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, 2002

                                       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               (I.R.S. Employer Identification No.)
of incorporation or organization)


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

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


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

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

                                                     Name of each exchange on
               Title of each class                         which registered
American Depositary Shares, each representing    Over-the-Counter Bulletin Board
 ten Ordinary Shares of $0.05 par value per share

Ordinary Shares of $0.05 par value per share    Over-the-Counter Bulletin Board*


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

       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| ]

       Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [ |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 June
28, 2002 as reported on the London  Stock  Exchange  (using an exchange  rate of
(pound)1.00  = $1.52) was  $11,376,945.  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 is not necessarily conclusive that these persons
are affiliates of the registrant.

       As of February  28,  2003,  the  registrant  had  outstanding  64,439,073
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  June  12,  2003,  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 ...................................................... 10
Item 3.    Legal Proceedings ............................................... 10
Item 4.    Submission of Matters to a Vote of Security Holders ............. 10


                                     PART II

Item 5.    Market for Registrant's Common Equity and Related
             Stockholder Matters .........................................   10
Item 6.    Selected Financial Data .......................................   15
Item 7.    Management's Discussion and Analysis of Financial
             Condition and Results of Operations .........................   16
Item 7A.   Quantitative and Qualitative Disclosures about Market Risk ....   34
Item 8.    Financial Statements and Supplementary Data ...................   36
Item 9.    Changes in and Disagreements with Accountants on
             Accounting and Financial Disclosure .........................   85


                                    PART III

Item 10.   Directors and Executive Officers of the Registrant ............   85
Item 11.   Executive Compensation ........................................   85
Item 12.   Security Ownership of Certain Beneficial Owners
             and Management ..............................................   85
Item 13.   Certain Relationships and Related Transactions ................   86


                                     PART IV

Item 14.   Controls and Procedures .......................................   87
Item 15.   Exhibits, Financial Statement Schedules and
           Reports on Form 8-K ...........................................   87

Financial Statement Schedules ............................................   91
Signatures ...............................................................   97
Certifications ...........................................................   98
Exhibit Index .................................. .........................  100
</TABLE>
<PAGE>




       As used herein, the terms  "registrant,"  "Company," "we," "us" and "our"
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

       Statements  contained  in this  Annual  Report  on Form 10-K 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 we operate, 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.  We undertake
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

       We  are  based  in  Jersey,   Channel  Islands,  and  are  a  diversified
international  financial  services company.  Our operating  subsidiaries  gather
assets through  distribution  networks,  primarily in the U.S.  Assets under the
Group's management, consulting or administration as of December 31, 2002 totaled
approximately $3.2 billion.

       We 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.  We
obtained  a  listing  on the  London  Stock  Exchange  in that same year and our
Ordinary  Shares  currently trade under the symbol LPG. Since 1985, we grew 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. In 2002, we lost management control of the U.S. life insurance
business  due to the  dilution  in the  level  of the life  insurance  company's
capital arising from bond and equity losses in poor market conditions.

       American  Depositary  Receipts ("ADRs")  representing our Ordinary Shares
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  ("NYSE") where its ADRs were traded under the symbol LDP. During
2002,  the  Company's  ADR price fell below the  minimum  required  by the NYSE;
consequently, the ADRs were withdrawn from listing and registration on the NYSE.
The Company's  shares currently trade on the  Over-the-Counter  ("OTC") Bulletin
Board under the symbol LDPGY.PK.

       During the first  quarter of 2000, we completed a  four-for-one  split of
our ADRs.  Effective from the close of business on March 23, 2000, each American
Depositary  Share ("ADS"),  represented by an ADR,  equaled one Ordinary  Share.
During the second  quarter of 2002, we completed a one-for-ten  reverse split of
our ADRs.  Effective  from the opening of business  on June 24,  2002,  each ADS
represents ten Ordinary Shares.

       We currently have offices in Jersey (Channel Islands) and California.

                                        1
<PAGE>

BUSINESS SEGMENTS

       We have four business  segments that we operate through our subsidiaries:
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 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 Capital Corporation       Venture capital management         San Francisco
Berkeley International Capital Limited           Venture capital management         Guernsey, Channel Islands
</TABLE>



       On March 10, 2003,  we announced  that a  definitive  agreement  had been
signed to sell  substantially  all of the  business and  operations  of Berkeley
Capital  Management  ("BCM")  to a  company  majority-owned  by funds  under the
management of Putnam Lovell NBF Private Equity.

       See Item 7 "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations - Results of Operations by Business  Segment" and Note
22 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

       Our U.S. life insurance  company,  London Pacific Life & Annuity  Company
("LPLA"),  was established in 1989 and provided tax advantaged annuity products.
By the end of 2001, LPLA grew to approximately $2.3 billion in assets;  however,
during 2002, the life insurance and annuities  segment suffered from the adverse
conditions in the bond and equity  markets.  On July 2, 2002, we announced  that
further declines in the value of LPLA's investment portfolio,  due to persistent
negative events in the equity and bond markets, continued to erode significantly
the statutory  capital of LPLA and that we had been unsuccessful in concluding a
transaction to enhance the capital of LPLA. Subsequently,  LPLA was placed under
regulatory  control and  rehabilitation  based on LPLA's  statutory  capital and
surplus as of June 30, 2002. On August 6, 2002, on petition of the  Commissioner
of  Insurance  of the  State of North  Carolina  (the  "Commissioner")  with the
consent of LPLA and unanimous  approval of its board of directors,  the Superior
Court of Wake County in the State of North Carolina  ordered the Commissioner to
take  possession  and  control  of all  of the  property,  books  and  accounts,
documents  and other  records of LPLA.  Based on this court order,  we no longer
exercise  control over LPLA. As a result of this event, we  deconsolidated  LPLA
and  recorded a charge to earnings in 2002 of  approximately  $38.5  million for
losses resulting from the disposition of LPLA.

London Pacific Assurance Limited

       Formed in 1999, our Jersey, Channel Islands insurance subsidiary,  London
Pacific Assurance  Limited  ("LPAL"),  has principally been engaged in marketing
and servicing investment oriented insurance products.  LPAL sold Sterling,  U.S.
dollar and Euro  guaranteed  return bonds in its home market of Jersey,  Channel
Islands, and in the UK, Guernsey, Isle of Man and other permitted jurisdictions.
The products guarantee both capital and yield for the duration of the investment
period, which are typically three or five years. From LPAL's start of operations
in the first quarter of 2000 through the end of 2002,  LPAL  generated  premiums
totaling $135.0 million. LPAL generated sales directly to the public and through
financial  intermediaries  in the Channel  Islands,  U.K., Isle of Man and other
international locations.

       On July 2, 2002,  we announced  that LPAL would  discontinue  writing new
policies  immediately.  The decision to discontinue the issuance of policies was
made  to  avoid  the  increased  capital   requirements  created  by  additional
policyholder   liabilities.   Subsequent   to  this   announcement   and   other
announcements  relating to the Group and LPLA, LPAL policy surrenders  increased
substantially.  The number of policyholders  fell from

                                       2
<PAGE>

2,603 at June 30, 2002 to 925 at December 31, 2002. The primary financial impact
of the high level of  surrenders  has been the reduction in the level of capital
required to support the policyholder liabilities.

       LPAL  has  over   200   sales   agreements   in  place   with   financial
intermediaries,  giving the company access to over 9,000  independent  financial
advisers ("IFAs"). However, if LPAL's management decides to sell policies in the
future,  it is not clear how many IFAs in the  network  will sell LPAL  policies
again due to the negative  announcements  regarding LPLA in the U.S. Inevitably,
the high level of surrenders and the  discontinuation  of policy  issuances will
also have a negative impact on this segment. Policy administration  continues to
be handled for a fee by LPLA in Raleigh, North Carolina.

Investment Portfolio

       In turbulent market  conditions,  LPAL's portfolio strategy has sought to
match the level of  policyholder  liabilities  with corporate bonds and cash. At
December 31, 2002,  policyholder  liabilities  amounted to $35.4 million and the
market value of LPAL's corporate bonds,  cash,  accrued interest and amounts due
from brokers amounted to $35.4 million.  In addition,  LPAL's portfolio included
listed  equities  valued at $8.9  million  and private  equities  valued at $7.2
million at December 31, 2002.

       See Item 7 "Management's  Discussion and Analysis of Financial  Condition
and  Results of  Operations  - Life  Insurance  and  Annuities"  for  additional
information on LPAL's  investment  portfolio and its effect on the profitability
of the insurance segment.

Competition

       LPAL operates in a highly competitive environment.  The 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 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.

       We believe LPAL could  compete  again in the future but its  distribution
capability may be significantly  weakened due to the ongoing  discontinuation of
sales activity,  as well as the negative  publicity  associated with the loss of
management  control of LPLA. LPAL has had little  pro-active  contact with sales
agents since the decision to discontinue issuing policies.

Financial Advisory Services

London Pacific Advisors

       In  September  1996,  we  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  ("AIST"),  an  insurance  agency.  LPAS,  LPS and  AIST are
collectively  known as  London  Pacific  Advisors  ("LPA").  LPA is  located  in
Sacramento,  California.  The  total  value  of  assets  under  LPA  management,
consulting or administration as of December 31, 2002 was $2.2 billion.

       LPA changed its business  strategy in 2000. The LPA  business  previously
focused on providing back office services to independent financial advisors (and
small groups of  advisors).  In 2000,  LPA expanded  its focus  considerably  to
include large  institutional  clients and to encompass a full range of web based
front  office and back  office  services.  LPA has  branded  this new package of
services as  myOfficeOnline,(SM)  and it now delivers these  services  primarily
over the Internet, or through intranets maintained by institutional  clients. We
believe  that the  change  in LPA's  strategy  will  allow LPA to  increase  its
revenues and greatly strengthen its competitive position.

       LPA has  partnerships  with or  provides  services  to several  prominent
institutions including First Mercantile Trust Co., H&R Block Financial Advisors,
Harris Investor Services, ORBA(R) Financial Management,

                                       3
<PAGE>

SunGard Wealth Management Services, Union Planters Investment Advisors and Wells
Fargo & Co. LPA has also developed a relationship  with and is in the process of
rolling out a platform to Lincoln Financial Advisors.

       Products, Services and Revenues

       LPA provides a comprehensive  menu of services to financial  institutions
and investment advisors, with an emphasis on web based technologies,  investment
consulting  and back office  services.  LPA's  products  and  services  are used
primarily to research,  create, manage and administer managed accounts comprised
of separate account  managers,  mutual funds and exchange traded funds. The term
"managed  account"  generally  denotes an investment  advisory program where the
client pays one asset based fee for a package of services  that includes some or
all of the following:  money  management,  asset allocation,  trading,  custody,
clearing and back office  services.  This segment of the  investment  management
industry is experiencing  rapid and accelerating  growth, as investors move away
from mutual  funds,  which lack the  flexibility  of managed  accounts and often
carry higher fees and tax costs.  To date, all of LPA's clients are U.S.  based,
but the managed account  business is gaining  momentum  outside of the U.S., and
LPA is positioned to address these developing markets.

       LPA offers a full complement of services, including portfolio accounting,
invoicing and performance reporting,  to the managed account industry. The open,
"menu driven" architecture of its software systems allows a client to select the
specific  capabilities  it  desires  to  utilize  on the  platform,  and then to
integrate those capabilities with its own, and third party, functionalities. The
result is a customized, private labeled solution to maximize each client's brand
awareness.

       LPA's four  principal  revenue  sources  are:  (i) asset  management  and
consulting  fees generated  under  contracts  providing for fees calculated as a
percentage of assets under  management  or consulting by its financial  advisors
and institutional clients; (ii) back office fees and web platform fees generated
under  contracts  providing for fees  calculated as a percentage of assets under
management or administration by its clients; (iii) commissions received from the
sale by advisors of insurance products,  including annuities and life insurance;
and (iv)  brokerage  fees  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.

       A portion of LPA's  revenues is paid out as commissions to its affiliated
advisors.  The  percentage  payouts  apply only to business  generated  by those
advisors,  and the  percentages  vary based on the source of the revenue and the
contractual relationship with the advisor.

       Net asset  management  and  consulting  fees decreased to $4.4 million in
2002 from $4.7 million in 2001. These fees contributed  approximately  71%, 72%,
and 65% to net revenues (i.e.,  gross revenues less  commissions)  for the years
ended December 31, 2002, 2001 and 2000,  respectively.  The composition of these
fees is changing as new  institutional  client fees are  realized and older back
office fee contracts reach maturity. The overall decrease in fees for 2002 was a
result  of the  significant  decline  in market  values  of the  assets of LPA's
financial advisors upon which the fees are based, offset by growth in the assets
and net revenues of LPA's institutional clients.

       Net commissions  received from the sale by advisors of insurance products
contributed approximately 4%, 3% and 5% to net revenues for 2002, 2001 and 2000,
respectively,  while net brokerage fees contributed  approximately  16%, 17% and
22% to net revenues for 2002, 2001 and 2000, 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 LPA.
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.

                                      4
<PAGE>

       A second 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 back office services
are tied to the assets under management in the institution's  program and are at
lower overall rates than full managed account services.  LPA's revenues increase
along with the growth of those program  assets.  Institutional  net revenues,  a
component of net asset management and consulting revenues,  increased in 2002 to
$2.7  million  from  $2.1  million  in  2001.  These  net  revenues  represented
approximately  44%,  32% and 21% of  total  net  revenues  for the  years  ended
December 31, 2002, 2001 and 2000, respectively.

       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  Leaders(R) and was registered on August 3, 1999. The registration has an
initial ten year "in force"  period,  unless  terminated  earlier as provided by
law, and is subject to  unlimited  renewals.  In August 2000,  LPA applied for a
trademark registration for myOfficeOnline,(SM) the name given to LPA's web based
services  package.  "MyOfficeOnline.com"  is also  the  domain  name  for  LPA's
website. This trademark  application remains outstanding,  pending resolution of
an alleged  potential  conflict with a trademark  held by another  company for a
different package of computer based products and services. LPA believes that the
existence of this alleged potential conflict with the other trademark should not
prevent the  registration  of LPA's  "myOfficeOnline"  mark, as the products and
services  identified  by LPA's mark differ  substantially  from the products and
services identified by the other mark. However,  there can be no assurances that
LPA will be able  successfully  to register its  "myOfficeOnline"  mark,  and no
assurance can be given that LPA will be able  successfully to enforce or protect
its rights under the myOfficeOnline(SM) mark in the event it is subject to third
party infringement claims.

          Although   we   consider   both   the   Global   Leaders(R)   and  the
myOfficeOnline(SM)  marks to be important  identifiers of LPA's products,  we do
not consider either of these marks to be material to our business.

Competition

       LPA operates 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.
We  believe  that  the  considerable   experience  and  past  success  of  LPA's
investment,  consulting and technical personnel, its growing base of prestigious
clients,  successful  performance for those clients and its proprietary  systems
enable LPA to compete within the markets in which it operates.

Asset Management

       BCM and Berkeley  International  Limited ("BIL") are our asset management
companies.  While BCM offers its services to third parties and Group affiliates,
BIL is currently inactive.

       On March 10, 2003,  we announced  that a  definitive  agreement  had been
signed to sell  substantially  all of the  business and  operations  of BCM to a
company  majority-owned  by funds  under the  management  of Putnam  Lovell  NBF
Private  Equity.  The  agreement  is subject to  certain  conditions,  including
receipt of sufficient  consents  from clients of BCM to the  assignment of their
investment management contracts to the acquiror.  The purchase price consists of
$7.75 million in cash to be paid at closing subject to certain adjustments;  and
a further $1.0 million cash  installment to be paid on December 31, 2003 subject
to certain  adjustments.  In addition,  up to $1.25 million of earn-out payments
will be paid by the buyer to the Group ratably over the four quarters of 2004 if
revenues  received in 2003 from a new product  planned for launch by BCM in 2003
exceed certain  defined  targets.  The  definitive  agreement is binding on both
companies and is subject to regulatory  approvals  and other  conditions.  As of
December  31,  2002,  BCM's  assets under  management  were  approximately  $1.2
billion,  including  approximately  $0.2 billion of assets  under a  subadvisory
agreement with LPA.

                                       5
<PAGE>

Berkeley Capital Management (See the immediately  preceding  paragraph regarding
       the definitive agreement to sell BCM)

       Established in 1972, BCM is a San Francisco based investment  manager and
is our primary asset  management  subsidiary.  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 at BCM
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 principal  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 Dividend Equity style (formerly named 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 portfolio of our insurance subsidiary, LPAL, is managed by BCM's
professional  fixed  income  managers  and  utilizes  a range  of  fixed  income
investments, including investment grade and high-yield corporate bonds.

       BCM's  principal  revenue source is derived from the management of equity
assets for  individuals and  institutions on a nationwide  basis and consists of
management  fees which are  calculated  based  upon the  dollar  value of assets
managed.  Additional  fees,  representing  9% and 29% of BCM's total fees during
2002  and  2001,   respectively,   were  received  from  the  Group's  insurance
subsidiaries  (LPLA and  LPAL),  again  based on a  percentage  of assets  under
management. The arrangement with LPLA was terminated effective October 31, 2002.
Fees of $0.4 million and $0.8 million were received by BCM from LPLA during 2002
and 2001, respectively.

       BCM has separately  managed  account  marketing  agreements  with over 20
firms, and assets managed under these agreements represent 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 and  PaineWebber.  During 2002, fees from these two customers
together represented more than 66% of BCM's revenues.

       BCM is  actively  seeking to broaden  its  product  array with firms with
which it has existing relationships. Competition for positions in these programs
is becoming increasingly fierce, enhancing the value of BCM's incumbent status.

       Intellectual Property

       We believe that the name and reputation of Berkeley Capital Management is
a material asset.  BCM registered  with the U.S.  Patent and Trademark  Office a
trademark for financial  management and mutual fund investment (Berkeley Capital
Management)  on June 15,  1999.  The  registration  has an initial  ten year "in
force" period, unless terminated earlier as provided by law.

                                       6
<PAGE>


Berkeley International Limited

       BIL is located in Jersey,  Channel Islands.  Prior to the loss of control
of  LPLA,  BIL  managed  the  listed  equity  securities  in  LPLA's  investment
portfolio. BIL is currently inactive.

Competition

       Numerous  competitors  offer  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 from year to year.  In  relation  to
direct institutional and individual client relationships,  BCM competes based on
the same  principal  factors  and price may be a  secondary  factor.  There are,
however, other firms with significantly greater assets under management than BCM
in each  category  in which it  competes.  In  addition  to the above,  there is
intense competition within the securities industry with respect to obtaining and
retaining the services of investment professionals.

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,  our 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. Placements are typically arranged in later
stage technology companies,  which are near alpha test of their product and need
to scale up their engineering,  marketing and sales infrastructure.  Within this
strategy,  BICC  has been  able to  identify  many  promising  young  technology
companies  that  have  grown  in  prominence  in  their  fields  and  gone on to
successful public offerings or acquisition transactions.

       Over the past 23 years,  BICC arranged over $1.9 billion of placements in
the private capital  markets on behalf of Group  companies and clients.  Many of
the companies are headquartered in close proximity to BICC's offices which allow
for  easier  access  to the  companies'  management.  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.  These placements included investments in
America  Online,  Oracle  Corporation,  Cadence Design  Systems,  Inc.,  Cypress
Semiconductor, Inc., Packeteer, Inc. and New Focus, Inc.

       Placement  activity was reduced  significantly in 2002 due to poor market
conditions and the loss of management control of LPLA. In general, institutional
investment  demand for technology  companies has weakened  considerably,  but we
believe interest in high growth companies continues  particularly where there is
a potential  strategic  relationship.

       The private technology investments arranged by BICC and currently held by
LPAL are Agility Communications, Inc., Alacritech, Inc. and Ceon Corporation.

       Due to the loss of control of LPLA, BICC will no longer receive fees from
LPLA.  Fees earned by BICC from LPLA during 2002 and 2001 were $2.9  million and
$9.9 million, respectively.

                                       7
<PAGE>


Berkeley International Capital Limited

       BICL,  formed  in 1988 and  based in  Guernsey,  Channel  Islands,  takes
principal positions in connection with private equity  transactions  arranged by
its sister  company,  BICC.  These  private  equity  positions may become 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, 2002, BICL held $7.6 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 economic and stock
market conditions.  The pool of capital seeking opportunities to invest in later
stage  technology  companies  contracted  further in 2002 but we believe  demand
continues for high value technology companies.

REGULATION

Life  Insurance  and  Annuities - London  Pacific  Assurance  Limited and London
Pacific Life & Annuity Company

       LPAL is regulated by the Jersey Financial Services  Commission  ("JFSC").
Under Article 6 of the Insurance  Business  (Jersey) Law 1996, LPAL is permitted
to conduct  long-term  insurance  business.  LPAL is required  to submit  annual
audited  financial   statements  (prepared  under  U.S.  GAAP  as  permitted  by
regulation),  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.  The annual filing
contains a report from the Appointed  Actuary on the matching of  investments to
liabilities.

       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  (pound)50,000 or 2.5% of the
value of the  long-term  business  fund,  (iii) 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 (iv) assets equal
to not less than 90% of  liabilities  must be placed with  approved  independent
custodians. As of December 31, 2002, LPAL met all of these conditions.

       LPAL is also required under the insurance laws to appoint an actuary. The
actuary must be qualified as defined under the laws and is required to supervise
the long-term insurance fund. No transfers,  except in satisfaction of long-term
insurance  business  liabilities,  including  dividends,  are permitted from the
long-term insurance fund without written consent from the actuary.

       LPLA,  which was  deconsolidated  effective  July 1, 2002,  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.

       During 2002, LPLA was placed under regulatory  control and rehabilitation
due to the erosion of its statutory  capital.  On August 6, 2002, on petition of
the  Commissioner of Insurance of the State of North

                                      8
<PAGE>


Carolina,  with the  consent  of LPLA and  unanimous  approval  of its  board of
directors,  the  Superior  Court of Wake  County in the State of North  Carolina
ordered the  Commissioner  to take  possession  and control of all the property,
books and accounts, documents and other records of LPLA.

Other Business Segments

       Our  U.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  each of these  subsidiaries  has $25  million or more of assets
under  management,  each is 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 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.

       Our  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.

       Our broker-dealer subsidiary, London Pacific Securities, Inc., 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 two clearing broker-dealers which maintain the customer accounts. LPS is
registered  under the  Securities  Exchange Act of 1934,  as amended  ("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.

Group

       We employ compliance officers  responsible for managing our subsidiaries'
compliance  with  applicable  regulatory  requirements.  Although  the  scope of
regulation  and form of supervision to which our  subsidiaries  are 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.  Our  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 our subsidiaries  currently
operate  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 our  subsidiaries,  and we do not
consider such  regulations to adversely  affect the competitive  position of our
subsidiaries.

EMPLOYEES

       As of December 31, 2002,  the Group had 106  employees.  The breakdown by
business  segment  was  as  follows:  financial  advisory  services,  76;  asset
management,  18; corporate, 5; venture capital management, 4; and life insurance
and  annuities,  3. None of the Group's  employees  are covered by a  collective
bargaining agreement and the Group has not experienced any work stoppages.

                                       9
<PAGE>

Item 2.    PROPERTIES

       We operate from three offices  located in Jersey (Channel  Islands),  San
Francisco and Sacramento,  currently  consisting of approximately  34,000 square
feet of space in the  aggregate.  All offices are  leased.  Approximately  1,000
square feet is leased in Jersey,  under a lease expiring in 2010,  pertaining to
our life insurance and annuities  segment.  Approximately  17,000 square feet is
leased  in  Sacramento,  under a  lease  expiring  in  2008,  pertaining  to our
financial   advisory  services   segment.   Under  a  lease  expiring  in  2004,
approximately  11,000  square  feet is  leased  in San  Francisco  of which  60%
pertains  to our  asset  management  segment  and  40% to  our  venture  capital
management  segment.  Approximately  5,000  square feet is leased for  corporate
activities in Jersey and San Francisco,  under leases expiring in 2010 and 2004,
respectively.  We believe that existing facilities are suitable and adequate for
the  conduct  of  our  business.  See  Note  15 to  the  Consolidated  Financial
Statements in Item 8 of Part II for further information regarding our leases.


Item 3.    LEGAL PROCEEDINGS

       On August 6, 2002,  on petition of the  Commissioner  of Insurance of the
State of North  Carolina  (the  "Commissioner"),  with the  consent  of LPLA and
unanimous approval of its board of directors,  the Superior Court of Wake County
in the State of North Carolina  ordered the  Commissioner to take possession and
control of all the property, books and accounts,  documents and other records of
LPLA. LPLA and its officers,  directors, agents, employees and all other persons
were  enjoined from  disposing of LPLA's  property and from  transacting  LPLA's
business  except with the consent of the  Commissioner.  The Court appointed the
Commissioner as  rehabilitator of LPLA. Based on the court order, the Company no
longer exercises control over LPLA.

       For further discussion, see the "Liquidity and Capital Resources" section
in Item 7 of Part II.

       We are  involved  in  various  legal  proceedings,  including  claims for
damages from clients of a nature we consider to be normal for our  business.  We
believe  the  ultimate  settlement  or other  resolution  of the claims will not
materially affect our consolidated financial position,  results of operations or
cash flows.


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

       No matters were  submitted to our  shareholders  during the quarter ended
December 31, 2002.


                                     Part II

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

MARKET INFORMATION

       The principal  trading market for our Ordinary Shares is the London Stock
Exchange  ("LSE"),  on which such shares have been listed since  February  1985.
ADSs, each  representing ten Ordinary Shares,  are represented by ADRs for which
The Bank of 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  Market(SM)  under the
symbol  "LPGL,"  from  November  1999 through July 3, 2002 on the NYSE under the
symbol "LDP" and since July 12, 2002 on the OTC Bulletin  Board under the symbol
"LDPGY.PK."  As of December  31, 2002,  there were  64,439,073  Ordinary  Shares
outstanding.  Also as of that  date,  there  were  1,807,742  ADSs  outstanding,
representing  18,077,420 Ordinary Shares or 28.1% of our outstanding shares. ADS
holders may exercise their voting rights through the ADR Depositary.

                                       10
<PAGE>

       In June 2002,  we completed a  one-for-ten  reverse split of our ADSs. On
June 24, 2002,  every ten of our ADSs issued and outstanding  were converted and
reclassified into one post-split ADS.  Consequently,  effective from the opening
of  business  on June  24,  2002,  each ADS is  equal  to ten  Ordinary  Shares.
Fractional new ADSs were sold by the Depositary Bank and paid in cash to the ADR
holders. This ADS split did not affect our Ordinary Shares listed on the LSE.

       On July 3, 2002,  the NYSE halted  trading of our ADRs in response to the
administrative  actions  taken by the North  Carolina  Department  of  Insurance
relating to LPLA.  On July 9, 2002,  trading of the ADRs was  suspended  and the
securities  were  withdrawn  from listing and  registration  from the NYSE. As a
result of the  delisting,  the  liquidity of our common stock and its price have
been adversely affected. These actions may limit our ability to raise additional
capital in the future,  and there is no  assurance  that a  significant  trading
market for the ADRs will develop.  If an active trading market does not develop,
ADR holders may be unable to sell their ADRs.

       Subsequent to the  delisting,  the ability of ADR holders to buy and sell
is  limited  to  trading  on the OTC  Bulletin  Board  under the  ticker  symbol
LDPGY.PK.  Shares traded on the OTC market  generally  experience  lower trading
volume than those traded on the organized  exchanges.  The trading volume of the
ADRs has decreased  substantially  since the NYSE  delisting and the transfer of
the ADRs to the OTC Bulletin Board.

       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 our  Ordinary  Shares  on the LSE,  based on its  Daily
Official  List,  and the high and low  trade  price  information  of the ADSs as
obtained  from  the  NYSE  through  the  second  quarter  of 2002 and on the OTC
Bulletin  Board from the third  quarter  of 2002 (as  restated  to  reflect  the
one-for-ten reverse split on June 24, 2002):
<TABLE>
<CAPTION>


                                                                         LSE                  NYSE/OTC Bulletin Board
                                                                     Pounds Per                    U.S. Dollars
                                                                   Ordinary Share                     Per ADS
                                                               -----------------------        -----------------------
                                                                 High          Low              High          Low
                                                               ---------     ---------        ---------    ---------


<S>                                                            <C>           <C>              <C>          <C>
2001:
First quarter ................................................     8.05         3.45           120.00         44.50
Second quarter................................................     4.73         3.08            69.00         39.00
Third quarter.................................................     4.18         1.88            59.90         25.00
Fourth quarter................................................     2.75         1.78            43.50         25.50

2002:
First quarter ................................................     3.08         1.93            45.50         27.50
Second quarter................................................     1.90         0.24            30.50          3.30
Third quarter.................................................     0.25         0.02             3.16          0.20
Fourth quarter................................................     0.13         0.05             1.75          0.50
</TABLE>

Holders

       As of February 28,  2003,  we had  approximately  1,752  shareholders  of
record and 45 ADS holders of record.  Because many Ordinary  Shares and ADSs are
held by brokers  and various  institutions  on behalf of other  holders,  we are
unable to estimate the total number of beneficial  holders  represented by these
holders of record.

Dividends

       Until 2002, we paid dividends on our Ordinary  Shares in every year since
we became listed on the LSE in 1985.  Dividends on our Ordinary Shares were paid
twice a year.  In view of our  requirement  to conserve  cash during the current
period of market instability and in order to meet the operating needs and growth
opportunities  of the  business,  and  given  undertakings  made to the  Bank of
Scotland in connection with our

                                       11
<PAGE>

loan facility not to pay dividends without their consent, our Board of Directors
suspended the 2002 interim  dividend and will not recommend a final dividend for
the year 2002.

       Holders of ADSs are entitled to receive  dividends  paid,  if any, on our
Ordinary Shares through the ADR Depositary.

