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, 2001

                                       OR

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

                         Commission file number 0-21874

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


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

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

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


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

                                                     Name of each exchange on
           Title of each class                           which registered
American Depositary Shares, each representing     New York Stock Exchange, Inc.
 one Ordinary Share of $0.05 par value per share
Ordinary Shares of $0.05 par value per share      New York Stock Exchange, Inc.*

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

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

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

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

      The aggregate market value of the voting stock held by  non-affiliates  of
the registrant,  based on the closing sale price of the Ordinary Shares on March
18, 2002 as reported on the London  Stock  Exchange  (using an exchange  rate of
GBP1.00 = $1.42) was $90,454,991. 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 March 18, 2002, 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 May 7, 2002, 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........................................................ 12
Item 3.    Legal Proceedings................................................. 12
Item 4.    Submission of Matters to a Vote of Security Holders............... 12


                                     PART II

Item 5.    Market for Registrant's Common Equity and Related
               Stockholder Matters........................................... 13
Item 6.    Selected Financial Data........................................... 17
Item 7.    Management's Discussion and Analysis of Financial
               Condition and Results of Operations........................... 17
Item 7A.   Quantitative and Qualitative Disclosures about Market Risk........ 33
Item 8.    Financial Statements and Supplementary Data....................... 35
Item 9.    Changes in and Disagreements with Accountants on Accounting and
               Financial Disclosure.......................................... 75


                                    PART III

Item 10.   Directors and Executive Officers of the Registrant................ 75
Item 11.   Executive Compensation............................................ 75
Item 12.   Security Ownership of Certain Beneficial Owners and Management.... 75
Item 13.   Certain Relationships and Related Transactions.................... 76


                                     PART IV

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K... 77

Financial Statement Schedules................................................ 81
Signatures ...................................................................88
Exhibit Index   ............................................................. 89

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

Forward-Looking Statements and Factors That May Affect Future Results

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


                                     PART I

Item  1. BUSINESS

OVERVIEW

      London  Pacific Group  Limited,  based in Jersey,  Channel  Islands,  is a
diversified  international  financial services company.  The Company's operating
subsidiaries  gather assets through their distribution  networks in the U.S. and
U.K. Assets under the Group's  management,  consulting or  administration  as of
December 31, 2001 totaled approximately $5.6 billion.

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

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

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

                                       1
<PAGE>
BUSINESS SEGMENTS

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

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

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

Life Insurance and Annuities

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

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

London Pacific Life & Annuity Company

      LPLA is  licensed  in 41 U.S.  states and the  District  of  Columbia  and
distributes its products through  approximately  3,500 contracted  agents.  This
network of independent contractors consists of life insurance agents,  financial
planners,  estate  planners  and brokers,  as well as banks and other  financial
institutions.  LPLA has recently  expanded its  distribution  network to include
select national  marketing  organizations.  Variable annuity contracts issued by
LPLA are distributed through independent broker-dealers,  stockbrokers and other
financial institutions.

      Products

      LPLA's  accumulation  products  include  fixed  rate  annuities,  variable
annuities,  and  annuities  with market value  adjustment  provisions,  all sold
through independent agents and financial advisors. LPLA primarily sells flexible
premium and single premium deferred annuity contracts.

                                       2
<PAGE>
      Typically,  the  policyholder  is permitted to withdraw all or part of the
premium  paid  plus the  accumulated  interest  credited  to the  contract  (the
"Accumulation  Value"),  subject to the  assessment  of  surrender  charges  for
withdrawals in excess of specified limits. Most of LPLA's accumulation  products
provide for penalty free withdrawals of up to 10% of the Accumulation Value each
year,  subject to limitations.  Withdrawals in excess of allowable  penalty free
amounts are assessed a surrender  charge during a penalty period which generally
ranges from three to ten years after the date a policy is issued. In addition to
the surrender  charge,  the  multi-year  guaranteed  rate  contracts may also be
subject  to a market  value  adjustment  charge  for  withdrawals  in  excess of
specified  limits.  The initial  surrender  charge generally is 12% to 9% of the
Accumulation  Value and generally  decreases by one  percentage  point  annually
during  the  penalty  period.  Surrender  charges  and market  value  adjustment
provisions,  where  applicable,  are designed to protect LPLA from loss on early
terminations  and to reduce the likelihood of  policyholders  terminating  their
contracts during periods of increasing  interest rates. These practices lengthen
the  effective  duration  of policy  liabilities  and  enable  LPLA to  maintain
profitability on such policies.

      Under one type of contract,  LPLA guarantees the policyholder's  principal
and credits the  accumulated  deposit with a rate of interest that is guaranteed
for the  initial  policy  year.  After the  initial  policy  year,  LPLA has the
discretionary  ability to change the crediting  rate to any  crediting  rate not
below a guaranteed  minimum rate (currently 3%). During the years ended December
31, 2001, 2000 and 1999,  sales of these products  accounted for $261.1 million,
$174.1  million  and  $136.2  million,   respectively,  or  64%,  36%  and  42%,
respectively, of total premiums collected. LPLA also sells market value adjusted
annuity  contracts  which  guarantee the crediting rate for the full term of the
contract.  During 2001,  2000 and 1999,  sales of these  products  accounted for
$121.2 million, $286.0 million and $149.1 million, respectively, or 30%, 58% and
46%, respectively, of total premiums collected. These multi-year guaranteed rate
contracts range in terms from three to seven years.  Fluctuations in the product
mix occur as LPLA's  marketing  emphasis  shifts in  response  to changes in the
level of interest rates, customer preferences and competition.

      Crediting  rates  are  initially  based  on:  (i) the rate of  return  the
insurance  subsidiaries  can earn on invested  assets acquired with the contract
deposits;  (ii) the costs related to marketing and  administering  the products;
and (iii) the crediting  rates offered on similar  products by other  companies.
Subsequent  adjustments  to  crediting  rates  are  based on  multiple  factors,
including the yield on the investment portfolio,  contract surrender assumptions
and the crediting rate history of particular  groups of annuity  contracts.  For
2001, 2000 and 1999, the average rate credited on outstanding  annuity contracts
was 5.98%, 5.89% and 5.48% respectively.

      Single premium  immediate  annuities  accounted for $21.1  million,  $19.1
million and $20.8  million,  or 5%, 4% and 6%,  respectively,  of total premiums
collected in 2001, 2000 and 1999,  respectively.  These products are designed to
provide a series of periodic  payments  for a fixed  period of time or for life,
according to the  policyholder's  choice at the time of issue. Once the payments
begin,  the amount,  frequency and length of time for which they are payable are
fixed.  The implicit  interest  rate on  outstanding  single  premium  immediate
annuity  contracts  averaged  4.67%,  4.65% and  4.71% for 2001,  2000 and 1999,
respectively.

      Variable  annuities  accounted  for $1.4  million,  $8.0 million and $13.1
million, or 0.4%, 2% and 4%, respectively,  of total premiums collected in 2001,
2000 and 1999,  respectively.  Variable annuities differ from fixed annuities in
that the principal  value may fluctuate  depending on the  performance of assets
allocated  pursuant to various  investment  options chosen by the  policyholder.
Variable annuities offer  policyholders a fixed or variable rate of return based
upon the specific investment option into which the premiums are directed.

      LPLA  discontinued  writing  any new  universal  life  business  in  1999,
although it  continues  to receive  renewal  premiums on the  policies in force.
Universal life insurance products  accounted for $1.0 million,  $1.5 million and
$2.4 million, or 0.3%, 0.3% and 0.7%, respectively,  of total premiums collected
in 2001, 2000 and 1999, respectively.  Universal life insurance products provide
whole life insurance with adjustable  rates of return based on current  interest
rates.

                                       3
<PAGE>
      Administration

      With over 47,000  policyholders,  customer service is a key focus of LPLA.
LPLA has implemented  technologically  advanced  administrative  processes which
have helped LPLA maintain its competitive  position.  In conjunction with IBM in
early 1991,  LPLA led the industry in adopting remote imaging for more accurate,
cost  effective   processing.   Image  processing  allows  a  constant  flow  of
communication  between  the home  office  in  Raleigh,  North  Carolina  and the
administrative office in Sacramento,  California.  Offices on both coasts of the
U.S. make it possible for LPLA to service  policyholders  nationwide  over an 11
hour workday.  These operating efficiencies play an important role in the LPLA's
ability to provide a high quality of customer service and to compete effectively
in the markets in which it operates.

London Pacific Assurance Limited

      LPAL, the Group's  insurance  subsidiary in Jersey,  Channel Islands,  was
formed in December 1999.  LPAL sells  Sterling,  U.S. dollar and Euro guaranteed
return  bonds in its home market of Jersey,  Channel  Islands,  and in the U.K.,
Guernsey, Isle of Man and other permitted jurisdictions.  The products guarantee
both  capital and yield for the  duration  of the  investment  period,  which is
typically three or five years.

      LPAL has over 200 sales agreements in place with financial intermediaries,
giving the company access to over 9,000 independent  financial advisors ("IFAs")
in place.  LPAL is  actively  seeking  to enter  into  similar  agreements  with
financial  intermediary  networks  and  advisory  divisions  of retail banks and
building societies.

      One of the  early  priorities  of LPAL  has  been to  establish  a  strong
customer service  capability to support the growth of the business.  The company
continues  to  benefit  from the high  quality  back  office  at LPLA,  based in
Raleigh,  North  Carolina.   Policy  applications  are  scanned  in  Jersey  and
transmitted  to Raleigh over the Internet.  The customer  records are created in
Raleigh  later in the day and  policy  forms  are  printed  in  Jersey  the next
morning.  This allows LPAL to achieve its service  standard of issuing  policies
within 24 hours.  The  administrative  synergy between the Group's two insurance
companies  has enabled LPAL to minimize  its  operating  overheads  and focus on
business development.

      Products

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

      The  bonds  offer an  investment  period of  either  three or five  years.
Sterling bond yields can be either taken as periodic payments or as a guaranteed
lump sum at maturity.  The periodic payments may be taken monthly,  quarterly or
annually.  The U.S.  dollar and Euro  denominated  bonds return  their  original
capital in full plus guaranteed growth at the end of the investment period.

      In early 2002,  LPAL launched the Guaranteed  Protected  Income Bond. This
new product is a seven-year  and one day single  premium  assurance  policy.  It
offers  investors a  guaranteed  minimum  yield set  annually,  together  with a
guaranteed return of capital at maturity.

      From LPAL's start of  operations  in the first quarter of 2000 through the
end of 2001, LPAL generated  premiums totaling $128.5 million.  LPAL makes sales
directly  to the public and  through  financial  intermediaries  in the  Channel
Islands, U.K., Isle of Man and other international locations, with approximately
44% of the premiums received through the end of 2001 from investors,  or through
financial intermediaries, in the Channel Islands.

                                       4
<PAGE>
Investment Portfolios

      The insurance  subsidiaries' $2.1 billion portfolio of securities (at fair
value) as of December 31, 2001 continued to be balanced, consisting primarily of
investment grade corporate bonds and collateralized  mortgage obligations,  with
no direct  exposure to commercial  mortgage  loans.  Private  placement debt and
preferred stock in high technology companies arranged by Berkeley  International
Capital  Corporation  represented  approximately  8.8% of  total  assets  of the
insurance  subsidiaries  as of December 31, 2001.  The  insurance  subsidiaries'
trading  portfolio of listed equity  securities,  at market value,  decreased to
$36.5  million as of December 31, 2001,  from $248.7  million as of December 31,
2000.  This  decrease  was  primarily  due to the decline in market value of the
trading  securities during 2001. The overall portfolio strategy of the insurance
subsidiaries is to hold equity  securities for further gain after the underlying
companies have completed an initial public offering,  and to sell in the shorter
term  other  listed  equity   securities   that  have  been   acquired   through
acquisitions.

      Investment activities are an integral part of the insurance  subsidiaries'
business.  Profitability of the insurance products is significantly  affected by
spreads  between  the  returns  on  invested  assets and the rates  credited  to
policyholders.  Changes in  crediting  rates may not be  sufficient  to maintain
targeted  investment  spreads  in  all  economic  and  market  environments.  In
addition,  competition  and other factors may limit the insurance  subsidiaries'
ability  to adjust or  maintain  crediting  rates at levels  necessary  to avoid
compression of spreads under certain market conditions. For 2001, 2000 and 1999,
the total  return on average  invested  assets was  -8.97%,  12.32% and  16.79%,
respectively, and the average interest rate credited to policyholders was 6.02%,
5.89% and 5.62%, respectively.

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

Competition

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

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

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

Financial Advisory Services

London Pacific Advisors

      In September  1996, the Group  completed the acquisition of London Pacific
Advisory Services, Inc. ("LPAS") (formerly Select Advisors,  Inc.), a registered
investment  adviser,  London Pacific  Securities,  Inc. ("LPS") (formerly Select
Capital  Corporation),  a  registered  broker/dealer,   and  Advisors  Insurance
Services  of  Texas  ("AIST"),  an  insurance  agency.  LPAS,  LPS and  AIST are
collectively  known as  London  Pacific  Advisors

                                       5
<PAGE>
("LPA").  LPA is located in  Sacramento,  California.  The total value of assets
under LPA management,  consulting or  administration as of December 31, 2001 was
$2.3 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 an  institution's  intranet.  By June 2002, it is
expected  that more than 5,000  advisors at partner  institutions  will be using
myOfficeOnline  (SM).  LPA is currently in the process of  completing an updated
version of the platform,  which includes several  enhancements  designed to keep
LPA at the  forefront of this rapidly  developing  industry.  Release of the new
version is planned for early in the second quarter of 2002.

      The change in LPA's strategy  appears to hold  considerable  potential for
growing  LPA's  revenues and greatly  strengthening  its  competitive  position.
Already, LPA is performing under contracts with prominent institutions including
Wells Fargo & Co., CSFBdirect,  H&R Block Financial Advisors, ORBA (R) Financial
Management,  Cambridge  Investment  Research  and five  other  institutions.  In
addition,  LPA is presently in the contract  phase with seven more firms and has
at least ten strong candidates for future partnerships.

      Products, Services and Revenues

      LPA provides a  comprehensive  menu of services to financial  advisors and
institutions, with an emphasis on web based technologies,  investment consulting
and back office  services.  Its  products  and  services  are used  primarily to
research,  build,  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  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. as well, and LPA is positioned to address
these developing markets.

      LPA offers a full complement of services,  including portfolio  accounting
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  deserves  to  utilize on the  platform,  and then to
integrate those capabilities with its own, and third party, functionalities. The
result is a  customized  solution  that is  private  labeled  to  maximize  each
client's brand awareness.

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

      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 increased to $4.7 million in 2001
from $4.2  million  in 2000.  These  fees  contributed  72%,  65% and 64% to net
revenues (i.e.,  gross revenues less  commissions)  for the years ended December
31, 2001, 2000 and 1999, respectively. The composition of these fees is changing
as new  institutional  client  fees are  realized  and  older  back  office  fee
contracts  reach  maturity.  The  increase  for  2001  was  achieved  despite  a
significant  decline  in market  values of the  assets  upon  which the fees are
based.

                                       6
<PAGE>
      Net commissions  received from the sale by advisors of insurance  products
contributed approximately 3%, 5% and 5% to net revenues for 2001, 2000 and 1999,
respectively,  while net  brokerage  fees  contributed  16%,  22% and 21% to net
revenues for 2001, 2000 and 1999, respectively.

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

      A 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 services are tied to
the  assets  under  management  in the  institution's  program,  and LPA's  fees
increase along with the growth of those program assets.

      Intellectual Property

      LPA  currently  has one  trademark  registered  with the U.S.  Patent  and
Trademark Office. This trademark is for LPA's flagship asset management product,
Global 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. In August 2000, LPA applied for a trademark registration for myOfficeOnline
(SM), the name given to LPA's web based services package.

Competition

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

Asset Management

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

Berkeley Capital Management

      BCM is a San Francisco based investment manager,  established in 1972, and
is the Group's primary asset management  subsidiary.  The company managed assets
totaling   approximately  $2.8  billion  as  of  the  end  of  2001,   including
approximately  $1.8  billion  in  corporate  bonds  for  the  Group's  insurance
subsidiaries.  BCM manages equity,  balanced and bond accounts for institutional
clients and for the wrap fee programs of major brokerage houses.  Its investment
approach involves strong fundamental research and is led by its senior portfolio
managers,  who have worked  together 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.

                                       7
<PAGE>
      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 Income Equity style  focuses on companies  from the S&P
500  universe  with high  relative  yields and is designed  to produce  superior
returns with below average volatility.  Both investment styles utilize bottom-up
approaches  and  disciplined  buy and sell  processes.  BCM's fixed income style
seeks out the most attractive  relative values in the  marketplace.  Risk levels
are set in  conjunction  with client  objectives  and value is added  around the
benchmark by trading into those areas that BCM believes  have the best  relative
values.

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

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

      BCM's  principal  source of revenue is the management of equity assets for
individuals and  institutions on a nationwide  basis.  Revenues in this area are
derived  exclusively  from management  fees which are calculated  based upon the
dollar value of assets managed. Additional fees, representing 16% of BCM's total
fees during 2001, were received from the Group's insurance  subsidiaries,  again
based on a percentage of assets under management.

      BCM has  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  2001,  fees from each of these two  customers
represented more than 10% of BCM's revenues.

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

      Intellectual Property

      Management  believes  that the name and  reputation  of  Berkeley  Capital
Management  is a  material  asset  and  protects  its name  through  appropriate
registration.  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.

Berkeley International Limited

      Berkeley  International  Limited  ("BIL") is  located  in Jersey,  Channel
Islands.  Currently,  BIL manages only the listed equity  securities held by the
Group's U.S. insurance subsidiary in its investment portfolio.

Competition

      There are numerous competitors offering asset management services.  Within
each brokerage firm managed account program, there are dozens of competitors and
many more potential  competitors.  BCM competes based upon performance,  service
and marketing.  Price is set by market  conditions and is generally the same for
all  investment  managers with managed  account  agreements  with each brokerage
firm.  There are no  dominant  competitors  in the managed  account  marketplace
because  brokerage  firms seek to limit the total

                                       8
<PAGE>
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 competition  within the securities  industry in
obtaining and retaining the services of investment executives.

Venture Capital Management

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

Berkeley International Capital Corporation

      BICC,  based in San Francisco,  arranges  private equity  placements  into
rapidly growing technology companies,  mainly on behalf of the Group's operating
companies.   Placements  are  typically   arranged  in  later  stage  technology
companies, which are near alpha test of their product and need to scale up their
engineering,  marketing and sales infrastructure.  With 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 22 years,  BICC  arranged over $1.9 billion of placements in
the private  capital  markets on behalf of Group  companies  and clients.  These
placements included investments in America Online,  Oracle Corporation,  Cadence
Design  Systems,  Inc.,  LSI  Logic  Corporation,   Broderbund  Software,   3COM
Corporation, Integrated Device Technology, Inc., Cypress Semiconductor, Inc. and
New Focus, Inc.

      During  2001,  the Group's  operating  companies  continued  to follow the
discipline of retaining the publicly  listed  securities  arising out of initial
public offerings, where those securities have the potential to yield substantial
future gains.

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

      The private equity technology  investments  arranged by BICC and currently
held by the Group's insurance  subsidiaries are: Agility  Communications,  Inc.,
Alacritech,  Inc., BeamReach Networks, Inc., BRECIS Communications  Corporation,
Catena Networks, Inc., Ceon Corporation,  Fast-Chip,  Inc., KnowledgeNet,  Inc.,
LightChip,  Inc., LongBoard,  Inc., Mahi Networks,  Inc., Telera, Inc., Triscend
Corporation, Westwave Communications, Inc. and Xtera Communications, Inc.

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, 2001, BICL held $45.3 million of such positions in listed equity securities.

Competition

      The  Group's  venture  capital   management   business  faces  competition
primarily from commercial  banks,  investment  banks,  venture capital firms and
insurance  companies,   many  of  which  have  substantially  greater  financial
resources  than the  Group.  The  marketplace  for  venture  capital  is  highly
competitive, and demand for financing is also influenced by current economic and
stock market  conditions.  The pool of capital that is

                                       9
<PAGE>
seeking  opportunities  to  invest  in later  stage  venture  capital  companies
contracted  in 2001 but  there  is still  demand  for  high  quality  technology
companies.

REGULATION

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

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

      On the basis of statutory statements filed with state regulators annually,
the National Association of Insurance  Commissioners ("NAIC") calculates certain
financial  ratios  to  assist  state  regulators  in  monitoring  the  financial
condition of insurance  companies.  A "usual range" of results for each ratio is
used as a  benchmark.  Departure  from the usual  ranges on four or more  ratios
generally lead to inquiries from individual state insurance  departments.  Based
on the 2001 statutory financial statements,  LPLA was outside the usual range of
four  ratios:  net change in capital and  surplus,  gross  change in capital and
surplus,  net  income  to total  income,  and  change in  premium.  LPLA has not
received any  communications  from any  insurance  departments  related to these
ratios.  In the past,  variances in certain  ratios  resulted in inquiries  from
certain  insurance  departments to which LPLA responded.  Such inquiries did not
lead to any restrictions affecting LPLA's operations.

