SEMELE GROUP INC, 10-Q, 1998-11-16

SEMELE GROUP INC
10-Q, 1998-11-16
REAL ESTATE INVESTMENT TRUSTS

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-QSB

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .

Commission File Number 0-16886

Semele Group Inc.
(Name of Small Business Issuer in its charter)

Delaware 36-3465422
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

One Canterbury Green, Stamford, Connecticut 06901
(Address of principal executive offices) (Zip Code)

Issuer's telephone number, including area code : (203) 363-0849

Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X . NO .

Shares of common stock outstanding as of November 13, 1998: 1,119,929

Transitional Small Business Disclosure Format: YES . NO X .

<PAGE>

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

SEMELE GROUP INC.
Consolidated Balance Sheets

September 30, 1998 and December 31, 1997
(Unaudited)

<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ----------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents.......................................... $ 6,329,310 $ 7,884,593
Interest Receivable on Loans....................................... -- 3,565
Loans Receivable................................................... 225,000 475,000
Rents Receivable................................................... 43,894 --
Accounts Receivable - Affiliate.................................... 1,102,845 --
Interest Receivable - Affiliate.................................... 46,374 --
Note Receivable - Affiliate........................................ 2,725,695 --
Equipment on operating lease, net of accumulated depreciation
of $13,518 at September 30, 1998................................. 361,482 --
Investment in Partnerships and Trusts.............................. 7,747,965 --
Foreclosed Real Estate Held for Sale, Net.......................... 9,961,991 9,961,991
Other Assets....................................................... 159,578 --
---------------- ----------------
Total Assets....................................................... $ 28,704,134 $ 18,325,149
---------------- ----------------
---------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Notes Payable - Affiliates......................................... $ 14,869,500 $ 4,419,500
Notes Payable...................................................... 1,124,349 --
Accrued Interest - Affiliate....................................... 60,958 --
Accrued Interest................................................... 21,201 --
Accrued Expenses - Affiliates...................................... 108,888 49,166
Accounts Payable and Accrued Expenses.............................. 771,483 404,358
Deferred Rental Income............................................. 43,218 --
Minority Interest.................................................. 174,589 --
---------------- ----------------
Total Liabilities.................................................. 17,174,186 4,873,024
---------------- ----------------
Stockholders' Equity
Shares of Common Stock, $0.01 Par Value,
5,000,000 Authorized, 2,080,185 and 2,125,327 Shares Issued at
September 30, 1998 and December 31, 1997, respectively.......... 170,663,365 171,019,463
Accumulated Deficit................................................ (142,924,442) (141,713,131)
Deferred Compensation, 41,952 and 15,483 Shares at
September 30, 1998 and December 31, 1997, respectively........... (713,184) (263,204)
Treasury Stock at Cost, 960,256 and 917,502 Shares at
September 30, 1998 and December 31, 1997, respectively........... (15,495,791) (15,591,003)
---------------- ----------------
Total Stockholders' Equity........................................ 11,529,948 13,452,125
---------------- ----------------
Total Liabilities and Stockholders' Equity........................ $ 28,704,134 $ 18,325,149
---------------- ----------------
---------------- ----------------
Book Value Per Share of Common Stock
(1,119,929 and 1,207,825 Shares Outstanding at
September 30, 1998 and December 31, 1997, respectively.......... $ 10.30 $ 11.14
---------------- ----------------
---------------- ----------------

</TABLE>

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

2
<PAGE>

SEMELE GROUP INC.
Consolidated Statements of Operations

For the Nine Months Ended September 30, 1998 and 1997
(Unaudited)

1998 1997
---------------- ----------------
<S> <C> <C>
INCOME
Income From Lending and Investing Activities:
Interest on Loans Receivable......................................... $ 24,705 $ 29,694
Income on Investments ............................................... 290,880 90,686
---------------- ---------------
Total Income From Lending and Investing Activities..................... 315,585 120,380
---------------- ---------------
Other Income:
Lease Revenue........................................................ 28,590 --
Interest on Note Receivable - Affiliate.............................. 25,763 --
Gain on Sale of Equipment ........................................... 3,400 --
---------------- ---------------
Total Other Income..................................................... 57,753 --
---------------- ---------------
Total Income .......................................................... 373,338 120,380
---------------- ---------------
EXPENSES
Expenses From Property Operating Activities:
Net Loss From Operations of Foreclosed Real Estate Held for Sale..... 605,094 451,418
Net Loss From Disposition of Foreclosed Real Estate Held for Sale.... -- 32,612
Net Income From Operations of Real Estate Venture ................... -- (412,236)
---------------- ---------------
Total Expenses From Property Operating Activities...................... 605,094 71,794
---------------- ---------------
Other Expenses:
Stockholder Expenses ................................................ 73,960 112,778
Directors' Fees, Expenses, and Insurance ............................ 173,828 167,545
Other Professional Fees ............................................. 84,800 289,744
General and Administrative .......................................... 229,845 665,121
Administrative Reimbursement - Affiliate ............................ 113,201 29,700
Interest Expense - Affiliates ....................................... 391,512 10,178
Depreciation Expense ................................................ 13,518 --
Interest Expense .................................................... 7,067 --
Recovery of Losses on Loans, Notes and Interest Receivable........... (108,176) --
---------------- ---------------
Total Other Expenses .................................................. 979,555 1,275,066
---------------- ---------------
Total Expenses ........................................................ 1,584,649 1,346,860
---------------- ---------------
Net Loss .............................................................. $ (1,211,311) $ (1,226,480)
---------------- ---------------
---------------- ---------------
Net Loss Per Share of Common Stock Basic
(Based on the Weighted Average Number of Shares
Outstanding of 1,202,287 and 1,105,729, respectively)................ $ (1.01) $ (1.11)
---------------- ---------------
---------------- ---------------

</TABLE>

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

3
<PAGE>

SEMELE GROUP INC.
Consolidated Statements of Operations

For the Three Months Ended September 30, 1998 and 1997
(Unaudited)

1998 1997
---------------- ---------------
<S> <C> <C>
INCOME
Income From Lending and Investing Activities:
Interest on Loans Receivable......................................... $ -- $ 5,000
Income on Investments ............................................... 94,176 71,275
---------------- ---------------
Total Income From Lending and Investing Activities..................... 94,176 76,275
---------------- ---------------
Other Income:
Lease Revenue........................................................ 28,590 --
Interest on Note Receivable - Affiliate.............................. 25,763 --
Gain on Sale of Equipment ........................................... 3,400 --
---------------- ---------------
Total Other Income..................................................... 57,753 --
---------------- ---------------
Total Income .......................................................... 151,929 76,275
---------------- ---------------
EXPENSES
Expenses From Property Operating Activities:
Net Loss From Operations of Foreclosed Real Estate Held for Sale..... 247,201 118,538
Net Income From Operations of Real Estate Venture ................... -- (367,203)
---------------- ---------------
Total Expenses From Property Operating Activities...................... 247,201 (248,665)
---------------- ---------------
Other Expenses:
Stockholder Expenses ................................................ 39,036 73,658
Directors' Fees, Expenses, and Insurance ............................ 70,459 56,451
Other Professional Fees ............................................. 23,108 38,964
General and Administrative .......................................... 89,955 202,363
Administrative Reimbursement - Affiliate ............................ 37,770 29,700
Interest Expense - Affiliates ....................................... 169,309 10,178
Depreciation Expense ................................................ 13,518 --
Interest Expense .................................................... 7,067 --
---------------- ---------------
Total Other Expenses .................................................. 450,222 411,314
---------------- ---------------
Total Expenses ........................................................ 697,423 162,649
---------------- ---------------
Net Loss .............................................................. $ (545,494) $ (86,374)
---------------- ---------------
---------------- ---------------
Net Loss Per Share of Common Stock Basic
(Based on the Weighted Average Number of Shares
Outstanding of 1,176,346 and 1,192,342, respectively)................ $ (0.46) $ (0.07)
---------------- ---------------
---------------- ---------------

</TABLE>

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

4
<PAGE>

SEMELE GROUP INC.
Consolidated Statement of Stockholders' Equity

For the Nine Months Ended September 30, 1998
(Unaudited)

<TABLE>
<CAPTION>
Common Stock
--------------------------- Accumulated Deferred Treasury
Shares Amount Deficit Compensation Stock Total
------------- ----------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stockholder's Equity,
December 31, 1997 ........................ 2,125,327 $ 171,019,463 $(141,713,131) $ (263,204) $ (15,591,003) $ 13,452,125
Deferred Compensation
26,469 Shares of Stock .................. -- -- -- (449,980) 449,980 --

1-for-300 reverse stock split and
30-for-1 forward stock split
(including $356,098 paid for fractional
shares) .................................. (45,142) (356,098) -- -- -- (356,098)
Acquisition of 69,223 Shares of Treasury
Stock, at Cost ........................... -- -- -- -- (354,768) (354,768)
Net Loss .................................. -- -- (1,211,311) -- -- (1,211,311)
------------- ----------- ------------- ----------- ------------- -------------
Stockholder's Equity,
September 30, 1998 ...................... 2,080,185 $ 170,663,365 $(142,924,442) $ (713,184) $ (15,495,791) $ 11,529,948
------------- ------------- ------------- ----------- ------------- ------------
------------- ------------- ------------- ----------- ------------- ------------

</TABLE>

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

5
<PAGE>

SEMELE GROUP INC.
Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 1998 and 1997
(Unaudited)

1998 1997
---------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss...................................................................... $ (1,211,311) $ (1,226,480)
Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities:
Net Loss From Disposition of Foreclosed Real Estate Held For Sale........... -- 32,612
Net Income From Operations of Real Estate Venture........................... -- (412,236)
Depreciation Expense........................................................ 13,518 --
Minority Interest........................................................... (373) --
Net Change In:
Interest Receivable on Loans................................................ 3,565 (14,694)
Rents Receivable............................................................ 1,027,638 --
Accounts Receivable - Affiliate............................................. (1,061,605) --
Interest Receivable - Affiliate............................................. (25,763) --
Investment in Partnerships and Trusts....................................... 8,607 --
Other Assets................................................................ (159,578) (17,922)
Accrued Interest - Affiliate................................................ 60,958 --
Accrued Interest............................................................ 7,067 --
Accrued Expenses - Affiliates............................................... (11,396) --
Accounts Payable and Accrued Expenses....................................... 322,105 441,809
Deferred Rental Income...................................................... 43,218 --
--------------- ---------------
Net Cash Used In Operating Activities......................................... (983,350) (1,196,911)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Ariston ...................................................... (111,067) --
Collection of Loans Receivable.............................................. 250,000 --
Distributions from Investment in Real Estate Venture........................ -- 4,713,101
Proceeds from Sale of Foreclosed Real Estate Held For Sale.................. -- 617,388
--------------- ---------------
Net Cash Provided By Investing Activities..................................... 138,933 5,330,489
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment for Fractional Shares as a Result of Reverse Stock Split............ (356,098) --
Acquisition of Treasury Stock............................................... (354,768) --
Issuance of Stock, Net...................................................... -- 2,655,500
--------------- ---------------
Net Cash Provided By (Used In) Financing Activities........................... (710,866) 2,655,500
--------------- ---------------
Net Increase (Decrease) in Cash and Cash Equivalents.......................... (1,555,283) 6,789,078
Cash and Cash Equivalents at Beginning of Period.............................. 7,884,593 145,335
--------------- ---------------
Cash and Cash Equivalents at End of Period.................................... $ 6,329,310 $ 6,934,413
--------------- ---------------
--------------- ---------------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest.................................... $ 330,554 $ --
--------------- ---------------
--------------- ---------------

</TABLE>

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

6
<PAGE>

SEMELE GROUP INC.

