________________________________________________________________________________

                               UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C.  20549

                                 FORM 20-F

[   ] REGISTRATION  STATEMENT  PURSUANT  TO  SECTION  12(b)  OR  (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 fiscal year ended JUNE 30, 2003
           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  333-8072

                                 PROVALIS PLC

           (Exact name of Registrant as specified in its charter)

                             ENGLAND AND WALES
              (Jurisdiction of incorporation or organisation)

                               NEWTECH SQUARE
                          DEESIDE INDUSTRIAL PARK
                                  DEESIDE
                                 FLINTSHIRE
                                  CH5 2NT
                  (Address of principal executive office)

Securities registered or to be registered pursuant to Section 12(b) of the
Act.

Title of each class              Name of each exchange on which to be registered
NONE                             NONE

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

      AMERICAN DEPOSITORY SHARES (REPRESENTING THIRTY ORDINARY SHARES EACH)
      ORDINARY SHARES, PAR VALUE OF 1P EACH
                              _______________

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.
           330,360,181 ORDINARY SHARES OUTSTANDING AS AT JUNE 30, 2003
                              _______________

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 ____X_________    Item 18 _______________
________________________________________________________________________________




<PAGE>

                             BASIS OF PRESENTATION

In this Annual Report, all references to "we", the "Company"  or  to "Provalis"
refer to Provalis plc, a company incorporated in England and Wales,  and not to
any  director,  officer or employee.  In this Annual Report, all references  to
the "Group" refer  to  the  Company,  its  direct and indirect subsidiaries and
controlled entities.

The Company is a public limited company registered  under  the  laws of England
and Wales.  Its Company Number in England and Wales is 3321624.   The Company's
fiscal year ends on June 30.  The Company changed its name from Cortecs  plc to
Provalis plc on November 19, 1999.

The  Company  prepares  its  financial  statements in accordance with generally
accepted  accounting principles in the UK  ("UK  GAAP"),  its  jurisdiction  of
organisation.   Except  as  otherwise indicated, all financial data included in
this Annual Report is prepared in accordance with UK GAAP.

UK  GAAP  differs  in  certain  respects  from  generally  accepted  accounting
principles  in the US ("US GAAP").   See  Note  24  of  Notes  to  Consolidated
Financial Statements for a discussion of the significant differences between UK
GAAP and US GAAP.

                         ENFORCEABILITY OF JUDGEMENTS

The Company is  a  resident  organisation  under the laws of England and Wales.
All of the Company's directors and key employees  are  non-residents of the US.
Almost all of the assets of the Company and such persons  are  located  outside
the US.  As a result, it may not be possible for investors to effect service of
process  within  the US upon such persons with respect to matters arising under
US federal securities  laws  or to enforce against them judgements of courts of
the US predicated upon the civil liability provisions of such laws.

The US and England currently do  not have a treaty providing for the reciprocal
recognition and enforcement of judgements  (other  than  arbitration awards) in
civil  and  commercial  matters.  Consequently, a final judgement  for  payment
rendered by any federal or  state  court  in  the  US based on civil liability,
whether  or not predicated solely upon US federal securities  laws,  would  not
automatically  be enforceable in England.  In order to enforce any US judgement
in England, proceedings  must be initiated by way of common law action before a
court of competent jurisdiction  in  England.   In  such  common law action, an
English   court  generally  will  not  (subject  to  the  following   sentence)
reinvestigate  the merits of the original matter decided by a US court and will
order summary judgement  on the basis that there is no defence to the claim for
payment.  The entry of an  enforcement order by an English court is conditional
upon  the following: (a) the  US  court  had  jurisdiction  over  the  original
proceeding,  (b) the judgement is final and conclusive on the merits and is for
a definite sum  of  money, (c) the judgement does not contravene English public
policy, (d) the judgement  is  not  for  a  tax,  penalty or fine arrived at by
doubling, trebling or otherwise multiplying a sum assessed  as compensation for
the  loss  or damage sustained and (e) the judgement has not been  obtained  by
fraud or in  breach  of  the  principles  of  natural  justice.  Subject to the
foregoing, an investor may be able to enforce in England  judgements  in  civil
and commercial matters obtained from US federal or state courts; however, there
can  be  no  assurance  that such judgements will be enforceable.  In addition,
there is doubt as to whether  an  English  court  would accept jurisdiction and
impose civil liability in an original action predicated  solely upon US federal
securities laws.

EXCHANGE RATES AND CURRENCY TRANSLATION

The Company publishes its consolidated financial statements  in Pounds Sterling
({pound-sterling}).   All  references herein to (i) "{pound-sterling}"  are  to
Pounds  Sterling  and  (ii) "US$"  or  "$"  are  to  US  dollars.   Solely  for
information purposes, this  document  contains  translations  of certain Pounds
Sterling  amounts  into  or  from  US  dollars  at  a  specified  rate.   These
conversions should not be construed as representations that the Pounds Sterling
amounts actually represent the US dollar amounts or could be converted  into or
from  US  dollars  at  the  rates  indicated. The

                                       i
<PAGE>


translations  of  financial  information  for the year ended June 30, 2003 from
Pounds   Sterling   into  US   dollars   have   been   made  at  the   rate  of
{pound-sterling}1.00 to US$1.6329,  being the noon buying rate in New York City
for cable transfers in Pounds Sterling as certified for customs purposes by the
Federal Reserve Bank of New York (the "Noon Buying Rate") at June 30, 2003. The
Noon Buying Rate at January 9 2004 was {pound-sterling}1.00 to US$1.8472.

               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain  statements  under the captions "Item 4 - Information on the Company  -
Business Overview" and  "Item 5 - Operating and Financial Review and Prospects"
and elsewhere in this Annual  Report  on  Form 20-F constitute "forward-looking
statements" within the meaning of the Private  Securities Litigation Reform Act
of  1995.  Such forward-looking statements involve  known  and  unknown  risks,
uncertainties and other factors which may cause the actual results, performance
or achievements  of  the  Group  to  be  materially  different  from any future
results,  performance  or  achievements  expressed or implied by such  forward-
looking statements.  Such factors include,  among  others,  the  following: the
rate  at which operating losses are incurred; the rate of net cash  utilisation
within  the  Group and, hence, the Group's possible need for additional capital
in the short,  medium and/or long term; the success of the Group's distribution
and  other  commercial   agreements   with  third  parties;  the  execution  of
development,  licencing,  research,  manufacturing   and   other  collaboration
agreements  with third parties; the success of the Group's continuing  research
and development,  strategies  and  activities;  uncertainties related to future
trial  results  and the associated regulatory process;  the  viability  of  the
Group's products, which are at various stages of development; the generation of
sufficient operating  cash  flow  by  the  Group's  pharmaceutical  and medical
diagnostics  businesses  to finance the ongoing development of these businesses
as  well as the Group's research  and  development  activities;  the  risks  of
technological  obsolescence  and  risks  associated  with  the  Group's  highly
competitive  industry; the Group's dependence on suppliers of products and  key
product components;  restrictions  placed  on  the  Group  within  the existing
pharmaceutical pricing environment; the impact of future competition  and other
laws, regulations and policies; the need to obtain regulatory approvals for the
Group's  products and the timing of required regulatory approvals; availability
and level  of  reimbursement  for  the  Group's products from government health
administration  authorities  and  other third  party  payors,  under  Medicare,
Medicaid and other similar regulations;  the  risk  of  product  liability  and
policy  limits  of  product  liability insurance; potential liability for human
clinical trials; the ability of the Group and/or its licensors to obtain patent
protection for products in Europe,  the US and other countries and to otherwise
protect its intellectual property; the share price of publicly quoted companies
in  the Group's sector, which can be highly  volatile;  compliance  with  laws,
regulations  or  policies  relating  to  environmental  protection, disposal of
hazardous substances and health and safety at work; the Group's  dependence  on
key  personnel and the quality, judgement and strategic decisions of management
and other  personnel;  general  business  and  economic  conditions;  and other
factors referenced herein, many of which are beyond the Group's control and may
cause  the  Group's  available  capital  resources to be used more quickly than
expected.

For a more detailed discussion of the risks  faced  by  the  Group,  please see
"Item 3 - Key Information - Risk Factors."


                                      ii

<PAGE>

                               TABLE OF CONTENTS

                                                                           PAGE
                                    PART I

Item 1 -   Identity of Directors, Senior Management and Advisers             1

Item 2 -   Offer Statistics and Expected Timetable                           1

Item 3 -   Key Information                                                   1

Item 4 -   Information on the Company                                        8

Item 5 -   Operating and Financial Review and Prospects                     24

Item 6 -   Directors, Senior Management and Employees                       35

Item 7 -   Major Shareholders and Related Party Transactions                46

Item 8 -   Financial Information                                            47

Item 9 -   The Offer and Listing                                            47

Item 10-   Additional Information                                           48

Item 11-   Quantitative and Qualitative Disclosures about Market Risk       55

Item 12-   Description of Securities Other Than Equity Securities           56

                                    PART II

Item 13-   Defaults, Dividend Arrearages and Delinquencies                  57

Item 14-   Material Modifications to the Rights of Security Holders and Use of
           Proceeds                                                         57

Item 15-   Controls and Procedures                                          57

Item 16-   Not Applicable                                                   57

                                   PART III

Item 17-   Financial Statements                                             58

Item 18-   Financial Statements                                             58

Item 19-   Exhibits                                                         58

Financial Pages                                                            F-1

Signatures                                                                 S-1

Exhibit Index                                                             Ex-1



                                      iii

<PAGE>

PART I


ITEM 1 * IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2 - OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3 - KEY INFORMATION

SELECTED FINANCIAL DATA

The  following  table  sets  forth  certain  selected  historical  consolidated
financial data for the Group.  The selected financial data has been prepared in
accordance  with  both  UK  GAAP  and US GAAP.  The other commentary in Item  3
follows UK GAAP. The Company prepares  its  financial  statements in accordance
with  generally  accepted  accounting  principles in the UK  ("UK  GAAP"),  its
jurisdiction  of organisation. Item 17 includes  financial  data  including  US
GAAP. UK GAAP differs in certain respects from US GAAP.


                                       1


<PAGE>


<TABLE>
<CAPTION>
                                                                 FISCAL YEAR ENDED JUNE 30
<S>                       <C>         <C>                <C>                <C>                <C>                <C>
AS PER UK GAAP               US
                         CONVERSION
                            2003           2003              2002              2001              2000              1999
                          US$'M(1)  {pound-sterling}'M {pound-sterling}'M {pound-sterling}'M {pound-sterling}'M  {pound-sterling}'M

STATEMENT OF OPERATIONS
DATA                         22.9       14.0                 9.4                 7.8                6.8                 9.2
  Turnover (2)
  Research and
  Development Costs          (3.3)      (2.0)               (3.3)               (3.3)              (3.9)              (16.5)
      Operating Loss         (3.4)      (2.1)               (5.4)               (5.2)              (7.7)              (23.3)
  Operating Loss per
     Share             (1.0{cent})     (0.6p)              (2.1p)              (2.3p)             (4.3p)             (14.7p)
  Operating loss from
     Continuing Operations   (2.8)      (1.7)               (4.2)               (3.7)              (7.4)              (20.7)
  Loss from Continuing
     Operations per Share    (0.8p)     (0.5p)              (1.6p)              (1.7p)             (4.1p)             (13.0p)
  Net Interest Income         0.3        0.2                 0.2                 0.5                0.2                 1.0
  Profit/(Loss) on
     Ordinary Activities
     Before Taxation and      2.1        1.3                (5.2)               (4.7)              (7.5)              (22.3)
     Outside
     Equity Interests
  Profit/(Loss) for           2.1        1.3                (4.8)               (4.4)              (7.5)              (22.1)
     Financial Year (2)
  Weighted Average Shares 330,360    330,360             258,294             221,620            181,174             158,664
     (in '000s) (3)
  Profit/ (Loss) per
     Ordinary Share (4) 0.7{cent}        0.4p               (1.9p)             (2.0p)             (4.2p)              (13.9p)
BALANCE SHEET DATA
  Cash and Deposits          10.8        6.6                10.4                 8.7                4.6                 5.8
  Total Assets               43.4       26.6                34.7                21.1               18.6                23.3
  Long Term Debt              2.9        1.8                 6.4                 0.1                0.3                 0.6
  Total Borrowings           10.5        6.4                11.1                 0.4                0.6                 0.8
  Capital Leases              -          -                   -                   -                  -                   0.3
  Total Liabilities          15.5        9.5                18.8                10.5               14.4                16.6
  Net Assets                 27.9       17.1                15.9                10.6                4.2                 6.7
  Equity Shareholders'       27.9       17.1                15.9                10.6                4.2                 6.7
     Funds
AS PER US GAAP
INCOME STATEMENT DATA
  Turnover(2)                22.9       14.0                 9.4                 7.8                6.7                 9.2
  Research and               (3.3)      (2.0)               (3.3)               (3.3)              (3.9)              (16.5)
     Development Costs
  Operating Loss             (3.4)      (2.1)               (5.4)               (5.2)              (6.0)              (21.2)
  Operating Loss from
     Continuing Operations    (2.8)      (1.7)               (4.2)               (3.7)              (5.7)              (20.0)
  Net Interest Income         0.3        0.2                 0.2                 0.5                0.2                 1.0
  Loss for Financial Year    (3.4)      (2.1)               (4.8)               (4.4)              (5.8)              (20.2)
     (2)
  Weighted Average Shares 330,360    330,360             258,294             221,620            181,174             158,664
     (in 000's) (3)
 Loss per Ordinary
     Share(4)          (1.0{cent})     (0.6p)              (1.9p)              (2.0p)             (3.2p)             (12.7p)

BALANCE SHEET DATA           10.8        6.6                10.4                 8.7                4.6                 5.8
  Cash and Deposits
  Total Assets               40.3       24.7                34.7                21.1               18.6                21.5
  Long Term Debt              2.9        1.8                 6.4                 0.1                0.3                 0.6
  Total Borrowings           10.5        6.4                11.1                 0.4                0.6                 0.8
  Capital Leases              -          -                   -                   -                  -                   0.3
  Total Liabilities          18.1       11.1                18.9                10.6               14.5                16.6
  Net Assets                 22.2       13.6                15.8                10.5                4.1                 4.9
  Equity Shareholders'       22.2       13.6                15.8                10.5                4.1                 4.9
  Funds
</TABLE>

(1)US dollar amounts  in 2003 have been translated from Pounds Sterling into US
   dollars at the Noon  Buying  Rate  at 30 June 2003 of {pound-sterling}1.00 =
   US$1.6329, and are provided solely for  information  purposes. See "Exchange
   Rates and Currency Translations".
(2)Includes   discontinued   activities.    See   "Consolidated  Statement   of
   Operations," for additional information regarding discontinued activities.
(3)Weighted  average shares has been calculated by adding  to  the  balance  of
   Ordinary Shares  outstanding  at  the start of the fiscal year the number of
   new Ordinary Shares issued and new Ordinary Shares issued upon exercising of
   options, applied on a pro rata basis  covering  the  proportion  of the year
   those new Ordinary Shares were outstanding.

                                       2
<PAGE>

(4)Diluted  loss  per Ordinary Share is equal to basic loss per Ordinary  Share
   because the Company's  options  have an anti-dilutive effect for the periods
   presented.

EXCHANGE RATES

The following table sets forth for the  years  and  dates  indicated certain
information concerning the Noon Buying Rate for Pounds Sterling expressed in
US dollars per {pound-sterling}1.00.  The Noon Buying Rate at 9 January 2004
was {pound-sterling}1.00 to US$1.8472.

FISCAL YEAR ENDED JUNE 30,                    AVERAGE (1)(2)
1999                                           1.6371
2000                                           1.5900
2001                                           1.4479
      1                                        1.4421
2003                                           1.5915

MONTH                             HIGH(2)      LOW(2)
July 2003                        1.6718        1.5867
August 2003                      1.6170        1.5728
September 2003                   1.6642        1.5732
October 2003                     1.7025        1.6598
November                         1.7219        1.6693
December 2003                    1.7842        1.7200
January 2004 (3)                 1.8472        1.7902


(1)Average  of  the noon buying rates on the last business day  of  each  month
   during the period.
(2)Source:  Federal Reserve Statistical Release H.10
(3)Such period commencing on 1 January 2004 and concluding 9 January 2004.


RISK FACTORS

FUNDING AVAILABILITY IS UNCERTAIN.

The Group's ability  to  deliver  the  required  level  of product research and
development  and  general  business  development  needed  in  order  to  remain
competitive is governed by the availability of funds. The Group's  strategy  is
to  generate  revenues  from  its operating divisions to use in funding further
product and business development.  Following  the recognition of an exceptional
profit of {pound-sterling}3.4 million from the  variation  of  the distribution
agreement  with  Dr  Falk  Pharma,  the  Group  declared  a  pre-tax profit  of
{pound-sterling}1.3  million  in  fiscal  year  2003.  However, the  Group  has
incurred net losses in each other year since it was established.  These  losses
have  resulted  principally  from  the  costs  incurred  in  the  research  and
development  of  the Group's products and from general and administrative costs
associated with the  Group's  operations. Despite this pre-tax profit in fiscal
year 2003, there is no assurance  that  the Group will ever achieve significant
revenues or profitability. This could impair  the  Group's  ability  to sustain
operations and to obtain any required additional funds.

WE RELY ON COMMERCIAL AGREEMENTS WITH THIRD PARTIES.

The Medical Diagnostics business currently derives the majority of its revenues
from  distribution  agreements  under  which  we  grant to other diagnostic  or
pharmaceutical  companies  the  rights  to  sell  products   developed   and/or
manufactured  by  the Medical Diagnostics division. The Pharmaceutical business
derives the majority  of

                                       3
<PAGE>


its revenues from the sale of pharmaceutical  products, some of which are owned
by it, others being supplied to it under distribution agreements.

The Group cannot guarantee that  any  such agreements already entered into will
be commercially successful. In addition,  the  Group  cannot  guarantee that it
will  be  able  to establish additional collaborative, supply, distribution  or
licence agreements or arrangements, that any such arrangement or agreement will
be on favourable  terms  or  that  any such arrangement or agreement will prove
successful.

The commercial success of all these  arrangements  depends,  in  part,  on  the
performance  of  the  third  parties. The Group cannot guarantee that the third
parties will be able to carry  out  all of their obligations under the relevant
arrangements.

OUR PRODUCTS MAY NOT ACHIEVE COMMERCIAL  SUCCESS;  WE ARE DEPENDENT ON SALES OF
DICLOMAX AND GLYCOSAL FOR GROWTH IN THE SHORT TERM.

There can be no assurance that the Group's technologies  and product candidates
will  be capable of being produced in commercial quantities  at  an  acceptable
cost, or that, if introduced, they will achieve market acceptance.

The Pharmaceutical  business,  which  accounted  for  78% of Group sales in the
fiscal    year    ended    30   June   2003,   is   dependent   on   sales   of
Diclomax{reg-trade-mark}, its  key pharmaceutical product. In particular, sales
of Diclomax need to be maintained  at  current  levels  in  order  to repay the
deferred element of the consideration payable to Parke Davis in connection with
the  acquisition  of this product, the final instalment of which is due  to  be
paid in November 2004.  If this requirement is not met, Parke Davis may enforce
a debenture over all of the  assets  of Provalis Healthcare Limited (other than
book debts) which lapses on payment of  all such deferred consideration.  Until
we   have   other   significant   cash   generating    products,    sales    of
Diclomax{reg-trade-mark} need to increase to fund growth of the business of the
Group.

The  Medical  Diagnostics  business'  key product Glycosal remains in the early
stages of its sales life-cycle. There can  be  no  guarantee  that this product
will  be  commercially successful. This product now benefits from  CLIA  waiver
approval in the US, which has increased its potential market in the US. If CLIA
waiver is lost, the future prospects for Glycosal may be adversely affected.

Unexpected adverse effects or problems with products can emerge after launch or
after significant  periods  of  sales,  which can lead to loss of market share,
withdrawal from the market and claims for damages.

PRODUCTS IN RESEARCH AND DEVELOPMENT ARE AT VARIOUS STAGES.

Those of the Group's diagnostic products  still in research and development are
at various stages in the process. Further investment  will  be  required  on an
ongoing basis to undertake and progress further research and development, which
is  dependent  on either funds being available to the Group, or to research and
development being  carried  out  and funded, in whole or part, by third parties
under collaborative or research and  development  agreements.  There  can be no
guarantee either that such funds will be available or that any third party will
be willing to enter into any such agreement.
In  addition,  laboratory,  pre-clinical  and  clinical  testing and regulatory
approvals  will  be required prior to the licencing or sale  of  any  of  these
product candidates  and there remains a risk of adverse or inconclusive results
which may substantially  delay,  or  halt  entirely, any further development of
these products.

All  of the Group's therapeutic vaccine products  are  at  an  early  stage  of
development.  The R&D component of the therapeutic vaccine product business was
stopped early in the first half of fiscal year 2003. However, Provalis retained
the licencing  deal with GlaxoSmithKline on a number of antigens as well as the
intellectual

                                       4

<PAGE>

property on certain other  programmes  which will be maintained at minimal cost
whilst  commercial  partners are sought.  There is no  guarantee  that any such
commercial partners will be found.

THE GROUP'S PRODUCTS ARE SUBJECT TO REGULATORY REQUIREMENTS.

The pre-clinical and clinical  evaluation,  manufacture  and  marketing  of the
Group's   products   and  product  candidates  and  its  ongoing  research  and
development activities  are  subject to regulation by government and regulatory
agencies in countries where the  Group  or  any  of  its potential licencees or
collaborators intend to test or market products. There can be no assurance that
any  of the Group's products or product candidates will  successfully  complete
the pre-clinical  evaluation  and  clinical  trial  process  or that regulatory
approvals  to  manufacture  and  market  the  Group's  product candidates  will
ultimately be obtained.

If  regulatory  approval  is  obtained,  the product and its  manufacturer  are
subject to continual review and there can  be  no  assurance that such approval
will not be withdrawn or restricted. Changes in the  application of legislation
or regulatory policies or the discovery of problems with  the  product  or  the
manufacturer  may  result  in  the imposition of restrictions on the product or
manufacturer.

The potential market for the sale  of  any medical diagnostic product in the US
is increased if CLIA waiver approval is  obtained  (see Item 4 - Information on
the  Company  -  Government  Regulation). There can be no  guarantee  that  the
Group's medical diagnostic products  will  obtain CLIA waiver approval, nor, if
obtained, that it can be maintained.

WE RELY ON THIRD PARTIES FOR MANUFACTURE OF CERTAIN PRODUCTS.

The  Group  has  expanded its manufacturing capabilities  to  meet  anticipated
future demand of its  medical  diagnostic  products;  however,  if the Group is
unable to continue uninterrupted supply, revenues will be affected.   Where the
Group  is  dependent upon third parties for manufacture of certain products  or
therapeutic product, its ability to procure their manufacture in a manner which
complies with  regulatory  requirements  may be constrained, and its ability to
develop and deliver such products on a timely  and  competitive  basis  may  be
adversely affected. Certain of the Group's products, and components used in the
manufacture  and  packaging  of  the  Group's  products,  are sourced from sole
suppliers;  if such suppliers are unable or unwilling to supply,  there  is  no
guarantee the  Group  will be able to source any such product or component from
elsewhere.

THE GROUP'S SUCCESS ALSO  DEPENDS  ON  ITS  ABILITY TO PROTECT ITS INTELLECTUAL
PROPERTY.

The commercial success of the Group depends to  a  great  extent on its ability
and/or  that  of  its  suppliers or licensors to obtain patent  protection  for
products in Europe, the  US  and other countries, protection for the trademarks
and  brand  names  under  which  products   are   sold   and  to  preserve  the
confidentiality  of  its own and its collaborators' know-how.   The  successful
commercialisation of these  products  and  technologies  (whether  by the Group
itself or by third parties as licencees or collaborators) is largely  dependent
on  the  extent of such intellectual property protection obtained. No assurance
is given that  the  Group  will  develop products which are patentable, or that
patents will be sufficiently broad in their scope to provide protection for the
Group's  intellectual property rights  and  exclude  competitors  with  similar
technology,  or  that  the  trademarks  or  brand names will be registerable or
capable of protection.

The  commercial  success  of  the Group will also  depend,  in  part,  on  non-
infringement of patents granted  to  third  parties.  Competitors  or potential
competitors  may  have  filed  applications,  or may have been granted, or  may
obtain patents that may relate to products competitive  with those of the Group
or  its  technologies.  If  this  is  the  case, the Group may have  to  obtain
appropriate  licences  under  these  patents  or  cease  and/or  alter  certain
activities or processes, or develop or obtain alternative technology. There can
be no assurance that, if any

                                       5
<PAGE>

licences are  required,  the Group will be able to obtain any such  licences on
commercially favourable terms, if at all.

The  sale  of  the  Group's medical diagnostic and pharmaceutical  products  is
dependent, to a large  degree,  on  the  Group being able to sell such products
under currently used trademarks or brand names.  Although  a  number  of  these
names are registered as trademarks they may still be subject to a challenge  by
a  third party which may result in the Group, or its suppliers, being unable to
use  such names. If the Group is unable to use the trademark or brand name of a
particular product, the sales of that product may be materially affected.

THE GROUP NEEDS TO ATTRACT AND RETAIN KEY EMPLOYEES.

The Group  is  highly  dependent on the principal members of its management and
professional staff. Attracting  and  retaining qualified personnel, consultants
and  advisers  will  be important to the  Group's  success.  There  can  be  no
assurance that the Group  will  be  able  to  attract  and  retain personnel on
acceptable  terms  given  the competition for such personnel among  healthcare,
pharmaceutical, biotechnology  and  diagnostic companies, universities and non-
profit research institutions. The loss  of  services  of any of these personnel
could impede the achievement of the Group's objectives.

THE GROUP COULD INCUR PRODUCT LIABILITIES NOT ADEQUATELY COVERED BY INSURANCE.

The Group's business exposes it to potential liability risks which are inherent
in research and development, clinical trials, manufacturing,  marketing and the
use of human pharmaceutical and diagnostic products.  There can be no assurance
that  future  necessary insurance cover will be available to the  Group  at  an
acceptable cost,  if  at  all, or that, in the event of any claim, the level of
insurance carried by the Group  now or in the future will be adequate or that a
liability  or  other  claim  would not  materially  and  adversely  affect  the
business.

THE GROUP HAS TO COMPETE WITH COMPANIES WITH SUBSTANTIALLY GREATER RESOURCES OR
EXPERIENCE.

The  Group's  competitors  include,   amongst   others,  major  pharmaceutical,
biotechnology, healthcare and diagnostics companies  with substantially greater
resources than those of the Group. There is no assurance  that competitors will
not succeed in developing technologies and products that are  more effective or
economical than any of those being developed by the Group or which would render
its  technologies  and/or  products  obsolete  and/or  otherwise uncompetitive.
Although  the  Group  has  collaborative  arrangements  with several  of  these
companies,  such arrangements do not generally prevent the  collaborators  from
marketing competing products or from collaborating with its competitors.

CHANGE IN THE  PRICING  ENVIRONMENT  FOR  OUR PRODUCTS MAY ADVERSELY AFFECT OUR
RESULTS.

The ability of the Group and its licencees to commercialise their products also
depends on the extent to which reimbursement  for the cost of such products and
related  treatments  will  be available from government  health  administration
authorities,  private  health  providers  and  other  organisations.  There  is
uncertainty    as    to   the   reimbursement    status    of    newly-approved
pharmaceutical/diagnostic  products,  and  there  is no assurance that adequate
health administration or third party coverage will be available to the Group or
its partners to obtain satisfactory price levels.

Suppliers of pharmaceutical products to the National  Health  Service of the UK
("NHS")  are currently subject to the Pharmaceutical Pricing Regulatory  Scheme
under which  the  prices  of  pharmaceutical  products  supplied to the NHS are
reviewed periodically. Such price reviews could have an adverse  effect  on the
profitability  of  the  Group.   See  also  "Item 4 - Business Overview - Price
Regulation."

                                       6

<PAGE>

CHANGES IN GOVERNMENT ACTIONS MAY ADVERSELY AFFECT US.

Governments reserve the right to amend their policies.  Changes in policies can
impact profoundly on the pharmaceutical and diagnostic industries as a whole or
in part. As with all other pharmaceutical and  diagnostic  companies, the Group
has no immunity from governmental actions.

WE ALSO HAVE TO COMPLY WITH ENVIRONMENTAL AND OTHER GOVERNMENT REGULATION.

The Group and its manufacturers are subject to laws, regulations  and  policies
relating  to  environmental  protection,  disposal  of hazardous or potentially
hazardous  substances,  healthy  and  safe  working  conditions,  manufacturing
practices and fire hazard control. There can be no assurance  that the Group or
any  of  the  Group's  manufacturers will not be required to incur  significant
costs to comply with future laws, regulations and policies relating to these or
similar matters. The risk  of  accidental   injury cannot be eliminated. In the
event of such an accident, the Group could be  held  liable for any damage that
results and any such liability could exceed the resources of the Group.

Changes  in government regulations or enforcement policies  could  impose  more
stringent  requirements  on  the  Group,  compliance with which could adversely
affect its business. Failure to comply with  applicable regulatory requirements
could  result  in  enforcement  action,  including   withdrawal   of  marketing
authorisation,  injunction, seizure of products and liability for civil  and/or
criminal penalties.

WE ARE SUBJECT TO COMPETITION REGULATIONS.

The Group's activities are subject to competition laws, including Article 81(l)
of the EU Treaty.  Article  81(1) prohibits agreements (as well as arrangements
and concerted practices) which  prevent, restrict or distort competition within
the  EU  which  may  affect  trade between  EU  member  states.  Provisions  of
agreements restricting competition within the meaning of Article 81(1) are void
and parties to them may face fines  from the European Commission and claims for
damages.

The Chapter 1 prohibition contained in  the UK's Competition Act 1998 prohibits
agreements which prevent, restrict or distort  competition  within  the  UK and
which  may  affect  trade  within  the UK, but only if they have an appreciable
effect  on  competition in the UK. The  consequences  of  infringement  of  the
Chapter 1 prohibition  are  similar  to  those  for the infringement of Article
81(1).

Agreements  falling  within  the  criteria set out in  block  exemptions  under
Article 81, or which have received an individual exemption under Article 81(3),
will automatically be exempt from the  Chapter  1  prohibition,  subject to any
directions  from  the  Director  General  of Fair Trading. For other agreements
which may fall within the Chapter 1 prohibition,  the  parties may apply for an
individual exemption.

Provisions  of some of the agreements to which the Group  is  a  party  may  be
restrictive of  competition  under  Article  81(1)  or  Chapter  1.  The  Group
determines  on  an  agreement-by-agreement basis whether Article 81 applies and
whether the agreements  benefit  from  an  automatic block exemption from these
provisions.  If  it does not, the Group determines  whether  to  apply  for  an
individual exemption.


OUR SHARE PRICE CAN BE VOLATILE.

The share price of  publicly  traded,  smaller  healthcare groups can be highly
volatile. The price at which the Company's shares  will be quoted and the price
which  investors may realise for their shares will be  influenced  by  a  large
number of  factors, which could include the performance of both the Group's and
its competitors'

                                       7
<PAGE>

research and development programmes,  large purchases or sales of the Company's
shares,   currency   fluctuations,   legislative   changes  in  the  healthcare
environment and general economic conditions.

WE HAVE NOT PAID CASH DIVIDENDS ON OUR SHARES.

The  Company  has  never paid any cash dividends and does not anticipate paying
cash dividends on the Ordinary Shares in the foreseeable future.

ITEM 4 -  INFORMATION ON THE COMPANY

                    HISTORY AND DEVELOPMENT OF THE COMPANY

The Company's name is  Provalis  plc.   The Company is a public limited company
registered under the Companies Act 1985 of  England  and  Wales.   Its  Company
Number in England and Wales is 3321624, and it was incorporated on February 20,
1997.   Its  registered  office  is at Newtech Square, Deeside Industrial Park,
Deeside,  Flintshire,  CH5 2NT, telephone  number  +44  (0)  1244  288888.  The
Company's agent in the US  is  Puglisi  & Associates, 850 Library Avenue, Suite
204, PO Box 885, Newark, Delaware 19715.

The Company changed its name from Cortecs (1997) plc to Cortecs plc on June 27,
1997 and from Cortecs plc to Provalis plc  on  November 19, 1999. The Company's
predecessor, Cortecs International Limited, was  incorporated  in  Australia in
1985.  On December 12, 1997, pursuant to a Shares Scheme and an Options  Scheme
approved by the shareholders of Cortecs International, the Company acquired all
outstanding  Ordinary  Shares of Cortecs International in exchange for an equal
number of Ordinary Shares of the Company.

Since 2002, Provalis' strategy  has  been  to  use  its Medical Diagnostics and
Pharmaceuticals businesses to deliver investor returns through:

{circle}  the  development of novel point of care  diagnostic  tests for use in
          major areas of chronic disease, such as diabetes and osteoporosis, in
          global markets;

{circle}  focusing  diabetes  diagnostic  products  specifically  on the key US
          market,  with its  economic  reimbursement  levels,  and  where it is
          estimated that 5%, or 16 million, of the population are diabetic;

{circle}  seeking   theranostic   opportunities   and  synergies   between  our
          diagnostic products with associated therapeutic products to aid their
          marketing by pharmaceutical companies;

{circle}  the  marketing and sale of owned or licenced  ethical  pharmaceutical
          products in new and existing  European  markets to generate cash flow
          to expand the Group's product pipeline; and

{circle}  acquiring   complementary   products  and  businesses  to  help  fuel
          corporate growth.



The main developments since July 2002 are as follows:

CORPORATE


{circle}  The Group's product pipeline continued to progress;

{circle}  The Group's cash position  remained  healthy and will further benefit
          from the monies due following the variation of the agreement  with Dr
          Falk   Pharma   and   the   stopping   in   November   2004   of  the
          {pound-sterling}88,000     weekly     payments    to    Pfizer    for
          Diclomax{reg-trade-mark};

{circle}  The Group refocussed its activities on its two operating  businesses,
          Medical  Diagnostics  and  Pharmaceuticals,  stopping R&D expenditure
          within its vaccines business.

                                       8


<PAGE>

MEDICAL DIAGNOSTICS


{circle} Glycosal{reg-trade-mark} made an important  sales  breakthrough  in the
   valuable US market;

{circle} G5  diagnostic  technology  progressed  towards  product completion and
   preparation for clinical trials in testing HbA1c;

{circle} Development programmes defined for a number of point of care products
   using the G5 platform in addition to the HbA1c test product.

PHARMACEUTICALS

{circle}  A variation agreed to the distribution  agreement with Dr Falk Pharma
          (See "Business Overview - Pharmaceutical business")

{circle}  Irish sales business established in February 2003

{circle}  Rapolyte{reg-trade-mark} launched in the UK in May 2003

{circle}  Diclomax{reg-trade-mark} launched in Ireland in November 2003

{circle}  Higher  strength  Salofalk  granules  launched  in UK and  Ireland in
          November 2003

{circle}  Further  product   licencing   opportunities   under  discussion  for
          pharmaceutical sales business to leverage existing sales force

{circle}  Sales  of  Diclomax{reg-trade-mark}  have  increased  the  sales  and
          profitability of the pharmaceutical business;


See  "Business  Overview  -  Capital  Expenditures"  and  "Business Overview  -
Acquisitions and Disposals" below for a description of the  Company's principal
capital expenditures and acquisitions and disposals in recent periods.


                               BUSINESS OVERVIEW

During the fiscal year ended June 30, 2003, the Group had three businesses:

MEDICAL  DIAGNOSTICS  - develops and sells to world markets medical  diagnostic
products for chronic disease  management. The division's principal products are
Glycosal{reg-trade-mark} and Osteosal{reg-trade-mark}  in the areas of diabetes
and osteoporosis respectively.

PHARMACEUTICALS  -  sells  and  markets  its  own,  and  third  party,  branded
prescription medicines in the UK and Ireland to GPs and hospitals  through  its
own  regionally  managed  sales-force.  The  division's  principal  product  is
Diclomax{reg-trade-mark},  a  medicine  for  use  in  the treatment of musculo-
skeletal   disorders,   and   it   also   sells   products  in  the  areas   of
gastroentorology, osteoporosis, migraine and dermatology.

THERAPEUTICS  R&D  -  owns a range of early stage vaccine  candidates  for  the
prevention of infectious  diseases. All R&D expenditure on these candidates was
stopped early in fiscal year 2003.

MEDICAL DIAGNOSTICS BUSINESS

From  the  early  1990s,  the activities  comprising  the  Medical  Diagnostics
division have focused on the  development  of  rapid point of care diagnostics.
Since 1998, this focus has incorporated quantification  at  point

                                       9
<PAGE>

of care using  small,  low cost  instrumentation.  Our aim has been to generate
revenues  from  the  sale of  disposable  tests  required  to be used  with the
instrument, as well as from the sale of the instrument itself.

Provalis  is one of the leading companies working to produce medical diagnostic
tests  for  diabetes.  Glycosal{reg-trade-mark}  is  a  quantitative  test  for
glycated haemoglobin ("HbA1c"), intended for use in the long-term management of
diabetes. The  test  is  a simple point-of-care format, utilising HaemaQuant, a
palm-sized quantitation unit.  We consider that Glycosal{reg-trade-mark} is the
best product for HbA1c testing that  is commercially available for professional
non-laboratory use. Our test is not only  faster but also cheaper and easier to
use than competitor products.

The    Group    has    a    semi-exclusive    distribution    agreements    for
Glycosal{reg-trade-mark} with Bio-Rad Laboratories,  Inc.  (covering the world)
and with Cholestech Corporation (covering the US, Japan, Europe and much of the
rest of the world). We retain the right to sell Glycosal{reg-trade-mark} in the
UK. Glycosal{reg-trade-mark} was also selected by Abbott Laboratories  in  July
2002  to serve the HbA1c testing needs of its customers. This agreement between
Cholestech  and  Abbott  generated  immediate  sales  of  both  instruments and
cartridges  to a large number of physicians' offices and hospital  laboratories
across the US,  although  this  did distort the sales profile of the product in
its first year of significant sales.

The major advance for Glycosal{reg-trade-mark}  this year has been in the USA -
the world's largest diagnostics market - where sales  of the instrument and the
pull-through of the test cartridges have been pleasing.  The  product  has been
particularly well received by the smaller doctors' practices.

In  the year the Group supplied over one million Glycosal{reg-trade-mark}  test
cartridges  for  sale  and shipped twice as many instruments as in the previous
two  years combined. Our  distributors  report  that  200  to  300  instruments
continue  to  be  placed  with  doctors  in  the  USA  each month and that test
cartridge volumes have been building steadily. Provalis estimates its installed
base   of  machines  now  stands  at  over  6,000.  The  Group  believes   that
Glycosal{reg-trade-mark}  is  now  the  leading  CLIA  waived  doctors'  office
diabetes HbA1c product in the USA market.

Sales of Glycosal{reg-trade-mark} continue to advance in the other markets into
which  it  is  sold  by our two key distributors, Cholestech Corporation, which
sells the product as the "GDX", and Bio-Rad Laboratories, which sells it as the
"MicroMat II".

The number of countries  in which Glycosal{reg-trade-mark} is sold continues to
increase.  In particular, Cholestech  has  recently  launched  the  product  in
Canada, another high value market, where over 2.2m people are estimated to have
diabetes, and  in  June  the  first shipment was made to Bio-Rad to service the
Japanese market  which is the second  largest  HbA1c  market  in  the world. In
addition,  Bio-Rad  introduced the product into India in October 2003,  and  is
establishing    a   number    of    direct    marketing    opportunities    for
Glycosal{reg-trade-mark} in developing markets.

Glycosal{reg-trade-mark} also received a number of technical acknowledgments in
the  year.  As  well   as   receiving  the  enhanced  National  Glycohemoglobin
Standardisation     Programme     Certification      ("NGSP")     registration,
Glycosal{reg-trade-mark}  scored  highly  in  the  independent   assessment  of
diabetes HbA1c tests assessed by the Medical Devices Agency in the UK.

One   disappointment   in   the   year   has   been   the  level  of  sales  of
Glycosal{reg-trade-mark} to the UK NHS under Provalis'  direct  selling scheme.
The Group has suspended its direct selling efforts in the UK and is now seeking
to  progress  the  product  in  the  UK through initiatives with pharmaceutical
companies,  as  exemplified  by  our relationship  with  Takeda,  or  via  sub-
distributors.  Our view on this may  be  revised  in  2004/5  once  the  recent
diabetes initiative with the UK NHS is fully underway and the new GP's contract
rewarding surgeries  for patient diabetes monitoring becomes fully implemented.
Nevertheless,  Glycosal{reg-trade-mark}   is   well   placed  to  continue  its
penetration of the multi-billion pound diabetes market.

                                      10

<PAGE>

We also have, in Osteosal{reg-trade-mark}, a simple device  and test to aid the
early  diagnosis and therapy monitoring of osteoporosis. The test  is  supplied
with a small  quantification  reading device, InstaQuant. InstaQuant is a palm-
sized photometer developed by the  Group  which  automatically  quantifies  the
amount  of an analyte in the sample. Under a licence granted by us, the product
is used by  Aventis  Pharma to aid its pharmaceutical promotional activities in
Italy.  We also market  Osteosal{reg-trade-mark}  in  Europe  and the Far East,
mainly through distributors .  We are currently precluded from  marketing  this
product in the US due to an unresolved patent dispute involving the supplier of
the  bone  marker  used  in  the test.  See "Patents and Intellectual Property"
below.

PHARMACEUTICAL BUSINESS

The Pharmaceutical business, which  is  our  pharmaceutical sales and marketing
business, trades under the name of Provalis Healthcare.  These  activities were
established in the mid 1980s, specialising in the sales and marketing of third-
party ethical (prescription) pharmaceutical products in the UK. The  division's
sales  force  had been gradually expanded and now consists of approximately  30
representatives and 8 national or regional sales directors or managers.

In December 2001,  we  acquired the UK marketing licences and trademarks of the
Diclomax{reg-trade-mark}  range  of  products  from Parke Davis & Co Limited (a
subsidiary of Pfizer Inc).  Diclomax{reg-trade-mark}  is a once-a-day treatment
for  musculo-skeletal  disorders  such as osteo and rheumatoid  arthritis,  and
general analgesia (pain relief). It  is  prescribed  mainly  to the elderly and
provides an excellent and acceptable cost-effective therapy.

The  cost  of acquisition of Diclomax{reg-trade-mark} before transaction  costs
was {pound-sterling}14.5m.  The  drug  had  sales  of  {pound-sterling}6.7m  in
calendar  year 2000, {pound-sterling}3.9m in the seven months since acquisition
until the end  of  fiscal  year  2002,  and {pound-sterling}6.4m in fiscal year
2003. We negotiated favourable payment terms  comprising  an initial payment of
{pound-sterling}1.9m and the balance payable in instalments  over  three years.
The product is both profitable and cash generative. Further details relating to
this  acquisition  are  given  in  "Risk Factors" in Item 3, "Acquisitions  and
Disposals" in Item 4 and "Liquidity and Capital Resources" in Item 5.

During fiscal year 2003, Diclomax was  promoted  heavily  by the representative
sales force and by using focused advertising. The sales of {pound-sterling}6.4m
were slightly below internal expectations, despite an increased  share  of  the
declining non-steroidal anti-inflammatory drug ("NSAID") market which continues
to  be  affected  by  the new COX2 inhibitors. A minor effect on sales was also
seen during January and  February  2003  when  wholesalers reduced purchases in
order to reduce their stockholdings. Diclomax{reg-trade-mark}  remains the most
important product for the Pharmaceutical division. In the year ahead  the Group
expects to see growth of Diclomax{reg-trade-mark} sales through both its launch
in   the   Republic  of  Ireland  during  November  2003  and  other  marketing
initiatives.

In addition,  the division has four exclusive distribution agreements in the UK
relating to Clotam  Rapid,  the  Falk range of products (Ursofalk, Salofalk and
Budenofalk), Calceos and Histofreezer, supplied by A/S Gea Farmaceutisk Fabrik,
Dr Falk Pharma, Laboratoire Innothera  and  STC  Technologies Inc respectively.
These products are used respectively within the following  areas  of  medicine:
Migraine,  Gastroenterology,  Osteoporosis  and  Dermatology.   The termination
provisions of these agreements generally include termination rights,  following
requisite notice, upon breach by the other party of its obligations, as well as
upon the occurrence of certain insolvency events of the other party.

Provalis has agreed to vary its distribution agreement with Dr Falk Pharma  for
the  Falk  range  of products. Provalis was due to distribute these products in
the UK until 2010 but  has  agreed  that  the  agreement  will now terminate in
December 2004. In return for this reduction in the distribution agreement term,
the  agreement  was  immediately  extended to include the Republic  of  Ireland
(which  had  established  sales  of {pound-sterling}0.5m  per  year),  Provalis
received {pound-sterling}1.5m in February  2003  and  will  receive  a  further
{pound-sterling}1.5m  in  January 2004 and up to a further {pound-sterling}2.0m
in January 2005. Provalis has  recognised under UK GAAP the income that relates
to the element that is

                                      11

<PAGE>

non-refundable, which was {pound-sterling}3.4 million in the year ended 30 June
2003.  The  remaining  {pound-sterling}1.6  million  will be  recognised  as it
becomes non-refundable on or before January 2005.


Provalis established a sales business  in  the  Republic of Ireland in February
2003.   Sales  of  the  Dr  Falk  Pharma  range  started   promisingly  with  a
contribution of {pound-sterling}0.5m in the period from February  to June 2003,
although  some of the sales were pipeline stocking.  We launched Diclomax  onto
the Irish market  in  November 2003, and with other product launches planned in
the forthcoming months, we expect the Irish market to be a driver of growth for
the Pharmaceutical business in the years ahead.


The Healthcare division's  primary  customers  include  UK-based multi-national
pharmaceutical wholesalers and the Health Authority Trusts  of  the UK National
Health Service.

RESEARCH AND DEVELOPMENT

Fiscal year 2003 was a year of change for Provalis in terms of its  approach to
R&D  and  product  development.  R&D  expenditure  within the Therapeutics  R&D
business  was stopped early in the first half of the  year.  However,  Provalis
retained the  licencing deal with GlaxoSmithKline on a number of these antigens
as well as the  intellectual property on certain other programmes which will be
maintained at minimal cost whilst commercial partners are sought.

R&D expenditure in  the  year  was {pound-sterling}2.0m, which was 14% of Group
turnover, {pound-sterling}1.6m of which was focused on Medical Diagnostics. The
directors believe this level of  expenditure  on  R&D remains commensurate with
the Group's cash flows and stage of development. In  2004, forecast expenditure
on R&D to complete the new G5 HbA1c product is some {pound-sterling}1.5m.

The  major  project  in  R&D  has  been  the  development of a  new  diagnostic
technology,  code  named  G5,  intended  initially  for   use   by   healthcare
professionals  at  the  point  of  care  and  then by the consumer at home. The
product  uses  the  same concept as Glycosal{reg-trade-mark}  -  an  instrument
reader and test cartridge  - and uses the same well proven chemistry to measure
HbA1c but being fully automated will be easier and quicker to use.

Assembly  of  the  first instruments  using  industrialised  mouldings  is  now
underway, and final cartridges and instruments are due to be delivered early in
calendar year 2004 to  allow  Provalis to initiate clinical trials suitable for
filing of the "home use" FDA marketing application in the USA.

The Group is currently considering  the  optimum  route for commercialising G5,
and is advanced stages of discussions with a number  of  parties  regarding the
commercialisation  of  G5. These discussions initially focused on the  diabetic
patient market where the  product  has  significant  market potential, but have
also highlighted that potential partners may require additional chronic disease
related  tests  such  as  glucose  on  the  product  as well as  enhanced  data
connectivity for the unit. Incorporation of these additional  features  on  the
product,  although  possibly delaying its introduction until the second half of
calendar  year 2004, will  give  the  patient,  doctor,  partner  and  Provalis
enhanced and longer term value.

To address  this  requirement, additional diagnostics tests are planned for the
G5 platform. The feasibility  of  the  G5  technology  to  conduct  a number of
additional  assays  using  a  wide  variety  of  diagnostic test methodologies,
including  turbidimetry,  enzymatic  and  immunological  types  of  diagnostics
assays, has now been demonstrated.

The selection of the final tests for development  will be made from an analysis
of  point  of  care  physician  needs,  potential  sales  volumes   and  likely
reimbursement  levels.  Consideration  will  also be given to the needs of  any
commercial partner who may require additional  tests to strengthen the point of
care diabetes management

                                      12

<PAGE>

offering with the product.  To meet these development needs the diagnostics R&D
effort on G5 will be expanded significantly in the year ahead.

The planning for the over the counter HbA1c system, Micro G, has been initiated
and a project  brief  developed  following a period of market research. Much of
the  technology  for Micro G will be  based  on  the  core  G5  technology  and
significant work will  begin  from early 2004 once the G5 product has completed
its final trial phase. As preparation  for  the  start of the Micro G programme
the Company is already in discussion with a number  of  research  institutes to
help prepare for the development programme.

As  at  30  June  2003, the average number of employees engaged in the  Group's
research and development  was  13 individuals, down from 17 for the year ending
30 June 2002 and 15 for the year ended 30 June 2001.

SALES BY BUSINESS SEGMENT AND GEOGRAPHICAL DESTINATION

The following tables set forth the  Group's turnover by business segment and by
geographical destination for the fiscal years 2001 to 2003.

<TABLE>
<CAPTION>
<S>                                       <C>               <C>                <C>
                                         2003              2002               2001
Turnover by business segment      {pound-sterling}'m {pound-sterling}'m {pound-sterling}'m

Continuing business activities:
- Pharmaceuticals                        10.9              8.2               6.2
- Medical Diagnostics                     3.1              0.9               1.3
                                     --------          -------           -------
                                         14.0              9.1               7.5
Discontinued activities (1)                 -              0.3               0.3
                                     --------          -------           -------
                                         14.0              9.4               7.8
                                     ========          =======           =======

</TABLE>
 (1)  Discontinued activities relate  to the research and development component
      of  the Therapeutics R&D business  which was stopped in the early part of
      fiscal year 2003.
<TABLE>
<CAPTION>
<S>                       <C>                <C>                <C>                <C>               <C>                <C>
                                          By origin                                            By destination
                         2003               2002               2001               2003               2002               2001
                  {pound-sterling}'m {pound-sterling}'m {pound-sterling}'m {pound-sterling}'m {pound-sterling}'m {pound-sterling}'m
Turnover by georgraphic
   segment
 United Kingdom          14.0                9.3                7.7               10.6                8.4                6.4
 Europe                     -                  -                  -                0.5                0.2                0.2
 USA                        -                  -                  -                2.8                0.6                0.8
 Rest of World              -                0.1                0.1                0.1                0.2                0.4
                      -------            -------            -------            -------            -------            -------
                         14.0                9.4                7.8               14.0                9.4                7.8
                      =======            =======            =======            =======            =======            =======

</TABLE>

CAPITAL EXPENDITURE

The Company incurred {pound-sterling}0.5 million  of capital expenditure in the
2003  fiscal year, {pound-sterling}0.8 million of capital  expenditure  in  the
2002 fiscal  year and {pound-sterling}0.5 million of capital expenditure in the
2001 fiscal year.  Capital  expenditure  during  the  2003  fiscal year related
primarily  to plant and equipment for the manufacture of Glycosal,  during  the
2002 fiscal  year  related  primarily to the manufacture of Glycosal (plant and
equipment and building fit out  costs)  and during the 2001 fiscal year related
primarily to plant and machinery for the  Medical Diagnostics division. Capital
expenditure being incurred in fiscal year 2004  relates primarily to production

                                      13

<PAGE>

plant and equipment in the UK for the Medical Diagnostics division and is being
financed out of available cash resources.

ACQUISITIONS AND DISPOSALS

There were no acquisitions or disposals during fiscal  year 2003. During fiscal
year 2002 the Group acquired the UK marketing licences and   trademarks  of the
Diclomax  range  of  products from Parke Davis for {pound-sterling}14.5 million
(together with a further  {pound-sterling}0.4  million  of  transaction costs).
This   consideration   is   payable  by  means  of  an  up  front  payment   of
{pound-sterling}1.9 million (paid  on  December  4,  2001) and 143 equal weekly
instalments  of  {pound-sterling}88,112  over  3 years. The  final  payment  is
expected  to  be made in November 2004, although the  quantum  of  each  weekly
payment will increase  if  sales  of  Diclomax  rise above an agreed threshold,
which  could  result in an earlier final repayment  date,  although  the  total
amount payable will remain {pound-sterling}14.5 million.

Also during fiscal  year  2002,  the  Group  disposed  of  a number of non-core
technologies  for  an  aggregate consideration of less than {pound-sterling}0.5
million. During fiscal year  2001,  Pharmaceutics  International Inc. exercised
the  right, pursuant to the option granted by the Group  in  October  2000,  to
acquire  two  of  the  Group's  non-core  drug delivery technologies. The Group
received payments related to the initial grant  of  the option and the exercise
of the option.

R&D expenditure on the Therapeutics R&D business was stopped early in the first
half  of the fiscal year 2003. However, Provalis retained  the  licencing  deal
with GlaxoSmithKline  on a number of these antigens as well as the intellectual
property on certain other  programmes  which will be maintained at minimal cost
whilst commercial partners are sought.

SEASONALITY

The Group's sales do not generally fluctuate due to seasonality.

RAW MATERIALS, COMPONENTS AND PACKAGING

Products are supplied to the Pharmaceuticals  business packaged ready for sale.
The suppliers of these products are made up of  the  entities with whom we have
distribution or supply agreements, the majority of which  are exclusive.  These
agreements have varied terms, the shortest being until the  end  of  2004  (but
which  is  renewable  for successive periods of 1 year) the longest being until
2007.  The  termination  provisions   of  these  agreements  generally  include
termination rights, following requisite  notice, upon breach by the other party
of its obligations, as well as upon the occurrence of certain insolvency events
of  the  other party.  The prices at which these  products  are  purchased  are
subject to  regular review, usually on an annual basis.  Some of these products
are sourced from sole providers.

Provalis has  agreed to vary its distribution agreement with Dr Falk Pharma for
the Falk range  of  products.  Provalis was due to distribute these products in
the UK until 2010 but has agreed  that  the  agreement  will  now  terminate in
December 2004. In return for this reduction in the distribution agreement term,
the   agreement   was  immediately  extended  to  include  Ireland  (which  had
established  sales  of   {pound-sterling}0.5m   per  year),  Provalis  received
{pound-sterling}1.5  million  in  February  2003 and  will  receive  a  further
{pound-sterling}1.5   million   in   January  2004  and   up   to   a   further
{pound-sterling}2.0 million in January 2005.

Within the Medical Diagnostics business, the Company's suppliers are made up of
providers of the components of, and packaging for, the Company's products (such
components including plastic parts, reagents and circuit boards, in the case of
more advanced products).  We arrange for  the  provision of such components and
packaging  through  short-  to medium-term agreements  which  include  standard
termination provisions related  to material breaches and insolvency events. The
prices at which these components  and  packaging  are  purchased are subject to
regular  review,  usually  on  an annual basis.  Some of these  components  and
packaging are sourced

                                      14
<PAGE>

from sole providers.



SALES AND MARKETING

Within  the pharmaceuticals business,  the  sales  force  now  consists  of  34
representatives  and  5  regional  sales  managers  within  the UK, and and one
country manager within the Republic of Ireland.  These parties  meet with local
general   practitioners,   or   doctors,   in  the  field,  and  with  hospital
representatives, and demonstrate the attributes  of  those  products  that  the
Company  distributes.   These  general practitioners, doctors and hospitals are
then able to place orders through  their respective National Healthcare System,
which  orders  are  ultimately  placed  on   the  Group.   Within  the  Medical
Diagnostics division, sales and marketing is effected  by the managing director
and  marketing director of the division, both of whom seek  out  and  establish
distribution    arrangements,   like   those   in   place   with   respect   to
Osteosal{reg-trade-mark} and Glycosal{reg-trade-mark}.

                                  COMPETITION

The pharmaceutical  and  medical  diagnostic industries are highly competitive.
Competition  involves,  among  other  things,   establishing,  maintaining  and
defending  intellectual  property  rights  and  establishing   and  maintaining
effective  product  marketing, distribution, price, performance, ease  of  use,
safety, physician acceptance  and  patient  compliance.  There  has  been  much
research  into  those  medical  areas concentrated on by the Group by companies
with  financial  and  technical  resources   and  manufacturing  and  marketing
capabilities substantially greater than those  of the Group.  In addition, many
of  the  Group's  competitors  have  greater  experience   than  the  Group  in
development activities and in obtaining regulatory approvals  and clearances to
manufacture  and market products.  The Group believes that competition  in  the
industry will continue to be intense.

The  Group's  competitors   include,   amongst  others,  major  pharmaceutical,
biotechnology and diagnostics companies  with  substantially  greater resources
than  those  of  the  Group.  There is no assurance that competitors  will  not
succeed in developing technologies  and  products  that  are  more effective or
economical than any of those being developed by the Group or which would render
its  technologies  and/or  products  obsolete  and/or  otherwise uncompetitive.
Although  the  Group  has  collaborative  arrangements  with several  of  these
companies,  such arrangements do not generally prevent the  collaborators  from
marketing competitive products or from collaborating with its competitors.

                       PATENTS AND INTELLECTUAL PROPERTY

The Group's success  in part will be related to the quality of its intellectual
property and the protection  and  use  of that property. In view of the cost of
obtaining and maintaining patents, the Group  has  adopted a policy under which
it  evaluates  both  the  commercial  and  scientific aspects  of  intellectual
property  before  any  patent application is filed.  A  similar  evaluation  is
undertaken before a decision  is taken to continue with applications previously
filed,  or to renew patents previously  granted.  In  addition,  patents  will,
unless there are commercial considerations to the contrary, only be applied for
or maintained in the principal pharmaceutical markets of North America, Europe,
Japan and China.

This policy  of selective territory applications should provide for appropriate
protection of the Group's intellectual property whilst conserving, as far as is
possible, the  Group's  available  funds. The implementation of this policy has
resulted in a significant reduction in the amount of money spent on the Group's
patent portfolio.

Implementation of the policy has also  resulted  in  the  identification  of  a
number  of  other  granted patents that will not be renewed by the Group on the
next renewal date.

                                      15

<PAGE>

In its patent applications,  it  is  the  Group's  policy  to use the mechanism
provided  by  the  Patent  Co-operation Treaty (the "PCT"), which  enables  the
prosecution of the early stages  of what will be a family of applications to be
centralised. In accordance with this  policy,  the Group first submits a patent
application in the United Kingdom, and the PCT then enables patent applications
for the same invention to then be filed up to a  year  later in other countries
where protection is sought, and the later applications are  effectively treated
as  if  they  were  filed  when the application was first filed in  the  United
Kingdom, provided that certain  formalities  are  complied with. In general, it
takes  between two and four years from the date of first  filing  of  a  patent
application under the PCT before patents are granted.

Brief details  of  the  key patents granted, and patent applications submitted,
relating to the main areas of the Group's operations are as follows:

Glycosal.  The Group has  submitted  3  patent  applications  under the PCT, in
respect  of  its  HaemaQuant  instrument  and  its  test  cartridge,  both  key
components  of  the Glycosal test. The first application was filed in  November
1997 and the others in June 1999. The first application has resulted in patents
being granted  which  cover  both the Glycosal test cartridge and instrument in
the US (October 2001), Western Europe (February 2003), New Zealand (March 2003)
and Australia (July 2003).

G5. The Group has submitted 2  patent applications under the PCT, in respect of
its G5 test cartridge. These applications  were submitted in September 2000 and
September 2001.

Osteosal.  The Group has licenced the patented CrossLaps{trademark} biochemical
marker utilised in Osteosal from Osteometer  SA (now known as Nordic Bioscience
A/S) ("Nordic"). The geographic scope of the licence  is exclusive for point of
care worldwide. In 1995, Ostex International, Inc. ("Ostex"), who licences NTx,
a  patented  competitive  biochemical  marker,  from  the  Washington  Research
Foundation,  commenced  proceedings  against  Nordic  and the Group  in  Europe
alleging that the CrossLaps{trademark} patent infringes  the  NTx patent. Ostex
subsequently withdrew the proceedings.

The  Group  understands  from  Nordic  that Ostex has commenced proceedings  in
respect of a second patent infringement  in  Seattle,  Washington claiming that
the  CrossLaps{trademark}  patent  infringes  the  NTx  patent.    We   further
understand  that  these proceedings have not yet been resolved.  The Group  has
not been joined as a party to the Seattle proceedings.

Ostex commenced proceedings  in  respect  of a third patent infringement in the
Hague. The Court found in Ostex's favour in  respect of the purification of the
sample and the size of a collagen fragment although  only for a very restricted
size  of fragment. This has not prevented the Group from  selling  the  product
anywhere  in the world other than the US where the Group has not, and does not,
market Osteosal.

The Group has submitted patent applications in the United Kingdom under the PCT
in respect of the blood and saliva collection devices and the one-step test kit
used in relation  to  Osteosal.  These  were  filed  on  various  dates from 13
November 1995.

Helisal.    Patents  have  been  granted  in  respect  of  this  one-step  test
apparatus,  used  in relation to the Group's Helisal range of tests, in the US,
Australia, New Zealand,  Singapore,  Taiwan and South Africa, all of which were
to expire in 2016. However, all of these  are  to  be abandoned at the earliest
opportunity.

Streptococcus  pneumoniae  - The Group has submitted five  patent  applications
under the PCT relating to these antigens, the first two submitted in July 1998,
the  others in March and December  1999  and  March  2001.  The  December  1999
application has been abandoned.

                                      16

<PAGE>

Haemophilus  influenzae  -  The  Group  has now been granted patents in the US,
Australia, New Zealand, Singapore, South  Africa and Taiwan. These patents will
expire in 2016. Applications are still pending  in  respect of other countries,
including the United Kingdom, western Europe, Canada and China.

Moraxella catarrhalis - The Group submitted four patent  applications under the
PCT relating to these antigens, the first submitted in May  1998,  two  in  May
2001  and  the  last  one  in  August 2001. The last three were merged into one
application, which has since been  abandoned.  The  May 1998 application has so
far resulted in patents being granted in South Africa  and Singapore in October
and December 2002 respectively.

Helicobacter pylori - The Group has submitted 3 patent applications  under  the
PCT  relating  to  these  antigens. The applications were submitted in February
1995, January 1997 and November  1998  respectively but are now to be abandoned
at the earliest opportunity.

Pseudomonas  antigen  -  The  Group has 2 patent  applications  under  the  PCT
relating to these antigens. The applications were submitted in January 1997 and
December 1999 respectively.

Macrulin{trademark}.  The Group has submitted patent applications in the United
Kingdom,  under  the PCT, in respect  of  formulations  which  allow  the  oral
delivery of insulin.  These  were  submitted  in the United Kingdom in December
1998, but have now been abandoned.

The sale of the Group's diagnostic and pharmaceutical products is dependent, to
a  large  degree, on the Group being able to sell  such  products  under  their
currently used  trademarks or brand names. Although a number of these names are
registered as trademarks  they  may  still be subject to a challenge by a third
party which may result in the Group, or its suppliers, being unable to use such
names.  If  the  Group  is unable to use the  trademark  or  brand  name  of  a
particular product, the sales of that product may be materially affected.

                             GOVERNMENT REGULATION

PRODUCT TESTING

The production and marketing  of the Group's products are subject to regulation
for quality, safety and efficacy  by  numerous  governmental authorities in the
UK,  Europe, the US and other countries.  The process  of  completing  clinical
testing  and  government  regulatory  approval  for  a  new clinical or medical
product takes a number of years and the expenditure of substantial resources.

No  new  clinical  or  medical  product  is permitted to be sold  in  developed
countries  without extensive data on its quality,  safety  and  efficacy  being
obtained, organised  and  submitted to governmental regulatory authorities, who
will  assess  the  data and advise  the  licencing  authority  whether  or  not
regulatory approval  should  be granted.  This process can take many years, and
incur significant costs.

                                      17

<PAGE>

EUROPE

Since  January 1998, the prime  licencing  system  in  the  European  Union  is
administered  by  the  EMEA  (European  Medicines  Evaluation  Agency) based in
London,  assisted by its professional assessment function, the CPMP  (Committee
on Proprietary  Medicinal Products).  For new chemical entities, excluding high
technology and biotechnology  products  (which  must  be  dealt  with under the
centralised  (Bio/High Tech) procedure set out below), a company can,  once  it
has received marketing  authorisation  in one Member State, apply for marketing
authorisation   in   other   Member  States  through   a   mutual   recognition
(decentralised) application.   The data requirements for European licencing are
discussed below in the section headed  "United Kingdom".  European licencing is
achieved by asking a second or subsequent member states to 'mutually recognise'
the marketing authorisation granted by the  first  member  state  (known as the
Reference  Member  State).  Special rules apply where parallel applications  to
other member states have been made, prior to the first member state approval.

