<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB



           [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                For the quarterly period ended September 30, 1998

                                       OR

            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                For the transition period from        to         .



                         Commission File Number 0-16886


                                Semele Group Inc.
                 (Name of Small Business Issuer in its charter)





          Delaware                                          36-3465422
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)



One Canterbury Green, Stamford, Connecticut                  06901
(Address of principal executive offices)                   (Zip Code)



Issuer's telephone number, including area code :  (203) 363-0849



Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X . NO .


Shares of common stock outstanding as of November 13, 1998:  1,119,929

Transitional Small Business Disclosure Format:  YES   .  NO X .



<PAGE>


PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                                SEMELE GROUP INC.
                           Consolidated Balance Sheets

                    September 30, 1998 and December 31, 1997
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                September 30,        December 31,
                                                                                    1998                 1997
                                                                              ---------------      ----------------
<S>                                                                           <C>                  <C>
ASSETS
Cash and Cash Equivalents..........................................           $      6,329,310     $      7,884,593
Interest Receivable on Loans.......................................                         --                3,565
Loans Receivable...................................................                    225,000              475,000
Rents Receivable...................................................                     43,894                   --
Accounts Receivable - Affiliate....................................                  1,102,845                   --
Interest Receivable - Affiliate....................................                     46,374                   --
Note Receivable - Affiliate........................................                  2,725,695                   --
Equipment on operating lease, net of accumulated depreciation
  of $13,518 at September 30, 1998.................................                    361,482                   --
Investment in Partnerships and Trusts..............................                  7,747,965                   --
Foreclosed Real Estate Held for Sale, Net..........................                  9,961,991            9,961,991
Other Assets.......................................................                    159,578                   --
                                                                              ----------------     ----------------
Total Assets.......................................................           $     28,704,134     $     18,325,149
                                                                              ----------------     ----------------
                                                                              ----------------     ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Notes Payable - Affiliates.........................................           $     14,869,500     $      4,419,500
Notes Payable......................................................                  1,124,349                   --
Accrued Interest - Affiliate.......................................                     60,958                   --
Accrued Interest...................................................                     21,201                   --
Accrued Expenses - Affiliates......................................                    108,888               49,166
Accounts Payable and Accrued Expenses..............................                    771,483              404,358
Deferred Rental Income.............................................                     43,218                   --
Minority Interest..................................................                    174,589                   --
                                                                              ----------------     ----------------
Total Liabilities..................................................                 17,174,186            4,873,024
                                                                              ----------------     ----------------
Stockholders' Equity
Shares of Common Stock, $0.01 Par Value,
  5,000,000 Authorized, 2,080,185 and 2,125,327 Shares Issued at
  September 30, 1998 and  December 31, 1997, respectively..........                170,663,365          171,019,463
Accumulated Deficit................................................               (142,924,442)        (141,713,131)
Deferred Compensation, 41,952 and 15,483 Shares at
  September 30, 1998 and December 31, 1997, respectively...........                   (713,184)            (263,204)
Treasury Stock at Cost, 960,256 and 917,502 Shares at
  September 30, 1998 and December 31, 1997, respectively...........                (15,495,791)         (15,591,003)
                                                                              ----------------     ----------------
Total  Stockholders' Equity........................................                 11,529,948           13,452,125
                                                                              ----------------     ----------------
Total Liabilities and Stockholders' Equity........................            $     28,704,134     $     18,325,149
                                                                              ----------------     ----------------
                                                                              ----------------     ----------------
Book Value Per Share of Common Stock
(1,119,929 and 1,207,825 Shares Outstanding at
  September 30, 1998 and  December 31, 1997, respectively..........           $          10.30     $          11.14
                                                                              ----------------     ----------------
                                                                              ----------------     ----------------

</TABLE>


        The accompanying notes are an integral part of these consolidated
                              financial statements


                                       2
<PAGE>


                                SEMELE GROUP INC.
                      Consolidated Statements of Operations

              For the Nine Months Ended September 30, 1998 and 1997
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                                                    1998                  1997      
                                                                              ----------------      ----------------
<S>                                                                           <C>                   <C>
INCOME
Income From Lending and Investing Activities:
  Interest on Loans Receivable.........................................       $         24,705      $        29,694
  Income on Investments ...............................................                290,880               90,686
                                                                              ----------------      ---------------
Total Income From Lending and Investing Activities.....................                315,585              120,380
                                                                              ----------------      ---------------
Other Income:
  Lease Revenue........................................................                 28,590                   --
  Interest on Note Receivable - Affiliate..............................                 25,763                   --
  Gain on Sale of Equipment ...........................................                  3,400                   --
                                                                              ----------------      ---------------
Total Other Income.....................................................                 57,753                   --
                                                                              ----------------      ---------------
Total Income ..........................................................                373,338              120,380
                                                                              ----------------      ---------------
EXPENSES
Expenses From Property Operating Activities:
  Net Loss From Operations of Foreclosed Real Estate Held for Sale.....                605,094              451,418
  Net Loss From Disposition of Foreclosed Real Estate Held for Sale....                     --               32,612
  Net Income From Operations of Real Estate Venture ...................                     --             (412,236)
                                                                              ----------------      ---------------
Total Expenses From Property Operating Activities......................                605,094               71,794
                                                                              ----------------      ---------------
Other Expenses:
  Stockholder Expenses ................................................                 73,960              112,778
  Directors' Fees, Expenses, and Insurance ............................                173,828              167,545
  Other Professional Fees .............................................                 84,800              289,744
  General and Administrative ..........................................                229,845              665,121
  Administrative Reimbursement - Affiliate ............................                113,201               29,700
  Interest Expense - Affiliates .......................................                391,512               10,178
  Depreciation Expense ................................................                 13,518                   --
  Interest Expense ....................................................                  7,067                   --
  Recovery of Losses on Loans, Notes and Interest Receivable...........               (108,176)                  --
                                                                              ----------------      ---------------
Total Other Expenses ..................................................                979,555            1,275,066
                                                                              ----------------      ---------------
Total Expenses ........................................................              1,584,649            1,346,860
                                                                              ----------------      ---------------
Net Loss ..............................................................       $     (1,211,311)     $    (1,226,480)
                                                                              ----------------      ---------------
                                                                              ----------------      ---------------
Net Loss Per Share of Common Stock Basic
  (Based on the Weighted Average Number of Shares
  Outstanding of 1,202,287 and 1,105,729, respectively)................       $          (1.01)     $         (1.11)
                                                                              ----------------      ---------------
                                                                              ----------------      ---------------

</TABLE>


        The accompanying notes are an integral part of these consolidated
                              financial statements


                                       3
<PAGE>


                                SEMELE GROUP INC.
                      Consolidated Statements of Operations

             For the Three Months Ended September 30, 1998 and 1997
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                    1998                  1997     
                                                                              ----------------      ---------------
<S>                                                                           <C>                   <C>
INCOME
Income From Lending and Investing Activities:
  Interest on Loans Receivable.........................................       $             --      $         5,000
  Income on Investments ...............................................                 94,176               71,275
                                                                              ----------------      ---------------
Total Income From Lending and Investing Activities.....................                 94,176               76,275
                                                                              ----------------      ---------------
Other Income:
  Lease Revenue........................................................                 28,590                   --
  Interest on Note Receivable - Affiliate..............................                 25,763                   --
  Gain on Sale of Equipment ...........................................                  3,400                   --
                                                                              ----------------      ---------------
Total Other Income.....................................................                 57,753                   --
                                                                              ----------------      ---------------
Total Income ..........................................................                151,929               76,275
                                                                              ----------------      ---------------
EXPENSES
Expenses From Property Operating Activities:
  Net Loss From Operations of Foreclosed Real Estate Held for Sale.....                247,201              118,538
  Net Income From Operations of Real Estate Venture ...................                     --             (367,203)
                                                                              ----------------      ---------------
Total Expenses From Property Operating Activities......................                247,201             (248,665)
                                                                              ----------------      ---------------
Other Expenses:
  Stockholder Expenses ................................................                 39,036               73,658
  Directors' Fees, Expenses, and Insurance ............................                 70,459               56,451
  Other Professional Fees .............................................                 23,108               38,964
  General and Administrative ..........................................                 89,955              202,363
  Administrative Reimbursement - Affiliate ............................                 37,770               29,700
  Interest Expense - Affiliates .......................................                169,309               10,178
  Depreciation Expense ................................................                 13,518                   --
  Interest Expense ....................................................                  7,067                   --
                                                                              ----------------      ---------------
Total Other Expenses ..................................................                450,222              411,314
                                                                              ----------------      ---------------
Total Expenses ........................................................                697,423              162,649
                                                                              ----------------      ---------------
Net Loss ..............................................................       $       (545,494)     $       (86,374)
                                                                              ----------------      ---------------
                                                                              ----------------      ---------------
Net Loss Per Share of Common Stock Basic
  (Based on the Weighted Average Number of Shares
  Outstanding of 1,176,346 and 1,192,342, respectively)................       $          (0.46)     $         (0.07)
                                                                              ----------------      ---------------
                                                                              ----------------      ---------------


