<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[x]  ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

For the fiscal year ended OCTOBER 31, 1999

                                       OR

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

For the transition period from        to

                         Commission File Number 0-13649

                             BERKSHIRE BANCORP INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                       <C>
DELAWARE                                                  94-2563513
(State or other jurisdiction of                           (I.R.S. employer
incorporation or organization)                            identification number)

160 BROADWAY, NEW YORK, NEW YORK                          10038
(Address of principal executive offices)                  (Zip Code)
</TABLE>


Registrant's telephone number, including area code: (212) 791-5362

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

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

COMMON STOCK, PAR VALUE $.10 PER SHARE
(Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements 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 the 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. [X]

Aggregate market value of voting (common) stock held by non-affiliates of the
Registrant as of January 18, 2000: $34,847,173.

Number of shares of Common Stock outstanding as of January 18, 2000: 2,127,265.

                      DOCUMENTS INCORPORATED BY REFERENCE:

None








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FORWARD-LOOKING STATEMENTS. Statements in this Annual Report on Form 10-K that
are not based on historical fact may be "forward-looking statements" as defined
by the Private Securities Litigation Reform Act of 1995. They include words like
"may", "will", "expect", "estimate", "anticipate", "continue" or similar terms
and reflect the Company's current analysis of existing trends. Actual results
could differ materially from those indicated due to: major changes in business
conditions and the economy, or the development of an adverse interest rate
environment that adversely affects the interest rate spread or other income
anticipated from the Company's operations and investments, loss of key senior
management, major disruptions in the operations of the Company's banking
facilities, new competitors or technologies, significant disruptions caused by
the failure of third parties to address the Year 2000 issue, acquisition
integration costs, dilution to earnings per share from stock issuance or
acquisitions, regulatory issues, litigation costs, and items listed in the
sections entitled "Business" and "Management's Discussion" in this Annual Report
on Form 10-K.

         Certain information customarily disclosed by financial institutions,
such as estimates of interest rate sensitivity and the adequacy of the loan loss
allowance, are inherently forward-looking statements because, by their nature,
they represent attempts to estimate what will occur in the future.

         A wide variety of factors could cause the Company's actual results and
experiences to differ materially from the anticipated results or other
expectations expressed or implied in the Company's forward-looking statements.
Some of the risks and uncertainties that may affect operations, performance,
results of the Company's business, the interest rate sensitivity of its assets
and liabilities, and the adequacy of its loan loss allowance, include but are
not limited to: (i) deterioration in local, regional, national or global
economic conditions which could result, among other things, in an increase in
loan delinquencies, a decrease in property values, or a change in the housing
turnover rate; (ii) changes in market interest rates or changes in the speed at
which market interest rates change; (iii) changes in laws and regulations
affecting the financial services industry; (iv) changes in competition; and (v)
changes in consumer preferences.

         For these reasons, the Company cautions readers not to place undue
reliance upon any forward-looking statements. Forward-looking statements speak
only as of the date made and the Company assumes no obligation to update or
revise any such statements upon any change in applicable circumstances.

                                     PART I

ITEM 1. BUSINESS

GENERAL

         Berkshire Bancorp Inc. (formerly Cooper Life Sciences, Inc.), a
Delaware corporation ("Berkshire") is a bank holding companies under the Bank
Holding Company Act. On August 6, 1998, Berkshire made a cash tender offer for
any and all of the outstanding shares of common stock of The Berkshire Bank (the
"Bank"), a New York state-chartered commercial bank and on January 4, 1999,
purchased approximately 99% of the outstanding shares of common stock of the
Bank. (See Note A of Notes to Consolidated Financial Statements). As used in
this Annual Report on Form 10-K, the term "Company" shall mean Berkshire and its
consolidated subsidiaries unless the context otherwise requires. The Company was
not engaged in any business operations during the fiscal year ended October 31,
1998. At present, the Bank comprises the Company's only business operations.

         Berkshire's obligation to purchase shares pursuant to the tender offer
was subject to various conditions including, among others, the receipt of
required regulatory approvals from the New York State Banking Board and the
Board of


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Governors of the Federal Reserve System (the "Federal Reserve"). The approvals
were received in December 1998. As a result of the acquisition, Berkshire became
a bank holding company under the Bank Holding Company Act. As a bank holding
company, Berkshire is subject to extensive regulation by the Federal Reserve and
the Bank remains subject to extensive regulation by the Federal Deposit
Insurance Corporation (the "FDIC") and the Superintendent of Banks of the State
of New York. See "Regulation" below. At present, the Bank comprises the
Company's only business operations.

         On December 10, 1999, the Board of Directors of the Company approved a
change in the Company's fiscal year to December 31. The report covering the two
month transition period ending December 31, 1999 will be filed on Form 10-K.

BUSINESS OF THE BANK - GENERAL

         The Bank's principal business consists of gathering deposits from the
general public and investing those deposits primarily in loans, debt obligations
issued by the U.S. Government, its agencies, and business corporations, and
mortgage-backed securities. The Bank operates from two deposit-taking offices.
Its main office, in Manhattan, is located on the upper floors of a high rise
office building and does not offer a customary retail banking presence. Instead,
it provides personal, face to face banking services for professionals and other
normally high-balance depositors. In addition, in 1995, the Bank opened a branch
in Brooklyn which provides the Bank with a customary retail banking office.

         The Bank's principal loan types are residential and commercial mortgage
loans and commercial non-mortgage loans, both unsecured and secured by personal
property. The Bank's revenues come principally from interest on loans and
investment securities. The Bank's primary sources of funds are deposits and
proceeds from principal and interest payments on loans and investment
securities.

OPERATING PLAN

         The Bank's operating plan concentrates on obtaining deposits from
businesses and professionals and investing those funds in conservatively
underwritten loans. Due to the Bank's underwriting criteria, its deposits have
significantly exceeded the level of satisfactory loans available for investment
in recent years. Hence, the Bank has, in recent years, invested a majority of
its available funds in investment and mortgage-backed securities.

         The Bank has sought to diversify its revenues and its customer base
through an active merchant credit card processing operation. The Bank, working
in conjunction with two separate credit card service companies, provides credit
card charge slip processing for merchants. This activity, which the Bank
undertook beginning in early 1997, results in fee income for the services
provided, allows the Bank to build deposit balances from the merchant customers,
and also allows the Bank to cross-sell other banking services to merchants as
appropriate. Back office processing is conducted by an independent service
company, while the Bank provides deposit and other traditional banking services
to the merchants.

MARKET AREA

         The Bank draws its customers principally from the New York City
metropolitan area. From time to time, the Bank may make loans or accept deposits
from outside the New York metropolitan area, but such transactions generally
represent outgrowths of existing local customer relationships. The Bank's
merchant credit card processing business, as discussed elsewhere in this report,
also includes processing of credit card transactions for merchants outside the
New York City metropolitan area.


                                        3







<PAGE>


COMPETITION

         The Bank's principal competitors for deposits are other commercial
banks, savings banks, savings and loan associations and credit unions in the
Bank's market area, as well as money market mutual funds, insurance companies
and securities brokerage firms. The Bank's competition for loans comes
principally from commercial banks, savings banks, savings and loan associations,
mortgage bankers, finance companies and other institutional lenders. The New
York City metropolitan area includes offices of many of the largest financial
institutions in the world. Many of the institutions which compete with the Bank
have much greater financial and marketing resources than the Bank. The Bank's
principal methods of competition include the quality of the personal service it
provides, the types of business services it provides, and other marketing
programs.

OPERATIONS OF THE BANK

         Reference is made to the information set forth in Item 7 herein
("Management's Discussion and Analysis of Financial Condition and Results of
Operations") for information as to various aspects of the Bank's operations,
activities and conditions.

SUBSIDIARY ACTIVITIES

         The Bank is permitted under New York and federal law to own
subsidiaries for certain limited purposes, generally to engage in activities
which are permissible for a subsidiary of a national bank. The Bank has no
subsidiaries.

REGULATION

         On January 4, 1999, as a result of the acquisition of the Bank,
Berkshire became a bank holding company under federal law and registered as such
with the Federal Reserve. The Bank is a commercial bank chartered under the laws
of New York State. It is subject to regulation at the state level by the New
York Superintendent of Banks and the New York Banking Board, while at the
federal level its primary regulator is the FDIC.

         Both the Berkshire and the Bank are subject to extensive state and
federal regulation of their activities. The following discussion summarizes
certain banking laws and regulations that affect Berkshire and the Bank.
Proposals to change these laws and regulations are frequently proposed in
Congress, in the New York State legislature, and before state and federal bank
regulatory agencies. The likelihood and timing of any changes and the impact
such changes might have on the Company are impossible to determine with any
certainty. A change in applicable laws or regulations, or a change in the way
such laws or regulations are interpreted by regulatory agencies or courts, may
have a material impact on the business, operations and earnings of the Company,
the nature of which cannot now be predicted.

         Most recently, on November 12, 1999, President Clinton signed into law
the Gramm-Leach-Bliley Act, which makes major changes to the statutory framework
for providing banking and other financial services in the United States. The
Gramm-Leach-Bliley Act, among other things, authorizes affiliations among
commercial banks, securities underwriting firms and insurance underwriting
firms.

BANK HOLDING COMPANY REGULATION

         The Federal Reserve is authorized to make regular examinations of the
Company and its nonbank subsidiaries. Under federal law and Federal Reserve
regulations, the activities in which the Company and its nonbank subsidiaries
may engage are limited. The Company may not acquire direct or indirect ownership
or control of more than 5% of the voting shares of any company, including a
bank, without the prior approval of the Federal Reserve, except as specifically


                                        4







<PAGE>


authorized under federal law and Federal Reserve regulations. The Company,
subject to the approval of the Federal Reserve, may acquire more than 5% of the
voting shares of non-banking corporations if those corporations engage in
activities which the Federal Reserve deems to be so closely related to banking
or managing or controlling banks as to be a proper incident thereto. These
limitations also apply to activities in which the Company engages directly
rather than through a subsidiary. However, pursuant to Section 103 of the
Gramm-Leach-Bliley Act, the Company may elect, provided it meets certain
conditions, to engage in a significantly broader range of activities or own
shares of companies that engage in such broader activities - those that are
determined to be financial in nature or incidental to such financial activity or
complementary in certain situations, to a financial activity.

         The Federal Reserve has enforcement powers over the Company and its
non-bank subsidiaries. This allows the Federal Reserve, among other things, to
stop activities that represent unsafe or unsound practices or constitute
violations of law, rule, regulation, administrative orders or written agreements
with a federal bank regulator. These powers may be exercised through the
issuance of cease-and-desist orders, the imposition of civil money penalties or
other actions.

         CAPITAL REQUIREMENTS. The Federal Reserve requires that the Company, as
a bank holding company, must maintain certain minimum ratios of capital to
assets. The Federal Reserve's regulations divide capital into types. Primary
capital includes common equity, surplus, undivided profits, perpetual preferred
stock, mandatory convertible instruments, the allowance for loan and lease
losses, contingency and other capital reserves, and minority interests in equity
accounts of consolidated subsidiaries. Secondary capital includes limited-life
preferred stock, subordinated notes and debentures and certain unsecured long
term debt.

         The Federal Reserve requires that bank holding companies maintain a
minimum ratio of primary capital to total assets of 5.5% and a minimum level of
total capital (primary plus secondary capital) equal to 6% of total assets. In
calculating capital ratios, the allowance for loan losses, which is a component
of primary capital, is added back in determining total assets. Certain capital
components, such as debt and perpetual preferred stock, are includable as
capital only if they satisfy certain definitional tests.

         The Company must also meet a risk-based capital standard. Capital, for
the risk-based capital requirement, is divided into Tier 1 capital and
Supplementary capital, determined as discussed below in connection with the FDIC
capital requirements imposed on the Bank. The Federal Reserve requires that the
Bank maintain a ratio of total capital (defined as Tier 1 plus Supplementary
capital) to risk-weighted assets of at least 8%, of which at least 4% must be
Tier 1 capital. Risk weighted assets are also determined in a manner comparable
to the determination of risk-weighted assets under FDIC regulations as discussed
below.

         At October 31, 1999, the Company satisfies all applicable Federal
Reserve minimum capital requirements.

         SOURCE OF STRENGTH DOCTRINE. It is the Federal Reserve policy that bank
holding companies must serve as a source of financial strength to its subsidiary
depository institutions and must commit all available resources to support such
institutions even if it might not otherwise do so. Although this "source of
strength" policy has been challenged in litigation, the Federal Reserve
continues to take the position that it has authority to enforce it. The Federal
Reserve also has the authority to terminate any activity of the Company that
constitutes a serious risk to the financial soundness or stability of the Bank
or, in extreme cases, to terminate its control of any bank or nonbank
subsidiaries.


                                        5







<PAGE>


         INTER-STATE BANKING. Bank holding companies may generally acquire banks
in any state. Federal law also permits a bank to merge with an out-of-state bank
and convert any offices into branches of the resulting bank if both states have
not opted out of interstate branching; permits a bank to acquire branches from
an out-of-state bank if the law of the state where the branches are located
permits the interstate branch acquisition; and permits banks to establish and
operate new interstate branches whenever the host state opts-in to that
authority. Bank holding companies and banks that want to engage in such
activities must be adequately capitalized and managed.

         The New York Banking Law generally authorizes interstate branching in
New York as a result of a merger, purchase of assets or similar transaction. An
out of state bank may not first enter New York by opening a new branch in New
York, but once a branch is acquired as described in the preceding sentence,
additional new branches may be opened.

REGULATION OF THE BANK

         In general, the powers of the Bank are limited to the express powers
described in the New York Banking Law and powers incidental to the exercise of
those express powers. The Bank is generally authorized to accept deposits and
make loans on terms and conditions determined to be acceptable to the Bank.
Loans may be unsecured, secured by real estate, or secured by personal property.
The Bank may also invest assets in bonds, notes or other debt securities which
are not in default and certain limited classes of equity securities including
certain publicly traded equity securities in an amount aggregating not more than
2% of assets or 20% of capital. The Bank may also engage in a variety of other
traditional activities for commercial banks, such as the issuance of letters of
credit.

         The exercise of these state-authorized powers is limited by FDIC
regulations and other federal laws and regulations. In particular, FDIC
regulations limit the investment activities of state-chartered, FDIC-insured
banks such as the Bank.

         Under FDIC regulations, the Bank generally may not directly or
indirectly acquire or retain any equity investment that is not permissible for a
national bank. In addition, the Bank may not directly or indirectly through a
subsidiary, engage as "principal" in any activity that is not permissible for a
national bank unless the FDIC has determined that such activities would pose no
risk to the applicable FDIC insurance fund and the Bank is in compliance with
applicable regulatory capital requirements. FDIC regulations permit real estate
investments under certain circumstances. The Bank does not engage in real estate
investing.

         LOANS TO ONE BORROWER. With certain exceptions, the Bank may not make
loans or other extensions of credit to a single borrower, or certain related
groups of borrowers, in an aggregate amount in excess of 15% of the Bank's net
worth, plus an additional 10% of the Bank's net worth if such amount is secured
by certain types of readily marketable collateral. In addition, the Bank is not
permitted to make a mortgage loan in excess of 15% of capital stock, surplus
fund and undivided profits.

         CAPITAL REQUIREMENTS. The FDIC requires that the Bank maintain certain
minimum ratios of capital to assets. The FDIC's regulations divide capital into
two tiers. The first tier ("Tier I") includes common equity, retained earnings,
certain non-cumulative perpetual preferred stock (excluding auction rate issues)
and minority interests in equity accounts of consolidated subsidiaries, minus
goodwill and other intangible assets (except mortgage servicing rights and
purchased credit card relationships subject to certain limitations).
Supplementary ("Tier II") capital includes, among other items, cumulative
perpetual and long-term limited-life preferred stock, mandatory convertible


                                        6







<PAGE>


securities, certain hybrid capital instruments, term subordinated debt and the
allowance for loan and lease losses, subject to certain limitations, less
required deductions.

         The FDIC requires that the highest rated banks maintain a Tier I
leverage ratio (Tier I capital to adjusted total assets) of at least 3.0%. All
other banks subject to FDIC capital requirements must maintain a Tier I leverage
ration of 4.0% to 5.0% or more. As of October 31, 1999, the Bank's Tier I
leverage capital ratio was 7.8%.

         The Bank must also meet a risk-based capital standard. The risk-based
standard requires the Bank to maintain total capital (defined as Tier I and
Supplementary capital) to risk-weighted assets of at least 8%, of which at least
4% must be Tier I capital. In determining the amount of risk-weighted assets,
all assets, plus certain off-balance sheet assets, are multiplied by a risk-
weight of 0% to 100%, based on the risks the FDIC believes are inherent in the
type of asset. As of October 31, 1999, the Bank maintained a 19.5% Tier I risk-
based capital ratio and a 20.7% total risk-based capital ratio.

         In addition to the foregoing regulatory capital requirements, the FDIC
Improvements Act of 1991 created a "prompt corrective action" framework, under
which decreases in a depository institution's capital category trigger various
supervisory actions. Pursuant to implementing regulations adopted by the FDIC,
for purposes of the prompt corrective action provisions, a state-chartered,
nonmember bank, such as the Bank, is deemed to be well capitalized if it has: a
total risk-based capital ratio of 10% or greater; a Tier I risk-based capital
ratio of 6% or greater; and a leverage ratio of 5% or greater. As of October 31,
1999, the Bank was well capitalized under all three of these standards.

         COMMUNITY REINVESTMENT ACT. The Bank must, under federal law, meet the
credit needs of its community, including low and moderate income segments of its
community. The FDIC is required, in connection with its examination of the Bank,
to assess whether the Bank has satisfied this requirement. Failure to satisfy
this requirement could adversely affect certain applications which the Bank may
make, such as branch applications, merger applications, and applications for
permission to purchase branches. In the case of Berkshire, the Federal Reserve
will assess the record of each subsidiary bank in considering certain
applications by Berkshire. The New York Banking Law contains similar provisions
applicable to the Bank.

         DIVIDENDS FROM THE BANK TO THE COMPANY. One source of funds for
Berkshire to pay dividends to its stockholders is dividends from the Bank to
Berkshire. Under the New York Banking Law, the Bank may pay dividends to
Berkshire, without regulatory approval, equal to its net profits for the year in
which the payment is made, plus retained net profits for the two previous years,
subject to certain limits not generally relevant. The Bank's retained net
profits for the 1997 and 1998 calendar years totaled $2,116,000 and the Bank's
net profits for the first ten months of calendar 1999 were $1,060,000. However,
the ability of Berkshire to pay dividends is not presently dependent upon the
receipt of dividends from the Bank.

         Under federal law, the Bank may not make any capital distribution to
Berkshire, including any dividend or repurchase of the Bank's stock, if, after
making such distribution, the Bank fails to meet the required minimum capital
ratio requirements discussed below. The FDIC may prohibit the Bank from paying
dividends if, in its opinion, the payment of dividends would constitute an
unsafe or unsound practice.

         TRANSACTIONS WITH RELATED PARTIES. The Company, its direct non-banking
subsidiaries and other companies controlled by shareholders who control the
Company are affiliates, within the meaning of the Federal Reserve Act, of the
Bank and its subsidiaries. The Bank's authority to engage in transactions with
its "affiliates" is limited by Sections 23A and 23B of the Federal Reserve Act.


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Section 23A limits the aggregate amount of transactions with any individual
affiliate to 10% of the capital and surplus of the Bank and also limits the
aggregate amount of transactions with all affiliates to 20% of the Bank's
capital and surplus. Extensions of credit to affiliates must be secured by
certain specified collateral, and the purchase of low quality assets from
affiliates is generally prohibited. Section 23B provides that certain
transactions with affiliates, including loans and asset purchases, must be on
terms and under circumstances, including credit standards, that are at least as
favorable to the Bank as those prevailing at the time for comparable
transactions with non-affiliated companies. In the absence of comparable
transactions, such transactions may only occur under terms and circumstances,
including credit standards, that in good faith would be offered to or would
apply to non-affiliated companies.

         The Bank may make loans to its directors, executive officers, and 10%
stockholders, as well as to entities controlled by them, subject to specific
federal and state limits. Among other things, these loans must (a) be made on
terms that are substantially the same as, and follow credit underwriting
procedures that are not less stringent than, those prevailing for comparable
transactions with unaffiliated persons and that do not involve more than the
normal risk of repayment or present other unfavorable features and (b) not
exceed certain limitations on the amount of credit extended to such persons,
individually and in the aggregate, which limits are based, in part, on the
amount of the Bank's capital. In addition, extensions of credit in excess of
certain limits must be approved by the Bank's Board of Directors. However, the
Bank may make loans to executive officers, directors and principal stockholders
on preferential terms, provided the extension of credit is made pursuant to a
benefit or compensation program of the Bank that is widely available to
employees of the Bank or its affiliates and does not give preference to any
insider over other employees of the Bank or affiliate. The Bank has no such
benefit or compensation programs.

