SECURITIES AND EXCHANGE COMMISSION
                                              WASHINGTON, D.C. 20549

                                                    FORM 10-KSB

[x]     Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
 Act of 1934 [Fee Required]

For the fiscal year ended December 31, 1996

[ ]     Transition Report Pursuant to Section 13 or 15(d) of the Securities
 Exchange Act of 1934 [No Fee Required]

For the transition period from                          to

Commission file number 0-22934

                                             DEVELOPMENT BANCORP, LTD.
                           (Exact name of small business issuer in its charter)


                         Washington                                 93-1192971
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer 
                                                       Identification No.)

                 14 Quai du Seujet
                 Geveva, Switzerland                                     CH-1201
           (Address of principal executive offices)                   (Zip Code)

Registrant's telephone number, including area code:          011 41 229 081 598

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

Securities registered pursuant to Section 12(g) of the Act: 
 Common Stock, no par value

           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

           Check if there is no disclosure of delinquent filers in response to 
Item 405 of Regulation S-B is not
contained in this form, and no disclosure will be contained, to the best of 
registrant's knowledge, in definitive proxy
or information statements incorporated by reference in part III of this Form 
10-K or any amendment to this Form
10-KSB. [X]

           State issuer's revenues for its most recent fiscal year: $103,243

           The aggregate market value of the voting stock held by non-affiliates
of the  registrant was  $14,740,363  based upon the average of the bid and asked
price of the Common Stock of $4.4375 as of May 27, 1997.

           The number of shares  outstanding  of the issuer's  classes of Common
Stock as of May 27, 1997:

Common Stock, No Par Value - 3,394,668  shares

                                    DOCUMENTS INCORPORATED BY REFERENCE:  NONE


<PAGE>



Item 1.  Description of Business
Business Development

         Development  Bancorp,  Ltd. (the  "Company")  Development  Bancorp is a
holding  company  that owns  various  interests  in  subsidiaries  and  investee
companies in the financial  services  industry in North America and Europe.  The
Company was incorporated on August 16, 1984 in the state of Washington under the
name Gold Valley,  Inc. for the primary purpose of exploring and developing gold
properties.  No commercial  ore deposits were  developed.  In 1986,  the Company
acquired an 18.75%  interest in an oil  partnership  consisting of five wells in
Pondera County,  Montana. In 1991, the Company sold this partnership interest to
the then officers and directors of the Company on an  installment  contract.  In
1991, the Company  canceled this contract from these  affiliates in exchange for
investment  banking and financial  consulting  services when it became  apparent
that  the  affiliates  were  not  willing  or  able to  pay.  After  sale of its
partnership interest, the Company began to seek other business opportunities. On
August 13, 1993, the Company changed its name to Development  Bancorp,  Ltd. and
effected a 165-for-1  reverse stock split in preparation for a private placement
fund raising. Under the Washington Business Corporation Act, the name change and
the reverse stock split only required  approval of the Board of Directors of the
Company and not approval of its  shareholders  In  conjunction  with the special
meeting in lieu of the annual  meeting,  held on October 4, 1993,  the Company's
shareholders  authorized the issuance of preferred stock, adopted a Stock Option
Plan and ratified the reverse stock split.  Following this  reorganization,  the
Company has directed its efforts towards financial  services as well as merchant
banking  activities  focused on investing in financial service  subsidiaries and
partnering with other companies around the world engaged in financial services.

Financial Services

         In June 1993 the Company commenced its business of providing  financial
services with the organization of an operating subsidiary, Societe Financiere de
Distribution Geneve S.A. (oSFDo).  SFD operates in Geneva,  Switzerland and is a
Swiss  financial  company.  In fiscal  1995 the  Company  organized  Development
Bancorp  Services  Limited,  an  Irish  corporation??   ("Ireland").  SFD's  and
Ireland's   activities  consist  primarily  of  financial  services,   including
financial advisory and transactional  support services.  Neither Ireland nor SFD
publicly  solicits  customer  deposits and both companies  employ other banks as
custodian of customer cash and securities  assets, and are therefore exempt from
the banking  regulations.  Both subsidiaries deal exclusively with institutional
clients in Europe.  The Company's  European  operations  are managed by Riccardo
Mortara,  president and chairman of the Company.  Mr.  Mortara has over 20 years
experience  in the Swiss  banking  industry  and he is the owner and operator of
Societe  Financiere  du Seujet,  a Swiss trust & portfolio  management  company.
Certain conflicts of interest do exist (See Conflicts...)

         SFD is owned 99.3% by the Company and 0.7% by Mr. Riccardo  Mortara,  a
managing  director  of SFD.  SFD was  capitalized  in  July,  1993 by a  capital
contribution of 427,000 Swiss Francs ("SFr") by the Company and SFr 3,000 by Mr.
Mortara.  If not for Mr. Mortara's  ownership of SFD, it would be a wholly owned
subsidiary  of the Company and under Swiss law the Company would be deemed to be
liable for all of SFD's  liabilities.  Societe  Financiere de Seujet,  S.A. is a
shareholder of the Company,  and its shares may be deemed  beneficially owned by
Mr. Mortara. Following the reorganization of the Company into financial services
and the establishment of the Company's  European  subsidiaries,  the Company has
been active in seeking merchant banking opportunities to invest and partner with
other financial services companies around the world.


Merchant Banking Activities

         In  September  of  1993,  the  Company  invested   US$921,000  with  an
organization  known as PEMP.  PEMP is a licensed  Canadian  financial  advisory,
insurance,  and fund management  group based in Montreal.  The Company  received
120,000 Class G Shares,  or 9%, of the holding company for the PEMP  operations,
known as  Gestion  PEMP,  Inc.,  as well as a royalty  to  receive a portion  of
certain fees from the  development  of the PEMP network.  The Class G shares are
not transferable  except in the event of a sale of the entire business.  In 1996
and 1995 the

                                                         2

<PAGE>



Company  received $0 and $35,017,  respectively,  in commissions from royalty in
the PEMP  Network.  No  proceeds  have been  received  in 1996  because  PEMP is
currently  reorganizing  its ownership  structure and it is anticipated that the
Company's  royalty right will be converted into redeemable  preferred  shares in
late 1997. The PEMP group currently has 5 offices and 6,000 customers throughout
Canada.

         In 1996, the Company helped fund PEMP's  expansion with the purchase of
4.65 million redeemable preferred shares of the senior holding Company,  Gestion
Guychar Inc. for $3.5  million  (Canadian  dollars).  The  preferred  shares are
non-voting, non-transferable, and non-participating and are redeemed as follows:
$1,250,000 on October 1, 2001, with an annual cumulative dividend of 4%, payable
on  October 1 of each  year;  $1,300,000  on  October  1,  2002,  with an annual
cumulative  dividend of 3.8%,  payable on October 1 of each year; and $2,100,000
on  October 1,  2003,  with an annual  cumulative  dividend  of 3.5%  payable on
October 1 of each year.  All  amounts  respecting  the  preferred  shares are in
Canadian  dollars.  The purchase price of the preferred shares in US dollars was
$3,132,012.

         On December 6, 1995, the Company acquired 1,967,1433 shares, or 51%, or
KSM Financial  Holdings,  Inc. ("KSM") for a purchase price of $250,000.  KSM, a
Nevada  corporation,  owns all of the capital stock of Global  Financial  Group,
Inc. ("Global"). The management of KSM and Global continued without change after
the  acquisition  by the Company.  Global is a broker deal  registered  with the
National Association of Securities Dealers, Inc. ("NASD"). Following the initial
acquisition,  the Company  invested  additional  sums and negotiated  with Kevin
Miller,  CEO of KSM and Global and the owner of the 49% remaining  stake in KSM,
to acquire his stake.  With the Company's  assistance,  Global quickly grew from
being an agency  brokerage  with offices in two US cities,  to a fully  licensed
market maker and  underwriter,  with offices in ten US cities.  The terms of the
acquisition  of the remaining  stake were  finalized in the early summer of 1996
and the  acquisition  was formally  closed on  September  6, 1996,  making KSM a
wholly owned subsidiary. The additional stake was acquired from Kevin Miller for
110,000 shares of Series B Convertible Preferred Shares of the Company.

         While the Company was pleased with Global's initial growth,  management
of the  subsidiaries  were reluctant to fully implement  changes or improvements
suggested by the Company,  and consistently failed to provide complete financial
information  to the Company.  The Company  believed that the  acquisition of the
remaining 49% stake, thus making KSM and Global wholly owned subsidiaries of the
Company,  would make KSM and Global  management fully  answerable.  This did not
prove to be the case.  Kevin  Miller  was  either  unwilling  or unable to fully
embrace  and  implement  the  suggested  direction  and  changes  favored by the
Company.  The Company favored revenue building strategies  including hiring more
brokers for each  office.  The Company also  favored  strategies  to have Global
enforce a basic dress code,  minimal work hours, and minimal  production levels.
The company  favored  increased  compliance and a policy of restricting  brokers
from  activities  that are not completely  understood and approved in advance by
Global's head of compliance.

         Replacing  Kevin Miller was an option but it was also noted that he had
substantial  loyalty among the Global workforce - who were  increasingly  seeing
the  Company as an  unwanted  and  meddlesome  outsider.  At the same time,  the
Company was having  difficulties  understanding the nature of Global's cash flow
needs as well as troubles  completing the Company's  public  reporting - largely
because of less than perfect cooperation from the subsidiaries.
 On November 1, 1996, the Company  agreed to rescind the  acquisition of KSM and
treat all  moneys  paid by the  Company  to or on behalf of KSM and  Global as a
loan, due and payable in 3 years with 10% interest paid annually.
 Kevin Miller signed the recission  agreement and wrote in two changes, a 5 year
term and 8%  interest,  which only he  initialed.  In the summer of 1997  during
routine audit  confirmations,  Kevin Miller informed the Company's  auditor that
KSM and Global has no intention of ever repaying the Company. In part due to Mr.
Miller's  comments  and in part for  fundamental  collectibility  concerns,  the
auditor  has caused the  Company to write its  investment  into  Global  down to
$250,000.  Because of Mr. Miller's current position and his failure to surrender
the  Company's  Series B  Convertible  Preferred  Shares that he  received,  the
Company is not certain of the legal  effect of the  recission or what the proper
terms are.  The Company  intends to recover the maximum  amount  possible and is
currently studying  litigation should a friendly  resolution not be forthcoming.
Unless  otherwise  stated in this filing,  all  information  herein reflects the
recission of the KSM/Global transaction.