      The  NAIC  has  developed   risk-based  capital  ("RBC")  standards  which
establish capital requirements for insurance companies based on the ratio of the
company's total adjusted capital (defined as the total of its statutory capital,
surplus,  asset valuation reserve and certain other adjustments) to its RBC. The
standards are designed to help identify  companies  which are  under-capitalized
and require  specific  regulatory  actions in the event an  insurer's  RBC ratio
falls below specified levels.  Further losses on LPLA's equity investments could
result in a decline in LPLA's capital that could,  in turn,  limit the company's
ability to generate new  business  due to the required RBC ratios.  In the event
that LPLA's statutory capital is not sufficient to meet regulatory minimums, the
company could be prohibited from writing any new business.

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

      LPLA prepares  financial  statements on the basis of statutory  accounting
practices prescribed or permitted by the insurance department in North Carolina,
its state of  domicile.  Prescribed  statutory  accounting  practices  include a
variety of  publications  promulgated  by the NAIC as well as U.S.  state  laws,
regulations  and  administrative  rules.  In  1998,  the NAIC  adopted  codified
statutory  accounting  practices.  The purpose of the codification was to create
uniformity in statutory financial reporting across the U.S. LPLA adopted the new
statutory  accounting  practices  effective  January 1, 2001.  The new statutory
accounting  practices  provide  for the same  principal  differences  from  U.S.
generally accepted accounting  principles that existed prior to January 1, 2001,
except that it  established  criteria for  recognizing  deferred  income  taxes.
However, the methodologies used to determine the amount of deferred income taxes
are  different  under the new  statutory  accounting  practices  than under U.S.
generally accepted  accounting  principles ("U.S.  GAAP"). The implementation of
the  new  statutory  accounting  practices  resulted  in a  decrease  in  LPLA's
statutory  surplus of $24.9 million,  almost entirely related to deferred income
taxes.

                                       10
<PAGE>
      LPLA is subject to guaranty fund  assessment  laws which exist in all U.S.
jurisdictions  in which LPLA transacts  business.  As a result of operating in a
state which has guaranty fund assessment laws, a solvent  insurance  company may
be assessed  for certain  obligations  arising  from the  insolvencies  of other
insurance  companies which operated in that U.S. state. As of December 31, 2001,
LPLA has accrued $0.8 million for estimated  expected future  assessments in its
financial statements.

      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 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  GBP50,000  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, 2001, 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.

Other Business Segments

      In the U.S., the Group's investment adviser  subsidiaries,  London Pacific
Advisory  Services,  Inc. and Berkeley  Capital  Management,  are  registered as
investment  advisers under the Investment  Advisers Act of 1940, as amended (the
"Advisers Act").  Because 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.

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

      The Group's  broker-dealer  subsidiary,  London Pacific Securities,  Inc.,
negotiates  security  transactions on behalf of its clients  through  registered
affiliates  in all 50  U.S.  states  and  clears  all  transactions  on a  fully
disclosed  basis through  another  clearing  broker-dealer,  which maintains the
customer  accounts.  LPS is registered  under the Exchange Act and is subject to
regulation by the SEC. The Exchange Act and related rules generally regulate the
conduct of business and the financial  condition of  registered  broker-dealers.
LPS  is a  member  of the  National  Association  of  Securities  Dealers,  Inc.
("NASD"),  a  self-regulatory  organization  that  oversees  the  activities  of
registered  broker-dealers.  The NASD requires  compliance  with its membership,

                                       11
<PAGE>
registration,  conduct, and marketplace rules, which govern, among other things,
the  registration  of  personnel,  finance and  operations,  recommendations  to
customers,   sales   practices,   underwriting  of  securities  and  supervisory
responsibilities.

      Berkeley  International Limited was previously registered with and subject
to regulation by the Jersey Financial  Services  Commission under the Investment
Business  (Jersey) Law 1998,  and was  authorized to manage  private  closed-end
investment  funds,  as defined by law. During 2001, BIL gave notice to terminate
its license to manage such funds as it no longer manages  investment  portfolios
for third parties.

Group

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

EMPLOYEES

      As of December 31, 2001,  the Group had 212  employees.  The  breakdown by
business  segment was as follows:  life insurance and annuities,  83;  financial
advisory services, 88; asset management, 17; venture capital management, 15; and
corporate,  9.  None  of the  Group's  employees  are  covered  by a  collective
bargaining agreement and the Group has not experienced any work stoppages.


Item  2. PROPERTIES

      The Group operates from four offices located in Jersey (Channel  Islands),
San Francisco,  Sacramento and Raleigh,  currently  consisting of  approximately
74,000  square  feet  of  space  in  the  aggregate.  All  offices  are  leased.
Approximately  36,000 square feet is leased in Jersey,  Raleigh and  Sacramento,
under leases  expiring in 2010, 2005 and 2012,  respectively,  pertaining to the
Group's life insurance and annuities business.  Approximately 22,000 square feet
is leased in  Sacramento,  under a lease  expiring  in 2012,  pertaining  to the
Group's 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 the Group's asset management  segment and 40% to the Group's 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.  Management  believes  that  existing  facilities  are
suitable  and  adequate  for the  conduct  of the  business.  See Note 12 to the
Consolidated  Financial  Statements  in Item 8  below  for  further  information
regarding the Group's leases.


Item  3. LEGAL PROCEEDINGS

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


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

      No matters were submitted to the Company's shareholders during the quarter
ended December 31, 2001.

                                       12
<PAGE>
                                    Part II

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

Market Information

      The  principal  trading  market for the Company's  Ordinary  Shares is the
London  Stock  Exchange,  on which such shares have been listed  since  February
1985.  American  Depositary  Shares each  representing  one Ordinary Share,  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," and since  November  1999 on the New
York Stock Exchange under the symbol "LDP." As of December 31, 2001,  there were
64,439,073  Ordinary  Shares  outstanding.  Also as of  that  date,  there  were
19,906,706 ADSs outstanding, representing 19,906,706 Ordinary Shares or 30.9% of
the Company's  outstanding  shares. ADS holders may exercise their voting rights
through the ADR Depositary.

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

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

<TABLE>
<CAPTION>
                                                 London                   New York
                                               Pounds Per               U.S. Dollars
                                             Ordinary Share               Per ADS
                                        ------------------------  ------------------------
                                            High         Low         High          Low
                                        -----------  -----------  -----------  -----------
<S>                                     <C>          <C>          <C>          <C>
2000:
First quarter.........................        19.38         5.15        32.50         8.00
Second quarter........................        13.90         6.08        24.06         8.75
Third quarter.........................        18.33         8.00        26.37        12.00
Fourth quarter........................        13.93         5.53        21.00         7.37

2001:
First quarter.........................         8.05         3.45        12.00         4.45
Second quarter........................         4.73         3.08         6.90         3.90
Third quarter.........................         4.18         1.88         5.99         2.50
Fourth quarter........................         2.75         1.78         4.35         2.55

</TABLE>

Holders

      As of March 18, 2002, the Company had approximately  1,727 shareholders of
record and 75 ADS holders of record.  Because many Ordinary  Shares and ADSs are
held by brokers and various institutions on behalf of other holders, the Company
is unable to estimate  the total number of  beneficial  holders  represented  by
these holders of record.

Dividends

      The Company has paid dividends on its Ordinary  Shares in every year since
it became listed on the London Stock Exchange in 1985. Dividends on its Ordinary
Shares  are paid  twice a year.  An  interim  gross

                                       13
<PAGE>
dividend on the Company's Ordinary Shares of $0.11 per share was declared by the
Board of Directors in August 2001 and was paid on September  14, 2001.  In March
2002,  the directors  recommended  a final gross  dividend for 2001 of $0.05 per
Ordinary  Share which,  together  with the interim  dividend,  will make a total
gross  dividend  for 2001 of $0.16  ($0.128 net of 20% Jersey tax) per  Ordinary
Share.  The final dividend is subject to formal  approval by shareholders at the
Company's Annual General Meeting on May 7, 2002, and, if approved,  will be paid
on May 8, 2002.

      Holders of ADSs are entitled to receive  dividends  paid on the  Company's
Ordinary  Shares through the ADR  Depositary.  Subject to formal approval of the
dividend by shareholders,  ADS holders will receive a final dividend for 2001 of
$0.04 per ADS (net of 20% Jersey tax) on May 17, 2002.

      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
                   --------------------------------------------------------      ---------------------------
                              Gross                       Net
                   ---------------------------  ---------------------------      ---------------------------
                    Interim    Final    Total    Interim    Final    Total        Interim    Final    Total
                   ---------------------------  ---------------------------      ---------------------------

<S>                 <C>       <C>      <C>       <C>       <C>      <C>           <C>       <C>      <C>
2000 .............  $  0.11   $ 0.18   $  0.29   $ 0.088   $ 0.144  $ 0.232       $ 0.088   $ 0.144  $ 0.232
2001 .............  $  0.11   $ 0.05*  $  0.16*  $ 0.088   $ 0.040* $ 0.128*      $ 0.088   $ 0.040* $ 0.128*

<FN>
----------------------------
* The final dividend is subject to formal approval by shareholders at the Annual
General Meeting on May 7, 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.

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

TAXATION

      The  following  summary  of  certain  Jersey  and  U.S.  tax  consequences
regarding share ownership is based on law and published practice as of March 18,
2002, and is subject to any changes in Jersey and U.S. law or published practice
or in the establishment of any double taxation convention between Jersey and the
U.S.  occurring  after that date.  The  summary  is not a complete  analysis  or
listing  of all the  possible  tax  consequences  and does not  address  the tax
implications for special classes of holders, such as banks,  insurance companies
and dealers in  securities.  The summary also does not address U.S. state income
tax  consequences.  Owners of Ordinary  Shares and ADSs should consult their own
tax advisors as to the tax consequences of such ownership.

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

Taxation of Dividends

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

                                       14
<PAGE>
      Charities,  superannuation  funds and certain  assurance  companies in the
U.K.,  together  with  individual  investors  who are  Commonwealth  citizens or
citizens of a member state of the European Community,  may be entitled to a full
or partial  repayment of the Jersey income tax credit suffered on distributions,
on submission of a claim to the Jersey  Comptroller of Income Tax.  Shareholders
who are unsure of their tax position should consult their tax advisor.

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

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

Taxation of Capital Gains

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

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

Backup Withholding Tax

      A U.S. holder may be subject to U.S. backup  withholding tax (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 attract U.K.
stamp duty if its execution  relates to anything done or to be done in the U.K.,
for example if it is executed in the U.K. or to be brought  into the U.K.  after
execution. If the transfer is on a sale then the rate of stamp duty will be 0.5%
of the consideration given. This charge is rounded up to the nearest GBP5. Gifts
and other transfers which are neither

                                       15
<PAGE>
sales nor made in  contemplation  of a sale do not attract this charge.  Instead
they will either be exempt or attract a fixed duty of GBP5 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  GBP5 if the  instrument  of
transfer  relates to anything done or to be done in the U.K.,  for example if it
is executed in the U.K. or is to be brought  into the U.K.  after  execution.  A
transfer  of  Ordinary  Shares from the  Depositary  directly to a purchaser  on
behalf  of an ADS  holder  may  attract  stamp  duty  at a rate  of  0.5% of the
consideration (rounded up to the nearest GBP5) if execution of the instrument of
transfer  relates to anything done or to be done in the U.K.,  for example if it
is executed in the U.K. or is to be brought into the U.K. after execution.

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

                                       16
<PAGE>
Item  6. SELECTED FINANCIAL DATA

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

<TABLE>
<CAPTION>
                                                                              Years Ended/As of December 31,
                                                              ----------------------------------------------------------
                                                                 2001        2000        1999        1998        1997
                                                              ----------  ----------  ----------  ----------  ----------
                                                                     (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..  $ (203,746) $  189,521  $  472,566  $  150,497  $  140,712
Income (loss) from continuing operations before income
  taxes.....................................................    (401,227)     15,010     305,662      28,882      26,877
Income from discontinued operations.........................           -           -           -       4,089         921
Income tax expense (benefit)................................     (56,443)    (17,447)     53,786       6,515       2,920
Net income (loss)...........................................    (344,784)     32,457     251,876      26,456      24,878
Earnings (loss) per share and ADS:
  Basic.....................................................       (6.76)       0.64        5.05        0.51        0.45
  Diluted...................................................       (6.76)       0.53        4.54        0.49        0.43

Financial Position
Cash and investments........................................   2,018,069   2,127,414   1,857,143   1,482,757   1,439,034
Total assets................................................   2,536,328   2,562,988   2,194,157   1,635,024   1,606,049
Long-term debt..............................................      36,874      35,556           -           -           -
Shareholders' equity........................................     221,653     567,742     552,475     328,481     345,346
Book value per share and ADS*...............................        4.37       11.00       11.25        6.67        6.27

Ordinary Share and ADS Data
Ordinary Shares outstanding as of December 31...............      64,439      64,433      64,433      64,424      68,328
Weighted average shares used in:
  Basic earnings per share calculation......................      50,984      50,795      49,892      52,206      55,490
  Diluted earnings per share calculation....................      50,984      60,728      55,445      53,552      57,295
Total dividends per share relating to the year (gross)**....  $     0.16  $     0.29  $     0.29  $     0.29  $     0.29
Total dividends per ADS relating to the year**..............  $    0.128  $    0.232  $    0.232  $    0.232  $    0.232
Market price per share on December 31.......................  GBP   2.60  GBP   5.53  GBP   5.59  GBP   1.87  GBP   1.77
Market price per ADS on December 31.........................  $     3.96  $     7.56  $     9.00  $     3.14  $     3.00
Market capitalization as of December 31.....................  $  244,611  $  530,431  $  583,495  $  199,449  $  198,341

<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 issued
excluding the shares held by the employee benefit trusts.

** Of the total dividends per share and ADS relating to 2001,  $0.05 (ADS $0.04)
is the recommended  final dividend for 2001, which is subject to formal approval
by shareholders at the Annual General Meeting on May 7, 2002.

</FN>

</TABLE>
Item  7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS

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

                                       17
<PAGE>
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 the Group
operates, management's current beliefs and assumptions made by management. Words
such as  "expects,"  "anticipates,"  "intends,"  "plans,"  "believes,"  "seeks,"
"estimates,"  "goals,"  variations  of such words and  similar  expressions  are
intended to identify such forward-looking  statements.  These statements are not
guarantees of future  performance and involve certain risks,  uncertainties  and
assumptions  that are  difficult  to predict.  Future  outcomes  and results may
differ  materially  from what is expressed  or forecast in such  forward-looking
statements.  The Group  undertakes no  obligation to update any  forward-looking
statements,  whether  as a result of new  information,  future  developments  or
otherwise.

      Factors  that  could  cause  or   contribute   to   deviations   from  the
forward-looking statements include those discussed in this section, elsewhere in
this Form 10-K and in the  Company's  other  filings  with the SEC.  The factors
include,   but  are  not  limited  to,  (i)  the  risks  described  in  Item  7A
"Quantitative and Qualitative Disclosures About Market Risk," (ii) variations in
demand for the Group's products and services,  (iii) the success of new products
and  services  provided  by the Group,  (iv) the credit  ratings of the  Group's
insurance  subsidiaries,  (v) significant changes in net cash flows in or out of
the Group's businesses,  (vi) fluctuations in the performance of debt and equity
markets  worldwide,  (vii) the  enactment of adverse  state,  federal or foreign
regulation or changes in government policy or regulation  (including  accounting
standards)  affecting  the  Group's  operations,  (viii) the effect of  economic
conditions and interest rates in the U.S., the U.K. or internationally, (ix) the
ability of the Group's  subsidiaries to compete in their respective  businesses,
and (x) the ability of the Group to attract and retain key personnel.


RESULTS OF OPERATIONS BY BUSINESS SEGMENT

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

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                                      (In thousands)
<S>                                                                      <C>           <C>           <C>
Income before income taxes by operating segment:
Life insurance and annuities (1) , (2).................................  $   (341,703) $    132,671  $    147,753
Financial advisory services............................................        (3,638)       (2,261)          166
Asset management (1)...................................................         1,533         1,778         1,036
Venture capital management (2).........................................       (51,262)     (110,444)      158,627
                                                                         ------------  ------------  ------------
                                                                             (395,070)       21,744       307,582
Reconciliation of segment amounts to consolidated amounts:
Interest income........................................................         2,004         1,574         2,836
Corporate expenses.....................................................        (5,692)       (7,388)       (4,366)
Goodwill amortization..................................................          (221)         (248)         (348)
Interest expense.......................................................        (2,248)         (672)          (42)
                                                                         ------------  ------------  ------------
Consolidated income (loss) before income taxes.........................  $   (401,227) $     15,010  $    305,662
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

<FN>
(1) Included in the revenues of the asset management segment are management fees
from the life  insurance and annuities  segment of  $1,954,000,  $2,775,000  and
$1,597,000 in 2001, 2000 and 1999, respectively.

(2)  Included  in the  revenues of the venture  capital  management  segment are
management  fees from the life  insurance and annuities  segment of  $9,924,000,
$7,474,000 and $7,943,000 in 2001, 2000 and 1999, respectively.

</FN>
</TABLE>

                                       18
<PAGE>
      Business segment data contained in Note 18 to the  Consolidated  Financial
Statements  should be read in  conjunction  with  this  discussion.  A  detailed
discussion of the results for each reportable segment follows.

Life Insurance and Annuities

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


<TABLE>
<CAPTION>
                                                                                               Years Ended December 31,
                                                                                       ----------------------------------------
                                                                                           2001          2000          1999
                                                                                       ------------  ------------  ------------
                                                                                                    (In thousands)
<S>                                                                                    <C>           <C>           <C>
Revenues:
Investment income....................................................................  $    129,141  $    103,909  $     85,768
Insurance policy charges.............................................................         5,672         7,400         6,671
Net realized investment gains (losses), including related amortization (1) ,(2)......      (103,024)      123,661         3,986
Change in net unrealized investment gains and losses on trading
  securities, including related amortization (1) ,(2)................................      (239,961)        8,269       144,861
Other fee income.....................................................................         1,369         1,684         1,421
                                                                                       ------------  ------------  ------------
Total revenues and investment gains (losses), including related
  amortization (1)...................................................................      (206,803)      244,923       242,707

Expenses:
Interest credited on insurance policyholder accounts.................................       118,965        94,065        73,753
Amortization of deferred policy acquisition costs related to operations (1)..........         7,408         9,420         8,324
Mortality expenses (gains)...........................................................           (79)         (340)         (167)
General and administrative expenses..................................................         8,606         9,107        13,044
                                                                                       ------------  ------------  ------------
Total expenses related to operations (1).............................................       134,900       112,252        94,954
                                                                                       ------------  ------------  ------------
Income (loss) before income taxes....................................................  $   (341,703) $    132,671  $    147,753
                                                                                       ------------  ------------  ------------
                                                                                       ------------  ------------  ------------
<FN>
(1)  As  a  result  of  net  realized  investment  gains  on  available-for-sale
securities  and  the  change  in net  unrealized  investment  gains  on  trading
securities which back the life insurance and annuities segment's investment-type
products,  amortization  of deferred policy  acquisition  costs was increased by
$16,332,000,  $11,735,000 and $8,473,000 in 2001,  2000 and 1999,  respectively.
For  purposes  of the  above  business  segment  presentation,  this  additional
amortization  is not shown in operating  expenses in accordance with the Group's
accounting  policy used to prepare the consolidated  income  statements,  but is
netted against net realized  investment gains (losses)  ($16,332,000  $7,544,000
and  $4,276,000  in 2001,  2000 and 1999,  respectively)  and the  change in net
unrealized  investment gains and losses ($0,  $4,191,000 and $4,197,000 in 2001,
2000 and 1999, respectively).

