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

                                     GALEN

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

                                  HOLDINGS PLC

                                      FOCUS

                                [GRAPHIC OMITTED]

                                     GROWTH

                         2002 Annual Report and Accounts

<PAGE>

                         Galen Holdings at a glance 2002

The Company

Galen Holdings PLC (LSE: GAL/NASDAQ: GALN) is an international pharmaceutical

company focused on three core therapeutic areas: women's healthcare, dermatology

and urology. The Company was listed on the London Stock Exchange and the Irish

Stock Exchange in 1997 and in the United States on the Nasdaq National Market(R)

in 2000, subsequent to its acquisition of Warner Chilcott, plc, on 29 September

2000. Galen develops, manufactures, supplies and markets branded prescription

pharmaceutical products in the United Kingdom, Ireland and the United States.

Nearly 75% of our pharmaceutical revenues are generated in the United States.

The divestment of our pharmaceutical services businesses during 2002 for a total

of (pound)156.3 million has transformed Galen into a pharmaceutical company with

a clear therapeutic focus and a strong presence in the United States. Revenues

generated from Duricef(R) and Moisturel(R), products acquired from Bristol-Myers

Squibb in 2002 for $40 million, replaced earnings lost by the divestiture of the

pharmaceutical services businesses in the second half of 2002. Based in

Craigavon, Northern Ireland and Rockaway, New Jersey in the US, Galen is well

positioned to meet the needs of a global marketplace. As of 30 September 2002,

our employees totalled 960, of which 298 are employed in the US.

PERFORMANCE

      Our Growth Strategy: We have made great progress towards the creation of

      an international pharmaceutical company. We will continue to develop

      powerful sales & marketing and research & development organizations, and

      leverage our substantial management experience to enable us to implement

      our growth strategy and enhance shareholder value. Our future growth

      depends on our ability to successfully continue organic growth through our

      existing businesses, develop and commercialise new proprietary products

      and selectively acquire products which complement our existing ranges. Our

      activities during the year have demonstrated success in all three elements

      of this strategy and we have created strong foundations for further growth

      in 2003.

      The execution of our growth strategy in 2002 included:

      Organic Growth:

                                Jan.-Sept. 2001     Jan.-Sept. 2002

      Product                  New Prescriptions   New Prescriptions  Change (%)

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

      Doryx(R) 75 mg & 100 mg       135,607              223,237         65%

      Ovcon(R) 35                   257,857              328,313         27%

      Estrace(R) Cream              328,309              347,525          6%

      Source: NDCHealth

      New Proprietary Products: An important part of our strategy is to develop

      and commercialise pharmaceutical products based on innovative formulations

      and novel drug delivery technology, particularly our proprietary

      intravaginal ring, or IVR, technology. In October 2002, we received an

      approvable letter from the US Food and Drug Administration (FDA) for our

      estradiol acetate intravaginal ring, sold in the United Kingdom as

      Menoring(R). In addition, our new drug application for our line extension

      of Ovcon(R) was accepted for filing by the FDA in June 2002. We launched

      Doryx(R) 75 mg, a new dosage of our proprietary pelletised formulation of

      doxycycline, Doryx(R), in January 2002. Doryx(R) 75 mg has been performing

      well and we expect accelerated growth of the Doryx(R) brand due to this

      new strength.

      Selective Acquisitions: In March 2002, we acquired from Bristol-Myers

      Squibb two profitable dermatology products: the antibiotic Duricef(R) and

      the skin cream Moisturel(R). In addition, we announced in December 2002

      that we entered into a conditional agreement to acquire the US sales and

      marketing rights to Sarafem(R) from Eli Lilly and Company ("Lilly"). The

      agreement is conditional on US regulatory approval. Sarafem(R) is an FDA

      approved prescription treatment for pre-menstrual dysphoric disorder, a

      severe form of pre-menstrual syndrome. Launched by Lilly in 2000,

      Sarafem(R) generated sales of approximately $85 million in the United

      States in the year ended 31 December 2001.

<PAGE>

                      Management and Corporate Information

Board of Directors

Dr John A King

Executive Chairman

Roger M Boissonneault

Chief Executive Officer

R Geoffrey Elliott

Chief Financial Officer

Non-Executive Directors:

Dr Michael G Carter (1, 2)

Dr Harold Ennis, OBE (1, 2)

David Gibbons, MBE (1, 2)

(1)   Audit Committee

(2)   Remuneration Committee

Management

Galen Holdings PLC

Dr John A King

Executive Chairman

Roger M Boissonneault

Chief Executive Officer

R Geoffrey Elliott

Chief Financial Officer

Anthony D Bruno

Senior Vice President,

Corporate Development & General Counsel

David G Kelly

Senior Vice President,

Finance & Planning

William J Poll

Senior Vice President, Finance

Pharmaceuticals

W Carlton Reichel

President, Pharmaceuticals

Technical Operations

Leland H Cross

Senior Vice President,

Technical Operations

Research & Development

Dr Herman Ellman

Senior Vice President,

Clinical Development

Regulatory Affairs

Alvin Howard

Vice President,

Regulatory Affairs

Shareholder Services

Registrar for Ordinary Shares

Computershare Investor Services PLC

PO Box 82, The Pavilions

Bridgewater Road

Bristol BS99 7NH

Stock Information

Ordinary Shares

London Stock Exchange: GAL.L

Irish Stock Exchange: GAL

American Depositary Shares

NASDAQ: GALN

Depository for ADS/Notes

Bank of New York

101 Barclay Street

New York, NY 10286

Investor Inquiries

For investor information, please contact:

USA

Warner Chilcott, Inc.

100 Enterprise Drive

Rockaway, NJ 07866

Tel: +1 973-442-3200 or

800-521-8813

Email: ir@wclabs.com

International

Galen Holdings PLC

Seagoe Industrial Estate

Craigavon, Northern Ireland

BT63 5UA

Tel: +44 28 3833 4974

Email:

investorrelations@galenplc.com

Registered Office

Seagoe Industrial Estate

Craigavon, Northern Ireland

BT63 5UA

Registered Number

NI25836

Secretary

Anthony D Bruno

Website

www.galenplc.com

Stockbrokers

ABN AMRO Equities Ltd

Hoare Govett Ltd

250 Bishopsgate

London EC2M 4AA

Credit Suisse First Boston

One Cabot Square

London E14 4QJ

Merrill Lynch International

2 King Edward Street

London EC1A 1HQ

Goodbody Stockbrokers

Ballsbridge Park

Dublin 4

Registered Auditors

PricewaterhouseCoopers

Waterfront Plaza

8 Laganbank Road

Belfast BT1 3LR

Solicitors

Ashurst Morris Crisp

Broadwalk House

5 Appold Street

London EC2A 2HA

US Legal Advisors

Simpson Thacher & Bartlett

425 Lexington Avenue

New York, NY 10017

Financial Advisors

Merrill Lynch International

2 King Edward Street

London EC1A 1HQ

Principal Bankers

Bank of Ireland

Donegall House

7 Donegall Square North

Belfast BT1 5LU

 

