Exhibit 13

 SELECTED FINANCIAL DATA
(In thousands except per share amounts and Other Company Data)

<TABLE>
<CAPTION>

                                                                          Year Ended
                                               June 27,       June 28,      June 30,      June 24,      June 25,
                                                 1997           1996          1995          1994           1993
<S> <C>

Results of Operations

Total Revenues                                 $ 80,907       $ 73,165      $ 54,119      $ 52,108      $ 48,146
Income before income taxes                        5,453          6,568         3,288         4,665         5,375
Net income                                        3,458          4,176         2,101         2,958         3,482


Per Share Data

Earnings per share - primary                      $1.10         $ 1.28        $ 0.66        $ 0.93        $ 1.10
Cash dividends per share (1)                       0.33           0.28          0.27          0.23          0.39
Book value per share                               9.20           8.47          7.98          7.61          6.95
Weighted average common shares
     and equivalents outstanding                  3,145          3,256         3,163         3,173         3,173

Financial Condition

Total assets                                  $ 129,854      $ 114,249      $ 93,266      $ 80,702      $ 79,484
Total liabilities                               100,676         88,558        68,028        56,680        57,307
Total stockholders' equity                       29,178         25,690        25,238        24,022        22,177

Other Financial Data

Profit margin:
     Pre-tax                                       6.7%           9.0%          6.1%          9.0%         11.2%
     After-tax                                     4.3%           5.7%          3.9%          5.7%          7.2%
Return on average equity:
     Pre-tax                                      19.7%          24.1%         13.3%         20.2%         25.5%
     After-tax                                    12.5%          15.3%          8.5%         12.8%         16.5%

Other Company Data

Total employees                                     566            520           479           458           418
Investment brokers                                  237            223           214           205           181
Branch offices                                       29             28            26            25            26

</TABLE>



     (1) Includes $.19 special dividend in 1993.






                                      13.1

<PAGE>





                MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
                     OF OPERATIONS AND FINANCIAL CONDITION


General

     The Company is the holding company for Scott & Stringfellow, Inc., a
regional brokerage, investment banking, and financial services firm
headquartered in Richmond, Virginia. Scott & Stringfellow operated as a
partnership from its founding in 1893 until its incorporation in 1974. The firm
has been a member of the New York Stock Exchange since June 20, 1895. The
holding company was established in 1986 in connection with an initial public
offering of common stock. Since 1986, the Company has experienced moderate
growth through strategic acquisitions, the opening of new branch offices in
communities within its market area, and the hiring of additional investment
brokers. At June 27, 1997, the Company operated 29 offices in communities
located across Virginia, North Carolina, West Virginia, and South Carolina and
had approximately 566 employees including 237 Investment Brokers.

     As a full-service firm, Scott & Stringfellow's securities brokerage
activities include retail and institutional brokerage and the distribution of
mutual funds, money market funds, and insurance products; and specialized
financial services including individual retirement account custodial services,
portfolio evaluation, financial planning, and managed account services. Scott &
Stringfellow also provides loans to clients which are secured by marketable
securities held in margin accounts. These brokerage activities are supported by
an in-house equity research department and trading desks for over-the-counter
equities, municipal bonds and taxable fixed income securities. The Company's
investment banking activities include the management of and participation in
underwritings of corporate and municipal securities and financial advisory
services to public and private companies and municipalities. Additionally, Scott
& Stringfellow Capital Management, a wholly owned subsidiary, provides fee-
based, investment advisory services to both individual and institutional
clients.

     During fiscal 1997, approximately 80% of the Company's total revenues were
derived from brokerage and investment banking including 74% from retail
brokerage, 4% from institutional brokerage, and 2% from investment banking fees.
Of the Company's remaining revenues, dividends and interest income provided 10%
and investment advisory and administrative service fees and other income
provided 10%.

     The Company's profitability is largely sensitive to the market volume of
trading in securities and the relative level and volatility of market prices for
equity and fixed income securities. Many of the Company's activities have high
operating costs which do not decrease proportionately with reduced levels of
activity and may even increase during such periods. Moreover, many of these
operating costs may increase at a proportionately greater rate than revenues
during periods of increased activity. While the Company attempts to develop
revenue sources which are less sensitive to financial market conditions, its
profitability is adversely affected by sustained periods of reduced transaction
volume or loss of brokerage clients. The Company's profitability is also
adversely affected when it is unable to compensate for increases in fixed costs
through increased transaction volume or the pricing of its services.

     Scott & Stringfellow is registered with the Securities and Exchange
Commission ("SEC") as a broker-dealer and Scott & Stringfellow Capital
Management is registered with the SEC as an investment advisor. Accordingly, the
Company is subject to SEC rules applicable to broker-dealers and investment
advisors and to rules promulgated by securities industry self-regulatory
agencies, such as the National Association of Securities Dealers, Inc. ("NASD")
and the Municipal Securities Rulemaking Board ("MSRB"). As a member of the New
York Stock Exchange, the Company is also subject to its rules and to a periodic
examination of the Company's broker-dealer operations. Scott & Stringfellow is a
member of the Securities Investor Protection Corporation ("SIPC") which insures
customer accounts of member broker-dealers.



                                      13.2

<PAGE>



LIQUIDITY AND CAPITAL RESOURCES

     The Company's primary sources of funds include its net income adjusted for
non-cash items, cash balances payable to clients, broker-dealers, and others,
and short-term bank financing. As set forth in the Consolidated Statement of
Cash Flows for the year ended June 27, 1997, presented in the financial
statements which follow, cash provided by operations was $13.9 million, of which
$6.5 million was used for financing activities and $5.4 million was used for
investing activities, resulting in an increase in cash and cash equivalents of
$2.0 million. Of particular note, $4.3 million of cash was used to repurchase
and retire the Company's common stock during the period. In addition, purchases
of equipment and leasehold improvements totaled $3.1 million, an increase of
$1.4 million from the amount expended in the previous fiscal year, which was
primarily attributable to implementation of the Company's technology plan.

     During fiscal 1997, the Company's total assets increased by 14% to $129.9
million from $114.2 million, primarily as a result of higher loan balances to
finance clients' purchases or carrying of securities on margin. These balances,
which are classified as receivable from customers on the Consolidated Statements
of Financial Condition, represent 70% of the Company's total assets. Receivable
from customers has increased from $59.7 million to $90.4 million over the past
three fiscal years, representing an annual increase of approximately 15%.
Approximately 86% of the Company's total assets, including receivables from
customers, are liquid, consisting of cash or assets convertible into cash.

     The Company has historically funded its assets with equity capital,
customer credit balances, and short-term bank loans. At June 27, 1997, total
stockholders' equity was $29.2 million, or 22% of total assets, compared to
$25.7 million, or 23% of total assets, at June 28, 1996. The Company's largest
liability, payable to customers, amounted to $78.0 million at June 27, 1997, an
increase of 29% from June 28, 1996. The remaining funding was provided primarily
by short-term liabilities arising in the ordinary course of the Company's
business and by short-term bank loans. Short-term bank loans are used from time
to time to finance periodic increases in receivables from customers and trading
securities. Such loans are secured by either customer-owned securities held in
margin accounts or firm-owned securities held in inventory accounts. The Company
maintains lines of credit from established financial institutions totaling $52.0
million, of which $5.0 million was outstanding as of June 27, 1997. Additional
bank lines of credit are available on a short-term basis for the purpose of
financing new underwritings.

     The Company received cash proceeds from issuance of common stock totaling
$1.5 million during the year, compared to $1.0 million in 1996 and $0.5 million
in 1995. Common stock is issued primarily to participants in the Company's
employee stock purchase plan and pursuant to exercises of stock options granted
to employees. Fund inflows from these sources are expected to increase in future
years as participation in the employee stock purchase plan grows and the
exercisable number of stock options granted in 1988 and later years continues to
increase. ( See Note 11 to the accompanying consolidated financial statements.)
Of the $4.3 million cash used to purchase and retire common stock, $3.8 million
was a result of the repurchase of shares pursuant to a "Dutch Auction" tender
offer which was recorded in fiscal 1996 but not settled until 1997. The
remaining $0.5 million was pursuant to the Company's existing share repurchase
program, for which authorization to repurchase 415,785 shares remained at June
27, 1997.

