<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934.


For the fiscal year ended October 31, 1998       Commission file number: 0-17517


                           SEA PINES ASSOCIATES, INC.
                           --------------------------
             (Exact name of registrant as specified in its charter)

       South Carolina                                                 57-0845789
       --------------                                                 ----------
(State or other jurisdiction of                                 (I.R.S. Employer
incorporation or organization)                               Identification No.)


32 Greenwood Drive
Hilton Head Island, South Carolina                                      29928
----------------------------------------                              ----------
(Address of principal executive offices)                              (Zip Code)

       Registrant's telephone number, including area code: (803) 785-3333

          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                      None

          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                             Common Stock (No Par)
                             ---------------------
                                (Title of Class)
                                ----------------

              Series A Cumulative Preferred Stock ($0.722 Dividend
            Rate/$7.60 Liquidation Preference and Redemption Price)
            -------------------------------------------------------
                                (Title of Class)

         Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes   X    No
                                              -----     -----

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. _____


         There is presently no established public trading market for shares of
the registrant's common stock, no par value, and there has been very limited
trading in such shares since their original issuance in 1987. Accordingly,
trading activity in the voting stock of the registrant does not currently
represent a reliable indicator of the aggregate market value of the voting
stock of the registrant held by non-affiliates of the registrant and the
registrant is unable to estimate such value.

The number of shares outstanding of the registrant's common stock as of January
20, 1999 was 1,842,525.

                      DOCUMENTS INCORPORATED BY REFERENCE

Registrant's Proxy Statement in connection with its 1999 Annual Meeting of
Shareholders on March 6, 1999 is incorporated by reference into Part III.

<PAGE>   2

                                     PART I

THIS REPORT ON FORM 10-K AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME
BY THE COMPANY OR ITS REPRESENTATIVES CONTAIN STATEMENTS WHICH MAY CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES ACT OF 1933,
AS AMENDED (THE "1933 ACT"), AND THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED BY THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. 15 U.S.C.A.
SECTIONS 77Z-2 AND 78U-5 (SUPP. 1996). THOSE STATEMENTS INCLUDE STATEMENTS
REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY AND MEMBERS
OF ITS MANAGEMENT TEAM, AS WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE
BASED. PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING
STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND
UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS CURRENTLY
KNOWN TO MANAGEMENT THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE IN FORWARD-LOOKING STATEMENTS INCLUDE THOSE SET FORTH IN THIS REPORT, AS
WELL AS THOSE CONTAINED IN THE SAFE HARBOR COMPLIANCE STATEMENT FOR
FORWARD-LOOKING STATEMENTS INCLUDED AS EXHIBIT 99.1 TO THIS REPORT ON FORM
10-K, WHICH FACTORS ARE HEREBY INCORPORATED BY REFERENCE. THE COMPANY
UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS TO
REFLECT CHANGED ASSUMPTIONS, THE OCCURRENCE OF UNANTICIPATED EVENTS OR CHANGES
TO FUTURE OPERATING RESULTS OVER TIME.


ITEM 1.       BUSINESS.

     (A)      GENERAL DEVELOPMENT OF BUSINESS. Sea Pines Associates, Inc. was
incorporated under South Carolina law on May 4, 1987. As used in this report on
Form 10-K, except where the context otherwise indicates, the "Company" means
Sea Pines Associates, Inc. and its subsidiaries. The Company was principally
organized to acquire, own and operate certain resort assets located in Sea
Pines, a 5,300 acre master planned resort community on Hilton Head Island,
South Carolina.

     Subsidiaries of the Company include Sea Pines Company, Inc. ("SPC"),
Sea Pines Real Estate Company, Inc. ("SPREC"), Sea Pines/TidePointe, Inc., Sea
Pines Senior Living Center, Inc. ("SPSLC"), and Fifth Golf Course Club, Inc.,
all of which are wholly owned.

     SPC is a full-service resort which owns and operates three golf courses,
tennis and various other recreational facilities, home and villa rental
management, and food and beverage services. SPREC provides real estate brokerage
services for buyers and sellers of real estate on Hilton Head Island and its
neighboring communities. Sea Pines/TidePointe, Inc. was formed to invest in a
general partnership, TidePointe Partners, that has developed a continuing care
retirement community on Hilton Head Island.

                                       2
<PAGE>   3

SPSLC was established to construct a healthcare facility within the TidePointe
retirement community. The healthcare facility was completed and licensed in
February 1997 and was operated by the Company prior to its sale to TidePointe
Partners on July 31, 1997. Fifth Golf Course Club, Inc. owns certain acreage
which could be used to develop another golf course.

     During 1989, the Company formed the Sea Pines Country Club, Inc. (the
"Club") which, until May 1996, was controlled by the Company. The May 1990
Equity Offering Agreement by which the Club was organized provided for the
eventual turnover by the Company of the operations and assets of the Club to the
equity members. This transfer was made, effective May 1, 1996, such that the
Club obtained control of all of its physical assets and assumed complete and
total responsibility for its operation and all the other risks and rewards of
ownership. The Company retained the right to sell the remaining unsold
memberships. Results of Club operations through the turnover date are included
in the Company's consolidated financial statements.

     (B)      FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS. See Note 15
to the consolidated financial statements for business segment information.

     (C)      NARRATIVE DESCRIPTION OF BUSINESS. The Company's business is
divided into three primary segments: resort operations, real estate brokerage,
and Country Club operations (prior to Club turnover on May 1, 1996).
Additionally, the Company developed and operated a healthcare facility within
the TidePointe retirement community on Hilton Head Island until its sale on
July 31, 1997.

              1.  RESORT OPERATIONS. Resort operations consist primarily of
the operation of three resort golf courses, a 28 court racquet club, a home and
villa rental management company, retail outlets, food service operations, and
other recreational facilities. For fiscal year 1998, resort operations
accounted for approximately $26,554,000 (69%) of the Company's total revenues,
with golf and tennis activities responsible for revenues of approximately
$15,064,000 (39%) and home and villa rental management activities responsible
for revenues of approximately $10,168,000 (26%). For fiscal year 1997, resort
operations accounted for approximately $26,322,000 (73%) of the Company's total
revenues, with golf and tennis activities responsible for revenues of
approximately $14,688,000 (41%) and home and villa rental management activities
responsible for revenues of approximately $10,001,000 (28%). For fiscal year
1996, resort operations accounted for approximately $24,588,000 (70%) of the
Company's total revenues, with golf and tennis activities responsible for
revenues of approximately $12,631,000 (36%) and home and villa rental
management activities responsible for revenues of approximately $9,068,000
(26%).

                                       3
<PAGE>   4

     During each of the fiscal years 1998, 1997 and 1996, approximately 70% of
golf and tennis revenues and 90% of home and villa rentals were derived from
vacation and conference use at Sea Pines. As a result, the Company believes its
future success is dependent upon Hilton Head (in general) and Sea Pines (in
particular) continuing to be considered as prime destination resort areas, with
appropriate lodging and conference facilities. The remaining golf and tennis
revenues, approximately 30%, were generated from Hilton Head Island residents.

     During fiscal years 1998, 1997 and 1996, residents and vacationers
utilizing accommodations at Sea Pines accounted for approximately 85-90% of the
use of the Company's golf and tennis facilities, with the remainder
attributable to use by persons residing outside Sea Pines. Fees charged to the
general public for use of the Company's facilities are typically higher than
the fees charged to persons residing within Sea Pines. The Company is also a
party to certain use and access agreements terminable at will with several
developments and hotels located both inside and outside of Sea Pines. These
agreements generally provide the management and guests of those particular
developments and hotels with access to the Company's facilities at rates
slightly lower than those available to the general public. In addition, the
Company will occasionally offer special discounts and package rates as part of
its ongoing promotional activities. Use of the Company's facilities resulting
from such agreements and discounts does not represent a material portion of
overall resort usage and has no significant impact on the Company's golf and
tennis revenues.

     Vacation use is seasonal with the highest period being from March through
November and the lowest period from December through February. In spite of
reduced levels of use during non-peak period, the Company continues to
experience substantial fixed costs, such as payroll and occupancy costs.

     The Company believes that its resort operations are relatively stable.
Economic conditions and other factors which adversely affect tourism on Hilton
Head in general may have a negative impact on the resort operations of the
Company. Because of its location on the Atlantic coast, Hilton Head is
susceptible to adverse weather conditions and resulting damage from hurricanes,
as well as the potential for damage from a major oil or hazardous waste spill.
Although the Island's location away from major oil drilling operations and
industrial sites greatly reduces the risk of the latter occurrence, there can
be no assurance that such damage will not occur in the future. The Company
maintains property and casualty insurance in amounts that it believes to be
adequate including coverage for business interruption. Furthermore, access to
the Company's facilities is dependent upon adequate means of transportation at
a reasonable cost. In the future, fuel shortages, increases in fuel costs and
other events which might inhibit or restrict airplane or automobile travel
could have a negative impact on the Company's operations, depending on the
severity and duration of the interruption.

                                       4
<PAGE>   5

      The Company is generally subject to various local and regional land
use and environmental regulations, ordinances and restrictive covenants. The
Company believes that it is currently in compliance with all such applicable
regulations and covenants and does not expect that compliance in the future
will have any material effect on the operations or the profitability of the
Company.

     Resort operations are subject to significant competition from various
competing facilities on Hilton Head, as well as other destination resorts in
South Carolina, Georgia and Florida. Specifically, the Company believes its
golf courses are directly competitive with approximately 16 golf courses
located on Hilton Head outside of Sea Pines. However, in as much as golf course
play is in large part dictated by the number of guests utilizing accommodations
within Sea Pines, the overall success of the Company's operations will continue
to be dependent on Sea Pines maintaining its reputation as a premier golf and
tennis resort. The Company believes that its rates are competitive compared to
other facilities of comparable quality on the Island and expects that its
facilities will continue to compete favorably with neighboring and regional
resorts due to their location, quality and design, as well as the established
reputation of Sea Pines.

     The Company's golf and tennis facilities are hosts to several national
tournaments, including the annual MCI Classic and the annual Family Circle
Magazine Cup. Although facility usage fees for these tournaments do not
constitute a major source of income, the extensive media coverage generated
from these tournaments provides the Company with substantial marketing benefits
resulting in the enhanced national reputation of Sea Pines and the Company's
facilities. Other than this benefit, however, the Company does not believe that
tournaments have a significant financial impact on its operations and,
accordingly, does not believe its operations are dependent upon one or more of
such tournaments or their sponsors.

     The Company's golf and tennis operations consist primarily of the
marketing and maintenance of the Company's facilities. The Company receives
court fees, greens fees, cart rental fees, and income from merchandise sales.
The Company's tennis facility and the three resort golf courses are open to the
general public. Maintenance and overhead expenses associated with the Company's
golf and tennis operations remain generally stable despite the volume of
facility usage. As a result, the Company's current and future financial results
are substantially dependent upon the revenues generated from the usage of its
facilities, which revenues are a function of both the volume of usage and the
fee levels the Company is in a position to charge in its market area.

     Resort operations employed approximately 251 people as of October 31,
1998.

         2.   REAL ESTATE BROKERAGE. SPREC is engaged primarily in the brokerage
of residential real estate on Hilton Head Island and its neighboring

                                       5
<PAGE>   6

communities. The Company competes with other real estate brokerage firms in the
Hilton Head Island area.

     SPREC maintains ten offices; seven located within Sea Pines and three
located outside of Sea Pines in the Hilton Head Island area.

     For fiscal year 1998, real estate brokerage operations accounted for
approximately $11,952,000 (31%) of the Company's total revenue. For fiscal year
1997, real estate brokerage operations accounted for approximately $9,574,000
(27%) of the Company's total revenue. For fiscal year 1996, real estate
brokerage operations accounted for approximately $8,504,000 (24%) of the
Company's total revenue.

     While brokerage activities are not tied directly to vacation and
conference activities, general downturns with respect to visitors to Hilton
Head Island can result in slower residential real estate sales. Furthermore,
rising interest rates and other economic conditions which adversely affect real
estate sales in general are anticipated to continue to have a significant
impact on real estate brokerage revenues in the future.

     SPREC employed 27 people and had 95 sales agents as of October 31, 1998.

         3.   COUNTRY CLUB OPERATIONS. On May 1, 1996 the Company turned over
the operations and assets of The Sea Pines Country Club to the equity members
as contemplated by the May 1990 Equity Offering Agreement. Effective with this
transfer, the Country Club members obtained control of all of its physical
assets and assumed complete and total responsibility for its operation and all
the other risks and rewards of ownership. As a result of recognizing the
deferred income related to past membership sales and removing the Club assets
from the Company's financial statements, the turnover generated in 1996, a
non-cash gain of $7,747,000 (approximately $4,786,000 after income tax effect)
which is included as other income in the Company's 1996 statement of
operations.