            [LOGO]                     [LOGO]                [LOGO] GALN

                                                                    NASDAQ

     Irish Stock Exchange      London STOCK EXCHANGE                LISTED

<PAGE>

                              Financial Highlights

   [THE FOLLOWING TABLE WAS DEPICTED AS A BAR CHART IN THE PRINTED MATERIAL]

          Revenue                                   Operating Profit

   (pounds in millions)                  before amortisation & exceptional items

                                                  (pounds in millions)

48.9  67.0   86.0  182.7  201.6             14.0  19.4   24.1   54.9   70.6

'98   '99    '00    '01    '02              '98   '99    '00    '01    '02

o     Revenue totalled (pound)202 million

      --    79% of total revenue ((pound)160 million) represented pharmaceutical

            product sales, an increase of 26% over 2001

      --    US pharmaceutical product sales up 46% to (pound)118 million,

            compared to (pound)81 million in 2001

o     Operating profit (before amortisation and exceptional items) generated by

      pharmaceutical products business was (pound)64 million, an increase of 47%

      over 2001

o     Adjusted earnings per share of 32.2p versus 23.4p in 2001

o     Proposed final dividend brings total 2002 dividend to 3.0p versus 2.49p in

      2001

For US investors, please note that the Letter to Shareholders and associated

charts have been prepared in accordance with UK GAAP. Please refer to the Galen

Holdings PLC Form 20-F filed with the Securities and Exchange Commission for a

US$/US GAAP presentation.

Table of Contents

Letter to shareholders                                                         2

Operational review                                                             8

Board of directors                                                            14

Shareholder value                                                             15

Directors' report                                                             16

Report of the remuneration committee                                          20

Statement on corporate governance                                             22

Statement on going concern                                                    23

Statement of directors' responsibilities                                      23

Auditors' report                                                              24

Consolidated profit and loss account                                          25

Reconciliation of movements in shareholders' funds                            26

Consolidated statement of total recognised gains and losses                   26

Consolidated balance sheet                                                    27

Company balance sheet                                                         28

Consolidated cash flow statement                                              29

Notes to the financial statements                                             30

Five year summary                                                             63

Financial calendar                                                            64

Management and corporate information                                         IBC

<PAGE>

                             Letter to Shareholders

Financial Overview

During the year ended 30 September 2002, Galen experienced solid progress in the

building of the business, particularly in the United States, and continued

excellent financial performance. The Company recorded revenues of (pound)201.6

million, an overall increase of 10% over the previous year. Of these revenues,

79% were generated by our pharmaceutical products business and 21% by our now

discontinued pharmaceutical services businesses. Pharmaceutical product revenues

grew by an excellent 26% over the prior year. Nearly three-quarters of our

pharmaceutical revenues now arise in the United States reflecting the ongoing

success of Warner Chilcott, which was acquired in September 2000.

Gross profit for the financial year 2002 increased to (pound)140.3 million from

(pound)118.5 million in the prior year driven primarily by the growth in sales

of high margin pharmaceutical products in the United States, which more than

compensated for the reduction in revenues resulting from the disposal of our

pharmaceutical services businesses. Operating profit (before exceptional items

and amortisation of intangible assets and goodwill) rose to (pound)70.6 million,

a 28% increase over 2001. Operating expenses, other than from amortisation of

intangible assets and goodwill, increased modestly from (pound)63.6 million to

(pound)69.7 million in the period, reflecting higher research and development

spending of (pound)13.9 million this year versus (pound)9.2 million last year.

Operating margins also improved from 30% to 35% due to our exit from

pharmaceutical services and continued growth in the US pharmaceutical market.

Earnings per share, before exceptional items and amortisation of intangible

assets and goodwill, rose by 38% to 32.2p. During the 2002 financial year, we

generated cash of (pound)63.3 million from operations, which provides additional

support to our already strong balance sheet and enhances our ability to continue

the acquisition element of our expansion strategy.

These excellent results reflect the strength and continuing growth of our

underlying business and have encouraged your Board to recommend the payment of a

final dividend of 2p per ordinary share, which represents a total for the year

of 3p, an increase of 20% over the 2.49p declared for the previous year.

Corporate Activity

Galen is committed to delivering continued growth in its fast growing

pharmaceutical business. As part of our strategy to achieve this goal, we

acquired Warner Chilcott in September 2000, which afforded us access to the US

pharmaceutical market, where the Company has achieved significant growth and

where we expect to achieve significant future growth. To free up additional

resources for our ambitious growth plans and to improve our operating margins,

we took the decision to dispose of our pharmaceutical services businesses. The

divestment of our pharmaceutical services businesses during 2002 for a total

(pound)156.3 million, transforms Galen into a

 

              GALEN HOLDINGS 2002       Annual Report and Accounts

<PAGE>

pharmaceutical company with clear therapeutic focus and a strong presence in the

United States. Your Directors believe that the resources released in this

process will achieve a substantially enhanced return when invested in our

pharmaceutical business.

In March 2002, we completed the acquisition in the United States of Duricef(R),

a cephalosporin antibiotic, and Moisturel(R), a skin moisturising cream, from

Bristol-Myers Squibb for a cash consideration of $40.4 million. This acquisition

strengthens our product portfolio in dermatology in the United States and

highlights our strategy to utilise acquisition of products to build Galen's

positions in our core therapeutic areas. These recently acquired products

performed well in the second half of the financial year 2002 replacing earnings

lost by the divestiture of the pharmaceutical services businesses. Our corporate

development group continues to actively pursue acquisition, licensing and other

opportunities to further strengthen the Company.

During the year ended 30 September 2002, we retired $111.3 million of high yield

(12.625%) bonds inherited at the time of the Warner Chilcott acquisition,

leaving only $48.4 million of the original $200 million outstanding. This debt

reduction has improved the quality of our balance sheet and, as a result of the

associated reduction in interest charges, will provide an uplift in earnings.

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                                      focus

                                 IVR Technology

                               [GRAPHIC OMITTED]

The receipt of an approvable letter from the FDA for our estrogen replacement

IVR is a great achievement for the Galen team, both in the US and Northern

Ireland. The US is the most significant market for this product and we believe

that this innovative form of delivery will be well received by the patient. We

look forward to finalising labelling with the FDA and preparing our sales and

marketing team for launch.

