FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

(Mark One) |X| ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
                                       OR

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to ___________

Commission file number: 0-26868

                      Lexington Global Asset Managers, Inc.
             (Exact name of Registrant as specified in its charter)

Delaware                                                     22-3395036
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)


PARK 80 WEST PLAZA TWO
SADDLE BROOK, NJ 07663
(Address of principal executive offices)  (Zip code)

                                (201) 845-7300
             (Registrant's telephone number including area code)

        Securities  registered  pursuant  to  Section 12(b) of the Act:
                                      None

           Securities registered pursuant to section 12(g) of the Act:
                     Common Stock, $.01 par value per share

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

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

      The number of shares  outstanding of the registrant's  voting Common Stock
and the aggregate  market value of such Common Stock held by  non-affiliates  on
March 12, 1998 was as follows:

                      Common Stock-$.01 Par Value Per Share
                          Authorized 15,000,000 Shares
                          5,174,887 Shares Outstanding
                       Aggregate Market Value $22,169,596

Document Incorporated by Reference.

Registrant's  Proxy  Statement for Annual Meeting of Stockholders to be held May
13, 1998 is incorporated by reference into Part III of this Filing.




                                     PART I
     The  statements  contained  in the  Annual  Report  on Form  10-K  ("Annual
Report")  which  are  not  historical  facts,  including,  but not  limited  to,
statements  found in Item 7,  Management's  Discussion and Analysis of Financial
Condition and Results of Operations, are forward-looking statements that involve
a number of risks and  uncertainties.  The actual  results of the future  events
described in such forward-looking  statements in this Annual Report could differ
materially  from  those  stated in such  forward-looking  statements.  Among the
factors  that could  cause  actual  results to differ  materially  are risks and
uncertainties set forth below under the heading Risk Factors and other risks and
uncertainties discussed in this Annual Report and set forth from time to time in
the registrant's other public reports and filings and public statements.

Item 1. Business
          HISTORY AND BUSINESS OF LEXINGTON GLOBAL ASSET MANAGERS, INC.
     Lexington  Global Asset Managers,  Inc. (the "Company") was incorporated in
Delaware  in  September  1995 as a holding  company  that  offers,  through  its
subsidiaries,  a variety of asset  management  and  related  services  to retail
investors, institutions and high net worth individuals.
      Prior  to  the   spin-off  of  the  Company  on  December  13,  1995  (the
"Spin-off"),  the Company was a wholly-owned  subsidiary of Piedmont  Management
Company Inc.  ("Piedmont"),  a Delaware  corporation.  Pursuant to the Spin-off,
Piedmont contributed to the Company all of its subsidiaries engaged in the asset
management  business and  distributed to each Piedmont  stockholder one share of
Common Stock of the Company for each share of Piedmont common stock held by such
stockholder.  The  Spin-off  resulted in 100% of the Common Stock of the Company
being distributed to Piedmont stockholders.
    The  Company  manages   portfolios  of  equity,   balanced,   fixed  income,
mortgage-backed and money market investments, which are designed to meet a broad
range of investment objectives.
     At  December  31,  1997 total  assets  under  management  amounted  to $3.5
billion,  with $1.9  billion in mutual  funds,  $1.1  billion  in  institutional
accounts and $0.5 billion in private client accounts.  The Company's client base
consists   of   approximately   180,000   mutual  fund   shareholder   accounts,
approximately 20 institutional  accounts,  and  approximately 620 private client
accounts. The tables below set forth the Company's total assets under management
in each of its three  major  markets at the dates  indicated  and the  Company's
total assets under management by type of investment.

<TABLE>


                               Asset Composition By Market (1)
                                    (Dollars in Thousands)

                                                        December 31,
<S>                             <C>          <C>          <C>          <C>           <C>    
                              -----------------------------------------------------------------
                                  1997         1996         1995         1994         1993
Mutual Funds                    $1,896,293   $1,797,238   $1,517,260   $1,501,668   $1,309,267
Institutional                    1,109,339    1,047,244    1,134,080    1,472,122    1,549,777
Private Clients                    467,072      360,226      428,434      421,204      460,756
                              -----------------------------------------------------------------
     Total                      $3,472,704   $3,204,708   $3,079,774   $3,394,994   $3,319,800
                              =================================================================


                                Revenue Composition by Market
                                    (Dollars in Thousands)

                                                        December 31,
<S>                                 <C>          <C>          <C>         <C>           <C>    
                              -----------------------------------------------------------------
                                     1997         1996         1995         1994         1993
Mutual Funds                       $11,223      $10,724       $9,789      $10,092       $5,890
Institutional                        3,634        3,520        4,254        4,518        4,500
Private Clients                      3,410        2,953        4,774        5,123        4,916
                              -----------------------------------------------------------------
     Total                         $18,267      $17,197      $18,817      $19,733      $15,306
                              =================================================================

                           Asset Composition By Type of Investment
                                    (Dollars in Thousands)
                                                        December 31,
<S>                             <C>           <C>         <C>          <C>          <C>    
                              -----------------------------------------------------------------
                                   1997         1996         1995         1994         1993
Domestic Equity                 $1,704,426   $1,329,087   $1,172,710   $1,096,988   $1,274,390
Foreign Equity                     850,274      807,962      699,842      696,882      578,008
                              -----------------------------------------------------------------
     Subtotal (2)                2,554,700    2,137,049    1,872,552    1,793,870    1,852,398
Precious Metals (3)                118,416      201,295      273,411      347,023      277,573
Fixed Income                       634,029      668,841      712,830      976,104      977,396
Money Market Funds                 165,559      196,212      220,981      277,997      212,433
                              -----------------------------------------------------------------
     Total                      $3,472,704   $3,203,397   $3,079,774   $3,394,994   $3,319,800
                              =================================================================

----------------------
(1)  Included in the  institutional  assets under management are invested assets
     of  members  of  the   Richardson   Family   (defined   below,   see  "Risk
     Factors---Substantial   Stockholders"),   principal   stockholders  of  the
     Company,  and certain other related  persons,  which assets at December 31,
     1997 were valued at  approximately  $842 million.  The fees charged for the
     management  of such assets are based upon  standard fee  schedules  and are
     comparable with the fees charged to unaffiliated accounts.
(2) Excludes precious metal equities.
(3) Precious Metals includes precious metals and precious metal equities.
</TABLE>

The following illustrates the structure of the Company as of December 31, 1997.

Lexington Global Asset Managers, Inc.
     Lexington Management Corporation                  (100%)
     Lexington Funds Distributor, Inc.                 (100%)
     Market Systems Research Advisors, Inc.            (65%)
          Market Systems Research, Inc. (100% owned
          by Market Systems Research Advisors, Inc.)
     Piedmont Asset Advisors, Inc.                     (51%)





     The  subsidiaries  of the  Company  can be divided  into its core  business
(Lexington Management Corporation ("LMC") and Lexington Funds Distributor,  Inc.
("LFD"),  the "Core Business"),  which business  generates most of the Company's
revenues and profits,  and its other subsidiaries,  which generate the remainder
of the Company's  revenues and profits.  On September 30, 1996, the Company sold
four  subsidiaries,  LCM Financial  Services Inc.  ("LFSI"),  Lexington  Capital
Management Associates, Inc. ("LCMA"), Lexington Plan Administrators ("LPA"), and
LCMI Insurance  Services ("LCMII") to Berkeley (USA) Holdings Limited, a company
formed by the CEO of these  subsidiaries  and the U.S.  unit of  London  Pacific
Group Limited. The Company recorded a one-time gain of $0.5 million on the sale.
On December 31, 1996,  another  subsidiary,  Lexington  Capital  Management Inc.
("LCM") was merged into LMC.

    The revenues of the Company  consist  primarily of management  fees based on
the value of assets under management and commissions  associated with the direct
sales of mutual fund products.

     The tables below set forth the  Company's  assets under  management  in and
revenues from each of these two segments:
<TABLE>

                                             Assets Under Management
                                              (Dollars in Thousands)

                                                                        December 31,
<S>                                            <C>           <C>            <C>            <C>          <C>   
                                           ------------------------------------------------------------------------
                                                  1997          1996           1995          1994          1993
LMC and LFD (1)                                $3,327,774    $2,720,094     $2,556,750    $2,874,412    $2,751,602
Other Subsidiaries (2)                            144,930       483,303        523,024       520,582       568,198
                                           ------------------------------------------------------------------------
     Total                                     $3,472,704    $3,203,397     $3,079,774    $3,394,994    $3,319,800
                                           ========================================================================

                                                     Revenues
                                              (Dollars in Thousands)
                                                                        December 31,
<S>                                               <C>           <C>            <C>           <C>           <C>
                                           ------------------------------------------------------------------------
                                                    1997          1996           1995          1994          1993
LMC and LFD (1)                                   $17,976       $14,384        $14,178       $14,796       $10,549
Other Subsidiaries                                  1,001         6,427          7,108         7,883         7,521
                                           ------------------------------------------------------------------------
     Total                                        $18,977       $20,811        $21,286       $22,679       $18,070
                                           ========================================================================

(1)  Lexington Management Corporation and Lexington Funds Distributor, Inc.
(2)    These  subsidiaries  include  Lexington  Capital  Management,  Inc.,  LCM
       Financial Services, Inc., Lexington Capital Management Associates,  Inc.,
       Lexington Plan  Administrators,  Inc., Market Systems Research  Advisors,
       Inc., Market Systems  Research,  Inc. and Piedmont Asset Advisors L.L.C..
       LCM was merged into LMC on December 31, 1996.  LFSI,  LCMA,  and LPA were
       divested on September 30, 1996.


</TABLE>


Primary Markets and Strategy for Growth

Markets

The Company's business strategy is targeted at three large market segments:

          Mutual  Funds--The   Company,   through  its  subsidiaries,   markets,
     promotes,  and  distributes  the  Lexington  family of 17 mutual funds (the
     "Lexington Funds") providing a variety of investment choices for the retail
investor,
     financial  planner and  intermediary,  and the defined  benefit and defined
     contribution  marketplace,  including the rapidly growing 401(k) market. In
     addition, the Company,  through its subsidiaries,  acts as a subadvisor and
     /or administrator to four mutual funds.

          Institutional   Market--The   institutional   market  for   investment
     management services includes corporate, government and multi-employee (Taft
     Hartley) pension plans,  charitable  endowments and foundations,  insurance
     company  general  accounts  and  defined  contribution  and  401(k)  plans.
     Lexington  has  secured  both  domestic  and   international   assignments,
     utilizing  investments in domestic and foreign equity securities,  precious
     metal equities, fixed income and its family of mutual funds.

          Private  Clients--The Company offers equity, fixed income and balanced
     fund alternatives,  tailored to the individual investment objectives of its
     private clients.

     In each of  these  areas,  management's  overall  objective  is to  execute
specific business strategies (see following  discussions) to profitably maximize
assets under  management and provide  clients with investment  performance  that
meets their objectives.

    The Company  derives its  revenues  primarily  from fees for its  investment
advisory  services  provided  to  retail  investors,  institutions  and  private
clients.

Mutual Funds

     Background.  The mutual  fund  industry  has  expanded  rapidly in the last
several  years.  According  to  the  Investment  Company  Institute,  the  trade
association  for investment  companies,  total assets of U.S.  mutual funds have
increased  from $3.5  trillion at December 31, 1996 to $4.5 trillion at December
31, 1997, a growth rate of approximately 27% for the year.

     In the mutual fund  industry,  mutual funds may be sold to investors with a
sales  charge or a  commission  (a "load"  fund) or without a sales  charge or a
commission (a "no-load"  fund). Of the seventeen  Lexington  Funds,  fifteen are
no-load  funds and two are load  funds.  In  addition,  all four of the funds to
which the Company  acts as a  subadvisor  and/or  administrator  are load funds.
Mutual funds may also be either  closed-end or open-end.  Generally,  closed-end
funds raise money from  stockholders  only once,  unlike an open-end  fund which
issues and redeems shares of the fund on a continuous basis. In addition, unlike
open-end  mutual  funds,  closed-end  funds do not stand  ready to redeem  their
shares at net asset value.  Instead,  stockholders  wishing to sell their shares
must  do  so by  trading  them  on a  national  securities  exchange  or in  the
over-the-counter  market,  at a price  determined  by the  market,  which may be
higher or lower than the fund's net asset  value.  All of the  Company's  mutual
funds are open-end funds.

     The  mutual  fund   industry  is  highly   competitive   and  is  currently
characterized  by a  high  degree  of  fragmentation  and a  large  and  rapidly
increasing  number of product  offerings.  The Company  believes that the mutual
fund  industry is becoming  similar to the  consumer  products  business,  where
marketing strategies, product development, business development, sales expertise
and servicing are increasingly important.

     Investment  Products and Services.  The Company has developed the Lexington
family of 17 mutual funds which are managed,  marketed and distributed under the
Lexington name through  Lexington  Management  Corporation  and Lexington  Funds
Distributor,  Inc.  The  Lexington  Funds are  designed  to provide a variety of
investment options for retail investors,  financial planners and intermediaries,
and for the defined benefit and defined contribution marketplace,  including the
401(k)  market.  These funds have been  selected for inclusion in various no fee
transaction broker programs, such as the Charles Schwab Mutual Fund OneSource(R)
program.

    Each of the  Company's  global/international  equity  funds may invest their
assets in any country  approved by the fund's Board of Directors  provided  such
assets  are  custodied  with an  eligible  custodian  under  Rule  17f-5  of the
Investment Company Act of 1940, as amended.  Currently,  Chase Manhattan Bank is
acting as master custodian of assets for each of the Lexington Funds.

     Except for the Lexington  Strategic  Investments  Fund,  Inc.,  which has a
significant portion of its assets under management invested in South Africa, the
Lexington  Goldfund,  Inc., which has a significant  portion of its assets under
management invested in Australia,  Canada and South Africa, the Lexington Crosby
Small Cap Asia Growth Fund, which has a significant  portion of its assets under
management  invested in Asia, and the Lexington Troika Dialog Russia Fund, which
has a significant portion of its assets under management invested in Russia, the
Company  believes  that,  in  general,   the  assets  under  management  in  its
global/international  and  precious  metal  equities  funds  are  invested  in a
geographically diversified manner.

    The  Company,   through  its   subsidiaries,   offers   subadvisory   and/or
administration  services  to  other  mutual  funds.  Such  services,  which  are
currently  used by four  unaffiliated  mutual  funds  with  total  assets  under
management of $340.4 million at December 31, 1997, include investment management
and mutual fund administration  services.  Mutual fund  administration  services
provided by the Company are  principally  in the areas of  accounting,  pricing,
compliance and marketing support.

     Strategy.  The Company's  current  strategies in the mutual fund market are
to: (i) identify  emerging  trends in order to develop new investment  products;
(ii)  strengthen the "brand name"  awareness of the Lexington  Funds both at the
broker-dealer  level and the retail investor level; (iii) broaden its efforts to
offer subadvisory and administration services to other mutual funds; (iv) expand
into other  distribution  channels;  and, (v)  evaluate  and pursue  acquisition
opportunities.

