##### Table of Contents

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SECURITIES AND EXCHANGE COMMISSION


Washington D.C. 20549





---




FORM 20-F





(Mark one)


| ̈ |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ------------------------------------------------------------------------------------------------




OR





|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ------------------------------------------------------------------------------------




For the financial year ended: June 30, 2002





OR





| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------




For the transition period from

to





Commission file number: 0-18892





---




MAYNE GROUP LIMITED


(formerly Mayne Nickless Limited)





ACN 004 073 410


(Exact name of registrant as specified in its charter)





Victoria, Australia


(Jurisdiction of incorporation or organization)





Mayne Group House,


390 St. Kilda Road,


Melbourne, Victoria, 3004


Australia


(Address of principal executive offices)





---




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





Title of each class

Name of each exchange on which registeredNone

None





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





Ordinary Shares


American Depositary Shares, each of which represents five Ordinary Shares


which are evidenced by American Depositary Receipts





Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:





None





Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report (at June 30, 2002):





809,780,008 fully paid Ordinary Shares





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 which financial statement item the registrant has elected to follow:  Item 17  ̈ Item 18  x





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##### Table of Contents




TABLE OF CONTENTS





FORWARD-LOOKING STATEMENTS

2SEC ITEM(1)ITEM 1

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT & ADVISORS

2ITEM 2

OFFER STATISTICS AND EXPECTED TIMETABLE

2ITEM 3

KEY INFORMATION

2ITEM 4

INFORMATION ON THE COMPANY

8ITEM 5

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

43ITEM 6

DIRECTORS AND SENIOR MANAGEMENT

67ITEM 7

MAJOR SHAREHOLDERS & RELATED PARTY TRANSACTIONS

90ITEM 8

FINANCIAL INFORMATION

97ITEM 9

THE OFFER AND LISTING

98ITEM 10

ADDITIONAL INFORMATION

100ITEM 11

QUANTITATIVE DISCLOSURE ABOUT MARKET RISK

116ITEM 12

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

119ITEM 13

DEFAULTS, DIVIDEND ARREARS AND DELINQUENCIES

119ITEM 14

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

119ITEM 15

RESERVED

119ITEM 16

RESERVED

119ITEM 17

FINANCIAL STATEMENTS AND EXHIBITS

119& 18

Directors DeclarationReport of Independent AuditorsITEM 19EXHIBITS





(1) This document includes the disclosure requirements of the US Securities and Exchange Commission and will be lodged with the SEC as an Annual Report on Form 20-F.




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##### Table of Contents




Forward-Looking Statements





This Annual Report contains certain forward-looking
statements, including statements regarding (i) certain plans, strategies and objectives of management related to expansion and other strategic opportunities, (ii) managements plans to focus on the Companys core businesses, (iii)
managements expectations about growth opportunities in the Australian health care and logistics markets, (iv) managements expectations regarding growth opportunities in Asian private health care and logistics markets and (v) the recent
divestment of the the Companys logistics business. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, certain of which are described in Item 3 
Key Information  Risk Factors and many of which are beyond the control of the Company, which may cause actual results to differ materially from those expressed in the statements contained in this Annual Report.





ITEM 1 
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT & ADVISORS





Not applicable





ITEM 2 
OFFER STATISTICS AND EXPECTED TIMETABLE





Not applicable





ITEM 3 
KEY INFORMATION





The future performance of the Company may be influenced by a range
of factors, many of which are outside the Companys control including the following:





General Risk Factors





Movements in interest rates, currency fluctuations, general economic conditions and changes in government policy may affect the
financial performance of the Company.





Specific Risk Factors





The growth of our domestic hospitals business depends to a large extent upon continued efforts of the Australian government to encourage participation in private health insurance.





The major source of demand for services in the Companys Australian hospitals is from patients who have private health
insurance. Item 4 describes the recent steps taken, and the incentives provided by the Federal Government to encourage participation in private health insurance. Any step taken by the Federal Government which erodes the incentive for Australians to
take out or maintain private health insurance may have a significant negative impact on future revenues of the Companys hospitals both in terms of demand and compensation rates.




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Changes in government regulation could adversely affect our business.





A significant proportion of diagnostic services revenue is Government funded and Item 4 describes the industry funding
agreement with the Federal Government that is currently in place. Any change to the manner or level of this funding may adversely impact the Companys diagnostics services business.





The Companys health care businesses operates in industries in which various licences are required to be obtained from government bodies. Changes to the regulation or licensing systems
could result in increased competition or adversely impact on the Companys growth opportunities.





The Pharmacy system involves
considerable government funding through the Pharmaceutical Benefits Scheme (PBS). The price paid for most prescription pharmaceuticals is regulated through the PBS, which is currently under review by the government. Changes to the PBS
may adversely impact on the profitability of the pharmaceuticals and pharmacy services businesses.





A decline in the value of the
Australian dollar against major currencies could increase costs.





A large proportion of the Companys medical supplies are sourced
directly and indirectly from overseas. Further decline in the Australian dollar may cause suppliers to increase their prices. In addition, fuel costs to the Companys logistics operations are heavily influenced by overseas oil prices and
currency fluctuations. The impact of this on Maynes profitability is influenced by its ability to recover these increased costs from its customers.





Our Logistics business could be adversely affected by any deceleration of growth in the economies of Australia and Canada.





Logistics businesses, by their very nature, are exposed to weaker general economic conditions which manifests in lower volumes and yield per shipment. Express freight parcel volumes are well correlated to the strength of the general
economy and any further slow down in the economy in either Australia or Canada may negatively impact parcel volumes. In contract logistics, whilst demand from customers involved in grocery and retail segments is relatively robust irrespective of
economic conditions, demand for services from linehaul customers and those customers involved in industrial services, which collectively account for approximately 43% of logistics revenue, may be negatively impacted if there is a further slow down
in the economy.





The sale of the Logistics business in Canada is subject to regulatory approval and the required approval may not
obtained.





Our Pharmaceuticals business could be adversely affected by litigation or failure to obtain regulatory approval




3




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The pharmaceuticals business is subject to significant regulation in all of the major markets in which
the company operates. The development of generic pharmaceuticals entails a risk of patent infringement litigation. There is also a risk of regulator approval of manufacturing facilities.





Currency of Presentation, Exchange Rates and Certain Definitions





Mayne Group Limited (Mayne or the Company) publishes its Financial Statements in Australian dollars (A$ or $). In this Annual Report, unless otherwise specified, or the context
otherwise requires, all dollar amounts are expressed in A$. For the convenience of the reader, this Annual Report translates certain A$ amounts into US$ at a specified exchange rate (as at 30 June 2002). These translations are not to be construed as
representations that the A$ amounts actually represent such US$ amounts or could be converted into US$ at the rate indicated.





The following table sets forth, for each of the Companys fiscal years indicated, information concerning the rates of exchange of A$ into US$ based on the noon buying rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal Reserve Bank of New York (the Noon Buying Rate).





Fiscal Years

At Period End US$ per A$1.00

High US$ per A$1.00

Low US$ per A$1.00

Average(1) Rate US$ per
A$1.001996-97

0.7537

0.8180

0.7455

0.78141997-98

0.6185

0.7483

0.5867

0.67571998-99

0.6703

0.6712

0.5550

0.62661999-00

0.6022

0.6679

0.5655

0.62832000-01

0.5076

0.6051

0.4775

0.53832001-02

0.5561

0.5754

0.5202

0.5232





(1): The average of the exchange rates on the last day of each month of the period.





The following table sets forth, the average, high and low Noon Buying Rate for each of the last four months of fiscal year 2001-02 and
the first two months of fiscal year.





Month

High US$ per
A$1.00

Low US$ per
A$1.00April 2002

0.5457

0.5258May 2002

0.5696

0.5340June 2002

0.5754

0.5560July 2002

0.5710

0.5354August 2002

0.5548

0.5231September 2002

0.5518

0.5419




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In addition, fluctuations in the A$/US$ exchange rate will affect the US$
equivalent of the A$ price of Maynes Ordinary Shares on the Australian Stock Exchange and, as a result, are likely to affect the tradeable value of Maynes American Depositary Shares (ADSs) in the United States. Such
fluctuations would also affect the US$ amounts received by holders of ADSs on conversion by the Depositary of cash dividends paid in A$ on the Ordinary Shares underlying the ADSs.





The Companys fiscal year ends at midnight on 30 June. Fiscal years prior to 2000-01 ended at midnight on the Sunday closest to 30 June. Usually this year-end cut off
method results in a 52 week year, but periodically it results in a 53 week year. The fiscal years ended 30 June 2002, 30 June 2001, 2 July 2000, 4 July 1999 and 5 July 1998 were 52 week years. As used herein, the fiscal year ended 30 June 2002 is
referred to as 2001-02 and other fiscal years are referred to in a corresponding manner.





SELECTED FINANCIAL DATA





The selected consolidated financial data as of 30 June 2002, 30 June 2001, and 2 July 2000, and for the fiscal years ended 30
June 2002, 30 June 2001, and 2 July 2000 is set forth below. It has been derived from, should be read in conjunction with, and is qualified in its entirety by reference to; the Mayne audited Consolidated Financial Report included herein, including
the notes thereto. The selected financial data as of 2 July 1999 and 5 July 1998 set forth below has been derived from the audited Consolidated Financial Reports of Mayne for the fiscal years ended 2 July 1999 and 5 July 1998, which are not included
herein. Maynes audited Financial Statement is prepared in accordance with Australian GAAP, which varies in certain significant respects from United States GAAP. See Note 37 to the Consolidated Financial Report for a discussion of the
significant differences between Australian GAAP and US GAAP as they apply to the Company.




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Income Statement


(A
Dollars in thousands, except ratios and EPS)





|
|

2001-02


2000-01


1999-00


1998-99


1997-98Sales revenue

4,991,957


3,158,663


3,100,402


2,797,695


2,634,934Costs and expensesOperating, selling and administrative expenses

4,545,134


2,809,911


2,793,074


2,492,452


2,312,465Depreciation and amortisation

197,138


137,550


136,886


115,132


101,819Total costs and expenses

4,742,272


2,947,461


2,929,960


2,607,584


2,414,284Profit before interest, tax and significant items

249,685


211,202


170,442


190,111


220,650Net interest expense

(19,562
)

(42,363
)

(48,071
)

(27,911
)

(11,915
)Income tax benefit / (expense)

(76,221
)

(58,546
)

(43,056
)

(51,669
)

(76,980
)Profit after interest and tax, before significant items

153,902


110,293


79,315


110,531


131,755Significant items after tax (1)

23,313


55,157


(249,501
)

372,576


(87,532
)Minority interest in operating profit afterinterest and tax

(3,604
)

(3,888
)

(3,893
)

(615
)

8Net income (loss)

173,611


161,562


(174,079
)

482,492


44,231Ratio of earnings to fixed charges (2)

3.7x


2.5x


2.2x


2.1x


2.3xEarnings per share (Australian cents)Basic earnings per shareBefore significant items

21.3c


26.8c


22.0c


31.7c


36.0cAfter significant items

24.6c


40.7c


(50.7
)c

139.3c


5.6cFully diluted earnings per shareBefore significant items

21.2c


26.7c


22.0c


31.5c


35.6cAfter significant items

24.5c


40.3c


(50.7
)c

137.7c


5.6cDividends per share (Australian cents)

14.0c


13.0c


17.0c


30.0c


30.0cAmounts restated in accordance with US GAAPSales revenue

4,991,957


3,158,663


3,100,402


2,797,695


2,634,934Net income

194,930


160,326


(145,500
)

676,842


7,942Ratio of earnings to fixed charges (2)

3.8x


2.5x


2.6x


2.3x


2.2xBasic earnings per share (Australian cents)

27.6


40.4


(42.4
)

195.4


2.4


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|(1) |  | Refer note 5 to the financial statements for details of significant items.
|--- |  | --------------------------------------------------------------------------

|(2) |  | For the purposes of computing the ratio of earnings to fixed charges for any period, earnings consist of income before taxes for such period plus fixed charges
deducted in calculating net income for such period (excluding interest capitalised during the period). Fixed charges for any period consist of interest charges, including capitalised interest, and the portion of rental expense deemed to be
representative of the interest factor.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------






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|
|

|
|

Balance Sheet Data (at period end)

2001-02

2000-01

1999-00

1998-99

1997-98(A Dollars in thousands, except ratios)Amounts prepared in accordance withAustralian GAAP:(1997-1998 Consolidated-not equity)AssetsCash and deposits

425,623

580,988

109,864

196,242

310,274Other current assets

1,422,746

673,435

494,197

460,576

1,102,278Non current assets

3,542,866

1,959,372

1,774,110

1,755,310

1,680,660Total assets

5,391,235

3,213,795

2,378,171

2,412,128

3,093,212LiabilitiesCurrent Liabilities

1,014,700

1,013,025

627,250

526,100

580,221Long term debt (including finance leases )

655,100

704,473

773,558

704,474

1,194,118Other non current liabilities

103,610

86,622

84,543

44,131

45,613Total liabilities

1,773,410

1,804,120

1,485,351

1,274,705

1,819,952Shareholders equity

3,617,824

1,409,675

892,820

1,137,423

1,273,260Total liabilities and shareholders equity

5,391,234

3,213,795

2,378,171

2,412,128

3,093,212Debt capitalisation ratio (1)

15

33

46

38

48Amounts prepared in accordance withUS GAAP:AssetsCurrent assets

1,842,139

1,262,659

604,061

656,818

1,412,552Non current assets

3,785,222

1,992,285

1,847,414

1,823,811

1,244,883Total assets

5,627,361

3,254,944

2,451,475

2,480,629

2,657,435LiabilitiesCurrent Liabilities

949,917

982,045

609,583

474,500

528,397Long term debt (including finance leases )655,100

704,473

773,558

704,474

1,194,118Other non current liabilities

212,235

140,622

181,761

182,347

35,827Total liabilities

1,817,252

1,827,140

1,564,902

1,361,321

1,758,342Shareholders equity

3,810,109

1,427,804

886,573

1,119,308

899,093Total liabilities and shareholders equity

5,627,361

3,254,944

2,451,475

2,480,629

2,657,435Debt capitalisation ratio (1)

15

33

47

39

57


---

|(1) |  | Ratio of long term debt to long term debt plus shareholders equity.
|--- |  | --------------------------------------------------------------------



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ITEM 4 
 INFORMATION ON THE COMPANY





The discussion below contains certain forward-looking statements. See
Forward Looking Statements.





A.  HISTORY AND DEVELOPMENT





i) General





Mayne
Group Limited (Mayne Group, Mayne or the Company) is an Australian company, with consolidated total assets of A$5.39 billion and consolidated total sales revenue of A$4.99 billion as of and for the fiscal year
ended June 30 2002. The Company operates substantial businesses in health and logistics.





The health business
includes three divisions: Hospitals, Health Services and Pharmaceuticals. Maynes Hospital operations are primarily conducted in Australia, although the Company operates three hospitals in Indonesia and one in Fiji with local partners.





Health Services consists of diagnostic imaging, pathology, pharmacy and medical centres. These businesses operate
solely within Australia.





The pharmaceuticals business, Mayne Pharmaceuticals, comprises the research,
development, manufacture and marketing of generic injectable and oral pharmaceutical products, as well as consumer health products. Mayne Pharmaceuticals has manufacturing facilities in Australia and Puerto Rico, and has representations in most
regions throughout the world.





Logistics services, Mayne Logistics, includes contract and cash logistics and
time-critical express. Contract operations are conducted primarily in Australia, with a growing presence in Asia. Time-critical express operations are conducted in two principal geographic areas: Australia and Canada. Cash logistics operations are
conducted in Australia.





The Companys business began in 1886 as a partnership operating a parcel delivery
service in Melbourne, Australia. The Company was incorporated in 1915 and has been publicly listed in Australia since 1926. In November 1998, the Company transferred its Australian Stock Exchange listing to the Healthcare and Biotechnology index,
from the Transport index. In October 2001 the Company completed its acquisition of FH Faulding & Co. Limited (Faulding), a transaction which increased the total asset base of the Company by over 80%. The acquisition of Faulding
significantly broadened the Companys health services business into the provision of distribution and retail management services to pharmacies, and pharmaceuticals and consumer health products manufacturing and marketing. In January 2002, the
Company changed its name from Mayne Nickless Limited to Mayne Group Limited. In May 2002, the Company announced its intention to assess the demerger of its non-health care logistics activities in the




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second half of calendar 2002. The decision to separate the logistics business was taken to strategically
focus the Company on health. A thorough process was undertaken to ensure that the Company explored all opportunities to maximise value for shareholders. As such, while progresing the de-merger, the Company implemented a formal process to evaluate
expressions of interest in Mayne Logistics from third parties. In November 2002, the Company announced that it had agreed to sell the logistics assets to a group of trade buyers comprising Linfox Pty Ltd (Linfox), DHL Worldwide Express
(DHL), and Toll Holdings Limited (Toll). Prior to the separation of the logistics assets, Mayne employed a total of 40,000 people globally, with 34,000 employees in Australia.





The Company is incorporated in the State of Victoria, Commonwealth of Australia, has its executive offices at 390 St. Kilda Rd, Melbourne,
Victoria, 3004 and its telephone number is +61 3 9868 0700.





ii) Recent Developments





a) Acquisitions





| |  |  | Acquisition of Faulding
| | - |  | -----------------------




| | - |  | On 12 July 2001 it was announced that the Faulding Board would recommend to its shareholders the Companys takeover offer.
| | - |  | --------------------------------------------------------------------------------------------------------------------------




| | - |  | Prior to acquisition, Faulding was an international health and personal care company listed on the ASX since 1947. Its principal business activities were the
production of oral and injectable pharmaceuticals, the production of consumer health products, the provision of distribution and retail management services to pharmacies and the provision of logistics management to hospitals. At 31 July 2001,
Faulding had a market capitalisation of approximately A$2.4 billion.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | - |  | Mayne paid 361 million new Mayne shares and A$194 million to Faulding shareholders in consideration for their shares.
| | - |  | ---------------------------------------------------------------------------------------------------------------------




| | - |  | The acquisition was completed on 2 October 2001, with the offer closing and the Company having received acceptances in respect of more than 95% of the number of
issued shares in Faulding enabling it to compulsorily acquire the remaining shares. Faulding ceased to be listed on the ASX from 29 November 2001.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Material business combination in the year of acquisition





On 2 October 2001, Mayne Group Limited acquired 100% of the issued share capital of FH Faulding & Co Ltd (Faulding). The results of Fauldings operations have been included in the consolidated financial
statements since that date. Faulding is a manufacturer and distributor of pharmaceutical products, globally.




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As a result of the acquisition, Mayne Group Limited is expected to be Australias leading
healthcare service provider and also the leading Australian logistics business servicing the health sector.





The aggregate purchase price
was A$2,354,914,796, including A$243,142,238 of cash and 360,986,762 shares issued at a market price of $5.85. The value of the shares was determined by way of reference to the market price at the date of announcing the offer. This differs to the
treatment required under US GAAP, refer to note 37 to the financials for details.





The following table summarises the estimated fair
values of the assets acquired and liabilities assumed at the date of acquisition.





Fair Value of Fauldings Net Assets Acquired (A$ 000)Current assets

997,624Property plant and equipment

351,195Intangible assets

127,916Other non current assets

747,863Goodwill

1,019,936Total assets acquired

3,244,534Current liabilities

(367,481
)Long-term debt

(522,137
)Total liabilities assumed

(889,618
)Net asset acquired

2,354,916





Of the A$127,916,000 of intangible assets acquired, A$108,492,000 was assigned to brand
names that are not subject to amortisation. The remaining A$19,424,000 of acquired intangible assets have a weighted average useful life of 5 years. The intangible assets that make up that amount include patents and rights of A$15,207,000 (5 year
weighted average useful life), and research and development assets of A$4,217,000 (5 year weighted average useful life).





The
A$1,019,936,000 of goodwill was assigned to the Healthcare Services and Pharmaceutical segments in the amount of A$275,562,000 and A$744,374,000 respectively. Of that total amount, nil is expected to be deductible for tax purposes.





Operating result of Mayne had the acquisition of Faulding occurred on 1 July 2000 for the 2001 and 2002 financial years





Note that the balances have been adjusted to reflect the difference in depreciation and amortisation expense caused by any variation between the fair
value attributed by Mayne to the assets acquired, and the carrying amount of these assets in the accounts of Faulding.





The pro forma net
income reported below includes A$71,000,000 in relation to Faulding in 2001 and A$73,122,000 in relation to Faulding in 2002.




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Year ended 30 June 2002 (A$
000)

Year ended 30 June 2001 (A$
000)Revenue

5,627,374

5,481,663Income before extraordinary items and the cumulative effect of accounting changes

190,992

232,562Net Income

190,992

232,562EPS

23.7 cents

30.7 cents





| |  |  | Acquisition of diagnostic imaging assets
| | - |  | ----------------------------------------




| | - |  | On 25 January 2002 it was announced that Mayne acquired Endeavour Healthcares radiology practices in Victoria, including a funded MRI licence. The
acquisition price was not required to be disclosed because the amount was immaterial to Mayne.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | - |  | On 26 February 2002 it was announced that Mayne acquired Port Macquarie Medical Imaging in NSW, including a funded MRI licence. The acquisition price was not
required to be disclosed because the amount was immaterial to Mayne.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | Acquisition of Queensland Medical Laboratory (QML)
| | - |  | ----------------------------------------------------




| | - |  | On 26 June 2002 it was announced that Mayne would acquire QML for an enterprise value of A$268.5 million.
| | - |  | ---------------------------------------------------------------------------------------------------------




| | - |  | QML is Queenslands leading pathology services provider employing 37 pathologists and 1,900 staff operating 27 laboratories and 149 collection centres in
Queensland, northern New South Wales and the Northern Territory.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | - |  | The acquisition was completed in September 2002.
| | - |  | ------------------------------------------------




| |  |  | Acquisition of medical centres
| | - |  | ------------------------------




| | - |  | During the fiscal year ended 30 June 2002 Mayne acquired a number of stand-alone medical centres and at year-end had 53 centres providing the services of 394
General Practitioners. The acquisition prices paid were not required to be disclosed because the amounts were immaterial to Mayne.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




The individually immaterial business combinations relating to diagnostic imaging assets and medical centres noted above are in the year of acquisition material in aggregate:





In the financial year ended 30 June 2002, Mayne Group Limited acquired the following diagnostic imaging and medical centres for
a total consideration of A$91,845,503, which was paid primarily in cash:





| | n |  | Port Macquarie diagnostic imaging
| | - |  | ---------------------------------




| | n |  | Endeavour radiology
| | - |  | -------------------




| | n |  | 42 Medical Centres
| | - |  | ------------------




The operations of each of these businesses are based in Australia.




11




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Goodwill recognised in these transactions amounted to A$77,522,256, and that amount is not deductible
for tax purposes. Goodwill was assigned to the Diagnostic Imaging and Medical Centre segments in the amounts of A$17,859,991 and A$59,662,265 respectively.





b) Divestments





| | n |  | Sale of Fauldings US-based oral pharmaceuticals business
| | - |  | ---------------------------------------------------------




| | - |  | Mayne sold the US-based oral pharmaceuticals business, owned by Faulding, to Alpharma Inc. for US$660 million. This sale was effective from 2 October 2001 and
completed on 13 December 2001.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | n |  | Potential sale of Fauldings injectable pharmaceuticals business
| | - |  | ----------------------------------------------------------------




| | - |  | Mayne entered an arrangement with Teva Pharmaceutical Industries Ltd relating to the potential disposal of Fauldings injectable pharmaceuticals business
for US$365 million following the Companys acquisition of Faulding.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | - |  | On 15 November 2001 the Company announced that this disposal would not occur and that Mayne would continue to operate the injectable pharmaceuticals business.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------




| | n |  | Sale of four former Australian Hospital Care (AHC) hospitals
| | - |  | --------------------------------------------------------------




| | - |  | As part of the acquisition of AHC, which was finalised during February 2001 for a total equity consideration of A$199.6 million, the company provided an
undertaking to the Australian Competition and Consumer Commission (ACCC) that it would divest four hospitals, of the 15 acquired, within 12 months of completion.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | - |  | By February 2002 the company had disposed of the four hospitals, three in Victoria and one in Queensland. The sale proceeds were not disclosed on the basis that
the amount was immaterial to Mayne.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | n |  | Sale of logistics businesses
| | - |  | ----------------------------




| | - |  | On 1 November 2002 the Company announced its intention to sell the non-healthcare logistics business to a group of trade buyers comprising Linfox Pty Ltd
(Linfox), DHL Worldwide Express (DHL) and Toll Holdings Limited (Toll) for a combined enterprise (ungeared) value of A$456 million.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | - |  | This followed a detailed review, announced on 30 May 2002, of the implications of de-merging Loomis which included the assessment of trade sale alternatives
based on proposals received from a number of parties.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




c) Capital Management





| | n |  | Share issues
| | - |  | ------------



12




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##### Table of Contents

| | - |  | A total of 361 million shares were issued by the Company in 2001-02 as part consideration to Faulding shareholders for their Faulding shares.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------




| | - |  | A total of 6.2 million shares were issued by the Company over the course of 2001-02 as part of its Employee Share Plan, Dividend Reinvestment Plan and Executive
Option Plan.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------




d) Management





| | n |  | Board and management succession
| | - |  | -------------------------------




| | - |  | On 19 December 2001, the Company announced that Mr Peter Smedley, Group Managing Director and Chief Executive Officer, would succeed Mr Mark Rayner as
Non-Executive Chairman of Mayne, and Chief Operating Officer Mr Stuart James would become Group Managing Director and Chief Executive Officer. The appointments were to take effect in September 2002.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | - |  | On 30 May 2002, the Company announced that Mr Smedley had advised the Board he would not take up the position of Chairman, and would retire as Group Managing
Director and Chief Executive Officer in 2002, after finalising the 2001-02 accounts and overseeing the demerger process in relation to the logistics assets. Mr Rayner advised he would continue as Chairman until an appropriate successor was in place.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | - |  | The Office of the CEO was created on 1 July 2002 with Mr James appointed CEO-Elect. On 28 August 2002 Mr Smedley retired as Group Managing Director and Chief
Executive Officer, with Mr James taking up the role on 29 August 2002.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | - |  | On 28 August 2002, the Company announced that Mr Peter Willcox would join the Board on 1 October 2002 as Deputy Chairman and take up the Chairmanship on 1
January 2003. Mr Rayner will retire from the Board on 31 December 2002.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | n |  | Senior management changes
| | - |  | -------------------------




| | - |  | In July 2001, Mr Alan Reid was appointed Group General Manager Mayne Pharmaceuticals. In April 2002, Mr Robert Cooke was appointed Group General Manager
Hospitals. In June 2002, Mr David Cranwell was appointed Group General Manager Logistics. On 1 July 2002, Mr Stephen Roche was appointed Group General Manager Health Services.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




e) Capital Expenditures and Divestitures





| | n |  | Capital Expenditures
| | - |  | --------------------




| | - |  | Capital expenditure on property, plant and equipment during 2001-02 totalled A$174.3 million (2001: A$145.6 million and 2000: A$165.3 million).
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------




| | - |  | The significant increase in capital expenditure in the past three years, excluding that in relation to Faulding, have related to investment in information
technology across hospitals,
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



13




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##### Table of Contents

| | - |  | diagnostics and logistics, new pathology laboratories in NSW and Victoria during 2001, and new diagnostic imaging equipment in 2001 and 2002.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------




| | - |  | Capital expenditure in relation to Faulding in 2002 includes a capacity upgrade in the Mulgrave injectables plant, investment in licenses, consolidation of
nutraceuticals manufacturing facilities in Queensland and information technology across the business.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | - |  | Capital expenditures are financed from the underlying cash flow of the Mayne businesses.
| | - |  | ----------------------------------------------------------------------------------------




| | n |  | Divestitures
| | - |  | ------------




| | - |  | Disposal of property, plant and equipment realised A$89.161 million in 2001-02 (2001: A$23.6 million and 2000: A$25.2 million).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------




| | - |  | Proceeds from the sales of businesses of A$1.3 billion were realised in 2001-02 primarily relating to the sale of Fauldings US-based oral pharmaceuticals
business; A$483.3 million in 2001 primarily relating to the sale of the UK Express freight business and the Australian ports business; and A$18.639 million in 2000 primarily relating to the sale of the Canadian cash logistics business.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




B.  BUSINESS OVERVIEW





i) Strategy





The Company is focused on the growth and development of its
broad-based businesses across the health sector. The Companys objective is to add value to its businesses through the application of its management skills and advanced technology. The Company has undertaken a number of steps to further this
strategy. The Company announced the sale of the non-health care logistics businesses in November 2002. The finalisation of the Faulding acquisition diversified the Companys income stream through the addition of businesses in pharmaceuticals
manufacturing, pharmacy services and health-related consumer products manufacturing and marketing. This was complemented by a range of acquisitions, including diagnostics assets in Victoria and New South Wales and the acquisition of QML in
Queensland in June 2002.





Within logistics, the Company has moved away from lower-margin general freight services
into higher-margin logistics services. Increasingly, these markets are converging as industries seek just-in-time deliveries linked to strategic inventory management and distribution facilities. In November 2002, the company announced the sale of
all of its logistics businesses except those related to pharmacy and pharmaceuticals distribution.





ii) Segment Information





For financial reporting purposes, the Company reports industry segment data for the segments of hospitals,
pathology services, diagnostic imaging services, medical centres, pharmacy services,




14




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##### Table of Contents




pharmaceuticals, consumer brands, Armaguard, logistics and Loomis Courier, and geographic segment data
for the regions of Australia, Other Pacific Regions, the Americas, and Europe, Middle East and Africa. See Note 25 to the Consolidated Financial Statements. The following tables set forth the contributions of each industry and geographical segment
to sales revenue and earnings before interest and tax (EBIT) for each of the last three fiscal years. This table represents earnings before significant items, interest and tax determined under Australian GAAP. This differs from earnings
determined under US GAAP. For details on these differences, refer to Note 37 to the Consolidated Financial Statements.




15




---

##### Table of Contents




Sales Revenue(A Dollars in millions except percentages)2001-02


2000-01


1999-00A$000


% of total


A$000


% of total


A$000


% of totalIndustry SegmentsHospitals

1,396.7


28.0
%

1,148.7


36.4
%

870.3


28.1
%Pathology Services

249.3


5.0
%

245.7


7.8
%

236.2


7.6
%Diagnostic Imaging Services

159.6


3.2
%

146.6


4.6
%

122.5


4.0
%Medical Centres

32.8


0.7
%

14.2


0.5
%

9.0


0.3
%Pharmacy Services

1,406.3


28.2
%




0.0
%




0.0
%Total Health Care Services

3,244.7


65.0
%

1,555.2


49.2
%

1,238.0


39.9
%Pharmaceuticals

332.8


6.7
%




0.0
%




0.0
%Consumer Products

167.2


3.4
%




0.0
%




0.0
%Total Pharmaceuticals

500.0


10.0
%




0.0
%




0.0
%Armaguard

221.2


4.4
%

231.2


7.3
%

202.3


6.5
%Logistics

673.9


13.5
%

680.6


21.5
%

664.3


21.4
%Australia & Pacific Logistics

895.2


17.9
%

911.8


28.9
%

866.6


28.0
%Loomis Courier

350.2


7.0
%

361.3


11.4
%

295.1


9.5
%Total Logistics Services

1,245.4


24.9
%

1,273.1


40.3
%

1,161.7


37.5
%Other




0.0
%

330.4


10.5
%

700.7


22.6
%Unallocated

1.8


0.0
%




0.0
%




0.0
%Consolidated

4,992.0


100.0
%

3,158.7


100.0
%

3,100.4


100.0
%Geographic SegmentsAustralia

4,245.9


85.1
%

2,395.0


75.8
%

2,047.7


66.0
%Other Pacific regions

130.7


2.6
%

72.0


2.3
%

56.9


1.8
%Australia & Pacific

4,376.7


87.7
%

2,466.9


78.1
%

2,104.7


67.9
%Americas

501.7


10.0
%

361.3


11.4
%

295.1


9.5
%Europe, Middle East & Africa

113.6


2.3
%




0.0
%




0.0
%Other




0.0
%

330.4


10.5
%

700.7


22.6
%Consolidated

4,992.0


100.0
%

3,158.7


100.0
%

3,100.4


100.0
%Basic EPS (Australian cents)

24.6





40.6





(50.7
)EBIT (*)(A Dollars in millions except percentages)2001-02


2000-01


1999-00A$000


% of total


A$000


% of total


A$000


% of totalIndustry SegmentsHospitals

71.6


28.7
%

94.5


44.7
%

54.2


31.81
%Pathology Services

30.4


12.2
%

32.5


15.4
%

25.2


14.8
%Diagnostic Imaging Services

16.7


6.7
%

10.3


4.9
%

8.0


4.7
%Medical Centres

(3.4
)

-1.4
%

(1.8
)

-0.85
%

0.6


0.4
%Pharmacy Services

19.5


7.8
%




0.0
%




0.0
%Total Health Care Services

134.9


54.0
%

135.5


64.2
%

88.0


51.6
%Pharmaceuticals

44.2


17.7
%




0.0
%




0.0
%Consumer Products

10.8


4.3
%




0.0
%




0.0
%Total Pharmaceuticals

55.0


22.0
%




0.0
%




0.0
%Armaguard

26.2


10.5
%

24.9


11.8
%

24.4


14.3
%Logistics

24.9


10.0
%

30.4


14.4
%

20.8


12.2
%Australia & Pacific Logistics

51.1


20.5
%

55.3


26.2
%

45.2


26.5
%Loomis Courier

21.5


8.6
%

15.1


7.2
%

15.0


8.8
%Total Logistics Services

72.6


29.1
%

70.4


33.3
%

60.2


35.3
%Other

(.2
)

-.01
%

13.3


6.3
%

29.7


17.4
%Unallocated

(12.7
)

-5.1
%

(8.0
)

-3.8
%

(7.5
)

-4.4
%Consolidated Group

249.7


100.0
%

211.2


100.0
%

170.4


100.0
%Geographic SegmentsAustralia

177.0


70.9
%

173.1


82.0
%

118.1


69.3
%Other Pacific regions

13.5


5.4
%

9.7


4.6
%

7.7


4.5
%Australia & Pacific

190.5


76.3
%

182.8


86.6
%

125.7


73.8
%Americas

45.1


18.1
%

15.1


7.1
%

15.0


8.8
%Europe, Middle East & Africa

14.3


5.7
%










Other

(.2
)

-0.1
%

13.3


6.3
%

29.7


17.4
%Consolidated Group

249.7


100.0
%

211.2


100.0
%

170.4


100.0
%





(*)  This table represents earnings before significant items, interest
and tax determined under Australian GAAP. This differs from earnings under US GAAP. For details on those differences refer to note 37 to the Consolidated Financial Statements.




16




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##### Table of Contents




I. HEALTH CARE





i) General





In health, Mayne is a leading manufacturer and
supplier of generic pharmaceuticals and consumer health products internationally, a provider of a broad range of health care services and a leading operator of private hospitals.





It has grown to become the largest private health care services group in Australia, in terms of revenue and capital employed, since its initial investment in the late
1980s.





Maynes investment in health grew initially as a result of collocation of private hospitals with
public hospital premises and privatisation of the operation of public hospitals. This was supplemented by acquisitions of privately owned hospitals and diagnostic imaging and pathology businesses.





The Faulding acquisition, completed in October 2001, provided significant diversification into additional ranges of health services and
products including:





| |  |  | pharmacy distribution
| | - |  | ---------------------




| |  |  | pharmacy retail services, and
| | - |  | -----------------------------




| |  |  | manufacturing, marketing and distribution of consumer products and oral and injectable pharmaceuticals.
| | - |  | -------------------------------------------------------------------------------------------------------




In addition to Faulding, over the past two years Mayne has expanded its involvement in health through a number of acquisitions. The
acquisition of AHC in February 2001 added a net 11 hospitals to the Mayne network, predominantly in Victoria but also in Queensland and New South Wales. The AHC hospitals also provided Mayne the opportunity to provide imaging and pathology services
in those hospitals.





During 2002, a number of diagnostic imaging acquisitions were made focusing on higher
modality businesses (particularly MRI-based) in New South Wales and Victoria. In June 2002, Mayne announced the acquisition of QML, Queenslands leading pathology services provider.





Today, Maynes Hospitals business consists of 58 hospitals across Australia, three hospitals in Indonesia and a minority interest in a hospital in Fiji. The Health
Services business operates private pathology networks, diagnostic imaging businesses, pharmacy distribution and retail services, and medical centres. The Pharmaceuticals business consists of research, development, manufacture and marketing of
generic injectable and oral pharmaceutical products as well as consumer health products.




17




---

##### Table of Contents




Maynes strategy is to grow this diversified health services and product
platform in Australia and expand the existing international profile primarily represented in the Pharmaceuticals business. Within





LOGO





Australia, this broad-based approach to services and products provides a platform as follows:





All figures are indicative of historical ranges





The principal revenue sources for the Hospitals and Health Services divisions are private health insurance funds, the Commonwealth Government through Medicare payments, the
PBS and State Governments who engage Mayne to provide public patient services. The principal revenue sources for the injectable and oral pharmaceuticals are hospitals and pharmacies. The principal revenue sources for consumer products are retail
outlets including pharmacies. The health industry and Australias national health care system are described more fully below.





ii) Industry Overview and Trends





Australia provides national public health care through a
combination of government-funded public hospitals and a compulsory government health insurance scheme known as Medicare. In addition, individuals have the option to participate in the private health system at their own cost.





Responsibility for health care in Australia is loosely divided between Commonwealth, State and Local Governments, although State (and
Territory) Governments carry the bulk of the responsibility of providing public health services. Health care funding is primarily derived from Federal Government general tax revenue, which is supplemented to a small degree (about 10%) by the
Medicare levy, which all individual Australian taxpayers must pay. The Medicare arrangements provide direct benefits to the public in two ways. First, patients who receive non-hospital medical services are entitled to an 85% rebate of the




18




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scheduled fee, which is set under the Commonwealth Medical Benefits Schedule (MBS).
Secondly, in-hospital procedures are free to public patients in public hospitals, while in other cases a subsidy of 75% of the MBS fee applies. The Commonwealth Government funding also includes the PBS, which subsidises payments for a high
proportion of prescription medicines.





The health care market in Australia is strategically attractive to Mayne
for a number of reasons. Mayne believes that the demographics are excellent, as the ageing population is expected to increase demand for health services in Australia. The Australian Bureau of Statistics forecasts that the proportion of the
population aged over 65 or over is expected to grow from 2.3 million or 12.3% of the population in 1999, to 4.2 million or 18.4% in 2021, rising to 6.6 million or 26.1% in 2051. 1 In addition, as technological advances have made more services available, at affordable prices, the demand for those services has increased.





iii) Pharmaceuticals Industry Overview





a) Generic Pharmaceutical Market





When a new pharmaceutical product is first
developed, it is given a generic name (the name of the active chemical compound in the pharmaceutical product) and a brand name (the name used by the manufacturer). When the new pharmaceutical product is introduced to the market, the branded product
is protected from competition for a period of time by its patent which is now normally a minimum of 20 years. Once the patent expires, the pharmaceutical product is considered generic: A generic pharmaceutical product is a duplicate of the branded
product, containing the same active ingredients and delivering the same amount of medication into the body in the same amount of time. As it does not involve lengthy and costly clinical trials, the development of a generic pharmaceutical product can
take around three years (compared to five to ten years for a branded product).





Given that less research and
development is required for generic pharmaceutical products, they typically sell for less than the brand name equivalents. Generic pharmaceutical products typically enter the market at a price lower than the price of the original brand name product,
and suffer price erosion over the remainder of the product life cycle as more generic competition enters the market. Success in the generic market is therefore highly dependent on securing timely regulatory approvals for new products so that they
can be launched as soon as possible following the establishment of a market for a new generic pharmaceutical when the patent expires. Intense price competition can take place between generic pharmaceutical suppliers at this time of market formation.
Introduction of generic substitutes at the time of branded pharmaceutical product patent expiry is the key determinant of the commercial prospects of generic pharmaceutical companies.




19




---

##### Table of Contents




Since the introduction of generic pharmaceutical products, generics have been
substituted for branded products at an increasing rate. The growing rate of substitution reflects:





| |  |  | the introduction of laws permitting and/or requiring pharmacists to substitute generics for branded pharmaceuticals;
| | - |  | --------------------------------------------------------------------------------------------------------------------




| |  |  | pressure from managed care and third party payors to encourage health care providers and consumers to contain costs;
| | - |  | --------------------------------------------------------------------------------------------------------------------




| |  |  | increased acceptance of generic pharmaceuticals by physicians, pharmacists and consumers; and
| | - |  | ---------------------------------------------------------------------------------------------




| |  |  | an increase in the number of formerly patented pharmaceuticals that have become available to off-patent competition.
| | - |  | --------------------------------------------------------------------------------------------------------------------




Substitution has been particularly rapid in the US, largely as a result of increasing pressure within the US health care industry to contain costs. As a result,
generic substitution is encouraged, and in some cases required, by Government legislation in the US, and this is increasingly becoming the case globally. In addition, physicians, pharmacists and consumers are becoming increasingly comfortable with
the quality and therapeutic equivalence of generic pharmaceuticals.





1. United States





In the US, the growth of the generic pharmaceuticals industry is expected to be significantly stronger than growth of the branded
pharmaceutical industry, due to the expiration of many patents in the next few years. It is estimated that between 20002005, brand name pharmaceuticals with annual sales of approximately US$40 - 50 billion will lose patent protection in the
US. The comparable figure for patent expirations for the period 1990 - 1999 was only US$17 billion. Companies that are well positioned in the generic pharmaceuticals sector should have significant growth opportunities.





The generic pharmaceuticals industry in the US is regulated by the Drug Price Competition and Patent Term Restoration Act (Waxman-Hatch
Act), which allows generic pharmaceuticals to be sold in the US following:





| |  |  | Food and Drug Administration (FDA) approval of an Abbreviated New Drug Application (ANDA) that includes evidence that the generic
pharmaceutical is bioequivalent to its branded counterpart; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | FDA approval expiration, invalidation, or circumvention of any patents on the corresponding branded pharmaceutical and the expiration of any other market
exclusivity periods applicable to the branded pharmaceutical.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




The FDA also requires that the
manufacturing operations of generic pharmaceutical companies in the US and companies that export to the US comply with current Good Manufacturing Practices (cGMP), as




20




---

##### Table of Contents

defined in the US Code of Federal Regulations. cGMP encompasses all aspects of the production process, including validation and record keeping.
The FDA routinely inspects/audits manufacturing compliance before a pharmaceutical is approved and every two years after approval.





The average length of time between initial submission of an ANDA and receipt of FDA approval is approximately one to two years. The number of generic pharmaceutical approvals follows the pattern of patent expirations. The
company that is the first to market with an ANDA may receive a 180-day exclusivity bonus that allows that company to offer the product without generic competition.








2. Europe





The largest generic pharmaceutical market in Europe is Germany, which is approximately US$3 billion (Source: Deutsche Bank) or around A$ 6 billion. Generic pharmaceutical products account for approximately 15% of the market
for oncology treatments in Germany.





Strong growth of generic pharmaceutical products is also occurring in the UK,
the second largest European generics market (approximate size is US$1 billion or around A$ 2 billion). In the UK, generic pharmaceutical products account for approximately 65% of total volume. The generic pharmaceutical market in the UK suffered a
downturn at the end of the 2000 year and early in the 2001 year due to significant price reductions instituted by the Ministry of Health.





A number of other European markets, including France, Italy and Spain, Denmark and Norway has also experienced growth in the consumption of generic products.





The research, development, manufacturing and marketing of pharmaceutical products in Europe is also subject to extensive Government regulation by authorities. The
regulating regime in the European Union and Norway involves a system of product and manufacturer licensing and marketing authorisation. Generic pharmaceutical companies in Europe are experiencing price pressure from parallel imports of identical
products from lower priced markets under European Union laws of free movement of goods. Companies are also affected by general governmental initiatives or actions to reduce pharmaceutical prices.








3. Australia





The Australian pharmaceutical industry represents approximately 1% of the world pharmaceutical market. There are approximately 120 companies involved in the manufacture of prescription and
over-the-counter pharmaceutical products in Australia, with total turnover of about A$7 billion in the 12 months ended 30 June 2000 (including prescription and self-medication pharmacy sales, hospital sales and exports).




21




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##### Table of Contents




Australia imported approximately A$3.3 billion of pharmaceuticals and exported
A$1.6 billion of pharmaceuticals in the 12 months ended 30 June 2000.





The pharmaceutical market is becoming
increasingly concentrated. This may make it more difficult for new entrants into the market. Most of the larger manufacturers are subsidiaries of international pharmaceutical companies. The top 10 PBS suppliers held a 56% market share based on
processed PBS prescriptions in the 2000 financial year.





Pharmaceutical manufacturing is characterised by high barriers to entry,
including:





| |  |  | the level of initial capital expenditure required to set up a manufacturing facility;
| | - |  | -------------------------------------------------------------------------------------




| |  |  | the presence of established multinational companies with significant market strength;
| | - |  | -------------------------------------------------------------------------------------




| |  |  | the cost of research and development;
| | - |  | -------------------------------------




| |  |  | the long patent life of products;
| | - |  | ---------------------------------




| |  |  | the review period for registration of pharmaceuticals under PBS;
| | - |  | ----------------------------------------------------------------




| |  |  | stringent quality and compliance standards for manufacture of pharmaceuticals; and
| | - |  | ----------------------------------------------------------------------------------




| |  |  | the extent and cost of Commonwealth Government regulation covering quality and community protection.
| | - |  | ----------------------------------------------------------------------------------------------------




The Commonwealth Government recognised that its position as the sole buyer of pharmaceutical products under the PBS reduces returns to
manufacturers. This, in turn, has an adverse impact on the level of pharmaceutical activity undertaken in Australia and the growth and development of the pharmaceutical industry. To foster increased activity and investment in Australia, and to
counter the low prices manufacturers receive for pharmaceuticals under the PBS, the Commonwealth Government pays higher prices on nominated products supplied by participating companies. In return, recipients are required to undertake certain
activities in Australia, including manufacturing and research and development.





This funding began with the Factor
(F) Scheme, which operated from April 1987 to 30 June 1999 and delivered a total of A$963 million in Government funding. Mayne (through the arrangements previously in place with Faulding) was a major beneficiary of this scheme. In April 1997 the
Commonwealth Government announced the introduction of the Pharmaceutical Industry Investment Program (PIIP). The PIIP commenced on 1 July 1999 and will conclude on 30 June 2004, with the need for further price compensation arrangements
being examined in 2003. The Commonwealth Government has allocated funding of A$300 million to the scheme, to cover payments to participating companies and administration costs. As a participant in the PIIP program, Mayne may receive up to A$40
million over the five year period. On 4 August 2002, the Commonwealth Government announced that the Productivity Commission




22




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##### Table of Contents

would review the PIIP to determine whether it is meeting its objectives and whether any further Government intervention in the industry is
justified when the PIIP expires.





b) Consumer Health Products





The Consumer Health products market is very broad and could include any non-prescription product that is sold to an individual that enhances his or her health. The relevant
segments of the market for Mayne are principally the nutraceutical and dermaceuticals markets.





The nutraceuticals
market comprises dietary supplements in the form of herbal, mineral, vitamin and other health supplements. In Australia, nutraceuticals are sold as over-the-counter products. Nutraceuticals may be either registered or listed in the Australian
Register of Therapeutic Goods depending on their composition and intended use. Listed medicines are considered to be of lower risk than registered medicines, often containing well-known ingredients, usually with a long history of use.





Nutraceuticals are sold through a number of retail outlets. Pharmacies, supermarkets and health food stores make up the
majority of retail sales, with the remainder represented by mail order and internet distribution. Traditionally, health food stores dominated the retail market for nutraceuticals.





The nutraceuticals market has exhibited strong growth, both internationally and domestically. It is estimated that the percentage of the population using herbal products in
the US increased from less than 5% in 1991 to almost 40% in 1998. In 1999, the world market for vitamins and dietary supplements was estimated at approximately A$50 billion. There is a trend for the increased involvement of large multinational
companies in the nutraceuticals market. The Australian nutraceuticals market is estimated to be worth approximately A$1 billion in annual turnover. Australian demand for nutraceuticals has been positively influenced by the maturing demographic
profile of the population, a trend to self-administration of preventative therapies, and the substitution of natural remedies for pharmaceutical medicines.





The dermaceuticals market is diverse and, for Mayne, comprises suncare, personal wash and skincare products. These products are sold primarily to supermarkets and pharmacies. This market, particularly
suncare, has experienced strong growth in recent years as consumers have become increasingly conscious of the detrimental impacts of the sun.





iv) Mayne Pharmaceuticals





Maynes Pharmaceuticals business develops and manufactures
injectable and oral pharmaceutical products, which are sold in more than 50 countries, as well as a range of consumer products.





As a result of the initiatives described below, revenue growth of the Pharmaceuticals business has been strong in financial year 2002. Revenue has increased by 21% and EBITA margins were maintained at greater than 20%.







23




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##### Table of Contents




a) Pharmaceutical Products





1. Injectable Pharmaceuticals





The Injectable Pharmaceuticals business develops, manufactures and markets generic injectable products. Since 1993, the Injectable Pharmaceuticals business has been transformed from a largely Australian focused operation to an
international pharmaceutical company. The division currently markets its injectable products in most regions throughout the world, including Australia, Europe, the Middle East, North America and South America. Mayne has research, development and
manufacturing facilities in Mulgrave, Victoria, and Aguadilla, Puerto Rico. The development and manufacturing facility in Puerto Rico has recently widened its focus from the US market to encompass markets worldwide and to provide greater support to
the primary facility in Mulgrave.





The Injectable Pharmaceuticals business focuses on the oncology (anti-cancer),
antibiotic and analgesic sectors. Mayne has the broadest range of generic oncology products in the United Kingdom, Portugal, Canada and Australia, with market shares estimated between 60-100% for Carboplatin, Panidronate, Flourouracil and Paclitaxel
in each of these markets. Geographic expansion is an important source of growth for the Injectable Pharmaceuticals business. Registering existing products in new markets provides a low cost entry to new markets and increases the returns on initial
development costs.





In the 2002 financial year, Mayne obtained 73 registrations for existing generic injectable
products to be marketed into new regions. The new registrations were spread through all markets, with 8 new registrations in the Americas, 39 in the combined European and Middle Eastern area, and 26 in the Asia Pacific region. A key area of focus
has been the transfer of the regulatory expertise gained in the Australian market to new markets.





Mayne also
launched five injectable products under the DBL brand in 2002, which are licensed from a partner. An increasing number of products are being developed at the Puerto Rico facility, where improvements have resulted in increased production volumes and
efficiencies.





Maynes product pipeline both in terms of the number and value of the products in development
remains strong and has continued to grow in the first half of calendar 2002. In the next 12 month period, it is expected that Mayne will receive 11 new approvals from products already submitted to regulatory authorities. The local brand market value
of these new products is around US$686 million.








2.
Branded and Oral Pharmaceuticals




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Mayne currently produces a number of oral based drugs which have proprietary
features, mainly related to modified release technology. Some of these products are marketed by third parties overseas and provide a consistent, strong margin income stream.





In its development of oral pharmaceutical products, Mayne does not seek to develop new chemical compounds but, rather, to utilise its drug delivery capabilities to develop
innovative products with improved formulations, new dosage forms, or simpler dosing schedules with fewer side effects. This business develops and markets branded products in therapeutic niche areas, including:





| |  |  | Kapanol®*, a
patented sustained-release morphine product; and
| | - |  | -------------------------------------------------------------




| |  |  | Eryc®and
Doryx®, modified-release antibiotics.
| | - |  | ----------------------------------------------




In addition to development of its own branded products, Mayne has also sought to expand its product portfolio through strategic alliances
and the acquisition of new products.








