<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
                           COMMISSION FILE NO. 1-12134
                              CUSIP NO. 286199-20-3

                          ELEPHANT & CASTLE GROUP INC.
                         (NAME OF SMALL BUSINESS ISSUER)


Province of British Columbia                         Not Applicable
----------------------------                         --------------
(State or other                                      (IRS Employer Identifi-
jurisdiction of                                       cation Number)
incorporation)

1190 Hornby Street
Vancouver, B.C. CANADA                                V6Z 2K5
----------------------                                -------

(Address of principal execu-                         (Zip Code)
 tive offices)

Registrant's telephone number including area code: (604) 684-6451

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 13 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days. YES X  NO
                          --    ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]



<PAGE>

Issuer's revenues during the fiscal year ended December 31, 2000: CDN
$50,084,000 (converts at applicable exchange rates to U.S. $33,389,000).

Aggregate market value of voting stock held by non-affiliates of the Registrant
as at March 15, 2001: U.S.$986,000 (CDN $1,479,000).

Number of shares outstanding of Issuer's Common Stock as of December 31, 2000:
2,594,604.

Securities registered pursuant to Section 12(b) of the Act:

         None.

Securities registered pursuant to Section 12(g) of the Act:

<TABLE>
<CAPTION>

                                 OTCBB        NUMBER OF
      TITLE OF EACH CLASS        SYMBOL       SHARES OUTSTANDING
      -------------------        ------       ------------------

<S>                              <C>             <C>
Common Stock, without par value  PUBSF        2,594,604 (a)
</TABLE>


(a) Calculated as of March 15, 2001.

FORWARD-LOOKING STATEMENTS

         This annual report on Form 10-K contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995,
including statements made with respect to the results of operations and
businesses of the Company. Words such as "may," "should," "believe,"
"anticipate," "estimate," "expect," "intend," "plan" and similar expressions are
intended to identify forward-looking statements. These forward-looking
statements are based upon management's current plans, expectations, estimates
and assumptions and are subject to a number of risks and uncertainties that
could significantly affect current plans, anticipated actions and the Company's
financial condition and results of operations. Factors that may cause actual
results to differ materially from those discussed in such-forward looking
statements include, among other, the following possibilities: (i) fluctuations
in foreign currency exchange rates; (ii) heightened competition, the entry of
new competitors; (iii) the inability to carry out development plans or to do so
without delays; (iv) loss of key executives; and (v) general economic and
business conditions. The Company does not intend to update these cautionary
statements.



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ITEM 1   DESCRIPTION OF BUSINESS

a.       GENERAL

         The Company owns and operates pub and casual dining restaurants in the
United States and Canada and is actively engaged in restaurant franchising
activities.

         As of the date of this report, the Company currently owns and operates
a chain of 20 full-service casual dining restaurants and pubs, 14 of which are
located in Canada and 6 of which are located in the United States.

         Seventeen of the Registrant's restaurants are operated under the name
"Elephant & Castle", an English pub concept, five of which are in the United
States. In addition to the owned and operated units, there are 3 Elephant &
Castle franchises, including the first United States franchise, which opened in
Grove City, Pennsylvania in January, 2000. One additional franchise agreement
has been signed and one corporate location is under construction in Chicago,
scheduled to open in April, 2001.

         The Company also owns and operates an "Alamo Grill" red meat steakhouse
at the Mall of America, Bloomington, Minnesota. The Company intends to expand
its chain of Alamo Grill steakhouse restaurants through franchising. The first
Alamo Grill franchise was opened in January 2000 in Atlanta. Four additional
franchise agreements have been signed.

         Previously the Company also entered into a joint venture with, and
exclusive licensee of, Rainforest Cafe, Inc., now a wholly owned subsidiary of
Landry's Seafood Restaurants Inc. (NYSE - LNY) for the development of Rainforest
Cafe restaurants in Canada through a joint venture entity, Canadian Rainforest
Restaurants Inc. ("CRRI"). CRRI opened three restaurants between June of 1998
and the summer of 1999, one in Vancouver, B.C. and two in Toronto, Ontario and
additionally sub-franchised Rainforest Cafe to Canadian Niagara Hotels for the
development of one Rainforest Cafe in Niagara, Ontario. CRRI signed a lease for
the development of a Rainforest Cafe in The Forum, Montreal. After development
difficulties and delays CRRI determined not to proceed with the Restaurant at
the Forum. One of the Toronto restaurants was closed in January, 2001. The
Company and Landry's are currently negotiating a restructuring



                                      -3-
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of their agreements. The Company has acquired the Vancouver Metrotown restaurant
and Landry's has acquired the Yorkdale restaurant and the Niagara sub-franchise
agreement. All of these assets are held on behalf of the joint venture partners
and are governed by an inter-creditor agreement.

         During the year 2000 and the first fiscal quarter of 2001, the company
substantially reshaped its business activities by the foregoing development
relating to its CRRI and the closure of the Franklin Mills, Pennsylvania "twin
restaurant".

The closure of the Franklin Mills Mall location and the reorganisation of the
Rainforest Restaurants resulted in significant losses for the Company in 2000.
See "Financial Statements, Management's Discussion and Analysis".

However, in the opinion of management this refocusing allows the Company a solid
base of profitable, cash-flow positive operations upon which it will seek to
grow its business. Future growth will be dependent, in part, on the availability
of capital. There is no assurance that adequate capital will be available to the
Company.
(See "BUSINESS - FINANCINGS")

         2000 RESULTS OF OPERATIONS

         During 2000 the Company opened two franchised restaurants - an Elephant
& Castle restaurant in Grove City PA and an Alamo Grill restaurant in Atlanta,
GA - and signed agreements for four additional franchises.

         In 2000, the Company's sales were CDN $50,084,000 compared to CDN
$50,104,000 for 1999. Sales increases in the Elephant & Castle restaurants were
more than offset by significant declines in the sales of the Canadian Rainforest
Cafe restaurants.

         During the fiscal year ended December 31, 2000, the Company incurred a
net loss of CDN $11,816,000 compared to a net loss of CDN $4,262,000 for the
corresponding period in 1999.

         The Company made provision for the closure of the `twin' restaurant in
Franklin Mills, PA and the Rainforest Cafe in Scarborough, a suburb of Toronto,
Ontario. These two items constituted $9,726,000 or 82 percent of the Company's
$11,816,000 loss in 2000. Both closures occurred on January 7th, 2001.

In connection with the closure of the Franklin Mills location the Company
reached agreement with its to terminate the lease in exchange for the surrender
of substantially all of the assets at



                                      -4-
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that locations, and the payment of up to fifteen months' rent. The Company made
full provision for this disposal of assets, rent payments and other closing
costs. These amounted to $4,787,000.

         Subsequent to the year-end and the closure of the Scarborough
Rainforest Cafe restaurant, the Company and Landry's have been negotiating a
restructuring of their agreements. The Company acquired the Vancouver Rainforest
Cafe restaurant and Landry's acquired the remaining Toronto Rainforest Cafe
restaurant and the Niagara sub-franchise agreement by action under their
Security Agreements. All of these assets are held on behalf of the joint venture
partners under an inter-creditor agreement. The Company made full provision
against its investment in CRRI and its receivable from the joint venture
company, resulting in a charge to earnings in 2000 of CDN$4,939,000.

         General and administrative expenses decreased from 6.8% of sales in
1999 to 5.8% of sales in 2000, partly as a result of administrative cost
reduction steps taken during the year. Interest on long term debt decreased to
CDN $1,874,000 in 2000 from CDN $2,056,000 in 1999 as a result of conversion of
a portion of the Company's convertible debt.

FINANCINGS

         1995 GEIPPP II FINANCING. In December of 1995, the Company completed a
major financing with a prominent U.S. private limited partnership money manager,
General Electric Investment Private Placement Partners II ("GEIPPP II"). That
financing ultimately added U.S. $1,000,000 (CDN $1,370,000) in equity before
issue costs and U.S. $9,000,000 (CDN $13,500,000) in subordinated convertible
notes to the Company's long term debt structure. In October, 1999 the Company
granted a security interest to GEIPPP II over substantially all of its assets in
exchange for a waiver of certain interest payments, waiver of existing defaults
and a relaxation of certain financial covenants.

         U.S. $6,000,000 of the funds borrowed by the Company from GEIPPP II are
now convertible by it, at its option, at U.S. $7.68 per share; and after the
stock consolidation referred to below and U.S. $3,000,000 of such Notes are
convertible at U.S. $10.00 per share. At the present time, GEIPPP II has the
right through conversion privileges and warrant exercise rights to acquire
approximately 58.8% of the Company's Common Shares, assuming exercise of all
such rights and privileges.


                                      -5-
<PAGE>

         The Company and GEIPPP II have had discussions relating to the
possibility that GEIPPP II may convert a significant portion of the principal
amount of the GEIPPP II capital to notes, or certain accrued interests
(amounting to US$ 360,000) as of a recent date, and reschedule the repayments of
the remaining principal. There is no assurance that any such conversion will
occur. Further there is no assurance that if it occurs the conversion will be on
terms and conditions favorable to existing equity holders.

         Management believes it has a favorable relationship with GEIPPP II and
is reasonably confident that the relationship will continue to be maintained on
a basis that is consistent with the interests of the Company's equity holders.
However any conversion by GEIPPP II is likely to be significantly dilutive to
such holders. In the absence of conversion of a substantial portion of the
GEIPPP II notes and accrued interest, the company may be unable to pay its debts
as they become due and GEIPPP II would be in a position to enforce its security
interest.

         DELPHI FINANCING. In February of 1999, the Company completed an
additional private placement equity financing with a group of U.S. investors.
The financing was arranged by Delphi Financial Corporation of Minneapolis
Minnesota. In total the Company raised U.S. $3,265,000 (CDN $4,897,500) from the
sale and issuance of additional Subordinated Convertible Notes (the "'99
Notes"). The '99 Notes have a five year term, bear interest at 8% per annum
payable quarterly in arrears commencing on June 30, 1999, in cash or Common
Shares, to the extent fully registered Common Shares of the Company are
available, at the option of the Company. All of the '99 Notes unpaid and not
converted by December 31, 2003 are immediately due and payable on such date,
together with a 25% premium on the unpaid principal amount thereof. The terms of
the `99 Notes were renegotiated in October, 1999 following which $1,582,000 of
these `99 Notes were converted into common stock at $2 per share (after
adjustment for the 1 for 2 stock consolidation) in exchange for the waiver of
penalties associated with the delay in registration of the underlying securities
and adjustment to the one year warrants to the terms noted below.

         The Company has a right for optional redemption of the remaining `99
Notes at 100% of par, plus accrued and unpaid interest, from time to time during
the period that the `99 Notes are outstanding if the market price for the
Company's Common Shares equals or exceeds 150% of the conversion price for
fifteen (15) consecutive trading days, under certain circumstances. Each of the
holders of the `99 Notes also received one year warrants, extended to three
years, to purchase an equal number of Common Shares. The Warrants are
exercisable at U.S. $4.00 per share (adjusted for the



                                      -6-
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1 for 2 stock consolidation) until 31st January, 2001 and at U.S. $6.00
(adjusted for the 1 for 2 stock consolidation) thereafter. GEIPPP II
participated in the Delphi Financing, and purchased U.S. $2,000,000 additional
of the 1999 Notes, U.S. $1,000,000 of which was subsequently converted into
500,000 Common Shares (adjusted for the 1 for 2 stock consolidation).

         STOCK CONSOLIDATION On March 23rd, 2000 the Company's shareholders
approved a 1 for 2 stock consolidation in order to increase the opportunities
for the Company's Common shares to retain the NASDAQ listing. This resulted in a
reduction in the number of shares outstanding from 5,289,209 to 2,644,604.

RESTAURANTS IN OPERATION

         ELEPHANT & CASTLE. At the Elephant & Castle restaurants, the Company
seeks to distinguish itself from competitive restaurants by its distinctive
British style and Tudor decor, and by featuring a wide variety of menu items
including a large number of English-style dishes. The Company's restaurants
offer a broad menu at popular prices. The menu is regularly updated to keep up
with current trends in customers' tastes. The average check per customer,
including beverage, was approximately CDN $14.00 during 2000, a number which has
more or less been stable since 1992. Although all of the Company's restaurants
provide full liquor service, alcoholic beverages are primarily served to
complement meals.

         MALL RESTAURANTS. The Company's mall restaurants average approximately
5,000 square feet, with a typical seating capacity of 220. The restaurants are
open 7 days a week for lunch, dinner and late-night dining. Average unit sales
are approximately CDN $1,200,000 with a sales mix of approximately 60% food and
approximately 40% alcoholic beverages. Due to their location at major downtown
and suburban malls and office complexes, the Elephant & Castle restaurants cater
to both shoppers and office workers.

         HOTEL RESTAURANTS. The Company has agreements for the operation of
restaurants in 5 hotel locations in Canada and the United States, including 2
Holiday Inn locations. The Winnipeg Delta,(formerly the Crowne Plaza Holiday
Inn) Elephant & Castle restaurant was opened on May 18, 1994. The Philadelphia
Holiday Inn unit was opened on February 28, 1995, and the San Diego Holiday Inn
was opened on July 1, 1996. The Boston, Massachusetts and Seattle, Washington
sites both added in 1997 are in hotel locations other than Holiday Inn. The
Company is currently constructing a hotel restaurant in Chicago and hopes to
build additional hotel restaurant units at first-class hotels over the next
several years. In the opinion of management, the three key ingredients in the
selection of


                                      -7-
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hotel based units are: (1) the control of occupancy costs; (2) the capacity to
work synergistically with a hotel management seeking to divorce itself from
direct involvement in food and beverage operations; and (3) the Company's
ability to control the menu, kitchen and restaurant amenities.

         ALAMO GRILL. In October of 1996, the Company acquired all of the
capital stock of Alamo Grill, Inc. ("Alamo"), a one unit restaurant business
located at the Mall of America, Bloomington, Minnesota. The acquisition provided
the Company with a "red meat" concept restaurant. The single unit Alamo has been
operated successfully by the Company since its acquisition. The new "Alamo
Grill" restaurants (Registrant may use such name or variants thereof) are casual
steakhouse restaurants with a distinctive southwestern design and theme and may
operate under the name "Alamo Grill" or "Alamo Steakhouse & Grill". They are
intended to be franchise restaurants located primarily in U.S. hotels. The menu
is positioned to deliver an average spend of U.S. $14-16 Dollars for food at
dinner. Each restaurant is planned to be up to 6,500 square feet with up to a
240-seat capacity. See also Franchising.

         FRANCHISING. Management of the company believes that the Company's
"brand" identification is a valuable asset. Three franchised locations of the
Elephant & Castle brand are now open, one at the new international terminal at
Vancouver International Airport, a second to a pair of former managers in
London, Ontario and a third, opened in January, 2000, in Grove City,
Pennsylvania. One additional franchise agreement has been signed for
Harrisburgh, Pennsylvania, which is expected to open in the second half of 2001.
         In 1999 the Company signed an exclusive franchise agreement with
Holiday Inn Hotels, whereby Holiday Inn Hotels and its franchises have the
exclusive right to franchise the Alamo Grill brand in hotel locations in the
United States. In consideration for this exclusivity, Holiday Inn Hotels has
undertaken to promote the brand to its franchisees as the exclusively endorsed
steakhouse restaurant. The first such franchise opened in a Holiday Inn hotel in
College Park, near Atlanta, Georgia. Additional franchises have been signed for
Sarasota, Florida; Evanston, Illinois; Colorado Springs, Colorado; and Anaheim,
California.

         The Company signed a sub-franchise agreement with Canadian Niagara
Hotels for the right to develop a Rainforest Cafe in Niagara, Ontario. This unit
is expected to open in the spring of 2001.

         Future activities are intended to include an expansion of the Company's
franchising activities for both the Alamo Grill and the Elephant & Castle brand.
No further sub-franchises of the Rainforest



                                      -8-
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Cafe brand are currently anticipated.

         THE CANADIAN RAINFOREST RESTAURANT VENTURE. This activity has been
substantially reorganized - see "Business Introduction". As of May 1, 1997, the
Company signed agreements with Rainforest Cafe, Inc. ("RCI") relating to the
Canadian Rainforest Joint Venture. The agreements provide for the establishment
of a jointly-owned Canadian corporation, Canadian Rainforest Restaurants, Inc.
("CRRI").

         The Registrant simultaneously acquired from RCI an exclusive Area
Development Agreement for U.S. $500,000 (CDN $685,000), U.S. $250,000 (CDN
$343,000) paid in advance, and U.S. $50,000 (CDN $69,000) per annum thereafter
until the balance is paid. The Area Development Agreement was assigned to CRRI,
the joint venture company. Each restaurant built within the exclusive territory
of Canada also entered into a license arrangement with RCI. The Rainforest Cafe
restaurants, a trademark and trade name protected concept, provide patrons with
a rainforest environment, which is both attractive and entertaining, and has
been sought out by mall operators and others on favorable terms as a destination
location.

         In 1999 an additional company, Yorkdale Rainforest Restaurant Inc.
("YRRI"), was formed for the development of one of the Rainforest Cafe
restaurants. CRRI and RCI each had a 50% interest in the Common Stock of YRRI,
giving the Registrant an effective 25% interest. The Registrant effectively
controls YRRI, as to day to day operations, through its management service
contract.

         The Company invested CDN $5.45 million, net, in the joint venture
entity towards the creation of the first three Canadian Rainforest restaurants.
The Company receives a management fee of 1.5% of sales from each licensed
restaurant in addition to distributions it receives as a shareholder of CRRI.

