UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-K

[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: 333-35105

                         Lockhart Caribbean Corporation
             (Exact Name of Registrant as Specified in its Charter)


     U.S. Virgin Islands                               66-0491618
(State or other jurisdiction of            (I.R.S. Employer Identification
 incorporation or organization)                          Number)

                              No. 44 Estate Thomas
                     St. Thomas, U.S. Virgin Islands 00802
             (address and Zip Code oif principal executive offices)

                                 (340) 776-1900
              (Registrant's telephone number including area code)

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

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

Indicate  by check mark  whether  the  Registrants  (1) have  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) have 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
or Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrants'  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.   [ ]

Number of outstanding shares of Registrant's  Common Stock as of March 15, 1999:
50,150  shares of Class A Common  Stock and  8,663,867  shares of Class B Common
Stock.

<PAGE>


                                TABLE OF CONTENTS

                                    FORM 10-K


                                     PART I
                                                                            Page
                                                                            ----
Item 1.  Business.........................................................    1
Item 2.  Properties.......................................................    3
Item 3.  Legal Proceedings ...............................................   10
Item 4.  Submission of Matters to a Vote of Security Holders .............   11

                                     PART II

Item 5.  Market of Registrant's Common Equity and
          Related Stockholder Matters.....................................   11
Item 6.  Selected Financial Data .........................................   11
Item 7.  Management's Discussion and Analysis of Financial Condition and
          Results of Operations ..........................................   12
Item 8.  Financial Statements and Supplementary Data .....................   18
Item 9.  Changes In and Disagreements with Accountants on
          Accounting And Financial Disclosure ............................   47

                                    PART III

Item 10. Directors and Executive Officers of the Registrant ..............   47
Item 11. Executive Compensation ..........................................   50
Item 12. Security Ownership of Certain Beneficial
          Owners and Management ..........................................   51
Item 13. Certain Relationships and Related Transactions ..................   52

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and
          Reports on Form 8-K ............................................   54

Signatures................................................................


<PAGE>

                                     PART I

Item 1. Business

     Lockhart  Caribbean  Corporation  (the  "Company"  or  "Lockhart")  and its
predecessors  have  conducted  business in the U.S.  Virgin  Islands since 1884,
which makes  Lockhart one of the oldest  continuous  business  operations in the
U.S. Virgin Islands. The enterprise, which started out as a general goods store,
has  evolved  over the years into the largest  owner of shopping  centers in the
U.S. Virgin Islands. In 1972, the Company solidified its position as a leader in
commercial  real  estate  development  through  the  construction  of the  first
shopping  center on St. Thomas.  This facility,  the Lockhart  Gardens  Shopping
Center, was the first commercial property located on St. Thomas to host national
retailers.  The Company is also one of the largest owners of undeveloped land on
the island of St. Thomas.

     Since 1987 the Company has been under the  direction of George H. T. Dudley
and Wesley S.  Williams,  Jr., two family members who function as Co-Chairmen of
the  Board  of  Directors  and  Co-CEOs  of the  Company.  Both  are  practicing
attorney's with  specialties in banking, finance and real estate.  Shortly after
assuming their roles, they recruited experienced  professionals from outside the
family to manage  the daily  affairs  of the  Company.  Under  this  management,
Lockhart  has  experienced  a period  of  substantial  growth  through  property
acquisitions,  commercial  property  development,  and expansion  into financial
services  and into other  markets of the  Caribbean.  Since 1987 the Company has
acquired four shopping  centers, developed two commercial  parks,  completed the
first  phase of  renovation  of a  historic  building  in the  central  business
district,  completed  the  reconstruction  of 85,000 square feet of retail space
damaged by  Hurricane  Marilyn,  and  completed an undated  master-plan  for the
development  of  the  Company's  commercial  and  residential  undeveloped  land
holdings.  Also, through the acquisition of four additional companies,  Lockhart
gained a dominant  share of the  automobile  insurance  market , and the premium
financing  market  for  individuals  and  small  businesses  in the U.S.  Virgin
Islands, and a presence in other Caribbean islands.

     The Company owns,  acquires,  operates,  renovates,  develops,  and manages
shopping centers and other  commercial real estate,  primarily on the islands of
St. Thomas and St. Croix. The Company,  through a wholly owned subsidiary,  H.E.
Lockhart Mangement , Inc.  ("HELM"),  currently owns and operates seven shopping
centers. Through another wholly owned subsidiary, Lockhart Realty, Inc. ("LRI"),
the  Company  also owns and  operates  commercial  parks in which it builds  the
infrastructure  for  commercial  development  (roads and utilities) and sells or
leases designated  parcels under long-term ground leases. In addition,  LRI owns
an aggregate of  approximately  415 acres of  undeveloped  real estate zoned for
residential development of varying densities. The Company intends to selectively
develop this land with  single-family  and  multi-family  units.  In some areas,
Lockhart will limit its activity to the development of the infrastructure (roads
and utilities) and subdivision of the property for sale as residential  lots for
individual  homeowners  construction.  In  management's  opinion,  the Company's
properties are covered adequately by insurance.

     In a move to achieve both business and geographic diversification, Lockhart
acquired four financial service companies in 1998. On June 22, 1998, the Company
acquired  all the  outstanding  common stock of Premium  Finance  Company of the
V.I., Inc.,  renamed Premium Finance  Company(Caribbean)  Ltd.,  ("PFC") and its
wholly-owned  subsidiary  Premium  Finance  Company  (E.C.) Ltd.  ("PFC-EC") for
$582,000  including  transaction  costs. The transaction was accounted for under
the purchase method of accounting.

     PFC and PFC-EC are engaged in the business of financing  insurance premiums
incurred  by  individuals  and  small  companies  seeking  to  insure  primarily
automobiles,  personal residences, commercial buildings, boats and airplanes, as
well as builder's risk or liability. Business is generated through the referrals
from  insurance  agents and brokers  that are the first point of contact for the
consumer in the  procuring  of  insurance  coverage.  The  insured  will make an
initial down payment on the insurance premium (20-30%) with the balance financed
by PFC or PFC -EC over a nine-month period.

     PFC is the largest independent premium financing company in the U.S. Virgin
Islands and has  operations  in the U.S.  Virgin  Islands,  the  British  Virgin
Islands,  Anguilla (West Indies),  and St.  Maarten,  Netherland  Antilles.  Its
primary  competitors are smaller premium finance  companies and insurance agents

                                       1
<PAGE>

and insurers that will finance premiums for select,  primarily larger,  clients.
Commercial banks also provide this service to select customers. In mid-1997, PFC
expanded its services to other Caribbean  markets to increase volume and achieve
diversification.  Through its wholly-owned subsidiary,  PFC-EC, PFC is currently
doing business in Antigua and Barbuda, St. Lucia, Grenada and St. Vincent.

     On December 31, 1998,  Lockhart acquired Guardian Insurance  Company,  Inc.
("GIC") and Heritage  Insurance Company  (Caribbean) Ltd.  ("HIC").  GIC and HIC
were  acquired for a total  purchase  price of $2.8 million  which  consisted of
$125,000 in cash, a short-term  note  payable to the seller of  $1,125,000,  and
approximately  185,000 shares of Class A Common Stock valued at $6.50 per share,
but  subject to  mandatory  redemption  at $8.30 per share for a 180-day  period
commencing  three years from the close of the  transaction.  The transaction was
accounted  for  under  the  purchase   method  of  accounting.   For  additional
information  regarding  the  purchase, see  Note  1  of  the  audited  financial
statements.

     GIC was founded in the United  States Virgin  Islands in July 1984.  GIC is
currently the largest  automobile  insurance carrier in the U.S. Virgin Islands.
GIC's business is now primarily  concentrated in the writing of automobile lines
of insurance in the U.S. Virgin Islands. Other lines of business include surety,
general liability and fire policies,  excluding  catastrophic  exposures.  Total
revenue  by  GIC  were  $4.9   million  and  $4.5  million  in  1997  and  1998,
respectively.  GIC  discontinued  the writing of property  insurance in the U.S.
Virgin  Islands in August 1996  following a Cease and Desist Order issued by the
Commissioner  of Insurance  after  losses due to Hurricane  Marilyn in September
1995  substantially  reduced GIC's surplus.  GIC incurred  losses totaling $10.5
million, net of reinsurance as a result of Hurricane Marilyn.

     In 1994,  GIC received its first rating from A.M.  Best  Company:  B (Fair)
Financial  Size  Category III. This was the first rating ever given by A.M. Best
Company to a company in the USVI. Subsequently in 1995, GIC rating was increased
to a B+ (Very  Good).  Guardian's  hope for a higher  rating was affected by the
overwhelming damage caused by Hurricane Marilyn.  Due to the decrease in surplus
caused by that  hurricane  and a change  in  underwriting  objectives,  Guardian
decided to retire from the rating process.

     Lockhart  intends  to  inject  additional  capital  in  GIC to  enable  the
resumption of writing property  insurance lines and  re-application  for an A.M.
Best rating.

     HIC was  formed as the first  domestic  insurance  carrier  in the  British
Virgin  Islands in March 1991.  HIC was also granted  licenses to operate in the
Turks and Caicos Islands and Anguilla.  Currently,  HIC writes mainly automobile
insurance and some property  insurance in the British  Virgin  Islands and Turks
and Caicos.  Total  revenues of HIC were $617,000 and $400,000 in 1997 and 1998,
respectively.

Business and Growth Strategies

     The Company's  fundamental  business and growth  strategies  are focused on
developing or acquiring  shopping centers and office buildings that either serve
the local  community or are located in select tourist  destinations,  monetizing
the imbedded  value of its  undeveloped  land through select sales or commercial
development, and a carefully planned diversification into the consumer financial
services  industry.  The Caribbean market (with an aggregate  population base of
over five million) represents one of the fastest growing economic regions in the
world,  with  tourism as the  driving  force  behind  that  growth.  The Company
believes  that as the  island  economies  of the  region  grow,  there will be a
corresponding  growth in the  financial  well-being  of the resident  population
matched  by a growth  in the  number  and  size of the  businesses  catering  to
increasing consumer demand for both goods and financial services.  Based on this
operating  paradigm,  the  Company's  business  objectives  are to  develop  the
commercial  locations  out of which these  businesses  will operate and to offer
select consumer financial services to serve consumer demand presently not met by
the banks and other existing financial intermediaries of the region.

     Lockhart  believes  that a number of  economic  factors  will  enhance  its
ability to achieve its business  objectives:  (i) the continuing  improvement in
the economies of the U.S. Virgin Islands and other Caribbean

                                       2
<PAGE>

markets  following  Hurricane Marilyn and other recent hurricanes in the region;
(ii) the  Company's  focus on the  growing  consumer  needs of the  increasingly
affluent resident  populations of the region;  (iii) the limited availability of
undeveloped  property  zoned  for  commercial  use and the  continuing  need for
housing at various price levels in the U.S. Virgin islands; and (iv) the limited
traditional  offerings  of  commercial  banks,  and the  general  inadequacy  of
consumer financial services offered throughout the Caribbean region.

     The Company's  primary business  strategies are to: (i) actively manage its
property  portfolio to improve cash flow; (ii) complete its planned projects and
develop its land  holdings  for their  highest and best use;  (iii)  selectively
execute real property acquisitions in strategic submarkets; and (iv) selectively
expand its  diversification  into strategic  segments of the financial  services
industry.

     The Company  intends to grow externally by acquiring  additional  developed
commercial  properties in the U.S. Virgin Islands and in other Caribbean markets
that  meet the  Company's  investment  criteria,  and by  diversifying  into the
consumer  financial  services  field through the  acquisition  or development of
businesses offering select consumer financial services. The strengthening of the
U.S.  Virgin Islands economy and the continued  growth in the various  Caribbean
markets as a result  primarily of tourism will  continue to enhance the economic
well-being of the resident  population.  The Company's business strategy,  which
has been  successful in the U.S.  Virgin  Islands,  is to focus primarily on the
region's resident  population and provide  commercial real estate locations that
allow  businesses to reach the local  consumer.  The Company's  initiative  into
financial  services  follows the same  premise--to  serve the  growing  consumer
financial services needs of the resident population.

     Lockhart is one of the oldest continuous operators of commercial properties
in the U.S.  Virgin  Islands.  Through the years,  the  Company has  assembled a
unique collection of commercial  properties that cater to tourists and serve the
local  community.  Lockhart  intends to expand and diversify its Virgin  Islands
presence by acquiring  properties  within other submarkets on St. Thomas and St.
Croix.  The Company's  business  strategy and economic model also will result in
consideration  of expansion  in select  tourist and local  community  submarkets
throughout  the eastern  Caribbean.  In  addition,  the Company may  selectively
divest  developed and  undeveloped  properties  from time to time to balance its
portfolio or to retain desirable  tenants and enhance adjacent  property held by
the Company.  The Company believes that its Caribbean base, its knowledge of the
region  and  its   long-standing   relationships   with  tenants,   real  estate
professionals,  financial  institutions  and other  sectors  of the U.S.  Virgin
Islands community offer significant competitive advantages in seeking investment
opportunities in the U.S. Virgin Islands and elsewhere in the Caribbean region.

     The Company  believes  that  diversification  into the  financial  services
industry  is a  logical  extension  of its  operations  in light  of  Lockhart's
history,  the  backgrounds  of the members of the Executive  Committee,  and the
Company's  recognition  of market  opportunities.  The  founder of the  Company,
Alfred H.  Lockhart,  also founded a bank in the Virgin Islands (then the Danish
West  Indies),  and he,  his son and his  grandson  each  served on the board of
directors  of that bank and its  successors  until its merger  into a  federally
chartered U.S. bank. Separately,  the Company has established relationships with
financial  service  providers  in the U.S.  Virgin  Islands and  throughout  the
Caribbean that has resulted in the identification of business opportunities that
remain  untapped  by  existing  businesses  offering  financial  services in the
targeted markets.  In addition,  the members of the Executive  Committee (George
H.T. Dudley, Wesley S. Williams,  Jr. and John P. deJongh, Jr.) and Richard E.W.
Grant,  the  president of PFC, each have  extensive  experience in the financial
services  industry.  These factors should allow the Company to capitalize on the
growth  opportunities in the non-banking,  consumer  financial services field in
the Caribbean.

Item 2. Properties

Shopping Centers

     The Company's shopping centers range in size from  approximately  11,000 to
140,000 square feet, and most  properties  include both retail and office space.
The Company  maintains an ongoing  leasing and marketing  program to enhance the
cash flow potential of each operating property and to respond to tenant

                                       3
<PAGE>

needs.  Lockhart  also  follows a  schedule  of  regular  physical  maintenance,
renovation  and  refurbishment  to  preserve  and  increase  the  value  of  its
properties.

     The  following  table  sets  forth  certain  information  for  each  of the
Company's shopping centers as of December 31, 1998:

                                           Year Built/   Net Rentable    Percent
                                             Acquired     Square Feet   Occupied
                                           -----------   ------------   --------
Drakes Passage Shopping Mall ............      1920         33,000         81%

Fort Mylner Commercial Center ...........      1996         10,800        100%

Fort Mylner Shopping Center .............      1996         26,200         86%

Grand Hotel Galleria ....................      1914         23,900(1)      58%

Lockhart Gardens Shopping Center ........      1972        140,198         82%

Orange Grove Shopping Center ............      1996         30,600         73%

Red Hook Plaza ..........................      1995         32,145         94%

----------
(1)  Approximately  4,500 square feet are being held vacant in  preparation  for
     renovation as part of Grand Galleria - Phase II.

     Drakes  Passage  Shopping  Mall  ("Drakes  Passage") is located in the main
tourist shopping and central business district of downtown  Charlotte Amalie and
offers  access to pedestrian  traffic from both Main Street and the  Waterfront.
Drakes  Passage  contains  approximately  33,000  square feet of rentable  space
spread  over  two  stories  and a  mezzanine,  and is the  only  air-conditioned
shopping  mall in the downtown  area.  The first floor has 20,500 square feet of
primarily  tourist-oriented retail space and was 87% occupied as of December 31,
1998;  the  second  floor has  12,500  square  feet of office  space and was 80%
occupied  as  of  December  31,  1998.   Retail  tenants   include   Boolchands,
Cosmopolitan,  Perfume Palace and Diamond's International.  The Company recently
completed renovation totaling $500,000 at this property.

Lease Expirations
-----------------
                            Number     Total Net Rentable      Percent of Net
Year                      of Tenants       Square Feet      Rentable Square Feet
----                      ----------   ------------------   --------------------
1999 ...................       1              3,900                  1.6%

2000 ...................       4              6,300                  5.0%

2001 ...................       2              1,409                  4.2%

2002-7 .................      18             21,637                 65.0%


                                                       1998      1997      1996
                                                      ------    ------    ------
Occupancy Rate(1) ..................................    81%       83%       85%

Average Net Effective Rent per Square Foot .........  $40.44    $38.13    $30.01


                                       4

<PAGE>

----------
(1)  The Fort Mylner  Properties  consist of the Fort Mylner  Commercial  Center
     with  approximately  10,800 square feet of rentable space on two floors and
     the Fort Mylner  Shopping Center with  approximately  26,200 square feet of
     rentable  space.  The total parking spaces  available at both properties is
     approximately  115.  Both  properties  were acquired by the Company in June
     1996 for an  aggregate  purchase  price of $6.4  million.  The Fort  Mylner
     properties  are located in the business  district of the Tutu area,  one of
     the most populous residential communities on St. Thomas.

     The Fort Mylner  Commercial  Center  provides  office  space to two primary
tenants: Banco Popular de Puerto Rico, a commercial bank, occupies approximately
2,700 square feet,  with two drive-thru  lanes and an automated  teller machine;
and Globalvest  Management Company,  L.P., a mutual fund investment firm, leases
approximately  8,100 square feet. The Fort Mylner  Shopping  Center  consists of
three one-story  buildings with 21,600,  2,800 and 1,800 square feet of rentable
space. Material lessees at the shopping center operate a home furnishings store,
a convenience store and a furniture store. Other tenants include CommoLoco, Inc.
(a small loan finance company) and Kentucky Fried Chicken.

