<PAGE>
                     SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
                                                                  

                                   FORM 10K
              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

                    FOR THE FISCAL YEAR ENDED JULY 31, 1998
                           COMMISSION FILE NO. 1-9015
                                                                  

                              MORGAN KEEGAN, INC.
            (Exact name of Registrant as specified in its charter)
                                                              
          
        Tennessee                                        62-1153850
(State or other jurisdiction of                     (I.R.S. Employer
incorporation or organization)                      Identification No.)

                              Fifty Front Street
                              Memphis, Tennessee
                                     38103
    Registrant's telephone number, including area code: (901) 524-4100
                                                                             
    Title of each class            Name of each exchange on which registered
Common Stock, $.625 par value               New York Stock Exchange, Inc.
         Securities registered pursuant to Section 12 (g) of the Act
                   Common Stock, par value $.625 per share
                               (Title of Class)

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

  Indicate by check mark if disclosure of delinquent filers pursuant to 
Item 405 of Regulation S-K (229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by references
in Part III of this Form 10-K or any amendment to this Form 10-K.


  At October 1, 1998, the Registrant had approximately 32,697,954 shares
of Common Stock outstanding.  The aggregate market value of Common Stock
held by non-affiliates was approximately $578,345,000.


                DOCUMENTS INCORPORATED HEREIN BY REFERENCE:
  Portions of the Registrant's Annual Report to Shareholders for the year
ended July 31, 1998, which has been furnished to the Commission pursuant
to Regulation 240.14a(3) (c), are incorporated by reference into Parts
I and II of this Report on Form 10-K.  Portions of the Proxy Statement
to be used in connection with the solicitation of proxies to be voted
at the Registrant's annual meeting of shareholders to be held
November 24, 1998, which will be filed with the Commission pursuant to
Regulation 240.14a(6)(c) prior to October 21, 1998, are incorporated
by reference into Part III and Part IV of this Report on Form 10-K.
<PAGE>
                                 PART I

Item 1. BUSINESS

General

  Morgan Keegan, Inc. (Registrant) is a holding company whose principal
subsidiary, Morgan Keegan & Company, Inc. (M.K. & Co.) is a regional
securities broker/dealer serving retail customers in the southeastern
United States and institutional clients throughout the United States
and abroad.  The Registrant has very few operations and substantially
all of the Registrant's consolidated revenues are generated through the
broker/dealer subsidiary.  The subsidiary is a trader, broker and
underwriter of fixed income and equity securities and provides related
financial services in support of its broker/dealer activities.
Products offered by M.K. & Co. include stocks; corporate and tax-exempt
bonds; U.S. Government, agency and guaranteed securities; tax advantaged
investments; options; investment and advisory services; a money market
fund; and a regional mutual fund managed by Morgan Asset Management,
Inc., a subsidiary of the Registrant.  M.K. & Co. also produces
capital raising services for corporate and government clients, 
margin credit for individual customers, research, and 
economic and business analysis of financial and stock market data
for its customers.  The percentage (%) of total revenues derived
from the various business areas is as follows:

<TABLE>
<CAPTION>
                                                Year Ended July 31
                                          1998         1997         1996
<S>                                        <C>          <C>          <C>
Institutional clients                      25%          23%          24%

Retail customers                           41           42           45

Investment banking and management
  fees, interest and other 
  activities                               34           35           31

Total                                     100%         100%         100%
</TABLE>
  M.K. & Co. is a three seat member of the New York Stock Exchange, Inc.
("NYSE"), owns seats on the American Stock Exchange, Inc. ("AMEX"); the
New York Financial Futures Exchange, Inc. ("NYFE"); the Philadelphia Stock
Exchange, Inc. ("PHLX"); the Chicago Board of Options Exchange, Inc.
("CBOE") and the Chicago Stock Exchange ("CSE").  Certain seats are
leased to third parties under agreements which may be canceled by either 
party on 30 days' notice.  M.K. & Co. is a member of the National 
Association of Securities Dealers ("NASD"), the Securities Industry
Association, and the Securities Investor Protection Corporation ("SIPC").
SIPC provides protection for customers up to $500,000 each, with a
limitation of $100,000 for claims for cash balances.

  M.K. & Co. has thirty-nine offices in twelve states.  The following 
Table reflects the number of account executives in each office as
of July 31, 1998:
<TABLE>
<CAPTION>
                          Account                                  Account
Office                   Executives      Office                   Executives

<S>                          <C>         <C>                         <C> 
Birmingham, Alabama          34          New Orleans, Louisiana      29

Decatur, Alabama              5          Shreveport, Louisiana       14

Fairhope, Alabama             1          Boston, Massachusetts        3

Huntsville, Alabama          13          Jackson, Mississippi        26

Mobile, Alabama              14          New York, New York           5

Montgomery, Alabama          29          Durham, North Carolina      11

Little Rock, Arkansas        42          Raleigh, North Carolina     11 

Rogers, Arkansas              6          Wilmington, North Carolina   5

Ft. Lauderdale, Florida       7          Jackson, Tennessee           6

Pensacola, Florida            6          Knoxville, Tennessee        29

Athens, Georgia               7          Memphis, Tennessee          

Atlanta, Georgia             20                Headquarters         117

Bowling Green, Kentucky       8                Suburban Offices      46

Lexington, Kentucky          11          Nashville, Tennessee        24

Louisville, Kentucky         24          Austin, Texas               28

Baton Rouge, Louisiana       13          Dallas, Texas               18

Lafayette, Louisiana         10          Houston, Texas              36

Mandeville, Louisiana         4                                             
</TABLE>                                             
     TOTAL                                                          662 
<PAGE>
Revenues by Source

  The following table sets forth the Registrant's consolidated revenues
indicated in dollars and as a percentage of total revenues for the
periods:
<TABLE>
<CAPTION>
                                         (Dollars in Thousands)
                                           Year Ended July 31              

                                1998             1997             1996

                            Amount     %     Amount     %     Amount     % 
<S>                        <C>       <C>     <C>       <C>    <C>       <C>
REVENUES
  Commissions
    Listed securities      $41,558   10.21   $27,946   8.51   $26,467   8.78
    Over-the-counter
        securities          31,316    7.69    25,776   7.85    21,849   7.25
    Options                  6,413    1.58     4,149   1.26     3,243   1.08
    Other                   30,795    7.56    21,988   6.69    16,311   5.41
      TOTAL                110,082   27.04    79,859  24.31    67,870  22.52

  Principal transactions
    Corporate securities    52,004   12.78    56,134  17.09    59,567  19.76
    Municipal securities    18,562    4.56    14,867   4.53    16,345   5.42
    U.S. Government
        obligations         51,224   12.58    38,963  11.86    39,291  13.04
     TOTAL                 121,790   29.92   109,964  33.48   115,203  38.22

  Investment banking
    Corporate securities    30,769    7.56    23,814   7.25    25,990   8.62
    Municipal securities     4,372    1.07     3,457   1.05     2,427   0.81
    Underwriting, management
        and other fees      32,622    8.01    23,908   7.28    21,884   7.26
      TOTAL                 67,763   16.64    51,179  15.58    50,301  16.69

  Interest
    Interest on margin
        balances            30,038    7.38    24,105   7.34    19,752   6.55
    Interest on securities
        owned               48,827   11.99    40,157  12.22    30,171  10.01
      TOTAL                 78,865   19.37    64,262  19.56    49,923  16.56
   
   Investment management
         fees               20,187    4.96    12,499   3.80     9,323   3.09
   Other income              8,407    2.07    10,771   3.27     8,786   2.92

       TOTAL REVENUES     $407,094   100.0  $328,534  100.0  $301,406  100.0

</TABLE>
  Because of the interdependence of various activities and departments
of the Registrant's business, and the arbitrary assumptions involved in
allocating overhead, including administrative, communications and
securities processing expenses, it is not possible to state the 
percentage contribution to net income of each aspect of the Registrant's
operations.

<PAGE>
Institutional Business

  During the three years ended July 31, 1998, approximately 24% of the
Registrant's total consolidated revenues were derived from institutional 
clients.  M.K. & Co.'s institutional clients include mutual funds,
commercial banks, thrift institutions, insurance companies, pension
funds and private money managers.  Most of these clients are located in
the United States; however, some are located abroad, principally in the 
United Kingdom and Canada.  In the fiscal year ended July 31, 1998, no single
institutional client accounted for more than 2% of the Registrant's total
revenues.  M.K. & Co.'s institutional clients purchase or sell fixed income 
and equity securities primarily in large dollar amounts; transactions in 
these securities are usually executed for these clients on a principal basis.
See PRINCIPAL TRANSACTIONS.  M.K. & Co. also provides other services, 
including research, to its institutional clients.


  For the fiscal years ended July 31, 1998, 1997, and 1996, institutional
revenues and percentages of total consolidated revenues were $100,284,000
(25%), $76,135,000 (23%), and $73,468,000 (24%), respectively.


Retail Business

  During each of the three years ended July 31, approximately 43% of the
Registrant's total revenues were derived from transactions with retail
(individual) customers.  For the fiscal years ended July 31, 1998, 1997,
and 1996, revenues and percentages of total consolidated revenues were
$166,313,000(41%), $137,112,000 (42%), $134,807,000 (45%), respectively.


  Retail commissions are charged on both exchange and over-the-counter 
transactions in accordance with a schedule which M.K. & Co. has 
formulated. In certain cases, discounts from the schedule are granted 
to retail customers, generally on large trades or to active customers.
In addition to acting as a broker/dealer for its retail customers, M.K.
& Co. supplies them with equity and fixed income research, conducts 
seminars and makes available personal financial planning services.

  Transactions in securities may be executed on either a cash or margin 
basis. As a service to its retail customers, M.K. & Co. provides margin 
accounts which allow the customer to pay less than the full cost of a 
security purchased, the balance of the purchase price being provided 
by M.K. & Co. as a loan secured by the securities purchased.  The 
amount of the loan is subject to the margin requirements (Regulation T)
of the Board of Governors of the Federal Reserve System, NYSE margin
requirements, and M.K. & Co. internal policies, which in some 
instances are more stringent than Regulation T or exchange requirements.
In permitting customers to purchase securities on margin, M.K. & Co.
bears the risk of a market decline which could reduce the value of its
collateral below the customers' indebtedness. Interest charged on 
customer margin accounts represented approximately 7% of total 
revenues in fiscal 1998.


Principal Transactions

  M.K. & Co. trades for its own account in corporate and tax-exempt 
Securities and U.S. government, agency and guaranteed securities.  Most 
of these transactions are entered into in order to facilitate the 
execution of customers' orders to buy or sell these securities.  
In addition, it trades certain equity securities in order to "make 
a market" in these securities.  As of July 31, 1998, the Registrant 
made a market in common stock or other equity securities of
approximately 191 corporations, many of which are stocks followed 
by its research department.

