<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 31,1999        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: (843) 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. 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. [X]


         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 common stock of the registrant does not currently
represent a reliable indicator of the aggregate market value of the common 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, 2000 was 1,842,525.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Proxy Statement in connection with its 2000 Annual
Meeting of Shareholders to be held on March 16, 2000 are incorporated by
reference into Part III.


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                                     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 , AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 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, AND 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") 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. Fifth Golf Course Club, Inc. owns certain acreage which
could be used for outdoor recreational uses.



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         (b) FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS. See Note 13 to
the consolidated financial statements contained elsewhere herein for business
segment information.

         (c) NARRATIVE DESCRIPTION OF BUSINESS. The Company's operations are
conducted primarily in two reportable business segments for the year ended
October 31, 1999. These segments are organized by the type of operations and for
the year ended October 31, 1999, included: (1) resort activities, including home
and villa rental management operations, golf course operations, food and
beverage operations, and various other recreational activities; and (2) real
estate brokerage for buyers and sellers of real estate in the Hilton Head, South
Carolina area. Additionally, prior to the year ended October 31, 1999, the
Company had a third reportable segment, which included all activities related to
the Company's investment in TidePointe Partners and the related healthcare
operations. During fiscal 1998, the Company sold its investment in TidePointe
Partners and therefore this is not a reportable segment for the year ended
October 31, 1999.

                  1. RESORT OPERATIONS. Resort operations consist primarily of
the operation of three resort golf courses, a racquet club facility, a home and
villa rental management company, retail outlets, food service operations, and
other recreational facilities. For fiscal year 1999, resort operations accounted
for approximately $28,941,000 (62%) of the Company's total revenues, with golf
and tennis activities responsible for revenues of approximately $15,075,000
(32%) and home and villa rental management activities responsible for revenues
of approximately $11,471,000 (25%). 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%).

         During each of the fiscal years 1999, 1998 and 1997, 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.



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         During fiscal years 1999, 1998 and 1997, 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 the 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.

         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.



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         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 marketing
and maintaining 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.

         The Company's resort operations employed approximately 340 people as of
October 31, 1999.

                  2. REAL ESTATE BROKERAGE. SPREC is engaged primarily in the
brokerage of residential real estate on Hilton Head Island and its neighboring
communities. The Company competes with other real estate brokerage firms in the
Hilton Head Island area.



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

         For fiscal year 1999, real estate brokerage operations accounted for
approximately $17,473,000 (38%) of the Company's total revenue. 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.

         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 30 people and had approximately 85 non-employee sales
agents as of October 31, 1999.

                  3. 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 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. The Company is
no longer involved in TidePointe, other than through a license agreement. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations - 1998 Compared to 1997.

         (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



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which are located within Sea Pines. Each of the Company's golf courses is
substantially 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. The Company is planning a major renovation of the
Harbour Town Golf Links. The renovation is tentatively scheduled to commence in
May 2000 with an estimated construction cost of $3,300,000. During the
construction and grow-in period, the course will be closed for approximately
nine months. Adjacent to the Harbour Town Golf Links is the Heritage Clubhouse
which contains a pro shop, restaurant space, and other small meeting and dining
facilities.

         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. This
facility is currently undergoing a major renovation project which has been
divided into two phases. Phase I of the Sea Pines Racquet Club renovation
includes a complete reconfiguration and reconstruction of the tennis court
facilities and surrounding area. Total construction costs of Phase I have been
estimated at $1,100,000. As of October 31, 1999, $273,000 has been spent.
Completion of Phase I is scheduled for the spring of 2000. Phase II of the
project includes a permanent 3,800 square-foot facility containing an expanded
pro shop, club offices and meeting room. The cost of Phase II is estimated at
$900,000 although no firm start date has been determined. The Family Circle
Magazine Cup is held at the Sea Pines Racquet Club annually.

         (c) INN AT HARBOUR TOWN. The Company is currently constructing a small
inn in the Harbour Town area. The Inn at Harbour Town will be a 47,000
square-foot facility featuring 60 inn rooms and will be adjacent to and provide
views of the Harbour Town Golf Links. Total construction costs are estimated at
$10,600,000. As of October 31, 1999, $1,482,000 has been spent. Completion is
scheduled for the fall of 2000.

         (d) HERITAGE CONFERENCE CENTER. The Company is also currently
constructing a conference facility located adjacent to the Harbour Town Golf
Links Clubhouse. The Heritage Conference Center will be a 16,000 square-foot
facility. Total construction costs



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are estimated at $5,500,000. As of October 31, 1999, $1,952,000 has been spent.
Completion is scheduled for the spring of 2000.

         (e) 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.

         (f) 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, food and beverage facilities, a
health and fitness center, a swimming pool, and a bike rental store.

         During 1999, the Company completed a major renovation of the conference
and food and beverage facilities located at the Plantation Club.

         (g) 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.

         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 and a real estate office.

         (h) 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.       Outdoor Recreation Tract - approximately 8 acres.



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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.

         (i) 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, 1999, 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.

         (j) 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.

         (k) 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 used for catering functions.

         (l) 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 12,000 square feet of office space in 10
locations throughout the Hilton Head Island, South Carolina, area.

         (m) 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.


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ITEM 3.           LEGAL PROCEEDINGS.

         The Company has signed a written settlement agreement with the
plaintiffs in a lawsuit relating to title of real and personal property. The
Plaintiff alleged ownership of certain parcels of real property and various
personal property. As part of the settlement, the parties have quit-claimed the
disputed properties to each other. The Company quick- claimed four properties to
the plaintiffs. These were properties that were not recorded on the books of the
Company. The settlement will have no material effect on the Company's assets or
operations.

         The Company is a defendant in a lawsuit filed in November 1995 in
Beaufort County, South Carolina by Greg 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 counterclaim 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 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.


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

         None.

                                     PART II

ITEM 5.           MARKET FOR REGISTRANT'S COMMON EQUITY 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.
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. However, there is no established public trading market for the
common stock.