                                                         3

<PAGE>




         In the second  half of 1997,  the  Company  purchased  7,345  shares of
Societe  Financiere Privee ("SFP"),  a Swiss bank for  US$4,148,293.  SFP offers
complete banking and portfolio management services and is publicly traded on the
Swiss Stock  Exchange.  The  Company's  ownership of SFP is equal to about 3% of
SFP's  outstanding  shares.  The Company is currently in discussion  with SFP to
co-develop and offer certain services in the United States.

Competition

         Competition in the Company's areas of focus come from international and
local banks,  brokerage firms, and other financial  institutions.  Most of these
competitors  have greater  experience and greater  financial  resources than the
Company.

Employees

         The Company has 5 employees,  including its  officers.  The officers of
the Company do not work  exclusively  for the Company and certain  conflicts  of
interest exist (See conflicts).

Regulations

         SFD is  subject  to  numerous  regulations  under the  Swiss  financial
companies statutes.  SFD is subject to annual audit requirements;  must maintain
an  adequate  relationship  between  its equity and its total  liabilities,  and
between its current assets and  liabilities;  and is prohibited from engaging in
money  laundering.  SFD is not  permitted to place  securities  with the general
public, but only with institutional  clients,  and does not hold custody of cash
for customers.  Commissions for securities  transactions are not regulated.  SFD
opens  accounts  for each  customer in an  authorized  bank,  outside of its own
balance sheet.

         Since SFD does not publicly  solicit  customer  deposits,  it is exempt
from many reporting and  regulatory  provisions  ordinarily  applicable to Swiss
financial companies.

         A financial  company like SFD which does not publicly  recommend itself
for the  acceptance  of deposits  can obtain the status of a  bank-like  finance
company  by  means  of a  decision  of  the  Banking  Commission.  Based  on the
activities  of a  finance  company,  the  Banking  Commission  is  empowered  to
interpret the applicability or  non-applicability  of certain  provisions of the
Swiss Banking Law.

         In  addition  to  the  general  regulations  applicable  to  all  Swiss
companies, bank-like companies, not publicly soliciting deposits, have to comply
with the following provisions:

         (1)Pursuant  to Article 7 of the Swiss Banking Law they are required to
submit to the National  Bank their annual  balance  sheet.  If the National Bank
requires it may also require detailed semi-annual balance sheets, as well as any
other  information  and  reports  which  it  may  consider  necessary,  such  in
connection with the credit and monetary policy.

         (2)To enable the Banking  Commission  to determine  whether a bank-like
finance company does not in fact publicly  solicit  deposits,  it is required to
submit to the Banking  Commission an annual balance sheet prepared in accordance
with the  Implementing  Ordinance to the Swiss  Banking Law, an annual report of
the board of directors,  and an auditor's  report prepared by an independent and
qualified auditing company.

         (3)Under  Article 8 of the Swiss Banking Law the prior  approval of the
Swiss  National  Bank is  required  for foreign  bond or share  issues of SFr 10
million  or  more  floated  in   Switzerland   and  for  credits  and  loans  to
non-residents in amounts exceeding this sum and with terms of longer than twelve
months.  The rule applies to the  placement  of medium term foreign  obligations
with a maturity of twelve  months or more,  if the amount  placed is expected to
total Sfr 3 million  within a year.  The Swiss  National  Bank is  empowered  to
refuse permission or to

                                                         4

<PAGE>



impose  conditions if deemed  necessary in the light of the Swiss franc exchange
rate,  the  interest  rate trend on the Swiss money and  capital  markets or the
overall national interest.

         In comparison  with banks,  the advantages of a finance company that is
subject to Articles 7 and 8 of the Swiss Banking Law only consist,  for example,
in the  fact  that  in the  exercise  of its  activity  it is not  bound  by the
provisions  of  the  Swiss  Banking  Law  concerning   ratios  between   equity,
liabilities and liquid funds. Moreover, such a finance company would be under no
restriction if, for example,  it proposed to grant substantial credit facilities
to a single  customer,  while real banks are  required  to  maintain an adequate
ratio to their own funds with regard to any single borrower.

         There are no other licensing or other requirements known to the Company
which would be required to enable it to compete effectively in the United States
and foreign markets.

Item 2.  Description of Property

         The  Company's  headquarters  in Geneva is furnished  by the  Company's
president at no cost.  The Company also has two office  leases in Palm  Springs,
California that expire in August of 1998, and February of 1999.

Item 3.  Legal Proceedings

         The Company is not currently involved in any litigation.  Litigation is
being contemplated by the Company against KSM Financial  Holdings,  Inc. ("KSM")
and  its  shareholder  Kevin  Miller.  KSM is the  holding  company  of an  NASD
registered  broker-dealer  under the name of Global  Financial  Group,  Inc.  In
December of 1995, the Company acquired a 51% interest in KSM for $250,000,  with
the intention of infusing  financial  and strategic  support to enable Global to
expand  its  operations.  The  Company  later  added to its  interest  in KSM by
acquiring the remaining common shares in KSM from Kevin Miller, who continued to
manage KSM and Global post-acquisition.  The Company provided its investment and
strategic   assistance  to  KSM  to  enable  Global  to  grow  from  an  initial
organization  that conducted  agency business in two cities,  to an organization
with complete  market-making and public underwriting  ability with offices in 10
cities.

         For the  time  that  KSM and  Global  were  subsidiaries,  the  Company
experienced  great  difficulty in securing  complete and open books and records.
The Company also developed doubts as to Miller's  effectiveness as the president
of Global,  with  regards to firm  profitability,  compliance,  and  leadership.
Despite the addition of several  branches and revenues,  KSM  frequently  sought
cash flow injections from the Company to meet its basic overhead.  These matters
caused the Company to become more  outspoken  and press for specific  changes in
Global - changes aimed at increasing revenues and compliance.  The Company found
Miller unwilling or unable to effect any significant  changes.  The only seeming
result of the Company's pushing for material changes was significant  resentment
from Miller and other employees of Global. The overwhelming  message received by
the  Company  from all of the above was that  Miller  and some of its  employees
viewed   Global's   relationship   with  the  Company  not  consistent   with  a
parent-subsidiary  structure but more as an  independent  partner in a voluntary
partnership.

         The  relationship  of the  individuals  of the  Company  and Global has
remained mostly  positive,  with perhaps one month of hostility when the Company
was hard  pressing for change.  When it became  evident to the Company that this
change would not happen  regardless  of the  Company's  percentage  ownership on
paper,  the  Company  faced a few  alternatives.  Rather than enter into a major
dispute  that may have  damaged  the future  viability  of KSM and  Global,  the
Company agreed to rescind the entire acquisition of KSM in exchange for treating
all  capital  infusions  into or on behalf of KSM and  Global as a loan from the
Company to KSM, with 10% interest and maturity in 3 years. Since the time of the
recission  agreement,  various actions and  developments  have taken place which
raise the concern of the Company.  Foremost  among these  actions is that Miller
informed  the auditor for the Company  that KSM and Global had no  intention  of
ever paying on the debt to the Company.  The Company is currently  contemplating
various  possibilities  to collect its debt and/or re-take  ownership of KSM and
Global,  and to recover any losses it may sustain in the process.  (See Merchant
Banking Activities)

                                                         5

<PAGE>





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

         Not applicable.



                                                         6

<PAGE>



                                                      PART II

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

         (a) Market Information

         Until  October  4, 1993 the  Company's  common  stock was  traded  only
intermittently  over-the-counter  in what is  commonly  referred to as the "pink
sheets." The Common Stock was listed  without  price  quotations  in 1992 and in
1993  through  October 4, 1993.  Thereafter,  the Common Stock was quoted in the
NASD's Electronic Bulletin Board, which reports the following quotations.  These
prices have been adjusted for a one-for-six  stock dividend to holders of record
as of November 1, 1996, payable November 15, 1996:
<TABLE>
<CAPTION>

                                                    Bid Price                       Ask Prices
                                             High              Low                High           Low

         Quarter Ended
         December 31, 1993
<S>                                          <C>                <C>               <C>            <C> 
         (commencing October 5, 1993)        6.25               2.92              7.50           3.33

         March 31, 1994                      5.83               3.75              6.67           4.58
         June 30, 1994                       5.42               3.75              6.67              4.58
         September 30, 1994                  5.42               3.33              6.67           6.25
         December 31, 1994                   5.83               4.58              6.25           6.04
         March 31, 1995                      5.83               2.50              6.46           5.00
         June 30, 1995                       4.79               3.33              6.46              5.00
         September 30, 1995                  2.50               1.67              5.83           3.33
         December 30, 1995                   4.37               2.50              5.00           4.58
         March 31, 1996                     4.695               1.25              5.00           2.92
         June 30, 1996                       2.71                .52              3.33              1.67
         September 30, 1996                  4.45               1.95              4.64           2.49
         December 31, 1996                   6.30               4.00              7.00           4.27
         March 31, 1997                      5.75               3.25              6.00           3.25
</TABLE>

         These prices  reflect  inter-dealer  prices,  without  retail  mark-up,
markdown or commission and may not represent  actual  transactions.  The Company
does not believe  that  trading of its common  stock  currently  is  necessarily
reflective of an established trading market.

         (b) Holders

         As of May 28,  1997,  there were  approximately  290 record  holders of
Company common stock. There are three holders of its Series A Preferred Stock.

         (c) Dividends

         The Company has not paid any dividends on its common stock. The Company
currently  intends to retain any earnings for use in its business and  therefore
does not anticipate paying cash dividends in the foreseeable  future. The Series
A Preferred  Stock has no dividend  rights and does not  restrict the payment of
dividends to holders of Common Stock.



                                                         7

<PAGE>



Item 6.  Management's Discussions and Analysis or Plan of Operations

         The following  discussion  regarding  the  financial  statements of the
Company  should be read in conjunction  with the financial  statements and notes
thereto included in this Report.