(2) Realized investment gains in the amount of $37,763,000 were recorded in 2001
by  the  life  insurance  and  annuities  segment,   related  to  intersegmental
investment  sales to the venture  capital  management  segment.  These  realized
investment  gains  were  offset  by  a  corresponding   decrease  in  unrealized
investment  gains on trading  securities  for the same amount.  These gains have
been eliminated in the Group's consolidated financial statements.
</FN>
</TABLE>

2001 compared to 2000

      In 2001,  the life  insurance and  annuities  segment,  which  consists of
London  Pacific Life & Annuity  Company and London  Pacific  Assurance  Limited,
contributed a loss before income taxes of $341.7 million to the Group's  overall
loss before taxes,  compared to income of $132.7  million in 2000.  Net realized
investment  losses in 2001,  including  related  amortization of deferred policy
acquisition  costs  ("DPAC"),  were $103.0  million,  compared  to net  realized
investment  gains of $123.7  million  in 2000.  The loss from the  change in net
unrealized investment gains and losses, including related DPAC amortization, was
$240.0  million in 2001,  compared  to a net gain of $8.3  million in 2000.  The
spread between investment income and interest credited to policyholder  accounts
increased by $0.3 million;  amortization of DPAC, excluding amortization related
to  investment  gains and losses,  decreased  by $2.0  million;  and general and
administrative  expenses  decreased

                                       19
<PAGE>
by $0.5 million,  each as compared to 2000. Policy charges for 2001 decreased by
$1.7 million and other fee income decreased by $0.3 million, each as compared to
2000.

      In accordance with U.S. GAAP,  premiums collected on annuity and universal
life contracts are not reported as revenues, but rather as deposits to insurance
liabilities. Revenues for these products are recognized over time in the form of
investment  income  and  surrender  or other  charges.  LPLA  offers  both fixed
annuities  which  typically  have an interest rate  guaranteed  for one to seven
years,  after  which the  company  has the  discretionary  ability to change the
crediting rate to any rate not below a guaranteed  rate, and variable  annuities
which allow the contract  holders the ability to direct  premiums  into specific
investment portfolios with rates of return being based on the performance of the
portfolio.  LPAL began selling  guaranteed bond contracts,  which are similar to
LPLA's fixed annuity  products,  in the Jersey,  Channel  Islands  market in the
first quarter of 2000 and in the U.K. market during the second quarter of 2000.

      Premiums received for all life,  annuity and guaranteed bond products were
$481.4 million during 2001, a decrease of 11%, over the premiums received during
2000. LPAL generated  $75.7 million of the total premiums  received during 2001,
an increase of $22.9  million  over the amount  generated  in 2000.  The premium
volume in 2001 for LPAL reflects 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. LPLA generated
premiums of $405.7 million in 2001, a 17% decrease over the premiums received in
2000. The $82.9 million  decrease in LPLA's  premiums  reflected the impact of a
declining  U.S.  interest rate  environment.  As a result of lower  reinvestment
rates, LPLA again reduced annuity crediting rates during 2001, which reduced the
competitiveness of its annuity product line. LPLA's mix of business continued to
shift toward traditional  annuities,  which typically  guarantee crediting rates
for one year, but have surrender charge periods ranging from seven to ten years.
Sales of traditional annuities in 2001 increased to $261.1 million,  compared to
$174.1  million in 2000, as a result of production  from new  distributors  that
have been  attracted to LPLA because of its strong track  record.  The declining
U.S.  interest  rate  environment  had the most  significant  impact  on  LPLA's
multi-year guaranteed rate annuities, sales of which in 2001 decreased to $121.2
million,  compared to $286.0  million in 2000. If interest rates remain at their
current level, sales of the multi-year guaranteed rate annuities may continue to
decline.

      Interest and dividend  income on investments was $129.1 million in 2001 as
compared with $103.9 million in 2000. This $25.2 million  increase was primarily
due to asset growth from new business, offset by lower reinvestment rates and by
acquisitions of capital appreciation (zero yield) securities. The carrying value
of the private  equity  portfolio  as of December  31, 2001 was $180.7  million,
compared  with $234.2  million as of December 31, 2000 and $145.5  million as of
December 31, 1999.

      Net investment losses,  including related DPAC  amortization,  were $343.0
million in 2001, compared to net investment gains of $131.9 million in 2000. Net
investment  losses in 2001 were comprised of net realized  investment  losses of
$86.7 million, a $240.0 million loss from the change in net unrealized gains and
losses on the  listed  equity  securities  held in the  trading  portfolio,  and
related DPAC amortization of $16.3 million. The trading portfolio decreased from
$248.7  million as of December  31,  2000,  to $36.5  million as of December 31,
2001.  Additions to the trading  portfolio during 2001 of $62.6 million resulted
from the $55.8 million  purchase of certain  listed equity  securities  from the
venture  capital  management  segment,  $5.0 million due to the  conversion of a
private  preferred stock to common stock of a publicly  traded company,  and the
transfer of a $1.8 million  listed equity  security from the  available-for-sale
classification.  LPLA and LPAL sold certain trading positions during 2001, which
resulted  in net  realized  gains of  $42.0  million  based  on their  aggregate
original cost of $20.6 million. Disposals of certain listed equity securities to
the venture  capital  management  segment  resulted  in realized  gains of $37.8
million based on their  aggregate  cost of $14.2  million.  These realized gains
were more than offset by realized losses of $167.6 million, including write-offs
and write-downs on fourteen private placement securities, one listed equity, and
six corporate bonds. The life insurance and annuities segment also recorded $1.1
million in net realized gains from the sale of certain corporate bonds and other
investments  during  the year.  All  intersegmental  investment  gains have been
eliminated in the Group's consolidated statements of income.

      If the Group's  investment  portfolio  continues to decline due to further
market or other  declines in 2002,  additional  other-than-temporary  investment
impairments are possible which could have an impact on LPLA's

                                       20
<PAGE>
and LPAL's  ability to write new business at the same level as in 2001.  LPLA is
currently  seeking to reduce the volatility of its regulatory  capital base, due
to its equity holdings,  through a number of strategic  initiatives.  One option
could  include the sale of a  percentage  of its private  equity  securities  in
exchange  for  an  equity-linked  note  issued  by  a  major  insurer.  LPAL  is
significantly  smaller than LPLA, and any necessary capital infusion would be on
a much smaller scale.

      Total  invested  assets  (defined as total assets  excluding  DPAC,  other
assets and income tax related  accounts)  remained  level at $2.2  billion as of
December 31, 2001. On total average  invested  assets for 2001,  the average net
return,  including both realized and unrealized investment gains and losses, was
-8.97%,  compared  with  12.32% for 2000.  This  decrease  in average net return
resulted primarily from the net investment losses discussed above.

      Policy  surrender and mortality charge income decreased by $1.7 million in
2001 to $5.7 million, compared with $7.4 million in 2000. Full policy surrenders
totaled  $99.8 million in 2001, a $46.9  million  decrease  over 2000.  Internal
policy  conversions  accounted for $28.9 million of the full surrenders in 2001,
compared to $47.5 million in 2000.  The decrease in policy  surrenders  reflects
one of the effects of the declining U.S.  interest rate  environment,  which has
reduced yields on competing  products.  Although the current U.S.  interest rate
environment favors higher policy persistency, annuity surrenders may increase in
future periods,  particularly if interest rates increase,  as the portion of the
business that can be withdrawn by  policyholders  without  incurring a surrender
charge penalty grows.  Higher surrenders could slow down the growth of the asset
base of the company.

      Interest credited on policyholder  accounts  increased by $24.9 million in
2001 to $119.0  million,  compared with $94.1 million in 2000.  The increase was
primarily  due to new  business  growth,  offset by favorable  renewal  rates on
certain blocks of business. The average rate credited to policyholders was 6.02%
in 2001, compared with 5.89% in 2000.

      Amortization of DPAC,  excluding  amortization related to investment gains
and losses, was $7.4 million in 2001, a decrease of $2.0 million over 2000. This
decrease was  primarily due to the lower level of policy  surrenders,  partially
offset by new business  growth.  Realized and  unrealized  investment  gains and
losses were included in the gross profits used to calculate the  amortization of
DPAC.  This  inclusion of  investment  gains and losses  resulted in  additional
amortization of $16.3 million in 2001, compared with $11.7 million in 2000.

      General and  administrative  expenses were $8.6 million in 2001,  compared
with $9.1 million in 2000. This $0.5 million decrease was primarily due to lower
business  development costs and lower insurance guaranty fund assessments during
2001,  offset by  higher  staff  costs in LPAL due to  additional  headcount  to
support its growth,  and reflecting a full year of operations in 2001,  compared
to nine months in 2000.  The expense ratio in 2001,  which is defined as general
and administrative  expenses divided by the average book value of total cash and
investments, was 0.37%, compared with 0.44% in 2000.

      Effective  December 31, 2001, LPLA entered into a reinsurance  transaction
related  to  approximately  90%  of  LPLA's  universal  life  business  with  an
authorized  domestic  reinsurance  company.  Under the terms of the  reinsurance
agreement,  LPLA ceded approximately $42.0 million of statutory reserves related
to this business to the  reinsurer and the reinsurer  placed assets equal to the
reserves ceded in a trust  established for the benefit of LPLA. LPLA is entitled
to receive an ongoing  administration  fee equal to $27 per in-force  policy and
received  an upfront  ceding  commission  of $6.5  million in 2001 that has been
deferred  for U.S.  GAAP and will be amortized  into revenue over the  remaining
life of the universal life business.  LPLA has accounted for this transaction in
accordance with Statement of Financial Accounting Standards No. 113, "Accounting
and Reporting for Reinsurance of Short-Duration  and  Long-Duration  Contracts,"
which  requires  insurance  companies to apply the gross  reporting  concept for
reinsurance  transactions.  The reinsurance  transaction had no impact on LPLA's
2001 operating results and is not expected to have any material impact on future
operating results.

                                       21
<PAGE>
2000 compared to 1999

      In 2000,  the life  insurance and  annuities  segment  contributed  $132.7
million to the Group's  overall income before taxes, a decrease of $15.1 million
from 1999. Net realized  investment  gains,  including  related  amortization of
DPAC, were $123.7  million,  compared to $4.0 million in 1999. The gain from the
change in net unrealized  investment  gains and losses,  including  related DPAC
amortization, decreased from $144.9 million in 1999 to $8.3 million in 2000. The
spread between investment income and interest credited to policyholder  accounts
decreased by $2.2 million;  amortization of DPAC, excluding amortization related
to  investment  gains and losses,  increased  by $1.1  million;  and general and
administrative  expenses  decreased by $3.9  million,  each as compared to 1999.
Policy charges for 2000 increased by $0.7 million and other fee income increased
by $0.3 million, each as compared to 1999.

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

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

      Net investment  gains,  including related DPAC  amortization,  were $131.9
million in 2000,  compared to $148.8 million in 1999.  Net  investment  gains in
2000 were comprised of net realized  investment gains of $131.2 million, a $12.4
million  change  in  net  unrealized  gains  and  losses  on the  listed  equity
securities held in the trading portfolio, and related DPAC amortization of $11.7
million.  The trading portfolio increased from $186.5 million as of December 31,
1999 to $248.7  million  as of  December  31,  2000.  Additions  to the  trading
portfolio  during 2000 of $69.8 million  resulted from three investee  companies
that completed initial public offerings and four private equity investments that
were acquired for stock by public companies.  LPLA and LPAL sold certain trading
positions in 2000 that resulted in net realized gains of $170.6 million based on
their  aggregate  original  cost of $20.1  million.  These  realized  gains were
partially offset by other-than-temporary impairment write-downs of $49.7 million
on five private placement debt securities and one private equity security. As of
December 31, 2000, LPLA's and LPAL's investment  portfolios  included ten former
private  preferred  stocks that had been converted to listed common equities and
one convertible bond holding in a publicly traded company.  Also, as of December
31, 2000, one additional  private equity  investment was in the process of being
acquired by a publicly traded company in exchange for its stock.

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

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

                                       22
<PAGE>
      Interest credited on policyholder  accounts  increased by $20.3 million in
2000 to $94.1  million,  compared with $73.8  million in 1999.  The increase was
primarily due to new business  growth in the multi-year  annuity  products which
generally have higher  crediting  rates than  traditional  annuity  products but
lower acquisition  costs, and an increase in overall policy crediting rates. The
average rate credited to policyholders  was 5.9% in 2000,  compared with 5.6% in
1999.

      Amortization of DPAC,  excluding  amortization related to investment gains
and losses,  was $9.4  million in 2000,  an increase of $1.1  million over 1999.
This increase was primarily due to new business  growth,  particularly  with the
multi-year  annuity  products that have shorter  product lives than  traditional
annuity  products,  and the higher level of policy  surrenders  discussed above.
Realized and unrealized  investment  gains and losses were included in the gross
profits used to calculate the amortization of DPAC. This inclusion of investment
gains and losses  resulted in additional  amortization of $11.7 million in 2000,
compared with $8.5 million in 1999.

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

Financial Advisory Services

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

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                                      (In thousands)

<S>                                                                      <C>           <C>           <C>
Gross financial advisory services fees.................................  $     18,627  $     22,952  $     19,913
Payouts due to independent advisors....................................       (12,039)      (16,441)      (13,314)
                                                                         ------------  ------------  ------------
                                                                                6,588         6,511         6,599

Operating expenses.....................................................        10,226         8,772         6,433
                                                                         ------------  ------------  ------------
Income (loss) before income taxes......................................  $     (3,638) $     (2,261) $        166
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

</TABLE>
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 more than 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

                                       23
<PAGE>
development project were replaced by additional staff costs.  Staffing additions
were made over the  course of the last year to  support  the  institutional  and
Internet based initiatives discussed below.

      In late  1999,  the Group  decided  to make the  London  Pacific  Advisors
business the  foundation  for an Internet  based  initiative  that could then be
migrated  to other  vertical  markets  in which the Group  has  expertise.  This
initiative  aims to deliver a full  complement  of  consulting  and back  office
services  to  institutions  and  financial  advisors  through the  Internet.  An
overview of the project is available at www.lpadvisors.com.

      The total  investment in the Internet based project  through  December 31,
2001 was $3.2  million,  including  $0.5  million in 2001.  Of this total,  $2.6
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 and the amount  amortized  during 2001 was $0.3
million.

      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 ten major  institutions,  and
additional  contracts are currently  under  negotiation.  The revenue  impact of
these  contracts  increased  during the second half of 2001 as newly  contracted
business came on line. Net asset  management and consulting fees are expected to
increase  significantly  during the second  quarter of 2002 as new business from
institutional clients comes onto the myOfficeOnline (SM) platform.

2000 compared to 1999

      Pre-tax income from the financial advisory services segment decreased to a
loss of $2.3 million in 2000 from $0.2 million in income in 1999,  primarily due
to  the  contractual  adjustment  to  certain  administration  fee  revenues  as
discussed below, as well as due to the costs of the Internet based initiative.

      Revenues of LPA increased by $3.0 million to $23.0 million in 2000.  Asset
management  and  consulting  fees  increased  due  to  the  company's  continued
expansion  of its network of financial  advisors  and assets  under  management,
consulting or  administration.  Although in total these assets  remained  fairly
constant at approximately $1.5 billion,  the components shifted favorably toward
the higher yielding management assets as opposed to administered assets.  Market
movement also had an unfavorable impact on total assets under management.  There
was a corresponding  increase in payouts to independent advisors of $3.1 million
to $16.4 million.

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

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

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

      The  costs  for the  Internet  based  initiative  included  in the  income
statement for 2000 were $0.7 million.

                                       24
<PAGE>
Asset Management

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

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                                      (In thousands)

<S>                                                                      <C>           <C>           <C>
Revenues...............................................................  $      6,764  $      7,799  $      6,826
Operating expenses.....................................................         5,231         6,021         5,790
                                                                         ------------  ------------  ------------
Income before income taxes.............................................  $      1,533  $      1,778  $      1,036
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

</TABLE>
2001 compared to 2000

      Berkeley  Capital  Management,  the Group's U.S. asset manager,  generates
most of this segment's  revenues and expenses.  BCM's revenues increased in 2001
by $0.2 million to $5.7 million,  which included $0.9 million of management fees
from the life  insurance and annuities  segment.  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,  which  represents  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.

      BCM will seek to add an additional  wrap account  product during 2002 with
the  objective  of  further   boosting   BCM's  assets  under   management   and
profitability in future years.

      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 Berkeley  International
Limited, the Group's 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  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 the U.S. life insurance operation which is managed
by BIL.

2000 compared to 1999

      Included  in the  revenues of the asset  management  segment for 2000 were
portfolio  management fees from the life insurance and annuities segment of $2.8
million,  compared with $1.6 million for 1999.  These  increased  fees primarily
account  for the  overall  increase  in income in the asset  management  segment
during 2000. The higher fees resulted from the larger portfolio of listed equity
securities held by the U.S. life insurance operation which is managed by BIL.

                                       25
<PAGE>
      Revenues at BCM remained  level in 2000 at $5.5  million,  including  $0.7
million  of  management  fees from the life  insurance  and  annuities  segment.
Expenses  increased by $0.3  million to $5.9  million,  primarily  due to higher
staff costs.

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

Venture Capital Management

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

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                                      (In thousands)

<S>                                                                      <C>           <C>           <C>
Revenues:
Management fees........................................................  $      9,924  $      9,398  $      7,943
Investment income......................................................             -           273           863
Net realized investment gains (losses) (1).............................        42,876        14,341       (16,843)
Change in net unrealized investment gains and losses on
  trading securities (1)...............................................       (93,470)     (123,474)      199,848
                                                                         ------------  ------------  ------------
Total revenues and net investment gains (losses).......................       (40,670)      (99,462)      191,811
Operating expenses.....................................................        10,592        10,982        33,184
                                                                         ------------  ------------  ------------
Income (loss) before income taxes......................................  $    (51,262) $   (110,444) $    158,627
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

<FN>
(1) Realized  investment gains in the amount of $37,269,000 were recorded during
2001 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  a  corresponding   decrease  in  unrealized
investment  gains on trading  securities  for the same amount.  These gains have
been eliminated in the Group's consolidated financial statements.
</FN>

</TABLE>
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

                                       26
<PAGE>
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.

      Significant  fluctuations in net unrealized gains and losses in the listed
equity trading portfolio are likely in future periods,  reflecting equity market
volatility, especially in the technology sector.

      Included in the  revenues of the venture  capital  management  segment for
2001 are 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 reflects the larger  portfolio of private  investments  held by LPLA during
2001 which were monitored by Berkeley  International  Capital Corporation.  BICC
sources and  monitors  private  investments  for LPLA,  for which LPLA pays BICC
management  fees.  Total  financings  completed  by BICC  during 2001 were $62.1
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 $11.0 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.

2000 compared to 1999

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

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

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

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

Corporate and Other

2001 compared to 2000

      Corporate  expenses  decreased by $1.7 million to $5.7 million in 2001, as
compared  to  $7.4  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

                                       27
<PAGE>
$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 the Group  (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
the Group.  Interest expense incurred by the Group (excluding the life insurance
and  annuities  segment)  increased  by $1.6  million to $2.2 million in 2001 as
compared  with 2000,  primarily  due to higher bank  borrowings  during  2001. A
discussion  of the Group's  sources and uses of cash is discussed in  "Liquidity
and Capital Resources" below.

2000 compared to 1999

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

      Additionally,  in 2000,  there were increased costs related to raising the
public profile of the Group, higher registrar fees, and costs for additional SEC
reporting requirements.

      Interest  income  earned by the Group  (excluding  the life  insurance and
annuities segment) decreased by $1.2 million to $1.6 million in 2000 as compared
with 1999,  primarily due to the decrease in cash and cash  equivalents  held by
the Group.  Interest expense incurred by the Group (excluding the life insurance
and  annuities  segment)  increased  by $0.6  million  to $0.7  million in 2000,
primarily due to bank borrowings during the latter part of 2000.

Consolidated Income (Loss) Before Income Taxes

2001 compared to 2000

      Consolidated  income before income taxes  decreased  from $15.0 million in
2000 to a loss of $401.2 million in 2001.  This loss was primarily  attributable
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 2002 and future years may be
volatile due to the Group's  holdings of listed equity  securities  primarily in
the technology  sector,  which are marked to market with changes in their market
value recognized in the income  statement for each period.  Other-than-temporary
impairments of the Group's private equity securities primarily in the technology
sector  could also effect  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.

2000 compared to 1999

      Consolidated  income  before  income  taxes  for 2000 was  $15.0  million,
compared  to $305.7  million in 1999.  The lower  income for 2000 was  primarily
attributable  to a  significant  decrease  in  the  level  of net  realized  and
unrealized investment gains.

Income Taxes

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

                                       28
<PAGE>
2001 compared to 2000

      The  effective  tax credit rate, as a percentage of the loss before income
taxes for 2001,  was 14%.  This low  effective  tax  credit  rate was  primarily
attributable to losses of $223.7 million  contributed by the Jersey and Guernsey
operations  during 2001,  which  primarily  consisted of  unrealized  investment
losses for which no tax benefits  will be  realized.  Though  income  before tax
expense  was $15.0  million  in 2000,  an income tax  benefit  of $17.4  million
resulted for the year. This was primarily attributable to the $51.2 million loss
from the U.S.  life and annuity  company  which  generated  a $17.9  million tax
benefit.  Income of $70.4  million was  contributed  by the Jersey and  Guernsey
operations during 2000, which primarily consisted of untaxed investment gains.