       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.
<TABLE>
<CAPTION>

                                 U.S. Dollars Per Ordinary Share                      U.S. Dollars Per ADS(1)
                 -----------------------------------------------------------      ------------------------------
                            Gross                              Net
                 --------------------------       --------------------------
                  Interim   Final    Total         Interim   Final    Total        Interim      Final     Total
                 --------------------------       --------------------------      ------------------------------

<C>                 <C>     <C>      <C>            <C>     <C>      <C>             <C>        <C>       <C>
2001............    $0.11   $0.05    $0.16          $0.088  $0.040   $0.128          $0.88      $0.40     $1.28
2002............    $0.00   $0.00    $0.00          $0.000  $0.000   $0.000          $0.00      $0.00     $0.00

<FN>
(1)  As restated to reflect the one-for-ten reverse split in June 2002.
</FN>
</TABLE>

       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.

       Currently,  Jersey does not have  exchange  control  restrictions  on the
payment of  dividends  on the  Ordinary  Shares or on the conduct of the Group's
operations.  See Note 11 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 February
28,  2003,  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 us 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.

                                       12
<PAGE>

       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 us.

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 generally 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
generally  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 generally 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 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% (18% if the ADR or  Ordinary  Share is held for more than five years and was
acquired after December 31, 2000).

Backup Withholding Tax

       A U.S. holder may be subject to U.S. backup withholding tax (currently at
a rate of 30%) 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 be subject
to U.K.  stamp duty if its  execution  relates to anything done or to be done in
the U.K. For example, a U.K. stamp duty may apply if such instrument is executed
in the U.K. or is 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  (pound)5.  Gifts and other  transfers which
are neither sales,  nor made in contemplation of a sale, are not subject to this
charge.  Instead,  they will  either be exempt  or  subject  to a fixed  duty of
(pound)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  (pound)5  if the
instrument  of transfer  relates to anything  done or to be done in the U.K. For
example,  a fixed stamp duty of (pound)5 may apply if such  transfer 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

                                       13
<PAGE>

ADS holder may be subject to a stamp duty at a rate of 0.5% of the consideration
(rounded up to the nearest  (pound)5) if execution of the instrument of transfer
relates  to  anything  done or to be  done in the  U.K.;  for  example,  if such
transfer  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.

EQUITY COMPENSATION PLANS

       The following  table is a summary of selected  information for our equity
compensation plans as of December 31, 2002.
<TABLE>
<CAPTION>

                                                                                                Number of Shares
                                            Number of Shares to        Weighted Average   Remaining Available for
                                        be Issued Upon Exercise      Exercise Price of     Future Issuance Under
                                        of Outstanding Options,    Outstanding Options,       Equity Compensation
                                            Warrants and Rights     Warrants and Rights                    Plans
                                        -----------------------    --------------------   -----------------------

<S>                                                <C>                           <C>                         <C>
Equity compensation plans
  approved by shareholders..............             13,575,312(1)                $3.10                      (1)

Equity compensation plans not
  approved by shareholders..............                388,100(1)                 3.73                      (1)
                                                    -----------                  ------
Total...................................             13,963,412                   $3.12
                                                    -----------                  ------
                                                    -----------                  ------

<FN>
(1) Our  equity  compensation  plans do not  contain  a limit on the  number  of
options that may be granted to  employees.  However,  the plans do not allow for
the  issuance  of  previously   authorized  and  unissued  shares  to  meet  the
obligations  of the plans upon an employee  option  exercise.  When an option is
granted, the trust that administers the plan borrows funds from us or one of our
subsidiaries  and uses those funds to purchase  the number of shares  underlying
the option  grant.  The maximum loan allowed in any given year is equal to 5% of
consolidated net assets as of the end of the previous fiscal year.
</FN>
</TABLE>

       Information  regarding the features of the equity  compensation  plan not
approved  by  shareholders  is  incorporated  by  reference  to  Note  18 to the
Consolidated  Financial Statements presented in Item 8 "Financial Statements and
Supplementary Data" of this Form 10-K.

WARRANTS

       On November 11, 2002, we agreed to grant 1,933,172  warrants to subscribe
for our Ordinary  Shares to Bank of Scotland in connection with the extension of
our credit facility.  The warrants were granted on February 14, 2003 and have an
exercise price of  (pound)0.1143  (based on the average of the closing prices of
the Ordinary Shares over the trading days from November 1, 2002 through November
11, 2002), which was higher than the market price of (pound)0.09 on November 11,
2002. These warrants are exercisable at any time prior to February 14, 2010.

                                       14
<PAGE>

Item 6.  SELECTED FINANCIAL DATA

       The following is a summary of selected financial data for the Group. This
data  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. ADS amounts have been restated to reflect
the four-for-one  split in March 2000 and the one-for-ten  reverse split in June
2002.

<TABLE>
<CAPTION>
                                                                            Years Ended/As of December 31,
                                                           --------------------------------------------------------------
                                                              2002         2001         2000         1999        1998
                                                           ----------   ----------   ----------   ----------  -----------
                                                                  (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 and losses  $ (11,879)   $(168,948)   $ 118,543    $ 221,386    $  34,393
Income (loss) from continuing operations before income
  taxes.................................................      (58,132)    (223,397)      66,196      157,909        5,049
Income tax expense (benefit) on continuing operations...        4,078          648          201        2,020       (2,787)
Income (loss) from discontinued operations..............     (151,024)    (177,830)     (51,186)     147,753       27,922
Income tax expense (benefit) on discontinued operations.       (7,730)     (57,091)     (17,648)      51,766        9,302
Net income (loss).......................................     (205,504)    (344,784)      32,457      251,876       26,456
Basic earnings (loss) per share:
   Continuing operations................................        (1.23)       (4.39)        1.30         3.13         0.15
   Discontinued operations..............................        (2.82)       (2.37)       (0.66)        1.92         0.36
                                                           ----------   ----------   ----------   ----------   ----------
Total basic earnings (loss) per share...................        (4.05)       (6.76)        0.64         5.05         0.51
Diluted earnings (loss) per share:
   Continuing operations................................        (1.23)       (4.39)        1.08         2.81         0.14
   Discontinued operations..............................        (2.82)       (2.37)       (0.55)        1.73         0.35
                                                           ----------   ----------   ----------   ----------   ----------
Total diluted earnings (loss) per share.................        (4.05)       (6.76)        0.53         4.54         0.49
Basic earnings (loss) per ADS:
   Continuing operations................................       (12.26)      (43.94)       12.99        31.25         1.50
   Discontinued operations..............................       (28.23)      (23.68)       (6.60)       19.24         3.57
                                                           ----------   ----------   ----------   ----------   ----------
Total basic earnings (loss) per ADS.....................       (40.49)      (67.62)        6.39        50.49         5.07
Diluted earnings (loss) per ADS:
   Continuing operations................................       (12.26)      (43.94)       10.87        28.12         1.46
   Discontinued operations..............................       (28.23)      (23.68)       (5.52)       17.31         3.48
                                                           ----------   ----------   ----------   ----------   ----------
Total diluted earnings (loss) per ADS...................       (40.49)      (67.62)        5.35        45.43         4.94

Financial Position
Cash and total investments (continuing operations)......       70,345      262,809      456,898      357,361      191,734
Total assets............................................       80,213    2,539,126    2,562,988    2,195,266    1,658,797
Bank debt...............................................        9,314       36,874       35,556            -            -
Guarantees under bank facility..........................       10,590            -            -            -            -
Shareholders' equity....................................       21,486      221,653      567,742      552,475      328,481
Book value per share*...................................         0.42         4.37        11.00        11.25         6.67
Book value per ADS*.....................................         4.23        43.68       109.98       112.52        66.70

Ordinary Share and ADS Data
Ordinary Shares outstanding as of December 31...........       64,439       64,439       64,433       64,433       64,424
Weighted average shares used in:
   Basic earnings per share calculation.................       50,753       50,984       50,795       49,892       52,206
   Diluted earnings per share calculation...............       50,753       50,984       60,728       55,445       53,552
Total dividends per share relating to the year (gross)..    $       -   $     0.16   $     0.29   $     0.29   $     0.29
Total dividends per ADS relating to the year............    $       -   $     1.28   $     2.32   $     2.32   $     2.32
Market price per share on December 31................... (pound)0.055  (pound)2.60  (pound)5.53  (pound)5.59  (pound)1.87
Market price per ADS on December 31.....................    $    0.50   $    39.60   $    75.60   $    90.00   $    31.40
Market capitalization as of December 31.................    $   5,706   $  244,611   $  530,431   $  583,495   $  199,449

<FN>
* Based on the net asset  value of the  Group  after  deducting  the cost of the
shares  held  by the  employee  benefit  trusts,  and on the  number  of  shares
outstanding  excluding the shares held by the employee  benefit trusts.
</FN>
</TABLE>

                                       15
<PAGE>

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  accounting
principles  generally  accepted in the United  States.  This item should also be
read in conjunction  with the  "Forward-Looking  Statements and Factors That May
Affect Future Results" set forth below and our 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  Form  10-K   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  about the industries in which we operate,
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.  We undertake
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 Form 10-K and in our 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 our
products and services,  (iii) the success of our new products and services, (iv)
significant  changes  in  net  cash  flows  in or out  of  our  businesses,  (v)
fluctuations in the performance of debt and equity markets  worldwide,  (vi) the
enactment  of  adverse  state,  federal  or  foreign  regulation  or  changes in
government policy or regulation  (including  accounting standards) affecting our
operations,  (vii) the effect of economic  conditions  and interest rates in the
U.S., the U.K. or  internationally,  (viii) the ability of our  subsidiaries  to
compete in their respective  businesses,  (ix) our ability to attract and retain
key personnel,  and (x) actions by  governmental  authorities  that regulate our
businesses, including insurance commissions.

                                       16
<PAGE>


RESULTS OF OPERATIONS BY BUSINESS SEGMENT

       Income before income taxes for our reportable  operating segments,  based
on management's internal reporting structure, is as follows:
<TABLE>
<CAPTION>

                                                                              Years Ended December 31,
                                                                        ------------------------------------
                                                                          2002          2001        2000
                                                                        ----------   ----------   ----------
                                                                                  (In thousands)
<S>                                                                     <C>          <C>          <C>
Income (loss) from continuing operations before income taxes
  by operating segment:
Life insurance and annuities (1), (2) ................................  $  (19,637)  $ (163,873)  $  183,857
Financial advisory services ..........................................      (4,211)      (3,638)      (2,261)
Asset management (2) .................................................         615        1,533        1,778
Venture capital management (3) .......................................     (28,149)     (51,262)    (110,444)
                                                                        ----------   ----------    ---------
                                                                           (51,382)    (217,240)      72,930
Reconciliation of segment amounts to consolidated amounts:
Interest income ......................................................         549        2,004        1,574
Corporate expenses ...................................................      (5,870)      (5,634)      (7,333)
Goodwill amortization and write-offs .................................        (396)        (221)        (248)
Interest expense (4)  ................................................      (1,033)      (2,306)        (727)
                                                                        ----------   ----------    ---------
Consolidated income (loss) from continuing operations before
  income taxes .......................................................  $  (58,132)  $ (223,397)  $   66,196
                                                                        ----------   ----------   ----------
                                                                        ----------   ----------   ----------
<FN>
(1) Netted  against the revenues  (investment  income) of the life insurance and
annuities  segment are management fees paid to the asset  management  segment of
$39,000, $47,000 and $9,000 in 2002, 2001 and 2000, respectively.

(2) Included in the revenues of the asset management segment are management fees
from the life insurance and annuities segment of $39,000,  $47,000 and $9,000 in
2002, 2001 and 2000, respectively. In addition, revenues of the asset management
segment also included management  fees from LPLA  (discontinued  operations)  of
$724,000, $1,907,000 and $2,766,000 in 2002, 2001 and 2000, respectively.

(3)  Included  in the  revenues of the venture  capital  management  segment are
management fees from LPLA  (discontinued  operations) of $2,908,000,  $9,924,000
and $7,474,000 in 2002, 2001 and 2000, respectively.

(4)  Included  in  interest  expense  is  interest  paid to  LPLA  (discontinued
operations)   of  $30,000,   $58,000  and  $55,000  in  2002,   2001  and  2000,
respectively.
</FN>
</TABLE>

       Business segment data contained in Note 22 to the Consolidated  Financial
Statements  in Item 8 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 our life insurance and annuities segment's
results of operations (continuing operations only) is as follows:
<TABLE>
<CAPTION>

                                                                              Years Ended December 31,
                                                                        ------------------------------------
                                                                          2002          2001        2000
                                                                        ----------   ----------   ----------
                                                                                  (In thousands)
<S>                                                                     <C>          <C>          <C>
Revenues:
Investment income.....................................................  $    6,059   $    6,214   $    1,957
Insurance policy charges .............................................       1,155           (7)           -
Net realized investment gains (losses) ...............................    (114,325)      12,900      139,340
Change in net unrealized investment gains and losses on
  trading securities..................................................      97,762     (174,780)      44,383
                                                                        ----------   ----------   ----------
Total revenues and investment gains (losses) .........................      (9,349)    (155,673)     185,680

Expenses:
Interest credited on insurance policyholder accounts .................       6,031        6,314        1,201
Amortization of deferred policy acquisition costs ....................       2,952          932          115
General and administrative expenses ..................................       1,305          954          507
                                                                        ----------   ----------   ----------
Total expenses related to operations .................................      10,288        8,200        1,823
                                                                        ----------   ----------   ----------
Income (loss) from continuing operations before income taxes .........  $  (19,637)  $ (163,873)  $  183,857
                                                                        ----------   ----------   ----------
                                                                        ----------   ----------   ----------
</TABLE>

       During 2002, our life insurance and annuities segment continued to suffer
from the adverse conditions in the bond and equity markets.

       During the year, our primary  insurance  company,  LPLA, was placed under
regulatory  control and  rehabilitation  based on LPLA's  statutory  capital and
surplus as of June 30, 2002. On August 6, 2002, on petition of the  Commissioner
with the consent of LPLA and unanimous  approval of its board of directors,  the
Superior  Court  of Wake  County  in the  State of North  Carolina  ordered  the
Commissioner  to take  possession and control of all of the property,  books and
accounts,  documents and other  records of LPLA.  As a result of this event,  we
deconsolidated  LPLA and recorded a charge to earnings in 2002 of $38.5  million
for losses resulting from this disposition.

       For further discussion, see the "Liquidity and Capital Resources" section
below  and  Note  4  "Discontinued  Operations"  to the  Consolidated  Financial
Statements in Part II, Item 8.

       On July 2, 2002,  we  announced  that  further  declines  in the value of
LPLA's investment portfolio, due to persistent negative events in the equity and
bond markets, continued to erode significantly the statutory capital of LPLA and
that we had been unsuccessful in concluding a transaction to enhance the capital
of LPLA. As a consequence,  LPLA discontinued the issuance of new policies as of
July 2, 2002. Although the statutory capital of our Jersey insurance subsidiary,
LPAL,  had not been affected by the adverse  equity and bond markets to the same
extent as the statutory  capital of LPLA, we also announced on July 2, 2002 that
LPAL would discontinue writing new policies effective immediately.  The decision
to discontinue  the issuance of new policies  through LPAL was made to avoid the
increased capital requirements created by additional  policyholder  liabilities.
Subsequent to this  announcement and other  announcements  relating to the Group
and LPLA, LPLA policy surrenders increased  substantially.  Approximately 73% of
LPAL's policyholder  liabilities as of December 31, 2001 had been redeemed as of
December 31, 2002.

       Due to the events referred to above,  LPAL plans to focus on managing the
remaining  block of  policyholder  liabilities.  There are no plans currently to
write new policies before conditions improve.

                                       18
<PAGE>


2002 compared to 2001

       In 2002, LPAL  contributed a loss before income taxes of $19.6 million to
our overall loss before income taxes,  compared to a loss before income taxes of
$163.9  million in 2001.  Net  realized  investment  losses in 2002 were  $114.3
million compared to net realized  investment gains of $12.9 million in 2001. The
gain from the  change in net  unrealized  investment  gains and losses was $97.8
million in 2002,  compared  to a loss of $174.8  million in 2001.  In 2002,  the
spread  between   investment  income  and  interest  credited  to  policyholders
increased by $0.1 million;  amortization  of deferred policy  acquisition  costs
("DPAC")  increased by $2.0  million;  and general and  administration  expenses
increased  by $0.4  million,  each as compared to 2001.  Policy  charges in 2002
increased by $1.2 million compared to 2001.

       LPAL generated $6.5 million of premiums  during 2002, a decrease of $69.2
million  from the  premiums  received  by LPAL in 2001.  LPAL's  premium  volume
continued to decline as a result of lowering interest crediting rates during the
last quarter of 2001 and the events as described above.

       Interest and  dividend  income on  investments  was $6.1 million in 2002,
compared with $6.2 million in 2001. This $0.1 million decrease was due primarily
to  a  decline  in  the  level  of  invested  bonds  and  cash,  offset  by  the
strengthening of sterling on the level of U.S. dollar income.

       During the second half of 2002, $96.0 million of bonds and cash were used
to meet policy redemptions.  Following this reduction, and further expected bond
realizations and maturities  required to meet 2003 policy  maturities,  interest
income is expected to decline to approximately $2.0 million for 2003.

       Policyholder liabilities at December 31, 2002 were $35.4 million of which
$10.6 million is scheduled to mature during 2003.  These maturities are expected
to be met by a combination of cash held at the beginning of 2003 of $3.8 million
and bond maturities of approximately $13.0 million during 2003. Excess cash will
be  reinvested  in bonds to meet  future  policy  redemptions  and  expenses  as
appropriate.  If there are no significant redemptions,  policyholder liabilities
are projected to be approximately $25.9 million at the end of 2003. Assuming the
reinvestment  of excess cash in bonds,  investment  income should  approximately
equal the amount  credited to  policies  during  2003.  Operating  expenses  are
expected to be  approximately  $0.9 million during 2003 and investment  gains on
listed equities were $1.2 million for the two months ended February 28, 2003.

       Net  investment  losses  were  $16.5  million  in 2002,  compared  to net
investment  losses of $161.9 million in 2001. Net investment losses in 2002 were
comprised of net realized  investment losses of $114.3 million and $97.8 million
in gains from the change in net realized  gains and losses on the listed  equity
securities held in the trading portfolio.  The trading portfolio  decreased from
$22.3  million as of December  31, 2001 to $8.9 million as of December 31, 2002.
Additions to the trading portfolio during 2002 of $5.0 million resulted from the
transfer of certain listed equity securities from the venture capital management
segment.  LPAL sold certain trading positions during 2002, which resulted in net
realized losses of $102.9 million based on an aggregate  original cost of $116.2
million. These disposals represented shares held in companies that had completed
initial  public  offerings  of their  securities.  These  realized  losses  were
increased  by net realized  losses of $2.9 million on sales of $96.9  million of
publicly traded corporate debt securities and by other-than-temporary impairment
charges on two  private  equity  securities  of $8.2  million  and on one public
corporate bond of $0.3 million.

       Total invested assets  (defined as total assets  excluding DPAC and other
assets)  decreased to $51.6 million as of December 31, 2002,  compared to $161.5
million as of December 31, 2001. On total average  invested  assets in 2002, the
average annualized net return, including both realized and unrealized investment
gains and losses, was -9.1%, compared with -78.8% in 2001.

       Policy  surrender charge income increased by $1.2 million in 2002 to $1.2
million,  compared with a net expense of $7,000 in 2001.  The increase in policy
surrenders followed the events as described above.

       Interest credited on policyholder  accounts  decreased by $0.3 million in
2002 to $6.0 million,  compared with $6.3 million in 2001.  The decrease was due
primarily to the substantial increases in policyholder  surrenders in the second
half of 2002.  The  average  rate  credited to  policyholders  was 6.1% in 2002,
compared  with 6.6% in 2001.

                                       19
<PAGE>

       Amortization  of DPAC  was $3.0  million  in 2002,  an  increase  of $2.0
million  over  2001.  This  increase  was  due  to  the   acceleration  of  DPAC
amortization  to fully  write-off  DPAC at December 31, 2002. The reason for the
write-off  is the  discontinuance  of new  business  at the  start of the  third
quarter  of 2002 and the  lack of  interest  spread  on the  remaining  block of
business.

       General and administrative  expenses were $1.3 million in 2002,  compared
with $1.0 million in 2001.  This $0.3 million  increase was due primarily to the
reduction  in  expenses  deferred  as  policy  acquisition  costs  and  employee
severance costs.

2001 compared to 2000

       In 2001, LPAL contributed a loss before income taxes of $163.9 million to
our overall loss before taxes, compared to income of $183.9 million in 2000. Net
realized investment gains in 2001 were $12.9 million, compared to $139.3 million
in 2000. The loss from the change in net unrealized  investment gains and losses
was $174.8 million in 2001, compared to a net gain of $44.4 million in 2000. The
spread between investment income and interest credited to policyholder  accounts
decreased by $0.9 million;  amortization of DPAC increased by $0.8 million;  and
general and administrative  expenses increased by $0.4 million, each as compared
to 2000.

       LPAL  generated  $75.7  million of premiums  during 2001,  an increase of
$22.9 million over the amount  generated in 2000. The premium volume in 2001 for
LPAL  reflected a full year of  operations  in 2001,  compared to nine months in
2000. LPAL's premium volume, however,  decreased during the last quarter of 2001
as a result of lowering interest crediting rates.

       Interest and dividend  income on investments  was $6.2 million in 2001 as
compared with $2.0 million in 2000. This $4.2 million increase was primarily due
to asset  growth from new  business,  offset by lower  reinvestment  rates.  The
carrying value of the private equity portfolio as of December 31, 2001 was $15.2
million, compared with $153.4 million as of December 31, 2000. This decrease was
the result of net investment sales of $120.2 million and impairment  adjustments
made to the carrying value of investments of $18.0 million.

       Net  investment  losses  were  $161.9  million in 2001,  compared  to net
investment  gains of $183.7 million in 2000. Net investment  losses in 2001 were
comprised  of net  realized  investment  gains  of $12.9  million,  and a $174.8
million  loss from the change in net  unrealized  gains and losses on the listed
equity securities held in the trading portfolio. The trading portfolio decreased
from $64.8  million as of December 31, 2000, to $22.3 million as of December 31,
2001.  Additions to the trading portfolio during 2001 of $139.3 million resulted
from the $55.8 million  purchase of certain  listed equity  securities  from the
venture capital management  segment,  and the transfer of a $83.5 million listed
equity  security from LPLA.  LPAL sold certain  trading  positions  during 2001,
which resulted in net realized  gains of $36.1 million based on their  aggregate
original  cost of $7.0  million.  These  realized  gains were offset by realized
losses of $23.2 million,  consisting of other-than-temporary  impairments on one
private  technology  security  and  one  publicly  traded  corporate  bond.  All
intersegmental  investment  gains,  other than those  arising from sales to LPLA
(discontinued  operations),  have been eliminated in our consolidated statements
of income.

       Total invested assets  (defined as total assets  excluding DPAC and other
assets)  decreased from $295.9 million as of December 31, 2000 to $161.5 million
as of December 31, 2001,  primarily due to the unrealized  holding losses in the
trading  securities  portfolio.  On total average  invested assets for 2001, the
average net return,  including both realized and unrealized investment gains and
losses, was -78.8%,  compared with 106.1% for 2000. This decrease in average net
return resulted primarily from the net investment losses discussed above.

       Interest credited on policyholder  accounts  increased by $5.1 million in
2001 to $6.3  million,  compared  with $1.2  million in 2000.  The  increase was
primarily  due to new business  growth,  and the interest  credited in 2001 also
reflected  a full year of  operations,  compared  to nine  months  in 2000.  The
average rate credited to policyholders  was 6.6% in 2001,  compared with 6.9% in
2000.

                                       20
<PAGE>

       Amortization  of DPAC  was $0.9  million  in 2001,  an  increase  of $0.8
million over 2000. This increase was primarily due to new business growth.

       General and administrative  expenses were $1.0 million in 2001,  compared
with $0.5 million in 2000.  This $0.5  million  increase  was  primarily  due to
higher  staff costs with the  additional  headcount  to support its growth,  and
reflected a full year of operations in 2001, compared to nine months in 2000.

Financial Advisory Services

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

                                                                              Years Ended December 31,
                                                                        ------------------------------------
                                                                          2002          2001        2000
                                                                        ----------   ----------   ----------
                                                                                  (In thousands)
<S>                                                                     <C>          <C>          <C>
Gross financial advisory services fees................................  $   16,184   $   18,627   $   22,952
Payouts due to independent advisors...................................     (10,029)     (12,039)     (16,441)
                                                                        ----------   ----------   ----------
                                                                             6,155        6,588        6,511

Operating expenses....................................................      10,366       10,226        8,772
                                                                        ----------   ----------   ----------
Loss before income taxes .............................................  $   (4,211)  $   (3,638)  $   (2,261)
                                                                        ----------   ----------   ----------
                                                                        ----------   ----------   ----------
</TABLE>

2002 compared to 2001

       Net revenues in the financial  advisory  services segment  decreased from
$6.6  million  in 2001  to $6.2  million  in  2002.  Net  asset  management  and
consulting fees decreased from the prior year as a result of an overall decrease
in assets under  management upon which these fees are based,  while net revenues
from brokerage and  commission  product sales  remained  constant.  Assets under
management,  consulting  or  administration  decreased  from $2.3  billion as of
December  31, 2001 to $2.2  billion as of December  31,  2002.  The  addition of
assets from new  institutional  clients  helped to offset the decline in managed
assets resulting from continued negative market conditions.  The fees associated
with these  institutional  back office  services are at lower overall rates than
full asset management and consulting services.

       Operating  expenses  increased to $10.4  million in 2002,  compared  with
$10.2  million  in 2001.  Before  the  capitalization  and  amortization  of web
development costs,  expenses totaled $10.2 million in 2002,  compared with $10.5
million in 2001.  Staffing  reductions  were made over the course of the year in
response to negative market  conditions  resulting in a $0.4 million decrease in
expenses.  This cost savings was offset,  in part, by the  recognition of a $0.2
million loss on disposition of property in connection with the relocation of the
LPA offices in December 2002.

       In late 1999, we decided to make the LPA business the  foundation  for an
Internet based  initiative that could then be migrated to other vertical markets
in which  the Group  had  expertise.  This  initiative  aimed to  deliver a full
complement of consulting and back office services to institutions  and financial
advisors through the Internet.

       The total  investment in the Internet based project through  December 31,
2002 was $3.6  million,  including  $0.4  million in 2002.  Of this total,  $2.9
million  has  been  capitalized  as  software  development  costs  and is  being
amortized (as a component of operating  expenses) over five years;  amortization
of these costs began in May 2001. The amount  amortized during 2001 and 2002 was
$0.3 million and $0.6 million, respectively.

       The  Internet  based  initiative  has  opened the door for  marketing  of
financial  advisory  services to institutions  and large groups of advisors.  To
date, service contracts have been signed with eleven major

                                       21
<PAGE>

institutions,  and additional  contracts are currently  under  negotiation.  The
revenue  impact of these  contracts  increased  during 2002 as newly  contracted
business came on line. Net asset  management and consulting fees are expected to
increase  significantly  during the  second  half of 2003 as new  business  from
institutional clients comes onto the myOfficeOnline(SM) platform.

2001 compared to 2000

       The pre-tax loss from the financial  advisory  services segment increased
to $3.6 million in 2001 from $2.3 million in 2000,  primarily due to an increase
in operating expenses, partially offset by an increase in net revenues resulting
from new client contracts.

       Net revenues increased from $6.5 million in 2000 to $6.6 million in 2001.
Net asset  management  and  consulting  fees  increased from the prior year as a
result of a shift toward higher margin  managed and consulting  accounts,  while
net revenues from  brokerage  and  commission  product sales  decreased due to a
change in focus toward fee based (rather than commission based) services and the
difficult market  conditions  prevailing  during 2001.  Assets under management,
consulting or administration increased from $1.5 billion as of December 31, 2000
to $2.3  billion as of  December  31,  2001.  The  addition  of assets  from new
institutional  clients helped to offset the decline in managed assets  resulting
from the negative market conditions.

       Operating expenses increased to $10.2 million in 2001, compared with $8.8
million in 2000. Before the  capitalization  and amortization of web development
costs,  expenses  totaled $10.5 million in 2001,  compared with $10.8 million in
2000. The mix of expenses changed in 2001 as outside consulting costs of the web
development project were replaced by additional staff costs.  Staffing additions
were made over the  course of 2001 to support  the  institutional  and  Internet
based initiatives.

       During 2001, LPA capitalized $0.5 million as software  development  costs
associated with the Internet based project.  The software  development costs are
being  amortized  (as a  component  of  operating  expenses)  over  five  years;
amortization  of these costs began in May 2001 and the amount  amortized  during
2001 was $0.3 million.

Asset Management

       On March  10,  2003,  the  Group  announced  that it had  entered  into a
definitive agreement to sell substantially all of the business and operations of
BCM to a company  majority-owned  by funds under the management of Putnam Lovell
NBF Private Equity.  The agreement is subject to certain  conditions,  including
receipt of sufficient  consents  from clients of BCM to the  assignment of their
investment management contracts to the acquiror.  The purchase price consists of
$7.75 million in cash to be paid at closing subject to certain adjustments;  and
a further $1.0 million cash  installment to be paid on December 31, 2003 subject
to certain  adjustments.  In addition,  up to $1.25 million of earn-out payments
will be paid by the buyer to the Group ratably over the four quarters of 2004 if
revenues  received in 2003 from a new product  planned for launch by BCM in 2003
exceeds certain  defined  targets.  The definitive  agreement is binding on both
companies and is subject to regulatory  approvals  and other  conditions.  As of
December  31,  2002,  BCM's  assets under  management  were  approximately  $1.2
billion,  including  approximately  $0.2 billion of assets  under a  subadvisory
agreement with LPA.