         ENFORCEMENT. The FDIC and the Banking Department have enforcement
authority over the Bank. The Superintendent may order the Bank to appear and
explain an apparent violation of law, to discontinue unauthorized or unsafe
practices and to keep prescribed books and accounts. If any director or officer
of the Bank has violated any law, or has continued unauthorized or unsafe
practices in conducting the business of the Bank after having been notified by
the Superintendent to discontinue such practices, the New York Banking Board may
remove the individual from office after notice and an opportunity to be heard.
The Superintendent also may take over control of the Bank under specified
statutory criteria.

         The FDIC's enforcement authority includes, among other things, the
ability to assess civil money penalties, to issue cease and desist orders and to
remove directors and officers. As indicated above, the FDIC is required to take
prompt action to correct deficiencies in banks which do not satisfy specified
FDIC capital ratio requirements. Dividends, other capital distributions or the
payment of management fees to any controlling person are prohibited if,
following such distribution or payment, a bank would be undercapitalized. An
undercapitalized bank must file a plan to restore its capital within 45 days
after being notified that it is undercapitalized. Undercapitalized,
significantly undercapitalized and critically undercapitalized institutions are
subject to increasing prohibitions on permitted activities, and increasing
levels of regulatory supervision, based upon the severity of their capital
problems. The FDIC is required to monitor closely the condition of an
undercapitalized bank. Enforcement action taken by the FDIC can escalate to the
appointment of a conservator or receiver of a critically undercapitalized bank.

         INSURANCE OF ACCOUNTS. Deposit insurance premiums payable to the FDIC
are based upon the perceived risk of the institution to the FDIC insurance fund.
The FDIC assigns an institution to one of three capital categories: (a) well


                                        8







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capitalized, (b) adequately capitalized or (c) undercapitalized. The FDIC also
assigns an institution to one of three supervisory categories based on an
evaluation by the institution's primary federal regulator and information that
the FDIC considers relevant to the institution's financial condition and the
risk posed to the deposit insurance funds. Deposit insurance premiums depend on
an institution's capital and supervisory categories. At present, the Bank pays
no deposit insurance premium based upon its risk-based categorization.

         However, the Bank must pay a share of the cost of the bonds issued in
the late 1980s to recapitalize the now defunct Federal Savings and Loan
Insurance Corporation. The Bank must pay an annual assessment for this purpose,
which for the most recent quarter was equal to 0.01184% of its insured deposits
and which is recorded as a deposit insurance premium expense for financial
statement purposes.

         RESERVE REQUIREMENTS. The Bank must maintain non-interest-earning
reserves against its transaction accounts (primarily NOW and regular checking
accounts). The Bank is generally able to satisfy the reserve requirements with
cash on hand and other non-interest bearing deposits which it maintains for
other purposes, so the reserve requirements do not impose a material financial
burden on the Bank.

GOVERNMENTAL POLICIES

         The earnings of the Company are significantly affected by the monetary
and fiscal policies of governmental authorities, including the Federal Reserve.
Among the instruments of monetary policy used by the Federal Reserve to
implement these objectives are open-market operations in U.S. Government
securities and Federal funds, changes in the discount rate on member bank
borrowings and changes in reserve requirements against member bank deposits.
These instruments of monetary policy are used in varying combinations to
influence the overall level of bank loans, investments and deposits, and the
interest rates charged on loans and paid for deposits. The Federal Reserve
frequently uses these instruments of monetary policy, especially its open-market
operations and the discount rate, to influence the level of interest rates and
to affect the strength of the economy, the level of inflation or the price of
the dollar in foreign exchange markets. The monetary policies of the Federal
Reserve have had a significant effect on the operating results of banking
institutions in the past and are expected to continue to do so in the future. It
is not possible to predict the nature of future changes in monetary and fiscal
policies, or the effect which they may have on the Company's business and
earnings.

DISCONTINUED OPERATIONS

         On December 19, 1995, as the result of a merger transaction, the
Company exchanged its equity interest in a development stage company named
Unistar Gaming Corp. for Common and Preferred Stock of Executone Information
Systems, Inc. (See Note C of Notes to Consolidated Financial Statements.)

COMMON STOCK OF THE COOPER COMPANIES, INC.

         The Company owned shares of common stock of The Cooper Companies, Inc.
(the "TCC Common Stock"), a Delaware corporation, the common stock of which is
traded on the New York Stock Exchange (see Note C of Notes to Consolidated
Financial Statements.) The Company sold all of its shares of TCC Common Stock in
open market transactions during 1998. The proceeds of such sales were used by
the Company to fund its operating expenses and to provide the cash which was
used in connection with the acquisition of the Bank and other new business
opportunities.


                                        9







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PERSONAL HOLDING COMPANY STATUS

         For the fiscal years ended October 31, 1999 and 1998, the Company has
been deemed to be a Personal Holding Company (a "PHC"), as defined in the
Internal Revenue Code. As a PHC, the Company is required to pay an additional
income tax or issue a dividend to its shareholders in an amount based upon the
PHC Internal Revenue Code formulas, which is primarily based upon net income. On
September, 14, 1999 and October 19, 1998, the Board of Directors of the Company
declared cash dividends in the amounts of $.12 and $.72 per common share,
respectively. (See Dividends in Item 5).

EMPLOYEES

         On January 18, 2000, Berkshire had one full time employee and the Bank
employed approximately 22 full time employees. The Bank's employees are not
represented by a collective bargaining unit, and the Bank considers its
relationship with its employees to be good.

ITEM 2. PROPERTIES.

         The following are Berkshire's and the Bank's principal facilities, all
of which are leased, as of January 18, 2000:


<TABLE>
<CAPTION>
                                                              Approximate       Approximate
                                                              Floor Area        Annual           Lease
Location                   Operations                         (Sq. Ft.)         Rent             Expiration
------------               -----------------                  ---------         ---------        ----------
<S>                     <C>                                <C>               <C>               <C>
New York, NY               Executive Offices                  1,500             $  18,000               (1)
New York, NY               Main Bank Office                   5,100             $ 217,000        March 2001
Brooklyn, NY               Bank Branch                        4,500             $  56,000        June 2000
</TABLE>

-------------
(1) Rented on a month to month basis from a company affiliated with a director
of the Company.

ITEM 3. LEGAL PROCEEDINGS.

         In the ordinary course of its operations, the Bank is a party to
routine litigation involving claims incidental to its banking business.
Management of the Bank believes that no current litigation, threatened or
pending, to which the Bank or its assets is or may become a party, poses a
substantial likelihood of potential loss or exposure which would have a material
adverse effect on the financial condition or results of operations of the Bank.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         Not Applicable.


                                       10







<PAGE>


                                            PART II

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

         The Company's Common Stock trades on the Nasdaq Stock Market (Small
Cap) under the symbol ZAPS.

         The following table sets forth, for the periods indicated, the high and
low sales prices for the Company's Common Stock as reported by the National
Association of Securities Dealers, Inc.

<TABLE>
<CAPTION>
                                                              HIGH              LOW
FISCAL YEAR ENDED OCTOBER 31, 1998                            ----              ---
----------------------------------
<S>                                                         <C>              <C>
November 1, 1997 to January 31, 1998                          37 7/8            25 1/4
February 1, 1998 to April 30, 1998                            41                35 3/4
May 1, 1998 to July 31, 1998                                  42 1/2            36 1/2
August 1, 1998 to October 31, 1998                            41 1/2            27 1/8

<CAPTION>
                                                              HIGH              LOW
                                                              ----              ---
FISCAL YEAR ENDED OCTOBER 31, 1999
----------------------------------
November 1, 1998 to January 31, 1999                          41                29 1/2
February 1, 1999 to April 30, 1999                            43 1/16           32
May 1, 1999 to July 31, 1999                                  45                39 1/2
August 1, 1999 to October 31, 1999                            39 1/2            34
</TABLE>

         As of the close of business on January 18, 2000, there were
approximately 2,287 holders of record of the Company's Common Stock.

DIVIDENDS

         On November 16, 1998, the Company paid a special dividend of $.72 per
Common Share to shareholders of record as of the close of business on October
29, 1998. On October 29, 1999, the Company paid a special dividend of $.12 per
Common Share to shareholders of record as of the close of business on October
25, 1999. The primary purpose for declaring these dividends was the probable
then current status of the Company as a "personal holding company" for federal
income tax purposes; and that, as a result thereof, if said dividends were not
declared and paid to the Company's shareholders, the Company would incur
substantial additional federal income tax liability.

         On March 23, 1999, the Board of Directors adopted a policy of paying
regular cash dividends in respect of the Common Stock of the Company in the
amount of $.20 per share per annum, payable in equal semi-annual installments of
$.10 each. Pursuant to said policy, the Board of Directors declared and the
Company paid a cash dividend of $.10 per share on April 30, 1999 and $.10 per
share on October 29, 1999 to shareholders of record as of the close of business
on April 15, 1999 and October 15, 1999, respectively. The declaration, payment
and amount of such dividends in the future is within the discretion of the Board
of Directors and will depend upon the Company's earnings, capital requirements,
financial condition and other relevant factors.


                                       11







<PAGE>


ITEM 6. SELECTED FINANCIAL DATA.

                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES

                         FIVE YEAR FINANCIAL HIGHLIGHTS

                           YEAR-END FINANCIAL POSITION
                             (DOLLARS IN THOUSANDS)

         The following is a summary of certain financial information with
respect to the Company's fiscal years ended October 31, 1999, 1998, 1997, 1996,
and 1995. This information is derived from and should be read in conjunction
with the Company's financial statements and notes thereto included elsewhere in
this Form 10-K.

<TABLE>
<CAPTION>
                                                                                  OCTOBER 31,
                                                         -------------------------------------------------------------
                                                         1999         1998           1997          1996           1995
                                                         ----         ----           ----          ----           ----
<S>                                                    <C>        <C>            <C>          <C>            <C>
Balance Sheet Data:
-------------------

Total Assets                                         $180,986      $66,830        $64,521       $34,138        $19,102

Loans, net                                             59,652           --             --            --             --

Investment Securities                                  82,876           --         38,067        33,572         13,645

Goodwill                                               12,195           --             --            --             --

Deposits                                              102,318           --             --            --             --

Stockholders' Equity                                   73,306       65,466         61,729        33,177         16,920
</TABLE>


                                       12







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                         FIVE YEAR FINANCIAL HIGHLIGHTS
                     SUMMARY OF CONSOLIDATED OPERATIONS(a)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                           FOR THE FISCAL YEARS ENDED OCTOBER 31,

                                                              1999           1998           1997           1996           1995
                                                              ------         ------         ------         ------         ------
<S>                                                           <C>         <C>            <C>             <C>            <C>
Interest income                                             $  8,525       $  3,313       $    669        $    --        $    --
Interest expense                                               2,548             --             --            138            193
                                                            --------       --------       --------        -------        -------
Net interest income before
 provision for loan losses                                     5,977          3,313            669           (138)          (193)
Provision for loan losses                                         45             --             --             --             --
                                                            --------       --------       --------        -------        -------
Net interest income                                            5,932          3,313            669           (138)          (193)

Investment securities gains (losses)                           7,622         38,909         16,845            772           (376)
Other income                                                     633             44            119             22             51
Other expenses                                                 2,948          1,066            823          2,905          1,132
Amortization of goodwill                                         608             --             --             --             --
                                                            --------       --------       --------        -------        -------

Income (loss) from continuing
 operations before income taxes                               10,631         41,200         16,810         (2,249)        (1,650)
Provision for income taxes                                     4,091          3,573            100             --             --
                                                            --------       --------       --------        -------        -------
Income (loss) from continuing
 operations                                                    6,540         37,627         16,710         (2,249)        (1,650)
Gain from discontinued
 operations                                                       --             --             --             --          2,823
                                                            --------       --------       --------        -------        -------

Net income (loss)                                           $  5,820       $ 37,627       $ 16,710        $(2,249)       $ 1,173
                                                            ========       ========       ========        =======        =======

Net income (loss) per share

Basic:
 Continuing operations                                      $   3.08        $ 17.70       $   7.78        $ (1.05)       $  (.75)
 Discontinued operations                                          --             --             --             --           1.28
                                                            --------       --------       --------        -------        -------

Net income (loss) per share                                 $   3.08       $  17.70       $   7.78        $ (1.05)       $   .53
                                                            ========       ========       ========        =======        =======

Diluted:
 Continuing operations                                      $   2.89       $  16.66        $  7.45        $ (1.05)       $  (.75)
 Discontinued operations                                          --             --             --             --           1.28
                                                            --------       --------        -------        -------        -------
Net income (loss) per share                                 $   2.89       $  16.66       $   7.45        $ (1.05)       $   .53
                                                            ========       ========       ========        =======        =======

Cash dividends per common share                             $    .32       $    .72       $     --        $    --        $    --
                                                            ========       ========       ========        =======        =======


Selected Operating Ratios

 Return on average assets                                        3.9%          55.0%          32.9%         (7.7)%           5.1%
 Return on average equity                                        6.2%          57.2%          33.8%         (8.3)%           5.8%
 Net interest margin                                             4.4%           4.8%           1.3%            --             --
 Average equity/average assets                                  48.3%          96.2%          97.3%         92.6 %          86.8%
 Allowance for loan losses/total                                 1.5%            --             --             --             --
 loans
</TABLE>

(a) The prior years' amounts have been reclassified to conform to the current
years' presentation.


                                       13






<PAGE>


ITEM 7.  MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

         The following discussion and analysis is intended to provide a better
understanding of the consolidated financial condition and results of operations
of Berkshire Bancorp Inc. and subsidiaries (the "Company") for the fiscal years
ended October 31, 1999 and 1998. References to Notes herein are references to
the "Notes to Consolidated Financial Statements" of the Company located in Item
8 herein. Reference is also made to Part I, Item 1 "Business" herein.

GENERAL

         The Company's historic financial statements included in this Form 10-K
for the twelve months ended October 31, 1999 do not include the operations of
the Bank for the period from November 1, 1998 through January 3, 1999. However,
to ensure comparability with prior year periods, the income statement data
discussed for the twelve months ended October 31, 1999 are based upon proforma
data for the Company after the acquisition of the Bank, and the Company during
fiscal 1999 prior to the acquisition. Proforma information as of and for the
fiscal years ended October 31, 1998 and 1997 has been provided for comparison
purposes. All data as of and for the twelve months ended October 31, 1998 and
1997 are from the Company only.

         To ensure comparability with the Bank in future periods, the Company
will change its fiscal year to December 31.


                                       14









<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                  PROFORMA SELECTED CONSOLIDATED FINANCIAL DATA

         The following sets forth a comparison of selected financial data which
reflects the balances and results of operations on an unaudited proforma
consolidated basis as if the acquisition of The Berkshire Bank had become
effective on October 31, 1999, 1998 and 1997, in the case of balance sheet
information presented, and at the beginning of the periods indicated, in the
case of operations information presented. Period end amounts have been utilized
to calculate performance ratios (dollars in thousands, except per share
amounts):

<TABLE>
<CAPTION>
                                                                                    Twelve Months Ended
                                                                                        October 31,
                                                                          ------------------------------------------
                                                                               1999            1998            1997
                                                                          ----------  --------------  --------------
<S>                                                                       <C>             <C>             <C>
Earnings Summary:
Interest income                                                           $   9,515       $   9,392       $   6,076
Interest expense                                                              2,964           3,642           3,836
                                                                          ---------       ---------       ---------
Net interest income                                                           6,551           5,750           2,240
Provision for possible loan losses                                               45              60              60
                                                                          ---------       ---------       ---------
Net interest income after provision
 for possible loan losses                                                     6,506           5,690           2,180
Other income (loss)                                                           8,355          39,311          17,336
Other expenses                                                              (4,156)           4,474           4,214
                                                                          ---------       ---------       ---------
Income (loss) before income taxes and
 extraordinary items                                                         10,705          40,527          15,302
Income taxes                                                                  4,844           3,258             145
                                                                          ---------       ---------       ---------
Income (loss) before extraordinary items                                      5,861          37,269          15,157
Extraordinary items                                                              --             150              --
                                                                          ---------       ---------       ---------
Net income (loss)                                                         $   5,861       $  37,119       $  15,157
                                                                          =========       =========       =========
Per Share Data:

Weighted average common shares outstanding-basic                              2,126           2,126           2,147
Weighted average common shares outstanding-diluted                            2,261           2,258           2,244
Net income per common share- basic                                        $    2.76       $   17.46       $    7.06
Net income per common share- diluted                                      $    2.59       $   16.44       $    6.75
Dividends paid per common share                                           $     .32       $     .72       $      --

Balance Sheet Summary:

Investment securities                                                     $  82,876       $  50,785       $  75,696
Cash and cash equivalents                                                    23,829          47,472          18,816
Loans, net                                                                   59,652          38,994          36,992
Allowance for loan losses                                                      (905)           (803)           (723)
Total assets                                                                183,148         155,388         152,961
Deposits                                                                    102,318          86,232          89,469
Stockholder's equity                                                      $  72,586       $  64,958       $  60,176

Performance Ratios:

Return on average assets                                                        3.3%           23.9%            9.9%
Return on average equity                                                        8.4%           57.4%           25.2%
Average equity to average assets                                               39.6%           41.1%           39.3%
Net Interest Margin                                                             4.4%            3.9%            2.3%
</TABLE>


                                       15









<PAGE>


DISCUSSION OF RESULTS OF OPERATIONS

OVERVIEW

         1999 COMPARED TO 1998. Net income was $6.5 million or $2.89 per diluted
share for fiscal 1999, compared to $37.6 million or $16.66 per diluted share for
fiscal 1998. The decrease in net income is primarily due to the decrease in
investment securities gains from $38.9 million in fiscal 1998 to $7.6 million in
fiscal 1999.

         1998 COMPARED TO 1997. Net income was $37.6 million or $16.66 per
diluted share for fiscal 1998, compared to $16.7 million or $7.45 per diluted
share for fiscal 1997. The increase in net income was primarily due to the
increase in investment securities gains from $16.8 million in fiscal 1997 to
$38.9 million in fiscal 1998.

SEGMENTS

         Management has determined that the Company operates in one business
segment, community banking. The Bank's principal business activity consists of
gathering deposits from the general public and investing those deposits in
residential and commercial mortgage loans and commercial non-mortgage loans,
both unsecured and secured by personal property. In addition, the Bank invests
those deposits in debt obligations issued by the U.S. Government, its agencies,
business corporations and mortgage-backed securities.

NET INTEREST INCOME

         Net interest income represents the difference between total interest
income earned on earning assets and total interest expense paid on
interest-bearing liabilities. The amount of interest income is dependent upon
many factors including the amount of interest-earning assets that the Company
can maintain based upon its funding sources; (ii) the relative amounts of
interest-earning assets versus interest-bearing liabilities; and (iii) the
difference between the yields earned on those assets and the rates paid on those
liabilities. Nonperforming loans adversely affect net interest income because
they must still be funded by interest-bearing liabilities, but they do not
provide interest income. Furthermore, when the Company designates an asset as
non-performing, all interest which has been accrued but not actually received is
deducted from current period income, further reducing net interest income.


                                       16









<PAGE>


         The Company's average balances, interest, and average yields are set
forth on the following tables (in thousands, except percentages):

<TABLE>
<CAPTION>
                                                                            Proforma
                                                                           (Unaudited)
                                                                 Twelve Months Ended October 31,
                                                                 -------------------------------
                                                                              1999
                                                                              -----
                                                                           Interest          Average
                                                            Average         and               Yield/
                                                            Balance        Dividends           Rate
                                                            -------        ---------         --------
<S>                                                         <C>            <C>                   <C>
INTEREST-EARNING ASSETS:
Loans (1)                                                   $  44,893      $  3,623              8.07%
Investment securities                                          66,352         3,760              5.67
Other (2)(5)                                                   38,573         2,132              5.53
                                                            ---------      --------              ----
Total interest-earning assets                                 149,818         9,515              6.35
                                                                                                 ----
Noninterest-earning assets                                     45,340
                                                            ---------
Total Assets                                                $ 195,158
                                                            =========
INTEREST-BEARING LIABILITIES:
Interest bearing deposits                                      53,236         1,669              3.14
Time deposits                                                  21,714         1,205              5.55
Other borrowings                                                1,514            90              5.94
                                                            ---------     ---------              ----
Total interest-bearing                                         76,464         2,964              3.88
 liabilities
                                                                          ---------              ----
Demand deposits                                                17,485
Noninterest-bearing liabilities                                 6,994
Stockholders' equity (5)                                       94,215
                                                            ---------
Total liabilities and
 stockholders' equity                                       $ 195,158
                                                            =========
Net interest income                                                        $  6,551
                                                                           ========
Interest-rate spread (3)                                                                         2.47%
                                                                                                 ====
Net interest margin (4)                                                                          4.37%
                                                                                                 ====
Ratio of average interest-earning
 assets to average interest
 bearing liabilities                                             1.96%
                                                            =========
</TABLE>

----------------------
(1)      Includes nonaccrual loans.
(2)      Includes interest-bearing deposits, federal funds sold and securities
         purchased under agreements to resell.
(3)      Interest-rate spread represents the difference between the average
         yield on interest-earning assets and the average cost of interest
         bearing liabilities.
(4)      Net interest margin is net interest income as a percentage of average
         interest-earning assets.
(5)      Average balances for Berkshire Bancorp Inc. (parent only) have been
         calculated on a monthly basis.