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         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 as reported to
the Company by Robinson Humphrey Company in Atlanta:

         Fiscal Year Ended
         October 31, 1999                   High                 Low
         -----------------                ---------            ---------
         Fourth Quarter                   $5,650.00            $5,600.00
         Third Quarter                    $5,650.00            $5,500.00
         Second Quarter                   $5,500.00            $5,400.00
         First Quarter                    $5,600.00            $5,400.00

         Fiscal Year Ended
         October 31, 1998                   High                 Low
         -----------------                ---------            ---------
         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

         (b) HOLDERS. As of January 20, 2000 there were approximately 575
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, 1998.

         At its December 13,1999, 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 $.18 per share on January 17, 2000, April 17, 2000, July 17, 2000,
and October 17, 2000, to shareholders of record on January 4, 2000, April 3,
2000, July 3, 2000 and October 2, 2000 respectively, and represents the accrued
dividend for the fiscal year ended October 31, 1999.



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         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 27 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 tennis center, 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 fourteen offices serving Hilton Head
Island and its neighboring communities.


1999 COMPARED TO 1998

         The Company reported consolidated revenues for fiscal year 1999 of
$46,414,000, a 20% increase over fiscal year 1998. Resort revenues totaled
$28,941,000 for fiscal 1999 reflecting an increase of $2,387,000 or 9.0% over
fiscal 1998. Real estate brokerage revenues totaled $17,473,000 for the year, an
increase of $5,521,000 or 46% as compared to fiscal 1998.

         Guest occupied home and villa unit nights in the Company's lodging
division totaled 63,176 for fiscal 1999, a 7.0% increase over fiscal 1998. The
average daily rate of $181 in fiscal 1999 increased 10% over the fiscal 1998
average daily rate of $164. This increase resulted primarily from the higher
quality ocean oriented units the Company has been able to attract to its rental
program. Units available for rental on the Company's rental program have
increased from 441 in fiscal 1998 to 517 in fiscal 1999. Revenues and operating
margins from golf operations continue to increase. The Company increased its
average rate per round by 5.9% by replacing discounted rounds with higher rate
rounds. The golf division produced operating margins of over 54% in fiscal 1999.



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         The Company's real estate brokerage operations closed over $395 million
in transactions for the year, a 44% increase over fiscal 1998. Many of the
factors that contributed to a successful fiscal 1998 continued for fiscal 1999.
These included favorable mortgage interest rates, the strong local and national
economy and the continued strong market demand for second homes. The Company
increased its market share of sales and listings of real estate from 20% in
fiscal 1998 to over 25% in 1999. The Company attributes this substantial
increase to its extensive marketing campaigns, aggressive positioning in the
market and by attracting and retaining professional real estate sales
executives. The operating margin from brokerage operations was over 11% in
fiscal 1999.

         Sales and marketing expenses were $1,957,000 in fiscal 1999,
representing a 52% increase from fiscal 1998. The increase is partially
attributable to pre-opening sales and marketing expenses associated with the Inn
and Conference Center currently under construction, as the Company starts to
place greater emphasis on the group meeting business. Additional increases
relate to costs associated with growing the lodging, food and beverage and real
estate businesses.

         General and Administrative expenses increased by 11.7%, or $535,000,
totaling $5,114,000 for the year. The increase is primarily attributable to
higher property taxes and the increased costs of medical claims paid by the
Company's self-funded medical plan.

         Depreciation and amortization expense decreased by 7%, or $101,000, and
totaled $1,307,000 in fiscal 1999. The decrease is attributable to assets that
have become fully depreciated.

         Interest income remained relatively constant at $164,000 and $154,000
in fiscal 1999 and fiscal 1998, respectively.

         Interest expense on the Company's long and short term debt decreased by
$246,000, or 18%, in 1999 as compared to 1998. The decrease results from the
favorable interest rates obtained as part of the October 1998 refinancing and
swap agreements and from the capitalization of $129,000 of interest in
connection with the Harbour Town construction projects.

         The Company reported a net gain on the sale or disposal of assets of
$359,000 in fiscal 1999. The three major components of this net gain are: (1) a
gain on the sale of the South Beach swimming pool property, (2) the write-off of
the remaining basis of property razed in connection with the Harbour Town
construction projects and (3) proceeds from a legal settlement relating to real
property.



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1998 COMPARED TO 1997

         The Company reported consolidated revenues for the fiscal year 1998 of
$38,506,000, a 7.3% increase over fiscal year fiscal 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 fiscal 1997.

         Guest occupied home and villa unit nights in the Company's lodging
division totaled 59,066 for fiscal 1998, a 1.4% increase over fiscal 1997. The
average daily rate of $164 in fiscal 1997 was maintained in fiscal 1998 after
significant price increases were implemented in fiscal 1997. Both revenues and
operating margins from golf operations continued to increase. The golf division
produced operating margins of over 53% in fiscal 1998. The average rate per
round increased by 6.8% in fiscal 1998. The increase in average rate 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 fiscal 1997. Many factors
contributed to a successful fiscal 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 fiscal 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 listing 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 fiscal 1998,
representing a 6.3% decrease from fiscal 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 $4,579,000 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.



                                       14
<PAGE>   15

         Due to the sale of all of the TidePointe assets in June 1998, which
included the healthcare facilities, 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.

LIQUIDITY AND CAPITAL RESOURCES

         Cash and cash equivalents increased by $443,000 during fiscal 1999 and
totaled approximately $3,042,000 at October 31, 1999, of which $2,380,000 is
restricted. This increase results from higher levels of advance deposits related
to future lodging reservations and pending real estate brokerage transactions
and increased operating cash on hand at year-end. Working capital increased
during the current year by $101,000 resulting in a working capital deficit of
$565,000 at October 31, 1999, compared to a deficit of $666,000 at October 31,
1998.

