1 EXHIBIT 99.4 DURHAM CENTRE STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES YEAR ENDED DECEMBER 31, 1996 1 2 Independent Auditors' Report To the Board of Trustees Continental Mortgage and Equity Trust We have audited the accompanying statement of revenues and direct operating expenses of Durham Centre for the year ended December 31, 1996. This statement of revenues and direct operating expenses is the responsibility of the Property's management. Our responsibility is to express an opinion on this statement of revenues and direct operating expenses based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and direct operating expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and direct operating expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement of revenues and direct operating expenses presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying financial statement is prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in Form 8-K of Continental Mortgage and Equity Trust) and, as described in Note 1, is not intended to be a complete presentation of the results of operations. In our opinion, the statement of revenues and direct operating expenses referred to above presents fairly, in all material respects, the revenues and direct operating expenses of Durham Centre for the year ended December 31, 1996, in conformity with generally accepted accounting principles. Farmer, Fuqua, Hunt & Munselle, P.C. Dallas, Texas August 14, 1997 2 3 DURHAM CENTRE STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES Year Ended December 31, 1996 REVENUES Net rental revenues and common area maintenance charges $3,576,320 Other revenues 63,333 ---------- Total revenues 3,639,653 DIRECT OPERATING EXPENSES Repairs and maintenance 513,055 Utilities 384,561 Property taxes 330,000 Insurance 23,646 Salaries 16,380 ---------- Total direct operating expenses 1,267,642 ---------- REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $2,372,011 ========== The accompanying notes are an integral part of this statement. 3 4 DURHAM CENTRE NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES December 31, 1996 NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION Durham Centre is a 205,467 square foot office building located in Durham, North Carolina. During 1996, the property was owned by DCV Limited Partnership. The accompanying financial statement does not include a provision for depreciation and amortization, bad debt expense, interest expense, significant non-recurring repairs expense and related insurance reimbursements or income taxes. Accordingly, this statement is not intended to be a complete presentation of the results of operations. NOTE 2: ACCOUNTING ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 3: OTHER REVENUES Other revenues consist of the following: Parking income $63,000 Miscellaneous 333 ------- $63,333 ======= NOTE 4: SUBSEQUENT EVENT The property was sold to Continental Mortgage and Equity Trust, a California business trust, on July 18, 1997. 4