2000 compared to 1999

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

CRITICAL ACCOUNTING POLICIES

      Management  has  identified  those  accounting   policies  that  are  most
important to the  portrayal of the Group's  financial  condition  and results of
operations and that require management's most complex or subjective  judgements,
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 the
Group's investments, and to the accounting for life insurance policy liabilities
and deferred policy acquisition costs.  These critical  accounting  policies are
described in Note 1 to the Consolidated Financial Statements, as well as below.

Determination of Fair Values of Investments

      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 valuation methodologies as described below.

      The Group holds 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 the Group makes  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 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 the

                                       29
<PAGE>
Group's  ability  to  recover  its  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
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.

      The  determination of fair values of investments  requires the application
of  significant  judgement.  It  is  possible  that  the  factors  evaluated  by
management and fair values will change in subsequent  periods,  especially  with
respect to the Group's 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 its portfolio
to   determine   if   there   are  any   declines   in  fair   value   that  are
other-than-temporary.

      As  the  Group's  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 the Group's  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 the Group's
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 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 as 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 judgement. It is possible that the impairment factors
evaluated  by  management  and fair values will  change in  subsequent  periods,
especially  with  respect to the Group's  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

                                       30
<PAGE>
annuities  and universal  life  products are  accounted  for as  investment-type
insurance  products and  universal  life-type  products,  respectively,  and are
recorded at accumulated value (premiums  received,  plus accrued interest to the
balance sheet date, less  withdrawals and assessed fees).  Life insurance policy
liabilities  for  certain  immediate  annuities  are  accounted  for as  limited
payment-type  policies,  and as such are recorded at the present value of future
benefits including assumptions as to investment yields, mortality,  withdrawals,
maintenance expenses and other assumptions based on generally accepted actuarial
methods and on the Group's experience.

Deferred Policy Acquisition Costs

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

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


RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

      See Note 1 to the  Consolidated  Financial  Statements  for a  summary  of
recently issued accounting pronouncements.


LIQUIDITY AND CAPITAL RESOURCES

      Cash and cash  equivalents  of the Group  decreased  during  2001 by $31.9
million to $82.4  million.  This decrease  resulted from a $320.7 million use of
cash in  investing  activities,  partially  offset by $50.9  million  and $237.9
million  provided by  operating  and  financing  activities,  respectively.  The
majority of cash used in investing activities relates to investment transactions
within the life insurance and annuities  segment.  As of December 31, 2001, cash
and cash  equivalents  of the Group,  excluding the life insurance and annuities
segment,  amounted to $58.3  million,  an increase of $5.0 million from December
31, 2000 and $28.4 million from December 31, 1999. The Group, excluding the life
insurance  and  annuities  segment,  also held $24.4  million  of listed  equity
securities  which could be sold within a short period of time as of December 31,
2001,  compared to $102.7  million as of December 31, 2000 and $213.4 million as
of December 31, 1999.

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

      As of December 31, 2001, the Group held $42.0 million in private corporate
debt securities and $180.8 million in private corporate equity securities. These
securities  were held almost  exclusively  in the  investment  portfolios of the
Group's insurance  subsidiaries (LPLA and LPAL).  Liquid markets exist for $10.1
million of these private  securities.  No public price  information is available
for the remainder of these  securities.  Debt  securities that are classified as
held-to-maturity  are valued at amortized cost,  unless these securities  become
other-than-temporarily  impaired,  and all other debt and equity  securities are
classified as available-for-sale and valued at estimated fair value based on the
valuation  methodologies  as described in the above section  entitled  "Critical
Accounting  Policies."  Debt securities  largely  represent loans to an array of
companies that are diversified by industry,  geography and financial  structure.
The majority of these debt securities  generally  contain covenant  restrictions
that management believes should provide a degree of financial  protection to the
debt holders,  including the Group's insurance subsidiaries.  The private equity
securities  are primarily  convertible  preferred  stock  holdings in technology
companies  and are  described  in more  detail  in the  above

                                       31
<PAGE>
section entitled "Critical Accounting  Policies."  Financial  information on the
issuers  of  these  debt  and  equity   securities   is  received  and  reviewed
periodically  by  Group's   management.   Contact  with  company  management  is
maintained through ongoing dialogue to examine future plans and prospects.

      The Group's investment portfolio includes 15 private equity investments in
technology  companies  with an  aggregate  fair  value of $148.0  million  as of
December 31, 2001.  After applying the valuation  methodologies  as described in
the above section entitled "Critical Accounting Policies," management determined
that five of these  investments were  other-than-temporarily  impaired and $32.8
million of realized losses were reflected in the consolidated  income statement.
The remaining  aggregate fair value of these five investments as of December 31,
2001 was $39.8 million.

      During 2001,  certain other private corporate debt and equity  investments
were considered by management to be other-than-temporarily impaired and realized
losses totaling $80.3 million were recorded in the consolidated income statement
for the  differences  between cost, or amortized  cost,  and the estimated  fair
value of these securities. As of December 31, 2001, the remaining carrying value
of these private investments  totaled $42.4 million.

      During 2001,  certain  public  corporate  debt  securities  classified  as
available-for-sale  were  considered by management to be  other-than-temporarily
impaired  and  realized  losses  totaling  $39.1  million  were  recorded in the
consolidated  income statement for the difference between amortized cost and the
fair value of these securities. As of December 31, 2001, the fair value of these
securities totaled $19.2 million.

      LPLA invests in collateralized  mortgage  obligations  ("CMOs") as part of
its ongoing efforts to maintain a broadly diversified portfolio.  As of December
31, 2001, LPLA's portfolio held $169.8 million in investment grade, liquid CMOs.
At year-end,  the market value of these  securities was $171.7  million.  Of the
total CMO securities as of December 31, 2001,  none were considered to be highly
volatile  with  respect  to  interest  rate  changes.  Management  review of the
collateral and cash flow  characteristics of each security is completed prior to
acquisition.  Ongoing review of security  holdings is an integral part of LPLA's
portfolio management practices.

      As of December  31,  2001,  the  insurance  subsidiaries'  fixed  maturity
security  portfolios had $34.0 million in unrealized  gains and $63.9 million in
unrealized  losses.  LPLA and LPAL believe that changes in interest rates should
neither materially alter the average maturity of their security portfolios,  nor
alter their  ability to hold fixed  maturity  securities  until their  scheduled
maturities.

      Shareholders'  equity  decreased during 2001 by $346.0 million from $567.7
million to $221.7 million,  primarily due to a net loss for the period of $344.8
million and dividends  paid of $11.8  million.  Shareholders'  equity  increased
during 2000 by $15.3  million from the prior year,  primarily  due to net income
for the period of $32.5 million,  less  dividends  paid of $11.6 million.  As of
December 31, 2001 and 2000,  $63.6 million and $58.0 million,  respectively,  of
the Company's Ordinary Shares, at cost, held by the employee benefit trusts have
been netted  against  shareholders'  equity.  Upon  exercise  of employee  share
options,  shareholders'  equity  will be  increased  by the  cost of the  shares
transferred to the employees and the proceeds received will increase Group cash.

      Until the latter part of 2000,  London Pacific Group  financed  operations
and capital  expenditures  with  internally  generated funds and existing liquid
resources.  As of December  31,  1999,  the Group had no bank  borrowings,  bond
issues or convertible securities outstanding.  However, as of December 31, 1999,
$11.8  million of the Group's  $50.0  million bank facility had been utilized in
the form of  letters  of  credit  and  guarantees  in  connection  with  certain
portfolio  companies.  As of December  31, 2000,  the Group had  utilized  $14.1
million of the bank facility in the form of letters of credit and  guarantees in
connection with these portfolio  companies,  and had drawn down $35.6 million in
loans. As of December 31, 2001, the Group had utilized $12.7 million of the bank
facility  in the form of letters of credit  and  guarantees,  and had drawn down
$36.9 million in loans. These loans were used for general corporate purposes and
are scheduled for repayment in May 2003.

      The Group had no material commitments  outstanding as of December 31, 2001
for capital  expenditures  or additional  funding for private  equity  portfolio
companies.  Management  believes that the balances of cash,

                                       32
<PAGE>
liquid  resources and available  borrowings  should be sufficient to satisfy the
Group's anticipated liquidity requirements during the next twelve months.

      There are  statutory  restrictions  on  LPLA's  ability  to make  dividend
payments. Dividend payments that exceed the lower of 10 percent of its statutory
surplus as of December 31 of the preceding year or net gain from  operations for
the preceding  year must be approved by certain  regulatory  authorities.  As of
December 31, 2001,  LPLA's U.S. GAAP equity amounted to $118.5 million,  none of
which could be  transferred  in the form of dividends,  loans or advances to the
parent company at that date without regulatory approval.

      LPLA,  in common with other U.S.  insurers,  is also subject to regulation
and supervision by the states and  jurisdictions in which it does business.  The
National   Association  of  Insurance   Commissioners   ("NAIC")  has  developed
risk-based  capital ("RBC")  requirements.  RBC relates an individual  insurance
company's statutory surplus to the risk inherent in its overall  operations.  As
of December 31,  2001,  LPLA's  adjusted  capital  exceeded  its RBC  standards.
Further losses on LPLA's equity  investments could result in a decline in LPLA's
capital  that  could,  in turn,  limit the  company's  ability to  generate  new
business due to the required RBC ratios.

      There are  statutory  restrictions  on  LPAL's  ability  to make  dividend
payments.  Jersey  insurance  companies,  including  LPAL,  are regulated by the
Jersey Financial Services  Commission under Jersey insurance laws. A requirement
of these  laws is to  maintain  at all  times,  within  an  insurance  company's
long-term  insurance fund,  sufficient  assets approved under the laws, to cover
liabilities plus a required  solvency margin,  currently  established at 2.5% of
the value of the fund.  Under the law, no transfers,  except in  satisfaction of
long-term insurance  liabilities,  including  dividends,  are permitted from the
long-term  insurance fund without written consent from LPAL's Appointed Actuary.
As of December 31, 2001,  LPAL's approved  assets exceeded its liabilities  plus
its required solvency margin by approximately $26.5 million.

      As  discussed  above,  LPLA  and LPAL  hold  most of the  Group's  private
corporate  debt and  equity  investments.  Private  corporate  debt  and  equity
investments held by LPLA and LPAL, at December 31, 2001,  totaled $206.6 million
and  $15.2  million,  respectively.  Further  declines  in the  value  of  these
investments  could have an adverse  impact on the  statutory  capital of the two
insurance subsidiaries.  A decrease in statutory capital could limit the ability
of the  insurance  subsidiaries  to  generate  new  business  due  to  statutory
restrictions  on premium  to  surplus  ratios  and  required  statutory  capital
parameters.  If the insurance  subsidiaries cannot generate sufficient statutory
capital to maintain minimum statutory  requirements  through increased statutory
profitability,   reinsurance  or  other  capital  generating  alternatives,  the
insurance  subsidiaries will be limited in their ability to generate  additional
premium from new business  growth,  which could result in lower net income under
U.S.  GAAP,  or in the event that  statutory  capital is not  sufficient to meet
regulatory minimums, the insurance subsidiaries could be prohibited from writing
any new business.

      The Group is  considering  various  options to reduce the level of risk in
its operating plan. One option would be to sell a significant  percentage of its
private  equity  securities  in exchange for an  equity-linked  note issued by a
major insurer. Other options include reinsurance,  capital raising or a range of
other strategic initiatives.


Item  7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Interest Rate Risk

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

                                       33
<PAGE>
effects  of  changes  are  reasonably  likely to be  offset.  LPLA's  and LPAL's
principal asset/liability  management goals are to achieve sufficient cash flows
from  invested  assets  to  fund  contractual   obligations,   while  maximizing
investment returns. LPLA and LPAL have not used derivative financial instruments
to achieve their  asset/liability  management  goals.  Exposure to interest rate
risk is estimated by performing  sensitivity tests based on duration analysis of
LPLA's investment and product portfolios.

      Duration is an option  adjusted  measure of the  percentage  change in the
market  value of the assets or  liabilities  in  response  to a given  change in
interest  rates.  For  LPLA's  universal  life  products  and for all of  LPAL's
products,  given that policyholder liabilities are only $48.0 million and $132.0
million,  respectively,  interest  rate risk is  considered  to be  minimal.  To
demonstrate the sensitivity of LPLA's assets and liabilities, tests performed on
LPLA's assets and liabilities indicated that, as of December 31, 2001, if market
interest rates had suddenly increased by 100 basis points, the fair value of the
investment   portfolio  that  is  subject  to  interest  rate  risk,  which  was
approximately $1.9 billion, would have decreased by $82.4 million, compared with
a decrease of $76.9  million for the  calculated  market  value of  liabilities,
which was approximately $1.8 billion. Conversely, a sudden decrease of 100 basis
points  would have  increased  the  investment  portfolio's  fair value by $85.3
million, compared with an increase in the calculated market value of liabilities
of $95.2 million.  These results depend upon certain key  assumptions  regarding
the behavior of interest  sensitive  cash flows.  Although LPLA has attempted to
ensure that the  assumptions  used are based on the best  available  data,  cash
flows cannot be forecasted  with certainty and can deviate  materially  from the
assumed results.

Equity Price Risk

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

      If the fair value of the Group's  listed  equity  portfolio as of December
31, 2001 and 2000, which totaled $82.9 million and $356.5 million, respectively,
had  abruptly  increased  or  decreased  by 50%,  the fair value of the listed
equity  portfolio  would have increased or decreased by $41.5 million and $178.3
million, respectively.

      The Group's listed equity securities  largely  represent  investments that
were  originally  made as private equity  investments  that either  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
the Group attempts to manage its risk in various ways. Firstly,  the performance
of the listed equity securities are monitored daily.  Secondly,  the Group seeks
to sell  investments  after a period of time,  particularly in the case of large
public company securities.

      As of  December  31,  2001,  the Group  held  $170.7  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 these Group's 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. Firstly, the investments are diversified in a number of technology
companies  to  avoid  excessive  concentration  in any  one  company.  Secondly,
extensive due diligence  procedures are performed prior to making an investment.
Thirdly,  regular reviews of the progress of the investee  companies are carried
out.

      For additional information relating to the Group's financial risk profile,
see  Note 13 to the  Consolidated  Financial  Statements  in  Item 8  "Financial
Statements and Supplementary Data" of this Form 10-K.

                                       34
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            Page
<S>                                                                         <C>
Report of Independent Auditors............................................... 36

Consolidated Balance Sheets as of December 31, 2001 and 2000................. 37

Consolidated Statements of Income for the Years Ended
        December 31, 2001, 2000 and 1999..................................... 38

Consolidated Statements of Cash Flows for the Years Ended
        December 31, 2001, 2000 and 1999..................................... 39

Consolidated Statements of Changes in Shareholders' Equity for the Years
        Ended December 31, 2001, 2000 and 1999............................... 41

Consolidated Statements of Comprehensive Income for the Years Ended
        December 31, 2001, 2000 and 1999..................................... 43

Notes to Consolidated Financial Statements................................... 44

</TABLE>

                                       35
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS


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


      In our  opinion,  the  consolidated  financial  statements  listed  in the
accompanying  index  present  fairly,  in all material  respects,  the financial
position of London  Pacific Group Limited and its  subsidiaries  at December 31,
2000 and 2001, and the results of their operations and their cash flows for each
of the three 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 14 on page 77, present fairly,  in all
material  respects,  the  information set forth therein when read in conjunction
with the related consolidated  financial statements.  These financial statements
and  financial  statement  schedules  are the  responsibility  of the  Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements and financial  statement  schedules based on our audits. We conducted
our audits of these statements in accordance with auditing  standards  generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe that our audits provide a reasonable basis for our opinion.


PricewaterhouseCoopers
Chartered Accountants

Jersey, Channel Islands
April 1, 2002

                                       36
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                      (In thousands, except share amounts)
<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                       --------------------------
                                                                                           2001          2000
                                                                                       ------------  ------------
                                     ASSETS

<S>                                                                                    <C>           <C>
Investments, principally of life insurance subsidiaries:
  Fixed maturities:
    Available-for-sale, at fair value (amortized cost: $1,595,080 and $1,352,313
      as of December 31, 2001 and 2000, respectively)...............................   $  1,562,790  $  1,292,015
    Held-to-maturity, at amortized cost (fair value: $100,936 and $129,400
      as of December 31, 2001 and 2000, respectively)...............................         98,619       127,514
  Equity securities:
    Trading, at fair value (cost: $86,036 and $99,747 as of December 31,
      2001 and 2000, respectively)..................................................         81,787       353,896
    Available-for-sale, at fair value (cost: $185,539 and $238,942 as of
      December 31, 2001 and 2000, respectively).....................................        181,927       229,403
  Policy loans......................................................................         10,529        10,301
                                                                                       ------------  ------------
Total investments...................................................................      1,935,652     2,013,129

Cash and cash equivalents...........................................................         82,417       114,285
Accrued investment income...........................................................         33,373        28,629
Deferred policy acquisition costs...................................................        168,826       168,102
Assets held in separate accounts....................................................        227,675       206,325
Reinsurance assets..................................................................         42,025             -
Other assets........................................................................         46,360        32,518
                                                                                       ------------  ------------
Total assets........................................................................   $  2,536,328  $  2,562,988
                                                                                       ------------  ------------
                                                                                       ------------  ------------
                      LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Life insurance policy liabilities...................................................   $  2,031,852  $  1,691,601
Liabilities related to separate accounts............................................        226,015       203,806
Notes payable.......................................................................         36,874        35,556
Deferred income tax liabilities.....................................................              -        41,587
Accounts payable, accruals and other liabilities....................................         19,934        22,696
                                                                                       ------------  ------------
Total liabilities...................................................................      2,314,675     1,995,246
                                                                                       ------------  ------------
Commitments and contingencies

Shareholders' equity:
Ordinary shares, $0.05 par value per share: 86,400,000 shares authorized;
  64,439,073 and 64,433,313 shares issued and outstanding as of
  December 31, 2001 and 2000, respectively..........................................          3,222         3,222
Additional paid-in capital..........................................................         68,346        67,591
Retained earnings...................................................................        223,590       580,176
Employee benefit trusts, at cost (13,698,181 and 12,811,381 shares as of
  December 31, 2001 and 2000, respectively).........................................        (63,599)      (58,003)
Accumulated other comprehensive income (loss).......................................         (9,906)      (25,244)
                                                                                       ------------  ------------
Total shareholders' equity..........................................................        221,653       567,742
                                                                                       ------------  ------------
Total liabilities and shareholders' equity..........................................   $  2,536,328  $  2,562,988
                                                                                       ------------  ------------
                                                                                       ------------  ------------
<FN>
          See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>

                                       37
<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,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
<S>                                                                      <C>           <C>           <C>

Revenues:
Investment income......................................................  $    143,022  $    116,005  $     99,007
Insurance policy charges...............................................         5,672         7,400         6,671
Financial advisory services, asset management and other fee income.....        24,807        31,584        26,563
Net realized investment gains (losses).................................      (118,848)      145,546        (8,581)
Change in net unrealized investment gains and losses on trading
  securities...........................................................      (258,399)     (111,014)      348,906
                                                                         ------------  ------------  ------------
                                                                             (203,746)      189,521       472,566
Expenses:
Interest credited on insurance policyholder accounts...................       118,965        94,065        73,753
Amortization of deferred policy acquisition costs......................        23,740        21,155        16,797
Operating expenses.....................................................        52,307        58,371        75,964
Goodwill amortization..................................................           221           248           348
Interest expense.......................................................         2,248           672            42
                                                                         ------------  ------------  ------------
                                                                              197,481       174,511       166,904
                                                                         ------------  ------------  ------------
Income (loss) before income tax expense................................      (401,227)       15,010       305,662

Income tax expense (benefit)...........................................       (56,443)      (17,447)       53,786
                                                                         ------------  ------------  ------------
Net income (loss)......................................................  $   (344,784) $     32,457  $    251,876
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

Basic earnings (loss) per share and ADS (1)............................  $      (6.76) $       0.64  $       5.05

Diluted earnings (loss) per share and ADS (1)..........................  $      (6.76) $       0.53  $       4.54


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

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

                                       38
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
<S>                                                                      <C>           <C>           <C>

Cash flows from operating activities:
Net income (loss)......................................................  $   (344,784) $     32,457  $    251,876

Adjustments to reconcile net income (loss) to net
  cash provided by operating activities:
Depreciation and amortization..........................................         1,739         1,175         1,055
Amortization of deferred policy acquisition costs......................        23,740        21,155        16,797
Deferred income tax expense (benefit)..................................       (66,807)      (12,502)       54,265
Interest credited on insurance policyholder accounts...................       118,965        94,065        73,753
Net realized investment losses (gains).................................       118,848      (145,546)        8,581
Change in net unrealized investment gains and losses on trading
  securities...........................................................       258,399       111,014      (348,906)
Net amortization of investment premiums and discounts..................        (2,178)       (1,966)       (3,309)