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                                 RECORD RESULTS

 

                                       3

<PAGE>

                                CONTINUED GROWTH

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                                      focus

                                FOCUSED RESOURCES

                               Proven Track Record

o     26% increase in pharmaceutical product revenue

o     top performing products, Ovcon(R), Doryx(R) and Estrace(R) Cream,

      experience significant new prescription growth

o     recently acquired products, Duricef(R) and Moisturel(R), perform well

o     Menoring(R), our first IVR product for ERT, perform to expectations

o     Expected additions of Sarafem(R) and estrogen replacement IVR to the US

      marketed product portfolio hold significant potential

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

Sales and Marketing

During the year, we continued to expand the benefits of the acquisition of

Warner Chilcott. Pharmaceutical product revenues for the year were (pound)160.0

million, representing a 26% increase over the previous year. The United States

now accounts for 74% of our total pharmaceutical revenues. As market

opportunities in the United States exceed those in Europe and other territories,

the predominant focus for our pharmaceutical activities is now clearly the

United States. Our 226 person US salesforce continues to gain market share in

our core therapeutic areas (women's healthcare, dermatology and urology). For

the first nine months of calendar year 2002, new prescription growth for

Ovcon(R), Doryx(R) and Estrace(R) Cream were 27%, 65% and 6% respectively over

the same period in 2001.

In women's healthcare, Galen has products in two categories important to the

obstetrician and gynaecologist (OBGYN): contraception and hormone replacement

therapy (HRT). The combined US market for these product categories exceeds $4

billion in sales annually. Our oral contraceptive, Ovcon(R), has grown strongly

in the year and now enjoys a 2.3% share of the US oral contraceptives market.

This offers an excellent base for the launch of our line extension, for which a

New Drug Application (NDA) was accepted for filing by the US Food and Drug

Administration (FDA) in June 2002.

 

              GALEN HOLDINGS       2002 Annual Report and Accounts

<PAGE>

In estrogen replacement therapy (ERT), Estrace(R) Cream is indicated for the

treatment of the local symptoms of the menopause and is prescribed by both the

OBGYN and the urologist. Our Estrace(R) Tablets product remains the second most

widely prescribed ERT product in the United States. We do not actively promote

Estrace(R) Tablets because of generic competition and our strategic objective is

to maintain market position until the launch of our proprietary

second-generation tablet formulation.

In dermatology, our proprietary pelletised formulation of doxycycline, Doryx(R),

is now the most widely prescribed oral tetracycline for the treatment of acne.

Total Doryx(R) revenues for the year increased 103% over the prior financial

year. In January 2002, we launched a new 75 mg dosage strength for Doryx(R).

Doryx(R) 75 mg has performed well and we have experienced accelerated growth of

the Doryx(R) brand due to this new strength.

In the United Kingdom, we are continuing to focus our business towards women's

health and the discontinuation and disposal of less profitable non-core brands.

Menoring(R), our first intravaginal ring (IVR) product for ERT, has completed

its first year in the UK market and has performed to expectations. Our

promotional strategy is directed towards its establishment with hospital

specialists. Positive patient feedback from our early experience programme is

consistent with the high levels of patient acceptance of the product in our

clinical trial. Our proprietary anticholinergic, Regurin(R), for the treatment

of incontinence (licensed from Madaus AG, Cologne) has performed well in the

second year since its launch.

The key strength in our pharmaceutical business continues to be the success of

our sales and marketing team in the United States. We have a proven track record

of successful product launches, sustaining product growth, revitalising acquired

products and utilising precision marketing techniques to focus our resources to

achieve maximum return.

Research and Development

Building on the strength of our marketed products, we continue to strengthen our

investment in research and development. Investment in R&D for the year ended 30

September 2002 was (pound)13.9 million, which represented

 

                                       5

<PAGE>

a 51% increase over the previous year. Our R&D efforts are firmly focused on the

development of proprietary products for commercialisation in the United States,

which are based on drug delivery systems such as the IVR. We also pursue the

development of new products and line extensions in our core therapeutic areas

that complement and strengthen our pharmaceutical business.

In women's health, we have programmes in contraception, estrogen replacement

therapy, infection control and prenatal vitamins. These involve a number of

proprietary technologies, including the IVR. During the year, we submitted NDAs

to the FDA for our intravaginal ring ERT product and Ovcon(R) line extension.

The NDA for our first IVR estrogen replacement therapy was accepted for filing

in February 2002. The receipt of an approvable letter for this product in

October 2002 represents a milestone in the history of the Company and reflects

the dedication and ability of our entire technical staff. Our second generation

Estrace(R) Tablet is in Phase III trials in the United States and we anticipate

submission of the NDA in mid 2003. We continue to make progress with a

metronidazole releasing IVR for bacterial vaginosis, which is our first

application of the IVR technology for infection control. This product entered

Phase III in the United States in November 2002. Our testosterone IVR is in

Phase II, where we are investigating experimental models to assess treatments

for female sexual dysfunction.

In dermatology, following the launch of Doryx(R) 75 mg in January 2002, we are

developing new and innovative delivery systems for the antibiotic to provide the

next generation of products in this category.

Galen's People

At the conclusion of our 2002 financial year, Galen had 960 employees, including

298 US based employees, which represents a substantial decrease from last year's

number, reflecting the sale of our pharmaceutical services businesses. Since the

IPO in 1997, Galen Holdings has consistently produced results in line with or in

excess of expectations. This exceptional performance would be impossible without

the skills and dedication of all colleagues within the Galen organisation. In

particular, we recognise our non-executive Directors whose able advice and

counsel is of major importance to the Company's ongoing success. In February

2002, we announced the resignation of Tom Lynch from our Board. We thank Tom for

his work during his tenure as a non-executive Director at Galen and wish him

well in the future.

Outlook

The year ended 30 September 2002 has seen much change at Galen Holdings. The

sale of our pharmaceutical services businesses completed our transformation into

a pharmaceutical company and released resources, which will be deployed

 

              GALEN HOLDINGS       2002 Annual Report and Accounts

<PAGE>

to achieve greater return. Our strategy for growth remains constant and

comprises three elements:

o     the continued organic growth of our pharmaceutical business;

o     the internal development of new proprietary products; and

o     the acquisition of products that complement and strengthen our existing

      activities.

During the year, we have reported success in all elements of this strategy as we

continue to leverage our position in the marketplace. We once again report

record sales achievement and healthy growth. Our R&D programme has grown;

however, it remains sharply focused on maximising economic return. We achieved a

milestone in the history of the Company when we received an approvable letter

from the FDA for our first IVR product in the United States and we continue to

strengthen our pipeline with new projects. We continue to evaluate acquisitions

to complement our existing product offerings in our core therapeutic areas.

We approach 2003 with much confidence.