     The Company  believes  that with  focused  market  research  efforts it can
identify  demographic  and industry  trends relevant to the growth of the mutual
fund  business  and  thereby  develop   products  to  meet  emerging  needs  and
opportunities. For example, the Company launched the Lexington Global Fund, Inc.
in  March  1987  after  the  Company's  research  indicated  that  international
investing  was an emerging  investment  trend which  offered the  potential  for
reduced  risk  and  higher  expected  returns  through  global  diversification.
Furthermore,  the Company  believes that its smaller relative size in the mutual
fund industry  provides it with a competitive  advantage by enabling the Company
to capitalize upon trends more quickly than its competitors. As another example,
in 1996, the Company launched the Lexington Troika Dialog Russia Fund, the first
open-end fund in the United States devoted to Russian  equities.  In 1997,  this
fund grew  almost  ten fold in assets to  become  one of the  Company's  largest
mutual funds under management.

   To  achieve  greater  "brand  name"  awareness,  the  Company  has used media
relations  consultants to assist in building  relationships  with the media. The
Company's portfolio managers,  analysts and management have appeared in national
print  publications as well as on television and radio.  This program,  combined
with the Company's  internal  promotion  staff that  communicates  directly with
financial  planners,  is  designed  to enhance  the "brand  name"  awareness  of
Lexington and its investment products.

    The Company continuously markets to insurance companies, financial planners,
consultants,  bank trust departments and other financial  intermediaries to sell
its subadvisory  and fund  administration  services and secure new  distribution
channels for its investment products.

     The  Company  utilizes a  formalized  screening  and  valuation  process to
identify  potential  acquisition  candidates  or strategic  partners in order to
expand its  business.  In addition to the Company's  management  contacts in the
mutual fund and investment  management industry,  an outside consultant has been
used in the past to complement management's efforts in this area.

    Management believes that the integration of financial products with targeted
services will also allow it to better pursue  opportunities  in various markets.
For example, the Company has developed funds for the specific purpose of funding
variable  annuity and  variable  life  insurance  policies  issued by  insurance
companies.  Currently,  two such funds are being sold by six insurance companies
and the Company  provides  subadvisory  services  for two  additional  insurance
company funds.

Institutional Market

      Background.  The  market for  institutional  clients  includes  corporate,
government  and   multi-employee   (Taft  Hartley)  pension  plans,   charitable
endowments and  foundations,  insurance  company general  accounts,  and defined
contribution  and 401(k) plans.  According to the 1997 Money Market Directory of
Pension Funds (including  401(k) plans),  the institutional  market  represented
over $4.7 trillion in total assets under  management,  including defined benefit
plan assets, endowments and foundations.

     The  institutional  market is  extremely  competitive  with long lead times
between initial contact and acquisition of an account.  Institutional  investors
increasingly  rely upon a competitive  review process when selecting  investment
advisory  firms.  The process  often  includes  the  assistance  of  independent
investment  consultants,  who analyze,  rank and  recommend  advisors as well as
conduct  searches  for  advisors  on behalf of  clients.  Consultants  typically
classify firms according to their investment style and place heavy emphasis upon
a demonstrated record of investment performance within a particular style. These
consultants often control access to prospective clients.

     Investment  Products and Services.  The products the Company  offers to the
institutional   market  include  investments  in  domestic  and  foreign  equity
securities,  precious metal  equities,  fixed income  securities and a family of
mutual  funds to be  utilized in a client's  pension,  defined  contribution  or
401(k) plan.

    The Company,  through its  subsidiaries,  acts as  subadvisor  under several
variable  annuity  contracts and variable  life  insurance  policies,  including
contracts and policies with Security  Benefit Life Insurance  Company and London
Pacific Life & Annuity  Company.  The Company  also makes  certain of its mutual
funds available to selected insurance companies as funding vehicles for variable
annuity  contracts  and  variable  life  insurance  policies,   including  Aetna
Insurance Company of America,  SafeCo Life Insurance  Company,  Kemper Investors
Life  Insurance  Company,   Transamerica   Occidental  Life  Insurance  Company,
Great-West  Life & Annuity  Insurance  Company,  and Fortis  Benefits  Insurance
Company.

     Strategy.  The Company's strategy in the institutional  market is to target
specialized  segments such as: (i) Taft Hartley and charitable  foundations  and
endowments,  (ii) public  retirement  accounts,  (iii) insurance company general
accounts and,  (iv) broker wrap  accounts.  In addition,  the Company has formed
joint management  arrangements  with other investment  advisory  companies which
offer specialized products or services.

       By targeting specialized segments, management believes that it can market
directly to these segments and leverage upon the integrated  financial  products
and services that it offers. The Company believes the strategy will allow better
penetration of the institutional market.

     The Company  believes that the 401(k) market is of key interest.  According
to Pensions  and  Investments,  assets in the 401(k)  market,  where  investment
decisions  are made by the  individual,  will  surpass the assets in the private
pension system. The 401(k) market,  according to Bernstein Research, is expected
to grow at an  average  annual  rate of 15%  over the next  several  years.  The
Company is targeting the 401(k)  market as a key growth market by  participating
in  administrative  alliances and various  discount broker programs which target
the defined contribution and 401(k) market.

     The  Company  has formed  joint  management  arrangements  with  investment
advisory firms to expand  investment  product  offerings.  The Company  develops
investment  products  in  consultation  with these firms  which  usually  have a
specialization  in evaluating and investing in specific  market segments such as
convertible  securities,  specific  geographic  regions and global fixed income.
These products are subsequently  distributed utilizing Lexington's  distribution
channels  and are jointly  managed by the Company  and the  investment  advisory
firm.  These joint  management  arrangements  are subject to the approval of the
shareholders of the fund utilizing these services and the annual approval of the
Board of Directors of the fund. Firms with which the Company has developed joint
management   arrangements   include  Ariston  Capital   Management   Corporation
(convertible  securities),  Crosby  Asset  Management  (US),  Inc.  (Asia),  MFR
Advisors,   Inc.  (Maria  Fiorini  Ramirez)   (global  fixed  income),   Capital
Technology, Inc. (small cap), and, Troika Dialog Asset Management, ZAO (Russia).
Each of these firms is a registered investment advisor.

      The  Lexington  Crosby  Small Cap Asia Growth Fund has a joint  management
arrangement with Crosby Asset  Management (US), Inc., a wholly-owned  subsidiary
of the Crosby group.  The Crosby group is an  independent  merchant bank in Asia
founded  in 1984  which  provides  a variety  of  financial  services  including
investment  management,  stock brokerage,  research,  and corporate finance. The
Crosby group,  headquartered  in Hong Kong,  employs over 500 people in Asia and
has 18 offices in 11 countries throughout the region, as well as in New York and
London.

     The Lexington Ramirez Global Income Fund has a joint management arrangement
with MFR  Advisors,  Inc.,  a  subsidiary  of Maria  Fiorini  Ramirez  Inc.  MFR
Advisors, Inc. was established in 1992 by the economist Maria Fiorini Ramirez to
provide  global  economic  consulting,  investment  advisory  and  broker-dealer
services.

   The Lexington Convertible  Securities Fund has a joint management arrangement
with Ariston Capital Management Corporation,  a corporation established in 1977.
Ariston Capital Management Corporation's president, Richard B. Russell, has over
20  years  of  experience  in  conducting  research  in the  use of  convertible
securities and market forecasting in portfolio management.

     The Lexington SmallCap Value Fund, Inc. has a joint management  arrangement
with  Capital  Technology,  Inc.,  which  has  been  managing  small  cap  stock
portfolios  since  1977.  Management  utilizes   computer-based   technology  in
combination with analytical research to identify companies for the portfolio.

    The  Lexington  Troika  Dialog  Russia  Fund,  Inc.  has a joint  management
arrangement  with Troika Dialog Asset  Management,  ZAO, a Russian  Closed Joint
Stock Company, established in 1991. Troika Dialog Asset Management, a pioneer in
the development of Russia's  securities  markets, is a subsidiary of the largest
brokerage firm in Russia.

Private Clients

     Background.  With the changing demographics of the United States, the aging
of the "baby boomer"  generation  and the  accumulation  of assets in retirement
accounts,  the  private  client  sector is a growing  segment of the  investment
advisory  industry.  The Company  believes that the principal  needs for private
clients  are  investment  advice and asset  management  services  because  these
clients, as they near retirement,  have a large amount of accumulated assets and
require  sophisticated  estate  planning  advice.  According to a September 1996
Bernstein Research report, there are approximately 2.0 million households in the
United  States  that  have  discretionary  assets  exceeding  $1  million.  This
represents  approximately 2.0% of all U.S.  households and total assets for this
market segment exceed $4.4 trillion.

     Investment Products and Services.  The Company offers equity,  fixed income
and  balanced  fund  investment  options to its high net worth  clients  through
portfolios which are tailored to the client's individual investment objectives.

   The average account size of the Company's  private clients is $753,000.  With
approximately 620 private clients,  the Company's clients are generally heads of
households  in their  mid-40s to 60s with a high  proportion  of their wealth in
liquid assets.

     Strategy. The Company's strategies in the private client sector are to: (i)
integrate  the products and services  offered to these  clients by the Company's
various  subsidiaries,  (ii) design an integrated set of financial  products and
services to meet the  financial  service  needs of these  individuals  and (iii)
excel  in  customer  service  through   utilization  of  the  most  current  and
sophisticated investment planning, management and reporting techniques.

     The Company  offers  products and services to its private  clients  through
LMC's private  client  group.  Currently,  marketing of investment  products and
services  to high net worth  prospects  is  primarily  conducted  by LMC through
direct  sales  and  referral  sales by  retail  stockbrokers,  CPAs  and  lawyer
networks.




LMC and LFD

    LMC and LFD,  both  located  in  Saddle  Brook,  New  Jersey,  form the core
business of the Company  generating  approximately  95% of revenues in 1997. LMC
and its  predecessors  have been active in the  investment  management  business
since 1938.  LMC  provides  products  and  services  for  institutional  clients
including  corporate,  government  and Taft Hartley  pension  plans,  charitable
endowments and foundations,  insurance company general and separate accounts and
defined  contribution and 401(k) plans. The Company's private client business is
also conducted  primarily  through LMC. LMC targets accounts in this market with
up to $5 million to invest, which accounts typically include wealthy individuals
and  smaller  institutional  accounts,  including  foundations,   not-for-profit
corporations, pension plans and employee benefit plans.

   LMC  and  LFD  are  responsible  for  managing,   servicing,   marketing  and
distributing  the  Lexington  Funds to financial  intermediaries  and the retail
market.  The  Lexington  Funds are  designed to provide a variety of  investment
options for retail investors, financial planners and intermediaries, and for the
defined  benefit  and defined  contribution  marketplace,  including  the 401(k)
market.   The  Lexington   Funds  include   equity,   balanced,   fixed  income,
mortgage-backed  and money market funds.  The  geographical  orientation  of the
Lexington Funds range from domestic to international to global.

     Certain  funds  specialize  in  specific  industries  or  sectors,  such as
precious  metals  and  natural  resources,  but  most are  broadly  diversified.
Currently,  the Lexington Funds have approximately 180,000 shareholders.  Of the
seventeen  Lexington  Funds,  two are load funds and fifteen are no-load  funds.
Investment  advisory  services,  as well as management  research and statistical
services,  are  provided to each fund by LMC and LFD. As  compensation  for such
services,  the  mutual  funds pay a fee which is based upon  average  net assets
under  management.  These fees are limited by certain  statutory  limitations on
fund expenses.

     LMC also acts as a sub-advisor and/or administrator to four open-end mutual
funds, all of which are load funds.

     The following  table sets forth the assets for each of the five years ended
December 31, 1997 of each of the Lexington  Funds and for each fund to which LMC
and LFD provides subadvisory and/or administration services.
<TABLE>

                                                    Fund Assets (1)
                                                 (Dollars in Thousands)
                                                                                     December 31,
<S>                                                             <C>          <C>         <C>        <C>         <C>    
                                                               ----------------------------------------------------------
                                                                   1997       1996        1995        1994       1993
Domestic Equity*
Lexington Growth & Income Fund                                   $228,058    $200,231    $138,840   $124,292    $134,494
Lexington Corporate Leaders Trust Fund                            476,405     384,990     247,560    152,990     142,798
London Pacific Corporate Leaders                                    3,506       1,311           -          -           -
Lexington Natural Resources Trust                                  65,320      37,896      16,962     13,620       5,272
Lexington SmallCap Value Fund, Inc.                                 9,578       8,056           -          -           -
                                                               ----------------------------------------------------------
     Total Domestic Equity                                       $782,867    $632,484    $403,362   $290,902    $282,564
                                                               ----------------------------------------------------------
Fixed Income*
Lexington Money Market Trust                                      $94,349     $97,680     $88,961   $110,811     $94,790
Lexington Short-Intermediate Government
  Securities Fund, Inc. (2)                                             -           -           -      5,799       7,718
Lexington GNMA Income Fund, Inc.                                  157,608     133,660     130,735    132,362     149,951
Lexington Ramirez Global Income Fund (3)                           23,569      28,992      10,754     10,578      14,573
Lexington Tax Free Money Fund, Inc. (4)                                 -      26,528      28,203     37,531      41,187
Lexington Convertible Securities Fund                              10,350      11,208      11,634      8,021       8,317
SBL Fund Series K (5) (6) (7)                                      14,445      11,755       5,684          -           -
Security Income Fund-Global Aggressive
  Bond Series (5) (6) (7)                                           6,269       4,915       4,409          -           -
                                                               ----------------------------------------------------------
     Total Fixed Income                                          $306,590    $314,738    $280,380   $305,102    $316,536
                                                               ----------------------------------------------------------
Global International Equity *
Lexington Worldwide Emerging Markets Fund, Inc. (8)              $137,988    $256,532    $260,423   $288,511    $227,464
Lexington Global Fund, Inc.                                        35,088      37,216      53,635     67,353      87,044
Lexington Emerging Markets Fund, Inc.                              24,061      21,581       7,840      4,598           -
Lexington International Fund, Inc.                                 19,950      18,891      17,855     17,811           -
Lexington Crosby Small Cap Asia Growth Fund                        13,986      25,246       8,900          -           -
SBL Fund Series D (5) (6) (7)                                     285,864     246,908     177,935    147,028      97,863
Parkstone Advantage International Discovery Fund (7)                    -           -      11,649      9,501       6,325
Security Equity Fund-Global Series (5) (6) (7)                     33,834      28,543      21,870     23,839      13,898
Lexington Troika Dialog Russia Fund (9)                           137,649      13,804           -          -           -
                                                               ----------------------------------------------------------
     Total Global/International Equity                           $688,420    $648,721    $560,107   $558,641    $432,594
                                                               ----------------------------------------------------------
Precious Metal Equity*
Lexington Goldfund, Inc.                                          $53,945    $109,215    $136,361   $158,846    $159,483
Lexington Strategic Investments Fund, Inc. (7)                     20,760      43,702      76,280    138,164      84,465
Lexington Strategic Silver Fund, Inc. (7)                          43,711      48,378      60,770     50,013      33,625
                                                               ----------------------------------------------------------
     Total Precious Metal Equity                                 $118,416    $201,295    $273,411   $347,023    $277,573
                                                               ----------------------------------------------------------
     Total Funds                                               $1,896,293  $1,797,238  $1,517,260 $1,501,668  $1,309,267
                                                               ==========================================================

--------------------------------------------------------
(1) Each of the funds listed is an open-end fund.  Unless  otherwise  indicated,
    each of the funds is a no-load fund.
(2) Fund  liquidated in December 1995.
(3) Fund  changed  objective  from  tax-exempt  bond fund to global  income  fund on
    January 3, 1995.
(4) Fund liquidated in August 1997.
(5) Fund sponsored by Security Benefit Life Insurance Company.
(6) Fund to which the Company,  through its subsidiaries,  provides  subadvisory
    and administration  services.
(7) Load fund. 
(8) Fund changed  objective from
    growth fund to emerging markets growth fund in June 1991.
(9) Fund commenced operations in June 1996.