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

                                                                              Years Ended December 31,
                                                                        ------------------------------------
                                                                          2002          2001        2000
                                                                        ----------   ----------   ----------
                                                                                   (In thousands)
<S>                                                                     <C>          <C>          <C>
Revenues .............................................................  $    5,256   $    6,764   $    7,799
Operating expenses ...................................................       4,641        5,231        6,021
                                                                        ----------   ----------   ----------
Income before income taxes ...........................................  $      615   $    1,533   $    1,778
                                                                        ----------   ----------   ----------
                                                                        ----------   ----------   ----------
</TABLE>
                                       22
<PAGE>

2002 compared to 2001

       BCM, our U.S.  asset manager,  generates most of this segment's  revenues
and expenses.  BCM's 2002 revenues declined $0.8 million to $4.9 million,  which
included  management  fees of $0.5 million from the life insurance and annuities
segment,  most of which was  received  in the first half of 2002,  a decrease of
$0.4  million  from the fees  received  in the full year  2001.  BCM's  expenses
decreased  $0.6  million  to $4.6  million  for 2002.  BCM's  revenues  declined
slightly more than its expenses for the year causing its contribution to segment
income to decline by $0.2 million.

       Total  assets  under  management  for managed  account  programs of major
brokerage  firms (wrap  accounts)  were $905  million as of December  31,  2002,
compared to $997 million as of December  31,  2001,  despite the addition of $81
million of new wrap assets in 2002, net of  redemptions.  Although the number of
wrap  accounts  increased  3% during 2002 to 5,381  accounts as of December  31,
2002, the decline in market value of the assets in the accounts more than offset
the market  value of the new wrap  accounts.  The U.S.  stock  market fell for a
third  consecutive  year in 2002  with the  total  return  of the S&P 500  index
yielding  approximately -22%. Returns for BCM's principal product,  its Dividend
Equity value equity  investment  style  (formerly  called Income  Equity),  were
approximately  -14% for the year.  Returns for BCM's  balanced  Dividend  Equity
style were approximately -6% for the year. As a result, BCM continued to attract
net new wrap  accounts,  more than  offsetting  account  losses from its smaller
Growth Equity product.

       The lower  expenses  at BCM  during  2002  reflected  both a second  cost
reduction program  implemented  during the year and a reduction in expenses as a
result of its diminished involvement with LPLA's corporate bond portfolio during
the year.

       Included in the  revenues of the asset  management  segment for 2002 were
portfolio  management  fees from LPLA received by BIL of $0.3 million,  compared
with $1.1 million for 2001. These reduced fees,  including similar fees received
by BCM,  primarily  account  for the  overall  decrease  in  income in the asset
management  segment.  The reduced fees  resulted  from the decline in the market
value of the listed equity  securities  portfolio held by LPLA which was managed
by BIL and as a result  of its  diminished  involvement  with  LPLA's  portfolio
during the year. Due to the loss of the management  contracts  related to LPLA's
investment portfolios, both BCM and BIL will no longer receive fees from LPLA in
future periods.

2001 compared to 2000

       BCM's revenues  increased in 2001 by $0.2 million to $5.7 million,  which
included $0.9 million of management fees from LPLA.  Expenses  decreased in 2001
by $0.7 million to $5.2  million.  The  increased  revenues  and lower  expenses
together increased BCM's contribution to segment income by $0.9 million for 2001
compared to 2000.

       Total wrap fee account  assets under  management  were $997 million as of
December  31,  2001,  compared to $955  million as of  December  31,  2000.  The
additional  assets under  management  resulted  from the 19% net increase in the
number of wrap accounts in 2001.  Wrap account assets under  management in BCM's
Income Equity style (from January 31, 2003,  named the Dividend  Equity  style),
which represented the majority of BCM's equity assets, increased during the year
as the inflow of new account assets more than offset market value declines. Wrap
account assets under  management in BCM's Growth Equity style  decreased  during
the year primarily due to market value declines.

       BCM  implemented a cost  reduction  program  during the second quarter of
2001,  which caused its operating  margins to increase during the second half as
compared with the first half.

       Other revenues in the asset management  segment decreased by $0.2 million
in 2001,  following the  conclusion at the end of the third quarter of 2000 of a
development   capital  fund  management  contract  handled  by  BIL,  our  asset
management subsidiary in Jersey.

       Included in the  revenues of the asset  management  segment for 2001 were
portfolio  management fees from the life insurance and annuities segment of $2.0
million,  compared  with $2.8  million in 2000.  These

                                       23
<PAGE>


reduced fees primarily  account for the overall  decrease in income in the asset
management segment. The lower fees resulted from the decline in the market value
of the listed equity securities portfolio held by LPLA which was managed by BIL.

Venture Capital Management

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

                                                                              Years Ended December 31,
                                                                        ------------------------------------
                                                                          2002          2001        2000
                                                                        ----------   ----------   ----------
                                                                                  (In thousands)
<S>                                                                     <C>          <C>          <C>
Revenues:
Management fees.......................................................  $    2,908   $    9,924   $    9,398
Investment income.....................................................           -            -          273
Net realized investment gains (losses) (1) ...........................     (44,130)      42,876       14,341
Change in net unrealized investment gains and losses on
  trading securities (1)..............................................      16,703      (93,470)    (123,474)
                                                                        ----------   ----------   ----------
Total revenues and net investment losses..............................     (24,519)     (40,670)     (99,462)
Operating expenses....................................................       3,630       10,592       10,982
                                                                        ----------   ----------   ----------
Loss before income taxes..............................................  $  (28,149)  $  (51,262)  $ (110,444)
                                                                        ----------   ----------   ----------
                                                                        ----------   ----------   ----------
<FN>
(1) Realized  investment gains in the amounts of $1,603,000 and $37,269,000 were
recorded during 2002 and 2001, respectively,  by the venture capital  management
segment,  related to  intersegmental  investment sales to the life insurance and
annuities segment.  These realized investment gains were offset by corresponding
decreases in unrealized  investment  gains and losses on trading  securities for
the  same  amounts.   These  gains  and  losses  have  been  eliminated  in  our
consolidated financial statements.
</FN>
</TABLE>

2002 compared to 2001

       The pre-tax loss from the venture capital  management  segment  decreased
from $51.3 million in 2001 to $28.1 million in 2002.  The loss in both years was
attributable  primarily  to net  realized and  unrealized  investment  losses on
listed equity securities.  These positions in listed equity securities  resulted
from  privately  held  technology  companies,   in  which  the  venture  capital
management  segment had an equity interest,  completing initial public offerings
or being acquired by publicly traded companies in stock-for-stock acquisitions.

       The  change in net  unrealized  gains and  losses  in the  listed  equity
trading  portfolio during 2002 was a gain of $16.7 million,  which was more than
offset by net realized losses of $44.1 million,  of which $33.0 million resulted
from  disposals  of  certain  listed  equity  securities  to LPLA  (discontinued
operations),  based on their aggregate cost of $50.0 million. We also took $14.0
million  in   other-than-temporary   impairment   write-downs  on  four  private
investments, including $10.8 million relating to guarantees as discussed in Note
12 to the consolidated  financial  statements.  The trading portfolio  decreased
from $45.3  million as of December  31, 2001 to $7.7  million as of December 31,
2002.  Additions to the trading  portfolio of $1.3 million in 2002 resulted from
the purchase of listed equity  securities.  The realized  losses were  partially
offset by net realized  gains of $1.3 million on sales of $2.3 million of listed
equity  securities  and a  realized  gain of $1.6  million  resulting  from  the
disposal of certain listed equity securities to the life insurance and annuities
segment   (LPAL),   based  on  their   aggregate  cost  of  $3.4  million.   All
intersegmental  investment gains and losses, other than those arising from sales
to LPLA  (discontinued  operations),  have been  eliminated in our  consolidated
statements of income.

       We expect significant  fluctuations in net unrealized gains and losses in
the listed equity  trading  portfolio in future  periods,  reflecting  continued
equity market volatility, especially in the technology sector.

                                       24
<PAGE>

       The venture capital management  segment earned portfolio  management fees
from LPLA of $2.9 million in 2002,  compared to $9.9  million in 2001.  The $7.0
million  decrease in fees resulted  from the lower value of the assets  managed,
the lower  percentage  fees  recorded  for the second  quarter of 2002,  and the
discontinuation  of fees for the third and fourth  quarter of 2002. As explained
above, BICC no longer manages LPLA's investment portfolio.

       Total  financings  completed  by BICC  during  2002 were  $27.2  million,
compared to $67.0 million in 2001.  No financings  were made in new companies in
2002, but follow-on  investments were completed in selected portfolio companies,
where in some  cases,  larger  ownership  stakes  could  be  taken in  promising
companies at  attractive  prices.  This  decreased  level of activity in venture
capital  placements  reflected a general trend in the industry as a whole during
2002, as many venture  capitalists  curtailed  their  investments in view of the
difficulties  experienced by the market and the technology sector in particular.
Future activity is expected to be focused more on third party investors.

       Operating  expenses in 2002 were $3.6 million,  compared to $10.6 million
in 2001.  The $7.0 million  decrease was  attributable  primarily to lower staff
costs, reflecting the reduction in business and staffing during the year.

2001 compared to 2000

       The loss before income taxes from the venture capital  management segment
decreased from $110.4 million in 2000 to $51.3 million in 2001. The loss in both
years was  primarily  attributable  to the  change in net  unrealized  gains and
losses 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  change in net  unrealized  gains and  losses  in the  listed  equity
trading portfolio during 2001 was a loss of $93.5 million. The trading portfolio
decreased  from $105.2  million as of December  31, 2000 to $45.3  million as of
December 31, 2001. The decline in value reflected the general  downward trend in
the market for technology stocks during 2001. Additions to the trading portfolio
during 2001 of $52.0 million resulted from the purchase of certain listed equity
securities from the life insurance and annuities  segment.  Disposals of certain
listed equity securities to the life insurance and annuities segment resulted in
realized gains of $37.3 million based on their aggregate cost of $18.5 million.

       Included in the revenues of the venture  capital  management  segment for
2001 were  portfolio  management  fees  from the life  insurance  and  annuities
segment of $9.9  million,  compared to $7.5  million in 2000.  The $2.4  million
increase in fees reflected the larger  portfolio of private  investments held by
LPLA during  2001 which were  monitored  by BICC.  BICC  sourced  and  monitored
private  investments for LPLA, for which LPLA paid BICC management  fees.  Total
financings completed by BICC during 2001 were $67.0 million,  compared to $131.1
million  during 2000.  Financings  totaling  $51.1 million were made in four new
investee companies,  and follow-on investments totaling $15.9 million were added
in selected  portfolio  companies where, in some cases,  larger ownership stakes
could be taken in promising companies at attractive prices. This decreased level
of activity in venture  capital  placements  reflected  the general trend in the
industry as a whole during 2001, as venture  capitalists  adopted a wait and see
policy in view of the difficulties  experienced by the market and the technology
sector in particular.  Other non-recurring fees of $1.9 million were received in
2000.

       Operating expenses in 2001 were $10.6 million,  compared to $11.0 million
in 2000.  This $0.4 million  decrease was primarily  attributable to lower staff
costs and other general  expenses due to the decreased level of activity in this
business area.

Corporate and Other

2002 compared to 2001

       Corporate  expenses increased by $0.3 million to $5.9 million in 2002, as
compared to $5.6 million for 2001.  This  increase was  primarily  due to higher
bank facility costs,  corporate  insurance  premiums,  pension

                                       25
<PAGE>


costs, legal and professional  services fees and audit fees, partially offset by
decreases  in  staff  compensation,  directors  fees,  stock  exchange  fees and
registrar fees.

       Interest  income earned by us and our  subsidiaries  (excluding  the life
insurance  and annuities  segment)  decreased by $1.5 million to $0.5 million in
2002 as  compared  with 2001,  primarily  due to the  decrease  in cash and cash
equivalents  held by us. Interest  expense  incurred by us and our  subsidiaries
(excluding the life insurance and annuities  segment)  decreased by $1.3 million
to $1.0  million in 2002 as  compared  with 2001,  primarily  due to the partial
repayment  of bank  borrowings  and  the  lower  interest  rate  environment.  A
discussion  of our  sources  and uses of cash is  discussed  in  "Liquidity  and
Capital Resources" below.

2001 compared to 2000

       Corporate  expenses decreased by $1.7 million to $5.6 million in 2001, as
compared  to  $7.3  million  for  2000.  This  decrease  was  primarily  due  to
compensation expense of $2.2 million relating to the extension of employee share
options  recorded in 2000, which was not repeated in 2001. This was offset by an
increase of $0.5  million in  corporate  expense in 2001 related to the grant of
employee  share options at an exercise price below fair market value on the date
of the grant.

       Interest  income earned by us and our  subsidiaries  (excluding  the life
insurance  and annuities  segment)  increased by $0.4 million to $2.0 million in
2001 as  compared  with 2000,  primarily  due to the  increase  in cash and cash
equivalents  held by us. Interest  expense  incurred by us and our  subsidiaries
(excluding the life insurance and annuities  segment)  increased by $1.6 million
to $2.3  million in 2001 as  compared  with 2000,  primarily  due to higher bank
borrowings during 2001.

Consolidated Income (Loss) from Continuing Operations Before Income Taxes

2002 compared to 2001

       The  consolidated  loss from  continuing  operations  before income taxes
decreased  from $223.4  million in 2001 to $58.1 million in 2002.  This loss was
attributable  primarily  to the change in net  unrealized  investment  gains and
losses on the listed equity securities held in the trading portfolio, as well as
net realized investment losses.

       Consolidated  income before income taxes for 2003 and future years may be
volatile  due to our  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.  Other-than-temporary
impairments of our private equity securities  primarily in the technology sector
could also affect consolidated income before income taxes in future periods. 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.

       See discussion of events  relating to LPLA and LPAL in the "Liquidity and
Capital Resources" section below.

2001 compared to 2000

       Consolidated  income  from  continuing  operations  before  income  taxes
decreased from $66.2 million in 2000 to a loss of $223.4  million in 2001.  This
loss was attributable primarily to the change in net unrealized investment gains
and losses on the listed equity securities held in the trading portfolio.

Income Taxes

       We are  subject to taxation  on our income in all  countries  in which we
operate based upon the taxable income arising in each country. However, realized
gains on certain  investments are exempt from Jersey and Guernsey  taxation.  We
are subject to income tax in Jersey at a rate of 20%. In the United  States,  we
are subject to both federal and California taxes at 34% and 8.84%, respectively.

                                       26
<PAGE>

2002 compared to 2001

       Although  the loss from  continuing  operations  before  income taxes was
$58.1 million for 2002,  an income tax expense of $4.1 million  resulted for the
year. This was largely  attributable  to losses of $52.5 million  contributed by
the Jersey and Guernsey operations during the year, which primarily consisted of
realized and  unrealized  investment  losses for which no tax  benefits  will be
realized.  In addition,  deferred  tax asset  valuation  allowances  in the U.S.
subsidiaries of continuing  operations were increased by $7.6 million during the
year.  These  allowances  were  considered  necessary  due to the high  level of
operating loss carryovers in the two U.S. tax groups,  raising doubt about their
ability to utilize these carryovers.

2001 compared to 2000

       Although  the loss from  continuing  operations  before  income taxes was
$223.4 million for 2001, an income tax expense of $0.6 million  resulted for the
year. This was largely  attributable to losses of $224.1 million  contributed by
the Jersey and Guernsey operations during the year, which primarily consisted of
realized and  unrealized  investment  losses for which no tax  benefits  will be
realized.

       The effective  tax rate,  as a percentage  of the income from  continuing
operations  before income taxes of $66.2 million,  for 2000 was 0.3%.  This very
low  effective  tax rate was  primarily  attributable  to gains of $70.2 million
contributed  by the Jersey and  Guernsey  operations  during the  period,  which
primarily consisted of untaxed investment gains.

Discontinued Operations

       In the first six months of 2002, prior to the loss of management  control
over LPLA,  we  recorded an  after-tax  loss from  operations  of LPLA of $104.8
million, compared to an after-tax loss from operations of LPLA of $120.7 million
for all of 2001.  The loss in the first  half of 2002 was  primarily  due to net
realized investment losses and the change in net unrealized investment gains and
losses totaling $97.6 million. As discussed above, we recorded impairment losses
totaling  $27.9  million  related  to LPLA in the  third  quarter  of 2002,  and
recognized  $10.6  million in our  income  statement  for LPLA's net  unrealized
losses on available-for-sale securities, net of deferred policy acquisition cost
amortization  adjustments and deferred income taxes. For further information see
Note 4 to the consolidated financial statements in Part II, Item 8.

CRITICAL ACCOUNTING POLICIES

       Management  has  identified  those  accounting  policies  that  are  most
important to the portrayal of our financial  condition and results of operations
and that require management's most complex or subjective  judgments,  often as a
result of the need to make  estimates  about  the  effect  of  matters  that are
inherently  uncertain.  These most critical  accounting  policies pertain to our
investments,  and to the accounting for life insurance  policy  liabilities.  In
addition,   for  2002,  our  accounting   policies  relating  to  consolidation,
deconsolidation  and  the  reporting  of  discontinued  operations  became  very
important to the portrayal of our financial condition and results of operations.
These critical accounting policies are described below.

Determination of Fair Values of Investments

       When a quoted market price is available for a security, we use this price
in the  determination  of fair value.  If a quoted market price is not available
for a  security,  management  estimates  the  security's  fair  value  based  on
valuation methodologies as described below.

       We hold  investments  in  privately  held  equity  securities,  primarily
convertible  preferred  stock in venture  capital  companies  doing  business in
various segments of technology  industries.  Venture capital  investing  entails
making  investments in companies  that are  developing  products or services for
large  emerging  markets  with the  belief  that  these  investments  will yield
superior  returns if these  companies  are  successful.  These  investments  are
normally held for a number of years. When we make these investments, most of the
companies  are still  developing  the products they intend to bring to market or
are in the early stages of product

                                       27
<PAGE>

sales.  Venture capital  companies are net consumers of cash and often dependent
upon  additional  financing to execute their business plans.  These  investments
involve substantial risk and the companies generally lack meaningful  historical
financial results used in traditional  valuation models.  The process of pricing
these  securities  range  from  fierce  competitive  bidding  between  financial
institutions to existing  investors  negotiating prices with the company without
outside  investor  validation.  Investments in convertible  preferred stock come
with  rights  that vary  dramatically  both from  company to company and between
rounds  of  financing   within  the  same  company.   These   rights,   such  as
anti-dilution,  redemption,  liquidation  preferences  and  participation,  bear
directly on the price an investor is willing to pay for a security.  The returns
on these  investments are generally  realized through an initial public offering
of the company's shares or, more commonly,  through the company's acquisition by
a public company.

       One of the  factors  affecting  fair value is the amount of time before a
company  requires  additional  financing to support its  operations.  Management
believes that companies that are financed to the estimated  point of operational
profitability  or for a period  greater  than one year will most  likely  return
value to the investor through an acquisition between a willing buyer and seller,
as the company does not need to seek financing from an opportunistic investor or
insider in an adverse  investment  environment.  If a particular  company  needs
capital in the near term,  management  considers  a range of factors in its fair
value  analysis,  including  our  ability  to  recover  our  investment  through
surviving liquidation  preferences.  Management's  valuation  methodologies also
include  fundamental  analysis that evaluates the investee company's progress in
developing  products,  building  intellectual  property  portfolios and securing
customer  relationships,  as well as overall industry conditions,  conditions in
and prospects for the investee's  geographic  region,  and overall equity market
conditions.   This  is  combined  with   analysis  of   comparable   acquisition
transactions and values to determine if the security's  liquidation  preferences
will ensure full recovery of our investment in a likely acquisition  outcome. In
its valuation analysis, management also considers the most recent transaction in
a company's shares.

       The determination of fair values of investments  requires the application
of significant judgment. It is possible that the factors evaluated by management
and fair values will change in subsequent  periods,  especially  with respect to
our  privately  held equity  securities in  technology  companies,  resulting in
material impairment charges in future periods.

Other-than-Temporary Impairments

       Management performs an ongoing review of all investments in the portfolio
to   determine   if   there   are  any   declines   in  fair   value   that  are
other-than-temporary.

       As our listed equity  securities  are  classified as trading  securities,
impairment  adjustments  are not  required as any change in the market  value of
these securities between reporting periods is included in earnings.

       In  relation  to  our  equity  securities  that  do not  have  a  readily
determinable  fair  value  and are  classified  as  available-for-sale,  factors
considered in impairment  reviews include:  (i) the length of time and extent to
which  estimated  fair  values  have been  below  cost and the  reasons  for the
decline,  (ii)  the  investee's  recent  financial  performance  and  condition,
earnings trends and future  prospects,  (iii) the market condition of either the
investee's  geographic area or industry as a whole, and (iv) concerns  regarding
the investee's  ability to continue as a going concern (such as the inability to
obtain  additional  financing).  If the evidence supports that a decline in fair
value is  other-than-temporary,  then the investment is reduced to its estimated
fair value,  which becomes its new cost basis,  and a realized loss is reflected
in earnings.

       A fixed maturity  security is deemed to be impaired when it is determined
that it is probable that amounts due  (principal and interest) will not be fully
collected  according to the security's  contractual terms. This determination is
made by considering all available facts and circumstances,  including our intent
and ability to continue to hold the investment to maturity.  Factors  considered
include:  (i) the length of time and extent to which the market values have been
below  amortized cost and the reasons for the decline,  (ii) the issuer's recent
financial performance and condition, earnings trends and future prospects in the
near to mid-term,  (iii) changes in the issuer's  debt rating and/or  regulatory
actions or other events that may effect the issuer's operations, (iv) the market
condition of either the issuer's geographic area or industry as a whole, and (v)
factors  that raise  doubt  about the  issuer's  ability to  continue as a going
concern.   If  the   evidence   supports   that

                                       28
<PAGE>

a  decline  in fair  value  is  other-than-temporary,  then the  fixed  maturity
security  is  written  down to its  quoted  market  value,  if  such a value  is
available.  If a readily  determinable fair value does not exist, then the fixed
maturity  security is written down to  management's  estimate of its fair value,
which is based on the valuation methodologies  described above.  Write-downs are
recorded as realized losses and included in earnings.

       The  evaluations  for   other-than-temporary   impairments   require  the
application of significant  judgment. It is possible that the impairment factors
evaluated  by  management  and fair values will  change in  subsequent  periods,
especially  with  respect to  privately  held equity  securities  in  technology
companies, resulting in material impairment charges in future periods.

Life Insurance Policy Liabilities

       Life insurance  policy  liabilities  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."  Life insurance policy liabilities for
deferred annuities are accounted for as  investment-type  insurance products and
are recorded at accumulated value (premiums  received,  plus accrued interest to
the balance sheet date, less withdrawals and assessed fees).

Consolidation, Deconsolidation and Reporting of Discontinued Operations

       Our  consolidated  financial  statements  include  the  accounts  of  the
Company,  its subsidiaries  (with the exception of LPLA which was deconsolidated
during 2002 as discussed  below),  the Employee Share Option Trust and the Agent
Loyalty Opportunity Trust (collectively,  the "Group"). Significant subsidiaries
included in the  continuing  operations  of the Group and discussed in this Form
10-K  include:  London  Pacific  Assurance  Limited,  London  Pacific  Advisors,
Berkeley Capital Management and Berkeley International Capital Corporation.  All
intercompany  transactions and balances are eliminated in  consolidation  except
for intercompany  transactions  between  continuing and discontinued  operations
principally  related to investment  management fees from LPLA (the  discontinued
operations)  to the continuing  operations.  Our  consolidated  balance sheet is
presented in an unclassified format as the majority of the Group's assets relate
to its continuing life insurance and annuities business.

       In accordance  with  Statement of Financial  Accounting  Standard No. 144
("SFAS 144"),  "Accounting for the Impairment or Disposal of Long-Lived Assets,"
if a long-lived  asset or  "component of an entity" (a  reportable  segment,  an
operating segment, a reporting unit, a subsidiary or an asset group) is disposed
of by sale or by  abandonment,  then the results of operations of that component
of an  entity  shall  be  reported  in  discontinued  operations  if both of the
following conditions are met: (i) the operations and cash flows of the component
have been  eliminated  from the  ongoing  operations  of the entity and (ii) the
entity will not have any significant continuing involvement in the operations of
the component.

       As described above in Item 1 "Business"  under the section entitled "Life
Insurance  and  Annuities,"  during  the third  quarter of 2002,  our U.S.  life
insurance company,  LPLA, was placed under regulatory control and rehabilitation
by the North Carolina  insurance  regulators.  As we no longer exercise  control
over LPLA, we  deconsolidated  LPLA and recorded a charge to earnings in 2002 of
approximately  $38.5 million for losses  resulting from the disposition of LPLA.
We will not regain  control or receive any benefit  from LPLA in the future.  As
such,  in  accordance   with  SFAS  144,  the  results  of  operations  of  LPLA
(pre-rehabilitation)  have been reported in discontinued operations.  Under SFAS
144, the results of operations of a  discontinued  business,  and any impairment
losses related to a discontinued business, are reported separately in the income
statement under discontinued  operations for the current and prior periods,  and
in the prior period balance sheet as total assets of discontinued operations and
total liabilities of discontinued operations.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

       See Note 3 to the  Consolidated  Financial  Statements  for a summary  of
recently issued accounting pronouncements.

                                       29
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

       Our cash and cash  equivalents  decreased during 2002 by $45.0 million to
$16.3  million.  This  decrease  resulted  from a $139.8  million use of cash in
financing  activities,  partially  offset  by $8.9  million  and  $85.9  million
provided by operating and investing  activities,  respectively.  The majority of
cash used in financing  activities  related to policy surrender benefits paid by
the life insurance and annuities  segment together with the partial repayment of
the bank line. As of December 31, 2002, our cash and cash equivalents, excluding
the life insurance and annuities segment,  amounted to $12.4 million, a decrease
of $45.9  million  from  December  31, 2001 and a $40.9  million  decrease  from
December 31, 2000.  Excluding the life insurance and annuities segment,  we also
held $7.7 million of listed equity securities which could be sold within a short
period of time as of December 31, 2002, compared to $24.4 million as of December
31, 2001 and $102.7 million as of December 31, 2000.

       Shareholders'  equity decreased during 2002 by $200.2 million from $221.7
million at December 31, 2001 to $21.5  million at December  31, 2002,  primarily
due to a net loss for the  period of $205.5  million  and  payment  of the final
dividend for 2001 of $2.0 million. Shareholders' equity decreased during 2001 by
$346.0 million from $567.7 million in 2000,  primarily due to a net loss for the
period of $344.8 million. As of December 31, 2002 and 2001, $63.6 million of our
Ordinary  Shares,  at cost, held by the employee benefit trusts have been netted
against shareholders' equity.

       Until  the  latter  part of 2000,  we  financed  operations  and  capital
expenditures with internally  generated funds and existing liquid resources.  As
of December 31, 2000,  we had utilized  $14.1  million of our $50.0 million bank
facility in the form of letters of credit and  guarantees  provided on behalf of
certain former investee companies, and had drawn down $35.6 million in loans. As
of December 31, 2001, we had utilized  $12.7 million of the bank facility in the
form of letters of credit and  guarantees  provided on behalf of certain  former
investee companies, and had drawn down $36.9 million in loans.

       Our  consolidated  results  for the  quarters  ended  June  30,  2002 and
September   30,  2002   resulted  in  breaches  of  the  net  worth,   operating
profit/interest  charge and intangible asset ratio financial covenants under our
bank  facility  with Bank of  Scotland.  On December  20,  2002,  we and Bank of
Scotland agreed to the terms and conditions of an amended credit  facility.  The
new facility  provided up to $23.0 million of borrowings,  with an interest rate
of 3.5% above the LIBOR rate on  borrowings  up to $10.0  million and 4.5% above
the LIBOR rate on borrowings  between $10.0 million and $23.0 million.  (The one
month LIBOR rate on December 31, 2002 was 1.38%.) The facility  limit  decreases
at the end of each  quarter,  such that the  facility  must be repaid in full no
later than  December  31,  2003;  however,  the bank has agreed to  consider  an
extension  of the  final  facility  expiration  date  in  light  of the  overall
circumstances  prevailing  at the time of any such request by us. In addition to
providing  the bank with  security  interest  over certain of our listed  equity
securities  having an aggregate  market value of $4.5 million as of February 28,
2003, we gave the bank other  guarantees,  pledges and security  interests  over
certain other assets. We agreed to pay the bank a one-time  restructuring fee of
(pound)180,000,  monthly management fees of (pound)10,000 and quarterly facility
fees which begin at 0.5% per annum and increase  each  quarter  until they reach
2.5% per annum in the third quarter of 2003 based on the average  facility usage
during the  quarter.  We also  granted to the bank  warrants  to  subscribe  for
1,933,172   Ordinary  Shares.   The  warrants  have  a  subscription   price  of
(pound)0.1143  ($0.184 at (pound)1 = $1.61) and may be exercised  any time prior
to February 14, 2010. New financial  covenants have been set under this reducing
credit facility with testing to take place as of the end of each quarter.  As of
December 31, 2002, we met the financial covenants under the facility.

       During  December  2002,  we repaid  $3.0  million to Bank of  Scotland in
permanent  reduction of the facility to $20.0 million.  As of December 31, 2002,
$9.3 million was outstanding under the facility.  In addition,  $10.6 million of
the  remaining  $10.7  million  under the  facility  was utilized in the form of
guarantees  provided  on behalf of certain  former  investee  companies.  During
February 2003, we sold certain of our listed equity  securities for $4.7 million
and the proceeds were used to reduce borrowings to $4.6 million and the facility
to $15.2 million.

       We believe that it is unlikely that the former  investee  companies  will
have  the  ability  to repay  any of their  borrowings  totaling  $10.6  million
according to the bank's  quarterly  repayment  schedule during 2003, and thus we
believe  we will be  obligated  to pay  this  amount  on their  behalf.  We have
recorded the maximum guarantee

                                       30
<PAGE>

obligation  of $10.6  million at December 31, 2002 on our  consolidated  balance
sheet and have  taken  other-than-temporary  impairment  losses  on the  related
investments in our consolidated income statement for 2002.

