal is a
reasonable approximation of the Property's current market value. As a result,
the Partnership adjusted the carrying value of the Property to reflect its fair
value, less estimated disposition costs, in accordance with generally accepted
accounting principles for land that is held for sale.
The 1996 and 1992 appraisals were prepared using essentially the same
assumptions and methodology, but differ as a result of changing market
conditions. In both cases, there were very few sales in the vicinity to be
used as comparable transactions and there was an abundance of land available
for development. There were a few sales of developed land in the area between
1992 and 1996 that enabled the 1996 appraiser to perform some additional
analysis of the Property's value and this analysis led to the conclusion of the
lower value. During the period between 1992 and 1996, based on management's
knowledge of the limited number of land sales and overall market conditions and
its disposition plans for the Property, there was no reason to conclude that
there had been a diminution in value.
INCOME TAXES
In conformity with the Internal Revenue Code and applicable state and local tax
statutes, taxable income or loss of the Partnership is required to be reported
in the tax returns of the partners in accordance with the terms of the
Partnership Agreement. Accordingly, no provision has been made in the
accompanying financial statements for any federal, state, or local income tax.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect various amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
3. RELATED-PARTY TRANSACTIONS
In 1994, the Partnership incurred a management fee of $8,100 to the General
Partner. The cumulative amount of such fee may not exceed $64,800 as provided
by the Partnership Agreement, and in 1994, such fees charged since inception
amounted to $64,800.
4. PARTNERS' EQUITY
The Partnership received cash equity contributions totaling $4,225,000 through
the sale of 4,225 limited partnership units. In accordance with the Partnership
Agreement, cash distributions and profits or losses for each year of the
Partnership shall be allocated as follows:
7
<PAGE> 24
Southeast Acquisitions I, L.P.
Notes to Financial Statements (continued)
4. PARTNERS' EQUITY (CONTINUED)
(a) Cash distributions shall be allocated 1% to the General
Partner and 99% to the limited partners in proportion to their
units until the limited partners have received distributions
equal to a 10% noncompounded cumulative annual return on their
adjusted capital contributions, as defined ($4,048,958 at
December 31, 1996) plus their capital contributions
($4,225,000 at December 31, 1996). Any additional cash
distributions shall be allocated 30% to the General Partner
and 70% to the limited partners in proportion to their units.
Amounts distributed in connection with the liquidation of the
Partnership shall be distributed in accordance with each
partner's adjusted capital account as defined in the
Partnership Agreement.
(b) Profits and losses shall be allocated as provided in the
Partnership Agreement. Generally, profits will be allocated to
reflect cash distributions or to offset any negative balances
in the partners' capital accounts. Losses will generally be
allocated 99% to the limited partners in proportion to their
units and 1% to the General Partner or to reduce any positive
account balances in the partners' capital accounts. In no
event will the General Partner be allocated less than 1% of
the profits or losses for any year.
The Partnership Agreement also provides that upon Partnership dissolution or
termination, the General Partner shall contribute to the capital of the
Partnership the lesser of any negative amount of its capital account, as
defined, or 1.01% of the capital contributions made by the limited partners.
Any amount so contributed shall be distributed to the limited partners in
proportion to their positive capital account balances. Additionally, on
dissolution or termination of the Partnership, if the limited partners do not
receive distributions which cumulatively total their initial capital
contributions plus a 10% noncompounded cumulative annual return, then the
General Partner shall contribute to the capital of the Partnership an amount
equal to the lesser of cumulative distributions to the General Partner or the
amount necessary to provide the limited partners with a return of the initial
capital contribution plus the 10% noncompounded cumulative annual return.
5. TIMBER REVENUE
During 1996, the Partnership entered into an agreement to sell timber. As
provided by the agreement, the Partnership received proceeds from the sale of
timber on the land totaling $54,000.
8