3. Ethical Category
Development





The Pharmaceuticals business procures and markets a range of generic pharmaceuticals to pharmacy brand members under the
brandnames Terry White Chemists ® , Chemmart ® and Healthsense ® and independent pharmacies under the brand name GenRx ® . Mayne intends to devote substantial resources to the development of its generic pharmaceuticals business in the
Australian market and expects to be able to achieve significant market share in the generics market in Australia within a five-year timeframe. The growth in sales is expected to result from:





| |  |  | significant growth in the overall Australian generic pharmaceuticals market;
| | - |  | ----------------------------------------------------------------------------




| |  |  | an increase in the range of Mayne generic pharmaceutical products; and
| | - |  | ----------------------------------------------------------------------




| |  |  | an increased and more focused marketing effort by Mayne.
| | - |  | --------------------------------------------------------




In 2002, Mayne sold its share in Axiom Healthcare Services, a company that provides automated pharmaceutical distribution units within hospitals, acquired as part of
Faulding, to its joint venture partner, Cardinal Health.





b) Consumer Health Products





Mayne is engaged in the development, manufacture, sales and marketing of consumer health products under a number of brand names. This
business is focused on:





| |  |  | nutraceuticals, which includes vitamin, mineral and other health supplements (53% of 2002 sales);
| | - |  | -------------------------------------------------------------------------------------------------




---

*The brand Kapanol is owned by GSK




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| |  |  | dermaceuticals, which include skin care and sun protection products (29% of 2002 sales); and
| | - |  | --------------------------------------------------------------------------------------------




| |  |  | other over-the-counter pharmaceuticals (18% of 2002 sales).
| | - |  | -----------------------------------------------------------




Mayne manufactures most of its consumer products and has agreements with external parties to contract manufacture the remainder. Manufacturing facilities are located at
Salisbury, South Australia (liquids and creams), Virginia, Queensland (tablets) and Shepparton, Victoria (soaps). Mayne also undertakes contract manufacturing for the therapeutic and related industries where capacity allows. Mayne moved its
nutraceuticals tablet manufacture from Salisbury to Virginia during 2002.








1. Nutraceuticals





Mayne owns the following nutraceuticals brands:





Bio-Organics TM





Natural Nutrition TM





Natures Own TM





Natural Alternative TM





Cenovis ®





Golden Glow ®





Vitelle ®





Nutriplan TM





Mayne is a
leading participant in the growing nutraceuticals sector in Australia. The Cenovis ® brand is the
market leader in supermarkets despite the recent entry of new competitors. The Natures Own ® brand is
a leading pharmacy and health food store nutraceutical brand, while the Golden Glow ® brand dominates
the direct marketing sector. As a result, Maynes portfolio of nutraceutical brands includes leading brands in all major sales channels  grocery, pharmacy, health food stores and direct marketing.








2. Dermaceuticals





Dermaceuticals include products for sun protection, personal wash and skincare. Mayne owns the following dermaceuticals brands:





Banta ®




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Country Life ®





Essences ®





Natural Selections ®





Pental ®





Sea & Ski ®





Solyptol ®





Mayne is a leading Australian manufacturer of sunscreen products and a significant
supplier to the pharmacy market. Suncare products include aftersun sticks/balms, sunscreen and tanners. The Banta ® suncare brand, which Mayne owns, was introduced in September 2000. Mayne also owns the Sea & Ski ® suncare brand worldwide.





Mayne is also a major manufacturer and marketer of personal
wash products, including soap bars, liquid soap, shower gels and bath additives. The soap bars market comprises more than 50% of supermarket sales of personal wash products. Personal wash products are also sold in pharmacies and convenience stores.
Mayne manufactures body wash products at a manufacturing facility in Shepparton, Victoria.








3. Over-the-Counter Pharmaceuticals





Mayne owns or in-licenses the
following over-the-counter pharmaceutical brands:





Betadine ® *





Faulding ®





Ford Senna ®





v) Health Services Industry Overview





a) Diagnostic Services





Diagnostic Services comprises
pathology and diagnostic imaging.





Pathology is a specialty of medicine that involves the testing of blood, urine
and body tissues to aid in the diagnosis and treatment of disease states. In Australia the pathology market covers both public and private community patients. The public sector is mainly restricted to public hospitals. The private





---

*Betadine ® is a registered trade mark under licence from Mundipharma BV.




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community patients are serviced by private pathology practices, which over the past ten years have
become larger and fewer as a result of mergers and acquisitions. The owners of these large practices, of which Mayne is one, are mainly public and private corporations that have successfully merged these smaller practices into larger pathology
networks. The provision of pathology services through these networks is by specialist pathologists, scientists and a well-organised logistics division of collection and courier services.





Diagnostic imaging is a branch of medicine which assists in diagnosis and some treatments using a range of high technology imaging models including:





| |  |  | diagnostic radiology - general x-rays, fluoroscopy (bariums), DEXA (bone density), mammography, OPG (dentistry);
| | - |  | ----------------------------------------------------------------------------------------------------------------




| |  |  | ultrasound;
| | - |  | -----------




| |  |  | CT scanning;
| | - |  | ------------




| |  |  | nuclear medicine; and
| | - |  | ---------------------




| |  |  | magnetic resonance imaging (MRI).
| | - |  | ---------------------------------




Diagnostic imaging is principally undertaken by radiologists, who are medical specialists of over ten years training and are Fellows of the Royal Australasian College of Radiologists. Nuclear medicine
is undertaken by nuclear medicine physicians. Some other medical specialists also undertake some diagnostic imaging procedures, such as use of ultrasound by obstetricians and use of angiography by cardiologists. The private diagnostic imaging market
in Australia had a turnover of more than A$1.5 billion in 2001 - 2002, which is largely funded by Medicare benefits paid by the Federal Government. Diagnostic imaging also has a significant component of direct patient billing, unlike pathology,
which is largely bulk-billed to Medicare. It is estimated that there was at least a further A$500 million in diagnostic imaging services in public hospitals during 2001 - 2002 funded through State Government health budgets.





Mayne believes that diagnostics is an attractive market for a number of reasons. First, revenues come from the government-funded Medicare
system, and are not dependent upon private health insurance for funding. Secondly, through an industry funding agreement with the Federal Government, industry growth is effectively guaranteed to be at least 5% per annum over the coming year. The MRI
funding agreement is currently under negotiation and there is a possibility of MRI funding being included in the industry funding agreement. Thirdly, the operating model for pathology businesses means large efficient operators can enjoy economies of
scale through further acquisition or consolidation.





Further growth in diagnostic services is expected,
particularly in imaging, through acquisition and organic growth, and as the network grows, opportunities provided by economies of scale and infrastructure sharing would also be expected to be available. Demand for services continues to be stimulated
by the




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movement away from invasive exploratory surgery towards the use of modalities such as MRI and CT
scanning for certain diagnoses.





b) Pharmacy System





In Australia, prescription (ethical) pharmaceutical products are principally dispensed via the prescription of a physician through a pharmacy or administered in hospitals.
The balance of the pharmaceutical market is made up of over-the-counter products that do not require the prescription of a physician. Some over-the-counter products are scheduled, requiring pharmacists to oversee the sale to the consumer. Other
over-the-counter consumer health care products are sold on an unrestricted basis through pharmacies, supermarkets and other retail outlets.





The PBS directly subsidises the cost of pharmaceuticals prescribed by physicians and dispensed by independent private sector pharmacists. Approximately 75% of all prescriptions are Government
subsidised under the PBS. The remaining 25% of prescriptions are those that cost less than the patient co-payment or private prescriptions.





General patients pay the cost of dispensed pharmaceuticals up to a maximum of the general patient co-payment, currently A$22.40 per item (proposed to increase, in the May 2002 budget, to A$28.60).
Where the dispensed price of a drug is above the general patient co-payment, the patient pays A$22.40 and the Commonwealth Government pays the balance up to the PBS listed price. Concessional patients (people who receive certain pensions, benefits
or health care concession cards, or who meet certain other criteria) pay only A$3.20 per item (proposed to increase, in the May 2002 budget, to A$4.60) with the Commonwealth Government paying the balance up to the PBS listed price. The price paid
for a prescription product represents the sum of:





the manufacturers price, negotiated between the Government and manufacturer;





a margin to cover the wholesale cost (currently 10%, but the Government has announced that the margin is under review);





a mark-up by the pharmacist (10% for PBS products up to A$180); and





a prescribed pharmacists professional fee (payable per script).





The majority of expenditure on the PBS is directed towards those least able to afford the cost of pharmaceuticals. Government expenditure on concessional benefits prescriptions represented around 80% of the total Government cost of
PBS prescriptions.





PBS payments are estimated at A$5.3 billion for the Commonwealth 2002 budget, an increase of
12.3%. The Commonwealth introduced a number of measures in its 2002/2003 budget, including increasing the co-payment, as noted above, to reduce the growth rate. Projected future PBS expenditure growth is expected to be around 7-8% per annum after
the impact of these measures.




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Specialist wholesalers undertake the distribution of pharmaceutical products to
pharmacies and hospitals in Australia. The Australian health care product wholesale market is highly concentrated with three primary wholesalers: Mayne (previously Faulding), Australian Pharmaceutical Industries Limited (API) and
Sigma Company Limited (Sigma). The market is highly competitive. Competition is based on the strength of the wholesalers distribution network, pricing and product mix and the range of value-added services provided to
pharmacists. Profitability for the three primary wholesalers is dependent on an ability to realise economies of scale and cost efficiencies, and servicing skills in attending to the needs of pharmacist customers.





The consumer price of most prescription pharmaceuticals is regulated. The manufacturers price is determined by negotiation between
the Commonwealth Government and pharmaceutical manufacturers through the PBS. The wholesale price for PBS prescription pharmaceuticals paid by the government to pharmacy is the sum of the agreed manufacturers price plus a 10% wholesale margin.
As noted above, the Commonwealth Government has announced its decision to review the current 10% margin, the outcome of which is not expected until later in 2002.





Australian wholesale sales of pharmaceutical products to pharmacies are estimated to be A$4.3 billion per annum. It is estimated that additional sales of approximately
A$600 million per annum bypass the wholesalers and are distributed directly by manufacturers to pharmacies.





There
are currently approximately 5,000 retail pharmacies operating in Australia, of which approximately 2,700 are members of retail pharmacy banner groups. Membership of a retail banner group provides individual pharmacies with access to an established
retail brand with the associated consumer awareness, greater buying power and a range of value-added services, extending from inventory management services to group marketing and promotional activities. In return for these services, banner group
member pharmacies pay membership fees. Most of the national banner groups are owned by Mayne, API or Sigma. However, banner group members remain free to purchase supplies from any wholesaler, and purchasing power ultimately rests with the
pharmacists.





Pharmacies in Australia are regulated by a range of Commonwealth and State-based legislation,
including the State and Territory Pharmacy Acts; Drugs, Poisons and Controlled Substances legislation; and the National Health Act. The State and Territory Pharmacy Acts generally prohibit the ownership of, or any pecuniary interest in, pharmacies
by any person other than:





a sole trading pharmacist;





pharmacists in partnership with other pharmacists to the extent permitted by legislation; and





family based companies controlled by a pharmacist.





The State Pharmacy Acts also impose limits on the number of
pharmacies that a pharmacist or a pharmacist-controlled body corporate can own.




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The Third Pharmacy Guild-Government Agreement was announced in May 2000. The
agreement provided for A$5.2 billion in prescription dispensing remuneration to pharmacists and A$416 million for other payments, and is to operate between 1 July 2000 and 30 June 2005. It also eased some restrictions regarding the geographic
location and separation of pharmacies and gave a significant boost to rural pharmacy.





vi)
Mayne Health Services





a) Diagnostics





Mayne provides both pathology and diagnostic imaging services with a presence in Victoria, New South Wales, Queensland, the Northern
Territory, Western Australia and Tasmania.





Maynes integrated pathology network is Australias second
largest. It comprises Dorevitch Pathology in Victoria, Laverty Pathology in New South Wales and the ACT, QML in Queensland and the Northern Territory, and Western Diagnostic Pathology in Western Australia and the Northern Territory. Maynes
intention to acquire QML was announced on 26 June 2002 and the acquisition was completed on 30 September 2002.





The network brings together more than 4,000 of Australias leading pathologist, scientists, technical and collection staff, couriers and support staff in more than 50 laboratories and 450 collection centres. This gives doctors
and patients access to some of Australias best pathologists, and is underpinned by high levels of service to provide improved outcomes.





Operating as a national pathology network allows Mayne to improve quality by drawing on the expertise of our staff across the network, and gain efficiency benefits arising from centralised purchasing
of equipment and reagents.





Total pathology episodes increased by 3.7% in financial year 2002 to 5.11 million. In
this period, strong growth was experienced in Victoria and Western Australia, with New South Wales experiencing a difficult period as it recovers from past service issues. Following the opening of a new laboratory in New South Wales and the
appointment of a medical director and other key management in that State, sales strategies are being put in place to expand the business in that State.





The increase in total pathology episodes combined with new laboratories in Victoria and New South Wales led to productivity improvements as measured by episodes per work hour of 1.15 in the first half
of calendar year 2002. This is translating into improved EBITA margins and returns on capital employed.





Maynes diagnostic imaging is believed to be Australias third largest diagnostic imaging network, operating in public hospitals, private hospitals and stand-alone imaging centres across most Australian states.





It provides the full range of services performed by some of the countrys foremost imaging




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specialists and technical and clerical staff. Its broad network enables imaging specialists to share
expertise across the group. The group also supports ongoing research to drive advances in diagnostic imaging, primarily in the areas of interventional radiology, MRI and neurology.





b) Pharmacy





The Pharmacy business
consists of two related businesses:





1.  Wholesale distribution services





The Pharmacy business distributes pharmaceuticals and related products to approximately 2,550 pharmacies (of which 574 are members of Maynes retail pharmacy
banner brands). Approximately 20,000 products, including prescription pharmaceuticals and a wide range of over-the-counter medication and health care products, are distributed on an on-demand basis from 17 warehouses throughout Australia. Most
capital city distribution centres offer up to two deliveries per day (using both Mayne-owned vehicles and owner-drivers), and delivery usually occurs within four hours of the customer placing an order. On-line ordering systems link customers
directly to Maynes distribution centres.





Distribution Services are also provided to some Australian
hospitals by acting as their prime vendor. This involves supplying pharmaceutical products and medical consumables, and improving the management of the hospitals internal supply function. Similarly, distribution services are provided to
dentists nationally with the provision of dental equipment and consumables. In addition, Health Services has the exclusive right to distribute products for Glaxo Wellcome Australia Ltd for their direct distribution to pharmacy in the Australian
market.





During the 2002 financial year, Mayne was the largest distributor of pharmaceutical products in
Australia, with an estimated market share of approximately 36%.





The Logistics sale will not affect Maynes
ability to continue its wholesale distribution business.





2.  Retail Services (retail branding and management services to
pharmacies)





The Pharmacy business assists pharmacies to offer better professional and retail services by
providing retail brands, private label products, back office support, technology and distribution services. Mayne currently has five retail pharmacy groups, with memberships as at 30 June 2002 as follows:





Mayne Pharmacy Banner GroupBrand name

MembersChem mart®

236




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Healthsense®

93Terry White Chemists®

101The Medicine Shoppe®*

9Synergy(unbranded)

135





Each retail pharmacy brand is targeted at a different market
segment. In addition, Synergy Operating Systems  provides unbranded business support services to 135
pharmacies.





Mayne also provides financial assistance to pharmacists seeking to acquire or expand pharmacies.
Through the pharmacy finance guarantee scheme, Mayne provides guarantees of pharmacists borrowings from a number of banks. To manage its exposure under these guarantees, Mayne has entered into arrangements that have the effect of limiting the
banks recourse to Mayne under the guarantees. The majority of guaranteed loans are now subject to a 10% recourse limit. Pursuant to this limit, Maynes total guarantee liability is limited to 10% of the total guarantees outstanding in
relation to the specified guaranteed loans. A small number of guaranteed loans (with total value of only A$6 million) are subject to a 25% recourse limit, and Mayne has a 100% exposure in relation to guaranteed loans totalling A$3 million. In total,
there were 1,516 individual loan facilities as at 30 June 2002. The table below summarises the guarantees by level of recourse as at 30 June 2002:





Mayne Pharmacy Guarantees (A$million)Recourse

Limit

Utilisation

Contingent Liability10%

875

772

7725%

100

6

2100%

6

3

3Total

981

781

82





Maynes total guarantee exposure (disclosed as a contingent
liability in its financial statements) is approximately A$82 million. This represents the maximum amount that Mayne could lose under the guarantees currently provided.





Retail Services provides point-of-sale systems, dispensary management systems, business planning tools and accounting software under the Endeavour ® and Minfos ® brands and connectivity via Australias largest pharmacy extranet, healthlinks.net ® . healthlinks.net ® is a web-based
portal providing a range of electronic information and web services to pharmacies, physicians, suppliers and manufacturers.





These pharmacy information services enhance Maynes position as the conduit for products and information between manufacturers and pharmacists.





c) Medical Centres




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Mayne operates 53 medical centres across Australia, with 19 in New South Wales,
11 in Victoria, 12 in Queensland and 11 in Western Australia.





These medical centres consist of stand-alone
medical practices and corporate health centres and are serviced by General Practitioners (GPs). Although Mayne has operated medical centres since 1995 it acquired a significant number of practices in 2001 and 2002. The basis for
the acquisition of a medical practice is a function of its strategic location in terms of Maynes other health facilities, and its quality of earnings, custom and price. Typically, the GPs involved in the practice continue to run the clinical
aspects of the business and enter a revenue sharing arrangement with Mayne.





Mayne seeks to enhance its network of
medical centres, in part by providing GPs with access to a range of ancillary services, such as pathology, diagnostic imaging, pharmacy, dentistry and physiotherapy.





Mayne upholds the clinical independence of GPs working within its medical centres. Maynes approach involves leveraging its management expertise and resources to
ensure the efficient management of medical centres to support GPs in their goal of providing quality medical care.





vii) Hospitals Industry Overview





Private hospitals are run either by for-profit
operators or by religious or charitable organisations on a not-for-profit basis. In public hospitals, patients can receive free shared-ward accommodation and treatment that is subject to availability, and the doctors are assigned by the hospital. As
an alternative, patients can choose to go to a private hospital or elect to have doctor of choice or private-ward accommodation in a public hospital. In either alternative, patients are charged for the services rendered and are
responsible for paying their own bills. While Medicare pays or reimburses patients for a portion of certain fees incurred for private medical care (most doctors fees, prescriptions, pathology, etc.), it does not cover hospital charges. Private
health insurance is available to cover charges for private care in both public and private hospitals, and a portion of the gap between charges for private medical care and the amount paid or reimbursed under Medicare.





Australian private health insurance funds experienced a decline in membership during the 1990s, principally because of an increase in
premium rates and the existence of the Australian public health care system as a free alternative. In addition, the trend has been for younger, healthier patients to disproportionately discontinue their private health insurance membership, which has
had an unfavourable impact on the private health funds claims experience (dollars of claims paid out as a percentage of premiums collected). Collectively, these two factors have negatively impacted the financial performance of the private
health insurers, which has constrained their ability to increase the rate of funding provided to private hospital operators. In addition, a growing number of private health insurers have taken a more risk averse approach to compensating private
hospital operators through the implementation of a regime of case payments known as episodic funding. Under episodic funding, a private hospital operator is paid a





---

|* |  | The Medicine Shoppe®is a registered trademark of Medicine Shoppe International used under license.
|- |  | --------------------------------------------------------------------------------------------------



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predetermined amount for a complete episode of hospital care, irrespective of the length of stay of a
patient within the hospital. This compares with a per diem environment which compensates hospitals for each day a patient occupies a bed. Episodic funding results in the private hospital operator incurring the risk or benefit associated with an
increased or decreased length of stay over which the episodic payment was derived.





In December 1998, private
health insurance membership had dropped to an historic low of 30.1% of the population compared with up to 50% in the 1980s. The current Federal Government recognised that a prosperous private sector can complement and, in some cases, ease the
pressure on the public health system and introduced a series of initiatives in an attempt to increase private health insurance membership. Since January 1999, the Federal Government has introduced a rebate on health fund premiums, effectively
reducing the cost by 30%, increased the Medicare levy by 1% for individuals with annual incomes of greater than A$50,000 who do not have private health insurance and introduced a new approach to health insurance, Lifetime Health Cover, as of 1 July
2000. Lifetime Health Cover is designed to encourage people to join a health fund early in life and maintain their membership. People who take out health insurance by the time they are aged 30 and maintain their membership will pay lower premiums
throughout their lifetime, relative to people who delay joining. As a result, health fund membership increased to 43% of the Australian population at 1 July 2000 and had further increased to 44.9% of the population as at June 2001, stabilising at
around these levels in 2002. Coupled with improving profitability within the health insurance industry, an environment conducive to a more co-operative and equitable partnership between private health funds and private hospital operators appears to
be emerging. Rather than solely focusing on price, discussions with the health funds are widening to include issues such as simplified billings and standardised contracts, both of which have the potential to benefit both the private health funds and
hospital operators.





Following a period of attractive returns in the early 1990s, many private hospital operators
commissioned additional bed capacity by developing new, and expanding existing, facilities. The majority of these additional beds had been planned and construction commenced in an environment of higher industry profitability than has been
experienced in recent years. This increase in bed supply further accentuated the impact that the fall in private health fund membership and corresponding lower patient demand had on occupancy levels. As a result, there has been a sharp decline in
the number of new beds planned or under construction.





viii) Mayne Hospitals





a)  Australian Hospitals





Maynes hospital portfolio in Australia consists of 58 hospitals of which 19 are located in New South Wales, 18 are in Victoria, 14 are in Queensland, four are in
Western Australia, two in Tasmania and one in the Australian Capital Territory. Four of these hospitals are operated by Mayne under management contracts with State Governments for the provision of public hospital services.




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Maynes hospitals offer all medical, surgical and other services commonly
available in private acute care hospitals. Such services range from operating and recovery rooms, diagnostic imaging facilities, intensive care and coronary care facilities, to pharmacy services. In 20012002 Mayne admitted more than 560,000
patients into these facilities.





Medical, surgical and psychiatric hospital operations are subject to certain
seasonal fluctuations. These primarily include decreases in patient occupancies during holidays and summer vacation periods and increases in the winter months.





The increase in the level of private health insurance participation over 2000 and 2001 had an initial positive impact on the demand for Mayne services with hospital admissions across like-for-like
facilities increasing by more than 10% in 2001 and occupancy levels averaging 73%. However, the growth in admissions significantly slowed in early 2002 across the industry and more specifically fell for Maynes hospitals as doctors referred
less of their case loads to Mayne demonstrating a level of dissatisfaction by the doctors with the manner in which certain centralisation and management initiatives were implemented over 2000 and 2001. Occupancy levels in Mayne hospitals in the
first half of calendar 2002 fell to 73.7% from 76.1% in the second half of calendar year 2001. While net revenue per admission increased on the prior period, the impact of lower occupancy levels against a large fixed cost base and increasing
variable cost rates led to a weaker financial performance for the Hospitals business in the first half of calendar year 2002.





Strategies have been put in place commencing in April 2002 to address these issues. These strategies are as follows:





| |  | the appointment as Group General Manager Hospitals of a hospitals manager with more than 25 years experience;
|- |  | -------------------------------------------------------------------------------------------------------------




| |  | an increase in the number of local hospital directors by 10 to 38 and re-establishment of local authority limits and accountability;
|- |  | ------------------------------------------------------------------------------------------------------------------------------------




| |  | the redeployment and appointment of business analysts and business development managers at the local site level;
|- |  | ----------------------------------------------------------------------------------------------------------------




| |  | comprehensive consultation with medical professionals and relevant professional groups;
|- |  | ---------------------------------------------------------------------------------------




| |  | the establishment of a new executive management team for hospitals, with five new appointments to the eight member team. Each new appointee has on average more
than 20 years hospital industry experience, and includes individuals recruited from both within and outside the business;
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | the introduction of coaching teams, consisting of experienced operators, to assist managers with local accountabilities and labour management;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------




| |  | the development of a new monthly key performance indicator (KPI) pack, in addition to the daily
|- |  | -------------------------------------------------------------------------------------------------



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labour KPI reports, ensuring accountability at the local level for a wide range
of management tasks versus a previous focus on accountability at the EBIT line;





| |  | consolidation of functional areas such as sales and marketing within hospitals, as resources have been redeployed to the local level;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------




| |  | a 50% reduction in hospitals corporate staff as a result of redeployment and consolidation of functional areas;
|- |  | ----------------------------------------------------------------------------------------------------------------




| |  | an agreement with Australias largest nursing agency to ensure access to casual nursing labour at reasonable rates;
|- |  | -------------------------------------------------------------------------------------------------------------------




| |  | an ongoing focus on nurse career development and training;
|- |  | ----------------------------------------------------------




| |  | commencement of discussions with suppliers to improve funding arrangements and administrative processes;
|- |  | --------------------------------------------------------------------------------------------------------




| |  | a focus on supplies ordering and management at site level, in consultation with doctors and clinical staff; and
|- |  | ---------------------------------------------------------------------------------------------------------------




| |  | ongoing participation in industry discussions regarding the current medical insurance cost increases impacting the industry.
|- |  | ----------------------------------------------------------------------------------------------------------------------------




These strategies are expected to turn around the performance of the Hospitals Business and are expected to result in Mayne
regaining market share of admissions to its hospitals over the medium term.





b)  Asian Hospitals





Mayne continues to review various opportunities to expand
its health care operations in Asia. There has been an expansion of the number of people who make up the middle class in many Asian countries where the current level of health care is not considered to be as high as in Australia. Although most of
these countries lack any significant private health insurance system, if and when such systems develop, Mayne believes that the size of the potential private health care markets in these countries could be significant.





In Indonesia, Mayne operates three hospitals: a 280 bed private hospital in Jakarta which commenced operation in 1996 - 1997; a 159 bed
hospital in Jakarta opened late 1998; and a 158 bed hospital in Surabaya opened in early 1998.





In Fiji, Mayne has
a management contract to operate a 45-bed facility in Suva that was commissioned in February 2001. In addition, Mayne and the Commonwealth Bank of Australia each hold a 20% equity interest in the facility with two local investors.




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II.    LOGISTICS SERVICES





The Companys logistics services include the provision of contract logistics and time sensitive express, and cash logistics. Contract
logistics services are provided in Australia and South-East Asia, time sensitive express in Australia and Canada and cash logistics in Australia. In November 2002, the Company agreed to sell the logistics business to Linfox, DHL, and Toll for a
combined enterprise (ungeared) value of A$456 million.





i)  Business Strategies





Loomis is focused on industry specialisation in the contract business and the Armaguard business and broad
network coverage in the time-critical business. Key strategies include:





| |  | Maintain and improve strong market position
|- |  | -------------------------------------------

| |  |  | The business intends to expand its current strong customer relationships by seeking to deliver an industry-leading breadth of products and services across
current customers who may be availing themselves of only limited services today. Through continued focus on service quality, value-adding and price competitiveness, Loomis will seek to increase its share of the clients volume and position
itself as the preferred or sole provider.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Focus on value-added product solutions and services
|- |  | ---------------------------------------------------




| |  |  | Loomis focus is innovation and value-added services. As industry demands on its customers make change necessary, Loomis will seek to pursue new solutions
for the benefit of the customer. Competitive forces dictate the need for smarter or different distribution channels and Loomis will add value by changing its service offerings, managing inventory differently, accessing technologies, or training its
employees to perform new functions, thereby removing risk and increasing reliability for its customers.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Vigilant approach towards employee safety
|- |  | -----------------------------------------




| |  |  | Loomis has a strong focus on continuing to improve the safety of employees, contractors and visitors to sites. Management is accountable for overall safety
performance and Loomis has in place a continuous improvement program to seek to eliminate or reduce the risk of injury.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Ensure cost effective solutions
|- |  | -------------------------------




| |  |  | By continuously seeking new and better ways of delivering supply chain solutions for its customers, Loomis will seek to provide its customers with lowest total
cost services. Loomis is implementing a range of cost reduction programs across the business to improve efficiency and ensure optimum use of capital. Particular focus is being placed on the cost of servicing smaller and infrequent transactional
customer in the Time-Sensitive Business, using technologies to effectively manage customer requirements.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  | Achieving excellence in customer service standards
|- |  | --------------------------------------------------




| |  |  | Loomis will continue to develop its business culture around exceeding customer expectations through continuous improvement in operational standards, express
pick-up simplicity, call centre effectiveness, visibility of products, reporting efficiencies, accuracy and performance and solution design and resolution.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Leveraging individual business strengths throughout the Loomis group
|- |  | --------------------------------------------------------------------




| |  |  | Loomis has specific centres of excellence in product, service, innovation, technology and people across its three regions and three business
streams. Loomis will seek to leverage each centre of excellence across the group in a broader sense. This will include, but not be limited to, information technology systems, express, courier and contract logistics products, management
and performance reporting tools, materials handling technologies and people.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




ii)  Contract Logistics





Contract logistics refers to a business, which provides
and manages, on a contract basis a customers requirements for order processing, raw materials supply, inventory management, warehousing, product distribution and/or fleet management. Logistics contracts can range from the relatively simple
supply of maintained trucks to the total management of the supply chain, from raw materials to inventory to product distribution. In the latter case, the types of transport and warehouse facilities utilised are typically determined by the logistics
customer. The Company seeks to provide integrated or full supply chain contract logistics services to its customers.





The Company believes that contract logistics services offer many benefits for its customers. One benefit is the ability of customers to transfer the costs of holding assets such as warehouses, trucks and information technology
off-balance sheet. In addition, the multi-user nature of most logistics properties effectively enables the customer to share the cost of these assets with other retailers and manufacturers, which results in greater utilisation and cost savings for
the customer. Customers also benefit from the contract logistics providers specialist knowledge and experience in solving complex distribution, warehousing, inventory control and fleet management problems, as well as its greater buying power
in equipment and fuel, superior computer booking and tracking systems to organise loads and track stock, and its ability to share peak loads from different customers. Finally, outsourcing inventory and distribution services permits customers to
focus on their core business activities.





As a result of high capital costs involved in fleet financing,
warehouses and information technology, the specialist knowledge and experience required and the size necessary to realise economies of scale, Mayne believes contract logistics is an industry with relatively high barriers to entry in which it can add
value, generate higher margins and achieve a strong market share.




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The exact nature of logistics contracts varies significantly depending on the
customers requirements and the types of activities involved. However, most logistics contracts provide for a minimum annual fee and additional fees based on volume or warehouse turnover measured by inventory movement. The minimum annual fee is
generally sufficient to cover warehouse leasing expenses and certain other fixed costs. While this provides some protection against the cyclicality of transport consignments (especially as compared with general freight transport), the key to
profitability in contract logistics is maximising volume turnover. Margins are directly related to the complexity of the contract logistics solution provided, with those requiring greater degrees of information technology and material handling
commanding greater margins. The Companys logistics contracts typically have an initial five-year term with a five-year renewal option in favour of the customer.





iii)  Time-Sensitive Express





The Companys time-sensitive express business in Australia consists of express courier and messenger services.





Mayne is a leader in the provision of express courier services in Australia. Express courier services deliver documents and small packages by 9:30 am on the next day. While
the principal line haul method for long distances is by air, road line haul is also used to reduce costs where distances permit. The Company provides domestic express courier services and also operates an international express courier document
delivery service.





The Companys express courier services operate specialised services in different market
niches, and seek to maintain a competitive advantage through comprehensive branch networks, reliability of service, competitive pricing and product differentiation. Services include late pick-up and early delivery, same day delivery and
international courier services to high volume customers seeking low-cost services and time critical overnight express freight services in rural Australia, principally to financial institutions. It has developed a strong network and regional presence
in Queensland, New South Wales, Victoria and South Australia.





The Companys messenger services provide same
day deliveries within the Australian State capital cities of Sydney, Melbourne, Brisbane, Adelaide and Perth.





Maynes North American operations consist of time-sensitive express freight services in Canada. Time-sensitive express services in Canada include regional overnight, long haul overnight, long haul deferred and security shipments
under various trade names, including Express Airborne, Loomis Courier Services and Security Express.





iv)  Cash Logistics




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The Company occupies a long established position as the market leader in the
provision of cash logistics services in Australia. Operating a fleet of over 500 armoured vehicles from its extensive network of 52 depots, it provides armoured transport, cash processing, ATM servicing and coin rolling/handling services across a
broad spectrum of clients, including retailers and financial institutions.





While the introduction of
electronic funds transfer at point of sale (EFTPOS) and its acceptance by the public has impeded growth in the cash collection market, increases in disposable income, increased penetration of the retail market by major retailers and
longer retail trading hours have all combined to provide a positive impetus to growth in cash collection and processing services. More recently, major retailers have sought to outsource their in-store cash office functions, and Armaguard regards
this opportunity as a source for potential growth.





Significant changes to the cash distribution system by the
Reserve Bank of Australia and major trading banks since 1998 have given rise to increased competition for the provision of bank branch cash delivery and collection services. At the same time, these changes have led to a broadening of servicing
opportunities to banks, particularly in the area of the collection and processing of individual customer deposits on behalf of banks. Increasingly, banks have shown a propensity to divest themselves of in-branch customer transaction processing and
this trend is expected to continue.





The decline of cash payrolls has given rise to a rapid expansion in the use
of ATMs in Australia, and Armaguard has enjoyed considerable success in providing cash replenishment, reconciliation and breakdown response services to banks and other financial institutions offsite, or remote, ATMs. However,
ongoing rationalisation and closures of bank branches are expected to underpin further expansion of offsite ATM networks.





Currently, the vast majority of ATMs are located in bank premises, and the servicing of these machines has historically been supported by bank branch staff. It is envisaged, however, that in the foreseeable future, banks will embrace
the notion that these machines can be effectively serviced by outside providers in conjunction with existing branch cash deliveries and collections.





C.    ORGANISATION STRUCTURE





The Company is organised into a series of
discrete business units supported by shared services functions including information technology, finance, human resources and corporate services. A Group General Manager is responsible for each business unit, the Chief Financial Officer is
responsible for all finance and development activities and a functional Group General Manager is responsible for each shared service function. They all report directly to the Group Managing Director and Chief Executive Officer, who in turn reports
to the Board of Directors.




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The four group business units are Hospitals, Health Services, Pharmaceuticals and
Logistics. Within each business unit separate operating units are headed by a General Manager reporting to the Group General Manager of that business unit.





A list of the Companys subsidiaries can be found in Note 31 to the financials.





D.    DESCRIPTION OF PROPERTY





The Company operates through separate
operating entities in eight markets, including Australia, several countries in Asia and North America. Except for freestanding private hospitals, which are predominantly owned, the Company operates mainly from leasehold sites and is not completely
dependent on any one facility. The Company is of the opinion that its site facilities are suitable and adequate for its existing and anticipated needs. The following details major properties occupied by the Company including use, size, location and
utilisation. There are currently no material properties outside Australia.





Property Use

Area (sqm)

Property Status

Occupancy

StateManufacturing

3,293

Leased

100%

QLDRetail

1,045

Leased

100%

VICRetail

2,543

Leased

100%

QLDRetail

1,150

Leased

100%

NSWAdministration

1,508

Leased

100%

NSWAdministration

751

Leased

100%

QLDAdministration

558

Leased

100%

SAAdministration

4,076

Leased

100%

VICHospital

47,390

Owned

70%-80%

QLDHospital

NA

Owned

90%

VICHospital

13,483

Leased

70%-80%

NSWHospital

36,102

Owned

70%-80%

NSWHospital

34,980

Leased

70%-80%

WAHospital

28,332

Owned

70%-80%

WAParcel Depot

9,500

Leased

100%

NSWParcel Depot

8,000

Leased

100%

VICPathology Laboratory

7,703

Leased

100%

NSWWarehouse

36,244

Leased

100%

NSWWarehouse

27,670

Leased

100%

VICWarehouse

17,477

Leased

100%

WAWarehouse

5,101

Leased

100%

TASWarehouse

16,583

Leased

100%

QLD





Environmental Issues





The Company is not aware of any significant environmental issues associated with or as a consequence of the operation of any of its businesses.




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ITEM 5-
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





The discussion below contains forward-looking statements. The Companys actual results could differ materially from those anticipated by those forward-looking statements due to a variety of factors, including those set forth
under Key Information  Risk Factors and Forward-Looking Statements and elsewhere in this Annual Report.





The Company operates in two different service industries (health care and logistics) and in three different geographical markets (Australia, including the Pacific Region, Europe, Middle East and Africa, and the Americas). In
November 2002, the Company agreed to the sale of the logistics business, which has operations in Australia and Pacific and North America. Australian and Pacific Logistics includes logistics and cash logistics. Health care consists of owning and
operating private hospitals, operating private hospitals under service agreements with various State and Territory Governments in Australia, providing certain health care related services, particularly diagnostic services, and manufacture and
distribution of generic pharmaceuticals and consumer health products. The Company has logistics operations in Australia, Asia/Pacific, and North America markets and health care operations in Australia, Asia/Pacific, Europe, Middle East and Africa,
and the Americas. The pharmaceuticals business, Mayne Pharma, comprises the research, development, manufacture and marketing of generic injectable and oral pharmaceutical products, as well as consumer health products. Mayne Pharma has manufacturing
facilities in Australia and Puerto Rico, and has representations in most regions throughout the world. See the tables set forth in Item 4  Information On The Company - Segment Information for the contributions of each industry and
geographic segment to the Companys consolidated sales revenue and operating profit before interest and tax (EBIT) for the last three fiscal years.





The Companys Financial Statements are prepared in accordance with Australian GAAP, which varies in certain material respects from United States GAAP. See Note 37 to
the Financial Statements for a discussion of the material differences between United States and Australian GAAP. In addition, profit and loss disclosure under Australian GAAP requires a distinction between normal and significant one-off
income and expense items. These distinctions are referred to in the discussion below. Under US GAAP such distinctions are not made.





The Company has amended its segment disclosure in this Annual Report to align with the way operations report within the Company. During the year, the Company acquired FH Faulding & Co Ltd, which has been included under
Health Care Services as Pharmacy Services, and the creation of the segment Pharmaceuticals comprising Pharmaceuticals and Consumer business units. In addition, Medical Centres was added as part of the Health Care Services segment. In respect of
geographic segments, the North American segment was expanded to the Americas, and Europe, Middle East and Africa was created.




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The Company has in recent years disposed of businesses that did not meet its
strategic criteria. In December 2000, the Company disposed of its UK Express business and its Australian Ports business in January 2001. In the 2000-01 financial statements, these businesses generated A$330.4 million of revenue, in 1999-00, A$611.7
million and in 1998-99 A$594.5 million of revenue. In the second half of 1999-00, the Company disposed of its North American cash logistics business. In the 1999-00 financial statements, this business generated A$84.5 million of revenue and in
1998-99 A$119.1 million of revenue. In the first half of 1998-99, the Company sold its Australian road express business which generated revenue of A$38.0 million in 1998-99.





Critical Accounting Policies





The policies discussed below
are considered by management to be critical to an understanding of Maynes financial statements because their application places the most significant demands on managements judgement, with financial reporting results relying on estimation
about the effect of matters that are inherently uncertain. Specific risks for these critical accounting areas are described in the following paragraphs, however primarily relate to the judgement exercised by management when assessing the carrying
value of asses and the appropriateness of recognising provisions. For all of these policies, management cautions that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment. Please note that the primary
reason for the significant increase in the balances discussed below is due to the FH Faulding & Co Ltd acquisition.





Trade
receivables  assessment of carrying value





Trading terms offered for trade receivables are generally 30
days. Management monitors the level and aging of trade receivables and establishes specific provisions for delinquent debtors. In addition, the Company maintains a general provision for doubtful debts based on historical levels of bad debts to
reflect the impact of debts which, whilst not yet identified, may not be collectable. The company exercises its judgement in establishing the general provision. Total trade debtors is A$789.7 million and A$375.9 million as at 30 June 2002 and 2001
respectively. The total provision for doubtful debts as at 30 June 2002 and 2001 is A$30.2 million and A$12.8 million respectively.





Inventories  assessment of carrying value





Inventories are carried at the lower of
cost and net realisable value. Company policy dictates levels of stock turnover which determine when a particular inventory item must be assessed to ensure it is not carried in excess of its net realisable value. When assessing the net realisable
value of inventory, the company takes into consideration factors such as historical inventory turn over rates, product expiry dates and anticipated sales. The carrying value of inventory as at 30 June 2002 and 2001 is A$402.8 million and A$42.7
million respectively.





Non-current assets  assessment of carrying value




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The Company chooses to own the majority of core assets, such as hospital
properties. Buildings and plant and equipment are amortised over their estimated useful lives as determined by the Company. As at 30 June 2002 and 2001, total property, plant, and equipment was A$1,451 million and A$1,178 million respectively.





As a result of acquisitions and the nature of operations undertaken by the Company, the Company has recognised a
number of intangible assets, including brand names and licences and goodwill.





Brand names and licences are not
amortised unless the end of the economic life of the brand name or licence can be foreseen and is limited by technical, commercial or legal factors. As at 30 June 2002, brand names and licenses at cost were A$108.5 million and A$142.0 million
respectively.





Goodwill is systematically amortised over the period, not exceeding 20 years, in which the benefits
are expected to arise. As at 30 June 2002 and 2001, total goodwill was A$ 1,457 million and A$ 396 million respectively.





The carrying value of all non-current assets has been assessed by the Company to ensure that the carrying value is appropriate and that these assets have not become impaired during the period.





Deferred tax assets





Future income tax benefits are not brought to account as deferred tax assets unless realisation of those assets is assured beyond reasonable doubt. Future income tax benefits relating to entities with tax losses are only brought to
account when their realisation is virtually certain. As at 30 June 2002 and 2001, net operating and capital losses carried forward were A$89.1 million and A$21.9 million respectively. The Company has undertaken an assessment of the recoverability of
these assets, taking into consideration anticipated future performance and/or transactions, and considers that the carrying value is appropriate.





Workers compensation provisions





The Company chooses to self-insure for workers
compensation claims liabilities where this is possible under the relevant Australian legislation. The Company establishes provision balances based on assessments of the exposure on a claim by claim basis, as established by the relevant employee at
each operational site. These estimates are then reviewed by the Companys centralised workers compensation department to ensure that they are appropriate. The provision balance recognised in the financial report is that assessed by an
independent actuary based on the records maintained by the Company. Included in other creditors is a liability for self insured workers compensation for the following Australian states:





| |  |  | New South Wales       A$13.852 million (June 2001 A$17.596 million);
| | - |  | --------------------------------------------------------------------

| |  |  | Victoria                       A$6.166 million
(June 2001 A$9.504 million);
| | - |  | ---------------------------------------------------------------------------

| |  |  | Queensland                 A$3.961 million (June 2001 A$3.569 million);
| | - |  | -----------------------------------------------------------------------



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| |  |  | Western Australia       A$0.877 million (June 2001 A$0.989 million);
| | - |  | --------------------------------------------------------------------

| |  |  | South Australia           A$0.03 million (June 2001 A$0.263 million).
| | - |  | ---------------------------------------------------------------------




Overview





The past year has been one in which the Companys future strategic direction has been firmly set. During the past two years of substantial business re-engineering, Maynes disparate businesses were formed into two distinct,
core operating streams of health and logistics. Non-core or non-strategic assets, such as the ports operations and UK express business were divested.





Mayne is now structured to reflect its core operating streams, with operating divisions in:





| |  |  | pharmaceuticals and consumer products manufacturing and marketing;
| | - |  | ------------------------------------------------------------------

| |  |  | health services, encompassing the groups businesses at the front-line of health care provision including pathology, diagnostic imaging, medical centres
and pharmacy distribution and services;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | hospitals; and
| | - |  | --------------

| |  |  | logistics, prior to the sale of this segment of our operations during calender 2002.
| | - |  | ------------------------------------------------------------------------------------




The decision to sell logistics was taken to strategically refocus the business on health  while delivering a strong outcome for shareholders. A thorough process
was undertaken to ensure that Mayne explored all opportunities to optimise value for shareholders. As such, it assessed a de-merger while, concurrently, undergoing a formal process to evaluate expressions of interest in Mayne Logistics from other
parties.





Throughout the period under review, we continued to develop our position in health. Importantly, the
acquisition of Faulding was a key element in forging Maynes position as a leading, broad-ranging Australian health care operator. With a presence now in more than 50 countries, it also gave Mayne a truly international growth platform.





The integration of Faulding has been completed. The pharmacy services and distribution operations have held
market share intact at pre-acquisition levels, with some improvement in margins. A value proposition was recently launched to community pharmacy with initiatives including improved health management services through technology, pharmacy services and
brand support.





The international generic pharmaceuticals manufacturing and marketing operations  retained
as part of the Faulding acquisition  formed a new business unit. This business unit has operations in the following geographic regions: Asia Pacific; Europe, the Middle East and Africa (EMEA); and the Americas. Following




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20 new product approvals for the year, covering all significant geographic locations, there were a
number of successful product launches in the last 12 months  notably, the launch of the oncology drug pamidronate in the United States, leveraging a relationship with US-based pharmaceutical company Gensia Sicor Inc for marketing and
distribution of the drug from April 2002. The brand market value for pamidronate in the US at the time of launch was around US$500 million and Mayne has been able to achieve a significant share of this market. European approval for pamidronate was
also received, with launch scheduled in late 2002.





There was further growth of the oral antibiotic
Doryx ® in the US, in association with our marketing partner Galen, and contract manufacturing of
paclitaxel for the US market  out of the Mulgrave, Victoria manufacturing facility. There is capacity to expand the Mulgrave facility to support future capacity requirements.





A high-potential product development pipeline provides a sound platform for further growth in pharmaceuticals. In the year ahead, we expect to receive around 11
new generic product approvals across major markets, and there are a further number of new products under development for submission for regulatory approval.





With Governments focussing on the need to contain health care costs  including the cost of pharmaceuticals  the market for lower-cost generic products is expected to continue to be
attractive.





Key developments in the consumer products manufacturing and marketing business included the
commissioning of a new facility at Virginia in Queensland during November, the culmination of a 12-month project to construct a state-of-the art tabletting facility for domestic vitamin and mineral supplements manufacturing. An upgrade of the
Shepparton soap manufacturing plant provided extra capacity to accommodate increased volumes from a new contract with Unilever.





Sales growth was supported by the launch of Nutriplan ® brand, a clinically proven
weight loss/control product in Australia, and expansion of the Banta ® sun care range to the UK
pharmacy market. There was also strong growth in the glucosamine product range, high potency supplements used to provide relief from pain associated with osteoarthritis.





Mayne continued to grow its involvement in general practice, increasing the number of medical centres nationally to 53, in which we work with 394 general practitioners.





Our presence in the Queensland pathology market has been boosted by the acquisition of market leader QML.
Queensland is the fastest growing pathology market in Australia in terms of episodes, has positive population trends for future growth and, due to the higher volume of work through more complex tests for conditions such as skin cancer, attracts
above-average episode fees.




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Key achievements in the groups diagnostic imaging operation during the year
included the successful acquisition and integration of Port Macquarie Medical Imaging in NSW and 13 radiology sites in Victoria. Each of these acquisitions included Medicare-funded MRI licences. Funded MRI services also commenced in Orange in
regional NSW, following a successful tender.





In order to achieve a corporate restructure and repositioning of the
magnitude undertaken within Mayne, the pace of change over the past two years has been rapid and far-reaching. In the past year, issues relating to the implementation of the restructure and strategy arose in our hospitals division, leading to some
loss of market share.





As part of the ongoing assessment of its asset portfolio, the company is reviewing the
performance of assets, including hospitals, to determine whether they are capable of meeting the companys profitability hurdle rates.





Notwithstanding, there were a number of significant achievements during the year that will help to shape and strengthen the hospitals business. Following the acquisition of AHC, which was completed in
February 2001, we completed the orderly divestment of four hospitals that had been the subject of an undertaking to the Australian Competition and Consumer Commission (ACCC). During the year, we were also successful in streamlining and
securing greater predictability in the funding arrangements we have in place with the health insurers.





In logistics, a number of
major contracts won in Australia included a five-year agreement with Kellogg and a new contract with Carter Holt Harvey Tissue for a further three years. These key contracts involve putting in place technology and systems that will provide a
step-change in supply management capabilities for these customers.





Internal restructuring and operational
improvements continued in this business  including the consolidation of sites across express and the streamlining of fleet management.





Mayne Logistics maintained its air linehaul ability following the collapse of a major domestic airline, Ansett, although this did result in a substantial change to the existing linehaul cost base for
the express operation.





In Canada, the volume growth was impacted by the September 11 terrorist attacks and the
general economic downturn, however, this business achieved a net increase in clients, improved internal efficiencies primarily through the centralisation and standardisation of support activities, the delivery of improved technology and the rollout
of new products.




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A number of valuable new contracts were negotiated across the developing Asian
operations and, in cash logistics, Armaguard secured contract renewals, notably with Woolworths and a further five-year deal with Australia Post. This business has been effectively restructured following the re-tendering of cash logistics work for
three major Australian banks, which produced a 5-6% shift in market share away from Armaguard.





De-merger/Divestment of Logistics
Business





In May 2002 Mayne announced its decision to de-merge its logistics business. The decision to
de-merge logistics was taken to strategically refocus the business on health  while delivering a strong outcome for shareholders. A thorough process was undertaken to ensure that Mayne explored all opportunities to optimise value for
shareholders. As such, it assessed a de-merger while, concurrently, undergoing a formal process to evaluate expressions of interest in Mayne Logistics from other parties.





On 1 November 2002, Mayne announced that it had agreed to sell the logistics assets to a group of trade buyers comprising Linfox Pty Ltd (Linfox), DHL Worldwide
Express (DHL) and Toll Holdings Limited (Toll) for a combined enterprise (ungeared) value of A$456 million. Mayne has entered contracts to sell the Australian and Asian Contract logistics and Cash Logistics (Armaguard)
businesses to Linfox; the Canadian Express business to DHL; and the Australian Express business to Toll. The DHL contract is subject only to Canadian regulatory approvals. It is expected that these approvals will be achieved to allow completion in
early 2003. The Linfox and Toll contracts are unconditional. It is expected that completion of the Linfox contract will occur in early 2003 and the Toll contract will complete in November 2002.





Results of Operations  2001-02 Compared with 2000-01





Consolidated





Sales revenue for 2001-02 increased 58% to A$4,992.0 million from
A$3,158.7 million in the prior year. The sales revenue for continuing businesses (i.e. excluding discontinued businesses) was A$4,992.0 million, an increase of 76.5% from A$2,828.3 million in the prior year. This improvement was driven by a
combination of organic growth and the contribution from the AHC and Faulding businesses, which were acquired in February 2001 and October 2001 respectively.





EBIT before significant items increased 18% to A$249.7 million from A$211.2 million the prior year. This increase reflects the part year contribution of the Faulding acquisition and full year
contribution of the AHC hospitals acquired in 2000-01, which was partly offset by a decline in the earnings contribution of the hospitals businesses.





Consolidated net profit after tax and before significant items was A$150.3 million for 2001-02, an increase of 41% from A$106.4 million in 2000-01. Consolidated net profit after tax and significant
items




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was A$173.6 million compared to A$161.6 million in 2000-01. Significant items of A$23.3 million profit
after tax in 2001-02 relate to the restructuring provisions associated with the Logistics business, further non recurring costs related to the acquisition of Faulding and the write off of IT development, which were offset by tax gains made relating
to the disposal of the UK express business of A$43 million.





Sales revenue for 2001-02 for Australian operations
(including Asia and Pacific regions) totalled $A$4,376.7 million, an increase of 77.4% from $A$2,466.9 million in the prior year. EBIT attributable to Australian operations increased by 4.2% to $A$190.5 million. Revenue increased across all business
segments while the earnings increase was predominantly the result of the contribution of the Faulding business.





Health Care
Services





Sales revenue from health care services was A$3244.7 million for 2001-02, a 108.6% increase from
A$1,555.2 million for the previous year. Revenue growth was primarily a result of revenue contribution from the Faulding business and to a lesser extent, the full year contribution from AHC. EBIT before significant items decreased by 0.44% to
A$134.9 million from A$135.5 million the previous year, with earnings contribution of Faulding being offset by lower earnings from hospitals.





Hospitals





Sales revenue for hospitals increased 21.6% to A$1,396.7 million, which was
primarily a result of the contribution from the AHC hospitals. EBIT before significant items decreased 24.2% to A$71.6 million from A$94.5 million as a result of reduced contribution margin on prosthesis equipment, the loss of earnings from four AHC
hospitals which the Company had undertaken to divest, higher insurance costs, increase in labour costs and use of agency labour, and a shortage of nurses.





Hospital admissions in Maynes Australian facilities grew by 7% in the June 2002 quarter; however, there was an overall decline in admissions in the second half. This reflects, in part,
industry-wide slowdown, compared with the high demand in the first half when exclusion periods for elective surgery expired for many health insurance policyholders.





The decline in admissions has impacted occupancy levels, which had increased to 76.1% in the first half but then fell to 73.7% in the second half. The continued improvement
in average length of stay  down to 3.01 days in the second half  also has an impact on reducing occupancy levels over time.





Net revenue per admission increased by 6.5% in the year, reflecting Maynes continued trend toward higher acuity services, increased price of prostheses and success in negotiating new arrangements with all of the 44
health funds nationally. This included extending the contractual terms, mostly to three years, to eliminate the inefficiencies in the previous system of often-protracted annual contract negotiations.




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Average labour cost per work hour (excluding workers compensation charges
and physician fees) increased by 7.7% in the six months to June 2002. This highlights the high fixed-cost nature of hospitals. Labour costs declined only 0.4% in the year despite the decline in work hours and Maynes success in attracting
permanent nursing staff, which were offset by the impact of enterprise bargaining agreement (EBA) wage rises effective February 2002 and agency nursing costs.





