<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

  X     ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT 
-----   OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998.

-----   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
        ACT OF 1934.


               COMMISSION FILE NUMBER: 0-18454 (FORMERLY 33-26759)

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

                        SOUTHEAST ACQUISITIONS III, L.P.

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

                         (Name of issuer in its charter)

        Delaware                                                     23-2532708
(State of Incorporation)       (IRS Employer Identification Organization Number)


                         301 South Perimeter Park Drive
                           Nashville, Tennessee 37211

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                    (Address of principal executive offices)

           Issuer's telephone no., including area code: (615) 833-8716

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           Securities registered pursuant to Section 12(b) of the Act.

                           Name of each exchange: None
             Title of each Class on which registered: Not Applicable

           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 ninety (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. Yes X  No 
              ---   ---

<PAGE>   2


                                TABLE OF CONTENTS

<TABLE>

<S>        <C>                                                               <C>
PART I

ITEM 1.    BUSINESS............................................................1

           Background..........................................................1
           Material Recent Developments........................................2
           Employees...........................................................2
           Competition.........................................................2
           Trademarks and Patents..............................................2

ITEM 2.    PROPERTIES..........................................................2

ITEM 3.    LEGAL PROCEEDINGS...................................................4

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................5

PART II

ITEM 5.    MARKET FOR THE PARTNERSHIP'S UNITS OF LIMITED PARTNERSHIP
           INTEREST AND RELATED SECURITY HOLDER MATTERS........................5

ITEM 6.    SELECTED FINANCIAL DATA.............................................5

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS...........................................6
           Background..........................................................6
           Results of Operations...............................................6
           1998 Compared to 1997...............................................6
           1997 Compared to 1996...............................................7
           Liquidity and Capital Resources.....................................7
           Year 2000 Compliance................................................8

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.........................8

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
           ACCOUNTING AND FINANCIAL DISCLOSURE.................................8

PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP.................8

ITEM 11.   EXECUTIVE COMPENSATION..............................................9

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT..........................................................9
           Security Ownership of Management...................................10
           Changes in Control.................................................10

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................10

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
           REPORTS ON FORM 8-K................................................10
           (a)   Index to Financial Statements................................10
           (b)   Reports on Form 8-K..........................................11
           (c)   Exhibits (numbered in accordance with Item 601 
                 of Regulation S-K)...........................................11

SIGNATURES
</TABLE>



                                      - i -


<PAGE>   3



                                     PART I

ITEM 1.   BUSINESS

          Background

          Southeast Acquisitions III, L.P. (the "Partnership") was formed on
November 4, 1988, as a Delaware limited partnership. The Partnership's public
offering of 12,400 units of limited partnership interest ("Units") commenced on
May 2, 1989 and terminated on August 29, 1989 when all 12,400 Units were sold.
The Partnership has since been scheduled to terminate on December 31, 2001.

          The Partnership purchased the following five parcels of unimproved
land in 1989: 208 acres in Fulton County, Georgia; 265 acres in Henry County,
Georgia; 24 Acres in Nashville, Tennessee; 47 acres in Fort Myers, Florida; and
51 acres in Columbia, South Carolina. The Partnership's primary business
objective is to realize appreciation in the value of the five parcels of
unimproved land (each a "Property, collectively the "Properties"), by holding
the Properties for investment and eventual sale, although there is no assurance
that this will be attained.

          Since acquisition, the Partnership has sold various parcels of the
Property. At December 31, 1998, the Partnership's Property consisted of
approximately 208 acres in Fulton County, Georgia, approximately 154 acres in
Henry County, Georgia, approximately 47 acres in Fort Myers, Florida and
approximately 42 acres in Columbia, South Carolina.

          There were no sales of the Fulton County, Georgia Property during
1998. In 1998 the Partnership entered into a contract to sell 100 acres for
$18,000 per acre. The contract contains several contingencies and there can be
no assurance the contract will close.

          At December 31, 1997 there were two separate sales contracts in place
to sell 66 acres and 13 acres of the Henry County, Georgia Property at prices
considerably in excess of the last appraisal of that Property. During December
31, 1998 the contract for 66 acres closed at a price of $8,550 per acre, less
commissions and expenses, and the contract for 13 acres closed at a price of
$12,000 per acre, less commissions and expenses.

          The 24 acre Nashville, Tennessee Property was sold in 1995.

          The 47 acres of residential land owned in Fort Myers, Florida remains
unsold. The General Partner has begun an active marketing program for this land
in 1999.

          None of the Partnership's Property in Columbia, South Carolina was
sold during 1998. This Property is currently being marketed through a Columbia,
South Carolina real estate broker. Prospects for sale seem improved by adjacent
road changes and improvements being done by the South Carolina Department of
Transportation.

          The timing and manner of sale will be determined by Southern
Management Group, LLC, the General Partner of the Partnership. The General
Partner generally has the right to sell Property, or portions thereof, without
the consent of the Limited Partners. The Partnership Agreement provides,
however, that a majority in interest of the Limited Partners must consent to the
sale or disposition at one time of 60% or more of the real estate acreage held
by the Partnership as of September 22, 1997 unless the sale or disposition is
being made in connection with the liquidation of the Partnership pursuant to the
Partnership Agreement or in the event that the net proceeds of the sale, when
distributed in accordance with the Partnership Agreement, will be sufficient to
provide the Limited Partners with distributions equal to the acquisition cost of
the assets sold.

          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.

          The General Partner has no plans to develop the Properties, except for
activities necessary to prepare the Properties for sale. There can be no
assurance that necessary funds would be available should it be desirable for the
Partnership to improve the Properties to facilitate their sale.



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<PAGE>   4

           At a special meeting of Limited Partners held on November 5, 1997, 
the Partnership Agreement was amended to (i) extend the term of the Partnership
from its original expiration date of December 31, 1999 to December 31, 2001;
(ii) substitute Southern Management Group, LLC for Southeast Acquisitions, Inc.
as the general partner of the Partnership; (iii) authorize new commissions and
new management fees for the new General Partner; (iv) give the new General
Partner the exclusive right to sell Partnership property; and (v) modify the
Partnership Agreement to require that a majority in interest of the Limited
Partners must consent to the sale or disposition at one time of 60% or more of
the real estate acreage held by the Partnership as of September 22, 1997 unless
the sale or disposition is being made in connection with the liquidation of the
Partnership pursuant to the Partnership Agreement or the net proceeds of the
sale, when distributed in accordance with the Partnership Agreement, will be
sufficient to provide the Limited Partners with distributions equal to the
acquisition cost of the assets sold.

          Material Recent Developments

          There were two Henry County, Georgia land sales in 1998. The first
sale was of 65.977 acres which were sold for a cash price of $8,550 per acre.
The second sale of 13.431 acres were sold for a cash price of $12,000 per acre.

          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 Properties. The Properties are
located in four distinct areas of the Southeastern United States.

          Trademarks and Patents

          The Partnership has no trademarks or patents.

ITEM 2.   PROPERTIES

          The Partnership owns four tracts of undeveloped land consisting of
approximately 208 acres in Fulton County, Georgia, 154 acres in Henry County,
Georgia, 47 acres in Fort Myers, Florida and 42 acres in Columbia, South
Carolina.