*       Of each of the Company's four market segments,  Domestic  Equity,  Fixed
        Income,  Global/International Equity and Precious Metal Equity, invested
        assets held by the Richardson Family constituted 33.2%, 22.8%, 10.8% and
        0%,  respectively,  of the total assets under management with respect to
        each segment.

</TABLE>




Other Subsidiaries

At December 31, 1997, the Company had 2 subsidiaries in addition to LMC and LFD:
Market  Systems  Research  Advisors,  Inc.  ("MSR") and Piedmont  Asset Advisors
L.L.C. ("PAA").
MSR, MSRI--New York, New York.
     MSR  provides  professional  portfolio  management  services  to  investors
through the use of proprietary  quantitative  price  momentum stock  selectivity
models. MSR offers investment advisory services to accounts within the Lexington
organization  and to other  clients.  MSR  publishes a monthly  research  report
through a subsidiary company, Market Systems Research,  Inc. ("MSRI"),  which is
marketed to other investment advisory companies. MSR is owned 65% by the Company
and 35% by Frank A.  Peluso,  a principal  employee who also serves as President
and a Director of the Company.

PAA--New York, New York.
     The  Company  owns 51% of PAA, an entity  formed in 1994 which  served as a
general  partner  of a  limited  investment  partnership  engaged  in the  asset
management   business.   (PAA's  activities  in  the  limited  partnership  were
terminated  in the third  quarter  of 1996.)  The  remainder  of PAA is owned by
R.V.Consultants,  Inc. a company which is owned by Messrs. Stuart S. Richardson,
Robert M. DeMichele and Richard M. Hisey, all of whom are principal employees of
the Company.

Marketing and Distribution

    Traditionally,  load  mutual  funds  were  principally  sold  by  registered
representatives   of   broker-dealers,   who  received   sales   commissions  as
compensation  for fund sales.  No-load  mutual  funds were sold  directly to the
investing  public  without the  assistance  of a registered  representative  and
therefore no sales commission was imposed on the purchase.

     The Company's products and services are marketed and distributed  through a
variety of captive and non-captive distribution channels which are listed below.
The approximate  percentage of assets under management  distributed through each
of  the  Company's  distribution  channels  listed  below  is  provided  in  the
parenthetical immediately prior to the description of such distribution channel.

          (43%) The  Lexington  Family of No Load Mutual  Funds are sold through
direct  sales and  marketing  efforts  utilizing  print,  radio  and  television
advertising.

          (33%) The Company also has  shareholder  servicing  arrangements  with
discount  brokers,  including Charles Schwab Mutual Fund OneSource(R) , Fidelity
Funds  Network(R),  Jack White & Company No Transaction Fee Mutual Fund Service,
Waterhouse Mutual Fund Connection and First Trust Corporation.  The Company also
has a number of its funds included in strategic  alliances and "wrap"  programs,
which will offer greater  distribution  opportunities in the future. At December
31, 1997,  approximately $642 million, or 33%, of LMC's total mutual fund assets
have been  generated  through these named  shareholder  servicing  arrangements.
Under these  shareholder  servicing  arrangements,  the discount  broker,  which
sells,  markets and distributes many mutual funds other than the Lexington Funds
is paid a fee for recordkeeping,  shareholder  communications and other services
provided by the discount broker to investors  purchasing shares of the Lexington
Funds through the discount broker's programs. This fee is typically based on the
average  daily  value of the  investments  in each  Lexington  Fund  made by the
discount broker on behalf of investors  participating  in the discount  broker's
program.  While  the  Company  has no reason to  believe  that such  shareholder
servicing arrangements will be terminated, no assurances can be given that these
arrangements  will continue or that they will continue to generate a substantial
portion of the Company's  total mutual fund assets.  The loss of any one or more
of these shareholder servicing  arrangements may materially adversely affect the
Company's  results of  operations.  The  Company's  ability to gain and maintain
access to these  distribution  channels is largely  dependent on the  investment
performance  of the  Company's  products,  the  development  of  new  investment
products, marketing and pricing strategies that serve the needs of investors and
discount brokers and the level of service provided by the Company.  Although the
Company historically has been successful in these aspects of its business, there
can be no assurance  that the Company can  continue to maintain  such access for
its products.

         (4%) The  Lexington  Strategic  Funds,  which are precious  metal stock
funds, as well as funds sponsored by Security Benefit Life Insurance Company are
sold with a sales charge through broker-dealers and directly by LFD.

         (20%) The  Lexington  Funds are also sold through  banks and  insurance
companies.

    Although the Company does not control all of its distribution  channels, the
Company  believes  that the use of  multiple  distribution  channels,  including
competing  non-captive  distribution  channels,  stabilizes  and  increases  the
distribution of its products.



Regulation

    LMC and MSR are  registered  as  investment  advisors  under the  Investment
Advisers Act of 1940, as amended (the "Advisory  Act"), and all applicable state
securities  laws.  LFD is registered  as a  broker/dealer  under the  Securities
Exchange  Act of 1934,  as amended (the "1934 Act"),  and all  applicable  state
securities  laws.  Accordingly,  this  company is subject to  regulation  by the
Securities and Exchange Commission (the "SEC") and state securities  commissions
and is  required to furnish  periodic  reports  and to observe  restrictions  on
certain  activities.  Each Lexington  Fund is registered  with the SEC under the
Investment  Company Act of 1940,  as amended (the "1940 Act"),  and is qualified
for sale  throughout the United  States.  The 1940 Act imposes  restrictions  on
certain transactions between the Lexington Funds and LMC.

    All  aspects  of  the  Company's  business  are  subject  to  the  laws  and
regulations of the countries and states in which Lexington, its subsidiaries and
affiliates  conduct business.  These laws and regulations are primarily intended
to benefit  clients and  shareholders  and, in some instances may impose minimum
capital  requirements.  These laws and regulations  generally grant  supervisory
agencies broad administrative  powers,  including the power to limit or restrict
Lexington's business and impose sanctions,  to suspend individual employees,  to
limit the Company  from  engaging in business for  specific  periods,  to revoke
LMC's  registration  as  an  investment  advisor  and  LFD's  registration  as a
broker-dealer  and to censure and levy fines.  Applicable  United States Federal
laws also  include the  Employee  Retirement  Income  Security  Act of 1974,  as
amended  ("ERISA"),  and the Securities Act of 1933, as amended (the "Securities
Act").

Competition

    The asset management  business is highly  competitive.  The Company competes
with a large  number of other  domestic  and  foreign  asset  management  firms,
commercial banks, insurance companies,  broker-dealers and others, although as a
practical  matter the  Company  typically  competes  with other  firms  offering
comparable  investment  services and  objectives.  In December 1997,  there were
approximately  10,400 asset  management firms nationwide that compete in some or
all of the  Company's  markets.  According  to The Money  Market,  Directory  of
Pension Funds and their  Investment  Managers,  the Company ranked among the top
380 largest of  investment  counsel  firms,  as measured by total  assets  under
management  at  December  1997.  As a  result,  some of the  financial  services
companies with which the Company competes have  substantially  greater resources
and  assets  under  management  than the  Company  and offer a wider  variety of
products and services.

    The  Company  believes  factors  which  affect its  competition  for clients
include  investment  performance  records,  the range of products  offered,  the
abilities and  reputations of its portfolio  managers,  management  fees and the
development of new investment strategies and marketing,  although the importance
of these  factors can vary  depending  on the type of asset  management  service
involved.  Client service is also an important competitive factor. The Company's
ability to increase  or retain  client  assets  could be  adversely  affected if
client  accounts  underperform  the market or if  portfolio  managers  leave the
Company. The ability of the Company to compete with other asset management firms
is also  dependent,  in part, on the relative  attractiveness  of its investment
philosophies  and  strategies  under  prevailing  market  conditions.  There are
relatively  few  barriers  to entry by new asset  management  firms  which could
increase competitive pressure in the industry.

  Selection of advisors by investors  often is subject to a  competitive  review
process relying heavily upon historical performance.

    A large  number of mutual  funds are sold to the public by asset  management
firms,  broker-dealers,  insurance  companies and banks in competition  with the
Company's  mutual  funds.  Many  competitors  apply  substantial   resources  to
advertising  and  marketing  their mutual funds which may  adversely  affect the
ability of the  Company's  mutual  funds to attract  new  clients  and to retain
assets under management.

Personnel

    At  December  31,  1997,  the  Company  employed  approximately  97  people.
Approximately  90, 3, 1, and 3 were located in Saddle  Brook,  New Jersey;  Gold
River, California; Dallas, Texas; and New York, New York, respectively.  None of
the  Company's  employees  are  represented  by a labor  union  and the  Company
believes that its relations with its employees are good.

                                            RISK FACTORS

Dependence upon Performance Record

   The market for providing investment management services is highly competitive
with  investors   generally  favoring   investment  advisors  with  a  sustained
successful investment  performance record. The performance record of the Company
may be  affected  by factors  over which the  Company  has little or no control,
including  general economic  conditions,  other factors  influencing the capital
markets,  the net sales of mutual  fund  shares  generally,  and  interest  rate
fluctuations.

Concentration of Distribution Channels and Reliance on Certain Distributors

    While the  Company  over time has used a variety of  distribution  channels,
currently a substantial percentage of the Company's investment product sales are
through  non-captive   distribution  channels,   including  no  transaction  fee
programs.  Such  non-captive  distribution  channels  generally  offer competing
internally and externally sponsored or managed investment products and access to
these  distribution  channels  is  limited.  The  Company's  ability to gain and
maintain  access to these  distribution  channels  is largely  dependent  on the
investment  performance  of  the  Company's  products,  the  development  of new
investment  products,  marketing and pricing  strategies that serve the needs of
investors  and the  non-captive  distribution  channels and the level of service
provided by the Company.  Although the Company  historically has been successful
in these aspects of its business, there can be no assurance that the Company can
continue to maintain such access for its products.

     As of  December  31,  1997,  approximately  $642  million,  or 33% , of the
Company's  total  mutual  fund assets have been  generated  through  shareholder
servicing  arrangements with five discount  brokers;  Charles Schwab Mutual Fund
OneSource(R)  , Fidelity Funds  Network(R),  Jack White & Company No Transaction
Fee Mutual Fund  Service,  Waterhouse  Mutual Fund  Connection,  and First Trust
Corporation.  While the Company has no reason to believe  that such  shareholder
servicing arrangements will be terminated, no assurances can be given that these
arrangements  will continue or that they will continue to generate a substantial
portion of the Company's total mutual fund assets under management.  The loss of
any one or more of these  arrangements  could  materially  adversely  affect the
Company's results of operations.

Changes in Market Conditions; Retention of Assets Under Management

    The Company derives the major portion of its revenues from asset  management
contracts with clients. Under these contracts,  the asset management fee paid to
the Company is  typically  based on the market value from time to time of assets
under   management.   Accordingly,   fluctuations  in  securities  prices  could
materially adversely affect the Company's results of operations.

      In  addition,  institutional  asset  management  contracts  are  generally
terminable  upon 30 days'  notice.  Mutual  fund and unit  trust  investors  may
generally  withdraw their funds at any time without prior notice.  Institutional
clients may elect to terminate their  relationship  with the Company,  or reduce
the aggregate  amount of assets under  management,  and  individual  clients may
elect to close their  accounts or redeem  their shares in the  Company's  mutual
funds or unit  trusts,  or shift their  funds to other  types of  accounts  with
different rate structures,  for any of a number of reasons, including investment
conditions  or  changes  in  prevailing   interest  rates  or  financial  market
conditions.  Fees vary with the aggregate  amount of assets under  management by
the Company and with the type of asset being managed, with higher fees earned on
actively  managed  equity and  balanced  accounts and lower fees earned on fixed
income and stable return accounts.

Global/International and Precious Metal Equity Mutual Fund Holdings

    At December 31, 1997, approximately $1.0 billion, or 27.9%, of the Company's
total assets under management were invested in global/international and precious
metal equities.  Many foreign markets,  especially  emerging markets and markets
where precious  metals are mined,  may be  characterized  by volatile  economic,
political and social  conditions.  Many of these countries have also experienced
significant exchange rate fluctuations between the local currencies and the U.S.
dollar  which may subject the U.S.  dollar value of the  Company's  assets under
management  in  global/international  and  precious  metal  equities to currency
translation risk, which could materially  adversely affect the Company's results
of  operations.  The markets in such  countries may also be less liquid and less
efficient  than  domestic  markets.  While the  Company  believes  international
investing  offers the  potential  for reduced risk and higher  expected  returns
through  global  diversification,  fluctuations  in foreign  markets  may have a
material  adverse  effect on the value of the  assets  under  management  in the
Company's global/international and precious metal equities.

     Except for the Lexington  Strategic  Investments  Fund,  Inc.,  which has a
significant portion of its assets under management invested in South Africa, the
Lexington  Goldfund,  Inc., which has a significant  portion of its assets under
management invested in Australia,  Canada and South Africa, the Lexington Crosby
Small Cap Asia Growth Fund, which has a significant  portion of its assets under
management  invested in Asia, and the Lexington Troika Dialog Russia Fund, Inc.,
which has a  significant  portion of its assets  under  management  invested  in
Russia, the Company believes that in general, the assets under management in its
global/international  and  precious  metal  equities  funds  are  invested  in a
geographically diversified manner.

Competition

      The asset management business is highly competitive.  The Company competes
with a large  number of other  domestic  and  foreign  asset  management  firms,
commercial banks, insurance companies,  broker-dealers and others, although as a
practical  matter the  Company  typically  competes  with other  firms  offering
comparable  investment  services and objectives.  Many of the financial services
companies with which the Company competes have  substantially  greater resources
and  assets  under  management  than the  Company  and offer a wider  variety of
products and services.

