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, 1998
                                       OR

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from ________ to ___________

Commission file number: 0-26868

                      Lexington Global Asset Managers, Inc.
             

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
(201) 845-7300
                                          

              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
February 23, 1999 was as follows:

                      Common Stock-$.01 Par Value Per Share
                          Authorized 15,000,000 Shares
                          4,731,204 Shares Outstanding
                        Aggregate Market Value $6,692,582

Document Incorporated by Reference.

Registrant's  Proxy  Statement for Annual Meeting of Stockholders to be held May
13, 1999 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 private clients.
      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,  1998 total  assets  under  management  amounted  to $3.2
billion,  with $1.5  billion in mutual  funds,  $1.1  billion  in  institutional
accounts and $0.6 billion in private client accounts.  The Company's client base
consists   of   approximately   141,000   mutual  fund   shareholder   accounts,
approximately 20 institutional  accounts,  and  approximately 680 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>
<S>                             <C>          <C>          <C>          <C>          <C>

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

                                                        December 31,
                              ------------------------------------------------------------------
                                  1998         1997          1996         1995         1994
Mutual Funds                    $1,460,303    $1,896,293   $1,797,238   $1,517,260   $1,501,668
Institutional                    1,115,762     1,109,339    1,047,244    1,134,080    1,472,122
Private Clients                    594,913       467,072      360,226      428,434      421,204
                              ------------------------------------------------------------------
     Total                      $3,170,978    $3,472,704   $3,204,708   $3,079,774   $3,394,994
                              ==================================================================


                            Asset Composition By Type of Investment
                                    (Dollars in Thousands)
                                                        December 31,
                              ------------------------------------------------------------------
                                  1998         1997          1996         1995         1994
Domestic Equity                 $1,807,759    $1,704,426   $1,330,398   $1,172,710   $1,096,988
Foreign Equity                     363,770       850,274      807,962      699,842      696,882
                              ------------------------------------------------------------------
     Subtotal (2)                2,171,529     2,554,700    2,138,360    1,872,552    1,793,870
Precious Metals (3)                 94,033       118,416      201,295      273,411      347,023
Fixed Income                       758,686       634,029      668,841      712,830      976,104
Money Market Funds                 146,730       165,559      196,212      220,981      277,997
                              ------------------------------------------------------------------
     Total                      $3,170,978    $3,472,704   $3,204,708   $3,079,774   $3,394,994
                              ==================================================================
</TABLE>

-----------------------
(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,
     1998 were valued at  approximately  $867 million.  The fees charged for the
     management  of such assets 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.


<PAGE>


The following illustrates the structure of the Company as of December 31, 1998.

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 L.L.C.                  ( 51%)
                                      


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.

               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 $810 billion at December  31, 1988 to $5.5  trillion at December
31, 1998, an average growth rate of approximately 21% per 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. 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.

 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.

   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.

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 1998 Money Market Directory of
Pension Funds (including  401(k) plans),  the institutional  market  represented
over $5.9 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 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  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),  Stratos Advisors
Inc. (emerging markets), 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 and corporate finance.

     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  Worldwide  Emerging  Markets  Fund,  Inc. and the Lexington
Emerging  Markets Fund, Inc. have a joint  management  arrangement  with Stratos
Advisors,  Inc., which is an affiliate of VZB Partners, LLC. Stratos specializes
in  managing  assets  in  emerging  markets  and  seeks  to  provide  investment
management  services to  institutional  investors for  sophisticated  individual
investors with net worth in excess of $1 million.

    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 sister  company of the
largest brokerage firm in Russia, Troika Dialog.




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.

     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 $875,000.  With
approximately 680 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 1998. 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 141,000 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.

The  following  table sets  forth the  assets  for each of the five years  ended
December 31, 1998 of each of the Lexington  Funds and for each fund to which LMC
and LFD provides subadvisory and/or administration services.

<TABLE>
<S>                                                              <C>        <C>         <C>         <C>        <C>

                                                    Fund Assets (1)
                                                 (Dollars in Thousands)
                                                                                     December 31,
                                                               ----------------------------------------------------------
                                                                  1998        1997       1996        1995        1994
Domestic Equity*
Lexington Growth & Income Fund                                    $245,734   $228,058    $200,231    $138,840   $124,292
Lexington Corporate Leaders Trust Fund                             482,678    476,405     384,990     247,560    152,990
London Pacific Corporate Leaders                                     8,182      3,506       1,311           -          -
Lexington Natural Resources Trust                                   35,442     65,320      37,896      16,962     13,620
Lexington SmallCap Value Fund, Inc.                                  8,165      9,578       8,056           -          -
                                                               ----------------------------------------------------------
     Total Domestic Equity                                        $780,201   $782,867    $632,484    $403,362   $290,902
                                                               ----------------------------------------------------------
Fixed Income*
Lexington Money Market Trust                                       $86,494    $94,349     $97,680     $88,961   $110,811
Lexington Short-Intermediate Government                                     
  Securities Fund, Inc. (2)                                              -          -           -           -      5,799
Lexington GNMA Income Fund, Inc.                                   273,063    157,608     133,660     130,735    132,362
Lexington Ramirez Global Income Fund (3)                            36,411     23,569      28,992      10,754     10,578
Lexington Tax Free Money Fund, Inc. (4)                                  -          -      26,528      28,203     37,531
Lexington Convertible Securities Fund                               10,306     10,350      11,208      11,634      8,021
SBL Fund Series K (5) (6) (7)                                       13,066     14,445      11,755       5,684          -
Security Income Fund-Global Aggressive
  Bond Series (5) (6) (7)                                            4,327      6,269       4,915       4,409          -
                                                               ----------------------------------------------------------
     Total Fixed Income                                           $423,667   $306,590    $314,738    $280,380   $305,102
                                                               ----------------------------------------------------------
Global/ International Equity *
Lexington Worldwide Emerging Markets Fund, Inc. (8)                $67,732   $137,988    $256,532    $260,423   $288,511
Lexington Global Fund, Inc.                                         17,846     35,088      37,216      53,635     67,353
Lexington Emerging Markets Fund, Inc.                               15,357     24,061      21,581       7,840      4,598
Lexington International Fund, Inc.                                  24,000     19,950      18,891      17,855     17,811
Lexington Crosby Small Cap Asia Growth Fund                         18,209     13,986      25,246       8,900          -
SBL Fund Series D (5) (6) (7) (10)                                       -    285,864     246,908     177,935    147,028
Parkstone Advantage International Discovery Fund (7)                     -          -           -      11,649      9,501
Security Equity Fund-Global Series (5) (6) (7) (10)                      -     33,834      28,543      21,870     23,839
Lexington Troika Dialog Russia Fund (9)                             19,258    137,649      13,804           -          -
                                                               ----------------------------------------------------------
     Total Global/International Equity                            $162,402   $688,420    $648,721    $560,107   $558,641
                                                               ----------------------------------------------------------
Precious Metal Equity*
Lexington Goldfund, Inc.                                           $50,886    $53,945    $109,215    $136,361   $158,846
Lexington Strategic Investments Fund, Inc. (7)                      17,502     20,760      43,702      76,280    138,164
Lexington Strategic Silver Fund, Inc. (7)                           25,645     43,711      48,378      60,770     50,013
                                                               ----------------------------------------------------------
     Total Precious Metal Equity                                   $94,033   $118,416    $201,295    $273,411   $347,023
                                                               ----------------------------------------------------------
     Total Funds                                                $1,460,303 $1,896,293  $1,797,238  $1,517,260 $1,501,668
                                                               ==========================================================
</TABLE>

--------------------------------------------------------
(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.
(10) Sub-advisory relationship terminated November 2, 1998.

