UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                              --------------------

                                    FORM 10-K
(Mark One)
    X        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2000

                                       OR

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

                         Commission file number 0-21874

                          London Pacific Group Limited
             (Exact name of registrant as specified in its charter)
                             ----------------------


      Jersey, Channel Islands                                 Not applicable
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

                          Minden House, 6 Minden Place
                           St. Helier, Jersey JE2 4WQ
                                 Channel Islands
                    (Address of principal executive offices)
                                   (Zip Code)

                              011 44 (1534) 607700
              (Registrant's telephone number, including area code)


           Securities registered pursuant to Section 12(b) of the Act:
                                                        Name of each exchange on
           Title of each class                              which registered
American Depositary Shares, each representing     New York Stock Exchange, Inc.
 one Ordinary Share of $0.05 par value per share
Ordinary Shares of $0.05 par value per share      New York Stock Exchange, Inc.*

*Not for  trading,  but only in  connection  with the  registration  of American
Depositary  Shares,  pursuant to the requirements of the Securities and Exchange
Commission.

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

    Indicate  by check mark  whether  the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [ |X|] No [ ]

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

    The aggregate  market value of  the voting stock held by  non-affiliates  of
the registrant,  based on the closing sale price of the Ordinary Shares on March
5, 2001 as  reported on the London  Stock  Exchange  (using an exchange  rate of
GBP1.00  =  $1.47)  was  $256,296,731.  Ordinary  Shares  held  by each  current
executive officer and director and by each person who is known by the registrant
to own 5% or more of the  outstanding  Ordinary  Shares have been  excluded from
this  computation  in that such  persons may be deemed to be  affiliates  of the
registrant.   This  determination  of  affiliate  status  is  not  a  conclusive
determination for other purposes.

    As of March 5, 2001,  the  registrant had  outstanding  64,433,313  Ordinary
Shares, $0.05 par value per share.


                       DOCUMENTS INCORPORATED BY REFERENCE

    The  registrant's  definitive proxy statement for its Annual General Meeting
of Shareholders to be held on May 31, 2001, is incorporated by reference in Part
III of this Form 10-K.



<PAGE>

<TABLE>
<CAPTION>

                                TABLE OF CONTENTS



                                     PART I                                 Page
<S>        <C>                                                               <C>
Item 1.    Business .........................................................  1
Item 2.    Properties........................................................ 11
Item 3.    Legal Proceedings................................................. 12
Item 4.    Submission of Matters to a Vote of Security Holders............... 12


                                     PART II

Item 5.    Market for Registrant's Common Equity and Related
               Stockholder Matters........................................... 12
Item 6.    Selected Financial Data........................................... 16
Item 7.    Management's Discussion and Analysis of Financial
               Condition and Results of Operations........................... 16
Item 7A.   Quantitative and Qualitative Disclosures about Market Risk........ 27
Item 8.    Financial Statements and Supplementary Data....................... 29
Item 9.    Changes in and Disagreements with Accountants on Accounting and
               Financial Disclosure.......................................... 63


                                    PART III

Item 10.   Directors and Executive Officers of the Registrant................ 63
Item 11.   Executive Compensation............................................ 63
Item 12.   Security Ownership of Certain Beneficial Owners and Management.... 63
Item 13.   Certain Relationships and Related Transactions.................... 63


                                     PART IV

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K... 64

Financial Statement Schedules................................................ 67
Signatures ...................................................................73
Exhibit Index   ............................................................. 74

</TABLE>
<PAGE>


       As used herein,  the terms  "registrant"  and  "Company"  refer to London
Pacific  Group  Limited.  Except as the  context  otherwise  requires,  the term
"Group" refers collectively to the registrant and its subsidiaries.

Forward-Looking Statements and Factors That May Affect Future Results

       The  statements  contained in this Annual Report on Form 10-K  ("Report")
that are not historical facts,  including,  but not limited to, statements found
in Item 1 "Business," Item 7 "Management's  Discussion and Analysis of Financial
Condition and Results of Operations" and Item 7A  "Quantitative  and Qualitative
Disclosures  About  Market  Risk,"  are  forward-looking  statements  within the
meaning of Section 21E of the  Securities  Exchange Act of 1934, as amended (the
"Exchange  Act").   Such   forward-looking   statements  are  based  on  current
expectations, estimates, forecasts and projections about the industries in which
the  Group  operates,  management's  current  beliefs  and  assumptions  made by
management.   Words  such  as  "expects,"   "anticipates,"  "intends,"  "plans,"
"believes," "seeks,"  "estimates," "goals," variations of such words and similar
expressions  are intended to identify  such  forward-looking  statements.  These
statements are not guarantees of future  performance  and involve certain risks,
uncertainties and assumptions that are difficult to predict. Future outcomes and
results  may  differ  materially  from what is  expressed  or  forecast  in such
forward-looking  statements.  The Group  undertakes  no obligation to update any
forward-looking  statements,  whether  as a result  of new  information,  future
developments or otherwise.


                                     PART I

Item 1.    BUSINESS

OVERVIEW

       London Pacific Group  Limited,  based in Jersey,  Channel  Islands,  is a
diversified  international  financial services company.  The Company's operating
subsidiaries  gather assets through their distribution  networks in the U.S. and
U.K. Assets under the Group's  management or  administration  as of December 31,
2000 totaled approximately $4.9 billion.

       The Company evolved from a financial  consulting  business,  The Berkeley
Consulting Group, formed in 1977. That business focused on financial  consulting
services and venture  capital  finance for U.S. high  technology  companies from
non-U.S. institutional financing sources. The Company (originally named Berkeley
Technology  Limited) was  incorporated in 1985 in Jersey,  Channel  Islands.  It
obtained  a  listing  on the  London  Stock  Exchange  in that  same year and is
currently trading under the symbol LPG. Since 1985, the Group has grown with the
establishment of life  insurance and  annuity  businesses  in  both the U.S. and
Jersey, and through  acquisitions  in the financial advisory  services and asset
management areas.

       American Depositary Receipts ("ADRs") representing the Ordinary Shares of
the Company began  trading in the U.S.  market in 1992.  The Company  obtained a
listing on The Nasdaq Stock  MarketSM in 1993 and in November  1999  migrated to
the New York Stock  Exchange where its ADRs are now traded under the symbol LDP.
During the first quarter of 2000, the Company completed a four-for-one  split of
its ADRs.  Effective from the close of business on March 23, 2000, each American
Depositary Share ("ADS"), represented by an ADR, equals one Ordinary Share.

       In September  1996, the Group completed the acquisition of London Pacific
Advisory Services, Inc. ("LPAS") (formerly Select Advisors,  Inc.), a registered
investment  adviser,  London Pacific  Securities,  Inc. ("LPS") (formerly Select
Capital  Corporation),  a  registered  broker/dealer,   and  Advisors  Insurance
Services of Texas, an insurance agency.  LPAS and LPS are collectively  known as
London  Pacific  Advisors  ("LPA").  On December 31, 1998,  the Group exited the
trust services  business by completing the sale of North American Trust Company.
On  December  24,  1999,  the Group  established  its  Jersey,  Channel  Islands
insurance subsidiary.

       London  Pacific  Group Limited  currently has offices in Jersey  (Channel
Islands), California and North Carolina.

                                       1
<PAGE>

BUSINESS SEGMENTS

         The Group  operates  in four  business  segments:  life  insurance  and
annuities,  financial  advisory  services,  asset management and venture capital
management. The Group's principal operating subsidiaries by business segment and
location, are set forth below:
<TABLE>
<CAPTION>

           Principal Subsidiaries                     Business Segment                       Location
------------------------------------------       -------------------------          -------------------------
<S>                                              <C>                                <C>
London Pacific Life & Annuity Company            Life insurance and annuities       Raleigh and Sacramento
London Pacific Assurance Limited                 Life insurance and annuities       Jersey, Channel Islands
London Pacific Advisors                          Financial advisory services        Sacramento
Berkeley Capital Management                      Asset management                   San Francisco
Berkeley International Limited                   Asset management                   Jersey, Channel Islands
Berkeley International Capital Corporation       Venture capital management         San Francisco
Berkeley International Capital Limited           Venture capital management         Guernsey, Channel Islands
</TABLE>


       See Item 7 "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations - Results of Operations by Business  Segment" and Note
17 to the  Consolidated  Financial  Statements in Item 8 of this Form 10-K for a
summary  of  the  Group's   financial   information  by  business   segment  and
geographical location.

Life Insurance and Annuities

       The Group's two  insurance  subsidiaries,  London  Pacific Life & Annuity
Company ("LPLA") and London Pacific Assurance  Limited  ("LPAL"),  are primarily
engaged in the  development,  marketing  and  servicing of  investment  oriented
insurance  products.  Accumulation  products,  such as annuities and  guaranteed
return  bonds,   comprise  the  principal  products  offered  by  the  insurance
subsidiaries.  In exchange  for an up-front  deposit,  such  products  generally
provide  policyholders  a tax deferred rate of investment  return and certain of
these products guarantee such a return for a stated period of time.

       The business of each  insurance  subsidiary  is based upon its network of
agents  and  financial  advisors,  a  focused  and  competitive  product  range,
efficient  administration  systems and  utilization  of the  Group's  investment
management capabilities.  The insurance subsidiaries'  accumulation products are
marketed primarily as investment vehicles. Single premium deferred annuities and
guaranteed  return  bonds  provide  policyholders  with a rate of return that is
either subject to periodic  adjustments or fixed for the entire  contract period
depending on the  customer's  preference.  The  insurance  subsidiaries  seek to
benefit  from  changing  demographic  trends,  an expected  growth in demand for
retirement savings products and anticipated  higher consumer savings.  Among the
products expected to benefit from these trends are accumulation products such as
those offered by the insurance subsidiaries.

London Pacific Life & Annuity Company

       LPLA is licensed  in 41 U.S.  states and the  District  of  Columbia  and
distributes its products through  approximately  3,000 contracted  agents.  This
network of independent contractors consists of life insurance agents,  financial
planners,  estate  planners  and brokers,  as well as banks and other  financial
institutions.  LPLA has recently  expanded its  distribution  network to include
select national  marketing  organizations.  Variable annuity contracts issued by
LPLA are distributed through independent broker-dealers,  stockbrokers and other
financial institutions.

       Products

       LPLA's  accumulation  products  include  fixed rate  annuities,  variable
annuities,  and  annuities  with market value  adjustment  provisions,  all sold
through independent agents and financial advisors.

       LPLA primarily sells flexible premium and single premium deferred annuity
contracts.  Under  one type of  contract,  LPLA  guarantees  the  policyholder's
principal  and credits the  accumulated  deposit with a rate of

                                       2
<PAGE>

interest  that is  guaranteed  for the initial  policy  year.  After the initial
policy year, LPLA has the discretionary  ability to change the crediting rate to
any crediting rate not below a guaranteed  minimum rate  (currently  3%). During
the years  ended  December  31,  2000,  1999 and 1998,  sales of these  products
accounted for $174.1 million,  $136.2 million and $113.8 million,  respectively,
or 36%, 42% and 56%, respectively,  of total premiums collected. LPLA also sells
market value adjusted  annuity  contracts which guarantee the crediting rate for
the full  term of the  contract.  During  2000,  1999 and  1998,  sales of these
products  accounted  for  $286.0  million,  $149.1  million  and $48.2  million,
respectively,  or 58%, 46% and 24%,  respectively,  of total premiums collected.
These  multi-year  guaranteed  rate contracts range in terms from three to seven
years.

       Crediting  rates  are  initially  based on:  (i) the rate of  return  the
insurance  subsidiaries  can earn on invested  assets acquired with the contract
deposits;  (ii) the costs related to marketing and  administering  the products;
and (iii) the crediting  rates offered on similar  products by other  companies.
Subsequent  adjustments  to  crediting  rates  are  based on  multiple  factors,
including the yield on the investment portfolio,  contract surrender assumptions
and the crediting rate history of particular  groups of annuity  contracts.  For
2000, 1999 and 1998, the average rate credited on outstanding  annuity contracts
was 5.89%, 5.48% and 5.59%, respectively.

       Typically,  the  policyholder is permitted to withdraw all or part of the
premium  paid  plus the  accumulated  interest  credited  to the  contract  (the
"Accumulation  Value"),  subject to the  assessment  of  surrender  charges  for
withdrawals in excess of specified limits. Most of LPLA's accumulation  products
provide for penalty free withdrawals of up to 10% of the Accumulation Value each
year,  subject to limitations.  Withdrawals in excess of allowable  penalty free
amounts are assessed a surrender  charge during a penalty period which generally
ranges from three to ten years after the date a policy is issued. In addition to
the surrender  charge,  the  multi-year  guaranteed  rate  contracts may also be
subject  to a market  value  adjustment  charge  for  withdrawals  in  excess of
specified  limits.  The initial  surrender  charge generally is 12% to 9% of the
Accumulation  Value and generally  decreases by one  percentage  point  annually
during  the  penalty  period.  Surrender  charges  and market  value  adjustment
provisions,  where  applicable,  are designed to protect LPLA from loss on early
terminations  and to reduce the likelihood of  policyholders  terminating  their
contracts during periods of increasing  interest rates. These practices lengthen
the  effective  duration  of policy  liabilities  and  enable  LPLA to  maintain
profitability on such policies.

       Single premium  immediate  annuities  accounted for $19.1 million,  $20.8
million and $11.7  million,  or 4%, 6% and 6%,  respectively,  of total premiums
collected in 2000, 1999 and 1998,  respectively.  These products are designed to
provide a series of periodic  payments  for a fixed  period of time or for life,
according to the  policyholder's  choice at the time of issue. Once the payments
begin,  the amount,  frequency and length of time for which they are payable are
fixed.  The implicit  interest  rate on  outstanding  single  premium  immediate
annuity  contracts  averaged  4.65%,  4.71% and  4.83% for 2000,  1999 and 1998,
respectively.

       Variable  annuities  accounted for $8.0 million,  $13.1 million and $26.9
million, or 2%, 4% and 13%,  respectively,  of total premiums collected in 2000,
1999 and 1998,  respectively.  Variable annuities differ from fixed annuities in
that the principal  value may fluctuate  depending on the  performance of assets
allocated  pursuant to various  investment  options chosen by the  policyholder.
Variable annuities offer  policyholders a fixed or variable rate of return based
upon the specific investment option into which the premiums are directed.

       LPLA  discontinued  writing  any new  universal  life  business  in 1999,
although it  continues  to receive  renewal  premiums on the  policies in force.
Universal life insurance products accounted for $1.5 million,  $2.4 million  and
$2.9 million, or 0.3%, 0.7% and 1.4%, respectively,  of total premiums collected
in 2000, 1999 and 1998, respectively.  Universal life insurance products provide
whole life insurance with adjustable  rates of return based on current  interest
rates.

       Administration

       With over 42,000 policyholders,  customer service is a key focus of LPLA.
LPLA has implemented  technologically  advanced  administrative  processes which
have helped LPLA maintain its competitive  position.  In conjunction with IBM in
early 1991,  LPLA led the industry in adopting remote imaging for more accurate,
cost  effective   processing.   Image  processing  allows  a  constant  flow  of
communication  between  the home  office  in  Raleigh,  North  Carolina  and the
administrative office in Sacramento, California. Offices on both coasts of the

                                       3
<PAGE>


U.S. make it possible for LPLA to service  policyholders  nationwide  over an 11
hour workday.  These  operating  efficiencies  play an important  role in LPLA's
ability to provide a high quality of customer service and to compete effectively
in the markets in which it operates.

London Pacific Assurance Limited

       LPAL, the Group's insurance  subsidiary in Jersey,  Channel Islands,  was
formed in 1999.  LPAL began selling  guaranteed  return bonds in Jersey  through
financial  intermediaries  and also directly to the public.  The sterling bonds,
which have a growth or regular  payment  option,  are  suitable  for  individual
investors,  corporate entities or trusts.  Sales were extended first to the U.K.
in April 2000,  followed by Guernsey  and the Isle of Man. The bonds have three-
or five-year maturities, and are attractive to investors because of their stable
investment  return.  In the first ten months of its  operations,  LPAL's premium
income exceeded $50 million. As of December 31, 2000, LPAL had over 800 clients.

       LPAL's early priorities have been to establish a high quality back office
and to develop distribution channels. Policy applications are received in Jersey
and then scanned and  transmitted  to LPLA's  administration  center in Raleigh,
North  Carolina.  Policies  are then  issued the  following  day in Jersey.  The
administrative  synergy between the Group's two insurance companies has enhanced
the customer service in Jersey and minimized the set-up costs.

       During 2000,  nearly 200 financial  intermediaries  signed  agreements to
sell LPAL's products, which gives LPAL access to approximately 6,000 independent
financial advisors ("IFAs") in the U.K. and Jersey.  LPAL is actively seeking to
enter into similar agreements with financial  intermediary networks and advisory
divisions of retail banks and building societies.

       Products

       LPAL offers three guaranteed  bonds:  sterling bonds,  U.S. dollars bonds
and Euro denominated  bonds.  All of LPAL's  guaranteed bonds are single premium
assurance policies designed to meet the needs of the security conscious investor
looking for a competitive guaranteed return for the duration of the investment.

       The  sterling  bond offers an  investment  period of either three or five
years.  Yields can either be taken as periodic  payments or as a guaranteed lump
sum at maturity. The former may be taken monthly, quarterly or annually.

       As LPAL is based  in  Jersey,  it is  well  positioned  to  target, where
permissable, expatriates  with savings and  investments  held by Channel Islands
financial  institutions  but who may be working abroad.  To attract  investments
from this potentially lucrative market, LPAL launched a new five-year guaranteed
bond  denominated in U.S. dollars in October 2000. A three-year U.S. dollar bond
was introduced early in 2001, along with the new Euro denominated product.  LPAL
now has a unique guaranteed product range.

       The U.S. dollar and Euro  denominated  bonds have  investment  periods of
either three or five years, each of which returns their original capital in full
plus guaranteed growth at the end of the investment period.

       From LPAL's  inception  through the end of 2000,  premium revenue for the
sterling  guaranteed bond was $49.3 million and for the U.S.  dollar  guaranteed
bond  was  $3.5  million.   95%  of  the  bonds  were  sold  through   financial
intermediaries.  LPAL is now  transacting  business  through over 100  financial
intermediaries  in the Channel Islands,  U.K. and Isle of Man. During 2000, over
50% of  premiums  generated  were  through  financial  institutions  and IFAs in
Jersey.

Investment Portfolios

       The insurance subsidiaries' $2.1 billion portfolio of securities (at fair
value) as of December 31, 2000 continued to be balanced, consisting primarily of
investment grade corporate bonds and collateralized  mortgage obligations,  with
no direct  exposure to commercial  mortgage  loans.  Private  placement debt and
preferred  stock in later stage high technology  companies  arranged by Berkeley
International Capital

                                        4
<PAGE>

Corporation  represented  approximately  11% of total  assets  of the  insurance
subsidiaries  as  of  December  31,  2000.  The  fair  value  of  the  insurance
subsidiaries'  listed  equity  securities  increased  to  $248.7  million  as of
December 31,  2000,  from $186.5  million as of December  31, 1999.  The overall
portfolio  strategy of the insurance  subsidiaries is to hold equity  securities
for further gain after the underlying companies have completed an initial public
offering,  and to sell in the shorter term other listed equity  securities  that
have been acquired via an acquisition.

       Investment activities are an integral part of the insurance subsidiaries'
business.  Profitability of the insurance products is significantly  affected by
spreads  between  the  returns  on  invested  assets and the rates  credited  to
policyholders.  Changes in  crediting  rates may not be  sufficient  to maintain
targeted  investment  spreads  in  all  economic  and  market  environments.  In
addition,  competition  and other factors may limit the insurance  subsidiaries'
ability  to adjust or  maintain  crediting  rates at levels  necessary  to avoid
compression of spreads under certain market conditions. For 2000, 1999 and 1998,
the total  return on  average  invested  assets  was  12.32%,  16.79% and 8.42%,
respectively, and the average interest rate credited to policyholders was 5.89%,
5.62% and 5.71%, respectively.

       See Item 7 "Management's  Discussion and Analysis of Financial  Condition
and  Results of  Operations  - Life  Insurance  and  Annuities"  for  additional
information on the insurance subsidiaries' investment portfolios.

Competition

       LPLA and LPAL operate in a highly competitive environment.  The insurance
industry  consists of a large  number of  companies,  many of which have greater
financial resources, more diversified product lines and larger staffs than those
of LPLA and LPAL. An expanding number of other financial services companies also
market insurance products or offer competing products. Competition is based on a
number of factors,  including product pricing,  service provided to distributors
and policyholders, and ratings.

       LPLA  currently  has an A.M.  Best Company  ("Best")  rating of B++ (Very
Good).  Best ratings for the industry  currently  range from A++ (Superior) to F
(In Liquidation).  Publications by Best indicate that the B++ rating is assigned
to companies that, in Best's opinion,  have, on balance, very good balance sheet
strength and operating performance.  Those companies,  in Best's opinion, have a
good  ability  to meet  their  ongoing  obligations  to  policyholders.  LPAL is
currently unrated.

       The  Group  believes  its  insurance  subsidiaries  are  able to  compete
effectively  because of: (i) their  ability to quickly  develop and bring to the
market innovative products in response to changing customer needs, (ii) superior
customer service  supported by customized  administrative  systems,  (iii) their
ability  to  offer  competitive  crediting  rates  as a  result  of  specialized
investment   management  skills  within  the  Group,  and  (iv)  access  to  new
distribution  sources  as a  result  of  product  integrity  and  experience  in
establishing and growing new relationships with independent producers.

Financial Advisory Services

London Pacific Advisors

       London Pacific Advisors ("LPA") is located in Sacramento, California. The
total value of assets under LPA management,  administration  or consulting as of
December 31, 2000 was $1.5 billion.

       LPA  experienced  significant  change  and  innovation  in 2000.  The LPA
business  (which was acquired by the Group in 1996) had previously  been focused
on providing back office services to independent  financial  advisors (and small
groups of advisors).  In 2000,  this focus was expanded  considerably to include
large  institutional  clients  and to  encompass a full range of web based front
office and back office services, which LPA has branded  myOfficeOnlineSM.  LPA's
business model is  particularly  well suited to an Internet  delivery  platform.
These  efforts  have   positioned  the  company  to   aggressively   pursue  the
institutional market and to better serve independent advisors.

                                       5
<PAGE>

       As part of this  change in  strategy,  several  noteworthy  actions  were
undertaken in 2000: (i) the company's  name was changed from Select  Advisors to
London Pacific Advisors,  and its web based technology  activities were moved to
London  Pacific  Technologies,  Inc.,  a newly formed  Group  company;  (ii) LPA
upgraded its back office  systems and staffing,  and  reengineered  its business
practices in order to meet the requirements of its institutional clients and its
"real time" web front-end  processing;  (iii) LPA's many service  offerings were
web enabled;  and (iv) a new  marketing  and sales  strategy was  developed  and
implemented.

       While the process of  innovation  will be a continuing  one, the reaction
from  clients,  prospects  and  employees to these  changes at LPA has been very
positive.  Early  indications from  institutional  clients and prospects suggest
that  myOfficeOnlineSM  is a unique  product  offering  that fills a void in the
marketplace.

       Products, Services and Revenues

       LPA provides a comprehensive  menu of services to financial  advisors and
institutions,  with an emphasis on web based technologies,  fee based investment
products and consulting.  These services range from providing  investment advice
to managing complex web based consulting platforms for institutional clients.

       LPA earns revenues from four principal sources:  (i) asset management and
consulting fees are generated under LPA contracts  providing for fees calculated
as a percentage  of assets  under  management  or  consulting  by its  financial
advisors and  institutional  clients;  (ii)  portfolio  servicing  fees are also
generated  under  contracts  providing for fees based on a percentage of assets;
(iii) commissions are received from the sale by advisors of insurance  products,
including annuities and life insurance;  and (iv) brokerage fees are received on
trading  activity  handled  through  LPA's  trading desk or via business  placed
directly  with  investment  companies.  The latter two sources of  revenues  are
generated by LPA's broker-dealer subsidiary, London Pacific Securities, Inc.

       Commissions paid to affiliated advisors vary broadly based on the product
and the contractual relationship with the advisor. No commissions are ordinarily
paid on portfolio servicing revenue.

       Asset  management and consulting fees contributed 44%, 28% and 20% to net
revenues (i.e.,  gross revenues less  commissions)  for the years ended December
31, 2000, 1999 and 1998,  respectively.  Portfolio  servicing fees declined over
the same period,  contributing  21%, 36% and 50% to net revenues for 2000,  1999
and 1998, respectively. A substantial portion of the portfolio servicing revenue
in 2000 was  related to a contract  with one client  which is  currently  due to
expire on September 30, 2002.

       Commissions  received  from the sale by  advisors of  insurance  products
contributed approximately 5%, 5% and 4% to net revenues for 2000, 1999 and 1998,
respectively,  while brokerage fees contributed 22%, 21% and 18% to net revenues
for 2000, 1999 and 1998, respectively.

       When financial advisors affiliate with LPA, they generally transfer their
clients' assets to LPA's registered  investment  adviser and  broker-dealer.  By
themselves,  such asset transfers may be a significant  source of growth for the
company. In addition,  once the financial advisor joins LPA, new assets from the
sale of fee based  services  and  commission  products  can be  invested  in LPA
services or processed by LPA companies.  Also, LPA achieves growth from existing
clients in the form of new  contributions,  market  appreciation  and reinvested
income.

       A new  source of growth  for LPA is its focus on adding  large  financial
institutions  to its client base.  In the typical  scenario,  LPA offers its web
based consulting,  administration  and reporting services to the institution and
to its financial  advisor  employees.  LPA's fees for these services are tied to
the assets under management in the  institution's  program,  and LPA's fees grow
along with the growth of those program assets.

       Intellectual Property

       LPA  currently  has one  trademark  registered  with the U.S.  Patent and
Trademark Office. This trademark is for LPA's flagship asset management product,
Global  LeadersTM,  and was registered on August 3, 1999. The

                                       6
<PAGE>

registration  has an  initial  ten year "in  force"  period,  unless  terminated
earlier as  provided  by law. In August  2000,  LPA applied for a trademark  for
myOfficeOnlineSM, the name given to LPA's web based services package.

Competition

       The Group's financial  advisory services business continues to operate in
a highly competitive  industry.  Competitors include other investment management
firms, broker-dealers,  commercial banks, trust companies,  insurance companies,
financial  advisory  firms,  application  software and service  providers in the
financial services sector,  and mutual funds. Many of LPA's competitors  operate
across  all of LPA's  markets,  offer a full  range  of  products  or  financial
services,  and have greater  financial  capacity and other resources.  The Group
believes that the  considerable  experience  and past success of its  investment
personnel, a focused and individualized approach to client servicing, successful
investment performance,  and its proprietary systems enable it to compete within
the markets in which it operates.

Asset Management

       Berkeley Capital  Management ("BCM") and Berkeley  International  Limited
("BIL")  are the  Group's  asset  management  companies.  While BCM  offers  its
services to third parties and Group affiliates, BIL manages only Group assets.

Berkeley Capital Management

       BCM is a San  Francisco  based  investment  manager with over 28 years of
experience and is the Group's primary asset management  subsidiary.  The company
managed  assets  totaling  approximately  $2.6  billion  as of the end of  2000,
including  approximately  $1.5  billion  in  corporate  bonds  for  the  Group's
insurance  subsidiaries.  BCM manages  equity,  balanced  and bond  accounts for
institutional  clients and for the wrap fee programs of major brokerage  houses.
Its investment  approach involves strong fundamental  research and is led by its
senior  portfolio  managers,  who have worked  together  since 1975. BCM derives
revenue from the  management of public equity and fixed income  securities.  The
level of the bond and stock markets affects BCM's revenues,  as BCM is generally
compensated for its services with fees calculated as percentages of assets under
management.