Net changes in operating assets and liabilities:
  Trading equity securities............................................        57,500       121,450        11,307
  Accrued investment income............................................        (4,744)       (6,461)       (3,093)
  Deferred policy acquisition costs....................................       (37,468)      (39,026)      (25,840)
  Reinsurance assets...................................................       (42,025)            -             -
  Other assets.........................................................         8,817         2,019        (1,235)
  Life insurance policy liabilities....................................       (33,812)      (86,089)      (65,545)
  Accounts payable, accruals and other liabilities.....................        (1,694)      (17,310)       23,990
  Income taxes payable.................................................        (3,734)       (3,598)         (628)

Other operating cash flows.............................................           183        (2,240)       (4,901)
                                                                         ------------  ------------  ------------
Net cash provided by (used in) operating activities....................        50,945        68,597       (11,833)
                                                                         ------------  ------------  ------------
Cash flows from investing activities:
Purchases of held-to-maturity fixed maturity securities................        (4,725)       (4,201)      (10,126)
Purchases of available-for-sale fixed maturity securities..............      (810,147)     (357,950)     (345,004)
Purchases of available-for-sale equity securities......................       (61,536)     (140,959)     (109,900)
Proceeds from redemption of held-to-maturity fixed maturity securities.        28,643        51,141        38,560
Proceeds from sale of available-for-sale fixed maturity securities.....       522,265        63,093       206,729
Proceeds from sale of available-for-sale equity securities.............         6,554       100,101        49,710
Capital expenditures...................................................        (1,488)       (3,659)       (1,184)
Other cash flows from investing activities.............................          (228)        3,123         3,166
                                                                         ------------  ------------  ------------
Net cash provided by (used in) investing activities....................      (320,662)     (289,311)     (168,049)
                                                                         ------------  ------------  ------------

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

                                       39
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
<S>                                                                      <C>           <C>           <C>

Cash flows from financing activities:
Insurance policyholder contract deposits...............................       450,919       493,998       305,514
Insurance policyholder benefits paid...................................      (195,669)     (226,796)     (173,414)
Issuance of Ordinary Shares............................................             3             -             5
Dividends paid.........................................................       (11,802)      (11,625)      (11,446)
Purchases of Ordinary Shares by the employee benefit trusts............        (6,005)      (12,712)       (4,043)
Proceeds from disposal of shares by the employee benefit trusts........           440         8,407         2,344
Notes payable..........................................................             -        35,000             -
Bank overdrafts........................................................             -          (593)         (789)
                                                                         ------------  ------------  ------------
Net cash provided by financing activities..............................       237,886       285,679       118,171
                                                                         ------------  ------------  ------------

Net increase (decrease) in cash and cash equivalents...................       (31,831)       64,965       (61,711)
Cash and cash equivalents at beginning of year.........................       114,285        49,703       111,414
Foreign currency translation adjustment................................           (37)         (383)            -
                                                                         ------------  ------------  ------------
Cash and cash equivalents at end of year...............................  $     82,417  $    114,285  $     49,703
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------


Supplemental disclosure of cash flow information:

Cash paid (received) during the year for:
Interest...............................................................  $        930  $         50  $         42
Income taxes (net of amounts recovered)................................  $     14,099  $     (1,347) $       (270)

Supplemental disclosure of non-cash investing activities:
Exchange of available-for-sale equity securities for trading equity
  securities...........................................................  $      5,000  $     97,857  $     31,372






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

                                       40
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
                (In thousands, except per share and ADS amounts)
<TABLE>
<CAPTION>
                                                                                     Accumulated
                                                                                        Other
                                       Ordinary   Additional               Employee    Compre-       Total
                                      Shares at    Paid-in     Retained     Benefit    hensive    Shareholders'
                                      Par Value    Capital     Earnings     Trusts   Income(Loss)    Equity
                                      ----------  ----------  ----------  ----------  ----------  ----------
<S>                                   <C>         <C>         <C>         <C>         <C>         <C>

Balance as of January 1, 1999.........$    3,221  $   62,199  $  318,785  $  (52,282) $   (3,442) $  328,481

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

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 ADS (1) ).............         -           -     (11,625)          -           -     (11,625)
Purchase of shares by the
  employee benefit trusts.............         -           -           -     (12,712)          -     (12,712)
                                      ----------  ----------  ----------  ----------  ----------  ----------
Balance as of December 31, 2000.......$    3,222  $   67,591  $  580,176  $  (58,003) $  (25,244) $  567,742
                                      ----------  ----------  ----------  ----------  ----------  ----------
                                      ----------  ----------  ----------  ----------  ----------  ----------

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

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

                                       41
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

     CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Continued)
                  YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
                (In thousands, except per share and ADS amounts)
<TABLE>
<CAPTION>
                                                                                     Accumulated
                                                                                        Other
                                       Ordinary   Additional               Employee    Compre-       Total
                                      Shares at    Paid-in     Retained     Benefit    hensive    Shareholders'
                                      Par Value    Capital     Earnings     Trusts   Income(Loss)    Equity
                                      ----------  ----------  ----------  ----------  ----------  ----------
<S>                                   <C>         <C>         <C>         <C>         <C>         <C>

Balance as of January 1, 2001.........$    3,222  $   67,591  $  580,176  $  (58,003) $  (25,244) $  567,742

Net income (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..........................         -         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 ADS ).................         -           -     (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.......$    3,222  $   68,346  $  223,590  $  (63,599) $   (9,906) $  221,653
                                      ----------  ----------  ----------  ----------  ----------  ----------
                                      ----------  ----------  ----------  ----------  ----------  ----------




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

                                       42
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
<S>                                                                      <C>           <C>           <C>

Net income (loss)......................................................  $   (344,784) $     32,457  $    251,876

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

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

Change in net unrealized gains and losses:
  Change in net unrealized gains and losses on available-for-sale
    securities.........................................................        34,796       (16,259)      (42,742)
  Deferred policy acquisition cost amortization adjustments............       (12,993)        5,740        20,794
  Deferred income taxes................................................        (6,350)        3,682         7,025

                                                                         ------------  ------------  ------------
Other comprehensive income (loss)......................................        15,338        (6,879)      (14,923)
                                                                         ------------  ------------  ------------
Comprehensive income (loss)............................................  $   (329,446) $     25,578  $    236,953
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------



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

                                       43
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note  1. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

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

      The consolidated  balance sheet is presented in an unclassified  format as
the Group is primarily engaged in the life insurance and 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 on the New York
Stock Exchange in the form of ADSs, which are represented by American Depositary
Receipts  ("ADRs").  Pursuant  to the  regulations  of the U.S.  Securities  and
Exchange  Commission  ("SEC"),   the  Company  is  considered  a  U.S.  domestic
registrant and must file financial statements prepared under U.S. GAAP. In years
prior to 2000,  the Company filed as a "foreign  private  issuer" (as defined by
the SEC) and prepared its financial  statements  under United Kingdom  generally
accepted accounting  principles ("U.K. GAAP") with a reconciliation to U.S. GAAP
for net income and shareholders' equity.

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

Cash  and Cash Equivalents

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

Investments

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

      i)    available-for-sale  securities  are  recorded  at fair  value,  with
            changes in unrealized gains and losses excluded from net income, but
            reported net of applicable  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; and
      iii)  trading  securities  are  recorded  at fair  value  with  changes in
            unrealized gains and losses included in net income.

                                       44
<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.
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 on the consolidated  statements of
income.  The cost basis of such securities is adjusted to reflect the write-down
recorded.

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

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

Deferred Policy Acquisition Costs

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

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

Reinsurance Assets

      Reinsurance  assets include estimated amounts due from reinsurers  related
to unpaid  policy  claims and future  policy  benefits  on  reinsured  policies.
Amounts received as ceding commissions for reinsurance contracts are recorded as
deferred  commission  income.  Reinsurance  receivables and deferred  commission
income are accounted  for over the terms of the  underlying  reinsured  policies
using assumptions consistent with those used to account for the policies.

Other Assets

      Other assets consist primarily of the following:

                                       45
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

a)    Deferred Income Tax Assets and Income Tax Refunds Receivable

      Income taxes are discussed below.

b)    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:

<TABLE>
        <S>                                      <C>  <C>
        Furniture and equipment                  -    five years
        Computer equipment, including software   -    three to five years
        Motor vehicles                           -    five years
        Leasehold improvements                   -    life of lease
</TABLE>

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

      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.

c)    Intangible Assets

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

Separate Accounts

      Separate account assets and liabilities represent funds segregated, either
legally or on a book  basis,  for the benefit of certain  policyholders  and are
recorded at fair value. For non-guaranteed  policies (variable  annuities),  the
policyholder  bears the investment risk, and  policyholder  account deposits and
withdrawals,  investment  income and realized gains and losses are excluded from
the  amounts  reported in the income  statement.  Fees  charged on  policyholder
deposits  are  included  in other fee income.  For  guaranteed  policies  (fixed
annuities  with market value  adjustment  provisions)  issued in certain  states
which  require  the  segregation  of the assets on a book basis,  the U.S.  life
company  bears a  portion  of the  investment  risk.  Policy  charges,  interest
credited, investment income and realized gains and losses on investments backing
the  guaranteed  policies  are  included in the  amounts  reported in the income
statement.  The fair value of the  investments  backing the guaranteed  policies
included  in  separate  account  assets  total  approximately  $177,559,000  and
$146,168,000 at December 31, 2001 and 2000, respectively.

                                       46
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Life  Insurance Policy Liabilities, Revenues and Expenses

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

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

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

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

Revenue Recognition

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

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

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

Stock Based Compensation

      The Group  accounts  for stock based  compensation  issued to employees in
accordance  with  Accounting   Principles  Board  Opinion  No.  25  ("APB  25"),
"Accounting  for  Stock  Issued to  Employees,"  which  recognizes  compensation
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.

                                       47
<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 judgement  about the  realization of the related  deferred  income tax
asset.

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

Earnings Per Share and ADS

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

Foreign Currencies

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

Comprehensive Income

      Comprehensive  income consists of net income;  changes in unrealized gains
or losses on  available-for-sale  securities,  net of income  taxes and deferred
policy   acquisition  cost  amortization   adjustments;   and  foreign  currency
translation  gains or losses arising on the translation of the Group's  non-U.S.
dollar based subsidiaries.

Recently Issued Accounting Pronouncements

      On January 1, 2001,  the Group adopted  Statement of Financial  Accounting
Standard  No. 133 ("SFAS  133"),  "Accounting  for  Derivative  Instruments  and
Hedging  Activities."  This  standard,  as amended,  establishes  accounting and
reporting  standards  for  derivative  instruments  and hedging  activities.  It
requires  that all  derivative  instruments  be recorded on the balance sheet at
fair value unless the derivative  qualifies as a hedge. The adoption of SFAS 133
did not have a material impact on the Group's consolidated financial position or
results of operations for the year ended December 31, 2001.

                                       48
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      In June 2001, the Financial  Accounting  Standards  Board ("FASB")  issued
Statement  of Financial  Accounting  Standard  No. 141 ("SFAS  141"),  "Business
Combinations," which superseded  Accounting Principles Board ("APB") Opinion No.
16, "Business Combinations." SFAS 141 eliminates the pooling-of-interests method
of accounting  for business  combinations  and modifies the  application  of the
purchase  accounting  method.  SFAS 141 also specifies  criteria that intangible
assets  acquired  in a  business  combination  must  meet to be  recognized  and
reported separately from goodwill. The elimination of the pooling-of-interests

method  is  effective  for  transactions  initiated  after  June 30,  2001.  The
remaining  provisions of SFAS 141 are effective for  transactions  accounted for
using the purchase  method for which the date of  acquisition is July 1, 2001 or
later.  The  adoption  of this  statement  did not have an effect on the Group's
consolidated  financial  position  or results of  operations  for the year ended
December 31, 2001.

      In June 2001,  the FASB also  issued  Statement  of  Financial  Accounting
Standard No. 142 ("SFAS 142"),  "Goodwill and Other  Intangible  Assets,"  which
superseded  APB Opinion No. 17,  "Intangible  Assets." SFAS 142  eliminates  the
current requirement to amortize goodwill and indefinite-lived intangible assets,
addresses  the  amortization  of  intangible  assets  with a defined  life,  and
addresses the  impairment  testing and  recognition  for goodwill and intangible
assets.  The  provisions of SFAS 142 are  effective  for fiscal years  beginning
after  December  15,  2001.  Impairment  losses,  if  any,  due to  the  initial
application  of SFAS  142 are to be  reported  as  resulting  from a  change  in
accounting  principle.  The Group  will  apply the new rules on  accounting  for
goodwill and other intangible assets beginning in the first quarter of 2002, and
the  adoption  of  this  Statement  will  not  have  a  material  effect  on its
consolidated  results of  operations or financial  position.  For the year ended
December 31, 2001, goodwill amortization amounted to $221,000.

      In August 2001, the FASB issued Statement of Financial Accounting Standard
No. 144 ("SFAS 144"),  "Accounting  for the Impairment or Disposal of Long-Lived
Assets."  SFAS  144  addresses  financial   accounting  and  reporting  for  the
impairment or disposal of long-lived  assets and  supercedes,  with  exceptions,
Statement  of  Financial  Accounting  Standard  No.  121,  "Accounting  for  the
Impairment of Long-Lived  Assets to Be Disposed Of." The  provisions of SFAS 144
are effective for fiscal years  beginning  after  December 15, 2001, and interim
periods within those fiscal years, with early application encouraged.  The Group
does not expect  adoption  of this  statement  to have a material  effect on its
consolidated results of operations or financial position.

Use of Estimates

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

Reclassifications

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

                                       49
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note  2. Investments

Summary Cost and Fair Value Information

Fixed Maturity Securities

        An analysis of fixed maturity securities is as follows:
<TABLE>
<CAPTION>
                                                                      December 31,
                          --------------------------------------------------------------------------------------------------
                                                2001                                              2000
                          -----------------------------------------------   ------------------------------------------------
                                         Gross       Gross      Estimated                  Gross       Gross       Estimated
                           Amortized   Unrealized  Unrealized     Fair       Amortized   Unrealized  Unrealized      Fair
                             Cost        Gains       Losses       Value        Cost        Gains       Losses        Value
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------
                                                                    (In thousands)
<S>                       <C>          <C>         <C>         <C>          <C>          <C>         <C>          <C>
Available-for-Sale:
U.S. treasury securities..$      985   $      97   $       -   $    1,082   $      982   $       -   $      (13)  $      969
Non-U.S. government
  debt securities.........     7,629          97           -        7,726       21,750       1,037            -       22,787
Non-U.S. corporate
  debt securities.........   253,736       4,952      (8,273)     250,415      178,167       3,558       (6,616)     175,109
Corporate debt securities. 1,157,406      23,159     (42,309)   1,138,256      923,179      12,992      (63,885)     872,286
Mortgage-backed securities   101,788       3,184          (1)     104,971       99,334       1,584         (179)     100,739
Private corporate debt
  securities..............    24,122           -      (1,500)      22,622       33,708          29       (1,488)      32,249
Other debt securities.....    49,414         146     (11,842)      37,718       95,193         676       (7,993)      87,876
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------
                          $1,595,080   $  31,635   $ (63,925)  $1,562,790   $1,352,313   $  19,876   $  (80,174)  $1,292,015
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------
Held-to-Maturity:
U.S. treasury securities..$    2,200   $      68   $       -   $    2,268   $    2,240   $      15   $      (22)  $    2,233
U.S. municipal securities.     1,919          13           -        1,932        2,044          41            -        2,085
Non-U.S. government
  debt securities.........       192           1           -          193          195           -            -          195
Non-U.S. corporate
  debt securities.........       311          15           -          326        1,301          28            -        1,329
Corporate debt securities.     9,837         267          (9)      10,095       11,410         186          (64)      11,532
Mortgage-backed securities    64,812       1,888          (3)      66,697       88,151       1,626         (153)      89,624
Private corporate debt
  securities..............    19,348          77           -       19,425       22,173         229            -       22,402
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------
                          $   98,619   $   2,329   $     (12)  $  100,936   $  127,514   $   2,125   $     (239)  $  129,400
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------

Total fixed maturity
  securities..............$1,693,699   $  33,964   $ (63,937)  $1,663,726   $1,479,827   $  22,001   $  (80,413)  $1,421,415
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------

</TABLE>
      During 2001, two fixed maturity securities  classified as held-to-maturity
were  sold  for  $147,000,  resulting  in a  realized  loss  of  $54,000.  These
securities  were sold due to credit  concerns.  There were no such sales  during
2000.  During 1999, one fixed maturity security  classified as  held-to-maturity
was sold for  $8,342,000,  resulting in no gain or loss.  This security was sold
due to credit concerns.

      During  2000  and  1999,   fixed   maturity   securities   classified   as
held-to-maturity   with  an  aggregate   carrying  value  of   $29,020,000   and
$20,122,000, respectively, were exchanged into preferred stock and classified as

                                       50
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

      Fixed  maturity  securities  totaling  $5,958,000 at amortized  cost as of
December 31, 2001,  were  non-income  producing for the twelve months  preceding
December 31, 2001.

      As  of  December  31,  2001,  fixed  maturity  securities   classified  as
held-to-maturity with an aggregate carrying value of $10,150,000 were on deposit
with U.S. state insurance departments to satisfy regulatory requirements.

Contractual Maturities

      The amortized cost and estimated  fair value of fixed maturity  securities
as of December  31, 2001 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.................................   $   48,473   $   47,135        $   10,436  $    10,584
Due after one year through five years...................      514,596      521,474            11,029       11,215
Due after five years through ten years..................      615,833      599,085               515          533
Due after ten years.....................................      314,390      290,125            11,827       11,907
                                                           ----------   ----------        ----------   ----------
                                                            1,493,292    1,457,819            33,807       34,239
Mortgage-backed securities..............................      101,788      104,971            64,812       66,697
                                                           ----------   ----------        ----------   ----------
                                                           $1,595,080   $1,562,790        $   98,619   $  100,936
                                                           ----------   ----------        ----------   ----------
                                                           ----------   ----------        ----------   ----------
</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,
                          --------------------------------------------------------------------------------------------------
                                               2001                                              2000
                          -----------------------------------------------   ------------------------------------------------
                                         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............. $  183,621   $   4,043   $  (6,876)  $  180,788   $  226,799   $       -   $        -   $  226,799
Listed equity securities.      1,918           -        (779)       1,139       12,143         124       (9,663)       2,604
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------
Total available-for-sale
  equity securities......    185,539       4,043      (7,655)     181,927      238,942         124       (9,663)     229,403

Trading securities.......     86,036      17,755     (22,004)      81,787       99,747     264,433      (10,284)     353,896
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------
Total equity securities.. $  271,575   $  21,798   $ (29,659)  $  263,714   $  338,689   $ 264,557   $  (19,947)  $  583,299
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------
                          ----------   ---------   ---------   ----------   ----------   ---------   ----------   ----------

</TABLE>
                                       51
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      Trading  securities  are  carried  at  fair  value  with  changes  in  net
unrealized gains and losses of  $(258,399,000),  $(111,014,000) and $348,906,000
included  in earnings  for the years ended  December  31,  2001,  2000 and 1999,
respectively.

Investment Concentration and Risk

      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. As of December 31, 2000,  investments in fixed
maturity and equity securities included two corporate issuers  representing more
than  ten  percent  of  shareholders'   equity.   Trading  securities   included
investments  in New Focus,  Inc.  and Siebel  Systems,  Inc.  recorded at market
values of $160,385,000 and $62,487,000,  respectively,  as of December 31, 2000.
Fixed maturity  securities  considered less than investment  grade  approximated
8.7% and 13.1% of total fixed  maturity  securities  as of December 31, 2001 and
2000, respectively.

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

      The  net  unrealized   losses  after  deferred  policy   acquisition  cost
adjustments on fixed maturity securities  classified as available-for-sale as of
December 31, 2001 totaled  $13,243,000  before tax and $8,118,000 after tax, and
as of December 31, 2000 totaled  $29,118,000  before tax and  $18,993,000  after
tax.   The  net   unrealized   losses  on  equity   securities   classified   as
available-for-sale  as of December  31, 2001 totaled  $3,612,000  before tax and
$1,631,000 after tax, and as of December 31, 2000 totaled  $9,539,000 before tax
and $6,209,000 after tax.