         In fiscal 1999 the Company invested approximately $5,823,000 in resort
capital expenditures. Capital investments including construction in progress on
the Harbour Town projects, extensive renovation work at the Plantation Club
along with normal expenditures for equipment replacement and resort facility
improvements. During the 12-year period from November 1, 1987 through October
31, 1999, the Company has invested over $39 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 $19,883,000 was outstanding at October 31, 1999.

         The term loan in the principal sum of $18,500,000 matures on October
31, 2008. As of October 31, 1999, $18,133,000 was outstanding under the term
loan.

         The $15,000,000 revolving line of credit has been pre-approved by the
bank for use in the construction of the Company's inn and conference center. As
of October 31, 1999, $1,750,000 was outstanding under the revolving line of
credit.



                                       15
<PAGE>   16

         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, 1999, there was no outstanding balance on the seasonal line of
credit.

         The Company has an interest swap agreement which effectively fixed the
interest rate on an $18 million notional principal amount under the term loan
described above at 5.24% per annum 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 at least October 31, 2000.

BUSINESS OUTLOOK AND RECENT DEVELOPMENTS

         The Company has entered into construction contracts and has commenced
construction on The Inn at Harbour Town, The Heritage Conference Center and the
court reconstruction phase of the Sea Pines Racquet Club renovation.
Construction contracts signed to date total approximately $12,539,000. Total
construction costs are estimated at $17,230,000 for all three projects. As of
October 31, 1999, total combined construction costs incurred to date are
$3,707,000.

         The Inn at Harbour Town will be a 47,000 square-foot facility featuring
60 inn rooms and will be adjacent to and provide views of the Harbour Town Golf
Links. Total construction costs are estimated at $10,600,000. As of October 31,
1999, $1,482,000, has been spent. Completion is scheduled for the fall of 2000.

         The Heritage Conference Center will be a 16,000 square-foot facility
adjacent to the existing Harbour Town Clubhouse. Total construction costs are
estimated at $5,500,000. As of October 31, 1999, $1,952,000 has been spent.
Completion is scheduled for the spring of 2000.

         Additionally, the Company is starting work on Phase I of the Sea Pines
Racquet Club renovation. Phase I includes a complete reconfiguration and
reconstruction of the tennis court facilities and surrounding area. Total
construction costs of Phase I have been estimated at $1,100,000. As of October
31, 1999, $273,000 has been spent. Completion of Phase I is scheduled for the
spring of 2000. Phase II of the project includes a permanent 3,800 square-foot
facility containing an expanded pro shop, club offices and



                                       16
<PAGE>   17

meeting room. The cost of Phase II is estimated at $900,000 although no firm
start date has been determined.

         The Company also is in the planning stages of a major renovation of the
Harbour Town Golf Links. This renovation is tentatively scheduled to commence in
May 2000 with an estimated construction cost of $3,300,000. During the
construction and grow-in period, the course will be closed for approximately
nine months.

         On December 21, 1999, the Company mailed to its shareholders and filed
with the Securities and Exchange Commission an Exchange Offer Prospectus. This
Prospectus offers holders of the Company's preferred stock the right to exchange
some or all of their preferred stock for either shares of common stock or a new
financial debt instrument, Trust Preferred Securities. Shareholders have until
January 31, 2000 to respond.

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 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 a 1998 assessment of its computerized systems, the Company
determined that it would be required to modify or replace portions of its
existing software so that its computer systems would properly utilize dates
beyond December 31, 1999.

         The Company believes that it completed and tested all necessary
software modifications and conversions prior to December 31, 1999. As a result
of its year 2000 readiness, the Company has experienced no significant year 2000
problems.

         The Company presently believes that it has very limited continued
exposure to year 2000 related issues. However, if the Company did not address
and remedy all of its year 2000 issues, these issues could have a material
impact on the operations of the Company.

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%



                                       17
<PAGE>   18

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.

                  None.

                                    PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

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, 1999 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," "Section 16(a) Beneficial Ownership
Reporting Compliance" and "Executive Officers" (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" and is hereby incorporated by reference.



                                       18
<PAGE>   19

                                     PART IV

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

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

         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.


                                       19
<PAGE>   20

                           SEA PINES ASSOCIATES, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                                          PAGE
                                                                          ----

Report of Ernst & Young LLP................................................F-2

Consolidated Balance Sheets at October 31, 1999 and 1998............F-3 thru 4

Consolidated Statements of Operations for the years
  ended October 31, 1999, 1998 and 1997....................................F-5

Consolidated Statements of Shareholders' Equity
  for the years ended October 31, 1999, 1998 and 1997  ....................F-6

Consolidated Statements of Cash Flows for the years
  ended October 31, 1999, 1998 and 1997.............................F-7 thru 8

Notes to Consolidated Financial Statements.........................F-9 thru 27

Report on Financial Statement Schedule....................................F-28

Schedule II - Valuation and Qualifying Accounts
  for the years ended October 31, 1999, 1998 and 1997.....................F-29


<PAGE>   21


                         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, 1999 and 1998, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended October 31, 1999. 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, 1999 and 1998, and the results of its operations
and its cash flows for each of the three years in the period ended October 31,
1999 in conformity with generally accepted accounting principles.



Atlanta, Georgia
November 19, 1999



                                      F-2

<PAGE>   22

                           Sea Pines Associates, Inc.