       BCM has two equity products and a fixed income product. The Growth Equity
style focuses on selecting companies with strong earnings growth potential.  The
median  market  capitalization  of the portfolio is greater than that of the S&P
500. The Income Equity style focuses on companies from the S&P 500 universe with
high  relative  yields and is designed to produce  superior  returns  with below
average  volatility.  Both investment  styles utilize  bottom-up  approaches and
disciplined buy and sell processes.  BCM's fixed income style seeks out the most
attractive  relative  values  in  the  marketplace.   Risk  levels  are  set  in
conjunction  with client  objectives  and value is added around the benchmark by
trading into those areas that BCM believes have the best relative values.

       BCM  also  provides  investment   management  services  to  institutional
clients,   which  include  pension  plans,   employee  benefit  plans,   trusts,
foundations  and  corporations,  as well as to individual  clients.  BCM markets
these  services  primarily  through  financial  consultants,  plan  sponsors and
brokerage  firms.  Most new  business  over the past  three  years has come from
managed account programs.

       The bond portfolios of the Group's insurance  subsidiaries are managed by
BCM's  professional  fixed income managers who have experience with a wide range
of fixed income  investments,  such as U.S.  government  bonds,  mortgage-backed
securities, high-grade, high-yield corporate bonds, and municipal bonds.

       BCM's principal  source of revenue is the management of equity assets for
individuals and  institutions on a nationwide  basis.  Revenues in this area are
derived  exclusively  from management  fees which are calculated  based upon the
dollar value of assets managed.  Additional fees,  representing less than 15% of
BCM's  total  fees  during  2000,  were  received  from  the  Group's  insurance
subsidiaries, again based on a percentage of assets under management.

                                       7
<PAGE>

       BCM has managed  account  marketing  agreements  with over 20 firms,  and
assets managed under these  agreements  represented the majority of BCM's assets
under management for unaffiliated parties. Some of these agreements have been in
place for more than ten years.  Either party may terminate  these  agreements at
will, though none of these contracts has ever been terminated by the other party
at any time  during  the past ten  years.  BCM's  largest  customers  are Morgan
Stanley Dean Witter and  PaineWebber.  During 2000,  fees from each of these two
customers  represented more than 10% of BCM's revenues.  An agreement negotiated
with an affiliate,  London  Pacific Life & Annuity  Company,  also provided more
than 10% of BCM's revenues during 2000.

       In 2000, BCM joined the core wrap program of Prudential  Securities,  one
of the big  five  U.S.  retail  brokerage  firms.  BCM is  currently  discussing
distribution agreements with other firms and also is actively seeking to broaden
its  product  array with firms with which it has  existing  relationships.  This
brokerage  firm  "shelf-space"  is  becoming   increasingly   valuable,  as  the
advantages of separately managed accounts for individuals with at least $100,000
of investable assets become more broadly known.

Berkeley International Limited

       Berkeley  International  Limited is located in Jersey,  Channel  Islands.
Previously,  BIL  managed  investment  portfolios  for third  parties  and Group
companies.  Non-affiliated  assets under management have been decreasing  during
recent years as managed  portfolios  reached the end of their scheduled lives or
were closed early. Currently, BIL primarily manages the listed equity securities
held by the Group's insurance subsidiaries in their investment portfolios.

Competition

       There are numerous competitors offering asset management services. Within
each brokerage firm managed account program, there are dozens of competitors and
many more potential  competitors.  BCM competes based upon performance,  service
and marketing.  Price is set by market  conditions and is generally the same for
all  investment  managers with managed  account  agreements  with each brokerage
firm.  There are no  dominant  competitors  in the managed  account  marketplace
because  brokerage  firms seek to limit the total client assets with any manager
and because  performance  records tend to vary over time.  In relation to direct
institutional  and individual  client  relationships,  BCM competes based on the
same principal  factors and price may be a secondary  factor. In addition to the
above,  there is  competition  within the  securities  industry in obtaining and
retaining the services of investment executives.

Venture Capital Management

       Berkeley   International   Capital  Corporation   ("BICC")  and  Berkeley
International  Capital  Limited  ("BICL")  comprise the Group's  venture capital
management  business.  In recent years, the Group's venture capital subsidiaries
have focused  primarily on U.S.  high  technology  companies,  with  investments
generally ranging from $5 million to $25 million.

Berkeley International Capital Corporation

       BICC,  based in San Francisco,  arranges  private equity  placements into
rapidly growing technology companies,  mainly on behalf of the Group's operating
companies.   Placements  are  typically   arranged  in  later  stage  technology
companies,  which are near beta test of their product and need to scale up their
engineering,  marketing and sales infrastructure. The venture capital management
business earns fees and may take some principal positions within BICL.

       Over the past 21 years, BICC has arranged over $1.8 billion of placements
in the private capital  markets on behalf of Group companies and clients.  These
have included investments in America Online, Oracle Corporation,  Cadence Design
Systems,  Inc., LSI Logic Corporation,  Broderbund  Software,  3COM Corporation,
Integrated Device Technology,  Inc., Cypress Semiconductor,  Inc. and New Focus,
Inc.

                                       8
<PAGE>

       During  2000,  the Group's  operating  companies  continued to follow the
discipline of retaining the publicly  listed  securities  arising out of initial
public offerings, where those securities have the potential to yield substantial
future gains.

       Proximity,  focus,  relationships,   experience  and  responsiveness  are
factors in BICC's success.  Many of the portfolio companies are headquartered in
close  proximity  to  BICC's  offices.  Most of these  companies  specialize  in
"business-to-business"  Internet technologies,  telecommunications (both central
office and consumer premises), data communications, software, semiconductors and
knowledge learning.

       The private equity technology  investments arranged by BICC and currently
held by the Group's operating subsidiaries are: AccessLan Communications,  Inc.;
Agility Communications, Inc.; Alacritech, Inc.; BeamReach Networks, Inc.; BRECIS
Communications Corporation; Catena Networks, Inc.; Ceon Corporation;  Fast-Chip,
Inc.; I-Cube, Inc.; KnowledgeNet,  Inc.; LightChip,  Inc.; LongBoard, Inc.; Mahi
Networks,  Inc.;  Mainstreet  Networks,  Inc.;  Mayan Networks,  Inc.;  RedCreek
Communications, Inc.; Shomiti Systems, Inc.; Telera, Inc.; Triscend Corporation;
Westwave Communications, Inc.; and Xtera Communications, Inc.

Berkeley International Capital Limited

       BICL,  based in  Guernsey,  Channel  Islands,  is able to take  principal
positions in connection with private equity transactions  arranged by its sister
company,  BICC.  These  private  equity  positions may evolve into listed equity
securities  pursuant  to initial  public  offerings  or in  connection  with the
acquisition of the private issuing  company by a listed company.  As of December
31,  2000,  BICL  held  $105.4  million  of  such  positions  in  listed  equity
securities.

Competition

       The  Group's  venture  capital  management   business  faces  competition
primarily from commercial  banks,  investment  banks,  venture capital firms and
insurance  companies,   many  of  which  have  substantially  greater  financial
resources  than the  Group.  The  marketplace  for  venture  capital  is  highly
competitive, and demand for financing is also influenced by current economic and
stock market  conditions.  The pool of capital that is seeking  opportunities to
invest in later stage  venture  capital  companies  has grown  rapidly in recent
years.  BICC has,  however,  continued to maintain a good flow of quality deals,
and  management  believes  that the recent  shakeout in the Internet  sector has
improved BICC's competitive position.

REGULATION

Life Insurance and Annuities

       London Pacific Life & Annuity  Company  ("LPLA") is subject to regulation
and supervision by the insurance regulatory agencies of the U.S. states in which
it transacts business.  State laws generally establish supervisory agencies with
broad  regulatory  authority,  including  the  power to:  (i)  grant and  revoke
business  licenses,  (ii)  regulate and  supervise  trade  practices  and market
conduct, (iii) establish guaranty associations, (iv) license agents, (v) approve
policy forms, (vi) establish reserve requirements,  (vii) prescribe the form and
content of required  financial  statements  and reports,  (viii)  determine  the
reasonableness and adequacy of statutory capital and surplus,  (ix) regulate the
type and amount of permitted investments,  and (x) limit the amount of dividends
that may be paid without obtaining regulatory approval.

       On  the  basis  of  statutory  statements  filed  with  state  regulators
annually,   the  National  Association  of  Insurance   Commissioners   ("NAIC")
calculates certain financial ratios to assist state regulators in monitoring the
financial condition of insurance companies.  A "usual range" of results for each
ratio is used as a  benchmark.  Departure  from the usual ranges on four or more
ratios generally lead to enquiries from individual state insurance  departments.
In the past,  variances in certain  ratios  resulted in  enquiries  from certain
insurance  departments to which LPLA  responded.  Such enquiries did not lead to
any restrictions affecting LPLA's operations.

                                       9
<PAGE>

       The NAIC  has  developed  risk  based  capital  ("RBC")  standards  which
establish capital requirements for insurance companies based on the ratio of the
company's total adjusted capital (defined as the total of its statutory capital,
surplus,  asset valuation reserve and certain other adjustments) to its RBC. The
standards are designed to help identify  companies  which are  under-capitalized
and require  specific  regulatory  actions in the event an  insurer's  RBC ratio
falls below  specified  levels.  As of December  31,  2000,  the total  adjusted
capital of LPLA was in excess of the minimum  level of RBC that would  require a
regulatory response.

       The U.S.  federal  government  does not directly  regulate the  insurance
industry.  However,  federal legislation and administrative  policies in several
areas,  including  pension  regulation,  age and sex  discrimination,  financial
services regulation,  securities  regulation and federal taxation, do affect the
insurance  industry.  From time to time,  legislation  is introduced in Congress
that would allow the federal government to assume some role in the regulation of
the insurance industry.

       LPLA prepares financial  statements on the basis of statutory  accounting
practices prescribed or permitted by the insurance department in North Carolina,
its state of  domicile.  Prescribed  statutory  accounting  practices  include a
variety of  publications  promulgated  by the NAIC as well as U.S.  state  laws,
regulations  and  administrative  rules.  In  1998,  the NAIC  adopted  codified
statutory  accounting  principles.  The  purpose  of  codification  is to create
uniformity  in  statutory  financial  reporting  across U.S.  states.  The North
Carolina  Insurance   Department  has  adopted  the  new  statutory   accounting
principles,  effective January 1, 2001. The Group expects the  implementation of
the new statutory accounting  principles will not have a material adverse impact
on LPLA's statutory surplus.

       LPLA is subject to guaranty fund  assessment laws which exist in all U.S.
states in which LPLA  transacts  business.  As a result of  operating in a state
which has guaranty  fund  assessment  laws, a solvent  insurance  company may be
assessed  for  certain  obligations  arising  from  the  insolvencies  of  other
insurance  companies which operated in that U.S. state. As of December 31, 2000,
LPLA has accrued $1.0 million for estimated  expected future  assessments in its
financial statements.

       London Pacific Assurance  Limited  ("LPAL")  is  regulated  by the Jersey
Financial  Services  Commission  ("JFSC") and under  Article 6 of the  Insurance
Business (Jersey) Law 1996 is permitted to conduct long-term insurance business.
The JFSC sets out the conditions  with which LPAL must comply and determines the
reporting requirements and the frequency of reporting. These conditions include:
(i) LPAL  must  hold,  at all  times,  approved  assets  at  least  equal to the
long-term  insurance fund plus the required minimum  solvency  margin,  (ii) the
margin of solvency must be the greater of GBP 50,000 or 2.5% of the value of the
long-term  business fund, (iii) at least 25% of total assets must be represented
by approved  assets,  (iv) a maximum of 20% of the approved assets  necessary to
cover the long-term  insurance fund and the required minimum solvency margin may
be held in private equity investments, and (v) assets equal to not less than 90%
of  liabilities  must be placed with approved  independent  custodians  and kept
unavailable  from access by other  creditors  of LPAL.  As of December 31, 2000,
LPAL met all of these conditions.

       LPAL is required to submit annual  audited  financial  statements  and an
audited annual filing to the JFSC in the format consistent with that required by
the  Insurance  Directorate  of HM  Treasury in the United  Kingdom.  The annual
filing submitted by LPAL must be accompanied by a Certificate from the Appointed
Actuary that based on sufficiently prudent assumptions, assets are sufficient to
cover all  liabilities  and that the annual  filing  contains a report  from the
Appointed  Actuary on the matching of  investments  to  liabilities.  All sales,
marketing and  advertising  literature used by LPAL must also be provided to the
JFSC.  Such  literature  must state that LPAL is a  regulated  insurer  based in
Jersey.

Other Business Segments

       In the U.S., the Group's investment adviser subsidiaries,  London Pacific
Advisory  Services,  Inc. and Berkeley  Capital  Management,  are  registered as
investment  advisers under the Investment  Advisers Act of 1940, as amended (the
"Advisers Act"). Because these subsidiaries have more than $25 million of assets
under  management,  they are required to register with the U.S.  Securities  and
Exchange  Commission  ("SEC").  The  Advisers  Act imposes  detailed  regulatory
requirements on the activities of SEC registered investment advisers, including,
but  not  limited   to:   contents   of   advisory   contracts,   recordkeeping,
fee structures, performance

                                       10
<PAGE>

advertising,   fiduciary  duty  to  clients,   and  custody  of  client  assets.
Additionally,  SEC registered  investment advisers are subject to state statutes
regulating  fraudulent  activity  in all  U.S.  states  in  which  they  conduct
business.

       The Group's investment adviser subsidiaries provide investment management
services to U.S.  retirement plan accounts.  Consequently,  they are required to
follow the  provisions of the Employee  Retirement  Income  Security Act of 1974
("ERISA"),  in addition to the  provisions of the Advisers Act. ERISA sets forth
specific rules  governing the conduct of ERISA plan  fiduciaries,  including but
not limited to: use of soft dollars,  proxy voting,  bonding  requirements,  tax
considerations,   performance  fees,  agency  and  principal  transactions,  and
solicitation  fees.  ERISA falls under the  governing  authority of the SEC, the
U.S. Department of Labor and the U.S. Internal Revenue Service.

       The Group's  broker-dealer  subsidiary,  London Pacific Securities,  Inc.
("LPS") (formerly Select Capital Corporation),  negotiates security transactions
on behalf of its clients through registered affiliates in all 50 U.S. states and
clears all  transactions on a fully  disclosed  basis through  another  clearing
broker-dealer,  which maintains the customer  accounts.  LPS is registered under
the Exchange Act and is subject to  regulation  by the SEC. The Exchange Act and
related  rules  generally  regulate  the conduct of business  and the  financial
condition  of  registered  broker-dealers.  LPS  is a  member  of  the  National
Association of Securities Dealers, Inc. ("NASD"), a self-regulatory organization
that oversees the  activities of  registered  broker-dealers.  The NASD requires
compliance with its membership,  registration,  conduct,  and marketplace rules,
which govern,  among other things,  the  registration of personnel,  finance and
operations,  recommendations  to customers,  sales  practices,  underwriting  of
securities and supervisory responsibilities.

       Berkeley   International  Limited  is  registered  with  and  subject  to
regulation by the Jersey  Financial  Services  Commission  under the  Investment
Business  (Jersey) Law 1998.  BIL is  authorized  to manage  private  closed-end
investment funds, as defined by law.

Group

       The Group  employs  compliance  officers  responsible  for  managing  the
Group's compliance with applicable regulatory  requirements.  Although the scope
of  regulation  and form of  supervision  to which  the  Group  is  subject,  as
described above, may vary from jurisdiction to jurisdiction, the applicable laws
and  regulations  often are complex and  generally  grant  broad  discretion  to
supervisory  authorities  in  adopting  regulations  and  supervising  regulated
activities.  The Group's  continuing ability to engage in the life insurance and
annuities,  financial  advisory  services,  asset management and venture capital
management  businesses in the  jurisdictions  in which it currently  operates is
dependent upon its compliance  with the rules and regulations  promulgated  from
time to time by the appropriate authorities in each of these jurisdictions.  The
burden  of such  regulation  weighs  equally  upon  all  companies  carrying  on
activities  similar to those of the Group,  and the Group does not consider such
regulation to adversely affect its competitive position.

EMPLOYEES

       As of December 31, 2000,  the Group had 237  employees.  The breakdown by
business  segment was as follows:  life insurance and annuities,  87;  financial
advisory services, 97; asset management, 24; venture capital management, 20; and
corporate,  9.  None  of the  Group's  employees  are  covered  by a  collective
bargaining agreement and the Group has not experienced any work stoppages.


Item 2.    PROPERTIES

       The Group operates from four offices located in Jersey (Channel Islands),
San Francisco,  Sacramento and Raleigh,  currently  consisting of  approximately
57,000  square  feet  of  space  in  the  aggregate.  All  offices  are  leased.
Approximately  26,000 square feet is leased in Jersey,  Raleigh and  Sacramento,
under  leases  expiring  from  2002 to  2010,  pertaining  to the  Group's  life
insurance and annuities business.  Approximately 15,000 square feet is leased in
Sacramento,  under a lease expiring in 2002, pertaining to the Group's financial
advisory services segment. Under a lease expiring in 2004,  approximately 12,000
square  feet is leased in San

                                       11
<PAGE>

Francisco of which 50% pertains to the Group's asset management  segment and 50%
to the Group's venture capital management  segment.  Approximately  4,000 square
feet is leased  for  corporate  activities  in Jersey and San  Francisco,  under
leases  expiring  in 2004 and 2010.  See Note 11 to the  Consolidated  Financial
Statements in Item 8 below for further information regarding the Group's leases.


Item 3.    LEGAL PROCEEDINGS

       There are no legal proceedings pending against the Group which are likely
to have a material adverse effect on the Group's  financial  position or results
of operations.


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

       No  matters  were  submitted  to the  Company's  shareholders  during the
quarter ended December 31, 2000.


                                     Part II

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

Market Information

       The principal  trading  market for the Company's  Ordinary  Shares is the
London  Stock  Exchange,  on which such shares have been listed  since  February
1985. American Depositary Shares ("ADSs"), each representing one Ordinary Share,
are represented by American  Depositary  Receipts ("ADRs") for which The Bank of
New York in New York is the  Depositary.  ADSs  have been  traded in the  United
States from September 1992 through August 1993 on the OTC Bulletin  Board,  from
September  1993 through  November  1999 on The Nasdaq Stock  MarketSM  under the
symbol  "LPGL," and since November 1999 on the New York Stock Exchange under the
symbol "LDP." As of December 31, 2000,  there were  64,433,313  Ordinary  Shares
outstanding.  Also as of that date,  there  were  18,008,971  ADSs  outstanding,
representing  18,008,971  Ordinary Shares or 27.9% of the Company's  outstanding
shares. ADS holders may exercise their voting rights through the ADR Depositary.

       The Company  completed a four-for-one  split of its ADSs,  effective from
the close of business on March 23, 2000. On March 24, 2000, ADS holders received
three  additional  ADSs for every one ADS they held on the record  date of March
23, 2000.  This ADS split did not affect the Company's  Ordinary Shares that are
listed on the London Stock Exchange.

       The  following  table  shows,  for the quarters  indicated,  the reported
highest and lowest middle market  quotations  (which represent an average of bid
and  asked  prices)  for the  Company's  Ordinary  Shares  on the  London  Stock
Exchange,  based on its Daily  Official  List,  and the high and low trade price
information  of the ADSs as obtained from Nasdaq and the New York Stock Exchange
(as restated to reflect the four-for-one split in March 2000):


                                       12
<PAGE>
<TABLE>
<CAPTION>


                                                                    Pounds Per               U.S. Dollars
                                                                  Ordinary Share               Per ADS
                                                               --------------------      --------------------
                                                                 High       Low            High        Low
                                                               --------   ---------      ---------  ---------

<S>                                                                <C>        <C>         <C>        <C>
1999:
First quarter ..............................................   GBP 2.28   GBP 1.85        $ 3.84     $ 3.08
Second quarter..............................................       5.08       2.20          9.72       3.31
Third quarter...............................................       4.35       3.18          7.26       5.31
Fourth quarter..............................................       6.18       2.65         11.61       4.37

2000:
First quarter...............................................      19.38       5.15         32.50       8.00
Second quarter..............................................      13.90       6.08         24.06       8.75
Third quarter...............................................      18.33       8.00         26.37      12.00
Fourth quarter..............................................      13.93       5.53         21.00       7.37

2001:
First quarter (through March 5, 2001).......................       8.05       5.18         12.00       7.06

</TABLE>

Holders

       As of March 5, 2001, the Company had approximately  1,954 shareholders of
record and 54 ADS  holders of record.  Because  many shares and ADSs are held by
brokers  and various  institutions  on behalf of other  holders,  the Company is
unable to estimate the total number of beneficial  holders  represented by these
holders of record.

Dividends

       The Company has paid  dividends on its  Ordinary  Shares for each year in
which it has been  listed  on the  London  Stock  Exchange,  from  1985 to date.
Dividends  on its  Ordinary  Shares  are paid  twice a year.  An  interim  gross
dividend on the Company's Ordinary Shares of $0.11 per share was declared by the
Board of  Directors  in  August  2000 and was paid on  September  25,  2000.  In
February  2001,  the directors  recommended  a final gross  dividend for 2000 of
$0.18 per Ordinary Share which, together with the interim dividend, made a total
gross  dividend  for 2000 of $0.29  ($0.232 net of 20% Jersey tax) per  Ordinary
Share.  The final dividend is subject to formal  approval by shareholders at the
Company's Annual General Meeting on May 31, 2001, and, if approved, will be paid
on June 1, 2001.

       Holders of ADSs are entitled to receive  dividends  paid on the Company's
Ordinary  Shares through the ADR  Depositary.  Subject to formal approval of the
dividend by shareholders,  ADS holders will receive a final dividend for 2000 of
$0.144 (net of 20% Jersey tax) on June 11, 2001.

       The table below shows the amounts of interim,  final and total  dividends
together  with the net  dividends  (after 20% Jersey tax) paid on each  Ordinary
Share for the last two  years.  Dividends  per ADS also are shown,  restated  to
reflect the four-for-one split in March 2000.
<TABLE>
<CAPTION>

                                 U.S. Dollars Per Ordinary Share                           U.S. Dollars Per ADS
                  --------------------------------------------------------------       ----------------------------
                             Gross                             Net
                  -----------------------------    -----------------------------
                  Interim    Final     Total       Interim    Final     Total          Interim    Final     Total
                  -----------------------------    -----------------------------       ----------------------------


<S>                <C>       <C>       <C>          <C>       <C>       <C>             <C>       <C>       <C>
1999............   $0.11     $0.18     $0.29        $0.088    $0.144    $0.232          $0.088    $0.144    $0.232
2000............   $0.11     $0.18*    $0.29*       $0.088    $0.144*   $0.232*         $0.088    $0.144*   $0.232*

</TABLE>

----------------------------
* The final dividend is subject to formal approval by shareholders at the Annual
General Meeting on May 31, 2001.

                                       13
<PAGE>

       Under current  practice,  holders of ADSs who are residents of the United
States for tax purposes  receive the net dividend  (the gross  dividend less the
associated Jersey income tax). See "Taxation - Taxation of Dividends" below.

       There are  currently no exchange  control  restrictions  in Jersey on the
payment of  dividends  on the  Ordinary  Shares or on the conduct of the Group's
operations.  See Item 7  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations"  and Note 7 to the  Consolidated  Financial
Statements  in  Item 8 of  this  Form  10-K  for  details  regarding  regulatory
restrictions on dividends.

TAXATION

       The  following  summary  of  certain  Jersey  and U.S.  tax  consequences
regarding share ownership is based on law and published  practice as of March 5,
2001, and is subject to any changes in Jersey and U.S. law or published practice
or in the establishment of any double taxation convention between Jersey and the
U.S.  occurring  after that date.  The  summary  is not a complete  analysis  or
listing  of all the  possible  tax  consequences  and does not  address  the tax
implications for special classes of holders, such as banks,  insurance companies
and dealers in  securities.  The summary also does not address U.S. state income
tax  consequences.  Owners of Ordinary  Shares and ADSs should consult their own
tax advisors as to the tax consequences of such ownership.

       There is no double tax treaty or similar  convention between the U.S. and
Jersey.  For the purposes of the U.S. Internal Revenue Code of 1986, as amended,
it is assumed that  beneficial  owners of ADSs, in accordance  with the terms of
the Deposit Agreement,  will be treated as the owners of the underlying Ordinary
Shares represented by the ADSs.

Taxation of Dividends

       Dividends  are  declared  gross in U.S.  dollars.  Dividends  paid by the
Company are treated as having  suffered  Jersey  income tax at the standard rate
(currently 20%) on the gross amount thereof.

       Charities,  superannuation  funds and certain assurance  companies in the
U.K.,  together  with  individual  investors  who are  Commonwealth  citizens or
citizens of a member state of the European Community,  may be entitled to a full
or partial  repayment of the Jersey income tax credit suffered on distributions,
on submission of a claim to the Jersey  Comptroller of Income Tax.  Shareholders
who are unsure of their tax position should consult their tax advisor.

       Generally,  the net  dividend  paid to a holder  or  owner  who is a U.S.
citizen, a U.S. resident, a U.S. domestic corporation or a trust or estate whose
income is subject to U.S. federal income taxation  regardless of source (a "U.S.
holder") will be included in gross income and treated as foreign source dividend
income for U.S. federal income tax purposes to the extent payment is made out of
the Company's  current or accumulated  earnings and profits as determined  under
U.S.  federal  income  tax  principles.  Such  dividends  generally  will not be
eligible for the "dividends  received"  deduction  permitted to be taken by U.S.
corporations.

       However,  special  rules apply for purposes of  determining  the dividend
income and potential  foreign tax credits  available to a U.S.  corporation that
controls 10% or more of the Company's voting stock. Any such shareholder  should
consult its tax advisor with  respect to the U.S. tax  treatment of its interest
in the Company.

Taxation of Capital Gains

       Currently,  there are no Jersey  taxes  levied on capital  gains.  A U.S.
holder that sells or exchanges an ADR or Ordinary Share will recognize a gain or
loss for U.S. federal income tax purposes,  in an amount equal to the difference
between  the  amount  realized  and the  holder's  tax basis in  either  the ADS
represented  by the ADR or the  Ordinary  Share.  Such a gain or loss  will be a
capital gain or loss if the ADR or the Ordinary Share was a capital asset in the
hands of the U.S. holder and will be a long-term capital gain or loss if the ADR
or Ordinary Share was held for more than one year (including,  in the case of an
ADR,  the period  during  which the

                                       14
<PAGE>

Ordinary Shares  surrendered in exchange  therefore were held). In general,  the
long-term  capital gain of a  non-corporate  U.S. holder is subject to a maximum
tax rate of 20%.

       Deposits and  withdrawals by U.S.  holders of Ordinary Shares in exchange
for ADSs are not currently subject to U.S. federal income tax.

Backup Withholding Tax

       A U.S. holder may be subject to U.S. backup  withholding tax at a rate of
31% with respect to dividends  received or gross  proceeds from the sale of ADRs
or Ordinary Shares unless the holder provides a taxpayer  identification  number
and certain  certifications  or otherwise  establishes  an exemption from backup
withholding.  Certain classes of persons, such as corporations,  are exempt from
backup  withholding.  Backup  withholding  is not an additional  tax; the amount
withheld may be credited against the holder's U.S. federal income tax liability,
and a refund  of any  excess  may be  obtained  from the U.S.  Internal  Revenue
Service.

Estate and Gift Tax

       No death, estate, gift,  inheritance or capital transfer taxes are levied
in Jersey.

Stamp Duty and Stamp Duty Reserve Tax

       No U.K.  stamp  duty  should be payable on any  transfer  of an  Ordinary
Share,  or of an ADS,  provided it is  executed  and  retained  outside the U.K.
Therefore,  a transfer of an ADS in the United States would not ordinarily  give
rise to a U.K. stamp duty charge.