     Results of Club operations through the turnover date are included in the
Company's consolidated financial statements.

     For the period November 1, 1995 to April 30, 1996 Country Club operations
accounted for approximately $1,866,000 (5.3%) of the Company's total revenue.

         4.   TIDEPOINTE RETIREMENT COMMUNITY. On January 14, 1994, Sea
Pines/TidePointe, Inc., a subsidiary of the Company, entered into a general
partnership, TidePointe Partners (the "Partnership"), with Providers
Enterprises, Inc., for the purpose of constructing, developing and operating a
continuing care retirement community on Hilton Head Island, South Carolina, to
be known as TidePointe. The Company

                                       6
<PAGE>   7

contributed $850,000 of certain predevelopment costs for a 17.5% interest in
the Partnership, and the other partner made an initial cash contribution of
$6,000,000 for an 82.5% interest in the Partnership. In addition the Company
loaned $1,505,000 to the Partnership. In 1998, the Partnership sold the assets
associated with the TidePointe development and the Company released its rights
in those assets. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Results of Operations - 1998 Compared to
1997 and 1997 Compared to 1996."

     (D)      FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND
EXPORT SALES. All of the Company's operations are confined to Beaufort County,
South Carolina. See Item 1(a).

ITEM 2.       PROPERTIES.

     (A)      GOLF FACILITIES. SPC directly owns three 18-hole resort golf
courses known as the Harbour Town Golf Links, the Ocean Course and the Sea
Marsh Course, all of which are located within Sea Pines. Each of the Company's
golf courses is fully utilized during the peak occupancy period on Hilton Head
Island, which is March through November.

     The Harbour Town Golf Links property consists of approximately 136 acres,
including a driving range. Harbour Town is the site of the MCI Classic, a
regular stop on the PGA Tour. Adjacent to the Harbour Town Golf Links is the
Heritage Clubhouse which contains a pro shop, restaurant space which is leased
to a restaurant operator, and other small meeting and dining facilities. The
Company is planning the construction of an inn and conference center addition
to this site - see "Business Outlook and Recent Developments."

     The Sea Marsh Golf Course contains approximately 92 acres and the Ocean
Course contains approximately 97 acres. There is a driving range located
adjacent to, and shared by, the Ocean and Sea Marsh golf courses. The Ocean
Course reopened in September of 1995 after undergoing an extensive renovation
project costing approximately $2,900,000.

     (B)      TENNIS FACILITIES. SPC owns and operates a tennis complex in the
Harbour Town area of Sea Pines known as the Sea Pines Racquet Club. There are
28 tennis courts, including a stadium court, and a tennis pro shop. The Family
Circle Magazine Cup is held at the Sea Pines Racquet Club annually.

     (C)      EQUESTRIAN FACILITIES. SPC owns a tract of land known as Lawton
Stables which contains approximately 21.8 acres. The stables are leased to a
stable operator who provides boarding, lessons, and trail rides.

                                       7
<PAGE>   8

     (D)      PLANTATION CLUB. SPC owns a tract of land with improvements
thereon known as the Plantation Club site containing approximately 9.4 acres.
It includes the golf pro shop associated with the Ocean and Sea Marsh golf
courses and a parking lot utilized by patrons on such courses. In addition, the
Plantation Club contains conference facilities, a food and beverage facility
leased to a restaurant operator, a health and fitness center, a swimming pool,
and a bike rental store.

     The Company is considering construction of improved conference facilities
and possibly an inn on the Plantation Club site but has no immediate plans
regarding the timing and scope of such development.

     (E)      OTHER RECREATIONAL FACILITIES. In the vicinity of the Harbour Town
Golf Links, SPC owns and operates recreational areas containing a playground, a
swimming pool, and a snack bar leased to a restaurant operator.

     SPC also owns and operates a Beach Club in the vicinity of the Plantation
Club, containing a retail shop, parking area, an outdoor food and beverage
facility leased to a restaurant operator and a real estate office.

     In the South Beach area of Sea Pines, SPC owns and operates a 3.9 acre
recreational area containing a swimming pool and parking area.

     (F)      UNDEVELOPED TRACTS/DEVELOPMENT RIGHTS. SPC owns a number of
undeveloped tracts of land within Sea Pines briefly described as follows:

              1.  Sea Pines Academy Tract - approximately 3 acres;

              2.  Sea Pines Center Residual - approximately 1.4 acres;

              3.  Harbour Town Main Parking Tract - approximately 3.21 acres;

              4.  Artists Area Tract - approximately 1.5 acres;

              5.  Cordillo Parkway Tract - 6 acres; and

              6.  Fifth Golf Course Tract - approximately 8 acres.

Development plans for these tracts are undetermined at the present time.

     In addition to the foregoing tracts, SPC owns the right to construct
approximately 66 dwelling units within Sea Pines along with the right to
construct 100 hotel rooms at the Plantation Club site and 60 hotel rooms in the
Harbour Town area. See "Business

                                       8
<PAGE>   9

Outlook and Recent Development" concerning discussion of planned 60 room inn in
the Harbour Town area.

     (G)      FOREST PRESERVE/FIFTH GOLF COURSE CLUB, INC. SPC owns a 495 acre
tract of land known as the Sea Pines Forest Preserve. Various recreational
activities are permitted to be conducted on 181 of these acres and the Fifth
Golf Course Club, Inc. is investigating various possibilities. Among such
possibilities is the development of a golf course. However, construction of
such a golf course would require the approval of 75% of Sea Pines property
owners voting on such issue. The balance of the Forest Preserve is generally
limited to use as a wildlife preserve, although certain sanitation uses are
permitted. In August, 1993, the Company made a commitment to donate
approximately 404 acres of the wildlife preserve to a not-for-profit
organization on Hilton Head Island, South Carolina. As of October 31, 1998
approximately 90 of the 404 acres had been donated and title transferred. The
remaining 314 acres are leased to the same not-for-profit organization for a
minimal amount.

     (H)      WELCOME CENTER. SPC owns a 6 acre tract of land which is the site
of the Sea Pines Welcome Center. This is a 23,000 square foot facility which
contains the Company's Executive and Administrative offices, the lodging front
office facilities, and the main office facility for Sea Pines Real Estate
Company.

     (I)      LIBERTY OAK CAFE. SPC owns a 1.6 acre tract of land and
improvements known as the Liberty Oak Cafe. This is an outdoor food and
beverage facility which is leased to a third party operator.

     (J)      LEASES. SPC currently leases approximately 31,000 square feet of
space used for the golf maintenance facilities, and Sea Pines Real Estate
Company, Inc. leases approximately 10,000 square feet of office space in 6
locations throughout the Island.

     (K)      OTHER REAL ESTATE. SPC owns a small office building in the Harbour
Town area known as the Saddlebag Building, the majority of which is currently
leased to The Family Circle Magazine Cup, and three small commercial buildings
in Harbour Town, two of which currently serve as sales offices for Sea Pines
Real Estate Company.

     (L)      HEALTHCARE FACILITY. In 1997 the Company completed construction of
a healthcare facility within the TidePointe retirement community. This facility
consists of 35 assisted living units, 44 skilled nursing rooms, including 10
dedicated to Alzheimer patients, with dining room facilities and other common
areas. All of the assets, liabilities and operations of the healthcare facility
were sold to The Rogers Center, LLC, a wholly owned subsidiary of TidePointe
Partners, on July 31, 1997. TidePointe Partners subsequently sold the assets of
the healthcare facility in June 1998. See "Management's

                                       9
<PAGE>   10

Discussion and Analysis of Financial Condition and Results of Operations -
Results of Operations - 1998 Compared to 1997 and 1997 Compared to 1996."

ITEM 3.  LEGAL PROCEEDINGS.

     The Company is a defendant in a lawsuit filed in November 1995 in Beaufort
County, South Carolina by Grey Point Associates, Inc. and its principals
relating to a contractual relationship. The plaintiff alleges breach of
contract and seeks unspecified damages. The Company has answered the suit and
filed a counter-claim for unspecified damages. The Company intends to defend
its position vigorously and pursue its counter-claim against the plaintiff. The
suit is presently dormant. However, neither the Company nor its legal counsel
can form an opinion as to the outcome of this matter at this time.

     The Company is a defendant in a lawsuit filed in January 1996 in Beaufort
County, South Carolina by Property Research Holdings, Inc. relating to title of
real and personal property. The plaintiff alleges ownership of certain parcels
of real property and various personal property and seeks a declaratory
judgement. The Company has answered the suit and intends to defend its position
vigorously, however, neither the Company nor its legal counsel can form an
opinion as to the outcome of this matter at this time.

     The Company was a defendant in a lawsuit filed in April 1997, relating to
its proposed construction of a new conference center in Harbour Town, adjacent
to the Harbour Town clubhouse. The suit, filed by the neighboring property
owners, challenged the Company's right to construct such a facility on the
site. The Court ruled on March 4, 1998 that the Company may proceed with the
construction of the conference center contingent upon the construction of a 50
to 60 room inn adjacent to the site. The Court's ruling required that
construction of the inn commence no later than two years after completion of
the conference center. The Company has begun construction of the inn in 1998.
The Plaintiffs in this lawsuit have filed an appeal of the Court's decision.
The Company has filed its answer to this appeal, which it intends to vigorously
pursue. No trial date has been set. Neither the Company nor its legal counsel
can form an opinion as to the outcome of this matter at this time. As of
October 31, 1998, the Company had also incurred and capitalized development
costs of $404,000 relating to the conference center. If the Company does not
construct the conference center in the future, these costs will be expensed at
that time.

     The Company is also a defendant in a lawsuit filed on December 19, 1997 by
thirteen condominium rental companies and two persons owning property within
Sea Pines Resort. The suit alleges that the Company has implemented a tying
arrangement by imposing certain restrictions regarding access to its pool and
parking facilities within Sea Pines Resort for vacationers renting condominiums
not listed with the rental agency operated by the Company. The suit further
alleges that the Company is not the lawful

                                      10
<PAGE>   11

owner in fee simple title of certain swimming pools, roadways, permanent and
common parks, and other amenities to which it claims fee simple title. The
complaint seeks treble damages, injunctive relief and a declaratory judgment
establishing the rights and obligations of the parties in the contested areas,
and the recovery of fees collected by the Company for use of the contested
areas. The Company has answered to the complaint and intends to defend its
position vigorously; however, neither the Company nor its legal counsel can
form an opinion as to the outcome of this matter at this time.

     The Company is subject to other claims and suits in the ordinary course of
business. In management's opinion, such currently pending legal claims and
suits against the Company will not, in the aggregate, have a material adverse
effect on the Company.

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

     None.

                                      11
<PAGE>   12

                                    PART II

ITEM 5.       MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
              MATTERS.

     (A)      MARKET INFORMATION. The Company's capital stock was originally
issued in 1987 in units consisting of 750 shares of voting common stock and 500
shares of Series A preferred stock. Virtually all transactions of the Company's
common stock and preferred stock have been in units as originally issued.
Beginning in September of 1993, transactions in units of the Company's capital
stock trade on a bid and ask basis through the over-the-counter market at
Robinson-Humphrey Company in Atlanta, Georgia. Prior to September 1993, there
was no established public trading market for the Company's common or preferred
stock. Quotes for the units of stock were available only through Prudential
Securities, Inc. and there was no available composite index of trading and
pricing of the units.

     Set forth below are the high and low closing sales price for units of the
Company's stock for each quarter of the last two fiscal years:

<TABLE>
<CAPTION>
     Fiscal Year Ended
     October 31, 1998                    High                    Low
     -----------------                   ----                    ---
     <S>                               <C>                     <C>
     Fourth Quarter                    $5,500.00               $5,400.00
     Third Quarter                     $5,400.00               $5,400.00
     Second Quarter                    $5,400.00               $5,400.00
     First Quarter                     $5,400.00               $5,400.00

<CAPTION>

     Fiscal Year Ended
     October 31, 1998                    High                    Low
     -----------------                   ----                    ---
     <S>                               <C>                     <C>
     Fourth Quarter                    $5,400.00               $5,400.00
     Third Quarter                     $5,400.00               $5,400.00
     Second Quarter                    $5,400.00               $5,400.00
     First Quarter                     $5,400.00               $5,400.00
</TABLE>


     None of the Company's Common Shares are subject to outstanding options or
warrants to purchase, or securities convertible into common equity of the
Company. The Company's Common Shares are not restricted securities and other
than those Common Shares held by officers, directors and affiliates of the
Company, the Common Shares are not subject to the volume and other limitations
pursuant to Rule 144 under the Securities Act. The Company is under no
obligation to register its Common Shares under the

                                      12
<PAGE>   13

Securities Act of 1933 for sale by holders of such shares and the Company has
no present intention to publicly offer any of its Common Shares.

