<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
         FOR THE QUARTERLY PERIOD ENDED OCTOBER 3, 1998

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


                        COMMISSION FILE NUMBER 001-11911

                       STEINWAY MUSICAL INSTRUMENTS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              DELAWARE                                       35-1910745
   (State or Other Jurisdiction of                        (I.R.S. Employer
   Incorporation or Organization)                        Identification No.)

     800 South Street, Suite 425
        Waltham, Massachusetts                                 02453
(Address of Principal Executive Offices)                    (Zip Code)

Registrant's telephone number including area code:   (781) 894-9770

                                       and

                            THE SELMER COMPANY, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              DELAWARE                                       95-4432228
   (State or Other Jurisdiction of                        (I.R.S. Employer
   Incorporation or Organization)                        Identification No.)

  600 Industrial Parkway, Elkhart, Indiana                     46516
  (Address of Principal Executive Offices)                   (Zip Code)

Registrant's telephone number including area code:   (219) 522-1675

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 during the past 90 days. Yes [X] No [ ]

Number of shares of Common Stock issued and outstanding as of October 30, 1998:

<TABLE>

<S>                     <C>    
         Class A          477,953
         Ordinary       8,828,972
                        ---------
         Total          9,306,925

</TABLE>

<PAGE>

               STEINWAY MUSICAL INSTRUMENTS, INC. AND SUBSIDIARIES

                                    FORM 10Q

                                      INDEX

PART I.   FINANCIAL INFORMATION

ITEM 1.   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:

          Condensed Consolidated Balance Sheets
           December 31, 1997 and October 3, 1998.........................    3

          Condensed Consolidated Statements of Operations
           Three months and nine months ended September 27, 1997 
           and October 3, 1998...........................................    4

          Condensed Consolidated Statements of Cash Flows
           Nine months ended September 27, 1997 and October 3, 1998......    5

          Notes to Condensed Consolidated Financial Statements...........    6

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS.....................................   13

PART II.  OTHER INFORMATION

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K...............................   16

          SIGNATURES.....................................................   17


                                       2

<PAGE>

               STEINWAY MUSICAL INSTRUMENTS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                           December 31,   October 3,
                                                                               1997         1998
                                                                           ------------   ----------
<S>                                                                         <C>            <C>      
ASSETS
Current assets:
   Cash                                                                     $   5,271      $   2,527
   Accounts, notes and leases receivable, net of allowance for
     bad debts of $7,504 and $7,991 in 1997 and 1998, respectively             47,377         76,872
   Inventories                                                                 87,954         93,784
   Prepaid expenses and other current assets                                    4,832          2,743
   Deferred tax assets                                                          6,188          6,387
                                                                            ---------      ---------
Total current assets                                                          151,622        182,313

Property, plant and equipment, net of accumulated depreciation of
  $19,531 and $24,568 in 1997 and 1998, respectively                           58,629         59,543
Other assets, net                                                              22,891         21,086
Cost in excess of fair value of net assets acquired, net of accumulated
  amortization of $2,734 and $3,510 in 1997 and 1998, respectively             33,566         34,010
                                                                            ---------      ---------

TOTAL ASSETS                                                                $ 266,708      $ 296,952
                                                                            ---------      ---------
                                                                            ---------      ---------


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Notes payable and current portion of long-term debt                      $   3,338      $   4,956
   Accounts payable                                                             5,668          5,997
   Other current liabilities                                                   31,423         32,411
                                                                            ---------      ---------
Total current liabilities                                                      40,429         43,364

Long-term debt                                                                112,119        125,724
Deferred taxes                                                                 26,279         25,772
Non-current pension liability                                                  12,120         13,821
                                                                            ---------      ---------
Total liabilities                                                             190,947        208,681

Commitments and Contingent Liabilities

Stockholders' equity:
   Common stock                                                                     9              9
   Additional paid in capital                                                  69,206         70,223
   Retained earnings                                                           14,492         26,543
   Accumulated translation adjustment                                          (6,030)        (3,650)
   Treasury stock                                                              (1,916)        (4,854)
                                                                            ---------      ---------
     Total stockholders' equity                                                75,761         88,271
                                                                            ---------      ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                  $ 266,708      $ 296,952
                                                                            ---------      ---------
                                                                            ---------      ---------

</TABLE>

           See notes to condensed consolidated financial statements.