Mayne has been impacted by the national shortage of nurses  as have all hospital operators  and has taken a number of measures to reduce the cost of agency
nursing. During the year, Mayne introduced a long-term strategy to lift the recruitment and retention of quality nursing staff at its hospitals. This included a program to support new nursing graduates and a refresher program. To address labour
costs, a number of management tools including daily labour KPI reports have been implemented and are being closely monitored and managed by enhanced management resources introduced at the local level.





Performance for the six months to June 2002 (excluding revenue from the four divested AHC hospitals) was down marginally on the first
half. This reflects the decline in admissions in the six months to June 2002, offset by the increase in compensation rates from the health funds and the continued strong performance of the groups three hospitals in Indonesia.





The earnings of the hospitals business were significantly lower in 2002, with EBIT falling to A$71.6 million for the year,
improvements in the first half having been offset by earnings deterioration in the second half. This reflects the decline in earnings before interest, tax, depreciation and amortisation (EBITDA) margin, impacted by the factors outlined
previously and a significant reduction in the margin for prostheses following Federal Government regulation. This margin, previously more than 10%, was capped at 5% from 1 July 2001, leading to an earnings reduction of around A$7 million as a result
of the high level of orthopaedic, cardiac and cardiothoracic services provided by Mayne hospitals. The EBITDA margin was also impacted by the divestment of four AHC hospitals (following an undertaking provided by Mayne to the ACCC) that had
contributed around A$6 million in earnings in the first half, and a doubling of insurance costs.





The appointment
of a provisional liquidator to a major medical indemnity organisation, United Medical Protection, had an immediate impact on a significant number of doctors who work in Mayne hospitals and flow-on effects to hospital insurers generally. Across the
industry, health care providers now encounter significantly higher premium costs and increased levels of self-insurance. Cover can be difficult to obtain for services deemed by insurers to be high risk, such as obstetrics and neurosurgery. Mayne has
joined with other leading health care providers in talking to stakeholders about solutions, and believes premium increases will be necessary to provide for the increased cost of insurance.





The renewal of Maynes medical professional indemnity insurance coincided with the end of the financial year. Maynes size, strength, market position and risk
management strategies have enabled it to




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secure medical professional indemnity and public liability insurance for all its medical facilities, in
Australia and overseas.





Diagnostic Imaging Services





The diagnostic imaging business consists of more than 95 sites in all states, except South Australia. Over the past year the business has moved to increase the level of
modality it operates as indicated by the closure of 44 low modality sites in 2001 and the purchase of the Endeavour Healthcare and Port Macquarie Imaging practices in 2002. Both practices included funded MRI licences.





Diagnostic imaging services continued to expand, with revenue reaching A$159.6 million, an increase of 8.9%, and EBIT before significant
items for 2001-02 of A$16.8 million increased by 62.9% from A$10.3 million. The increase in sales revenue is primarily a result of the increased number of examinations flowing from the acquisition of Endeavours Melbourne radiology practice and
Port Macquarie Medical Imaging in New South Wales, effective from January and April respectively. The increase in EBIT before significant items reflects the ability to successfully increase the modality mix of the business, across a smaller number
of sites.





Approximately 1.4 million imaging examinations were completed in 2002, with the second half up 5.4% on
the prior period. The full impact of the Port Macquarie acquisition on examination numbers is expected to be evident in the 2002/03 financial year.





Average revenue received per examination increased marginally to A$112.60, despite the 5% fee cut for CT examinations effective from November 2001 and the stabilisation of bulk-billed examinations at
around 40% of total revenue. The impact of the fee cut was significant as CT examinations accounted for approximately 26% of revenue in the second half. The ability to increase revenue per examination despite these constraints is a result of
increased use of higher-end modalities within the business, particularly Magnetic Resonance Imaging (MRI) equipment. In addition to two funded MRIs acquired through acquisitions, a funded MRI service was successfully tendered for in Orange, New
South Wales, under a joint venture arrangement.





Efficiency across the network, measured in terms of the number of
examinations completed per work hour, improved by 7.2%. Examinations per work hour are expected to improve further in 2003 as the benefits of a recently negotiated enterprise bargaining agreement in Victoria are realised and integration of the
recent acquisitions continues.





Mayne recently embarked on a partnership with Sydneys Prince of Wales
Medical Research Institute to purchase a Philips Intera 3T MRI system, the first of its kind in NSW. The system allows high-powered analysis of the brain and nervous system and will be used for clinical work and research.




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Pathology Services





Pathology services revenue increased by 1.5% to A$249.3 million, reflecting organic growth. EBIT before significant items for 2001-02 of A$30.4 million decreased by 6.5% on
the prior year from A$32.5 million in 2000-01. The decrease in EBIT before significant items was a result of a 1% fee reduction (effective 1 July, 2001), reduced levels of private billing and an increase, in line with inflation, in the cost of
consumables and labour.





The number of pathology episodes increased 3.7%, to 5.11 million, in 2002. All States
experienced growth in the second half, with Victoria increasing 8.9% year on year as it continued to benefit from the successful establishment of pathology services to former AHC hospitals. Episode numbers also grew in New South Wales, with the June
2002 quarter delivering the first quarter-on-quarter increase since the 1998 acquisition of the Macquarie practice. This is a result of initiatives to address volume decline in that State, including a state-of-the-art laboratory, a dedicated sales
team, and key management appointments including a new Medical Director.





The network-wide growth in episode
numbers, combined with the efficiency benefits of the new, central laboratories in Victoria and New South Wales, has led to further improvement in the number of episodes per work hour. This ratio has risen from 1.02 in 2000 to 1.09 in 2001 and 1.15
in the second half of 2002, countering the impact of the trend for GPs to request a higher number of tests per episode.





Mayne is continuing to build its pathology business, most notably through the recent acquisition of QML. Over many years, QML has gained a well-earned reputation as a high quality provider. It is currently Queenslands leading
pathology provider and will ideally complement Maynes pathology businesses in Western Australia and Victoria and its operations in New South Wales.





Medical Centres





Medical Centres revenue increased 130.4% to A$32.8 million in
2001-02 from A$14.3 million in 2000-01. However EBIT decreased 86.6% to a loss of (A$3.4) million in 2001-02 from a loss of (A$1.8) million in 2000-01. The increase in revenue reflects the large number of medical centres acquired during the year,
with the Company working with 394 doctors in 53 medical centres, including seven corporate health centres that provide services in the management of workplace risk and the treatment of injuries. The decrease in EBIT before significant items reflects
the cost of integrating the acquired medical centres, higher goodwill amortisation costs arising from the acquisition.





Mayne is a founding signatory to the industry Code of Conduct for companies that manage general practices. Its approach to this business centres on leveraging its management expertise and resources to ensure the efficient management
of medical centres to support GPs in their goal of providing quality clinical outcomes while upholding their clinical independence.




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Medical centre revenue more than doubled in 2002. EBITDA of A$0.9 million was
achieved in the second half, which represents an EBITDA margin of 4%. EBIT before significant items improved in the second half despite the significant amortisation costs arising from acquisitions. The improved earnings resulted from the continued
integration of individual practices into the network and the initial benefits arising from the application of a standard business model, the introduction of common IT infrastructure and the centralisation of non-clinical aspects of the business.





With the network having achieved viable size and scale, the focus now will be on consolidation to drive operating
efficiencies to ensure this business generates an appropriate return on investment.





Pharmacy Services





Pharmacy Services encompasses the wholesale distribution of pharmaceutical products as well as the provision of retail and marketing
services to pharmacies. The business has held its national market share in pharmacy distribution, notwithstanding the transitional risk in the integration with Mayne and increased competitive pressures. The revenue of A$1,406 million and EBIT of
A$19.5 million was for the nine months from 1 October 2001, the date upon which the Faulding transaction was completed.





A strategic review of pharmacy services during the year resulted in the recent launch to community pharmacy of Maynes value proposition. Based on four platforms  Healthcare Links, Product Delivery Services, Pharmacy
Support Services and Pharmacy Brands  these initiatives are geared to advance Mayne from being positioned as a supplier of pharmacy products and services to a total professional partner in pharmacy. Healthcare Links, initially comprising a
series of health screening programs that pharmacists can offer to their customers, will be developed to encompass automated programs for disease management. Maynes broad expertise in health care, including its strong credentials in
diagnostics, uniquely positions the company to support its partners in community pharmacy in this way.





The new
core IT platform, Orion, was successfully rolled out to all warehouses, with the distribution/customer service components due for completion by June 2003.





Pharmaceuticals





Pharmaceuticals





Maynes Pharmaceuticals operations acquired from Faulding in October 2001 have been consolidated into a global business unit. Pharmaceuticals reported revenue of
A$332.8 million for the nine-month period under Mayne ownership to 30 June 2002 and A$ 441.5 million for the twelve months to 30 June 2002. This represents a 21% increase in Pharmaceuticals revenues (based on an equivalent 12-month period) over the
prior corresponding period under the previous Faulding ownership. The continued growth reflects the successful new product launches and geographic diversification, with sales now spread evenly across the major global regions. The EBIT before
significant items for the period was A$44.2 million.




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Maynes operations in pharmaceuticals, acquired from Faulding in October
2001, have been consolidated into a global business unit and a strategic review of the business was undertaken during the period,





There was evidence of a major turnaround in the US business, which delivered a substantial profit during the period of Mayne ownership. The 59.6% increase in revenue in the Americas in the second half reflected the success of the
cancer-related drug pamidronate and further expansion into Latin America. The market positions in Asia Pacific and Europe are also strong and the product pipeline is robust, particularly in Europe, with key product launches expected to contribute
significantly over the next 24 months.





The earnings of the business continued to expand in line with the strong
growth in revenue. Before the impact of goodwill amortisation associated with Maynes acquisition of Faulding, the earnings before interest tax and amortisation before significant items (EBITA) margin for the second half of the year
was 20.2%. This margin is indicative of the competitive position of our product portfolio, particularly cancer products.





Contract manufacturing out of the Mulgrave facility in Melbourne also contributed strongly in the period, particularly the manufacture of the cancer drug paclitaxel for the US market. The Mulgrave (injectable manufacturing) and
Salisbury (oral manufacturing) sites have met significantly increased capacity demands during the year, including a doubling in demand for oral products. Mayne has secured the opportunity to increase capacity at the Mulgrave site in the future by
purchasing an adjoining property.





Investment in research and development has remained consistent as a percentage
of sales, at just over 10%. This reflects Maynes commitment to growing the pharmaceuticals business through a dynamic product pipeline and product innovation.





New product approvals in 2002 compare favourably with 2001, with the 20 product approvals having a local brand market value of around US$939 million and encompassing all
significant regions. This includes several significant in-licensed products for the Asia Pacific region, most notably a generic version of cyclosporin capsules which is the third largest hospital product in the Australian market and has a local
branded market value of approximately US$17 million. The major new product approval in the US was for a generic solution formula of pamidronate, which provides a sturdy platform for growth. Mayne has already secured a meaningful share of this
market, which was valued at around US$500 million in April 2002 when the product was launched in an alliance with US generic company, Gensia Sicor. Pamidronate approval was also received in Europe, where it is scheduled for launch in 2002/03 and has
a local brand market value of around US$135 million.





The pharmaceutical product development pipeline
remains active, in terms of both the number and value of the products. In 2002/03, Mayne anticipates receiving approvals for 11 products already submitted




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to regulatory authorities, with total local brand market value of around US$686 million. This includes
amiodarone in the US, which has a local brand market value of around US$269 million, and paclitaxel in Europe, with a local brand value of around US$248 million.





Maynes considerable in-licensing expertise will continue to provide a strategic advantage, complementing our own product development program. A number of new in-licensed products are scheduled to
be approved across all major regions.





In addition, Mayne estimates 21 new products will be submitted to
regulatory authorities in the key regions in the first half of 2002/03, with local brand market value in excess of US$1.7 billion.





The Australian Ethical Category Development (ECD) business, encompassing the GenRx ® branded generic prescription pharmaceuticals and a private label range marketed in conjunction with retail pharmacy banner groups, also provides Mayne with a significant growth opportunity in what is considered a
relatively high margin segment. While Mayne is a relatively small but growing player in the Australian oral generic pharmaceutical market, it has successfully established a range of 41 products with a market value of around A$658 million, and a
product pipeline with a market value of more than A$1 billion.





Consumer Health Products





Maynes consumer health products reported revenue of A$167.2 million for the nine months to 30 June 2002, with second half growth of
6.2% on the first six months. This reflects the continued recovery in demand for vitamin and mineral supplements, particularly in the grocery market, and Maynes ability to retain its domestic market shares in this category with new and
established brands moving across wider distribution channels. The EBIT before significant items for the period was A$10.8 million.





Specifically, revenue growth was driven by: strong sales growth of the Cenovis Once Daily ® range and the Bio-Organics TM glucosamine product range, a high potency
supplement that provides pain relief associated with osteoarthritis; the launch of the Nutriplan ® clinically-proven weight control products; and the re-launch of Sea and Ski ® sunscreen in the US
market.





While most of Australia experienced a mild summer, Maynes suncare brands recorded strong market
shares and were, collectively, the clear market leader in grocery. Market share for the Banta ® product range grew from less than 6% in the summer of 2000/01 to more than 13% last summer.





The operating
performance for the second half was down relative to the three-month contribution in the first half, reflecting product launch costs in Australia, UK and the US, costs associated with ceasing production and distribution of the Banana
Boat 2  ® brand of sunscreens following the end of the licence agreement with Playtex, and the commissioning of the nutriceutical plant in Virginia, Queensland. These




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factors meant the earnings margin for this business reduced significantly in the second half, however,
the underlying operational performance was sound, with the efficiency of the new, state-of-the-art Virginia facility and the upgrade of the personal wash manufacturing plant in Shepparton, Victoria, to provide a sound platform for future growth.





Mayne Logistics  Australia and Asia





The Australian and Pacific Logistics business reported a decrease in revenue of 1.82 % to A$895.2 million in 2001-02 and EBIT before significant items decreased by 7.59 %
to A$51.1 million from A$55.3 million in 2000-01.





In 2001-02 lower economic growth in Australia has had a
negative impact on revenue from existing customers due to both a reduced number of shipments and lower average consignment weight per shipment. In addition, considerable disruption was caused as a result of the collapse of Ansett, a major domestic
airline, in September 2001. Logistics revenue decreased by 0.98 % to A$673.9 million in 2001-02 as a result of the loss of the Paperlinx contract, administrative costs incurred as a result of the difficult implementation of a new billing system, and
resultant change in air courier costs due to the collapse of Ansett. EBIT before significant items decreased by 18.1 % to A$24.9 million reflecting the above mentioned issues.





Express revenue was effectively flat on a year-on-year basis. This reflects stable prices and volumes as a result of unfavourable economic factors and the disruption caused
by the collapse of Ansett on 14 September 2001. This was offset by the introduction of a number of new products, including Utilitypak, Return-a-pak and Time Sensitive Freight, and by the business bringing in-house services that were previously
undertaken by competitors, particularly in south-east Queensland.





The Ansett collapse impacted on earnings before
interest and tax due to higher ongoing freight charges as well as some temporary disruption to business. Additional costs of more than A$5 million were incurred as a result of higher air linehaul charges. New contracts were put in place with
Australian Air Express, however the impact resulted in a step change in costs for this segment of the business.





In addition, the implementation of the Parcel Management System during the year generated some initial billing difficulties, causing a disruption to customer service levels. Extra administrative cost was incurred while resolving
these difficulties, which have now been fully overcome.





Revenue for Maynes contract logistics business in
Australia and Asia of A$379.3 million, despite the impact of the loss of the Paperlinx contract in Australia. A number of new contracts were won including Westpac, the Commonwealth Bank of Australia, Wella, Schwarzkopf, Streets Ice Cream, Compaq,
Esprit,


---

3 Banana Boat is a registered trademark of Sun Pharmaceuticals Inc.




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Colgate, Kimberley Clark and Tricon. Major contracts that were renewed during the year include Kellogg,
Carter Holt Harvey Tissue, Kodak and Cryovac, a leading manufacturer of packaging materials and systems in the industrial, food and consumer markets.





Many contracts that were won require the implementation of new technology that will provide a step change in supply chain management technology for those customers. For example, the Kellogg and Carter
Holt Harvey Tissue contracts include requirements to commission Tier 1 EXE warehouse management systems into various sites across the country. Implementation of this technology has commenced for both these clients, and completion is scheduled in the
next financial year.





During the year a A$1.7 million loss was incurred as a result of costs associated with the
commissioning of a site in Chullora in New South Wales. The site was an investment committed to and made by Faulding prior to that company being acquired by Mayne. The Chullora site has now been merged into Maynes logistics operations and
offers significant expansion opportunities in the future, in addition to inherent growth now that the site has been established with its blue-chip customer base.





As part of winning the warehousing and distribution contract for Tricon in Victoria, South Australia and Tasmania for a five-year period, the assets of a small food services business were acquired in
July 2002, further extending the business capabilities in the food service sector.





The business
successfully completed a warehouse project that was established to determine the viability of centralised distribution for medical supplies to a number of Mayne Health hospitals by utilising existing infrastructure.





The linehaul business is also continuing its successful rollout of 53-foot containers into the Australian intermodal market.





The Asian business continues to deliver strong revenue growth. Two new warehouses in Thailand and Indonesia were designed,
built and commenced operations during the year to service the Unilever contract. While the Asian business is still incurring expansion costs, the expertise and reputation it is gaining places it in a position of strength in this growth region.





New contracts in Asia such as Foremost Dairies and Walls Ice Cream and the expansion of existing contract work,
such as with Unilever, combined with the continued successful rollout of the EXE warehouse management system, also position the Asian business well for future growth.





There are a number of significant opportunities in the pipeline for the contract and express businesses in Australia and Asia. The value of business under development has
grown considerably over the past year, reflecting the increased efforts of the business development team. The strength of this




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pipeline and the full impact of new contract wins over the past year place the Australian and Asian
businesses in a strong position for future growth.





Mayne Logistics Armaguard





Armaguards revenue decreased by 4.33% to A$221.2 million in 2001-02 from A$231.2 million in 2000-01 and EBIT increased by 5.22% to
A$26.2 million. The decrease in revenue reflects the increased competitive pressures arising from the collective tendering for cash logistics servicing by three major banks that resulted in a change in the spread of services provided by Armaguard to
these banks from 2000-01. The redistribution of this work will continues to impact revenue in 2002-03. To offset this, Armaguard has continued to successfully diversify its business. Major non-bank contracts won, extended or renewed during the
financial year included Australia Post, Woolworths, Bunnings and Telstra.





The increase in EBIT before significant
items was achieved through a strong management focus on restructuring the business and driving operational efficiencies. For example, six sites were consolidated and route planning technology was implemented with the aim of generating greater
efficiency. Other management initiatives to improve efficiency have included implementation of the continued introduction of high-speed cash processing machines and the conversion of more than 100 vehicles to enable two-man crewing. The roll out of
two-man crewing will continue in 2003 with the number of converted vehicles expected to double.





Benefits from
these efficiencies, combined with improvement in the pricing environment following a period of downward pressure, is expected to stabilise the recent decline in margins.





Mayne Logistics Loomis





Sales revenue for the North
American time critical express operations, which are Canadian-based, was A$350.2 million for 2001-02, an decrease of 3.1 % from A$361.3 million in the prior year. The decrease in revenue is largely a reflection of economic conditions in North
America, including the impact of the September 11 terrorist attacks. EBIT before significant items increased 42.5% to A$21.5 million from A$15.1 million in 2000-01. This was a result of improved operational efficiencies and cost management
initiatives including centralisation and standardisation of support activities and the benefits of the reorganisation from a regional structure to a functional structure.





The business air linehaul capabilities were maintained following the bankruptcy of Canada 3000, a local air linehaul provider. While volumes decreased, the business
managed to secure a number of new customers, particularly in the south-north market. The success in growing the south-north market was achieved through leveraging opportunities with the existing Canadian customer base importing goods from the United
States, as well as the expansion by some Canadian businesses into the United States as the




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benefits of the North American Free Trade Agreement continue to increase trade relations between the
countries.





Mayne Logistics Loomis secured 17 new major contracts, worth A$5.7 million in revenue, during the
financial year. These new contracts will bring A$10.6 million in annualised revenue to the company in the 2003 financial year, although these gains will be offset by the loss of four major contracts that reduced revenue by A$1.7 million in the
2001/2002 financial year. The annualised effect of these losses in the next financial year will be A$3.7 million.





EBITA margin for this business at 6.4% improved significantly, despite lower revenue. There has been a continued improvement in margin since the opening of the new Edmonton and Toronto distribution hubs in late 2000 and the
investment in automated sortation in 2001. The favourable outcomes arising from these investments continue to have a positive impact on operating efficiency.





Mayne Logistics Loomis also secured a 1.8% average price increase while maintaining its existing customer base. This price increase was supplemented by the introduction of aviation insurance and
special handling surcharges that improved the margin on the existing revenue base by 2.9%.





Results of Operations  2000-01
Compared with 1999-00





Consolidated





Sales revenue for 2000-01 increased 1.8% to A$3,158.7 million from A$3,100.4 million in the prior year. The sales revenue for continuing businesses (i.e. excluding discontinued businesses) was
A$2,828.3 million, an increase of 17.9% from A$2,399.7 million in the prior year. This increase reflects strong growth in both health care and Canadian logistics and a five month contribution from AHC, acquired in February 2001.





EBIT before significant items increased 23.9% to A$211.2 million from A$170.4 million the prior year. This increase reflects
that the Company experienced improved trading conditions in the Companys Australian hospitals as well as the initial cost savings associated with the Companys strategic review that was undertaken in November 2000 which has been
substantially implemented.





Consolidated net profit after tax and before significant items was A$106.4 million for
2000-01, an increase of 40.7% from A$75.4 million in 1999-00. Consolidated net profit after tax and significant items was A$161.6 million compared to a loss of A$(174.1) million in 1999-00. Significant items of A$53.9 million after tax in 2000-01
relate to the profit on sale of the UK Express business which was partly offset by the loss on the sale of the Australian ports business, the cost of corporate restructuring and re-branding and an increase in provisions for litigation, bad and
doubtful debt allowance and liability for workers compensation for prior period claims as a result of amended legislation.




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Sales revenue for 2000-01 for Australian operations (including Asia and Pacific
regions) totalled A$2,466.9 million, an increase of 17.2% from A$2,104.7 million in the prior year. EBIT before significant items attributable to Australian operations increased by 45.4% to A$182.8 million. Revenue increased across all business
segments while the earnings increase was predominantly the result of a increase in the returns of the hospital and logistics networks.





Health Services





Sales revenue from Health Services was A$1,555.2 million for 2000-01, a
25.6% increase from A$1,238.0 million for the previous year. Revenue growth was related to strong growth in revenue from hospitals, including the five month contribution from AHC and continued growth in the diagnostic services businesses. EBIT
before significant items increased by 54% to A$135.5 million from A$88.0 million the previous year, reflecting improvements in demand for services and improved operating efficiency across all businesses.





Hospitals





Sales
revenue for hospitals, including medical centres, increased 32.2% to A$1,162.9 million. Patient demand for hospital services remained solid during 2000-01 which led to a 22.2% increase in admissions including more than 50,000 admissions in AHC
hospitals. EBIT before significant items increased 69.1% to A$92.7 million from A$54.8 million despite only small increases in reimbursement rates from private health insurance funds during the period, as no contracts were due for renegotiation in
the last six months of 2000-01. With the Company having completed its current phase of facility development, its focus was to progressively shift to a functional organisation designed to deliver regional and national synergies through operating as
an integrated network rather than stand-alone facilities. This has resulted in reduced overhead charges in such areas as sales, marketing, finance and health fund negotiations with all of these functions undertaken through shared infra-structure.
Labour efficiency levels improved during the 2000-01 and average length of stay decreased by 8.6% reflecting the initial benefit of standardising clinical pathways.





Diagnostic Imaging Services





Diagnostic imaging services
continued to expand, with revenue reaching A$146.6 million, an increase of 19.7%, and EBIT for 2000-01 of A$10.3 million increased by 28.7% from A$8.0 million. The increase in sales revenue resulted from both prior period acquisitions and organic
revenue growth, including the provision of services to a greater number of the Companys hospital facilities. During 2000-01, revenue reflected a twelve month contribution from the Melbourne Diagnostic Imaging Group, North Coast X-Ray and
businesses acquired in the previous period. The increase in EBIT before significant items reflects a 14% increase in the number of examinations completed as well as an increase in the average fee charged per examination. In addition, a site
rationalisation program resulted in the same number of examinations being performed across a smaller number of sites.




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Pathology Services





Pathology services revenue increased by 4.0% to A$245.7 million, reflecting organic growth. EBIT for 2000-01 of A$32.5 million increased by 29% on the prior year from
A$25.2 million in 1999-00. The improvement in return reflects the improved performance of the New South Wales pathology practice following the rationalisation of laboratory facilities in New South Wales, and the commissioning of the new central
laboratory in North Sydney. All businesses improved efficiency, measured in terms of episodes completed per work hour with a 17% improvement achieved in NSW in the last six months of 2000-01.





Mayne Logistics





The Australian and Pacific
Logistics business reported an increase in revenue of 5.2% to A$911.8 million in 2000-01 and EBIT increased by A$10.0 million to A$55.3 million from A$45.2 million in 1999-00, reflecting improvement across both Armaguard and Logistics.





In 2000-01 lower economic growth in Australia has had a negative impact on revenue from existing customers due to both a
reduced number of shipments and lower average consignment weight per shipment. Despite this, Logistics revenue increased by 2.5% to A$680.6 million in 2000-01 with increases in time critical express business, due to an increase in the average
revenue received per parcel and contract logistics, due to yield improvements and an increase in the level of new business written. EBIT before significant items increased by 45.9% to A$30.4 million reflecting cost savings associated with servicing
the express and contract logistics businesses through a single infrastructure and facility rationalisation. In express, improvements in pick up and delivery services and fleet consolidation which has reduced the use of external contractors for out
of hours servicing, has improved efficiency whereas in the logistics business, the efficiency has been improved via site productivity improvements.





Mayne Logistics Armaguard





Armaguards revenue increased by 14.3% to A$231.2 million
in 2000-01 from A$202.3 million in 1999-00 and EBIT increased by 2% to A$24.9 million. The increase in revenue reflects continued strong increases in demand for services as the major banks continue rationalising their branch network and customers
seek alternate forms of servicing. The increase in EBIT before significant items was achieved despite competitive pressure following the entry of a new competitor into the Australian cash logistics market, adversely impacting margins in the last six
months of 1999-00 and impacting the 2000-01 result for the full year. Despite these competitive pressures, the EBIT before significant items improvement was achieved from an increase in demand for services, the centralisation of the state-based
administration functions to Melbourne and improvements in cash processing.





Mayne Logistics Loomis Courier




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Sales revenue for the North American time critical express operations, which are
Canadian-based, was A$361.3 million for 2000-01, an increase of 22.4 % from A$295.1 million in the prior year. New hubs were commissioned in both Toronto and Edmonton during 2000-01 which have increased parcel capacity. This increase in capacity has
facilitated the increase in revenue but despite this, EBIT before significant items only increased marginally to A$15.1 million. This was due to additional operating costs associated with the commissioning of new hubs in Toronto and Edmonton and the
associated depreciation associated with that investment.





Europe





The time critical express businesses in the UK and Ireland, comprised of Parceline and Interlink Express was divested on 20 December 2000. To the date of sale revenue was
A$289.5 million, down 46% on 1999-00 and EBIT before significant items for 2000-01 of A$12.6 million was down 62% on 1999-00.





Australian GAAP compared with US GAAP





Fiscal Year2001-02

2000-01

1999-00(A$ in millions)Operating profit/loss attributable to shareholdersUS GAAP

194.9

160.3

(145.5
)Australian GAAP

173.6

161.6

(174.1
)Shareholders equityUS GAAP

3,810.1

1,427.8

886.6Australian GAAP

3,617.8

1,409.7

892.8





These differences, which are described in note 37 to the Consolidated Financial
Statements, mainly resulted from:





| |  | the different treatment of fixed asset revaluations;
|- |  | ----------------------------------------------------




| |  | amortisation of intangibles;
|- |  | ----------------------------




| |  | the timing and recognition of expenditure;
|- |  | ------------------------------------------




| |  | superannuation liability recognition;
|- |  | -------------------------------------




| |  | timing of recognition of income;
|- |  | --------------------------------




| |  | the different treatment of the employee share acquisition plan;
|- |  | ---------------------------------------------------------------




| |  | the different treatment of stock compensation;
|- |  | ----------------------------------------------




| |  | the different treatment of impairment of assets;
|- |  | ------------------------------------------------




| |  | the different treatment of provisions;
|- |  | --------------------------------------




| |  | the timing of recognition of dividend liabilities;
|- |  | --------------------------------------------------




| |  | the different treatment of a gain on exchange of assets for a controlling equity interest; and
|- |  | ----------------------------------------------------------------------------------------------




| |  | the different treatment of derivatives
|- |  | --------------------------------------



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Liquidity and Capital Resources





The Company believes that its cash holdings, operating cash flow and existing credit facilities are adequate to finance all of its existing business needs over the next
twelve months, including anticipated capital expenditure and debt repayments. In addition, the Company believes that its operating cash flow, together with its ability to access the capital markets, will enable it to finance its foreseeable business
needs.





As shown in the following table, during the past three fiscal years, the Company has expended significant
amounts on new property, plant and equipment, acquisitions and investments.





Fiscal Year2001-02

2000-2001

1999-2000(A$ in millions)Capital expenditure

174.9

145.1

174.3Acquisitions

267.7

9.6

92.8Payments for investments

5.5

2.6

10.9Total

448.1

157.3

278.0





In 2001-02 capital expenditure, acquisitions and investments were
funded through a combination of cash from operations and the issue of 361 million ordinary shares. In addition, surplus funds were used to retire debt as well as increase the cash resources of the Company. In 2000-01 capital expenditure,
acquisitions and investments were largely funded through cash provided from operations A$197 million proceeds from an equity placement and the disposal of the UK express business, both of which occurred in November 2000. In 1999-00 capital
expenditure, acquisitions and investments were largely funded through cash provided from operations and new borrowings. In 1998-99, the proceeds from the sale of the Companys investment in Optus of A$1,015.5 million and A$92 million of
proceeds from the securitisation of the rental cash flows of the Joondalup Health Campus enabled the Company to fund the increased expenditure on acquisitions in addition to retiring debt and making a return of capital to shareholders. The Company
generated cash flows from operating activities of approximately A$85 million, A$173.5 million and A$133.5 million in 2000-01, 1999-00 and 1998-99 respectively.





Net operating cash flows in 2001-02 increased by 110.6% to A$180 million. This increase in operating cash flows was attributable to greater sales growth associated with the acquisition of Faulding
businesses. Cash receipts from operations increased by 68.2% in 2001-02, whilst payments to suppliers and employees increased by 67.9 %. These increases are attributable to growth in sales activity from the pharmacy services, pharmaceuticals, and
consumer businesses of Faulding. Net interest payments decreased due to a decline in average net debt levels, which was partly offset by an increase in the average yield. Average net debt yield has been impacted by the investment of surplus cash,
set aside to fund future investment opportunities, in highly rated short-term securities.




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The Company had unused credit facilities of approximately A$1,552 million at 30
June 2002. Of this, approximately 45% (A$699.0 million) was represented by committed facilities and the balance was represented by uncommitted facilities, including commercial paper facilities in the United States and Australia.





At 30 June 2002, the Company had total long term debt of approximately A$655.1 million. Of this amount, A$5.8 million, A$2.6
million, A$620.5 million and A$26.1 million was debt scheduled to mature in 2003-04, 2004-05, 2005-06, and after 2005-06 respectively. The table below provides further information in respect of the Companys outstanding indebtedness, earnings
to fixed charges ratio and debt-to-capitalisation ratio as at the fiscal-year end for each of the past five years.





On 28 August 2002 the Board announced an on-market buy-back program of up to 75 million shares. The on-market buy-back program will commence after the documentation relating to the proposed Logistics de-merger is lodged with the ASX.
Mayne has appointed UBS Warburg and JB Were to act on the Companys behalf in respect of this buy-back program.





The Company has historically limited its net debt to not more than 40% of net debt plus shareholders equity. As at 30 June 2002, the gearing ratio is 5.1%.





Off Balance Sheet Arrangements





The Company leases
premises and plant and equipment under operating leases. A profile of operating lease commitments is set out in Note 37 (o) in the financials. Lease terms for plant and equipment are predominantly 3 to 5 years, however longer leases are entered into
for equipment with longer useful lives, such as CT scanners and MRI machines. Lease terms for property are predominantly 3 to 10 years depending on the strategic importance of the property and prevailing market conditions for such properties.





Apart from operating leases, Mayne has no off balance sheet arrangements that are not consolidated as at 30
June 2002.





Mayne Group Debt Profile





At Fiscal Year End2001-02


2000-01


1999-00


1998-99


1997-98(In millions, except ratios)Cash and deposits

A$
425.6


A$
581.0


A$
109.9


A$
196.2


A$
310.3Non-finance leases

A$
576.2


A$
500.0


A$
628.9


A$
512.4


A$
392.0Long Term Debt(1)

A$
655.1


A$
704.5


A$
773.6


A$
704.5


A$
1,194.1Total Debt(2)

A$
660.7


A$
1016.2


A$
839.9


A$
731.0


A$
1,236.1Net Debt(3)

A$
194.2


A$
431.4


A$
729.4


A$
534.2


A$
924.3Ratio of earnings to fixed charges(4)


2.27
x


2.5
x


2.2
x


2.1
x


2.3
xDebt to capitalisation(5)


15
%


34
%


46
%


38
%


48
%




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|(1) |  | Debt maturing in excess of twelve months of period end (including finances leases).
|--- |  | -----------------------------------------------------------------------------------

|(2) |  | Long term debt plus short term debt (including finance leases in each case).
|--- |  | ----------------------------------------------------------------------------

|(3) |  | Total debt less cash and deposits and loan receivables.
|--- |  | -------------------------------------------------------

|(4) |  | For the purpose of computing the ratio of earnings to fixed charges for any period, earnings consist of income before income taxes for such period plus fixed
charges deducted in calculating net income for such period (excluding interest capitalised during the period). Fixed charges for any period consist of interest charges, including capitalised interest, and the portion of rental expenses deemed to be
representative of the interest factor.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Ratio of long term debt to long term debt plus shareholders equity.
|--- |  | --------------------------------------------------------------------




Contractual Obligations and Commercial Commitments





Contractual Obligations

Payments Due by PeriodTotal

Less than 1 year

1  3 years

4  5 years

After 5 yearsLong  Term Debt

649,737



623,731

26,006

Capital Lease Obligations

8,447

3,082

5,264

101

Operating Leases

576,193

110,428

206,713

40,327

218,725Unconditional Purchase Obligations

66,143

58,625

5451

794

1,273Total Contractual Obligations

1,300,520

172,135

841,159

67,228

219,998





Other Contractual Commitments

Total Amounts Committed

Amount of Commitment Expiration Per PeriodTotal

Less than 1 year

1  3 years

4  5 years

After 5 yearsLines of Credit

510







510Standby Letters of Credit

12,311

3,829

643



7,838Guarantees

58,704

313

2,703

53

55,635Other Commercial Commitments1

22,793

22,791

2Total Contractual Obligations

94,318

26,933

3,349

53

63,983


---

|1. |  | Includes performance bonds and import collections
|-- |  | -------------------------------------------------



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ITEM 6-
DIRECTORS AND SENIOR MANAGEMENT AND EMPLOYEES





A.  DIRECTORS AND SENIOR MANAGEMENT





Board of Directors





At 31 October 2002, the Directors of the Company were as follows:





Name

Position

Initially Elected or
Appointed

Date Eligible for re-electionMark Richard Rayner Peter Charles Barnett Sir Ross Buckland Stuart Bruce James Sarah Carolyn Hailes Kay Peter Edward Mason Rowan McRae
Russell Prof Judith Sloan Peter John Willcox

Chairman Director Director Managing Director Director Director Director Director Director

1995 1996 2001 2002 2001 1992 2001 1995 2002

2004 2004 2004  2003 2002 2003 2002 2002





Details of the nature and amount of each element of the emolument of each Director for the
year 2001-2002 are set out in the following table:





Name

Annual Base Salary (a)

Interest free Loan
benefit (b)

Other benefits
(c) $

Total remuneration $Executive DirectorsP J Smedley

1,741,818

354,530

1,924,380

3,846,038S B James

749,999

132,950

634,123

1,517,072Directors Fees (d)Cash $

Shares $Non-executive DirectorsM R Rayner

180,000

45,000

21,026

246,026P C Barnett

67,500

7,500

6,000

81,000R Buckland

51,750

5,743

4,600

62,093I R L Harper

24,801

1,875

395,817(e)

422,493S C H Kay

50,906

5,682

4,525

61,113P E Mason



75,000

6,000

81,000R McR Russell

57,228

6,250

5,087

68,565J Sloan

60,000

15,000

6,000

81,000





|(a) |  | The executive Directors did not receive any fees for their services as a Director.
|--- |  | ----------------------------------------------------------------------------------



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|(b) |  | The benefit of interest free loans was provided to finance an issue of 2,000,000 shares to Mr Smedley and 750,000 shares to Mr James, on 23 June 2000 at market
price, as approved by shareholders at the 2000 Annual General Meeting. All dividends payable on these shares, after tax, are applied to loan repayment.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(c) |  | The executive Directors other benefits include payment of the 2000/2001 bonus relating to performance in that year, fringe benefits tax FBT
and company contributions to superannuation. The executive Directors did not qualify for a bonus for 2001/2002.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




The non-executive Directors other benefits include FBT and company contributions to superannuation.





|(d) |  | The non-executive Directors remuneration is inclusive of fees in connection with attending Board and Board committee meetings.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------




|(e) |  | This includes a retirement payment of $390,184.
|--- |  | -----------------------------------------------




RMcR Russell was appointed as a Director on 28 August 2001. Sir Ross Buckland and SCH Kay were appointed as Directors on 25 September 2001 and 28 September 2002 respectively. IRL Harper announced his
retirement from the Board at the Annual General Meeting on 13 November 2001. SB James was appointed as a Director on 29 January 2002. PJ Smedley, the former Managing Director of the Company, retired from the Board on 28 August 2002. Mr PJ Willcox
was appointed as Director on 1 October 2002.





Pursuant to Maynes constitution, and subject to the provisions
of the Corporations Act 2001, a Director may from time to time, by notice in writing to the Company, appoint any person approved by the majority of the other Directors to act as an Alternate Director in the Directors place for such period as
the Director decides. At 31 October 2002 there were no Alternate Directors.





Details of each Directors
qualifications, experience and special responsibilities are as follows:








Mr Mark Rayner





BSc (Hons), Chem Eng, FTSE, FAusIMM, FIEA, FAICD





Chairman





Joined the Board in 1995 and appointed Chairman in April 1997. Member of
the Boards Audit and Compliance Committee and its Compensation and Nomination Committee. Chairman of Pasminco Ltd (in voluntary administration), a Director of Boral Ltd and Director-elect of Alumina Ltd. Also Vice President of Australia Japan
Business Cooperation Committee, Vice President of Academy of Technological Sciences and Engineering, and Chairman, Advisory Board of Andrology Australia. Former Chief Executive of Comalco Ltd, Executive Director of CRA Ltd and Chairman of National
Australia Bank Ltd. Age 64.








Mr Peter Barnett





FCPA





Joined the Board in 1996. Chairman
of the Boards Audit and Compliance Committee and a member of its Compensation and Nomination Committee. Director of AMCIL and Santos Ltd, and Director and




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shareholder of Opis Capital Ltd. Member of the ABN AMRO Australasian Advisory Council and a member of
the Victoria Racing Club Committee. Former Chief Executive Officer of EZ Industries Ltd and Managing Director of Pasminco Ltd (1988-1995). Age 62.








Sir Ross Buckland





FCPA, FCIS





Joined the Board in 2001. Director of Allied Domecq Plc, Goodman Fielder Ltd and Clayton Utz. Former Chief Executive of Uniq Plc (formerly Unigate Plc) London
(1990-2001) and Kellogg Cereal Company (1973-1990). Also held Chief Executive positions in Australia/New Zealand, Canada and Europe. Former President of the United Kingdoms Food and Drink Federation and the Institute of Grocery Distribution,
Vice President of CIAA (the European food and drink Federation), Member of the UK Medical Research Foundation and Presidents Committee of the Confederation of British Industry. Age 59.








Mr Stuart James





BA (Hons)





Group Managing Director and Chief Executive Officer





Joined Mayne as Chief Operating Officer in July 2000. Joined the Board in January 2002 [management contract with Company for his new position will need to be disclosed if his compensation is disclosed
on an individual basis in Australia] as an executive Director and became Group Managing Director and Chief Executive Officer in August 2002. Director of The Smith Family. Previously Managing Director, Australian Financial Services, Colonial,
following 25 years with Shell Australia and Shell International. Age 53.








Ms Carolyn Kay





BA, LLB, MAICD





Joined the Board in 2001. Director of Ansell Ltd, Treasury Corporation of Victoria, Deputy Chair Victorian Funds Management Corporation and National Gallery of Victoria Art Foundation and Advisor of Morgan Stanley. Former Executive
Director of Morgan Stanley (in London and Melbourne) and Director of Colonial State Bank. Age 41.








Mr Peter Mason AM





BCom (Hons), MBA





Joined the Board in 1992. Member of the Boards Audit and Compliance Committee. Chairman of JP Morgan. Also a Member of the Council of the University of New South Wales, Director of the University
of New South Wales Foundation, member of the Federal Governments Higher Education Review Reference Group and Governor of the Taronga Foundation. Age 56.




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Mr Rowan Russell





BA, LLB (Hons)





Joined the Board in 2001. Partner of Mallesons Stephen Jaques. A
Professional Associate of the Monash University Law School. Age 47.





Professor Judith Sloan





BA (Hons), MA (Melb), MSc (Lon)





Joined
the Board in 1995. Represents the Board on the Trustee Board of the Mayne Group Superannuation Fund Pty Ltd. Also Director of Santos Ltd and Australian Broadcasting Corporation and Chairman of SGIC Holdings Ltd. Commissioner of the Productivity
Commission (part-time). Former Professor of Labour Studies, Flinders University, South Australia. Age 47.





Peter Willcox BA (Hons), MA
(Cambridge)





Deputy Chairman, Chairman-elect





Joined the Board in October 2002 as Deputy Chairman with the intention of becoming Chairman on 1 January 2003. Deputy Chairman of Energy Developments Ltd and Director of AMP Ltd. Previously Director
and Deputy Chairman of Lend Lease Corporation. Also former Director of MLC Ltd, FH Faulding & Co. Ltd, James Hardie Industries Ltd, Schroders Holdings Australia Ltd, BHP Ltd, North Ltd, Woodside Petroleum Ltd, Tejas Gas Corporation (USA) and
Hamilton Oil Corporation (USA). Former Chief Executive Officer of BHP Petroleum. Age 57.





Senior Management





The Senior Managers of the Company as at 31 October 2002 are as follows:





Name

Position

Initially Appointed

Joined CompanyStuart Bruce James

Group Managing Director and Chief Executive Officer


2002

2000Robert John Cooke

Group General Manager, Hospitals

2002

2000David Benjamin Cranwell

Group General Manager, Logistics

2002

1995Peter John Fleming

Chief Information Officer

2002

2002Peter Lindsay Jenkins

Chief Financial Officer

2000

2000Jeannette Louise McLoughlin

Group General Manager, Public Affairs

2000

2000Jeffrey Wayne Pearce

Group General Manager, Personnel

2000

2000John William Priestley

Group General Manager, Corporate Services

2000

1989Alan Morton Reid

Group General Manager, Pharmaceuticals

2001

2001Stephen Patrick Roche

Group General Manager, Health

2002

2001







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Details of each Senior Managers (other than SB James) qualifications, experience and special
responsibilities are as follows:





Robert Cooke





DipBus, BHA





Robert joined Mayne in 2000 following earlier roles with the company
from 1991 to 1998. He is responsible for Maynes Australian hospital network and its investments in hospitals in Indonesia and the Fiji Islands. Robert has more than 25 years experience in hospital management, including the CEO role at a number
of hospitals both within and outside the Mayne network. Age 46.





David Cranwell





MBA, MNautSc





David joined Mayne in 1995
and is responsible for the Groups logistics businesses internationally. He previously held senior management positions with TNT and CS First Boston and is a qualified Master Mariner. Age 45.





Peter Fleming





BBM, G Dip Comp





Peter joined Mayne in 2002. He is responsible for information technology initiatives across the group, including the evaluation of
emerging technologies to support Maynes businesses internationally. Previously Chief Information Officer at Vodafone Australia and Colonial, Peter has also held senior IT roles with Coles Myer. Age 43.





Peter Jenkins





BCom, ACA (NZ)





Peter joined Mayne in 2000 and is responsible for all aspects of Maynes financial management and reporting. He previously held
senior planning, business integration and finance positions at Colonial  including Chief Financial Officer of Colonial Australian Financial Services  and senior planning, finance and marketing positions at Shell Australia. Age 50.




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Jeannette McLoughlin





BA





Jeannette joined Mayne in 2000 and is responsible for group-wide management of
corporate communications and public affairs issues. Jeannette previously held senior public affairs roles with Colonial and ANZ. She has also lectured in public relations at Deakin University. Age 42.





Jeff Pearce





BCom





Jeff joined Mayne in 2000 and is responsible for the personnel function across the group. Jeff was previously Group General Manager Personnel at
Colonial, following a 30-year career with Trans Australia Airlines where he held senior positions in personnel and airline operations. Age 59.





John Priestley





BEc, LLB





John joined Mayne in 1989 and was appointed Company Secretary in April 2000. Previously a solicitor with Minter Ellison, John is responsible for group secretariat, legal, compliance and insurance
functions. Age 44.





Alan Reid





BA (Hons)





Alan joined Mayne in 2001. He is responsible for the oral and injectable pharmaceuticals businesses and
the consumer products business unit. Alan was previously Senior Vice PresidentAsia Pacific for Basell International, a BASF/Royal Dutch Shell Group joint venture. Through previous assignments with Shell International, he has multi-discipline
international experience in the energy, resources, polymers and chemical industries. Age 56.





Stephen Roche





BBus





Stephen joined Mayne in
2001. He is responsible for the groups health services division, which includes pathology and diagnostic imaging services, medical centres and retail and logistics services for community pharmacy. Stephen previously held a number of senior
positions at Faulding and was appointed Chief Operating Officer of its health care services business in 1999. Age 40.





B. COMPENSATION





The aggregate income received or due and receivable by Directors and Senior Management for the year ended 30
June 2002 was approximately A$6,733,757. This amount covers 18 people worldwide.





Non-executive
Directors




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The Companys Constitution provides that the Board shall determine the total
remuneration paid to Directors for their services as Directors in respect of each year and its distribution amongst them, provided that such total amount shall not exceed the maximum amount approved from time to time by shareholders in a general
meeting.





The Board periodically obtains external independent advice as to the appropriate remuneration levels to
remain competitive with the market, having regard to companies of comparable size and complexity to Mayne.





The
Board also believes it is important for non-executive Directors to have share ownership in the Company to better align their interests with those of shareholders. To achieve this, the establishment of a non-executive Directors Share Plan
(the Plan) was approved by shareholders at the Annual General Meeting held in November 2000. The Plan requires all existing and future non-executive Directors to apply a minimum of 10 per cent of their annual Directors fees in
acquiring ordinary shares in the Company at the market price at the time of acquisition. Non-executive Directors may elect to take more than the mandatory 10 per cent in the form of shares in the Company.





Senior Management





The Companys remuneration policy is to relate total remuneration to the nature and level of responsibility and performance of senior executives, whilst recognising that market competitive remuneration rates are required to
attract and retain quality employees.





To assist in the determination of appropriate remuneration, the Company
obtains input from external specialist remuneration advisers and participates in comprehensive external executive reward surveys.





In consideration of the need to relate reward to performance, a market comparable part of total reward for senior executives is at risk as a performance based bonus, i.e. dependent on the achievement of Board approved
financial targets and strategic/business plan objectives. Details of bonus payments are set out below.





Details of the nature and amount
of emolument for the five highest remunerated officers during the year are:





Name Mayne Group Officers

Annual base salary $

Performance based bonus (a) $

Other benefits (b) $

Options granted this year over ordinary shares

Total remuneration $Number

Remuneration Value (c) $P L Jenkins

444,662

226,072

120,754

100,000

326,400

1,117,888A M Reid

465,435



3,816

200,000 100,000

424,000 118,000

1,011,251S Roche

207,440



93,630

200,000

462,000

763,070P M Hourihan

335,169

244,511

128,970





708,650R Cooke

310,960

129,232

93,510

100,000

112,000

645,702







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|(a) |  | Comprises contract bonus payments in respect of FY 2000/2001, based on performance in that year.
|--- |  | ------------------------------------------------------------------------------------------------




|(b) |  | Comprises other remuneration benefits such as company contributions to superannuation and the package value of motor vehicle benefits inclusive of FBT.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------




|(c) |  | The exercise price is the last sale price of Mayne Group ordinary shares on the business day immediately preceding the date of issue and the Black-Scholes
method has been used for valuation.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Only the Directors and the top 5 senior
management income figures are required to be disclosed under the Corporations Act 2001.





Group Executives are
entitled to participate in a short term incentive scheme where a bonus as a percentage of fixed annual remuneration may be awarded for the achievement of agreed target objectives related to the Group business plan. Target performance criteria are
agreed at the commencement of each measured period and are used as the basis for determining the payment related to the period.





As at 30 June 2002, the Company participated in superannuation plans applicable to all of the Companys employees generally, which include benefits to Directors and Officers or their dependants on retirement, resignation,
disablement or death. The Company makes contributions as specified in the rules of the respective funds, but no amounts can be attributed to individuals other than voluntary salary sacrifice contributions and, in some cases,
contributions made in accordance with minimum statutory requirements.





The Company has established a separate plan
for non-executive Directors which provides benefits upon retirement. The aggregate amount set aside or accrued with respect to this plan during 2001-2002 was A$230,000.





Each of the non-executive Directors of the Company has entered into a service agreement after two years of service as a Director with the Company pursuant to which a
retiring allowance in excess of that permitted by the Corporations Act 2001 as authorised by shareholders at the Annual General Meetings of the Company held on 8 November 1988 and 8 November 1994 (and amended with shareholder approval on 14 November
2000) is paid to the non-executive Director on retirement from office. The full extent of the liabilities of the Company under these arrangements is being provided for in the Financial Statements over the period to the planned dates of retirement.
At 30 June 2002, the maximum amount to be provided in future periods was A$1,322,000.





For full details of
Directors and Senior Managers option and shareholdings see Item 7 Share Ownership below.




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C. BOARD PRACTICES





Role of the Board





The Board is the governing body of Mayne
Group Limited and its primary role is the protection and enhancement of shareholder value. The Board represents and serves the interests of shareholders by overseeing and appraising the strategies, policies and performance of the company.





Board composition





The names and qualifications of the current Directors of the company are set out above. Rowan Russell was appointed as a Director on 28 August 2001. Sir Ross Buckland and Carolyn Kay were appointed as Directors on 25
September 2001 and 28 September 2001, respectively. Ian Harper announced his retirement from the Board at the Annual General Meeting in November 2001. Stuart James was appointed as a Director on 29 January 2002. Peter Smedley retired from the Board
on 28 August 2002.





Peter Willcox has accepted an invitation to join the Board as Deputy Chairman effective 1
October 2002 and will assume the role of Chairman upon the retirement of Mark Rayner from the Board on 31 December 2002.





During the year a majority of the Directors were independent, non-executive Directors. Independent means the Director is generally free of any interest and any business or other relationship which could, or could be
perceived to, materially interfere with the Directors ability to act in the best interests of the company.





The composition of the Board is reviewed by the Compensation and Nomination Committee to ensure that the Board has the appropriate mix of expertise and experience. Whilst it is the Boards role to define the desired
qualifications and attributes for any new Board candidate, the Board seeks the advice of the Compensation and Nomination Committee which also puts forward appropriate candidates, generally with input from independent consultants





Board meetings and contacts with executives





The full Board currently holds 11 scheduled meetings each year, plus meetings at such other times as may be necessary to address any significant matters that may arise, such as major investment
decisions. Sixteen Board Meetings were held during the year. Senior executives regularly attend Board and Board Committee meetings to make presentations, and Directors also undertake visits to operational sites from time to time.





Performance review of Board




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The Board periodically conducts a review of its processes to ensure that it is
able to carry out its functions in the most effective manner. This involves each Director assessing and commenting on the Boards performance against its major accountabilities.