     Scott & Stringfellow is subject to the net capital requirements of the
Securities and Exchange Commission and the New York Stock Exchange, which are
designed to measure the general financial soundness and liquidity of
broker-dealers. The Company has consistently operated in excess of the minimum
regulatory net capital requirements. At June 27, 1997, Scott & Stringfellow's
net capital of $14.9 million exceeded the minimum requirement by approximately
$13.0 million.

     Management believes that funds provided by earnings, combined with its
liquid capital base and its present lines of credit, will be fully adequate to
meet the Company's financing needs for the foreseeable future.




                                      13.3

<PAGE>



RESULTS OF OPERATIONS

     The results of the Company's operations over the three year period covered
by fiscal years 1997, 1996, and 1995 reflect increasing levels of both revenues
and expenses. Although these periods have generally been marked by favorable
financial market conditions and expanding markets for the Company's services,
the financial services industry has been and continues to be in a period of
significant competitive change. The Company has made significant financial
commitments, especially in the areas of technology and recruitment of investment
brokers, over the past 3 years to execute a business strategy which it believes
will position it to grow profitably in future years. This strategy includes the
development of the Company's capital markets effort based upon regional equity
research capabilities, growth in customer assets under management, and
development of the retail branch system. During fiscal year 1997 these financial
commitments had some negative effect on profit margins despite increased
revenues.

     The following table provides a summary of the changes in the major
categories of revenues and expenses in both dollar amounts and percentage terms
for the years ended June 27, 1997, June 28, 1996, and June 30, 1995, and serves
as a basis for the comparative discussion of the results of operations for the
last three fiscal years which follows. In this discussion, these three fiscal
years are referred to as 1997, 1996, and 1995, respectively. Because the
Company's fiscal periods end with the last Friday of each month, the results of
operations for fiscal year 1995 include 53 weeks of activity while the results
of operations for fiscal years 1997 and 1996 include 52 weeks of activity.

                        CHANGES IN RESULTS OF OPERATIONS

<TABLE>
<CAPTION>

(In thousands)                                  1997 vs. 1996                      1996 vs. 1995
                                            Increase (decrease)                Increase (decrease)
                                           Amount          Percent            Amount          Percent
<S> <C>

Revenues
     Commissions                          $ 2,763               7%          $ 11,602              41%
     Principal transactions                 2,727              24%               434               4%
     Investment banking                    -2,202             -21%             4,302              69%
     Interest and dividends                 1,236              19%               769              13%
     Advisory and administrative fees       2,974              64%             1,895              68%
     Other                                    244              99%                44              22%

        Total revenues                      7,742              11%            19,046              35%

Expenses
     Employee compensation
        and benefits                        4,376               9%            12,799              37%
     Communications                           451              14%               320              11%
     Occupancy and equipment                1,428              47%               614              25%
     Advertising and sales promotion          399              22%                96               6%
     Postage, stationery and supplies         158               7%               387              22%
     Brokerage, clearing and
        exchange fees                         315              24%               302              30%
     Data processing                          260              22%               260              28%
     Interest                                 733              32%               379              20%
     Other operating expenses                 737              16%               610              16%

        Total expenses                      8,857              13%            15,767              31%

     Income before income taxes            -1,115             -17%             3,279             100%


     Income taxes                            -397             -17%             1,205             102%

     Net income                            $ -718             -17%           $ 2,074              99%

</TABLE>

                                      13.4


<PAGE>



1997 Compared With 1996

        Net income declined by 17% from 1997 to 1996 as the Company absorbed
cost increases and experienced a decline in investment banking revenues. The
Company's after-tax profit margin declined from 5.7% to 4.3% on net income of
$3.5 million . Primary earnings per share of $1.10 equaled the second highest
total in firm history.

        Total revenues increased by $7.7 million, or 11%, in 1997 to a record
$80.9 million. Revenues increased in each revenue category with the significant
exception of investment banking revenues, which declined by $2.2 million, or
21%. The decline in investment banking revenues was significant because these
fees represent a profitable source of revenues for the Company.

        Commissions revenues increased by $2.8 million, or 7%, from the prior
year. Commissions on listed equity securities, mutual funds, annuities, and
options increased by approximately $3.7 million in the aggregate. These
increases were partially offset by $0.9 million decline in commissions on
over-the-counter agency transactions. A greater portion of transactions in
over-the-counter equity securities were executed on a principal basis, rather
than an agency basis, in 1997 compared to 1996. (See following paragraph.)

        Revenues from principal transactions include sales credits or "mark-ups"
on most fixed income security transactions as well as over-the-counter equity
securities in which the Company makes a market. Principal transactions revenue
also reflects the trading profits or losses as the Company buys and sells these
securities. Principal transactions revenues increased by $2.7 million, or 24%,
from the previous fiscal year. Sales credits from over-the-counter equity
securities increased by $1.7 million, or 23%. Sales credits from fixed income
securities declined by 1% reflecting continued investor demand in favor of
equity securities as opposed to fixed income securities. Equity trading profits,
aided by generally favorable market conditions, increased by $0.7 million
compared to the prior year. Municipal bond trading income approximated $0 in
1997 as compared to $0.2 million of trading losses incurred in 1996. Overall,
municipal bond trading activity declined as the Company closed its institutional
municipal trading desk located in Lynchburg in December 1996.

        The $2.2 million decline in investment banking revenues reflected a
decline in the number of managed equity offerings from 10 in 1996 to 5 in 1997.
As a result, selling concessions on managed underwritten equity securities
declined by $2.0 million from the prior year and management fees declined by
$0.9 million. The number of equity syndicate participations also declined, from
197 in 1996 to 138 in 1997, as selling concessions on underwritten equity
securities declined by $0.3 million. However, underwriting profits increased by
$0.7 million. Also partially offsetting the decline in investment banking
revenues was a $0.2 million increase in corporate finance fees.

        Interest and dividend income increased by $1.2 million, or 19%, from
1996 to 1997, which included a $1.1 million increase in interest received from
clients. This increase was primarily the result of an 18% increase in the
average balances of client margin borrowings.

        Revenue from advisory and administrative fees increased by $3.0 million,
or 64%, from the prior year. Investment advisory fees from Scott & Stringfellow
Capital Management increased by $1.2 million, or 85%, as assets under management
grew from approximately $311 million at the end of 1996 to $600 million at the
end of 1997. The growth in assets under management was the result of recent
performance in portfolios managed by the Company as well as enhanced marketing
initiatives. Fees from money market distribution assistance increased by $0.7
million, or 44%, as the Company emphasized marketing its money market and
related cash services and

                                      13.5

<PAGE>



changed the provider of its money market product during the year. Revenues from
managed account services, which entail a fee based on a percentage of the
client's managed assets in lieu of charging standard brokerage commissions,
increased by $0.7 million from 1996 to 1997.

        Total expenses increased by $8.9 million, or 13%, from the prior year.
The overall increase was attributable to variable expenses associated with
revenue growth, implementation of a new technology plan, cost increases in
certain expense categories, and the hiring of additional personnel to increase
growth opportunities in both the retail and capital markets areas.

        Employee compensation and benefits increased by $4.4 million, or 9%,
from the previous fiscal year. As the largest category of expense, the increase
in compensation expense represented 49% of the total increase in expenses.
Commissions and other compensation paid to investment brokers increased by $2.5
million, or 10%, as a result of increased commissions and sales credits as well
as higher fixed compensation related to the hiring of additional investment
brokers. Salaries expense increased by $1.1 million, or 12%, as the number of
support personnel employed during 1997 increased by 11% during the year. The
support-to- broker personnel ratio increased from an average of 1.33 during 1996
to 1.36 during 1997 as personnel were added in product support and
administrative areas. Other performance-based compensation, based upon
departmental and product revenues and profitability, increased by $0.8 million,
or 16%. However, discretionary compensation expense, which includes Company
profit sharing contributions and bonuses paid to employees in respect of
calendar year results, declined by $0.9 million, or 25%, as a result of the
Company's lower level of overall profitability in 1997 as compared to 1996. The
remaining increase in employee compensation and benefits was due primarily to
higher payroll taxes and employee benefits, reflecting the higher employee
count, higher compensation, and growth of participant earnings in the deferred
compensation plan.