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                               OCTOBER 31
                                                                       1999                     1998
                                                            --------------------------------------------------
                                                                        (In Thousands of Dollars)
<S>                                                         <C>                        <C>
 ASSETS
 Current assets:
   Cash and cash equivalents
        Unrestricted                                        $          662             $          591
        Restricted                                                   2,380                      2,008
                                                            --------------------------------------------------
                                                                     3,042                      2,599

   Accounts receivable, less allowance for doubtful
     accounts of $41 and $50 at October 31, 1999 and 1998,
     respectively                                                    1,189                      1,027
   Current portion of notes receivable                                 373                        441
   Income tax refund receivable                                        346                         --
   Inventories                                                         737                        653
   Prepaid expenses                                                    140                        132
                                                            --------------------------------------------------
 Total current assets                                                5,827                      4,852




 Notes receivable, less current portion                              1,687                      1,767
 Deferred income taxes                                                  83                        316
 Deferred loan fees, net                                                36                         70
 Other assets, net                                                      78                         82
                                                            --------------------------------------------------
                                                                     1,884                      2,235
 Real estate assets
   Construction in progress                                          6,575                      1,135
   Operating properties, net                                        23,765                     22,680
   Properties held for future development                            4,623                      7,023
                                                            --------------------------------------------------
                                                                    34,963                     30,838
                                                            --------------------------------------------------
 Total assets                                               $       42,674             $       37,925
                                                            ==================================================
</TABLE>


                                      F-3
<PAGE>   23

                           Sea Pines Associates, Inc.

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                               OCTOBER 31
                                                                       1999                    1998
                                                             ------------------------------------------------
                                                                        (In Thousands of Dollars)
<S>                                                             <C>                        <C>
 LIABILITIES AND SHAREHOLDERS' EQUITY
 Current liabilities:
   Accounts payable and accrued expenses                        $     3,300                $    2,469
   Advance deposits                                                   2,155                     1,946
   Income taxes payable                                                  --                       113
   Current portion of deferred revenue and other
     liabilities                                                        537                       623
   Current portion of long-term debt                                    400                       367
                                                             ------------------------------------------------
 Total current liabilities                                            6,392                     5,518

 Long-term debt, less current portion                                19,483                    16,792
 Deferred revenue and other long-term liabilities                       905                       897
                                                             ------------------------------------------------
 Total liabilities                                                   26,780                    23,207

 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                                                  6,510                     5,334
                                                             ------------------------------------------------
 Total shareholders' equity                                          15,894                    14,718
                                                             ------------------------------------------------
 Total liabilities and shareholders' equity                     $    42,674                $   37,925
                                                             ================================================
</TABLE>

See accompanying notes.



                                      F-4
<PAGE>   24

                           Sea Pines Associates, Inc.

                      Consolidated Statements of Operations


<TABLE>
<CAPTION>
                                                                      YEAR ENDED OCTOBER 31
                                                            1999                1998               1997
                                                    -----------------------------------------------------------
                                                         (In Thousands of Dollars, Except Per Share Amounts)

<S>                                                         <C>                  <C>                 <C>
Revenues, other than healthcare                             $46,414              $38,506             $35,896

Cost and expenses, other than healthcare:
   Cost of revenues                                          34,185               27,068              24,752
   Sales and marketing expenses                               1,957                1,290               1,376
   General and administrative expenses                        5,114                4,579               4,475
   Depreciation and amortization                              1,307                1,408               1,586
                                                    -----------------------------------------------------------
                                                             42,563               34,345              32,189
                                                    -----------------------------------------------------------

Income from operations, other than healthcare                 3,851                4,161               3,707

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

Income from operations                                        3,851                4,161               3,063

Other income (expense):
   Gain on sale or disposal of assets, net                      359                   --                  --
   Interest income                                              164                  154                 325
   Interest expense, net of amounts capitalized:
     Healthcare                                                  --                   --                (381)
     Resort                                                  (1,099)              (1,345)             (1,476)
   Equity in loss and write down of investment in
     and advances to TidePointe Partners                         --                   --              (2,658)
   Gain on sale of healthcare business and assets                --                  179                 846
                                                    -----------------------------------------------------------
                                                               (576)              (1,012)             (3,344)
                                                    -----------------------------------------------------------
Income (loss) before income taxes                             3,275                3,149                (281)

Provision for (benefit from) income taxes                     1,212                1,099                (215)
                                                    -----------------------------------------------------------
Net income (loss)                                             2,063                2,050                 (66)

Preferred stock dividend requirements                           887                  887                 887
                                                    -----------------------------------------------------------

Net income (loss) attributable to common stock              $ 1,176              $ 1,163             $  (953)
                                                    ===========================================================

Per share of common stock
   Net income (loss)                                        $  0.64              $  0.63             $ (0.52)
                                                    ===========================================================
</TABLE>


See accompanying notes.


                                      F-5
<PAGE>   25

                           Sea Pines Associates, Inc.

                 Consolidated Statements of Shareholders' Equity

<TABLE>
<CAPTION>
                                             SERIES A
                                         PREFERRED STOCK          COMMON STOCK
                                      ----------------------- ----------------------     RETAINED
                                       SHARES      AMOUNT      SHARES      AMOUNT        EARNINGS         TOTAL
                                      ---------- ------------ ---------- ----------- ----------------- ------------
                                                               (In Thousands of Dollars)
<S>                                    <C>         <C>         <C>        <C>            <C>             <C>

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
   Net income                             --           --         --          --          2,063            2,063
   Declaration of preferred stock
     dividend of $0.722 per share
                                          --         --           --         --            (887)            (887)
                                      ---------- ------------ ---------- ----------- ----------------- ------------
Balance at October 31, 1999            1,228       $7,218      1,843      $2,166         $6,510          $15,894
                                      ========== ============ ========== =========== ================= ============
</TABLE>


See accompanying notes.


                                      F-6
<PAGE>   26

                           Sea Pines Associates, Inc.