         The Scarborough restaurant failed to sustain its initial sales levels
and declined to below the point at which the restaurant was generating cash. The
joint venture parties agreed to the closure of that restaurant, which was
effected 7th January, 2001.

         Subsequent to the year-end and the closure of the Scarborough
Rainforest Cafe restaurant, the Company and Landry's have been negotiating a
restructuring of their agreements. The Company has acquired the Vancouver
Metrotown restaurant and Landry's has acquired the Yorkdale restaurant and the
Niagara sub-franchise agreement. All of these assets are held on behalf of the
joint venture partners and are governed by an inter-creditor agreement. The
Company made full provision against its investment in CRRI and its receivable
from the joint venture company, resulting in a charge



                                      -9-
<PAGE>

to earnings in 2000 of CDN$4,939,000.

         FRANKLIN MILLS "TWIN" RESTAURANT. In 1998 the Company opened a
dual-brand "twin" restaurant in Franklin Mills, outside of Philadelphia,
Pennsylvania. The E&C/Alamo was approximately 14,000 square feet and shared a
common kitchen. The efficiencies of the dual-brand concept intended to be
realized include facility and construction cost limitations, while presenting
two distinct brand images to the public. This unit did not operate at
satisfactory volume or profit levels.

         The Company reached agreement with its landlord in Franklin Mills to
close the `twin' Elephant & Castle/Alamo Grill restaurant and to terminate the
lease in exchange for the surrender of substantially all of the assets at that
location, and the payment of up to fifteen months' rent. The Company made full
provision for the disposal of assets, rent payments and other closing costs.
These amounted to CDN $4,787,000.

         FUTURE COMPANY GROWTH. The Company's strategy for future growth of its
Elephant & Castle and Alamo Grill concepts involves both franchising and
development of company owned and operated locations. These will be predominantly
hotel-based or in high traffic, urban centre locations. The Company's intention
is to cluster restaurants in prime locations in chosen geographic regions. Key
points for consideration include the need for consistency in use and revenues
resulting therefrom. The Company's current cash position and cash flow from
operations are insufficient to both fulfill its current debt repayment
obligations and allow development of company owned units. The Company is
currently in discussions with its principal creditor, GEIPPP II, for the
rescheduling of its payments of principal and interest.

         ADDITIONAL INFORMATION

a.       FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.

         During each of the last three years, the Company considers that it has
been substantially engaged in a single line of business - the ownership and
operation of casual dining restaurants - and does not separately segment its
financial results.

b.       NARRATIVE DESCRIPTION OF THE BUSINESS.

         i. PRINCIPAL PRODUCTS OR SERVICES AND THEIR MARKETS. See Description of
the Business - General.


                                      -10-
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         ii. DISTRIBUTION METHODS. The Company focuses on the casual dining
segment. The Company has not set out to establish its restaurants as
"destination locations". Instead, it relies primarily on its high-traffic,
convenient downtown and suburban mall, and most recently, high-occupancy hotel
locations, consumer satisfaction and reputation to attract new and repeat
customers.


The Company conducts many local promotions and loyalty programs
geared to the neighborhoods and markets the restaurants serve, and supports
these with print and direct mail advertising. During fiscal 2000, the Company's
expenditures for advertising and promotional activities were approximately 2% of
its revenues.

         iii. STATUS OF NEW DEVELOPMENTS. The Company is constantly in the
process of examining, evaluating and undertaking various new restaurant
opportunities. Currently, in addition to the development of five restaurants
under franchise agreements, the Company has one company-owned unit under
construction in a Club Quarters hotel in Chicago, Illinois. This unit is
expected to open in April 2001.

         iv) RELATIONSHIP WITH HOTEL OPERATORS. The Registrant's relationship
with hotel operators is predicated on (i) shared investment in significant
physical improvements to the facility at the onset of the occupancy; (ii) costs
of occupancy measured by a percentage of the unit's revenues; (iii) adequate
time to recruit and train a restaurant staff of Registrant's selection; and (iv)
reliance upon restaurant operator's control of the physical environment and menu
selections. In addition to its Holiday Inn locations in San Diego, California
and Philadelphia, Pennsylvania, the Registrant currently operates hotel
restaurants at the Delta Hotel (Winnipeg, Canada), Club Quarters Hotel (Boston,
Massachusetts), WestCoast Grand Hotel on Fifth (Seattle, Washington) and
Rosedale Hotel (Vancouver, Canada). Management considers its relationship with
Hotel Operators currently to be satisfactory.

         v. COMPETITORS AND COMPETITIVE BUSINESS CONDITIONS. The restaurant and
food service industry is highly competitive and fragmented. There are an
uncountable number of restaurants and other food and beverage service operations
that complete directly and indirectly with the Company. In addition, many
restaurant chains have significantly greater financial resources and higher
sales volumes than the Company. Restaurant revenues are affected by changing
consumer tastes and discretionary spending priorities, local economic
conditions, demographic trends, traffic patterns, the ability of business
customers to deduct restaurant expenses, the increasing trend towards
prohibition of smoking in restaurants and the type, number and location of
competing restaurants. In addition, factors such as inflation and increased
food, liquor, labor and other employee compensation costs can adversely affect


                                      -11-
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profitability. The Company believes that its ability to compete effectively and
successfully will depend on, among other things, management's ability to
continue to offer quality food for moderate prices, management's ability to
control labor costs, and ultimately on the executive determinations as to
extensions of the brand (I.E., selection of sites for new locations and related
strategies).

         vi. SUPPLIERS. Food products and related restaurant supplies are
purchased both through home office purchasing programs and already at the
restaurant level from specified food producers, independent wholesale food
distributors and manufacturers. This process enables the Company to ensure
quality companies. Management believes all essential food and beverage products
are available from multiple sources in all of the locations it serves, and that
it is not dependent on any one of a limited number of suppliers.

         vii. DEPENDENCE ON CUSTOMERS. Elephant & Castle appeals to a diverse
customer base, including business and professional people who occupy offices in
the vicinity of the restaurants, shoppers from the malls, downtown tourists, and
others. The Company's locations and broad menu attract traffic from lunch
through mid-afternoon, dinner and into the evening hours. Most all of the
Company's restaurants are open seven days and evenings, each week. All items on
the menu are available for take-out, although take-out customers account for
less than 2% of total restaurant sales.

         viii. TRADEMARKS; LICENSES. The Company has registered "The Elephant &
Castle Pub & Restaurant" with the Canadian Trademarks Office, and with the
United States Patent and Trademark Office. The Company acquired "The Elephant &
Castle" trademark in the United States. The Company agreed to pay U.S. $50,000
(CDN $75,000), plus a one-time fee of U.S. $5,000 (CDN $7,500) per location for
the first ten locations for the mark. The Company regards its "Elephant &
Castle" trademark as having substantial value and as being an important factor
in the marketing of its restaurants. The Company is not aware of any infringing
uses that could materially affect its business or any prior claim to the
trademarks in its business.

         ix. GOVERNMENTAL LICENSES AND APPROVALS. The Company is subject to
various rules, regulations and laws affecting its business. Each of the
Company's restaurants is subject to licensing and regulations by a number of
governmental authorities, including alcoholic beverage control and health,
safety and fire agencies in the state, province or municipality in which the
restaurant is located. Difficulties in obtaining or failure to obtain the
required licenses or approvals could prevent or delay the


                                      -12-
<PAGE>

development of a new restaurant in a new location. Management believes the
Company is in compliance in all material respects with all relevant regulations.
The Company has never experienced unusual difficulties or delays in obtaining
the required licenses or approvals required to open a new restaurant.

         Various Canadian federal and provincial labor laws govern the Company's
relationship with its employees, including such matters as minimum wage
requirements, overtime and other working conditions. Significant additional
government-imposed increases in minimum wage, paid leaves of absences and
mandated health benefits, or increased tax reporting and tax payment
requirements for employees who receive gratuities, may impose significant
burdens on the Company. The Company's restaurants in the United States are
subject to similar requirements.

         Alcoholic beverage control regulations require each of the Company's
restaurants to apply to a state authority and, in certain locations, county and
municipal authorities, for a license and permit to sell alcoholic beverages in
the premises. Typically, licenses must be renewed annually and may be revoked or
suspended for cause at any time. Alcoholic beverage control regulations relate
to numerous aspects of the daily operations of the Company's restaurants. The
Company has not encountered any material problems related to alcoholic beverage
licensing to date. The failure to receive or retain, or a delay in obtaining a
liquor license in a particular location could adversely affect the Company's
ability to obtain such a license elsewhere.

         x. EFFECT OF EXISTING AND PROBABLE GOVERNMENTAL REGULATIONS. The
Company is subject to "dram-shop" statutes in California, Pennsylvania and
Washington and may become subject to similar proposed legislation in Canada.
"Dram-shop" statutes generally provide a person injured by an intoxicated person
the right to recover damages from an establishment which wrongfully served
alcoholic beverages to such a person. The Company carries liquor liability
coverage which it believes to be consistent with the coverage carried by other
entities in the restaurant industry. Even though the Company is covered by
insurance, a judgment against the Company under a "dram-shop" statute in excess
of the Company's liability coverage could have a material adverse effect on the
Company. The Company has never been the subject of a "dram-shop" claim.

         xi. RESEARCH AND DEVELOPMENT. The Company places significant emphasis
on the design and interior decor of its restaurants.

         The Company's Elephant & Castle unit designs requires somewhat



                                      -13-
<PAGE>

higher capital costs and furniture and fixtures investment to open a new
restaurant than is typical in the industry. Landlord contributions defray a part
or a substantial part of interior design and decor at a typical new restaurant.
The Company believes that its design and decor features enhance the dining
experience. Each restaurant typically features large, airy dining areas.
Additionally, several offer patio seating, which adds substantially to seasonal
capacity, revenues and profits. Table layouts are flexible, permitting
re-arrangement of seating to accommodate large groups and effective utilization
of maximum seating capacity.

         The Company also believes that the location of a restaurant is
important to its success. In general, significant time and resources are spent
in determining whether a prospective site is acceptable. Traditional Elephant &
Castle restaurants were located at high-profile sites at malls/office complexes
within larger metropolitan areas. In selecting future sites, the Registrant
intends to analyze demographic information for each prospective site, hotel
occupancy, hotel uses, and factors such as visibility, traffic patterns,
accessibility, proximity of shopping areas, offices, parks, tourist attractions,
and competitive restaurants.

         xii. COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS. The
Company is not aware of, and does not anticipate any significant costs related
to compliance with environmental laws.

         xiii. NUMBER OF TOTAL EMPLOYEES AND FULL-TIME EMPLOYEES. As of December
31, 2000, the Company, including its Canadian Rainforest Cafe joint venture,
employed approximately 1,000 persons on a full-time and part-time basis. 20 of
such persons serve in administrative or executive capacities, approximately 80
serve as restaurant management personnel and the remainder are hourly workers in
the Company's restaurant operations. The Company believes that its working
conditions and compensation packages are competitive with those offered by its
competitors. Management considers the Company's relations with its employees to
be good, and its rate of employee turnover to be low in relation to industry
standards. The Company has an agreement with the union which represented the
former workers at the predecessor restaurant located at the Holiday Inn unit in
Philadelphia which requires the Registrant to seek new hires first from among
the pool of available union hiring hall personnel. The Company's service
personnel at the San Diego Elephant & Castle unit and Rosie's on Robson are
unionized.

         The Company has sought to attract and retain high-quality,
knowledgeable restaurant management and staff. Each restaurant is managed by one
general manager, and from one to three assistant managers depending on volume.
Most restaurants, again depending on



                                      -14-
<PAGE>

volume, also have one kitchen manager and one to three assistant kitchen
managers. On average, general managers have about five years' experience with
the Company. The Company also employs three regional managers and may be
required to add additional supervisory people as the chain expands. As the
Company adds new restaurants, its future success may depend in part on its
ability to continue to attract and train capable additional managers. The
Company also anticipates that the opening of additional restaurants including at
hotel sites in the United States will require a commensurate increase in
employees. The Company does not expect a proportionate increase in the number of
corporate or administrative personnel. Restaurant managers, many of whom have
moved up through the ranks, are required to complete a training program during
which they are instructed in areas including food quality and preparations,
customer service, alcohol service, liquor liability avoidance and employee
relations. The Company believes its training programs for managers and other
employees are comparable to the training provided for managers and other
employees at substantially larger restaurant chains. Restaurant managers are
also provided with operations manuals relating to food and beverage standards
and other expectations of restaurant operations. Management has made a conscious
commitment to provide customer service of the highest standards. In addition to
evaluations made by the customers, the Company uses a "designated customer"
quality control program to independently monitor service and operations.
"Designated customers" are independent people who test the standards of food,
beverage and service as customers of the restaurant without the knowledge of
management or staff. Done on a periodic basis, their findings are reported to
corporate management. Efficient, attentive and friendly service is integral to
the Company's overall concept. Any new employee at all functional levels is
closely supervised after his or her on-the-job training. Management regularly
solicits employee suggestions concerning operations, and endeavors to be
responsive to legitimate employee concerns.

         The Company believes its commitment to employee morale is also critical
to its long-term success. The Company has compiled a favorable record of
employee retention. The average tenure of the current restaurant general
managers in the Elephant & Castle chain is five years. The Company considers the
quality of its employee interaction with customers to be an important element of
its business strategy.



                                      -15-
<PAGE>


ITEM 2   PROPERTIES

         The Company currently operates 10 mall based restaurants. All of such
facilities are leased properties. The following table provides opening date,
square footage and indoor seating capacity information with respect to each of
the mall based restaurants currently in operation:

<TABLE>
<CAPTION>
                                                                   INDOOR
CITY               MALL             OPENING DATE   SQUARE FEET     SEATING(a)
----               ----             ------------   -----------     ----------

<S>               <C>               <C>            <C>             <C>
Ottawa, Ont.      Rideau Center     Mar. 1983      7,119           280
West Edm., Alb.   West Edmonton     Jul. 1988      6,500           245
Edmonton, Alb.    Eaton Center      Sep. 1988      5,939           225
Victoria, B.C.    Eaton Center      Jun. 1989      5,640           225
Bellingham, WA    Bellis Fair       May  1990      5,200           220
Saskatoon, Sask.  Midtown Plaza     Oct. 1990      5,815           225
Calgary, Alb.     Eaton Center      Dec. 1990      5,851           225
Surrey, B.C.      Guildford Town    May  1992      4,835           200
Bloomington, MN   Mall of America   Oct. 1996      6,750           280
Vancouver, BC     Metrotown         Jun. 1998     18,000           340
</TABLE>


(a) Outdoor/patio seating is available at a number of the locations, and not
included herein.

         All of the restaurants are located on leased sites. The Company owns
the furnishings, fixtures and equipment in each of its mall based restaurants.
Existing restaurant leases have expirations ranging from 2001 through 2017
(including existing renewal options). The Company does not anticipate any
difficulties renewing its existing leases as they expire. Mall leases typically
provide for fixed rent plus payment of certain escalations and operating
expenses, against a percentage at restaurant sales.

         The Company's hotel restaurant leases are more typically focused on a
percentage of restaurant sales, against a minimum base rental. Thus, while the
Company's aggregate annual minimum rent continues to increase, such rent per
facility and per square foot controlled by the Company is typically declining.

         The Company's facilities at Hotels and other non-mall locations are
occupied on the following basis:

<TABLE>
<CAPTION>

HOTEL LOCATIONS     OPENING DATE     SQUARE FT.     INDOOR SEATING
---------------     ------------     ----------     --------------

<S>                 <C>              <C>            <C>
Winnipeg            May 1994         4,300          180
Philadelphia        February 1995    7,900          310
Vancouver           August, 1995     5,500          200
San Diego           July 1996        7,500          300
Seattle             August, 1997     7,600          230
</TABLE>


                                      -16-
<PAGE>


<TABLE>
<CAPTION>

<S>                 <C>              <C>            <C>
Boston              November, 1997   9,500          200
</TABLE>

<TABLE>
<CAPTION>

OTHER NON-MALL LOCATIONS
------------------------
<S>                 <C>              <C>            <C>
BCIT
 (Burnaby,B.C.)     September, 1995  4,500          300
Toronto
 King Street        October, 1996    9,200          330
Edmonton            November, 1997   5,600          180
Toronto
 Yonge Street       December, 1999   3,200          160
</TABLE>

         The following table sets forth, for all restaurants by location, the
earliest expiration date of the leases and the minimum annual rent:

<TABLE>
<CAPTION>

                                    EARLIEST
LOCATION                         EXPIRATION DATE   MINIMUM ANNUAL RENT
--------                         ---------------   -------------------

<S>                                    <C>                 <C>
Edmonton Eaton Center                  2001                109,000
Minneapolis, Mall of America           2002                344,000
BCIT, Burnaby, B.C.                    2003                105,000
West Edmonton Mall                     2003                130,000
Ottawa Rideau Center                   2003                165,000
Victoria Eaton Center                  2004                169,000
Winnipeg, Delta Hotel                  2004                 60,000
Saskatoon Midtown Plaza                2005                200,000
Bellingham Bellis Fair                 2005                152,000
Vancouver, Rosedale Hotel              2005                 60,000
Philadelphia, Holiday Inn              2005                150,000
Calgary Eaton Center                   2005                117,000
San Diego, Holiday Inn                 2006                 90,000
Surrey, Guildford                      2007                156,000
Boston, Club Quarters                  2007                 90,000
</TABLE>



                                      -17-
<PAGE>

<TABLE>
<CAPTION>

                                    EARLIEST
LOCATION                         EXPIRATION DATE   MINIMUM ANNUAL RENT
--------                         ---------------   -------------------

<S>                                    <C>                 <C>

Toronto, Yonge Street                  2008                 110,000
Toronto, King Street                   2011                 109,000
Edmonton, Whyte Ave                    2012                  95,000
Seattle, WestCoast Grand               2012                  84,000
Vancouver, Metrotown                   2013                 585,000

         TOTAL:                                      CDN $3,080,000
</TABLE>




                                      -18-
<PAGE>

ITEM 3   LEGAL PROCEEDINGS

         From time to time lawsuits are filed against the Company in the
ordinary course of business. The Company is not currently a party to any
litigation which would, if adversely determined, have a material adverse effect
on the Company or its business and is not aware of any such threatened
litigation.