*       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 30.8%, 22.2%, 31.0% and
        0%,  respectively,  of the total assets under management with respect to
        each segment at December 31, 1998.


Other Subsidiaries

At December 31, 1998, 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. At this point in time, PAA is an inactive 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.

          (57%) The  Lexington  Family of No Load Mutual  Funds are sold through
direct  sales and  marketing  efforts  utilizing  print,  radio  and  television
advertising.

          (37%) 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, 1998,  approximately $535 million, or 37%, 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.

         (1%) 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.

         (5%) 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.  According to The Money Market
Directory of Pension Funds and their  Investment  Managers,  the Company  ranked
among the top 390  largest of  investment  counsel  firms,  as measured by total
tax-exempt  assets under  management at December 1998. 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,  1998,  the  Company  employed  approximately  92  people.
Approximately  86, 2, 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,  1998,  approximately  $535  million,  or 37% , 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, 1998, approximately $0.5 billion, or 14.4%, 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.

 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.

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 prepare the Company's
computer  systems and applications for the Year 2000, as well as to identify and
address any other Year 2000  operational  issues  which may affect the  Company.
Progress  reports on the Company's Year 2000 program are presented  regularly to
the Company's Board of Directors and senior management.

The Company expects to be Year 2000 compliant  during the second quarter of 1999
and is in the process of preparing a contingency plan, which should be completed
by the second  quarter of 1999.  Although the Company  believes it is adequately
addressing  its Year 2000  issues,  the failure to correct a material  Year 2000
problem  could result in an  interruption  in, or a failure of,  certain  normal
business  activities or  operations.  Such failure could  materially  affect the
Company's results of operations, liquidity and financial condition.

For  additional  information  on  Year  2000  status,  please  refer  to Item 7,
Management's Discussion and Analysis.

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 and  September  17,  1998 the Board of  Directors  of the
Company authorized share repurchase programs of up to 750,000 shares for a total
program of up to 1,500,000  shares.  Repurchases have been and will be made from
time to time in the open market or through privately negotiated  transactions at
market  prices.  The stock  repurchase  plans have terms of three years.  During
1998, the Company  repurchased 532,350 shares of stock for an aggregate purchase
price of $2,353,857. Also during 1998, 11,000 treasury shares were awarded under
the Company's  Restricted Stock Award Plan. During 1997, the Company repurchased
313,000  shares  of  its  common  stock  for  an  aggregate  purchase  price  of
$2,280,375.  Also during 1997,  233,000  treasury  shares were awarded under the
Company's Restricted Stock Award Plan. To date, 244,000 shares have been awarded
and 77,671 shares have been issued under the plan.

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 48% of the voting power of all the Company's outstanding voting securities.
Accordingly,  the  Richardson  Family  has  the  ability  to  exert  significant
influence   over  the  outcome  of  any  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, 1998 the Company also managed approximately $867 million in
invested assets of the Richardson Family and certain other related persons which
represent  approximately 27.3% 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  approximately  $116,000 in
1998.

      Additional  information  concerning  leases is  provided  in Note 8 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 13, 1998 Annual Meeting of Stockholders

(b)  Matters voted on and number of affirmative/negative votes:

              1.  Election of Directors:
              Sion A. Boney, Haynes G. Griffin, Robert M. DeMichele

              For All Directors:  4,974,937    Withheld Authority:  71,577

              2.   Ratification   of  the  selection  of  KPMG  LLP  as  the
independent auditors for the current calendar year.

              Votes:            For              Against           Abstain
                             5,043,388             234              2,892




                                 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:

                            1998                             1997
                     High         Low                 High          Low

First              $ 9.500      $ 6.750              $ 7.125      $ 5.875
Second             $ 8.500      $ 6.750              $ 7.000      $ 5.875
Third              $ 7.250      $ 3.313              $ 9.500      $ 6.875
Fourth             $ 5.250      $ 3.250             $ 10.125      $ 8.000


On March 7, 1997,  and  September 17, 1998 the Board of Directors of the Company
authorized share repurchase programs of up to 750,000 shares for a total program
of up to 1,500,000  shares.  Repurchases have been and will be made from time to
time in the open market or through privately  negotiated  transactions at market
prices.  The stock repurchase plans have terms of three years.  During 1998, the
Company  repurchased  532,350 shares of stock for an aggregate purchase price of
$2,353,857.  Also during 1998,  11,000  treasury  shares were awarded  under the
Company's  Restricted  Stock Award Plan.  During 1997,  the Company  repurchased
313,000  shares  of  its  common  stock  for  an  aggregate  purchase  price  of
$2,280,375.  Also during 1997,  233,000  treasury  shares were awarded under the
Company's Restricted Stock Award Plan. To date, 244,000 shares have been awarded
and 77,671 shares have been issued under the plan.

    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,  1998,  there  were 607  holders of record of Common
Stock.


Item 6.  Selected Financial Data

<TABLE>
<S>                                           <C>          <C>         <C>           <C>         <C>
                                                              Year Ended December 31,
                                          -----------------------------------------------------------------
                                              1998         1997         1996         1995         1994
                                                       (000's omitted except per share data)
                                                                    (Unaudited)
Results of Operation:
      Total revenues (1)                       $19,437      $21,213      $21,824      $21,683      $22,982
      Total expenses                            17,962       17,548       18,697       19,361       17,878
      Provision for taxes                          724        1,208        1,270          700        2,059
      Net income                                   714        2,397        2,475        1,579        2,990

Per Share Data:
      Basic earnings per share                   $0.14        $0.45        $0.45        $0.29        $0.55
      Diluted earnings per share                 $0.14        $0.45        $0.45        $0.29        $0.55

Financial Position:
      Total assets                             $16,883      $17,433      $16,078      $14,774      $13,646
      Total liabilities                          7,514        6,938        5,911        6,994       16,201
      Total stockholders' equity (deficit)       8,940       10,090        9,822        7,347       (2,908)
</TABLE>

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





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


1998 Compared with 1997

The  consolidated net income in 1998 was $0.7 million, $0.14 per share, compared
to net income of $2.4 million, $0.45 per share in 1997.

Total assets under management at December 31, 1998 were $3.2 billion compared to
$3.5 billion at December 31, 1997. Mutual fund assets under management decreased
$0.4 billion from the prior year,  while private  account assets  increased $0.1
billion.  The  decrease  in mutual  fund  assets is mainly  attributable  to the
termination  of an  advisory  relationship  with  one  of the  Company's  larger
accounts  in the  fourth  quarter  of  1998.  Assets  under  management  in this
relationship  were  approximately  $300  million.  In  addition,  the turmoil in
emerging markets in 1998 adversely affected the Company's funds with exposure to
these  markets.  The  Lexington  Troika  Dialog  Russia  Fund and the  Lexington
Worldwide Emerging Markets Fund each declined by approximately $100 million from
December 31, 1997. Partially offsetting these declines was strong performance or
growth in several other  products,  most notably the Lexington  GNMA Income Fund
which  increased in size by  approximately  $100 million from December 31, 1997.
Both the  private  account  and  institutional  segments,  which  are  primarily
invested  in the U.S.  equity  and bond  markets,  experienced  growth in assets
through  strong  performance  results  associated  with the robust U.S.  capital
markets in 1998.