                      Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>
                                                                          YEAR ENDED OCTOBER 31
                                                                    1999           1998           1997
                                                               ---------------------------------------------
                                                                        (In Thousands of Dollars)
<S>                                                              <C>            <C>            <C>
OPERATING ACTIVITIES
Net income (loss)                                                $  2,063       $  2,050       $    (66)
Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:
     Depreciation and amortization                                  1,307          1,408          1,586
     Allowance for doubtful accounts                                   (9)           (23)            46
     Deferred income taxes                                            233            489         (1,217)
     Gain on sale and disposal of assets                             (359)            --           (170)
     Equity in loss and write down of investment in and
       advances to TidePointe Partners                                 --             --          2,658
     Changes in assets and liabilities:
        Restricted cash                                              (372)           (43)          (769)
        Accounts and notes receivable                                  (5)            49           (317)
        Inventories                                                   (84)           (36)           116
        Prepaid expenses                                               (8)           108             53
        Deferred loan fees                                             34            (70)           (41)
        Accounts payable and accrued expenses                         831            659           (227)
        Deferred revenue                                                8            119            564
        Advance deposits                                              209             66            657
        Income taxes payable                                         (113)           (53)            24
        Income tax refund receivable                                 (346)            --             --
        Current portion of deferred revenue                           (86)           184             68
                                                               ---------------------------------------------
Net cash provided by operating activities                           3,303          4,907          2,965

INVESTING ACTIVITIES
Proceeds from sale of assets                                          754             --            529
Capital expenditures and property acquisitions                     (5,823)        (1,617)        (1,378)
Increase in note receivable and accrued interest from
   TidePointe Partners                                                 --             --           (155)
                                                               ---------------------------------------------
Net cash used in investing activities                              (5,069)        (1,617)        (1,004)
</TABLE>



                                      F-7
<PAGE>   27

                           Sea Pines Associates, Inc.

                Consolidated Statements of Cash Flows (continued)


<TABLE>
<CAPTION>
                                                                          YEAR ENDED OCTOBER 31
                                                                    1999           1998           1997
                                                               ---------------------------------------------
                                                                        (In Thousands of Dollars)
<S>                                                            <C>               <C>           <C>

FINANCING ACTIVITIES
Reductions to line of credit with bank                                 --           (467)          (308)
Additions to long-term debt                                         3,091             --             --
Principal repayments of debt                                         (367)        (1,560)          (783)
Dividends paid                                                       (887)          (887)          (887)
                                                               ---------------------------------------------
Net cash provided by (used in) financing activities                 1,837         (2,914)        (1,978)
                                                               ---------------------------------------------

Net increase (decrease) in unrestricted cash and cash
   equivalents                                                         71            376            (17)
Unrestricted cash and cash equivalents at beginning
   of year                                                            591            215            232
                                                               =============================================
Unrestricted cash and cash equivalents at end of year          $      662        $   591       $    215
                                                               =============================================
</TABLE>


See accompanying notes.


                                      F-8
<PAGE>   28

                           Sea Pines Associates, Inc.

                   Notes to Consolidated Financial Statements

                         October 31, 1999, 1998 and 1997


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.

SPCI is a full-service resort, which provides guests with the use of three golf
courses, tennis facility, 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 in the Hilton Head
Island, South Carolina area (see Note 13 for business segment information). Sea
Pines/TidePointe, Inc. was formed to invest in a general partnership, TidePointe
Partners, which was formed to develop a continuing care retirement community
(see Note 8). Sea Pines/TidePointe, Inc. is now dormant. SPSLC was established
to construct a healthcare facility within the TidePointe community (see Note 8).
SPSLC is also now dormant. Fifth Golf Course Club, Inc. owns certain acreage
which could be used for outdoor recreational activities.

PRINCIPLES OF CONSOLIDATION

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

The Company accounted for its general partner interest in the TidePointe
Partners Partnership (see Note 8) using the equity method of accounting.



                                      F-9
<PAGE>   29

                           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 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.

Sales of new Country Club 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>   30

                           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
new development, 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 $129,000, $0, and $6,000 in 1999, 1998 and 1997,
respectively. 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>   31

                           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
notional 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, 1999 and 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>   32

                           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

The Financial Accounting Standards Board issued Statement No. 133, Accounting
for Derivative Instruments and Hedging Activities, which the Company will be
required to adopt, effective November 1, 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 are hedges, 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 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.

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.


                                      F-13
<PAGE>   33

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)


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

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
                                                   1999              1998             1997
                                             -----------------------------------------------------
<S>                                               <C>               <C>              <C>

Cash paid during the year for:
   Interest, net of amounts capitalized           $1,022            $1,352           $1,452
   Income taxes                                    1,438               662              965
</TABLE>


                                      F-14
<PAGE>   34

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)


3. INVENTORIES

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

                                                  OCTOBER 31
                                            1999             1998
                                      -----------------------------------

Merchandise                               $ 628             $ 580
Supplies, parts and accessories              37                35
Food and beverages                           44                10
Other                                        28                28
                                      -----------------------------------
                                          $ 737             $ 653
                                      ===================================

4. REAL ESTATE ASSETS

Construction in progress of $6,575,000 and $1,135,000 at October 31, 1999 and
1998, consists primarily of costs related to the Inn and Conference Center in
1999, and renovations on existing properties in 1998.

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

                                                    OCTOBER 31
                                              1999              1998
                                        -----------------------------------

Land and improvements                      $  19,047         $  20,140
Buildings                                      8,466             7,103
Machinery and equipment                        7,308             6,399
Property held under capital leases                --               251
                                        -----------------------------------
                                              34,821            33,893
Less accumulated depreciation                (11,056)          (11,213)
                                        -----------------------------------
                                           $  23,765         $  22,680
                                        ===================================

Properties held for future development of $4,623,000 and $7,023,000 at October
31, 1999 and 1998 respectively, consist primarily of land and certain future
development rights. The decrease relates to amounts transferred to construction
in progress.