                                      -19-
<PAGE>







<PAGE>



ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         STOCK CONSOLIDATION The shareholders approved a proposal to consolidate
the shares on a 1 for 2 basis at an Extraordinary General Meeting held on March
23, 2000, and trading commenced on this basis on 27th March, 2000. As a result
of this proposal the number of authorised Common shares was reduced from
20,000,000 to 10,000,000 and the number of Common shares in issue was reduced
from 5,289,209 to 2,644,604 at that date.



                                      -21-
<PAGE>

                                     PART II

ITEM 5   MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
         STOCKHOLDER MATTERS

         The Company's Common Stock was traded on NASDAQ - small cap market from
June 29, 1993 until it lost that listing on March 22, 2000 as a result of having
failed to maintain a minimum bid price of $1.00. The company continues to be
listed on the Pacific Exchange (ECG) and on the OTCBB (PUBSF).

         The range of high and low sales prices for the Common Stock from
January 1, 1999, to the end of 2000 has been:

<TABLE>
<CAPTION>
                           High      Low

<S>                       <C>      <C>
First Quarter of 1999:    $2.125   $1.594
Second Quarter of 1999:   $2.25    $1.50
Third Quarter of 1999:    $1.625   $0.688
Fourth Quarter of 1999:   $0.594   $1.156

First Quarter of 2000:    $2.437   $1.437
Second Quarter of 2000:   $2.135   $0.969
Third Quarter of 2000:    $1.313   $0.313
Fourth Quarter of 2000:   $0.656   $0.070
</TABLE>

         The approximate number of record holders of the Company's common stock
as of January 2001 is 528.

         The shareholders approved a proposal to consolidate the shares on a 1
for 2 basis at an Extraordinary General Meeting held on March 23, 2000. All
figures in the table above have been adjusted to reflect this consolidation.



                                      -22-
<PAGE>


ITEM 6   SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>

                              2000           1999          1998             1997         1996
                              ----           ----          ----             ----         ----
<S>                      <C>            <C>            <C>            <C>            <C>
Sales                    $    50,084    $    50,104    $    42,630    $    34,231    $    29,284
 Income from
 Restaurant
 Operations                   (7,621)         2,844          3,770          1,883          1,587
Earnings
 before
 Interest and Taxes          (10,504)        (2,196)           156           (912)          (840)
Net Income                   (11,816)        (4,262)          (930)        (1,416)        (1,174)
Total Assets                  19,650         30,028         30,797         24,621         16,767
Shareholder's  Equity         (2,938)         6,793          8,621         10,209          7,928
Long Term
 Debt                    $    16,182    $    15,792    $    16,605    $    10,279    $     5,337
Average
 Shares
 Outstanding(A)            2,619,000      1,756,000      1,598,000      1,474,000      1,342,000
Earnings Per  Share(a)   $     (4.51)   $     (2.43)   $     (0.58)   $     (0.96)   $     (0.88)
</TABLE>

(a) Adjusted for the Company's 1 for 2 stock consolidation on March 23, 2000.



                                      -23-
<PAGE>


ITEM 7   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

FIFTY THREE WEEKS ENDED DECEMBER 31, 2000 VS. FIFTY TWO WEEKS ENDED DECEMBER 26,
1999

         Since its first restaurant was opened in 1976, the Company has focused
its operations on single concept units of its brand, principally British style
pub restaurants (its Core business). Recently the company entered into two
ventures (Canadian Rainforest Restaurants and a "twin" restaurant concept in
Franklin Mills Mall in Pennsylvania). Neither of these ventures performed up to
expectations and full provision for the write-down of both investments has been
made. The unsatisfactory results from these two ventures are of sufficient
magnitude to mask the underlying health of the Company's Core business. The
following discussion and analysis include, where appropriate, comments on the
Core business, as well as discussion on the entire business.

NET INCOME

         For the fifty three weeks ended December 31, 2000, the Company's net
loss was CDN ($11,816,000) compared to CDN ($4,262,000) for the fifty two week
period in 1999. Loss per share for the current period was CDN ($4.51) compared
to ($2.43) in 1999. The average number of shares outstanding increased from
1,756,000 in 1999 to 2,619,000 for the current year.

         Included in the year 2000 losses are costs relating to the closure of
the Franklin Mills `twin' restaurant (CDN$4,787,000) and provision for the
write-down of the Company's investment in the Canadian Rainforest Cafe
restaurants joint venture (CDN$4,939,000). The prior year's results include
costs associated with the resolution of certain disputes and corporate
restructuring (CDN$1,892,000).

         The 2000 net income excluding the operating loss of the Franklin Mills
and Canadian Rainforest restaurant ventures and the one-time items mentioned
above was CDN $49,000 or CDN $0.02 per share.

SALES

         Sales remained static during the fifty three weeks ended December 31,
2000 at CDN $50,084,000 from CDN $50,104,000 in 1999.

         For the twelve Canadian E&C locations open throughout both periods,
sales for the fifty three weeks December 31, 2000 totaled CDN $19,903,000 and
were up 4.4% compared to the fifty two weeks ended December 26, 1999.
Approximately 1.7% of the increase was due



                                      -24-
<PAGE>

to the fifty-third week, with the remaining 2.7% reflecting a strong sales trend
in the majority of the Canadian stores.

         For the six US locations, excluding Franklin Mills, open throughout
both periods, sales for the 2000 period were US $12,565,000 and were down 0.7%
compared to the prior year. Weaker than expected sales at the Minneapolis and
Philadelphia locations offset solid gains at the other locations.

         The Company's share of sales for the three Rainforest Cafe restaurants
were $7,861,000, compared with $8,929,000 for 1999. The increase in the number
of trading weeks at both the Scarborough and Yorkdale restaurants was more than
offset by the decline in sales at all three locations.

FOOD AND BEVERAGE COSTS

         Overall, food and beverage costs, as a percentage of sales, increased
marginally to 29.0% for the fifty three weeks ended December 31, 2000, compared
to 28.8% for the fifty two weeks ended December 26, 1999. Excluding the
Rainforest and Franklin Mills locations, the food and beverage percentage would
have been 28.7%, compared to 28.6% on the same basis a year ago.

LABOUR AND BENEFITS COSTS

         Labour and benefits increased from 32.0% of sales in 1999 to 33.1% in
the current period. The disappointing sales at the Franklin Mills location led
to unacceptably high labour rates at that location and influenced the overall
rate.

         Excluding Rainforest and Franklin Mills, the labour and benefits rate
would have been 32.2%, a 1.5% increase over the comparable period in 1999. The
increase was being driven by two locations that saw significant deterioration in
their labour percentages. Steps have been taken, including replacement of
restaurant management, to remedy these situations.

OCCUPANCY AND OTHER OPERATING COSTS

         Occupancy and other operating expenses increased as a percentage of
sales from 25.5% in 1999 to 28.0% in the current period. Excluding Rainforest
and Franklin Mills, the rate would have been 23.4%, compared to 22.0% in 1999.

RESTAURANT CLOSING COSTS

         Included in the 2000 results is a provision of CDN $9,726,000 to
reflect the costs associated with the closure of the `twin' restaurant in
Franklin Mills, PA, and the restructuring of the Canadian Rainforest Cafe
restaurants joint venture.


                                      -25-
<PAGE>

         The Company reached agreement with its landlord in Franklin Mills to
close the `twin' Elephant & Castle/Alamo Grill restaurant and to terminate the
lease in exchange for the surrender of substantially all of the assets at that
locations, and the payment of up to fifteen months' rent. The Company made full
provision for the disposal of assets, and the cost of lease and employee
terminations. These amounted to $4,787,000.

         Subsequent to the year-end and the closure of the Scarborough
Rainforest Cafe restaurant, the Company and Landry's have been engaged in the
negotiation of a restructuring of the joint venture. The Company made full
provision against its investment in CRRI and its receivable from the joint
venture company, resulting in a charge to earnings in 2000 of CDN $4,939,000.

         Included in the results for 1999 was a provision of CDN $250,000 for
the costs of closure of an older Canadian mall-based restaurant.

DEPRECIATION AND AMORTIZATION EXPENSE

         Depreciation and amortization costs decreased to 5.7% of sales for the
current period from 7.6% last year. Amortization of pre-opening costs for new
restaurants, which is effected over the twelve months following opening, was the
major driver of the 1999 rate. The combination of low sales and high development
costs at Rainforest and Franklin Mills had a significant impact on the rate.
Without Rainforest and Franklin Mills, the depreciation and amortization rate
was 4.3% of sales.

INCOME FROM RESTAURANT OPERATIONS

         As a result of the above factors, particularly the Restaurant Closing
Costs and unsatisfactory results from Rainforest and Franklin Mills, the Company
incurred a loss from restaurant operations of CDN $(7,621,000) for 2000. This
compared to income of CDN $2,844,000 in 1999.

         The impact of Rainforest and Franklin Mills was disproportionate.
Excluding the results from these locations, and the one-time provision for
closing costs, income from restaurant operations for the fifty-three weeks ended
December 31, 2000 was CDN $4,567,000 compared to CDN $5,085,000 in 1999. The
1999 figure included a $CDN 250,000 provision for closing costs of an
unprofitable Canadian location, plus the operating results from that location.

GENERAL AND ADMINISTRATIVE COSTS

         General and administrative costs decreased from 6.8% of sales



                                      -26-
<PAGE>

in 1999 to 5.8% in the current period. In dollar terms, general and
administrative costs decreased from CDN $3,398,000 for 1999 to CDN $2,893,000
for 2000.

INTEREST ON LONG TERM DEBT

         Interest on long term debt was CDN $1,874,000 for the fifty three weeks
ended December 31, 2000, compared to CDN $2,056,000 for the comparable period in
1999. The decrease is attributable to the conversion of $1,265,000 of
convertible debt into equity early in 2000.

(LOSS) BEFORE TAXES

         The Company incurred a loss before income taxes of CDN ($12,378,000)
for 2000 compared to a loss of CDN ($4,252,000) for 1999. As discussed above,
the Company experienced a negative impact from its Franklin Mills location and
the Canadian Rainforest Restaurants joint venture. The losses at these locations
and the CDN $9,726,000 in one-time costs related to closure of the Franklin
Mills location and write-down of the investment in CRRI resulted in the
increased loss for the year.

INCOME TAXES

         The Company incurred a loss in the fifty three week period ended
December 31, 2000 and therefore has no current tax liability. The Company also
has loss carry-forwards that will reduce its effective tax rate in future
periods. Included in 1999 is a provision of CDN $125,000 representing the
Company's current estimate of the cost of settling a dispute that dates back to
1984.

NET INCOME

         For the fifty three weeks ended December 31, 2000, the Company's net
loss was CDN ($11,816,000) compared to CDN ($4,262,000) for the corresponding
period in 1999. Loss per share for the current period was CDN ($4.51), compared
to ($2.43) in 1999. The average number of shares outstanding increased from
1,756,000 in 1999 to 2,619,000 for the current year (after giving effect to the
1 for 2 share consolidation).

         Included in the 1999 year are certain costs associated with the
resolution of certain disputes and corporate restructuring.

         The 2000 net income, excluding the operating losses at the Rainforest
and Franklin Mills locations, the closing costs related to Rainforest and
Franklin Mills and the one-time items mentioned above was CDN $49,000 or CDN
$0.02 per share, compared to a loss of CDN ($872,000) in 1999 (CDN ($1.36) per
share) when calculated on the same basis.



                                      -27-
<PAGE>

FIFTY TWO WEEKS ENDED DECEMBER 26, 1999 VS. FIFTY TWO WEEKS ENDED DECEMBER 27,
1998

SALES

         Sales increased 17.5% during the fifty two weeks ended December 26,
1999 to CDN $50,104,000 from CDN $42,630,000 in 1998. As discussed above, the
1999 figure includes sales for four new locations: Franklin Mills PA (opened
November 13, 1998); Rainforest - Scarborough ON (opened February 4, 1999);
Rainforest - Yorkdale ON (opened June 30, 1999); and Toronto ON (opened November
10, 1999). The Company disposed of its London ON location, by way of a franchise
agreement with two of its location managers, on September 28, 1998.

         For the thirteen Canadian E&C locations open throughout both periods,
sales for the fifty two weeks December 26, 1999 totaled CDN $19,703,000 and were
down 1.8% compared to the fifty two weeks ended December 27, 1998. Newly enacted
bans on indoor smoking at several locations and the impact of the Eaton's
department store chain bankruptcy on several mall locations contributed to the
decline.

         For the six US locations open throughout both periods, sales for the
1999 period were US $12,657,000 and were down 1.9% compared to the prior year.
Food sales, which make up approximately 70% of total sales were up slightly, but
beverage sales were down, again partially attributable to restrictions on indoor
smoking. Sales at the Franklin Mills location continue to disappoint, despite
numerous targeted marketing programs implemented during 1999.

         Sales at the Rainforest - Sales at theme restaurants such as Rainforest
are not considered to be "comparable" until after eighteen months of operation.
None of the locations have yet reached that point of comparability. As discussed
under "Site Developments" above, the Company has developed strategies and
programs, including the hiring of an experienced marketing and promotions
manager, in order to take advantage of the sales potential in the markets served
by the restaurants.

FOOD AND BEVERAGE COSTS

         Overall, food and beverage costs, as a percentage of sales, increased
marginally to 28.8% for the fifty two weeks ended December 26, 1999, compared to
28.1% for the fifty two weeks ended December 27, 1998. Excluding Franklin Mills,
the food and beverage percentage would have been 28.6%.

LABOUR AND BENEFITS COSTS

         Labour and benefits decreased from 32.3% of sales in 1998 to



                                      -28-
<PAGE>

32.0% in the 1999 period. The disappointing sales at the Franklin Mills location
led to unacceptably high labour rates at that location and influenced the
overall rate.

         Excluding Franklin Mills, the labour and benefits rate would have been
30.8%, a 1.5% (of sales) improvement over the comparable period in 1998. The
decrease is being driven by continued emphasis on cost management techniques at
all locations.

OCCUPANCY AND OTHER OPERATING COSTS

         Occupancy and other operating expenses increased as a percentage of
sales from 24.8% in 1998 to 25.5% in the 1999 period. Excluding Franklin Mills,
the rate would have been 24.0%, representing an improvement of 0.8% compared to
1998.

RESTAURANT CLOSING COSTS

         Included in the results for 1999 is a provision of CDN $250,000 for the
costs of closure (scheduled for March 25, 2000) of an older Canadian mall-based
restaurant. There were no such costs in the comparable period of 1998.

DEPRECIATION AND AMORTIZATION EXPENSE

         Depreciation and amortization costs increased to 7.6% of sales for the
1999 period from 5.9% in 1998. Amortization of pre-opening costs for new
restaurants, which is effected over the twelve months following opening, is the
major driver of the cost increase. The combination of low sales and high
development costs at Franklin Mills had a significant impact on the rate.
Without Franklin Mills, the depreciation and amortization rate was 5.6% of
sales.

INCOME FROM RESTAURANT OPERATIONS

         As a result of the above factors, income from restaurant operations, as
a percentage of sales, decreased from 8.8% for the fifty two weeks ended
December 27, 1998 to 5.7% for the 1999 period. In dollars terms, the decrease
was from CDN $3,770,000 to CDN $2,844,000.

         The impact of Franklin Mills was disproportionate. Excluding Franklin
Mills, and the one-time provision for potential closing costs of a Canadian
location, income from restaurant operations improved to 10.5% of sales in the
1999 period from 8.8% in the comparable period of 1998. In dollar terms, the
improvement was CDN $1,232,000, from CDN $3,770,000 to CDN $5,002,000.

GENERAL AND ADMINISTRATIVE COSTS

         General and administrative costs decreased from 8.5% of sales

                                      -29-
<PAGE>

in 1998 to 6.8% in the 1999 period. Economies of scale are now being achieved as
new restaurants are opened without commensurate increases in general and
administrative costs. In dollar terms, general and administrative costs were
down slightly from 1998, despite higher legal costs incurred during 1999.

RETIRING ALLOWANCES AND OTHER COSTS

         As part of a restructuring of corporate office in 1999, employment
contracts with two executive officers of the company were not renewed, and other
corporate staff were terminated. CDN $867,000 has been provided for retiring
allowances and other costs related to the restructuring.

LEGAL SETTLEMENT

         The Company reached an agreement with Shilo Management Corporation to
settle a legal dispute that arose in 1995. The cost of the settlement was CDN
$775,000 and has been included in the results for the fifty two weeks ended
December 26, 1999.

INTEREST ON LONG TERM DEBT

         Interest on long term debt rose to CDN $2,056,000 for the fifty two
weeks ended December 26, 1999, compared to CDN $1,085,000 for the comparable
period in 1998. The increase is attributable to interest on funds raised in late
1998 and early 1999 to finance the construction of the new Canadian Rainforest
Cafe operations and the Franklin Mills location.