                           Combined Lease Expirations
                           --------------------------

                            Number     Total Net Rentable      Percent of Net
Year                      of Tenants       Square Feet      Rentable Square Feet
----                      ----------   ------------------   --------------------
1999 ...................       3              3,900                 10.5%

2000 ...................       3              6,300                 17.0%

2001 ...................      --                 --                   --

2002 ...................       3              9,900                 26.7%

2003-7 .................       2              5,400                 14.6%

                          Fort Mylner Commercial Center
                          -----------------------------

                                                       1998      1997      1996
                                                      ------    ------    ------
Occupancy Rate .....................................   100%      100%      100%

Average Net Effective Rent per Square Foot .........  $21.79    $21.48    $21.13

                           Fort Mylner Shopping Center
                           ---------------------------

                                                       1998      1997      1996
                                                      ------    ------    ------
Occupancy Rate .....................................    86%       79%      100%

Average Net Effective Rent per Square Foot .........  $23.30    $23.30    $23.47


                                       5

<PAGE>

     The Grand Galleria is located at the beginning of the main tourist shopping
district in downtown St.  Thomas and one block from the  municipal  parking lot.
The Grand Galleria complex consists of four two-story stone and timber buildings
with an aggregate of approximately 24,000 net rentable square feet of retail and
office space,  of which 4,500 square feet will be available  upon  completion of
Phase II. No tenant occupies 10% or more of the rental space.

     The Grand Galleria  complex was originally  built in the early 1800s and is
located in the Charlotte Amalie historic  district.  Alfred H. Lockhart acquired
the  property in 1914.  The Company  extensively  renovated  the  interiors  and
exteriors  of  three  of the  Grand  Galleria's  four  buildings  in 1994 for an
aggregate cost of $1.9 million.  Lockhart intends to invest  approximately  $2.2
million to complete the second phase of renovations to the Grand Galleria.

Lease Expirations
-----------------

                            Number     Total Net Rentable      Percent of Net
Year                      of Tenants       Square Feet      Rentable Square Feet
----                      ----------   ------------------   --------------------
1999 ...................       7              6,763                 20.7%

2000 ...................      --                 --                   --

2001 ...................      --                 --                   --

2002-7 .................       1                855                  2.6%


                                                       1998      1997      1996
                                                      ------    ------    ------
Occupancy Rate .....................................    58%       64%       67%

Average Net Effective Rent per Square Foot .........  $35.80    $35.84    $35.62

     Lockhart  Gardens  Shopping Center  ("Lockhart  Gardens") is located on the
eastern edge of Charlotte  Amalie and within walking distance of the main cruise
ship dock. Lockhart Gardens consists of approximately 140,200 square feet of net
rentable square feet. Lockhart Gardens has approximately 245 parking spaces. The
Company's  major  tenant is a  department  store  operated by Kmart  Corporation
("Kmart").  Kmart  has  leased  approximately  60,000  square  feet at  Lockhart
Gardens.  Other key tenants  currently  include Banco Popular de Puerto Rico and
Footlocker.

     A supermarket was operated pursuant to a ground lease of 30,000 square feet
of land until Hurricane Marilyn destroyed the entire shopping center,  including
the supermarket,  in September 1995. The supermarket continued to make its lease
payments but did not  reconstruct  the  building,  as required  under its lease.
Lockhart and the ground lessee were in  litigation  regarding  this matter.  The
legal dispute  was  resolved  (see Item 3. Legal  Proceedings)  with the Company
receiving  $2.7 million  from the  insurance  company  holding the policy on the
supermarket and $35,000 from the ground lessee who also surrendered its interest
in the lease. Of the proceeds received from the insurance company, $2 million is
to be used solely for reconstruction of the building.

     Lockhart Gardens Shopping  Center-Lockhart  Mall is a mini-mall area within
the existing shopping center with an aggregate of 10,000 square feet of rentable
space,  consisting  of eight  retail  stores  ranging  in size from 500 to 1,000
square feet.  The area also  includes,  an  elevator,  public  restrooms  and an
emergency  generator.  Construction  cost  of the  mini-mall  was  approximately
$500,000.

                                       6

<PAGE>

Lease Expirations
-----------------

                            Number     Total Net Rentable      Percent of Net
Year                      of Tenants       Square Feet      Rentable Square Feet
----                      ----------   ------------------   --------------------
1999 ...................       2             35,120                 25.0%

2000 ...................      --                 --                   --

2001 ...................       1              3,500                  2.5%

2002 ...................       3             63,384(1)              45.2%

2003-7 .................       5              3,294                  2.4%

----------
(1)  Includes 60,000 square feet leased by K-Mart.

                                                       1998      1997      1996
                                                      ------    ------    ------
Occupancy Rate .....................................    82%       72%       72%

Average Net Effective Rent per Square Foot .........   $6.95     $5.91     $5.91

     Orange Grove Shopping  Center  ("Orange  Grove") is located just outside of
Christiansted, the largest town on St. Croix, on the main traffic artery leading
westward  out of town.  The Company  acquired  Orange  Grove in June 1996 for an
aggregate purchase price of $3.6 million.  The approximately  30,600 square feet
of net  rentable  square  feet at Orange  Grove are used for  retail  and office
space.   The  major  tenant  is  Banco  Popular  de  Puerto  Rico  which  leases
approximately 5,400 square feet and Kentucky Fried Chicken (2,700 square feet).

Lease Expirations
-----------------

                            Number     Total Net Rentable      Percent of Net
Year                      of Tenants       Square Feet      Rentable Square Feet
----                      ----------   ------------------   --------------------
1999 ...................       1              1,400                  4.6%

2000 ...................       4              7,000                 22.9%

2001 ...................       1              1,400                  4.6%

2002 ...................      --                 --                   --

2003-7 .................      --                 --                   --

                                                       1998      1997      1996
                                                      ------    ------    ------
Occupancy Rate .....................................    73%       82%       86%

Average Net Effective Rent per Square Foot .........  $17.30    $16.82    $15.35


                                       7
<PAGE>

     Red Hook Plaza (the "Plaza") is located in the Red Hook area on the eastern
side of St.  Thomas.  The Company  acquired  the Plaza in  February  1995 for an
aggregate purchase price of $5.5 million.  The approximately 36,000 net rentable
square  feet in the  Plaza is  spread  over two  buildings;  the main  two-story
building has both retail and office space and the one-story  building is used as
a restaurant.  Major tenants at the Plaza include a pharmacy with  approximately
3,877 square feet,  Banco Popular de Puerto Rico, an Ace Hardware  franchise and
several  eateries.  The second floor office space consists  primarily of medical
suites.

Lease Expirations
-----------------

                            Number     Total Net Rentable      Percent of Net
Year                      of Tenants       Square Feet      Rentable Square Feet
----                      ----------   ------------------   --------------------
1999 ...................       5              6,689                 20.8%

2000 ...................       2              1,988                  6.1%

2001-7 .................       5             12,269                 38.1%

                                                       1998      1997      1996
                                                      ------    ------    ------
Occupancy Rate .....................................    98%       92%       98%

Average Net Effective Rent per Square Foot .........  $24.50    $24.47    $24.25


Ground Leases

     Sugar Estate Park (the "Park") is a commercial  business park  developed by
the Company on the eastern edge of Charlotte  Amalie,  mid-island on St. Thomas.
The Park consists of an aggregate of approximately  7.1 acres of land, which has
been  subdivided  for  lease  to  tenants  under  long-term   ground  leases  or
development by the Company.

     Lockhart  has leased 1.1 acres to a  commercial  tenant  under a  long-term
ground lease at the Park. In addition,  there are two one-acre parcels available
for lease.  The Company  provides paved roads and underground  utility access at
the Park,  and  tenants  construct  their own  facilities.  The  current  tenant
operates a  building  supply  store.  The lease  expires  in 2000.  The lease is
subject to three  ten-year  renewal  options.  Upon  expiration  of the tenant's
lease, the Company will obtain ownership of all improvements on the land.

     The Company has reserved approximately 2.5 acres at the Park to develop two
projects.  See  "--Development  Projects--Sugar  Estate  Commercial  Centre" and
"--Sugar Estate Plaza".

     Market  Square East is a commercial  park  development  located on the main
highway that connects  Charlotte Amalie to the eastern end of St. Thomas.  To be
developed  in  multiple  phases as tenant  demand  requires,  Phase I, about 98%
completed,  includes  long-term  ground leases with a retail and wholesale  food
discount chain and a movie theater chain (for the construction of a multi-screen
cinema and restaurant complex).  The Company built the required  infrastructure,
consisting of parking facilities, utilities, drainage, power and access roads at
a cost of $1.8 million.

     Phase II, currently in the preliminary  development stage, will involve the
Company  rezoning  a portion  of the  property  for  commercial  use,  executing
long-term   ground  leases  and   constructing   build-to-suit   facilities  for
high-quality  tenants.  The Company will continue to provide the infrastructure,
consisting of parking

                                       8
<PAGE>


facilities,  utilities, drainage, power and roads. The scheduled completion date
is dependent on the progress of the Company's leasing program.

     Cinema One Building is located in a residential  area near the eastern edge
of  Charlotte  Amalie  and  sits on  approximately  one  acre of land  owned  by
Lockhart. The Company has leased the parcel under a triple-net, long-term ground
lease that expires in December 2009, and the tenant has  constructed a two-story
building on the property. The property is commonly referred to as the Cinema One
Building  because of the  multi-screen  theater located there. The building also
has office space.  Upon expiration of the lease,  Lockhart will obtain ownership
of the building and all improvements.


Development Projects

     The  following  table  sets  forth  certain  information  for  each  of the
Company's projects under development as of December 31, 1998:

                                      Estimated Cost   Estimated Completion Date
                                      --------------   -------------------------
Sugar Estate Commercial Centre         $0.9 million               2001

Longford Industrial Park               $1.3 million               2001

Lockhart Gardens Shopping Center--
  Phase II                             $5.5 million               2000

Grand Galleria -- Phase II             $2.2 million               2000

Sugar Estate Plaza                     $5.3 million               2001
----------

     Sugar Estate  Commercial  Centre will be located in Sugar Estate Park.  The
Company will  construct a  multiple-use  building  suitable for tenants  seeking
warehouse,  retail and showroom space. The  approximately  14,500 square feet of
rentable  space in the planned  building will be divided into eight bays ranging
in size from 1,300 square feet to 4,500 square feet.  The  scheduled  completion
date is early 2001, and the estimated construction cost of $915,000.

     Longford  Industrial Park ("Longford") is located just off the main highway
that  connects  Charlotte  Amalie to the  eastern end of St.  Thomas,  where the
majority  of the  island's  population  resides.  Longford  will  consist  of 16
half-acre  parcels  available for long-term  ground lease by light  industry and
manufacturers,  who will construct their own facilities. The Company has cleared
the site and public water and electrical  power are available.  Lockhart intends
to construct paved roads, a sewage treatment plant and appropriate  drainage and
install  electrical  power  and sewer  connections  to the  subdivided  parcels.
Construction  of  such   improvements  will  begin  once  suitable  tenants  are
identified.  The Company has  invested  $100,000 as of December  31,  1998,  and
estimates that the total cost of Longford will be $1.3 million.

     Lockhart  Gardens  Shopping  Center-Phase  II involves the  construction of
approximately  47,000 square feet of rentable  space in the northern half of the
shopping center, which includes 30,000 square feet currently subject to a ground
lease. As a part of that development, the Company has arranged with the Division
of  Highway  Planning  of the  Government  of the U.S.  Virgin  Islands  for the
installation  of  signalized  access from the main  east-west  roadway  into the
shopping center. The scheduled completion date is mid-2000 for an estimated cost
of $5.5 million.

     Grand  Galleria-Phase II involves the final phase of the renovation process
of the entire  property that began in 1994 with the first phase  renovations  of
three of the four buildings surrounding the courtyard.  This final phase of work
is targeted to the fourth (main) building, which has frontage on the main artery
of the tourist

                                       9
<PAGE>

shopping district in downtown Charlotte Amalie, and will create a central atrium
space and ground  level  passage  surrounded  at both levels by high-end  retail
shops and a theme  restaurant  at the second level.  Approximately  4,500 square
feet of  additional  space  will be  available  for  lease by the  Company  upon
completion.  The  scheduled  completion  date is  mid-2000,  at  which  time the
property will be renamed the "Grand Galleria" and marketed as a high-end tourist
shopping destination. The Company estimates construction costs of $2.2 million.

     Sugar  Estate  Plaza will also be located in Sugar  Estate Park and will be
constructed in two phases. When completed, the two-building, three-story complex
will  provide  approximately  55,000  square feet of rentable  retail and office
space. The Company has had preliminary  discussions with certain primary tenants
for the first phase of development. The scheduled completion date for the entire
complex is early 2001, and the estimated construction cost is $5.3 million.


Item 3. Legal Proceedings

     HELM, had an action brought against it by a land lessee at Lockhart Gardens
Shopping  Center,  who  operated a  supermarket  (the  "Tenant"),  for  tortious
interference with contract and declaratory judgement.  HELM filed a counterclaim
against  Tenant,  alleging  that it  breached  the lease by  failing to keep the
premises  insured  and by failing to restore  the  premises  promptly  following
Hurricane Marilyn, which completely destroyed the supermarket operated by Tenant
at the shopping center.  Soon after this action was filed, the Territorial Court
of the U.S. Virgin Islands denied  Tenant's  motion for preliminary  injunction,
and Tenant later filed a motion for partial  summary  judgement.  HELM responded
with an opposition and  cross-motion  for summary  judgement,  asserting that it
properly terminated the lease due to the aforementioned breaches.

     After HELM filed several renewed motions for summary judgement,  which were
countered  by  renewed  oppositions  to HELM's  motions  and  requests  to amend
Tenant's  complaint  to add,  among other  things,  claims  arising  from HELM's
alleged breach of the exclusivity provisions of the Lease, the Territorial Court
on  December  10,  1998  entered an order  directing  the parties to mediate the
matter by March 1, 1999.  The parties  entered  into  mediation on March 4, 1999
after the  Territorial  Court  approved a request for  extension  of the March 1
deadline.  On March 4, 1999, HELM and Tenant signed an agreement  wherein Tenant
agreed to pay HELM $35,000 and surrender its interest in the lease. Both parties
also agreed to dismiss all pending  claims,  including  HELM's claim against the
insurance  company holding the policy on the  supermarket,  and to exchange full
and comprehensive releases in favor of and by all parties.

     HELM had also filed an action for  damages  against the  insurance  company
which purportedly issued a retroactive insurance policy covering the supermarket
occupied by Tenant at Lockhart Gardens  Shopping Center,  and against the parent
company  for  Tenant,  which  arranged  for the  issuance  of the  policy  after
initially  advising  HELM that the  supermarket  was  insured  under the  parent
company's Self-Insured Retention (SIR) Program.

     On November 23, 1998, the District Court of the U.S. Virgin Islands granted
the  defendants'  July 15, 1997 motion to dismiss on the  grounds  that  Tenant,
whose  presence  in  the  case  would   eliminate  the  Court's  subject  matter
jurisdiction, should have been joined as a party. As a result, HELM commenced an
action in the  Territorial  Court on  December  22, 1998  realleging  its claims
against the insurance  company and the parent  company,  and  asserting  similar
claims against Tenant.

     On March 1, 1999, HELM signed an agreement with the insurance company which
provided  for  the  deposit  of  $2,010,000  (estimated  cost of  replacing  the
supermarket building) in an escrow account for the sole purpose of replacing the
destroyed  building.  In addition to the escrow deposit,  the insurance  company
paid HELM $690,000  representing interest on the policy proceeds as permitted by
the laws of the U.S.  Virgin Islands.  In  consideration  of the payments,  HELM
fully and finally released and forever  discharged the insurance company and its
affiliates  from any and all liability of every kind in any way  connected  with
the  insurance  policy.  HELM also  assigned  to the  insurance  company all the
rights,  claims,  etc.  which it may have against  Tenant and its parent company
relating to or arising out of entitlement  to proceeds of the insurance  policy,
reserving all other claims or causes of action against the Tenant and the parent
company.

                                       10

<PAGE>

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

     None

                                     PART II

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

     The Company's securities are currently not listed or publicly traded on any
stock  exchange or other  quotation  system.  On  February 4, 1999,  the Company
officially terminated its initial public offering of Class A Common Stock. Sales
of Class A Common Stock prior to the  termination  of the offering did not reach
the minimum offering of $7.5 million and all  subscriptions  held in escrow will
be returned to investors.

     The Company paid  $332,764 in dividends on Class B Common Stock in 1998. No
dividends  were paid on Class A Common  Stock in 1998.  There are  currently  32
stockholders.


Item 6 Selected Financial Data

<TABLE>
<CAPTION>
                                       (in thousands except per share data)

                                  1998        1997        1996        1995      1994
                                  ----        ----        ----        ----      ----
<S>                            <C>         <C>         <C>         <C>        <C>     
Total revenue(1) ...........   $  8,021    $  5,107    $  4,379    $  9,890   $  3,076
Total expenses .............      8,518       7,251       5,664       5,799      3,169
Income tax (benefit) .......        303        (774)       (453)       1588        (42)
Net Income (loss) ..........       (800)     (1,369)       (833)      2,504        (51)
Earnings per share
Class A ....................      (0.13)      (0.20)         --          --         --
Class B ....................      (0.17)      (0.24)      (0.17)       0.30      (0.01)
Dividend per share .........       0.04        0.04        0.04        0.04       0.04

Weighted Average # of Shares
Class A ....................         26           1          --          --         --
Class B ....................      8,664       8,641       8,561       8,427      8,314
Total property and equipment     33,954      32,882      33,228      18,444     12,766
Total assets ...............     43,898      35,704      36,270      25,505     14,896
Total long-term debt .......     26,054      24,711      24,650      12,655      6,370
</TABLE>
----------
(1)  Includes gain on land sale of $2.4 million in 1998 and  insurance  proceeds
     of $5 million in 1995.