Notes To Consolidated Financial Statements
September 30, 1998

(Unaudited)

Readers of this quarterly report should refer to the audited consolidated
financial statements of Semele Group Inc. (the "Company"), formerly known as
Banyan Strategic Land Fund II, for the year ended December 31, 1997, which are
included in the Company's 1997 Annual Report on Form 10-KSB, as certain footnote
disclosures which would substantially duplicate those contained in such audited
statements have been omitted from this report.

In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at September 30, 1998 and December 31, 1997 and results of operations
for the three and nine month periods ended September 30, 1998 and 1997 have been
made and are reflected.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries and consolidated ventures which
hold title to the Company's property. In August 1998, the Company acquired
Ariston Corporation (see Transactions with Affiliates and Related Parties - Note
6 herein). In April 1996, the Company acquired 100% of the outstanding shares of
BMC Banden Corp. The net assets of BMC Banden Corp. had no value, therefore, the
consolidated financial statements of the Company were not affected by this
purchase. All intercompany balances and transactions have been eliminated in
consolidation. The Company's 47% interest in the H Street Assemblage was
accounted for under the equity method and was reported as an investment in real
estate venture (see Note 8 for discussion of sale).

EARNINGS PER SHARE

In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share", which was required to be adopted on December 31,
1997. This statement established standards for computing and presenting earnings
per share. The statement replaced primary earnings per share with basic earnings
per share. Basic earnings per share excludes all dilution and is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding for the period. Diluted earnings per share is
computed similarly to fully diluted earnings per share. Diluted earnings per
share reflects the potential dilution that could occur if stock options and
stock award grants were exercised. All prior year amounts have been restated to
conform to SFAS No. 128.

CASH EQUIVALENTS

At September 30, 1998, the Company had $3,559,470 invested in federal
agency discount notes and reverse repurchase agreements secured by U.S. Treasury
Bills or interests in U.S. Government securities.

RECLASSIFICATION

Certain 1997 balances have been reclassified to conform to the 1998
presentation.

2. EQUIPMENT ON OPERATING LEASE

The Company acquired equipment on operating leases as a result of the
Ariston acquisition which is depreciated using the straight-line method over the
equipment's remaining estimated useful life. Rental income and interest expense
on associated indebtedness are recognized as earned and incurred, respectively.
At September 30, 1998, the Company's equipment portfolio consisted of equipment
with a cost and accumulated depreciation of $375,000 and $13,518, respectively.

7
<PAGE>

SEMELE GROUP INC.

Notes To Consolidated Financial Statements

(Continued)

At September 30, 1998, future minimum rents due in connection with equipment on
operating leases was as follows:

<TABLE>

<S> <C>
For the year ending September 30, 1999 $ 184,101
2000 137,346
-----------
Total $ 321,447
-----------
-----------

</TABLE>

3. NOTES PAYABLE

Through its acquisition of Ariston, the Company acquired a limited
partnership interest in a real estate investment program and assumed $872,406 of
related debt. The note bears a fluctuating interest rate based on Prime plus a
margin and requires quarterly payments of principal and interest. The note
matures on January 15, 2003 and is secured by the associated limited partnership
interest. Repayment of the debt is partially guaranteed by certain individuals,
including Messrs. Engle and Coyne.

Additionally, the Company assumed $251,943 of non-recourse debt, consisting
of installment notes that are collateralized by certain equipment held on
operating leases. The installment notes will be repaid fully by non-cancelable
rents generated by the associated lease agreements. At September 30, 1998, the
interest rate on these obligations was 7.1%.

The annual maturities of the installment notes payable are as follows:

<TABLE>

<S> <C>
For the year ending September 30, 1999 $ 211,393
2000 263,797
2001 180,094
2002 197,339
2003 271,726
-------------
Total $ 1,124,349
-------------
-------------

</TABLE>

4. DISPOSITION OF FORECLOSED REAL ESTATE HELD FOR SALE

The Lindfield Tract D property is an 8.5-acre parcel of land zoned for
commercial use within a multi-use planned unit development, located in
Kissimmee, Florida. On June 23, 1997, the Company sold the Lindfield Tract D
property to an unaffiliated third party for a purchase price of $675,000. The
Company's carrying value for this property at the time of the sale was $650,000.
Cash proceeds received, net of transaction costs, were $617,388, resulting in a
net loss on disposition of $32,612 for financial reporting purposes.

5. FORECLOSED REAL ESTATE HELD FOR SALE

Rancho Malibu is a 274-acre parcel of undeveloped land north of Malibu,
California. On July 1, 1992, a joint venture (the "Venture") between the Company
and Legend Properties, Inc. (f/k/a Banyan Mortgage Investment Fund) ("Legend")
acquired title to the property pursuant to a deed in lieu of foreclosure
agreement. The Company owns a 98.6% general partner interest in the Venture
while Legend holds the remaining 1.4% interest as a limited partner. The
Venture's results are consolidated in the accompanying financial statements.

The Venture has engaged in zoning and entitlement activities that have been
opposed by the City of Malibu and various citizen groups since the acquisition
of the property. The city initiated two separate legal actions intended to
preclude the issuance of a Coastal Development Permit, both of which were
ultimately resolved in favor of the Venture.

Concurrent with the aforementioned litigation, the Venture pursued
entitlements before the Board of Supervisors for the County of Los Angeles. In
September 1995, the Los Angeles County Regional Planning Commission, by a 3 to 2
vote,

8
<PAGE>

SEMELE GROUP INC.

Notes To Consolidated Financial Statements

(Continued)

approved a revised plan to develop a fifty-one unit housing community on the
Rancho Malibu property. The Los Angeles County Regional Planning Commission's
approval was appealed to the Los Angeles County Board of Supervisors. On May
14, 1996, the Los Angeles County Board of Supervisors approved a compromise
project (the "Project") to create forty-six single family lots. These
approvals are specified in Los Angeles County CUP No. 91-315(3), Oak Tree
Permit No. 91-315(3) and Tentative Tract No. 46277 (revised), approved May
14, 1996. On June 17, 1996, a neighboring homeowners association filed an
action entitled La Chusa Highlands Property Owners Association, Inc. v. Los
Angeles County, et al., Los Angeles County Superior Court Case No. BS039789
(the "La Chusa Litigation"), challenging the aforesaid approvals. The
Company, Legend and the Venture are named as real parties in interest. The La
Chusa Litigation was tried before a Court on January 27, 1997. On February 5,
1997, the Court issued its ruling, granting the Petitioner's Writ and
remanding the matter to the County Board of Supervisors for further action on
three separate grounds: (i) the Supervisors' analyses and findings relating
to the consistency of the Projects' cul de sacs and streets within certain
County of Los Angeles Code provisions restricting the length of cul de sacs
to 1,000 feet were deemed inadequate; (2) a proposed deed restriction
requiring the Venture to "diligently seek" approval for a second living unit
on five of the forty-six lots was held to be too abstract to comply with the
low income housing requirement of state law and (3) the Court found that the
County acted improperly when it approved the Project in January of 1996 and
later approved a Supplemental Environmental Impact Report ("SEIR") in May of
1996 ("Court Writ"). The Court's Writ specifically rejected challenges to the
Project's entitlements predicated on (i) the adequacy of the Supervisors'
analyses of the environmental impacts of the Project under the SEIR; (ii) the
consistency of the Project with the County General Plan; (iii) the approval
of a sewage treatment plant and (iv) the density of the Project under the
Hillside Management Ordinance.

The Court entered a final judgment in the La Chusa Litigation on March
25, 1997. The Venture filed a notice of appeal of the Court Writ on April 25,
1997. In addition to appealing the Court Writ, the Venture sought further
action by the Supervisors to address the three issues specified in the Court
Writ in order to reinstate the entitlements set aside by the Court. The
Venture appeared before the Supervisors at a public hearing on November 6,
1997. The matter was heard and continued with no action taken. On January 27,
1998, the Supervisors held a continued public hearing and directed County
staff to present the Final SEIR and environmental finding at a future meeting
(scheduled for February 24, 1998) for review and consideration for approval.
On February 24, 1998, the Supervisors certified the Final SEIR and adopted
environmental findings for the Project. The public hearing was continued for
the Board to review and consider approval of Project entitlements. On March
31, 1998, the Supervisors considered the Project entitlements. The
Supervisors directed the Venture to revise the proposed tract map to relocate
lots 23 and 24 from the eastern ridge to the main development cluster and
present the revised tract map to the Supervisors for their review and
consideration at a future meeting. On June 9, 1998, the Supervisors approved
Tentative Tract Map No. 46277 (revised), CUP No. 91-315(3) and Oak Tree
Permit No. 91-315(3) for a 46 residential lot and 5 second unit project
("1998 County Project"). Pursuant to the Board's direction, the new tract map
relocates former lots 23 and 24 to the northeastern portion of the main
development cluster. The statute of limitations to challenge the
environmental review for the 1998 County Project under the California
Environmental Quality Act expired on July 16, 1998. Neither the County nor
the Venture has been served with a lawsuit under the California Environmental
Quality Act at this time and the Venture is not aware of any lawsuit having
being filed. The statute of limitations to challenge the Project entitlements
themselves expired on September 9, 1998. The Venture and La Chusa extended
this statute of limitations for La Chusa only until October 23, 1998, in
order to discuss settlement. Since a settlement agreement was entered into
between the Venture, the County, and La Chusa on October 22, 1998 (see
discussion below), no lawsuit was filed by La Chusa prior to the expiration
of the extended statute of limitations. Neither the County nor the Venture
has been served with a lawsuit challenging the Project entitlements at this
time and the Venture is not aware of any lawsuit having been filed.

On August 6, 1998, in compliance with the Court Writ, the County and
Venture filed a motion seeking a court finding that the 1998 County Project
is in compliance with the court writ and discharging the writ. The motion was
scheduled to be heard on August 21, 1998. The Venture took the motion off the
calendar to discuss settlement with La Chusa. On or about October 30, 1998,
the Venture filed in the trial court a stipulation signed by La Chusa, the
County and the Venture requesting the court to discharge the writ and dismiss
the action with prejudice. The trial court rejected the stipulation and
requested a formal, noticed motion. On November 13, 1998 the Venture, the
County and La Chusa requested the trial court to discharge the writ. The
Court issued a minute order on November 13, 1998 discharging the Court Writ.