     (B)      HOLDERS. As of January 20, 1999 there were approximately 610
holders of record of shares of Common Stock. Most of the holders hold units
consisting of shares of both Common Stock and shares of Preferred Stock
(generally in units of 750 shares of Common Stock and 500 shares of Preferred
Stock).

     (C)      DIVIDENDS. The Articles of Incorporation of the Company provide
for dividends on the preferred stock of $.722 per share per annum. The Company
has paid all accrued dividends on the preferred stock through the fiscal year
ended October 31, 1997.

     At its December 1998 Board of Directors meeting, the Company declared a
cash dividend to holders of Series A Cumulative Preferred Stock of $.722 per
share. This dividend is payable in equal quarterly installments of
approximately $.181 per share on January 15, 1999, April 15, 1999, July 15,
1999, and October 15, 1999 to shareholders of record on January 4, 1999, April
1, 1999, July 1, 1999 and October 1, 1999 respectively.

     Historically, the Company has not paid dividends on its common stock and
has no present intention of paying such dividends in the foreseeable future.

ITEM 6.       SELECTED FINANCIAL DATA.

     The selected financial data is included on Exhibit 99 which is attached
and filed as part of this report.

ITEM 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS.

     RESULTS OF OPERATIONS

     The Company's operations are conducted primarily through two wholly owned
subsidiaries. Sea Pines Company, Inc. operates all of the resort assets,
including three resort golf courses, a 28 court racquet club, a home and villa
rental management business, retail sales outlets, food service operations and
other resort recreational facilities. Sea Pines Real Estate Company, Inc. is an
independent real estate brokerage firm with ten offices serving Hilton Head
Island and its neighboring communities.

                                      13
<PAGE>   14

1998 COMPARED TO 1997

     The Company reported consolidated revenues for fiscal year 1998 of
$38,506,000, a 7.3% increase over fiscal year 1997. Resort revenues totaled
$26,554,000 for fiscal 1998 reflecting an increase of $232,000 over fiscal
1997. Real estate brokerage revenues totaled $11,952,000 for the year, an
increase of $2,378,000 or 24.8% as compared to 1997.

     Guest occupied unit nights in the Company's lodging division totalled
59,066 for 1998, a 1.4% increase over 1997. The average daily rate of $164 in
1997 was maintained in 1998 after significant price increases were implemented
in 1997. Both revenues and operating margins from golf operations continued to
increase. The golf division produced operating margins of over 53% in 1998. The
average rate per round increased by 6.8% in 1998. The increase in average rates
results from the combined effect of price increases and yield management
resulting in fewer discounted rounds. The Company continues to maintain its
market share of golf rounds despite increased competition.

     The Company's real estate brokerage operations closed over $275 million in
transactions for the year, a 27% increase over 1997. Many of the factors that
contributed to a successful 1997 continued for 1998. These included favorable
mortgage interest rates, the strong local and national economy and the
continued strong market demand for second homes. The operating margin from
brokerage operations in 1998 was 12.46%, an 11% increase over the prior year.
The trend of increasing gross revenues has lead to higher operating margins as
many of the costs associated with the real estate offices are fixed. The
Company has continued to maintain its island-wide market share of sales and
listings of real estate through creative marketing campaigns, aggressive
positioning in the market and by attracting and retaining professional real
estate sales executives.

     Sales and marketing expenses were $1.3 million in 1998, representing a
6.3% decrease from 1997. The decrease was attributable to more cost effective
selective targeted marketing. The Company has planned future increases in
marketing expenses as it brings additional lodging and conference facilities on
line.

     General and Administrative expenses increased by 2.3% or $104,000,
totaling $4.6 million for the year. The increase can primarily be attributable
to higher property taxes and the increased costs associated with maintaining
the Company's older facilities. These increases were partially offset by
significant reductions in the Company's property and casualty insurance
premiums.

     On June 30, 1998, TidePointe Partners sold all of the TidePointe project
assets to CC-Hilton Head, Inc. (an affiliate of Classic Residences by Hyatt)
for a sales price of

                                      14
<PAGE>   15

$23,200,000. At closing, the Company received no cash funds or other
consideration and released its mortgage on the TidePointe property, which
secured its investments and loans to the project. The Company has no ownership
interest in CC-Hilton Head, Inc. and no longer has any ownership interest in
the TidePointe community. TidePointe Partners is in the process of winding up
its Partnership affairs and intends to liquidate in the near future. The
Company will receive no additional funds from the Partnership, and is under no
obligation to fund the Partnership in any way.

     Due to the sale of all of the TidePointe assets in June 1998, which
included the healthcare facility, the Company recognized the remaining gain of
$179,375, which had been deferred at the time of the sale of the healthcare
facility in July 1997. The Company has also entered into a 26-year license and
use agreement with CC-Hilton Head, Inc. for the use of the Company's logo,
trade name, a non-compete agreement and other services and amenity use in
connection with the TidePointe community. Under this agreement, the Company
will receive fixed annual license fees, ranging from $125,000 to $325,000 and
totaling $4,125,000 over the 26-year term. Approximately $67,000 of license fee
income has been recognized by the Company in fiscal year 1998.

1997 COMPARED TO 1996

     The Company reported increases in resort and real estate brokerage
revenues and gross margins in fiscal year 1997 as compared to fiscal year 1996.
Resort revenues increased $1.7 million, or 7.1%, in 1997 and real estate
brokerage revenues increased $1.1 million, or 12.6%, in 1997. Resort gross
margin increased 8.4% to $10.0 million during the year and real estate
brokerage gross margin increased 21.9% to $1.1 million.

     Volume and average rate increases in the Company's lodging accommodations
during 1997 resulted in improvements in resort revenues and gross margin. The
Company experienced growth in demand for lodging accommodations during the
normally busy spring and summer vacation seasons during the year. Occupied unit
nights totalled 58,259 during the year, representing a 2.2% increase over 1996.
The average daily rate for lodging accommodations increased 8.8% in 1997,
averaging $164 for 1997. Revenue from golf operations also increased during the
year as the average rate per golf round increased 3.9% in 1997. The Company has
maintained its market share of golf rounds in an increasingly competitive
market by offering well-maintained courses and professionally staffed pro
shops. The improved practice and teaching facility at the Plantation Club has
allowed the Company to expand its offering of golf clinics and lessons to
players of all skill levels.

     Several factors were attributable to the improved financial results
experienced by the Company's real estate brokerage operations. The market value
of real estate in Sea Pines and throughout the Hilton Head Island area
continued to escalate in 1997

                                      15
<PAGE>   16

producing higher sales prices and larger brokerage commissions. The Hilton Head
Island real estate market continues to experience significant demand in the
second home market, particularly ocean front and ocean oriented property. This
demand is supported by favorable economic conditions in national stock and
mutual fund financial markets and the generally favorable business climate
throughout the country. Mortgage interest rates available to purchasers of real
estate decreased in 1997 and were nearing a 30-year low at the Company's
year-end. The Company has continued to maintain its island-wide market share of
sales and listings of real estate through creative marketing campaigns,
aggressive positioning in the market, and by attracting and retaining
professional real estate sales executives.

     Sales and marketing expenses were $1.4 million in 1997, representing a
12.9% increase over 1996. The increase was attributable to additional media
advertisements, marketing collateral materials, and sales commissions necessary
to maintain the Company's market share in its competitive lines of business.

     General and administrative expenses increased 7.4% in 1997, or $309,000,
totaling $4.5 million for the year. This increase was primarily the result of
increased property and casualty insurance premiums from the Company's decision
to expand its coverage to include business interruption from the threat of
hurricanes and other major storms.

     The Company, through its wholly owned subsidiary, Sea Pines/TidePointe,
Inc. owns a 17.5% general partnership interest in TidePointe Partners (the
"Partnership"). The Company formed the Partnership on January 14, 1994 with
Providers Enterprises, Inc. (a 82.5% general partner) for the purpose of
constructing, developing and operating a continuing care retirement community
on Hilton Head Island, South Carolina, to be known as TidePointe.

     The construction of the healthcare facility located within the TidePointe
retirement community was completed by the Company's wholly owned subsidiary,
Sea Pines Senior Living Center, Inc., in February 1997. The Company operated
the facility from its opening in February through its sale on July 31, 1997, a
period of approximately five months. The start-up operations of the healthcare
facility produced an operating loss of $644,000 and interest expense of
$381,000 during the period the Company operated the facility. TidePointe
Partners funded the operating loss and interest expense, in accordance with the
partnership agreement. On July 31, 1997 Sea Pines Senior Living Center, Inc.
sold all of the assets, liabilities and operations relating to the healthcare
facility at TidePointe to the Rogers Center, LLC, a subsidiary of TidePointe
Partners. The Sale generated a net gain of $1,025,000 which was equal to the
net operating losses including interest expense incurred in operating the
healthcare facility through the closing date. As a result of this transaction
the Company has recognized a gain on the sale of $845,626 (82.5%

                                      16
<PAGE>   17

of the total gain) in 1997, and has deferred $179,375 (17.5% of the total gain)
because of its minority general partner interest in TidePointe Partners.

     In December 1997, the Company learned that PIE Mutual Insurance Company
("PIE Mutual"), the ultimate parent of the Providers Enterprises, Inc. (the
82.5% general partner in the Partnership), had been placed under the
supervision of the Insurance Department of the State of Ohio for the purpose of
rehabilitation and possible liquidation, due to questions about PIE Mutual's
financial condition. PIE Mutual had provided significant amounts of equity
capital, debt and debt collateral for the Partnership. Based on this
information, the significant uncertainties created by the majority partner's
financial problems and the significant losses incurred in the 1997 results of
operations of the TidePointe project, the Company recorded a write-down
representing all of its remaining investment in and advances to TidePointe
Partners, which when combined with its equity share of the fiscal 1997
TidePointe Partners' operating loss, totaled $2,658,000.

LIQUIDITY AND CAPITAL RESOURCES

     Cash and cash equivalents increased by $419,000 during fiscal 1998 and
totaled approximately $2,599,000 at October 31, 1998, of which $2,008,000 is
restricted. This increase results from higher levels of advanced deposits held
on future lodging reservations and real estate transactions and increased
operating cash on hand at year-end. Working capital increased during the
current year by $502,000 resulting in a working capital deficit of $666,000 at
October 31, 1998.

     The Company invested approximately $1,617,000 in resort capital
expenditures. Capital investments in 1998 included extensive renovation work at
the Plantation Club along with normal expenditures for equipment replacement
and resort facility improvements. During the 11-year period from November 1,
1987 through October 31, 1998, the Company has invested over $33 million in
capital purchases, property acquisitions and property improvements thereby
significantly enhancing the resort assets originally acquired in 1987.

     Under a Master Credit Agreement with its principal corporate lender, the
Company maintains a term loan, a revolving line of credit and a seasonal line
of credit. Available funds under these facilities total $36,000,000, of which
$17,159,000 was outstanding at October 31, 1998. The outstanding balance
represents a $1,560,000 decrease in total outstanding long-term debt from 1997.

     The term loan in the principal sum of $18,500,000 matures on October 31,
2008. As of October 31, 1998, $17,159,000 was outstanding under the term loan
and $1,341,000 was available to borrow until May 1, 1999 for general working
capital purposes.

                                      17
<PAGE>   18

     The $15,000,000 revolving line of credit is maintained by the Company
primarily to fund its capital projects. $11,000,000 has been pre-approved by
the bank for use in the construction of the Company's planned inn and
conference center. The remaining $4,000,000 is restricted to bank approved
uses. As of October 31, 1998 there was no outstanding amount under the
revolving line of credit.

     The seasonal line of credit in the principal amount of $2,500,000 is used
to meet cash requirements during the Company's off-season winter months. As of
October 31, 1998, there was no outstanding balance on the seasonal line of
credit.

     On September 30, 1998, the Company entered into an interest rate swap
agreement which effectively fixed the interest rate on an $18 million notional
principal amount under the term note described above at 5.24% plus a credit
margin ranging from 1.25% to 1.5%, based on the calculation of certain
financial ratios, for a period ending November 10, 2005. The lender has the
option of calling the swap agreement on November 10, 2003.

     The Company expects that available cash, cash provided by operations, and
existing short term and long term lines of credit will be sufficient to meet
its cash requirements through October 31, 1999.

BUSINESS OUTLOOK AND RECENT DEVELOPMENTS

     The Company has started site work on The Inn at Harbour Town. The Inn at
Harbour Town will be a 47,000 square foot facility featuring 60 rooms and will
be adjacent to and provide views of the Harbour Town golf course. The current
schedule calls for drainage and other site preparation work to continue until
the end of January 1999, when construction will be suspended until after the
professional golf and tennis tournaments hosted by the Company. Full
construction is scheduled to resume in May 1999, moving towards a grand opening
in the summer of 2000. Total construction cost is estimated to be $6.5 million.