Board Committees





To assis t in the execution of its
responsibilities, the Board has established a number of Board Committees including an Audit and Compliance Committee, Compensation and Nomination Committee, Share Issue Committee and a Standing Committee for Urgent Matters. Towards the end of the
year, an Occupational Health, Safety and Environment Committee was also established by the Board. These committees have written terms of reference which are reviewed on a regular basis.





Audit and Compliance Committee





This Committee
is responsible for providing a link between the external auditors of Mayne and the Board. It reviews financial statements for accuracy, to ensure they reflect a true and fair view, and for adherence to accounting standards and policies. The
Committee reviews accounting policies adopted or any changes made or contemplated, and is also responsible for reviewing the plans, results and effectiveness of the external and internal audit programs. In addition it is the Committees role to
approve the scope of the audit and recommend the external auditors fees for Board approval. It also ensures that procedures are in place to verify the existence and effectiveness of accounting and financial systems and other systems of
internal control and business risk management.





Another role of this Committee is to review procedures and
policies the company has in place to ensure compliance with laws and regulations including in areas such as trade practices, health legislation, discrimination and equal opportunity.





A majority of members of the Committee (including the Chair) are independent non-executive Directors and the Committee met five times during the year. The members during
the year were Messrs PC Barnett (Chair), MR Rayner, PE Mason and PJ Smedley (ex-officio).





The external audit firm partner usually
attends meetings by invitation, together with relevant senior executives. The external auditors (KPMG) were appointed on 31 October 1972. The Lead External Audit Engagement Partner was last rotated in 2000.





Compensation and Nomination Committee





This Committees purpose is to monitor, review and make recommendations to the Board, as necessary, regarding:





| |  |  | the remuneration arrangements for the Group Managing Director and Chief Executive Officer and other senior executives;
| | - |  | ----------------------------------------------------------------------------------------------------------------------




| |  |  | the remuneration policies and personnel practices and strategies of the company generally;
| | - |  | ------------------------------------------------------------------------------------------



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| |  |  | company option / share schemes;
| | - |  | -------------------------------




| |  |  | the remuneration arrangements for non-executive members of the Board;
| | - |  | ---------------------------------------------------------------------




| |  |  | the size and composition of the Board, criteria for Board membership and the membership of the Board, and to propose candidates for consideration by the Board.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------




A majority of members of the Committee (including the Chair) are independent non-executive
Directors and the Committee met six times during the year. The members of the Committee during the year were Mr IRL Harper (Chair until retirement in November 2001), Sir Ross Buckland (Chair) and Messrs MR Rayner, PC Barnett and PJ Smedley
(ex-officio).





Share Issue Committee and Standing Committee for Urgent Matters





All Directors are members of these Committees, although it is not expected all will attend each meeting.





The Share Issue Committee has delegated power to issue shares pursuant to the Dividend Reinvestment Plan, under employee share and option
schemes and in other circumstances approved by the Board. Two Directors, including at least one non-executive Director, can form a quorum.





The Standing Committee for Urgent Matters deals with urgent matters that require a quick response and have previously been approved in principle by the Board. Three Directors, including the Group Managing Director and at
least two non-executive Directors, can form a quorum.





Occupational Health, Safety and Environment (OHSE) Committee





This Committees purpose is to review and report to the Board as appropriate on all significant OHSE policies; monitor and
report to the Board on the adequacy and effectiveness of the management and compliance systems to manage OHSE risks and issues across the group; receive reports from management regarding compliance with the OHSE Management System; ensure adequate
internal and external audit review of the OHSE Management System and major risks is undertaken; and report to the Board on any significant OHSE matters.





All members of the Committee are independent non-executive Directors and the Committee held its first meeting early in the 2002/2003 year. The members of the Committee are Mr RMcR Russell (Chair) Sir
Ross Buckland and Ms SCH Kay.





Director remuneration and other terms and conditions of appointment





The companys Constitution provides that the Board shall determine the total remuneration paid to Directors for their services as
Directors for each financial year and its distribution amongst them, provided




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that the total amount does not exceed the maximum approved from time to time by shareholders in general
meeting.





Total remuneration for all non-executive Directors, last voted upon by shareholders at the 2001 Annual
General Meeting, is not to exceed A$1,000,000 per annum in aggregate.





The total remuneration paid (excluding
retirement payments) to all of the non-executive Directors for their services as Directors during 2001/2002 in aggregate was A$706,581. Further details of Director emoluments, and of the Boards policy and practice with respect to Director
remuneration, are set out in Item 6A above.





After completing two years of service, each Director is invited to
enter into a service agreement on terms previously approved by shareholders. Under this agreement the company provides a retiring allowance equivalent to the last three years of the Directors fees, plus 5 per cent of that amount for each
additional year of service beyond three years. Any superannuation benefits from compulsory company contributions are deducted from this allowance.





All Directors, except the Group Managing Director, must retire by rotation every three years, although each may stand for re-election. In addition, a maximum 15-year service period for newly appointed
Directors was introduced in November 1995, and Directors are advised of this at the time of appointment. Under the companys mandatory retirement rules, a Director must retire at the end of the Annual General Meeting following their 70th
birthday.





Under its Constitution, the company indemnifies its Directors, to the extent permitted by law, against
any liability incurred to a person other than Mayne Group Limited or its related bodies corporate, unless the liability arises out of conduct by the Director involving a lack of good faith. The indemnity also extends to cover costs and expenses
incurred by the Director in connection with legal proceedings. The company has entered into formal deeds confirming this indemnity in favour of each of its Directors.





In addition, the company has entered into deeds in favour of each of its Directors granting rights of access to and use of Board papers, minutes of meetings and other
related documents in connection with proceedings in which the Director may be involved. In general terms, the rights of access and use expire seven years after they cease to be a Director. Under the deeds, the company also assumes obligations to
arrange Directors and Officers liability insurance on behalf of the Directors, generally until the end of seven years after ceasing to be a Director. These deeds have been entered into under the companys Constitution approved by
shareholders.




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The policy and practice of the Board is that Directors must comply with the
requirements of the Corporations Act regarding disclosure of any office, property or other interests held by a Director which could create a potential conflict of interest. This position is also entrenched in the companys Constitution.





Independent professional advice





Any Director, with the approval of the Chairman, can seek independent professional advice at the companys expense. If the Chairman refuses approval, the Director may consult with the full Board
or, in the case of an executive Director, with the non-executive Directors.





Board review of management performance and remuneration





Strategic plans and business plans are prepared each financial year for Board review and approval. The
business plans are monitored regularly by the Board against actual performance. The Board reviews annually the individual performance and remuneration arrangements of the Group Managing Director and senior executives. The Compensation and Nomination
Committee assists in this process. Details of the remuneration packages of the five officers receiving the highest emoluments during the year are set out in Item 6.





Ethics





An important goal of the company is to develop and
maintain a strong culture built on the expectation that all Directors, managers and employees will act with integrity and honesty at all times. The company has policies across a range of areas including, for example, occupational health and safety,
workplace discrimination and harassment and appropriate use of internet and email.





Mayne Healths Charter of
Care articulates Maynes commitment to strive for superior clinical outcomes within a framework of efficient and ethical management and practice. Further, Mayne Health was a founding signatory to the national Code of Conduct for companies that
provide management and administrative services in medical centres. The voluntary Code affirms the importance that Mayne places on quality medical care, delivered within working and clinical environments that support the maintenance of relevant
ethical standards and professional excellence in the delivery of primary health care services to the people of Australia.





Share
trading policy for Directors and employees and continuous disclosure policy and processes





Mayne has an
established policy in relation to trading in Mayne securities by Directors and employees of Mayne. The policy reflects the insider trading provisions of the Corporations Act and, broadly speaking, seeks to limit trading of Mayne securities by
Directors and employees to three one month windows during the year coinciding with the release of Maynes half-year results, annual results and the holding of Maynes Annual General Meeting.




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Mayne has policies in place to ensure it meets its continuous disclosure
obligations, including a media relations policy that clearly outlines individuals who are authorised to make statements to the media and the process for authorising media releases. Mayne has an established practise of posting media releases and
other major announcements, such as half-year and full year results, on its internet site promptly following releases to the Australian Stock Exchange. There are also procedures relating to the release of price-sensitive information, which require
confirmation of market release from the ASX prior to release of information to any other parties. In addition, there are standing agenda items for Board and internal management meetings to consider whether any matters require disclosure.





Internal control and management of significant business risk





Financial reporting and investment appraisal





The results
of each business are reported against budget and monitored by the Board and management. There are guidelines for capital expenditure, which include specified levels of delegated authority and require Board approval for significant expenditure
proposals.





Risk management





The identification and proper management of risk within the company is an important priority for the Board and management. Each business is individually responsible, and financially accountable, for
ensuring it has appropriate systems in place for the protection of its people and assets. In addition, the company maintains a global insurance program.





The company is also exposed to changes in interest rates and foreign exchange rates. The companys policy is to use derivative financial instruments solely to hedge these risks. It does not enter,
hold or issue derivative financial instruments for trading purposes.





Internal audit and compliance





The companys internal audit function is resourced by a combination of internal and external personnel. Internal personnel ensure
that service delivery is aligned to changing business needs whilst external resources (PricewaterhouseCoopers) bring robust and proven methodologies and audit techniques. The audit program uses a business risk-based approach that is aligned to group
business objectives. Its focus is on controls assurance: maintaining adequate controls over key processes and strategic initiatives being pursued by the business.





A Group Compliance Program was implemented in the first half of the year to monitor the companys compliance with its legal and statutory obligations. The principal
objectives of the Compliance Program are to ensure there is a clear understanding across the group of all relevant obligations, to monitor compliance and, where issues are identified, to take prompt action to ensure compliance.




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Communications with shareholders





The Board aims to ensure that shareholders are informed of all major developments affecting Maynes state of affairs. Information is communicated to shareholders
through the Financial Report and Annual Review, half-year and full year results announcements, formal disclosures to the Australian Stock Exchange, the companys internet site and the Annual General Meeting. The Annual General Meeting also
provides an important opportunity for shareholders to express views and respond to Board proposals.





D. EMPLOYEES





At 30 June 2002, Mayne employed or engaged approximately 36,500 employees on a full-time equivalent basis. Of these,
approximately 5,400 were outside Australia, covering 2,800 in Canada, 400 in the USA, 300 in Europe and 1,900 in Asia. These employees were employed in the following business units: Pharmaceuticals, Consumer Health Products, Medical Centres,
Hospitals, Pathology, Pharmacy Services, Diagnostic Imaging, Logistics and Corporate.





The average number of
temporary employees employed by Mayne in 2001-02 was not significant, however the number of casuals employed was approximately 2,200 people or a full-time equivalent of approximately 900 people. Casual employees are hourly hire employees
who have no tenure of employment.





Since 2000-01 the number of Mayne employees has increased by approximately 12%
due to the acquisition of F H Faulding & Co Limited.





Wages in Australia for employees other than those
engaged in managerial or staff positions have historically been determined centrally, underpinned by the existence of Federal and State conciliation and arbitration tribunals and legal minimum wage rates.





Over the past decade the emphasis has been on enterprise bargaining agreements (EBAs) where wages and rates, working arrangements
and conditions are negotiated to suit the business enterprise. The aim of the agreement is to introduce improved performance, greater workforce participation and job satisfaction. Where appropriate, access is still available through the tribunals
for assistance and direction in resolving negotiation difficulties.





The unions are recognised as formal
representatives of employees and enterprise negotiations are conducted with unions acting on behalf of employees. Mayne enjoys a positive relationship with the unions, in an environment where the roles of the union have formal standing.




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Approximately, 30-40% of Mayne employees belong to a variety of unions including,
amongst others, the Transport Workers Union, National Workers Union, Nurses Federation, Non-nursing Hospital Employees Union and Professional Paramedical Associations.





In Canada, the Mayne employees are principally represented by either the International Brotherhood of Teamsters or the Canadian Auto Workers Union. Wages for unionised
employees are established under collective agreements, and it should be noted that the process for agreement negotiations is similar in Canada and Australia.





In both Australia and Canada, agreements are usually effective for periods of up to 3 years.





In the USA and Europe the employees are substantially professional and are not represented by employee organisations.





E. SHARE OWNERSHIP





Shareholding of Directors and Executive Officers as at 31
October 2002





Ordinary Shares(1) Director/Senior Manager

Options

Held Beneficially

Held Non-BeneficiallyMR Rayner



40,707

PC Barnett



11,879

R Buckland



21,073

SB James



750,000

SCH Kay



1,064

PE Mason



74,220

RMcR Russell



7,309

J Sloan



14,448

PJ Willcox



5,000

RJ Cooke

200,000

133

DB Cranwell

120,000

30,133

PJ Fleming

150,000



PL Jenkins

400,000

1,033

JL McLoughlin

120,000



JW Pearce

200,000

133

JW Priestley

120,000

1,172

AM Reid

300,000

5,000

SP Roche

200,000

764






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Option Holder Details





Name

Number Options

Exercise Price A$ (1)

Expiry DateRJ Cooke

100,000 100,000

3.71 3.97

31-May-05 27-Feb-07DB Cranwell

40,000 40,000 40,000

3.36 5.24 5.72

02-May-05 27-Feb-04 02-Feb-03PJ Fleming

150,000

3.86

12-Mar-07PL Jenkins

250,000 50,000
100,000

3.76 5.30 6.45

19-May-05 14-Nov-05 30-Apr-06JL McLoughlin

60,000 60,000

4.12 6.45

10-Jul-05 30-Apr-06JW Pearce

200,000

3.78

13-Jun-05JW Priestley

40,000 40,000 40,000

5.70 5.24 3.37

2-Feb-03 27-Feb-04 5-Feb-05AM Reid

200,000 100,000

7.01 4.07

20-Sep-06 25-Apr-07SP Roche

200,000

7.45

25-Aug-06





|(1) |  | All options are over ordinary shares of the Company and were awarded at no cost to the relevant officer.
|--- |  | --------------------------------------------------------------------------------------------------------




OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES





Executive Share Option Scheme





The Company has an Executive
Share Option Scheme, which was approved by shareholders on 8 November 1988. A brief summary of the Scheme is as follows:





|(a) |  | The options are granted at no cost to the executive.
|--- |  | ----------------------------------------------------




|(b) |  | The price per share payable on the exercise of an option shall be the greater of the last sale price of the shares recorded on the Australian Stock Exchange
Limited on the business day immediately preceding the Date of the Grant of the option and the nominal amount thereof after any adjustment appropriate following any pro rata issue of additional shares. As at June 2002, the rules of the plan were
amended and the price per share payable is the average sale price of the companys shares on the Australian Stock Exchange on the five business days immediately preceding the Date of Grant of the Option after any adjustment appropriate
following any pro rata issue of additional shares.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(c) |  | The option may be exercised at any time in the period from the fourth anniversary of the Date of the Grant of the Option (or such earlier date as the Directors
may, in their absolute discretion determine)
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------






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| |  | to 58 months from the date of grant (or, in respect of an option granted after 1 July 1999, such longer period, not exceeding 10 years from the date of the
grant, as the Directors may decide), except in the case of the special conditions which apply if an executive by reason of death, injury, disability, redundancy, retirement or other prescribed circumstances, leaves the employment of the Company or
if there is a takeover, reconstructions or winding up of the Company. Options that are not exercised at the end of the 58 months from the Date of Grant will lapse.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(d) |  | In general, if the option holder ceases employment for any reason other than death, retirement, injury, disability, redundancy or certain other prescribed
circumstances, the option will lapse at the date of ceasing employment.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(e) |  | No further options shall be granted if the result would be that the aggregate number of shares over which subsisting options have been granted under the Scheme
exceeds 5% of the aggregate number of fully paid shares then on issue.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(f) |  | Consistent with securities laws in Canada, a further special rule for Canadian executives applies whereby Canadian executives who participate in the Scheme are
deemed to have agreed, upon exercise of an option, not to transfer or trade any shares so acquired, except through the facilities of a stock exchange located outside Canada.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




The offering by the Company of its ordinary shares in Cable & Wireless Optus (Optus) entailed the issue of entitlements to subscribe for Optus shares
to Mayne shareholders and the return of capital to shareholders of A$1.00 per share in January 1999. To compensate option holders for these changes, which substantially affected the Mayne share price after the Optus float, options outstanding were
repriced as approved by shareholders at an extraordinary general meeting on 18 December 1998. The exercise prices of all executive options then current were reduced by amounts of between A$1.00 and A$2.28 to reflect the effect on the Mayne share
price of the entitlement offer to Mayne shareholders to apply for Optus shares, and the capital reduction of A$1.00. The average revised prices are indicated in brackets after the original exercise prices in the following paragraphs which set out
details of existing options. Only two current option series are affected by this adjustment.





On 8 April 1997, the
Company granted further options over 2,112,000 unissued shares to 260 executives of the Company and its subsidiaries at an exercise price of A$7.66 (A$5.88) per share.





On 3 April 1998, the Company granted further options over 2,823,000 unissued shares to 268 executives of the Company and its subsidiaries at an exercise price of A$7.87
(A$6.16) per share.




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On 28 April 1999, the Company granted further options over 2,371,000 unissued
shares to 246 executives of the Company and its subsidiaries at an exercise price of A$5.24 per share.





On 6
October 1999, the Company granted further options over 280,000 unissued shares to 6 executives of the Company and its subsidiaries at an exercise price of A$4.50 per share.





On 6 April 2000, the Company granted further options over 2,067,000 unissued shares to 210 executives of the Company and its subsidiaries at an exercise price of A$3.366
per share.





On 20 July 2000, the Company granted a further option over 250,000 unissued shares to an executive of
the Company at an exercise price of A$3.76 per share.





On 1 August 2000, the Company granted further options over
155,000 unissued shares to 2 executives of the Company at an exercise price of A$3.71 per share.





On 14 August
2000, the Company granted a further option over 200,000 unissued shares to an executive of the Company at an exercise price of A$3.78 per share.





On 1 September 2000, the Company granted a further option over 100,000 unissued shares to an executive of the Company at an exercise price of A$3.98 per share.





On 11 September 2000, the Company granted a further option over 60,000 unissued shares to an executive of the Company at an exercise price
of A$4.12 per share.





On 1 October 2000, the Company granted a further option over 30,000 unissued shares to an
executive of the Company at an exercise price of A$4.14 per share.





On 9 October 2000, the Company granted a
further option over 100,000 unissued shares to an executive of the Company at an exercise price of A$4.25 per share.





On 16 October 2000, the Company granted a further option over 330,000 unissued shares to 3 executives of the Company at an exercise price of A$4.48 per share.





On 15 January 2001, the Company granted a further option over 50,000 unissued shares to an executive of the Company at an exercise price of A$5.30 per share.




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On 23 April 2001, the Company granted a further option over 90,000 unissued
shares to an executive of the Company at an exercise price of A$6.23 per share.





On 1 July 2001, the Company
granted a further option over 160,000 unissued shares to 2 executives of the Company at an exercise price of A$6.45 per share.





On 28 August 2001, the Company granted a further option over 75,000 unissued shares to an executive of the Company at an exercise price of A$6.27 per share





On 26 October 2001, the Company granted a further option over 200,000 unissued shares to an executive of the Company at an exercise price of A$7.45 per share





On 1 November 2001, the Company granted a further option over 120,000 unissued shares to 2 executives of the Company at an
exercise price of A$7.45 per share





On 19 November 2001, the Company granted a further option over 100,000
unissued shares to an executive of the Company at an exercise price of A$7.11 per share





On 21 November 2001, the
Company granted a further option over 200,000 unissued shares to an executive of the Company at an exercise price of A$7.01 per share





On 1 December 2001, the Company granted a further option over 100,000 unissued shares to an executive of the Company at an exercise price of A$7.229 per share





On 1 January 2002, the Company granted a further option over 200,000 unissued shares to an executive of the Company at an exercise price of A$6.88 per share





On 1 April 2002, the Company granted a further option over 40,000 unissued shares to an executive of the Company at an exercise
price of A$5.16 per share





On 10 April 2002, the Company granted a further option over 50,000 unissued shares to
an executive of the Company at an exercise price of A$5.07 per share





On 15 April 2002, the Company granted a
further option over 50,000 unissued shares to an executive of the Company at an exercise price of A$5.09 per share




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On 28 April 2002, the Company granted a further option over 100,000 unissued
shares to an executive of the Company at an exercise price of A$3.97 per share





On 13 May 2002, the Company
granted a further option over 150,000 unissued shares to an executive of the Company at an exercise price of A$3.86 per share





On 30 May 2002, the Company granted a further option over 240,000 unissued shares to an executive of the Company at an exercise price of A$3.98 per share





On 26 June 2002, the Company granted a further option over 100,000 unissued shares to an executive of the Company at an exercise price of A$4.07 per share





On 1 July 2002, the Company granted a further option over 74,000 unissued shares to an executive of the Company at an exercise
price of A$4.14 per share





On 1 October 2002, the Company granted a further option over 60,000 unissued shares to
an executive of the Company at an exercise price of A$3.51 per share





During 2001-02, options to subscribe for
604,000 fully paid ordinary shares lapsed.





At 31 October 2002, an aggregate of 6,152,000 unissued ordinary shares
were under option to executives.





The Mayne Employee Share Acquisition Plan





At the Annual General Meeting on 17 November 1998, the shareholders approved the establishment of the Mayne Employee Share Acquisition Plan (ESAP), a brief
summary of which is as follows:





|a) |  | The company has advanced funds to the Mayne Employee Share Acquisition Plan Trust to enable the trust to acquire shares in the company.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------




|b) |  | The company has established a wholly owned subsidiary to act as Trustee and Plan Manager of the ESAP.
|-- |  | -----------------------------------------------------------------------------------------------------




|c) |  | Eligible employees who have served for a period decided from time to time by the Plan Manager are invited to purchase shares from the Plan Manager. The purchase
price will be at a discount to the market price of the shares on the day of purchase.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|d) |  | The purchase price is repayable from dividends payable on the shares, from any proceeds of a sale of bonus shares or rights or a return of capital, from any
sale of the shares under a takeover or compulsory
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  | acquisition, from the net proceeds of a sale consequent to the cessation of employment or death of the employee or from a voluntary payment by the employee.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------




|e) |  | No interest is payable on the unpaid purchase price.
|-- |  | ----------------------------------------------------




|f) |  | Except in the case of cessation of employment, an employee cannot dispose of an interest in the shares until three years from the date of purchase.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------




|g) |  | When the purchase price has been fully paid and the restrictions on disposal have ceased, the employee may require the Plan Manager to transfer the shares into
the employees name or to sell the shares and to account to the employee for the proceeds.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|h) |  | If an employee ceases to be employed before the purchase price has been paid in full, the shares must be sold by the Plan Manager unless, in specified periods,
the employee or his or her executors voluntarily pay the balance of the purchase price to the Plan Manager. If the balance is paid, the shares will be transferred to the employee or his or her executors.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|i) |  | If the Plan Manager sells the shares, the proceeds must be applied in or towards paying the outstanding purchase price but the employee will have no obligation
to pay the balance of the price if the proceeds are insufficient. If there is a surplus, the surplus must be paid to the employee. If the proceeds from selling the shares would be insufficient to fully pay the outstanding purchase price, the Plan
Manager may defer the sale and the employee will then have no further obligation to pay the outstanding price and no further rights in respect to the shares.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|j) |  | The Plan Manager may seek a direction from the employee as to voting in respect of the shares and in the absence of a direction may vote or abstain as it
decides.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------




|k) |  | At 30 June 2002 there were 1,394,169 restricted shares held on behalf of 7,074 Australian employees (June 20011,500,549 shares held on behalf of 7,617
employees) under the ESAP at a price of A$5.06 per share and 1,717,296 restricted shares held on behalf of 12,912 Australian employees under the ESAP at a price of A$0.01 per share.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




On 31 August 2001, the Plan Manager issued an invitation to eligible employees to purchase approximately A$1,000 of Mayne Group ordinary
shares at a purchase price of 1 cent per share, with the number of shares to be received based on the volume weighted average price at which Mayne shares were traded on the Australian Stock Exchange during the week up to and including the date of
allocation. On 1 November 2001, 1,800,022 shares were issued to 13,534 employees under the invitation.





Non-Executive Directors
Share Plan





At the Annual General Meeting on 14 November 2000, the shareholders approved the establishment of
the Mayne Group Non-Executive Directors Share Plan (NED Plan).





A brief summary of the NED Plan
is as follows:





|(a) |  | The NED Plan commenced operation from 1 January 2001.
|--- |  | -----------------------------------------------------



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(b)    Under the NED Plan, each non-executive Director is required to apply a
minimum of 10% of his or her annual directors fees (including any board committee fees) in acquiring ordinary shares in the Company. The terms of the NED Plan also allow a non-executive Director to elect to take more than the mandatory 10% in
the form of shares in the Company.





(c)    The NED Plan is not open to executive Directors.





(d)    The NED Plan does not provide for any loans to Directors or other financial assistance by the Company.





(e)    Shares are normally acquired on a quarterly basis and are either purchased on the ASX or issued as new shares.





(f)    Shares acquired on the ASX are purchased at the prevailing market price of the Companys shares
and each Director receives the number of shares that can be purchased (inclusive of any brokerage and stamp duty) with 10% of his or her total directors fees or such greater percentage of those fees as the Director may elect in accordance with
the NED Plan rules.





(g)    If new shares are issued, the price of those shares is the weighted average of the
prices at which the Companys shares were traded on the ASX during the five trading days prior to and including the date of issue.





(h)    If shares cannot be acquired by a Director for legal or other reasons, the Director will receive his or her fees in cash for that period.





(i)    Shares acquired by or issued to Directors under the NED Plan rank equally (in respect of dividends and other rights) in all respects with the other issued fully
paid ordinary shares.





(j)    Each Director is, in general, required to retain the shares for:





| | (1) |  | as long as he or she holds office as a Director; or
| | --- |  | ---------------------------------------------------




| | (2) |  | 10 years,
| | --- |  | ---------




whichever is the shorter period (the restriction period). Unless a non-executive Director elects to be taxed on the shares in the year they are acquired, the Director will not be taxed on the shares until the restriction
period has ended.





(k)    Implementation of the NED Plan does not increase the total remuneration paid or provided
by the Company to non-executive Directors.





During the 2001 and 2002 financial years, the total number of
ordinary shares purchased under the Plan was 38,447 (June 200110,509 shares) and no shares were issued under the Plan.




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ITEM 7-
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS





The information in this section is correct as at 31
October 2002.





A.    MAJOR SHAREHOLDERS





The Company is not directly or indirectly owned or controlled by another corporation or by any foreign government.





The following companies have notified the Company that they owned more than 5% of any class of the Companys voting securities. The number of ordinary full paid
shares on issue at 31 October 2002 is 813,779,611.





Name and address of Shareholder

Latest reported shareholding

Reported % of issued capitalMaple-Brown Abbott (MBA)Level 28 Westpac Plaza, 60 Margaret Street Sydney

88,957,553

10.93
%Franklin Resources, Inc. and its affiliates (FRI)500 East Broward Blvd, Suite 2100, Fort Lauderdale

57,257,051

7.07
%National Australia Bank Limited GroupLevel 24, 55 Bourke Street, Melbourne Vic 3000

42,419,488

5.21
%





Set forth below is a history of the changes in the shareholdings of
the shareholders listed above as notified by those shareholders to the Company.





Holder

Date of Initial
Notice

No of Shares
Held

Date of Highest
Holding

No of Shares
Held

Date of last
Notice

Latest Reported
HoldingMBA

3-Mar-99

21,785,040

16-Sep-02

79,827,877

16-Sep-02

79,827,877FRI

04-Jul-02

40,918,259

24-Sep-02

57,257,051

24-Sep-02

57,257,051NAB

18-10-02

42,419,488

18-10-02

42,419,488

18-10-02

42,419,488




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Distribution of shares





Holdings

Number of holders of fully paid ordinary shares

Number of shares1-1,000

40,921

22,098,4681,001-5,000

52,639

121,824,6985,001-10,000

7,912

56,557,03710,001-100,000

4,131

85,927,832100,001 and over

189

527,371,576Total

105,792

813,779,611





Twenty Largest Shareholders





Number of Shares

Percent of Shares on issueNational Nominees Limited

110,152,032

13.54
%J P Morgan Nominees Australia Limited

101,808,032

12.51
%Westpac Custodian Nominees Limited

80,873,336

9.94
%RBC Global Services Australia

29,871,503

3.67
%MLC Limited

20,992,343

2.58
%ANZ Nominees Limited

17,249,827

2.12
%Citicorp Nominees Pty Limited

16,116,132

1.98
%Queensland Investment Corporation

11,889,686

1.46
%Commonwealth Custodial Services Limited

11,321,016

1.39
%AMP Life Limited

9,204,030

1.13
%ING Life Limited

8,650,134

1.06
%Cogent Nominees Pty Limited

8,449,577

1.04
%PGA Group Pty Limited

7,500,000

0.92
%HSBC Custody Noms (Aust) Limited

4,817,321

.59
%Government Superannuation Office

3,489,725

.43
%Mayne Employee Share Acquisition Plan Pty Ltd

3,085,329

.38
%Victorian Workcover Authority

3,029,969

.37
%Australian Foundation Investment

2,899,027

.36
%Bond Street Custodians Limited

2,820,441

.35
%Zurich Australia Limited

2,815,018

.35
%




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Voting Rights





On a show of hands, every person present in the capacity of a member or the representative of a member which is a body corporate, or the proxy or an attorney of a member,
or in more than one of those capacities has one vote. On a poll, every member who is present in person or by proxy or attorney or, in the case of a member which is a body corporate, by representative has one vote in respect of every fully paid share
held by such member. No shareholder has any different voting rights than are enjoyed by all shareholders.





Change in Control





There are no arrangements known to the Company, the operation of which may at a subsequent date result in a
change in control of the Company.





Related Party Transactions





Loans to Directors





At the Annual General Meeting in
November 2000 shareholders ratified the issue, on 23 June 2000, of 2,000,000 shares to PJ Smedley and 750,000 shares to SB James, in each case at market price and financed by an interest free loan of A$5.86 million in the case of Mr Smedley and
A$2.198 million in the case of Mr James. The loan to Mr Smedley must be repaid in full by 31 December 2002 and the loan to Mr James must be repaid in full by no later than the expiry date of Mr James service agreement being 28 August 2007. In
each case, if the amount outstanding at the relevant date exceeds the value of the shares issued, repayment is only required of an amount equal to the value of the shares on that date. The loans must be reduced by the after-tax amount of any
dividends received in respect of the shares and by the after-tax amount of any fees received by Mr Smedley or Mr James (as the case may be) as a result of holding a directorship (with the Companys consent) of a company outside the Mayne Group.
Any proceeds of a buy-back or cancellation of the shares by the Company must first also be applied to repayment of the loans. The Company is liable for any fringe benefits tax payable in respect of the issues of shares and the loans. During the
year, A$290,000 of the loan to Mr Smedley was repaid and A$ 50,000 of the loan to Mr James was repaid. At 30 June 2002, the balance of the loan to Mr Smedley outstanding was A$5.395 million and of the loan to Mr James outstanding was A$2.105
million.





In addition, the balance of car loans previously made to RC Susilo, a director of PT Putramas
Mutiasantosa, and J Gunawan, a director of PT Mitrajaya Medikatama, was A$35,110 at balance date (2001: A$47,272). These loans are for a period of 5 years and expire in 2002 and March 2005 respectively and are interest free. An amount of A$7,296.90
from Mr Gunawan and A$4,865 from Mr Susilo was received in part repayment of these loans during the year.




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Other transactions





Particulars of related party transactions entered into by the economic entity with Directors or their director related entities during the year are as follows:





|(a) |  | During the year, the parent entity has entered into:
|--- |  | ----------------------------------------------------




| | (i) |  | deeds of indemnity in favour of SB James (who became a Director on 29 January 2002), S C H Kay (who became a Director on 28 September 2001), Sir R Buckland (who
became a Director on 25 September 2001) and R McR Russell (who became a Director on 28 August 2001) in accordance with the terms of rules 69(a) and (b) of the parent entitys constitution which provide an indemnity against liabilities incurred
while acting as an officer of the parent entity to persons (excluding the parent entity or its related bodies corporate) to the extent permitted by law;
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (ii) |  | deeds in favour of SB James, SCH Kay, Sir R Buckland and RMcR Russell in accordance with the terms of rules 68 and 69(c) of the parent entitys
constitution which include basically for a period of seven years after ceasing to be a Director:
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | rights of access and use with respect to Board papers, minutes of Board and of Committee meetings and other related documents in connection with proceedings in
which the Director may be involved, subject to reasonable limitations where issues of confidentiality or privilege arise; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | obligations of the parent entity to arrange directors and officers liability insurance on terms which are reasonable having regard to various
factors relating to the parent entity and the insurance market;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (iii) |  | deeds of indemnity with PE Mason, MR Rayner, PC Barnett, PJ Smedley, SB James, PL Jenkins, PM Hourihan, A Burgess, JW Priestley and KP Kee indemnifying them
against certain liabilities that may be incurred in connection with the takeover bid to acquire all the shares and options in FH Faulding & Co Limited and their involvement in the due diligence process connected with the takeover bid and also
against certain associated legal costs that may be reasonably incurred by them in defending an action for any such liability;
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (iv) |  | deeds of indemnity with G Brown, D Cranwell, R Passalaqua and H Anneveldt, being the Directors of the newly incorporated subsidiary PT Mayne Logistics
Operations (Indonesia), against liabilities incurred in their capacity as an officer of the subsidiary whilst it was in the process of formation, to the extent permitted by law.
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(b) |  | The parent entity pays premiums in respect of directors and officers liability insurance. Part of the premium relates to former directors and
officers of the economic entity.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(c) |  | Mr GG Spurling who resigned as a Director of the parent entity on 29 May 2001 was paid A$197,420 during the year in accordance with his service contract and as
approved by shareholders.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(d) |  | Certain wholly owned controlled entities entered into transactions with their Directors or entities associated with their Directors. These transactions
included:
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (i) |  | Rental paid to Mr B McClelland, a director of Central Laboratories Limited and Central Laboratories (Ireland) Limited, for the use of premises leased from him.
Services were provided to Central Laboratories by Mr P McClelland, Mr McClelland brother, trading as Desktop Design. Both fees were paid on normal commercial terms and conditions.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (ii) |  | Legal fees paid to the legal firm Fraser Milner Casgrain LLP, of which Mr R S Carswell, a director of Mayne Pharma (Canada) Inc, is a partner. These fees were
paid on normal commercial terms and conditions.
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (iii) |  | Legal fees paid to Borden Ladner Gervais LLP, where Ms S Beaubien, a director of Mayne Pharma (Canada) Inc, is a partner. These fees were paid on normal
commercial terms and conditions.
| | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (iv) |  | Legal fees paid to the legal firm Reed Smithof which Mr W R Griffith, a director of Faulding Holdings Inc and Faulding Healthcare international Holdings Inc and
various subsidiaries of those companies, is a partner. These fees were paid on normal commercial terms and conditions.
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (v) |  | Legal fees paid to Mallesons Stephen and Jaques where Mr R Russell, a director of Mayne Group Limited, is a partner. These fees were paid on normal commercial
terms and conditions.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (vi) |  | Corporate Service Fees were paid to Hicks-Woode Corporate Services Sdn Bhd of which Ms Mah Li Chen, a director of Faulding Pharmaceuticals (M) Sdn Bhd, is a
director.
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (vii) |  | Management fees and corporate services fees paid to AON Insurance Managers (Singapore) Pte Ltd of which Michael John Parrish and Betty Tan Kim Hiang, directors
of Transport Security Insurance (Pte) Limited, are directors.
| | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (viii) |  | Euromed Srl, Fin Posillipo Spa, Farmacie Petrone Srl, Farmacie Massimo Petrone, Farmacie Internazionale and Farmacie Carmine Petrone Srl, all of which are
director related entities of R Petrone, a director of Faulding Farmaceutici Srl, bought and sold various goods and services and received commissions on sales from the F H Faulding & Co Ltd Group of companies on normal commercial terms and
conditions.
| | ------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The above transactions comprise:





2002

2001A$000

A$000Purchase of Goods & Services

973

Sale of Goods & Services

725

Commission Paid

91

Legal fees

2,102

434Rent paid

26

Corporate Services and other Fees

59

144





The following amounts were outstanding at the end of the year arising from transactions
with Directors of companies in the economic entity and their Director related entities during the year detailed above:





Aggregate amounts
receivable from Directors and their director related entities





Current

A$
74,471





Aggregate amounts payable to Directors and their director related
entities





Current

A$
656,295





|(e) |  | From time to time Directors of the parent entity or its controlled entities may use the logistics or healthcare services provided by entities within the
economic entity.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(f) |  | Directors of the parent entity are Directors of other entities which trade with the economic entity under normal customer supplier relationships. None of these
Directors is able individually or jointly to significantly influence the commercial relationship of these entities with the economic entity.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(g) |  | In addition to the transactions above transactions entered into during the year with Directors of its controlled entities or with director-related entities
included contracts of employment with relatives of Directors on either a full time, casual or work experience basis on normal commercial terms and conditions.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Each of the transactions referred to in (e), (f) and (g) above:





| | (i) |  | occur within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those which it is reasonable to expect the
entity would have adopted if dealing with the director or director-related entity at arms length in the same circumstances;
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | (ii) |  | do not have the potential to adversely affect decisions about the allocation of scarce resources made by users of the financial report, or the discharge of
accountability by the directors, if disclosed in the financial report only by general description; and
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (iii) |  | are trivial or domestic in nature.
| | ----- |  | ----------------------------------



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ITEM 8
FINANCIAL INORMATION





SELECTED FINANCIAL DATA





Refer to Item 18 pages F1  F81





LEGAL
PROCEEDINGS





To the best knowledge of the Company, neither the Company nor any of its subsidiaries is engaged
in any litigation or claim which is likely to have a significant effect on the Companys financial position or profitability or that of any of its subsidiaries.





DIVIDEND POLICY





The full year dividend of 14 cents
represents a payout ratio of approximately 52% of net profit after tax before the impact of significant items and the amortisation of intangibles.




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ITEM 9
THE OFFER AND LISTING





The principal trading market for Mayne Group
Ordinary Shares is the Australian Stock Exchange (ASX).





American Depositary Shares
(ADSs), each representing five (5) Ordinary Shares and evidenced by American Depositary Receipts (ADRs), for which Citibank N.A. of New York is the Depositary, are traded over the counter in the United States.





The following table sets forth for the periods indicated the highest and lowest market closing price quotations for Ordinary
Shares reported on the Daily Official List of the ASX adjusted to reflect stock dividends, rights issues and entitlement issues during the periods indicated. Prices for the Companys ADSs in the United States over the counter market are not
currently quoted on a national exchange.





Ordinary SharesHigh A$

Low A$1997-98



7.45

5.001998-99



8.21

4.921999-2000



5.55

2.902000-01



6.70

3.55First Quarter

4.20

3.55Second Quarter

5.95

4.23Third Quarter

6.61

4.88Fourth Quarter

6.70

6.002001-02



7.50

3.65First Quarter

7.07

6.17Second Quarter

7.50

6.48Third Quarter

6.92

5.16Fourth Quarter

5.36

3.65Ordinary SharesHigh A$

Low A$March-02



5.79

5.16April-02



5.36

3.68May-02



4.27

3.65June-02



4.30

4.00July-02



4.22

3.91August-02



3.95

3.67September-02



3.70

3.50







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As of 13 September 2002, 593,050ADRs representing 2,965,250 Ordinary Shares were
outstanding and were held by two holders. As of 13 September 2000, 514,176 Ordinary Shares were registered in the names of 107 holders with United States addresses representing approximately 0.06% of the Companys outstanding Ordinary Shares.





The priority entitlement to Mayne Group shareholders to the Companys Optus shares through the divestment of
its shareholding in Optus in November 1998 and the subsequent capital return of A$1.00 per share in January 1999 represented significant value transfers to shareholders. The share price from the second quarter of 1998-99 includes these value
transfers.




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ITEM 10
ADDITIONAL INFORMATION





Constitution





The following is a summary of certain of the major provisions of the constitution of Mayne which may be inspected during normal business hours at the registered office of
Mayne.





Voting





At a general meeting, every member present in person or by proxy, attorney or representative has one vote on a show of hands in respect of its shareholding, and has one vote on a poll for each fully paid Mayne Share held
(with adjustments for partly paid Mayne Shares of which there are none issued at present).





Meetings of Members





A general meeting may be called by directors resolution or at the request of Mayne shareholders with at least 5% of the
votes that may be cast at a general meeting or at least 100 Mayne shareholders entitled to vote at the general meeting.





Dividends





The directors of Mayne may pay any interim and final dividends that, in their judgement, the financial
position of the company justifies. The directors of Mayne may rescind a decision to pay a dividend if they decide, before the payment date, that Maynes financial position no longer justifies the payment.





Issue of Further Shares





Subject to Mayne Groups constitution, the directors of Mayne Group may issue shares in Mayne Group. The directors may also decide the terms on which shares in Mayne are issued and the rights and restrictions attached to those
Mayne Group Shares.





Transfer of Mayne Shares





Holders of Mayne Shares may transfer them by a proper transfer effected in accordance with the SCH Business Rules (the business rules of the securities clearing house or by
a written transfer in any usual form or in any other form approved by the directors.




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Winding Up





Subject to any special or preferential rights attaching to any class or classes of Mayne Shares, members will be entitled, in the event of a winding up, to share in any
surplus assets of Mayne in proportion to the capital paid up or which ought to have been paid up on the Mayne Shares held by them.





Small Holdings





The directors of Mayne may sell Mayne Shares which constitute less than a
marketable parcel subject to following certain procedures. The directors may send to a Mayne Shareholder who holds less than a marketable parcel a notice advising that shareholder that he or she may choose to be exempt from this rule of the
constitution of Mayne. If, however, after the expiration of at least 6 weeks, the Mayne Shareholder has not responded, the Mayne Shareholder is deemed to have irrevocably appointed Mayne as his or her agent to sell the Mayne Shares constituting a
less than marketable parcel as soon as practicable at a price which the directors consider is the best price reasonably available for the shares when they are sold. The proceeds of the sale of those Mayne Shares must then be paid to the former Mayne
Shareholder and must not be applied to the expenses of the sale.





Proportional Takeover Provision





Where offers have been made under a proportional takeover bid in respect of Mayne Shares, the registration of a transfer giving effect to
a takeover contract for the bid is prohibited unless and until an approving resolution to approve the takeover bid is passed at a meeting convened by Mayne of all Mayne Shareholders entitled to vote on the resolution.





Directors





The
minimum number of directors of Mayne Group is four and the maximum number is 14 unless Mayne in general meeting resolves otherwise.





Officers Indemnity





Mayne, to the extent permitted by law, indemnifies each officer
of Mayne (and any person who has previously served in any such capacity) against any liability which results from their service as an officer of Mayne or a related body corporate of Mayne which does not arise out of conduct involving a lack of good
faith.




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Buy back Authorisation





Nothing in Mayne constitution precludes Mayne buying back its own shares or imposes restrictions on the exercise of Mayne power to buy back its own shares. Mayne has an
on-market buy back in place.





Modification of Constitution





Mayne may modify or repeal its constitution, or a provision of its constitution, by special resolution, being a resolution of which notice has been properly given in
accordance with the Corporations Act and which has been passed by at least 75% of the votes cast by members of Mayne entitled to vote on the resolution at a general meeting.





MATERIAL CONTRACTS





Acquisition of Australian Hospital Care Limited





The acquisition of Australian Hospital Care Limited by HCoA Hospital Holdings (Australia) Pty Ltd, a wholly
owned subsidiary of Mayne was completed in March 2001. During the acquisition, we provided an undertaking to the Australian Competition and Consumer Commission to divest four hospitals as a result of localised competition issues.





Offer to acquire FH Faulding & Company Limited





In May 2001, Mayne announced an offer to acquire Faulding. In relation to this offer, Mayne has entered into an agreement with global specialty pharmaceutical company, Alpharma Inc., under which Mayne
will dispose of Fauldings US-based oral pharmaceuticals business for US$660 million following Maynes acquisition of Faulding.





Faulding shareholders could choose from any of the following three forms of consideration:





|1. |  | 2.344 Mayne shares for each Faulding share; or
|-- |  | ----------------------------------------------




|2. |  | $6.50 cash plus 1.239 Mayne shares for each Faulding share; or
|-- |  | --------------------------------------------------------------




|3. |  | a minimum of $6.50 cash plus
|-- |  | ----------------------------




| |  |  | additional cash of up to $7.84 per share to the extent cash is available from a total cash pool (for both of the cash and share alternatives) of approximately
$1.108 billion
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | to the extent cash is not available, 0.158 Mayne shares for each $1 that would otherwise be payable in cash.
| | - |  | ------------------------------------------------------------------------------------------------------------



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A number of agreements were entered into as part of Maynes offer for
Faulding. These are described in greater detail below.





Agreement with Alpharma to Sell Oral Pharmaceuticals Business





On 12 July 2001, Mayne, Mayne Health Logistics Pty Ltd (Mayne Health Logistics) and Alpharma and a
wholly-owned subsidiary of Alpharma (collectively Alpharma) entered into the Alpharma Put and Call which provides for Mayne to dispose of the Oral Pharmaceuticals Business to Alpharma for US$660 million following Mayne Health
Logistics acquisition of 100% of the Faulding Shares and Faulding Options under the offers.





Alpharma is a
specialty pharmaceutical company with positions in products for humans and animals. It is presently active in more than 60 countries. Alpharma a manufacturer of generic liquid and topical pharmaceuticals in the United States and a manufacturer of
generic solid dose pharmaceuticals in Europe, with a presence in Southeast Asia. It is listed on the New York Stock Exchange.





Implementation





The terms of the agreement provided that as soon as practicable
after all of the conditions of the offers were satisfied or waived, the Companys wholly-owned subsidiary, Mayne Health Logistics would cause the board of Faulding and each of its subsidiaries to be reconstituted so that each comprises a
majority of Mayne Health Logistics nominees. Mayne Health Logistics would then appoint Alpharma to manage the Oral Pharmaceuticals Business, pursuant to a management agreement which would provide Alpharma with full and exclusive authority to
take all action which, in its reasonable discretion, it believed necessary or desirable to operate and manage or direct the operation and management of the Oral Pharmaceuticals Business.





The agreement required that following the reconstitution of the Faulding board and the acquisition of 100% of the Faulding Shares and the Faulding Options, Mayne would
reorganise the assets and liabilities of Faulding and its subsidiaries. The purpose of the reorganisation was to restructure the Faulding Group such that, after the reorganisation Mayne Health Logistics would hold all of the assets and liabilities
that relate primarily to the Oral Pharmaceuticals Business. The agreement required the reorganisation to be completed not later than 60 Business Days after Mayne Health Logistics acquired 100% of Faulding Shares and Faulding Options.





Put and Call Options





Alpharma granted Mayne a put option (the Put Option) such that, following the reorganisation of Faulding described above; Mayne may require Alpharma to buy all of the shares in Mayne Health Logistics.
Mayne Health Logistics granted to Alpharma a call option (the Call Option) whereby, if Mayne did not exercise the Put Option, Alpharma may require Mayne Health Logistics to sell to it all of its shares in the U.S.




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corporation which is the parent corporation of certain of the corporations which conduct the Oral Pharmaceuticals Business and all of the other
assets and liabilities of the Oral Pharmaceuticals Business.





Funding





Alpharma and Mayne entered into a US$400 million Loan Facility Agreement (the Loan Facility Agreement) pursuant to which Alpharma agreed to advance US$400
million to Mayne as a non-interest bearing loan. Alpharma deposited US$145 million into an escrow account. The deposit was treated as an advance under the US$400 million facility and on the day that the board of Faulding is reconstituted, the Loan
Facility Agreement required Alpharma to advance a further US$255 million to Mayne, which together with the US$145 million, would be held in an escrow account pending payment of the consideration under the offers. Repayment of the loan facility would
be satisfied by Alpharma directing Mayne to effect repayment by applying the amount advanced to the satisfaction of the purchase price on the exercise of the Put Option or the Call Option.





On the day that the board of Faulding is reconstituted, the terms of the Loan Facility Agreement required Alpharma to provide Mayne with an irrevocable standby letter of
credit issued by Bank of America in the amount of US$260 million, which could be drawn by Mayne on the closing of the Put Option or the Call Option. If Alpharma did not advance the US$255 million under the Loan Facility Agreement as described above
or provide the letter of credit for US$260 million as described above, Mayne would be entitled to sell the Oral Pharmaceuticals Business to a third party and claim against the US$145 million deposit if the Oral Pharmaceuticals Business is sold for
less than US$660 million. In the event that the Oral Pharmaceuticals Business was not sold within two years, Mayne would be able to claim against the US$145 million for any damages it suffered as a consequence.





Offer Conditions





Under the various agreements, Mayne Health Logistics was required to obtain Alpharmas consent prior to:





declaring
the offers free of any conditions, other than those in Sections 7.9(a)(ii) and (xi) of the offer Healthcare Business or the Injectables Business (as defined in the Statement on page 63), those in Sections 7.9(a)(iv), (v) and (ix)B of the Statement;





extending the offer period beyond the earlier of 12 November 2001 or 28 days after the offers are declared free of all conditions (other
than the minimum acceptance conditions in Sections 7.9(a)(i) and (ii) of the Statement); or





varying the offers under certain
circumstances or withdrawing the offers.




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Other Provisions





| |  |  | The Alpharma Put Option and Call Option provided for limited representations and warranties by each of the parties, generally only as to capacity and title to
the shares and assets being sold.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | Mayne was required to indemnify Alpharma against all liabilities of Mayne Health Logistics prior to the closing of the sale of Mayne Health Logistics shares on
exercise of the Put Option (including any liabilities to third parties arising out of the offers).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | Alpharma was required to indemnify Mayne in respect of third-party claims in relation to the information provided by Alpharma for inclusion in the Statement.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | Mayne was required to indemnify Alpharma and Mayne Health Logistics in respect of tax imposed on Mayne Health Logistics prior to the closing of the sale of
Mayne Health Logistics shares on exercise of the Put Option and certain taxes imposed in relation to the reorganisation of Faulding prior to the exercise of the Put Option or the Call Option.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Sale of Maynes Non-Health Logistic Businesses





General





On 1 November 2002, Mayne Group Limited and certain of its subsidiaries
(Mayne) entered into a number of agreements for the sale of its logistics businesses in Australia, Asia and Canada and the real properties used in the conduct of those businesses. Further details of these agreements are set out
below. The aggregate of the purchase price payable for the businesses (including the real properties sold as part of the businesses), the value of the trade debtors retained by Mayne and the debt assumed by the purchasers is A$456 million.





Express





On 1 November 2002, Mayne Group Limited and Mayne Logistics Pty Limited (Mayne) entered into an asset sale agreement (Express Sale Agreement) with Toll Transport Pty Limited
(Toll), pursuant to which Mayne agreed to sell to Toll its Australian business operations and activities comprising the provision of time-critical express courier and messenger services, and its fashion and technical services
logistics businesses (Express Business). Tolls parent company, Toll Holdings Limited guarantees Tolls obligations under the agreement. Completion of the sale pursuant to the Express Sale Agreement occurred on 11
November 2002.





The assets sold comprise goodwill, fixed assets, motor vehicles, intellectual property, stock,
prepayments, business records, business names, Maynes rights under certain business contracts and property leases relating substantially to the Express Business and all other assets owned by Mayne which are used substantially in the conduct of
the Express Business but exclude cash and trade and other debtors (to which




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Mayne remains entitled after Completion). Mayne has sold real property relating to the Express Business under the terms of a separate land sale
agreement.





Under the Express Sale Agreement, Toll has assumed responsibility and liability for obligations
arising after Completion under business contracts relating to the Express Business and certain employment related liabilities referred to below. Mayne has retained responsibility and liability for all other debts and liabilities of the Express
Business.





Toll was obliged to make offers to employees and independent contractors of the Express Business on
terms and conditions no less favourable in aggregate than those on which the relevant employees or independent contractors were employed immediately prior to Completion, and to recognise their accrued entitlements. Toll has assumed responsibility
and liability for obligations relating to the employees and independent contractors of the Express Business (including workers compensation claims arising before or after Completion in respect of employees and independent contractors
transferring to Toll and any retirement, redundancy or severance payments or costs in respect of employees or independent contractors of the Express Business).





Mayne has given warranties and indemnities customary in asset sale agreements in Australia, subject to limitations at to time, minimum and maximum claim amounts and certain other limitations.





Subject to certain exceptions, Mayne has agreed not to carry on any business of priority freight, courier,
technical support courier, parcel freight mailroom or fashion distribution courier or transport, distribution or storage business, or any business which is substantially the same as, or competitive with, the Express Business in Australia for 3 years
after Completion.





The parties have entered into a shared services agreement pursuant to which Mayne has agreed to
provide Toll with certain transitional services, including IT related services, for up to 6 months from Completion.





The parties have also entered into a service agreement pursuant to which Toll was appointed the preferred supplier to Mayne of express and courier services for a period of 3 years from Completion.