                                       52
<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, 1999, 2000 and 2001 were as follows:

<TABLE>
<CAPTION>

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

<S>                                                                               <C>            <C>            <C>
Net unrealized gains (losses) on available-for-sale securities as of
  December 31, 1998.............................................................  $      (4,552) $       1,110  $      (3,442)
Changes during the year ended December 31, 1999:
  Change in net unrealized gains and losses on available-for-sale securities....        (38,452)        (4,290)       (42,742)
  Decrease in amortization of deferred policy acquisition costs.................         20,794              -         20,794
  Decrease in deferred income tax liabilities...................................          6,180            845          7,025
                                                                                  -------------  -------------  -------------
Net unrealized gains (losses) on available-for-sale securities as of
  December 31, 1999.............................................................        (16,030)        (2,335)       (18,365)

Changes during the year ended December 31, 2000:
  Change in net unrealized gains and losses on available-for-sale securities....        (10,197)        (6,062)       (16,259)
  Decrease in amortization of deferred policy acquisition costs.................          5,740              -          5,740
  Decrease in deferred income tax liabilities...................................          1,494          2,188          3,682
                                                                                  -------------  -------------  -------------
Net unrealized gains (losses) on available-for-sale securities as of
  December 31, 2000.............................................................        (18,993)        (6,209)       (25,202)

Changes during the year ended December 31, 2001:
  Change in net unrealized gains and losses on available-for-sale securities....         28,869          5,927         34,796
  Increase in amortization of deferred policy acquisition costs.................        (12,993)             -        (12,993)
  Increase in deferred income tax liabilities...................................         (5,001)        (1,349)        (6,350)
                                                                                  -------------  -------------  -------------
Net unrealized gains (losses) on available-for-sale securities as of
  December 31, 2001.............................................................  $      (8,118) $      (1,631) $      (9,749)
                                                                                  -------------  -------------  -------------
                                                                                  -------------  -------------  -------------
</TABLE>

                                       53
<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,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                                      (In thousands)

<S>                                                                      <C>           <C>           <C>
Interest on fixed maturity securities.................................   $    138,948  $    112,039  $     94,546
Dividends on equity securities........................................             13           431           213
Interest on policy loans..............................................            625           640           606
Interest on cash and cash equivalents.................................          3,849         3,389         3,780
                                                                         ------------  ------------  ------------
Gross investment income...............................................        143,435       116,499        99,145
Investment expenses...................................................           (413)         (494)         (138)
                                                                         ------------  ------------  ------------
                                                                              143,022       116,005        99,007
Interest credited on insurance policyholder accounts..................       (118,965)      (94,065)      (73,753)
                                                                         ------------  ------------  ------------
Net investment income.................................................   $     24,057  $     21,940  $     25,254
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

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


Realized Gains and Losses

      Information  about net and gross  realized  gains and losses on securities
transactions is as follows:

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                                      (In thousands)
<S>                                                                      <C>           <C>           <C>
Net realized gains (losses) on securities transactions:
Fixed maturities, available-for-sale..................................   $    (44,942) $         13  $     (6,735)
Fixed maturities, held-to-maturity....................................         (5,897)      (28,274)      (36,862)
Equity securities, trading............................................         42,019       186,516        34,403
Equity securities, available-for-sale.................................       (110,028)      (12,709)          613
                                                                         ------------  ------------  ------------
                                                                         $   (118,848) $    145,546  $     (8,581)
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

</TABLE>

                                       54
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                                      (In thousands)
<S>                                                                      <C>           <C>           <C>
Gross realized gains (losses) on securities transactions:
Fixed maturities, available-for-sale:
  Gross gains.........................................................   $     19,304  $        244  $      2,179
  Gross losses........................................................        (64,246)         (231)       (8,914)
Fixed maturities, held-to-maturity:
  Gross losses........................................................         (5,897)      (28,274)      (36,862)
Equity securities, trading:
  Gross gains.........................................................         43,665       187,717        34,403
  Gross losses........................................................         (1,646)       (1,201)            -
Equity securities, available-for-sale:
  Gross gains.........................................................          1,591           179         7,822
  Gross losses........................................................       (111,619)      (12,888)       (7,209)
                                                                         ------------  ------------  ------------
Net realized investment gains (losses) on securities transactions.....   $   (118,848) $    145,546  $     (8,581)
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

</TABLE>
      During 2001, management determined that five private equity investments in
technology companies were other-than-temporarily impaired and consequently $32.8
million of realized losses were reflected 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
$80.3 million were recorded in the consolidated  income  statement.  In addition
during  2001,   certain   public   corporate  debt   securities   classified  as
available-for-sale  were  considered by management to be  other-than-temporarily
impaired  and  realized  losses  totaling  $39.1  million  were  recorded in the
consolidated  income statement for the difference between amortized cost and the
fair value of these securities.

Listed Equity Securities Held in Escrow

      As a result of third party  acquisitions  of  companies in which the Group
held  private  equity  investments  during  2001 and 2000,  the  Group  received
publicly  traded stock in the  acquiring  companies.  In these  transactions,  a
portion,  generally  10-15%,  of the shares to be  received  were  withheld  and
deposited into escrow with an escrow agent, to serve as security for any damages
caused  to  the   acquiror  as  a  result  of  any   inaccuracy   or  breach  of
representations and warranties made by the acquired company, or any action, suit
or proceeding  pending  against the acquired  company.  The securities have been
fully reflected in the consolidated financial statements as of December 31, 2001
and 2000.

      The aggregate market value of the Group's listed equity securities held in
escrow  as of  December  31,  2001  and  2000,  was  $627,000  and  $22,956,000,
respectively.  During 2001, the equity  securities held in escrow as of December
31, 2000 were released and no claims were made by the acquiring  companies.  The
Group is not aware of any actual or potential claims against the securities held
in escrow as of December 31, 2001.

                                       55
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note  3. Deferred Policy Acquisition Costs

      Deferred policy acquisition cost activity was as follows:

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                                      (In thousands)
<S>                                                                      <C>           <C>           <C>
Balance as of January 1...............................................   $    168,102  $    144,518  $    114,681
Deferral of costs relating to:
Commissions...........................................................         33,214        32,634        21,996
Other.................................................................          4,254         6,392         3,844
                                                                         ------------  ------------  ------------
                                                                               37,468        39,026        25,840
Amortization relating to:
Operations............................................................          7,408         9,420         8,324
Investment gains......................................................         16,332        11,735         8,473
                                                                         ------------  ------------  ------------
                                                                               23,740        21,155        16,797
                                                                         ------------  ------------  ------------
Net deferral..........................................................         13,728        17,871         9,043
Adjustment for unrealized losses (gains) on available-for-sale fixed
  maturity securities.................................................        (12,993)        5,740        20,794
Decrease due to foreign exchange......................................            (11)          (27)            -
                                                                         ------------  ------------  ------------
Balance as of December 31                                                $    168,826  $    168,102  $    144,518
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

</TABLE>

Note  4. Reinsurance Assets

      During 2001,  the Group's U.S. life insurance  subsidiary,  London Pacific
Life & Annuity Company ("LPLA")  entered into a reinsurance  agreement to reduce
its exposure to mortality risk associated  with universal life policies  written
by LPLA.  Under the  agreement,  approximately  90% of the premiums and benefits
payable under specified policies were ceded to another insurance  company.  LPLA
will continue to service the policies, and the reinsurer will pay LPLA a service
fee of $27 per in-force policy.

      The  reinsurance  contract does not relieve LPLA from its  obligations  to
policyholders.  A contingent  liability  exists with respect to insurance  ceded
which  could  become a  liability  should  the  reinsurer  be unable to meet the
obligations assumed under the reinsurance  agreement.  To minimize its exposure,
LPLA   evaluates  the  financial   condition  of  its  reinsurers  and  monitors
concentrations  of credit risk.  Additionally,  assets  related to the reinsured
business have been placed in trust for the benefit of LPLA.

      At December 31, 2001,  reinsurance assets were $42.0 million, and deferred
commission  income  relating to  reinsurance  contracts  was $6.5  million.  The
deferred  commission  income will be amortized  into revenue over the  remaining
life of the universal  life business.  These amounts  relate to one  reinsurance
agreement with a single reinsurer.

                                       56
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note  5. Other Assets

      An analysis of other assets is as follows:

<TABLE>
<CAPTION>
                                                                                December 31,
                                                                         --------------------------
                                                                             2001          2000
                                                                         ------------  ------------
                                                                               (In thousands)

<S>                                                                      <C>           <C>
Deferred income tax assets............................................   $     23,308  $      4,277
Property, equipment and leasehold improvements, net...................          4,987         4,901
Intangible assets, net................................................          3,868         4,213
Prepayments...........................................................          2,638         1,901
Receivables:
  Income tax refunds receivable.......................................          9,399         5,520
  Fee income receivable...............................................            774         1,666
  Allowance for doubtful accounts.....................................             (5)           (5)
  Other receivables...................................................          1,387         1,242
  Due from brokers....................................................              -         8,799
Other assets..........................................................              4             4
                                                                         ------------  ------------
Total other assets....................................................   $     46,360  $     32,518
                                                                         ------------  ------------
                                                                         ------------  ------------

</TABLE>


Note  6. Intangible Assets

      Intangible assets (included in other assets) consist primarily of goodwill
and the cost of acquiring U.S. state life insurance  licenses.  Intangible asset
activity was as follows:

<TABLE>
<CAPTION>
                                                                                Years Ended
                                                                                December 31,
                                                                         --------------------------
                                                                             2001          2000
                                                                         ------------  ------------
                                                                               (In thousands)
<S>                                                                      <C>           <C>
Cost:
Balance  as of  January  1............................................   $      8,116  $      8,155
Disposals.............................................................              -           (39)
                                                                         ------------  ------------
Balance as of December 31.............................................          8,116         8,116

Accumulated amortization:
Accumulated amortization as of January 1..............................          3,903         3,480
Amortization recorded.................................................            345           462
Accumulated amortization on disposals.................................              -           (39)
                                                                         ------------  ------------
Accumulated amortization as of December 31............................          4,248         3,903
                                                                         ------------  ------------
Net book value as of December 31......................................   $      3,868  $      4,213
                                                                         ------------  ------------
                                                                         ------------  ------------

</TABLE>

                                       57
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note  7. Life Insurance Policy Liabilities

      An analysis of life insurance policy liabilities is as follows:

<TABLE>
<CAPTION>
                                                                                December 31,
                                                                         --------------------------
                                                                             2001          2000
                                                                         ------------  ------------
                                                                               (In thousands)
<S>                                                                      <C>           <C>
Future policy benefits:
  Immediate annuities.................................................   $    170,051  $    169,357
Policyholder contract deposits:
  Deferred annuities..................................................      1,812,262     1,468,070
  Universal life products.............................................         48,010        49,574
Other policy claims and benefits......................................          1,529         4,600
                                                                         ------------  ------------
                                                                         $  2,031,852  $  1,691,601
                                                                         ------------  ------------
                                                                         ------------  ------------

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

Interest Rate Assumptions

      Credited interest rates for universal  life-type products ranged from 4.0%
to 6.25% in 2001, and from 5.5% to 6.25% in 2000. Guarantees ranged from 4.0% to
5.5% in both  2001 and 2000.  For  annuity  products,  credited  interest  rates
generally  ranged  from 3.25% to 8.75% in 2001,  and from 5.0% to 8.75% in 2000.
The interest rates credited on immediate annuities ranged from 1% to 11% in both
2001 and 2000.

Mortality Assumptions

      Assumed  mortality  rates were  generally  based on  experience  multiples
applied  to Select  and  Ultimate  Tables  commonly  used in the  industry.  For
immediate annuities,  mortality assumptions were based on the 1983 IAM Mortality
Table.

Withdrawal Assumptions

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


Note  8. Statutory Financial Information and Restrictions

      LPLA prepares  financial  statements on the basis of statutory  accounting
practices ("SAP")  prescribed or permitted by the insurance  department in North
Carolina,   its  state  of  domicile.   Prescribed  SAP  include  a  variety  of
publications  promulgated by the National Association of Insurance Commissioners
("NAIC") as well as U.S. state laws,  regulations and  administrative  rules. In
1998, the NAIC adopted codified statutory accounting principles.  The purpose of
the  codification  was to create  uniformity  in statutory  financial  reporting
across  the U.S.  LPLA  adopted  the new SAP  effective  January  1,  2001.  The
implementation of the new SAP resulted in a decrease in LPLA's statutory surplus
of $24.9 million,  almost entirely related to deferred income taxes.

                                       58
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

      The new SAP provides for the same  principal  differences  between SAP and
GAAP that existed prior to January 1, 2001, except that it established  criteria
for  recognizing  deferred  income taxes.  However,  the  methodologies  used to
determine the amount of deferred  income taxes are  different  under the new SAP
than under GAAP.

      A  comparison  of net income and  statutory  capital  and  surplus of LPLA
determined on the basis of SAP to net income and shareholder's equity of LPLA on
the basis of GAAP is as follows:

<TABLE>
<CAPTION>
                                                                             2001              2000             1999
                                                                         ------------      ------------     ------------
                                                                                          (In thousands)
<S>                                                                      <C>               <C>              <C>
Statutory Accounting Practices:
Net income (loss) for the years ended December 31.....................   $    (42,261)     $    (13,246)    $        993
Statutory capital and surplus as of December 31.......................         82,945           152,955          166,701

Generally Accepted Accounting Principles:
Net income (loss) for the years ended December 31.....................       (120,739)          (33,538)          95,593
Shareholder's equity as of December 31................................   $    118,526      $    179,097     $    215,134


</TABLE>
      Risk based capital  ("RBC")  requirements  promulgated by the NAIC require
life  insurers to maintain  minimum  capitalization  levels that are  determined
based on formulas  incorporating credit risk, insurance risk, interest rate risk
and general business risk. As of December 31, 2001,  LPLA's adjusted capital and
surplus  exceeded  its  authorized  control  level of RBC.  Included  within the
statutory  capital and surplus as of December 31, 2001 and 2000 shown above were
$15,000,000 and $20,000,000,  respectively,  of notes issued by LPLA to a sister
company.

      The  insurance  statutes  of the state of  domicile  limit  the  amount of
dividends  that  LPLA  can  pay  annually  without  first  obtaining  regulatory
approval. Generally, the limitations are based on a combination of statutory net
gain from operations for the preceding year, 10% of statutory surplus at the end
of the preceding year, and dividends and distributions made during the preceding
twelve months.  No dividends can be paid by LPLA during 2002 without  regulatory
approval.

      London  Pacific  Assurance  Limited  ("LPAL") is  regulated  by the Jersey
Financial  Services  Commission  ("JFSC") and under  Article 6 of the  Insurance
Business (Jersey) Law 1996 is permitted to conduct long-term insurance business.
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

                                       59
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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  GBP50,000  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, 2001, 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  9. Notes Payable

      In June 2001, the Group's  credit  facility with a bank was extended until
May  2003,  under  which the Group may  borrow  up to  $50,000,000  for  general
corporate  purposes.  As  of  December  31,  2001  and  2000,   $36,874,000  and
$35,556,000,  respectively,  was  outstanding  under this credit  facility,  and
$12,704,000 and $14,074,000,  respectively,  was utilized in the form of letters
of credit and guarantees in connection  with certain  portfolio  companies which
are highly leveraged. The credit facility bears interest at variable rates based
on LIBOR.  The annual  interest  rate on  borrowings as of December 31, 2001 and
2000 was 3.0% and 7.375%,  respectively,  and  commitment  fees were  charged at
0.375% per annum on the  unutilized  balance  during 2001 and 2000. The facility
may be extended annually by mutual consent of the Group and the lender after May
2003.  The final  lump sum  repayment  date of the credit  facility  is May 2003
unless extended.


Note  10. 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 2001, 2000 and 1999.

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

      A breakdown  of the  Group's  income  (loss)  before  income  taxes by tax
jurisdiction follows:

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                                      (In thousands)

<S>                                                                      <C>           <C>           <C>
Income (loss) before income taxes:
Jersey, Guernsey and United Kingdom...................................   $   (224,085) $     70,227  $    165,576
United States.........................................................       (177,142)      (55,217)      140,086
                                                                         ------------  ------------  ------------
Total income (loss) before income taxes...............................   $   (401,227) $     15,010  $    305,662
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------
</TABLE>

                                       60
<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
before  income  taxes.  The  sources and tax  effects of the  difference  are as
follows:

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                                      (In thousands)

<S>                                                                      <C>           <C>           <C>
Income taxes computed at Jersey statutory income tax rate of 20%......   $    (80,245) $      3,002  $     61,132
Realized and unrealized investment gains not subject to taxation in
  Jersey (losses not deductible)......................................         30,550       (37,344)          112
Other losses not deductible in Jersey.................................            627         1,676           796
Income in Guernsey not subject to taxation (losses not deductible)....         15,141        23,171       (32,414)
Taxes on income at higher than 20% statutory Jersey rate:
  Realized and unrealized investment gains and losses in the U.S......        (24,781)       (6,273)       22,793
  Other income and losses in the U.S..................................          2,165          (626)        1,375
Adjustment of prior years' provisions.................................              -        (1,053)            -
Other.................................................................            100             -            (8)
                                                                         ------------  ------------  ------------
Actual tax expense (benefit)..........................................   $    (56,443) $    (17,447) $     53,786
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

</TABLE>
      The components of the actual tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                                      (In thousands)
<S>                                                                      <C>           <C>           <C>
Jersey, Guernsey and United Kingdom:
  Current tax expense.................................................   $      1,601  $      1,549  $      1,602
  Deferred tax expense................................................              -             -             -

United States:
  Current tax expense (benefit).......................................          8,763        (6,494)       (2,081)
  Deferred tax expense (benefit)......................................        (66,807)      (12,502)       54,265
                                                                         ------------  ------------  ------------
Total actual tax expense (benefit)....................................   $    (56,443) $    (17,447) $     53,786
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

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

      The tax effects of  temporary  differences  that give rise to  significant
portions of the deferred  income tax assets and deferred  income tax liabilities
are presented  below.  Net deferred income tax assets existed as of December 31,
2001, and net deferred income tax  liabilities  existed as of December 31, 2000,
in the U.S. life insurance  subsidiary  which files a separate U.S.  federal tax
return.  Net deferred income tax assets existed as of December 31, 2001 and 2000
in the U.S. non-life insurance  subsidiaries which file consolidated federal tax
returns for two separate non-life insurance groups.

                                       61
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                                --------------------------
                                                                                    2001          2000
                                                                                ------------  ------------
                                                                                      (In thousands)
<S>                                                                             <C>           <C>
U.S. non-life insurance subsidiaries:

Deferred income tax assets:
Net operating loss carry forwards.............................................  $      5,712  $      6,553
Revenues and expenses recognized on a cash basis for income tax purposes......         1,124         1,713
Unrealized losses on investments..............................................           186             -
Other assets..................................................................         2,705         2,490
Valuation allowance...........................................................        (3,462)       (6,121)
                                                                                ------------  ------------
Deferred income tax assets, net of valuation allowance........................         6,265         4,635

Deferred income tax liabilities:
Depreciation, amortization and other..........................................          (402)         (358)
Other liabilities.............................................................          (359)            -
                                                                                ------------  ------------
                                                                                        (761)         (358)
                                                                                ------------  ------------
Net deferred income tax assets - U.S. non-life insurance subsidiaries.........         5,504  $      4,277
                                                                                ------------  ------------
                                                                                              ------------
U.S. life insurance subsidiary:

Deferred income tax assets:
Net operating loss carry forwards.............................................             -         6,822
Unrealized losses on investments..............................................        31,549        27,967
Insurance policyholder liabilities............................................        32,752        27,013
Other assets..................................................................         2,811            26
                                                                                ------------  ------------
                                                                                      67,112        61,828
                                                                                ------------  ------------
Deferred income tax liabilities:
Unrealized gains on investments...............................................             -       (46,687)
Accretion recognized on a cash basis for income tax purposes..................        (4,255)       (3,830)
Cost of policies produced.....................................................       (40,053)      (52,757)
Other liabilities.............................................................        (5,000)         (141)
                                                                                ------------  ------------
                                                                                     (49,308)     (103,415)
                                                                                ------------  ------------
Net deferred income tax assets (liabilities) - U.S. life insurance subsidiary.        17,804       (41,587)
                                                                                ------------  ------------
Total net deferred income tax assets (liabilities)............................  $     23,308  $    (41,587)
                                                                                ------------  ------------
                                                                                ------------  ------------

</TABLE>

                                       62
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      As of December 31, 2001,  the U.S.  non-life  insurance  subsidiaries  had
pre-tax federal net operating loss carrryforwards of approximately $13.8 million
expiring  as  follows:  approximately  $1.6  million  from  2002  to  2019,  and
approximately   $12.2  million  from  2020  to  2021.  These  subsidiaries  have
California  net operating  loss  carryforwards  of  approximately  $11.5 million
expiring  as  follows:  approximately  $2.7  million  from  2002  to  2004,  and
approximately $8.8 million from 2010 to 2011. The Group has recorded a valuation
allowance  of $589,000 as of December  31, 2001 for those  carryforward  amounts
that are expected to expire prior to being utilized.