                                       11
<PAGE>

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

Overview

     The  following  discussion  should  be read in  conjunction  with  Selected
Financial Data and the Company's  consolidated  financial  statements  appearing
elsewhere in this document.

     The  Company's  revenue  currently is derived from the rental of retail and
office space,  long-term  ground lease of real property,  sale of real property,
and premium  financing.  In 1998,  building space rental  accounted for 61.0% of
total revenue,  ground lease payments  accounted for 6.0%, sale of real property
accounted for 30.6% and premium  financing  accounted for 2.4%. PFC was acquired
by the Company on June 22, 1998, and accordingly only premium  financing revenue
subsequent to June 22, 1998 was included in the Company's consolidated financial
statements.  In 1997,  building space rental  generated 89% of total revenue and
ground lease payments accounted for 11%.

     The wholly-owned  subsidiaries,  HELM, LRI, and PFC account for 100% of the
Company's  revenue.  In 1998,  HELM  accounted for 61.7% of total  revenue,  LRI
accounted for 35.9%, and PFC accounted for 2.4%. In 1997, HELM accounted for 90%
of total revenue and LRI accounted for 10%.

     LRI is expected to account for a greater  portion of real estate revenue in
the  future  as it  develops  the  approximately  415  acres of land  zoned  for
residential use owned by the Company. In addition, LRI is currently planning the
development of Market Square East Phase II and Longford  Industrial  Park.  Both
projects  involve  just the creation of  infrastructure  (roads,  parking  lots,
utilities)  to  facilitate  plot sales or long-term  ground leases to commercial
tenants.

     Revenues  from  HELM  should  increase  following  completion  of  Phase II
construction at Lockhart  Gardens Shopping Center and at Grand Galleria in 2000.
Lockhart Gardens Shopping Center Phase II will make an additional  47,000 square
feet of building  space  available for rental,  and Grand Galleria Phase II will
add 5,000 square feet in building space rental.

     The  Company  also  expects  revenue  growth  from  the  recently  acquired
companies.  Guardian  Insurance  Company,  Inc. and Heritage  Insurance  Company
(Caribbean) Ltd. which were acquired on December 31, 1998, reported combined net
revenues of $4.9  million in 1998.  Since GIC and HIC were  acquired on December
31, their assets and  liabilities  are reported on the Company's  balance sheet,
but no  information  for GIC or HIC is included in the  Company's  statement  of
operations for the year ended December 31, 1998.  Revenues from PFC are expected
to grow as PFC  further  develops  the markets in  St.Lucia,  St.  Vincent,  and
Grenada.

Year Ended December 31, 1998 compared to Year Ended December 31, 1997

     Total revenue for the years ended December 31, 1998 and 1997 was $8,021,048
and $5,106,780,  respectively.  The $2,914,628 or 57% increase in 1998 over 1997
resulted  primarily from the gain on sale of land of approximately  $2.4 million
and an increase in tenant reimbursements due to the fact that the Company is now
requiring such reimbursements in all new or renegotiated leases.

     For the years  ended  December  31,  1998 and  1997,  total  expenses  were
$8,518,241 and $7,250,697, respectively.

     Exclusive  of interest  costs,  depreciation  and  amortization,  and other
non-recurring items, expenses were $4,122,230 and $3,354,270 for the years ended
December 31, 1998 and 1997,  respectively.  The increase in expenses in 1998 was
due primarily to increases in salaries and benefits  ($451,910),  property taxes
($177,283),  other general and administrative expenses ($114,444),  and bad debt
expense ($90,942).

                                       12
<PAGE>


     Interest expense  increased by $96,911 for the year ended December 31, 1998
compared to the year ended December 31, 1997.  The increase in interest  expense
was due to an additional  $722,854  drawn on three separate lines of credit with
financial  institutions,  and interest paid in the third and fourth  quarters on
additional bank financing for completed  construction  projects at Market Square
East and Lockhart Mall.

     Depreciation  and  amortization  decreased by $193,059 for 1998 compared to
1997.  The decrease was  primarily  attributed to a capital lease that was fully
amortized by November 1997.

     There were  non-recurring  expenses of $795,732 in 1998 for costs  incurred
with the initial  public  offering that was  terminated on February 4, 1999, and
$200,000 in 1997 for a payment made to Woolworth for termination of its lease at
Lockhart  Gardens  Shopping  Center at Lockhart  Gardens  Shopping  Center.  The
increases  due  to the  above-mentioned  factors  were  partially  off-set  by a
reduction in the prime rate of 75 basis points in 1998.

     As result of the foregoing,  the Company had a net loss of $800,042 for the
year ended  December 31, 1998 compared to a net loss of $1,369,465  for the year
ended December 31, 1997.

Year Ended December 31, 1997 Compared with Year Ended December 31, 1996


     Total revenue for the years ended December 31, 1997 and 1996 was $5,106,780
and $4,378,843, respectively. The $727,937 or 17% increase in 1997 over 1996 was
due to a full year of  revenue  recorded  in 1997 from  three  properties  (Fort
Mylner Shopping Center, Fort Mylner Commercial Center, and Orange Grove Shopping
Center) that were acquired in June 1996;  accordingly only six months of revenue
from these properties were recorded in 1996.

     For the years  ended  December  31,  1997 and  1996,  total  expenses  were
$7,250,697 and $5,664,448, respectively.

     Exclusive  of interest  costs,  depreciation  and  amortization,  and other
non-recurring items, expenses were $3,354,270 and $2,743,744,  respectively. The
increase  in  expenses  in 1997 was due to (I) a full year of  expenses  in 1997
compared  to only six  months of  expenses  in 1996  from the  three  properties
acquired in June 1996, and (ii) increases in the reserve for doubtful  accounts,
contracted security guard services, and pension and retirement benefits.

     Depreciation  and  amortization  increased  by $202,710 or 16% for the year
ended December 31, 1997. The increase was due primarily to the three  properties
acquired  and the $6.0  million  investment  in the  reconstruction  of Lockhart
Gardens  Shopping Center as a consequence of damage caused by Hurricane  Marilyn
in September, 1995.

     Interest expense  increased by $573,013 or 34% in 1997 compared to 1996 due
to (I) an $11.0 million  increase in bank debt for the  acquisition of the three
properties  in 1996 and  additional  reconstruction  costs at  Lockhart  Gardens
Shopping Center not covered by the insurance proceeds,  (ii) increased borrowing
under the Company's  line of credit,  and (iii) a 50 basis point increase in the
prime rate in April,  1997,  which resulted in a  corresponding  increase in the
interest rate payable under the Company's bank debt.

     For the year ended December 31, 1997,  the Company made a one-time  payment
to  Woolworth  Corp.  of $200,000 to terminate  their lease at Lockhart  Gardens
Shopping Center.

     As a result of the foregoing, the Company reported a net loss of $1,369,465
in 1997 compared to a net loss of $832,710 in 1996.

                                       13
<PAGE>


Cash Flow

     Net cash flow used in  operating  activities  increased by $381,816 in 1998
compared  to 1997.  Net cash  flow  used in  investing  activities  declined  by
$458,410  in 1998  primarily  as a result of the  proceeds  from the sale of 3.6
acres of land to a land lessee in Sugar Estate Park.  Net cash flows provided by
financing  activities  increased by $1.1 million as a result of additional  bank
borrowing  and cash  transferred  from the two insurance  companies  acquired on
December 31, 1998.

     Net cash flow from  operating  activities  declined by $4.9 million in 1997
compared to 1996. Cash flows from operating  activities in 1996 were affected by
$5.3 million in insurance proceeds collected by the Company.  Net cash flow used
in investing  activities was $14.8 million more in 1996 as a result of the three
properties  acquired in 1996 and the  reconstruction  of the southern section of
Lockhart Gardens Shopping Center. Net cash flow provided by financing activities
was $10.8  million more in 1996  compared to 1997 as a result of the  additional
bank  financing  obtained  to  purchase  three  properties  in 1996  and to fund
additional construction costs at Lockhart Gardens Shopping Center not covered by
insurance proceeds.

Liquidity and Capital Resources

     The principle sources of funding for development,  acquisitions, expansion,
and renovations have historically been construction  loans, and intermediate and
permanent debt financing.  Proceeds from insurance  companies have been utilized
in the  past  three  years  to  reconstruct  operating  properties  impacted  by
Hurricane Marilyn. The majority of the borrowings are executed at the subsidiary
level (HELM and LRI) with a parent company guarantee. The acquisition of GIC and
HIC was  effected  through  a  combination  of  cash,  seller  financing  in the
short-term and shares of the Company's Class A Common Stock.

     On October 21, 1996,  HELM entered into a Loan Agreement (the  "Development
Loan") with Banco  Popular de Puerto Rico ("BPPR") to: (i)  consolidate  certain
pre-existing development loans; (ii) refinance certain acquisition indebtedness;
(iii) reduce the Company's  interest costs;  and (iv) achieve level debt service
payments.  The  parent  company,  Lockhart  Caribbean  Corporation,  and  HELM's
subsidiaries  have each fully and  unconditionally  guaranteed  the  Development
Loan.  Approximately  $19.1 million of proceeds from the  Development  Loan were
drawn down,  primarily to retire the mortgages on certain operating  properties,
and such  amount is  secured  by  first-priority  mortgages  on  Drakes  Passage
Shopping Mall, the Fort Mylner properties, the Grand Galleria,  Lockhart Gardens
Shopping Center and Orange Grove Shopping Center and a second-priority  mortgage
on Red Hook Plaza.  The  Company is  obligated  to make  monthly  principal  and
interest  payments of  approximately  $163,500 with respect to the $19.1 million
and expects to fund such payments with cash flow from  operations.  The interest
on the  Development  Loan is at 0.5% above the prime lending rate or 8.25% as of
December 31, 1998.

     The  Development  Loan also provides for a $1.0 million line of credit with
an interest  rate of 0.5% above the prime rate.  As of December  31,  1998,  the
Company had $30,000  available  under the line of credit,  and the interest rate
was 8.25%. The entire outstanding  balance under the Development Loan is due and
payable  on  April 1,  2000.  However,  BPPR  has  agreed,  subject  to  certain
conditions,  including  the  absence  of any  material  default  by HELM and the
Company under the  Development  Loan, to convert the balance into a fifteen year
installment loan with covenants similar to those of the Development Loan.

     In February  1995,  the Company  acquired  Red Hook Plaza for an  aggregate
purchase price of $5.8 million from an  unaffiliated  party.  HELM financed this
purchase with a $4.7 million first-priority  mortgage payable to the seller (the
"Red Hook  Loan") and $1.1  million of bank  financing.  The Red Hook Loan bears
interest at 8.75% per annum and matures in January  2004.  The $1.1  million was
refinanced in October 1996 with proceeds from the Development Loan.

     In June 1996,  HELM acquired the Fort Mylner  Commercial  Center,  the Fort
Mylner  Shopping  Center and the Orange Grove  Shopping  Center for an aggregate
purchase price of $10.1 million from an  unaffiliated  party.  HELM financed the
acquisition  with a short-tern  demand note which was refinanced in October 1996
with proceeds from the Development Loan.

                                       14
<PAGE>


     On March 31, 1998, the Company sold 3.68 acres of land in Sugar Estate Park
to the ground  lessee for $2.8  million.  A portion of the  proceeds was used to
retire the Sugar Estate Park Loan, which had an outstanding balance of $720,000.
The Company also used a portion of the proceeds to purchase all the  outstanding
common stock of PFC for $550,000. The balance of the proceeds from the land sale
was used for renovations at the Drake's Passage Mall and working capital needs.

     On May  22,  1998,  the  Company  secured  two  construction  loans  from a
financial  institution.  One  loan  for  $1.8  million  is  being  used  for the
construction  of  roads,  a  parking  lot,   underground   utilities  and  other
infrastructure  at Market Square East, a commercial  park offering ground leases
for tenant-built commercial facilities.  Market Square East is already home to a
36,000  square  foot  discount  bulk-food  retail  store,  and will  soon have a
multi-screen  cinema  under  construction.  The  second  construction  loan  for
$577,000  was used for the  conversion  of 10,000  square  feet on two floors in
Lockhart  Gardens  Shopping Center into a mini-mall with a total of eight rental
spaces.  Both of these projects were under  construction prior to the closing of
the construction loans and were financed during that period by demand notes from
the  financial  institution.  The demand notes were retired from proceeds of the
construction  loans.  At December 31, 1998,  the Market  Square East project was
approximately  98% complete,  and the mini-mall  project was  approximately  95%
complete and 100% of the space had been leased.

     On December 31, 1998, the Company acquired two insurance companies, GIC and
HIC for approximately $2.8 million.  The purchase price consisted of $125,000 in
cash,  $1,125,000 in a short-term note payable to the seller,  and approximately
185,000 shares of Class A Common Stock subject to mandatory  redemption at $8.30
per share for a 180-day  period  commencing  three  years  from the close of the
transaction.  The seller note was repaid  from the  proceeds of a line of credit
negotiated with a financial institution.

     The Company expects to meet its short-term liquidity requirements with cash
flow from  operations.  The Company expects cash flow to increase as a result of
(i) a reduction of net operating  funds needed to service annual debt,  (ii) the
acquisition of PFC, GIC and HIC, and (iii) increased net rentable space from the
reconstruction  and  renovation of Lockhart  Gardens  Shopping  Center and Grand
Galleria and (iv)  continued  pass through of certain  reimbursable  expenses to
tenants.  The Company also believes that the foregoing sources of liquidity will
be sufficient to fund its liquidity needs for the foreseeable future,  including
capital maintenance expenditures.

     The Company expects to meet certain long-term liquidity requirements,  such
as acquisitions, scheduled debt maturities, renovations, expansions , commercial
and residential  development  ventures,  and other  non-recurring  major capital
improvements,  through  long-term  secured or unsecured debt and the issuance of
equity securities.

Recent Developments

     On January 19, 1999,  The Company repaid a $200,000 line of credit that was
extended by a financial  institution  for  PFC-EC's  expansion  into the Eastern
Caribbean.

     On February 4, 1999,  Lockhart  officially  terminated  its initial  public
offering..

     On  February  12,  1999,  Lockhart  signed a stock  purchase  agreement  to
purchase  91% of the  outstanding  shares of  common  stock of EPO  Capital  and
Keylink  Transmedia,  Inc.  for  $400,000  plus 25,000  shares of Class A Common
Stock.  EPO  Capital,  a  licensed  broker/dealer  and  member  of the  National
Association of Securities Dealers, was established in 1996 to conduct electronic
public  offerings.  Keylink  Transmedia,  Inc.  designs and develops  customized
websites.

     On March 1, 1999, the Company signed an agreement with an insurance company
against which the Company filed a claim in the  Territorial  Court of the Virgin
Islands  as a third  party  beneficiary  under the terms of a policy  insuring a
building  occupied  by a tenant at  Lockhart  Gardens  Shopping  Center that was
destroyed  by  Hurricane  Marilyn  in  September  1995.  Under  the terms of the
agreement,  an amount of $2,010,000 was

                                       15
<PAGE>


deposited into an escrow account for the sole purpose of replacing the building.
Also,  the  Company was paid  $690,000  representing  interest on the  insurance
proceeds as permitted by the laws of the U.S.Virgin  Islands.  On March 4, 1999,
the Company also signed an agreement with the tenant of the building under which
the tenant  agreed to pay the Company  $35,000 and to surrender  its interest in
the lease. (See Item 3)

     On March 12, 1999 and March 30, 1999,  the Company sold two parcels of land
to land lessees in Sugar Estate Park an aggregate sales price of $1,020,000.

     On March 18,  the  Company  signed a  commitment  letter for a loan of $6.5
million at 7.85% interest to be secured by Drake's Passage. The proceeds will be
used to retire approximately $4.3 million in bank debt currently being amortized
at 9.25% per annum and repay a bank line of credit for $1,350,000.

Forward Looking Statements

     Management=s  Discussion and Analysis of Financial Condition and Results of
Operations  and  other  sections  of  this  Prospectus  contain  forward-looking
statements which are subject to various risks and uncertainties.  Actual results
could differ materially from those discussed herein.

YEAR 2000

     The Company has made an  assessment  of its computer  hardware and software
environment for the year 2000 ("Y2K") compliance.

REAL ESTATE

     Most of the  computers  are new and,  therefore,  already Y2K  compliant or
upgradeable to be Y2K compliant.  Three computers could not be upgraded and were
replaced.  Installation  of the new  machines  as well as the final  upgrade  of
existing machines, was completed by January 1999.

     The Company  replaced its word  processing  software with a program that is
already Y2K compliant.  With the exception of one module (property  management),
the  accounting  software  package was recently  upgraded to Y2K  versions.  The
property  management  Y2K  upgrade  will be released by the vendor by the second
quarter of 1999. All machines have been upgraded from Windows 3.1 to Windows 98.
All other applications and operating system programs are Y2K compliant.

     The  total  cost to the  Company  of  implementing  the  above  changes  is
projected to be approximately $20,000.

PFC

     All  software  and  hardware  of  PFC  have  already  been  updated  to Y2K
compliance.