Contract Logistics





On 1 November 2002, Mayne Group Limited and Faulding Healthcare Pty Limited (Mayne) entered into a share and asset sale agreement (Contract Logistics Sale Agreement) with Linfox Proprietary
Limited (Linfox), pursuant to which Mayne agreed to sell to its business comprising integrated contact distribution, warehousing, inventory control, fulfilment and fleet management carried on in Australia, Malaysia, Indonesia,
Thailand and China (Contract Logistics Business). Completion of the sale pursuant to the Contract Logistics Sale Agreement is scheduled to occur on 3 February 2003.





The sale of the Contract Logistics Business will be effected by the sale of all of the issued shares in the capital of Mayne Logistics Pty Limited (MLPL)
and certain other assets. The other assets to be sold




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comprise goodwill, fixed assets, motor vehicles, intellectual property, stock, prepayments, business
records, business names, trade debts owing to Mayne in respect of the Contract Logistics Business prior to Completion, Maynes rights under certain business contracts and property leases relating exclusively to the Contract Logistics Business
and all other assets owned by Mayne which are used exclusively in the conduct of the Contract Logistics Business but exclude cash and debtors other than trade debtors (to which Mayne remains entitled after Completion).





Under the Contract Logistics Sale Agreement, Linfox has assumed responsibility and liability for obligations arising after Completion
under business contracts and property leases relating to the Contract Logistics Business and certain employment related liabilities referred to below. Mayne has retained responsibility and liability for all other debts and liabilities of the
Contract Logistics Business (other than debts and liabilities of MLPL).





Linfox is obliged to make offers to
employees and independent contractors employed or engaged by Mayne exclusively in the Contract Logistics Business on terms and conditions no less favourable in aggregate than those on which the relevant employees or independent contractors were
employed immediately prior to Completion, and to recognise their accrued entitlements. Linfox has assumed responsibility and liability for obligations relating to the employees and independent contractors of the Contract Logistics Business
(including workers compensation claims arising before or after Completion in respect of employees and independent contractors transferring to Linfox and any retirement, redundancy or severance payments or costs in respect of employees or
independent contractors of the Contract Logistics Business).





Mayne has given warranties and indemnities customary
in asset sale agreements in Australia, subject to limitations at to time, minimum and maximum claim amounts and certain other limitations. Mayne has also given an indemnity against any liabilities incurred by Linfox or MLPL under the terms of the
sale agreement relating to the sale by Mayne and MLPL of the Express Business.





Subject to certain exceptions,
Mayne has agreed not to carry on or be concerned or interested economically in any business or activity which is the same as, substantially similar to, or competitive with, the Contract Logistics Business in Australia, Indonesia, Thailand, Malaysia
and China for a period of up to 5 years after Completion.





The parties have entered into a shared services
agreement pursuant to which Mayne has agreed to provide Linfox with certain transitional services, including IT related services, for up to 18 months from Completion.





Armaguard





On 1 November 2002, Mayne Group Limited
(Mayne) entered into an asset sale agreement (Armaguard Sale Agreement) with Linfox Swanston Street Pty Limited (Linfox), pursuant to which Mayne agreed to sell to Linfox its Australian
business comprising the provision of armoured car transport,




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non-armoured car transport, cash processing, servicing of automatic teller machines and other ancillary cash logistic services to the public and
private sector (Armaguard Business). Linfoxs parent company, Linfox Proprietary Limited guarantees Linfoxs obligations under the agreement. Completion of the sale pursuant to the Contract Logistics Sale Agreement is
scheduled to occur on 3 February 2003.





The assets to be sold comprise goodwill, fixed assets, motor vehicles,
intellectual property, stock, prepayments, business records, business names and Maynes rights under certain business contracts and property leases relating exclusively to the Armaguard Business and all other assets owned by Mayne which are
used exclusively in the conduct of the Armaguard Business but exclude cash, trade debtors and other debtors to which Mayne remains entitled after Completion. Mayne has also agreed to sell real property relating to the Armaguard Business under the
terms of a number of separate land sale agreements.





Under the Armaguard Sale Agreement, Linfox has assumed
responsibility and liability for obligations arising after Completion under business contracts and property leases relating to the Armaguard Business and certain employment related liabilities referred to below. Mayne has retained responsibility and
liability for all other debts and liabilities of the Armaguard Business.





Linfox is obliged to make offers to
employees and independent contractors of the Armaguard Business on terms and conditions no less favourable in aggregate than those on which the relevant employees or independent contractors were employed immediately prior to Completion, and to
recognise their accrued entitlements. Linfox has assumed responsibility and liability for obligations relating to the employees and independent contractors of the Armaguard Business (including workers compensation claims arising before or
after Completion in respect of employees and independent contractors transferring to Linfox and any retirement, redundancy or severance payments or costs in respect of employees or independent contractors of the Armaguard Business).





Mayne has given warranties and indemnities customary in asset sale agreements in Australia, subject to limitations at to time,
minimum and maximum claim amounts and certain other limitations.





Subject to certain exceptions, Mayne has agreed
not to carry on or be concerned or interested economically in any business or activity which is the same as, substantially similar to, or competitive with, the Armaguard Business in Australia for a period of up to 5 years after Completion.





The parties have entered into a shared services agreement pursuant to which Mayne has agreed to provide Linfox
with certain transitional services, including IT related services, for up to 18 months from Completion.





DHL





On 1 November 2002, Mayne Group Limited (Mayne) and its wholly-owned subsidiaries, Mayne Group Canada Inc.
(MGCI) and Loomis Canada Holding Company Inc. (CanadaCo) entered into a share sale agreement (MGCI Share Sale Agreement) with DHL International Express Ltd. (DHL) and DHL
Worldwide Express B.V., pursuant to which Mayne agreed to sell to DHL all of the issued and




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outstanding shares in MGCI (Shares), being the company which carries on the business of providing package transportation
services and time-critical express services in Canada. DHLs parent company, DHL Worldwide Express B.V. guarantees DHLs obligations under the MGCI Share Sale Agreement until the time of Completion. Completion of the sale pursuant to the
MGCI Share Sale Agreement is scheduled to occur on 31 January 2003 and is conditional only on DHL obtaining regulatory approval for the acquisition under the Competition Act (Canada) and the Investment Canada Act (Canada).





Mayne has negotiated warranties and indemnities consistent with warranties and indemnities which would be
contained in a sale agreement in connection with a transaction of this nature in Canada. The warranties and indemnities in relation to breach of warranties and for third party claims are subject to limitations as to time, minimum and maximum claim
amounts and certain other limitations. In addition, Mayne has given specific indemnities including in respect of all claims and losses in connection with any contribution holiday in respect of the defined contribution component of one of MGCIs
pension plans; and in respect of claims, taxes or other liabilities arising in connection with the pre-completion reorganisation of Maynes Canadian holdings (described below). These specific indemnities are not subject to the limitations that
apply to the warranties and other indemnities.





The MGCI Share Sale Agreement contemplates that Maynes
Canadian holdings will be reorganised such that CanadaCo will acquire MGCI and DHL will enter into an agreement to acquire all of the shares in CanadaCo (the CanadaCo Share Sale Agreement). The CanadaCo Share Sale Agreement would
be conditional only on DHL obtaining the same regulatory approvals required pursuant to the MGCI Share Sale Agreement. The MGCI Share Sale Agreement provides that the MGCI Share Sale Agreement will complete prior to the CanadaCo Share Sale
Agreement, thus ensuring that, at the time that DHL acquires CanadaCo, MGCI is a wholly-owned subsidiary of CanadaCo. Mayne has given an indemnity in favour of DHL, CanadaCo and MGCI in relation to liabilities which may be incurred by them in
consequence of the reorganisation.





On completion and subject to certain agreed exceptions, Mayne and DHL will
enter into a non-competition agreement pursuant to which Mayne will agree not to carry on or be engaged in any business of providing package transportation services and time-critical express services in North America for 5 years after completion.





TAXATION





Commonwealth of Australia Taxation





The taxation discussion set forth below is intended
only as a descriptive summary and does not purport to be a complete analysis or listing of all potential tax effects relevant to the ownership of Ordinary Shares or ADRs. Except as otherwise noted, the following discussion is based on the Australian
laws in force as of the




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date of this Annual Report and is subject to any changes in Australian law, and in any double taxation convention between the United States and
Australia, occurring after the date of this Annual Report.





The following summary of certain Australian tax
consequences is not exhaustive of all possible tax considerations, and holders of ADRs are advised to satisfy themselves as to the overall tax consequences of their acquisition and ownership of ADRs and the Ordinary Shares represented thereby by
consulting their own tax advisors.





Under the current double taxation convention between Australia and the United
States (the Treaty), dividends paid by Mayne to a United States resident shareholder of Mayne, including an ADR holder, who is not deemed to be an Australian resident for the purposes of the convention, will be subject to an Australian
withholding tax at a maximum rate of 15% (or 5% where the shareholding is 10% or greater and the dividend is paid on or after the effective date of change of the convention  refer below) on their unfranked amount. To the extent that
withholding tax is paid, this is a final tax and no other Australian tax would be payable.





The Australian income
tax legislation incorporates an imputation system for the relief of double taxation on dividends paid by Australian resident corporations. The imputation system applies with the effect that dividends paid to non-residents of Australia will not
attract Australian withholding tax to the extent that the dividend has been franked. A dividend will generally be franked to the extent that the corporation declaring the dividend has tax credits available from the payment of Australian
corporate tax and has declared that the dividend is so franked. Subject to the comments below, dividends paid to United States residents which are not franked (or are partly franked) will continue to attract withholding tax at a rate of 15% (or 5%
where the shareholding is 10% or greater and the dividend is paid on or after the effective date of change of the convention  refer below) on the unfranked amount.





On 27 September 2001 the Australian and United States Governments signed a protocol to amend the double tax convention between the two countries (Protocol). The Protocol
will take effect on the later of 1 July 2003 and the first day of the second month following ratification of the Protocol by the United States.





If the Protocol is ratified, unfranked dividends paid to US resident companies holding at least 10% of the voting interests in Mayne will be subject to withholding tax at the rate of only 5%. All other
unfranked dividends will continue to be subject to a 15% withholding tax.





Mayne has provided and will continue to
provide all shareholders with notices which specify the franked and unfranked amount of each dividend and the amount (if any) of dividend withholding tax deducted.





A United States citizen who is a resident in Australia or a United States corporation which is a resident of Australia (by reason of carrying on business in Australia and
having its voting power controlled by shareholders who are residents of Australia or being managed or controlled in Australia) may be liable to pay Australian income tax in respect of the profit or capital gain (if any) derived upon the disposal of
ADSs or




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Ordinary Shares. Under current Australian tax laws, no tax is payable in respect of the disposal of ADSs or Ordinary Shares held by
non-residents of Australia except:





(a)        if the ADSs or Ordinary
Shares are trading stock of the holder or if an ordinary incident of the holders business is the sale of securities for a profit, and, in either case, the profit is sourced in Australia; or





(b)        if sold and the total number of ADSs or Ordinary Shares held by the non-resident or his associates, or the
non-resident together with his associates, at any time during the period of five years preceding the disposal represents 10% or more of the issued share capital of Mayne (excluding share capital carrying no right to participate beyond a specified
amount in a distribution of profits or capital).





Notwithstanding that the profit or gain upon the sale of the
ADSs or Ordinary Shares is assessable in Australia in the circumstances of (a) or (b) above, if the vendor is a resident of the United States, then depending on the circumstances of the case, relief from double tax may nevertheless be available
under the current double taxation convention referred to above.





However, the 27 September 2001 Protocol expressly
allows Australia to apply its domestic laws to tax capital gains made by US residents. Accordingly, if the Protocol is ratified the convention will not provide relief from Australian capital gains tax.





In addition, under current Australian tax law, no Australian State or Federal estate duty or any other inheritance taxes will be payable
in respect of ADSs or Ordinary Shares upon the death of a holder thereof, regardless of the holders domicile. For capital gains tax purposes, the death of the holder will not produce a deemed disposal, except if the ADSs or Ordinary Shares are
bequeathed to a tax-exempt institution (as defined by reference to certain Australian exempting provisions). In all other circumstances, the liability for tax on any gain is effectively transferred to the deceaseds legal representatives or
beneficiaries, subject to those matters referred to above. Such deemed disposal or a disposal subsequently by the beneficiary will have the consequences set out above.





Australian Stamp Duty





Australian stamp duty will not be
payable on the acquisition of ADSs or on any subsequent transfer of an ADS. Stamp duty on:





| | (a) |  | transfers of shares listed for quotation on the Australian Stock Exchange or a recognised stock exchange; and
| | --- |  | -------------------------------------------------------------------------------------------------------------




| | (b) |  | transfers of interests in shares listed for quotation on the Australian Stock Exchange ora recognised stock exchange, whether or not the interest is listed for
quotation on the Australian Stock Exchange or a recognised stock exchange;
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




was abolished in the State of Victoria on
and from 1 July 2001.




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Stamp duty on transfers of unlisted shares or interests in shares was abolished
in Victoria on and from 1 July 2002.





United States Federal Income Taxation





This section describes the material U.S. federal income taxation of the ownership of Ordinary Shares or ADSs by U.S. Holders, as defined below. It applies to you only
if you hold your Ordinary Shares or ADSs as capital assets for tax purposes.





This section is based on the
Internal Revenue Code of 1986, as amended (the Code), its legislative history, existing and proposed regulations, published rulings and court decisions, all as currently in effect, as well as on the Treaty. These laws are subject to
change, possibly on a retroactive basis. In addition, this section is based in part upon the representations of the Depositary and the assumption that each obligation in the Deposit Agreement and any related agreement will be performed in accordance
with its terms.





For purposes of the Treaty and the Code, U.S. holders of ADRs will be treated as the owners of
the Ordinary Shares underlying the ADSs evidenced by the ADRs. Exchanges of Ordinary Shares for ADSs, and ADSs for Ordinary Shares, generally will not be subject to U.S. federal income tax. For purposes of this discussion, you are a U.S. holder if
you are a beneficial owner of Ordinary Shares or ADSs and you are: (i) a citizen or resident of the United States, (ii) a domestic corporation, (iii) an estate whose income is subject to United States federal income tax regardless of its source, or
(iv) a trust if a United States court can exercise primary supervision over the trusts administration and one or more United States persons are authorized to control all substantial decisions of the trust.





This section does not apply to you if you are a member of a special class of holders subject to special rules, including a dealer in
securities, a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings, a tax-exempt organization, a life insurance company, a person liable for alternative minimum tax, a person that actually or
constructively owns 10% or more of the voting stock of Mayne, a person that holds Ordinary Shares or ADSs as part of a straddle or a hedging or conversion transaction, or a person whose functional currency is not the U.S. dollar.





This summary is not a comprehensive description of all the tax considerations that may be relevant with respect to your
Ordinary Shares or ADSs. You should consult your own tax advisor regarding the U.S. federal, state and local and other tax consequences of owning and disposing of Ordinary Shares and ADSs in your particular circumstances.





Taxation of Dividends




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Under the U.S. federal income tax laws, if you are a U.S. holder, you must
include in your gross income the gross amount of any dividend paid by Mayne out of its current or accumulated earnings and profits (as determined for U.S. federal income tax purposes). You must include any Australian tax withheld from the dividend
payment in this gross amount even though you do not in fact receive it. The dividend is ordinary income that you must include in income when you, in the case of Ordinary Shares, or the Depositary, in the case of ADSs, receive the dividend, actually
or constructively. The dividend will not be eligible for the dividends-received deduction generally allowed to U.S. corporations in respect of dividends received from other U.S. corporations. The amount of the dividend distribution that you must
include in your income as a U.S. holder will be the U.S. dollar value of the Australian dollar payments made, determined at the spot Australian dollar/U.S. dollar rate on the date the dividend distribution, regardless of whether the payment is in
fact converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date you include the dividend payment in income to the date you convert the payment into U.S. dollars will be
treated as ordinary income or loss. The gain or loss generally will be income or loss from sources within the U.S. for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits, as determined for
U.S. federal income tax purposes, will be treated as a non-taxable return of capital to the extent of your basis in the Ordinary Shares or ADSs and thereafter as capital gain.





Subject to certain limitations, the Australian tax withheld in accordance with the Treaty and paid over to Australia will be creditable against your United States federal
income tax liability.





Dividends will be income from sources outside the United States, but generally will be
passive income or financial services income which is treated separately from other types of income for purposes of computing the foreign tax credit allowable to you.





Taxation of Capital Gains





If you are a
U.S. holder and you sell or otherwise dispose of your Ordinary Shares or ADSs, you will recognize capital gain or loss for U.S. federal income tax purposes equal to the difference between the U.S. dollar value of the amount that you realize and your
tax basis, determined in U.S. dollars, in your Ordinary Shares or ADSs. Capital gain of a noncorporate U.S. holder is generally taxed at a maximum rate of 20% where the property is held more than one year. The gain or loss will generally be income
or loss from sources within the U.S. for foreign tax credit limitation purposes.





PFIC Considerations





Mayne believes that Ordinary Shares and ADSs should not be treated as stock of a passive foreign investment company (a
PFIC) for United States federal income tax purposes, and this discussion so assumes, but this conclusion is a factual determination that is made annually and thus may be subject to change. If Mayne were to be treated as a PFIC, unless a
U.S. holder elects to be taxed annually on a mark-to-market basis with respect to the Ordinary Shares or ADSs, gain realized on the sale or other disposition of




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your Ordinary Shares or ADSs would in general not be treated as capital gain. Instead, if you are a U.S. Holder, you would be treated as if you
had realized such gain and certain excess distributions rateably over your holding period for the Ordinary Shares or ADSs and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together
with an interest charge in respect of the tax attributable to each such year.





EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING
SECURITY HOLDERS





Under existing Australian legislation, the Reserve Bank of Australia does not inhibit the
import and export of funds, and no permission is required by Mayne for the movement of funds in and out of Australia, except in connection with the transfer of funds or certain payments to or by the order of, and certain transactions involving,
directly or indirectly the Government of Iraq or its respective agencies or nationals, the Embassy of the Federal Republic of Yugoslavia, the Consulate-General of the Federal Republic of Yugoslavia and Narodna Banka Jugoslavije (including Banque
Nationale de Yugoslavie) for amounts greater than the value of A$100,000.00 and the National Union for the Total Independence of Angola (UNITA), senior officials of UNITA or adult members of the immediate families of senior officials of UNITA.
Additionally, the Charter of United Nations (Anti-terrorism Measures) Regulations 2001 (Regulations) empowers the Australian Minister of Foreign Affairs (the Minister) to prevent foreign exchange dealings
with, and freeze funds and other assets of, persons and entities identified and proscribed by the Minister as being associated with terrorist acts.





Accordingly, at the present time, remittance of any dividends, interest or other payment by Mayne to non-resident holders of Maynes securities in the United States are not restricted by exchange
controls or other limitations unless the non-resident holder is a person or entity proscribed by the Minister for the purposes of the Regulations.





There are no limitations, either under the laws of Australia or under the Constitution of Mayne, to the right of non-residents to hold or vote Mayne Ordinary Shares other than under the Foreign
Acquisitions and Takeovers Act of Australia and the Australian Corporations Act 2001.





The Foreign Acquisitions
and Takeovers Act requires prior notification by the acquirer to and approval by the Treasurer of the Australian Commonwealth Government of any acquisition of interests in the outstanding shares of an Australian corporation (other than an exempt
corporation the definition of which excludes a corporation such as Mayne) which would result in one foreign person alone or with associated persons controlling 15% or more of total voting power or issued shares. In addition, the statute requires
prior notification to and approval by the Treasurer of the Australian Commonwealth Government of any acquisition by two or more non-associated foreign persons, together with any associated persons, when such acquisition will result in foreign
persons controlling, or when foreign persons control, in the aggregate, 40% or more of total voting power or issued shares. The Treasurer may prevent such an acquisition or permit it only subject to conditions.




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Breaches of the compulsory notification procedures constitute statutory offences
punishable by fines or imprisonment.





The Australian Corporations Act 2001 (the ACA) prohibits any
person (including a corporation) from acquiring shares if after the acquisition that persons, or any other persons, voting power would exceed 20% of the total voting power in a company. A person is considered to have voting power under
the ACA if he or an associate (as defined in the ACA) holds voting rights or has, or is deemed under the ACA to have, power (whether direct or indirect and whether legally enforceable or not and irrespective of certain restrictions and restraints on
such powers and other matters and things as specified in the ACA): (i) to exercise, or to control the exercise of, the right to vote attached to that share; or (ii) to dispose of, or to exercise control over the disposal of, that share; and a person
is considered to have acquired a share when he has acquired such power over such share. This prohibition is subject to certain exceptions which must be strictly complied with to be applicable.





Some of the more significant exceptions are as follows:





| | (i) |  | Section 611, item 1 of the ACA permits a person who proposes to acquire control over more than 20% of the voting shares of a company to make a formal off-market
takeover offer in writing to the shareholders of the target company to acquire their shares. Separate takeover schemes are required for each class of shares sought.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (ii) |  | Under Section 611, item 1 of the ACA, a person can acquire in excess of 20% of the companys voting shares by causing an on-market bid to be made on his
behalf by his sharebroker on the home exchange of the target company. The bidder must offer to acquire all the shares in the class which the bidder seeks to acquire.
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (iii) |  | Under Section 611, item 9 of the ACA, a person who has for six months had voting power of 19% or more in the company is permitted to acquire not more than 3%
additional voting power in any period of six months.
| | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Documents on Display





Any public documents referred to in the 20-F may be inspected by contacting the Company Secretary on (613) 9868 0728 or writing to The
Company Secretary, Level 21, 390 St. Kilda Road, Melbourne, Victoria, Australia, 3004.





It is possible to read and
copy documents referred to in this annual report on Form 20-F that have been filed with the Securities and Exchange Commission (SEC) at the SECs public reference room located at 450 Fifth Street, NW, Washington DC 20549. Please call the SEC at
1-800-SEC-0330 for further instructions.




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ITEM 11 
 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





The following
discussion includes certain forward-looking statements. See Forward-Looking Statements.





The Company
is exposed to interest rate risk and foreign currency exchange rate risk associated with underlying assets and liabilities. To hedge these exposures, which relate primarily to long term borrowings in United States dollars and to assets held by self
sustaining foreign affiliates, the Company uses derivative financial instruments, including interest-rate swaps, cross-currency interest-rate swaps, foreign-exchange swaps and interest-rate options.





The policy of the Company is not to enter, hold or issue derivative financial instruments for trading purposes. The Company does not have
a material exposure to equity price risk or commodity price risk.





Derivative financial instruments that are
designated as hedges of underlying exposures are accounted for on the same basis as the underlying exposure.





Interest rate risk





The Companys major borrowings are denominated in United States dollars and are primarily of a fixed
interest nature. The Company enters into interest rate swaps and interest rate options to lower funding costs, or to alter interest rate risk exposures arising from mismatches between assets and liabilities (e.g. converting fixed debt to floating to
match a floating receivable).





Borrowings (in thousands of A$):





The following table sets out the book values, weighted average interest rates, maturities and fair values of the Companys borrowings at 30 June 2002.





Type

Expected to mature in

2001-02

2000-012002/03


2003/04


2004/05


2005/06


2006/07


Thereafter

Total

Fair value

Total

Fair valueBank overdrafts

197
















197

197

71

71Average rate  floating

7.75
%US dollar Bonds










618,266







618,265

633,163

689,519

677,315Average rate  fixed










6.25
%Bank term loans

2,426











26,006




28,432

28,432

358

358Average rate  floating

18.87
%










18.75
%Money Market Borrowings






















105,000

105,000Average rate  floatingMedium term notes  US dollars






















197,005

199,527Average rate  fixedOther loans and deposits

68


2,701


1,444


1,320







5,533

5,533

6,946

6,947Average rate  floating

6.47
%

7.87
%

7.87
%

7.87
%Lease liabilities

3,082


3,117


1,205


942


101




8,447

8,447

17,267

17,267Average rate  fixed

6.91
%

8.44
%

10.46
%

10.46
%

9.32
%





Interest rate swaps (in thousands of A$)




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The following table indicates the types of interest rate swaps used at 30 June
2002 showing their notional amounts and fair values, their maturities and the weighted average interest rates. The average floating rate is the implied market rate for the term of the swap (plus any applicable margin) weighted by the face value of
the instrument.





Expected to mature in


2001-02


2000-012002/03


2003/04


2004/05


2005/06


2006/07

Thereafter


Total

Fair value


Total

Fair valueReceive  fixed rate swapsAustralian dollars















38,150


38,150

860


39,101

657Average fixed rate















8.18
%Average floating rate















7.70
%United States dollars










618,265







618,265

35,665


866,824

14,262Average fixed rate










6.28
%Average floating rate










4.45
%Pay  fixed rate swapsAustralian dollars

5,000


35,000


10,000


140,000




54,726


244,726

(6,026
)

246,135

(6,411
)Average fixed rate

6.44
%

5.52
%

6.5
%

5.88
%



9.47
%Average floating rate

5.13
%

5.57
%

5.86
%

5.96
%



7.08
%United States Dollars























9,850

(307
)Average fixed rateAverage floating rate





All the receive fixed swaps convert fixed debt to floating debt,
hence their fair values are offset by the difference between the fair value and the book value of the underlying debt instrument.





Within policy parameters, pay fixed swaps are used to hedge the economic entitys floating debt exposure. A portion of the pay fixed swaps greater than 5 years derive from hedging a fixed receivable.




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Interest rate options (in thousands of A$)





Interest rate options give the purchaser the right but not the obligation to pay or to receive interest flows for a specified time at a specified rate at a specified
date in the future. The following table sets out the interest rate options in place at 30 June 2002, showing the face values, the average interest rates and the fair values.





Expected to mature in

2001-02


2000-012002/03


2003/04

2004/05

2005/06

2006/07

Thereafter

Total

Fair value


Total

Fair valueSoldCapBritish Pounds

13,495












13,495






Average rate

8.15
%Canadian Dollars

3,506












3,506






Average rate

7.50
%Euro

8,738












8,738






Average rate

5.80
%SoldFloorPounds sterling

13,495












13,495

(68
)



Average rate

6.00
%Canadian Dollars

3,506












3,506

(19
)



Average rate

5.01
%Euro

8,738












8,738

(1
)



Average rate

3.45
%BoughtCapPounds Sterling

26,990












26,990






Average rate

8.99
%Canadian Dollars

7,012












7,012






Average Rate

8.02
%Euro

17,476












17,746






Average Rate

6.88
%




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Foreign exchange risk





The Company is exposed to foreign currency exchange rate risk through its borrowings, which are predominantly in United States dollars and through the net assets held by its self sustaining foreign
affiliates, which are predominantly denominated in Euro, British pounds and Canadian dollars. The Company uses foreign currency swaps and cross currency swaps to hedge these exposures. The economic entity also uses the foreign exchange market to
hedge transactional exposures derived from direct exports, capital purchases and expenses denominated in foreign currencies, and internal loans between the parent company and its wholly owned offshore entities. The following table sets out the face
values of foreign currency swaps and cross currency interest rate swaps in place at 30 June 2002, showing the contract rates, maturities and fair values converted to AUD at current rates at balance date.





Derivative instruments subject to foreign exchange risk





(in thousands of A$)





Expected to mature in

2001-02


2000-012002/03

2003/04

2004/05

2005/06

2006/07

Thereafter

Total

Fair value


Total

Fair valueSellCanadian dollars

142,280











142,280

1,450


119,453

(936
)Average contracted rate

0.8438British pounds

26,991











26,991

(105
)

38,409

16Average contracted rate

0.3715European dollars

57,148











57,148

(1,350
)



Average contracted rate

0.5847New Zealand

5,274











5,274

(44
)



Average contracted rate

1.1669United States dollars

10,360











10,360

667




Average contracted rate

0.5328BuyBritish pounds

37,247











37,247

862




Average contracted rate

0.3790United States dollars

285,554







247,306



532,860

45,737


806,935

89,378Average contracted rate

0.5367







0.7475





ITEM 12 
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES





Not applicable





ITEM 13 
DEFAULTS, DIVIDEND ARREARS AND DELINQUENCIES





None





ITEM 14 
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE PROCEEDS





None





ITEM 15 
RESERVED





Not applicable





ITEM 16 
RESERVED





Not applicable





ITEM 17 
FINANCIAL STATEMENTS





Not responded to as Item 18 complied with.





ITEM 18 
FINANCIAL STATEMENTS




119




---

##### Table of Contents




Page No.Table of Contents:Independent Audit Report

F-1Statements of Financial Performance

F-2Statements of Financial Position

F-3Statements of Cash Flows

F-4Notes:1.

Statement of Significant Accounting Policies

F-52.

Change in accounting policy

F-83.

Revenue

F-94.

Operating Profit

F-105.

Income Tax

F-116.

Earnings Per Share

F-127.

Dividends

F-138.

Cash and deposits

F-139.

Receivables (Current)

F-1310.

Inventories

F-1411.

Other current assets

F-1412.

Receivables (Non-Current)

F-1413.

Other financial assets

F-1414.

Property, plant and equipment

F-1515.

Intangibles

F-1816.

Other non-current assets

F-1817.

Payables

F-1818.

Interest-bearing liabilities

F-1919.

Provisions

F-2120.

Contributed equity

F-2121.

Reserves and retained profits

F-2422.

Equity reconciliations

F-2523

Notes to the Statements of Cash Flows

F-2624.

Additional Financial Instruments Disclosure

F-2925.

Segmental Reporting

F-3626.

Capital Expenditure Commitments

F-3927.

Lease Commitments

F-3928.

Auditors Remuneration

F-4029.

Contingent Liabilities

F-4030.

Deed of Cross Guarantee

F-4131.

Particulars in Relation to Controlled Entities

F-4332.

Equity Accounting Information

F-5033.

Transactions with Related Parties

F-5234.

Superannuation Commitments

F-5735.

Remuneration of Directors and Executives

F-5936.

Subsequent events

F-6137.

United States Generally Accepted Accounting Principles (US GAAP) Disclosures

F-62





This financial report incorporates full disclosure requirements under both Australian and
United States generally accepted accounting principles.






---

##### Table of Contents




REPORT OF INDEPENDENT AUDITORS











To the members of Mayne Group Limited:














We have audited the accompanying consolidated statements of financial position of
Mayne Group Limited and its subsidiary companies (the Group) as of June 30, 2002 and 2001, and the related consolidated statements of financial performance and cash flows for each of the years in the three-year period ended June 30, 2002, all
expressed in Australian dollars. These consolidated financial statements are the responsibility of the Groups management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.





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





In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of the Group at June 30, 2002 and 2001 and the results of its operations and its cash flows for each of the years in the three year period ended June 30, 2002, in conformity with accounting principles generally accepted in
Australia.





Accounting principles generally accepted in Australia vary in certain respects from accounting principles generally accepted
in the United States of America. An explanation of the significant differences between the two sets of principles as they relate to the Group is presented in Note 37 to the consolidated financial statements. The application of the United States of
Americas principles would have affected the determination of consolidated net income for each of the years in the three-year period ended June 30, 2002, and the determination shareholders equity at June 30, 2002 and 2001 to the extent
summarised in Note 37 to the consolidated financial statements.





KPMG


Chartered Accountants











Melbourne,
Australia


11 December 2002







---

##### Table of Contents




Statements of Financial Performance


for financial year ended 30 June 2002





ConsolidatedNote 1(b)

2002


2001


2000$000


$000


$000Revenues from ordinary activities

3

5,110,420


3,756,328


3,140,674Employee expense



(1,663,254
)

(1,409,609
)

(1,281,750
)Subcontractor expense



(403,637
)

(405,754
)

(392,053
)Purchases of materials and trading stocks



(991,327
)




Change in inventories



(16,733
)




Consumables expense



(460,479
)

(400,017
)

(298,385
)Marketing costs



(77,662
)

(8,752
)

(1,812
)Fleet operation and disribution costs



(152,302
)

(107,313
)

(99,104
)Occupancy costs



(80,902
)

(64,349
)

(62,057
)Depreciation and amortisation

4

(197,138
)

(137,550
)

(136,886
)Borrowing costs

4

(51,476
)

(62,739
)

(52,951
)Other expenses from ordinary activities



(806,764
)

(919,164
)

(971,331
)Share of net profits / (losses) of associates accounted for using the equity method

32

(915
)

(289
)

20Profit / (loss) from ordinary activities before income tax (expense) / benefit



207,831


240,792


(155,635
)Income tax (expense) / benefit

5

(30,616
)

(75,342
)

(14,551
)Net profit / (loss)



177,215


165,450


(170,186
)Net profit / (loss) attributable to outside equity interests

22

(3,604
)

(3,888
)

(3,893
)Net profit / (loss) attributable to members of Mayne Group Limited



173,611


161,562


(174,079
)








The accompanying notes form part of this financial
report







---

##### Table of Contents




Statements of Financial Position as at 30 June 2002





ConsolidatedNote 1(b)

2002


2001$000


$000Current AssetsCash and deposits

8

425,623


580,988Receivables

9

987,137


516,784Inventories

10

402,828


42,746Other current assets

11

32,781


113,905Total Current Assets



1,848,369


1,254,423Non-Current AssetsDeposits

8

41,998


3,777Receivables

12

8,512


14,868Investments accounted for using the equity method

32

8,382


8,798Other financial assets

13

25,893


18,068Property, plant & equipment

14

1,450,658


1,178,263Intangibles

15

1,707,827


506,793Deferred tax assets

16

232,142


131,237Other

16

67,454


97,568Total Non-Current Assets



3,542,866


1,959,372Total Assets

25

5,391,235


3,213,795Current LiabilitiesPayables

17

787,719


499,482Interest-bearing liabilities

18

5,773


311,694Current tax liabilities

19

9,975


49,539Provisions

19

211,233


152,310Total Current Liabilities



1,014,700


1,013,025Non-Current LiabilitiesPayables

17

8,447


21,452Interest-bearing liabilities

18

655,101


704,473Deferred tax liabilities

19

71,194


42,007Provisions

19

23,969


23,163Total Non-Current Liabilities



758,711


791,095Total Liabilities



1,773,411


1,804,120Net Assets



3,617,824


1,409,675EquityMayne Group Limited InterestContributed equity

20

3,403,284


1,266,252Reserves

21

(2,766
)

(27,448
)Retained profits

21

214,146


153,953Total Mayne Group Limited equity interest



3,614,664


1,392,757Outside equity interests

22

3,160


16,918Total Equity



3,617,824


1,409,675








The accompanying notes form part of this financial
report







---

##### Table of Contents




Statements of Cash Flows


for financial year ended 30 June 2002





ConsolidatedNote 1(b)

2002


2001


2000$000


$000


$000Cash Flows from Operating ActivitiesCash receipts from customers



5,366,314


3,189,932


3,025,609Cash payments to suppliers and employees



(5,066,071
)

(3,016,620
)

(2,766,305
)Dividends and trust distributions received



1,863


730


Interest received



32,566


17,410


5,137Borrowing costs paid



(55,725
)

(50,409
)

(50,371
)Income taxes (paid)/refunded



(98,888
)

(56,058
)

(40,600
)Net operating cash flows

23

180,059


84,985


173,470Cash Flows from Investing ActivitiesProceeds/(payments) on disposal of entities



23,474


456,683


16,768Payments for acquisition of entities



(267,742
)

(9,435
)

(87,543
)Proceeds from sale of property, plant and equipment



89,161


19,098


24,599Payments for property, plant and equipment



(174,952
)

(145,077
)

(174,304
)Proceeds from sale of investments



3,796





12,103Payments for investments



(5,493
)

(2,554
)

(10,853
)Proceeds from loans repaid



678


2,865


517Payments for loans



(968
)

(2,422
)

Payments for additional equity in controlled entities



(60,596
)

(143
)

(5,755
)Payments for loans to associated entities









(295
)Proceeds from sale of Fauldingoral pharmaceutical business



1,312,257





Payments for amounts capitalised into goodwill



(73,821
)




Net investing cash flows



845,794


319,015


(224,763
)Cash Flows from Financing ActivitiesProceeds from issue of shares



9,823


206,465


453Proceeds from borrowings



46,801


106,217


414,235Repayments of borrowings



(1,094,091
)

(231,757
)

(369,387
)Finance lease principal



(9,139
)

(7,737
)

(552
)Payments for share buy-back









(39,296
)Dividends paid



(66,241
)

(33,171
)

(63,298
)Realised foreign exchange gains



(60,042
)

16,123


26,973Net financing cash flows



(1,172,889
)

56,140


(30,872
)Net increase/(decrease) in cash held



(147,036
)

460,140


(82,165
)Cash at the beginning of the financial year



580,901


109,761


184,726Effect of exchange rate changes on cash held



(8,454
)

11,000


7,200Cash at the end of the financial year

23

425,411


580,901


109,761





The accompanying notes form part of this financial report




---

##### Table of Contents




Notes to financial statements for the financial year ended 30 June
2002





1.    Statement of Significant Accounting Policies





The significant policies which have been adopted in the preparation of this financial report are:





(a) Basis of preparation





The financial report, being a general purpose financial report, has been prepared in accordance with the following significant accounting policies which, except where there is a change in accounting
policy which is separately disclosed, are generally consistent with previous years and which are also in accordance with Accounting Standards, Urgent Issues Group Consensus Views, other authoritative pronouncements of the Australian Accounting
Standards Board and the Corporations Act 2001.





The financial report has been prepared in accordance with
conventional historical cost principles and has not been adjusted to take account of changing money values except to the extent that the revaluations of certain non-current assets partially reflect such changes.





(b) Financial Year





The 2002 financial year comprised the year ended 30 June 2002 compared to the 2001 financial year which comprised 52 weeks from 3 July 2000 through to 30 June 2001 and the 2000 financial year which comprised 52 weeks from 5
July 1999 through to 2 July 2000. The accounts have been prepared in accordance with the versions of applicable Accounting Standards in force for financial years ending on 30 June.





From 1 July 2001 the economic entity has operated on fiscal years ending on 30 June.





(c) Reclassification of financial information





As a result
of the adoption on 2 July 2000 of the revised standards AASB 1018 Statement of Financial Performance, AASB 1034 Financial Report Presentation and Disclosures and the new AASB 1040 Statement of Financial Position
certain line items and sub-totals reported for the year ended 2 July 2000 were reclassified and repositioned in the financial statements.





Revenue and expense items previously disclosed as abnormal were reclassified and disclosed as individually significant items in Note 4. Abnormal items are no longer included separately on the face of the statement of
financial performance.





The reconciliation of opening to closing retained profits was transferred from the face of
the statement of financial performance to Note 21.





The following assets and liabilities were removed from
previous classifications and disclosed as separate line items on the face of the statement of financial position:





- investments accounted for using the equity method, previously included within other financial assets


- deferred tax assets, previously
included within other non-current assets


- current tax liabilities, previously included within current provisions


- deferred tax liabilities, previously included within non-current provisions





(d) Revenue recognition





Sales revenue comprises revenue
earned (net of discounts and allowances) from the provision of services and from the sale of goods to entities outside the economic entity. Sales revenue is recognised when the service has been performed or when the economic entity has passed
control and title of the goods to the buyer. Prepaid revenue for freight satchels and stickers is deferred and recognised when the service has been completed using systems which monitor sales and service patterns.





Interest income is recognised as the interest accrues.





The gross proceeds of asset sales are recognised as revenue once a contract of sale has been finalised and the profit or loss on disposal is brought to account.





Dividend income from controlled entities is brought to account in the parent entity at the time the dividends
have been declared by the controlled entities. Dividend income from associated entities is brought to account at the time the dividends are received.





(e) Foreign Currency





Transactions:





Foreign currency transactions are translated to Australian currency at average rates approximating the rates of exchange
applicable at the transaction dates and gains and losses have been brought to account in determining period income.





Amounts receivable and payable in foreign currencies at balance date have been translated at the rates of exchange ruling on that date. Exchange differences relating to amounts receivable and payable in foreign currencies are brought
to account as exchange gains or losses in the statement of financial performance in the financial year in which the exchange rates change.





Translation of the financial statements of overseas controlled entities:





Assets and
liabilities of overseas controlled entities have been translated at the rates of exchange ruling at balance date.





The statements of financial performance have been translated at an average rate for the year. Exchange differences arising on translation have been transferred to the Exchange Fluctuation Reserve.





The balance of the foreign currency translation reserve relating to a controlled entity that is disposed of is transferred to retained
earnings in the year of disposal.





Hedges:





Having regard to natural currency hedges, where foreign assets are offset against foreign liabilities, the Directors have, where prudent, entered into specific hedge
transactions to protect the value of equity in and loans to overseas controlled entities. In accordance with the requirements of AASB 1012 - Foreign Currency Translation gains or losses resulting from these transactions relating to
self-sustaining controlled entities have been transferred to the Exchange Fluctuation Reserve.





Where hedge
transactions are designed to hedge the purchase or sale of goods or services, exchange differences arising up to the date of the purchase or sale, together with any costs or gains arising at the time of entering into the hedge, are deferred and
included in the measurement of the purchase or sale.





Any exchange differences on the hedge transaction after the
date of the purchase or sale are included in the statement of financial performance.





(f) Income Tax





Tax effect accounting is adopted in both the parent entity and economic entity financial statements. To the
extent that timing differences occur between the time items are taken up in the financial statements and when they are taken into account for determination of taxable income, the related taxation liability or benefit calculated at current rates is
disclosed in the financial statements as Deferred Tax Liabilities or Deferred Tax Assets. Future income tax benefits are not brought to account as deferred tax assets unless realisation of the asset is assured beyond
reasonable doubt. Future income tax benefits relating to entities with tax losses are only brought to account when their realisation is virtually certain. The tax effect of capital losses are not recorded unless realisation is virtually certain.





Withholding tax payable on the distribution of profits from overseas investments is brought to account at the
time dividends are proposed. Capital gains tax is provided in the statement of financial performance in the period in which an asset is sold.





When an asset is revalued capital gains tax is not provided at the time of revaluation unless it is known that the asset will eventually be sold.





(g) Inventory Valuation





Inventory held for internal use, inventory held for resale and raw materials have been valued at the lower of cost and net realisable value.





Overheads directly related to production are included in calculating inventory costs.





(h) Receivables





Trade debtors are generally to be settled within 30 days and are
carried at amounts due. Other debtors are carried at amounts due.





The collectibility of debts is assessed at
balance date and specific provisions are made for any doubtful accounts. In addition a general provision is maintained.







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





1.    Statement of Significant Accounting Policies (continued)





(i)    Investments





The economic entity financial report is a consolidation of the financial statements of the parent entity (holding company) and all its controlled entities (subsidiaries)
and equity consolidation of all of its associated entities.





The controlled entities have been determined in
accordance with the definition in AASB 1024 Consolidated Accounts. AASB 1024 defines control as the capacity of an entity to dominate decision making, directly or indirectly, in relation to the financial and operating policies of another
entity so as to enable the other entity to operate with it in achieving the objectives of the controlling entity.





The associated entities have been determined in accordance with AASB 1016 Accounting for Investments in Associates. This includes all associated entities over which the parent entity has the capacity to influence
significantly the policies of that associate.





Outside interests in the equity and results of the entities that
are controlled by the economic entity are shown as a separate item in the consolidated accounts.





All inter-entity
transactions and balances have been eliminated on consolidation.





Accounts of foreign controlled entities prepared
in accordance with foreign accounting principles are, for consolidation purposes, amended to conform with Australian generally accepted accounting principles.





(j)    Property, Plant & Equipment





Acquisition:





Items of property, plant & equipment are recorded at cost and depreciated as
outlined in Note 1(p).





Revaluations:





Land and buildings are independently revalued every three years to their fair values based on their highest and best use. In the intervening periods the fair values are
reassessed in the light of prevailing trading conditions by reference to the present values of the net cash inflows generated by the operations using the land and buildings which can be attributed to these assets. These valuations are disclosed as
Directors valuations.





No revaluations of land and buildings have taken into account the potential capital
gains tax in relation to Australian assets.





Assets held for resale:





Items of property, plant & equipment held for resale are classified as Other Current Assets. These assets are carried at their fair
values.





(k)    Intangibles





Goodwill:





Purchased goodwill and
goodwill on consolidation, representing the difference between the cost of investments in certain businesses and controlled entities and the fair value of the net assets acquired, have been reviewed by the directors to confirm that the current
valuation is appropriate and systematically amortised against operating income over the period of time, not exceeding twenty years, during which benefits are expected to arise.





Brand names and licences:





The brand
names and licences, where applicable, have all been acquired with purchases of businesses or controlled entities. Acquired brands are only recognised where title is clear, brand earnings are separately identifiable and the brand could be sold
separately from the rest of the business.





No annual amortisation is provided except where the end of the economic
life of the acquired brand or licence can be foreseen and is limited by technical, commercial or legal factors.





The value inherent in the brand names and licences is reliant on the ability to generate superior returns for the business. The economic entity has adopted a policy to review the useful life and recoverable amount on an annual basis
in conjunction with a triennial independent valuation of each brand and licence.





(l)Capitalisation of Interest





Building projects:





To establish the costs of capital projects, interest is capitalised on capital projects during development. The
interest is amortised over the estimated useful life of the relevant fixed asset.





(m)    Capitalisation of Leased Assets





Finance lease assets and
liabilities are capitalised in the financial statements. Assets and liabilities have been recorded at the present value of the minimum lease payments from the beginning of the lease term. Leased assets are amortised over the lease term, or over the
expected life of the leased property. The lease liabilities have been classified between current and non-current amounts.





(n)    Recoverable amounts of Non-Current Assets valued on a cost basis





The carrying amounts of non-current assets valued on a cost basis are reviewed to determine whether they are in excess of their recoverable amount at balance date. If the carrying value of a non-current asset exceeds its recoverable
amount, the asset is written down to the lower amount. In assessing the recoverable amount the relevant cash flows have not been discounted to their present value.





(o)    Deferred Expenditure





Material items of expenditure are deferred to the extent that future economic benefits can be measured reliably, are recoverable out of future revenue, do not relate solely to revenue which has already been brought to
account and will contribute to the future earning capacity of the economic entity.





Deferred expenditure is
amortised over the period in which the related benefits are expected to be realised and is reviewed in accordance with the policy set out in Note 1(n).





(p)    Depreciation and amortisation





Freehold Properties:





Depreciation of buildings on freehold land has been calculated on their fair
value. Buildings are depreciated at 2.5% per annum.





Leasehold Improvements:





The fair values of leasehold improvements are amortised by equal annual charges over the unexpired lease periods.





Plant and Equipment:





Provision for depreciation of these assets is calculated by the straight line method at various rates appropriate to their estimated useful lives.





Depreciation rates range from 5% per annum to 33.3% per annum dependent upon the nature and useful life of the asset.





Leased Plant and Equipment:





Provision for depreciation of these assets is calculated by the straight line method at various rates appropriate to their estimated useful lives.





Depreciation rates range from 5% per annum to 33.3% per annum dependent upon the nature and useful life of the asset.







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





1.    Statement of Significant Accounting Policies (continued)





(q)    Payables





Trade creditors are generally settled within 30 days and are carried at amounts payable. Other creditors are carried at amounts payable.





(r)    Employee Entitlements





Wages, Salaries, Annual Leave and Sick Leave:





The provisions for employee entitlements to wages, salaries, annual leave and vesting sick leave represent the amount which the economic entity has a present obligation to pay resulting from employees services provided up to
the balance date. The provisions have been calculated at nominal amounts based on prevailing wage and salary rates and including related on-costs.





Long Service Leave:





The liability for employee entitlements to
long service leave represents the present value of the estimated future cash outflows to be made by the employer resulting from employees services provided up to the balance date.





In determining the liability for employee entitlements, consideration has been given to future increases in wage and salary rates, and the economic entitys experience
with staff departures. Related on-costs have also been included in the liability.





Superannuation Funds:





The economic entity contributes to several superannuation funds. Contributions are charged against income as they
are made.





Executive Share Option Plan:





The parent entity granted options to certain employees under an executive share option plan. Other than the costs incurred in administering the scheme, which are expensed
as incurred, the scheme does not result in any expense to the economic entity.





Employee Share Acquisition Plan:





During the 1998/1999 financial year the economic entity granted shares to certain employees under an employee
share acquisition plan. An interest free loan has been advanced to employees under this scheme. The loan is carried in the accounts at its recoverable amount. The costs incurred in administering the scheme and the cost of any write down of the loan
to employees to its recoverable amount are an expense to the economic entity.





During the current financial year
eligible employees were invited to purchase approximately $1,000 of Mayne Group ordinary shares at a purchase price of 1 cent per share. Other than the costs incurred in administering the scheme, which are expensed as incurred, the scheme does not
result in any expense to the economic entity.





(s)    Provisions





A provision is recognised when a legal or constructive obligation exists as a result of a past event and it is probable that
this will result in an outflow of economic benefits.





Where the effect is material, provisions are determined by
discounting the expected future cash flows at a rate that reflects the time value of money and the risks specific to the liability.





Restructuring:





A provision for restructuring is recognised at acquisition where there is
a demonstrable commitment and a detailed plan such that there is little or no discretion to avoid the payments and the amounts can be reliably estimated. Such provisions relate only to costs associated with the acquired entity.





Other provisions for restructuring are recognised when a detailed plan has been approved and the restructure has commenced or
been publicly announced.





Onerous contracts:





Provision is made where the economic entity is party to onerous contracts.





Surplus leased premises:





Provisions are made in circumstances
where the economic entity has entered into non-cancellable operating leases for premises which have either been vacated or have been sub-let at lower rentals than the economic entity is paying.





(t)    Derivatives





The economic entity is exposed to changes in interest rates and foreign exchange rates from its activities. To hedge these exposures the economic entity uses derivative financial instruments, including interest rate swaps, cross
currency interest rate swaps, foreign exchange swaps and interest rate options. The economic entity does not enter, hold or issue derivative financial instruments for trading purposes. Controls have been put in place to monitor compliance with
economic entity policy. Derivative financial instruments that are designated as hedges and are effective as hedges of underlying exposures are accounted for on the same basis as the underlying exposure.





Interest Rate Swaps:





Interest payments and receipts under interest rate swap contracts are recognised on an accruals basis in the statement of financial performance as an adjustment to interest expense during the period.





Cross Currency Interest Rate Swaps:





Interest payments and receipts under cross currency interest rate swap contracts are recognised on an accruals basis in the statement of financial performance as an adjustment to interest expense
during the period. The accounting for principal amounts is set out in Note 1 (e).





Foreign Exchange Swaps:





Interest payments and receipts under foreign exchange swap contracts are recognised on an accruals basis in the
statement of financial performance as an adjustment to interest expense during the period.





Interest Rate Options:





Interest rate options are used to hedge interest rate exposures. The premiums paid on interest rate options and
any realised gains or losses on exercise are included in other assets and are amortised to interest expense over the terms of the agreements.





(u)    Goods and services tax





Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the GST is not recoverable from the Australian Tax Office (ATO), when it is recognised as part of the cost of acquisition of
an asset or as part of an expense.





Receivables and payables are stated with the amount of GST included.





The net amount recoverable from or payable to the ATO is included as a current asset or a current liability in
the statement of financial position.





Cash flows are included in the statement of cash flows on a gross of GST
basis. GST components of investing and financing cash flows recoverable from or payable to the ATO are classified as operating cash flows.





(v)     Use of estimates





The preparation of the consolidated
financial report in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial report and the
reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.





(w)     Nature of operations





The economic entity operates
substantial businesses in four core service industries: Hospitals, Health Services, Pharmaceuticals and Logistics. Hospitals comprises the management of stand alone and co-located private hospitals as well as public hospital management. The Hospital
division operates predominantly in Australia along with operations in Indonesia and Fiji. Health Services include pathology and diagnostic imaging services, medical centres and the provision of distribution and retail management services to
pharmacies. Health Services operations are solely in Australia. Pharmaceuticals includes the development, manufacture and distribution of injectible pharmaceuticals and of health and personal care products. Pharmaceuticals operates in Australia,
North America and Europe. Logistics services include time-critical express, contract logistics and cash logistics. Logistics businesses operate predominantly in Australia and Canada. Logistics businesses in the United Kingdom were divested during
the prior year.







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





2.    Change in accounting policy





The economic entity has applied AASB 1005 Segment Reporting and AASB 1027 Earnings per Share for the first time
from 1 July 2001.





Comparative figures have been restated in accordance with the requirements of these standards.





The economic entity applied AASB 1041 Revaluation of Non-Current Assets for the first time from 3
July 2000. The standard required each class of non-current asset, other than inventories, foreign currency monetary assets, goodwill, investments valued using the equity accounting method, deferred tax assets and other assets measured at net market
value where the market value movements are recognised in the statement of financial position, to be measured on either the cost or fair value basis.