                                       17









<PAGE>


<TABLE>
<CAPTION>
                                                                             Proforma
                                                                             (Unaudited)
                                                                    Twelve Months Ended October 31,
                                                                    --------------------------------
                                                          1998                                          1997
                                                          ----                                          ----
                                                      Interest          Average                        Interest          Average
                                        Average         and              Yield/         Average         and              Yield/
                                        Balance       Dividends           Rate          Balance        Dividends          Rate
                                        -------       ---------         -------         -------        ---------         --------
<S>                                     <C>           <C>                   <C>         <C>            <C>                  <C>
INTEREST-EARNING ASSETS:
Loans (1)                               $ 39,085      $ 3,325               8.51%       $ 31,081       $ 2,771              8.92%
Investment securities                     45,569        2,713               5.95          76,095         2,284              3.00
Other (2)(5)                              61,051        3,354               5.49          19,352         1,021              5.27
                                        --------      -------               ----        --------       -------              ----
Total interest-earning assets            145,705        9,392               6.45         126,528         6,076              4.80
                                                                            ----                                            ----
Noninterest-earning assets                18,222                                          16,556
                                        --------                                        --------
Total Assets                            $163,927                                        $143,084
                                        ========                                        ========
INTEREST-BEARING LIABILITIES:
Interest bearing deposits                 58,273        2,320               3.98          39,234         1,442              3.67
Time deposits                             25,203        1,299               5.15          31,926         1,663              5.21
Other borrowings                             382           23               6.02           8,151           731              8.97
                                        --------      -------               ----        --------       -------              ----
Total interest-bearing
 liabilities                              83,858        3,642               4.34          79,311         3,836              4.84
                                                      -------                                          -------              ----
Demand deposits                           13,144                                           8,721
Noninterest-bearing liabilities            2,623                                             972
Stockholders' equity (5)                  64,302                                          54,080
                                        --------                                        --------
Total liabilities and
 stockholders' equity                   $163,927                                        $143,084
                                        ========                                        ========

Net interest income                                   $ 5,750                                          $ 2,240
                                                      =======                                          =======

Interest-rate spread (3)                                                    2.11%                                           (.84)%
                                                                            ====                                            ====

Net interest margin (4)                                                     3.95%                                           2.34%
                                                                            ====                                            ====

Ratio of average interest-earning
 assets to average interest
 bearing liabilities                        1.74%                                           1.59%
                                        ========                                        ========
</TABLE>

----------------------
(1)      Includes nonaccrual loans.
(2)      Includes interest-bearing deposits, federal funds sold and securities
         purchased under agreements to resell.
(3)      Interest-rate spread represents the difference between the average
         yield on interest-earning assets and the average cost of interest
         bearing liabilities.
(4)      Net interest margin is net interest income as a percentage of average
         interest-earning assets.
(5)      Average balances for Berkshire Bancorp Inc. (parent only) have been
         calculated on a monthly basis.


                                       18









<PAGE>


         Changes in net interest income may also be analyzed by segregating the
volume and rate components of interest income and interest expense. The
following tables set forth certain information regarding changes in interest
income and interest expense of the Company for the years indicated. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (1) changes in rate (change
in rate multiplied by prior volume), (2) changes in volume (changes in volume
multiplied by prior rate) and (3) changes in rate-volume (change in rate
multiplied by change in volume) (in thousands):

<TABLE>
<CAPTION>
                                                                  Proforma
                                                       Twelve Months Ended October 31,
                                                              1999 versus 1998
                                                         Increase (Decrease) Due to
                                          ---------------------------------------------------------
                                                Rate             Volume                 Total
                                          ----------------- -----------------     -----------------
<S>                                         <C>               <C>                   <C>
Interest-earning assets:
 Loans                                      $    (34)         $    332              $    298
 Investment securities                           (15)            1,062                 1,047
 Other                                             2            (1,224)               (1,222)
                                            --------          --------              --------
Total                                            (47)              170                   123
                                            --------          --------              --------

Interest-bearing
 liabilities:
Deposit accounts:
 Interest bearing deposits                      (128)             (523)                 (651)
 Time deposits                                    (5)              (89)                  (94)
 Other borrowings                                 --                67                    67
                                            --------          --------              --------
Total                                           (133)             (545)                 (678)
                                            --------          --------              --------

Net interest income                         $     86          $    715              $    801
                                            ========          ========              ========
</TABLE>


<TABLE>
<CAPTION>
                                                                  Proforma
                                                       Twelve Months Ended October 31,
                                                              1998 versus 1997
                                                         Increase (Decrease) Due to
                                          ---------------------------------------------------------
                                                Rate             Volume                 Total
                                          ----------------- -----------------     -----------------
<S>                                         <C>               <C>                   <C>
Interest-earning assets:
 Loans                                       $   (132)          $    686             $    554
 Securities                                       (19)               448                  429
 Other                                             45              2,288                2,333
                                             --------           --------             --------
Total                                            (106)             3,422                3,316
                                             --------           --------             --------

Interest-bearing
 liabilities:
Deposit accounts:
 Interest bearing deposits                        125                753                  878
 Time deposits                                    (18)              (346)                (364)
 Other borrowings                                (181)              (527)                (708)
                                             --------           --------             --------
Total                                            (747)              (120)                (194)
                                             --------           --------             --------

Net interest income                          $    (32)          $  3,542             $  3,510
                                             ========           ========             ========
</TABLE>


                                       19









<PAGE>


INTEREST RATE RISK

         Fluctuations in market interest rates can have a material effect on the
Bank's net interest income because the yields earned on loans and investments
may not adjust to market rates of interest with the same frequency, or with the
same speed, as the rates paid by the Bank on its deposits.

         Most of the Bank's deposits are either interest-bearing demand deposits
or short term certificates of deposit and other interest-bearing deposits with
interest rates that fluctuate as market rates change. Management of the Bank
seeks to reduce the risk of interest rate fluctuations by concentrating on loans
and securities investments with either short terms to maturity or with
adjustable rates or other features that cause yields to adjust based upon
interest rate fluctuations. In addition, to cushion itself against the potential
adverse effects of a substantial and sustained increase in market interest
rates, the Bank has purchased off balance sheet interest rate cap contracts
which generally provide that the Bank will be entitled to receive payments from
the other party to the contract if interest rates exceed specified levels. These
contracts are entered into with major financial institutions.

         The Company seeks to maximize its net interest margin within an
acceptable level of interest rate risk. Interest rate risk can be defined as the
amount of the forecasted net interest income that may be gained or lost due to
favorable or unfavorable movements in interest rates. Interest rate risk, or
sensitivity, arises when the maturity or repricing characteristics of assets
differ significantly from the maturity or repricing characteristics of
liabilities.

PROVISION FOR LOAN LOSSES

         The allowance for loan losses is established through a provision for
loan losses based on management's evaluation of the risks inherent in the Bank's
loan portfolio and the general economy. The allowance for loan losses is
maintained at an amount management considers adequate to cover loan losses which
are deemed probable and can be estimated. The allowance is based upon a number
of factors, including the size of the loan portfolio, asset classifications,
economic trends, industry experience and trends, industry and geographic
concentrations, estimated collateral values, management's assessment of the
credit risk inherent in the portfolio, historical loan loss experience and the
Bank's underwriting policies. In general, it is the Bank's policy to maintain a
minimum allowance equal to 1% of outstanding loans plus outstanding commitments
and letters of credit. In addition, the Bank evaluates all loans identified as
problem loans and augments the allowance based upon the perceived risks
associated with such problem loans.

         Management believes it uses a reasonable and prudent methodology to
project potential future losses in the loan portfolio, and hence assess the
adequacy of the allowance for loan losses. However, any such assessment is
speculative and future adjustments may be necessary if economic conditions or
the Bank's actual experience differ substantially from the assumptions upon
which the evaluation of the allowance was based. Furthermore, state and federal
regulators, in reviewing the Bank's loan portfolio as part of a future
regulatory examination, may request the Bank to increase its allowance for loan
losses, thereby negatively affecting the Bank's financial condition and earnings
at that time. Moreover, future additions to the allowance may be necessary based
on changes in economic and real estate market conditions, new information
regarding existing loans, identification of additional problem loans and other
factors, both within and outside of management's control.

NON-INTEREST INCOME

         Non-interest income consists primarily of service fee income and the
realized gains on sales of investment securities.


                                       20









<PAGE>


NON-INTEREST EXPENSE

         The major categories of non-interest expense include salaries and
employee benefits, occupancy and equipment expenses, legal and professional fees
and other operating expenses associated with the day-to-day operations of the
Company. The amortization of intangible assets of $608,000 in 1999 is a result
of the goodwill recorded in the acquisition of the Bank.

INCOME TAXES

         The provision for income taxes was $4.01 million for fiscal 1999, $3.57
million for fiscal 1998, and $100,000 for fiscal 1997. In 1998 and 1997, the
Company utilized its remaining net operating loss carryforwards to offset taxes
which would have been due. The Company's income in 1999 was fully taxable.

INVESTMENT ACTIVITIES

         GENERAL. The investment policy of the Bank is designed primarily to
provide satisfactory yields while maintaining adequate liquidity, a balance of
high quality, diversified investments, and minimal risk. The Bank does not
invest in equity securities. The largest component of the Bank's securities
investments, representing more than 50% of total securities investments, are
debt securities issued by the Federal Home Loan Mortgage Corporation (Freddy
Mac), the Federal National Mortgage Association (Fanny Mae) or the Government
National Mortgage Association (Ginny Mae). The remainder of the Bank's debt
securities investments are primarily short term debt securities issued by the
United States or its agencies. The Bank maintains a small portfolio of less than
$2 million of high-yield corporate debt securities. Recognizing the higher
credit risks of these securities, the Bank underwrites these securities in a
manner similar to its loan underwriting procedures.

         As required by the Statement of Financial Accounting Standard No. 115
("SFAS No. 115"), securities are classified into three categories: trading,
held-to-maturity and available-for-sale. Securities that are bought and held
principally for the purpose of selling them in the near term are classified as
trading securities and are reported at fair value with unrealized gains and
losses included in trading account activities in the statement of income.
Securities that the Bank has the positive intent and ability to hold to maturity
are classified as held-to-maturity and reported at amortized cost. All other
securities are classified as available-for-sale. Available-for-sale securities
are reported at fair value with unrealized gains and losses included, on an
after-tax basis, as a separate component of net worth. The Bank does not have a
trading securities portfolio and has no current plans to maintain such a
portfolio in the future. The Bank generally classifies all newly purchased debts
securities as available for sale in order to maintain the flexibility to sell
those securities if the needs arises. The Bank has a limited portfolio of
securities classified as held to maturity, represented principally by securities
purchased a number of years ago.

         FEDERAL HOME LOAN BANK STOCK. The Bank owns stock of the Federal Home
Loan Bank of New York (the "FHLBNY") which is necessary for it to be a member of
the FHLBNY. Membership requires the purchase of stock equal to 1% of the Bank's
residential mortgage loans. If the Bank borrows from the FHLBNY, the Bank must
own stock at least equal to 5% of its borrowings.


                                       21








<PAGE>


         The following table sets forth the cost and estimated fair value of
available-for-sale and held-to-maturity securities as of the dates indicated (in
thousands):


<TABLE>
<CAPTION>
                                                              COST             FAIR VALUE
                                                              ----             ----------
                     OCTOBER 31, 1999
<S>                                                         <C>                 <C>
  Available-For-Sale
U.S. Government Agencies                                    $ 65,934            $ 66,468
Mortgage-backed securities                                     4,841               4,768
Marketable equity securities and other                         4,572              11,143
                                                            --------            --------
Total                                                       $ 75,347            $ 80,775
                                                            ========            ========
  Held-To-Maturity
U.S. Government Agencies                                    $  1,605            $  1,603
Corporate notes                                                  496                 496
                                                            --------            --------
Total                                                       $  2,101            $  2,099
                                                            ========            ========
</TABLE>


<TABLE>
<CAPTION>
                                                              COST             FAIR VALUE
                                                              ----             ----------
                         PROFORMA
                     OCTOBER 31, 1998
<S>                                                         <C>                 <C>
  Available-For-Sale
U.S. Government Agencies                                    $ 33,586            $ 33,687
Corporate notes                                                1,893               1,815
Federal Home Loan Bank Stock                                     535                 535
                                                            --------            --------
Total                                                       $ 36,014            $ 36,037
                                                            ========            ========
  Held-To-Maturity
U.S. Government Agencies                                    $ 12,504            $ 12,468
Corporate notes                                                2,244               2,242
                                                            --------            --------
Total                                                       $ 14,748            $ 14,710
                                                            ========            ========
</TABLE>


<TABLE>
<CAPTION>
                                                              COST             FAIR VALUE
                                                              ----             ----------
                         PROFORMA
                     OCTOBER 31, 1997
<S>                                                         <C>                 <C>
  Available-For-Sale
U.S. Government Agencies                                    $ 15,542            $ 15,445
Corporate notes                                                2,276               2,320
Marketable equity securities                                   4,007              38,067
Federal Home Loan Bank Stock                                     535                 535
                                                            --------            --------
Total                                                       $ 22,360            $ 56,367
                                                            ========            ========
  Held-To-Maturity
U.S. Government Agencies                                    $ 17,088            $ 16,985
Corporate notes                                                2,241               2,247
                                                            --------            --------
Total                                                       $ 19,329            $ 19,232
                                                            ========            ========
</TABLE>



                                       22







<PAGE>


         The following table summarizes the Company's available-for-sale and
held-to-maturity securities at October 31, 1999 (dollars in thousands):

<TABLE>
<CAPTION>
                                     WEIGHTED
                                      AVERAGE
                                       YIELD            COST         FAIR VALUE
                                     --------           ----         ----------
AVAILABLE-FOR-SALE
<S>                                    <C>          <C>             <C>
  U.S. Government
   Agencies Obligations
Due within one year                    5.15%        $ 10,000        $  9,968
Due after one year
 through five years                    5.27           39,989          39,288
Due after five years
 through ten years                     5.30           13,175          12,899
Due after ten years                    5.40            7,611           7,476
                                                    --------        --------
                                                      70,775          69,631
                                                    --------        --------
  Corporate Notes
Due within one year                                       --              --
Due after one year
 through five years                    8.20              904             778
Due after five years
 through ten years                     7.90              640             581
Due after ten years                    8.00              200             194
                                                    --------        --------
                                                       1,744           1,553
                                                    --------        --------
  Executone Information
   Systems, Inc.
   Common Stock                         --                --           6,837
  Preferred Stocks                     8.56            2,293           2,219
  Federal Home Loan
   Bank Stock                          8.29              535             535
                                                    --------        --------
                                                       2,828           9,591
                                                    --------        --------
                                                    $ 75,347        $ 80,775
                                                    ========        ========
HELD-TO-MATURITY
  U.S. Government
   Agencies Obligations
Due within one year                    4.50              998             997
Due after one year
 through five years                    6.60              155             155
Due after five years
 through ten years                     6.40              123             122
Due after ten years                    6.50              329             329
                                                    --------        --------
                                                       1,605           1,603
                                                    --------        --------
  Corporate Notes
Due within one year
Due after one year
 through five years                    5.47              496             496
Due after five years
 through ten years
Due after ten years
                                                    --------        --------
                                                         496             496
                                                    --------        --------
                                                    $  2,101        $  2,099
                                                    ========        ========
</TABLE>


                                       23








<PAGE>


LOAN PORTFOLIO

         LOAN PORTFOLIO COMPOSITION. The Company's loans consist primarily of
mortgage loans secured by residential and non-residential properties as well as
commercial loans which are either unsecured or secured by personal property
collateral. Most of the Company's loans are either made to individuals or
personally guaranteed by the principals of the business to which the loan is
made. At October 31, 1999, the Company had total loans of $60.5 million and an
allowance for loan losses of approximately $905,000. From time to time, the Bank
may originate residential mortgage loans and then sell them on the secondary
market, normally recognizing fee income in connection with the sale.

         Interest rates on loans are affected by the demand for loans, the
supply of money available for lending, credit risks, the rates offered by
competitors and other conditions. These factors are in turn affected by, among
other things, economic conditions, monetary policies of the federal government,
and legislative tax policies.

         In order to manage interest rate risk, the Bank focuses its efforts on
loans with interest rates that adjust based upon changes in the prime rate or
changes in United States Treasury or similar indices. Generally, credit risks on
adjustable-rate loans are somewhat greater than on fixed-rate loans primarily
because, as interest rates rise, so do borrowers' payments, increasing the
potential for default. The Bank seeks to impose appropriate loan underwriting
standards in order to protect against these and other credit related risks
associated with its lending operations.

         In addition to analyzing the income and assets of its borrowers when
underwriting a loan, the Bank obtains independent appraisals on all material
real estate in which the Bank takes a mortgage. The Bank generally obtains title
insurance in order to protect against title defects on mortgaged property.

         COMMERCIAL MORTGAGE LOANS. The Bank originates commercial mortgage
loans secured by office buildings, retail establishments, multi-family
residential real estate and other types of commercial property. Substantially
all of the properties are located in the New York City metropolitan area.

         The Bank makes commercial mortgage loans with loan to value ratios not
to exceed 75% and with terms to maturity that do not exceed 15 years. Loans
secured by commercial properties generally involve a greater degree of risk than
one- to four-family residential mortgage loans. Because payments on such loans
are often dependent on successful operation or management of the properties,
repayment may be subject, to a greater extent, to adverse conditions in the real
estate market or the economy. The Bank seeks to minimize these risks through its
underwriting policies. The Bank evaluates the qualifications and financial
condition of the borrower, including credit history, profitability and
expertise, as well as the value and condition of the underlying property. The
factors considered by the Bank include net operating income; the debt coverage
ratio (the ratio of cash net income to debt service); and the loan to value
ratio. When evaluating the borrower, the Bank considers the financial resources
and income level of the borrower, the borrower's experience in owning or
managing similar property and the Bank's lending experience with the borrower.
The Bank's policy requires borrowers to present evidence of the ability to repay
the loan without having to resort to the sale of the mortgaged property. The
Bank also seeks to focus its commercial mortgage loans on loans to companies
with operating businesses, rather than passive real estate investors.

         COMMERCIAL LOANS. The Bank makes commercial loans to businesses for
inventory financing, working capital, machinery and equipment purchases,
expansion, and other business purposes. These loans generally have higher yields
than mortgages loans, with maturities of one year, after which the borrower's
financial condition and the terms of the loan are re-evaluated.


                                       24






<PAGE>


         Commercial loans tend to present greater risks than mortgage loans
because the collateral, if any, tends to be rapidly depreciable, difficult to
sell at full value and is often easier to conceal. In order to limit these
risks, the Bank evaluates these loans based upon the borrower's ability to repay
the loan from ongoing operations. The Bank considers the business history of the
borrower and perceived stability of the business as important factors when
considering applications for such loans. Occasionally, the borrower provides
commercial or residential real estate collateral for such loans, in which case
the value of the collateral may be a significant factor in the loan approval
process.

         ORIGINATION OF LOANS. Loan originations can be attributed to
depositors, retail customers, telephone inquiries, advertising, the efforts of
the Bank's loan officers, and referrals from other borrowers and real estate
brokers and builders. The Bank originates loans primarily through its own
efforts. Occasionally, the Bank may obtain loan opportunities as a result of
referrals from loan brokers.

         At October 31, 1999, the Bank's total capital was approximately $13.3
million and thus it was generally not permitted to make loans to one borrower in
excess of approximately $2.0 million, with an additional approximately $1.3
million being permitted if secured by readily marketable collateral. The Bank
was also not permitted to make any single mortgage loan in an amount in excess
of approximately $2.0 million. At October 31, 1999, the Bank was in compliance
with these standards.