GIC and HIC

     GIC and HIC use a software for its underwriting and claims  operations that
was  customized  for the  companies.  This  software  is a database  that uses a
variety of source codes,  mainly  Clipper and Fox Pro. This software is not Year
2000  compliant.  HIC and GIC  embarked  on a  project  during  January  1998 to
completely  update these  applications.  For this  purpose a System  Analyst was
employed full time to design,  develop and integrate the new  applications  in a
time  frame  of 18  months.  It was  also  decided  to  consider  purchasing  an
application  for  claims  processing.  The  vendor  selected  is  Orca  Software
Solutions  and the  software  is  Claimen.  The  current  plan is to acquire the
Claimen  software and  concentrate  all developing  efforts in the  underwriting
application.  The estimated cost of Claimen is approximately  $33,000  including
testing and implementation.  The underwriting application is about 50% completed
for  the PAP  (Personal  Auto  Policy)  module.  The  cost  incurred  to date is
approximately $28,000

                                       16
<PAGE>


(including  the salary of the System  Analyst).  It is estimated  that remaining
modules will be finished,  tested and in production  progressively  during 1999.
The  estimated  cost  to  complete  the  underwriting   application  is  $75,000
(basically the salaries of the Systems Analyst).

     All hardware stations are relatively new, and there is no Y2K exposure.

     The previous discussion notwithstanding, there can be no assurance that the
Comapny will not experience any difficulty or problems in the Year 2000.





                                       17
<PAGE>


                 LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES


Item 8.  Financial Statements and Supplementary Data

Index to Financial Statements                                               Page
                                                                            ----
Financial Statements:

  Report of Independent Accountants........................................  20
  Consolidated Financial Statements........................................  21
  Consolidated Balance Sheet as of December 31, 1998 and 1997..............  21
  Consolidated Statement of Operations for the years ended
    December 31, 1998, 1997 and 1996.......................................  22
  Consolidated Statement of Changes in Stockholders' Equity for the
    years ended December 31, 1998, 1997 and 1996...........................  23
  Consolidated Statement of Cash Flows for the years ended
    December 31,1998, 1997 and 1996........................................  24
  Notes to Consolidated Financial Statements...............................  25

Financial Statement Schedule:
Schedule I - Real Estate and Accumulated Depreciation as of
  December 31, 1998 and 1997...............................................  43


All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.

                                       18

<PAGE>



LOCKHART CARIBBEAN CORPORATION
Consolidated Financial Statements and
Report of Independent Accountants

For Inclusion in Form 10-K Annual Report
Filed with Securities and Exchange Commission






                                       19




<PAGE>


                        Report of Independent Accountants


To the Board of Directors
and Stockholders of
Lockhart Caribbean Corporation


In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects,  the financial position Lockhart
Caribbean Corporation and its subsidiaries at December 31, 1998, and the results
of their  operations  and  their  cash  flows  for the year in  conformity  with
generally accepted  accounting  principles.  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
of these  statements in accordance with generally  accepted  auditing  standards
which 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,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for the opinion expressed above.

/s/PricewaterhouseCoopers LLP

PRICEWATERHOUSECOOPERS LLP

San Juan, Puerto Rico

February 5, 1999, except as to Notes 17 and 18, which
are as of February 12 and March 4, 1999, respectively

CERTIFIED PUBLIC ACCOUNTANTS
(OF PUERTO RICO)
License No. 216 Expires Dec. 1, 2001
Stamp 1537591 of the P.R. Society of
Certified Public Accountants has been
affixed to the file copy of this report


                                       20
<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 1998 and 1997
--------------------------------------------------------------------------------


                                                          1998          1997
                                                      -----------   -----------
                       Assets

Operating property:
  Land and improvements ............................  $11,250,875   $10,146,068
  Buildings and improvements .......................   25,275,799    25,155,646
  Equipment ........................................    1,215,515       468,369
  Prepaid lease ....................................           --     1,460,657
  Construction-in-progress .........................    1,217,521       798,166
                                                      -----------   -----------
Total operating property ...........................   38,959,710    38,028,906

Accumulated depreciation and amortization ..........   (5,005,554)   (5,146,943)
                                                      -----------   -----------
                                                       33,954,156    32,881,963
                                                      -----------   -----------
Cash and cash equivalents, including $682,725
  restricted in 1998 ...............................    1,047,840       376,930
Short-term investments, including $415,892
  restricted in 1998 ...............................    1,095,357            --
Securities available for sale, at market value .....      571,546            --
Accounts receivable, net ...........................    1,999,821       771,992
Prepaid expenses ...................................      445,583       353,975
Deferred financing costs, net ......................      220,743       354,507
Investment in real estate ..........................    2,250,000            --
Other assets .......................................    1,810,829       964,213
Land held for sale .................................      192,826            --
Goodwill ...........................................      309,609            --
                                                      -----------   -----------
                                                        9,944,154     2,821,617
                                                      -----------   -----------
Total assets .......................................  $43,898,310   $35,703,580
                                                      ===========   ===========

        Liabilities and Stockholders' Equity

Liabilities:
  Notes payable ....................................  $28,247,695   $25,953,806
  Loan payable to related parties ..................    1,488,768            --
  Property taxes payable ...........................      521,501       844,460
  Tenant security deposits .........................      484,917       388,902
  Unearned premiums ................................    1,886,851            --
  Unpaid losses and loss adjustment expenses .......    1,544,116            --
  Accounts payable and accrued expenses ............    1,145,700       927,498
  Deferred revenue .................................      166,667       200,000
  Deferred income taxes ............................      986,614       648,892
                                                      -----------   -----------
Total liabilities ..................................   36,472,829    28,963,558
                                                      -----------   -----------
Mandatorily redeemable securities at
  redemption value .................................    1,534,930            --
                                                      -----------   -----------
Commitments and contingencies (Note 14)
                                                      -----------   -----------
Stockholders' equity:
  Preferred stock, $.01 par value, 1,000,000
    shares authorized; none issued
  Class A common stock, $0.1 par value,
    40,000,000 shares authorized; 50,150 shares
    issued and outstanding (1997 - 6,560) ..........          502            66
  Class B common stock, $.01 par value,
    9,000,000 shares authorized ; 8,663,867
    shares issued and outstanding (1997 - 8,663,867)       86,639        86,639
  Additional paid-in capital .......................    7,059,893     6,776,994
  Deficit ..........................................   (1,256,483)     (123,677)
                                                      -----------   -----------
Total stockholders' equity .........................    5,890,551     6,740,022
                                                      -----------   -----------
Total liabilities and stockholders' equity .........  $43,898,310   $35,703,580
                                                      ===========   ===========


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

                                       21

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations
Years Ended December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------


                                          1998           1997           1996
                                      -----------    -----------    -----------
Revenue:
  Rental income ...................   $ 4,394,451    $ 4,465,945    $ 3,385,002
  Tenant expense reimbursements ...       816,463        476,769        248,898
  Other operating income ..........       169,891        164,066        582,833
  Interest and service income .....       188,772             --             --
  Gain on disposal of property ....     2,451,831             --         86,440
  Insurance proceeds ..............            --             --         75,670
                                      -----------    -----------    -----------
                                        8,021,408      5,106,780      4,378,843
                                      -----------    -----------    -----------
Expenses:
  Operating and maintenance .......       344,688        299,098        243,817
  Salaries and employee benefits ..     1,668,336      1,216,426      1,021,097
  Utilities .......................       301,006        290,062        162,418
  Insurance .......................       450,421        538,194        454,670
  Other taxes .....................       754,708        577,425        475,836
  Professional fees ...............       171,589        206,969        203,157
  Other general and administrative        250,326        135,882        150,949
  Depreciation and amortization ...     1,254,425      1,447,484      1,244,774
  Bad debt expense ................       181,156         90,214         31,800
  Interest expense ................     2,345,854      2,248,943      1,675,930
  Lease termination costs .........            --        200,000             --
  IPO expenses ....................       795,732             --             --
                                      -----------    -----------    -----------
                                        8,518,241      7,250,697      5,664,448
                                      -----------    -----------    -----------
Loss before income taxes ..........      (496,833)    (2,143,917)    (1,285,605)
                                      -----------    -----------    -----------
Income taxes:
  Current .........................            --             --         (1,295)
  Deferred ........................      (303,209)       774,452        454,190
                                      -----------    -----------    -----------
                                         (303,209)       774,452        452,895
                                      -----------    -----------    -----------
Net loss ..........................   $  (800,042)   $(1,369,465)   $  (832,710)
                                      ===========    ===========    ===========
Basic earnings per share:
  Class A .........................   $      (.13)   $      (.20)            --
  Class B .........................          (.17)          (.24)   $      (.17)


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

                                       22

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                Common Stock                                    Additional     Retained
                                   Class A                Class B                 Paid-In      Earnings
                                 # of shares   Amount   # of shares    Amount     Capital     (Deficit)       Total
                                ------------   ------   -----------   -------   ----------   -----------   -----------
<S>                                <C>          <C>      <C>          <C>       <C>          <C>           <C>        
Balance at December 31, 1995 ..        --         --     8,525,543    $85,255   $6,501,909   $ 2,741,692   $ 9,328,856

Issuance of common stock ......        --         --        96,612        967      167,470            --       168,437

Net loss ......................        --         --            --         --           --      (832,710)     (832,710)

Cash dividends ................        --         --            --         --           --      (330,613)     (330,613)
                                   ------       ----     ---------    -------   ----------   -----------   -----------
Balance at December 31, 1996 ..        --       $ --     8,622,155    $86,222   $6,669,379   $ 1,578,369   $ 8,333,970

Issuance of common stock ......     6,560         66        41,712        417      107,615            --       108,098

Net loss ......................        --         --            --         --           --    (1,369,465)   (1,369,465)

Cash dividends ................        --         --            --         --           --      (332,581)     (332,581)
                                   ------       ----     ---------    -------   ----------   -----------   -----------
Balance at December 31, 1997 ..     6,560       $ 66     8,663,867    $86,639   $6,776,994   $  (123,677)  $ 6,740,022

Issuance of common stock ......    43,590        436            --         --      282,899            --       283,335

Net loss ......................        --         --            --         --           --      (800,042)     (800,042)

Cash dividends ................        --         --            --         --           --      (332,764)     (332,764)
                                   ------       ----     ---------    -------   ----------   -----------   -----------
Balance at December 31, 1998 ..    50,150       $502     8,663,867    $86,639   $7,059,893   $(1,256,483)  $ 5,890,551
                                   ======       ====     =========    =======   ==========   ===========   ===========
</TABLE>


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

                                       23

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Years Ended December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                             1998           1997           1996
                                                         -----------    -----------    ------------
<S>                                                      <C>            <C>            <C>          
Cash flows from operating activities:
Net loss .............................................   $  (800,042)   $(1,369,465)   $   (832,710)
                                                         -----------    -----------    ------------
Adjustments to reconcile net (loss) income to net
  cash (used in) provided by operating activities:
    Depreciation and amortization ....................     1,254,425      1,447,484       1,244,774
    Amortization of deferred revenue .................        33,333             --              --
    Amortization of IPO expenses .....................       687,732             --              --
    Deferred income taxes (benefit) expense ..........       303,209       (774,452)       (454,190)
    Gain on disposal of operating property ...........    (2,451,831)            --         (86,440)
    Bad debt expense .................................       181,156         90,214          31,800
    Changes in operating assets and liabilities,
      net of effects of net assets acquired:
        Accounts receivable ..........................       (94,299)      (108,433)      5,299,627
        Prepaid expenses .............................        60,939        (28,096)        (75,781)
        Other assets .................................      (125,909)      (642,456)     (1,179,207)
        Tenant security deposits .....................        96,015         74,867          88,398
        Accounts payable and accrued expenses ........      (153,985)       516,938         242,007
        Deferred revenue .............................            --        200,000              --
        Income tax payable ...........................        34,042             --              --
                                                         -----------    -----------    ------------
        Total adjustments ............................      (175,173)       776,066       5,110,988
                                                         -----------    -----------    ------------
Net cash (used in) provided by operating activities ..      (975,215)      (593,399)      4,278,278
                                                         -----------    -----------    ------------
Cash flows from investing activities:
  Acquisition of operating property ..................    (2,324,256)      (745,666)    (15,666,539)
  Proceeds on sale of property .......................     2,800,000             --          80,405
  Acquisition of subsidiaries ........................      (763,000)            --              --
                                                         -----------    -----------    ------------
  Net cash used in investing activities ..............      (287,256)      (745,666)    (15,586,134)
                                                         -----------    -----------    ------------
Cash flows from financing activities:
  Principal payments on notes payable ................    (1,820,418)      (293,208)    (18,030,008)
  Proceeds from issuance of notes payable ............     3,371,529      1,303,523      29,800,000
  Proceeds from issuance of common stock .............            --        126,134         256,513
  Repurchase of common stock .........................            --        (18,036)        (88,076)
  Cash dividends .....................................      (332,764)      (332,581)       (330,613)
  Cash transferred upon acquisition of subsidiaries ..       715,034             --              --
                                                         -----------    -----------    ------------

Net cash provided by financing activities ............     1,933,381        785,832      11,607,816
                                                         -----------    -----------    ------------

Net increase (decrease) in cash and cash equivalents .       670,910       (553,233)        299,960

Cash and cash equivalents at beginning of year .......       376,930        930,163         630,203
                                                         -----------    -----------    ------------
Cash and cash equivalents at end of year .............   $ 1,047,840    $   376,930    $    930,163
                                                         ===========    ===========    ============
</TABLE>

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

                                       24

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
--------------------------------------------------------------------------------

1.   Reporting Entity

     The  consolidated  financial  statements  include the  accounts of Lockhart
     Caribbean   Corporation   (LCC  or  the  Company)   and  its   wholly-owned
     subsidiaries H.E. Lockhart Management,  Inc. (HELM),  Lockhart Realty, Inc.
     (LRI),   Premium  Finance  Company  (Caribbean)  Limited  (PFC),   Guardian
     Insurance   Company,   Inc.   (Guardian)  and  Heritage  Insurance  Company
     (Caribbean)  Limited  (Heritage),  Lockhart  Caribbean Finance  Corporation
     (LCFC),  Lockhart  Housing  Development,  Inc.  (LHD),  Lockhart  Caribbean
     Insurance  Corporation (LI) and Lockhart Internet Services Corp. (LIS). LCC
     is organized  as a United  States  Virgin  Islands  corporation  engaged in
     owning,  developing and leasing commercial and residential real estate. LCC
     leases  developed land, and retail and office space to customers  primarily
     under long-term leases.  Significant intercompany accounts and transactions
     have been eliminated in  consolidation.  Since the acquisition of Guardian,
     Heritage and PFC, the Company began to operate in the  insurance  industry.
     Guardian is primarily engaged in the automobile and liability  insurance in
     the U.S.  Virgin  Islands;  Heritage  is a property  and  casualty  insurer
     authorized to issue insurance  policies risks located in the British Virgin
     Islands;  PFC's primary  activity is to acquire premium finance  agreements
     with insured parties in the U.S.  Virgin  Islands,  British Virgin Islands,
     Anguila,  St. Maarten,  Antigua,  St. Vicent,  Grenada and St. Lucia. LCFC,
     LHD, LI and LIS are inactive and have no assets or liabilities.

     On July 5, 1997, the  shareholders of The Lockhart  Companies  Incorporated
     (LCI) voted to restructure and recapitalize the Company and to offer common
     stock to the public in an initial  public  offering  (IPO) to be registered
     with the U.S.  Securities and Exchange Commission (SEC). In connection with
     the  restructuring and  recapitalization,  LCI changed its name to Lockhart
     Caribbean   Corporation   on  August  22,  1997.  On  the  same  date,  the
     shareholders  of LCI exchanged each of their shares for 9.7 shares of Class
     B common  stock  of LCC.  The  transaction  was  accounted  for in a manner
     similar  to  a   pooling-of-interests   and,  accordingly,   the  financial
     statements as of and for the year ended  December 31, 1996 were restated to
     give  retroactive  recognition  to this  transaction.  On February 4, 1998,
     LCC's registration  statement was declared effective by the SEC and certain
     state  regulatory  authorities.  The  Company  started  conducting  its IPO
     primarily  over the World Wide Web. IPO expenses,  consisting  primarily of
     legal  fees,  amounting  to  approximately  $687,000  were  capitalized  at
     December 31, 1997. On February 4, 1999, the Company  officially  terminated
     its IPO.  Approximately $795,000 of IPO expenses were charged to operations
     during the year ended December 31, 1998.

     On June 22, 1998, the Company purchased all of the outstanding common stock
     of PFC and its  wholly-owned  subsidiary,  Premium  Finance Company (E.C.),
     Ltd. (PFC-EC) for $582,000,  including  transaction  costs. The transaction
     was accounted for under the purchase  method of accounting.  As a result of
     this transaction,  goodwill of approximately  $192,000 was recorded and the
     statement of operations of the Company for the year ended December 31, 1998
     includes the operations of PFC since June 22, 1998.

     On December 31, 1998, the Company  purchased all of the outstanding  common
     stock of Guardian and Heritage.


                                       25

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
--------------------------------------------------------------------------------

     The acquisition cost amounted to approximately $2,841,000 as follows:


     Cash paid ................................................  $  125,000
     Note payable to seller, bearing interest at prime
       and paid subsequent to December 31, 1998 ...............   1,125,000
     Class A common stock issued (184,931 shares
       valued at $6.50 per share but subject to mandatory
       redemption at $8.30 per share for a 180-day period
       commencing three years from December 31, 1998) .........   1,535,000
     Transaction costs ........................................      56,000
                                                                 ----------
                                                                 $2,841,000
                                                                 ==========

     The  transaction was accounted for under the purchase method of accounting.
     The  excess of the  purchase  price  over the fair  value of the assets and
     liabilities acquired was allocated to goodwill for approximately  $117,000.
     The statement of operations of the Company for the year ended  December 31,
     1998 does not include the operations of Guardian and Heritage.

     The  purchase  agreement  of Guardian  and  Heritage  provides  for various
     contingent considerations including the following:

     o    Seller will receive additional shares equal to 1.5 times the amount of
          the tax benefit resulting from offsetting future Guardian's net income
          against certain net loss carryforwards that Guardian has accumulated.

     o    Seller  will  receive   additional  shares  equal  to  1.5  times  the
          difference between the actual insurance payment made and the insurance
          reserve amount established for certain insurance claims outstanding at
          the date of the purchase  transaction  if such  payments are less than
          the amount of the reserve.