<PAGE>
  M.K. & Co.'s trading activities require the commitment of capital.  
All principal transactions place the Registrant's capital at risk.  
Profits and losses are dependent upon the skills of employees and 
market fluctuations.  In some cases, in order to hedge the risks 
of carrying inventory, M.K. & Co. enters into transactions for 
U.S. Treasury note futures.  The following table sets
forth for the year ended July 31, 1998, the highest, lowest 
and average month-end inventories (including the aggregate of 
both long and short positions) for the types of securities in 
which M.K. & Co. acts as principal:

<TABLE>
<CAPTION>
                                   Highest         Lowest          Average
                                  Inventory       Inventory       Inventory

<S>                            <C>              <C>             <C>
Common stocks                  $ 24,249,069     $ 9,871,820     $ 16,111,674

Corporate debt securities        73,375,759      10,181,565       35,188,521

Tax-exempt securities           315,263,226      83,628,484      162,613,458
 
U.S. government, agency, 
 and guaranteed securities      348,909,436     188,744,787      292,936,842
</TABLE>

The following table sets forth the composition of revenues from principal 
transactions: 
<TABLE>
<CAPTION>
                                      Year Ended July 31                
                           1998              1997              1996     

                         Amount    %        Amount    %        Amount    %  
 
<S>                  <C>           <C>  <C>           <C>  <C>           <C>
Common stocks        $ 42,397,557  35   $ 47,968,002  44   $ 52,206,040  45
Corporate debt
 securities             9,606,210   8      8,166,789   7      7,361,130   7

Tax-exempt securities  18,562,001  15     14,866,270  14     16,344,828  14
U.S. government,
 agency,and
 guaranteed
 securities            51,224,537  42     38,963,040  35     39,291,236  34

Total                $121,790,305 100   $109,964,101 100   $115,203,234 100
</TABLE>
<PAGE>
  M.K. & Co. participates in selling groups organized to distribute new 
issues of securities of the Federal Home Loan Bank, the Federal National
Mortgage Association, the Federal Home Loan Mortgage Corporation, the 
Federal Farm Credit Bank and the Student Loan Mortgage Association.  
The following table sets forth selling group participation of M.K. & Co.
in distributions of agency securities:

<TABLE>
<CAPTION>

          Year Ended               Number               Amount of
           July 31                 Issues            Participation
            <S>                     <C>               <C>
            1998                    54                $403,105,000
            1997                    45                 327,400,000
            1996                    46                 317,690,000
            1995                    52                 382,075,000
            1994                    70                 566,630,000
</TABLE>            
            
Repurchase Transactions

  M.K. & Co. engages in repurchase transactions primarily to facilitate
the sale of U.S. government, agency and guaranteed securities.  A 
repurchase transaction is the sale of a security coupled with an 
agreement by the seller to repurchase the security at the sale price.  
A reverse repurchase transaction is the purchase of the security with 
an agreement to resell it. M.K. & Co.'s repurchase transactions are 
generally matched in order to minimize the risk of loss due to 
fluctuation in the underlying securities prices.  In a matched 
repurchase transaction, M.K. & Co. will simultaneously engage in a 
repurchase transaction and a reverse repurchase transaction covering 
the same security.  The other party to a matched repurchase agreement 
looks to M.K. & Co. for delivery of the securities or repurchase of the
securities, as the case may be.  M.K. & Co. takes a risk that it will 
be obligated to perform whether or not the other party performs.  
M.K. & Co. attempts to minimize this risk by dealing with those
deemed credit worthy.

  Although repurchase transactions are structured as sales, courts 
recently have treated them as financing transactions, that is, loans
collateralized by securities.  Because of this uncertain nature of the
transaction, it is M.K. & Co.'s practice to take steps to perfect 
a security interest in the securities to protect itself if a transaction
were deemed a loan.  In repurchase transactions M.K. & Co. bears the 
risk that the other party to the transaction will fail to perform its 
obligation to repurchase the securities (repay the loan) or to 
deliver the securities purchased (return the collateral).  In such 
event, M.K. & Co. could incur a loss equal to the difference between 
the price to be paid for the securities and their market value at 
the repurchase date.  If the transaction is deemed to be a loan and 
should M.K. & Co. fail to take possession of the securities acquired 
by it in such a transaction, or otherwise fail to perfect a security 
interest in them, the loss could be equal to the full repurchase price.

<PAGE>
Concentrations of Credit Risk

  As a securities broker/dealer, M.K. & Co. is engaged in various
Securities trading and brokerage activities servicing a diverse 
group of domestic and foreign corporations, governments, institutional
and retail (individual) investors.  A substantial portion of M.K. 
& Co.'s transactions are collateralized and are executed with and 
on behalf of institutional investors including other broker/dealers, 
commercial banks, insurance companies, pension plans, mutual funds 
and other financial institutions.  M.K. & Co.'s exposure to credit risk
associated with the non-performance of these customers in fulfilling
their contractual obligations pursuant to securities and commodities 
transactions, can be directly impacted by volatile trading markets 
which may impair the customers' ability to perform. M.K. & Co.'s 
principal activities are also subject to the risk of the counterpart's
non-performance.

  In connection with these activities, particularly in U.S. government
and agency securities, M.K. & Co. enters into collateralized reverse 
repurchase and repurchase agreements, securities lending arrangements
and certain other secured transactions which may result in significant
credit exposure in the event the counterparty to the transaction was
unable to fulfill their contractual obligations.  In accordance with 
industry practice, repurchase agreements and securities borrowing 
arrangements are generally collateralized by cash or securities with 
a market value in excess of the obligation under the contract.  
M.K. & Co. attempts to minimize credit risk associated with these 
activities by monitoring customer credit exposure and collateral 
values on a daily basis and requiring additional collateral to be 
deposited when necessary.  M.K. & Co. participates in the trading 
of some derivative securities for its customers which is not a major 
portion of its business.


Investment Banking

  M.K. & Co. participates in corporate and tax-exempt securities 
distributions as a member of an underwriting syndicate or a member 
of a selling group.  Tax-exempt securities are obligations issued 
by state and municipal governments, hospitals, public utility systems 
and industrial development authorities.  M.K.& Co.'s underwriting 
activities, together with its selling group participation, are 
important as a source of securities for sale to its customers.  The 
following table sets forth corporate and tax-exempt underwriting 
syndicate participation of the subsidiary:
<TABLE>
<CAPTION>

                         CORPORATE                     TAX-EXEMPT

Year Ended        Number of     Amount of       Number of    Amount of
 July 31           Issues    Participation       Issues    Participation
  <S>                <C>      <C>                   <C>    <C>
  1998               187      $708,299,008          564    $3,924,190,000 
  1997               181       545,853,372          362     1,818,060,000
  1996               246       744,497,589          322     1,449,875,000
  1995               195       867,514,389          104       349,005,000
  1994               330       774,651,373          159       312,056,000
</TABLE>
<PAGE>
  Participation in an underwriting syndicate or a selling group involves
both economic and regulatory risks.  A participant may incur losses
if it is unable to resell the securities it has committed to purchase,
or if it is forced to liquidate its commitment at less than the agreed 
purchase price.  In addition, under federal securities laws, other 
statutes and court decisions, a participant may be subject to substantial
liability for material misstatements or omissions in prospectuses 
and other communications with respect to such offerings. Further, 
underwriting commitments involve a charge against net capital and the 
ability to make underwriting commitments may be limited by the 
requirement that it must at all times be in compliance with the 
net capital rule.  See Note 10 - Regulatory Requirements - on 
page 36 of the 1998 Annual Report to Shareholders.

In addition to its underwriting and selling group activities, M.K. & Co. 
engages in structuring, managing and marketing private offerings of 
corporate and tax-exempt securities, and assists in arranging mergers,
acquisitions, divestitures and venture capital financing.  M.K. & Co. 
provides valuation and financial consulting services for gift and 
estate tax purposes, employee stock ownership trusts, mergers, 
acquisitions, stock purchase agreements and other corporate purposes, 
as well as valuations for private companies in the process of going 
public.  Other services include long-range financial planning, financial
public relations and cash management services. 

Other Products

  M.K. & Co. offers special products, including insurance products and
interests in various tax advantaged investments.  Such tax advantaged
investments are generally in the form of limited partnership interests
in real estate, oil drilling, or similar ventures.  Neither the Registrant
nor the broker/dealer acts as the general partner for such partnerships.
Morgan Keegan Fund Management, a wholly-owned subsidiary of the Registrant,
acts as general partner to the Southern Capital Enhanced Equity Fund 
Limited Partnership, (the "FUND"), an investment limited partnership.
The Fund seeks substantial capital appreciation through investing 
approximately 80% of its assets in growth stocks and the remaining 
assets in a stock index futures trading program.

  M.K. & Co. is a distributor of shares of Bedford Money Market Fund, 
a money market mutual fund whose shares are sold without a sales 
charge.  The fund is managed by Provident Institutional Management 
Corporation.  M.K. & Co. also sells shares in unit investment trusts 
which hold portfolios of tax-exempt bonds, and as a service to its 
customers, offers shares of various mutual funds including those of 
Southern Capital Fund.  This fund, which invests primarily in
equity securities of companies located in the southern United States, 
is a mutual fund managed by Morgan Asset Management, Inc., a subsidiary
of the Registrant, and is solely distributed by M.K. & Co.  Also, 
M.K. & Co. acts as a broker in the purchase and sale of put and call
options on the CBOE, AMEX and other exchanges.

<PAGE>

Research Services

  M.K. & Co.'s research services include the review and analysis of the 
economy, general market conditions, industries and specific companies;
recommendation of specific action with regard to industries and specific
companies; review of customer portfolios; furnishing of information to 
retail and institutional customers; and responses to inquiries from 
customers and account executives. These services are made available 
generally without charge to customers.

Administration and Operations

  Administrative and operations personnel are responsible for the 
execution of orders; processing of securities transactions; receipt,
identification and delivery of funds and securities; internal financial
control; accounting functions; office services; custody of customers'
securities; and compliance with regulatory requirements.

  There is considerable fluctuation in the volume of transactions 
which a securities firm must handle.  In the past, when the volume of
trading in securities reached record levels, the securities industry 
experienced serious operating problems.  M.K. & Co. has never experienced 
any significant operating difficulties, even during periods of 
exceptionally heavy trading.  There is, however, no assurance that heavy
trading volume in the future will not result in clearing and processing
difficulties.

  The following table sets forth high, low and average monthly purchase
and sale transactions processed by M.K. & Co:
<TABLE>
<CAPTION>

     Year Ended                      Number of Transactions
      July 31                  High           Low           Average
       <S>                    <C>            <C>             <C>  
       1998                   95,579         67,491          78,251
       1997                   88,770         58,873          72,267
       1996                   77,289         47,209          61,618
       1995                   57,362         41,414          47,875 
       1994                   56,859         38,457          43,340
       
</TABLE>         
  M.K. & Co. uses its own electronic data processing equipment to process
orders and floor reports, transmit execution reports to its branches, and 
record all data pertinent to trades.  It also clears its own securities
transactions.

  M.K. & Co. believes that its internal controls and safeguards against
securities theft, including use of depositories and periodic securities
counts, are adequate.  As required by the NYSE and certain other 
authorities, M.K. & Co. carries fidelity bonds covering any loss or 
theft of securities, as well as embezzlement and forgery.  The amount 
of such bonds, which provide total coverage of $25,000,000 (with 
$500,000 deductible provision per incident) is considered adequate.
<PAGE>

  M.K. & Co. posts its books and records daily and believes they are 
accurate. Periodic reviews of certain controls are conducted, 
and administrative and operations personnel meet frequently with 
management to review operational conditions in the firm.  Operations
personnel monitor day to day operations to assure compliance with 
applicable laws, rules and regulations.  There is an internal audit 
department and an audit committee, both of which help management 
place an emphasis on strong internal controls.