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

<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                                      (In thousands)

<S>                                                                      <C>           <C>           <C>
Potential tax liability on distributable earnings of subsidiaries.....   $     11,260  $     24,507  $     30,985
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

</TABLE>

Note  11. Shareholders' Equity

      The Company has authorized  86,400,000 Ordinary Shares with a par value of
$0.05 per share.  As of December 31, 2001 and 2000,  there were  64,439,073  and
64,433,313 Ordinary Shares issued and outstanding, respectively.

      Changes in the number of Ordinary Shares were as follows:

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                                      (In thousands)

<S>                                                                      <C>           <C>           <C>
Shares issued as of January 1.........................................         64,433        64,433        64,424
New share capital issued..............................................              6             -             9
                                                                         ------------  ------------  ------------
Shares issued as of December 31.......................................         64,439        64,433        64,433
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

</TABLE>

      Total  dividends  declared  and paid were $0.29 gross per  Ordinary  Share
($0.232 net of 20% Jersey tax) and $0.232 per ADS (net of 20% Jersey tax) during
each of the years  ended  December  31,  2001,  2000 and 1999,  or  $11,802,000,
$11,625,000 and $11,446,000, respectively, in total. Dividends per ADS have been
restated to reflect the four-for-one split in March 2000.

      Accumulated other comprehensive  income (loss) consists of two components,
foreign currency translation  adjustments and the change in net unrealized gains
and  losses  of  available-for-sale  securities.  Accumulated  foreign  currency
translation  adjustments  were  $(157,000),  $(42,000) and $0 as of December 31,
2001,  2000 and 1999,  respectively.  The  accumulated  change in net unrealized
gains  and   losses  on   available-for-sale   securities   were   $(9,749,000),
$(25,202,000)  and  $(18,365,000)  as of  December  31,  2001,  2000  and  1999,
respectively.

                                       63
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      The Group has two share  incentive  plans as  described  in Note 15 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,
                               ----------------------------------------------------------------------------------
                                          2001                        2000                        1999
                               --------------------------  --------------------------  --------------------------
                                   ESOT          ALOT          ESOT          ALOT          ESOT          ALOT
                               ------------  ------------  ------------  ------------  ------------  ------------
                                                                 (In thousands)

<S>                            <C>           <C>           <C>           <C>           <C>           <C>
Shares held as of January 1....      12,374           438        14,682           650        14,527           650
Purchased......................       1,027             -           694             -           865             -
Exercised......................        (141)            -        (3,214)            -          (710)            -
Transferred between trusts                -             -           212          (212)            -             -
                               ------------  ------------  ------------  ------------  ------------  ------------
Shares held as of December 31..      13,260*          438        12,374*          438        14,682           650
                               ------------  ------------  ------------  ------------  ------------  ------------
                               ------------  ------------  ------------  ------------  ------------  ------------

<FN>
*     834,000 and 604,000 held in ADR form for the years ended December 31, 2001
      and 2000, respectively.
</FN>
</TABLE>


Note  12. Commitments and Contingencies

Lease Commitments

      The Group leases  furniture,  fixtures  and  equipment  under  capital and
operating  leases with terms in excess of one year. The Group also leases office
space  under  operating  leases.  Total  rent  expense on  operating  leases was
$1,610,000,  $1,237,000  and  $1,442,000  for the years ended December 31, 2001,
2000 and 1999, respectively.

      Future minimum lease payments  required under capital and  non-cancellable
operating  leases with terms of one year or more, as of December 31, 2001,  were
as follows:


<TABLE>
<CAPTION>
                                                                             Capital      Operating
                                                                             Leases        Leases
                                                                           ------------  ------------
                                                                                 (In thousands)

<S>                                                                        <C>           <C>
2002..................................................................     $        269  $      1,071
2003..................................................................              166         1,326
2004..................................................................               65         1,325
2005..................................................................               30         1,193
2006..................................................................                2         1,093
2007 and thereafter...................................................                -         6,279
                                                                           ------------  ------------
Total.................................................................              532       $12,287
                                                                                         ------------
                                                                                         ------------
Less amounts representing interest....................................              (57)
                                                                           ------------
Present value of net minimum lease payments...........................     $        475
                                                                           ------------
                                                                           ------------

</TABLE>

                                       64
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Letters of Credit and Guarantees

      For  disclosure  of letters of credit  and  guarantees,  see Note 9 to the
Consolidated Financial Statements.


Note  13. 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  judgement  is required in  interpreting  market data used to
develop the estimates of fair value. Accordingly, the estimates presented herein
are not  necessarily  indicative  of the  amounts  that could be  realized  in a
current market exchange.  The use of different market  assumptions or estimation
methodologies may have a material effect on the estimated fair value amounts.

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

<TABLE>
<CAPTION>
                                                                                December 31,
                                                           ------------------------------------------------------
                                                                      2001                        2000
                                                           --------------------------  --------------------------
                                                             Carrying     Estimated      Carrying     Estimated
                                                              Value       Fair Value      Value       Fair Value
                                                           ------------  ------------  ------------  ------------
                                                                               (In thousands)

<S>                                                        <C>           <C>           <C>           <C>
Financial assets:
Cash and cash equivalents..............................    $     82,417  $     82,417  $    114,285  $    114,285
Investments:
  Fixed maturities:
    Available-for-sale.................................       1,562,790     1,562,790     1,292,015     1,292,015
    Held-to-maturity...................................          98,619       100,936       127,514       129,400
  Equity securities:
    Trading............................................          81,787        81,787       353,896       353,896
    Available-for-sale.................................         181,927       181,927       229,403       229,403
  Policy loans.........................................          10,529        10,529        10,301        10,301
Assets held in separate accounts.......................         227,675       227,675       206,325       206,325

Financial liabilities:
Life insurance policy liabilities......................       2,031,852     1,917,383     1,691,601     1,597,951
Liabilities related to separate accounts...............         226,015       212,976       203,806       188,683
Notes payable..........................................          36,874        36,874        35,556        35,556

</TABLE>

                                       65
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

Fixed  Maturity  Securities:  Fair values for  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.

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

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

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

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

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

Note  14. Employee Benefit Plan

1993  Deferred Compensation Plan

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

                                       66
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

redeem out of certain publicly traded underlying securities). The Group does not
fund this plan and the rights of the  participants to receive  payments from the
plan are unsecured claims against the Group.

      The Group's liability under this plan was as follows:

<TABLE>
<CAPTION>
                                                                                  December 31,
                                                                           --------------------------
                                                                               2001          2000
                                                                           ------------  ------------
                                                                                 (In thousands)
<S>                                                                        <C>           <C>
Employee deferrals and realized appreciation of underlying investments
  credited to participants...............................................  $      2,691  $      3,740
Unrealized appreciation of underlying investments not yet credited to
  participants...........................................................            29         1,662
                                                                           ------------  ------------
Deferred compensation liability..........................................  $      2,720  $      5,402
                                                                           ------------  ------------
                                                                           ------------  ------------

</TABLE>
      The Group recognized expense related to this deferred compensation plan of
$1,412,000  and  $2,476,000  for the years  ended  December  31,  2000 and 1999,
respectively.  For the year  ended  December  31,  2001,  there  was a credit to
expense of $943,000 due to the reversal of  unrealized  appreciation  on certain
underlying listed investments.


Note  15. 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.

      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 11 to the  Consolidated
Financial Statements for a summary of the share activity within the ESOT.

                                       67
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      Share option activity for the years ended December 31, 2001, 2000 and 1999
was as follows:

<TABLE>
<CAPTION>
                                                      2001                         2000                         1999
                                           --------------------------   --------------------------   --------------------------
                                                           Weighted                     Weighted                     Weighted
                                              Number       Average         Number       Average         Number       Average
                                                of         Exercise          of         Exercise          of         Exercise
(Options in thousands)                        Options        Pice          Options        Pice          Options        Pice
                                           ------------  ------------   ------------  ------------   ------------  ------------

<S>                                        <C>           <C>            <C>           <C>            <C>           <C>
Outstanding as of January 1................      12,213  $       4.32         15,256  $       3.61         14,215  $       3.47
Granted....................................       2,388          5.19(1)         431         19.55          1,852          4.50
Exercised..................................        (141)         3.13         (3,214)         2.62           (710)         3.30
Forfeited..................................         (89)        12.44           (160)        12.59           (101)         3.32
Expired....................................      (1,108)         2.48           (100)         2.50              -             -
                                           ------------  ------------   ------------  ------------   ------------  ------------
Outstanding as of December 31..............      13,263  $       4.59         12,213  $       4.32         15,256  $       3.61
                                           ------------  ------------   ------------  ------------   ------------  ------------
                                           ------------  ------------   ------------  ------------   ------------  ------------

Options exercisable as of December 31......      11,757  $       4.44          9,632  $       4.05         11,444  $       3.54
                                           ------------  ------------   ------------  ------------   ------------  ------------
                                           ------------  ------------   ------------  ------------   ------------  ------------
<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  less than
      market price had a weighted  average  exercise price of $2.46. All options
      granted during 2000 and 1999 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.

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

                                       68
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                               (In thousands, except per share
                                                                                       and ADS amounts)
<S>                                                                      <C>           <C>           <C>
Net income (loss):
As reported...........................................................   $   (344,784) $     32,457  $    251,876
Pro forma.............................................................       (349,419)       30,896       250,971
Basic earnings (loss) per share and ADS (1):
As reported...........................................................          (6.76)         0.64          5.05
Pro forma.............................................................          (6.85)         0.61          5.03
Diluted earnings (loss) per share and ADS (1):
As reported...........................................................          (6.76)         0.53          4.54
Pro forma.............................................................          (6.85)         0.51          4.53
Weighted average fair value of options granted
  at market price during year.........................................           2.38          9.24          0.76
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 four-for-one  split in March
      2000.
</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>
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
<S>                                                                      <C>           <C>           <C>
Expected dividend yield (2)...........................................              -             -             -
Expected stock price volatility.......................................            76%           67%           31%
Risk-free interest rate...............................................          5.09%         6.07%         5.49%
Weighted average expected life (in years).............................              5             5             5

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

</TABLE>
      Summary  information  about the Group's  share options  outstanding  as of
December 31, 2001 is as follows:

<TABLE>
<CAPTION>
                                           Options Outstanding                          Options Exercisable
                              ---------------------------------------------        -----------------------------
                                                Weighted
                                                 Average         Weighted                            Weighted
          Range of                              Remaining         Average                             Average
          Exercise              Number          Contractual      Exercise            Number          Exercise
           Prices              Outstanding        Life            Price              Exercisable       Price
        ---------------       -------------   -------------   -------------        -------------   -------------
                              (In thousands)     (Years)                            (In thousands)
        <S>                   <C>             <C>             <C>                  <C>             <C>

        $ 1.00 - $ 5.00               8,278            2.58   $        3.36                7,313   $        3.36
          5.01 -  10.00               4,673            5.83            5.84                4,291            5.75
         10.01 -  15.00                  65            5.42           12.75                   16           12.75
         15.01 -  20.00                 147            8.65           19.18                   37           19.18
         20.01 -  25.00                 100            8.68           21.00                  100           21.00
        ---------------       -------------   -------------   -------------        -------------   -------------
        $ 1.00 - $25.00              13,263            3.85   $        4.59               11,757   $        4.44
        ---------------       -------------   -------------   -------------        -------------   -------------
        ---------------       -------------   -------------   -------------        -------------   -------------

</TABLE>

                                       69
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Agent Loyalty Opportunity Trust

      The Agent Loyalty  Opportunity Trust ("ALOT") provides for the granting of
stock appreciation rights ("SARs") on the Company's Ordinary Shares to agents of
the U.S.  life  insurance  business.  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.

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

      SAR activity for the years ended  December 31, 2001,  2000 and 1999 was as
follows:


<TABLE>
<CAPTION>
                                                      2001                         2000                         1999
                                           --------------------------   --------------------------   --------------------------
                                                           Weighted                     Weighted                     Weighted
                                              Number       Average         Number       Average         Number       Average
                                             of Award      Exercise       of Award      Exercise       of Award      Exercise
(Award units in thousands)                    Units          Pice          Units          Pice          Units          Pice
                                           ------------  ------------   ------------  ------------   ------------  ------------

<S>                                        <C>           <C>            <C>           <C>            <C>           <C>
Outstanding as of January 1................         438  $       3.71            576  $       3.65            613  $       3.35
Granted....................................           -             -              -             -             94          5.19
Exercised..................................         (10)         3.46           (109)         3.50            (84)         3.35
Forfeited..................................         (24)         3.41            (29)         3.35            (47)         3.35
                                           ------------  ------------   ------------  ------------   ------------  ------------
Outstanding as of December 31..............         404  $       3.73            438  $       3.71            576  $       3.65
                                           ------------  ------------   ------------  ------------   ------------  ------------
                                           ------------  ------------   ------------  ------------   ------------  ------------

Award units exercisable as of December 31..         173  $       3.64             68  $       3.62             62  $       3.35
                                           ------------  ------------   ------------  ------------   ------------  ------------
                                           ------------  ------------   ------------  ------------   ------------  ------------

</TABLE>
      Summary  information about the Group's SARs outstanding as of December 31,
2001 is as follows:

<TABLE>
<CAPTION>
                                         Award Units Outstanding                      Award Units Exercisable
                              ---------------------------------------------        -----------------------------
                                                Weighted
                                                 Average         Weighted                            Weighted
          Range of                              Remaining         Average                             Average
          Exercise              Number          Contractual      Exercise            Number          Exercise
           Prices              Outstanding        Life            Price              Exercisable       Price
        ---------------       -------------   -------------   -------------        -------------   -------------
                              (In thousands)     (Years)                            (In thousands)
        <S>                   <C>             <C>             <C>                  <C>             <C>
        $          3.35                 320            3.00   $        3.35                  146   $        3.35
                   5.19                  84            4.28            5.19                   27            5.19
        ---------------       -------------   -------------   -------------        -------------   -------------
        $ 3.35 - $ 5.19                 404            3.26   $        3.73                  173   $        3.64
        ---------------       -------------   -------------   -------------        -------------   -------------
        ---------------       -------------   -------------   -------------        -------------   -------------

</TABLE>

                                       70
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

      Compensation  expense  relating to award grants in the ALOT was  accounted
for  under  APB 25,  prior to the  issuance  of FIN 44.  Thus,  no  expense  was
recognized  at the grant  dates  because  all awards  were made with an exercise
price equal to the prevailing  market value.  However,  compensation  expense of
$20,000, $1,943,000 and $300,000 for the years ended December 31, 2001, 2000 and
1999, respectively, was recognized. This compensation expense was capitalized in
the  consolidated  balance  sheet  as  deferred  policy  acquisition  costs,  in
accordance  with  the  Group's  accounting  policy  as  stated  in Note 1 to the
Consolidated Financial Statements.


Note  16. Earnings Per Share and ADS

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

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                               (In thousands, except per share
                                                                                       and ADS amounts)
<S>                                                                      <C>           <C>           <C>
Net income (loss).....................................................   $   (344,784) $     32,457  $    251,876

Basic earnings per share and ADS:
Weighted average number of Ordinary Shares outstanding,
  excluding shares held by the employee benefit trusts................     50,984,146    50,794,731    49,891,778
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

Basic earnings (loss) per share and ADS...............................   $      (6.76) $       0.64  $       5.05
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------
Diluted earnings per share and ADS:
Weighted average number of Ordinary Shares outstanding,
  excluding shares held by the employee benefit trusts................     50,984,146    50,794,731    49,891,778
Effect of dilutive securities (employee share options)................              -     9,932,897     5,553,591
                                                                         ------------  ------------  ------------
Weighted average Ordinary Shares used in diluted earnings per
  share calculations..................................................     50,984,146    60,727,628    55,445,369
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

Diluted earnings (loss) per share and ADS.............................   $      (6.76) $       0.53  $       4.54
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

</TABLE>
      As the Group recorded a net loss for the year ended December 31, 2001, the
calculation  of  diluted  earnings  per share  for this  year  does not  include
potentially  dilutive employee share options as they are anti-dilutive and would
result in a  reduction  of net loss per  share.  If the Group had  reported  net
income for the year ended December 31, 2001, there would have been an additional
3,022,963 shares included in the calculation of diluted earnings per share.

                                       71
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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


Note  17. Transactions with Related Parties

      The Group paid legal fees of approximately $60,000,  $418,000 and $560,000
during  2001,  2000 and  1999,  respectively,  to a law firm of which one of its
directors, Victor A. Hebert, is a member.


Note  18. Business Segment and Geographical Information

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

      Intercompany transfers between reportable operating segments are accounted
for at prices  which are designed to be  representative  of  unaffiliated  third
party  transactions.  During the years ended  December 31, 2001,  2000 and 1999,
there were  included  in the asset  management  and venture  capital  management
segments,  portfolio  management  fees  from the life  insurance  and  annuities
segment  of  $11,878,000,   $10,249,000  and  $9,540,000,   respectively.  These
management fees have been approved by the insurance  regulatory body in the life
insurance company'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,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                                      (In thousands)
<S>                                                                      <C>           <C>           <C>
Jersey................................................................   $   (145,358) $    181,516  $     (4,956)
Guernsey..............................................................        (59,268)      (99,098)      195,107
United States.........................................................            880       107,103       282,415
                                                                         ------------  ------------  ------------
Consolidated revenues and net investment gains (losses)...............   $   (203,746) $    189,521  $    472,566
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

</TABLE>

      Total assets by geographic segment were as follows:

<TABLE>
<CAPTION>
                                                                                December 31,
                                                                         --------------------------
                                                                             2001          2000
                                                                         ------------  ------------
                                                                               (In thousands)
<S>                                                                      <C>           <C>
Jersey................................................................   $     50,319  $    251,255
Guernsey..............................................................        166,657       176,173
United States.........................................................      2,319,352     2,135,560
                                                                         ------------  ------------
Consolidated total assets.............................................   $  2,536,328  $  2,562,988
                                                                         ------------  ------------
                                                                         ------------  ------------
</TABLE>

                                       72
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      Revenues  and income  before  taxes for the Group's  reportable  operating
segments, based on management's internal reporting structure, were as follows:

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                                      (In thousands)
<S>                                                                      <C>           <C>           <C>
Revenues:
Life insurance and annuities (1), (2), (3)............................   $   (190,471) $    256,658  $    251,180
Financial advisory services...........................................         18,627        22,952        19,913
Asset management (2)..................................................          6,764         7,799         6,826
Venture capital management (3)........................................        (40,670)      (99,462)      191,811
                                                                         ------------  ------------  ------------
                                                                             (205,750)      187,947       469,730
Reconciliation of segment amounts to consolidated amounts:
Interest income.......................................................          2,004         1,574         2,836
                                                                         ------------  ------------  ------------
Consolidated revenues and net investment gains (losses)...............   $   (203,746) $    189,521  $    472,566
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------
Income before income taxes:
Life insurance and annuities (1), (2), (3)............................   $   (341,703) $    132,671  $    147,753
Financial advisory services...........................................         (3,638)       (2,261)          166
Asset management (2)..................................................          1,533         1,778         1,036
Venture capital management (3)........................................        (51,262)     (110,444)      158,627
                                                                         ------------  ------------  ------------
                                                                             (395,070)       21,744       307,582
Reconciliation of segment amounts to consolidated amounts:
Interest income.......................................................          2,004         1,574         2,836
Corporate expenses....................................................         (5,692)       (7,388)       (4,366)
Goodwill amortization.................................................           (221)         (248)         (348)
Interest expense......................................................         (2,248)         (672)          (42)
                                                                         ------------  ------------  ------------
Consolidated income (loss) before income taxes........................   $   (401,227) $     15,010  $    305,662
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

<FN>
-------------------------------------
(1)   Netted against the revenues  (investment income) of the life insurance and
      annuities  segment are  management  fees paid to the asset  management and
      venture  capital  management  segments  of  $11,878,000,  $10,249,000  and
      $9,540,000 in 2001, 2000 and 1999, respectively.

(2)   Included in the revenues of the asset  management  segment are  management
      fees  from  the  life  insurance  and  annuities  segment  of  $1,954,000,
      $2,775,000 and $1,597,000 in 2001, 2000 and 1999, respectively.