                                      F-15
<PAGE>   35

                           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
                                                                        1999             1998
                                                                  ----------------------------------
<S>                                                                   <C>              <C>

Term note payable to bank, bearing interest at various
   London Interbank Offered Rates (LIBOR) (5.41% at
   October 31, 1999), plus 1.25% to 1.5% collateralized
   by substantially all assets of the Company. Principal
   is payable monthly from May through October each year
   in amounts ranging from $66,602 in 2000 to $220,979
   in 2008. Interest is payable monthly. The note
   matures November 1, 2008.                                          $ 18,133         $ 17,159

$15 million revolving line of credit to bank, pre-approved
   for use in construction of the Company's inn and
   conference center, bearing interest at various London
   Interbank Offered Rates (LIBOR) (5.41% at October 31,
   1999), plus 1.25% to 1.5% collateralized by
   substantially all assets of the Company. Interest is
   payable monthly. The line matures October 31, 2003.                   1,750             --
                                                                  ----------------------------------
                                                                        19,883           17,159
Less current portion of long-term debt                                    (400)            (367)
                                                                  ----------------------------------
Total long-term debt                                                  $ 19,483         $ 16,792
                                                                  ==================================
</TABLE>


                                      F-16
<PAGE>   36

                           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, 1999 are as follows (in
thousands of dollars):

Year ending October 31
   2000                                   $    400
   2001                                        733
   2002                                        796
   2003                                        868
   2004                                        946
   Thereafter                               16,140
                                     ------------------
Total                                    $  19,883
                                     ==================

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.

The Company has an interest rate swap agreement, which effectively fixes 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.

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% and the Seasonal Line expires October 31, 2003. Borrowings under the
Seasonal Line are also collateralized by substantially all of the assets of the
Company. There was no outstanding balance as of October 31, 1999.



                                      F-17
<PAGE>   37

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)


6. INCOME TAXES

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

<TABLE>
<CAPTION>
                                                  YEAR ENDED OCTOBER 31
                                            1999           1998           1997
                                       ---------------------------------------------
<S>                                    <C>            <C>              <C>
Current taxes:
   Federal                             $      839     $      506       $    856
   State                                      140            104            146
                                       ---------------------------------------------
                                              979            610          1,002

Deferred income taxes (benefit):
   Federal                                    202            423         (1,053)
   State                                       31             66           (164)
                                       ---------------------------------------------
                                              233            489         (1,217)
                                       ---------------------------------------------
                                       $    1,212     $    1,099       $   (215)
                                       =============================================
</TABLE>


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
                                                            1999          1998           1997
                                                       ---------------------------------------------
<S>                                                      <C>             <C>             <C>
Tax at statutory federal income tax rates                $  1,113        $ 1,071         $ (95)
State income taxes, net of federal income tax benefit         108            116            --
Decrease in valuation allowance                              (168)           (80)         (121)
Charitable contribution expiration                            140             --            --
Other                                                          19             (8)            1
                                                       ---------------------------------------------
                                                         $  1,212       $  1,099         $(215)
                                                       =============================================
</TABLE>



                                      F-18
<PAGE>   38

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)


6. INCOME TAXES (CONTINUED)

The tax effects of the types of temporary differences and carryovers, which give
rise to deferred income tax assets (liabilities) at October 31, 1999, 1998 and
1997, are as follows (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                             OCTOBER 31
                                                                   1999          1998          1997
                                                            ---------------------------------------------
<S>                                                               <C>            <C>           <C>
Deferred revenue:
  Country club membership sales                                   $   38         $   43        $   48
  Health care transfer                                                --             --            67
Charitable contribution carryover                                     --            235           295
License and fee income                                               200            200            --
Reserve for investment in and advances to TidePointe
   Partners                                                           --             --           805
Accrued liabilities                                                  167            141           110
Other assets                                                          15             19            26
                                                            ---------------------------------------------
   Gross deferred income tax assets                                  420            638         1,351
Less:  Valuation allowance                                           (23)          (191)         (271)
                                                            ---------------------------------------------
   Deferred income tax assets                                        397            447         1,080
                                                            ---------------------------------------------
Depreciation                                                        (231)           (78)          (91)
Equity loss from TidePointe Partners                                  --             --           (97)
Other liabilities                                                    (83)           (53)          (87)
                                                            ---------------------------------------------
   Gross deferred income tax liabilities                            (314)          (131)         (275)
                                                            ---------------------------------------------
Net deferred income tax assets                                    $   83         $  316        $  805
                                                            =============================================
</TABLE>

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


                                      F-19
<PAGE>   39

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)


7. SHAREHOLDERS' EQUITY (CONTINUED)

PREFERRED STOCK (CONTINUED)

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 in arrears 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.
As of October 31, 1999, all preferred stock dividends through October 31, 1998
have been declared and paid.

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).

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.


                                      F-20
<PAGE>   40

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)


7. SHAREHOLDERS' EQUITY (CONTINUED)

COMMON STOCK (CONTINUED)

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.

In September 1999, the Board of Directors of the Company approved in concept a
plan to offer the holders of the Company's preferred stock the right to exchange
some or all of their Preferred Stock shares for either shares of common stock or
a new financial instrument, Trust Preferred Securities. The exchange offer is
expected to be made in December 1999, with holders required to elect by January
31, 2000.

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 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.



                                      F-21
<PAGE>   41

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)


7. SHAREHOLDERS' EQUITY (CONTINUED)

STOCK PURCHASE RIGHTS PLAN (CONTINUED)

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. The community
also included 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. Due to the Company's partial ownership of
the Partnership, $179,375 of the gain on this sale was not recognized in 1997
but was recorded as deferred gain at the time of the 1997 sale.

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).

In December 1997, the Company learned that its partner had financial
difficulties. 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.,



                                      F-22
<PAGE>   42

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)


8. TIDEPOINTE PARTNERS (CONTINUED)

(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, has wound-up its affairs and has been
liquidated.

Due to the sale of all of the Partnership's assets, which included the
healthcare facility, the Company 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 $200,000 and $67,000 of license fee income
has been recognized by the Company in fiscal year 1999 and 1998 respectively.