Employees

  As of July 31, 1998, M.K. & Co. had 1,683 employees, 662 of whom 
were account executives, 693 of whom were engaged in other service 
areas, including trading, research and investment banking, and 328
of whom were employed in accounting, clearing, data processing, 
management and other activities.

  In large part, the Registrant's future success is dependent upon its
subsidiary's continuing ability to hire, train and retain qualified 
account executives.  During the fiscal year ended July 31, 1998, 
M.K. & Co. hired 114 account executives for a net increase of 38 
over the beginning of the fiscal year.  M.K. & Co. trains new account
executives who are required to take examinations given by the NYSE, 
the NASD and certain state securities regulators in order to be 
registered and qualified.  M.K. & Co. also provides continuing 
training programs for account executives.  Competition is intense 
among securities firms for account executives with good sales 
production records.

  M.K. & Co. considers its employee relations to be good and considers
compensation and employee benefits offered which includes medical, life 
and disability insurance, 401(k) retirement plan and a discounted stock
purchase plan, to be competitive with those offered by other securities
firms.

Regulation

  The securities industry in the United States is subject to extensive 
regulation under federal and state laws.  The SEC is the federal agency
charged with administration of the federal securities laws.  Much of the
regulation of broker/dealers, however, has been delegated to 
self-regulatory organizations, principally the NASD and the national 
securities exchanges.  These self-regulatory organizations adopt 
rules (which are subject to approval by the SEC) which govern the 
industry and conduct periodic examinations of member broker/dealers.
Securities firms are also subject to regulation by state 
securities commissions in the states in which they are registered.  
M.K. & Co. is registered in 50 states.
<PAGE>

  The regulations to which broker/dealers are subject cover all 
aspects of the securities business, including sales methods, trade 
practices among broker/dealers, capital structure of securities firms, 
uses and safekeeping of customers' funds and securities, recordkeeping,
and the conduct of directors, officers and employees.  Additional 
legislation, changes in rules promulgated by the SEC and by 
self-regulatory organizations, or changes in interpretation or 
enforcement of existing laws and rules, often affect directly the 
method of operation and profitability of broker/dealers.  The SEC 
and the self-regulatory organizations may conduct administrative 
proceedings which can result in censure, fines, suspension or 
expulsion of a broker/dealer, its officers or employees.  
The principal purpose of regulation and discipline of broker/dealers 
is the protection of customer and the securities market rather than the 
protection of creditors and stockholders of broker/dealers.

  One of the most important regulations with which the Registrant's 
broker/dealer subsidiary must continually comply is the "net capital
rule" of the Securities and Exchange Commission and a similar rule 
of the New York Stock Exchange.  These rules, under the alternative 
method, prohibit a broker/dealer from engaging in any securities 
transactions at a time when its net capital is less than 2% of 
aggregate debit balances arising from customer transactions; in 
addition, restrictions may be imposed on the operations of a 
broker/dealer if its net capital is less than 5% of aggregate 
debit items.  At July 31, 1998, the Registrant's subsidiary's net 
capital was 35% of aggregate debit items.  See Note 10 - Regulatory
Requirements - page 36 of the 1998 Annual Report to Shareholders.

  The laws, rules and regulations of the various federal, state 
and other regulatory bodies to which the business of the Registrant
is subject are constantly changing.  While management believes 
that it is currently in compliance in all material respects with 
all laws, rules and regulations applicable to its business, it cannot
predict what effect any such changes might have.

Item 2.  PROPERTIES

  The Registrant's headquarters occupy approximately 160,000 square 
feet in Morgan Keegan Tower in Memphis, Tennessee.  On May 31, 1996,
Morgan Keegan Tower was purchased by Morgan Properties, LLC, a 
wholly-owned subsidiary of the Registrant.  The acquisition was 
financed with a twenty-five year term mortgage payable at 8.25% 
fixed rate with the building as collateral. All of the 
Registrant's offices are leased. See Note 4 - Leases - on 
page 33 of the 1998 Annual Report to Shareholders.

  In September, 1997, Morgan Properties, LLC entered into an agreement
to sell the Registrant's corporate headquarters building for $36 
million and lease-back a portion of it under a ten year lease agreement.
The $13.8 million gain was deferred and will be taken into income 
over the 10-year life of the lease.  A portion of the sale proceeds
was used to pay off the mortgage note payable.
<PAGE>
Item 3.  LEGAL PROCEEDINGS

  The Registrant is named in and subject to various proceedings and
claims incidental to its securities business.  While the ultimate 
resolution of pending litigation and claims cannot be predicted 
with certainty, based upon the information currently known, 
management is of the opinion that the resolution of 
such litigation and claims will have no material adverse effect 
on the Registrant's results of operations or financial condition.


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

  No matters were submitted to security holders during the fourth 
quarter of the fiscal year covered by this report.


                                  PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
         MATTERS

  The information required by this item is incorporated herein by 
reference to Note 12 - Quarterly Results of Operations (Unaudited)
- on page 37 of the 1998 Annual Report to Shareholders, a copy of
which is enclosed.

Item 6.  SELECTED FINANCIAL DATA

  The information required by this item is incorporated herein by 
reference to the Ten Year Financial Summary on pages 24 and 25 and 
Additional Financial Information (Unaudited) on page 28 of the 1998
Annual Report to Shareholders, a copy of which is enclosed.

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

  The information required by this item is incorporated herein by
reference to pages 26 and 27 of the 1998 Annual Report to Shareholders,
a copy of which is enclosed.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  The information required by this item is incorporated herein by 
reference to page 27 of the 1998 Annual Report to Shareholders, a 
copy of which is enclosed.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

  The information required by this item is incorporated herein by 
reference to pages 29 through 37 of the 1998 Annual Report to 
Shareholders, a copy of which is enclosed.

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

  There were no changes in or disagreements with accountants on 
accounting and financial disclosure.
<PAGE>


                                  PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

   The information required by this item is incorporated herein by 
reference to the Registrant's definitive Proxy Statement which was 
filed with the Commission pursuant to Regulation 240.14a(6)(c) on 
October 20, 1998 and will be used in connection with the solicitation
of proxies to be voted at the Registrant's annual meeting of shareholders
to be held November 24, 1998.

Item 11. EXECUTIVE COMPENSATION

   The information required by this item is incorporated herein by 
reference to the Registrant's definitive Proxy Statement which was 
filed with the Commission pursuant to Regulation 240.14a(6)(c) on 
October 20, 1998 and will be used in connection with the solicitation
of proxies to be voted at the Registrant's annual meeting of shareholders
to be held November 24, 1998.
 
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  The information required by this item is incorporated herein by
reference to the Registrant's definitive Proxy Statement which was 
filed with the Commission pursuant to Regulation 240.14a(6)(c) on
October 20, 1998 and will be used in connection with the solicitation 
of proxies to be voted at the Registrant's annual meeting of shareholders
to be held November 24, 1998.
     
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  The information required by this item is incorporated herein by 
reference to the Registrant's definitive Proxy Statement which was
filed with the Commission pursuant to Regulation 240.14a(6)(c) on 
October 20, 1998 and will be used in connection with the solicitation
of proxies to be voted at the Registrant's annual meeting of 
shareholders to be held November 24, 1998.
<PAGE>


                                  PART IV

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

(a) List of Financial Statements, Financial Statement Schedules and Exhibits

(1) The following consolidated financial statements of the Registrant
and its subsidiaries, included in the 1998 Annual Report to Shareholders
are incorporated by reference in Item 8:


  Consolidated Statements of Financial Condition    July 31, 1998 and 1997   
  Consolidated Statements of Income               Years ended July 31, 1998
                                                        1997, and 1996

  Consolidated Statements of Stockholders'        Years ended July 31, 1998
        Equity                                           1997, and 1996
  
  Consolidated Statements of Cash Flows           Years ended July 31, 1998
                                                          1997, and 1996

  Notes to Consolidated Financial Statements                  July 31, 1998

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

(3) The following exhibits are filed herewith or incorporated by reference
    as indicated.  Exhibit numbers refer to Item 601 of Regulation S-K:

   Exhibit 3  - Articles of Incorporation filed as Exhibits B & C
                and Bylaws to Proxy Statement.

   Exhibit 13 - Annual Report to Shareholders*

   Exhibit 22 - List of Subsidiaries of Registrant*

   Exhibit 23 - Consent of Independent Auditors                Page 18 
   
   Exhibit 27 - Financial Data Schedule                        Page 19


*Certain portions of the Annual Report to Shareholders are incorporated
herein by reference:  the Annual Report to Shareholders is not to be 
deemed filed as a part of this Annual Report on Form 10-K.

(b) No reports on Form 8-K were filed during the fourth quarter of the
year ended July 31, 1998.

(c) Exhibits - The response to this portion of Item 14 is submitted as
a separate section of this report.

(d) Financial Statement Schedules - The response to this portion of
Item 14 is submitted as a separate section of this report.

<PAGE>
SIGNATURES

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

                                        Morgan Keegan, Inc.
                                           (Registrant)


                                        BY   /s/ Allen B. Morgan, Jr.
                                             Allen B. Morgan, Jr.
                                                  Chairman

Date:  October 27, 1998

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

SIGNATURE                       TITLE                        DATE


/s/ Kenneth F. Clark, Jr.                             
Kenneth F. Clark, Jr.          Director                     October 27, 1998


/s/ William W. Deupree, Jr.                             
William W. Deupree, Jr.        Director                     October 27, 1998


/s/ James E. Harwood, III                             
James E. Harwood, III          Director                     October 27, 1998

                             
/s/ Allen B. Morgan, Jr.                             
Allen B. Morgan, Jr.           Chairman and Director        October 27, 1998


/s/ Harry J. Phillips                             
Harry J. Phillips              Director                     October 27, 1998

                             
/s/ Donald Ratajczak                             
Donald Ratajczak               Director                     October 27, 1998


/s/ John W. Stokes, Jr.                             
John W. Stokes, Jr.            Vice President and Director  October 27, 1998


/s/ Joseph C. Weller                             
Joseph C. Weller               Secretary/Treasurer and      October 27, 1998
                               Director

<PAGE>
EXHIBIT 23 - CONSENT OF INDEPENDENT AUDITORS

  We consent to the incorporation by reference in this Annual Report
(Form 10-K) of Morgan Keegan, Inc. of our report dated September 18, 1998,
included in the 1998 Annual Report to Shareholders of Morgan Keegan, Inc.

  We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-16982) pertaining to the 1985 Restricted Stock and Stock 
Option Plan and in the Registration Statement (Form S-8 No. 33-32974) 
pertaining to the Employee Stock Purchase Plan of Morgan Keegan, Inc. of 
our report dated September 18, 1998, with respect to the consolidated 
financial statements of Morgan Keegan, Inc. incorporated by reference 
in the Annual Report (Form 10-K) for the year ended July 31, 1998.