          Fulton County, Georgia Property:

          The Fulton County, Georgia Property consists of 208 acres of
multi-zoned undeveloped land located in the southern portion of Fulton County
approximately 16 miles southwest of the central business district, approximately
10 miles west of the Hartsfield-Atlanta International Airport. The Property is
located at the northeast and southeast quadrants of the intersection of State
route 92 (Campbelltown-Fairburn Road) and the South Fulton Parkway. The Property
has approximately 6,000 feet of frontage along State Route 92 on its east side,
1,955 feet of frontage on Red Mill Road and 3,345 feet of frontage on Thompson
Road. Both Red Mill and Thompson Roads are paved and intersect with State Route
92 south and north, respectively, of the South Fulton Parkway. The portion of
the South Fulton Parkway which intersects the Property provides the site with
direct access to both I-85 and I-285, major north-south arteries. The Property
is currently the only non-residentially zoned land in the immediate surrounding
area. Approximately 108 acres are located in the northeast quadrant of the State
Route 92 and South Fulton Parkway intersection, of which 22 acres are zoned C-1
Commercial, 52 are zoned M-1A Industrial Park, and 34 acres are zoned a
Multi-Family Apartment. Approximately 100 acres are located at the southeast
quadrant of State Route 92 and South Fulton Parkway intersection of which 37
acres are zoned C-1 Commercial, 46 are zoned M-1A Industrial Park and 17 acres
are zoned 0-1 Office Institutional. At December 31, 1998 the Partnership had



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<PAGE>   5

contracted to sell 100 acres of this land at $18,000 per acre. The contract is
scheduled to close during 1999 but it contains several contingencies and there
can be no assurance that the contract will close.

          All utilities are available to the Property except sewer facilities.
The Partnership may bring a sewer trunk to the Property from an existing line
north of the Property. It is estimated that the cost to bring the trunk line
on-site will be approximately $200,000. Funds have been set aside by the
Partnership for this purpose. The Partnership has no other plans for development
of this Property. The General Partner has the sole discretion to decide whether
the Partnership should develop the Property to facilitate sales.

          The former general partner had the Fulton County Property appraised in
1996 by Urban Realty Advisors, Inc. The 1996 appraiser has no relationship with
the former general partner or the current General Partner. The Property was
appraised in 1996 for $1,350,000 or approximately $6,490 per acre. The appraiser
used the sales comparison (market) approach to value the Property. The appraiser
concluded that the Property's only immediate use was residential due to the low
traffic counts and low population density in the area. The appraiser also
determined that the Property was not imminently ready for development and
therefore did not conduct a development analysis for comparison to the market
approach.

          The appraised value does not reflect costs, expenses and commissions,
which would be incurred in connection with a sale of the property. Moreover,
appraisals are only an approximation of current market value which can only be
established by an actual sale.

          Henry County, Georgia Property

          The Henry County, Georgia Property is located in the southeast section
of the Metropolitan Atlanta area. At December 31, 1998, the Property consisted
of approximately 154 acres of undeveloped land zoned M-1 Light Industrial. The
Property fronts on I-75, State Route 23/42 and Bethlehem Road and a significant
portion of the Property has rail access via the Southern Railroad. The land is
irregular in shape and is generally rolling with a fair amount of woods. The
Property has approximately 1,600 feet of frontage along I-75 on its western
side, 2,800 feet of frontage along Bethlehem Road through the interior of the
Property and approximately 4,100 feet of frontage on Southern Railroad rails on
its eastern side.

          All utilities, except sewer facilities, are presently available to the
Property, including a 16-inch county water line. The General Partner does not
believe that the availability of sewers is considered necessary for the Property
as septic tanks can be adequately utilized in this area.

          The Property is divided into two parcels. The parcels are separated by
an 80-foot wide industrial boulevard. The larger parcel is located on the
northern side of the road with the remaining acres on the southern side. The
most highly prized part of the Property is the northern acres because of the
access to the Southern Railroad rail line.

          The former general partner had the Henry County Property appraised in
1996 by Urban Realty Advisors, Inc. The 1996 appraiser has no relationship with
the former general partner or the current General Partner. The Property, which
consisted of 238 acres at the time, was appraised in 1996 for $1,700,000 or
approximately $7,143 per acre. The appraiser used the sales comparison (market)
approach to value the Property. The appraiser determined that the Property's
best use was residential land because of the current market conditions for
industrial land in Henry County. The appraiser used a number of market factors
to support this conclusion; absorption of the current supply of industrial land;
topography of the Property; and the lack of sanitary sewer which is often
required by larger industrial users. These factors and the amount of land
available in nearby established parks, in the appraisers' views, prohibited the
Property from effectively competing for large industrial users. The current
industrial real estate market conditions suggest an extremely protracted
development if the Property is marketed to larger industrial users.

          The appraised value does not reflect costs, expenses and commissions,
which would be incurred in connection with a sale of the property. Moreover,
appraisals are only an approximation of current market value which can only be
established by an actual sale. At December 31, 1998 the Partnership had a
contract to sell 130+ acres of its remaining Henry County land for $18,000 per
acre less contributions to sewer extension, commissions and other closing costs.
This contract should close by April 30, 1999 but there is no assurance this will
occur.



                                       3

<PAGE>   6

          Fort Myers, Florida Property

          The Fort Myers Property is situated in Lee County approximately two
miles inland from the Gulf of Mexico. The Property consists of 47 acres of
undeveloped land located one mile south of the Summerlin Road/Winkler Road
intersection. Approximately three-fourths of the Property is generally level
farm land with the remaining one-fourth being heavily wooded. The Property lies
within federally designated Floor Hazard Zone A-12 which will require increasing
the elevation of home sites by approximately three feet.

          The Property is currently zoned AG Agricultural which designation is
considered to be a "holding" classification until such time as the Property can
be rezoned to permit a more intensive development. The Property is also
classified as "Suburban" under the Lee County Comprehensive Land Use Plan. The
"Suburban" areas are characterized as being predominantly residential areas that
are either on the fringe of the central urban areas or in areas where it is
appropriate to protect existing residential neighborhoods.

          All utilities including sewer and water are presently available to the
Property for a high density residential use. The General Partner believes that
the availability of sewer and water to this Property is an important factor
since both sewer and water are necessary before a building permit can be issued
in Lee County.

          The former general partner had the Fort Myers Property appraised in
1996 by Stewart, Stephan & Bowen, Inc. The 1996 appraiser has no relationship
with the former general partner or the current General Partner. The Property was
appraised in 1996 for $1,395,000 or approximately $29,062 per acre. The
appraiser used the sales comparison (market) approach to value the Property.

          The appraised value does not reflect costs, expenses and commissions,
which would be incurred in connection with a sale of the property. Moreover,
appraisals are only an approximation of current market value which can only be
established by an actual sale.

          Columbia, South Carolina Property

          The Columbia, South Carolina Property is located on the southwest side
of US Highway 176, also known as Broad River Road in Richland County, northwest
of downtown Columbia, South Carolina. The Property consists of approximately 42
acres of undeveloped land, generally rectangular in shape, and heavily wooded
with a sloping topography. The Property has an abundance of paved frontage
including frontage on US Highway 176, County Road 286, County Road 385, and on a
new county road.

          All utilities including a sewer line on the Property and county water
less than a mile west are presently available to the Property for commercial
use.

          The former general partner had the Columbia Property appraised in 1996
by Owen Faulkner & Associates. The appraiser has no affiliation with the former
general partner or the current General Partner. The Property, which consisted of
approximately 50 acres at the time, was appraised for $740,000 or approximately
$14,800 per acre. The appraisal used the sales comparison (market) approach to
value.

          The appraised value does not reflect costs, expenses and commissions,
which would be incurred in connection with a sale of the property. Moreover,
appraisals are only an approximation of current market value which can only be
established by an actual sale.

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.




                                       4
<PAGE>   7



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

          There were no matters submitted to a vote of security holders in 1998.

                                     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 2, 1989 of 12,400 Units of limited partnership
interests. The offering of $12,400,000 was fully subscribed and terminated on
August 29, 1989. As of December 31, 1998, there were 712 limited partners in the
Partnership.