                                       3

<PAGE>

               STEINWAY MUSICAL INSTRUMENTS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                           Three Months Ended               Nine Months Ended
                                        ---------------------------    ---------------------------
                                        September 27,    October 3,    September 27,    October 3,
                                            1997           1998            1997           1998
                                        -------------   -----------    -------------   -----------
<S>                                     <C>             <C>             <C>            <C>        
Net sales                               $    64,554     $    68,646     $   208,055    $   220,807
Cost of sales                                43,308          46,748         140,147        148,333
                                        -----------     -----------     -----------    -----------
Gross profit                                 21,246          21,898          67,908         72,474

Operating Expenses:
   Sales and marketing                        7,337           8,102          23,881         26,107
   General and administrative                 4,496           3,810          13,435         12,186
   Amortization                                 952             963           2,905          2,871
   Other (income) expense                       (49)            (37)            115            251
                                        -----------     -----------     -----------    -----------
Total Operating Expenses                     12,736          12,838          40,336         41,415
                                        -----------     -----------     -----------    -----------
Earnings from operations                      8,510           9,060          27,572         31,059

Interest expense, net                         3,542           3,330           9,798          9,057
                                        -----------     -----------     -----------    -----------
Income before income taxes                    4,968           5,730          17,774         22,002

Provision for income taxes                    2,266           2,431           8,168          9,951
                                        -----------     -----------     -----------    -----------
Net income                              $     2,702     $     3,299     $     9,606    $    12,051
                                        -----------     -----------     -----------    -----------
                                        -----------     -----------     -----------    -----------
Net income per share:
    Basic                               $       .29     $       .35     $      1.02    $      1.29
                                        -----------     -----------     -----------    -----------
                                        -----------     -----------     -----------    -----------
    Diluted                             $       .28     $       .35     $      1.02    $      1.26
                                        -----------     -----------     -----------    -----------
                                        -----------     -----------     -----------    -----------
Weighted average shares outstanding:
    Basic                                 9,438,852       9,331,592       9,428,242      9,353,501
                                        -----------     -----------     -----------    -----------
                                        -----------     -----------     -----------    -----------
    Diluted                               9,504,485       9,473,550       9,450,120      9,539,343
                                        -----------     -----------     -----------    -----------
                                        -----------     -----------     -----------    -----------

</TABLE>

           See notes to condensed consolidated financial statements.


                                       4

<PAGE>

               STEINWAY MUSICAL INSTRUMENTS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                           Nine Months Ended
                                                     ---------------------------
                                                     September 27,    October 3,
                                                         1997           1998
                                                     -------------    ----------
<S>                                                    <C>            <C>     
Cash flows from operating activities:                                
  Net income                                           $  9,606       $ 12,051
  Adjustments to reconcile net income to                             
    cash flows from operating activities:                            
    Depreciation and amortization                         7,926          7,957
    Deferred tax benefit                                 (1,728)        (1,549)
    Other                                                   594            272
    Changes in operating assets and liabilities:                     
      Accounts, notes and leases receivable             (31,102)       (29,413)
      Inventories                                        (2,900)        (4,332)
      Prepaid expense and other current assets           (1,181)           417
      Accounts payable                                     (902)           222
      Accrued expenses                                    3,766            670
                                                       --------       --------
    Cash flows from operating activities                (15,921)       (13,705)
                                                                     
Cash flows from investing activities:                                
  Capital expenditures                                   (3,766)        (4,272)
  Proceeds from disposals of fixed assets                    34            132
  Acquisition of business (net of cash acquired)         (1,606)          --
  Changes in other assets                                (1,322)         2,156
                                                       --------       --------
    Cash flows from investing activities                 (6,660)        (1,984)
                                                                     
Cash flows from financing activities:                                
  Net borrowings under lines of credit                   20,015         15,538
  Repayments of long-term debt                             (664)          (713)
  Proceeds from issuance of stock                           458          1,017
  Purchase of treasury stock                               --           (2,938)
                                                       --------       --------
    Cash flows from financing activities                 19,809         12,904
                                                                     
Effect of foreign exchange rate changes on cash             (24)            41
                                                       --------       --------
Decrease in cash                                         (2,796)        (2,744)
Cash, beginning of period                                 3,277          5,271
                                                       --------       --------
Cash, end of period                                    $    481       $  2,527
                                                       --------       --------
                                                       --------       --------
Supplemental Cash Flow Information                                   
    Interest paid                                      $  7,127       $  6,794
                                                       --------       --------
                                                       --------       --------
    Taxes paid                                         $  9,857       $ 12,573
                                                       --------       --------
                                                       --------       --------

</TABLE>

           See notes to condensed consolidated financial statements.


                                       5

<PAGE>

               STEINWAY MUSICAL INSTRUMENTS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 OCTOBER 3, 1998
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

(1)   BASIS OF PRESENTATION

     The accompanying condensed consolidated financial statements of Steinway
Musical Instruments, Inc. and subsidiaries (the "Company") for the nine months
ended September 27, 1997 and October 3, 1998 are unaudited. In the opinion of
management, these statements have been prepared on the same basis as the audited
consolidated financial statements as of and for the year ended December 31,
1997, and include all adjustments which are of a normal and recurring nature,
necessary for the fair presentation of financial position, results of operations
and cash flows for the interim period. The condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto, together with management's discussion and analysis
of financial condition and results of operations, contained in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997. The
results of operations for the nine months ended October 3, 1998 are not
necessarily indicative of the results which may be expected for the entire year.