        Communications expense, primarily comprised of telephone and market
quote services, increased by $0.5 million, or 14%, due primarily to additional
leased equipment and service charges for the system supporting the Company's
administrative network ("intranet") which was placed in service during the year.
Expenses for market quote services also increased due to the higher number of
investment brokers and additional services purchased.

        Occupancy and equipment expense increased by $1.4 million, or 47%, and
was an important factor in the Company's reduced level of profitability.
Depreciation on computer systems, which reflected the replacement of virtually
100% of investment broker workstations during the year, increased by $0.7
million. Maintenance contracts increased by $0.1 million as the result of new
portfolio and contact management software installed for the benefit of
investment brokers. In addition to these technology improvements, office rent
expense, combined with depreciation on furniture and equipment, increased by
$0.4 million with the addition of 2 new offices, relocations and renovations of
existing branch offices, and scheduled rent increases on leases in place.

        Advertising and sales promotion increased by $0.4 million, or 22%, due
to higher expenditures for marketing brochures, special marketing programs, and
increased business travel and entertainment.

        Postage, stationery and supplies increased by $0.2 million, or 7%.
Expenses associated with preparing and mailing monthly client statements
increased modestly, as did general postage and office supplies.

        Brokerage, clearing and exchange fees increased by $0.3 million, or 24%,
due to higher transaction volumes and fee increases for clearing and depository
services.

        Data processing costs increased by $0.3 million, or 22%, due to higher
transaction volumes as well as a per unit rate increase for the Company's
transaction processing service bureau.

        Interest expense increased by $0.7 million, or 32%, reflecting higher
average interest-bearing customer credit balances as well as higher average
levels of bank borrowings to finance the Company's securities inventories.

        Other operating expenses increased by $0.7 million, or 16%.  Included in
this category are computer

                                      13.6

<PAGE>



consulting fees, which increased by $0.3 million because of installation of
computer equipment and software associated with the Company's technology plan.
Other costs which increased included correspondent research, statistical
services, and business consulting fees. Legal fees, settlements, and provisions
for losses in connection with legal actions relating to the Company's securities
business increased by $0.2 million. Other operating expenses which declined
included employment agency fees, general legal fees, and charitable
contributions.

1996 Compared With 1995

        The Company enjoyed record revenues and profits in 1996 as a result of
generally favorable equity market conditions, the completion of 10 managed
equity offerings, and substantial increases in advisory and administrative fees.
Net income was a record $4.2 million, an increase of 99% from the previous year.
Earnings per share of $1.28 represented an increase of 92% from the previous
year as weighted average outstanding common shares and equivalents increased by
3%.

        Total revenues increased by $19.0 million, or 35%, in 1996 to $73.2
million. Revenues increased in each revenue category, led by an $11.6 million,
or 41%, increase in commissions and a $4.3 million, or 69% increase in revenues
from investment banking activities. Increased levels of revenue from advisory
and administrative fees also contributed significantly to the Company's growth
and profitability.

        The increase in commissions revenue was concentrated in equity and
mutual fund securities. Commissions on equity securities transactions accounted
for $7.9 million of the overall $11.6 million increase in commissions. Mutual
funds commissions increased by $2.4 million. Together, these categories
represented 88% of the total increase in commissions revenue. Commissions from
the sale of annuity products increased by $0.7 million, or 42%, and account for
6% of total commissions revenue. An increase in commissions on option
transactions of $0.4 million, or 50%, also contributed to the overall increase.

        Revenues from principal transactions were up only $0.4 million, or 4%,
from the previous fiscal year as higher transaction volumes in equity securities
offset sharply lower volumes, as well as trading losses, in fixed income
securities. Sales credits from over-the-counter equity securities increased by
$2.0 million, or 38%. However, sales credits from fixed income securities
declined markedly, reflecting a lack of investor enthusiasm for these
securities. In particular, sales credits from municipal bond transactions
declined by $0.9 million, or 32%. In addition, municipal bond trading losses of
$0.2 million were incurred in 1996, compared with profits of $0.3 million in
1995.

        The $4.3 million increase in revenues from investment banking activities
reflected a sharp increase in the number of managed equity offerings during
1996. Following a very poor year for equity underwritings in 1995, selling
concessions on underwritten equity securities increased by $3.0 million, or
108%, principally due to an increase in the number of managed equity offerings
to 10 from 2 in the previous year. The number of equity syndicate participations
increased to 197 from 149. The increase in the number of managed equity
offerings also contributed to a $1.8 million increase in underwriting profits
and management fees. Despite the general decline in commissions on fixed income
securities, underwriting activity for municipal bonds increased from the
depressed level of 1995 as selling concessions on managed underwritten municipal
bond offerings increased by $0.4 million. Fee income from corporate finance
services declined by $0.7 million, or 36%, in 1996 as compared to 1995, during
which revenue from corporate finance engagements was very strong.

        Interest and dividend income increased by $0.8 million, or 13%, from
1995 to 1996. Interest income received from clients on margin account borrowings
increased by $0.6 million, or 10%. The average balances of client margin
borrowings increased by approximately 16% from 1995 to 1996, offsetting a
decline in the average margin interest rate of approximately 40 basis points
from 1995 to 1996.

        The increase in revenue from advisory and administrative fees reflects
growth from three distinct sources: the investment advisory services provided by
Scott & Stringfellow Capital Management, Inc., the introduction of a managed
account service, and fees charged for administrative services provided by the
Company.  Investment

                                      13.7

<PAGE>



advisory fees increased by $0.5 million, or 64%, as assets under management grew
from $164 million at the end of 1995 to $311 million at the end of 1996. Managed
account services provided revenue of $0.3 million in its first full year under
the current marketing program. Fees from administrative services, which include
money market services, IRA custodial services, and postage and handling
services, accounted for the remaining $1.1 million increase in revenue from
investment and advisory fees.

        Total expenses increased by $15.8 million, or 31%, reflecting the
variable nature of a large portion of the Company's expenses, principally
compensation. In addition, the average number of personnel employed during 1996
increased by approximately 7% over 1995, contributing to increases in both
compensation and non- compensation expenses. Implementation of a new technology
plan and continued improvements to office space also contributed to increased
expenses.

        Employee compensation and benefits increased by $12.8 million, or 37%,
from 1995 to 1996. Commission and performance-based compensation paid to
investment brokers increased by $7.0 million, or 40%, as a result of the higher
level of sales production. Other performance-based compensation increased by
$2.2 million, or 76%. Administrative and professional salaries increased by $0.9
million, or 11%, as the average number of support personnel employed during 1996
increased by 8% over 1995. The support-to-broker personnel ratio increased to
1.33 at June 28, 1996 from 1.24 at June 30, 1995. Discretionary compensation
expense increased by $2.0 million, or 140%, as a result of the Company's much
higher level of profitability in 1996 as compared to 1995. Higher payroll taxes
and employee benefits also contributed to the increase in compensation expense.

        Communications expense, primarily comprised of telephone and market
quote services, increased by $0.3 million, or 11%, due primarily to higher long
distance telephone charges.

        Occupancy and equipment expense increased by $0.6 million, or 25%, as a
result of higher rent expense on the Company's office spaces related to new
offices, expansions, relocations and renovations and higher depreciation expense
because of equipment placed in service during 1996 pursuant to the Company's
technology plan and the office improvements. Capital expenditures were $1.7
million in 1996, an increase of 142% from the previous year.

        Advertising and sales promotion increased by $0.1 million, or 6%, due to
modest increases in advertising and travel and entertainment expenditures.

        Postage, stationery and supplies increased by $0.4 million, or 22%, due
to the ongoing increase in the volume of client statements and higher general
office expenses, in part related to the increase in employee headcount.

        The increased expenses for brokerage, clearing and exchange fees (30%)
and data processing (28%) were due mainly to the increased volume of securities
transactions in 1996 compared to 1995.

        Interest expense increased by $0.4 million, or 20%, as interest paid on
higher average interest-bearing customer credit balances offset a reduction in
interest expense on lower levels of bank borrowings to finance securities
inventory.

        The $0.6 million increase in other operating expenses was due in part to
an increase in employment agency fees of $0.2 million, charitable contributions
of $0.1 million, and legal settlements of $0.1 million.