(LOSS) BEFORE TAXES

         The Company incurred a loss before income taxes of CDN ($4,252,000) for
1999 compared to a loss of CDN ($929,000) for 1998. As discussed above, the
Company experienced a negative impact from its new Franklin Mills location,
which more than offset improved performance at the remainder of its locations.
Significant improvements in labour, occupancy and other costs were offset by
poor performance in these areas at Franklin Mills. The poor performance at
Franklin Mills, plus increased interest costs, some of which was related to
Franklin Mills, and CDN $1,912,000 in one-time costs related to retiring
allowances, settlement of an old legal dispute and the potential closure of one
location resulted in the increased loss for the year.

INCOME TAXES

         The Company incurred a loss in the fifty two week period ended December
26, 1999 and therefore has no current tax liability. The Company also has loss
carry-forwards that will reduce its effective tax rate in future periods.
Included in 1999 is a provision of CDN



                                      -30-
<PAGE>

$125,000 representing the Company's current estimate of the cost of settling a
dispute that dates back to 1984. This dispute had been carried as a contingent
liability, with an estimated possible cost of CDN $785,000 as at December 27,
1998. A portion of the dispute has been settled, and, subject to confirmation of
certain facts by the taxing authorities, the Company believes the balance of the
dispute will be resolved for the CDN $125,000 recorded in the 1999 period.
Should a change to this estimate be necessary, it will be recorded at the time
such determination is made. A deferred income tax recovery of CDN $125,000
related to timing differences in a joint venture has also been recorded in the
1999 period.


FINANCIAL CONDITION AND OTHER ITEMS

LIQUIDITY AND CAPITAL RESOURCES

         The Company currently has cash balances slightly in excess of CDN $1.7
million. Aside from day to day operating requirements, its most immediate cash
requirements are to pay the construction costs of its new Chicago restaurant.
Funds on hand, plus cash flow from operations and landlord contributions will be
sufficient to satisfy these current requirements. The Company's growth strategy,
as discussed on page two of this report, is to focus on strengthening the
profitability of existing operations and leveraging the brands' strength through
franchising and through corporate store growth to the extent deliverable from
internally generated cash flow.

The Company is currently in negotiations with its principal lender, GEIPPP II.
These negotiations are intended to restructure the existing debt plus US$360,000
of current interest payments to permit a repayment schedule, which allows for
corporate store growth, and other possible expansions of the Company's business
activities. In the absence of a negotiated restructuring, there is no certainty
that the Company will be able to meet the current interest and principal
payments as they fall due. The first installment of principal, US$1,125,000, is
due on 30th November, 2001.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CDN AND U.S. GAAP)

         The Company prepares its financial statements in accordance with CDN
GAAP. (The reader is referred to Note 18 of the Consolidated Financial
Statements for the year ended December 31, 2000 for additional explanation.) The
Financial statements, if prepared in accordance with U.S. GAAP would have
differed as follows:

         Net loss for the year ended December 31, 2000 would be

                                      -31-
<PAGE>

         decreased by CDN $106,000 comprised of pre-opening costs that would
         have been expensed in 1999 under U.S. GAAP, offset by amortization
         expense resulting from exclusion of the first option period in
         calculating the amortization of certain leasehold improvements. The
         impact of this adjustment would be to decrease the net loss per share
         from CDN ($4.51) under CDN GAAP to CDN ($4.46) under U.S. GAAP.

         Net loss for the year ended December 26, 1999 would be decreased by
         CDN $1,189,000 comprised of recognition on non-capital loss
         carry-forwards, offset by dividends on paid-in capital that would be
         treated as interest expense under U.S. GAAP; by amortization expense
         resulting from exclusion of the first option period in calculating the
         amortization of certain leasehold improvements; and by pre-opening
         costs that would be expensed under U.S. GAAP.


         Shareholders' Equity at December 31, 2000 under U.S. GAAP would have
been improved to CDN ($2,303,000) compared to CDN ($2,963,000) under CDN GAAP

         Shareholders' Equity at December 26, 1999 under U.S. GAAP would have
been CDN $7,325,000 compared to CDN $6,793,000 under CDN GAAP, due to the
cumulative effect of reconciliation adjustments.




                                      -32-
<PAGE>


ITEM 7A  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


         Intentionally omitted.


                                      -33-
<PAGE>



ITEM 8   FINANCIAL STATEMENTS

         The Company's consolidated financial statements and the report of the
independent accountants thereon appear beginning at page F-2. See index to
consolidated Financial Statements on page F-1.



                                      -34-
<PAGE>


ITEM 9   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                  ON ACCOUNTING AND FINANCIAL DISCLOSURE

         None.  Not applicable.



                                      -35-
<PAGE>


                                    PART III



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

     The names, ages, principal occupation and (country of ordinary residence)
of the directors as of April 15, 2001, and certain information about them, are
set forth below:

<TABLE>
<CAPTION>
         NAME                       AGE          PRINCIPAL OCCUPATION
<S>                                 <C>          <C>
Jeffrey M. Barnett(a)(b)            62           Founder and Director
(Canada)

Richard H. Bryant                   47           President and Chief
(Canada)                                         Executive Officer

David Matheson(a)                   51           Director and Executive
(Canada)                                         Vice President
                                                 Equatorial Energy Inc.

George Pitman(b)                    59           Founder and Director
(Canada)

Colin Stacey                        61           Vice President and
(Canada)                                         Chief Operating Officer
                                                 of the Company

David Wiederecht(b)(c)              45           Vice President,
(U.S.)                                           Alternative Investments
                                                 GE Investment Corporation
</TABLE>

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

(a) Audit Committee as of 2000 - 2001

(b) Compensation Committee as of 2000 - 2001

(c) Recently added to Audit Committee, as Chairman.


EXECUTIVE OFFICERS AND DIRECTORS

     Jeffrey M. Barnett co-founded the predecessor of the Company in 1977 with
his twin brother, Peter J. Barnett, and their long-time business colleague, Mr.
George W. Pitman. Jeffrey M. Barnett served as Chairman of the Board until July,
1999 and Chief Executive Officer for the Company until March of 1998.


                                      -36-

<PAGE>


     Richard H. Bryant, was appointed President & Chief Executive Officer of the
Company on October 22, 1999, having previously served as Chief Financial Officer
since November, 1997. Prior to joining the Company, Mr. Bryant was Chief
Financial Officer of the Keg Restaurants Limited, a subsidiary of Whitbread PLC,
from August 1993 to June of 1997. Prior thereto, he served as financial
controller of the Whitbread Beer Company, a division of Whitbread PLC, from June
of 1990 until August of 1993. Mr. Bryant has been serving as a director of the
Company since March of 1998.

     David Matheson, Director, is a Chartered Accountant and holds a Bachelor of
Commerce Degree from the University of British Columbia. Mr. Matheson has over
17 years of experience financing oil and gas projects world wide and supervising
financial and accounting functions of public oil and gas companies. Since 1996,
Mr. Matheson has been the Executive Vice President and a Director of Equatorial
Energy Inc.

     George W. Pitman is one of the founders of the Company and served as a key
executive and a director of the Company since prior to the initial public
offering, and continues to work with the Company as a consultant with respect to
Design and Development activities.

     David Wiederecht is Vice President of Alternative Investments for GE
Investment Corporation since January 1994. Prior to his current assignment, he
served GE Investments in various senior financial management assignments in
GEIC's real estate and finance organization since 1988. Prior to joining GEIC,
Mr. Wiederecht worked at various assignments within General Electric Company,
including corporate headquarters and GE's audit staff. Mr. Wiederecht was first
elected to the Board of Directors of the Company in January, 1996.

     Colin Stacey is the Chief Operating Officer of the Company since June of
1997. Prior to joining the Company, Mr. Stacey was President and Chief Executive
Officer of Keg's Restaurants, a North American subsidiary of Whitbread PLC, from
1992 to June of 1997. Prior to this assignment, Mr. Stacey occupied senior
management positions within Whitbread's restaurants and leisure businesses in
the United Kingdom and Australia. He has served as a director since 1997.


                                      -37-

<PAGE>


     Daniel DeBou, Chartered Accountant, has been the Chief Accounting Officer
of the Company since January 1, 1993. Prior to joining the Company, Mr. DeBou
was employed from 1978 to 1992 in various financial capacities with Woodward
Stores Limited, a publicly-owned company traded on the Toronto Stock Exchange
and engaged in the operation of department and specialty stores.

RESIGNATIONS

     Mr. William McEwen resigned from the Board of Directors as of October 01,
2000.

     Mr. Anthony Mariani, one of two nominees of GEIPPP II, resigned from the
Board of Directors in early April, 2001. GEIPPP II has indicated its intention
to replace Mr. Mariani with a substitute nominee.

MEETINGS, ATTENDANCE, COMMITTEES

     The Board of Directors of the Company held 10 regular meetings in 2000. The
Board maintains two Standing committees: the Compensation Committee and the
Audit Committee. With the exception of Mr. Matheson and Mr. Mariani, who has
resigned and is not a candidate for re-election, each director attended at least
75% of the aggregate of: (1) the total number of Board meetings held during the
period he was a director; and (2) the number of meetings held by all Committees
of the Board on which he served during such period.

     It is the function of the Compensation Committee to review the Company's
remuneration policies and practices, administer certain of the Company's
incentive compensation and stock option plans, and establish the salaries of the
executive officers of the Company. Messrs. Jeffrey Barnett, George Pitman and
David Wiederecht have heretofore served as the Compensation Committee. It is the
function of the Audit Committee to review the external audit programs of the
Company and to make recommendations to the Board of Directors of the company
concerning its appointment of independent auditors, the conduct of the audit and
related matters. Messrs. Jeffrey Barnett, David Matheson and Anthony Mariani
have heretofore served as the Audit Committee. The Committees meet separately
from, but usually on the same days as, regularly scheduled Board meetings. The
Company does not maintain a nominating committee or one performing similar
function.


                                      -38-

<PAGE>


AUDIT COMMITTEE

     The Audit Committee is required to have a minimum of three members, not
less than two of whom, shall be "Independent Directors" as such term is defined
below, and not less than one of whom shall have past employment experience in
finance or accounting, professional certification in accounting, or other
comparable experience or background including a current or past position, as a
senior officer of a substantial for-profit company responsible for oversight of
an entity's financial transactions.

     Non-independent directors may serve on the Audit Committee only in
circumstances where the Board of Directors unanimously determines that it is in
the best interest of the Corporation and its shareholders. Mr. Jeffrey M.
Barnett currently so serves on the Audit Committee.

     Current officers and managers of the Company and their immediate families
are not eligible to serve on the Audit Committee.

     The Audit Committee has the responsibility to oversee all of the Company's
financial transactions and to interact directly with the independent outside
Auditors of the Company, conferring with such auditors from time to time as
reasonably required, at least once annually, in the absence of all current
officers and managers of the Company.

     The Audit Committee makes formal recommendations to management concerning
financial controls and with respect to the retention of outside auditors of the
Company.

     The Board recently adopted an Audit Committee Charter, a copy of which
follows in its entirety:


                         CHARTER OF THE AUDIT COMMITTEE

The Audit Committee shall be comprised of not less than three (3) directors
selected by the Board of Directors of the Company. Each member of the
Committee shall be an independent director, as defined by the applicable
rules of the Securities & Exchange Commission and any Exchange upon which the
Company's securities may be listed for trading, except for up to a maximum of
one (1) member of this


                                      -39-

<PAGE>


Committee, and each of whom shall have sufficient financial experience and
ability to enable such persons to discharge the responsibilities of the Audit
Committee, and shall have accounting or related financial management expertise.

The following shall constitute the charter of the Audit Committee:

     1.   to review and discuss the audited financial statements of the Company
          with the Company's independent accountants;

     2.   to review and discuss the audited financial statements of the Company
          with management;

     3.   to discuss with the independent auditors the matters required to be
          discussed by SAS 61 (Codification of Statements on Auditing Standards,
          AU 380), as may be modified or supplemented;

     4.   to receive the written disclosures and the letter from the independent
          accountants required by Independence Standards Board Standard No. 1
          (Independence Standards Board Standard No. 1, Independence Discussions
          with Audit Committees), as may be modified or supplemented, and to
          discuss with the independent accountant the independent accountant's
          independence;

     5.   to recommend to the Board of Directors that the audited financial
          statements be included in the Company's Annual Report;

     6.   to review with the independent auditors the Company's independent
          system of audit and financial controls and results of internal audits
          and to review such matters with appropriate members of management;

     7.   to review and discuss the Company's financial report, accounting
          standards and principles of the Company, and any significant changes
          in such standards or principles or in their application;

     8.   to review any matters pertaining to the integrity of management,
          including conflicts of interest, adherence to standards of business
          conduct, and report to the full Board thereon; and


                                      -40-

<PAGE>


     9.   to make recommendations to the full Board with respect to management
          intentions concerning the retention of, or change in, the Company's
          independent auditor or in the personnel of the independent auditing
          firm assigned to audit the Company's financial statements.


REPORT OF THE AUDIT COMMITTEE

     The Audit Committee of the Board of Directors has reviewed and discussed
the Company's audited fianncial statements for the year ended December 31,
2000, and discussed with the Company's independent auditors the matters
required to be discussed by Statement of Auditing Standards No. 61,
"Communication with Audit Committee" and received the written disclosures and
letter from such independent auditors required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees) and the
Audit Committee has discussed with Pannell Kerr Forster Worldwide that firm's
independence from the Company and its management. The aggregate fees billed
for professional services rendered by such firm for its audit of the Company
annual financial statements for the year ended December 31, 2000 and for its
review of interim statements was CDN $81,000. The aggregate fees billed for
all other services rendered by Pannell Kerr Forster Worldwide to the Company
during the fiscal year 2000 was CDN $24,000, and such fees were primarily for
audits of subsidiary and joint venture companies. The Audit Committee has
determined that the provision of such services and the payment of such fees
is compatible with the independence of Pannell Kerr Forster Worldwide as the
Company's auditors.

     Based upon the matters referred to above, the Audit Committee has
recommended to the Company's Board of Directors the inclusion of the Company's
audited financial statements to be included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000 to be filed with the U.S.
Securities and Exchange Commission, and on such other forms and with such other
agencies as


                                      -41-

<PAGE>


required by the fact that the Company is a corporation organized and existing
under the laws of British Columbia, Canada and subject to the jurisdiction
thereof and regulations thereunder.

                                                    David Wiederecht (Chairman)*
                                                    Jeffrey Barnett(Member)
                                                    David Matheson (Member)


COMPENSATION OF DIRECTORS

     Directors who are not employees or officers of the Company (herein the
"Outside Directors") were separately compensated for their services as follows:
CDN$1,250 per quarter plus 3,000 Common shares for each year of service. Certain
Outside Directors have elected not to accept cash compensation and have
redirected their Common Share compensation to their employer. No director is
indebted to the Company


EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE

     The Compensation Committee (the "Committee") is currently composed of three
directors, Messrs. David Wiederecht, Chairman, Jeffrey Barnett and George
Pitman. All are non-employee directors. See "INTEREST OF INSIDERS IN MATERIAL
TRANSACTIONS". During 2000, the Committee has not altered or otherwise modified
the compensation practices and general rates which previously prevailed for the
principal executives of the Company initial public offering. The Committee
reviewed and approved a compensation package for Mr. Bryant, the President and
Chief Executive Officer of the Company.

                                               The Compensation Committee
                                               By:  David Wiederecht (Chairman)*
                                                    Jeffrey Barnett (Member)
                                                    George Pitman (Member)

*Mr. Wiederecht was elected to the Audit Committee in substitution
for Anthony Mariani, the other GEIPPP II nominee to the Board of
Directors, who resigned as a director and Chairman of the Audit
Committee in April of 2001, in connection with his changing
responsibilities at GEIPPP II.  Mr. Wiederecht will be replaced on
the Compensation Committee.


                                      -42-

<PAGE>


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Four of the six remaining directors are not full time employees of the
Company. The Company intends to continue a policy of having directors
unaffiliated with management to constitute a majority of the full Board. Filling
vacancies on the Board may require finding Canadian residents willing to so
serve, since the Board of any corporation organized under the laws of British
Columbia are required to consist of a majority of Canadian residents. Five of
the six directors are currently Canadian residents. There are no interlocks
among the members of the Compensation Committee.







                                      -43-

<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth a summary of the compensation of the Chief
Executive Officer of the Company and the four other other most highly paid
executive officers of the Company serving as such ("Named Executive Officers")
as of the end of the last fiscal year for their services rendered during fiscal
years 2000, 1999 and 1998. All figures are in Canadian dollars. The relative
value of the Canadian dollar compared to the U.S. dollar fluctuates from time to
time. During 2000, the average value was each CDN $1.00 equals U.S. $0.67.


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
                                         Annual Compensation         Long Term
                                                                   Compensation
                                       ----------------------    ----------------
                                                                      Awards
                                                                 ----------------
  Name and Principal                                             Securities Under         All Other
       Position              Year       Salary        Bonus       Options Granted      Compensation(1)
--------------------------------------------------------------------------------------------------------
<S>                          <C>       <C>           <C>         <C>                   <C>
Rick Bryant, President       2000      $180,000      $     0         150,000(4)              $798
and Chief Executive          1999      $155,355      $28,000                                 $864
Officer                      1998      $132,125         -             50,000(4)                -
--------------------------------------------------------------------------------------------------------
David Evans, Vice            2000      $144,000      $10,500
President, Franchise         1999      $      0
Development(2)               1998      $      0
--------------------------------------------------------------------------------------------------------
Paul Tilbury, Vice           2000      $111,173      $16,500            -                  $2,047
President, Canadian          1999      $ 99,359      $16,200            -                  $4,958
Rainforest(3)                1998      $ 86,359         -               -                  $4,094
--------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Other compensation consists of retiring allowances and benefits, director's
     fees and an automobile allowance.