         The  following  Summary  Financial  Information  is  derived  from  the
financial statements of the Company.
<TABLE>
<CAPTION>

Income Statement Data


                                                                                   Year Ended December 31,
                                                                 1996           1995         1994         1993         1992
<S>                                                          <C>           <C>           <C>          <C>          <C>    
Revenues                                                     $  103,243    $  656,482    $  42,106    $    9,843   $     -0-
Net Income (Loss) - Continuing Operations                    $  (3,451)    $(349,773)    $(127,339)   $ (19,338)     (9,728)
Net Income (Loss) - Discontinued Operations            $     (520,257)$326,087
Net Income (Loss) Per Share                                  $     (.30)   $     (.35)        (.13)        (.08)        (.53)
Weighted Average
 Shares Outstanding                                           1,747,762     1,282,403      984,090       233,550      18,424


Balance Sheet Data

                                                                                     As of December 31,
                                                                 1996           1995         1994         1993         1992

Working capital                                              $    725,475  $ 2,181,582    $ 2,097,051  $ 1,309,393  $  3,221
Long Term Debt                                               $        -0-  $    41,770    $       -0-  $       -0-  $    -0-

Total Assets                                                 $  9,476,510  $ 4,857,460    $ 4,308,941  $ 3,808,696  $  3,221

Shareholders'
 Equity                                                      $  9,179,427  $ 3,446,447    $ 3,881,892  $ 3,032,264  $  3,221

</TABLE>

Results of Operations

         The  Company's  revenues  in  1996  were  primarily  derived  from  its
ownership of Gestion Pemp Network  shares and from one time  consulting  fees of
$64,509  received from a corporation  affiliated  with an officer.  Discontinued
operations  relate to the  operations  of KSM and Global  Financial  Group.  The
acquisition of Global Financial was mutually rescinded in November 1996.
 It was intended that Global would be the cornerstone of the Company's financial
services  network in the U.S.  Soon after the  acquisition  was  completed,  the
Company encountered  difficulty in obtaining monthly and quarterly financial and
other operating information regarding Global. In the view of management,  Global
was not  being  operated  in  conformity  with  the  Company's  strategic  plan.
Management  considered  various  plans  to  remedy  the  situation  and  finally
concluded  that  implementation  of its plans would lead to  excessive  employee
attrition at Global,  lessening the value of Global to the Company. The Board of
Directors  determined  that it would be in the best  interests of the Company to
rescind the  acquisition.  In the  recision  agreement,  KSM agreed to repay all
amounts advanced to it or on its behalf.  However, since Global has informed the
Company's  auditor  that it won't pay anything  and total  collectibility  is in
doubt,  the company has written down this  receivable to $250,000.  See Notes 19
and 20 to Consolidated Financial Statements.

         General  and  administrative  expenses  were more than double in fiscal
1996,  compared to 1995,  primarily  because the Company  commenced  significant
operations  only in the latter half of fiscal 1995.  Other income in fiscal 1996
was $980,257, compared to expense of $349,773 in fiscal 1995. The difference was
due primarily to foreign currency  transaction gains and losses, which were more
favorable  in  fiscal  1996 and a  significant  increase  in gain in  marketable
securities.  Future  other  income  (loss) is  difficult  to predict  due to the
fluctuating  nature of the value of foreign  currencies and  securities  prices.
There can be no assurance that the Societe Financiere Privee or Gestion Guychar,
Inc. securities can be resold or redeemed, respectively, at any given price.

                                                               8

<PAGE>




Investments

         In 1996 the Company  entered into a strategic  investment in the common
shares of  Societe  Financial  Privee,  Geneva,  a Swiss  financial  institution
involved in portfolio management and financial services.  The Company intends to
market SFP Geneva's  services in the United  States.  A total of 7,345 shares of
SFP (constituting 3% of SFP's outstanding shares) were purchased for $4,148,293.

         In 1996 the Company purchased 4.65 million redeemable  preferred shares
of Gestion  Guychar,  Inc.,  which is a related company to Gestion Pemp Network.
The  redeemable  preferred  stock was  purchased  for  investment.  See Merchant
Banking Activities.

         The Company  purchased  120,000  Class G shares of Gestion  PEMP,  Inc.
("PEMP") and Gestion PEMP Network,  a multi-level  marketing  system of PEMP for
$921,000  in  September  1993.  The  shares  are  held by a  custodian  bank not
affiliated  with the Company.  The Class G shares are not  transferable,  except
that in the event  Gestion  Guychar  (PEMP)  Inc.  sells its Class G shares  the
Company  shall have the right to sell its shares at the same price.  The Class G
shareholders are also obligated to vote in favor of any proposed public offering
of PEMP. In 1996 and 1995 the Company  received $0 and $35,017,  respectively in
commissions  from the  ownership of Gestion PEMP Network.  See Merchant  Banking
Activities.

Liquidity and Capital Resources

         The  Company  has  generated  cash for its  operations  and  investment
through  operations  and  private  placements,  and  believes  that such  funds,
together with current financial resources,  are sufficient to support operations
over the next 12  months.  The  Company  has not,  however,  adopted  any formal
budget. No material capital expenditures are contemplated at this time.

Item 7.  Financial Statements and Supplementary Data

         Financial Statements

         The following financial statements are included herein:

                  Independent Auditors' Report
                  Consolidated Balance Sheet at December 31, 1996 and 1995
                  Consolidated  Statement  of  Operations  for the  years  ended
                  December   31,  1996  and  1995   Consolidated   Statement  of
                  Shareholders' Equity Consolidated  Statement of Cash Flows for
                  the  years  ended   December   31,  1996  and  1995  Notes  to
                  Consolidated Financial Statements

Item 8.  Changes in and Disagreements with Accountants on Accounting and 
Financial Disclosure

         The  Registrant's  former  independent  accountant  Terrence  J. Dunne,
C.P.A.  ("Dunne") resigned from that capacity on December 6, 1995. The report by
Dunne on the  financial  statements  of the  Registrant  dated  June  27,  1995,
including  balance sheets as of December 31, 1994 and 1993 and the statements of
operations, cash flows and statement of stockholders' equity for the years ended
December  31,  1994,  1993 and 1992 did not  contain  an  adverse  opinion  or a
disclaimer  of opinion,  or was qualified or modified as to  uncertainty,  audit
scope or  accounting  principles.  During  the period  covered by the  financial
statements through the date of resignation of the former accountant,  there were
no  disagreements  with  the  former  accountant  on any  matter  of  accounting
principles or practices,  financial statement  disclosure,  or auditing scope or
procedure.  A letter from the former  independent  accountant for the Registrant
was  attached  as an Exhibit to a Form 8-K dated  December  6, 1995 in which the
resignation  of Mr.  Dunne was  reported.  On February  28, 1996 the  Registrant
engaged  Silverman,  Olson,  Thorvilson & Kaufmann  Ltd. as its new  independent
accountant.

                                                               9

<PAGE>



                                                            PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
 Compliance with Section 16(a) of the Exchange Act.

         The members of the Board of  Directors  of the Company  serve until the
next  annual  meeting  of  stockholders,  or until  their  successors  have been
elected.  Information as to the directors and executive  officers of the Company
is as follows. No annual meeting has been set.

         Riccardo Mortara           President and Director
         Dempsey K. Mork                     Chief Financial Officer, Secretary
  and Director

Riccardo Mortara

         Riccardo  Mortara,  age 49, has been  President  and a Director  of the
Company  since  June  1993.  Mr.  Mortara is the  managing  director  of Societe
Financiere du Seujet,  Geneva,  Switzerland,  a company which provides portfolio
management  and financial  services to banks,  corporations,  and high net-worth
individuals primarily in Europe. Between the years of 1984 and 1991, Mr. Mortara
was a director  of a Geneva  private  portfolio  management  company in which he
still  is a  co-owner.  Mr.  Mortara  currently  serves  on the  boards  of five
financial services companies.

Dempsey K. Mork

         Dempsey K. Mork, age 54, has been the Secretary/Treasurer and a 
Director of the Company since December 1992 and
was President from December 1992 to June 1993.    Mr. Mork is also president and
 a director of A.G. Holdings, Inc., Gaensel
Gold Mines, Inc. and Magellan Capital Corporation.    Mr. Mork's background 
includes consulting experience in international
transactional work.


Item 10. Executive Compensation

         The following  table sets forth the cash  compensation of the Company's
executive officers and directors during each of the last three fiscal years. The
remuneration  described in the table does not include the cost to the Company of
benefits  furnished  to the named  executive  officers,  including  automobiles,
premiums for health  insurance and other benefits  provided to such  individuals
that are extended in connection with the conduct of the Company's business.  The
value  of such  benefits  cannot  be  precisely  determined,  but the  executive
officers named below did not receive other  compensation in excess of the lesser
of $50,000 or 10% of such officer's cash compensation.


                                                               10

<PAGE>

<TABLE>
<CAPTION>


                                                   Summary Compensation Table

                       ANNUAL COMPENSATION                                        LONG TERM COMPENSATION
    Name and                                                   Other Annual        Awards       Payouts        All
    Principal Position                 Year        Salary          Bonus       Compensation                                    Other
                                                                              Restricted         Options/    LTIP
                                                                              Stock ($)SARs(#)   Payouts ($)


<S>                      <C>                         <C>      <C>                 <C>      <C>         <C>  <C>                     
 Riccardo Mortara        1996(1)                     0        60,000              0        0           0    0 
President and Director
                           1995(1)                           0           60,000   0         0          0              0 
                           1994(1)                       0                                97,417       0          0

 Dempsey K. Mork           1996(1)                           0           60,000   0         0          0              0
 Chief Financial Officer,  1995(1)                           0           60,000   0         0          0              0   
 Secretary and
Director                   1994(1)                   0       0              0              97,417          0          0

</TABLE>

(1)  The above table does not include fringe  benefits since such amount is less
     than  $25,000  for each  person,  and does not  include  23,333  shares  of
     restricted  stock  awarded to each of the named  persons  for  services  in
     fiscal 1994. The Board of Directors  awarded  $120,000 to Messrs.  Mork and
     Mortara  for  services  in fiscal  1995 but the Company has not paid to Mr.
     Mork the $60,000.  The Company issued 29,165 shares to Mr. Mortara for such
     amount.

Options Granted in Fiscal 1996

     There were no options granted in fiscal 1996.

Option Exercises and Year-end Value Table

    The following  table contains  information  concerning the exercise of stock
options and employment  related  options and  information  in unexercised  stock
options held as of December 31, 1996 by the named executive officers:
<TABLE>
<CAPTION>

                                                                                             Value of Unexercised
                                                                                             In-the-Money Options
                                                            Number of Unexercised                     at
                             Shares                           Options & Warrants                December 31, 1996
                           Acquired on       Value
                            Exercise       Realized(1)   Exercisable     NonExercisable          Exercisable(2)
<S>                              <C>              <C>        <C>                   <C>            <C>          
Riccardo Mortara                -0-        $     -0-         97,417                0              $     235,749
Dempsey K. Mork                 -0-        $     -0-         97,417                0              $     235,749



</TABLE>
(1)  Market Value at time of exercise less exercise price.
(2)  The average of the closing bid and ask prices of the Common Stock at
 December 30, 1996 was $4.50.  Value equals the
     difference between market value and exercise price.

     In fiscal 1994,  the Company  issued 23,333 shares to each of Messrs.  Mork
and Mortara for  services  rendered.  The shares were valued at $1.83 per share,
and the  number  of  shares  was not based  upon the  hours of  services  to the
Company.  In April 1994 the Company issued options to purchase 200,000 Shares at
$2.08 per share, exercisable until April, 2004, including 97,417 options to each
of Messrs. Mork and Mortara. The options were not issued under the 1993 Plan.