</TABLE>





        The accompanying notes are an integral part of these consolidated
                              financial statements



                                       4
<PAGE>


                                SEMELE GROUP INC.
                 Consolidated Statement of Stockholders' Equity

                  For the Nine Months Ended September 30, 1998
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                    Common Stock
                                             ---------------------------  Accumulated     Deferred        Treasury
                                                 Shares        Amount       Deficit      Compensation       Stock          Total
                                             -------------   -----------  ------------   ------------   -------------  -------------
<S>                                            <C>         <C>           <C>           <C>               <C>           <C>
Stockholder's Equity,
 December 31, 1997 ........................   2,125,327   $ 171,019,463 $(141,713,131)   $ (263,204)  $ (15,591,003)  $  13,452,125
Deferred Compensation
  26,469 Shares of Stock ..................          --              --            --      (449,980)        449,980              --

1-for-300 reverse stock split and 
 30-for-1 forward stock split 
 (including $356,098 paid for fractional
 shares) ..................................     (45,142)       (356,098)           --            --              --        (356,098)
Acquisition of 69,223 Shares of Treasury
 Stock, at Cost ...........................          --              --            --            --        (354,768)       (354,768)
Net Loss ..................................          --              --    (1,211,311)           --              --      (1,211,311)
                                             -------------   -----------  -------------   -----------   -------------  -------------
Stockholder's Equity,
  September 30, 1998 ......................   2,080,185   $ 170,663,365  $(142,924,442)  $  (713,184)  $ (15,495,791)  $ 11,529,948
                                             ------------- -------------  -------------   -----------   -------------   ------------
                                             ------------- -------------  -------------   -----------   -------------   ------------


</TABLE>




        The accompanying notes are an integral part of these consolidated
                              financial statements


                                       5
<PAGE>


                                SEMELE GROUP INC.
                      Consolidated Statements of Cash Flows

              For the Nine Months Ended September 30, 1998 and 1997
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                                                      1998                  1997
                                                                                ----------------      ---------------
<S>                                                                              <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss......................................................................   $   (1,211,311)       $   (1,226,480)
Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities:
  Net Loss From Disposition of Foreclosed Real Estate Held For Sale...........               --                32,612
  Net Income From Operations of Real Estate Venture...........................               --              (412,236)
  Depreciation Expense........................................................           13,518                    --
  Minority Interest...........................................................             (373)                   --
Net Change In:
  Interest Receivable on Loans................................................            3,565               (14,694)
  Rents Receivable............................................................        1,027,638                    --
  Accounts Receivable - Affiliate.............................................       (1,061,605)                   --
  Interest Receivable - Affiliate.............................................          (25,763)                   --
  Investment in Partnerships and Trusts.......................................            8,607                    --
  Other Assets................................................................         (159,578)              (17,922)
  Accrued Interest - Affiliate................................................           60,958                    --
  Accrued Interest............................................................            7,067                    --
  Accrued Expenses - Affiliates...............................................          (11,396)                   --
  Accounts Payable and Accrued Expenses.......................................          322,105               441,809
  Deferred Rental Income......................................................           43,218                    --
                                                                                ---------------       ---------------
Net Cash Used In Operating Activities.........................................         (983,350)           (1,196,911)
                                                                                ---------------       ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Investment in Ariston ......................................................         (111,067)                   --
  Collection of Loans Receivable..............................................          250,000                    --
  Distributions from Investment in Real Estate Venture........................               --             4,713,101
  Proceeds from Sale of Foreclosed Real Estate Held For Sale..................               --               617,388
                                                                                ---------------       ---------------
Net Cash Provided By Investing Activities.....................................          138,933             5,330,489
                                                                                ---------------       ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Payment for Fractional Shares as a Result of Reverse Stock Split............         (356,098)                   --
  Acquisition of Treasury Stock...............................................         (354,768)                   --
  Issuance of Stock, Net......................................................               --             2,655,500
                                                                                ---------------       ---------------
Net Cash Provided By (Used In) Financing Activities...........................         (710,866)            2,655,500
                                                                                ---------------       ---------------
Net Increase (Decrease) in Cash and Cash Equivalents..........................       (1,555,283)            6,789,078
Cash and Cash Equivalents at Beginning of Period..............................        7,884,593               145,335
                                                                                ---------------       ---------------
Cash and Cash Equivalents at End of Period....................................   $    6,329,310        $    6,934,413
                                                                                ---------------       ---------------
                                                                                ---------------       ---------------
Supplemental disclosure of cash flow information:
  Cash paid during the period for interest....................................   $      330,554        $           --
                                                                                ---------------       ---------------
                                                                                ---------------       ---------------


</TABLE>





        The accompanying notes are an integral part of these consolidated
                              financial statements



                                       6
<PAGE>


                                SEMELE GROUP INC.

                   Notes To Consolidated Financial Statements
                               September 30, 1998

                                   (Unaudited)


     Readers of this quarterly report should refer to the audited consolidated
financial statements of Semele Group Inc. (the "Company"), formerly known as
Banyan Strategic Land Fund II, for the year ended December 31, 1997, which are
included in the Company's 1997 Annual Report on Form 10-KSB, as certain footnote
disclosures which would substantially duplicate those contained in such audited
statements have been omitted from this report.

     In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at September 30, 1998 and December 31, 1997 and results of operations
for the three and nine month periods ended September 30, 1998 and 1997 have been
made and are reflected.


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     PRINCIPLES OF CONSOLIDATION

     The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries and consolidated ventures which
hold title to the Company's property. In August 1998, the Company acquired
Ariston Corporation (see Transactions with Affiliates and Related Parties - Note
6 herein). In April 1996, the Company acquired 100% of the outstanding shares of
BMC Banden Corp. The net assets of BMC Banden Corp. had no value, therefore, the
consolidated financial statements of the Company were not affected by this
purchase. All intercompany balances and transactions have been eliminated in
consolidation. The Company's 47% interest in the H Street Assemblage was
accounted for under the equity method and was reported as an investment in real
estate venture (see Note 8 for discussion of sale).

     EARNINGS PER SHARE

     In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share", which was required to be adopted on December 31,
1997. This statement established standards for computing and presenting earnings
per share. The statement replaced primary earnings per share with basic earnings
per share. Basic earnings per share excludes all dilution and is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding for the period. Diluted earnings per share is
computed similarly to fully diluted earnings per share. Diluted earnings per
share reflects the potential dilution that could occur if stock options and
stock award grants were exercised. All prior year amounts have been restated to
conform to SFAS No. 128.

     CASH EQUIVALENTS

     At September 30, 1998, the Company had $3,559,470 invested in federal
agency discount notes and reverse repurchase agreements secured by U.S. Treasury
Bills or interests in U.S. Government securities.

     RECLASSIFICATION

     Certain 1997 balances have been reclassified to conform to the 1998
presentation.


2.    EQUIPMENT ON OPERATING LEASE

     The Company acquired equipment on operating leases as a result of the
Ariston acquisition which is depreciated using the straight-line method over the
equipment's remaining estimated useful life. Rental income and interest expense
on associated indebtedness are recognized as earned and incurred, respectively.
At September 30, 1998, the Company's equipment portfolio consisted of equipment
with a cost and accumulated depreciation of $375,000 and $13,518, respectively.






                                       7
<PAGE>


                                SEMELE GROUP INC.

                   Notes To Consolidated Financial Statements

                                   (Continued)



At September 30, 1998, future minimum rents due in connection with equipment on
operating leases was as follows:

<TABLE>

        <S>                                          <C>
       For the year ending September 30, 1999        $   184,101
                                         2000            137,346
                                                     -----------
                                        Total        $   321,447
                                                     -----------
                                                     -----------

</TABLE>


3.   NOTES PAYABLE

     Through its acquisition of Ariston, the Company acquired a limited
partnership interest in a real estate investment program and assumed $872,406 of
related debt. The note bears a fluctuating interest rate based on Prime plus a
margin and requires quarterly payments of principal and interest. The note
matures on January 15, 2003 and is secured by the associated limited partnership
interest. Repayment of the debt is partially guaranteed by certain individuals,
including Messrs. Engle and Coyne.