         DELINQUENCY PROCEDURES. When a borrower fails to make a required
payment on a loan, the Bank attempts to cause the deficiency to be cured by
contacting the borrower. The Bank reviews past due loans on a case by case
basis, taking the action it deems appropriate in order to collect the amount
owed. Litigation may be necessary if other procedures are not successful.
Judicial resolution of a past due loan can be delayed if the borrower files a
bankruptcy petition because collection action cannot be continued unless the
Bank first obtains relief from the automatic stay provided by the Bankruptcy
Code.

         If a non-mortgage loan becomes delinquent and satisfactory arrangements
for payment cannot be made, the Bank seeks to realize upon any personal property
collateral to the extent feasible and collect any remaining amount owed from the
borrower through legal proceedings, if necessary.

         It is the Bank's policy to discontinue accruing interest on a loan when
it is 90 days past due or if management believes that continued interest
accruals are unjustified. The Bank may continue interest accruals if a loan is
more than 90 days past due if the Bank determines that the nature of the
delinquency and the collateral are such that collection of the principal and
interest on the loan in full is reasonably assured. When the accrual of interest
is discontinued, all accrued but unpaid interest is charged against current
period income. Once the accrual of interest is discontinued, the Bank records
interest as and when received until the loan is restored to accruing status. If
the Bank determines that collection of the loan in full is in reasonable doubt,
then amounts received are recorded as a reduction of principal until the loan is
returned to accruing status.


                                       25








<PAGE>


         The following tables set forth information concerning the Company's
loan portfolio by type of loan at the dates indicated (dollars in thousands):

<TABLE>
<CAPTION>
                                                              October 31,
                                   -------------------------------------------------------------------
                                         1999                               1998
                                   -------------------------------- ----------------------------------
                                                      % of                                  % of
                                           Amount     Total                     Amount      Total
                                          --------   --------                 ---------    -------
<S>                                       <C>          <C>                     <C>           <C>
Commercial and
 professional loans                       $  6,824     11.3%                   $  3,548      8.9%
Secured by real
 estate                                     51,300     84.7                      33,015     82.9
Personal                                     1,932      3.2                       1,970      5.0
Other                                          501      0.8                       1,264      3.2
                                           --------  --------                  ---------  -------
Total loans                                 60,557    100.0%                     39,797    100.0%
                                                     ========                             =======
Less:
 Allowance for loan
 losses                                       (905)                                (803)
                                          ---------                           ----------
Loans, net                                $ 59,652                             $ 38,994
                                          =========                           ==========
</TABLE>


<TABLE>
<CAPTION>
                                                                       October 31,
                                   -------------------------------------------------------------------------------------------
                                         1997                             1996                             1995
                                   -------------------------------- -------------------------------- -------------------------
                                                      % of                              % of                             % of
                                         Amount       Total              Amount         Total             Amount         Total
                                   ----------------  -------------- -----------------  ------------- -----------------  ------
<S>                                       <C>          <C>              <C>             <C>                <C>            <C>
Commercial and
 professional loans                       $  7,011     18.6%            $   5,646       22.4%              $  7,856       34.3%
Secured by real                             27,164     72.0                16,152       64.1                 12,388       54.1
 estate
Personal                                     2,275      6.0                 2,447        9.7                  2,288       10.0
Other                                        1,265      3.4                   959        3.8                    371        1.6
                                          ---------  --------            ---------     --------            ---------     ------
Total loans                                 37,715    100.0%               25,204      100.0%                22,903      100.0%
                                                     ========                          ========                          ======
Less:
 Allowance for loan

 losses                                       (723)                          (824)                            (893)
                                          ---------                      ---------                      -----------
Loans, net                                $ 36,992                       $ 24,380                         $ 22,010
                                          =========                      =========                      ===========
</TABLE>






                                       26








<PAGE>


IMPAIRED LOAN BALANCE, NONACCRUAL LOANS AND LOANS GREATER THAN 90 DAYS STILL
ACCRUING

         The following table sets forth certain information regarding nonaccrual
loans, including the ratio of such loans to total assets as of the dates
indicated, and certain other related information. The Bank had no foreclosed
real estate or loans past due more than 90 days still accruing during these
periods (dollars in thousands).


<TABLE>
<CAPTION>
                                                                            PROFORMA
                                                                           OCTOBER 31,
                                                                          -------------
                                         1999              1998               1997              1996       1995
                                         ----              ----               ----              ----       ----
<S>                                     <C>               <C>                <C>               <C>         <C>
Nonaccrual loans:
Commercial and other loans              $  --             $  --              $  --             $ 114       $  682
Secured by real estate                    121                30                237               555          801
                                        -----             -----              -----             -----       ------
Total nonaccrual loans                    121                30                237               669        1,483
                                        -----             -----              -----             -----       ------
Total nonperforming loans               $ 121             $  30              $ 237             $ 669       $1,483
                                        =====             =====              =====             =====       ======
Total nonperforming loans
 to total assets                          .07%              .08%               .63%             2.65%        2.01%
                                        =====             =====              =====             =====       ======
</TABLE>







                                       27








<PAGE>


         The following tables present information regarding the Company's total
allowance for loan losses as well as the allocation of such amounts to the
various categories of loans at the dates indicated (dollars in thousands):

<TABLE>
<CAPTION>
                                                      October 31, 1999
                                     -------------------------------------------------------
                                          Allowance
                                           for Loan           Percent of          Percent of
                                            Losses            Allowance           Total Loans
                                      ---------------      ---------------     ----------------
<S>                                     <C>                 <C>                <C>
Commercial and
 professional loans                        $  --                 --%                  --%
Secured by real estate                        59                6.5                 0.12
Personal and other                            58                6.4                 0.11
General allowance (1)                        788               87.1                 1.56
                                           -----              -----                 ----
Total allowance
 for loan losses                           $ 905              100.0%                1.79%
                                           =====              =====                 ====
</TABLE>

------------------
(1) The allowance for loan losses is allocated to specific loans as necessary.


<TABLE>
<CAPTION>
                                                      October 31, 1999
                                     ----------------------------------------------------------
                                          Allowance
                                           for Loan           Percent of          Percent of
                                            Losses            Allowance           Total Loans
                                      ---------------      ---------------     ----------------
<S>                                     <C>                 <C>                <C>
Commercial and
 professional loans                         $  --               -- %                 --%
Secured by real estate                         64               8.0                 0.2
Personal and other                              2               0.2                  --
General allowance (1)                         737              91.8                 1.8
                                            -----             -----                ----
Total allowance
 for loan losses                            $ 803             100.0%                2.0%
                                            =====             =====                ====
</TABLE>

----------------
(1) The allowance for loan losses is allocated to specific loans as necessary.

<TABLE>
<CAPTION>
                                                      October 31, 1999
                                     -------------------------------------------------------
                                          Allowance
                                           for Loan           Percent of          Percent of
                                            Losses            Allowance           Total Loans
                                      ---------------      ---------------     ----------------
<S>                                     <C>                 <C>                <C>
Commercial and
 professional loans                         $  --                 --%                -- %
Secured by real estate                        119               16.5                 0.3
Personal and other                              6                0.8                  --
General allowance (1)                         598               82.7                 1.6
                                            -----              -----                ----
Total allowance
 for loan losses                            $ 723              100.0%                1.9%
                                            =====              =====                ====
</TABLE>

--------------
(1) The allowance for loan losses is allocated to specific loans as necessary.


                                       28









<PAGE>


<TABLE>
<CAPTION>
                                                October 31, 1996
                                                ----------------
                                          Allowance
                                           for Loan        Percent of          Percent of
                                            Losses         Allowance           Total Loans
                                       ---------------  ---------------      ---------------
<S>                                      <C>              <C>                  <C>
Commercial and
 professional loans                         $   6            0.7%                 --%
Secured by real estate                        322           39.0                 1.3
Personal and other                             57            6.9                 0.2
General allowance (1)                         439           53.4                 1.8
                                            -----          -----                 ---
Total allowance
 for loan losses                            $ 824          100.0%                3.3%
                                            =====          =====                 ===

</TABLE>

--------------
(1) The allowance for loan losses is allocated to specific loans as necessary.


<TABLE>
<CAPTION>
                                               October 31, 1995
                                               ----------------
                                          Allowance
                                           for Loan        Percent of          Percent of
                                            Losses         Allowance           Total Loans
                                        --------------  ---------------     ----------------
<S>                                        <C>           <C>                  <C>
Commercial and
 professional loans                      $  97              10.9%              0.42%
Secured by real estate                     344              38.5               1.50
Personal and other                         183              20.5               0.80
General allowance (1)                      269              30.1               1.18
                                         -----             -----               ----
Total allowance
 for loan losses                         $ 893             100.0%              3.90%
                                         =====             =====               ====
</TABLE>

------------
(1) The allowance for loan losses is allocated to specific loans as necessary.

         The following table sets forth proforma information regarding the
aggregate maturities of the Company's loans in the specified categories and the
amount of such loans which have fixed and variable rates at October 31, 1999
(dollars in thousands):

<TABLE>
<CAPTION>
                                                                  Proforma
                                                               October 31, 1999
                                                               ----------------
                                                    WITHIN           1 TO            AFTER
                                                    1 YEAR          5 YEARS         5 YEARS          TOTAL
                                                   --------        ---------       ---------        ------
<S>                                               <C>             <C>             <C>              <C>
Commercial-fixed rate                              $  1,250        $     --        $     --         $  1,250
                                                   --------        --------        --------         --------
Total fixed rate                                      1,250              --              --              --
                                                   --------        --------        --------         --------
Commercial-adjustable rate                            3,730           6,849           2,890           13,469
                                                   --------        --------        --------         --------
Total adjustable rate                                 3,730           6,849           2,890           13,469
                                                   --------        --------        --------         --------
Total                                              $  4,980        $  6,849        $  2,890         $ 14,719
                                                   ========        ========        ========         ========
</TABLE>






                                       29







<PAGE>


         The following table sets forth information with respect to activity in
the Company's allowance for loan losses during the periods indicated (dollars in
thousands, except percentages):

<TABLE>
<CAPTION>
                                                                           Proforma
                                                               Twelve Months Ended October 31,
                                                               -------------------------------
                                                  1999            1998            1997             1996            1995
                                                  ----            ----            ----             ----            ----
<S>                                             <C>             <C>             <C>              <C>              <C>
Average loans outstanding                       $ 48,387        $ 39,085        $ 31,081         $ 24,199         $21,708
                                                ========        ========        ========         ========         =======
Allowance at beginning of period                     803             723             824              893           1,329
Charge-offs:
 Commercial and other loans                           --              --              --              314             549
 Real estate loans                                    31              --             196              232              --
                                                --------        --------        --------         --------         -------
  Total loans charged-off                             31              --             196              546             549
                                                --------        --------        --------         --------         -------
Recoveries:
 Commercial and other loans                           78              20              28               22              63
 Real estate loans                                    --              --               7               --              --
                                                --------        --------        --------         --------         -------
  Total loans recovered                               78              20              35               22              63
                                                --------        --------        --------         --------         -------
  Net (charge-offs) recoveries                        47              20             161              524            (486)
                                                --------        --------        --------         --------         -------
Provision for loan losses
 charged to operating expenses                        55              60              60              455              50
                                                --------        --------        --------         --------         -------
Allowance at end of period                           905             803             723              824             893
                                                --------        --------        --------         --------         -------
Ratio of net recoveries (charge-offs)
 to average loans outstanding                        .09%            .05%            .51%            2.17%           2.24%
                                                ========        ========        ========         ========         =======
Allowance as a percent of total loans               1.49%           2.02%           1.92%            3.27%           3.90%
                                                ========        ========        ========         ========         =======
Total loans at end of period                    $ 60,557        $ 39,797        $ 37,715         $ 25,204         $22,903
                                                ========        ========        ========         ========         =======
</TABLE>








                                     30








<PAGE>


DEPOSITS

         The Bank concentrates on obtaining deposits from businesses and
professionals. The Bank offers a number of different deposit programs, including
statement savings accounts, NOW accounts, money market deposits accounts,
checking accounts and certificates of deposits with terms from seven days to
five years. Deposit account terms vary according to the minimum balance
required, the time period the funds must remain on deposit and the interest
rate, among other factors. The Bank prices its deposit offerings competitively
within the market it serves. These products are designed to attract new
customers, retain existing customers and create opportunities to offer other
bank products or services. While the market and pricing for deposit funds is
very competitive, the Bank believes that personalized, quality service is also
an important element in retaining core deposit customers.

         The following table summarizes the composition of major deposit
categories (dollars in thousands):

<TABLE>
<CAPTION>

                                               OCTOBER 31,
                                                   1999
                                              ---------------
                                                       % OF
                                               AMOUNT  TOTAL
                                              -------- ------
<S>                                           <C>        <C>
Demand deposits                               $ 14,676   14.3%
NOW and money market                            52,286   51.1
Savings deposits                                 4,348    4.4
Time deposits                                   31,008   30.3
                                              -------- ------
Total deposits                                $102,318   100 %
                                              ======== ======
</TABLE>

         The aggregate amount of jumbo certificates of deposit, each with a
minimum denomination of $100,000, was approximately $27,477,000 at October 31,
1999.

         The following table summarizes the maturity distribution of time
deposits of $100,000 or more as of October 31, 1999 (in thousands):

<TABLE>
<CAPTION>
                                                                        OCTOBER 31,
                                                                           1999
                                                                       ------------
<S>                                                                   <C>
3 months or less                                                          $  23,282
Over 3 months but within 6 months                                             1,844
Over 6 months but within 12 months                                              111
Over 12 months                                                                2,240
                                                                          ---------
Total                                                                     $  27,477
                                                                          =========
</TABLE>



                                      31








<PAGE>


CAPITAL RESOURCES AND LIQUIDITY

LIQUIDITY

         The management of the Company's liquidity focuses on ensuring that
sufficient funds are available to meet loan funding commitments, withdrawals
from deposit accounts, the repayment of borrowed funds, and ensuring that the
Bank and the Company complies with regulatory liquidity requirements. Liquidity
needs of The Berkshire Bank have historically been met by deposits, investments
in federal funds sold, principal and interest payments on loans, and maturities
of investment securities.

         For the parent company, Berkshire Bancorp Inc. ("Berkshire"), liquidity
means having cash available to fund operating expenses and to pay shareholder
dividends, when and if declared by Berkshire's Board of Directors. Berkshire
paid cash dividends of $.32 per share and $.72 per share in fiscal 1999 and
1998, respectively. The ability of Berkshire to fund its operations and to pay
dividends is not dependent upon the receipt of dividends from The Berkshire
Bank. At October 31, 1999, Berkshire had cash of $33.7 million and marketable
securities of $9.2 million.

CAPITAL

         The capital ratios of the Bank and Berkshire are presently in excess of
the requirements necessary to meet the "well capitalized" capital category
established by bank regulators. See Note O.

INTEREST RATE RISK

         Fluctuations in market interest rates can have a material effect on the
Bank's net interest income because the yields earned on loans and investments
may not adjust to market rates of interest with the same frequency, or with the
same speed, as the rates paid by the Bank on its deposits.

         Most of the Bank's deposits are either interest-bearing demand deposits
or short term certificates of deposit and other interest-bearing deposits with
interest rates that fluctuate as market rates change. Management of the Bank
seeks to reduce the risk of interest rate fluctuations by concentrating on loans
and securities investments with either short terms to maturity or with
adjustable rates or other features that cause yields to adjust based upon
interest rate fluctuations. In addition, to cushion itself against the potential
adverse effects of a substantial and sustained increase in market interest
rates, the Bank has purchased off balance sheet interest rate cap contracts
which generally provide that the Bank will be entitled to receive payments from
the other party to the contract if interest rates exceed specified levels. These
contracts are entered into with major financial institutions.

         The Company seeks to maximize its net interest margin within an
acceptable level of interest rate risk. Interest rate risk can be defined as the
amount of the forecasted net interest income that may be gained or lost due to
favorable or unfavorable movements in interest rates. Interest rate risk, or
sensitivity, arises when the maturity or repricing characteristics of assets
differ significantly from the maturity or repricing characteristics of
liabilities.

                                      32









<PAGE>


         In the banking industry, a traditional measure of interest rate
sensitivity is known as "gap" analysis, which measures the cumulative
differences between the amounts of assets and liabilities maturing or repricing
at various time intervals. The following table sets forth the Company's interest
rate repricing gaps for selected maturity periods:

<TABLE>
<CAPTION>
                                                                BERKSHIRE BANCORP INC.
                                       PROFORMA INTEREST RATE SENSITIVITY GAP AT OCTOBER 31, 1999 (a)
                                                          (IN THOUSANDS, EXCEPT FOR PERCENTAGES)
                                     -------------------------------------------------------------------------------------
                                         3 MONTHS            3 THROUGH          1 THROUGH              OVER
                                          OR LESS            12 MONTHS           3 YEARS             3 YEARS             TOTAL
                                     -----------------  ------------------- ------------------  ------------------  ----------------
<S>                                      <C>                 <C>                 <C>                 <C>                <C>
Federal funds sold                     $ 25,500          $      --           $      --           $      --           $  25,500
                            (Rate)         5.23%
                                       --------           --------           ---------           ---------           ---------
Interest bearing deposits in banks           28                100                  --                  --                 128
                            (Rate)         5.20%              5.60%
                                       --------           --------           ---------           ---------           ---------
Loans (1)(2)

Adjustable rate loans                    10,608              7,088               3,060              10,020              30,776
                            (Rate)         8.73%              8.85%               9.23%               7.93%
Fixed rate loans                            476              1,751                 955              22,868              26,050
                            (Rate)         7.00%              6.93%               8.71%               7.63%
Other loans                                 205                 12                  67                 268                 552
                            (Rate)         8.25%              8.25%                7.0%                6.0%
                                       --------           --------           ---------           ---------           ---------
Total loans                              11,289              8,851               4,082              33,156              57,378
Investments (3)(4)                        2,583             10,770              21,722              40,929              76,004
                            (Rate)         5.21%              5.80%               6.90%               5.50%
                                       --------           --------           ---------           ---------           ---------
Total rate-sensitive assets              39,400             19,721              25,804              74,085             159,010
                                       --------           --------           ---------           ---------           ---------

Deposit accounts (5)

Savings and NOW                          10,225                 --                  --                  --              10,225
                            (Rate)         1.90%
Money market                             51,944                 --                  --                  --              51,944
                            (Rate)         3.43%
Time deposits                            25,499              2,930                 696               1,613              30,738
                            (Rate)         4.60%              4.50%               5.60%               5.70%
                                       --------           --------           ---------           ---------           ---------
Total deposit accounts                   87,668              2,930                 696               1,613              92,907
Other borrowings                             --                 --                  --               1,500               1,500
                            (Rate)                                                                    5.96%
                                       --------           --------           ---------           ---------           ---------
Total rate-sensitive liabilities         87,668              2,930                 696               3,113              94,407
                                       --------           --------           ---------           ---------           ---------
Gap (repricing differences)             (48,268)            16,791              25,108              70,792              64,603
                                       ========           ========           =========           =========           =========
Cumulative Gap                          (48,268)           (31,477)             (6,369)             64,603
                                       ========           ========           =========           =========
Cumulative Gap to Total Rate

Sensitive Assets                          (30.3)%            (19.8)%              (4.0)%              40.6%
                                       ========           ========           =========           =========
</TABLE>

----------------------------------
(a) The Company utilized financial information of the Bank as of September 30,
    1999 to develop this table.

(1) Adjustable-rate loans are included in the period in which the interest rates
    are next scheduled to adjust rather than in the period in which the loans
    mature. Fixed-rate loans are scheduled according to their maturity dates.

(2) Includes nonaccrual loans.

(3) Investments are scheduled according to their respective repricing (variable
    rate loans) and maturity (fixed rate securities) dates.

(4) Investments are stated at book value.

(5) NOW accounts and savings accounts are regarded as readily accessible
    withdrawal accounts. The balances in such accounts have been allocated
    amongst maturity/repricing periods based upon The Berkshire Bank's
    historical experience. All other time accounts are scheduled according to
    their respective maturity dates.


                                       33








<PAGE>


IMPACT OF THE YEAR 2000

         The Company, apart from its subsidiaries, reviewed its financial and
other systems and modified and/or replaced those systems which may have been
impacted by the arrival of the year 2000. The total cost of the Year 2000
preparedness program for the Company, apart from its subsidiaries, was not
material.