It has been recognised  that  the cost of pharmaceutical research is reduced by
this European harmonisation, the  need for the unnecessary duplication of tests
being  eliminated.  This  fact  was  confirmed   at   the  two  Conferences  on
Harmonisation held in Brussels in 1991 and Orlando in 1993.  Recognition  of EU
guidelines by countries such as the US and Japan and acceptance of EU data  and
formatting  by  countries  such  as  Australia  and  Canada will further reduce
research and registration costs.

It is likely, therefore, that the new systems that are  based  on  the  current
systems are likely to reduce research costs rather than increase them. The only
area  where  the opportunity for registration may be reduced by the new systems
would be if a  project  was  targeted only at an individual country. Currently,
data requirements can be tailored  specifically  for  a country that may have a
specific need for a product for political, social or pricing  reasons. In these
circumstances, the country may accept a higher risk registration and reduce the
amount of supporting documentation required. This type of application is likely
to be phased out by the new systems and registration with limited  data  is not
likely  to  be  possible.  The  cost of this type of application will therefore
increase as it will need to meet EU standards.

On the basis of the foregoing, the  Group believes the overall financial impact
of  the  future  harmonisation  system  will   be  to  reduce  development  and
registration costs.

UNITED KINGDOM AND EUROPE

PHARMACEUTICAL PRODUCTS

Whilst the European system of licencing is now the  primary  system  throughout
the  European  Union, for local (one Territory) products, applicants may  still
submit applications  to  National  agencies.  In the UK, the Medicines Act 1968
(the "Medicines Act") provides for the  control  of  medicinal  products (which
will,  in  general, include most human medicines) and certain other  substances
and  articles  (e.g.,  certain  biological  substances)  through  a  system  of
licences,  certificates  or  specified  exemptions.   Under  the  comprehensive
licencing system, it is unlawful for the products concerned to be manufactured,
sold  or  supplied  in  or  imported  into  the  UK, or (in the case of certain
biological products or substances) exported from the  UK  except  in accordance
with the appropriate licences.  The licencing of human medicines is  handled by
the  Department  of  Health  through  the  Medicines  and Healthcare Regulatory
Agency,  taking  into account advice on quality, safety and  efficacy  received
from the appropriate committees established under the Medicines Act.

The administration  of  the  licencing system comes under the responsibility of
the Medicines and Healthcare Regulatory  Agency  and  it  is  to this unit that
applications for the various licences have to be submitted.  There  are several
types   of   licences   and   authorisations   including:    product  licences,
manufacturer's   licences,   wholesale   dealer's   licences,  clinical   trial
certificates,  clinical  trial exemptions and special import  exemptions.   The

                                      18

<PAGE>


licencing authority has the  power  to  revoke,  vary  or  suspend  licences or
certificates previously granted in certain circumstances.

The data required to obtain a product licence permitting the marketing of a new
product in the UK is now specified by European legislation and is identical  to
the data required to be submitted in any European Member State.  A company must
submit  data  to support the quality, safety and efficacy of the product to the
Medicines and Healthcare  Regulatory  Agency  who will then assess the data and
advise the Licencing Authority whether a product  licence  should  be  granted.
This means that a company has to perform an extensive range of studies or tests
in  the  areas  of  chemistry  and  pharmacy,  pharmacology and toxicology, and
clinical trials.  The initial part of this process  is to generate the required
pre-clinical data and then to apply to the licencing  authority for a "clinical
trial  exemption"  or  "clinical  trial  certificate" for approval  to  perform
clinical trials and for authority to sell  and  supply  or  procure the sale or
supply of medicinal products for the purposes of the trials.   There  is a time
limit  on  the  licencing authority for the review of clinical trial exemptions
(maximum 63 days)  but  there  is  no  such  limit for review of clinical trial
certificate applications.  No UK clinical trial  certificate or compliance with
a UK clinical trial exemption is required for clinical  trials that are carried
out wholly outside the UK. Such clinical trials will require  approvals  of the
relevant authorities in that country.

The data from the clinical trials, together with the pre-clinical data, is then
submitted  in  a  product  licence  application.   The  pre-clinical  study and
clinical  study  requirements  for a product licence application in the UK  are
very similar to those for a new  drug  application  in the US (see "US" below).
Product licence applications can take from as little as a few months to several
years for approval.  There is no time limit on the licencing  authority for the
review of a licence application.

In addition, the manufacturer of a product must hold a manufacturer's  licence.
The  manufacturer's  licence  authorises  the manufacture and assembly of broad
classes  of products consistent with the licence  holder's  possession  of  the
appropriate   facilities  -  premises,  equipment,  staff  and  expertise.  The
manufacturer's  licence  also  specifies  products  that  can  be manufactured.
Normally,  before  a  licence  is  granted,  an inspection of the manufacturing
premises  is  made by staff of the Medicines Inspectorate.   The  premises  are
subject  to  re-inspection  at  appropriate  intervals.   Compliance  with  the
principles of  good  manufacturing  practices  (GMP)  is  a pre-requisite for a
manufacturer's  licence.   The product licence holder and/or  manufacturer  may
also need to hold a wholesale dealer's licence.

Project and personal licences  under  the  Animals  (Scientific Procedures) Act
1986 must be obtained for research and experiments on  animals at all stages in
the research and development of human drugs.  The licencing  authority is under
no obligation to approve applications for licences.  Furthermore,  licences can
be modified or revoked at any time if there is due cause.

MEDICAL DIAGNOSTICS PRODUCTS

In  order  to  sell  Medical  Diagnostic products they must comply with the  EU
Directive 98/79/EC on in vitro  diagnostic  medical  devices (the "Directive").
(Capitalised terms used in this sub-section and not defined  elsewhere  in this
report  have  the meanings provided in the Directive). If they comply they  can
then be self-certified  by  being  CE marked. The Directive is currently in the
"transitional  stage"  and all products  must  comply  by  December  2003.  The
relevant products of the Company are all CE marked.

The requirements needed  in  order  to  comply  vary  according  to the type of
product. As the Company's products are for self-assessment, they have to comply
with  the  Essential  Requirements,  which  includes  specific requirements  on
design, manufacturing, microbial control, calibration,  labeling, risk analysis
and safety.  Provided the Company is able to satisfy itself  that the Essential
Requirements  are met, it is able to sell the product as soon as  the  relevant
authorised national  body has been advised.  In relation to the United Kingdom,
this body is the Medicines  and  Healthcare  Regulatory  Agency. The Company is
also  required  to demonstrate that it has a full Quality Assurance  system  in
place; this is evidenced by the Company's ISO9001 approval.

                                      19

<PAGE>

All products subject  to such self-assessment also require a Design examination
by a Notified Body. The  requirements  for this include test reports, including
results  of  studies  being carried out by  lay  persons  and  reports  on  the
suitability of the product for self-testing. The timescale for this examination
is approximately 1 month.

Trials carried out by the Company for European CE Marking purposes will also be
designed to ensure the licencing requirements in other countries are met as far
as is practicable.

UNITED STATES

Regulation by FDA

The production and marketing  of  the  Group's  products  and  its research and
development  activities  are  subject  to  regulation  by numerous governmental
authorities in the US.  Of particular importance, biological  products,  drugs,
medical  devices and diagnostic products are subject to rigorous review by  the
FDA.  The Food, Drug, and Cosmetic Act, the Public Health Service Act and other
federal and  state  statutes  and  regulations govern or influence the testing,
manufacture, safety, efficacy, potency,  labelling,  storage,  record  keeping,
approval,  advertising  and  promotion  of  such products.  Non-compliance with
applicable requirements can result in, among  other  actions,  fines, recall or
seizure  of  products,  refusal  of  the  government to approve product  and/or
licence applications or to allow the Group  to  enter  into  government  supply
contracts,  the  withdrawal  of  previously  approved applications and criminal
prosecution.

The Company will be required to seek FDA approval  prior to marketing in the US
any new medical diagnostic  product drugs and biologics under development.  The
testing and approval process requires  substantial time,  effort, and financial
resources, and we cannot be certain that any approvals for our products will be
granted in a timely manner.  In the US, medical devices are classified into one
of three classes on the basis of the controls deemed by the FDA to be necessary
to reasonably  ensure their safety and  effectiveness.  Class I devices in most
instances are subject to general controls, including labelling and adherence to
quality  systems   regulations,   or  QSRs,  which  are  device  specific  good
manufacturing  practices  regulations.  Class II devices are subject to general
controls and special  controls,  including  performance  standards,  pre-market
notification  and  post-market  surveillance.  Class III devices are subject to
most  of the  previously  identified  requirements  as  well  as to  pre-market
approval. Most diagnostic devices are regulated as Class I or Class II devices,
although certain diagnostic tests may be classified as Class III devices.

Before a new device can be introduced in the market, its manufacturer generally
must obtain marketing clearance through either a pre-market  notification under
Section 510(k) of the Federal Food, Drug and Cosmetic Act, or  approval  for  a
pre-market  approval  application,  or  PMA.   A  510(k) pre-market notice must
demonstrate that the device in question is substantially  equivalent to another
legally  marketed  device  that does not require pre-market approval.   FDA  is
supposed  to  complete  its review  of  a  510(k)  notice  within  90  days  of
submission, but it may request additional data, including clinical information,
thus increasing the time  that  will  be  necessary to review the notice.  Most
Class  I  devices  and  many  Class  II  devices are  exempt  from  the  510(k)
requirements.

If the device is not substantially equivalent  to  a  marketed device or if the
use  of  the 510(k) procedure is not otherwise appropriate  or  available,  the
manufacturer  must  file  a  PMA.  The PMA process is more complex, costly, and
time consuming than the 510(k) clearance procedure.  A PMA must be supported by
more detailed scientific evidence  than  a  510(k),  including clinical data to
demonstrate the safety and efficacy of the device.  Before  clinical trials may
begin,  a  manufacturer  must submit an Investigational Device Exemption  (IDE)
which must include, among other things, preclinical animal data, clinical trial
designs, and manufacturing information.  The FDA is required to review a PMA in
180 days, but it typically  requests additional

                                      20

<PAGE>

information  and may be required to refer the PMA to a FDA  advisory  committee
for review and  recommendation.  A PMA  application  can take several  years to
complete, and there can be no assurance that any submitted PMA application will
ultimately be approved.  Moreover,  even when  approved,  the FDA may limit the
indication  for which the  product  may be  marketed or to whom it may be sold.
Additionally,  there  can  be no  assurance  that  the  FDA  will  not  request
additional  information  or request  the  performance  of  additional  clinical
studies after the PMA is approved.

There is no assurance  that the FDA will act favourably or quickly in reviewing
submitted  applications,   and   significant   difficulties  or  costs  may  be
encountered  by the Group in its efforts to obtain  FDA  approvals  that  could
delay or preclude  the  Group  from marketing any products it may develop.  The
FDA may also require post-marketing  testing  and  surveillance  to monitor the
effects  of approved products or place conditions on any approvals  that  could
restrict the  commercial  applications of such products.  Product approvals may
be withdrawn if compliance  with  regulatory  standards  is not maintained.  In
addition, after approval of a product from the FDA is obtained,  further delays
may  be  encountered  before the product becomes commercially available.   With
respect  to  patented  products   or   technologies,   delays  imposed  by  the
governmental approval process may materially reduce the period during which the
Group will have the exclusive right to exploit them.

Continued compliance with all FDA requirements and conditions in an approved or
cleared   application,   including  those  concerning  product   specification,
manufacturing  process, validation,  labelling,  promotional  material,  record
keeping  and  reporting  requirements,  is  necessary  for  all  products.   In
addition, the Group's  facilities  will  be  inspected from time to time by the
FDA.  Failure to comply with any FDA requirement  could  lead  to  the need for
product  recall  or  other  FDA-initiated  actions,  which  could delay further
marketing until the products are brought into compliance.  Even  after approval
by the FDA, products may later exhibit adverse effects that could prevent their
widespread use or necessitate their withdrawal from the market.

In  the  US,  Congress  passed  the  Clinical Laboratory Improvement Amendments
(CLIA) Act in 1988, establishing quality  standards  for all laboratory testing
to ensure the accuracy and reliability of all laboratory  tests,  regardless of
where the test was performed. The CLIA regulations are based on the  complexity
of  the  test  method, and the more complex the test method, the more stringent
the requirements  are  for  the  laboratory  which  carries  out the test. Test
methods  are  assessed  by  the  FDA and the Centers for Medicare and  Medicaid
Services (CMS) and assigned one of  three  complexity  ratings,  namely, waived
test,  moderately  complex  test  and  highly  complex test. For a test  to  be
designated  as  waived  it  must be so simple and accurate  as  to  render  the
likelihood of obtaining an erroneous  result  as  negligible.  The  majority of
laboratories in the US are only licenced to carry out tests which are waived.

Medicare and Medicaid

The  Medicare  program and other federal programs which provide defined  health
benefits may be  an  indirect  source  of  revenue  for  the  Group's products.
Further, the Medicaid program, a joint federal and state program  that provides
defined  health  benefits  to  certain financially needy individuals, may  also
provide a source of revenue for  the  Group's  products.  There is no guarantee
that  currently  covered  products will continue to  be  reimbursed  under  the
Medicare  and Medicaid programs  or  that  products  that  would  otherwise  be
expected to receive coverage will receive coverage. In general, any restriction
on reimbursement,  coverage  or  eligibility  under  the  Medicare  or Medicaid
program  could adversely affect revenues to the Group for products provided  to
beneficiaries  of  such  programs. In addition, as other insurance programs and
third party payors may base  their  own  coverage  criteria  and  reimbursement
determinations on the Medicare and Medicaid programs, any restriction  on  that
reimbursement,  coverage  or eligibility under the Medicare or Medicaid program
could adversely affect revenues  for  the  Group's products provided to persons
covered under such other programs.

If the Group's products are covered by the Medicare  and Medicaid programs, the
Group will be subject to extensive federal and state regulation,  including but
not  limited  to  (i)  the  Medicare  and  Medicaid  fraud and abuse laws which
prohibit  the  offering  or  payment of any bribe, kickback,  rebate  or  other
remuneration in

                                      21
<PAGE>

return for the  referral or  recommendation  of patients for items and services
covered by federal health care programs; (ii) the Omnibus Budget Reconciliation
Act of 1993 (commonly known as "Stark II") which prohibits certain referrals of
federally  funded  patients by a physician  to an entity if the  physician or a
member of such  physician's  immediate  family has a  "financial  relationship"
(defined  broadly to include any type of compensation  arrangement or ownership
interest) with the entity; and (iii) the federal False Claims Act which imposes
civil and criminal  liability on  individuals  or entities that submit false or
fraudulent  claims for payment to the government.  A failure to comply with the
requirements  of such  provisions or their state law  equivalents  could have a
material adverse effect on the Group's business and results of operations.

PRICE REGULATION

In  the  UK,  prices  of prescription pharmaceuticals  (all  products  sold  by
Provalis Healthcare Limited)  are  controlled  by  reference to limits upon the
overall profitability, measured by the rate of return  on  capital employed, of
sales  of products supplied under the National Health Service.   The  permitted
rate  of  return  on  capital  employed  for  each  pharmaceutical  company  is
determined  through  negotiations  with  the  UK Department of Health under the
Pharmaceutical Price Regulation Scheme.  If a company's  actual  rate of return
exceeds the agreed rate, it is required to negotiate either a repayment of past
profits  which  the  Department  considers  to  be  excessive  or  future price
reductions.

In line with other companies supplying pharmaceutical products to the  National
Health  Service  in  the UK, the Group is subject to the Pharmaceutical Pricing
Regulatory Scheme under  which  prices  are  regulated  and reviewed every five
years. The latest review resulted in a price decrease of  4.5  percent  from  1
August  1999. The next review is scheduled to be implemented from October 2004,
but no proposals  have  yet  been made. If this review implements further price
reductions, the profitability  of  the  Group's pharmaceuticals business may be
adversely affected.

Governments may also influence the price  of  pharmaceutical  products  through
their control of national health care organisations which may bear a large part
of the cost of supply of such products to consumers.  In the US,  Australia and
Germany,   for  instance,  indirect  pressure  can  be  exerted  on  prices  by
government-funded or private medical care plans.

ENVIRONMENTAL REGULATION

Neither the  Group's  research  and  development  nor its current manufacturing
sites makes toxic or any other significant emissions  into  the atmosphere, nor
do  they  discharge  industrial  effluent requiring specialised treatment.  The
Group  is,  however,  subject  to  laws  and  regulations  governing  the  use,
manufacture, storage, handling and disposal of such materials and certain waste
products. Waste water from the Group's  sites are of sufficiently low hazard to
be  discharged  to  the  sewage system. The small  amount  of  hazardous  waste
produced in laboratories is  handled  by  qualified  staff  and  disposed of by
properly licenced waste-disposal contractors. The Group believes that the small
quantities  of  other  waste  it  generates  are dealt with in compliance  with
current statutory requirements and that all of  its  facilities  and  its waste
disposal procedures are in compliance with environmental law.

LEGAL PROCEEDINGS

The  Group  sought  compensation  from  Dimethaid  Research  Inc in relation to
Dimethaid's  decision  to  terminate  the  Distribution  Agreement under  which
Provalis  Healthcare  distributed  Pennsaid in the United Kingdom.  Arbitration
proceedings were commenced in November  2002,  and  the arbitration hearing was
held  during  October  2003. An award of {pound-sterling}1.2m  plus  a  further
{pound-sterling}0.4m in  costs  and  interest,  was  made in the Group's favour
during December 2003, but this has not yet been paid by  Dimethaid.  This award
has  not been recognised in these financial statements. The Group has not  been
involved  in any other legal or arbitration proceedings which

                                      22

<PAGE>

may have, or have had, a significant effect on the Group's financial  position,
nor are any such proceedings pending or threatened by or against the Group.

                         PROPERTY, PLANT AND EQUIPMENT

The  Company's  registered  office   is  located  at  Newtech  Square,  Deeside
Industrial  Park,  Deeside,  Flintshire,  CH5  2NT.   The  Company  and/or  its
subsidiary companies have entered  into leases in respect of the following main
premises:

1. DEESIDE                LABORATORY AND OFFICES FOR EACH DIVISION
   Address:               Newtech Square, Deeside Industrial Park,
                          Deeside, Flintshire, CH5 2NT
   Lease Commencement:    May 1995
   Term:                  12 years
   Current Annual Rent:   {pound-sterling}130,000
   Size:                   21,000 square feet
   Rent Review:           Every three years

2. DEESIDE                MEDICAL    DIAGNOSTIC    BUSINESS    WAREHOUSE    AND
                          MANUFACTURING FACILITY
   Address:               Unit 37 Deeside Industrial Park,
                          Deeside, Flintshire.
   Lease Commencement:    June 2001
   Term:                  10 years
   Current Annual Rent:   {pound-sterling}35,500
   Size:                  11,000 square feet
   Rent Review:           5 years

3. SANDYCROFT             PHARMACEUTICALS BUSINESS WAREHOUSE FACILITY
   Address:               Unit C, St Ives Way, Sandycroft, Flintshire.
   Term:                  5 years
   Current Annual Rent:   {pound-sterling}24,000
   Size:                  6,000 square feet
   Rent Review:           None

Properties  used in the Group's operations  are  considered  suitable  for  the
purpose for which  they  are  currently  used  and adequate to meet the Group's
current needs.

The Manufacturing capacity of the Medical Diagnostics  manufacturing  facility,
based   on   a   single   shift   working   pattern,   is   approximately  1.8m
Glycosal{reg-trade-mark} test cartridges per year. In the fiscal  year ended 30
June  2003, the utilisation of this capacity was around 65%. This capacity  can
be significantly  increased  by  the  adoption  of a two or three shift working
pattern, should demand require it.

                           ORGANISATIONAL STRUCTURE

The Company has a number of subsidiaries, the majority  of  which  are dormant.
The  Company's  material  subsidiaries,  and  the  Company's direct or indirect
interest therein, are listed below.


                                      23
<PAGE>


<TABLE>
<CAPTION>
    NAME       PLACE OF                             PRIMARY BUSINESS ACTIVITY                            CLASS OF  % OF SHARES HELD
             INCORPORATION                                                                                SHARES      BY COMPANY
<S>           <C>           <C>                                                                             <C>        <C>
Cortecs       Jersey       Holding company.                                                               Ordinary      100
Holdings Ltd  Channel
              Islands
Provalis UK   England      Holding company and holder of intellectual property; pharmaceutical licencing; Ordinary      100
Ltd                        pharmaceutical investment and research development.
Provalis      England      Research and development; manufacture and distribution; holder of intellectual Ordinary      100
Diagnostics                property.
Ltd
Provalis      England      Pharmaceutical distribution.                                                   Ordinary      100
Healthcare
Ltd
Cortecs       Australia    Holding company and holder of intellectual property.                           Ordinary      100
International
Pty Ltd
</TABLE>



ITEM 5 - OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The  following  is  a  discussion of the consolidated financial  condition  and
results of operations of  the  Group  for  the  fiscal years ended 30 June 2003
("Fiscal 2003"), 30 June 2002 ("Fiscal 2002") and 30 June 2001 ("Fiscal 2001"),
prepared  in  accordance  with  UK GAAP.  This discussion  should  be  read  in
conjunction with the Financial Statements  included elsewhere herein.   UK GAAP
differs  in certain respects from US GAAP.  One  principal  difference  results
from the treatment of share based remuneration.

                         CRITICAL ACCOUNTING POLICIES

To understand Provalis' financial statements, it is important to understand its
accounting  policies.  In preparing our financial statements in accordance with
accounting principles  generally  accepted in the United Kingdom and the United
States, management must make estimates and assumptions that impact the reported
amount of revenues, expenses, assets,  liabilities  and  related disclosures at
the  date  of the financial statements and during the reporting  period.   Such
judgements are  subjective  and  can  be complex.  Actual outcomes could differ
from those estimates.  The Group's critical accounting policies are as follows:

INCOME RECOGNITION

PRODUCT SALES

{circle}  Revenue from product  sales is recorded as turnover in our  financial
          statements  and valued at the invoiced  amount  (excluding  sales and
          value added taxes). Revenue is recognised on shipment of goods.

INCOME RECOGNITION CRITERIA FOR NON-PRODUCT SALES

{circle}  Royalties are recognised on a time accrual basis unless there remains
          uncertainty  over  their  collection,  in which case  recognition  is
          deferred until such  uncertainties  are removed which is typically on
          cash  receipt.

{circle}  Revenue under research and development reimbursement contracts, where
          there is no obligation  to repay such  amounts,  is recognised as the
          related costs are incurred and is recorded as turnover under UK GAAP.

{circle}  Income  associated with  performance  milestones is recognised  based
          upon the occurrence of the event that triggers the milestone payment,
          as defined in the respective agreement, and is recorded as turnover.

The Group has to consider carefully whether income  received in relation to the
final  three  bullet  points  above,  can be treated as earned  or  has  to  be
deferred.  Judgements can be difficult  under  both  UK  and  US GAAP.  This is
particularly  the  case  where  there is a multiple element arrangement  and/or
Provalis retains certain

                                      24

<PAGE>

obligations.  Under US GAAP  such  arrangements  are  accounted  for  under the
guidance  of SAB101 and may be  deferred.  Under UK GAAP,  which is our primary
GAAP, non-refundable licence fee revenue is recognised when earned and when the
Group has no future obligation  pursuant to the licence fee, in accordance with
the terms of the relevant  contract.  Contracts are evaluated  based upon their
terms  and  the  individual   elements  where  appropriate  are  accounted  for
separately.

INTANGIBLES
Acquisition of product distribution rights, technology  rights and brands which
are shown at cost less amortisation and provision is made  for  any impairment.
Costs  are amortised over the period in which future benefits are  expected  to
arise. The  Diclomax{reg-trade-mark}  product licence is being amortised over a
10 year period, which is its expected useful, economic life.

TAXATION
The Group has operations in tax jurisdictions  in  the  UK and Australia and is
subject to audit in these jurisdictions.

The  Group evaluates the need for a deferred tax asset valuation  allowance  by
assessing  whether it is more likely than not that it will realise its deferred
tax assets in  the  future.   The  assessment  of  whether  or  not a valuation
allowance  is  required  often  requires  significant  judgement including  the
forecast  of  future  taxable  income  and  the  evaluation  of   tax  planning
initiatives.  Adjustments to the deferred tax valuation allowance are  made  to
earnings in the period when such assessment is made.

                               GENERAL OVERVIEW
GENERAL

Provalis  had  a  strong  year in fiscal year 2003. Sales grew significantly to
{pound-sterling}14.0m  and  the   Group   operating   loss   was  reduced  from
{pound-sterling}5.4m to {pound-sterling}2.1m. Following the recognition  of  an
exceptional   profit   of   {pound-sterling}3.4m  from  the  variation  of  the
distribution agreement with Dr Falk Pharma, the Group declared a pre-tax profit
of  {pound-sterling}1.3m  -  a  first  for  the  Group  -  against  a  loss  of
{pound-sterling}5.2m in 2002.

The year saw a notable success in  the  USA  with  Cholestech  Corporation, our
point   of   care   partner   in   this   key   market,   beginning   to   sell
Glycosal{reg-trade-mark},  our  diabetes diagnostic product. Cholestech's sales
were kick started by immediate, but  "one  off",  sales  to Abbott Laboratories
which  were  then  followed by further good progress in the year.  The  Medical
Diagnostics business  had  sales  of  {pound-sterling}3.1m  as a result of this
sales progress and has now supplied over 7,100 instruments and  approaching two
million test cartridges since the product was introduced in 2000. The directors
believe  that, with Glycosal{reg-trade-mark}, Provalis has the leading  product
in the point  of  care  testing  of glycated haemoglobin ("HbA1c"). This market
continues to expand in the USA as  tests  that  would  have been carried out as
part of the $1bn laboratory market are beginning to be carried  out in the near
patient setting.

The Group's pharmaceutical sales business made good progress in the  year  with
sales  of  {pound-sterling}10.9m  and  a  major  advance  in  profitability  to
{pound-sterling}2.5m  (profit  on  ordinary  activities  before  tax).  Through
focused   promotion,   it   generated   sales  of  Diclomax{reg-trade-mark}  of
{pound-sterling}6.4m,  successfully initiated  its  business  in  Ireland  with
{pound-sterling}0.5m  sales,  launched  Rapolyte{reg-trade-mark}  onto  the  UK
market and completed a  variation  of its distribution arrangement with Dr Falk
Pharma  for  its  products  for  the UK market.  The  directors  recognise  the
importance of replacing the income stream from the Dr Falk Pharma products, and
discussions are on-going with third parties which have products available.

Encouraging progress has been made  in  product development, with the continued
investment  in G5, the Group's next generation,  patient  focused,  diagnostics
technology. The diabetes HbA1c product using this platform is now coming to the
end of its development  and is being readied for clinical trials to support the
Group's application to register  the  product  for prescription home use status
with the FDA in the USA.

                                      25
<PAGE>


The cash position and future cash flows of the Group will benefit from a number
of factors; the margin from the growing pharmaceutical sales business, stopping
R&D  expenditure within the Therapeutic R&D business,  the  availability  of  a
{pound-sterling}0.95m  grant  from  the  Welsh  Development  Agency  to support
capital   expenditure  related  to  manufacturing  expansion,  the  anticipated
payment of  {pound-sterling}1.6m from Dimethaid following the arbitration award
and the variation of the Dr Falk Pharma distribution agreement yielding up to a
further {pound-sterling}3.5m  cash  by  January  2005.  Importantly, the weekly
instalments  payable  to  Pfizer  for  Diclomax{reg-trade-mark}  will  stop  in
November  2004,  resulting  in  substantial   cash  flows  being  generated  by
Diclomax{reg-trade-mark} thereafter.

PRODUCTS AND MARKETS

Provalis'   two   key   products   are   the  diabetes  management   diagnostic
Glycosal{reg-trade-mark}      and      the      anti-arthritis       medication
Diclomax{reg-trade-mark}.

GLYCOSAL{reg-trade-mark}

The major advance for Glycosal{reg-trade-mark} this fiscal year has been in the
USA  -  the  world's largest diagnostics market - where sales of the instrument
and the pull-through of the test cartridges have been pleasing. The product has
been particularly well received by the smaller doctors' practices.

In   fiscal   year    2003    the    Group    supplied    over    one   million
Glycosal{reg-trade-mark}  test  cartridges for sale and shipped twice  as  many
instruments as in the previous two years combined. Our distributors report that
200 to 300 instruments continue to  be  placed  with  doctors  in  the USA each
month. Provalis estimated its installed base of machines stood at over 6,000 by
September  2003.  The Group believes that Glycosal{reg-trade-mark} is  now  the
leading CLIA waived doctors' office diabetes HbA1c product in the USA market.

Sales of Glycosal{reg-trade-mark} continue to advance in the other markets into
which it is sold by  our  two  key  distributors, Cholestech Corporation, which
sells the product as the "GDX", and Bio-Rad Laboratories, which sells it as the
"MicroMat II".

The number of countries in which Glycosal{reg-trade-mark}  is sold continues to
increase.  In  particular,  Cholestech  has  recently launched the  product  in
Canada, another high value market, where over 2.2m people are estimated to have
the disease, and in June the first shipment was  made to Bio-Rad to service the
Japanese market  which is the second largest HbA1c  market  in  the  world.  In
addition,  Bio-Rad  introduced  the  product into India in October 2003, and is
establishing    a    number    of    direct   marketing    opportunities    for
Glycosal{reg-trade-mark} in developing markets.

Glycosal{reg-trade-mark} also received a number of technical acknowledgments in
the  year.  As  well  as  receiving  the  enhanced   National   Glycohemoglobin
Standardisation      Programme     Certification     ("NGSP")     registration,
Glycosal{reg-trade-mark}   scored  highly  in  the  independent  assessment  of
diabetes HbA1c tests assessed by the Medical Devices Agency in the UK.

One  disappointment  in  the  year   has   been   the   level   of   sales   of
Glycosal{reg-trade-mark}  to  the UK NHS under Provalis' direct selling scheme.
The Group has suspended its direct selling efforts in the UK and is now seeking
to  progress the product in the  UK  through  initiatives  with  pharmaceutical
companies,  as  exemplified  by  our  relationship  with  Takeda,  or  via sub-
distributors.  Our  view  on  this  may  be  revised  in 2004/5 once the recent
diabetes initiative with the UK NHS is fully underway and the new GP's contract
rewarding surgeries for patient diabetes monitoring becomes fully implemented.

Nevertheless,   Glycosal{reg-trade-mark}  is  well  placed  to   continue   its
penetration of the multi-billion pound diabetes market.

                                      26


<PAGE>

DICLOMAX{reg-trade-mark}

Diclomax{reg-trade-mark}  was  acquired  from Pfizer in late 2001 and this year
represented the first full year of sales by  Provalis  in  the  UK. It has been
promoted   heavily   by   the  representative  sales  force  and  with  focused
advertising.   Sales  were  {pound-sterling}6.4m,   slightly   below   internal
expectations, despite  an  increased  share of the declining NSAID market which
continues to be affected by the new COX2  inhibitors.  A  minor effect on sales
was also seen with a period of reduced purchases by wholesalers  during January
and   February   2003   to   enable   them   to   reduce  their  stockholdings.
Diclomax{reg-trade-mark}   remains   the  most  important   product   for   the
Pharmaceutical division. In the year ahead  the  Group expects to see growth of
Diclomax{reg-trade-mark} sales through both its launch  in  Ireland  and  other
marketing initiatives.

OTHER PHARMACEUTICAL PRODUCTS

Good sales progress was made with the other core products in the Pharmaceutical
range,  Calceos{reg-trade-mark},  Clotam  Rapid{reg-trade-mark} and products in
the Dr Falk Pharma range (Ursofalk{reg-trade-mark},  Budenofalk{reg-trade-mark}
and Salofalk{reg-trade-mark}), and all showed growth in the year.

PHARMACEUTICAL SALES IN THE REPUBLIC OF IRELAND

Sales  of  the  Dr  Falk  Pharma  range  in  the  Republic  of Ireland  started
promisingly  with  a  contribution of {pound-sterling}0.5m in the  period  from
February to June 2003.  Inevitably some of the sales were pipeline stocking but
we expect the Irish market  to  be  a  driver  of growth for the Pharmaceutical
division in the year ahead. Diclomax{reg-trade-mark} and Salofalk granules were
launched during November 2003.

THE DR FALK PHARMA DEAL

Provalis has agreed to vary its distribution agreement  with Dr Falk Pharma for
the Falk range of products. Provalis was due to distribute  these  products  in
the  UK  until  2010  but the agreement will now terminate in December 2004. In
return for this reduction in the distribution agreement term, the agreement was
immediately  extended to  include  Ireland  (which  had  established  sales  of
{pound-sterling}0.5m  per  year),  Provalis  received  {pound-sterling}1.5m  in
February  2003 and will receive up to a further {pound-sterling}3.5m in cash by
January 2005.

LICENCING AND PRODUCT ACQUISITION

During May  the  Pharmaceuticals  business  launched  Rapolyte{reg-trade-mark},
which is a competitively priced fruit flavoured oral rehydration  therapy, onto
the UK market. Further products in the Falk range have been introduced into the
UK   market   over   the   past   few   months,   and   these,   together  with
Diclomax{reg-trade-mark},  were  launched  in  Ireland  during  November  2003.
Additional  products  for  this  profitable  Pharmaceutical business are  being
identified.

PARTNER AND DISTRIBUTOR MANAGEMENT

Provalis recognises that the success of its Medical  Diagnostics  business,  at
least  in the short term, must come from the success of its selected commercial
partners  or distributors. During the fiscal year it managed a significant, but
"one off" order for Glycosal{reg-trade-mark} with Abbott Laboratories, cemented
its relationship  with Bio-Rad Laboratories Inc. and Cholestech Corporation for
Glycosal{reg-trade-mark}  and  continued its supply of Osteosal{reg-trade-mark}
to Aventis.

The Group prides itself on its partnering arrangements and believes it has much
to  offer  to  ensure  mutual commercial  success  in  the  long  term.  Strong
intellectual property, timely  product  supply,  high  and  consistent  product
quality,   regulatory  compliance  and  the  flexibility  to  allow  commercial
opportunities  to  be  pursued,  are  considered  important for success and are
attributes  that Provalis is dedicated to achieve. In  return,  Provalis

                                      27

<PAGE>

seeks rapid  market  feedback on product  performance  from  customers,  and an
understanding of the key elements of the sales process in its target markets to
guide future product development and commercialisation.

MANUFACTURING AND PRODUCT SUPPLY

2003 has been a year in which Provalis  has  built a strong product supply base
for its Medical Diagnostics business.

The Glycosal{reg-trade-mark} test cartridge manufacturing  facility  at Deeside
is  now  fully  on stream, and in April 2003 became fully automated. This  gave
manufacturing  efficiencies,   lower   cycle  times  per  cartridge  and  lower
production costs ready for a greater volume  of  supply  in 2004. Manufacturing
output in 2003 was four times that of 2002 and over one million test cartridges
were produced in the year.

The Far East supply of Glycosal{reg-trade-mark} instruments  began  in the year
providing  both  margin  and  capacity  improvement  for  the  Group.  This was
important  for  both  supplying  the  key  US market and meeting the order from
Abbott Laboratories.

Provalis has built its product supply network  with  its  distributors  and  in
April  2003  opened a new Healthcare and Diagnostics logistics centre some five
miles from Deeside. This centre has allowed the expansion of the recent Deeside
manufacturing  area  to  begin  to  make  space  for  the  G5 cartridge filling
equipment  that  will  be  installed  in 2004. Provalis anticipates  that  over
{pound-sterling}1m will be committed to G5 manufacturing equipment in 2004 with
support  coming  from the grant given to  Provalis  by  the  Welsh  Development
Agency.

                              RECENT DEVELOPMENTS

Group  sales  in  the  first  quarter  of  fiscal  year  2004  were  just  over
{pound-sterling}3.0m, lower than both expectations and the {pound-sterling}3.5m
in the same period  last year.  However, it should be remembered that the first
quarter   last   year   was    dominated    by    the    one-off    sales    of
Glycosal{reg-trade-mark} instruments and test cartridges to Abbott Laboratories
of  approximately  {pound-sterling}0.4m.   Although  our  cash position remains
healthy,  with  cash  above  expectations,  we  do anticipate that  this  sales
shortfall will affect the result for the first half of the year.

Sales by the pharmaceutical business were marginally  below  those  of the same
quarter  last  year.   The  remainder  of  the  year should, however, see sales
growth, helped by the launches during November of Diclomax{reg-trade-mark} onto
the Irish market and a new, high strength, version  of Salofalk{reg-trade-mark}
onto both the UK and Irish markets.

We are in discussions with several companies concerning the acquisition, or in-
licencing, of new products for the pharmaceutical business,  some  of which are
at  an advanced stage.  We are also pursuing innovative co-marketing  deals  on
products,  particularly  for  the  Ireland  market.  We  hope  to  make further
announcements on these initiatives later in the year.

Medical    Diagnostics'    sales   to   its   distributors,   particularly   of
Glycosal{reg-trade-mark} cartridges,  were  slower  in  July  and  August,  and
although they picked up again in September, overall sales for the first quarter
are  below  expectations  and  those  of last year. This is not that surprising
given the sales last year to Abbott.

Our distributors have reported to us that  they  themselves  have  had stronger
Glycosal{reg-trade-mark}  sales  in  the July to September period than  in  the
previous 3 months, with approximately  1,000 instruments placed in the US alone
and  important repeat orders for test cartridges.   Much  of  this  demand  was
supplied from stock held within the extended supply chain which is comprised of
our distributors  and  their  multiple  sub-distributors.  Outside  the US, our
distributors  have  also  informed  us  that Glycosal{reg-trade-mark} has  been
introduced into India during October and  is  continuing its roll-out in Japan,
both significant diabetes markets as well as having been launched in Canada.


                                      28

<PAGE>


                               OPERATING RESULTS

FISCAL 2003 COMPARED TO FISCAL 2002

Turnover  increased  {pound-sterling}4.6m from {pound-sterling}9.4m  in  Fiscal
2002 to {pound-sterling}14.0m  in  Fiscal  2003.  The  increase  was  primarily
attributable to higher sales by the Pharmaceutical division, principally due to
a full year's sales of Diclomax{reg-trade-mark}, compared to seven months  from
acquisition  in  Fiscal  2002,  and  the  growth of {pound-sterling}2.2m in the
Diagnostics division from the sales of Glycosal{reg-trade-mark}.

Gross profit increased {pound-sterling}2.4m from {pound-sterling}5.3m in Fiscal
2002 to {pound-sterling}7.7m in Fiscal 2003  as  a  result  of  the  impact  of
increased sales.

Selling    and   distribution   costs   decreased   {pound-sterling}0.1m   from
{pound-sterling}3.2m in Fiscal 2002 to {pound-sterling}3.1m in Fiscal 2003 as a
result of tight expenditure controls.

Administration  costs increased by {pound-sterling}0.4m to {pound-sterling}3.2m
in Fiscal 2003, due  in  part  to  the costs of establishing the pharmaceutical
sales business in Ireland and inflation.

Amortisation  costs  of  {pound-sterling}1.5m   were  charged  in  Fiscal  2003
({pound-sterling}1.4m in Fiscal 2002).  The costs  in Fiscal 2002 represented a
write  off  of  the  investment  in  Pennsaid  ({pound-sterling}0.5m)  and  the
amortisation    since    acquisition    in    December   2001    of    Diclomax
({pound-sterling}0.9m).  The  costs  in Fiscal 2003  represent  a  full  year's
amortisation cost of Diclomax.  The cost  of  acquisition  of Diclomax has been
capitalised, and is being written off over ten years.

The  Group's  expenditure  on research and development during Fiscal  2003  was
approximately {pound-sterling}2.0m,  down  from  {pound-sterling}3.3m in Fiscal
2002  following  the  decision  to  stop  investment in  the  Therapeutics  R&D
business.

As a result of the foregoing, the operating  loss  reduced {pound-sterling}3.3m
from  {pound-sterling}5.4m  in  Fiscal 2002 to {pound-sterling}2.1m  in  Fiscal
2003.

The profit on the variation of the  distribution agreement is the fixed element
of the cash receivable from the variation of the distribution agreement with Dr
Falk   Pharma.    {pound-sterling}1.5m   was   received   in   February   2003,
{pound-sterling}1.5m  is due to be received  in  January  2004  and  a  further
{pound-sterling}0.4m in  January 2005.  Up to a further {pound-sterling}1.6m is
expected to be received in  January  2005, the exact amount being contingent on
the level of sales of Falk products in calendar year 2004.

Net interest income was unchanged at {pound-sterling}0.2m.

As  a result of the foregoing, the net  profit  for  Fiscal  2003  amounted  to
{pound-sterling}1.3m  compared  with  a loss of {pound-sterling}4.8m for Fiscal
2002.

FISCAL 2002 COMPARED TO FISCAL 2001

Turnover increased {pound-sterling}1.6m  from  {pound-sterling}7.8m  in  Fiscal
2001  to  {pound-sterling}9.4m  in  Fiscal  2002.  The  increase  was primarily
attributable to higher volumes of sales by the Healthcare division, principally
of  the  newly acquired product, Diclomax{reg-trade-mark}, in the seven  months
since acquisition.

Gross profit increased {pound-sterling}2.2m from {pound-sterling}3.1m in Fiscal
2001 to {pound-sterling}5.3m  in  Fiscal  2002  as a result of the impact since
acquisition of Diclomax{reg-trade-mark}.

                                      29


<PAGE>
Selling   and   distribution   costs   increased   {pound-sterling}0.6m    from
{pound-sterling}2.6m in Fiscal 2001 to {pound-sterling}3.2m in Fiscal 2001 as a
result of greater marketing activity and expansion of the sales force.

Administration  costs increased by {pound-sterling}0.4m to {pound-sterling}2.8m
in Fiscal 2002, mainly  as  a  result  of  not having the exceptional credit of
{pound-sterling}0.8m recorded in Fiscal 2001, which related to costs associated
with the departure of a former director which were written back.

Amortisation costs of {pound-sterling}1.4m were  charged in Fiscal 2002 (nil in
Fiscal  2001).   This  represented a write off of the  investment  in  Pennsaid
({pound-sterling}0.5m) and  the amortisation since acquisition in December 2001
of Diclomax ({pound-sterling}0.9m).   The  cost  of acquisition of Diclomax has
been capitalised, and is being written off over ten years.

The  Group's expenditure on research and development  during  the  fiscal  year
ended  30  June 2002 was approximately {pound-sterling}3.3m, unchanged from the
prior fiscal year.

As a result of the foregoing, the operating loss increased {pound-sterling}0.2m
from {pound-sterling}5.2m  in  Fiscal  2001  to  {pound-sterling}5.4m in Fiscal
2002.

Net interest income decreased {pound-sterling}0.3m from {pound-sterling}0.5m in
Fiscal  2001  to  {pound-sterling}0.2m  in  Fiscal 2002.  Interest  income  has
decreased as a result of reduced interest rates and lower cash balances.

As  a  result  of  the  foregoing, the net loss for  Fiscal  2002  amounted  to
{pound-sterling}4.8m compared with {pound-sterling}4.4m for Fiscal 2001.

SUBSEQUENT EVENT The Group's UK financial  statements for the year ended 30 June
2003 were  approved and issued on the 1st  September  2003. In December 2003 the
Inland Revenue  rejected a claim for Research and Development tax credits in the
Medical  Diagnostics  business.  The group is  strongly  contesting  the  Inland
Revenue's decision.  Cumulatively, the Group has recognised {pound-sterling}0.4m
in  respect  of the  Research  and  Development  tax  credits  for  the  Medical
Diagnostics business. However if the Group's appeals are unsuccessful,  the cash
received to date of  {pound-sterling}0.3m  in respect of these credits will have
to be repaid.

At the same time the Inland  Revenue  accepted  the claim for the  Research  and
Development  tax  credits  for  the  Therapeutics   business  at  an  amount  of
{pound-sterling}0.1m  in  excess of the  credits  previously  recognised  in the
accounts.

The effect of the Inland  Revenue's  decisions  to date on the  accounts for the
year   ended  30  June  2004  will  be  an   increase   in  the  tax  charge  of
{pound-sterling}0.3m. As the event occurred subsequent to the issuance of the UK
financial  statements  for the year  ended 30 June 2003 it is not  reflected  in
those financial statements.

                        LIQUIDITY AND CAPITAL RESOURCES

The Group's sources of liquidity  are  (i) unrestricted cash reserves (ii) cash
flow from operations and (iii) possible  future  equity  and  debt  financings.
Over  the  past  three  fiscal  years,  the  Group has also generated cash from
disposals of non-core businesses and a variation  to  a distribution agreement;
it  does  not, however, anticipate further disposals or similar  variations  to
agreements in the near term to the degree undertaken over the last three years,
although smaller disposals of non-core assets may be undertaken, and certain of
the Therapeutic R & D programmes have been offered for sale.

Net   cash  outflow   from   operating   activities   for   Fiscal   2003   was
{pound-sterling}0.7m  as  compared  to  {pound-sterling}3.7m in Fiscal 2002 due
principally to a {pound-sterling}3.3m decrease  in  operating loss offset by in
an  adverse  working  capital  movement.   Net  cash  inflow  from  returns  on
investments  and  servicing  of  finance was unchanged at {pound-sterling}0.2m.
Capital expenditures during Fiscal 2003 were {pound-sterling}0.5m compared with
{pound-sterling}0.8m in Fiscal 2002.   Capital  expenditures during Fiscal 2003
were primarily for plant and machinery for the Medical  Diagnostics  business .
In  Fiscal 2003 there was a spending of {pound-sterling}4.6m on the acquisition
of intangible  assets,  compared  with  {pound-sterling}3.9m in Fiscal 2002. In
Fiscal 2003 {pound-sterling}1.5m was received  following  the  variation  of  a
distribution  agreement  with  Dr  Falk Pharma (nil in Fiscal 2002).  In Fiscal
2002, the Company raised a net {pound-sterling}10.1m  from  the  new  issue  of
96,000,000  shares  at 11.25p per share. The Group continues to pursue positive
cash  flows from its two  operating  businesses,  Pharmaceuticals  and  Medical
Diagnostics,  to  fund  the  expanded  R&D  effort  of  the Medical Diagnostics
business to advance new and current product programmes.

In  the Group's opinion, its working capital is sufficient  for  the  Company's
present requirements.

The Group had an unsecured loan, the balance outstanding at June 30, 2002 being
{pound-sterling}0.1m. This loan bore a rate of interest at 9% per annum and was
repaid on August 13, 2002.

In addition,  at  June  30,  2003,  the Group had deferred acquisition costs of
{pound-sterling}6.4m owing to Parke Davis  in  respect  of  the  acquisition of
Diclomax,  of  which  {pound-sterling}1.8m  is due after June 30, 2004.   These
deferred  acquisition

                                      30

<PAGE>

costs are payable by weekly  instalments  until  November 2004. As security for
these  payments,  Parke  Davis had a  debenture  over all of the  assets of the
Company and has a debenture  over all of the assets  (excluding the book debts)
of Provalis Healthcare  Limited.  The security offered by the Company lapsed on
December 3, 2002,  but the Company  continues to  guarantee  the payment of the
deferred acquisition costs by Provalis Healthcare Limited. The security offered
by Provalis Healthcare Limited remains in place until all deferred  acquisition
costs have been paid.

No other borrowings were incurred  during,  nor  since,  Fiscal  Year 2003. The
Group has no committed borrowing facilities in place.

The Group had unprovided capital commitments of {pound-sterling}0.1m as at June
30, 2003, largely in respect of equipment for the Medical Diagnostics business.
It anticipates paying for these from its own cash resources.

The  Group's  current  strategy  is  designed  to  both  improve the commercial
viability of the Group by focusing its operational businesses  on core products
and  technologies,  as  well  as  to  reduce the Group's cash burn. It  is  the
intention of the Group that cash generated  by  the Pharmaceuticals and Medical
Diagnostics  businesses  will  fund  the  Group's  research   and   development
activities  in the medium to long term. The Group's future working capital  and
capital requirements  may,  however,  vary  significantly  from those currently
anticipated.  Those requirements will depend, inter alia, on  the rate at which
operating  losses  are  incurred; the rate of net cash utilisation  within  the
Group and, hence, the Group's  possible  need  for  additional  capital  in the
short,  medium  and/or  long  term; the success of the Group's distribution and
other commercial agreements with  third  parties; the execution of development,
licencing,  research,  manufacturing and other  collaboration  agreements  with
third parties; the success  of the Group's continuing research and development,
strategies and activities; uncertainties  related  to  future trial results and
the associated regulatory process; the viability of the Group's products, which
are  at various stages of development; the generation of  sufficient  operating
cash flow  by  the Group's pharmaceutical and medical diagnostics businesses to
finance the ongoing  development  of  these  businesses  as well as the Group's
research  and  development activities; the risks of technological  obsolescence
and risks associated  with the Group's highly competitive industry; the Group's
dependence on suppliers  of  products  and key product components; restrictions
placed on the Group within the existing pharmaceutical pricing environment; the
impact of future competition and other laws, regulations and policies; the need
to  obtain regulatory approvals for the Group's  products  and  the  timing  of
required  regulatory approvals; availability and level of reimbursement for the
Group's products  from  government  health administration authorities and other
third party payors, under Medicare, Medicaid and other similar regulations; the
risk of product liability and policy  limits  of  product  liability insurance;
potential liability for human clinical trials; the ability of  the Group and/or
its licensors to obtain patent protection for products in Europe,  the  US  and
other  countries  and to otherwise protect its intellectual property; the share
price of publicly quoted  companies  in the Group's sector, which can be highly
volatile;  compliance  with  laws,  regulations   or   policies   relating   to
environmental  protection,  disposal  of  hazardous  substances  and health and
safety  at  work;  the  Group's  dependence  on  key personnel and the quality,
judgement and strategic decisions of management and  other  personnel;  general
business and economic conditions; and other factors referenced herein, many  of
which  are  beyond  the  Group's  control  and  may cause the Group's available
capital resources to be used more quickly than expected.


MATERIAL COMMITMENTS

The following table shows amounts committed to as at 30 June, 2003.

<TABLE>
<CAPTION>

<S>                          <C>                 <C>                 <C>                 <C>
                               {lesser} 1 year          1-2 years          2-5 years  {greater} 5 years
                            {pound-sterling}'m {pound-sterling}'m {pound-sterling}'m {pound-sterling}'m
Lease payments                     0.1                0.1                0.1                 0.1

                                      31


<PAGE>

Capital commitments                0.1                 -                  -                  -
Intangible asset commitments       4.6                1.8                 -                  -
                                 _______            _______            _______            _______
                                   4.8                1.9                0.1                0.1
                                 _______            _______            _______            _______
</TABLE>

FOREIGN EXCHANGE

The Group's operations are primarily in the UK.   Foreign currency transactions
are recorded in Pounds Sterling using either the rate of exchange prevailing at
the  date  of  the transaction or, when foreign exchange  contracts  have  been
entered into, the  contract  rates.  At the fiscal year end, amounts receivable
and  payable  by  the Group in foreign  currency  are  translated  into  Pounds
Sterling at the exchange  rates  prevailing  at  that  date.   The  accounts of
foreign  subsidiaries  are  translated  into  Pounds  Sterling on the following
basis: balance sheet items are translated at closing rates  and profit and loss
account  items  are translated at the average rate during the relevant  period.
Translation gains and losses relating to self sustaining subsidiaries are taken
to the foreign currency  translation reserve in shareholders' equity.  Exchange
differences in the consolidated  financial  accounts arising on the translation
of the Group's net investment in foreign subsidiaries are recorded as movements
in the profit and loss account reserve.

The  UK  is  regarded as a historically low inflation  jurisdiction,  therefore
inflation generally  is not considered to have a material impact on the Group's
results.

EUROPEAN ECONOMIC AND MONETARY UNION

European Economic and  Monetary  Union began on 1 January 1999 in eleven member
states of the European Union (the  "EU").   Each  of these participating member
states  replaced  its  old  currency  with  a  single  currency  (the  "Euro"),
irrevocably  fixed its exchange rate and transferred authority  for  conducting
its national monetary policy to a European Central Bank.  The UK government has
announced that  it  does  not  intend  to  participate in European Economic and
Monetary  Union until a later date, if at all.   Accordingly,  Pounds  Sterling
remains unaffected  by  the  introduction  of  the Euro.  As the Group conducts
almost all of its operations in the UK, it will  continue  to record and report
business transactions in Pounds Sterling.

UK companies will, however, remain exposed to any additional exchange rate risk
which results from the introduction of the Euro.  Although the  majority of its
revenues and expenses are denominated in Pounds Sterling, with some trade in US
dollars  and  Euros, the Group has entered into forward purchases of  Euros  to
hedge against exchange rate risk in respect of purchases for the pharmaceutical
business.

The Group continues  to  review its accounting and management systems to ensure
that  they are Euro compatible  and  that  it  may  accommodate  suppliers  and
customers with pan-European operations.  Based on the review to date, the Group
believes  that  the  costs  associated  with  ensuring  flexibility to transact
business  in  Euros will not have a material adverse effect  on  its  financial
condition or results of operations.

If the UK should  eventually decide to participate in the European Economic and
Monetary  Union, the  Group  may  be  required  to  invest  in  accounting  and
management systems with additional flexibility, including duplicate accounting.
It is possible  that  achieving  this  flexibility  may  result  in significant
additional cost to the Group.

NEW US AND UK ACCOUNTING STANDARDS

New UK Accounting Standards

There are no new UK accounting standards

                                      32

<PAGE>

New US Accounting Standards

SFAS 146

In  June 2002, the FASB issued Statement of Financial Accounting Standards  No.
146 "Accounting  for  Costs Associated with Exit or Disposal Activities".  SFAS
No. 146 supersedes Emerging  Issues  Task Force No. 94-3 "Liability Recognition
for Certain Employee Termination Benefits  and  Other Costs to Exit an Activity
(Including Certain Costs Incurred in a Restructuring.   SFAS  No.146 eliminates
the  provisions  of  EITF  94-3 that required a liability to be recognized  for
certain exit or disposal activities  at the date an entity committed to an exit
plan. SFAS No. 146 requires a liability  for  costs  associated with an exit or
disposal activity to be recognized when the liability is incurred. SFAS No. 146
is effective for exit or disposal activities that are  initiated after December
31, 2002. The adoption of SFAS 146 has not had a material impact on our results
of operations or financial position.

SFAS No. 148

In  December  2002  the FASB issued SFAS No. 148  "Accounting  for  Stock-Based
Compensation-Transition and Disclosure-an amendment of FASB Statement No. 123".
SFAS No. 148 amends SFAS  No.  123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition  for  a  voluntary change to the fair
value  based  method  of accounting for stock-based employee  compensation.  In
addition, SFAS No. 123  amends  the disclosure requirements of Statement 123 to
require prominent disclosures in  both  annual and interim financial statements
about the method of accounting for stock-based  employee  compensation  and the
effect of the method used on reported results.

SFAS No. 148 permits two additional transition methods for entities that  adopt
the preferable method of accounting for stock-based employee compensation. Both
of  those methods avoid the ramp-up effect arising from prospective application
of the fair value based method. In addition, to address concerns raised by some
constituents  about  the  lack  of  comparability caused by multiple transition
methods, this Statement does not permit  the  use of the original Statement 123
prospective method of transition for changes to  the  fair  value  based method
made  in fiscal years beginning after December 15, 2003.  In the absence  of  a
single  accounting  method  for stock-based employee compensation, SFAS No. 148
requires disclosure of comparable  information  for all companies regardless of
whether, when, or how an entity adopts the preferable,  fair value based method
of accounting.



                                      33


<PAGE>


SFAS No. 149

In April 2003 the FASB issued SFAS No. 149  "Amendment of  FASB  Statement  No.
133" on Derivative Instruments and Hedging Activities". SFAS No. 149 amends and
clarifies  financial  accounting  and  reporting  for  derivative  instruments,
including  certain derivative instruments embedded in other contracts  and  for
hedging activities  under  SFAS  No.133, "Accounting for Derivative instruments
and Hedging Activities".  The Statement  is  generally  effective for contracts
entered or modified after June 30, 2003 and is not expected  to have a material
impact on our financial position or results of operations.

SFAS No.150

On May 15, 2003, the FASB issued SFAS No.150 "Accounting for Certain  Financial
Instruments with Characteristics of Both Liabilities and Equity" which requires
issuers  to  classify  as  liabilities  (or assets in some circumstances) three
classes of freestanding financial instruments  that  embody  obligations of the
issuer.  The Statement is generally effective for instruments  entered  into or
modified after May 31, 2003 and is otherwise effective at the beginning of  the
first interim period beginning after June 15, 2003.   The Company is evaluating
the impact on our financial position or results of operations.

EITF 00-21

  In November 2002, the Emerging Issues Task Force issued its consensus on EITF
00-21,  Revenue  Arrangements  with  Multiple Deliverables ("EITF 00-21") on an
approach  to determine whether an entity  should  divide  an  arrangement  with
multiple deliverables into separate units of accounting. According to the EITF,
in an arrangement  with  multiple deliverables, the delivered item(s) should be
considered a separate unit  of  accounting if all of the following criteria are
met: (1) the delivered item(s) has value to the customer on a standalone basis,
(2)  there  is  objective and reliable  evidence  of  the  fair  value  of  the
undelivered item(s),  and  (3)  if  the arrangement includes a general right of
return,  delivery  or  performance of the  undelivered  item(s)  is  considered
probable and substantially  in the control of the vendor. If all the conditions
above are met and there is objective  and  reliable  evidence of fair value for
all units of accounting in an arrangement, the arrangement consideration should
be allocated to the separate units of accounting based  on  their relative fair
values.  The  guidance  in  this  Issue  is  effective for revenue arrangements
entered into in fiscal periods beginning after  15  June  2003. The Company has
not  yet  completed  an analysis of EITF 00-21 and the related  impact  on  its
shareholders' equity or results.

                           RESEARCH AND DEVELOPMENT

The Group's expenditure  on  research  and  development during the fiscal years
ended  30  June  2003,  2002,  and  2001 was approximately  {pound-sterling}2.0
million,   {pound-sterling}3.3   million    and   {pound-sterling}3.3   million
respectively.  As at 30 June 2003, the average  number  of employees engaged in
the Group's research and development was 13 individuals,  down  from 17 for the
year  ending  30  June 2002 and 15 for the year ended 30 June 2001.   As  noted
elsewhere in this report,  given  the  still significant costs required to fund
the  evaluation  of  mainstream  vaccine candidates  through  clinical  trials,
significant expenditure on the R&D  associated  with  the  Group's  therapeutic
vaccine products was stopped early in the first half of fiscal year 2003.

                               TREND INFORMATION

For  information  on  trends  in  future operations and capital resources,  see
"General  Overview",  "Results  of  Operations"   and  "Liquidity  and  Capital
Resources" above.

                                      34
<PAGE>


                        OFF BALANCE SHEET ARRANGEMENTS

The Group has no off balance sheet arrangements as defined by SEC rules.

ITEM 6 - DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

                        DIRECTORS AND SENIOR MANAGEMENT


The Articles of Association of the Company provide that there shall be not less
than  three nor more than twelve Directors.  As at the  date  of  this  filing,
there were five Directors of the Company.  These are:

Mr Frank Harding           Non-Executive Chairman
Dr Philip Gould            Chief Executive Officer
Mr Peter Bream             Finance Director (appointed July 1st 2003)
Ms Christine Soden         Non-Executive Director
Dr David Bloxham           Non-Executive Director

Mr Neil Kirkby, the previous finance director, resigned on April 4th 2003 to
pursue other interests.

See "-  Board  Practices  -  Regular  Re-election of Directors" below regarding
terms of the Directors.
As at the date of this filing, there were  three  additional  members of senior
management of the Company. These are:

Mr Mark Keeling            Managing Director of the Pharmaceutical business
Mr John Curtis             Managing Director of the Medical Diagnostics
                           business
Mr Lee Greenbury           Company Secretary of the Company

Details  of the current Directors and senior management of the Company  are  as
follows:

MR FRANK HARDING

NON-EXECUTIVE CHAIRMAN AGED 66
Frank Harding  was  appointed  as  a  non-executive  director of the Company in
November 1998 and became Chairman in November 1999. He  is  also  non-executive
Chairman  of  KLM UK Holdings Limited and a director of Sitka Health  Fund  VCT
plc. Mr Harding  is  a Chartered Accountant who was a partner in KPMG from 1967
to 1996 and who from 1997 to 2000 was President of the International Federation
of Accountants.

DR PHILIP GOULD

CHIEF EXECUTIVE OFFICER AGED 50

Phil Gould joined the  Group  in  January  1998  as  Director  of  Research and
Development and became Chief Executive Officer in January 1999. He is  also the
non-executive  Chairman  of  Lectus  Therapeutics  Limited.   Prior  to joining
Provalis,  he  was  Head  of  New Product Introduction at GlaxoWellcome. Before
GlaxoWellcome, Dr Gould worked  at  a number of other pharmaceutical companies,
including Reckitt & Colman Pharmaceuticals, Pfizer Central Research and Lederle
Laboratories. Dr Gould became a Fellow  of  the  Royal  Society of Chemistry in
1990. He has a BSc (Hons) in Chemistry and a PhD in Physical Chemistry from the
University  of Hull and has published widely on drug delivery  systems.  He  is
also an Honourary  Professor  of  Health  Sciences  at  Liverpool  John  Moores
University.  Dr  Gould  is  also  the  inventor of four patented pharmaceutical
systems.



                                      35


<PAGE>



MR PETER BREAM

FINANCE DIRECTOR AGED 36

Peter Bream joined the Group in July 2003  as  Finance  Director from API Group
plc,  a  specialised  packaging group, where he was Finance  Director  for  the
Group's largest division. Following a degree in Engineering and Management from
Cambridge  University,  he   trained  with  Coopers  &  Lybrand  Deloitte  (now
PricewaterhouseCoopers) spending significant time in management consultancy and
on corporate finance projects. After qualification as a Chartered Accountant in
1991,  he  joined  Esso  UK,  undertaking   financial   accounting,  management
accounting and strategic planning roles before joining Gestetner  Group  plc as
Group Accountant and subsequently API Group plc.

MS CHRISTINE SODEN

NON-EXECUTIVE DIRECTOR AGED 46

Christine Soden was appointed as a non-executive director of the Company and as
Chairman  of  the  Audit Committee in March 2000. Ms Soden, who currently holds
the position of Chief  Financial  Officer of Oxagen Ltd, was previously Finance
Director of Chiroscience Group plc  and,  following  its  merger  with Celltech
Group plc, Chief Financial Officer of Celltech Chiroscience plc. Ms  Soden, who
qualified  as a Chartered Accountant in 1981, has extensive experience  in  the
pharmaceutical   industry   in   finance,  business  development  and  investor
relations.

DR DAVID BLOXHAM

NON-EXECUTIVE DIRECTOR AGED 56

David Bloxham was appointed as a non-executive  director  of the Company in May
2000.  Dr  Bloxham  is  the  Chief Executive Officer of Evolutec  Ltd  and  was
previously Chief Executive of  Cobra  Therapeutics  Limited, now a wholly owned
subsidiary of ML Laboratories plc. Dr Bloxham has formerly  held  positions  of
Research and Development Director and Chief Operating Officer of Celltech Group
plc.  Dr Bloxham obtained a degree in Biochemistry in 1971 at the University of
Southampton, and has held a number of senior industrial positions.

MR LEE GREENBURY

COMPANY SECRETARY AGED 40

Lee Greenbury joined the Company as Group Legal Counsel in July 1998. He became
Company  Secretary  in  November  1998,  and  has  subsequently  taken  on  the
additional  role of Director of Corporate Affairs. Mr Greenbury joined Provalis
from The Boots  Company plc where he was Commercial Legal Adviser. Mr Greenbury
qualified as a Solicitor in 1989.

MR JOHN CURTIS

MANAGING DIRECTOR, PROVALIS DIAGNOSTICS AGED 52

John Curtis joined  the  Group in October 1996 as Managing Director of Provalis
Diagnostics Limited. Between  1979  and 1996 Mr Curtis was Managing Director of
Wilj International Limited, before which  he  was Product Director for Wellcome
Diagnostics  from  1976  to 1979. He has founded and  co-founded  a  number  of
companies

                                      36


<PAGE>

in the  pharmaceutical and diagnostics  sectors including Clinical  Innovations
Limited,  Meduser  Systems Limited and Anagen plc. Mr Curtis is the inventor of
several novel systems in medical  diagnostics,  including closed system genetic
probe analysis,  decontamination  of dispensing  systems,  computer  control of
multiple  precision  movement mechanics and measurement of ultra-low amounts of
light derived from chemi-luminescent reactions.

MR MARK KEELING

MANAGING DIRECTOR, PROVALIS HEALTHCARE AGED 43

Mark  Keeling  joined  the  Group  in April 1993 as General Manager of Provalis
Healthcare Limited and he was promoted  to Managing Director in September 1999.
Mr Keeling has a BSc in Pharmacology from  the  University of Aberdeen and is a
member of the Pharmaceutical Marketing Society. Before  joining  the  Group  Mr
Keeling was Marketing Manager for Kent Pharmaceuticals. He has also worked at a
number    of    pharmaceutical    companies   including   Evans-Kerfoot,   Berk
Pharmaceuticals and Rorer Healthcare.