       On March  10,  2003,  the  Group  announced  that it had  entered  into a
definitive agreement to sell substantially all of the business and operations of
BCM to a company  majority-owned  by funds under the management of Putnam Lovell
NBF  Private  Equity  ("Putnam  Lovell").  The  agreement  is subject to certain
conditions,  including receipt of sufficient consents from clients of BCM to the
assignment of their  investment  management  contracts to the  acquiror.  If the
transaction  closes,  the purchase  price will consist of: (1) $7.75  million in
cash to be  paid at  closing,  subject  to a 2  percent  adjustment  (upward  or
downward  to a maximum  adjustment  of  $775,000)  for  every 1  percent  change
(between 105 percent and 110 percent, or 90 percent and 95 percent, only) in the
annualized  revenues  from BCM clients who will become  clients of the  acquiror
(measured as an average of that  computation  for the 30 days prior to close) as
compared to the annualized  client revenues of BCM at the date of signing of the
definitive agreement;  (2) a further $1.0 million cash installment to be paid on
December 31, 2003,  less up to one quarter of management fees the acquiror would
have  received  from  subadvising  certain  products of LPA should LPA terminate
before December 31, 2003 a new subadvisory  agreement which LPA and the acquiror
will enter into at closing;  and (3) up to $1.25 million of earn-out payments to
be paid by the  buyer  ratably  over the four  quarters  of  2004,  if  revenues
received  in 2003 from a new  product  planned  for launch by BCM in 2003 exceed
certain defined targets. As part of the agreement,  BCM and its shareholder make
certain representations and warranties,  and related indemnities,  and these and
other  customary  obligations  are  guaranteed  by the Company.  The  definitive
agreement is binding on both  companies,  subject to  regulatory  approvals  and
other  conditions.  Should the  annualized  revenues  from BCM  clients who will
become  clients of the acquiror fall below 90% of a base  revenue,  the acquiror
will have the  opportunity  to either  terminate the  acquisition or renegotiate
terms. We expect the sale to close on or before May 15, 2003. As of December 31,
2002, BCM's assets under management were approximately  $1.2 billion,  including
approximately $0.2 billion of assets under a subadvisory agreement with LPA.

       We intend to use a  combination  of cash,  proceeds  from  listed  equity
security  sales and the net  proceeds  from the sale of BCM in order to meet the
paydown schedule under the bank facility described above.

       As of March 19, 2003, we had approximately $11.2 million in cash and cash
equivalents,  and  approximately  $4.9  million  in  listed  equity  securities,
excluding  cash and  securities  held by LPAL,  which are  discussed  separately
below. Our total liability to Bank of Scotland,  including guarantees, as of the
date of this filing,  is $15.2  million.  We are required to repay the bank $0.2
million by March 31, 2003. The approximate $7.6 million in net proceeds expected
at closing of the sale of BCM will be used to pay down the bank facility  during
the second  quarter of 2003.  This would meet all of our paydown  obligation  of
$5.0  million  for the  second  quarter  of 2003,  and $2.6  million of our $5.0
million  paydown  obligation for the third quarter of 2003, and would leave $7.4
million outstanding on our bank facility.  We believe that the remaining balance
of cash and the proceeds from the possible sale of our listed equity  securities
after the remaining bank  obligations are fully repaid,  as well as the expected
$1.0 million  installment from the sale of BCM due on December 31, 2003, will be
sufficient to fund operations over the next twelve months.

       In the  unlikely  event  that the  sale of BCM to  Putnam  Lovell  is not
completed,  in order to meet our  near-term  obligations,  we will  need to find
other  sources  of  liquidity.  We  believe  that  we  can  meet  our  near-term
obligations  through  the  sale of BCM to  another  party  or the  sale of other
assets.

       It is  possible  that  we may  not be  able  to  meet  one of the  bank's
financial covenants at the quarterly reporting dates of March 31, 2003, June 30,
2003 or September 30, 2003 due to a potential shortfall in operating income. The
financial  covenant  relates to our  cumulative  quarterly  loss targets for the
Group's  core  businesses.  If the bank were  unwilling to waive such a covenant
breach,  we may be in default under the bank facility and all of the outstanding
amounts under the bank facility would  immediately  become due. In the event the
bank  facility  becomes  repayable,  we believe the  balances of existing  cash,
proceeds from the sale of listed equity securities and the net proceeds from the
sale of BCM will be  sufficient  to repay the bank  facility  and to meet  other
obligations  for  the  next  twelve  months,   including   working  capital  for
operations.

                                       31
<PAGE>

       As disclosed in our  quarterly  report on Form 10-Q for the quarter ended
March 31,  2002,  which was filed with the SEC on May 17,  2002,  the  statutory
capital and surplus of our primary insurance company, LPLA, decreased to a level
which  resulted  in LPLA's  risk  based  capital  ("RBC")  ratio  falling to the
"company action level." We pursued various corrective measures designed to raise
LPLA's RBC position above the "company action level,"  including a sale of LPLA,
reinsurance  of all or a portion of LPLA's  existing  block of business,  and an
exchange by LPLA of its private equity and debt  portfolio for an  equity-linked
note. On July 2, 2002, we announced that further declines in the value of LPLA's
investment  portfolio due to persistent  negative  events in the bond and equity
markets continued to erode  significantly the statutory capital of LPLA and that
we had been  unsuccessful  in concluding a transaction to enhance the capital of
LPLA. As a consequence,  LPLA discontinued the issuance of new policies.  Though
the statutory capital of our Jersey, Channel Islands insurance subsidiary, LPAL,
had not been affected to the same extent as the statutory  capital of LPLA, LPAL
also  discontinued  writing  new  policies  effective  as of July 2,  2002.  The
decision to discontinue  writing new policies through LPAL was made to avoid the
increased capital requirement created by additional policyholder liabilities.

       As a result of LPLA informing the North Carolina  Department of Insurance
("NCDOI")  that further  deterioration  in LPLA's  capital and surplus caused by
declines in the fair values of its investments  would reduce LPLA's RBC ratio to
the  "authorized  control  level," the NCDOI  placed  LPLA under  administrative
supervision on July 3, 2002.

       As our  further  efforts  to  conclude a  transaction  to sell LPLA or to
enhance its capital were  unsuccessful,  and as the RBC ratio of LPLA as of June
30, 2002, as subsequently determined, fell below the "authorized control level,"
on August 6, 2002, on petition of the Commissioner  with the consent of LPLA and
unanimous approval of its board of directors,  the Superior Court of Wake County
in the State of North Carolina  ordered the  Commissioner to take possession and
control of all of the property, books and accounts,  documents and other records
of LPLA.  LPLA and its  officers,  directors,  agents,  employees  and all other
persons were enjoined  from  disposing of LPLA's  property and from  transacting
LPLA's business except with the consent of the Commissioner. The Court appointed
the  Commissioner  as  Rehabilitator  of LPLA.  Based on this court order, we no
longer exercise control over LPLA.

       Due to the loss of  control  of LPLA,  a loss for the  impairment  of our
investment  in  LPLA  in  the  amount  of  $27.9  million  was  recorded  in our
consolidated  financial statements during the third quarter of 2002. This amount
consists  of the $12.3  million  in  LPLA's  net  equity as of June 30,  2002 as
determined  under U.S. GAAP and $15.6 million in receivables from LPLA which may
be uncollectible.  In addition, LPLA's net unrealized losses of $10.6 million as
of June  30,  2002 on  available-for-sale  securities,  net of  deferred  policy
acquisition  cost  amortization  adjustments  and deferred  income  taxes,  were
recognized in our consolidated income statement in the third quarter of 2002.

       During 2002 and 2001, LPLA paid  investment  management fees to our asset
management and venture  capital  management  segments  totaling $3.7 million and
$11.9 million,  respectively.  The investment  management agreement between LPLA
and our other  subsidiaries and related fees had been approved by the NCDOI. Due
to the loss of control of LPLA, we no longer  manage LPLA's  portfolio of public
corporate  bonds and private equity and debt  investments  and no longer receive
investment management fees for these services.

       We are not aware of any  obligations of the Group to cover any current or
future losses of LPLA.  However,  in the course of the administration of LPLA in
rehabilitation, during November 2002, the NCDOI requested information concerning
the  history of a limited  number of  investments  in  securities  of  portfolio
companies.  These portfolio  investments have been associated with LPLA for more
than seven  years,  and  involve  intercompany  transfers.  The history of their
investment  performance  and  ownership is complex.  We have complied with these
requests.  We are not able at this time to predict  what  conclusions  the NCDOI
will reach after evaluating this information.

       As discussed above, on July 2, 2002, we announced that LPAL  discontinued
issuing new policies.  Subsequent to this  announcement and other  announcements
relating to the Group and LPLA, LPAL policy

                                       32
<PAGE>

surrenders substantially  increased.  Approximately 75% of LPAL's $140.2 million
policyholder  liabilities  as of June 30, 2002 had been  redeemed as of December
31, 2002. Policy surrenders  significantly decreased by the end of 2002; for the
month of  December  2002,  surrenders  totaled  $0.5  million.  We do not expect
significant surrender activity during 2003; however, approximately $10.6 million
of  policyholder   liabilities  are  scheduled  to  mature  during  2003.  These
maturities are expected to be met by a combination of cash held at the beginning
of 2003 of $3.8 million and the proceeds from maturing bonds which are estimated
to be $13.0 million  during 2003.  Assuming the  reinvestment  of excess cash in
bonds,  investment  income  should  approximately  equal the amount  credited to
policies during 2003.

       Due to the weakened  economic  environment,  in February 2003, the Jersey
Financial Services  Commission amended LPAL's insurance permit such that private
equity  investments  are no longer approved assets and it has requested a letter
of comfort from us that we will meet any capital  shortfall should LPAL's listed
equities become  impaired.  Declines in the market value of LPAL's listed equity
securities,  which  totaled $8.9  million as of December 31, 2002,  could have a
significant  impact on  LPAL's  statutory  capital  level.  If LPAL's  statutory
capital falls below the minimum  solvency level required by the Jersey insurance
regulators, we may be required to inject additional capital into LPAL. A capital
injection would be limited to the extent any shortfall  arises from a decline in
the value of LPAL's  listed  equity  securities  that are  required  to  support
minimum  solvency.  As of December 31, 2002,  approximately  $6.7 million of the
listed  equity   holdings   were  required  to  support  the  minimum   solvency
requirement.  Due to the sale of  approximately  $2.0 million of listed equities
since  December 31, 2002,  $3.0 million of the listed  equities were required to
support the minimum solvency level as of February 28, 2003.

       Given the liquidity  issues  facing us as discussed  above and in view of
the agreement with Bank of Scotland  regarding their approval of dividends,  our
Board of Directors  suspended the 2002 interim  dividend to shareholders and ADR
holders and is not recommending a final dividend for the year 2002.

       As of December 31, 2002, we had no material  commitments  outstanding for
capital   expenditures  or  additional  funding  for  private  equity  portfolio
companies.

                                       33
<PAGE>

CONTRACTUAL OBLIGATIONS AND CONTINGENT LIABILITIES AND COMMITMENTS

       The following table aggregates our expected  contractual  obligations and
commitments subsequent to December 31, 2002.
<TABLE>
<CAPTION>

                                                                         2004 -        2006 -       Beyond
Contractual obligations(1)                                    2003         2005          2007        2007        Total
-------------------------------------                      ----------   ----------   ----------   ----------   ----------
                                                                            (In thousands)

<S>                                                          <C>         <C>          <C>          <C>          <C>
Bank debt............................................       $   9,314    $       -    $       -    $       -    $   9,314
Guarantees under bank facility.......................          10,590            -            -            -       10,590
Capital lease commitments (2)........................             166           94            2            -          262
Operating lease commitments..........................             455          973          878          526        2,832
                                                           ----------   ----------   ----------   ----------   ----------
Total contractual cash obligations...........               $  20,525    $   1,067     $    880    $     526    $  22,998
                                                           ----------   ----------   ----------   ----------   ----------
                                                           ----------   ----------   ----------   ----------   ----------
<FN>
(1)    Does not include other commitments for the purchase of goods and services
       which in the aggregate are immaterial.
(2)    Includes amounts classified as interest.
</FN>
</TABLE>


Item 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

       The nature of our  businesses  exposes us to market risk.  Market risk is
the risk of loss that may occur when changes in interest rates and public equity
prices adversely affect the value of invested assets.

Interest Rate Risk

       LPAL is subject to risk from interest rate fluctuations when payments due
to  policyholders  are not matched in respect of amount and duration with income
from investments.  LPAL attempts to minimize this risk by ensuring that payments
and income are matched as closely as possible while also  maximizing  investment
returns.  LPAL  has not used  derivative  financial  instruments  as part of its
investment  strategy.  Exposure to interest rate risk is estimated by performing
sensitivity tests to changes in interest rates.

       For LPAL's business, the amount of policyholder liabilities is unaffected
by  changes in  interest  rates.  Given the  existing  policy and bond  maturity
profiles,  and that bonds will be held to maturity and early policy  redemptions
are protected by a market value adjustment and surrender penalty,  the bonds and
policies carry no interest rate risk.  Excess cash from bond  maturities,  after
meeting redemptions and operating  expenses,  is expected to yield approximately
$0.2 million during 2003. For each 100 basis point move in market interest rates
this amount will vary by approximately $67,000 per annum.

       As of December 31, 2002,  $9.3 million was  outstanding  under our credit
facility  with Bank of Scotland.  In addition,  $10.6  million of the  remaining
$10.7  million  under the facility was  utilized in the form of  guarantees  and
letters of credit  provided  on behalf of  certain  former  investee  companies.
During February 2003, we sold certain listed equity  securities for $4.7 million
and the  proceeds  were used to reduce our  borrowings  to $4.6  million and the
facility to $15.2 million. Under the terms of the loan facility, the total usage
must be  reduced  to $15.0  million by March 31,  2003 and by $5.0  million  per
quarter thereafter. For every 100 basis point movement in market interest rates,
interest  expense on our borrowings will increase by  approximately  $13,000 per
annum and exposure to liabilities  relating to the  guarantees  will increase by
$151,000 per annum.

Equity Price Risk

       We are exposed to equity price risk on the listed equity  securities held
entirely in our trading portfolio.  Changes in the level or volatility of equity
prices affect the value of the listed equity  securities.  These changes

                                       34
<PAGE>

in turn  directly  affect our  consolidated  net income  because our 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 fair value of our listed equity portfolio, as of December 31, 2002
and 2001,  which  totaled  $16.5 million and $67.6  million,  respectively,  had
abruptly  increased or  decreased  by 50%,  the fair value of the listed  equity
portfolio  would have  increased or decreased by $8.3 million and $33.8 million,
respectively.

       Our listed equity  securities  largely  represent  investments  that were
originally  made as private equity  investments  in companies that  subsequently
completed  an initial  public  offering or were  acquired  by a larger  publicly
traded company.  The performance of these listed equity securities can be highly
volatile, but we attempt to manage this risk in various ways. The performance of
the listed equity  securities are monitored daily. In addition,  we seek to sell
investments  after a period of time,  particularly  in the case of large  public
company securities.

       As of December 31, 2002, we held $7.2 million in private corporate equity
securities  primarily in technology  companies  for which liquid  markets do not
exist.  Private  equity  prices do not  fluctuate  directly  with public  equity
markets,   but   significant   market   movements   may  trigger  a  review  for
other-than-temporary  adjustment  of the carrying  values of our private  equity
securities.  The risks  inherent  in these  private  equity  investments  relate
primarily to the viability of the investee companies. These risks are managed in
various ways.  Extensive due diligence  procedures are performed prior to making
an investment, and regular reviews of the progress of the investee companies are
carried out.

       For additional  information  relating to our financial risk profile,  see
Note 16 to the Consolidated Financial Statements in Item 8 "Financial Statements
and Supplementary Data" of this Form 10-K.

                                       35
<PAGE>

Item 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            Page

<S>                                                                           <C>
Reports of Independent Certified Public Accountants.........................  37

Consolidated Balance Sheets as of December 31, 2002 and 2001................  39

Consolidated Statements of Income for the Years Ended
December 31, 2002, 2001 and 2000............................................  40

Consolidated Statements of Cash Flows for the Years Ended
December 31, 2002, 2001 and 2000............................................  42

Consolidated Statements of Changes in Shareholders' Equity for the
Years Ended December 31, 2002, 2001 and 2000................................  44

Consolidated Statements of Comprehensive Income for the Years Ended
December 31, 2002, 2001 and 2000............................................  46

Notes to Consolidated Financial Statements..................................  47


</TABLE>

                                       36
<PAGE>


               REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors and Shareholders of
London Pacific Group Limited
Jersey, Channel Islands

       We have audited the  accompanying  consolidated  balance  sheet of London
Pacific  Group  Limited (the  "Company") as of December 31, 2002 and the related
consolidated  statements  of  income,  shareholders'  equity,  cash  flows,  and
comprehensive income for the year then ended. We have also audited the schedules
on pages 91 to 96 in Item 15 (the "Schedules").  These financial  statements and
the  Schedules  are  the  responsibility  of  the  Company's   management.   Our
responsibility  is to express an opinion on these  financial  statements and the
Schedules based on our audit.

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

       In our opinion,  the consolidated  financial statements and the Schedules
referred to above  present  fairly,  in all  material  respects,  the  financial
position of London Pacific Group Limited at December 31, 2002 and the results of
its  operations  and its cash flows for the year then ended in  conformity  with
accounting principles generally accepted in the United States of America.

       As discussed in Notes 3 and 8 to the consolidated  financial  statements,
the Company changed its method of accounting for goodwill in 2002, in accordance
with  Statement of Financial  Accounting  Standard No. 142,  "Goodwill and Other
Intangible Assets."



/s/  BDO Seidman, LLP
San Francisco, California
February 28, 2003, except for Note 2 which is as of March 10, 2003

                                       37
<PAGE>


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,
2001,  and the results of their  operations and their cash flows for each of the
two years in the period ended  December 31, 2001 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 15 on page 88, 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.



/s/  PricewaterhouseCoopers
Chartered Accountants
Jersey, Channel Islands
April 1, 2002, except for Note 4 as for which the date is March 19, 2003

                                       38
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                      (In thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                                             December 31,
                                                                                   --------------------------------
                                                                                        2002             2001(1)
                                                                                   --------------    --------------
                                            ASSETS

<S>                                                                                  <C>               <C>
Investments (principally of life insurance subsidiary):
   Fixed maturities:
     Available-for-sale, at fair value (amortized cost: $30,481 and $116,853
       as of December 31, 2002 and 2001, respectively)............................   $     30,335      $    117,701
     Held-to-maturity, at amortized cost (fair value: $0 and $871
       as of December 31, 2002 and 2001, respectively)............................              -               871
   Equity securities:
     Trading, at fair value (cost: $26,785 and $64,175 as of December 31,
       2002 and 2001, respectively) ..............................................         16,505            67,617
     Available-for-sale, at fair value (cost: $8,983 and $17,297 as of
       December 31, 2002 and 2001, respectively) .................................          7,233            15,303
                                                                                   --------------    --------------
Total investments ................................................................         54,073           201,492

Cash and cash equivalents ........................................................         16,272            61,317
Accrued investment income ........................................................            900             3,214
Deferred policy acquisition costs ................................................              -             3,113
Property and equipment, net ......................................................          3,301             4,168
Goodwill..........................................................................          2,568             2,964
Other assets .....................................................................          3,099             8,350
Total assets of discontinued operations ..........................................              -         2,254,508
                                                                                   --------------    --------------
Total assets .....................................................................   $     80,213        $2,539,126
                                                                                   --------------    --------------
                                                                                   --------------    --------------
                        LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Life insurance policy liabilities ................................................        $35,441          $131,831
Notes payable ....................................................................          9,314            36,874
Accounts payable and accruals ....................................................          3,382            12,786
Guarantees under bank facility ...................................................         10,590                 -
Total liabilities of discontinued operations .....................................              -         2,135,982
                                                                                   --------------    --------------
Total liabilities ................................................................         58,727         2,317,473
                                                                                   --------------    --------------
Commitments and contingencies (See Notes 12 and 15)

Shareholders' equity:
Ordinary shares, $0.05 par value per share: 86,400,000 shares authorized;
   64,439,073 shares issued and outstanding as of December 31, 2002
   and 2001.......................................................................          3,222             3,222
Additional paid-in capital .......................................................         68,394            68,346
Retained earnings ................................................................         16,054           223,590
Employee benefit trusts, at cost (13,684,881 and 13,698,181 shares as of
   December 31, 2002 and 2001, respectively) .....................................        (63,571)          (63,599)
Accumulated other comprehensive loss .............................................         (2,613)           (9,906)
                                                                                   --------------    --------------
Total shareholders' equity .......................................................         21,486           221,653
                                                                                   --------------    --------------
Total liabilities and shareholders' equity .......................................   $     80,213        $2,539,126
                                                                                   --------------    --------------
                                                                                   --------------    --------------
<FN>
(1)  Reclassifications  have been made related to discontinued  operations - see
Note 4.
</FN>
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.
                                       39
<PAGE>


                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
                (In thousands, except per share and ADS amounts)
<TABLE>
<CAPTION>
                                                                                         Years Ended December 31,
                                                                                   ------------------------------------
Continuing operations:                                                                2002        2001(1)      2000(1)
                                                                                   ----------   ----------   ----------
<S>                                                                                <C>          <C>          <C>
Revenues:
Investment income............................................................      $    6,647   $    8,264   $    3,813
Insurance policy charges (credits)...........................................           1,155           (7)           -
Financial advisory services, asset management and other fee income(2)  ......          24,309       35,269       40,140
Net realized investment gains (losses).......................................         (21,507)      18,507      153,681
Change in net unrealized investment gains and losses on trading
   securities ...............................................................         (22,483)    (230,981)     (79,091)
                                                                                   ----------   ----------   ----------
                                                                                      (11,879)    (168,948)     118,543
Expenses:
Interest credited on insurance policyholder accounts.........................           6,031        6,314        1,201
Amortization of deferred policy acquisition costs............................           2,952          932          115
Operating expenses...........................................................          35,841       44,676       50,056
Goodwill amortization and write-offs.........................................             396          221          248
Interest expense.............................................................           1,033        2,306          727
                                                                                   ----------   ----------   ----------
                                                                                       46,253       54,449       52,347
                                                                                   ----------   ----------   ----------
Income (loss) from continuing operations before income taxes.................         (58,132)    (223,397)      66,196

Income tax expense ..........................................................           4,078          648          201
                                                                                   ----------   ----------   ----------
Income (loss) from continuing operations.....................................         (62,210)    (224,045)      65,995

Discontinued operations:
Loss from discontinued operations, net of income
   tax benefit of $7,730, $57,091 and $17,648, respectively..................        (104,762)    (120,739)     (33,538)
Loss on disposal of discontinued operations, net of income
   tax benefit of $0.........................................................         (38,532)           -            -
                                                                                   ----------   ----------   ----------
Loss on discontinued operations..............................................        (143,294)    (120,739)     (33,538)
                                                                                   ----------   ----------   ----------
Net income (loss)............................................................      $ (205,504)  $ (344,784)  $   32,457
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
<FN>
(1)    Reclassifications have been made related to discontinued operations - see
       Note 4.

(2)    Includes amounts of $3,632,  $11,831 and $10,240 for revenues earned from
       entities included in discontinued operations for the years ended December
       31, 2002, 2001 and 2000.
</FN>
</TABLE>
          See accompanying Notes to Consolidated Financial Statements.
                                       40
<PAGE>




                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF INCOME (continued)
                (In thousands, except per share and ADS amounts)
<TABLE>
<CAPTION>
                                                                                         Years Ended December 31,
                                                                                   ------------------------------------
                                                                                      2002        2001(1)     2000(1)
                                                                                   ----------   ----------   ----------

<S>                                                                                <C>          <C>          <C>
Basic earnings (loss) per share and ADS(2):
Basic earnings (loss) per share:
Continuing operations........................................................      $    (1.23)  $    (4.39)  $     1.30
Discontinued operations......................................................           (2.82)       (2.37)       (0.66)
                                                                                   ----------   ----------   ----------
                                                                                   $    (4.05)  $    (6.76)  $     0.64
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
Basic earnings (loss) per ADS(2):
Continuing operations........................................................      $   (12.26)  $   (43.94)  $    12.99
Discontinued operations......................................................          (28.23)      (23.68)       (6.60)
                                                                                   ----------   ----------   ----------
                                                                                   $   (40.49)  $   (67.62)  $     6.39
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------

Diluted earnings (loss) per share and ADS(2):
Diluted earnings (loss) per share:
Continuing operations........................................................      $    (1.23)  $    (4.39)  $     1.09
Discontinued operations......................................................           (2.82)       (2.37)       (0.55)
                                                                                   ----------   ----------   ----------
                                                                                   $    (4.05)  $    (6.76)  $     0.54
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
Diluted earnings (loss) per ADS(2):
Continuing operations........................................................      $   (12.26)  $   (43.94)  $    10.87
Discontinued operations......................................................          (28.23)      (23.68)       (5.52)
                                                                                   ----------   ----------   ----------
                                                                                   $   (40.49)  $   (67.62)  $     5.35
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------

<FN>
(1)    Reclassifications have been made related to discontinued operations - see
       Note 4.

(2)    ADS amounts have been restated to reflect the  one-for-ten  reverse split
       in June 2002.
</FN>
</TABLE>
          See accompanying Notes to Consolidated Financial Statements.
                                       41
<PAGE>
                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                         Years Ended December 31,
                                                                                   ------------------------------------
                                                                                      2002        2001(1)     2000(1)
                                                                                   ----------   ----------   ----------

<S>                                                                                <C>          <C>          <C>
Cash flows from continuing operating activities:
Net income (loss)............................................................      $  (62,210)  $ (224,045)  $   65,995

Adjustments to reconcile net income (loss) to net
   cash provided by (used in) operating activities:
Loss on disposal of tangible assets..........................................             245            -            -
Depreciation and amortization ...............................................           1,734        1,332          808
Amortization of deferred policy acquisition costs ...........................           2,952          932          115
Deferred income tax expense (benefit) .......................................           5,537       (1,066)         124
Interest credited on insurance policyholder accounts.........................           6,031        6,314        1,200
Net realized investment losses (gains).......................................          21,507      (18,507)    (153,681)
Change in net unrealized investment gains and losses
   on trading securities.....................................................          22,483      230,981       79,091
Net amortization of investment premiums and discounts........................             289          311           81
Stock based employee compensation expense....................................               -          530        2,943

Net changes in operating assets and liabilities:
   Trading equity securities.................................................          32,623      (92,558)     119,509
   Accrued investment income ................................................           2,314       (1,284)      (1,738)
   Deferred policy acquisition costs ........................................            (250)      (2,142)      (1,505)
   Other assets .............................................................             848        3,209        3,581
   Life insurance policy liabilities.........................................               4          175          389
   Accounts payable, accruals and other liabilities .........................          (3,689)      (7,929)     (16,837)
   Income taxes payable .....................................................          (2,846)         145         (718)

Other operating cash flows ..................................................            (471)       1,349        1,149
                                                                                   ----------   ----------   ----------
Net cash provided by (used in) continuing operations ........................          27,101     (102,253)     100,506
                                                                                   ----------   ----------   ----------
Write-off of doubtful receivables from discontinued operations...............         (15,614)           -            -
Capital paid in to discontinued operations...................................               -      (48,377)      (4,335)
Amounts due from discontinued operations.....................................          (2,798)      22,011      (20,322)
                                                                                   ----------   ----------   ----------
Net cash used in discontinued operations ....................................         (18,412)     (26,366)     (24,657)
                                                                                   ----------   ----------   ----------
Net cash provided by (used in) operating activities .........................           8,689     (128,619)      75,849
                                                                                   ----------   ----------   ----------
Cash flows from investing activities:
Purchases of held-to-maturity fixed maturity securities .....................          (2,828)      (1,959)      (1,913)
Purchases of available-for-sale fixed maturity securities ...................          (7,447)     (80,190)     (48,509)
Purchases of available-for-sale equity securities............................               -      (16,000)    (106,055)
Proceeds from redemption of held-to-maturity fixed maturity securities.......               -        1,733        6,317
Proceeds from sale of available-for-sale fixed maturity securities ..........          96,884        3,664          962
Proceeds from sale of available-for-sale equity securities ..................               -      149,358       56,635
Capital expenditures.........................................................            (712)      (1,033)      (3,392)
Other cash flows from investing activities ..................................               -            -        3,110
                                                                                   ----------   ----------   ----------
Net cash provided by (used in) investing activities .........................          85,897       55,573      (92,845)
                                                                                   ----------   ----------   ----------
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.
                                       42
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                         Years Ended December 31,
                                                                                   ------------------------------------
                                                                                      2002        2001(1)     2000(1)
                                                                                   ----------   ----------   ----------

<S>                                                                                <C>          <C>          <C>
Cash flows from financing activities:
Insurance policyholder contract deposits ....................................           6,827       74,368       52,838
Insurance policyholder benefits paid ........................................        (117,063)      (2,999)        (336)
Issuance of Ordinary Shares .................................................               -            3            -
Purchases of Ordinary Shares by the employee benefit trusts..................               -       (6,005)     (12,712)
Proceeds from disposal of shares by the employee benefit trusts..............              43          440        8,407
Dividends paid ..............................................................          (2,032)     (11,802)     (11,625)
Proceeds from issuance of notes payable......................................           2,440            -       35,000
Repayments of notes payable..................................................         (30,000)           -         (593)
                                                                                   ----------   ----------   ----------
Net cash provided by (used in) financing activities .........................        (139,785)      54,005       70,979
                                                                                   ----------   ----------   ----------

Net increase (decrease) in cash and cash equivalents ........................         (45,199)     (19,041)      53,983
Cash and cash equivalents at beginning of year (1) ..........................          61,317       80,395       26,795
Foreign currency translation adjustment .....................................             154          (37)        (383)
                                                                                   ----------   ----------   ----------
Cash and cash equivalents at end of year (1).................................      $   16,272   $   61,317   $   80,395
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------


Supplemental disclosure of cash flow information(1):

Cash paid (received) during the year for:
Interest ....................................................................      $    1,024   $      930   $       50
Income taxes (net of amounts recovered) .....................................      $    1,409   $    1,584   $    1,189

Supplemental disclosure of non-cash investing activities:
Exchange of available-for-sale equity securities for trading equity
   securities................................................................      $       22   $      117   $   56,523
Stock based employee compensation expense....................................      $        -   $      530   $    2,943