On April 29, 1997, counsel for La Chusa Highlands Property Owners
Association, Inc., presented a petition for an award of attorney's fees in
connection with the Court's judgment of March 25, 1997. The Court heard argument
on the petition and

9
<PAGE>

SEMELE GROUP INC.

Notes To Consolidated Financial Statements

(Continued)

on April 30, 1997 awarded the petitioner's counsel the sum of $126,711 in
attorney's fees and related costs. An appeal of this order has been
incorporated into the Company's appeal of the March 25, 1997 judgment
discussed above. The Company's initial brief on appeal was filed on October
9, 1997. The petitioner's response was filed on February 9, 1998. On March 2,
1998, the Company filed its reply brief. On or about October 27, 1998, the
Venture and the County filed a Request for Dismissal of the appeal pursuant
to the Settlement Agreement (see discussion below). On or about October 29,
1998, at the request of the court of appeal, the Venture, the County and La
Chusa filed a stipulation in the court of appeal stipulating that each party
shall bear its own costs in connection with the appeal. The court of appeal
issued an order dismissing the appeal on October 30, 1998.

On October 22, 1998, the Venture, the County and La Chusa entered into a
Settlement Agreement to resolve the La Chusa Litigation, the appeal, and any
challenge to the 1998 County Project or future Coastal Commission action on the
1998 County Project. The settlement is contingent upon dismissal of the La Chusa
action. On October 23, 1998, the Venture transferred the amount of One Hundred
and Twenty Five Thousand Dollars ($125,000) to La Chusa's counsel of record.
That amount is to be held in a trust account until the trial court discharges
the writ and dismisses the La Chusa Lawsuit with prejudice. On October 23, 1998,
the Venture transferred an additional amount of One Hundred and Twenty Five
Thousand Dollars ($125,000) to an escrow account established at Boston Private
Bank & Trust Company. On November 12, 1998 the Venture directed the Bank to wire
that amount to La Chusa's Counsel of Record. That amount is also to be in a
trust account until the trial court discharges the writ and dismisses the La
Chusa Lawsuit.

On November 4, 1998, the California Coastal Commission unanimously approved
an amendment to the Coastal Development Permit for the 51 lot Project previously
approved in 1993. The amendment revised the Coastal Development Permit to
conform to the 46 lot 1998 County Project. On November 4, 1998, the California
Coastal Commission also approved an extension of the term of the Coastal
Development Permit to August 11, 1999. The statute of limitations to challenge
the Coastal Commission actions will expire on January 4, 1999. Neither the
Coastal Commission nor the Venture has been served with a lawsuit at this time
and the Venture is not aware of any lawsuit being filed.

In an earlier action, the Venture challenged the General Plan and the
Environmental Impact Report adopted by the City of Malibu on November 20, 1995
in a lawsuit entitled BMIF/BSLFII Rancho Malibu Limited Partnership v. City of
Malibu, Los Angeles County Superior Court Case No. SS006374. On July 31, 1996,
the Venture and the City of Malibu executed and delivered a settlement agreement
which, among other things, resulted in a dismissal of the lawsuit challenging
the City's General Plan and which precludes the City from challenging the
Venture's entitlements before any public body (in the absence of a significant
requested change). The City is also precluded by the settlement agreement from
participating in the La Chusa Litigation.

During the nine months ended September 30, 1998, the Venture incurred
approximately $605,000 in costs in connection with Rancho Malibu relating to
entitlement activities, holding costs and litigation. These costs, treated as
capital contributions to the Venture by the Company, were included in total
expenses from property operating activities on the Company's consolidated
statements of operations. At September 30, 1998, the Company's carrying balance
for the property is $9,961,991.

6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

ACQUISITION OF ARISTON CORPORATION

10
<PAGE>

SEMELE GROUP INC.

Notes To Consolidated Financial Statements

(Continued)

limited partnership interest in AFG Eireann Limited Partnership ("AFG Eireann"),
a Massachusetts limited partnership having a tax interest in a diversified pool
of lease contracts owned by an institutional investor and (ii) a 98% limited
partnership interest in Old North Capital Limited Partnership ("ONC"), a
Massachusetts limited partnership with investments in cash and notes, equipment
leases, and limited partnerships that are engaged in either equipment leasing or
real estate. Gary D. Engle, Chairman, Chief Executive Officer and a director of
the Company and James A. Coyne, President, Chief Operating Officer and a
director of the Company both are affiliated with ONC and Gary D. Engle is
affiliated with AFG Eireann. Ariston was organized on July 31, 1998 as a
Delaware corporation. On August 3, 1998, Equis Financial Group Limited
Partnership ("EFG") contributed its limited partnership interests in AFG Eireann
and ONC to Ariston in exchange for Ariston common stock. Ariston was a
wholly-owned subsidiary of EFG until its acquisition by the Company and was
formed principally to facilitate the transfer of limited partnership interests
held by EFG in AFG Eireann and ONC. Gary D. Engle controls EFG and is the sole
director of Ariston.

The acquisition of Ariston was approved by the Company's independent
directors. (Both Messrs. Engle and Coyne elected to abstain from any votes
conducted by the Company's Board of Directors in connection with this
acquisition.) In addition, the Company, through its independent directors,
engaged an independent investment banking firm (the "Investment Banker"), to
evaluate the transaction and express its opinion as to whether the acquisition
was fair to the Company's shareholders from a financial point of view. The
Investment Banker concluded that the terms of the acquisition were fair to the
Company's shareholders.

The Company purchased all of the common stock of Ariston from EFG for cash
of $2 million and a purchase-money note of $10,450,000 (the "Note"). The Note
bears interest at the annualized rate of 7%, payable quarterly in arrears, and
requires principal reductions based upon the cash flows generated by the limited
partnership interests owned by Ariston. The Note matures on August 31, 2003 and
is recourse only to the common stock of Ariston. The cost of the Ariston
acquisition has been preliminarily allocated on the basis of the estimated fair
value of the assets acquired and liabilities assumed. In October 1998, Ariston
declared and paid a cash distribution of $2,020,000 to the Company.

The following summarized, unaudited pro forma results of operations for the
nine months ended September 30, 1998 and 1997, assume that the Company effected
the acquisition at the beginning of the respective periods:

1998 1997
--------------- ---------------
<S> <C> <C>
Revenue and Other Income $ 5,910,416 $ 3,972,304

Net Income $ 3,865,338 $ 1,935,647

Net Income Per Share of
Common Stock Basic $ 3.21 $ 1.75

</TABLE>

AFG Eireann is a special purpose limited partnership created in 1994 having
a tax interest in a diversified pool of lease contracts owned by a institutional
investor. Gary D. Engle is a 50% owner and a director of the general partner of
AFG Eireann. ONC is a Massachusetts limited partnership established in 1995. ONC
has investments in (i) cash of approximately $1.9 million, (ii) a portfolio of
equipment leases, (iii) limited partnership units of several
direct-participation equipment leasing programs sponsored and managed by EFG,
(iv) general and limited partnership interests in a real estate partnership
sponsored by EFG that owns two commercial buildings leased to an
investment-grade educational institution, and (v) a note receivable having a
principal balance of approximately $2.7 million that is due from Messrs. Engle
and Coyne. Gary D. Engle owns all of the voting stock, and has a one-third
equity interest in, and is a director of the general partner of ONC. James A.
Coyne owns non-voting stock, and has a one-third equity interest in, and is a
director of the general partner of ONC.

OTHER RELATED PARTY TRANSACTIONS

The Company executed and delivered an Exchange Agreement dated April 30,
1997 (amended as of August 7, 1997, the "Agreement") among the Company, Equis
Exchange L.L.C., a Massachusetts limited liability company ("Equis"), Equis

11
<PAGE>

SEMELE GROUP INC.

Notes To Consolidated Financial Statements

(Continued)

Financial Group Limited Partnership ("EFG") and certain partnerships managed by
EFG ("the Partnerships"). Pursuant to the Agreement, on April 30, 1997, the
Company issued to the Partnerships 198,700 shares of the Company's common stock
at the price of $15.00 per share. Cash proceeds received by the Company,
$2,480,500, were net of related costs of $500,000. In addition, the Partnerships
made a three-year loan (the "Loan") to the Company in the amount of $4,419,500.
The Loan has an interest rate of 10% per annum with mandatory principal
reductions, if and to the extent net proceeds are received from the sale or
refinancing of the Rancho Malibu property. At September 30, 1998, the carrying
value of the note payable approximates fair value.

Pursuant to the Agreement, the Administrative Services Agreement between
the Company and Banyan Management Corp. ("BMC") was amended to provide, among
other things, for the payment to BMC of a termination fee in the amount of
$251,823 and the transfer of the Company's ownership interest in BMC to BMC's
designee. Effective May 6, 1997, EFG entered into an Administrative Services
Agreement to provide administrative services to the Company, replacing BMC.
Administrative costs, primarily salaries and general and administrative
expenses, of $113,201 were incurred on the Company's behalf by EFG during the
nine months ended September 30, 1998. During the nine months ended September 30,
1997, the Company incurred $29,700 in administrative costs for services provided
by EFG and $107,781 for services provided by BMC. The costs incurred by EFG on
behalf of the Company are reflected as Administrative Reimbursement - Affiliate
on the Consolidated Statements of Operations. The costs incurred by BMC on
behalf of the Company are included in General and Administrative expenses on the
Consolidated Statements of Operations.

In connection with the Ariston acquisition, the Company recorded certain
outstanding accounts receivable totaling $1,102,845 that are reflected as
Accounts Receivable - Affiliate on the accompanying Consolidated Balance Sheet.
These funds were collected by the Company in October 1998.

7. RECOVERY OF LOSSES ON LOANS, NOTES AND INTEREST RECEIVABLE

During the first quarter of 1998, the Company received cash distributions
of $18,423 related to its interest in a liquidating trust established for the
benefit of the unsecured creditors (including the Company) of VMS Realty
Partners and its affiliates. In addition, the Company received $89,753 from its
interest in Springtown Partners, a California limited partnership formed by
three land owners, including the Company, for the purpose of merging land
parcels in order to option them to a third party for use as a wetland mitigation
bank. The Company acquired the land from Anden Group as a result of a loan
default, but fully reserved for the asset as the land was determined to be
"undevelopable" due to certain environmental issues. Since 1993, the Company has
sought to realize value from this asset. The Company has treated both amounts as
a recovery of amounts previously charged to losses on loans, notes and interest
receivable on its consolidated statement of operations for the nine months ended
September 30, 1998.

8. DISPOSITION OF INVESTMENT IN REAL ESTATE VENTURE

On October 22, 1990, the Company acquired title to the property known as
the H Street Assemblage located in Washington, D.C. pursuant to an agreement
with Banyan Strategic Realty Trust ("BSRT"). On June 5, 1992, the Company and
BSRT formed a joint venture (the "Venture") to pursue its development rights.
The Company had a 47% interest in the Venture while BSRT owned the remaining
53%. This property consisted of 36,100 square feet of undeveloped land in
downtown Washington D.C. plus an approximately 55,900 square foot office
building. The entire property was zoned for office development.