ITEM 6.   SELECTED FINANCIAL DATA

<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,
                           1998                   1997            1996              1995                1994
--------------------------------------------------------------------------------------------------------------------
<S>                     <C>                   <C>              <C>              <C>                <C>

Operating
Revenues                 $  333,395           $  114,666       $   131,091         $  438,539       $    44,179
--------------------------------------------------------------------------------------------------------------------

Net Income (Loss)        $  240,988           $   (5,089)      $(4,306,098)*       $  362,771       $   (50,782)
--------------------------------------------------------------------------------------------------------------------

Net Income (Loss) per
Unit of Limited
Partnership
Interest                 $    19.43           $   ( 0.41)      $   (347.27)        $    29.26       $     (4.10)
--------------------------------------------------------------------------------------------------------------------

Total Assets             $4,490,341           $4,895,246       $ 4,876,351*        $9,180,938       $10,377,257
--------------------------------------------------------------------------------------------------------------------

Long Term
Obligations                 None                  None              None              None              None

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

Cash
Distributions
Declared per
Unit of Limited
Partnership
Interest                 $    50.00               None              None           $      125           None
---------------------------------------------------------------------------------------------------------------------
</TABLE>

*Includes a provision for loss on land of $4,348,886.




                                       5

<PAGE>   8



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.

          The Partnership originally purchased 595 acres of unimproved land at
five locations. The status of these Properties at December 31, 1998 is as
follows:

<TABLE>
<CAPTION>

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

                                              Property Sold Prior to    Remaining Property
Place                    Property Purchased      December 31, 1998         Held for Sale
--------------------------------------------------------------------------------------------
<S>                      <C>                     <C>                      <C>

Fulton County, Georgia       208 acres                0 acres               208 acres
-------------------------------------------------------------------------------------------

Henry County, Georgia        265 acres              111 acres               154 acres
-------------------------------------------------------------------------------------------

Fort Myers, Florida           47 acres                0 acres                47 acres
-------------------------------------------------------------------------------------------

Columbia, South Carolina      51 acres                9 acres                42 acres
-------------------------------------------------------------------------------------------

Nashville, Tennessee          24 acres               24 acres                 0 acres
-------------------------------------------------------------------------------------------
</TABLE>


          Results of Operations

          The Partnership had no operations from the date of its formation on
November 4, 1988 until June 1, 1989 when it acquired the initial Property and
sold 6,215 Units of Limited Partnership interest. During 1989 the Partnership
acquired four additional Properties and sold 6,185 additional Units of Limited
Partnership interests.

          1998 Compared to 1997

          During 1998, the Partnership had two sales of the Henry County,
Georgia Property for a gain of $310,015 as compared to 1997 when gains from
Property sales were $91,709. Other revenue during 1998 was interest income of
$23,380 compared with 1997 interest income of $22,957.

          Expenses for 1998 were $92,407, consisting of general and
administrative expenses of $35,940, management fees of $26,500, real estate
taxes of $28,608 and insurance of $1,359. The general and administrative fees
included $26,004 for legal and accounting fees. The $13,333 increase in legal
and accounting fees over 1997 was due to the change in the general partner, as
well as additional assistance required for preparing the income tax return and
preparing Security and Exchange Commission reports. The general and
administrative fees also included consulting fees totaling $3,256 related to
customizing the General Partner's computer software for maintaining limited
partner records. In 1997, expenses were $119,755 consisting of general and
administrative of $15,397, management fees of $20,260, real estate taxes of
$34,365, insurance of $584 and professional fees of $49,149. The latter amount
related to a change in the General Partner and Amendments to the Partnership
Agreement. The increase in management fees between 1997 and 1998 represent new
management fees for the new General Partner



                                       6
<PAGE>   9

which were included as part of an amendment to the Limited Partnership
Agreement. The $5,757 decrease in property taxes was due to the sale of land.

          1997 Compared to 1996

          During 1997, the Partnership sold 7.16 acres of the Columbia Property
for a gain of $91,709, as compared with the sale of 11 acres of the Henry County
Property in 1996 for a gain of $103,294. In 1996 the Partnership realized
$14,199 from the sale of timber. No timber was sold in 1997. Other revenues in
1997 consisted of $21,857 in interest income and $1,100 in partnership transfer
fees, as compared with $12,373 in interest income and $1,225 in transfer fees in
1996.

          Expenses for 1997 included $49,149 of professional and other fees
related to the change in general partner and an amendment of the Partnership
Agreement in connection with a special meeting of the Limited Partners in
November 1997. There were no such fees in 1996. In addition, expenses in 1997
included $20,260 in management fees as compared with $24,886 in management fees
in 1996. The management fees paid to the former general partner provided for a
limit on cumulative management fees over the life of the Partnership and this
limit was reached in 1997. The amended Partnership Agreement approved at the
November 5,1997 special meeting of Limited Partners provides for an annual
management fee of $26,500 to the current General Partner through December 2001.

          General and administrative expenses decreased from $27,136 in 1996 to
$15,397 in 1997, primarily due to costs of appraisals in 1996 which were not
recurring expenditures. Real estate taxes decreased to $34,365 in 1997 from
$35,773 in 1996. Insurance expense in 1997 was approximately the same as in
1996.

          Appraisals were commissioned on each of the Partnership's Properties
in 1996 as the last appraisals were four years old. These appraisals estimated
the aggregate fair value of the Properties to be $5,185,000. The 1992 appraisals
judged the aggregate value for these Properties to be $19,700,500. Ninety-five
percent (95%) of the $14,515,500 difference between the aggregate valuations can
be attributed to the Fulton County Property and the Henry County Property. The
difference in the appraised values for the Columbia Property and the Fort Myers
Property were not as significant as those for the Fulton County Property and the
Henry County Property. Given the excess of value between the 1992 appraisal and
the carrying value of the Properties and management's former strategy of holding
the Fulton County, Columbia and Fort Myers Properties for investment, awaiting
an improvement in market conditions, and the number of potential sales of the
Henry County Property in the intervening period, management had no reason to
believe that the market value of any of the Properties had declined below the
carrying value.

          The different assumptions of the 1996 and the 1992 appraisers of the
Fulton County and the Henry County Properties and the reduction in market value
of the Columbia and Fort Myers Properties based on comparable sales in the
vicinity of those Properties accounted for the difference between the 1992
appraisals and the 1996 appraisals. The former general partner reviewed the
assumptions and conclusions of each of the 1996 appraisals and met with the
appraisers, numerous local real estate professionals, the South Carolina
Department of Commerce and the Henry County Development Authority to confirm the
validity of the appraisals. Based on the result of these activities, the former
general partner concluded that each of the 1996 appraisals was a reasonable
approximation of the then current market value of the respective Property.

          As a result, the Partnership adjusted the carrying value of the Fort
Myers Property, the Columbia Property and the Fulton County Property to reflect
their respective fair value, less estimated disposition expenses, in accordance
with generally accepted accounting principles for land held for sale, resulting
in an aggregate write-down of $4,348,886 in 1996.

          Inflation did not have a material impact on operations during 1998,
1997 and 1996.

          Liquidity And Capital Resources

          The Partnership had cash reserves of $493,350 at December 31, 1998.
The General Partner believes that the Partnership has sufficient cash reserves
to cover normal partnership expenses for an additional three years. However, if
additional expenses are incurred or if the Partnership goes forward with the
construction to bring sewer to the Fulton County Property, the reserves may be
inadequate to cover the Partnership's operating expenses.



                                       7
<PAGE>   10

If the reserves are exhausted, the Partnership may have to dispose of some of
the Property or incur indebtedness on unfavorable terms.