     Except as noted  above,  the Company  has no  agreement  or  understanding,
express or implied,  with any officer or director, or any other person regarding
employment  with the  Company or  compensation  for  services.  Compensation  of
officers and directors is determined by the Company's  board of directors and is
not subject to shareholder approval.

                                                               11

<PAGE>



Stock Option Plan

     The Company has adopted the 1993 Stock Option Plan (the "Plan") to offer an
incentive based compensation system to employees,  officers and directors and to
outside consultants or advisors,  and, as is frequently the practice,  including
to the professional corporations of such consultants or advisors.

     A total of 800,000 shares are authorized for issuance under the Plan. As of
December 31, 1994, no options had been granted  under the Plan.  The Company may
increase the number of shares authorized for issuance under the Plan or may make
other material modifications to the Plan without shareholder approval.  However,
no amendment may change the existing rights of any option holder.

     Any shares which are subject to an award but are not used because the terms
and  conditions  of the  award  are not met,  or any  shares  which  are used by
participants to pay all or part of the purchase price of any option may again be
used for awards  under the Plan.  However,  shares with respect to which a stock
appreciation right has been exercised may not again be made subject to an award.

     In the  discretion  of a  committee  comprised  of  non-employee  directors
outside consultants or advisors,  including to the professional  corporations of
such consultants or advisors (the  "Committee"),  directors,  officers,  and key
employees of the Company and its  subsidiaries  or  employees of companies  with
which the Company does business  become  participants in the Plan upon receiving
grants in the form of stock options or restricted  stock.  Pending  formation of
the Committee, the Board of Directors is acting as the Committee.

     Stock  options may be granted as  non-qualified  stock options or incentive
stock  options,  but incentive  stock options may not be granted at a price less
than 100% of the fair market value of the stock as of the date of grant (110% as
to any 10%  shareholder at the time of grant);  non-qualified  stock options may
not be granted at a price less than 85% of fair market  value of the stock as of
the  date of  grant.  Restricted  stock  may not be  granted  under  the Plan in
connection with incentive stock options.

     Stock  options  may be  exercised  during  a  period  of time  fixed by the
Committee except that no stock option may be exercised more than ten years after
the date of grant or three years after death or disability,  whichever is later.
In the discretion of the Committee, payment of the purchase price for the shares
of stock  acquired  through the  exercise of a stock option may be made in cash,
shares of the Company's Common Stock or by delivery or recourse promissory notes
or a combination  of notes,  cash and shares of the Company's  common stock or a
combination  thereof.  Incentive  stock options may only be issued to directors,
officers and employees of the Company.

     Stock  options  may be  granted  under  the Plan may  include  the right to
acquire an Accelerated Ownership  Non-Qualified Stock Option ("AO"). All options
granted to date have included the "AO" feature.  If an option grant contains the
AO feature and if a  participant  pays all or part of the purchase  price of the
option with shares of the  Company's  common  stock,  then upon  exercise of the
option the participant is granted an AO to purchase, at the fair market value as
of the date of the AO grant,  the number of shares of common  stock the  Company
equal  to the sum of the  number  of whole  shares  used by the  participant  in
payment of the purchase price and the number of whole shares,  if any,  withheld
by the Company as payment for withholding  taxes. An AO may be exercised between
the date of grant and the date of expiration, which will be the same as the date
of expiration of the option to which the AO is related.

     Stock  appreciation  rights  and/or  restricted  stock  may be  granted  in
conjunction  with, or may be unrelated to stock  options.  A stock  appreciation
right entitles a participant to receive a payment,  in cash or common stock or a
combination  thereof,  in an amount equal to the excess of the fair market value
of the stock at the time of exercise  over the fair market  value as of the date
of grant.  Stock  appreciation  rights may be exercised  during a period of time
fixed by the  Committee not to exceed ten years after the date of grant or three
years after death or disability,  whichever is later.  Restricted stock requires
the  recipient  to  continue  in service as an  officer,  director,  employee or
consultant  for a fixed period of time for  ownership of the shares to vest.  If
restricted  shares or stock  appreciation  rights  are  issued  in  tandem  with
options,  the  restricted  stock or stock  appreciation  right is canceled  upon
exercise of the option and the option will  likewise  terminate  upon vesting of
the restricted shares.

     Directors currently receive no compensation for their duties as directors.

     Compliance with Section 16


                                                               12

<PAGE>



     Not Applicable.

Item 11.      Security Ownership of Certain Beneficial Owners and Management

     Principal Shareholders. The following table sets forth information relating
to the  beneficial  ownership  of  Company  securities  by  executive  officers,
directors  and those  persons  beneficially  holding more than 5% of the Company
capital stock,  based on 3,394,668  common shares  outstanding and 1,500 Class A
Preferred Shares outstanding at May 27, 1997.
<TABLE>
<CAPTION>

                                            Name and Address                      Amount and Nature
                                              of Beneficial                         of Beneficial                Percent
  Title of Class                                Ownership                             Ownership                 of Class

<S>                                      <C>                                          <C>                           <C> 
Common Stock                             Dempsey K. Mork(2)                           137,585                       3.9%
                                         74900 Highway 111
                                         Suite 121
                                         Indian Wells, CA 92210

                                         Riccardo Mortara(3)                          130,145                       3.7%
                                         14 Quai du Seujet
                                         CH-1201 Geneva
                                         Switzerland


Series A
  Preferred
  Stock(1)                               Dempsey K. Mork                                  500                      33.3%
                                         74900 Highway 111
                                         Suite 121
                                         Indian Wells, CA 92210


                                         Riccardo Mortara                                 500                      33.3%
                                         14 Quai du Seujet
                                         CH-1201 Geneva
                                         Switzerland

                                         Parley International, Inc.(4)                    500                      33.3%

All directors and officers and
as a Group (3 persons)

Common Stock                                                                          267,730                       7.5%
Series A Preferred Stock                                                                1,500                       100%
</TABLE>

(1)      The holders of the  beneficial  ownership  of Series A Preferred  Stock
         have the right, voting unanimously, to collectively elect two-thirds of
         the Board of Directors.
(2)      Includes options to purchase 97,417 shares, as well as shares held in
 the name of a corporation controlled
         by Mr. Mork.
(3)      Includes 10,000 Shares held by the spouse of Mr. Mortara of which Mr.
  Mortara disclaims beneficial
         ownership, and options to purchase 97,417 Shares.
(4)     The controlling shareholder of Parley International is Terrence Ramsden.


Item 12. Certain Relationships and Related Transactions

         Certain  conflicts  of  interest  now exist and will  continue to exist
between the Company and its officers and directors due to the fact that each has
other business interests to which he devotes his primary attention. Each officer

                                                        13

<PAGE>



and director may continue to do so notwithstanding the fact that management time
should be  devoted to the  business  of the  Company.  No  procedures  have been
adopted to resolve such conflicts of interest.

         On November 4, 1994 Resource Bank & Trust loaned $35,000 to theCompany.
  This note is due November
1999 and interest is payable monthly at the rate of 10.5%

         The Company issued 23,333, 23,333 and 17,500 shares to Dempsey K. Mork,
Riccardo Mortara, and Jehu Hand in December 1994 for services rendered valued at
$1.83 per share as officers of the Company.

         The Company issued 40,833 shares to Societe Financiere du Seujet, SA on
August 15, 1995 in  reimbursement  of out of pocket expenses for travel costs of
$189,000 incurred on behalf of the Company.  The shares were valued at the price
of a recent placement of shares at $5.00 less the commission of $.50 which would
have been paid if the Company had sold the shares to a third party.  Mr. Mortara
is a principal of Societe Financiere du Seujet.

         On  February  27,  1997 the Company  issued  22,728  shares to Riccardo
Mortara in reimbursement of costs and expenses  incurred by him on behalf of the
Company in the amount of $90,912. The shares were valued at $4.00 per share, the
current trading price of the Common Stock.

                                                        14

<PAGE>



                                                      PART IV

Item 13. Exhibits


                                                                              
    Exhibit No.            Document Description     


      2.   Plan of acquisition, reorganization, arrangement, liquidation or
 succession.

           2.1.  Share Purchase Agreement between KSM Financial Holdings and the
 Company.(3)

           2.2   Recission Agreement with respect to the trasaction described i
 Exhibit 2.1(4)

      3.   Articles of Incorporation and Bylaws

           3.1             Articles of Incorporation, (1)
           3.2             Bylaws (1)
           3.3             Amendment to Articles of Incorporation changing name
 to
                           Development Bancorp, Ltd.(1)
           3.4             Amendment to Articles of Incorporation authorizing 
Series A
                           Preferred Stock as revised. (5)
           3.5             Certificate of Designation for Series B Convertible
 Preferred Stock(2)

23.   Consents of Auditors.  Consent of Silverman, Olson, Thorvilson & Kaufman,
 Ltd.(5)

21.   Subsidiaries.  The Company's subsidiary, Societe Financiere de 
Distribution, Geneva, SA is incorporated in
Switzerland.  The subsidiary Development Corp. Services Limited is incorporated
 in Ireland; KSM Holding
Corporation is incorporated in Minnesota; and Global Financial Group, a
 subsidiary of KSM Holding Corporation,
is a Colorado corporation.

--------------------------------
(1)   Incorporated by reference to the Company's registration statement on
 Form 10-SB, file no. 0-22934.
(2)   Incorporated by reference to the Company's Annual Report on Form 10-KSB 
for the year ended December 31,
      1995.
(3)   Incorporated by reference to the Company's Current Report on Form 8-K 
dated December 6, 1995.
(4)   Incorporated by reference to the Company's Current Report on Form 8-K 
dated November 1, 1996.
(5)   Filed herewith.

                                                        15

<PAGE>



                                                    SIGNATURES


         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant  caused this  Registration  Statement to be
signed on its behalf by the undersigned thereunto duly authorized.


Dated:    June 29, 1997                               DEVELOPMENT BANCORP, LTD.



                                                        By:/s/ Dempsey K. Mork
                                                              Dempsey K. Mork
                                                             Secretary/Treasurer

          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
Registrant and in the capacities indicated on June 29, 1997.



By:/s/ Riccardo Mortara
   Riccardo Mortara
   President (principal executive officer) and Director



By:/s/ Dempsey K. Mork
   Dempsey K. Mork
   Secretary/Treasurer (principal accounting and financial officer)
   and Director


                                                        16

<PAGE>



                                             DEVELOPMENT BANCORP, LTD.