     The  additional  shares  will be  issued  by LCC on the  same  basis as the
     original shares issued for the original  purchase price (at $6.50 per share
     with the $8.30 redemption  clause).  The aggregate  maximum amount that the
     seller will be entitled  to under above  contingency  clauses is limited to
     $1,839,927. The value of any additional shares issued will be treated as an
     increase in the purchase  price,  added to goodwill and amortized  over its
     remaining life.

     The purchase agreement also provides for certain contingent adjustments for
     two legal actions outstanding at the date of the purchase.


                                       26

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
--------------------------------------------------------------------------------

     The following unaudited pro-forma summary presents the consolidated results
     of operations of the Company as if the acquisition of Guardian and Heritage
     had occurred as of January 1:

                                                         1998         1997
                                                       -------      -------
     Revenues ......................................   $12,889      $10,749
                                                       =======      =======
     Net loss ......................................   $ ( 890)     $  (528)
                                                       =======      =======
     Basic EPS:
       Class A .....................................   $  (.14)     $  (.10)
       Class B .....................................   $  (.18)     $  (.14)

     PFC amounts are not significant.  The pro-forma  results do not necessarily
     represent  results which could have occurred if the  acquisition  had taken
     place at January 1, 1998.

2.   Summary of Significant Accounting Policies

     Use of Estimates

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

     Operating Property

     Operating property is stated at cost. Depreciation of operating property is
     provided using the straight-line  method for financial  reporting  purposes
     and the modified  accelerated  cost recovery system for income tax purposes
     over their  estimated  useful  lives,  which  range  from 5 to 31.5  years.
     Expenditures  for maintenance and general repairs are charged to expense as
     incurred,   whereas  major   improvements  are  capitalized.   Interest  is
     capitalized as a component of the cost of operating property constructed.

     Construction-in-Progress

     Construction-in-progress  consists primarily of costs (including applicable
     property taxes and interest)  incurred  relating to certain  renovation and
     rebuilding  projects.  These costs are  included in  depreciable  operating
     property when the projects are completed.

     Investment in Real Estate

     Represents a parcel of land acquired in the acquisition of Guardian.

     Land Held for Sale

     Land  held for sale is  stated  at the  lower  of cost or fair  value  less
     estimated cost to sell.


                                       27

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
--------------------------------------------------------------------------------

     Securities Available-for-Sale

     Securities  that are held neither for trading or to maturity are  presented
     as  securities   available-for-sale   and  recorded  at  fair  value,  with
     unrealized  gains and losses  excluded from  earnings and reported,  net of
     taxes, in a separate component of stockholders' equity.

     Short-term investments

     Short-term  investments represent certificate of deposits whose maturities,
     at the time of acquisition are one year or less.

     Allowance for Doubtful Accounts

     Allowance for doubtful  accounts  provides for estimated losses on accounts
     receivable.  The  allowance  is  established  based  upon a  review  of the
     individual  accounts,  loss  experience,   economic  conditions  and  other
     pertinent  factors.  Account losses are charged and recoveries are credited
     to the allowance for doubtful accounts.

     Goodwill

     Consists  of the  excess of the  purchase  price over the fair value of net
     assets acquired from Guardian,  Heritage and PFC. It will be amortized over
     its estimated useful life of fifteen years commencing January 1, 1999.

     Deferred Policy Acquisition Costs

     Policy  acquisition costs related to unearned  premiums,  which principally
     consist of commissions,  premium tax,  underwriting  salaries,  and service
     fees paid to agents,  are deferred and  amortized in  proportion to premium
     revenue recognized. Deferred acquisition costs are reviewed periodically to
     assure  their  recoverability.   The  recoverability  of  the  deferral  is
     calculated without considering investment income.

     Deferred Financing Costs

     Deferred  financing costs represent costs incurred  related to the issuance
     of debt and are  amortized  over the term of the related  debt. At December
     31, 1998 accumulated amortization was $337,007 (1997 - $153,682).

     Unearned Premiums

     The portion of premiums  written by Guardian and Heritage that apply to the
     unexpired  terms of  insurance  contracts  in force  are  accounted  for as
     unearned  premiums and amortized  under the daily pro-rata  method over the
     period of insurance coverage.

     Unpaid Losses and Loss Adjustment Expenses

     Guardian's and Heritage's liabilities for unpaid losses and loss adjustment
     expenses are estimates of future payments to be made on reported losses and
     related loss adjustment expenses,  and estimates of losses incurred but not
     reported.  No  estimated  amounts  of  salvage  and  subrogation  on unpaid
     reported  losses are deducted  from the  liability  for unpaid losses since
     such amounts are not anticipated.


                                       28

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
--------------------------------------------------------------------------------

     The estimates for unpaid losses and loss  adjustment  expenses for reported
     losses  are  based  on  case  estimates,  including  an  amount  for  claim
     adjustment expenses. Such estimates require reliance on available data that
     reflects past  experience,  current trends and other  information,  and the
     exercise of informed judgment. The process by which such estimates are made
     are subject to uncertainties that are normal, recurring and inherent in the
     property and casualty business.  As information  develops which varies from
     experience, provides additional data or, in some cases, augments data which
     previously was not considered  sufficient for use in determining  reserves,
     changes in the Company's ultimate liabilities may be required.

     Reinsurance

     Guardian and Heritage  originate  insurance  policies and cede a portion of
     originated  risks to reinsurers.  Reinsurance  is ceded  primarily to limit
     losses from large  exposures and to permit  recovery of a portion of direct
     losses,  although ceded insurance does not relieve the originating  insurer
     of its contingent liability. Risks ceded are treated as risks for which the
     Company is not liable;  however, the Company would be liable for such risks
     if a reinsurer  fails to meet its  obligation  under  existing  contractual
     agreements.

     Contingent Commissions

     Heritage primary insurance  activity involves covering risks in the British
     Virgin Islands through various  insurance  agents under various  contracts.
     Some of these contracts provide for contingent commissions based on premium
     production  and other  provisions.  The  contingent  commission  payable is
     recognized  when  determinable  in accordance with the terms of the related
     contracts.  No such commission  payable has been recognized at December 31,
     1998.

     Revenue Recognition

     Rental income is recognized in equal monthly installments over the lives of
     the leases.

     Revenue from land sales is recognized  at the time of closing.  The related
     profit is  recognized  in full when  collectibility  of the sales  price is
     reasonably assured and the earnings process is substantially complete.

     Deferred Revenue

     Amounts  received  from  lessees for lease  acquisitions  are  deferred and
     amortized over the term of the lease on the straight-line method.

     Lease Termination Costs

     Lease termination costs are charged to operations as incurred.

     Foreign Currency

     A subsidiary of PFC (PFC-EC)  operates in the Eastern  Caribbean  where the
     currency is not the U.S.  dollar.  The financial  statements of PFC-EC were
     converted  from  East  Caribbean  currency  (EC$) to U.S.  dollar  using an
     exchange rate of 2.69 to the U.S. dollar.  Any fluctuation in this exchange
     rate would result in an adjustment to the stockholders'  equity. The EC$ is
     a very  stable  currency  that is  pegged to the U.S.  dollar  and has been
     trading at the above rate over the past ten years.


                                       29

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
--------------------------------------------------------------------------------

     Accounting for Impairment of Long-lived Assets

     The  Company  continually  evaluates  its  long-lived  assets to  determine
     whether current events and circumstances warrant adjustment to the carrying
     values or amortization  periods.  The Company measures  impairment whenever
     events or changes in circumstances  indicate that the carrying amount of an
     asset may not be recoverable.  In performing the review for recoverability,
     an estimate of the future cash flows expected to result from the use of the
     asset and its eventual  disposition  must be made. If the sum of the future
     cash flows  (undiscounted  and without  interest  charges) is less than the
     carrying amount of the asset, an impairment loss is recognized.

     Income Taxes

     In  accounting  for income  taxes the Company  uses an asset and  liability
     approach  that requires the  recognition  of deferred tax  liabilities  and
     assets for the expected future tax  consequences  of temporary  differences
     between the carrying amounts and the tax bases of assets and liabilities. A
     valuation  allowance  is  recognized  for any deferred tax asset for which,
     based on management's evaluation,  it is more likely than not (a likelihood
     of more than 50%) that some  portion or all the deferred tax asset will not
     be realized.

     Statement of Cash Flows

     Cash and cash  equivalents  include cash,  money market accounts and highly
     liquid investments with an original maturity of three months or less.

     Earnings per Share

     Basic  net  income  per share has been  determined  by using the  two-class
     method.  The  two-class  method  is  an  earning  allocation  formula  that
     determines  earnings per share for each class of common stock  according to
     dividends  declared and  participation  rights in  undistributed  earnings.
     Under  this  method,  net  income is  reduced  by the  amount of  dividends
     declared  in the  current  period  for each  class  of  common  stock.  The
     remaining  earnings  are  allocated  to each  class of common  stock to the
     extent  that each stock may share in earnings  as if all  earnings  for the
     period had been distributed.  The total earnings allocated to each stock is
     divided by the weighted  average number of outstanding  shares of the stock
     to which the earnings are allocated.

     The  weighted-average  number of shares of common stock used for  computing
     the basic earnings per share was as follows:

                                           1998         1997         1996
                                        ---------    ---------    ---------
     Basic:
       Class A common stock ..........     26,587          766           --
       Class B common stock ..........  8,663,867    8,640,874    8,561,452

     Fair Values of Financial Instruments

     The Company uses the following  methods and  assumptions  in estimating its
     fair value disclosures for financial instruments:

     Cash and cash equivalents: the carrying amounts are reasonable estimates of
     fair value due to the short period to maturity.


                                       30

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
--------------------------------------------------------------------------------

     Securities available for sale: valued at quoted market prices obtained from
     independent pricing services.

     Accounts  receivable,  accrued expenses and accounts payable:  the carrying
     amounts are  reasonable  estimates  of fair value due to payment  terms and
     current interest rates.

     Notes and loans payable:  the carrying amounts are reasonable  estimates of
     fair value due to the periodic repricing of the interest rates.

     Unpaid  losses  and loss  adjustment  expense:  the  carrying  amounts  are
     reasonable estimate of fair value due to recent acquisition.

     Recent Accounting Pronouncements

     In June 1998,  the FASB  issued  SFAS No. 133  "Accounting  for  Derivative
     Instruments and Hedging Activities." This statement establishes  accounting
     and reporting standards for derivative  instruments,  including  derivative
     instruments  that  are  embedded  in  other  contracts,   and  for  hedging
     activities.  This  statement  is  effective  January  1,  2000.  Management
     believes  the  adoption  of the  statement  will not have an  impact on the
     financial  statements  since the  Company  does not  engage  in  derivative
     activities.

     Reclassifications

     Certain  reclassifications  have been  made to the 1997 and 1996  financial
     statements to conform with the 1998 presentation.

3.   Regulatory Matters

     Guardian and Heritage are subject to certain regulatory requirements.

     Guardian

     To comply with the  regulations  of the  Insurance  Commissioner,  Guardian
     maintains a depository  agreement with the Insurance  Commissioner  whereby
     $500,000 in  certificates  of deposit is held in lieu of a surety bond.  At
     December  31,  1998,  Guardian  had  $582,725  deposited  on  behalf of the
     Insurance  Commissioner.   These  certificates  of  deposit  are  shown  as
     short-term investments in the accompanying financial statements.

     The Virgin Islands Insurance Code requires property and casualty  insurance
     companies  to maintain a minimum of $450,000  in  capital,  and  stipulates
     certain  restrictions  on the  amount of  dividends  which can be paid.  In
     addition, the Insurance Commissioner  customarily,  in accordance with NAIC
     rules,  requires a maximum  ratio of net  written  premiums  to capital and
     surplus of 3:1.  At  December  31,  1998,  Guardian's  ratio of net written
     premiums to  statutory  surplus was 2.6:1.  The current  ratio may indicate
     that future  operations  may be  curtailed  by the  Insurance  Commissioner
     unless additional capital is obtained.


                                       31

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
--------------------------------------------------------------------------------

     At  December  31,  1998,  Guardian  is  required  to comply with the NAIC's
     risk-based capital ("RBC")  requirements.  RBC is a method of measuring the
     amount of capital  appropriate  for an  insurance  company  to support  its
     overall business  operations in light of its size and risk profile.  NAIC's
     RBC  standards  will be used by  regulators  to set in  motion  appropriate
     regulatory  actions  relating  to  insurers  which  show  signs  of weak or
     deteriorating  condition.  At December 31, 1998  Guardian was in compliance
     with the RBC requirements.

     Heritage

     At December 31, 1998,  Heritage maintains under custody with its investment
     broker cash of $415,892.  The use of this broker  account is  restricted by
     the Commissioner of Insurance of the British Virgin Islands. The Act states
     that a person  who at the date the Act came  into  force  was  carrying  on
     insurance  business  of any kind in or from  within  the  Territory,  shall
     within  three  months  after  the Act  came  into  force  comply  with  the
     provisions  of the Act.  In order to control  the  quality and yield of its
     investment  portfolio,  Heritage maintains its investment  portfolio with a
     U.S. Investment brokerage firm.  Management believes no such brokerage firm
     exists within the territory at the present time.

     In  addition,  the  Superintendent  of  Insurance  of the Turks and  Caicos
     Islands  requires  Heritage  to  maintain a deposit of  $100,000.  Heritage
     complied  with this  requirement  by  maintaining,  under the  custody of a
     commercial bank, certificates of deposit of approximately $113,400.

     The  Insurance  Commissioner  of the British  Virgin  Islands has requested
     Heritage to maintain a minimum capital of $250,000. As of December 31, 1998
     the Company was in compliance with this requirement.

4.   Securities Available-For-Sale

     Securities  available-for-sale  were acquired as part of the acquisition of
     Guardian and Heritage and, therefore,  are stated at market.  These consist
     of:

     Callable U.S. Municipal Bonds
       (due after 10 years) ....................................   $269,425

     Federal National Mortgage
       Association (due February 2003) .........................    150,099

     Federal National Mortgage
       Association (due March 2008) ............................    152,022
                                                                   --------
                                                                   $571,546
                                                                   ========

     Expected maturities on debt securities  available-for-sale  may differ from
     contractual  maturities  because  borrowers  may have the  right to call or
     prepay obligations with or without prepayment penalties.


                                       32

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
--------------------------------------------------------------------------------

5.   Accounts Receivable

     At December 31, accounts receivable consist of:

                                                        1998         1997
                                                     ----------    --------
     Tenant accounts receivable ...................  $  756,920    $671,846
     Finance receivables ..........................     867,474          --
     Reinsurance recoverable on unpaid losses
       and loss adjustment expense ................     255,249          --
     Note receivable - PFC ........................          --      78,187
     Shareholders .................................     100,404     101,193
     Other ........................................     388,944     108,780
                                                     ----------    --------
                                                      2,368,991     960,006
     Less allowance for doubtful accounts .........     369,170     188,014
                                                     ----------    --------
                                                     $1,999,821    $771,992
                                                     ==========    ========

     Finance  receivables  represent  amounts due from customers whose insurance
     premiums were financed by PFC and consist of the following:

     Consumer ...................................................  $704,517
     Commercial .................................................   214,205
                                                                   --------
                                                                    918,722
     Less - Unearned interest ...................................   (21,248)

     Provision for recoveries from insurance
       policies cancelled .......................................   (30,000)
                                                                   --------
                                                                   $867,474
                                                                   ========

     Changes in the allowance for doubtful accounts were as follows:

                                              1998        1997        1996
                                            --------    --------    -------
     Balance at beginning of year ........  $188,014    $ 97,800    $66,000
     Bad debt expense ....................   181,156      90,214     31,800
                                            --------    --------    -------
     Balance at end of year ..............  $369,170    $188,014    $97,800
                                            ========    ========    =======


                                       33

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
--------------------------------------------------------------------------------

6.   Other Assets

     At December 31, other assets consist of:

                                                        1998         1997
                                                     ----------    --------
     Income tax refund claim ......................  $  925,970          --
     Deferred IPO costs ...........................          --    $687,733
     Deferred policy acquisition costs ............     492,153          --
     Other ........................................     392,706     276,480
                                                     ----------    --------
                                                     $1,810,829    $964,213
                                                     ==========    ========


                                       34

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
--------------------------------------------------------------------------------

7.   Notes Payable

     At December 31, notes payable consist of:

                                                              December 31,
                                                       -------------------------
                                                           1998          1997
                                                       -----------   -----------
     First and second mortgage note payable to
     a financial institution at prime plus .5%
     (8.25% and 9.00% at December 31, 1998 and
     1997, respectively). ...........................  $14,254,777   $14,472,438

     First mortgage note payable to a financial
     institution at prime plus .5% (8.25% and 9.00%
     at December 31, 1998 and 1997, respectively). ..    4,393,596     4,460,683

     First mortgage note payable to a financial
     institution at prime plus 1.5% (10.00% at
     December 31, 1997). ............................           --       737,723

     First mortgage note payable to seller at 8.75%.     4,596,089     4,635,737

     Promissory note payable to a financial
     institution under a non-revolving line of
     credit at prime plus .5% (8.25% and 9.00% at
     December 31, 1998 and 1997, respectively). .....      970,000       746,000

     First mortgage note payable to a financial
     institution at prime plus .5% (8.25% at
     December 31, 1998). ............................    1,767,499            --

     First mortgage note payable to a financial
     institution at prime plus .5% (8.25% at
     December 31, 1998). ............................      577,000            --

     Amount due under a revolving line of credit
     payable to a financial institution at prime
     plus 1.5% (9.25% at December 31, 1998) .........      155,131            --
           
     Note payable to a financial institution at 
     8.75%, guaranteed by certain stockholders ......      600,000            --
           
     Demand note payable to a financial institution
     at .5% over prime rate (8.25% at December 31,
     1998) ..........................................      125,000            --

     Amount payable to a bank under a line of credit
     of $950,000 and a bank overdraft facility of
     $50,000 at prime plus 2% (9.75% at December 31,
     1998) ..........................................      518,177            --
          
     Amount payable to a bank under a line of credit
     of $200,000 at prime plus 1.5% (9.25% at
     December 31, 1998) .............................      200,000            --

     Demand notes payable to a financial institution
     at prime plus .5% (9.00% at December 31, 1997).            --       500,000

     Other ..........................................       90,426       401,225
                                                       -----------   -----------
                                                       $28,247,695   $25,953,806
                                                       ===========   ===========


                                       35

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
--------------------------------------------------------------------------------

     The first and second mortgage note payable to a financial  institution with
     an  outstanding  balance of $14,254,777 at December 31, 1998, is payable in
     monthly installments of principal and interest of $125,032. A final balloon
     payment  of $14.1  million  is due when the  note  matures  in April  2000.
     However, if there are no events of default,  the financial  institution has
     agreed to convert the balance  outstanding  on April 1, 2000 to a term loan
     payable in 15 years and bearing interest at prime plus .5%.