                                 COMPENSATION

Details of the emoluments and aggregate  remuneration  of directors and members
of senior management for Fiscal 2003 are as follows:

EMOLUMENTS OF DIRECTORS AND MEMBERS OF SENIOR MANAGEMENT

<TABLE>
<CAPTION>
                    Salaries/                                            2003            2002            2003            2002
<S>           <C>              <C>              <C>              <C>              <C>              <C>              <C>
                         Fees           Bonus        Benefits           TOTAL           Total         PENSION          Pension
             {pound-sterling} {pound-sterling} {pound-sterling} {pound-sterling} {pound-sterling} {pound-sterling} {pound-sterling}

CURRENT
EXECUTIVE
Dr P Gould            210,000          31,500          13,323         254,823         223,033          25,200          22,800
CURRENT  NON-
EXECUTIVE
Mr F Harding           50,000               -               -          50,000          50,000               -               -
Ms C Soden            26,000*               -               -          26,000          26,000               -               -
Dr D Bloxham         23,500**               -               -          23,500          21,000               -               -
CURRENT
SENIOR
MANAGEMENT
Mr J Curtis           126,000          22,700          12,685         161,385         141,590          15,120          14,400
Mr M Keeeling          91,000          13,700          12,313         117,013         111,298          10,920          10,440
Mr L                   92,500          13,900          11,837         118,237         106,818          11,100          10,020
Greenbury
FORMER
EXECUTIVE
Mr N Kirkby
(resigned              88,020          10,500           8,312         106,893         121,115          10,562          11,400
04.04.03)
FORMER   NON-
EXECUTIVE
Dr D Earl                   -               -               -               -           8,750               -               -
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL                 707,020          92,300          58,470         857,790         809,604          72,902          69,060
-----------------------------------------------------------------------------------------------------------------------------------
Money                       -               -               -          72,902          69,060
purchase
pension
contributions
AGGREGATE
REMUNERATION          707,020          92,300          58,470         930,692         878,664
(INCLUDING
MEMBERS OF
SENIOR
MANAGEMENT
---------------------------------------------------------------------------------------------
</TABLE>

                                      37

<PAGE>

*     Includes {pound-sterling}5,000 per annum in respect of her Chairmanship
      of the Audit Committee.
**    Includes {pound-sterling}2,500 ({pound-sterling}5,000 per annum) for six
      months in respect of his Chairmanship of the Remuneration Committee.

Each executive  director  of  the Company participates in the Group's executive
bonus scheme.  Under this scheme, the director may receive a bonus of up to 45%
of his annual salary in fiscal  year  2004,  rising  to 50% in each fiscal year
thereafter,  dependent  on  the  achievement of objectives  determined  by  the
Company's Remuneration Committee.  Executive  directors  are  also  eligible to
participate in the Group's Long Term Incentive Plan 2003, which was adopted  by
the  Company  at  its Annual General Meeting held on October 23 2003. Following
the adoption of this  plan, no executive director or senior manager is entitled
to participate in the Group's share option scheme save on joining the Group.

On October 15 2002 Dr.  Gould  received  a  grant  of  an  option  to  purchase
1,532,846 Ordinary Shares at an exercise price of {pound-sterling}0.0685, which
option  will expire on October 14, 2012; on October 15 2002 Mr. Kirkby received
a grant of  an  option to purchase 839,416 Ordinary Shares at an exercise price
of {pound-sterling}0.0685,  which  option  expired  on  April  4th 2003 when Mr
Kirkby  ceased  employment with the Company; and on October 14, 2003  Mr  Bream
received a grant  of  an  option  to  purchase  250,000  ordinary  shares at an
exercise  price of {pound-sterling}0.117, which options will expire on  October
13, 2013.

During the  last fiscal year, the Group did not make any payments, set aside or
accrual in respect  of pension benefits for its directors and members of senior
management, other than the {pound-sterling}72,902 set out in the table above.

                                BOARD PRACTICES

DIRECTORS' SERVICE CONTRACTS AND REMUNERATION

All senior executives  of  the  Company  have  service  contracts.  None of the
service  contracts  is  for  a  fixed term. All of these service contracts  are
terminable by the Company or by the executive on giving the specified period of
notice. In each such contract, the  Company reserves the right to terminate the
employment without notice and to make  a  payment  of  salary  in  lieu of such
notice.  No  such  contract  contains  any  provision quantifying the level  of
compensation payable to an executive for loss of office. Details of the service
contracts currently in place for directors are as follows:


(a) Dr Philip Gould was appointed a director  on  30 November 1998. His service
    contract  is  with Provalis UK Limited and specifies  a  notice  period  of
    twelve months on  either  side.  His  annual salary with effect from 1 July
    2003 is {pound-sterling}218,400 and he is entitled to pension contributions
    of 12% of his annual salary into a money  purchase scheme, the provision of
    a motor car or allowance, private healthcare,  permanent  health  and  life
    insurance.  In  addition,  he  may  also  be  entitled,  depending  on  the
    achievement of corporate and individual objectives which will be set by the
    Company's  Remuneration  Committee,  to  bonus  payments  under the Group's
    discretionary  bonus  scheme  up to a maximum of 45% of his salary  in  the
    financial year ending 30 June 2004, and up to a maximum of 50% in each year
    thereafter (see Item 6 - Board Practices - Performance related bonus scheme
    and long term incentive plan for details). As a director, Dr Gould has been
    entitled to participate in the  Provalis  plc  1997  Employee  Share Option
    Scheme, the Provalis plc Savings-Related Share Option Scheme 2001  and  the
    Provalis  plc  Enterprise Management Incentive Scheme (which was introduced
    during the fiscal year). Details of the options granted to Dr Gould, and of
    the performance  conditions relating to each, are set out under "Directors,
    Senior Management  and  Employees  -  Share  Ownership".  Dr  Gould  is now
    entitled  to participate in  the Long Term Incentive Plan in place of these
    earlier schemes.

                                      38

<PAGE>


(b) Mr Peter Bream  was  appointed  a  director  on  1  July  2003. His service
    contract is with Provalis UK Limited and specifies a notice  period  of six
    months  on  either side. His annual salary with effect from 1 July 2003  is
    {pound-sterling}105,000  and he is entitled to pension contributions of 12%
    of his annual salary into a money purchase scheme, the provision of a motor
    car or allowance, private  healthcare, permanent health and life insurance.
    In addition, he may also be  entitled,  depending  on  the  achievement  of
    corporate  and  individual  objectives  which  will be set by the Company's
    Remuneration Committee, to bonus payments under  the  Group's discretionary
    bonus  scheme  up to a maximum of 45% of his salary in the  financial  year
    ending 30 June 2004,  and  up  to  a maximum of 50% in each year thereafter
    (see Item 6 - Board Practices - Performance  related  bonus scheme and long
    term incentive plan for details). As a director, Mr Bream has been entitled
    to participate in the Provalis plc 1997 Employee Share  Option  Scheme, the
    Provalis plc Savings-Related Share Option Scheme 2001, and the Provalis plc
    Enterprise  Management Incentive Scheme. Details of the options granted  to
    Mr Bream, and  of  the performance conditions relating to each, are set out
    under "Directors, Senior  Management  and  Employees - Share Ownership". Mr
    Bream is now entitled to participate in the  Long  Term  Incentive  Plan in
    place of these earlier schemes.




(c) The  Chairman  and  other  non-executive  directors  do  not  have  service
    agreements.  However,  each  has  been  appointed  pursuant  to  letters of
    appointments dated 11  November 1998 in respect of Mr Frank Harding,  5 May
    2000  in  respect  of  Ms  Christine Soden and 12 May 2000 in respect of Dr
    David  Bloxham.  Mr  Harding,  as   Chairman   of   the  Company,  is  paid
    {pound-sterling}50,000  per annum. Ms Soden and Dr Bloxham  are  each  paid
    {pound-sterling}21,000 per annum in respect of their directorship, together
    with an additional {pound-sterling}5,000  per  annum  in  respect  of their
    Chairmanship   of   the   Audit   Committee   and   Remuneration  Committee
    respectively. No non-executive director receives any  other  benefits.  The
    appointment of each non-executive director can be terminated by one month's
    notice  on  either  side.  No  letter of appointment contains any provision
    quantifying any compensatory payment on loss of office.

STATEMENT OF REMUNERATION POLICY

The remuneration policy is set by the  Board and is described below. Individual
remuneration packages are determined by  the  Remuneration Committee within the
framework  of  this  policy.  Dr David Bloxham (Chairman  of  the  Remuneration
Committee), Ms Christine Soden  and Mr Frank Harding are the current members of
the  Remuneration  Committee.  Throughout   the   year,   the  members  of  the
Remuneration Committee have all been non-executive directors of the Company.

The Remuneration Committee is responsible for setting the remuneration  of  all
executive    directors   and   senior   executives   earning   in   excess   of
{pound-sterling}75,000   per  annum.  It  investigates  and  takes  account  of
remuneration paid to the directors  and senior executives of other companies of
a similar size and comparable industry  sector  in  the  UK,  and  the relative
performance  of such companies, to ensure that the levels of remuneration  paid
by  the  Group are  appropriate.  The  Remuneration  Committee  has  access  to
independent  advice  where  it  considers  it appropriate. During the year such
advice was received from Halliwell Consulting.  The  appointment  of  Halliwell
Consulting was made by the Remuneration Committee.

The main objective of the Remuneration Committee is to ensure that the  Company
pays total compensation packages to its directors and senior executives that:

{circle}  are competitive within its sector;

{circle}  enable the Company to attract and retain high calibre staff; and


                                      39
<PAGE>


{circle}  provide an  incentive  to achieve  long term growth of the Company as
          reflected in improved returns to shareholders.

In  collaboration  with   Halliwell   Consulting,  the  Remuneration  Committee
undertook  a  review  of  the  total compensation  packages  of  21  comparator
companies in the healthcare sector  and  came  to  the  conclusion  that  basic
salaries   were  competitive  but  that  performance  related  pay  and  equity
participation   were   relatively   low.   Therefore,   in  considering  future
remuneration policy, the Committee aims to develop a system  that maintains the
relative levels of basic salary and increases the level of performance  related
pay  and  equity  participation for directors and senior executives as detailed
below.

BASIC SALARIES

Directors and senior  executives  should receive basic salaries that are within
the median level of compensation in  the  comparator group, taking into account
their job description, level of performance and experience.

PERFORMANCE RELATED BONUS SCHEME AND LONG TERM INCENTIVE PLAN

The Remuneration Committee has introduced a  performance  related  bonus scheme
linked  to  a  long  term  incentive  plan having effect from 1 July 2003.  The
objective behind the introduction of this  scheme is to increase directors' and
senior  executives'  shareholding  in the Company  so  that  the  interests  of
shareholders and employees are better aligned. Under this scheme:

{circle}  all  directors  and selected  senior  executives  will be entitled to
          receive a performance related bonus of up to 50% of basic salary (45%
          in the financial year 2003-2004).  The criteria for the bonus payment
          will be set annually by the Remuneration  Committee and will be based
          on  quantitative   parameters   linked  to  the  Group's  budget  and
          qualitative  parameters relating to the strategic  development of the
          business;

{circle}  each  executive  receiving  such a performance  related bonus will be
          required to use a  pre-determined  percentage  of any after tax bonus
          payment to purchase shares in the Company on the open market; and

{circle}  the Company will provide a long term  incentive  linked to this share
          purchase under which each executive  could receive  further shares in
          the Company if:

          o    the executive  remains  employed by the Group for at least three
               years;

          o    the  executive  retains  beneficial   ownership  of  all  shares
               purchased by him using the bonus  payment  until the  additional
               shares are transferred to him; and

          o    the  Company's  share  price   increases  by  a   pre-determined
               percentage during the three year period.

It   is   intended  that  there  will  initially  be  five  senior   executives
participating in the proposed scheme. Thereafter, the scheme will be offered to
some executives  outside  this senior level, although their potential levels of
bonus payments will be lower.  The  maximum  number  of participants, given the
Company's current size, should be no more than ten.

It  is  expected that during the period of operation of  this  proposed  scheme
there will  be  no  further  grants  of  share  options  to directors or senior
executives under the Provalis 1997 Employee Share Option Scheme  other  than to
new employees.

This  scheme  was  approved by the Company's shareholders at the Annual General
Meeting of the Company held in October 2003.



                                      40


<PAGE>



SHARE INCENTIVE PLAN

It is ultimately intended  to  introduce  a  Share  Incentive  Plan, which will
replace  the  Provalis  plc  Savings-Related  Share  Option  Scheme  2001,   to
incentivise  those  employees  who  are not eligible to participate in the Long
Term Incentive Scheme. The details of this plan are still under consideration.

DISCRETIONARY BONUS SCHEME

The  Group  operates  a  discretionary bonus  scheme  linked  to  meeting  both
corporate  and  individual  objectives   under   the  general  control  of  the
Remuneration  Committee. These objectives are determined  by  the  Remuneration
Committee at the  commencement of each financial year, with the amount of bonus
payable being determined  following  the  end of that financial year based upon
performance against these objectives.

In  the  last  financial  year,  each executive  director  was  entitled  to  a
discretionary bonus of up to 30% of basic salary. The Committee had established
an individual set of quantitative  and qualitative objectives for each director
at  the  start  of  the year based on Group  sales,  cash  management,  EBITDA,
obtaining grant support,  investor  relations,  the  variation of the agreement
with  Dr  Falk Pharma and the cessation of significant expenditure  within  the
Therapeutics   R&D   business.   The   Remuneration   Committee   decided  that
discretionary  bonuses  of  {pound-sterling}31,500  and  {pound-sterling}10,500
should be paid to Dr Gould and Mr Kirkby respectively, based upon the extent to
which  each  of these objectives had been met. In the case of  Mr  Kirkby,  his
payment was reduced pro-rata to his length of service during the year.

EXISTING SHARE OPTION SCHEMES

The Company has operated the Provalis plc 1997 Employee Share Option Scheme and
the Provalis plc  Enterprise  Management  Incentive  Scheme to provide a longer
term incentive for directors and senior executives, as  well as other employees
of the Company. The number of options granted in the year  to  directors of the
Company  under  this  scheme  was determined by dividing 50% of the  director's
annual salary by the exercise price  of the options granted.  Now that the Long
Term Incentive Plan has been approved  by  shareholders,  no  further grants of
options to directors or senior executives will be made under this scheme.

The  exercise of all options granted under these schemes on or after  16  April
2000 is  subject  to  the  achievement  of  performance  conditions  which were
determined by the Remuneration Committee but there are no performance  criteria
applicable  to  grants made before that date. These performance conditions  are
detailed under "Directors,  Senior Management and Employees - Board Practices -
Share Ownership", and were considered  appropriate  and demanding indicators of
the performance and growth of the Company.

The  Company  has also operated the Provalis plc Savings-Related  Share  Option
Scheme 2001 in which all employees of the Company employed for one year or more
are entitled to  participate.  In  common with most other schemes of this type,
the  exercise  of  options  granted  under  this  scheme  are  not  subject  to
performance conditions. This scheme is  intended  to  be  replaced by the Share
Incentive Plan referred to above.

The remuneration of the non-executive directors is determined by the Board as a
whole,  based  on  outside  advice  and  review of current practices  in  other
companies.

CORPORATE GOVERNANCE

In June 1998 the Hampel Committee and the  London  Stock Exchange published the
Combined  Code  on  Corporate Governance. This combines  the  Cadbury  Code  on
Corporate Governance,  the  Greenbury  Code  on

                                      41

<PAGE>

Directors'  Remuneration and the requirements  arising from the findings of the
Hampel Committee. The Company has been reviewing the proposed new Combined Code
on Corporate  Governance which when adopted will implement certain of the Higgs
and Smith proposals.  The Company will report on its' intentions in relation to
compliance with this Code in its next Annual Report.

STATEMENT OF COMPLIANCE WITH THE CODE OF BEST PRACTICE

The Board believes that the Company complies with the Provisions of the Code of
Best Practice set out in section 1 of the Combined  Code.  Code Provision D.3.1
requires  the  members  of  the Audit Committee to be named in the  report  and
accounts. Ms Christine Soden  (Chairman  of  the  Audit  Committee),  Dr  David
Bloxham  and  Mr  Frank Harding are the current members of the Audit Committee.
All three have experience  of  Audit  Committee activities in other groups, and
both Christine Soden and Frank Harding  are Chartered Accountants. At all times
during the year, the Audit Committee, in  compliance with Code provision D.3.1,
was  comprised of three non-executive directors,  all  of  whom  attended  each
meeting of the Audit Committee held during the year.

STATEMENT ABOUT APPLYING THE PRINCIPLES OF GOOD GOVERNANCE

The Board  has  applied  principle  D.2  of the Combined Code by establishing a
continuous process for identifying, evaluating  and  managing  the  significant
risks the Group faces. The Board regularly reviews the process, which  has been
in place from the start of the year to the date of approval of this Report  and
which  is  in  accordance  with Internal Control: Guidance for Directors on the
Combined Code published in September 1999.

The Board's monitoring covers  all  controls,  including financial, operational
and compliance controls and risk management. The  Board  has  also  performed a
specific  assessment  for the purpose of this Report. This assessment considers
all significant aspects  of  internal control arising during the period covered
by the Report.

NON-EXECUTIVE DIRECTORS

The  Company currently has three  non-executive  directors,  all  of  whom  are
independent. The Company has named Ms Christine Soden as its senior independent
director.

DIVISION OF RESPONSIBILITIES BETWEEN CHAIRMAN AND CHIEF EXECUTIVE OFFICER

The Board  has  divided  the responsibilities for running the Board and running
the  Company's  business between  the  non-executive  Chairman  and  the  Chief
Executive Officer respectively.

BOARD BALANCE

The Company's commitment  to achieving a balance of executive and non-executive
directors remains. There are  currently  three  non-executive directors and two
executive directors.

TIMELINESS AND QUALITY OF BOARD INFORMATION

The Board has sought to ensure that directors are  properly  briefed  on issues
arising at Board meetings. Board papers are completed and are distributed  well
in  advance  of  meetings.  The Board considers the adequacy of the information
provided before making decisions and adjourns meetings or defers decisions when
concerns exist about the information available to them. The Board has adopted a
formal schedule of matters specifically reserved for decision by the Board.

                                      42

<PAGE>

TRANSPARENCY OF BOARD APPOINTMENTS

Mr Frank Harding (Chairman of  the  Nominations  Committee), Ms Christine Soden
and Dr David Bloxham are the current members of the  Nominations Committee. The
Nominations Committee is responsible for identifying appropriate candidates for
the  Company's  executive  and  non-executive posts and for  recommending  such
candidates to the Board.

REGULAR RE-ELECTION OF DIRECTORS

Code Provision A.6.2 of the Code  of  Best Practice set out in Section 1 of the
Combined Code requires all directors to  submit  themselves  for re-election at
intervals  of  no  more than three years.  The Company has complied  with  this
provision of the Code.

DIALOGUE WITH SHAREHOLDERS

The directors seek to build on a mutual understanding of objectives between the
Company  and  its  shareholders,   in  particular  by  communicating  regularly
throughout the year. The Company website  www.provalis.com  also provides up to
date  information to existing and potential investors. The information  on  the
Company's website is not incorporated into this annual report.

MAINTENANCE OF A SOUND SYSTEM OF INTERNAL CONTROL

In applying  the  principle  that  the  Board should maintain a sound system of
internal  control  to  safeguard shareholders'  investment  and  the  Company's
assets, the directors recognise  that  they  have  overall  responsibility  for
ensuring  that the Group maintains a system of internal control to provide them
with  reasonable   assurance  regarding  effective  and  efficient  operations,
internal control and  compliance  with laws and regulations. However, there are
inherent limitations in any system of internal control and accordingly even the
most effective system can provide only  reasonable, and not absolute, assurance
against material misstatement or loss. The Board has reviewed its management of
risk and identified areas where procedures need to be changed or installed.

There is a system of annual budgeting and  monthly  reporting,  in which actual
results are compared to budget and significant variances highlighted.

Capital  and  other  expenditure  is  subject  to  review  in  accordance  with
authorisation procedures measuring both the financial and legal impact.

AUDIT COMMITTEE

The Audit Committee has detailed and specific terms of reference  covering such
matters  as  membership  of  the  committee,  frequency of meetings, roles  and
responsibilities.

The Audit Committee meets at least three times  a year, once each to review the
interim  and  final accounts, and once to review internal  controls  and  other
operating matters.  The Committee will also meet on an ad hoc basis if and when
necessary.

The Committee reviews  the internal controls and risk management assessments at
least twice a year.  It  ensures  that  any  perceived  weaknesses  in internal
controls are addressed as effectively as possible and that suitable actions are
taken  to  control, manage or limit business risks. The Committee ensures  that
the external  audit  focuses  on  those  areas  of most significant risk to the
Group's business.

The  Committee  reviews the Group's monthly management  accounts,  budgets  and
forecasts and compares these with external evidence in order to ensure that the
financial statements appear reasonable.

                                      43

<PAGE>

The Interim and Annual  Reports  are  reviewed by the Committee, in conjunction
with information supplied by the external  auditors  and other external sources
of advice, in order to ensure they reflect the Group's  business operations and
comply with current laws, regulations and standards.

The Audit Committee is responsible for the appointment of auditors, and reviews
the  independence of the auditors both before their appointment  and  regularly
thereafter.   The  auditors  provide  the  Committee with confirmation of their
independence and of their processes for ascertaining that independence.

The  Audit  Committee  has a policy on those non-audit  services  that  may  be
provided by the auditors. In essence, the external auditors may not provide any
service which would put them in the position of having to give an audit opinion
either upon services they  have  provided,  or on any areas where they might be
required to form a material judgement on which the Group would act.

The Audit Committee regularly reviews the need  to appoint a dedicated internal
audit function. Given the small size and low complexity of the Group, the Audit
Committee currently believes that such a function is not necessary.

                                SHARE OWNERSHIP

The beneficial interest of each Director or member of senior management who was
a  director or member of senior management in Fiscal  2003  (or  who  has  been
subsequently appointed as such) in the capital of the Company as at 31 December
2003 are as follows:


<TABLE>
<CAPTION>
                                               NUMBER OF                  % Held of Fully Diluted
<S>                                              <C>             <C>                <C>
Name (1)                                  ORDINARY SHARES HELD Options (2) Ordinary Share Capital
Dr P Gould                                      235,927         2,917,667          0.95
Mr P Bream                                       75,000          250,000           0.10
Mr F Harding*                                   141,058             -              0.04
Dr D Bloxham                                     76,700             -              0.02
Ms C Soden                                       17,280             -              0.01
Mr N Kirkby**                                    72,033             -              0.02
Total Interest of Directors as a Group (3)      617,998         3,167,667          1.14
</TABLE>

*In addition, Mr F Harding has a non-beneficial interest in 40,000 shares.

** Mr N Kirkby resigned as a director of the Company in April 2003.

(1)   In the aggregate, Mr J Curtis. Mr M Keeling and Mr L Greenbury, the three
      remaining members of senior management, own less than one percent of the
      total outstanding shares of the Company.
(2)   The  interests  of  the  directors  in share options of the Company at 31
      December 2003 together with details of  applicable  performance  criteria
      were as follows:



<TABLE>
<CAPTION>

                                          At 30 June        Exercise   Date from
<S>                       <C>            <C>           <C>               <C>           <C>
                                                2003           Price       which    Expiry
                                              Number{pound-sterling} exercisable    date
DR P GOULD
1997 Employee Share Option Scheme
                                              65,000            0.50    26.10.01  25.10.05
                                             125,000            0.50    26.10.02  25.10.05


                                      44
<PAGE>


                                             250,000            0.25    26.04.00  25.04.06
                                             250,000            0.25    26.04.01  25.04.06
                                             250,000            0.25    26.04.02  25.04.06
                                          50,000 (i)            0.25    19.04.02  18.04.07
                                         50,000 (ii)            0.25    19.04.03  18.04.07
                                         200,000 (i)            0.13    29.03.04  28.03.08
                                              60,000            0.50    26.10.01  25.10.08
                                       510,963 (iii)          0.0685    15.10.05  14.10.12
Savings-Related Share Option Scheme 2002       84,821           0.112   01.06.05  30.11.05
Enterprise Management  Incentive Scheme     1,021,883          0.0685   15.10.05  14.10.12
                                         ------------
TOTAL                                      2,917,667
MR P BREAM
Enterprise Management Incentive Scheme   250,000 (iv)           0.117   14.10.0613.10.13
                                         ------------
TOTAL                                         250,000
</TABLE>
     (i)  These options may be exercised provided that the closing price of the
          Company's shares on the trading day immediately preceding the date of
          exercise  is not less  than  one and a half  times  greater  than the
          closing price of the  Company's  shares on the day which is two years
          before the date of exercise.

     (ii) These options may be exercised provided that the closing price of the
          Company's shares on the trading day immediately preceding the date of
          exercise is not less than two times greater than the closing price of
          the Company's  shares on the day which is three years before the date
          of exercise.

     (iii)The  maximum  number  of these  options  that may be  exercisable  is
          determined by reference to the pre-tax  earnings per share ("EPS") of
          the Company for the financial year which last ended prior to the date
          of exercise.  In the financial  year ending 30 June 2005,  the lowest
          threshold, at which 25% of the options may be exercised, is an EPS of
          0.52 pence and the  maximum  threshold,  at which 100% of the options
          may be  exercised,  is an EPS of 2.22 pence.  These  thresholds  will
          increase over the exercise period until the options lapse in 2012.

      (iv)  The  maximum number of these options that  may  be  exercisable  is
         determined  by  reference to the pre-tax earnings per share ("EPS") of
         the Company for the  financial year which last ended prior to the date
         of exercise. In the financial  year  ending  30  June 2006, the lowest
         threshold, at which 25% of the options may be exercised,  is an EPS of
         0.52 pence and the maximum threshold, at which 100% of the options may
         be exercised, is an EPS of 2.22 pence.  These thresholds will increase
         over the exercise period until the options lapse in 2013.

 (3)  No  Director holds any other securities of the Company, other than  those
      listed  in  the  table  above,  or  has the right to acquire other equity
      securities of the Company.

The Company has the following option schemes  under which the Company currently
grants, or has previously granted, options to employees  to  purchase  Ordinary
Shares: the CIL Employee Option Scheme; the Approved and Non Approved parts  of
the  Company's 1997 Employee Option Scheme; the Company's Savings Related Share
Option Scheme 2002; the Company's Long Term Incentive Plan 2003.  All employees
who are  not  eligible  to participate in the Long Term Incentive Plan 2003 are
entitled to participate in  the  Company's  1997  Employee  Option Scheme, with
options being granted at the discretion of its Board of Directors.   No options
have  been  granted  under the CIL Employee Option Scheme since 1997, and  none
will be granted under that scheme in the future.

                                   EMPLOYEES

The Group had 102 employees at 31 December 2003. 64 employees were based at the
Company's premises in  Deeside,  North  Wales,  of  which  30  were involved in
management  and  administration,  17  in  research  and

                                      45

<PAGE>

development and 17 in  manufacturing  and  production.  All of the remaining 38
employees were country or area directors or managers, or sales representatives,
of the  pharmaceuticals  business.  No  employee is  represented  by a union or
covered by a collective bargaining agreement. The Group recognises,  and places
considerable   value  on,  the  contribution  made  by  all  employees  to  the
development of the Group and the  achievement of its goals.  The Group seeks to
keep all of its employees  informed on matters  affecting them as employees and
affecting the Group as a whole.

Applications for employment by  disabled  persons  are always fully considered,
bearing  in  mind the aptitudes of the applicant concerned.  In  the  event  of
members of staff  becoming  disabled  every effort is made to ensure that their
employment with the Group continues and  that appropriate training is arranged.
It  is  the  policy  of  the Group that the training,  career  development  and
promotion of disabled persons  should,  as  far  as possible, be identical with
that of other employees.

ITEM 7 - MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

                              MAJOR SHAREHOLDERS

Under  the  Companies  Acts  of  England and Wales, a person  with  a  relevant
interest  in 3% of the Company is required  to  notify  the  Company  of  their
holding and  is  further  required  to notify the Company in the event that (i)
their holding falls below 3%; or (ii) their holding varies by more than 1%.  To
the  knowledge  of  the Company, it is not  directly  or  indirectly  owned  or
controlled by any other  corporation  or  by  any  foreign  government  and the
Company disclaims control by any of the companies, organisations or individuals
listed  below.  The  names  of  substantial  shareholders who as at the date of
filing of this report had notified the Company  of  their  holdings of Ordinary
Shares  as  required  by  the laws of England and Wales and the  percentage  of
Ordinary Shares held based  on  the number of Ordinary Shares outstanding as of
the date detailed below were as follows:

<TABLE>
<CAPTION>
                            NUMBER OF   % HELD OF  NUMBER OF ORDINARY%   HELD OF ISSUED   NUMBER OF ORDINARY   % HELD OF ISSUED
                             ORDINARY   ORDINARY         SHARES        ORDINARY SHARES      SHARES HELD AT     ORDINARY SHARES AT
NAME                          SHARES    SHARES AT   HELD AT OCTOBER       AT OCTOBER       DECEMBER 14 2001    DECEMBER 14 2001
                             HELD AT       25           25 2002            25 2002
                                25      DECEMBER
                             DECEMBER     2003
                               2003
<S>                          <C>          <C>         <C>                  <C>                <C>                    <C>
Yggdrasil AB                53,187,259    16.10        53,187,259              16.10         37,731,380               16.09
Schroder UK Enterprise Fund
                            31,888,867     9.64        31,250,067               9.46            Below 3%            Below 3%
Barclays Personal Investment
Management                  23,519,391     7.11          Below 3%            Below 3%           Below 3%            Below 3%
TD Waterhouse Investor
Services                    16,939,388     5.12        13,086,181               3.96            Below 3%            Below 3%
Charles Schwab Dealing       Below 3%   Below 3%       15,791,724               4.78          9,189,169                3.92
Invesco Asset Management
                             Below 3%   Below 3%         Below 3%            Below 3%        12,564,454                5.36
AXA Sun Life                 Below 3%   Below 3%         Below 3%            Below 3%        11,130,785                4.75
Abbey National               Below 3%   Below 3%         Below 3%            Below 3%         7,612,300                3.25
Finsbury Technology Trust
                             Below 3%   Below 3%         Below 3%            Below 3%         7,180,588                3.06
Nomura International plc     Below 3%   Below 3%         Below 3%            Below 3%         2,088,159                0.89
</TABLE>

None of the above shareholders have any special voting rights.

As of 31 December 2003, there were  23  record  holder of ADSs, representing in
the aggregate 4,200,750 Ordinary Shares or approximately  1.3%  of  the  issued
Ordinary Shares of the Group.

                                      46

<PAGE>

RELATED PARTY TRANSACTIONS

No  related  party transactions took place during the fiscal year ended 30 June
2003 or have taken place subsequent thereto through to the date of this report.
No related party transaction is currently proposed.


ITEM 8 - FINANCIAL INFORMATION

The Consolidated  Statements  and  other Financial Information required by this
Item are included under Item 17 of this report.

ITEM 9 - THE OFFER AND LISTING

TRADING MARKETS AND PRICE INFORMATION

The outstanding share capital of the  Company as at 31 December 2003 represents
346,440,014 Ordinary Shares (which comprises  330,660,929  Ordinary  Shares  of
{pound-sterling}0.01 each and 15,779,085 options granted but unexercised).

The  Ordinary  Shares  of  the Company are listed on the London Stock Exchange.
The Company's ADSs are traded through the NASDAQ National Market.

On August 5, 2002, the ratio  of  the  Company's ADSs to the Company's Ordinary
Shares was changed so that 1 ADS now represents 30 Ordinary Shares.

As at 31 December 2003, the Company's Ordinary Shares share register identified
12,268 holders in the UK, holding 325,757,275  Ordinary Shares and 8 holders in
the US, holding 301,526 Ordinary Shares.  The Bank of New York, in its capacity
as Depository for the Company's ADSs, holds its  Ordinary  Shares under nominee
accounts with BNY Nominees Limited and ANZ Nominees Limited.   The  sub-account
of  The  Bank  of  New  York  at 31 December 2003 identified 23 ADS holders  of
record, representing 140,025 ADSs, which represent 4,200,750 Ordinary Shares.

On 9 January 2004 the closing sale  price  of  the Company's Ordinary Shares on
the London Stock Exchange was {pound-sterling}0.08  and  the last trading price
of the Company's ADS' on Nasdaq was US$4.26.

<TABLE>
<CAPTION>
                             ORDINARY SHARES
                                 LONDON          ADS         AUSTRALIAN
<S>     <C>                <C>    <C>         <C>         <C>      <C>
                         STOCK EXCHANGE    NASDAQ         STOCK EXCHANGE(2)
                          HIGH     LOW    HIGH   LOW       HIGH     LOW
                            P       P    US$(1) US$(1)      A$      A$

1999   July 98 - June 99   97       8    43.50   3.38      2.30    0.23
2000   July 99 - June 00   34       9    13.88   5.25      0.97    0.53
2001   July 00 - June 01   66       9    22.31   4.86      1.30    0.30
2002   July 01 - June 02  21.71     5    10.80   1.74      0.68    0.16
2003   July 02 - June 03  10.25     5     4.75   1.70

2002   July 01 - Sept. 01 11.90   6.68    5.76   2.70      0.35    0.21
       Oct. 01 - Dec. 01  21.71   7.72   10.80   3.06      0.68    0.23
       Jan. 02 - Mar. 02  20.46  10.23   10.14   4.80      0.64    0.30
       Apr. 02 - June 02  13.75   5.00    5.88   1.74      0.35    0.16


                                      47


<PAGE>

2003   July 02 - Sept. 02 10.25   5.00    4.44   1.92
       Oct. 02 - Dec. 02   8.25   5.75    4.30   1.70
       Jan. 03 - Mar. 03   9.00   5.57    3.85   2.91
       Apr. 03 - June 03   9.62   6.25    4.75   2.82

       July 2003          10.50   8.25    4.66   3.96
       August 2003        15.00   9.75    7.32   4.15
       September 2003     13.88  11.25    6.79   5.30
       October 2003       13.00   9.50    6.22   4.40
       November 2003       9.75   8.50    4.80   4.08
       December 2003       9.50   8.50    4.25   4.10
       January 2004 (3)    8.75   8.00    4.35   4.11
</TABLE>


   (1) Adjusted for 1-for-6 reverse split on August 5, 2002.
   (2) In respect of the ASX until 14 June 2002, when the Company's shares were
       de-listed.
   (3) Such period commencing on 1 January 2004 and concluding 9 January 2004.


ITEM 10 - ADDITIONAL INFORMATION

                    MEMORANDUM AND ARTICLES OF ASSOCIATION

The Company is a public limited company registered under the  laws  of  England
and Wales.  Its Company Number in England and Wales is 3321624.  A copy of  the
Memorandum  and  Articles of Association of the Company is contained in Exhibit
1.1. The Company's  principal  object,  which  is  contained in Clause 4 of the
Memorandum of Association is to carry on the business of a holding company. The
rules relating to directors and officers are detailed  in Articles 73 to 113 of
the Company's Articles of Association.  Article 106 provides  that any director
may  not  vote  on  any matter in which he has a material interest,  except  in
certain limited circumstances.  Directors'  compensation  is  determined by the
Remuneration Committee, as detailed in "Item 6".  Article 102 provides that the
directors may exercise all powers of the Company to borrow money.   Articles 74
and  75  provide  that  any  director  appointed  since the last annual general
meeting must retire at the next annual general meeting  and be proposed for re-
election, that one third of the remaining directors must retire by rotation and
again be proposed for re-election and that any director who  has  served  for 3
years since last re-election must retire by rotation and again be proposed  for
re-election.   Article  82  provides that a director shall vacate his office at
the annual general meeting next  after  he  attains the age of 70.  There is no
shareholding qualification for being a director.

The Company has only one class of shares, Ordinary  Shares with a nominal value
of 1p each.  The rights relating to each share are detailed in Articles 4 to 44
of  the  Company's  Articles  of  Association.  The rights  attaching  to  each
Ordinary  Share  are  the  same, and all  shares  participate  equally  in  any
dividends or surplus.

Subject  to any conditions of  allotment,  the  directors  may  make  calls  on
shareholders  in  respect  of  monies unpaid (whether on account of the nominal
amount or by way of premium) by  giving at least 14 days' notice specifying the
time and place of payment of each  call.  The Company has a first lien on every
not fully paid share for all moneys called in respect of that share.

Any change to the rights attaching to  any  shares  will require the consent of
shareholders at a general meeting.

The  rules  governing  the  notification,  holding and proceedings  of  General
Meetings  are  detailed  in  Articles 45 to 72 of  the  Company's  Articles  of
Association.  The directors may  convene  a  general meeting and, on request of
members  (i.e.,  shareholders)  in accordance with  the  Companies  Act,  shall
convene an extraordinary general

                                      48

<PAGE>

meeting. An annual general meeting and an extraordinary general meeting for the
passing of a special  resolution  must be called  with at least 21 clear  days'
notice and all other  extraordinary  general  meetings  must be called  with at
least 14 clear days'  notice.  No  business  may be  transacted  at any general
meeting unless a quorum is present. Generally three persons entitled to vote at
the meeting,  each being a member or a proxy for a member or a duly  authorised
representative of a corporation, shall constitute a quorum.

All shareholders of the Company  are  entitled  to  attend  and vote, either in
person  or  by  proxy,  at  all general meetings of the Company. At  a  general
meeting, every shareholder has  one  vote  on  a show of hands and one vote for
every share of which he is the holder upon a poll.

There are no restrictions on the ownership of shares in the Company.  There are
no  provisions in the Articles of Association which  would  prevent,  delay  or
defer any change in control of the Company.

The Company  incorporates  by reference all other information in its Memorandum
and Articles of Association contained in Exhibit 1.

                              MATERIAL CONTRACTS

The following contracts (not  being  contracts  entered  into  in  the ordinary
course  of  business) have been entered into by the Group within the period  of
two years immediately  preceding the date of filing of this document and may be
material:

{circle}  Underwriting  Agreement  made between the  Company,  N M Rothschild &
          Sons  Limited  and  Beeson  Gregory  Limited  dated 7  March  2002 in
          connection  with the Placing and Open Offer  announced by the Company
          on  12  March  2002.  The  Underwriting  Agreement  contains  certain
          standard  warranties  from the  Company in favour of  Rothschild  and
          Beeson  Gregory  and  indemnities  given by the  Company in favour of
          Rothschild and Beeson Gregory.  As  consideration  for their services
          under the  Underwriting  Agreement,  the Company paid in aggregate to
          Rothschild   and   Beeson   Gregory   corporate   finance   fees   of
          {pound-sterling}150,000,  underwriting  commissions  of 0.5 per cent.
          and other  commissions  of 2.0 per cent.  equating  to  approximately
          {pound-sterling}249,000,       and      paid      an       additional
          {pound-sterling}20,000 of commissions to placees.

{circle}  Irrevocable  undertakings  from all the  Directors of the Company and
          from  Yggdrasil  AB dated 7 March  2002 under the terms of which they
          undertake to take up their full  entitlements (one new Ordinary Share
          for every five  Ordinary  Shares  held of record) at 11.25p per share
          under the Placing and Open Offer announced by the Company on 12 March
          2002.

{circle}  Exclusive  distribution  agreement  dated March  13th,  1992 and made
          between Interfalk AG and Thames  Laboratories  Limited (the "Original
          Agreement"),  as amended by an Amendment and Termination  Deed, and a
          Non-  Compete  Deed,  both dated  January 31,  2003 and made  between
          Provalis  plc and Dr Falk  Pharma  (together  the "New  Agreements").
          Under the terms of the Original Agreement, the Group was appointed as
          the exclusive distributor of the Falk range of Products in the United
          Kingdom until March 2010.  The effect of the New  Agreements was to:-

          o    extend the territory to include the Republic of Ireland;

          o    provide for the  Original  Agreement  to  terminate  on December
               31st,  2004;

          o    provide  that the Group  would not  promote,  market or sell any
               products which compete with the Falk range of products in either
               the United  Kingdom or the Republic of Ireland  before  December
               31st,  2006;  and #

          o    provide  for Dr  Falk to pay to the  Company  the  total  sum of
               {pound-sterling}5.0m,  in instalments of {pound-sterling}1.5m in
               February   2003,   {pound-sterling}1.5m   in  January  2004  and
               {pound-sterling}2.0m  in January 2005.  The final  instalment is
               subject to a pro-rata  reduction  in the event sales of the Falk
               products  are  less  than   {pound-sterling}2.4m.

                                      49

<PAGE>


          Under these  Agreements,  the Group pays for all  products  purchased
          from Falk in Euros within 30 days of receipt of invoice, such invoice
          to be submitted on or after delivery of the products.

{circle}  Distribution   agreement   dated    May   20,   2002   made    between
          Cholestech,  Inc. and Provalis  Diagnostics  Limited,  under the terms
          of which Cholestech was  appointed as  the semi-exclusive  distributor
          of Glycosal{reg-trade-mark}  in all  countries of the world other than
          the UK, Turkey, Russia,  China, Iran, Pakistan,  South Korea, Thailand
          and  New  Zealand.  Under  this  agreement  Cholestech  pays  for  all
          products  purchased  in  pounds  sterling within 45 days of receipt of
          invoice,  such invoice  to  be  submitted on or after  delivery of the
          products.  The  invoiced  price  for  the  products  is altered in the
          event the US dollar/pounds  sterling  exchange rate moves outside  the
          range  of  {pound-sterling}1  to $1.387 - 1.533  such that  Cholestech
          and Provalis each bear 50% of the exchange rate difference.

See also "Directors' Service Contracts and Remuneration" under Item 6.

                               EXCHANGE CONTROLS

There are currently no UK laws, decrees or regulations that restrict the export
or import of capital, including foreign exchange controls,  or  that affect the
remittance of dividends or other payments to US holders of equity securities of
UK companies, except as set forth under "Taxation."

                                   TAXATION

This summary is of a general nature only and does not discuss all aspects of US
and UK taxation that may be relevant to a particular investor.

The  statements  of US and UK tax laws set out below are based on the  laws  in
force and as interpreted by the relevant taxation authorities as of the date of
this Report and are subject to any changes in the US (possibly with retroactive
effect) or English  law,  or  in  the  interpretation  thereof  by the relevant
taxation authorities, or in the double taxation conventions between  the US and
the UK (the "Conventions"), occurring after such date.

Holders  are  advised  to  consult  their own tax advisers to determine the  US
Federal,  US  state  and  local and UK tax  consequences  arising  out  of  the
purchase, ownership and disposition of an ADS.

                            UNITED KINGDOM TAXATION

TAXATION OF DIVIDENDS

The Company does not anticipate  paying dividends on the Ordinary Shares in the
foreseeable future.  Under current  UK  law,  no  tax  need  be  withheld  from
payments of dividends by the Company.

The  tax  credit  for UK resident individuals is 1/9th of the cash dividend and
there is no further tax liability for individuals whose marginal rate of tax is
the basic or lower  rate.  For individuals liable to higher rate UK tax at 40%,
the  effective  rate of UK tax  on  the  dividend  and  tax  credit  is  32.5%.
Individuals whose  UK  tax liability is lower than the tax credit attached to a
dividend may not obtain  a  repayment  of  the  difference. Different rules and
rates apply to shareholders who are trustees of UK resident trusts.

Dividends paid to UK resident companies carry a tax  credit  equal  to 1/9th of
the cash dividend. Normally UK resident companies are not liable to UK  tax  on
dividends  received  from  other  UK  resident  companies. The dividend and tax
credit will be treated as franked investment income of the recipient company in
its computation of shadow Advance Corporation Tax.  Companies  which are exempt
from tax or exempt from corporation tax on investment income may  not  claim  a
repayment of the tax credit.

                                      50

<PAGE>

A US Holder may not claim a refund from the UK Inland Revenue in respect of the
tax credit.

UK STAMP DUTY AND STAMP DUTY RESERVE TAX

Charges  to UK stamp duty and/or stamp duty reserve tax ("SDRT") may be imposed
in respect of, inter alia, the following transactions:

(a)   the transfer of an ADS;

(b)   the transfer of an Ordinary Share;

(c)   the  deposit  of  an  Ordinary Share with the Custodian under the Deposit
      Agreement and the subsequent issue of an ADR; and

(d)   the transfer of an Ordinary Share on surrender of the ADS.

This section discusses in turn each such possible charge.

Although liability to UK stamp  duty may arise on transfer of an ADS, duty will
not in practice become payable provided  that  the  instrument  of  transfer is
executed and remains outside the UK, nor will there be any liability to SDRT in
respect of any agreement for the transfer of ADSs.

Ad  valorem stamp duty will be charged on conveyances or transfers of  Ordinary
Shares at the rate of  1/2% of the consideration, if any, for the transfer.

SDRT  will  be  imposed,  at  the  rate  of   1/2% of the consideration for the
transaction, if an agreement is made for the sale of Ordinary Shares, unless an
instrument of transfer of the Ordinary Shares in favour of the purchaser or its
nominee  is  executed and duly stamped.  SDRT is  in  general  payable  by  the
purchaser of Ordinary  Shares, but regulations have been made which provide for
collection from other persons in certain circumstances.

Ad valorem stamp duty will  be  imposed on any instrument transferring Ordinary
Shares to a nominee or agent for  a  depository  which  then  issues depository
receipts (such as the ADSs).  Where the instrument is liable to stamp duty as a
"conveyance on sale" (because it completes a sale of Ordinary Shares  or ADSs),
then  the  rate  of  duty  will  be  1  1/2%  of the consideration for the sale
implemented  by  the  instrument.   Where the instrument  of  transfer  is  not
stampable as a conveyance on sale, then  the rate of duty will be 1 1/2% of the
market value of the security transferred by the instrument.

There is also a potential charge to SDRT which will apply where Ordinary Shares
are transferred to a nominee or agent for  the  Depository under an arrangement
under which the Depository issues ADRs.  SDRT, which  will  be  payable  by the
Depository,  will  be  charged at a rate of 1 1/2% of the consideration for the
transfer.  Where there is  no  such consideration, the rate of the SDRT will be
1 1/2% of the market value of the  securities  transferred.  The charge to SDRT
will, however, be reduced by the amount, if any,  of ad valorem stamp duty paid
on the instrument transferring the Ordinary Shares.

A transfer of Ordinary Shares from the Depository or its agent or nominee to an
ADR holder, or a person designated by such holder,  on  cancellation  of an ADS
which is liable to duty as a "conveyance of sale" because it completes  a  sale
of  such  Ordinary  Shares, will be liable to ad valorem stamp duty, payable by
the purchaser, at the  rate  of   1/2%  of  the  consideration, if any, for the
transfer.  A transfer of Ordinary Shares from the  Depository  or  its agent or
nominee to an ADR holder on cancellation of an ADS which is not liable  to duty
as   a  "conveyance  on  sale"  will  be  liable  to  a  fixed  stamp  duty  of
{pound-sterling}5.

                                      51


<PAGE>

UK TAXATION OF CAPITAL GAINS

A US Holder  who  is  not  resident or ordinarily resident in the UK for UK tax
purposes will not be liable  for UK tax on capital gains realised or accrued on
the sale or other disposal of  ADSs unless the ADSs are held in connection with
a trade or business carried on by  such US Holder in the UK through a branch or
agency which constitutes a permanent  establishment or fixed base, and the ADSs
are or have been used, held or acquired  for  the  purposes  of  such  trade or
business of such branch or agency.

UK INHERITANCE TAX

An ADS beneficially owned by an individual US Holder who is domiciled in the US
for  the  purposes  of  the  Convention  relating to estate and gift taxes (the
"Estate and Gift Tax Convention") is not subject  to  UK inheritance tax on the
individual's  death or on a gift made by the individual  during  his  lifetime,
except where the  ADS  is  part  of  the  business  property  of a UK permanent
establishment of the individual or pertains to a UK fixed base of an individual
used for the performance of independent personal services.  The Estate and Gift
Tax Convention generally provides for tax paid in the UK to be credited against
tax payable in the US and for tax paid in the US to be credited against any tax
payable in the UK, based on priority rules set forth in that Convention,  in  a
case  where an ADS is subject to both UK inheritance tax and US federal gift or
estate tax.  There are special rules applying to trusts.

                            UNITED STATES TAXATION

This discussion  is based on current provisions of the Internal Revenue Code of
1986, as amended,  referred  to  as  the  Code,  current  and proposed Treasury
regulations promulgated thereunder, judicial decisions and  published positions
of  the  US Internal Revenue Service, known as the "IRS", and other  applicable
authorities,  all  as  in  effect  as  of the date hereof, and each of which is
subject to change or to differing interpretations,  possibly  with  retroactive
effect.   This  discussion  does  not  address all aspects of US federal income
taxation  that  may  be relevant to any particular  shareholder  based  on  the
shareholder's individual circumstances.

The  following  discussion   describes  the  material  US  federal  income  tax
consequences to US Holders that will own American Depository Shares or Ordinary
Shares as capital assets and does  not address the potential application of the
US alternative minimum tax or the US  federal  income  tax  consequences  to US
Holders that are subject to special treatment, including US Holders that

   -  are broker-dealers;

   -  have elected mark-to-market accounting;

   -  are tax-exempt organizations;

   -  are  financial institutions or insurance companies or other entities that
      derive financial services income;

   -  hold American Depository Shares or Ordinary Shares as part of a straddle,
      "hedge",  "conversion  transaction" or other risk reduction strategy with
      other investments;

   -  have a functional currency that is not the US dollar;

   -  are regulated investment companies; or

   -  own  more than 10% of the  Company's  shares,  directly  or  through  the
      application of US stock ownership attribution rules.


                                      52

<PAGE>


This discussion  does  not  consider  the  tax  treatment  of  persons who hold
American  Depository Shares or Ordinary Shares through a partnership  or  other
pass-through  entity.  In addition, this discussion does not address any aspect
of US state or local, US estate and gift, or non-US tax laws.  Certain material
aspects of US federal income  tax  relevant to a holder other than a US Holder,
referred to as a Non-US Holder, are also discussed below.

TAXATION OF DIVIDENDS

For the purposes of the following paragraphs,  a  "US  Holder"  is a beneficial
owner of Ordinary Shares or ADSs that, for US federal income tax  purposes, is:
(i) a citizen or resident of the US, (ii) a partnership or corporation  created
or  organized  in  or  under  the  laws  of  the US or any or any state thereof
(including the District of Columbia), (iii) an  estate  the  income of which is
subject to US federal income taxation regardless of its source  or (iv) a trust
if such trust validly elects to be treated as a US person for US federal income
tax  purposes  or  if  (a)  a  court within the US is able to exercise  primary
supervision over its administration  and  (b)  one  or more US persons have the
authority to control all of the substantial decisions of such trust.  A "Non-US
Holder"  is a beneficial owner of Ordinary Shares or ADSs  that  is  not  a  US
Holder.

The gross  amount  of  any distribution by the Company of cash or property with
respect to Company Ordinary  Shares  or  ADSs  to  any  US Holder (that is, the
amount  before reduction for the UK withholding tax and inclusive  of  any  tax
refunds or  credits  paid  to  the  US  Holder  with  respect  to the dividend)
generally will be includable in gross income by a US Holder as dividend  income
to  the  extent  such  distributions are paid out of the current or accumulated
earnings and profits of  the  Company as determined under US federal income tax
principles.  The dividend will  not  be  eligible  for  the  dividends received
deduction otherwise allowed to US corporations.  To the extent,  if  any,  that
the amount of any distribution by the Company exceeds the Company's current and
accumulated  earnings  and  profits  as  determined under US federal income tax
principles, it will be treated first as a  tax-free  return  of the US Holder's
adjusted  US  tax  basis  in Company Ordinary Shares or ADSs and thereafter  as
capital gain.  The Company  does  not maintain calculations of its earnings and
profits under US federal income tax principles.

President Bush signed into law the  Jobs  and  Growth Tax Relief Reconciliation
Act  of  2003  on May 28, 2003, which contains a provision  modifying  dividend
treatment to noncorporate  taxpayers.   Effective  retroactively  to January 1,
2003,  dividends  from  US  corporations  and  qualified  foreign  corporations
(including  dividends  with  respect  to ADSs) and received by noncorporate  US
Holders are treated as net capital gains.   They  are  taxed in full at capital
gain rates and cannot be first offset with capital losses.  A qualified foreign
corporation  is a corporation that is incorporated in a US  possession,  or  is
eligible for benefits  of  a comprehensive income tax treaty with the US, which
the IRS determines is satisfactory  for  purposes  of this provision, and which
includes an exchange of information program.  The US  and the UK ratified a new
income tax treaty on March 31, 2003, replacing the old  treaty and in force for
dividend payments made on or after May 1, 2003.  The IRS has not opined whether
either  the  old  or  the  new  treaty  is comprehensive for purposes  of  this
provision.  However, the House and Senate  conferees  of  the Act intend that a
company will be eligible for benefits of a comprehensive tax  treaty within the
meaning of this provision if it would qualify for the benefits  of  the  treaty
with  respect  to  substantially all of its income in the taxable year in which
the dividend is paid  (with  the  exception  of  Barbados).  A  Passive Foreign
Investment Company or a Foreign Personal Holding Company will not be considered
a  qualified foreign corporation for purposes of dividend treatment.The  amount
includable in income will be the US dollar equivalent of the payment regardless
of whether  the  payment  is in fact converted into US dollars.  Generally, any
gain or loss resulting from  currency  exchange fluctuations will be treated as
ordinary income or loss.  Pounds Sterling  received  by  US Holders will have a
tax basis equal to the US dollar value at the time of distribution.  Subject to
certain  limitations,  any UK withholding tax imposed on the  dividend  may  be
eligible for credit against  a  US  Holder's  US  federal  income tax if the US
Holder meets certain requirements.

Subject to the discussion below under "Backup Withholding Tax  and  Information
Reporting Requirements", a Non-US Holder of the Company Ordinary Shares or ADSs
generally  will  not  be  subject  to  US federal income

                                      53

<PAGE>

or  withholding  tax on dividends  received on the Company  Ordinary  Shares or
ADSs,  unless such  income is  effectively  connected  with the conduct by such
Non-US Holder of a trade or business in the US.

PASSIVE FOREIGN INVESTMENT COMPANY STATUS

In  general, the Company will be a Passive Foreign Investment Company  ("PFIC")
if either  75%  or  more of its gross income in a tax year is passive income or
the average percentage  of  its assets (by value) which produce or are held for
the production of passive income is at least 50%.

Because the Company will receive interest income and may receive royalties, the
Company may be PFIC for US federal  income  tax  purposes.   US  Holders should
consult  with  their  tax adviser to determine the tax consequences of  holding
stock in a PFIC.

If the Company is (or under the circumstances described above, was) a PFIC, the
direct  and certain indirect  US  Holders  must  either  (i)  elect  to  report
currently  their  pro  rata  share  of  the Company's ordinary earnings and net
capital gain even if they do not receive  distributions  from  the Company (the
"QEF"  election), or (ii) upon disposition of the Ordinary Shares  or  ADSs  or
receipt  of  an  "excess  distribution"  (as defined in the Code), generally be
subject  to  tax as if the gain or distribution  were  ordinary  income  earned
ratably over the  period  in  which  the  Ordinary  Shares  or  ADSs  were held
(including  payment  of an interest charge on the deferred tax) and face  other
adverse tax consequences.   US  Holders  may  elect  to  "mark to market" their
Ordinary Shares or ADSs in determining their PFIC income amount  as long as the
Ordinary Shares or ADSs constitute "marketable stock".

The  qualified  election  and  the  "mark  to  market" election are made  on  a
shareholder-by-shareholder basis.  Each US Holder  should  consult with his own
tax  adviser  to  decide  whether  to  make the "QEF" or the "mark  to  market"
election.

A US Holder may recognise foreign currency  gain  or  loss,  subject  to  a  de
minimis  limit  for  individual  US  Holders,  if  any,  with respect to income
included  if  the "QEF" is made at the time it received an actual  distribution
from the Company.

GAIN ON DISPOSAL

Upon the sale,  exchange  or redemption of ADSs or Ordinary Shares, a US Holder
will recognise a gain or loss, if any, for US federal income tax purposes equal
to  the  difference  between  the  amount  realised  upon  the  sale  or  other
disposition (or the US dollar value  thereof determined at the spot rate on the
date  of  disposition  if  the amount realised  is  denominated  in  a  foreign
currency) and the US Holder's  US  tax  basis  in  the ADSs or Ordinary Shares.
Except as described above under "Passive Foreign Investment Company Status" the
gain or loss will be a capital gain or loss if the ADS  or  the  Ordinary Share
was a capital asset in the hands of the US Holder and will be long-term capital
gain or loss if the ADS or the Ordinary Share was held for more than  one year.
In  all  cases,  gain  on  disposal  of  shares held less than one year will be
treated as short-term capital gain.  Net short-term  capital gain (i.e., excess
of short-term capital gain over short-term capital loss), if any, will be taxed
as ordinary income at the US Holder's marginal income tax rate.

The Jobs and Growth Tax Relief Reconciliation Act of 2003,  signed  into law on
May 28, 2003, has reduced the rate on adjusted net capital gain of noncorporate
US  Holders from 10% (for taxpayers in the two lowest brackets) and 20%  to  5%
and 15%, respectively, generally for sales and exchanges after May 5, 2003.

If a  US Holder receives any foreign currency on the sale of an Ordinary Share,
the US  Holder  may  recognise  ordinary  gain  or loss as a result of currency
fluctuations between the date of the sale and the  date  the  sale proceeds are
converted into US dollars.

                                      54

<PAGE>

Neither  the  surrender  of ADSs in exchange for the deposited Ordinary  Shares
represented by the surrendered ADSs nor the deposit of Ordinary Shares for ADRs
representing the Ordinary  Shares will be a taxable event for the purpose of US
Federal income tax.  Accordingly,  US  Holders  will  not recognise any gain or
loss upon such surrender of ADSs or such deposit of Ordinary Shares.

BACKUP WITHHOLDING TAX AND INFORMATION REPORTING REQUIREMENTS

US  backup  withholding  tax  and information reporting requirements  generally
apply to certain payments to certain non-corporate holders' stock.  Information
reporting generally will apply  to  payments  of  dividends on, and to proceeds
from the sale or redemption of, Company Ordinary Shares or ADSs made within the
US  to  a  holder  of Company Ordinary Shares or ADSs (other  than  an  "exempt
recipient", including  a  corporation,  a  payee  that  is not a US person that
provides an appropriate certification and certain other persons).  A payor will
be required to backup withholding tax on any payments of  dividends  on, or the
proceeds from the sale or redemption of, Company Ordinary Shares or ADSs within
the  US to a holder (other than an "exempt recipient") if such holder fails  to
furnish its correct taxpayer identification number or otherwise fails to comply
with, or establish an exemption from, such backup withholding tax requirements.
The current  backup  withholding  tax rate of 28 percent is scheduled to remain
through until December 31 2010.

In the case of such payments made within  the  US  to a foreign simple trust, a
foreign  grantor  trust  or a foreign partnership (other  than  payments  to  a
foreign simple trust, a foreign  grantor  trust  or  a foreign partnership that
qualifies   as  a  "withholding  foreign  trust"  or  a  "withholding   foreign
partnership" within the meaning of such US Treasury Regulations and payments to
a foreign simple  trust,  a foreign grantor trust or a foreign partnership that
are effectively connected with  the  conduct of a trade or business in the US),
the beneficiaries of the foreign simple  trust,  the  persons  treated  as  the
owners of the foreign grantor trust or the partners of the foreign partnership,
as  the  case  may  be, will be required to provide the certification discussed
above in order to establish  an  exemption  from  backup  withholding  tax  and
information   reporting   requirements.   Moreover,  a  payor  may  rely  on  a
certification provided by a  payee  that  is not a US person only if such payor
does not have actual knowledge or a reason  to  know  that  any  information or
certification stated in such certificate is incorrect.

                             DOCUMENTS ON DISPLAY

The  Company  is  subject  to  the  information  requirements of the Securities
Exchange Act of 1934, as amended.  In accordance with  these  requirements, the
Company  files  reports  and other information with the SEC.  These  materials,
including this annual report  and exhibits thereto, may be inspected and copied
at prescribed rates at the SEC's  Public Reference Section at 450 Fifth Street,
N.W.,  Washington,  D.C.  20549.  The public  may  obtain  information  on  the
operation of the SEC's public reference  rooms by calling the SEC in the United
States at 1-800-SEC-0330. The documents filed  by  the Company with the SEC via
EDGAR are also available at the SEC's website at www.sec.gov.


ITEM 11 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Provalis'  primary market risk exposures are interest  rate  risk  and  foreign
currency risk.

INTEREST RATE SENSITIVITY
The Group's  exposure  to  market  risk  for  changes in interest rates relates
primarily to its cash investments.  Provalis centrally  manages  its investment
portfolios  balancing  investment  opportunities,  risks, tax consequences  and
overall financing strategies.

Provalis' investment portfolio consists of cash and  short  term bank deposits.
None  of  these  investments are subject to interest rate risk and  their  fair
value will not decrease in value if market interest rates increase.

                                      55

<PAGE>


Assuming variable rate debt and cash levels as at 31 December 2003, a one point
change in interest  rates  would impact annual net interest income by less than
{pound-sterling}0.1million.

FOREIGN EXCHANGE RATE SENSITIVITY
Provalis  operates in international  markets.   All  turnover  is  invoiced  in
sterling.   The  Group  has  entered  into  a  distribution  agreement  for its
diagnostic  business  with  Cholestech  Inc  in  the  USA, whereby the price of
product  varies  in accordance with the US dollar/UK pounds  sterling  exchange
rate.  The contract  was entered into when the exchange rate was 1.55 US dollar
= 1.00 pound sterling.   The  impact  on  the profit and loss accounts was less
than {pound-sterling}0.1million in 2003.  The  Group  regularly  reviews its US
dollar  transactional exposure, and considers whether or not to seek  to  hedge
through forward  exchange  forward  instruments,  any significant transactional
exposures during the year.

The  Group purchases the majority of products for its  pharmaceutical  business
from the  Eurozone,  and  enters  into foreign exchange forward instruments, in
order to hedge its transactional exposure for up to one year ahead.

MARKET AND CREDIT RISK
The foreign exchange contracts are entered into with its bankers, Barclays Bank
plc.  The Group monitors its credit  exposure  to  its counterparties, together
with their credit rating.

The  cash  at  bank  and  on  deposit comprise of money market  deposits.   The
investments are with counterparties having strong credit ratings.

In addition to the above risks,  the  Group's  ability  to   manage its working
capital  requirements  is  partially  dependent  on  the timing of the  capital
receipts due from Dr Falk Pharma and of the arbitration  award  from  Dimethaid
International Inc. The Group actively monitors working capital requirements and
considers ways to address potential shortfalls.

ITEM 12 - DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.





                                      56


<PAGE>

PART II

ITEM 13 - DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14 - MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND  USE  OF
          PROCEEDS

Not applicable.

ITEM 15 - CONTROLS AND PROCEDURES

The  Group  maintains  disclosure  controls and procedures that are designed to
ensure that information required to be disclosed in the reports filed under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the time periods  specified  in  SEC rules and regulations.
The  Group  carried  out  an  evaluation, under the supervision  and  with  the
participation of the Group's management,  including the Chief Executive Officer
and Chief Financial Officer, of the effectiveness  of  the design and operation
of these disclosure controls and procedures at June 30,  2003.  Based  on  that
evaluation,  the  Chief  Executive  Officer  and Chief Financial Officer of the
Group have concluded that the Group's disclosure  controls  and  procedures are
effective. No change in the Group's  internal control over financial  reporting
has  occurred during the year ended June 30, 2003 that has materially affected,
or is reasonably likely to materially affect, the Group's internal control over
financial reporting.

ITEM 16A - AUDIT COMMITTEE FINANCIAL EXPERT

Not applicable.

ITEM 16B - CODE OF ETHICS

Not applicable.

ITEM 16C - PRINCIPAL ACCOUNTANT FEES AND SERVICES

Not applicable.

ITEM 16D - EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.










                                      57


<PAGE>





PART III

ITEM 17 - FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
                                                                           Page

Report of Independent Auditors                                              F-1

Consolidated Statements of Operations for the fiscal years
ended 30 June 2003, 2002 and 2001                                           F-2

Consolidated Balance Sheets at 30 June 2003 and 2002                        F-3

Consolidated Cash Flow Statements for the fiscal years
ended 30 June 2003, 2002 and 2001                                           F-4

Statement of Total Recognised Gains and Losses for the fiscal years
ended 30 June 2003, 2002 and 2001                                           F-5

Reconciliation of Movements in Shareholders' Funds for the fiscal years
ended 30 June 2003, 2002, 2001                                              F-5

Notes to the Consolidated Financial Statements                              F-6



ITEM 18 - FINANCIAL STATEMENTS

The Company has responded to Item 17 in lieu of responding to this Item.