For the year ended December 31, 1998,  total revenues of $19.4 million  declined
by $1.8 million from $21.2 million in 1997.  Net mutual fund revenues  decreased
by  approximately  $2.6  million  from $13.5  million to $10.9  million with the
decline in assets under management.

Mutual fund commissions of $72 thousand were more than the $63 thousand recorded
in 1997 because sales of the  Company's two products with sales loads  increased
as a result of investor interest in precious metals mutual funds.

Other  management  fees of $8.0 million are up  approximately  $1.0 million from
$7.0 million in 1997.  The  Company's  private  account  business  accounted for
approximately $0.9 million of the increase due to continued  increases in assets
under  management  associated  with the continuing  strength of the U.S.  equity
markets.  Institutional  asset  management fees  contributed $0.1 million of the
increase.

Commission income of $109 thousand decreased $42 thousand from $151 thousand in 
1997.  The decrease is due to client terminations.

Other income of $0.3 million  decreased  $0.2 million from $0.5 million in 1997.
The decrease is a result of unrealized  depreciation  of marketable  securities.
The unrealized  depreciation stems from the Company's investments in a number of
the funds managed by the Company.

Total expenses in 1998 increased by approximately  $0.5 million to $18.0 million
from $17.5 million in 1997 due primarily to administrative and general expenses,
which increased $0.7 million.  This increase is almost entirely  attributable to
the Company's  administrative  contract with Select Advisors  ("Select") for the
Company's private account business. This contract was part of the reorganization
of this business,  which occurred in 1996.  Under this contract the Company pays
fees to Select for administrative and support services for the Company's private
account  clients.  Because  these  clients are billed  annually in advance,  the
expenses  incurred for the  administrative  contract are amortized evenly over a
twelve-month  period.  The 1998 expense  includes  amortization  of the contract
expense across the entire client base. In 1997,  the Company  benefited from the
fact that no  administrative  fees were charged in 1997 for those accounts which
entered into or renewed  advisory  agreements  in the first nine months of 1996;
i.e.,  prior to September 30, 1996,  the date of the  reorganization.  Partially
offsetting the increase is a decrease of $0.3 million in selling and promotional
expense,  mainly  attributed to a reduction in advertising and sales  literature
for the year. These expenses  declined as the Company made greater use of public
relations in its promotional efforts.  Total personnel costs of $9.0 million are
even with 1997.  Although the costs are even, the Company recognized an increase
of $0.5 million of expense  associated with the issuance of restricted  stock to
certain key executive  employees.  In addition,  salaries increased $0.2 million
due to annual salary increases. Offsetting the increase was a reduction in bonus
expense due to the  Company's lower earnings.

Pre-tax  income of $1.5  million  is $2.2  million  less  than the $3.7  million
recorded in 1997.  The  provision  for state and federal  taxes  decreased  $0.5
million due to the decrease in taxable  income.  The Company used  approximately
$1.8  million  of net  operating  loss  carryforwards  (NOLs)  in  1998  and has
remaining  NOLs of  approximately  $0.2  million  which are  available to offset
future taxable income which expire over the period 2008 through 2013.



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"),  Lexington Financial Services,  Inc. ("LFSI"),
Lexington Plan Administrators ("LPA"), and LCMI Insurance Services ("LCMII"). 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 $21.2  million are 2.8% below 1996 when the Company  recorded
revenues of $21.8 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
$17.8 million were $1.6 million above the $16.2 million recorded in 1996.

Net mutual fund management fees, the Company's largest revenue source, increased
approximately $1.8 million to $13.5 million in 1997 compared to $11.7 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 $17.5 million are $1.2 million below total  expenses of $18.7
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,  offset by an
increase of $0.9 million of subadvisor  fees due to the increase in assets under
management with subadvisory agreements.

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 prior year,  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 $7.2  million are $1.0  million  above the
prior year's figure of $6.2 million. The increase is primarily attributable to a
$0.9 million  increase in subadvisory  fees. The increase was due to an increase
in assets under management with subadvisory agreements. Also contributing to the
increase 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.
Offsetting  the  increase  was a decrease  in general and  administrative  costs
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.

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.

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 $0.3 million over the past three years.  The primary use of cash
in 1998 was for the purchase of computer equipment.

Cash flows from financing  activities  consistently  have been negative over the
past  three  years.  On March 7,  1997,  and  September  17,  1998 the  Board of
Directors of the Company  authorized share repurchase  programs of up to 750,000
shares for a total program of up to 1,500,000 shares.  Repurchases have been and
will  be  made  from  time  to time in the  open  market  or  through  privately
negotiated  transactions at market prices. The stock repurchase plans have terms
of three years. During 1998, the Company repurchased 532,350 shares of stock for
an aggregate purchase price of $2,353,857.  During 1997, the Company repurchased
313,000  shares  of  its  common  stock  for  an  aggregate  purchase  price  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, 1998 the Company  has $8.4  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, 1998 of $25,000.  The aggregate net capital of LFD
was $0.3  million at December  31,  1998.  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, 1998  decreased to $8.9 million from $10.1
million a year  earlier  primarily  as a result  of the  Company's  purchase  of
treasury shares.

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 prepare the Company's
computer  systems and applications for the Year 2000, as well as to identify and
address any other Year 2000  operational  issues  which may affect the  Company.
Progress  reports on the Company's Year 2000 program are presented  regularly to
the Company's Board of Directors and senior management.

The  Company's  Year  2000  program,  which  was  commenced  in June 1997 and is
administered  by internal  staff,  consists of the  following  three  components
relating to the Company's operations: (i) information technology ("IT") computer
systems and  applications  which may be impacted by the Year 2000 problem,  (ii)
non-IT  systems and equipment  which include  embedded  technology  which may be
impacted by the Year 2000  problem and (iii) third party  vendors with which the
Company has significant  relationships  which could adversely affect the Company
if such parties fail to be Year 2000 compliant.

The general  phases common to all three  components  of the Company's  Year 2000
program are: (1) Awareness  (the  identification  of the Year 2000 issues facing
the Company);  (2) Assessment (the  prioritization of the issues and the actions
to be taken); (3) Renovation  (implementation of the specific actions determined
upon assessment, including repair, modification or replacement of items that are
determined not to be Year 2000 compliant); (4) Validation (testing of the new or
modified  information  systems,  other systems, and equipment to verify the Year
2000  readiness);  (5)  Implementation  (actual  operation  of such  systems and
equipment and, if necessary,  the actual implementation of any contingency plans
in the event Year 2000 problems occur,  notwithstanding the Company's renovation
program).

The  Company has  completed  an  assessment  of its Year 2000  readiness  and is
undergoing a renovation of its internal  systems  which are not  currently  Year
2000  compliant.  This phase involves the  replacement  of certain  systems with
purchased software, the renovation of other systems, and the purchase of certain
hardware and other devices,  all of which are Year 2000  compliant.  The Company
anticipates  that the renovation phase related to these  applications  should be
completed  by the end of March 1999,  and that the  validation  phase  should be
completed  by the end of April  1999.  The  implementation  phase has  commenced
(overlapping  the  validation   phase)  with  systems  being  installed  at  the
completion of their validation  testing.  Excluding normal system upgrades,  the
Company estimates that total costs for conversion and testing of new or modified
IT systems and applications will aggregate  approximately  $174,000, of which an
aggregate of $56,000 has been incurred to date.

The Company is keeping  apprised of the  progress of outside  vendors'  plans to
become Year 2000 compliant. All outside vendors are in the validation phase.