         The Bank had an ongoing program to ensure that its operational and
financial systems would not be adversely affected by Year 2000 software
failures. The Bank purchased, installed and converted to new hardware and
banking software, and successfully completed a series of tests to ensure Year
2000 compliance. The cost of such conversion and other Year 2000 preparations
was approximately $200,000. The Bank developed a contingency plan which would
allow it to continue operations while unforeseen software problems were
corrected. The contingency plan called for the creation of complete system
backups of critical data on critical dates, the creation of duplicate account
balances and transaction files, and the downloading of account balances and
transaction files to personal computer spreadsheets. In the event that any
software problems were encountered during processing at century roll over, or
are encountered at leap year, the Bank has expected that it would be able to
manage its operations by using the files noted above, along with manual reports.
Given the size of the Bank, the number of accounts, and the number of daily
transactions, management believes that the Bank could continue operations while
such software problems are corrected.

         While the Bank believes it has and is taking all appropriate steps to
assure Year 2000 compliance, it is dependent on vendor compliance to some
extent. The Bank required its systems and software vendors to represent that the
services and products provided were Year 2000 compliant.

         In addition to possible expenses related to the Bank's systems and
those of its service providers, the Bank could incur losses if Year 2000
problems adversely affected any of its depositors or borrowers. Such problems
could include, among other things, delayed loan payments. Due to the diversity
of the loan portfolio and the fact that the Bank's market area is not dependent
on one employer or industry, the Bank did not expect any such Year 2000 related
difficulties that may have affected its depositors and borrowers to
significantly affect net earnings or cash flow.

IMPACT OF INFLATION AND CHANGING PRICES

         The Company's financial statements measure financial position and
operating results in terms of historical dollars without considering the changes
in the relative purchasing power of money over time due to inflation. The impact
of inflation is reflected in the increasing cost of the Company's operations.
The assets and liabilities of the Company are largely monetary. As a result,
interest rates have a greater impact on the Company's performance than do the
effects of general levels of inflation. In addition, interest rates do not
necessarily move in the direction, or to the same extent as the price of goods
and services. However, in general, high inflation rates are accompanied by
higher interest rates, and vice versa.

NEW ACCOUNTING PRONOUNCEMENTS

DERIVATIVES AND HEDGING

         In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 133 ("SFAS No. 133"), "Accounting
for Derivative Instruments and Hedging Activities" which establishes
requirements for the proper accounting, reporting and financial statement
presentation of derivative instruments and hedging activities. Among other
provisions, SFAS No. 133 requires that derivative instruments must be reflected
in a company's financial statements independent of any hedging or similar
transaction designed


                                       34






<PAGE>


to reduce the risks of owning the derivative instrument. The Company will
reflect any investments in derivative instruments or hedging activities in
accordance with SFAS No. 133 and does not expect such reporting to have a
material effect on its financial condition or results of operations. SFAS No.
133 also permits certain reclassifications of securities among the trading,
available for sale and held to maturity classifications. The Company and the
Bank have no current intention to reclassify any securities pursuant to SFAS No.
133. Subsequent to SFAS No. 133, the FASB issued SFAS No. 137, which amended the
effective date of SFAS No. 133 to be all fiscal quarters of fiscal years
beginning after June 15, 2000. Earlier application is permitted only as of the
beginning of any fiscal quarter. The Company is currently reviewing the
provisions of SFAS No. 133, as amended by SFAS No. 137.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

         See Item 7. Managements' Discussion and Analysis of Financial Condition
and Results of Operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         INASMUCH AS THE ACQUISITION OF THE BANK WAS NOT CONSUMMATED UNTIL
SUBSEQUENT TO OCTOBER 31, 1998, THE FINANCIAL STATEMENTS SET FORTH BELOW INCLUDE
THE RESULTS OF OPERATIONS OF THE BANK FROM THE DATE OF THE ACQUISITION, JANUARY
4, 1999, THROUGH OCTOBER 31, 1999.


                                       35






<PAGE>


               Report of Independent Certified Public Accountants

Board of Directors and Stockholders
Berkshire Bancorp Inc.


We have audited the accompanying consolidated balance sheets of Berkshire
Bancorp Inc. and its subsidiaries as of October 31, 1999 and 1998, and the
related consolidated statements of income, stockholders' equity and
comprehensive income, and cash flows for the three years ended October 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Berkshire Bancorp
Inc. and its subsidiaries as of October 31, 1999 and 1998, and the consolidated
results of their operations and their consolidated cash flows for each of the
three years in the period ended October 31, 1999 in conformity with generally
accepted accounting principles.

GRANT THORNTON LLP

New York, New York
January 21, 2000


                                       36






<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                             OCTOBER 31,        OCTOBER 31,
                                                                                1999               1998
                                                                         ---------------------------------------
<S>                                                                        <C>                 <C>
ASSETS
Cash and due from banks                                                    $   2,333           $      58
Interest bearing deposits                                                      3,496              65,200
Federal funds sold                                                            18,000                  --
                                                                           ---------           ---------
Total cash and cash equivalents                                               23,829              65,258
Investment Securities:
 Available-for-sale                                                           80,775                  --
 Held-to-maturity                                                              2,101                  --
                                                                           ---------           ---------
Total investment securities                                                   82,876                  --
Loans, net of unearned income                                                 60,557                  --
 Less: allowance for loan losses                                                (905)                 --
                                                                           ---------           ---------
Net loans                                                                     59,652                  --
Accrued interest receivable                                                    1,567                  --
Premises and equipment, net                                                      392                  --
Goodwill, net of amortization of $608                                         12,195                  --
Other assets                                                                     475               1,572
                                                                           ---------           ---------
Total assets                                                               $ 180,986           $  66,830
                                                                           =========           =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
 Non-interest bearing                                                      $  14,676           $      --
Interest bearing                                                              87,642                  --
                                                                           ---------           ---------
Total deposits                                                               102,318                  --
Securities sold under agreements to repurchase                                 1,500                  --
Accrued interest payable                                                         290                  --
Accrued other liabilities                                                      1,671               1,185
Income taxes payable                                                           1,424                 179
Deferred tax liability                                                           477                  --
                                                                           ---------           ---------
Total liabilities                                                            107,680               1,364
                                                                           ---------           ---------
Stockholders' equity
 Preferred stock - $.10 Par value:                                                --                  --
  2,000,000 shares authorized - none issued
 Common stock - $.10 par value
  Authorized  -- 10,000,000 shares
  Issued      --  2,566,095 shares
  Outstanding --
   October 31, 1999, 2,127,265 shares
   October 31, 1998, 2,126,265 shares                                            256                 256
Additional paid-in capital                                                    78,570              78,546
Accumulated other comprehensive income, net                                    1,943                  --
Accumulated deficit                                                           (4,073)            (10,563)
Less: Common stock in treasury - at cost:
 October 31, 1999, 438,830 shares
 October 31, 1998, 439,830 shares

                                                                              (2,760)             (2,773)
                                                                            ---------           ---------
Total stockholders' equity                                                    73,306              65,466
                                                                           ---------           ---------
                                                                           $ 180,986           $  66,830
                                                                           =========           =========
</TABLE>

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                       37









<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                             FOR THE YEARS ENDED OCTOBER 31,
                                                          --------------------------------------------
                                                            1999            1998             1997
                                                          --------        --------         ------
<S>                                                       <C>             <C>              <C>
INTEREST INCOME
Short-term interest-earning assets                        $    965        $  3,313         $    669
Securities and other investments                             4,415              --               --
Loans                                                        3,145              --               --
                                                          --------        --------         --------
Total interest income                                        8,525           3,313              669
                                                          --------        --------         --------
INTEREST EXPENSE
Deposits                                                     2,473              --               --
Borrowings                                                      75              --               --
                                                          --------        --------         --------
Total interest expense                                       2,548              --               --
                                                          --------        --------         --------
Net interest income                                          5,977           3,313              669
PROVISION FOR LOAN LOSSES                                       45              --               --
                                                          --------        --------         --------
Net interest income after
 provision for loan losses                                   5,932           3,313              669
                                                          --------        --------         --------
NON-INTEREST INCOME
Investment securities gains                                  7,622          38,909           16,845
Other income                                                   633              44              119
                                                          --------        --------         --------
Total non-interest income                                    8,255          38,953           16,964
                                                          --------        --------         --------
NON-INTEREST EXPENSE
Salaries and employee benefits                               1,474             103              112
Net occupancy expense                                          360              18               18
Equipment expense                                               99              --               --
FDIC assessment                                                  8              --               --
Data processing expense                                         17              --               --
Amortization of goodwill                                       608              --               --
Other                                                          990             945              693
                                                          --------        --------         --------
Total non-interest expense                                   3,556           1,066              823
                                                          --------        --------         --------
Income before provision for taxes                           10,631          41,200           16,810
Provision for income taxes                                   4,091           3,573              100
                                                          --------        --------         --------
Net income                                                $  6,540        $ 37,627         $ 16,710
                                                          ========        ========         ========
Net income per share:
 Basic                                                    $   3.08        $  17.70         $   7.78
                                                          ========        ========         ========
 Diluted                                                  $   2.89        $  16.66         $   7.45
                                                          ========        ========         ========
Dividends per share                                       $    .32        $    .72         $     --
</TABLE>

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                       38









<PAGE>

                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
     CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME

                   YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
                                 (In Thousands)
<TABLE>
<CAPTION>
                                                                       ACCUMULATED
                                                 STOCK     ADDITIONAL      OTHER       ACCUMU-                     MINIMUM
                                      COMMON      PAR        PAID-IN   COMPREHENSIVE    LATED       TREASURY       PENSION
                                      SHARES     VALUE       CAPITAL    INCOME, NET   (DEFICIT)       STOCK       LIABILITY
<S>                                <C>         <C>          <C>         <C>           <C>            <C>             <C>
BALANCE AT OCTOBER 31, 1996          2,566     $    256     $ 78,538    $ 20,230     $(63,369)    $ (1,962)    $   (516)

Net Income                                                                             16,710
Treasury shares issued for
 options exercised                                                 8                                    72
Acquisition of treasury shares                                                                        (883)
Other comprehensive income (loss)
 net of reclassification adjustment
 and taxes                                                                12,129

Comprehensive income

Reduction of minimum
 pension liability                                                                                                  516
                                  --------     --------     --------    --------    --------     --------     ---------
BALANCE AT OCTOBER 31, 1997          2,566          256       78,546      32,359     (46,659)      (2,773)        --

Net Income                                                                            37,627
Other comprehensive income (loss)
 net of reclassification adjustment                                      (32,359)
 and taxes


Comprehensive income

Cash dividends                                                                        (1,531)
                                  --------     --------     --------    --------    --------     --------     --------
BALANCE AT OCTOBER 31, 1998          2,566          256       78,546        --       (10,563)      (2,773)        --

Net Income                                                                             6,540
Treasury shares issued for
 options exercised                                                24                                   13
Other comprehensive income (loss)
 net of reclassification adjustment
 and taxes                                                                 1,943

Comprehensive income

Cash dividends                                                                          (680)
                                  --------     --------     --------    --------    --------     --------     --------
BALANCE AT OCTOBER 31, 1999          2,566     $    256     $ 78,570    $  1,943    $ (4,703)    $ (2,760)    $   --
                                  ========     ========     ========    ========    ========     ========     ========
<CAPTION>
                                          TOTAL
                                      STOCKHOLDERS'   COMPREHENSIVE
                                         EQUITY         INCOME
<S>                                   <C>            <C>
BALANCE AT OCTOBER 31, 1996            $ 33,177

Net Income                               16,710        $ 16,710
Treasury shares issued for
 options exercised                           80
Acquisition of treasury shares             (883)
Other comprehensive income (loss)
 net of reclassification adjustment
 and taxes                               12,129           12,129
                                                        --------
Comprehensive income                                    $ 28,839
                                                        ========
Reduction of minimum
 pension liability                        516
                                     --------
BALANCE AT OCTOBER 31, 1997            61,729

Net Income                             37,627           37,627
Other comprehensive income (loss)
 net of reclassification adjustment   (32,359)
                                     --------
 and taxes                                             (32,359)
                                                      --------
Comprehensive income                                  $  5,268
                                                      ========
Cash dividends                        (1,531)
                                    --------
BALANCE AT OCTOBER 31, 1998           65,466

Net Income                             6,540             6,540
Treasury shares issued for
 options exercised                       37
Other comprehensive income (loss)
 net of reclassification adjustment
 and taxes                             1,943             1,943
                                                      --------
Comprehensive income                                  $  8,483
                                                      ========
Cash dividends                        (680)
                                  --------
BALANCE AT OCTOBER 31, 1999       $ 73,306
                                  ========
</TABLE>

        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

                                       39








<PAGE>


                    BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                  FOR THE YEARS ENDED OCTOBER 31,
                                                              ---------------------------------------
                                                               1999            1998             1997
                                                              ------          ------           -----
<S>                                                           <C>              <C>              <C>
  Cash flows from operating activities:

Net income                                                    $  6,540         $ 37,627         $ 16,710
Adjustments to reconcile net income to net
 cash provided by (used in) operating activities:

Realized gain on investment securities                          (7,622)         (38,909)         (16,845)
(Increase) in deferred taxes                                    (1,402)            (925)            --
Depreciation and amortization and other                            713             --                114
Provision for loan losses                                           45             --               --

  Changes in assets and liabilities:

 (Increase) in accrued interest receivable                        (817)            --               --
 (Increase) decrease in prepaid expenses and other                 115              (80)               9
 Increase in accounts payable, other accrued
  expenses, liabilities and income taxes payable                 4,542              272              131
                                                              --------         --------         --------
 Net cash provided by (used in) operating activities             2,114           (2,015)             119
                                                              --------         --------         --------

  Cash flows from investing activities:
Investment in The Berkshire Bank                               (25,216)            --               --
Cash of entities acquired                                       22,439             --               --
Proceeds from sales of common stock                              7,634           42,916           26,177
Investment securities available for sale
 Purchases                                                     (23,138)            --               --
Net increase in loans                                          (18,744)            --               --
Net increase in loans held for sale                             (1,872)            --               --
Acquisition of premises and equipment                             (191)            --               --
                                                              --------         --------         --------
Net cash provided by (used in) investing activities            (39,088)          42,916           26,177
                                                              --------         --------         --------

  Cash flows from financing activities:

Net (decrease) in non interest bearing deposits                 (6,361)            --               --
Net increase in interest bearing deposits                        2,577             --               --
Proceeds from exercise of common stock options                       9             --                  3
Acquisition of treasury stock                                     --               --               (883)
Dividends paid                                                    (680)          (1,531)            --
                                                              --------         --------         --------
Net cash (used in) financing activities                         (4,455)          (1,531)            (880)
                                                              --------         --------         --------

  Net increase (decrease) in cash and cash equivalents         (41,429)          39,371           25,416
  Cash and cash equivalents at beginning of year                65,258           25,887              471
                                                              --------         --------         --------
  Cash and cash equivalents at end of year                    $ 23,829         $ 65,258         $ 25,887
                                                              ========         ========         ========
Supplemental disclosures of cash flow information:

  Cash used to pay interest                                   $  2,258         $   --           $   --
  Cash used to pay income taxes                               $  2,602         $  4,419         $   --
</TABLE>

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                       40







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         OCTOBER 31, 1999, 1998 AND 1997

NOTE A - ORGANIZATION AND PLAN OF MERGER AND CAPITALIZATION

         ORGANIZATION

         In December 1998, Berkshire Bancorp Inc. ("Berkshire"), a Delaware
corporation, received regulatory approval from the Federal Reserve Bank of New
York to become a Bank Holding Company registered under the Bank Holding Company
Act of 1956 and to acquire control of The Berkshire Bank. The consolidated
financial statements include the accounts of Berkshire Bancorp Inc. and its
wholly owned subsidiaries, Greater American Finance Group, Inc. ("GAFG") and The
Berkshire Bank (the "Bank"), (collectively, the "Company"). In fiscal 1999, the
Company changed its name to Berkshire Bancorp Inc. from Cooper Life Sciences,
Inc.

         The Bank, a New York State chartered commercial bank, was established
in 1989 to provide highly personalized services to high net worth individuals
and to small and mid-sized commercial businesses primarily from the New York
City metropolitan area. The Bank's main office is in Manhattan and it has one
branch in Brooklyn, NY.

         The Bank competes with other banking and financial institutions in its
markets. Commercial banks, savings banks, savings and loan associations,
mortgage bankers and brokers, and credit unions actively compete for deposits
and loans. Such institutions, as well as consumer finance, mutual funds,
insurance companies, and brokerage and investment banking firms may be
considered to be competitors of the Bank with respect to one or more of the
services provided by the Bank.

         The Company and the Bank are subject to the regulations of certain
state and federal agencies and, accordingly, are periodically examined by those
regulatory authorities. As a consequence of such regulation of banking
activities, the Bank's business may be affected by state and federal
legislation.

         Prior to the acquisition of the Bank on January 4, 1999, Berkshire has
not been engaged in any operating activities since October 1994 when it disposed
of its majority interest in a company engaged in mortgage banking.

         PLAN OF MERGER

         In August 1998, Berkshire, through its wholly owned subsidiary GAFG,
made a cash tender offer for any and all of the outstanding shares of common
stock of the Bank at $10.50 cash per share. The purchase was consummated on
January 4, 1999. Pursuant to the terms of the offer, Berkshire acquired 99% of
the outstanding shares of the Bank's common stock for a purchase price of
approximately $25.2 million. In connection with this transaction, the Bank
became a wholly owned subsidiary of Berkshire.

         This transaction was accounted for under the purchase method of
accounting and accordingly, the results of operations of the Company for the
year ended October 31, 1999, include only the results of operations of the Bank
from the date of acquisition, January 4, 1999, through October 31, 1999. The
acquisition resulted in the recording of approximately $14.6 million of
goodwill, which is being amortized on a straight-line basis over 20 years.
Amortization expense for the year ended October 31, 1999, was approximately
$608,000.

                                       41







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997

NOTE A - (CONTINUED)

         The following represents the unaudited pro forma financial information
of the Company as if the acquisition occurred on the first date of the period
indicated. The pro forma information should be read in conjunction with the
related historical information and is not necessarily indicative of the results
that would have been attained had the transaction actually taken place (in
thousands).

<TABLE>
<CAPTION>
                                                    FOR THE YEAR ENDED  FOR THE YEAR ENDED
                                                     OCTOBER 31, 1999    OCTOBER 31, 1998
                                                    ------------------  ------------------
<S>                                                      <C>                   <C>
Interest income                                          $ 9,515               $ 9,392
Interest Expense                                           2,964                 3,642
                                                         -------               -------
Net interest income                                        6,551                 5,750
Provision for loan losses                                     45                    60
Non-interest income                                        8,355                39,311
Non-interest expense                                       4,156                 4,474
                                                         -------               -------
Net income                                               $ 5,861               $37,119
                                                         =======               =======
</TABLE>

NOTE B - SUMMARY OF ACCOUNTING POLICIES

1.       BASIS OF FINANCIAL STATEMENT PRESENTATION

         The consolidated financial statements include the accounts of Berkshire
Bancorp Inc. and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated. During fiscal year 1997, the Company
liquidated its majority owned subsidiary, Moore Sports Ltd.

         CHANGE IN FISCAL YEAR

         On December 10, 1999, the Board of Directors of the Company approved a
change in the Company's fiscal year to December 31. The report covering the two
month transition period ending December 31, 1999 will be filed on Form 10-K.

         In preparing the financial statements in conformity with generally
accepted accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the balance
sheets, and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

         The principal estimate that is susceptible to significant change in the
near term relates to the allowance for loan and lease losses. The evaluation of
the adequacy of the allowance for loan losses includes an analysis of the
individual loans and overall risk characteristics and size of the different loan
portfolios, and takes into consideration current economic and market conditions,
the capability of specific borrowers to pay specific loan obligations, as well
as current loan collateral values. However, actual losses on specific loans,
which also are encompassed in the analysis, may vary from estimated losses.


                                       42







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997

NOTE B - (CONTINUED)

         In 1998, the Company adopted Statement of Financial Accounting
Statements ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and
Related Information." SFAS No. 131 redefines how operating segments are
determined and requires disclosures of certain financial and descriptive
information about the Company's operating segments. Management has determined
the Company operates in one business segment, community banking.

         At October 31, 1998, the Company's principal assets consisted of cash
and cash equivalents.