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                                      focus

                                   Leadership

                                [PHOTOS OMITTED]

                                  /s/ John King

                                  Dr John King

                               Executive Chairman

                             /s/ Roger Boissonneault

                               Roger Boissonneault

                             Chief Executive Officer

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

                                  OPPORTUNITIES

 

                                       7

<PAGE>

FOCUS

[PHOTO OMITTED]

Izumi Hara

Anthony D Bruno

Our Corporate Development team evaluates and executes acquisition opportunities.

Operational Review

Galen continued to make significant progress in executing its growth strategy

during the financial year ended 30 September 2002. We set the following targets

for 2002: to sharpen our focus on our fast growing pharmaceutical business by

divesting our pharmaceutical services businesses, to continue to deliver sales

and earnings growth with our existing products, to advance promising products in

our pipeline and to make an acquisition.

Over the course of financial year 2002, we sold our pharmaceutical services

businesses for a total of (pound)156.3 million. These sales, together with

increased profits and the proceeds from our July 2001 offering further

strengthened our Company's net cash position to (pound)165.8 million at

financial year end, affording us strong financial standing and flexibility and

permitting us to focus intently on investing in our profitable pharmaceutical

business through organic growth, research and development and selective

acquisitions.

Our salesforce remains the centrepiece of our forward growth strategy and

continues to produce excellent results. Due to the success of our salesforce,

our proprietary pelletised formulation of doxycycline, Doryx(R), is now the most

widely prescribed oral tetracycline for the treatment of acne. Doryx(R) 75 mg,

launched by the Warner Chilcott salesforce in January, has been performing well

and we experienced accelerated growth of the Doryx(R) brand due to this new

strength. Our oral contraceptive, Ovcon(R), has grown strongly in the year, and

now enjoys a 2.3% share of the US oral contraceptives market, offering an

excellent base for the launch of our line extension, for which a New Drug

Application (NDA) was accepted for filing by the US Food and Drug Administration

(FDA) in June 2002. Our operating profits (before exceptional items and

amortisation) in financial year 2002 increased by 28% over financial year 2001.

We were pleased to have made notable progress with our pipeline during the year.

Three weeks following the close of our 2002 financial year, on 21 October 2002,

we announced the receipt of an approvable letter from the FDA for our estradiol

acetate intravaginal ring, sold in the United Kingdom as Menoring(R). We believe

this product holds great promise for patients in the United States, and, as this

2002 annual report went to press, we were working with the FDA to finalise

labeling requirements in preparation for the product's commercialisation in the

United States.

STRATEGY

Execution of the Company's growth strategy included the March 2002 acquisition

from Bristol-Myers Squibb of two profitable dermatology products: the antibiotic

Duricef(R) and the skin cream Moisturel(R). Approaching 2003 and beyond, we are

confident that, supported by salesforce promotion, we can continue to grow sales

of these products.

As we enter the 2003 financial year, we are pleased with the leadership provided

by our senior management team in respect of our sharpened focus on growing our

Company, through the development of new products and strategic acquisitions.

During the last three years, our team has consistently delivered growth in

revenues, profit and earnings per share and completed (pound)404 million in

pharmaceutical acquisitions. As we continue to evaluate potential product and

company acquisitions, we are very pleased to have a strong corporate development

team, led by two executives with substantial experience in the assessment and

negotiation of pharmaceutical acquisitions: Anthony D Bruno, Galen's Senior Vice

President, Corporate Development and General Counsel, and Izumi Hara, the

Company's Deputy General Counsel. With 40 years of highly relevant experience

between them, first with top New York City law firms, then with Warner-Lambert

Company, where both were actively involved in the evaluation, analysis,

negotiation and execution of pharmaceutical acquisitions, dispositions and

strategic alliances, Mr Bruno and Ms Hara will continue to be heavily engaged in

evaluating possible acquisition opportunities that will add shareholder value to

our Company and continue to build Galen's strength in our target markets.

On 9 December 2002, we announced that we entered into a conditional agreement to

acquire the US sales and marketing rights to Sarafem(R) from Eli Lilly and

Company ("Lilly"). The agreement is conditional on US regulatory approval.

Sarafem(R) is an FDA approved prescription treatment for pre-menstrual dysphoric

disorder, a severe form of pre-menstrual syndrome. Launched by Lilly in 2000,

Sarafem(R) generated sales of approximately $85 million in the United States in

the year ended 31 December 2001.

 

                                       8

<PAGE>

                                   Galen Focus

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

                                       FPO

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

                               [GRAPHIC OMITTED]

                              direction

                                      [PHOTO OMITTED]

                                      Carl Reichel

                                      President, Pharmaceuticals

 

                                       9

<PAGE>

                                     FOCUS

                               [GRAPHIC OMITTED]

                                      FPO

                                    STRENGTH

Galen's sales and marketing capabilities continue to be a key contributor to our

success. Galen's sales and marketing personnel, numbering 259 in the United

States and 55 in the United Kingdom, continue to gain market share in our core

therapeutic areas of women's healthcare, dermatology and urology.

In the United States, which generated 74% of our pharmaceutical revenue in

financial year 2002, our sales force strategy is focused on employing precision

marketing techniques to market and promote our key branded products to high

volume prescribing physicians. These techniques require comprehensive internal

analysis of actual prescription data to determine the most effective allocation

of our sales and marketing resources and enable us to expand market share in

markets that represent the most promise. Our precision marketing team, together

with their sales and marketing colleagues, analyse prescription data and develop

strategies and tactics to maximise growth in our sales and market share. By

employing these precision marketing techniques, Galen, through Warner Chilcott,

has been able to sustain product growth, revitalise acquired products and

successfully launch new products in the United States.

Due to the success of our salesforce, our proprietary pelletised formulation of

doxycycline, Doryx(R), is now the most widely prescribed oral tetracycline for

the treatment of acne. Total Doryx(R) revenues increased 103% over the prior

financial year. Doryx(R) 75 mg, launched by the Warner Chilcott salesforce in

January,

 

                                       10

<PAGE>

                           Sales & Marketing Expertise

                               [GRAPHIC OMITTED]

                                      FPO

has been performing well and we experienced accelerated growth of the Doryx(R)

brand due to this new strength. Our oral contraceptive, Ovcon(R), has grown

strongly in the year, achieving a 29% increase over last year. Ovcon(R) now

enjoys a 2.3% share of the US oral contraceptives market and offers an excellent

base for the launch of our line extension, for which an NDA was accepted for

filing by the FDA in June 2002.

At Galen, we have sought to employ and develop some of the most sophisticated

and successful sales and marketing personnel in the pharmaceutical business. The

ability of our salesforce to effectively employ precision marketing techniques

lies at the core of our marketing success and, year over year, along with the

clinical value of our products, is the key generator of our pharmaceutical sales

growth. To this end, we provide advanced sales training opportunities to our top

sales representatives several times each year, so that our top sales

representatives have an opportunity to continue to improve their understanding

and the execution of these techniques.