     The Company  believes  factors  which  affect its  competition  for clients
include  investment  performance  records,  the range of products  offered,  the
abilities and  reputations of its portfolio  managers,  management  fees and the
development of new investment strategies and marketing,  although the importance
of these  factors can vary  depending  on the type of asset  management  service
involved.  Client service is also an important competitive factor. The Company's
ability to increase  or retain  client  assets  could be  adversely  affected if
client  accounts  underperform  the market or if  portfolio  managers  leave the
Company. The ability of the Company to compete with other asset management firms
is also  dependent,  in part, on the relative  attractiveness  of its investment
philosophies  and  strategies  under  prevailing  market  conditions.  There are
relatively  few  barriers  to entry by new asset  management  firms  which could
increase competitive pressure in the industry.

Reliance on Key Personnel

     The Company's  business is managed by key executive  officers,  the loss of
whom could have a material  adverse effect on the Company.  The Company believes
that its  continued  success will depend in large part on its ability to attract
and  retain  highly  skilled  and  qualified  personnel.  In the event  that any
officers or directors of the Company  cease to be  associated  with the Company,
the  Company  will seek to find a  qualified  person or  persons  to fill  their
positions  with the  Company.  There can,  however,  be no  assurance  that such
individuals could be engaged by the Company.

     The Company has reserved 750,000 shares of common stock for issuance to key
employees  under the Long Term  Incentive  Plan  established  in 1995.  The plan
provides for the granting of stock options,  stock appreciation rights and other
stock-based performance awards to employees.

Dividends and Dividend Policy

     The decision  whether to apply  legally  available  funds to the payment of
dividends on the Common  Stock will be made by the Board of Directors  from time
to time in the exercise of its business  judgment,  taking into  account,  among
other things,  the Company's  results of operations and financial  condition and
any  then  existing  or  proposed  commitments  for  the use by the  Company  of
available funds.

    The Company may in the future issue debt  securities  or preferred  stock or
enter into loan or other  agreements  that  restrict the payment of dividends on
and repurchases of the Company's capital stock.

Company Buy-Back Program

     On March 7, 1997, the Company announced a share repurchase program of up to
750,000 shares of its common stock. Repurchases are to be made from time to time
in the open  market  or  through  privately  negotiated  transactions  at market
prices.  The stock  repurchase plan has a term of three years.  During 1997, the
Company repurchased 313,000 shares of its common stock for an aggregate purchase
price of $2,280,375.


Substantial Stockholders

     Descendants  of  Lunsford  Richardson,   Sr.,  their  spouses,   trusts,  a
corporation  in  which  they  have   interests  and   charitable   organizations
established  by such  descendants  (the  "Richardson  Family")  some of whom are
directors of the Company,  beneficially own shares of Common Stock  representing
over 50% of the voting power of all the Company's outstanding voting securities.
Accordingly,  the  Richardson  Family has the ability to elect a majority of the
Board of Directors and, in general, exert significant influence over the outcome
of any other  matters  submitted to the  Company's  stockholders  for  approval,
including mergers, consolidations or the sale of all or substantially all of the
Company's assets, and to prevent or cause a change in control of the Company.

     At December 31, 1997 the Company also managed approximately $842 million in
invested assets of the Richardson Family and certain other related persons which
represent  approximately 24.3% of the Company's total assets under management at
such date.  The fees  charged for the  management  of such assets are based upon
standard fee schedules and are comparable  with the fees charged to unaffiliated
accounts.  While the Company  believes  that it will  continue  to manage  these
assets,  no assurance can be given with respect to the  continued  management of
these  assets.  The loss of such assets would  materially  adversely  affect the
Company's results of operations.

Item 2.  Properties

     Neither the Company nor its  subsidiaries  and majority owned companies own
real  estate.  The  principal  offices of the Company and its  subsidiaries  are
leased from unaffiliated third parties,  which leases expire at various dates up
until the year 2003. The Company and its subsidiaries LMC and LFD are located in
Saddle Brook, New Jersey,  occupying  approximately 28,000 square feet of office
space at an annual rental of  approximately  $578,000  under a lease expiring in
2003.

    MSR leases  approximately 2,100 square feet of office space in New York, New
York, at an annual rental rate of  approximately  $42,000 under a lease expiring
in 1999.

     Substantially  all of the leases  referred to above provide for the payment
of tax, escalation,  maintenance, insurance and certain other operating expenses
applicable to the leased premises.

    In addition to the above leases, the Company leases equipment on a long-term
or month-to-month basis, which rental expense was $112,123 in 1997.

      Additional  information  concerning  leases is  provided  in Note 6 of the
Notes to Consolidated Financial Statements, and such information is incorporated
in this item by reference.

Item 3.  Legal Proceedings

      As part of the normal course of its operations, the Company and certain of
its subsidiaries and majority owned companies are named as defendants in various
legal actions seeking monetary damages.  Management does not expect any material
adverse  judgments to be rendered  against the Company or its  subsidiaries as a
result of pending legal actions.

Item 4.  Submission of Matters to a Vote of Security Holders

(a)  Date of Meeting:  May 15, 1997 Annual Meeting of Stockholders

(b) Matters voted on and number of affirmative/negative votes:
    1.  Election of Directors:
        William R. Miller, L. Richardson Preyer, Lunsford Richardson, Jr.

    For All Directors:  5,279,658      Withheld Authority:  51,943

2.  Other  Directors  whose  term  of  office  as  a  director
    continued  after the May 15, 1997  meeting: 
    Sion A.  Boney,  III, Robert M.  DeMichele,  Haynes  G.  Griffin,
    Peter L.  Richardson, Stuart Smith Richardson
    Carl H. Tiedemann, Marion A. Woodbury

3.  Ratification  of the  selection of KPMG Peat Marwick LLP as the  independent
auditors for the current calendar year.

                  Votes:       For              Against           Abstain
                            5,325,409           1,464              4,728



                                            PART II

Item 5.  Market for Registrant's Common Stock and Related Stockholder Matters

     The Company's  Common Stock is traded in the NASDAQ  National Market System
under the symbol LGAM.  The quarterly  range of prices of the  Company's  Common
Stock as reported by the NASDAQ National Market System were as follows:
                                 1997                               1996
                           High         Low                  High         Low

First                  $ 7.125      $ 5.875              $ 4.906      $ 3.625
Second                 $ 7.000      $ 5.875              $ 6.500      $ 4.375
Third                  $ 9.500      $ 6.875              $ 5.500      $ 4.250
Fourth                $ 10.125      $ 8.000              $ 7.313      $ 5.000



On March 7, 1997,  the  Company  announced a share  repurchase  program of up to
750,000 shares of its common stock. Repurchases are to be made from time to time
in the open  market  or  through  privately  negotiated  transactions  at market
prices. The stock repurchase plan has a term of three years. During the year the
Company repurchased 313,000 shares of its stock for a total of $2,280,375.

     The payment of any  dividends  will depend,  among other  things,  upon the
Company's  earnings,  assets and  general  financial  condition,  and upon other
relevant factors.

       As of  December  31,  1997,  there  were 641  holders of record of Common
Stock.

Item 6.  Selected Financial Data
<TABLE>

                                                              Year Ended December 31,
<S>                                            <C>          <C>          <C>          <C>          <C>   
                                          -----------------------------------------------------------------
                                                1997         1996         1995         1994         1993
                                                       (000's omitted except per share data)
                                                                                                 (Unaudited)
Results of Operation:
      Total revenues (1)                       $18,977      $20,811      $21,286      $22,680      $18,070
      Total expenses                            15,312       17,684       18,965       17,576       15,963
      Provision for taxes                        1,208        1,270          700        2,059          977
      Net income                                 2,397        2,475        1,579        2,990        1,145

Per Share Data:
      Basic per share                            $0.45        $0.45        $0.29        $0.55        $0.21
      Diluted Earnings per share                 $0.45        $0.45        $0.29        $0.55        $0.21

Financial Position:
      Total assets                             $17,433      $16,078      $14,774      $13,646      $10,867
      Total liabilities                          6,938        5,911        6,994       16,201       15,012
      Total stockholders"  equity (deficit)     10,090        9,822        7,347       (2,908)      (4,346)

(1)    Decrease  in  revenue  from  1996  is  attributable  to the  sale of four
       subsidiaries, LFSI, LCMA, LPA, LCMII to Berkeley USA Holdings Limited and
       U.S. unit of London Pacific Group on September 30, 1996.

</TABLE>



(a) Exhibits.  (27) Financial Data Schedule for the twelve months ended December
31, 1997.







Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

     The  consolidated  net  income in 1997 was $2.4  million,  $0.45 per share,
compared to net income of $2.5 million, $0.45 per share in 1996. Included in the
1996 results is a one-time  pre-tax gain of $0.5 million  ($0.09 per share) from
the sale of four of the  Company's  West Coast  subsidiaries.  On September  30,
1996, the Company sold four of the California subsidiaries: LCMA, LFSI, LPA, and
LCMII, to a company formed by the CEO of the  subsidiaries  and the U.S. unit of
London Pacific Group Limited,  Berkeley (USA) Holdings Limited.  On December 31,
1996, LCM was merged into LMC.

     A further discussion and analysis of results of operations follows.

1997 Compared with 1996

The consolidated net income in 1997 was $2.4 million,  $0.45 per share, compared
to net income of $2.5  million,  $0.45 per share in 1996.  Included  in the 1996
results is a one-time  pre-tax gain of $0.5  million  ($0.09 per share) from the
sale of four of the Company's  West Coast  subsidiaries.  On September 30, 1996,
the  Company  sold  four  of  the  California  subsidiaries:  Lexington  Capital
Management  Associates  ("LCMA"),  etc. On December 31, 1996, the remaining West
Coast subsidiary, Lexington Capital Management ("LCM") was merged into Lexington
Management Corporation ("LMC"), the Company's principal operating subsidiary.

Total assets under management at December 31, 1997 were $3.5 billion compared to
$3.2 billion at December 31, 1996.  Each of the Company's  three primary  served
markets,  (Mutual Funds,  Private Client, and  Institutional),  contributed $0.1
billion to the  growth in  assets.  Both the  Private  Client and  Institutional
segments,  which are  primarily  invested in the U.S.  bond and equity  markets,
experienced  growth in assets through superior  performance  results  associated
with the  relatively  strong U.S.  capital  markets in 1997.  Mutual fund assets
under management grew primarily through net cash inflows of $0.2 billion. One of
the  Company's  newer  products,   the  Lexington  Troika  Dialog  Russia  Fund,
experienced  net cash  inflows  of  approximately  $150  million  in 1997 due to
superior investment  performance (ranked number one among emerging markets funds
tracked by Lipper Analytical  Services,  Inc. and as the number four fund in the
Overall Lipper Equity Fund Universe (4,883  funds));  one of the Company's older
products,  the  Lexington  Corporate  Leaders Trust Fund  contributed  over $100
million in net positive  cash flow due primarily to its superior long term track
record and the U.S. equity markets. Although not as significant from a cash flow
standpoint, the Company enjoyed superior investment performance from a number of
its other  products,  including the Lexington  GNMA Income Fund (number one fund
among GNMA Funds tracked by Lipper Analytical Services,  Inc.) and the Lexington
Natural  Resources Trust (which was the number one natural resources fund in the
variable insurance  products category  according to Lipper Analytical  Services,
Inc.). In contrast,  the Lexington  Worldwide  Emerging Markets Fund experienced
net cash outflows of  approximately  $100 million in 1997 due to lower  quartile
performance  and a disaffection  with emerging  markets on the part of investors
due to turmoil in the Asian economies and capital markets. The Asian "contagion"
significantly affected performance in a number of the Company's mutual funds and
was a  contributing  factor to net  depreciation  of $0.1 billion for the mutual
fund group as a whole.  In short,  mutual  fund asset  growth  amounted  to $0.1
billion and was comprised of net cash inflow of $0.2 billion partially offset by
net depreciation of $0.1 billion.

Total  revenues of $19.0  million are 8.7% below 1996 when the Company  recorded
revenues of $20.8 million.  Revenues from the West Coast  operations  which were
reorganized and partially disposed of in 1996,  amounted to $3.4 million in 1997
and $5.6 million in 1996. Excluding the West Coast operations, total revenues of
$15.5 million were $0.3 million above the $15.2 million recorded in 1996.

Net mutual fund management fees, the Company's largest revenue source, increased
$0.5 million to $11.2 million in 1997  compared to $10.7 million in 1996.  These
revenues  increased  as a result  of the  growth  in mutual  fund  assets  under
management. However, underlying the growth in assets under management is a shift
in assets under  management  from some of the Company's  higher priced  products
(emerging  markets and  precious  metals) to some of the lower  priced  products
(domestic  equity  and  fixed  income)  and  to  products  with  shared  revenue
arrangements  (sub-advisory  relationships).  This shift occurred as a result of
relative investment  performance and changing investor  preferences which toward
the end of the year  favored  U.S.  capital  markets  over  some of the  foreign
markets, particularly the emerging markets.

Mutual  fund  commissions  of $63  thousand  were  less  than the $216  thousand
recorded in 1996 because  sales of the  Company's  two products with sales loads
decreased as a result of declining  investor  interest in precious metals mutual
funds.

Other management fees of $7.0 million are down $0.4 million from $7.4 million in
1996.  The  disposed  West Coast  operations  account  for all of this  decline.
Similarly, commissions income declined to $0.2 million in 1997 from $1.7 million
in 1996 as a result of the disposal of the West Coast  operations.  Other income
of $0.5 million is $0.2 million below the 1996 figure of $0.7 million due to the
weaker  performance of some of the Company's  investments in the Lexington Funds
which  were  adversely  affected  by the  turmoil  in the Asian  markets.  Total
expenses of $15.3 million are $2.4 million below total expenses of $17.7 million
in 1996.  Virtually  all of the  decline is  attributable  to the  disposed  and
reorganized  West Coast operations which recorded total expenses of $2.3 million
in 1997 compared to $5.3 million in the prior year period.

Total  personnel  costs of $9.0  million are $2.2  million  lower than the $11.2
million  recorded  in 1996.  A $2.8  million  decline  in West  Coast  personnel
expenses  was  partially  offset by a $0.6 million  increase in LMC's  personnel
costs;  LMC added  personnel  to support and service  its  remaining  West Coast
revenue stream. In addition,  the Company recognized  approximately  $150,000 of
expense  associated  with  the  issuance  of  restricted  stock to  certain  key
executive  employees.  Finally,  employee benefits increased  approximately $0.1
million as a result of higher medical  insurance  premiums despite the Company's
switch to a different provider.