EFFECTS OF INFLATION

        The Company's assets consist largely of liquid, financial assets such as
cash, trading and investment securities valued at current market prices, and
receivables from customers, and are not significantly affected by inflation. The
Company's investment in fixed assets such as furniture, equipment, and leasehold
improvements is not material relative to its total assets or equity capital, and
the impact of inflation on replacement cost of such assets should not materially
affect the Company's profitability or financial condition. The general rate of
inflation does, however, affect certain operating expenses such as compensation,
communications, occupancy, postage, stationery,

                                      13.8

<PAGE>



supplies, and other general and administrative expenses. Because of competitive
factors in the securities brokerage industry, increases in these costs resulting
from inflation may not be readily recoverable through increased fees for the
Company's services and may lead to adverse changes in results of operations and
financial condition.

EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS

        In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation." Effective for financial statements for fiscal
years beginning after December 15, 1995, SFAS 123 establishes a fair value-based
method of accounting for stock options and other equity instruments. While
permitting entities to continue to use the intrinsic value method included in
Accounting Principles Board No. 25 ("APB 25") "Accounting for Stock Issued to
Employees", it requires employers to disclose additional information including
disclosure of the pro forma amount of net income and earnings per share as if
the fair value-based method were used to account for stock-based compensation,
if the intrinsic value method of APB 25 is retained. The Company will continue
using the intrinsic value method. As described in Note 11 to the accompanying
consolidated financial statements, the effect on pro forma net income as if the
Company had adopted the fair value-based method was a reduction in net earnings
of $206,134 for 1997 and $16,987 for 1996 and a reduction in primary earnings
per share of $0.07 for 1997 and no change in primary earnings per share for
1996.

        On March 3, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per
Share." Effective for financial statements for fiscal periods ending after
December 15, 1997, SFAS 128 establishes simplified new standards for computing
and presenting earnings per share. The new standard replaces the presentation of
primary and fully diluted earnings per share with a presentation of basic and
diluted earnings per share, respectively. Basic earnings per share is computed
by dividing income available to common stockholders by the weighted-average
number of common shares outstanding. Unlike primary earnings per share, basic
earnings per share does not include any dilutive effect of outstanding stock
options. Diluted earnings per share is computed similarly to fully diluted
earnings per share and does include the effect of dilutive outstanding stock
options. For the Company, the primary effect of this change will be the
exclusion of outstanding dilutive stock options from the computation of basic
earnings per share. This change will begin with the financial statements for the
quarterly period which will end on December 31, 1997. The presentation of
earnings per share for all prior periods will be restated beginning at that
time. If the Company had used the basic earnings per share computation in 1997,
1996, and 1995 it is estimated that basic earnings per share would have been
$1.12, $1.29, and $0.66 and diluted earnings per share would have been $1.09,
$1.28, and $0.66.

         Statement of Financial Accounting Standards No. 130 ("SFAS 130"),
"Reporting Comprehensive Income", establishes standards for the reporting and
the presentation of comprehensive income, which is divided into net income and
other comprehensive income. Other comprehensive income items are to be
classified by their nature and by their related accumulated balances in the
appropriate financial statements of a company. Generally, other comprehensive
income includes transactions not typically recorded as a component of net income
such as foreign currency items, minimum pension liability adjustments, and
unrealized gains and losses on certain debt and equity securities. SFAS 130
requires that such items be presented with equal prominence on a comparative
basis in the appropriate financial statements for fiscal years beginning after
December 15, 1997. Accordingly, the Company intends to comply with SFAS 130
beginning with its 1999 fiscal year. If the Company had reported comprehensive
income for fiscal years 1997, 1996, and 1995, there would not have been a
material difference between net income and comprehensive income.

        Statement of Financial Accounting Standards No. 131 ("SFAS 131"),
"Disclosures about Segments of an Enterprise and Related Information",
establishes standards and disclosure requirements for the way companies report
information about operating segments, including related product information,
both in annual and interim reports issued to stockholders. Operating segments
are components of a company about which separate financial information is
available and which are used in determining resource allocations and performance
results. Information such as segment net earnings, appropriate revenue and
expense items and certain balance sheet items are required to be presented, and
such amounts are required to be reconciled to the company's combined financial

                                      13.9

<PAGE>



information. This standard is effective for financial statements issued for
periods ending after December 31, 1997, including interim periods. The Company
will assess the methodologies and reporting for compliance with SFAS 131.

FORWARD-LOOKING STATEMENTS

        Certain statements in this discussion may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks
including, but not limited to, changes in general economic and business
conditions, interest rate and securities market fluctuations, competition from
within and from outside the investment brokerage industry, new products and
services in the investment brokerage industry, changing trends in customer
profiles and changes in laws and regulations applicable to the Company. Although
the Company believes that its expectations with respect to the forward-looking
statements are based upon reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that the
actual results, performance or achievements of the Company will not differ
materially from any future results, performance or achievements expressed or
implied by such forward-looking statements.



                                      13.10

<PAGE>



             SCOTT & STRINGFELLOW FINANCIAL, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>


                                                                           June 27,              June 28,
                                                                             1997                  1996
<S> <C>

ASSETS
   Cash and cash equivalents                                             $ 6,566,361           $ 4,604,319
   Cash segregated under Federal regulations                                 670,044                   627
   Receivable from brokers, dealers and
    clearing organizations (note 2)                                        2,256,973             4,773,883
   Receivable from customers (note 3)                                     90,404,457            78,691,390
   Trading and investment securities,
    at market value (note 4)                                              13,548,274            12,940,722
   Exchange memberships, at adjusted cost
    (market value $2,761,500 in 1997 and $3,097,000 in 1996)                 838,100               838,100
   Equipment and leasehold improvements, at
    cost (less accumulated depreciation and amortization of
    $6,240,658 in 1997 and $5,822,486 in 1996)                             4,075,051             2,973,023
   Deferred income taxes (note 7)                                          1,087,429               639,429
   Other assets (note 9)                                                  10,406,848             8,787,079

   Total Assets                                                        $ 129,853,537         $ 114,248,572

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
   Drafts payable                                                      $         -           $   4,068,235
   Short term bank loans (note 5)                                          4,950,000             3,600,000
   Payable to brokers, dealers and
    clearing organizations (note 2)                                        4,714,494             2,227,376
   Payable to customers (note 3)                                          77,976,229            60,577,764
   Securities sold, but not yet purchased,
    at market value (note 4)                                                 545,978             2,372,116
   Accounts payable, accrued compensation
    and other liabilities (note 8)                                        12,489,184            11,912,646
   Payable to shareholders for purchase and
    retirement of common stock                                                   -               3,800,000

   Total Liabilities                                                     100,675,885            88,558,137

Stockholders' Equity (notes 6, 8, 10 and 11)
   Common stock, $0.10 par value. Authorized
    10,000,000 shares; issued and outstanding
    3,172,946 in 1997 and 2,022,475 in 1996                                  317,295               202,247
   Additional paid-in capital                                             12,540,734            10,426,723
   Retained earnings                                                      17,384,953            15,537,305
   Subscriptions receivable                                               -1,065,330              -475,840

   Total Stockholders' Equity                                             29,177,652            25,690,435

   Commitments and Contingencies (notes 12 and 13)

   Total Liabilities and Stockholders' Equity                          $ 129,853,537         $ 114,248,572

</TABLE>

See notes to consolidated financial statements.