(2)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     PRINCIPLES OF CONSOLIDATION--The consolidated financial statements of the
Company include the accounts of all of its direct and indirect wholly-owned
subsidiaries, including The Selmer Company, Inc. ("Selmer") and The Steinway
Piano Company, Inc. ("Steinway"). Significant intercompany balances have been
eliminated in consolidation.

     INCOME PER SHARE--The Company has computed income per share in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share". Previously reported income per share did not differ from that computed
using SFAS 128.

     A reconciliation of weighted average shares used for the basic and diluted
computations for the three and nine month periods ended September 27, 1997 and
October 3, 1998 is as follows:

<TABLE>
<CAPTION>

                                                       Three months ended              Nine months ended
                                                   ---------------------------     ---------------------------
                                                      1997             1998           1997             1998
                                                   -----------      ----------     -----------     -----------
<S>                                                  <C>             <C>             <C>             <C>      
     Weighted average shares for basic               9,438,852       9,331,592       9,428,242       9,353,501
     Dilutive effect of stock options                   65,633         141,958          21,878         185,842
                                                     ---------       ---------       ---------       ---------
     Weighted average shares for diluted             9,504,485       9,473,550       9,450,120       9,539,343
                                                     ---------       ---------       ---------       ---------
                                                     ---------       ---------       ---------       ---------

</TABLE>

     NEW ACCOUNTING PRONOUNCEMENTS - During the first quarter of 1998, the
Company adopted SFAS No. 130, "Reporting Comprehensive Income". The only item
that the Company currently records as other comprehensive income is the change
in cumulative translation adjustment resulting from changes in exchange rates
and the effect of those changes upon translation of the financial statements of
the Company's foreign operations. Comprehensive net income for the first nine
months of 1997 and 1998 was $5,658 and $14,431, respectively.


                                       6

<PAGE>

     In February 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 132, "Employers' Disclosure about Pensions and Other Postretirement
Benefits", which the Company will be required to adopt in 1998. SFAS 132 will
require additional disclosure concerning changes in the Company's pension
obligations and assets and eliminates certain other disclosures no longer
considered useful. Adoption will not have any effect on reported results of
operations or financial position.

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement requires companies to
recognize all derivatives as either assets or liabilities, with the instruments
measured at fair value. The accounting for changes in fair value, gains or
losses, depends on the intended use of the derivative and its resulting
designation. The statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The Company is currently evaluating the effect of
adopting SFAS 133 on the consolidated financial statements.

(3)   INVENTORIES

     Inventories consist of the following:

<TABLE>
<CAPTION>

                                 December 31,  October 3,
                                    1997          1998
                                 ------------  ----------
<S>                               <C>           <C>    
Raw materials                     $11,944       $14,080
Work in process                    35,309        37,339
Finished goods                     40,701        42,365
                                  -------       -------
Total                             $87,954       $93,784
                                  -------       -------
                                  -------       -------

</TABLE>


(4)   COMMITMENTS AND CONTINGENT LIABILITIES

   Certain environmental matters are pending against the Company, which might
result in monetary damages, the amount of which, if any, cannot be determined at
the present time. Philips Electronics, a previous owner of the Company, has
agreed to hold the Company harmless from any financial liability arising from
these environmental matters which were pending as of December 29, 1988.
Management believes that these matters will not have a material adverse impact
on the Company's results of operations or financial condition.


                                       7

<PAGE>

(5)  SUMMARIZED FINANCIAL INFORMATION

     The Company is a holding company whose only material asset consists of its
investment in its wholly-owned subsidiary, Selmer. Summarized financial
information for Selmer and its subsidiaries is as follows:

<TABLE>
<CAPTION>

                                                                   Nine Months Ended
                                     December 31,  October 3,   September 27,  October 3,
                                         1997         1998           1997         1998
                                     ------------  ----------   -------------  ----------
<S>                                   <C>          <C>           <C>           <C>
Current assets                        $ 149,022    $ 179,343
Total assets                            263,725      293,522
Current liabilities                      46,664       54,553
Stockholder's equity                     78,302       92,611
Total sales                                                      $  206,010    $ 218,871
Gross profit                                                         67,420       71,806
Net income                                                            9,758       11,929

</TABLE>

(6)   SEGMENT INFORMATION

     The Company has adopted the provisions of SFAS No. 131 "Disclosures about
Segments of an Enterprise and Related Information". SFAS 131 requires that a
company disclose segmented information about its businesses based upon the way
in which management oversees and evaluates the results of such businesses.
Consistent with this approach, the Company has identified two distinct and
reportable segments: the piano segment and the band and orchestral instrument
segment.