     Additionally, the Company assumed $251,943 of non-recourse debt, consisting
of installment notes that are collateralized by certain equipment held on
operating leases. The installment notes will be repaid fully by non-cancelable
rents generated by the associated lease agreements. At September 30, 1998, the
interest rate on these obligations was 7.1%.

       The annual maturities of the installment notes payable are as follows:

<TABLE>

       <S>                                                <C>
       For the year ending September 30, 1999             $     211,393
                                         2000                   263,797
                                         2001                   180,094
                                         2002                   197,339
                                         2003                   271,726
                                                          -------------
                                        Total             $   1,124,349
                                                          -------------
                                                          -------------

</TABLE>


4.   DISPOSITION OF FORECLOSED REAL ESTATE HELD FOR SALE

     The Lindfield Tract D property is an 8.5-acre parcel of land zoned for
commercial use within a multi-use planned unit development, located in
Kissimmee, Florida. On June 23, 1997, the Company sold the Lindfield Tract D
property to an unaffiliated third party for a purchase price of $675,000. The
Company's carrying value for this property at the time of the sale was $650,000.
Cash proceeds received, net of transaction costs, were $617,388, resulting in a
net loss on disposition of $32,612 for financial reporting purposes.


5.   FORECLOSED REAL ESTATE HELD FOR SALE

     Rancho Malibu is a 274-acre parcel of undeveloped land north of Malibu,
California. On July 1, 1992, a joint venture (the "Venture") between the Company
and Legend Properties, Inc. (f/k/a Banyan Mortgage Investment Fund) ("Legend")
acquired title to the property pursuant to a deed in lieu of foreclosure
agreement. The Company owns a 98.6% general partner interest in the Venture
while Legend holds the remaining 1.4% interest as a limited partner. The
Venture's results are consolidated in the accompanying financial statements.

     The Venture has engaged in zoning and entitlement activities that have been
opposed by the City of Malibu and various citizen groups since the acquisition
of the property. The city initiated two separate legal actions intended to
preclude the issuance of a Coastal Development Permit, both of which were
ultimately resolved in favor of the Venture.

     Concurrent with the aforementioned litigation, the Venture pursued
entitlements before the Board of Supervisors for the County of Los Angeles. In
September 1995, the Los Angeles County Regional Planning Commission, by a 3 to 2
vote, 



                                       8
<PAGE>



                                SEMELE GROUP INC.

                   Notes To Consolidated Financial Statements

                                   (Continued)



approved a revised plan to develop a fifty-one unit housing community on the 
Rancho Malibu property. The Los Angeles County Regional Planning Commission's 
approval was appealed to the Los Angeles County Board of Supervisors. On May 
14, 1996, the Los Angeles County Board of Supervisors approved a compromise 
project (the "Project") to create forty-six single family lots. These 
approvals are specified in Los Angeles County CUP No. 91-315(3), Oak Tree 
Permit No. 91-315(3) and Tentative Tract No. 46277 (revised), approved May 
14, 1996. On June 17, 1996, a neighboring homeowners association filed an 
action entitled La Chusa Highlands Property Owners Association, Inc. v. Los 
Angeles County, et al., Los Angeles County Superior Court Case No. BS039789 
(the "La Chusa Litigation"), challenging the aforesaid approvals. The 
Company, Legend and the Venture are named as real parties in interest. The La 
Chusa Litigation was tried before a Court on January 27, 1997. On February 5, 
1997, the Court issued its ruling, granting the Petitioner's Writ and 
remanding the matter to the County Board of Supervisors for further action on 
three separate grounds: (i) the Supervisors' analyses and findings relating 
to the consistency of the Projects' cul de sacs and streets within certain 
County of Los Angeles Code provisions restricting the length of cul de sacs 
to 1,000 feet were deemed inadequate; (2) a proposed deed restriction 
requiring the Venture to "diligently seek" approval for a second living unit 
on five of the forty-six lots was held to be too abstract to comply with the 
low income housing requirement of state law and (3) the Court found that the 
County acted improperly when it approved the Project in January of 1996 and 
later approved a Supplemental Environmental Impact Report ("SEIR") in May of 
1996 ("Court Writ"). The Court's Writ specifically rejected challenges to the 
Project's entitlements predicated on (i) the adequacy of the Supervisors' 
analyses of the environmental impacts of the Project under the SEIR; (ii) the 
consistency of the Project with the County General Plan; (iii) the approval 
of a sewage treatment plant and (iv) the density of the Project under the 
Hillside Management Ordinance.

     The Court entered a final judgment in the La Chusa Litigation on March 
25, 1997. The Venture filed a notice of appeal of the Court Writ on April 25, 
1997. In addition to appealing the Court Writ, the Venture sought further 
action by the Supervisors to address the three issues specified in the Court 
Writ in order to reinstate the entitlements set aside by the Court. The 
Venture appeared before the Supervisors at a public hearing on November 6, 
1997. The matter was heard and continued with no action taken. On January 27, 
1998, the Supervisors held a continued public hearing and directed County 
staff to present the Final SEIR and environmental finding at a future meeting 
(scheduled for February 24, 1998) for review and consideration for approval. 
On February 24, 1998, the Supervisors certified the Final SEIR and adopted 
environmental findings for the Project. The public hearing was continued for 
the Board to review and consider approval of Project entitlements. On March 
31, 1998, the Supervisors considered the Project entitlements. The 
Supervisors directed the Venture to revise the proposed tract map to relocate 
lots 23 and 24 from the eastern ridge to the main development cluster and 
present the revised tract map to the Supervisors for their review and 
consideration at a future meeting. On June 9, 1998, the Supervisors approved 
Tentative Tract Map No. 46277 (revised), CUP No. 91-315(3) and Oak Tree 
Permit No. 91-315(3) for a 46 residential lot and 5 second unit project 
("1998 County Project"). Pursuant to the Board's direction, the new tract map 
relocates former lots 23 and 24 to the northeastern portion of the main 
development cluster. The statute of limitations to challenge the 
environmental review for the 1998 County Project under the California 
Environmental Quality Act expired on July 16, 1998. Neither the County nor 
the Venture has been served with a lawsuit under the California Environmental 
Quality Act at this time and the Venture is not aware of any lawsuit having 
being filed. The statute of limitations to challenge the Project entitlements 
themselves expired on September 9, 1998. The Venture and La Chusa extended 
this statute of limitations for La Chusa only until October 23, 1998, in 
order to discuss settlement. Since a settlement agreement was entered into 
between the Venture, the County, and La Chusa on October 22, 1998 (see 
discussion below), no lawsuit was filed by La Chusa prior to the expiration 
of the extended statute of limitations. Neither the County nor the Venture 
has been served with a lawsuit challenging the Project entitlements at this 
time and the Venture is not aware of any lawsuit having been filed.

     On August 6, 1998, in compliance with the Court Writ, the County and 
Venture filed a motion seeking a court finding that the 1998 County Project 
is in compliance with the court writ and discharging the writ. The motion was 
scheduled to be heard on August 21, 1998. The Venture took the motion off the 
calendar to discuss settlement with La Chusa. On or about October 30, 1998, 
the Venture filed in the trial court a stipulation signed by La Chusa, the 
County and the Venture requesting the court to discharge the writ and dismiss 
the action with prejudice. The trial court rejected the stipulation and 
requested a formal, noticed motion. On November 13, 1998 the Venture, the 
County and La Chusa requested the trial court to discharge the writ. The 
Court issued a minute order on November 13, 1998 discharging the Court Writ.

     On April 29, 1997, counsel for La Chusa Highlands Property Owners
Association, Inc., presented a petition for an award of attorney's fees in
connection with the Court's judgment of March 25, 1997. The Court heard argument
on the petition and 



                                       9
<PAGE>



                                SEMELE GROUP INC.

                   Notes To Consolidated Financial Statements

                                   (Continued)



on April 30, 1997 awarded the petitioner's counsel the sum of $126,711 in 
attorney's fees and related costs. An appeal of this order has been 
incorporated into the Company's appeal of the March 25, 1997 judgment 
discussed above. The Company's initial brief on appeal was filed on October 
9, 1997. The petitioner's response was filed on February 9, 1998. On March 2, 
1998, the Company filed its reply brief. On or about October 27, 1998, the 
Venture and the County filed a Request for Dismissal of the appeal pursuant 
to the Settlement Agreement (see discussion below). On or about October 29, 
1998, at the request of the court of appeal, the Venture, the County and La 
Chusa filed a stipulation in the court of appeal stipulating that each party 
shall bear its own costs in connection with the appeal. The court of appeal 
issued an order dismissing the appeal on October 30, 1998.