     The Company has also started site work on The Heritage Conference Center
in Harbour Town. The Conference Center will be a 16,000 square foot facility,
featuring state of the art meeting amenities and catering facilities. The work
on this facility will also be suspended during the tournament season. The
resumption of work is currently scheduled for May 1999 moving towards a grand
opening in the spring of 2000. Total construction cost is estimated to be $4.5
million.

     The Company is in the planning stages of a new racquet club, to be located
near the present site. The facility will be approximately 3,800 square feet and
feature an

                                      18
<PAGE>   19

expanded pro shop, club offices and meeting room. Construction is scheduled to
start this summer.

     The Company also is in the planning stages of a major renovation of the
Harbour Town golf course. This renovation is tentatively scheduled to commence
in May 2000. During construction and grow-in, the course will be closed for
approximately 8 months.

     The Company's real estate brokerage operations also have expansion plans.
Three additional office locations have been leased and leasehold improvements
are underway with scheduled openings this spring. This will bring the total
number of offices to thirteen.

YEAR 2000 ISSUE

     The year 2000 issue is the result of computer programs having been written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.

     Based on its recently completed assessment, the Company determined that it
will be required to modify or replace portions of its existing software so that
its computer systems will properly utilize dates beyond December 31, 1999.

     The Company has divided its year 2000 issues into what it considers to be
critical and non-critical issues. The Company believes that in its line of
business the critical issues revolve around the ability to process retail
transactions from the reservation stage through settlement and collection.
Additionally, of prime importance is the maintenance of accurate accounting and
corporate records.

     The systems that the Company has identified as being critical include but
may not be limited to the following: AS400 Operating System, Lodging Management
System, Point of Sale System, General Ledger System, Credit Card Processing,
banking relationships, and its telecommunications vendors.

     The Company has also identified non-critical issues including, but not
limited to, stand alone personal computers, computerized irrigation systems,
other third party vendors and possible security systems issues.

     The Company presently believes that with modifications to existing
software and conversions to new software, the year 2000 issue can be mitigated.
The Company is

                                      19
<PAGE>   20

currently working on these modifications. The Company will utilize both
internal and external resources to program, or replace and test its software
for the year 2000 modifications. The Company has not determined the total cost
of the year 2000 project. However, the costs are not expected to exceed
$150,000 nor have a material effect on its financial statements. The Company
has spent less than $75,000 to date, all of which has been expensed. The
Company plans to complete the year 2000 project not later than June 30, 1999
and is currently on schedule to meet this target.

     However, if such modifications and conversions are not made, or are not
completed timely, the year 2000 issue could have a material impact on the
operations of the Company. The Company has not yet determined the extent of
contingency planning that may be required for the Company's critical systems if
unanticipated problems or delays are encountered with its year 2000 project.

ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     On September 30, 1998, the Company entered into an interest rate swap
agreement, which effectively fixed the interest rate on an $18 million notional
principal amount under the term note that the Company maintains with its
corporate lender at 5.24% plus a credit margin ranging from 1.25% to 1.5%,
based on the calculation of certain financial ratios, for a period ending
November 10, 2005. The lender has the option of calling the swap agreement on
November 10, 2003.

     The Company has minimal interest rate risks. A change in the LIBOR rate
would affect the rate at which the Company could borrow funds in excess of the
$18 million notional principal amount, which is effectively fixed by the above
swap agreement.

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The audited Consolidated Financial Statements of the Company are attached
hereto beginning at page F-1.

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

                                      20
<PAGE>   21

                                    PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.

ITEM 11.      EXECUTIVE COMPENSATION.

ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Information called for by Part III (Items 10, 11, 12 and 13) has been
omitted as the Company intends to file with the Securities and Exchange
Commission not later than 120 days after the close of its fiscal year ended
October 31, 1998 a definitive Proxy Statement pursuant to Regulation 14A. Such
information is set forth in such Proxy Statement (i) with respect to Item 10,
under the caption "Election of Directors," (ii) with respect to Item 11, under
the caption "Executive Compensation," (iii) with respect to Item 12, under the
caption "Principal Shareholders," and (iv) with respect to Item 13, under the
caption "Certain Transactions."


                                    PART IV

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

(a)(1)-(2)    Financial Statements and Schedule:

     The financial statements and schedules listed in the accompanying Index to
Consolidated Financial Statements at page F-1 herein are filed as part of this
report.

     All other schedules for which provision is made in the applicable
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.

     (3)      Exhibits:

     The exhibits listed on the accompanying Exhibit Index at pages E-1 to E-5
are filed as part of this report.

(b)  Reports on Form 8-K:

     None.

                                      21
<PAGE>   22
                           SEA PINES ASSOCIATES, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                       PAGE
                                                                                       ----
<S>                                                                              <C>
Report of Ernst & Young LLP.............................................................F-2

Consolidated Balance Sheets at October 31, 1998 and 1997.........................F-3 thru 4

Consolidated Statements of Operations for the years
  ended October 31, 1998, 1997 and 1996.................................................F-5

Consolidated Statements of Shareholders' Equity
  for the years ended October 31, 1998, 1997 and 1996  .................................F-6

Consolidated Statements of Cash Flows for the years
  ended October 31, 1998, 1997 and 1996..........................................F-7 thru 8

Notes to Consolidated Financial Statements......................................F-9 thru 29

Report on Financial Statement Schedule.................................................F-30

Schedule II - Valuation and Qualifying Accounts
  for the years ended October 31, 1998, 1997 and 1996..................................F-31
</TABLE>

                                      F-1
<PAGE>   23
                         Report of Independent Auditors

Board of Directors and Shareholders of
   Sea Pines Associates, Inc.

We have audited the accompanying consolidated balance sheets of Sea Pines
Associates, Inc. (the "Company") as of October 31, 1998 and 1997, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended October 31, 1998. These
financial statements are the responsibility of the Company'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 consolidated financial position of Sea Pines
Associates, Inc. at October 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
October 31, 1998 in conformity with generally accepted accounting principles.


                                     /s/Ernst & Young LLP

Atlanta, Georgia
December 10, 1998

                                      F-2
<PAGE>   24

                           Sea Pines Associates, Inc.

                          Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                   OCTOBER 31
                                                            1998                1997
                                                       ---------------------------------
                                                           (In Thousands of Dollars)
<S>                                                    <C>                   <C>
 ASSETS
 Current assets:
  Cash and cash equivalents
       Unrestricted                                    $     591             $   215
       Restricted                                          2,008               1,965
                                                       ---------------------------------
                                                           2,599               2,180

  Accounts receivable, less allowance for
    doubtful accounts of $50 and $73 at
    October 31, 1998 and 1997, respectively                1,027                 965
  Current portion of notes receivable                        441                 402
  Inventories                                                653                 617
  Prepaid expenses                                           132                 240
                                                       ---------------------------------
Total current assets                                       4,852               4,404





Notes receivable, less current portion                     1,767               1,894
Deferred income taxes                                        316                 805
Deferred loan fees, net                                       70                  61
Other assets, net                                             82                  87
                                                       ---------------------------------
                                                           2,235               2,847
Real estate assets
  Construction in progress                                 1,135                 598
  Operating properties, net                               22,680              22,942
  Properties held for future development                   7,023               7,023
                                                       ---------------------------------
                                                          30,838              30,563
                                                       ---------------------------------
Total assets                                             $37,925             $37,814
                                                       =================================
</TABLE>
                                                                            

                                      F-3
<PAGE>   25

                           Sea Pines Associates, Inc.

                          Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                        OCTOBER 31
                                                                 1998                1997
                                                             --------------------------------
                                                                (In Thousands of Dollars)
<S>                                                          <C>                   <C>
 LIABILITIES AND SHAREHOLDERS' EQUITY
 Current liabilities:
  Accounts payable and accrued expenses                        $ 2,469             $ 1,810
  Advance deposits                                               1,946               1,880
  Line of credit with bank                                          --                 467
  Income taxes payable                                             113                 166
  Current portion of deferred revenue and other
    liabilities
                                                                   623                 439
  Current portion of long-term debt                                367                 810
                                                             --------------------------------
Total current liabilities                                        5,518               5,572

Long-term debt, less current portion                            16,792              17,909
Deferred revenue and other long-term liabilities                   897                 778
                                                             --------------------------------
Total liabilities                                               23,207              24,259

Commitments and contingencies

Shareholders' equity:
  Series A cumulative preferred stock, no par
    value, 2,000,000 shares authorized;
    1,228,350 shares issued and outstanding
    (liquidation preference $9,335,460)                          7,218               7,218
  Series B junior cumulative preferred stock, no
    par value, 3,000 shares authorized, none
    issued or outstanding                                           --                  --
  Common stock, 23,000,000 shares authorized,
    no par value, 1,842,525 shares issued and
    outstanding
                                                                 2,166               2,166
  Retained earnings                                              5,334               4,171
                                                             --------------------------------
Total shareholders' equity                                      14,718              13,555
                                                             --------------------------------
Total liabilities and shareholders' equity                     $37,925             $37,814
                                                             ================================
</TABLE>

See accompanying notes.

                                                                              
                                      F-4
<PAGE>   26


                           Sea Pines Associates, Inc.

                     Consolidated Statements of Operations


<TABLE>
<CAPTION>
                                                                       YEAR ENDED OCTOBER 31
                                                            1998                1997               1996
                                                    -----------------------------------------------------------
                                                       (In Thousands of Dollars, Except Per Share Amounts)
<S>                                                 <C>                        <C>                 <C>
Revenues, other than healthcare                            $ 38,506            $ 35,896            $ 34,958

Cost and expenses, other than healthcare:
   Cost of revenues                                          27,068              24,752              24,758
   Sales and marketing expenses                               1,290               1,376               1,219
   General and administrative expenses                        4,579               4,475               4,137
   Depreciation and amortization                              1,408               1,586               1,745
   Impairment loss on Carolina Center                            --                  --                 810
                                                    -----------------------------------------------------------
                                                             34,345              32,189              32,669
                                                    -----------------------------------------------------------

Income from operations, other than healthcare                 4,161               3,707               2,289

Healthcare income (expense)
   Revenue                                                       --                 345                  --
   Cost of revenues                                              --                (989)                 --
                                                    -----------------------------------------------------------
                                                                 --                (644)                 --
                                                    -----------------------------------------------------------

Income from operations                                        4,161               3,063               2,289

Other income (expense):
   Equity in loss and write down of investment in
     and advances to TidePointe Partners                         --              (2,658)                (22)
   Gain on sale of healthcare business and assets               179                 846                  --
   Gain on equity club turnover                                  --                  --               7,747
   Interest income                                              154                 325                 176
   Interest expense, net of amounts capitalized
     Healthcare                                                  --                (381)                 --
     Other                                                   (1,345)             (1,476)             (1,451)
                                                    -----------------------------------------------------------
                                                             (1,012)             (3,344)              6,450
                                                    -----------------------------------------------------------
Income (loss) before income taxes                             3,149                (281)              8,739

Provision for (benefit from) income taxes                     1,099                (215)              3,340
                                                    -----------------------------------------------------------
Net income (loss)                                             2,050                 (66)              5,399

Preferred stock dividend requirements                           887                 887                 887
                                                    -----------------------------------------------------------
Net income (loss) attributable to common stock             $  1,163            $   (953)           $  4,512
                                                    ===========================================================
Per share of common stock
   Net income (loss)                                       $   0.63            $  (0.52)           $   2.45
                                                    ===========================================================

See accompanying notes.
</TABLE>

                                                                              
                                      F-5
<PAGE>   27


                           Sea Pines Associates, Inc.

                Consolidated Statements of Shareholders' Equity


<TABLE>
<CAPTION>
                                            SERIES A                                         RETAINED
                                         PREFERRED STOCK          COMMON STOCK               EARNINGS
                                      -----------------------------------------------      (ACCUMULATED
                                       SHARES        AMOUNT       SHARES       AMOUNT         DEFICIT)         TOTAL
                                      ----------------------------------------------------------------------------------
                                                               (In Thousands of Dollars)
<S>                                   <C>            <C>            <C>         <C>            <C>            <C>
Balance at October 31, 1995             1,228        $ 8,105        1,843       $ 2,166        $  (275)       $  9,996
   Net income                              --             --           --            --          5,399           5,399
   Declaration of preferred stock
     dividend of $0.722 per share          --           (887)          --            --             --            (887)
                                      ----------------------------------------------------------------------------------
Balance at October 31, 1996             1,228          7,218        1,843         2,166          5,124          14,508
   Net loss                                --             --           --            --            (66)            (66)
   Declaration of preferred stock
     dividend of $0.722 per share          --             --           --            --           (887)           (887)
                                      ----------------------------------------------------------------------------------
Balance at October 31, 1997             1,228          7,218        1,843         2,166          4,171          13,555
   Net income                                                                                    2,050           2,050
   Declaration of preferred stock
     dividend of $ 0.722 per share         --             --           --            --           (887)           (887)
                                      ==================================================================================
Balance at October 31, 1998             1,228        $ 7,218        1,843       $ 2,166        $ 5,334        $ 14,718
                                      ==================================================================================
</TABLE>

See accompanying notes.