                                         /s/ Ernst & Young LLP
                                         ERNST & YOUNG LLP




Memphis, Tennessee
October 21, 1998

EXHIBIT 27 - FINANCIAL DATA SCHEDULE




<PAGE>
Report of Independent Auditors



Board of Directors
Morgan Keegan, Inc.

  We have audited the accompanying consolidated statements of financial 
condition of Morgan Keegan, Inc. and subsidiaries as of July 31, 1998 
and 1997, and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended 
July 31, 1998.  These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on 
these financial statements based on our audits.

  We conducted our audits in accordance with generally accepted auditing 
standards. These standards require that we plan and perform an audit to
obtain reasonable assurance about whether the financial statements are 
free of material misstatement. An audit includes examining, on a test 
basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles 
used and significant estimates made by management, as well as evaluating 
the overall financial statement presentation. We believe that our audits 
provide a reasonable basis for our opinion.

  In our opinion, the financial statements referred to above present 
fairly in all material respects, the consolidated financial position 
of Morgan Keegan, Inc. and subsidiaries at July 31, 1998 and 1997 and 
the consolidated results of their operations and their cash flows for 
each of the three years in the period ended July 31, 1998 in conformity 
with generally accepted accounting principles.



                                                    /s/ Ernst & Young LLP
                                                    ERNST & YOUNG LLP


Memphis, Tennessee
September 18, 1998

<PAGE>
<TABLE>
Ten Year Financial Summary
Morgan Keegan, Inc. and Subsidiaries                                       
<CAPTION>
                                    (In thousands, except per share amounts)
<S>                                     <C>          <C>          <C>  
Years ended July 31                         1998         1997       1996   
Revenues
Commissions:
  Listed securities                     $   41,558   $   27,946   $ 26,467
  Over-the-counter                          31,316       25,776     21,849
  Options                                    6,413        4,149      3,243
  Other                                     30,795       21,988     16,311  
                                           110,082       79,859     67,870  
Principal transactions:
  Corporate securities                      52,004       56,134     59,567
  Municipal securities                      18,562       14,867     16,345
  U.S. government securities                51,224       38,963     39,291  
                                           121,790      109,964    115,203  
Investment banking:
  Corporate securities                      30,769       23,814     25,990
  Municipal securities                       4,372        3,457      2,427
  Underwriting management and other fees    32,622       23,908     21,884  
                                            67,763       51,179     50,301  
Interest:
  Interest on margin balances               30,038       24,105     19,752
  Interest on securities owned              48,827       40,157     30,171  
                                            78,865       64,262     49,923  
Investment management fees                  20,187       12,499      9,323  
Other                                        8,407       10,771      8,786  
                                           407,094      328,534    301,406  
Expenses
Compensation                               204,829      164,364    158,352
Floor brokerage and clearance                6,028        5,043      4,397
Communications                              23,112       21,549     18,892
Travel and promotional                      10,612        8,724      7,336
Occupancy and equipment costs               17,403       15,854     11,812
Interest                                    51,165       44,652     32,930
Taxes, other than income taxes               9,888        7,986      7,006
Other operating expenses                     6,871        5,084      5,514  
                                           329,908      273,256    246,239  
  Income (loss) before income taxes         77,186       55,278     55,167
  Income tax expense (credit)               29,000       20,900     21,300  
  Net income                            $   48,186   $   34,378   $ 33,867  
Net income per share
  Basic                                 $     1.47   $     1.10   $   1.11   
  Diluted                               $     1.47   $     1.10   $   1.10
Book value                              $     7.84   $     6.44   $   5.51
Other Data (at year end):
Total assets                            $1,463,821   $1,208,257   $946,648
Stockholders' equity                    $  257,358   $  203,720   $169,008
Common shares outstanding*                  32,817       31,652     30,657
<FN>
All per share data has been adjusted for a four-for-three stock split in 
September, 1991, a three-for-two stock split in March, 1992, a three-for-two 
stock split in June, 1993, a three-for-two stock split in June, 1995 and a 
three-for-two stock split in September, 1997.
</FN>
</TABLE>
<PAGE>
<TABLE>
Ten Year Financial Summary
Morgan Keegan, Inc. and Subsidiaries                                       

<CAPTION>
                                 (In thousands, except per share amounts)
<S>                                   <C>         <C>        <C>
Years ended July 31                       1995       1994       1993    
Revenues
Commissions:
  Listed securities                    $ 21,246   $ 22,748   $ 20,457
  Over-the-counter                       12,624     10,076     10,159
  Options                                 2,631      1,990      1,927
  Other                                   9,661     11,723     11,196   
                                         46,162     46,537     43,739   
Principal transactions:
  Corporate securities                   36,724     33,541     34,404
  Municipal securities                   16,404     14,135     17,432
  U.S. government securities             33,982     41,746     51,297   
                                         87,110     89,422    103,133   
Investment banking:
  Corporate securities                   25,009     32,850     15,760
  Municipal securities                    1,926      4,059      3,947
  Underwriting management and other fees 18,259     18,923      9,571   
                                         45,194     55,832     29,278   
Interest:
  Interest on margin balances            17,519     10,824      7,047
  Interest on securities owned           20,261     14,070     12,627   
                                         37,780     24,894     19,674   
Investment management fees                7,171      6,063      5,413   
Other                                     4,655      8,972      7,958   
                                        228,072    231,720    209,195   
Expenses
Compensation                            120,795    125,205    109,748 
Floor brokerage and clearance             3,724      3,875      5,296
Communications                           15,962     13,852     12,012
Travel and promotional                    5,855      5,721      4,241
Occupancy and equipment costs             9,716      8,320      8,153
Interest                                 23,600     14,393     11,185
Taxes, other than income taxes            6,298      4,972      4,199
Other operating expenses                  3,774      3,741      4,659   
                                        189,724    180,079    159,493   
  Income (loss) before income taxes      38,348     51,641     49,702
  Income tax expense (credit)            14,500     19,800     19,000   
  Net income                           $ 23,848   $ 31,841   $ 30,702   
Net income per share
  Basic                                $    .78   $    .98   $    .97
  Diluted                              $    .78   $    .97   $    .97
Book value                             $   4.61   $   4.06   $   3.31
Other Data (at year end):
Total assets                           $882,292   $571,009   $527,084
Stockholders' equity                   $139,457   $125,365   $106,335
Common shares outstanding*               30,254     30,834     32,112   

<FN>
All per share data has been adjusted for a four-for-three stock split in 
September, 1991, a three-for-two stock split in March, 1992, a three-for-two 
stock split in June, 1993, a three-for-two stock split in June, 1995, and a 
three-for-two stock split in September, 1997.
</FN>
</TABLE>
<PAGE>
<TABLE>

Ten Year Financial Summary
Morgan Keegan, Inc. and Subsidiaries                                       
<CAPTION>
                                 (In thousands, except per share amounts)
<S>                                   <C>         <C>        <C>
Years ended July 31                       1992       1991       1990    
Revenues
Commissions:
  Listed securities                    $ 18,378   $ 13,143   $ 14,444
  Over-the-counter                        9,041      5,347      1,745
  Options                                 2,089      2,134      2,180
  Other                                   7,632      4,824      4,434   
                                         37,140     25,448     22,803   
Principal transactions:
  Corporate securities                   28,161     16,554     11,808
  Municipal securities                   12,037     10,730      7,445
  U.S. government securities             48,588     30,279     18,478   
                                         88,786     57,563     37,731   
Investment banking:
  Corporate securities                   16,730      4,836      2,947
  Municipal securities                    3,960        376        159
  Underwriting management and other fees  9,862      5,436      3,926   
                                         30,552     10,648      7,032   
Interest:
  Interest on margin balances             5,941      4,867      5,521
  Interest on securities owned           12,709     12,490     10,769   
                                         18,650     17,357     16,290   
Investment management fees                4,627      3,086      2,415   
Other                                     2,909      2,415      2,737   
                                        182,664    116,517     89,008   
Expenses
Compensation                             94,348     61,265     48,243
Floor brokerage and clearance             4,571      3,751      3,749
Communications                            9,791      8,764      8,436
Travel and promotional                    3,699      2,982      2,660
Occupancy and equipment costs             7,557      8,194      7,789
Interest                                 12,562     12,953     12,591
Taxes, other than income taxes            3,823      3,116      2,682
Other operating expenses                  4,122      3,288      3,308   
                                        140,473    104,313     89,458   
  Income (loss) before income taxes      42,191     12,204       (450)
  Income tax expense (credit)            16,400      4,500       (475)  
  Net income                           $ 25,791   $  7,704   $     25   
Net income per share:
  Basic                                $    .83   $    .25   $    .01       
  Diluted                              $    .83   $    .25   $    .01
Book value                             $   2.45   $   1.67   $   1.43
Other Data (at year end):
Total assets                           $434,448   $304,445   $236,991
Stockholders' equity                   $ 76,690   $ 50,837   $ 44,888
Common shares outstanding*               31,340     30,504     31,439
<FN>

All per share data has been adjusted for a four-for-three stock split in 
September, 1991, a three-for-two stock split in March, 1992, a three-for-two 
stock split in June, 1993, a three-for-two stock split in June, 1995, and a 
three-for-two stock split in September, 1997.
</FN>
</TABLE>
<PAGE>
<TABLE>
Ten Year Financial Summary
Morgan Keegan, Inc. and Subsidiaries                                       
<CAPTION>
                                 (In thousands, except per share amounts)
<S>                                   <C>
Years ended July 31                       1989                   
Revenues
Commissions:
  Listed securities                    $ 13,675     
  Over-the-counter                        1,848      
  Options                                 2,339      
  Other                                   4,192          
                                         22,054          
Principal transactions:
  Corporate securities                   14,369        
  Municipal securities                    5,993         
  U.S. government securities             14,707          
                                         35,069          
Investment banking:
  Corporate securities                    3,461       
  Municipal securities                      213       
  Underwriting management and other fees  4,057          
                                          7,731          
Interest:
  Interest on margin balances             5,698       
  Interest on securities owned            6,129          
                                         11,827          
Investment management fees                1,713          
Other                                     1,037          
                                         79,431          
Expenses
Compensation                             43,953          
Floor brokerage and clearance             2,966         
Communications                            7,996          
Travel and promotional                    1,990          
Occupancy and equipment costs             6,852          
Interest                                  7,931          
Taxes, other than income taxes            2,326          
Other operating expenses                  2,330           
                                         76,344           
  Income (loss) before income taxes       3,087          
  Income tax expense (credit)               715           
  Net income                           $  2,372           
Net income per share:
  Basic                                $    .07
  Diluted                              $    .07                         
Book value                             $   1.45      
Other Data (at year end):
Total assets                           $397,007     
Stockholders' equity                   $ 48,432     
Common shares outstanding*               33,329
<FN>          
All per share data has been adjusted for a four-for-three stock split in 
September, 1991, a three-for-two stock split in March, 1992, a three-for-two 
stock split in June, 1993, a three-for-two stock split in June, 1995, and a 
three-for-two stock split in September, 1997.
</FN>
</TABLE>
<PAGE>
General Business Environment

Morgan Keegan, Inc. and its subsidiaries (the "Company") are principally
engaged in the origination, underwriting, distribution, trading and 
brokerage of fixed income and equity securities and also providing 
investment advisory services. While the Company regularly participates 
in the trading of some derivative securities for its customers, this 
trading is not a major portion of the Company's business.  The Company 
is not involved with high yield securities, bridge loan financing, 
or any other ventures that management feels may not be appropriate 
for the Company's strategy.
Many factors affect the Company's revenues including changes in economic 
conditions, investor sentiment, the level and volatility of interest 
rates, inflation, political events and competition.  As these factors 
are beyond the Company's control, and certain expenses are relatively 
fixed, earnings can significantly vary from year to year regardless of
management's efforts to enhance revenue and control costs.