The following tables present information about the Company's operating segments
for the three months and nine months ended September 27, 1997 and October 3,
1998:

<TABLE>
<CAPTION>

THREE MONTHS ENDED 1997                  Piano Segment                   Band and Orchestral Segment
                            ------------------------------------------   -------------------------------    Other &     Consol
                                US      Germany      Other      Total       US        Other      Total        Elim      Total
                                --      -------      -----      -----       --        -----      -----        ----      -----
<S>                         <C>         <C>        <C>        <C>        <C>         <C>        <C>          <C>      <C>     
Revenues from external
    customers               $ 20,232    $  9,048   $  3,845   $ 33,125   $ 30,293    $  1,136   $ 31,429     $ --     $ 64,554
Segment net income (loss)       (323)        449        226        352         (5)         41         36      2,314      2,702

</TABLE>

<TABLE>
<CAPTION>

THREE MONTHS ENDED 1998                 Piano Segment            Band and Orchestral Segment
                         -------------------------------------   ----------------------------   Other &   Consol
                           US      Germany    Other     Total      US       Other     Total      Elim     Total
                           --      -------    -----     -----      --       -----     -----      ----     -----
<S>                      <C>       <C>       <C>       <C>       <C>       <C>       <C>        <C>      <C>    
Revenues from external
    customers            $24,095   $ 7,943   $ 3,653   $35,691   $31,731   $ 1,224   $32,955    $ --     $68,646
Segment net income           491       144       236       871        18        16        34     2,394     3,299

</TABLE>

<TABLE>
<CAPTION>

NINE MONTHS ENDED 1997                     Piano Segment                  Band and Orchestral Segment
                            ------------------------------------------   ------------------------------    Other &    Consol
                               US      Germany      Other     Total        US       Other      Total        Elim      Total
                               --      -------      -----     -----        --       -----      -----        ----      -----
<S>                         <C>         <C>        <C>        <C>        <C>        <C>        <C>          <C>      <C>     
Revenues from external
    customers               $ 61,521    $ 29,108   $  8,525   $ 99,154   $106,211   $  2,690   $108,901     $ --     $208,055
Segment net income (loss)       (628)        615        338        325      2,277        120      2,397      6,884      9,606

</TABLE>

<TABLE>
<CAPTION>

NINE MONTHS ENDED 1998                 Piano Segment                  Band and Orchestral Segment
                         -----------------------------------------   ------------------------------     Other &   Consol
                            US      Germany      Other     Total        US       Other      Total        Elim     Total
                            --      -------      -----     -----        --       -----      -----        ----     -----
<S>                      <C>        <C>        <C>        <C>        <C>        <C>        <C>          <C>      <C>     
Revenues from external
    customers            $ 74,696   $ 25,601   $ 11,598   $111,895   $105,769   $  3,143   $108,912     $  --    $220,807
Segment net income          1,554        685        673      2,912      1,707         57      1,764      7,375     12,051

</TABLE>


                                       8

<PAGE>

(7)   SUMMARY OF MERGER AND GUARANTEES

     The acquisition of Steinway in May 1995 was funded by Selmer's issuance of
$105 million of 11% Senior Subordinated Notes due 2005 and available cash
balances of the Company. Selmer's payment obligations under the Senior
Subordinated Notes are fully and unconditionally guaranteed on a joint and
several basis by the Company as Parent (the "Guarantor Parent"), and by Steinway
and certain direct and indirect wholly-owned subsidiaries of the Company, each a
"Guarantor" (the "Guarantor Subsidiaries"). These subsidiaries, together with
the operating divisions of Selmer, represent all of the operations of the
Company conducted in the United States. The remaining subsidiaries, which do not
guarantee the Notes, represent foreign operations (the "Non Guarantor
Subsidiaries").

     The following condensed consolidating supplementary data illustrates the
composition of the combined Guarantors. Separate complete financial statements
of the respective Guarantors would not provide additional material information
which would be useful in assessing the financial composition of the Guarantors.
No single Guarantor has any significant legal restrictions on the ability of
investors or creditors to obtain access to its assets in event of default on the
Guarantee other than its subordination to senior indebtedness.

     Investments in subsidiaries are accounted for by the parent on the cost
method for purposes of the supplemental consolidating presentation. Earnings of
subsidiaries are therefore not reflected in the parent's investment accounts and
earnings. The principal elimination entries eliminate investments in
subsidiaries and intercompany balances and transactions.