2.       INVESTMENT SECURITIES

         In accordance with SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities", Company management determines the appropriate
classification of securities at the time of purchase and reevaluates such
designation as of each balance sheet date. This standard requires investments in
securities to be classified in one of three categories: held to maturity,
trading or available for sale. Investments in debt securities, for which
management has both the ability and intent to hold to maturity, are carried at
cost, adjusted for the amortization of premiums and accretion of discounts
computed by the interest method. Investments in debt securities, which
management believes may be sold prior to maturity due to changes in interest
rates, prepayment risk and equity, liquidity requirements or other factors, are
classified as available for sale. Available-for-sale securities are carried at
fair value, with the unrealized gains and losses, net of tax, and reported as a
separate component of shareholders' equity and excluded from the determination
of net income. Gains or losses on disposition are based on the net proceeds and
cost of the securities sold, adjusted for amortization of premiums and accretion
of discounts, using the specific identification method.

         In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activity." SFAS
No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments imbedded in other
contracts, and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as a hedge. The accounting for
changes in the fair value of a derivative (gains and losses) depends on the
intended use of the derivative and resulting designation. Subsequent to SFAS No.
133, the FASB issued SFAS No. 137, which amended the effective date of SFAS No.
133 to be all fiscal quarters of fiscal years beginning after June 15, 2000.
Earlier application is permitted only as of the beginning of any fiscal quarter.
The Company is currently reviewing the provisions of SFAS No. 133, as amended by
SFAS No. 137.

         At October 31, 1997, the Company owned approximately 6.7% of the
outstanding common stock of The Cooper Companies, Inc. ("TCC") and approximately
2% of the outstanding common stock of Executone Information Systems, Inc.
("Executone") (See Note C) all of which were considered to be available-for-sale
securities.  During 1998, all such marketable securities were sold.


                                       43







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997

NOTE B - (CONTINUED)

3.       LOANS AND ALLOWANCE FOR LOAN LOSSES

         Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are stated at the amount of
unpaid principal and are net of unearned discount, unearned loan fees and an
allowance for credit losses. The allowance for loan losses is established
through a provision for loan losses charged to expense. Loan principal
considered to be uncollectible by management is charged against the allowance
for credit losses. The allowance is an amount that management believes will be
adequate to absorb possible losses on existing loans that may become
uncollectible based upon an evaluation of known and inherent risks in the loan
portfolio. The evaluation takes into consideration such factors as changes in
the nature and size of the loan portfolio, overall portfolio quality, specific
problem loans, and current and future economic conditions which may affect the
borrowers' ability to pay. The evaluation details historical losses by loan
category, the resulting loss rates for which are projected at current loan total
amounts.

         Interest income is accrued as earned on a simple interest basis.
Accrual of interest is discontinued on a loan when management believes, after
considering economic and business conditions and collection efforts, that the
borrower's financial condition is such that collection of interest is doubtful.
When a loan is placed on such non-accrual status, all accumulated accrued
interest receivable applicable to periods prior to the current year is charged
off to the allowance for credit losses. Interest which had accrued in the
current year is reversed out of current period income. Loans 90 days or more
past due and still accruing interest must have both principal and accruing
interest adequately secured and must be in the process of collection.

         The Company accounts for its impaired loans in accordance with SFAS No.
114, "Accounting by Creditors for Impairment of a Loan," as amended by SFAS No.
118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures." This standard requires that a creditor measure impairment based on
the present value of expected future cash flows discounted at the loan's
effective interest rate, except that as a practical expedient, a creditor may
measure impairment based on a loan's observable market price, or the fair value
of the collateral if the loan is collateral-dependent. Regardless of the
measurement method, a creditor must measure impairment based on the fair value
of the collateral when the creditor determines that foreclosure is probable.

4.       BANK PREMISES AND EQUIPMENT

         Bank premises and equipment, including leasehold improvements, are
stated at cost less accumulated depreciation. Depreciation expense is computed
on the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are depreciated over the shorter of the estimated useful
lives of the improvements or the terms of the related leases.

5.       OTHER REAL ESTATE OWNED

         Other real estate owned ("OREO"), representing property acquired
through foreclosure, is recorded at the lower of cost or estimated fair market
value, less costs of disposal. When property is acquired, the excess, if any, of
the loan balance over fair market value is charged to the allowance for loan
losses. Periodically thereafter, the asset is reviewed for subsequent declines
in the


                                       44







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997

NOTE B - (CONTINUED)

estimated fair market value. Subsequent declines, if any, and holding costs, as
well as gains and losses on subsequent sale, are included in the consolidated
statements of operations.

6.       GOODWILL

         Goodwill resulted from the acquisition of the Berkshire Bank and is
being amortized on a straight-line basis over approximately 20 years.

7.       INCOME TAXES

         The Company accounts for income taxes under the provisions of SFAS No.
109 - "Accounting for Income Taxes." Deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax bases
of assets and liabilities as measured by the enacted tax rates that will be in
effect when these differences reverse. Deferred tax expense is the result of
changes in deferred tax assets and liabilities. The principal types of
differences between assets and liabilities for financial statement and tax
return purposes are allowance for loan and lease losses, deferred loan fees,
deferred compensation and securities available for sale.

8.       NET INCOME PER SHARE

         The Company follows the provisions of SFAS No. 128, "Earnings Per
Share," which eliminated primary and fully dilutive earnings per share and
requires presentation of basic and dilutive earnings per share with disclosure
of the methods used to compute the per share amounts.

9.       EMPLOYEE BENEFIT PLANS

         The Company follows SFAS No. 123 "Accounting for Stock Based
Compensation," This statement introduced a method of accounting for employee
stock-based compensation plans based upon the fair value of the awards on the
date they are granted. Under this fair value based method, public companies
estimate the fair value of stock options using a pricing model, such as the
Black-Scholes model, which requires inputs such as the expected volatility of
the stock price and an estimate of the dividend yield over the option's expected
life. The FASB, however, does not require the use of this method. Entities that
continue to account for stock option plans under the existing method (APB No.
25) are required to disclose proforma net income and earnings per share, as if
the fair value method had been used.

10.      CASH EQUIVALENTS

         The Company considers all highly liquid debt investments purchased with
an original maturity of three months or less, and amounts due from brokers to be
cash equivalents.

11.      RESTRICTIONS ON CASH AND DUE FROM BANKS

         The Bank is required to maintain reserves against customer demand
deposits by keeping cash on hand or balances with the Federal Reserve Bank in a
non-interest bearing account. The amounts of those reserve and cash balances at
October 31, 1999 was approximately $688,000.


                                       45







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997

NOTE B - (CONTINUED)

12.      COMPREHENSIVE INCOME

         On January 1, 1998, the Company adopted the provisions of SFAS No. 130,
"Reporting Comprehensive Income." This new standard establishes standards for
reporting comprehensive income, which includes net income as well as certain
other items, which results in a change to equity during the period. These
financial statements have been reclassified to reflect the provisions of SFAS
No. 130.

<TABLE>
<CAPTION>
                                                      October 31, 1999
                                            -------------------------------------
                                                              Tax
                                             Before tax    (expense)     Net of tax
                                               amount       benefit         Amount
                                            ------------   ---------     ----------
<S>                                           <C>           <C>            <C>
Unrealized gains
 on securities:

  Unrealized holding gains                    $10,860       $(4,344)       $ 6,516
   arising during period

  Less reclassification                         7,622        (3,049)         4,573
   adjustment for gains
   realized in net income
                                              -------       -------        -------
Other comprehensive
 income, net                                  $ 3,238       $(1,295)       $ 1,943
                                              =======       =======        =======
</TABLE>


<TABLE>
<CAPTION>
                                                         October 31, 1998
                                              --------------------------------------
                                                              Tax
                                              Before tax    (expense)     Net of tax
                                                amount       benefit         Amount
                                              -----------   ---------     -----------
<S>                                           <C>            <C>            <C>
Unrealized gains (losses) on securities:

  Unrealized holding losses                   $(15,023)      $  6,009       $ (9,014)
   arising during period

  Less reclassification                         38,909        (15,564)        23,345
   adjustment for gains
   realized in net income
                                              --------       --------       --------
Other comprehensive
 income (loss), net                           $(53,932)      $ 21,573       $(32,359)
                                              ========       ========       ========
</TABLE>

                                       46







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997

NOTE B - (CONTINUED)


<TABLE>
<CAPTION>
                                                    October 31, 1997
                                           -------------------------------------
                                                           Tax
                                           Before tax    (expense)    Net of tax
                                             amount       benefit        Amount
                                           ----------    ---------    ----------
<S>                                        <C>           <C>            <C>
Unrealized gains
 on securities:

  Unrealized holding gains                 $ 37,060      $(14,824)      $ 22,236
   arising during period
  Less reclassification                      16,845        (6,738)        10,107
   adjustment for gains
   realized in net income
                                           --------      --------       --------
Other comprehensive
 income, net                               $ 20,215      $ (8,086)      $ 12,129
                                           ========      ========       ========
</TABLE>


13.      RECLASSIFICATIONS

         Certain amounts in the 1998 and 1997 financial statements have been
reclassified to conform to the current year's presentation.

NOTE C - INVESTMENT SECURITIES

         The following is a summary of held to maturity securities as of October
31, 1999:

<TABLE>
<CAPTION>
                                                    (IN THOUSANDS)

                                                   OCTOBER 31, 1999
                                   ---------------------------------------------
                                                GROSS         GROSS        FAIR
                                   AMORTIZED  UNREALIZED    UNREALIZED    MARKET
                                     COST       GAINS         LOSSES       VALUE
                                   ---------  ----------    ----------    ------
<S>                                 <C>         <C>           <C>         <C>
Investment securities

U.S. Government
Agencies                            $1,605      $   --        $    2      $1,603
Corporate notes                        496          --          --           496
                                    ------      --------      ------      ------
 Totals                             $2,101      $   --        $    2      $2,099
                                    ======      ========      ======      ======
</TABLE>

                                       47







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997

NOTE C - (CONTINUED)

         The following is a summary of available-for-sale securities as of
October 31, 1999:

<TABLE>
<CAPTION>
                                                   (IN THOUSANDS)

                                                  OCTOBER 31, 1999
                                    --------------------------------------------
                                                  GROSS       GROSS       FAIR
                                    AMORTIZED   UNREALIZED  UNREALIZED    MARKET
                                      COST        GAINS       LOSSES      VALUE
                                    ----------  ----------  ----------    -----
<S>                                  <C>         <C>         <C>         <C>
Investment securities

U.S. Treasury and
 U.S. Government
 Agencies                            $65,934     $  --       $ 1,070     $66,864

Mortgage-backed
 securities                            4,841        --            73       4,768

Marketable equity
 securities and other                  4,572       6,837         266      11,143
                                     -------     -------     -------     -------
 Totals                              $75,347     $ 6,837     $ 1,409     $80,775
                                     =======     =======     =======     =======
</TABLE>

         At October 31, 1997, the Company owned 2,127,533 shares of the common
stock of TCC, (the "TCC Common Stock") and 1,166,520 shares of the common stock
of Executone (the "Executone Common Stock"). At October 31, 1998, all said
shares of TCC Common Stock and Executone Common Stock had been sold in open
market transactions.

         The amortized cost and estimated market value of investment securities
available for sale, by contractual maturity, at October 31, 1999 are shown
below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.

<TABLE>
<CAPTION>
                                                              (IN THOUSANDS)

                                                             OCTOBER 31, 1999
                                                          ----------------------
                                                                          FAIR
                                                          AMORTIZED      MARKET
                                                            COST          VALUE
                                                          --------       -------
<S>                                                        <C>           <C>
Due in one year or less                                    $10,000       $ 9,968
Due after one through five years                            40,893        40,066
Due after five through ten years                            13,815        13,480
Due after ten years                                          7,811         7,670
Marketable equity securities and other                       2,828         9,591
                                                           -------       -------
 Totals                                                    $75,347       $80,775
                                                           =======       =======

</TABLE>


                                       48








<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997


NOTE C - (CONTINUED)

         The amortized cost and estimated market value of investment securities
held to maturity, by contractual maturity, at October 31, 1999 are shown below.
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.

<TABLE>
<CAPTION>
                                                              (IN THOUSANDS)

                                                             OCTOBER 31, 1999
                                                          ----------------------
                                                                           FAIR
                                                          AMORTIZED       MARKET
                                                            COST           VALUE
                                                          ----------     --------
<S>                                                        <C>            <C>
Due in one year or less                                    $1,000         $  999
Due after one through five years                              651            651
Due after five through ten years                              123            122
Due after ten years                                           327            327
                                                           ------         ------
 Totals                                                    $2,101         $2,099
                                                           ======         ======
</TABLE>

         Proceeds from the sales of investment securities during 1999, 1998 and
1997, were $7,634,000, $42,916,000 and $26,177,000, respectively. Gross gains
realized on those sales were $7,622,000, $38,909,000 and $16,845,000 in 1999,
1998 and 1997, respectively. Losses were not material in 1999, 1998 and 1997.

         As of October 31, 1999, investment securities with a book value of
approximately $300,000 were pledged to secure public deposits and for other
purposes as provided by law. As of October 31, 1999 and 1998, the Company did
not have any investment securities of any one issuer where the carrying value
exceeded 10% of shareholders' equity.

         COMMON STOCK OF EXECUTONE INFORMATION SYSTEMS, INC.

         In 1995, Unistar Gaming Corp. ("UGC") acquired Unistar Entertainment,
Inc., a privately held Colorado corporation ("Unistar"). As a result of the
acquisition, approximately 27.5% of the outstanding Common Stock of UGC (the
"UGC Common Stock") was owned by the Company, and approximately 72.5% of the UGC
Common Stock was owned by the former stockholders of Unistar. Unistar held an
exclusive contract with the Coeur d'Alene Indian Tribe in Idaho to develop and
manage what would be the first national lottery in the United States. The shares
of UGC Common Stock which were owned by the Company were purchased for
approximately $5 million comprised primarily of cash, portfolio securities and a
note payable. In December 1995, the Company increased its stake in UGC to
approximately 31.5% by purchasing an additional 400,000 shares of UGC Common
Stock from a UGC stockholder for a cash purchase price of $.50 per share.

         In December 1995, the Company sold its minority equity interest in
Unistar Gaming Corp. ("UGC") to Executone, a Virginia corporation whose common
stock trades on the NASDAQ National Market System. The Company's investment in
UGC was approximately $5.2 million.


                                       49







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997

NOTE C - (CONTINUED)

         In exchange for its interest in UGC, the Company received shares of
Executone Common Stock, all of which were sold in open market transactions
during 1998, and shares of Executone Series A and Series B Preferred Stock (the
"Executone Preferred Stock"). In 1997, the Company fully reserved the carrying
value, approximately $2.1 million, of its shares of Executone Preferred Stock
and recorded a deferred tax asset of $925,000.

         In March 1999, Executone exercised its right to redeem and convert the
Executone Preferred Stock into Executone Common Stock and on April 6, 1999, in
exchange for its shares of Executone Preferred Stock, the Company received
4,193,204 shares of Executone Common Stock with a market value of approximately
$17.7 million.

         At October 31, 1999, the Company owned 2,514,651 shares of Executone
Common Stock which have been classified as available-for-sale securities. The
unrealized gain of approximately $4.1 million, net of deferred taxes of
approximately $2.7 million, has been recorded as a component of other
accumulated comprehensive income.

NOTE D - LOANS

         Major classifications of loans are as follows:

<TABLE>
<CAPTION>
                                                                   (In Thousands)

                                                                  October 31, 1999
                                                                  ----------------
<S>                                                                   <C>
Commercial                                                            $  9,204
Commercial mortgage                                                     26,431
Residential mortgage                                                    24,876
Overdrafts                                                                  46
                                                                      --------
                                                                        60,557

Allowance for credit losses                                               (905)
                                                                      --------
                                                                      $ 59,652
                                                                      ========
</TABLE>

         Changes in the allowance for credit losses are as follows:

<TABLE>
<CAPTION>
                                                                   (In Thousands)

                                                                  October 31, 1999
                                                                  ----------------

<S>                                                                   <C>
Balance at beginning of year                                          $    --
Provision charged to operations                                            45
Loans charged off                                                          --
Recoveries                                                                 69
Acquisition of The Berkshire Bank                                         791
                                                                      -------
Balance at end of year                                                $   905
                                                                      =======
</TABLE>


                                       50







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997

NOTE D - (CONTINUED)

         At October 31, 1999, the Bank did not have any loans outstanding to its
directors and officers which were secured by real estate and/or deposit
accounts. Management of the Bank is of the opinion that such loans, when and if
made, are made in the ordinary course of business and on substantially the same
terms as those prevailing at the same time for comparable transactions with
unrelated parties and do not involve more than normal risk of collectibility or
present other unfavorable features. In June 1999, the Company made a term loan
in the principal amount of $2,000,000 to Pharmaceutical Holdings Corp., a
Delaware corporation, the principal stockholder of which is Momar Corporation,
the principal stockholder and chief executive officer of which is Moses Marx, a
director and principal stockholder of the Company.

         Included in loans receivable are non-accrual loans past due 90 days or
more in the amounts of $121,000 at October 31, 1999. If interest income had been
recorded on all non-accrual loans had they been current in accordance with their
original terms, income would have increased for the year ended October 31, 1999
by approximately $6,000.

         At October 31, 1999, the Company did not have any loans past due 90
days or more and accruing interest or any impaired loans.

NOTE E - PREMISES AND EQUIPMENT

         Major classifications of premises and equipment are summarized as
follows:

<TABLE>
<CAPTION>
                                                Estimated               October 31,
                                              useful lives                  1999
                                              ------------              ------------
                                                                       (in thousands)
<S>                                           <C>                         <C>
Equipment                                     3 to 10 years               $   889
Leasehold improvements                        2 to 40 years                   281
                                                                          -------
                                                                            1,170
Accumulated depreciation and amortization                                    (778)
                                                                          -------
Total                                                                     $   392
                                                                          =======
</TABLE>



NOTE F - DEPOSITS

         The aggregate amount of jumbo certificates of deposits greater than
$100,000 were $27,447,000 as of October 31, 1999.

The scheduled maturities of certificates of deposit are as follows:

<TABLE>
<CAPTION>
                                             (IN THOUSANDS)
                                            OCTOBER 31, 1999
                                            ----------------
<C>                                            <C>
2000                                           $ 28,459
2001                                                961
2002                                                 --
2003                                              1,545
2004                                                 43
Thereafter                                           --
                                               --------
                                               $ 31,008
                                               ========
</TABLE>

                                       51







<PAGE>



                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997

NOTE G - EARNINGS PER SHARE

         The Company's calculation of earnings per share in accordance with
SFAS No. 128 is as follows:

<TABLE>
<CAPTION>
                                                     YEAR ENDED OCTOBER 31, 1999
                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                              ---------------------------------------
                                                Income          Shares      Per share
                                              (numerator)   (denominator)    amount
                                               ----------------------  ---------------
<S>                                             <C>             <C>           <C>
Basic earnings per share
 Net income available to
  common stockholders                           $6,540          2,126         $3.08

Effect of dilutive securities
 Options                                            --            135          (.19)
                                                ------         ------         -----
Dilutive earnings per share

 Net income available to
  common stockholders plus
  assumed conversions                           $6,540          2,261         $2.89
                                                ======         ======         =====
</TABLE>

<TABLE>
<CAPTION>
                                                     YEAR ENDED OCTOBER 31, 1998
                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                              ---------------------------------------
                                                Income          Shares      Per share
                                              (numerator)   (denominator)    amount
                                               ----------------------  ---------------
<S>                                             <C>             <C>           <C>
Basic earnings per share

 Net income available to
  common stockholders                          $37,627          2,126         $17.70
Effect of dilutive securities
 Options                                          --              132         $(1.04)
                                               -------        -------         ------
Dilutive earnings per share

 Net income available to
  common stockholders plus
  assumed conversions                          $37,627          2,258         $16.66
                                               =======        =======         ======
</TABLE>

<TABLE>
<CAPTION>
                                                     YEAR ENDED OCTOBER 31, 1997
                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                              ---------------------------------------
                                                Income          Shares      Per share
                                              (numerator)   (denominator)    amount
                                               ----------------------  ---------------
<S>                                             <C>             <C>           <C>
Basic earnings per share

 Net income available to
  common stockholders                           $16,710        2,147        $7.78

Effect of dilutive securities
 Options                                             --           97         (.33)
                                                --------        -----       -----
Dilutive earnings per share

 Net income available to
  common stockholders plus
  assumed conversions                           $16,710         2,244       $7.45
                                                =======         =====       =====
</TABLE>

                                       52








<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997


NOTE H - INCOME TAXES

         The components of income tax expense for the years ended October 31,
1999, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
                                                1999                       1998                       1997
                                            ----------                 ----------                 --------
<S>                                         <C>                        <C>                        <C>
Current                                     $2,689,000                 $5,219,000                 $100,000
Deferred Taxes
   (Benefit)                                 1,402,000                   (925,000)                    --
Reversal of
   Valuation Allowance                           --                      (721,000)                    --
                                            ----------                 ----------                 --------
                                            $4,091,000                 $3,573,000                 $100,000
                                            ==========                 ==========                 ========
</TABLE>


         A reconciliation of the provision for income taxes for the years ended
October 31, 1999, 1998 and 1997 and the amount computed by applying the
statutory Federal income tax rate to income (loss) from continuing operations
follows:

<TABLE>
<CAPTION>
                                                1999                       1998                       1997
                                            ----------                 -----------                -----------
<S>                                         <C>                        <C>                        <C>
Computed expected provision
   (benefit) for income taxes               $3,721,000                 $14,420,000                $ 5,884,000
Utilization of loss
   carryforwards and credits                  (325,000)                 (9,132,000)                (5,884,000)
Changes in valuation
   allowance                                    --                        (721,000)                   --
Amortization of goodwill                       243,000                      --                        --
Alternative minimum taxes
   and other                                   452,000                    (994,000)                   100,000
                                            ----------                 -----------                -----------
Actual provision for
   income taxes                             $4,091,000                 $ 3,573,000                $   100,000
                                            ==========                 ===========                ===========
</TABLE>


         The tax effect of the principal temporary differences at October 31,
1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                                  1999                       1998
                                                              -----------                ------------
<S>                                                            <C>                        <C>
Deferred tax assets
   Net operating loss carryforwards                            $  548,000                 $   --
   Credit carryforwards                                           386,000                     --
   Unrealized loss on Executone
      Preferred Stock                                              --                         925,000
   Other                                                          461,000                     --
                                                              -----------                ------------
                                                                1,395,000                     925,000
Deferred tax liabilities
   Unrealized gain on Executone
      Preferred Stock                                          (1,872,000)                    --
                                                              -----------                ------------
  Net deferred tax asset (liability)                          $  (477,000)               $    925,000
                                                              ===========                ============
</TABLE>

         The valuation allowance on the deferred tax asset was eliminated in
1998, reflecting the realization of all of the remaining net operating loss
carryforwards and other temporary differences.