          Year 2000 Compliance

          The Partnership's operations are not dependent in any meaningful way
on computer hardware or software. The General Partner has determined that the
Partnership's accounting systems and Limited Partner registration records will
not be negatively affected by the so-called "Year 2000 Problem." The "Year 2000
Problem" generally refers to the inability of computer software or hardware to
recognize years in more than two digits. As a result, the year 2000 would appear
as "00" and may be viewed by the computer as the year 1900. This could cause
severe negative consequences in some computer software and hardware.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          The Partnership's financial statements for the years ended December
31, 1998 and 1997, together with the report of the Partnership's independent
auditors, Williams Benator & Libby, LLP, and the financial statements for the
years ended December 31, 1996 and 1995, together with the report of the
Partnership's former independent auditors, Ernst & Young LLP, are included in
this Form 10-K.

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

          Not Applicable.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE 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
members and executive officers and directors of the General Partner are
identified and described below.

          The General Partner is a Tennessee limited liability company whose
members are Richard W. Sorenson, who owns a 50% interest in the General Partner
and has a 51% voting right, and Southeast Venture LLC, a Tennessee limited
liability company which owns 50% and has a 49% voting right.

          Mr. Sorenson, age 73, has over 37 years experience in several real
estate disciplines, including land acquisition and development, development of
office buildings, shopping centers, warehouses and medical facilities. All of
these activities occurred in the southeastern United States.

          Mr. Sorenson was President of Phoenix Investment Company ("Phoenix"),
a publicly owned, Atlanta based real estate development and investment firm from
1965 to 1970. Concurrent with his employment at Phoenix, he was President of
First Atlanta Realty Fund, a publicly owned real estate investment trust. During
his tenure with the trust, he served as a Trustee of the National Association of
Real Estate Investment Trusts.

          Following his departure from Phoenix in 1970, Mr. Sorenson became Vice
President of Cousins Properties in Atlanta, where he was responsible for
development of office buildings, shopping centers and apartments until 1971.
Until forming Southeast Venture Companies ("SV") in 1979, Mr. Sorenson was an
independent real estate developer.

          Mr. Sorenson was co-founder of SV in 1979. In 1992, substantially all
of the assets of SV were sold to Southeast Venture Corporation.

          Mr. Sorenson is a graduate of the Northwestern University Business
School with a major in real estate.

          The other member of the General Partner is Southeast Venture LLC
("SVLLC"). The officers and key employees of SVLLC include the following:




                                       8
<PAGE>   11

          Paul J. Plummer, age 49. Mr. Plummer serves as director of project
management services for SVLLC. Mr. Plummer is responsible for management, team
structuring, cost control and scheduling of large scale projects for SVLLC
including office buildings, medical centers, commercial office buildings,
commercial land ventures and build-to-suit projects. Before joining SV in 1986,
Mr. Plummer served as a partner and director of design for the Nashville-based
architecture and engineering firm of Gresham, Smith and Partners. In that
capacity he was responsible for the design and planning of over 15 major
projects throughout the United States and Saudi Arabia. Mr. Plummer earned his
bachelor of architecture degree from the University of Kentucky and is a member
of the American Institute of Architects.

          Wood S. Caldwell, age 45. Mr. Caldwell is responsible for all site
development activities on behalf of commercial and health care clients of SVLLC,
including managing all design consultants, permitting, scheduling, budgeting and
construction management. He contributes to SVLLC's development team in the areas
of land planning, zoning, permitting, engineering and construction. Before
joining SV in 1985, Mr. Caldwell served as a professional engineer for Gresham,
Smith and Partners. As the prime site design engineer for Gresham, Smith and
Partners, Mr. Caldwell produced and coordinated site development plans for over
50 separate medical facilities in over 40 different communities throughout the
southeast. Mr. Caldwell earned his bachelor of engineering degree from the
Vanderbilt University School of Engineering.

          Axson E. West, age 44. Mr. West serves as vice president of brokerage
services for SVLLC, specializing in office and industrial leasing, improved
property sales and land disposition for several commercial and residential
projects. Mr. West has sold real estate and real estate securities since 1980
and, since joining SV in 1988, he has been responsible for the disposition of
land encompassing industrial, office and retail developments. Mr. West is past
director of the Nashville Board of Realtors and past president of the board's
commercial investment division. He received his bachelor of arts degree from
Vanderbilt University and is a Certified Commercial Investment Member, a
designation of the Commercial Investment Real Estate Institute.

          Cameron W. Sorenson, age 37. Mr. Sorenson serves as director of
vertical development for SVLLC. He is primarily responsible for providing
development and project management for the clients of SVLLC. Prior to assuming
these responsibilities, Mr. Sorenson was project director for two large scale
land development ventures for SVLLC. Prior to joining SV in 1987, Mr. Sorenson
was with Trust Company Bank in Atlanta, as an officer in the National Division,
managing a credit portfolio in excess of $150 million. He received his bachelor
of science degree in finance from the MacIntyre School of Business at the
University of Virginia. Cameron Sorenson is the son of Richard W. Sorenson, the
individual majority member of the General Partner.

          Randall W. Parham, age 44. Mr. Parham is the President of SVLLC. He is
primarily responsible for property management, park and association management
and also specializes in real estate development and brokerage. Mr. Parham is a
licensed real estate broker and architect. Prior to joining SVLLC in 1998, Mr.
Parham was a project manager with Gresham, Smith and Partners from 1978 to 1983
and was responsible for overall project management of project team and project
financial management. Following his departure from Gresham, Smith and Partners,
Mr. Parham joined MetroCenter Properties, Inc., an 850 acre mixed-use
development in Nashville, Tennessee. He was Vice President and was responsible
for initiation and development of new projects, land sales and lease
negotiations. In 1991 he purchased the assets of MetroCenter Properties and
formed MetroCenter Management, Inc. where he served as President through 1997.

ITEM 11.  EXECUTIVE COMPENSATION

          During the fiscal year ended December 31, 1998, the Partnership did 
not pay compensation to any officers of the General Partner. The Partnership
paid the General Partner a management fee of $26,500 and $4,066 in the fiscal
years ended December 31, 1998 and 1997 respectively. The Partnership also paid a
management fee of $16,194 to the former general partner during the year ended
December 13, 1997. See Item 13 of this report, "Certain Relationships and
Related Transactions."

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

          As of December 31, 1998, no 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.



                                       9
<PAGE>   12


          Security Ownership of Management

          No individual member, or director or officer of a member, 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 30% of cash distributions
after the Limited Partners have received a return of their capital contributions
plus cumulative distributions equal to a 10% non-compounded Cumulative Annual
Return of their Adjusted Capital Contributions as those terms are defined in the
Partnership Agreement. 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.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          From 1988 to November 5, 1997, the Partnership paid $24,886 annually
as an administration fee to the former general partner. This fee was computed as
one quarter of one percent of the base cost of the land. The cumulative amount
of such fee could not exceed $207,244,which limit was reached and paid during
1997 as provided in the Partnership Agreement. As of November 5, 1997, the
Limited Partners voted and agreed to pay the new General Partner, Southern
Management Group, LLC, a fee of $4,066 for the period November 5, 1997 through
December 31, 1997 and annual fees of $26,500 from January 1, 1998 through
December 31, 2001. Any fee payments will cease at a date when the Partnership is
liquidated.

          The General Partner will also receive 30% of cash distributions after
the Limited Partners have received (i) a return of their Capital Contributions
plus (ii) cumulative distributions equal to a 10% Cumulative Annual Return on
their Adjusted Capital Contributions (as those terms are defined in the
Partnership Agreement). During 1998, 1997, and 1996 the General Partner received
no cash distributions.

          At the special meeting of Limited Partners held on November 5, 1997,
the Partnership Agreement was amended to provide that total compensation paid to
all persons, including the General Partner, for the sale of the Partnership's
Property is limited to a competitive real estate commission or disposition fee
not to exceed 10% of the contract price of the property, provided that the
General Partner or its affiliates would only be entitled to up to 50% of any
such compensation. Any such real estate commission or disposition fee that is
paid to the General Partner will reduce any distributions to which it would
otherwise be entitled under the amended Partnership Agreement. In addition, the
Partnership Agreement was amended to provide that the General Partner may act as
the exclusive agent for the sale of the Property. During 1998, the Partnership
paid real estate commissions of $8,059 to the General Partner.