                                     13.11

<PAGE>




             SCOTT & STRINGFELLOW FINANCIAL, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                              Year Ended

                                                         June 27,              June 28,              June 30,
                                                          1997                   1996                  1995
<S> <C>

REVENUES
   Commissions                                        $ 42,665,846          $ 39,902,423          $ 28,300,683
   Principal transactions                               13,886,838            11,159,434            10,725,020
   Investment banking                                    8,357,622            10,559,244             6,257,511
   Interest and dividends                                7,856,697             6,621,355             5,852,740
   Advisory and administrative
    service fees                                         7,651,131             4,677,522             2,781,944
   Other income                                            489,077               245,327               201,391

   Total Revenues                                       80,907,211            73,165,305            54,119,289

EXPENSES
   Employee compensation and
    benefits (notes 8 and 11)                           51,377,400            47,001,154            34,202,361
   Communications                                        3,755,984             3,305,237             2,985,387
   Occupancy and equipment                               4,485,341             3,057,326             2,443,465
   Advertising and sales promotion                       2,240,461             1,841,300             1,745,289
   Postage, stationery and supplies                      2,287,018             2,128,837             1,741,974
   Brokerage, clearing and
    exchange fees                                        1,627,275             1,312,314             1,010,292
   Data processing                                       1,440,231             1,180,086               920,506
   Interest                                              3,012,398             2,280,110             1,900,923
   Other operating expenses                              5,228,124             4,491,128             3,880,677

   Total Expenses                                       75,454,232            66,597,492            50,830,874

   Income before income taxes                            5,452,979             6,567,813             3,288,415

   Income taxes (note 7)                                 1,995,400             2,392,100             1,187,000

   Net income                                          $ 3,457,579           $ 4,175,713           $ 2,101,415


   Earnings per common share:
     Primary                                                $ 1.10                $ 1.28                $ 0.66
     Fully Diluted                                          $ 1.09                $ 1.28                $ 0.66

</TABLE>


See notes to consolidated financial statements.





                                     13.12

<PAGE>



             SCOTT & STRINGFELLOW FINANCIAL, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
          Years Ended June 27, 1997, June 28, 1996, and June 30, 1995


<TABLE>
<CAPTION>
                                           Common Stock        Additional                   Subscrip-
                                      Number of                   Paid-in       Retained     tions
                                       Shares         Amount      Capital       Earnings   Receivable      Total

<S> <C>

Balance at June 24, 1994              2,102,896    $ 210,290   $ 9,671,859  $ 14,140,038 $     -       $ 24,022,187
Issuance of common stock
   (notes 8, 10 and 11)                  52,407        5,240       513,918        -            -            519,158
Purchase and retirement of
   common stock (note 10)               -47,683       -4,768      -221,004      -338,379       -           -564,151
Cash dividends
   ($0.27 per share)                      -            -             -          -840,763       -           -840,763
Net income                                -            -             -         2,101,415       -          2,101,415

Balance at June 30, 1995              2,107,620      210,762     9,964,773    15,062,311       -         25,237,846
Issuance of common stock
   (notes 8, 10 and 11)                 116,247       11,624     1,473,805          -        -475,840     1,009,589
Purchase and retirement of
   common stock (note 10)              -201,392      -20,139    -1,011,855    -2,787,144         -       -3,819,138
Cash dividends
   ($0.28 per share)                      -            -             -          -913,575         -         -913,575
Net income                                -            -             -         4,175,713         -        4,175,713

Balance at June 28, 1996              2,022,475      202,247    10,426,723    15,537,305     -475,840    25,690,435

Issuance of common stock
   (notes 8, 10 and 11)                 136,952       13,695     2,303,875          -        -799,875     1,517,695
Purchase and retirement of
   common stock (note 10)               -36,239       -3,623      -189,864      -482,684      180,010      -496,161
Subscriptions received                    -            -             -             -           30,375        30,375
Cash dividends
   ($0.33 per share)                      -            -             -        -1,022,271         -       -1,022,271
Stock split effected as a
   stock dividend (note 8)            1,049,758      104,976          -         -104,976         -             -
Net income                                -            -             -         3,457,579         -        3,457,579

Balance at June 27, 1997              3,172,946    $ 317,295  $ 12,540,734  $ 17,384,953  $-1,065,330   $29,177,652

</TABLE>


   See notes to consolidated financial statements.




                                     13.13

<PAGE>



             SCOTT & STRINGFELLOW FINANCIAL, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>


                                                                                    Year Ended
                                                              June 27,              June 28,           June 30,
                                                                1997                  1996               1995
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net Income                                               $ 3,457,579           $ 4,175,713        $ 2,101,415
   Adjustments to reconcile net income to net cash
     provided by operating activities:
   Depreciation and amortization                              1,767,026               920,418            720,494
   (Gains) losses on disposition of equipment                   173,326                   829             -1,712
   Deferred income taxes                                       -448,000              -314,000           -199,000
   Allowance for doubtful accounts                              -35,882               -24,497             87,000
   Changes in assets and liabilities:
     Cash segregated under Federal regulations                 -669,417                 5,176              7,996
     Receivable from brokers, dealers and
      clearing organizations                                  2,516,910            -2,448,268           -861,481
     Receivable from customers                              -11,742,050           -13,698,032         -5,355,587
     Trading securities                                        -594,510               506,367         -4,938,079
     Other assets                                               761,671            -1,963,476           -154,458
     Payable to brokers, dealers
      and clearing organizations                              2,487,118             1,334,382         -1,944,388
     Payable to customers                                    17,398,465             9,795,185         12,597,018
     Securities sold, but not yet purchased                  -1,826,138             1,801,328             11,756
     Accounts payable, accrued compensation
      and other liabilities                                     620,173             4,100,258          1,624,608

Net cash provided by operating activities                    13,866,271             4,191,383          3,695,582

CASH FLOWS FROM FINANCING ACTIVITIES
   Net change in drafts payable                              -4,068,235             2,642,850         -5,437,663
   Net change in short term bank loans                        1,350,000            -3,000,000          4,500,000
   Net change in securities sold under
    agreements to repurchase                                       -                    -                -21,250
   Cash dividends paid                                       -1,003,409              -857,641           -822,766
   Purchase and retirement of common stock                   -4,296,161               -19,138           -564,151
   Issuance of common stock                                   1,548,070             1,009,589            519,158

Net cash used for financing activities                       -6,469,735              -224,340         -1,826,672

CASH FLOWS FROM INVESTING ACTIVITIES
   Proceeds from sales of not readily
    marketable securities                                        77,658               260,077            196,637
   Purchases of not readily marketable securities               -90,700              -340,899           -205,438
   Proceeds from disposition of investment real estate              -                   -                804,638
   Proceeds from disposition of equipment                        30,623                   911             13,474
   Purchases of equipment and leasehold improvements         -3,060,192            -1,719,691           -721,384
   Repayments of  loans receivable                              176,165                81,018            314,678
   Increase in loans receivable                              -2,568,048            -1,405,521           -921,001

Net cash used for investing activities                       -5,434,494            -3,124,105           -518,396

Net increase in cash and cash equivalents                     1,962,042               842,938          1,350,514

Cash and cash equivalents at beginning of year                4,604,319             3,761,381          2,410,867
Cash and cash equivalents at end of year                    $ 6,566,361           $ 4,604,319        $ 3,761,381

</TABLE>


                                     13.14

<PAGE>
<TABLE>

<S> <C>

Cash paid during the year for interest                      $ 3,008,337           $ 2,297,495        $ 1,905,064
Cash paid during the year for income taxes                  $ 2,468,975           $ 2,570,481        $ 1,231,106

</TABLE>


   See notes to consolidated financial statements.




                                     13.15

<PAGE>



             SCOTT & STRINGFELLOW FINANCIAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Scott & Stringfellow Financial, Inc. (the "Parent") is a holding company which
owns all of the outstanding capital stock of Scott & Stringfellow, Inc. ("Scott
& Stringfellow") and other diversified financial services subsidiaries.

Scott & Stringfellow, the Parent's principal subsidiary, is a broker-dealer
registered under the Securities Exchange Act of 1934 and it operates 29 offices
in communities located across Virginia, North Carolina, West Virginia, and South
Carolina. A summary of the significant accounting policies of Scott &
Stringfellow Financial, Inc. and subsidiaries (collectively, the "Company") is
presented below.

A. PRINCIPLES OF CONSOLIDATION.  The Company's consolidated financial statements
include all of the accounts of Scott & Stringfellow Financial, Inc. and its
subsidiaries, all of which are wholly owned.  All material intercompany balances
and transactions have been eliminated in consolidation.

B. USE OF ESTIMATES.  Management makes a number of estimates in preparing these
financial statements. Actual results may differ significantly from these
estimates.

C.   FAIR VALUE OF FINANCIAL INSTRUMENTS.  The value of all financial assets and
liabilities on the consolidated statements of financial condition approximate
their fair values.