         As of the acquisition date of the Bank, deferred tax assets of
$2,162,000 were recorded, less a $1,812,000 valuation allowance. It was
determined that the deferred tax asset was more likely to be realized than
not. Accordingly, at October 31, 1999, the deferred tax valuation account and
goodwill was reduced by $1,812,000.


NOTE I - ESTIMATED TAX LIABILITIES

         The Company is a party to a tax sharing agreement, as amended, with TCC
and Cooper Development Company ("CDC") related to the Cooper Labs, Inc. ("CLI")
liquidation on June 27, 1985. The above companies have agreed that: (i) in the
event that the amount of tax liability, including interest and penalties, shall
be ultimately determined to be greater or less than $10,000,000, then such
excess or deficiency shall be shared 50%, 25%, and 25% by TCC, CDC, and the
Company, respectively, and (ii) they are jointly and severally liable. TCC is
coordinating the defenses for these tax examinations. In 1998, after reviewing
certain documents related to the tax examinations which were provided by TCC,
and


                                       53







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997


NOTE I - (CONTINUED)

after consulting with its tax advisors, the Company recorded a charge of
$150,000 and $149,000 in 1998 and 1997, respectively, to increase the Company's
accrual for interest charges related to potential assessments. In 1999, after
reviewing certain documents, management determined that no such adjustment was
necessary for the fiscal year ended October 31, 1999.


NOTE J - STOCK PLANS

         In March 1999, the stockholder's of the Company approved the 1999 Stock
Incentive Plan (the "1999 Stock Incentive Plan"). The 1999 Stock Incentive Plan
replaces the 1991 Stock Option Plan For Non-Employee Directors and the 1991
Stock Incentive Plan For Employees (collectively the "1991 Plans"). No further
awards may be granted under the 1991 Plans. A brief description of the 1999
Stock Incentive Plan is as follows:

         The 1999 Stock Incentive Plan permits the granting of awards in the
form of nonqualified stock options, incentive stock options, restricted stock,
deferred stock, and other stock-based incentives. Up to 200,000 shares of common
stock of the Company may be issued pursuant to the 1999 Stock Incentive Plan
(subject to appropriate adjustment in the event of changes in the corporate
structure of the Company). Officers, directors and other key employees of the
Company or any subsidiary are eligible to receive awards under the 1999 Stock
Incentive Plan. The option exercise price of all options which are granted under
the 1999 Stock Incentive Plan must be at least equal to 100% of the fair market
value of a share of common stock of the Company on the date of grant. At October
31, 1999, 44,875 options have been granted under the 1999 Stock Incentive Plan.

         SFAS No. 123 "Accounting for Stock Based Compensation." This statement
introduced a method of accounting for employee stock-based compensation plans
based upon the fair value of the awards on the date they are granted. Under this
fair value based method, public companies estimate the fair value of stock
options using a pricing model, such as the Black-Scholes model, which requires
inputs such as the expected volatility of the stock price and an estimate of the
dividend yield over the option's expected life. The FASB, however, does not
require the use of this method. Entities that continue to account for stock
option plans under the existing method (APB No. 25) are required to disclose
proforma net income and earnings per share, as if the fair value method had been
used. Certain additional disclosures are also required, as follows:


                                       54







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997


NOTE J - (CONTINUED)

         A summary of the activity with respect to the Plans is as follows:

<TABLE>
<CAPTION>
                                          1999                              1998                             1997
                               --------------------------        --------------------------      ----------------------------
                                                WEIGHTED                          WEIGHTED                          WEIGHTED
                                                AVERAGE                           AVERAGE                           AVERAGE
                                                EXERCISE                          EXERCISE                          EXERCISE
                                 SHARES          PRICE             SHARES          PRICE             SHARES          PRICE

                               -----------------------------------------------------------------------------------------------
<S>                             <C>             <C>               <C>             <C>              <C>              <C>
Outstanding at
beginning
of year                          168,500         $ 7.37            168,500         $ 7.28            182,500         $ 7.28
Granted                           44,875         $38.00               --                               1,500          14.25
Cancelled                             --                              --                                --
Exercised                         (1,000)        $ 9.75               --                             (15,000)          6.99
                                  ------                           -------                           -------
Outstanding at
end of year                      212,375         $13.83            168,500         $ 7.37            168,500         $ 7.37
                                 =======                           =======                           =======
Exercisable at
end of year                      167,500         $ 7.36            168,500         $ 7.37            168,500         $ 7.37
                                 =======                           =======                           =======
Weighted average
fair value of
options granted
during the year                                  $16.04                            $  .--                            $ 4.48
                                                 ======                            ======                            ======
</TABLE>


         The following table summarizes information about options outstanding at
October 31, 1999:

<TABLE>
<CAPTION>
                         OPTIONS OUTSTANDING                                      OPTIONS EXERCISABLE
---------------------------------------------------------------------       ------------------------------
                         NUMBER           WEIGHTED                             NUMBER
                      OUTSTANDING          AVERAGE         WEIGHTED           OUTSTANDING       WEIGHTED
                           AT             REMAINING         AVERAGE                AT            AVERAGE
   RANGE OF           OCTOBER 31,        CONTRACTUAL       EXERCISE           OCTOBER 31,       EXERCISE
EXERCISE PRICES           1999          LIFE (YEARS)        PRICE                 1999            PRICE
---------------       -----------       ------------       --------           -----------       --------
<S>                   <C>                 <C>              <C>                <C>               <C>
$ 7.00 - $9.75          165,000             0.44            $ 7.25              165,000          $ 7.25
 14.25 - 15.00            2,500             1.64             14.55                2,500           14.25
 38.00                   44,875             4.91             38.00                 --              --
                        -------                                                -------
                        212,375                                                 167,500
                        =======                                                ========
</TABLE>


                                     55







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997


NOTE J - (CONTINUED)

         The Company's stock option plan has been accounted for under APB
Opinion No. 25, and related interpretations. No compensation cost has been
recognized for the plan. Had compensation cost for the plan been determined
based upon fair value of the options at the grant dates consistent with the
requirements of SFAS No. 123, the Company's net income and earnings per share
would have been the pro forma amounts indicated below.

<TABLE>
<CAPTION>
                                                 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                               OCTOBER 31,
                                                ------------------------------------------
                                                     1999         1998         1997
                                                    -------     ---------    --------
<S>                           <C>                   <C>         <C>          <C>
Net income                    As Reported:          $ 6,540     $ 37,627     $ 16,710
                              Pro Forma:              6,480       37,627       16,703
Basic earnings per share      As Reported:             3.08        17.70         7.78
                              Pro Forma:               3.04        17.70         7.78
Diluted earnings per share    As Reported:             2.89        16.66         7.45
                              Pro Forma:               2.87        16.66         7.45
</TABLE>

         The fair value of each option is estimated on the date of grant using
the Black-Scholes options-pricing model with the following weighted-average
assumptions used for grants in 1999, 1998 and 1997, expected volatility of 40%,
0% and 25%, respectively, risk-free interest of 6.14%, 0% and 6.0%,
respectively, and expected lives of 5 years.


NOTE K - EMPLOYEE BENEFIT PLANS

         In April 1985, the Company adopted its Retirement Income Plan (the
"Retirement Plan"), a noncontributory plan covering substantially all full-time,
non-union United States employees of the Company. Benefits were based upon a
combination of employee compensation and years of service. The Company paid the
entire cost of the plan for its employees and funded such costs as they accrued.
The Company's funding policy was to make annual contributions within minimum and
maximum levels required by applicable regulations. The Company's customary
contributions were designed to fund normal cost on a current basis and fund over
30 years the estimated prior service cost of benefit improvements (15 years of
annual gains and losses). The projected unit cost method was used to determine
the annual cost. Plan assets consist principally of equity and fixed income
mutual funds.

         Benefit accruals have been frozen as of September 15, 1988, resulting
in a plan curtailment. As a result of such curtailment, the Company will not
accrue benefits for future services; however, the Company will continue to
contribute as necessary for any unfunded liabilities.

         Assumptions used in the accounting were:

<TABLE>
<CAPTION>
                                                   1999              1998
                                                   ----              ----
<S>                                                <C>               <C>
         Discount rates - liability                7.50%             7.50%
          Long-term rate of return - assets        8.50              8.50
</TABLE>


                                       56







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997


NOTE K - (CONTINUED)

         A summary of the components of net periodic pension cost for 1999, 1998
and 1997 is as follows:

<TABLE>
<CAPTION>
                                                               1999              1998             1997
                                                              ------            ------           ------
<S>                                                         <C>               <C>               <C>
         Service cost - benefits earned
            during the period                               $   --            $    --           $   --
         Interest cost on projected
            benefit obligation                                 85,706            87,435           86,342
         Actual return on plan assets                        (124,703)         (125,061)         (94,636)
         Net amortization and deferral                          2,870             2,368           24,204
                                                            ---------          --------         --------
         Net pension cost of defined
            benefit plans                                   $ (36,127)        $ (35,258)        $ 15,940
                                                            =========         =========         ========
</TABLE>


         The following table sets forth the funded status and amounts recognized
in the Company's balance sheet for its defined benefit plan at October 31, 1999
and 1998:

<TABLE>
<CAPTION>
                                                               1999             1998
                                                            -----------      -----------
<S>                                                        <C>               <C>
Actuarial present value of
   accumulated benefit obligations,
   all of which is vested                                   $ 1,175,354      $ 1,202,396
                                                            ===========      ===========
  Projected benefit obligations                             $(1,175,354)     $(1,202,396)
  Fair value of plan assets                                   2,010,000        1,704,000
                                                            -----------      -----------
  Lesser of projected benefit
     obligation over fair value
     of plan assets                                             834,646          501,604
  Unrecognized net loss/(gain)                                 (267,558)          29,357
  Adjustment required to recognize
     minimum liability                                                0                0
                                                            -----------      -----------
  Prepaid pension cost                                      $   567,088      $   530,961
                                                            ===========      ===========
</TABLE>


NOTE L - COMMITMENTS AND CONTINGENCIES

1.  LEASES AND OTHER COMMITMENTS

         The Company leases certain of its operating facilities under
non-cancelable operating leases expiring in 2000 through 2001. The leases
require payment by the Company of the real estate taxes and insurance on the
leased properties. Approximate future minimum annual rental payments are as
follows (in thousands):

<TABLE>
<CAPTION>
            Year Ending October 31
            ----------------------
            <S>                            <C>
                  2000                      $  489
                  2001                         489
                  2002                         489
                  2003                         489
                  2004                         489
                  Thereafter                   489
                                            ------
                                            $2,445
                                            ======
</TABLE>

         Rental expense was approximately $278,000 in 1999 and $18,000 in 1998
and 1997. Included in rental expense was approximately $18,000 in 1999, 1998 and
1997 which was paid to a company affiliated with a director of the Company.


                                       57







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997


NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS

         SFAS No. 107 requires disclosure of the estimated fair value of an
entity's assets and liabilities considered to be financial instruments. For the
Company, as for most financial institutions, the majority of its assets and
liabilities are considered financial instruments as defined in SFAS No. 107.
However, many such instruments lack an available trading market, as
characterized by a willing buyer and seller engaging in an exchange transaction.
Also, it is the Company's general practice and intent to hold its financial
instruments to maturity and not to engage in trading or sales activities, except
for certain loans. Therefore, the Company had to use significant estimations and
present value calculations to prepare this disclosure.

         Changes in the assumptions or methodologies used to estimate fair
values may materially affect the estimated amounts. Also, management is
concerned that there may not be reasonable comparability between institutions
due to the wide range of permitted assumptions and methodologies in the absence
of active markets. This lack of uniformity gives rise to a high degree of
subjectivity in estimating financial instrument fair values.

         Estimated fair values have been determined by the Company using the
best available data and an estimation methodology suitable for each category of
financial instruments. The estimation methodologies used, the estimated fair
values, and recorded book balances at October 31, 1999 and 1998 are outlined
below.

         For cash and cash equivalents, the recorded book values of $23,829,000
and $65,258,000 at October 31, 1999 and 1998, respectively, approximate fair
values. The estimated fair values of investment securities are based on quoted
market prices, if available. Estimated fair values are based on quoted market
prices of comparable instruments if quoted market prices are not available.

<TABLE>
<CAPTION>
                                                 (IN THOUSANDS)

                                                OCTOBER 31, 1999
                                      ------------------------------------
                                        CARRYING             ESTIMATED
                                         AMOUNT              FAIR VALUE
                                      -------------       ----------------
<S>                                     <C>                   <C>
Investment securities                   $ 82,876              $ 82,874
Loans, net                                59,652                59,652
</TABLE>

         The net loan portfolio at October 31, 1999 has been valued using a
present value discounted cash flow where market prices were not available. The
discount rate used in these calculations is the estimated current market rate
adjusted for credit risk. The carrying value of accrued interest approximates
fair value.

         The estimated fair values of demand deposits (i.e. interest (checking)
and non-interest bearing demand accounts, savings and certain types of money
market accounts) are, by definition, equal to the amount payable on demand at
the reporting date (i.e. their carrying amounts). The carrying amounts of
variable rate accounts and certificates of deposit approximate their fair values
at the reporting date. The carrying amount of accrued interest payable
approximates its fair value.

         The majority of all time deposits with stated maturities of
approximately $31,000,000 mature or reprice within one year of October 31, 1999;
therefore, the recorded book value of such deposits approximates its fair value.


                                       58







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997


NOTE M - (CONTINUED)

         The fair values of the securities sold under agreements to repurchase
totaling $1,500,000 are estimated to approximate their recorded book balances at
October 31, 1999.

         There was no material difference between the notional amount and the
estimated fair value of off-balance-sheet items which totalled approximately
$6,088,000 at October 31, 1999, and primarily comprise unfunded loan commitments
which are generally priced at market at the time of funding.


NOTE N - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND CONCENTRATIONS
         OF CREDIT RISK

         The Bank is party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of their customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Such financial instruments are recorded in the financial
statements when they become payable. Those instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized in the consolidated balance sheets. The contract or notional amounts
of those instruments reflect the extent of involvement the Banks have in
particular classes of financial instruments.

         The Bank's exposure to credit loss in the event of non-performance by
the other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual or notional amount
of those instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as they do for on-balance-sheet
instruments.

         Unless noted otherwise, the Bank does not require collateral or other
security to support financial instruments with credit risk. The approximate
contract amounts are as follows:

<TABLE>
<CAPTION>
                                                     (In Thousands)
                                                    October 31, 1999
                                                  --------------------
<S>                                                      <C>
Financial instruments whose contract
   amounts represent credit risk                         $  --
   Commitments to extend credit                            4,591
   Standby letters of credit and financial
      guarantees written                                   1,497
                                                         -------
                                                         $ 6,088
                                                         =======
</TABLE>

         Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank upon extension of credit, is based on management's
credit evaluation.


                                     59







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997


NOTE N - (CONTINUED)

         Standby letters of credit are conditional commitments issued by the
Bank to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing and similar
transactions. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.
The Bank holds residential or commercial real estate, accounts receivable,
inventory and equipment as collateral supporting those commitments for which
collateral is deemed necessary. The extent of collateral held for those
commitments at October 31, 1999 varies up to 100%.

         The Bank grants loans primarily to customers in New York and its
immediately adjacent suburban. Although the Bank has a diversified loan
portfolio, a large portion of their loans are secured by commercial or
residential real property. The Bank does not generally engage in non-recourse
lending and typically will require the principals of any commercial borrower to
obligate themselves personally on the loan. Although the Bank has a diversified
loan portfolios, a substantial portion of their debtors' ability to honor their
contracts is dependent upon the economic sector. Commercial and standby letters
of credit were granted primarily to commercial borrowers.


NOTE O - REGULATORY MATTERS

         The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory - and possible additional
discretionary - actions by regulators that, if undertaken, could have a direct
material effect on the Bank's consolidated financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company must meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities and certain off-balance-sheet items
as calculated under regulatory accounting practices. The Bank's capital amounts
and classification are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.

         Quantitative measures established by regulations to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios (set forth in
the table below) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets, and of Tier 1 capital to average assets. Management
believes that, as of October 31, 1999, the Bank meets all capital adequacy
requirements to which it is subject.

         As of October 31, 1999, the Bank met all regulatory requirements for
classification as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Bank must maintain
minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set
forth in the following table. There are no conditions or events since that date
that management believes have changed the institution's category.