       An instrument transferring Ordinary Shares, or an ADS, could attract U.K.
stamp duty if its execution  relates to anything done or to be done in the U.K.,
for example if it is executed in the U.K. or to be brought  into the U.K.  after
execution. If the transfer is on a sale then the rate of stamp duty will be 0.5%
of the  consideration  given.  This  charge is rounded up to the  nearest GBP 5.
Gifts and other transfers which are neither sales nor made in contemplation of a
sale do not attract this charge. Instead they will either be exempt or attract a
fixed duty of GBP 5 per transfer.

       A  transfer  from  the  Depositary  to an ADS  holder  of the  underlying
Ordinary  Shares may be subject to a fixed stamp duty of GBP 5 if the instrument
of transfer  relates to anything done or to be done in the U.K.,  for example if
it is executed in the U.K. or is to be brought into the U.K. after execution.  A
transfer  of  Ordinary  Shares from the  Depositary  directly to a purchaser  on
behalf  of an ADS  holder  may  attract  stamp  duty  at a rate  of  0.5% of the
consideration  (rounded up to the nearest GBP 5) if execution of the  instrument
of transfer  relates to anything done or to be done in the U.K.,  for example if
it is executed in the U.K. or is to be brought into the U.K. after execution.

       U.K.  stamp  duty  reserve  tax will not be payable  on an  agreement  to
transfer the Ordinary Shares or ADSs.

                                       15
<PAGE>

Item 6.    SELECTED FINANCIAL DATA

         The following is a summary of selected  financial  data for the Company
and its  subsidiaries.  This data should be read in conjunction with the audited
consolidated  financial  statements  of the Company which are included in Item 8
"Financial  Statements  and  Supplementary  Data" of this Form 10-K. ADS amounts
have been restated to reflect the four-for-one split in March 2000.
<TABLE>
<CAPTION>

                                                                              Years Ended/As of December 31,
                                                                 ------------------------------------------------------
                                                                    2000       1999       1998       1997       1996
                                                                 ---------- ---------- ---------- ---------- ----------
                                                                        (In thousands, except per share and ADS data)
<S>                                                              <C>        <C>        <C>        <C>        <C>
Operating Results
Revenues from continuing operations, including net realized
  and change in net unrealized investment gains.............     $  189,521 $  472,566 $  150,497 $  140,712 $  137,608
Income from continuing operations before income tax
  expense...................................................         15,010    305,662     28,882     26,877     32,295
Income (loss) from discontinued operations..................              -          -      4,089        921        (65)
Income tax expense (benefit)................................        (17,447)    53,786      6,515      2,920      7,945
Net income .................................................         32,457    251,876     26,456     24,878     24,285
Earnings per share and ADS:
    Basic...................................................           0.64       5.05       0.51       0.45       0.44
    Diluted.................................................           0.53       4.54       0.49       0.43       0.42

Financial Position
Cash and investments........................................      2,127,414  1,857,143  1,482,757  1,439,034  1,473,965
Total assets................................................      2,562,988  2,194,157  1,635,024  1,606,049  1,667,752
Long-term debt..............................................         35,556          -          -          -          -
Shareholders' equity........................................        567,742    552,475    328,481    345,346    326,939
Book value per share and ADS................................           8.81       8.57       5.10       5.05       4.79

Ordinary Share and ADS Data
Ordinary Shares outstanding as of December 31...............         64,433     64,433     64,424     68,328     68,326
Weighted average shares used in:
    Basic earnings per share calculation....................         50,795     49,892     52,206     55,490     54,980
    Diluted earnings per share calculation..................         60,728     55,445     53,552     57,295     57,807
Cash dividends declared per share (gross)...................     $     0.29 $     0.29 $     0.29 $     0.29 $     0.29
Cash dividends declared per ADS.............................     $    0.232 $    0.232 $    0.232 $    0.232 $    0.232
Market price per share on December 31.......................     GBP   5.53 GBP   5.59 GBP   1.87 GBP   1.77 GBP   2.10
Market price per ADS on December 31.........................     $     7.56 $     9.00 $     3.14 $     3.00 $     3.50
Market capitalization as of December 31.....................     $  530,431 $  583,495 $  199,449 $  198,341 $  244,774

</TABLE>

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

       This  Management's  Discussion  and Analysis of Financial  Condition  and
Results  of  Operations   should  be  read  in  conjunction   with  the  audited
consolidated  financial statements,  and the notes thereto,  presented in Item 8
"Financial   Statements  and   Supplementary   Data"  of  this  Form  10-K.  The
consolidated  financial  statements  are prepared in accordance  with  generally
accepted  accounting  principles in the United States.  This item should also be
read in conjunction  with the  "Forward-Looking  Statements and Factors That May
Affect  Future  Results"  which are set forth below and in the  Company's  other
filings with the SEC.

Forward-Looking Statements and Factors That May Affect Future Results

       This  Management's  Discussion  and Analysis of Financial  Condition  and
Results of Operations and other sections of this Report contain  forward-looking
statements  within  the  meaning  of  Section  21E of  the  Exchange  Act.  Such
forward-looking  statements  are  based  on  current  expectations,   estimates,
forecasts and  projections

                                       16
<PAGE>

about the industries in which the Group operates,  management's  current beliefs
and  assumptions  made by  management.  Words such as "expects,"  "anticipates,"
"intends," "plans,"  "believes,"  "seeks,"  "estimates,"  "goals," variations of
such words and similar expressions are intended to identify such forward-looking
statements.  These  statements  are not  guarantees  of future  performance  and
involve  certain  risks,  uncertainties  and  assumptions  that are difficult to
predict.  Future  outcomes  and  results  may  differ  materially  from  what is
expressed or forecast in such forward-looking  statements.  The Group undertakes
no obligation to update any forward-looking  statements,  whether as a result of
new information, future developments or otherwise.

       Factors  that  could  cause  or  contribute   to   deviations   from  the
forward-looking statements include those discussed in this section, elsewhere in
this  Report  and in the  Company's  other  filings  with the SEC.  The  factors
include,   but  are  not  limited  to,  (i)  the  risks  described  in  Item  7A
"Quantitative and Qualitative Disclosures About Market Risk," (ii) variations in
demand for the Group's products and services,  (iii) the success of new products
and  services  provided  by the Group,  (iv) the credit  ratings of the  Group's
insurance  subsidiaries,  (v) significant changes in net cash flows in or out of
the Group's businesses,  (vi) fluctuations in the performance of debt and equity
markets  worldwide,  (vii) the  enactment of adverse  state,  federal or foreign
regulation or changes in government policy or regulation  (including  accounting
standards)  affecting  the  Group's  operations,  (viii) the effect of  economic
conditions and interest rates in the U.S., the U.K. or internationally, (ix) the
ability of the Group's  subsidiaries to compete in their respective  businesses,
and (x) the ability of the Group to attract and retain key personnel.

RESULTS OF OPERATIONS BY BUSINESS SEGMENT

         Income  before  tax  expense  for  the  Group's  reportable   operating
segments, based on management's internal reporting structure, is as follows:


<TABLE>
<CAPTION>
                                                                                          Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                     2000           1999           1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)
<S>                                                                              <C>            <C>            <C>
Income by operating segment:
Life insurance and annuities (1) (2) ........................................    $     132,671  $     147,753  $      23,833
Financial advisory services .................................................           (2,261)           166            369
Asset management (1) ........................................................            1,778          1,036            838
Venture capital management (2) ..............................................         (110,444)       158,627          3,520
                                                                                 -------------  -------------  -------------
                                                                                        21,744        307,582         28,560
Reconciliation of segment amounts to consolidated amounts:
Interest income .............................................................            1,574          2,836          4,526
Corporate expenses ..........................................................           (7,388)        (4,366)        (3,950)
Goodwill amortization .......................................................             (248)          (348)          (236)
Interest expense ............................................................             (672)           (42)           (18)
                                                                                 -------------  -------------  -------------
Consolidated income from continuing operations before
  income tax expense ........................................................    $      15,010  $     305,662  $      28,882
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------
(1)  Intersegmental revenue in asset management segment
     from life insurance and annuities segment...............................    $       2,775  $       1,597  $       2,880
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------
(2)  Intersegmental revenue in venture capital management
     segment from life insurance and annuities segment.......................    $       7,474  $       7,943  $       2,945
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------
</TABLE>


         Business  segment  data  contained  in  Note  17  to  the  Consolidated
Financial  Statements  should be read in  conjunction  with this  discussion.  A
detailed discussion of the results for each reportable segment follows.

                                       17
<PAGE>

Life Insurance and Annuities

       Certain information  regarding the life insurance and annuities segment's
results of operations is as follows:
<TABLE>
<CAPTION>

                                                                                           Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                     2000           1999           1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)

<S>                                                                              <C>            <C>            <C>
Revenues:
Investment income............................................................    $     103,909  $      85,768  $      83,800
Insurance policy charges ....................................................            7,400          6,671          7,111
Net realized investment gains, including related amortization (1) ...........          123,661          3,986          4,944
Change in net unrealized investment gains on trading securities,
  including related amortization (1).........................................            8,269        144,861         11,184
Other fee income ............................................................            1,684          1,421          1,065
                                                                                 -------------  -------------  -------------
Total revenues and investment gains, including related
  amortization (1)...........................................................          244,923        242,707        108,104

Expenses:
Interest credited on insurance policyholder accounts                                    94,065         73,753         68,067
Amortization of deferred policy acquisition costs related to operations (1)              9,420          8,324          8,171
Mortality expenses (gains)...................................................             (340)          (167)          (153)
General and administrative expenses .........................................            9,107         13,044          8,186
                                                                                 -------------  -------------  -------------
Total expenses related to operations (1).....................................          112,252         94,954         84,271
                                                                                 -------------  -------------  -------------
Income before income tax expense ............................................    $     132,671  $     147,753  $      23,833
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------
</TABLE>
(1)  As  a  result  of  net  realized  investment  gains  on  available-for-sale
securities,  and the  change  in net  unrealized  investment  gains  on  trading
securities,   which   back   the  life   insurance   and   annuities   segment's
investment-type products,  amortization of deferred policy acquisition costs was
increased by $11,735,  $8,473 and $8,000 in 2000,  1999 and 1998,  respectively.
For  purposes  of the  above  business  segment  presentation,  this  additional
amortization  is not shown in operating  expenses in accordance with the Group's
accounting  policy used to prepare the  consolidated  income  statement,  but is
netted against  realized  investment  gains ($7,544,  $4,276 and $2,926 in 2000,
1999 and 1998,  respectively) and the change in net unrealized  investment gains
($4,191, $4,197 and $5,074 in 2000, 1999 and 1998, respectively).


2000 compared to 1999

       In 2000,  the life  insurance and annuities  segment,  which  consists of
London  Pacific Life & Annuity  Company  ("LPLA") and London  Pacific  Assurance
Limited  ("LPAL"),  contributed  $132.7  million to the Group's  overall  income
before  taxes,  a decrease of $15.1 million from 1999.  Net realized  investment
gains,  including  related  amortization  of deferred policy  acquisition  costs
("DPAC"),  increased  by  $119.7  million,  while the  change in net  unrealized
investment  gains,  including  related  DPAC  amortization,  decreased by $136.6
million.  Amortization  of DPAC,  excluding  amortization  related to investment
gains and losses,  increased  by $1.1  million,  the spread  between  investment
income and interest  credited to insurance  policyholder  accounts  decreased by
$2.2 million, and general and administrative expenses decreased by $3.9 million.
Insurance policy charges  increased by $0.7 million,  other fee income increased
by $0.3 million over 1999,  and mortality  gains  increased by $0.2 million over
1999.

       In accordance with U.S. GAAP, premiums collected on annuity and universal
life contracts are not reported as revenues, but rather as deposits to insurance
liabilities. Revenues for these products are recognized over time in the form of
investment  income  and  surrender  or other  charges.  LPLA  offers  both fixed
annuities  which  typically  have an interest rate  guaranteed  for one to seven
years,  after  which the  company  has the  discretionary  ability to change the
crediting rate to any rate not below a guaranteed  rate, and variable

                                       18
<PAGE>

annuities  which allow the contract  holders the ability to direct premiums into
specific  investment  portfolios  with  rates  of  return  being  based  on  the
performance  of the portfolio.  LPAL began selling  guaranteed  bond  contracts,
which are similar to LPLA's fixed annuity  products,  in the Channel Islands and
the U.K. markets during the first quarter of 2000.

       Premiums received for all life, annuity and guaranteed bond products were
$541.5  million  during 2000,  an increase of $219.9  million,  or 68%, over the
premiums received during 1999. LPAL generated $52.8 million of the total premium
volume  received  during 2000.  The increase in LPLA's  premiums  reflected  the
continuing strong performance of its multi-year  guaranteed rate annuity product
series, Regal Accumulator,  which added approximately $286.0 million in sales in
2000, compared to $149.1 million in 1999.  Further,  sales of LPLA's traditional
one-year  guaranteed rate annuity products were $174.1 million in 2000, compared
to $136.2  million in 1999.  LPAL's  sales met first year  expectations  and the
company  was  successful  in  attracting   independent   financial  advisors  to
distribute its products,  despite being a start-up company in a very competitive
U.K. market.

       Interest and dividend  income on investments  was $103.9 million in 2000,
compared with $85.8 million in 1999.  This $18.1 million  increase was primarily
due to asset growth from new business and higher  reinvestment  rates, offset by
acquisitions of capital appreciation (zero yield) securities. The carrying value
of the private  equity  portfolio  as of December  31, 2000 was $234.2  million,
compared with $145.5 million as of December 31, 1999.

       Net investment gains,  including related DPAC  amortization,  were $131.9
million in 2000,  compared to $148.8 million in 1999.  Net  investment  gains in
2000 were  comprised of realized  investment  gains of $131.2  million,  a $12.4
million change in net unrealized  gains on the listed equity  securities held in
the trading  portfolio,  and related DPAC  amortization  of $11.7  million.  The
market  value of the  trading  portfolio  increased  from  $186.5  million as of
December 31, 1999 to $248.7  million as of December  31, 2000.  Additions to the
trading  portfolio  during 2000 of $69.8 million  resulted  from three  investee
companies  that  completed  initial  public  offerings  and four private  equity
investments that were acquired for stock by public companies. LPLA and LPAL sold
certain trading  positions in 2000 that resulted in net realized gains of $170.6
million based on their  aggregate  original cost of $20.1  million.  These gains
were  partially  offset by permanent  impairment  writedowns of $39.4 million on
five private  placement debt securities and one private equity  security.  As of
December 31, 2000, LPLA's and LPAL's investment  portfolios  included ten former
private  preferred stocks that have been converted to listed common equities and
one convertible bond holding in a publicly traded company.  Also, as of December
31, 2000, one additional  private equity  investment was in the process of being
acquired by a publicly traded company in exchange for its stock.

       Total invested  assets  (defined as total assets  excluding  DPAC,  other
assets and income tax related accounts) increased to $2.2 billion as of December
31, 2000,  compared  with $1.7 billion as of December 31, 1999. On total average
invested  assets for 2000,  the average  annualized  net return,  including both
realized and unrealized  investment gains and losses,  was 12.3%,  compared with
16.8% for 1999. This decrease in annualized net return  resulted  primarily from
the decrease in net investment gains discussed above.

       Policy surrender and mortality charge income increased by $0.7 million in
2000 to $7.4 million, compared with $6.7 million in 1999. Full policy surrenders
totaled  $146.7  million in 2000,  a $57.3  million  increase  over 1999.  These
increased surrenders occurred in older blocks of business that were in the later
stages of their surrender  penalty periods.  Annuity  surrenders may increase as
the portion of the  business  that can be  withdrawn  by  policyholders  without
incurring  a  surrender  charge  penalty  grows.   Internal  policy  conversions
accounted for $47.5 million of the full surrenders in 2000,  compared with $16.1
million in 1999.

       Interest credited on policyholder  accounts increased by $20.3 million in
2000 to $94.1  million,  compared with $73.8  million in 1999.  The increase was
primarily due to new business  growth in the multi-year  annuity  products which
generally have higher  crediting  rates than  traditional  annuity  products but
lower acquisition  costs, and an increase in overall policy crediting rates. The
average rate credited to policyholders  was 5.9% in 2000,  compared with 5.6% in
1999.

       Amortization of DPAC, excluding  amortization related to investment gains
and losses,  was $9.4  million in 2000,  an increase of $1.1  million over 1999.
This increase was primarily due to new business  growth,

                                       19
<PAGE>

particularly  with the  multi-year  annuity  products that have shorter  product
lives  than  traditional  annuity  products,  and the  higher  level  of  policy
surrenders  discussed  above.  Realized  and  unrealized  investment  gains were
included in the gross profits used to calculate the  amortization  of DPAC. This
inclusion of  investment  gains  resulted in  additional  amortization  of $11.7
million in 2000, compared with $8.5 million in 1999.

       General and administrative  expenses were $9.1 million in 2000,  compared
with $13.0  million in 1999.  This $3.9 million  decrease was  primarily  due to
non-recurring  legal  expenses  in 1999 and the  receipt  of  several  insurance
guaranty fund refunds during 2000. The annualized  expense ratio in 2000,  which
is defined as general and  administrative  expenses  divided by the average book
value of total cash and investments, was 0.44%, compared with 0.88% in 1999.

       LPAL,  which began its  operations in the first quarter of 2000,  sells a
single  premium term life  insurance  bond designed to offer a yield higher than
bank deposits. The single premium investment, the Guaranteed Return Bond, offers
a  guaranteed  yield and a  guaranteed  return of capital at maturity for either
three or five years.  Yields can be either  taken as  periodic  payments or as a
guaranteed lump sum at maturity.  LPAL had over 800 policyholders as of December
31, 2000, and premiums  totaling  $52.8 million had been generated  through that
date. Sales have been made through 109 financial  intermediaries  in the Channel
Islands,  the U.K. and the Isle of Man,  with over 52% of the premiums  received
from  investors  in, or through  financial  intermediaries  in  Jersey,  Channel
Islands.

1999 compared to 1998

       In 1999,  the life  insurance and annuities  segment  contributed  $147.8
million to the  Group's  overall  income  before  taxes,  an  increase of $123.9
million over the same period in 1998. Net realized  investment gains,  including
related amortization of DPAC, decreased by $1.0 million, while the change in net
unrealized investment gains,  including related DPAC amortization,  increased by
$133.7  million.   Amortization  of  DPAC,  excluding  amortization  related  to
investment  gains and losses,  increased  by $0.2  million,  the spread  between
investment  income and  interest  credited to  insurance  policyholder  accounts
decreased by $3.7 million, and general and administrative  expenses increased by
$4.9 million.  Insurance  policy  charges  decreased by $0.4 million,  other fee
income increased by $0.4 million, and mortality gains remained level.

       Premiums received for all life, annuity and guaranteed bond products were
$321.6  million  during 1999,  an increase of $118.1  million,  or 58%, over the
premiums  received  during 1998. The increase in LPLA's  premiums  reflected the
success of the new five-year guaranteed rate annuity product,  Regal Accumulator
5, which added  $149.1  million in sales  during  1999,  and the 50% increase in
licensed agents to approximately 3,000 at the end of 1999.

       Interest and dividend  income on  investments  was $85.8 million in 1999,
compared  with $83.8 million in 1998.  This $2.0 million  increase was primarily
due to  asset  growth  from new  business,  offset  by an  increase  in  capital
appreciation  (zero yield)  securities and the higher management fees paid to an
affiliate on these  particular  securities.  The  carrying  value of the private
equity portfolio as of December 31, 1999 was $145.5 million, compared with $81.5
million as of December 31, 1998.

       Net investment  gains,  including  related DPAC  amortization were $148.8
million in 1999,  compared to net investment gains of $16.1 million in 1998. Net
investment gains were comprised of realized  investment gains of $8.2 million, a
$149.1 million change in net  unrealized  gains on the listed equity  securities
held in the trading  portfolio,  and related DPAC  amortization of $8.5 million.
The market value of the trading  portfolio  increased  from $27.8  million as of
December 31, 1998 to $186.5  million as of December  31, 1999.  Additions to the
trading  portfolio  during  1999 of $16.0  million  resulted  from two  investee
companies  that  completed  initial  public  offerings  and three  other  equity
investments that were acquired for stock by public companies.  LPLA sold certain
trading positions in 1999 that resulted in realized gains of $28.0 million based
on their  aggregate  original cost of $6.4 million.  An additional  gain of $6.3
million was realized on a private equity investment that was purchased for cash.
Realized  losses  totaled $26.1 million,  primarily due to permanent  impairment
writedowns  on private  debt and equity  securities.  As of December  31,  1999,
LPLA's investment  portfolio  included four former private preferred stocks that
had been converted to listed common equities and two  convertible  bond holdings
in publicly traded companies.

                                       20
<PAGE>
       Total invested assets  increased to $1.7 billion as of December 31, 1999,
compared with $1.3 billion as of December 31, 1998.  On total  average  invested
assets for 1999, the average annualized net return,  including both realized and
unrealized  investment gains and losses, was 16.8%, compared with 8.4% for 1998.
This increase in annualized net return  resulted  primarily from the increase in
net investment gains discussed above.

       Policy surrender and other policy charge income decreased by $0.4 million
in 1999 to $6.7  million,  compared  with  $7.1  million  in 1998.  Full  policy
surrenders  totaled  $89.4  million in 1999, a $2.3 million  increase over 1998.
Internal policy  conversions  accounted for $16.1 million of the full surrenders
in 1999, compared with $2.5 million in 1998.

       Interest credited on policyholder  accounts  increased by $5.7 million in
1999 to $73.8  million,  compared with $68.1 million in 1998.  This increase was
primarily due to new business growth and an increase in overall policy crediting
rates.  The average rate credited to  policyholders  was 5.6% in 1999,  compared
with 5.7% in 1998.

       Amortization of DPAC, excluding  amortization related to investment gains
and losses,  was $8.3  million in 1999,  an increase of $0.1  million over 1998.
This increase was primarily due to new business  growth,  particularly  with the
five-year  product  discussed  above,  and a higher level of policy  surrenders.
Realized and unrealized investment gains were included in the gross profits used
to calculate  the  amortization  of DPAC.  This  inclusion of  investment  gains
resulted in additional  amortization of $8.5 million in 1999, compared with $8.0
million in 1998.

       General and administrative  expenses were $13.0 million in 1999, compared
with $8.2 million in 1998.  The increase was primarily due to higher legal costs
and employee  compensation  and benefit costs.  The annualized  expense ratio in
1999,  which is defined as general and  administrative  expenses  divided by the
average book value of total cash and investments, was 0.88%, compared with 0.62%
in 1998.

Financial Advisory Services

       Certain  information  regarding the financial advisory services segment's
results of operations is as follows:
<TABLE>
<CAPTION>

                                                                                           Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                     2000            1999           1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)
<S>                                                                              <C>            <C>            <C>
Revenues:
Financial advisory services fees.............................................    $      22,952  $      19,913  $      14,502

Expenses:
Commissions..................................................................           16,441         13,314          8,994
Operating expenses...........................................................            8,772          6,433          5,139
                                                                                 -------------  -------------  -------------
                                                                                        25,213         19,747         14,133
                                                                                 -------------  -------------  -------------
Income (loss) before income tax expense .....................................    $      (2,261) $         166  $         369
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------
</TABLE>

2000 compared to 1999

       Financial advisory services income decreased from $0.2 million in 1999 to
a loss of $2.3 million in 2000,  primarily due to the contractual  adjustment to
certain  servicing fee revenues as discussed  below, as well as due to the costs
of the Internet based initiative also discussed below.

       Revenues of London  Pacific  Advisors  ("LPA")  (formerly  SAI  Financial
Advisors)  increased by $3.0 million to $23.0 million in 2000.  Asset management
and consulting  fees increased due to the company's  continued  expansion of its
network of financial advisors and assets under management, consulting, servicing
or

                                       21
<PAGE>

administration.  Although  in total these  assets  remained  fairly  constant at
approximately  $1.5 billion,  the components shifted favorably toward the higher
yielding  management assets as opposed to administered  assets.  Market movement
also had an  unfavorable  impact on total assets under  management.  There was a
corresponding increase in commission expense of $3.1 million to $16.4 million.

       LPA's gross revenues less  commissions for 2000 were $6.5 million,  which
was level with 1999.  The rate of growth in revenues  less  commissions  did not
correspond  with the rate of growth in gross revenues  primarily  because of the
contractual  decline in the percentage of fees received by LPA for administering
managed portfolios on behalf of another company. The contract was renewed during
the third quarter of 1999 on less favorable  terms.  There was no  corresponding
decline  in LPA's  operating  costs  related to these  portfolio  administration
services.

       Operating  expenses,  excluding  costs  of  the  Group's  Internet  based
initiative,  increased by 27% to $8.1 million in 2000 compared with $6.4 million
in 1999.  Staff costs increased by 22% primarily due to staffing  additions,  as
the  company  positioned  itself  for  expected  growth  in its  management  and
administration divisions. Excluding staff costs, operating expenses increased by
34% in 2000 compared with 1999,  primarily due to increases in advertising costs
and new operating systems.

       The contractual adjustment to the servicing fees discussed above cut into
profitability for 2000.  However,  the company is focusing more of its marketing
efforts on large institutional  clients with the goal of adding sizeable revenue
blocks at higher margins.

       In late 1999,  the Group decided to make the LPA business the  foundation
for an Internet  based  initiative  that could then be migrated to several other
vertical markets in which the Group has expertise. The costs for this initiative
included in the income statement for 2000 were $0.7 million,  and it is expected
that further  development  costs will increase  total  expenses in the financial
advisory services segment throughout 2001.

1999 compared to 1998

       Financial advisory services income decreased from $0.4 million in 1998 to
$0.2 million in 1999.

       Revenues of LPA increased by $5.4 million to $19.9 million in 1999. Asset
management and consulting fees and broker-dealer  revenues  increased due to the
company's  continued  expansion of its network of financial  advisors and assets
under management, consulting, servicing or administration.  These assets grew to
$1.6  billion as of December 31, 1999 from $1.2 billion as of December 31, 1998,
after  excluding  $269.4  million  in  assets  administered  by  Select  Benefit
Consultants,  Inc.  ("SBC"),  a subsidiary  which was sold on December 31, 1999.
There was a  corresponding  increase in commission  expense of $4.3 million from
$9.0 million in 1998 to $13.3 million in 1999.

       LPA's gross revenues less commissions  increased by 20% from $5.5 million
in 1998 to $6.6 million in 1999. The rate of growth in revenues less commissions
did not correspond with the rate of growth in gross revenues  primarily  because
of the  contractual  decline  in the  percentage  of  fees  received  by LPA for
administering  managed portfolios on behalf of another company. The contract was
renewed during the third quarter of 1999 on less favorable  terms.  There was no
corresponding  decline  in LPA's  operating  costs  related  to these  portfolio
administration services.

       Operating expenses increased by 25% to $6.4 million in 1999 compared with
1998.  Staff costs  increased by 42%  primarily due to staffing  additions  made
throughout 1999, as the company  positioned itself for expected future growth in
2000 and beyond.  Excluding staff costs,  operating  expenses increased by 2% in
1999 compared with 1998. Included in 1999 revenues is the gain on sale of SBC of
$0.1 million.

                                       22
<PAGE>

Asset Management

       Certain information  regarding the asset management  segment's results of
operations is as follows:
<TABLE>
<CAPTION>


                                                                                          Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                     2000           1999           1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)

<S>                                                                              <C>            <C>            <C>
Revenues ....................................................................    $       7,799  $       6,826  $       6,607
Operating expenses ..........................................................            6,021          5,790          5,769
                                                                                 -------------  -------------  -------------
Income before income tax expense ............................................    $       1,778  $       1,036  $         838
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------
</TABLE>

2000 compared to 1999

       Included in the  revenues of the asset  management  segment for 2000 were
portfolio  management fees from the life insurance and annuities segment of $2.8
million,  compared with $1.6 million for 1999.  These  increased  fees primarily
account for the overall increase in income in the asset management segment.  The
higher fees resulted from the larger portfolio of listed equity  securities held
by the life  insurance  operation  which is  managed by  Berkeley  International
Limited, the Group's asset management subsidiary in Jersey.