     On October 22, 1998, the Venture, the County and La Chusa entered into a
Settlement Agreement to resolve the La Chusa Litigation, the appeal, and any
challenge to the 1998 County Project or future Coastal Commission action on the
1998 County Project. The settlement is contingent upon dismissal of the La Chusa
action. On October 23, 1998, the Venture transferred the amount of One Hundred
and Twenty Five Thousand Dollars ($125,000) to La Chusa's counsel of record.
That amount is to be held in a trust account until the trial court discharges
the writ and dismisses the La Chusa Lawsuit with prejudice. On October 23, 1998,
the Venture transferred an additional amount of One Hundred and Twenty Five
Thousand Dollars ($125,000) to an escrow account established at Boston Private
Bank & Trust Company. On November 12, 1998 the Venture directed the Bank to wire
that amount to La Chusa's Counsel of Record. That amount is also to be in a
trust account until the trial court discharges the writ and dismisses the La
Chusa Lawsuit.

     On November 4, 1998, the California Coastal Commission unanimously approved
an amendment to the Coastal Development Permit for the 51 lot Project previously
approved in 1993. The amendment revised the Coastal Development Permit to
conform to the 46 lot 1998 County Project. On November 4, 1998, the California
Coastal Commission also approved an extension of the term of the Coastal
Development Permit to August 11, 1999. The statute of limitations to challenge
the Coastal Commission actions will expire on January 4, 1999. Neither the
Coastal Commission nor the Venture has been served with a lawsuit at this time
and the Venture is not aware of any lawsuit being filed.

     In an earlier action, the Venture challenged the General Plan and the
Environmental Impact Report adopted by the City of Malibu on November 20, 1995
in a lawsuit entitled BMIF/BSLFII Rancho Malibu Limited Partnership v. City of
Malibu, Los Angeles County Superior Court Case No. SS006374. On July 31, 1996,
the Venture and the City of Malibu executed and delivered a settlement agreement
which, among other things, resulted in a dismissal of the lawsuit challenging
the City's General Plan and which precludes the City from challenging the
Venture's entitlements before any public body (in the absence of a significant
requested change). The City is also precluded by the settlement agreement from
participating in the La Chusa Litigation.

     During the nine months ended September 30, 1998, the Venture incurred
approximately $605,000 in costs in connection with Rancho Malibu relating to
entitlement activities, holding costs and litigation. These costs, treated as
capital contributions to the Venture by the Company, were included in total
expenses from property operating activities on the Company's consolidated
statements of operations. At September 30, 1998, the Company's carrying balance
for the property is $9,961,991.


6.   TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

     ACQUISITION OF ARISTON CORPORATION

     On August 31, 1998, the Company executed an agreement to acquire all of the
common stock of Ariston Corporation ("Ariston") for a total purchase price of
$12,450,000. Ariston is a holding company having two investments: (i) a 99%



                                       10
<PAGE>



                                SEMELE GROUP INC.

                   Notes To Consolidated Financial Statements

                                   (Continued)



limited partnership interest in AFG Eireann Limited Partnership ("AFG Eireann"),
a Massachusetts limited partnership having a tax interest in a diversified pool
of lease contracts owned by an institutional investor and (ii) a 98% limited
partnership interest in Old North Capital Limited Partnership ("ONC"), a
Massachusetts limited partnership with investments in cash and notes, equipment
leases, and limited partnerships that are engaged in either equipment leasing or
real estate. Gary D. Engle, Chairman, Chief Executive Officer and a director of
the Company and James A. Coyne, President, Chief Operating Officer and a
director of the Company both are affiliated with ONC and Gary D. Engle is
affiliated with AFG Eireann. Ariston was organized on July 31, 1998 as a
Delaware corporation. On August 3, 1998, Equis Financial Group Limited
Partnership ("EFG") contributed its limited partnership interests in AFG Eireann
and ONC to Ariston in exchange for Ariston common stock. Ariston was a
wholly-owned subsidiary of EFG until its acquisition by the Company and was
formed principally to facilitate the transfer of limited partnership interests
held by EFG in AFG Eireann and ONC. Gary D. Engle controls EFG and is the sole
director of Ariston.

     The acquisition of Ariston was approved by the Company's independent
directors. (Both Messrs. Engle and Coyne elected to abstain from any votes
conducted by the Company's Board of Directors in connection with this
acquisition.) In addition, the Company, through its independent directors,
engaged an independent investment banking firm (the "Investment Banker"), to
evaluate the transaction and express its opinion as to whether the acquisition
was fair to the Company's shareholders from a financial point of view. The
Investment Banker concluded that the terms of the acquisition were fair to the
Company's shareholders.

     The Company purchased all of the common stock of Ariston from EFG for cash
of $2 million and a purchase-money note of $10,450,000 (the "Note"). The Note
bears interest at the annualized rate of 7%, payable quarterly in arrears, and
requires principal reductions based upon the cash flows generated by the limited
partnership interests owned by Ariston. The Note matures on August 31, 2003 and
is recourse only to the common stock of Ariston. The cost of the Ariston
acquisition has been preliminarily allocated on the basis of the estimated fair
value of the assets acquired and liabilities assumed. In October 1998, Ariston
declared and paid a cash distribution of $2,020,000 to the Company.

     The following summarized, unaudited pro forma results of operations for the
nine months ended September 30, 1998 and 1997, assume that the Company effected
the acquisition at the beginning of the respective periods:

<TABLE>
<CAPTION>

                                             1998                 1997     
                                       ---------------      ---------------
<S>                                    <C>                  <C>
     Revenue and Other Income          $     5,910,416      $    3,972,304

     Net Income                        $     3,865,338      $    1,935,647

     Net Income Per Share of
       Common Stock Basic              $          3.21      $         1.75

</TABLE>


     AFG Eireann is a special purpose limited partnership created in 1994 having
a tax interest in a diversified pool of lease contracts owned by a institutional
investor. Gary D. Engle is a 50% owner and a director of the general partner of
AFG Eireann. ONC is a Massachusetts limited partnership established in 1995. ONC
has investments in (i) cash of approximately $1.9 million, (ii) a portfolio of
equipment leases, (iii) limited partnership units of several
direct-participation equipment leasing programs sponsored and managed by EFG,
(iv) general and limited partnership interests in a real estate partnership
sponsored by EFG that owns two commercial buildings leased to an
investment-grade educational institution, and (v) a note receivable having a
principal balance of approximately $2.7 million that is due from Messrs. Engle
and Coyne. Gary D. Engle owns all of the voting stock, and has a one-third
equity interest in, and is a director of the general partner of ONC. James A.
Coyne owns non-voting stock, and has a one-third equity interest in, and is a
director of the general partner of ONC.

     OTHER RELATED PARTY TRANSACTIONS

     The Company executed and delivered an Exchange Agreement dated April 30,
1997 (amended as of August 7, 1997, the "Agreement") among the Company, Equis
Exchange L.L.C., a Massachusetts limited liability company ("Equis"), Equis



                                       11
<PAGE>




                                SEMELE GROUP INC.

                   Notes To Consolidated Financial Statements

                                   (Continued)



Financial Group Limited Partnership ("EFG") and certain partnerships managed by
EFG ("the Partnerships"). Pursuant to the Agreement, on April 30, 1997, the
Company issued to the Partnerships 198,700 shares of the Company's common stock
at the price of $15.00 per share. Cash proceeds received by the Company,
$2,480,500, were net of related costs of $500,000. In addition, the Partnerships
made a three-year loan (the "Loan") to the Company in the amount of $4,419,500.
The Loan has an interest rate of 10% per annum with mandatory principal
reductions, if and to the extent net proceeds are received from the sale or
refinancing of the Rancho Malibu property. At September 30, 1998, the carrying
value of the note payable approximates fair value.

     Pursuant to the Agreement, the Administrative Services Agreement between
the Company and Banyan Management Corp. ("BMC") was amended to provide, among
other things, for the payment to BMC of a termination fee in the amount of
$251,823 and the transfer of the Company's ownership interest in BMC to BMC's
designee. Effective May 6, 1997, EFG entered into an Administrative Services
Agreement to provide administrative services to the Company, replacing BMC.
Administrative costs, primarily salaries and general and administrative
expenses, of $113,201 were incurred on the Company's behalf by EFG during the
nine months ended September 30, 1998. During the nine months ended September 30,
1997, the Company incurred $29,700 in administrative costs for services provided
by EFG and $107,781 for services provided by BMC. The costs incurred by EFG on
behalf of the Company are reflected as Administrative Reimbursement - Affiliate
on the Consolidated Statements of Operations. The costs incurred by BMC on
behalf of the Company are included in General and Administrative expenses on the
Consolidated Statements of Operations.