                                       60







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997


NOTE O - (CONTINUED)

         The following table sets forth the actual and required regulatory
capital amounts and ratios of, the Company and the Bank as of October 31, 1999
(dollars in thousands):

<TABLE>
<CAPTION>
                                                                                                      To be well
                                                                                                   capitalized under
                                                                                For capital        prompt corrective
                                                              Actual         adequacy purposes     action provisions
                                                              ------         -----------------     -----------------
                                                         Amount      Ratio    Amount     Ratio     Amount     Ratio
                                                         ------      -----    ------     -----     ------     -----
<S>                                                      <C>         <C>      <C>         <C>      <C>         <C>
OCTOBER 31, 1999
Total Capital (to Risk-Weighted Assets)
  Company                                                $57,541     68.4%    $ 6,729    >8.0%     $ 8,412     N/A
                                                                                         -                    -
  Bank                                                    13,316     20.7%      5,140    >8.0%       6,425    >10.0%
                                                                                         -                    -
Tier I Capital (to Risk-Weighted Assets)
  Company                                                 56,636     67.3%      3,364    >4.0%       5,047     N/A
                                                                                         -                     -
  Bank                                                    12,512     19.5%      2,570    >4.0%       3,855     >6.0%
                                                                                         -                     -
Tier I Capital (to Average Assets)
  Company                                                 56,636     26.9%      8,404    >4.0%      10,506     N/A
                                                                                         -                     -
  Bank                                                    12,512      7.8%      6,424    >4.0%       8,030     >5.0%
                                                                                         -                     -
</TABLE>


NOTE P - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY

         The condensed financial information for Berkshire Bancorp, Inc. (parent
company only) is as follows (in thousands):

<TABLE>
<CAPTION>
                                 CONDENSED BALANCE SHEETS
                                      (IN THOUSANDS)

                                                          October 31,         October 31,
                                                             1999                1998
                                                        -----------------------------------
<S>                                                        <C>                 <C>
ASSETS
Cash                                                       $ 33,774            $ 65,238
Equity investment in subsidiaries                            26,276                  --
Investment in securities available for sale                   9,226                  --
Loans                                                         9,895                  --
Accrued interest receivable                                      58                  --
Other assets                                                    594               1,572
                                                           --------            --------
Total assets                                               $ 79,823            $ 66,830
                                                           ========            ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Other liabilities                                          $  6,517            $  1,364

Stockholders' equity
Common stock                                                    256                 256
Additional paid-in capital                                   78,570              78,546
Accumulated deficit                                          (4,703)            (10,563)
Accumulated other comprehensive income, net                   1,943                  --
Less: Common stock in treasury, at cost                      (2,760)             (2,773)
                                                          ---------           ---------
Total stockholders' equity                                   73,306              65,466
                                                          ---------           ---------
                                                          $  79,823           $  66,830
                                                          =========           =========
</TABLE>



                                        61






<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997


NOTE P - (CONTINUED)

                               CONDENSED STATEMENTS OF INCOME
                                       (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                       For the Years Ended October 31,
                                                                    -------------------------------------
                                                                      1999            1998           1997
                                                                    --------        --------        ------
<S>                                                                 <C>             <C>             <C>
INCOME
Interest income from the Bank                                       $  1,153        $     --        $     --
Interest income                                                        1,138           3,313             669
Gain on sales of investment securities                                 7,634          38,909          16,845
Other income                                                             130              44             119
                                                                    --------        --------        --------
Total income                                                          10,055          42,266          17,633

EXPENSES
Salaries and employee benefits                                           143             129             138
Other expenses                                                           440             937             685
                                                                    --------        --------        --------
Total expenses                                                           583           1,066             823
                                                                    --------        --------        --------
Income before income taxes and equity
   in undistributed net income of the Bank                            10,472          41,200          16,810
Equity in undistributed net income
   of the Bank                                                         1,060              --              --
                                                                    --------        --------        --------
Income before taxes                                                   11,532          41,200          16,810
Provision for income taxes                                             4,992           3,573             100
                                                                    --------        --------        --------
Net income                                                          $  6,540        $ 37,627        $ 16,710
                                                                    ========        ========        ========
</TABLE>


                                       62







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997


NOTE P - (CONTINUED)

                       CONDENSED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                       For the Years Ended October 31,
                                                                    -------------------------------------
                                                                      1999            1998           1997
                                                                    --------        --------        ------
<S>                                                                 <C>             <C>             <C>
   Operating activities:
Net income                                                           $ 6,540         $ 37,627      $ 16,710
Adjustments to reconcile net income to net
   cash provided by (used in) operating activities:
Gain on sales of investment securities                                (7,634)         (38,909)      (16,845)
Equity in undistributed net income of the Bank                        (1,060)              --            --
   (Increase) in deferred taxes                                       (1,402)            (925)           --
Depreciation and amortization and other                                   --               --           114
Increase (decrease) in other liabilities                               6,583              727           131
Increase (decrease) in other assets                                      920              (80)            9
                                                                    --------         --------      --------
Net cash provided by (used in) operating activities                    3,947           (2,015)          119
                                                                    --------         --------      --------
   Investing activities:
Investment in subsidiaries                                           (25,216)              --            --
Proceeds from sale of investment securities
   available for sale                                                  7,634           42,916        26,177
Purchases of investment securities
   available for sale                                                (17,178)              --            --
                                                                    --------         --------      --------

Net cash provided by (used in) investing activities                  (34,760)          42,916        26,177
                                                                    --------         --------      --------
   Financing activities:
Proceeds from exercise of common stock options                             9               --             3
Acquisition of treasury stock                                             --               --          (883)
Dividends paid                                                          (680)          (1,531)           --
                                                                    --------         --------      --------
Net cash (used in) financing activities                                 (671)          (1,531)         (880)
                                                                    --------         --------      --------

  Net increase (decrease) in cash and cash equivalents               (31,484)          39,371        25,416
  Cash and cash equivalents at beginning of year                      65,258           25,887           471
                                                                    --------         --------      --------
  Cash and cash equivalents at end of year                          $ 33,774         $ 65,258      $ 25,887
                                                                    ========         ========      ========

Supplemental disclosures of cash flow information:

  Cash used to pay income taxes                                     $  2,602         $  4,419      $     --
</TABLE>


                                       63







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997


NOTE Q - QUARTERLY FINANCIAL DATA (UNAUDITED)

         The following represents summarized quarterly financial data of the
Company which, in the opinion of management, reflects all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the Company's results of operations (in thousands, except per
share data).

<TABLE>
<CAPTION>
                                                                           Three Months Ended
                                                        -----------------------------------------------------------------
                                                        January 31        April 30          July 31           OCTOBER 31
                                                        ----------        ----------        ----------        ----------
   1999
   ----
<S>                                                     <C>               <C>               <C>               <C>
Interest income                                         $  1,296          $  2,312          $  2,406          $  2,511
Interest expense                                             262               794               731               761
                                                        --------          --------          --------          --------
Net interest income                                        1,034             1,518             1,675             1,750
Provision for loan losses                                     (5)              (15)              (10)              (15)
Gains (losses) on sale of securities                         (12)            1,653             2,973             3,008
Other operating income                                       235                98               138               162
Other operating expenses                                    (443)           (1,019)           (1,003)           (1,091)
                                                        --------          --------          --------          --------
Income before taxes                                          809             2,235             3,773             3,814
Provision for taxes                                          378             1,000             1,707             1,006
                                                        --------          --------          --------          --------
Net income                                              $    431          $  1,235          $  2,066          $  2,808
                                                        ========          ========          ========          ========

Per share data
  Net income per common share

  Basic                                                 $    .20          $    .58          $    .97          $   1.33
                                                        ========          ========          ========          ========
  Diluted                                               $    .19          $    .55          $    .91          $   1.24
                                                        ========          ========          ========          ========
</TABLE>


<TABLE>
<CAPTION>
                                                                            Three Months Ended
                                                        ----------------------------------------------------------------
                                                        January 31        April 30          July 31           OCTOBER 31
                                                        ----------        ----------        ----------        ----------
   1998
   ----
<S>                                                     <C>               <C>               <C>               <C>
Interest income                                         $    610          $    934          $    913          $    856
                                                        --------          --------          --------          ---------
Net interest income                                          610               934               913               856
Gain (loss) on sale of securities                         38,926               (17)               --                --
Other operating expenses                                    (142)             (444)             (131)             (349)
                                                        --------          --------          --------          --------
Income before taxes                                       39,394               473               782               551
Provision (benefit) for taxes                              3,319               (90)              440               (96)
                                                        --------          --------          --------          --------
Net income                                              $ 36,075          $    563          $    342          $    647
                                                        ========          ========          ========          ========

Per share data
  Net income per common share
  Basic                                                 $  16.97          $    .26          $    .16          $    .30
                                                        ========          ========          ========          ========
  Diluted                                               $  16.01          $    .25          $    .15          $    .29
                                                        ========          ========          ========          ========
</TABLE>


                                       64







<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         OCTOBER 31, 1999, 1998 AND 1997


NOTE R - SUBSEQUENT EVENTS

         On January 3, 2000, the Company entered into an agreement to acquire
24.9% of the issued and outstanding shares of the common stock of Madison
Merchant Services, Inc., a privately held New York State corporation
("Madison"), for a cash purchase price of $285,000. In addition, the Company
will receive an option to purchase up to an additional 26.1% of the presently
outstanding shares of Madison common stock during the period from November 1,
2001 and February 1, 2003.

         Madison currently provides merchant credit card processing services for
restaurants, other retail establishments and a variety of other merchants. The
Company anticipates closing the transaction immediately following receipt of all
required administrative and regulatory approvals.






                                       65








<PAGE>


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

         Not Applicable.


                               PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The following are the current directors and executive officers of the Company:

<TABLE>
<CAPTION>
Name                                Age     Position(s)
----                                ---     ----------------------------
<S>                               <C>     <C>
William L. Cohen                    58      Director
Moses Marx                          64      Director
Steven Rosenberg                    51      President, Director
Harold L. Schneider                 57      Secretary
Randolph B. Stockwell               53      Director
</TABLE>


         Mr. Cohen was elected a director in July 1993.  Mr. Cohen is President,
Chief Executive Officer and Chairman of the Board of The Andover Apparel Group,
Inc., an apparel manufacturing company, positions he has held for more than the
past five years.

         Mr. Marx was elected a director in May 1995. Mr. Marx has been a
general partner in United Equities Company (a securities brokerage firm) since
1954 and a general partner in United Equities Commodities Company (a commodities
brokerage firm) since 1972. He is also President of Momar Corp. (an investment
company). Mr. Marx is a director of The Cooper Companies, Inc. (a developer and
manufacturer of healthcare products).

         Mr. Rosenberg has served as President and Chief Executive Officer of
the Company since March 1999 and as Vice President and Chief Financial Officer
since 1990. He also serves as chief administrative officer of the Company.
Mr. Rosenberg was elected a director in May 1995. From September 1987 through
April 1990, he served as President and Director of Scomel Industries, Inc., a
company engaged in international marketing and consulting. Mr. Rosenberg is
a director of The Cooper Companies, Inc.

         Mr. Schneider was elected Secretary in April 1990. Mr. Schneider has
been a partner in the law firm Kirkpatrick & Lockhart LLP since July 1999. He
was a partner in the law firm Tenzer Greenblatt LLP from May 1981 to July 1999.

         Mr. Stockwell was elected a director in July 1988. He has been private
investor for over ten years and has served in various capacities with the
Community Bank, a commercial bank, from September 1972 to January 1987.

         There are no family relationships (whether by blood, marriage or
adoption) among any of the Company's current directors or executive officers.


                                       66







<PAGE>


ITEM 11. EXECUTIVE COMPENSATION

         The following table discloses the compensation awarded by the Company,
for the three fiscal years ended October 31, 1999, 1998 and 1997, to Mr. Steven
Rosenberg, its President and principal executive officer. Mr. Rosenberg was the
only officer of the Company during the fiscal year ended October 31, 1999.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                        Annual
                                                        Compensation
                                                        ------------
Name and Principal Position
---------------------------
                                                 Year   Salary($)
                                                 ----   ---------
<S>                                            <C>     <C>
Steven Rosenberg, President,                     1999   125,000
Vice President and Chief                         1998    90,000
Financial Officer                                1997    90,000
</TABLE>


         No options were granted in the fiscal year ended October 31, 1999
to Mr. Rosenberg.

         The following table sets forth information concerning options exercised
by Mr. Rosenberg during the fiscal year ended October 31, 1999, and the number
of options owned by Mr. Rosenberg and the value of any in-the-money unexercised
options as of October 31, 1999.


                          AGGREGATED OPTION EXERCISES*
                        AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
                         Number of Securities                        Value of Unexercised
                         Underlying Unexercised                      In-The-Money Options
                         Options at October 31, 1999                 at October 31, 1999(1)
                         ---------------------------                 -----------------------

Name                     Exercisable   Unexercisable                 Exercisable    Unexercisable
----                     -----------   -------------                 -----------    -------------
<S>                     <C>           <C>                          <C>              <C>
Steven Rosenberg           15,000        0                            $363,750        0
</TABLE>


* No options were exercised in the fiscal year ended October 31, 1999 by
Mr. Rosenberg.

---------------
(1) Year-end values for unexercised in-the-money options represent the positive
spread between the exercise price of such options and the fiscal year end market
value of the common stock. An Option is "in-the-money" if the fiscal year end
fair market value of the Common Stock exceeds the option exercise price. The
last sale price (the fair market value) of the Common Stock on October 39, 1999
was $34.00 per share.

COMPENSATION OF DIRECTORS

         Each director who is not an employee of the Company receives monthly
fees of $1,000 for serving as a director of the Company and $1,000 for each day
during which he participates in a meeting of the Board and, if on a separate
day, $500 for each day during which he participates in a meeting of a committee
of the Board of which is a member. In addition, see "1999 Stock Incentive Plan"
below.

1999 STOCK INCENTIVE PLAN

         The 1999 Stock Incentive Plan permits the granting of awards in the
form of nonqualified stock options, incentive stock options, restricted stock,
deferred stock, and other stock-based incentives. Up to 200,000 shares of common
stock of the Company may be issued pursuant to the 1999 Stock Incentive Plan
(subject to appropriate adjustment in the event of changes in the corporate


                                       67







<PAGE>


structure of the Company). Officers, directors and other key employees of the
Company or any subsidiary are eligible to receive awards under the 1999 Stock
Incentive Plan. The option exercise price of all options which are granted under
the 1999 Stock Incentive Plan must be at least equal to 100% of the fair market
value of a share of common stock of the Company on the date of grant. At January
15, 2000, options to acquire 43,875 shares of common stock have been granted
under this plan and 156,125 options are available for future grants.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information as of January 15,
2000 with respect to the beneficial ownership of the Company's Common Stock by
(i) each person who is known by the Company to own beneficially more than 5% of
the Company's Common Stock, (ii) each of the Company's directors and Steven
Rosenberg, the Company's only executive officer, and (iii) all executive
officers and directors as a group.


<TABLE>
<CAPTION>
                                                               Number of                          Percent
                                                                Shares                            of Class
                                                               ---------                          ---------
<S>                                                           <C>                               <C>
William Cohen                                                      1,500(1)                        *

Moses Marx                                                     1,106,120(2)                       51.9%
160 Broadway, New York, NY 10038

Steven Rosenberg                                                  20,082(3)                        *

Randolph B. Stockwell                                              7,000(4)                        *

All executive officers and directors
  as a group (4 persons)                                       1,134,702(5)                       52.9%
</TABLE>

----------------
 *  Less than 1%.

(1) Includes 1,000 shares issuable upon the exercise of options which have
    been granted to Mr. Cohen under the Company's 1991 Stock Option Plan
    for Non-Employee Directors.

(2) Includes 500 shares issuable upon the exercise of options which have
    been granted to Mr. Marx under the Company's 1991 Stock Option Plan for
    Non-Employee Directors.

(3) Includes 15,000 shares issuable upon the exercise of outstanding
    options which have been granted to Mr. Rosenberg.

(4) Includes 1,000 shares issuable upon the exercise of options which have
    been granted to Mr. Stockwell under the Company's 1991 Stock Option
    Plan for Non-Employee Directors.

(5) Includes 17,500 shares of Common Stock which are issuable upon the
    exercise of outstanding options.


                                       68







<PAGE>


PRINCIPAL SECURITYHOLDERS

         The following tables sets forth certain information regarding ownership
of the Company's Common Stock as of January 18, 2000 by parties who have advised
the Company that they own more than five percent (5%) of the Company's Common
Stock.

<TABLE>
<CAPTION>
                                                                       Common Stock Beneficially Owned
                                                                       ----------------------------------
                                                                       Number of                 Percent
                                                                        Shares                   of Class
                                                                       ---------                 --------
<S>                                                                 <C>                         <C>
Estate of Mel Schnell(1)                                               150,000                     6.6%
6 Maiden Lane
New York, NY 10038

Citibank Overseas Investment Corporation(2)                            115,000                     5.4%
One Penn's Way
New Castle, DE 19720
</TABLE>

------------
(1) Based upon filings made by the estate of Mr. Schnell with the Securities and
Exchange Commission. Represents 150,000 shares of Common Stock which are
issuable upon the exercise of options granted to Mr. Schnell, while President of
the Company, under the Company's 1991 Stock Incentive Plan.
(2) Based upon a joint filing of Schedule 13G with Citibank, N.A., Citicorp and
Citigroup Inc.

         The foregoing information with respect to persons who are known by the
Company to own beneficially more than 5% of the Company's Common Stock is based
upon filings made by said persons with the Securities and Exchange Commission.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         In June 1999, the Company made a term loan in the principal amount of
$2,000,000 to Pharmaceutical Holdings Corp., a Delaware corporation, the
principal stockholder of which is Momar Corporation, the principal stockholder
and chief executive officer of which is Moses Marx, a director and principal
stockholder of the Company.


                                       69







<PAGE>


                                PART IV


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

         (A) DOCUMENTS FILED AS PART OF THIS REPORT:

         (i)  Financial Statements

         Report of Independent Certified Public Accountants
         Consolidated Balance Sheets as of October 31, 1999 and 1998
         Consolidated Statements of Operations for the Years Ended October 31,
           1999, 1998 and 1997
         Consolidated Statements of Stockholders' Equity for the Years Ended
           October 31, 1999, 1998 and 1997
         Consolidated Statements of Cash Flows for the Years Ended October 31,
           1999, 1998 and 1997
         Notes to Consolidated Financial Statements

         (ii)  Financial Statement Schedules


<TABLE>
<CAPTION>
         Schedule
         Number            Description
         --------          -----------
         <S>               <C>
         None
</TABLE>


         All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are not applicable and, therefore, have been omitted.

         (iii)  Exhibits


<TABLE>
<CAPTION>

EXHIBIT
NUMBER            DESCRIPTION
-------           -----------
<S>      <C>
 3.1      Amended and Restated Certificate of Incorporation of the Company
            (incorporated by reference to Exhibit 3.1 to the Company's Current
            Report on Form 8-K dated March 30, 1999).

 3.2      Amended and Restated By-laws of the Company (incorporated by reference
            to Exhibit 3.2 to the Company's Current Report on Form 8-K dated
            March 30, 1999).

10.1      Assignment, Assumption and Indemnification Agreement dated October 25,
            1984 between Cooper Laboratories, Inc. and the Company (incorporated
            by reference to Exhibit 10(h) to the Company's Registration
            Statement on Form S-1 (Registration No. 2-97498)).

10.2      Tax Sharing Agreement between the Company and Cooper Laboratories,
            Inc. dated as of October 25, 1984 (incorporated by reference to
            Exhibit 10(j) to the Company's Registration Statement on Form S-1
            (Registration No. 2-97498)).

10.3      Joint Amendment dated as of June 14, 1985, to the Tax Sharing
            Agreement between the Company and Cooper Laboratories, Inc. dated as
            of October 25, 1984 (incorporated by reference to Exhibit No. 10.3
            to the Company's Quarterly Report on Form 10-Q for the Fiscal
            Quarter Ended April 30, 1990).

10.4      1991 Stock Incentive Plan of the Company (incorporated by reference to
            Exhibit 10.14 to the Company's Annual Report on Form 10-K for the
            Fiscal Year Ended October 31, 1991).

10.5      Stock Incentive Plan for Non-Employee Directors of the Company
            (incorporated by reference to Exhibit 10.15 to the Company's Annual
            Report on Form 10-K for the Fiscal Year Ended October 31, 1991).
</TABLE>


                                       70







<PAGE>


<TABLE>
<CAPTION>

EXHIBIT
NUMBER            DESCRIPTION
-------           -----------
<S>      <C>
10.6      Corporate Assumption of Tax Liability dated December 10, 1985
            (incorporated by reference to Exhibit 10.20 to the Company's Current
            Report on Form 8-K dated April 20, 1992).

10.7      Registration Rights Agreement, dated as of August 31, 1993, by and
            between the Company and Mr. Moses Marx (incorporated by reference to
            Exhibit 10.37 to the Company's Quarterly Report on Form 10-Q for the
            Fiscal Quarter Ended July 31, 1993).

10.8      1999 Stock Incentive Plan of the Company (incorporated by reference to
            Exhibit 10.8 to the Company's Current Report on Form 8-K dated March
            30, 1999).

21.       Subsidiaries of the Company.

23.       Consent of Independent Certified Public Accountant

27.       Financial Data Schedules
</TABLE>


         (B)  REPORTS ON FORM 8-K.

         The Company filed a current report on Form 8-K dated December 13, 1999
which sets forth information under Item 8. Change in Fiscal Year.


                                       71







<PAGE>


                                   SIGNATURES


         PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE COMPANY HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.


                                            BERKSHIRE BANCORP INC.


                                            BY:  /s/  Steven Rosenberg
                                                --------------------------------
                                                      STEVEN ROSENBERG
                                            President, (Chief Executive Officer)


                                            DATE:    January 27, 2000
                                                 -------------------------------

         PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
COMPANY AND IN THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
         SIGNATURE                                   TITLE                                       DATE
         ---------                                   -----                                       ----
<S>                                                <C>                                        <C>
                                                     President, (Chief
                                                     Executive Officer,
                                                     Principal Financial
                                                     Officer and Principal
                                                     Accounting Officer);
/s/  Steven Rosenberg                                Director                                    January 27, 2000
----------------------------
      STEVEN ROSENBERG

/s/  William Cohen                                   Director                                    January 27, 2000
----------------------------
      WILLIAM COHEN

/s/  Moses Marx                                      Director                                    January 27, 2000
----------------------------
      MOSES MARX

/s/ Randolph B. Stockwell                            Director                                    January 27, 2000
----------------------------
     RANDOLPH B. STOCKWELL
</TABLE>


                                       72