ITEM 19 - EXHIBITS

1.1    Memorandum  and  Articles of Association of the Company (incorporated by
       reference to Exhibit 1.1 to the Company's annual report on Form 20-F for
       the fiscal year ended June 30, 2000).

2.1    Amended and Restated  Deposit  Agreement  (incorporated  by reference to
       Exhibit   A   to  the  Company's  post-effective  amendment  no.  1   to
       registration statement  on  Form F-6, File No. 333-8072, filed on August
       5, 2002).

4.1    Standard Form Service Agreement  for Executive Directors of Provalis plc
       (incorporated by reference to Exhibit 4.1 to the Company's annual report
       on Form 20-F for the fiscal year ended June 30, 2001).

4.2    Sale of Business Agreement dated 24th October 2001 between Parke Davis &
       Co  Limited,  and  Provalis  Healthcare   Limited   and   Provalis   plc
       (incorporated by reference to Exhibit 4.2 to the Company's annual report
       on Form 20-F for the fiscal year ended June 30, 2001).

4.3    Rules  of  the 1997 Employee Option Scheme (incorporated by reference to
       Exhibit 4.3  to  the Company's annual report on Form 20-F for the fiscal
       year ended June 30, 2002).


                                      58

<PAGE>

4.4    Rules of the 2001  Save As You Earn Scheme (incorporated by reference to
       Exhibit 4.4 to the Company's  annual  report on Form 20-F for the fiscal
       year ended June 30, 2002).

4.5    Rules of the Provalis plc Long Term Incentive Plan 2003.

4.6    Draft Trust Deed of the Provalis plc employee share ownership trust.

4.7    Underwriting Agreement made between the  Company,  N M Rothschild & Sons
       Limited and Beeson Gregory Limited dated 7 March 2002  (incorporated  by
       reference to Exhibit 4.5 to the Company's annual report on Form 20-F for
       the fiscal year ended June 30 2002).

4.8    Standard  form  of irrevocable undertaking given by each director of the
       Company and by Yggdrasil  AB  in  connection  with  the Placing and Open
       Offer  announced  by  the  Company  on  12  March 2002 (incorporated  by
       reference to Exhibit 4.6 to the Company's annual report on Form 20-F for
       the fiscal year ended June 30 2002).

4.9    Distribution Agreement made between Interfalk AG and Thames Laboratories
       Limited dated March 13, 1992, as amended by an Amendment and Termination
       Deed,  and a Non-Compete Deed, both dated January  31,  2003,  and  made
       between Dr Falk Pharma and Provalis plc.

4.10   Distribution   Agreement   made  between  Cholestech  Inc  and  Provalis
       Diagnostics Limited dated May 20, 2002.

6      See notes to the consolidated financial statements.

8      See "Organisational Structure" under Item 4.

12.1   Certification of the Chief Executive  Officer pursuant to Section 302 of
       the Sarbanes-Oxley Act of 2002.

12.2   Certification of the Chief Financial Officer  pursuant to Section 302 of
       the Sarbanes-Oxley Act of 2002.

13.1   Certification of the Chief Executive Officer pursuant to Section 1350 of
       Chapter  63  of  Title 18 of the United States Code,  18  USC  1350,  as
       adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

13.2    Certification of  the  Chief Financial Officer pursuant to Section 1350
       of Chapter 63 of Title 18  of  the  United  States Code, 18 USC 1350, as
       adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.


                                      59

<PAGE>

INDEPENDENT AUDITORS' REPORT



The Board of Directors and Stockholders
Provalis plc:



We  have  audited  the accompanying consolidated balance sheets of Provalis plc
and subsidiaries as  of  June  30,  2003 and 2002, and the related consolidated
statements of operations, cash flows,  and  changes  in shareholders' funds for
each  of  the  years  in  the  three-year period ended June  30,  2003.   These
consolidated financial statements  are  the  responsibility  of  the  Company'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 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 Provalis plc and
subsidiaries as of June 30, 2003 and 2002,  and the results of their operations
and their cash flows for each of the years in  the three-year period ended June
30, 2003, in conformity with generally accepted  accounting  principles  in the
United Kingdom.



Accounting  principles generally accepted in the United Kingdom vary in certain
significant respects  from  accounting  principles  generally  accepted  in the
United  States  of  America.   Information relating to the nature and effect of
such  differences  is  presented in  Note  24  to  the  consolidated  financial
statements.



"/s/ Mark Hunt"

KPMG Audit Plc

Liverpool, United Kingdom
January 14, 2004









                                      F-1

<PAGE>

CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED 30 JUNE 2003

<TABLE>
<CAPTION>
<S>                              <C>          <C>      <C>          <C>          <C>      <C>          <C>          <C>      <C>
                              BEFORE  EXCEPTIONAL                Before  Exceptional                BEFORE  EXCEPTIONAL
                         EXCEPTIONAL        ITEMS           exceptional        items           EXCEPTIONAL        ITEMS
                               ITEMS       NOTE 4    TOTAL        items       note 4    Total        ITEMS       NOTE 4    TOTAL
                                2003         2003     2003         2002         2002     2002         2001         2001     2001
                   Notes     {GBP}'M      {GBP}'M  {GBP}'M      {GBP}'m      {GBP}'m  {GBP}'m      {GBP}'M      {GBP}'M  {GBP}'M
--------------------------------------------------------------------------------------------------------------------------------
TURNOVER
- Continuing        2, 3        14.0            -     14.0          9.1            -      9.1          7.5            -      7.5
activities
- Discontinued      2, 3           -            -        -          0.3            -      0.3          0.3            -      0.3
activities
--------------------------------------------------------------------------------------------------------------------------------
                                14.0                  14.0          9.4                   9.4          7.8                   7.8
Cost of sales          2       (6.3)            -    (6.3)        (4.1)            -    (4.1)        (4.7)            -    (4.7)
--------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT                     7.7            -      7.7          5.3            -      5.3          3.1            -      3.1
Selling and
distribution           2       (3.1)            -    (3.1)        (3.2)            -    (3.2)        (2.6)            -    (2.6)
expenses
                        --------------------------------------------------------------------------------------------------------
Administration
expenses
   Amortisation of
   intangible
   assets            2,9       (1.5)            -    (1.5)        (0.9)        (0.5)    (1.4)            -            -        -
   Administration      2       (3.2)            -    (3.2)        (2.8)            -    (2.8)        (3.2)          0.8    (2.4)
   costs
   Research and
   development         2       (2.0)            -    (2.0)        (3.3)            -    (3.3)        (3.3)            -    (3.3)
   costs
                        --------------------------------------------------------------------------------------------------------
                               (6.7)            -    (6.7)        (7.0)        (0.5)    (7.5)        (6.5)          0.8    (5.7)
--------------------------------------------------------------------------------------------------------------------------------
OPERATING LOSS
- Continuing           2       (1.7)            -    (1.7)        (3.7)        (0.5)    (4.2)        (4.5)          0.8    (3.7)
activities
- Discontinued
  activities           2       (0.4)            -    (0.4)        (1.2)            -    (1.2)        (1.5)            -    (1.5)
--------------------------------------------------------------------------------------------------------------------------------
                               (2.1)            -    (2.1)        (4.9)        (0.5)    (5.4)        (6.0)          0.8    (5.2)
Loss on termination
of discontinued
activities                         -        (0.2)    (0.2)            -            -        -            -            -        -
Profit on variation of
distribution agreement
- continuing
activities             4           -          3.4      3.4            -            -        -            -            -        -
--------------------------------------------------------------------------------------------------------------------------------
   PROFIT (LOSS) ON
ORDINARY ACTIVITIES
    BEFORE INTEREST            (2.1)          3.2      1.1        (4.9)        (0.5)    (5.4)        (6.0)          0.8    (5.2)
Interest receivable
 and similar income              0.2            -      0.2          0.2            -      0.2          0.5            -      0.5
--------------------------------------------------------------------------------------------------------------------------------
   PROFIT (LOSS) ON
ORDINARY ACTIVITIES
    BEFORE TAXATION 3, 6       (1.9)          3.2      1.3        (4.7)        (0.5)    (5.2)        (5.5)          0.8    (4.7)
     Tax on loss on
ordinary activities    7           -            -        -          0.4            -      0.4          0.3            -      0.3
--------------------------------------------------------------------------------------------------------------------------------
 PROFIT (LOSS) FOR
THE FINANCIAL YEAR             (1.9)          3.2      1.3        (4.3)        (0.5)    (4.8)        (5.2)          0.8    (4.4)
--------------------------------------------------------------------------------------------------------------------------------
 PROFIT (LOSS) PER
           SHARE -
 BASIC AND DILUTED     8      (0.6)P         1.0P     0.4P       (1.7)p       (0.2)p   (1.9)p       (2.3)p         0.3p   (2.0)p
================================================================================================================================
</TABLE>

The  notes on pages  F-6 to F-28 form an  integral  part of these  consolidated
financial statements.

                                      F-2

<PAGE>

CONSOLIDATED BALANCE SHEET
AT 30 JUNE 2003

<TABLE>
<CAPTION>
<S>                                                          <C>           <C>           <C>
                                                                          2002          2003
                                                           Notes       {GBP}'M       {GBP}'m
--------------------------------------------------------------------------------------------
FIXED ASSETS
Intangible assets                                              9          12.5          14.0
Tangible assets                                               10           1.6           1.6
Investments - restricted deposits                          12,17             -           4.9
--------------------------------------------------------------------------------------------
                                                                          14.1          20.5
--------------------------------------------------------------------------------------------
CURRENT ASSETS
Stocks                                                        13           1.9           1.4
Debtors                                                       14           4.0           2.4
Cash and deposits                                             20           6.6          10.4
--------------------------------------------------------------------------------------------
                                                                          12.5          14.2
CREDITORS: Amounts falling due within one year                15          (7.7)         (7.5)
--------------------------------------------------------------------------------------------
NET CURRENT ASSETS                                                         4.8           6.7
--------------------------------------------------------------------------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES                                     18.9          27.2
CREDITORS: Amounts falling due after more than                16         (1.8)         (6.4)
one year
PROVISIONS FOR LIABILITIES AND CHARGES                     12,17             -         (4.9)
--------------------------------------------------------------------------------------------
NET ASSETS                                                     3          17.1          15.9
============================================================================================

CAPITAL AND RESERVES
Called-up share capital                                       18           3.3           3.3
Share premium account                                         19          24.1          24.1
Merger reserve                                                19          96.3          96.3
Profit and loss account                                       19       (106.6)       (107.8)
--------------------------------------------------------------------------------------------
EQUITY SHAREHOLDERS' FUNDS                                    19          17.1          15.9
============================================================================================
</TABLE>

The  notes  on  pages F-6 to F-28 form an integral part of  these  consolidated
financial statements.




                                      F-3

<PAGE>

CONSOLIDATED CASH FLOW STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2003

<TABLE>
<CAPTION>
<S>                                                                    <C>          <C>           <C>           <C>
                                                                                   2003          2002          2001
                                                                     Notes      {GBP}'M       {GBP}'m       {GBP}'m
-------------------------------------------------------------------------------------------------------------------
NET CASH OUTFLOW FROM OPERATING ACTIVITIES                             20a        (0.7)         (3.7)         (6.0)
-------------------------------------------------------------------------------------------------------------------

RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received                                                                   0.2           0.2           0.5
-------------------------------------------------------------------------------------------------------------------
NET CASH INFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF                        0.2           0.2           0.5
FINANCE
-------------------------------------------------------------------------------------------------------------------

TAXATION
Research and development tax credit received                                        0.6           0.1             -
-------------------------------------------------------------------------------------------------------------------
NET CASH INFLOW FROM TAXATION                                                       0.6           0.1             -
-------------------------------------------------------------------------------------------------------------------

CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of intangible fixed assets                                               (4.6)         (3.9)         (0.5)
Purchase of tangible fixed assets                                                 (0.5)         (0.8)         (0.5)
Proceeds on variation of distribution agreement                                     1.5             -             -
-------------------------------------------------------------------------------------------------------------------
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT                (3.6)         (4.7)         (1.0)
-------------------------------------------------------------------------------------------------------------------

ACQUISITIONS AND DISPOSALS
Termination of discontinued businesses                                            (0.2)             -             -
-------------------------------------------------------------------------------------------------------------------
NET CASH OUTFLOW FROM ACQUISITIONS AND DISPOSALS                                  (0.2)             -             -
-------------------------------------------------------------------------------------------------------------------
NET CASH OUTFLOW BEFORE MANAGEMENT OF LIQUID RESOURCES AND                        (3.7)         (8.1)         (6.5)
FINANCING
-------------------------------------------------------------------------------------------------------------------

MANAGEMENT OF LIQUID RESOURCES
Decrease (increase) in short term deposits                                          3.5         (0.5)         (4.0)
-------------------------------------------------------------------------------------------------------------------
NET CASH INFLOW (OUTFLOW) FROM MANAGEMENT OF LIQUID RESOURCES                       3.5         (0.5)         (4.0)
-------------------------------------------------------------------------------------------------------------------

FINANCING
Issue of ordinary shares                                                              -          10.8          11.5
Share issue costs                                                                     -         (0.7)         (0.7)
Unsecured loan repayments                                                         (0.1)         (0.3)         (0.2)
-------------------------------------------------------------------------------------------------------------------
NET CASH (OUTFLOW) INFLOW FROM FINANCING                                          (0.1)           9.8          10.6
-------------------------------------------------------------------------------------------------------------------

(DECREASE) INCREASE IN CASH                                         20b, c        (0.3)           1.2           0.1
===================================================================================================================
</TABLE>

The notes on pages  F-6  to  F-28  form  an integral part of these consolidated
financial statements.





                                      F-4

<PAGE>

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30 JUNE 2003

<TABLE>
<CAPTION>
<S>                                                          <C>           <C>           <C>
                                                            2003          2002          2001
                                                         {GBP}'M       {GBP}'m       {GBP}'m
--------------------------------------------------------------------------------------------
Profit (loss) for the financial year                         1.3         (4.8)         (4.4)
Currency translation differences on
foreign currency net investments                          (0.1)             -             -
--------------------------------------------------------------------------------------------
TOTAL RECOGNISED GAINS AND
LOSSES RELATING TO THE YEAR                                 1.2         (4.8)         (4.4)
============================================================================================
</TABLE>

The  notes on pages F-6 to F-28 form an integral  part  of  these  consolidated
financial statements.


RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 30 JUNE 2003


<TABLE>
<CAPTION>
<S>                                                          <C>           <C>           <C>
                                                            2003          2002          2001
                                                         {GBP}'M       {GBP}'m       {GBP}'m
--------------------------------------------------------------------------------------------
Shareholders' funds at the beginning of the year            15.9          10.6           4.2
Share capital issued                                           -          10.8          11.5
Share issue costs                                              -         (0.7)         (0.7)
Profit (loss) for the financial year                         1.3         (4.8)         (4.4)
Currency translation differences on
foreign currency net investments                           (0.1)             -             -
--------------------------------------------------------------------------------------------
SHAREHOLDERS' FUNDS AT THE END OF THE YEAR                  17.1          15.9          10.6
============================================================================================
</TABLE>

The notes  on  pages  F-6  to  F-28 form an integral part of these consolidated
financial statements.
















                                      F-5

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003

1. ACCOUNTING POLICIES

A summary of the principal accounting  policies, all of which have been applied
consistently throughout the year and the preceding year, are set out below:

(a) Basis of accounting and preparation

The accounts have been prepared under the  historical  cost  convention  and in
accordance with applicable UK accounting standards.

(b) Basis of consolidation

The  Group  accounts  consolidate  the  accounts  of  Provalis  plc and all its
subsidiary undertakings. All inter-company balances, transactions  and  profits
are eliminated on consolidation.

(c) Intangible fixed assets

Acquisition  of  product distribution rights, technology rights and brands  are
shown at cost less amortisation and provision is made for any impairment. Costs
are amortised over the period in which future benefits are expected to arise.

(d) Research and development 'R&D'

R&D expenditure is written off in the year of expenditure.

(e) R&D syndication

The Group entered  into  R&D syndicates which involved the licensing of certain
technology by the Group to  those  syndicates and the agreement of the Group to
undertake R&D projects on behalf of  the  syndicates  with a view to developing
commercially viable new technology.

The  transaction documents of these syndicates provided  that  these  deposits,
together  with interest earned thereon, may only be used for the conduct of the
agreed R&D  or,  in  certain  circumstances,  in  satisfaction  of  the Group's
obligations to acquire third party interests in the syndication. Accordingly, a
provision  was  made equating to the amounts held on deposit as an estimate  of
the funding of acquisition  obligations  that  may  arise  under  the syndicate
arrangements.

The last of these syndicates was unwound in July 2002.

(f) Tangible fixed assets

Tangible fixed assets are stated at cost, net of depreciation and any provision
for impairment. Depreciation is provided at rates calculated to write  off  the
cost,  less  estimated  residual  value, of each asset on a straight-line basis
over its expected useful life, as follows:

Plant and machinery                 2-10 years

Equipment, fixtures and fittings    5-10 years

Computer equipment                  3 years

(g) Leased assets

Payments under operating leases are  charged  to the Statement of Operations in
the period in which they are incurred.

(h) Investments

Fixed asset investments are shown at cost less provision for impairment.

(i) Stocks

Stocks are valued at the lower of cost and net  realisable  value.  The cost of
manufactured goods includes materials, direct labour and an appropriate portion
of fixed and variable overheads, based on normal levels of activity.  Costs are
assigned on a first-in-first-out basis.


                                      F-6

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003

1. ACCOUNTING POLICIES (CONTINUED)

(j) Taxation

Corporation tax payable is provided on taxable profits at the current rate.

Deferred  tax  is  recognised,  without  discounting,  in respect of all timing
differences between the treatment of certain items for taxation  and accounting
purposes  which have arisen but not reversed by the Balance Sheet date,  except
as otherwise  required  by  FRS 19. As the Group has an unprovided deferred tax
asset there has been no impact in the financial statements.

(k) Pensions

The Group operates a defined contribution fund for all employees. Contributions
are accounted for when they become payable.

(l) Foreign exchange

Foreign currency transactions  during  the  year are recorded using the rate of
exchange prevailing at the date of the transaction.

At the Balance Sheet date, amounts receivable and payable in foreign currencies
are translated at the exchange rates prevailing  at  that date other than those
transactions  to  be  settled  at  a  contracted rate and trading  transactions
covered by a related or matching forward contract which are translated at those
contracted rates.

For the purposes of consolidation, the closing rate method is used, translating
assets and liabilities at the rate prevailing  at  the  Balance  Sheet date and
under  which translation gains and losses are shown as a movement to  reserves.
Statements  of Operations of overseas subsidiary undertakings are translated at
the average exchange rate for the year.

Exchange differences  relating  to monetary items are brought to account in the
Statement of Operations in the period in which they arise.

(m) Turnover

Group turnover comprises the value  of  sales (excluding VAT and similar taxes,
trade discounts and intra-group transactions)  of  goods  and  services  in the
normal  course  of business. Turnover also includes the sale of product rights,
royalties and milestone  payments  which  are  recognised  in  accordance  with
contractual terms. Revenue on product sales is recognised on shipment of goods.







                                      F-7

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003

2. CONTINUING/DISCONTINUED ACTIVITIES

<TABLE>
<CAPTION>
<S>                                <C>           <C>      <C>         <C>           <C>      <C>         <C>           <C>      <C>
                                                2003                             2002                                 2001
                            CONTINUING  DISCONTINUED    TOTAL  Continuing  Discontinued    Total  Continuing  Discontinued    Total
                               {GBP}'M       {GBP}'M  {GBP}'M     {GBP}'m       {GBP}'m  {GBP}'m     {GBP}'m       {GBP}'m  {GBP}'m
-----------------------------------------------------------------------------------------------------------------------------------
TURNOVER                          14.0             -     14.0         9.1           0.3      9.4         7.5           0.3      7.8
Cost of sales                    (6.3)             -    (6.3)       (4.1)             -    (4.1)       (4.7)             -    (4.7)
-----------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT                       7.7             -      7.7         5.0           0.3      5.3         2.8           0.3      3.1
Selling and
distribution                     (3.1)             -    (3.1)       (3.2)             -    (3.2)       (2.6)             -    (2.6)
expenses
Administration
expenses
                              -----------------------------------------------------------------------------------------------------
       Amortisation of
       intangible assets         (1.5)             -    (1.5)       (1.4)             -    (1.4)           -             -        -
       Administration            (3.2)             -    (3.2)       (2.8)             -    (2.8)       (2.4)             -    (2.4)
       costs
       Research and
       development costs         (1.6)         (0.4)    (2.0)       (1.8)         (1.5)    (3.3)       (1.5)         (1.8)    (3.3)
                              -----------------------------------------------------------------------------------------------------
                                 (6.3)         (0.4)    (6.7)       (6.0)         (1.5)    (7.5)       (3.9)         (1.8)    (5.7)
-----------------------------------------------------------------------------------------------------------------------------------
OPERATING LOSS                   (1.7)         (0.4)    (2.1)       (4.2)         (1.2)    (5.4)       (3.7)         (1.5)    (5.2)
===================================================================================================================================
</TABLE>






                                      F-8

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003

3. SEGMENTAL ANALYSIS

(a) Analysis by geographical segment

The  analysis  by  geographical  segment  of  the  Group's  turnover, profit on
ordinary activities before taxation and net assets is set out below:

<TABLE>
<CAPTION>
<S>                                          <C>                            <C>
Turnover                          By Destination                      By Origin
</TABLE>


<TABLE>
<CAPTION>
<S>                         <C>            <C>            <C>            <C>            <C>            <C>
                           2003           2002           2001           2003           2002           2001
                        {GBP}'M        {GBP}'m        {GBP}'M        {GBP}'M        {GBP}'m        {GBP}'m
----------------------------------------------------------------------------------------------------------
UK                         10.6            8.4            6.4           14.0            9.3            7.7
Europe                      0.5            0.2            0.2              -              -              -
US                          2.8            0.6            0.8              -              -              -
Rest of World               0.1            0.2            0.4              -            0.1            0.1
----------------------------------------------------------------------------------------------------------
                           14.0            9.4            7.8           14.0            9.4            7.8
==========================================================================================================
</TABLE>

<TABLE>
<CAPTION>
<S>                                                                 <C>           <C>          <C>
PROFIT (LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION
                                                                   2003          2002         2001
                                                                {GBP}'M       {GBP}'m      {GBP}'m
--------------------------------------------------------------------------------------------------
UK                                                                  1.1         (5.4)        (5.2)
Rest of World                                                         -             -            -
--------------------------------------------------------------------------------------------------
Profit (loss) on ordinary activities before interest                1.1         (5.4)        (5.2)

Net interest receivable                                             0.2           0.2          0.5
--------------------------------------------------------------------------------------------------
                                                                    1.3         (5.2)        (4.7)
==================================================================================================
</TABLE>

<TABLE>
<CAPTION>
<S>                                                                 <C>           <C>          <C>
NET ASSETS
                                                                   2003          2002         2001
                                                                {GBP}'M       {GBP}'m      {GBP}'m
--------------------------------------------------------------------------------------------------
UK                                                                 10.4           5.4          1.7
Rest of World                                                       0.1           0.1          0.2
--------------------------------------------------------------------------------------------------
Net operating assets                                               10.5           5.5          1.9
Unallocated assets including cash and deposits                      6.6          10.4          8.7
--------------------------------------------------------------------------------------------------
NET ASSETS                                                         17.1          15.9         10.6
==================================================================================================
</TABLE>



                                      F-9

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003

3. SEGMENTAL ANALYSIS (CONTINUED)

(b) Analysis by class of business

The  analysis by class of business segment of the Group's turnover,  profit  on
ordinary activities before taxation and net assets is set out below:

<TABLE>
<CAPTION>
TURNOVER
<S>                                                                 <C>           <C>          <C>
                                                                   2003          2002         2001
                                                                {GBP}'M       {GBP}'m      {GBP}'m
--------------------------------------------------------------------------------------------------
Continuing activities
- Medical Diagnostics                                               3.1           0.9          1.3
- Pharmaceuticals                                                  10.9           8.2          6.2
--------------------------------------------------------------------------------------------------
                                                                   14.0           9.1          7.5
- Discontinued activities                                             -           0.3          0.3
--------------------------------------------------------------------------------------------------
                                                                   14.0           9.4          7.8
==================================================================================================
</TABLE>


PROFIT (LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION

<TABLE>
<CAPTION>
<S>                                   <C>          <C>      <C>         <C>          <C>      <C>         <C>          <C>      <C>
                                                  2003                              2002                              2001
                              -----------------------------------------------------------------------------------------------------
                                 ORDINARY  EXCEPTIONAL             Ordinary  Exceptional             ORDINARY  EXCEPTIONAL
                               ACTIVITIES        ITEMS    TOTAL  activities        items    Total  ACTIVITIES        ITEMS    TOTAL
                                  {GBP}'M      {GBP}'M  {GBP}'M     {GBP}'m      {GBP}'m  {GBP}'m     {GBP}'M      {GBP}'M  {GBP}'M
-----------------------------------------------------------------------------------------------------------------------------------
Continuing activities
- Medical Diagnostics*              (2.3)            -    (2.3)       (3.4)            -    (3.4)       (2.6)            -    (2.6)
- Pharmaceuticals                     2.5            -      2.5         1.3        (0.5)      0.8         0.2            -      0.2
- Common costs                      (1.9)            -    (1.9)       (1.6)            -    (1.6)       (2.1)          0.8    (1.3)
- Net interest receivable             0.2            -      0.2         0.2            -      0.2         0.5            -      0.5
Profit on variation of
distribution agreement                  -          3.4      3.4           -            -        -           -            -        -
-----------------------------------------------------------------------------------------------------------------------------------
                                    (1.5)          3.4      1.9       (3.5)        (0.5)    (4.0)       (4.0)          0.8    (3.2)
Discontinued activities**           (0.4)            -    (0.4)       (1.2)                 (1.2)       (1.5)            -    (1.5)
Loss on termination of
discontinued activities**               -        (0.2)    (0.2)           -            -        -           -            -        -
-----------------------------------------------------------------------------------------------------------------------------------
                                    (1.9)          3.2      1.3       (4.7)        (0.5)    (5.2)       (5.5)          0.8    (4.7)
===================================================================================================================================
</TABLE>

*  Medical   Diagnostics'   loss   is   stated   inclusive   of  R&D  spend  of
{GBP}1.6m (2002: {GBP}1.6m).

**  Discontinued  activities  relate  to  programmes  in the vaccines  research
business  of  Therapeutics R&D, which closed during the period.  The  costs  of
closure  have been  included  in  the  "Loss  on  termination  of  discontinued
activities".





                                      F-10

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003
<TABLE>
<CAPTION>

3. SEGMENTAL ANALYSIS (CONTINUED)
NET ASSETS
<S>                                                                               <C>          <C>
                                                                                 2003         2002
                                                                              {GBP}'M      {GBP}'m
--------------------------------------------------------------------------------------------------
- Medical Diagnostics                                                             0.5          1.6
- Pharmaceuticals                                                                 7.2          3.9
- Therapeutics R&D                                                                  -            -
--------------------------------------------------------------------------------------------------
                                                                                  7.7          5.5
Unallocated assets including cash and deposits                                    9.4         10.4
--------------------------------------------------------------------------------------------------
                                                                                 17.1         15.9
==================================================================================================
</TABLE>
LONG TERM ASSETS
<TABLE>
<CAPTION>
<S>                                                                               <C>          <C>
                                                                                 2003         2002
                                                                              {GBP}'M      {GBP}'m
--------------------------------------------------------------------------------------------------
Fixed assets
- Intangible                                                                     12.5         14.0
- Tangible                                                                        1.6          1.6
--------------------------------------------------------------------------------------------------
                                                                                 14.1         15.6
Investments - restricted deposits                                                   -          4.9
--------------------------------------------------------------------------------------------------
                                                                                 14.1         20.5
--------------------------------------------------------------------------------------------------
Medical Diagnostics                                                               1.6          1.6
Pharmaceuticals                                                                  12.5         14.0
Therapeutics R&D                                                                    -          4.9
--------------------------------------------------------------------------------------------------
                                                                                 14.1         20.5
==================================================================================================
</TABLE>
4.  EXCEPTIONAL ITEMS

<TABLE>
<CAPTION>
<S>                                                                               <C>          <C>
                                                                                 2003         2002
                                                                              {GBP}'M      {GBP}'m
--------------------------------------------------------------------------------------------------
Profit on variation of distribution agreement - continuing activities(1)          3.4            -
Loss on termination of discontinued activities (2)                              (0.2)            -
Pennsaid{reg-trade-mark} write off(3)                                               -        (0.5)
==================================================================================================
</TABLE>
Notes

1. This relates to profit  recognised on payments arising from the variation of
   the  distribution  agreement with Dr Falk Pharma.  {GBP}1.5m was received in
   February 2003, {GBP}1.5m is due to be received in January 2004 and a further
   {GBP}0.4m  in January  2005.  Up to a further  {GBP}1.6m  may be received in
   January 2005  contingent on the levels of sales of Falk products in calendar
   year 2004.

2. This  relates  to  the redundancy and closure  costs  of  Therapeutic  R&D's
   Vaccine programmes.

3. This charge writes off the cost of  Pennsaid{reg-trade-mark}  including both
   the cost of acquisition of the UK  distribution  rights and the value of the
   remaining  stock  holding.  Provalis  commenced  arbitration  proceedings in
   November  2002  against  Dimethaid  Research Inc (the owners of Pennsaid) in
   relation to the early  termination  of  Provalis'  rights under the Pennsiad
   distribution  agreement.  An award of {GBP}1.2m plus a further  {GBP}0.4m in
   costs and interest was made in the Group's favour during  December 2003, but
   has not yet been paid. This award has not been recognised in these financial
   statements.

4. There are no taxation consequences of the above exceptional items due to the
   availability of tax losses.

                                      F-11

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTE TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003


5. STAFF COSTS

<TABLE>
<CAPTION>
                                                                    2003       2002       2001
<S>                                                                  <C>        <C>        <C>
                                                                 {GBP}'M    {GBP}'m    {GBP}'m
----------------------------------------------------------------------------------------------
Employee costs during the year (including executive directors)
amounted to:
Wages and salaries                                                   3.5        3.3        3.2
Social security costs                                                0.4        0.4        0.4
Other pension costs                                                  0.2        0.2        0.2
----------------------------------------------------------------------------------------------
                                                                     4.1        3.9        3.8
==============================================================================================
</TABLE>

The average number of persons (including executive directors) employed by the
Group during the year was:

<TABLE>
<CAPTION>
                                                                    2003       2002      2001
<S>                                                                  <C>        <C>        <C>
                                                                  NUMBER     Number     Number
----------------------------------------------------------------------------------------------
BY ACTIVITY
R&D                                                                   13         17         15
Sales, marketing and distribution                                     48         50         42
Production                                                            20         20         23
Administration                                                        26         24         26
----------------------------------------------------------------------------------------------
                                                                     107        111        106
==============================================================================================

</TABLE>

Detailed  information  concerning  directors'  emoluments,   shareholdings  and
options is shown in the "Compensation"  and "Share Ownership"  sections of Item
6 - Directors, Senior Management and Employees.


6. PROFIT (LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION

Profit (loss) on ordinary activities before taxation is stated after charging:

<TABLE>
<CAPTION>
                                                                    2003       2002       2001
<S>                                                                  <C>        <C>        <C>
                                                                 {GBP}'M    {GBP}'m    {GBP}'m
----------------------------------------------------------------------------------------------
Depreciation and amortisation
- Tangible owned assets                                              0.5        0.4        0.4
- Intangible assets                                                  1.5        1.4          -
Operating lease rentals
- Plant and machinery                                                0.3        0.3        0.3
- Land and buildings                                                 0.2        0.3        0.2
Auditors' remuneration
- Audit services                                                     0.1        0.1        0.1
- Non audit services (2002: previous auditors)                         -        0.1        0.1
==============================================================================================
</TABLE>

In  2003  non  audit  services  of {GBP}17,000 were payable  to  the
auditors in respect of tax compliance  services  and  {GBP}31,000 in
respect of tax advisory services.




                                      F-12

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTE TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003


7. TAXATION

There  is  no  charge  to  corporation  tax during the year nor  is  there  any
provision required for deferred taxation.

The  tax credit in 2002 represents a claim  for  refundable  R&D  tax  credits.
Accumulated tax losses have not been recognised as deferred tax assets.

There  are  taxable  losses  of  approximately  {GBP}68.4m  (2002:  {GBP}69.2m)
available for carrying forward against suitable future taxable profits of Group
companies.  The agreement of the relevant Revenue  authorities will be required
before any such tax losses can be utilised.

(a) Analysis of credit in year

<TABLE>
<CAPTION>
                                                                    2003       2002       2001
<S>                                                                  <C>        <C>        <C>
                                                                 {GBP}'M    {GBP}'m    {GBP}'m
----------------------------------------------------------------------------------------------
UK corporation tax on loss for year                                    -          -          -
R&D tax credit                                                         -        0.4        0.3

Deferred taxation                                                      -          -          -
----------------------------------------------------------------------------------------------
                                                                       -        0.4        0.3
==============================================================================================
</TABLE>

(b) Factors affecting the tax credit for the year

<TABLE>
<CAPTION>
                                                                    2003       2002       2001
<S>                                                                  <C>        <C>        <C>
                                                                 {GBP}'M    {GBP}'m    {GBP}'m
----------------------------------------------------------------------------------------------
(Profit)loss on ordinary activities before taxation                 (1.3)       5.2        4.7
----------------------------------------------------------------------------------------------
(Profit)loss on ordinary activities multiplied by standard          (0.4)       1.5        1.4
rate of taxation (30%)
Effects of:
- Non tax deductible expenses and income not taxable for             0.6       (0.5)         -
tax purposes
- Capital allowances for period in excess of depreciation              -       (0.1)      (0.1)
_ Other timing differences                                             -          -        0.2
- Impact of additional tax relief for R&D                            0.2          -          -
- Impact of R&D tax credit cash claim                                  -       (0.1)      (0.1)
- Increase in losses carried forward                                (0.4)      (0.4)      (1.1)
----------------------------------------------------------------------------------------------
Tax credit on (profit)loss on ordinary activities                      -        0.4        0.3
==============================================================================================
</TABLE>






                                      F-13

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTE TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003


7. TAXATION (CONTINUED)

(c) Deferred tax assets not provided

<TABLE>
<CAPTION>
                                                                    2003       2002       2001
<S>                                                                  <C>        <C>        <C>
                                                                 {GBP}'M    {GBP}'m    {GBP}'m
----------------------------------------------------------------------------------------------
Accelerated capital allowances                                       0.3        0.3        0.2
Tax losses carried forward                                          20.5       20.7       23.2
----------------------------------------------------------------------------------------------
Deferred tax assets not provided                                    20.8       21.0       23.4
==============================================================================================
</TABLE>


8. EARNINGS PER SHARE ("EPS")

<TABLE>
<CAPTION>
                                                    2003                       2002                     2001
------------------------------------------------------------------------------------------------------------------
<S>                                          <C>           <C>          <C>           <C>         <C>          <C>
                                         {GBP}'M             P      {GBP}'M             p     {GBP}'M            p
------------------------------------------------------------------------------------------------------------------
Earnings per share are based on:
Profit (loss) after exceptional items
attributable to ordinary shareholders        1.3           0.4         (4.8)         (1.9)       (4.4)        (2.0)

Exceptional items                           (3.2)         (1.0)         0.5           0.2        (0.8)        (0.3)
------------------------------------------------------------------------------------------------------------------
Loss before  exceptional items
attributable to ordinary shareholders       (1.9)         (0.6)        (4.3)         (1.7)       (5.2)        (2.3)
==================================================================================================================

                                                          2003                       2002                     2001
------------------------------------------------------------------------------------------------------------------
Basic and diluted weighted average                 330,360,181                258,294,428              221,620,393
number of ordinary shares
==================================================================================================================
</TABLE>
















                                      F-14

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTE TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003


9. INTANGIBLE FIXED ASSETS

<TABLE>
<CAPTION>
                                                                                         Group
                                                                                product rights
                                                                                  and licences
                                                                                       {GBP}'m
----------------------------------------------------------------------------------------------
<S>                                                                                        <C>
COST
At 1 July 2002                                                                            15.4
Termination of distribution agreement                                                     (0.5)
----------------------------------------------------------------------------------------------
AT 30 JUNE 2003                                                                           14.9
==============================================================================================
AMORTISATION
At 1 July 2002                                                                             1.4
Charge for year                                                                            1.5
Eliminated on termination of distribution agreement                                       (0.5)
----------------------------------------------------------------------------------------------
AT 30 JUNE 2003                                                                            2.4
==============================================================================================
NET BOOK VALUE
AT 30 JUNE 2003                                                                           12.5
==============================================================================================
At 30 June 2002                                                                           14.0
----------------------------------------------------------------------------------------------
</TABLE>

The   intangible   assets   represent   the  total  cost  of   acquisition   of
Diclomax{reg-trade-mark}  from Parke Davis,  a subsidiary  of Pfizer Inc., on 3
December 2001, for {GBP}14.9m  (including  {GBP}0.4m of transaction costs). The
asset is being amortised over a period of ten years and the Consolidated Profit
and Loss  Account  for the year  ended 30 June 2003  contains  amortisation  of
{GBP}1.5m (2002: contained first seven months' amortisation of {GBP}0.9m).  The
intangible  asset  of  {GBP}0.5m,   representing  the  cost  of  investment  in
Pennsaid{reg-trade-mark}  which was fully provided against in 2002 following an
impairment  review,  has been  written off  following  the  termination  of the
distribution agreement.

The cash outflow  associated with the  acquisition of  Diclomax{reg-trade-mark}
was {GBP}4.6m in the year. The remaining  {GBP}6.4m of acquisition cost is held
within creditors (with {GBP}1.8m of this due in greater than one year) and will
be payable in weekly  instalments  until  November  2004.  As security  for the
payment of the  deferred  consideration  Parke  Davis has a fixed and  floating
charge over the assets (excluding book debts) of Provalis  Healthcare  Limited.
The security offered by Provalis plc lapsed on 3 December 2002 but Provalis plc
will  continue to guarantee  the debt of Provalis  Healthcare  Limited to Parke
Davis Limited.










                                      F-15

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTE TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003

10. TANGIBLE FIXED ASSETS

<TABLE>
<CAPTION>
                                                                        Group
                                                ----------------------------------------------
                                                                   Equipment,
                                                   Plant and         fixtures
                                                   machinery     and fittings            Total
                                                     {GBP}'m          {GBP}'m          {GBP}'m
----------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>              <C>
COST
At 1 July 2002                                           2.3              0.9              3.2
Additions                                                0.4              0.1              0.5
Disposals                                               (0.1)               -             (0.1)
----------------------------------------------------------------------------------------------
AT 30 JUNE 2003                                          2.6              1.0              3.6
==============================================================================================
DEPRECIATION
At 1 July 2002                                           1.2              0.4              1.6
Charge for year                                          0.4              0.1              0.5
Disposals                                               (0.1)               -             (0.1)
----------------------------------------------------------------------------------------------
AT 30 JUNE 2003                                          1.5              0.5              2.0
==============================================================================================
NET BOOK VALUE
AT 30 JUNE 2003                                          1.1              0.5              1.6
==============================================================================================
At 30 June 2002                                          1.1              0.5              1.6
----------------------------------------------------------------------------------------------
</TABLE>













                                      F-16

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTE TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003

11. FIXED ASSET INVESTMENTS

(a) Principal subsidiary undertakings

The  directors  consider  that  to  give  full  particulars  of all  subsidiary
undertakings  would  lead  to  a  statement of excessive length. The  following
information relates to those subsidiary undertakings whose results or financial
position, in the opinion of the directors,  principally  affected the profit or
net assets of the Group.

<TABLE>
<CAPTION>
                                                                                 PROPORTION OF
                                                                                       NOMINAL
                                                                                      VALUE OF
                                                                                 ISSUED SHARES
                                                  Country of                  HELD BY GROUP AT
                                              incorporation/   Description of     30 JUNE 2003
Name of undertaking                             registration      shares held                %         Activity
---------------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>              <C>              <C>
Provalis UK Limited                                  England      Ordinary                 100              1,4
Provalis Healthcare Limited                          England      Ordinary                 100                3
Provalis Diagnostics Limited                         England      Ordinary                 100            2,4,5
Cortecs Holdings Limited                         Jersey C.I.      Ordinary                 100                1
Cortecs International Pty Limited ("CIL")*         Australia      Ordinary                 100                1
Cortecs (OM) Pty Limited                           Australia      Ordinary                 100                2
Auspharm International Pty Limited                 Australia      Ordinary                 100              2,4
===============================================================================================================
</TABLE>

All   of   the  above  companies  operate  principally  in  their  country   of
incorporation or registration.

* Directly held by Provalis plc

Principal business activities of these subsidiary undertakings are:

1.     Investment/holding company

2.     R&D company

3.     Pharmaceutical sales and distribution company

4.     Intellectual property holding company

5.     Diagnostic manufacturing and sales company









                                      F-17

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTE TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003

12. INVESTMENTS - RESTRICTED DEPOSITS

<TABLE>
<CAPTION>
                                                                                Group
                                                                         2003             2002
                                                                      {GBP}'M          {GBP}'m
----------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>
R&D syndication restricted deposits - long term:
At 1 July 2002                                                            4.9              7.1
Foreign exchange adjustment                                                 -              0.1
Repaid to syndicate investors                                            (4.9)            (2.7)
R&D syndication restricted deposits interest                                -              0.4
----------------------------------------------------------------------------------------------
AT 30 JUNE 2003                                                             -              4.9
==============================================================================================

</TABLE>

Restricted cash  deposits  relate  to the R&D syndications. These deposits were
repaid during the year to syndicate  investors when the final R&D syndicate was
unwound in July 2002 (see notes 1e and 19).


13. STOCKS

<TABLE>
<CAPTION>
                                                                                Group
                                                                         2003             2002
                                                                      {GBP}'M          {GBP}'m
----------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>
Raw materials and consumables                                             1.2              0.6
Finished goods and goods for resale                                       0.7              0.8
----------------------------------------------------------------------------------------------
                                                                          1.9              1.4
==============================================================================================
</TABLE>


14. DEBTORS

<TABLE>
<CAPTION>
                                                                                Group
                                                                         2003             2002
                                                                      {GBP}'M          {GBP}'m
----------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>
Amounts falling due within one year:
Trade debtors                                                             1.8              1.5
Other debtors (see note 4)                                                1.9                -
Prepayments                                                               0.3              0.3
R&D tax credit receivable                                                   -              0.6
Amounts owed by subsidiary undertakings                                     -                -
----------------------------------------------------------------------------------------------
                                                                          4.0              2.4
==============================================================================================
</TABLE>

Debtors include other debtors of {GBP}0.4m  due  after more than one
year.









                                      F-18

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTE TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003

15. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

<TABLE>
<CAPTION>
                                                                                Group
                                                                         2003             2002
                                                                      {GBP}'M          {GBP}'m
----------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>
Trade creditors                                                           1.6              1.1
Taxation and social security                                              0.5              0.4
Other creditors                                                           4.6              4.6
Accruals                                                                  1.0              1.3
Loans (unsecured)                                                           -              0.1
Amounts owed to subsidiary undertakings                                     -                -
----------------------------------------------------------------------------------------------
                                                                          7.7              7.5
==============================================================================================
</TABLE>


16. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

<TABLE>
<CAPTION>
                                                                                Group
                                                                         2003             2002
                                                                      {GBP}'M          {GBP}'m
----------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>
Other creditors                                                           1.8              6.4
==============================================================================================
</TABLE>


17. PROVISION FOR LIABILITIES AND CHARGES

<TABLE>
<CAPTION>
                                                                        Group
                                                                         2003
                                                                      {GBP}'M
-----------------------------------------------------------------------------
<S>                                                                       <C>
R&D syndications
At 1 July 2002                                                            4.9
Utilisation on repayment to syndicate investors                          (4.9)
-----------------------------------------------------------------------------
AT 30 JUNE 2003                                                             -
=============================================================================
</TABLE>

This provision relates to the Group's obligations to perform  R&D activities or
to   acquire  third  party  interests  in  the  R&D  syndications,  in  certain
circumstances.   The final R&D syndicate was unwound in July 2002 (see notes 1e
and 12).


18. CALLED-UP SHARE CAPITAL

<TABLE>
<CAPTION>
                                                                         2003             2002
                                                                      {GBP}'M          {GBP}'m
----------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>
Authorised
500,000,021 ordinary shares of {GBP}0.01 each                             5.0              5.0
==============================================================================================
Allotted, called-up and fully paid
330,360,181 fully-paid  ordinary  shares of {GBP}0.01 each                3.3              3.3
(2002: 330,360,181 fully-paid ordinary shares of {GBP}0.01 each)
==============================================================================================
</TABLE>





                                      F-19

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTE TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003

18. CALLED-UP SHARE CAPITAL (CONTINUED)

OPTIONS

(a) Summary of employee options

<TABLE>
<CAPTION>
                                                                        As at                                              AS AT
                                                                       1 July                                            30 JUNE
                                                        Note             2002          Granted           Lapsed             2003
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>              <C>              <C>              <C>
Approved scheme                                            b        2,266,420        3,304,104         (994,382)       4,576,142
Unapproved scheme                                          b        3,587,580          510,963         (479,347)       3,619,196
Mr Travers                                                 c        2,000,000                -                -        2,000,000
Share Save Scheme 2001                                     d        1,281,704                -         (101,623)       1,180,081
Enterprise Management Incentive Scheme                     e                -        5,481,323         (839,416)       4,641,907
--------------------------------------------------------------------------------------------------------------------------------
                                                                    9,135,704        9,296,390       (2,414,768)      16,017,326
================================================================================================================================
</TABLE>

 (b) The Company's 1997 employee option scheme

The following options have been granted over ordinary shares of {GBP}0.01 in the
Company under the 1997 Employee Option Scheme:

<TABLE>
<CAPTION>
                                                       As at                                              AS AT         Exercise
                                                      1 July                                            30 JUNE            price
Date exercisable                                        2002          Granted           Lapsed             2003            {GBP}
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>              <C>              <C>              <C>
APPROVED SCHEME
From 26 October 2001 to 25 October 2008              295,000                -          (25,000)         270,000             0.50
From 26 April 2002 to 25 April 2009                   65,000                -          (20,000)          45,000             0.25
From 26 April 2002 to 25 October 2002                125,000                -         (125,000)               -             0.25
From 19 April 2003 to 18 April 2010                  259,500                -          (30,500)         229,000             0.25
From 19 April 2003 to 18 October 2003                  4,000           22,500                -           26,500             0.25
From 16 October 2003 to 15 October 2010              150,000                -         (150,000)               -             0.25
From 16 October 2003 to 15 April 2004                      -           50,000                -           50,000             0.25
From 29 March 2004 to 28 March 2011                1,192,920                -         (415,153)         777,767             0.13
From 29 March 2004 to 28 September 2004                    -          224,615                -          224,615             0.13
From 18 April 2005 to 17 April 2012                  175,000                -                -          175,000             0.14
From 15 October 2005 to 14 October 2012                    -        3,006,989         (228,729)       2,778,260           0.0685
--------------------------------------------------------------------------------------------------------------------------------
TOTAL                                              2,266,420        3,304,104         (994,382)       4,576,142
================================================================================================================================
</TABLE>




                                      F-20

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTE TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003

18. CALLED-UP SHARE CAPITAL (CONTINUED)
UNAPPROVED SCHEME

<TABLE>
<CAPTION>
<S>                                                      <C>              <C>              <C>              <C>              <C>
From 26 October 2001 to 25 October 2005               30,000                -                -          130,000             0.50
From 26 October 2002 to 25 October 2005              425,000                -          (25,000)         400,000             0.50
From 26 April 2000 to 25 April 2006                  500,000                -          (25,000)         475,000             0.25
From 26 April 2001 to 25 April 2006                  440,000                -          (20,000)         420,000             0.25
From 26 April 2002 to 25 April 2006                  375,000                -                -          375,000             0.25
From 19 April 2002 to 18 April 2007                  419,500                -          (30,500)         389,000             0.25
From 19 April 2003 to 18 October 2007                160,000                -                -          160,000             0.25
From 16 October 2002 to 15 October 2007              150,000                -         (150,000)               -             0.25
From 29 March 2004 to 28 March 2008                  988,080                -         (228,847)         759,233             0.13
From 15 October 2003 to 14 October 2012                    -          510,963                -          510,963           0.0685
--------------------------------------------------------------------------------------------------------------------------------
TOTAL                                              3,587,580          510,963         (479,347)       3,619,196
================================================================================================================================
</TABLE>


(c) Mr Travers' options

Mr G Travers is entitled to exercise options in respect of two million ordinary
shares at {GBP}1.85  per  share. These options lapse on 9 July 2004.
Mr Travers can exercise a maximum of one  million of these options in any year,
the exact number being determined by reference  to  the  market  price  of  the
Company's shares at that time. These options lapse six months after the date of
any  change  of  control  of  the  Company  through  an  acquisition, merger or
reconstruction, or of the date of any winding up of the Company.

(d) Share Save Scheme 2001

The   following   options   have   been   granted   over  ordinary  shares   of
{GBP}0.01  in  the  Company under the Provalis  plc  Savings-Related
Share Option Scheme 2001:

<TABLE>
<CAPTION>
                                                       As at                                              AS AT         Exercise
                                                      1 July                                            30 JUNE            price
Date exercisable                                        2002          Granted           Lapsed             2003            {GBP}
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>              <C>              <C>              <C>
From 1 June 2005 to 30 November 2005                 717,236                -          (66,159)         651,077            0.112
From 1 June 2007 to 30 November 2007                 564,468                -          (35,464)         529,004            0.112
--------------------------------------------------------------------------------------------------------------------------------
TOTAL                                              1,281,704                -         (101,623)       1,180,081
================================================================================================================================
</TABLE>





                                      F-21

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003

18. CALLED-UP SHARE CAPITAL (CONTINUED)

 (e) Enterprise Management Incentive Scheme

The   following   options  have  been   granted   over   ordinary   shares   of
{GBP}0.01  in  the Company under the Enterprise Management Incentive
Scheme:

<TABLE>
<CAPTION>
                                                       As at                                              AS AT         Exercise
                                                      1 July                                            30 JUNE            price
Date exercisable                                        2002          Granted           Lapsed             2003            {GBP}
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>              <C>              <C>              <C>
From 15 October 2005 to 14 October 2012                    -        5,481,323         (839,416)       4,641,907           0.0685
--------------------------------------------------------------------------------------------------------------------------------
TOTAL                                                      -        5,481,323         (839,416)       4,641,907
================================================================================================================================
</TABLE>


19. MOVEMENTS IN SHARE CAPITAL AND RESERVES

<TABLE>
<CAPTION>
                                                   Called-up            Share                            Profit
                                                       share          premium           Merger         and loss
                                                     capital          account          reserve          account            Total
                                                     {GBP}'m          {GBP}'m          {GBP}'m          {GBP}'m          {GBP}'m
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>              <C>              <C>              <C>
Balance at 1 July 2002                                   3.3             24.1             96.3           (107.8)            15.9
Profit for the year                                        -                -                -              1.3              1.3
Currency translation differences in                        -                -                -             (0.1)            (0.1)
foreign currency net investments
--------------------------------------------------------------------------------------------------------------------------------
BALANCE AT 30 JUNE 2003                                  3.3             24.1             96.3           (106.6)            17.1
================================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                    Called-up            Share           Profit
                                                                        share          premium         and loss
                                                                      capital          account          account            Total
                                                                      {GBP}'m          {GBP}'m          {GBP}'m          {GBP}'m
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>              <C>              <C>
COMPANY
Balance at 1 July 2002                                                    3.3             24.1             22.7             50.1
Profit for the year                                                         -                -              3.5              3.5
--------------------------------------------------------------------------------------------------------------------------------
BALANCE AT 30 JUNE 2003                                                   3.3             24.1             26.2             53.6
================================================================================================================================
</TABLE>







                                      F-22

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003

20. CASH FLOW INFORMATION

(a) Reconciliation of operating loss to operating cash flows

<TABLE>
<CAPTION>
                                                                         2003             2002             2001
                                                                      {GBP}'M          {GBP}'m          {GBP}'m
---------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>              <C>
Operating loss                                                           (2.1)            (5.4)            (5.2)
Depreciation and impairment of tangible fixed assets                      0.5              0.4              0.4
Amortisation and impairment of intangible fixed assets                    1.5              1.4                -
(Decrease) increase in trade creditors                                    0.5             (0.1)             0.1
Decrease in other creditors and accruals                                 (0.3)            (0.1)            (0.7)
Increase in stocks                                                       (0.5)            (0.6)               -
Decrease (increase) in trade debtors                                     (0.3)             0.3              0.7
Decrease in other debtors and prepayments                                   -              0.4              0.1
---------------------------------------------------------------------------------------------------------------
NET CASH OUTFLOW FROM OPERATING ACTIVITIES                               (0.7)            (3.7)            (6.0)
===============================================================================================================
</TABLE>


(b) Reconciliation of net cash flow to movements in net funds

<TABLE>
<CAPTION>
                                                                         2003             2002             2001
                                                                      {GBP}'M          {GBP}'m          {GBP}'m
---------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>              <C>
(Decrease) increase in cash in the year                                  (0.3)             1.2              0.1
Repayments of unsecured loan                                               0.1             0.3              0.2
(Decrease) increase in short term deposits                               (3.5)             0.5              4.0
---------------------------------------------------------------------------------------------------------------
Movement in net funds in the year                                        (3.7)             2.0              4.3
Net funds at 1 July 2002                                                 10.3              8.3              4.0
---------------------------------------------------------------------------------------------------------------
NET FUNDS AT 30 JUNE 2003                                                 6.6             10.3              8.3
===============================================================================================================
</TABLE>


(c) Analysis of changes in net funds

<TABLE>
<CAPTION>
                                                       As at                             AS AT            As at
                                                      1 July                           30 JUNE           1 July
                                                        2002        Cash flow             2003             2001
                                                     {GBP}'m          {GBP}'m          {GBP}'M          {GBP}'m
---------------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>              <C>              <C>
Cash                                                     1.9             (0.3)             1.6              0.7
Short term deposits                                      8.5             (3.5)             5.0              8.0
---------------------------------------------------------------------------------------------------------------
Cash and deposits                                       10.4             (3.8)             6.6              8.7
Unsecured loan due in under one year                    (0.1)             0.1                -             (0.3)
Unsecured loan due in more than one year                   -                -                -             (0.1)
---------------------------------------------------------------------------------------------------------------
Net funds                                               10.3             (3.7)             6.6              8.3
===============================================================================================================
</TABLE>

Short term deposits have a  maturity  of  more  than  24 hours but less than 12
months.  They  are  repayable  on  demand  subject, in some instances,  to  the
repayment  of  certain  expenses.  Cash includes  cash  in  hand  and  deposits
repayable on demand.



                                      F-23

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003

21. GUARANTEES AND OTHER FINANCIAL COMMITMENTS

(a) Lease commitments

Annual commitments under non-cancellable operating leases are as follows:

<TABLE>
<CAPTION>
                                                               2003                               2002
                                                    LAND AND                          Land and
                                                   BUILDINGS            OTHER        buildings            Other
                                                     {GBP}'M          {GBP}'M          {GBP}'m          {GBP}'m
---------------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>              <C>              <C>
Expiry:
- within one year                                          -              0.1                -              0.1
- within one to two years                                  -              0.1                -              0.2
- within two to five years                               0.1                -                -              0.1
- after five years                                       0.1                -              0.3                -
---------------------------------------------------------------------------------------------------------------
                                                         0.2              0.2              0.3              0.4
===============================================================================================================
</TABLE>


(b) Capital commitments

There were unprovided capital commitments  of  {GBP}0.1m  at 30 June
2003 (2002: {GBP}0.1m).

(c) Guarantees

The Group operates under a duty deferment scheme with HM Customs and Excise for
which a {GBP}0.1m guarantee is in place.

22. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS

The numeric disclosures in this note deal with financial assets and liabilities
as defined in FRS 13 `Derivatives and other Financial Instruments Disclosures'.

As  permitted  by  FRS  13, short term debtors and creditors have been excluded
from  the  disclosures.  Certain   financial  assets  such  as  investments  in
subsidiary companies are also excluded from the scope of these disclosures.

Interest rate profile

The Group has no interest  bearing  financial  assets other than  sterling cash
deposits of {GBP}5.0m (2002:  {GBP}8.5m).  The sterling cash deposits  comprise
deposits placed on the money market, for variable periods, with rates fixed for
the duration of the deposit.  The average  interest  rate on sterling  deposits
during the year was 3.2%, and at the year end was 3.3%.

As at 30 June  2002,  the Group  owed  {GBP}0.1m  under an  unsecured  interest
bearing sterling loan. This was repaid during the year.

Maturity of financial liabilities

The maturity profile of the Group's financial liabilities as at 30 June 2003 is
given in notes 17 and 18.

Borrowing facilities

The Group  had no undrawn committed borrowing facilities at 30 June 2003, or 30
June 2002.

Fair values of financial assets and liabilities

There is no  material  difference  between the book value and the fair value of
the Group's financial assets or liabilities.






                                      F-24

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003

22. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (CONTINUED)

Currency exposures

The table below shows the Group's current  exposures;  in  other  words,  those
transactional  (or non-structural) exposures that give rise to the net currency
gains and losses  recognised  in  the  Profit  and Loss Account. Such exposures
comprise the monetary assets and monetary liabilities of the Group that are not
denominated in the operating (or "functional") currency  of  the operating unit
involved, other than certain non-sterling borrowings treated as  hedges  of net
investments in overseas operations. As at 30 June 2003 these exposures were  as
follows:

<TABLE>
<CAPTION>
                                            NET FOREIGN CURRENCY MONETARY ASSETS (LIABILITIES)
                                           ---------------------------------------------------
                                                  AUSTRALIAN
                                                      DOLLAR             EURO            TOTAL
FUNCTIONAL CURRENCY OF GROUP OPERATION               {GBP}'M          {GBP}'M          {GBP}'M
----------------------------------------------------------------------------------------------
<S>                                                     <C>               <C>              <C>
STERLING                                                 0.1             (0.2)            (0.1)
==============================================================================================
</TABLE>


The exposures at 30 June 2002 for comparison purposes were as follows:

<TABLE>
<CAPTION>
                                            Net foreign currency monetary assets (liabilities)
                                           ---------------------------------------------------
                                                  Australian
                                                      Dollar             Euro            Total
Functional currency of Group operation               {GBP}'m          {GBP}'m          {GBP}'m
----------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>              <C>
Sterling                                                   -             (0.5)            (0.5)
==============================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                                2003
                                                               CONTRACT VALUE       FAIR VALUE
                                                                      {GBP}'M          {GBP}'M
----------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>
OFF BALANCE SHEET
Foreign currency contracts                                                1.4              1.4
==============================================================================================
</TABLE>

Interest  rate instruments and foreign currency contracts and options have been
marked to market to produce a fair value figure. The Company first entered into
foreign currency  contracts  on  10  March 2003. There were no foreign currency
contracts in place during 2002.

Gains and losses on hedges

There are no unrecognised gains or losses on hedges.

The Group has no financial assets/liabilities  held  for  trading  purposes and
holds no cash settled commodity contracts.

The disclosures in the Treasury section of the Directors' Report form  part  of
the financial statements.

23. PENSION ARRANGEMENTS

The Group operates a defined contribution scheme for which the pension cost for
the year amounted to {GBP}0.2m (2002: {GBP}0.2m).

There  are  no  prepayments  or accruals relating to pension costs at either 30
June 2003 or at 30 June 2002.





                                      F-25

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003

24.    RECONCILIATION WITH US GAAP


The Group's Consolidated Financial  Statements  are prepared in accordance with
UK GAAP which differ in certain significant respects  from  US  GAAP.  Set  out
below  is  a summary of the significant differences, a reconciliation of profit
from UK GAAP  to  US  GAAP,  a  statement of comprehensive income, earnings per
share, a reconciliation of equity  shareholders'  funds from UK GAAP to US GAAP
and a summary cash flow statement on a US GAAP basis.

<TABLE>
<CAPTION>
                                                                         2003             2002             2001
                                                                      {GBP}'M          {GBP}'m          {GBP}'m
<S>                                                                       <C>              <C>              <C>
Reconciliation of net profit (loss) between UK GAAP and US GAAP
---------------------------------------------------------------------------------------------------------------
Net loss in accordance with UK GAAP                                       1.3             (4.8)            (4.4)
ADJUSTMENTS TO CONFORM TO US GAAP
Profit on variation of distribution agreement (a)                        (3.4)               -                -
---------------------------------------------------------------------------------------------------------------
Net loss in accordance with US GAAP                                      (2.1)            (4.8)            (4.4)
===============================================================================================================
Loss per share - basic* and diluted
Per UK GAAP                                                               0.4P            (1.9)p          (2.0)p
Per US GAAP                                                             (0.6)P            (1.9)p          (2.0)p
Weighted average number of ordinary shares - basic (millions)           330.4            258.3            221.6
</TABLE>

* Diluted net loss per ordinary share is equal to basic  net  loss per ordinary
share  because  the  Group's share options have a non-dilutive effect  for  the
periods presented.

<TABLE>
<CAPTION>
                                                                         2003              2002            2001
                                                                      {GBP}'M          {GBP}'m          {GBP}'m
---------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>              <C>
Stockholders' equity in accordance with UK GAAP                          17.1             15.9             10.6
ADJUSTMENTS TO CONFORM TO US GAAP
Profit on variation of distribution agreement (a)                        (3.4)               -                -

Revenue recognition (b)                                                  (0.1)            (0.1)            (0.1)
---------------------------------------------------------------------------------------------------------------
Stockholders' equity in accordance with US GAAP                          13.6             15.8             10.5
===============================================================================================================
</TABLE>


A) PROFIT ON VARIATION OF DISTRIBUTION AGREEMENT

The  profit recognised  in  relation  to  the  variation  of  the  distribution
agreement  relates to consideration in relation to an Amendment and Termination
Deed and a Non-Compete Deed. Under UK GAAP the income recognised relates to the
part of the  income  receivable under both Deeds which is non-refundable. Under
US GAAP, the Deeds are  treated  as a single element arrangement and the income
is recognised evenly over the term  of  the  Non-Compete  Deed, which continues
until December 2006





                                      F-26

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003

24.  RECONCILIATION WITH US GAAP (CONTINUED)

B)  REVENUE RECOGNITION

This difference arises on the recognition of income from the  receipt  of a
non-refundable payment from a collaboration partner for the development  of
a  certain  technology.  As a result, this income is deferred under US GAAP
until marketing authorisation is granted.

C)  VALUATION AND QUALIFYING ACCOUNTS

The Group had  no  activity  in its allowance for doubtful accounts for the
years ended 30 June 2001, 2002 and 2003.

D)  STATEMENT OF CASH FLOWS

Under UK GAAP,  cash flows are presented  separately for operating  activities,
returns on investments and servicing of finance,  taxation,  capital investment
and  financial  investment,   acquisitions  and  disposals,  equity  dividends,
management of liquid resources and financing activities.

Under US GAAP,  cash flows  activities  are reported as  operating  activities,
investing  and  financing  activities.  Cash flow from  taxation and returns on
investments  and  servicing of finance  would,  with the exception of dividends
paid,  be included as operating  activities.  The payment of dividends and debt
issue costs would be included under financing activities.

Set out below is a summary consolidated statement of cash flows for the Group
under US GAAP.

<TABLE>
<CAPTION>
                                                                         2003             2002             2001
                                                                      {GBP}'m          {GBP}'m          {GBP}'m
---------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>              <C>
Net cash used in operating activities                                    (0.1)            (3.4)            (5.5)
Net cash provided by investing activities                                (3.6)            (4.7)            (1.0)
Net cash provided by financing activities                                 3.4              9.3              6.6
---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash under US GAAP                            (0.3)             1.2              0.1
---------------------------------------------------------------------------------------------------------------
</TABLE>

E) EXCEPTIONAL ITEMS

Under UK GAAP, material items  arising  from  events within the past or present
ordinary activities are disclosed separately. Under  US  GAAP, such items would
be included in the appropriate financial statement line items.

F) SHARE OPTIONS

Share options are accounted for using the intrinsic value method under APB 25.

G) STATEMENT OF COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                         2003             2002             2001
                                                                      {GBP}'M          {GBP}'m          {GBP}'m
---------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>              <C>
Net loss for the financial year in accordance with US GAAP               (2.1)            (4.8)            (4.4)
Currency translation                                                     (0.1)               -                -
---------------------------------------------------------------------------------------------------------------
Comprehensive income in accordance with US GAAP                        (2.2)              (4.8)            (4.4)
</TABLE>





                                      F-27

<PAGE>

PROVALIS PLC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2003


25.  COMPANIES ACT 1985

The  Consolidated  Financial Statements do not constitute "statutory  accounts"
within the meaning of  the  Companies  Act 1985 of Great Britain for any of the
periods presented. Statutory accounts for the years ended June 30 2003 and 2002
have been filed with the United Kingdom's  Registrar of Companies. The auditors
have  reported on these accounts. The reports  were  unqualified  and  did  not
contain statements under Section 237(2) or (3) of the Act.