     In connection with the Ariston acquisition, the Company recorded certain
outstanding accounts receivable totaling $1,102,845 that are reflected as
Accounts Receivable - Affiliate on the accompanying Consolidated Balance Sheet.
These funds were collected by the Company in October 1998.


7.    RECOVERY OF LOSSES ON LOANS, NOTES AND INTEREST RECEIVABLE

     During the first quarter of 1998, the Company received cash distributions
of $18,423 related to its interest in a liquidating trust established for the
benefit of the unsecured creditors (including the Company) of VMS Realty
Partners and its affiliates. In addition, the Company received $89,753 from its
interest in Springtown Partners, a California limited partnership formed by
three land owners, including the Company, for the purpose of merging land
parcels in order to option them to a third party for use as a wetland mitigation
bank. The Company acquired the land from Anden Group as a result of a loan
default, but fully reserved for the asset as the land was determined to be
"undevelopable" due to certain environmental issues. Since 1993, the Company has
sought to realize value from this asset. The Company has treated both amounts as
a recovery of amounts previously charged to losses on loans, notes and interest
receivable on its consolidated statement of operations for the nine months ended
September 30, 1998.


8.   DISPOSITION OF INVESTMENT IN REAL ESTATE VENTURE

     On October 22, 1990, the Company acquired title to the property known as
the H Street Assemblage located in Washington, D.C. pursuant to an agreement
with Banyan Strategic Realty Trust ("BSRT"). On June 5, 1992, the Company and
BSRT formed a joint venture (the "Venture") to pursue its development rights.
The Company had a 47% interest in the Venture while BSRT owned the remaining
53%. This property consisted of 36,100 square feet of undeveloped land in
downtown Washington D.C. plus an approximately 55,900 square foot office
building. The entire property was zoned for office development.

     On March 20, 1997, the Venture sold approximately 3,500 square feet of the
Venture's land to the United States General Services Administration ("GSA") for
a purchase price of $1,828,900, including $150,000 paid by GSA for reimbursement
of expenses that the Venture incurred in anticipation of this transaction. On
July 29, 1997, the Venture sold the remaining land and office building to an
unaffiliated third party for net sale proceeds of $8,469,821. The Company's
share of the gain on disposition recognized by the Venture was $371,979 and is
included in net income from operations of real estate venture for the three and
nine months ended September 30, 1997 on the accompanying consolidated statements
of operations. During the 



                                       12
<PAGE>




                                SEMELE GROUP INC.

                   Notes To Consolidated Financial Statements

                                   (Continued)



nine September 30, 1997, the Company received aggregate distributions from the
Venture of $4,713,101, including its allocation of sales proceeds. The Venture
has no further ownership interest in the H Street Assemblage property.

9.   DEFERRED COMPENSATION

     In December 1997, the Company established an incentive compensation plan
(the "Plan") for Messrs. Engle and Coyne (the "Participants"). The Plan provides
for all or some of the Participants' salary to be deferred. All such deferred
compensation is held subject to the claims of creditors of the Company in a
"rabbi" trust until paid to the Participants following the Participants'
termination of employment. The amounts deferred are invested in common stock of
the Company. Pursuant to the Plan, the Participants deferred $180,000 of
compensation during the nine months ended September 30, 1998 which represented
26,469 shares of common stock. The number of shares of common stock was
determined by dividing the dollar amount of the salary deferred each month by
the average of the closing prices of the Company's common stock for the last ten
trading days of the month. The deferred amount was expensed by the Company
during 1998 and is included in general and administrative expenses on the
consolidated statement of operations for the nine months ended September 30,
1998. Future compensation will be deferred and invested in common stock which
will be issued on a monthly basis to the trust for the benefit of the
Participants.


10.  STOCK SPLITS

     Effective June 30, 1998, the stockholders approved a 1-for-300 reverse
stock split followed by a 30-for-1 forward stock split. As a result of the
reverse stock split, each stockholder of record who owned less than 300 shares
of common stock immediately prior to the reverse stock split received in lieu of
the fractional share resulting from the reverse split, cash in the amount of
$.790625 per share (the average daily closing price per share of common stock on
the Nasdaq Stock Exchange for the ten trading days prior to effective date)
multiplied by the number of shares of common stock owned by such stockholder
immediately prior to the reverse stock split. Immediately after the reverse
stock split, the number of shares of common stock of each holder (excluding
stockholders who held less than 300 shares immediately prior to the reverse
split) was converted in a forward split into multiple shares of common stock on
the basis of 30 shares of common stock for each share or fraction thereof then
held. The Company paid $356,098 to fractional stockholders on July 17, 1998 as a
result of the reverse stock split. All share and per share data for prior
periods presented have been restated to reflect the stock splits.


11.  TREASURY STOCK

     On September 23, 1998, the Company purchased 69,223 shares of common stock,
or approximately 6.2% of the Company's common stock outstanding. The Company
paid cash in the amount of $5 1/8 per share, for a total purchase price of
$354,768.


12.  NASDAQ POTENTIAL DELISTING

     The Company has not consistently satisfied the conditions for continued
inclusion on the NASDAQ National Market. NASDAQ has notified the Company that it
intends to delist the stock from the NASDAQ National Market. On November 6,
1998, a representative from the Company attended a hearing on this matter. As of
the date hereof, a decision by NASDAQ has not been rendered. In the event of a
delisting, the stock may be eligible to trade on the NASD OTC Bulletin Board
system. The Company may also consider listing on another exchange.



                                       13
<PAGE>




                                SEMELE GROUP INC.

                   Notes To Consolidated Financial Statements

                                   (Continued)



13.  SUBSEQUENT EVENT

     During 1994, in connection with the restructuring of Anden, the Company was
conveyed an interest in a first mortgage loan collateralized by a parcel of land
located in Hemet, California. The borrower was Hemet Phase IV Partners, L.P.
("Hemet"). The Company also was conveyed a limited partnership interest in
Hemet. The Company recorded its interest in the loan acquired at $500,000 as of
the date of foreclosure. During 1994, the Company recorded a provision for
losses on loans, notes and interest receivable relating to the Hemet loan in the
amount of $275,000. Pursuant to the Company's valuation of the underlying
collateral, the loan was placed on non-accrual status. On October 8, 1998, the
Company received $744,795 as payment in full on the loan and interest. The
Company recorded $225,000 as a principal repayment, $275,000 as a recovery of
amounts previously charged to losses on loans, notes and interest receivable and
the remainder as interest income.


14.  FUTURE FILINGS WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION

     Pursuant to the Rules of Item 7 of Form 8-K, the Company expects to file
audited financial statements of Ariston Corporation. The audit of Ariston
Corporation is pending at this date. As soon as the audit is complete, the
Company will file Form 8-K with the Securities and Exchange Commission
containing such financial statements.



                                       14
<PAGE>


Item 2.   Management's Discussion and Analysis of Financial Condition or Plan of
          Operation


General

     Certain statements in this quarterly report that are not historical fact
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Without limiting the foregoing, words
such as "anticipates", "expects", "intends", "plans" and similar expressions are
intended to identify forward-looking statements. These statements are subject to
a number of risks and uncertainties including the Company's ability to
successfully implement a new growth-oriented business plan. Actual results could
differ materially from those projected in the forward-looking statements.

     The Company, formerly known as Banyan Strategic Land Fund II, was
originally established to invest primarily in short-term, junior,
pre-development and construction mortgage loans. The borrowers subsequently
defaulted on these mortgage loan obligations, adversely affecting the Company.
As a result of these defaults, the Company suspended the making of new loans,
except for advances of additional funds under circumstances in which it was
deemed necessary to preserve the value of existing collateral, including
instances where the Company had foreclosed upon or taken title, directly or
indirectly, to the collateral. In 1990, the Company implemented a plan designed
to preserve its assets and manage its properties acquired through foreclosure or
otherwise until they would be disposed of in an orderly manner. On February 25,
1997, the Directors of the Company authorized management to engage an investment
banking firm for purposes of evaluating strategic alternatives for maximizing
stockholder value. The Company executed and delivered an Exchange Agreement
dated April 30, 1997 (amended as of August 7, 1997, the "Agreement") among the
Company, Equis Exchange L.L.C., a Massachusetts limited liability company
("Equis"), Equis Financial Group Limited Partnership ("EFG") and certain
partnerships affiliated with EFG (the "Partnerships"). Pursuant to the
Agreement, the Company issued to the Partnerships 198,700 shares of the
Company's common stock at the price of $15.00 per share. Cash proceeds received
by the Company, $2,480,500, were net of related costs of $500,000. In addition,
the Partnerships made a three-year loan to the Company in the amount of
$4,419,500. These transactions are intended to provide capital to assist the
Company in a new growth-oriented business plan, which includes the development
of the Company's property known as Rancho Malibu.