<FN>
(1)  Amounts reflect continuing operations only.
</FN>
</TABLE>
          See accompanying Notes to Consolidated Financial Statements.
                                       43
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                (In thousands, except per share and ADS amounts)
<TABLE>
<CAPTION>
                                                                                           Accumulated
                                                                                               Other
                                    Ordinary Shares   Additional                Employee      Compre-       Total
                               ---------------------    Paid-in    Retained      Benefit      hensive   Shareholders'
                                 Number     Amount     Capital     Earnings      Trusts        Loss        Equity
                               ---------- ---------- ----------- -----------   ---------   ----------- -------------
<S>                                <C>     <C>        <C>          <C>         <C>           <C>          <C>
Balance as of January 1, 2000      64,433  $   3,222  $   62,307   $ 559,344   $ (54,033)    $ (18,365)   $ 552,475

Net income......................        -          -           -      32,457           -             -       32,457
Change in net unrealized
   gains and 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 $2.32
   per ADS)(1)..................       -           -           -    (11,625)           -             -      (11,625)
Purchase of shares by the
   employee benefit trusts......        -          -           -           -     (12,712)            -      (12,712)
                               ---------- ---------- ----------- -----------   ---------   ----------- ------------
Balance as of
   December 31, 2000............   64,433  $   3,222   $  67,591   $ 580,176   $ (58,003)    $ (25,244)   $ 567,742
                               ---------- ---------- ----------- -----------   ---------   ----------- ------------
                               ---------- ---------- ----------- -----------   ---------   ----------- ------------

Net loss........................        -  $       -   $       -   $(344,784)  $       -     $       -    $(344,784)
Change in net unrealized
   gains and losses on
   available-for-sale securities        -          -           -           -           -        15,453       15,453
Foreign currency translation
   adjustment...................        -          -           -           -           -          (115)        (115)
Exercise of employee share
   options, including income
   tax effect...................        6          -         191           -         409             -          600
Grant of employee share
   options below fair market
   value........................        -          -         530           -           -             -          530
Net realized gains on disposal
   of shares held by the
   employee benefit trusts......        -          -          31           -           -             -           31
Cash dividends (23.2 cents
   net per share and $2.32
   per ADS)(1)..................        -          -           -     (11,802)          -             -      (11,802)
Issuance of Ordinary Shares.....        -          -           3           -           -             -            3
Purchase of shares by the
   employee benefit trusts......        -          -           -           -      (6,005)            -       (6,005)
                               ---------- ---------- ----------- -----------   ---------   ----------- ------------
Balance as of
   December 31, 2001............   64,439  $   3,222   $  68,346   $ 223,590   $ (63,599)   $   (9,906)   $ 221,653
                               ---------- ---------- ----------- -----------   ---------   ----------- ------------
                               ---------- ---------- ----------- -----------   ---------   ----------- ------------
<FN>
(1) ADS amounts have been restated to reflect the  one-for-ten  reverse split in
June 2002.
</FN>
</TABLE>
          See accompanying Notes to Consolidated Financial Statements.
                                       44
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

     CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Continued)
                (In thousands, except per share and ADS amounts)
<TABLE>
<CAPTION>
                                                                                           Accumulated
                                                                                               Other
                                    Ordinary Shares   Additional                Employee      Compre-       Total
                               ---------------------    Paid-in    Retained      Benefit      hensive   Shareholders'
                                 Number     Amount     Capital     Earnings      Trusts        Loss        Equity
                               ---------- ---------- ----------- -----------   ---------   ----------- -------------
<S>                                <C>     <C>        <C>          <C>         <C>           <C>          <C>
Balance as of January 1, 2002...   64,439 $    3,222  $   68,346   $ 223,590   $ (63,599)    $  (9,906)   $ 221,653

Net loss........................        -          -           -    (205,504)          -             -     (205,504)
Change in net unrealized
   gains and losses on
   available-for-sale securities        -          -           -           -           -         7,853        7,853
Foreign currency translation
   adjustment...................        -          -           -           -           -          (560)        (560)
Exercise of employee share
   options, including income
   tax effect...................        -          -           3           -          28             -           31
Warrants issued to bank ........        -          -          30           -           -             -           30
Net realized gains on disposal..
   of shares held by the
   employee benefit trusts......        -          -          15           -           -             -           15
Cash dividends ($0.04 net
   per share and $0.40 per
   ADS ) (1)....................        -          -           -      (2,032)          -             -       (2,032)
                               ------------------------------------------------------------------------------------
Balance as of
   December 31, 2002............   64,439 $    3,222  $   68,394  $   16,054    $(63,571)    $  (2,613)  $   21,486
                               ------------------------------------------------------------------------------------
                               ------------------------------------------------------------------------------------

<FN>
(1) ADS amounts have been restated to reflect the  one-for-ten  reverse split in
June 2002.
</FN>
</TABLE>
          See accompanying Notes to Consolidated Financial Statements.
                                       45
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                 (In thousands)

 <TABLE>
<CAPTION>
                                                                                         Years Ended December 31,
                                                                                   ------------------------------------
                                                                                      2002        2001(1)     2000(1)
                                                                                   ----------   ----------   ----------

<S>                                                                                <C>          <C>          <C>
Net income (loss)............................................................      $ (205,504)  $ (344,784)  $   32,457

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

Foreign currency translation adjustments, net of income
   taxes of $0...............................................................            (560)        (115)         (42)

Change in net unrealized gains and losses related to
   continuing operations:
   Unrealized holding gains and losses on available-for-sale securities......          (1,116)      (1,623)        (149)
   Less: reclassification adjustment for gains and losses included
     in net income (loss)....................................................             366          836            -
   Deferred policy acquisition cost amortization adjustments.................            (551)         405          147

Change in net unrealized gains and losses related to
   discontinued operations:
   Change in net unrealized gains and losses on
     available-for-sale securities...........................................           5,744       35,583      (16,110)
   Deferred policy acquisition cost amortization adjustments.................          (8,044)     (13,398)       5,593
   Deferred income taxes.....................................................             805       (6,350)       3,682
   Reclassification adjustment for losses of discontinued
     operations included in net income (loss)................................          10,649            -            -
                                                                                   ----------   ----------   ----------
Other comprehensive income (loss) ...........................................           7,293       15,338       (6,879)
                                                                                   ----------   ----------   ----------
Comprehensive income (loss) .................................................      $ (198,211)  $ (329,446)  $   25,578
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
</TABLE>
          See accompanying Notes to Consolidated Financial Statements.
                                       46
<PAGE>



                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.   Material Events

       During the third quarter of 2002,  London Pacific Life & Annuity  Company
("LPLA"),  the primary  insurance  company of London  Pacific Group Limited (the
"Company"),  was placed under  regulatory  control and  rehabilitation  based on
LPLA's statutory  capital and surplus as of June 30, 2002. On August 6, 2002, on
petition of the  Commissioner  of Insurance of the State of North  Carolina (the
"Commissioner")  with the unanimous  approval of LPLA's board of directors,  the
Superior  Court  of Wake  County  in the  State of North  Carolina  ordered  the
Commissioner  to take  possession and control of all of the property,  books and
accounts,  documents and other records of LPLA.  Based on this court order,  the
Company no longer  exercises  control over LPLA. As a result of this event,  the
Company has  deconsolidated  LPLA and recorded a charge to earnings in the third
quarter of 2002 of $38.5 million for losses  resulting  from the  disposition of
LPLA.

       For further information, see Note 4 "Discontinued Operations" below.

       On July 2, 2002, the Company announced that further declines in the value
of LPLA's investment  portfolio due to persistent  negative events in the equity
and bond markets continued to erode  significantly the statutory capital of LPLA
and that the  Company had been  unsuccessful  in  concluding  a  transaction  to
enhance the capital of LPLA. As a consequence, LPLA discontinued the issuance of
new policies as of July 2, 2002. Although the statutory capital of the Company's
Jersey insurance subsidiary,  London Pacific Assurance Limited ("LPAL"), had not
been  affected by the adverse  equity and bond markets to the same extent as the
statutory  capital of LPLA, the Company also announced on July 2, 2002 that LPAL
would discontinue  writing new policies effective  immediately.  The decision to
discontinue  the  issuance of new  policies  through  LPAL was made to avoid the
increased capital requirements created by additional  policyholder  liabilities.
Subsequent to this announcement and other announcements  relating to the Company
and LPLA, LPAL policy surrenders increased  substantially.  Approximately 75% of
LPAL's $140.2 million in  policyholder  liabilities as of June 30, 2002 had been
redeemed as of December 31, 2002.


Note 2.    Subsequent Events

       On March 10,  2003,  the Company  announced  that it had  entered  into a
definitive agreement to sell substantially all of the business and operations of
Berkeley Capital Management  ("BCM") to a company  majority-owned by funds under
the  management  of Putnam  Lovell NBF Private  Equity  ("Putnam  Lovell").  The
agreement  is subject to certain  conditions,  including  receipt of  sufficient
consents from clients of BCM to the  assignment of their  investment  management
contracts to the acquiror.  The purchase price consists of $7.75 million in cash
to be paid at closing subject to certain adjustments; and a further $1.0 million
cash installment to be paid on December 31, 2003 subject to certain adjustments.
In addition,  up to $1.25 million of earn-out payments will be paid by the buyer
ratably over the four  quarters of 2004 if revenues  received in 2003 from a new
product  planned for launch by BCM in 2003 exceed certain defined  targets.  The
definitive  agreement is binding on both  companies and is subject to regulatory
approvals and other conditions.  Should the annualized revenues from BCM clients
who will become  clients of the acquiror fall below 90% of a base  revenue,  the
acquiror  will have the  opportunity  to either  terminate  the  acquisition  or
renegotiate  terms.  The Company  expects the sale to close on or before May 15,
2003. As of December 31, 2002, BCM's assets under management were  approximately
$1.2 billion.

                                       47
<PAGE>


                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3.    Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

       The accompanying  consolidated financial statements have been prepared by
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  (with  the  exception  of LPLA as
discussed  above in Note 1 "Material  Events"),  the Employee Share Option Trust
("ESOT") and the Agent Loyalty  Opportunity  Trust ("ALOT")  (collectively,  the
"Group").  Significant subsidiaries included in the continuing operations of the
Group and discussed in this document include:  London Pacific Assurance Limited,
London Pacific Advisors,  Berkeley Capital Management and Berkeley International
Capital  Corporation.  All  intercompany  transactions  and  balances  have been
eliminated  in  consolidation  except  for  intercompany   transactions  between
continuing  and  discontinued   operations  principally  related  to  investment
management  fees from  LPLA  (the  discontinued  operations)  to the  continuing
operations.

       During the second  quarter of 2002,  the Company  completed a one-for-ten
reverse  split of its American  Depositary  Shares  ("ADSs").  On June 24, 2002,
every ten of the  Company's  ADSs  issued and  outstanding  were  converted  and
reclassified into one post-split ADS.  Consequently,  effective from the opening
of business on June 24,  2002,  each ADS is equal to ten  Ordinary  Shares.  All
dividend  and  earnings  (loss) 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 majority of the Group's assets relate to its  continuing  life insurance and
annuities  business.   The  Group's  other  businesses  are  financial  advisory
services, asset management and venture capital management.

       The Company is incorporated  under the laws of Jersey,  Channel  Islands.
Its Ordinary  Shares are traded on the London Stock  Exchange and in the U.S. on
the  Over-the-Counter  ("OTC")  Bulletin  Board in the form of ADSs,  which  are
evidenced 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.

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  income taxes and  adjustments to deferred  policy  acquisition  cost
amortization as a separate component of accumulated other comprehensive income;

       ii)  held-to-maturity  securities  are recorded at amortized  cost unless
these securities become other-than-temporarily impaired; and

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

                                     48
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       When a quoted  market price is available  for a security,  the Group uses
this price in the  determination  of fair value. If a quoted market price is not
available for a security,  management  estimates the security's fair value based
on appropriate valuation  methodologies.  Management's  valuation  methodologies
include  fundamental  analysis that evaluates the investee company's progress in
developing  products,  building  intellectual  property  portfolios and securing
customer  relationships,  as well as overall industry conditions,  conditions in
and  prospects  for the  investee's  geographic  region,  overall  equity market
conditions,  and the level of financing  already secured and available.  This is
combined  with  analysis of comparable  acquisition  transactions  and values to
determine if the security's liquidation preferences will ensure full recovery of
the  Group's  investment  in a  likely  acquisition  outcome.  In its  valuation
analysis,  management also considers the most recent  transaction in a company's
shares.

       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. Any  other-than-temporary  declines in the fair value of
available-for-sale or held-to-maturity  securities,  below the cost or amortized
cost basis, are recognized as realized losses in the consolidated  statements of
income.  The cost basis of such securities is adjusted to reflect the write-down
recorded.

Deferred Policy Acquisition Costs

       Policy  acquisition  costs are the costs of producing  life insurance and
annuity business:  principally  commissions 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.

       During 2002, all deferred policy acquisition costs were written off.

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

       In  accordance   with  Statement  of  Position  No.  98-1  ("SOP  98-1"),
"Accounting  for the  Costs of  Computer  Software  Developed  or  Obtained  for
Internal  Use,"  the Group  capitalizes  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.

                                       49
<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.

Goodwill

       Goodwill  is  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  was
capitalized  until January 1, 2002, and amortized on a straight-line  basis over
its estimated  useful economic life,  generally 25 years.  Beginning  January 1,
2002, goodwill is no longer amortized, but is regularly evaluated for impairment
and any impairment  losses are recognized in the consolidated  income statement.
See the discussion in "Recently Issued Accounting Pronouncements" below.

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 are accounted
for as investment-type  insurance products and are recorded at accumulated value
(premiums  received,  plus  accrued  interest  to the balance  sheet date,  less
withdrawals and assessed fees).

       ii) Revenues for  investment-type  insurance  products consist of charges
assessed against policy account values for surrenders.

       iii)Benefits  for  investment-type  insurance  products  are  charged  to
expense  when  incurred  and reflect  the claim  amounts in excess of the policy
account  balance.  Expenses for  investment-type  products  include the interest
credited to the policy account balance.

Revenue Recognition

       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.

       Management  fees  collected  on  investment   management   contracts  are
recognized  proportionately  over the term of the related contracts.  Generally,
management fees are billed in advance and calculated based upon the market value
of the managed portfolios at the end of the preceding  quarter.  Fees collected,
but not yet earned,  are deferred and recognized over their respective  contract
period.

       London Pacific Advisors ("LPA") develops and implements web based systems
for creating,  managing and monitoring fee based  investment  accounts.  It also
provides investment advisory services to retail and institutional  customers and
portfolio support services to other investment advisors.  Its revenues for these
products and services are generally computed on a quarterly basis based upon the
assets maintained on its

                                       50
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


systems, or for which it provides advisory or support services. The revenues are
recognized over the period to which they relate.

       In certain  circumstances,  LPA also provides custom software development
and consulting  implementation  services for separately  negotiated fees. During
the year ended  December 31, 2002, LPA earned  approximately  $150,000 for these
consulting  services.  Revenues  from  consulting  implementation  services  are
recognized as such services are performed.

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
expense  based upon the  intrinsic  value of the stock options as of the date of
grant.  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.

       Had  compensation  expense for the Group's ESOT activity been  determined
based upon the fair value  method in  accordance  with SFAS 123, the Group's net
income  (loss) and  earnings  (loss)  per share and ADS would have been  reduced
or increased to the pro forma amounts as follows:

                                       51
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>
                                                                                         Years Ended December 31,
                                                                                   ------------------------------------
                                                                                      2002        2001(1)     2000(1)
                                                                                   ----------   ----------   ----------
                                                                                     (In thousands, except per share
                                                                                            and ADS amounts)
<S>                                                                                <C>          <C>          <C>
Net income (loss) as reported................................................      $ (205,504)  $ (344,784)  $   32,457
Add: Stock based employee compensation expense included in
   reported income (loss), net of related tax effects........................               -          530        2,943
Deduct: Total stock based employee compensation expense determined
   under fair value based methods for all awards, net of related tax effects.            (796)      (5,165)      (1,561)
                                                                                   ----------   ----------   ----------
Pro forma net income (loss) .................................................      $ (206,300)  $ (349,419)  $   33,839
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------

Basic earnings (loss) per share:
As reported..................................................................           (4.05)       (6.76)        0.64
Pro forma....................................................................           (4.06)       (6.85)        0.67
Basic earnings (loss) per ADS (1):
As reported..................................................................          (40.49)      (67.62)        6.39
Pro forma....................................................................          (40.65)      (68.53)        6.66
Diluted earnings (loss) per share:
As reported..................................................................           (4.05)       (6.76)        0.54
Pro forma....................................................................           (4.06)       (6.85)        0.56
Diluted earnings (loss) per ADS (1):
As reported..................................................................          (40.49)      (67.62)        5.35
Pro forma....................................................................          (40.65)      (68.53)        5.57
Weighted average fair value of options granted
   at market price during year...............................................            0.23         2.38         9.24
Weighted average fair value of options granted
   at less than market price during year.....................................               -         2.86            -
<FN>
(1) ADS amounts have been restated to reflect the  one-for-ten  reverse split in
June 2002.
</FN>
</TABLE>

       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>

                                                                                      2002        2001        2000
                                                                                   ----------   ----------   ----------
<S>                                                                                <C>          <C>          <C>
Expected dividend yield (2)..................................................               -            -            -
Expected stock price volatility..............................................            125%          76%          67%
Risk-free interest rate......................................................           3.95%        5.09%        6.07%
Weighted average expected life (in years)....................................               5           5            5
<FN>
(2) As the  Company  paid a  constant  dividend  amount  for  2001 and  2000,  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.
For 2002,  the deduction to the share price was zero, as future  dividends  have
not been assumed.
</FN>
</TABLE>
                                       52
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 judgment  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 ESOT and the ALOT 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. The Company has also issued  Ordinary Share warrants to Bank of Scotland in
connection with the Company's bank facility, which are also 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."

Foreign Currencies

       The Group uses the (pound)  sterling as the functional  currency for LPAL
and the U.S.  dollar as the  functional  currency  for the Company and all other
significant  subsidiaries.  Foreign exchange gains and losses resulting from the
remeasurement  of foreign  currency  assets  and  liabilities  into an  entity's
functional  currency are included in other operating expense in the consolidated
statements of income. For entities using a (pound) sterling 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 and
income and expense  items are  translated  to U.S.  dollars at average  exchange
rates in effect during the period. The resulting translation adjustment is shown
as a separate component of other comprehensive  income in shareholders'  equity.
Foreign  currency  transaction  gains and losses are  recorded in the results of
operations, and were not material in all periods presented.

Comprehensive Income

       Comprehensive income consists of net income;  changes in unrealized gains
and 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  non-U.S.
dollar based subsidiaries.

                                       53
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Recently Issued Accounting Pronouncements

       In June 2002, the FASB issued Statement of Financial  Accounting Standard
No. 146 ("SFAS 146"),  "Accounting  for Costs  Associated  with Exit or Disposal
Activities." SFAS 146 requires the Group to recognize costs associated with exit
or  disposal  activities  when they are  incurred  rather  than at the date of a
commitment to an exit or disposal plan.  SFAS 146 replaces  Emerging Issues Task
Force Issue No. 94-3,  "Liability  Recognition for Certain Employee  Termination
Benefits and Other Costs to Exit an Activity  (including  Certain Costs Incurred
in a Restructuring)."  The provisions of SFAS 146 will be applied  prospectively
to exit or disposal  activities  initiated  after December 31, 2002. The Group's
management  believes  that the adoption of SFAS 146 will not have a  significant
effect on its consolidated financial statements.

       In December  2002,  the FASB amended  Statement  of Financial  Accounting
Standard  No. 123  "Accounting  for  Stock-Based  Compensation"  ("SFAS 123") by
issuing  Statement  of  Financial  Accounting  Standard  No. 148  ("SFAS  148"),
"Accounting for Stock-Based  Compensation,  Transition and Disclosure." SFAS 148
provides  alternative  methods  of  transition  for an entity  that  voluntarily
changes to the fair value based method of  accounting  for stock based  employee
compensation.  Additionally, the statement amends the disclosure requirements of
SFAS 123 to require  prominent  disclosures in the annual and interim  financial
statements about the method of accounting for stock based employee  compensation
and the effect of the method used on reported results. SFAS 148 is effective for
financial  statements  for fiscal years ending after  December 15, 2002, and for
financial reports containing  condensed financial statements for interim periods
beginning  after  December 15, 2002. In compliance  with SFAS 148, the Group has
elected to continue to follow the intrinsic  value method in accounting  for its
stock based compensation and has made the applicable  disclosures in this Note 3
above.

       In November  2002,  the FASB  approved FASB  Interpretation  No. 45 ("FIN
45"),  "Guarantor's  Accounting  and  Disclosure  Requirements  for  Guarantees,
Including Indirect  Guarantees of Indebtedness to Others".  FIN 45 elaborates on
the existing disclosure requirements for most guarantees. It also clarifies that
at the time a company issues a guarantee,  the company must recognize an initial
liability for the fair value,  or market value,  of the  obligations  it assumes
under that  guarantee  and must  disclose  that  information  in its interim and
annual financial statements. The disclosure requirements of FIN 45 are effective
for financial  statements of interim or annual periods ending after December 15,
2002. The Group has adopted the disclosure  provisions of this interpretation as
of  December  31,  2002.  The  Group's  management  does not expect the  initial
recognition and measurement  provisions for guarantees  issued or modified after
December  31,  2002 to have a  material  impact  on its  consolidated  financial
statements.

       In  January  2003,  the FASB  issued  Interpretation  No. 46 ("FIN  46"),
"Consolidation of Variable Interest  Entities," which requires the consolidation
of  variable  interest  entities  ("VIE"),  as  defined  in  FIN  46.  FIN 46 is
applicable  to  financial  statements  to be  issued by the  Group  after  2002;
however,  disclosures are required currently if the Group expects to consolidate
any variable interest entities. As of December 31, 2002, the Group does not have
entities meeting the definition of a VIE and does not expect the adoption of FIN
46 to have an impact on its financial statements.

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 the valuation of investments, life
insurance  policy   liabilities  and  deferred  policy  acquisition  costs,  are
disclosed throughout these notes to the financial statements.

                                       54
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Reclassifications

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


Note 4.   Discontinued Operations

       As  described  above in Note 1  "Material  Events,"  the Group,  with the
unanimous  approval of LPLA's board of  directors,  ceded control of LPLA to the
North Carolina insurance regulators on August 6, 2002. In connection  therewith,
the  Group  deconsolidated  LPLA and  recorded  a charge  to  earnings  of $38.5
million.  Although LPLA was placed under regulatory control and  rehabilitation,
the Group  will not  regain  control or  receive  any  benefit  from LPLA in the
future.  As such, in accordance with SFAS 144, the results of operations of LPLA
(pre-rehabilitation)  have been reported in discontinued operations.  Under SFAS
144, the results of operations of a  discontinued  business,  and any impairment
losses related to a discontinued business, are reported separately in the income
statement under discontinued  operations for the current and prior periods,  and
in the prior period balance sheet as total assets of discontinued operations and
total liabilities of discontinued operations.

       A summary  of  LPLA's  pre-tax  operating  results  for the  years  ended
December 31, 2002, 2001 and 2000, and LPLA's total assets and total  liabilities
as of December 31, 2001, are shown below.

<TABLE>
<CAPTION>
                                                                                        Years ended December 31,
                                                                                   ------------------------------------
                                                                                    2002 (1)       2001         2000
                                                                                   ----------   ----------   ----------
                                                                                              (In thousands)
<S>                                                                                <C>          <C>          <C>
Revenues:
Investment income before intercompany management fee expense.................      $   62,453   $  134,758   $  112,192
Intercompany management fee expense (2)......................................          (3,632)     (11,831)     (10,240)
Other income.................................................................           4,176        7,048        9,084
Net realized and change in net unrealized investment gains
   and losses................................................................         (97,618)    (164,773)     (40,058)
                                                                                   ----------   ----------   ----------
Total revenues and net investment gains (losses).............................         (34,621)     (34,798)      70,978

Expenses:
Interest credited on insurance policyholder accounts.........................          56,133      112,651       92,864
Amortization of deferred policy acquisition costs............................          17,145       22,808       21,040
Other expenses...............................................................           4,593        7,573        8,260
                                                                                   ----------   ----------   ----------
Total expenses...............................................................          77,871      143,032      122,164
                                                                                   ----------   ----------   ----------
Loss before income taxes.....................................................      $ (112,492)  $ (177,830)  $  (51,186)
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
<FN>
(1) Though the Group did not lose  control  of LPLA  until  August 6, 2002,  the
Group was not able to obtain LPLA's  financial  results on a U.S. GAAP basis for
the  period  July  1,  2002  up  to  August  6,  2002.  Therefore,  the  Group's
consolidated  income  statement  includes  LPLA's  results only through June 30,
2002. These results are reflected as discontinued operations in the consolidated
income statement.

(2) These fees were paid to and included in the revenues of the venture  capital
management and asset management business segments of continuing operations.
</FN>
</TABLE>
                                       55
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

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

                                                                                               December 31,
                                                                                                  2001
                                                                                              --------------
                                                                                              (In thousands)
<S>                                                                                             <C>
Assets of discontinued operations:
Cash and investments....................................................................        $1,755,260
Deferred policy acquisition costs.......................................................           165,713
Assets held in separate accounts........................................................           227,675
Reinsurance assets......................................................................            42,025
Other assets............................................................................            63,835
                                                                                              ------------
Total assets of discontinued operations.................................................        $2,254,508
                                                                                              ------------
                                                                                              ------------

Liabilities of discontinued operations:
Life insurance policy liabilities.......................................................        $1,900,022
Liabilities related to separate accounts................................................           226,015
Accounts payable, accruals and other liabilities........................................             9,945
                                                                                              ------------
Total liabilities of discontinued operations............................................        $2,135,982
                                                                                              ------------
                                                                                              ------------
</TABLE>

       LPLA had been  included  in the  Group's  life  insurance  and  annuities
business segment.


       The loss on disposal of discontinued operations, net of tax, was recorded
in the third quarter of 2002 and reported in the Group's Form 10-Q as follows:
<TABLE>
<CAPTION>

                                                                                              (In thousands)

<S>                                                                                             <C>
Net unrealized losses on available-for-sale securities, net of
   deferred policy acquisition cost amortization adjustments and deferred income taxes...       $   10,649
Impairment on long-lived assets (LPLA's net assets)......................................           12,269
Write-off of doubtful receivables from LPLA..............................................           15,614
                                                                                              ------------
                                                                                                    38,532
Income tax benefit.......................................................................                -
                                                                                              ------------
Net loss on disposal of discontinued operations..........................................       $   38,532
                                                                                              ------------
                                                                                              ------------
</TABLE>
                                       56
<PAGE>
                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 5.    Investments

Summary Cost and Fair Value Information

Fixed Maturity Securities

       An analysis of fixed maturity securities is as follows:
<TABLE>
<CAPTION>

                                                                       December 31,
                            --------------------------------------------------------------------------------------------------
                                                 2002                                               2001
                            ----------------------------------------------      ----------------------------------------------
                                           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:
Non-U.S. government
  debt securities.......... $        -  $        -  $        -  $        -      $    7,629  $       97  $        -  $    7,726
Non-U.S. corporate
  debt securities..........     12,709         115          (9)     12,815          64,323         981        (359)     64,945
Corporate debt securities       17,772          90        (342)     17,520          44,901         477        (348)     45,030
                            ----------  ----------  ----------  ----------      ----------  ----------  ----------  ----------
                            $   30,481  $      205  $     (351) $   30,335      $  116,853  $    1,555  $     (707) $  117,701
                            ----------  ----------  ----------  ----------      ----------  ----------  ----------  ----------
Held-to-Maturity:
Private corporate debt
  securities............... $        -  $        -  $        -  $        -      $      871  $        -  $        -  $      871
                            ----------  ----------  ----------  ----------      ----------  ----------  ----------  ----------
Total fixed maturity
  securities............... $   30,481  $      205  $     (351) $   30,335      $  117,724  $    1,555  $     (707) $  118,572
                            ----------  ----------  ----------  ----------      ----------  ----------  ----------  ----------
                            ----------  ----------  ----------  ----------      ----------  ----------  ----------  ----------
</TABLE>

       No fixed maturity  securities  classified as  held-to-maturity  were sold
during 2002,  2001 or 2000.  During  2002,  $871,000 in private  corporate  debt
securities  classified as  held-to-maturity  were considered by management to be
other-than-temporarily  impaired  and  consequently  their  amortized  cost  was
reduced to zero during 2002.

       During 2000,  fixed maturity  securities  classified as  held-to-maturity
with an aggregate  carrying value of  $23,397,000  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.  There were no such transfers in
2001 or 2002.

       As of  December  31,  2002,  there  were no  non-income  producing  fixed
maturity securities for the twelve months preceding December 31, 2002.

                                       57
<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, 2002 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)

<S>                                                   <C>              <C>              <C>             <C>
Due in one year or less ..........................     $    13,070     $    13,213      $         -    $          -
Due after one year through five years.............          17,411          17,122                -               -
                                                    --------------  --------------   --------------  --------------
                                                       $    30,481     $    30,335      $         -    $          -
                                                    --------------  --------------   --------------  --------------
                                                    --------------  --------------   --------------  --------------
</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,
                            --------------------------------------------------------------------------------------------------
                                                 2002                                               2001
                            ----------------------------------------------      ----------------------------------------------
                                           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............... $    8,983  $        -  $   (1,750) $    7,233      $   17,155  $        -  $   (1,875) $   15,280
Other equity securities ...          -           -           -           -             142           -        (119)         23
                            ----------  ----------  ----------  ----------      ----------  ----------  ----------  ----------
Total available-for-sale
  equity securities........      8,983           -      (1,750)      7,233          17,297           -      (1,994)     15,303

Trading securities.........     26,785       5,236     (15,516)     16,505          64,175      16,317     (12,875)     67,617
                            ----------  ----------  ----------  ----------      ----------  ----------  ----------  ----------
Total equity securities.... $   35,768  $    5,236  $  (17,266) $   23,738      $   81,472  $   16,317  $  (14,869) $   82,920
                            ----------  ----------  ----------  ----------      ----------  ----------  ----------  ----------
                            ----------  ----------  ----------  ----------      ----------  ----------  ----------  ----------
</TABLE>

       Trading  securities  are  carried  at  fair  value  with  changes  in net
unrealized gains and losses of $(22,483,000),  $(230,981,000)  and $(79,091,000)
included  in earnings  for the years ended  December  31,  2002,  2001 and 2000,
respectively.  During 2002, the loss from the change in net unrealized gains and
losses  on  trading  securities   included  a  reclassification   adjustment  of
$8,761,000  related  to  securities  purchased  from LPLA at above  the  Group's
original cost.