These  Consolidated   Financial   Statements  exclude  certain  parent  company
statements and other information required  by  the Companies Act 1985, however,
they include all material disclosures required by generally accepted accounting
principles in the United Kingdom including those Companies Act 1985 disclosures
relating to the statements of income and balance sheet items.


26. SUBSEQUENT EVENT

The  Group's  UK  financial   statements   for  the year ended 30 June 2003 were
approved  and issued on the 1st  September  2003.  In  December  2003 the Inland
Revenue rejected a claim for Research and Development tax credits in the Medical
Diagnostics  business.  The group is strongly  contesting  the Inland  Revenue's
decision. Cumulatively, the Group has recognised {pound-sterling}0.4m in respect
of the  Research  and  Development  tax  credits  for  the  Medical  Diagnostics
business. However if the Group's appeals are unsuccessful,  the cash received to
date of {pound-sterling}0.3m in respect of these credits will have to be repaid.

At the same time the Inland  Revenue  accepted  the claim for the  Research  and
Development  tax  credits  for  the  Therapeutics   business  at  an  amount  of
{pound-sterling}0.1m  in  excess of the  credits  previously  recognised  in the
accounts.

The  effect  of  the  Inland  Revenue's  decisions  to  date on the accounts for
the  year  ended  30  June  2004  will  be an  increase  in the  tax  charge  of
{pound-sterling}0.3m. As the event occurred subsequent to the issuance of the UK
financial  statements  for the year  ended 30 June 2003 it is not  reflected  in
those financial statements.



















                                      F-28


<PAGE>

                                  SIGNATURES

The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.


                                        PROVALIS PLC


                                        "/s/ Philip Leon Gould"
                                        Name: Philip Leon Gould
                                        Title: Chief Executive Officer

Date:  January 14th 2004



                                      S-1


<PAGE>



                                  EXHIBIT INDEX

Exhibit
1.1    Memorandum and Articles of Association of the Company  (incorporated  by
       reference to Exhibit 1.1 to the Company's annual report on Form 20-F for
       the fiscal year ended June 30, 2000).
2.1    Amended and Restated  Deposit  Agreement  (incorporated  by reference to
       Exhibit  A  to  the   Company's   post-effective   amendment  no.  1  to
       registration  statement on Form F-6, File No. 333-8072,  filed on August
       5, 2002).
4.1    Standard Form Service Agreement for Executive  Directors of Provalis plc
       (incorporated by reference to Exhibit 4.1 to the Company's annual report
       on Form 20-F  (incorporated by reference to Exhibit 4.1 to the Company's
       annual report on Form 20-F for the fiscal year ended June 30, 2001).
4.2    Sale of Sale ofBusiness  Agreement dated 24th October 2001 between Parke
       Davis & Co Limited,  and  Provalis  Healthcare  Limited and Provalis plc
       (incorporated by reference to Exhibit 4.2 to the Company's annual report
       on Form 20-F for the fiscal year ended June 30, 2001).
4.3    Rules of the 1997 Employee Option Scheme  (incorporated  by reference to
       Exhibit 4.3 to the  Company's  annual report on Form 20-F for the fiscal
       year ended June 30, 2002).
4.4    Rules of the 2001 Save As You Earn Scheme  (incorporated by reference to
       Exhibit 4.4 to the  Company's  annual report on Form 20-F for the fiscal
       year ended June 30, 2002).
4.5    Rules of the Provalis plc Long Term Incentive Plan 2003.
4.6    Draft Trust Deed of the Provalis plc employee share ownership trust.
4.7    Underwriting  Agreement made between the Company,  N M Rothschild & Sons
       Limited and Beeson Gregory Limited dated 7 March 2002  (incorporated  by
       reference to Exhibit 4.5 to the Company's annual report on Form 20-F for
       the fiscal year ended June 30 2002).
4.8    Standard form of irrevocable  undertaking  given by each director of the
       Company  and by  Yggdrasil  AB in  connection  with the Placing and Open
       Offer  announced  by the  Company  on 12  March  2003  (incorporated  by
       reference to Exhibit 4.6 to the Company's annual report on Form 20-F for
       the fiscal year ended June 30 2002).
4.9    Distribution Agreement made between Interfalk AG and Thames Laboratories
       Limited dated March 13, 1992, as amended by an Amendment and Termination
       Deed,  and a Non-Compete  Deed,  both dated  January 31, 2003,  and made
       between Dr Falk Pharma and Provalis plc.
4.10   Distribution   Agreement  made  between   Cholestech  Inc  and  Provalis
       Diagnostics Limited dated May 20, 2002.

                                      Ex-1

<PAGE>

6      See notes to the consolidated financial statements.
8      See "Organisational Structure" under Item 4.
12.1   Certification of the Chief Executive  Officer pursuant to Section 302 of
       the Sarbanes-Oxley Act of 2002.
12.2   Certification of the Chief Financial  Officer pursuant to Section 302 of
       the Sarbanes-Oxley Act of 2002.
13.1   Certification of the Chief Executive Officer pursuant to Section 1350 of
       Chapter  63 of Title 18 of the  United  States  Code,  18 USC  1350,  as
       adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13.2   Certification of the Chief Financial Officer pursuant to Section 1350 of
       Chapter  63 of Title 18 of the  United  States  Code,  18 USC  1350,  as
       adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.








                                     Ex-2


<PAGE>


                                                                    EXHIBIT 4.5

            RULES OF THE PROVALIS PLC LONG TERM INCENTIVE PLAN 2003




1     DEFINITIONS AND INTERPRETATION


1.1   In these Rules, unless the context otherwise requires:


      THE ADOPTION DATE means the date upon which this Scheme is adopted by the
      Company


      ANNUAL  BONUS means the gross cash amount payable to an Eligible Employee
      in respect of any Financial  Year  under  any  annual  bonus  plan of the
      Company or any other member of the Group


      APPROPRIATE PROPORTION RANGE means, in relation to each Eligible Employee
      selected  to  participate  in  this  Plan  for  any  Financial  Year, the
      percentage  range  of  his Annual Bonus which the Committee notifies  (in
      accordance with Rule 2.1(b)) to such Eligible Employee as being the range
      from  which  he may select  the  Appropriate  Proportion  to  be  applied
      pursuant to the Plan in the purchase of Restricted Shares


      APPROPRIATE PROPORTION has the meaning given thereto in Rule 2.2


      AWARD CERTIFICATE means a certificate issued in accordance with Rule 4.4


      AWARD means a  Contingent  Award  and/or  an Option Award as the case may
      require


      AWARD DATE means, in relation to any Contingent  Award, the date on which
      such Award is made


      AWARD DEED has the meaning given thereto in Rule 4.8


      AWARD PERIOD means the period of 42 days following  the date on which the
      Company  announces  to the London Stock Exchange its preliminary  results
      for the Financial Year in respect of which the applicable Annual Bonus is
      payable


      BUSINESS DAY means a  day  on which the London Stock Exchange is open for
      business in London


      COMMITTEE means the committee  of  the  board of directors of the Company
      whose principal task is to consider and determine  (or  recommend  to the
      board of directors) the remuneration (in all its forms) of, among others,
      executive  directors  of  the  Company  or,  in  the  absence of any such
      committee, such other committee, consisting principally  of non-executive
      directors,  to  which the operation of the Plan may be delegated  by  the
      board of directors of the Company


      THE COMPANY means Provalis plc (Registered No. 3321624)


      CONTINGENT AWARD means an award made by the Company to a Participant upon
      terms that the Company  agrees,  subject  to  and  in accordance with the
      Rules of the Plan and the Award Certificate, to transfer  or  to  procure
      the  transfer  to  such  Participant  Matching Shares on or following the
      Vesting Date in relation to that award  and  which  is for the time being
      subsisting or (where the context so requires or permits)  such  an  award
      proposed to be so made


      CONTROL has the meaning ascribed thereto by section 840 Taxes Act

                                      63

<PAGE>

      EBT  means  an  employee  benefit  trust  established  for the benefit of
      persons  who  include substantially all of the persons who  are  Eligible
      Employees


      ELIGIBLE EMPLOYEE means, at any time, any person who, at that time, is an
      employee (including  an  executive director) of any one or more companies
      in the Group


      EMPLOYEES' SHARE SCHEME has  the  meaning  given  thereto  in section 743
      Companies Act 1985


      EXERCISE  PERIOD  means,  in  relation  to  an  Option  Award, the period
      commencing  on  the  Vesting  Date in relation to that Option  Award  and
      ending  three  months thereafter  or,  if  the  Participant,  not  having
      previously exercised  the  Option Award, shall be prevented from so doing
      on the last day of the said period of three months by virtue of Rule 8.1,
      ending 30 days after the first day thereafter on which he shall not be so
      prevented


      FINANCIAL YEAR means a financial  year  (within the meaning given thereto
      by section 223 Companies Act 1985) of the Company


      GROUP  means  the Company and its subsidiaries  (within  the  meaning  of
      section 736 Companies Act 1985) for the time being


      LONDON STOCK EXCHANGE means the Recognised Stock Exchange operated at the
      Adoption Date by London Stock Exchange plc or such other Recognised Stock
      Exchange as is the principal stock exchange in the United Kingdom


      MARKET VALUE means in relation to a Plan Share on any date:


      (a)  if the Plan Shares have been admitted to the Official List of the UK
           Listing Authority  and  to trading on the London Stock Exchange, the
           middle market quotation of  a  Plan  Share as derived from the Daily
           Official List of the London Stock Exchange  dated  the  Business Day
           immediately preceding such date; or


      (b)  if  the Plan Shares are not then so listed and traded on the  London
           Stock  Exchange,  market value as determined for the purposes of the
           Plan by the Committee  having regard to the provisions of  Part VIII
           of the Taxation of Chargeable Gains Act 1992


      MATCHING SHARES has the meaning given thereto in Rule 4.3


      MATCHING SHARES MARKET VALUE  means  for the purposes of Rules 2.1(c) the
      average middle market quotation of a Plan  Share  for the 90 dealing days
      immediately preceding (and ending on) the last day  of the Financial Year
      in respect of which the relevant Annual Bonus is payable


      MODEL CODE means, at any time, the then current model  code on directors'
      dealings in listed securities traded on the London Stock Exchange or such
      other code of dealing in terms no less exacting than such  model  code as
      may have been adopted by the Company


      NOTIFIED SUM has the meaning given thereto in Rule 8.6


      OPTION  AWARD  means  a  right  to acquire Matching Shares granted by the
      Company to a Participant in accordance with the Plan and applicable Award
      deed and for the time being subsisting  or (where the context so permits)
      such a right proposed to be granted under the Plan


      ORDINARY SHARE CAPITAL has the meaning given thereto by section 832 Taxes
      Act and ORDINARY SHARE shall be construed accordingly

                                      64

<PAGE>

      PARTICIPANT means a person who holds an Award  and  includes  (where  the
      context admits) his personal representatives


      PERFORMANCE CERTIFICATE means a certificate to be delivered in accordance
      with Rule 5.1


      PERFORMANCE CONDITION means any performance or other condition imposed by
      the  Committee pursuant to Rule 4.6 in relation to an Award and specified
      in the Award Deed in relation to that Award


      PERFORMANCE  PERIOD  means, in relation to an Award, the period specified
      as such in the Award Deed in relation to such Award, not being a period:


      (a)  commencing earlier than the first day of the Financial Year in which
           the Award Date falls; and


      (b)  of less than 35 months


      PLAN means the Plan constituted  by  these  Rules  in its present form or
      with and subject to any amendment thereto for the time being in force


      PLAN SHARE means a fully paid ordinary share (of whatever  class)  in the
      capital of the Company


      RECOGNISED  STOCK  EXCHANGE  has the meaning given thereto in section 841
      Taxes Act


      RELEVANT AMOUNT means, in relation  to an Eligible Employee, the net cash
      amount to be paid to the Trustees or  the  Participant (as applicable) in
      accordance with Rule 3.1 as the Committee shall  determine represents the
      net cash amount of the Appropriate Proportion of his  Annual  Bonus after
      the  deduction  or withholding therefrom of all amounts required  by  the
      laws of any applicable  jurisdiction to be deducted or withheld therefrom
      in respect of tax and national insurance or social security contributions
      or levies or in respect of any other matter whatsoever


      RESTRICTED SHARES has the meaning given thereto in Rule 3.5


      RIGHTS OFFER means an offer  conferring  rights in respect of Plan Shares
      to be allotted or to acquire, on payment,  other  shares or securities or
      rights of any description in the Company


      RULES means the rules of this Plan including any amendments  effected  in
      accordance with Rule 10 from time to time in force


      SHARE SCHEMES means:


      (a)  the Plan; and


      (b)  any  other employees' share scheme adopted by the Company in general
           meeting.


      TAXES ACT means the Income and Corporation Taxes Act 1988


      TRUSTEES means the trustee or trustees for the time being of any EBT


      VESTING DATE  means,  in  relation  to  an  Award,  the date upon which a
      Performance Certificate is issued in respect of the Award or such earlier
      date  on  which  the  Award  has  become  exercisable  or has  vested  in
      accordance with the Plan and applicable Award Deed


1.2   A Participant shall, for the purposes of these Rules, be treated as being
      in QUALIFYING SERVICE at any time if at that time he is a director, other
      than a non-executive director, or an employee of any member of the Group.

                                      65
<PAGE>


1.3   In these Rules unless the context otherwise requires:


      (a)  words importing the singular only shall include the  plural and vice
           versa, words importing the masculine gender only shall  include  the
           feminine  gender  and  words  importing  natural  persons shall also
           include corporations;


      (b)  references  to  any  statute  or  statutory provision shall  include
           (i) any subordinate legislation made under it and (ii) any provision
           superseding  it  or  re-enacting  it  (whether   with   or   without
           modification);


      (c)  references  to  a Rule or Rules are to a rule or rules of this Plan;
           and


      (d)  the descriptive headings to Rules are inserted for convenience only,
           have no legal effect  and  shall be ignored in the interpretation of
           these Rules.


2     NOTIFICATION OF AWARDS


2.1   The Committee may, in relation to  any  present  or  future Award Period,
      notify  Eligible Employees who are prospectively entitled  to  an  Annual
      Bonus and,  where  the  Committee  determines  in its discretion that the
      Restricted Shares be acquired by the Trustees on  behalf  of the Eligible
      Employee, the Trustees of:


      (a)  the type of Award which it is offering to the Eligible Employee;


      (b)  the Appropriate Proportion Range for that Financial Year, in respect
           of which the minimum may not be less than 25 per cent  of the Annual
           Bonus  and  the  maximum  may  not exceed 50 per cent of the  Annual
           Bonus;


      (c)  the basis on which the number of Matching Shares which the Committee
           agrees to make available to the  Eligible  Employee  pursuant to the
           terms of the Award and the Plan will be calculated, which  shall  be
           up  to  a  maximum  of  the cash value of the Appropriate Proportion
           multiplied by three and divided by the Matching Shares Market Value,
           as the Committee shall in its discretion determine; and


      (d)  the Performance Period and  the  Performance  Condition(s) which the
           Committee is imposing in relation to the Award


      provided  that  for the purposes of this Rule 2.1, an  Eligible  Employee
      shall  be  deemed  to  be  prospectively  entitled  to  an  Annual  Bonus
      notwithstanding that  it  may  be a condition of such entitlement that he
      participate in the Plan.


2.2   On receipt of the notification referred  to  in  Rule  2.1,  an  Eligible
      Employee who wishes to receive an Award under the Plan, shall inform  the
      Company   in   writing,  within  5  business  days  of  receipt  of  such
      notification of  the  proportion  of  his  Annual Bonus (which shall fall
      within the Appropriate Proportion Range notified  to him pursuant to Rule
      2.1(b)) which he wishes to apply towards acquiring  Restricted  Shares in
      accordance  with  Rule  3.4 (APPROPRIATE PROPORTION).  In the absence  of
      making such a notification  to  the Company, the Committee may determine,
      in its discretion:


      (a)  that the Eligible Employee does not wish to participate in the Plan,
           in which event, no Award shall be made to the Eligible Employee; or


      (b)  the Appropriate Proportion in respect of such Eligible Employee.

                                      66
<PAGE>


3     RESTRICTED SHARES


3.1   Following the determination of the  Appropriate  Proportion in accordance
      with Rule 2.2, the Company shall, where it determines  in  its discretion
      that the Restricted Shares are to be acquired by the:


      (a)  Participant,  pay the Annual Bonus to the Participant, on  condition
           that the Relevant  Amount  shall, subject to Rule 3.2, be applied in
           accordance with Rules 3.3 and 3.4(b); or


      (b)  Trustees, on behalf of the Participant,  the  Relevant Amount shall,
           subject to Rule 3.2 ,be paid out of the Annual Bonus to the Trustees
           on  or  before  the  day it would otherwise have been  paid  to  the
           Eligible Employee to be  applied  in  accordance  with Rules 3.3 and
           3.4(a) and only the balance of the Annual Bonus (less  tax and other
           withholdings on the total amount of the Annual Bonus) shall  be paid
           to the Eligible Employee.


3.2   If  an Eligible Employee selected for participation in this Plan for  any
      Financial Year:


      (a)  has  ceased to be an Eligible Employee on or before the day on which
           the payment  of the Relevant Amount is to be made in accordance with
           Rule 3.1; or


      (b)  on or before that day has given or received notice of termination of
           his employment  upon  the  expiry  of  which he would cease to be an
           Eligible Employee (whether such notice would  expire  before,  on or
           after that day),


      he  shall not be entitled to an Award of Matching Shares pursuant to this
      Plan  and  the  availability of his Annual Bonus shall be governed by the
      terms of the Eligible Employee's service contract.


3.3   The Relevant Amount  shall  be  paid  in  the  currency of payment of the
      Eligible  Employee's  Annual Bonus and, if such currency  is  not  pounds
      sterling, the Participant  or the Trustees (as applicable) shall purchase
      pounds sterling with the moneys  received  in such other currency as soon
      as practicable after receipt of the Relevant Amount by them and shall pay
      all bank and other charges incurred in making  such  purchase out of such
      moneys.


3.4   The Participant or the Trustees (as applicable) shall  apply the Relevant
      Amount  paid to them in accordance with Rule 3.1 (after,  if  applicable,
      conversion into pounds sterling in accordance with Rule 3.3 and deduction
      of the costs of such conversion):


      (a)  in the  case of the Trustees, in purchasing Plan Shares as agent for
           and on behalf of such Participant on the day on which funds received
           by the Trustees  in  accordance  with  Rule 3.1 would otherwise have
           been paid to the Eligible Employee or, if  for  any  reason they are
           unable  to  purchase Plan Shares or sufficient Plan Shares  on  that
           day, as soon as practicable thereafter; or


      (b)  in the case of the Participant, in purchasing Plan Shares on the day
           on which he receives  the Relevant Amount in accordance with 3.1 or,
           if for any reason he is unable to purchase Plan Shares or sufficient
           Plan Shares on that day, as soon as practicable thereafter


      provided  that  in  each such case  the  relevant  Plan  Shares  will  be
      purchased:


      (c)  on the London Stock Exchange at the best available price; or


      (d)  by private treaty  (including  from  the  Trustees  acting  in their
           capacity as trustees of the EBT) at a price no greater than the best
           available  price for purchases on the London Stock Exchange on  that
           day

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<PAGE>

      in addition, the  Relevant Amount shall also be applied by the Trustee or
      Participant (as applicable)  in  meeting all commissions and expenses and
      stamp  duty or stamp duty reserve tax  arising  on  such  purchase.   Any
      balance  of  such  amount  not  so applied shall be either by paid by the
      Trustee to the Eligible Employee  or  retained  by  the  Participant  (as
      applicable).


3.5   The  Plan Shares purchased by or on behalf of a Participant in accordance
      with Rule  3.4  are  referred  to  as RESTRICTED SHARES, which expression
      shall extend to and include any shares  in  the  capital  of  the Company
      arising  as  a result of any redesignation, sub-division or consolidation
      of Restricted  Shares  and  any  additional  shares, securities or rights
      which may be registered in the name of the Participant or the Trustees in
      accordance with Rule 3.6 or Rule 3.7.


3.6   Shares,  securities  or  rights  in  the  Company  issued   by   way   of
      capitalisation  in respect of Restricted Shares shall, on registration in
      the name of the Participant  (where  the Relevant Amount was paid to such
      Participant  in  accordance with Rule 3.1(a))  or  in  the  name  of  the
      Trustees  (where  the  Relevant  Amount  was  paid  to  the  Trustees  in
      accordance with Rule 3.1(b)), be treated as additional Restricted Shares.


3.7   In the event of a Rights Offer:


      (a)  where  the Restricted  Shares  are  held  by  the  Participant,  the
           Participant may take or refrain from taking action in such manner as
           he may determine (subject, where necessary, to his paying any moneys
           required  to  subscribe  for  or  pay for such shares, securities or
           rights and to pay any commissions and  expenses, stamp duty or stamp
           duty reserve tax in connection with such  subscription  or purchase)
           and,  in the event that the Participant subscribes for or  purchases
           any such  shares,  securities  or  rights, the Participant may elect
           that  so  many of such shares, securities  or  rights  as  he  shall
           determine (not exceeding the number which could have been subscribed
           for or purchased  with  the  proceeds  of  a disposal of some of the
           rights  in  respect  of  his Restricted Shares in  order  to  obtain
           sufficient funds to exercise  other such rights or, where the rights
           in respect of his Restricted Shares  are  not  themselves capable of
           disposal,  with the proceeds of a disposal of some  of  the  shares,
           securities or  rights offered in order to obtain sufficient funds to
           reimburse the cost  of acquisition of all such shares, securities or
           rights) are to be held by him as additional Restricted Shares; or


      (b)  where the Restricted  Shares  are held by the Trustees, the Trustees
           shall, in relation to the shares,  securities  or  rights offered to
           the Trustees as holders of Restricted Shares beneficially  owned  by
           the  Participant,  take or refrain from taking action in such manner
           as the Participant directs (subject where necessary to his paying to
           the Trustees or as they  direct any moneys required to subscribe for
           or  pay  for  such shares, securities  or  rights  and  to  pay  any
           commissions and  expenses,  stamp  duty or stamp duty reserve tax in
           connection with such subscription or  purchase)  and,  in  the event
           that  the  Participant  directs  the  Trustees  to  subscribe for or
           purchase  on his behalf any such shares, securities or  rights,  the
           Participant  may  direct  the  Trustees that so many of such shares,
           securities or rights as the Participant specifies (not exceeding the
           number which could have been subscribed  for  or  purchased with the
           proceeds  of  a  disposal  of some of the rights in respect  of  his
           Restricted Shares in order to  obtain  sufficient  funds to exercise
           other such rights or, where the rights in respect of  his Restricted
           Shares are not themselves capable of disposal, with the  proceeds of
           a  disposal  of some of the shares, securities or rights offered  in
           order  to  obtain   sufficient   funds  to  reimburse  the  cost  of
           acquisition of all such shares, securities or rights) are to be held
           by the Trustees as additional Restricted  Shares.  In the absence of
           instructions the Trustees shall allow the rights offered to lapse.

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<PAGE>

3.8   Restricted  Shares  acquired  in accordance with Rule  3.4(a),  shall  be
      registered  in the name of the Trustees  who  shall  hold  them  as  bare
      nominee for the Participant for whom they were purchased and not in their
      capacity as trustees of the EBT and, accordingly, the Trustees shall:


      (a)  account  to  the  Participant for all dividends and, subject to Rule
           3.5, other distributions  received  in  respect  of  his  Restricted
           Shares;


      (b)  vote  in respect of any Restricted Shares at any general meeting  of
           the Company  in  accordance  with  the  written  instructions of the
           Participant beneficially entitled thereto;


      (c)  transfer all or any of the Restricted Shares forthwith  upon written
           demand  by  the  Participant  beneficially entitled thereto to  such
           Participant or as he may direct;


      (d)  without prejudice to Rule 3.7,  generally  deal  with the Restricted
           Shares  in  such  manner  as  the Participant beneficially  entitled
           thereto may in writing direct; and


      (e)  unless  otherwise  instructed  by   the  Participant,  transfer  the
           Restricted Shares into the name of the  Participant  within  28 days
           after  the  earlier  of  the  Vesting Date and the date on which the
           Participant ceases to be in Qualifying Service.


3.9   Restricted  Shares acquired in accordance  with  Rule  3.4(b),  shall  be
      registered in  the  name  of  the  Participant who will be the beneficial
      owner of such shares.  Accordingly,  as beneficial owner, the Participant
      will have complete discretion as to any  dealings  in  the  shares and in
      relation to any receipts in respect of the Restricted Shares.


3.10  Where Restricted Shares are held by the Trustees in accordance  with rule
      3.8,  no instruction to the Trustees in respect of any Restricted  Shares
      shall be  valid  and binding on the Trustees unless it is in writing duly
      executed by the Participant  beneficially  entitled  to  such  Restricted
      Shares or his agent or attorney duly authorised in writing by him.


3.11  Restricted Shares shall be purchased within the relevant Award Period  in
      respect  of  the  Financial Year in relation to which the Annual Bonus is
      payable, provided that  Restricted  Shares  may be purchased at any other
      time at which the Committee resolves that exceptional circumstances exist
      which justify the same.


4     AWARDS OF MATCHING SHARES


4.1   Following the determination of the Appropriate  Proportion  in accordance
      with Rule 2.2, the Committee shall make Awards of Matching Shares during:


      (a)  any Award Period; or


      (b)  at  any  time  not  within  an  Award  Period at which the Committee
           considers that exceptional circumstances  exist  which  justify  the
           making of an Award or Awards


      provided  that,  if,  by  reason  of  statute, order, rule, regulation or
      government directive or any undertaking or agreement to which the Company
      may for the time being be a party as a  condition of or in consequence of
      its ordinary share capital being traded on  or dealt in on any recognised
      stock exchange, the Company shall be restricted from making Awards within
      any Award Period, Awards may be made within the  period  of 42 days after
      the lifting of such restrictions.


4.2   Any Award shall be conditional upon Restricted Shares being  purchased in
      accordance with Rule 3.4.

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<PAGE>

4.3   The  Plan Shares in respect of which an Award is made in accordance  with
      this Rule  4  are  referred  to  in  these Rules as MATCHING SHARES which
      expression shall extend to and include  any  shares, securities or rights
      in the Company which by virtue of Rule 9 are for the time being comprised
      in an Award.


4.4   An Award shall be either:


      (a)  an  Option  Award, being the grant by the Company  to  the  relevant
           Participant of  an  option to acquire for nil consideration from the
           Company up to such number  of  Plan  Shares  as  is specified in the
           Award  Deed  relating  to such Option Award upon the  terms  and  in
           accordance with the Rules  of  the  Plan  and  the provisions of the
           Award Deed relating to such Option Award; or


      (b)  a Contingent Award, being a contingent award by  the  Company  to  a
           Participant  upon  terms  whereby  the  Company will, subject to the
           Rules of the Plan and the relevant Award  Deed,  on or following the
           Vesting  Date  in  relation  to that Contingent Award  transfer  (or
           procure the transfer) to such  Participant  up  to  such  number  of
           Matching Shares as is specified in the relevant Award Deed.


4.5   The  maximum  number  of  Matching  Shares  comprised  in an Award to any
      Eligible  Employee  shall  be  calculated  on the basis notified  to  the
      Eligible  Employee  in  accordance  with  Rule  2.1(c),   following   the
      determination of the Appropriate Proportion in accordance with Rule 2.2.


4.6   In making any Award under the Plan the Committee shall determine that the
      exercise   or   vesting  of  such  Award  shall  be  conditional  on  the
      satisfaction of one or more performance or other conditions determined by
      the Committee before  such Award is made.  Any such Performance Condition
      may provide that the Award  shall  become exercisable or, as the case may
      be, shall vest in respect of a given number or proportion of the Matching
      Shares comprised in the Award according  to  whether,  and  the extent to
      which, such condition is met.


4.7   If  prior  to  the  satisfaction  of  any  Performance  Condition imposed
      pursuant  to  Rule  4.6,  an  event  occurs  which  causes  the Committee
      reasonably  to  consider  that any such Performance Condition would  not,
      without some alteration or  addition,  achieve  its original purpose, the
      Committee  may  make  such  alteration  or addition to  such  Performance
      Condition  as  it  considers  fair  and  reasonable   but  so  that  such
      Performance  Condition shall not be any more difficult to  satisfy  after
      such alteration or addition than it was as originally imposed.


4.8   An Award shall  be  made  to an Eligible Employee by deed in such form as
      the Committee may decide (an  AWARD  DEED) which shall be executed by the
      Company and:


      (a)  if the Eligible Employee has previously  executed a separate deed in
           favour of the Company irrevocably agreeing  to be bound by the Rules
           of the Plan and the terms of any Award which may be made to him, the
           Award shall be treated as having been made and  shall take effect on
           delivery of the Award Deed by the Company; or


      (b)  if Rule 4.7(a) does not apply, the Award shall be  treated as having
           been  made  on  delivery  by  the Company but shall not take  effect
           unless and until the Award Deed  has  also been duly executed by the
           Eligible Employee to whom the Award is made.


4.9   An Award shall be evidenced by an Award Certificate  (which may, but need
      not, constitute an Award Deed) issued by the Company to  the  Participant
      specifying:


      (a)  the Award Date;


      (b)  whether the Award is an Option Award or a Contingent Award;

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<PAGE>

      (c)  the  maximum  number  of Matching Shares to which the Award relates,
           being the maximum number of Matching Shares which may be acquired on
           exercise of an Option Award or the maximum number of Matching Shares
           which may vest pursuant to a Contingent Award;


      (d)  the Performance Period; and


      (e)  details of any Performance  Conditions  imposed  in  relation to the
           Award pursuant to Rule 4.6.


4.10  No monetary consideration shall be payable for the making or  grant of an
      Award or in the respect of the vesting or exercise of any Award.


4.11  Each  Award  shall be personal to the Participant and shall not (save  as
      provided in Rules 7.1, 7.3, 7.4 and 7.5) be capable of being transferred,
      assigned, charged,  encumbered  or in any way dealt in or of being listed
      or dealt in on any stock exchange  and,  if (save as aforesaid) any Award
      or any interest therein is or is purported  to  be transferred, assigned,
      charged, encumbered or in any way dealt in, such  Award  shall  lapse and
      the Company shall not knowingly permit its vesting or exercise.


4.12  No  Award shall be made on a date which is more than ten years after  the
      Adoption Date.


4.13  Without  prejudice  to Rules 8.5 and 8.6, the Company may, in relation to
      any Option Award, either  in  any such separate deed as is referred to in
      Rule 4.8(a) or in the Award Deed relating to the Option Award executed by
      the Eligible Employee in accordance  with  Rule  4.8(b),  if  and  to the
      extent  so  permitted  by law, make it a condition of the exercise of the
      Option Award that the Participant makes good to the Company, the Trustees
      or any other member of the  Group  or  any  other  person (other than the
      Participant) all or such part as may be specified in  the  Award  Deed of
      any secondary national insurance contributions for which the Company, the
      Trustees  or  any  other member of the Group or any such other person  is
      liable as a consequence of such exercise.


5     CERTIFICATION OF PERFORMANCE CONDITIONS


5.1   The  Company  shall,  as  soon  as  practicable  after  the  end  of  the
      Performance Period in relation to any Award, ascertain whether or not all
      or any of the Performance  Conditions have been satisfied and the Company
      shall  use  its  reasonable endeavours  to  issue  a  written  notice  (a
      PERFORMANCE CERTIFICATE)  within  four months following the expiry of the
      relevant Performance Period notifying  the  Participant (and the Trustees
      where applicable) whether or not the Award, if  it is an Option Award, is
      exercisable or, if it is a Contingent Award, whether or not the Award has
      vested in accordance with the Plan and the applicable Award Deed.


5.2   If the Company shall notify the Participant that  an Award is exercisable
      or  has  vested in accordance with Rule 5.1, it shall,  in  the  relevant
      Performance  Certificate,  also  notify the Participant (and the Trustees
      where applicable) of the number of  Matching  Shares  in respect of which
      the Award, if it is an Option Award, may be exercised by  the Participant
      or,  if the Award is a Contingent Award, has vested and the  Award  shall
      lapse  in respect of any Plan Shares in respect of which it does not then
      become exercisable or does not then vest.


5.3   If the Performance Certificate shall certify that none of the Performance
      Conditions  has  been  satisfied,  the  Award shall lapse in its entirety
      forthwith  upon  receipt  by the Participant  (and  the  Trustees,  where
      applicable) of the Performance Certificate.


6     EXERCISE AND VESTING OF AWARD IN NORMAL CIRCUMSTANCES


6.1   Save as otherwise provided  in  Rule  7,  an  Option  Award shall only be
      capable of being exercised and a Contingent Award shall  only  be capable
      of vesting:

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<PAGE>

      (a)  if  the  Participant  has been in Qualifying Service throughout  the
           period commencing on the  applicable  Award Date and ending the date
           of receipt by the Participant or the Trustees (as applicable) of the
           applicable Performance Certificate issued pursuant to Rule 5.1;


      (b)  if the applicable Performance Certificate  shall  certify  that  the
           Performance  Conditions  imposed  pursuant  to  Rule  4.6  have been
           satisfied; and


      (c)  the  Participant  has  not  and  has not instructed the Trustees  to
           transfer any of the Restricted Shares  to him or as he may direct to
           prior to the Vesting Date


      but  shall only be exercisable or vest to the  extent  specified  in  the
      applicable Performance Certificate.


6.2   An Award  shall  lapse  on the happening of the earliest of the following
      events:


      (a)  where Rule 5.3 applies,  the  receipt  by the Participant and/or the
           Trustee (as applicable) of the relevant Performance Certificate;


      (b)  where  Rule  5.2  applies,  the  receipt by Participant  and/or  the
           Trustee (as applicable) of the relevant Performance Certificate, but
           only  to  the  extent  determined in accordance  with  the  relevant
           Performance Certificate;


      (c)  in the case of an Option  Award,  the expiry of its Exercise Period,
           unless the Participant shall have died at any time before the expiry
           of the Exercise Period;


      (d)  if the Participant ceases to be in  Qualifying  Service  before  the
           date of receipt by Participant and/or the Trustee (as applicable) of
           the  applicable  Performance Certificate and prior to the occurrence
           of any such event  as  is  referred  to in any of Rules 7.6, 7.7 and
           7.8, the expiry of the period of 90 days  after  the day on which he
           so ceases, unless and to the extent (if any) to which  the Committee
           before the expiry of such period of 90 days exercises its discretion
           pursuant  to  Rule 7.1  or  Rule  7.2 to permit him (or his personal
           representatives)  to exercise the Option  Award  or  to  permit  the
           Contingent Award to vest;


      (e)  in the case of an Option  Award,  the expiry of the period permitted
           for the exercise of the Option Award  by  the Participant's personal
           representatives in accordance with Rule 7.1,  Rule  7.3, Rule 7.4 or
           Rule 7.5;


      (f)  in  the case of an Option Award, the expiry of the period  permitted
           for exercise  by  the  Participant of the Option Award in accordance
           with  Rule 7.2(B) unless  the  Participant  shall  die  during  such
           period;


      (g)  the expiry of the period specified in accordance with Rule 7.7;


      (h)  in the case of an Option Award, where any such event as is specified
           in any  of  Rules  7.7(a),  7.7(b) and 7.7(c) occurs on or after the
           Vesting  Date, the expiry of such  period  as  the  Committee  shall
           determine  and  notify  to  the  Participant in writing (not being a
           period of less than one month from the date of such notification);


      (i)  the passing of a resolution for the  voluntary  winding  up  of  the
           Company or the making of an order for its compulsory winding up; and


      (j)  the Participant becoming bankrupt.

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<PAGE>

7     RIGHT TO EXERCISE AND VESTING OF AWARD IN SPECIAL CIRCUMSTANCES


7.1   In  the  event  of the death of the Participant while he is in Qualifying
      Service before the date of receipt by Participant (and, where applicable,
      the Trustee) of the  applicable  Performance Certificate and prior to the
      occurrence of any such event as is  referred  to in any of Rules 7.6, 7.7
      and 7.8, the Committee may, in their discretion,  cause the Award to vest
      immediately to such extent as the Committee may determine  in  accordance
      with  Rule  7.9  and,  in  the  case  of  an Option Award, may permit the
      personal representatives of the Participant  to exercise the Option Award
      to the extent so determined during such period  (not exceeding 12 months)
      after the date of the Participant's death as they may determine, provided
      that such discretion shall be exercised (if at all) no later than 90 days
      after the death of the Participant and, in the case  of  an Option Award,
      the  Award shall not be exercisable unless and until such discretion  has
      been so exercised.


7.2   In the event of a Participant ceasing to be in Qualifying Service, before
      the date  of  receipt by Participant (and, where applicable, the Trustee)
      of the applicable  Performance Certificate and prior to the occurrence of
      any such event as is  referred  to  in  any of Rules 7.6, 7.7 and 7.8, by
      reason of:


      (a)  retirement on or after reaching his  normal retirement date or, with
           the consent of the Committee, prior to that date;


      (b)  redundancy (within the meaning of the Employment Rights Act 1996);


      (c)  injury, disability or ill-health (evidenced  to  the satisfaction of
           the Company);


      (d)  the company by which he is employed ceasing to be  a  member  of the
           Group;


      (e)  the  undertaking  in  which he is employed being sold or transferred
           outside the Group; or


      (f)  other special circumstances as determined by the Committee;


      the Committee may, in its discretion, either:


      (A)  permit  the  Award  to vest  after  the  issue  of  the  Performance
           Certificate in respect  of such Award but so that the maximum number
           of Matching Shares in respect of which the Award shall be capable of
           so vesting shall be determined in accordance with Rule 7.10; or


      (B)  except in a case falling  within  Rule  7.2(f),  in  the  case  of a
           Contingent Award, cause the Award to vest immediately to such extent
           as  the  Board may determine in accordance with Rule 7.9 and, in the
           case of an  Option  Award,  permit  the Award to be exercised to the
           extent so determined during such period  (subject  to  Rule  7.3) as
           they may determine;


      provided  that  such  discretion  shall be exercised (if at all) no later
      than 90 days after the date on which  the  Participant  ceases  to  be in
      Qualifying  Service  and, in the case of an Option Award, the Award shall
      not be exercisable unless and until the discretion given by this Rule 7.2
      has been so exercised.


7.3   The personal representatives  of a deceased Participant shall be entitled
      to exercise an Option Award held  by  the  Participant at the date of his
      death  during  the  period  of  12  months  following  the  date  of  the
      Participant's  death (in so far as it shall not  have  lapsed  under  any
      other Rule), if either:


      (a)  the Participant  was in Qualifying Service at the date of receipt by
           the  Participant  (and,   where  applicable,  the  Trustee)  of  the
           applicable Performance Certificate  and  died  after  that  date and
           before the expiry of its Exercise Period; or

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<PAGE>

      (b)  the Participant had ceased to be in Qualifying Service prior  to his
           death  and  the  Committee  has  exercised their discretion (whether
           before or after his death) to permit exercise of his Option Award in
           accordance with Rule 7.2(B), provided that:


           (i)   where  such discretion was exercised  before  his  death,  the
                 period permitted  by  the  Committee for such exercise had not
                 expired at the date of his death; and


           (ii)  the Option Award may only be  exercised to the extent to which
                 the Committee has permitted it  to  be  exercised  pursuant to
                 Rule 7.2(B).


7.4   Subject  to Rule 7.5, if a Participant who has ceased to be in Qualifying
      Service dies  before  the  receipt by Participant (and, where applicable,
      the Trustee) of the Performance Certificate in respect of an Option Award
      made  to  him  which  remains capable  of  being  exercised  pursuant  to
      Rule 7.2(A), his personal  representatives  shall be entitled to exercise
      the Option Award (in so far as it shall not have  lapsed  under any other
      Rule)  during  the  period  commencing  on  the  date  of receipt by  the
      Participant  (and,  where  applicable,  the  Trustee) of the  Performance
      Certificate and ending on the later of the expiry  of the Exercise Period
      and the first anniversary of the Participant's death,  but  only  to  the
      extent  to  which  the  Participant  has  been permitted to exercise such
      Option Award in accordance with Rule 7.2.


7.5   If a Participant who has ceased to be in Qualifying  Service  dies before
      the earlier of the receipt by the Participant (and, where applicable, the
      Trustee)  of the Performance Certificate in respect of an Award  made  to
      him which remains  capable  of  being exercised or of vesting pursuant to
      Rule 7.2(A) and the occurrence of any such event as is referred to in any
      of Rules 7.6, 7.7 and 7.8, the Company  may, in its discretion, cause the
      Award to vest immediately to such extent  as  the Committee may determine
      in accordance with Rule 7.9 and, in the case of  an Option Award, may (to
      the  exclusion  of Rule 7.4) permit the personal representatives  of  the
      Participant to exercise  the  Option  Award  to  the extent so determined
      during  such  period  (not exceeding 12 months) after  the  date  of  the
      Participant's death as they may determine.


7.6   In the event that notice  is  given  to  shareholders of the Company of a
      resolution to approve the reconstruction or demerger of the Company or of
      any other member of the Group, the Company  may  make  such provision for
      the variation of the terms of any Award and/or the applicable Performance
      Condition(s) and/or for early exercise or early vesting  (in  whole or in
      part)  of  Awards  as  the  Committee  shall,  in  the  exercise  of  its
      discretion,   consider   appropriate  to  take  proper  account  of  such
      circumstances, provided that no such provision shall take effect so as to
      abrogate the rights of a Participant  without the Company first obtaining
      his consent in writing.


7.7   If before the receipt by Participant (and, where applicable, the Trustee)
      of the Performance Certificate in respect of an Award any person:


      (a)  obtains control of the Company as  a  result  of  making  a  general
           offer:


           (i)   to  acquire  the  whole  of  the  issued  share capital of the
                 Company  made  subject  to  a  condition such that  if  it  is
                 satisfied the person making the offer will have control of the
                 Company; or


           (ii)  to acquire all the shares in the Company which are of the same
                 class as the Plan Shares;


      (b)  obtains  control  of the Company in pursuance  of  a  compromise  or
           arrangement sanctioned  by the Court under section 425 Companies Act
           1985; or

                                      74
<PAGE>


      (c)  becomes bound or entitled  to acquire Plan Shares under sections 428
           to 430F (inclusive) Companies Act 1985;


      then  the  Company  may, in its discretion,  permit  the  Participant  to
      exercise an Option Award  which  has  not  yet  become exercisable or may
      cause a Contingent Award which has not yet vested  to  vest  within  such
      reasonable  period  as  the  Company  shall  determine  and notify to the
      Participant  in  writing  to  such  extent as the Committee may,  in  its
      discretion, determine in accordance with  Rule 7.11, notwithstanding that
      such exercise or vesting is within the Performance  Period  of the Award,
      provided that the provisions of Rule 7.6 shall apply, and this  Rule  7.7
      shall  not  apply,  in  relation to any circumstances in which any person
      acquires control of the Company  in consequence of a reconstruction which
      falls within the provisions of sections 135 to 139 Taxation of Chargeable
      Gains Act 1992.


7.8   In the event of notice being given  to shareholders of the Company before
      the receipt by Participant (and, where  applicable,  the  Trustee) of the
      Performance  Certificate in respect of any Award convening a  meeting  to
      consider a resolution  for  the  members'  voluntary  winding  up  of the
      Company,  the  Company may, in its discretion, permit the Participant  to
      exercise the Award  if  it  is  an Option Award or may cause the Award to
      vest at any time before the commencement of the winding up to such extent
      as the Committee may, in their discretion,  determine  in accordance with
      Rule 7.11, notwithstanding that such exercise or vesting  is  within  the
      Performance Period.


7.9   An  Award  may  only be exercised or vest in any of the circumstances set
      out in Rule 7.1,  Rule  7.2(B) or Rule 7.5, if and to the extent that the
      Company, acting on the recommendation  of  the  Committee,  are satisfied
      that:


      (a)  where the Participant ceased to be in Qualifying Service on or after
           the  end  of  the  Performance  Period,  the  Performance Conditions
           imposed  pursuant  to  Rule  4.6  have  been  satisfied   over   the
           Performance Period; or


      (b)  where  the Participant ceased to be in Qualifying Service before the
           end of the  Performance  Period,  the Performance Conditions imposed
           pursuant to Rule 4.6 have been satisfied  on  such modified basis as
           they think fit over the period from the beginning of the Performance
           Period  to  the  date  on  which  the Participant ceased  to  be  in
           Qualifying Service,


      and, for the purpose of determining the  number  of  Matching  Shares  in
      respect  of which the Award vests as a consequence of the extent (if any)
      to which the Performance Condition(s) have been so satisfied, the maximum
      number of  Matching  Shares  comprised  in  the Award shall be the number
      determined in accordance with Rule 7.10.


7.10  For the purpose of calculating the number of  Matching  Shares in respect
      of  which an Award may be exercised by the Participant or  which  may  be
      permitted  to vest pursuant to any of Rules 7.1, 7.2 and 7.5. the maximum
      number of Matching  Shares comprised in the Award shall be the proportion
      of the number of Matching  Shares originally comprised in the Award which
      equals the proportion which the number of days which have elapsed:


      (a)  from and including the  later  of  the  first  day of the applicable
           Performance  Period and the date on which the Participant  commenced
           employment with the Group;


      (b)  to and including  the  earlier  of  the  last  day of the applicable
           Performance Period and the day upon which the Participant  ceased to
           be in Qualifying Service


      bears:


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<PAGE>

      (c)  where the Participant commenced employment with the Group during the
           Performance  Period,  to  the  number of days during the Performance
           Period during which he was so employed or


      (d)  in any other case, to the number of days in the Performance Period.


7.11  Awards may only be exercised or vest in the circumstances set out in Rule
      7.7 or Rule 7.8 if and to the extent that the Committee considers it fair
      and reasonable taking into account the  extent  to  which the Performance
      Conditions  applied  over such modified period as the Committee  consider
      appropriate have been  satisfied and such other criteria as the Committee
      in their discretion consider relevant.


8     EXERCISE AND VESTING OF AWARDS


8.1   No Option Award shall be  exercised  and  no  Matching  Shares  shall  be
      transferred  pursuant  to  the  exercise  or vesting of any Award save in
      accordance with the then current model code  on  directors'  dealings  in
      listed  securities traded on the London Stock Exchange or such other code
      of dealing  in  terms  no  less  exacting  than such model code as may be
      adopted by the Company.  This restriction shall apply to directors of the
      Company  and  to  any Participant who is, at the  time  of  the  proposed
      exercise or transfer  of  the  Matching  Shares, a "relevant employee" in
      terms of the then current model code.


8.2   All  transfers of Matching Shares to a Participant  on  the  exercise  or
      vesting of an Award or on the exercise of an Option Award will be subject
      to the  obtaining of any necessary consents under any relevant enactments
      or regulations  for  the  time  being  in  force  and  it  shall  be  the
      responsibility  of  the Participant to comply with any requirements to be
      fulfilled in order to obtain or obviate any such consents.


8.3   An Option Award may only  be  exercised by a Participant giving notice in
      writing  to  the Company in the form  prescribed  by  the  Committee  and
      (unless the Committee  otherwise  permits)  an Award Certificate covering
      the number of Matching Shares in respect of which  the Option Award is so
      being exercised.


8.4   An Option Award shall be capable of exercise on one occasion only and, if
      an  Option  Award is exercised in respect of part only  of  the  Matching
      Shares then subject  to  that Option Award, that Option Award shall lapse
      in respect of the balance  of such Matching Shares. Exercise of an Option
      Award shall only be effective:


      (a)  upon receipt of the duly completed form of exercise; and


      (b)  any payment, authority or other security required in accordance with
           Rule  8.6.


8.5   The exercise of an Option Award by a Participant and the execution by any
      Participant of an Award Deed or such other deed as is referred to in Rule
      4.8(a) shall constitute the  agreement and undertaking of the Participant
      with the Company that he will  forthwith  upon  written  demand  from the
      Company pay to the Company or as the Company may direct:


      (a)  any  amount  of  taxes,  social  security  contributions  and  other
           withholdings  (including  but  not limited to income tax and primary
           national insurance contributions  of  the  United Kingdom) for which
           the Participant may be liable or which may be  payable in respect of
           the Participant as a consequence of the grant or exercise or vesting
           of any Award or any appropriation or transfer of any Matching Shares
           or other assets to a Participant pursuant to the Plan or any payment
           to a Participant pursuant to the Plan and which  the  Trustees,  the
           Company  or  any  other member of the Group (past or present) or any
           other person (other  than  the Participant) may be required (whether
           such requirement is legally enforceable or not) to pay to the Inland
           Revenue or any other taxation authority in any jurisdiction; and


                                      76

<PAGE>

      (b)  any amounts of secondary national  insurance  contributions  of  the
           United Kingdom for which the Trustees, the Company or any such other
           member  of  the  Group  or  any such other person may be liable as a
           consequence of the grant or exercise  or vesting of any Award or any
           appropriation or transfer of any Matching  Shares  to  a Participant
           pursuant to the Plan or any payment to a Participant pursuant to the
           Plan to the extent that the Trustees, the Company or any  such other
           member  of  the  Group  or  any  such  other  person may lawfully be
           entitled  to  require,  or  may  lawfully  have  agreed   with   the
           Participant,  that  the  Participant  will make good the same to the
           Trustees, the Company or any other member  of  the  Group  (past  or
           present) or any such other person


      and  shall  also  constitute authority to the Trustees, the Company, each
      such other member of  the  Group  and any such other person to deduct any
      amount so demanded which remains unpaid  from  payments otherwise payable
      to the Participant, including but not limited to authority to deduct from
      wages or salary for the purposes of Part II of the  Employment Rights Act
      1996.


8.6   Without prejudice to the generality of Rule 8.5, the Company may, as soon
      as  practicable following the Vesting Date in relation  to  an  Award  or
      following  the receipt of a notice of exercise of an Option Award, notify
      the Participant  in  writing  of  the  amount (if any) (THE NOTIFIED SUM)
      which in its reasonable opinion it estimates the Trustees, the Company or
      any member of the Group (past or present) or any other person (other than
      the Participant) will be required (whether  such  requirement  is legally
      enforceable or not) to pay to the Inland Revenue and/or the Contributions
      Agency in respect of:


      (a)  income tax or primary national insurance contributions of the United
           Kingdom  for which the Participant is liable or which is payable  in
           respect of the Participant as a consequence of the grant or exercise
           or vesting  of  any  Award  or  any appropriation or transfer of any
           Matching Shares to a Participant pursuant to the Plan or any payment
           to a Participant pursuant to the Plan: and/or


      (b)  secondary national insurance contributions  for  which the Trustees,
           the Company or any such other member of the Group  or any such other
           person  is  liable  as  a  consequence  of the grant or exercise  or
           vesting  of  any  Award  or any appropriation  or  transfer  of  any
           Matching Shares to a Participant pursuant to the Plan or any payment
           to a Participant pursuant  to  the  Plan  to  the  extent  that  the
           Trustees,  the  Company or any such other member of the Group or any
           such other person  may  lawfully  be  entitled  to  require,  or may
           lawfully have agreed with the Participant, that the Participant will
           make  good  the  same to the Trustees, the Company or any such other
           member of the Group or any such other person.


      Subject as hereafter provided,  upon  the  giving  of  such  a notice the
      Participant shall thereupon be bound and obliged to pay to the Company or
      as  the Company may direct within seven days thereafter the Notified  Sum
      and any  obligation  of  the  Trustees to transfer Matching Shares to the
      Participant as a result of the  exercise or vesting of any Award shall be
      conditional upon receipt by the Company  of  the  Notified  Sum.   In the
      event  that  the  Notified Sum proves to be an over-estimate, the Company
      shall on the date on  which  there is paid to the Inland Revenue or other
      taxation authority the sum actually  so  due repay to the Participant the
      excess of that part of the Notified Sum estimated to be due to the Inland
      Revenue or other taxation authority (as the case may be) not so paid.  In
      the event that the Notified Sum is less than  the  aggregate amount which
      is  required  to be so paid to the Inland Revenue and/or  other  taxation
      authority, the  Participant  shall forthwith on demand pay to the Company
      the balance of the amount so paid.   The  Company  may  in their absolute
      discretion  accept,  in  lieu  of immediate payment of the Notified  Sum,
      irrevocable  authority in writing  from  the  Participant  (in  form  and
      substance satisfactory  to  the Trustees and the Company) authorising the
      Trustees to sell such number  of  the Matching Shares in respect of which
      the Award Option has been exercised  or  which  have  vested pursuant the
      Contingent Award as may be necessary to raise the required  funds  and to

                                      77
<PAGE>


      apply the same in discharge of the Notified Sum and any further sum which
      may  become  due from the Participant as aforesaid or such other security
      in form and substance  satisfactory  to  the  Company  for payment to the
      Company of the Notified Sum and any such further sum.


8.7   Subject  to  Rule 8.6 and, in the case only of a Contingent  Award,  Rule
      8.9, upon the  exercise  of  an Option Award becoming effective or upon a
      Contingent Award vesting, the  Company  shall  vest or shall procure that
      there be vested in the Participant, beneficial ownership of the number of
      Matching  Shares  in  respect  of which the Option Award  has  been  duly
      exercised or (as the case may be)  the  Contingent Award has vested, free
      from all liens, charges and encumbrances  and  together with the right to
      receive and retain, all dividends or other distributions  paid or made on
      the ordinary share capital of the Company by reference to a  record  date
      occurring  on  or after the date on which such exercise or vesting became
      effective.


8.8   The Company shall  forthwith  after effective exercise of an Option Award
      in  accordance with Rule 8.3 or  after  vesting  of  a  Contingent  Award
      either:


      (a)  notify the Trustees of such exercise or vesting and procure that the
           Trustees  shall,  subject  to  Rule  8.6  and, in the case only of a
           Contingent  Award, Rule 8.9, within 28 days  after  notification  to
           them of the exercise  or  vesting  of  an  Award,  transfer  to  the
           Participant  or  as  he  may direct the legal title to the number of
           Matching Shares acquired by the Participant pursuant to the exercise
           of an Option Award or pursuant to the vesting of a Contingent Award;
           or


      (b)  subject to Rule 8.6 and in the case only of a Contingent Award, Rule
           8.9, transfer to the Participant or as he may direct, within 28 days
           of the receipt of a valid notice of exercise in accordance with Rule
           8.3, the legal title to the  number  of  Matching Shares acquired by
           the  Participant  pursuant to the exercise of  an  Option  Award  or
           pursuant to the vesting of a Contingent Award.


8.9   Notwithstanding any other  provision  of the Rules of the Plan and/or the
      provisions of any Award Deed, the Company may elect (by written notice to
      the  Participant  no  later  than the date  upon  which  the  Performance
      Certificate is issued to the Participant) to satisfy their obligations to
      transfer or procure the transfer  all  or  any Matching Shares to which a
      Participant is entitled on vesting of a Contingent Award by paying to the
      Participant  or procuring the payment to the  Participant  of  an  amount
      equal to the Market  Value  at  the date of vesting of such number of the
      Matching Shares in respect of which the Award has vested as the Committee
      shall determine. Any such payment  shall be made by the Company or on the
      Company's behalf to the Participant  within 28 days of the Company having
      received a valid notice of exercise in accordance with Rule 8.3 and shall
      be  subject  to  deduction  of any income  tax  and/or  primary  national
      insurance contributions and/or  any other tax for which the Trustees, the
      Company or any other member of the  Group  (past or present) or any other
      person  (other  than the Participant) may be liable  to  account  to  the
      Inland Revenue or  any  other  taxation  authority in respect of any such
      payment.


9     VARIATION OF SHARE CAPITAL


9.1   Upon any capitalisation issue or a rights  issue  or  any reduction, sub-
      division  or consolidation of the Company's share capital  or  any  other
      variation of  share  capital,  the  number  of Matching Shares and/or the
      class or designation of Matching Shares subject to an Option Award may be
      adjusted in such manner and with effect from  such  dates  as the Company
      may determine to be appropriate (not excluding retrospective  adjustments
      where  such  variation occurs after the Vesting Date in relation  to  the
      Option Award but the record date relating to such variation precedes such
      Vesting Date) provided that no adjustment shall be made in the event of a
      capitalisation  issue  made  for the purpose of a scrip

                                      78


<PAGE>

      dividend  to which  section  249  Income and  Corporation  Taxes Act 1988
      applies,  unless such scrip  dividend is an  enhanced  scrip  dividend in
      which event the  adjustment  shall be limited to that  necessary  to take
      account of so much of the ordinary  share capital  issued which would not
      have been issued but for such  enhancement and provided  further that the
      issue of shares or securities as consideration  for an acquisition  shall
      not be regarded as a circumstance requiring any such adjustment.


9.2   Notice of any such adjustment  shall  be  given  to  the  Participants in
      writing.


10    ADMINISTRATION AND AMENDMENT OF THE PLAN


10.1  The  decision  of  the  Committee  as to any matter, question or  dispute
      arising  from  the  Plan  shall be final  and  binding  on  all  Eligible
      Employees and Participants.


10.2  The Committee shall have the  power  from  time  to time to make and vary
      such  regulations  (not  being  inconsistent  with  the   Plan)  for  the
      implementation and administration of the Plan as they think fit.


10.3  The Plan may be altered in any respect by the Committee except that:


      (a)  no amendment shall be effective which would materially prejudice the
           interests  of  Participants  in relation to Awards already  made  or
           granted  to  them unless with such  prior  consent  or  sanction  of
           Participants as  would  be  required  under  the  provisions for the
           alteration of class rights contained in the Articles  of Association
           of the Company for the time being if the Matching Shares the subject
           of the Awards constituted a separate but single class of  shares (or
           two  or more classes of shares according to the respective dates  of
           award  or  grant  as  the  Committee  may deem appropriate) and such
           shares were entitled to such rights; and


      (b)  save  as provided in Rule 10.4, no amendment  to  the  advantage  of
           current or prospective Participants shall be made, without the prior
           sanction of an ordinary resolution of the Company in general meeting
           to:


           (i)   the definition of Eligible Employee;


           (ii)  the  time  or  times  at  which and the circumstances in which
                 Awards may be made or be exercised or vest;


           (iii) the basis on which any adjustment may be made to the number of
                 Matching Shares subject to any Award;


           (iv)  the basis of calculation of the total numbers of unissued Plan
                 Shares available for the Plan; or


           (v)   this Rule 10.3 or Rule 10.4.


10.4  The Committee may, without the sanction  of an ordinary resolution of the
      Company in general meeting, make minor amendments  to the Plan to benefit
      the  administration  thereof  or  to obtain or maintain  favourable  tax,
      exchange control or regulatory treatment  for  the Trustees, the Company,
      any  other  member  of the Group or any existing, future  or  prospective
      Participant.


10.5  Written notice of any  material  alteration  made in accordance with Rule
      10.3  or  Rule 10.4 shall be given to all Participants  affected  by  the
      relevant alteration.


10.6  Notices or documents required to be given or sent to an Eligible Employee
      or a Participant shall:


      (a)  either  be  delivered  to  him  by  hand  or sent to him at his home
           address according to the records of his employer; and

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<PAGE>

      (b)  if  sent  by  post be deemed to have been given  on  the  third  day
           following the date of posting.


11    PARTICIPANTS' LEGAL ENTITLEMENTS


11.1  The terms of employment  of  a  Participant  by  the Company or any other
      member  of  the Group shall not be affected by his participation  in  the
      Plan which shall  not form part of such terms.  In no circumstances shall
      a person ceasing to  be  in  Qualifying Service by reason of dismissal or
      otherwise howsoever be entitled  to  or  claim  against the Trustees, the
      Company  or  any  other  member  or  former  member  of  the   Group  any
      compensation for or in respect of any consequent diminution or extinction
      of  his rights or benefits (actual or prospective) under any Awards  then
      held by him or otherwise in connection with the Plan.


11.2  Any Award made to a Participant shall not be pensionable and shall not be
      brought  into  account for the purposes of calculating any salary-related
      benefits of the Participant.


12    LIMITATIONS ON THE COMPANY


12.1  The aggregate number of unissued Plan Shares which the Company may on any
      day issue for the  purposes of the Plan shall be limited so that it shall
      not exceed, when aggregated with:


      (a)  ordinary shares  that  have  been  issued  by the Company within the
           period of ten years ending on that day pursuant  to  the Plan or any
           other Share Schemes otherwise than on the exercise of options and


      (b)  ordinary  shares  that  have been issued or remain issuable  by  the
           Company in respect of options  granted within the said period of ten
           years under the Plan or any other Share Schemes,


      ten per cent of the issued ordinary share  capital  of the Company on the
      day preceding that day.


13    TERMINATION


13.1  The Company may at any time resolve to terminate the  Plan in which event
      no further Awards shall be made thereafter, but the subsisting  rights of
      Participants shall remain in force.





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<PAGE>


                                                                    EXHIBIT 4.6

      DRAFT TRUST DEED OF THE PROVALIS PLC EMPLOYEE SHARE OWNERSHIP TRUST





                   DATED                         2003










                              PROVALIS PLC                  (1)

                         {diamond-suit} LIMITED             (2)


                       --------------------------------
                                  TRUST DEED
                         CONSTITUTING THE PROVALIS PLC
                        EMPLOYEE SHARE OWNERSHIP TRUST
                       --------------------------------









                                      81


<PAGE>


THIS TRUST DEED is made on                                          200

BETWEEN

(1)  PROVALIS  PLC  (company  number  3321624)  whose  registered  office is at
      Newtech  Square, Deeside Industrial Estate, Deeside, Flintshire  CH5  2NT
      (COMPANY), and



(2)  {diamond-suit}    LIMITED    (registered    in    {diamond-suit},   number
      {diamond-suit})  whose  registered office is at {diamond-suit}  (ORIGINAL
      TRUSTEE)



WHEREAS

(A)   The Company is establishing  this  Trust as an employees' share scheme in
      order to encourage and facilitate the  acquisition  and holding of Shares
      by or for the benefit of Beneficiaries in such manner as the Trustees may
      from time to time determine.

(B)   It  is contemplated that the Company and/or one or more  Group  Companies
      and/or  the  Trustees  may  establish  one  or more share purchase, share
      option, share incentive, profit-sharing and other  arrangements  for  the
      distribution and application of the Trust Fund.

(C)   The  Company has transferred the sum of {pound-sterling}100 into the name
      of the  Original  Trustee  for  the  purposes  hereinafter  appearing and
      proposes  to  transfer  further  sums to the Trustees for the purpose  of
      establishing an employees' share scheme.

IT IS AGREED

1.    DEFINITIONS AND INTERPRETATION

1.1   In  this  deed  unless  the  context  otherwise  requires  the  following
      expressions have the following meanings respectively:

      BENEFICIARIES means the bona fide employees  and  former  employees  from
      time to time of the Company and any other Group Company and the Relatives
      of  such employees and former employees but excluding any Excluded Person
      and BENEFICIARY has a corresponding meaning


      EBT means  an  employee  benefit trust established by the Company for the
      benefit of persons who are among the class of Beneficiaries


      EMPLOYEES' SHARE SCHEME has  the  meaning  given  thereto  in section 743
      Companies Act 1985


      EXCLUDED  PERSON  means any person who ceases to be a Beneficiary  or  is
      incapable of becoming  a  Beneficiary  pursuant  to a declaration to that
      effect by the Trustees under the power conferred on them by clause 7(x)


      GROUP COMPANY means the Company and any company which  is  for  the  time
      being  its  subsidiary  as  defined by section 736 Companies Act 1985 (as
      amended)

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<PAGE>


      ICTA 1988 means the Income and Corporation Taxes Act 1988


      IHTA 1984 means the Inheritance Tax Act 1984


      RELATIVES means spouses, widows,  widowers and children and step-children
      under the age of eighteen and RELATIVE shall be construed accordingly


      SHARES means ordinary shares in the capital of the Company


      TRUST means the Provalis plc employee  benefit  trust established by this
      deed


      TRUST FUND means the said sum of {pound-sterling}100, all property at any
      time added thereto by way of further settlement,  accumulation of income,
      capital  accretion  or  otherwise  and  all property from  time  to  time
      representing any of the same


      TRUST PERIOD means the period of eighty years  beginning  with  the  date
      hereof (which period shall be the perpetuity period applicable hereto) or
      if  shorter  the period from the date hereof to such date as the Trustees
      may with the prior  written  consent of the Company appoint by deed to be
      the date of expiration of the Trust Period (not being a date earlier than
      the date of such deed)


      TRUSTEES means the Original Trustee  or other trustee or trustees for the
      time being of the Trust.


1.2   References in this deed to any enactment  shall  be deemed to include any
      statutory modification or re-enactment thereof.

1.3   References in this deed to clauses are to clauses of this deed.

1.4   Clause headings in this deed are for ease of reference only and shall not
      affect the interpretation and effect of the provisions hereof.