                                  INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                  For the Years Ended December 31, 1996 and 1995








<TABLE>
<CAPTION>

<S>                                                                                                          <C>
Independent Auditors' Report                                                                                 1


Consolidated Balance Sheet                                                                                   2


Consolidated Statement of Operations                                                                         3


Consolidated Statement of Shareholders' Equity                                                               4


Consolidated Statement of Cash Flows                                                                     5-6


Notes to Consolidated Financial Statements                                                              7-20




                                                        17

<PAGE>








</TABLE>







                                         INDEPENDENT AUDITORS' REPORT



Board of Directors and Shareholders
Development Bancorp, Ltd.
Indian Wells, California


We have  audited the  accompanying  consolidated  balance  sheet of  Development
Bancorp,  Ltd. as of December  31, 1996 and 1995,  and the related  consolidated
statements of operations, shareholders' equity and cash flows for the years then
ended.  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 provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of Development Bancorp,
Ltd. as of December 31, 1996 and 1995,  and the results of their  operations and
their cash flows for the years then ended in conformity with generally  accepted
accounting principles.




SILVERMAN OLSON THORVILSON & KAUFMANN LTD
CERTIFIED PUBLIC ACCOUNTANTS
Minneapolis, Minnesota

June 6, 1997


                                                     
<PAGE>
<TABLE>
<CAPTION>



                                                 DEVELOPMENT BANCORP, LTD.
                                                CONSOLIDATED BALANCE SHEET
                                                December 31, 1996 and 1995


           ASSETS                                                                       1996               1995
Current assets:
<S>                                                                              <C>                  <C>       
    Cash and equivalents                                                         $        34,139      $1,518,327
    Commissions receivable                                                                     -           244,874
    Other receivables                                                                      11,088            92,728
    Marketable securities (Note 2)                                                       661,066        1,572,608
    Loan receivable - related party (Note 3)                                             303,098                 -
    Other current assets                                                                   13,167          122,288

               Total current assets                                                   1,022,558         3,550,825

Investments (Note 4)                                                                  8,165,123            888,381
Contract receivable - related party (Note 5)                                             250,000                 -
Property and equipment, net (Note 6)                                                       38,829          139,319
Intangible assets, net (Note 7)                                                                -            278,935

               Total assets                                                      $   9,476,510        $4,857,460

           LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
    Checks drawn in excess of available funds                                    $      196,826       $         -
    Note payable - bank (Note 8)                                                               -             50,000
    Notes payable - related parties (Note 9)                                                   -            304,875
    Accounts payable                                                                       46,034          482,467
    Accrued payroll and commissions                                                        54,223          253,587
    Other accrued liabilities                                                                  -            251,433
    Current portion of long-term debt (Note 10)                                                -              26,881

               Total current liabilities                                                  297,083       1,369,243

Long-term debt (Note 10)                                                                        -                6,770
Long-term debt - related party (Note 11)                                                        -              35,000

               Total liabilities                                                          297,083       1,411,013

Commitments and contingencies (Note 12)                                                        -                  -

Shareholders' equity:
    Class A preferred stock, no par value (Note 13)                                           1,000            1,000
    Class B convertible preferred stock, no par value (Note 13)                                 -            165,000
    Common stock, no par value; 50,000,000 shares
        authorized, 3,317,440 and 1,211,606 shares
        issued and outstanding, respectively (Note 14)                               12,133,685         3,672,496
    Accumulated deficit                                                           (   3,110,258)       (   795,771)
    Translation adjustment                                                                155,000          403,722

               Total shareholders' equity                                              9,179,427        3,446,447

               Total liabilities and shareholders' equity                        $    9,476,510       $4,857,460
</TABLE>

                                          Theaccompanying  notes are an integral
                                             part of the financial statements.


                                                            
<PAGE>


<TABLE>
<CAPTION>

                                                 DEVELOPMENT BANCORP, LTD.

                                           CONSOLIDATED STATEMENT OF OPERATIONS

                                      For the Years Ended December 31, 1996 and 1995



                                                                                         1996                1995
Revenues:
<S>                                                                              <C>                  <C>          
    Commissions and consulting fees                                              $        38,734      $      39,952
    Consulting fees - related party (Note 15)                                              64,509                 -

               Total revenues                                                            103,243              39,952

General and administrative expenses                                                   1,087,041             513,880

               Loss from operations                                              (      983,798)      (     473,928)

Other income (expense):
    Gain on sale of marketable securities                                                771,721            570,795
    Unrealized gain (loss) on marketable
        securities portfolio                                                     (             946)           61,112
    Interest income                                                                        49,492             41,480
    Interest expense                                                                           -      (           17)
    Foreign currency transaction gain (loss) (Note 16)                                   159,990      (     323,597)

           Total other income (expense)                                                  980,257      (     349,773)

               Loss from continuing operations                                   (           3,541)   (     124,155)

Loss from discontinued operations (Note 20)                                      (       520,257)     (     326,087)

               Net loss                                                          $(     523,798)      $(   450,242)


Per share information (Note 14):

    Loss from continuing operations                                              $            -        $(           .10)
    Loss from discontinued operations                                            (               .30) (             .25)

               Net loss per share                                                $(             .30)  $(           .35)

    Weighted average number
        of common shares outstanding                                                  1,747,762          1,282,403




</TABLE>







                                          Theaccompanying  notes are an integral
                                             part of the financial statements.

                                                            

<PAGE>
<TABLE>
<CAPTION>




                                                     DEVELOPMENT BANCORP, LTD.

                                                 STATEMENT OF SHAREHOLDERS' EQUITY

                                           For the Years Ended December 31, 1996 and 1995


                                      Class A and B                                       Accu-       Trans-                 Total
                                       Preferred Stock              Common Stock         mulated    lation        Shareholders'
                                        Shares          Amount     Shares      Amount    Deficit      Adjustment     Equity
<S>                                        <C>          <C>        <C>         <C>          <C>       <C>             <C>        
Balances at December 31, 1994 (Note 14)    1,000        $1,000     1,275,773   $4,081,496   $(345,529)$ 144,925       $3,881,892
Issuance of common stock for cash        -        -                   58,333      270,000          -          -          270,000
Issuance of common stock for services             -              -    52,500      121,000          -             -       121,000
Issuance of preferred stock in acquisition
    of KSM Holding Corporation (Note 19)  110,000      165,000  -          -          -                     -            165,000
Redemption of common stock in sale
    of investments (Note 4)                      -        -         (175,000)    (800,000)          -          -        (800,000)
Equity adjustment from foreign currency translation                       -  -       -          -       258,797          258,797
Net loss                                 -        -          -            -                  (450,242)         -        (450,242)
Balances at December 31, 1995 (Note 14)   111,000      166,000     1,211,606    3,672,496    (795,771)  403,722        3,446,447

Issuance of common stock for cash        -        -                2,006,667    6,466,500          -          -        6,466,500
Issuance of common stock for services             -              -    99,167      204,000          -             -       204,000
Issuance of common stock dividend (Note 14)                               -     1,790,689  (1,790,689)                            
Redemption of preferred sock in rescission of KSM
    Holding Corporation acquisition (Note 20)
                                         (110,000)    (165,000)      -            -          -          -               (165,000)
Equity adjustment from foreign currency translation
                                         -    -   -          -            -                            (248,722)        (248,722)
Net loss                                 -    -   -          -                   (523,798)         -                    (523,798)

Balance at December 31, 1996
                                            1,000       $1,000     3,317,440  $12,133,685 $ 3,110,258) $155,000      $ 9,179,427


</TABLE>







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




                                                                

<PAGE>


<TABLE>
<CAPTION>


                                                 DEVELOPMENT BANCORP, LTD.

                                           CONSOLIDATED STATEMENT OF CASH FLOWS

                                      For the Years Ended December 31, 1996 and 1995


                                                                                       1996                 1995
Cash flows from operating activities:
<S>                                                                              <C>                  <C>     
    Net loss                                                                     $(    523,798)       $(  450,242)
    Adjustments to reconcile net loss to net
        cash provided by (used in) operating activities:
           Depreciation and amortization                                                  20,990             22,064
           Common stock issued for services                                             204,000            121,000
           Non-cash gain on sale of investment                                                -        (       9,572)
           Unrealized (gain) loss on marketable securities                                     946     (     62,868)
           Foreign currency transaction (gain) loss                                     204,325            106,032
           Loss from discontinued operations                                            582,457                  -
        (Increase) decrease in assets:
           Commissions receivable                                                       170,632        (   200,067)
           Other receivables                                                      (       90,852)      (     32,195)
           Marketable securities                                                        395,065        (   632,107)
           Other current assets                                                           80,189       (     59,305)
        Increase (decrease) in liabilities:
           Checks drawn in excess of available funds                                    196,826                  -
           Accounts payable                                                       (     368,216)           327,972
           Accrued liabilities                                                    (       13,953)          350,011

               Net cash provided by (used in) operating activities                       858,611       (   519,277)

Cash flows from investing activities:
     Increase in loan and contract receivable - related party                     (   1,061,568)                 -
    Purchase of investments                                                       (   7,348,293)                 -
    Increase in intangible assets                                                              -       (     52,482)
    Purchase of property and equipment                                            (        46,619)     (     41,962)

               Net cash used in investing activities                              (   8,456,480)       (     94,444)

Cash flows from financing activities:
    Repayment of notes payable - related parties                                  (        76,544)     (   112,094)
    Repayment of long-term debt                                                   (        27,553)     (       5,101)
    Repayment of long-term debt - related party                                                -       (       5,000)
    Proceeds from issuance of common stock                                            6,466,500            270,000

               Net cash provided by financing activities                              6,362,403            147,805

Effect of exchange rate changes on cash                                           (      248,722)          258,797

Decrease in cash and equivalents                                                  (   1,484,188)       (   207,119)

Cash and equivalents - beginning of year                                               1,518,327        1,725,446

Cash and equivalents - end of year                                               $        34,139      $1,518,327



</TABLE>


                                                            

<PAGE>



                                          Theaccompanying  notes are an integral
                                             part of the financial statements.
<TABLE>
<CAPTION>

                                                 DEVELOPMENT BANCORP, LTD.

                                           CONSOLIDATED STATEMENT OF CASH FLOWS

                                      For the Years Ended December 31, 1996 and 1995



                                                                                      1996                 1995

<S>                                                                              <C>                      <C>  
Supplemental disclosure of cash flow information:

    Cash paid during the year for interest                                       $      6,619         $     11,057
</TABLE>

Supplemental schedule of non-cash investing and financing activities:

    During 1996:
        The Company  issued $14,413 of long-term debt in exchange for $14,413 of
property and equipment.

        The Company recorded $132,774 of non-cash foreign currency exchange gain
on marketable securities.

        The Company  issued  477,517 shares of its common stock as a dividend to
shareholders valued at $1,790,689.