The Company expects to be Year 2000 compliant  during the second quarter of 1999
and is in the process of preparing a contingency plan, which should be completed
by the second quarter of 1999.

Although the Company believes it is adequately  addressing its Year 2000 issues,
the  failure  to  correct  a  material  Year  2000  problem  could  result in an
interruption  in,  or a  failure  of,  certain  normal  business  activities  or
operations.  Such  failure  could  materially  affect the  Company's  results of
operations, liquidity and financial condition.



Item 8.  Financial Statements


     The following are included and filed under this item:

                                                                             

 Independent Auditors' Report ...............................................18


LEXINGTON GLOBAL ASSET MANAGERS, INC.

Consolidated Statements of Financial Condition--December 31, 1998 and 1997...19
Consolidated Statements of Operations--Years Ended December 31, 1998,
1997 and 1996 ...............................................................20
Consolidated Statements of Changes in Stockholders' Equity--Years Ended
 December 31, 1998, 1997 and  1996 ..........................................21
Consolidated Statements of Cash Flows--Years Ended December 31, 1998,
 1997 and 1996 ..............................................................22
Notes to Consolidated Financial Statements ..................................23





                          Independent Auditors' Report


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

We have audited the accompanying  consolidated statements of financial condition
of Lexington Global Asset Managers,  Inc. and Subsidiaries ("the Company") as of
December  31,  1998  and  1997,  and  the  related  consolidated  statements  of
operations,  changes in  stockholders'  equity,  and cash flows for the two-year
period  then   ended.   These   consolidated   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these  consolidated  financial  statements  based on our audits.  The
accompanying  consolidated  statements of operations,  changes in  stockholders'
equity,  and cash flows for the year ended  December  31,  1996 were  audited by
other auditors whose report thereon, dated February 19, 1997, except for Note 15
as to which the date is March 22,  1999,  expressed  an  unqualified  opinion on
these consolidated financial statements.

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 1998 and 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, 1998
and 1997,  and the  results  of their  operations  and their  cash flows for the
two-year  period then ended in conformity  with  generally  accepted  accounting
principles.




                                  /s/ KPMG LLP
                                    KPMG LLP


New York, New York
February 16, 1999



<TABLE>

                      LEXINGTON GLOBAL ASSET MANAGERS, INC.
                                           AND SUBSIDIARIES


                                                                          

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31,
<S>                                                       <C>                <C> 
                                                          1998               1997

Assets:
Cash and cash equivalents:
   Cash                                                   $ 228,347          $ 193,383
   Money market accounts                                  8,209,827          8,511,915
                                                      --------------    ---------------
                                                          8,438,174          8,705,298
                                                      --------------    ---------------

Receivables:
   Investment advisory and management fees                  863,920          1,233,377
   Due from funds and other                                 426,585            596,333
                                                      --------------    ---------------
                                                          1,290,505          1,829,710
                                                      --------------    ---------------
Trading securities                                        1,337,110          1,524,788
Prepaid expenses                                          1,859,517          1,608,122
Prepaid taxes                                               182,066            106,203
Fixed assets (net of accumulated depreciation and
   amortization)                                          1,193,515          1,384,772
Intangible assets (net of accumulated amortization)         178,476            194,676
Assets associated with deferred compensation                834,309                  -
Deferred tax asset, net                                   1,560,686          1,938,213
Other assets                                                  8,608            141,491
                                                      --------------    ---------------
        Total assets                                   $ 16,882,966       $ 17,433,273
                                                      ==============    ===============


Liabilities:
Accounts payable and accrued expenses                     $ 769,969          $ 926,177
Accrued compensation                                        615,055          1,530,100
Accrued employee benefits                                 2,559,653          1,981,308
Deferred income                                           1,879,969          1,626,123
Deferred compensation                                       834,309                  -
Federal income taxes payable                                843,434            863,667
Other liabilities                                            11,391             10,579
                                                      --------------    ---------------
        Total liabilities                                 7,513,780          6,937,954
                                                      --------------    ---------------
Minority interest                                           428,821            405,058

Stockholders' Equity:
Common stock, $.01 par value; 15,000,000 authorized 
shares; 5,487,887 issued, 4,720,208 and 5,174,887,
 respectively, outstanding                                   54,879             54,879
Additional paid-in capital                               21,573,392         21,708,142
Accumulated deficit                                      (8,633,541)        (9,345,918)
Deferred compensation                                    (1,118,758)        (1,654,342)
Treasury stock at cost                                   (2,935,607)          (672,500)
                                                      --------------    ---------------
        Total stockholders' equity                        8,940,365         10,090,261
                                                      --------------    ---------------

        Total liabilities and stockholders' equity     $ 16,882,966       $ 17,433,273
                                                      ==============    ===============



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

                                         LEXINGTON GLOBAL ASSET MANAGERS, INC.
                                                              AND SUBSIDIARIES

<TABLE>


CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31,
<S>                                                        <C>             <C>              <C>    

                                                           1998            1997            1996

Revenues:
   Investment advisory:                               
      Mutual fund management fees (including
          approximately $318,000,  $521,000 and $430,000,
          respectively, from related parties)               $ 10,920,941    $ 13,458,933    $ 11,736,786
      Mutual fund commissions                                     71,600          62,838         215,656
      Other management fees (including approximately
         $2,954,000,  $2,695,000 and  $2,102,000,
         respectively, from related parties)                   7,991,944       7,044,356       7,395,337
   Commissions income                                            108,508         151,334       1,734,411
   Other income                                                  343,711         495,175         742,092
                                                           --------------  --------------  --------------
       Total revenues                                         19,436,704      21,212,636      21,824,282
                                                           --------------  --------------  --------------

Expenses:
   Salaries and other compensation                             9,011,246       9,015,128      11,241,242
   Selling and promotional                                       971,841       1,299,742       1,231,927
   Administrative and general                                  7,979,098       7,233,004       6,223,394
                                                           --------------  --------------  --------------
       Total expenses                                         17,962,185      17,547,874      18,696,563
                                                           --------------  --------------  --------------
       Income before income taxes, gain on sale of
            subsidiaries, and minority interest                1,474,519       3,664,762       3,127,719

Gain on sale of subsidiaries                                           -               -         529,881

Provision (benefit) for income taxes:
   Current                                                       346,539          13,929       1,353,734
   Deferred                                                      377,527       1,193,629         (83,559)
                                                           --------------  --------------  --------------
       Total provision                                           724,066       1,207,558       1,270,175
                                                           --------------  --------------  --------------
       Income before minority interest                           750,453       2,457,204       2,387,425
Minority interest                                                 36,013          60,149         (87,227)
                                                           --------------  --------------  --------------
       Net income                                              $ 714,440     $ 2,397,055     $ 2,474,652
                                                           ==============  ==============  ==============

Earnings per share (Note 12):
   Basic earnings per share                                        $0.14           $0.45           $0.45
                                                           ==============  ==============  ==============
   Diluted earnings per share                                      $0.14           $0.45           $0.45
                                                           ==============  ==============  ==============

   Average shares outstanding during the period                4,994,048       5,322,172       5,487,887
                                                           ==============  ==============  ==============


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

                                         LEXINGTON GLOBAL ASSET MANAGERS, INC.
                                                             AND SUBSIDIARIES
<TABLE>



CONSOLIDATED  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
 Years Ended December 31, 1998, 1997, and 1996