     The  first  mortgage  note  payable  to a  financial  institution  with  an
     outstanding  balance of  $4,393,596  at December  31,  1998,  is payable in
     monthly  installments of principal and interest of $38,537. A final balloon
     payment of  approximately  $4.3 million is payable when the note matures on
     April 1, 2000.  However,  if there are no events of default,  the financial
     institution has agreed to convert the balance  outstanding on April 1, 2000
     to a term loan payable in 15 years and bearing interest at prime plus .5%.

     The first mortgage note payable with an  outstanding  balance of $4,596,086
     at December 31, 1998 is payable in monthly  installments  of principal  and
     interest of $36,975. A final installment  comprised of the principal amount
     then outstanding together with any unpaid interest is payable when the note
     matures in January 2004. The note is secured by a first  priority  mortgage
     on  properties  at the  Red  Hook  Plaza  Shopping  Center,  a  conditional
     assignment of leases and rents,  and a guarantee of the Lockhart  Caribbean
     Corporation up to a maximum amount of $750,000.

     The   promissory   note  payable  to  a  financial   institution   under  a
     non-revolving line of credit is due in April, 2000.  However,  if there are
     no events of default,  the financial  institution has agreed to convert the
     balance  outstanding  on such date to a term loan  payable  in 15 years and
     bearing interest at prime plus .5%.

     The mortgage note payable to a financial  institution  with an  outstanding
     balance of $1,767,499 at December 31, 1999,  has principal  payments due in
     1999 of $33,911 and of $1,733,588 in 2000.  However, if there are no events
     of default,  the  financial  institution  has agreed to convert the balance
     outstanding on April 1, 2000 to a term loan payable in 15 years and bearing
     interest at prime plus .5%.

     The mortgage note payable to a financial  institution  with an  outstanding
     balance  of  $577,000  at  December  31,   1998,   is  payable  in  monthly
     installments  of  principal  and interest of $5,142  commencing  in January
     1999.  A  final   installment   comprised  of  the  principal  amount  then
     outstanding  together  with any unpaid  interest  is payable  when the loan
     matures in April  2000.  However,  if there are no events of  default,  the
     financial  institution  has agreed to convert  the balance  outstanding  on
     April 1, 2000 to a term loan  payable in 15 years and  bearing  interest at
     prime plus .5%.

     The amount of  $155,131  is due under a $336,000  revolving  line of credit
     payable in monthly installments of $37,333.

     Under the various  loan  agreements,  the Company  must comply with several
     covenants and restrictions which include,  among others,  limitation on the
     dividends declared or paid by certain subsidiaries to a maximum of $860,000
     per year,  limitation  on capital  expenditures  and other  conditions.  At
     December 31, 1998, the Company was in compliance  with these  covenants and
     restrictions.


                                       36

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
--------------------------------------------------------------------------------

     Aggregate principal payments of notes payable for the five years subsequent
     to December 31, 1998, are as follows:

          1999 ..........................................  $ 2,193,625
          2000 ..........................................   21,534,611
          2001 ..........................................       65,063
          2002 ..........................................       56,407
          2003 ..........................................       61,295
          Thereafter ....................................    4,336,694
                                                           -----------
                                                           $28,247,695
                                                           ===========

     On January 29, 1999, the Company issued two first mortgage notes payable to
     a financial institution of $100,000 and $1,250,000,  respectively,  bearing
     interest at 1.0% over prime. The notes are payable in monthly interest only
     payments  commencing February 1, 1999 through July 1, 1999. A final balloon
     is due when the notes mature on July 30, 1999. The notes are collateralized
     by a first priority mortgage on operating  properties plus an assignment of
     Sale Proceeds of a Purchase and Sale  Agreement of properties in the amount
     of $1,200,000.

8.   Income Taxes

     The Company files a consolidated income tax return. At December 31, the net
     deferred income tax asset (liability) consist of:

                                                          1998          1997
                                                      -----------   -----------
     Deferred tax assets resulting from:
       Net operating loss carry-forward ............  $ 1,959,746   $ 1,248,803
       Depreciation ................................      203,176       701,882
       Provision for doubtful accounts receivable ..      115,413        82,601
       Contributions carry-forward .................       45,483        31,307
       Deferred revenue ............................           --        74,800
       Unearned premium ............................      127,064            --
       AMT Credit ..................................       45,536            --
       Valuation allowance .........................     (529,162)           --
                                                      -----------   -----------
                                                        1,967,256     2,139,393
                                                      -----------   -----------
     Deferred tax liabilities resulting from:
       Basis of operating property .................   (2,788,285)   (2,788,285)
       Deferred policy acquisition costs ...........     (165,585)           --
                                                      -----------   -----------
                                                       (2,953,870)   (2,788,285)
                                                      -----------   -----------
     Net deferred tax liability ....................  $  (986,614)  $  (648,892)
                                                      ===========   ===========


                                       37

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
--------------------------------------------------------------------------------

     At  December  31,  1998,  the  Company  has  operating  loss  carryforwards
     available to offset future taxable income expiring as follows:

          Year                                                Amount
          ----                                              ----------
          2010 ..........................................   $  668,000
          2011 ..........................................    1,145,000
          2017 ..........................................    1,937,000
          2018 ..........................................       76,000

     The differences between income taxes at the statutory rate of 37.4% and the
     income tax provision (benefit) in the accompanying statements of operations
     amount to  $489,024,  $27,372 and  $27,921 for the years ended  December 3,
     1998, 1997 and 1996,  respectively,  and are due to nondeductible  expenses
     and miscellaneous items.

     Guardian is subject to income taxes in the U.S.  Virgin  Islands.  Guardian
     has approximately  $1,414,000 of loss carryforwards expiring in 2011. Since
     Guardian must file a separate  income tax return for  insurance  companies,
     these losses cannot be used by LCC.

9.   Leases

     As Lessor

     The  Company  receives  rental  income  from  leases  for retail and office
     building  space and ground  leases to  tenants  under  noncancelable  lease
     agreements  which expire at various  dates.  Five year renewal  options are
     available  for most leases.  The leases  provide for minimum  annual rental
     payments plus  adjustments,  if applicable,  for certain  additional  costs
     incurred by the lessor  and/or a  percentage  of gross  sales.  Included in
     rental  income for the years ended  December  31, 1997 and 1996 are $52,000
     and $77,000, respectively, of rent attributable to a percentage of tenants'
     gross sales.

     At December 31, 1998, the approximate future minimum rental income payments
     due during  the next five  years  under  non-cancelable  terms of  existing
     leases are as follows:

          1999 ..........................................  $ 4,887,500
          2000 ..........................................    5,063,400
          2001 ..........................................    5,168,400
          2002 ..........................................    5,272,200
          2003 ..........................................    5,372,800
                                                           -----------
                                                           $25,764,300
                                                           ===========

     As Lessee

     As lessee,  Guardian  leases office space,  parking and other property from
     Unlimited Holdings, Inc., Guardian's former parent. The operating lease for
     the office  space is for a five year term  commencing  January 1, 1998 with
     annual rental payments plus common area charges of $149,520.


                                       38

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
--------------------------------------------------------------------------------

     The Company  leases  other  property  from  Unlimited  Holdings,  Inc. on a
     monthly  basis to provide  housing to certain  employees,  as agreed in the
     purchase agreement for a three-year period commencing January 1, 1999.

     In addition,  Guardian  leases its U.S. Virgin Islands claims office in St.
     Croix under an operating lease agreement, which is renewed every month.

     Future minimum rental commitments are as follows:

          1999 .............................................  $173,520
          2000 .............................................   173,520
          2001 .............................................   173,520
          2002 .............................................   149,520
                                                              --------
                                                              $670,080
                                                              ========

10.  Lease Termination and Deferred Revenue

     In July 1997,  one of the Company's  tenant decided to close its department
     store  operations  throughout the United States,  including the U.S. Virgin
     Islands,  and as of October  31,  1997,  ceased  retail  sales at  Lockhart
     Gardens Shopping Center.  The tenant's lease did not expire until 2001, and
     it was  obligated to make base rental  payments  and tenant  reimbursements
     until  lease  expiration.   The  Company  negotiated  a  lease  termination
     agreement  and payment.  The new tenant that took  possession  of the space
     occupied  by the  previous  tenant  reimbursed  the Company for the payment
     made.

     The amount  received  from the new tenant  has been  deferred  and is being
     amortized over the initial term of the lease on the straight-line method.

11.  Transactions with Related Parties

     Loans payable to related parties consist of:

       Loan payable to seller of Guardian and Heritage,
       bearing interest at prime (7.75% at December 31,
       1998) due March 31, 1999. ..............................  $1,125,000

       Loan payable to Guardian's former parent, bearing
       interest at 2% above the bank base rate of lending
       (7.73% at December 31, 1998), collaterized by a
       mortgage as security agreement in investment in real
       estate. Principal payable in 1998 amounts to $27,132. ..     363,768
                                                                 ----------
                                                                 $1,488,768
                                                                 ==========

     The amounts due from  shareholders were to be paid with the proceeds of the
     IPO,  however,  as the IPO  has  been  terminated,  these  amounts  have no
     specific repayment terms and bear interest at 9%.


                                       39

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
--------------------------------------------------------------------------------

     A shareholder of the Company and member of the Board of Directors is also a
     partner of a law firm which renders legal  services to the Company.  During
     the years ended  December 31,  1998,  1997 and 1996 legal fees paid to this
     law  firm  amounted  to  approximately  $99,000,   $147,000  and  $201,000,
     respectively.

12.  Employee Benefit Plan

     The  Company,  through  HELM,  sponsors a  defined-contribution  retirement
     benefit plan,  subject to ERISA,  that covers  substantially all employees.
     The plan  provides  that  the  Company  will  match  the  employee-directed
     contributions up to a maximum of $500. The Company's contributions pursuant
     to  the  plan  for  the  years  ended  December  31,  1998  and  1997  were
     approximately,  $30,000 and $17,000,  respectively.  No contributions  were
     made in 1996.

13.  Capital Stock

     Common Stock Description

     Except as otherwise  set forth below or as  otherwise  required by law, the
     rights and  privileges of each class of the common stock are  substantially
     identical in all material respects, including the right of the members of a
     class of common  stock to  participate  ratably in offers by the Company to
     repurchase  shares of common  stock that are directed to all of the holders
     of any  other  class of the  common  stock.  No class of  common  stock has
     preemptive rights.

     Voting Rights

     Each  holder  of Class B Common  Stock is  entitled  to ten  votes for each
     share. If the aggregate  number of shares of Class B Common Stock no longer
     represent at least 75% of the combined voting power, each holder of Class B
     Common Stock is entitled to one vote.

     Distributions

     The Board of Directors of the Company may cause distributions to be paid to
     holders of shares of Common Stock out of funds  legally  available  for the
     payment of distributions,  provided,  however,  that the Board of Directors
     may declare the payment of cash  distributions of up to $.425 per annum per
     share of  Class B  Common  Stock  to the  holders  of Class B Common  Stock
     without  declaring or paying any distributions on Class A Common Stock. The
     right of the Board of Directors to declare a separate  distribution payable
     only on the Class B Common  Stock shall  cease once the Board of  Directors
     declares  a   distribution   payable  to  both  classes  of  Common  Stock.
     Thereafter, any distribution on the Common Stock shall be payable on shares
     of Class A Common Stock and Class B Common Stock share alike.

     Liquidation Rights

     In the event of any  dissolution,  liquidation or winding up of the affairs
     of  the  Company,  whether  voluntary  or  involuntary,  after  payment  or
     provision  for payment of the debts and other  liabilities  of the Company,
     the  remaining  assets and funds of the Company,  if any,  shall be divided
     among  and paid  ratable  to the  holders  of Class A Common  Stock and the
     holders  of  Class  B  Common  Stock  provided,  however,  that  so long as
     distributions  are not being paid on Class A Common  Stock,  the holders of
     Class A Common Stock shall be entitled to preferential  rights in the event
     of  liquidation,  dissolution or winding up of the Company with each holder
     of Class A Common Stock  entitled to receive $6.50 per share before any sum
     shall be paid to or any  assets  distributed  among the  holders of Class B
     Common Stock.


                                       40

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
--------------------------------------------------------------------------------

     Conversion Rights

     Each and every share of Class B Common  Stock is  convertible  into Class A
     Common Stock at any time at the option of the holder. Such conversion shall
     be on a  share-for-share  basis.  Shares  of Class A Common  Stock  are not
     convertible.

     Mandatorily Redeemable Securities

     Mandatorily  redeemable  securities  consist of  184,931  shares of Class A
     Common Stock and are recorded at the redemption value of $8.30 per share.

     Dividends

     Dividends  payment dates are scheduled for the last day of each month, with
     the per  share  amount  paid  per  dividends  determined  by the  Board  of
     Directors at its quarterly meetings.

14.  Contingencies

     The  Company is a  defendant  in certain  legal  proceedings  in the normal
     course of  business  that  have not been  finally  adjudicated.  Management
     believes, based on the opinion of legal counsel, that the final disposition
     of these  legal  actions  will not have a  material  adverse  effect on the
     Company's financial position or results of operations.

15.  Financial Instruments with Off-Balance Risk

     Guardian and Heritage are  participants  in catastrophic  cover  agreements
     made with reinsurers  that provide  insurance  protection  coverage up to a
     certain  level  for  losses   exceeding   Guardian's  and  Heritage's  risk
     retention.  Even though these agreements are legally binding,  Guardian and
     Heritage will be liable for such risks only if the reinsurer  fails to meet
     its obligations under existing agreements.

16.  Supplemental Disclosure of Cash Flows Information

     Interest paid for the years ended December 31, 1998, 1997 and 1996 amounted
     to $2,350,000, $2,140,000 and $1,627,000, respectively.

     The Company capitalized interest amounting to $47,000 and $6,200 during the
     years ended December 31, 1998 and 1997, respectively.

     Non-cash  transactions  during the year ended December 31, 1998 include the
     following:

     --   Acquisition of Guardian and Heritage by issuing Class A common stock.

     --   Capitalization  of a note  receivable from PFC outstanding at December
          31, 1997.


                                       41

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
--------------------------------------------------------------------------------

17.  Subsequent Event

     On February 12, 1999, LCC signed a stock purchase  agreement  underwhich it
     agreed to purchase at a future date 91% of the outstanding shares of common
     stock  of EPO  Capital  Corporation  (EPO)  and  Keylink  Transmedia,  Inc.
     (Keylink  Transmedia)  for  $400,000  plus  25,000  shares of LCC's Class A
     Common  Stock.  EPO, a licensed  broker/dealer  and member of the  National
     Association  of  Securities  Dealers,  was  established  in 1996 to conduct
     electronic  public  offerings.  Keylink  Transmedia  designs  and  develops
     customized websites.

18.  Agreement with Insurance Company and Tenant

     One of the Company's  tenants  operated a supermarket  on leased land.  The
     tenant  constructed  a building on the land leased from HELM.  On September
     15, 1995, Hurricane Marilyn destroyed the building. The land lease provided
     that the tenant had to keep the  building  insured  against loss or damages
     for the  mutual  benefit of the  tenant  and HELM.  On March 1, 1999,  HELM
     signed an agreement  with the  insurance  company that issued the policy on
     the aforementioned  building in which the insurance company recognized HELM
     as a third party beneficiary under the terms of the insurance policy.

     The agreement also provided for the deposit of $2,010,000  (estimated  cost
     of replacing  the  building)  in an escrow  account for the sole purpose of
     replacing the  destroyed  building.  In addition to the deposit  made,  the
     insurance  company paid HELM $690,000  representing  interest on the policy
     proceeds  as  permitted  by  the  laws  of  the  U.S.  Virgin  Islands.  In
     consideration  of the aforesaid  payments,  HELM fully and finally released
     and forever  discharged the insurance  company and its affiliates  from any
     and all  liability of every kind in any way  connected  with the  insurance
     policy. HELM also assigned to the insurance company all the rights, claims,
     etc.  which it may have  against  the tenant  relating to or arising out of
     entitlement to proceeds of the insurance  policy reserving all other claims
     or causes of action against the tenant.

     On March 4, 1999,  HELM  signed an  agreement  with the tenant in which the
     tenant  agreed to pay HELM  $35,000 and to  surrender  its  interest in the
     lease.  Both parties also agreed to dismiss all pending  claims,  including
     HELM's  claim  against the  insurance  company,  and to  exchange  full and
     comprehensive releases in favor of and by all parties.

     No  amount  related  to  these  agreements  have  been  recognized  in  the
     accompanying financial statements.