D. SECURITIES TRANSACTIONS.  Securities transactions and related revenues and
expenses are recorded on settlement date (normally the third business day
following the transaction date), which is not materially different from a trade
date basis.

Trading and investment securities are valued at market except for not readily
marketable securities, which are valued at estimated fair value as determined by
management. Unrealized gains and losses are included in revenues from principal
transactions in the accompanying consolidated statements of income.

E. INVESTMENT BANKING.  Management fees on investment banking transactions and
selling concessions are recorded on settlement date, which is not materially
different from a trade date basis.  Underwriting fees, net of expenses, are
generally recorded on the date the underwriting syndicate is closed.

F. CONSOLIDATED STATEMENTS OF CASH FLOWS. For purposes of the consolidated
statements of cash flows, the Company considers cash and cash equivalents to be
comprised of cash on hand, cash on deposit with financial institutions, and
money market investments with original maturities of ninety days or less. At
June 27, 1997 and June 28, 1996, cash equivalents included $778,134 and $723,358
of money market investments, respectively.

G. INCOME TAXES.  The Parent and its subsidiaries file consolidated income tax
returns.  Deferred income taxes are recognized for the future tax consequences
attributable to differences between the financial reporting and income tax bases
of assets and liabilities.

H. EQUIPMENT AND LEASEHOLD IMPROVEMENTS.  The Company depreciates furniture and
equipment using straight-line and accelerated methods, based on estimated useful
lives of three to seven years. Computer software is generally amortized on a
straight-line basis over three years. Leasehold improvements are amortized over
the lesser of the estimated useful lives of the improvements or the terms of the
related leases.

I. EARNINGS AND DIVIDENDS PER COMMON SHARE.  Earnings and dividends per common
share are calculated by dividing net income and dividends, respectively, by the
weighted average common shares and common stock equivalents outstanding during
the period. Fully diluted earnings per share is computed using the weighted
average common shares outstanding during the period, including the maximum
dilutive effect of common stock equivalents. Common stock equivalents include
unexercised stock options and are determined using the treasury stock method.

                                     13.16

<PAGE>




The number of shares used in the earnings and dividends per common share
calculations are 3,145,300 for the year ended June 27, 1997, 3,256,095 for the
year ended June 28, 1996, and 3,163,373 for the year ended June 30, 1995.

J. STOCK OPTION PLAN. Prior to June 29, 1996, the Company accounted for its
stock options in accordance with the provisions of Accounting Principles Board
("APB") Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related
interpretations. As such, compensation expense would be recorded on the date of
grant only if the current market price of the underlying stock exceeded the
exercise price. On June 29, 1996, the Company adopted SFAS No. 123, ACCOUNTING
FOR STOCK BASED COMPENSATION, which permits entities to recognize as expense
over the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the provisions of APB No.
25 and provide the pro forma disclosure provisions of SFAS No. 123.


NOTE 2.  RECEIVABLE FROM AND PAYABLE TO BROKERS, DEALERS AND CLEARING
ORGANIZATIONS.

Receivable from and payable to brokers, dealers and clearing organizations
consist of the following:

                                                      June 27,        June 28,
                                                       1997             1996
   Receivable from brokers, dealers, and
   clearing organizations:
     Securities failed to deliver                   $ 264,793        $ 259,607
     Deposits paid for securities borrowed          1,821,989        4,246,600
     Receivable from clearing organizations           170,191          267,676

     Total                                        $ 2,256,973      $ 4,773,883

   Payable to brokers, dealers, and
   clearing organizations:
     Securities failed to receive                   $ 580,238      $ 1,580,908
     Deposits received for securities loaned        3,610,700          356,200
     Payable to clearing organizations                523,556          290,268

     Total                                        $ 4,714,494      $ 2,227,376


NOTE 3.  RECEIVABLE FROM AND PAYABLE TO CUSTOMERS

The balances represent the net amounts receivable from and payable to customers
in connection with normal cash and margin transactions. A substantial portion of
receivables from customers is due from customers residing in the southeastern
United States. The amounts receivable from customers are collateralized by
securities held by the Company, the value of which is not reflected in the
accompanying consolidated financial statements.

Included in receivable from and payable to customers are balances with officers
and directors of the Company as follows:

                                                    June 27,        June 28,
                                                      1997            1996

     Receivable from officers and directors       $ 5,570,647     $ 3,805,115
     Payable to officers and directors            $ 1,009,238     $   210,656



                                     13.17

<PAGE>



NOTE 4.  TRADING AND INVESTMENT SECURITIES

Trading and investment securities consist of the following:

<TABLE>
<CAPTION>

                                                              June 27,           June 28,
                                                                1997               1996

<S> <C>

   Owned:
     Marketable securities, at market value:
       U.S. government and government
         agency obligations                                   $ 420,896          $ 490,628
       State and municipal obligations                        8,694,168          7,496,724
       Corporate bonds                                          806,508          1,380,440
       Corporate stocks                                       2,248,043          3,011,271
       Other                                                    466,385            325,586
       Sub-total                                             12,636,000         12,704,649

     Not readily marketable securities, at
       estimated fair value                                     912,974            236,073

     Total                                                 $ 13,548,274       $ 12,940,722

   Sold, but not yet purchased, at market value:
     U. S. Government and government
        agency obligations                                     $ 28,727               -
     State and municipal obligations                               -              $ 27,140
     Corporate bonds                                              2,685              5,100
     Corporate stocks                                           479,486          2,326,376
     Other                                                       35,080             13,500

     Total                                                    $ 545,978        $ 2,372,116
</TABLE>

NOTE 5.  SHORT-TERM BANK LOANS

The Company maintains lines of credit from established financial institutions
totaling $52.0 million, of which $4,950,000 was outstanding as of June 27, 1997.
Additional bank lines of credit are available on a short-term basis for the
purpose of financing new underwritings. Short-term bank loans are secured by
customer-owned securities purchased on margin or firm-owned securities.
Short-term bank loans are generally made at the bank's broker call rate (7.25%
at June 27, 1997) and are payable on demand. The market value of firm-owned
securities pledged as collateral at June 27, 1997 was $6,153,467. Customer
securities were not pledged as collateral for short-term bank loans at June 27,
1997.


NOTE 6.  NET CAPITAL REQUIREMENTS

Scott & Stringfellow is subject to the net capital rules of the Securities and
Exchange Commission and the New York Stock Exchange, Inc. and elects to compute
its net capital requirements in accordance with the alternative method.

Under this method, Scott & Stringfellow is required to maintain minimum net
capital, as defined, equal to two percent of aggregate debit balances arising
from customer transactions, as defined. The net capital rules also provide that
equity capital may not be withdrawn or cash dividends paid if resulting net
capital would be less than five percent of aggregate debits. At June 27, 1997,
Scott & Stringfellow's net capital of $14,863,886 was 16% of aggregate debit
balances and was $12,984,958 in excess of the minimum net capital required.



                                     13.18

<PAGE>


NOTE 7.  INCOME TAXES

The provision for income tax expense (benefit) consists of the following:

                                                Year Ended
                               June 27,           June 28,          June 30,
                                1997               1996              1995
   Current:
     Federal                 $ 2,080,000        $ 2,301,100       $ 1,208,000
     State                       363,400            405,000           178,000
       Total current           2,443,400          2,706,100         1,386,000

   Deferred:
     Federal                    -374,000           -261,000          -166,000
     State                       -74,000            -53,000           -33,000
       Total deferred           -448,000           -314,000          -199,000

   Total                     $ 1,995,400        $ 2,392,100       $ 1,187,000

Income tax expense differs from the amount computed by applying the 34%
statutory Federal income tax rate to income before income taxes for the
following reasons:

<TABLE>
<CAPTION>
                                                            Year Ended
                                              June 27,        June 28,        June 30,
                                               1997            1996            1995

<S> <C>

Federal tax, computed at
 statutory rate                             $ 1,854,013     $ 2,233,056     $ 1,116,000
State income taxes, net of
 Federal tax benefit                            190,321         232,643          95,700
Tax-exempt interest and dividends,
 net of non-deductible carrying
 charges                                        -37,142         -94,105         -92,100
Meals and entertainment                          79,155          46,488          51,500
Increase in cash surrender value of
 life insurance policies                       -112,776         -31,145            -
Other, net                                       21,829           5,163          15,900
   Income tax expense                       $ 1,995,400     $ 2,392,100     $ 1,187,000