The Company faces increasing competition from commercial banks and thrift
institutions as these institutions expand their investment banking and 
financial services which were previously offered only by securities 
firms. The Federal Reserve Board has eased numerous restrictions on 
commercial banks and thrift institutions which has allowed them 
to greatly increase their abilities to compete in the securities 
industry.  The Company anticipates increasing regulation in the 
securities industry, meaning that continued compliance may be 
more difficult and costly.  At present, the Company is unable 
to predict the extent of changes that may be enacted or the effect 
on the Company's business.
Favorable conditions in the U.S. securities markets continued for most
of the Company's fiscal year.  U.S. equity markets achieved record 
trading volume and price levels, largely due to continued economic 
growth, gain in corporate earnings and modest inflation.  This was a
contributing factor to the Company's third consecutive record year.
It is uncertain if the favorable conditions experienced in the past 
three years will continue.  The Company anticipates continuing to 
grow its regional brokerage and other services in the southeastern
United States.


Results of Operations
The Company concluded its third consecutive year of record revenues, 
surpassing $400,000,000 for the first time and exceeding the 1997 
revenues by $78,560,000 or 24%.  The 1997 revenues of $328,534,000 
were $27,128,000 or 9% ahead of the previous year.  Outstanding 
markets for most of the year helped each aspect of the Company's 
business to contribute to record net income level of $48,186,000 
which was $13,808,000 or 40% in excess of the previous years record 
level.  An outstanding fourth quarter in fiscal 1997 pushed the 
Company to a record net income of $34,378,000, which was $511,000 
in excess of the previous year.

More than half of the increase in fiscal 1998 revenues came from 
the combination of commissions which increased 38% or $30,223,000 
and principal transactions which increased $11,826,000.  The 
increases can be attributed to another strong year from trading 
volume equity securities as well as a substantial increase 
from government and municipal securities.

The largest percentage increase in fiscal 1998 revenues was in 
investment management fees which increased 62% or $7,688,000 
following a 34% increase over the 1996 fiscal year.  The 
increase reflects the commitment of the Company to grow this
aspect of the business with the acquisition of two small money
management firms.  Investment banking revenues in fiscal 1998 
increased $16,584,000 or 32% as the IPO market remained strong for 
most of the year.

<PAGE>
Results of Operations (continued)

Operating expenses rose from $273,256,000 in fiscal 1997 to 
$329,908,000 in fiscal 1998 representing a $56,652,000 or 21% 
increase.  This follows an 11% increase for fiscal 1997 above 
1996. More than 70% of the total fiscal 1998 increase was 
reflected in compensation which increased 25% or $40,464,000.  
The 25% increase in compensation closely corresponds to the 24% 
increase in revenues as much of the Company's compensation costs 
are directly affected by the increase in production.  The increase 
in compensation expense did not directly correspond to the revenue
increase for fiscal 1997 over fiscal 1996 as a significant 
portion of that revenue increase came from interest income which 
does not have a direct effect on compensation expense.  Other 
operating expense increased in proportion as the Company continued
efforts to expand its retail network and control expenses.

For most of the securities industry, fiscal 1998 was a highly 
profitable year, as the Dow rose from 8000 to 9300 and fell back 
to 8800 at the year's close. During the past three years, 
the Company has benefited from its on-going expansion efforts 
and the favorable market conditions.  During the past year, 
the securities industry has gone through much consolidation.
It is difficult to predict what impact this may have on the Company.

Impact of Year 2000
Many of the world's computer systems currently record years in 
a two-digit format. Such computer systems will be unable to 
properly interpret dates beyond the year 1999, which could lead 
to business disruptions.  The potential costs and uncertainties 
associated with this issue will depend on a number of factors 
including software, hardware, and the nature of the industry in 
which a company operates.  Additionally, companies must coordinate
with other entities with which they electronically interact, 
such as customers, vendors, and borrowers. This is a significant 
undertaking for securities firms, as virtually every aspect of 
the sale of securities and related processing of transactions 
will be affected and the consequences for noncompliance will 
be significant.

A significant portion of the Company's operations and information 
systems are provided by third-party service providers.  The Company's
interface systems are vulnerable to those third parties' failure 
to remediate their own year 2000 issues. The Company has developed 
a plan to analyze how the Year 2000 will impact its operations, 
including monitoring the status of its service providers and 
evaluating alternatives.  Given the Company's exposure to third-party 
service providers, management does not believe the internal 
costs to address the Year 2000 issue will have a material impact
on future operations other than the impact such event will have on 
the cost of services provided by its vendors which is unknown at 
this time. There is no guarantee that the systems of other companies
on which the Company's systems rely will be timely converted and will 
not have an adverse effect on the Company's information systems.  
The Company is well into the testing phase of its Year 2000 plan 
and will participate in the industry wide testing in March, 1999. 
The interdependent nature of securities transactions and the 
success of the Company's external counterparties and vendors in 
dealing with this issue could significantly influence the Company's
estimate of the impact the Year 2000 will have on its business.

The Company is reviewing the most reasonably likely worst-case 
effects of Year 2000 and has a preliminary contingency plan in 
place for any such unanticipated negative effects.  It is expected 
this plan will be updated and finalized by December 31, 1998.



More than 95% of the Company's revenue is generated by its 
registered broker dealer.  Virtually all the securities owned are 
held for the short term based on customer demand and are financed 
by short term borrowings.  The Company marks all the securities to 
market. The short position typically reflects any hedges 
and all positions are marked to market.  While the Company 
strictly adheres to this philosophy, circumstances may change 
and the Company may reevaluate its financing arrangements.  
(See interest rate sensitivity)


<PAGE>
Liquidity and Capital Resources
The Company's assets are primarily liquid, consisting mainly of 
cash and assets readily convertible into cash.  These assets 
are financed primarily by free credit balances, commercial paper, 
equity capital, bank lines of credit, repurchase agreements 
and other payables.

During the current fiscal year, cash used in operating 
activities was $43,373,000 which was financed by $18,455,000 
of cash provided by financing activities and $24,667,000 provided
by investing activities which included the sale of the Company's
headquarters building for $34,582,000.

The Company's broker-dealer subsidiary is subject to requirements 
of the Securities and Exchange Commission and the New York 
Stock Exchange relating to liquidity and capital standards.  
It has historically operated well in excess of the standards. 
At July 31, 1998, the net capital of the Company's broker-dealer
subsidiary exceeded the SEC's minimum requirements by approximately 
$143,000,000 which is $36,000,000 more than the previous years 
excess.  Continued expansion is not expected to have a 
significant adverse impact on liquidity or capital 
funds available from operations and lines of credit should 
provide sufficient sources to meet capital needs for the 
foreseeable future.

During the year, the Company continued its stock repurchase 
program, purchasing 180,000 shares at a cost of $4,453,000.  
This followed fiscal 1997 repurchases of 17,400 shares and 
572,000 shares in fiscal 1996.  The board previously
authorized the purchase of a total of 7,125,000 shares under 
the repurchase program. 

In fiscal 1998, the board further authorized the company to 
repurchase a total of 1,200,000 shares through 3/31/2000 to 
fund the Company's restricted stock and employee stock purchase 
programs.

In fiscal 1999, the board further authorized the Company to 
repurchase a total of 1,200,000 shares through 3/31/2000 to 
fund the Company's restricted stock and employee stock purchase
programs.


Forward Looking Statements.
This Annual Report may be deemed to contain certain forward-looking
Statements regarding the anticipated financial and operating results
of the Company.  The Company undertakes no obligation to publicly 
release any revisions to any forward-looking statements contained 
herein to reflect events or circumstances occurring after the 
date hereof or to reflect the occurrence of unanticipated 
events. Information contained in these forward-looking statements 
in inherently uncertain; and actual performance and results may 
differ materially due to many important factors, many of which 
are beyond the Company's control including the Company's ability 
to sustain and manage growth; dealing with increasing competition;
additional government regulations; changes in general economic 
conditions; and the like.



<TABLE>
<CAPTION>                                                                            
(Dollars in thousands)                       Increase (Decrease)
Revenues:                              1998 vs 1997        1997 vs 1996     

  <S>                                <C>        <C>      <C>        <C>                                                           
  Commissions                        $30,223    38%      $11,989    18%       
  Principal transactions              11,826    11%       (5,239)   (5%)     
  Investment banking                  16,584    32%          878     2%     
  Interest                            14,603    23%       14,339    29%      
  Investment management fees           7,688    62%        3,176    34%   
  Other                               (2,364)  (22%)        1,985    23%     
                                     $78,560    24%      $27,128     9%     


Expenses:
  Compensation                       $40,464    25%      $ 6,012     4%      
  Floor brokerage and clearance          985    20%          646    15%      
  Communications                       1,563     7%        2,657    14%      
  Travel and promotional               1,888    22%        1,388    19%      
  Occupancy and equipment costs        1,549    10%        4,042    34%    
  Interest                             6,513    15%       11,722    36%    
  Taxes, other than income taxes       1,902    24%          980    14%    
  Other operating expenses             1,787    35%         (430)   (8%)    
                                     $56,652    21%      $27,017    11%     
</TABLE>

<TABLE>
Interest Rate Sensitivity

            Principal (Notional) Amount by Expected Maturity
<CAPTION>
                                      Fiscal       Interest       Fair Value
(Dollars in thousands)                 1999          Rate      at July 31, 1998  
<S>                                 <C>            <C>              <C>
Assets
  U.S. government obligations       $224,716        5.50%           $224,716
  State and municipal obligations     85,920        4.55%             85,920
  Corporate bonds                     32,970        6.20%             32,970
  Securities purchased under
   agreements to resell              174,583        5.75%            174,583
  Margin debits                      430,125        7.94%            430,125

                                                                                 

Liabilities
  Commercial paper                  $ 37,502        5.45%           $ 37,502
  Short term borrowings               68,400        5.98%             68,400
  Securities sold under
   agreements to repurchase          162,734        5.20%            162,734
  Securities sold, not yet purchased
   U.S. government obligations       107,004        5.50%            107,004
   Corporate bonds                     7,360        6.20%              7,360
  Customer credits                   663,038        4.67%            663,038
</TABLE>

<PAGE>
Additional Financial Information (Unaudited)