                                                                              
                                      F-6
<PAGE>   28

                           Sea Pines Associates, Inc.

                     Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>
                                                                             YEAR ENDED OCTOBER 31
                                                                    1998              1997              1996
                                                                -----------------------------------------------
                                                                        (In Thousands of Dollars)
<S>                                                             <C>                 <C>                <C>
OPERATING ACTIVITIES
Net income (loss)                                                $ 2,050            $   (66)           $ 5,399
Adjustments to reconcile net income (loss) to net
   cash provided by operating activities:
     Depreciation and amortization                                 1,408              1,586              1,745
     Gain on equity club turnover                                     --                 --             (7,747)
     Allowance for doubtful accounts                                 (23)                46                 (3)
     Deferred income taxes                                           489             (1,217)             3,074
     Gain on sale of asset                                            --               (226)                --
     Write off of assets                                              --                 56                 --
     Loss on real estate assets                                       --                 --                585
     Equity in loss and write down of investment in and
       advances to TidePointe Partners                                --              2,658                 22
     Changes in assets and liabilities:
        Restricted cash                                              (43)              (769)               442
        Accounts and notes receivable                                 49               (317)               369
        Inventories                                                  (36)               116                 16
        Prepaid expenses                                             108                 53                (92)
        Deferred loan fees                                           (70)               (41)                --
        Other assets                                                  --                 --                 41
        Accounts payable and accrued expenses                        659               (227)              (264)
        Deferred revenue                                             119                564                107
        Advance deposits                                              66                657               (223)
        Income taxes payable                                         (53)                24                129
        Current portion of deferred revenue                          184                 68               (487)
        Other liabilities                                             --                 --               (645)
                                                                -----------------------------------------------
Net cash provided by operating activities                          4,907              2,965              2,468

INVESTING ACTIVITIES
Short-term investments                                                --                 --                475
Proceeds from sale of assets                                          --                529                 47
Capital expenditures and property acquisitions                    (1,617)            (1,378)            (2,407)
Increase in note receivable and accrued interest
  from TidePointe Partners                                            --               (155)              (156)
                                                                -----------------------------------------------
Net cash used in investing activities                             (1,617)            (1,004)            (2,041)
</TABLE>

                                                                              
                                      F-7
<PAGE>   29


                           Sea Pines Associates, Inc.

               Consolidated Statements of Cash Flows (continued)


<TABLE>
<CAPTION>
                                                                           YEAR ENDED OCTOBER 31
                                                                     1998           1997           1996
                                                               ---------------------------------------------
                                                                        (In Thousands of Dollars)
<S>                                                            <C>                 <C>            <C>
FINANCING ACTIVITIES
Reductions to line of credit with bank                               (467)          (308)          (525)
Additions to long-term debt                                            --             --          1,600
Principal repayments of debt                                       (1,560)          (783)          (713)
Dividends paid                                                       (887)          (887)          (887)
                                                               ---------------------------------------------
Net cash used in financing activities                              (2,914)        (1,978)          (525)
                                                               ---------------------------------------------

Net increase (decrease) in unrestricted cash and
   cash equivalents                                                   376            (17)           (98)
Unrestricted cash and cash equivalents at
   beginning of year
                                                                      215            232            330
                                                               =============================================
Unrestricted cash and cash equivalents at end of
   year
                                                                 $    591        $   215       $    232
                                                               =============================================
</TABLE>

See accompanying notes.

                                                                              
                                      F-8
<PAGE>   30


                           Sea Pines Associates, Inc.

                   Notes to Consolidated Financial Statements

                        October 31, 1998, 1997 and 1996



1.  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Sea Pines Associates, Inc. ("SPA" or the "Company") was incorporated in South
Carolina on May 4, 1987. The Company was principally organized to acquire, own
and operate certain resort assets in Sea Pines Plantation on Hilton Head
Island, South Carolina.

The wholly-owned subsidiaries of the Company are Sea Pines Company, Inc.
("SPCI"), Sea Pines Real Estate Company ("SPREC"), Sea Pines/TidePointe, Inc.,
Sea Pines Senior Living Center, Inc. ("SPSLC") and Fifth Golf Course Club, Inc.
During 1989, the Company formed a corporation, The Sea Pines Country Club, Inc.
(the "Club") which the Company controlled prior to its turnover to the equity
members on May 1, 1996 (see Note 10 for further discussion).

SPCI is a full-service resort, which provides guests with the use of three golf
courses, tennis, various other recreational facilities, home, and villa rental
management, and food-and-beverage services. The Club is a private membership
country club that operates food-and-beverage services, a golf course and other
recreational facilities. SPREC provides real estate brokerage services for
buyers and sellers of real estate in the Hilton Head Island, South Carolina
area (see Note 15 for business segment information). Sea Pines/TidePointe, Inc.
was formed to invest in a general partnership, TidePointe Partners, to develop
a continuing care retirement community (see Note 8). SPSLC was established to
construct a healthcare facility within the TidePointe community (see Note 8).
Fifth Golf Course Club, Inc. owns certain acreage which could be used to
develop another golf course.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its wholly-owned or controlled subsidiaries. All intercompany accounts and
transactions have been eliminated.

The Company accounts for its general partner interest in the TidePointe
Partners partnership (see Note 8) using the equity method of accounting
pursuant to AICPA Statement of Position 78-9. Under the equity method, the
Company's investment in and advances to TidePointe Partners equals its capital
contributions, plus its share of net income or loss of the Partnership, less
any capital distributions received and write downs due to doubtful
recoverability.

                                                                              
                                      F-9
<PAGE>   31

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  (CONTINUED)

STATEMENTS OF CASH FLOWS

For purposes of the statements of cash flows, the Company considers all
short-term investments with maturities of 90 days or less at the time of
purchase to be cash equivalents.

REVENUE RECOGNITION

Revenues and expenses from resort services and commercial and country club
operations are recognized as goods are sold and services are provided. Real
estate brokerage revenues are recognized upon closing of the sale. Advance
deposits are required for certain resort reservations, but in general the
Company's accounts receivable are unsecured.

Proceeds from the sale of country club memberships and a portion of the
proceeds from resales were deferred until May 1, 1996 when the Club was turned
over to its equity members (see Note 10). Subsequent to May 1, 1996, sales of
new memberships and commissions on sales of reissued memberships are recognized
as income pursuant to the terms of an agreement with the Club, which rotates
sales of new and reissued memberships between the Company and the Club
according to a pre-set schedule. At the members' request, such sales and
resales are financed by the Company over periods of one to seven years under
interest-bearing notes; payments to the Club on resales are made as the Company
collects from the members.

Revenues from long-term service contracts are recognized during the periods in
which the services are provided.

COST OF REVENUES

Cost of revenues includes payments to home and villa owners, real estate sales
commissions, cost of inventories sold, credit-card commissions and costs
incurred to operate and maintain operating properties.

                                                                              
                                      F-10
<PAGE>   32


                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   (CONTINUED)

CONCENTRATION OF CREDIT RISK

The Company maintains substantially all of its cash with one financial
institution. Account balances greater than $100,000 are not federally insured
and are subject to an accounting loss if the financial institution fails.
Management believes such risk is minimal based on the current financial
condition of the financial institution.

CASH HELD IN ESCROW

Cash includes cash held in escrow pending real estate closings, advance
deposits for home and villa rentals, and rental receipts to be paid to home and
villa owners.

INVENTORIES

Inventories are valued at the lower of cost (first-in, first-out method) or
market.

REAL ESTATE ASSETS

Real estate assets are recorded at cost less any impairment losses. The costs
of additions and improvements which substantially extend the useful lives of
assets are capitalized. Capitalized costs include costs of construction,
property taxes, interest and miscellaneous expenses incurred during the
construction period. Capitalized construction period interest totalled
approximately $6,000, and $630,000 in 1997 and 1996, respectively. No interest
was capitalized in 1998. Repairs and maintenance costs are expensed as
incurred.

The Company provides depreciation for financial reporting purposes when the
asset is placed in operation using straight-line and certain accelerated
methods over the estimated useful lives of the assets, which range from five to
39 years.

                                                                             
                                      F-11
<PAGE>   33

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   (CONTINUED)

OTHER ASSETS

Intangible assets are amortized using the straight line method over ten years.
Deferred loan fees are amortized over the lives of the corresponding debt.

IMPAIRMENT OF LONG-LIVED ASSETS

An impairment loss is recognized whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
Company considers historical performances and future estimated results in its
evaluation of potential impairment and then compares the carrying amount of the
asset to the estimated future cash flows expected to result from the use of the
asset. If the carrying amount of the asset exceeds the estimated expected
future cash flows, the Company measures the amount of the impairment by
comparing the amount of the asset to its fair value.

FINANCIAL INSTRUMENTS

The Company accounts for its interest rate swap by recording differences in
interest on the notational amount up to the amount of debt outstanding as
interest expense. Differences in fair value related to the excess of the
notational amount over the debt outstanding are recorded in the balance sheet
and as current period expense. Such excess fair value fluctuations were not
material at October 31, 1998.

INCOME TAXES

The Company accounts for income taxes using the liability method, which
requires recognition of deferred tax liabilities and assets based on temporary
differences between the financial statement and tax bases of assets and
liabilities using current statutory tax rates. A valuation allowance is
established against net deferred tax assets if, based upon the available
evidence, it is more likely than not that some or all of the deferred tax
assets will not be realized.

                                                                             
                                      F-12
<PAGE>   34

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   (CONTINUED)

INCOME (LOSS) PER SHARE

Income (loss) per share of common stock is calculated by dividing net income or
loss after preferred stock dividend requirements by the weighted average number
of outstanding shares of common stock. Furthermore, basic and diluted earnings
per share are identical for all periods presented. Potentially dilutive
securities consist of additional shares of common stock issuable when the stock
rights become exercisable. These contingently issuable shares have not been
included in basic or diluted earnings per share as the stock rights are not yet
exercisable. (See Note 7.)

NEW ACCOUNTING STANDARDS

In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 131, Disclosures about Segments of an Enterprise and Related
Information ("Statement 131"), which replaces FASB Statement No. 14, Financial
Reporting for Segment of a Business Enterprise. Statement 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports. Statement 131 also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
The Company is not required to disclose segment information in accordance with
Statement 131 until its fiscal October 31, 1999 year-end. Management does not
anticipate that the adoption of the new Statement will have a significant
impact on its financial statement disclosures.

In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities, which the
Company would be required to adopt, starting with fiscal year ending October
31, 2000. Statement 133 requires the recognition of all derivatives on the
balance sheet at fair value. Derivatives that are not hedges must be adjusted
to fair value through income. If the derivatives is a hedge, depending on the
nature of the hedge, changes in the fair value of derivatives will either be
offset against the change in fair value of the hedged assets, liabilities, or
firm commitments through earnings or recognized in other comprehensive

                                                                             
                                      F-13
<PAGE>   35

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   (CONTINUED)

NEW ACCOUNTING STANDARDS (CONTINUED)

income until the hedged item is recognized in earnings. The effective portion
of a derivative's change in fair value will be immediately recognized in
earnings.

Currently, the Company has entered into an interest rate swap agreement as
described in Note 5, which would be subject to the new Statement. The Company
has not yet determined the effect of Statement 133 on the earnings and
financial position of the Company.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.

RECLASSIFICATIONS

Certain amounts in the prior years financial statements have been reclassified
to conform to the current year presentation.