Our key branded products include the oral contraceptives Ovcon(R) 35 and

Ovcon(R) 50; Estrace(R) Cream, a urogenital atrophy therapy; Doryx(R) 100 mg and

Doryx(R) 75 mg, an antibiotic for the treatment of acne.

[PHOTOS OMITTED]

Ken Kayel

Nicola Crawford

A Dominick Musacchio

Our precision marketing yeam, together with sales and marketing colleagues,

analyse prescription data and develop strategies to maximise growth.

(top right)

Douglas Popper

Jennifer McCusker

Mitch Lazar

Advanced training provides top sales representatives with opportunities to

further develop their precision marketing skills.

 

                                       11

<PAGE>

                             Research & Development

                               [GRAPHIC OMITTED]

 

                                     -----

                                      FPO

                                     -----

innovation

[PHOTO OMITTED]                                           [PHOTO OMITTED]

IVR Technology                                               OVCON(R)

                                 [PHOTO OMITTED]

                              R&D facility, Larne,

                              Northern Ireland

<PAGE>

                                      FOCUS

Building on the strength of our marketed products, we have increased our

investment in identifying and developing novel drug delivery technologies,

particularly our intravaginal ring technology, new pharmaceutical products and

improvements to our marketed products. In the 2002 financial year, our research

and development commitment grew a considerable 51% over 2001, to (pound)13.9

million.

As was the case in financial year 2002, we will continue to focus our research

and development in ways that represent the best opportunities for return on

investment and, ultimately, the interest of long-term shareholder value. This

means that our research and development efforts will focus extensively on the

development of additional applications for our existing proprietary technologies

and new products that are complementary to our core therapeutic areas,

particularly line extensions to improve our existing branded products in the

United States.

This approach has proved fruitful for Galen in the recently concluded financial

year, as we made notable progress in moving several pipeline products toward

possible commercialisation in the United States:

      o     In one of the most significant developments in Galen's product

            development history, we received an approvable letter from the FDA

            in October 2002 in reference to the NDA for our first IVR for

            estrogen replacement therapy in the United States. We are now

            working with the FDA to finalise labeling requirements and expect

            that this promising product will soon become commercially available

            in the United States.

      o     In June 2002, our NDA for a line extension to our oral contraceptive

            product Ovcon(R) was accepted for filing by the FDA.

      o     We also continued to make progress with our second generation

            Estrace(R) Tablets, an estrogen replacement therapy. Currently in

            Phase III trials in the United States, we anticipate submission of

            an NDA to the FDA for this product in mid-2003.

      o     Also during the recently completed financial year, drawing further

            on our research and development work on the IVR, we advanced several

            new and promising applications for this technology. Phase III trials

            for our metronidazole-releasing IVR for bacterial vaginosis, our

            first application of IVR technology for potential infection control,

            began in November 2002. We also see promise for utilising the IVR

            for the delivery of testosterone for possible treatment of female

            sexual dysfunction. During the recently completed financial year,

            our testosterone IVR continued in Phase II trials.

      o     Finally, in the dermatology product category, building on the

            success of our January 2002 launch of Doryx(R) 75 mg, we continue to

            assess new delivery systems for the antibiotic to provide the next

            generation of products in this category.

[PHOTOS OMITTED]

Olu Aloba, PhD

Ileana C Brown

Michael Liang, PhD

Kelly Smith, MD

Rosa Lee, PharmD

R&D colleagues, together with Regulatory Affairs and Medical Affairs colleagues,

focus on advancing our pipeline products.

                                   POTENTIAL

 

                                       13

<PAGE>

                               Board of Directors

[PHOTO OMITTED]

Dr John King (53)  Executive Chairman

Dr King joined Galen in 1979 as Technical Manager responsible for the

development and registration of new products. Dr King was appointed Technical

Director in 1981, Managing Director in 1984, Chief Executive in 1991 and

Executive Chairman in 2000. Prior to joining the Group he was a lecturer in the

Pharmacy Department of The Queen's University, Belfast. He obtained a PhD in

1974 and registered with the Pharmaceutical Society of Northern Ireland in 1976.

                                   LEADERSHIP

[PHOTO OMITTED]

Roger Boissonneault (54)  Chief Executive Officer

Roger Boissonneault serves as Chief Executive Officer for Galen. He previously

served as President and Chief Operating Officer of WC plc since 1996, serving as

a director since 1998. From 1976 to 1996 Mr Boissonneault served in various

capacities with Warner-Lambert Company, including Vice President, Female

Healthcare, Director of Corporate Strategic Planning, and Director of

Obstetrician/Gyneacologist Marketing. Mr Boissonneault has BA in Biology from

the University of Connecticut and an MBA from Rutgers University.

[PHOTO OMITTED]

Mr Geoffrey Elliott (50)  Chief Financial Officer

Mr Elliott qualified as a Chartered Accountant in 1984. After a period in

industry and management consultancy, he joined the accountancy practice of Magee

Todd & Vaughan, becoming a partner in 1988. He was appointed Chief Financial

Officer of Galen in 1993.

[PHOTO OMITTED]

Dr Harold Ennis OBE (72)  Non-Executive Director

Dr Ennis was appointed to the Board in May 1996. He is the Chairman of Creative

Composites Limited, Vice Chairman of Trade and Business Development Body and a

non-executive director of a number of private companies. Previously he was a

member of the Northern Ireland Economic Council and the Industrial Development

Board for Northern Ireland.

[PHOTO OMITTED]

Mr David Gibbons MBE (64)  Non-Executive Director

Mr Gibbons was appointed to the Board in March 1997. He was previously Chairman

and Managing Director of Abbott Laboratories UK and was a board member of The

Association of the British Pharmaceutical Industry and Chairman of the

Pharmaceutical Price Regulation Scheme Committee. He is non-executive Chairman

of Nexan Group Limited, MedNova Limited and Genosis Inc.

[PHOTO OMITTED]

Dr Michael Carter (64)  Non-Executive Director

Dr Carter was appointed to the Board in May 1998. He has 25 years pharmaceutical

industry experience with both Roche and Zeneca, acting as a board member of

Salick Health Care in the United States. He holds a triple fellowship of the

Royal Pharmaceutical Society, the Royal College of Physicians of Edinburgh and

the Faculty of Pharmaceutical Physicians of the Royal Colleges. He is a

non-executive director of Provensis Limited, Micromet AG, Kudos Pharmaceuticals

Limited, Cancervax Inc and Genosis Inc and non-executive Chairman of Metris

Therapeutics Limited.