The economic entity applied AASB 1041 as follows:





The economic
entity adopted the fair value basis for land and buildings. The change in accounting policy had no financial effect in the prior period as the fair value did not change from 3 July 2000 to 30 June 2001. In the current period the financial effect of
the triennial independent revaluation of land and buildings has been reflected.





All other classes of non-current
assets to which AASB 1041 applies, such as plant and equipment, intangibles other than goodwill, investments and non-current receivables, continue to be measured on the cost basis.







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





ConsolidatedNote

2002

2001

2000$000

$000

$0003.  RevenueRevenue from operating activities:Sales Revenue-  Revenue from services



3,085,707

3,158,663

3,100,402-  Revenue from sale of goods



1,906,250



Other RevenueDividends received-  other persons



1,003

25

Interest received-  other associated entities



15

13

-  other persons



31,899

20,363

4,881Revenue from outside operating activities:Proceeds on sale of non-current assets-  property, plant and equipment



17,186

23,615

25,208-  businesses and controlled entities



4,551

553,649

10,183Other Income



63,809



5,110,420

3,756,328

3,140,674




---

##### Table of Contents

Notes to the financial statementsfor the financial year ended 30 June 2002 (continued)





Consolidated2002


2001


2000$000


$000


$0004.   Operating Profit(a)  Operating Profit/(Loss) from ordinary activities before income tax includes the following specific
net gains and expenses:Cost of goods sold

(1,583,979
)




Borrowing costs:-  Other persons

(50,904
)

(60,379
)

(52,165
)-  Finance leases

(572
)

(2,360
)

(2,083
)(51,476
)

(62,739
)

(54,248
)-  Less interest capitalised







1,297(51,476
)

(62,739
)

(52,951
)Amortisation and depreciation of:-  Goodwill

(66,912
)

(26,694
)

(26,089
)-  Operating rights and research and development

(1,421
)




-  Freehold buildings

(17,216
)

(15,157
)

(12,754
)-  Leasehold improvements

(5,232
)

(4,718
)

(7,075
)-  Plant and equipment

(100,708
)

(81,729
)

(80,748
)-  Leased plant and equipment

(4,552
)

(8,024
)

(6,740
)-  Deferred expenditure

(1,097
)

(1,228
)

(3,480
)(197,138
)

(137,550
)

(136,886
)Bad and doubtful debts expense

(6,133
)

(5,989
)

(11,581
)Net gain on sale of property, plant & equipment

7,564


3,898


3,250Net loss on sale of property, plant & equipment

(2,275
)

(540
)

(1,762
)Net gain on sale of investments

3,796


224,994


2,664Net loss on sale of investments




(23,922
)

(4,041
)Provision for employee benefits

(100,608
)

(84,272
)

(84,340
)Operating lease rentals:-  Property

(66,912
)

(75,763
)

(81,514
)-  Plant and equipment

(34,606
)

(73,947
)

(72,556
)Realised foreign exchange gains/(losses)

(9
)

25


(139
)Unrealised foreign exchange gains/(losses)

(161
)

35


1,042(b) Individually significant items included in profit/(loss) from ordinary activities before income tax
expense:Gain on disposal of UK Express business

4,551


224,876


Loss on disposal of Australian ports business




(23,922
)

Revision of estimates on provisions and contingencies




(33,487
)

Restructuring expense

(26,843
)

(76,112
)

(27,423
)Rebranding expense




(19,402
)

Year 2000 compliance expenses







(10,468
)Write down of assets to recoverable amount







(98,976
)Write down of deferred commencement costs







(50,865
)Provision for doubtful debts







(4,683
)Goodwill & brandnames written off







(85,591
)(22,292
)

71,953


(278,006
)




---

##### Table of Contents

Notes to the financial statementsfor the financial year ended 30 June 2002 (continued)





Consolidated2002

2001

2000$000

$000

$0005.    Income TaxBenefit for Tax Losses incurred(a) Benefit RecognisedIncluded in the balance shown for deferred tax asset in Note 16 are the following amounts in respect of tax losses which have been tax
effected for accounting purposes:Included in deferred tax asset

55,086

21,388

16,572(b) Benefit Not RecognisedThe potential future income tax benefit in controlled entities arising from tax losses (revenue and capital) not recognised as an asset
because recovery is not virtually certain is estimated at:

10,750

3,289

828





This benefit for tax losses will only be obtained
if:





(i) the relevant company derives future assessable income of a nature and of an amount sufficient to enable
the benefit from the deductions for the losses to be realised or the benefit can be utilised by another company in the economic entity;





(ii) the relevant company and/or economic entity continues to comply with conditions for deductibility imposed by tax legislation; and





(iii) no changes in tax legislation adversely affect the relevant company and/or economic entity in realising the benefit from the deductions for the losses.




---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





Consolidated2002


2001


20006.   Earnings per ShareBasic earnings per share:Before significant items

21.3
c

26.8
c

22.0
cProfit and loss from ordinary activities

24.6
c

40.7
c

(50.7
)cFully diluted earnings per share:Before significant items

21.2
c

26.7
c

22.0
cProfit and loss from ordinary activities

24.5
c

40.6
c

(50.7
)c$000


$000


$000Reconciliation of earnings used in calculation of basic and fully diluted earnings per share before and after significant
items:Profit after tax and outside equity interests before significant items

150,299


106,405


75,422Significant items

23,312


55,157


(249,501
)Profit and loss from ordinary activities

173,611


161,562


(174,079
)NUMBER OF SHARESReconciliation of weighted average number of shares used in the calculation of earnings per share:Weighted average number of ordinary shares used

706,627,202


397,146,527


343,199,092Add: Effect of of potential conversion to ordinary shares under the executive options scheme

1,234,919


777,137


332,216Weighted average number of shares used in calculation of diluted earnings per share

707,862,121


397,923,664


343,531,308







---

##### Table of Contents

Notes to the financial statementsfor the financial year ended 30 June 2002 (continued)





Consolidated2002


2001


2000$000


$000


$0007.   DividendsOver/(under) provision for prior period

(121
)




834Interim ordinary paid 28 March 2002 6.0c (100% franked Class C, 30%)(2001-paid 30 March 2001 6.0c (100% franked Class C, 34%)(2000-paid 31 March 2000 12.0c (40% franked Class C, 36%)

(48,514
)

(26,370
)

(40,591
)Provision for final ordinary payable 30 September 2002 8.0c(40% franked Class C, 30% )(2001-paid 28 September 2001 7.0c 100% franked Class C, 30%)(2000-paid 29 September 2000 5.0c 100% franked Class C, 34%)

(64,783
)

(30,980
)

(17,667
)(113,418
)

(57,350
)

(57,424
)





Consolidated2002


2001$000


$0008.    Cash and DepositsCurrentCash on hand and at banks

119,927


40,973Deposits

305,696


540,015425,623


580,988Deposits are denominated in the following currencies:Australian Dollars

231,977


377,097United States Dollars

3,281


4,156Canadian Dollars

65,736


68,369Great British Pounds




79,528Malaysian Ringgit

3,532


4,452Indonesian Rupiah

1,170


6,072New Zealand Dollars




341305,696


540,015Weighted average interest rates

4.22
%

5.00
%Non CurrentDeposits

41,998


3,777Deposits are denominated in the following currencies:Australian dollars

41,026


2,368United States Dollars

788


860Fijian Dollars

184


54941,998


3,777Weighted average interest rates

8.29
%

8.83
%9.  Receivables (Current)Trade debtors

789,730


375,890Provision for doubtful debts

(30,237
)

(12,815
)759,493


363,075Other debtors

222,249


153,709Loans to director

5,395


987,137


516,784







---

##### Table of Contents

Notes to the financial statementsfor the financial year ended 30 June 2001 (continued)





Consolidated2002

2001$000

$00010. InventoriesRaw materials and stores at cost

75,088

37,836Work in progress at cost

16,972

Finished goods at cost

299,799

4,910Finished goods at net realisable value

10,969

Total Inventories at Cost

402,828

42,74611. Other Current AssetsPrepayments

32,781

18,358Assets held for resale



95,54732,781

113,90512. Receivables (Non-Current)Loans to executives

2,183

7,845Loan to Employees re Share Acquisition Plan

6,329

7,0238,512

14,86813. Other financial assetsInvestments in other entities (a) (b)Quoted on prescribed Stock Exchanges:-  Shares at market value

4

4-  Shares at cost

4

4Not quoted on prescribed Stock Exchanges:-  Shares at cost

22,796

15,660-  Loans at cost

693

Interest in partnership at cost

2,400

2,40425,893

18,068Total Other Investments

25,893

18,068




---

##### Table of Contents

Notes to the financial statementsfor the financial year ended 30 June 2002 (continued)





Consolidated2002


2001$000


$00013. Other financial assets (continued)(a) Other investments are denominated in the following currencies:Australian Dollars

25,893


18,06825,893


18,068(b) Non interest bearing

25,893


18,06825,893


18,06814. Property, Plant and EquipmentFreehold land and buildingsAt 2002 Directors valuation

854,017


At 2001 Directors valuation




810,681Total at cost/valuation (a)

854,017


810,681Provision for depreciation of buildings on freehold landAt 2002 Directors valuation

(10,115
)

At 2001 Directors valuation




(33,056
)Total provision for depreciation

(10,115
)

(33,056
)Freehold land and buildings written down valueAt cost




At 2001 Directors valuation

843,902


At 2002 independent valuation




777,625Total written down value

843,902


777,625




---

##### Table of Contents

Notes to the financial statementsfor the financial year ended 30 June 2002 (continued)





Consolidated2002


2001$000


$00014. Property, Plant and Equipment (continued)Leasehold improvementsAt 2002 Directors valuation

138,803


At 2001 Directors valuation




135,563Total at cost/valuation

138,803


135,563Provision for amortisation of leasehold improvementsAt 2002 Directors valuation

(71,494
)

At 2001 Directors valuation




(71,708
)Total provision for amortisation

(71,494
)

(71,708
)Leasehold improvements written down valueAt 2002 Directors valuation

67,309


At 2001 Directors valuation




63,855Total written down value

67,309


63,855Plant and equipmentAt cost

869,133


675,889Provision for depreciation

(482,688
)

(416,671
)Written down value

386,445


259,218Assets under constructionAt cost

122,307


58,010Leased plant and equipmentAt capitalised cost

48,993


34,526Provision for amortisation

(18,298
)

(14,971
)Written down value

30,695


19,555Total property, plant and equipment written down value

1,450,658


1,178,263





|(a) |  | Included in the cost is capitalised interest of $1.91 5 million (June 2001 $1.981 million) of which $    nil (June 2001 $nil ) was
capitalised during the current year.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(b) |  | Revaluation of properties
|--- |  | -------------------------




In the 2001/2002 financial year, in accordance with the economic entitys policy of triennial revaluations, certain freehold and long term leasehold land and buildings (including integral plant)
owned by Mayne Group Limited and its controlled entities were independently valued. The carrying values of the properties were written up or down in the respective accounts in accordance with those valuations.





Properties were valued on the basis of the open market value of the properties based on their highest and best use. The carrying values of
freehold and long term leasehold land and buildings (including integral plant) at 2002 Directors valuation are managements assessment based on these independent valuations.





The economic entity adopted AASB 1041  Revaluation of Non-Current Assets from 3 July 2000 and elected to continue to carry freehold and long term leasehold land
and buildings at their fair values. AASB 1041 requires assessment of the fair values at each balance date. Because independent valuations are not performed at each balance date, the fair values in the intervening periods are disclosed as at
Directors valuation, even where the carrying values are still the same as at the last independent valuation. Fair values at balance date were assessed by reference to the discounted cash flows attributable to the relevant pool of assets.





|(c) |  | Recoverable amounts of non-current assets
|--- |  | -----------------------------------------




Included in assets under construction are capitalised costs relating to software development of core information technology systems. In assessing the recoverable amount of these non current assets
regard has been made to the planned capital expenditure required to complete the project relative to the future benefits to the business which are expected to be derived from these core systems.





Included in leasehold improvements is a provision for impairment of $ 50.8 million (June 2001 $ 59.4 million) of which $ 8.6 million was released during the current
period (June 2001 $ 7.9 million).




---

##### Table of Contents




Notes to the financial statements for the financial year ended 30 June
2002 (continued)





14. Property, Plant and Equipment (continued)





Reconcilations of the carrying amounts for each class of property, plant and equipment are set out below:





Freehold land and buildings


Leasehold improvements


Plant and equipment


Assets under construction


Leased plant and equipment


Total$ 000


$ 000


$ 000


$ 000


$ 000


$ 000Consolidated2002Carrying amount at start of year

777,625


63,855


259,218


58,010


19,555


1,178,263Additions

1,317


5,761


112,813


50,732


2,171


172,794Transfers

179


3,755


43,256


(47,190
)




Disposals

(3,837
)

(154
)

(4,586
)

(2,771
)

(549
)

(11,897
)Additions through acquisitions of entities

72,360





87,600


63,966


14,063


237,989Revaluation increments

8,777


(573
)










8,204Write down to recoverable amounts
















Depreciation/amortisation expense

(17,216
)

(5,232
)

(100,708
)




(4,552
)

(127,708
)Foreign currency exchange differences

4,697


(103
)

(11,148
)

(440
)

7


(6,987
)Carrying amount at end of year

843,902


67,309


386,445


122,307


30,695


1,450,658





Freehold land and buildings


Leasehold improvements


Plant and equipment


Assets under construction


Leased plant and equipment


Total$ 000


$ 000


$ 000


$ 000


$ 000


$ 000Consolidated2001Carrying amount at start of year

604,145


82,578


272,511


73,013


25,364


1,057,610Additions

1,658


6,013


54,709


113,002


3,792


179,174Transfers

34,439


10,721


31,625


(76,168
)

(617
)

Disposals

(36,681
)

(34,366
)

(47,811
)

(53,193
)

(802
)

(172,852
)Additions through acquisitions of entities

189,723


13


24,372








214,108Revaluation increments
















Write down to recoverable amounts
















Depreciation/amortisation expense

(15,157
)

(4,718
)

(81,729
)




(8,024
)

(109,628
)Foreign currency exchange differences

(502
)

3,614


5,541


1,356


(158
)

9,851Carrying amount at end of year

777,625


63,855


259,218


58,010


19,555


1,178,263




---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





Consolidated2002


2001$000


$00015. IntangiblesGoodwill at cost

1,613,676


486,704Provision for amortisation

(156,407
)

(90,653
)Written down value

1,457,269


396,051Brand names at cost

108,492


Licences at cost

143,484


110,742(1,418
)

Written down value

142,066


110,742Total Intangibles written down value

1,707,827


506,793





During the 1999/2000 financial year a charge of $4.821 million was made as a significant
expense for the period to write down the carrying value of goodwill to its recoverable amount.





During the1999/2000 financial year
licences relating to pathology and imaging business operations were independently valued by Trowbridge Consulting. This resulted in a separation of the book values of brand names and licences. The residual carrying values of brands were then written
down. This resulted in a charge of $80.77 million as a significant expense for the period.





16. Other Non-current Assets





Deferred tax asset

232,142


131,237Deferred expenditure

6,607


6,890Provision for amortisation

(2,302
)

(1,441
)Written down value

4,305


5,449Cross currency swap principal

60,015


88,517Other

3,134


3,602Other non-current assets

67,454


97,568





During the 1999/2000 financial year a charge of $50.865 million was made to the profit and
loss account to write down the carrying value of deferred expenditure following reassessment of the carrying values.





17. Payables





CurrentTrade creditors

386,952

102,918Other creditors (a)

400,767

396,564787,719

499,482Non currentOther

8,447

21,4528,447

21,452





|(a) |  | Included in other creditors is a liability for self insured workers compensation in the following Australian States:
|--- |  | --------------------------------------------------------------------------------------------------------------------




New South Wales

$13.852 million (June 2001 $17.596 million)Victoria

$6.166 million (June 2001 $9.504 million)Queensland

$ 3.961 million (June 2001 $3.569 million)Western Australia

$0.877 million (June 2001 $ 0.989 million)South Australia

$0.203 million (June 2001 $0.263 million)





|(b) |  | Included in other creditors are provisions for onerous contracts of $ 20.7 million (June 2001 $ 32.6 million ) of which $ 11.9 million was released during the
current period (June 2001 $ 7.7 million)
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------






---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)








Consolidated2002

2001$000

$00018. Interest-bearing liabilitiesCurrentBank overdrafts (unsecured - (a))

197

71Bank term loans (unsecured - (a))

2,426

177Money market borrowings (unsecured - (a))



105,000Medium term notes (unsecured - (a))



197,006Other borrowings (unsecured - (a))

68

1,296Lease liabilities (a)

3,082

8,1445,773

311,694(a)  Current interest-bearing liabilities are denominated in the following currencies:Australian Dollars

3,357

113,004United States Dollars



197,006Chinese Yuan



177Indonesian Rupiah

2,351

Thai Baht

65

211Malaysian Ringgit



1,2965,773

311,694Non currentUnited States dollar denominated bonds (unsecured - (b))

618,265

689,519Bank term loans (secured - (b) (c))

26,006

181Other borrowings (unsecured - (b))

5,465

5,650Lease liabilities (b)

5,365

9,123655,101

704,473(b) Non current interest-bearing liabilities are denominated in the following currencies:Australian Dollars

10,830

14,954Indonesian Rupiah

26,006

United States Dollars

618,265

689,519655,101

704,473





(c) In the prior year the bank term loan is secured by a lien over an investment in
a research and development syndicate





The liabilities created by borrowings denominated in currencies other than Australian dollars and
attendant foreign currency swaps provide a hedge to the economic entitys net assets in self sustaining foreign operations.




---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30
June 2002 (continued)





18.    Interest-bearing liabilities
(continued)





Maturity profile:





Year ended 30 June 2002 Expected to mature inType

2001/02 $000


2002/03 $000


2003/04 $000


2004/05 $000


2005/06


Thereafter $000


2002 Totals $000Bank overdrafts

197

















197Average rate  floating

7.75
%US dollar denominated bonds










618,265








618,265Average rate  fixed










6.25
%Bank term loans

2,426











26,006





28,432Average rate  floating

18.87
%










18.75
%Other borrowings

68


2,701


1,444


1,320








5,533Average rate  floating

6.47
%

7.87
%

7.87
%

7.87
%Lease liabilities

3,082


3,117


1,205


942


101





8,447Average rate  fixed

6.91
%

8.44
%

10.46
%

10.46
%

9.32
%Totals

5,773


5,818


2,649


620,527


26,107





660,874Year ended 30 June 2001 Expected to mature inType

2001/02 $000


2002/03 $000


2003/04 $000


2004/05 $000


2005/06


Thereafter $000


2001 Totals $000Bank overdrafts

71

















71Average rate  floating

7.75
%US dollar denominated bonds













689,519





689,519Average rate  fixed













6.25
%Bank term loans

177


181














358Average rate  floating

4.61
%

6.45
%Money market borrowings

105,000

















105,000Average rate  floating

4.90
%Medium term notes

197,006

















197,006Average rate  fixed

8.65
%Other borrowings

1,296


1,444


1,444


1,444


1,318





6,946Average rate  floating

3.55
%

7.87
%

7.87
%

7.87
%

7.87
%Lease liabilities

8,144


4,900


2,905


1,268


37


13


17,267Average rate  fixed

8.43
%

7.74
%

7.42
%

7.50
%

7.50
%

7.50
%Totals

311,694


6,525


4,349


2,712


690,874


13


1,016,167







---

##### Table of Contents




Notes to the financial statementsfor the financial year
ended 30 June 2002 (continued)





Consolidated2002

2001$000

$00019.  ProvisionsCurrentCurrent tax liabilities

9,975

49,539Dividends

64,783

30,980Employee entitlements (a)

146,450

121,330211,233

152,310Non currentDeferred tax liabilities

71,194

42,007Employee entitlements (a)

23,969

23,163(a) Aggregate current and non current employee entitlements

170,419

144,493The present values of employee entitlements not expected to be settled within twelve months of balance date have been calculated using an
average discount rate of 2.5% which allows for the assumed rate of increase in wage and salary rates.Number of employees at balance date

39,849

33,00020.  Contributed equityIssued and paid up capital:809,780,008 Ordinary Shares fully paid(442,572,232 Ordinary Shares fully paid  June 2000)

3,403,284

1,266,252Total Issued and Paid Up Capital

3,403,284

1,266,252Movements in share capitalOpening balance

1,266,252

845,275Add:Ordinary shares issued during the year : Pursuant to exercise of options under the Mayne NicklessExecutive Share Option Scheme

9,805

12,991 Pursuant to the Mayne Employee Share Acquisition Plan

18

 Pursuant to the Dividend Reinvestment Plan

15,436

13,440 Pursuant to private placements



197,008 Pursuant to the acquisition of Australian Hospital Care Ltd



201,072 Pursuant to the acquisition of F H Faulding & Co Ltd

2,111,773

Less:Costs of share issues



(3,534
)Closing balance

3,403,284

1,266,252







---

##### Table of Contents




Notes to the financial statementsfor the financial year
ended 30 June 2002 (continued)





20.    Contributed equity (continued)





Share Issues in the year ended 30 June 2002

Share Issues in the year ended 30 June 2001The following ordinary shares were issued during the year:

The following ordinary shares were issued during the
year:Dividend reinvestment plan:

Dividend reinvestment plan:1,243,314 ordinary shares, fully paid at $6.33 per share

1,483,181 ordinary shares, fully paid at $4.12 per share1,336,678 ordinary shares, fully paid at $5.66 per share

1,237,969 ordinary shares, fully paid at $5.92 per shareExecutive Share Option Scheme:

Executive Share Option Scheme:1,841,000 ordinary shares, fully paid at a weighted average exercise price of $5.326 per share

2,705,000 ordinary shares, fully paid at a weighted
average exercise price of $4.80 per shareEmployee share acquisition plan

Private placement1,800,022 ordinary shares, fully paid at $0.01 per share

41,475,448 ordinary shares, fully paid at $4.75 per shareIssue to F H Faulding & Co Ltd shareholders

Issue to Australian Hospital Care Ltd shareholders360,986,762 ordinary shares, fully paid at $5.85 per share

42,330,989 ordinary shares, fully paid at $4.75 per share





Terms and conditions of ordinary shares:





Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per
share at shareholders meetings.





In the event of winding up of the Company ordinary shareholders rank after
all creditors and are fully entitled to any proceeds of liquidation.





Stock Exchange Listings


Mayne Group Limiteds shares are listed on the Australian Stock Exchange.





The Mayne Executive Share Option Scheme





The number of
unissued shares for which options were outstanding as at the end of the year was 6,024,000 (June 2001- 6,494,000).





A brief summary of the Scheme, which was approved by shareholders on the 8th November 1988 is as follows:





(a)    The options are granted at no cost to the executive.





(b)    The price per share payable on the exercise of an option shall be the average sale price of the companys shares on the Australian Stock Exchange on the 5 business days immediately preceding the Date
of the Grant of the option after any adjustment appropriate following any pro rata issue of additional shares.





(c)    The option may be exercised at any time in the period from the fourth anniversary of the Date of the Grant of the Option (or such earlier date as the Directors may, in their absolute discretion determine)
to 58 months from the date of Grant or such longer period as is applicable under the rules of the Scheme, except in the case of the special conditions which apply if an executive by reason of death, injury, disability, redundancy, retirement or
other prescribed circumstances, leaves the employment of the economic entity or if there is a takeover, reconstructions or winding up. Options that are not exercised at the end of the 58 months from the Date of Grant or such longer period as is
applicable under the rules of the Scheme will lapse.





(d)    In general, if the option holder
ceases employment for any reason other than reasons including death, retirement, injury, disability, redundancy or certain other prescribed circumstances, the option will lapse at the date of ceasing employment.





(e)    No further options shall be granted if the result would be that the aggregate number of shares over which
subsisting options have been granted under the Scheme exceeds 5% of the aggregate number of fully paid shares then on issue.







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





20.    Contributed equity (continued)





The Mayne Employee Share Acquisition Plan (ESAP)





A brief summary of the ESAP, which was approved by shareholders on the 17 November 1998, is as follows:





(a) The company has advanced funds to the Mayne Employee Share Acquistion Plan Trust to enable the trust to acquire shares in the company.





(b) The company has established a wholly owned subsidiary to act as Trustee and Plan Manager of the ESAP.





(c) Eligible employees who have served for a period decided from time to time by the Plan Manager are invited to purchase shares from the
Plan Manager. The purchase price will be at a discount to the market price of the shares on the day of purchase.





(d) The purchase price is repayable from dividends payable on the shares, from any proceeds of a sale of bonus shares or rights or a return of capital, from any sale of the shares under a takeover or compulsory acquisition, from the
net proceeds of a sale consequent to the cessation of employment or death of the employee or from a voluntary payment by the employee.





(e) No interest is payable on the unpaid purchase price.





(f) Except in the case of
cessation of employment, an employee cannot dispose of an interest in the shares until three years from the date of purchase.





(g) When the purchase price has been fully paid and the restrictions on disposal have ceased, the employee may require the Plan Manager to transfer the shares into the employees name or to sell the shares and to account to the
employee for the proceeds.





(h) If an employee ceases to be employed before the purchase price has been paid in
full, the shares must be sold by the Plan Manager unless, in specified periods, the employee or his or her executors voluntarily pay the balance of the purchase price to the Plan Manager. If the balance is paid, the shares will be transferred to the
employee or his or her executors.





(i) If the Plan Manager sells the shares, the proceeds must be applied in or
towards paying the outstanding purchase price but the employee will have no obligation to pay the balance of the price if the proceeds are insufficient. If there is a surplus, the surplus must be paid to the employee. If the proceeds from selling
the shares would be insufficient to fully pay the outstanding purchase price, the Plan Manager may defer the sale and the employee will then have no further obligation to pay the outstanding price and no further rights in respect to the shares.





(j) The Plan Manager may seek a direction from the employee as to voting in respect of the shares and in the
absence of a direction may vote or abstain as it decides.





(k) At 30 June 2002 there were 1,394,169 restricted
shares held on behalf of 7,074 Australian employees ( June 2001 - 1,500,549 shares held on behalf of 7,617 employees) under the ESAP at a price of $5.06 per share and 1,717,296 restricted shares held on behalf of 12,912 Australian employees under
the ESAP at a price of $0.01 per share.





On 31 August 2001, the Plan Manager issued an invitation to eligible
employees to purchase approximately $1,000 of Mayne Group ordinary shares at a purchase price of 1 cent per share, with the number of shares to be received based on the volume weighted average price at which Mayne Group shares are traded on the
Australian Stock Exchange during the week up to and including the date of allocation. On 1 November 2001, 1,800,022 shares were issued to 13,534 employees under the invitation.





Non-Executive Directors Share Plan (the Plan)





The Plan was approved by shareholders at the Annual General Meeting held in November 2000. The Plan commenced operations from 1 January 2001. The Plan requires all existing and future non-executive
directors to apply a minimum of 10 percent of their annual directors fees in acquiring Mayne ordinary shares (by purchase or issue). The terms of the Plan allow a non-executive director to elect to take more than the mandatory 10 percent in
the form of Mayne Group ordinary shares.





In accordance with the waiver granted by the Australian Stock Exchange
from Listing Rule 10.14, the parent entity may issue shares to non-executive directors under the Plan without obtaining shareholder approval for the issue during the period of three years from the Plans commencement, that is until 31 December
2003.





During the 2001 and 2002 financial years, the total number of ordinary shares purchased under the Plan was
38,447 (June 2001 - 10,509 shares) and no shares were issued under the Plan.







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)








Consolidated2002


2001$000


$00021.

Reserves and retained profitsAsset Revaluation Reserve:Opening balance




Increment on independent revaluation of properties

8,204


8,204


Capital Profits Reserve:Opening balance

2,656


2,656Transfer from asset revaluation reserve




2,656


2,656General Reserve:Opening balance

2,122


2,096Transfer from retained earnings




262,122


2,122Exchange Fluctuation Reserve:Opening balance

(32,226
)

(24,074
)Variation in value of investment in overseas controlledentities due to currency realignments

(26,168
)

57,407Net exchange gains/(losses) after income tax of $14.373million (June 2001$7.416 million) incurred on loans takento hedge effects of exchange movements

42,646


(65,559
)Net movement for the period

16,478


(8,152
)(15,748
)

(32,226
)Total Reserves

(2,766
)

(27,448
)Retained profitsRetained profits at the beginning of the financial year

153,953


49,767Net profit attributable to membersof Mayne Group Limited

173,611


161,562Transfer to general reserve




(26
)Dividends provided for or paid

(113,418
)

(57,350
)Retained profits at the end of the financial year

214,146


153,953





Nature and purpose of reserves





Asset revaluation reserve





The asset revaluation reserve includes the net revaluation increments and decrements arising from the revaluation of freehold and long term leasehold assets in accordance with the economic
entitys policy to recognise these assets at their fair values under accounting standard AASB 1041 Revaluation of Non-current Assets.





Capital profits reserve





Where assets which have been
revalued are disposed of, any related revaluation increment in the asset revaluation reserve is transferred to the capital profits reserve.





General reserve





The balance in the general reserve relates
to amounts allocated in prior periods from retained profits for non-specific purposes.





Exchange fluctuation
reserve





The exchange fluctuation reserve records the foreign currency differences arising from the
translation of self-sustaining foreign operations on consolidation and the translation of transactions that hedge the economic entitys net investment in a foreign operation or the translation of foreign currency monetary items forming part of
the net investment in a self-sustaining operation.









---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)








Consolidated2002


2001$000


$00022. Equity reconciliationsTotal equity reconciliationTotal equity at the beginning of the year

1,409,675


892,820Total changes in equity recognised in the statement offinancial performance attributable to membersof Mayne Group Limited

198,293


153,410Transactions with members of Mayne Group Limited as owners:Equity contributed

2,137,032


420,977Share buyback




Dividends

(113,418
)

(57,350
)Total changes in outside equity interest

(13,758
)

(182
)Total equity at the end of the year

3,617,824


1,409,675Reconciliation of outside equity interestsOutside Equity Interest2002


2001$000


$000Operating profit/(loss) after income tax

3,604


3,888Retained profits/(losses) at the beginning of the financial year

4,604


2,634Total available for appropriation

8,208


6,522Adjustments for entities acquired or sold

(3,758
)

Dividends paid / provided for

(2,181
)

(1,918
)Retained profits at the end of the financial year

2,269


4,604Share Capital

431


10,255Reserves

460


2,0593,160


16,918







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





Consolidated2002


2001


2000$000


$000


$00023.    Notes to the Statements of Cash Flows(a) Reconciliation of CashFor the purpose of the Statements of Cash Flows, cash includes cash on hand and at bank and short term deposits with maturity within 3
months, net of outstanding bank overdrafts. Cash as at the end of the financial year as shown in the Statements of Cash Flows is reconciled to the related items in the Statements of Financial Position as follows:Cash

119,927


40,973


68,011Short term deposits

305,696


540,015


41,853Less short term deposits with maturity over 3 months

(15
)

(16
)

(19
)Bank overdraft

(197
)

(71
)

(84
)425,411


580,901


109,761(b)
Reconciliation of Operating Profit/(Loss) after Income Tax to Net Cash Provided by Operating ActivitiesOperating Profit/(Loss) after income tax

177,215


165,450


(170,186
)Add/(Less): Adjustments of non-cash items:Depreciation and amortisation

197,138


137,550


136,886(Profit)/Loss on sale of non-current assets

9,085


(204,430
)

(111
)Interest capitalised







(1,297
)Undistributed (profits)/losses of associated entities

915


289


(20
)Unrealised exchange (gains)/losses

161


(35
)

(1,042
)Write down of non-current assets to recoverable amounts

6,002





94,123Write down of deferred commencement costs







41,760Goodwill and brand names written off







85,591Other

(2,216
)

403


345Add/(Less): Items classified as investing/financing activities:Realised exchange (gains)/losses

9


(25
)

139Changes in assets and liabilities net of effects from acquisitions/disposals of businesses and controlled
entities:(Increase)/Decrease in trade debtors/other debtors

24,818


(35,585
)

(57,960
)(Increase)/Decrease in inventories

(31,715
)

(4,134
)

(3,749
)(Increase)/Decrease in prepayments

22,595


256


1,304Increase/(Decrease) in trade creditors/other creditors

(94,847
)

24,032


49,692Increase/(Decrease) in provisions

(9,392
)

4,988


10,301Increase/(Decrease) in current tax liabilities

(51,942
)

41,994


1,688Increase/(Decrease) in deferred tax liabilities

15,873


4,632


3,235(Increase)/Decrease in deferred tax assets

(83,640
)

(50,400
)

(34,173
)(Increase)/Decrease in other assets







16,944Net operating cash flows

180,059


84,985


173,470







---

##### Table of Contents

Notes to the financial statementsfor the financial year ended 30 June 2002 (continued)





Consolidated2002


2001


2000$000


$000


$00023. Notes to the Statements of Cash Flows (continued)(c)    Acquisitions of Entities/BusinessesCash

329,351


5,776


87,883Non-cash consideration

2,111,773


193,421


Amounts due in future periods

6,351


400


2,300Consideration

2,447,475


199,597


90,183Fair value of net assets acquired:Fixed and non-current assets

1,243,893


314,939


59,264Current assetscash

52,572


(3,659
)

366Current assetsother

945,697


60,450


2,654Creditors and borrowings

(892,859
)

(262,689
)

(32,423
)1,349,303


109,041


29,861Goodwill

1,098,172


90,556


60,3222,447,475


199,597


90,183Cash consideration

329,351


5,776


87,883Less: Balances acquiredCash

61,609


80


366Bank overdraft




(3,739
)

(26
)267,742


9,435


87,543Payments relating to acquisition of 35% outside equity interest in PT Putramas Muliasantosa

41,394





Payments relating to acquisitions in prior periods

19,202


143


5,75560,596


143


5,755Outflow of cash

328,338


9,578


93,298(d)    Disposal of Entities/BusinessesCash




483,345


18,639Amounts due in future periods




70,451


Disposal price/(cost)




553,796


18,639Assets and liabilities disposed of:Fixed and non-current assets




241,064


18,316Current assetscash




26,662


1,871Current assetsother




142,297


33,958Creditors and borrowings




(99,423
)

(34,833
)Net assets disposed of:




310,600


19,312Receipts relating to disposals in prior periods

23,474





Inflow/(outflow) of cash

23,474


456,683


16,768


|(e) |  | Proceeds from sale of Faulding orals pharmaceuticals business
|--- |  | -------------------------------------------------------------




In conjuction with the acquisition of F H Faulding & Co Ltd the Group simultaneously disposed of the Faulding oral pharmaceutical business at the fair value of the net
assets, amounting to proceeds of $1,312.257 million.





|(f) |  | Non-cash Financing and Investing Activities
|--- |  | -------------------------------------------




During the financial year the economic entity acquired property, plant and equipment with an aggregate fair value of $ nil (2001$3.792 million; 2000$25.205 million) by means of finance
leases.





Dividends satisfied by the issue of shares under the dividend reinvestment plan are shown in Note 20.






---

##### Table of Contents

Notes to the financial statementsfor the financial year ended 30 June 2002 (continued)





Consolidated2002

2001

2000$000

$000

$00023. Notes to the Statements of Cash Flows (continued)(f)  Financing FacilitiesCommitted Facilities (note 1):

698,952

826,615

814,962Less: Utilisation





Available Committed Facilities

698,952

826,615

814,962Drawn Term Financings (note 2):

646,622

886,525

755,563Uncommitted Facilities and Programs (note 3):Commercial Paper

853,294

894,011

1,164,231Less: Utilisation





10,000Available Uncommitted Facilities

853,294

894,011

1,154,231





Notes:


| | 1. |  | Committed Facilities Lines include:
| | -- |  | -----------------------------------

| | (a) |  | Syndicated Standby Facility-USD 240 million syndicated variable rate facility providing support for Commercial Paper facilities and available for working
capital. The facility expires in November 2002.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) |  | AUD Bi-lateral Standby Facility-AUD 75 million. Evergreen.
| | --- |  | ----------------------------------------------------------

| | (c) |  | Bank Debt Facilities-The economic entity has AUD 200 million of undrawn bank debt, which matures in March 2003.
| | --- |  | ---------------------------------------------------------------------------------------------------------------




| | 2. |  | Drawn term financings include:
| | -- |  | ------------------------------

| | (a) |  | US$ Bond-USD 350 million maturing in February 2006.
| | --- |  | ---------------------------------------------------

| | (b) |  | IDR 15 billion revolving credit facility drawn to IDR 11.6 billion.
| | --- |  | -------------------------------------------------------------------

| | (c) |  | Term loan facility of IDR 200 billion drawn to IDR 128.3 billion, maturing in December 2006.
| | --- |  | --------------------------------------------------------------------------------------------




| | 3. |  | Uncommitted facilities and programs:
| | -- |  | ------------------------------------

Major programs include:


| | (a) |  | Commercial Paper-The economic entity has two Commercial Paper programs under differing dealer arrangements according to the particular markets.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------

| | 3 |  | (a) Commercial Paper (continued):
| | - |  | ---------------------------------




Location

Number of Dealers

Facility Limit

Drawings at balance dateMillions

MillionsNew York

1

USD 200

USD NilAustralia

4

AUD 500

AUD Nil





| | (b) |  | The economic entity has a number of other uncommitted facilities which are bilateral bank facilities available to various entities within the economic entity.
They have various maturities but are generally short term.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (c) |  | Bank overdraft facilities are arranged in each country in which the economic entity operates. Terms and conditions are agreed from time to time.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------








---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





24.    Additional Financial Instruments Disclosure





| | (a) |  | Interest Rate Risk
| | --- |  | ------------------




Interest Rate Risk Exposures





The economic entitys exposures to interest
rate risk and the effective weighted interest rates for loans and deposits are set out in note 8, for other financial assets are set out in note 13, for interest bearing liabilities are set out in note 18 and for employee benefits are set out in
note 19. The economic entitys other financial assets and liabilities, being cash, receivables, payables and dividends payable, are non interest bearing.





The economic entity enters into interest rate swaps and interest rate options to lower funding costs or to alter interest rate exposures arising from mismatches between assets and liabilities. (e.g.
converting fixed debt to floating to match a floating receivable).





Interest Rate Swaps





An interest rate swap is an agreement to swap interest payment streams based on a notional principal amount. Interest rate
swaps allow the economic entity to raise borrowings at fixed or floating rates and swap them into appropriate exposures.





The following table indicates the types of swaps used, their notional amounts, maturity date, and weighted average interest rates. The average floating rate is the implied market rate for the term of the swap plus a margin where
applicable, weighted by the face value of the instrument. All face values have been converted to AUD at foreign exchange rates current at reporting date. The interest rates may change significantly, affecting future cash flows.





Year ended 30 June 2002Expected to mature in

Thereafter $000


Total $000

Fair value $0002002/03 $000


2003/04 $000


2004/05 $000


2005/06 $000


2006/07 $000Receivefixed rate swaps (1)Australian dollars















38,150


38,150

860Average fixed rate















8.18
%Average floating rate















7.70
%United States dollars










618,265







618,265

35,665Average fixed rate










6.28
%Average floating rate










4.45
%Payfixed rate swapsAustralian dollars

5,000


35,000


10,000


140,000




54,276


244,276

(6,026
)Average fixed rate

6.44
%

5.52
%

6.50
%

5.88
%



9.47
%Average floating rate

5.13
%

5.57
%

5.86
%

5.96
%



7.08
%





|(1) |  | All the receive fixed rate swaps convert fixed debt to floating debt, hence their fair values are offset by the difference between the fair value and the book
value of the underlying debt instrument. (Refer section 24 (d)).
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)








24.    Additional Financial Instruments
Disclosure (continued)





| | (a) |  | Interest Rate Risk (continued)
| | --- |  | ------------------------------




Year ended 30 June 2001Expected to mature in





Total $000

Fair value $0002001/02 $000


2002/03 $000


2003/04 $000


2004/05 $000

2005/06 $000


Thereafter $000Receive - fixed rate swaps (1)Australian dollars















39,101


39,101

657Average fixed rate















8.18
%Average floating rate















7.88
%United States dollars

177,305










689,519





866,824

14,262Average fixed rate

6.27
%









6.28
%Average floating rate

3.80
%









5.76
%Pay - fixed rate swapsAustralian dollars




75,000


35,000




80,000


56,135


246,135

(6,411
)Average fixed rate




5.91
%

5.52
%



6.17
%

9.46
%Average floating rate




5.55
%

5.74
%



6.19
%

7.25
%United States dollars

9,850
















9,850

(307
)Average fixed rate

8.65
%Average floating rate

3.80
%





|(1) |  | All the receive fixed rate swaps convert fixed debt to floating debt, hence their fair values are offset by the difference between the fair value and the book
value of the underlying debt instrument. (Refer section 24 (d)).
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





|24. |  | Additional Financial Instruments Disclosure (continued)
|--- |  | -------------------------------------------------------




| | (a) |  | Interest Rate Risk (continued)
| | --- |  | ------------------------------




Interest Rate Options


Interest rate options are purchased to reduce the impact of changes in
interest rates on floating rate long-term debt. An interest rate option gives the purchaser the right but not the obligation to pay or receive interest flows for a specified period of time at a specified rate at a specified date in the future.





The economic entitys option contracts have terms up to 3 years. The premiums paid for interest rate options
purchased are included in other assets and are amortised to interest expense over the terms of the agreements.





The economic entity had A$ 51.5 million of bought caps, A$ 25.7 million of sold caps and A$ 25.7 million of sold floors in place at balance date (2001 Nil million). Details are set out in the below table.





Year ended 30 June 2002Expected to mature in2002/03 $000


2003/04 $000

2004/05 $000

2005/06 $000

2006/07 $000

Thereafter $000

Total $000

Fair value $000BoughtCapPounds sterling

26,990












26,990

Average rate

8.99
%Canadian dollars

7,012












7,012

Average rate

8.02
%Euro

17,476












17,476

Average rate

6.88
%SoldCapPounds sterling

13,495












13,495

Average rate

8.15
%Canadian dollars

3,506












3,506

Average rate

7.50
%Euro

8,738












8,738

Average rate

5.80
%FloorPounds sterling

13,495












13,495

(68
)Average rate

6.00
%Canadian dollars

3,506












3,506

(19
)Average rate

5.01
%Euro

8,738












8,738

(1
)Average rate

3.45
%






---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





|24. |  | Additional Financial Instruments Disclosure (continued)
|--- |  | -------------------------------------------------------




(b)  Foreign Exchange Risk





The primary objective of the economic entitys foreign exchange hedging policy is the protection of the economic entitys consolidated shareholders funds. This is achieved by matching the currency exposures of debt
raised to the currency of the underlying assets.





In order to provide appropriately denominated foreign currency
borrowings the economic entity borrows principally in US Dollars and swaps the US Dollars through the foreign exchange market into the required currencies. The economic entity also uses the foreign exchange market to hedge transactional exposures,
such as firm purchase or sale commitments denominated in foreign currencies, or internal loans between wholly owned offshore controlled entities.





Foreign Currency Swap Agreements


A foreign currency swap is an agreement to buy and sell one
currency against another at two different dates. This effectively denominates the debt issued by the economic entity into the currency received from the swap counterparty.





The terms of these commitments are rarely more than six months.





The economic entity had in place foreign exchange swaps with a net face value of $460.5 million, converted to AUD at rates current at reporting date (June 2001$ - 639.74 million).





Cross Currency Interest Rate Swap Agreements


The economic entity had in place cross currency swaps with a gross face value of $247.3 million, converted to AUD at rates current at reporting date (June 2001 - $275.81 million) under which it had contracted to exchange
both currency and floating interest rate obligations. This contract matures in February 2006.





The following
tables set out the gross face values of foreign currency swap and cross currency interest rate swap agreements. Foreign currency amounts are translated to Australian Dollars (AUD) at rates current at reporting date. The buy amounts
represent the AUD equivalents of commitments to purchase foreign currencies, and the sell amounts represent the AUD equivalent of commitments to sell foreign currencies. The tables show the contract rates, maturities and fair values.





Year ended 30 June 2002Expected to mature in2002/03 $000

2003/04 $000

2004/05 $000

2005/06 $000

2006/07 $000

Thereafter $000

Total $000

Fair value $000SellCanadian Dollars

142,280











142,280

1,450Average contracted rate

0.8438Pounds Sterling

26,991











26,991

(105
)Average contracted rate

0.3715Euro

57,148











57,148

(1,350
)Average contracted rate

0.5847New Zealand Dollars

5,274











5,274

(44
)Average contracted rate

1.1669United States Dollars

10,360











10,360

667Average contracted rate

0.5328BuyUnited States Dollars

285,554





247,306





532,860

45,737Average contracted rate

0.5367





0.7475Pounds Sterling

37,247











37,247

862Average contracted rate

0.3790









---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





|24. |  | Additional Financial Instruments Disclosure (continued)
|--- |  | -------------------------------------------------------







(b)  Foreign Exchange Risk (continued)





Year ended 30 June 2002Expected to mature in2002/03 $000

2003/04 $000

2004/05 $000

2005/06 $000

2006/07 $000

Thereafter $000

Total $000

Fair value $000SellCanadian Dollars

119,453











119,453

(936
)Average contracted rate

0.7812Pounds Sterling

38,409











38,409

16Average contracted rate

0.3604BuyUnited States Dollars

531,127







275,808



806,935

89,378Average contracted rate

0.5067







0.7475






---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





24.    Additional Financial Instruments Disclosure (continued)





(c) Credit risk exposures





Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted.





Recognised Financial Instruments





The credit risk on
financial assets, excluding investments, of the economic entity which have been recognised on the statement of financial position is the carrying amount, net of any provision for doubtful debts.





The economic entity minimises concentrations of credit risk by undertaking transactions with a large number of customers and counterparties in various countries.





The economic entity is not materially exposed to any individual overseas country or to any individual customer.
Concentrations of credit risk on trade debtors due from customers occur in the Health Care segment in Australia, where the private and government sponsored health insurance funds account for 60.7% (200171.7%) of trade debtors of Hospitals.
Pharmacies account for 61.7% of trade debtors of the Pharmacy and Pharmaceuticals sectors.





Unrecognised
Financial Instruments





Swaps and options are subject to the credit worthiness of counterparties, which are
principally large banks. Counterparty limits are based upon credit ratings issued by major ratings agencies.





Foreign Currency Swap Agreements and Interest Rate Swaps Agreements





The theoretical risk
in using these instruments is the cost of replacing, at market rates, these swaps in the event of default by the counterparty. In order to control this risk management assigns counterparty risk weightings to each transaction. Additionally, the
economic entity deals only with strong financial intermediaries, principally major banks and their controlled entities and as a result, the economic entity does not expect any counterparties to fail to meet their obligations given their high credit
ratings.





The credit exposure of interest rate and foreign exchange contracts, as set out in the table below, is
represented by the aggregate of positive fair value contracts at the reporting date, exclusive of recognised accrued interest, reduced by the effects of netting arrangements with financial institution counterparties.








Consolidated2002 Exposure

2001 Exposure$000

$000Foreign currency swaps

259

1,168Cross currency interest rate swaps

59,977

90,192Interest rate swaps

36,309

13,423







---

##### Table of Contents

Notes to the financial statementsfor the financial year ended 30 June 2002 (continued)





|24. |  | Additional Financial Instruments Disclosure (continued)
|--- |  | -------------------------------------------------------




(d) Net fair value of financial assets and liabilities





Net fair values of financial assets and liabilities are determined by the economic entity on the following basis:





Recognised Financial Instruments





Assets





Cash, short term deposits and debtors


| | - |  | the carrying amount approximates fair value because of the short maturity of these instruments.
| | - |  | -----------------------------------------------------------------------------------------------




Long Term Investments


| | - |  | the fair values of quoted investments are based on quoted market prices for these investments. A reasonable estimate of the fair value of long term investments
with no quoted market   prices was not made as no loss will crystalise if they are held to maturity.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Liabilities





Short Term Debt


| | - |  | the carrying amount approximates fair value because ofthe short maturity of these instruments.
| | - |  | ----------------------------------------------------------------------------------------------




Long Term Debt


| | - |  | the fair value of long term debt has been estimated based on the current rates offered in the secondary market.
| | - |  | ---------------------------------------------------------------------------------------------------------------




The carrying amounts and estimated fair values of the economic entitys recognised financial assets and liabilities are as follows:








Consolidated2002

2002

2001

2001Carrying

Net Fair

Carrying

Net FairAmount

Value

Amount

Value$000

$000

$000

$000Financial Assets:Cash

119,927

119,927

40,973

40,973Loans and deposits

305,696

305,696

540,015

540,015Loans and deposits non current

41,998

41,998

3,777

3,777Receivables current

987,137

987,137

516,784

516,784Receivables non current

8,512

8,512

14,868

14,868Other financial assets- Shares in other corporations - listed

4

4

4

4- Shares in other corporations - unlisted

23,489

23,489

15,660

15,660- Interest in partnership

2,400

2,400

2,404

2,404Financial Liabilities:Payables current

787,719

787,719

499,482

499,482Interest-bearing liabilities current

5,773

5,773

311,694

311,694Provisions current

221,208

221,208

201,849

201,849Payables non current

8,447

8,447

21,452

21,452Interest-bearing liabilities non current

655,101

669,999

704,473

692,269Provisions non current

95,163

95,163

65,170

65,170





Unrecognised Financial Instruments





Foreign Currency Contracts





The fair value
of foreign currency contracts, used for hedging purposes, is estimated using market data and quotes from banks.





Interest Rate
Contracts





The fair value of interest rate contracts is estimated by obtaining quotes from banks.





The net fair values of unrecognised financial instruments held as at the reporting date are:





Consolidated2002 Net Fair Value


2001 Net Fair Value$000


$000Interest rate swaps

30,499


8,201Foreign exchange contracts

(13,387
)

(1,734
)Cross currency interest rate swaps

60,605


90,192Interest rate options

(88
)









---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)








Sales Revenue

Assets

Liabilities2002 $000

2001 $000

2000 $000

2002 $000

2001 $000

2000 $000

2002 $000

2001 $000

2000 $00025.

Segmental ReportingIndustry SegmentsHospitals

1,396,749

1,148,667

870,326

1,418,542

1,261,344

926,276

219,857

234,019

151,037Pathology Services

249,268

245,674

236,165

229,300

250,397

220,110

31,662

34,021

27,803Diagnostic Imaging Services

159,617

146,570

122,494

188,500

138,580

118,991

19,661

26,827

20,949Medical Centres

32,828

14,246

9,046

91,235

22,726

5,418

5,347

13,668

732Pharmacy Services

1,406,264





757,814





287,616



Health Care Services

3,244,726

1,555,157

1,238,031

2,685,391

1,673,047

1,270,795

564,143

308,535

200,521Pharmaceuticals

332,753





1,198,807





112,758



Consumer Products

167,233





367,977





28,902



Total Pharmaceuticals

499,986





1,566,784





141,660



Armaguard

221,248

231,159

202,275

125,611

141,168

128,080

28,779

31,964

30,169Logistics

673,921

680,632

664,344

264,744

329,479

256,672

71,120

99,791

120,966Australia & Pacific Logistics

895,169

911,791

866,619

390,355

470,647

384,752

99,899

131,755

151,135Loomis Courier

350,236

361,313

295,092

147,322

77,521

59,928

31,274

46,934

32,574Total Logistics Services

1,245,405

1,273,104

1,161,711

537,677

548,168

444,680

131,173

178,689

183,709Other



330,402

700,660

6,164

7,192

378,981

3,484

4,315

71,9154,990,117

3,158,663

3,100,402

4,796,016

2,228,407

2,094,456

840,460

491,539

456,145Unallocated

1,840





595,219

985,388

283,715

932,951

1,312,581

1,029,206Consolidated

4,991,957

3,158,663

3,100,402

5,391,235

3,213,795

2,378,171

1,773,411

1,804,120

1,485,351Geographical SegmentsAustralia

4,245,915

2,394,961

2,047,716

4,780,401

2,802,181

1,770,793

1,660,111

1,703,353

1,363,778Other Pacific Regions

130,749

71,987

56,934

183,592

129,941

125,759

17,289

11,152

8,513Australia & Pacific Regions

4,376,664

2,466,948

2,104,650

4,963,993

2,932,122

1,896,552

1,677,400

1,714,505

1,372,291North America

501,656

361,313

295,092

258,920

161,383

96,657

63,078

50,138

36,501Europe

113,637





162,158

113,098

5,981

29,449

35,162

4,644Other



330,402

700,660

6,164

7,192

378,981

3,484

4,315

71,915Consolidated

4,991,957

3,158,663

3,100,402

5,391,235

3,213,795

2,378,171

1,773,411

1,804,120

1,485,351









---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





Profit before tax & Significant Items


Significant Items before
tax


Profit from ordinary operations before tax2002 $000


2001 $000


2000 $000


2002 $000


2001 $000


2000 $000


2002 $000


2001 $000


2000 $00025.