                                     PART IV

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

<TABLE>
<CAPTION>


          (a)   Index to Financial Statements                               Page
         
          <S>   <C>                                                         <C>
                Report of Independent Auditors for 1998 and 1997             F-1
                Balance Sheets                                               F-2
                Statements of Operations                                     F-3
                Statements of Partners' Equity (Deficit)                     F-4
                Statements of Cash Flows                                     F-5
                Notes to Financial Statements                                F-6
                Report of Independent Auditors for 1996 and 1995             F-12
                Balance Sheets                                               F-13
                Statements of Operations                                     F-14
                Statements of Partners' Equity (Deficit)                     F-15



</TABLE>




                                       10
<PAGE>   13

<TABLE>

<S>             <C>                                                          <C>
                Statements of Cash Flows                                     F-16
                Notes to Financial Statements                                F-17
 
                Schedules have been omitted because they are 
                inappropriate, not required, or the information
                is included elsewhere in the financial statements
                or notes thereto.

          (b)   Reports on Form 8-K

                No reports on Form 8-K were filed by the Partnership
                during  the fourth quarter of 1998.

          (c)   Exhibits (numbered in accordance with Item 601 of
                Regulation S-K)

</TABLE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
Exhibit Numbers                Description                           Page Numbers
-----------------------------------------------------------------------------------
<S>               <C>                                                 <C>
3.1(a)            Certificate of Limited Partnership                       *
-----------------------------------------------------------------------------------

3.1(b) & (4)      Restated Limited Partnership Agreement                   **
-----------------------------------------------------------------------------------

3.1(c)            First Amendment to Restated Limited Partnership
                  Agreement                                                E-1
-----------------------------------------------------------------------------------

11                Not Applicable
-----------------------------------------------------------------------------------

12                Not Applicable
-----------------------------------------------------------------------------------

13                Not Applicable
-----------------------------------------------------------------------------------

16                Not Applicable
-----------------------------------------------------------------------------------

18                Not Applicable
-----------------------------------------------------------------------------------

19                Not Applicable
-----------------------------------------------------------------------------------

22                Not Applicable
-----------------------------------------------------------------------------------

24                Not Applicable
-----------------------------------------------------------------------------------

25                Not Applicable
-----------------------------------------------------------------------------------

27                Financial Data Schedule (for SEC use only)
-----------------------------------------------------------------------------------

</TABLE>


                                       11

<PAGE>   14


<TABLE>

<S>               <C>
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. 33-26759.

**       Incorporated by reference to Exhibit 3.2 filed as part of the 
         Partnership's Registration Statement on Form S-18, Registration 
         No. 33-26759.





                                       12
<PAGE>   15



                                   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 III, L.P.
                                   a Delaware limited partnership


                                   By:  SOUTHERN MANAGEMENT GROUP, LLC
                                        General Partner

                                   By:  /s/ Richard W. Sorenson
                                        ---------------------------------------
                                        RICHARD W. SORENSON
                                        President and Chief Executive Officer

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

<TABLE>
<CAPTION>


         Signature                   Title                                    Date
         ---------                   -----                                    ----
<S>                                <C>                                  <C>

/s/ Richard W. Sorenson        President, Chief Executive Officer        March 11, 1999
-----------------------        and Chief Financial Officer of
                               Southern Management Group, LLC

</TABLE>






                                       13















<PAGE>   16











                        SOUTHEAST ACQUISITIONS III, L.P.

                          AUDITED FINANCIAL STATEMENTS

                                DECEMBER 31, 1998

                                      with

                          INDEPENDENT AUDITORS' REPORT











<PAGE>   17



                         REPORT OF INDEPENDENT AUDITORS

Partners
Southeast Acquisitions III, L.P.
Nashville, Tennessee

We have audited the accompanying balance sheets of Southeast Acquisitions III,
L.P. (a Delaware limited partnership) as of December 31, 1998 and 1997, and the
related statements of operations, partners' equity (deficit), and cash flows for
the years then ended. 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 III,
L.P. as of December 31, 1998 and 1997, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.



WILLIAMS BENATOR & LIBBY, LLP


Atlanta, Georgia
January 15, 1999



                                       F-1


<PAGE>   18


BALANCE SHEETS

SOUTHEAST ACQUISITIONS III, L.P.

<TABLE>
<CAPTION>

                                                             December 31
                                                       1998             1997
                                                   ------------------------------
<S>                                                <C>               <C>
ASSETS

Land and improvements--Note D                       $ 3,996,991      $ 4,376,416
Cash and cash equivalents                               493,350          504,876
Receivable from affiliate--Note B                           -0-           13,954
                                                    -----------      -----------
                                                    $ 4,490,341      $ 4,895,246
                                                    ===========      ===========

LIABILITIES AND PARTNERS' EQUITY (DEFICIT)

Accounts payable and accrued expenses--Note B       $    13,558      $    19,311
Escrow on pending sale of land                              -0-           20,000
Payable to previous general partner--Note B               3,584            3,584

Partners' equity (deficit)--Note C
    General partner                                     (43,909)         (46,319)
    Limited partners (12,400 units outstanding)       4,517,108        4,898,670
                                                    -----------      -----------
                                                      4,473,199        4,852,351
                                                    -----------      -----------

                                                    $ 4,490,341      $ 4,895,246
                                                    ===========      ===========
</TABLE>


See notes to financial statements.




                                       F-2


<PAGE>   19


STATEMENTS OF OPERATIONS

SOUTHEAST ACQUISITIONS III, L.P.

<TABLE>
<CAPTION>
                                                          Year Ended December 31
                                                           1998          1997
                                                        ------------------------
<S>                                                    <C>            <C>
Revenues:
    Gain on sale of land                                $ 310,015     $  91,709
    Interest and other income                              23,380        22,957
                                                        ---------     ---------
                                                          333,395       114,666

Expenses:
    General and administrative                             35,940        15,397
    Management fee--Note B                                 26,500        20,260
    Real estate taxes                                      28,608        34,365
    Insurance                                               1,359           584
    Professional and other fees related to change
       in general partner and amendment of
       partnership agreement                                  -0-        49,149
                                                        ---------     ---------
                                                           92,407       119,755
                                                        ---------     ---------

Net income (loss)--Note C:
    General partners                                        2,410           (51)
    Limited partners                                      238,578        (5,038)
                                                        ---------     ---------
                                                        $ 240,988     $  (5,089)
                                                        =========     =========
Net income (loss) per limited partnership unit          $   19.43     $    (.41)
                                                        =========     =========

</TABLE>


See notes to financial statements.




                                       F-3


<PAGE>   20


STATEMENTS OF PARTNERS' EQUITY (DEFICIT)

SOUTHEAST ACQUISITIONS III, L.P.

<TABLE>
<CAPTION>
                                                   General         Limited
                                                   Partners        Partners        Total
                                                  ----------      ------------  ------------
<S>                                               <C>             <C>           <C>
Balance at January 1, 1997                        $   (46,268)    $ 4,903,708    $ 4,857,440

Net loss for the year ended December 31, 1997             (51)         (5,038)        (5,089)
                                                  -----------     -----------    -----------
Balance at December 31, 1997                          (46,319)      4,898,670      4,852,351

Net loss for the year ended December 31, 1998           2,410         238,578        240,988

Distributions ($50 per unit)                              -0-        (620,140)      (620,140)
                                                  -----------     -----------    -----------
Balance at December 31, 1998                      $   (43,909)    $ 4,517,108    $ 4,473,199
                                                  ===========     ===========    ===========

</TABLE>


See notes to financial statements.