(2)  Mr. Evans began his employment with the Company in September of 1999.

(3)  Mr. Tilbury resigned from the Company, effective November, 2000.

(4)  Adjusted to reflect the 1 for 2 reverse split, which was effective
     March 23, 2000.

         The Company currently does not maintain, and none of the Named
Executive Officers are eligible for, deferred compensation, long-term incentive
plan payouts, restricted stock awards, or other similar compensatory
arrangements.

OTHER COMPENSATION INFORMATION

         The aggregate compensation paid or payable directly to the Company's
directors and executive officers as a group (including the Named Executive
Officers) by the Company for the year ended December 31, 2000 was CDN $749,038.
These amounts include salaries, fees, commissions


                                      -44-

<PAGE>


and bonuses, but exclude the value of options granted in partial compensation
for salary or bonus. The directors and executive officers as a group earned
taxable benefits in 2000 aggregating less than $6,000 comprising solely standard
medical benefits and, in one case, an automobile allowance.

EMPLOYEE STOCK OPTION AND STOCK COMPENSATION PLANS

     The Board of Directors of the Company has adopted two stock plans, and the
Shareholders have ratified such plans. These plans are the 1993 Stock Option
Plan (the "1993 Plan") and the 1997 stock Compensation Plan (the "1997 Plan").
Under the 1993 Plan, Options may be granted to key salaried management and
administration employees. Messrs. Jeffrey M. Barnett, Peter J. Barnett and
George W. Pitman are not eligible for grants pursuant to the 1993 Plan. 50,000
Common shares of the Company were initially set aside for grants pursuant to the
1993 Plan, while 200,000 Common shares of the Company were set aside pursuant to
the 1997 Plan, the number of Common shares in each case being adjusted to
reflect the 1 for 2 reverse split which became effective on March 23, 2000.
Options granted pursuant to both Plans vest 1/3 after 18 months; 1/3 after 30
months; and the remaining 1/3 after 42 months. All options expire on the fifth
annual anniversary of the date of grant. No stock options were granted or
exercised under either Plan during the most recent fiscal year. Both the 1993
Plan and the 1997 Plan are intended to permit the Company to retain and attract
qualified individuals who contribute to the overall success of the Company and
the achievement of performance measures. Both Plans are administered by the
Compensation Committee of the Board of Directors, whose members determine to
whom options will be granted and the terms of the options. The Committee is
entitled to accelerate the vesting of options upon such circumstances as it
deems appropriate. Actual vesting can be accelerated or delayed based on
performance measures established by the Compensation Committee.

NON-PLAN OPTIONS

     During 2000 150,000 non-plan options were approved for issuance to Richard
H. Bryant at an exercise price of US$2.00 per Share. The non-Plan options were
not issued to him, and a substitute Option Plan and grants to Mr. Bryant and
other members of management is currently under active consideration for
presentation at the 2001 Annual Meeting of Shareholders.

TOTAL OPTIONS/WEIGHTED AVERAGE EXERCISE PRICE

     There were an aggregate of 297.125 options outstanding at December 31,
2000, exercisable at various prices at a weighted average exercise price of U.S.
$12.58 per share. The number of options has been adjusted to reflect the 1 for 2
reverse split which was effective March 23, 2000.

INDEMNIFICATION OF DIRECTORS OR OFFICERS

     There was no indemnification payable during the 2000 financial year to
directors or officers of the Company.


                                      -45-

<PAGE>


PERFORMANCE TABLE

     The following table compares the total cumulative shareholder return for
$100.00 invested in Common shares on December 31, 1995 with the total returns of
the S&P Restaurant Index and the NASDAQ Composite Index. The chart reflects a
drastic declination in the value of the Company's shares, occasioned by very
substantial operating losses, and to the financial solvency of the Company, a
reverse stock split and the delisting of the Company's shares from NASDAQ. In
the opinion of Management, operations have stabilized and are currently cash
positive.

<TABLE>
<CAPTION>
------------------------------------------------------------------------
                    ELEPHANT & CASTLE GROUP INC.
------------------------------------------------------------------------
                         5 Year Performance
------------------------------------------------------------------------
                 Elephant &             S&P 500                NASDAQ
 Month             Castle             Restaurant             Composite
------------------------------------------------------------------------
<S>              <C>                  <C>                    <C>
Dec-95            $100.00               $100.00               $100.00
------------------------------------------------------------------------
Mar-96            $126.67               $103.43               $104.70
------------------------------------------------------------------------
Jun-96            $131.11               $102.31               $113.20
------------------------------------------------------------------------
Sep-96            $104.44               $105.40               $117.30
------------------------------------------------------------------------
Dec-96            $135.56               $ 98.80               $123.00
------------------------------------------------------------------------
Mar-97            $165.33               $102.52               $116.40
------------------------------------------------------------------------
Jun-97            $171.11               $107.21               $137.70
------------------------------------------------------------------------
Sep-97            $183.33               $105.40               $160.90
------------------------------------------------------------------------
Dec-97            $124.44               $106.09               $150.70
------------------------------------------------------------------------
Mar-98            $102.22               $128.34               $176.40
------------------------------------------------------------------------
Jun-98            $ 91.11               $145.23               $181.30
------------------------------------------------------------------------
Sep-98            $ 71.11               $131.70               $163.40
------------------------------------------------------------------------
Dec-98            $ 30.00               $186.25               $212.10
------------------------------------------------------------------------
Mar-99            $ 40.00               $201.73               $238.30
------------------------------------------------------------------------
Jun-99            $ 27.78               $182.08               $260.80
------------------------------------------------------------------------
Sep-99            $ 13.33               $181.56               $267.10
------------------------------------------------------------------------
Dec-99            $ 44.35               $169.13               $394.80
------------------------------------------------------------------------
Mar-00            $ 15.06               $156.27               $441.20
------------------------------------------------------------------------
Jun-00            $ 11.11               $140.07               $382.30
------------------------------------------------------------------------
Sep-00            $  5.28               $134.91               $354.50
------------------------------------------------------------------------
Dec-00            $  0.62               $152.64               $237.40
------------------------------------------------------------------------
</TABLE>


INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS

     Other than as set forth below, no director, executive officer, proposed
nominee for election as a director, nor any of their respective associates or
affiliates is or has been at any time since the beginning of the last completed
financial year indebted to the Company.


                                      -46-

<PAGE>


                       TABLE OF INDEBTEDNESS OF DIRECTORS,
            EXECUTIVE OFFICERS AND SENIOR OFFICERS UNDER SECURITIES
                         PURCHASE PROGRAMS AND OTHERWISE

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Name of         Involvement        Largest            Amount               Financially         Security for
Principal       of Issuer or       Amount             Outstanding          Assisted            Indebtedness
Position        Subsidiary         Outstanding        as at April 25,      Securities
                                   ($)                2001                 Purchases
                                                                           During 2000
-----------------------------------------------------------------------------------------------------------
<S>             <C>                <C>                <C>                  <C>                 <C>
Mr. Jeffrey     Former             $350,000           0                    None                Company
Barnett         Chairman                                                                       Shares
-----------------------------------------------------------------------------------------------------------
</TABLE>

(1)  For the terms of indebtedness See "CERTAIN RELATIONSHIPS AND RELATED
     TRANSACTIONS".





                                      -47-

<PAGE>


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
         NAME                      NUMBER OF COMMON                   APPROXIMATE
                              SHARES BENEFICIALLY OWNED        PERCENTAGE OF TOTAL ISSUED
                               OR OVER WHICH CONTROL OR          AND OUTSTANDING COMMON
                                DIRECTION IS EXERCISED                   SHARES
-----------------------------------------------------------------------------------------
<S>                           <C>                              <C>
Jeffrey M. Barnett(1)                   285,187                           10.8%
-----------------------------------------------------------------------------------------
Peter J. Barnett(2)                     275,187                           10.4%
-----------------------------------------------------------------------------------------
Richard Bryant(1)                         3,500                        Less than 1%
-----------------------------------------------------------------------------------------
D. Matheson(1)                              750                        Less than 1%
-----------------------------------------------------------------------------------------
Anthony Mariani(1)(3)                      -                                -
-----------------------------------------------------------------------------------------
George Pitman (1)                        66,125                            2.5%
-----------------------------------------------------------------------------------------
Colin Stacey(1)                            -                                -
-----------------------------------------------------------------------------------------
David Wiederecht(1)(3)                     -                                -
-----------------------------------------------------------------------------------------
Daniel DeBou                                100                        Less than 1%
-----------------------------------------------------------------------------------------
General Electric                        649,860                           24.6%
Investment Private
Placement Partners II(4)
-----------------------------------------------------------------------------------------
All Directors and                     1,301,239                           49.2%
Executive Officers
as a Group
-----------------------------------------------------------------------------------------
</TABLE>



(1)  Each person was elected as a director at the last Annual General Meeting.

(2)  Includes 25,000 Common shares transferred by Mr. Peter Barnett to his adult
     children.

(3)  Messrs. Wiederecht and Mariani are employed by a fund, GEIM, general
     partner of GEIPPP II, the holdings of which are separately stated herein.

(4)  Excludes approximately 1,600,000 additional Common shares issuable on
     conversion of certain Subordinated Convertible Debentures held by the Fund.


                     COMPLIANCE WITH SECTION 16(A) REPORTING

     Each director, officer and beneficial owner of ten percent (10%) or more of
a registeredlass of the Company's equity securities is required to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of the Common Shares and other equity securities of the
Company by specific due dates. Based upon such persons Form 3 and Form 4
filings, during the year ended December 31, 2000, all such filing requirements
were complied with.


                                      -48-

<PAGE>


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Other than as set forth herein, no Director or Officer of the Company,
person who was a Director or Officer of the Company at any time since the
beginning of its last completed financial year, Shareholder who holds more
than 10% of the voting rights attached to the shares of the Company or any
associate, or affiliate of any of the foregoing has any material interest in
any transaction or in any proposed transaction which, in either case, has
materially affected or will materially affect the Company or any of its
subsidiaries.

SECURITY INTEREST IN FAVOUR OF GEIPPP II

     The Company has provided a security interest over all the assets of the
Company and each of its subsidiaries to secure the repayment of the U.S.
$9,000,000 of Convertible Unsecured Debentures (the "Debentures") issued by the
Company to GEIPPP II in November, 1995. In consideration for the security
interest in the assets of the Company and its subsidiaries, GEIPPP II waived all
existing defaults, all interest payments for a period of six months and amended
certain financial covenants to make them less onerous.

     The grant of a security interest was approved by the Board of Directors of
the Company on July 16, 1999 and re-affirmed by the Board, following a review of
the Company's financial position on September 13, 1999. Messrs. Wiederecht and
Mariani, both of whom were serving as nominees of GEIPPP II, did not participate
in either the discussion or the vote at the two meetings when this security
interest was approved by the Board.


                                      -49-

<PAGE>


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
                  FORM 8-K

         (a)  See Index to Exhibits, attached.
         (b) During the last quarter of the period covered by this report, the
         Registrant filed no reports on Form 8-K.



                                      -50-
<PAGE>


                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

(Registrant)  Elephant & Castle Group Inc.

By       /s/ RICHARD BRYANT
         -----------------------------------------------------------------------
         RICHARD BRYANT, PRESIDENT, CHIEF EXECUTIVE OFFICER/DIRECTOR

Date     MARCH 29, 2001
         -----------------------------------------------------------------------


By       /s/ DANIEL DEBOU
         -----------------------------------------------------------------------
         DANIEL DEBOU, CHIEF ACCOUNTING OFFICER

Date     MARCH 29, 2001
         -----------------------------------------------------------------------

         In accordance with the Exchange Act, this report has been additionally
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.

By       /s/ JEFFREY BARNETT
         -----------------------------------------------------------------------
         JEFFREY BARNETT, DIRECTOR

Date     MARCH 29, 2001
         -----------------------------------------------------------------------


By       /s/ COLIN STACEY
         -----------------------------------------------------------------------
         COLIN  J. STACEY, DIRECTOR

Date     MARCH 29, 2001
         -----------------------------------------------------------------------


By       /s/ GEORGE PITMAN
         -----------------------------------------------------------------------
         GEORGE W. PITMAN, DIRECTOR

Date     MARCH 29, 2001
         -----------------------------------------------------------------------


By       /s/ DAVID WIEDERECHT
         -----------------------------------------------------------------------
         DAVID WIEDERECHT, DIRECTOR

Date     MARCH 29, 2001
         -----------------------------------------------------------------------


By       /s/ ANTHONY MARIANI
         -----------------------------------------------------------------------
         ANTHONY MARIANI, DIRECTOR

Date     MARCH 29, 2001
         -----------------------------------------------------------------------


                                      -51-
<PAGE>

By       /s/ DAVID MATHESON
         -----------------------------------------------------------------------
         DAVID MATHESON, DIRECTOR

Date     MARCH 29, 2001
         -----------------------------------------------------------------------



                                      -52-
<PAGE>


                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>

EXHIBITS


<S>     <C>                                                              <C>
3.1      Certificate of Incorporation and                                *
         Certificate of Name Change of
         Registrant

3.2      Articles of Association of Registrant                           *

3.3      Certificate of Amalgamation, dated                              *
         May 1, 1990, The Elephant and Castle
         Canada Inc.

3.4      Resolution to increase the authorized                           ******
         share capital of Registrant

3.5      Amendment to Articles of Association of                         *******
         Registrant, dated March 23, 2000

3.6      Memorandum of Agreement dated October 19,
         1999 between the Company and a shareholder
         group relative to governance of the Corporation                 *******

4.1      Form of certificate evidencing shares                           *
         of Common Stock

4.2      Form of Underwriter's Warrant Agreement                         *
         between Registrant and the Underwriter

4.3      Form of Subordinated Convertible Note
         issued in Delphi Financing                                      *****

4.4      Form of Noteholders Warrant issued in
         Delphi Financing                                                *****

4.5      Form of amended Noteholder Warrant issued                       *******
         on renegotiation of Delphi Financing

4.6      Form of certificate evidencing shares of                        *******
         Common Stock, amended March 27, 2000

10.1     Bank Loan Agreement, dated September 13,                        *
         1990, with Toronto Dominion Bank

10.2     Letter Agreement dated June 26, 1991,                           *
         regarding expansion of facilities at
         Edmonton Eaton Centre food court relocation
</TABLE>


                                      -53-
<PAGE>

<TABLE>
<S>     <C>                                                              <C>
10.3     Retailer Application dated May 23, 1992,                        *
         and Specimen Agreement for Alberta Lotteries
         and Alberta Gaming Control

10.4     License Agreement dated July 9, 1992, with                      *
         Servomation Inc. relating to B.C. Place
         Stadium

10.5     Restaurant lease dated November 10, 1992,                       *
         with Shilo Management Corporation, relating
         to the Shilo Inn, Yuma, Arizona

10.6     Letter Agreement, with Shilo Management                         *
         Corporation relating to Shilo Hotel, Pomona,
         California

10.7     Restaurant Lease Agreement with Holiday Inns                    **
         of Canada, Ltd., relating to Holiday Inn Crowne
         Plaza at Winnipeg, Manitoba.

10.8     Restaurant Lease Agreement relating to Holiday
         Inn,     Philadelphia, Pennsylvania                             ***

10.9     Abstract of Restaurant Lease relating to Holiday
         Inn, San Diego Lease                                            ****

10.10    Revised Lease Abstract of Restaurant Lease
         relating to Canadian Rainforest Restaurants,
         Inc. (Yorkdale)                                                 *****

10.11    Revised Lease Abstract of Restaurant Lease
         relating to Canadian Rainforest Restaurants,
         Inc.(Montreal)                                                  *****

10.12    Revised Lease Abstract of Canadian Rainforest
         Restaurants, Inc.(Burnaby, B.C.)                                *****

10.13    Lease Abstract of Elephant & Castle Group, Inc.
         (Edmonton)                                                      *****

10.14    Lease Abstract of Canadian Rainforest
         Restaurants, Inc., (Scarborough, Ont.)                          *******

10.15    Lease Abstract of Elephant & Castle Group, Inc.
         (Franklin Mills, Pennsylvania)                                  *******

10.16    Abstract of Canadian Niagara Hotels sub-franchise               *******

10.17    Abstract of Holiday Inns Hotels Exclusivity
         Agreement re: franchise facilities                              *******

10.18    Form of Franchise Agreement for Alamo Grill                     *******

</TABLE>



                                      -54-
<PAGE>

<TABLE>

<S>     <C>                                                              <C>
10.19    Form of Franchise Agreement for Elephant & Castle               *******

10.20    Lease Abstract of Elephant & Castle Group, Inc.
        (Chicago, Illinois)                                              *******

21        List of Subsidiaries                                           ****

24.1     Irrevocable Consents and Power of Attorney on
         Form F-X                                                        *

99.1     Canadian Declaration as of May 11, 1990,                        *
         claiming the trade name "The Elephant and
         Castle"

99.2     Filing receipt dated February 5, 1993, for                      *
         U.S. service mark application "E&C"

99.3     Filing receipt dated February 5, 1993, for                     *
         U.S. service mark "Elephant Mug"
</TABLE>

         ---------------------
X        Filed herewith.