Segmental Reporting (continued)Industry SegmentsHospitals

71,647


94,465


54,226





(21,201
)

(157,043
)

71,647


73,264


(102,817
)Pathology Services

30,432


32,548


25,203





(10,715
)

(32,100
)

30,432


21,833


(6,897
)Diagnostic Imaging Services

16,740


10,277


7,987





(13,253
)

(48,354
)

16,740


(2,976
)

(40,367
)Medical Centres

(3,370
)

(1,806
)

564





(3,783
)




(3,370
)

(5,589
)

564Pharmacy Services

19,454

















19,454





Health Care Services

134,903


135,484


87,980





(48,952
)

(237,497
)

134,903


86,532


(149,517
)Pharmaceuticals

44,249

















44,249





Consumer Products

10,786

















10,786





Total Pharmaceuticals

55,035

















55,035





Armaguard

26,206


24,924


24,398


(6,713
)

(4,165
)

(420
)

19,493


20,759


23,978Logistics

24,927


30,405


20,834


(5,400
)

(18,687
)

(10,240
)

19,527


11,718


10,594Australia & Pacific Logistics

51,133


55,329


45,232


(12,113
)

(22,852
)

(10,660
)

39,020


32,477


34,572Loomis Courier

21,499


15,087


15,000





(8,810
)

(446
)

21,499


6,277


14,554Total Logistics Services

72,632


70,416


60,232


(12,113
)

(31,662
)

(11,106
)

60,519


38,754


49,126Other

(232
)

13,269


29,702


4,551


200,954


(2,062
)

4,319


214,223


27,640262,338


219,169


177,914


(7,562
)

120,340


(250,665
)

254,776


339,509


(72,751
)Unallocated

(12,653
)

(7,967
)

(7,472
)

(14,730
)

(48,387
)

(27,341
)

(27,383
)

(56,354
)

(34,813
)Earnings before Interest and Tax

249,685


211,202


170,442


(22,292
)

71,953


(278,006
)

227,393


283,155


(107,564
)Net Interest (Expense)

(19,562
)

(42,363
)

(48,071
)










(19,562
)

(42,363
)

(48,071
)Consolidated

230,123


168,839


122,371


(22,292
)

71,953


(278,006
)

207,831


240,792


(155,635
)Geographical SegmentsAustralia

176,999


173,110


118,051


(26,843
)

(119,087
)

(273,943
)

150,156


54,023


(155,892
)Other Pacific Regions

13,523


9,736


7,689





(916
)

(1,555
)

13,523


8,820


6,134Australia & Pacific Regions

190,522


182,846


125,740


(26,843
)

(120,003
)

(275,498
)

163,679


62,843


(149,758
)Americas

45,094


15,087


15,000





(8,998
)

(446
)

45,094


6,089


14,554Europe, Middle East & Africa

14,301

















14,301





Other

(232
)

13,269


29,702


4,551


200,954


(2,062
)

4,319


214,223


27,640Earnings before Interest and Tax

249,685


211,202


170,442


(22,292
)

71,953


(278,006
)

227,393


283,155


(107,564
)Net Interest (Expense)

(19,562
)

(42,363
)

(48,071
)










(19,562
)

(42,363
)

(48,071
)Consolidated

230,123


168,839


122,371


(22,292
)

71,953


(278,006
)

207,831


240,792


(155,635
)









---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





Depreciation and Amortisation

Capital expenditure on
Property, Plant and Equipment2002

2001

2000

2002

2001

2000$000

$000

$000

$000

$000

$00025.

Segmental Reporting (continued)Industry SegmentsHospitals

67,371

52,493

51,724

47,347

43,271

57,642Pathology Services

9,864

9,745

8,659

5,616

20,662

13,790Diagnostic Services

15,663

14,163

9,961

17,973

8,238

3,299Medical Centres

3,158

747

384

923

2,115

81Pharmacy Services

14,999





7,477



Health Care Services

111,055

77,148

70,728

79,336

74,286

74,812Pharmaceuticals

34,625





26,731



Consumer Products

6,159





7,258



Total Pharmaceuticals

40,784





33,989



Armaguard

11,991

12,650

11,155

11,665

13,506

14,770Logistics

22,633

24,858

23,052

20,810

23,869

15,287Australia & Pacific Logistics

34,624

37,508

34,207

32,475

37,375

30,057Loomis Courier

10,675

7,501

6,488

7,833

12,554

8,365Total Logistics Services

45,299

45,009

40,695

40,308

49,929

38,422Other



9,893

24,642



861

40,149197,138

132,050

136,065

153,633

125,076

153,383Unallocated



5,500

821

20,678

20,570

11,960Consolidated

197,138

137,550

136,886

174,311

145,646

165,343Geographical SegmentsAustralia

177,599

112,697

99,749

145,735

130,578

112,826Other Pacific Regions

8,527

7,456

5,991

8,595

1,653

4,003Australia & Pacific Regions

186,126

120,153

105,740

154,330

132,231

116,829Americas

9,651

7,504

6,504

18,555

12,554

8,365Europe, Middle East & Africa

1,361





1,426



Other



9,893

24,642



861

40,149Consolidated

197,138

137,550

136,886

174,311

145,646

165,343





Notes





|(i) |  | The economic entity operates predominantly in the following industries:
|--- |  | -----------------------------------------------------------------------




Health Care Services comprises the management of stand alone and co-located private hospitals, public hospital management, pathology and diagnostic imaging
services, the management of medical centres and the provision of distribution and retail management services to pharmacies.





Logistics Services comprises warehousing and distribution, distribution fleet management, armoured cars, priority and specialised express freight, couriers and messengers.





Pharmaceuticals comprises the development, manufacture and distribution of injectible pharmaceuticals and of health and
personal care products.





Other comprises discontinued services.





Unallocated comprises expenditure which is not recovered from the operating businesses, cash, deposits, investments,
borrowings and tax balances not attributed to the operating businesses.





|(ii) |  | The above figures are after elimination of inter-entity transactions. There are no material inter-segment sales. All inter-segment transactions are on arms
length conditions.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(iii) |  | The 2001 and 2000 figures have been restated in line with the current segmental structure.
|----- |  | ------------------------------------------------------------------------------------------



---

##### Table of Contents




Notes to the financial statementsfor the financial year
ended 30 June 2002 (continued)





Consolidated2002


2001$000


$00026.

Capital Expenditure CommitmentsEstimated capital expenditure contracted for at balancedate but not provided for, payable -Freehold land and buildingsWithin one year

23,000


2,480Plant and equipmentWithin one year

12,625


14,301Later than one and less than two years

3,858


Later than two and less than five years

2,386


Later than five years

1,273


20,142


14,301Amounts due in future periods in respect of:Acquisitions of businesses, payable -Within one year

23,000


59Later than one and less than two years




23,000


5927.

Lease Commitments(a) Finance lease commitments payable -Within one year

3,349


8,644Later than one and less than two years

3,388


5,342Later than two and less than five years

2,444


4,492Later than five years




13Minimum lease commitments

9,181


18,491Future finance charges

(734
)

(1,224
)Total Finance Lease Liabilities

8,447


17,267Classified as:Current liabilities

3,082


8,144Non-current liabilities

5,365


9,123Total Finance Lease Liabilities

8,447


17,267(b) Operating lease commitments payable -(i) Property -Within one year

81,297


59,480Later than one and less than two years

66,980


45,303Later than two and less than five years

134,976


92,261Later than five years

211,043


170,803Total

494,296


367,847(ii) Plant and equipment -Within one year

29,131


34,565Later than one and less than two years

20,315


30,080Later than two and less than five years

24,770


47,311Later than five years

7,682


20,128Total

81,898


132,084Total Operating Lease Commitments

576,194


499,931







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





Consolidated2002

2001$000

$00028.

Auditors RemunerationAudit servicesAudit and review of the financial reports

2,617

1,653Other regulatory audit services

31

41Other servicesAuditors of the CompanyKPMGOther assurance services

504

2,388Taxation services

1,111

1,4181,615

3,806KPMG related practices



901,615

3,89629.

Contingent Liabilities(a)

Claims for which no reserves are considered appropriate

11,400

7,708Contingencies relating to sale of businesses

2,757

3,592F H Faulding Pharmacy Guarantee Scheme (c)

81,800

Other

250

250(unsecured)

96,207

11,550





(b) The economic entity at 30 June 2002 had service agreements with certain Non-Executive
Directors which provide benefits upon retirement. The full extent of the liabilities of the parent entity under these agreements is being provided for in the financial statements over the period to the planned dates of retirement. At 30 June 2002
the maximum amount to be provided in future periods was $1.322 million (2001 $1.276 million). Service agreements also exist with certain executives under which termination benefits may in some circumstances become payable.





(c) F H Faulding & Co Limited, acquired by Mayne Group on 1 October 2001, provides guarantees of pharmacists borrowings from a number of banks to
enable the pharmacists to acquire or expand pharmacies. To manage exposure under these guarantees, arrangements have been entered into to limit the banks recourse to F H Faulding & Co Limited under the guarantee scheme. The contingent
liability represents the recourse limit based on loan utilisation at 30 June 2002.





(d) Under the terms of the Deeds of Cross Guarantee,
described in Note 30, the Company has guaranteed the repayment of all current and future creditors in the event any of the parties to the Deeds are wound up. No deficiencies of net assets exists in these companies.





(e) Unsecured unascertainable contingent liabilities have been undertaken in the ordinary course of business.




---

##### Table of Contents




Notes to the financial statements for the financial year ended 30 June
2001 (continued)





30.    Deed of Cross Guarantee





Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998 the wholly-owned subsidiaries listed below are relieved from the Corporations Act 2001 requirements
for preparation, audit and lodgement of financial reports, and directors reports.





It is a condition of the
Class Order that each of the holding entities and each of the subsidiaries enter into a Deed of Cross Guarantee.





The effect of the Deed is that each holding entity guarantees to each creditor payment in full of any debt in the event of winding up of any of the subsidiaries in each group under certain provisions of the Corporations Act 2001. If
a winding up occurs under other provisions of the Corporations Act 2001, each holding entity will only be liable in the event that after six months any creditor has not been paid in full.





The subsidiaries have also given similar guarantees in the event that each holding entity is wound up.





The holding entities and subsidiaries subject to the deeds as at 30 June 2002 are:





Mayne Group

FH Faulding GroupThe Mayne Group class order was entered into on

The F H Faulding & Co Ltd Group was acquired5 June 2001.

by the economic entity on 1 October 2001, thereforeno comparatives are disclosed for the F HMayne Group Ltd (holding entity)

Faulding Group class order.Mayne Logistics Pty LtdAustralian Medical Enterprises Limited

F H Faulding & Co Ltd (holding entity)Mayne Health Pathology Pty Limited

Faulding Healthcare Pty LtdGynaelab Pty Ltd

BML Pharmaceuticals Pty LtdHCoA Operations (Australia) Pty Limited

Cenovis Pty LtdHealthcare Imaging Services Pty Limited

Faulding Healthcare Retail Pty LtdHealthcare Imaging Services (Vic) Pty Limited

Terry White Management Pty LtdHospital Corporation Australia Pty Limited

Independent Pharmaceutical Supplies Pty LtdHospitals of Australia LimitedPathology Services Pty Limited

The following companies were added to theFaulding Group class order by virtue of anThe following companies were added to the

Assumption Deed on 28 June 2002:Mayne Group class order by virtue of anAssumption Deed on 22 May 2002:

Bullivants Natural Health Products LimitedChem Mart Pty LtdAHC Risen Pty LtdAHC Tlibox Pty Ltd

AHC GroupAustralian Hospital Care (Allamanda) Pty LtdAustralian Hospital Care (Como) Pty Ltd

The AHC Group was acquired by the economicAustralian Hospital Care (HPH) Pty Ltd

entity on 1 February 2001 and at 30 June 2001Australian Hospital Care (Lady Davidson) Pty Ltd

had a separate class order. The MayneAustralian Hospital Care (Latrobe) Pty Ltd

Group class order incorporates the AHC GroupAustralian Hospital Care (Masada) Pty Ltd

companies as at 22 May 2002.Australian Hospital Care (MPH) Pty LtdAustralian Hospital Care (Northpark) Pty Ltd

Australian Hospital Care Ltd (holding entity)Australian Hospital Care (The Avenue) Pty Ltd

Australian Hospital Care (Allamanda) Pty LtdAustralian Hospital Care Investments Pty Ltd

Australian Hospital Care (Como) Pty LtdAustralian Hospital Care 1988 Pty Ltd

Australian Hospital Care (HPH) Pty LtdRehabilitation Holdings Pty Ltd

Australian Hospital Care (Lady Davidson) Pty LtdThe Victorian Rehabilitation Centre Pty Ltd

Australian Hospital Care (Latrobe) Pty LtdHealth Technologies Pty Ltd

Australian Hospital Care (MPH) Pty LtdAustralian Hospital Care Ltd

Australian Hospital Care (Northpark) Pty LtdHCoA Hospital Holdings (Australia) Pty Ltd

Australian Hospital Care (The Avenue) Pty LtdMayne Diagnostic Imaging Holdings Pty Ltd

Australian Hospital Care Investments Pty LtdMayne Healthcare Holdings Pty Ltd

Australian Hospital Care 1988 Pty LtdMayne Medical Centre Holdings Pty Ltd

Rehabilitation Holdings Pty LtdMayne Medical Centre Operations Pty Ltd

The Victorian Rehabilitation Centre Pty LtdMayne Pathology Holdings Pty Ltd

Health Technologies Pty Ltd





Consolidated statements of financial performance and consolidated
statements of financial position, comprising the holding entities and subsidiaries which are parties to the Deeds, after eliminating all transactions between parties to the Deeds of Cross Guarantee, at 30 June 2002 are set out on the following page.




---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)








Mayne Group


AHC Group


F H Faulding Group2002


2001


2001


2002$000


$000


$000


$00030.

Deed of Cross Guarantee (continued) Statements of Financial
PerformanceProfit/(loss) from ordinary activities before income tax

49,855


120,758


(5,673
)

1,055,508Income tax (expense)/benefit relating to ordinary activities

(5,780
)

32,408


2,706


4,567Net Profit/(loss) from ordinary activities after related income tax expense

44,075


153,166


(2,967
)

1,060,075Retained profits/(losses) at the beginning of the year

75,185


(20,011
)

(62,375
)

223,420Dividends provided for or paid

(113,418
)

(57,350
)

(8,323
)

Retained profits/(losses) at the end of the year

5,842


75,805


(73,665
)

1,283,495Statements of Financial PositionCurrent AssetsCash and deposits

225,288


395,581





31,750Receivables

1,164,768


1,065,771


52,234


946,486Inventories

35,796


29,159


2,511


229,482Assets held for resale







64,098


Other current assets

24,726


13,864


11,503


Total Current Assets

1,450,578


1,504,375


130,346


1,207,718Non-Current AssetsDeposits

244


3,532





Receivables

111,609


8,619





865,479Other financial assets

2,869,776


500,513


60,887


67,936Property, plant & equipment

806,802


698,049


70,227


113,795Intangibles

500,497


422,906





110,860Deferred tax assets

141,957


94,682


24,417


39,236Other

5,563


14,432





Total Non-Current Assets

4,436,448


1,742,733


155,531


1,197,306Total Assets

5,887,026


3,247,108


285,877


2,405,024Current LiabilitiesPayables

249,897


357,125


57,959


455,923Interest-bearing liabilities

1,370,013


673,325


26,600


Current tax liabilities

6,690


1,128





23,855Provisions

177,525


129,293


8,547


17,379Total Current Liabilities

1,804,125


1,160,871


93,106


497,157Non-Current LiabilitiesPayables

2,640


19,296





3,191Interest-bearing liabilities

607,728


696,225


5,650


912Deferred tax liabilities

24,309


15,063


2,982


6,994Provisions

19,196


13,580


2,219


1,515Total Non-Current Liabilities

653,873


744,164


10,851


12,612Total Liabilities

2,457,998


1,905,035


103,957


509,769Net Assets

3,429,028


1,342,073


181,920


1,895,255EquityContributed equity

3,403,284


1,266,252


254,705


611,021Reserves

19,902


16


880


739Retained profits/(losses)

5,842


75,805


(73,665
)

1,283,495Total Equity

3,429,028


1,342,073


181,920


1,895,255







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)








Country of Incorporation

Mayne Group Limiteds direct and indirect interest held2002

2001Notes



%

%31. Particulars in relation to Controlled EntitiesParent EntityMayne Group Limited




AustraliaControlled Entities

(a
)(b)Stonehenge Properties Pty Ltd




Australia

100

100The Ward Corporation Pty Limited




Australia

100

100Mayne Finance Limited

(d
)

Australia

100

100Mayne Finance (Australia) Pty Ltd




Australia

100

100Mayne Properties Pty Ltd




Australia

100

100Mayne Employee Share Acquisition Plan Pty Ltd




Australia

100

100 Mayne Employee Share Acquisition Plan Trust

(d
)



100

100Mayne Logistics Pty Ltd

(c
)

Australia

100

100 Mayne Asian Holdings Pty Ltd




Australia

100

100Saftsal Pty Limited




Australia

100

100 Aksertel Pty Limited




Australia

100

100 Onosas Pty Limited




Australia

100

100 Lamsak Pty Limited




Australia

100

100HCoA International Holdings Pty Ltd




Australia

100

100Pathology Services Pty Ltd

(c
)

Australia

100

100 Gynaelab Pty Limited

(c
)

Australia

100

100Pruinosa Pty. Limited




Australia

100

100Australian Medical Enterprises Limited

(c
)

Australia

100

100 AME Hospitals Pty Ltd




Australia

100

100 AME Trust






100

100 Victoria House Holdings Pty Limited




Australia

100

100 Larches Pty Ltd




Australia

100

100 AME Properties Pty Ltd




Australia

100

100 AME Property Trust






100

100 Attadale Hospital Property Pty Ltd




Australia

100

100 Glengarry Hospital Property Pty Ltd




Australia

100

100 Jamison Private Hospital Property Pty Ltd




Australia

100

100 AME Trading Trust






100

100 Hadassah Pty Ltd




Australia

100

100 Rannes Pty Ltd




Australia

100

100 Glengarry Hospital Unit Trust No 2






100

100 Glengarry Hospital Unit Trust No 1






100

100 Hallcraft Pty Ltd




Australia

100

100 Hallcraft Unit Trust






100

100 Jandale Pty Ltd




Australia

100

100 AME Medical Services Pty Ltd




Australia

100

100 Integrated Health Care Pty Ltd




Australia

100

100 Kelldale Pty Ltd




Australia

100

100 Seacresh Pty Limited




Australia

51

51 Seacrest Unit Trust

(d
)



51

51 Pacific Medical Centres Pty Limited




Australia

100

100 Link Medical Laboratory Holdings Pty Ltd




Australia

100

100







---

##### Table of Contents

Notes to the financial statementsfor the financial year ended 30 June 2002 (continued)





Country of Incorporation

Mayne Group Limiteds direct and indirect interest held2002

2001Notes


%

%31.

Particulars in relation to Controlled Entities (continued)Trezise Services Pty Ltd



Australia

100

100Hillsands Pty Ltd



Australia

100

100Sugermans Pathology Pty. Ltd.



Australia

100

100Mayne Healthcare Holdings Pty Lt

(c)

Australia

100

100  Mayne Health Logistics Pty Ltd



Australia



100  Mayne Pathology Holdings Pty Ltd

(c)

Australia

100

100  Mayne Health Pathology Pty Ltd

(c)

Australia

100

100  Dorevitch Laboratory Services Pty Ltd



Australia

100

100  Mayne Medical Centre Holdings Pty Limited

(c)

Australia

100

100  Mayne Medical Centre Operations Pty Limited

(c)

Australia

100

100  Mayne Aged Care Holdings Pty Ltd



Australia

100

100  Mayne Aged Care Operations Pty Ltd



Australia

100

100  Mayne Diagnostic Imaging Holdings Pty Limited

(c)

Australia

100

100  Healthcare Imaging Services Pty Ltd

(c)

Australia

100

100  Healthcare Imaging Services (Vic) Pty Ltd

(c)

Australia

100

100  Cabramatta Imaging Pty Ltd



Australia

50

50  Cabramatta Unit Trust



Australia

50

50  Brystow Pty Ltd



Australia

100

100  Western Suburbs Ultra-sound & Radiology Services Trust



Australia

100

100  Orana Services Trust

(d)

Australia

50

50  Orana Services Pty Ltd



Australia

50

50  Norcoray Unit Trust

(d)

Australia

50

50  Norcoray Pty Ltd



Australia

50

50HCoA Operations Pty Ltd



Australia

100

100  HCA Management Pty Limited



Australia

100

100Malahini Pty Limited



Australia

100

100  Tilemo Pty Limited



Australia

100

100  Hospital Affiliates of Australia Pty Ltd



Australia

100

100  C.R.P.H. Pty. Limited



Australia

100

100  P.M.P.H. Pty. Limited



Australia

100

100  Hospital Developments Pty. Limited



Australia

100

100Relkban Pty. Limited



Australia

100

100Relkmet Pty. Limited



Australia

100

100Votraint No. 664 Pty. Limited



Australia

100

100Votraint No. 665 Pty. Limited



Australia

100

100  HOAIF Pty Ltd



Australia

100

100Hospitals of Australia Limited

(c)

Australia

100

100  Dabuvu Pty Limited



Australia

100

100Wellness Holdings Pty Ltd



Australia

100

100  Corporate Wellness Solutions Pty Ltd



Australia

100

100




---

##### Table of Contents

Notes to the financial statementsfor the financial year ended 30 June 2002 (continued)





Country of Incorporation

Mayne Group Limiteds direct and indirect interest held2002

2001Notes


%

%31.

Particulars in relation to Controlled Entities (continued) HCoA Hospital Holdings (Australia) Pty Ltd

(c)

Australia

100

100 HCoA Operations (Australia) Pty Ltd

(c)

Australia

100

100 Hospital Corporation Australia Pty Limited

(c)

Australia

100

100 Australian Hospital Care Limited

(c)

Australia

100

100 Australian Hospital Care (Latrobe) Pty Ltd

(c)

Australia

100

100 Australian Hospital Care (MPH) Pty Ltd

(c)

Australia

100

100 Australian Hospital Care (The Avenue) Pty Ltd

(c)

Australia

100

100 Rehabilitation Holdings Pty Ltd

(c)

Australia

100

100 Australian Hospital Care 1998 Pty Ltd

(c)

Australia

100

100 Australian Hospital Care (Masada) Pty Ltd

(c)

Australia

100

100 Masada Private Hospital Unit Trust





100

100 Australian Hospital Care (Como) Pty Ltd

(c)

Australia

100

100 AHC Tilbox Pty Ltd

(c)

Australia

100

100 AHC Risen Pty Ltd

(c)

Australia

100

100 Australian Hospital Care (Knox) Pty Ltd



Australia

100

100 Knox Private Hospital Unit Trust





100

100 Australian Hospital Care (Northpark) Pty Ltd

(c)

Australia

100

100 Australian Hospital Care (Dorset) Pty Ltd



Australia

100

100 Dorset Private Hospital Unit Trust





100

100 Australian Hospital Care Investments Pty Ltd

(c)

Australia

100

100 AHC Radiology Pty Ltd



Australia

100

100 The AHC Radiology Unit Trust





100

100 Australian Hospital Care (Pindara) Pty Ltd



Australia

100

100 Pindara Private Hospital Unit Trust





100

100 Australian Hospital Care (Ringwood) Pty Ltd



Australia

100

100 Ringwood Private Hospital Unit Trust





100

100 Australian Hospital Care (Lady Davidson) Pty Ltd

(c)

Australia

100

100 Australian Hospital Care (MSH) Pty Ltd



Australia

100

100 Australian Hospitals Unit Trust





100

100 Australian Hospital Care (Allamanda) Pty Ltd

(c)

Australia

100

100 Australian Hospital Care (HPH) Pty Ltd

(c)

Australia

100

100 The Victorian Rehabilitation Centre Pty Ltd

(c)

Australia

100

100 Health Technologies Pty Ltd

(c)

Australia

100

100 eHealth Technologies Limited



Australia

100

100 Australian Hospital Care (Spare) Pty Ltd



Australia

100

100 Spare Unit Trust





100

100F H Faulding & Co Ltd

(d)

Australia

100

 Mayne Pharma Pty Ltd (formerly Mayne Health Logistics International Pty Ltd)

(d)

Australia

100

100




---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





Country of Incorporation

Mayne Group Limiteds direct and indirect interest held2002

2001Notes


%

%31.

Particulars in relation to Controlled Entities (continued)Mayne Limited



New Zealand

100

100 Mayne Holdings (NZ) Limited



New Zealand

100

100Transport Security Insurance (Pte) Ltd



Singapore

100

100 Gold Reserve Limited



Hong Kong

100

100 China-Australia Cold Store and Warehouse Co. Ltd



Peoples Republic of China

95

95 Mayne Logistics (Malaysia) Sdn. Bhd.



Malaysia

100

100(formerly Online Distribution Services Sdn. Bhd.) Etika Gelora Sdn. Bhd.

(e)

Malaysia

30

30 Mayne Logistics (Thailand) Limited



Thailand

60

60PT Health Care of Surabaya



Indonesia

99

99PT Putramas Muliasantosa

(i)

Indonesia

95

60 PT Mitrajaya Medikatama



Indonesia

95

52.8 PT Mayne Logistics Operations



Indonesia

100

100 Mayne Holdings (Fiji) Ltd



Fiji

100

100 Mayne Services (Fiji) Ltd



Fiji

100

100 Mayne Nickless Deutschland GmbH

(g)

Germany



100 Bergaglio Trasporti S.R.l.

(g)

Italy

100

100 Mayne SNC

(f)

Belgium

100

100 Mayne International B.V.



The Netherlands

100

100 Mayne Holdings (UK) Ltd



The Netherlands

100

100 Mayne European Holdings Limited



United Kingdom

100

100 Security Express Limited



United Kingdom

100

100 D.P.E. International Limited



United Kingdom

100

100Mayne Group Canada Inc.



United Kingdom

100

100 Mayne Transport Inc.



Canada

100

100 Mayne Logistics Inc.



Canada

100

100 Mayne Incorporated



United States

100

100




---

##### Table of Contents

Notes to the financial statementsfor the financial year ended 30 June 2002 (continued)





Country of Incorporation

Mayne Group Limiteds direct and indirect interest held2002

2001Notes


%

%31.

Particulars in relation to Controlled Entities (continued) DBL Australia Pty Ltd



Australia

100

 Mayne Pharma (Canada) Inc (formerly Faulding (Canada) Inc)



Canada

100

 Faulding Farmaceutica do Brasil Lda



Brazil

100

 Faulding Healthcare Pty Ltd

(c)

Australia

100

 BML Pharmaceuticals Pty Limited

(c)

Australia

100

 Cenovis Pty Ltd

(c)

Australia

100

 Cenovis Health Co Sdn Bhd



Malaysia

100

 Cenovis Health Co Pty Ltd



Australia

100

 Vitelle Health Company Pty Limited



Australia

100

 AHB Pty Limited



Australia

100

 Faulding Healthcare Europe Holdings Ltd



UK

100

 Faulding Consumer UK Limited



UK

100

 Bullivants Natural Health Products Pty Limited

(c)

Australia

100

 Bullivants Natural Health Products (HK) Limited



Hong Kong

100

 Bullivants Natural Health Products (International) Pty Ltd



Australia

100

 Faulding Consumer (NZ) Limited



New Zealand

100

 Natural Nutrition Pty Ltd



Australia

100

 Natural Facts Pty Limited



Australia

100

 Chem Mart Pty Limited

(c)

Australia

100

 Faulding Healthcare Retail Pty Ltd

(c)

Australia

100

 Terry White Management Pty Ltd

(c)

Australia

100

 Healthsense Pty Ltd



Australia

100

 The Medicine Shoppe Australia Pty Ltd



Australia

100

 Minfos Systems Pty Ltd



Australia

80

 F H Faulding Securities Pty Ltd



Australia

100

 F H Faulding Services Pty Ltd



Australia

100

 Queensland Biochemics Pty Ltd



Australia

100

 Independent Pharmaceutical Supplies Pty Ltd

(c)

Australia

100

 ACN 091 753 043 Pty Ltd



Australia

100

 Healthlinks.net Pty Ltd



Australia

100

 COMDOTPLI Pty Ltd



Australia

50

 GenRx Pty Ltd



Australia

100

 Faulding Healthcare International Holdings Inc



USA

100

 Faulding Healthcare US Holdings Inc



USA

100

 Faulding Consumer Holdings Inc



USA

100

 Faulding Healthcare (IP) Holdings Inc



USA

100

 Faulding Consumer Inc



USA

100

 Faulding Medical Device Co



USA

100

 Faulding Pharmaceutical Co



USA

100

 Faulding Puerto Rico, Inc



USA

100






---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)








Mayne Group Limiteds direct and indirect interest heldCountry of Incorporation

2002

2001Notes


%

%31.

Particulars in relation to Controlled Entities (continued) Faulding Pharmaceuticals (Hong Kong) Ltd



Hong Kong

100

 Faulding Pharmaceuticals (M) Sdn Bhd



Malaysia

100

 Faulding Pharmaceuticals (NZ) Ltd



New Zealand

100

 Chem Mart Pharmaceuticals (NZ) Ltd



New Zealand

100

 Faulding Pharmaceuticals plc



UK

100

 Faulding Arzneimittel GmbH



Germany

100

 Faulding Farmaceutica, Lda



Portugal

100

 Faulding Pharmaceuticals NV



Belgium

100

 Faulding Pharmaceuticals SA



France

100

 Faulding Farmaceutici srl



Italy

100

 Faulding Farmaceutica SL



Spain

100

 Central Laboratories Limited



Ireland

100

 Central Laboratories (Ireland) Ltd



Ireland

100

 Faulding Pharmaceuticals GmbH



Switzerland

100

 Faulding Pharmaceuticals (SEA) Pte Ltd



Singapore

100

 Faulding Distributors (SEA) Pte Ltd



Singapore

100

 Newage Sdn Bhd



Malaysia

67

 Faulding-DBL Pharmaceuticals Company (Japan) Limited



Japan

100

 Faulding Pharmaceuticals Philippines Inc



Philippines

100

 F H Faulding Properties (Vic) Pty Ltd



Australia

100

 F H Faulding Properties (SA) Pty Ltd



Australia

100

 F H Faulding Properties (Vic) Trust





100

 F H Faulding (Vic) 1984 Pty Ltd



Australia

100

 PSPA Pty Ltd



Australia

100

 Naslock Pty Ltd



Australia

100

 Pharmacy Promotions Pty Ltd



Australia

100

 ACN 007 444 322 Pty Ltd



Australia

100

 DSU Pty Ltd (formerly CMAX Pty Ltd)



Australia

100







(a) All controlled entities are audited by KPMG with the exception
of China Australia Cold Store & Warehouse Co Ltd and Faulding Pharmaceuticals S A.


(b) Entities not directly held by Mayne Group Limited are
indented.


(c) These Australian controlled entities are not required to prepare financial reports or to be audited for statutory purposes because they
have entered into deeds of cross guarantee as detailed in Note 30.


All Australian controlled entities other than those noted under (d) are small
proprietary companies and are not required to prepare audited financial reports.


(d) These Australian controlled entities are required to prepare audited
financial reports.


(e) The economic entity has arrangements in place whereby it controls the company.


(f) Owned 99% by Mayne Holdings (U.K.) Limited and 1% by Mayne European Holdings Limited.


(g) In
liquidation.


(h) All entities are domiciled in their country of incorporation.


(i) Owned 60% by Mayne Group Limited and 35% by PT Healthcare of Surabaya


(j) No controlled entities carry on material business
operations other than in their country of incorporation






---

##### Table of Contents




Notes to the financial statementsfor the financial year
ended 30 June 2002 (continued)





31.    Particulars in relation to Controlled Entities (continued)





Acquisition and Disposal of Controlled Entities:





The following controlled entities were acquired during the financial year:





Date of Acquisition

Consideration

Proportion of Shares Acquired$000

%FH Faulding & Co Limited (1)

1/10/2001

2,354,915

100





| | (  ) |  | FH Faulding & Co Limited manufacture and distribute pharmaceutical and other healthcare products. Pharmaceuticals comprises the development, manufacture and
distribution of injectible pharmaceuticals and of health and personal care products and the provision of distribution and retail management services to pharmacies. A restructuring provision of $36.9 million for restructuring the operations of F H
Faulding & Co Ltd was established at acquisition. This related primarily to redundancies, contractual arrangements and claims liabilities. At 30 June 2002 $19.0 million remains in the provision.
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




On 1 December 2001 the 35% outside equity interest in P T Putramas Muliasantosa was acquired for $ 41.394 million.





The following controlled entity was disposed of during the financial year:





Date of Disposal

Consideration


Consolidated Profit/(Loss) on
Disposal

Proportion of Shares Sold$000


$000

%Mayne Health Logistics Pty Ltd

7/12/2001

(1
)

nil

100





| | (1) |  | In conjuction with the acquisition of F H Faulding & Co Ltd and the simultaneous disposal of the Faulding oral pharmaceutical business, Mayne Health
Logistics Pty Ltd was sold to Alpharma Inc. for consideration of $1.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




The following controlled
entities were acquired during the previous financial year:





Date of Acquisition

Consideration

Proportion of Shares Acquired$000

%Corporate Wellness Solutions Pty Ltd (1)

3/07/2000

1,322

100Australian Hospital Care Limited (2)

1/02/2001

198,275

100





| | (1) |  | Corporate Wellness Solutions Pty Ltd advises companies on employee health issues.
| | --- |  | ---------------------------------------------------------------------------------

| | (2) |  | Australian Hospital Care Limited (AHC) owns and operates private hospitals.
| | --- |  | -----------------------------------------------------------------------------

A restructuring provision of $50.4 million for restructuring the operations of AHC was established at acquisition. This related primarily to redundancies, contractual arrangements and claims
liabilities. At 30 June 2002 $ 25.703 million remains in the provision.








The following controlled entities were disposed of during the previous financial year:








Date of Disposal



Consideration

Consolidated Profit/(Loss)on Disposal

Proportion of Shares Sold$000

$000

%Mayne Nickless Europe plc

20/12/2000

)Mayne Nickless (U.K.) Limited

20/12/2000

)Interlink Express plc

20/12/2000

)Interlink Express Parcels Limited

20/12/2000

)Interlink Ireland Limited

20/12/2000

)

511,870

157,240

100








Other unincorporated
entities were divested during the previous financial year for net consideration of $41.8 million.












---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





|32. |  | Equity Accounting Information
|--- |  | -----------------------------




Associated Entities at 30 June 2002 were:





Investment Carrying amount





Equity share of Operating Profits & Losses After Tax &Associated Entity

Principal Activity

% Interest in Equity
Capital


Equity Accounted Year Ended

Equity Value

Equity Value

Dividends Received

Extraordinary Items & Outside Equity
Interests2002


2001




2002

2001

2002

2001

2002


2001$000

$000

$000

$000

$000


$000St George Private

Medical Services -Hospital Nuclear

AustraliaMedicine Pty Ltd



50.00
%

50.00
%

30 June

362

340



28

22


5Campsie Nuclear

Medical Services -Medicine Pty Ltd

Australia

50.00
%

50.00
%

30 June

47

57





(10
)

27Gippsland Pathology

Pathology Services -Service Pty Ltd (b)

Australia

32.00
%

32.00
%

30 June

7,492

7,921

866

677

(429
)

(255
)Minjesk Investment

Hospital -Corporation Limited

Fiji

20.00
%

20.00
%

30 June

481

480





(498
)

(66
)8,382

8,798

866

705

(915
)

(289
)





|(a) |  | No notional goodwill is attributable to the associated entities.
|--- |  | ----------------------------------------------------------------




|(b) |  | The investment in Gippsland Pathology Service Pty Limited was acquired on 1 April 2000.
|--- |  | ---------------------------------------------------------------------------------------




|(c) |  | The market values of investments in associated entities are represented by their equity carrying values.
|--- |  | --------------------------------------------------------------------------------------------------------








---

##### Table of Contents

Notes to the financial statementsfor the financial year ended 30 June 2002 (continued)





2002


2001$000


$00032.

Equity Accounting Information (continued)Financial Information relating to Associates:The economic entitys share of profits and losses, assets and liabilities of associates, in aggregate is:Statement of Financial Performance:Share of profits / (losses) from ordinary activities before tax of associates

728


1,311Share of income tax expense attributable to profit/(loss) from ordinary activities of associates

(367
)

(485
)Share of net profit/(loss) as disclosed by associates

361


826Equity accounting adjustments:  goodwill amortisation

(410
)

(410
)Equity accounted share of net profit/(loss) of associates

(49
)

416Dividends received from associates

(866
)

(705
)Share of associates net profit equity accounted

(915
)

(289
)Statement of Financial Position:Reserves:Equity share of reserves of associated entities at the beginning of the year

(3
)

Equity share of reserves in the current year

(4
)

(3
)Equity accounted share of reserves of associates at the end of the year

(7
)

(3
)Retained Profits:Equity share of retained profits of associated entities at the beginning of the year

(191
)

98Equity share of retained profits in the current year

(915
)

(289
)Equity accounted share of retained profits of associates at the end of the year

(1,106
)

(191
)Movements in carrying amount of investments:Carrying amount of investments in associates at the beginning of the year

8,798


9,169Changes in equity invested in associates during the year

503


(79
)Share of movement in associates reserves

(4
)

(3
)Share of associates net profit equity accounted

(915
)

(289
)Carrying amount of investments in associates at the end of the year

8,382


8,798







---

##### Table of Contents




Notes to the financial statementsfor the
financial year ended 30 June 2002 (continued)





2002


2001$000


$00033.

Transactions with Related PartiesWholly Owned GroupDividends and interest received by the parent entity from controlled entities are disclosed in Note 3.Interest paid by the parent entity to controlled entities is disclosed in Note 4.Details of investments in controlled entities are disclosed in Notes 13 and 31.Amounts due to and receivable from controlled entities within the wholly owned group
are disclosed in Notes 9, 12 and 18.These balances comprise:Receivables

33,190


15,612Loans at call

1,927,482


1,595,699Accrued interest

1,733


1,998Amounts owing by controlled entities

1,962,405


1,613,309Weighted average interest rates

4.82
%

2.53
%Payables

1,259


515Loans at call

1,801,651


774,616Accrued interest

31,288


18,664Amounts owing to controlled entities

1,834,198


793,795Weighted average interest rates

4.85
%

5.21
%Interest is charged only on loans at call owing to operating controlled entities. Interest rates charged are based on the economic entitys planned
investment and borrowing rates set at the commencement of each financial year.Loans between entities in the wholly owned group are repayable at call.







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





33.    Transactions with Related Parties (continued)





Associated Entities:





Dividends paid by associated entities are disclosed in Note 32.





St George Private
Hospital Nuclear Medicine Pty Ltd





An entity within the economic entity charges rent and outgoings and
provides accounting services for St George Private Hospital Nuclear Medicine Pty Ltd. During the 2002 financial year these charges totalled $nil (2001, $0.134 million).





Campsie Nuclear Medicine Pty Ltd





An entity within the economic entity charged rent and outgoings and provides accounting services for Campsie Nuclear Medicine Pty Ltd. During the 2002 financial year these charges totalled $ 0.255 million (2001, $nil) of which $ nil
(2001, $ nil ) was outstanding at period end.





Minjesk Investment Corporation Limited





An entity within the economic entity charges management fees to Minjesk Investment Corporation Limited. During the 2002
financial year these charges totalled $ 0.176 million (2001, $ 0.167 million). An entity within the economic entity holds convertible notes in Minjesk Investment Corporation Limited. At 30 June 2002, these totalled $ 0.184 million (2001, $ nil).
Interest paid on these notes during the period was $ 0.015 million which was all outstanding at period end.







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





33.    Transactions with Related Parties (continued)





Directors Interests





Parent Entity





The names of the Directors of Mayne Group
Limited who held office at any time during the financial year are:





M.R. Rayner

Director since 1995P.C. Barnett

Director since 1996Sir Ross Buckland

Appointed 25 September 2001I.R.L. Harper

Director since 1978, retired on 13 November 2001S.B. James

Appointed 29 January 2002S.C.H. Kay

Appointed 28 September 2001P.E. Mason

Director since 1992R.McR. Russell

Appointed 28 August 2001J. Sloan

Director since 1995P.J.Smedley

Director since 2000, retired on 28 August 2002





Directors holdings of shares and options (1) :





The interests of Directors of the parent entity and their Director related entities in shares and options of
entities within the economic entity at balance date was:





2002

2001Mayne Group Limited:Ordinary shares fully paid

2,944,814

2,155,556Options over ordinary shares









(1)    This includes 2,000,000 shares issued to
PJ Smedley and 750,000 shares issued to SB James on 23 June 2000 pursuant to shareholder approval received at the Annual General Meeting in November 2000 details of which are referred to below.





Share Transactions:





The
aggregate number of shares acquired and disposed of by Directors of the parent entity and their Director related entities during the year was:





2002

2001Mayne Group Limited:Shares acquired:Ordinary shares fully paid (1)

70,272

11,433Options over ordinary shares



Shares disposed of:Ordinary shares fully paid









Dividends paid by the parent entity during the year on
Directors shareholdings were $0.382 million (2001, $0.237 million).





The Directors held no shares in the
capital of any corporation related to the economic entity (as defined in Section 50 of the Corporations Act 2001) as at the date of this financial report other than as bare trustee for a company in the economic entity.





Loans to Directors:





At the Annual General Meeting in November 2000 shareholders ratified the issue, on 23 June 2000, of 2,000,000 shares to PJ Smedley and 750,000 shares to SB James, in each case at market price, and financed by an interest
free loan of $5.86 million in the case of Mr Smedley and $2.198 million in the case of Mr James. The loan to Mr Smedley must be repaid in full by 31 December 2002 and the loan to Mr James must be paid in full by no later than the expiry date of Mr
James service agreement. In each case, if the amount outstanding at the relevant date exceeds the value of the shares issued, repayment is only required of an amount equal to the value of the shares on that date. The loans must be reduced by
the after-tax amount of any dividends received in respect of the shares and by the after tax amount of any fees received by Mr Smedley or Mr James (as the case may be) as a result of holding a directorship (with the Companys consent) of a
company outside the Mayne Group. Any proceeds of a buy-back or cancellation of the shares by the Company must first also be applied to repayment of the loans.The company is liable for any fringe benefits tax payable in respect of the issue of shares
and the loans. During the year, $ 0.29 million (2001, $0.17 million) of the loan to Mr Smedley was repaid and $0.05 million ( 2001, $ 0.04 million) of the loan to Mr James was repaid . At 30 June 2002, the balance of the loan to Mr Smedley
outstanding was $ 5.395 million (2001, $5.69 million) and of the loan to Mr James outstanding was $2.105 million (2001, $2.15 million).





In addition, the balance of car loans previously made to RC Susilo, a director of PT Putramas Mutiasantosa, and J Gunawan, a director of PT Mitrajaya Medikatama, was $A35,110 at balance date (2001: A$47,272). These loans are
for a period of 5 years and are interest free. An amount of A$12,162 was received in part repayment of these loans during the year.







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





33.    Transactions with Related Parties (continued)





Other transactions:





Particulars of related party transactions entered into by the economic entity with Directors or their director related entities during the year are as follows;





| | (a) |  | During the year, the parent entity has entered into:
| | --- |  | ----------------------------------------------------




| | (i) |  | deeds of indemnity in favour of SB James (who became a Director on 29 January 2002), S C H Kay (who became a Director on 28 September 2001), Sir Ross Buckland
(who became a Director on 25 September 2001) and R McR Russell (who became a Director on 28 August 2001) in accordance with the terms of rules 69(a) and (b) of the parent entitys constitution which provide an indemnity against liabilities
incurred while acting as an officer of the parent entity to persons (excluding the parent entity or its related bodies corporate) to the extent permitted by law;
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (ii) |  | deeds in favour of SB James, SCH Kay, Sir Ross Buckland and R McR Russell in accordance with the terms of rules 68 and 69(c) of the parent entitys
constitution which include for a period of seven years after ceasing to be a Director:
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | rights of access and use with respect to Board papers, minutes of Board and of Committee meetings and other related documents in connection with proceedings in
which the Director may be involved, subject to reasonable limitations where issues of confidentiality or privilege arise; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | obligations of the parent entity to arrange directors and officers liability insurance on terms which are reasonable having regard to various
factors relating to the parent entity and the insurance market;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (iii) |  | deeds of indemnity with PE Mason, MR Rayner, PC Barnett, PJ Smedley, SB James, PL Jenkins, PM Hourihan, A Burgess, JW Priestley and KP Kee indemnifying them
against certain liabilities that may be incurred in connection with the takeover bid to acquire all the shares and options in FH Faulding & Co Limited and their involvement in the due diligence process connected with the takeover bid and also
against certain associated legal costs that may be reasonably incurred by them in defending an action for any such liability; and
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (vi) |  | deeds of indemnity with G. Brown, D. Cranwell, R. Passalaqua and H. Anneveldt, being the Directors of the newly incorporated Indonesian subsidiary PT Mayne
Logistics Operations (Indonesia), against liabilities incurred in their capacity as an officer of the company whilst it was in the process of formation, to the extent permitted by law.
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (b) |  | The parent entity pays premiums in respect of directors and officers liability insurance. Part of the premium relates to former directors and
officers of the economic entity.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (c) |  | Mr GG Spurling who resigned as a director of the parent entity on 29 May 2001 was paid $197,420 during the year in accordance with his service contract and as
approved by shareholders.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------






---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





33.    Transactions with Related Parties (continued)





| | (d) |  | Certain wholly-owned controlled entities entered into transactions with their Directors or entities associated with their Directors. These transactions
included:
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------




(i)    Rental paid to Mr B McClelland, a director of Central
Laboratories Limited and Central Laboratories (Ireland) Limited, for the use of premises leased from him. Services were provided to Central Laboratories by parties related to Mr McClelland. Both fees were paid on normal commercial terms and
conditions.





(ii)    Legal fees paid to the legal firm of which Mr R S Carswell, a director of
Mayne Pharma (Canada) Inc, is a partner. These fees were paid on normal commercial terms and conditions.





(iii)    Legal fees paid to the legal firm of which Ms S Beaubien, a director of Mayne Pharma (Canada) Inc, is a partner. These fees were paid on normal commercial terms and conditions.





(iv)    Legal fees paid to the legal firm of which Mr W R Griffith, a director of Faulding Holdings Inc and Faulding
Healthcare International Holdings Inc and various subsidiaries of those companies, is a partner. These fees were paid on normal commercial terms and conditions.





(v)    Legal fees paid to the legal firm of which Mr R McR Russell, a director of Mayne Group Limited, is a partner. These fees were paid on normal commercial terms and conditions.





(vi)    Corporate service fees were paid to Hicks-Woode Corporate Services Sdn Bhd of which
Ms Mah Li Chen, a director of Faulding Pharmaceuticals (M) Sdn Bhd, is a director.





(vii)    Management fees and corporate service fees paid to AON Insurance Managers (Singapore) Pte Ltd of which Michael John Parrish and Betty Tan Kim Hiang, directors of Transport Security Insurance (Pte)
Limited, are directors.





(viii)    Euromed Srl, Fin Posillipo Spa, Farmacie Petrone Srl,
Farmacie Massimo Petrone, Farmacie Internazionale and Farmacie Carmine Petrone Srl, all of which are director related entities of R Petrone, a director of Faulding Farmaceutici Srl, bought and sold various goods and services and received commissions
on sales from the F H Faulding & Co Ltd Group of companies on normal commercial terms and conditions.





These amounts comprise:





2002

2001$000

$000Purchase of goods and services

973

Sale of goods and services

725

Commision paid

91

Legal fees

2,102

434Rent paid

26

Corporate services and other fees

59

144





The following amounts were outstanding at the end of the year arising from transactions
with directors of companies in the economic entity and their director related entities during the year detailed above:





Aggregate amounts receivable:from Directors and their director related entitiesCurrent

$
74,471Aggregate amounts payable:to Directors and their director related entitiesCurrent

$
656,295





| | (e) |  | From time to time Directors of the parent entity or its controlled entities may use the logistics or healthcare services provided by entities within the
economic entity.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (f) |  | Directors of the parent entity are Directors of other entities which trade with the economic entity under normal customer supplier relationships. None of these
Directors is able individually or jointly to significantly influence the commercial relationship of these entities with the economic entity.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (g) |  | In addition to the transactions above, transactions entered into during the year with Directors of its controlled entities or with director-related entities
included contracts of employment with relatives of Directors on either a full time, casual or work experience basis on normal commercial terms and conditions.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Each of the transactions referred to in (e), (f) and (g) above:





| | (i) |  | occur within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those which it is reasonable to expect the
entity would have adopted if dealing with the director or director- related entity at arms length in the same circumstances;
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (ii) |  | do not have the potential to adversely affect decisions about the allocation of scarce resources made by users of the financial report, or the discharge of
accountability by the directors, if disclosed in the financial report only by general description; and
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (iii) |  | are trivial or domestic in nature.
| | ----- |  | ----------------------------------






---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





|34. |  | Superannuation Commitments
|--- |  | --------------------------




As at 30 June 2002 entities within the economic entity participated in three defined benefit plans.





The three defined benefit plans provide benefits to employees or their dependants on retirement, resignation, disablement or death. Members and entities within the economic entity make contributions as
specified in the rules of the respective funds. Contributions by these entities are based on percentages of current salaries actuarially assessed to meet defined benefits based on multiples of final average salaries determined by length of service
and are enforceable in accordance with the respective rules so long as they are parties to the funds.





Actuarial
assessments of the three defined benefit plans have been made by the following independent actuaries on the dates indicated.





A further actuarial review of the Mayne Group Limited Superannuation Fund is to be undertaken as at 1 July 2002





Australia:



1 July 1999

D.A. Scott, F.I.A.Canada:

Plan A

26 April 2000

William M MercerPlan B

26 April 2000

William M Mercer





The assets of each fund are sufficient to satisfy all benefits that
would have been vested in the event of the termination of the fund, or in the event of the voluntary or compulsory termination of the employment of each employee. Contributions are also made to a number of industry accumulation funds in accordance
with various awards.





Mayne Group Limited Superannuation Fund


Loomis Canadian Pension
Plans A & B A, B


Total$000


$000


$000At 30 June 2002Dates at which the following amounts were determined:Market Value of Plan Assets

30 June 2002


30 June 2002Accrued Benefits (a)

30 June 2002


30 June 2002Vested Benefits (a)

30 June 2002


30 June 2002Net Market Value of Plan Assets (a)

62,968


8,346


71,314Accrued Benefits (a)

63,688


8,616


72,304Excess/(deficiency) of PlanAssets Over Accrued Benefits

(720
)

(270
)

(990
)Vested Benefits

62,022


5,630


67,652Employer ContributionsRecognised in the Financial Statements

8,023


45


8,068





(a) At 30 June 2002 the figures for the Mayne Group Limited
Superannuation Fund were unaudited and were derived from an interim actuarial review. As noted above a further actuarial review of the Mayne Group Limited Superannuation Fund is to be undertaken as at 1 July 2002.





The Group acquired F H Faulding & Co Ltd (FHF) during the current financial year and Australian Hospital Care Limited (AHC) during the
previous financial year. FHF and AHC contribute to a number of defined contribution funds for the provision of benefits for their employees. The benefits provided under the plans are based on accumulated contributions and fund earnings.







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





34.    Superannuation Commitments (continued)





Mayne Group Limited Superannuation Fund

Loomis Canadian Pension Plans A and B

Total$000

$000

$000At 30 June 2001Dates at which the following amounts were determined:Market Value of Plan Assets

30 June 2000

30 June 2001Accrued Benefits

1 July 1999

30 June 2001Vested Benefits

30 June 2000

30 June 2001Net Market Value of Plan Assets

87,549

19,232

106,781Accrued Benefits

82,482

16,264

98,746Excess/(deficiency) of PlanAssets Over Accrued Benefits

5,067

2,968

8,035Vested Benefits

80,620

13,115

93,735Employer ContributionsRecognised in the Financial Statements

2,116

87

2,203







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)








Consolidated

Parent Entity2002

2001

2002

2001$000

$000

$000

$00035.