                                       9

<PAGE>

               STEINWAY MUSICAL INSTRUMENTS, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATING BALANCE SHEETS
                                 OCTOBER 3, 1998
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                  Non
                                        Guarantor     Issuer     Guarantor     Guarantor
                                         Parent      of Notes   Subsidiaries  Subsidiaries  Eliminations  Consolidated
                                        ---------    ---------  ------------  ------------  ------------  ------------
<S>                                     <C>          <C>          <C>           <C>          <C>           <C>      
ASSETS                                                                                                    
Current assets:                                                                                           
   Cash                                 $    --      $     250    $   1,499     $     778    $    --       $   2,527
   Accounts, notes and leases                                                                             
     receivable, net                         --         62,584        7,092         7,196         --          76,872
   Inventories                               --         33,441       32,316        28,910         (883)       93,784
   Prepaid expenses and other current                                                                     
     assets                                   100        1,344          756           543         --           2,743
   Deferred tax assets                       --          1,060        2,420         3,880         (973)        6,387
                                        ---------    ---------    ---------     ---------    ---------     ---------
Total current assets                          100       98,679       44,083        41,307       (1,856)      182,313
                                                                                                          
Property, plant and equipment, net            103       15,161       27,489        16,790         --          59,543
Investment in subsidiaries                 71,143      168,557       56,147          --       (295,847)         --
Other assets, net                             613        1,930       12,500         7,356       (1,313)       21,086
Cost in excess of fair value                                                                              
   of net assets acquired, net               --          9,435       11,236        13,339         --          34,010
                                        ---------    ---------    ---------     ---------    ---------     ---------
TOTAL ASSETS                            $  71,959    $ 293,762    $ 151,455     $  78,792    $(299,016)    $ 296,952
                                        ---------    ---------    ---------     ---------    ---------     ---------
                                        ---------    ---------    ---------     ---------    ---------     ---------
                                                                                                          
LIABILITIES AND STOCKHOLDERS' EQUITY                                                                      
Current liabilities:                                                                                      
   Notes payable and current                                                                              
      portion of long-term debt         $    --      $    --      $    --       $   4,956    $    --       $   4,956
   Accounts payable                            62        2,322        1,975         1,638         --           5,997
   Other current liabilities              (11,403)      14,494       20,694        10,028       (1,402)       32,411
                                        ---------    ---------    ---------     ---------    ---------     ---------
Total current liabilities                 (11,341)      16,816       22,669        16,622       (1,402)       43,364
                                                                                                          
Long-term debt                                185      121,431        2,565         1,543         --         125,724
Intercompany                               17,899       67,798      (88,064)        2,367         --            --
Deferred taxes                               --          1,787       10,034        13,951         --          25,772
Non-current pension liability                --            995         --          13,821         (995)       13,821
                                        ---------    ---------    ---------     ---------    ---------     ---------
Total liabilities                           6,743      208,827      (52,796)       48,304       (2,397)      208,681
                                                                                                          
Stockholders' equity                       65,216       84,935      204,251        30,488     (296,619)       88,271
                                        ---------    ---------    ---------     ---------    ---------     ---------
Total                                   $  71,959    $ 293,762    $ 151,455     $  78,792    $(299,016)    $ 296,952
                                        ---------    ---------    ---------     ---------    ---------     ---------
                                        ---------    ---------    ---------     ---------    ---------     ---------
                                                                                                         
</TABLE>


                                       10

<PAGE>


               STEINWAY MUSICAL INSTRUMENTS, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
                        NINE MONTHS ENDED OCTOBER 3, 1998
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                            Non
                                  Guarantor     Issuer      Guarantor     Guarantor
                                    Parent     of Notes    Subsidiaries  Subsidiaries  Eliminations  Consolidated
                                  ----------  -----------  ------------  ------------  ------------  ------------
<S>                               <C>          <C>          <C>            <C>          <C>            <C>      
Net sales                         $    --      $ 105,164    $  82,610      $  40,342    $  (7,309)     $ 220,807
Cost of sales                          --         73,112       55,576         26,661       (7,016)       148,333
                                  ---------    ---------    ---------      ---------    ---------      ---------
Gross profit                           --         32,052       27,034         13,681         (293)        72,474
                                                                                                       
Operating expenses:                                                                                    
  Sales and marketing                  --          9,854       10,361          5,984          (92)        26,107
  General and administrative          2,037        3,994        3,059          3,096         --           12,186
  Amortization                         --            344        1,556            971         --            2,871
  Other (income) expense             (1,912)          37        1,598            436           92            251
                                  ---------    ---------    ---------      ---------    ---------      ---------
Total operating expenses                125       14,229       16,574         10,487         --           41,415
                                  ---------    ---------    ---------      ---------    ---------      ---------

Earnings (loss) from operations        (125)      17,823       10,460          3,194         (293)        31,059
                                                                                                       
Interest (income) expense:                                                                             
  Interest income                      (197)        (508)     (11,921)           (37)      11,915           (748)
  Interest expense                     --         14,710        6,689            321      (11,915)         9,805
                                  ---------    ---------    ---------      ---------    ---------      ---------
Interest expense, net                  (197)      14,202       (5,232)           284         --            9,057
                                  ---------    ---------    ---------      ---------    ---------      ---------

Income before income taxes               72        3,621       15,692          2,910         (293)        22,002