Morgan Keegan, Inc. and Subsidiaries
<TABLE>                                         
                                 (In thousands, except per share amounts)
<CAPTION>
Summary of Quarterly Results                                                
                                  First      Second     Third      Fourth
                                  Quarter    Quarter    Quarter    Quarter
<S>                              <C>        <C>        <C>        <C>
Fiscal 1998
  Revenues                       $101,198   $ 96,572   $103,546   $105,779
  Income before income taxes       20,688     18,002     19,272     19,225 
  Net income                       12,788     11,402     12,272     11,725
  Net income per share*              0.40       0.35       0.37       0.35  
                                                                           

Fiscal 1997
  Revenues                       $ 74,415   $ 83,527   $ 77,283   $ 93,309
  Income before income taxes       11,749     14,674     10,910     17,945
  Net income                        7,349      9,274      6,910     10,845
  Net income per share*              0.24       0.30       0.22       0.34
                                                                            
                                                          
Fiscal 1996
  Revenues                        $68,940    $77,457    $79,297    $75,712
  Income before income taxes       14,230     14,917     14,076     11,944
  Net income                        8,830      9,217      8,576      7,244
  Net income per share*              0.29       0.30       0.27       0.24
                                                                            

Fiscal 1995
  Revenues                        $56,206    $55,267    $50,147    $66,452
  Income before income taxes       10,971      9,537      6,960     10,880
  Net income                        6,771      5,937      4,360      6,780
  Net income per share*              0.22       0.19       0.15       0.22
                                                                            

Fiscal 1994
  Revenues                        $57,664    $60,125    $56,294    $57,637
  Income before income taxes       13,732     14,310     10,657     12,942
  Net income                        8,432      8,810      6,657      7,942
  Net income per share*              0.26       0.26       0.20       0.25
                                                                            
<FN>
*After retroactive adjustment for all stock dividends and stock splits
declared through July 31, 1998.  The earnings per share amounts prior
to 1998 have been restated as required to comply with Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share."
</FN>
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Statistical Comparison of Production                             

                                                                                       
                 1998          1997          1996          1995          1994      
<S>        <C>          <C>            <C>           <C>           <C>                                                     
Total pro-
 duction   $266,597,243  $213,247,662  $208,275,740  $160,335,704  $168,350,637 
Percentage
 change in
 production       +25.0%         +2.4%        +29.9%         -4.8%         +9.1% 
Number of
 tickets        939,013       685,790       749,560       558,967       480,564 
Average
 commissions
 per
 ticket    $        284   $       311  $        278   $       287  $        350 
Number of
 investment
 brokers            662           623           596           551           492 
Number of
 Investment
 brokers
 (over 1 year)      609           566           487           438           436 
Total number
 of employees     1,683         1,549         1,491         1,335         1,218 
Average
 commissions
 per investment
 broker (over
  1 year)   $   436,669   $   362,830   $   345,885   $   334,555   $   346,274 
Number of
 new accounts
 opened          37,936        32,166        33,835        29,559        25,861        
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Income
Morgan Keegan, Inc. and Subsidiaries                                      
                                             Years ended
                                               July 31
                         (In thousands, except share and per share amounts)
                                      1998         1997         1996     
<S>                                <C>          <C>          <C>                                           
Revenues
  Commissions                      $110,082     $ 79,859     $ 67,870   
  Principal transactions            121,790      109,964      115,203    
  Investment banking                 67,763       51,179       50,301    
  Interest                           78,865       64,262       49,923    
  Investment management fees         20,187       12,499        9,323    
  Other                               8,407       10,771        8,786     
                                    407,094      328,534      301,406     
Expenses
  Compensation                      204,829      164,364      158,352    
  Floor brokerage and clearance       6,028        5,043        4,397    
  Communications                     23,112       21,549       18,892     
  Travel and promotional             10,612        8,724        7,336     
  Occupancy and equipment costs      17,403       15,854       11,812     
  Interest                           51,165       44,652       32,930     
  Taxes, other than income taxes      9,888        7,986        7,006     
  Other operating expenses            6,871        5,084        5,514     
                                    329,908      273,256      246,239     
  Income Before Income Taxes         77,186       55,278       55,167     
  Income Tax Expense                 29,000       20,900       21,300     
  Net Income                       $ 48,186     $ 34,378     $ 33,867     

 Net Income Per Share*
  Basic                            $   1.47     $   1.10     $   1.11     
  Diluted                          $   1.47     $   1.10     $   1.10     


  Average shares outstanding     32,671,141   31,325,041   30,774,663     
<FN>
*The earnings per share amounts prior to 1998 have been restated as
 required to comply with Statement of Financial Accounting Standards
 (SFAS) No. 128, "Earnings per Share."

See accompanying notes.
</FN>
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Stockholders' Equity
Morgan Keegan, Inc. and Subsidiaries                                        

                             Common   Common  Additional            Stock-
                             Stock    Stock    Paid-In   Retained   holders'
                             Shares   Amount   Capital   Earnings   Equity  
                           (In thousands, except share and per share amounts)
<S>                         <C>        <C>      <C>       <C>       <C>
Balance at August 1, 1995   20,168,703 $12,605  $   712   $126,140  $139,457 
Issuance of restricted 
 stock                         292,231     183     (183)
Issuance of common
 stock                         358,463     224    2,698                2,922
Dividends paid ($.17  
 per share)                                                 (5,283)   (5,283)
Repurchase & retirement
 of common stock              (381,800)   (239)  (4,296)              (4,535)
Amortization of
 restricted stock                                 2,580                2,580
Net income                                                  33,867    33,867 
Balance at July 31, 1996    20,437,597  12,773    1,511    154,724   169,008 
Issuance of restricted
 stock                        296,771     185      (185)
Issuance of common
 stock                        378,660     237     3,951                4,188
Dividends paid ($.20  
 per share)                                                (6,212)    (6,212)
Repurchase & retirement
 of common stock              (11,600)     (7)     (135)                (142)
Amortization of
 restricted stock                                 2,500                2,500
Net income                                                 34,378     34,378
Stock split effected in
 the form of a stock
 dividend                   10,550,714   6,594   (6,594)                           
Balance at July 31, 1997    31,652,142  19,782    1,048   182,890    203,720  
Issuance of restricted
 stock                         194,596     122     (122)
Issuance of common
 stock                       1,150,466     719   13,675               14,394
Dividends paid ($.24  
 per share)                                                (7,789)    (7,789)
Repurchase & retirement
 of common stock              (180,000)   (113)  (4,340)              (4,453)
Amortization of
 restricted stock                                 3,300                3,300
Net income                                                 48,186     48,186
                                                                                    
Balance at July 31, 1998    32,817,204 $20,510  $13,561  $223,287   $257,358   


<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Financial Condition
Morgan Keegan, Inc. and Subsidiaries                                        
                          (In thousands, except share and per share amounts)
July 31                                                 1998         1997   
<S>                                                 <C>          <C>
Assets
  Cash                                              $   22,172   $   22,423  
  Securities segregated for regulatory purposes,
    at market                                          346,900      280,100  
  Deposits with clearing organizations and others        9,818        9,153  
  Receivable from brokers and dealers and 
    clearing organizations                              31,897       37,730  
  Receivable from customers                            444,609      358,020  
  Securities purchased under agreements to resell      174,583      146,881  
  Securities owned, at market                          353,708      275,611  
  Memberships in exchanges, at cost (market value-
    $5,049 at July 31, 1998; $4,202 at 
    July 31, 1997)                                       2,428          719  
  Furniture, equipment and leasehold improvements,
    at cost (less allowances for depreciation and
    amortization-$20,981 at July 31, 1998;
    $16,257 at July 31, 1997)                           24,332       24,062  
  Building and improvements, at cost (less
    allowance for depreciation-$644 at
    July 31, 1997)                                                   19,356  
  Other assets                                          53,374       34,202   
                                                    $1,463,821   $1,208,257   
Liabilities and Stockholders' Equity
  Short-term borrowings                             $   68,400   $      570 
  Mortgage note payable                                    -         19,714 
  Commercial paper                                      37,502      106,930 
  Payable to brokers and dealers and clearing
    organizations                                       13,151       12,718 
  Payable to customers                                 700,332      583,922 
  Customer drafts payable                               17,615       17,362  
  Securities sold under agreements to repurchase       162,734       97,417  
  Securities sold, not yet purchased, at market        116,727       94,298  
  Other liabilities                                     90,002       71,606   
                                                     1,206,463    1,004,537   
  Stockholders' equity
    Common Stock, par value $.625 per share:
    authorized 100,000,000 shares; 32,817,204
    shares issued and outstanding at July 31, 1998;
    31,652,142 at July 31, 1997                         20,510       19,782  
  Additional paid-in capital                            13,561        1,048  
  Retained earnings                                    223,287      182,890   
                                                       257,358      203,720   

                                                    $1,463,821   $1,208,257   
<FN>
See accompanying notes.
</FN>
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Morgan Keegan, Inc. and Subsidiaries                                                
Years ended July 31                            1998       1997       1996    
Cash Flows From Operating Activities:               (In thousands)
<S>                                          <C>        <C>        <C>
Net income                                   $48,186    $34,378    $33,867 
Non-cash items included in earnings:
  Depreciation and amortization                8,128      7,023      4,387 
  Deferred income taxes                       (4,700)    (1,000)      (750)
  Amortization of gain on sale of building
    and related assets                         1,150
  Amortization of restricted stock             3,300      2,500      2,580  
                                              56,064     42,901     40,084  
  (Increase) decease in operating assets:
    Receivable from brokers and dealers and
      clearing organizations                   5,833    (20,752)     8,068 
    Deposits with clearing organizations
      and others                                (665)    (1,498)         
    Receivable from customers                (86,598)   (43,584)   (53,729)
    Securities segregated for regulatory
     purposes, at market                     (66,800)   (54,900)       800 
    Securities owned, at market              (78,097)   (46,333)   (19,363)
    Memberships in exchanges                  (1,709)
    Other assets                             (14,472)    (5,654)    (1,733)
  (Decrease) increase in operating liabilities:
    Payable to brokers and dealers and 
      clearing organizations                     433      3,517      3,814 
    Payable to customers                     116,410     99,375     46,029 
    Customer drafts payable                      253      2,906        682 
    Securities sold, not yet purchased,
     at market                                22,429     31,326     (5,458)
    Other liabilities                          3,546     14,261     11,096  
                                             (99,437)   (21,336)    (9,794) 
 Cash provided by (used in)
   operating activities                      (43,373)    21,565     30,290  
Cash Flows From Financing Activities:
    Commercial paper                         (69,428)    64,002     35,460 
    Mortgage note payable                        -          -       20,000
    Mortgage note payments                   (19,714)      (251)       (35)
    Issuance of common stock                  14,394      4,188      2,922
    Retirement of common stock                (4,453)      (142)    (4,535)
    Dividends paid                            (7,789)    (6,212)    (5,283)
    Short-term borrowings                     67,830    (30,830)   (96,249)
    Securities purchased under agreements
      to resell                              (27,702)   (77,603)    19,466 
    Securities sold under agreements to 
      repurchase                              65,317     42,591     22,583  
  Cash provided by (used in)
    financing activities                      18,455     (4,257)    (5,671) 
 Cash Flows From Investing Activities:
  Payments for furniture, equipment and
    leasehold improvements                    (9,915)   (12,041)    (9,750)
  Proceeds from sale of building
   and related assets                         34,582
  Building purchase                                                (20,000)
  Cash provided by (used in)
   investing activities                       24,667    (12,041)   (29,750)
  Net increase (decrease) in cash               (251)     5,267     (5,131)
Cash at beginning of period                   22,423     17,156     22,287  
Cash at end of period                        $22,172    $22,423    $17,156  
<FN>
Income tax payments totaled $36,191,000 in 1998, $19,400,000 in 1997,and
$20,275,000 in 1996.  Interest payments totaled $49,722,000 in 1998,
$44,499,000 in 1997, and $32,761,000 in 1996.