       Revenues at Berkeley Capital Management  ("BCM"),  the Group's U.S. asset
manager,  remained  level in 2000 at $5.5  million,  including  $0.7  million of
management  fees  from  the  life  insurance  and  annuities  segment.  Expenses
increased by $0.3 million to $5.9 million, primarily due to higher staff costs.

       Increased  profitability at BCM was hindered by lower than planned growth
in the wrap  fee  account  business,  with  sales  for 2000  largely  offset  by
redemptions.  Total wrap assets  under  management  as of December 31, 2000 were
approximately  $955 million,  up from  approximately $890 million as of June 30,
2000,  but down from  approximately  $972 million as of December  31, 1999.  BCM
again  benefited  during 2000 from having two  complementary  equity  investment
styles.  The strong  long-term  performance  record of the Growth Equity product
allowed BCM to attract net new wrap assets each quarter throughout the year. The
growth  style  benefited  early on in 2000  from the  market's  strong  focus on
technology  carrying over from 1999 into the first quarter of 2000.  BCM's Value
Equity product,  which had  underperformed  the broad market averages during the
period when technology was favored so  exclusively,  experienced net redemptions
in wrap programs early in 2000. As the market  changed at the end of March,  the
value  holdings  began to rise  once  again  and  redemptions  began to fall off
sharply.  By the end of 2000, BCM's value portfolios had provided investors with
returns  of over 10% for the full  year and both  investment  styles  again  had
positive net sales.

       During 2001,  BCM plans to add a new wrap product which blends its growth
and value styles into a single equity  product.  The goal of adding this product
is to boost BCM's assets under management and profitability in future years.

1999 compared to 1998

       Income from the asset management  segment  increased by $0.2 million from
$0.8  million  in 1998 to $1.0  million in 1999.  This  increase  was  primarily
attributable to improved 1999 results at BCM.

       Revenues of BCM increased in 1999 by 40% to $5.5  million,  primarily due
to  higher  management  fees on wrap  fee  accounts.  Total  wrap  assets  under
management as of December 31, 1999 were approximately $972 million,  compared to
approximately  $690 million as of December 31, 1998. BCM's expenses increased by
$0.7  million to $5.6  million due to increased  staff  costs,  including  sales
commissions to the company's wrap account wholesalers.

                                       23
<PAGE>

       Included in the  revenues of the asset  management  segment for 1999 were
portfolio  management fees from the life insurance and annuities segment of $1.6
million, compared to $2.9 million in 1998.

Venture Capital Management

       Certain  information  regarding the venture capital management  segment's
results of operations is as follows:
<TABLE>
<CAPTION>

                                                                                            Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                     2000           1999           1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)

<S>                                                                              <C>            <C>            <C>
Revenues:
Management fees............................................................      $       9,398  $       7,943  $       5,805
Investment income..........................................................                273            863            815
Net realized investment gains (losses).....................................             14,341        (16,843)         2,138
Change in net unrealized investment gains (losses).........................           (123,474)       199,848              -
                                                                                 -------------  -------------  -------------
Total revenues and net investment gains (losses)...........................            (99,462)       191,811          8,758
Operating expenses.........................................................             10,982         33,184          5,238
                                                                                 -------------  -------------  -------------
Income (loss) before income tax expense....................................      $    (110,444) $     158,627  $       3,520
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------
</TABLE>

2000 compared to 1999

       Income before taxes from the venture capital management segment decreased
from $158.6 million in 1999 to a loss of $110.4  million in 2000.  This loss was
attributable  to the change in net  unrealized  gains for the year on the listed
equity  securities  held in the trading  portfolio.  These  positions  in listed
equity  securities were the result of private equity  transactions in technology
companies.  The losses reflected the downward trend in the market for technology
stocks during the latter part of 2000.

       The change in net unrealized gains in the listed equity trading portfolio
during 2000 was a decrease of $123.5  million.  The market  value of the trading
portfolio  decreased  from  $213.3  million as of  December  31,  1999 to $105.2
million as of December 31, 2000.  Additions to the trading portfolio during 2000
of $25.5 million  resulted from the initial public  offerings or acquisitions by
publicly traded companies of seven private  preferred stock holdings.  Disposals
of certain trading positions in 2000 resulted in realized gains of $15.9 million
based on their  aggregate  original cost of $10.1 million.  Other realized gains
and losses netted to a loss of $1.6 million, primarily resulting from writedowns
on private placement debt securities.

       Significant  fluctuations  in net  unrealized  gains in the listed equity
trading  portfolio  are  likely in future  quarters,  reflecting  equity  market
volatility,  especially in the technology sector. The potential impact of losses
relating to the old private debt  portfolio  has declined over the past eighteen
months  due to the  increase  in the  Group's  net  assets,  as  well  as due to
liquidity  events and writedowns taken against this portfolio in the latter part
of 1999 and during 2000.

       Included in the revenues of the venture  capital  management  segment for
2000 are portfolio management fees from the life insurance and annuities segment
of $7.5  million,  compared  to $7.9  million  in 1999.  Berkeley  International
Capital Corporation  ("BICC") sources and monitors private investments for LPLA,
for which LPLA pays BICC management fees. Total financings completed by BICC for
the  insurance  subsidiaries  and for  Berkeley  International  Capital  Limited
("BICL")  during 2000 were $131.1  million,  compared to $104.8  million  during
1999. Other non-recurring fees of $1.9 million were received in 2000.

       Interest income on private debt  securities  decreased to $0.3 million in
2000 from $0.9 million in 1999.  Operating  expenses in 2000  decreased by $22.2
million  to  $11.0  million,  primarily  due  to  lower  employee  compensation,
consistent with the lower income in this segment in 2000.

                                       24
<PAGE>

1999 compared to 1998

       Income before taxes from the venture capital management segment increased
from  $3.5  million  in 1998 to  $158.6  million  in  1999.  This  increase  was
attributable  to the  change  in net  unrealized  gains  on  the  listed  equity
securities  held in the trading  portfolio.  These  positions  in listed  equity
securities  were  the  result  of  private  equity  transactions  in  technology
companies.

       Net investment gains were $183.0 million in 1999, of which $199.8 million
represented the change in net unrealized  gains on the listed equity  securities
held  in  the  trading  portfolio  during  the  year.  The  gains  were  largely
attributable to one holding in BICL's portfolio.  Realized gains of $6.8 million
on listed equity  securities and private  preferred stocks were more than offset
by $23.6 million of losses and writedowns on private debt and equity securities.

       Revenues  (excluding net investment  gains) for this segment increased by
$2.2 million,  to $8.8 million in 1999.  Consulting and arrangement fees of $2.9
million were received from investee companies during the first half of 1998, but
the Group has not received  such fees since that time.  This loss of revenue has
been  offset by an increase  of more than $5.0  million to $7.9  million of fees
received for  management  services  provided by BICC to LPLA with respect to its
private  placement  portfolio.  This was consistent  with the increased value of
that  portfolio,  as well as the  increased  fees agreed upon relating to LPLA's
private equity securities.  Total financings  completed by BICC during 1999 were
$104.8 million, up from the $49.5 million completed during 1998.

       Interest  income on private debt securities  contributed  $0.9 million in
1999, a $0.1 million increase over 1998. Operating expenses in 1999 increased by
$27.9 million to $33.2 million  primarily due to higher  employee  compensation,
which was in line with the higher level of venture capital  management income in
1999.

Corporate and Other

2000 compared to 1999

       Corporate  expenses  increased  by $3.0  million to $7.4 million in 2000,
compared to $4.4 million for 1999,  primarily  due to the  extension of employee
share option grants which were due to expire.  Under U.S.  GAAP,  the difference
between the exercise price and the fair market value on the date of extension is
considered  compensation  expense  in the  current  period,  as no  compensation
expense was recorded at the  original  grant dates when the options were granted
with an exercise price equal to the fair market value of the underlying shares.

       Additionally,  in 2000, there were increased costs related to raising the
public profile of the Group, higher registrar fees, and costs for additional SEC
reporting requirements.  It is expected that these costs will continue into 2001
and future years.

       Interest  income earned by the Group  (excluding  the life  insurance and
annuity  segment)  decreased by $1.2 million to $1.6 million in 2000 as compared
with 1999,  primarily due to the decrease in cash and cash  equivalents  held by
the Group.  Interest expense incurred by the Group (excluding the life insurance
and  annuity  segment)  increased  by $0.6  million  to $0.7  million  in  2000,
primarily due to bank borrowings during the latter part of 2000. A discussion of
the Group's use of cash is discussed in "Liquidity and Capital Resources" below.

1999 compared to 1998

       Corporate  expenses  increased  by $0.4  million to $4.4 million in 1999,
compared  to $4.0  million  for 1998,  primarily  due to initial  New York Stock
Exchange listing fees and an increase in professional fees.

       Interest  income earned by the Group  (excluding  the life  insurance and
annuity  segment)  decreased by $1.7 million to $2.8 million in 1999 as compared
with 1998,  primarily due to the decrease in cash and cash

                                       25
<PAGE>

equivalents held by the Group.  Group cash was used during the year primarily to
pay dividends and for investment purchases.

Consolidated Income from Continuing Operations Before Income Tax Expense

       Consolidated income from continuing  operations before income tax expense
increased by $276.8  million,  from $28.9  million in 1998 to $305.7  million in
1999, and then decreased by $290.7 million to $15.0 million in 2000. These large
movements  were  primarily  attributable  to the high level of net  realized and
unrealized investment gains in 1999 which was not repeated in 2000.

       Consolidated  income  before income tax expense for 2001 and future years
may  be  volatile  due to the  Group's  holdings  of  listed  equity  securities
primarily in the technology  sector,  which are marked to market with changes in
their market value recognized in the income statement for each period.  For more
information  on the  possible  effects  of  volatility  in the  prices of equity
securities,  see Item 7A "Quantitative and Qualitative  Disclosures About Market
Risk" below.

Income Taxes

       The Group is subject to taxation on its income in all  countries in which
it operates  based upon the taxable  income  arising in each  country.  However,
realized  gains on certain  investments  are  exempt  from  Jersey and  Guernsey
taxation.  The Group is subject to income tax in Jersey at a rate of 20%. In the
United  States,  the Group is subject to both  federal and  California  taxes at
34-35% and 8.84%, respectively.

2000 compared to 1999

       Though income before tax expense was $15.0 million in 2000, an income tax
benefit of $17.4 million resulted for the year. This was primarily  attributable
to the $51.2 million loss from the U.S. life and annuity company which generated
a  federal  tax  benefit  of  approximately  35%.  Income of $70.4  million  was
contributed by the Jersey and Guernsey  operations  during 2000, which primarily
consisted of untaxed  investment  gains. The effective tax rate, as a percentage
of income before income taxes for 1999, was 18%.

1999 compared to 1998

       The effective tax rate, as a percentage of income before income taxes for
1999,  was 18%. This effective tax rate reflects the fact that 48% of the income
for 1999 was  contributed  by the U.S. life and annuity  company,  and that more
than 50% of the  income  for the year  represented  income  from the  Jersey and
Guernsey  operations,  which largely consisted of untaxed  investment gains. The
effective tax rate, as a percentage of income from continuing  operations before
income taxes for 1998, was 19%.

LIQUIDITY AND CAPITAL RESOURCES

       Until the latter part of 2000,  the Group  financed  its  operations  and
capital  expenditures  with  internally  generated  funds  and  existing  liquid
resources.  As of December 31, 1999 and December 31, 1998, the Group had no bank
borrowings bond issues or convertible  securities  outstanding.  However,  as of
these dates, $11.8 million and $2.5 million,  respectively, of the Group's $50.0
million  bank  facility  had been  utilized in the form of letters of credit and
guarantees in connection with certain  portfolio  companies.  As of December 31,
2000,  the Group had utilized  $14.1 million of the bank facility in the form of
letters of credit and guarantees in connection with these  portfolio  companies,
and had drawn down $35.6  million in loans which are  scheduled for repayment in
April 2002. These loans were used for general corporate purposes.

       On  a  consolidated  basis  as  of  December  31,  2000,  cash  and  cash
equivalents  of the Group,  excluding the life  insurance  segment,  amounted to
$53.3 million. As of December 31, 2000, the Group,  excluding the life insurance
and annuity segment,  also held $102.7 million of listed equity securities which
could  be sold  within a short  period  of time.  Management  believes  that the
balances of cash,  liquid  resources  and  borrowings,  should be  sufficient to
satisfy the Group's  anticipated  financing  requirements during the next twelve
months.  Shareholders'  equity  increased during 2000 by $15.3 million to $567.7
million,  primarily  due to net  income for

                                       26
<PAGE>

the  period  of $32.5  million,  less  dividends  paid of $11.6  million.  As of
December 31, 2000, $58.0 million of the Company's Ordinary Shares, at cost, held
by the employee  benefit trusts have been netted against  shareholders'  equity.
Upon exercise of employee share options,  shareholders' equity will be increased
by the cost of the shares transferred to the employees and the proceeds received
will increase Group cash.

       At the end of 1999,  the Group  had cash  held in escrow of $3.1  million
related to the sale of North American  Trust Company at the end of 1998.  During
2000,  this escrow  account was released to the Group,  after  deduction of $0.3
million for claims by the buyer.

       The total  assets of the Group  have  grown  substantially  over the last
eleven  years from $210.1  million at the end of 1989 to $2.6 billion at the end
of 2000.  A major  factor  behind the growth in total assets was the creation in
1989 and subsequent expansion of LPLA.

       As of  December  31,  2000,  the Group  held  $281.2  million  in private
corporate debt and equity securities.  Of this total, $277.0 million was held in
the investment portfolios of the insurance  subsidiaries (LPLA and LPAL). Liquid
markets  exist for $19.2 million of these  private  securities.  No public price
information  is available for the remainder of these  securities,  and therefore
debt is valued at  amortized  cost and  equity is valued at the  original  cost,
unless these securities become other than temporarily impaired.  Debt securities
largely  represent  subordinated  loans  to  an  array  of  companies  that  are
diversified by industry,  geography and financial  structure.  All of these debt
securities contain covenant restrictions that management believes should provide
a degree of  financial  protection  to the debt  holders,  including  LPLA.  The
private equity securities are primarily  preferred stock holdings in later stage
technology  companies.  Financial  information  on the issuers of these debt and
equity  securities is received and reviewed  periodically.  Contact with company
management is maintained  through  ongoing  dialogue to examine future plans and
prospects.

       LPLA invests in collateralized  mortgage  obligations ("CMOs") as part of
its ongoing efforts to maintain a broadly diversified portfolio.  As of December
31, 2000, LPLA's portfolio held $188.9 million in investment grade, liquid CMOs.
The  market  value of these  securities  was  $190.4  million.  Of the total CMO
securities  as of December 31, 2000,  $0.1 million  could be  considered  highly
volatile  with  respect  to  interest  rate  changes.  Management  review of the
collateral and cash flow  characteristics of each security is completed prior to
acquisition.  Ongoing review of security  holdings is an integral part of LPLA's
portfolio management practices.

       As of December 31,  2000,  the  insurance  subsidiaries'  fixed  maturity
security  portfolios had $22.0 million in unrealized  gains and $80.4 million in
unrealized  losses.  LPLA and LPAL believe that changes in interest rates should
not  materially  alter the average  maturity of their security  portfolios,  nor
alter their  ability to hold fixed  maturity  securities  until their  scheduled
maturities.

       There are  statutory  restrictions  on LPLA's  ability  to make  dividend
payments. Dividend payments that exceed the lower of 10 percent of its statutory
surplus as of December 31 of the preceding year or net gain from  operations for
the preceding  year must be approved by certain  regulatory  authorities.  As of
December 31, 2000, LPLA's equity amounted to $179.1 million, none of which could
be transferred in the form of dividends, loans or advances to the parent company
at that date without regulatory approval.

       The  Group  had  no  material   commitments   for  capital   expenditures
outstanding at December 31, 2000.


Item 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

       The nature of the Group's  businesses  exposes the Group to market  risk.
Market  risk is the risk of loss that may occur  when  interest  rate and equity
price movements adversely change the value of invested assets.

Interest Rate Risk

       The Group's life  insurance  and annuity  segment is subject to risk from
interest  rate  fluctuations  when there is a  difference  between the amount of
interest earning assets and the amount of interest bearing  liabilities that are
prepaid,  mature or are repriced in specific  periods.  LPLA and LPAL attempt to
minimize  their  exposure

                                       27
<PAGE>



to interest rate  fluctuations by managing the  characteristics  of their assets
and  liabilities  so that the  effects of changes  are  reasonably  likely to be
offset.  LPLA's and LPAL's  principal  asset/liability  management  goals are to
achieve   sufficient  cash  flows  from  invested  assets  to  fund  contractual
obligations,  while maximizing  investment returns.  LPLA and LPAL have not used
derivative  financial  instruments to achieve their  asset/liability  management
goals.  Exposure to interest  rate risk is estimated by  performing  sensitivity
tests based on duration analysis of LPLA's investment and product portfolios.

       Duration is an option  adjusted  measure of the percentage  change in the
market  value of the assets or  liabilities  in  response  to a given  change in
interest  rates.  For LPAL,  given that  policyholder  liabilities are less than
$55.0  million,  interest rate risk is considered to be minimal.  To demonstrate
the  sensitivity  of LPLA's assets and  liabilities,  tests  performed on LPLA's
assets and  liabilities  indicated  that,  as of December  31,  2000,  if market
interest rates had suddenly increased by 100 basis points, the fair value of the
investment   portfolio  that  is  subject  to  interest  rate  risk,  which  was
approximately $1.7 billion, would have decreased by $77.3 million, compared with
a decrease of $44.6  million for the  calculated  market  value of  liabilities,
which was approximately $1.6 billion. Conversely, a sudden decrease of 100 basis
points  would have  increased  the  investment  portfolio's  fair value by $79.1
million, compared with an increase in the calculated market value of liabilities
of $46.7 million.  These results depend upon certain key  assumptions  regarding
the behavior of interest  sensitive  cash flows.  Although LPLA has attempted to
ensure that the  assumptions  used are based on the best  available  data,  cash
flows cannot be forecasted with certainty,  and can deviate  materially from the
assumed results.

Equity Price Risk

       The Group,  including  LPLA and LPAL,  is exposed to equity price risk on
the listed  equity  securities  held almost  entirely in its trading  portfolio.
Changes  in the level or  volatility  of equity  prices  affect the value of the
listed equity securities.  These changes in turn directly affect the Group's net
income,  because the Group's holdings of listed equity  securities are marked to
market,  with changes in their market value  recognized in the income  statement
for the period in which the changes  occur.  These listed equity  securities are
primarily in companies in the high technology industry sector, many of which are
small capitalization stocks.

       If the market price of the Group's listed equity portfolio as of December
31, 2000 and December 31, 1999, which totaled $356.5 million and $408.2 million,
respectively,  had  abruptly  increased or decreased by 50%, the market value of
the listed equity  portfolio would have increased or decreased by $178.3 million
and  $204.1  million,  respectively.  $264.6  million of the value of the listed
equity  portfolio  as  of  December  31,  2000  represented   unrealized  market
appreciation.  Of the listed  equity  securities  held as of December  31, 2000,
$160.4  million and $62.5 million  consisted of holdings in New Focus,  Inc. and
Siebel Systems, Inc., respectively,  with unrealized gains of $145.4 million and
$48.0 million, respectively.

       For  additional  information  relating  to  the  Group's  financial  risk
profile,  see  Note  12 to  the  Consolidated  Financial  Statements  in  Item 8
"Financial Statements and Supplementary Data" of this Form 10-K.

                                       28
<PAGE>

Item 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            Page

<S>                                                                           <C>
Report of Independent Auditors...........................................     29

Consolidated Balance Sheets as of December 31, 2000 and 1999.............     30

Consolidated Statements of Income for the
     Years Ended December 31, 2000, 1999 and 1998........................     31

Consolidated Statements of Cash Flows for the
     Years Ended December 31, 2000, 1999 and 1998........................     32

Consolidated Statements of Changes in Shareholders' Equity for the
     Years Ended December 31, 2000, 1999 and 1998........................     34

Consolidated Statements of Comprehensive Income for the
     Years Ended December 31, 2000, 1999 and 1998........................     36

Notes to Consolidated Financial Statements...............................     37
</TABLE>



                         REPORT OF INDEPENDENT AUDITORS


To the Board of Directors and Shareholders of
London Pacific Group Limited


       In our  opinion,  the  consolidated  financial  statements  listed in the
accompanying  index  present  fairly,  in all material  respects,  the financial
position of London  Pacific Group Limited and its  subsidiaries  at December 31,
1999 and 2000, and the results of their operations and their cash flows for each
of the three years in the period  ended  December  31, 2000 in  conformity  with
accounting  principles  generally  accepted in the United States of America.  In
addition,  in our  opinion,  the  financial  statement  schedules  listed in the
accompanying  index appearing  under Item 14 on page 64, present fairly,  in all
material  respects,  the  information set forth therein when read in conjunction
with the related consolidated  financial statements.  These financial statements
and  financial  statement  schedules  are the  responsibility  of the  Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements and financial  statement  schedules based on our audits. We conducted
our audits of these statements in accordance with auditing  standards  generally
accepted in the United States of America, which 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,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe that our audits provide a reasonable basis for our opinion.


PricewaterhouseCoopers
Chartered Accountants

Jersey, Channel Islands
March 8, 2001

                                       29
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                          December 31,
                                                                                 ----------------------------
                                                                                     2000           1999
                                                                                 -------------  -------------
                                                                             (In thousands, except share amounts)
                                    ASSETS
<S>                                                                              <C>            <C>
Cash and cash equivalents.....................................................   $     114,285  $      49,703
Cash held in escrow...........................................................               -          3,110
Investments, principally of life insurance subsidiaries:
   Fixed maturities:
     Available-for-sale, at fair value (amortized cost: $1,352,313 and
       $1,037,085 as of December 31, 2000 and 1999, respectively).............       1,292,015        989,065
     Held-to-maturity, at amortized cost (fair value: $129,400 and $221,167
       as of December 31,  2000 and 1999, respectively).......................         127,514        222,110
   Equity securities:
     Trading, at fair value (cost: $99,747 and $34,680 as of December 31,
       2000 and 1999, respectively) ..........................................         353,896        399,844
     Available-for-sale, at fair value (cost: $238,942 and $186,403 as of
       December 31, 2000 and 1999, respectively) .............................         229,403        182,926
   Policy loans ..............................................................          10,301         10,385
                                                                                 -------------  -------------
Total investments ............................................................       2,013,129      1,804,330

Accrued investment income ....................................................          28,629         22,168
Deferred policy acquisition costs ............................................         168,102        144,518
Assets held in separate accounts .............................................         206,325        125,528
Receivables ..................................................................          17,222         34,167
Other assets .................................................................          15,296         10,633
                                                                                 -------------  -------------
Total assets .................................................................   $   2,562,988  $   2,194,157
                                                                                 -------------  -------------
                                                                                 -------------  -------------
                        LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Life insurance policy liabilities ............................................   $   1,691,601  $   1,416,423
Liabilities related to separate accounts .....................................         203,806        126,703
Notes payable ................................................................          35,556              -
Deferred income tax liabilities ..............................................          41,587         57,896
Accounts payable, accruals and other liabilities .............................          22,696         40,660
                                                                                 -------------  -------------
Total liabilities ............................................................       1,995,246      1,641,682
                                                                                 -------------  -------------
Commitments and contingencies

Shareholders' equity:
Ordinary shares, $0.05 par value per share: authorized 86,400,000 shares;
   issued and outstanding 64,433,313 shares ..................................           3,222          3,222
Additional paid-in capital ...................................................          67,591         62,307
Retained earnings ............................................................         580,176        559,344
Employee benefit trusts, at cost (shares: 12,811,381 and 15,331,656 as of
   December 31, 2000 and 1999, respectively) .................................         (58,003)       (54,033)
Accumulated other comprehensive income (loss) ................................         (25,244)       (18,365)
                                                                                 -------------  -------------
Total shareholders' equity ...................................................         567,742        552,475
                                                                                 -------------  -------------
Total liabilities and shareholders' equity ...................................   $   2,562,988  $   2,194,157
                                                                                 -------------  -------------
                                                                                 -------------  -------------

<FN>
         See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>

                                       30
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
                                                                                          Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                      2000           1999           1998
                                                                                 -------------  -------------  -------------
                                                                                       (In thousands, except per share
                                                                                              and ADS amounts)

<S>                                                                              <C>            <C>            <C>
Revenues:
Investment income..........................................................      $     116,005  $      99,007  $      94,966
Insurance policy charges...................................................              7,400          6,671          7,111
Financial advisory services, asset management and other fee income........              31,584         26,563         22,154
Net realized investment gains (losses).....................................            145,546         (8,581)        10,008
Change in net unrealized investment gains (losses) on trading securities ..           (111,014)       348,906         16,258
                                                                                 -------------  -------------  -------------
                                                                                       189,521        472,566        150,497
Expenses:
Interest credited on insurance policyholder accounts.......................             94,065         73,753         68,067
Amortization of deferred policy acquisition costs..........................             21,155         16,797         16,171
Operating expenses.........................................................             58,371         75,964         37,123
Goodwill amortization......................................................                248            348            236
Interest expense...........................................................                672             42             18
                                                                                 -------------  -------------  -------------
                                                                                       174,511        166,904        121,615
                                                                                 -------------  -------------  -------------
Income from continuing operations before income tax expense................             15,010        305,662         28,882

Income tax expense (benefit) on continuing operations......................            (17,447)        53,786          5,419
                                                                                 -------------  -------------  -------------
Income from continuing operations..........................................             32,457        251,876         23,463

Loss from discontinued operations, net of income tax benefit of $861.......                  -              -         (2,003)
Gain on sale of discontinued operations, net of income tax expense
   of $1,957...............................................................                  -              -          4,996
                                                                                 -------------  -------------  -------------
Net income.................................................................      $      32,457  $     251,876  $      26,456
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------

Basic earnings per share and ADS(1):
Continuing operations......................................................      $        0.64  $        5.05  $        0.45
Discontinued operations....................................................                  -              -           0.06
                                                                                 -------------  -------------  -------------
                                                                                 $        0.64  $        5.05  $        0.51
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------

Diluted earnings per share and ADS(1):
Continuing operations......................................................      $        0.53  $        4.54  $        0.44
Discontinued operations....................................................                  -              -           0.05
                                                                                 -------------  -------------  -------------
                                                                                 $        0.53  $        4.54  $        0.49
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------


(1)ADS amounts have been restated to reflect the four-for-one split in March
   2000.
<FN>
          See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>

                                       31
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                          Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                      2000           1999           1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)
<S>                                                                              <C>            <C>            <C>
Cash flows from operating activities:
Net income...................................................................    $      32,457  $     251,876  $      26,456

Adjustments to reconcile net income to net
   cash provided by operating activities:
Net gain on sale of discontinued operations..................................                -              -         (6,953)
Change in life insurance policy liabilities, net.............................            7,976          8,208         42,266
Depreciation and amortization ...............................................            1,175          1,055          2,151
Amortization of deferred policy acquisition costs ...........................           21,155         16,797         16,171
Deferred income tax expense (benefit) .......................................          (12,502)        54,265          8,332
Net realized investment (gains) losses ......................................           40,970         42,984        (10,008)
Net amortization of investment premiums and discounts........................           (1,966)        (3,309)          (982)