        The Company  rescinded its  acquisition  of KSM. In connection  with the
        rescission,  the  Company  received  a  contract  receivable  valued  at
        $250,000 and redeemed  110,000  shares of its preferred  stock valued at
        $165,000 in exchange for returning  $95,661 of KSM net assets,  the 1996
        write-off of $622,861 of KSM advances and $278,935 of intangible assets,
        resulting in a $582,457 loss on disposal of the business (Note 20).

    During 1995:

        The  Company  redeemed  175,000  shares of its  common  stock  valued at
        $800,000 in the sale of oil and gas investments valued at $790,428 (Note
        4).

        In connection  with the  acquisition  of KSM, the Company issued 110,000
        shares of  preferred  stock  valued at $165,000 in exchange for assuming
        various liabilities and various non-cash assets (Note 19).

















                                          Theaccompanying  notes are an integral
                                             part of the financial statements.


                                                            F-6

<PAGE>




                              DEVELOPMENT BANCORP, LTD.

                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      For the Years Ended December 31, 1996 and 1995



Note 1:           Organization and Significant Accounting Policies

                  Nature of Organization:

                      Development Bancorp, Ltd. ("Development" or "the Company")
 is a holding company
                      organized in the state of Washington for the purpose of 
providing international investment
                      banking services through its majority-owned subsidiaries: 
 Development Corp Services Limited
                      (Ireland - 99.93% owned), SFD Societe Financiere De 
 Distribution Geneve SA (Switzerland -
                       99.3% owned), and KSM Holding Corporation ("KSM") (United
                      States - 99.93%  owned) for the period from  November  14,
                      1995 to November 1, 1996 (Notes 19 and 20).  KSM owns 100%
                      of Global Financial Group ("Global") (United States).

                  Basis of Presentation:

                      For the year ended  December  31, 1996,  the  consolidated
                      financial  statements  include the accounts of Development
                      Bancorp,   Ltd.   and   its   wholly-owned   subsidiaries,
                      Development   Corp   Services   Limited  and  SFD  Societe
                      Financiere  De  Distribution  Geneve SA,  and KSM  Holding
                      Corporation  for  the  period  from  January  1,  1996  to
                      November  1, 1996 (Note 20).  For the year ended  December
                      31, 1995, the consolidated  financial  statements  include
                      the  accounts  of  Development   Bancorp,   Ltd.  and  its
                      wholly-owned   subsidiaries,   Development  Corp  Services
                      Limited, SFD Societe Financiere De Distribution Geneve SA,
                      and  KSM   Holding   Corporation   for  the  period   from
                      acquisition (November 14, 1995) to December 31, 1995 (Note
                      19).

                      All  references  to  "the  Company"  in  these   financial
                      statements   relate  to  the  consolidated   entity.   All
                      significant  intercompany  accounts and  transactions  are
                      eliminated in consolidation.

                  Cash and Equivalents:

                      Cash  equivalents  include all highly  liquid  investments
                      purchased with a maturity of three months or less.

                  Marketable Securities:

                      Marketable  securities  consist of various equity and debt
                      securities  and are stated at current  market  value.  All
                      equity securities are considered  "trading" securities and
                      all debt  securities are  considered  "available for sale"
                      under the provisions of Statement of Financial  Accounting
                      Standards No. 115,  Accounting and Certain  Investments in
                      Debt  and  Equity  Securities  (SFAS  115).   Accordingly,
                      unrealized  gains  and  losses on  equity  securities  are
                      reflected in operations,  and unrealized  gains and losses
                      on debt securities are credited or charged to "translation
                      adjustment" on the accompanying balance sheet.

                      Market value is  determined  by the quoted market price as
                      of the balance  sheet date.  Net realized  gains or losses
                      are determined on the specific identification cost method.



                                                 DEVELOPMENT BANCORP, LTD.

                                        NOTES TO CONSOLIDATED FINANCIAL 
STATEMENTS


                                                            F-7

<PAGE>



                                 For the Years Ended December 31, 1996 and 1995



Note 1:           Organization and Significant Accounting Policies (Continued)

                  Investments:

                      Investments  consist of various equity ownership interests
                      in    privately-held    corporations   or    partnerships.
                      Investments  are stated at cost,  as adjusted  for foreign
                      currency translation gains or losses, if any.

                  Property and Equipment:

                      Property and equipment is stated at cost.  Depreciation is
                      computed using  straight-line and accelerated methods over
                      the  estimated  five to  seven  year  useful  lives of the
                      assets.

                      Expenditures    for   additions   and   improvements   are
                      capitalized, while repairs and maintenance are expensed as
                      incurred.

                  Intangible Assets:

                      Intangible  assets  consist of the costs of  broker/dealer
                      network development and related customer lists acquired in
                      the acquisition of KSM Holding  Corporation.  These assets
                      are being  amortized  on a  straight-line  basis over five
                      years.

                  Income Taxes:

                      Income   taxes  are   provided  for  the  tax  effects  of
                      transactions  reported  in the  financial  statements  and
                      consist of taxes  currently  due plus deferred  taxes,  if
                      any.  Deferred  taxes  represent  the net tax  effects  of
                      temporary  differences  between  the  carrying  amounts of
                      assets and  liabilities for financial  reporting  purposes
                      and the amounts used for income tax purposes.

                  Net Loss Per Share:

                      Loss per share is calculated based on the weighted average
                      number  of  common  shares  outstanding  as the  effect of
                      including common stock equivalents would be anti-dilutive.

                  Financial Instruments:

                      The  carrying  amounts of  financial  instruments  such as
                      cash,   commissions  and  other  receivables,   marketable
                      securities,  and short-term liabilities approximated their
                      fair value based upon the  short-term  maturities of these
                      instruments.












                                                        8

<PAGE>



                                                 DEVELOPMENT BANCORP, LTD.

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  For the Years Ended December 31, 1996 and 1995



Note 1:           Organization and Significant Accounting Policies (Continued)

                  Concentrations of Credit Risk:

                      Financial instruments that potentially subject the Company
                      to  concentration  of credit risk consist  principally  of
                      cash,  commissions  receivable,   and  the  Company's  and
                      customers' margin transactions.

                      Cash

                         The Company  maintains  cash in bank  deposit  accounts
                         which, at times, may exceed federally insured limits or
                         are in foreign banks.  The Company  believes it has its
                         cash  deposits at high quality  financial  institutions
                         and that no significant credit risk exists with respect
                         to these deposits.

                      Commissions Receivable

                         Commissions  receivable  arise from the introduction of
                         customers'   security   trades  to  the  Company's  two
                         carrying  brokers  who collect and remit to the Company
                         their allocable share of the  commissions  earned.  The
                         Company  believes its carrying  brokers are financially
                         stable  entities and no significant  credit risk exists
                         with respect to these receivables.

                      Company's Margin Transactions

                         In  the  normal   course  of  business,   Global  sells
                         securities not yet purchased  (short sales) for its own
                         account.  The  establishment of short positions exposes
                         Global to  off-balance  sheet  market risk in the event
                         prices increase,  as Global may be obligated to acquire
                         the securities at prevailing market prices.

                      Customers' Margin Transactions

                         The  activities of Company  customers are transacted on
                         either a cash or margin basis through the facilities of
                         its  clearing  broker.  In  margin  transactions,   the
                         clearing   broker  extends  credit  to  the  customers,
                         subject to various regulatory and margin  requirements,
                         collateralized by cash and securities in the customer's
                         account.  In  connection  with  these  activities,  the
                         clearing    broker   executes   and   clears   customer
                         transactions  involving the sale of securities  not yet
                         purchased ("short sales").

                         These   transactions   may   expose   the   Company  to
                         significant  of off- balance sheet risk in the event
                         margin
                         requirements  are not  sufficient to fully cover losses
                         which  the  customers  may  incur.  In  the  event  the
                         customers  fail to  satisfy  their  obligations  to the
                         clearing  broker,   the  Company  may  be  required  to
                         compensate the clearing  broker for losses  incurred on
                         behalf of its customers.







                                                        F-9

<PAGE>




                                                 DEVELOPMENT BANCORP, LTD.

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 For the Years Ended December 31, 1996 and 1995



Note 1:           Organization and Significant Accounting Policies (Continued)

                  Concentrations of Credit Risk (continued):

                      Customers' Margin Transactions (continued)

                         The  Company,  through its clearing  brokers,  seeks to
                         control  the  risk   associated   with  its  customers'
                         activities  by requiring  customers to maintain  margin
                         collateral in compliance  with various  regulatory  and
                         internal  guidelines.   The  clearing  brokers  monitor
                         required  margin  levels  daily and,  pursuant  to such
                         guidelines, requires the customer to deposit additional
                         collateral, or reduce positions, when necessary.

                  Newly-Issued Accounting Standards:

                      In 1996, the company adopted Statement of Financial
                         Accounting Standards No. 121,
                      "Accounting for the Impairment of Long-Lived Assets and 
                    for Long-Lived Assets to be
                      Disposed Of" ("SFAS No. 121") which was issued in March 
                         1995

                      This statement requires that long-lived assets and certain
                      intangibles be reviewed for impairment  whenever events or
                      changes in circumstances  indicate that the carrying value
                      of an  asset  may not be  recoverable.  In  adopting  this
                      standard,  the Company is required to estimate  the future
                      cash flows  expected  to result  from the use of the asset
                      and its eventual  disposition.  If the sum of the expected
                      future  cash  flows  (undiscounted  and  without  interest
                      charges) is less than the carrying amount of the asset, an
                      impairment loss would be recognized.

                      The adoption of SFAS No. 121 did not result in an 
                         impairment loss in 1996.

                  Use of Estimates:

                      The preparation of financial statements in conformity with
                      generally   accepted   accounting    principles   requires
                      management to make certain estimates and assumptions about
                      the  future  outcome  of  current  transactions  which may
                      affect the reporting and disclosure of these transactions.
                      Accordingly,   actual  results  could  differ  from  those
                      estimates  used  in the  preparation  of  these  financial
                      statements.

                  Reclassifications:

                      Certain  reclassifications  have  been  made  in the  1995
                      financial   statements  in  order  to  conform  with  1996
                      financial statement presentation.  These reclassifications
                      have no  effect on  accumulated  deficit  or net loss,  as
                      originally reported.







                                                       F-10

<PAGE>



                                                 DEVELOPMENT BANCORP, LTD.