Selling and  promotional  costs of $1.3 million are $0.1 million  above the $1.2
million in such costs in the year earlier,  reflecting LMC's greater advertising
support  behind  several  mutual funds with  superior  performance  results.  In
particular, the Lexington Troika Dialog Russia Fund received significant support
in the second half of 1997 as its performance placed the Fund in the top five of
the entire equity fund universe followed by Lipper Analytical Services.

General and administrative  costs of $5.0 million are $0.2 million less than the
prior year's figure of $5.2 million.  The decrease is primarily  attributable to
the disposed West Coast operations.  In addition, the Company benefited from the
absence  of  certain  legal  and  audit  fees   associated  with  the  Company's
reorganization which impacted the prior year results. Partially offsetting these
decreases were higher  administrative costs related to assets generated from its
West Coast  operations  and one-time  costs  related to the  termination  of the
Company's former portfolio  management system. The Company's new system is fully
state-of-the-art which includes compliance with the year 2000 data requirements.

Pre-tax  income  amounted to $3.7 million for 1997 and 1996.  The  provision for
state and federal taxes  remained  relatively  unchanged  due to the  comparable
profit performance in 1997 and 1996. The Company used approximately $3.8 million
of net operating  loss  carryforwards  (NOLs) in 1997 and has remaining  NOLs of
approximately  $2.1 million which are available to offset future  taxable income
which expire over the period 2003 through 2012. Overall,  net income amounted to
$2.4  million or $0.45 per share in 1997  compared  to $2.5  million,  $0.45 per
share in 1996.


1996 Compared with 1995

Total revenues of $20.8 million are 2.4% less than the $21.3 million recorded in
1995.

The revenue decrease primarily  reflected the sale of four of the Company's West
Coast  subsidiaries  on  September  30,  1996.  These  subsidiaries  would  have
contributed  approximately  $1.5  million in  additional  revenue for the fourth
quarter.  Partially  offsetting  the  effect of the sale is a 9.5%  increase  in
mutual fund  management  fees. This reflects the strong mutual fund asset growth
at the Company's Core Business (LMC/LFD).  This business delivered $14.4 million
in revenues in 1996 versus $14.2 million in 1995,  reflecting  the $300 million,
18.4%  increase  in mutual  fund  assets  under  management.  Asset  growth  was
strongest in domestic  equity  ($0.2  billion)  and  international  equity ($0.1
billion),  partially offset by precious metals which were down $0.1 billion. The
largest  increase  in mutual  fund  assets  under  management  was in  Lexington
Corporate  Leaders Trust which  increased by 56% or $137 million in assets under
management.  In general, stronger investor demand and performance in a number of
the Lexington funds drove the increase in assets under  management.  Mutual fund
management fees increased from $9.8 million in 1995 to $10.7 million in 1996. In
particular,  management  fees associated  with the Lexington  Corporate  Leaders
Trust Fund,  SBL Fund Series D, and  Lexington  Growth & Income Fund,  Inc. grew
significantly due to the asset increases noted above.

Other  management  fees  experienced a $1.7 million decline from $9.1 million in
1995 to $7.4 million.  This income primarily  reflects private client management
fees at the West Coast  operations,  which, as mentioned above, were sold at the
end of the third quarter and contributed  $1.2 million in other  management fees
in  the  fourth  quarter  of  1995.   This  revenue  line  also  includes  LMC's
institutional asset management fees which declined by $0.8 million from 1995 due
to client terminations.

Commissions income of $1.7 million were even with 1995.

Other income of $0.7 million is $0.2 million above 1995, and is  attributable to
higher investment income.

Expenses of $17.7 million decreased $1.3 million from $19.0 million in 1995. The
Company's Core Business  incurred total expenses of $10.9 million which are $1.1
million below the $12.0  million for 1995,  when the Company  incurred  one-time
reorganization expenses of $2.2 million due to the Spin-off. The Company's other
subsidiaries  incurred expenses of $6.8 million for 1996 versus $7.0 million for
1995.

Total  salaries and other  compensation  increased $0.7 million to $11.2 million
from $10.5  million as a result of : 1) the  addition  of  investment  and other
personnel;  2) higher  commissions  associated  with  increased  revenues in the
Company's West Coast  operations;  and, 3) the fact that the prior year expenses
benefited from an employee  benefit  refund  associated  with a good  experience
rating.  Selling and promotional expenses of $1.2 million are down $0.7 million.
This is primarily  due to the Company  re-targeting  its  marketing  efforts and
making greater use of public relations.  Administrative  and general expenses of
$5.2  million are $1.4  million  lower than $6.6  million in 1995.  The decrease
reflects $2.2 million in various  professional  fees incurred in 1995 associated
with  the  Spin-off  and  internal  reorganization  of  the  Company.  Partially
offsetting the $2.2 million decline are the additional costs associated with the
Company's public reporting responsibilities.

The Company  recorded a $0.5 million gain on the sale of LFSI,  LPA,  LCMA,  and
LCMII which occurred on September 30, 1996.  Pre-tax income grew to $3.7 million
in 1996  from  $2.3  million  in 1995,  an  increase  of 60.9% or $1.4  million.
Provision for state and federal taxes  increased 88.7% from $0.7 million in 1995
to $1.3 million in 1996, due to higher profits.

Overall, net income increased 56.3% from $1.6 million in 1995 to $2.5 million in
1996. Earnings per share were $0.45 in 1996 compared to $0.29 in 1995.

Effects of Inflation

The Company does not believe that inflation has had a significant  impact on the
operations of the Company to date.  The Company's  assets  consist  primarily of
cash and  investments  which are  monetary  in  nature.  However,  to the extent
inflation results in rising interest rates with the attendant adverse effects on
the securities  markets and on the values of  investments  held in the Company's
accounts,  inflation may adversely affect the Company's  financial  position and
results of operations. Inflation also may result in increased operating expenses
(primarily  personnel-related  costs) that may not be readily recoverable in the
fees charged by the Company.

Liquidity and Financial Condition

The  Company's   business  typically  does  not  require   substantial   capital
expenditures.  The most  significant  investments  are in technology,  including
computer equipment and telephones.

Historically,  the  Company  has been  cash  self-sufficient.  Cash  flows  from
operations have ranged between $1.5 million and $3.7 million over the past three
years primarily as a result of the Company's net income.

Net cash from investing  activities  have ranged between inflows of $0.5 million
and outflows of $0.5 million over the past three years.  The primary use of cash
in 1997 were the purchase of computer equipment.

Cash flows from financing  activities  consistently  have been negative over the
past three  years.  The most  significant  outflow  was the payment of a regular
quarterly dividend to Piedmont, the Company's former parent which ended in 1995.
On March 7, 1997, the Company announced a 750,000 share repurchase program under
which the Company may  repurchase its stock from time to time in the open market
or  through  privately  negotiated  transactions  at  market  prices.  The stock
repurchase  plan  has a term  of  three  years.  During  the  year  the  Company
repurchased  313,000 shares of its stock for a total of $2,280,375.  The Company
may in the future issue debt securities or preferred stock or enter into loan or
other agreements that restrict the payment of dividends on and repurchase of the
Company's capital stock.

Historically,  the Company has maintained a substantial  amount of liquidity for
purposes of meeting regulatory  requirements and potential business demands.  At
December  31, 1997 the Company  has $8.7  million of cash and cash  equivalents.
Management  believes  the  Company's  cash  resources,  plus  cash  provided  by
operations,  are  sufficient  to meet  the  Company's  foreseeable  capital  and
liquidity  requirements.  As a result  of the  holding  company  structure,  the
Company's  cash flows will depend  primarily on  dividends or other  permissible
payments from its subsidiaries.  The Company has no standby  lines-of-credit  or
other similar arrangements.

LFD,  as  a  registered  broker-dealer,   has  federal  and  state  net  capital
requirements  at December 31, 1997 of $25,000.  The aggregate net capital of LFD
was $0.3  million at December  31,  1997.  LMC,  MSR,  and MSRI,  as  registered
investment  advisors,  must meet net capital requirements imposed at the Federal
and state levels.

Stockholders'  equity on December 31, 1997  increased to $10.1 million from $9.8
million a year earlier primarily as a result of the Company's net income.

Management  believes that the Company's  liquid assets and its net cash provided
by operations  will enable it to meet any  foreseeable  cash  requirements.  The
Company's overall financial condition remains strong.

Year 2000

The Company,  like most  commercial  and financial  institutions,  is working to
ensure that its operating and processing  systems will,  along with those of its
service providers,  continue to function when the year 2000 arrives. The Company
has developed  and  implemented  a  comprehensive  plan to complete all internal
system  conversions by the end of 1998. A significant  part of the plan involves
upgrading  current  software  to  newer  versions  which  are  fully  Year  2000
compliant.  To date, most of the Company's  current  software  systems are fully
compliant.  Based on this plan, it is estimated that incremental expenses to the
Company for the Year 2000 project will be nominal.  In addition,  the Company is
keeping  apprised of the progress of outside  vendors' plans to become Year 2000
compliant.  Based on their progress,  we feel confident that the outside vendors
will achieve compliance in 1998.




Item 8.  Financial Statements

     The following are included and filed under this item:

                                                            

Report of Independent Accountants                             


LEXINGTON GLOBAL ASSET MANAGERS, INC.

Consolidated Statements of Financial Condition--
December 31, 1997 and 1996                                    


Consolidated Statements of Operations--Years Ended
 December 31, 1997, 1996 and 1995 .                           


Consolidated Statements of Changes in Stockholders
 Equity (Deficit)--Years Ended December 31, 1997,
   1996 and  1995                                             


Consolidated Statements of Cash Flows--Years Ended
 December 31, 1997, 1996 and 1995                             


Notes to Consolidated Financial Statements                    





                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Stockholders of
Lexington Global Asset Managers, Inc. :

   We  have  audited  the  consolidated  statement  of  financial  condition  of
Lexington  Global Asset Managers,  Inc. and  Subsidiaries  ("the Company") as of
December  31,  1997,  and the related  consolidated  statements  of  operations,
changes  in  stockholders'  equity  (deficit),  and cash flows for the year then
ended.  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  audit.  The  accompanying  consolidated  statement  of
financial condition of Lexington Global Asset Managers,  Inc. as of December 31,
1996,  and  the  related  consolidated  statements  of  operations,  changes  in
stockholders' equity (deficit),  and cash flows for the years ended December 31,
1996 and 1995,  were  audited by other  auditors  whose  report  thereon,  dated
February  19,  1997,   expressed  an  unqualified  opinion  on  these  financial
statements.

    We  conducted  our audit in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 audit provides a reasonable basis for our opinion.

    In our opinion, the 1997 consolidated financial statements referred to above
present fairly, in all material  respects,  the financial  position of Lexington
Global Asset  Managers,  Inc. and  Subsidiaries as of December 31, 1997, and the
results of their operations and their cash flows for the year ended December 31,
1997, in conformity with generally accepted accounting principles.



                                                /s/ KPMG Peat Marwick LLP
                                                KPMG Peat Marwick LLP




February 18, 1998


<TABLE>


                                        LEXINGTON GLOBAL ASSET MANAGERS, INC.
                                                             AND SUBSIDIARIES


                                                                            



CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31,
                                                             1997               1996
<S>                                                        <C>              <C>  

Assets:
Cash and cash equivalents:
   Cash                                                    $ 193,383        $ 1,631,249
   Money market accounts                                   8,511,915          5,898,575
                                                      ---------------    ---------------
                                                           8,705,298          7,529,824
                                                      ---------------    ---------------

Receivables:
   Investment advisory and management fees                 1,233,377          1,161,473
   Due from funds and other                                  596,333            868,649
                                                      ---------------    ---------------
                                                           1,829,710          2,030,122
                                                      ---------------    ---------------
Marketable securities                                      1,524,788          1,205,350
Prepaid expenses                                           1,708,122            367,159
Prepaid taxes                                                  6,203             11,900
Fixed Assets (net of accumulated depreciation and
   amortization)                                           1,384,772          1,347,324
Intangible assets (net of accumulated amortization)          194,676            210,875
Deferred income taxes                                      1,938,213          3,131,842
Other assets                                                 141,491            243,120
                                                      ---------------    ---------------
        Total assets                                    $ 17,433,273       $ 16,077,516
                                                      ===============    ===============


Liabilities:
Accounts payable and accrued expenses                      $ 926,177        $ 1,027,123
Accrued compensation                                       1,530,100          1,480,337
Accrued employee benefits                                  1,981,308          1,183,866
Deferred income                                            1,626,123          1,197,576
Federal income taxes payable                                 863,667          1,015,351
Other liabilities                                             10,579              6,681
                                                      ---------------    ---------------
        Total liabilities                                  6,937,954          5,910,934
                                                      ---------------    ---------------
Minority interest                                            405,058            344,909

Stockholders' Equity:
Common stock, $.01 par value; 15,000,000 authorized shares;
   5,487,887 issued                                           54,879             54,879
Additional paid-in capital                                21,708,142         21,501,517
Accumulated deficit                                       (9,345,918)       (11,734,723)
Deferred compensation                                     (1,654,342)                 -
Treasury stock at cost                                      (672,500)                 -
                                                      ---------------    ---------------
        Total stockholders' equity                        10,090,261          9,821,673
                                                      ---------------    ---------------

        Total liabilities and stockholders' equity      $ 17,433,273       $ 16,077,516
                                                      ===============    ===============



           See accompanying notes to the consolidated financial statements.
</TABLE>
<TABLE>

                                          LEXINGTON GLOBAL ASSET MANAGERS, INC.
                                                               AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31,
                                                          1997            1996            1995
<S>                                                    <C>            <C>              <C>  
Revenues:
   Investment advisory:
      Mutual fund management fees (including
          approximately $521,000,  $430,000,  
          $452,000, from related parties)              $ 11,223,251   $ 10,723,805     $ 9,789,003
      Mutual fund commissions                                62,838        215,656         175,434
      Other management fees (including approximately
         $2,695,000  $2,102,000 $2,443,000
         from related parties)                            7,044,356      7,395,337       9,107,863
   Commissions income                                       151,334      1,734,411       1,692,261
   Other income                                             495,175        742,092         521,556
                                                      --------------  -------------   -------------
      Total revenues                                     18,976,954     20,811,301      21,286,117
                                                      --------------  -------------   -------------

Expenses:
   Salaries and other compensation                        9,015,128     11,241,242      10,492,925
   Selling and promotional                                1,299,742      1,231,927       1,893,083
   Administrative and general                             4,997,322      5,210,413       6,578,621
                                                      --------------  -------------   -------------
      Total expenses                                     15,312,192     17,683,582      18,964,629
                                                      --------------  -------------   -------------
      Income before income taxes, gain on sale of
           subsidiaries, and minority interest            3,664,762      3,127,719       2,321,488

Gain on sale of subsidiaries                                      -        529,881               -