Provision for income taxes               35        1,825        6,654          1,495          (58)         9,951
                                  ---------    ---------    ---------      ---------    ---------      ---------
Net income                        $      37    $   1,796    $   9,038      $   1,415    $    (235)     $  12,051
                                  ---------    ---------    ---------      ---------    ---------      ---------
                                  ---------    ---------    ---------      ---------    ---------      ---------
</TABLE>

                                       11

<PAGE>

               STEINWAY MUSICAL INSTRUMENTS, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                        NINE MONTHS ENDED OCTOBER 3, 1998
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                    Non
                                             Guarantor    Issuer    Guarantor     Guarantor
                                              Parent     Of Notes  Subsidiaries  Subsidiaries  Eliminations  Consolidated
                                             ---------   --------  ------------  ------------  ------------  ------------
<S>                                          <C>         <C>         <C>          <C>           <C>            <C>     
Cash flows from operating activities:
  Net income                                 $     37    $  1,796    $  9,038     $  1,415      $   (235)      $ 12,051
  Adjustments to reconcile net income
  to cash flows from operating activities:
    Depreciation and amortization                  27       2,499       3,398        2,033          --            7,957
    Deferred tax benefit                         --          --          (707)        (842)         --           (1,549)
    Other                                        --           135         136            1          --              272
    Changes in operating assets and                                                                            
     liabilities:                                                                                              
      Accounts, notes and leases                                                                               
       receivable                                --       (29,008)     (1,052)         647          --          (29,413)
      Inventories                                 (29)      4,446      (3,911)      (5,131)          293         (4,332)
      Prepaid expense and other current                                                                        
       assets                                     301         260        (399)         255          --              417
      Accounts payable                           (267)        469        (139)         159          --              222
      Accrued expenses                         (4,760)        846       5,569         (927)          (58)           670
                                             --------    --------    --------     --------      --------       --------
Cash flows from operating activities           (4,691)    (18,557)     11,933       (2,390)         --          (13,705)

Cash flows from investing activities:                                                                          
  Capital expenditures                            (10)     (2,053)     (1,847)        (362)         --           (4,272)
  Proceeds from disposals of fixed assets        --          --          --            132          --              132
  Changes in other assets                         283         418        --          1,455          --            2,156
                                             --------    --------    --------     --------      --------       --------
Cash flows from investing activities              273      (1,635)     (1,847)       1,225          --           (1,984)

Cash flows from financing activities:
  Net borrowings under lines of credit            135      13,684         362        1,357          --           15,538
  Repayments of long-term debt                   --          --          --           (713)         --             (713)
  Proceeds from sale of stock                   1,017        --          --           --            --            1,017
  Purchase of treasury stock                   (2,938)       --          --           --            --           (2,938)
  Intercompany dividend                          --          --           800         (800)         --             --
  Intercompany                                  6,204       4,724     (11,662)         734          --             --
                                             --------    --------    --------     --------      --------       --------
Cash flows from financing activities            4,418      18,408     (10,500)         578          --           12,904
                                                                                                               
Effect of exchange rate changes on cash          --          --          --             41          --               41
                                                                                                               
Decrease in cash                                 --        (1,784)       (414)        (546)         --           (2,744)
Cash, beginning of period                        --         2,034       1,913        1,324          --            5,271
                                             --------    --------    --------     --------      --------       --------
Cash, end of period                          $   --      $    250    $  1,499     $    778      $   --         $  2,527
                                             --------    --------    --------     --------      --------       --------
                                             --------    --------    --------     --------      --------       --------

</TABLE>


                                       12

<PAGE>

ITEM 2   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS
         (DOLLARS IN THOUSANDS)

INTRODUCTION

     The Company, through its Steinway and Selmer subsidiaries, is one of the
world's leading manufacturers of musical instruments.

     Certain statements contained in the following Discussion and Analysis of
Financial Condition and Results of Operations are "forward-looking statements"
within the meaning of Section 21E of the Securities and Exchange Act of 1934, as
amended. These forward-looking statements represent the Company's present
expectations or beliefs concerning future events. The Company cautions that such
statements are necessarily based on certain assumptions which are subject to
risks and uncertainties, including, but not limited to, changes in general
economic conditions, increased competition, exchange rate fluctuations, and the
availability of production capacity which could cause actual results to differ
materially from those indicated herein. Further information on these risk
factors is included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 and its Final Prospectus filed in August 1996.

RESULTS OF OPERATIONS

THREE MONTHS ENDED OCTOBER 3, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER 27,
1997

     NET SALES--Net sales increased $4.1 million (6%) to $68.6 million in the
third quarter of 1998. Piano sales increased $2.6 million (8%) for the quarter.
Overall unit volume increased 10% for Steinway and 5% for the Boston line
despite declines in foreign shipments. Band and orchestral instrument sales
increased $1.5 million (5%) for the third quarter of 1998 on a 2% increase in
unit shipments. Improved domestic delivery of student brass instruments offset
continued weak demand in foreign markets.