                                       58
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Investment Concentration and Risk

       As of December  31, 2002,  fixed  maturity  securities  held by the Group
included  investments  in  General  Motors of  $7,974,000,  British  Telecom  of
$3,270,000,  Daimler  Chrysler of  $3,269,000,  Ford Motor Credit of $3,220,000,
Fiat Finance of $2,871,000,  North American Capital of $2,819,000 and Clarica of
$2,771,000.  Equity securities held by the Group primarily included  investments
in Agility Communications,  Inc. of $3,375,000,  Alacritech, Inc. of $2,250,000,
New Focus, Inc. of $2,496,000 and Packeteer,  Inc. of $11,402,000.  These eleven
corporate issuers each represented more than ten percent of shareholders' equity
as of December 31, 2002.

       As of  December  31,  2001,  there were no  investments  in either  fixed
maturity  or equity  securities  in any one  issuer  representing  more than ten
percent of shareholders'  equity. Fixed maturity securities considered less than
investment grade approximated 10.7% and 7.5% of total fixed maturity  securities
as of December 31, 2002 and 2001, respectively.

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

       The net  unrealized  losses on fixed  maturity  securities  classified as
available-for-sale  as of December  31,  2002  totaled  $146,000.  There were no
related  deferred  policy  acquisition  cost  adjustments or income taxes. As of
December 31, 2001, for continuing operations,  the net unrealized gains on fixed
maturity  securities  classified as  available-for-sale  after  deferred  policy
acquisition cost adjustments were $1,399,000.

       The  net   unrealized   losses  on  equity   securities   classified   as
available-for-sale  as of December  31, 2002 totaled  $1,750,000.  There were no
related income taxes.  As of December 31, 2001, for continuing  operations,  the
net  unrealized  losses on equity  securities  classified as  available-for-sale
totaled $1,994,000.

                                       59
<PAGE>
                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       Changes  in  net  unrealized  gains  and  losses  on   available-for-sale
securities included in other  comprehensive  income for the years ended December
31, 2000 and 2001 and 2002 were as follows:
<TABLE>
<CAPTION>
                                                                                       Net Unrealized Gains (Losses)
                                                                                   ------------------------------------
                                                                                     Fixed
                                                                                    Maturity      Equity
                                                                                   Securities   Securities      Total
                                                                              -    ----------   ----------   ----------
                                                                                             (In thousands)

<S>                                                                                <C>          <C>          <C>
Net unrealized 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 for continuing operations:
   Unrealized holding gains and losses on available-for-sale securities......            (335)         186         (149)
   Reclassification adjustment for gains and losses included in net income (loss)           -            -            -
   Decrease in amortization of deferred policy acquisition costs.............             147            -          147
Changes during the year ended December 31, 2000 for discontinued operations:
   Change in net unrealized gains and losses on available-for-sale securities          (9,862)      (6,248)     (16,110)
   Decrease in amortization of deferred policy acquisition costs.............           5,593            -        5,593
   Decrease in deferred income tax liabilities...............................           1,494        2,188        3,682
                                                                                   ----------   ----------   ----------
Net unrealized losses on available-for-sale securities as of
   December 31, 2000.........................................................         (18,993)      (6,209)     (25,202)

Changes during the year ended December 31, 2001 for continuing operations:
   Unrealized holding gains and losses on available-for-sale securities......             458       (2,081)      (1,623)
   Reclassification adjustment for gains and losses included in net income (loss)         724          112          836
   Decrease in amortization of deferred policy acquisition costs.............             405            -          405
Changes during the year ended December 31, 2001 for discontinued operations:
   Change in net unrealized gains and losses on available-for-sale securities          27,687        7,896       35,583
   Increase in amortization of deferred policy acquisition costs.............         (13,398)           -      (13,398)
   Increase in deferred income tax liabilities...............................          (5,001)      (1,349)      (6,350)
                                                                                   ----------   ----------   ----------
Net unrealized losses on available-for-sale securities as of
   December 31, 2001.........................................................          (8,118)      (1,631)      (9,749)

Changes during the year ended December 31, 2002 for continuing operations:
   Unrealized holding gains and losses on available-for-sale securities......            (116)      (1,000)      (1,116)
   Reclassification adjustment for gains and losses included in net income (loss)        (878)       1,244          366
   Increase in amortization of deferred policy acquisition costs.............            (551)           -         (551)
Changes during the year ended December 31, 2002 for discontinued operations:
   Change in net unrealized gains and losses on available-for-sale securities          16,584      (10,840)       5,744
   Increase in amortization of deferred policy acquisition costs.............          (8,044)           -       (8,044)
   Decrease (increase) in deferred income tax liabilities....................          (2,989)       3,794          805
   Reclassification adjustment for losses of discontinued operations included
    in net income (loss).....................................................           3,966        6,683       10,649
                                                                                   ----------   ----------   ----------
Net unrealized losses on available-for-sale securities as of
   December 31, 2002.........................................................      $     (146)  $   (1,750)  $   (1,896)
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
</TABLE>
                                       60
<PAGE>
                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Net Investment Income

       The details of  investment  income,  net of investment  expenses,  are as
follows:
<TABLE>
<CAPTION>

                                                                                         Years Ended December 31,
                                                                                   ------------------------------------
                                                                                      2002        2001        2000
                                                                                   ----------   ----------   ----------
                                                                                             (In thousands)

<S>                                                                                <C>          <C>          <C>
Interest on fixed maturity securities........................................      $    5,972   $    6,040   $    1,412
Interest on cash and cash equivalents........................................             686        2,230        2,401
                                                                                   ----------   ----------   ----------
Gross investment income......................................................           6,658        8,270        3,813
Investment expenses..........................................................             (11)          (6)           -
                                                                                   ----------   ----------   ----------
                                                                                        6,647        8,264        3,813
Interest credited on insurance policyholder accounts.........................          (6,031)      (6,314)      (1,201)
                                                                                   ----------   ----------   ----------
Net investment income........................................................      $      616   $    1,950   $    2,612
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
</TABLE>

       Investment   expenses   included  costs  of  investment   administration,
primarily custodial fees.

Realized Gains and Losses

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

                                                                                         Years Ended December 31,
                                                                                   ------------------------------------
                                                                                      2002        2001        2000
                                                                                   ----------   ----------   ----------
                                                                                             (In thousands)

<S>                                                                                <C>          <C>          <C>
Realized gains (losses) on securities transactions:
Fixed maturities, available-for-sale:
   Gross gains...............................................................      $    1,798   $       13   $        3
   Gross losses .............................................................         (15,611)      (7,042)           -
                                                                                   ----------   ----------   ----------
Net realized gains (losses) on fixed maturities, available-for-sale .........         (13,813)      (7,029)           3
                                                                                   ----------   ----------   ----------
Fixed maturities, held-to-maturity:
   Gross losses..............................................................          (2,125)        (434)      (1,336)
                                                                                   ----------   ----------   ----------
Equity securities, trading:
   Gross gains...............................................................           5,601       36,070      155,521
   Gross losses..............................................................          (1,629)           -         (300)
                                                                                   ----------   ----------   ----------
Net realized gains on equity securities, trading ............................           3,972       36,070      155,221
                                                                                   ----------   ----------   ----------
Equity securities, available-for-sale:
   Gross gains...............................................................               -          456          110
   Gross losses..............................................................          (9,541)     (10,556)        (317)
                                                                                   ----------   ----------   ----------
Net realized losses on equity securities, available-for-sale ................          (9,541)     (10,100)        (207)
                                                                                   ----------   ----------   ----------

Net realized investment gains (losses) on securities transactions............      $  (21,507)  $   18,507   $  153,681
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
</TABLE>
                                       61
<PAGE>


                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       During 2002, management determined that two private equity investments in
technology  companies  were  other-than-temporarily  impaired  and  consequently
realized  losses  of $8.2  million  were  recorded  in the  consolidated  income
statement.  Certain other private  corporate  debt and equity  investments  were
considered  by  management  to be  other-than-temporarily  impaired and realized
losses  totaling  $12.7  million  were  recorded  in  the  consolidated   income
statement.   In  addition  during  2002,  one  public  corporate  debt  security
classified   as   available-for-sale   was   considered   by  management  to  be
other-than-temporarily impaired and a realized loss of $0.3 million was recorded
in the consolidated  income  statement for the difference  between the amortized
cost and the fair value of this security.

       During 2001,  management determined that one private equity investment in
a technology  company was  other-than-temporarily  impaired and  consequently  a
realized  loss  of  $10.0  million  was  recorded  in  the  consolidated  income
statement.  Certain other private  corporate debt investments were considered by
management to be  other-than-temporarily  impaired and realized  losses totaling
$0.4 million were recorded in the  consolidated  income  statement.  In addition
during 2001, one public corporate debt security classified as available-for-sale
was  considered  by  management  to  be  other-than-temporarily  impaired  and a
realized loss of $7.0 million was recorded in the consolidated  income statement
for the  difference  between  the  amortized  cost  and the  fair  value of this
security.


Note 6.    Deferred Policy Acquisition Costs

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

                                                                                         Years Ended December 31,
                                                                                   ------------------------------------
                                                                                      2002         2001         2000
                                                                                   ----------   ----------   ----------
                                                                                              (In thousands)

<S>                                                                                <C>          <C>          <C>
Balance as of January 1......................................................      $    3,113   $    1,509   $        -
Deferral of costs relating to:
Commissions .................................................................             169        1,737        1,153
Other .......................................................................              81          405          352
                                                                                   ----------   ----------   ----------
                                                                                          250        2,142        1,505
Amortization relating to:
Operations ..................................................................           2,952          262          115
Investment gains ............................................................               -          670            -
                                                                                   ----------   ----------   ----------
                                                                                        2,952          932          115
                                                                                   ----------   ----------   ----------
Net deferral ................................................................          (2,702)       1,210        1,390
Adjustment for unrealized losses (gains) on available-for-sale fixed
   maturity securities.......................................................            (551)         405          146
Increase (decrease) due to foreign exchange..................................             140          (11)         (27)
                                                                                   ----------   ----------   ----------
Balance as of December 31 ...................................................      $        -   $    3,113   $    1,509
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
</TABLE>

       Due  to  the  events   described  in  Note  1  "Material   Events,"  LPAL
discontinued  the  issuance of new  policies on July 2, 2002 and since that date
experienced  a  substantial  increase  in policy  redemptions.  Based on revised
estimates of the gross  profits on the remaining  block of business,  management
determined  that the  balance of deferred  policy  acquisition  costs  should be
written-off in full as of September 30, 2002.

                                       62
<PAGE>


                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7.    Property and Equipment

       Property  and  equipment  are  carried  at  cost  and  consisted  of  the
following:
<TABLE>
<CAPTION>

                                                                                         December 31,
                                                                                   -----------------------
                                                                                      2002         2001
                                                                                   ----------   ----------
                                                                                        (In thousands)

<S>                                                                                <C>          <C>
Property, equipment and leasehold improvements.................................... $    5,029   $    5,010
Capitalized software development costs............................................      2,923        2,553
                                                                                   ----------   ----------
                                                                                        7,952        7,563
Accumulated depreciation..........................................................     (4,651)      (3,395)
                                                                                   ----------   ----------
Property and equipment, net....................................................... $    3,301   $    4,168
                                                                                   ----------   ----------
                                                                                   ----------   ----------
</TABLE>

Note 8.    Goodwill

       Goodwill activity was as follows:

<TABLE>
<CAPTION>
                                                                                         Years Ended
                                                                                         December 31,
                                                                                   -----------------------
                                                                                      2002         2001
                                                                                   ----------   ----------
                                                                                        (In thousands)

<S>                                                                                <C>          <C>
Cost:
Balance as of January 1 .......................................................... $    5,276   $    5,276
Goodwill written-off..............................................................       (396)           -
                                                                                   ----------   ----------
Balance as of December 31 ........................................................      4,880        5,276

Accumulated amortization:
Accumulated amortization as of January 1 .........................................      2,312        2,091
Amortization recorded.............................................................          -          221
                                                                                   ----------   ----------
Accumulated amortization as of December 31 .......................................      2,312        2,312
                                                                                   ----------   ----------
Net book value as of December 31 ................................................. $    2,568   $    2,964
                                                                                   ----------   ----------
                                                                                   ----------   ----------
</TABLE>
                                       63
<PAGE>
                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       Had  SFAS 142 been in  effect  prior to  January  1,  2002,  the  Group's
reported net loss and loss per share and ADS would have been as follows:
<TABLE>
<CAPTION>
                                                                                         Years Ended
                                                                                         December 31,
                                                                                   -----------------------
                                                                                      2002         2001
                                                                                   ----------   ----------
                                                                                  (In thousands, except per
                                                                                    share and ADS amounts)
<S>                                                                                <C>          <C>
Net loss from continuing operations:
As reported....................................................................... $  (62,210)  $ (224,045)
Goodwill adjustment...............................................................          -          221
                                                                                   ----------   ----------
Adjusted.......................................................................... $  (62,210)  $ (223,824)
                                                                                   ----------   ----------
                                                                                   ----------   ----------

Basic and diluted loss per share (continuing operations):
As reported....................................................................... $    (1.23)  $    (4.39)
Effect of goodwill amortization...................................................          -            -
                                                                                   ----------   ----------
Adjusted.......................................................................... $    (1.23)  $    (4.39)
                                                                                   ----------   ----------
                                                                                   ----------   ----------
Basic and diluted loss per ADS (continuing operations):
As reported....................................................................... $   (12.26)  $   (43.94)
Effect of goodwill amortization...................................................          -         0.04
                                                                                   ----------   ----------
Adjusted.......................................................................... $   (12.26)  $   (43.90)
                                                                                   ----------   ----------
                                                                                   ----------   ----------
</TABLE>

       In accordance  with SFAS 142, the Group  evaluated its carrying  value of
goodwill  during 2002 and determined  that the goodwill  carried on the books of
two of its subsidiaries was impaired.  Advisors  Insurance Services of Texas has
been  inactive  and  is  in  the  process  of  being  liquidated;  consequently,
approximately  $7,000 of goodwill  was  written-off.  Subsequent  to the loss of
control of LPLA and the  termination of the investment  management  contract for
LPLA's  investment  portfolio,  the value of BICC's  technology  venture capital
business is less certain. Consequently, BICC's goodwill balance of approximately
$389,000 was written-off during 2002.

                                       64
<PAGE>


                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9.    Other Assets

       An analysis of other assets is as follows:
<TABLE>
<CAPTION>

                                                                                         December 31,
                                                                                   -----------------------
                                                                                      2002         2001
                                                                                   ----------   ----------
                                                                                       (In thousands)

<S>                                                                                <C>          <C>
Deferred income tax assets ....................................................... $        -   $    5,504
Prepayments ......................................................................      1,684        1,763
Receivables:
   Income tax refunds receivable..................................................         61            -
   Fee income receivable..........................................................        686          774
   Allowance for doubtful accounts................................................        (12)          (5)
   Other receivables..............................................................        182          311
   Due from brokers...............................................................        472            -
Other assets .....................................................................         26            3
                                                                                   ----------   ----------
Total other assets  .............................................................. $    3,099   $    8,350
                                                                                   ----------   ----------
                                                                                 ----------   ----------
</TABLE>

Note 10.    Life Insurance Policy Liabilities

       An analysis of life insurance policy liabilities is as follows:
<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                                   -----------------------
                                                                                      2002         2001
                                                                                   ----------   ----------
                                                                                        (In thousands)

<S>                                                                                <C>          <C>
Deferred annuities - policyholder contract deposits .............................. $   35,441   $  131,765
Other policy claims and benefits .................................................          -           66
                                                                                   ----------   ----------
                                                                                   $   35,441   $  131,831
                                                                                   ----------   ----------
                                                                                   ----------   ----------
</TABLE>

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

Interest Rate Assumptions

       Guaranteed  reset rates were 3.0% for seven year annuity  products issued
in 2002.  For three and five year  annuity  products,  credited  interest  rates
generally  ranged from 3.30% to 7.40% in 2002,  3.45% to 7.40% in 2001, and from
6.50% to 7.40% in 2000.

Mortality Assumptions

       Assumed  mortality  rates were based on standard  tables commonly used in
the U.K. life insurance  industry,  namely the AM80 table for male lives and the
AF80 table for female lives.

Withdrawal Assumptions

       Withdrawal charges on deferred annuities  generally ranged from 1% to 7%,
grading to zero over a period of up to 7 years.

                                       65
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11.   Statutory Financial Information and Restrictions

       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.  LPAL is required to submit annual audited
financial  statements  (prepared  under U.S.  GAAP which is  permitted),  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.  The annual filing  contains a report from the Appointed
Actuary on the matching of investments to liabilities.

       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  (pound)50,000 or 2.5% of the
value of the  long-term  business  fund,  (iii) 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 (iv) assets equal
to not less than 90% of  liabilities  must be placed with  approved  independent
custodians. As of December 31, 2002, LPAL met all of these conditions.

       LPAL is also required under the insurance laws to appoint an actuary. The
actuary must be qualified as defined under the laws and is required to supervise
the long-term insurance fund. No transfers,  except in satisfaction of long-term
insurance  business  liabilities,  including  dividends,  are permitted from the
long-term insurance fund without written consent from the actuary.


Note 12.    Notes Payable

       The Group's consolidated results for the quarters ended June 30, 2002 and
September   30,  2002   resulted  in  breaches  of  the  net  worth,   operating
profit/interest  charge and intangible asset ratio financial covenants under its
bank facility with Bank of Scotland.  On December 20, 2002, the Company and Bank
of Scotland  agreed to the terms and conditions of an amended  credit  facility.
The new facility  provided up to $23.0 million of  borrowings,  with an interest
rate of 3.5% above the LIBOR rate on  borrowings  up to $10.0  million  and 4.5%
above the LIBOR rate on borrowings between $10.0 million and $23.0 million. (The
one month  LIBOR rate on  December  31,  2002 was  1.38%.)  The  facility  limit
decreases at the end of each  quarter,  such that the facility must be repaid in
full no later than December 31, 2003;  however,  the bank has agreed to consider
an  extension  of the final  facility  expiration  date in light of the  overall
circumstances  prevailing  at the time of any such  request by the  Company.  In
addition  to  providing  the bank with  security  interest  over  certain of the
Group's  listed  equity  securities  having an  aggregate  market  value of $4.5
million  as of  February  28,  2003,  the  Company  has  given  the  bank  other
guarantees,  pledges and security interests over certain other Group assets. The
Company agreed to pay the bank a one-time  restructuring fee of  (pound)180,000,
monthly management fees of (pound)10,000 and quarterly facility fees which begin
at 0.5% per annum and increase  each quarter  until they reach 2.5% per annum in
the third  quarter  of 2003  based on the  average  facility  usage  during  the
quarter.  The  Company  also  granted  to the bank  warrants  to  subscribe  for
1,933,172 Ordinary Shares of the Company. The warrants have a subscription price
of  (pound)0.1143  ($0.184 at  (pound)1 = $1.61) and may be  exercised  any time
prior to February 14, 2010.  New  financial  covenants  have been set under this
reducing  credit  facility  with  testing  to take  place  as of the end of each
quarter.  As of December 31, 2002, the Group met the financial  covenants  under
the facility.

                                       66
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       During  December  2002, the Group repaid $3.0 million to Bank of Scotland
in  permanent  reduction of the  facility to $20.0  million.  As of December 31,
2002,  $9.3 million was  outstanding  under the  facility.  In  addition,  $10.6
million of the  remaining  $10.7  million under the facility was utilized in the
form of guarantees  and letters of credit  provided on behalf of certain  former
investee  companies.  During February 2003, the Group sold certain of its listed
equity  securities  for $4.7  million and the  proceeds  were used to reduce the
Group's borrowings to $4.6 million and the facility to $15.2 million.

       The  Group's  management  believes  that it is  unlikely  that the former
investee  companies  will  have the  ability  to repay  any of their  borrowings
totaling  $10.6 million  according to the bank's  quarterly  repayment  schedule
during  2003,  and thus the Group will be  obligated to pay this amount on their
behalf. The Group has recorded the maximum guarantee obligation of $10.6 million
at  December  31,  2002  on  its  consolidated   balance  sheet  and  has  taken
other-than-temporary  impairment  losses  on  the  related  investments  in  its
consolidated income statement for 2002.

       The Group intends to use a combination  of existing  cash,  proceeds from
listed equity  security sales and the net proceeds from the sale of BCM in order
to meet the paydown  schedule under the bank facility  described  above.  In the
event  that the sale of BCM to Putnam  Lovell  (see Note 2  "Subsequent  Events"
above) is not completed, in order to meet its near-term obligations, the Company
will be required to identify other sources of liquidity.  The Group's management
believes  that it will still be able to meet its near-term  obligations  through
the sale of BCM to another party or the sale of other assets.


Note 13.    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 2002, 2001 and 2000.

       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% and 8.84%, respectively.

       A breakdown of the Group's book income (loss) from continuing  operations
before income taxes by tax jurisdiction follows:
<TABLE>
<CAPTION>

                                                                                          Years Ended December 31,
                                                                                   ------------------------------------
                                                                                      2002         2001         2000
                                                                                   ----------   ----------   ----------
                                                                                             (In thousands)
<S>                                                                                <C>          <C>          <C>
Income (loss) from continuing operations before income taxes:
Jersey, Guernsey and United Kingdom..........................................      $  (52,539)  $ (224,085)  $   70,227
United States................................................................          (5,593)         688       (4,031)

                                                                                   ----------   ----------   ----------
Total income (loss) from continuing operations before income taxes ..........      $  (58,132)  $ (223,397)  $   66,196
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
</TABLE>
                                       67
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

                                                                                         Years Ended December 31,
                                                                                   ------------------------------------
                                                                                      2002         2001         2000
                                                                                   ----------   ----------   ----------
                                                                                           (In thousands)

<S>                                                                                <C>          <C>          <C>
Income taxes computed at Jersey statutory income tax rate of 20%.............      $  (11,626)  $  (44,679)  $   13,239
Realized and unrealized investment losses (gains) not subject to taxation
   in Jersey ................................................................           4,880       30,550      (37,344)
Other losses not deductible in Jersey........................................           2,611          627        1,676
Losses not deductible in Guernsey............................................           2,970       15,141       23,171
Taxes on income (benefits on losses) at higher than 20% statutory
   Jersey rate:
   Net income (loss) on continuing operations in the U.S.....................          (1,277)         148         (908)
Non-deductible compensation in the U.S.......................................               -        1,012          383
Exercise of employee stock options (additional paid-in capital
   adjustment)...............................................................               -            -       (1,809)
Adjustment of prior years' provisions........................................          (1,563)          59         (251)
Increase (decrease) in valuation allowance ..................................          23,958       (2,660)       1,920
Less: valuation allowance related to discontinued operations.................         (16,309)           -            -
Other........................................................................             434          450          124

                                                                                   ----------   ----------   ----------
Actual tax expense for continuing operations ................................      $    4,078   $      648   $      201
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
</TABLE>

       The components of the actual tax expense for continuing operations are as
follows:
<TABLE>
<CAPTION>

                                                                                         Years Ended December 31,
                                                                                   ------------------------------------
                                                                                      2002        2001        2000
                                                                                   ----------   ----------   ----------
                                                                                             (In thousands)
<S>                                                                                <C>          <C>          <C>
Jersey, Guernsey and United Kingdom:
   Current tax expense (benefit).............................................      $     (671)  $    1,601   $    1,549
   Deferred tax expense......................................................               -            -            -

United States:
   Current tax expense (benefit).............................................            (755)         128       (1,078)
   Deferred tax expense (benefit)............................................           5,504       (1,081)        (270)

                                                                                   ----------   ----------   ----------
Total actual tax expense.....................................................      $    4,078   $      648   $      201
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------

       The  components  of the actual tax  expense  (benefit)  for  discontinued
operations are as follows:

United States:
   Current tax expense (benefit).............................................      $   (8,307)  $    8,635   $   (5,416)
   Deferred tax expense (benefit)............................................             577      (65,726)     (12,232)
                                                                                   ----------   ----------   ----------
                                                                                   $   (7,730)  $  (57,091)  $  (17,648)
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
</TABLE>
                                       68
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       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 assets existed as of December 31,
2001 in the U.S.  subsidiaries of continuing  operations which file consolidated
federal tax returns for two  separate  groups.  As of December  31,  2002,  full
valuation  allowances  were provided on the net deferred tax assets of both U.S.
tax groups due to the uncertainty of generating future taxable income or capital
gains to benefit from the deferred tax assets. The net increase in the valuation
allowance  during  2002  was  $23,958,000   ($7,649,000  related  to  continuing
operations).
<TABLE>
<CAPTION>

                                                                                         December 31,
                                                                                   -----------------------
                                                                                      2002         2001
                                                                                   ----------   ----------
                                                                                        (In  thousands)
U.S. subsidiaries (continuing operations):

<S>                                                                                <C>          <C>
Deferred income tax assets:
Net operating loss carryforwards.................................................. $    8,539   $    5,713
Capital loss carryforwards........................................................     18,774        2,687
Unrealized losses on investments..................................................        376          186
Deferred compensation.............................................................        137        1,122
Other assets......................................................................         27           19
Valuation allowance...............................................................    (27,420)      (3,462)
                                                                                   ----------   ----------
Deferred income tax assets, net of valuation allowance............................        433        6,265

Deferred income tax liabilities:
Depreciation, amortization and other..............................................       (431)        (402)
Other liabilities ................................................................         (2)        (359)
                                                                                   ----------   ----------
                                                                                         (433)        (761)
                                                                                   ----------   ----------
Net deferred income tax assets - U.S. subsidiaries
   (continuing operations)........................................................ $        -   $    5,504
                                                                                   ----------   ----------
                                                                                   ----------   ----------
</TABLE>

       As of December 31, 2002, the U.S.  subsidiaries of continuing  operations
had pre-tax  federal net operating loss  carryforwards  of  approximately  $21.5
million expiring as follows:  approximately  $1.5 million from 2003 to 2012, and
approximately   $20.0  million  from  2020  to  2022.  These  subsidiaries  have
California  net operating  loss  carryforwards  of  approximately  $13.8 million
expiring as follows: approximately $0.5 million in 2004, and approximately $13.3
million from 2010 to 2012. The Group has recorded a full valuation allowance for
the deferred tax assets arising from these  carryforward  amounts as of December
31, 2002.

       LPLA, the U.S. life insurance subsidiary (discontinued  operations),  had
net deferred tax assets of $17,804,000  as of December 31, 2001 and  $18,031,000
as of June 30, 2002. LPLA files a separate U.S. federal tax return.

                                       69
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14.    Shareholders' Equity

       The Company has authorized 86,400,000 Ordinary Shares with a par value of
$0.05 per  share.  As of  December  31,  2002 and 2001,  there  were  64,439,073
Ordinary Shares issued and outstanding.

       A final dividend for 2001 of $0.05 gross per Ordinary Share ($0.04 net of
20% Jersey tax) and $0.40 per ADS (net of 20% Jersey tax) or $2,032,000 in total
was declared and paid during 2002. Total dividends  declared and paid were $0.29
gross per Ordinary  Share  ($0.232 net of 20% Jersey tax) and $2.32 per ADS (net
of 20% Jersey tax) during each of the years ended December 31, 2001 and 2000, or
$11,802,000 and $11,625,000, respectively, in total. Dividends per ADS have been
restated to reflect the one-for-ten reverse split in June 2002.

       Accumulated other comprehensive income (loss) consists of two components,
foreign currency translation  adjustments and net unrealized gains and losses on
available-for-sale   securities.   Accumulated   foreign  currency   translation
adjustments were  $(717,000),  $(157,000) and $(42,000) as of December 31, 2002,
2001 and 2000,  respectively.  The net unrealized  losses on  available-for-sale
securities after deferred policy  acquisition cost amortization  adjustments and
income taxes were  $(1,896,000),  $(9,749,000) and  $(25,202,000) as of December
31, 2002, 2001 and 2000,  respectively.  Of these amounts,  $0, $(9,154,000) and
$(24,989,000)  related to discontinued  operations as of December 31, 2002, 2001
and 2000, respectively.

       The Group has two share  incentive  plans as  described in Note 18 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,
                                       ----------------------------------------------------------------------------
                                                  2002                      2001                       2000
                                       -----------------------   -----------------------   ------------------------
                                           ESOT         ALOT          ESOT         ALOT         ESOT         ALOT
                                       ----------   ----------   ----------   ----------   ----------    ----------
                                                                       (In thousands)

<S>                                        <C>             <C>       <C>             <C>       <C>              <C>
Shares held as of January 1 ..........     13,260          438       12,374          438       14,682           650
Purchased ............................          -            -        1,027            -          694             -
Exercised ............................        (13)           -         (141)           -       (3,214)            -
Transferred between trusts ...........          -            -            -            -          212          (212)
                                       ----------   ----------   ----------   ----------   ----------    ----------
Shares held as of December 31.........     13,247*         438       13,260*         438       12,374*          438
                                       ----------   ----------   ----------   ----------   ----------    ----------
                                       ----------   ----------   ----------   ----------   ----------    ----------
<FN>
*  834,000,  834,000  and  604,000  were  held in ADR form for the  years  ended
December 31, 2002, 2001 and 2000, respectively.
</FN>
</TABLE>
                                       70
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Warrants

       On November 11, 2002, the Company agreed to grant  1,933,172  warrants to
subscribe  for the Company's  Ordinary  Shares to Bank of Scotland in connection
with the extension of the Group's credit facility.  The warrants were granted on
February  14, 2003 and have an  exercise  price of  (pound)0.1143  (based on the
average of the closing prices of the Ordinary  Shares over the trading days from
November 1, 2002 through  November 11,  2002),  which was higher than the market
price of (pound)0.09 on November 11, 2002. These warrants are exercisable at any
time  prior to  February  14,  2010 and their fair  value was  determined  to be
$251,125,  based on a risk-free rate of 2.80%, volatility of 179% and a dividend
yield of zero.  The  Company  recognized  $30,625 of expense  relating  to these
warrants in 2002.  The balance of $220,500  will be recognized as an expense pro
rata in 2003, with the corresponding entries to additional paid in capital.