2     DECLARATION OF TRUSTS

2.1   The Trustees shall hold the Trust Fund and the income  thereof  upon such
      trusts  for all or any one or more exclusively of the others or other  of
      the Beneficiaries  in such shares and with and subject to such powers and
      provisions and in such  manner  generally  as  the  Trustees  (subject to
      clauses   3  and  19.1  and  to  the  application  of  the  rule  against
      perpetuities)  shall  in  their  absolute discretion by any deed or deeds
      revocable or irrevocable appoint.

2.2   Subject to clauses 2.1, 3 and 19.1,  the  Trustees shall during the Trust
      Period hold the Trust Fund upon trust to pay  or  apply  the  income  and
      capital  thereof  to  or  for  the  benefit  of  all  or  any one or more
      exclusively  of the others or other of the Beneficiaries in  such  shares
      and in such manner  generally  as  the  Trustees  shall in their absolute
      discretion think fit provided that:

      (a)  notwithstanding  the foregoing provisions of this  clause  2.2,  the
           Trustees may, at any  time or times during the Trust Period (or such
           lesser period as shall  be  allowed  by the law governing

                                      83

<PAGE>

           the  trusts  hereof),  in  their  absolute  discretion,  instead  of
           applying all or any part or parts of the income, accumulate the same
           by investing or otherwise  applying it and its resulting income from
           time to time in any  application or  investments  authorised by this
           deed or by law and, subject to paragraph (b) of this proviso,  shall
           hold such  accumulations as an accretion to the capital of the Trust
           Fund; and

      (b)  the  Trustees may, at any time or times during the Trust Period  (or
           such lesser period as aforesaid), apply the whole or any part of the
           income  accumulated  under  paragraph  (a) of this proviso, as if it
           were income arising in the then current year.

2.3   Subject as provided in clauses 2.1 and 2.2 and  if  and  in so far as not
      wholly  disposed of for any reason whatever by the above provisions,  the
      capital and  income  of  the  Trust  Fund shall be held on trust for such
      English  charity  or  charities (or purposes  recognised  as  exclusively
      charitable under English  law)  as  the  Trustees shall in their absolute
      discretion select, provided that:

      (a)  there is no Beneficiary who is capable of taking; and

      (b)  the Trust is in consequence being wound up.

3     EXCLUSION OF PARTICIPATORS FROM BENEFIT

      If any property shall have become comprised in the Trust Fund as a result
      of  a disposition to the Trustees by any close  company  (as  defined  in
      section  102(1)  IHTA  1984)  which but for section 13(1) IHTA 1984 would
      have been a transfer of value,  no part of such property shall be applied
      for  the  benefit of any person falling  within  any  of  the  categories
      specified in  section  13(2) IHTA 1984 (as modified by section 13(3) IHTA
      1984) except to the extent permitted by section 13(4) IHTA 1984.


4     TRUSTEES MAY BENEFIT

      The Trustees may exercise  any  power  or  discretion hereby conferred on
      them in favour of any Beneficiary:


      (a)  notwithstanding that he is one of the Trustees  so  long as at least
           one of the Trustees is neither a Beneficiary nor a corporate Trustee
           whose directors include a Beneficiary; or

      (b)  notwithstanding  that  he  is a director, officer or employee  of  a
           corporate trustee of the Trust so long as either he has not voted on
           any resolution relating to such  exercise  or  at  least  one of the
           Trustees  is  neither  a  Beneficiary  nor a corporate Trustee whose
           directors include a Beneficiary.

5     PAYMENTS TO THE TRUST

5.1   Each Group Company may at any time with the consent  of  the Company make
      contributions or loans to the Trust Fund and the Trustees  shall  keep  a
      separate  account  in  relation  to  the total amount of contributions or
      loans made by each Group Company.  Each  Group  Company  other  than  the
      Company  will  make contributions or loans so as to benefit Beneficiaries
      who are its employees  or  former  employees  or  their Relatives and the
      Company will do so so as to benefit all or any Beneficiaries.   Any loans
      must be agreed to by the Trustees.

5.2   Notwithstanding anything to the contrary in this deed, in relation to the
      income  and  capital  of any part of the Trust Fund which shall comprise,
      represent or arise from monies given to the Trustees by any

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      Group Company  (other than the Company) by way of further  settlement the
      Trustees  shall  so  far as  practicable  exercise  any  trust  power  or
      discretion  herein or otherwise  contained or conferred in favour only of
      persons  who are  Beneficiaries  by  virtue  of  their  being  (or  being
      Relatives of) employees or former employees of that Group Company.

5.3   All  monies paid to the Trustees  pursuant  to  this  clause 5  shall  be
      treated  for  all  purposes  as  capital monies and shall be invested and
      applied by the Trustee in the manner authorised in this deed.

6     APPLICATION OF FUNDS

6.1   Without prejudice to the generality  of  clause  2  but subject always to
      clauses 3 and 19.1, it shall be lawful for the Trustees  in  exercise  of
      their  foregoing  powers  and discretions to appoint pay or apply capital
      monies for the benefit of all or any of the Beneficiaries:

      (a)  by transferring the same  to  the  trustees  of any other settlement
           (governed  by the law of any part of the world  and  whose  trustees
           shall be resident  domiciled  or  (if corporate) incorporated in any
           part of the world) to be held by them  on  the  trusts applicable to
           capital monies comprised in such settlement if such  transfer  would
           not infringe the rule against perpetuities and if the provisions  of
           such  other  settlement shall in the opinion of the Trustees be such
           that such transfer  would be beneficial to the Beneficiaries whom it
           is thereby sought to benefit;

      (b)  by reserving any shares  or other assets comprised in the Trust Fund
           from time to time for the  benefit  of  such  Beneficiaries  as  the
           Trustees  may  in their absolute discretion select and on such terms
           and subject to such conditions (if any) as the Trustees may in their
           absolute discretion determine;

      (c)  by granting options  (whether  for  full  value,  in  excess of full
           value, at an undervalue or gratuitously) at the expense of the Trust
           Fund  to the Beneficiaries whom it is thereby sought to  benefit  if
           the grant  of  such  options would in the opinion of the Trustees be
           advantageous to such persons;

      (d)  by  lending the same to  any  Beneficiary  upon  such  terms  as  to
           repayment  and interest (if any) and otherwise as the Trustees shall
           in their absolute  discretion  think  fit provided that no such loan
           shall  be  made upon terms that repayment  may  be  made  after  the
           expiration of the Trust Period;

      (e)  by entering into binding contracts with the Beneficiaries whom it is
           thereby sought  to  benefit  to acquire from such Beneficiaries such
           assets at such price or prices  and  at  such time or times and upon
           such  other  terms  as  would  in  the opinion of  the  Trustees  be
           advantageous to such persons.

6.2   The Trustees shall have power to agree with  the  Company  or  any  other
      Group  Company that, if the Company or such other Group Company shall  at
      any time  by  notice in writing direct the Trustees to reserve any shares
      or other assets  comprised  in  the  Trust  Fund  for  the benefit of any
      Beneficiary in accordance with the rules of any long term incentive plan,
      deferred  bonus  plan, restricted share scheme or other employees'  share
      scheme adopted by  the  Company or such other Group Company, the Trustees
      shall (to the extent that  such  assets  are comprised in the Trust Fund)
      reserve such assets on the terms and subject  to  the conditions (if any)
      prescribed by the rules of any such plan or scheme.

6.3   The Trustees may agree with the Company or any other  Group Company that,
      if either the Company or such other Group Company shall  at  any  time by
      notice in writing direct the Trustees to transfer to any Beneficiary  any
      number  of  Shares  in  respect  of  which  such  Beneficiary  shall have
      exercised  an option

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<PAGE>

      granted under a share option scheme  adopted by the Company or such other
      Group Company in consideration of payment to the Trustees of the price at
      which such  Shares may be acquired by the  exercise of such  option,  the
      Trustees  shall (to the extent that such Shares shall be comprised in the
      Trust Fund) transfer to such  Beneficiary such Shares in consideration of
      the payment to the Trustees of such price.

7     GENERAL POWERS OF THE TRUSTEES

      The Trustees shall (in addition to all other powers vested in them hereby
      or by law) have the  following powers to be exercised or not exercised as
      the Trustees may in their  sole and absolute discretion from time to time
      think fit:


      (a)  power to retain any asset  which  now  or  at any time in the future
           forms  part  of  the Trust Fund or any part thereof  (including  any
           uninvested money)  in  its actual state and condition for any period
           and to vary or transpose  the  mode  of investment of the Trust Fund
           within the range hereinafter authorised;

      (b)  power  to  invest  trust monies in the acquisition  (either  by  the
           Trustees alone or by  them  jointly with any other person or body of
           trustees) by purchase or otherwise  of  Shares  (whether  on or off-
           market)  and/or  any  other  assets  or  upon  the  security of such
           property of whatever nature and wherever situated and whether or not
           involving liability or producing income or upon such personal credit
           (with or without security) as the Trustees shall think  fit  to  the
           intent  that  the Trustees shall have the same full and unrestricted
           powers of investment  in  all  respects  as  if  they  were absolute
           beneficial  owners  of  the  Trust  Fund  and it is hereby expressly
           declared that the Trustees shall be under no obligation to diversify
           their investments and in particular but not  by  way  of  limitation
           that  the  Trustees shall be entitled to accept, acquire and  retain
           such  Shares   or  other  securities  in  the  Company  without  any
           limitation whatsoever  even  though  the  Trust  Fund shall comprise
           wholly such Shares or such other securities;

      (c)  power  to  enter  into  put and/or call arrangements in  respect  of
           Shares or securities in the  Company  and  to  invest  monies in the
           acquisition of Shares or securities in the Company pursuant  to  the
           said  put  and/or call option arrangements even if the price payable
           under those  arrangements  is  in excess of the market value for the
           time being of the said Shares or securities;

      (d)  power to invest or hold or allow  to remain in the name or under the
           control of any Trustee or other person or persons in any part of the
           world as nominee of the Trustees the  whole or such part or parts of
           the  Trust Fund as the Trustees shall think  fit  and  the  Trustees
           shall  not  be  liable  for any loss to the Trust Fund or the income
           thereof occasioned by the exercise of this power;

      (e)  power (notwithstanding any  rule of law to the contrary) to delegate
           to any person or persons (including  one  or more of themselves) for
           any period and upon such terms and conditions  as they think fit and
           in any part of the world the execution or exercise of all or any one
           or more of the trusts powers and discretions vested  in the Trustees
           (whether by this deed or any law or otherwise) including  but not by
           way  of  limitation  those relating to the investment management  or
           administration of the  Trust  Fund without being liable for the acts
           or defaults of such person or persons  or any loss of the Trust Fund
           resulting therefrom provided that the Trustees  shall have exercised
           due  skill  and  care  selecting any such person or persons  and  in
           monitoring their conduct;

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<PAGE>

      (f)  power instead of acting  personally to employ and pay at the expense
           of  the Trust Fund any agent  in  any  part  of  the  world  whether
           attorneys,  solicitors, accountants, brokers, banks, trust companies
           or other agents  without  being  responsible  for the default of any
           agent employed in good faith to transact any business  or do any act
           required  to be transacted or done in the execution of these  trusts
           including the  receipt  and  payment  of monies and the execution of
           documents;

      (g)  power in their absolute discretion so long  as  at  least one of the
           Trustees shall have no interest therein and shall not be a corporate
           trustee  any of whose directors shall have an interest  therein,  to
           enter into  any contract, disposition or transaction with any one or
           more of themselves  or  any director of any corporate trustee hereof
           (whether such one or more  of  themselves  or such director shall be
           acting alone or jointly with other persons)  if  the  Trustees could
           lawfully  have  entered  into  the same if dealing with persons  not
           including any of themselves and  not being a director of a corporate
           trustee provided that they shall have received advice from competent
           valuers that the same shall be expedient  in  the  interests  of the
           Beneficiaries or such of them as would be affected by the same;

      (h)  power  for  any of the Trustees or any director, officer or employee
           of a corporate  Trustee to be employed and remunerated as a director
           or other officer  or  employee  or  as  a  partner in or as agent or
           adviser of the Company or any other company, body or firm in any way
           connected  with  the  Trust  Fund,  to  charge  and   be   paid  all
           professional legal and other expenses and proper charges and to keep
           as  his property (and without being liable to account therefor)  any
           remuneration,  fees or profits received by him in any such capacity,
           notwithstanding  that his situation or office may have been obtained
           or may be held or  retained in right or by means or by reason of his
           position  as one of the  Trustees  or  as  a  director,  officer  or
           employee of  a  corporate Trustee or of any shares, stock, property,
           rights or powers  whatever  belonging to or connected with the Trust
           Fund;

      (i)  power for any of the Trustees being a banker to act as banker to the
           Trustees and any of the Trustees being a subsidiary or an associated
           company of a banker to employ such banker as banker for the purposes
           hereof and (subject as otherwise  provided  in this deed) in neither
           case shall such banker or such of the Trustees  be liable to account
           for any profits or advantages so obtained;

      (j)  power for the Trustees (or any director, officer  or  employee  of a
           corporate  trustee) to employ any of their number who may be engaged
           in any profession or business and for any of the Trustees so engaged
           to charge and  be  paid  (without being liable to account therefore)
           all professional or other  reasonable  and  proper  charges  for any
           business  or  services rendered or time spent by him or his firm  in
           connection with  the  trusts, powers or provisions hereof whether or
           not  within  the usual scope  of  his  profession  or  business  and
           although not of  a nature requiring the employment of a professional
           person;

      (k)  power to open current  or deposit accounts with any bank in any part
           of  the  world  in the names  of  the  Trustees  and  to  make  such
           arrangements for  the  operation  of  such accounts as they shall in
           their absolute discretion think fit including  but  not  by  way  of
           limitation  arrangements as to the number of Trustees to be required
           to sign cheques  drawn  on  such  accounts and as to any maximum sum
           which may be withdrawn at any one time  on  such  signatures and the
           power to delegate to any one or more of their number  the  operation
           of any bank account in their names;

      (l)  power for the Trustees at any time to borrow monies (other than from
           an  Excluded  Person) on the security of the Trust Fund or any  part
           thereof or on personal security only for any purpose

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<PAGE>


           for which trust monies may be applied  hereunder  (including for the
           mere purpose of making  investments  permitted by clause 7.1(b)) and
           on such  terms  as to the  payment  of  interest  (if any) and as to
           repayment as the Trustees shall in their absolute  discretion  think
           fit and no  purchaser,  lender or other  person  paying or advancing
           money in respect of any sale, loan or other transaction purported to
           be made by the  Trustees  under or for any of the  purposes  of this
           Trust shall be  concerned to see that the money is wanted or that no
           more than is wanted is raised or  otherwise  as to the  propriety of
           the  transaction  or the  application of the money provided that the
           Trustees  may not  borrow  from the  Company  on terms that are more
           beneficial  to the Company  than would have  applied if the loan had
           been between unconnected persons acting at arm's length;

      (m)  power to enter into  and  engage  in any obligations or contracts or
           dealings of any nature whatsoever for  the  purpose  of  hedging  or
           limiting  the  exposure  of  the Trust Fund to movements in interest
           rates or rates of exchange and  in  particular but without prejudice
           to the generality thereof to enter into swap contracts and engage in
           dealings in currencies, traded or swap  options,  financial futures,
           commodities or commodity futures;

      (n)  power  to  pay  any  taxes,  fees  or  duties (and any interest  and
           penalties chargeable thereon) in relation  to  the Trust Fund or any
           part  thereof  in  any circumstances whatsoever and  notwithstanding
           that such taxes, fees  or duties are not legally enforceable against
           the Trustees;

      (o)  power to insure against  any  loss  or  damage  from  any  peril any
           property for the time being comprised in the Trust Fund and  to  pay
           the premiums out of the Trust Fund;

      (p)  power  if  they  shall  consider  the  same  to  be expedient in the
           interests of the Beneficiaries or such of them as  would be affected
           thereby  to  permit  any  company  any  of  whose  shares, stock  or
           securities are comprised in the Trust Fund to retain any part of its
           income and so that the Trustees shall not be bound to take any steps
           to  remove  any  director of any such company who may recommend  any
           such retention of its income;

      (q)  power  to  give  or enter  into  any  indemnity  warranty  guarantee
           undertaking or covenant  or  enter  into  any type of agreement that
           they shall in their absolute discretion think  fit  relating  to the
           transfer or sale of a business or shareholding held or owned for the
           time  being  by  the  Trustees  whether  relating to the business or
           company itself its assets liabilities shares  or  employees  or  any
           other  aspect of the business or company in favour of any transferee
           purchaser  or  other  relevant party and including any limitation or
           restriction on value or  otherwise  as  the  Trustees shall in their
           absolute discretion think fit;

      (r)  power to treat all dividends and other payments  in  the  nature  of
           income   received   by  them  as  income  at  the  date  of  receipt
           irrespective of the period for which the dividend or other income is
           payable to the effect  that  the  statutory  and  equitable rules of
           apportionment shall not apply to the Trust;

      (s)  power  (exercisable  either expressly or by implication)  to  allot,
           appropriate partition  or  apportion  any property whatever which is
           (or the future proceeds of sale of which  are)  for  the  time being
           subject to the trusts hereof in or towards satisfaction of any share
           or  interest in the Trust Fund or the income thereof in such  manner
           as the Trustees shall in their absolute discretion (without the need
           to obtain  any  consent)  consider  just according to the respective
           rights of the persons interested;

      (t)  power to purchase Shares from or sell Shares to a Beneficiary or the
           trustees  for  the  time  being  of  any other  settlement  to  whom
           transfers of capital monies could be made  under  the

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<PAGE>

           provisions  of clause 6.1(a) at such price (which need not be market
           value)  as the  Trustees  shall  think  fit or to give  Shares  to a
           Beneficiary  or to the  trustees  for the  time  being  of any  such
           settlement  if in the opinion of the  Trustees a purchase or sale of
           Shares at that price or a gift of Shares shall be  beneficial to the
           Beneficiary whom it is thereby sought to benefit;

      (u)  power  to pay to any Beneficiary who is contingently entitled to any
           Shares  or   other  assets  any  dividends  or  other  distributions
           attaching to such Shares or other assets;

      (v)  power  to  invite   any   Beneficiary  for  whom  Shares  have  been
           contingently reserved:

           (i)   to direct the Trustees as to the exercise of any voting rights
                 attaching to such Shares; and

           (ii)  in the event that the  Company  grants  any  rights to acquire
                 Shares or other securities or other rights of  any  nature  in
                 relation  to  Shares,  to  direct  the  Trustees how to act in
                 relation to such rights;

      (w)  power to vote or abstain from voting as the Trustees shall think fit
           (taking into account the interest of the Beneficiaries)  in  respect
           of  any Shares or other shares or securities and to give proxies  or
           powers  of attorney in favour of any person or persons for voting or
           acting on  behalf  of  the  Trustees  as  the  owner of any property
           whatsoever; and

      (x)  the  power  to declare by deed or deeds that any person  who  is  or
           could become  one  of the Beneficiaries shall cease to be or (as the
           case  may  be)  shall  be   incapable   of   becoming   one  of  the
           Beneficiaries,  provided  that the exercise of this power shall  not
           prejudice, modify or affect  any  appointment  of  capital or income
           already  made  and  provided  further that this power shall  not  be
           exercised so that the Beneficiaries  shall cease to comprise most of
           the individuals who are for the time being  employed  by  or holding
           office with the Company and all Group Companies.

8     WAIVER OF DIVIDENDS

      The Trustees shall waive or otherwise forgo any dividend or dividends due
      or  to  become  due at any time or times in the future in respect of  any
      Shares or other securities in the Company for the time being comprised in
      the Trust Fund unless and to the extent otherwise directed by the Company
      from time to time.


9     DEALINGS WITH RESERVED SHARES

9.1   Where the Trustees  shall have reserved or granted any options or entered
      into any other arrangement in respect of Shares or other assets comprised
      in the Trust Fund the  Trustees  shall  as  soon  as  possible inform the
      Beneficiary  in  whose  favour such reservation or other arrangement  has
      been made or such option has been granted of any arrangement entered into
      affecting or any alteration  or  proposed  alteration  to  any  rights or
      liabilities attaching thereto and on receipt from such Beneficiary within
      such time as the Trustees shall specify of a notice advising the Trustees
      of  the  same shall enter into any compromise or arrangement with respect
      to or release  or  forbear  to  exercise  all  or  any of their rights as
      shareholders   or  owners  whether  in  connection  with  a   scheme   of
      reconstruction or  amalgamation or otherwise and may accept in or towards
      satisfaction of all  or  any  of  such  rights such consideration as such
      Beneficiary shall direct whether in the form  of  cash  or stock, shares,
      debentures,  debenture  stock  or obligations or securities  without  the
      Trustees being in any way liable  or  responsible  for any loss resulting
      from  complying  with  any such direction or any liability  or  increased
      liability of such

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      Beneficiary to tax or in respect of any inadequacy or alleged  inadequacy
      in the nature or amount of such consideration.

9.2   The Trustees shall not be liable or responsible for any loss or liability
      or increased liability of a Beneficiary to tax arising out of any failure
      by the Trustees to inform the Beneficiary  of  any proposed alteration as
      set  out  in  clause  9.1  or the failure of the Beneficiary  to  give  a
      direction to the Trustees or to give a direction within a particular time
      or if the Beneficiary has directed  the  Trustees to use their discretion
      arising out of the bona fide exercise by the Trustees of that discretion.

10    TAKEOVERS

      If an offer is made for the Shares which is made on a condition such that
      if  it  is satisfied the person or persons making  the  offer  will  have
      control (within  the  meaning  given  by  section  840  ICTA 1988) of the
      Company, the Trustees may not accept or vote in favour of  such  an offer
      or  sell  Shares  to  any  other person, firm or company while such offer
      remains open without prior consultation  with  the Company and subject to
      this  they  may  take  all or any or none of the following  matters  into
      account:


      (a)  the long term interests of Beneficiaries;

      (b)  interests of Beneficiaries other than financial interests;

      (c)  interests of Beneficiaries  in their capacity as employees or former
           employees of the Company or any Group Company;

      (d)  interests of persons (whether  or  not  identified)  who  may become
           Beneficiaries in the future; and

      (e)  considerations  of a local, moral, ethical, environmental or  social
           nature.

11    DEDUCTION OF TAX

11.1  If and when so directed  by  the  Company  or any other Group Company the
      Trustees shall deduct and withhold from any  amount  to  be  paid  or any
      assets  to be transferred to a Beneficiary any tax and National Insurance
      Contributions  for  which  the Beneficiary is liable (including by way of
      contract) in respect of such payment or transfer.

11.2  The Trustees shall have power to arrange for any Group Company to account
      to  the  Inland Revenue or other  authority  conferred  for  any  amounts
      deducted or  withheld  from  any  payment  or  transfer  to a Beneficiary
      pursuant to clause 11.1.

12    TRUSTEES LIABILITY

12.1  In the professed execution of these trusts and the provisions  hereof  no
      Trustee and no director, officer or employee of a corporate Trustee shall
      be  liable  for  any loss or damage which may happen to the Trust Fund or
      the income thereof  arising from any improper investment or purchase made
      by him in good faith  or  for  the  negligence  or  wilful fraud or other
      wrongdoing of any agent employed by him or by any other  Trustee although
      his employment was not strictly necessary or expedient or  by  reason  of
      any  mistake  or  omission  made  in  good  faith  by  any Trustee or any
      director,  officer  or  employee  of any corporate Trustee except  wilful
      fraud or other wrongdoing or negligence on the part of the Trustee or the
      director, officer or employee of a  corporate trustee who is sought to be
      made liable or, in the case

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<PAGE>


      of a body  corporate  which  is a  Trustee,  the  wilful  fraud  or other
      wrongdoing or  negligence  of any  director,  officer or employee of such
      body corporate.

12.2  On  any  Trustee  retiring  or  being  removed  as a Trustee hereof, such
      retiring  or  removed Trustee shall be under no liability  whatsoever  in
      relation to these trusts for any money or other property which is (or but
      for any default on his part would have been) held subject to these trusts
      or any matter arising  in  relation  to  these  trusts  or  any monies or
      property in relation hereto during the period in which he was  a  Trustee
      except  in the case of wilful fraud or other wrongdoing or negligence  on
      the part  of  such  retiring or removed Trustee or, in the case of a body
      corporate, the wilful  fraud  or  other  wrongdoing  or negligence of any
      director, officer or employee of such body corporate which is retiring or
      being removed as a Trustee.

12.3  The Trustees shall not be under any obligation or bound  or  required  to
      interfere  in the management or conduct of the business of the Company or
      of  any  other   company   in   which  the  Trust  shall  be  interested,
      notwithstanding that the Trustees have (whether directly or indirectly) a
      substantial holding in or control of any such company, and so long as the
      Trustees   shall  have  no  notice  of   any   act   of   dishonesty   or
      misappropriation  of  monies  on  the  part  of  the directors having the
      management of the Company or any such other company the Trustees shall be
      at liberty to leave the conduct of its business (including the payment or
      non-payment of dividends) wholly to its directors  and  the Beneficiaries
      shall  not  be  entitled  to require the payment of any dividend  or  the
      making of any other distribution by the Company or any such other company
      nor to require the Trustees  to  exercise  any  powers  they  may have of
      compelling any such distribution.

12.4  The  Trustees  shall  incur  no  liability whatsoever in relation to  the
      waiver of dividends pursuant to clause 8.

13    INDEMNITY FROM THE COMPANY

      Without prejudice to any right of  indemnity by law given to the Trustees
      and any attorney, agent or other person  appointed by them hereunder, the
      Company hereby covenants with the Original  Trustee  that  it will at all
      times keep it and each and all of its successors in title as the Trustees
      and each of them and every director, officer or employee of any corporate
      Trustee   harmless  and  indemnified  against  any  costs,  expenses   or
      liabilities  whatsoever to which they shall as Trustees hereof or as such
      director, officer  or  employee be or become liable by virtue of any act,
      omission,  event  or thing  whatsoever  except  for  costs,  expenses  or
      liabilities attributable  to  wilful fraud or wrongdoing or negligence on
      the part of the Trustee or director,  officer  or  employee  whom  it  is
      sought  to  make  liable  (or, in the case of a body corporate which is a
      Trustee, on the part of a director,  officer  or  employee  of  such body
      corporate) but only to the extent that such cost, expense or liability is
      not capable of being discharged out of the Trust Fund.


14    APPOINTMENT REMOVAL AND RETIREMENT OF TRUSTEES

14.1  The statutory power of appointing new or additional Trustees hereof shall
      be vested in the Company and shall be exercisable with the prior  written
      consent of the Trustees.

14.2  In addition to the said statutory power, the Company shall have the power
      by  deed  at  any  time without any such consent as aforesaid and without
      giving any reason therefor to appoint:

      (a)  a new Trustee or  new  Trustees in the place of any Trustee who, for
           any reason, ceases to be a Trustee; and


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<PAGE>


      (b)  (without  limitation  as  to   number)   an  additional  Trustee  or
           additional Trustees (notwithstanding that  the  effect  of  any such
           appointment  is  to  increase  the  number of Trustees hereof beyond
           four),

      provided that if any person or any group of  persons  acting  in  concert
      (within  the  meaning  given to that phrase by the City Code on Takeovers
      and Mergers) obtains control of the Company or the Company shall cease to
      exist these powers shall then be vested in the Trustees.


14.3  For  the avoidance of doubt,  it  is  hereby  declared  that  any  person
      wheresoever resident and whether an individual or a body corporate (other
      than the Company) may be appointed as a Trustee hereof.

14.4  The Company  may  at any time by deed remove any Trustee hereof (provided
      that such removal shall only become effective upon receipt by the Trustee
      of any such deed) and  any  Trustee  hereof may at any time by giving not
      less than thirty days notice in writing  to  the  Company (with copies to
      the remaining Trustees) retire forthwith from the trusts hereof, provided
      that:

      (a)  if after such removal or retirement there shall  not be at least one
           corporate  Trustee  or  two  individual  Trustees  such  removal  or
           retirement shall not be effective and the outgoing Trustee shall not
           be discharged until sufficient new Trustees have been  appointed  by
           the  Company  (with  the  consent  of  the  Trustees  other than the
           outgoing Trustee) in place of such outgoing Trustee to  make  up the
           number of Trustees as aforesaid; and

      (b)  if  the  Company shall not have appointed a new Trustee within three
           months of  receiving such written notice of retirement then, for the
           purpose only  of  enabling  the  Trustee  wishing  to  retire  to be
           discharged  as Trustee hereof as aforesaid, the power of appointment
           of new Trustees  shall  be exercisable by such retiring Trustee (and
           if more than one, jointly).

14.5  The  Company  and the continuing  Trustees  shall  execute  such  further
      documents and do such further things as may be necessary to give full and
      proper effect to  any retirement or removal of a Trustee and all acts and
      deeds done or executed  for  the purpose vesting of the assets subject to
      these trusts in new or additional  Trustees shall be done and executed by
      the continuing or retiring Trustee or  Trustees  at  the  expense  of the
      Trust Fund.

14.6  Any  of  the  Trustees being a corporation shall have power to act by its
      officers duly authorised in accordance with its constitution for the time
      being in force.

14.7  The provisions  of sections 37 and 39 Trustee Act 1925 shall apply hereto
      as if any reference  therein to a trust corporation were a reference to a
      corporation carrying on trust business.

15    REMUNERATION OF TRUSTEES

15.1  Any corporate Trustee  hereof  may  act  in  accordance with its standard
      terms and conditions from time to time in force  or  if  none  upon  such
      terms as may be agreed upon by the Company at the date of its appointment
      as  Trustee  and  in  addition to reimbursement of its proper expenses it
      shall be entitled to remuneration  (free  of any Inheritance Tax or other
      succession estate or death duties wheresoever  payable  and  as  a  first
      charge  on the Trust Fund) for its services as trustee in accordance with
      its published scale of fees in effect at the date hereof while such scale
      remains in force and thereafter in accordance with its published scale of
      fees in force  from  time  to time provided however that such Trustee may
      transact on behalf of or with  the  Trust or any Beneficiary any business
      which by its constitution it is authorised  to  undertake  upon  the same
      terms  as would for the time being be made with an ordinary customer  and
      without  accounting  for  any  profit  thereby made and in particular and
      without

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      prejudice to the  generality of the foregoing  such Trustee may retain on
      current  account or deposit  account  or advance at  interest  all monies
      necessary or convenient to be retained or advanced in connection with the
      Trust.

15.2  Any individual Trustee hereof being a person engaged in any profession or
      business shall be entitled  to  be  paid all usual professional or proper
      charges for the business transacted time expended and acts done by him or
      his firm in connection with the trusts  hereof  including  acts  which  a
      trustee  not  being  in  any  profession  or  business  could  have  done
      personally.

15.3  Any Trustee shall be entitled to retain any brokerage or other commission
      or  remuneration  which  may  be received personally or by such Trustee's
      firm in respect of any transaction carried out on behalf of the Trust for
      which  such  Trustee or Trustee's  firm  is,  in  the  normal  course  of
      business,  allowed   brokerage   or  other  commission  or  remuneration,
      notwithstanding  that  the  receipt  of  such  brokerage,  commission  or
      remuneration was procured by an exercise  by such Trustee or the Trustees
      of powers over the Trust Fund.

15.4  No  Trustee nor any director, officer or employee  of  a  body  corporate
      acting  as  Trustee  shall  be  precluded  from underwriting, purchasing,
      holding,  dealing  in  and  disposing  of  any  stock,  shares  or  other
      securities whatsoever of any Group Company or from  otherwise at any time
      contracting   or  entering  into  any  insurance,  financial   or   other
      transactions with  any  Group  Company  or  being  interested in any such
      transaction  or accepting and holding the trusteeship  of  any  debenture
      stock or other  securities  of  any  Group  Company,  neither shall he be
      liable  to  account for any profit made by him thereby or  in  connection
      therewith and any Trustee or any such director, officer or employee shall
      also be at liberty  to  retain  for  his  own  benefit  and  shall not be
      accountable  for  any  fees, commissions, shares, brokerages or discounts
      allowed to him by banks,  brokers  or  other persons in relation to or in
      connection with any of the matters aforesaid.

16    ADMINISTRATION

16.1  If there is more than one Trustee, the Trustees  may act by a majority in
      the execution of the trusts hereof and the administration  of  the  Trust
      Fund  (including the exercise of any power hereby or by law conferred  on
      the Trustees) provided that:

      (a)  the minority shall not be liable for any acts of default on the part
           of the majority;

      (b)  the majority shall keep written records of their proceedings; and

      (c)  all acts necessary for giving effect to any decision of the majority
           shall be performed by all of the Trustees.

16.2  The Trustees  shall cause such accounts and records relating to the Trust
      Fund and to the  operation  of  the Trust to be kept as the Company shall
      from time to time require and shall,  at  the  request  of  the  Company,
      furnish  copies  of  or  extracts  from  such accounts and records to the
      Company or persons nominated by it and permit  any  person  authorised by
      the   Company  to  examine  such  accounts  and  records  and  all  other
      correspondence  and  documents relating to the Trust.  The Trustees shall
      also, if required by a Beneficiary in writing, make available to him such
      details of the accounts and records as relate to any loan or loans he may
      have received under the Trust.

16.3  The Trustees shall cause  proper minutes to be kept and entered in a book
      provided for the purpose of all their resolutions and proceedings and any
      such minutes of any meeting  of the Trustees if purported to be signed by
      the Chairman of such meeting or  by  the chairman of a subsequent meeting
      shall be admissible as prima facie evidence of the matters states in such
      minutes.

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16.4  Valid effectual receipts and discharges  for any monies or other property
      payable, transferable or deliverable to the  Trustees  or any of them may
      be given by any one Trustee or by any person from time to time authorised
      in writing for the purpose by the Trustees.

17    INFORMATION PROVIDED TO THE TRUSTEES

17.1  The Company shall provide and shall procure that any other  Group Company
      shall provide such information as the Trustees may reasonably require for
      the  purposes of this deed including without prejudice to the  generality
      of the foregoing:

      (a)  the  identity  of  any  company  which  has provided funds by way of
           settlement comprising any part of the Trust Fund;

      (b)  the identity of the company by which any  Beneficiary  who is or was
           an  employee  of  the Company or any other Group Company is  or  was
           employed (or where  any  Beneficiary  is  a Beneficiary by virtue of
           being the Relative of any employee or former employee of the Company
           or  a  Group  Company  the  identity of the company  by  which  that
           employee or former employee is or was employed);

      (c)  the identity of the Beneficiaries or any of them;

      (d)  whether any body corporate is a Group Company; and

      (e)  the total number of Shares in issue at any time.

17.2  The Trustees may rely without further enquiry on any information provided
      to them by the Company or any other  Group  Company  for  the purposes of
      this deed.

18    EXERCISE OF POWERS

18.1  Subject as provided in clauses 3 and 19, the Trustees shall have absolute
      and uncontrolled discretion in the exercise of powers conferred  on  them
      by this deed or by law.

18.2  Notwithstanding anything to the contrary in this deed, the Trustees shall
      only  be  empowered  to exercise their powers and discretions as Trustees
      until the expiration of the Trust Period.

18.3  The Trustee and/or the  Company  shall  have  power  at any time or times
      during the Trust Period by deed to release or to any extent  restrict the
      future exercise of any powers hereby or by law conferred on them provided
      that the Trustees shall not release or restrict their powers without  the
      prior written consent of the Company.

18.4  The  Trustees  and/or the Company shall have power at any time during the
      Trust Period to release the requirement under the deed for the consent to
      be  obtained  to  the  exercise  by  the  Company  or  the  Trustees  (as
      appropriate) of all or any of their powers hereunder.

19    GENERAL RESTRICTION ON POWERS

19.1  No discretion or power  by  the Trust or by law conferred on the Trustees
      or any other person shall be  exercised  and  no  provision  of the Trust
      shall operate directly or indirectly so as to cause or permit any part of
      the  capital or income of the Trust Fund to become in any way payable  to
      or applicable  for the benefit of any Excluded Person, the Company or any
      other Group Company.

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<PAGE>


19.2  The prohibitions  contained  in  clause  19.1 shall apply notwithstanding
      anything else contained or implied in this deed.

20    LIMITS ON SUBSCRIPTION FOR SHARES

20.1  Subject to clauses 20.2, 20.3 and 20.4, the Trustees shall exercise their
      powers to subscribe for Shares so as to ensure  as  far  as they are able
      that the number of Shares issued to them on any day shall not on that day
      exceed, when aggregated with:

      (a)  Shares  which have been issued by the Company within the  period  of
           ten years  ending  on that day to the Trustees or to trustees of any
           other EBT pursuant to any other employees' share schemes established
           by the Company, otherwise than on the exercise of options and

      (b)  Shares which have been  issued  or  remain  issuable  by the Company
           pursuant  to  options  granted  within the said period of ten  years
           under any employees' share schemes established by the Company,

      (c)  10% of the issued ordinary share  capital  of the Company on the day
      preceding that day.


20.2  Clause  20.1  shall  not  apply  to limit the power of  the  Trustees  to
      subscribe on any day for Shares pursuant  to  the  terms  of  an issue of
      Shares by way of rights to the holders (including the Trustees) of Shares
      or  of  any  class of Shares but the Shares so subscribed shall be  taken
      into account for  the  purposes of calculating the limit applicable under
      clause 20.1 on any subsequent day.

20.3  Where Shares are issued by the Company to the Trustees or to the trustees
      of any other EBT for the  purpose  of  enabling such the Trustees or such
      other  trustees, pursuant to the rules of  any  employees'  share  scheme
      established  by  the Company, to transfer such Shares to beneficiaries of
      the Trust or any other  EBT  in satisfaction of options granted under any
      such employees' share scheme and  the  Shares in question have been taken
      into account for the purposes of this clause  pursuant  to clause 20.1(b)
      on the grant of such options, such Shares shall not be taken into account
      pursuant  to clause 20.1(a) upon their issue to the Trustees  or  to  the
      trustees of such EBT.

20.4  For the purposes  of  clause  20.1,  Shares  shall  be  deemed  not to be
      issuable by the Company pursuant to any option to acquire Shares,  if and
      to the extent that:

      (a)  where  the  option  is  granted  by  the Company, there are in place
           arrangements (whether legally binding  or  not)  between the Company
           and any other person (including the Trustees) under  which,  in  the
           reasonable  opinion  of the Trustees, the Company will be able, upon
           the exercise of such option, to procure the transfer by such person,
           in satisfaction thereof,  of  issued Shares, not being Shares issued
           for such purpose pursuant to any employees' share scheme; or

      (b)  where the option is granted by  a person other than the Company, the
           Trustees are satisfied, in their  reasonable opinion, that, upon the
           exercise  of  such  option,  the  Shares   to   be   transferred  in
           satisfaction  thereof  will  not  be Shares issued for such  purpose
           pursuant to any employees' share scheme.

21    ALTERATION OF TRUST DEED

      The Company may at any time, by deed, alter  or  add to all or any of the
      provisions hereof in any respect, provided that:

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<PAGE>

      (a)  the  limits set out in clause 20 shall not be  amended  without  the
           prior  sanction  of an ordinary resolution of the Company in general
           meeting; and

      (b)  no alteration or addition shall:

           (i)   vary or conflict with the provisions of clauses 3 and 19;

           (ii)  extend the perpetuity period;

           (iii) cause any part  of  the  Trust  Fund  or the income thereof to
                 become  payable  to  or  applicable  for the  benefit  of  any
                 Excluded Person, the Company or any other Group Company;

           (iv)  cause any property comprised in the Trust  Fund  to be applied
                 in any manner contrary to clause 3; or

           (v)   adversely affect the Trustees

           (vi)  without the Trustees' prior written consent.


22    PRELIMINARY EXPENSES

      The  Trustees  shall have power to pay out of the Trust Fund expenses  of
      whatever nature incidental to the preparation of this deed.


23    IRREVOCABILITY

      This deed shall be irrevocable.


24    GOVERNING LAW

24.1  Subject to clause  24.2  this  deed shall be construed and take effect in
      accordance with the laws of England and Wales.

24.2  Notwithstanding anything hereinbefore  contained  the  Trustees may (with
      the  prior written consent of the Company) at any time during  the  Trust
      Period  declare  that the trusts, powers and provisions hereof shall from
      the  date  of  such  declaration   take   effect   with   such  necessary
      modifications  as shall be specified in the said deed in accordance  with
      the law of such other territory as shall be therein specified and as from
      the date of such declaration the law of such other territory shall be law
      applicable hereto  and  the  Courts  in such other territory shall be the
      forum for the administration hereof but  subject  to the powers conferred
      by this clause 23.2 and until any further declaration  is  made hereunder
      provided that the foregoing power shall not be exercisable in  any manner
      which  might  directly  or  indirectly  cause  this  deed  under  the law
      applicable thereto to become illegal, void or voidable.

25    COUNTERPARTS

25.1  This  Deed  may  be  executed  in  any number of counterparts, and by the
      parties on separate counterparts, but in that case shall not be effective
      until each party has executed at least one counterpart.

                                      96
<PAGE>


25.2  Each counterpart shall constitute the  original of this deed, but all the
      counterparts shall together constitute one and the same instrument.

EXECUTED AS A DEED by the parties or their duly  authorised representatives but
not delivered until the date of this deed.

Executed as a deed by               )  .................................
PROVALIS PLC                        )  Director
acting by two directors or by a     )
director and its secretary          )  .................................
                                    )  Director/Secretary


The common seal of
{diamond-suit} LIMITED
was hereunto affixed as its deed
in the presence of                  )  .................................
                                    )  Authorised signatory







                                      97


<PAGE>

                                                                    EXHIBIT 4.9

   DISTRIBUTION AGREEMENT  MADE BETWEEN INTERFALK AG AND THAMES LABORATORIES
LIMITED DATED MARCH 13, 1992, AS AMENDED BY AN AMENDMENT AND TERMINATION DEED,
 AND A NON-COMPETE DEED, BOTH DATED JANUARY 31, 2003, AND MADE BETWEEN DR FALK
                            PHARMA AND PROVALIS PLC


                                FALK AGREEMENT


This agreement is made on the 13th day of March 1992 between

(1)   Interfalk AG of Hardstrasse 28, CH-4020 Basel, Switzerland ("Interfalk")

(2)   Thames  Laboratories  Limited  of  The  Old  Blue  School,  Lower Square,
      Isleworth,  Middlesex,  England ("Thames"), a wholly owned subsidiary  of
      Cortecs Limited ("Cortecs") of the same address

WHEREAS

(A)   Interfalk has developed and  owns  confidential  data, know-how and trade
      secrets  concerning  pharmaceutical  speciality  products   described  in
      Schedule I (hereinafter called "the Products")

(B)   Thames  has  purchased  and desires to continue to purchase the  Products
      ready  for sale for the countries  listed  in  Schedule  II  (hereinafter
      called "the  Territory")  and to sell the Products in the Territory under
      Thames' label and under the  trademarks  owned  by Interfalk (hereinafter
      called "the Trademarks").

(C)   Interfalk and Thames have agreed to terminate all  existing  distribution
      agreements   between   them   in  respect  of  the  Products  ("the  Falk
      Agreements") and for Thames to be simultaneously re-appointed distributor
      of the Products in the Territory  on the terms and conditions hereinafter
      appearing.

(D)   The  Falk  Agreements  include written  licence  agreements  between  the
      parties for the products "Chenofalk", "Ursofalk" and "Mucofalk".

Now this Agreement witnesseth as follows:-

1.    (a)    Interfalk  and  Thames  hereby  terminate  the  Falk Agreements and
             subject to sub-clause (c) each  party  releases and  discharges the
             other from all claims and  demands whatsoever under or arising from
             the Falk Agreements.

      (b)    Interfalk hereby  grants  Thames and Thames accepts from Interfalk
             the exclusive non transferable  right  to sell the Products in the
             Territory (using the Trademarks under the  conditions specified in
             clause 6).

      (c)    The  termination of the Falk Agreements shall  not  discharge  the
             liability of either party prior to the date hereof:

             (i)   to pay for or deliver supplies of the Products in accordance
                   with  the  terms of the Falk Agreements ordered prior to the
                   date hereof; or

             (ii)  in respect of any claims or proceedings against either party
                   arising from the supply of the Products to third parties.

                                       98
<PAGE>


      (d)    Interfalk shall offer  to  appoint  Thames  distributor of any new
             pharmaceutical products it wishes to be licensed  or  sold  in the
             Territory.  Both  parties  shall  negotiate  in good faith and use
             their best endeavours to agree the terms for such appointment (s).
             In the event that such terms cannot be agreed  within a reasonable
             time  from  notification and receipt of full particulars  of  such
             products by Thames  Interfalk  may  offer  those products to third
             parties  but  on terms no less favourable than  those  offered  to
             Thames.

2.    (a)    Interfalk  undertakes  to  furnish  promptly  to Thames for Thames'
             assistance  in  registering  and  selling  the Products  such data,
             formulae,  reports  and  other  information  (collectively  herein
             referred to as "Information") either in:

             (i)   its possession, control or ownership; or

             (ii)  the  possession  or  control  of  a  third  party  of  which
                   Interfalk  is  entitled  to  be  informed  and supplied with
                   copies;

             relating to pharmaceutical registration, clinical  use and sale of
             the  Products.  For the purposes of this clause "Interfalk"  shall
             include  any "subsidiary"  or  "parent  company"  (as  defined  in
             section 144 of the Companies Act 1989) of Interfalk.

      (b)    The  pharmaceutical   registration/application  for  each  of  the
             Products in the Territory  (each  such registration or application
             hereinafter  referred  to  as  the  "Product  Licence")  with  the
             exception of Salofalk products is at the date of this Agreement in
             the name of Thames and any registration  fees  in  respect of each
             such  non-Salofalk  Product  Licence shall be for Thames  account.
             Thames shall provide Interfalk  with  access to its pharmaceutical
             registration files for each of the non-Salofalk Products to enable
             Interfalk  to  apply for its own Product  Licence  for  each  such
             Product.

      (c)    Product Licences  in  the  Territory  for  each  of  the  Salofalk
             Products  (for  which  Thames  holds no Product Licence) shall  be
             applied for by and shall be registered  in  the  name of Interfalk
             with Thames registered as the distributor and any registration and
             other  fees  shall be for the account of Interfalk.  Thames  shall
             provide all reasonable  pharmaceutical  regulatory  assistance  to
             enable  each  Salofalk  product  to  obtain a Product Licence. All
             formulation, clinical trial, manufacturing,  stability  and  other
             data required by the Department of Health not in the possession of
             Thames shall be supplied by Interfalk to Thames expeditiously  (at
             no  cost  to  Thames)  to  enable  Thames to prepare the necessary
             Salofalk Product Licence applications for Interfalk.

      (d)    In the event that Cortecs becomes insolvent  or any legal petition
             or other form of pleading for composition of or  relief  from  its
             debts  is  filed by it or against it or a receiver or a trustee is
             appointed for  the  benefit  of  its  creditors,  then all Product
             Licences  for each of the Products in the Territory  shall  revert
             from Cortecs  or  Thames  to INTERFALK U.K. In this event, Cortecs
             and Thames shall provide all necessary assistance for the transfer
             of the said Product Licences to INTERFALK U.K.


                                       99
<PAGE>

3.    Thames  undertakes  to treat as  confidential  the  know-how and all other
      information  received from  Interfalk  under the terms of this  agreement.
      Disclosure by Thames of such know-how and information shall be confined to
      persons in executive or technical  positions in its  organisation who need
      such  information  for the proper  operation of its business or to Thames'
      professional  or  technical   advisers  assisting  Thames  in  the  proper
      operation of its business or to the proper operation of its business or to
      those government employees to whom disclosure must be made for the purpose
      of  obtaining  a  permit  to sell  the  Products  in the  Territory.  Upon
      termination of this  agreement,  Thames shall return to Interfalk all such
      know-how or other  information  received  hereunder and shall refrain from
      making any further use thereof.

      The  obligation hereunder shall not apply to any of said information  and
      data which  is or becomes public knowledge or which is lawfully disclosed
      to Thames by a third party.

4.    In the event that the parties  agree to carry out clinical  trials for the
      development  in the  Territory of the clinical use of the  Products,  then
      Interfalk  shall supply the Products needed for these studies free of cost
      and all other costs  involved in  connection  with the studies  will be to
      Interfalk's  account.  The clinical  documentation thus collected would be
      the property of  Interfalk,  provided  always that Thames shall within the
      Territory have a royalty free licence to use any or all of the information
      contained in such documentation for any reasonable purpose.

5.    (a)    Interfalk  shall effect orders from Thames for the Products in bulk
             meeting  the  specifications given and accompanied by a certificate
             of analysis. The  supplies of  the Products shall comply with their
             respective Product Licences.

      (b)    Interfalk shall  use  its  best  endeavours  to supply Products in
             accordance with written orders from Thames within  8 (eight) weeks
             of receipt of such orders.

      (c)    Prices and terms shall be the ones listed in Schedule I hereto and
             shall  be  effective for a period of 2 (two) years from  the  date
             hereof. Thereafter,  prices inclusive of CIF London, shall only be
             changed  by  mutual  agreement   between  the  parties,  any  such
             adjustment to prices shall not be  made  at intervals of less than
             12 months. Provided always that if Thames are not able to obtain a
             price from the UK National Health Service  which allows it to make
             what is in its opinion a reasonable margin on  sale of each of the
             Products having regard to its obligation hereunder  then by notice
             in  writing  from  Thames  at any time Interfalk shall adjust  the
             prices hereunder to allow Thames a reasonable margin as aforesaid.
             The parties would regard a reasonable  margin  to  be  70%  of Net
             Turnover.

      (d)    For the purposes of this agreement:

             (i)   "Net  Turnover"  shall  mean the aggregate sum received from
                   the sale of the Products  in  the  Territory  less transport
                   charges, returns and VAT;


                                       100
<PAGE>

             (ii)  "Cost  of  Goods"  shall  mean  the  aggregate sums paid  to
                   Interfalk to purchase supplies of the Products (less VAT and
                   returns) plus the cost to Thames of packaging  such supplies
                   in ready-for-sale packs.

             (iii) "Gross  Profit"  shall  mean  the  difference  between  "Net
                   Turnover" and "Cost of Goods".

      (e)    The prices set out in Schedule I, which are in Deutsch Marks, were
             negotiated on the basis of the sterling/Deutsch Mark exchange rate
             on   the  date  of  this  Agreement  (the  "base  rate")  and  any
             adjustments to the prices after the two year period will similarly
             be negotiated  on  the  basis  of  the  then sterling/Deutsch Mark
             exchange rate (base date and the subsequent adjustment dates being
             hereinafter referred to as the "exchange  rate  base  dates"). Any
             change  in the rate of exchange between sterling and Deutsch  Mark
             which is  more  than  {plus-minus}5% (five percent) different from
             the previous exchange rate  on  the  exchange  rate base date will
             automatically cause the then price to be adjusted  up  or  down in
             accordance  with  the  corresponding  change in the exchange rate.
             Provided that in no event prices be adjusted down by more than 10%
             in a full year pursuant hereunder. Interfalk  shall  notify Thames
             in writing of the modification made to the prices of Products made
             hereunder.

      (f)    Payment  in  Deutsch Marks shall be made within 30 days  from  the
             date of receipt of goods.

      (g)    Wherever used  in  the  agreement  "CIF"  shall  have  the meaning
             ascribed  to  it in the current Incoterms as may be modified  from
             time to time.

6.    (a)    Thames  undertakes   to   sell   and  promote  the  Products  from
             Interfalk in the Territory by Thames  all  under  the  Trademarks.
             These Trademarks are the property of Interfalk and Thames acquires
             no  right,  interest  or proprietorship therein by virtue of  this
             agreement  but  Interfalk  agrees  to  enter  into  any  necessary
             registered user agreement  or  other  permissions  free of cost to
             Thames  to  enable  Thames  to  market  the  Products  under   the
             Trademarks  during  the  term  hereof.  Interfalk  shall indemnify
             Thames  from  any claims, costs, damages liabilities and  expenses
             arising out of  the  sale  by  Thames  of  products  bearing  such
             Trademarks  provided that the conditions of use for the Trademarks
             recommended by Thames have been approved by Interfalk.

      (b)    Thames undertakes  diligently  to promote the Products, to further
             sales in the Territory. Each twelve  months  for  the  first three
             years  of  this  agreement  Thames  shall  spend on promoting  the
             Products (or in incurring liability for such expenditure) not less
             than 10% (ten per cent) of the Gross Profit  earned by Thames from
             the sale of the Products during each such twelve  month period and
             thereafter shall spend a reasonable sum on promoting the Products.

      (c)    Interfalk  agrees  to cooperate with Thames in the development  of
             advertising and promotional  plans  for the Products and to supply
             Thames  free  of  charge  with  such  reports,   negatives  and/or
             published papers in the hands of Interfalk.


                                       101
<PAGE>

      (d)    Thames and Interfalk shall meet at least three times each calendar
             year to further the aims of this agreement.

      (e)    For the duration of this Agreement neither party shall without the
             other parties written consent market or otherwise  be  involved in
             products in the Territory which are directly competitive  with the
             Products  and  for  the  avoidance  of  doubt  Interfalk shall not
             subject  to  clauses  6f and 6g directly or indirectly  market  or
             distribute  the Products  in  the  Territory  other  than  through
             Thames.

      (f)    In the event  that  Thames fails to purchase the minimum number of
             units for each of the  Chenofalk,  Ursofalk  and Mucofalk products
             specified in Schedule I during each twelve month  period  from the
             date  of this Agreement, Falk may within two months of the end  of
             any such  twelve  month period by two months written notice change
             the  exclusive distribution  licence  granted  herein  to  a  non-
             exclusive  licence  but  only in respect of such of the Chenofalk,
             Ursofalk and Mucofalk products  for  which  the  minimum  targeted
             purchases by Thames are not achieved.

      (g)    In  the case of each of the Salofalk and Lithofalk products  there
             shall  be no minimum targeted purchases during the first two years
             of this  Agreement.  One  month prior to the second anniversary of
             this Agreement the parties  shall negotiate in good faith to agree
             minimum purchases by Thames of  each of the Salofalk and Lithofalk
             products for each subsequent twelve  month  period and such agreed
             figures shall be inserted in Schedule I. In the  event that Thames
             fails  to  purchase  the  minimum number of units of each  of  the
             Salofalk  and Lithofalk products  then  specified  in  Schedule  I
             during any  twelve  month  period  from  the  date  of  the Second
             Anniversary of this Agreement, Falk may within two months  of  the
             end  of  any such twelve month period by two months written notice
             change the exclusive distribution licence granted herein to a non-
             exclusive licence in respect of each of the Salofalk and Lithofalk
             products for  which  the minimum targeted purchases by Thames were
             not achieved.

7.    (a)    This  agreement shall  take  effect on  the  date  hereof and shall
             remain in force  for a period  of 8 (eight)  years  and  thereafter
             shall continue unless and until terminated by either party upon not
             less than 2 (two) years prior written notice to expire on or at any
             time after the said 8 (eight) year period.

      (b)    Without prejudice to the rights of either party for breach of this
             agreement,  each  party  shall  have  the  right to terminate this
             agreement by a ninety-day prior written notice to the other party,
             should any one or all of the following events occur but shall have
             no grounds to terminate otherwise:

             (i)   If  the  other  party  is  in  breach  of  any   substantial
                   obligation  contained  in this agreement which is remediable
                   and fails to remedy the  same within 90 days of notice given
                   by the other party of such breach.

             (ii)  If the other party is in breach  of  two or more substantial
                   obligations  contained  in  this  agreement  which  are  not
                   capable of remedy within 90 days of  written notice given by
                   the other party.

                                       102
<PAGE>

             (iii) If the other party becomes insolvent or  any  legal petition
                   or other form of pleading for composition of or  relief from
                   such  party's  debts  is  filed  by  it  or against it or  a
                   receiver or a trustee is appointed for the  benefit  of  the
                   creditors of such party.

      (c)    In  the  event of termination of this agreement as a result of the
             acts or events  set  forth in this article having occurred, Thames
             shall be permitted to  sell its existing inventory of the Products
             at the date of such termination  on  condition  that Thames, after
             exhausting  said inventory shall immediately discontinue  any  and
             all use of the know-how.

      (d)    Neither party  hereto  shall  be held liable for failure to comply
             with any of its obligations hereunder,  when  and  if such failure
             arises from a cause which is beyond the control of and without the
             negligence  of  the  party failing to perform. Such force  majeure
             causes include, but are  not  limited  to  acts  of  God,  acts of
             Government,  wars,  hostilities, insurrections, riots, strikes  or
             labour difficulties or unusually severe weather.

      (e)    All the terms and conditions  of this agreement are closely linked
             together  and  therefore must be  jointly  construed.  Failure  by
             either party to enforce at any time and for any period of time one
             or more of such  terms and conditions shall not be waiver of it or
             of the rights of such  party  to  enforce  each and every term and
             condition.

      (f)    Interfalk  shall indemnify Thames against any  costs,  damages  or
             liabilities  arising  as  a result of any claim by any third party
             that any or all of the Products  infringe  any  relevant patent or
             patent application in the Territory.

8.    This Agreement shall be governed by the law of England and  both  parties
      submit to the exclusive jurisdiction of the English courts.

9.    All notices required under any of the provisions of this agreement  shall
      be validly given if sent by registered mail, return receipt requested, to
      the  last  known  address  of the other party and shall be deemed to have
      been given on the date appearing  from  the  post  mark  of  the place of
      mailing.

10.   Neither  party  shall  be  entitled  to transfer or assign, partially  or
      entirely,  any  of  its rights or obligations  under  this  agreement  to
      another without prior  written  consent  of  the other party, except that
      either party may transfer or assign its rights  and  obligation hereunder
      to  any  of  its  subsidiaries  and  affiliated  companies which  now  or
      hereafter  may  be  organised  provided  that such assignment  shall  not
      relieve either party hereunder of its primary responsibilities under this
      agreement.

11.   (a)    In    this  agreement, unless  the    context   clearly  otherwise
             indicates, words  importing  the  singular  include the plural  and
             vice  versa; a reference to  any  one  gender  includes  the  other
             genders; a  reference to a natural person  includes  an  artificial
             person and vice versa.

      (b)    The  Schedules  to  this agreement are deemed to  be  incorporated
             herein and form an integral part hereof.

                                       103
<PAGE>

      (c)    In this agreement and the Schedules the word "agreement" refers to
             this agreement and the  words "clause" or "clauses" and "Schedule"
             or "Schedules refer to clauses of or Schedules to this Agreement.

12.   This  Agreement  constitutes the entire  agreement  between  the  parties
      hereto with respect to the within subject matter.

13.   This  Agreement is executed in the English text which shall be the binding
      text.

FOR INTERFALK AG                FOR THAMES LABORATORIES LIMITED


By     M Falk                    By     G Hill


Title: President                 Title: Managing Director



Dated: 13th of March 1992        Dated: 27th April 1`992


                                       104
<PAGE>


                                  SCHEDULE I


<TABLE>
<CAPTION>
TRADEMARKS      PRICES PER PRODUCTS                                                                MINIMUM TARGET SALES UNITS
<S>             <C>                                                                                <C>
Chenofalk       40 DMS per 100 x 250mg capsules each CIF Wrexham                                   808 x 60
Ursofalk        60 DMS per 100 x 250mg capsules each CIF Wrexham                                   4,140 x 60
Mucofalk        (to be agreed) DMS per 20 sachets CIF Wrexham supplied in pre printed cartons
Lithofalk       (to be agreed)
Salofalk        22.10 DMS per box of 100 x 250mg tablets CIF Wrexham
Salofalk        15.20 DMS per box of 30 x 250mg suppositories including 10% free goods CIF Wrexham
Salofalk        56 DMS per box of 7 x 4mg enemas CIF Wrexham

</TABLE>


                                       105
<PAGE>





                                  SCHEDULE II


                                   TERRITORY




                                 GREAT BRITAIN

                               NORTHERN IRELAND





                                       106
<PAGE>





                            DATED 31st JANUARY 2003



                               PROVALIS PLC (1)


                                    - AND -



                            DR FALK PHARMA GMBH (2)



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

                        AMENDMENT AND TERMINATION DEED

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







                               Legal Department
                                 Provalis plc
                                Newtech Square
                           Deeside Industrial Park
                                   Deeside
                                  Flintshire
                                   CH5 2NT

                              Tel:  01244 833402
                              Fax:  01244 280288

                           REF:  LG/AGMTS/COMM/FALK



                                      107


<PAGE>

THIS DEED is made the 31st day of  January 2003 between


(1)   PROVALIS PLC a company registered in England under company number 3321624

      whose registered  office  is  at Newtech Square, Deeside Industrial Park,

      Deeside, Flintshire, CH5 2NT ("Provalis")



(2)   DR FALK PHARMA GMBH a company registered  in Germany under company number

      HRB  3266  whose  registered  office  is at Leinenweberstrasse  5,  79108

      Freiburg, Germany ("Falk")



RECITALS



(A)   Thames assigned the Falk Agreement to Healthcare on 1st July 1998;



(B)   Healthcare assigned the Falk Agreement to Provalis on 20th August 2002;



(C)   At  Falk's request Provalis has agreed that  the  Falk  Agreement  should

      terminate early on 31st December 2004;



(D)   Falk and Provalis have agreed certain amendments to the Falk Agreement;



(E)   The parties  have  agreed  to  provide  for  the  above  on the terms and

      conditions contained in this Deed.



NOW IT IS HEREBY AGREED AS FOLLOWS



1.    INTERPRETATION



1.1   DEFINITIONS



      In this Deed the following words shall have the following meanings:-

      "Associate"  shall  mean  with respect to either one of the parties,  any
      person, firm, trust, corporation  or  other entity or combination thereof
      which directly or indirectly (a) controls  said  party, (b) is controlled
      by said party, or (c) is under common control with  said party; the terms
      "control" and "controlled" meaning ownership of fifty  percent  (50%)  or
      more,   including   ownership  by  trusts  with  substantially  the  same
      beneficial interests,  of  the  voting  and equity rights of such person,
      firm, trust, corporation or

                                      108

<PAGE>


      other entity or combination thereof or the power to direct the management
      of such person,  firm, trust,  corporation or other entity or combination
      thereof;


      "Falk Agreement"  shall  mean the Distribution Agreement dated 13th March
      1992 now between Falk and Provalis;


      "Final Instalment" shall mean the instalment detailed in Clause 3.1 (c);


      "Force  Majeure"  shall  mean   any  event  or  circumstance  beyond  the
      reasonable control of the party affected by such event or circumstance;


      "Gross Invoice Value" shall mean  the  value of each invoice exclusive of
      any value added tax or other sales tax but  inclusive  of  any  trade  or
      other discount given by Provalis in relation thereto that is shown on the
      invoice;


      "Healthcare" shall mean Provalis Healthcare Limited, a company registered
      in  England  under  company  number  1916352,  which  is  a  wholly owned
      subsidiary company of Provalis;


      "Initial  Rate"  shall  mean  a pounds sterling to euro exchange rate  of
      {pound-sterling}1 = *1.5813;


      "Marketing  Authorisations"  shall  mean  all  marketing  authorisations,
      product  licences  and product authorisations  for  distribution  of  the
      Products in the Territory  that  are  registered  in the name of Provalis
      (including for any new pharmaceutical products which  have  been licensed
      to  Provalis between the date hereof and the date of termination  of  the
      Falk Agreement);


      "Parallel  Import Amount" shall mean the amount by which parallel imports
      of the Products into the United Kingdom in the 12 months to 31st December
      2004 as reported by IMS BPI Data exceed {pound-sterling}100,000;


      "Payment Date  Rate"  shall  mean the mid market daily rate quoted in the
      London Financial Times published  in  London  on  the  date  on which the
      payment of the Sum is due to be made;


      "Products"  shall  mean  all  products  distributed  by Provalis, or  any
      Associate of Provalis, pursuant to rights granted by Falk  under the Falk
      Agreement;

                                      109
<PAGE>


      "Thames" shall mean Thames Laboratories Limited, a company registered  in
      England  under company number 1433320, which is a wholly owned subsidiary
      company of Provalis;


      "Threshhold  Amount" shall mean the sum of {pound-sterling}2,455,000 less
      the Parallel Import Amount;


      "2004 Turnover"  shall  mean  the  Gross  Invoice  Value  of all Products
      supplied  by  Provalis  in  the United Kingdom in the 12 months  to  31st
      December 2004.


1.2   Words and phrases defined in  the  Falk  Agreement  shall  bear  the same
      meaning  if used in this Deed, unless such word or phrase is specifically
      defined in  this Deed, in which case the specific definition in this Deed
      shall apply.



1.3   A reference in  this  Deed  to  the  singular includes a reference to the
      plural  and  vice  versa and a reference  to  the  masculine  includes  a
      reference to the feminine and neuter and a reference to a person includes
      reference to a company as well as to any legal or natural person.


1.4   The construction of this Deed is not to be affected by any heading.


1.5   References to this Deed include references to the schedules to this Deed.


2.    CONSIDERATION


1.1   In consideration  of Provalis  entering into this Deed, Falk shall pay to
      Provalis the sum of  {pound-sterling}4,500,000  ("the Sum"),  as the same
      may be adjusted in accordance with Clause 4.