     GROSS PROFIT--Gross profit increased by $0.7 million (3%) to $21.9 million
in the third quarter of 1998. Gross margins decreased from 32.9% in 1997 to
31.9% in 1998. Band and orchestral instrument margins continued to be negatively
impacted by higher than planned production costs associated with the new student
saxophone. This, coupled with a shift in product mix from professional to
student instruments, resulted in a gross margin decline to 29.4% from 32.2% in
the third quarter of 1997. Piano margins, which increased from 33.5% in 1997 to
34.2% in 1998, have been primarily affected by yen driven cost reductions in the
Boston piano line.

     OPERATING EXPENSES--Operating expenses increased by $0.1 million (1%) to
$12.8 million in the third quarter of 1998. Expenses decreased as a percentage
of sales from 19.7% in 1997 to 18.7% in 1998.

     EARNINGS FROM OPERATIONS--Earnings from operations increased by $0.6
million (6%) to $9.1 million in the third quarter of 1998. These improved
earnings resulted from increased sales combined with firm control over operating
expenses.

     NET INTEREST EXPENSE--Net interest expense decreased $0.2 million in the
third quarter of 1998 to $3.3 million. Lower outstanding balances on the
Company's lines of credit accounted for the decrease.


                                       13

<PAGE>

NINE MONTHS ENDED OCTOBER 3, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 27,
1997

     NET SALES--Net sales increased $12.7 million (6%) to $220.8 million in the
first nine months of 1998. Strong domestic demand for pianos helped offset a
more competitive environment for band instruments. Piano sales increased $12.7
million (13%) to $111.9 million in 1998 on unit increases of 13% for Steinway
and 19% for Boston. Band and orchestral instrument sales remained flat at $108.9
million on a 3% decrease in unit shipments.

     GROSS PROFIT--Consistent with the increase in sales, gross profit
increased by $4.6 million (7%) to $72.5 million in the first nine months of
1998. Gross margins increased to 32.8% in 1998 compared to 32.6% in 1997. Piano
margins, which increased from 32.8% in 1997 to 35.0% in 1998, were positively
affected by extremely strong retail piano sales combined with yen driven cost
reductions in the Boston piano line. Band and orchestral instrument margins were
negatively impacted by the manufacturing inefficiencies experienced with the
introduction of the new student saxophone, resulting in a decline in margins
from 32.5% in 1997 to 30.6% in 1998.

     OPERATING EXPENSES--Operating expenses increased by $1.1 million (3%) to
$41.4 million in the first nine months of 1998. Expenses decreased as a
percentage of sales from 19.4% in 1997 to 18.8% in 1998.

     EARNINGS FROM OPERATIONS--Earnings from operations increased by $3.5
million (13%) to $31.1 million in the first nine months of 1998. These improved
earnings resulted from increased sales combined with improved gross profit
margins and firm control over operating expenses.

     NET INTEREST EXPENSE--Net interest expense decreased $0.7 million in the
first nine months of 1998 to $9.1 million. Lower outstanding balances on the
Company's lines of credit accounted for the reduction.


LIQUIDITY AND CAPITAL RESOURCES

     The Company has relied primarily upon cash provided by operations,
supplemented as necessary by seasonal borrowings under its working capital line,
to finance its operations, repay long-term indebtedness and fund capital
expenditures.

     Cash used in operations in the first nine months decreased $2.2 million
from $15.9 million in 1997 to $13.7 million in 1998. Increased cash earnings
from operations of $2.4 million in 1998 contributed to the reduction.

     Capital expenditures were $3.8 million and $4.3 million for the first nine
months of 1997 and 1998, respectively. These capital expenditures were mainly
used for the purchase of new machinery and building improvements. The Company
expects to increase its level of capital expenditures in the future as it
modernizes its equipment and renovates its facilities in order to expand its
production capacity and piano restoration services.


                                       14

<PAGE>

     The Company's domestic, seasonal borrowing requirements are accommodated
through a committed, revolving credit facility with a domestic bank (the
"Facility"). The Facility provides the Company with a potential borrowing
capacity of up to $60 million, based on eligible accounts receivable and
inventory balances. As of October 3, 1998, $14.2 million was outstanding, with
additional availability of approximately $45.0 million. Open account loans with
foreign banks also provide for borrowings by Steinway's foreign subsidiaries of
up to 25 million Deutsche marks ($15,188 at the October 3, 1998 exchange rate).

     The Company's long-term financing consists primarily of $110 million of
Senior Subordinated Notes. The Company's debt agreements contain restrictive
covenants that place certain restrictions on the Company, including restrictions
to the Company's ability to incur additional indebtedness, to make investments
in other entities, or to pay cash dividends.