(3)   Included in the  revenues of the venture  capital  management  segment are
      management  fees  from  the  life  insurance  and  annuities   segment  of
      $9,924,000,   $7,474,000   and   $7,943,000   in  2001,   2000  and  1999,
      respectively.
</FN>
</TABLE>

                                       73
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

<TABLE>
<CAPTION>
                                                                                December 31,
                                                                         --------------------------
                                                                             2001          2000
                                                                         ------------  ------------
                                                                               (In thousands)
<S>                                                                      <C>           <C>
Assets:
Life insurance and annuities..........................................   $  2,416,900  $  2,360,806
Financial advisory services...........................................         10,199         9,966
Asset management......................................................          8,334         8,749
Venture capital management............................................         46,253       109,604
Corporate and other...................................................         54,642        73,863
                                                                         ------------  ------------
Consolidated total assets.............................................   $  2,536,328  $  2,562,988
                                                                         ------------  ------------
                                                                         ------------  ------------

</TABLE>

Note  19. Selected Quarterly Financial Information (Unaudited)

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

<TABLE>
<CAPTION>
                                                                                          2001
                                                          --------------------------------------------------------------------
                                                             First        Second          Third        Fourth        Full
                                                            Quarter       Quarter        Quarter       Quarter       Year
                                                          ------------  ------------  ------------  ------------  ------------
<S>                                                       <C>           <C>           <C>           <C>           <C>
Revenues including net investment gains (losses).......   $   (144,571) $     75,959  $   (114,902) $    (20,232) $   (203,746)
Income (loss) before income taxes......................       (191,618)       26,108      (165,501)      (70,216)     (401,227)
Net income (loss)......................................       (180,226)       29,383      (144,445)      (49,496)     (344,784)
Basic earnings (loss) per share and ADS................          (3.50)         0.58         (2.85)        (0.98)        (6.76)
Diluted earnings (loss) per share and ADS..............   $      (3.50) $       0.54  $      (2.85) $      (0.98) $      (6.76)
</TABLE>

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

</TABLE>
      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.

                                       74
<PAGE>
Item  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

      None.

                                    PART III

      Certain  information  required by Part III is omitted  from this Form 10-K
and is incorporated by reference to the Company's definitive Proxy Statement for
its  Annual  Meeting  of  Shareholders  to be held on May 7,  2002  (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

      The executive officers of the Company are as follows:

      Arthur I. Trueger, Executive Chairman: Mr. Trueger, age 53, is the founder
and a principal  shareholder of London Pacific Group Limited.  He has worked for
the Company for more than 25 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 47, has held
the position of Chief Financial Officer of London Pacific Group Limited since he
joined the Company in 1990. In addition,  he was the Chief Executive  Officer of
London Pacific Life & Annuity Company between 1994 and 1999. Mr.  Whitehead is a
member of the Institute of Chartered Accountants in England and Wales.

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

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


Item  11. EXECUTIVE COMPENSATION

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


Item  12.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND MANAGEMENT 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.

                                       75
<PAGE>
      The following table is a summary of selected information for the Company's
equity compensation plans as of December 31, 2001.

<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..............            13,262,621 (1)             4.59                       (1)

Equity compensation plans not
  approved by shareholders..............               403,500 (1)             3.73                       (1)
                                                    ----------                -----
Total                                               13,666,121                 4.42
                                                    ----------                -----
                                                    ----------                -----

<FN>
________________
(1)   The equity compensation plans of the Company 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  the  Company  or one of its  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.

      The information regarding the features of the equity compensation plan not
      approved by  shareholders  is  incorporated by reference to Note 15 to the
      Consolidated   Financial   Statements   presented  in  Item  8  "Financial
      Statements and Supplementary Data" of this Form 10-K.
</FN>

</TABLE>
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.

                                       76
<PAGE>
                                    PART IV

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

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

1.    Financial Statements:                                                 Page

      The following  consolidated  financial  statements of London Pacific Group
      Limited and subsidiaries are included in Item 8:

<TABLE>
            <S>                                                             <C>
            Report of Independent Auditors.................................   36

            Consolidated Balance Sheets as of
              December 31, 2001 and 2000...................................   37

            Consolidated Statements of Income for the Years Ended
              December 31, 2001, 2000 and 1999.............................   38

            Consolidated Statements of Cash Flows for the Years Ended
              December 31, 2001, 2000 and 1999.............................   39

            Consolidated Statements of Changes in Shareholders' Equity
              for the Years Ended December 31, 2001, 2000 and 1999.........   41

            Consolidated  Statements of Comprehensive Income for the
              Years Ended December 31, 2001, 2000 and 1999.................   43

            Notes to the Consolidated Financial Statements.................   44
</TABLE>

2.    Financial Statement Schedules:

      The  following  financial  statement  schedules  of London  Pacific  Group
      Limited  and  subsidiaries  are  included  in this Form  10-K  immediately
      following Item 14 and should be read in conjunction  with the consolidated
      financial statements and notes thereto included in Item 8:
<TABLE>
      <S>                                                                   <C>
      Schedule I - Summary of Investments - Other Than
        Investments in Related Parties.....................................   81

      Schedule II - Condensed Financial Information of Registrant

            Condensed Balance Sheets as of
              December 31, 2001 and 2000...................................   82

            Condensed  Statements  of Income for the Years Ended
              December 31, 2001, 2000 and 1999.............................   83

            Condensed  Statements  of  Cash  Flows  for  the Years Ended
              December 31, 2001, 2000 and 1999.............................   84

            Note to Condensed Financial Statements.........................   85

      Schedule III - Supplementary Insurance Information...................   86

      Schedule IV - Reinsurance............................................   87
</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

                                       77
<PAGE>
      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 the  Company's  Form 10-Q for the quarter ended
            June 30, 2000).

4.1         Specimen Ordinary Share certificate (filed previously as Exhibit 4.1
            to the Company's 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 London Pacific Group Limited,  The Bank of
            New York as Depositary, and all Owners and Holders from time to time
            of American  Depositary Receipts issued thereunder (filed previously
            as Exhibit A to the  Company's  Registration  Statement  on Form F-6
            (Registration No. 333-11658) dated March 14, 2000).

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

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

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

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

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

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

                                       78
<PAGE>
10.2.5      Executed  Instrument  dated  August 22, 1996 among (1) Richard  John
            Pirouet,  (2) Clive Aubrey  Charles  Chaplin and (3) Ronald  William
            Green,  relating to The London  Pacific  Group 1990  Employee  Share
            Option Trust (filed  previously  as Exhibit  3.2.4 to the  Company's
            Annual Report on Form 20-F filed on June 30, 1997).

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

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

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

10.3.1 (1)  Agreement  dated July 1, 1990  between  the  Company and Ian Kenneth
            Whitehead (filed  previously as Exhibit 10.3.1 to the Company's 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 the  Company's  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.

10.4.1      Settlement dated May 23, 1997 among BG Services Limited and A.L.O.T.
            Trustee Limited establishing Agent Loyalty Opportunity Trust.

10.4.2      Executed  Deed  dated  July 16,  1997 by  A.L.O.T.  Trustee  Limited
            relating to Agent Loyalty Opportunity Trust.

10.4.3      Executed  Deed dated  August 13,  1997 by A.L.O.T.  Trustee  Limited
            relating to Agent Loyalty Opportunity Trust.

10.4.4      Executed  Deed dated  August 20,  1998 by A.L.O.T.  Trustee  Limited
            relating to Agent Loyalty Opportunity Trust.

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.

21          Subsidiaries of the Company as of March 18, 2002.

____________

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

                                       79
<PAGE>
(b)   Reports on Form 8-K:

      No reports on Form 8-K were filed by the Company  during the quarter ended
      December 31, 2001.

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

(d)   The financial  statement  schedules  for London  Pacific Group Limited and
      subsidiaries follow on pages 81 through 87.

                                       80
<PAGE>
                     SCHEDULE I - SUMMARY OF INVESTMENTS -
                   OTHER THAN INVESTMENTS IN RELATED PARTIES

                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                            As of December 31, 2001

<TABLE>
<CAPTION>
                      Column A                                             Column B      Column C      Column D
                      --------                                             --------      --------      --------
                                                                                                       Amount at
                                                                                                     Which Shown
                                                                                                    in Consolidated
                                                                                          Fair         Balance
                 Type of Investments                                       Cost (1)       Value        Sheet (2)
-----------------------------------------------------------              ------------  ------------  ------------
                                                                                      (In thousands)
<S>                                                                      <C>           <C>           <C>
Fixed maturity securities:
Bonds:
  United States government and government
    agencies and authorities.........................................    $      3,212  $      3,377  $      3,308
  States, municipalities and political subdivisions..................           1,919         1,932         1,919
  Foreign governments................................................           7,821         7,919         7,918
  Public utilities...................................................          94,166        92,608        92,599
  Convertibles and bonds with warrants attached......................          21,123        19,623        19,623
  All other corporate bonds..........................................       1,555,961     1,528,851     1,526,626
Redeemable preferred stock...........................................           9,497         9,416         9,416
                                                                         ------------  ------------  ------------
Total fixed maturity securities......................................       1,693,699     1,663,726     1,661,409
                                                                         ------------  ------------  ------------
                                                                                       ------------
Equity securities:
Common stocks:
  Industrial, miscellaneous and all other............................          88,004        82,976        82,976
Non-redeemable preferred stocks......................................         183,571       180,738       180,738
                                                                         ------------  ------------  ------------
Total equity securities..............................................         271,575  $    263,714       263,714
                                                                         ------------  ------------  ------------
                                                                                       ------------

Policy loans.........................................................          10,529                      10,529
                                                                         ------------                ------------
Total investments....................................................    $  1,975,803                $  1,935,652
                                                                         ------------                ------------
                                                                         ------------                ------------
<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>

                                       81
<PAGE>
          SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                          LONDON PACIFIC GROUP LIMITED
                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                       --------------------------
                                                                                           2001          2000
                                                                                       ------------  ------------
                                     ASSETS                                       (In thousands, except share amounts)
<S>                                                                                    <C>           <C>
Cash and cash equivalents............................................................  $      8,497  $     31,933
Investment in subsidiaries...........................................................       152,243       462,028
Intercompany balances................................................................        65,777        77,143
Other assets.........................................................................           563           503
                                                                                       ------------  ------------
Total assets.........................................................................  $    227,080  $    571,607
                                                                                       ------------  ------------
                                                                                       ------------  ------------
</TABLE>

<TABLE>
<CAPTION>
                      LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                                                                    <C>           <C>
Liabilities:
Accounts payable, accruals and other liabilities.....................................  $      2,814  $      2,938
Intercompany balances................................................................         2,613           927
                                                                                       ------------  ------------
Total liabilities....................................................................         5,427         3,865
                                                                                       ------------  ------------
Commitments and contingencies

Shareholders' equity:
Ordinary shares, $0.05 par value per share: 86,400,000 shares authorized;
  64,439,073 and 64,433,313 shares issued and outstanding as of
  December 31, 2001 and 2000, respectively...........................................         3,222         3,222
Additional paid-in capital...........................................................        68,346        67,591
Retained earnings....................................................................       223,590       580,176
Employee benefit trusts, at cost (13,698,181 and 12,811,381 shares as of
  December 31, 2001 and 2000, respectively)..........................................       (63,599)      (58,003)
Accumulated other comprehensive income (loss)........................................        (9,906)      (25,244)
                                                                                       ------------  ------------
Total shareholders' equity...........................................................       221,653       567,742
                                                                                       ------------  ------------
Total liabilities and shareholders' equity...........................................  $    227,080  $    571,607
                                                                                       ------------  ------------
                                                                                       ------------  ------------

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

                                       82
<PAGE>
    SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

                          LONDON PACIFIC GROUP LIMITED
                         CONDENSED STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                                      (In thousands)
<S>                                                                      <C>           <C>           <C>
Revenues:
Investment income.....................................................   $        605  $      1,092  $        499
Interest and fees from subsidiaries, net (1)..........................         15,047        15,994        14,119
Financial advisory services, asset management and other fee income....              -         2,092           302
Gain on redemption of preferred shares by subsidiary (1)..............              -             -        84,040
Distribution from subsidiary (1)......................................         52,462             -        29,238
                                                                         ------------  ------------  ------------
                                                                               68,114        19,178       128,198
Expenses:
Staff costs...........................................................          3,180         5,944         3,718
Escrow release........................................................           (100)       (1,000)            -
Other operating expenses..............................................          2,579         3,488         3,160
                                                                         ------------  ------------  ------------
                                                                                5,659         8,432         6,878
                                                                         ------------  ------------  ------------
Income before income tax expense and equity in
  undistributed net income (loss) of subsidiaries.....................         62,455        10,746       121,320

Income tax expense....................................................          1,579         1,550         1,602
                                                                         ------------  ------------  ------------
Income before equity in undistributed net income (loss) of
  subsidiaries........................................................         60,876         9,196       119,718

Equity in undistributed net income (loss) of subsidiaries (1).........       (405,660)       23,261       132,158
                                                                         ------------  ------------  ------------
Net income (loss).....................................................   $   (344,784) $     32,457  $    251,876
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

<FN>
(1) Eliminated on consolidation.

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

                                       83
<PAGE>
    SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

                          LONDON PACIFIC GROUP LIMITED
                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                                      (In thousands)

<S>                                                                      <C>           <C>           <C>
Cash flows from operating activities:
Net income (loss).....................................................   $   (344,784) $     32,457  $    251,876

Adjustments to reconcile net income (loss) to net
  cash provided by operating activities:
Equity in undistributed net income (loss) of subsidiaries.............        405,660       (23,261)     (132,158)
Distributions from subsidiary.........................................        (52,462)            -             -
Gain on redemption of preferred shares of subsidiary..................              -             -       (84,040)
Gain on liquidation of subsidiary.....................................              -             -       (29,238)
Other operating cash flows............................................            299           923        22,290
                                                                         ------------  ------------  ------------
Net cash provided by operating activities.............................          8,713        10,119        28,730
                                                                         ------------  ------------  ------------
Cash flows from investing activities:
Investment in subsidiaries............................................        (33,380)       (7,668)            -
Distributions from subsidiary.........................................         52,462             -        29,248
Cash proceeds from redemption of preferred shares of subsidiary.......              -             -         8,230
Advances to subsidiaries..............................................        (39,410)            -       (40,508)
Other cash flows from investing activities............................            (23)          (42)        3,930
                                                                         ------------  ------------  ------------
Net cash provided by (used in) investing activities...................        (20,351)       (7,710)          900
                                                                         ------------  ------------  ------------
Cash flows from financing activities:
Dividends paid........................................................        (11,801)      (11,777)      (11,599)
Issuance of Ordinary Shares...........................................              3             -             5
Repayments from subsidiaries..........................................              -        16,351             -
                                                                         ------------  ------------  ------------
Net cash provided by (used in) financing activities...................        (11,798)        4,574       (11,594)
                                                                         ------------  ------------  ------------

Net increase (decrease) in cash and cash equivalents..................        (23,436)        6,983        18,036
Cash and cash equivalents at beginning of year........................         31,933        24,950         6,914
                                                                         ------------  ------------  ------------
Cash and cash equivalents at end of year..............................   $      8,497  $     31,933  $     24,950
                                                                         ------------  ------------  ------------
                                                                         ------------  ------------  ------------

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

                                       84
<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, 2001.

      Additional  information about the significant  accounting policies applied
by the Company and its  subsidiaries  is included in Note 1 to the  Consolidated
Financial  Statements  in Item 8 of Form 10-K for the year  ended  December  31,
2001.

                                       85
<PAGE>
               SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION

                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                      Life Insurance and Annuities Segment

<TABLE>
<CAPTION>
                                                                              Years Ended/As of December 31,
                                                                         ----------------------------------------
                                                                             2001          2000          1999
                                                                         ------------  ------------  ------------
                                                                                      (In thousands)

<S>                                                                      <C>           <C>           <C>
Deferred policy acquisition costs.....................................   $    168,826  $    168,102  $    144,518


Future policy benefits, losses, claims and loss expenses (1)..........      2,030,323     1,687,001     1,414,391


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


Other policy claims and benefits payable (1)..........................          1,529         4,600         2,032


Premium revenue (2)...................................................          5,672         7,400         6,671


Net investment income (3).............................................        129,141       103,909        85,768


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


Amortization of deferred policy acquisition costs.....................         23,740        21,155        16,797


Other operating expenses..............................................          8,606         9,107        13,044


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


<FN>
---------------------------
(1)   For  additional   disclosure   regarding   life   insurance   policyholder
      liabilities, see Note 7 to the consolidated financial statements of London
      Pacific  Group  Limited and  subsidiaries  which are included in Item 8 of
      Form 10-K for the year ended December 31, 2001.

(2)   Insurance policy charges.

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

</TABLE>

                                       86
<PAGE>
                           SCHEDULE IV - REINSURANCE

                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                      Life Insurance and Annuities Segment

<TABLE>
<CAPTION>
                      Column A                              Column B      Column C      Column D      Column E      Column F
------------------------------------------------           ------------  ------------  ------------  ------------  ------------

                                                                                                                   Percentage
                                                                                      (In thousands)                  Of
                                                           -----------------------------------------------------    Amount
                                                                           Ceded to      Assumed                    Assumed
                                                                            Other       From Other                    to
                                                           Gross Amount   Companies     Companies    Net Amount       Net
                                                           ------------  ------------  ------------  ------------  ------------
<S>                                                        <C>           <C>           <C>           <C>           <C>
Year ended December 31, 2001:
Life insurance in force at end of year..................   $    300,088  $    271,136  $          -  $     28,952            0%
Premium revenue recorded in
  income statement......................................   $          -  $          -  $          -  $          -            0%


Year ended December 31, 2000:
Life insurance in force at end of year..................   $    318,205  $          -  $          -  $    318,205            0%
Premium revenue recorded in
  income statement......................................   $          -  $          -  $          -  $          -            0%


Year ended December 31, 1999:
Life insurance in force at end of year..................   $    353,472  $          -  $          -  $    353,472            0%
Premium revenue recorded in
  income statement......................................   $          -  $          -  $          -  $          -            0%

</TABLE>

                                       87
<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:  April 1, 2002                      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:  April 1, 2002       Arthur I. Trueger
                           Executive Chairman
                           (Principal Executive Officer)


                           /s/  Ian K. Whitehead
                           --------------------------------
Date:  April 1, 2002       Ian K. Whitehead
                           Chief Financial Officer
                           (Principal Financial and Accounting Officer)


                           /s/  Victor A. Hebert
                           --------------------------------
Date:  April 1, 2002       Victor A. Hebert
                           Deputy Chairman and Non-Executive Director


                           /s/  John Clennett
                           --------------------------------
Date:  April 1, 2002       John Clennett
                           Non-Executive Director


                           /s/  Harold E. Hughes, Jr.
                           --------------------------------
Date:  April 1, 2002       Harold E. Hughes, Jr.
                           Non-Executive Director


                           /s/  The Viscount Trenchard
                           --------------------------------
Date:  April 1, 2002       The Viscount Trenchard
                           Non-Executive Director


                           /s/  Gary L. Wilcox
                           --------------------------------
Date:  April 1, 2002       Gary L. Wilcox
                           Non-Executive Director

                                       88
<PAGE>
                 LONDON PACIFIC GROUP LIMITED AND SUBSIDIARIES

                EXHIBIT INDEX FOR THE ANNUAL REPORT ON FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 2001


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

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

4.1         Specimen Ordinary Share certificate (filed previously as Exhibit 4.1
            to the Company's 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 London Pacific Group Limited,  The Bank of
            New York as Depositary, and all Owners and Holders from time to time
            of American  Depositary Receipts issued thereunder (filed previously
            as Exhibit A to the  Company's  Registration  Statement  on Form F-6
            (Registration No. 333-11658) dated March 14, 2000).

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

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

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

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

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

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

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

                                       89
<PAGE>
10.2.6      Executed  Instrument  dated  August 29, 1998 among (1) Richard  John
            Pirouet,  (2) Clive Aubrey Charles Chaplin, (3) Ronald William Green
            and (4) Victor Aloysius Hebert, relating to The London Pacific Group
            1990 Employee Share Option Trust (filed  previously as Exhibit 3.2.5
            to the Company's Annual Report on Form 20-F filed on June 30, 1999).

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

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

10.3.1 (1)  Agreement  dated July 1, 1990  between  the  Company and Ian Kenneth
            Whitehead (filed  previously as Exhibit 10.3.1 to the Company's 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 the  Company's  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.

10.4.1      Settlement dated May 23, 1997 among BG Services Limited and A.L.O.T.
            Trustee Limited establishing Agent Loyalty Opportunity Trust.

10.4.2      Executed  Deed  dated  July 16,  1997 by  A.L.O.T.  Trustee  Limited
            relating to Agent Loyalty Opportunity Trust.

10.4.3      Executed  Deed dated  August 13,  1997 by A.L.O.T.  Trustee  Limited
            relating to Agent Loyalty Opportunity Trust.

10.4.4      Executed  Deed dated  August 20,  1998 by A.L.O.T.  Trustee  Limited
            relating to Agent Loyalty Opportunity Trust.

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.

21          Subsidiaries of the Company as of March 18, 2002.

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

                                       90