3.    PAYMENT OF THE SUM


3.1   Falk shall, subject to the provisions of Clause 3.2 and to receipt  of an
      invoice  from  Provalis,  pay  the  Sum  to  Provalis  in  the  following
      instalments on the following dates:-


      (a)  {pound-sterling}1,000,000 on or before 14th February 2003;


      (b)  {pound-sterling}1,500,000 on 2nd January 2004; and

                                      110


<PAGE>

      (c)  {pound-sterling}2,000,000,  adjusted in accordance with Clause  4.2,
           within 14 days of the date by  which  Provalis  has notified Falk of
           both the 2004 Turnover and the Parallel Import Amount.



3.2   Each instalment  detailed in Clause 3.1, and any Excess Amount calculated
      pursuant  to Clause  4.3,  shall be  re-calculated  by  Provalis  to take
      account of exchange rate variations in accordance with the following:-


      (a)  The relevant  instalment  or the Excess  Amount (as the case may be)
           shall be  converted  into Euros using the  Initial  Rate ("the First
           Conversion");


      (b)  The relevant  instalment  or the Excess  Amount (as the case may be)
           shall also be converted into Euros using the Payment Date Rate ("the
           Second Conversion");


      (c)  The First  Conversion shall be added to the Second  Conversion,  and
           the resultant sum divided by 2 ("the Adjusted Euro Sum"); and



      (d)  The Adjusted Euro Sum shall be converted into pounds  sterling using
           the Payment Date Rate,  the  resultant  figure being the  instalment
           amount  actually  payable by Falk, or the amount (if any) payable by
           Provalis pursuant to Clause 4.3, (as the case may be).



      The Final Instalment shall be re-calculated after any  adjustment thereto
      in accordance with Clause 4.2.


3.3   The  payment  of each instalment of the Sum shall be by transfer  to  the
      following bank account:-


      Account Name:    Provalis plc
      Account Number:  40707422
      Sort Code:       20-42-73
      Bank:            Barclays Bank plc
                       Barclays Business Centre
                       Hounslow Branch
                       210 High Street
                       Hounslow TW3 1DL

                                      111

<PAGE>

      or to such other  bank account as Provalis may notify in writing to Falk.
      Each such payment shall  be  made  without  any  set-off,  withholding or
      deduction  except  such  amount  (if  any) of tax as Falk is required  to
      deduct or withhold by law.


3.4   If Falk fails to pay any instalment of  the  Sum  on the date detailed in
      Clause 3.1, or in the manner detailed in Clause 3.3,  Provalis  shall  be
      entitled  (without  limiting  any  other  right or remedy it may have) to
      charge Falk interest on such instalment of the Sum, both before and after
      any judgement, at the rate of 4 per cent per  annum  above  Barclays Bank
      PLC  base rate in force from time to time from the date payment  was  due
      until actual payment is made.


4.    ADJUSTMENT OF FINAL INSTALMENT


4.1   Provalis  shall notify Falk of the amount of the 2004 Turnover and of the
      Parallel Import  Amount  as  soon  as  is  reasonably possible after 31st
      December 2004 and in any event on or before 15th January 2005.


4.2   In the event that the 2004 Turnover does not  exceed the Threshold Amount
      the  Final Instalment shall be reduced by {pound-sterling}0.65  for  each
      {pound-sterling}1.00 by which the 2004 Turnover falls below the Threshold
      Amount, save to the extent that any such shortfall is caused by:-


      (a)  any failure of Falk to deliver any Products ordered by Provalis;


      (b)  the withdrawal or suspension of any marketing authorisation relating
           to any of the Products;


      (c)  any  product  recall  and/or adverse event in connection with any of
           the Products;


      (d)  any Products not complying  with  their  specifications or marketing
           authorisations, or otherwise not complying  with  any warranty given
           by Falk;


      (e)  any  breach  by  Falk  of  any  of  its obligations under  the  Falk
           Agreement; or


      (f)  any event of Force Majeure.


                                      112


<PAGE>




5.    TERMINATION OF THE FALK AGREEMENT



5.1   Provided that Provalis has received all payments  due  to  it pursuant to
      Clause 3.1, the Falk Agreement shall be deemed to have terminated on 31st
      December  2004, such termination being by the mutual written  consent  of
      both Falk and  Provalis.   The  provisions  of  Clause  7 (c) of the Falk
      Agreement shall not apply on such termination.


5.2   (a)  On termination of the Falk Agreement in accordance with  Clause 5.1,
           Falk  shall purchase from Provalis  all stocks of the Products  then
           in Provalis' possession or control.


      (b)  The  total price to be paid by Falk for the purchase of the Products
           pursuant  to  Clause  5.2  (a)  shall be the aggregate price paid by
           Provalis  to Falk therefor, together  with  the  aggregate  freight,
           insurance and  handling  costs  and expenses incurred by Provalis in
           procuring  the transportation of such  products  from  the  original
           point of delivery thereof to Provalis' warehouse.


      (c)  Falk shall pay  the  price  determined in accordance with Clause 5.2
           (a) within 14 days of the date  of Provalis' invoice therefore, such
           payment to be made by bank transfer  to  the  account  specified  in
           Clause 3.3.


      (d)  The  sale  of  these  products by Provalis back to Falk shall be ex-
           works at Provalis' warehouse.  Provalis  shall  make  such  Products
           available for collection by Falk on 3rd January 2005 and Falk  shall
           ensure  that all quantities of such Products are collected on behalf
           of Falk on that day.


      (e)  Falk and Provalis shall in good faith during the 6 months commencing
           on 1st July  2004  seek  to  agree a schedule for deliveries of Falk
           Products to Provalis that minimises  the quantities of Products that
           are in Provalis' possession or control  at  the  termination  of the
           Agreement  but that does not prejudice Provalis' ability to continue
           the promotion, marketing and distribution of the Products.


                                      113


<PAGE>

6.    MARKETING AUTHORISATIONS

6.1   Falk shall ensure  that  Provalis is named as the sole distributor of the
      Products on all marketing  authorisations,  product  licences and product
      authorisations necessary for the promotion, marketing  and  sale  of  the
      Products  in  the  Republic of Ireland as soon as is practicable and that
      all such marketing authorisations  are  transferred  into  Falk's name as
      soon is practicable.


6.2   Provalis shall prepare all regulatory documents necessary for  the change
      of  ownership of all Marketing Authorisations to Falk, and shall  deliver
      the same  to  Falk  as  soon  as is reasonably possible after the date of
      receipt by it of all monies due hereunder.  Falk shall be responsible for
      submitting the said documentation  to the relevant regulatory authorities
      and for obtaining such changes of ownership.


6.3   The mechanism for the transfer of the  Marketing  Authorisations shall be
      discussed  in  good  faith  by  Provalis  and Falk during  the  6  months
      commencing on 1st May 2004.


6.4   Provalis shall give Falk such reasonable assistance  as  may be requested
      in effecting the transfer of such Marketing Authorisations.


6.5   Falk shall bear all third party costs and expenses associated  with  such
      transfers, including the payment of all registration and regulatory fees.


7.    REPUBLIC OF IRELAND


7.1   Schedule  II  of  the  Falk Agreement shall be amended by the addition of
      "the Republic of Ireland".   This amendment shall be deemed to have taken
      effect on 1st January 2003.


7.2   Those Products to be distributed  by  Provalis in the Republic of Ireland
      are detailed in the Schedule hereto.


7.3   Subject to Clause 7.4, the prices of those Products purchased by Provalis
      that are to be distributed by Provalis in the Republic of Ireland are set
      out in the Schedule hereto, which Schedule  shall  be  incorporated  into
      Schedule I of the Falk Agreement.


7.4   Whenever  Falk  delivers  any  quantities  of  any Product that are to be
      distributed  by  Provalis  in the Republic of Ireland,  Falk  shall  also
      deliver an additional 10% of  the  quantities  of  each  such  Product so
      ordered.

                                      114
<PAGE>


7.5   For  the avoidance of doubt, Schedules I and II to the Falk Agreement  as
      at the date hereof and as amended by this Agreement, are attached hereto.


8.    NEW PRODUCTS


8.1   In the  event  Falk  wishes  to  licence  or  sell any new pharmaceutical
      products  in  the  Territory, its discussions with  Provalis  in  respect
      thereof shall continue  in  the same spirit as the discussions concerning
      new products have taken place  previously under the Falk Agreement, which
      includes, for the avoidance of doubt, that Provalis shall not be required
      to make any upfront or milestone  payments  in  respect thereof; provided
      however that following termination of the Falk Agreement,  Falk  shall be
      free  to  license  and  sell  any  pharmaceutical products, including new
      products, in the Territory without any obligation whatsoever to Provalis.
      In particular, Falk shall be under no obligation after termination of the
      Falk Agreement to offer to appoint Provalis  as  distributor  of  any new
      pharmaceutical  products  it  wishes  to  be  licensed  or  sold  in  the
      Territory.


9.    AMENDMENTS TO THE FALK AGREEMENT


9.1   The  word "Deutsch Marks" wherever it appears in Clauses 5 (e) and (f) of
      the  Falk   Agreement  shall  be  replaced  by  the  word  "Euros",  such
      replacement being deemed to have taken effect on 1st January 2002.


9.2   In addition to  the  specific  amendments  referred  to in this Deed, the
      terms and conditions of this Deed shall be deemed incorporated  into  the
      Falk  Agreement,  and  to  make such consequential amendments to the Falk
      Agreement as may be necessary  to  give  full  effect  to  the  terms and
      conditions of this Deed.


9.3   In  the  event  of any conflict between the terms and conditions of  this
      Deed, and those of  the  Falk Agreement, the terms and conditions of this
      Deed shall take precedence.


10.   CONFIDENTIALITY


10.1  Falk and Provalis shall each  be  entitled  to release a press release in
      the form previously agreed upon by the other,  such  press  release to be
      released within 7 days of the date hereof.

                                      115

<PAGE>

10.2  Save for the press releases referred to in Clause 10.1, each  party shall
      keep  the terms of this Deed confidential and shall not make any  release
      or other public statement concerning this Deed unless required by law, by
      the rules  or  regulations  of  any  stock  exchange, taxation authority,
      accounting standards body, governmental organisations,  medicines control
      agency or other statutory or regulatory body of a similar  nature without
      the prior written consent of the other.


10.3  The  restrictions  contained in Clause 10.2 shall not prevent  any  party
      from disclosing any information which is in the public domain at the date
      hereof, or which subsequently  comes  into the public domain, provided it
      has not occurred due to breach by that  party  of  its  obligations under
      this Clause 10.


11.   GOVERNING LAW


11.1  The construction interpretation meaning validity and performance  of this
      Deed  shall be governed by the laws of England which is agreed to be  the
      applicable  law  of this Agreement. The parties hereto submit to the non-
      exclusive jurisdiction of the English Courts.


12.   NOTICES


12.1  Any notice request or other communication required to be given under this
      Deed shall be made  in  writing  and  may  be  hand-delivered  or sent by
      registered  post  (return  receipt  requested)  to  the  recipient at the
      address first set out in this agreement or such other address that either
      party may notify to the other in writing for this purpose.


12.2  Notices shall be deemed to have been received:-


      (a)  if sent by post 2 business days after the date of posting; and


      (b)  if delivered by hand on the date of delivery.


12.3  It shall be sufficient in proving service that the letter  containing the
      notice was properly addressed and (as the case may be) put in  the  post,
      delivered or transmitted.


                                      116
<PAGE>

13.   GENERAL

13.1  No  relaxation,  forbearance,  delay  or  indulgence  by  either party in
      exercising  its  rights under this Deed or any granting of time  by  such
      party shall prejudice  or  affect its rights hereunder.  No waiver of any
      default or breach under this  agreement  or failure to enforce any rights
      by either party shall constitute a waiver of any subsequent or continuing
      default or breach.  No waiver shall be effective  unless  made in writing
      agreed and signed on behalf of the party so granting the waiver.


13.2  This  Deed  and  the  Falk  Agreement supersede any other correspondence,
      negotiations, arrangements or  agreements between the parties in relation
      to the matters specifically dealt  with  herein  and represent the entire
      understanding  of  the  parties  in relation to the matters  specifically
      dealt with herein.


13.3  No amendment to or alteration of this Deed shall be effective unless made
      in writing agreed and signed on behalf of each of the parties hereto.


13.4  Each party shall bear their own costs  and  expenses  in  connection with
      this  Deed  and shall be responsible for the payment of any taxes  levied
      against them as a consequence of the payment or receipt of the Sum.


13.5  Should  provisions   of  this  Deed  be  entirely  or  partially  legally
      ineffective or unenforceable or should provisions later loose their legal
      effectiveness or enforceability, the validity of the remaining provisions
      of  this  Deed will not  be  affected  as  a  result.  In  place  of  the
      ineffective  or  unenforceable  provisions,  a reasonable provision is to
      apply which so far as legally possible comes as close as possible to what
      the  parties  wanted  or  to  the  sense and purpose  of  the  respective
      ineffective or unenforceable provision.


AS WITNESS the parties hereto have executed  and  delivered  this document as a
deed on the date first appearing above.




                                      117


<PAGE>

                                   SCHEDULE



<TABLE>
<CAPTION>
            Product            Price (*)
<S>                             <C>
   Salofalk 4g/60ml 7 enemas     28.70
  Salofalk 250mg 100 tablets     13.60
Salofalk 250mg 30 suppositories  14.40
     Ursofalk 100 capsules       30.70
</TABLE>



                                      118


<PAGE>

Executed as a Deed by

PROVALIS PLC

Acting by



Director



Director/Secretary







Executed as a Deed by

DR FALK PHARMA GMBH

Acting by



Director



Director/Secretary






                                      119


<PAGE>

                     ATTACHMENT REFERRED TO IN CLAUSE 7.5



                   Schedules I and II to the Falk Agreement

     (as at the date of signature of this Amendment and Termination Deed)



                                  SCHEDULE I



                                 The Products



                      Great Britain and Northern Ireland



<TABLE>
<CAPTION>
            Products             Price (*)
<S>                               <C>
    Salofalk 2g/60ml 7 Enemas      18.30
    Salofalk 500mg 30 Suppos        8.20
   Salofalk 250mg 100 Tablets      10.20
       Salofalk Foam 1 Can         18.30
      Ursofalk 60 Capsules         10.10
Ursofalk Suspension 250ml Bottle   14.90
   Budenofalk 3mg 100 Capsules     42.00
Budenofalk 3mg 10 Capsules Sample   4.10
</TABLE>




                            The Republic of Ireland



<TABLE>
<CAPTION>
            Product            Price (*)
<S>                             <C>
   Salofalk 4g/60ml 7 enemas     28.70
  Salofalk 250mg 100 tablets     13.60
Salofalk 250mg 30 suppositories  14.40
     Ursofalk 100 capsules       30.70
</TABLE>




                                      120


<PAGE>

                                  SCHEDULE II

                                 The Territory


                                 Great Britain

                               Northern Ireland

                            The Republic of Ireland







                                      121


<PAGE>


                           DATED  31ST JANUARY 2003





                               PROVALIS PLC (1)




                                    - AND -



                            DR FALK PHARMA GMBH (2)



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

                               NON-COMPETE DEED

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








                               LEGAL DEPARTMENT
                                 PROVALIS PLC
                                NEWTECH SQUARE
                            DEESIDE INDUSTRIAL PARK
                                    DEESIDE
                                  FLINTSHIRE
                                    CH5 2NT

                              TEL:  01244 833402
                              FAX:  01244 280288

                           REF:  LG/AGMTS/COMM/FALK


                                      122


<PAGE>


THIS DEED is made the 31st day of January 2003 between

(1)   PROVALIS PLC a company registered in England under company number 3321624
      whose  registered  office is at Newtech Square, Deeside Industrial  Park,
      Deeside, Flintshire, CH5 2NT ("Provalis")

(2)   DR FALK PHARMA GMBH  a company registered in Germany under company number
      HRB  3266 whose registered  office  is  at  Leinenweberstrasse  5,  79108
      Freiburg, Germany ("Falk")

RECITALS

(A)   Thames assigned the Falk Agreement to Healthcare on 1st July 1998;

(B)   Healthcare assigned the Falk Agreement to Provalis on 20th August 2002;

(C)   Falk and  Provalis  have  entered  into  the  Amendment  and  Termination
      Agreement  which,  inter  alia,  provides  that  the Falk Agreement shall
      terminate early on 31st December 2004;

(D)   As a consequence of such early termination, Falk and Provalis have agreed
      that  they  should  each  be  subject  to certain restrictions  on  their
      business activities;

(E)   The  parties  have  agreed to provide for the  above  on  the  terms  and
      conditions contained in this Deed.

NOW IT IS HEREBY AGREED AS FOLLOWS

1.    INTERPRETATION

1.1   DEFINITIONS

      In this Deed the following words shall have the following meanings:-

      "Amendment  and Termination  Agreement"  shall  mean  the  Amendment  and
      Termination Agreement made between Falk and Provalis on the date hereof;

      "Associate" shall  mean  with  respect  to either one of the parties, any
      person, firm, trust, corporation or other  entity  or combination thereof
      which directly or indirectly (a) controls said party,  (b)  is controlled
      by said party, or (c) is under common control with said party;  the terms
      "control"  and  "controlled" meaning ownership of fifty percent (50%)  or
      more,  including  ownership   by   trusts  with  substantially  the  same
      beneficial interests, of the voting  and  equity  rights  of such person,
      firm,  trust, corporation or other entity or combination thereof  or  the
      power to  direct  the management of such person, firm, trust, corporation
      or other entity or combination thereof;

      "Competitor of a Product"  shall  mean a product which is either licensed
      for the same primary indication as  the  relevant  Product,  or a product
      containing the same active ingredient as the relevant Product.

      "Falk  Agreement" shall mean the Distribution Agreement dated 13th  March
      1992 now between Falk and Provalis;

      "Healthcare" shall mean Provalis Healthcare Limited, a company registered
      in England  under  company  number  1916352,  which  is  a  wholly  owned
      subsidiary company of Provalis;


                                      123

<PAGE>


      "Initial  Rate"  shall  mean  a  pounds sterling to euro exchange rate of
      {pound-sterling}1 = *1.5813

      "Initial Sum" shall mean {pound-sterling}500,000;

      "Payment Date Rate" shall mean the  mid  market  daily rate quoted in the
      London  Financial Times  published in London on the  date  on  which  the
      payment of the Sum is due to be made;

      "Products"  shall  mean  all  products  distributed  as  at  the  date of
      termination  of  the  Falk  Agreement  by  Provalis,  or any Associate of
      Provalis, pursuant to rights granted by Falk under the Falk Agreement;

      "Thames" shall mean Thames Laboratories Limited, a company  registered in
      England under company number 1433320, which is a wholly owned  subsidiary
      company of Provalis;

      "Territory" shall mean the United Kingdom and the Republic of Ireland.

1.2   A  reference  in  this  Deed to the singular includes a reference to  the
      plural  and vice versa and  a  reference  to  the  masculine  includes  a
      reference to the feminine and neuter and a reference to a person includes
      reference to a company as well as to any legal or natural person.

1.3   The construction of this Deed is not to be affected by any heading.

1.4   References  to this Deed include references to the schedules to this Deed
      (if any).

2.    CONSIDERATION

2.1   Falk has  agreed to enter  into this Deed in  consideration  of  Provalis
      entering into the Amendment and Termination Agreement.

2.2   Provalis has agreed to enter into this Deed in consideration of Falk:-

      (a)  entering into the Amendment and Termination Agreement; and

      (b)  paying Provalis the sum calculated in accordance with Clause 3 ("the
           Sum").

3.    CALCULATION OF THE SUM

3.1.1 The Sum shall be calculated by Provalis to take account of exchange  rate
      variations in accordance with the following:-

      (a)  The Initial Sum shall be converted into Euros using the Initial Rate
           ("the First Conversion");

      (b)  The Initial Sum shall also be converted into Euros using the Payment
           Date Rate ("the Second Conversion");

      (c)  The First  Conversion shall be added to the Second  Conversion,  and
           the resultant sum divided by 2 ("the Adjusted Euro Sum"); and

      (d)  The Adjusted Euro Sum shall be converted into pounds  sterling using
           the Payment Date Rate, the resultant figure being the Sum.


                                      124

<PAGE>

4.    PAYMENT

4.1   Falk shall, subject to receipt  of  an invoice from Provalis, pay the Sum
      to Provalis in pounds sterling on or before 14th February 2003.

4.2   The  payment  of  the  Sum shall be by transfer  to  the  following  bank
      account:-

      Account Name:    Provalis plc
      Account Number:  40707422
      Sort Code:       20-42-73
      Bank:            Barclays Bank plc
                       Barclays Business Centre
                       Hounslow Branch
                       210 High Street
                       Hounslow TW3 1DL

      or to such other bank account  as Provalis may notify in writing to Falk.
      Such  payment  shall  be  made be without  any  set-off,  withholding  or
      deduction except such amount  (if  any)  of  tax  as  Falk is required to
      deduct or withhold by law.

4.3   If Falk fails to pay the Sum on the date detailed in Clause  4.1,  or  in
      the  manner  detailed  in Clause 4.2, Provalis shall be entitled (without
      limiting any other right  or  remedy it may have) to charge Falk interest
      on the Sum, both before and after  any  judgement,  at  the rate of 4 per
      cent per annum above Barclays Bank PLC base rate in force  from  time  to
      time from the date on which payment was due until actual payment is made.

5.    NON-COMPETITION PROVISIONS

5.1   Falk  and  Provalis  each  covenant to the other that they shall not (and
      that they shall procure that  no  Associate  of theirs shall), during the
      remainder of the Falk Agreement, nor in the period of 24 months after the
      date  of termination of the Falk Agreement, employ  any  person  who  has
      previously  been  employed by the other without the prior written consent
      of the other.

5.2   Provalis covenants  to  Falk that it shall not (and that it shall procure
      that none of its Associates  shall)  in the period of 24 months after the
      date of termination of the Falk Agreement  promote,  market or distribute
      in the Territory any product which is a Competitor of a Product.

6.    CONFIDENTIALITY

6.1   Falk and Provalis shall each be entitled to release a  press  release  in
      the  form  previously  agreed upon by the other, such press release to be
      released within 7 days of the date hereof.

6.2   Save for the press releases  referred  to in Clause 6.1, each party shall
      keep the terms of this Deed confidential  and  shall not make any release
      or other public statement concerning this Deed unless required by law, by
      the  rules  or  regulations  of any stock exchange,  taxation  authority,
      accounting standards body, governmental  organisations, medicines control
      agency or other statutory or regulatory body  of a similar nature without
      the prior written consent of the other.


                                      125
<PAGE>


6.3   The restrictions contained in Clause 6.2 shall not prevent any party from
      disclosing  any information which is in the public  domain  at  the  date
      hereof, or which  subsequently  comes into the public domain, provided it
      has not occurred due to breach by  that  party  of  its obligations under
      this Clause 6.

7.    GOVERNING LAW

7.1   The construction interpretation meaning validity and  performance of this
      Deed shall be governed by the laws of England which is  agreed  to be the
      applicable law of this Agreement.  The parties hereto submit to the  non-
      exclusive jurisdiction of the English Courts.

8.    NOTICES

8.1   Any notice request or other communication required to be given under this
      Deed  shall  be  made  in  writing  and  may be hand-delivered or sent by
      registered  post  (return receipt requested)  to  the  recipient  at  the
      address first set out in this agreement or such other address that either
      party may notify to the other in writing for this purpose.

8.2   Notices shall be deemed to have been received:-

      (a)  if sent by post 2 business days after the date of posting; and

      (b)  if delivered by hand on the date of delivery.

8.3   It shall be sufficient  in proving service that the letter containing the
      notice was properly addressed  and  (as the case may be) put in the post,
      delivered or transmitted.

9.    GENERAL

9.1   No  relaxation,  forbearance, delay or  indulgence  by  either  party  in
      exercising its rights  under  this  Deed  or any granting of time by such
      party shall prejudice or affect its rights  hereunder.   No waiver of any
      default or breach under this agreement or failure to enforce  any  rights
      by either party shall constitute a waiver of any subsequent or continuing
      default  or  breach.  No waiver shall be effective unless made in writing
      agreed and signed on behalf of the party so granting the waiver.

9.2   This Deed (together with any documents referred to herein) supersedes any
      preliminary or  previous  correspondence,  negotiations,  arrangements or
      agreements  between  the  parties in relation to the matters specifically
      dealt with herein and represents  the entire understanding of the parties
      in relation to the matters specifically dealt with herein.

9.3   No amendment to or alteration of this Deed shall be effective unless made
      in writing agreed and signed on behalf of each of the parties hereto.

9.4   Each party shall bear their own costs  and  expenses  in  connection with
      this  Deed  and shall be responsible for the payment of any taxes  levied
      against them as a consequence of the payment or receipt of the Sum.

9.5   Should  provisions   of  this  Deed  be  entirely  or  partially  legally
      ineffective or unenforceable or should provisions later loose their legal
      effectiveness or enforceability, the validity of the remaining provisions
      of  this  Deed will not  be  affected  as  a  result.  In  place  of  the
      ineffective  or  unenforceable  provisions,  a reasonable provision is to
      apply which so far as legally possible comes as close as possible to what
      the  parties  wanted  or  to  the  sense and purpose  of  the  respective
      ineffective or unenforceable provision.

                                      126
<PAGE>


AS WITNESS the parties hereto have executed  and  delivered  this document as a
deed on the date first appearing above.



Executed as a Deed by
PROVALIS PLC
Acting by

Director

Director/Secretary



Executed as a Deed by
DR FALK PHARMA GMBH
Acting by

Director

Director/Secretary







                                      127


<PAGE>

                                                                   EXHIBIT 4.10

  DISTRIBUTION AGREEMENT MADE BETWEEN CHOLESTECH INC AND PROVALIS DIAGNOSTICS
                                    LIMITED
                              DATED MAY 20, 2002


                             DATED 20th MAY 2002




                         PROVALIS DIAGNOSTICS LIMITED



                                     -AND-



                            CHOLESTECH CORPORATION




                        ______________________________

                            DISTRIBUTION AGREEMENT

                        ______________________________






                         Ref:LG/AGMTS/DIST/CHOLESTECH

                               Legal Department
                              Provalis UK Limited
                                Newtech Square
                            Deeside Industrial Park
                                    Deeside
                                  Flintshire
                                    CH5 2NT

                               Tel: 01244 833402
                               Fax: 01244 280288



                                      128


<PAGE>


THIS AGREEMENT is made the 20th day of  May 2002

BETWEEN:

PROVALIS DIAGNOSTICS LIMITED of Newtech Square Deeside Industrial  Park Deeside
Flintshire  CH5  2NT England (Company Registration Number 1800438) (hereinafter
called "Provalis")

and

CHOLESTECH CORPORATION  of  3347  Investment Boulevard Hayward California 94545
USA (hereinafter called "Distributor")

WHEREAS:


A.    Provalis  is  engaged  in  the business  of  the  research,  development,
      manufacture and sale of diagnostic  products,  and  has developed and has
      rights to the Product.

B.    Distributor wishes to act as and Provalis desires to  permit  Distributor
      to be one of Provalis' distributors for the Products in the Territory.

NOW IT IS HEREBY AGREED as follows:

1.    DEFINITIONS:

In this Agreement the following terms shall have the following meanings:

1.1   "Affiliated Companies" means any corporation or entity controlling,
      controlled by or under the common control of Provalis or Distributor (as
      the case may be), and as used herein, "control" means the power or right
      to direct, or cause the direction, of the management and policies of a
      corporation or entity by reason of ownership or interest therein.

1.2   "Competitor of Distributor" means any person, firm or company directly
      involved in the research, development, manufacture, distribution or sale
      of human medical in-vitro diagnostic products for use in cardiovascular
      disease and/or diabetes.

1.3   "Competitor of Provalis" means any person, firm or company directly
      involved in the research, development, manufacture, distribution or sale
      of human medical in-vitro diagnostic products.

1.4   "Control Cartridges" means the Provalis control cartridge detailed in the
      Product Specification referred to in Part III of Schedule 2. This will be
      sold by Distributor for use with HaemaQuant.

 1.5  "Distributor's Trade Marks" means the trademarks, marks, logos, trade
      names and service marks that Distributor uses in connection with the
      Products. The ones that Distributor is to use initially are set forth in
      Schedule 9. These may be changed from time to time by the mutual
      agreement of the parties in writing.

1.6   "Field" means the Point of Care Market, unless otherwise mutually agreed
      by the parties in writing.

                                      129

<PAGE>


1.7   "First  Delivery  Date" means the date on which Provalis makes the  first
      delivery of any of the Products to Distributor.

1.8   "Force Majeure" means, in relation to either party, any circumstances
      beyond the reasonable control of that party (including, without
      limitation, any strike, lockout or other form of industrial action) but,
      in respect of Distributor, excluding any act or omission of any Sub-
      Distributor.

1.9   "Forecast" means the rolling 12 month forecast submitted and updated in
      accordance with the provisions of Clause 5.2.

1.10  "Glycosal" means the Provalis diagnostic product detailed in the Product
      Specification referred to in Part I of Schedule 2. This is to be used in
      connection with HaemaQuant and is to be marketed by Distributor in the
      Territory under Distributor's Trade Marks.

1.11  "HaemaData" means the Provalis software programme detailed in the Product
      Specification referred to in Part IV of Schedule 2. This is to be sold by
      Distributor for use with HaemaQuant.

1.12  "HaemaQuant" means the Provalis reader detailed in the Product
      Specification referred to in Part II of Schedule 2. This is to be used in
      connection with Glycosal and is to be marketed by Distributor in the
      Territory under Distributor's Trade Marks.

1.13  "HbA1c Control" means the third party whole blood control detailed in the
      Product Specification referred to in Part V of Schedule 2.  This is to be
      sourced by Provalis and on-sold to Distributor for use with Glycosal.

1.14  "Health Authority" means the relevant health or governmental authority in
      the Territory responsible for issuing the Marketing Authorisation.

1.15  "Healthcare Professionals" means physicians, chiropractors, pharmacists,
      physician assistants, nurse practitioners, nurses, dieticians and health
      screeners (with or without medical staff) and all individuals employed by
      or that work with any of the foregoing that are entitled to use the
      Products in the Field.

1.16  "In Field Correction" means a repair or correction carried out on any of
      the Products in order to remedy a Product which is in breach of the
      warranties in Clause 14.1 which as a result:-

      (a)  causes a result to be generated that is incorrect to a clinically
           significant amount; but

      (b)  does not cause any physical danger to the user.

1.17  "Institutions" means hospitals, independent healthcare delivery
      facilities, occupational health centres, health screening companies,
      pharmaceutical companies, event marketing management companies, public
      health departments, public authority departments, prisons, universities
      and colleges, retailers involved in screening programmes and fitness
      centres.

1.18  "Intellectual Property" means any patent or patent application (including
      any extension, reissue, division, continuation or continuation-in-part of
      any  such patent application  or  patent  and  any  patent  of  addition,
      supplementary  protection certificate or similar rights based on any such
      patent), copyright,  moral  right, registered design, unregistered design
      right,  registered  or unregistered  trade  mark  or  other  intellectual
      property right subsisting in the Territory.

1.19  "Launch"  means in respect  of  the  US,  using  commercially  reasonable
      efforts to  exhibit  the  Products at the American Diabetes Association's
      annual meeting to be held between  the  14th  and  18th  of June 2002

                                      130
<PAGE>


      and thereafter and in respect of each country in the Territory (including
      the  US)  holding  product  training  meetings  for  those  employees  of
      Distributor involved in the distribution of the Products and of each Sub-
      Distributor(s) in that country.

1.20  "Marketing Authorisation" means  all necessary licences authorisations or
      approvals from the Health Authority to distribute, market and sell each
      of the Products (including, where applicable, a Modified Product) in the
      Territory.

1.21  "Modified Product" means a Product incorporating a Product Modification.

1.22  "Packaging Specifications" means the specifications for the labelling and
      packaging of each of the Products to be agreed in accordance with Clause
      13.2 as may be modified from time to time upon mutual written agreement.

1.23  "Point of Care Market" means the market in which Healthcare Professionals
      use the Products to test  or screen patients or consumers, and to relay
      the results thereof to such people, in one of the Institutions, but
      excluding, without limiting the generality of the foregoing, the sale of
      any of the Products to such Healthcare Professionals or Institutions for
      re-sale by them to patients or consumers for use by such patients or
      consumers at home or at any place other than at the relevant Institution.

1.24  "Price" means the price for each Unit of each of the Products as
      determined in accordance with Clause 7.1.

1.25  "Products" means Glycosal, HaemaQuant, Control Cartridges, HaemaData
      and/or HbA1c Control as the context requires.

1.26  "Product Modification"  means  a  change  to a Product that increases the
      ability of that Product to meet its product  claims and specification but
      without extending or changing those claims or specification and following
      which the Product can still be promoted, marketed  or sold under the same
      Marketing Authorisations.

1.27  "Product Specifications" means the specifications for the formulation,
      manufacture, testing and release of each of the Products which comply
      with the Marketing Authorisations and which are detailed in Schedule 2,
      amendments to which may be notified to Distributor from time to time in
      writing.

1.28  "Provalis Intellectual Property" means any other Intellectual Property
      owned by Provalis and/or any of its Affiliated Companies.

1.29  "Quarter" means any period of 3 consecutive calendar months commencing on
      the 1st of January, 1st of April, 1st of July or 1st of October
      respectively in any Year as the context so requires.

1.30  "Restricted Information" means any information which is disclosed
      (whether orally or in writing) by one party to the other party pursuant
      to or in connection with this Agreement.

1.31  "Specifications" means the Product Specifications and the Packaging
      Specifications.

1.32  "Sub-Distributor" means any person, firm or company appointed by
      Distributor to promote, market, sell or supply the Products (whether in
      accordance with Clause 22.3 or otherwise).

1.33  "Target  Purchase  Quantities"  means  the  quantities  of  Glycosal  and
      HaemaQuant  that  Distributor  anticipates  purchasing  in each  Year  as
      determined in accordance with Clause 9.2.

                                      131
<PAGE>


1.34  "Technical   Bulletin"   means   either   an   instructional  update   or
      clarification or a bulletin issued by Provalis to Distributor in response
      to  a Product which is in breach of the warranties  in  Clause  14.1  but
      which as a result:-

      (a)  in  normal operations does not cause a result that falls outside the
           performance specifications of the Products;

      (b)  does not cause any physical danger to the user; and

      (c)  is of a non-urgent nature

      and which  bulletin defines the issue giving rise to the system fault and
      offers a correction or work-around.

1.35  "Territory"  means  each  country  in  the  world  other  than the United
      Kingdom, Turkey, Russia, China, Iran, Pakistan, South Korea, Thailand and
      New Zealand.

1.36  "Unit" of the Product means in respect of (a) HaemaQuant, one reader, (b)
      Glycosal, twelve individual test cartridges, (c) Control Cartridges,  one
      individual  cartridge,  (d)  HaemaData,  one  compact  disc and (e) HbA1c
      Control,  three  high  controls,  three  low  controls  and one  diluent,
      regardless of the number of each contained in each pack.

1.37  "US" means the United States of America.

1.38  "Working  Day"  means  a day (other than a Saturday or Sunday)  on  which
      banks are generally open in London for normal business.

1.39  "Year " means (i) in respect of the first Year the period from the date
      first written above until 31st of March 2003, and (ii) in respect of each
      subsequent Year, a consecutive period of 12 (twelve) months commencing on
      the 1st of April.


2.    APPOINTMENT

2.1   Provalis hereby appoints  Distributor  as  a non-exclusive distributor to
      promote,  market,  distribute  and  sell  (or  have  promoted,  marketed,
      distributed and sold through the Sub-Distributors) the Products under the
      Distributor Trade Marks to Healthcare Professionals  and/or  Institutions
      for use in the Field in the Territory subject to the terms and conditions
      of this Agreement.

2.2   Provalis  agrees  that  there  shall  not  be  more  than one other party
      appointed  to promote, market, distribute and sell the  Products  in  any
      country in the  Territory to Healthcare Professionals and/or Institutions
      for use in the Field.  This  other  party  will  not  be  Provalis unless
      Distributor otherwise agrees in writing.

2.3   Distributor shall be entitled to describe itself as Provalis' "Authorised
      Importer and Distributor" for the Products, but shall not hold itself out
      as Provalis' agent for the sale of the Products or as being entitled to
      bind Provalis in any way.

2.4   The parties understand and agree that the rights granted herein  are  for
      the  Territory  and  Field  only. Should Distributor desire to extend the
      Territory or Field, Distributor and Provalis shall discuss such extension
      in  good  faith  following  Distributor's   request.   Any  extension  of
      Distributor's rights to

                                      132

<PAGE>


      promote,  market,  distribute  or sell the Products  outside the Field or
      Territory  shall  be  subject  to such  terms  and  conditions  as may be
      mutually agreed upon at the time. Nothing in this Agreement shall prevent
      Provalis  from  granting any such  extended  rights,  at any time, to any
      other person,  firm or company  without notice to Distributor  and in the
      event Provalis does so,  Distributor shall not be entitled to any payment
      or  other  benefit,  whether  in  respect  of  compensation,  damages  or
      otherwise.

3.    TERM OF THE AGREEMENT

3.1   This  Agreement  shall  take  effect  on  the  date hereof and subject to
      earlier termination in accordance with the provisions hereof shall remain
      in force until either party gives the other party  not  less  than twelve
      (12)  months written notice of termination, such notice not to be  served
      before the second anniversary of the First Delivery Date.

4.    MARKETING AUTHORISATION

4.1    Provalis  shall,  at  its own expense, apply for, and thereafter use its
      reasonable   endeavours   to   obtain   and   maintain   such   Marketing
      Authorisations as are necessary to permit Distributor to promote, market,
      distribute and sell the Products  in  the  Territory;  provided, however,
      with respect to Japan, the parties shall agree on which  of  them  is  to
      apply, such agreement not to be unreasonably refused or delayed.

4.2   Unless  otherwise  agreed on by the parties, the Marketing Authorisations
      shall be in the name  of,  and  be  and  remain the property of, Provalis
      unless legally required to be in some other name, but in all events shall
      be  broad  enough  in  scope to permit Distributor  to  promote,  market,
      distribute and sell the Products in the Territory.  Distributor's ability
      to promote, market, distribute  and sell the Products in the Territory is
      dependent   upon  the  Marketing  Authorisations   being   obtained   and
      maintained. Distributor  shall  be  entitled  to terminate this Agreement
      with respect to any country within the Territory  for  which  Provalis is
      unable  to  obtain  the  Marketing Authorisation as soon as is reasonably
      possible after the date hereof,  or for which the Marketing Authorisation
      subsequently  becomes invalid, such  termination  to  be  effective  upon
      written notice to Provalis.

4.3   Distributor shall  be responsible for and Provalis shall at Distributor's
      expense provide reasonable  assistance to Distributor solely with respect
      to  any  negotiations  with relevant  authorities  as  to  the  level  of
      reimbursement to be applied in respect of the Products under any national
      health or welfare scheme  in  the Territory, unless such negotiations are
      legally the responsibility of the  holder  of the Marketing Authorisation
      and  shall  use  its  best  endeavours  to  obtain  agreement  from  such
      authorities  to  the  level of reimbursement as  soon  as  is  reasonably
      possible.

4.4   To the extent Provalis requires advice and assistance from Distributor in
      order to apply for or maintain  the Marketing Authorisations, Distributor
      shall,  at  Provalis'  expense,  give   Provalis  reasonable  advice  and
      assistance as is necessary solely for the  purpose  of  obtaining  and/or
      maintaining the Marketing Authorisations.

4.5   In the event the Marketing Authorisation(s) are obtained in Distributor's
      name, then on termination of this Agreement Distributor shall cease using
      or operating under the Marketing Authorisations and shall promptly and at
      Provalis'  own  expense  do  one  or  more of the following as reasonably
      requested by Provalis:-

      (a)  transfer or assist Provalis in procuring the transfer to Provalis or
           its nominee of any Marketing  Authorisations  held in  Distributor's
           name.

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      (b)  cancel  any   Marketing   Authorisations   in  order  to  facilitate
           application for corresponding  Marketing  Authorisations by Provalis
           or its nominee;

      (c)  permit  and  authorise  Provalis  or its  nominee  in  applying  for
           corresponding  Marketing  Authorisations  to rely on or refer to any
           documents  submitted by Distributor to the relevant Health Authority
           or Authorities; and

      (d)  take any other steps  which may be  reasonably  necessary  to enable
           Provalis  or its nominee to use or operate  under the then  existing
           Marketing Authorisations .

5.    FORECASTS AND ORDERING

5.1   In  order  to facilitate Provalis'  planning,  Distributor  has  provided
      Provalis with  an  initial Forecast ("Initial Forecast") of the number of
      Units of Glycosal, HaemaQuant  and  HbA1c  Control that it anticipates it
      will purchase from Provalis in each month during  the  first Year and the
      Initial Forecast is set out in Schedule 3. The Initial Forecast  and  any
      subsequent forecasts are for planning purposes only and save as expressly
      provided  in  this  Agreement shall not represent a binding commitment of
      either party.

5.2   This Forecast shall be updated on a rolling, monthly basis such that:-

      (a)  each updated Forecast  is  delivered  not less than 1 month prior to
           the commencement of the first month covered by such Forecast;

      (b)  the first 2 months of each updated Forecast  shall be unchanged from
           the  quantities  forecasted  for  each such month  in  the  previous
           Forecast submitted hereunder;

      (c)  any quantities forecasted for purchase  in  each  month shall be for
           not less than 300 Units of Glycosal, 100 Units of HaemaQuant  and/or
           200  Units  of  HbA1c  Control,  if  Distributor desires to purchase
           Products; and

      (d)  in respect of HaemaQuant only, the forecast  for  the calendar month
           which is the third month of each updated Forecast shall  not  be for
           more  than  twice  the  quantities  of  HaemaQuant forecast for such
           calendar month in the previous Forecast submitted hereunder.

5.3   The quantities forecasted for each of the first 3 months contained within
      each Forecast submitted hereunder (including the  Initial Forecast) shall
      constitute  a  firm order in respect of each such month  and  Distributor
      shall either issue an annual blanket purchase order or a monthly purchase
      order in respect of the firm orders for such 90 day period, such purchase
      orders to be issued in accordance with Clause 5.4.

5.4   (a)  Distributor  shall  if  desiring to issue an annual blanket purchase
           order:-

           (i)  within 5 Working  Days of the date of this  Agreement  submit a
                purchase  order for the twelve (12) month period  commencing on
                1st July 2002; and/or

           (ii) on or  before  1st  April  in each  subsequent  year  submit  a
                purchase  order for the twelve (12) month period  commencing on
                the next 1st July; and

           (iii)in the event any updated Forecast given hereunder  results in a
                firm order being given for any month which is for a quantity of
                any of the Products  which  differs from that

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                specified in any twelve  monthly  purchase  order,  Distributor
                shall,  on or  before  the  1st day of such  month,  submit  an
                addendum to such twelve  monthly  purchase order to reflect the
                variation in  quantities  of those  Products to be delivered in
                that month

           in  each  case detailing the quantities  of  each  of  the  Products
           required in each month covered by such purchase order.

      (b)  Distributor  shall,  if  desiring  to  place monthly purchase orders
           rather than an annual blanket purchase order:-

           (i)   place purchase orders for those quantities of Products ordered
                 in accordance with the binding forecast  obligations set forth
                 in Clause 5.3, whereby Distributor shall by  the  first day of
                 the  first  month  covered  by  such  purchase order submit  a
                 purchase order covering the binding and  committed  portion of
                 the applicable Forecast; and

           (ii)  place  the  first  such  purchase  order  (for the first three
                 months contained within the Initial Forecast)  within five (5)
                 Working Days of the date of this Agreement

           in  each  case  detailing  the  quantities  of  each of the Products
           required in each month covered by such purchase order.

      (c)  For the avoidance of doubt, the annual blanket purchase  orders, the
           monthly purchase orders, and any addenda thereto, simply confirm the
           firm orders previously given.

      (d)  If  Distributor  fails  to  submit  a purchase order, or any addenda
           required  thereto, by the date specified  therefor  in  Clause  5.4,
           Provalis may  notify Distributor of such failure, and if Distributor
           does not submit  the  relevant purchase order, or addenda, within 15
           days of such notification,  Provalis  shall  be  entitled to deliver
           only the quantities of Products forecast to be ordered  in any month
           within the binding 90 day period for which Provalis does  not have a
           purchase  order  or  addenda  (as  the  case  may be) and to invoice
           Distributor therefor.

5.5   Distributor shall be entitled to submit orders for Control Cartridges and
      HaemaData as and when required. Each such order shall  be in writing, and
      shall  have a lead time between the date of the order and  the  requested
      date of delivery of not less than 90 days.

5.6   In order  to  assist  Provalis  and  Distributor  in  meeting higher than
      expected  demand  for  the  Products, both Provalis and Distributor  will
      maintain buffer stocks of the  Products,  or components thereof necessary
      to  manufacture  Products,  which  are at least  equal  to  Distributor's
      forecasted requirements for the Products  for  the  following two months.
      Provalis' buffer stock shall be used, inter alia, to  meet  orders placed
      by  Distributor pursuant to Clause 5.6. As each party's buffer  stock  of
      each  Product is used, it shall be returned to the required level as soon
      as reasonably possible.

5.7   In addition  to  the  orders  placed as set forth in Clauses 5.2, 5.3 and
      5.4, Distributor shall be entitled  to  purchase additional quantities of
      Glycosal,  HaemaQuant  and/or  HbA1c  Control  by  submitting  a  written
      purchase order at any time, which order  shall  specify the date by which
      Distributor wishes them delivered. Within 5 Working  Days  of  receipt of
      any such order, Provalis shall notify Distributor either that:-

      (a)  it can deliver such quantities of Products by the date so specified,
           in which event the order shall be deemed accepted by Provalis; or

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      (b)  the  parties  will  need  to  agree  upon different delivery date(s)
           therefor, in which event Provalis shall  notify  Distributor  of the
           scheduled  delivery date for these additional quantities as soon  as
           is reasonably possible and Distributor shall after such notification
           have the option  of  either accepting such revised delivery date, in
           which event the order shall be deemed accepted, or of cancelling the
           order.

      In  no  circumstances  shall  any  order  for  additional  quantities  of
      Glycosal, HaemaQuant and/or HbA1c  Control be deemed accepted by Provalis
      unless Provalis has given Distributor  the  notification  referred  to in
      this  Clause 5.6 and a delivery date for the relevant order been accepted
      by Provalis and Distributor as provided in this Clause 5.7.

5.8   In each  order  for Products submitted hereunder, Distributor shall state
      the address(es) to  which  quantities  of  Products  are  required  to be
      shipped  and  Provalis  shall  pack  the  quantities  for shipping to the
      addresses  so specified. The Price of the Products is inclusive  of  such
      packaging in  respect of the first address so specified, but a paperwork,
      packaging and handling  charge  of  {pound-sterling}25  shall be added in
      respect of each additional address so specified.

5.9   Subject to Clause 6.7, default by Provalis with respect to  any one order
      shall not entitle Distributor to terminate this Agreement.

6.    DELIVERY, TITLE AND RISK

6.1   Provalis agrees to and shall, prior to delivery of each order of the
      Products sold hereunder, perform, or procure the performance of, quality
      tests on all batches of Products in the order in accordance with
      Provalis' standard written operating procedures as provided by Provalis
      to Distributor. Each delivery of Products shall be accompanied by a
      certificate of analysis from Provalis' quality control laboratory in
      Provalis' standard form (examples of the current versions of which are
      contained in Schedule 10).

6.2   All Products delivered pursuant to this Agreement shall be suitably
      packed for air freight shipment in Provalis' standard shipping cartons in
      accordance with the Packaging Specification and marked for shipment to
      the addresses specified by Distributor in accordance with Clause 5.7.
      All such Products shall, at Distributor's option but subject to Clause
      6.1, be delivered to Distributor or its carrier agent either ex-works
      Provalis' plant in Deeside, North Wales, or FCA Manchester Airport,
      England and upon delivery title and risk of loss therein shall pass to
      Distributor. As used herein, the terms ex-works and FCA shall have the
      meanings set forth in the International Chamber of Commerce's Incoterms
      2000 Edition).  Provalis shall give Distributor not less than 7 days
      notice of the date on which each order of Products will be available for
      collection by Distributor in each month.  If Distributor fails to collect
      any order within five (5) Working Days of the notified date, Provalis
      shall be entitled to immediately invoice Distributor for such Product and
      to charge Distributor for the reasonable costs of warehousing such
      Product until the actual date of collection.  If Distributor opts for
      delivery to be made ex-works, Provalis shall provide such reasonable
      advice and assistance as may be requested by Distributor from time to
      time in connection with obtaining customs clearance for any delivery of
      the Products.

6.3   Distributor  will  inspect  the  delivered  Products for visible shipping
      damage as could be reasonably apparent on such  an inspection, as soon as
      reasonably possible after delivery, and in any event  within  thirty (30)
      days thereof.

6.4   In  the  event  that  there  is a shortage of any Product for any reason,
      Provalis shall use it reasonable  endeavours  to  apportion  supplies  of
      Product  in  accordance  with  the purchase histories of its distributors
      (based upon sales history and realistic forecasted demand).

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<PAGE>


6.5   Provalis shall be entitled to maintain  an  action  for  the price of any
      Product ordered but not paid for, notwithstanding that title  has  passed
      to Distributor.

6.6   If after accepting an order, Provalis decides it will be unable to fulfil
      such  order  for Products, Provalis shall notify Distributor promptly  in
      writing and provide  Distributor  with  a revised delivery date therefor.
      If Distributor receives any such notice,  or if Provalis fails to deliver
      any order of Products within fifteen (15) Working  Days  of  the delivery
      date therefor specified and accepted in accordance with the terms hereof,
      Distributor shall have the option to cancel that order on giving  written
      notice  to  Provalis  at any time before Provalis makes delivery thereof.
      Save as provided in Clause  6.7,  this shall be Distributor's sole remedy
      and Provalis' sole liability in respect  of  any  late or non-delivery of
      Products. The quantities of Products in any orders  that are so cancelled
      shall be included in the quantities of Products purchased  by Distributor
      in  any Year for the sole purpose of determining whether Distributor  has
      complied with its obligations under Clause 9.1.

6.7   If in any Year Provalis fails to deliver any three (3) orders of Products
      within  15  Working  Days  of  the  delivery  date therefor specified and
      accepted in accordance with the terms hereof, Provalis shall be deemed to
      have committed a breach of its material obligations  under this Agreement
      for the purposes of Clause 19.1 (a) that is incapable  of  remedy  and in
      addition to the remedy provided in Clause 6.6, Distributor shall have the
      one  additional  remedy  and  Provalis  shall  have  the  one  additional
      liability  of  Distributor  being  able  to  terminate this Agreement  in
      accordance with Clause 19.1 (a).

7.    PRICE AND PAYMENT

7.1   Provalis shall invoice and Distributor shall pay for each Unit of Product
      delivered  to  Distributor  hereunder. Save as provided  in  Clause  7.2,
      Distributor will pay to Provalis  the  price  calculated  as set forth in
      Schedule  4  ("the  Price"). Save as provided in Clauses 5.3 and/or  6.2,
      Provalis shall be entitled  to  submit  its  invoice  in  respect of each
      delivery  on  or after the date of delivery. The Prices are inclusive  of
      delivery ex-works  Provalis'  plant  in  Deeside,  North  Wales and if in
      accordance with Clause 6.2 Distributor opts for delivery of any order FCA
      Manchester Airport, England, Distributor shall in addition be responsible
      for  paying  all  additional  costs and expenses incurred by Provalis  in
      delivering such order FCA Manchester  Airport,  England  rather  than ex-
      works  Provalis'  plant in Deeside, North Wales.  In addition, the Prices
      do not include, and  Distributor  shall  in  addition  be responsible for
      arranging  and  paying,  all  costs of transport and insurance  following
      delivery of the Products to Distributor as set forth in Clause 6.2.

7.2   If Distributor believes that the  sale  of the Products in respect of any
      country  within the Territory is being materially  affected  because  the
      Price ("the Provalis Original Price") is too high, and hence the price at
      which the  Products  are sold, or are to be sold, in that country is also
      too high, Distributor  shall  notify  Provalis.  Distributor and Provalis
      shall then discuss in good faith whether  the  Price should be reduced to
      make it possible for Distributor to similarly reduce  its prices in order
      to  generate increased sales in respect of such country.   In  the  event
      Provalis  and  Distributor  are  able  to  agree to a reduced Price ("the
      Provalis Reduced Price") in respect of Products  to be sold in respect of
      any such country, then:-

      (i)  Distributor shall confirm to Provalis the price  it  previously  on-
           sold  Products  for  sale  in  that country ("Distributor's Original
           Price");

      (ii) Distributor shall indicate the price at which Distributor intends to
           on-sell  the Products for sale in  that  country  ("the  Distributor
           Reduced Price") if Provalis sells the Products to it at the Provalis
           Reduced Price

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<PAGE>

      and any Products  sold to Distributor at the Provalis Reduced Price shall
      only be sold or supplied  by Distributor for sale in the specific country
      agreed upon by the parties.   It  is  agreed by the parties that although
      these discussions are to take place to  enable  Distributor to reduce its
      own prices with the intention that equivalent reductions  will  be passed
      down  the distribution chain by the relevant Sub-Distributor, Distributor
      is not  obliged to reduce the price at which it on-sells the Products for
      sale in such  country,  but  if  it  does  not do so, or if it sells such
      Products for on-sale into any country other  than  those  for  which  the
      relevant  Provalis  Reduced  Price  has  been  agreed,  the provisions of
      Clauses  7.10  and  7.11  shall  apply.   Distributor shall, on  request,
      provide  Provalis  with  such  documentary  evidence   as   Provalis  may
      reasonably require in order to verify the price on which Distributor  on-
      sold  or  supplied  the Products purchased by Distributor at the Provalis
      Reduced Price agreed  under  this  Clause  7.2 and the countries to which
      such Products have been sold.  Provalis shall,  at  any time, be entitled
      to  stop  any such reduced price sales if it has reasonable  grounds  for
      believing that  Products  sold  by  it at the Provalis Reduced Prices are
      being sold or supplied into any country  other than the ones to which the
      reduced  price  arrangements  have  been agreed  or  if  the  anticipated
      increases in sales do not occur.  The  quantities  of  Products  sold  to
      Distributor at the Provalis Reduced Prices in accordance with this Clause
      shall  be  included  in  the  calculations  of the quantities of Products
      purchased  for  the  purposes  of  determining  whether  Distributor  has
      complied with its obligations under Clause 9.1 in  each  Year,  but shall
      only  be  included  in  the  calculations  of  the quantities of Products
      purchased for the purposes of calculating the price  payable for Glycosal
      in accordance with Clause 7.1 during Year 1.

7.3   Where Provalis agrees to arrange for transport and insurance as agent for
      Distributor, Distributor shall reimburse to Provalis the  full  costs  of
      doing  so and all the applicable provisions of this Agreement shall apply
      with respect  to  the  payment of those costs as they apply to payment of
      the price of the Product.

7.4   Distributor will make all  payments  due from it hereunder within 45 days
      of receipt of the relevant invoice.  If  Distributor  fails  to  make any
      payment  within such period, Provalis shall be entitled (without limiting
      any other  right or remedy it may have) to charge Distributor interest on
      the price, both  before and after any judgment, at the rate of 1 per cent
      per month (or part)  from  the  date  the payment became due until actual
      payment is made and, in addition, Provalis shall be entitled to cancel or
      suspend  any  further  deliveries  of Product  until  such  time  as  all
      outstanding payments have been made.

7.5   The Prices of the Products are exclusive of any applicable value added or
      any other sales tax, for which Distributor shall be responsible.

7.6   Subject to Clause 7.7, all payments  due from Distributor hereunder shall
      be made in pounds sterling, in each case by transfer to such bank account
      as  Provalis  may from time to time notify  in  writing  to  Distributor,
      without any set-off, withholding or deduction except such amount (if any)
      of tax as Distributor is required to deduct or withhold by law.

7.7   Upon not less than  forty  five  (45) days written notice to Distributor,
      and subject to Clause 7.12, Provalis  may elect to change the currency of
      all payments due hereunder from pounds  sterling  to Euros. The converted
      price  of the Products shall be determined in accordance  with  the  Euro
      exchange  rate  (mid  price) quoted in the Financial Times as of the date
      such currency change shall  take  place,  such  date  being stated in the
      notice  given by Provalis (i.e. at least forty five (45)  days  following
      the date  of  Provalis'  notice).   The parties agree that any conversion
      from pounds sterling to Euros may occur only once during the term of this
      Agreement and shall take effect at the  commencement  of  a  Year, unless
      legally required to take effect earlier.

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<PAGE>

7.8   (a)  Subject  to Clause 7.12, the parties may adjust the Prices  for  the
           Products on  an  order  by  order  basis as a result of any currency
           fluctuations.  Any such adjustments  shall be in accordance with the
           following, and shall take effect for that order only.

      (b)  Pricing   in   this   Agreement   is   to   be   calculated   on   a
           {pound-sterling}1.00  to US$1.46 pound sterling/US  dollar  exchange
           rate (the "Base Rate").  If  the  currency  of  payments  under this
           Agreement  is  changed  in  accordance  with Clause 7.7, the parties
           shall, in good faith at that time agree upon the appropriate euro/US
           dollar  exchange  rate  for use as the new Base  Rate.   If  on  the
           Working Day immediately before  the  date  of delivery of any order,
           the pound sterling/US dollar exchange rate is  outside  a  range  of
           plus  or  minus five percent (5%) of the Base Rate (i.e. outside the
           range of {pound-sterling}1.00 to US$1.387 - 1.533) the Prices of the
           Products in respect of that order only will be adjusted as follows:-

           New Price =            New  US$ Price converted into pounds sterling
                                  at the New Exchange Rate

           where:

           New US$ Price =        Old Price + (Adjusted Price - Old Price)
                                              ----------------------------
                                                         2;

           Old Price =            US$ Price  payable  for the relevant Products
                                  calculated at the Base Rate;

           Adjusted Price =       US$ Price payable for  the  relevant Products
                                  calculated at the New Exchange Rate; and

           New Exchange Rate =    Pound Sterling/US Dollar exchange rate on the
                                  Working Day immediately before  the  date  of
                                  delivery of the relevant order.

      (c)  The pound  sterling/dollar  exchange  rate for the  purposes of this
           Clause 7.8 shall be  calculated  from the closing mid price for each
           currency for the Working Day immediately before the date of delivery
           of the relevant order as quoted in the Financial Times.

      (d)  The  adjusted  price shall only apply to the Prices of the  Products
           the subject of the order for which the adjustment took place.

      (e)  This process of Provalis and Distributor sharing equally the loss or
           gain due to exchange rate fluctuations will continue  throughout the
           term of this Agreement.

7.9   Distributor shall  provide Provalis with a report detailing in respect of
      each of the Products  the  sales and stocks thereof by volume and country
      on an annual basis.  Distributor  shall  remit such report to Provalis as
      soon as is reasonably possible, and in any  event  within  60 days of the
      end  of  the  Year  to  which  it relates.  If Distributor generates  any
      similar reports on a more frequent  basis,  it shall remit a copy of such
      reports as soon as reasonably possible, but shall not be obliged to do so
      more than once in each Quarter.

7.10  Provalis shall be entitled, no more than once  during each Year, to audit
      the relevant books and records of Distributor and  any  of its Affiliated
      Companies  engaged  in the sale or supply of the Products,  in  order  to
      verify  the payment terms  and  conditions  (including  price)  on  which
      Distributor  on-sold or supplied the Products purchased by Distributor at
      the Provalis Reduced  Price and the countries to

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      which such Products have been sold. The following  conditions shall apply
      to any  audit  performed  by or on behalf of  Provalis  pursuant  to this
      Agreement:-

      (a)  Provalis shall give Distributor notice  in writing at least fourteen
           (14) days before it intends to audit such books and records;

      (b)  the audit shall only be conducted during normal business hours;

      (c)  the  audit will be performed at the offices  of  Distributor  by  an
           independent chartered accountant appointed by Provalis;

      (d)  Provalis  shall  bear  the cost and expense of the audit, unless (i)
           the audit proves either  that Distributor has not in respect of each
           country reduced the price  at  which  it  sells Products for sale in
           that  country  to  the relevant Distributor Reduced  Price  or  that
           Distributor has sold  or supplied such Products for on-sale into any
           country other than those  for  which  the  relevant Provalis Reduced
           Price has been agreed and (ii) the amount Distributor  actually paid
           for such Products is less than ninety percent (90%) of the Resultant
           Sum  (as  calculated in accordance with Clause 7.11) in which  event
           the cost and expense of such audit shall be borne by Distributor.

7.11  If any audit carried out hereunder proves either that Distributor has not
      in respect of each country  reduced the price at which it sells  Products
      for sale in that country to the  relevant  Distributor  Reduced  Price or
      that  Distributor has sold or supplied such Products for on-sale into any
      country  other than those for which the relevant  Provalis  Reduced Price
      has been agreed  Distributor  shall  forthwith pay Provalis the sum ("the
      Resultant Sum") calculated by multiplying the total number of Products so
      affected by the Price Difference, together with interest on the Resultant
      Sum,  calculated in  accordance  with Clause 7.4 as if the payment of the
      Resultant  Sum were a late payment  dating back to the  original  date by
      which such Products should have been paid for. The "Price Difference" for
      the purposes of Clause 7.10 and this Clause 7.11 means:-

      (a)  the  result  of  the  following  calculation  if Distributor has not
           reduced  the  price  at  which it sells Products for  sale  in  that
           country to the relevant Distributor Reduced Price:-

                 Price Difference =[1 - (A / B)] x C

           where

           A = Distributor's Original  Price  -  Price Distributor actually on-
           sold at;

           B = Distributor's Original Price - Distributor's Reduced Price; and

           C = Provalis' Original Price - Provalis' Reduced Price; or

      (b)  the Provalis  Original  Price,  if Distributor  has sold or supplied
           such  Products  for on-sale  into any  country  other than those for
           which the relevant Provalis Reduced Price has been agreed.

7.12  Prior  to  any adjustment for currency fluctuations  in  accordance  with
      Clause 7.8 and/or  a  change of currency from pounds sterling to Euros in
      accordance with Clause  7.7, the parties agree to meet via teleconference
      or in person to discuss in  good faith the anticipated adjustments and/or
      changes and the resulting Prices applicable under this Agreement, but the
      Prices shall be amended as determined  under

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<PAGE>


      Clause 7.7 or 7.8 (as the case may be) unless at such meeting the parties
      agree  otherwise.   If  following  any  actual  adjustment  for  currency
      fluctuations  in  accordance  with Clause 7.8 and/or a change of currency
      from pounds  sterling to Euros in accordance  with Clause 7.7 (whether or
      not the parties  have met to discuss  them as provided for in this Clause
      7.12)  either  party   determines  that  the  resulting  Prices  are  not
      consistent  with the  spirit  of the Price  payable  by  Distributor  (as
      converted to US dollars) and receivable by Provalis (in pounds  sterling)
      as at the date of this  Agreement (as varied in accordance  with Schedule
      4),  the  parties  shall in good  faith  seek to  discuss  and  agree any
      appropriate further adjustments. If it is not possible for the parties to
      agree upon any further adjustments,  either of them may on written notice
      to the other invoke the  escalation  procedure  set forth in Clause 31 in
      order to seek  agreement,  but if the parties  are still  unable to agree
      upon any  further  adjustments  within 1 month of date of such notice the
      party invoking the  escalation  procedure may terminate this Agreement on
      not less than 6 months notice in writing to the other.

8.    ADVERTISING, PROMOTION & LAUNCH OF PRODUCTS BY DISTRIBUTOR

8.1   Distributor  shall have  Launched the Products in the US on or before the
      31st  December  2002 and in each  other  country in the  Territory  on or
      before the 31st March 2003. If Distributor  has not Launched the Products
      in the US on or before the 31st December  2002,  Provalis  shall have the
      ability  within  sixty  (60)  days  thereafter,  at its  option to either
      terminate  this  Agreement  in its  entirety or to remove the US from the
      Territory.  If  Distributor  has not  Launched the Products in any of the
      other  countries  within the  Territory by the 31st March 2003,  Provalis
      shall have the ability within sixty (60) days thereafter,  to remove from
      the  Territory  some or all of those  countries  in the  Territory  where
      Distributor  has not so Launched the  Products,  after a discussion  with
      Distributor  in  respect  of each such  country.  If  Provalis  elects to
      exercise any of the foregoing  options,  it shall give Distributor  prior
      written  notice.  Notwithstanding  anything to the contrary  herein,  the
      foregoing states Provalis' sole remedy and  Distributor's  sole liability
      for any failure to meet such Launch Date.

8.2   Distributor shall use reasonable commercial efforts to advertise,  market
      and  promote  the  Products  in the  Territory  in  accordance  with  its
      marketing  plans  and  goals  and any  such  advertising,  marketing  and
      promotion shall be at Distributor's sole expense.