Provision for income  taxes
   Current                                                   13,929      1,353,734       1,285,843
   Deferred                                               1,193,629        (83,559)       (586,027)
                                                      --------------  -------------   -------------
      Total provision                                     1,207,558      1,270,175         699,816
                                                      --------------  -------------   -------------
      Income before minority interest                     2,457,204      2,387,425       1,621,672
Minority interest                                            60,149        (87,227)         43,015
                                                      --------------  -------------   -------------
      Net income                                        $ 2,397,055    $ 2,474,652     $ 1,578,657
                                                      ==============  =============   =============

Earnings per share (Note 12):
   Basic earnings per share                                   $0.45          $0.45           $0.29
                                                      ==============  =============   =============
   Diluted earnings per share                                 $0.45          $0.45           $0.29
                                                      ==============  =============   =============

   Average shares outstanding during the period           5,322,172      5,487,887       5,487,887
                                                      ==============  =============   =============


                 See   accompanying   notes   to  the   consolidated   financial
statements.
</TABLE>
<TABLE>

                                          LEXINGTON GLOBAL ASSET MANAGERS, INC.
                                                              AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) Years Ended
December 31, 1997, 1996, and 1995




                                     Common Stock                                                         Total
                                       Shares                Additional       Accumulated   Deferred    Treasury     Stockholders'
                                       Issued      Amounts   Paid-In Capital     Deficit    Compensation   Shares  Equity (Deficit)
                                      ---------   --------   --------------   ---------    ---------   ---------     -----------
<S>                                   <C>          <C>        <C>           <C>           <C>          <C>            <C>

Balance at December 31, 1994          5,487,887    $54,879    $11,325,665  ($14,288,032)           -           -     ($2,907,488)
Net income                                    -          -              -     1,578,657            -           -       1,578,657
Dividends                                     -          -              -    (1,500,000)           -           -      (1,500,000)
Capital contributions                         -          -         76,000             -            -           -          76,000
Conversion of debt to equity                  -          -     10,099,852             -            -           -      10,099,852
                                      ---------   --------      ---------     ----------  ----------  -----------    -----------
Balance at December 31, 1995          5,487,887     54,879     21,501,517   (14,209,375)           -           -       7,347,021
Net income                                    -          -              -     2,474,652            -           -       2,474,652
                                      ---------   --------      ---------     ----------  ----------  -----------    -----------
Balance at December 31, 1996          5,487,887     54,879     21,501,517   (11,734,723)           -           -       9,821,673
Net income                                    -          -              -     2,397,055            -           -       2,397,055
Purchase of treasury shares at cost           -          -              -        (8,250)           -  (2,280,375)     (2,288,625)
Issuance of restricted stock awards           -          -        206,625             -            -   1,607,875       1,814,500
Deferred compensation                         -          -              -             -   (1,654,342)          -      (1,654,342)
                                      ---------   --------      ---------     ----------  ----------  -----------    -----------
Balance at December 31, 1997          5,487,887    $54,879     21,708,142    (9,345,918) ($1,654,342)  ($672,500)     10,090,261
                                      =========   ========     ==========     ==========  ==========  ===========    ===========



    See  accompanying  notes  to  the  consolidated   financial statements.
</TABLE>
<TABLE>

                                          LEXINGTON GLOBAL ASSET MANAGERS, INC.
                                                               AND SUBSIDIARIES




CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
                                                              1997            1996          1995
<S>                                                        <C>           <C>           <C> 

Cash flows from operating activities:
Net income                                                 $ 2,397,055   $ 2,474,652   $ 1,578,657
Adjustments to reconcile net income to net cash provided
   by operating activities:
      Depreciation and amortization                            319,267       389,090       392,923
      Amortization of deferred costs                             9,220        36,884        36,884
      Gain on sale of subsidiaries                                   -      (529,881)            -
      Deferred income taxes                                  1,193,629       (83,559)     (586,027)
      Minority interest                                         60,149       (87,227)       43,015
      Compensation expense - stock options                     151,908             -             -
Change in assets and liabilities
      Receivables                                              200,412       754,372      (779,783)
      Trading securities                                      (319,438)     (273,068)     (157,399)
      Prepaid expenses                                      (1,340,043)      (17,391)     (190,697)
      Prepaid taxes                                              5,697        30,465        (4,969)
      Accounts payable and accrued expenses                    746,259      (566,869)    1,092,218
      Federal income taxes payable                            (151,684)       36,167       445,799
      Deferred income                                          428,547      (394,955)     (224,309)
      Other                                                     45,432        48,823      (114,493)
      Net assets of subsidiaries sold                                -      (286,425)            -
                                                          ------------- ------------- -------------
Net cash provided by operating activities                    3,746,410     1,531,078     1,531,819

Cash flows from investing activities:
      Purchases of furniture, equipment and leasehold
         improvements                                         (340,515)     (425,803)     (504,648)
      Purchases of intangibles                                       -        (7,225)            -
      Sale of furniture and equipment                                -       157,470             -
      Net proceeds from sale of subsidiaries                    49,954       816,306             -
                                                          ------------- ------------- -------------
Net cash (used in) provided by investing activities           (290,561)      540,748      (504,648)

Cash flows from financing activities:
      Principal payments under capital lease obligations             -      (157,019)     (135,764)
      Dividends                                                      -             -    (1,500,000)
      Capital contributions                                          -             -        76,000
      Purchase of treasury stock                            (2,280,375)            -             -
                                                          ------------- ------------- -------------
Net cash used in financing activities                       (2,280,375)     (157,019)   (1,559,764)
                                                          ------------- ------------- -------------
Net increase / (decrease) in cash and cash equivalents       1,175,474     1,914,807      (532,593)
Cash and cash equivalents, beginning of year                 7,529,824     5,615,017     6,147,610
                                                          ------------- ------------- -------------
Cash and cash equivalents, end of year                     $ 8,705,298   $ 7,529,824   $ 5,615,017
                                                          ============= ============= =============

Supplemental cash flow disclosure
     Income taxes paid                                       $ 472,910   $ 1,665,849     $ 917,679
     Interest paid                                                 $ -           $ -     $ 108,530

Supplemental schedule of non-cash investing activities
     Conversion of debt to equity                                  $ -           $ -  $ 10,099,852




    See   accompanying   notes   to  the   consolidated   financial statements.
</TABLE>

                                          LEXINGTON GLOBAL ASSET MANAGERS, INC.
                                                              AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Organization and Business

Lexington  Global  Asset  Managers,  Inc.  (the  "Company")  serves as a holding
company for the following asset management  subsidiaries  (collectively referred
to as  the  "Subsidiaries"):  Lexington  Management  Corporation  (100%  owned),
Lexington Funds Distributor Inc. (100% owned), MSR Advisors Inc. (65% owned) and
Piedmont  Asset  Advisors  (51%  owned).  The  Subsidiaries  are  engaged in the
management,  distribution,  and administrative services for the Lexington Family
of Funds  ("Funds") and for its  institutional  and private  clients.  Lexington
Management  Corporation  ("LMC") and MSR Advisors  Inc.,  ("MSR") are registered
investment  advisors  under the  Investment  Advisers  Act of 1940,  as amended.
Lexington  Funds  Distributor  ("LFD") is a registered  broker/dealer  under the
Securities  Exchange  Act of 1934,  is a member of the National  Association  of
Securities  Dealers,  Inc.  ("NASD"),  and is therefore  subject to various NASD
regulations, including net capital requirements.

On September  30, 1996,  the Company sold four of its  California  subsidiaries:
Lexington Capital Management  Associates,  Inc. ("LCMA"), LCM Financial Services
Inc.  ("LFSI"),  Lexington  Plan  Administrators  ("LPA"),  and  LCMI  Insurance
Services  ("LCMII"),  to a company formed by the CEO of the subsidiaries and the
U.S. unit of London Pacific Group Limited,  Berkeley (USA) Holdings Limited.  On
December 31, 1996, Lexington Capital Management ("LCM") was merged into LMC.

2.  Basis of Presentation and Summary of Significant Accounting Policies

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of contingent  assets and liabilities at the date of the consolidated
financial  statements and the reported  amounts of revenues and expenses  during
the reporting period. Actual results could differ from those estimates.

Principles of Consolidation
     The accompanying  consolidated financial statements include the accounts of
the Company and the  Subsidiaries.  All material  intercompany  transactions and
accounts have been eliminated.

Cash Equivalents
     Cash equivalents consist of highly liquid investments. At December 31, 1997
and 1996 cash  equivalents  consist  primarily of investments in Lexington Money
Market Trust, recorded at market value (which approximates cost).

Trading Securities
     The Company designates all marketable equity securities as held for trading
purposes.

     Marketable  equity  securities  (including  funds  that are  advised by the
Company)  are  carried  at value.  The  value of  marketable  equity  securities
(excluding  funds that are advised by the Company) is generally  based on quoted
market  prices.  The value of the  Funds  that are  advised  by the  Company  is
determined  by  multiplying  the  number  of  shares  held in  each  Fund by its
respective net asset value.

     Realized  gains and losses are  calculated  on the specific  identification
method and are included in other income. Unrealized appreciation  (depreciation)
arises  from the  difference  between  the cost and value of  securities  and is
recognized in other income.

Revenue Recognition
     Investment  management  and  advisory  fees are  recorded as income for the
period in which the  services  are  performed.  Commissions  related to security
transactions are recorded on trade date.

Segment Reporting
     The Company considers themselves to operate in one line of business.

Depreciation and Amortization
     Furniture and equipment are depreciated on a straight-line basis over their
estimated useful lives.  Leasehold improvements are amortized on a straight-line
basis over the shorter of the lease term or the estimated useful life.


Intangible Assets
     The Company assesses the  recoverability  of its intangible assets whenever
significant events or changes occur which may impair recovery of recorded costs.
Based on its  most  recent  analysis,  the  Company  believes  that no  material
impairment of its intangible assets exists at December 31, 1997.

Stock-Based  Compensation  
In October 1995, the Financial  Accounting  Standards Board issued  Statement of
Financial  Accounting  Standards  ("SFAS") No. 123,  "Accounting for Stock-Based
Compensation,"  effective for financial  statements  for fiscal years  beginning
after  December  15, 1995.  SFAS No. 123  required the Company to adopt,  at its
election, either 1) the provisions in SFAS No. 123 which require the recognition
of compensation  expense for employee  stock-based  compensation plans or 2) the
provisions in SFAS No. 123 which require the pro forma  disclosure of net income
and earnings per share as if the recognition provisions of SFAS No. 123 had been
adopted. SFAS No. 123 explicitly provides that employers may continue to account
for  their  employee   stock-based   compensation  plans  using  the  accounting
prescribed by Accounting  Principles Board Opinion No. 25, "Accounting for Stock
Issued  to  Employees"   (APB  No.  25).  The  Company  adopted  the  disclosure
requirements of SFAS No. 123 effective  January 1, 1996 and continues to account
for its employee  stock-based  compensation plans under APB No. 25. 

Employee and Retiree  Benefit  Plans 
Certain  subsidiaries  sponsor  various benefit plans including a 401(k) savings
plan and a defined  benefit pension plan covering  substantially  all employees.
The Subsidiaries  also provide retired employees the option of continuing health
and life insurance  benefits  through various welfare benefit plans in which the
retiree shares in the cost.

Income Taxes
     The  Company  and  its  wholly  owned  subsidiaries  are  included  in  the
consolidated  federal  income tax return filed by the Company.  Partially  owned
subsidiaries filed their own federal income tax returns.
      The  Company  accounts  for  income  taxes  under the asset and  liability
method.  Deferred  income  tax  assets  and  liabilities  are  computed  for the
differences  between  the  financial  statement  and tax  bases  of  assets  and
liabilities  based on enacted  tax laws and rates  applicable  to the periods in
which the differences are expected to reverse.

Financial Instruments
     The fair value of cash and cash equivalents,  receivables, accounts payable
and accrued  expenses  approximates  cost because of the immediate or short term
maturity of these financial  instruments.  The fair value of trading  securities
has been disclosed in the  accompanying  consolidated  financial  statements and
notes.

Securities Transactions
     Purchases and sales of fund shares through the  underwriting  activities of
LFD are recorded on a trade date basis.  All customer  funds and  securities  in
connection with its investment  management and advisory  services are maintained
by independent custodians.

Financial Statement Presentation
     Certain  prior year  amounts  have been  reclassified  to conform  with the
current year presentation.



3.  Fixed Assets
<TABLE>

Fixed assets at December 31, 1997 and 1996 consisted of the following:

                                                                 1997              1996
<S>                                                            <C>               <C>    

Furniture, fixtures and equipment                              $3,074,485        $2,733,968
Leasehold improvements                                            155,521           155,521
                                                             -------------     -------------
     Depreciable fixed assets                                   3,230,006         2,889,489
Less accumulated depreciation and amortization                  1,845,234         1,542,165
                                                             -------------     -------------
Fixed assets, net                                              $1,384,772        $1,347,324
                                                             =============     =============

</TABLE>

Depreciation and amortization charged to operations were $319,267, $389,090, and
$392,923 for the years ended  December 31,  1997,  1996 and 1995,  respectively.
These amounts include amortization of goodwill of approximately $16,200.

Depreciation  and amortization is provided using the  straight-line  method over
the following estimated lives:

            Asset                                           Estimated Life
Furniture and fixtures                                         12 years
Office equipment                                                5 years
Leasehold improvements                                      term of lease


4.  Trading Securities

At December 31, 1997 and 1996, trading securities consisted of the following:

                                                1997              1996
Funds advised by the Company                $1,272,519        $1,205,350
Equity Securities                              252,269                 -
                                            ----------        ----------
Total trading securities                    $1,524,788        $1,205,350
                                            ==========        ==========

5.  Deferred Income and Prepaid Expenses

Certain clients pay investment  advisory fees to LMC annually in advance.  These
fees are recorded as deferred  income and  recognized as income over the periods
the services are  performed.  At December 31, 1997,  the balance in the deferred
income   account  was  $1,626,123  and  was  recorded  as  a  liability  in  the
consolidated statement of financial condition.

LMC has an agreement with SAI Capital Holdings, Inc. ("Select"),  whereby Select
provides  back office and other  administrative  services  for these  clients in
return for an administration  fee. The administration fee ranges from 50% to 82%
of the investment  advisory fee received from these clients.  The fee is paid to
Select annually in advance and is recorded as a prepaid expense and amortized as
services are received.  At December 31, 1997, the balance in prepaid expense for
administrative services was $1,255,175.


6.  Regulatory Requirements

The  broker/dealer  subsidiary  is  subject  to  rules  and  regulations  of the
Securities  and Exchange  Commission  which require  maintenance  of minimum net
capital and reserve  accounts.  At December 31, 1997,  the amount of net capital
required for the broker dealer subsidiary pursuant to such rules and regulations
was $25,000.  The net capital of the  broker/dealer  subsidiary  at December 31,
1997 amounted to $298,594.