                                       F-4


<PAGE>   21


STATEMENTS OF CASH FLOWS

SOUTHEAST ACQUISITIONS III, L.P.

<TABLE>
<CAPTION>
                                                                 Year Ended December 31
                                                                  1998           1997
                                                              -------------------------
 <S>                                                          <C>           <C> 
  CASH FLOWS FROM OPERATING ACTIVITIES
    Net income (loss)                                          $ 240,988    $  (5,089)
    Adjustments to reconcile net income (loss) to net
      cash provided by operating activities:
         Gain on sale of land                                   (310,015)     (91,709)
         Net proceeds from sale of land                          707,940      232,351
         Cash paid for land improvements                         (18,500)         -0-
         Decrease (increase) in receivable from affiliate         13,954      (13,954)
         (Decrease) increase in accounts payable and
            accrued expenses                                      (5,753)      10,206
         (Decrease) increase in escrow on pending
            sale of land                                         (20,000)      20,000
         Decrease in payable to previous
            general partners                                         -0-       (6,222)

                                                               ---------    ---------
                                        NET CASH PROVIDED
                                  BY OPERATING ACTIVITIES        608,614      145,583

  CASH FLOWS FROM FINANCING ACTIVITIES
    Distributions paid to limited partners                      (620,140)         -0-
                                                               ---------    ---------
                                   (DECREASE) INCREASE IN
                                CASH AND CASH EQUIVALENTS        (11,526)     145,583

  Cash and cash equivalents at beginning of year                 504,876      359,293
                                                               ---------    ---------
                                CASH AND CASH EQUIVALENTS
                                           AT END OF YEAR      $ 493,350    $ 504,876
                                                               =========    =========

</TABLE>

See notes to financial statements.




                                       F-5


<PAGE>   22


NOTES TO FINANCIAL STATEMENTS

SOUTHEAST ACQUISITIONS III, L.P.

December 31, 1998

NOTE A--DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Southeast Acquisitions III, L.P. ("the Partnership") is a Delaware limited
partnership that was formed to acquire undeveloped land. The Partnership was
formed during November 1988 and received equity contributions totaling
$12,373,480 through the sale of 12,400 limited partnership units during 1989.
The Partnership was originally scheduled to terminate on December 31, 1999.
However, during November 1997, concurrent with the replacement of the previous
general partner, the term of the Partnership was extended to December 31, 2001.

During 1989, the Partnership purchased undeveloped land as follows:
approximately 211 acres in Fulton County, Georgia, approximately 265 acres in
Henry County, Georgia, approximately 24 acres in Nashville, Tennessee,
approximately 48 acres in Fort Myers, Florida, and approximately 51 acres in
Columbia, South Carolina. This land was purchased from an affiliate of the
previous general partner. The land in Nashville, Tennessee was sold during 1995.
At December 31, 1998, the Partnership's property consisted of approximately 208
acres in Fulton County, Georgia, approximately 154 acres in Henry County,
Georgia, approximately 47 acres in Fort Myers, Florida, and approximately 42
acres in Columbia, South Carolina.

The following accounting policies are presented to assist the reader in
understanding the Partnership's financial statements:

Basis of Accounting: The Partnership maintains its accounting records on the
accrual basis of accounting. Sales of land are recognized upon the closing of an
enforceable sales contract and the Partnership's execution of its obligations
under the contract.

Land: Effective January 1, 1996, the Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of. In accordance
with SFAS Statement No. 121, land held for investment is carried at the lower of
cost or fair value. Land held for sale is carried at the lower of cost or fair
value less estimated cost to sell. During 1997, land that had previously been
considered as held for investment was reclassified to held for sale.




                                       F-6


<PAGE>   23


NOTES TO FINANCIAL STATEMENTS--Continued

SOUTHEAST ACQUISITIONS III, L.P.

NOTE A--DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--
        Continued

The Partnership's land is carried net of write-downs to fair value, as
determined by independent appraisals. Prior to 1996, the Partnership's policy
was to carry land at the lower of cost or fair value. Cumulative original
write-downs to fair value through December 31, 1998 totaled $3,622,126 on the
Fulton County, Georgia land, $676,199 on the Fort Myers, Florida land and
$625,861 on the Columbia, South Carolina land. No write-downs to fair value have
been recorded on the Henry County, Georgia land since the appraised value of the
land exceeds its cost.

Income Taxes: Federal and state income taxes have not been provided for in the
financial statements. Under existing law, the Partnership is not treated as a
taxable entity. Rather, each partner must include his allocated share of
Partnership income, loss, gain, deduction, and credit in his individual income
tax return. Write-downs of the land's carrying value that have been recorded for
financial statement purposes will not be recognized for income tax purposes
until the land is sold. At December 31, 1998 and 1997, remaining write-downs
that have not been recognized for income tax purposes totaled $4,822,859.

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

Cash and Cash Equivalents: For purposes of reporting cash flows, the Partnership
considers all demand deposits and highly liquid investments purchased with an
original maturity of three months or less which can be readily converted to cash
on demand, without penalty, to be cash equivalents. Since inception, cash of
$200,000 has been reserved to enable the Partnership to participate in bringing
sewer to the Fulton County, Georgia property. At December 31, 1998, cash on
deposit included approximately $403,000 in excess of federally insured limits.




                                       F-7


<PAGE>   24


NOTES TO FINANCIAL STATEMENTS--Continued

SOUTHEAST ACQUISITIONS III, L.P.

NOTE B--RELATED PARTY TRANSACTIONS

During the year ended December 31, 1998 and 1997, the Partnership paid
management fees of $26,500 and $4,066 to the current General Partner, as
provided for in the amendment to the partnership agreement that was adopted
during November 1997. Management fees were paid to the previous General Partner
totaling $16,194 during the year ended December 31, 1997. The original
partnership agreement provided for cumulative management fees to be paid to the
previous general partner of $207,244. That limit was reached during 1997.

The amended partnership agreement provides for annual management fees of $26,500
to be paid to the current general partner through the year ended December 31,
2001.

At December 31, 1998 and 1997, the Partnership had commissions payable to the
previous general partner of $3,584. During the year ended December 31, 1998, the
Partnership paid commissions on the sale of land of $8,059 to the current
general partner.

The Partnership agreement provides for reimbursement of expenses incurred by the
general partner related to the administration and operation of the Partnership.
Reimbursements to the current general partner's members and related companies
totaled $10,090 during the year ended December 31, 1998. Reimbursements to the
previous general partner totaled $41,325 during the year ended December 31,
1997.

At December 31, 1997, the Partnership owed $5,673 to companies related to the
current general partner for legal fees incurred for the change in general
partner and approval of the amendments to the partnership agreement. The
Partnership also had a receivable of $13,954 from Southeast Acquisitions II,
L.P., a partnership with the same general partner.




                                       F-8


<PAGE>   25


NOTES TO FINANCIAL STATEMENTS--Continued

SOUTHEAST ACQUISITIONS III, L.P.

NOTE C--PARTNERS' EQUITY

In accordance with the partnership agreement (as amended in November 1997), cash
distributions and Partnership profits and losses are to be allocated as follows:

(a)  Cash Distributions--Except for distributions in connection with the
     liquidation of the Partnership, cash distributions, if any, will be made
     100% to the limited partners until the limited partners have received (i) a
     return of their capital contributions ($10,203,337 at December 31, 1998)
     plus (ii) cumulative distributions equal to their 10% non-compounded
     cumulative annual return on their adjusted capital contributions, as
     defined ($11,187,693 at December 31, 1998); thereafter distributions will
     be made 70% to the limited partners and 30% to the general partner.
     Distributions in connection with the Partnership's liquidation will be made
     in accordance with the partners' capital accounts as maintained for federal
     income tax purposes.