                                       42

<PAGE>

                                                                      SCHEDULE I

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Schedule I - Real Estate and Accumulated Depreciation
December 31, 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                           Cost Capitalized
                                                                             subsequent to            Gross amount at
                                             Initial Cost to Company          acquisition            December 31, 1998
                                          ----------------------------  ----------------------  ---------------------------
                                          Land and Land  Buildings and                Carrying      Land      Buildings and
Description                 Encumbrances   Improvements   Improvements  Improvements    Costs   Improvements   Improvements
-----------                 ------------  -------------  -------------  ------------  --------  ------------  -------------
<S>                        <C>             <C>            <C>            <C>            <C>      <C>           <C>         
Drakes Passage
  Charlote Amalie
  St. Thomas
  Retail/office complex    Mortgage lien   $     5,000    $    40,000    $   696,286    $  --    $     5,000   $   736,286 

Grand Hotel
  Charlote Amalie
  St. Thomas
  Retail/office complex    Mortgage lien       264,743         65,000      4,480,117       --        264,743     4,516,973 

Lockhart Gardens Shopping
  Center, Estate Tomas,
  St. Thomas
  Shopping Center          Mortgage lien        34,987        497,380     10,045,504       --         34,987     7,452,203 

Sugar Estate Park
  Estate Thomas,
  St. Thomas
  Business Park            Mortgage lien       277,172             --      1,102,348       --        714,352            -- 

Market Square East
  Estate Donoa,
  St. Thomas
  Land                     Mortgage lien            --             --      1,769,975       --      1,769,975            -- 

Cinema One Building
  Estate Thomas,
  St. Thomas                                     5,000             --             --       --          5,000            -- 

Red Hook Shopping Center
  Red Hook, St. Tomas
  Shopping Center          Mortgage lien     1,013,862      4,971,608        239,943       --      1,013,862     5,211,551 

Fort Mylner Commercial
  Center
  Estate Tutu, St. Thomas
  Office Building          Mortgage lien       646,910      1,218,220         53,018       --        646,910     1,271,238 
</TABLE>

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Schedule I - Real Estate and Accumulated Depreciation (Continued)
December 31, 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                         Accumulated     Date of      Date    Useful
Description                   Total     Depreciation  Construction  Acquired   Life
-----------                -----------  ------------  ------------  --------  ------
<S>                        <C>           <C>              <C>         <C>      <C> 
Drakes Passage
  Charlote Amalie
  St. Thomas
  Retail/office complex    $   741,286   $   98,589                   1920     31.5

Grand Hotel
  Charlote Amalie
  St. Thomas
  Retail/office complex      4,781,716    1,151,756                   1914     31.5

Lockhart Gardens Shopping
  Center, Estate Tomas,
  St. Thomas
  Shopping Center            7,487,190    1,461,241       1972                 31.5

Sugar Estate Park
  Estate Thomas,
  St. Thomas
  Business Park                714,352      134,534       1991                 31.5

Market Square East
  Estate Donoa,
  St. Thomas
  Land                       1,769,975           --       1997                 31.5

Cinema One Building
  Estate Thomas,
  St. Thomas                     5,000           --

Red Hook Shopping Center
  Red Hook, St. Tomas
  Shopping Center            6,225,413      646,055                   1995     31.5

Fort Mylner Commercial
  Center
  Estate Tutu, St. Thomas
  Office Building            1,918,148       99,663                   1996     31.5
</TABLE>

                                       43

<PAGE>

                                                                      SCHEDULE I

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Schedule I - Real Estate and Accumulated Depreciation (Continued)
December 31, 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                           Cost Capitalized
                                                                             subsequent to            Gross amount at
                                             Initial Cost to Company          acquisition            December 31, 1998
                                          ----------------------------  ----------------------  ---------------------------
                                          Land and Land  Buildings and                Carrying      Land      Buildings and
Description                 Encumbrances   Improvements   Improvements  Improvements    Costs   Improvements   Improvements
-----------                 ------------  -------------  -------------  ------------  --------  ------------  -------------
<S>                        <C>             <C>            <C>            <C>            <C>      <C>           <C>         
Fort Mylner Shopping
  Center
  Estate Tutu, St. Thomas
  Shopping Center          Mortgage lien   $ 1,825,144    $ 2,743,426    $        --    $  --    $ 1,825,144   $ 2,743,426 

Orange Grove Shopping
  Center
  Orange Grove, St. Croix
  Shopping Center          Mortgage lien       501,997      3,082,428         24,827       --        501,997     3,107,255 

Corporate Office Building
  Estate Thomas,
  St. Thomas
  Office Building          Mortgage lien            --        202,295         34,573       --             --       236,867 

Undeveloped Land                             4,335,771             --        133,134       --      4,468,905            -- 
                                           -----------    -----------    -----------    -----    -----------   ----------- 
                                             8,910,586     12,820,357     18,579,725       --     11,250,875    25,275,799 

Investment in real estate                    2,250,000                                             2,250,000
Land held for sale                             192,826                                               192,826
                                           -----------    -----------    -----------    -----    -----------   ----------- 
                                           $11,353,412    $12,820,357    $18,579,725    $  --    $13,693,701   $25,275,799 
                                           ===========    ===========    ===========    =====    ===========   =========== 
</TABLE>

<TABLE>
<CAPTION>
                                         Accumulated     Date of      Date    Useful
Description                   Total     Depreciation  Construction  Acquired   Life
-----------                -----------  ------------  ------------  --------  ------
<S>                        <C>           <C>              <C>         <C>      <C> 
Fort Mylner Shopping
  Center
  Estate Tutu, St. Thomas
  Shopping Center          $ 4,568,570   $  216,947                   1996     31.5

Orange Grove Shopping
  Center
  Orange Grove, St. Croix
  Shopping Center            3,609,252      246,082                   1996     31.5

Corporate Office Building
  Estate Thomas,
  St. Thomas
  Office Building              236,867       56,989       1990                 31.5

Undeveloped Land             4,468,905           --
                           -----------   ----------
                            36,526,674    4,111,856

Investment in real estate  
Land held for sale         
                           -----------   ----------
                           $36,526,674   $4,111,856
                           ===========   ==========
</TABLE>

                                       44

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Schedule I - Real Estate and Accumulated Depreciation (Continued)
December 31, 1998
--------------------------------------------------------------------------------

Reconciliation - Land and Land improvements

                                                   Year ended December 31
                                         --------------------------------------
                                             1998          1997         1996
                                         -----------   -----------  -----------
Balance at beginning of year .........   $10,146,068   $10,009,236  $ 7,030,326

Additions during the year:
  Acquisitions .......................            --            --    2,974,051
  Improvements .......................     1,769,975       136,832       12,366
                                         -----------   -----------  -----------
Total additions ......................     1,769,975       136,832    2,986,417

Deductions during the year:
  Cost of real estate sold ...........      (424,649)           --       (7,507)
  Cost of real estate held for sale ..      (240,519)           --           --
                                         -----------   -----------  -----------
Total deductions .....................      (665,168)           --       (7,507)
                                         -----------   -----------  -----------
Balance at end of year ...............   $11,250,875   $10,146,068  $10,009,236
                                         ===========   ===========  ===========


Reconciliation - Building and Improvements

                                                   Year ended December 31
                                         --------------------------------------
                                             1998          1997         1996
                                         -----------   -----------  -----------
Balance at beginning of year .........   $25,155,646   $25,068,409  $11,548,709

Additions during the year:
  Acquisitions .......................            --            --    7,044,074
  Improvements .......................       120,153        87,237    6,475,626
                                         -----------   -----------  -----------
Total additions ......................       120,153        87,237   13,519,700
                                         -----------   -----------  -----------
Balance at end of year ...............   $25,275,799   $25,155,646  $25,068,409
                                         ===========   ===========  ===========


The basis of all depreciable assets is $26,546,255.


                                       45

<PAGE>

LOCKHART CARIBBEAN CORPORATION AND SUBSIDIARIES
Schedule I - Real Estate and Accumulated Depreciation (Continued)
December 31, 1998
--------------------------------------------------------------------------------

Reconciliation - Accumulated Depreciation

                                                   Year ended December 31
                                         --------------------------------------
                                             1998          1997         1996
                                         -----------   -----------  -----------
Balance at beginning of year .........   $ 3,369,010   $ 2,457,293  $ 1,815,062

Additions during the year:
  Depreciation expense ...............       867,019       911,717      642,231

Deductions during the year:
  Land improvements sold .............       (76,480)           --           --
  Reclassification ...................       (47,693)           --           --
                                         -----------   -----------  -----------
Total deductions .....................      (124,173)      136,832           --
                                         -----------   -----------  -----------
Balance at end of year ...............   $ 4,111,856   $ 3,369,010  $ 2,457,293
                                         ===========   ===========  ===========



                                       46

<PAGE>


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


     None


                                    PART III

Item 10. Directors and Executive Officers of the Registrant


      Name                Age                Position
      ----                ---                --------
George H.T. Dudley....... 49  Co-Chairman of the Board of Directors and Co-CEO
Wesley S. Williams, Jr... 56  Co-Chairman of the Board of Directors and Co-CEO
John P. deJongh, Jr...... 41  President, Chief Operating Officer and a Director
Cornel Williams ......... 41  Treasurer and Chief Financial Officer
Christine A. O'Keefe..... 49  Secretary, and Vice-President - Property Managment
Etienne R. Bertrand...... 48  Senior Vice President-Development
Alton L. Adams........... 41  Director
Steve Begleiter.......... 37  Director
Lisa S. Curreri.......... 58  Director
Raymond L .Fournier...... 30  Director
Kathleen P. Goldberg..... 54  Director
William H. Hastie........ 51  Director
Herbert E. Lockhart, III. 48  Director
John E. Oxendine......... 55  Director


     George H.T.  Dudley is  Co-Chairman of the Board of Directors and Co-CEO of
the Company and has been a member of the  Company's  Executive  Committee  since
1987. A member of the Virgin Islands and  Pennsylvania  Bars, and the founder in
1978 and  managing  partner of the firm of Dudley,  Topper  and  Feuerzeig  (the
largest law firm in the Virgin  Islands),  Mr. Dudley  specializes  in financial
services, real estate, finance, and corporate management, and general commercial
law. Mr.  Dudley is a member of the Board of Trustees of the  University  of the
Virgin  Islands  (where he serves on its Executive  Committee and as chairman of
the Board's  Committee  on  Finance),  a member of the  American  Law  Institute
(serving on the Institute's governing Council and its Executive Committee),  and
a  current  member  and past  Chairman  of the  Villanova  Law  School  Board of
Consultors.  Mr. Dudley received his undergraduate degree from George Washington
University and his J.D. from Villanova University.  In 1994, Mr. Dudley received
the honorary title of Chevalier  (Knight) from the King of Belgium for his years
of service as Honorary Consul of Belgium. Mr. Dudley served as an Adviser to the
Restatement of the Law, Third, Property  (Mortgages),  published by the American
Law Institute, and currently serves as an Adviser to the Institute's Restatement
of the Law, Third, Property (Joint Ownership), presently in development.

     Wesley S. Williams, Jr. is Co-Chairman of the Board of Directors and Co-CEO
of the Company and has been a member of the Company's  Executive Committee since
1987.  A member of the  District  of Columbia  and New York Bars,  and a partner
since  1975 in the firm of  Covington  &  Burling  -- which has law  offices  in
Washington,  D.C., London and Brussels,  and a correspondent  office in Paris --
Mr. W. Williams  specializes in financial services,  real estate,  finance,  and
corporate  and  securities  law.  Mr.  W.  Williams  is a member of the Board of
Trustees (and of its Executive  Committee) of Penn Mutual Life Insurance Company

                                       47
<PAGE>


(sole parent of, inter alia, Janney Montgomery Scott), of the Board of Directors
(and of its Executive Committee) of CarrAmerica Realty Corporation, of the Board
of Managers of  Blackstar  L.L.C.,  and of the Boards of  Directors of Blackstar
Communications,  Inc.  and of the  Federal  Reserve  Bank of  Richmond.  Mr.  W.
Williams was formerly Chairman of the Boards of Directors of Broadcast  Capital,
Inc. and Broadcast Capital Fund, Inc., and a member of the Board of Directors of
Salomon Inc. (sole parent of Salomon Brothers Inc, Phibro Inc. and Phibro Energy
Production,  Inc.). A member of the American Law  Institute,  Mr. W. Williams at
one time held a faculty appointment at Columbia University Law School, and later
served as an Adjunct Professor of real estate finance and financial services law
at Georgetown University Law Center. Mr. W. Williams holds B.A. and J.D. degrees
from Harvard University,  an M.A. degree from Tufts University's Fletcher School
(earned  as a  Woodrow  Wilson  Fellow),  and  an  LL.M.  degree  from  Columbia
University Law School. Confirmed by the U.S. Senate and House of Representatives
as a member of the  Board of  Regents  of the  Smithsonian  Institution,  Mr. W.
Williams  formerly  served  as a member of the  Board of  Overseers  (and of its
Executive Committee) of Harvard University.

     John P. deJongh, Jr. has served as President and Chief Operating Officer of
the  Company  and as a member of its Board of  Directors  since  1996.  Prior to
joining  Lockhart,  Mr.  deJongh was a Senior  Managing  Consultant  with Public
Financial   Management,   Inc.   (co-managing  the  firm's  strategic  municipal
consulting  practice),  from  1993 to 1996;  and  earlier  served  as  Executive
Assistant to the Governor of the U.S. Virgin Islands,  from 1990 to 1992, and as
the U.S.  Virgin  Islands'  Commissioner  of Finance,  from 1987 to 1990.  While
holding these government  positions,  Mr. deJongh also served as Chairman of the
U.S.  Virgin  Islands  Water and Power  Authority  (1987 to 1992),  as Executive
Director of the U.S. Virgin Islands Public Finance Authority (1988 to 1990), and
as Chairman of the U.S.  Virgin Islands Tax Review Board,  Secretary of the U.S.
Virgin  Islands  Banking  Board,  and a member of the U.S.  Virgin Islands Small
Business  Development  Agency (in each instance,  1987 to 1990). Mr. deJongh has
been a Vice President-Country  Consumer Manager (responsible for consumer credit
in the  U.S.  and  British  Virgin  Islands,  and on  St.  Maarten,  Netherlands
Antilles),  having earlier served as a Second Vice President-Corporate  Lending,
in each instance with Chase  Manhattan  Bank,  N.A., on St. Thomas,  U.S. Virgin
Islands  (1984 to 1987).  Mr.  deJongh is a graduate  of Antioch  College and of
Chase Manhattan Bank's Corporate Credit Development  Program. Mr. deJongh serves
as President of the Karen Ingeborg Lockhart  Foundation,  and is a member of the
Boards of Directors of the Community  Foundation of the U.S. Virgin Islands, and
of the St. Thomas/St. John Chamber of Commerce.

     Cornel Williams,  who is not related to Mr. W. Williams,  has served as the
Company's  Corporate  Secretary and Treasurer  (Chief  Financial  Officer) since
1996. Prior to joining Lockhart, Mr. C. Williams served as Accounting Manager of
the U.S.  Virgin Islands Port  Authority from 1992 to 1996, as Finance  Manager,
Virgin Islands Telephone Corporation, and Assistant Controller, Guyana Telephone
and Telegraph Company Ltd. from 1990 to 1992, as Controller, Cowpet Beach Resort
Development  on St.  Thomas from 1989 to 1990,  as a financial  analyst for Ford
Motor Company in Detroit,  from 1986 to 1988, and as Financial  Manager,  Virgin
Islands Maritime Services from 1982 to 1984. Mr. C. Williams received his M.B.A.
(with a  concentration  in finance)  from the  University  of  Illinois,  having
earlier  received  a  baccalaureate  degree  from the  University  of the Virgin
Islands.

     Christine O'Keefe joined the Company as  Vice-President-Investor  Relations
in February,  1998. Prior to joining Lockhart, Ms. O'Keefe served as Comptroller
to the Leather Shop, Inc., a group of retail stores featuring  high-end designer
leather  goods,  luggage  and  clothing  on St.  Thomas,  from 1996 to 1998,  as
Regional  Manager for Ambient  Technologies,  Inc. on St. Thomas (a wholly-owned
subsidiary  of Israel  Desalination  Engineering,  Ltd.)  from 1983 to 1996,  as
Assistant  Project Manager for Armour  Enterprises,  a real property  management
firm, on St. Thomas from 1987-1988,  as host of "Conversation" talk show on WVWI
Radio,  St. Thomas (CBS  affiliate) from 1980 to 1983, as Comptroller of Dudley,
Martin & Dudley law firm on St. Thomas from 1979 to 1980, and as General Manager
of Ohio Water Treatment of Ohio from 1974 to 1978. Ms. O'Keefe received her B.A.
from Akron University in 1973.

     Etienne R.  Bertrand has served as the  Company's  Senior Vice  President -
Development  since 1990 and as Secretary of the Company from 1991 to 1996. Prior
to joining  Lockhart,  Mr.  Bertrand  served as Senior  Project  ManagerCEastern
Region with the Barker  Partrinely  Group in Houston and  southern  Florida from
1986

                                       48
<PAGE>


to 1990, as a Construction  Manager with Gerald D. Hines  Interests in Miami and
Houston from 1981 to 1986,  Project Architect with  3D/International  in Houston
from 1979 to 1981, Tenant Construction Manager with Gerald D. Hines CPS Division
in Houston from 1978 to 1979,  Project Job Captain  with John S. Chase,  FAIA in
Houston from 1977 to 1978,  and as Technical  Production  Coordinator  with A.M.
Kinney-Wm.  J. Rabon & Associates  in  Cincinnati  from 1975 to 1977. A licensed
architect  in the U.S.  Virgin  Islands and Texas,  Mr.  Bertrand  received  his
bachelor of architecture degree from the University of Cincinnati.