On March 20, 1997, the Venture sold approximately 3,500 square feet of the
Venture's land to the United States General Services Administration ("GSA") for
a purchase price of $1,828,900, including $150,000 paid by GSA for reimbursement
of expenses that the Venture incurred in anticipation of this transaction. On
July 29, 1997, the Venture sold the remaining land and office building to an
unaffiliated third party for net sale proceeds of $8,469,821. The Company's
share of the gain on disposition recognized by the Venture was $371,979 and is
included in net income from operations of real estate venture for the three and
nine months ended September 30, 1997 on the accompanying consolidated statements
of operations. During the

12
<PAGE>

SEMELE GROUP INC.

Notes To Consolidated Financial Statements

(Continued)

nine September 30, 1997, the Company received aggregate distributions from the
Venture of $4,713,101, including its allocation of sales proceeds. The Venture
has no further ownership interest in the H Street Assemblage property.

9. DEFERRED COMPENSATION

In December 1997, the Company established an incentive compensation plan
(the "Plan") for Messrs. Engle and Coyne (the "Participants"). The Plan provides
for all or some of the Participants' salary to be deferred. All such deferred
compensation is held subject to the claims of creditors of the Company in a
"rabbi" trust until paid to the Participants following the Participants'
termination of employment. The amounts deferred are invested in common stock of
the Company. Pursuant to the Plan, the Participants deferred $180,000 of
compensation during the nine months ended September 30, 1998 which represented
26,469 shares of common stock. The number of shares of common stock was
determined by dividing the dollar amount of the salary deferred each month by
the average of the closing prices of the Company's common stock for the last ten
trading days of the month. The deferred amount was expensed by the Company
during 1998 and is included in general and administrative expenses on the
consolidated statement of operations for the nine months ended September 30,
1998. Future compensation will be deferred and invested in common stock which
will be issued on a monthly basis to the trust for the benefit of the
Participants.

10. STOCK SPLITS

Effective June 30, 1998, the stockholders approved a 1-for-300 reverse
stock split followed by a 30-for-1 forward stock split. As a result of the
reverse stock split, each stockholder of record who owned less than 300 shares
of common stock immediately prior to the reverse stock split received in lieu of
the fractional share resulting from the reverse split, cash in the amount of
$.790625 per share (the average daily closing price per share of common stock on
the Nasdaq Stock Exchange for the ten trading days prior to effective date)
multiplied by the number of shares of common stock owned by such stockholder
immediately prior to the reverse stock split. Immediately after the reverse
stock split, the number of shares of common stock of each holder (excluding
stockholders who held less than 300 shares immediately prior to the reverse
split) was converted in a forward split into multiple shares of common stock on
the basis of 30 shares of common stock for each share or fraction thereof then
held. The Company paid $356,098 to fractional stockholders on July 17, 1998 as a
result of the reverse stock split. All share and per share data for prior
periods presented have been restated to reflect the stock splits.

11. TREASURY STOCK

On September 23, 1998, the Company purchased 69,223 shares of common stock,
or approximately 6.2% of the Company's common stock outstanding. The Company
paid cash in the amount of $5 1/8 per share, for a total purchase price of
$354,768.

12. NASDAQ POTENTIAL DELISTING

The Company has not consistently satisfied the conditions for continued
inclusion on the NASDAQ National Market. NASDAQ has notified the Company that it
intends to delist the stock from the NASDAQ National Market. On November 6,
1998, a representative from the Company attended a hearing on this matter. As of
the date hereof, a decision by NASDAQ has not been rendered. In the event of a
delisting, the stock may be eligible to trade on the NASD OTC Bulletin Board
system. The Company may also consider listing on another exchange.

13
<PAGE>

SEMELE GROUP INC.

Notes To Consolidated Financial Statements

(Continued)

13. SUBSEQUENT EVENT

During 1994, in connection with the restructuring of Anden, the Company was
conveyed an interest in a first mortgage loan collateralized by a parcel of land
located in Hemet, California. The borrower was Hemet Phase IV Partners, L.P.
("Hemet"). The Company also was conveyed a limited partnership interest in
Hemet. The Company recorded its interest in the loan acquired at $500,000 as of
the date of foreclosure. During 1994, the Company recorded a provision for
losses on loans, notes and interest receivable relating to the Hemet loan in the
amount of $275,000. Pursuant to the Company's valuation of the underlying
collateral, the loan was placed on non-accrual status. On October 8, 1998, the
Company received $744,795 as payment in full on the loan and interest. The
Company recorded $225,000 as a principal repayment, $275,000 as a recovery of
amounts previously charged to losses on loans, notes and interest receivable and
the remainder as interest income.

14. FUTURE FILINGS WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Pursuant to the Rules of Item 7 of Form 8-K, the Company expects to file
audited financial statements of Ariston Corporation. The audit of Ariston
Corporation is pending at this date. As soon as the audit is complete, the
Company will file Form 8-K with the Securities and Exchange Commission
containing such financial statements.

14
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition or Plan of
Operation

General

Certain statements in this quarterly report that are not historical fact
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Without limiting the foregoing, words
such as "anticipates", "expects", "intends", "plans" and similar expressions are
intended to identify forward-looking statements. These statements are subject to
a number of risks and uncertainties including the Company's ability to
successfully implement a new growth-oriented business plan. Actual results could
differ materially from those projected in the forward-looking statements.

The Company, formerly known as Banyan Strategic Land Fund II, was
originally established to invest primarily in short-term, junior,
pre-development and construction mortgage loans. The borrowers subsequently
defaulted on these mortgage loan obligations, adversely affecting the Company.
As a result of these defaults, the Company suspended the making of new loans,
except for advances of additional funds under circumstances in which it was
deemed necessary to preserve the value of existing collateral, including
instances where the Company had foreclosed upon or taken title, directly or
indirectly, to the collateral. In 1990, the Company implemented a plan designed
to preserve its assets and manage its properties acquired through foreclosure or
otherwise until they would be disposed of in an orderly manner. On February 25,
1997, the Directors of the Company authorized management to engage an investment
banking firm for purposes of evaluating strategic alternatives for maximizing
stockholder value. The Company executed and delivered an Exchange Agreement
dated April 30, 1997 (amended as of August 7, 1997, the "Agreement") among the
Company, Equis Exchange L.L.C., a Massachusetts limited liability company
("Equis"), Equis Financial Group Limited Partnership ("EFG") and certain
partnerships affiliated with EFG (the "Partnerships"). Pursuant to the
Agreement, the Company issued to the Partnerships 198,700 shares of the
Company's common stock at the price of $15.00 per share. Cash proceeds received
by the Company, $2,480,500, were net of related costs of $500,000. In addition,
the Partnerships made a three-year loan to the Company in the amount of
$4,419,500. These transactions are intended to provide capital to assist the
Company in a new growth-oriented business plan, which includes the development
of the Company's property known as Rancho Malibu.

The transaction also called for a one time $2.00 per share cash dividend to
be paid in the event certain stockholder proposals were approved. The Company
solicited its stockholders for proxies in connection with proposed changes in
the Company's Certificate of Incorporation and By-laws. Among the principal
changes requested were: (i) the election of new Directors nominated by EFG for
terms of up to 3 years and an increase in size of the Board of Directors (the
"Board") to as many as nine members, provided a majority of the Board shall
consist of members independent of the Company, EFG or any affiliate; (ii) an
amendment extending the Company's life to perpetual and changing its name and
(iii) an amendment designed to restrict or deter, to the extent legally
permissible, the acquisition of more than 4.9% of the common stock of the
Company by any person in such a manner as would cause such person to become a 5%
stockholder within the meaning of Section 382 (g) of the Internal Revenue Code.
The Consent of the stockholders was obtained and the proposals, including the
changes described in (i) through (iii) above, were adopted on October 21, 1997.

Pursuant to the Agreement, the Administrative Services Agreement between
the Company and Banyan Management Corp. ("BMC") was amended to provide, among
other things, for the immediate payment to BMC of a termination fee in the
amount of $251,823 and the transfer of the Company's ownership interest in BMC
to BMC's designee. Pursuant to the Agreement, the Company also entered into a
new Administrative Services Agreement with EFG (see Note 6 to the consolidated
financial statements).

On August 31, 1998, the Company executed an agreement to acquire all of the
common stock of Ariston Corporation ("Ariston") for a total purchase price of
$12,450,000. Ariston is a holding company having two investments: (i) a 99%
limited partnership interest in AFG Eireann Limited Partnership ("AFG Eireann"),
a Massachusetts limited partnership having a tax interest in a diversified pool
of lease contracts owned by an institutional investor and (ii) a 98% limited
partnership interest in Old North Capital Limited Partnership ("ONC"), a
Massachusetts limited partnership with investments in cash and notes, equipment
leases, and limited partnerships that are engaged in either equipment leasing or
real estate. Gary D. Engle, Chairman, Chief Executive Officer and a director of
the Company and James A. Coyne, President, Chief Operating Officer and a
director of the Company both are affiliated with ONC and Gary D. Engle is
affiliated with AFG Eireann. Ariston was organized on July 31, 1998 as a
Delaware corporation. On August 3, 1998, EFG contributed its limited partnership
interests in AFG Eireann and ONC to Ariston in exchange for Ariston common
stock. Ariston was a wholly-owned subsidiary of EFG until its acquisition by the
Company and was formed principally to facilitate the transfer of limited
partnership interests held by EFG in AFG Eireann and ONC. Gary D. Engle controls
EFG and is the sole director of Ariston.

15
<PAGE>

The Company currently holds an ownership interest in a 274 acre land parcel
located in Southern California known as the Rancho Malibu property. The Company
also holds a 0.3% beneficial interest in a liquidating trust, established for
the benefit of a group of unsecured creditors of a previous borrower of the
Company, which holds interests in various assets. In addition, the Company has
one loan referred to as Hemet IV (see Note 13 to the financial statements
concerning subsequent repayment).

Year 2000 Issue

The Year 2000 Issue generally refers to the capacity of computer
programming logic to correctly identify the calendar year. Many companies
utilize computer programs or hardware with date sensitive software or embedded
chips that could interpret dates ending in "00" as the year 1900 rather than the
year 2000. In certain cases, such errors could result in system failures or
miscalculations that disrupt the operations of the affected businesses. The
Company uses information systems provided by EFG and has no information systems
of its own. EFG has adopted a plan to address the Year 2000 Issue that consists
of four phases: assessment, remediation, testing, and implementation and has
elected to utilize principally internal resources to perform all phases.
Presently, EFG anticipates completing its Year 2000 project by December 31, 1998
at a di minimus cost to the Company. Aggregate costs for the entire project are
anticipated to be less than $50,000, all of which will have been expensed as
incurred.