Changes in assets and liabilities:
Trading equity securities  (including change in net unrealized (gains)
   losses of $111,014 in 2000, $(348,906) in 1999 and $(16,258)
   in 1998) ................................................................            45,948       (372,002)       (27,842)
Accrued investment income ...................................................           (6,461)        (3,093)        (1,227)
Deferred policy acquisition costs ...........................................          (39,026)       (25,840)       (19,167)
Receivables..................................................................            1,647           (611)         4,102
Other assets ................................................................              372           (624)           160
Accounts payable, accruals and other liabilities ............................          (17,310)        23,990           (698)
Income taxes payable ........................................................           (3,598)          (628)        (8,832)
Other operating cash flows ..................................................           (2,240)        (4,901)        (4,601)
                                                                                 -------------  -------------  -------------
Net cash provided by (used in) operating activities .........................           68,597        (11,833)        19,328
                                                                                 -------------  -------------  -------------
Cash flows from investing activities:
Purchases of held-to-maturity fixed maturity securities .....................           (4,201)       (10,126)       (25,582)
Purchases of available-for-sale fixed maturity securities ...................         (357,950)      (345,004)      (558,064)
Purchases of available-for-sale equity securities............................         (140,959)      (109,900)       (77,736)
Proceeds from redemption of held-to-maturity fixed maturity securities.......           51,141         38,560        106,421
Proceeds from sale of available-for-sale fixed maturity securities ..........           63,093        206,729        510,070
Proceeds from sale of available-for-sale equity securities ..................          100,101         49,710         40,347
Capital expenditures.........................................................           (3,659)        (1,184)        (1,173)
Proceeds from sale of subsidiary.............................................                -              -          8,500
Other cash flows from investing activities ..................................            3,123          3,166         (1,656)
                                                                                 -------------  -------------  -------------
Net cash provided by (used in) investing activities .........................         (289,311)      (168,049)         1,127
                                                                                 -------------  -------------  -------------


<FN>
         See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>

                                       32
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)


<TABLE>
<CAPTION>
                                                                                           Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                      2000           1999           1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)

<S>                                                                              <C>            <C>            <C>
Cash flows from financing activities:
Insurance policyholder contract deposits ....................................          493,998        305,514        201,112
Insurance policyholder benefits paid ........................................         (226,796)      (173,414)      (178,371)
Issue of Ordinary Shares ....................................................                -              5             35
Purchase of Ordinary Shares .................................................                -              -        (12,651)
Dividends paid ..............................................................          (11,625)       (11,446)       (12,749)
Purchases of Ordinary Shares by the employee benefit trusts..................          (12,712)        (4,043)       (12,462)
Proceeds from disposal of shares by the employee benefit trusts..............            8,407          2,344          5,208
Notes payable................................................................           35,000              -              -
Bank overdrafts..............................................................             (593)          (789)         1,139
                                                                                 -------------  -------------  -------------
Net cash provided by (used in) financing activities .........................          285,679        118,171         (8,739)
                                                                                 -------------  -------------  -------------

Net increase (decrease) in cash and cash equivalents ........................           64,965        (61,711)        11,716
Cash and cash equivalents at beginning of year ..............................           49,703        111,414         99,698
Foreign currency translation adjustment .....................................             (383)             -              -
                                                                                 -------------  -------------  -------------
Cash and cash equivalents at end of year ....................................    $     114,285  $      49,703  $     111,414
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------


Supplemental disclosure of cash flow information:
Cash paid (received) during the year for:
Interest ....................................................................    $          50  $          42  $          85
Income taxes (net of amounts recovered) .....................................           (1,347)          (270)         6,774

Supplemental disclosure of non-cash investing activities:
Exchange of available-for-sale equity securities for trading equity
   securities................................................................    $      97,857  $      31,372  $      11,585



<FN>
          See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>

                                       33
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                (In thousands, except per share and ADS amounts)

<TABLE>
<CAPTION>
                                                                                     Accumulated
                                                                                        Other
                                       Ordinary   Additional               Employee    Compre-       Total
                                      Shares at    Paid-in     Retained     Benefit    hensive    Shareholders'
                                      Par Value    Capital     Earnings     Trusts   Income(Loss)    Equity
                                      ----------  ----------  ----------  ----------  ----------  ----------
<S>                                    <C>         <C>         <C>         <C>         <C>         <C>
Balance as of January 1, 1998 .....    $  3,416    $ 73,870    $305,078    $(44,306)   $  6,219    $344,277

Net income.........................           -           -      26,456           -           -      26,456
Change in net unrealized gains
   (losses) on available-for-sale
   securities......................           -           -           -           -      (9,661)     (9,661)
Exercise of employee share
   options, including income
   tax effect......................           -          28           -       4,486           -       4,514
Net realized gains on disposal
   of shares held by the employee
   benefit trusts..................           -         722           -           -           -         722
Cash dividends (23.2 cents net
   per share and ADS(1))...........           -           -     (12,749)          -           -     (12,749)
Issue of Ordinary Shares...........           3          32           -           -           -          35
Purchase of Ordinary Shares
   for cancellation................        (198)    (12,453)          -           -           -     (12,651)
Purchase of shares by the
   employee benefit trusts.........           -           -           -     (12,462)          -     (12,462)
                                       --------    --------    --------    --------    --------    --------
Balance as of December 31, 1998....    $  3,221    $ 62,199    $318,785    $(52,282)   $ (3,442)   $328,481
                                       --------    --------    --------    --------    --------    --------
                                       --------    --------    --------    --------    --------    --------

Net income.........................    $      -    $      -    $251,876    $      -    $      -    $251,876
Change in net unrealized gains
   (losses) on available-for-sale
   securities......................           -           -           -           -     (14,923)    (14,923)
Exercise of employee share
   options, including income
   tax effect......................           -          52           -       2,292           -       2,344
Net realized gains on disposal
   of shares held by the employee
   benefit trusts..................           -          52           -           -           -          52
Cash dividends (23.2 cents net
   per share and ADS(1))...........           -           -     (11,446)          -           -     (11,446)
Issue of Ordinary Shares...........           1           4           -           -           -           5
Purchase of shares by the
   employee benefit trusts.........           -           -           -      (4,043)          -      (4,043)
Other..............................           -           -         129           -           -         129
                                       --------    --------    --------    --------    --------    --------
Balance as of December 31, 1999....    $  3,222    $ 62,307    $559,344    $(54,033)   $(18,365)   $552,475
                                       --------    --------    --------    --------    --------    --------
                                       --------    --------    --------    --------    --------    --------



(1) ADS amounts have been  restated to reflect the  four-for-one  split in March
    2000.

<FN>
          See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>

                                       34
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

     CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Continued)
                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                (In thousands, except per share and ADS amounts)
<TABLE>
<CAPTION>

                                                                                     Accumulated
                                                                                        Other
                                       Ordinary   Additional               Employee    Compre-       Total
                                      Shares at    Paid-in     Retained     Benefit    hensive    Shareholders'
                                      Par Value    Capital     Earnings     Trusts   Income(Loss)    Equity
                                      ----------  ----------  ----------  ----------  ----------  ----------
<S>                                    <C>         <C>         <C>         <C>         <C>         <C>
Balance as of January 1, 2000 .....    $  3,222    $ 62,307    $559,344    $(54,033)   $(18,365)   $552,475

Net income ........................           -           -      32,457           -            -     32,457
Change in net unrealized gains
   (losses) on available-for-sale
    securities.....................           -           -           -           -      (6,837)     (6,837)
Foreign currency translation
   adjustment......................           -           -           -           -         (42)        (42)
Exercise of employee share
   options, including income
   tax effect......................           -       2,676           -       8,742           -      11,418
Extension of employee
   share options...................           -       2,943           -           -           -       2,943
Net realized gains (losses) on
   disposal of shares held by the
   employee benefit trusts.........           -        (335)          -           -           -        (335)
Cash dividends (23.2 cents net
   per share and ADS(1))...........           -           -     (11,625)          -           -     (11,625)
Purchase of shares by the
   employee benefit trusts.........           -           -           -     (12,712)          -     (12,712)
                                       --------    --------    --------    --------    --------    --------
Balance as of December 31, 2000....    $  3,222    $ 67,591    $580,176    $(58,003)   $(25,244)   $567,742
                                       --------    --------    --------    --------    --------    --------
                                       --------    --------    --------    --------    --------    --------



(1) ADS amounts have been  restated to reflect the  four-for-one  split in March
    2000.

<FN>
          See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>

                                       35
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


<TABLE>
<CAPTION>
                                                                                           Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                      2000           1999           1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)

<S>                                                                              <C>            <C>            <C>
Net income...................................................................    $      32,457  $     251,876  $      26,456

Other comprehensive income (loss), net of deferred income taxes:

Foreign currency translation adjustments, net of income taxes of $0..........              (42)             -              -

Change in net unrealized gains (losses) on available-for-sale securities
   arising during the year,  net of income taxes and deferred  policy
   acquisition  cost amortization adjustments of $9,423, $27,819, and
   $12,706, respectively ...................................................            (6,837)       (14,923)        (9,661)
                                                                                 -------------  -------------  -------------
Other comprehensive income (loss) ...........................................           (6,879)       (14,923)        (9,661)
                                                                                 -------------  -------------  -------------
Comprehensive income ........................................................    $      25,578  $     236,953  $      16,795
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------



<FN>
          See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>

                                       36
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.    Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

       The accompanying  consolidated financial statements have been prepared by
London  Pacific Group Limited (the  "Company") in conformity  with United States
generally  accepted  accounting  principles ("U.S.  GAAP").  These  consolidated
financial statements include the accounts of the Company, its subsidiaries,  the
Employee   Share  Option  Trust  and  the  Agent   Loyalty   Opportunity   Trust
(collectively,  the "Group"). All intercompany transactions have been eliminated
in  consolidation.  During the first  quarter of 2000,  the Company  completed a
four-for-one  split of its American  Depositary Shares ("ADSs").  Effective from
the close of business on March 23, 2000, each ADS represents one Ordinary Share.
All  dividend  and  earnings  per  ADS  amounts  disclosed  in  these  financial
statements have been restated to reflect this split.

       The consolidated  balance sheet is presented in an unclassified format as
the Group is primarily engaged in the life insurance and annuity business.

       The Company is incorporated  under the laws of Jersey,  Channel  Islands.
Its Ordinary  Shares are traded on the London Stock Exchange and on the New York
Stock Exchange in the form of ADSs, which are represented by American Depositary
Receipts  ("ADRs").  Pursuant  to the  regulations  of the U.S.  Securities  and
Exchange  Commission  ("SEC"),   the  Company  is  considered  a  U.S.  domestic
registrant and must file financial statements prepared under U.S. GAAP. In prior
years,  the Company filed as a "foreign  private issuer" (as defined by the SEC)
and prepared its financial  statements under United Kingdom  generally  accepted
accounting  principles ("U.K.  GAAP") with a reconciliation to U.S. GAAP for net
income and shareholders' equity.

       The  significant  impact of  converting  to U.S. GAAP is the reduction of
shareholders'  equity due to the reclassification of the cost of the shares held
by the employee benefit trusts,  which had been recorded  previously as an asset
in the  consolidated  balance sheet under U.K. GAAP. The effect of the change to
U.S.  GAAP on net income,  as  previously  reported for 1999, is a decrease from
$252.8 million to $251.9 million,  and on diluted  earnings per share and ADS, a
decrease from $4.61 to $4.54.

Cash and Cash Equivalents

       The Group  considers  all  highly  liquid  investments  with an  original
maturity of three months or less to be cash equivalents.

Investments

       The Group's  investments consist of fixed maturity and equity securities.
Fixed  maturity  securities  are  classified  as  either  available-for-sale  or
held-to-maturity,  and equity  securities  are  classified as either  trading or
available-for-sale. The investments are accounted for as follows:

       i) available-for-sale securities are recorded at fair value, with changes
in unrealized  gains and losses  excluded  from net income,  but reported net of
applicable   taxes  and   adjustments  to  deferred  policy   acquisition   cost
amortization as a separate component of comprehensive income;

       ii) held-to-maturity securities are recorded at amortized cost; and

       iii)  trading  securities  are  recorded  at fair value  with  changes in
unrealized gains and losses included in net income.

       Amortization  of  premiums and  accretion of discounts on fixed  maturity
securities  are  reflected  in  earnings  over  the  contractual  terms  of  the
investments in a manner that produces a constant effective yield. Realized gains
and  losses  on  securities  are  included  in net  income  using  the  specific
identification method.

                                       37
<PAGE>

                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Where declines in the value of investments are considered  other than temporary,
a charge is reflected in net income for the difference between cost or amortized
cost and estimated net realizable value.

       Private  corporate debt and equity securities are valued at cost, and are
adjusted for declines in value that are considered other than temporary.

       Policy loans are carried at aggregate unpaid principal balances. Interest
income on such loans is accrued as earned.

       Included  in  available-for-sale   and  held-to-maturity  fixed  maturity
securities  are  collateralized  mortgage  obligations  ("CMOs").  Premiums  and
discounts  arising  from the  purchase of CMOs are treated as yield  adjustments
over  their  estimated   lives.   For  single  class  and  defined   multi-class
mortgage-backed  and  asset-backed   securities,   anticipated  prepayments  are
considered when determining the amortization of discount or premium.  Prepayment
assumptions  are  obtained  from  dealer  surveys  and are based on the  current
interest rate and economic development.  The retrospective  adjustment method is
used to value all such securities except for interest-only securities, which are
valued using the prospective method.

Deferred Policy Acquisition Costs

       Policy  acquisition  costs are the costs of producing  life insurance and
annuity  business:  principally  commissions,  underwriting  costs  and  certain
marketing   expenses  which  vary  with,  and  are  primarily  related  to,  the
acquisition of new business. Policy acquisition costs are deferred and amortized
over the estimated lives of the policies in relation to their  estimated  future
gross  profits.  Amortization  is adjusted in the current year when estimates of
total profits to be realized from a group of products are revised.

       Deferred  policy  acquisition  costs  are  adjusted  for  the  change  in
amortization  that  would  have  been  recorded  if  fixed  maturity  securities
classified as  available-for-sale  had been sold at their stated  aggregate fair
value  and the  proceeds  reinvested  at  current  yields.  The  impact  of this
adjustment  is  included  in  accumulated  other  comprehensive   income  within
shareholders' equity.

Other Assets

       Other assets consist primarily of the following:

a)     Property, Equipment and Leasehold Improvements

       Property,  equipment and leasehold  improvements  are stated at cost less
accumulated depreciation. Depreciation is calculated on a straight-line basis at
rates  sufficient to write-off such assets over their estimated  useful lives on
the following basis:

       Furniture and equipment                       -  five years
       Computer equipment, including software        -  three to five years
       Motor vehicles                                -  five years
       Leasehold improvements                        -  life of lease

       The  Group   adopted   Statement  of  Position  No.  98-1  ("SOP  98-1"),
"Accounting  for the  Costs of  Computer  Software  Developed  or  Obtained  for
Internal  Use," as of January 1, 2000.  With the adoption of SOP 98-1, the Group
began  capitalizing  certain  internal and external  costs incurred to obtain or
create internal use software.  These  capitalized  costs are amortized over five
years with the amortization  period beginning when the software is ready for its
intended use.

                                       38
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       Assets held under capital leases are included in property,  equipment and
leasehold  improvements  and are depreciated  over their estimated useful lives.
The future  obligations  under these  leases are  included in accounts  payable,
accruals and other  liabilities.  Interest paid on capital  leases is charged to
the income statement over the periods of the leases.

b)     Intangible Assets

       Intangible  assets  consist  of the cost of  acquiring  U.S.  state  life
insurance  licenses,  which are being  amortized over a period of 20 years,  and
goodwill recorded at acquisition of subsidiaries. Goodwill at acquisition arises
where the consideration given exceeds the fair value attributed to the separable
net assets.  All goodwill on  acquisitions  is  capitalized  and  amortized on a
straight-line basis over its estimated useful economic life, generally 25 years.

Separate Accounts

       Separate  account assets and liabilities  represent funds  segregated for
the  benefit  of  certain  policyholders.   For  non-guaranteed   policies,  the
policyholder  bears the investment risk, and  policyholder  account deposits and
withdrawals,  investment  income and realized gains and losses are excluded from
the  amounts  reported in the income  statement.  Fees  charged on  policyholder
deposits are included in other fee income.  For  guaranteed  policies  issued in
certain  states,  the U.S. life company bears a portion of the investment  risk.
Policy  charges,  interest  credited,  investment  income and realized gains and
losses on  investments  backing  the  guaranteed  policies  are  included in the
amounts reported in the income statement.

Life Insurance Policy Liabilities, Revenues and Expenses

       Life insurance policy liabilities,  premium revenues and related expenses
are accounted for in accordance with Statement of Financial Accounting Standards
No.  97,  "Accounting  and  Reporting  by  Insurance   Enterprises  for  Certain
Long-Duration  Contracts  and for  Realized  Gains and  Losses  from the Sale of
Investments," as follows:

       i) Life insurance policy liabilities for deferred annuities and universal
life  products  are  accounted  for as  investment-type  insurance  products and
universal  life-type  products,  respectively,  and are recorded at  accumulated
value (premiums received,  plus accrued interest to the balance sheet date, less
withdrawals and assessed fees).  Life insurance  policy  liabilities for certain
immediate annuities are accounted for as limited payment-type  policies,  and as
such are recorded at the present value of future benefits including  assumptions
as to investment yields, mortality, withdrawals,  maintenance expenses and other
assumptions  based on generally  accepted  actuarial  methods and on the Group's
experience.

       ii)  Revenues  for  investment-type   insurance  products  and  universal
life-type products consist of charges assessed against policy account values for
the cost of  insurance,  policy  administration  and  surrenders.  Revenues  for
limited payment-type products are recognized when due.

       iii) Benefits for  investment-type  insurance  products and for universal
life-type  products are charged to expense  when  incurred and reflect the claim
amounts in excess of the policy account  balance.  Expenses for  investment-type
and universal  life-type  products  include the interest  credited to the policy
account balance.  Benefits and expenses,  other than deferred policy acquisition
costs,  for limited  payment-type  products are charged to expense in the period
incurred.

                                       39
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenue Recognition

       Fee income for  financial  advisory  and asset  management  services  are
recorded on an accrual basis when the services are performed for the client.

       Interest  income is  accounted  for on an accrual  basis.  Dividends  are
accounted for when declared.

       Listed equity securities received as a result of an acquisition of one of
the Group's  investee  companies by a publicly  traded  company that are held in
escrow by an escrow agent,  are recognized in the financial  statements when the
transaction is completed.  Reductions are made to the number of shares of listed
equity securities held in escrow that are carried in the financial statements as
claims are made by the  acquiring  company  against the  escrow,  or if evidence
exists that a claim is probable.

Stock Based Compensation

       The Group  accounts for stock based  compensation  issued to employees in
accordance  with  Accounting   Principles  Board  Opinion  No.  25  ("APB  25"),
"Accounting for Stock Issued to Employees,"  which recognizes  compensation cost
based upon the intrinsic value at the date of grant of the option  awarded.  The
Financial  Accounting  Standards Board issued Statement of Financial  Accounting
Standards No. 123 ("SFAS 123"), "Accounting for Stock Based Compensation," which
encourages,  but does not require,  companies to recognize  compensation expense
for grants of stock options based on their fair value. The Group has elected, as
permitted by SFAS 123, to adopt the  disclosure  requirement  of SFAS 123 and to
continue to account for stock based compensation under APB 25.

Income Taxes

       The Group  accounts  for income  taxes in  accordance  with  Statement of
Financial  Accounting  Standards  No. 109 ("SFAS 109"),  "Accounting  for Income
Taxes." Under SFAS 109, the Group recognizes taxes payable or refundable for the
current  year,  and  deferred  tax  assets  and  liabilities  due  to  temporary
differences in the basis of assets and liabilities  between amounts recorded for
financial statement and tax purposes.

       The Group provides a valuation  allowance for deferred  income tax assets
if it is more likely than not that some portion of the deferred income tax asset
will not be realized. The Group includes in income any increase or decrease in a
valuation  allowance that results from a change in  circumstances  that causes a
change in judgement  about the  realization of the related  deferred  income tax
asset.

       The Group includes in additional paid-in capital the tax benefit on share
options  exercised during the period to the extent that such exercises result in
a permanent  difference  between financial  statement and tax basis compensation
expense.

Earnings Per Share and ADS

         The Group calculates earnings per share in accordance with Statement of
Financial Accounting Standards No. 128 ("SFAS 128"),  "Earnings per Share." This
statement  requires the  presentation  of basic and diluted  earnings per share.
Basic  earnings  per share is  calculated  by dividing net income or loss by the
weighted  average number of Ordinary  Shares  outstanding  during the applicable
period,  excluding  shares held by the Employee Share Option Trust and the Agent
Loyalty  Opportunity Trust which are regarded as treasury stock for the purposes
of this  calculation.  The Group has issued  employee share  options,  which are
considered  potential common stock under SFAS 128. Diluted earnings per share is
calculated  by dividing  net income by the weighted  average  number of Ordinary
Shares   outstanding   during  the  applicable  period  as  adjusted  for  these
potentially  dilutive  options which are determined based on the "Treasury Stock
Method."

                                       40
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Foreign Currencies

       The Group uses the U.S.  dollar as its  functional  currency.  Assets and
liabilities  denominated in foreign  currencies are translated into U.S. dollars
at the prevailing  exchange rates at the balance sheet date.  Individual  income
statement items are translated to U.S.  dollars at prevailing  exchange rates on
the transaction  date. The resulting net difference on balance sheet translation
is shown as a separate  component  of  shareholders'  equity.  Foreign  currency
transaction gains and losses are recorded in the income statement.

Comprehensive Income

       Comprehensive income consists of net income;  changes in unrealized gains
or losses on  available-for-sale  securities,  net of income  taxes and deferred
policy   acquisition  cost  amortization   adjustments;   and  foreign  currency
translation  gains or losses arising on the  translation of the Group's  Jersey,
Channel Islands insurance subsidiary.

Recently Issued Accounting Pronouncements

       In June 1998, the Financial  Accounting  Standards  Board ("FASB") issued
Statement of Financial Accounting Standard No. 133 ("SFAS 133"), "Accounting for
Derivative  Instruments and Hedging  Activities."  This statement  requires that
derivatives  be  recognized as assets and  liabilities,  and be measured at fair
value,  with  changes in the fair value being  accounted  for within net income,
unless qualifying for hedge accounting.  In June 1999, the FASB issued Statement
of  Financial  Accounting  Standard  No. 137 ("SFAS  137")  which  deferred  the
effective date of SFAS 133 to all fiscal  quarters of all fiscal years beginning
after June 15,  2000.  In June 2000,  the FASB  issued  Statement  of  Financial
Accounting  Standard  No. 138 ("SFAS  138")  which  amended the  accounting  and
reporting  standards of SFAS 133 for certain derivative  instruments and certain
hedging  activities.  The Group will adopt SFAS 133,  as amended by SFAS 137 and
SFAS 138, on January 1, 2001. The adoption of this  financial  standard will not
have a  material  impact  upon  the  presentation  of  the  Group's  results  of
operations and financial position.

Use of Estimates

       The  preparation  of financial  statements  requires  management  to make
estimates  and  assumptions   affecting  the  reported  amounts  of  assets  and
liabilities and the  disclosures of contingent  assets and liabilities as of the
date of the  financial  statements,  and the  reported  amounts of  revenue  and
expenses for the reporting  period.  Estimates are inherently  subject to change
and  actual  results  could  differ  from  the  estimates.  Certain  significant
estimates,  including those used to determine life insurance policy  liabilities
and deferred policy acquisition  costs, are disclosed  throughout these notes to
the financial statements.

Reclassifications

       Certain  reclassifications  were made to prior years' balances to conform
with the current year's presentation.  These reclassifications have no effect on
prior years' net income or shareholders' equity.

                                       41
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2.    Investments

Summary Cost and Fair Value Information

Fixed Maturity Securities

       An analysis of fixed maturity securities is as follows:

<TABLE>
<CAPTION>
                                                                      December 31,
                          --------------------------------------------------------------------------------------------------
                                                2000                                              1999
                          -----------------------------------------------   ------------------------------------------------
                                         Gross       Gross      Estimated                  Gross       Gross       Estimated
                           Amortized   Unrealized  Unrealized     Fair       Amortized   Unrealized  Unrealized      Fair
                             Cost        Gains       Losses       Value        Cost        Gains       Losses        Value
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------
                                                                    (In thousands)
<S>                       <C>          <C>         <C>         <C>          <C>          <C>         <C>          <C>
Available-for-sale:
U.S. treasury securities. $      982   $       -   $     (13)  $      969   $      979   $       -   $       (9)  $      970
Non-U.S. government
  debt securities........     21,750       1,037           -       22,787       10,969         529          (38)      11,460
Non-U.S. corporate
  debt securities........    178,167       3,558      (6,616)     175,109      111,188         304       (5,993)     105,499
Corporate debt securities    923,179      12,992     (63,885)     872,286      692,551         944      (44,775)     648,720
Mortgage-backed securities    99,334       1,584        (179)     100,739      106,222         164       (3,900)     102,486
Private corporate debt
  securities............      33,708          29      (1,488)      32,249       33,151      11,858            -       45,009
Other debt securities...      95,193         676      (7,993)      87,876       82,025          94       (7,198)      74,921
                          ----------   ---------   ---------   ----------   ----------   ---------    ---------   ----------
                          $1,352,313   $  19,876   $ (80,174)  $1,292,015   $1,037,085   $  13,893   $  (61,913)  $  989,065
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------
Held-to-maturity:
U.S. treasury securities. $    2,240   $      15   $     (22)  $    2,233   $    2,242   $      29   $      (14)  $    2,257
U.S. municipal securities      2,044          41           -        2,085        2,158          36           (3)       2,191
Non-U.S. government
  debt securities ......         195           -           -          195          182           -           (2)         180
Non-U.S. corporate
  debt securities ......       1,301          28           -        1,329        6,816          90           (2)       6,904
Corporate debt securities     11,410         186         (64)      11,532       12,312         147         (228)      12,231
Mortgage-backed securities    88,151       1,626        (153)      89,624       99,816         480       (1,735)      98,561
Private corporate debt
  securities............      22,173         229           -       22,402       98,483         259            -       98,742
Other debt securities...           -           -           -            -          101           -            -          101
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------
                          $  127,514   $   2,125   $    (239)   $ 129,400   $  222,110   $   1,041   $   (1,984)  $  221,167
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------
Total fixed maturity
  securities              $1,479,827   $  22,001   $ (80,413)  $1,421,415   $1,259,195   $  14,934   $  (63,897)  $1,210,232
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------
</TABLE>
       There  were  no  sales  of  fixed  maturity   securities   classified  as
held-to-maturity   during  2000.   During  1999,  one  fixed  maturity  security
classified as held-to-maturity was sold for $8,342,000,  resulting in no gain or
loss. This security was sold due to credit concerns.

       Non-income  producing  fixed  maturity  securities  during  2000  totaled
$11,527,000 at amortized cost as of December 31, 2000.

                                       42
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contractual Maturities

       The amortized cost and estimated fair value of fixed maturity  securities
as of December  31, 2000 by  contractual  maturity,  are shown  below.  Expected
maturities may differ from  contractual  maturities as certain  issuers have the
right to call and certain borrowers have the right to prepay obligations without
penalty.