Note 15.    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 in the
continuing operations was $1,085,000,  $933,000 and $792,000 for the years ended
December 31, 2002, 2001 and 2000, respectively.

       Future minimum lease payments required under capital and  non-cancellable
operating  leases with terms of one year or more, as of December 31, 2002,  were
as follows:
<TABLE>
<CAPTION>

                                                                                       Capital        Operating
                                                                                       Leases          Leases
                                                                                     -----------     -----------
                                                                                              (In thousands)

<C>                                                                                    <C>              <C>
2003 .............................................................................     $     166        $   455
2004 .............................................................................            65            490
2005 .............................................................................            29            483
2006..............................................................................             2            453
2007..............................................................................             -            425
2008 and thereafter ..............................................................             -            526
                                                                                     ------------      ---------
Total ............................................................................           262         $2,832
                                                                                                       ---------
                                                                                                       ---------
Less amounts representing interest ...............................................           (18)
                                                                                     ------------
Present value of net minimum lease payments ......................................      $    244
                                                                                     ------------
                                                                                     ------------
</TABLE>
       Commitments  eliminated as a result of the actions of the North  Carolina
Department of Insurance  ("NCDOI")  with respect to LPLA (as described in Note 1
"Material   Events")  for   operating  and  capital   lease   commitments   were
approximately $10.8 million and $0, respectively.

                                       71
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Guarantees and Letters of Credit

       For  disclosure of guarantees  and letters of credit,  see Note 12 to the
Consolidated Financial Statements.

       In the course of the administration of LPLA in rehabilitation,  the NCDOI
requested information  concerning the history of a limited number of investments
in securities of portfolio  companies  during  November  2002.  These  portfolio
investments  have  been  associated  with LPLA for more than  seven  years,  and
involve intercompany transfers.  The history of their investment performance and
ownership is complex. The Company has complied with these requests.  The Company
is not able at this time to predict what  conclusions the NCDOI will reach after
evaluation of this information.

       The Group is involved in various legal proceedings,  including claims for
damages from clients of a nature  considered to be normal to its  business.  The
Company believes the ultimate  settlement or other resolution of the claims will
not materially affect its consolidated financial position, results of operations
or cash flows.


Note 16.   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, estimated
fair value is based on valuation  methodologies  performed by management,  which
evaluate company, industry,  geographical and overall equity market factors that
would influence the security's fair value.

       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.

       Considerable  judgment 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.

                                       72
<PAGE>


                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

                                                                              December 31,
                                                 ------------------------------------------------------------------
                                                                2002                               2001
                                                 --------------------------------  --------------------------------
                                                     Carrying        Estimated        Carrying          Estimated
                                                       Value        Fair Value          Value          Fair Value
                                                 ---------------  ---------------  ---------------  ---------------
                                                                           (In thousands)
<S>                                                  <C>              <C>             <C>               <C>
Financial assets:
Cash and cash equivalents .......................    $    16,272      $    16,272      $    61,317      $    61,317
Investments:
   Fixed maturities:
       Available-for-sale........................         30,335           30,335          117,701          117,701
       Held-to-maturity..........................              -                -              871              871
   Equity securities:
       Trading...................................         16,505           16,505           67,617           67,617
       Available-for-sale........................          7,233            7,233           15,303           15,303

Financial liabilities:
Life insurance policy liabilities ...............         35,441           35,430          131,831          127,409
Notes payable....................................          9,314            9,314           36,874           36,874

</TABLE>

       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  actively  traded  fixed  maturity
securities classified as available-for-sale  and held-to-maturity were generally
based upon  quoted  market  prices.  Fair  values  for  private  corporate  debt
securities  were based on the results of  valuation  methodologies  performed by
management.

Equity Securities:

a) Trading Securities:  Fair values 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 based upon the  results of  management's  valuation
methodologies, including analysis of company, industry, geographical and overall
equity market factors which influence fair value.

Life Insurance  Policy  Liabilities:  The balance sheet caption "life  insurance
policy liabilities" includes investment-type insurance contracts (i.e., deferred
annuities). The estimated fair values of deferred annuity policies were based on
their 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.

                                       73
<PAGE>


                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 17.    Employee Benefit Plan

1993 Deferred Compensation Plan

       Until June 2002,  the Group  sponsored a deferred  compensation  plan for
certain U.S. employees. It was 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  elected to
defer payment of all or a portion of their  compensation  and then to invest in,
on a "phantom"  basis,  securities  which  mirrored the  performance  of private
investments  made by the  Group.  The  participants  did not own the  underlying
securities  and did not  risk  their  original  principal  amount  deemed  to be
invested in the underlying securities. The plan was terminated in June 2002, and
all participating employees elected to take cash distributions from the plan.

       The Group's liability under this plan was as follows:
<TABLE>
<CAPTION>

                                                                                         December 31,
                                                                                   -----------------------
                                                                                      2002          2001
                                                                                   ----------   ----------
                                                                                        (In  thousands)
<S>                                                                                <C>          <C>
Employee deferrals and realized appreciation of underlying investments
   credited to participants....................................................... $        -   $    2,227
Unrealized appreciation of underlying investments not yet credited to
   participants...................................................................          -           20
                                                                                   ----------   ----------
Deferred compensation liability .................................................. $        -   $    2,247
                                                                                   ----------   ----------
                                                                                   ----------   ----------
</TABLE>

       The Group recognized  expense related to this deferred  compensation plan
of $1,428,000 for the year ended December 31, 2000. For the years ended December
31,  2002 and 2001 there were  credits  to  expense  of  $12,000  and  $658,000,
respectively,  due  to  the  reversal  of  unrealized  appreciation  on  certain
underlying listed investments.


Note 18.    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 Employee Share Option Trust ("ESOT"), which
was approved by shareholders in 1990, 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
generally  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.

                                       74
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       The ESOT may purchase  shares of the Company in the open  market,  funded
each  year by a loan from the  Company  or its  subsidiaries.  While the loan is
limited  up to an annual  maximum  of 5% of the  consolidated  net assets of the
Group,  the ESOT is not limited as to the number of options that may be granted.
The loan is secured by the shares held in the trust,  is interest  free,  and is
eliminated in the  consolidated  financial  statements.  The ESOT has waived its
entitlement  to dividends on any shares  held.  See Note 14 to the  Consolidated
Financial Statements for a summary of the share activity within the ESOT.

       Share  option  activity for the years ended  December 31, 2002,  2001 and
2000 was as follows:
<TABLE>
<CAPTION>

                                                           2002                  2001                  2000
                                                   -------------------   ------------------   --------------------
                                                             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......................    13,263   $  4.59      12,213   $  4.32      15,256    $ 3.61
Granted..........................................     5,165      0.32       2,388      5.19(1)      431     19.55
Exercised........................................       (13)     3.26        (141)     3.13      (3,214)     2.62
Forfeited........................................    (4,496)     4.35         (89)    12.44        (160)    12.59
Expired..........................................      (344)     2.42      (1,108)     2.48        (100)     2.50
                                                   --------  --------    --------  --------    --------  --------
Outstanding as of December 31....................    13,575   $  3.10      13,263   $  4.59      12,213    $ 4.32
                                                   --------  --------    --------  --------    --------  --------
                                                   --------  --------    --------  --------    --------  --------

Options exercisable as of December 31............     9,297   $  4.13      11,757   $  4.44       9,632    $ 4.05
                                                   --------  --------    --------  --------    --------  --------
                                                   --------  --------    --------  --------    --------  --------

<FN>
(1) Of the options  granted  during  2001,  those  granted at market price had a
weighted  average  exercise price of $5.44 and those granted at less than market
price had a weighted average exercise price of $2.46. All options granted during
2002 and 2000 were granted at market price.
</FN>
</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." In accordance with APB 25, the Group
recorded  compensation expense relating to stock options of $530,000 in 2001 and
$2,943,000 in 2000. This expense represented the difference between the exercise
price of options and the market  value of the  underlying  shares at the date of
grant or  modification  and was  recognized  in full as all  options  were fully
vested.  The Group extended the expiration date on 310,000  outstanding  options
during 2000.  Of the options  modified,  250,000 were extended for an additional
three years from the original date of  expiration,  and 60,000 were extended for
an additional ten years from the date of modification.

       See Note 3 for a  reconciliation  of net income (loss) as reported and as
adjusted under SFAS 123.

                                       75
<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, 2002 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)

<C>                            <C>              <C>              <C>                          <C>            <C>
$ 0.10 - $0.50                  4,290            9.63             $0.30                        300            $0.43
  0.51 -  5.00                  6,483            1.91              3.31                      6,435             3.30
  5.01 - 10.00                  2,576            7.57              5.78                      2,399             5.69
 10.01 - 21.00                    226            7.67             19.19                        163            20.30
--------------        ---------------     -----------      ------------            ---------------     ------------
$0.10 - $21.00                 13,575            5.52             $3.10                      9,297            $4.13
--------------        ---------------     -----------      ------------            ---------------     ------------
--------------        ---------------     -----------      ------------            ---------------     ------------
</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
LPLA. The ALOT was  established  in 1997 without  shareholders'  approval.  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. Given that LPLA
is under the  administrative  supervision  of the NCDOI and is no longer selling
policies, the status of these awards is unclear.

       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 14 to the Consolidated Financial Statements for a
summary of the share activity within the ALOT.

                                       76
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       SAR activity for the years ended December 31, 2002,  2001 and 2000 was as
follows:
<TABLE>
<CAPTION>


                                                          2002                   2001                  2000
                                                ----------------------  ---------------------  ---------------------
                                                             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......................       404      $3.73        438      $3.71         576      $3.65
Granted..........................................         -          -          -          -           -          -
Exercised........................................         -          -        (10)      3.46        (109)      3.50
Forfeited........................................       (16)     $3.88        (24)      3.41         (29)      3.35
                                                ------------ ---------  ---------- ----------  ---------- ----------
Outstanding as of December 31....................       388      $3.73        404      $3.73         438      $3.71
                                                ------------ ---------  ---------- ----------  ---------- ----------
                                                ------------ ---------  ---------- ----------  ---------- ----------

Award units exercisable as of December 31........       284      $3.62        173      $3.64          68      $3.62
                                                ------------ ---------  ---------- ----------  ---------- ----------
                                                ------------ ---------  ---------- ----------  ---------- ----------
</TABLE>

       Summary information about the Group's SARs outstanding as of December 31,
2002 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)

  <C>                             <C>            <C>              <C>                          <C>            <C>
  $        3.35                   309            1.99             $3.35                        243            $3.35
           5.19                    79            3.28              5.19                         41             5.19
-------------------   ---------------      ----------     -------------             --------------     ------------
  $3.35 - $5.19                   388            2.25             $3.73                        284            $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,  upon  exercise of the
awards,  compensation  expense of $0, $20,000 and $1,943,000 for the years ended
December  31,  2002,  2001  and  2000,  respectively,   was  recognized  in  the
consolidated income statements as part of the loss from discontinued operations.
This compensation  expense was capitalized in the consolidated balance sheets as
deferred policy  acquisition  costs,  in accordance with the Group's  accounting
policy as stated in Note 3 to the Consolidated Financial Statements.

                                       77
<PAGE>


                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 19.     Pension Plans

Jersey Plan

       The Group  provides a defined  benefit  pension plan for Jersey,  Channel
Islands,  employees. The plan provides benefits on retirement at age sixty based
on one sixtieth of an employee's  final average salary over the employee's  last
three  years of  employment  for each full year of service,  and life  insurance
coverage  for  current  employees.  There  are nine  individuals  (five  current
employees and four  ex-employees)  who are entitled to future benefits under the
plan. The plan is funded by contributions from the Group. The assets of the plan
are held in a trust for the  benefit  of the  employees  and are  managed  by an
external asset manager.

       An actuarial valuation by an independent actuary, including a funding and
contribution review, is required every three years. The last actuarial valuation
was carried out as of December  31,  2000.  At that time the trust had assets of
$1,153,000 and the actuarial  valuation of past service ongoing  liabilities was
$1,746,000,  indicating  a past service  deficit of $593,000 in the plan.  There
were, as at that date,  twelve  individuals  (nine  current  employees and three
ex-employees)  who were entitled to future  benefits under the plan. The company
funding  rate prior to the  valuation  was 20% of  participants'  salaries.  The
actuary  recommended  that  the  past  service  deficit  be  made  up  and  that
contributions  be increased to 21.5% of  participants'  salaries to cover future
liabilities. Additional contributions, sufficient to cover the deficit indicated
in the actuarial valuation, were made to the trust during 2002 and contributions
on salaries were  increased to 21.5%  effective  from the beginning of 2001. The
next actuarial valuation will be carried out as of December 31, 2003.

       Contributions  of $731,000,  $361,000 and $189,000 were made to the trust
in 2002, 2001 and 2000, respectively.  Assets held by the trust were $1,721,000,
$1,247,000 and $1,153,000 as of December 31, 2002, 2001 and 2000, respectively.

U.K. Plan

       The Group provides a defined contribution plan for U.K. employees.  There
is currently one  participant in the plan. The Group has no ongoing  liabilities
associated with the plan.  Contributions  of $143,000,  $52,000 and $17,000 were
made to the plan in 2002, 2001 and 2000, respectively. Of the 2002 contribution,
$94,000 was offset by a salary waiver.


Note 20.    Earnings Per Share and ADS

       Earnings per ADS are equivalent to ten times earnings per Ordinary Share,
following  the  one-for-ten  reverse  split in June 2002.  All ADS amounts shown
below have been restated to reflect this split.

                                       78
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       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,
                                                                                   ------------------------------------
                                                                                      2002           2001          2000
                                                                                   ----------   ----------   ----------
                                                                                  (In thousands, except share, per share
                                                                                            and ADS amounts)

<S>                                                                                <C>          <C>          <C>
Income (loss) from continuing operations...............................            $  (62,210)  $ (224,045)  $   65,995
Loss on discontinued operations........................................              (143,294)    (120,739)     (33,538)
                                                                                   ----------   ----------   ----------
Net income (loss)......................................................            $ (205,504)  $ (344,784)  $   32,457
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
Basic earnings (loss) per share and ADS:
Weighted average number of Ordinary Shares outstanding,
  excluding shares held by the employee benefit trusts.................            50,753,084   50,984,146   50,794,731
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
Basic earnings (loss) per share:
Continuing operations .................................................            $    (1.23)  $    (4.39)  $     1.30
Discontinued operations................................................                 (2.82)       (2.37)       (0.66)
                                                                                   ----------   ----------   ----------
                                                                                   $    (4.05)  $    (6.76)  $     0.64
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
Basic earnings (loss) per ADS:
Continuing operations..................................................            $   (12.26)  $   (43.94)  $    12.99
Discontinued operations................................................                (28.23)      (23.68)       (6.60)
                                                                                   ----------   ----------   ----------
                                                                                   $   (40.49)  $   (67.62)  $     6.39
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------

Diluted earnings (loss) per share and ADS:
Weighted average number of Ordinary Shares outstanding,
  excluding shares held by the employee benefit trusts................             50,753,084   50,984,146   50,794,731
Effect of dilutive securities (warrants and employee share options) ..                      -            -    9,932,897
                                                                                   ----------   ----------   ----------
Weighted average number of Ordinary Shares used in diluted
  earnings per share calculations.....................................             50,753,084   50,984,146   60,727,628
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
Diluted earnings (loss) per share:
Continuing operations .................................................            $    (1.23)  $    (4.39)  $     1.09
Discontinued operations................................................                 (2.82)       (2.37)       (0.55)
                                                                                   ----------   ----------   ----------
                                                                                   $    (4.05)  $    (6.76)  $     0.54
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
Diluted earnings (loss) per ADS:
Continuing operations..................................................            $   (12.26)  $   (43.94)  $    10.87
Discontinued operations................................................                (28.23)      (23.68)       (5.52)
                                                                                   ----------   ----------   ----------
                                                                                   $   (40.49)  $   (67.62)  $     5.35
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
</TABLE>
                                       79
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       As the Group  recorded a net loss for the years ended  December  31, 2002
and 2001, the  calculation of diluted  earnings per share for these years do not
include potentially  dilutive employee share options and warrants issued to Bank
of Scotland as they are anti-dilutive and, if included, would have resulted in a
reduction  of the net loss per share.  If the Group had  reported net income for
the years ended December 31, 2002 and 2001,  there would have been an additional
347,258 and 3,022,963  shares,  respectively,  included in the  calculations  of
diluted earnings per share for these years.


Note 21.    Transactions with Related Parties

       The Group paid legal fees of approximately $130,000, $60,000 and $418,000
during  2002,  2001 and  2000,  respectively,  to a law firm of which one of its
directors, Victor A. Hebert, is a member.


Note 22.    Business Segment and Geographical Information

       The Group's reportable operating segments are classified according to its
principal  businesses,  which are the  following:  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, 2002,  2001 and
2000, there were included in the asset management and venture capital management
segments,  portfolio  management  fees from LPLA  (discontinued  operations)  of
$3,632,000,   $11,831,000  and   $10,240,000,   respectively.   These  portfolio
management  fees are included in the revenues of continuing  operations and have
not been eliminated in the consolidated  financial statements.  These management
fees were  approved by the  insurance  regulatory  body in LPLA's U.S.  state of
domicile.

       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,
                                                                                   ------------------------------------
                                                                                      2002         2001         2000
                                                                                   -----------  ----------   ----------
                                                                                            (In  thousands)

<S>                                                                                <C>          <C>          <C>
Jersey.................................................................            $  (22,215)  $ (145,358)  $  181,516
Guernsey...............................................................               (13,671)     (59,268)     (99,098)
United States..........................................................                24,007       35,678       36,125
                                                                                   ----------   ----------   ----------
Consolidated revenues and net investment gains (losses)
    for continuing operations..........................................            $  (11,879)  $ (168,948)  $  118,543
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
</TABLE>
                                       80
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

       Total assets by geographic segment were as follows:
<TABLE>
<CAPTION>
                                                                                                     December 31,
                                                                                                -----------------------
                                                                                                   2002         2001
                                                                                                ----------   ----------
                                                                                                    (In  thousands)

<S>                                                                                             <C>          <C>
Jersey.............................................................................             $   52,221   $   50,319
Guernsey...........................................................................                  8,148      166,657
United States......................................................................                 19,844       67,642
                                                                                                ----------   ----------
Consolidated total assets - continuing operations .................................             $   80,213      284,618
                                                                                                ----------
                                                                                                ----------
Discontinued operations (United States)............................................                           2,254,508
Elimination due to intercompany balances...........................................                              (2,798)
                                                                                                             ----------
Consolidated total assets as previously reported ..................................                          $2,536,328
                                                                                                             ----------
                                                                                                             ----------

</TABLE>

       Revenues and income (loss) before income taxes for the Group's reportable
operating  segments  included in continuing  operations,  based on  management's
internal reporting structure, were as follows:
<TABLE>
<CAPTION>


                                                                                        Years Ended December 31,
                                                                                   ------------------------------------
                                                                                      2002         2001         2000
                                                                                   ----------   ----------   ----------
                                                                                             (In  thousands)
<S>                                                                                <C>          <C>          <C>
Revenues:
Life insurance and annuities (1), (2) .................................            $   (9,349)  $ (155,673)  $  185,680
Financial advisory services............................................                16,184       18,627       22,952
Asset management (2) ..................................................                 5,256        6,764        7,799
Venture capital management (3) ........................................               (24,519)     (40,670)     (99,462)
                                                                                   ----------   ----------   ----------
                                                                                      (12,428)    (170,952)     116,969
Reconciliation of segment amounts to consolidated amounts:
Interest income .......................................................                   549        2,004        1,574
                                                                                   ----------   ----------   ----------
Consolidated revenues and net investment gains (losses)
    for continuing operations..........................................            $  (11,879)  $ (168,948)  $  118,543
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------


Income (loss) from continuing operations before income taxes:
Life insurance and annuities (1), (2)..................................            $  (19,637)  $ (163,873)  $  183,857
Financial advisory services ...........................................                (4,211)      (3,638)      (2,261)
Asset management (2)...................................................                   615        1,533        1,778
Venture capital management (3) ........................................               (28,149)     (51,262)    (110,444)
                                                                                   ----------   ----------   ----------
                                                                                      (51,382)    (217,240)      72,930
Reconciliation of segment amounts to consolidated amounts:
Interest income .......................................................                   549        2,004        1,574
Corporate expenses ....................................................                (5,870)      (5,634)      (7,333)
Goodwill amortization and write-offs...................................                  (396)        (221)        (248)
Interest expense (4)...................................................                (1,033)      (2,306)        (727)
                                                                                   ----------   ----------   ----------
Consolidated income (loss) from continuing operations
    before income taxes ...............................................            $  (58,132)  $ (223,397)  $   66,196
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
</TABLE>
                                       81
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) Netted  against the revenues  (investment  income) of the life insurance and
annuities  segment are management fees paid to the asset  management  segment of
$39,000, $47,000 and $9,000 in 2002, 2001 and 2000, respectively.

(2) Included in the revenues of the asset management segment are management fees
from the life insurance and annuities segment of $39,000,  $47,000 and $9,000 in
2002, 2001 and 2000, respectively. In addition, revenues of the asset management
segment also included management  fees from LPLA  (discontinued  operations)  of
$724,000, $1,907,000 and $2,766,000 in 2002, 2001 and 2000, respectively.

(3)  Included  in the  revenues of the venture  capital  management  segment are
management fees from LPLA  (discontinued  operations) of $2,908,000,  $9,924,000
and $7,474,000 in 2002, 2001 and 2000, respectively.

(4)  Included  in  interest  expense  is  interest  paid to  LPLA  (discontinued
operations)   of  $30,000,   $58,000  and  $55,000  in  2002,   2001  and  2000,
respectively.


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

                                                                                         December 31,
                                                                                   -----------------------
                                                                                      2002         2001
                                                                                   ----------   ----------
                                                                                       (In  thousands)
<S>                                                                                <C>          <C>
Assets:
Life insurance and annuities.....................................................  $   51,557   $  165,190
Financial advisory services......................................................       6,394       10,199
Asset management.................................................................       8,197        8,334
Venture capital management.......................................................       7,710       46,253
Corporate and other..............................................................       6,355       54,642
                                                                                   ----------   ----------
Consolidated total assets - continuing operations ...............................  $   80,213      284,618
                                                                                   ----------
                                                                                   ----------
Discontinued operations (U.S. life insurance and annuities)........................              2,254,508
Elimination due to intercompany balances...........................................                 (2,798)
                                                                                                ----------
Consolidated total assets as previously reported ..................................             $2,536,328
                                                                                                ----------
                                                                                                ----------
</TABLE>
                                       82
<PAGE>



                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 23.    Selected Quarterly Financial Information (Unaudited)

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

                                                                                     2002
                                                           ---------------------------------------------------------
                                                             First      Second      Third        Fourth      Full
                                                            Quarter     Quarter     Quarter     Quarter      Year
                                                           ---------   ---------   ---------   ---------   ---------
<S>                                                        <C>         <C>         <C>         <C>         <C>
Continuing operations:
Revenues including net investment gains (losses)........   $   1,781   $  (7,916)  $     (32)  $  (5,712)  $ (11,879)
Loss before income taxes ...............................     (10,492)    (21,454)    (11,800)    (14,386)    (58,132)
Net loss................................................     (11,305)    (23,333)    (11,619)    (15,953)    (62,210)

Discontinued operations:
Net loss................................................     (19,000)    (85,762)    (38,532)          -    (143,294)

Basic loss per share:
Continuing operations ..................................       (0.22)      (0.46)      (0.23)      (0.31)      (1.23)
Discontinued operations.................................       (0.37)      (1.69)      (0.76)          -       (2.82)
                                                           ---------   ---------   ---------   ---------   ---------
                                                               (0.59)      (2.15)      (0.99)      (0.31)      (4.05)
                                                           ---------   ---------   ---------   ---------   ---------
                                                           ---------   ---------   ---------   ---------   ---------
Basic loss per ADS(1):
Continuing operations ..................................       (2.23)      (4.60)      (2.29)      (3.14)     (12.26)
Discontinued operations.................................       (3.74)     (16.90)      (7.59)          -      (28.23)
                                                           ---------   ---------   ---------   ---------   ---------
                                                               (5.97)     (21.50)      (9.88)      (3.14)     (40.49)
                                                           ---------   ---------   ---------   ---------   ---------
                                                           ---------   ---------   ---------   ---------   ---------
Diluted loss per share:
Continuing operations ..................................       (0.22)      (0.46)      (0.23)      (0.31)      (1.23)
Discontinued operations.................................       (0.37)      (1.69)      (0.76)          -       (2.82)
                                                           ---------   ---------   ---------   ---------   ---------
                                                               (0.59)      (2.15)      (0.99)      (0.31)      (4.05)
                                                           ---------   ---------   ---------   ---------   ---------
                                                           ---------   ---------   ---------   ---------   ---------
Diluted loss per ADS(1):
Continuing operations ..................................       (2.23)      (4.60)      (2.29)      (3.14)     (12.26)
Discontinued operations.................................       (3.74)     (16.90)      (7.59)          -      (28.23)
                                                           ---------   ---------   ---------   ---------   ---------
                                                               (5.97)     (21.50)      (9.88)      (3.14)     (40.49)
                                                           ---------   ---------   ---------   ---------   ---------
                                                           ---------   ---------   ---------   ---------   ---------
<FN>
(1) ADS amounts have been restated to reflect the  one-for-ten  reverse split in
June 2002.
</FN>
</TABLE>
                                       83
<PAGE>

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>
                                                                                     2001
                                                           ---------------------------------------------------------
                                                             First      Second       Third       Fourth      Full
                                                            Quarter     Quarter     Quarter     Quarter      Year
                                                           ---------   ---------   ---------   ---------   ---------
<S>                                                        <C>         <C>         <C>         <C>         <C>
Continuing operations:
Revenues including net investment gains (losses)........   $(145,703)  $  51,074   $ (94,565)  $  20,246   $(168,948)
Income (loss) before income taxes ......................    (158,498)     36,758    (108,394)      6,737    (223,397)
Net income (loss).......................................    (158,737)     36,358    (107,370)      5,704    (224,045)

Discontinued operations:
Net loss................................................     (21,489)     (6,975)    (37,075)    (55,200)   (120,739)

Basic earnings (loss) per share:
Continuing operations ..................................       (3.08)       0.72       (2.12)       0.11       (4.39)
Discontinued operations.................................       (0.42)      (0.14)      (0.73)      (1.09)      (2.37)
                                                           ---------   ---------   ---------   ---------   ---------
                                                               (3.50)       0.58       (2.85)      (0.98)      (6.76)
                                                           ---------   ---------   ---------   ---------   ---------
                                                           ---------   ---------   ---------   ---------   ---------
Basic earnings (loss) per ADS(1):
Continuing operations ..................................      (30.79)       7.15      (21.16)       1.12      (43.94)
Discontinued operations.................................       (4.17)      (1.37)      (7.31)     (10.88)     (23.68)
                                                           ---------   ---------   ---------   ---------   ---------
                                                              (34.96)       5.78      (28.47)      (9.76)     (67.62)
                                                           ---------   ---------   ---------   ---------   ---------
Diluted earnings (loss) per share:
Continuing operations ..................................       (3.08)       0.67       (2.12)       0.11       (4.39)
Discontinued operations.................................       (0.42)      (0.13)      (0.73)      (1.09)      (2.37)
                                                           ---------   ---------   ---------   ---------   ---------
                                                               (3.50)       0.54       (2.85)      (0.98)      (6.76)
                                                           ---------   ---------   ---------   ---------   ---------
                                                           ---------   ---------   ---------   ---------   ---------
Diluted earnings (loss) per ADS(1):
Continuing operations ..................................      (30.79)       6.67      (21.16)       1.12      (43.94)
Discontinued operations.................................       (4.17)      (1.28)      (7.31)     (10.88)     (23.68)
                                                           ---------   ---------   ---------   ---------   ---------
                                                              (34.96)       5.39      (28.47)      (9.76)     (67.62)
                                                           ---------   ---------   ---------   ---------   ---------
                                                           ---------   ---------   ---------   ---------   ---------
<FN>
(1) ADS amounts have been restated to reflect the  one-for-ten  reverse split in
June 2002.
</FN>
</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.

                                       84
<PAGE>

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

       The information required by this Item is incorporated by reference to our
Form 8-K filed on June 26, 2002, containing  information announcing that on June
19, 2002,  PricewaterhouseCoopers notified us of its resignation as the auditors
for the Group.

       The information  required by this Item is also  incorporated by reference
to our Form 8-K filed on July 31, 2002,  containing  information  announcing the
appointment of BDO International and BDO Seidman,  LLP as auditors for the Group
with effect from July 31, 2002.


                                    PART III

       Certain  information  required by Part III is omitted from this Form 10-K
and is  incorporated  by reference to our  definitive  Proxy  Statement  for the
Annual  Meeting  of  Shareholders  to be held  on  June  12,  2003  (the  "Proxy
Statement"),  which will be filed with the SEC not later than 120 days after the
end of the fiscal year covered by this Form 10-K.


Item 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

       Our executive officers are as follows:

       Arthur  I.  Trueger,  Executive  Chairman:  Mr.  Trueger,  age 54, is the
founder and a principal  shareholder  of London  Pacific Group  Limited.  He has
worked for us for more than 26 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 48, has
held the position of Chief  Financial  Officer of London  Pacific  Group Limited
since he joined  us in 1990.  Mr.  Whitehead  is a member  of the  Institute  of
Chartered Accountants in England and Wales.