EFG's primary information software was coded by IBM at the point of
original design to use a four digit field to identify calendar year. In
addition, EFG has gathered information about the Year 2000 readiness of
significant vendors and third party servicers and continues to monitor
developments in this area. All of EFG's peripheral computer technologies, such
as its network operating system and third-party software applications, including
payroll and electronic banking, have been evaluated for potential programming
changes and are expected to require only minor modifications to function
properly with respect to dates in the year 2000 and thereafter. Moreover, EFG
understands that each of its and the Company's significant vendors and
third-party servicers are in the process, or have completed the process, of
making their systems Year 2000 compliant. Substantially all parties queried have
indicated that their systems will be Year 2000 compliant by the end of 1998.
Presently, EFG is not aware of any outside servicer with a Year 2000 Issue that
would have a material effect on the Company's results of operations, liquidity,
or financial position.

EFG believes that its Year 2000 compliance plan will be effective in
resolving all material Year 2000 risks in a timely manner and that the Year 2000
Issue will not pose significant operational problems with respect to its
computer systems or result in a system failure or disruption of its or the
Company's business operations. However, EFG has no means of ensuring that all
vendors and third-party servicers will conform ultimately to Year 2000
standards. The effect of this risk to the Company is not determinable.

Liquidity and Capital Resources

Cash and cash equivalents consist of cash and short-term investments. The
Company's cash and cash equivalents balance at September 30, 1998 and December
31, 1997 was $6,329,310 and $7,884,593, respectively. The decrease in total cash
and cash equivalents of $1,555,283 is the result of cash used for operating and
financing activities.

Cash Flow From Operating Activities: Net cash used in operating activities
decreased by $213,561 for the period ended September 30, 1998 to $983,350 from
$1,196,911 for the same period in 1997.

16
<PAGE>

Cash Flow From Investing Activities: During the nine months ended September
30, 1998, net cash provided by investing activities resulted from a $250,000
principal repayment on the Lindfield Tract A loan (see below) offset by the
Company's investment in Ariston. During the nine months ended September 30,
1997, net cash provided by investing activities was $5,330,489 resulting from
distributions from the Company's investment in a real estate venture of
$4,713,101 (see below) and proceeds received from the sale of foreclosed real
estate of $617,388 (see below).

Cash Flow From Financing Activities: During the nine months ended September
30, 1998, net cash used in financing activities resulted from $356,098 cash used
to pay fractional shareholders as a result of the reverse stock split and
$354,768 to purchase 69,223 shares of the Company's common stock. During the
nine months ended September 30, 1997, net cash provided by financing activities
was $2,655,500 resulting from the issuance of stock pursuant to the Exchange
Agreement described above.

The Company's future liquidity needs are dependent upon, among other
things: (i) the level of liquidity required to successfully implement a new
growth-oriented business plan and (ii) the Company's ability to control its
property level and Company level operating expenses. In addition, the Company
will have future cash flows as a result of the Ariston acquisition (see above),
which will be used to service associated acquisition indebtedness.

As of September 30, 1998 and December 31, 1997, the Company's mortgage loan
portfolio consisted of loans with a carrying value totaling $225,000 and
$475,000, respectively. During the nine months ended September 30, 1998, the
Company received final principal and interest payments on its Lindfield Tract A
loan totaling $278,270. See Note 13 to the financial statements for subsequent
repayment of the Hemet IV loan.

Results of Operations

Nine months ended September 30, 1998 compared to the nine months ended September
30, 1997:

Total income for the nine months ended months ended September 30, 1998
increased to $373,338 from $120,380 for the nine months ended September 30,
1997. The increase is due primarily to an increase in income earned on
investments. The increase in income earned on investments reflects an increase
in cash available for investment resulting primarily from the issuance of stock
(see above) and cash distributions received related to the Company's investment
in the real estate venture (see below). Other income during the nine months
ended September 30, 1998 resulted from the acquisition of Ariston (see above)
which included: (i) equipment on operating leases generating lease revenue and
(ii) a note receivable-affiliate generating interest income. Interest income on
the note receivable-affiliate is subordinate to the repayment of certain
institutional indebtedness.

Total expenses for the nine months ended September 30, 1998 increased to
$1,584,649 from $1,346,860 for the nine months ended September 30, 1997. This
increase of $237,789 for the nine months ended September 30, 1998 when compared
to the same period in 1997 is due to an increase in total expenses from property
operating activities offset by a decrease in total other expenses. The increase
in total property operating expenses is due primarily to costs incurred in
connection with the Rancho Malibu property relating to entitlement activities,
holding costs and litigation (see Note 5 to the consolidated financial
statements for discussion of settlement). The Company also recognized net income
from operations of the real estate venture of $412,236, relating to the
Company's interest in the H Street property (see discussion below) during 1997.
The decrease in total other expenses is due to a decrease in other professional
fees and general and administrative expenses and an offset in 1998 of $108,176
reflecting a recovery of amounts previously charged to losses on loans, notes
and interest receivable. Other professional fees were higher during 1997 due to
legal costs related to the Winding River litigation as discussed below and costs
incurred to engage an investment banking firm for purposes of evaluating
strategic alternatives for maximizing shareholder value. General and
administrative expenses were higher in 1997 due to a termination fee of $251,823
paid to BMC in connection with the Exchange Agreement (see Note 6 to the
consolidated financial statements) and

17
<PAGE>

incentive compensation accrued in connection with the H-Street sale. Other
expenses in 1998 include interest expense of $391,512 related to the loan from
the Partnerships as a result of the Exchange Agreement (see above) and the
purchase money note to EFG as a result of the Ariston acquisition (see above).
Interest expense during 1997 was $10,178 related to the loan from the
Partnerships.

During the nine months ended September 30, 1997, the Company recorded net
income of $412,236 from the operations of a real estate venture. This net income
reflects the Company's 47% interest in the H Street Venture (the "Venture"). The
Venture owned an office building with approximately 55,900 square feet of gross
leasable area (the "Victor Building") and an adjacent land parcel consisting of
36,100 square feet (the "H Street Assemblage") located in Washington, D.C. On
March 20, 1997, the Venture sold approximately 3,500 square feet of the
Venture's land to the United States General Services Administration ("GSA") for
a net purchase price of $1,828,900, including $150,000 paid by the GSA as a
reimbursement of expenses that the Venture incurred in anticipation of this
transaction. On July 29, 1997, the Venture sold the remaining land and office
building to an unaffiliated third party for net sale proceeds of $8,469,821. The
Company's share of the gain on disposition recognized by the Venture was
$371,979 and is included in net income from operations of real estate venture
for the nine months ended September 30, 1997 on the accompanying Consolidated
Statement of Operations. During the nine months ended September 30, 1997, the
Company received aggregate distributions from the Venture of $4,713,101,
including its allocation of such sales proceeds. The Venture has no further
ownership interest in the H Street Assemblage property. See Note 8 to the
consolidated financial statements for additional information regarding the sale
of this property and subsequent cash distribution from the Venture.

On June 23, 1997, the Company sold the Lindfield Tract D property, having a
carrying value of $650,000, to an unaffiliated third party for a purchase price
of $675,000. Cash proceeds received, net of transaction costs, were $617,388
resulting in a loss on disposition of $32,612 for financial reporting purposes.

The above discussed changes resulted in a decrease in the net loss for the
nine months ended September 30, 1998 to $1,211,311 ($1.01 per share) from
$1,226,480 ($1.11 per share) for the nine months ended September 30, 1997. On
April 30, 1997, the Company issued 198,700 shares of stock. In addition, the
Company issued 15,483 shares of common stock on December 30, 1997 and 26,469
shares of common stock during 1998 in connection with the incentive compensation
plan (see Note 9 to the consolidated financial statements). On September 23,
1998, the Company purchased 69,223 shares of common stock, which are reflected
as treasury stock on the accompanying balance sheet at September 30, 1998. As a
result of these changes, the net loss per share for the nine months ended
September 30, 1998 is based on the weighted average number of shares outstanding
during the period of 1,202,287 as compared to 1,105,729 for the same period in
1997.

Three months ended September 30, 1998 compared to the three months ended
September 30, 1997:

Total income for the three months ended months ended September 30, 1998
increased to $151,929 from $76,275 for the three months ended September 30,
1997. This increase is due primarily to income generated through the acquisition
of Ariston (see above). The Company acquired: (i) equipment on operating leases
which generated lease revenue and (ii) a note receivable-affiliate which
generated interest income. Interest income on the note receivable-affiliate is
subordinate to the repayment of certain institutional indebtedness. Income
earned on investments further contributed to an increase in income during the
period. This increase reflects an increase in cash available for investment
resulting primarily from cash distributions received related to the Company's
investment in the real estate venture (see Note 8 to the consolidated financial
statements).

Total expenses for the three months ended September 30, 1998 increased to
$697,423 from $162,649 for the three months ended September 30, 1997. This
increase of $534,774 is due to an increase in both total expenses from property
operating activities and total other expenses. The increase in total property
operating expenses is due to additional costs incurred in connection with the
Rancho Malibu property relating to entitlement activities, holding costs and
litigation (see Note 5 to the consolidated financial statements for discussion
of settlement). The Company also recognized net income from operations of the
real estate venture of $367,203, relating to the Company's interest in the H
Street property (see discussion above) in 1997 which partially offset property
operating expenses. The increase in total other expenses is due primarily to an
increase in interest expense - affiliates offset by a decrease in general and
administrative expenses and stockholders expenses. General and administrative
expenses were higher during the three months ended September 30, 1997 as
compared to the same period in 1998 due to incentive compensation accrued in
connection with the H Street sale and executive compensation. Stockholder
expenses were higher during the three months ended September 30, 1997 as
compared to the same period in 1998 due to costs incurred in connection with
obtaining the stockholder consent to, among other things, change the Company's
Certificate of Incorporation and By-Laws as discussed above. Other expenses in
1998 include interest expense of $169,309 related to the loan from the
Partnerships as a result of the Exchange Agreement (see above) and the loan

18
<PAGE>

from EFG as a result of the Ariston acquisition (see above). Interest expense
during 1997 was $10,178 related to the loan from the Partnerships.

The above discussed changes resulted in an increase in net loss for the
three months ended September 30, 1998 to $545,494 ($0.46 per share) from $86,374
($0.07 per share) for the three months ended September 30, 1997. On April 30,
1997, the Company issued 198,700 shares of stock. In addition, the Company
issued 15,483 shares of common stock on December 30, 1997 and 26,469 shares of
common stock during 1998 in connection with the incentive compensation plan (see
Note 9 to the consolidated financial statements). On September 23, 1998, the
Company purchased 69,223 shares of common stock, which are reflected as treasury
stock on the accompanying balance sheet at September 30, 1998. As a result of
these changes, the net loss per share for the three months ended September 30,
1998 is based on the weighted average number of shares outstanding during the
period of 1,176,346 as compared to 1,192,342 for the same period in 1997.

On a quarterly basis, management reviews the mortgage loans in the
Company's portfolio and records appropriate loss provisions. The provisions are
based upon a number of factors, including management's analyses of the value of
the collateral and, in certain cases, ongoing negotiations regarding disposition
of this collateral, as well as consideration of the general business conditions
affecting the Company's portfolio. Management also reviews the investment
properties held by the Company on a quarterly basis and, when it has been
determined that a permanent impairment in the value of a given property has
occurred, the carrying value of the property is then written down to its fair
market value. Management has determined that no reductions are necessary for the
three and nine months ended September 30, 1998.