8.3   Distributor  shall  deliver  to  Provalis a  written,  annual,  sales and
      marketing  plan  for  each  Year,   outlining  the   anticipated   sales,
      promotional   and  marketing   activities   that  may  be  undertaken  by
      Distributor  in such Year. The plan in respect of the first Year shall be
      provided  within  30 days of the  date  hereof,  and in  respect  of each
      subsequent  Year  shall be  provided  not later  than 30 days  before the
      commencement of the Year to which it relates.

8.4   In connection with Distributor's rights under this Agreement, Distributor
      may:-

      (a)  participate  in  congresses, symposia  and  exhibitions  within  the
           Territory that have relevance to the Products;

      (b)  sponsor technical papers related to the Products; and

      (c)  organize user panels in the Territory.

8.5   Distributor shall ensure that all advertising, literature and promotional
      material for any of the  Products produced by or on behalf of Distributor
      or  any  Sub-Distributor  shall  be  developed  in  accordance  with  all
      applicable laws and regulations  in or relating to the Territory.  A copy
      of all materials created by or on  behalf  of  Distributor and an English
      translation thereof shall be submitted to Provalis  prior to use by or on
      behalf  of  Distributor  or  any  Sub-Distributor.  All  such   materials
      submitted  to Provalis are solely

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      for review by  Provalis  and no right or  license is granted to  Provalis
      permitting  Provalis to use,  reproduce,  distribute or otherwise exploit
      any  such  materials  whether  in whole  or in  part.  Distributor  shall
      consider any  suggestions  made by Provalis in good faith and Distributor
      agrees it shall not  unreasonably  refuse to make any reasonable  changes
      requested by Provalis;  provided however,  even if a suggestion is deemed
      reasonable by Distributor,  if the  implementation of such change is cost
      prohibitive,  Distributor  shall have no obligation to implement any such
      change  unless  the  parties  agree to  share  any  incremental  costs in
      connection  therewith.  All such  materials  shall be used by Distributor
      entirely at its own risk, and Provalis shall have no liability whatsoever
      in respect  thereof.  Provalis shall be deemed to have no comments on any
      such materials unless Provalis  provides  Distributor with written notice
      within five (5) days of submission by Distributor.

 8.6  Distributor undertakes that it  will not, and shall procure that any Sub-
      Distributor does not, take any action which could prejudice the Marketing
      Authorisation.

9.    SALES PERFORMANCE

9.1   Distributor agrees that it shall use all reasonable commercial efforts in
      each Year to purchase the Target  Purchase  Quantities  of HaemaQuant and
      Glycosal specified for that Year. If Distributor fails to  purchase sixty
      percent  (60%) of the Target Purchase Quantities of either HaemaQuant  or
      Glycosal in  any  Year,  Provalis  shall  be  entitled, at its option, to
      either  terminate this Agreement, or to unilaterally  delete  Clause  2.2
      from this  Agreement  (which  deletion  in such circumstances Distributor
      hereby consents to) upon 90 days' written  notice  to  Distributor.  Such
      termination or deletion shall be Provalis' sole remedy for any failure by
      Distributor  to  purchase  the  Target Purchase Quantities of Glycosal or
      HaemaQuant.

9.2   The Target Purchase Quantities for  Years  1  and  2  are  set  forth  in
      Schedule  1 and with respect to each Year thereafter, the Target Purchase
      Quantities shall be discussed during the first Quarter of the immediately
      preceding Year.  During such discussions the parties shall use their best
      efforts to  agree  in  good  faith  on  the  appropriate  Target Purchase
      Quantities for the next Year, and in respect of Year 3, in the absence of
      any  agreement,  the  Target  Purchase  Quantities shall be seventy  five
      percent (75%) of those for Year 2.

10.   SALES AND PURCHASES

10.1  Distributor  shall not, and shall use best  endeavours to procure that no
      Sub-Distributor shall:-


      (a)  obtain  any  of  the  Products  for resale from any person  firm  or
           company other than Provalis;

      (b)  seek customers for the Product outside the Territory;

      (c)  sell the Product to any Healthcare  Professional  and/or Institution
           within  the  Territory  if  to the knowledge of Distributor  or  the
           relevant   Sub-Distributor  the   Healthcare   Professional   and/or
           Institution intends to resell the Product;

      (d)  sell the Product  to  any Healthcare Professional and/or Institution
           if to the knowledge of  Distributor  or the relevant Sub-Distributor
           the Healthcare Professional and/or Institution  intends  to  use the
           Products outside the Field.

      If  either Distributor or Provalis becomes aware that any Sub-Distributor
      is or  has  been  acting  in  contravention of any of the obligations set
      forth in this Clause 10.1 (regardless  of  whether  Distributor

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      has used best endeavours to procure  otherwise),  they shall  immediately
      notify the other.  Distributor  shall within five (5) Working Days of the
      date of such notification serve a notice on such Sub-Distributor  (with a
      copy to  Provalis)  requiring  such  Sub-Distributor  to cease  acting in
      contravention  of the  obligations  set forth in this Clause 10.1, and if
      such Sub-  Distributor  does not comply with the  requirements set out in
      such  notice  within  thirty  (30)  days  of  the  date  of  the  notice,
      Distributor shall not thereafter sell or supply the Products (directly or
      indirectly) to such  Sub-Distributor.  If either  Distributor or Provalis
      becomes  aware  that  any  Sub-Distributor  is  or  has  been  acting  in
      contravention  of any of the  obligations  set forth in this  Clause 10.1
      (regardless of whether  Distributor  has used best  endeavours to procure
      otherwise) and such Sub-  Distributor  has  previously  received a notice
      from  Distributor  under the  provisions of this Clause 10.1,  they shall
      immediately notify the other and Distributor shall not thereafter sell or
      supply the Products (directly or indirectly) to such Sub-Distributor.

10.2  Distributor  shall  not  directly  or  indirectly  manufacture,  sell  or
      distribute in the Territory  any  third party product which competes with
      Glycosal and/or HaemaQuant and/or HbA1c  Control.   Further,  Distributor
      agrees that it shall not manufacture, sell or distribute its own  product
      that  would  compete with Glycosal and/or HaemaQuant and/or HbA1c Control
      on or before 1st January 2004, and that it shall notify Provalis at least
      nine  (9) months  prior  to  the  commercial  availability  of  any  such
      competitive   product.   Following  receipt  of  any  such  notification,
      Provalis and Distributor  shall  have  good faith discussions concerning,
      inter alia, whether Distributor shall continue  distributing the Products
      or the arrangements needed for the orderly transfer  of  the distribution
      of  the Products to Provalis and/or any nominee of Provalis,  but  unless
      otherwise  agreed  in  writing during such discussions, Provalis shall be
      entitled to terminate this  Agreement  on  not  less than nine (9) months
      notice at any time thereafter.

10.3  Distributor  shall  obtain  and  maintain  all  consents,   licences  and
      approvals (other than the Marketing Authorisation) as may be necessary in
      connection  with  the  importation  and  sale  of  the  Products  in  the
      Territory,  and  shall  pay  all  applicable  customs duties and taxes in
      respect of the importation of the Products into  the  Territory and their
      subsequent resale.

10.4  Distributor  shall not, and shall procure that no Sub-Distributor  shall,
      supply any Product  which  does  not comply with the law of the Territory
      (or part of the Territory) in which they are sold.

10.5  Distributor agrees that it shall only  sell  the Products in the original
      packaging and in the same condition as received  by  Distributor and that
      there  will  not be any alteration or addition to the Products  or  their
      packaging unless approved in writing by Provalis.

10.6  Should Provalis  become  aware of any third party that wishes to purchase
      the Products for use within  the  Field in the Territory, Provalis shall,
      provided  it  is  not  precluded  from  doing   so   by  any  contractual
      relationship with any other person, firm or company in  existence  at the
      date of this Agreement:-

      (a)  refer  any  such  third  parties to Distributor if they  are from or
           pertain to pharmaceutical  companies for use within the Territory in
           the Field; and

      (b)  refer such third parties in  all other cases proportionately between
           Distributor and Provalis' other distributors of the Products.

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11.   REPRESENTATIONS

11.1  Distributor shall not, and shall procure  that  no Sub-Distributor shall,
      make  any  promises,  representations,  warranties  or   guarantees  with
      reference  to the Products that are inconsistent with the representations
      and warranties given by Provalis.

11.2  Distributor  shall,  and  shall  procure that each Sub-distributor shall,
      comply with all applicable laws and  regulations  in  force  from time to
      time  in  relation to the promotion, marketing, sale and distribution  of
      the Products.

11.3  Each party shall give prompt notice to the other party if there is at any
      time a change  in  the  ownership  or  control  of  that  party from that
      existing at the date of this Agreement.

12.   INFORMATION FROM DISTRIBUTOR/TRAINING/MEETINGS

12.1  Distributor  shall  provide  Provalis  with  (and  will  update with  any
      significant  changes  within  three  (3)  months)  an  organogram   (i.e.
      organization  chart)  detailing the names, job titles and contact details
      of  all  of  its  managers  involved  in  the  importation,  warehousing,
      distribution, promotion,  sale,  supply or marketing of the Products, and
      hereby consents to Provalis contacting  any  of  such people from time to
      time in connection with the carrying out of Distributors  obligations, or
      the exploitation of its rights, under this Agreement.

12.2  To  assist Distributor in promoting, marketing and selling the  Products,
      Provalis  shall  provide  training to Distributor's and Sub-Distributor's
      personnel at periodic intervals,  with the frequency and locations of the
      training to be mutually agreed upon  by the parties but the party to bear
      the  costs and expenses in connection with  any  training  provided,  and
      incurred  by Provalis in respect thereof, to be agreed upon in good faith
      by the parties,  save  as  provided below. Notwithstanding the foregoing,
      during the first year, Provalis shall provide up to 40 Provalis man hours
      of  training,  over  5 consecutive  days  at  Distributor's  premises  in
      California, for Distributor's and any of its Sub-Distributor's personnel,
      and Provalis shall pay  for its own costs and expenses, including travel,
      food  and  lodging  costs  incurred  in  connection  with  such  training
      sessions.

12.3  Provalis  and  Distributor  shall   meet   either   in   person   or  via
      teleconference  at  least  every  6 months (with meetings in person being
      held alternately in the UK and the  US unless agreed otherwise) to review
      all  aspects  of the distribution of the  Products  by  Distributor.   An
      agenda for such meetings shall be agreed in advance, and each party shall
      ensure they have  those  personnel  available at the meeting to deal with
      all matters on the agenda.

13.   PRODUCT PACKAGING AND LEGAL REQUIREMENTS

13.1  Provalis shall be entitled to make only  such  amendments  to the Product
      Specifications as do not affect the form, fit or function of the Products
      without  the  consent  of Distributor.  Any other amendments require  the
      written  consent  of  Distributor,  but  if  Distributor  withholds  such
      consent, Provalis shall  be  entitled  to use the escalation procedure in
      accordance with Clause 31, save that if  the  issue  cannot  be resolved,
      neither party shall be entitled to commence litigation or terminate  this
      Agreement.

13.2  The Packaging Specifications are to be Provalis' packaging specifications
      (as the same have been notified by Provalis to Distributor) incorporating
      such  changes  to  the  artwork,  branding  and  labelling thereof as are
      requested by Distributor and agreed upon by Provalis,  such agreement not
      to  be  unreasonably  refused  or  delayed, and all discussions  relating
      thereto  to  be  carried  out in good faith,  it  being  acknowledged  by
      Provalis that the prime responsibility  for  editorial  control  of  such
      artwork  and branding remains with Distributor. Following such agreement,
      neither party  shall  make  any  change  to

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      the Packaging  Specifications  without the prior  written  consent of the
      other, such consent not to be unreasonably refused or delayed.

13.3  Notwithstanding   the  provisions  of  Clause  13.2,  the  packaging  and
      labelling for the Glycosal and HaemaQuant shall include:-

      (a)  in  the  case  of   Glycosal   the  statement  :  "This  Product  is
           manufactured  by and sold under licence  from  Provalis  Diagnostics
           Limited";

      (b)  in the case of  HaemaQuant  the  statement  :  "This Product is sold
           under licence from Provalis Diagnostics Limited"; and

      (c)  in the case of both the details of any patents (or  patents pending)
           relating  to the Products of which Provalis makes Distributor aware,

      in  such  places,  format,  and  size  as Distributor agrees (not  to  be
      unreasonably  refused  or delayed) does not  detract  from  Distributor's
      Trade Marks but otherwise as may be reasonably required by Provalis.

13.4  Provalis and Distributor shall in good faith and as soon as is reasonably
      possible after the date  of  this  Agreement  seek  to  agree  upon those
      Product  Specifications  referred  to in Schedule 2 as to be agreed  upon
      pursuant to this Clause 13.4.

13.5  Each  party  shall inform the other party  immediately  by  telephone  or
      facsimile transmission  if any circumstances become known to a party that
      would give rise to a possible or actual recall of any of the Products and
      shall  immediately send written  confirmation  by  pre-paid  first  class
      registered air mail.

13.6  Provalis  shall have the right on the grounds of public health and safety
      to require Distributor to discontinue sale of and recall and recover some
      or all batches  of  the  Products  as  specified by Provalis. If Provalis
      issues a recall of any of the Products as  a  consequence of the Products
      being supplied in breach of the warranties given in Clause 14.1, Provalis
      shall  be  solely  responsible  for  all  costs  and expenses  reasonably
      incurred by Distributor and/or any of its Affiliated  Companies  involved
      in  the  distribution  of  the  Products  that  pertain  to  such recall,
      including  the reasonable costs and expenses of any Sub-Distributor  that
      pertain to such  recall  which have been reimbursed by Distributor or any
      of its Affiliated Companies  as a result of a contractual obligation with
      such Sub-Distributor. In all other  circumstances,  each party shall bear
      their own costs and expenses of any recall.

13.7  Where  a  Product  recall is initiated, whether by the Health  Authority,
      other statutory or regulatory authority in the Territory, or by Provalis,
      Distributor shall inform  all  customers  so affected and require them to
      deliver or make available for collection all  relevant stocks of Products
      in  their possession.  Subject to Clause 13.6, Distributor  shall  ensure
      that  all  such  stocks  of  Products  are  collected and securely stored
      pending further instructions from Provalis.

13.8  If  either  party becomes aware of any changes  to  any  current  safety,
      health and other applicable laws and regulations which apply to or affect
      any of the Products, it shall promptly notify the other party thereof.

13.9  Provalis and  Distributor  agree  that it is desirable to reduce the size
      and fill volume of the vials in which  the  HbA1c  Controls are supplied.
      They  shall  each  use  their  reasonable endeavours to agree  a  revised
      Product Specification and price  for the HbA1c Controls with the supplier
      thereof to provide for such reductions.

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14.   WARRANTY, LIABILITY AND INSURANCE

14.1  Provalis  warrants that the Products  (other  than  HaemaData  and  HbA1c
      Control) shall:-

      (a)   on delivery  and  for a period of fifteen (15) months thereafter in
            respect of HaemaQuant  and  for  the remainder of the shelf life in
            respect of the other Products comply  with  the  Specifications and
            the Marketing Authorisation;

      (b)   have  been  manufactured  in accordance with the US Food  and  Drug
            Administration Good Manufacturing Practices; and

      (c)   on delivery have not less than  ten  (10)  months or eighty percent
            (80%) of its stated shelf life remaining, whichever is the greater.

14.2  Provalis' liability for breach of any of the warranties  in  Clause  14.1
      shall  be  limited  at  Provalis  option  and  at its cost and expense to
      either:-

      (a)  Issuing a Technical Bulletin for Distributor  to circulate to all of
           its Sub-Distributors;

      (b)  Issuing,  or carrying out, an In Field Correction  on  the  Products
           concerned; or

      (c)  replacing  the   defective  Products  in  question  as  soon  as  is
           reasonably possible  or  refunding  to Distributor the Price paid by
           Distributor  in respect of such defective Products.

      The warranty terms and conditions for HaemaData, are detailed in Schedule
      6. In the event of any conflict between the terms and conditions detailed
      in  Schedule  6,  and  the terms and conditions  of  this  Agreement,  in
      relation to the supply or  use  of  HaemaData,  those in Schedule 6 shall
      prevail. The warranty terms and conditions of HbA1c  Control are detailed
      in  Schedule  7.  In  the  event  of any conflict between the  terms  and
      conditions contained in Schedule 7,  and the terms and conditions of this
      Agreement, in relation to the supply or  use  of  HbA1c Control, those in
      Schedule 7 shall prevail.

14.3  (a)  Provalis further warrants that:-

           (i)   other   than   the   Marketing   Authorisation,    no    other
                 authorisation,   consent,   approval,   license,   filing   or
                 registration   with   any  court,  governmental  authority  or
                 regulatory body is required for the due execution, delivery or
                 performance  by  Provalis   of   its  obligations  under  this
                 Agreement;

           (ii)  that  the  Products  do  not  infringe   any   third   party's
                 Intellectual Property or other proprietary rights.

      (b)  Distributor  warrants  to  Provalis  that no authorisation, consent,
           approval,   license,  filing  or  registration   with   any   court,
           governmental  authority  or  regulatory body is required for the due
           execution, delivery or performance by Distributor of its obligations
           under this Agreement.


14.4  Distributor  shall give Provalis  notice (in accordance  with a complaint
      procedure to be agreed upon by the parties as soon as possible  after the
      date hereof) of any Product delivered to it that does not comply with the
      warranties  given in  Clause  14.1  within  30 days of  delivery  of such
      Product to Distributor or, if any such non-compliance could not have been
      identified  by  reasonable  examination,  within 30 days of the date when
      Distributor  is made aware of such  non-compliance.  If no such notice is
      received by

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      Provalis  within the required,  relevant thirty (30) day period set forth
      in Clause 14.4,  those Products shall be deemed to have complied with the
      warranties  in Clause  14.1,  and  Distributor  shall not be  entitled to
      reject them. No Product shall be deemed to be in breach of the warranties
      given  herein if the event or act  giving  rise to such  breach  has been
      caused by any failure of Distributor,  any Sub-Distributor or any user of
      the Products to store,  use or handle the Products in accordance with the
      instructions of Provalis.


14.5  Within  the notice Distributor provides in accordance with  Clause  14.4,
      Distributor  shall  provide a statement of the alleged non-conformity, if
      known, and shall request  a  return  material  authorization  in  respect
      thereof.  Provalis  agrees to respond to all requests for return material
      authorizations within two (2) Working Days of receipt of the notice given
      pursuant to Clause 14.4  and to bear all reasonable freight and insurance
      costs incurred by Distributor  associated  with  either Products which do
      not  meet  the  warranty  set  forth  in Clause 14.1 or  which  are  over
      shipments  of  Products  ordered.   If  Distributor  rejects  Product  in
      accordance with Clause 14.4, but such Product  is  subsequently proven by
      Provalis to comply with the warranties given in respect  of such Product,
      Provalis'  only  liability  in  respect  thereof  shall  be  to reimburse
      Distributor  with  fifty  percent  (50%)  of the reasonable and validated
      costs incurred by Distributor in returning such Products to Provalis.


14.6  (a)  If Distributor's or any Sub-Distributor's  end  users  experience an
           Epidemic Failure (as defined below) in respect of the Products,  the
           remaining terms of this Clause shall apply.


      (b)  For the purposes of this Clause, an Epidemic Failure shall be deemed
           to have occurred if either:-


           (i)   more  than  three  percent  (3%)  of  the  then  current total
                 installed  base  of  the same Product manufactured within  the
                 last 12 months are in breach of the warranties given in Clause
                 14.1  as  a  result  of  substantially   the  same  fault  and
                 Distributor  rejects such Products in accordance  with  Clause
                 14.4 within any time period of ninety (90) days; or


           (ii)  if more than five  percent  (5%)  of  the  then  current total
                 installed  base  of  the  same  Product  are in breach of  the
                 warranties given in Clause 14.1 as a result  of  substantially
                 the  same  fault  and  Distributor  rejects  such Products  in
                 accordance with Clause 14.4   within any time period of thirty
                 (30) days.


      (c)  Provalis shall bear the burden of establishing that  any Products so
           rejected  were  manufactured  more  than  twelve  months before  the
           relevant breach.


      (d)  In the case of any Epidemic Failure, Provalis and Distributor  shall
           cooperate to implement the following procedure:-


           (i)   Distributor  shall  promptly  notify  Provalis in writing upon
                 becoming aware of the potential Epidemic Failure;


           (ii)  Within  five  (5)  Working  Days of receipt  of  Distributor's
                 notification,  Provalis  shall   give   an   initial  response
                 indicating its timescale for producing and implementing a plan
                 for diagnosing and correcting the problem;


           (iii) Provalis and Distributor shall jointly exert all  commercially
                 reasonable  efforts to diagnose the problem and plan  a  work-
                 around or more permanent solution;


           (iv)  Provalis shall  prepare and consult with Distributor regarding
                 an appropriate recovery  plan  as well as an appropriate work-
                 around, as an interim solution,  if  one  is  needed and shall
                 implement such plan as soon as is reasonably possible.

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      (e)  Provalis  shall  be  responsible  for all costs incurred  by  it  in
           rectifying any Epidemic Failure, including  without  limitation, for
           any solution, work-arounds, recovery plan or engineering changes, as
           well  as  all  reasonable  freight and insurance costs and  expenses
           incurred by Distributor in transporting  the  Products  experiencing
           the Epidemic Failure.


14.7  Except  for  the  express  warranties  set  forth in this Agreement,  all
      conditions and warranties express or implied,  statutory or otherwise, as
      to the quality or fitness of the Products are hereby excluded.


14.8  Notwithstanding anything to the contrary in this Agreement and, except in
      respect of death or personal injury caused by the negligence of either of
      them, neither party shall be liable to the other  party  by reason of any
      representation (unless fraudulent) or any implied warranty,  condition or
      other term or any duty at common law, or under the express terms  of this
      Agreement,   for   any  loss  of  profit  or  any  indirect,  special  or
      consequential loss or damage, costs, expenses or other claims arising out
      of or in connection with this Agreement, the manufacture or supply of the
      Products, its resale by Distributor or its use by any customer; provided,
      however, all damages  paid  by  Distributor  to any third party under any
      Action shall be deemed to be direct damages for  purposes  of this Clause
      14.8 and this Agreement generally.


14.9  Further, except for all indemnification obligations regarding third party
      claims  and except in respect of death or personal injury caused  by  the
      negligence  of  either of them, the total liability of each party for any
      other  loss,  damage,  costs,  expenses  or  other  claims  which  arises
      hereunder shall not exceed One Million Dollars (US$1,000,000).


14.10 Subject to Clauses  14.8  and  17.7,  Provalis  shall  indemnify and hold
      harmless  Distributor  from any and all claims, charges, suits,  demands,
      judgments,  damages  and reasonable  and  necessary  attorneys  fees  and
      expenses  ("Actions")  arising   from   claims  against  Distributor,  or
      liabilities  of  Distributor  to any of its  Sub-Distributors  under  any
      contractual obligation relating  directly  to  the  Products,  based upon
      injury  to  persons,  including  death,  or  property  and any liability,
      damages or penalties awarded or agreed to therein and resulting  from  or
      arising  out  of Provalis' negligent manufacture, storage or transport of
      Products prior  to  receipt by Distributor or from any breach by Provalis
      of its obligations hereunder.


14.11 Subject to Clauses 14.8  and  17.7,  Distributor shall indemnify and hold
      harmless Provalis from any and all Actions  arising  from  claims against
      Provalis  based  upon  Distributor's or any Sub-Distributor's failure  to
      properly store, handle and  distribute  the  Products  in accordance with
      this  Agreement,  the  laws  of  any  part  of  the Territory and/or  the
      Marketing  Authorisations  or  from  any  breach  by Distributor  of  its
      obligations hereunder.


14.12 During the period of time from the beginning of the first Year until five
      (5)  years  after  the expiry or earlier termination of  this  Agreement,
      Provalis and Distributor  shall  each have and maintain, with financially
      reputable insurers, not less than the insurance coverages set forth below
      and shall furnish to the other party certificates of insurance evidencing
      such insurance coverages.  Provalis  and  Distributor  shall  each ensure
      that  their  respective insurance coverage permits suits brought  in  the
      United States and the United Kingdom.


      (a)  Distributor shall have and maintain the following:


           (i)  Commercial  General  Liability,   including  products/completed
                operations  and broad form  property  damage,  personal  injury
                liability, and contractual liability,  with a limit of not less
                than $1,000,000 per occurrence and $7,000,000 in the aggregate;

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           (ii) Products   Liability,   with  a   limit   of  not   less   than
                {pound-sterling}5,000,000  per occurrence and in the aggregate,
                or a US dollar equivalent not to exceed $10,000,000; and


           (iii)Workers'   Compensation   as   required   under  any   Workers'
                Compensation or similar law in the  jurisdiction  where work is
                performed,  with an Employer's Liability limit of not less than
                $500,000 per accident..


      (b) Provalis shall have and maintain the following:


           (i)  Commercial  General  Liability,   including  products/completed
                operations  and broad form  property  damage,  personal  injury
                liability, and contractual liability,  with a limit of not less
                than $1,000,000 per occurrence and $7,000,000 in the aggregate;


           (ii) Products   Liability,   with  a   limit   of  not   less   than
                {pound-sterling}5,000,000  per occurrence and in the aggregate;
                and


           (iii)Workers'   Compensation   as   required   under  any   Workers'
                Compensation or similar law in the  jurisdiction  where work is
                performed,  with an Employer's Liability limit of not less than
                $500,000 per accident.


       (c) Further, Provalis shall, as soon as is reasonably possible after the
           date of this Agreement but in no event later than thirty (30) days,
           name Distributor and its officers, directors, employees,
           subsidiaries, and shareholders, as additional insureds on all
           products liability policies detailed in sub-clauses (b) (i) to (iii)
           above.  A separate endorsement indicating the additional insured
           status must be issued. Such insurance shall be endorsed to be
           primary to and non-contributory with any insurance obtained by
           Distributor.


      (d)  Each party shall, promptly following the date of this Agreement,
           deliver to the other party a certificate of insurance evidencing
           that the above insurance is in force.  Neither party will cancel or
           materially alter any such insurance cover without first giving the
           other party 30 days' prior written notice.  Any failure to provide
           such certificate within thirty (30) days of any subsequent request
           so to do shall be deemed a material breach of obligations hereunder.


      (a)  Nothing contained in this section limits either party's liability to
           the other party to the limits of insurance certified or carried.


15.   PRODUCT MODIFICATIONS

15.1  If at any time during  the  period  of  this Agreement Provalis devises a
      Product  Modification to the Products, it  shall  notify  Distributor  in
      writing ("the  First  Notice")  both of the Product Modification, and the
      date by which a Modified Product  incorporating such Product Modification
      is intended to be introduced into the Territory.  If Distributor does not
      wish  such Modified Product to be introduced  it  shall  notify  Provalis
      within  seven  (7) days of receipt of the First Notice (any failure so to
      do to constitute  deemed acceptance by Distributor of the introduction of
      such Modified Product)  and  Provalis and Distributor shall then discuss,
      in  good  faith,  whether  or not  such  a  Modified  Product  should  be
      introduced.  If within thirty  (30)  days  of Distributors receipt of the
      First Notice the parties have not agreed on  whether  or not the Modified
      Product  should be introduced, Provalis shall be entitled,  on  giving  a
      further written notice ("the Second Notice") to Distributor, to introduce
      the Modified  Product  on  a specified date, which date shall be not less
      than thirty (30) days after  the  date of the Second Notice.  If Provalis
      does  serve  the  Second  Notice  on Distributor,  Distributor  shall  be

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      entitled to terminate this Agreement  upon not less than ninety (90) days
      notice to Provalis, such notice to be served  within  seven  (7)  days of
      receipt of the Second Notice.

15.2  If  a  Modified  Product  is introduced into the Territory, such Modified
      Product shall be deemed to  become  the  Product for the purposes of this
      Agreement from the date of such introduction.

16.   NEW PRODUCTS

16.1  Provalis agrees that it shall, before appointing any third party, discuss
      with  Distributor  in  good faith the possibility  of  Distributor  being
      appointed as a distributor  for  any  other  diabetes  or  cardiovascular
      diagnostic  product  developed  by  Provalis.  However, nothing  in  this
      Agreement shall prevent Provalis from  granting  any  rights  to any such
      diabetes  or  cardiovascular  diagnostic  product, whether in respect  of
      distribution or otherwise, at any time, to  any  other  person,  firm  or
      company  without notice to Distributor and in the event Provalis does so,
      Distributor  shall  not  be  entitled  to  any  payment or other benefit,
      whether in respect of compensation, damages or otherwise.

16.2  Notwithstanding  the provisions of Clause 16.1, if  the  parties  do  not
      discuss in good faith the possibility of Distributor being appointed as a
      distributor for any  other  diabetes or cardiovascular diagnostic product
      developed  by  Provalis  and Distributor  reasonably  believes  that  the
      appointment of a distribution  partner  other than Distributor in respect
      of such products impairs the relationship contemplated by this Agreement,
      then Distributor may adjust the Target Purchase  Quantities  for the then
      current Year.

17.   INTELLECTUAL PROPERTY/TRADEMARKS

17.1  Distributor  shall  market,  distribute  and sell the Product only  under
      Distributor's  Trade Marks, and under no other  third  party  trade  mark
      unless otherwise agreed in writing by Provalis.

17.2  Neither party shall  by  virtue  of  this  Agreement  acquire  any right,
      property or title in the other party's Intellectual Property, or  in  any
      other  patent,  trade  mark,  trade name, emblem, logo, symbol, design or
      other proprietary rights whatsoever  from  time  to time owned or used by
      the other party.

17.3  Neither party shall do or authorise any third party  to  do any act which
      would  invalidate  or  be  inconsistent  with  any  of the other  party's
      Intellectual Property and shall not omit or authorise  any third party to
      omit  to  do  any act which, by its omission, would have that  effect  or
      character.

17.4  Distributor shall  promptly  and  fully  inform  Provalis  of any actual,
      threatened   or  suspected  infringement  of  the  Provalis  Intellectual
      Property, in the  Territory  coming  to  its  knowledge, and of any third
      party claims coming to its notice that any patents,  trade  mark or other
      intellectual  property rights belonging to any third party are  infringed
      by the Product in the Territory.  Distributor shall take such actions and
      provide such assistance  as  may  reasonably  be  required by Provalis in
      connection  with  the  taking  or  resisting  of  any  action,  claim  or
      proceedings  in relating to any such infringement or claim.   Each  party
      shall  bear their  own  costs  and  expenses  in  relation  to  any  such
      infringement  or  claim,  except that Provalis shall bear all third party
      adviser costs incurred therewith.

17.5  Subject to Clause 17.7, Provalis  agrees  to  and shall defend, indemnify
      and hold Distributor harmless from and against  all  Actions arising from
      claims  against Distributor that the use or sale of Products  constitutes
      an infringement  of  any Intellectual Property right or other proprietary
      right or the unauthorized use of any third party trade secret.

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17.6  Subject to Clause 17.7, Distributor agrees to and shall defend, indemnify
      and hold Provalis harmless  from  and  against  all  Actions arising from
      claims  against Provalis that the use of Distributor's  Trade  Marks,  as
      used in connection  with the Products, constitutes an infringement of any
      Intellectual  Property   right   or   other   proprietary  right  or  the
      unauthorized use of any third party trade secret.

17.7  Any party seeking indemnification under this Agreement (the "Indemnitee")
      shall:-

      (a)  promptly notify the indemnifying party (the "Indemnitor") in writing
           of the Action;

      (b)  give the  Indemnitor  full  details of the  Action  and  immediately
           provide the Indemnitor with copies of all documents  relating to the
           Action whenever the same may be received;

      (c)  provide the  Indemnitor  with sole control  over the defense  and/or
           settlement  of  such  Action,  at  Indemnitor's   expense  and  with
           Indemnitor's choice of counsel;

      (d)  take no action and make no comment to any person  without  the prior
           written consent of the Indemnitor;

      (e)  at the  Indemnitor's  request and  expense,  provide all  reasonable
           advice and  assistance  to  Indemnitor  with respect to such Action.
           Indemnitee  may join in  defense  of an Action  with  counsel of its
           choice at its expense; and

      (f)  use all  reasonable  endeavours  to mitigate  the extent,  scope and
           quantum of the Action.

18.   CONFIDENTIALITY

18.1  Except as provided  in  Clause 18.2, each party shall at all times during
      the continuance of this Agreement  and  after  its  termination keep  all
      Restricted  Information  confidential  and  shall  not use the Restricted
      Information  for  any  purpose other than the proper performance  of  its
      obligations under this Agreement.

18.2  Any Restricted Information  may  be  disclosed by the receiving party to:
      (a) the Health Authority or any other  governmental authority; or (b) any
      employee of the receiving party who has  a  need  to know and is aware of
      the  confidentiality  restrictions  hereunder;  or  (c)   to   authorized
      consultants  and  vendors  of  the  receiving  party  that  are  under  a
      confidentiality  agreement  with  the  receiving  party,  but only to the
      extent  necessary  for  the  proper performance of the receiving  party's
      obligations hereunder, provided always that the receiving party shall use
      its best endeavours to ensure that such persons or entities keep the same
      confidential and only use the  same  for the purpose for which disclosure
      was made.

a.2   Any obligations of confidentiality shall  not  apply to information which
      is:

      (a)  now or hereafter comes into the public domain  other  than by breach
           of the receiving party's obligations under this Clause 18;

      (b)  already  in the possession of the receiving party other  than  as  a
           result of having received if from the disclosing party;

      (c)  disclosed  to  the  receiving  party  by  a third party who does not
           require that it be maintained in confidence;

      (d)  independently developed by the receiving party  without  the  use of
           the Restricted information;

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      (e)  required  to  be  disclosed  by  law  or by any competent regulatory
           authority  or under the rules of any stock  exchange  on  which  the
           shares of the disclosing party are listed.

19.   TERMINATION

19.1  Each party shall  have  the right to terminate this Agreement on not less
      than thirty (30) days prior  written  notice  thereof to the other party,
      should any one or all of the following events occur:

      (a)  if the other party is in breach of any of  its material  obligations
           contained in this Agreement and, in the case  of such a breach which
           is capable of remedy, fails to remedy same within  30  (thirty) days
           of written notice given by the other party of such breach; or

      (b)  if  the  other party goes into liquidation or becomes insolvent,  or
           any legal  petition  or other form of pleading for composition of or
           relief from such party's  debts is filed by it (and is not dismissed
           within  90  days),  or  against   it,   or  becomes  subject  to  an
           administration  order  or  makes a voluntary  arrangement  with  its
           creditors, or an encumbrancer,  receiver  or  a trustee is appointed
           for  the  benefit  of  the  creditors  of  such party,  or  anything
           analogous to any of the foregoing occurs to  the  other  party under
           the laws of any jurisdiction; or

      (c)  the other party ceases to carry on all, or the relevant part, of its
           business.

19.2  Provalis  shall have the right to terminate this Agreement by giving  not
      less than 30  (thirty) days notice to Distributor if there is at any time
      a change in the ownership or control of Distributor from that existing at
      the date of this  Agreement  other  than  for  the  purposes of corporate
      reconstruction where the effective control remains the  same,  regardless
      of  whether  Provalis has received notice of the same, provided that  the
      person, firm or  company  gaining  control  or ownership of Provalis is a
      Competitor of Provalis or is someone with whom Provalis has been involved
      in litigation with at any time during the twelve (12) months prior to the
      date of such change in ownership or control.

19.3  Distributor shall have the right to terminate  this  Agreement  by giving
      not less than 30 (thirty) days notice to Provalis if there is at any time
      a  change  in the ownership or control of Provalis from that existing  at
      the date of  this  Agreement  other  than  for  the purposes of corporate
      reconstruction where the effective control remains  the  same, regardless
      of  whether Provalis has received notice of the same, provided  that  the
      person,  firm  or  company  gaining control or ownership of Provalis is a
      Competitor of Distributor or  is  someone  with whom Distributor has been
      involved in litigation with at any time during  the  twelve  (12)  months
      prior to the date of such change in ownership or control.

19.4  Distributor may terminate this Agreement at any time after December  2002
      effective  upon  written  notice  to Provalis if Provalis fails to obtain
      recertification   of   the  Product  by  the   National   Glycohemoglobin
      Standardization Program  ("NGSP") and such recertification is not renewed
      at  the  first  reasonably  available  opportunity  after  receiving  the
      official notice of such failure.

19.5  If  Distributor  terminates this  Agreement  in  accordance  with  Clause
      19.1(b) Distributor may manufacture or have manufactured the Products, in
      accordance with the license and the terms set forth in Schedule 8.

19.6  The rights to terminate  this  Agreement given by this Clause 19 shall be
      without prejudice to any other right or remedy of either party in respect
      of the breach concerned (if any) or any other breach.

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19.7  For the purposes of Clause 19.1(a),  a breach shall be considered capable
      of  remedy  if  the  party in breach can comply  with  the  provision  in
      question in all respects other than as to the time of performance.

20.   CONSEQUENCES OF TERMINATION

20.1  In  the  event  of  termination   of  this  Agreement  howsoever  caused,
      Distributor shall:

      (a)  immediately cease to promote and market the Products and to make any
           further use of  any of Provalis' Intellectual Property;

      (b)  at the option and on the written  request  of  Provalis, either sell
           its existing fully marketable inventory of the Products  at the date
           of  such  termination  to  Provalis  or to such person indicated  by
           Provalis at the Price or sell it in the  Territory  at  the  maximum
           obtainable price without discounting;

      (c)  within  60  (sixty)  days,  at  Distributor's own expense, return to
           Provalis  or  otherwise  dispose of  as  Provalis  may  require  all
           Restricted Information of Provalis.

      (d)  immediately terminate any  agreements (in whole or in part) with any
           Sub-Distributors solely as such agreements pertain to the Products;

      (e)  pay to Provalis all sums due  to it hereunder as soon as is possible
           and in any event within 5 Working  Days,  unless  termination  is by
           Distributor  pursuant  to  Clauses 19.1, 19.3 or 19.4 in which event
           payment shall be made in accordance  with  the payment terms set out
           in Clause 7.4; and

      (f)  promptly take all steps to comply with its obligations  under Clause
           4.5.

20.2  Neither  party  shall under any circumstances have any claim against  the
      other party for compensation  for  loss  of  profit, loss of distribution
      rights, loss of goodwill or any similar loss,  or any other consequential
      or indirect or economic loss caused arising out  of or in connection with
      this Agreement or the subject matter hereof howsoever arising.

20.3  Termination  of  this  Agreement  for  whatever  cause shall  be  without
      prejudice to the rights of either party arising hereunder  which may have
      accrued prior to such termination.  Clauses 4.5, 6.5, 7.10,  7.11,  14.1,
      14.4, 14.6, 14.8, 14.9, 14.10, 14.11, 14.12, 17.2, 17.5, 17.6, 17.7,  18,
      20.1,  20.2,  26,  27  and  31  shall  continue in full force and effect,
      notwithstanding any expiration or termination of this Agreement, provided
      that Clauses 7.10 and 7.11 shall only remain in full force and effect for
      one year following any expiry or termination.

21.   FORCE MAJEURE

21.1  If either party is affected by Force Majeure it shall promptly notify the
      other party in writing of the nature and  extent  of the circumstances in
      question.

21.2  Notwithstanding  any  other  provision of this Agreement,  neither  party
      shall be deemed to be in breach of this Agreement, or otherwise be liable
      to the other for any delay in  performance  or the non-performance of any
      of its obligations under this Agreement, to the  extent that the delay or
      non-performance is due to any Force Majeure of which  it has notified the
      other  party,  and the time for performance of that obligation  shall  be
      extended accordingly.

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22.   ASSIGNMENT/APPOINTMENT OF SUB-DISTRIBUTORS

22.1  Each party shall  be entitled to assign or sub-contract all or any of its
      rights, benefits or  obligations  under  this  Agreement  to  any  of its
      Affiliated Companies.

22.2  This  Agreement  is  personal  to  Distributor  which  shall not, save as
      provided in Clause 22.1 and 22.3, transfer, delegate or assign, partially
      or  entirely,  any of its rights or obligations under this  Agreement  to
      another without  the  prior  written  consent  of Provalis, which consent
      shall  not  be  unreasonably  withheld or delayed and  any  purported  or
      attempted  assignment  or  transfer,  prohibited  hereunder,  shall  give
      Provalis   the   right   to   terminate    this    Agreement   forthwith.
      Notwithstanding  the  foregoing,  Distributor  may  assign  Distributor's
      entire benefit and burden of this Agreement if such assignment is part of
      a  sale  of all or substantially all of Distributor's assets.   Following
      any such assignment,  Distributor  shall  give  Provalis  notice  thereof
      within  ten  (10)  Working  Days of such assignment taking place.  In the
      event Distributor does assign  this Agreement as part of a sale of all or
      substantially all of Distributor's  assets, Provalis shall be entitled to
      terminate this Agreement by giving not less than thirty (30) days' notice
      to  Distributor only if any such assignment  is  to  a  person,  firm  or
      company  which  is  a  Competitor  of Provalis or is to a person, firm or
      company with which Provalis has been  involved  in litigation with at any
      time during the twelve (12) months prior to the date of such assignment.

22.3  Distributor  shall  be  entitled  to appoint Sub-Distributor(s)  for  the
      Products in each country in the Territory  other  than  the  US, provided
      always  that Distributor informs each such Sub-Distributor in writing  of
      the terms and conditions on which the Products are able to be distributed
      (a copy of  Distributor's  standard  terms  to  be given to Provalis upon
      Provalis'  request)  and  thereafter  requires that each  Sub-Distributor
      comply in full with such terms and conditions. Under no circumstances may
      Provalis contact or otherwise sell any  Products  to any Sub-Distributors
      without Distributor's prior written consent.


22.4  Subject  to Clause 17.6, Distributor shall indemnify  Provalis  and  hold
      Provalis harmless against any Action arising from claims against Provalis
      alleging or  based  upon  any  wrongful  act  or  omission  of  any  Sub-
      Distributor.

22.5  This  Agreement  shall be binding on the successors and permitted assigns
      of the parties hereto.

23.   ANNOUNCEMENTS

23.1  Press Releases. Within  thirty  (30)  days  of  the  Effective  Date, the
      parties  may  issue press releases, the content of which shall be subject
      to  the approval  of  the  other  party,  which  approval  shall  not  be
      unreasonably withheld or delayed.

23.2  With  the  exception of the announcements referred to in Clause 23.1, and
      unless required  by  law  or  any  regulatory authority, no party to this
      Agreement shall make or procure or permit any person to make any press or
      other public announcement concerning  the  existence  of  or the terms of
      this Agreement or the Product or otherwise refer to the name of the other
      party (except to the extent the same is in the public domain) without the
      prior  written  consent  of  the  other  party  (not  to  be unreasonably
      withheld) as to the text of such announcement or reference.

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24.   WAIVER

24.1  Failure by either party to enforce at any time and for any period of time
      any terms and conditions of this Agreement shall not be a waiver  of them
      or  of  the  rights  of  such  party  to  enforce each and every term and
      condition.

25.   NOTICES AND DOMICILE

25.1  All notices required under any of the provisions  of this Agreement shall
      be  validly  given  if  hand  delivered or sent by pre-paid  first  class
      registered air mail to the address of the other party set forth below, or
      to such other address as may be  notified  for  this  purpose.   All such
      notices  shall  be deemed to have arrived 1 (one) day after hand delivery
      or 5 (five) days after posting.

      If to Provalis:             If to Distributor:
      Attn: Managing Director           Attn: Chief Executive Officer
      Newtech Square                    3347 Investment Boulevard
      Deeside Industrial Park           Hayward
      Deeside                           California
      Flintshire CH5 2NT                USA
      England

      with in Provalis' case, a copy for the attention of the Company Secretary
      at the same address.

26.   GOVERNING LAW,  OFFICIAL LANGUAGE

26.1  This Agreement shall  be  governed  and  construed  in  all  respects  in
      accordance with the laws of England.

27.   ARBITRATION

27.1  All  disputes  arising  out  of  or  in  connection  with this Agreement,
      including disputes relating to the breach, interpretation, termination or
      validity  thereof,  shall  be  finally settled by arbitration  in  Paris,
      France under the Rules of Arbitration  of  the  International  Chamber of
      Commerce, as in force on the date of this Agreement (the "Rules"), by one
      or  more  arbitrators  appointed  in accordance with the said Rules.  The
      arbitrator(s) may, however, call and  conduct  hearings  and  meetings at
      such  other  places as the parties may agree. The law applicable  to  the
      arbitration procedure  shall  be  the  laws of England. The arbitrator(s)
      shall be fluent in written and spoken English  and  the  English language
      shall  be  used  throughout  the  arbitration  in  all  notices,  written
      submissions and oral proceedings. All non-English documents submitted  by
      the  parties  shall  be translated into English prior to such submission,
      except  such  documents   as  the  arbitrator  may,  in  his  discretion,
      designate. Notwithstanding  the  foregoing,  the parties may apply to any
      court of competent jurisdiction for injunctive  relief  without breach of
      this arbitration provision.

28.   CONSTRUCTION

28.1  All  the  terms  and  conditions  of  this  Agreement are closely  linked
      together and therefore must be jointly construed.

28.2  Words importing a person shall include a firm or corporation.

28.3  Words importing any gender shall include every gender.

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28.4  Words importing the singular shall include the plural and vice versa.

28.5  All  references  to  Clauses and Schedules are (unless  expressly  stated
      otherwise) references  to  Clauses and Schedules in and to this Agreement
      and all references to the parties  or  a  party  are  references  to  the
      parties or a party to this Agreement (unless expressly stated otherwise).

29.   SEVERABILITY

29.1  If  any  provision  of  this  Agreement  is  held  by  any court or other
      competent  authority  to  be void or unenforceable in whole  or  part  by
      reason of any provision of applicable law, the parties shall re-negotiate
      those provisions to achieve  an  agreement  as  close  as possible to the
      original without infringing the relevant law and all other  provisions of
      this Agreement shall continue in full force and effect but if, after such
      negotiations,  the  parties  are  unable to agree upon an amendment  such
      provision shall be deemed to have been  deleted  from this Agreement with
      effect from the date of such holding.

30.   INDEPENDENT CONTRACTORS

30.1  The  parties  are  acting as independent contractors  and  shall  not  be
      considered partners,  joint  venturers,  or  agents  of  the other party.
      Neither party shall have the right to act on behalf of or  bind the other
      except as expressly provided for in this Agreement or as may be hereafter
      agreed to in writing.

31.   DISPUTES

31.1  The  parties  shall  make  a  good  faith  attempt to resolve any dispute
      arising  out  of  or  relating  to  this  Agreement  (including  reaching
      agreement to those matters referred to herein  as  requiring agreement in
      good  faith, or to which agreement is not to be unreasonably  refused  or
      delayed) through informal negotiation between appropriate representatives
      from each of the parties.  If at any time either party believes that such
      negotiations  are  not leading to a resolution of the dispute, such party
      may  send  a  notice to  the  other  party  describing  the  dispute  and
      requesting a meeting  of  the  senior executives from each party.  Within
      ten (10) Working Days after such notice of a dispute is given, each party
      shall select its appropriate senior  executives  (e.g.,  director or V.P.
      level) who shall have the authority to resolve the matter  and shall meet
      (either  in person or by teleconference) within twenty (20) Working  Days
      after such  notice  to attempt in good faith to negotiate a resolution of
      the dispute prior to pursuing other available remedies.

31.2  During  the course of  negotiations  under this  Clause,  all  reasonable
      requests  made by one  party  to the  other  for  information,  including
      requests for copies of relevant documents,  will be honored. The specific
      format  for  such  negotiations  will be left  to the  discretion  of the
      designated  negotiating senior executives but may include the preparation
      of agreed  upon  statements  of fact or written  statements  of  position
      furnished to the other party.

31.3  If any dispute arising out of or related to this Agreement is not settled
      by the parties  within  thirty  (30) days after the first  meeting of the
      negotiating  senior  executives,  and as a consequence one party believes
      the other to be in breach of its obligations  under this Agreement,  that
      party may  commence  formal  proceedings  with  respect to the dispute in
      accordance with Clause 27.

32.   ENTIRE AGREEMENT

32.1  This Agreement, including all Schedules attached hereto, constitutes  the
      entire  agreement  between the parties hereto with respect to the subject
      matter and supersedes  all previous agreements and

                                      156

<PAGE>

      understandings  between the parties with respect thereto.  This Agreement
      shall not be changed or modified orally.

32.2  Each party acknowledges  that,  in  entering into this Agreement, it does
      not  do so on the basis of, and does not  rely  on,  any  representation,
      warranty  or other provision except as expressly provided herein, and all
      conditions,  warranties  or  other terms implied by statute or common law
      are hereby excluded to the fullest  extent  permitted by law, but nothing
      in the foregoing shall apply to any fraudulent misrepresentation.

IN WITNESS whereof the parties hereto have executed  this  Agreement  by  their
duly authorised officers as of the day and year first above written.






                                      157


<PAGE>


                                  SCHEDULE 1



                          TARGET PURCHASE QUANTITIES



                                    PART I



                                   GLYCOSAL



                   First Year                   12,542 Units



                      Second Year            50,544 Units







                                    PART II



                                  HAEMAQUANT



                    First Year                   1984 Units



                      Second Year            2246 Units







                                      158


<PAGE>


                                  SCHEDULE 2



                               THE SPECIFICATION



                               PART I -GLYCOSAL



    PROVALIS' specification for Glycosal under reference number DS901062C.



                             PART II - HAEMAQUANT



   PROVALIS' specification for HaemaQuant under reference number DS901063Z.



                        PART III -  CONTROL CARTRIDGES



     PROVALIS' specification for Control Cartridges under reference number
                                  DS901064X.



                              PART IV - HAEMADATA



  This Specification is to be agreed by the parties in accordance with Clause
                                     13.4.



                            PART V - HBA1C CONTROL



 PROVALIS' specification for HbA1c Controls under reference number DS902071V.

  This Specification is to be agreed by the parties in accordance with Clause
                                     13.4.







                                      159


<PAGE>


                                  SCHEDULE 3



                               INITIAL FORECAST








<TABLE>
<CAPTION>
               Jul-02 Aug-02  Sep-02 Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03
<S>             <C>    <C>     <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>
HaemaQuant        530    270     400    270    350    260    140    230    230    230    230    230
Glycosal        3,164  1,722   1,613  1,341  2,248  1,658  1,533  1,902  1,683  3,200  3,550  3,900
HbA1c Controls    320    200     260      0    200    200    200    200    200    220    350    400
</TABLE>







                                      160


<PAGE>


                                  SCHEDULE 4



                                     PRICE

                                    Part I



The Initial Price of each of the Products shall be the following:

i.    For HaemaQuant:        {pound-sterling}210.00 per Unit

ii.   For Glycosal:          The  price  calculated  in accordance
                             with   Part   II  of  this Schedule

iii.  For Control Cartridge: {pound-sterling}15.00 per Unit

iv.   For HaemaData:         To be agreed; and

v.    For HbA1c Control:     {pound-sterling}40.00 per Unit.


                                    Part II

                                See Spreadsheet



                                   Part III


The  parties  shall,  discuss  and  seek  to  agree the prices for each of  the
Products for the following Year during the last  Quarter of the preceding Year.
If  they  are  unable to agree on any such initial prices,  Provalis  shall  be
entitled to increase  the  price  of  each of the Products by such amount as it
deems appropriate, provided, however, in  no event shall any price be increased
by  more  than five percent (5%), which, in the  case  of  Glycosal,  shall  be
determined against the price carried forward in accordance with Part II of this
Schedule.






                                      161


<PAGE>


                                  SCHEDULE 5

                       MARKETING PLAN FOR THE FIRST YEAR



Overview of Marketing Communication Plan                 8th March 2002

Promotional  activities  will  capitalize  on  a  new,  comprehensive lipid and
diabetes management positioning strategy.  The core elements  of  the marketing
communication plan are:
Branding  -  strategic  planning  and development of product names, logos,  and
dress.
Training - for Cholestech Sales, Customer Service, and Technical Service staff.
A  new  Product  Manager/Trainer  and  Regional   Sales  Managers  (RSMs)  will
subsequently  train the distributor sales representatives  via  one-on-one  and
branch meeting  presentations.  Extensive training support materials (including
training binders,  cheat sheets, patient education cards, video and audiotapes,
and CD-ROMs) will facilitate  training.   Ideally, training of Cholestech staff
will occur at least 4-6 weeks prior to launch.
Selling Tools - RSMs and distributor sales  representatives  will use new sales
flyers, fact cards, and technical briefs.  Marketing will exploit  the  synergy
between lipid and diabetes management to economize on development of materials.
Ideally, these materials will be available at least 4-6 weeks prior to launch.
Promotional Programs - Marketing will determine an appropriate program strategy
in  the context of other promotional programs planned or underway as the launch
date  nears.   The  goal  is  to  drive  demand  from  end-users  and stimulate
distribution  partners  to  focus  their  efforts  on A1C.  These programs  may
include an incentive for end-users, distribution partners, and/or RSMs.
Primary Demand Creation - Cholestech currently markets  directly to health care
professionals  via  association meetings ("trade shows"), journal  advertising,
kit  stuffers (notices  placed  in  cassette  boxes),  and  mailings  to  large
databases,  including  the  Cholestech  installed  base.   The  goal  of  these
marketing  communications  is  to create awareness and drive demand that can be
fulfilled by our RSMs and distribution  partners.   Marketing  will  assess the
need for modifying existing materials and programs or creating new ones  in the
context  of other programs planned or underway as the launch date nears.  Trade
show attendance,  mailing programs, and advertising will be expanded to include
key audiences for diabetes (AACE, AADE, and ENDO).
Opinion Leader Program - Marketing will identify 3-5 sites in the US for early,
controlled evaluations.   The  goals are three-fold: confirm performance of the
product in the field, create buy-in  from  key  opinion leaders and/or prestige
institutions, and generate publications that can  support the overall sales and
marketing effort.

Preliminary US Forecast

<TABLE>
<CAPTION>
               FY03     FY04     FY05       FY06       FY07
<S>             <C>      <C>     <C>        <C>        <C>
Analyzers     1,404    1,685    1,938      2,131      2,344
Cartridges  126,000  539,136  973,814  1,462,069  1,999,150
</TABLE>

FY: April 1 to March 31.  Assumed launch date is July  1,  2002.  An additional
100  analyzers  will  be  required  prior  to  launch as demo units  for  field
personnel.  Analyzers are not inclusive of units used in promotional programs.

Forecast  for  WellCheck remains TBD.  Forecast for  International  markets  is
highly dependent upon pricing.

As used in this  Schedule, "Analysers" means HaemaQuant, and "Cartridges" means
Glycosal.






                                      162


<PAGE>


                                  SCHEDULE 6



                     TERMS OF SUPPLY AND USE OF HAEMADATA



    To be agreed in accordance with the principles set out in Clause 13.4.







                                      163


<PAGE>


                                  SCHEDULE 7



                     WARRANTY PROVISIONS FOR HBA1C CONTROL



         To be supplied by Provalis as soon as is reasonably possible







                                      164


<PAGE>


                                  SCHEDULE 8



                             MANUFACTURING RIGHTS



Provalis hereby grants  to Distributor and Distributor accepts a non-exclusive,
license under Provalis' Intellectual  Property, including its Patent rights, to
make,  have made, use and sell the Products  in  the  Territory  for  the  sole
purpose  of  enabling  Distributor  to promote, market, distribute and sell the
Products in  accordance with the rights  granted  to it under the terms of this
Agreement; provided, however, the parties expressly  agree that Distributor may
only  exercise  the  rights  granted  to it under this licence  if  Distributor
terminates this Agreement pursuant to Clause 19.1 (b).









                                      165


<PAGE>


                                  SCHEDULE 9



                           DISTRIBUTOR'S TRADE MARKS



                          CHOLESTECH{reg-trade-mark}














                           CHOLESTECH GDX{trademark}















                                      166


<PAGE>


                                  SCHEDULE 10

                           CERTIFICATES OF ANALYSIS

                               PART I *GLYCOSAL


Kit Lot No: 062CXX                                  Expiry Date: 2002-09-19

Date of Manufacture of Sample Buffer: 2001-09-19  Cartridge Lot No: 105R20B

The reagents below were tested as described  in  SOP  1E571/1F001  and  checked
against the specifications stated in 1K031.

<TABLE>
<CAPTION>
  COMPONENTS     LOT NO.   EXPIRY DATE
<S>               <C>        <C>
Sample Buffer    072E42    2002-09-19
Elution Buffer   073C46    2002-11-16
Wash Buffer      074Z40    2002-11-14
</TABLE>

<TABLE>
<CAPTION>
                 TEST                   RESULT      SPECIFICATION   COMPLIES / FAILS
<S>                                     <C>         <C>                <C>
Text Checks                                    -          -             Complies
Tube Inspections                               -          -             Complies
Wash Buffer pH                              8.05     8.00 to 8.10       Complies
Elution Buffer pH                           5.06     5.00 to 5.10       Complies
Sample Buffer pH                            7.96     7.90 to 8.10       Complies
Wash Buffer Conductivity               8.99mS/cm  8.49 to 9.15 mS/cm    Complies
Elution Buffer Conductivity            27.3mS/cm  25.4 to 28.3 mS/cm    Complies
Sample Buffer Conductivity             8.53mS/cm  8.37 to 8.93 mS/cm    Complies
Wash Buffer Weight Check                  1.500g   1.455 to 1.545 g     Complies
Elution Buffer Weight Check               0.800g   0.776 to 0.824 g     Complies
Sample Buffer Weight Check                1.000g   0.970 to 1.030 g     Complies
% Error Codes                               3.8%        * 4.0%          Complies
Level 1 Control Target (lot 24/9-01/10)    5.1 %          -               N/A
Level 1 Mean Value (Bias from Target)      0.4 %  {plus-minus} 0.5%     Complies
Level 2 Control Target (lot 01/10)         7.5 %          -               N/A
Level 2 Mean Value (Bias from Target)      0.1 %  {plus-minus} 0.6%     Complies
Level 3 Control Target (lot 24/9-01/10)   10.4 %          -               N/A
Level 3 Mean Value (Bias from Target)        0 %  {plus-minus} 0.9%     Complies
Overall %CV                                4.6 %         * 7%           Complies
</TABLE>







                                      167


<PAGE>


                             PART II - HAEMAQUANT


Instrument Serial No: H0173

This  instrument  was tested as described in SOP 1D555 and checked against  the
specifications stated in 9J889.


<TABLE>
<CAPTION>
                     TEST                          RESULT        SPECIFICATIONS    COMPLIES / FAILS
<S>                                               <C>          <C>                    <C>
Description                                          -                 -               Complies
Electrical Soak Test                              Complete         * 48 hours          Complies
Offset Check                                      Complete             -               Complies
Paddle Function                                   Complete             -               Complies
Control Cartridge (% bias from Mean)               -2.3%       {plus-minus} 6.25%      Complies
Engineering Options Disabled                      Complete             -               Complies
Abnormal Control (Bias from Mean of 9.4% HbA1c)  0.6 %HbA1c  {plus-minus}1.3 %HbA1c    Complies
</TABLE>


                        PART III -  CONTROL CARTRIDGES


Kit Lot Number: 064XXX

Cartridge Lot No: 088N23AExpiry Date: 2003-09-07Date of Manufacture: 2002-03

The batch of cartridges  was  tested  as  described  in  SOP  1E578 and checked
against the specifications stated in 1K031.


<TABLE>
<CAPTION>
   TEST          RESULT             SPECIFICATION        COMPLIES / FAILS
<S>               <C>                    <C>                   <C>
Text Check         -                      -                  Complies
Mean Value      10.2 % HbA1c         8 to 13 % HbA1c         Complies
SD                0.09%               {greater} 0.4          Complies
Range         9.1-11.2 % HbA1c  {plus-minus} 10 % of Mean      N/A
</TABLE>















                                      168


<PAGE>


                              PART IV - HAEMADATA



     To be agreed in accordance with the principles set out in Clause 13.4



                            PART V - HBA1C CONTROLS





     To be agreed in accordance with the principles set out in Clause 13.4






                                      169


<PAGE>




Signed by JOHN S CURTIS

For and on behalf of

PROVALIS DIAGNOSTICS LIMITED











Signed by WARREN L PINCKERT II

For and on behalf of

CHOLESTECH CORPORATION




                                      170


<PAGE>


                                                                   EXHIBIT 12.1

    CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, PHILIP LEON GOULD, certify that:

1.    I have reviewed this annual report on Form 20-F of Provalis plc;

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

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

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

      a.   Designed such disclosure controls  and  procedures,  or  caused such
           disclosure   controls  and  procedures  to  be  designed  under  our
           supervision, to  ensure  that  material  information relating to the
           company, including its consolidated subsidiaries,  is  made known to
           us by others within those entities, particularly during  the  period
           in which this report is being prepared;

      b.   Evaluated the effectiveness of the company's disclosure controls and
           procedures  and  presented  in this report our conclusions about the
           effectiveness of the disclosure  controls  and procedures, as of the
           end of the period covered by this report based  on  such evaluation;
           and

      c.   Disclosed  in  this  report  any  change  in the company's  internal
           control over financial reporting that occurred  during  this  period
           covered  by  the  annual  report that has materially affected, or is
           reasonably  likely  to materially  affect,  the  company's  internal
           control over financial reporting.

5.    The company's other certifying  officer(s) and I have disclosed, based on
      our most recent evaluation of internal  control over financial reporting,
      to the company's auditors and the audit committee  of the company's board
      of directors (or persons performing the equivalent functions):

      a.   All significant deficiencies and material weaknesses  in  the design
           or operation of internal control over financial reporting which  are
           reasonably  likely  to  adversely  affect  the  company's ability to
           record, process, summarize and report financial information; and

      b.   Any  fraud,  whether  or not material, that involves  management  or
           other  employees  who have  a  significant  role  in  the  company's
           internal control over financial reporting.




"/s/ Philip Leon Gould"           January 14th 2004
Chief Executive Officer           Date







<PAGE>

                                                                   EXHIBIT 12.2

    CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, PETER EDWARD BREAM, certify that:

1.    I have reviewed this annual report on Form 20-F of Provalis plc;

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

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

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

      a.   Designed  such  disclosure  controls  and procedures, or caused such
           disclosure  controls  and  procedures  to  be   designed  under  our
           supervision,  to ensure that material information  relating  to  the
           company, including  its  consolidated subsidiaries, is made known to
           us by others within those  entities,  particularly during the period
           in which this report is being prepared;

      b.   Evaluated the effectiveness of the company's disclosure controls and
           procedures and presented in this report  our  conclusions  about the
           effectiveness of the disclosure controls and procedures, as  of  the
           end  of  the period covered by this report based on such evaluation;
           and

      c.   Disclosed  in  this  report  any  change  in  the company's internal
           control over financial reporting that occurred  during  this  period
           covered  by  the  annual  report that has materially affected, or is
           reasonably  likely  to materially  affect,  the  company's  internal
           control over financial reporting.

5.    The company's other certifying  officer(s) and I have disclosed, based on
      our most recent evaluation of internal  control over financial reporting,
      to the company's auditors and the audit committee  of the company's board
      of directors (or persons performing the equivalent functions):

      a.   All significant deficiencies and material weaknesses  in  the design
           or operation of internal control over financial reporting which  are
           reasonably  likely  to  adversely  affect  the  company's ability to
           record, process, summarize and report financial information; and

      b.   Any  fraud,  whether  or not material, that involves  management  or
           other  employees  who have  a  significant  role  in  the  company's
           internal control over financial reporting.



"/s/ Peter Edward Bream"          January 14th 2004
Chief Financial Officer           Date



<PAGE>


                                                                   EXHIBIT 13.1

             CERTIFICATION PURSUANT TO SECTION 1350 OF CHAPTER 63
         OF TITLE 18 OF THE UNITED STATES CODE, AS ADOPTED PURSUANT TO
                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, PHILIP LEON GOULD, the chief executive officer of Provalis plc, certify that

(i) the annual report on Form  20-F  of  Provalis plc for the fiscal year ended

June 30, 2003 fully complies with the requirements of Section 13(a) or 15(d) of

the Securities Exchange Act of 1934 and (ii)  the  information contained in the

annual  report  on  Form  20-F fairly presents, in all material  respects,  the

financial condition and results of operations of Provalis plc.





                                        "/s/ Philip Leon Gould"
                                        Philip Leon Gould

Date: January 14th 2004







<PAGE>

                                                                   EXHIBIT 13.2


             CERTIFICATION PURSUANT TO SECTION 1350 OF CHAPTER 63
         OF TITLE 18 OF THE UNITED STATES CODE, AS ADOPTED PURSUANT TO
                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002




I, PETER EDWARD BREAM, the  finance  director of Provalis plc, certify that (i)

the annual report on Form 20-F of Provalis  plc  for the fiscal year ended June

30, 2003 fully complies with the requirements of Section  13(a) or 15(d) of the

Securities  Exchange  Act  of  1934 and (ii) the information contained  in  the

annual report on Form 20-F fairly  presents,  in  all  material  respects,  the

financial condition and results of operations of Provalis plc.





                                        "/s/ Peter Edward Bream"
                                        Peter Edward Bream

Date: January 14th 2004