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 For the Years Ended December 31, 1996 and 1995



Note 2:           Marketable Securities

                  Marketable  securities  consisted of the following at December
31:
<TABLE>
<CAPTION>

                                                                                                    Estimated
                  1996                                                                                Market
                                                                                      Cost             Value

<S>                                                                              <C>               <C>        
                     Equity securities                                           $   257,796       $   259,949
                     Debt securities                                                  403,994           401,117

                                                                                 $   661,790       $   661,066

                                                                                                    Estimated
                  1995                                                                                Market
                                                                                      Cost             Value

                     Equity securities                                           $1,155,803        $1,170,108
                     Debt securities                                                  400,000           402,500

                                                                                 $1,555,803        $1,572,608
</TABLE>

                  Unrealized  gain (loss)  included in marketable  securities at
                  December   31,   1996  and  1995  was  $(724)   and   $16,805,
                  respectively.

                  At December 31, 1996,  the maturities of debt  securities,  at
                  estimated market value,  which are classified as available for
                  sale are as follows:
<TABLE>
<CAPTION>

<S>                                                                              <C>        
                           Within one year                                       $         -
                           One - five years                                           401,117

                                                                                 $   401,117
</TABLE>

Note 3:           Loan Receivable - Related Party

                  Loan  receivable  -  related  party  consisted  of a  $303,098
                  advance  to a  corporation  related  to the  Company by common
                  management  and  control.  The loan is  non-interest  bearing,
                  unsecured and due upon demand.






                                                       F-11

<PAGE>




                                                 DEVELOPMENT BANCORP, LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 For the Years Ended December 31, 1996 and 1995

Note 4:           Investments
                  Investments consisted of the following at December 31:
<TABLE>
<CAPTION>

                                                                                      1996              1995
<S>                                                                               <C>              <C>
                  7,345 common shares of Societe Financiere Privee               
                      (Switzerland)                                              $ 4,148,293       $         -
                  4,650,000 redeemable preferred shares of
                      Gestion Guychar, Inc.                                         3,132,012                 -
                  Investment in Gestion Pemp Network (Canada)                          621,566          624,069
                  120,000 shares of Gestion Pemp, Inc. (Canada)                        263,252          264,312

                  Total investments                                              $ 8,165,123       $   888,381

                  Societe Financiere Privee:
</TABLE>

                      The company owns 7,345 common shares of Societe Financiere
                      Privee, representing an approximate 3% ownership interest.

                  Gestion Guychar, Inc.:

                      The company owns 4,650,000  redeemable preferred shares of
                      Gestion   Guychar,   Inc.  These  shares  are  non-voting,
                      non-participating  and  non-transferable.  They  are to be
                      redeemed at a price of one Canadian  dollar per share plus
                      annual  commutative  dividends  payable on October  1st of
                      each  year  at  various  rates  ranging  from  3.5%  to 4%
                      according to the following schedule:
                                                                       Shares To
                                                                     Be Redeemed

                                    October 1, 2001                    1,250,000
                                    October 1, 2002                    1,300,000
                                    October 1, 2003                    2,100,000

                                                                       4,650,000
                  Gestion Pemp Network:

                      The company  owns an interest in Gestion Pemp  Network,  a
                      multi-level  marketing  system  of Pemp,  Inc.,  a related
                      Canadian  corporation.  The $2,503 and $74,506  decline in
                      value experienced in 1996 and 1995, respectively,  was due
                      to  foreign   currency   exchange  rate   declines   which
                      management  considers to be  temporary.  During 1995,  the
                      company   received   $35,017  in  commissions   from  this
                      investment.

                  Gestion Pemp, Inc.:
                      The company owns 120,000  common  shares of Gestion  Pemp,
                      Inc., representing an approximate 8% ownership interest.

                                                       F-12

<PAGE>



                                                 DEVELOPMENT BANCORP, LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  For the Years Ended December 31, 1996 and 1995
Note 4:           Investments (Continued)
                  Investment in oil and gas leaseholds:

                      In 1995,  the Company sold its interest in the oil and gas
                      leaseholds  for a redemption of 150,000  shares of Company
                      common stock valued at $800,000.

Note 5:           Contract Receivable - Related Party
         Contract receivable - related party  consisted of a contract  valued at
                  $250,000 which was received in the KSM  rescission  (Note 20).
                  The contract  bears  interest at 8%, is  unsecured  and due in
                  November 2001.

Note 6:           Property and Equipment

                  Property and equipment  consisted of the following at December
31:
<TABLE>
<CAPTION>
                                                                                     1996             1995
<S>                                                                              <C>             <C>       
                  Furniture and equipment                                        $   38,978      $  178,710
                  Leasehold improvements                                                9,796          13,176
                                                                                      48,774         191,886

                  Less accumulated depreciation                                   (     9,945)    (    52,567)

                  Property and equipment, net                                    $    38,829     $  139,319
</TABLE>

                  Depreciation expense aggregated $20,990 in 1996 and $17,334 in
1995.

                  On November  1, 1996,  the  company  disposed of property  and
                  equipment  with an aggregate book value of $140,532 as part of
                  the KSM rescission (Note 20).

Note 7:           Intangible Assets

                  Intangible   assets  arose  in  the  acquisition  of  KSM  and
                  consisted of the following at December 31, 1995 (Note 19):
<TABLE>
<CAPTION>

<S>                                                                                              <C>       
                  Broker/dealer network development                                              $  233,665
                  Customer lists                                                                       50,000
                                                                                                       283,665
                  Less accumulated amortization                                                   (      4,730)

                  Intangible assets, net                                                         $  278,935

</TABLE>
                  Amortization expense was $4,730 in 1995.

                  On November 1, 1996, the Company  rescinded its acquisition of
                  KSM and  accordingly  the  remaining  $278,935  of  intangible
                  assets  were  written-off  as part of the  rescission  in 1996
                  (Note 20).


                                                       F-13

<PAGE>



                                                 DEVELOPMENT BANCORP, LTD.

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 For the Years Ended December 31, 1996 and 1995



Note 8:           Note Payable - Bank

                  The Company had a $100,000 bank line of credit  available,  of
                  which  $50,000 was  outstanding  as of  December  31, 1995 and
                  continuing  through  November 1, 1996.  Interest  accrues at a
                  variable  rate (10.0% as of  November 1, 1996).  This debt was
                  assumed by KSM as part of the  rescission  on November 1, 1996
                  (Note 20).

Note 9:           Notes Payable - Related Parties

                  At December 31, 1995, the Company had notes payable to related
parties as follows:
<TABLE>
<CAPTION>

<S>                                                                                             <C>    
                  Note payable - officer/shareholder bearing
                  interest at 15%.  The note is unsecured and
                  matures August 1996.                                                           $  108,000

                  Note  payable -  affiliated  company  related  through  common
                  control,  bearing  interest at 10%.  The note was created when
                  the  affiliate  transferred  ownership  of certain  marketable
                  securities  to the  Company  and is  repaid  by  returning  an
                  equivalent  number of the same  marketable  securities  to the
                  affiliated  company upon demand. As a result, the note payable
                  principal  fluctuates with the market price of the securities.
                  The note is personally guaranteed
                  by an officer/shareholder of the Company.                                          196,875

                  Notes payable - related parties                                                $  304,875
</TABLE>

                  These notes, aggregating $228,331 as of November 1, 1996, were
                  assumed by KSM as part of the KSM rescission (Note 20).

Note 10:          Long-Term Debt

                  Long-term  debt  consisted  of the  following  at December 31,
1995:
<TABLE>
<CAPTION>

<S>                                                                                             <C>
                  Note payable - investment broker bearing
                  interest at 9%.  The note matures in January
                  1997 and is secured by furniture and equipment.                                $    12,091

                  Note payable - equipment bearing interest at
                  13.5%.  The note matures in March 1997 and
                  is secured by equipment.                                                            21,560
                                                                                                      33,651
                  Less current portion                                                              (    26,881)

                  Long-term debt                                                                 $      6,770
</TABLE>

                  Long-term debt aggregating $20,510 as of November 1, 1996, was
                  assumed by KSM as part of the KSM rescission (Note 20).

                                                       F-14

<PAGE>








                                                 DEVELOPMENT BANCORP, LTD.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  For the Years Ended December 31, 1996 and 1995



Note 11:          Long-Term Debt - Related Party

                  As of December  31, 1995 and  continuing  through  November 1,
                  1996,  the Company had a $35,000 note payable to an officer of
                  the  Company.  The  unsecured  note bears  interest  at 10.5%,
                  payable monthly,  with principal due upon maturity in November
                  1999.

                  This note was assumed by KSM as part of the KSM  rescission on
November 1, 1996 (Note 20).

Note 12:          Commitments and Contingencies

                  Bank line of credit:

                      At December  31, 1996,  the company had a 1,950,000  Swiss
                      Franc   line  of  credit   available   at  a  Swiss   bank
                      (approximately  $1,450,000 as of December 31, 1996). As of
                      December 31, 1996, there were no amounts outstanding under
                      the line of credit.

                  Development Stock Option Plan:

                      At December 31 1996,  and 1995,  an  aggregate  of 800,000
                      shares of common stock were  reserved  for issuance  under
                      the  Company's  1993 stock  option  plan.  Pursuant to the
                      plan,   the  board  of  directors  may  grant  options  to
                      employees,   officers,   directors   or  others  at  their
                      discretion.  As of December 31, 1996 and 1995,  no options
                      had been granted under the plan.

                  Other Development Stock Options:

                      As of December 31, 1996 and 1995,  an aggregate of 233,334
                      shares of common stock were  reserved  for  issuance  upon
                      exercise of  non-qualified  stock options  outstanding  to
                      purchase an  aggregate  of 233,334  shares of common stock
                      (of which  194,834 were to Company  officers) at $2.50 per
                      share.  The options  expire in April 2004.  These  options
                      were not issued  under the  Company's  1993  stock  option
                      plan.

                  Operating Leases:

                      The  Company  leases its  corporate  offices  and  certain
                      equipment under noncancellable operating leases.

                      Future minimum lease payments are as follows for the years
ended December 31:
<TABLE>
<CAPTION>

<S>                                                                               <C>         
                           1997                                                  $     63,037
                           1998                                                         53,197
                           1999                                                           4,478

                                                                                 $   120,712
</TABLE>

                      Rent  expense  in 1996 and  1995  aggregated  $89,495  and
$58,837, respectively.

                                                       F-15

<PAGE>





                                                       F-16

<PAGE>



                                                 DEVELOPMENT BANCORP, LTD.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 For the Years Ended December 31, 1996 and 1995



Note 13:          Preferred Stock

                  The Company has authorized an aggregate of 1,000,000 shares of
no par preferred stock as follows:

                  Class A Preferred Stock:

                      The Company has  designated  1,000  shares of no par value
                      Class A  preferred  stock.  Class A  shareholders  are not
                      entitled to receive  dividends.  At December  31, 1996 and
                      1995,  there were 1,000 shares of Class A preferred  stock
                      issued and outstanding.