See accompanying notes.
</FN>
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
Morgan Keegan, Inc., and Subsidiaries
July 31, 1998                                                               

NOTE 1-SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: The consolidated financial statements include
the accounts of Morgan Keegan, Inc. and its subsidiaries (collectively 
referred to as the Company).  All significant intercompany balances 
and transactions have been eliminated in consolidation.  The Company 
is in one principal line of business, that of providing investment 
services primarily in the southern United States.

Financial Assets and Liabilities: Substantially all of the Company's 
financial assets and liabilities are carried at market value or at 
amounts which because of the short-term nature of the financial 
instruments, approximate current fair value.


Securities Transactions: Securities transactions and related commission
revenue and expense are recorded on a settlement date basis, generally 
the third business day following the transaction date, which is not 
materially different from a trade date basis.


Securities: Securities owned and securities sold, not yet purchased 
are carried at market value and unrealized gains and losses are 
reflected in revenues.


Investment Banking: Management fees on investment banking transactions
and selling concessions are recorded on the settlement date.  
Underwriting fees are generally recorded on the date the underwriting 
syndicate is closed.


Fixed Assets: Furniture, equipment and leasehold improvements are 
carried at cost. Depreciation and amortization are provided on a 
straight-line basis over the estimated useful lives of the assets.  
Prior to sale, building and improvements are carried at cost and 
are being depreciated over a thirty-one year period.

Securities-Lending Activities: Securities borrowed and securities 
loaned transactions are generally reported as collateralized financings
except where letters of credit or other securities are used as 
collateral.  Securities borrowed transactions require the Company 
to deposit cash, letters of credit, or other collateral with the 
lender.  With respect to securities loaned, the Company receives 
collateral in the form of cash or other collateral in an amount 
generally in excess of the market value of securities loaned.  
The Company monitors the market value of securities borrowed and 
loaned on a daily basis, with additional collateral obtained or 
refunded as necessary.


Reverse Repurchase and Repurchase Agreements: Securities purchased 
under agreements to resell (Reverse Repurchase Agreements) and 
securities sold under agreements to repurchase (Repurchase Agreements)
are carried at the amounts at which the securities will be subsequently 
resold or reacquired as specified in the respective agreements.  
Government securities segregated in a special reserve bank account 
for the benefit of customers under rule 15c3-3 of the Securities 
and Exchange Commission represent securities purchased under an 
agreement to resell of $346,900,000 and $280,100,000 at 
July 31, 1998 and 1997, respectively.

<PAGE>
Income Taxes: The parent and its subsidiaries file a consolidated 
income tax return.  Deferred income taxes reflect the net tax 
effects of temporary differences between the carrying amounts 
of assets and liabilities for financial reporting purposes and 
the amounts used for income tax purposes. 

Net Income Per Share: In fiscal 1998, the Company adopted the 
provisions of Financial Accounting Standards Board ("FASB") 
Statement No. 128, "Earnings per Share" ("Statement 128").  
Statement 128 replaced the calculation of primary and 
fully diluted earnings per share with basic and diluted 
earnings per share. Unlike primary earnings per share, basic 
earnings per share excludes any dilutive effects of options, 
warrants and convertible securities.  Diluted earnings per 
share is very similar to the previously reported fully diluted 
earnings per share.  All earnings per share amounts for all 
periods presented have been restated to conform to the requirements
of Statement 128.  


The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
                                                    Year ended July 31
                                             1998          1997          1996    
                                           (In thousands, except per share data)
<S>                                          <C>          <C>           <C>
Numerator:
  Net income                                 $48,186      $34,378       $33,867  

Denominator:
  Denominator for basic earnings
    per share-weighted average shares         32,671       31,170        30,632   
  Effect of dilutive securities-
    stock options                                183          155           143  
  Denominator for diluted earnings
    per share - adjusted weighted 
    average shares and assumed
    conversions                               32,854       31,325        30,775   

Net income per share of common stock        $   1.47      $  1.10       $  1.11
Net income per share of common stock,
   assuming dilution                        $   1.47      $  1.10       $  1.10   
</TABLE>

All earnings per share data included in the consolidated financial 
statements and notes thereto have been adjusted to give effect to 
all stock splits.


Accounts with Customers: Accounts with customers include amounts arising
from uncompleted transactions and margin balances.  Securities which are 
owned by customers but held as collateral for receivables from customers 
are not included in the consolidated financial statements.


Restricted Stock: Amortization of restricted stock is provided on the 
straight-line basis over the life of the restriction, which is five years.


Stock-based Compensation: The Company grants stock options for a fixed 
number of shares to employees with an exercise price equal to the fair 
value of the shares at the date of grant.  The Company accounts for 
stock option grants in accordance with Accounting Principles Board 
(APB) Opinion No. 25, "Accounting for Stock Issued to Employees," 
and, accordingly, recognized no compensation expense for the stock 
option grants.

<PAGE>
Other Accounting Pronouncements: In December 1996, the Financial 
Accounting Standards Board (FASB) issued Statement No. 127, "Deferral 
of the Effective Date of Certain Provisions of FASB Statement 
No. 125 Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities."  Statement 127 deferred the 
effective date of provisions of Statement 125 relating to the
recognition of collateral, securities lending transactions, 
repurchase agreements, dollar-rolls, and similar transactions 
until January 1, 1998.  The adoption of Statement 125 had no 
material effect on the Company's consolidated financial position
or results of operations.

In June 1997, the FASB issued Statement No. 131, "Disclosures 
about Segments of an Enterprise and Related Information," which 
is effective for annual and interim periods ending after 
December 15, 1997.  The Company will adopt the new 
requirements retroactively in fiscal 1999.  This statement 
established standards for the method that public entities
use to report information about operating segments in 
annual financial statements and requires that those
enterprises report selected information about operating 
segments in interim financial reports issued to stockholders. 
It also establishes standards for related disclosures about 
products and services, geographical areas and major customers. 
Management has not completed its review of the statement, but 
does not anticipate its adoption will have a significant effect
on the company's annual or interim reporting.


The Financial Accounting Standards Board issued in June 1998 
its new standard on derivatives - Statement No. 133, Accounting 
for Derivative Instruments and Hedging Activities.  The new 
Statement resolves the inconsistencies that existed with respect
to derivatives accounting, and dramatically changes the way many
derivatives transactions and hedged items are reported.  The 
Statement is effective for years beginning after June 15, 1999.
The Company has not yet determined the effect, if any, 
Statement 133 will have on he earnings and financial condition 
of the Company.


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




NOTE 2-BORROWINGS


The short-term borrowings of $68,400,000 and $570,000 at July 31, 1998 
and 1997 respectively, consist of loans payable on demand primarily used
to finance clearance of securities and to carry customers' margin
accounts and firm positions. The notes bear interest at the broker loan
rate, which was 6.2% and 6.4% at July 31, 1998 and 1997, respectively.

The Company had total lines of credit of $345,000,000 at July 31, 1998,
with expirations prior to July 31, 1999, under which a maximum of
$250,000,000 could be borrowed on an unsecured basis.  There were no
compensating balances associated with these lines of credit.  There
were no borrowings outstanding on these lines of credit at July 31,
1997.

The Company also issues its own commercial paper to investors at
fluctuating interest rates (5.45% and 5.75% at July 31, 1998 and 1997,
respectively). The paper matures over various terms not to exceed nine
months.


The weighted average interest rate on all forms of short-term borrowings
for the years ended July 31, 1998 and 1997 was 6.46% and 6.85%,
respectively.



<PAGE>
NOTE 3-SECURITIES

Securities owned for trading purposes consist of the following at
July 31, in thousands:
<TABLE>
 
                                              1998               1997                                                           
     <S>                                   <C>                <C>
     U.S. government obligations           $224,716           $163,544   
     State and municipal obligations         85,920             57,690   
     Corporate bonds                         32,970             44,376    
     Stocks                                   9,922              9,787    
     Bankers' acceptance                        180                214    
                                           $353,708           $275,611  
</TABLE>
State and municipal obligations include an issue with a par value of
$12,700,000 which has been written down to an approximate fair market
value of $5,715,000 at July 31, 1998 and July 31, 1997, as determined
by management of the Company.

Securities sold, not yet purchased at market consist of the following
at July 31, in thousands:
<TABLE>
                                               1998            1997
     <S>                                    <C>              <C>                                                  
     U.S. government obligations            $107,004         $80,983
     State and municipal obligations             108             230
     Corporate bonds                           7,360             525
     Stocks                                    2,255          12,560
                                            $116,727         $94,298
</TABLE>

NOTE 4-LEASES

The Company leases office space, furniture and equipment under 
noncancellable leases expiring through 2009, with options to renew 
the leases for up to five years.  Total rental expense for each of 
the years ended July 31 was as follows, in thousands:
<TABLE>
               <S>                          <C>
               1998                         $14,034 
               1997                         $ 9,124
               1996                         $ 8,838

</TABLE>

Aggregate future annual minimum rental commitments, excluding 
escalations, for the years ending July 31 are as follows, in thousands:

<TABLE>
<S>           <C>
1999          $ 8,723
2000            8,147
2001            7,302
2002            6,614
2003            6,131
Thereafter     20,701 
              $57,618 
</TABLE>

<PAGE>
NOTE 5-COMMITMENTS AND CONTINGENCIES

At July 31, 1998, the Company was obligated under commercial letters of
credit of approximately $20,500,000 drawn in favor of certain clearing 
organizations which were collateralized by customer-owned securities of
$25,353,000 and firm-owned securities of $5,500,000.  These obligations
normally settle through the clearance of the related securities
transactions with the respective organizations.

The Company is named in and subject to various proceedings and claims
incidental to its securities business.  While the ultimate resolution
of pending litigation and claims cannot be predicted with certainty,
based upon the information currently known, management is of the
opinion that the resolution of such litigation and claims will have no
material adverse effect on the Company's consolidated results of
operations or financial condition.