</TABLE>

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below:


<TABLE>
<CAPTION>

                                                              June 27,           June 28,
                                                                1997               1996
<S> <C>

Deferred tax assets:
   Deferred compensation                                    $   953,712        $   501,008
   Accrued expenses for financial reporting purposes            284,165            328,364
   Loans receivable, principally due to allowance for
     doubtful accounts                                            1,283             26,256
     Total gross deferred tax assets                          1,239,160            855,628
     Less: valuation allowance                                    -                  -
     Deferred tax assets                                      1,239,160            855,628

Deferred tax liabilities:
   Exchange seats, principally due to differences in
     assigned values and tax bases                             -142,084           -191,430
   Other, principally due to differences in assigned
     values and tax bases of investments                         -9,647            -24,769
     Total gross deferred tax liabilities                      -151,731           -216,199

     Net deferred tax asset                                 $ 1,087,429        $   639,429

</TABLE>

                                     13.19

<PAGE>



The Company believes that a valuation allowance with respect to the realization
of the total gross deferred tax assets is not necessary. Based on the Company's
historical earnings, future expectations of taxable income and the reversing of
gross deferred tax liabilities and potential net operating loss carrybacks,
management believes it is more likely than not that the Company will realize the
gross deferred tax assets. However, there can be no assurances that the Company
will generate taxable income in any future period or that the reversal of timing
differences attributable to gross deferred tax liabilities will occur during the
future tax periods as currently expected.


NOTE 8.  EMPLOYEE BENEFIT PLANS

The Company maintains an employee profit sharing plan which incorporates a
401(k) feature and covers substantially all employees of the Company. Employees
may contribute up to fifteen percent of their individual earnings to the plan
each year, subject to an annual limitation established by the Internal Revenue
Code. In addition to employee contributions, matching contributions and profit
sharing contributions may be made at the discretion of the Company. Under the
plan, matching contributions of $351,262, $307,850, and $280,143 were made in
1997, 1996, and 1995, respectively. Additional contributions, determined on the
basis of calendar year profitability, totaled $1,478,754 in 1997, $1,286,750 in
1996, and $794,095 in 1995.

The Company also maintains a non-qualified and unfunded deferred compensation
plan for the benefit of selected highly compensated employees. This plan allows
the participants to defer compensation and to receive discretionary profit
sharing contributions beyond the Internal Revenue Code limitations governing the
Company's profit sharing plan. Company expense pursuant to this plan amounted to
$807,101 in 1997, $413,289 in 1996, and $120,065 in 1995. At June 27, 1997 and
June 28, 1996, the Company's obligations under this plan amounted to $2,380,921
and $1,301,320, respectively, which are included in other liabilities in the
accompanying consolidated statements of financial condition.

The Company also maintains an employee stock purchase plan, which allows
substantially all employees to acquire shares of the Company's common stock
through a payroll deduction program. Shares are issued to the plan trust
quarterly at a price equal to 85% of the fair market value as defined in the
plan. During 1997, a total of 60,340 shares of common stock were issued to this
plan at an average price of $12.61 per share. During 1996, a total of 101,512
shares of common stock were issued to this plan at an average price of $8.51 per
share. During 1995, 64,599 shares were issued at an average price of $6.89 per
share. The preceding description of shares issued and prices has been adjusted
for the 3 for 2 stock split effected in the form of a 50% stock dividend which
was distributed to shareholders on May 6, 1997.


NOTE 9.  TRANSACTIONS WITH RELATED PARTIES

Loans to directors and executive officers of the Company, exclusive of amounts
included in receivable from customers as discussed in note 3, amounted to
$443,662 and $460,522 at June 27, 1997 and June 28, 1996, respectively. The
loans are included in other assets in the accompanying consolidated statements
of financial condition. In addition, promissory notes in the amount of
$1,065,330 and $475,840 at June 27, 1997 and June 28, 1996, respectively, were
receivable from directors and officers of the Company pursuant to terms of the
Management Stock Purchase Loan Plan. These amounts are included in subscriptions
receivable in the stockholders' equity section of the accompanying consolidated
statements of financial condition. (Also see "Common Stock Transactions.")


NOTE 10.  COMMON STOCK TRANSACTIONS

During 1997, 1996, and 1995, the Company repurchased and retired 36,239,
201,392, and 47,683 shares, respectively, of its common stock. Of the shares
repurchased, 25,308 were repurchased from directors at a cost of $488,125 in
1997, 29,758 were repurchased from directors at a cost of $565,402 in 1996, and
1,968 were repurchased from a director at a cost of $21,648 in 1995.

During 1997 and 1996, the Company issued 39,500 and 33,440 shares, respectively,
of its common stock to management employees, including directors and executive
officers, pursuant to the terms of its Management Stock

                                     13.20

<PAGE>



Purchase Loan plan in exchange for promissory notes with original face amounts
totaling $799,875 in 1997 and $475,840 in 1996. The purpose of this plan is to
issue stock to selected management employees at fair market value, as defined in
the plan, in exchange for promissory notes. The notes are payable upon demand
and bear interest at the short-term applicable federal rate, which ranged from
5.63% to 6.23% during 1997. The notes are fully recourse and are secured by a
collateral pledge of the shares.


NOTE 11.  STOCK OPTION PLAN

In 1987, the Company adopted a stock option plan (the "Plan") pursuant to which
options to purchase up to 720,000 shares of common stock may be granted to
eligible employees. The Plan expired in October 1996. However, options
previously granted were outstanding at June 27, 1997. Stock options were granted
with an exercise price equal to the stock's fair market value at the date of
grant. Options may, but need not, qualify as "incentive stock options" under
Section 422 of the Internal Revenue Code. The options become exercisable over
periods ranging from 2 to 6 years from the date of grant and expire 10 years
from the date of grant.

The following table summarizes the Company's stock options as of June 27, 1997,
June 28, 1996, and June 30, 1995, and changes during the years then ended. All
amounts have been adjusted for the 3 for 2 stock split effected in the form of a
50% stock dividend which was distributed to shareholders on May 6, 1997.

                                                               Weighted
                                                                Average
                                                               Exercise
                                             Shares             Price

   Outstanding June 24, 1994                337,788              $ 7.14
   Granted                                   64,500                8.00
   Canceled                                 -18,371                7.57
   Exercised                                -13,921                4.97

   Outstanding June 30, 1995                369,996                7.35
   Granted                                   82,275                9.61
   Canceled                                  -1,332                8.18
   Exercised                                -22,698                6.06

   Outstanding June 28, 1996                428,241                7.85
   Granted                                  206,250               11.74
   Canceled                                 -13,314                9.81
   Exercised                                -28,986                6.64

   Outstanding June 27, 1997                592,191                9.22


The following table summarizes information about stock options outstanding at
June 27, 1997:

<TABLE>
<CAPTION>


                                        Options Outstanding                            Options Exercisable
                                               Weighted        Weighted                               Weighted
              Range of                         Average          Average                                Average
              Exercise          Number        Remaining        Exercise              Number           Exercise
              Prices         Outstanding  Contractual Life      Price             Exercisable          Price

<S> <C>

         $4.03 - $6.00            22,878      2.4 years          $ 4.37                22,878           $ 4.37
          6.00 - 9.00            287,538      6.2                  7.75               135,018             7.65
          9.00 - 12.00           281,775      9.3                 11.12                 -                 -

</TABLE>


                                     13.21

<PAGE>



The Company applies APB Opinion No. 25 and related interpretations in accounting
for its stock options. Accordingly, no compensation cost has been recognized for
stock options in the financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No. 123, the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below:


                                                1997                1996

Net Income            As Reported           $ 3,457,579         $ 4,175,713

                      Pro Forma               3,251,445           4,158,726

Primary earnings
 per share            As Reported                 $1.10               $1.28

                      Pro Forma                    1.03                1.28

Fully diluted
 earnings per share   As Reported                 $1.09               $1.28

                      Pro Forma                    1.03                1.27

Pro forma net income reflects only options granted in 1997 and 1996. Therefore,
the full impact of calculating compensation cost for stock options under SFAS
No. 123 is not reflected in the pro forma net income amounts presented above
because compensation cost is reflected over the options' vesting period of 6
years and compensation cost for options granted prior to August 1, 1995 is not
considered.