<S>                                    <C>         <C>       <C>          <C>           <C>          <C>         <C>



                                             Common Stock                                                          Total
                                           Shares             Additional   Accumulated  Deferred     Treasury     Stockholders'
                                           Issued   Amounts Paid-In Capital  Deficit    Compensation   Shares     Equity
                                           -------- ------- --------------- ----------  ------------  -------    ------------

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 amortization           -         -           -              -      (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
Net income                                   -         -           -           714,440           -           -       714,440
Purchase of treasury shares at cost          -         -           -              -              -   (2,353,857)  (2,353,857)
Issuance of restricted stock awards          -         -           -            (2,063)          -       90,750       88,687
Deferred compensation amortization           -         -           -              -         535,584          -       535,584
Miscellaneous adjustment                     -         -        (134,750)         -              -           -      (134,750)
                                         -------- --------    ----------   ----------- ------------ ------------  ------------
Balance at December 31, 1998            5,487,887  $54,879   $21,573,392   ($8,633,541) ($1,118,758)($2,935,607)  $8,940,365
                                         ======== ========    ==========    =========== ============ ============ ============

</TABLE>

     See accompanying notes to the consolidated financial statements.
                                                  
                                        LEXINGTON GLOBAL ASSET MANAGERS, INC.
                                                             AND SUBSIDIARIES

<TABLE>


<S>                                                    <C>          <C>          <C>   

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
                                                          1998         1997         1996

Cash flows from operating activities:
Net income                                               $ 714,440  $ 2,397,055  $ 2,474,652
Adjustments to reconcile net income to net cash provided
   by operating activities:
      Depreciation and amortization                        337,706      319,267      389,090
      Amortization of deferred costs                             -        9,220       36,884
      Gain on sale of subsidiaries                               -            -     (529,881)
      Deferred income taxes                                377,527    1,193,629      (83,559)
      Minority interest                                     36,013       60,149      (87,227)
      Compensation expense for restricted shares awarded   624,271      151,908            -
Change in assets and liabilities
      Receivables                                          539,205      200,412      754,372
      Trading securities                                   187,678     (319,438)    (273,068)
      Prepaid expenses                                    (251,395)  (1,240,043)     (17,391)
      Prepaid taxes                                        (75,863)     (94,303)      30,465
      Accounts payable and accrued expenses               (492,908)     746,259     (566,869)
      Federal income taxes payable                         (20,233)    (151,684)      36,167
      Deferred income                                      253,846      428,547     (394,955)
      Other                                                133,695       45,432       48,823
      Net assets of subsidiaries sold                            -            -     (286,425)
                                                       ------------ ------------ ------------
Net cash provided by operating activities                2,363,982    3,746,410    1,531,078
                                                       ------------ ------------ ------------

Cash flows from investing activities:
      Purchases of furniture, equipment and leasehold
         improvements                                     (130,249)    (340,515)    (425,803)
      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       (130,249)    (290,561)     540,748
                                                       ------------ ------------ ------------

Cash flows from financing activities:
      Principal payments under capital lease obligations         -            -     (157,019)
      Dividends and other                                 (147,000)           -            -
      Purchase of treasury stock                        (2,353,857)  (2,280,375)           -
                                                       ------------ ------------ ------------
Net cash used in financing activities                   (2,500,857)  (2,280,375)    (157,019)
                                                       ------------ ------------ ------------
Net increase / (decrease) in cash and cash equivalents    (267,124)   1,175,474    1,914,807
Cash and cash equivalents, beginning of year             8,705,298    7,529,824    5,615,017
                                                       ------------ ------------ ------------
Cash and cash equivalents, end of year                 $ 8,438,174  $ 8,705,298  $ 7,529,824
                                                       ============ ============ ============

Supplemental cash flow disclosure
     Income taxes paid                                   $ 302,543    $ 472,910  $ 1,665,849
                                                       ============ ============ ============



              See accompanying notes to the consolidated financial statements.
</TABLE>
                                           LEXINGTON GLOBAL ASSET MANAGERS, INC.
                                                                AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS            December 31, 1998 and 1997

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,  Inc. ("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, 1998
and 1997 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 itself to operate in three business segments:  mutual
funds, institutional, and private accounts.

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, 1998.

Stock-Based Compensation
    The Company accounts for its employee  stock-based  compensation plans under
Accounting  Principles  Board Opinion No. 25,  "Accounting for Stock Issued  to
Employees"   (APB  No.  25)  and  has  adopted  the  disclosure requirements of
Statement of Financial Accounting  Standards  ("SFAS") No. 123,  "Accounting for
Stock-Based  Compensation,"  (SFAS No. 123) effective January 1, 1996.
     
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 file 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

Fixed assets at December 31, 1998 and 1997 consisted of the following:
<TABLE>
<S>                                                           <C>                <C>  

                                                                 1998              1997

Furniture, fixtures and equipment                              $3,191,678        $3,074,485
Leasehold improvements                                            168,577           155,521
                                                             -------------     -------------
     Depreciable fixed assets                                   3,360,255         3,230,006
Less accumulated depreciation and amortization                  2,166,740         1,845,234
                                                             -------------     -------------
Fixed assets, net                                              $1,193,515        $1,384,772
                                                             =============     =============
</TABLE>


Depreciation and amortization charged to operations were $337,706, $319,267, and
$389,090 for the years ended  December 31,  1998,  1997 and 1996,  respectively.
These amounts  include  amortization of goodwill of  approximately  $16,200 each
year.

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

       Asset                              Estimated Life
Furniture and fixtures                     5 - 12 years
Office equipment                           3 - 5  years
Leasehold improvements                     term of lease
                                                                            

4.  Trading Securities

At December 31, 1998 and 1997, trading securities consisted of the following:

                                            1998               1997
Funds advised by the Company            $1,036,211         $1,272,519
Equity Securities                          300,899            252,269
                                        ----------         ----------
Total trading securities                $1,337,110         $1,524,788
                                        ==========         ==========

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, 1998 and 1997,  the balance in the
deferred  income account was $1,879,969 and  $1,626,123,  respectively,  and was
recorded as a liability in the accompanying consolidated statements 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, 1998 and 1997,  the balance in prepaid
expense for administrative services was $1,259,097 and $1,255,175, respectively.

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, 1998,  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,
1998 amounted to $304,975.

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  $485,000 and
$469,000 at December 31, 1998 and 1997, respectively.

8.  Commitments and Contingencies

The Subsidiaries lease  administrative  offices under  noncancellable  operating
leases.

The future minimum lease payments as of December 31, 1998 are as follows:

         1999...................................   $624,000
         2000...................................    586,000
         2001...................................    578,000
         2002...................................    578,000
         2003...................................    386,000
                                                  ---------
                                                 $2,752,000
                                                  =========

Rent expense was approximately  $736,000,  $626,000, and $941,000, for the years
ended December 31, 1998, 1997, and 1996, respectively.
 
9.  Preferred Stock

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 (the "Plan")  established in 1995.
The Plan provides for the granting of stock options,  stock appreciation  rights
and other stock-based performance awards to employees.

Restricted Award Plan

Under the Plan the Company  established the Restricted  Stock Award Plan,  which
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  years  ended  December  31,  1998 and  1997,  the  Company  awarded
restricted  shares  which will be issued out of  Treasury  Stock when the awards
vest. 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
   April 1, 1998                           11,000              $8.06

For the years ended December 31, 1998 and 1997, the Company recognized  $624,271
and $151,908, respectively,  of compensation  expense relating to the Restricted
Stock Award Plan.