       Information  regarding our directors is  incorporated by reference to the
sections  entitled  "Proposal 2 - 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 AND
            RELATED STOCKHOLDER MATTERS

       The information regarding security ownership of certain beneficial owners
and management is incorporated by reference to the section entitled "Information
Regarding  Beneficial  Ownership  of  Principal   Shareholders,   Directors  and
Executive Officers" in the Proxy Statement.

                                       85
<PAGE>

       The following  table is a summary of selected  information for our equity
compensation plans as of December 31, 2002.

<TABLE>
<CAPTION>
                                                                                                Number of Shares
                                            Number of Shares to        Weighted Average   Remaining Available for
                                        be Issued Upon Exercise      Exercise Price of     Future Issuance Under
                                        of Outstanding Options,    Outstanding Options,       Equity Compensation
                                            Warrants and Rights     Warrants and Rights                    Plans
                                        ------------------------   --------------------   ------------------------

<S>                                                  <C>                         <C>                         <C>
Equity compensation plans
  approved by shareholders..............             13,575,312(1)                $3.10                      (1)

Equity compensation plans not
  approved by shareholders..............                388,100(1)                 3.73                      (1)
                                                     ----------                 -------
Total...................................             13,963,412                   $3.12
                                                     ----------                 -------
                                                     ----------                 -------
</TABLE>

(1) Our  equity  compensation  plans do not  contain  a limit on the  number  of
options that may be granted to  employees.  However,  the plans do not allow for
the  issuance  of  previously   authorized  and  unissued  shares  to  meet  the
obligations  of the plans upon an employee  option  exercise.  When an option is
granted, the trust that administers the plan borrows funds from us or one of our
subsidiaries  and uses those funds to purchase  the number of shares  underlying
the option  grant.  The maximum loan allowed in any given year is equal to 5% of
consolidated net assets as of the end of the previous fiscal year.

       Information  regarding the features of the equity  compensation  plan not
approved  by  shareholders  is  incorporated  by  reference  to  Note  18 to the
Consolidated  Financial Statements presented in Item 8 "Financial Statements and
Supplementary Data" of this Form 10-K.


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.

                                       86
<PAGE>
                                     PART IV

Item 14.    CONTROLS AND PROCEDURES

       We maintain  disclosure  controls  and  procedures  that are  designed to
ensure that  information  required  to be  disclosed  in our  filings  under the
Securities Exchange Act of 1934 is recorded, processed,  summarized and reported
within  the  periods  specified  in the rules and  forms of the  Securities  and
Exchange  Commission.  Such  information is accumulated and  communicated to our
management,  including our principal  executive officer and principal  financial
officer,   as  appropriate,   to  allow  timely  decisions   regarding  required
disclosure.  Our management,  including the principal  executive officer and the
principal financial officer, recognizes that any set of controls and procedures,
no matter how well designed and operated,  can provide only reasonable assurance
of achieving the desired control objectives.

       Within 90 days prior to the  filing  date of this  annual  report on Form
10-K,  we  carried  out an  evaluation,  under  the  supervision  and  with  the
participation of our management,  including our principal  executive officer and
principal financial officer, of the effectiveness of the design and operation of
our disclosure controls and procedures.  Based on such evaluation, our principal
executive officer and principal  financial officer concluded that our disclosure
controls and procedures are effective.

       There have been no  significant  changes in our  internal  controls or in
other factors that could  significantly  affect the internal controls subsequent
to the date of their  evaluation  in  connection  with the  preparation  of this
annual report on Form 10-K.


Item 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)    The following documents are filed as a part of this Form 10-K:

1.     Financial Statements:                                                Page

       The following  consolidated  financial  statements of us and subsidiaries
       are included in Item 8:
<TABLE>

          <S>                                                                <C>
          Reports of Independent Certified Public Accountants...............  37

          Consolidated Balance Sheets as of December 31, 2002 and 2001 .....  39

          Consolidated Statements of Income for the Years Ended
              December 31, 2002, 2001 and 2000 .............................  40

          Consolidated Statements of Cash Flows for the Years Ended
              December 31, 2002, 2001 and 2000 .............................  42

          Consolidated Statements of Changes in Shareholders' Equity for
              the Years Ended December 31, 2002, 2001 and 2000 .............  44

          Consolidated Statements of Comprehensive Income for the Years Ended
              December 31, 2002, 2001 and 2000 .............................  46

          Notes to the Consolidated Financial Statements ...................  47

</TABLE>
                                       87
<PAGE>






2.     Financial Statement Schedules:                                       Page

       The  following  financial  statement  schedules of London  Pacific  Group
       Limited  and  subsidiaries  are  included  in this Form 10-K  immediately
       following Item 15 and should be read in conjunction with the consolidated
       financial statements and notes thereto included in Item 8:
<TABLE>

          <S>                                                                <C>
          Schedule I - Summary of Investments - Other Than Investments
              in Related Parties ...........................................  91

          Schedule II - Condensed Financial Information of Registrant

              Condensed Balance Sheets as of December 31, 2002 and 2001 ....  92

              Condensed Statements of Income for the Years Ended
                 December 31, 2002, 2001 and 2000 ..........................  93

              Condensed Statements of Cash Flows for the Years Ended
                 December 31, 2002, 2001 and 2000 ..........................  94

              Note to Condensed Financial Statements .......................  95

          Schedule III - Supplementary Insurance Information ...............  96
</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.


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 our Form  10-Q for the  quarter  ended  June 30,
          2000).

4.1       Specimen Ordinary Share  certificate  (filed previously as Exhibit 4.1
          to our Form 10-K for the year ended December 31, 2000).

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 us, 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 our
          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 us  covering  the  Basic  Administration  Charge  relating  to the
          Deposit  Agreement  (shown above as Exhibit 4.2) (filed  previously as
          Exhibit 3.8 to our Post-Effective  Amendment No. 2 to our Registration
          Statement on Form 20-F/A dated August 31, 1993).

                                       88
<PAGE>


4.4       Form of Deposit Agreement as amended and restated as of June 24, 2002,
          among  us,  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 4.4 to our Form 10-Q for the
          quarter ended June 30, 2002).

10.1.1    Multicurrency Term Facility Agreement dated May 2, 2000 between us and
          the Governor and Company of the Bank of Scotland (filed  previously as
          Exhibit  10.1.1 to our Form 10-Q for the quarter  ended  September 30,
          2000).

10.1.2    Term Loan and Guarantee Facility of up to $23,000,000,  dated December
          20,  2002  between  us and the  Governor  and  Company  of the Bank of
          Scotland.

10.2.1    Settlement  dated  February  16,  1990 among (1) us,  (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 our 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.

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.

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.

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.

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.

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 our
          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 our Form 10-Q for the quarter  ended  September 30,
          2000).

10.3.1(1) Agreement  dated  July 1, 1990  between us and Ian  Kenneth  Whitehead
          (filed  previously  as  Exhibit  10.3.1  to our Form 10-K for the year
          ended December 31, 2000).

10.3.2(1) Berkeley  (USA)  Holdings  Limited  Amended and Restated 1993 Deferred
          Compensation Plan dated December 16, 1999 (filed previously as Exhibit
          10.3.2 to our Form 10-K for the year ended December 31, 2000).

                                       89
<PAGE>

10.3.3(1) London Pacific Advisers Limited  Retirement Scheme  confirmation dated
          December  5,  2000 for Ian  Kenneth  Whitehead  (filed  previously  as
          Exhibit 10.3.3 to our Form 10-K for the year ended December 31, 2001).

10.4.1    Settlement  dated May 23, 1997 among BG Services  Limited and A.L.O.T.
          Trustee Limited  establishing  Agent Loyalty  Opportunity Trust (filed
          previously  as  Exhibit  10.4.1  to our Form  10-K for the year  ended
          December 31, 2001).

10.4.2    Executed Deed dated July 16, 1997 by A.L.O.T. Trustee Limited relating
          to Agent Loyalty Opportunity Trust (filed previously as Exhibit 10.4.2
          to our Form 10-K for the year ended December 31, 2001).

10.4.3    Executed  Deed  dated  August 13,  1997 by  A.L.O.T.  Trustee  Limited
          relating to Agent  Loyalty  Opportunity  Trust  (filed  previously  as
          Exhibit 10.4.3 to our Form 10-K for the year ended December 31, 2001).

10.4.4    Executed  Deed  dated  August 20,  1998 by  A.L.O.T.  Trustee  Limited
          relating to Agent  Loyalty  Opportunity  Trust  (filed  previously  as
          Exhibit 10.4.4 to our Form 10-K for the year ended December 31, 2001).

10.4.5    Executed Deed of Amendment  and  Appointment  dated  December 11, 2001
          among  Berkeley  International  Capital  Limited and A.L.O.T.  Trustee
          Limited relating to Agent Loyalty  Opportunity Trust (filed previously
          as  Exhibit  10.4.5 to our Form 10-K for the year ended  December  31,
          2001).

21        Subsidiaries as of February 28, 2003.

99.1      Certification by our Executive Chairman pursuant to 18 U.S.C.  Section
          1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of
          2002.

99.2      Certification  by our Chief  Financial  Officer  pursuant to 18 U.S.C.
          Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
          Act of 2002.
____________

(1)        Management contract or compensatory  arrangement filed in response to
Item 15(a)(3) of the instructions to Form 10-K.



(b)    Reports on Form 8-K:

       No reports on Form 8-K were filed by us during the quarter ended December
       31, 2002.

(c)    The  exhibits  of us and our  subsidiaries  are  listed in Item  15(a)(3)
       above.

(d)    The financial  statement  schedules for us and our subsidiaries follow on
       pages 91 through 96.

                                       90
<PAGE>



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

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                             As of December 31, 2002

<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...................................  $            -   $            -  $           -
   States, municipalities and political subdivisions............               -                -              -
   Foreign governments..........................................               -                -              -
   Public utilities.............................................               -                -              -
   Convertibles and bonds with warrants attached................               -                -              -
   All other corporate bonds....................................          30,481           30,335         30,335
Redeemable preferred stock......................................               -                -              -
                                                                  --------------   --------------  -------------
Total fixed maturity securities.................................          30,481   $       30,335         30,335
                                                                  --------------   --------------  -------------
                                                                                   --------------
Equity securities:
Common stocks:
   Industrial, miscellaneous and all other......................          26,785           16,505         16,505
Non-redeemable preferred stocks.................................           8,983            7,233          7,233
                                                                  --------------   -----------------------------
Total equity securities.........................................          35,768   $       23,738         23,738
                                                                  --------------   -----------------------------
                                                                                   --------------
Total investments...............................................  $       66,249                   $      54,073
                                                                  --------------                   -------------
                                                                  --------------                   -------------

----------------------------
<FN>
(1)    Cost  of  fixed  maturity   securities  is  original  cost,   reduced  by
       other-than-temporary    impairments,    repayments   and   adjusted   for
       amortization  of premiums  and  accretion  of  discounts.  Cost of equity
       securities is original cost, reduced by other-than-temporary impairments.

(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.
</FN>
</TABLE>
                                       91
<PAGE>


           SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                          LONDON PACIFIC GROUP LIMITED
                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                           December 31,
                                                                                   -----------------------
                                                                                      2002       2001 (1)
                                                                                   ----------   ----------
                                                                              (In thousands, except share amounts)
                                     ASSETS

<S>                                                                                <C>           <C>
Cash and cash equivalents ....................................................     $       27   $    8,497
Investment in subsidiaries ...................................................        (74,519)      33,717
Intercompany balances ........................................................        121,720       65,777
Other assets .................................................................            620          563
Total assets and investments in discontinued operations.......................              -    2,254,508
                                                                                   ----------   ----------
Total assets .................................................................     $   47,848   $2,363,062
                                                                                   ----------   ----------
                                                                                   ----------   ----------


                      LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
Accounts payable and accruals ................................................     $      403   $    2,814
Guarantees under bank facility................................................         10,590            -
Intercompany balances ........................................................         15,369        2,613
Total liabilities of discontinued operations..................................              -    2,135,982
                                                                                   ----------   ----------
Total liabilities ............................................................         26,362    2,141,409
                                                                                   ----------   ----------
Commitments and contingencies

Shareholders' equity:
Ordinary shares, $0.05 par value per share: 86,400,000 shares authorized;
   64,439,073 shares issued and outstanding as of December 31, 2002
   and 2001...................................................................          3,222        3,222
Additional paid-in capital ...................................................         68,394       68,346
Retained earnings ............................................................         16,054      223,590
Employee benefit trusts, at cost (13,684,881 and 13,698,181 shares as of
   December 31, 2002 and 2001, respectively) .................................        (63,571)     (63,599)
Accumulated other comprehensive loss .........................................         (2,613)      (9,906)
                                                                                   ----------   ----------
Total shareholders' equity ...................................................         21,486      221,653
                                                                                   ----------   ----------
Total liabilities and shareholders' equity ...................................     $   47,848   $2,363,062
                                                                                   ----------   ----------
                                                                                   ----------   ----------
<FN>
(1)  Reclassifications  have been made related to discontinued  operations - see
Note 4 to the Consolidated  Financial  Statements in Item 8 of Form 10-K for the
year ended December 31, 2002.
</FN>
</TABLE>
            See accompanying Note to Condensed Financial Statements.
                                       92
<PAGE>

     SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

                          LONDON PACIFIC GROUP LIMITED
                         CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                                                                          Years Ended December 31,
                                                                                   ------------------------------------
                                                                                      2002        2001(1)    2000(1)
                                                                                   ----------   ----------   ----------
                                                                                              (In thousands)
<S>                                                                                <C>          <C>          <C>
Revenues:
Investment income..........................................................        $      128   $      605   $    1,092
Interest and fees from subsidiaries, net (2)...............................               307       15,047       15,994
Financial advisory services, asset management and other fee income.........                 -            -        2,092
Distribution from subsidiary (2)...........................................                 -       52,462            -
Net realized investment losses.............................................           (10,827)           -            -
                                                                                   ----------   ----------   ----------
                                                                                      (10,392)      68,114       19,178
Expenses:
Staff costs................................................................             2,277        3,180        5,944
Escrow release.............................................................              (100)        (100)      (1,000)
Other operating expenses...................................................             2,840        2,579        3,488
                                                                                   ----------   ----------   ----------
                                                                                        5,017        5,659        8,432
                                                                                   ----------   ----------   ----------
Income (loss) before income tax expense and equity in
  undistributed net income (loss) of subsidiaries..........................           (15,409)      62,455       10,746

Income tax expense (benefit)...............................................              (683)       1,579        1,550
                                                                                   ----------   ----------   ----------
Income before equity in undistributed net income (loss) of
  subsidiaries.............................................................           (14,726)      60,876        9,196

Equity in undistributed net income (loss) of subsidiaries (2)..............          (190,317)    (284,921)      56,799
                                                                                   ----------   ----------   ----------
Income (loss) from continuing operations ..................................          (205,043)    (224,045)      65,995
                                                                                   ----------   ----------   ----------

Discontinued operations:
Loss on disposal of discontinued operations, net of income tax
   benefit of $0...........................................................              (461)           -            -
Equity in undistributed net loss of discontinued operations (2)............                 -     (120,739)     (33,538)
                                                                                   ----------   ----------   ----------
Loss on discontinued operations............................................              (461)    (120,739)     (33,538)
                                                                                   ----------   ----------   ----------

Net income (loss) .........................................................        $ (205,504)  $ (344,784)  $   32,457
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
<FN>
(1)  Reclassifications  have been made related to discontinued  operations - see
Note 4 to the Consolidated  Financial  Statements in Item 8 of Form 10-K for the
year ended December 31, 2002.

(2) Eliminated on consolidation.
</FN>
</TABLE>
            See accompanying Note to Condensed Financial Statements.
                                       93
<PAGE>




     SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

                          LONDON PACIFIC GROUP LIMITED
                       CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>


                                                                                          Years Ended December 31,
                                                                                   ------------------------------------
                                                                                      2002        2001(1)      2000(1)
                                                                                   ----------   ----------   ----------
                                                                                              (In thousands)
<S>                                                                                <C>          <C>          <C>
Cash flows from continuing operating activities:
Net income (loss)............................................................      $ (205,043)  $ (224,045)  $   65,995

Adjustments to reconcile net income (loss) to net
   cash provided by (used in) operating activities:
Equity in undistributed net income (loss) of subsidiaries....................         190,317      284,921      (56,799)
Distribution from subsidiary.................................................               -      (52,462)           -
Net realized investment (gains) losses.......................................          10,827            -            -
Taxes........................................................................          (2,162)           -            -
Other operating cash flows ..................................................            (532)         299          923
                                                                                   ----------   ----------   ----------
Net cash provided by (used in) operating activities .........................          (6,593)       8,713       10,119
                                                                                   ----------   ----------   ----------
Cash flows from investing activities:
Investment in subsidiaries ..................................................               -      (33,380)      (7,668)
Distributions from subsidiary ...............................................               -       52,462            -
Advances to subsidiaries ....................................................               -      (39,410)           -
Other cash flows from investing activities ..................................               -          (23)         (42)
                                                                                   ----------   ----------   ----------
Net cash used in investing activities .......................................               -      (20,351)      (7,710)
                                                                                   ----------   ----------   ----------
Cash flows from financing activities:
Dividends paid ..............................................................          (2,032)     (11,801)     (11,777)
Issuance of Ordinary Shares .................................................               -            3            -
Repayments from subsidiaries ................................................             155            -       16,351
                                                                                   ----------   ----------   ----------
Net cash provided by (used in) financing activities .........................          (1,877)     (11,798)       4,574
                                                                                   ----------   ----------   ----------

Net increase (decrease) in cash and cash equivalents ........................          (8,470)     (23,436)       6,983
Cash and cash equivalents at beginning of year ..............................           8,497       31,933       24,950
                                                                                   ----------   ----------   ----------
Cash and cash equivalents at end of year ....................................      $       27   $    8,497   $   31,933
                                                                                   ----------   ----------   ----------
                                                                                   ----------   ----------   ----------
<FN>
(1)  Reclassifications  have been made related to discontinued  operations - see
Note 4 to the Consolidated  Financial  Statements in Item 8 of Form 10-K for the
year ended December 31, 2002.
</FN>
</TABLE>
            See accompanying Note to Condensed Financial Statements.
                                       94
<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, 2002.

       Additional  information about the significant accounting policies applied
by the Company and its  subsidiaries  is included in Note 3 to the  Consolidated
Financial  Statements  in Item 8 of Form 10-K for the year  ended  December  31,
2002.

                                       95
<PAGE>

               SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION

                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

          Life Insurance and Annuities Segment (Continuing Operations)
<TABLE>
<CAPTION>
                                                                                      Years Ended/As of December 31,
                                                                                   ------------------------------------
                                                                                      2002        2001(1)      2000(1)
                                                                                   ----------   ----------   ----------
                                                                                              (In thousands)


<S>                                                                                <C>          <C>          <C>
Deferred policy acquisition costs..........................................        $        -   $    3,113   $    1,509


Future policy benefits, losses, claims and loss expenses (2) ..............            35,441      131,765       52,781


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


Other policy claims and benefits payable (2)...............................                 -           66        1,344


Premium revenue (3)........................................................             1,155           (7)           -


Net investment income (4) .................................................             6,060        6,214        1,957


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


Amortization of deferred policy acquisition costs..........................             2,952          932          115


Other operating expenses...................................................             1,294          955          507


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


---------------------------
<FN>
(1)    Reclassifications have been made related to discontinued operations - see
       Note 4 to the  Consolidated  Financial  Statements in Item 8 of Form 10-K
       for the year ended December 31, 2002.

(2)    For additional  disclosure  regarding life insurance policy  liabilities,
       see Note 10 to the  Consolidated  Financial  Statements in Item 8 of Form
       10-K for the year ended December 31, 2002.

(3)    Insurance policy charges.

(4)    Expenses related to the management and administration of investments have
       been netted with investment income in the determination of net investment
       income.
</FN>
</TABLE>
                                       96
<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 19, 2003                                   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 19, 2003               Arthur I. Trueger
                                    Executive Chairman
                                    (Principal Executive Officer)


                                    /s/  Ian K. Whitehead
Date:  March 19, 2003               Ian K. Whitehead
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)


                                    /s/  Victor A. Hebert
Date:  March 19, 2003               Victor A. Hebert
                                    Deputy Chairman and Non-Executive Director


                                    /s/  John Clennett
Date:  March 19, 2003               John Clennett
                                    Non-Executive Director


                                    /s/  Harold E. Hughes, Jr.
Date:  March 19, 2003               Harold E. Hughes, Jr.
                                    Non-Executive Director


                                    /s/  The Viscount Trenchard
Date:  March 19, 2003               The Viscount Trenchard
                                    Non-Executive Director









                                       97
<PAGE>
                                 CERTIFICATION


I, Arthur I. Trueger, certify that:

       (1)    I have reviewed this annual report on Form 10-K of London  Pacific
              Group Limited;

       (2)    Based on my  knowledge,  this  annual  report does not contain any
              untrue  statement  of a material  fact or omit to state a material
              fact  necessary  to make  the  statements  made,  in  light of the
              circumstances   under  which  such   statements   were  made,  not
              misleading  with  respect  to the period  covered  by this  annual
              report;

       (3)    Based  on  my  knowledge,  the  financial  statements,  and  other
              financial  information  included  in this  annual  report,  fairly
              present in all material respects the financial condition,  results
              of operations and cash flows of the registrant as of, and for, the
              periods presented in this annual report;

       (4)    The registrant's  other  certifying  officer and I are responsible
              for   establishing   and  maintaining   disclosure   controls  and
              procedures  (as defined in Exchange  Act Rules  13a-14 and 15d-14)
              for the registrant and have:

              (a)    Designed such disclosure  controls and procedures to ensure
                     that  material  information  relating  to  the  registrant,
                     including its consolidated  subsidiaries,  is made known to
                     us by others within those entities, particularly during the
                     period in which this annual report is being prepared;

              (b)    Evaluated the effectiveness of the registrant's  disclosure
                     controls and  procedures  as of a date within 90 days prior
                     to the filing date of this annual  report ("the  Evaluation
                     Date"); and

              (c)    Presented in this annual report our  conclusions  about the
                     effectiveness  of the  disclosure  controls and  procedures
                     based on our evaluation as of the Evaluation Date;

       (5)    The registrant's  other  certifying  officer and I have disclosed,
              based on our most recent evaluation,  to the registrant's auditors
              and the audit committee of the registrant's board of directors (or
              persons performing the equivalent function):

              (a)    All significant  deficiencies in the design or operation of
                     internal   controls  which  could   adversely   affect  the
                     registrant's  ability to  record,  process,  summarize  and
                     report   financial   data  and  have   identified  for  the
                     registrant's  auditors any material  weaknesses in internal
                     controls; and

              (b)    Any  fraud,   whether  or  not   material,   that  involves
                     management or other  employees who have a significant  role
                     in the registrant's internal controls; and


       (6)    The registrant's  other certifying officer and I have indicated in
              this annual report whether or not there were  significant  changes
              in internal controls or in other factors that could  significantly
              affect internal controls subsequent to the date of our most recent
              evaluation,  including  any  corrective  actions  with  regard  to
              significant deficiencies and material weaknesses.



Date: March 19, 2003                             By:    /s/  Arthur I. Trueger
                                                        Arthur I. Trueger
                                                        Executive Chairman

                                       98
<PAGE>


                                  CERTIFICATION


I, Ian K. Whitehead, certify that:

       (1)    I have reviewed this annual report on Form 10-K of London  Pacific
              Group Limited;

       (2)    Based on my  knowledge,  this  annual  report does not contain any
              untrue  statement  of a material  fact or omit to state a material
              fact  necessary  to make  the  statements  made,  in  light of the
              circumstances   under  which  such   statements   were  made,  not
              misleading  with  respect  to the period  covered  by this  annual
              report;

       (3)    Based  on  my  knowledge,  the  financial  statements,  and  other
              financial  information  included  in this  annual  report,  fairly
              present in all material respects the financial condition,  results
              of operations and cash flows of the registrant as of, and for, the
              periods presented in this annual report;

       (4)    The registrant's  other  certifying  officer and I are responsible
              for   establishing   and  maintaining   disclosure   controls  and
              procedures  (as defined in Exchange  Act Rules  13a-14 and 15d-14)
              for the registrant and have:

              (a)    Designed such disclosure  controls and procedures to ensure
                     that  material  information  relating  to  the  registrant,
                     including its consolidated  subsidiaries,  is made known to
                     us by others within those entities, particularly during the
                     period in which this annual report is being prepared;

              (b)    Evaluated the effectiveness of the registrant's  disclosure
                     controls and  procedures  as of a date within 90 days prior
                     to the filing date of this annual  report ("the  Evaluation
                     Date"); and

              (c)    Presented in this annual report our  conclusions  about the
                     effectiveness  of the  disclosure  controls and  procedures
                     based on our evaluation as of the Evaluation Date;

       (5)    The registrant's  other  certifying  officer and I have disclosed,
              based on our most recent evaluation,  to the registrant's auditors
              and the audit committee of the registrant's board of directors (or
              persons performing the equivalent function):

              (a)    All significant  deficiencies in the design or operation of
                     internal   controls  which  could   adversely   affect  the
                     registrant's  ability to  record,  process,  summarize  and
                     report   financial   data  and  have   identified  for  the
                     registrant's  auditors any material  weaknesses in internal
                     controls; and

              (b)    Any  fraud,   whether  or  not   material,   that  involves
                     management or other  employees who have a significant  role
                     in the registrant's internal controls; and

       (6)    The registrant's  other certifying officer and I have indicated in
              this annual report whether or not there were  significant  changes
              in internal controls or in other factors that could  significantly
              affect internal controls subsequent to the date of our most recent
              evaluation,  including  any  corrective  actions  with  regard  to
              significant deficiencies and material weaknesses.



Date: March 19, 2003                             By:    /s/  Ian K. Whitehead
                                                        Ian K. Whitehead
                                                        Chief Financial Officer

                                       99
<PAGE>



                  LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                EXHIBIT INDEX FOR THE ANNUAL REPORT ON FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 2002

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 our Form  10-Q for the  quarter  ended  June 30,
          2000).

4.1       Specimen Ordinary Share  certificate  (filed previously as Exhibit 4.1
          to our Form 10-K for the year ended December 31, 2000).

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 us, 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 our
          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 us  covering  the  Basic  Administration  Charge  relating  to the
          Deposit  Agreement  (shown above as Exhibit 4.2) (filed  previously as
          Exhibit 3.8 to our Post-Effective  Amendment No. 2 to our Registration
          Statement on Form 20-F/A dated August 31, 1993).

4.4       Form of Deposit Agreement as amended and restated as of June 24, 2002,
          among  us,  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 4.4 to our Form 10-Q for the
          quarter ended June 30, 2002).

10.1.1    Multicurrency Term Facility Agreement dated May 2, 2000 between us and
          the Governor and Company of the Bank of Scotland (filed  previously as
          Exhibit  10.1.1 to our Form 10-Q for the quarter  ended  September 30,
          2000).

10.1.2    Term Loan and Guarantee Facility of up to $23,000,000,  dated December
          20,  2002  between  us and the  Governor  and  Company  of the Bank of
          Scotland.

10.2.1    Settlement  dated  February  16,  1990 among (1) us,  (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 our 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.

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.

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.

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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.

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.

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 our
          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 our Form 10-Q for the quarter  ended  September 30,
          2000).

10.3.1(1) Agreement  dated July 1, 1990  between us and  Ian  Kenneth  Whitehead
          (filed  previously  as  Exhibit  10.3.1  to our Form 10-K for the year
          ended December 31, 2000).

10.3.2(1) Berkeley  (USA)  Holdings  Limited  Amended and Restated 1993 Deferred
          Compensation Plan dated December 16, 1999 (filed previously as Exhibit
          10.3.2 to our Form 10-K for the year ended December 31, 2000).

10.3.3(1) London Pacific Advisers Limited  Retirement Scheme  confirmation dated
          December  5,  2000 for Ian  Kenneth  Whitehead  (filed  previously  as
          Exhibit 10.3.3 to our Form 10-K for the year ended December 31, 2001).

10.4.1    Settlement  dated May 23, 1997 among BG Services  Limited and A.L.O.T.
          Trustee Limited  establishing  Agent Loyalty  Opportunity Trust (filed
          previously  as  Exhibit  10.4.1  to our Form  10-K for the year  ended
          December 31, 2001).

10.4.2    Executed Deed dated July 16, 1997 by A.L.O.T. Trustee Limited relating
          to Agent Loyalty Opportunity Trust (filed previously as Exhibit 10.4.2
          to our Form 10-K for the year ended December 31, 2001).

10.4.3    Executed  Deed  dated  August 13,  1997 by  A.L.O.T.  Trustee  Limited
          relating to Agent  Loyalty  Opportunity  Trust  (filed  previously  as
          Exhibit 10.4.3 to our Form 10-K for the year ended December 31, 2001).

10.4.4    Executed  Deed  dated  August 20,  1998 by  A.L.O.T.  Trustee  Limited
          relating to Agent  Loyalty  Opportunity  Trust  (filed  previously  as
          Exhibit 10.4.4 to our Form 10-K for the year ended December 31, 2001).

10.4.5    Executed Deed of Amendment  and  Appointment  dated  December 11, 2001
          among  Berkeley  International  Capital  Limited and A.L.O.T.  Trustee
          Limited relating to Agent Loyalty  Opportunity Trust (filed previously
          as  Exhibit  10.4.5 to our Form 10-K for the year ended  December  31,
          2001).

21        Subsidiaries of the Company as of February 28, 2003.

99.1      Certification  by the  Company's  Executive  Chairman  pursuant  to 18
          U.S.C.  Section  1350,  as  adopted  pursuant  to  Section  906 of the
          Sarbanes-Oxley Act of 2002.

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99.2      Certification by the Company's Chief Financial  Officer pursuant to 18
          U.S.C.  Section  1350,  as  adopted  pursuant  to  Section  906 of the
          Sarbanes-Oxley Act of 2002.

____________

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

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