     The transaction also called for a one time $2.00 per share cash dividend to
be paid in the event certain stockholder proposals were approved. The Company
solicited its stockholders for proxies in connection with proposed changes in
the Company's Certificate of Incorporation and By-laws. Among the principal
changes requested were: (i) the election of new Directors nominated by EFG for
terms of up to 3 years and an increase in size of the Board of Directors (the
"Board") to as many as nine members, provided a majority of the Board shall
consist of members independent of the Company, EFG or any affiliate; (ii) an
amendment extending the Company's life to perpetual and changing its name and
(iii) an amendment designed to restrict or deter, to the extent legally
permissible, the acquisition of more than 4.9% of the common stock of the
Company by any person in such a manner as would cause such person to become a 5%
stockholder within the meaning of Section 382 (g) of the Internal Revenue Code.
The Consent of the stockholders was obtained and the proposals, including the
changes described in (i) through (iii) above, were adopted on October 21, 1997.

     Pursuant to the Agreement, the Administrative Services Agreement between
the Company and Banyan Management Corp. ("BMC") was amended to provide, among
other things, for the immediate payment to BMC of a termination fee in the
amount of $251,823 and the transfer of the Company's ownership interest in BMC
to BMC's designee. Pursuant to the Agreement, the Company also entered into a
new Administrative Services Agreement with EFG (see Note 6 to the consolidated
financial statements).

     On August 31, 1998, the Company executed an agreement to acquire all of the
common stock of Ariston Corporation ("Ariston") for a total purchase price of
$12,450,000. Ariston is a holding company having two investments: (i) a 99%
limited partnership interest in AFG Eireann Limited Partnership ("AFG Eireann"),
a Massachusetts limited partnership having a tax interest in a diversified pool
of lease contracts owned by an institutional investor and (ii) a 98% limited
partnership interest in Old North Capital Limited Partnership ("ONC"), a
Massachusetts limited partnership with investments in cash and notes, equipment
leases, and limited partnerships that are engaged in either equipment leasing or
real estate. Gary D. Engle, Chairman, Chief Executive Officer and a director of
the Company and James A. Coyne, President, Chief Operating Officer and a
director of the Company both are affiliated with ONC and Gary D. Engle is
affiliated with AFG Eireann. Ariston was organized on July 31, 1998 as a
Delaware corporation. On August 3, 1998, EFG contributed its limited partnership
interests in AFG Eireann and ONC to Ariston in exchange for Ariston common
stock. Ariston was a wholly-owned subsidiary of EFG until its acquisition by the
Company and was formed principally to facilitate the transfer of limited
partnership interests held by EFG in AFG Eireann and ONC. Gary D. Engle controls
EFG and is the sole director of Ariston.



                                       15
<PAGE>


     The acquisition of Ariston was approved by the Company's independent
directors. (Both Messrs. Engle and Coyne elected to abstain from any votes
conducted by the Company's Board of Directors in connection with this
acquisition.) In addition, the Company, through its independent directors,
engaged an independent investment banking firm (the "Investment Banker"), to
evaluate the transaction and express its opinion as to whether the acquisition
was fair to the Company's shareholders from a financial point of view. The
Investment Banker concluded that the terms of the acquisition were fair to the
Company's shareholders.

     The Company purchased all of the common stock of Ariston from EFG for cash
of $2 million and a purchase-money note of $10,450,000 (the "Note"). The Note
bears interest at the annualized rate of 7%, payable quarterly in arrears, and
requires principal reductions based upon the cash flows generated by the limited
partnership interests owned by Ariston. The Note matures on August 31, 2003 and
is recourse only to the common stock of Ariston. The cost of the Ariston
acquisition has been preliminarily allocated on the basis of the estimated fair
value of the assets acquired and liabilities assumed. In October 1998, Ariston
declared and paid a cash distribution of $2,020,000 to the Company.

     The Company currently holds an ownership interest in a 274 acre land parcel
located in Southern California known as the Rancho Malibu property. The Company
also holds a 0.3% beneficial interest in a liquidating trust, established for
the benefit of a group of unsecured creditors of a previous borrower of the
Company, which holds interests in various assets. In addition, the Company has
one loan referred to as Hemet IV (see Note 13 to the financial statements
concerning subsequent repayment).

Year 2000 Issue

     The Year 2000 Issue generally refers to the capacity of computer
programming logic to correctly identify the calendar year. Many companies
utilize computer programs or hardware with date sensitive software or embedded
chips that could interpret dates ending in "00" as the year 1900 rather than the
year 2000. In certain cases, such errors could result in system failures or
miscalculations that disrupt the operations of the affected businesses. The
Company uses information systems provided by EFG and has no information systems
of its own. EFG has adopted a plan to address the Year 2000 Issue that consists
of four phases: assessment, remediation, testing, and implementation and has
elected to utilize principally internal resources to perform all phases.
Presently, EFG anticipates completing its Year 2000 project by December 31, 1998
at a di minimus cost to the Company. Aggregate costs for the entire project are
anticipated to be less than $50,000, all of which will have been expensed as
incurred.

     EFG's primary information software was coded by IBM at the point of
original design to use a four digit field to identify calendar year. In
addition, EFG has gathered information about the Year 2000 readiness of
significant vendors and third party servicers and continues to monitor
developments in this area. All of EFG's peripheral computer technologies, such
as its network operating system and third-party software applications, including
payroll and electronic banking, have been evaluated for potential programming
changes and are expected to require only minor modifications to function
properly with respect to dates in the year 2000 and thereafter. Moreover, EFG
understands that each of its and the Company's significant vendors and
third-party servicers are in the process, or have completed the process, of
making their systems Year 2000 compliant. Substantially all parties queried have
indicated that their systems will be Year 2000 compliant by the end of 1998.
Presently, EFG is not aware of any outside servicer with a Year 2000 Issue that
would have a material effect on the Company's results of operations, liquidity,
or financial position.

     EFG believes that its Year 2000 compliance plan will be effective in
resolving all material Year 2000 risks in a timely manner and that the Year 2000
Issue will not pose significant operational problems with respect to its
computer systems or result in a system failure or disruption of its or the
Company's business operations. However, EFG has no means of ensuring that all
vendors and third-party servicers will conform ultimately to Year 2000
standards. The effect of this risk to the Company is not determinable.


Liquidity and Capital Resources

     Cash and cash equivalents consist of cash and short-term investments. The
Company's cash and cash equivalents balance at September 30, 1998 and December
31, 1997 was $6,329,310 and $7,884,593, respectively. The decrease in total cash
and cash equivalents of $1,555,283 is the result of cash used for operating and
financing activities.

     Cash Flow From Operating Activities: Net cash used in operating activities
decreased by $213,561 for the period ended September 30, 1998 to $983,350 from
$1,196,911 for the same period in 1997.



                                       16
<PAGE>


     Cash Flow From Investing Activities: During the nine months ended September
30, 1998, net cash provided by investing activities resulted from a $250,000
principal repayment on the Lindfield Tract A loan (see below) offset by the
Company's investment in Ariston. During the nine months ended September 30,
1997, net cash provided by investing activities was $5,330,489 resulting from
distributions from the Company's investment in a real estate venture of
$4,713,101 (see below) and proceeds received from the sale of foreclosed real
estate of $617,388 (see below).

     Cash Flow From Financing Activities: During the nine months ended September
30, 1998, net cash used in financing activities resulted from $356,098 cash used
to pay fractional shareholders as a result of the reverse stock split and
$354,768 to purchase 69,223 shares of the Company's common stock. During the
nine months ended September 30, 1997, net cash provided by financing activities
was $2,655,500 resulting from the issuance of stock pursuant to the Exchange
Agreement described above.

     The Company's future liquidity needs are dependent upon, among other
things: (i) the level of liquidity required to successfully implement a new
growth-oriented business plan and (ii) the Company's ability to control its
property level and Company level operating expenses. In addition, the Company
will have future cash flows as a result of the Ariston acquisition (see above),
which will be used to service associated acquisition indebtedness.