*        Incorporated by reference from the Exhibits filed with the
         Company's Registration Statement on Form SB-2 (Registration
         No. 33-60612) Modification of the numbering of the exhibits is
         in accordance with Item 601 of Registration S-B.

**       Filed with Registrant's 10-K SB for the Fiscal Year ended December 31,
         1993.

***      Filed with Registrant's 10-K SB for the Fiscal Year Ended December 31,
         1994.

****     Filed with Registrant's 10-KSB A-1 for Fiscal Year Ended
         December 31, 1996

*****    Filed with Registrant's 10-K for Fiscal Year Ended
         December 27, 1998

******   Filed with Registrant's 8-K dated December 8, 1999

*******  Filed with Registrant's 10-K dated December 27, 1999


                                      -55-
<PAGE>


ELEPHANT & CASTLE GROUP INC.


CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(CANADIAN DOLLARS)






         INDEX                                                        PAGE
         -----                                                        ----

         MANAGEMENT REPORT                                              1

         INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS               2

         CONSOLIDATED FINANCIAL STATEMENTS

         Consolidated Balance Sheets                                    3

         Consolidated Statements of Operations                          4

         Consolidated Statements of Shareholders' Equity (Deficit)      5

         Consolidated Statements of Cash Flows                          6

         Notes to Consolidated Financial Statements                  7-21



<PAGE>



MANAGEMENT REPORT

Management is responsible for preparing the Company's financial statements and
the other information that appears in this annual report. Management believes
that the financial statements fairly reflect the form and substance of
transactions and reasonably present the Company's financial condition and
results of operations in conformity with Canadian generally accepted accounting
principles. Management has included in the Company's financial statements
amounts that are based on estimates and judgments, which it believes are
reasonable under the circumstances.

The Company maintains a system of internal accounting policies, procedures and
controls intended to provide reasonable assurance, at appropriate cost, that
transactions are executed in accordance with Company authorization and are
properly recorded and reported in the financial statements and that assets are
adequately safeguarded.

Panell Kerr Forster audits the Company's financial statements in accordance with
auditing standards generally accepted in the United States of America and
provides an objective, independent review of the Company's internal controls and
the fairness of its reported financial condition and results of operations.

Elephant and Castle Group Inc's Board of Directors has an Audit Committee
composed of non-management Directors. The Committee meets with financial
management and the independent auditors to review internal accounting controls
and accounting, auditing and financial reporting matters.






"Richard Bryant"

President and Chief Executive Officer


                                       1
<PAGE>


                          INDEPENDENT AUDITORS' REPORT

TO THE SHAREHOLDERS OF ELEPHANT & CASTLE GROUP INC.

We have audited the consolidated balance sheets of Elephant & Castle Group Inc.
as at December 31, 2000 and December 26, 1999 and the consolidated statements of
operations, shareholders' equity and cash flows for the three years in the
period ended December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of Elephant & Castle Group Inc. as at
December 31, 2000 and December 26, 1999 and the results of its operations and
its cash flows for the three years in the period ended December 31, 2000 in
accordance with generally accepted accounting principles in Canada applied on a
consistent basis. Accounting principles generally accepted in Canada differ in
certain significant respects from accounting principles generally accepted in
the United States of America and are discussed in Note 15 to the consolidated
financial statements.

In the United States of America, reporting standards for auditors require the
addition of an explanatory paragraph (included following the opinion paragraph)
when the financial statements are affected by the Company's ability to continue
as a going concern. Our report to the shareholders dated March 23, 2001 is also
expressed in accordance with Canadian reporting standards which do not permit a
reference to such an uncertainty in the auditors' report when the uncertainty is
adequately disclosed in the financial statements.

"Pannell Kerr Forster"

Chartered Accountants

Vancouver, Canada
March 23, 2001

                    COMMENTS BY AUDITORS FOR CANADIAN READERS
                        ON CANADA - US REPORTING CONFLICT

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in note 1 to the
consolidated financial statements, the Company has a working capital deficiency
and has sustained operating losses for the past three years. These matters raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustment that might result from
the outcome of this uncertainty.

"Pannell Kerr Forster"

Chartered Accountants

Vancouver, British Columbia
March 23, 2001


                                       2
<PAGE>


ELEPHANT & CASTLE GROUP INC.
CONSOLIDATED BALANCE SHEETS
(CANADIAN DOLLARS)
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------
                                                               DECEMBER 31,   DECEMBER 26,
                                                                   2000           1999
------------------------------------------------------------------------------------------
<S>                                                           <C>             <C>
ASSETS (note 6)

CURRENT
  Cash and term deposits                                      $      1,725    $      1,014
  Accounts receivable (note 13(c))                                     670             863
  Inventory                                                            507           1,062
  Deposits and prepaid expenses                                        368             419
  Pre-opening costs                                                      0             167
------------------------------------------------------------------------------------------
                                                                     3,270           3,525
FIXED (note 3)                                                      10,907          22,649
GOODWILL                                                             1,882           1,949
FUTURE INCOME TAX BENEFITS (note 12)                                 2,722             115
OTHER (note 4)                                                         984           1,790
------------------------------------------------------------------------------------------
                                                              $     19,765    $     30,028
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
LIABILITIES
CURRENT
  Accounts payable and accrued liabilities (note 5)           $      6,546    $      7,443
  Current portion of long-term debt (note 6)                         1,739              62
------------------------------------------------------------------------------------------
                                                                     8,285           7,505
LONG-TERM DEBT (note 6)                                             14,443          15,730
------------------------------------------------------------------------------------------
                                                                    22,728          23,235
------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY (DEFICIT)

CAPITAL STOCK (note 7)
  Authorized
                10,000,000    Common shares without par value
  Issued
                 2,594,604 (1999 - 1,847,354) Common shares         15,966           3,955
OTHER PAID-IN CAPITAL (note 7(a))                                      356               0
SUBSCRIPTIONS RECEIVED                                                   0           2,374
CURRENCY TRANSLATION ADJUSTMENT                                       (596)           (618)
DEFICIT                                                            (18,689)         (8,918)
------------------------------------------------------------------------------------------
                                                                    (2,963)          6,793
------------------------------------------------------------------------------------------
                                                              $     19,765    $     30,028
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
</TABLE>

Contingencies and Commitments (notes 9 and 10)

Approved on behalf of the Board:

"R. Bryant"                                     "C. Stacey"
 ............................. Director .............................. Director
 R. Bryant                                       C. Stacey


See notes to consolidated financial statements.



                                       3
<PAGE>


ELEPHANT & CASTLE GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2000, DECEMBER 26, 1999 AND DECEMBER 27, 1998 (CANADIAN
DOLLARS)
(IN THOUSANDS OF DOLLARS, EXCEPT LOSS PER SHARE)

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------
                                                    2000           1999           1998
------------------------------------------------------------------------------------------
<S>                                             <C>            <C>            <C>
SALES                                           $    50,084    $    50,104    $    42,630
------------------------------------------------------------------------------------------

RESTAURANT EXPENSES
  Food and beverage                                  14,523         14,418         11,990
  Operating
      Labour                                         16,587         16,026         13,764
      Occupancy and other                            14,020         12,760         10,581
  Restaurant closing costs (note 11)                  9,726            250              0
  Depreciation and amortization                       2,849          3,806          2,525
------------------------------------------------------------------------------------------
                                                     57,705         47,260         38,860
------------------------------------------------------------------------------------------
INCOME (LOSS) FROM RESTAURANT OPERATIONS             (7,621)         2,844          3,770
------------------------------------------------------------------------------------------
GENERAL AND ADMINISTRATIVE EXPENSES                   2,883          3,398          3,614
RETIRING ALLOWANCES AND OTHER COSTS (note 11)             0            867              0
LEGAL SETTLEMENT                                          0            775              0
INTEREST ON LONG-TERM DEBT                            1,874          2,056          1,085
------------------------------------------------------------------------------------------
                                                      4,757          7,096          4,699
------------------------------------------------------------------------------------------
LOSS BEFORE INCOME TAXES                            (12,378)        (4,252)          (929)
INCOME TAXES (note 9)                                     0           (125)             0
FUTURE INCOME TAX BENEFIT (note 12)                     562            115              0
------------------------------------------------------------------------------------------
NET LOSS FOR YEAR                               $   (11,816)   $    (4,262)   $      (929)
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
NET LOSS PER COMMON SHARE                       $     (4.51)   $     (2.43)   $     (0.58)
------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING     2,619,000      1,756,000      1,598,000
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
</TABLE>



                                       4
<PAGE>


ELEPHANT & CASTLE GROUP INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 2000, DECEMBER 26, 1999 AND DECEMBER 27, 1998
(CANADIAN DOLLARS)
(IN THOUSANDS OF DOLLARS)


<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------
                                                              2000           1999           1998
----------------------------------------------------------------------------------------------------
<S>                                                       <C>            <C>            <C>
NUMBER OF COMMON SHARES ISSUED
  Beginning balance                                         1,847,354      1,660,667      1,501,092
  Issue of shares
    For interest (notes 6 and 13(d))                                0         16,250          7,500
    For settlement of legal matter                                  0         75,000              0
    For services                                                6,000              0            500
    On conversion of long-term debt                           791,250              0              0
    Cancellations of shares                                   (50,000)             0              0
    On conversion of other paid-in capital (note 7(a))              0         95,437        151,575
----------------------------------------------------------------------------------------------------

ENDING BALANCE                                              2,594,604      1,847,354      1,660,667
----------------------------------------------------------------------------------------------------
COMMON SHARES ISSUED
  Beginning balance                                       $    13,955    $    12,982    $    11,228
  Issue of shares
    For interest (note 6)                                           0             98             29
    For settlement of legal matter                                  0            303              0
    For services                                                   15              0              3
    Conversion of long-term debt                                2,374              0              0
    On conversion of other paid-in capital (note 7(a))              0            572          1,722
    Cancellation of shares                                       (378)             0              0
----------------------------------------------------------------------------------------------------
  Ending balance                                               15,966         13,955         12,982
----------------------------------------------------------------------------------------------------
OTHER PAID-IN CAPITAL
  Beginning balance                                                 0            844          2,421
  Paid-in capital converted into shares                           106           (844)        (1,577)
  On cancellation of shares                                       250              0              0
----------------------------------------------------------------------------------------------------
  Ending balance                                                  356              0            844
----------------------------------------------------------------------------------------------------
SUBSCRIPTIONS RECEIVED
  Beginning balance                                             2,374              0              0
  Amount reserved to issue shares                                   0          2,374              0
  Shares issued                                                (2,374)             0              0
----------------------------------------------------------------------------------------------------
  Ending balance                                                    0          2,374              0
----------------------------------------------------------------------------------------------------
CURRENCY TRANSLATION ADJUSTMENT
  Beginning balance                                              (618)        (1,051)             0
  Deferred gain (loss) incurred during year                        22            433         (1,051)
----------------------------------------------------------------------------------------------------
  Ending balance                                                 (596)          (618)        (1,051)
----------------------------------------------------------------------------------------------------
DEFICIT
  Beginning balance                                            (8,918)        (4,514)        (3,440)
  Adjustment to reflect adoption of liability method of
    accounting for future income tax assets (note 12)           2,045              0              0
  Dividends paid on other paid-in capital                           0           (142)          (145)
  Net loss                                                    (11,816)        (4,262)          (929)
----------------------------------------------------------------------------------------------------
  Ending balance                                              (18,689)        (8,918)        (4,514)
----------------------------------------------------------------------------------------------------

TOTAL SHAREHOLDERS' EQUITY (DEFICIT)                      $    (2,963)   $     6,793    $     8,261
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
</TABLE>

                                       5
<PAGE>


ELEPHANT & CASTLE GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, DECEMBER 26, 1999 AND DECEMBER 27, 1998
(CANADIAN DOLLARS)
(IN THOUSANDS OF DOLLARS)


<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------
                                                      2000        1999       1998
-------------------------------------------------------------------------------------
<S>                                                <C>         <C>         <C>

OPERATING ACTIVITIES
  Net loss                                         $(11,816)   $ (4,262)   $   (929)
  Operating items not using cash                     12,886       5,023       2,502
-------------------------------------------------------------------------------------

OPERATING CASH FLOW                                   1,070         761       1,573
-------------------------------------------------------------------------------------

CHANGES IN NON-CASH WORKING CAPITAL
  Accounts receivable                                   193        (306)        115
  Inventory                                             555        (254)       (125)
  Deposits and prepaid expenses                          51          98         140
  Accounts payable and accrued liabilities             (898)      1,512       1,645
-------------------------------------------------------------------------------------

                                                        (99)      1,050       1,775
-------------------------------------------------------------------------------------

CASH PROVIDED BY OPERATING ACTIVITIES                   971       1,811       3,348
-------------------------------------------------------------------------------------

INVESTING ACTIVITIES
  Acquisition of fixed assets                          (215)     (3,857)     (8,682)
  Acquisition of other assets                             0        (546)     (1,326)
  Acquisition of trademark                               (8)          0         (17)
-------------------------------------------------------------------------------------

CASH USED IN INVESTING ACTIVITIES                      (223)     (4,403)    (10,025)
-------------------------------------------------------------------------------------

FINANCING ACTIVITIES
  Deferred finance charges                                0        (364)       (108)
  Proceeds from long-term debt                           29       1,847       5,740
  Repayment of long-term debt                           (66)       (345)       (584)
-------------------------------------------------------------------------------------

CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES         (37)      1,138       5,048
-------------------------------------------------------------------------------------

INFLOW (OUTFLOW) OF CASH                                711      (1,454)     (1,629)
CASH AND TERM DEPOSITS, BEGINNING OF YEAR             1,014       2,468       4,097
-------------------------------------------------------------------------------------

CASH AND TERM DEPOSITS, END OF YEAR                $  1,725    $  1,014    $  2,468
-------------------------------------------------------------------------------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Cash paid during the year for
    Interest                                       $  1,007    $    820    $    723
    Income taxes                                   $      0    $      0    $      0
-------------------------------------------------------------------------------------
</TABLE>


                                       6
<PAGE>




ELEPHANT & CASTLE GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, DECEMBER 26, 1999 AND DECEMBER 27, 1998
(CANADIAN DOLLARS)
(IN THOUSAND OF DOLLARS)

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

1.       BASIS OF PRESENTATION

         These financial statements include the accounts of Elephant & Castle
         Group Inc. ("the Company") and its wholly-owned subsidiaries. All
         significant inter-company balances and transactions are eliminated.

         (a)       The Elephant and Castle Canada Inc. ("the Canadian
                   subsidiary") which owns and operates English style
                   restaurants across Canada under the name "The Elephant &
                   Castle Restaurant and Pub";

         (b)       Elephant & Castle Inc. ("the U.S. subsidiary" incorporated
                   in Texas) and its subsidiaries which own and operate English
                   style restaurants in Washington, Pennsylvania, Massachusetts
                   and California;

         (c)       Alamo Grill, Inc. ("Alamo" incorporated in Indiana) which
                   owns and operates a red meat steak house at the Mall of
                   America, Bloomington, Minnesota;

         (d)       Elephant & Castle International, Inc. incorporated in Texas,
                   September 4, 1997 to franchise the Elephant & Castle
                   British-style pub and restaurant and Alamo Grill steakhouse
                   concept;

         Also included in these financial statements are the Company's
         proportionate shares of revenues and expenses from its interest in a
         joint venture established to develop and operate rainforest theme
         restaurants in Canada. The 1999 and 1998 financial statements of the
         Company included its proportionate share of assets, liabilities and
         restaurant revenues and expenses. Effective December 31, 2000 the
         Company has written off its entire investment in the joint venture (see
         notes 10 and 11).

         During 2000, the Company incurred a net loss of $11,816 (1999 - $4,262;
         1998 - $929) and at December 31, 2000 had a working capital deficiency
         (an excess of current liabilities over current assets) of $5,015,
         including $1,739 of long-term debt due within one year. Management has
         undertaken three initiatives for the Company to continue as a going
         concern. These initiatives are in recognition that for the Company to
         continue as a going concern it must generate sufficient cash flow to
         cover its obligations and expenses. In addition, management believes
         these initiatives can provide the Company with a solid base for
         profitable operations, positive cash flows and reasonable growth.

         These initiatives are:

         (a)      The closure of its unsuccessful restaurant located at Franklin
                  Mills, PA (2000 operating loss at this location was $1,234).
                  The one time charge to earnings in 2000 was $4,787 (note 11).

         (b)      The write-off of its entire investment in its rainforest
                  restaurants joint venture (2000 operating loss was $905) and
                  closed the money losing Scarborough, ON location. The one time
                  charge to earnings in 2000 was $4,939. Included in this
                  initiative is a release from any future commitments to develop
                  additional rainforest restaurants (notes 10(b) and 11).

         (c)      The initiation of discussions with its principal lender,
                  General Electric Investments Private Placement Partners II,
                  ("GEIPPP II") to restructure a portion of its convertible
                  debentures. (Debt due within one year totals $1,688).

                  Management is unable to predict the results of its discussions
                  at this time. Should management be unsuccessful in its
                  initiative to restructure debt with GEIPPP II the Company's
                  ability to continue as a going concern is uncertain.

                  These financial statements do not give effect to any
                  adjustments to the amounts and classifications of assets and
                  liabilities which might be necessary should the Company be
                  unable to continue its operations as a going concern.