     Alton L. Adams was elected to the Company's Board of Directors in 1997. Mr.
Adams is the  President of Standard & Poor's DRI.  Previously,  he was the Chief
Operating  Officer  of  The  Faneuil  Group  in  Boston  (a  marketing  services
organization  providing  database  telemarketing and analytical  services in the
U.S., Canada and Australia),  Mr. Adams, who received his bachelor's degree from
Georgetown  University  and his M.B.A.  from the  University  of  Pennsylvania's
Wharton  School,  has been a guest  lecturer  in the field of  marketing  at the
Anderson  Graduate  School of Business of the  University  of  California at Los
Angeles, and also at Germany's University of Mainz.

     Steven L. Begleiter is a Senior Managing  Director in the Corporate Finance
Division of Bear,  Stearns & Co.,  Inc.,  where he heads the  Specialty  Finance
Group. He joined Bear Stearns in 1984 and since then has worked extensively with
commercial and savings banks and their holding  companies,  non-bank  commercial
and  mortgage  lenders,  and a  variety  of  specialty  finance  companies.  Mr.
Begleiter has completed a broad range of assignments,  including restructurings,
financings,  mergers and acquisitions, and asset-backed securitizations . He has
also participated in debt and equity  transactions for Latin American  financial
institutions.  Mr Begleiter received his undergraduate  degree in economics from
Haverford College.

     Lisa S.  Curreri was elected to the  Company's  Board of Directors in 1997.
Since 1996,  Ms.  Curreri has been a name  principal  in the St.  Thomas firm of
McLaughlin  Arguin Curreri  Realtors,  the Virgin Islands real estate  brokerage
firm where she has worked as a broker since 1989.  Ms.  Curreri served as a real
estate sales  associate  with  McLaughlin  Realtors  from 1979 to 1988,  and was
earlier employed by St. Thomas' WBNB,  Channel 10. A graduate of Foxcroft School
(Middleburg,  VA),  Ms.  Curreri  is a member  of the  National  Association  of
Realtors.  She holds the Certified  Residential  Specialist and Graduate Realtor
Institute designations.

     Raymond L. Fournier has been President of Guardian since 1996, and has been
President and Chairman of the Board of Directors of Heritage since 1993, and has
served as a member of the Board of Directors of Unlimited  Holdings,  Inc. since
1994.  Mr.  Fournier,  who is a native of Puerto  Rico,  received a BA degree in
economics  and finance  from Clark  University,  and trained in  reinsurance  at
Cologne Reinsurance Company,  Cologne, Germany, and D.G. Durham Ltd., at Lloyd's
of London.

     Kathleen P.  Goldberg  was elected to the  Company's  Board of Directors in
1981. A Vice President of Beverly Hills  Manuscript and Rare Coins,  Inc., and a
Trustee of its Profit and  Pension  Plan since 1981,  Ms.  Goldberg is active in
community  charities in the Los Angeles area,  and  previously  chaired the 14th
annual Vista Del Mar Child Care Service  Fishing and Golfing  Invitational.  Ms.
Goldberg studied at Cazanovia College and Howard University.

     William H. Hastie was elected to the Company's  Board of Directors in 1997.
Since  1994,  Mr.  Hastie has been a partner,  Vice  Chairman  and an  Executive
Committee member with the law firm of Arnelle Hastie McGee Willis & Greene,  Los
Angeles,  California.  Previously,  Mr. Hastie served as co-founder and managing
partner of the law firm of Arnelle & Hastie,  San  Francisco,  California,  from
1985 to 1994, and as  Undersecretary  and General Counsel of California's  State
and  Consumer  Services  Agency,  from 1979 to 1983.  Mr.  Hastie  received  his
bachelor's  degree from Amherst  College,  a certificate  from the University of
Strasbourg,  and his J.D.  from Boalt Hall  School of Law of the  University  of
California  at Berkeley.  Mr. Hastie has been a member of the Board of Directors
of the California  HealthCare Foundation since 1996, having previously served as
a member of the Board of  Directors  of Blue  Cross of  California  from 1992 to
1996. He has also served as an Adjunct  Professor of Law at the Graduate  School
of Public Policy of the University of California at Berkeley.


                                       49
<PAGE>


     Herbert E. Lockhart, III was elected to the Company's Board of Directors in
1985.  Sole proprietor of a salvage  business,  Herbie's Big Tow, and a resource
recovery consultant since 1990, Mr. Lockhart previously served as reconstruction
project supervisor for St. Thomas' Mountaintop Condominium Association from 1991
to 1992. Mr. Lockhart was the Company's  President from 1986 to 1990, and a Vice
President of the Company from 1981 to 1986. Earlier,  Mr. Lockhart served as the
Manager of Operations  and Water  Technician for St. Thomas' Donoe Water Company
from 1977 to 1980, and as a management trainee with the Hechinger Company in the
Washington,  D.C. suburbs.  A graduate of Milton College,  with further study at
the Computer Institute of Boston, George Mason University, and the University of
the Virgin Islands, Mr. Lockhart is the past President of the Rotary Club of St.
Thomas, and of the Humane Society of the Virgin Islands, and also served as Vice
President of the Boy Scouts of America/Virgin  Islands Council, and as Treasurer
of St. Thomas' Masonic Lodge No. 356. Mr. Lockhart has also been active with the
Navy League of the United States' St. Thomas/ St. John Council, and as a charter
member of the Toastmasters Club of the Virgin Islands.

     John E. Oxendine was elected to the  Company's  Board of Directors in 1997.
Since  1987,  Mr.  Oxendine  has  served  as the  founding  Chairman  and CEO of
Blackstar  Communications,  Inc., a television  broadcast  holding  company with
stations in Florida,  Michigan  and  Oregon.  Since 1994,  he has also served as
founding  Chairman and CEO of  Blackstar  L.L.C.,  also a  television  broadcast
holding company, with additional stations in South Dakota and now sole parent of
Blackstar Communications, Inc. Mr. Oxendine was recently appointed President and
CEO of Broadcast  Capital,  Inc. and  Broadcast  Capital  Fund,  Inc., a venture
capital firm and supporting foundation, where he had served as President and CEO
from 1981 to 1995.  Previously,  Mr.  Oxendine  served as Assistant Chief in the
Financial   Assistance   Division  of  the  Federal  Savings  &  Loan  Insurance
Corporation  from 1979 to 1981, as Assistant  Manager with the Chicago,  London,
Mexico City, and New York offices of First National Bank of Chicago from 1974 to
1979, as a Senior Associate with Korn\Ferry  Associates in Los Angeles from 1972
to 1974, as a Management  Consultant  with Fry Consultants in San Francisco from
1971  to  1972,  and  as  a  Management  Advisor  with  the   Bedford-Stuyvesant
Restoration  Corporation from 1968 to 1969. Mr. Oxendine received his bachelor's
degree from Hunter College,  and an M.B.A.  from Harvard  University's  Graduate
School of Business  Administration,  where he was a John Hay Whitney Fellow. Mr.
Oxendine serves on the Boards of Directors of HSN, Inc., and of Medlantic Health
Care Group.


Item 11. Executive Compensation

Director Compensation

     Directors are  reimbursed for  reasonable  expenses  incurred in connection
with  attendance at meetings of the  Company's  Board of Directors or committees
thereof.  Additionally,  each non-employee  director currently receives $500 for
attending each meeting of the Board, a subscription  to The Virgin Islands Daily
News,  and options  each year to  purchase up to 1,000  shares of Class A Common
Stock at the fair market value at the date of grant. No options have been issued
or exercised by any director. Directors who are employees of the Company receive
no compensation for their service as directors of the Company.


Executive Compensation

     The following table shows compensation paid to, deferred or accrued for the
benefit of each of the Company's  executive  officers whose salary and bonus for
the year ended December 31, 1998 totaled at least $100,000 in the aggregate (the
"Named  Executive  Officers") for all services  rendered to Lockhart  during the
fiscal year ended December 31, 1998.

                                       50

<PAGE>


                         1998 Summary Compensation Table


                               Annual Compensation

Name and Principal Position      Salary       Bonus(1)       Other Annual (2)
---------------------------      ------       --------       ----------------
George H.T. Dudley
  Co-Chairman and Co-CEO         $33,750      $174,900             ----

Wesley S. Williams, Jr.
  Co-Chairman and Co-CEO         $51,750      $163,650             ----

John P. deJongh, Jr.
  President and Chief            $101,153     $ 170,250          $21,900
  Operating Officer

Etienne R. Bertrand
  Senior Vice President,
  Development                    $93,941      $ 35,750           $20,400

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

(1)  The amount reported as Bonus for each Named Executive  Officer  consists of
     two  components:   (i)  a  1998  general   performance  bonus  and  (ii)  a
     transaction-based bonus for the same period. Bonuses were paid both in cash
     and in shares of Class A Common Stock as follows:

                         Dudley    Williams     deJongh     Bertrand
                         ------    --------     -------     --------
     Performance-Cash   $ 22,500   $ 11,250    $ 11,250     $ 26,250
     Performance-Stock   126,100    126,100     126,100        6,500
     Transaction-Cash     26,300     26,300      32,900        3,000
                       --------    --------    --------     --------
                        $174,900   $163,650    $170,250     $ 35,750


     The value of the shares paid as bonuses is based on the fair  market  value
     of the Class B Common  Stock on the date of  grant,  as  determined  by the
     Board of Directors of the Company.

(2)  The amount  reported for Mr. deJongh and Mr.  Bertrand  include $13,200 and
     $14,400 for a housing allowance, respectively. The Company has not included
     in  the  Summary  Compensation  Table  the  value  of  incidental  personal
     perquisites furnished by the Company to the other Named Executive Officers,
     since  such  value did not exceed the lesser of $50,000 or 10% of the total
     of annual salary and bonus reported for such Named Executive Officers.

Item 12. Security Ownership of Certain Beneficial Owners and Management

         The  following  table  sets forth  certain  information  regarding  the
beneficial  ownership of the  Company's  Common Stock as of December 31, 1998 by
(i) each person known by Lockhart to be the beneficial  owner of more than 5% of
any  class of the  Company's  voting  Common  Stock,  (ii) the  Named  Executive
Officers,  and (iii) all of the Company's  directors and executive officers as a
group. Except as otherwise indicated,  the address of each holder is the same as
the Company.  Unless otherwise noted, each holder has sole voting and investment
power with respect to all shares of stock listed as owned by such person.

                                       51
<PAGE>

<TABLE>
<CAPTION>
                                        Class B             Class A          Percent of Vote
                                     Common Stock         Common Stock      of all Classes of
Name of Beneficial Owner            Number        %      Number       %       Common Stock
------------------------            ------       ---     ------      ---       ------------
<S>                                <C>          <C>     <C>         <C>          <C> 
George H.T. Dudley (1) ........     284,560      3.3%    11,390      22.7%        3.3%

Wesley S. Williams, Jr. (2) ...   1,520,454     17.5%    22,970      45.8%       17.6%

John P. deJongh, Jr ...........       7,275       *       9,760      19.5%         *

Etienne R. Bertrand ...........      30,943       *       1,280       2.6%         *

Kathleen P. Goldberg (3) ......   1,248,146     14.4%     1,630       3.3%       14.4%

William H. Hastie .............     595,401      6.9%                             6.9%

Herbert E. Lockhart, III ......      70,325       *                                *

Cassandra M. Flipper(4) .......     446,384      5.2%                             5.1%

Irma Corinne Lockhart .........   1,937,139     22.4%                            22.3%

Gertrude L. Melchior ..........   1,963,445     22.7%       780       1.6%       22.7%

John E. Oxendine ..............       5,385       *                    *           *

All Directors and executive
 officers as a group ..........   3,763,459     43.4%    48,810      97.3%       43.5%
</TABLE>

---------------
*    Represents less than 1% of the class or vote, as the case may be.
(1)  Includes  94,973  shares of Class B Common Stock held in trust.  Shares not
     held in trust are owned jointly by Mr. Dudley and his wife.
(2)  Includes  469,761 shares of Class B Common Stock held in trust.  Shares not
     held in trust are owned jointly by Mr. Williams and his wife.
(3)  Includes 233,084 shares of Class B Common Stock held in trust.
(4)  Includes 379,299 shares of Class B Common Stock held in trust.

Item 13. Certain Relationships and Related Transactions

     George H.T. Dudley, who serves as Co-Chairman of the Board of Directors and
Co-CEO  of the  Company,  is a  partner  in the  law  firm  Dudley,  Topper  and
Feuerzeig.  Dudley,  Topper and Feuerzeig  renders legal services to the Company
and was paid fees of  approximately  $99,000,  $147,000,  and  $201,000 for such
services by the Company  during the fiscal  years ended  December 31, 1998 ,1997
and 1996, respectively.

     The Company has entered into an  agreement  to lease No. 10 Estate  Thomas,
which is  adjacent  to Sugar  Estate  Park.  No. 10 Estate  Thomas  consists  of
approximately 2.64 acres zoned for business development and includes a Victorian
style  residence,  which  sustained  damage in  Hurricane  Marilyn.  The Company
intends to repair the  residence,  converting it into office space,  and to move
its principal executive offices into the new space. The lease agreement requires
the Company to pay monthly  rent equal to the greater of $2,100 or one-half  the
rent  received  by the  Company  from No. 44 Estate  Thomas,  which the  Company
currently uses as its principal executive offices. No. 10 Estate Thomas is owned
by Gertrude L. Melchior,  one of the Company's  principal  stockholders.  George
H.T. Dudley is the son of Mrs. Melchior.

     Lisa S.  Curreri is a member of the Board of Directors of the Company and a
principal of McLaughlin  Arguin  Curreri  Realtors.  McLaughlin  Arguin  Curreri
Realtors has provided real estate brokerage services to the Company from time to
time, and the Company  expects to use such services in the future.  All past and
any future brokerage  services rendered by McLaughlin Arguin Curreri Realtors to
the Company have been


                                       52
<PAGE>



and will be on terms  consistent with the industry and  commensurate  with those
available from unaffiliated parties.

     Richard  E.W.  Grant,   President  of  PFC,  is  the  beneficial  owner  of
approximately  29,250  shares  of the  Company's  Class B  Common  Stock,  which
represents  less than one  percent  of such  shares  outstanding.  Approximately
20,500 of such  shares  are held  jointly  by Mr.  Grant  and his wife,  and the
remaining  shares are held by Mrs. Grant.  The Company acquired PFC and retained
Mr.  Grant  as an  employee  of the  Company  following  the  acquisition.  As a
shareholder  of PFC, Mr. Grant and a trust  established by Mr. Grant received an
aggregate  of  approximately  $187,500  from the  Company  for their PFC shares.
George H.T. Dudley is Mr. Grant's brother-in-law.




                                       53

<PAGE>

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


A.   The Financial  statements  required by Item 8 are incorporated by reference
     herein (See Item 8)


B.   Reports on Form 8-K

          Form 8-K dated  December 31, 1998.  Filed to report the closing of the
          acquisition  of  Guardian  Insurance  Company and  Heritage  Insurance
          Company (Caribbean) Ltd.

          Form 8-K/A dated  December 31, 1998.  Filed to report  historical  and
          proforma   financial   statements  for  the  acquisition  of  Guardian
          Insurance Company and Heritage Insurance Company (Caribbean) Ltd.

          Form 8-K dated February 3, 1999.  Filed to announce the termination of
          the Company's public offering.


C.   Exhibits

          Exhibit 27 -- Financial Data Schedules


D.   The financial statements schedules required are included in Item 8.



                                       54

<PAGE>

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


                         LOCKHART CARIBBEAN CORPORATION


Date: April 15, 1999         By:  /s/ John P. deJongh, Jr
                                  ---------------------------------------------
                                      John P. deJongh, Jr., President
                                      (Principal Executive Officer)

Date: April 15, 1999         By:  /s/ Cornel Williams
                                  ---------------------------------------------
                                      Cornel Williams, Chief Financial Officer
                                      (Principal Financial Officer and Principal
                                      Accounting Officer)




<PAGE>




Pursuant to the Requirements of the Securities Act of 1934, this report has been
signed  by  the  following  persons  on  behalf  of  the  registrant  and in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>

                                Signature                          Title
                                ---------                          -----
<S>                           <C>                              <C>
Date:    April 15, 1999         /s/ John P. deJongh, Jr.       President and a Director
                                ---------------------------    (Principal Executive Officer)
                                    John P. deJongh, Jr.        

Date:    April 15, 1999         /s/ Cornel Williams            Chief Financial Officer (Principal
                                ---------------------------    Financial Officerand Principal
                                    Cornel Williams            Accounting Officer)           
                                                               

Date:    April 15, 1999         /s/ George H.T. Dudley         Co-Chairperson of the Board of
                                ---------------------------    Directors
                                    George H.T. Dudley             

Date:    April 15, 1999         /s/ Wesley S. Williams, Jr     Co-Chairperson of the Board of
                                ---------------------------    Directors
                                    Wesley S. Williams, Jr.        

Date:    April 15, 1999         /s/ Alton L. Adams             Director
                                ---------------------------
                                    Alton L. Adams

Date:    April 15, 1999         /s/ Steven L. Begleiter        Director
                                ---------------------------
                                    Steven L. Begleiter

Date:    April 15, 1999         /s/ Lisa S. Curreri            Director
                                ---------------------------
                                    Lisa S. Curreri

Date:    April 15, 1999         /s/ Raymond L. Fournier        Director
                                ---------------------------
                                    Raymond L. Fournier

Date:    April 15, 1999         /s/ Kathleen P. Goldberg       Director
                                ---------------------------
                                    Kathleen P. Goldberg

Date:    April 15, 1999         /s/ William H. Hastie          Director
                                ---------------------------
                                    William H. Hastie

Date:    April 15, 1999         /s/ Herbert E. Lockhart        Director
                                ---------------------------
                                    Herbert E. Lockhart

Date:    April 15, 1999         /s/ John E. Oxendine           Director
                                ---------------------------
                                    John E. Oxendine
</TABLE>