     In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share", which was required to be adopted on December 31,
1997. This statement established standards for computing and presenting earnings
per share. The statement replaced primary earnings per share with basic earnings
per share. Basic earnings per share excludes all dilution and is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding for the period. Diluted earnings per share is
computed similarly to fully diluted earnings per share. Diluted earnings per
share reflects the potential dilution that could occur if stock options and
stock award grants were exercised. All prior year amounts have been restated to
conform to SFAS No. 128.

     As of September 30, 1998 and December 31, 1997, the Company's mortgage loan
portfolio consisted of loans with a carrying value totaling $225,000 and
$475,000, respectively. During the nine months ended September 30, 1998, the
Company received final principal and interest payments on its Lindfield Tract A
loan totaling $278,270. See Note 13 to the financial statements for subsequent
repayment of the Hemet IV loan.


Results of Operations

Nine months ended September 30, 1998 compared to the nine months ended September
30, 1997:

     Total income for the nine months ended months ended September 30, 1998
increased to $373,338 from $120,380 for the nine months ended September 30,
1997. The increase is due primarily to an increase in income earned on
investments. The increase in income earned on investments reflects an increase
in cash available for investment resulting primarily from the issuance of stock
(see above) and cash distributions received related to the Company's investment
in the real estate venture (see below). Other income during the nine months
ended September 30, 1998 resulted from the acquisition of Ariston (see above)
which included: (i) equipment on operating leases generating lease revenue and
(ii) a note receivable-affiliate generating interest income. Interest income on
the note receivable-affiliate is subordinate to the repayment of certain
institutional indebtedness.

     Total expenses for the nine months ended September 30, 1998 increased to
$1,584,649 from $1,346,860 for the nine months ended September 30, 1997. This
increase of $237,789 for the nine months ended September 30, 1998 when compared
to the same period in 1997 is due to an increase in total expenses from property
operating activities offset by a decrease in total other expenses. The increase
in total property operating expenses is due primarily to costs incurred in
connection with the Rancho Malibu property relating to entitlement activities,
holding costs and litigation (see Note 5 to the consolidated financial
statements for discussion of settlement). The Company also recognized net income
from operations of the real estate venture of $412,236, relating to the
Company's interest in the H Street property (see discussion below) during 1997.
The decrease in total other expenses is due to a decrease in other professional
fees and general and administrative expenses and an offset in 1998 of $108,176
reflecting a recovery of amounts previously charged to losses on loans, notes
and interest receivable. Other professional fees were higher during 1997 due to
legal costs related to the Winding River litigation as discussed below and costs
incurred to engage an investment banking firm for purposes of evaluating
strategic alternatives for maximizing shareholder value. General and
administrative expenses were higher in 1997 due to a termination fee of $251,823
paid to BMC in connection with the Exchange Agreement (see Note 6 to the
consolidated financial statements) and 



                                       17
<PAGE>


incentive compensation accrued in connection with the H-Street sale. Other
expenses in 1998 include interest expense of $391,512 related to the loan from
the Partnerships as a result of the Exchange Agreement (see above) and the
purchase money note to EFG as a result of the Ariston acquisition (see above).
Interest expense during 1997 was $10,178 related to the loan from the
Partnerships.

     During the nine months ended September 30, 1997, the Company recorded net
income of $412,236 from the operations of a real estate venture. This net income
reflects the Company's 47% interest in the H Street Venture (the "Venture"). The
Venture owned an office building with approximately 55,900 square feet of gross
leasable area (the "Victor Building") and an adjacent land parcel consisting of
36,100 square feet (the "H Street Assemblage") located in Washington, D.C. On
March 20, 1997, the Venture sold approximately 3,500 square feet of the
Venture's land to the United States General Services Administration ("GSA") for
a net purchase price of $1,828,900, including $150,000 paid by the GSA as a
reimbursement of expenses that the Venture incurred in anticipation of this
transaction. On July 29, 1997, the Venture sold the remaining land and office
building to an unaffiliated third party for net sale proceeds of $8,469,821. The
Company's share of the gain on disposition recognized by the Venture was
$371,979 and is included in net income from operations of real estate venture
for the nine months ended September 30, 1997 on the accompanying Consolidated
Statement of Operations. During the nine months ended September 30, 1997, the
Company received aggregate distributions from the Venture of $4,713,101,
including its allocation of such sales proceeds. The Venture has no further
ownership interest in the H Street Assemblage property. See Note 8 to the
consolidated financial statements for additional information regarding the sale
of this property and subsequent cash distribution from the Venture.

     On June 23, 1997, the Company sold the Lindfield Tract D property, having a
carrying value of $650,000, to an unaffiliated third party for a purchase price
of $675,000. Cash proceeds received, net of transaction costs, were $617,388
resulting in a loss on disposition of $32,612 for financial reporting purposes.

     The above discussed changes resulted in a decrease in the net loss for the
nine months ended September 30, 1998 to $1,211,311 ($1.01 per share) from
$1,226,480 ($1.11 per share) for the nine months ended September 30, 1997. On
April 30, 1997, the Company issued 198,700 shares of stock. In addition, the
Company issued 15,483 shares of common stock on December 30, 1997 and 26,469
shares of common stock during 1998 in connection with the incentive compensation
plan (see Note 9 to the consolidated financial statements). On September 23,
1998, the Company purchased 69,223 shares of common stock, which are reflected
as treasury stock on the accompanying balance sheet at September 30, 1998. As a
result of these changes, the net loss per share for the nine months ended
September 30, 1998 is based on the weighted average number of shares outstanding
during the period of 1,202,287 as compared to 1,105,729 for the same period in
1997.

Three months ended September 30, 1998 compared to the three months ended
September 30, 1997:

     Total income for the three months ended months ended September 30, 1998
increased to $151,929 from $76,275 for the three months ended September 30,
1997. This increase is due primarily to income generated through the acquisition
of Ariston (see above). The Company acquired: (i) equipment on operating leases
which generated lease revenue and (ii) a note receivable-affiliate which
generated interest income. Interest income on the note receivable-affiliate is
subordinate to the repayment of certain institutional indebtedness. Income
earned on investments further contributed to an increase in income during the
period. This increase reflects an increase in cash available for investment
resulting primarily from cash distributions received related to the Company's
investment in the real estate venture (see Note 8 to the consolidated financial
statements).

     Total expenses for the three months ended September 30, 1998 increased to
$697,423 from $162,649 for the three months ended September 30, 1997. This
increase of $534,774 is due to an increase in both total expenses from property
operating activities and total other expenses. The increase in total property
operating expenses is due to additional costs incurred in connection with the
Rancho Malibu property relating to entitlement activities, holding costs and
litigation (see Note 5 to the consolidated financial statements for discussion
of settlement). The Company also recognized net income from operations of the
real estate venture of $367,203, relating to the Company's interest in the H
Street property (see discussion above) in 1997 which partially offset property
operating expenses. The increase in total other expenses is due primarily to an
increase in interest expense - affiliates offset by a decrease in general and
administrative expenses and stockholders expenses. General and administrative
expenses were higher during the three months ended September 30, 1997 as
compared to the same period in 1998 due to incentive compensation accrued in
connection with the H Street sale and executive compensation. Stockholder
expenses were higher during the three months ended September 30, 1997 as
compared to the same period in 1998 due to costs incurred in connection with
obtaining the stockholder consent to, among other things, change the Company's
Certificate of Incorporation and By-Laws as discussed above. Other expenses in
1998 include interest expense of $169,309 related to the loan from the
Partnerships as a result of the Exchange Agreement (see above) and the loan 



                                       18
<PAGE>


from EFG as a result of the Ariston acquisition (see above). Interest expense
during 1997 was $10,178 related to the loan from the Partnerships.

     The above discussed changes resulted in an increase in net loss for the
three months ended September 30, 1998 to $545,494 ($0.46 per share) from $86,374
($0.07 per share) for the three months ended September 30, 1997. On April 30,
1997, the Company issued 198,700 shares of stock. In addition, the Company
issued 15,483 shares of common stock on December 30, 1997 and 26,469 shares of
common stock during 1998 in connection with the incentive compensation plan (see
Note 9 to the consolidated financial statements). On September 23, 1998, the
Company purchased 69,223 shares of common stock, which are reflected as treasury
stock on the accompanying balance sheet at September 30, 1998. As a result of
these changes, the net loss per share for the three months ended September 30,
1998 is based on the weighted average number of shares outstanding during the
period of 1,176,346 as compared to 1,192,342 for the same period in 1997.