Litigation

In connection with the Company's interest in a joint venture which owns the
Rancho Malibu property (the "Venture"), the Venture has been engaged in zoning
and entitlement activities which have been opposed by the City of Malibu and
various citizen groups. During the nine months ended September 30, 1998, the
Venture incurred approximately $605,000 in costs in connection with Rancho
Malibu relating to entitlement activities, holding costs and litigation. These
costs, treated as capital contributions to the Venture by the Company, were
included in total expenses from property operating activities on the Company's
consolidated statements of operations. See Note 5 to the consolidated financial
statements for discussion of settlement.

The Company continues to be engaged in litigation involving a real estate
development project known as "Winding River." The ultimate outcome of this
matter cannot be determined at this time. However, in the opinion of management
of the Company, the eventual outcome of this matter will not have a material
adverse effect on the financial position of the Company. The financial
statements do not include any adjustments for liability, if any, arising from
this matter.

19
<PAGE>

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

See Note 5 to the consolidated financial statements.

Item 6. Exhibits and Reports on Form 8-K

(a) A list of exhibits filed or incorporated by reference is as
follows:

<TABLE>
<S> <C>
3.1 Certificate of Amendment to Amended and Restated Certificate of
Incorporation (filed with the Securities and Exchange Commission
as Exhibit (3.1) to the Registrant's Quarterly Report on Form
10-QSB for the quarter ended June 30, 1998 and incorporated by
reference)

3.2 Restated Certificate of Incorporation (filed with the Securities
and Exchange Commission as Exhibit (3)(i) to the Registrant's
Report on Form 8-K dated October 21, 1997 and incorporated by
reference)

3.3 Amended and Restated By-Laws (filed with the Securities and
Exchange Commission as Exhibit (3)(ii) to the Registrant's Report
on Form 8-K dated October 21, 1997 and incorporated by reference)

4 Form of new stock certificate (filed with the Securities and
Exchange Commission as Exhibit (4) to the Registrant's Quarterly
Report on Form 10-QSB for the quarter ended September 30, 1997
and incorporated by reference)

10.1 Executive Employment Agreement for Gary D. Engle (filed with the
Securities and Exchange Commission as Exhibit 10.1 to the
Registrant's Annual Report on Form 10-KSB for the year ended
December 31, 1997 and incorporated by reference)

10.2 Executive Employment Agreement for James A. Coyne (filed with the
Securities and Exchange Commission as Exhibit 10.2 to the
Registrant's Annual Report on Form 10-KSB for the year ended
December 31, 1997 and incorporated by reference)

10.3 Amended 1994 Executive and Director Stock Option Plan (filed with
the Securities and Exchange Commission as Exhibit 10.3 to the
Registrant's Annual Report on Form 10-KSB for the year ended
December 31, 1997 and incorporated by reference)

10.4 Incentive Compensation Plan (filed with the Securities and
Exchange Commission as Exhibit 10.4 to the Registrant's Annual
Report on Form 10-KSB for the year ended December 31, 1997 and
incorporated by reference)

10.5 Trust under Semele Group Inc. Incentive Compensation Plan (filed
with the Securities and Exchange Commission as Exhibit 10.5 to
the Registrant's Annual Report on Form 10-KSB for the year ended
December 31, 1997 and incorporated by reference)

10.6 Qualified Stock Option Agreement Executive Option Grant Program
dated December 30, 1997 between Semele Group Inc. and Gary D.
Engle (filed with the Securities and Exchange Commission as
Exhibit 10.6 to the Registrant's Annual Report on Form 10-KSB for
the year ended December 31, 1997 and incorporated by reference)

10.7 Qualified Stock Option Agreement Executive Option Grant Program
dated December 30, 1997 between Semele Group Inc. and James A.
Coyne (filed with the Securities and Exchange Commission as
Exhibit 10.7 to the Registrant's Annual Report on Form 10-KSB for
the year ended December 31, 1997 and incorporated by reference)

10.8 Director Stock Option Agreement Director Option Grant Program
(filed with the Securities and Exchange Commission as Exhibit
10.8 to the Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 1997 and incorporated by reference)

</TABLE>

20
<PAGE>

<TABLE>
<S> <C>
10.9 Amendment to Director Stock Option Agreement Director Option
Grant Program dated December 30, 1997 between Semele Group Inc.
and Gerald L. Nudo (filed with the Securities and Exchange
Commission as Exhibit 10.9 to the Registrant's Annual Report on
Form 10-KSB for the year ended December 31, 1997 and incorporated
by reference)

10.10 Amendment to Director Stock Option Agreement Director Option Grant
Program dated December 30, 1997 between Semele Group Inc. and
Robert M. Ungerleider (filed with the Securities and Exchange
Commission as Exhibit 10.10 to the Registrant's Annual Report on
Form 10-KSB for the year ended December 31, 1997 and incorporated
by reference)

10.11 Amendment to Director Stock Option Agreement Director Option Grant
Program dated December 30, 1997 between Semele Group Inc. and
Walter E. Auch (filed with the Securities and Exchange Commission
as Exhibit 10.11 to the Registrant's Annual Report on Form 10-KSB
for the year ended December 31, 1997 and incorporated by
reference)

10.12 Third Amended and Restated Employment Agreement for Leonard G.
Levine dated May 1, 1997 (filed with the Securities and Exchange
Commission as Exhibit (10)(i) to the Registrant's Quarterly Report
on Form 10-QSB for the quarter ended June 30, 1997 and
incorporated by reference)

10.13 Amendment No. 1 to Exchange Agreement dated August 7, 1997 (filed
with the Securities and Exchange Commission as Exhibit (10)(ii)
to the Registrant's Quarterly Report on Form 10-QSB for the
quarter ended June 30, 1997 and incorporated by reference)

10.14 Exchange Agreement dated April 30, 1997 by and among AFG Hato
Arrow Limited Partnership, AFG Dove Arrow Limited Partnership,
AIP/Larkfield Limited Partnership, Equis Exchange LLC, Equis
Financial Group Limited Partnership and the Registrant and related
exhibits (filed with the Securities and Exchange Commission as
Exhibit (10)(i) to the Registrant's Quarterly Report on Form
10-QSB for the quarter ended June 30, 1997 and incorporated by
reference)

10.15 Directors Stock Option Agreement dated July 15, 1994

10.16 Executive Stock Option Agreements dated July 1, 1994, July 11,
1995 and April 16, 1996

10.17 Agreement for Purchase and Sale of Stock dated August 31, 1998
between Semele Group Inc. and Equis Financial Group Limited
Partnership (filed herewith)

10.18 Promissory Note dated August 31, 1998 between Semele Group Inc.
and Equis Financial Group Limited Partnership (filed herewith)

10.19 Security Agreement dated August 31, 1998 between Semele Group
Inc. and Equis Financial Group Limited Partnership (filed
herewith)

21 Subsidiaries of the Company

27 Financial Data Schedule (such schedule is not deemed filed as
part of this report)

99.1 Press Release dated October 21, 1997 (filed with the Securities
and Exchange Commission as Exhibit (99)(i) to the Registrant's
Report on Form 8-K dated October 21, 1997 and incorporated by
reference)

(b) A current report on Form 8-K, dated August 31, 1998, was filed by
the Registrant on September 15, 1998 with the Securities and
Exchange Commission.

</TABLE>

<PAGE>

SIGNATURES

PURSUANT to the requirements of the Exchange Act, the Issuer has duly caused
this Report to be signed on its behalf by the undersigned thereunto duly
authorized.

SEMELE GROUP INC.

By: /s/ Gary D. Engle Date: November 16, 1998
-------------------------------------------
Gary D. Engle, Chairman, Chief Executive
Officer and Director

By: /s/ Gary M. Romano Date: November 16, 1998
-------------------------------------------
Gary M. Romano, Vice President and
Chief Financial Officer

<PAGE>

EXHIBIT 10.17
AGREEMENT FOR PURCHASE AND SALE OF STOCK

This Agreement for Purchase and Sale of Stock is made as of the 31st
day of August, 1998, by and between Equis Financial Group Limited Partnership, a
Massachusetts limited partnership with offices located at 88 Broad Street,
Boston, Massachusetts 02110 (the "Seller"), and Semele Group Inc., a Delaware
corporation with offices located at One Canterbury Green, Stamford, Connecticut
06901 (the "Buyer");

WITNESSETH:

WHEREAS, the Seller owns all the issued and outstanding shares of
capital stock of Ariston Corporation, a newly formed Delaware corporation (the
"Company"), consisting of 100 shares of Common Stock, $.01 par value (the
"Stock");

WHEREAS, the Seller wishes to sell and the Buyer wishes to purchase the
Stock subject to the provisions set forth herein;

NOW, THEREFORE, in consideration of the terms, covenants and conditions
hereinafter set forth, the parties hereto agree as follows:

1. Purchase and Sale of Stock

The Seller hereby transfers, sells and assigns to the Buyer, and the
Buyer hereby purchases from the Seller, the Stock for a purchase price of
$12,450,000, paid by the delivery to the Seller simultaneously with the
execution hereof of $2,000,000 in cash and a promissory note of the Buyer
payable to the Seller in the principal amount of $10,450,000 against delivery by
the Buyer of the stock certificate representing the Stock accompanied by a duly
executed separate stock power endorsed in blank. Such promissory note, which is
in the form of Exhibit A hereto, bears interest on the unpaid principal balance
thereof from time to time at the rate of 7% per annum and is payable on the
terms set forth therein. The Buyer's obligations under such note are secured by
a pledge of the Stock pursuant to a Security Agreement in the form of Exhibit B
hereto.

The parties agree that the sale provided for herein is subject to the
following condition subsequent (the "Condition Subsequent"): (a) the purchase
and sale shall be unwound; (b) the Stock and any dividends or distributions
received by the Buyer in respect of the Stock shall be returned to the Seller;
(c) the full amount of the purchase price (including the promissory note) shall
be returned by the Seller to the Buyer, and (d) the parties shall be returned in
all respects to the status quo ante unless the Buyer shall have received, on or
before the date which is 60 days after the date hereof, from Josephthal & Co.
Inc. or other investment banker acceptable to the Buyer in its reasonable
discretion, a "fairness opinion" with respect to the amount of the purchase
price, which opinion shall be acceptable to the Board of Directors of the Buyer
in its reasonable judgment. In the event of the occurrence of the Condition
Subsequent, the Buyer and the Seller agree to treat the purchase and sale as if
it had never occurred for purposes of their federal and state income tax
reporting returns.

2. Familiarity with the Company

The Buyer hereby acknowledges that it is familiar with the business,
assets and liabilities of the Company, which was formed to hold, and holds on
the date hereof, a 99% limited partnership interest in AFG/Eireann Limited
Partnership, a Massachusetts limited partnership, and a 98% limited partnership
interest in Old North Capital Limited Partnership, a Massachusetts limited
partnership (collectively, the "Partnership Interests"). The Buyer further
hereby acknowledges that it has had the opportunity to examine such financial
records, make such inquiries of employees and representatives of the Seller and
consult with such experts as it has deemed appropriate or necessary in
connection with the execution of this Agreement and the consummation of the
transaction provided for herein.