7.  Intangible Assets

Intangible  assets represent the goodwill arising from the original  acquisition
of the LMC business by Piedmont Management Company,  Inc.  ("Piedmont") in 1969.
The  goodwill  is the  excess of the  purchase  price over the fair value of net
assets acquired and is amortized on a straight-line basis over forty years.

Accumulated  amortization  of goodwill  amounted to  approximately  $469,000 and
$452,000 at December 31, 1997 and 1996, respectively.


8.  Commitments and Contingencies

The Subsidiaries lease  administrative  offices under  noncancellable  operating
leases.

     The future minimum lease payments are as follows:

         1998.....................................$599,000
         1999..................................... 624,000
         2000..................................... 586,000
         2001..................................... 578,000
         2002..................................... 578,000
         Later years.............................. 386,000
                                                  --------
                                                $3,351,000
                                                ==========

Rent expense was approximately $626,000, $941,000, and $1,140,000, for the years
ended December 31, 1997, 1996, and 1995, respectively.

9.  Common and Preferred Stock

On December  13,  1995,  the Company was  recapitalized  by adoption of restated
articles  of  incorporation  authorizing  15,000,000  shares  of  common  stock.
Piedmont distributed all of the Company's outstanding common stock as a dividend
to the  holders  of  Piedmont  common  stock,  on a  one-for-one  basis for each
outstanding  share of  Piedmont  common  stock.  The  accompanying  consolidated
financial statements of the Company have been retroactively reclassified to give
effect to the recapitalization.

The Company has 5,000,000 shares of preferred stock,  $.01 par value authorized;
no shares are issued or outstanding.

10.  Incentive Plan

The Company has  reserved  750,000  shares of common  stock for  issuance to key
employees  under the Long Term  Incentive  Plan  established  in 1995.  The plan
provides for the granting of stock options,  stock appreciation rights and other
stock-based performance awards to employees. In 1997, 131,000 stock options were
granted at an exercise  price of $6.25 and 10,000 stock  options were granted at
an exercise price of $8.00,  the market values at the respective dates of grant.
During 1995,  180,000 stock options were  granted,  all at an exercise  price of
$4.75,  the  market  value at date of  grant.  No grants  were made in 1996.  No
options  were  exercised  or  expired  in 1997 and  1996  although  90,000  were
exercisable at December 31, 1997.

The Company's Restricted Stock Award Plan provides for awards of common stock to
key employees,  subject to forfeiture if employment  terminates prior to the end
of the prescribed periods.  The restrictions on the shares will be released over
a three year period as the employees provide service. The market value of shares
awarded  under the plan is recorded as deferred  compensation  in  stockholders'
equity.  The unearned  amounts are  amortized to  compensation  expense over the
periods the employees provide services.


During the year ended December 31, 1997, the Company awarded  restricted  shares
out of Treasury Stock. The restricted  shares awarded and the respective  market
values at date of grant were as follows:

                                          Shares              Market
                                          Awarded              Value
         February 3, 1997                  33,000              $6.25
         November 7, 1997                 200,000              $8.00

For the year ended  December  31,  1997,  the  Company  recognized  $151,908  of
compensation  expense  relating to the Restricted  Stock Award Plan. At December
31, 1997,  the Company has  $1,654,342  of deferred  compensation  recorded as a
reduction of stockholders' equity.


Stock Option Plan

The Company has a fixed  option plan which  reserve  shares of common  stock for
issuance  to  key  employees.   The  Company  has  adopted  the  disclosure-only
provisions  of  SFAS  No.  123,   "Accounting  for  Stock-Based   Compensation."
Accordingly, no compensation cost has been recognized for the stock options. Had
compensation  cost for the Company's stock option plan been determined  based on
the fair value at the grant date for awards in 1997 and 1995 consistent with the
provisions  of SFAS No. 123, the  Company's  net earnings and earnings per share
would have been reduced to the pro forma amounts indicated below:

              (Dollars in thousands except for earnings per share information)

                                             1997          1996        1995
         Net earnings:
                  As reported              $2,397         $2,475      $1,579
                  Pro forma                $2,252         $2,399      $1,572
         Basic earnings per share:
                  As reported               $0.45          $0.45       $0.29
                  Pro forma                 $0.42          $0.44       $0.29
         Diluted earnings per share:
                  As reported               $0.45          $0.45       $0.29
                  Pro forma                 $0.42          $0.44       $0.29

The fair value of each option  granted is  estimated  on the date of grant using
the  Black-Scholes  option-pricing  model  with the  following  weighted-average
assumptions  used for grants in 1997 and 1995:  dividend  yield of 0%;  expected
volatility of 35.0%;  risk-free  interest  rate of 5.95% to 6.64%;  and expected
lives of 10 years.

Under the plan  approved by the  stockholders  on  December  8, 1995,  the total
number of shares of common  stock  that may be  granted  is  750,000.  This plan
provides that shares granted come from the Company's  authorized but unissued or
reacquired  common  stock.  The price of the options  granted  pursuant to these
plans will not be less than 100 percent of the fair  market  value of the shares
on the date of grant.  An option may not be  exercised  within one year from the
date of grant and no option will be exercisable after ten years from the date of
grant.  Participants may exercise  approximately  one-fourth of the stock option
shares after the end of each year of the cycle.


Stock Option Plan
<TABLE>

Information regarding this option plan for 1997, 1996 and 1995 is as follows:

                                                                       1997                  1996         1995
                                                               ------------------------  -----------  -----------
                                                                            Weighted-
                                                                             Average
                                                                             Exercise
                                                                 Shares      Price           Shares       Shares
<S>                                                              <C>          <C>            <C>         <C>    

Options outstanding, beginning of year                            180,000       $4.75        180,000            -
Options exercised                                                       -           -              -            -
Options granted                                                   141,000     $6.3741              -      180,000
                                                               -----------               -----------  -----------
Options outstanding, end of year                                  321,000                    180,000      180,000
                                                               ===========               ===========  ===========
Option price range at end of year                                   $6.25                                  $4.75
                                                                    $8.00
Option price range for exercised shares                                 -


Weighted-average fair value of options, granted during the year   $6.3741
Weighted-average grant-date fair value of options, granted
     during the year                                              $3.8720                          -     $2.8028

The following  table  summarizes  information  about  fixed-price  
stock options outstanding at December 31, 1997:


                                                                            Options Outstanding             Options Exercisable
                                                                    -------------------------------------  -----------------------
                                                                                    Weighted-
                                                                                    Average       Weighted                Weighted-
                                                                        Number     Remaining       Average      Number     Average
                                                                     Outstanding  Contractual     Exercise   Exercisable  Exercise
                                  <S>                                <C>             <C>          <C>           <C>          <C>

                                  Range of Exercise Prices           at 12/31/97     Life           Price     at 12/31/97    Price
                                                     $4.75               180,000         8         $4.75         90,000      $4.75
                                                     $6.25               131,000         9         $6.25              -          -
                                                     $8.00                10,000        10         $8.00              -          -
                                                                     -----------  -----------  -----------  -----------  ----------
                                                     $4.75 to $8.00      321,000                                 90,000
                                                                     ===========                            ===========


</TABLE>

11.  Common Stock Buy-Back Program

On March 7, 1997,  the Board of  Directors  of the  Company  authorized  a share
repurchase  program of up to 750,000  shares.  Repurchases are made from time to
time in the open market or through privately  negotiated  transactions at market
price.  The stock  repurchase  plan has a term of three  years.  During the year
ended December 31, 1997, the Company  repurchased  313,000 shares of stock for a
total of $2,280,375.  Also,  during the year 233,000 treasury shares were issued
under the Company's Restricted Stock Award Plan.

12.  Earnings Per Share

At December 31, 1997,  the Company  adopted SFAS No. 128,  "Earnings Per Share,"
which  establishes  standards for computing  and  presenting  earnings per share
("EPS").  SFAS No. 128 replaces the  presentation  of primary EPS with basic EPS
and fully  diluted EPS with  diluted  EPS.  Basic EPS  excludes  dilution and is
calculated by dividing income applicable to common  stockholders by the weighted
average  number of common  shares  outstanding  for the  period.  Diluted EPS is
computed similarly to fully diluted EPS.
All periods presented have been restated to conform with SFAS No. 128.
                           
Basic  earnings per common share amounts were computed by dividing net income by
the  weighted-average  number of common shares  outstanding during the year. The
average number of common shares  outstanding was the average number of shares of
common stock outstanding adjusted for repurchased shares.

Diluted earnings per share amounts were calculated by dividing net income by the
weighted-average  number of common shares and dilutive  potential  common shares
outstanding during the year.

Diluted  earnings  per  share  assumes  the  conversion  into  common  stock  of
outstanding  stock  options as computed  under the  treasury  stock  method,  if
dilutive.  Under the treasury stock method,  the number of incremental shares is
determined by assuming the issuance of the outstanding stock options, reduced by
the number of shares assumed to be repurchased from the issuance proceeds, using
the averages market price for the year of the Company's common stock.

The following table sets forth the computation of basic and diluted earnings per
share for the years ended December 31, 1997, 1996 and 1995.
<TABLE>


                                                 1997           1996            1995
<S>                                            <C>            <C>             <C> 
Numerator:
  Net income                                   $2,397,055     $2,474,652      $1,578,657
                                             =============  =============   =============
  Numerator for basic and diluted
    earnings per share-income
    available to common stockholders           $2,397,055     $2,474,652      $1,578,657
                                             =============  =============   =============

Denominator:
  Denominator for basic earnings
    per share-weighted-average
    shares outstanding                          5,322,172      5,487,887       5,487,887
  Effect of dilutive securities:
    Employee stock options                         59,613         10,957              55
                                             -------------  -------------   -------------
  Dilutive potential common shares                 59,613         10,957              55
  Denominator for diluted earnings
    share-adjusted weighted-average
    shares after assumed conversions            5,381,785      5,498,844       5,487,942
                                             =============  =============   =============

Basic earnings per share                            $0.45          $0.45           $0.29
                                             =============  =============   =============
Diluted earnings per share                          $0.45          $0.45           $0.29
                                             =============  =============   =============

</TABLE>



13.  Employee and Retiree Benefit Plans

Effective with the December 13, 1995 Spin-off of 100% of the common stock of the
Company being distributed to Piedmont Management  stockholders,  LMC has assumed
the  sponsorship  of  certain of  Piedmont's  employee  benefit  plans and their
related  trusts  and  insurance  contracts,  and is solely  responsible  for all
liabilities  and  obligations  under such plans.  In  addition,  in exchange for
payment  from  Piedmont  of  approximately  $740,000,  LMC  assumed  certain  of
Piedmont's  obligations  to provide  continuing  medical and dental  coverage to
certain of Piedmont's and The  Reinsurance  Corporation  of New York's  ("RECO")
employees,  and  retirement  and  postretirement  medical and life  insurance to
former RECO employees.



  Savings Plan
    LMC's and MSR's  employees  participate in the 401(k) savings plan sponsored
by LMC.  Employees are eligible to participate upon attaining age twenty-one and
completing  six months of  service.  The savings  plan  provides  for  voluntary
participant  contributions which may not exceed 10% of each participant's annual
salary.   Additionally,   for  each  participant's  voluntary  contribution  not
exceeding 6% of the  participant's  annual  salary,  LMC and MSR  contribute  an
amount equal to 50% of the individual participant's contribution.

     LMC's and MSR's  contributions  fully vest to  employees at the end of five
years.  The annual savings plan expense by LMC and MSR were $122,760,  $114,409,
and $88,395 for the years ended December 31, 1997, 1996, and 1995, respectively.

Retirement Plan
    LMC  sponsors a defined  benefit  plan which is part of a master  trust.  An
employee  becomes a participant  in the plan after  attaining age twenty-one and
completing  one year of service.  Full vesting in the accrued  benefit occurs at
the earlier of completing  five years of service after attaining age eighteen or
reaching  early  retirement  age. The funding policy for the plan is to annually
contribute the statutory required minimum amount as actuarially determined.  The
funded status and net pension liability for the Master Trust for the years ended
December 31, 1997 and 1996 is provided in the table below:
<TABLE>

                                                             1997               1996
<S>                                                         <C>                <C>   
Actuarial present value of benefit obligations:
Vested                                                      $5,675,200         $4,851,900
Non-vested                                                     149,600            127,600
                                                        ---------------     --------------
     Accumulated benefit obligation                         $5,824,800         $4,979,500
                                                        ===============     ==============
Projected benefit obligation                                 6,573,300          5,603,100
Plan assets at fair value                                    5,158,200          4,848,000
                                                        ---------------     --------------
Plan assets less than projected benefit obligations         (1,415,100)          (755,100)
Unrecognized prior service cost                                256,500             60,600
Unrecognized net loss                                          573,200            191,300
Unrecognized transition asset                                 (179,600)          (216,100)
                                                        ---------------     --------------
     Net pension liability                                   ($765,000)         ($719,300)
                                                        ===============     ==============

</TABLE>


The development of the foregoing  projected benefit obligations was based upon a
discount rate of 7.0% in 1997 and 7.5% in 1996; a 6% average rate of increase in
employee  compensation  was used for each year.  The expected  long-term rate of
return on assets was 10%. Plan assets are invested  primarily in bonds,  stocks,
short-term securities and cash equivalents.

Net periodic  pension cost for the years ended December 31, 1997,  1996 and 1995
included the following components:
<TABLE>

                                                                  1997            1996            1995
<S>                                                             <C>             <C>             <C>  

Service cost - benefits earned during the period                $239,200        $220,200        $129,800
Interest cost on projected benefit obligation                    415,700         389,800         174,500
Actual return on plan assets                                    (487,000)       (485,600)       (245,600)
Net amortization and deferral                                       (600)          3,000          83,100
Extraordinary expense                                                  -               -          27,800
                                                             ------------    ------------    ------------
     Net periodic pension cost                                  $167,300        $127,400        $169,600
                                                             ============    ============    ============

</TABLE>


The straight line amortization method is used in calculating prior service cost.
Gains and losses are  amortized  only if they are outside of the 10% corridor of
the larger of projected benefit obligation or fair value of plan assets.

LMC  also  maintains  non-qualified   supplemental  benefit  plans  for  certain
employees.  These  plans  replace  the  portion  of  benefits  that  exceed  the
limitations  established by the Internal Revenue Code for tax qualified  benefit
plans. The amount charged to expense  relating to these plans was  approximately
$86,900,  $116,600, and $51,600 for the years ended December 31, 1997, 1996, and
1995, respectively.

  Postretirement Employee Benefits
     In addition to providing pension benefits,  the Company, along with certain
affiliates,  provides  the option of life and  medical  insurance  benefits  for
retirees.  Pensioners  whose employment was terminated by retirement (age 55 and
10 years of service) become eligible for these benefits.  The medical  insurance
benefits are partially contributory in nature.
Postretirement benefit plans other than pensions are not funded.

As of January 1, 1992,  the provisions of SFAS No. 106,  "Employers'  Accounting
for  Postretirement  Benefits Other Than  Pensions,"  were adopted.  The Company
elected the  prospective  transition  approach and is amortizing the transaction
obligation over a 20-year period.