<TABLE>
<CAPTION>

                                                              Available-for-Sale              Held-to-Maturity
                                                           -----------------------        -----------------------
                                                                         Estimated                     Estimated
                                                            Amortized      Fair            Amortized     Fair
                                                              Cost         Value             Cost        Value
                                                           ----------   ----------        ----------   ----------
                                                                (In thousands)                (In thousands)

<S>                                                        <C>          <C>               <C>         <C>
Due in one year or less ...........................        $    6,676   $    6,681        $    7,508   $    7,542
Due after one year through five years .............           306,593      301,518            19,184       19,293
Due after five years through ten years ............           563,387      540,623               796          801
Due after ten years ...............................           376,323      342,454            11,875       12,140
                                                           ----------   ----------        ----------   ----------
                                                            1,252,979    1,191,276            39,363       39,776
Mortgage-backed securities ........................            99,334      100,739            88,151       89,624
                                                           ----------   ----------        ----------   ----------
                                                           $1,352,313   $1,292,015        $  127,514   $  129,400
                                                           ----------   ----------        ----------   ----------
                                                           ----------   ----------        ----------   ----------
</TABLE>
Equity Securities

       Equity  securities  are  comprised  of  available-for-sale   and  trading
securities. An analysis of equity securities is as follows:
<TABLE>
<CAPTION>

                                                                     December 31,
                          --------------------------------------------------------------------------------------------------
                                               2000                                         1999
                          -----------------------------------------------   ------------------------------------------------
                                         Gross      Gross       Estimated                  Gross       Gross       Estimated
                                      Unrealized  Unrealized      Fair                   Unrealized  Unrealized      Fair
                             Cost        Gains      Losses        Value        Cost        Gains       Losses        Value
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------
                                                                   (In thousands)
<S>                       <C>          <C>         <C>         <C>          <C>          <C>         <C>          <C>
Private corporate equity
  securities............. $  226,799   $       -   $       -   $  226,799   $  174,592   $       -   $        -   $  174,592
Listed equity securities.     12,143         124      (9,663)       2,604       11,811          94       (3,571)       8,334
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------
Total available-for-sale
  equity securities......    238,942         124      (9,663)     229,403      186,403          94       (3,571)     182,926

Trading securities.......     99,747     264,433     (10,284)     353,896       34,680     367,295       (2,131)     399,844
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------
Total equity securities.. $  338,689   $ 264,557   $ (19,947)  $  583,299   $  221,083   $ 367,389   $   (5,702)  $  582,770
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------
</TABLE>

       Trading  securities  are  carried  at  fair  value  with  changes  in net
unrealized  gains  (losses)  of  $(111,014,000),  $348,906,000  and  $16,258,000
included in earnings during 2000, 1999 and 1998, respectively.

Investment Concentration and Risk

         As of December  31,  2000,  investments  in fixed  maturity  and equity
securities included two corporate issuers  representing more than ten percent of
shareholders' equity. Trading securities included investments in

                                       43
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

New Focus, Inc. and Siebel Systems recorded at market values of $160,385,000 and
$62,487,000,  respectively,  as of December 31, 2000. These investments were not
held as of December 31, 1999.  Fixed maturity  securities  considered  less than
investment grade approximated 13.1% and 19.3% of total fixed maturity securities
as of December 31, 2000 and 1999, respectively.

Changes in Net Unrealized Gains (Losses) on Available-for-Sale Securities

       The  net  unrealized  losses  after  deferred  policy   acquisition  cost
adjustments on fixed maturity securities  classified as available-for-sale as of
December 31, 2000 totaled  $29,118,000 before tax and $18,993,000 after tax, and
as of December 31, 1999 totaled  $24,662,000  before tax and  $16,030,000  after
tax.

       Changes in net unrealized gains (losses) on available-for-sale securities
included in other  comprehensive  income for the years ended  December 31, 1998,
1999 and 2000 were as follows:

<TABLE>
<CAPTION>

                                                                                        Net Unrealized Gains (Losses)
                                                                                 -------------------------------------------
                                                                                     Debt          Equity
                                                                                  Securities     Securities       Total
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)

<S>                                                                              <C>            <C>            <C>
Net unrealized gains (losses) on available-for-sale securities as of
  December 31, 1997 .........................................................    $       2,903  $       3,316  $       6,219
Changes during the year ended December 31, 1998:
Decrease in stated amount of securities......................................          (19,772)        (2,595)       (22,367)
Decrease in amortization of deferred policy acquisition costs................            8,303              -          8,303
Decrease in deferred income tax liabilities..................................            4,014            389          4,403
                                                                                 -------------  -------------  -------------
Net unrealized gains (losses) on available-for-sale securities as of
  December 31, 1998..........................................................           (4,552)         1,110         (3,442)

Changes during the year ended December 31, 1999:
Decrease in stated amount of securities......................................          (38,452)        (4,290)       (42,742)
Decrease in amortization of deferred policy acquisition costs................           20,793              -         20,793
Decrease in deferred income tax liabilities..................................            6,181            845          7,026
                                                                                 -------------  -------------  -------------
Net unrealized gains (losses) on available-for-sale securities as of
  December 31, 1999..........................................................          (16,030)        (2,335)       (18,365)

Changes during the year ended December 31, 2000:
Decrease in stated amount of securities......................................          (10,198)        (6,062)       (16,260)
Decrease in amortization of deferred policy acquisition costs................            5,741              -          5,741
Decrease in deferred income tax liabilities..................................            1,494          2,188          3,682
                                                                                 -------------  -------------  -------------
Net unrealized gains (losses) on available-for-sale securities as of
  December 31, 2000..........................................................    $     (18,993) $      (6,209) $     (25,202)
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------
</TABLE>

Net Investment Income

       The details of  investment  income,  net of investment  expenses,  are as
follows:

                                       44
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>

                                                                                            Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                      2000           1999          1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)
<S>                                                                              <C>            <C>            <C>
Interest on fixed maturity securities.....................................       $     112,039  $      94,546  $      89,811
Dividends on equity securities............................................                 431            213             69
Interest on policy loans..................................................                 640            606            539
Interest on cash and cash equivalents.....................................               3,389          3,780          5,296
                                                                                 -------------  -------------  -------------
Gross investment income...................................................             116,499         99,145         95,715
Investment expenses.......................................................                (494)          (138)          (749)
                                                                                 -------------  -------------  -------------
                                                                                       116,005         99,007         94,966
Interest credited on insurance policyholder accounts......................             (94,065)       (73,753)       (68,067)
                                                                                 -------------  -------------  -------------
Net investment income.....................................................       $      21,940  $      25,254  $      26,899
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------
</TABLE>

       Investment  expenses  included  professional  fees,  salaries  and  other
allocated costs of investment management and administration.

Realized Gains and Losses and Impairments

       Information  about net and gross  realized gains and losses on securities
transactions is as follows:
<TABLE>
<CAPTION>


                                                                                          Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                      2000           1999          1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)
<S>                                                                              <C>            <C>            <C>
Net realized gains (losses) on securities transactions:
Fixed maturities, available-for-sale.......................................      $          13  $      (6,735) $       9,196
Fixed maturities, held-to-maturity.........................................            (28,274)       (36,862)        (2,734)
Trading securities.........................................................            186,516         34,403              -
Equity securities, available-for-sale......................................            (12,709)           613          3,546
                                                                                 -------------  -------------  -------------
                                                                                 $     145,546  $      (8,581) $      10,008
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------

Gross  realized  gains (losses) on securities  transactions:
Fixed  maturities, available-for-sale:
    Gross gains............................................................      $         244  $       2,179  $      10,002
    Gross losses...........................................................               (231)        (8,914)          (806)
Fixed maturities, held-to-maturity:
    Gross losses...........................................................            (28,274)       (36,862)        (2,734)
Trading securities:
    Gross gains............................................................            187,717         34,403              -
    Gross losses...........................................................             (1,201)             -              -
Equity securities, available-for-sale:
    Gross gains............................................................                179          7,822          4,388
    Gross losses...........................................................            (12,888)        (7,209)          (842)
                                                                                 -------------  -------------  -------------
Net realized investment gains (losses) on securities transactions..........      $     145,546  $      (8,581) $      10,008
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------
</TABLE>

                                       45
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       During 2000,  securities with an aggregate  carrying value of $27,674,000
classified as held-to-maturity and $12,869,000  classified as available-for-sale
were considered  other than temporarily  impaired by management.  These realized
losses totaling  $40,543,000 were recorded in the consolidated income statement.
Fixed maturity  securities  with an aggregate  carrying value of $23,397,000 and
$20,122,000 in 2000 and 1999, respectively,  classified as held-to-maturity were
exchanged  into  preferred  stock  and  classified  as  available-for-sale.  The
exchanges resulted from refinancings by the investee companies and there were no
gains or losses recorded in the consolidated income statement.

Listed Equity Securities Held in Escrow

       As a result of the acquisitions of four companies in which the Group held
private equity investments during 2000, the Group received publicly traded stock
in the acquiring companies. In these transactions,  a portion, generally 10-15%,
of the shares to be received  were  withheld and  deposited  into escrow with an
escrow agent,  to serve as security for any damages  caused to the acquiror as a
result of any inaccuracy or breach of representations and warranties made by the
acquired company, or any action, suit or proceeding pending against the acquired
company.

       The aggregate  market value of the Group's listed equity  securities held
in escrow as of December 31, 2000 was $22,956,000.  During February 2001, one of
the escrow accounts was released in full and the Group received shares valued at
$12,687,000  as of  December  31,  2000.  The  remaining  escrow  shares are all
scheduled to be released  during 2001,  subject to claims made by the  acquiring
companies.  The shares have been fully reflected in the  consolidated  financial
statements  as of  December  31,  2000.  The Group is not aware of any actual or
potential claims,  after making enquiries,  other than a pending claim estimated
at $100,000 which has been reflected in the carrying value stated above.


Note 3.    Deferred Policy Acquisition Costs

       Deferred policy acquisition cost activity was as follows:
<TABLE>
<CAPTION>

                                                                                            Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                      2000          1999           1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)

<S>                                                                              <C>            <C>            <C>
Balance as of January 1.....................................................     $     144,518  $     114,681  $     103,382
Deferral of costs relating to:
Commissions ................................................................            32,634         21,996         15,955
Other ......................................................................             6,392          3,844          3,212
                                                                                 -------------  -------------  -------------
                                                                                        39,026         25,840         19,167
Amortization relating to:
Operations .................................................................             9,420          8,324          8,171
Investment gains ...........................................................            11,735          8,473          8,000
                                                                                 -------------  -------------  -------------
                                                                                        21,155         16,797         16,171
                                                                                 -------------  -------------  -------------
Net deferral ...............................................................            17,871          9,043          2,996
Adjustment for unrealized losses on available-for-sale fixed
   maturity securities......................................................             5,740         20,794          8,303
Decrease due to foreign exchange............................................               (27)             -              -
                                                                                 -------------  -------------  -------------
Balance as of December 31 ..................................................     $     168,102  $     144,518  $     114,681
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------
</TABLE>

                                       46
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4.    Receivables

       An analysis of receivables is as follows:
<TABLE>
<CAPTION>
                                                                                           December 31,
                                                                                 ----------------------------
                                                                                     2000           1999
                                                                                 -------------  -------------
                                                                                        (In thousands)

<S>                                                                              <C>            <C>
Fee income receivable ......................................................     $       1,666  $       1,404
Allowance for doubtful accounts ............................................                (5)           (16)
Due from brokers ...........................................................             8,799         27,048
Income tax refund receivable ...............................................             5,520          2,640
Other receivables ..........................................................             1,242          3,091
                                                                                 -------------  -------------
Total receivables ..........................................................     $      17,222  $      34,167
                                                                                 -------------  -------------
                                                                                 -------------  -------------
</TABLE>

Note 5.    Intangible Assets

       Intangible assets consist primarily of goodwill and the cost of acquiring
U.S. state life insurance licenses. Intangible asset activity was as follows:
<TABLE>
<CAPTION>
                                                                                          Years Ended
                                                                                          December 31,
                                                                                 ----------------------------
                                                                                      2000          1999
                                                                                 -------------  -------------
                                                                                        (In thousands)

<S>                                                                              <C>            <C>
Cost:
Balance as of January 1 ....................................................     $       8,155  $       8,362
Disposals ..................................................................               (39)          (207)
                                                                                 -------------  -------------
Balance as of December 31 ..................................................             8,116          8,155

Accumulated amortization:
Accumulated amortization as of January 1 ...................................             3,480          3,046
Amortization recorded.......................................................               462            451
Accumulated amortization on disposals ......................................               (39)           (17)
                                                                                 -------------  -------------
Accumulated amortization as of December 31 .................................             3,903          3,480
                                                                                 -------------  -------------
Net book value as of December 31 ...........................................     $       4,213  $       4,675
                                                                                 -------------  -------------
                                                                                 -------------  -------------
</TABLE>

Note 6.    Life Insurance Policy Liabilities

       An analysis of life insurance policy liabilities is as follows:
<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                                 ----------------------------
                                                                                      2000           1999
                                                                                 -------------  -------------
                                                                                       (In thousands)
<S>                                                                              <C>            <C>
Future policy benefits:
   Immediate annuities......................................................     $     169,357  $     167,822
Policyholder contract deposits:
   Deferred annuities ......................................................         1,468,070      1,194,872
   Universal life products .................................................            49,574         51,697
Other policy claims and benefits ...........................................             4,600          2,032
                                                                                 -------------  -------------
                                                                                 $   1,691,601  $   1,416,423
                                                                                 -------------  -------------
                                                                                 -------------  -------------
</TABLE>

                                       47
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       The  liability  for future  policy  benefits  and  policyholder  contract
deposits was determined based on the following assumptions:

Interest Rate Assumptions

       Credited interest rates for universal life-type products ranged from 5.5%
to 6.25% in 2000 and in 1999. Guarantees ranged from 4.0% to 5.5% in 2000 and in
1999. For annuity  products,  credited interest rates generally ranged from 5.0%
to 8.75% in 2000, and from 5.0% to 7.75% in 1999. The interest rates credited on
immediate annuities ranged from 1% to 11% in 2000 and 1999.

Mortality Assumptions

       Assumed  mortality  rates were  generally  based on experience  multiples
applied  to Select  and  Ultimate  Tables  commonly  used in the  industry.  For
immediate annuities, mortality assumptions were based on blends of the 1983a and
1979-81 U.S. Life Tables.

Withdrawal Assumptions

       Withdrawal charges on deferred annuities generally ranged from 9% to 12%,
grading  to zero  over a period of up to 12 years.  Withdrawal  assumptions  for
individual life insurance  policies were based on historical  company experience
and varied by issue, age, type of coverage and policy duration.


Note 7.   Statutory Financial Information and Restrictions

       The Group's U.S. life insurance subsidiary, London Pacific Life & Annuity
Company  ("LPLA"),  prepares  financial  statements  on the  basis of  statutory
accounting practices ("SAP") prescribed or permitted by the insurance department
in North  Carolina,  its state of domicile.  Prescribed SAP include a variety of
publications  promulgated by the National Association of Insurance Commissioners
("NAIC") as well as U.S. state laws,  regulations and  administrative  rules. In
1998, the NAIC adopted codified statutory accounting principles.  The purpose of
codification is to create  uniformity in statutory  financial  reporting  across
U.S. states. The North Carolina Insurance  Department has adopted  codification,
effective  January 1, 2001. The Group expects the  implementation of the new SAP
will not have a material adverse impact on LPLA's statutory surplus.

       Prior to January 1, 2001, the principal  differences between SAP and U.S.
GAAP ("GAAP") were: (i) policy acquisition costs were expensed as incurred under
SAP, but were deferred and amortized  under GAAP,  (ii) amounts  collected  from
holders of universal  life-type and annuity products were recognized as premiums
when collected under SAP, but were initially recorded as contract deposits under
GAAP,  with cost of  insurance  recognized  as revenue  when  assessed and other
contract charges  recognized as revenue over the periods for which services were
provided, (iii) the classification and carrying amount of investments in certain
securities  were  different  under SAP than under GAAP,  (iv) the  criteria  for
providing asset valuation  allowances,  and the methodologies  used to determine
the  amounts  thereof,  were  different  under SAP than GAAP,  (v) the timing of
establishing  certain  reserves,  and the  methodologies  used to determine  the
amounts thereof, were different under SAP than under GAAP, (vi) no provision was
made for  deferred  income taxes under SAP,  and (vii)  certain  assets were not
admitted for purposes of determining surplus under SAP.

                                       48
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       A  comparison  of net income and  statutory  capital  and surplus of LPLA
determined on the basis of SAP to net income and shareholders' equity of LPLA on
the basis of GAAP is as follows:
<TABLE>
<CAPTION>

                                                                                     2000           1999           1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)

<S>                                                                              <C>            <C>            <C>
Statutory Accounting Practices:
Net income (loss) for the years ended December 31..........................      $     (13,246) $         993  $         133
Statutory capital and surplus as of December 31 ...........................            152,955        166,701         80,316

Generally Accepted Accounting Principles:
Net income (loss) for the years ended December 31..........................            (33,538)        95,593         15,470
Shareholders' equity as of December 31 ....................................      $     179,097  $     215,134  $     162,814

</TABLE>

       Risk based capital ("RBC")  requirements  promulgated by the NAIC require
life  insurers to maintain  minimum  capitalization  levels that are  determined
based on formulas  incorporating credit risk, insurance risk, interest rate risk
and general business risk. As of December 31, 2000,  LPLA's adjusted capital and
surplus  exceeded their  authorized  control level of RBC.  Included  within the
statutory  capital  and  surplus  as of  December  31,  2000  shown  above  were
$20,000,000 of notes issued by LPLA to a sister company.

       The  insurance  statutes  of the state of  domicile  limit the  amount of
dividends  that  LPLA  can  pay  annually  without  first  obtaining  regulatory
approval. Generally, the limitations are based on a combination of statutory net
gain from operations for the preceding year, 10% of statutory surplus at the end
of the preceding year, and dividends and distributions made during the preceding
twelve months.  No dividends can be paid by LPLA during 2001 without  regulatory
approval.


Note 8.    Notes Payable

       On May 2, 2000,  the Group's  credit  facility  with a bank was  extended
until April 2002, under which the Group may borrow up to $50,000,000 for general
corporate  purposes.  As of  December  31,  2000 and 1999,  $35,556,000  and $0,
respectively,  was outstanding  under this credit facility,  and $14,074,000 and
$11,842,000,  respectively,  was  utilized  in the form of letters of credit and
guarantees  in  connection  with certain  portfolio  companies  which are highly
leveraged.  The credit facility bears interest at variable rates based on LIBOR.
The annual  interest  rate on  borrowings as of December 31, 2000 was 7.375% and
commitment  fees were  charged  at 0.375%  per annum on the  unutilized  balance
during  2000.  The facility  may be extended  annually by mutual  consent of the
Group and the lender after April 2002.


Note 9.    Income Taxes

       The Group is subject to taxation on its income in all  countries in which
it operates  based upon the taxable  income  arising in each  country.  However,
realized  gains on certain  investments  are  exempt  from  Jersey and  Guernsey
taxation.  This and other tax benefits  which may not recur have reduced the tax
charge in 2000, 1999 and 1998.

       The Group is  subject  to income  tax in Jersey at a rate of 20%.  In the
United States, the Group is subject to both federal and California taxes charged
at 34-35% and 8.84%, respectively.

       The  provision  for income  taxes  differs  from the amount  computed  by
applying the Jersey,  Channel Islands statutory income tax rate of 20% to income
before  taxes from  continuing  operations.  The  sources and tax effects of the
difference are as follows:

                                       49
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
                                                                                          Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                      2000          1999           1998
                                                                                 -------------  -------------  -------------
                                                                                               (In  thousands)

<S>                                                                              <C>            <C>            <C>
Income taxes computed at Jersey statutory income tax rate of 20%.............    $       3,002  $      61,132  $       5,776
Realized and unrealized investment gains not subject to taxation in
   Jersey (losses not deductible)............................................          (37,344)           112           (755)
Other losses not deductible in Jersey........................................            1,676            796            792
Income in Guernsey not subject to taxation (losses not deductible)...........           23,171        (32,414)           (18)
Taxes on income at higher than 20% statutory Jersey rate:
   Realized and unrealized investment gains and losses in the U.S............           (6,273)        22,793          3,619
   Other income and losses in the U.S. ......................................             (626)         1,375           (412)
Adjustment of prior years' provisions .......................................           (1,053)             -         (3,577)
Other .......................................................................                -             (8)            (6)
                                                                                 -------------  -------------  -------------
Actual tax expense (benefit) ................................................    $     (17,447) $      53,786  $       5,419
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------
</TABLE>



       The  Group  recognizes  assets  and  liabilities  for  the  deferred  tax
consequences  of  temporary  differences  between  the tax basis of  assets  and
liabilities  and their  reported  amounts  in the  financial  statements.  These
temporary  differences  will result in taxable or  deductible  amounts in future
years when the  reported  amounts of assets and  liabilities  are  recovered  or
settled.   The  deferred  income  tax  assets  are  reviewed   periodically  for
recoverability  and valuation  allowances  are provided as  necessary.  Deferred
income  tax  assets  and  liabilities  are  disclosed  net in  the  consolidated
financial  statements when they arise within the same tax  jurisdiction  and tax
return.

       The tax effects of temporary  differences  that give rise to  significant
portions of the deferred  income tax assets and deferred  income tax liabilities
are presented below. Net deferred income tax liabilities  existed as of December
31, 2000 and 1999 in the U.S. life insurance  subsidiary  which files a separate
U.S.  federal tax return.  Net deferred income tax assets existed as of December
31,  2000 and 1999 in the U.S.  non-life  subsidiaries  which file  consolidated
federal tax returns for two separate non-life groups.
<TABLE>
<CAPTION>

                                                                                          December 31,
                                                                                 ----------------------------
                                                                                      2000          1999
                                                                                 -------------  -------------
                                                                                      (In  thousands)
<S>                                                                              <C>            <C>
Deferred income tax assets:
Net operating loss carry forwards ...........................................    $       6,822  $           -
Unrealized losses on investments.............................................           27,967         21,152
Insurance policyholder liabilities ..........................................           27,013         27,199
Other assets.................................................................               26            956
                                                                                 -------------  -------------
                                                                                        61,828         49,307
                                                                                 -------------  -------------
Deferred income tax liabilities:
Unrealized gains on investments .............................................          (46,687)       (57,860)
Accretion recognized on a cash basis for income tax purposes ................           (3,830)        (3,098)
Cost of policies produced ...................................................          (52,757)       (46,020)
Other liabilities ...........................................................             (141)          (225)
                                                                                 -------------  -------------
                                                                                      (103,415)      (107,203)
                                                                                 -------------  -------------
Net deferred income tax liabilities..........................................    $     (41,587) $     (57,896)
                                                                                 -------------  -------------
                                                                                 -------------  -------------
</TABLE>

                                       50
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>

                                                                                          December 31,
                                                                                 ----------------------------
                                                                                      2000          1999
                                                                                 -------------  -------------
                                                                                      (In  thousands)

<S>                                                                              <C>            <C>
Deferred income tax assets:
Net operating loss carry forwards ..........................................     $       6,553  $       2,904
Revenues and expenses recognized on a cash basis for income tax purposes ...             1,713          1,303
Intangible assets ..........................................................                 -             42
Unrealized losses on investments ...........................................                 -            739
Other assets ...............................................................             2,490          1,176
Valuation allowance ........................................................            (6,121)        (4,154)
                                                                                 -------------  -------------
Deferred income tax assets, net of valuation allowance .....................             4,635          2,010

Deferred income tax liabilities:
Depreciation, amortization and other.........................................             (358)          (285)
                                                                                 -------------  -------------
Net deferred income tax assets...............................................    $       4,277  $       1,725
                                                                                 -------------  -------------
                                                                                 -------------  -------------
</TABLE>

       Income  taxes  in  the  following   amounts  would  have  arisen  if  the
distributable earnings of subsidiaries were remitted to the parent. No provision
for deferred  income  taxes has been made for these  potential  liabilities,  as
there is currently no intention to distribute such earnings.
<TABLE>
<CAPTION>

                                                                                                 December 31,
                                                                                 -------------------------------------------
                                                                                      2000           1999           1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)

<S>                                                                              <C>            <C>            <C>
Potential tax liability on distributable earnings of subsidiaries .........      $      24,507  $      30,985  $      34,553
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------
</TABLE>

Note 10.    Shareholders' Equity

       The Company has authorized 86,400,000 Ordinary Shares with a par value of
$0.05 per  share.  As of  December  31,  2000 and 1999,  there  were  64,433,313
Ordinary Shares issued and outstanding.

       Changes in the number of Ordinary Shares were as follows:
<TABLE>
<CAPTION>

                                                                                             Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                      2000          1999           1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)

<S>                                                                              <C>            <C>            <C>
Shares issued as of January 1..............................................             64,433         64,424         68,328
New share capital issued...................................................                  -              9             64
Purchase of shares by the Company..........................................                  -              -         (3,968)
                                                                                 -------------  -------------  -------------
Shares issued as of December 31 ...........................................             64,433         64,433         64,424
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------
</TABLE>

       Total dividends  declared were $0.29 gross per Ordinary Share ($0.232 net
of 20% Jersey tax) and $0.232 per ADS (net of 20% Jersey tax) during each of the
years ended December 31, 2000,  1999 and 1998, or  $11,625,000,  $11,446,000 and
$12,749,000, respectively, in total.

                                       51
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       The Group has two share  incentive  plans as  described in Note 14 to the
Consolidated Financial Statements. Under the terms of these plans, shares of the
Company may be purchased in the open market and held in trust.  These shares are
owned by the employee benefit trusts,  which are subsidiaries of the Company for
financial reporting purposes.

       Changes in the number of shares  held by The  London  Pacific  Group 1990
Employee  Share Option Trust  ("ESOT") and the Agent Loyalty  Opportunity  Trust
("ALOT") were as follows:
<TABLE>
<CAPTION>


                                                               Years Ended December 31,
                                       ------------------------------------------------------------------------
                                                 2000                    1999                     1998
                                       ----------------------   ----------------------   ----------------------
                                          ESOT        ALOT         ESOT        ALOT         ESOT         ALOT
                                       ----------  ----------   ----------  ----------   ----------  ----------
                                                                    (In thousands)

<S>                                        <C>           <C>        <C>            <C>       <C>            <C>
Shares held as of January 1 ..........     14,682         650       14,527         650       12,886         325
Purchased ............................        694           -          865           -        3,398         325
Exercised ............................     (3,214)          -         (710)          -       (1,757)          -
Transfer between trusts ..............        212        (212)           -           -           -            -
                                       ----------  ----------   ----------  ----------   ----------  ----------
Shares held as of December 31.........     12,374*        438       14,682         650       14,527         650
                                       ----------  ----------   ----------  ----------   ----------  ----------
                                       ----------  ----------   ----------  ----------   ----------  ----------
</TABLE>
*  604,000 held in ADR form.


Note 11.    Commitments and Contingencies

Lease Commitments

       The Group leases  furniture,  fixtures and  equipment  under  capital and
operating  leases with terms in excess of one year. The Group also leases office
space  under  operating  leases.  Total  rent  expense on  operating  leases was
$1,237,000,  $1,442,000  and  $1,790,000  for the years ended December 31, 2000,
1999 and 1998, respectively.

       Future minimum lease payments required under capital and  non-cancellable
operating leases with terms of one year or more, as of December 31, 2000 were as
follows:
<TABLE>
<CAPTION>

                                                                                Capital     Operating
                                                                                Leases        Leases
                                                                                -------      --------
                                                                                   (In thousands)
<S>                                                                             <C>          <C>
2001 .......................................................................    $   261      $  1,334
2002 .......................................................................        244           864
2003 .......................................................................        134           708
2004 .......................................................................         38           481
2005 .......................................................................          7           201
2006 and thereafter ........................................................          -           388
                                                                                -------      --------
Total ......................................................................        684      $  3,976
                                                                                -------      --------
                                                                                             --------
Less amounts representing interest .........................................        (97)
                                                                                -------
Present value of net minimum lease payments ................................    $   587
                                                                                -------
                                                                                -------

</TABLE>

                                       52
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Letters of Credit and Guarantees

       For  disclosure  of letters of credit and  guarantees,  see Note 8 to the
Consolidated Financial Statements.


Note 12.   Fair Value of Financial Instruments

       Substantially  all financial  instruments used in the Group's trading and
investing  activities are carried at fair value or amounts that approximate fair
value.  Fair value is based  generally on listed market prices or  broker-dealer
price  quotations.  To the extent that prices are not readily  available,  or if
liquidating the Group's position is reasonably expected to affect market prices,
estimated fair value is based on internal valuation models and estimates made by
management.