<PAGE>
NOTE 6-INCOME TAXES

Significant components of the provision (credit) for income taxes are as follows
for the years ended July 31, in thousands:

<TABLE>
                             1998         1997         1996          
     <S>                   <C>          <C>          <C>                                       
     Federal:
       Current             $28,900      $18,500      $18,450   
       Deferred             (4,700)      (1,000)        (750)  
                            24,200       17,500       17,700   
     State                   4,800        3,400        3,600   
                           $29,000      $20,900      $21,300   

</TABLE>

The principal reasons for the difference between the effective rate and
the federal statutory income tax rate for the years ended July 31 are as
follows, in thousands:
<TABLE>
<CAPTION>

                           1998               1997                1996      
                     Amount  Percent     Amount  Percent     Amount  Percent

<S>                  <C>       <C>       <C>       <C>       <C>       <C>
Federal Statutory
 rate applied to
 pretax earnings     $27,000   35.0%     $19,347   35.0%     $19,308   35.0%  
State and local
 taxes, less federal
 income tax benefit    3,120    4.0        2,210    4.0        2,340    4.2   
Non-taxable interest,
 less non-deductible
 interest               (795)  (1.0)        (533)  (1.0)        (353)  (0.6)  
Other - net             (325)  (0.4)        (124)     -            5      -   
                     $29,000   37.6%     $20,900   38.0%     $21,300   38.6%  

</TABLE>



Significant components of the Company's deferred tax assets and
liabilities as of July 31 are as follows, in thousands:
<TABLE>
                                                                       
                                                   1998           1997
 <S>                                              <C>            <C>                                                          
 Deferred tax assets:
  Deferred compensation and restricted stock      $4,470         $3,212 
  Deferred gain on building sale                   4,865
  Non-deductible reserves                          2,312          2,265  
  Insurance and benefits                           1,452          1,649  
  Other                                              280            501   
                                                  13,379          7,627   

Deferred tax liabilities:
  Depreciation and other building related items    2,903          2,464   
  Other                                              776            163 
                                                   3,679          2,627 
  Net deferred tax assets                         $9,700         $5,000 
                                                                           
</TABLE>

<PAGE>
NOTE 7-COMMON STOCK

The Board of Directors has reserved 9,168,750 shares for issuance under
the Company's Restricted Stock and Incentive Stock Option plans of 1983
and 1985. Under provisions of the Restricted Stock and the Incentive
Stock Options Plans, benefits may be granted to key officers and
employees in either, or a combination of, incentive stock options or
restricted stock awards.  Incentive stock options are granted at the
fair market value of the stock at the time of grant.  There were
approximately 1,561,077 remaining shares available to be granted at
July 31, 1998.

The Board of Directors has authorized 675,000 shares to be granted to
non-employee directors in the form of incentive stock options.  As of
July 31, 1998, 162,000 options were outstanding and exercisable at an
average price of $11.40. 
During fiscal year 1998, 54,000 options were exercised at an average
price of $5.18 and 54,000 options were granted at an average price of $18.875.

Employee stock option activity which includes 6,750 shares that are
exercisable, is summarized as follows:

<TABLE>
<CAPTION>
                                               Average 
                                     Shares     Price   
   Exercisable
                                                          
   <S>                              <C>        <C>        <C>
   Outstanding at July 31, 1995     167,474      4.55   
     Granted                         28,313      5.60     1995-2001
     Exercised                      (62,438)   ( 1.70)  
   Outstanding at July 31, 1996     133,349      6.11   
     Granted                          9,750     11.64     1997-2002
     Exercised                      (10,184)   ( 5.60)   
   Outstanding at July 31, 1997     132,915      6.55     
     Granted                         22,500     19.30     1998-2003
     Exercised                      (60,765)    (5.82)   
   Outstanding at July 31, 1998      94,650    $10.06    
</TABLE>


The Company has approximately 2,129,806 shares of restricted stock
included in common stock outstanding which was issued at the fair
market value at the date of grant.

Under an Employee Stock Purchase Plan, 4,275,000 shares have been
reserved to allow employees to purchase company shares at a 15%
discount, not to exceed 506,250 shares to all employees in any year.

Activity by year under the plan is summarized as follows:
<TABLE>
                     <S>                   <C>                                  
                     Year                  Shares Sold
                   
                     1996                    428,007
                     1997                    449,808
                     1998                    306,872

The Company accounts for stock-based compensation under the provisions of (APB) 
Opinion No. 25, "Accounting for Stock Issued to Employees," rather than the fair 
value method in Financial Accounting Standards Board Statement No. 123, 
"Accounting for Stock-Based Compensation."  Accordingly, no compensation costs 
were charged to earnings for options granted under the Company's plans.

<PAGE>
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period.  The
Company's pro forma information for the years ended July 31 are as
follows:

</TABLE>
<TABLE>
<CAPTION>

                                                1998        1997        1996
<S>                                           <C>         <C>         <C>
Pro forma net income                          $47,657     $33,499     $33,199
Pro forma earnings per share
  Basic                                          1.46        1.07        1.08
  Diluted                                        1.45        1.07        1.08

</TABLE>

NOTE 8-REPURCHASE AND REVERSE REPURCHASE AGREEMENTS

The Company enters into sales of securities under agreements to
repurchase, which substantially mature in less than 30 days, with the
obligation to repurchase the securities sold reflected as a liability
in the consolidated statement of financial condition.  The majority of
the repurchase agreements are matched with a reverse repurchase
agreement.

Repurchase agreement information as of July 31, 1998 is summarized
as follows, in thousands:
<TABLE>
<CAPTION>
                                Assets Sold             Repurchase Liability    
                           Carrying      Market                      Interest
                            Amount       Value          Amount         Rate     
<S>                        <C>         <C>              <C>       <C>
Mortgage-backed
 certificates and other    $164,280    $165,413         $162,734  5.20% - 6.20% 
</TABLE>  
 

Repurchase agreement information as of July 31, 1997 is summarized
as follows, in thousands:
<TABLE>
<CAPTION>

                                 Assets Sold             Repurchase Liability    
                            Carrying      Market                      Interest
                             Amount       Value          Amount         Rate     
<S>                         <C>         <C>              <C>       <C>
Mortgage-backed
 certificates and other     $ 79,444    $ 78,891         $ 80,928  5.49%-5.63% 
U.S. Treasury securities      16,505      16,571           16,489        5.10%

                            $ 95,949    $ 95,462         $ 97,417                
 

</TABLE>
The Company also enters into purchases of securities under
agreements to resell (reverse repurchase agreements).  The
amounts advanced under these agreements represent short-term 
loans and are reflected as a receivable in the consolidated 
statement of financial condition.  Securities purchased under 
agreements to resell are held in safekeeping in the Company's 
name.  Should the market value of the underlying securities 
decrease below the amount recorded, the counterparty is required 
to place an equivalent amount of additional securities in 
safekeeping in the name of the Company.


<PAGE>
NOTE 9-EMPLOYEE BENEFIT PLANS

The Company makes discretionary contributions to its 401(k) 
defined contribution plan and its profit sharing plan covering 
substantially all employees.  The Company also has a defined benefit
retirement plan covering certain executives. Total provisions 
for expenses under all plans for each of the years ended 
July 31, 1998, 1997, and 1996 totaled $2,637,000, $1,994,000,
and $1,475,000, respectively.


NOTE 10-REGULATORY REQUIREMENTS

The Company's broker/dealer subsidiary, Morgan Keegan & 
Company, Inc., is a member of the New York Stock Exchange 
and is subject to the Securities and Exchange Commission's 
(SEC) uniform net capital rule.  The subsidiary broker/dealer 
company has elected to operate under the alternate method of 
the rule, which prohibits a dealer from engaging in any 
securities transactions when its net capital is less than 
2% of its aggregate debit balances, as defined, arising from 
customer transactions.  The SEC may also require a member to 
reduce its business and restrict withdrawal of subordinated 
capital if its net capital is less than 4% of aggregate debit 
balances, and may prohibit a member firm from expanding its 
business and declaring cash dividends if its net capital is 
less than 5% of aggregate debit balances.


At July 31, 1998, the subsidiary had net capital of 
$151,648,000 which was 35% of its aggregate debit balances 
and $142,996,520 in excess of the 2% net capital requirement.  
At July 31, 1997, the subsidiary had net capital of $114,572,020, 
which was 31% of its aggregate debit balances and $107,182,218 
in excess of the 2% net capital requirement.

<PAGE>                                                                        
NOTE 11-FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

In the normal course of business, the Company's activities 
involve the execution, settlement and financing of various 
securities transactions.  These activities may expose the 
Company to risk in the event the customer is unable to fulfill 
its contractual obligations.  The Company maintains cash and 
margin accounts for its customers located throughout the 
United States but primarily in the Southeast.

The Company, as part of its normal brokerage activities, 
assumes short positions on securities.  The establishment 
of short positions exposes the Company to off-balance sheet 
risk in the event prices increase, as the Company may be 
obligated to cover such positions at a loss.  The Company 
manages its exposure to these instruments by entering into 
offsetting or other positions in a variety of financial 
instruments.

As a securities broker/dealer, a substantial portion of the 
Company's transactions are collateralized.  The Company's 
exposure to credit risk associated with nonperformance in 
fulfilling contractual obligations pursuant to securities 
transactions can be directly impacted by volatile trading 
markets which may impair the customer's or contra party's 
ability to satisfy their obligations to the Company.  Where 
considered necessary, the Company requires a deposit of 
additional collateral, or a reduction of securities positions.

In the normal course of business, the Company enters into 
underwriting and forward and future commitments.  At 
July 31, 1998, the contract amount of future contracts to 
purchase and sell U.S. Government and municipal securities 
was approximately $85 and $22 million, respectively.  At 
July 31, 1997, the contract amount of future contracts to 
purchase and sell U.S. Government and municipal securities 
was approximately $104 million and $9 million, respectively.
The Company typically settles its position by entering into 
equal but opposite contracts and, as such, the contract 
amounts do not necessarily represent future cash requirements.
Substantially all transactions relating to such commitments were
subsequently settled and had no material effect on the Company's
consolidated financial position.


The Company will occasionally hedge a portion of its long 
proprietary inventory position through the use of short positions
in financial future contracts.  At July 31, 1998, the Company did 
not have any open futures contracts.  At July 31, 1997, the Company
had $11 million of these contracts.  The contract amounts do not
necessarily represent future cash requirements.


While the Company regularly participates in the trading of some
derivative securities for its customers, this trading is not a
significant portion of the Company's business.



<PAGE>
<TABLE>
<CAPTION>

NOTE 12-QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)


                                (In thousands, except per share amounts)

                                             Quarter Ended

                             October 31   January 31    April 30    July 31 
<S>                          <C>          <C>          <C>         <C>
1998:
  Revenues                   $101,197     $ 96,572     $103,546    $105,779 
  Expenses                     80,509       78,570       84,275      86,554
  Income before income taxes   20,688       18,002       19,271      19,225 
  Net income                   12,788       11,402       12,271      11,725
  Net income per share:        
    Basic                        0.40         0.35         0.37        0.35
    Diluted                      0.40         0.35         0.37        0.35
  Dividends per share            0.06         0.06         0.06        0.06
  Stock price range:
   High                         21.38        25.63        24.13       28.44
   Low                          13.83        15.88        21.06       22.00

                                                      
1997:
  Revenues                   $ 74,415     $ 83,527     $ 77,283    $ 93,309
  Expenses                     62,666       68,853       66,373      75,364 
  Income before income taxes   11,749       14,674       10,910      17,945
  Net income                    7,349        9,274        6,910      10,845
  Net income per share:
    Basic                        0.24         0.30         0.22        0.34
    Diluted                      0.24         0.30         0.22        0.34
  Dividends per share            0.05         0.05         0.05        0.05
  Stock price range:
   High                         10.59        11.92        14.67       14.63
   Low                           8.25        10.33        10.67       11.92


</TABLE>
</PAGE>