2. STATEMENTS OF CASH FLOWS

Supplemental disclosure of cash flows information follows (in thousands of
dollars):

<TABLE>
<CAPTION>
                                                YEAR ENDED OCTOBER 31
                                         1998           1997           1996
                                   ---------------------------------------------
<S>                                <C>                <C>            <C>
Cash paid during the year for:
   Interest                            $1,352         $1,452         $1,577
   Income taxes                           662            965             98
</TABLE>

                                                                             
                                      F-14
<PAGE>   36


                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



3. INVENTORIES

Inventories consist of the following (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                  OCTOBER 31
                                                            1998             1997
                                                      -----------------------------------
<S>                                                   <C>                    <C>
Merchandise                                                $580              $546
Supplies, parts and accessories                              35                35
Food and beverages                                           10                11
Other                                                        28                25
                                                      -----------------------------------
                                                           $653              $617
                                                      ===================================
</TABLE>

4. REAL ESTATE ASSETS

Operating properties consist of the following (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                  OCTOBER 31
                                                            1998              1997
                                                      -----------------------------------
<S>                                                   <C>                    <C>
Land and improvements                                     $ 20,140          $ 19,884
Buildings                                                    7,103             7,051
Machinery and equipment                                      6,399             5,645
Property held under capital leases                             251               251
                                                      -----------------------------------
                                                            33,893            32,831
Less accumulated depreciation                              (11,213)           (9,889)
                                                      -----------------------------------
                                                          $ 22,680          $ 22,942
                                                      ===================================
</TABLE>

Properties held for future development of $7,023,000 at October 31, 1998 and
1997 consist primarily of land and certain future development rights.

                                      F-15
<PAGE>   37


                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



5. LONG-TERM DEBT AND LINE OF CREDIT AGREEMENTS

Long-term debt consists of the following (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                                             OCTOBER 31
                                                                                         1998           1997
                                                                                    ---------------------------
<S>                                                                                 <C>                <C>
Term note payable to bank, bearing interest at various
   London Interbank Offered Rates (LIBOR) plus 1.5%
   (6.91% at October 31, 1998), collateralized by
   substantially all assets of the Company. Principal is
   payable monthly from May through October each year in
   amounts ranging from $61,193 in 1999 to $196,577 in
   2008. Interest is payable monthly. The note matures
   November 1, 2008. At October 31, 1998, $1.34 million
   was available to borrow until May 1, 1999 for general
   working capital purposes.                                                         $17,159                --

Note payable to bank, bearing interest at various London
   Interbank Offered Rates (LIBOR) plus 1.5% (averaging
   7.26% at October 31, 1997), collateralized by substantially
   all assets of the Company.  Note was fully repaid and
   retired as of October 31, 1998.                                                        --           $11,119

Note payable to bank, bearing interest at LIBOR plus 1.5%
   (7.14% at October 31, 1997). Note was fully repaid and
   retired as of October 31, 1998.                                                        --             7,600
                                                                                    ---------------------------
                                                                                      17,159            18,719
Less current portion of long-term debt                                                  (367)             (810)
                                                                                    ---------------------------
Total long-term debt                                                                 $16,792           $17,909
                                                                                    ===========================
</TABLE>

                                      F-16
<PAGE>   38

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



5. LONG-TERM DEBT AND LINE OF CREDIT AGREEMENTS (CONTINUED)

Scheduled maturities of long-term debt as of October 31, 1998 are as follows
(in thousands of dollars):

<TABLE>
         <S>                                          <C>
         Year ending October 31
            1999                                      $      367
            2000                                             400
            2001                                             654
            2002                                             712
            2003                                             775
            Thereafter                                    14,251
                                                      -------------
         Total                                           $17,159
                                                      =============
</TABLE>


The loan agreements contain provisions and covenants which impose certain
restrictions on the use of the Company's assets. The more significant of these
restrictions include limitations as to new indebtedness, the sale or disposal
of certain assets, capital contributions and investments, and new lines of
business.

On September 30, 1998, the Company entered into an interest rate swap
agreement, which effectively fixed the interest rate on an $18 million notional
principal amount under the term note described above at 5.24% plus a credit
margin ranging from 1.25% to 1.5% for a period ending November 10, 2005. The
lender has the option of calling the swap agreement on November 10, 2003.

The Company also has available a revolving line of credit (the "Revolver") in
the amount of $15,000,000 of which $11,000,000 has been preapproved by the bank
for capital projects. The remaining $4,000,000 is restricted to bank approved
uses. Borrowings under the Revolver are collateralized by substantially all of
the assets of the Company. Interest is payable monthly at LIBOR plus 1.5% and
the Revolver expires October 31, 2002. The maturity date automatically extends
to October 31, 2003 unless the bank notifies the Company prior to October 31,
1999.  As of October 31, 1998 there was no outstanding amount under the
Revolver.

                                      F-17
<PAGE>   39


                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



5. LONG-TERM DEBT AND LINE OF CREDIT AGREEMENTS (CONTINUED)

In addition, the Company maintains a $2,500,000 seasonal line of credit (the
"Seasonal Line") with the same bank. Interest is payable monthly at LIBOR plus
1.5% (7.31% at October 31, 1997) and the Seasonal Line expires October 31,
2002. The maturity date automatically extends to October 31, 2003 unless the
bank notifies the Company prior to October 31, 1999. Borrowings under the
Seasonal Line are also collateralized by substantially all of the assets of the
Company. As of October 31, 1997, $467,000 was outstanding under a previous
seasonal line, which was due October 31, 1998. There was no outstanding balance
as of October 31, 1998.

6. INCOME TAXES

The provision (benefit) for income taxes consists of the following (in
thousands of dollars):

<TABLE>
<CAPTION>
                                                    YEAR ENDED OCTOBER 31
                                              1998           1997           1996
                                         ---------------------------------------------
<S>                                      <C>            <C>               <C>
Current taxes:
   Federal                                 $    506      $     856        $    167
   State                                        104            146              99
                                         ---------------------------------------------
                                                610          1,002             266

Deferred income taxes (benefit):
   Federal                                      423         (1,053)          2,658
   State                                         66           (164)            416
                                         ---------------------------------------------
                                                489         (1,217)          3,074
                                         ---------------------------------------------
                                           $  1,099      $    (215)       $  3,340
                                         =============================================
</TABLE>

                                      F-18
<PAGE>   40


                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



6. INCOME TAXES (CONTINUED)

The reconciliation between actual income tax expense (benefit) and the amount
calculated by applying the federal statutory rates to income (loss) before
income taxes follows (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                               YEAR ENDED OCTOBER 31
                                                                         1998          1997           1996
                                                                    -------------------------------------------
<S>                                                                 <C>              <C>             <C>
Tax at statutory federal income tax rates                              $ 1,071       $   (95)        $ 2,971
State income taxes, net of federal income tax benefit
                                                                           116            --             361
Decrease in valuation allowance                                            (80)         (121)            (13)
Other                                                                       (8)            1              21
                                                                    -------------------------------------------
                                                                       $ 1,099       $  (215)        $ 3,340
                                                                    ===========================================
</TABLE>


The tax effects of the types of temporary differences and carryovers, which
give rise to deferred income tax assets (liabilities) at October 31, 1998, 1997
and 1996, are as follows (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                                    OCTOBER 31
                                                                          1998          1997           1996
                                                                    -------------------------------------------
<S>                                                                 <C>              <C>             <C>
Deferred revenue:
  Country club membership sales                                        $    43       $    48         $    52
  Health care transfer                                                      --            67              --
Charitable contribution carryover                                          235           295             392
License and fee income                                                     200            --              --
Reserve for investment in and advances to
  TidePointe Partners                                                       --           805              --
Accrued liabilities                                                        141           110              99
Other assets                                                                19            26              10
                                                                    -------------------------------------------
   Gross deferred income tax assets                                        638         1,351             553
Less:  Valuation allowance                                                (191)         (271)           (392)
                                                                    -------------------------------------------
   Deferred income tax assets                                              447         1,080             161
                                                                    -------------------------------------------
Depreciation                                                               (78)          (91)           (142)
Intangible assets                                                           --            --             (49)
Equity loss from TidePointe Partners                                        --           (97)           (284)
Other liabilities                                                          (53)          (87)            (98)
                                                                    -------------------------------------------
   Gross deferred income tax liabilities                                   131          (275)           (573)
                                                                    -------------------------------------------
Net deferred income tax assets (liabilities)                           $   316       $   805         $  (412)
                                                                    ===========================================
</TABLE>

                                      F-19
<PAGE>   41


                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



6. INCOME TAXES (CONTINUED)

These net amounts are included in the consolidated balance sheets as noncurrent
assets.

7. SHAREHOLDERS' EQUITY

The Company's capital stock generally trades in units, each consisting of 500
preferred shares and 750 voting common shares. The preferred and common shares
were issued on December 22, 1987.

PREFERRED STOCK

Of the 5,000,000 authorized shares of preferred stock, 2,000,000 shares are
designated as Series A cumulative preferred stock and 3,000 shares are
designated as Series B junior cumulative preferred stock. The Board of
Directors has the authority to approve the issuance amount, rights and powers
of an additional 2,997,000 shares of non-Series A preferred stock except that
such rights and powers shall not be superior to those of the Series A
cumulative preferred shares.

The Series A cumulative preferred shares provide for a cumulative dividend of
$0.722 per share per annum, payable as declared by the Board of Directors.
These shares have a liquidation value of $7.60 per share plus accumulated but
unpaid dividends. If four or more years of dividends are in arrears, the Series
A cumulative preferred shareholders shall be entitled to elect a majority of
the Board of Directors of the Company. All or any part of such shares may be
redeemed at the option of the Company at liquidation value.

The Series B Junior cumulative preferred shares are subject to the prior and
superior rights of the holders of the Series A and all other classes of
preferred shares. These Series B shares provide for a cumulative dividend of
the greater of $0.25 per share or an amount as adjusted for the Antidilution
Number (initially 1,000). Each share of the Series B also entitles the holder
to the number of votes equal to the Antidilution Number. Generally, the Series
B and common shareholders shall vote together as one class on all matters
submitted to a vote. The Series B shares have a liquidation value of $100 per
share, plus dividends thereon. The Series B shares are not redeemable. No
shares of the Series B junior cumulative preferred stock have been issued (see
Stock Purchase Rights Plan).

                                      F-20
<PAGE>   42

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



7. SHAREHOLDERS' EQUITY (CONTINUED)

COMMON STOCK

Of the 23,000,000 authorized shares of common stock, 2,000,000 shares are
designated as special common stock and 1,000,000 are designated as nonvoting
common stock. All other shares are voting. The 1,842,525 shares of common stock
outstanding are all voting common stock.

Each share of common stock (regardless of class) shall participate on an equal
and pro rata basis in all dividends and other distributions, including
liquidation, subject to the rights of the preferred shareholders.

Holders of shares of voting common stock shall be entitled to one vote per
share. Holders of special common shares (if issued) shall have such voting
rights as specified by the Board of Directors, except that such rights shall
not be superior to the voting common stock.

STOCK PURCHASE RIGHTS PLAN

On August 23, 1993 the Company's Board of Directors approved a Stock Purchase
Rights Plan ("Plan") and declared a dividend distribution of one right
("Right") for each share of the Company's outstanding common stock. Each Right
entitles a shareholder to purchase one one-thousandth of a share of Series B
junior cumulative preferred stock at a price of $50 per Right, subject to
adjustment.

The Rights become exercisable after any person or group of affiliated or
associated persons (an "Acquirer") acquires 20% percent or more of the
Company's outstanding common stock or commences a tender offer that would
result in the Acquirer owning 20% or more of the Company's outstanding common
stock or an Acquirer has been designated an Adverse Person, as such term is
defined in the Plan. In the event the Rights become exercisable, a Right will
entitle the holder to receive shares of the Company's common stock having a
value equal to twice the exercise price of the Right. In the event that the
Company is acquired in a merger or other business combination or sale of 50% or
more of its assets or earning power, a Right will entitle the holder to receive
shares of the surviving company's common stock having a market value equal to

                                      F-21
<PAGE>   43


                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



7. SHAREHOLDERS' EQUITY (CONTINUED)

STOCK PURCHASE RIGHTS PLAN (CONTINUED)

twice the exercise price of the Right. The Board of Directors has the
flexibility to lower the 20% threshold to not less than 10% under certain
circumstances.

In general, the Rights may be redeemed by the Company at $.01 per Right at
anytime before certain events occur. One Right is attached to and trades with
each share of common stock. The Rights will not trade separately unless they
become exercisable. All Rights expire on August 23, 2003.

8. TIDEPOINTE PARTNERS

In 1994, a subsidiary of the Company entered into a general partnership,
TidePointe Partners (the Partnership), with Providers Enterprises, Inc., for
the purpose of constructing, developing and operating a continuing care
retirement community on Hilton Head Island, South Carolina, to be known as
TidePointe. The Company contributed $850,000 of certain predevelopment costs
for a 17.5% interest in the Partnership, and the other partner made an initial
cash contribution of $6,000,000 for an 82.5% interest in the Partnership.

The Partnership developed phase one of the TidePointe community at a cost of
over $24 million which was designed as a two-phase residential development
consisting of multi-family buildings called villas, quadraplex units called
verandas and detached single family homes called cottages. The community also
includes an assisted living and skilled nursing healthcare facility, which a
subsidiary of the Company developed and operated until July 31, 1997, when the
Partnership purchased the facility for $9,015,000. Due to the Company's partial
ownership of the Partnership, $179,375 of the gain on this sale was not
recognized but was recorded as deferred gain at the time of the 1997 sale.