 

                                       14

<PAGE>

                                Shareholder Value

Galen has undergone significant changes in 2002. The sale of the pharmaceutical

services businesses completes our transformation into a pharmaceutical product

company. Galen approaches the 2003 financial year with a continuing and strong

commitment to building value for our shareholders. Like most publicly traded

companies, Galen's market capitalisation was affected negatively during the 2002

financial year by the bearish global economic climate. Nonetheless, our Company

has continued to deliver excellent financial performance and has made notable

and important progress that we believe positions us well to build shareholder

value in the year and years to come.

Our excellent financial results reflect the strength and continuing growth of

our pharmaceutical business and have resulted in an increase in EPS to 32.2p

(before exceptional items and amortisation), a 38% increase over the 2001

financial year and dividend growth of 20% from 2.49p in financial year 2001 to

3p in financial year 2002.

Galen also ended the 2002 financial year with a vastly improved balance sheet,

highlighted by our net cash position of (pound)165.8 million, compared to

(pound)18 million at the end of 2001. This means that Galen enters 2003 on a

strong and stable financial footing, positioned to continue investing in both

organic growth and, more particularly, growth by acquisition.

Galen shares are traded in three of the world's leading stock markets, the

London Stock Exchange in the United Kingdom, The NASDAQ Stock Markett in the

United States and the Irish Stock Exchange in Ireland. Galen is pleased to now

receive research coverage by 13 financial institutions. In the United States,

Galen is covered by CIBC and Ryan, Beck. In the United Kingdom, Galen is covered

by ABN Amro, Credit Suisse First Boston, ING Barings, Merrill Lynch, Nomura, UBS

Warburg and WestLB Panmure. In Ireland, Galen is covered by Davy Stockbrokers,

Goodbody Stockbrokers, Merrion Stockbrokers and NCB Stock brokers. We are

hopeful that this research coverage will add notably to our exposure among

prospective investors.

Galen also continues to maintain a strong and ongoing commitment to openness

with our shareholders regarding our business and forward strategies. Our

website, www.galenplc.com, is a rich source of information for shareholders, and

offers shareholders and prospective shareholders the opportunity to be added to

our mailing list.

Finally, we extend our appreciation to the continued confidence of our

investors, and we reiterate our commitment to maintain our sharp focus on

maximising growth and shareholder value.

                                   COMMITMENT

 

                                       15

<PAGE>

Directors' report for the year ended 30 September 2002

The directors present their report and the audited financial statements for the

year ended 30 September 2002.

Principal activities

The activities of the Group consist of the development, manufacture and supply

of branded prescription pharmaceutical products. During the year the Group

disposed of its pharmaceutical services operations. The activities of the

holding company consist of the management of its investments in its

subsidiaries.

Review of business

The consolidated profit and loss account for the year is set out on page 25. A

review of business during the year and of the future development of the Group is

contained in the Letter to Shareholders and the Operational Review accompanying

this report.

Dividends

An interim dividend of 1p per share amounting to (pound)1,902,000 (2001: 0.83p

per share--(pound)1,351,000) was paid during the year. The directors recommend

payment of a final dividend for the year of 2p per share amounting

to (pound)3,662,000 (2001: 1.66p per share--(pound)3,143,000).

Group research and development activities

The Group is strongly committed to research and development activities in order

to secure and enhance its market position. Expenditure in the year totalled

(pound)13.9 million (2001: (pound)9.3 million).

Directors

The directors of the Company during the year were:

Dr J A King            R G Elliott       Dr H A Ennis         D Gibbons

R M Boissonneault      A D Armstrong     Dr M G Carter        T G Lynch

      In accordance with the Articles of Association, Dr J A King, Dr H A Ennis

and Dr M G Carter will be retiring by rotation at this year's Annual General

Meeting and, being eligible, will be proposed for re-election. Dr King has a

service agreement with the Company terminable on twelve months notice given by

either party to the other. Dr Ennis and Dr Carter have letters of appointment

with the Company pursuant to which their appointment as non-executives may be

terminated at the will of either party.

      AD Armstrong resigned as director on 9 January 2002 and TG Lynch resigned

on 13 February 2002.

Directors' interests in shares of the Company

The interests of the members of the Board of Directors at 30 September 2002 in

the shares of the Company are set out below.

      All such interests are beneficially owned.

                                                            % of

                                       Ordinary         Ordinary       Ordinary

                                      shares of           shares      shares of

                                       10p each      outstanding       10p each

                                        30.9.02          30.9.02        30.9.01

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

J A King                             14,475,306              7.7     14,475,306

R M Boissonneault                        20,792                *         20,792

R G Elliott                           5,372,271              2.9      5,372,271

H A Ennis                               118,879                *        105,279

M G Carter                                   --               --             --

D Gibbons                                    --               --             --

                                     ==========================================

*less than 1%

 

                                       16

<PAGE>

Changes in directors' interests since the year end

There have been no changes in the interests of directors between the year end

and 6 December 2002.

Interests in share options

Details of options held by members of the Board of Directors at 30 September

2002 are set out below:

<TABLE>

<CAPTION>

                                                                                                    Exercise   Earliest

                                                                   At       Granted         At         price   exercise       Expiry

                                                              1.10.01       in year    30.9.02       (pound)       date         date

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

<S>                                                            <C>          <C>         <C>           <C>      <C>          <C>

Approved Executive Share Option Scheme

  (over ordinary shares)

R G Elliott                                                     6,703            --       6,703       4.475      5.2.02       5.2.09

                                                              ======================================================================

Unapproved Executive Share Option Scheme

  (over ordinary shares)

J A King                                                       75,636            --      75,636       4.475      5.2.02       5.2.09

                                                               38,614            --      38,614       5.050    30.12.02     30.12.09

                                                               50,000            --      50,000       8.225     4.12.03      4.12.10

                                                                   --       100,761     100,761       7.225    19.11.04     19.11.11

R G Elliott                                                    56,890            --      56,890       4.475      5.2.02       5.2.09

                                                               29,703            --      29,703       5.050    30.12.02     30.12.09

                                                               50,000            --      50,000       8.225     4.12.03      4.12.10

                                                                   --       157,055     157,055       7.225    19.11.04     19.11.11

                                                              ======================================================================

<CAPTION>

                                                                                                               Earliest

                                                       At     Granted     Exercised          At    Exercise    exercise       Expiry

                                                  1.10.01     in year       in year     30.9.02       price        date         date

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

<S>                                                <C>         <C>               <C>     <C>         <C>        <C>         <C>

Options assumed by Galen upon purchase of

  Warner Chilcott (a)

R M Boissonneault                                  18,750          --            --      18,750      $ 1.60     29.9.00     31.10.06

                                                   75,000          --            --      75,000      $32.00     29.9.00     31.10.06

                                                   15,625          --            --      15,625      $15.63     29.9.00     24.01.08

                                                   25,000          --            --      25,000      $13.00     29.9.00      11.2.09

                                                   37,500          --            --      37,500      $11.30     29.9.00      14.8.09

                                                  ==================================================================================

2000 US option scheme (a)

R M Boissonneault                                  62,500          --            --      62,500      $49.35      1.4.02      29.9.10

                                                   23,500          --            --      23,500      $46.75         (b)      4.12.10

                                                       --      50,000            --      50,000      $40.75         (c)     19.11.11

                                                  ==================================================================================

</TABLE>

(a)   over American Depositary Shares--four Ordinary Shares equal one American

      Depositary Share.