     On a quarterly basis, management reviews the mortgage loans in the
Company's portfolio and records appropriate loss provisions. The provisions are
based upon a number of factors, including management's analyses of the value of
the collateral and, in certain cases, ongoing negotiations regarding disposition
of this collateral, as well as consideration of the general business conditions
affecting the Company's portfolio. Management also reviews the investment
properties held by the Company on a quarterly basis and, when it has been
determined that a permanent impairment in the value of a given property has
occurred, the carrying value of the property is then written down to its fair
market value. Management has determined that no reductions are necessary for the
three and nine months ended September 30, 1998.



Litigation

     In connection with the Company's interest in a joint venture which owns the
Rancho Malibu property (the "Venture"), the Venture has been engaged in zoning
and entitlement activities which have been opposed by the City of Malibu and
various citizen groups. During the nine months ended September 30, 1998, the
Venture incurred approximately $605,000 in costs in connection with Rancho
Malibu relating to entitlement activities, holding costs and litigation. These
costs, treated as capital contributions to the Venture by the Company, were
included in total expenses from property operating activities on the Company's
consolidated statements of operations. See Note 5 to the consolidated financial
statements for discussion of settlement.

     The Company continues to be engaged in litigation involving a real estate
development project known as "Winding River." The ultimate outcome of this
matter cannot be determined at this time. However, in the opinion of management
of the Company, the eventual outcome of this matter will not have a material
adverse effect on the financial position of the Company. The financial
statements do not include any adjustments for liability, if any, arising from
this matter.



                                       19
<PAGE>


PART II - OTHER INFORMATION


Item 1.  Legal Proceedings

See Note 5 to the consolidated financial statements.

Item 6.  Exhibits and Reports on Form 8-K

(a)           A list of exhibits filed or incorporated by reference is as
              follows:

<TABLE>
<S>           <C>
3.1           Certificate of Amendment to Amended and Restated Certificate of
              Incorporation (filed with the Securities and Exchange Commission
              as Exhibit (3.1) to the Registrant's Quarterly Report on Form
              10-QSB for the quarter ended June 30, 1998 and incorporated by
              reference)

3.2           Restated Certificate of Incorporation (filed with the Securities
              and Exchange Commission as Exhibit (3)(i) to the Registrant's
              Report on Form 8-K dated October 21, 1997 and incorporated by
              reference)

3.3           Amended and Restated By-Laws (filed with the Securities and
              Exchange Commission as Exhibit (3)(ii) to the Registrant's Report
              on Form 8-K dated October 21, 1997 and incorporated by reference)

4             Form of new stock certificate (filed with the Securities and
              Exchange Commission as Exhibit (4) to the Registrant's Quarterly
              Report on Form 10-QSB for the quarter ended September 30, 1997
              and incorporated by reference)

10.1          Executive Employment Agreement for Gary D. Engle (filed with the
              Securities and Exchange Commission as Exhibit 10.1 to the
              Registrant's Annual Report on Form 10-KSB for the year ended
              December 31, 1997 and incorporated by reference)

10.2          Executive Employment Agreement for James A. Coyne (filed with the
              Securities and Exchange Commission as Exhibit 10.2 to the
              Registrant's Annual Report on Form 10-KSB for the year ended
              December 31, 1997 and incorporated by reference)

10.3          Amended 1994 Executive and Director Stock Option Plan (filed with
              the Securities and Exchange Commission as Exhibit 10.3 to the
              Registrant's Annual Report on Form 10-KSB for the year ended
              December 31, 1997 and incorporated by reference)

10.4          Incentive Compensation Plan (filed with the Securities and
              Exchange Commission as Exhibit 10.4 to the Registrant's Annual
              Report on Form 10-KSB for the year ended December 31, 1997 and
              incorporated by reference)

10.5          Trust under Semele Group Inc. Incentive Compensation Plan (filed
              with the Securities and Exchange Commission as Exhibit 10.5 to
              the Registrant's Annual Report on Form 10-KSB for the year ended
              December 31, 1997 and incorporated by reference)

10.6          Qualified Stock Option Agreement Executive Option Grant Program
              dated December 30, 1997 between Semele Group Inc. and Gary D.
              Engle (filed with the Securities and Exchange Commission as
              Exhibit 10.6 to the Registrant's Annual Report on Form 10-KSB for
              the year ended December 31, 1997 and incorporated by reference)

10.7          Qualified Stock Option Agreement Executive Option Grant Program
              dated December 30, 1997 between Semele Group Inc. and James A.
              Coyne (filed with the Securities and Exchange Commission as
              Exhibit 10.7 to the Registrant's Annual Report on Form 10-KSB for
              the year ended December 31, 1997 and incorporated by reference)

10.8          Director Stock Option Agreement Director Option Grant Program
              (filed with the Securities and Exchange Commission as Exhibit
              10.8 to the Registrant's Annual Report on Form 10-KSB for the
              year ended December 31, 1997 and incorporated by reference)

</TABLE>



                                       20
<PAGE>


<TABLE>
<S>           <C>
10.9          Amendment to Director Stock Option Agreement Director Option
              Grant Program dated December 30, 1997 between Semele Group Inc.
              and Gerald L. Nudo (filed with the Securities and Exchange
              Commission as Exhibit 10.9 to the Registrant's Annual Report on
              Form 10-KSB for the year ended December 31, 1997 and incorporated
              by reference)

10.10         Amendment to Director Stock Option Agreement Director Option Grant
              Program dated December 30, 1997 between Semele Group Inc. and
              Robert M. Ungerleider (filed with the Securities and Exchange
              Commission as Exhibit 10.10 to the Registrant's Annual Report on
              Form 10-KSB for the year ended December 31, 1997 and incorporated
              by reference)

10.11         Amendment to Director Stock Option Agreement Director Option Grant
              Program dated December 30, 1997 between Semele Group Inc. and
              Walter E. Auch (filed with the Securities and Exchange Commission
              as Exhibit 10.11 to the Registrant's Annual Report on Form 10-KSB
              for the year ended December 31, 1997 and incorporated by
              reference)

10.12         Third Amended and Restated Employment Agreement for Leonard G.
              Levine dated May 1, 1997 (filed with the Securities and Exchange
              Commission as Exhibit (10)(i) to the Registrant's Quarterly Report
              on Form 10-QSB for the quarter ended June 30, 1997 and
              incorporated by reference)

10.13         Amendment No. 1 to Exchange Agreement dated August 7, 1997 (filed
              with the Securities and Exchange Commission as Exhibit (10)(ii)
              to the Registrant's Quarterly Report on Form 10-QSB for the
              quarter ended June 30, 1997 and incorporated by reference)

10.14         Exchange Agreement dated April 30, 1997 by and among AFG Hato
              Arrow Limited Partnership, AFG Dove Arrow Limited Partnership,
              AIP/Larkfield Limited Partnership, Equis Exchange LLC, Equis
              Financial Group Limited Partnership and the Registrant and related
              exhibits (filed with the Securities and Exchange Commission as
              Exhibit (10)(i) to the Registrant's Quarterly Report on Form
              10-QSB for the quarter ended June 30, 1997 and incorporated by
              reference)

10.15         Directors Stock Option Agreement dated July 15, 1994

10.16         Executive Stock Option Agreements dated July 1, 1994, July 11,
              1995 and April 16, 1996

10.17         Agreement for Purchase and Sale of Stock dated August 31, 1998
              between Semele Group Inc. and Equis Financial Group Limited
              Partnership (filed herewith)

10.18         Promissory Note dated August 31, 1998 between Semele Group Inc.
              and Equis Financial Group Limited Partnership (filed herewith)

10.19         Security Agreement dated August 31, 1998 between Semele Group
              Inc. and Equis Financial Group Limited Partnership (filed
              herewith)

21            Subsidiaries of the Company

27            Financial Data Schedule (such schedule is not deemed filed as
              part of this report)

99.1          Press Release dated October 21, 1997 (filed with the Securities
              and Exchange Commission as Exhibit (99)(i) to the Registrant's
              Report on Form 8-K dated October 21, 1997 and incorporated by
              reference)

(b)           A current report on Form 8-K, dated August 31, 1998, was filed by
              the Registrant on September 15, 1998 with the Securities and
              Exchange Commission.

</TABLE>





                                       21

<PAGE>


                                   SIGNATURES


PURSUANT to the requirements of the Exchange Act, the Issuer has duly caused
this Report to be signed on its behalf by the undersigned thereunto duly
authorized.


SEMELE GROUP INC.




By:   /s/ Gary D. Engle                                Date:  November 16, 1998
   -------------------------------------------
      Gary D. Engle, Chairman, Chief Executive
      Officer and Director




By:   /s/ Gary M. Romano                               Date:  November 16, 1998
   -------------------------------------------
      Gary M. Romano, Vice President and
      Chief Financial Officer