During the course of the development, the Partnership borrowed monies under
various construction loan facilities and also from the two general partners. As
of October 31,1997, the Company had loaned the Partnership $1,505,000, which
accrued interest at prime plus two percent (totaling $344,000 at October 31,
1997). This loan was secured by a third mortgage on the Partnership's real
estate assets. Pursuant to the Partnership

                                      F-22
<PAGE>   44


                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



8. TIDEPOINTE PARTNERS (CONTINUED)

agreement, the Company was under no obligation to fund additional monies to the
Partnership.

In December 1997, the Company learned that PIE Mutual Insurance Company ("PIE
Mutual"), the ultimate parent of the Providers Enterprises, Inc. (the 82.5%
general partner in the Partnership), had been placed under the supervision of
the Insurance Department of the State of Ohio for the purpose of rehabilitation
and possible liquidation, due to questions about PIE Mutual's financial
condition. PIE Mutual had provided significant amounts of equity capital, debt
and debt collateral for the Partnership. Based on this information, the
significant uncertainties created by the majority partner's financial problems
and the significant losses incurred in the 1997 results of operations of the
TidePointe project, the Company recorded a writedown representing all of its
remaining investment in and advances to TidePointe Partners, which when
combined with its equity share of the fiscal 1997 TidePointe Partners'
operating loss, totaled $2,658,000.

During 1998, the Partnership explored its options and on June 30, 1998,
TidePointe Partners closed on the sale of all of the TidePointe project assets
to CC-Hilton Head, Inc. (an affiliate of Classic Residences by Hyatt) for a
sales price of $23,200,000. At closing, the Company received no cash funds or
other consideration and released its mortgage on the TidePointe property, which
secured its investments and loans to the project. The Company has no ownership
interest in CC-Hilton Head, Inc. and no longer has any ownership interest in
the TidePointe community. TidePointe Partners, the Partnership, is in the
process of winding up its affairs and intends to liquidate. The Company will
receive no additional funds from the Partnership, and is under no obligation to
fund the Partnership in any way.

Due to the sale of the assets, which included the healthcare facility, the
Company has recognized the remaining gain of $179,375 in June 1998. The Company
has also entered into a 26-year license and use agreement with CC-Hilton Head,
Inc. for the use of the Company's logo, trade name, a non-compete agreement and
other services and amenity use in connection with the TidePointe community.
Under this agreement, the Company will receive fixed annual license fees,
ranging from $125,000 to $325,000 and totaling $4,125,000 over the 26-year
term. Approximately $67,000 of license fee income has been recognized by the
Company in fiscal year 1998.

                                      F-23
<PAGE>   45

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



9. COMMITMENTS AND CONTINGENCIES

Rent expense aggregated $554,077, $585,000 and $689,000 for the years ended
October 31, 1998, 1997 and 1996, respectively. Operating leases relate
primarily to office space and equipment. Minimum annual rental commitments
remaining at October 31, 1998, under noncancelable operating leases with
original terms of at least one year are as follows (in thousands of dollars):

<TABLE>
         <S>                                       <C>
         Year ending October 31
            1999                                    $    419,736
            2000                                         422,236
            2001                                         391,102
            2002                                         215,387
            2003                                         217,174
            Thereafter                                   834,150
                                                   ===============
                                                    $  2,499,785
                                                   ===============
</TABLE>

The Company is a defendant in a lawsuit relating to a contractual relationship
related to its investment in TidePointe Partners. The plaintiff alleges breach
of contract and seeks unspecified damages. The Company has answered the suit
and filed a counterclaim for unspecified damages. The Company intends to defend
its position vigorously and pursue its counterclaim against the plaintiff.
However, neither the Company nor its legal counsel can form an opinion as to
the outcome of this matter at this time.

The Company is a defendant in a lawsuit relating to title of real and personal
property. The plaintiff alleges ownership of certain parcels of real property
and various personal property and seeks a declaratory judgement. The Company
has answered the suit and intends to defend its position vigorously, however,
neither the Company nor its legal counsel can form an opinion as to the outcome
of this matter at this time.

The Company was a defendant in a lawsuit filed in April 1997, relating to its
proposed construction of a new conference center in Harbour Town, adjacent to
the Harbour Town clubhouse. The suit, filed by the neighboring property owners,
challenged the Company's right to construct such a facility on the site. The
Court ruled on March 4, 1998 that the Company may proceed with the construction
of the conference center contingent upon the construction of a 50 to 60 room
inn adjacent to the site.

                                      F-24
<PAGE>   46

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



9. COMMITMENTS AND CONTINGENCIES (CONTINUED)

The Court's ruling required that construction of the inn commence no later than
two years after completion of the conference center. The Company has begun
construction of the inn in 1998. The Plaintiffs in this lawsuit have filed an
appeal of the Court's decision. The Company has filed its answer to this
appeal, which it intends to vigorously pursue. No trial date has been set.
Neither the Company nor its legal counsel can form an opinion as to the outcome
of this matter at this time. As of October 31, 1998, the Company had incurred
and capitalized predevelopment costs of $404,000 relating to the conference
center. If the Company does not construct the conference center in the future,
these costs will be expensed at that time.

The Company is subject to other claims and suits in the ordinary course of
business. In management's opinion, such currently pending claims and suits
against the Company will not, in the aggregate, have a material adverse effect
on the Company.

In 1993, the Company made a commitment to donate approximately 404 acres of the
wildlife preserve to a not-for-profit organization on Hilton Head Island, South
Carolina. As of October 31, 1998 approximately 90 of the 404 acres have been
donated and title transferred. The remaining 314 acres has been leased to the
same not-for-profit organization for a nominal amount.

In 1998, the Company entered into a $676,000 construction contract for certain
site work at the inn and conference center, none of which has been incurred as
of October 31, 1998. The estimated construction cost of the two facilities is
approximately $11 million.

10. THE SEA PINES COUNTRY CLUB, INC.

The Equity Offering Agreement, by which the Sea Pines Country Club was
organized in 1990, provided for the eventual turnover by the Company of the
operations and assets of the Club to the equity members. This transfer was
made, effective May 1, 1996, such that the Club obtained control of all of its
physical assets and assumed complete and total responsibility for its operation
and all the other risks and rewards of ownership. The Company retained the
right to sell the remaining unsold memberships. Revenue from the sale of
memberships and a portion of the proceeds from resales had been deferred until
the turnover. As of October 31, 1995 the Company had sold 1,148 new memberships
and

                                      F-25
<PAGE>   47

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



10. THE SEA PINES COUNTRY CLUB, INC. (CONTINUED)

received approximately $13,276,000, which was recorded as deferred revenue, and
$645,000 related to resales which was included in other liabilities at that
date.

As a result of recognizing the deferred income related to past membership sales
and removing the Club assets from the Company's financial statements, the
turnover generated a non-cash gain in 1996 of $7,747,000 which is included as
other income in the 1996 statement of operations.

Results of operations and the assets and liabilities of the Club are included
in the Company's consolidated financial statements through April 30, 1996.
Subsequent to turnover, the Company has recognized revenues from the sale or
resale of memberships of approximately $260,000, $260,000 and $494,000 in 1998,
1997 and 1996, respectively.

The Company had entered into an agreement with the Club to provide certain
administrative services, which terminated as of October 31, 1998. The Company
earned $63,000, $114,750 and $72,000 under this agreement during 1998, 1997 and
1996, respectively. Additionally, the Club has reimbursed the Company $887,000
related to payroll and benefits during the period May 1, 1996 through October
31, 1996. No amounts were reimbursed during 1998 or 1997 as the Club directly
employed the individuals.

11. SALE OF CAROLINA CENTER

In 1996, the Company reached an agreement with the plaintiff in a
previously-filed lawsuit relating to the Company's purchase of property known
as the Carolina Center. The Company agreed to sell the property, including
improvements, to the plaintiff for $1.5 million and to pay the plaintiff
$225,000 in cash. Furthermore, the Company agreed to finance the sale with a
15-year note bearing interest at 7.5% per annum and collateralized by the
property. Such note receivable had an outstanding balance of $1,387,000 at
October 31, 1998. As a result of the agreement, the Company recorded a pre-tax
impairment loss of $810,000 ($500,000) after income tax effect in 1996). On
October 31, 1996, the Company consummated the sale of the property, as agreed,
and no additional gain or loss was recorded.

                                      F-26
<PAGE>   48

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



12. EMPLOYEE SAVINGS PLAN

Effective January 1, 1989, the Company adopted a 401(k) defined contribution
plan for all eligible employees with a minimum of six months of service and who
meet certain age requirements, as defined. The Company matches 50% of the first
6% of the participants' compensation. The Company's contributions to the plan
were $119,000, $106,000 and $80,000 for the years ended October 31, 1998, 1997
and 1996, respectively.

13. FINANCIAL INSTRUMENTS

The carrying amounts of cash and cash equivalents, trade receivables, notes
receivable, other current assets, accounts payable, line of credit with bank,
long-term debt and accruals meeting the definition of financial instruments
approximate their fair values, as of October 31, 1998. As of October 31, 1998,
the estimated fair value of the interest rate swap agreement is a negative
$411,000. Fair value of the interest rate swap was determined through a
combination of management estimates and information obtained from third parties
using market data such as bid/ask spreads, available on the last day of the
business year.

14. COMMUNITY SERVICES ASSOCIATES, INC.

Community Services Associates, Inc. ("CSA"), a homeowner association for Sea
Pines property owners, reimbursed the Company $594,000, related to payroll and
benefits in 1996. No amounts were reimbursed in 1998 or 1997 as CSA directly
employed the individuals and provided its own administrative services. In
addition, the Company paid approximately $104,000, $162,000, and $136,000 to
CSA for security service, landscaping and other related services during the
years ended October 31, 1998, 1997 and 1996, respectively.

                                      F-27
<PAGE>   49

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



15. BUSINESS SEGMENT INFORMATION

Under the guidance of FASB Statement No. 14, the Company operates primarily in
three business segments: resort operations, real estate brokerage services and
country club operations (see Note 10). Identifiable assets by segment include
assets directly employed by those operations. Corporate assets consist
primarily of deferred income tax assets and other assets. Intersegment
transactions are insignificant. A summary of Company operations by segment
follows (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                YEAR ENDED OCTOBER 31
                                                       1998             1997              1996
                                                 ----------------------------------------------------
<S>                                              <C>                   <C>               <C>
Revenues:
   Resort                                            $ 26,554          $26,322           $24,588
   Real estate brokerage                               11,952            9,574             8,504
   Country club                                            --               --             1,866
                                                 ----------------------------------------------------
                                                       38,506           35,896            34,958
                                                 ----------------------------------------------------
Cost of revenues:
   Resort                                              16,605           16,249            15,320
   Real estate brokerage                               10,463            8,503             7,626
   Country club                                            --               --             1,812
                                                 ----------------------------------------------------
                                                       27,068           24,752            24,758
                                                 ----------------------------------------------------
Depreciation and amortization expense:
   Resort                                               1,378            1,411             1,364
   Real estate brokerage                                   30              175               172
   Country club                                            --               --               209
                                                 ----------------------------------------------------
                                                        1,408            1,586             1,745
                                                 ----------------------------------------------------
Corporate expenses:
   Sales and marketing                                  1,290            1,376             1,219
   General and administrative                           4,579            4,475             4,137
   Impairment loss on Carolina Center                      --               --               810
   Healthcare, net                                         --              644                --
                                                 ----------------------------------------------------
                                                        5,869            6,495             6,166
                                                 ----------------------------------------------------
Income from operations                                $ 4,161          $ 3,063           $ 2,289
                                                 ====================================================
</TABLE>

                                      F-28
<PAGE>   50

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)



15. BUSINESS SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
                                                            YEAR ENDED OCTOBER 31
                                                     1998           1997            1996
                                                -----------------------------------------------
<S>                                             <C>               <C>             <C>
Identifiable assets:
   Resort                                         $35,431         $34,731         $37,167
   Real estate brokerage                            2,156           1,881           1,535
   Healthcare                                          --              --           7,073
   Corporate                                          338           1,202             482
                                                -----------------------------------------------
                                                  $37,925         $37,814         $46,257
                                                ===============================================

<CAPTION>
                                                            YEAR ENDED OCTOBER 31
                                                     1998           1997            1996
                                                -----------------------------------------------
<S>                                             <C>               <C>             <C>
Capital expenditures:
   Resort                                         $1,590          $1,363          $2,267
   Real estate brokerage                              27              15             120
   Country club                                       --              --              20
   Healthcare                                         --             917           3,878
                                                -----------------------------------------------
                                                  $1,617          $2,295          $6,285
                                                ===============================================
</TABLE>

                                      F-29
<PAGE>   51

                         Report of Independent Auditors


Board of Directors and Shareholders of
   Sea Pines Associates, Inc.