9. COMMITMENTS

Rent expense aggregated $694,591, $554,077 and $585,000 for the years ended
October 31, 1999, 1998 and 1997, respectively. Operating leases relate primarily
to office space and equipment. Minimum annual rental commitments remaining at
October 31, 1999, under noncancelable operating leases with original terms of at
least one year are as follows (in thousands of dollars):

Year ending October 31
   2000                                       $524,199
   2001                                        493,066
   2002                                        316,112
   2003                                        283,394
   2004                                        115,642
   Thereafter                                  750,350
                                     ------------------
                                            $2,482,763
                                     ==================

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.



                                      F-23
<PAGE>   43

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)


9. COMMITMENTS (CONTINUED)

As of October 31, 1999 approximately 90 of the 404 acres have been donated and
title transferred. The remaining 314 acres have been leased to the same
not-for-profit organization for a nominal amount.

In 1999, the Company entered into a $12,539,000 construction contract for the
construction of the Inn and Conference Center and the renovation of the
Company's tennis facility. As of October 31, 1999, $1,220,406 has been paid
under this contract. Total construction costs of these facilities are estimated
at $17,230,000.

10. CONTINGENCIES

The Company has reached a written settlement agreement with the plaintiffs that
filed a lawsuit against the Company relating to the construction of a new
conference center in the Harbour Town area. The settlement agreement requires
the plaintiffs to dismiss their appeal and agree to be bound by the trial
court's order of March 4, 1998 if the Company proceeds with the construction of
a 60-room inn adjacent to the conference center site and meets certain
construction timelines. The Company also paid $15,000 to the plaintiffs for
legal fees incurred in the appeal. Construction of both the conference center
and the inn began in the third quarter of 1999 and both facilities are expected
to be completed and operational before the end of fiscal year 2000.

The Company also signed a written settlement agreement with the plaintiffs in a
lawsuit filed by thirteen condominium rental companies and two individuals
relating to an alleged tying arrangement regarding access to the Company's pools
and parking facilities. The plaintiffs have dismissed all claims against the
Company and conveyed by quit-claim deeds any interest they have in all of the
properties involved in the lawsuit. The Company is required to allow access to
the Company's swimming pools under certain conditions to guests of the
plaintiffs.

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.


                                      F-24
<PAGE>   44

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)


10. CONTINGENCIES (CONTINUED)

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. The parties have been involved in extensive
settlement discussions and are proceeding with the work required to document a
possible settlement of all issues. The potential settlement, as currently being
discussed, will have no material effect on the Company's assets or operations.
If no settlement is reached, the case will proceed to trial in early 2000.
Neither the Company nor its legal counsel can form an opinion as to the possible
outcome of a trial 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 claims and suits
against the Company will not, in the aggregate, have a material adverse effect
on the Company.

11. 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 $126,000, $119,000 and $106,000 for the years ended October 31, 1999, 1998
and 1997, respectively.

12. 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, 1999 and 1998. As of October
31, 1999 and 1998, the estimated fair value of the interest rate swap agreement
was $681,000 and negative $411,000, respectively. 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.



                                      F-25
<PAGE>   45

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)


13. BUSINESS SEGMENT INFORMATION

The Company had two reportable business segments for the year ended October 31,
1999, and prior to that the Company had three operating segments. The Company's
reportable segments are organized by the type of operations and for the year
ended October 31, 1999, included: (1) resort activities, including home and
villa management operations, golf course operations, food and beverage
operations, and various other recreational activities; and (2) real estate
brokerage for buyers and sellers of real estate in the Hilton Head, South
Carolina, area. Additionally, prior to the year ended October 31, 1999, the
Company had a third reportable segment, which included all activities related to
the Company's investment in TidePointe Partners and the related healthcare
operations. During 1998, the Company sold its investment in TidePointe Partners
and therefore this is not a reportable segment for the year ended October 31,
1999.

The Company evaluates performance and allocates resources based on earnings
before interest, depreciation and other non-cash items. The accounting policies
of the reportable segment are the same as those described in the summary of
significant accounting policies (Note 1). All intercompany transactions between
segments have been eliminated upon consolidation.



                                      F-26
<PAGE>   46

                           Sea Pines Associates, Inc.

             Notes to Consolidated Financial Statements (continued)


13. BUSINESS SEGMENT INFORMATION (CONTINUED)

Segment information as of and for the years ended October 31, 1999, 1998 and
1997 are as follows: (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                YEAR ENDED OCTOBER 31
                                                       1999             1998              1997
                                                 ----------------------------------------------------
<S>                                                   <C>              <C>               <C>
Revenues:
   Resort                                             $28,941          $26,554           $26,322
   Real estate brokerage                               17,473           11,952             9,574
   TidePointe Partners and healthcare
      operations                                           --               --               345
                                                 ----------------------------------------------------
                                                       46,414           38,506            36,241
                                                 ----------------------------------------------------

Interest expense:
   Resort                                               1,099            1,345             1,476
   TidePointe Partners and healthcare
     operations                                            --               --               381
                                                 ----------------------------------------------------
                                                        1,099            1,345             1,857
                                                 ----------------------------------------------------

Depreciation and amortization expense:
   Resort                                               1,263            1,378             1,411
   Real estate brokerage                                   44               30               175
                                                 ----------------------------------------------------
                                                        1,307            1,408             1,586
                                                 ----------------------------------------------------

Segment income before income taxes:
   Resort                                               1,368            1,511             1,660
   Real estate brokerage                                1,907            1,459               896
   TidePointe Partners and healthcare
      operations                                           --              179            (2,837)
                                                 ----------------------------------------------------
                                                        3,275            3,149              (281)
                                                 ----------------------------------------------------

Identifiable assets:
     Resort                                            40,218           35,769            35,933
     Real estate brokerage                              2,456            2,156             1,881
                                                 ----------------------------------------------------
                                                      $42,674          $37,925           $37,814
                                                 ----------------------------------------------------
</TABLE>


                                      F-27
<PAGE>   47

                         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, 1999 and 1998, and for each of the three years in the
period ended October 31, 1999, and have issued our report thereon dated November
19, 1999, 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
November 19, 1999



                                      F-28
<PAGE>   48

                           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, 1997         $ 27            $76              ($ 30)          $ 73

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

For the year ended
  October 31, 1999         $ 50            $ 0              ($  9)          $ 41

Deferred tax asset
valuation allowance:

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

For the year ended
  October 31, 1998         $271            $ 0              ($ 80)          $191

For the year ended
  October 31, 1999         $191            $ 0              ($168)          $ 23
</TABLE>



                                      F-29
<PAGE>   49

                                  EXHIBIT INDEX

                     Pursuant to Item 601 of Regulation S-K

                                   Exhibit No.