3. Representations of the Seller

The Seller hereby represents and warrants to the Buyer that

(a) it has good and marketable title to the Stock free and clear of all
liens, security interests, charges or encumbrances of any kind and that upon the
execution of this Agreement title to the Stock will pass to the Buyer free and

<PAGE>

clear of any pledge, lien, security interest, charge or encumbrance of any kind
and thereupon the Buyer, as record and beneficial owner, will be entitled to all
rights including voting rights with respect to the Stock;

(b) the Company has good and marketable title to the Partnership
Interests free and clear of all liens, security interests, charges or
encumbrances of any kind;

(c) the Seller is a duly formed and validly existing limited
partnership under the laws of the Commonwealth of Massachusetts with the right,
power and authority to enter into and carry out the provisions of this
Agreement; Equis Corporation is the sole general partner of the Seller; and Gary
D. Engle is an officer of such general partner who has been duly authorized by
all necessary partnership and corporate action to execute, deliver and perform
on behalf of the Seller all such instruments and agreements and take all such
other action as he may deem necessary or desirable for the Seller to consummate
the sale of the Stock to the Buyer, including, without limiting the generality
of the foregoing, this Agreement and the stock power effecting the transfer of
the Stock to the Buyer;

(d) the execution, delivery and performance of this Agreement by the
Seller and the consummation by the Seller of the transaction contemplated hereby
do not and will not violate, conflict with or result in a breach of or
constitute a default under any of the terms, conditions or provisions of any
instrument or contract to which the Seller is a party or by which it or any of
its properties or assets is bound or any judgment, decree, order, statute, rule
or regulation to which it is subject or by which it or any of its properties or
assets is bound, or result in the creation of any lien, charge or encumbrance on
any of its properties or assets, including the Partnership Interests;

(e) the Seller has delivered to the Buyer true, accurate and complete
copies of the Certificate of Organization and By-Laws of the Company, and has
delivered to the Buyer the original minute book and stock ledger of the Company.
The minute book of the Company contains accurate and complete records of all
meetings and other corporate actions of its stockholders and Board of Directors,
and the stock ledger included in the minute book is accurate and complete.

4. Representations of the Buyer

The Buyer hereby represents and warrants to the Seller that

(a) the Buyer is a duly formed and validly existing corporation under
the laws of the State of Delaware with the right, power and authority to enter
into and carry out the provisions of this Agreement; and James A. Coyne is an
officer of the Buyer who has been duly authorized by all necessary corporate
action to execute, deliver and perform on behalf of the Buyer all such
instruments and agreements and take all such other action as he may deem
necessary or desirable for the Buyer to consummate the purchase of the Stock
from the Seller, including, without limiting the generality of the foregoing,
this Agreement and the promissory note delivered to the Seller pursuant to this
Agreement;

(b) the execution, delivery and performance of this Agreement by the
Buyer and the consummation by the Buyer of the transaction contemplated hereby
do not and will not violate, conflict with or result in a breach of or
constitute a default under any of the terms, conditions or provisions of any
instrument or contract to which the Buyer is a party or by which it or any of
its properties or assets is bound or any judgment, decree, order, statute, rule
or regulation to which it is subject or by which it or any of its properties or
assets is bound, or result in the creation of any lien, charge or encumbrance on
any of its properties or assets.

5. Survival of Representations and Warranties

All agreements, covenants, representations and warranties of the
parties are set forth and merged in this Agreement, and no other oral or written
understanding, representation or warranty shall be deemed to be part of this
Agreement . All of the representations, warranties, agreements and covenants of
the Seller contained in this Agreement shall survive the date hereof.

6. Counterparts

This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which, taken together, shall
constitute one and the same agreement.

7. Entire Agreement

<PAGE>

This Agreement represents the only agreement between the parties and
supersedes all prior agreements or understandings concerning the subject matter
hereof.

8. Governing Law

This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.

9. Binding Effect

This Agreement shall be binding upon and inure to the benefit of the
Seller and the Buyer and their respective successors and assigns.

10. Indemnification

The Seller will indemnify and hold the Buyer harmless from and against
any loss or expense, including reasonable legal fees and expenses, which the
Buyer may incur as the result of (i) any breach of the representations and
warranties made by the Seller hereunder or (ii) any claim made against the Buyer
arising out of the ownership by the Seller or the Company of the Stock or the
Partnership Interests prior to the date hereof. Whenever, on each occasion, and
as often as the Buyer shall incur any such loss or expense which may entitle the
Buyer to indemnification under the provisions of this Section 10 the Buyer shall
promptly so notify the Seller in writing of any such loss or expense and of the
amount of indemnification which may be claimed by the Buyer hereunder. The
Seller shall be entitled to take any and all such action as may be within its
power to mitigate the amount of any such loss or expense and shall be entitled
at its own expense to participate in and to select reputable counsel and direct
the defense of any such claim against the Buyer. If the Seller acknowledges in
writing that it is liable to the Buyer for such claim and elects to employ such
counsel and to direct such defense, the Seller shall have no further liability
hereunder for any legal fees and expenses incurred by the Buyer in connection
with such defense, provided that in such event the Buyer may employ its own
counsel at its own cost and expense.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.

"Buyer" "Seller"

SEMELE GROUP INC. EQUIS FINANCIAL GROUP LIMITED
PARTNERSHIP

By: Equis Corporation, General Partner

By: By:
------------------------ -------------------------------------
Name: James A. Coyne Name: Gary D. Engle
Title: President Title: President

<PAGE>

EXHIBIT A
PROMISSORY NOTE

Boston, Massachusetts
$10,450,000 August 31, 1998

FOR VALUE RECEIVED, Semele Group Inc., a Delaware corporation with
offices located at One Canterbury Green, Stamford, Connecticut 06901 (the
"Maker"), promises to pay to the order of Equis Financial Group Limited
Partnership, a Massachusetts limited partnership (the "Payee"), at 88 Broad
Street, Boston, Massachusetts 02110, or at such other place as the Payee may
from time to time designate in writing at least ten days before a payment
hereunder is due, the principal sum of Ten Million Four Hundred Fifty Thousand
Dollars ($10,450,000), together with interest on the unpaid principal balance
hereof from time to time at the rate of seven percent (7%) per annum. Interest
shall be payable hereunder quarterly in arrears, with all accrued interest
payable on the last day of each calendar quarter commencing on September 30,
1998, provided, however, that if and to the extent that the Available Interest
Amount shall be less than the interest due and payable hereunder (the "Interest
Amount"), then the balance shall be added to the outstanding principal of this
Note. As used herein, "Available Interest Amount" shall mean an amount, not to
exceed the Interest Amount, determined as of each quarterly interest payment
date, equal to the sum of the Interest Reserve Amount and any cash generated by
the assets owned by Ariston Corporation ("Ariston") on the date hereof during
the previous quarterly period. Prior to the maturity date of this Note,
principal hereunder shall be payable only out of and to the extent of (i) the
net proceeds to the Maker from the conversion, if any, by Ariston of leased
assets to cash, less (ii) such amount as it may be necessary to retain from such
net proceeds in order to permit the Maker to maintain a reserve equal to the
amount of interest that is estimated to be payable hereunder in the ensuing
12-month period (the amount, if any, in such reserve account at any time is
herein referred to as the "Interest Reserve Amount"). Any such mandatory
payments of principal shall be made within 15 days of receipt by the Maker of
such net proceeds.

The entire unpaid principal balance and all accrued and unpaid interest
hereunder shall be absolutely due and payable in full on the date that is 5
years from the date hereof.

All payments hereunder shall be applied first to any costs and expenses
of the holder due hereunder, then to interest due hereunder, and any balance
shall be applied to the outstanding principal balance of this Note.

This Note may be prepaid in whole or in part at any time without
penalty, provided that all accrued interest is paid with any such prepayment.

This Note evidences amounts owned to the Payee by the Maker under an
Agreement for Purchase and Sale of Stock dated the date hereof between the Maker
and the Payee. This Note is secured by the collateral referred to in the
Security Agreement between the Maker and the Payee dated the date hereof and is
recourse to the Maker only to the extent of such collateral.

All amounts payable under this Note shall immediately become due and
payable in full at the option of the holder without notice or demand in the
event of (1) the failure of the Maker to make any payment hereunder when and as
the same shall become due and payable, and such failure shall not be cured
within 30 days after the Maker shall have received written notice from the
holder of such failure, (2) the Maker ceasing to do business, being liquidated
or winding down its affairs or being a party to a merger or consolidation, (3)
the filing of bankruptcy proceedings involving the Maker as a debtor, (4) the
application for appointment of a receiver for the Maker or any of its property,
(5) the making of a general assignment for the benefit of the Maker's creditors,
(6) the insolvency of the Maker, or (7) the declaration or payment of dividends
by Ariston Corporation, a Delaware corporation, in excess of $2,020,000 in the
aggregate without the prior written consent of the Payee (each, an "Event of
Default").

The Maker shall pay, upon demand, all costs and expenses, including
legal expenses and reasonable attorneys' fees, paid or incurred by the holder in
enforcing any obligations of the Maker under this Note.

Except as specifically provided herein, the Maker waives presentment,
demand, notice, protest and all other demands or notices in connection with the
delivery, acceptance, performance, default or enforcement of the obligations of
the Maker under this Note.

The holder of this Note shall not by any act, delay, omission or
otherwise be deemed to have waived any of such holder's rights or remedies under
this Note unless such waiver shall be in writing and signed by the holder. A
waiver on any one occasion shall not be construed as a bar to or waiver of any
such right or remedy on any future occasion.

All notices hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand, or mailed, certified or registered mail
with first class postage prepaid, (i) to the holder at the address of the Payee
set forth above or to such other address as the holder shall direct in writing;
and (ii) to the Maker at the address of the Maker set forth above or to such
other address as the Maker shall direct in writing.

This Note shall be construed in accordance with and governed by the
laws of the Commonwealth of Massachusetts.

EXECUTED under seal as of the date first above written.

<PAGE>

SEMELE GROUP INC.