Net periodic postretirement benefit costs for the years ended December 31, 1997,
1996 and 1995 included the following components:
<TABLE>


                                                               1997             1996             1995
<S>                                                          <C>              <C>              <C>   

Service cost                                                 $55,000          $76,000          $47,000
Interest cost                                                 78,000           96,000           53,000
Amortization of transition obligation over 20 years           22,500           29,000           27,000
                                                         ------------     ------------     ------------
     Net periodic postretirement benefit cost               $155,500         $201,000         $127,000
                                                         ============     ============     ============

</TABLE>

The  accumulated  unfunded  postretirement  benefit  obligation  and the accrued
estimated  portion of the unfunded  postretirement  benefit  obligation  for the
Company at December 31, 1997 and 1996 are provided in the table below:

<TABLE>

                                                                  1997              1996
<S>                                                             <C>               <C>    

Retirees                                                        $624,000          $735,000
Eligible active participants                                      92,000            89,000
Other active participants                                        521,000           592,000
                                                            -------------     -------------
Total Accumulated Postretirement Benefit Obligation            1,237,000         1,416,000
                                                            -------------     -------------
Unrecognized cumulative gain                                      26,000          (200,000)
Unrecognized net transition amount                              (341,000)         (366,000)
                                                            -------------     -------------
     Accrued Postretirement Benefit Cost                        $922,000          $850,000
                                                            =============     =============
</TABLE>


The discount rate used in determining  the  accumulated  postretirement  benefit
obligation was 7.0% in 1997 and 7.5% in 1996. The assumed health care cost trend
rate was 7.5% in each year. If the  assumptions  used in  developing  the health
care cost  trend rate in each of the last two years  were  increased  by 1%, the
effect  on  the  service  and   interest   cost   components   of  net  periodic
postretirement  benefit  cost  and on  the  accumulated  postretirement  benefit
obligation would be an increase of approximately 20%.

Deferred Compensation Program
     The Company implemented a non-qualified  deferred  compensation program for
highly compensated  employees in 1997. The program allows the employees to defer
a portion of their annual compensation.



14. Income Taxes

A reconciliation  of income tax expense  computed at the U.S.  statutory rate to
the effective rate reflected in the  consolidated  financial  statements for the
years ended December 31, 1997, 1996, and 1995 follows:

<TABLE>

                                            1997              1996             1995
<S>                                        <C>              <C>              <C> 

Expected tax rate                          34.00%            34.00%           34.00%
State and local taxes                       6.70              6.50            (3.50)
Other                                      (7.75)            (5.78)            0.01
                                         ------------     -------------    -------------
Effective tax rate                         32.95%            34.72%           30.51%
                                         ============     =============    =============
</TABLE>
<TABLE>


     The tax effects of temporary differences that give rise to the net deferred
tax asset at December 31, 1997 and 1996 are as follows:

                                                              1997             1996
<S>                                                         <C>              <C>   
Deferred tax assets:
     Net operating loss carryforwards                         $708,678       $2,203,641
     Deferred compensation                                     647,256          565,587
     Retirement and postretirement                             648,001          500,880
     Other                                                      90,349                -
                                                          -------------    -------------
          Total deferred tax asset                           2,094,284        3,270,108
                                                          -------------    -------------
Deferred tax liabilities
     Deferred state taxes                                      (86,976)         (93,302)
    Other                                                      (69,095)         (44,964)
                                                          -------------    -------------
          Total deferred tax liabilities                      (156,071)        (138,266)
                                                          -------------    -------------
          Net deferred tax asset                            $1,938,213       $3,131,842
                                                          =============    =============

Income tax expense attributable to income for the years ended December 31, 1997,
1996, and 1995 consists of:

                                           Current          Deferred          Total
<S>                                        <C>             <C>                <C>
Year ended December 31, 1997:
     U.S. Federal                          ($339,801)       $1,175,028         $835,227
     State and local                         353,730            18,601          372,331
                                         ------------     -------------    -------------
                                             $13,929        $1,193,629       $1,207,558
                                         ============     =============    =============

                                           Current          Deferred          Total
Year ended December 31, 1996:
     U.S. Federal                           $903,832            $5,859         $909,691
     State and local                         449,902           (89,418)         360,484
                                         ------------     -------------    -------------
                                          $1,353,734          ($83,559)      $1,270,175
                                         ============     =============    =============

                                           Current          Deferred          Total
Year ended December 31, 1995:
     U.S. Federal                           $992,530         ($401,031)        $591,499
     State and local                         293,313          (184,996)         108,317
                                         ------------     -------------    -------------
                                          $1,285,843         ($586,027)        $699,816
                                         ============     =============    =============
</TABLE>

                           
The Company  believes it is more  likely than not that it will  generate  future
taxable  income  to  realize  the  benefits  of  the  net  deferred  tax  asset.
Accordingly,  the Company has not  provided a  valuation  allowance.  The amount
ultimately  realized,  however,  could be  reduced  if actual  amounts of future
taxable income are reduced.

The Company has net operating loss  carryforwards  of  approximately  $2,100,000
which are available to offset future taxable income which expire over the period
2003 through 2012.


15.  Disclosures about Segments of an Enterprise and Related Information

In June 1997,  FASB  issued  SFAS No.  131,  "Disclosures  about  Segments of an
Enterprise and Related Information".  SFAS No. 131 establishes standards for the
way a public  enterprise  reports  information  about operating  segments in its
annual and interim  financial  statements.  It also  establishes  standards  for
related  disclosures  about  products and services,  geographic  areas and major
customers.  Generally,  financial information will be required to be reported on
the basis used by management for evaluating segment performance and for deciding
how to allocate  resources  to segments.  SFAS No. 131 is  effective  for fiscal
years  beginning  after  December  31,  1997 and need not be  applied to interim
reporting  in the initial  year of  adoption.  The Company  intends to adopt the
provisions  of SFAS  No.  131 in its  1998  consolidated  financial  statements,
however,  management of the Company has not yet determined what information,  if
any, will be reported.


16. Quarterly Financial Data (Unaudited)

<TABLE>
     The unaudited  quarterly  financial  data for the years ended  December 31,
1997, 1996, and 1995 follows:

                                       First             Second            Third             Fourth
                                      Quarter           Quarter           Quarter           Quarter

<S>                                   <C>              <C>               <C>               <C> 
 
1997
Results of operations:
     Total revenues                   $4,623,365        $4,745,656        $5,022,686        $4,585,247
     Total expenses                    3,348,977         3,590,374         3,833,388         4,539,453
     Provision for taxes                 523,329           210,861           543,465           (70,097)
     Net income                          738,964           931,782           628,824            97,485
     Basic earnings per share              $0.13             $0.17             $0.12             $0.02
     Diluted earnings per share            $0.13             $0.17             $0.12             $0.02

Common stock price range
     High                                $ 7.125           $ 7.000           $ 9.500          $ 10.125
     Low                                 $ 5.875           $ 5.875           $ 6.875           $ 8.000

1996
Results of operations:
     Total revenues                   $5,717,300        $5,606,059        $5,565,017        $3,922,925
     Total expenses                    4,955,313         4,855,620         4,832,825         3,039,824
     Provision for taxes                 206,807           335,985           580,875           146,508
     Net income                          543,940           396,835           789,326           744,551
     Basic earnings per share             $ 0.10            $ 0.07            $ 0.14            $ 0.14
     Diluted earnings per share           $ 0.10            $ 0.07            $ 0.14            $ 0.14

Common stock price range:
     High                                $ 4.906           $ 6.500           $ 5.500           $ 7.313
     Low                                 $ 3.625           $ 4.375           $ 4.250           $ 5.000

1995
Results of operations:
     Total revenues                   $5,218,727        $5,347,927        $5,440,059        $5,279,403
     Total expenses                    4,261,104         4,513,279         4,890,031         5,300,215
     Provision for taxes                 447,094           311,691           122,234          (181,203)
     Net income                          510,528           519,104           404,651           144,374
     Basic earnings per share             $ 0.09            $ 0.10            $ 0.07            $ 0.03
     Diluted earnings per share           $ 0.09            $ 0.10            $ 0.07            $ 0.03

Common stock price range:
     High                                N/A               N/A               N/A               $ 5.000
     Low                                 N/A               N/A               N/A               $ 4.625


</TABLE>



Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

    The Company  terminated  its audit  relationship  with its former  principal
accountant,  Coopers & Lybrand  L.L.P.  ("C&L"),  on March 6, 1997. On that same
day, KPMG Peat Marwick LLP was engaged as principal accountant for the Company.

    C & L's report on the  financial  statements  for the past two years did not
contain an adverse  opinion or disclaimer  of opinion,  and was not qualified or
modified as to uncertainty, audit scope, or accounting principles.

   The decision to change  principal  accountants  was  recommended by the Audit
Committee and approved by the Board of Directors of the Company.

   During the Company's two most recent fiscal years and any subsequent  interim
period preceding such termination,  there were no disagreements  with the former
accountant  on any  matter of  accounting  principles  or  practices,  financial
statement disclosures, or auditing scope or procedure, which disagreement(s), if
not resolved to the satisfaction of the former accountant,  would have caused it
to make  reference to the subject  matter of the  disagreement(s)  in connection
with its report.

    There were no  reportable  events of the type  described in Item 304 (a) (1)
(v) (A) through (D) of Regulation S-K.


                                    PART III

Item 10.  Directors and Executive Officers of the Registrant


                      EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table sets forth certain  information as of December 31, 1997
with respect to the Company's executive officers.

                                 Principal Occupation or Employment Office(s)
Name                     Age     Year Elected Executive Officer

Stuart S. Richardson     51      Chairman (1995)

Robert M. DeMichele      53      President and Chief Executive Officer (1995)

Richard M. Hisey         39      Executive Vice President and Chief Financial 
                                 Officer (1995)

Lawrence Kantor          50      Executive Vice President and General 
                                 Manager - Mutual Funds (1995)

     Other information required under this item is contained in the Registrant's
1998 definitive  proxy statement which will be filed with the Commission  within
120 days  after  the close of the  fiscal  year and is  herein  incorporated  by
reference.


Item 11.  Executive Compensation

     Information  required under this item is contained in the Registrant's 1998
definitive  proxy statement  which will be filed with the Commission  within 120
days after the close of the fiscal year and is herein incorporated by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

     Information  required under this item is contained in the Registrant's 1998
definitive  proxy statement  which will be filed with the Commission  within 120
days after the close of the fiscal year and is herein incorporated by reference.

Item 13.  Certain Relationships and Related Transactions

     Information  required under this item is contained in the Registrant's 1998
definitive  proxy statement  which will be filed with the Commission  within 120
days after the close of the fiscal year and is herein incorporated by reference.



                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

     The following information is filed under this item:

(a) (1) Financial Statements

     The  following  consolidated  financial  statements  of the Company and its
subsidiaries  are  included  in Item 8:  Consolidated  Statements  of  Financial
Condition-December   31,   1997   and   1996;    Consolidated    Statements   of
Operations-Years Ended December 31, 1997, 1996, 1995; Consolidated Statements of
Stockholders'  Equity  (Deficit)-Years  Ended  December  31, 1997,  1996,  1995;
Consolidated Statements of Cash Flows-Years Ended December 31, 1997, 1996, 1995;
Notes to Consolidated Financial Statements.

(a) (2) Schedules

   All  schedules  for  which  provision  is made in the  applicable  accounting
regulation of the Securities and Exchange  Commission are not required under the
related  instructions,  are  inapplicable  or are  adequately  explained  in the
financial statements and, therefore, have been omitted.

     Financial  statements of interests of 50% or less,  which are accounted for
by the equity method,  have been omitted because they do not,  considered in the
aggregate as a single subsidiary, constitute a significant subsidiary.

(a)(3) Exhibits

     13.1 Registrant's Annual Report to Stockholders for the year ended December
31, 1997.

     99.1  Report of Independent Accountants from predecessor auditors

Exhibits specified by Item 601 of Regulation S-K, other than those listed above,
have been omitted since they are either not required or are not applicable.

(b)  Report on Form 8-K

       None filed during the fourth quarter of 1997


(c)  Schedules  described  in item 14A (2) are  excluded  from the  Registrant's
Annual Report to Stockholders.


(d)    Items Incorporated by Reference

   The Registrant's Definitive Proxy Statement for its 1998 Annual Stockholders'
meeting and its Annual Report to stockholders for the fiscal year ended December
31, 1997 are incorporated by reference herein. The Proxy Statement will be filed
with the  Commission  within 120 days after the close of the fiscal year,  along
with a copy of the Registrant's Annual Report.


                                   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:

                                         LEXINGTON GLOBAL ASSET MANAGERS, INC.

                                               By  /s/ Richard M. Hisey

                                     Richard M. Hisey, Executive Vice President
                                             (Chief Financial Officer)

Date March 27, 1998

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

          /s/Stuart Smith Richardson
        Stuart Smith Richardson, Chairman                  Date March 27, 1998
          of the Board of Directors

            /s/Robert M. DeMichele
Robert M. DeMichele, President & Director                  Date March 27, 1998
              (Chief Executive Officer)

                    /s/Richard M. Hisey
Richard M. Hisey, Executive Vice President                 Date March 27, 1998
(Principal Financial and Accounting Officer)

                    /s/ Sion A. Boney
              Sion A. Boney, III, Director                 Date March 27, 1998

                  /s/Haynes G. Griffin
             Haynes G. Griffin, Director                   Date March 27, 1998

                 /s/William R. Miller
            William R. Miller, Director                    Date March 27, 1998

              /s/L. Richardson Preyer
           L. Richardson Preyer, Director                  Date March 27, 1998

           /s/Lunsford Richardson, Jr.
       Lunsford Richardson, Jr., Director                  Date March 27, 1998

              /s/Peter L. Richardson
           Peter L. Richardson, Director                   Date March 27, 1998

                /s/Carl H. Tiedemann
          Carl H. Tiedemann, Director                      Date March 27, 1998

           /s/ Marion A. Woodbury
         Marion A. Woodbury, Director                      Date March 27, 1998






                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Stockholders of
Lexington Global Asset Managers, Inc.

     We have  audited the  consolidated  statement  of  financial  condition  of
Lexington  Global Asset Managers,  Inc. and Subsidiaries as of December 31, 1996
and the related consolidated statements of operations,  changes in stockholders'
equity  (deficit),  and cash flows for each of the two years in the period ended
December 31, 1996.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

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

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
Lexington Global Asset Managers,  Inc. and Subsidiaries as of December 31, 1996,
and the  consolidated  results of their operations and their cash flows for each
of the two years in the period  ended  December  31, 1996,  in  conformity  with
generally accepted accounting principles.


                                                  /s/ Coopers & Lybrand L.L.P.
                                                  Coopers & Lybrand L.L.P.

New York, New York
February 19, 1997