                                       7
<PAGE>



ELEPHANT & CASTLE GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, DECEMBER 26, 1999 AND DECEMBER 27, 1998
(CANADIAN DOLLARS)
(IN THOUSAND OF DOLLARS)
------------------------------------------------------------------------------

1.       BASIS OF PRESENTATION (Continued)

         These consolidated financial statements are prepared in accordance with
         Canadian generally accepted accounting principles and all figures are
         in Canadian dollars unless otherwise stated. Canadian generally
         accepted accounting principles differ in certain respects from
         accounting principles generally accepted in the United States of
         America. The significant differences and the approximate related effect
         on the consolidated financial statements are set forth in Note 15.

         Certain comparative figures have been restated to conform to current
         presentation.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         (a)      Franchise fees

                  The Company recognizes initial fees from the sale of
                  franchises as a recovery of general and administrative
                  expenses. Continuing franchise fees are included in sales as
                  they are earned.

         (b)      Inventory

                  Inventory consists of food, beverages and retail merchandise
                  and is recorded at the lower of cost or market. Cost is
                  determined using the first-in, first-out method.

         (c)      Fixed assets

                  Fixed assets are recorded at cost and are depreciated annually
                  as follows:

                           Furniture and fixtures  -  10% Straight-line method
                           Computer equipment      -  20% Straight-line method

                  Improvements to leased premises and property under capital
                  leases are being amortized on the straight-line method over
                  the term of the lease plus the first renewal option. For
                  locations opened subsequent to January 1, 1993, such
                  improvements are being amortized on a straight-line basis over
                  the term of the lease.

                  China, glassware and cutlery are not depreciated and
                  replacements are charged directly to operations.

         (d)      Goodwill

                  Goodwill is recorded at cost and amortization is calculated on
                  a straight-line basis over periods from 10 to 40 years.

         (e)      Pre-opening costs

                  Pre-opening costs represent amounts for staff training costs,
                  payroll for trainees, rents paid prior to opening, travel and
                  accommodation of trainers and supplies consumed prior to
                  opening which were all incurred to open new locations. These
                  costs are amortized on a straight-line basis over 12 months.


                                       8
<PAGE>




ELEPHANT & CASTLE GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, DECEMBER 26, 1999 AND DECEMBER 27, 1998
(CANADIAN DOLLARS)
(IN THOUSAND OF DOLLARS)
------------------------------------------------------------------------------


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         (f)      Other assets

                  The following other assets are recorded at cost which is
                  amortized annually as follows:

                       Deferred finance costs         - Term of the related
                                                        financial instruments
                       Restaurant development rights  - 5 Years
                       Deferred franchise costs       - 5 Years
                       Trademark                      - 10 Years

         (g)      Income taxes

                  Income taxes are calculated using the liability method of tax
                  accounting. Temporary differences arising from the difference
                  between the tax basis of an asset or liability and its
                  carrying amount on the balance sheet are used to calculate
                  future income tax assets or liabilities. Future income tax
                  assets or liabilities are calculated using tax rates
                  anticipated to apply in the periods that the temporary
                  differences are expected to reverse. A valuation allowance is
                  provided to reduce the asset to the net amount management
                  estimates to be reasonable to carry as a future income tax
                  asset (note 12).

         (h)      Foreign currency translation

                  Amounts recorded in foreign currency are translated into
                  Canadian dollars as follows:

                  (i)      Monetary assets and liabilities at the rate of
                           exchange in effect at the balance sheet date;

                  (ii)     Non-monetary assets and liabilities at the exchange
                           rates prevailing at the time of the acquisition of
                           the assets or assumption of the liabilities; and,

                  (iii)    Revenues and expenses (excluding depreciation and
                           amortization which are translated at the same rate as
                           the related asset), at the average rate of exchange
                           for the year.

                  Gains and losses arising from this translation of foreign
                  currency are included in net income except for unrealized
                  gains and losses on long-term monetary assets and liabilities,
                  which are deferred and amortized over the lives of those
                  items. The unrealized gains and losses will be recognized as
                  amounts are received or paid and are included as a separate
                  component of shareholders' equity.

         (i)      Net loss per share

                  Net loss per share computations are based on the weighted
                  average number of common shares outstanding during the year.
                  There is no dilutive effect on net loss per share in 2000,
                  1999 or 1998 after the assumed exercise of stock options or
                  warrants or conversion of convertible debentures.

         (j)      Use of estimates

                  The preparation of financial statements in conformity with
                  generally accepted accounting principles requires management
                  to make estimates and assumptions that affect the reported
                  amount of assets and liabilities and disclosures of contingent
                  assets and liabilities at the date of the financial
                  statements, and the reported amounts of revenues and expenses
                  during the reporting period. Actual results could differ from
                  those estimates and would impact future results of operations
                  and cash flows.


                                       9
<PAGE>



ELEPHANT & CASTLE GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, DECEMBER 26, 1999 AND DECEMBER 27, 1998
(CANADIAN DOLLARS)
(IN THOUSANDS OF DOLLARS)



3.       FIXED ASSETS

         --------------------------------------------------
<TABLE>
<CAPTION>
                                                   2000
                                                Accumulated
                                               Depreciation
                                                     and
                                          Cost  Amortization   Net
         ----------------------------------------------------------
         <S>                            <C>       <C>       <C>
         Leasehold improvements         $14,165   $ 6,338   $ 7,827
         Furniture and fixtures           7,753     5,306     2,447
         China, glassware and cutlery       439         0       439
         Computer equipment                 422       228       194
         ----------------------------------------------------------
                                        $22,779   $11,872   $10,907
         ----------------------------------------------------------
         ----------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>

         -----------------------------------------------------------------
                                                     1999
                                                  Accumulated
                                                  Depreciation
                                                      and
                                            Cost   Amortization     Net
         -----------------------------------------------------------------
<S>                              <C>         <C>         <C>
         Leasehold improvements           $23,253     $ 6,463     $16,790
         Furniture and fixtures             9,906       5,067       4,839
         China, glassware and cutlery         539           0         539
         Computer equipment                   735         254         481
         -----------------------------------------------------------------
                                          $34,433     $11,784     $22,649
         -----------------------------------------------------------------
         -----------------------------------------------------------------
</TABLE>


4.       OTHER ASSETS

<TABLE>
<CAPTION>


                                                      2000       1999
         --------------------------------------------------------------
<S>                                                   <C>        <C>
         Deferred finance costs                       $  544     $  701
         Rainforest Restaurant development rights          0        440
         Deferred franchise costs                        228        228
         Trademark                                       131        123
         Other                                            81        298
         --------------------------------------------------------------
                                                      $  984     $1,790
         --------------------------------------------------------------
         --------------------------------------------------------------
</TABLE>

5.       ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

<TABLE>
<CAPTION>

          ----------------------------------------------------------------
                                                         2000       1999
          ----------------------------------------------------------------
<S>                                                     <C>        <C>
          Trade payables                                $1,348     $2,168
          Accrued salaries, wages and related taxes      1,302        893
          Closing costs and legal settlement               953        400
          Occupancy and other operating expenses           716      1,335
          Debt redemption and other interest costs         724        495
          Other payables                                   693        777
          Sales taxes                                      361        311
          Prepaid supplier rebates                         250        250
          Retiring allowances                              199        639
          Construction costs                                 0        175
          ----------------------------------------------------------------
                                                        $6,546     $7,443
          ----------------------------------------------------------------
          ----------------------------------------------------------------
</TABLE>


                                       10
<PAGE>



ELEPHANT & CASTLE GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, DECEMBER 26, 1999 AND DECEMBER 27, 1998
(CANADIAN DOLLARS)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE PRICES)



6.       LONG-TERM DEBT

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                    2000                1999
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                 <C>                 <C>


         General Electric Investment Private Placement Partners II ("GEIPPPII)",  a limited
         partnership,  $9,000 U.S.  ($13,500  CDN.)  convertible  subordinated  debentures,
         interest only at 5% per annum to November  997, 6% per annum to November  1998, 7%
         per  annum  to  November  999 and 8% per  annum  thereafter,  repayable  in  equal
         semi-annual  instalments  of  one  eighth  of  the  principal  amount  outstanding
         commencing  November 2001. In  consideration  for the below market interest rates,
         the  agreement  provides for the issuance to the lender of 35,274 common shares in             $13,500            $13,140
         each of 1996  and 1997 and  7,500  common  shares  in each of 1998 and  1999.  The
         lender  may  exercise  its  conversion  privilege  at any time on the basis of one
         share for each $7.68 U.S. of principal.  A Security  Agreement  granting  security
         over  substantially  all of the company's  assets was entered into with the lender
         in 1999.

         Convertible  subordinated  notes issued  February 1999 $3,265 U.S.  ($4,897 CDN.),
         due  December  31,  2003,  interest at 8% per annum  payable  quarterly in cash or
         common  shares  commencing  June 30,  1999.  Notes  unpaid  and not  converted  by
         December  31,  2003 are  immediately  due and  payable  with a 25%  premium on the
         unpaid  principal.  The terms were renegotiated in October 1999 and $1,583 U.S. of
         the notes  were  converted  into  791,250  common  shares at $2 U.S.  per share in               2,524              2,457
         exchange for waiver of penalties  and extension of one year warrants to three year
         warrants (see note 7(e) below). The Company may, if the market price of its common
         shares equals  or exceeds 150% of  the conversion  price  for fifteen  consecutive
         trading days, redeem  the remaining  notes at 100% of par  plus accrued and unpaid
         interest.  GEIPPPII participated in the  above financing by purchasing $2,000 U.S.
         of which $1,000 U.S. was subsequently converted into 500,000 common shares,
         included in the above

         Capital  lease  obligations  repayable  over terms  ranging  from 36 to 60 months,                 158                171
         interest rates average 13%

         Camdev  Properties  Inc.  -  repayable  in  monthly  instalments  of $3  including
         interest  at 13%,  due  August 1, 2000,  secured by a charge on certain  leasehold                   0                 24
         improvements
-----------------------------------------------------------------------------------------------------------------------------------

                                                                                                         16,182             15,792
         Less:  Current portion                                                                           1,739                 62
-----------------------------------------------------------------------------------------------------------------------------------

                                                                                                        $14,443            $15,730
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       11
<PAGE>



ELEPHANT & CASTLE GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, DECEMBER 26, 1999 AND DECEMBER 27, 1998
(CANADIAN DOLLARS)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE PRICES)
------------------------------------------------------------------------------


6.       LONG-TERM DEBT (Continued)

         Long-term debt principal repayments due in each of the next five years
         are as follows:

------------------------------------------------------------------------------
<TABLE>
<CAPTION>

<S>                                                                   <C>
          2001                                                        $1,739
          2002                                                         3,441
          2003                                                         5,934
          2004                                                         3,389
          2005                                                         1,689
------------------------------------------------------------------------------

                                                                     $16,192
------------------------------------------------------------------------------
</TABLE>


7.       CAPITAL STOCK

          (a)       In July 1997, the Company issued $2,000 U.S. ($2,740 CDN.)
                    of 6% convertible subordinated debentures recorded as "other
                    paid-in capital". As at December 27, 1998 $616 U.S. ($844
                    CDN.) remained outstanding. During 1999, 95,437 shares were
                    issued to convert $386 U.S. ($597 CDN.) and the remainder
                    were redeemed for cash.

                    In December 1999 the Company reached an agreement with the
                    holders of its 8% notes whereby $1,583 U.S. ($2,374 CDN.) is
                    to be converted into 791,250 shares. These shares were
                    issued in January 2000. The conversion rate on the remaining
                    $1,683 remains unchanged at $4 U.S. per share.

          (b)       Stock option plans have been adopted as follows:

                    (i)        The 1993 Founders' option plan set aside 50,000
                               common shares. Options on the entire 50,000
                               shares have been granted at $13.20 U.S. ($19.80
                               CDN.). These options become exercisable on the
                               5th through 9th anniversary date of granting.
                               21,875 of these options were cancelled through
                               December 31, 2000.

                    (ii)       The 1993 employee option plan set aside 50,000
                               common shares. Options have been granted for
                               approximately 45,000 shares. All options expire
                               on the 5th anniversary date of the grant. 8,916
                               of the options have been exercised through
                               December 31, 2000 and 36,084 of the options
                               were cancelled through December 31, 2000.

                    (iii)      The 1997 employee option plan set aside 200,000
                               common shares. Options have been granted for
                               139,000 shares. All options expire on the 5th
                               anniversary date of the grant. None have been
                               exercised through December 31, 2000 and 40,000
                               of the options were cancelled through December
                               31, 2000.


                                       12
<PAGE>




ELEPHANT & CASTLE GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, DECEMBER 26, 1999 AND DECEMBER 27, 1998
(CANADIAN DOLLARS)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE PRICES)
------------------------------------------------------------------------------


7.       CAPITAL STOCK (Continued)

                  (iv)    The 1993 directors' option plan set aside 10,000
                          common shares. All have been granted, 7,500 cancelled
                          and none have been exercised through December 31,
                          2000.

                  There are 297,125 (including the 162,500 options in (c) below)
                  options outstanding at December 31, 2000 exercisable at
                  various prices detailed in note 16(e).

         (c)      During 1998, options for 472,500 common shares were granted to
                  five key executives, four of whom commenced employment with
                  the Company in 1997. None have been exercised and 310,000 of
                  these options were cancelled through December 31, 2000.

         (d)      During 1994, 31,750 shares were issued to a director at $9.50
                  U.S. per share. At December 31, 2000, $300 U.S. ($411 CDN.) of
                  these proceeds were unpaid. The amount unpaid was charged to
                  shareholders' equity in the 1994 fiscal year.

         (e)      At December 31, 2000, warrants to purchase common shares were
                  outstanding as follows:

<TABLE>
<CAPTION>

                  -----------------------------------------------------------
                                            Exercise
                  Expiry Date                 Price                    Number
                  -----------------------------------------------------------
<S>                                          <C>                     <C>
                  2001                       $ 16.32 U.S.               3,062
                  2002                        $ 9.82 U.S.             488,798
                  2002                        $ 7.68 U.S.             351,562
                  2003               $ 4.00 - $ 6.00 U.S.             816,250
                  -----------------------------------------------------------

                                                                    1,659,672
                  -----------------------------------------------------------
</TABLE>

                   These warrants are subject to an anti-dilution provision,
                   which provides for an adjustment to the exercise price to
                   take into consideration the issue of other shares, or
                   securities convertible into shares, at prices below the
                   existing exercise price. In addition the number of shares
                   issued on exercise may increase such that the total dollar
                   amount paid on exercise of these warrants will be the same at
                   all times regardless of the exercise price.

         (f)      Shareholders approved a special resolution on March 23, 2000
                  to consolidate the Company's authorized and issued capital
                  stock on a one for two basis. All numbers of shares, options
                  and warrants reported in these financial statements are on a
                  post-consolidated basis.

8.       FINANCIAL INSTRUMENTS

         (a)      Fair value

                  The carrying value of cash and term deposits, accounts
                  receivable, accounts payable and accrued liabilities
                  approximate their fair value because of the short maturity of
                  these financial instruments.

                  The carrying values of convertible subordinated debentures
                  held by General Electric Investment Private Placement Partners
                  II and convertible subordinated notes issued in February 1999
                  approximate their fair value because the interest payments
                  over the term of the debentures approximated market rates when
                  the agreements were finalized.

                  The carrying value of 6% convertible subordinated debentures
                  recorded as "other paid-in capital" has been adjusted to
                  reflect market rates at the date the transaction was
                  completed.


                                       13
<PAGE>



ELEPHANT & CASTLE GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, DECEMBER 26, 1999 AND DECEMBER 27, 1998
(CANADIAN DOLLARS)
(IN THOUSANDS OF DOLLARS)
------------------------------------------------------------------------------


8.       FINANCIAL INSTRUMENTS (Continued)

         (b)      Credit risk

                  The Company's financial assets that are exposed to credit
                  risk consist primarily of cash and term deposits and accounts
                  receivable. Cash and term deposits are placed with major
                  financial institutions rated in the two highest grades by
                  nationally recognized rating agencies. Credit risk from
                  customer exposure is nominal due to the nature of the
                  business.

         (c)      Interest rate risk

                  The Company is not exposed to significant interest rate risk
                  due to the short-term maturity of its monetary current assets
                  and current liabilities and the relatively small amount of
                  long-term debt subject to interest rate changes.

         (d)      Translation risk

                  The Company translates the results of U.S. operations into
                  Canadian currency using rates approximating the average
                  exchange rate for the year. The exchange rate may vary from
                  time to time. This risk is minimized to the extent U.S.
                  capital expansions are financed through borrowing in U.S.
                  dollars and all non-Canadian source revenues and expenses are
                  in U.S. dollars.

9.       CONTINGENCY

         In 1989 and 1990, the Canadian subsidiary received Notices of
         Reassessment from Revenue Canada and the Ontario Ministry of Revenue
         regarding a construction allowance received in 1984 from the landlord
         for its former Sarnia, Ontario location. The reassessment has been
         under appeal since 1989. A portion of the dispute was settled in the
         Company's favour and a tax provision of $125 has been made for the
         estimated remainder of the dispute. Including interest accrued
         retroactively since 1984, the total amount disputed at December 31,
         2000 approximates $240.

10.      COMMITMENTS

         (a)      The subsidiaries are committed to leases on their restaurant
                  locations extending into the 2014 fiscal year. Minimum annual
                  rentals for the restaurants excluding realty taxes, common
                  area maintenance and other charges are as follows:

<TABLE>
<CAPTION>

                  --------------------------------------------------------
<S>                                                                <C>
                  2001                                             $ 3,618
                  2002                                               3,371
                  2003                                               3,142
                  2004                                               2,901
                  2005                                               2,306
                  2006 to 2014 inclusive                            11,641
                  --------------------------------------------------------

                                                                   $26,979
                  --------------------------------------------------------
</TABLE>

                  Each of the aforementioned leases provide for the payment of
                  additional rent based on percentages of gross annual revenue
                  in excess of minimum rents, or other graduated formulae
                  derived from gross revenue as defined in the particular lease
                  agreements. The percentages range from 6% to 11%.