(b)  Profits and losses are to be allocated as provided in the partnership
     agreement. Generally, profits will be allocated to reflect cash
     distributions, or to offset negative balances in the partners' capital
     accounts, but at least 1% of profits will be allocated to the general
     partner. 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 profits or losses for
     any year.

Upon Partnership dissolution and termination, the general partner is required to
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.

During the year ended December 31, 1998, the Partnership made distributions to
the limited partners of $620,140, or $50 a unit, representing a return of their
capital contributions. The Partnership made no distributions to the limited
partners during the year ended December 31, 1997.




                                       F-9


<PAGE>   26


NOTES TO FINANCIAL STATEMENTS--Continued

SOUTHEAST ACQUISITIONS III, L.P.

NOTE C--PARTNERS' EQUITY--Continued

Total compensation paid to all persons, including the general partner, upon the
sale of the Partnership's property is limited to a competitive real estate
commission or disposition fee not to exceed 10% of the contract price. Any such
commission or disposition fee paid to the general partner would reduce any
distribution which it would otherwise be entitled to pursuant to the partnership
agreement. The general partner or an affiliate may be given an exclusive right
to sell property for the partnership.

NOTE D--SUMMARY OF PROPERTY AND ACTIVITY

At December 31, 1998, land consisted of the following:

<TABLE>
<CAPTION>
                                                       Gross Amount
                                                     at Which Carried at
           Description                Initial Cost   December 31, 1998    Date Acquired
-----------------------------------   ------------   -------------------  -------------
<S>                                   <C>            <C>                  <C>
208 acres of undeveloped land in
  Fulton County, Georgia              $ 4,972,126      $ 1,350,000          June 1989

154 acres of undeveloped land in
  Henry County, Georgia                   792,133          792,133          June 1989

47 acres of undeveloped land
   in Fort Myers, Florida               1,898,291        1,222,092          August 1989

42 acres of undeveloped land
   in Columbia, South Carolina          1,157,300          632,766          December 1989
                                       ----------      -----------

                                       $8,819,850      $ 3,996,991
                                       ==========      ===========
</TABLE>


There were no liens on the land as of December 31, 1998. At December 31, 1998,
the aggregate carrying value of this land for income tax purposes was
$8,819,850. The difference between the carrying value for financial statement
purposes and income tax purposes resulted from write-downs on the land in Fulton
County, Georgia, Fort Myers, Florida, and Columbia, South Carolina that were
recorded for financial statement purposes, as more fully described in Note A.




                                      F-10


<PAGE>   27


NOTES TO FINANCIAL STATEMENTS--Continued

SOUTHEAST ACQUISITIONS III, L.P.

NOTE D--SUMMARY OF PROPERTY AND ACTIVITY--Continued

Land activity during the years ended December 31, 1997 and 1998 consisted of the
following:

<TABLE>
<CAPTION>

      <S>                                                            <C>   
      Balance at January 1, 1997                                     $ 4,517,058
      Additions                                                              -0-
      Deductions--cost of land sold                                     (140,642)
                                                                     -----------
                                     Balance at December 31, 1997      4,376,416

      Additions--water and sewer improvements                             18,500
      Deductions--cost of land sold                                     (397,925)
                                                                     -----------
                                     Balance at December 31, 1998    $ 3,996,991
                                                                     ===========

</TABLE>






                                      F-11



<PAGE>   28

                        Southeast Acquisitions III, L.P.

                              Financial Statements

                     Years ended December 31, 1996 and 1995





                                    CONTENTS



<TABLE>
<S>                                                                 <C>
Report of Independent Auditors......................................F-13

Audited Financial Statements

Balance Sheets......................................................F-14
Statements of Operations............................................F-15
Statements of Partners' Equity (Deficit)............................F-16
Statements of Cash Flows............................................F-17
Notes to Financial Statements.......................................F-18
</TABLE>


                                      F-12
<PAGE>   29


                         Report of Independent Auditors


To the Partners of Southeast Acquisitions III, L.P.


We have audited the accompanying balance sheets of Southeast Acquisitions III,
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 III,
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

Philadelphia, Pennsylvania
March 7, 1997


                                                                             


                                      F-13
<PAGE>   30


                        Southeast Acquisitions III, L.P.

                                 Balance Sheets





<TABLE>
<CAPTION>
                                                                              DECEMBER 31
                                                                      1996                  1995
                                                              --------------------------------------------
<S>                                                           <C>                       <C>           
ASSETS
Land, net                                                         $    4,517,058        $    8,922,258
Cash and cash equivalents                                                359,293               258,680
                                                              --------------------------------------------
                                                                  $    4,876,351        $    9,180,938
                                                              ============================================


LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Accrued expenses                                                  $        9,105        $        7,594
Due to affiliates                                                          9,806                 9,806

Partners' equity (deficit):
    General                                                              (46,268)               (3,207)
    Limited (12,400 units authorized, issued and outstanding)
                                                                       4,903,708             9,166,745
                                                              --------------------------------------------
                                                                  $    4,876,351        $    9,180,938
                                                              ============================================
</TABLE>



See accompanying notes.

                                                                            

                                      F-14
<PAGE>   31


                        Southeast Acquisitions III, L.P.

                            Statements of Operations



<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31
                                                          1996               1995                1994
                                                   ----------------------------------------------------------
<S>                                                <C>                  <C>                 <C>           
Revenue:
    Gain on sale of land                             $      103,294     $      410,858      $       24,894
    Interest and other income                                13,598             27,681              19,285
    Timber revenue                                           14,199                  -                   -
                                                   ----------------------------------------------------------
                                                            131,091            438,539              44,179
Expenses:
    General and administrative                               27,136             13,469              14,220
    Management fee                                           24,886             24,886              24,886
    Real estate taxes                                        35,773             36,835              47,952
    Insurance                                                   508                578               6,653
    Amortization                                                  -                  -               1,250
    Provision for loss on land                            4,348,886                  -                   -
                                                   ----------------------------------------------------------
                                                          4,437,189             75,768              94,961
                                                   ----------------------------------------------------------
Net (loss) income:
    Allocated to General Partner                            (43,061)             3,628                (508)
    Allocated to Limited Partners                        (4,263,037)           359,143             (50,274)
                                                   ----------------------------------------------------------
                                                     $   (4,306,098)    $      362,771      $      (50,782)
                                                   ==========================================================

Net (loss) income per limited
    partnership unit                                 $      (347.27)    $        29.26      $        (4.10)
                                                   ==========================================================
</TABLE>



See accompanying notes.




                                     F-15
<PAGE>   32


                        Southeast Acquisitions III, L.P.

                    Statements of Partners' Equity (Deficit)


<TABLE>
<CAPTION>

                                               GENERAL               LIMITED
                                               PARTNER              PARTNERS                TOTAL
                                        ------------------------------------------------------------------
<S>                                     <C>                      <C>                   <C>            
Balance, January 1, 1994                   $     (6,327)         $    10,407,879       $    10,401,552
    Net loss                                       (508)                 (50,274)              (50,782)
                                        ------------------------------------------------------------------
Balance, December 31, 1994                       (6,835)              10,357,605            10,350,770
    Capital distribution                              -               (1,550,003)           (1,550,003)
    Net income                                    3,628                  359,143               362,771
                                        ------------------------------------------------------------------
Balance, December 31, 1995                       (3,207)               9,166,745             9,163,538
    Net loss                                    (43,061)              (4,263,037)           (4,306,098)
                                        ------------------------------------------------------------------
Balance, December 31, 1996                 $    (46,268)         $     4,903,708       $     4,857,440
                                        ==================================================================
</TABLE>


See accompanying notes.



                                      F-16
<PAGE>   33


                        Southeast Acquisitions III, L.P.