                  Class B Convertible Preferred Stock:

                      The Company has designated  110,000 shares of no par value
                      convertible Class B preferred stock.  Class B shareholders
                      are entitled to receive  dividends in a manner  similar to
                      common   shareholders   when  declared  by  the  board  of
                      directors.  Each  Class B share  is  convertible  into one
                      share of common stock,  at the option of the  shareholder,
                      provided  that the market price for the  Company's  common
                      stock is at or above $4.50 per share.

                      In 1995,  the  Company  issued  110,000  shares of Class B
                      preferred stock in the acquisition of KSM (Note 19). These
                      shares were redeemed in 1996 as part of the KSM rescission
                      (Note 20).

Note 14:          Common Stock Dividend

                  On November 1, 1996, The Company declared a one-for-six  share
                  common  stock  dividend  to the  shareholders  of record.  All
                  references  in the  accompanying  financial  statements to the
                  number  of  common  shares  and  per-share  amounts  have been
                  retroactively  restated to reflect the issuance of the 477,517
                  share common stock dividend for both years presented.

Note 15:          Related Party Transactions

                  During 1996, the Company provided  consulting  services to two
                  corporations  affiliated  through common  control.  Total fees
                  received  aggregated  $64,509 and are  included in  consulting
                  fees related party.

Note 16:          Foreign Currency Transaction Gain (Loss)

                  Foreign  currency  transaction  gains or losses  result from a
                  change in exchange  rates between the  functional  currency of
                  the Company or its  subsidiaries  and the  currency in which a
                  foreign transaction is denominated.  These gains or losses are
                  comprised of actual  currency  gains or losses  realized  upon
                  settlement  of  foreign  currency  transactions  and  expected
                  (unrealized)  currency  gains or losses on  unsettled  foreign
                  currency transactions.

                  For 1996 and  1995,  the  foreign  currency  transaction  gain
                  (loss) was $159,990 and $(323,597), respectively.



                                                       F-17

<PAGE>




                                                 DEVELOPMENT BANCORP, LTD.

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 For the Years Ended December 31, 1996 and 1995



Note 17:          Income Taxes

                  The  effective  tax  rate  varies  from  the  maximum  federal
                  statutory rate as a result of the following items:
<TABLE>
<CAPTION>

                                                                                    1996             1995
<S>                                                                              <C>             <C> 
                 Tax benefit computed at the
                      maximum federal statutory rate                             (     34.0)%     (     34.0)%

                  Foreign income exclusion                                               2.9            30.5
                  Net (increase) decrease  due to various
                      temporary and permanent differences                        (      2.0)      (     13.6)

                  Net operating loss carryforward                                      33.1              17.1

                  Income tax provision                                                   -    %           -    %

                  Deferred taxes consisted of the following at December 31:

                                                                                    1996             1995
                  Asset:
                      Net operating loss carryforward                           $  76,500        $  47,000
                      Other                                                      (       500)     (    7,000)
                  Net deferred tax asset before
                      valuation allowance                                           76,000           40,000
                  Less valuation allowance                                       (  76,000)       (  40,000)

                  Net deferred tax asset                                        $       -        $        -
</TABLE>

                  For  financial  statement  purposes,  no tax  benefit has been
                  reported in 1996 or 1995 as the  Company  has had  significant
                  losses in recent years and  realization of the tax benefits is
                  uncertain.   Accordingly,   a  valuation  allowance  has  been
                  established for the full amount of the deferred tax asset.

                  At December  31,  1996,  the Company  had net  operating  loss
                  carryforwards  aggregating  approximately  $510,500 for income
                  tax purposes that expire in 2011.

                  The  utilization  of the net operating loss  carryforwards  is
                  dependent   upon  the  ability  of  the  Company  to  generate
                  sufficient  taxable income during the carryforward  period. In
                  addition, utilization of these carryforwards is limited due to
                  ownership changes as defined in the Internal Revenue Code.



                                                       F-18

<PAGE>




                                                 DEVELOPMENT BANCORP, LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  For the Years Ended December 31, 1996 and 1995



Note 18:          Industry and Geographical Segment Reporting

                  The Company  operated and had assets in the United  States and
Europe as follows:
<TABLE>
<CAPTION>

                                                                                    1996              1995
                  Revenues:
<S>                                                                              <C>               <C>         
                      United States                                              $  103,243        $     35,017
                      Europe                                                               -                4,935

                             Total revenues                                      $  103,243        $    39,952

                  Loss From Operations:
                      United States                                              $( 946,991)       $(  482,152)
                      Europe                                                       (   36,807)              8,224

                             Total loss from operations                          $( 983,798)       $   473,928

                  Identifiable Assets:
                      United States                                              $4,369,417        $2,121,811
                      Europe                                                       5,107,093         2,735,649

                             Total identifiable assets                           $9,476,510        $4,857,460
</TABLE>

Note 19:          KSM Holding Company Acquisition

                  On November 14,  1995,  the Company  exchanged  110,000 of its
                  convertible  preferred  stock for all 3,617,143  shares of KSM
                  common  stock  issued and  outstanding  (not  including  2,400
                  shares of preferred stock outstanding).  The exchange resulted
                  in KSM becoming a 99.93% owned subsidiary of the Company.

                  The  total KSM  purchase  price was  $217,482,  consisting  of
                  110,000 shares of Company  convertible  preferred stock valued
                  at $165,000 and acquisition costs totaling $52,482.  The $1.50
                  price  per  share  used  to  value  the  preferred  stock  was
                  determined based upon the market value of an equivalent number
                  of shares of common stock due to the conversion  rights less a
                  discount to factor in the  reduction  in value  stemming  from
                  restrictions  in  conversion  and the size of the newly issued
                  block.

                  The Company  accounted for the acquisition  under the purchase
                  method whereby the assets and  liabilities of KSM are recorded
                  at their net book value,  which approximated fair market value
                  as of the date of acquisition as estimated by management.

                                                       F-19

<PAGE>




                                                 DEVELOPMENT BANCORP, LTD.

                                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                For the Years Ended December 31, 1996 and 1995


Note 19:          KSM Holding Company Acquisition (Continued)

                  The following items represent the net tangible assets acquired
                  and liabilities assumed:
<TABLE>
<CAPTION>

<S>                                                                              <C>         
                           Commissions receivable                                $     44,807
                           Other receivables                                            53,236
                           Marketable securities                                      392,633
                           Other current assets                                         51,983
                           Net property and equipment                                 114,691
                           Note payable - bank                                    (     50,000)
                           Notes payable - related parties                        (   416,969)
                           Accounts payable                                       (   143,803)
                           Accrued liabilities                                    (     34,009)
                           Long-term debt                                         (     38,752)
                           Long-term debt - related parties                       (     40,000)

                                    Net assets (liabilities)                     $(    66,183)
</TABLE>

                  The $283,665 excess purchase price of the fair market value of
                  tangible assets and  liabilities  acquired has been identified
                  as  broker/dealer   network  development  and  customer  lists
                  acquired and is being amortized over a five-year period.

                  Summarized  below is the  unaudited  condensed  and  pro-forma
                  consolidated statement of operations as if the KSM acquisition
                  had taken place at the  beginning  of the year ended  December
                  31, 1995.
<TABLE>
<CAPTION>

                                                                1995 Pro-forma Consolidated


                                                                   Statement of Operations (Unaudited)
                                                                                                            Pro-forma
                                                  Development        KSM Holding            Pro-forma     Development
                                                  Bancorp, Ltd.        Corporation      Consolidating     Bancorp, Ltd.
                                                  Consolidated     Consolidated (1)        Entries (2)    Consolidated
<S>                                               <C>                 <C>                  <C>            <C>         
                  Revenues                        $      656,482      $  1,571,490         $      -       $  2,227,972
                  General & administrative         (   1,186,400)      (  1,831,532)        (  52,003)     (  3,069,935)
                          Loss from operations     (      529,918)     (     260,042)       (   52,003)    (     841,963)
                  Other income (expense)                    79,676     (       37,342)              -             42,334
                          Net loss                $(     450,242)     $(    297,384)       $(  52,003)    $(    799,629)
                  Net loss per share              $(             .41)                                     $(        .73)
                  Weighted average number
                     of shares outstanding             1,095,606                                              1,095,606
</TABLE>

                  (1)      Represents  KSM  Holding   Corporation   consolidated
                           unaudited  activity  for the period  from  January 1,
                           1995 to November 14, 1995 (date of acquisition).

                                                          F-20

<PAGE>



                  (2)      Represents  adjustment to  amortization of intangible
                           assets  acquired  in  the  KSM  Holding   Corporation
                           acquisition  for the period  from  January 1, 1995 to
                           November 14, 1995 (date of acquisition).
                                                    DEVELOPMENT BANCORP, LTD.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  For the Years Ended December 31, 1996 and 1995



Note 20:          Loss from Discontinued operations

                  Loss from discontinued  operations  consisted of the following
at December 31:
<TABLE>
<CAPTION>

                                                                                     1996             1995

<S>                                                                             <C>              <C>       
                  Loss from disposal of business                                $(582,457)       $        -
                  Income (loss) from discontinued operations                       62,200      (   326,087)

                  Total loss from discontinued operations                       $(520,259)       $( 326,087)
</TABLE>

                  Loss from Disposal of Business:

                      In November 1996, the Company rescinded its acquisition of
                      KSM (Note 19).  The terms of the  rescission  specify that
                      all  110,000  shares of Company  Class B  preferred  stock
                      valued  at  $165,000  be  returned  to  the  Company,  and
                      $1,032,861  of Company  advances to KSM  ($160,000  of the
                      advances were expensed by the Company in 1995 and $250,000
                      is included in the $278,935  intangible  asset  valuation)
                      were to be recorded as a contract  receivable from KSM, in
                      exchange  for  return of $95,661 of KSM net assets and the
                      write-off of $278,935 of  intangible  assets.  At December
                      31, 1996,  the Company  valued the contract  receivable at
                      $250,000 (Note 5). Accordingly,  this valuation adjustment
                      resulted in an  additional  loss of $622,861 in 1996.  The
                      rescission  resulted  in an  aggregate  $582,457  loss  on
                      disposal of business.

                  Income (loss) from discontinued operations:

                      Summarized  results  of  discontinued  operations  were as
follows for years ended December 31:

<TABLE>
<CAPTION>

                                                                                     1996            1995

<S>                                                                             <C>              <C>       
                           Revenues                                             $2,577,079       $  616,530
                           General and administrative Expenses                  ( 2,597,967)     (   883,019)
                           Other income (expense)                            83,088     (     59,598)

                           Income (loss) from discontinued operations  $    62,200      $( 326,087)

</TABLE>