                                       14
<PAGE>



ELEPHANT & CASTLE GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, DECEMBER 26, 1999 AND DECEMBER 27, 1998
(CANADIAN DOLLARS)
(IN THOUSANDS OF DOLLARS)
------------------------------------------------------------------------------


10.      COMMITMENTS (Continued)

         (b)     In 1997, the Company, through its joint venture agreement with
                 Rainforest Cafe Canada Holdings Inc. (RCCH), committed to open
                 a minimum of five Canadian Rainforest restaurants by March
                 2001. Three restaurants have been opened and a third party is
                 developing one additional unit under a sub-licencing
                 agreement. By mutual agreement with RCCH, the commitment for a
                 fifth location has been cancelled. The Company has written-off
                 its entire investment in the Rainforest venture and has no
                 further commitment.

11.      RESTAURANT CLOSING COSTS, RETIRING ALLOWANCES AND OTHER COSTS

         Restaurant closing costs for 2000 are comprised of the following:

         (a)     Write-off of investment in Rainforest Restaurants Joint
                 Venture ($4,939)

                 In 1997 the Company entered into a joint venture agreement
                 with Rainforest Cafe Canada holdings Inc. for the development
                 of rainforest themed restaurants in Canada through a joint
                 venture entity, Canadian Rainforest Restaurants Inc. ("CRRI").
                 As of December 31, 2000 the Company has made full provision
                 against its investment in CRRI and its receivable from the
                 joint venture company, resulting in a charge to earnings of
                 $4,939.

         (b)     Closure of Franklin Mills Restaurant ($4,787)

                 The Company reached an agreement with the landlord of its
                 unsuccessful Franklin Mills location to terminate the lease in
                 exchange for the surrender of substantially all of the assets
                 at that location, and the payment of up to fifteen months'
                 rent. The restaurant was closed on January 7, 2001 and full
                 provision for the disposal of assets, payment of rent and
                 other closing costs has been made in these financial
                 statements, resulting in a charge to earnings of $4,787.

         Restaurant closing costs for 1999 ($250) represented full provision of
         closing costs for its Regina, Canada location on expiration of its
         lease. The restaurant was closed on March 27, 2000.

         Senior executive retiring allowances and former employee costs for 1999
         ($867) were primarily related to the retirement of two executives in
         1999.

         Legal  settlement  costs in 1999 ($775)  were for a lease  dispute
         with Shilo  Hotels that was settled in 1999.

         These costs are summarized as follows:

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------
                                                                                2000       1999       1998
------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>        <C>        <C>

          RESTAURANT CLOSING COSTS
                   Write-off of investment in Joint Venture and restaurant     $9,726     $  250     $    0
                   closure costs
------------------------------------------------------------------------------------------------------------
          RETIRING ALLOWANCES AND OTHER COSTS
            Senior executive retirement allowances                             $    0        820     $    0
            Other former employee costs                                             0         47          0
------------------------------------------------------------------------------------------------------------
                                                                               $    0     $  867     $    0
------------------------------------------------------------------------------------------------------------
          LEGAL SETTLEMENT
            Legal settlement costs                                             $    0     $  775     $    0
------------------------------------------------------------------------------------------------------------
</TABLE>


                                       15
<PAGE>



ELEPHANT & CASTLE GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, DECEMBER 26, 1999 AND DECEMBER 27, 1998
(CANADIAN DOLLARS)
(IN THOUSANDS OF DOLLARS)
------------------------------------------------------------------------------


12.      INCOME TAXES

         Effective January 1, 2000 the Company adopted the new recommendations
         of the Canadian Institute of Chartered Accountants with respect to
         accounting for income taxes. Under the new recommendations, the
         liability method of tax allocation is used, based on differences
         between financial reporting and tax bases of assets and liabilities.
         Previously, the deferral method was used, based on differences in the
         timing of reporting income and expenses in financial statements and tax
         returns. The new method was applied retroactively without restatement
         of the 1999 and 1998 financial statements.

         The effect of the new recommendations on the opening 2000 financial
         statements was to increase (decrease) the following:

<TABLE>
<CAPTION>
         --------------------------------------------------------------------
                                                                        2000
         --------------------------------------------------------------------
<S>                                                                   <C>
         Future income tax benefits                                   $2,045
         Deficit                                                     $(2,045)
         --------------------------------------------------------------------
</TABLE>


         The adjustment to deficit was a result of recognition of the future tax
         value of loss carry forward amounts that are more likely than not to be
         realized.

         The components of the future income tax assets at December 31, 2000,
         are as follows:

<TABLE>
<CAPTION>
         ---------------------------------------------------------------------------
                                                                                2000
         ---------------------------------------------------------------------------
<S>                                                                           <C>

        Future income tax

            Tax benefit of non-capital loss carryforwards                     $ 4,739
            Tax benefit of capital loss carryforwards                           1,075
            Fixed assets values for tax purposes in excess of book values       1,087
         ----------------------------------------------------------------------------

                                                                                6,901
          Valuation allowance                                                  (4,179)
         ----------------------------------------------------------------------------

          Net future income tax asset                                         $ 2,722
        -----------------------------------------------------------------------------
</TABLE>


         The Company has the following available tax losses, the partial
         benefits of which have been recorded in these financial statements:

         (i)      Non-capital losses of approximately $5,800 which can be
                  applied against future income for Canadian tax purposes up to
                  and including 2005.

         (ii)     Operating losses of approximately $4,000 U.S. ($6,000 CDN.)
                  which may be carried forward to apply against future years'
                  income for United States income tax purposes expiring up to
                  2020.

         (iii)    Net capital losses of approximately $5,300 which can be
                  applied against future capital gains income for Canadian tax
                  purposes indefinitely.


                                       16
<PAGE>



ELEPHANT & CASTLE GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, DECEMBER 26, 1999 AND DECEMBER 27, 1998
(CANADIAN DOLLARS)
(IN THOUSANDS OF DOLLARS)
------------------------------------------------------------------------------


13.      RELATED PARTY TRANSACTIONS

         (a)      Included in general and administrative are wages and
                  management fees paid to directors, former directors, officers,
                  former officers and personal service corporations used by
                  these individuals for a total of $358 (1999 - $717) (1998 -
                  $800).

         (b)      A shareholder and a former director of the Company provides
                  legal and consulting services to the Company. Fees for these
                  services totalled $54 (1999 - $122) (1998 - $103).

         (c)      At December 26, 1999 the Company held a non-interest bearing
                  promissory note for $350 from a director and former officer of
                  the Company. The note was repaid in 2000. Consideration
                  included cash plus the surrender of 50,000 shares of the
                  capital stock of the Company.

         (d)      GEIPPPII (note 6) is related to the Company by way of its
                  share ownership in the Company and the election of two
                  directors to the Board. Interest payments totalled $937 in
                  2000; $824 in 1999 and $762 in 1998 consisting of cash of $937
                  in 2000, $725 in 1999 and $732 in 1998; the balance was paid
                  by share issuances.

14.      GEOGRAPHIC SEGMENTED DATA

<TABLE>
<CAPTION>
         ----------------------------------------------------------------------------------
                                                          2000         1999          1998
         ----------------------------------------------------------------------------------
<S>                                                    <C>           <C>           <C>

          Sales to unaffiliated customers
            Canada                                     $ 29,958      $ 28,703      $ 23,647
            United States                                20,126        21,401        18,983
         ----------------------------------------------------------------------------------

                                                       $ 50,084      $ 50,104      $ 42,630
         ----------------------------------------------------------------------------------

          Income (loss) from restaurant operations
            Canada                                     $ (3,771)     $  2,225      $  2,224
            United States                                (3,850)          619         1,546
         ----------------------------------------------------------------------------------
                                                         (7,621)        2,844         3,770
          Other charges                                   4,757         7,096         4,699
         ----------------------------------------------------------------------------------

          Loss before income taxes                     $(12,378)     $ (4,252)     $   (929)
         ----------------------------------------------------------------------------------

          Identifiable assets
            Canada                                     $  7,310      $ 16,501      $ 14,072
            United States                                 8,749        11,598        14,101
         ----------------------------------------------------------------------------------

                                                       $ 16,059      $ 28,099      $ 28,173
         ----------------------------------------------------------------------------------
</TABLE>

         (a)      U.S. accounting pronouncements

                  (i)      Earnings (loss) per share

                           In February 1997, the Financial Accounting
                           Standards Board ("FASB") issued Statement of
                           Financial Accounting Standards ("SFAS") No.
                           128, "Earnings per Share". The statement is
                           effective for financial statements for
                           periods ending after December 15, 1997, and
                           changes the method in which earnings per
                           share will be determined. The Company's
                           adoption of FASB 128 for U.S. GAAP purposes
                           results in no difference in net income
                           (loss) disclosure.


                                       17
<PAGE>



ELEPHANT & CASTLE GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, DECEMBER 26, 1999 AND DECEMBER 27, 1998
(CANADIAN DOLLARS)
(IN THOUSANDS OF DOLLARS, EXCEPT LOSS PER SHARE)
------------------------------------------------------------------------------


15.      DIFFERENCES  BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
         ACCOUNTING  PRINCIPLES  (CANADIAN GAAP AND U.S. GAAP)

         (a)      U.S. accounting pronouncements

                  (i)      Earnings (loss) per share

                           In February 1997, the Financial Accounting Standards
                           Board ("FASB") issued Statement of Financial
                           Accounting Standards ("SFAS") No. 128, "Earnings per
                           Share". The statement is effective for financial
                           statements for periods ending after December 15,
                           1997, and changes the method in which earnings per
                           share will be determined. The Company's adoption of
                           FASB 128 for U.S. GAAP purposes results in no
                           difference in net income (loss) disclosure.

                  (ii)     SFAS 130, "Reporting Comprehensive Income" and SFAS
                           131, "Disclosures About Segments of an Enterprise and
                           Related Information" were also issued in 1997. These
                           standards, which became effective in 1998, expand or
                           modify disclosures and, accordingly, will have no
                           effect on the Corporation's consolidated financial
                           position, results of operations or cash flows. Under
                           U.S. GAAP, the Company would have reported
                           comprehensive loss of $11,688; $2,640 and $1,700 for
                           2000, 1999 and 1998, respectively.

                  (iii)    In April 1998, the American Institute of Certified
                           Public Accountants (AICPA) issued Statement of
                           Position No. 98-5 (SOP 98-5), "Reporting on the Costs
                           of Start-Up Activities". SOP 98-5 generally requires
                           costs of start-up activities to be expensed instead
                           of being capitalized and amortized and is required to
                           be adopted no later than January 1, 1999. Under U.S.
                           GAAP in fiscal 2000 the Company would have no
                           pre-opening costs.


                                       18
<PAGE>



ELEPHANT & CASTLE GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, DECEMBER 26, 1999 AND DECEMBER 27, 1998
(CANADIAN DOLLARS)
(IN THOUSANDS OF DOLLARS)
------------------------------------------------------------------------------


15.      DIFFERENCES  BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
         ACCOUNTING  PRINCIPLES  (CANADIAN GAAP AND U.S. GAAP) (Continued)

         (b)      Reconciliation of earnings (loss) reported in accordance with
                  Canadian GAAP and U.S. GAAP:

<TABLE>
<CAPTION>

                         --------------------------------------------------------------------------------------------------
                                                                                        2000            1999         1998
                         --------------------------------------------------------------------------------------------------
<S>                                                                                    <C>            <C>            <C>
                           Net loss - Canadian GAAP                                    $(11,816)      $(4,262)       $(929)
                           Adjustments decreasing (increasing) net loss
                           Amortization of improvement costs *                              (61)          (61)         (61)
                           Dividend  on paid-in  capital  that would be reated                 0         (142)        (145)
                           as interest under U.S. GAAP (note 7(a))
                           Pre-opening costs expensed in 1999 for U.S. AAP                   167         (167)            0
                           Recognition of non-capital loss carry forwards *                    0         1,559          486
                         --------------------------------------------------------------------------------------------------

                           Net loss U.S. GAAP                                           (11,710)       (3,073)        (649)
                           Comprehensive income adjustments                                   22           433      (1,051)
                         --------------------------------------------------------------------------------------------------

                           Comprehensive loss U.S. GAAP                                $(11,688)      $(2,640)     $(1,700)
                         --------------------------------------------------------------------------------------------------

                           Net loss per common share
                             Canadian GAAP                                              $ (4.51)      $ (2.43)     $ (0.58)
                         --------------------------------------------------------------------------------------------------


                             U.S. GAAP                                                  $ (4.47)      $ (1.74)     $ (0.40)
                         --------------------------------------------------------------------------------------------------

                           Weighted average number of

                             shares outstanding
                                                                                       2,619,000     1,756,000    1,598,000
                         --------------------------------------------------------------------------------------------------
</TABLE>

         *        Under U.S. GAAP,  amortization of leasehold  improvement
                  costs would be restricted to the term of the lease.
         **       Carry forward loss that would be recorded as a deferred tax
                  asset under U.S. GAAP.


                                       19
<PAGE>



ELEPHANT & CASTLE GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, DECEMBER 26, 1999 AND DECEMBER 27, 1998
(CANADIAN DOLLARS)
(IN THOUSANDS OF DOLLARS)
------------------------------------------------------------------------------


15.      DIFFERENCES  BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
         ACCOUNTING  PRINCIPLES  (CANADIAN GAAP AND U.S. GAAP) (Continued)

         (c)      Reconciliation of shareholders' equity (deficit) reported in
                  accordance with Canadian GAAP and U.S. GAAP:

<TABLE>
<CAPTION>

                --------------------------------------------------------------------------------------------------------------------
                                                                                 2000                   1999                  1998
                --------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                    <C>                   <C>
                  Shareholders'  equity  (deficit),   end  of  ear              $(2,963)               $6,793                $8,261
                  under Canadian GAAP
                  Beneficial  conversion  feature  of  convertible                 2,436                2,436                 2,436
                  subordinated debentures (note 6 and 16(c)(i))
                  Cumulative  increase in net loss reported  under               (1,776)              (1,904)               (3,093)
                  Canadian GAAP to net loss under U.S. GAAP
                  Other paid-in  capital under  Canadian AAP (note                     0                    0                 (844)
                  7(a)) treated as debt obligation for U.S. GAAP
                --------------------------------------------------------------------------------------------------------------------

                  Shareholders'  equity  (deficit),  end  of  year              $(2,303)               $7,325                $6,760
                  under U.S. GAAP
                --------------------------------------------------------------------------------------------------------------------
</TABLE>


                  (i)      The beneficial conversion feature of convertible
                           subordinated debentures is accounted for as an
                           interest expense at the date of issue of the
                           security. This policy conforms to the accounting for
                           these transactions announced by the SEC staff in
                           March, 1997.

                           The reconciliation of shareholders' equity reported
                           in accordance with Canadian GAAP and U.S. GAAP has
                           been adjusted by $2,436 Cdn. to reflect this charge
                           to income and increase in capital in 1995.


                                       20
<PAGE>



ELEPHANT & CASTLE GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, DECEMBER 26, 1999 AND DECEMBER 27, 1998
(CANADIAN DOLLARS)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE PRICES)
------------------------------------------------------------------------------


15.      DIFFERENCES  BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
         ACCOUNTING  PRINCIPLES  (CANADIAN GAAP AND U.S. GAAP) (Continued)

         (d)      Stock options

                  The Company has granted founders, directors and certain
                  employees stock options. Stock option activity is summarized
                  as follows:

<TABLE>
<CAPTION>

         --------------------------------------------------------------------------------
                                                      NUMBER            EXERCISE PRICE
                                                    OF SHARES        (U.S.$)      (CDN.$)
         --------------------------------------------------------------------------------
<S>                                                 <C>             <C>        <C>
          Balance outstanding, December 31, 1997      200,984         12.22 *      16.74
          1998 - Granted                              525,000         13.04        19.58
          1998 - Cancelled                            (69,692)        12.08        18.14
         --------------------------------------------------------------------------------

          Balance outstanding, December 27, 1998      656,292         12.90 *      19.34
          1999 - Cancelled                            (25,000)        11.36        16.46
         --------------------------------------------------------------------------------

          Balance outstanding December 26, 1999       631,292      $  12.96 *  $   18.80
          2000 - Cancelled                           (334,167)        13.29        19.27
         --------------------------------------------------------------------------------

          Balance outstanding December 31, 2000       297,125      $  12.58 *  $   18.25
         --------------------------------------------------------------------------------
</TABLE>


                  *        Weighted average exercise price.

                  In 1995 the FASB issued SFAS No. 123 "Accounting for
                  Stock-Based Compensation", which contains a fair value-based
                  method for valuing stock-based compensation that entities may
                  use. This measures compensation cost at the grant date based
                  on the fair value of the award. Compensation is then
                  recognized over the service period, which is usually the
                  vesting period. For U.S. GAAP purposes management accounts for
                  options under APB Opinion No. 25. As option exercise prices
                  approximated market price on the dates of grants no
                  compensation expense has been recognized. If the alternative
                  accounting-related provisions of SFAS No. 123 had been adopted
                  as of the beginning of 1995, the effect on 2000, 1999 and 1998
                  U.S. GAAP net loss per share would have been immaterial.


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