We have audited the consolidated financial statements of Sea Pines Associates,
Inc. as of October 31, 1998 and 1997, and for each of the three years in the
period ended October 31, 1998, and have issued our report thereon dated
December 10, 1998, included elsewhere in this Annual Report on Form 10-K. Our
audits also included the financial statement schedule listed in Item 14(a)(1)
and (2). This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statement schedule
based on our audits.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

                                    /s/ Ernst & Young LLP


Atlanta, Georgia
December 10, 1998

                                      F-30
<PAGE>   52



                           Sea Pines Associates, Inc.

                       Valuation and Qualifying Accounts
                                  Schedule II
                             (Amounts in Thousands)


<TABLE>
<CAPTION>
                                                                   Additions        Net
                                                     Balance at    charged to    deductions     Balance
                                                    beginning      costs and        and         at end
                                                    of year        expenses       expenses      of year
                                                    ----------------------------------------------------
<S>                                                 <C>            <C>            <C>           <C>
   Allowance for doubtful accounts receivable:
--------------------------------------------------


    For the year ended October 31, 1996                $ 30            $ 0          ($  3)         $ 27

    For the year ended October 31, 1997                $ 27            $76          ($ 30)         $ 73

    For the year ended October 31, 1998                $ 73            $ 6          ($ 29)         $ 50

    Deferred tax asset valuation allowance:
--------------------------------------------------


    For the year ended October 31, 1996                $405            $ 0          ($ 13)         $392

    For the year ended October 31, 1997                $392            $ 0          ($121)         $271

    For the year ended October 31, 1998                $271            $ 0          ($ 80)         $191
</TABLE>

                                      F-31
<PAGE>   53

                                   SIGNATURES


         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant, Sea Pines Associates, Inc., has duly
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

                                    SEA PINES ASSOCIATES, INC.



Dated: January 29, 1999             By:/s/Charles W. Flynn           
                                       ------------------------------
                                       Charles W. Flynn
                                       Chairman


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant, Sea Pines Associates, Inc., and in the capacities and on the dates
indicated.

<TABLE>
<CAPTION>
       Signature                                       Title                                    Date
       ---------                                       -----                                    ----
<S>                                             <C>                                       <C>
/s/Charles W. Flynn                             Chairman and Director                     January 29, 1999
-----------------------------------
Charles W. Flynn


/s/Michael E. Lawrence                          Chief Executive Officer                   January 29, 1999
-----------------------------------             and Director
Michael E. Lawrence


/s/Thomas C. Morton                             Treasurer (Principal                      January 29, 1999
-----------------------------------             Financial and
Thomas C. Morton                                Accounting Officer)
                                                and Director

/s/Norman P. Harberger                          Vice Chairman and                         January 29, 1999
-----------------------------------             Director
Norman P. Harberger



/s/Angus Cotton                                 Secretary and                             January 29, 1999
-----------------------------------             Director
Angus Cotton                                    
</TABLE>

<PAGE>   54

<TABLE>
<S>                                             <C>                                       <C>
/s/Paul B. Barringer, II                        Director                                  January 29, 1999
-----------------------------------
Paul B. Barringer, II


/s/Thomas G. Daniels                            Director                                  January 29, 1999
-----------------------------------
Thomas G. Daniels


/s/Ralph L. Dupps, Jr.                          Director                                  January 29, 1999
-----------------------------------
Ralph L. Dupps, Jr.


/s/P.R. Easterlin, Jr.                          Director                                  January 29, 1999
-----------------------------------
P. R. Easterlin, Jr.


/s/James L. Gray                                Director                                  January 29, 1999
-----------------------------------
James L. Gray


/s/John G. McGarty                              Director                                  January 29, 1999
-----------------------------------
John G. McGarty


/s/Robert W. Siler, Jr.                         Director                                  January 29, 1999
-----------------------------------
Robert W. Siler, Jr.


/s/Arthur P. Sundry                             Director                                  January 29, 1999
-----------------------------------
Arthur P. Sundry


/s/Joseph F. Vercellotti                        Director                                  January 29, 1999
-----------------------------------
Joseph F. Vercellotti


/s/Frank E. Zimmerman, Jr.                      Director                                  January 29, 1999
-----------------------------------
Frank E. Zimmerman, Jr.


*By: /s/Angus Cotton
-----------------------------------
     Angus Cotton
     Attorney-in-Fact for each
     of the persons indicated
</TABLE>


<PAGE>   55

                                 EXHIBIT INDEX

                     Pursuant to Item 601 of Regulation S-K

<TABLE>
<CAPTION>
                                                                                            Sequential
Exhibit No.                                                                                   Page No.
-----------                                                                                 ----------
<S>               <C>                                                                       <C>
3(a)              Articles of Incorporation of Registrant
                    (Incorporated by reference to Exhibit 3
                    to Registration Statement on Form 10
                    filed March 1, 1989)

3(b)              Articles of Amendment to Articles of
                    Incorporation of Registrant (Incorporated
                    by reference to Exhibit 3(b) to the
                    Registrants' Form 10-K for the fiscal
                    year ended December 31, 1989 filed on
                    January 29, 1990)

3(c)              Articles of Amendment to Articles of
                    Incorporation of Registrant (Incorporated
                    by reference to Exhibit 3(c) to Form 10-K
                    filed January 26, 1994)

3(d)              Bylaws of Registrant (Incorporated by
                    reference to Exhibit 3 to Registration
                    Statement on Form 10 filed March 1, 1989)

3(e)              Amended Bylaws of Registrant Revised
                    February 26, 1996 (Incorporated
                    by reference to Exhibit 3(e) to Form 10-K
                    filed January 29, 1997)

3(f)              Amended Bylaws of Registrant Revised
                    January 30, 1998

4(a)              Excerpt from Articles of Incorporation of
                    Registrant Relative to Preferred Stock
                    (Incorporated by reference to Exhibit 4
                    to Registration Statement on Form 10
                    filed March 1, 1989)
</TABLE>


                                      E-1
<PAGE>   56

<TABLE>
<CAPTION>
                                                                                            Sequential
Exhibit No.                                                                                   Page No.
-----------                                                                                 ----------
<S>               <C>                                                                       <C>
4(b)              Rights Agreement, dated August 23, 1993, between
                    Sea Pines Associates, Inc. and Wachovia Bank
                    of North Carolina, N.A. (Incorporated by
                    reference to Exhibit 4 to Registrant's
                    Form 8-K filed August 23, 1993)

10(a)             Amended and Restated Partnership Agreement
                    of TidePointe Partners dated January
                    14, 1994 (Incorporated by reference
                    to Exhibit 19(a) to Form 10-K filed
                    January 26, 1995)

10(b)             First Amendment to Amended and Restated
                    Partnership Agreement of TidePointe
                    Partners dated August 1, 1994 (Incorporated
                    by reference to Exhibit 19(b) to Form 10-K
                    filed January 26, 1995)

10(c)             Settlement Agreement between Sea Pines Company, Inc.
                    and Asset Management Associates, Inc. dated
                    October 31, 1996  (Incorporated by reference
                    to Exhibit 10(q) to Form 10-K filed January 29, 1997)

10(d)             Agreement for Sale of Improved Land on Hilton Head
                    Island between Sea Pines Company, Inc. and
                    Carolina Center Building Corp. dated
                    October 31, 1996  (Incorporated by reference to
                    Exhibit 10(r) to Form 10-K filed January 29, 1997)

10(e)             Settlement Statement between Sea Pines Company, Inc.
                    and Carolina Center Building Corp. dated
                    October 31, 1996  (Incorporated by reference to
                    Exhibit 10(s) to Form 10-K filed January 29, 1997)
</TABLE>
                                      E-2
<PAGE>   57

<TABLE>
<CAPTION>
                                                                                            Sequential
Exhibit No.                                                                                   Page No.
-----------                                                                                 ----------
<S>               <C>                                                                       <C>
10(f)             Adjustable Rate Promissory Note between Sea Pines
                    Company, Inc. and Carolina Center Building
                    Corp. dated October 31, 1996  (Incorporated by reference to
                    Exhibit 10(t) to Form 10-K filed January 29, 1997)


10(g)             Mortgage Assignment and Security Agreement
                    between Sea Pines Company, Inc. and
                    Carolina Center Building Corp. dated
                    October 31, 1996  (Incorporated by reference to
                    Exhibit 10(u) to Form 10-K filed January 29, 1997)

10(h)             Agreement to Turnover Management and Control
                    between Sea Pines Company, Inc. and Sea Pines
                    Country Club, Inc. dated April 30, 1996
                    (Incorporated by reference to Exhibit 10(v)
                    to Form 10-K filed January 29, 1997)

                    This Agreement contains certain supporting schedules as
                    outlined in the Agreement's Schedule of Exhibits. Any
                    omitted supporting schedules will be furnished
                    supplementally to the Commission upon request.

10(i)             Third Clarification of Membership Plan documents
                    between Sea Pines Company, Inc. and Sea Pines
                    Country Club, Inc. dated April 30, 1996
                    (Incorporated by reference to Exhibit 10(w)
                    to Form 10-K filed January 29, 1997)

10(j)             Second Amendment to Amended and Restated Partnership
                    Agreement of TidePointe Partners dated May 24, 1995.
                    (Incorporated by reference to Exhibit 10(w) to Form 10-K
                    filed February 13, 1998)
</TABLE>


                                      E-3
<PAGE>   58

<TABLE>
<CAPTION>
                                                                                            Sequential
Exhibit No.                                                                                   Page No.
-----------                                                                                 ----------
<S>               <C>                                                                       <C>
10(k)             Third Amendment to Amended and Restated Partnership
                    Agreement of TidePointe Partners dated July 30, 1997
                    (Incorporated by reference to Exhibit 10(w) to
                    Form 10-K filed February 13, 1998)

10(l)             Master Credit Agreement dated as of October 31, 1998
                    between Sea Pines Associates, Inc. and Sea Pines
                    Company, Inc. and Wachovia Bank, N.A.

10(m)             Amended and Restated Term Note between Sea Pines Associates, Inc.
                    and Sea Pines Company, Inc. and Wachovia Bank, N.A.
                    in the principal sum of $18,500,000 dated October 31, 1998
                    with respect to the Credit Agreement in 10(l) above.

10(n)             Amended and Restated Revolving Line of Credit Note between
                    Sea Pines Associates, Inc. and Sea Pines Company, Inc.
                    and Wachovia Bank, N.A. in the principal sum of
                    $15,000,000 dated October 31, 1998 with respect
                    to the Credit Agreement in 10(l) above.

10(o)             Amended and Restated Seasonal Line of Credit Note
                    between Sea Pines Associates, Inc. and Sea Pines
                    Company, Inc. and Wachovia Bank, N.A. in the
                    principal sum of $2,500,000 dated October 31, 1998
                    with respect to the Credit Agreement in 10(l) above.

10(p)             Mortgage Modification and Restatement Agreement dated
                    October 31, 1998 between Sea Pines Associates, Inc.
                    and Sea Pines Company, Inc. and Wachovia Bank,
                    N.A. with respect to the note in 10(m) above.

10(q)             Mortgage Modification and Restatement Agreement dated
                    October 31, 1998 between Sea Pines Associates, Inc.
                    and Sea Pines Company, Inc. and Wachovia Bank,
                    N.A. with respect to the note in 10(n) above.
</TABLE>
                                      E-4
<PAGE>   59


<TABLE>
<CAPTION>
                                                                                            Sequential
Exhibit No.                                                                                   Page No.
-----------                                                                                 ----------
<S>               <C>                                                                       <C>
10(r)             Mortgage Modification and Restatement Agreement dated
                    October 31, 1998 between Sea Pines Associates, Inc.
                    and Sea Pines Company, Inc. and Wachovia Bank,
                    N.A. with respect to the note in 10(o) above.

10(s)             Swap Transaction confirmation between Sea Pines Company,
                    Inc. and Wachovia Bank, N.A. dated September 30, 1998.

10(t)             License and Use Agreement dated June 30, 1998 between
                    Sea Pines Company, Inc. and CC-Hilton Head, Inc.

10(u)             Asset Purchase Agreement dated July 31, 1997 between
                    Sea Pines Senior Living Center, Inc. and
                    The Rogers Center, L.L.C.
                    (Incorporated by reference to Exhibit 10(w) to
                    Form 10-K filed February 13, 1998)

21                Subsidiaries of the Registrant

27                Financial Data Schedule (for SEC use only)

99.1              Safe Harbor Disclosure
</TABLE>

                                      E-5