     The Company repurchased 114,700 shares of its common stock at a cost of
$2,938 during the first nine months 1998, of which 73,700 shares were
repurchased during the third quarter at a cost of $1,780.

     YEAR 2000 COMPLIANCE -- The Year 2000 issue is the result of computer 
programs being written using two digits rather than four digits to define the 
applicable year. Computer programs and hardware that are date sensitive may 
recognize a date using "00" as the year 1900 rather than the year 2000. The 
Company's products, which are finely crafted instruments, do not contain 
software programs and, therefore, their functionality will not be affected by 
this issue. However, it could cause some disruptions of internal operations, 
including, among other things, a temporary inability to process transactions 
or engage in normal business activities.

     The Company has identified the following operational areas in its Year 
2000 compliance review: (1) information systems hardware and software; (2) 
manufacturing, distribution and facility equipment containing embedded 
microprocessors; and (3) third-party relationships. The Company has replaced 
many of its accounting and manufacturing information systems in the normal 
course of operations over the past two years with Year 2000 compliant 
programs. Other hardware and software systems and equipment that are 
identified as not being Year 2000 compliant will be replaced or upgraded in a 
timely manner. In addition, the Company is communicating with major suppliers 
to determine the extent to which the Company may be vulnerable if a supplier 
fails to correct their own Year 2000 issue. The Company anticipates 
completing its Year 2000 compliance review during fiscal 1999. At that point, 
the Company will develop a contingency plan addressing those areas determined 
not to be compliant.

     Based on its review to date, the Company believes the Year 2000 problem 
will not pose significant internal operational problems. Potential risks 
include (1) general failure of infrastructure systems, such as power, heat 
and water, (2) the inability of principal suppliers to be Year 2000 ready, 
which could result in delays of raw material deliveries from such suppliers, 
and (3) disruption of the distribution channel, including ports and 
transportation vendors. Any of these risks could adversely affect the 
Company's ability to produce and deliver its products in a timely manner. The 
Company believes that these risks will be mitigated since its operations are 
geographically dispersed and rely on a large supplier base.

     The Company does not expect the costs associated with its Year 2000 
compliance to be material. Modifications to many of the Company's information 
technology systems have been performed by internal staff with the associated 
costs incorporated into the normal operating expenses. Less than $1 million 
has been spent on new systems to date and future costs are not anticipated to 
be material to its financial position or results of operations either in the 
aggregate or in any given year.

     Management believes that cash on hand, together with cash flow anticipated
from operations and available borrowings under the Facility, will be adequate to
meet debt service requirements, fund continuing capital requirements and satisfy
working capital and general corporate needs through 1998.


                                       15

<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS

     During the first quarter of 1998, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income". The only item that the Company currently
records as other comprehensive income is the change in cumulative translation
adjustment resulting from changes in exchange rates and the effect of those
changes upon translation of the financial statements of the Company's foreign
operations. Comprehensive net income for the first nine months of 1997 and 1998
was $5,658 and $14,431, respectively.

     In February 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 132, "Employers' Disclosure about Pensions and Other Postretirement
Benefits", which the Company will be required to adopt in 1998. SFAS 132 will
require additional disclosure concerning changes in the Company's pension
obligations and assets and eliminates certain other disclosures no longer
considered useful. Adoption will not have any effect on reported results of
operations or financial position.

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement requires companies to
recognize all derivatives as either assets or liabilities, with the instruments
measured at fair value. The accounting for changes in fair value, gains or
losses, depends on the intended use of the derivative and its resulting
designation. The statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The Company is currently evaluating the effect of
adopting SFAS 133 on the consolidated financial statements.

PART II  OTHER INFORMATION

ITEM 6   EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

          Exhibit 27.1. Steinway Musical Instruments, Inc.--Financial Data
            Schedule

          Exhibit 27.2 The Selmer Company, Inc.--Financial Data Schedule

     (b)  Reports on Form 8-K

     The Company did not file any reports on Form 8-K during the quarter ended
October 3, 1998.


                                       16

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned, thereunto duly authorized.


                               STEINWAY MUSICAL INSTRUMENTS, INC.
                              
                               /s/   Dana D. Messina
                               -----------------------------------------------
                               Dana D. Messina
                               Director, President and Chief Executive Officer
                              
                               /s/   Dennis M. Hanson
                               -----------------------------------------------
                               Dennis M. Hanson
                               Vice President and Chief Financial Officer
                              
                              
                               THE SELMER COMPANY, INC.

                               /s/   Thomas T. Burzycki
                               -----------------------------------------------
                              
                               Thomas T. Burzycki
                               Director, President and Chief Executive Officer
                              
                               /s/   Michael R. Vickrey
                               -----------------------------------------------
                               Michael R. Vickrey
                               Executive Vice President and Chief 
                                Financial Officer


Date:   November 16, 1998


                                      17