Stock Option Plan

Under the Plan the Company also  established a Stock Option Plan,  which reserve
shares of common  stock for  issuance to key  employees.  In 1998,  81,500 stock
options were granted at an exercise  price of $8.06 and 7,000 stock options were
granted at an exercise price of $4.00, the market values at the respective dates
of grant.  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. No grants were made in 1996. No
options were exercised or expired in 1998,  1997 and 1996 although  170,250 were
exercisable at December 31, 1998.

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 1998,  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)

                                               1998      1997        1996
Net earnings:
      As reported                              $714     $2,397      $2,475
      Pro forma                                $513     $2,252      $2,399
Basic earnings per share:
      As reported                             $0.14      $0.45       $0.45
      Pro forma                               $0.10      $0.42       $0.44
Diluted earings per share:
      As reported                             $0.14      $0.45       $0.45
      Pro forma                               $0.10      $0.42       $0.44


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 1998,  1997 and  1995:  dividend  yield of 0%;
expected  volatility of 35.0%;  risk-free  interest rate of 5.23% to 6.64%;  and
expected lives of 10 years.

The Stock  Option 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 the Stock  Option Plan 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.
<TABLE>
<S>                                                         <C>           <C>           <C>         <C>

Information regarding the Stock Option Plan for 1998, 1997 and 1996 is as follows:

                                                                1998                      1997         1996
                                                             ------------------------- -----------  -----------
                                                                           Weighted-
                                                                            Average
                                                                           Exercise
                                                               Shares        Price       Shares       Shares

Options outstanding, beginning of year                          321,000       $5.4634     180,000      180,000
Options exercised                                                     -             -           -            -
Options granted                                                  88,500       $7.7389     141,000            -
                                                             -----------               -----------  -----------
Options outstanding, end of year                                409,500                   321,000      180,000
                                                             ===========               ===========  ===========
Option price range, end of year                                   $4.00                     $6.25        $4.75
                                                                  $8.06                     $8.00            -
Option price range for exercised shares                               -                         -            -


Weighted-average fair value of options, granted during the year $7.7389                   $6.3741            -
Weighted-average grant-date fair value of options, granted
     during the year                                            $4.5480                   $3.8720            -
</TABLE>

The following table summarizes  information  about stock options  outstanding at
December 31, 1998:

<TABLE>
<S>                             <C>                        <C>           <C>           <C>         <C>         <C>

                                                                     Options Outstanding              Options Exercisable
                                                             -------------------------------------  ------------------------
                                                                           Weighted-
                                                                            Average     Weighted                 Weighted-
                                                               Number      Remaining    Average       Number      Average
                                                             Outstanding  Contractual   Exercise    Exercisable   Exercise
                                  Range of Exercise Prices   at 12/31/98     Life        Price      at 12/31/98    Price
                                                     $4.00        7,000            10       $4.00            -            -
                                                     $4.75      180,000             7       $4.75      135,000        $4.75
                                                     $6.25      131,000             8       $6.25       32,750        $6.25
                                             $8.00 - $8.06       91,500             9       $8.05        2,500        $8.00
                                                             -----------                            -----------
                                             $4.00 - $8.06      409,500                                170,250    
                                                             ===========                            ===========
</TABLE>

11.  Common Stock Buy-Back Program

On March 7, 1997,  and  September 17, 1998 the Board of Directors of the Company
authorized share repurchase programs of up to 750,000 shares for a total program
of up to 1,500,000  shares.  Repurchases have been and will be made from time to
time in the open market or through privately  negotiated  transactions at market
prices.  The stock repurchase plans have terms of three years.  During 1998, the
Company  repurchased  532,350 shares of stock for an aggregate purchase price of
$2,353,857.  Also during 1998,  11,000  treasury  shares were awarded  under the
Company's  Restricted  Stock Award Plan.  During 1997,  the Company  repurchased
313,000  shares  of  its  common  stock  for  an  aggregate  purchase  price  of
$2,280,375.  Also during 1997,  233,000  treasury  shares were awarded under the
Company's Restricted Stock Award Plan. To date, 244,000 shares have been awarded
and 77,671  shares have been issued under the  Restricted  Stock Award Plan.  At
December  31,  1998 and 1997,  767,679 and  313,000  treasury  shares were held,
respectively.

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 average 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, 1998, 1997 and 1996.
<TABLE>
<S>                                                           <C>                  <C>               <C>

                                                                    1998               1997              1996
          Numerator:
            Net income                                              $714,440         $2,397,055        $2,474,652
                                                                =============      =============     =============
            Numerator for basic and diluted
              earnings per share - income
              available to common stockholders                      $714,440         $2,397,055        $2,474,652
                                                                =============      =============     =============
          Denominator:
            Denominator for basic earnings
              per share-weighted-average
              shares outstanding                                   4,994,048          5,322,172         5,487,887
            Effect of dilutive securities:
              Employee stock options                                  62,118             59,613            10,957
                                                                -------------      -------------     -------------
            Dilutive potential common shares                          62,118             59,613            10,957
            Denominator for diluted earnings per
              share-adjusted weighted-average
              shares and assumed conversions                       5,056,166          5,381,785         5,498,844
                                                                =============      =============     =============

          Basic earnings per share                                     $0.14              $0.45             $0.45
                                                                =============      =============     =============
          Diluted earnings per share                                   $0.14              $0.45             $0.45
                                                                =============      =============     =============
</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,  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 or 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 $117,498,  $122,760,
and  $114,409  for  the  years  ended   December  31,  1998,   1997,  and  1996,
respectively.

Retirement Plan
    LMC sponsors a defined benefit plan  ("Retirement  Plan") which is part of a
master trust.  An employee  becomes a participant in the  Retirement  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 Retirement  Plan is to annually  contribute the statutory  required  minimum
amount as  actuarially  determined.  Approximately  26% of the plan  assets  are
invested in the Lexington Group of Mutual Funds.

LMC also maintains non-qualified supplemental benefit plans ("SERP") 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
$85,303,  $86,900, and $116,600 for the years ended December 31, 1998, 1997, and
1996, respectively.

The following is selected actuarial information for the Retirement Plan and SERP
(the "Plans"):

The Plans'  projected  benefit  obligation  at  December  31,  1998 and 1997 was
comprised of:

                                                    1998         1997

Benefit obligation at beginning of year       $7,067,630     $5,888,552
Service cost                                     338,530        267,931
Interest cost                                    487,785        436,804
Actuarial loss                                   390,032        647,121
Benefits paid                                   (309,508)      (298,411)
                                               ---------      ---------
    Benefit obligation at end of year         $7,974,469     $6,941,997
                                               =========      =========

The plan assets at fair value for the years ended December 31, 1998 and 1997 was
comprised of:

                                                     1998         1997

Fair value of plan assets at beginning of year   $5,158,165   $4,848,048
Actual return on plan assets                        706,108      486,981
Employer contributions                              138,656      121,547
Benefits paid                                      (309,508)    (298,411)
                                                  ---------    ---------
       Fair value of plan assets at end of year  $5,693,421   $5,158,165
                                                  =========    =========

The following  table  presents the Plans' funded status and amounts  recorded in
the Company's  accompanying  consolidated  statements of financial  condition at
December 31, 1998 and 1997:

                                                    1998         1997

Funded status                                   ($2,281,048) ($1,783,832)
Unrecognized net actuarial loss                     685,031      631,001
Unrecognized transition obligation or(asset)        123,142      (20,164)
Unrecognized prior service cost                     372,489      267,066
                                                  ---------    ---------
  Net amount recorded at end of year            ($1,100,386)   ($905,929)
                                                  =========    =========