Witness: By:
------------------------------ ------------------------------
Name: James A. Coyne
Title: President

<PAGE>

EXHIBIT B
SECURITY AGREEMENT

THIS SECURITY AGREEMENT made as of the 31st day of August, 1998, by and
between Semele Group Inc., a Delaware corporation (the "Pledgor"), and Equis
Financial Group Limited Partnership, a Massachusetts limited partnership (the
"Secured Party"),
W I T N E S S E T H:

WHEREAS, pursuant to an Agreement for Purchase and Sale of Stock dated
as of the date hereof (the "Purchase Agreement"), the Pledgor has purchased from
the Secured Party 100 shares of the Common Stock, $.01 par value (the "Stock"),
of Ariston Corporation, a Delaware corporation (the "Company"), which are all
the shares of capital stock of the Company issued and outstanding;

WHEREAS, the Pledgor has paid for such shares by a $2,000,000 cash
payment to the Secured Party and delivery of the Pledgor's promissory note
payable to the Secured Party in the principal amount of $10,450,000 (the
"Note"); and

WHEREAS, the Pledgor has agreed to secure his commitments under the
Note by a pledge of the Stock now owned by the Pledgor;

NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto hereby agree as follows:

1. Pledge.

In consideration of the acceptance by the Secured Party of the
Note and the undertakings of the Pledgor in this Agreement, the Pledgor hereby
grants a security interest to the Secured Party in the Stock (together with any
other securities or other property at any time pledged hereunder pursuant to the
terms hereof, the "Pledged Stock"). The Pledged Stock is represented by
Certificate No. 1, which certificate, accompanied by a separate stock power duly
endorsed in blank by the Pledgor, is herewith delivered to the Secured Party, to
be held on the terms and conditions contained herein. The Pledgor hereby
appoints the Secured Party as its attorney in fact to cause the transfer of the
Pledged Stock on the books of the Company to the Secured Party or his designee
upon the occurrence of an "Event of Default," as such term is defined in the
Note. The Secured Party shall hold the Pledged Stock as security for the
purposes described herein and shall not encumber or dispose of such property
except in accordance with the provisions of this Agreement.

2. Stock Dividend or Stock Split; Liquidation, Recapitalization,
Merger, etc.

Any additional shares of capital stock paid upon or
distributed with respect to any of the Pledged Stock in the event of any stock
dividend or stock split declared by the Company or any issuer thereof and any
sums paid upon or with

<PAGE>

respect to any of the Pledged Stock upon the merger, consolidation,
liquidation, recapitalization, dissolution or reorganization of the Company or
any other issuer thereof shall be paid over to the Secured Party to be held by
him as security for the Note; and in case any distribution of capital shall be
made upon or with respect to any of the Pledged Stock or any property shall be
distributed upon or with respect to any of the Pledged Stock pursuant to the
recapitalization or reclassification of the capital of the issuer thereof or
pursuant to the reorganization, merger or consolidation thereof, the property so
distributed shall be delivered to the Secured Party to be held by him as
security for the Note. All securities, sums of money and other property paid or
distributed in respect of the Pledged Stock upon any such stock dividend, stock
split, merger, consolidation, liquidation, dissolution, reorganization,
recapitalization or reclassification which are received by the Pledgor shall,
until paid or delivered to the Secured Party, be held in trust for the Secured
Party as security for the Note.

3. Warranty of Title.

The Pledgor warrants that he has good and marketable title to
the Pledged Stock pledged hereunder on the date hereof, subject to no pledge,
lien, security interest, charge, option, restriction or other encumbrance, and
that it has power, authority and legal right to pledge such Pledged Stock
pursuant to this Agreement. The Pledgor covenants that it will defend the
Secured Party's rights and security interest in such Pledged Stock against the
claims and demands of all persons whomsoever; and the Pledgor covenants that it
will have the like title to and right to pledge all other property hereafter
pledged with the Secured Party hereunder and will likewise defend the Secured
Party's rights and security interest therein.

4. Dividends and Voting Rights.

Unless and until an Event of Default shall have occurred and
be continuing, the Pledgor shall be entitled to receive all cash dividends paid
in respect of the Pledged Stock and to vote the Pledged Stock and to give
consents, waivers and ratifications in respect of the Pledged Stock; provided,
however, that no vote shall be cast, or consent, waiver or ratification given or
action taken which would be inconsistent with or violate any provisions of this
Agreement or the Note. All such rights of the Pledgor to receive any cash
dividends shall cease in case an Event of Default shall have occurred and be
continuing, and in that case cash dividends shall be paid over by the Pledgor to
the Secured Party to be applied by it to the satisfaction of the Note, and all
cash dividends received by the Pledgor shall, until so paid to the Secured
Party, be held in trust for the Secured Party as security for the Note. All such
rights of the Pledgor to vote and give consents, waivers and ratifications with
respect to the Pledged Stock shall, at the Secured Party's option as evidenced
by the Secured Party's notifying the Pledgor of such election, cease in case an
Event of Default shall have occurred and be continuing, and in that case the
Secured Party shall have all such rights.

<PAGE>

5. Discharge of Obligations.

Upon payment and performance in full of all obligations to be
performed by the Pledgor under the Note, the Secured Party shall transfer to the
Pledgor all of the Pledged Stock and all rights received by the Secured Party as
a result of the pledge contained herein.

6. Default.

Upon the occurrence of an Event of Default, the Secured Party
shall have the rights and remedies provided in the Uniform Commercial Code of
Massachusetts, and in that connection the Secured Party may, upon 5 days' notice
to the Pledgor sent by registered mail and without liability for any diminution
in price which may have occurred, sell all of the Pledged Stock in such manner
and for such price as the Secured Party may determine. It is agreed by the
Pledgor that such notice is reasonable. At any public sale, the Secured Party
shall be free to purchase all or any part of the Pledged Stock. Out of the
proceeds of any sale, the Secured Party may retain an amount equal to the
principal and interest then due under the Note, plus the amount of the expenses
of sale, including legal costs and reasonable attorneys' fees, and shall pay any
balance of such proceeds to the Pledgor.

7. Binding Effect.

This Agreement shall be binding upon and inure to the benefit
of the Pledgor and the Secured Party and their successors and assigns; provided,
however, that neither party may assign this Agreement without the consent of the
other.

8. Other Provisions.

(a) Waivers; Rights and Remedies. No delay or omission on the
part of the Secured Party in exercising any right or remedy shall operate as a
waiver thereof or of any other right or remedy. No waiver by the Secured Party
shall be effective unless made in writing, and a waiver on any one occasion
shall not be construed as a bar to or waiver of any right or remedy on any
future occasion. All the Secured Party's rights and remedies shall be cumulative
and may be exercised singularly or concurrently, and nothing herein shall be
deemed to limit in any way any rights the Secured Party might otherwise have
under any other instrument or by law, including, without limiting the generality
thereof, the right to negotiate any note or other instrument together with any
collateral specifically described herein.

(b) Entire Agreement; Amendment. This Agreement constitutes
the entire agreement of the parties with respect to the subject matter hereof
and may be amended only by an instrument in writing referring to this Agreement
executed by the Pledgor and the Secured Party.

<PAGE>

(c) Governing Law. This Agreement shall be governed by and
construed and interpreted according to the laws of the Commonwealth of
Massachusetts.
(d) Notices. All notices required or permitted hereunder shall
be in writing and shall be deemed to have been duly given if delivered in hand
or deposited in the United States mail, postage prepaid, or with Federal Express
or comparable overnight delivery service, addressed as follows:

(i) if to the Pledgor:

Semele Group Inc.
One Canterbury Green
Stamford, CT 06901
Attn: President

(ii) if to the Secured Party:

Equis Financial Group Limited Partnership
88 Broad Street
Boston, MA 02110
Attn: Chief Executive Officer

or to such other address as a party shall designate by notice to the other.

IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.

SEMELE GROUP INC.

By:
----------------------------
James A. Coyne
Title: President

EQUIS FINANCIAL GROUP LIMITED
PARTNERSHIP

By: Equis Corporation, its general partner

By:
----------------------------
Gary D. Engle
Title: President

<PAGE>

EXHIBIT 10.18

PROMISSORY NOTE

Boston, Massachusetts
$10,450,000 August 31, 1998

The entire unpaid principal balance and all accrued and unpaid interest
hereunder shall be absolutely due and payable in full on the date that is 5
years from the date hereof.

This Note may be prepaid in whole or in part at any time without
penalty, provided that all accrued interest is paid with any such prepayment.

This Note shall be construed in accordance with and governed by the
laws of the Commonwealth of Massachusetts.

<PAGE>

EXECUTED under seal as of the date first above written.

SEMELE GROUP INC.

Witness: By:
---------------------------- ----------------------------
Name: James A. Coyne
Title: President

<PAGE>

EXHIBIT 10.19

SECURITY AGREEMENT

WHEREAS, the Pledgor has agreed to secure his commitments under the
Note by a pledge of the Stock now owned by the Pledgor;

1. Pledge.

2. Stock Dividend or Stock Split; Liquidation, Recapitalization,
Merger, etc.

<PAGE>

respect to any of the Pledged Stock upon the merger, consolidation, liquidation,
recapitalization, dissolution or reorganization of the Company or any other
issuer thereof shall be paid over to the Secured Party to be held by him as
security for the Note; and in case any distribution of capital shall be made
upon or with respect to any of the Pledged Stock or any property shall be
distributed upon or with respect to any of the Pledged Stock pursuant to the
recapitalization or reclassification of the capital of the issuer thereof or
pursuant to the reorganization, merger or consolidation thereof, the property so
distributed shall be delivered to the Secured Party to be held by him as
security for the Note. All securities, sums of money and other property paid or
distributed in respect of the Pledged Stock upon any such stock dividend, stock
split, merger, consolidation, liquidation, dissolution, reorganization,
recapitalization or reclassification which are received by the Pledgor shall,
until paid or delivered to the Secured Party, be held in trust for the Secured
Party as security for the Note.

3. Warranty of Title.

4. Dividends and Voting Rights.

<PAGE>

5. Discharge of Obligations.

6. Default.

7. Binding Effect.

8. Other Provisions.

<PAGE>

(c) Governing Law. This Agreement shall be governed by and
construed and interpreted according to the laws of the Commonwealth of
Massachusetts.

(d) Notices. All notices required or permitted hereunder shall
be in writing and shall be deemed to have been duly given if delivered in hand
or deposited in the United States mail, postage prepaid, or with Federal Express
or comparable overnight delivery service, addressed as follows:

(i) if to the Pledgor:

Semele Group Inc.
One Canterbury Green
Stamford, CT 06901
Attn: President

(ii) if to the Secured Party:

Equis Financial Group Limited Partnership
88 Broad Street
Boston, MA 02110
Attn: Chief Executive Officer

or to such other address as a party shall designate by notice to the other.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.

SEMELE GROUP INC.

By:
----------------------------------------
James A. Coyne
Title: President

EQUIS FINANCIAL GROUP LIMITED
PARTNERSHIP

By: Equis Corporation, its general partner

By:
----------------------------------------
Gary D. Engle
Title: President

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEMELE GROUP
INC.'S FORM 10QSB FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10QSB.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 6,329,310
<SECURITIES> 0
<RECEIVABLES> 4,143,808
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,701,049
<PP&E> 10,336,991
<DEPRECIATION> 0
<TOTAL-ASSETS> 28,704,134
<CURRENT-LIABILITIES> 1,217,141
<BONDS> 15,782,456
11,529,948
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 28,704,134
<SALES> 0
<TOTAL-REVENUES> 373,338
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,584,649
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,211,311)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,211,311)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,211,311)
<EPS-PRIMARY> (1.01)
<EPS-DILUTED> (1.01)

</TABLE>