                            Statements of Cash Flows


<TABLE>
<CAPTION>

                                                                          YEAR ENDED DECEMBER 31
                                                               1996                1995               1994
                                                        -----------------------------------------------------------
<S>                                                     <C>                    <C>                <C>          
OPERATING ACTIVITIES
Net (loss) income                                          $   (4,306,098)     $      362,771     $    (50,782)
Adjustments to reconcile net income (loss)
    to net cash provided by (used in)
    operating activities:
       Amortization                                                     -                   -            1,250
       Gain on sale of land                                      (103,294)           (410,858)         (24,894)
       Provision for loss on land                               4,348,886                   -                -
       Proceeds from sale of land parcels                         159,608           1,306,199           42,335
       Changes in operating assets and
          liabilities:
              Due from general partner                                  -               3,584            3,585
              Accrued expenses                                      1,511              (9,087)          (2,117)
                                                        -----------------------------------------------------------
Net cash provided by (used in) operating
    activities                                                    100,613           1,252,609          (30,623)

FINANCING ACTIVITIES
Distribution to limited partners                                        -          (1,550,003)               -
                                                        -----------------------------------------------------------
Net cash used in financing activities                                   -          (1,550,003)               -
                                                        -----------------------------------------------------------
Net increase (decrease) in cash and cash equivalents              100,613            (297,394)         (30,623)

Cash and cash equivalents, beginning of year                      258,680             556,074          586,697
                                                        -----------------------------------------------------------
Cash and cash equivalents, end of year                     $      359,293      $      258,680     $    556,074
                                                        ===========================================================
</TABLE>


See accompanying notes.



                                      F-17
<PAGE>   34


                        Southeast Acquisitions III, L.P.

                          Notes to Financial Statements

                                December 31, 1996

1. DESCRIPTION OF BUSINESS

Southeast Acquisitions III, 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). Per the
Partnership Agreement, the Partnership shall exist for a term ending December
31, 1999, at which time it shall be dissolved.

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 June
1994, was amended in January 1995 and again in June 1996.

The Partnership purchased approximately 211 acres of unimproved land in Fulton
County, Georgia, on June 1, 1989, from Southeastern Land Fund, Inc. (SELF), an
affiliate of the General Partner. On June 30, 1989, the Partnership purchased
approximately 265 acres of unimproved land in Henry County, Georgia, and
approximately 24 acres of unimproved land in Nashville, Tennessee, from SELF. On
August 25, 1989, the Partnership purchased approximately 48 acres of unimproved
land in Fort Myers, Florida, and on September 15, 1989, purchased approximately
51 acres of unimproved land in Columbia, South Carolina, from SELF. The
unimproved land in Nashville, Tennessee was sold on July 28, 1995. Three of the
remaining four tracts of unimproved land are held for investment and one tract,
Henry County is being marketed for sale. The General Partner anticipates that
all the Properties will be sold or otherwise disposed of by the Partnership as
conditions warrant.

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 held for
investment is carried at the lower of cost or fair value. Land held for sale is
carried at lower of cost or fair value less estimated cost to sell.


                                      F-18
<PAGE>   35


                        Southeast Acquisitions III, 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
write-downs of $4,348,886 in 1996 to fair value, as determined by independent
appraisals, as well as a write-down of $575,301 in 1991 to fair value, also
determined by independent appraisals. 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.

Appraisals were commissioned on each of the Partnership's Properties in 1996 as
the last appraisals were four years old. These appraisals estimated the
aggregate fair value of the Properties to be $5,185,000. The 1992 appraisals
judged the aggregate value for these Properties to be $19,700,500. Ninety-five
percent (95%) of the $14,515,500 difference between the aggregate valuations can
be attributed to the Fulton County, GA and Henry County, GA properties, which
appraised at $1,350,000 and $1,700,000, respectively, in 1996 and $12,335,000
and $4,537,500, respectively, in 1992. The difference in the appraised values
for the Columbia, SC and Fort Myers, FL properties, which were valued at
$740,000 and $1,395,000, respectively, and $808,000 ad $2,020,000, respectively,
in 1992, were not as significant as those for the Fulton County, GA and Henry
County, GA properties. The aggregate carrying value of the Properties at
December 31, 1992 was $9,835,040 (which included the $927,309 carrying value of
the Nashville, TN property sold by the Partnership in 1995). Given the excess of
value between the 1992 appraisals and the carrying value of the Properties and
management's strategy of holding the Fulton County, GA, Columbia, SC and Fort
Myers, FL properties for investment awaiting an improvement in market conditions
and the number of potential sales of the Henry County, GA property in the
intervening period, management had no reason to believe that the market value of
any of the Properties had declined below the carrying value.

The General Partner reviewed the assumptions and conclusions of each of the 1996
appraisals and met with the appraisers, numerous local real estate
professionals, the South Carolina Department of Commerce and the Henry County
Development Authority to confirm the validity of the appraisals. Based on the
result of these activities, the General Partner concluded that each of the 1996
appraisals were reasonable approximations of the current market value of the
Properties.




                                      F-19
<PAGE>   36


                        Southeast Acquisitions III, L.P.

                    Notes to Financial Statements (continued)



2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

LAND (CONTINUED)

As a result, the Partnership adjusted the carrying value of the Fort Myers, FL
property from $1,931,700 to $1,255,500 to reflect its fair value, less estimated
disposition expenses, in accordance with generally accepted accounting
principles for land held for sale. The Partnership also adjusted the carrying
value of the Columbia, SC property from $790,560 to $740,000 and the Fulton
County, GA property from $4,972,126 to $1,350,000 to reflect their fair value,
in accordance with generally accepted accounting principles for land held for
investment. The fair value of the Henry County, GA property exceeded its
carrying value and did not warrant an adjustment.

CASH EQUIVALENTS

For purposes of reporting cash flows, short-term investments which have an
original maturity of three months or less are considered cash equivalents.

INCOME TAX

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 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

An annual management fee of $24,886 was paid in 1996, 1995, and 1994 to the
General Partner. The annual management fee is equal to one quarter of one
percent of the original cost of the land as provided in the Partnership
Agreement. The cumulative amount of such fees may not exceed $207,244 as
provided by the Partnership Agreement, and cumulative fees charged since
inception amounted to $191,050 at December 31, 1996.



                                      F-20
<PAGE>   37


                        Southeast Acquisitions III, L.P.

                    Notes to Financial Statements (continued)



4. PARTNERS' EQUITY

The Partnership received cash equity contributions totaling $12,400,000 through
the sale of 12,400 limited partnership units. In accordance with the Partnership
Agreement, cash distributions and profits or losses of the Partnership shall be
allocated as follows:

         (a)      Cash Distributions - Except for distributions in connection
                  with the liquidation of the Partnership, cash distributions,
                  if any, will be made 100% to the limited partners until the
                  limited partners have received (i) a return of their capital
                  contributions ($10,823,477 at December 31, 1996) plus (ii)
                  cumulative distributions equal to their 10% noncompound
                  cumulative annual return on their adjusted capital
                  contributions, as defined ($9,085,011 at December 31, 1996);
                  thereafter distributions will be made 70% to the limited
                  partners and 30% to the General Partner. Distributions in
                  connection with the Partnership's liquidation will be made in
                  accordance with the partners' capital accounts as maintained
                  for Federal income tax purposes.

         (b)      Profits and Losses - Profits generally will be allocated to
                  the partners to reflect cash distributions, but at least 1% of
                  profits will be allocated to the General Partner. Losses
                  generally will be allocated 99% to the limited partners and 1%
                  to the General Partner. In no event will the General Partner
                  be allocated less than 1% of profits or losses for any year.

During 1995, the Partnership made distributions to the limited partners in the
amount of $125 per unit, or $1,550,000. The distribution represented a payment
of earnings in the amount of $28.95 per unit, or $359,000 and a return of basis
in the amount of $96.05 per unit, or $1,191,000. These are the cumulative
distributions through December 31, 1996.

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 $14,199.


                                      F-21