Amounts  recorded in the  consolidated  statements  of  financial  condition  at
December 31, 1998 and 1997 consisted of:

                                             1998         1997

       Accrued benefit liability           ($1,343,147)     ($1,133,718)
       Intangible asset                        242,761          227,789
                                             ---------        ---------
       Net amount recorded at end of year  ($1,100,386)       ($905,929)
                                             =========        =========

The following  table presents year end  information  for the Plans'  accumulated
benefit obligations in excess of plan assets at December 31, 1998 and 1997:

                                             1998         1997

       Projected benefit obligation        $7,974,469   $6,941,997
       Accumulated benefit obligation       7,036,568    6,193,505
       Fair value of plan assets            5,693,421    5,158,165

Actuarial  computations  at December 31, 1998, 1997 and 1996 were made utilizing
the following assumptions:

                                             1998         1997        1996

       Discount rate                         6.75%        7.00%        7.50%
       Expected return on plan assets       10.00%       10.00%       10.00%
       Rate of compensation increase         6.00%        6.00%        6.00%

Net expense under the Plans for the years ended December 31, 1998, 1997 and 1996
was comprised of:

                                             1998         1997        1996

       Service cost                        $338,530     $267,931     $309,741
       Interest cost                        487,785      436,804      404,717
       Expected return on plan assets      (501,717)    (469,064)    (449,958)
       Amortization of prior service cost    26,188       18,674        5,760
       Amortization of transitional asset   (17,673)     (26,196)     (26,196)
                                           ---------    ---------    --------
       Net periodic benefit cost           $333,113     $228,149     $244,064
                                           =========    =========    ========


                                                                          



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.

The following is selected actuarial information for the Company's postretirement
employee benefits:

The postretirement employee benefits' accumulated benefit obligation at December
31, 1998 and 1997 was comprised of:

                                                     1998           1997

        Benefit obligation at beginning of year   $1,236,634     $1,473,965
        Service cost                                  57,181         54,702
        Interest cost                                 75,775         78,203
        Actuarial gain                              (102,883)      (286,666)
        Benefits paid                                (28,628)       (83,570)
                                                  -----------    -----------

        Benefit obligation at end of year         $1,238,079     $1,236,634
                                                  ===========    ===========

The following table presents the postretirement employee benefits' funded status
and amounts recorded in the Company's  accompanying  consolidated  statements of
financial condition at December 31, 1998 and 1997:

                                                     1998           1997

        Funded status                             ($1,238,079)   ($1,103,304)
        Unrecognized net actuarial gain               (94,122)      (109,028)
        Unrecognized transition obligation            316,000        341,000
                                                  -----------    -----------

        Net amount recorded at end of year        ($1,016,201)     ($871,332)
                                                  ===========    ===========

Amounts  recorded  in the  accompanying  consolidated  statements  of  financial
condition at December 31, 1998 and 1997 consisted of:

                                                     1998           1997

        Accrued benefit liability                 ($1,016,201)    ($871,332)
                                                  -----------    -----------

        Net amount recorded at end of year        ($1,016,201)    ($871,332)
                                                  ===========    ===========

Actuarial  computations  at December 31, 1998, 1997 and 1996 were made utilizing
the following assumptions:

                                   1998           1997            1996

        Discount rate             6.75%          7.00%           7.50%

For  measurement  purposes,  a 9.8% (pre age 65 coverage)  and 8.4% (post age 65
coverage)  annual rate of increase in the per capita cost of covered health care
benefits was assumed for 1998.  The rate is assumed to decrease  gradually to 5%
for 2007 and remain at that level thereafter.

Net  expense  under the  postretirement  employee  benefits  for the years ended
December 31, 1998, 1997 and 1996 was comprised of:

                                              1998         1997         1996

Service cost                                 $57,181      $54,702      $76,000
Interest cost                                 75,775       78,203       96,000
Expected return on plan assets                (3,260)      (2,461)       4,000
Amortization of transitional obligation       25,000       25,000       25,000
                                         -----------  -----------    ---------

 Net periodic benefit cost                  $154,696     $155,444     $201,000
                                         ===========  ===========    =========

Assumed  health care cost trend rates have a  significant  effect on the amounts
reported  for the health care plans.  A  one-percentage-point  change in assumed
health care cost trend rates would have the following effects:

                                      One-percentage        One-percentage
                                      point increase        point decrease
                                     ---------------      ----------------

Effect on total of service and interest
cost components                           $26,340             ($26,340)
Effect on postretirement benefit
obligation                                203,431             (203,431)


Deferred Compensation Program
     The  Company   sponsors  a   supplemental   retirement   plan  which  is  a
non-qualified deferred compensation plan (the "Plan"). The Plan is maintained by
the Company for purposes of providing  deferred  compensation for a select group
of key employees. The Company established a trust for this Plan and consolidates
the trust  assets  with those of the  Company in the  accompanying  consolidated
statements  of financial  condition  and records an  offsetting  liability.  The
investments held in the trust consist of various mutual fund holdings, including
funds in the Lexington Group of Mutual Funds  (approximately  27% of the trust's
assets). The value of these investments at December 31, 1998 was $834,309.


14. Income Taxes

A reconciliation  of income tax expense  computed at the U.S.  statutory rate to
the effective  rate  reflected in the  accompanying  consolidated  statements of
operations for the years ended December 31, 1998, 1997, and 1996 follows:



                                       1998             1997           1996
Expected tax rate                     34.00%           34.00%         34.00%
State and local taxes                  9.92             6.81           6.35
Restricted Stock                       8.02               -              -
Other                                 (1.61)           (7.31)         (6.43)
                                -------------    -------------  --------------
Effective tax rate                    50.33%           33.50%         33.92%
                                =============    =============  ==============


The tax effects of temporary  differences that give rise to the net deferred tax
asset at December 31, 1998 and 1997 are as follows:

                                                    1998             1997
Deferred tax assets:
     Net operating loss carryforwards            $63,213            $708,678
     Deferred compensation                       651,300             647,256
     Retirement and postretirement               800,068             648,001
     Other                                       189,059              90,349
                                           -------------      --------------
          Total deferred tax asset             1,703,640           2,094,284
                                           -------------      --------------
Deferred tax liabilities:
     Deferred state taxes                      (106,865)             (86,976)
     Other                                      (36,089)             (69,095)
                                           -------------       --------------
          Total deferred tax liabilities       (142,954)            (156,071)
                                           -------------       --------------
          Net deferred tax asset             $1,560,686           $1,938,213
                                           =============       ==============

Income tax expense attributable to income for the years ended December 31, 1998,
1997, and 1996 consists of:

                                    Current         Deferred           Total
                                -------------    -------------   --------------
Year ended December 31, 1998:
     U.S. Federal                   $71,794          $436,024          $507,818
     State and local                274,745           (58,497)          216,248
                               -------------     -------------    --------------
                                   $346,539          $377,527          $724,066
                               =============     =============    ==============

                                    Current        Deferred            Total
                                -------------    -------------   --------------
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
                               =============   =============      ==============


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 $186,000 which
are available to offset future  taxable income which expire over the period 2008
through 2013.

15.  Disclosures about Segments of an Enterprise and Related Information

The Company and its subsidiaries  are principally  engaged in a variety of asset
management and related  services to retail  investors,  institutions and private
accounts.