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)         Amended Bylaws of Registrant Revised October 25, 1999

4(a)         First Amended and Restated Rights Agreement between Sea Pines
             Associates, Inc. and EquiServe Trust Company, NA dated as of August
             23, 1993 and Amended and Restated as of July 20, 1999 (Incorporated
             by reference to Form 8A12G/A filed August 8, 1999)

10(a)        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)


                                      E-1
<PAGE>   50

Exhibit No.
-----------

10(b)        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(c)        Master Credit Agreement dated as of October 31, 1998 between Sea
             Pines Associates, Inc. and Sea Pines Company, Inc. and Wachovia
             Bank, N.A. (Incorporated by reference to Exhibit 10 (l) to Form
             10-K filed January 29, 1999)

10(d)        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(c) above. (Incorporated by reference to
             Exhibit 10 (m) to Form 10-K filed January 29, 1999)

10(e)        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(c) above.
             (Incorporated by reference to Exhibit 10 (n) to Form 10-K filed
             January 29, 1999)

10(f)        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(c) above. (Incorporated by
             reference to Exhibit 10 (o) to Form 10-K filed January 29, 1999)



                                      E-2
<PAGE>   51

Exhibit No.
-----------

10(g)        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(d) above.
             (Incorporated by reference to Exhibit 10 (m) to Form 10-K filed
             January 29, 1999)

10(h)        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(e) above.
             (Incorporated by reference to Exhibit 10 (q) to Form 10-K filed
             January 29, 1999)

10(i)        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(f) above.
             (Incorporated by reference to Exhibit 10 (r) to Form 10-K filed
             January 29, 1999)

10(j)        Swap Transaction confirmation between Sea Pines Company, Inc. and
             Wachovia Bank, N.A. dated September 30, 1998. (Incorporated by
             reference to Exhibit 10 (s) to Form 10-K filed January 29, 1999)

10(k)        License and Use Agreement dated June 30, 1998 between Sea Pines
             Company, Inc. and CC-Hilton Head, Inc. (Incorporated by reference
             to Exhibit 10 (t) to Form 10-K filed January 29, 1999)

10(l)        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)


                                      E-3
<PAGE>   52

Exhibit No.
-----------

10(m)        First Master Credit Agreement Modification Agreement dated October
             31, 1999 between Sea Pines Associates, Inc. and Sea Pines Company,
             Inc. and Wachovia Bank, NA

10(n)        First Revolving Line of Credit Modification Agreement dated October
             31, 1999 between Sea Pines Associates, Inc. and Sea Pines Company,
             Inc. and Wachovia Bank, NA

10(o)        First Seasonal Line of Credit Note Modification Agreement dated
             December 20, 1999 between Sea Pines Associates, Inc. and Sea Pines
             Company, Inc. and Wachovia Bank, NA

10(p)        First Term Note Modification Agreement dated December 20, 1999
             between Sea Pines Associates, Inc. and Sea Pines Company, Inc. and
             Wachovia Bank, NA

10(q)        Standard Form of Agreement between Owner and Contractor dated June
             17, 1999 between Sea Pines Company, Inc. and Harden


21           Subsidiaries of the Registrant

24           Powers of Attorney

27           Financial Data Schedules (for SEC use only)

99.1         Safe Harbor Disclosure

                                      E-4
<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 27, 2000             By: /s/ Norman P. Harberger
                                        ------------------------------
                                        Norman P. Harberger
                                        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.

       Signature                             Title                  Date
       ---------                             -----                  ----

/s/Norman P. Harberger                Chairman and Director     January 27, 2000
---------------------------------
Norman P. Harberger


/s/Michael E. Lawrence                Chief Executive Officer   January 27, 2000
---------------------------------     and Director
Michael E. Lawrence


/s/Thomas C. Morton                   Treasurer (Principal      January 27, 2000
---------------------------------     Financial and
Thomas C. Morton                      Accounting Officer)
                                      and Director

/s/James L. Gray                      Vice Chairman and         January 27, 2000
---------------------------------     Director
James L. Gray




/s/Angus Cotton                       Secretary and             January 27 ,2000
---------------------------------     Director
Angus Cotton


<PAGE>   54

/s/Paul B. Barringer, II              Director                  January 27, 2000
---------------------------------
Paul B. Barringer, II


/s/Thomas G. Daniels                  Director                  January 27, 2000
---------------------------------
Thomas G. Daniels


/s/Ralph L. Dupps, Jr.                Director                  January 27, 2000
---------------------------------
Ralph L. Dupps, Jr.


/s/P.R. Easterlin, Jr.                Director                  January 27, 2000
---------------------------------
P. R. Easterlin, Jr.


/s/Charles W. Flynn                   Director                  January 27, 2000
---------------------------------
Charles W. Flynn


/s/John G. McGarty                    Director                  January 27, 2000
---------------------------------
John G. McGarty


/s/Robert W. Siler, Jr.               Director                  January 27, 2000
---------------------------------
Robert W. Siler, Jr.


/s/Arthur P. Sundry                   Director                  January 27, 2000
---------------------------------
Arthur P. Sundry


/s/Joseph F. Vercellotti              Director                  January 27, 2000
---------------------------------
Joseph F. Vercellotti


/s/Frank E. Zimmerman, Jr.            Director                  January 27, 2000
---------------------------------
Frank E. Zimmerman, Jr.


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