(b)   options vest quarterly over four years beginning 1 October 2000.

(c)   options vest quarterly over four years beginning 1 October 2001.

      No other directors have been granted share options in the shares of the

Company or other Group companies.

      The market price of the Company's shares on the London Stock Exchange at

the end of the financial year was (pound)3.68 (2001: (pound)6.43) and the range

of market prices during the year was between (pound)2.75 and (pound)7.75 (2001:

(pound)4.95 and (pound)9.77). The market price of the Company's American

Depositary Shares on NASDAQ(R) at the end of the financial year was $22.89

(2001: $38.20) and the range of market prices during the year was between $16.54

and $45.75.

      There were no contracts of significance with the Company or any of its

subsidiaries subsisting during, or at the end of the financial year, in which a

director of the Company was materially interested.

 

                                       17

<PAGE>

Directors' report for the year ended 30 September 2002

Substantial shareholdings

As at 6 December 2002 the Company had received notification of the following

beneficially owned interests of 3% or more in its ordinary shares:

                                                            Number of

                                                               shares          %

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

A J McClay                                                 16,986,469        9.0

J A King                                                   14,475,306        7.7

Standard Life Investments                                   7,527,121        4.0

Elan International Services Limited                         7,119,200        3.8

                                                           =====================

      The Company is not directly or indirectly owned or controlled by another

corporation or by a government or person. All shareholders have the same voting

rights.

Share capital

Details of the movements in the Company's share capital during the year are

given in note 21 to the financial statements.

      During the year, in order to create a more efficient capital structure,

enhancing earnings and net asset value per share, the Company exercised the

authority granted by shareholders on 19 February 2002 to make market purchases

of its own shares. In total 2,050,000 shares representing 1.1% of the issued

share capital were repurchased at a total cost of (pound)8,001,000 (nominal

value (pound)205,000). The average price paid was (pound)3.90 per share, and

costs of (pound)20,000 were incurred.

      On 29 September 2000 the Company's American Depositary Shares ("ADS") were

listed on NASDAQ(R) and were available in the United States through an American

Depositary Receipt program established pursuant to separate Depositary

Agreements entered into by the Company and The Bank of New York, as depositary.

One ADS represents four ordinary shares. The total number of ADSs outstanding on

30 September 2002 was 4,146,928.

Corporate social responsibility policy

Galen is committed to the development, marketing and manufacturing of

pharmaceutical products. We recognise that our business activities have an

influence on the environmental and social spheres as well as the economic, and

we accept that we have a duty to carry out these business activities in a

socially responsible manner.

      Our current initiatives promote an effective socially responsible

approach. The practices, set out below, establish how we will continue to

fulfill our duty in the future. We will:

o     meet or exceed legal requirements or regulations and we will aim to

      satisfy international agreements, where these are relevant to our

      business;

o     create a culture where all our staff will be informed of their individual

      responsibility, and will be encouraged to consider social, environmental

      and ethical issues as an everyday part of their role;

o     create a culture where social considerations are integrated into all

      activities across the business;

o     conduct business as a responsible corporate member of society committed to

      continual improvement in all aspects of our performance;

o     provide a safe and healthy work environment for all our employees, where

      we can work to eliminate all injuries and incidents;

o     economise on the use of natural resources and work to minimise the impact

      on the environment;

o     provide information on our policies and communicate openly with all

      interested parties;

o     ensure managers shall have processes for consulting with employees on

      social responsibility matters in order to encourage their involvement and

      commitment and to provide them with information;

o     select key suppliers after considering their approach to their social

      responsibilities, to ensure that competent partners are selected who

      comply with all appropriate legislation or regulations;

o     ensure that no applicant or employee either directly or indirectly is

      subjected to unlawful discrimination or harassment on account of or based

      on their religious beliefs, political opinion, sex, disability, marital

      status, age, race, colour, national origin or veteran status; and that no

      applicant or employee is placed at a disadvantage by requirements or

      conditions which cannot be shown to be relevant to performance. Our policy

      is to give full and fair consideration to disabled workers for those

      vacancies that they are able to fill. All necessary assistance with

      initial training courses is given. Arrangements are made, whenever

      possible, for retraining employees who become disabled, to enable them to

      perform work identified as appropriate to their aptitudes and abilities.

 

                                       18

<PAGE>

Employee involvement

Group policy is to consult and discuss with employees those matters likely to

affect employees' interests. Employee share schemes have been introduced as a

means of further encouraging the involvement of employees in the Group's

performance.

Political and charitable contributions

The Group made charitable donations amounting to (pound)22,000 (2001:

(pound)27,019) during the year. No donations for political purposes were made

during the year.

Creditor payment policy

In general, the Group agrees payment terms with each supplier at the start of

business with that supplier and seeks to abide by those terms whenever it is

satisfied that the supplier has provided the goods or services in accordance

with the agreed terms and conditions. It does not have a standard or code which

deals specifically with the payment of suppliers.

      The Group's average creditor payment period at 30 September 2002 was 83

days (2001: 74 days).

Auditors

The auditors, PricewaterhouseCoopers, have indicated their willingness to

continue in office, and a resolution concerning their re-appointment will be

proposed at this year's Annual General Meeting.

Annual General Meeting

The Annual General Meeting of the Company will be held on 18 February 2003 at

10.00 am at Malone House, Barnett Demesne, Belfast.

      Your directors consider that there may be occasions when it might be

desirable to reduce the issued ordinary share capital of the Company by

purchases in the market and accordingly, a special resolution will be proposed

at the Annual General Meeting as special business to authorise the Company to

make purchases of up to a maximum in aggregate of 27,983,357 Ordinary Shares of

10p each in the capital or, if less, 14.9% of its issued ordinary share capital

at the date of Annual General Meeting. The Directors would only exercise the

power to effect the purchase by the Company of its own shares at price levels

and in circumstances which they consider to be in the interests of the

shareholders, after taking into account the Group's overall financial position,

and which, in particular would lead to a beneficial impact on the earnings per

share of the Company. In any event, no purchase will be made which would

effectively alter the control of the Company without the prior approval of the

shareholders in general meeting.