       With  the  exception  of the  fixed  maturity  securities  classified  as
held-to-maturity,  which are held at amortized  cost, the carrying values of the
Group's financial assets are equal to estimated fair value.

       It  is  not  practicable  for  the  Group  to  estimate  with  sufficient
reliability a meaningful fair value range for its portfolio of private corporate
securities because of the many qualitative rather than quantitative factors that
would require consideration in making such an estimate.

       Considerable  judgement is required in  interpreting  market data used to
develop the estimates of fair value. Accordingly, the estimates presented herein
are not  necessarily  indicative  of the  amounts  that could be  realized  in a
current market exchange.  The use of different market  assumptions or estimation
methodologies may have a material effect on the estimated fair value amounts.

       The carrying  values and estimated  fair values of the Group's  financial
instruments were as follows:

<TABLE>
<CAPTION>
                                                                               December 31,
                                                      ------------------------------------------------------
                                                               2000                          1999
                                                      ------------------------      ------------------------
                                                       Carrying     Estimated        Carrying     Estimated
                                                        Value       Fair Value        Value       Fair Value
                                                      ----------    ----------      ----------    ----------
                                                                           (In thousands)

<S>                                                   <C>           <C>             <C>           <C>
Financial assets:
Cash and cash equivalents .......................     $  114,285    $  114,285      $   49,703    $   49,703
Cash held in escrow .............................              -             -           3,110         3,110
Investments:
  Fixed maturities:
       Available-for-sale........................      1,292,015     1,292,015         989,065       989,065
       Held-to-maturity..........................        127,514       129,400         222,110       221,167
   Equity securities:
       Trading...................................        353,896       353,896         399,844       399,844
       Available-for-sale........................        229,403       229,403         182,926       182,926
   Policy loans..................................         10,301        10,301          10,385        10,385
Assets held in separate accounts.................        206,325       206,325         125,528       125,528

Financial liabilities:
Life insurance policy liabilities ...............      1,691,601     1,597,951       1,416,423     1,346,923
Liabilities related to separate accounts.........        203,806       188,683         126,703       118,599
Notes payable....................................         35,556        35,556               -             -
</TABLE>

                                       53
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       The  following  methods  and  assumptions  were  used  by  the  Group  in
estimating the fair value of the financial instruments presented:

Cash and Cash  Equivalents:  The carrying  amounts  reported in the consolidated
balance sheet for these instruments approximated fair value.

Fixed Maturity Securities:  Fair values for fixed maturity securities classified
as  available-for-sale  and  held-to-maturity  were generally  based upon quoted
market prices and appropriate valuation methodologies.

Equity Securities:
a)   Trading Securities:  Fair value for equity securities classified as trading
were based on quoted market prices.

b)   Available-for-Sale Securities: Fair values for equity securities classified
as  available-for-sale  were generally  based  upon  quoted  market  prices  and
appropriate valuation methodologies.

Policy Loans: The carrying  amounts  reported in the consolidated  balance sheet
for these instruments approximated fair value.

Assets  Held in  Separate  Accounts:  Fair  values for assets  held in  separate
accounts were based on quoted market prices.

Life Insurance  Policy  Liabilities:  The balance sheet caption "Life  insurance
policy liabilities" includes investment-type insurance contracts (i.e., deferred
annuities and universal life  contracts) and immediate  annuity  contracts.  The
estimated fair values of deferred annuity and universal life policies were based
on the account values after deduction of surrender  charges.  The estimated fair
values  of  immediate  annuity  contracts  were  based on the  present  value of
expected  benefits  using a discount rate equal to the five-year  U.S.  Treasury
rate.

Liabilities Related to Separate Accounts:  The estimated fair values of deferred
annuity and variable  annuity  policies  were based on the account  values after
deduction of surrender charges.

Notes Payable:  The carrying amounts reported in the consolidated  balance sheet
for  these  instruments  approximated  fair  value as the bank  borrowings  bear
interest at a variable rate.


Note 13.    Employee Benefit Plan

1993 Deferred Compensation Plan

       The  Group  sponsors  a  deferred  compensation  plan  for  certain  U.S.
employees.   It  is  designed  to  allow  these  employees  the  opportunity  to
participate  in the  potential  gains to be realized by the Group from  selected
private company  investments made by the Group.  Plan  participants may elect to
defer payment of all or a portion of their  compensation  and then to invest in,
on a  "phantom"  basis,  securities  which  mirror  the  performance  of private
investments  made  by the  Group.  The  participants  do not  actually  own  the
underlying  securities and do not risk their original principal amount deemed to
be  invested  in the  underlying  securities.  Under the  terms of the plan,  as
amended,  participants  may elect to receive in cash,  or to  rollover  into the
plan,  "redemption"  amounts (e.g., amounts realized in cash by the Group on the
underlying  investments,  return of principal  amounts upon  reaching  specified
expiration  dates,  or amounts  related to an annual  election  to redeem out of
certain  publicly traded  underlying  securities).  The Group does not fund this
plan and the rights of the  participants  to receive  payments from the plan are
unsecured claims against the Group. As of December 31,

                                       54
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2000 and  1999,  the  Group's  liability  to  participants  under  this plan was
$5,402,000  and  $3,864,000,  respectively.  In  addition,  as of  those  dates,
unrealized   appreciation  on  the  underlying   securities  of  $2,089,000  and
$1,936,000,   respectively,  had  been  accrued  but  was  not  yet  payable  to
participants.

       The Group recognized  expense related to this deferred  compensation plan
of  $1,412,000,  $2,476,000  and $173,000 for the years ended December 31, 2000,
1999 and 1998, respectively.


Note 14.    Share Incentive Plans

       The  Group has two  share  incentive  plans  for  employees,  agents  and
directors of London Pacific Group Limited and its subsidiaries  that provide for
the issuance of share options and stock appreciation rights.

Employee Share Option Trust

       The London  Pacific Group 1990 Share Option Trust  ("ESOT")  provides for
the granting of share options to employees and directors. The objectives of this
plan  include   retaining  the  best  personnel  and  providing  for  additional
performance incentives.  Options are granted with an exercise price equal to the
fair market value at the date of grant.  Such grants to employees  are generally
exercisable in four equal annual  installments  beginning one year from the date
of grant, subject to employment continuation, and expire seven or ten years from
the date of grant.  Such  grants to  directors  are fully  vested on the date of
grant and expire seven or ten years from the date of the grant.

       The ESOT may purchase  shares of the Company in the open  market,  funded
each year by a loan from the Company or its subsidiaries up to an annual maximum
of 5% of the  consolidated  net assets of the Group.  The loan is unsecured  and
interest free and is eliminated in the consolidated  financial  statements.  The
ESOT has waived its  entitlement to dividends on any shares held. See Note 10 to
the Consolidated Financial Statements for a summary of the share activity within
the ESOT.

       Share  option  activity for the years ended  December 31, 2000,  1999 and
1998 was as follows:
<TABLE>
<CAPTION>


                                                            2000                   1999                   1998
                                                    --------------------   --------------------   --------------------
                                                                Weighted               Weighted               Weighted
                                                    Number      Average    Number      Average    Number      Average
                                                      of        Exercise     of        Exercise     of        Exercise
(Options in thousands)                              Options      Price     Options      Price     Options      Price
                                                    -------     --------   -------     --------   -------     --------

<S>                                                  <C>        <C>         <C>        <C>         <C>        <C>
Outstanding as of January 1......................    15,256     $  3.61     14,215     $  3.47     12,356     $  3.42
Granted..........................................       431       19.55      1,852        4.50      3,842        3.38
Exercised........................................    (3,214)       2.62       (710)       3.30     (1,757)       2.96
Forfeited........................................      (160)      12.59       (101)       3.32       (226)       3.34
Expired..........................................      (100)       2.50          -           -          -           -
                                                    -------     -------    -------     -------    -------     -------
Outstanding as of December 31....................    12,213     $  4.32     15,256     $  3.61     14,215     $  3.47
                                                    -------     -------    -------     -------    -------     -------
                                                    -------     -------    -------     -------    -------     -------

Options exercisable as of December 31............     9,632     $  4.05     11,444     $  3.54      9,242     $  3.55
                                                    -------     -------    -------     -------    -------     -------
                                                    -------     -------    -------     -------    -------     -------
</TABLE>

       The Group accounts for stock based compensation using the intrinsic value
method  prescribed  by  Accounting  Principles  Board  Opinion No.25 ("APB 25"),
"Accounting for Stock Issued to Employees."  Under APB 25, no compensation  cost
is recognized for stock option awards granted at or above fair market value.

                                       55
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All grants made by the Group were at market  value,  and thus,  no  compensation
expense was  recorded  for options  granted.  However,  the Group  extended  the
expiration  date on 310,000  outstanding  options during 2000 and, in accordance
with  APB  25,  recorded  compensation  expense  of  $2,943,000.   This  expense
represents  the  difference  between the  exercise  price of the options and the
market  value of the  underlying  shares at date of  extension.  Of the  options
modified,  250,000  were  extended  for an  additional  three years from date of
expiration,  and 60,000 were extended for an  additional  ten years from date of
modification.

       Had  compensation  expense for the Group's ESOT activity been  determined
based upon the fair value  method in  accordance  with  Statement  of  Financial
Accounting   Standard  No.  123  ("SFAS  123"),   "Accounting  for  Stock  Based
Compensation,"  the Group's net income and earnings per share and ADS would have
been reduced to the pro forma amounts as follows:
<TABLE>
<CAPTION>

                                                                                         Years Ended December 31,
                                                                                 -----------------------------------------
                                                                                     2000           1999           1998
                                                                                 -----------    -----------    -----------
                                                                                       (In thousands, except per share
                                                                                               and ADS amounts)

<S>                                                                              <C>            <C>            <C>
Net income:
As reported..............................................................        $    32,457    $   251,876    $    26,456
Pro forma................................................................             30,896        250,971         25,989
Basic earnings per share and ADS (1):
As reported..............................................................               0.64           5.05           0.51
Pro forma................................................................               0.61           5.03           0.50
Diluted earnings per share and ADS (1):
As reported..............................................................               0.53           4.54           0.49
Pro forma................................................................               0.51           4.53           0.49
Weighted average fair value of each option granted during the year.......        $      9.24    $      0.76    $      0.36
</TABLE>

(1) ADS amounts have been  restated to reflect the  four-for-one  split in March
2000.

       The pro forma  disclosures  shown above were  calculated  for all options
granted after December 31, 1994 using a Black-Scholes  option pricing model with
the following assumptions:
<TABLE>
<CAPTION>

                                                                                     2000           1999           1998
                                                                                 -----------    -----------    -----------
<S>                                                                                    <C>            <C>           <C>
Expected dividend yield (2) .............................................                 -              -             -
Expected stock price volatility .........................................                67%            31%           26%
Risk-free interest rate .................................................              6.07%          5.49%         5.75%
Weighted average expected life (in years)................................                 5              5             5
</TABLE>

(2) As the  Company  has paid a  constant  dividend  amount for these  years,  a
deduction to the share price was made in the amount of the net present  value of
the dividend and the dividend yield in the option pricing model was set to zero.

                                       56
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       Summary  information  about the Group's share options  outstanding  as of
December 31, 2000 is as follows:
<TABLE>
<CAPTION>

                                       Options Outstanding                         Options Exercisable
                            --------------------------------------------       -----------------------------
                                             Weighted
                                              Average          Weighted                            Weighted
      Range of                               Remaining         Average                             Average
      Exercise                 Number       Contractual        Exercise            Number          Exercise
       Prices               Outstanding        Life             Price           Exercisable         Price
    -----------             -----------    ------------     -------------      --------------    -----------
                          (In thousands)       (Years)                          (In thousands)
<S>  <C>                         <C>              <C>        <C>                       <C>        <C>
     $ 1 -  $ 5                  9,364            3.03       $      3.27               7,338      $    3.24
         6 - 10                  2,486            3.71              6.19               2,194           5.98
        11 - 15                     65            6.42             12.75                   -              -
        16 - 20                    198            9.65             19.18                   -              -
        21 - 25                    100            9.68             21.00                 100          21.00
    -----------              ---------      ----------       -----------        ------------      ---------
      $ 1 -$ 25                 12,213            3.35       $      4.32               9,632      $    4.05
    -----------              ---------      ----------       -----------        ------------      ---------
    -----------              ---------      ----------       -----------        ------------      ---------
</TABLE>

Agent Loyalty Opportunity Trust

       The Agent Loyalty Opportunity Trust ("ALOT") provides for the granting of
stock appreciation rights ("SARs") on the Company's Ordinary Shares to agents of
the U.S. life  insurance  business.  Each award unit entitles the holder to cash
compensation  equal to the  difference  between the Company's  prevailing  share
price and the  exercise  price.  The award units are  exercisable  in four equal
annual installments commencing on the first anniversary of the date of grant and
are forfeited upon termination of the agency  contract.  Vesting of the award in
any given  year is also  contingent  on the  holder of the  award  surpassing  a
predetermined  benchmark  tied to sales and  persistency.  The SARs expire seven
years from the date of grant.

       The ALOT may purchase  Ordinary  Shares in the open  market,  funded by a
loan from a Group  subsidiary.  The loan is secured  by the  shares  held in the
trust and bears interest  based upon the trust's net income before  interest for
each financial period. The trust receives dividends on all Ordinary Shares held.
The  loan,   interest  income,   and  dividend  income  are  eliminated  in  the
consolidated  financial  statements.  See Note 10 to the Consolidated  Financial
Statements for a summary of the share activity within the ALOT.

       SAR activity for the years ended December 31, 2000,  1999 and 1998 was as
follows:

<TABLE>
<CAPTION>

                                              2000                    1999                   1998
                                      --------------------    --------------------    --------------------
                                                 Weighted                Weighted                Weighted
                                        Number    Average       Number    Average       Number    Average
                                       of Award  Exercise      of Award  Exercise      of Award  Exercise
(Award units in thousands)               Units     Price         Units     Price         Units     Price
                                      ---------  ---------    ---------  ---------    ---------  ---------

<S>                                       <C>       <C>            <C>      <C>            <C>      <C>
Outstanding as of January 1...........     576      $3.65          613      $3.35          228      $3.35
Granted...............................       -          -           94       5.19          396       3.35
Exercised.............................    (109)      3.50          (84)      3.35            -          -
Forfeited.............................     (29)      3.35          (47)      3.35          (11)      3.35
                                       -------    -------      -------    -------      -------    -------
Outstanding as of December 31.........     438      $3.71          576      $3.65          613      $3.35
                                       -------    -------      -------    -------      -------    -------
                                       -------    -------      -------    -------      -------    -------
Award units exercisable as of
  December 31.........................      68      $3.62           62      $3.35           44      $3.35
                                       -------    -------      -------    -------      -------    -------
                                       -------    -------      -------    -------      -------    -------
</TABLE>

                                       57
<PAGE>

                LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       Summary information about the Group's SARs outstanding as of December 31,
2000 is as follows:
<TABLE>
<CAPTION>
                                        Award Units Outstanding                   Award Units Exercisable
                            ---------------------------------------------      -----------------------------
                                             Weighted
                                              Average         Weighted                             Weighted
      Range of                               Remaining        Average                              Average
      Exercise                 Number       Contractual       Exercise             Number          Exercise
       Prices               Outstanding        Life            Price            Exercisable         Price
   -------------            ------------   ------------     -------------      --------------    -----------
                           (In thousands)      (Years)                         (In thousands)
<S><C>                             <C>            <C>              <C>                    <C>         <C>
   $        3.35                   353            4.00             $3.35                  58          $3.35
            5.19                    85            5.28              5.19                  10           5.19
   -------------             ---------      ----------       -----------        ------------      ---------
   $3.35 - $5.19                   438            4.25             $3.71                  68          $3.62
   -------------             ---------      ----------       -----------        ------------      ---------
   -------------             ---------      ----------       -----------        ------------      ---------
</TABLE>

     In  March  2000,   the   Financial   Accounting   Standards   Board  issued
Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions Involving
Stock  Compensation,  an  Interpretation  of APB  Opinion  No.  25,"  which  was
effective for all awards granted after July 1, 2000.

     Compensation expense relating to award grants in the ALOT was accounted for
under APB 25, prior to the issuance of FIN 44. Thus,  no expense was  recognized
at the grant dates because all awards were made with an exercise  price equal to
the prevailing  market value.  However,  compensation  expense of $1,943,000 and
$300,000  for the years  ended  December  31,  2000 and 1999,  respectively,  on
exercise of the awards was recognized. This compensation expense was capitalized
in the  consolidated  balance sheet as deferred  policy  acquisition  costs,  in
accordance  with  the  Group's  accounting  policy  as  stated  in Note 1 to the
Consolidated Financial Statements.


Note 15.    Earnings Per Share and ADS

       A  reconciliation  of the numerators and  denominators  for the basic and
diluted  earnings  per  share  calculations  in  accordance  with  Statement  of
Financial Accounting Standard No. 128 ("SFAS 128"),  "Earnings per Share," is as
follows:
<TABLE>
<CAPTION>

                                                                                           Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                      2000          1999           1998
                                                                                 -------------  -------------  -------------
                                                                                    (In thousands, except share, per share
                                                                                               and ADS amounts)

<S>                                                                              <C>            <C>            <C>
Net income.............................................................          $      32,457  $     251,876  $      26,456

Basic earnings per share and ADS:
Weighted average number of Ordinary Shares outstanding,
  excluding shares held by the employee benefit trusts.................             50,794,731     49,891,778     52,205,641
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------

Continuing operations .................................................          $        0.64  $        5.05  $        0.45
Discontinued operations ...............................................                      -              -           0.06
                                                                                 -------------  -------------  -------------
Basic earnings per share and ADS ......................................          $        0.64  $        5.05  $        0.51
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------
</TABLE>

                                       58
<PAGE>
                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>

                                                                                           Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                      2000           1999          1998
                                                                                 -------------  -------------  -------------
                                                                                    (In thousands, except share, per share
                                                                                                and ADS amounts)

<S>                                                                              <C>            <C>            <C>
Diluted earnings per share and ADS:
Weighted average number of Ordinary Shares outstanding,
  excluding shares held by the employee benefit trusts.................             50,794,731     49,891,778     52,205,641
Effect of dilutive securities (employee share options) ................              9,932,897      5,553,591      1,346,637
                                                                                 -------------  -------------  -------------
Weighted average Ordinary Shares used in diluted earnings per
  share calculations...................................................             60,727,628     55,445,369     53,552,278
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------


Continuing operations .................................................          $        0.53  $        4.54  $        0.44
Discontinued operations ...............................................                      -              -           0.05
                                                                                 -------------  -------------  -------------
Diluted earnings per share and ADS ....................................          $        0.53  $        4.54  $        0.49
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------
</TABLE>

       Earnings per ADS are equivalent to earnings per Ordinary Share, following
the four-for-one split of ADSs which was effective from the close of business on
March 23, 2000. All ADS amounts have been restated to reflect this split.


Note 16.    Transactions with Related Parties

       The Group  paid  legal  fees of  approximately  $418,000,  $560,000,  and
$38,000 during 2000, 1999 and 1998, respectively,  to a law firm of which one of
its directors, Victor A. Hebert, is a member.

       As of  December  31,  1999,  an  executive  officer of the  Company had a
housing loan from a Group company  amounting to $728,000 which was  subsequently
repaid during 2000. The facility had been provided at an interest rate of 7.25%.


Note 17.    Business Segment and Geographical Information

       The Group's reportable operating segments are classified according to its
principal  businesses,  which  are:  life  insurance  and  annuities,  financial
advisory services, asset management and venture capital management.

       Intercompany   transfers  between   reportable   operating  segments  are
accounted for at prices which are designed to be  representative of unaffiliated
third party  transactions.  During the years ended  December 31, 2000,  1999 and
1998, there were included in the asset management and venture capital management
segments,  portfolio  management  fees  from the life  insurance  and  annuities
segment  of  $10,249,000,   $9,540,000  and  $5,825,000,   respectively.   These
management fees have been approved by the insurance  regulatory body in the life
insurance company's U.S. state of domicile.

                                       59
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       Summary  revenue and  investment  gain (loss)  information  by geographic
segment,  based on the domicile of the Group company  generating those revenues,
is as follows:
<TABLE>
<CAPTION>

                                                                                            Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                     2000           1999           1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)

<S>                                                                              <C>            <C>            <C>
Jersey...................................................................        $     181,516  $      (4,956) $       2,757
Guernsey.................................................................              (99,098)       195,107          5,666
United States............................................................              107,103        282,415        142,074
                                                                                 -------------  -------------  -------------
Consolidated revenues and net investment gains (losses)..................        $     189,521  $     472,566  $     150,497
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------
</TABLE>

       Total assets by geographic segment were as follows:
<TABLE>
<CAPTION>
                                                                                          December 31,
                                                                                 ----------------------------
                                                                                      2000          1999
                                                                                 -------------  -------------
                                                                                       (In thousands)

<S>                                                                              <C>            <C>
Jersey....................................................................       $     251,255  $      79,869
Guernsey..................................................................             176,173        223,099
United States.............................................................           2,135,560      1,891,189
                                                                                 -------------  -------------
Consolidated total assets ................................................       $   2,562,988  $   2,194,157
                                                                                 -------------  -------------
                                                                                 -------------  -------------
</TABLE>

       Revenues  and  income  before  tax  expense  for the  Group's  reportable
operating segments, based on management's internal reporting structure,  were as
follows:
<TABLE>
<CAPTION>

                                                                                           Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                      2000           1999           1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)

<S>                                                                              <C>            <C>            <C>
Revenues:
Life insurance and annuities (1)(2)......................................        $     256,658  $     251,180  $     116,104
Financial advisory services..............................................               22,952         19,913         14,502
Asset management (1) ....................................................                7,799          6,826          6,607
Venture capital management (2) ..........................................              (99,462)       191,811          8,758
                                                                                 -------------  -------------  -------------
                                                                                       187,947        469,730        145,971
Reconciliation of segment amounts to consolidated amounts:
Interest income .........................................................                1,574          2,836          4,526
                                                                                 -------------  -------------  -------------
Consolidated revenues and net investment gains (losses)..................        $     189,521  $     472,566  $     150,497
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------
-------------------------------------
(1) Intersegmental revenue in asset management segment
    from life insurance and annuities segment............................        $       2,775  $       1,597  $       2,880


(2) Intersegmental revenue in venture capital management
    segment from life insurance and annuities segment....................        $       7,474  $       7,943  $       2,945
</TABLE>

                                       60
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>

                                                                                            Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                      2000           1999           1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)

<S>                                                                              <C>            <C>            <C>
Income before income tax expense:
Life insurance and annuities (1)(2)......................................        $     132,671  $     147,753  $      23,833
Financial advisory services .............................................               (2,261)           166            369
Asset management (1) ....................................................                1,778          1,036            838
Venture capital management (2) ..........................................             (110,444)       158,627          3,520
                                                                                 -------------  -------------  -------------
                                                                                        21,744        307,582         28,560
Reconciliation of segment amounts to consolidated amounts:
Interest income .........................................................                1,574          2,836          4,526
Corporate expenses ......................................................               (7,388)        (4,366)        (3,950)
Goodwill amortization ...................................................                 (248)          (348)          (236)
Interest expense ........................................................                 (672)           (42)           (18)
                                                                                 -------------  -------------  -------------
Consolidated income before income tax expense ...........................        $      15,010  $     305,662  $      28,882
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------
-------------------------------------
(1) Intersegmental revenue in asset management segment
    from life insurance and annuities segment............................        $       2,775  $       1,597  $       2,880


(2) Intersegmental revenue in venture capital management
    segment from life insurance and annuities segment....................        $       7,474  $       7,943  $       2,945
</TABLE>


       Assets attributable to each of the Group's reportable operating segments,
based on management's reporting structure, were as follows:
<TABLE>
<CAPTION>

                                                                                         December 31,
                                                                                 ----------------------------
                                                                                      2000          1999
                                                                                 -------------  -------------
                                                                                        (In thousands)
<S>                                                                              <C>            <C>
Assets:
Life insurance and annuities.............................................        $   2,360,806  $   1,879,504
Financial advisory services..............................................                9,966          6,446
Asset management.........................................................                8,749         11,414
Venture capital management...............................................              109,604        277,886
Corporate and other......................................................               73,863         18,907
                                                                                 -------------  -------------
Consolidated total assets ...............................................        $   2,562,988  $   2,194,157
                                                                                 -------------  -------------
                                                                                 -------------  -------------
</TABLE>

Note 18.     Discontinued Operations

       On December 31, 1998,  the Group  completed  the sale of its  subsidiary,
North  American  Trust  Company  ("NATC").  At the  time,  NATC  was part of the
Financial  Advisory  Services segment of the Group.  Proceeds from the sale were
$11,500,000  in cash, of which  $3,000,000  was held in escrow pending claims by
the buyer. In August 2000, the Group received  $2,727,000 plus interest from the
escrow account. The net gain on sale of $4,996,000, including income tax expense
of $1,957,000,  and the net operating loss of $2,030,000 for 1998,  including an
income tax benefit of $861,000,  have been reflected as income from discontinued
operations in the consolidated financial statements.

                                       61
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       Summarized  financial  information  for  discontinued  operations  is  as
follows:

<TABLE>
<CAPTION>
                                                                                  Year Ended
                                                                                  December 31,
                                                                                     1998
                                                                                 -------------
                                                                                 (In thousands)

<S>                                                                              <C>
Net revenues.............................................................        $       8,706
Operating expenses.......................................................               11,570
                                                                                 -------------
Operating gain (loss)....................................................               (2,864)
Gain on sale of discontinued operations..................................                6,953
                                                                                 -------------
Income before income taxes...............................................                4,089
Income tax expense.......................................................                1,096
                                                                                 -------------
Net income from discontinued operations..................................        $       2,993
                                                                                 -------------
                                                                                 -------------
</TABLE>


Note 19.    Selected Quarterly Financial Information (Unaudited)

          Unaudited  quarterly financial  information (in thousands,  except per
share and ADS amounts) is as follows:
<TABLE>
<CAPTION>

                                                                                    2000
                                                          ------------------------------------------------------
                                                             First      Second     Third     Fourth      Fiscal
                                                            Quarter    Quarter    Quarter    Quarter      Year
                                                          ----------  ---------  ---------  ---------  ---------
<S>                                                       <C>         <C>        <C>        <C>        <C>
Revenues including net investment gains (losses)........  $  (25,984) $ 454,531  $  64,573  $(303,599) $ 189,521
Income (loss) before income tax expense (benefit) ......     (65,015)   410,156     21,114   (351,245)    15,010
Net income (loss).......................................     (55,538)   339,831     29,061   (280,897)    32,457
Basic earnings (loss) per share and ADS ................       (1.11)      6.57       0.56      (5.42)      0.64
Diluted earnings (loss) per share and ADS ..............  $    (1.11) $    5.62  $    0.47  $   (5.42) $    0.53
</TABLE>

<TABLE>
<CAPTION>

                                                                                    1999
                                                          ------------------------------------------------------
                                                             First      Second     Third      Fourth     Fiscal
                                                            Quarter    Quarter    Quarter     Quarter     Year
                                                          ----------  ---------  ---------  ---------  ---------
<S>                                                       <C>         <C>        <C>        <C>        <C>
Revenues including net investment gains ................  $   64,818  $  66,495  $ 132,048  $ 209,205  $ 472,566
Income before income tax expense .......................      31,802     27,325     97,173    149,362    305,662
Net income..............................................      20,353     20,445     89,551    121,527    251,876
Basic earnings per share and ADS .......................        0.41       0.41       1.81       2.48       5.05
Diluted earnings per share and ADS .....................  $     0.40  $    0.36  $    1.62  $    2.17  $    4.54
</TABLE>



       Due to the method  required  by SFAS 128 to  calculate  per share and ADS
amounts,  the  quarterly per share and ADS amounts do not total to the full year
per share and ADS  amounts.  ADS  amounts  have been  restated  to  reflect  the
four-for-one split in March 2000.