The per share weighted-average fair value of stock options granted during 1997
and 1996 was $5.56 and $3.80 on the date of grant using the binomial option
pricing model with the following weighted-average assumptions: 1997 expected
dividend yield 2.72%, risk-free interest rate of 6.56%, and an expected life of
7.3 years; 1996 - expected dividend yield of 2.88%, risk-free interest rate of
6.46%, expected volatility of 32.2%, and an expected life of 7.3 years.


NOTE 12.  COMMITMENTS AND CONTINGENCIES

The Company leases office space and certain data processing and communications
equipment under operating leases expiring at various dates to 2005. Minimum
future rental payments required under such leases that have initial or remaining
non-cancelable lease terms in excess of one year as of June 27, 1997 are as
follows:


              Year                            Minimum Rental Commitments
                             Office Space       Equipment             Total

              1998            $ 2,477,538       $ 483,270       $ 2,960,808
              1999              2,415,233         219,155         2,634,388
              2000              2,128,824         114,417         2,243,241
              2001              1,994,654          16,953         2,011,607
              2002              1,657,258          4,482          1,661,740
              Thereafter        3,772,655           -             3,772,655

              Total          $ 14,446,162       $ 838,277      $ 15,284,439

Some of the Company's leases contain escalation clauses and renewal options.
Total rent expense under operating leases approximated $2,660,000 in 1997,
$2,341,000 in 1996, and $1,885,000 in 1995.


                                     13.22

<PAGE>



As of June 27, 1997, the Company had a $1.5 million irrevocable letter of credit
available for the purpose of collateralizing certain customer option positions.
No amounts were outstanding with respect to this letter of credit at June 27,
1997 or June 28, 1996.

The Company has been named in legal actions relating to its securities business.
In the opinion of management, based upon consultation with legal counsel
handling such matters, the resolution of open litigation is not expected to have
a material adverse effect on the financial position or results of operations of
the Company.


NOTE 13.  FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Company records securities transactions on a settlement date basis,
generally the third business day following the transaction. The risk of loss on
unsettled transactions is identical to settled transactions and relates to the
customers' or brokers' inability to meet the terms and conditions of their
contracts. Credit risk is reduced by the industry policy of obtaining and
maintaining adequate collateral until the commitment is completed.

The Company executes and clears customers transactions involving the sale of
securities not yet purchased as well as the writing or sale of option contracts.
Substantially all of these transactions, with the exception of the writing of
fully covered option contracts, are effected on a margin basis subject to
individual exchange regulations. These transactions may expose the Company to
significant off-balance-sheet risk in the event margin requirements are not
sufficient to fully cover losses that customers may incur. In the event the
customer fails to satisfy its obligations, the Company may be required to
purchase or sell financial instruments at prevailing market prices in order to
fulfill the customer's obligations.

The Company's customer financing and securities settlement activities require
the Company to pledge customer securities as collateral in support of various
secured financing sources. In addition, the Company pledges customer securities
as collateral to satisfy margin deposits of various exchanges. Much of this
collateral is held by independent third parties, and if the third party is
unable to meet is contractual obligation to return customer securities pledged
as collateral, the Company may be exposed to the risk of acquiring these
securities at prevailing market prices in order to satisfy its customer
obligations.


                                     13.23

<PAGE>



REPORT ON MANAGEMENT RESPONSIBILITY FOR FINANCIAL REPORTING


   The accompanying Consolidated Financial Statements and related financial
information contained in this annual report have been prepared by and are the
responsibility of management. These statements have been prepared in accordance
with generally accepted accounting principles and necessarily include certain
amounts that are based upon the judgement and estimates of management.

   Management maintains a system of internal accounting controls and internal
auditing procedures designed to provide reasonable assurance, at a reasonable
cost, of the accuracy and reliability of the Company's financial records and the
protection of its assets. The financial statements contained in this annual
report have been audited by KPMG Peat Marwick LLP, independent auditors, whose
report follows. This audit includes a review of the Company's internal
accounting controls and internal auditing procedures to the extent required by
generally accepted auditing standards.

   The Audit Committee of the Board of Directors, which includes three outside
directors, meets periodically with the internal auditor, the independent
auditors, and management to discuss auditing, internal accounting, and financial
reporting matters and to insure that each is properly discharging its
responsibilities. Both the independent and internal auditors have access to the
Audit Committee without the presence of management.

   Management believes that during fiscal 1997 its system of internal accounting
controls and internal auditing procedures were adequate to accomplish their
intended objectives of assuring the accuracy and reliability of the Company's
financial information and the protection and control of its assets.

/s/ Mike D. Johnston
--------------------
Mike D. Johnston
Vice President and Chief Financial Officer

/s/ C. Lewis Loth
-----------------
C. Lewis Loth
Vice President and Treasurer








                                     13.24

<PAGE>





                         REPORT OF INDEPENDENT AUDITORS


The Board of Directors
Scott & Stringfellow Financial, Inc.

   We have audited the accompanying consolidated statements of financial
condition of Scott & Stringfellow Financial, Inc. and subsidiaries as of June
27, 1997 and June 28, 1996 and the related consolidated statements of income,
changes in stockholders' equity, and cash flows for the years ended June 27,
1997, June 28, 1996, and June 30, 1995. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

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

   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Scott &
Stringfellow Financial, Inc. and subsidiaries as of June 27, 1997 and June 28,
1996 and the results of their operations and their cash flows for the years
ended June 27, 1997, June 28, 1996, and June 30, 1995 in conformity with
generally accepted accounting principles.



                                                     /s/ KPMG Peat Marwick LLP
                                                     -------------------------


Richmond, Virginia
August 5, 1997









                                     13.25

<PAGE>




Exhibit 13


QUARTERLY RESULTS OF OPERATIONS - Unaudited
(In thousands except per share amounts)

<TABLE>
<CAPTION>


                                                                Quarter Ended
1997                                 June 27            March 27         December 31       September 29

<S> <C>

Revenues                            $ 22,169            $ 20,826            $ 19,968           $ 17,944
Expenses                              20,471              19,862              18,521             16,600
Income before income taxes             1,698                 964               1,447              1,344
Income taxes                             625                 351                 531                488
Net income                          $  1,073            $    613            $    916           $    856
Earnings per common share           $   0.33            $   0.19            $   0.30           $   0.28


                                                                Quarter Ended
1996                                 June 28            March 29         December 31       September 29

Revenues                            $ 20,473            $ 17,447            $ 17,591           $ 17,654
Expenses                              18,670              16,307              15,872             15,748
Income before income taxes             1,803               1,140               1,719              1,906
Income taxes                             654                 412                 640                685
Net income                          $  1,149            $    728            $  1,079           $  1,221
Earnings per common share           $   0.34            $   0.22            $   0.34           $   0.38

</TABLE>







                                     13.30

<PAGE>



Common Stock Performance and Dividends

     Scott & Stringfellow Financial, Inc. Common Stock is traded on the NASDAQ
National Market System under the symbol "SCOT." As of June 27, 1997, there were
332 holders of record of the Company's Common Stock. The table below provides a
comparative summary of the prices for the Company's Common Stock and cash
dividends declared for the years ended June 27, 1997 and June 28, 1996.


<TABLE>
<CAPTION>

                                            Common Stock Prices (1)              Dividends Per Share (1)
                                        1997                 1996                  1997          1996
                                   High       Low        High       Low

<S> <C>

First Quarter                    $ 12.33    $ 11.33     $ 9.67     $ 8.17          $ .08        $ .07
Second Quarter                     12.83      11.67       9.83       9.00            .08          .07
Third Quarter                      17.33      12.83       9.83       9.00            .08          .07
Fourth Quarter                     20.00      13.50      12.33       9.17            .09          .08

</TABLE>


(1) All common stock prices and dividend per share amounts have been adjusted to
reflect a 3:2 stock split effected in the form of a 50% stock dividend
distributed on May 6, 1997, to shareholders of record on April 18, 1997.





                                     13.40

<PAGE>