Remuneration of Directors and Executives(a)

Total income paid or payable, or otherwise made available,to all directors of the parent entity and controlled entitiesfrom the parent entity or any related party

8,997

6,000

6,466

2,554(b)

The number of directors of the parent entity whoseincome from the parent entity or any related partyfalls within the following bands:





$10,000



19,999







160,000



69,999





3

170,000



79,999







480,000



89,999





3

220,000



229,999







1240,000



249,999





1

420,000



429,999





1

1,510,000



1,519,999





1

1,950,000



1,959,999







13,840,000



3,849,999





1







|(c) |  | Details of fees paid or payable to currently serving Non-Executive Directors during the period are set out in the Directors Report.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------




|(d) |  | The economic entity provides for retirement benefits for Non- Executive Directors pursuant to special resolutions passed by shareholders at the Annual General
Meetings of the parent entity on 8 November 1988 and 8 November 1994. The provision balance is $1.141 million (2001 $1.301 million).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | The amount charged in the statement of financial performance was $0.230 million (2001 $0.240 million) and the amount paid out was $0.390 million (2001 $ nil).
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------




|(e) |  | Any amounts paid to superannuation funds on account of Executive Directors are included on a notional basis in the total remuneration of Directors in note (b)
above. During the period the Executive Directors were principally part of a defined benefit superannuation scheme and the amounts paid by the economic entity to the scheme are not necessarily attributable to the Executive Directors.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




The Directors, having regard to the number of persons to whom these particulars would relate and the nature
of these particulars, believe the provision of full particulars would be unreasonable for the economic entity to disclose.




---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)








Consolidated2002

2001$
000

$
00035. Remuneration of Directors and Executives (continued)(f) Total income in respect of the financial year received, or due andreceivable, from the parent entity, entities in the economic entityor related parties by executive officers of the parent entity andof controlled entities whose income is $100,000 or more (1), (2)


16,264


18,048The number of Australian based executive officers of the parent entity and of controlled entities whose income from the parent entity, entities in the
economic entity or related parties was at least $100,000falls within the following bands:





$



Number100,001



110,000

1

1150,001



160,000

1

1160,001



170,000



1170,001



180,000



1190,001



200,000

1

200,001



210,000

2

3210,001



220,000

1

230,001



240,000



2240,001



250,000

1

1260,001



270,000

1

280,001



290,000

3

1290,001



300,000



1300,001



310,000

1

310,001



320,000

1

1330,001



340,000



1340,001



350,000



1360,001



370,000

2

370,001



380,000

1

400,001



410,000

1

410,001



420,000



2430,001



440,000

1

440,001



450,000

2

2450,001



460,000

1

460,001



470,000

2

470,001



480,000



2480,001



490,000

1

510,001



520,000

1

1530,001



540,000

1

580,001



590,000

1

630,001



640,000



1680,001



690,000



1700,001



710,000

1

1760,001



770,000



1790,001



800,000

1

830,001



840,000



11,300,001



1,310,000



11,320,001



1,330,000



11,440,001



1,450,000



11,510,001



1,520,000

1

1,710,001



1,720,000



11,950,001



1,960,000



13,840,001



3,850,000

1

31

32







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





35.    Remuneration of Directors and Executives (continued)





Notes:





| | 1. |  | Disclosure encompasses the total compensation cost including salary, superannuation, motor vehicle benefits inclusive of fringe benefits taxes and benefits
received under service agreements, for executives including the Executive Director, responsible for the strategic direction and management of the Group during the year.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 2. |  | The remuneration of executives who work wholly or mainly outside Australia is not included in the disclosure.
| | -- |  | -------------------------------------------------------------------------------------------------------------




36.    Subsequent events





Logistics demerger





On 28 August 2002 the Board announced
that following an extensive assessment, including a concurrent trade sale process, the Board believes that a de-merger of the Groups logistics businesses is in the best interests of Mayne Group shareholders. Unless a superior and clearly
achieveble trade sale emerges in the meantime, the Board envisages that formal documentation to effect a de-merger will be lodged with the relevant regulatory authorities in late September, with a view to listing Loomis Limited on the Australian
Stock Exchange (ASX) by the end of the year.





Share buy back





On 28 August 2002 the Board announced an on-market buy-back program of up to 75 million shares. The on-market buy-back program will
commence after the documentation relating to the de-merger is lodged with the ASX. Mayne has appointed UBS Warburg and JB Were to act on the Companys behalf in respect of this buy-back program.







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





37.   United States Generally Accepted Accounting Principles (US GAAP) Disclosures





MAJOR DIFFERENCES BETWEEN AUSTRALIAN GAAP AND US GAAP





The consolidated financial report of the economic entity is prepared in accordance with Generally Accepted Accounting Principles
applicable in Australia (Australian GAAP) (refer note 1), which differ in certain significant respects from Generally Accepted Accounting Principles in the United States (US GAAP).





The following is a summary of the major differences between Australian GAAP and US GAAP which provides an expansion of certain information
included in the notes to the financial statements.





The following table includes profit and loss account
information prepared in accordance with Australian GAAP but presented in US GAAP format:





Consolidated2002


2001


2000$000


$000


$000Sales revenue

4,991,957


3,158,663


3,100,402Costs and expensesOperating expenses

3,535,430


2,215,380


1,972,188Depreciation and amortisation

197,138


137,550


136,886Selling, general and administrative expenses

1,117,630


747,165


1,098,912Total costs and expenses

4,850,198


3,100,095


3,207,986Operating profit/(loss) before interest and tax

141,759


58,568


(107,584
)Other income - net gain on disposal of property, plant & equipment

17,186





Other income - net gain on disposal of related entities

5,554


224,876


Other income

63,809





Interest income

31,914


20,376


4,881Interest expense

(51,476
)

(62,739
)

(52,952
)Income tax expense

(30,616
)

(75,342
)

(14,551
)Operating profit/(loss) after interest and tax

178,130


165,739


(170,206
)Equity share of associated entities after tax

(915
)

(289
)

20Minority interest in operating (profits)/losses after interest and tax

(3,604
)

(3,888
)

(3,893
)Net profit/(loss) after income tax

173,611


161,562


(174,079
)





Had the balance sheet been presented in a US GAAP format (prepared in accordance with
Australian GAAP):


(i) Other Creditors under current liabilities would have been further dissected in note 17 as follows and the provision for workers compensation would have
been reclassified from accounts payable to provisions.





Provision for workers compensation

22,733

30,612Payroll related payables

57,362

68,073Interest payable

26,372

30,274Insurance payables

9,991

7,468Prepaid revenue

14,679

11,537Provision for loss arising from divestments

15,878

39,670Accrued taxes

18,291

14,151Cross currency swap principal

12,205

1,371Deferred settlement for acquisitions



20,701Provision for restructure, contingencies and onerous contracts

12,591

45,604Acquisition provisions

25,701

47,499Accrued expenses

184,964

79,604Other creditors per note 17 under Australian GAAP

400,767

396,564





(ii) Payables non-current under non-current liabilities would have been further dissected
in note 17 as follows:





Deferred settlement for acquisitions

1,725

1,098Provision for restructure, contingencies and onerous contracts

1,980

19,084Other non-current liabilities

4,742

1,2708,447

21,452







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





37.    United States Generally Accepted Accounting Principles (US GAAP) Disclosures
(continued)





|(a) |  | Property and integral plant
|--- |  | ---------------------------




Certain property and integral plant has been revalued by the economic entity at various times. These revaluation increments have increased the carrying value of the assets and accordingly the depreciation charges have been increased
above those which would be required on a historical cost basis. For US GAAP purposes the carrying value of assets are restated to historical cost by adjusting the


effect of the
revaluation increments and decrements and by reversing the additional depreciation charge.





The above policy also causes differences in
reported gains and losses on the sale of property, and integral plant. Gains and losses for Australian GAAP are based on consideration less revalued amounts net of accumulated depreciation and amortisation. For US GAAP purposes, gains and losses are
determined having regard to historical cost net of accumulated depreciation and amortisation, and revaluation reserves applicable to assets sold are reported as income.





Under Australian GAAP write downs of revalued properties to their fair values can be made against the asset revaluation reserve. For US GAAP purposes these write downs are reported against income.





(b) Goodwill amortisation





Under Australian GAAP goodwill was, until 2 July 1995, amortised using the inverse sum of the digits rate over periods not exceeding 20 years. In addition, a minimum annual write off is applied to small items to recognise that future
benefits arising from these acquisitions are expended sooner than those from large acquisitions.





With effect from 3 July 1995 the
unamortised balance of goodwill must be amortised under Australian GAAP on a straight line basis over a period not exceeding 20 years from the original acquisition date. Additions since 3 July 1995 are amortised on a straight line basis over a
maximum period of 20 years.





For US GAAP purposes where the useful life is considered to be 20 years or longer, the economic entity has
maintained the method of straight line amortisation over 40 years. The unamortised balance is reviewed semi-annually and any diminution in value is charged to the Profit and Loss Statement. The recoverability of goodwill is assessed by determining
whether the amortisation of the asset balance over its remaining life can be recovered through projected undiscounted future operating cash flows.





(c) Brand names and licences





Brand names and licences are not amortised under Australian GAAP.





To comply with US GAAP an adjustment has been made to amortise brand names and licences on a straight line basis over 40 years.





(d) Deferred expenditure recognised as a period expense





The economic entity has capitalised certain expenditure the benefits for which will be received in future periods. Refer to note 1 (o). This expenditure is treated as a period expense under US GAAP.




---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





37.   United States Generally Accepted Accounting Principles (US GAAP) Disclosures
(continued)





(e) Income Taxes





Under US GAAP the economic entity applies SFAS 109 Accounting for Income Taxes. Under Australian GAAP income taxes are accounted for in accordance with the
liability method. SFAS 109 is materially consistent with Australian GAAP.





SFAS 109 requires deferred tax amounts
to be raised in respect of certain purchase price allocation adjustments made as a result of business combinations. A deferred tax asset or liability is recognised for differences between the assigned values and the tax basis of assets and
liabilities resulting from a business combination.





Deferred tax reconciliation





The types of temporary differences that give rise to significant portions of the deferred tax


liabilities and deferred tax assets are comprised of the following at 30 June 2002 and 30 June 2001:





Consolidated2002


2001$000


$000Gross deferred tax liability:Depreciation and consumables

35,875


20,824Timing difference on capital gains

12,416


12,749Accrued income

11,339


9,223Other, net

11,564


(789
)71,194


42,007Gross deferred tax assets:Net operating and capital loss carry forwards (1)

89,144


21,876Self insurance provisions




330Employee benefit provisions

59,972


47,892Provision for asset write downs and contractual arrangements

36,972


24,527Unrealised foreign exchange (gains)/losses

(1,836
)

14,076Timing differences on restructuring provisions

23,618


10,133Tax arising from acquisition provisions taken to goodwill




11,623Other, net

24,270


780232,140


131,237





(1) The net operating and capital loss carry forwards of $89.144
million (June 2001 $21.876 million) are available indefinitely.




---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





37.   United States Generally Accepted Accounting Principles (US GAAP) Disclosures
(continued)





(f) Provisions





The term provisions is used in Australian GAAP to designate accrued expenses with no definitive payment date. This can include such items as employee leave
entitlements not yet taken. Classification between current and non-current is generally based on management assessments.





Provisions disclosed in note 19 comply, except where noted, in all material respects with US GAAP. Dividends are not formally declared until shortly after balance sheet date. Under US GAAP, dividends are recorded as liabilities only
if formally declared prior to balance date. This difference in treatment has been adjusted in the US GAAP reconciliation of shareholders equity. Restructure and onerous contract provisions are discussed at note 37 (v) and (u) respectively.





(g) Minority interests





Minority interests are frequently included as part of total shareholders equity under Australian GAAP. The reconciliation to US GAAP has excluded these from
shareholders equity consistent with US GAAP treatment.





(h) Segment reporting





SFAS 131, Disclosures about Segments of an Enterprise and Related Information requires disclosure of certain
information about operating segments and geographic areas of operation. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker, or
decision making group, in deciding how to allocate resources and in assessing performance. The economic entitys chief operating decision maker is the Managing Director.





For the purposes of segment reporting Mayne has identified its reportable segments based on a combination of the services provided and the geographic area in which these
services are provided.





The following operating segments have been separately disclosed in note 25 but are also
added together and disclosed in the following larger operating groups for information purposes:





- Hospitals


- Diagnostic Imaging Services


- Pathology Services


- Medical Centres


- Pharmacy Services





- Pharmaceuticals


- Consumer
Products





- Armaguard


- Logistics


- Loomis Courier





The accounting policies of the operating segments are the same as those described in note 1. The required disclosures are included in note 25.





(i) Earnings Per Share





The
calculation methodology for earnings per share under US GAAP is consistent with the calculation under Australian GAAP. Consequently, the only difference arises as a result of the adjustments made to Australian GAAP earnings to comply with US GAAP.







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





37.    United States Generally Accepted Accounting Principles (US GAAP) Disclosures
(continued)





(j)  Pension plans





The economic entity is party to three defined benefit pension plans in Australia and Canada. The United Kingdom plan was divested during 2001





The economic entity makes annual contributions to the plans. The contributions, which are equal to the amount charged as pension expense
for Australian GAAP purposes, are determined on an actuarial basis.





The actuarial calculations, revised at least
triennially, take account of the defined benefits set out in the plans having regard to the contributions made by the employees, estimated future increments and cost of living increases in salaries and pensions, expected investment rates on new
monies and the expected returns on monies invested.





Contributions to the various plans by employees, together
with specified annual returns thereon comprises vested benefits. Contributions by the economic entity together with total returns on investment in excess of those necessary to meet the requirements of the specified annual returns are non-vested
until such time as a member reaches a certain number of years of service, retires or dies prior to retirement, when the defined benefit is calculated and the appropriate amount is considered vested.





In addition to the pension plans referred to above, the economic entity also contributes to union sponsored/industry (multi-employer)
defined contribution accumulation plans and has an ongoing commitment to do so under various union awards and/or workplace agreements. The amount contributed to such plans, and charged to expense, for the year ended 30 June 2002 was approximately
$66.9 million (2001 $57.8 million and 2000 $42.2 million).





The economic entity and its controlled entities are
not parties to the administration of these funds and are generally not responsible for unfunded deficits.





A
detailed level of reporting in respect of pension plans is not presently required by Australian GAAP. Under Australian GAAP contributions to the various pension plans are recorded as an expense in the income statement.





The adjustment made as set out below recognizes the effect of the application of US SFAS 87 and SFAS 88 to each of the pension plans.




---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





37.   United States Generally Accepted Accounting Principles (US GAAP) Disclosures
(continued)





(j) Pension plans (continued)





Net periodic pension cost for 30 June 2002, 30 June 2001 and 2 July 2000 included the following components:





Year ended 30 June 2002Australian plan


Canadian plans


United Kingdom plan

Totals$000


$000


$000

$000Service cost-benefits earned during the period

11,163


760




11,923Interest cost on projected benefit obligation

3,421


574




3,995Expected return on plan assets

(4,395
)

(753
)



(5,148
)Net amortisation and deferred cost

(1,140
)

(502
)



(1,642
)SFAS 88 income









9,049


79




9,128Assumptions used in the accounting were:Discount rate

6.00
%

7.00
%

Rate of increase in future salary levels

4.00
%

4.50
%

Expected long-term rate of return on assets

7.50
%

7.00
%

Rate of increase to pensions in payment

n/a


2.10
%







Year ended 30 June 2001Australian plan


Canadian plans


United Kingdom plan


Totals$000


$000


$000


$000Service cost-benefits earned during the period

9,036


1,342


2,246


12,624Interest cost on projected benefit obligation

4,027


929


4,249


9,205Expected return on plan assets

(5,995
)

(1,306
)

(4,921
)

(12,222
)Net amortisation and deferred cost

(1,649
)

(449
)

(283
)

(2,381
)SFAS 88 income

(3,906
)




597


(3,309
)1,513


516


1,888


3,917Assumptions used in the accounting were:Discount rate

6.00
%

7.00
%

6.00
%Rate of increase in future salary levels

4.00
%

4.50
%

4.50
%Expected long-term rate of return on assets

7.50
%

7.00
%

8.00
%Rate of increase to pensions in payment

n/a


2.10
%

2.75
%





Year ended 30 June 2001Australian plan


Canadian plans


United Kingdom plan


Totals$000


$000


$000


$000Service cost-benefits earned during the period

8,524


2,525


5,355


16,404Interest cost on projected benefit obligation

4,197


1,635


8,015


13,847Expected return on plan assets

(6,173
)

(2,000
)

(8,433
)

(16,606
)Net amortisation and deferred cost

(1,649
)

(7,529
)

1,027


(8,151
)4,899


(5,369
)

5,964


5,494Assumptions used in the accounting were:Discount rate

6.00
%

7.00
%

6.50
%Rate of increase in future salary levels

4.00
%

4.50
%

5.00
%Expected long-term rate of return on assets

7.50
%

7.00
%

8.00
%Rate of increase to pensions in payment

n/a


2.10
%

2.75
%





The US GAAP adjustment to period income to recognise the net
periodic pension cost is as follows:





2002

2001

2000$000

$000

$000Pension expense recognised in Australian GAAP financial statements  note 34

8,068

2,203

6,644Pension expense recognised under SFAS 87

9,128

3,917

5,494Adjustment for US GAAP

1,060

1,714

(1,150
)







F-67




---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





37.   United States Generally Accepted Accounting Principles (US GAAP) Disclosures
(continued)





(j) Pension plans (continued)





The following tables set forth reconciliations of the change in projected benefit obligation, change in plan assets and the funded status of the plans for the periods ended
30 June 2002 and 30 June 2001 under US GAAP:





Year ended 30 June 2002Australian plan


Canadian plans


United Kingdom plan

Totals$000


$000


$000

$000Change in projected benefit obligationProjected benefit obligation at the beginning of the period

49,326


15,703




65,029Service cost

11,163


760




11,923Interest cost

3,421


574




3,995Employee contributions

2,412







2,412Amounts received from other funds

4,263







4,263Actuarial (gains)/losses

10,261


(171
)



10,090Benefits paid

(15,326
)

(709
)



(16,035
)Plan expenses

(1,114
)






(1,114
)Tax paid

(718
)






(718
)Amounts transferred to other funds




(6,312
)



(6,312
)Plan amendments









Effect of divestitures









Effect of settlements









Foreign currency exchange rates




(1,229
)



(1,229
)Projected benefit obligation at the end of the period

63,688


8,616




72,304Change in plan assetsValue of plan assets at the beginning of the period

61,294


19,232




80,526Actual employer contributions

13,043


(504
)



12,539Actual return on plan assets

(166
)

(1,423
)



(1,589
)Employee contributions

2,412







2,412Amounts received from other funds

4,263







4,263Benefits paid

(15,326
)

(709
)



(16,035
)Plan expenses

(1,114
)






(1,114
)Tax paid

(718
)






(718
)Amounts transferred to other funds




(6,842
)



(6,842
)Effect of divestitures









Effect of settlements









Adjustements

(720
)




Foreign currency exchange rates




(1,408
)



(1,408
)Value of plan assets at the end of the period

62,968


8,346




71,314Reconciliation of funded statusExcess/(deficiency) of plan assets compared toprojected benefit obligation

(720
)

(122
)



(990
)Unrecognised net (gain)/loss

7,847


(3,160
)



4,687Unrecognised prior service cost




326




326Unrecognised net (asset) existing at adoption of SFAS 87

(2,450
)

(241
)



(2,691
)Prepaid/(accrued) pension cost

4,677


(3,197
)



1,332





Note:


Plan assets include a mixed portfolio of investments, including fixed interest securities, Australian and overseas listed securities and real estate investments.









---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





37.    United States Generally Accepted Accounting Principles (US GAAP) Disclosures
(continued)





(j) Pension plans (continued)








Year ended 30 June 2001Australian plan


Canadian plans


United Kingdom plan


Totals$000


$000


$000


$000Change in projected benefit obligationProjected benefit obligation at the beginning of the period

66,663


12,732


129,560


208,955Service cost

9,036


1,342


2,246


12,624Interest cost

4,027


929


4,249


9,205Employee contributions

225


538


1,000


1,763Amounts received from other funds

2,750








2,750Actuarial (gains)/losses




(401
)

1,760


1,359Benefits paid

(30,436
)

(1,384
)

(2,294
)

(34,114
)Plan expenses

(2,037
)

(164
)

(269
)

(2,470
)Tax paid

(902
)







(902
)Amounts transferred to other funds







(173
)

(173
)Plan amendments










Effect of divestitures







(149,512
)

(149,512
)Effect of settlements










Foreign currency exchange rates




2,111


13,433


15,544Projected benefit obligation at the end of the period

49,326


15,703





65,029Change in plan assetsValue of plan assets at the beginning of the period

71,866


17,434


135,213


224,513Actual employer contributions

7,987


87


2,046


10,120Actual return on plan assets

11,841


54


2,755


14,650Employee contributions

225


538


1,000


1,763Amounts received from other funds

2,750








2,750Benefits paid

(30,436
)

(1,384
)

(2,294
)

(34,114
)Plan expenses

(2,037
)

(164
)

(269
)

(2,470
)Tax paid

(902
)







(902
)Amounts transferred to other funds







(173
)

(173
)Effect of divestitures







(152,151
)

(152,151
)Effect of settlements










Foreign currency exchange rates




2,667


13,873


16,540Value of plan assets at the end of the period

61,294


19,232





80,526Reconciliation of funded statusExcess/(deficiency) of plan assets compared toprojected benefit obligation

11,968


3,529





15,497Unrecognised net (gain)/loss

(7,609
)

(6,037
)




(13,646
)Unrecognised prior service cost




255





255Unrecognised net (asset) existing at adoption of SFAS 87

(3,675
)

(404
)




(4,079
)Prepaid/(accrued) pension cost

684


(2,657
)




(1,973
)





Note:


Plan assets include a mixed portfolio of investments, including fixed interest securities, Australian and overseas listed securities and real estate investments.




---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





37.   United States Generally Accepted Accounting Principles (US GAAP) Disclosures
(continued)





(k)    Cash Flow Reconciliation





Under Australian GAAP cash flows are reconciled to cash and deposits net of bank overdrafts.


For US GAAP bank overdrafts are not included in the reconciliation of cash and movements in bank overdraft are reclassified as movements in borrowings.





Cash Flows under US GAAP are reconciled as follows:





2002


2001


2000$000


$000


$000Cash at the beginning of the financial year per Australian GAAP

580,901


109,761


184,852Add back bank overdrafts

197


71


11,516Cash at the beginning of the financial year per US GAAP

581,098


109,971


196,368Increase/(decrease) in cash held

(147,036
)

460,140


(82,165
)Add back movement in bank overdrafts

126


(13
)

(11,432
)Foreign exchange movements

(8,454
)

11,000


7,200Cash at the end of the financial year per US GAAP

425,734


581,098


109,971





In addition, under Australian GAAP, realised foreign exchange gains
are included as part of cash flows from financing activities. Under US GAAP, such gains would be included as part of cash flows from operating activities. Accordingly, under US GAAP, realised foreign exchange gains/(losses) of ($(60.042) million,
$16.123 million and $26.973 million in 2002, 2001 and 2000 respectively would be reclassified from net financing cash flows to net operating cash flows.





(l)    Investment securities





For US
GAAP purposes, the Company applies SFAS 115, Accounting for Certain Investments in Debt and Equity Securities in accounting for investment securities. In accordance with SFAS 115, the Company classifies securities as either held to
maturity or available for sale. Securities are classified as held to maturity when the Company has the positive intent and ability to hold such securities to maturity. Securities held to maturity are recorded at amortised cost. Securities available
for sale are securities other than those held to maturity or trading and are recorded at fair value, with unrealised gains and losses excluded from earnings and recorded in accumulated other comprehensive income within shareholders equity .





Realised gains and losses on securities classified as available for sale are recorded in earnings in the year of
sale based on the specific identification of each individual security sold.





A decline in the fair value of
available for sale securities below cost that is deemed other than temporary is charged to earnings, resulting in the establishment of a new cost basis for the security.





The Company does not hold securities for trading purposes. In 2000 the Company realised all of its holding of fixed interest securities and therefore had no unrealised
gains or losses. In prior periods these unrealised gains or losses were charged, net of income tax, directly to shareholders equity for US GAAP purposes.







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





37.   United States Generally Accepted Accounting Principles (US GAAP) Disclosures
(continued)





(m)   Stock compensation





At 30 June 2002 the economic entity has in place an executive share option scheme and an employee share acquisition plan as described in note 20. Details of the status
of options outstanding for each of the years 1999-2000 through 2001-2002 are set out below.





The economic entity
applies APB Opinion No. 25 and related interpretations in calculating its net income according to US GAAP. The economic entity has a fixed Employee Share Acquisition Plan whereby compensation expense has been recognised in the calculation of net
income as the issue price was less than the market price on issue date. Fixed plans relating to executive options do not result in compensation expense under APB 25 as the issue price is equal to the market price on issue date.





Compensation expense relating to Variable plans has been calculated in accordance with APB 25 and is disclosed in the
reconciliation of profit under US GAAP.





Executive options





The following table summarises information about share options outstanding at 30 June 2002:





Options outstanding

Options exercisableRange of exercise prices

Number outstanding at 30 June 2002

Weighted average remaining contractual life (years)

Weighted average exercise prices

Number exercisable at 30 June 2002

Weighted average exercise prices$5.63 to $6.87

859,000

0.59

$
5.85

859,000

$
5.85$5.24

882,000

1.67

$
5.24




$4.50

20,000

2.10

$
4.50




$3.37

1,013,000

2.60

$
3.37




$3.76

250,000

2.88

$
3.76




$3.71

155,000

2.92

$
3.71




$3.78

200,000

2.95

$
3.78




$4.12

60,000

3.03

$
4.12




$3.98

100,000

3.08

$
3.98




$4.14

30,000

3.17

$
4.14




$4.25

100,000

3.11

$
4.25




$4.48

330,000

3.13

$
4.48




$5.30

50,000

3.38

$
5.30




$6.45

160,000

3.83

$
6.45




$6.23

90,000

3.65

$
6.23




$6.27

75,000

3.99

$
6.27




$7.45

200,000

4.15

$
7.45




$7.45

120,000

4.17

$
7.45




$7.11

100,000

4.13

$
7.11




$7.01

200,000

4.22

$
7.01




$7.23

100,000

4.25

$
7.23




$6.88

100,000

4.34

$
6.88




$6.88

100,000

4.34

$
6.88




$5.16

40,000

4.59

$
5.16




$5.07

50,000

4.61

$
5.07




$5.09

50,000

4.63

$
5.09




$3.97

100,000

4.66

$
3.97




$3.86

150,000

4.70

$
3.86




$3.98

240,000

4.75

$
3.98




$4.07

100,000

4.82

$
4.07




$3.37 - 7.45

6,024,000

2.83

$
4.99

859,000

$
5.85





The fair value of each share option grant was estimated on the date
of grant using the Black-Scholes option-pricing model with the following assumptions:





Options granted to certain
executives are subject to satisfaction of ASX 100 index hurdles.





The fair value is before allowing any discount
for these hurdles. The intrinsic value of each option at the date of issue was nil.





2002


2001


2000Weighted average risk free interest rates

5.19
%

6.10
%

6.00
%Dividend yield

2.20
%

2.40
%

3.40
%Expected lives

2.8 years


3.5 years


5 yearsVolatility

33.00
%

33.00
%

29.82
%







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





37.   United States Generally Accepted Accounting Principles (US GAAP) Disclosures
(continued)





(m) Stock compensation (continued)





A summary of the status of the Companys executive share option plan for fiscal 2002, 2001 and 2000 and the changes during those years is as follows:





2002

2001

2000Options


Weighted average exercise prices

Options


Weighted average exercise prices

Options


Weighted average exercise pricesOutstanding at beginning of year

6,494,000


$
4.83

11,543,000


$
5.02

10,247,000


$
5.41Granted

1,975,000


$
5.93

1,275,000


$
4.09

2,376,000


$
3.50Exercised

(1,841,000
)

$
5.24

(2,705,000
)

$
4.80

(104,000
)

$
4.36Forfeited

(604,000
)

$
5.02

(3,619,000
)

$
4.92

(976,000
)

$
5.19Outstanding at end of year

6,024,000


$
4.99

6,494,000


$
4.83

11,543,000


$
5.02Options exercisable at year end

859,000


$
5.85

713,000


$
5.88

2,999,000


$
4.90Weighted average fair value of options granted during the year




$
1.77




$
1.27




$
0.86




---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





37.   United States Generally Accepted Accounting Principles (US GAAP) Disclosures
(continued)





(m) Stock compensation (continued)





Share issues to employees and executives





In June 1999 the parent entity issued 1,596,094 shares to employees under an employee share acquisition plan (ESAP). The details of the plan are set out in note 20. The shares were issued at $5.06 and the fair value at
issue date was $1.60.





At 30 June 2002 1,394,169 shares were outstanding under the plan.





In June 2000 the parent entity issued shares to certain executives at market price financed by limited recourse interest free loans.





Both of the above share plans are considered variable plans under APB 25.





On 1 November 2001, 1,800,022 shares were issued to 13,534 employees under ESAP 2. The plan is considered a fixed plan under APB 25 and
compensation expense has been recognised for amortisation of the difference between the issue price and the market price.





Had the compensation cost for the economic entitys stock compensation plans been determined in accordance with SFAS 123 the economic entitys net income/(loss) and earnings per share in Australian cents would have been
reduced to the pro forma amounts indicated below:





2002

2001


2000$000

$000


$000Net Income/(loss)

As reported

194,930

160,326


(145,500
)Pro forma

181,288

165,116


(149,519
)Basic earnings per share

As reported

27.6

40.4
c

(42.4
)cPro forma

25.7

41.6
c

(43.6
)cDiluted earnings per share

As reported

27.5

40.3
c

(42.4
)cPro forma

25.6

41.5
c

(43.6
)c





(n) Accounting for derivative instruments and hedging activities





In June 1998, the Financial Accounting Standards Board (FASB) issued, then subsequently amended, Statement of
Financial Accounting Standards No. 133 Accounting for Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133 is effective for all financial years beginning after 15 June 2000 (July 3, 2000 for the Company). SFAS 133 requires that all
derivative instruments be recorded on the balance sheet at their fair values and changes in fair value are recognised immediately in earnings, unless the derivatives qualify as cash-flow hedges. For fair-value hedge transactions in which the Company
is hedging changes in an assets, liabilitys, or firm commitments fair value, changes in the fair value of the derivative instrument will generally be offset in the income statement by changes in the hedged items fair value.
For cash-flow hedge transactions, in which the Company is hedging the variability of cash flows related to a variable-rate asset, liability or a forecasted transaction, changes in the fair value of the derivative instrument will be reported in other
comprehensive income. The gains and losses on the derivative instrument that are reported in other comprehensive income will be reclassified as earnings in the periods in which earnings are impacted by the variability of the cash flows of the hedged
item. The ineffective portion of all hedges will be recognised in current period earnings.





The Company is exposed
to interest rate risk and foreign exchange risk associated with underlying assets and liabilities. To hedge these exposures, which relate primarily to long term borrowings in United States Dollars and to assets held by self sustaining foreign
affiliates, the Company uses derivative financial instruments to mitigate or eliminate those risks. The accounting change described above affected only the pattern and timing of non-cash accounting recognition.





Further information on the Companys risk management policies and use of derivative instruments can be found in note 24 to the
financial statements.







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





37.   United States Generally Accepted Accounting Principles (US GAAP) Disclosures
(continued)





(n) Accounting for derivative instruments and hedging activities (continued)





On adoption of SFAS 133 beginning July 3, 2000, the Companys financial statements were adjusted to record a cumulative
effect of adopting this accounting change as follows:





Earnings


Shareholders Equity (OCI)A$000


A$000Adjustment to fair value of derivatives

(112
)

(36
)Total

(112
)

(36
)





A reconciliation of current period changes, net of applicable
income taxes, in the separate components of shareholders equity follows:





Earnings


OCI


EquityBalance as at 30 June 2001

2,203


(521
)

1,682Current period increase/(decline) in fair value  net

(586
)

(489
)

(1,075
)Reclassifications to earnings  net

(192
)

192


Balance as at 30 June 2002

1,425


(818
)

607





Additional disclosures required by SFAS 133 are provided in the
following paragraphs.





Hedges of Future Cash Flows





The ineffective portion of changes in fair values of hedge positions, reported in current period earnings, amounted to nil, net of income taxes. There were no amounts
excluded from the measure of effectiveness. The amount to be reclassified from equity to earnings in the next 12 months is unable to be determined in advance as market conditions at the time will impact the amounts. Based on fair values of the cash
flow hedge positions at 30 June 2002, $74k, net of taxes, will be reclassified during the next financial year.





Hedges of Recognized Assets, Liabilities and Firm Commitments





The ineffective portion of
changes in fair values of hedged positions, reported in current period earnings, amounted to $1,658k, net of income taxes. The amount is included in adjustment (o) in the reconciliation of profit calculated in accordance with US GAAP. There were no
amounts excluded from the measure of effectiveness.





Hedges of Net Investments in Foreign Operations





The ineffective portion of changes in fair values of hedged positions, reported in current period earnings,
amounted to $nil net of income taxes. The amount is included in adjustment (o) in the reconciliation of profit calculated in accordance with US GAAP. There were no amounts excluded from the measure of effectiveness.





Derivatives not designated as hedges





Derivatives not designated as hedges primarily consist of interest rate swaps which, while effective as hedges from an economic perspective, do not qualify for hedge accounting under SFAS 133.







---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





37.   United States Generally Accepted Accounting Principles (US GAAP) Disclosures
(continued)





(o) Operating lease commitments





Operating lease commitments disclosed in accordance with the requirements of SFAS 13:





2002

2001$000

$000PropertyWithin 1 year

81,297

59,480Later than 1 and less than 2 years

66,979

45,303Later than 2 and less than 3 years

55,165

37,710Later than 3 and less than 4 years

44,351

30,095Later than 4 and less than 5 years

35,460

24,456Later than 5 years

211,043

170,803494,295

367,847Plant and equipmentWithin 1 year

29,131

34,565Later than 1 and less than 2 years

20,315

30,080Later than 2 and less than 3 years

12,969

23,431Later than 3 and less than 4 years

6,934

16,163Later than 4 and less than 5 years

4,867

7,717Later than 5 years

7,682

20,12881,898

132,084Total operating lease commitments

576,193

499,931









---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





37.    United States Generally Accepted Accounting Principles (US GAAP) Disclosures
(continued)





(p) Statement of comprehensive income





SFAS 130, Reporting Comprehensive Income establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) for each period presented. Comprehensive income for the periods ended 30 June 2002, 30 June 2001 and 2 July 2000 and accumulated other comprehensive income as at 30 June 2002, 30 June 2001 and 2 July
2000 are included in the US GAAP reconciliation set out below.





(q) Employee Share Acquisition Plan





During the 1999 year eligible employees were entitled to participate in the employee Share Acquisition Plan
as described in note 20. In June 2000 the parent entity issued shares to certain executives at market price financed by interest free loans. Under US GAAP the loans to employees and executives (note 12) should be classified as a reduction in
shareholders equity. The difference in treatment has been adjusted in the US GAAP reconciliation of assets and shareholders equity.





This plan is accounted for using variable plan accounting as determined under APB Opinion No. 25. Shares were issued under this plan just prior to 4 July 1999.





On 1 November 2001, 1,800,022 shares were issued to 13,534 employees under invitation. The plan is considered a fixed plan under APB 25.





(r) Impairment





During the 2000 year certain impairment charges were recognised under Australian GAAP based on the undiscounted cash flows with respect to the impaired assets.





Australian GAAP (refer note 1 (n)) requires an assessment of the carrying value of the economic entitys non current assets to ensure
that these assets are not recorded in excess of their recoverable amounts.





In accordance with the requirements of
SFAS 121 Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of an adjustment has been recorded to write down these assets based on their discounted cash flows.





These US GAAP impairment charges by segment were:





Hospitals

$
91.207mDiagnostic Imaging Services

$
2.777mLogistics

$
0.432m





Following a decision to consider the issue of branding in the
context of an overall strategic review, the economic entity also wrote down the Australian brand values. These impairment charges were recorded in the Diagnostic Imaging Services segment ($76.17m) and the Logistics segment ($4.6m).





In the current year, certain impairment provisions were released under Australian GAAP recognising the improvement in the
underlying performance of these assets. US GAAP does not allow these provisions to be reversed.





(s)
Securitisation of rental income





During the 1999 year the economic entity recognised income from the sale of
its right to a rental stream and wrote-off the written down value of the non-current asset from which this rental stream is derived. For US GAAP purposes the sale of future revenues is treated as a financing transaction. The relevant non-current
asset has been reinstated in the balance sheet at its original written down value and depreciated over its economic useful life, also being 20 years.





(t) Gain recognised on exchange of assets for a controlling equity interest





During the 1999 year the parent entity exchanged assets for a controlling interest in MPG Logistics Pty Ltd. Under US GAAP a gain and a corresponding increase in goodwill was recognised on this exchange of assets for a
controlling equity interest, in accordance with EITF 90-13 Accounting for Simultaneous Common Control Mergers.





This goodwill is being amortised over its useful life.





(u) Provisions for onerous contracts





During the period the economic entity has released provisions for onerous contracts in accordance with
Australian GAAP which did not meet the criteria for initial recognition as a liability under US GAAP.


The economic entity acquired Australian Hospital
Care Limited in February 2001. At acquisition certain provisions for onerous contracts were raised and taken to goodwill in accordance with Australian GAAP which do not meet the criteria for recognition under US GAAP.





(v) Provisions for restructuring





During 2001 the economic entity has recognised provisions for restructuring in accordance with Australian GAAP which do not meet the criteria for recognition under US GAAP.




---

##### Table of Contents

Notes to the financial statementsfor the financial year ended 30 June 2002 (continued)





37.    United States Generally Accepted Accounting Principles (US GAAP) Disclosures (continued)





(w) Business combinations





The SECs interpretation of SFAS 141 and EITF 99-12 requires that the value of the shares issued as consideration for Faulding be determined based on the market price on the date the offer became
non-hostile. No discounting can be applied in consideration of factors such as the volume of shares issued, market liquidity and other factos relevant to the fair value of the shares issued.





Material business combination in the year of acquisition





On 2 October 2001, Mayne Group Limited acquired 100% of the issued share capital of FH Faulding & Co Ltd (Faulding). The results of Fauldings operations have been included in the
consolidated financial statements since that date. Faulding is a manufacturer and distributor of pharmaceutical products, globally. As a result of the acquisition, Mayne Group Limited is expected to be Australias leading healthcare service
provider and also the leading Australian logistics business servicing the health sector.





The aggregate purchase
price was A$2,354,914,796, including A$243,142,238 of cash and 360,986,762 shares issued at a market price of $5.85. The value of the shares was determined by way of reference to the market price at the date of announcing the offer. This differs to
the treatment required under US GAAP, refer to note 37 to the financials for details.





The following table
summarises the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.





Fair Value of Fauldings Net Assets Acquired(A$ 000)Current assets

997,624Property plant and equipment

351,195Intangible assets

127,916Other non current assets

747,863Goodwill

1,019,936Total assets acquired

3,244,534Current liabilities

-367,481Long-term debt

-522,137Total liabilities assumed

-889,618Net asset acquired

2,354,916





Of the A$127,916,000 of intangible assets acquired, A$108,492,000
was assigned to brand names that are not subject to amortisation. The remaining A$19,424,000 of acquired intangible assets have a weighted average useful life of 5 years. The intangible assets that make up that amount include patents and rights of
A$15,207,000 (5 year weighted average useful life), and research and development assets of A$4,217,000 (5 year weighted average useful life).





Operating result of Mayne had the acquisition of Faulding occurred on 1 July 2000 for the 2001 and 2002 financial years





Note that the balances have been adjusted to reflect the difference in depreciation and amortisation expense caused by any variation between the fair value attributed by
Mayne to the assets acquired, and the carrying amount of these assets in the accounts of Faulding.





The pro forma
net income reported below includes A$71,000,000 in relation to Faulding in 2001 and A$73,122,000 in relation to Faulding in 2002.





Year ended 30 June 2002

Year ended 30 June 2001(A$ 000)

(A$ 000)Revenue

5,627,374

5,481,663Income before extraordinary items and the cumulative effect of accounting changes

190,992

232,562Net Income

190,992

232,562EPS

23.7 cents

30.7 cents




---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





37.    United States Generally Accepted Accounting Principles (US GAAP) Disclosures
(continued)





(x) Recent changes in US GAAP (continued)





Any recognised intangible asset determined to have an indefinite useful life is not be amortised, but instead tested for impairment in
accordance with Statement 142 until its life is determined no longer to be indefinite.





The economic entity has
adopted the provisions of Statements 141 and 142 effective from 1 July 2002, with the exception of the immediate requirement to use the purchase method of accounting for all business combinations completed after 30 June 2001. Any goodwill and any
intangible asset determined to have an indefinite useful life that is acquired in a business combination completed after 30 June 2001 has not been amortised. Goodwill and intangible assets acquired in business combinations completed before 1 July
2001 will continue to be amortised until 30 June 2002. The adoption of Statements 141 and 142 has not had a significant impact on the economic entitys financial report.





During the current financial year, goodwill with a cost of $ 1,097.5 million was not amortised for US purposes as a result of the transition adjustments of these standards.





In June 2001, the FASB issued Statement No. 143, Accounting for Asset Retirement Obligations. Statement 143
addresses financial accounting and reporting obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs, and applies to legal obligations associated with the retirement of long-lived assets
and/or the normal operation of a long-lived asset. Under Statement 143, the fair value of a liability for an asset retirement obligation is recognised in the period in which it is incurred if a reasonable estimate of fair value can be made. The
associated asset retirement costs are capitalised as part of the carrying amount of the long-lived asset. The liability is discounted and accretion expense is recognised using the credit-adjusted risk-free interest rate in effect when the liability
was initially recognised. Statement 143 will be effective for the economic entity as of 1 July 2002. The adoption of Statement 143 has not had a significant impact on the economic entitys financial report.





In August 2001, the FASB issued Statement No. 144, Accounting for the Impairment and Disposal of Long-Lived assets.





Statement 144 addresses financial reporting and accounting for the impairment of long-lived assets, and will supersede (a)
Statement 121 with respect to the accounting for the impairment or disposal of long-lived assets and (b) Accounting Principles Board Opinion No. 30 (Opinion 30) for the disposal of a segment of a business. Statement 144 retains the requirements of
Statement 121 to (a) recognise an impairment loss only if the carrying amount of a long-lived asset is not recoverable from its


undiscounted cash flows
and (b) measure an impairment loss as the difference between the carrying amount and the fair value of the asset.





Statement 144 also requires that a long-lived asset to be abandoned, exchanged for a similar productive asset, or distributed to the owners in a spin-off be considered held and used until the asset is disposed of.





Statement 144 retains the basic provisions of Opinion 30 for the presentation of discontinued operations in the income
statement but broadens that presentation to include a component of an entity (rather than a segment of a business). A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial
reporting purposes, from the rest of the entity. A component of an entity that is classified as held for sale or that has been disposed of is presented as a discontinued operation if the operations and cash flows of the component will be (or have
been) eliminated from the ongoing operations of the entity and the entity will not have any significant continuing involvement in the operations of the component. In addition, discontinued operations are no longer measured on a net realisable value
basis, and future operating losses are no longer recognised before they occur.





The adoption of Statement 144 has
not had a significant impact on the economic entitys financial report.





In April 2002 the FASB issued SFAS
No. 145, Rescission of FASB Statements No. 4,44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. As a result of the rescission of SFAS No. 4, a loss on extinguishment of debt will no longer be presented as an
extraordinary item upon the adoption of SFAS No. 145, which is effective for the economic entity in the Fiscal year beginning July 1, 2002.





In July 2002 the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 is based on the general principle that a liability for a cost
associated with an exit or disposal activity should be recorded when it is incurred and initially measured at fair value. SFAS No. 146 applies to costs associated with (1) an exit activity that does not involve an entity newly acquired in a business
combination, or (2) a disposal activity within the scope of SFAS No. 144. These costs include certain termination benefits, costs to terminate a contract that is not a capital lease, and other associated costs to consolidate facilities or relocate
employees. Because the provisions of this statement are to be applied prospectively to exit or disposal activities initiated after December 31, 2002, the effect of adopting this statement cannot be determined.




---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





37.    United States Generally Accepted Accounting Principles (US GAAP) Disclosures
(continued)





Note


2002


2001


2000$000


$000


$000Reconciliation to US GAAPConsolidated Profit and Loss StatementsNet profit/(loss) reported using Australian GAAP




173,611


161,562


(174,079
)Add back / (deduct) from the net profit / (loss):Adjustments due to revaluation of assets

(a
)

(8,030
)

6,368


(1,617
)Depreciation charged on difference between revalued amount and historical cost of buildings

(a
)

347


66


501Adjustments for amortisation of goodwill

(b
)

47,704


(9,598
)

9,373Amortisation of brand names and licences

(c
)

(2,753
)

9,665


(1,378
)Deferred expenditure recognised as a period expense

(d
)

1,144


1,348


37,566Accrued pension cost, including effect of settlement and curtailment gains

(j
)

(1,060
)

(1,714
)

1,150Stock compensation

(m
)

5,269


(11,060
)

(7,010
)Adjustments due to the application of SFAS 133

(n
)

(1,113
)

3,148


Impairment of assets

(r
)

(3,475
)

(3,063
)

(10,500
)Net adjustment on deferral of securitised income stream and reinstatement of related asset

(s
)

282


282


282Adjustment on exchange of assets for a controlling equity interest

(t
)

(1,128
)

(1,128
)

(1,222
)Provisions

(u
)

(10,745
)

(7,337
)

16,900Restructuring

(v
)

(16,270
)

13,736


Tax effect of above adjustments, net




11,147


(1,949
)

(15,466
)Net income/(loss) according to US GAAP




194,930


160,326


(145,500
)Other comprehensive income, net of taxes:Foreign currency translation reserve




16,478


(8,152
)

(4,686
)Adjustments due to the application of SFAS 133

(n
)

(296
)

(521
)

Adjustments due to the application of SFAS 87

(j
)

(3,719
)




Comprehensive income/(loss) according to US GAAP

(p
)

207,393


151,653


(150,186
)Accumulated other comprehensive income balances:Foreign currency translation reserve




(15,748
)

(32,226
)

(24,074
)Adjustments due to the application of SFAS 133

(n
)

(818
)

(521
)

Adjustments due to the application of SFAS 87

(j
)

(3,719
)




Total accumulated other comprehensive income

(p
)

(20,285
)

(32,747
)

(24,074
)Income tax expense allocated to foreign currency translation adjustments was $14.373 million, $7.416 million and $5.797 million in 2002, 2001 and 2000 respectivelyBasic and diluted earnings per share according toUS GAAP (Australian cents):Basic earnings per ordinary share:Net income




27.6


40.4


(42.4
)Number of shares used in calculation (1)




706,627,202


397,146,527


343,199,092Diluted earnings per ordinary share:Net income




27.5


40.3


(42.4
)Number of shares used in calculation (2)




707,862,121


397,908,635


343,199,092


---

|(1) |  | Based on weighted average shares outstanding
|--- |  | --------------------------------------------




|(2) |  | Based on weighted average shares outstanding, adjusted for options calculated under the Treasury Stock Method (being the only reconciling item when compared to
(1) )
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------






---

##### Table of Contents




Notes to the financial statementsfor the financial year ended 30 June
2002 (continued)





37.   United States Generally Accepted Accounting Principles (US GAAP) Disclosures
(continued)





Note


2002


2001$000


$000Reconciliation to US GAAP(continued)Consolidated Balance SheetsTotal Assets reported using Australian GAAP




5,391,235


3,213,795Add back / (deduct) from total assets:Revaluation surplus of land and buildings

(a
)

(30,786
)

(14,860
)Adjustment for provision for depreciation on buildings revalued

(a
)

1,842


1,599Amortisation of brand names and licences

(c
)

(16,063
)

(13,310
)Adjustments due to the application of SFAS 133

(n
)

42,097


8,237Adjustment for amortisation of goodwill

(b
)

79,517


31,813Deferred expenditure recognised as a period expense

(d
)

(4,305
)

(5,449
)Loan to employees and executives offset to equity

(q
)

(13,907
)

(14,868
)Impairment of assets

(r
)

(11,405
)

(13,106
)Net adjustment on deferral of securitised income stream and reinstatement of related asset

(s
)

74,016


78,792Goodwill arising from gain recognised on exchange of assets for a controlling equity interest

(t
)

19,088


20,216Provisions recognised in goodwill

(u
)

(21,148
)

(30,727
)Adjustment due to the application of SFAS 141

(w
)

119,126


Restructuring

(v
)

(1,946
)

(7,188
)Total Assets according to US GAAP




5,627,361


3,254,944Shareholders Equity at Year EndShareholders Equity reported using Australian GAAP




3,617,824


1,409,675Add back / (deduct from shareholders equity:Adjustment relating to outside equity interests

(g
)

(3,160
)

(16,918
)Elimination of revaluation surplus of land and buildings (net of revaluation increments on disposals)


(a
)

(33,037
)

(17,111
)Cumulative adjustment for provision for depreciation on buildings revalued

(a
)

1,751


1,404Cumulative adjustment for amortisation of brand names and licences

(c
)

(16,063
)

(13,310
)Adjustment required to recognise US GAAP pension liability, net of tax

(j
)

(15,774
)

(9,401
)Adjustments due to the application of SFAS 133

(n
)

867


2,404Provision for final cash dividend

(f
)

64,783


30,980Cumulative adjustment for amortisation of goodwill

(b
)

79,517


31,813Deferred expenditure recognised as a period expense

(d
)

(4,305
)

(5,449
)Loan to employees and executives offset to equity

(q
)

(13,907
)

(14,868
)Impairment of assets

(r
)

(17,038
)

(13,563
)Net adjustment on deferral of securitised income stream and reinstatement of related asset

(s
)

(4,378
)

(4,660
)Gain recognised on exchange of assets for a controlling equity interest

(t
)

19,088


20,216Provisions

(u
)

(1,182
)

9,563Adjustment due to the application of SFAS 141

(w
)

119,126


Restructuring

(v
)

(2,534
)

13,736Tax effect of above adjustments, net




18,531


3,293Total Shareholders Equity according to US GAAP




3,810,109


1,427,804









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##### Table of Contents




ITEM 19  EXHIBITS





|4. |  | Material Contracts
|-- |  | ------------------




| | 4.1. |  | Service Agreement between Mayne Group Limited and Stuart Bruce James commencing on 29 August 2002
| | ---- |  | -------------------------------------------------------------------------------------------------




| | 4.2. |  | Employment Agreement between Mayne Group Limited and Stephen Roche dated 8 July 2002.
| | ---- |  | -------------------------------------------------------------------------------------




| | 4.3. |  | Employment Agreement between Mayne Group Limited and Robert Cooke dated 23 April 2002.
| | ---- |  | --------------------------------------------------------------------------------------




| | 4.4. |  | Rules of the Mayne Executive Share Option Scheme (incorporating Special Rules for United Kingdom, Canada and United States) (including all amendments up to and
including 27 August 2002).
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 4.5. |  | Asset Sale Agreement  Armaguard between Mayne Group Limited ACN 004 073 410 (Vendor) and Linfox Swanston Street Pty Limited ACN 099 701 872 (Purchaser)
and Linfox Proprietary Limited ACN 004 667 298 (Purchasers Guarantor) dated 1 November 2002.
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 4.6. |  | Share and Asset Sale Agreement  Contract Logistics between Mayne Group Limited ACN 004 073 410 (Vendor) and Faulding Healthcare Pty Limited ACN 000 875
034 (Chullora Vendor) and Linfox Proprietary Limited ACN 004 667 298 (Purchaser) dated 1 November 2002.
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 4.7. |  | Share Sale Agreement between Mayne Group Limited ACN 004 073 410 (Vendor) and DHL International Express Ltd. (Purchaser) and DHL Worldwide Express B.V.
(Purchasers Guarantor) and Mayne Group Canada Inc. and Loomis Canada Holding Company Inc. dated 1 November 2002.
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 4.8. |  | Asset Sale Agreement  Express between Mayne Group Limited ACN 004 073 410 (Vendor) and Mayne Logistics Pty Limited ACN 085 886 862 (FTS Vendor) and Toll
Transport Pty Limited ACN 006 604 191 (Purchaser) and Toll Holdings Limited ACN 006 592 089 (Purchasers Guarantor) dated 1 November 2002.
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents




SIGNATURES





Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused
this annual report to be signed on its behalf by the undersigned, thereunto duly authorised.





MAYNE GROUP LIMITED





/S/    PETER LINDSAY
JENKINS


Peter Jenkins


Chief Financial Officer


11 December 2002




---

##### Table of Contents




Certifications








Chief Executive Officer Certification





I, Stuart Bruce James, certify that:





|1. |  | I have reviewed this annual report on Form 20-F of Mayne Group Limited;
|-- |  | -----------------------------------------------------------------------




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




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




Date: 11 December 2002





/S/    STUART
BRUCE JAMESName:  Stuart Bruce James Title:    Chief Executive Officer








Chief Financial Officer
Certification





I, Peter Lindsay Jenkins, certify that:





|1. |  | I have reviewed this annual report on Form 20-F of Mayne Group Limited;
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|2. |  | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; and
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




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




Date: 11 December 2002





/S/    PETER LINDSAY
JENKINSName:  Peter Lindsay Jenkins Title:    Chief Financial Officer