                                       62
<PAGE>

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

       None.

                                    PART III

       Certain  information  required by Part III is omitted from this Report on
Form 10-K since the  Company  will file a  definitive  Proxy  Statement  for its
Annual  Meeting  of  Shareholders  to be  held  on May  31,  2001,  pursuant  to
Regulation  14A of the  Securities  Exchange Act of 1934, as amended (the "Proxy
Statement"), not later than 120 days after the end of the fiscal year covered by
this  Report,  and  certain  information  included  in the  Proxy  Statement  is
incorporated by reference.


Item 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

       The executive officers of the Company are as follows:

       Arthur  I.  Trueger,  Executive  Chairman:  Mr.  Trueger,  age 52, is the
founder of London  Pacific  Group  Limited and a principal  shareholder.  He has
worked for the  Company  for more than 24 years and holds  A.B.,  M.A.  and J.D.
degrees from the University of California.

       Ian K. Whitehead,  Chief Financial  Officer:  Mr. Whitehead,  age 46, has
held the position of Chief  Financial  Officer of London  Pacific  Group Limited
since he joined the Company in 1990.  In  addition,  he was the Chief  Executive
Officer of London Pacific Life & Annuity  Company between 1994 and 1999. He is a
Chartered Accountant.

       Information   regarding  the  Company's   directors  is  incorporated  by
reference  to the  sections  entitled  "Proposal 3 - Election of  Director"  and
"Board of Directors and Committees" in the Proxy Statement.

       Information  regarding  compliance  with Section 16(a) of the  Securities
Exchange Act of 1934 is incorporated by reference to the section entitled "Other
Information About Directors and Executive Officers" in the Proxy Statement.


Item 11.    EXECUTIVE COMPENSATION

       The information required by this Item is incorporated by reference to the
sections entitled "Executive Compensation" and "Directors'  Compensation" in the
Proxy Statement.


Item 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

       The information required by this Item is incorporated by reference to the
section  entitled  "Information  Regarding  Beneficial  Ownership  of  Principal
Shareholders, Directors and Executive Officers" in the Proxy Statement.


Item 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

       The information required by this Item is incorporated by reference to the
section entitled "Other  Information About Directors and Executive  Officers" in
the Proxy Statement.

                                       63
<PAGE>

                                     PART IV

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

(a) The following documents are filed as a part of this report:
<TABLE>
<CAPTION>

    1. Financial Statements:                                                          Page
                                                                                      ----

       The following  consolidated  financial statements of London Pacific Group
       Limited and subsidiaries are included in Item 8:
<S>                                                                                    <C>
          Report of Independent Auditors........................................       29

          Consolidated Balance Sheets as of December 31, 2000 and 1999..........       30

          Consolidated Statements of Income for the
                   Years Ended December 31, 2000, 1999 and 1998.................       31

          Consolidated Statements of Cash Flows for the
                   Years Ended December 31, 2000, 1999 and 1998.................       32

          Consolidated Statements of Changes in Shareholders' Equity for the
                   Years Ended December 31, 2000, 1999 and 1998.................       34

          Consolidated Statements of Comprehensive Income for the
                   Years Ended December 31, 2000, 1999 and 1998.................       36

          Notes to the Consolidated Financial Statements........................       37

    2. Financial Statement Schedules:

       The  following  financial  statement  schedules of London  Pacific  Group
       Limited  and  subsidiaries  are  included  in this Form 10-K  immediately
       following Item 14 and should be read in conjunction with the consolidated
       financial statements and notes thereto included in Item 8:

          Schedule I - Summary of Investments - Other Than Investments
                   in Related Parties ..........................................       67

          Schedule II - Condensed Financial Information of Registrant

                   Condensed Balance Sheets as of December 31, 2000 and 1999....       68

                   Condensed Statements of Income for the
                      Years Ended December 31, 2000, 1999 and 1998..............       69

                   Condensed Statements of Cash Flows for the
                      Years Ended December 31, 2000, 1999 and 1998..............       70

                   Note to Condensed Financial Statements.......................       71

          Schedule III - Supplementary Insurance Information....................       72
</TABLE>

       All other financial  statement  schedules required by Regulation S-X have
       been omitted because they are not applicable or the required  information
       is included in the applicable  consolidated financial statements or notes
       thereto in Item 8 "Financial  Statements and Supplementary  Data" of this
       Form 10-K.

                                       64
<PAGE>


3.   Exhibits:

     The following exhibits of London Pacific Group Limited and subsidiaries are
     filed herewith or incorporated by reference as indicated below:

Exhibit
Number      Description
-------     -----------

3.(i)       Memorandum  and  Articles of  Association  of London  Pacific  Group
            Limited, as amended and restated on April 18, 2000 (filed previously
            as Exhibit  3.(I) to the  Company's  Form 10-Q for the quarter ended
            June 30, 2000).

4.1         Specimen Ordinary Share certificate.

4.2         Form of Deposit  Agreement  dated September 25, 1992, as amended and
            restated as of November 24, 1993, as further amended and restated as
            of March 14, 2000,  among London Pacific Group Limited,  The Bank of
            New York as Depositary, and all Owners and Holders from time to time
            of American  Depositary Receipts issued thereunder (filed previously
            as Exhibit A to the  Company's  Registration  Statement  on Form F-6
            (Registration No. 333-11658) dated March 14, 2000).

4.3         Letter  Agreement dated August 25, 1992 between The Bank of New York
            and the Company covering the Basic Administration Charge relating to
            the Deposit Agreement (shown above as Exhibit 4.2) (filed previously
            as Exhibit 3.8 to the  Company's  Post-Effective  Amendment No. 2 to
            Registration Statement on Form 20-F/A dated August 31, 1993).

10.1        Multicurrency  Term  Facility  Agreement  dated May 2, 2000  between
            London  Pacific  Group  Limited and the  Governor and Company of the
            Bank  of  Scotland  (filed  previously  as  Exhibit  10.1.1  to  the
            Company's Form 10-Q for the quarter ended September 30, 2000).

10.2.1      Settlement  dated February 16, 1990 among (1) the Company,  (2) John
            Gerald Patrick Wheeler and (3) Ian Walter Strang,  constituting  The
            Govett & Company 1990 Employee Share Option Trust (filed  previously
            as Exhibit 3.2 to the  Company's  Post-Effective  Amendment No. 2 to
            Registration Statement on Form 20-F/A dated August 31, 1993).

10.2.2      Executed  Instrument  dated  March 18,  1994  among (1) John  Gerald
            Patrick Wheeler, (2) Ian Walter Strang and (3) Richard John Pirouet,
            relating to The Govett & Company  1990  Employee  Share Option Trust
            (filed previously as Exhibit 3.2.1 to the Company's Annual Report on
            Form 20-F filed on June 10, 1994).

10.2.3      Executed  Instrument  dated  September 27, 1994 among (1) Ian Walter
            Strang,  (2)  Richard  John  Pirouet  and (3) Clive  Aubrey  Charles
            Chaplin, relating to The Govett & Company 1990 Employee Share Option
            Trust (filed  previously as Exhibit  3.2.2 to the  Company's  Annual
            Report on Form 20-F filed on June 29, 1995).

10.2.4      Executed Instrument dated March 3, 1995 among (1) Ian Walter Strang,
            (2) Richard  John  Pirouet  and (3) Clive  Aubrey  Charles  Chaplin,
            relating to The Govett & Company  1990  Employee  Share Option Trust
            (filed previously as Exhibit 3.2.3 to the Company's Annual Report on
            Form 20-F filed on June 29, 1995).

10.2.5      Executed  Instrument  dated  August 22, 1996 among (1) Richard  John
            Pirouet,  (2) Clive Aubrey  Charles  Chaplin and (3) Ronald  William
            Green,  relating to The London  Pacific  Group 1990  Employee  Share
            Option Trust (filed  previously  as Exhibit  3.2.4 to the  Company's
            Annual Report on Form 20-F filed on June 30, 1997).

                                       65
<PAGE>


10.2.6      Executed  Instrument  dated  August 29, 1998 among (1) Richard  John
            Pirouet,  (2) Clive Aubrey Charles Chaplin, (3) Ronald William Green
            and (4) Victor Aloysius Hebert, relating to The London Pacific Group
            1990 Employee Share Option Trust (filed  previously as Exhibit 3.2.5
            to the Company's Annual Report on Form 20-F filed on June 30, 1999).

10.2.7      Executed  Instrument  dated  May 31,  2000  among (1)  Richard  John
            Pirouet,  (2) Clive Aubrey Charles Chaplin, (3) Ronald William Green
            and (4) Victor Aloysius Hebert, relating to The London Pacific Group
            1990 Employee Share Option Trust (filed previously as Exhibit 10.2.1
            to the  Company's  Form 10-Q for the  quarter  ended  September  30,
            2000).

10.2.8      Executed  Instrument  dated  May 31,  2000  among (1)  Richard  John
            Pirouet, (2) Clive Aubrey Charles Chaplin, (3) Ronald William Green,
            (4) Victor Aloysius Hebert and (5)  Christopher  Byrne,  relating to
            The London  Pacific  Group 1990  Employee  Share Option Trust (filed
            previously  as  Exhibit  10.2.2 to the  Company's  Form 10-Q for the
            quarter ended September 30, 2000).

10.3.1 (1)  Agreement  dated July 1, 1990  between the  Company  and Ian Kenneth
            Whitehead.

10.3.2 (1)  Berkeley (USA) Holdings Limited  Amended and  Restated 1993 Deferred
            Compensation Plan dated December 16, 1999.

21          Subsidiaries of the Company as of March 5, 2001.

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

(1)    Management contract or compensatory arrangement filed in response to Item
       14(a)(3) of the instructions to Form 10-K.



(b)    Reports on Form 8-K:

       No reports on Form 8-K were filed by the Company during the quarter ended
       December 31, 2000.

(c)    The exhibits of London Pacific Group Limited and  subsidiaries are listed
       in Item 14(a)(3) above.

(d)    The  financial  statement schedules for  London Pacific Group Limited and
       subsidiaries follow on pages 67 through 72.

                                       66
<PAGE>


                      SCHEDULE I - SUMMARY OF INVESTMENTS -
                    OTHER THAN INVESTMENTS IN RELATED PARTIES

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                             As of December 31, 2000
<TABLE>
<CAPTION>
                            Column A                                  Column B         Column C        Column D

                                                                                                      Amount at
                                                                                                     Which Shown
                                                                                                   in Consolidated
                                                                                         Fair          Balance
                       Type of Investments                            Cost (1)           Value        Sheet (2)
----------------------------------------------------------------    ------------     ------------   -------------
                                                                                    (In thousands)
<S>                                                                 <C>              <C>            <C>
Fixed maturity securities:
Bonds:
   United States government and government
     agencies and authorities...................................    $      3,258     $      3,238   $      3,244
   States, municipalities and political subdivisions............           2,044            2,086          2,044
   Foreign governments..........................................          21,945           22,981         22,981
   Public utilities.............................................          44,003           43,937         43,926
   Convertibles and bonds with warrants attached................          28,708           27,220         27,220
   All other corporate bonds....................................       1,333,028        1,276,033      1,274,194
Redeemable preferred stock......................................          46,841           45,920         45,920
                                                                    ------------     ------------   ------------
Total fixed maturity securities.................................       1,479,827        1,421,415      1,419,529
                                                                    ------------     ------------   ------------
                                                                                     ------------
Equity securities:
Common stocks:
   Industrial, miscellaneous and all other......................         111,940          356,550        356,550
Non-redeemable preferred stocks.................................         226,749          226,749        226,749
                                                                    ------------     ------------   ------------
Total equity securities.........................................         338,689          583,299        583,299
                                                                    ------------     ------------   ------------
                                                                                     ------------

Policy loans....................................................          10,301                          10,301
                                                                    ------------                    ------------
Total investments...............................................    $  1,828,817                    $  2,013,129
                                                                    ------------                    ------------
                                                                    ------------                    ------------
</TABLE>
--------------
(1)  Cost of fixed maturity  securities is original cost,  reduced by repayments
     and adjusted for amortization of premiums and accretion of discounts.  Cost
     of equity securities is original cost.

(2)  Differences  between amounts  reflected in Column B or Column C and amounts
     at which shown in the  consolidated  balance  sheet  reflected  in Column D
     result from the application of Statement of Financial  Accounting Standards
     No.  115,   "Accounting   for  Certain   Investments  in  Debt  and  Equity
     Securities."   Fixed   maturity   securities   are   classified  as  either
     available-for-sale or held-to-maturity.  Available-for-sale  securities are
     recorded  at fair  value,  with  changes  in  unrealized  gains and  losses
     excluded  from  net  income,  but  reported  net of  applicable  taxes  and
     adjustments to deferred policy  acquisition cost amortization as a separate
     component of comprehensive income. Held-to-maturity securities are recorded
     at amortized cost.

                                       67
<PAGE>

           SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                          LONDON PACIFIC GROUP LIMITED
                            CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                          December 31,
                                                                                 ----------------------------
                                                                                     2000           1999
                                                                                 -------------  -------------
                                                                              (In thousands, except share amounts)
                                     ASSETS

<S>                                                                              <C>            <C>
Cash and cash equivalents ....................................................   $      31,933  $      24,950
Investment in subsidiaries ...................................................         462,028        437,049
Intercompany balances ........................................................          77,143         93,041
Other assets .................................................................             503            319
                                                                                 -------------  -------------
Total assets .................................................................   $     571,607  $     555,359
                                                                                 -------------  -------------
                                                                                 -------------  -------------


                      LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
Accounts payable, accruals and other liabilities..............................   $       2,938  $       2,411
Intercompany balances ........................................................             927            473
                                                                                 -------------  -------------
Total liabilities ............................................................           3,865          2,884
                                                                                 -------------  -------------
Commitments and contingencies

Shareholders' equity:
Ordinary shares, $0.05 par value per share: authorized 86,400,000 shares;
   issued and outstanding 64,433,313 shares ..................................           3,222          3,222
Additional paid-in capital ...................................................          67,591         62,307
Retained earnings ............................................................         580,176        559,344
Employee benefit trusts, at cost (shares: 12,811,381 and 15,331,656 as of
   December 31, 2000 and 1999, respectively) .................................         (58,003)       (54,033)
Accumulated other comprehensive income (loss) ................................         (25,244)       (18,365)
                                                                                 -------------  -------------
Total shareholders' equity ...................................................         567,742        552,475
                                                                                 -------------  -------------
Total liabilities and shareholders' equity ...................................   $     571,607  $     555,359
                                                                                 -------------  -------------
                                                                                 -------------  -------------

<FN>
            See accompanying Note to Condensed Financial Statements.
</FN>
</TABLE>

                                       68
<PAGE>

     SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

                          LONDON PACIFIC GROUP LIMITED
                         CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>


                                                                                           Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                      2000           1999           1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)

<S>                                                                              <C>            <C>            <C>
Revenues:
Investment income..........................................................      $       1,092  $         499  $         566
Interest and fees from subsidiaries, net (1)...............................             15,994         14,119          9,960
Financial advisory services, asset management and other fee income.........              2,092            302          1,495
Gain on redemption of preferred shares by subsidiary (1) ..................                  -         84,040              -
Distribution from subsidiary (1)...........................................                  -         29,238              -
                                                                                 -------------  -------------  -------------
                                                                                        19,178        128,198         12,021
Expenses:
Staff costs ...............................................................              5,944          3,718          2,277
Escrow release ............................................................             (1,000)             -           (600)
Other operating expenses...................................................              3,488          3,160          1,475
                                                                                 -------------  -------------  -------------
                                                                                         8,432          6,878          3,152
                                                                                 -------------  -------------  -------------
Income before income tax expense and equity in
  undistributed net income of subsidiaries.................................             10,746        121,320          8,869

Income tax expense.........................................................              1,550          1,602          1,155
                                                                                 -------------  -------------  -------------
Income before equity in undistributed net income of
  subsidiaries.............................................................              9,196        119,718          7,714

Equity in undistributed net income of subsidiaries (1).....................             23,261        132,158         18,742
                                                                                 -------------  -------------  -------------
Net income.................................................................      $      32,457  $     251,876  $      26,456
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------



(1)  Eliminated on consolidation.

<FN>
            See accompanying Note to Condensed Financial Statements.
</FN>
</TABLE>

                                       69
<PAGE>

     SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

                          LONDON PACIFIC GROUP LIMITED
                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                           Years Ended December 31,
                                                                                 -------------------------------------------
                                                                                      2000           1999           1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)
<S>                                                                              <C>            <C>            <C>
Cash flows from operating activities:
Net income...................................................................    $      32,457  $     251,876  $      26,456

Adjustments to reconcile net income to net
   cash provided by operating activities:
Equity in undistributed net income of subsidiaries...........................          (23,261)      (132,158)       (18,742)
Gain on redemption of preferred shares of subsidiary.........................                -        (84,040)             -
Gain on liquidation of subsidiary............................................                -        (29,238)             -
Other operating cash flows ..................................................              923         22,290         (1,685)
                                                                                 -------------  -------------  -------------
Net cash provided by operating activities ...................................           10,119         28,730          6,029
                                                                                 -------------  -------------  -------------
Cash flows from investing activities:
Investment in subsidiaries ..................................................           (7,668)             -              -
Distributions from subsidiary ...............................................                -         29,248              -
Cash proceeds from redemption of preferred shares of subsidiary .............                -          8,230              -
Advances to subsidiaries ....................................................                -        (40,508)             -
Other cash flows from investing activities ..................................              (42)         3,930           (321)
                                                                                 -------------  -------------  -------------
Net cash provided by (used in) investing activities .........................           (7,710)           900           (321)
                                                                                 -------------  -------------  -------------
Cash flows from financing activities:
Dividends paid ..............................................................          (11,777)       (11,599)       (12,852)
Issue of Ordinary Shares ....................................................                -              5             35
Purchase of Ordinary Shares .................................................                -              -        (12,651)
Repayments from subsidiaries ................................................           16,351              -         21,038
                                                                                 -------------  -------------  -------------
Net cash provided by (used in) financing activities .........................            4,574        (11,594)        (4,430)
                                                                                 -------------  -------------  -------------

Net increase in cash and cash equivalents ...................................            6,983         18,036          1,278
Cash and cash equivalents at beginning of year ..............................           24,950          6,914          5,636
                                                                                 -------------  -------------  -------------
Cash and cash equivalents at end of year ....................................    $      31,933  $      24,950  $       6,914
                                                                                 -------------  -------------  -------------
                                                                                 -------------  -------------  -------------


<FN>
           See accompanying Note to Condensed Financial Statements.
</FN>
</TABLE>

                                       70
<PAGE>

     SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

                          LONDON PACIFIC GROUP LIMITED
                     NOTE TO CONDENSED FINANCIAL STATEMENTS


Note 1.    Basis of Presentation and Significant Accounting Policies

      The accompanying financial statements comprise a condensed presentation of
financial position, results of operations and cash flows of London Pacific Group
Limited (the "Company") on a separate company basis.  These condensed  financial
statements  do not  include  the  accounts of the  Company's  subsidiaries,  but
instead  include  the  Company's  investment  in those  subsidiaries,  stated at
amounts which are equal to the Company's equity in the subsidiaries' net assets.
The  consolidated  financial  statements of the Company and its subsidiaries are
included in Item 8 of Form 10-K for the year ended December 31, 2000.

       Additional  information about the significant accounting policies applied
by the Company and its  subsidiaries  is included in Note 1 to the  Consolidated
Financial  Statements  in Item 8 of Form 10-K for the year  ended  December  31,
2000.

                                       71
<PAGE>



               SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                      Life Insurance and Annuities Segment

<TABLE>
<CAPTION>

                                                                                         Years Ended/As of December 31,
                                                                                 -------------------------------------------
                                                                                      2000           1999           1998
                                                                                 -------------  -------------  -------------
                                                                                                (In thousands)


<S>                                                                              <C>            <C>            <C>
Deferred policy acquisition costs..........................................      $     168,102  $     144,518  $     114,681


Future policy benefits, losses, claims and loss expenses (1) ..............          1,687,001      1,414,391      1,274,974


Unearned premiums..........................................................                N/A            N/A            N/A


Other policy claims and benefits payable (1)...............................              4,600          2,032          1,141


Premium revenue (2) .......................................................              7,400          6,671          7,111


Net investment income (3) .................................................            103,909         85,768         83,800


Benefits, claims, losses and settlement expenses...........................                N/A            N/A            N/A


Amortization of deferred policy acquisition costs..........................             21,155         16,797         16,171


Other operating expenses...................................................              9,107         13,044          8,186


Premiums written...........................................................                N/A            N/A            N/A


</TABLE>
-----------------
(1)  For   additional   disclosure   regarding   life   insurance   policyholder
     liabilities,  see Note 6 to the consolidated financial statements of London
     Pacific Group Limited and subsidiaries which are included in Item 8 of Form
     10-K for the year ended December 31, 2000.

(2)  Insurance policy charges.

(3)  Expenses related to the management and  administration  of investments have
     been netted with investment  income in the  determination of net investment
     income.

                                       72
<PAGE>

                                    SIGNATURES


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


                                                 LONDON PACIFIC GROUP LIMITED
                                                 (Registrant)

                                                 By     /s/  Arthur I. Trueger
                                                        ------------------------
Date:  March 30, 2001                                   Arthur I. Trueger
                                                        Executive Chairman


       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 and on the dates indicated.


                                    /s/  Arthur I. Trueger
                                    -------------------------------
Date:  March 30, 2001               Arthur I. Trueger
                                    Executive Chairman
                                    (Principal Executive Officer)


                                    /s/  Ian K. Whitehead
                                    -------------------------------
Date:  March 30, 2001               Ian K. Whitehead
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)


                                    /s/  Victor A. Hebert
                                    -------------------------------
Date:  March 30, 2001               Victor A. Hebert
                                    Deputy Chairman and Non-Executive Director


                                    /s/  John Clennett
                                    -------------------------------
Date:  March 30, 2001               John Clennett
                                    Non-Executive Director


                                    /s/  Harold E. Hughes, Jr.
                                    -------------------------------
Date:  March 30, 2001               Harold E. Hughes, Jr.
                                    Non-Executive Director


                                    /s/  The Viscount Trenchard
                                    --------------------------------
Date:  March 30, 2001               The Viscount Trenchard
                                    Non-Executive Director


                                    /s/  Gary L. Wilcox
                                    ---------------------------------
Date:  March 30, 2001               Gary L. Wilcox
                                    Non-Executive Director

                                       73
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                EXHIBIT INDEX FOR THE ANNUAL REPORT ON FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 2000

Exhibit
Number      Description
-------     -----------

3.(i)       Memorandum  and  Articles of  Association  of London  Pacific  Group
            Limited, as amended and restated on April 18, 2000 (filed previously
            as Exhibit  3.(I) to the  Company's  Form 10-Q for the quarter ended
            June 30, 2000).

4.1         Specimen Ordinary Share certificate.

4.2         Form of Deposit  Agreement  dated September 25, 1992, as amended and
            restated as of November 24, 1993, as further amended and restated as
            of March 14, 2000,  among London Pacific Group Limited,  The Bank of
            New York as Depositary, and all Owners and Holders from time to time
            of American  Depositary Receipts issued thereunder (filed previously
            as Exhibit A to the  Company's  Registration  Statement  on Form F-6
            (Registration No. 333-11658) dated March 14, 2000).

4.3         Letter  Agreement dated August 25, 1992 between The Bank of New York
            and the Company covering the Basic Administration Charge relating to
            the Deposit Agreement (shown above as Exhibit 4.2) (filed previously
            as Exhibit 3.8 to the  Company's  Post-Effective  Amendment No. 2 to
            Registration Statement on Form 20-F/A dated August 31, 1993).

10.1        Multicurrency  Term  Facility  Agreement  dated May 2, 2000  between
            London  Pacific  Group  Limited and the  Governor and Company of the
            Bank  of  Scotland  (filed  previously  as  Exhibit  10.1.1  to  the
            Company's Form 10-Q for the quarter ended September 30, 2000).

10.2.1      Settlement  dated February 16, 1990 among (1) the Company,  (2) John
            Gerald  Patrick  Wheeler  and  (3)  Ian  Walter  Strang,   trustees,
            constituting  the Govett & Company 1990 Employee  Share Option Trust
            (filed  previously  as Exhibit 3.2 to the  Company's  Post-Effective
            Amendment  No. 2 to  Registration  Statement  on Form  20-F/A  dated
            August 31, 1993).

10.2.2      Executed  Instrument  dated  March 18,  1994  among (1) John  Gerald
            Patrick Wheeler, (2) Ian Walter Strang and (3) Richard John Pirouet,
            relating to the Govett & Company  1990  Employee  Share Option Trust
            (filed previously as Exhibit 3.2.1 to the Company's Annual Report on
            Form 20-F filed on June 10, 1994).

10.2.3      Executed  Instrument  dated  September 27, 1994 among (1) Ian Walter
            Strang,  (2)  Richard  John  Pirouet  and (3) Clive  Aubrey  Charles
            Chaplin, relating to the Govett & Company 1990 Employee Share Option
            Trust (filed  previously as Exhibit  3.2.2 to the  Company's  Annual
            Report on Form 20-F filed on June 29, 1995).

10.2.4      Executed Instrument dated March 3, 1995 among (1) Ian Walter Strang,
            (2) Richard  John  Pirouet  and (3) Clive  Aubrey  Charles  Chaplin,
            relating to the Govett & Company  1990  Employee  Share Option Trust
            (filed previously as Exhibit 3.2.3 to the Company's Annual Report on
            Form 20-F filed on June 29, 1995).

10.2.5      Executed  Instrument  dated  August 22, 1996 among (1) Richard  John
            Pirouet,  (2) Clive Aubrey  Charles  Chaplin and (3) Ronald  William
            Green,  relating to The London  Pacific  Group 1990  Employee  Share
            Option Trust (filed  previously  as Exhibit  3.2.4 to the  Company's
            Annual Report on Form 20-F filed on June 30, 1997).

                                       74
<PAGE>

10.2.6      Executed  Instrument  dated  August 29, 1998 among (1) Richard  John
            Pirouet,  (2) Clive Aubrey Charles Chaplin, (3) Ronald William Green
            and (4) Victor Aloysius Hebert, relating to The London Pacific Group
            1990 Employee Share Option Trust (filed  previously as Exhibit 3.2.5
            to the Company's Annual Report on Form 20-F filed on June 30, 1999).

10.2.7      Executed  Instrument  dated  May 31,  2000  among (1)  Richard  John
            Pirouet,  (2) Clive Aubrey Charles Chaplin, (3) Ronald William Green
            and (4) Victor Aloysius Hebert, relating to The London Pacific Group
            1990 Employee Share Option Trust (filed previously as Exhibit 10.2.1
            to the  Company's  Form 10-Q for the  quarter  ended  September  30,
            2000).

10.2.8      Executed  Instrument  dated  May 31,  2000  among (1)  Richard  John
            Pirouet, (2) Clive Aubrey Charles Chaplin, (3) Ronald William Green,
            (4) Victor Aloysius Hebert and (5)  Christopher  Byrne,  relating to
            The London  Pacific  Group 1990  Employee  Share Option Trust (filed
            previously  as  Exhibit  10.2.2 to the  Company's  Form 10-Q for the
            quarter ended September 30, 2000).

10.3.1(1)   Agreement dated  July 1, 1990 between  the  Company and  Ian Kenneth
            Whitehead.

10.3.2(1)   Berkeley  (USA)  Holdings Limited Amended and Restated 1993 Deferred
            Compensation Plan dated December 16, 1999.

21          Subsidiaries of the Company as of March 5, 2001.

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

(1)    Management contract or compensatory arrangement filed in response to Item
       14(a)(3) of the instructions to Form 10-K.

                                       75