In June 1997, the Financial  Accounting  Standards  Board (FASB) issued SFAS No.
131,  "Disclosures  about  Segments of an Enterprise  and Related  Information",
which the  Company has adopted in the  current  year.  SFAS No. 131  establishes
standards for the way a public  enterprise  reports  information about operating
segments in its annual and interim financial  statements.  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.

The Company operates in three business  segments:  Mutual Funds,  Institutional,
and  Private  Accounts.  The mutual  fund  segment,  through  its  subsidiaries,
markets,  promotes,  and  distributes  the  Lexington  family of 17 mutual funds
providing  a variety  of  investment  choices.  The  institutional  segment  for
investment management services includes corporate, government and multi-employee
pension plans, charitable endowments and foundations,  insurance company general
accounts and defined  contribution and 401(k) plans. The private account segment
offers  equity,  fixed income and balanced  fund  alternatives,  tailored to the
individual investment objectives of its private clients.

<TABLE>
<S>                                    <C>           <C>             <C>             <C>          <C>

                                         Mutual                      Private
Year ended December 31, 1998             Funds      Institutional    Accounts        Other         Total
--------------------------------------------------------------------------------------------------------------

Revenue                                 $11,055,576    $4,052,963     $4,287,002       $41,163    $19,436,704

Salaries and other compensation          $3,941,343    $3,852,303     $1,217,600       -           $9,011,246
Selling and promotional                    $562,642      $255,755        $99,983       $53,461       $971,841
Administrative and general               $3,459,644    $1,271,214     $2,979,938      $268,302     $7,979,098

Income before income taxes
     and minority interest               $3,091,947   ($1,326,309)      ($10,519)    ($280,600)    $1,474,519

--------------------------------------------------------------------------------------------------------------

                                         Mutual                      Private
Year ended December 31, 1997             Funds      Institutional    Accounts        Other         Total
--------------------------------------------------------------------------------------------------------------

Revenue                                 $13,829,223    $3,899,630     $3,448,775       $35,008    $21,212,636

Salaries and other compensation          $3,982,392    $3,913,902     $1,118,834       -           $9,015,128
Selling and promotional                    $810,112      $337,928        $87,932       $63,770     $1,299,742
Administrative and general               $3,982,367    $1,379,779     $1,624,753      $246,105     $7,233,004

Income before income taxes
     and minority interest               $5,054,352   ($1,731,979)      $617,256     ($274,867)    $3,664,762

--------------------------------------------------------------------------------------------------------------


                                         Mutual                      Private
Year ended December 31, 1996             Funds      Institutional    Accounts        Other         Total
--------------------------------------------------------------------------------------------------------------

Revenue                                 $12,353,380    $3,803,814     $5,592,285       $74,803    $21,824,282

Salaries and other compensation          $3,752,832    $3,405,083     $4,083,327       -          $11,241,242
Selling and promotional                    $804,776      $250,926       $128,525       $47,700     $1,231,927
Administrative and general               $2,635,663    $1,132,598     $1,665,746      $789,387     $6,223,394

Income before income taxes
     and minority interest               $5,160,109     ($984,793)     ($285,313)    ($762,284)    $3,127,719

--------------------------------------------------------------------------------------------------------------
</TABLE>

Management does not evaluate assets as a means to allocate  resources and assess
performance. The Company is domiciled in the United States and does not have any
international operations.

16. Quarterly Financial Data (Unaudited)

     The unaudited  quarterly  financial  data for the years ended  December 31,
1998, 1997, and 1996 follows:
<TABLE>
<S>                                  <C>               <C>               <C>               <C>

                                       First             Second            Third             Fourth
                                      Quarter           Quarter           Quarter           Quarter

1998 Results of operations:
     Total revenues                   $5,148,793        $5,013,062        $4,567,306        $4,707,543
     Total expenses                    4,734,477         4,673,205         4,353,313         4,201,190
     Provision for taxes                 181,100           157,968           116,274           268,724
     Net income                          232,587           174,447            89,017           218,389
     Basic earnings per share             $ 0.04            $ 0.03            $ 0.02            $ 0.05
     Diluted earnings per share           $ 0.04            $ 0.03            $ 0.02            $ 0.05

Common stock price range:
     High                                $ 9.500           $ 8.500           $ 7.250           $ 5.250
     Low                                 $ 6.750           $ 6.750           $ 3.313           $ 3.250

1997
Results of operations:
     Total revenues                   $5,015,387        $5,205,805        $5,722,193        $5,269,251
     Total expenses                    3,740,999         4,050,523         4,532,895         5,223,457
     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                   $5,892,531        $5,838,642        $5,836,374        $4,256,735
     Total expenses                    5,130,544         5,088,203         5,104,182         3,373,634
     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
</TABLE>

                                    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, 1998
with respect to the Company's executive officers.

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

Stuart S. Richardson     52        Chairman (1995)

Robert M. DeMichele      54        President and Chief Executive Officer (1995)

Richard M. Hisey         40        Executive Vice President and Chief Financial 
                                   Officer (1995)

Lawrence Kantor          51        Executive Vice President and General 
                                   Manager - Mutual Funds (1995)

     Other information required under this item is contained in the Registrant's
1999 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 1999
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 1999
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 1999
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,   1998   and   1997;    Consolidated    Statements   of
Operations-Years Ended December 31, 1998, 1997, 1996; Consolidated Statements of
Stockholders'  Equity-Years  Ended December 31, 1998, 1997,  1996;  Consolidated
Statements of Cash  Flows-Years  Ended December 31, 1998,  1997,  1996; 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, 1998.

     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 1998


(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 1999 Annual Stockholders'
meeting and its Annual Report to stockholders for the fiscal year ended December
31, 1998 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 24, 1999

    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 24, 1999
          of the Board of Directors

            /s/Robert M. DeMichele          
Robert M. DeMichele, President & Director                  Date March 24, 1999
              (Chief Executive Officer)

            /s/Richard M. Hisey              
Richard M. Hisey, Executive Vice President                 Date March 24, 1999
(Principal Financial and Accounting Officer)

            /s/ Sion A. Boney                
        Sion A. Boney, III, Director                       Date March 24, 1999

           /s/Haynes G. Griffin               
        Haynes G. Griffin, Director                        Date March 24, 1999

           /s/William R. Miller                
        William R. Miller, Director                        Date March 24, 1999

         /s/L. Richardson Preyer                
       L. Richardson Preyer, Director                      Date March 24, 1999

           /s/Lunsford Richardson, Jr.               
       Lunsford Richardson, Jr., Director                  Date March 24, 1999

           /s/Peter L. Richardson                 
        Peter L. Richardson, Director                      Date March 24, 1999

           /s/Carl H. Tiedemann                 
        Carl H. Tiedemann, Director                        Date March 24, 1999

           /s/ Marion A. Woodbury           
       Marion A. Woodbury, Director                        Date March 24, 1999





                        REPORT OF INDEPENDENT ACCOUNTANTS




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


We have audited the accompanying consolidated statements of operations,  changes
in stockholders' equity, and cash flows of Lexington Global Asset Managers, Inc.
and  Subsidiaries  (the  "Company") for the year 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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  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 consolidated  financial statements referred to above present
fairly,  in all material  respects,  the consolidated  results of operations and
cash flows of Lexington Global Asset Managers,  Inc. and  Subsidiaries,  for the
year ended December 31, 1996, in conformity with generally  accepted  accounting
principles.




                                             /s/ PricewaterhouseCoopers LLP
                                             PricewaterhouseCoopers LLP


New York, New York February 19, 1997,
except for Note 15 as to which the date is
March 22, 1999.