By order of the Board

 

Anthony D Bruno

Secretary

Craigavon

6 December 2002

 

                                       19

<PAGE>

Report of the remuneration committee

The Remuneration Committee was comprised of the following directors during the

year:

D Gibbons (Chairman of the Committee)       Dr H A Ennis         Dr M G Carter

Role of the Committee

The primary function of the Committee is to determine remuneration and other

terms of employment for the executive directors and senior employees, having

regard to performance. The Committee has given full consideration to those

principles and provisions of the Combined Code which relate to directors'

remuneration.

      The Committee has sought independent external advice on the setting of

      executive remuneration. 

      In setting remuneration policy the Committee considers a number of factors

      including:

(a)   the basic salaries and benefits available to executive directors of

      comparable companies;

(b)   the need to attract and retain directors of an appropriate calibre;

(c)   the need to ensure executive directors' commitment to the continued

      success of the Group by means of incentive schemes.

Remuneration policy for executive directors 

Remuneration policy for executive directors is to:

(a)   have regard to the directors' experience and the nature and complexity of

      their work in order to pay a competitive salary that attracts and retains

      management of the highest quality;

(b)   link individual remuneration packages to the Group's performance;

(c)   provide a competitive package of employment related benefits.

Salaries and benefits

The Remuneration Committee meets at least once a year in order to consider and

set the annual salaries for executive directors, having regard to personal

performance and independently compiled salary survey information.

Long-term benefits

The Committee considers that share ownership by directors and employees

strengthens the link between their personal interests and those of shareholders.

This is achieved through the operation of the following share schemes:

(i)   The Galen Approved Executive Share Option Scheme and the Galen Unapproved

      Executive Share Option Scheme Options under these schemes are granted on

      the recommendation of the Remuneration Committee. Options may be granted

      over unissued shares or shares held in a trust. Options granted will be

      subject to such objective performance conditions as the Committee sees fit

      and which must be fulfilled before the options can be exercised.

(ii)  The Galen Savings Related Share Option Scheme This scheme is open to all

      UK employees who have been with the Group for at least one year. The

      directors have discretion to include other employees. Options may be

      granted over unissued shares or shares held in a trust. All options must

      be linked to a contractual savings scheme with a savings institution

      nominated by the directors and approved by the Inland Revenue.

(iii) The Galen 2000 US Option Scheme Under this scheme both incentive stock

      options and non-qualified stock options may be granted to eligible

      employees of the Group's US subsidiaries at the discretion of the

      Remuneration Committee.

 

                                       20

<PAGE>

The Galen Employee Benefit Trust

The Employee Trust was established by deed dated 10 June 1997 between Dr McClay

and Galen Trustees Limited, and on 27 June 1997 Dr McClay gifted the equivalent

of 5,000,262 ordinary shares to the Trust. Dr McClay cannot be a beneficiary of

the Trust. Its purpose is to facilitate and encourage the ownership of shares by

or for the benefit of eligible employees including directors. The Trustees may

consider any recommendations made to them by the Remuneration Committee on

behalf of the Board.

Remuneration of non-executive directors

The remuneration of non-executive directors is determined by the Board.

Directors' detailed emoluments

Details of individual directors' remuneration are set out in note 11 to the

Group financial statements.

Non-executive directorships

The Remuneration Committee believes that the Company can benefit from executive

directors accepting appointments as non-executives and, as a consequence, allows

them to hold limited appointments as non-executive directors. Any fees related

to such employment may be retained by the director concerned at the discretion

of the Remuneration Committee.

Pensions

Dr King and Mr Elliott are currently members of defined contribution schemes

operated by the Group. Mr Boissonneault participates in the Warner Chilcott

401(k) Savings Plan.

Contracts of service

All of the executive directors have contracts of service which can be terminated

by either party with a notice period of twelve months. The contract of service

with Mr. Boissonneault further provides that should the contract be terminated

pursuant to a change of control (as defined in the contract) the severance

payment due to Mr. Boissonneault will be equal to his base salary, target bonus

and benefits for a period of eighteen months. The appointment terms of the

non-executive directors are at the will of the parties, but are envisaged to

last for three years, following which they are reviewed annually. The Committee

will, where it considers it to be appropriate, apply the principle of mitigation

to any compensation payable on the termination of service contracts.

On behalf of the Board

 

D Gibbons

Chairman, Remuneration Committee

6 December 2002

 

                                       21

<PAGE>

Statement on corporate governance

The Board of Directors believes that the business of the Group should be

conducted according to the highest legal and ethical standards, and is committed

to a system of sound corporate governance. The Board has applied all the

Principles of Good Governance set out in the Combined Code and considers that

all of the provisions of the Code of Best Practice have been complied with

during the year.

      The following paragraphs, together with the Report of the Remuneration

Committee on pages 20 to 21, demonstrate how the principles of the Combined Code

have been applied.

The Board

The Board currently comprises three executive directors and three independent

non-executive directors. The Board meets regularly to review Group strategy and

trading performance, assess the adequacy of funding and formulate policy on key

issues. It has a schedule of matters reserved to it for decision. The Board is

supplied with timely and relevant information to enable it to properly discharge

its duties.

      Dr Ennis is the senior independent non-executive director.

Board committees

An Audit Committee and a Remuneration Committee have operated throughout the

year. The Audit Committee at present consists of the Group's three independent

non-executive directors: Dr Ennis, Mr. Gibbons and Dr Carter. The Audit

Committee, which is chaired by Dr Ennis, meets at least four times a year and

assists the Board in ensuring that the Group's published financial statements

give a true and fair view and in ensuring that reliable internal financial

information is available for decision making. It also reviews the suitability

and effectiveness of the Group's internal controls.

      The Audit Committee reviews the findings of the external auditors and

reviews key accounting policies and judgments. It is also responsible for the

appointment of the Group Internal Auditor and recommends to the Board the

appointment of the external auditors and the level of their audit and non-audit

remuneration. The Audit Committee reviews the scope and results of each audit

and its cost effectiveness. It also monitors the objectivity and independence of

the auditors. The Committee monitors the nature and extent of non-audit services

and seeks to maintain objectivity and value for money. The Committee has written

terms of reference.

      The Remuneration Committee consists of the three non-executive directors

and is chaired by Mr. Gibbons. The Committee meets at least once a year. The

report of the Remuneration Committee is set out on pages 20 to 21.

      The Board, as a whole, functions as a Nomination Committee under the

chairmanship of Dr Ennis.

Internal controls

The Board is responsible for the Group's system of internal controls. It should

be recognised that such a system can provide only reasonable and not absolute

assurance against material misstatement or loss. The key features of the

systems, which have been established, are set out below.

Control environment

The Group's control environment is the responsibility of its directors and

managers at all levels. The Group's organisational structure has clear lines of

responsibility, and operating and financial responsibility for subsidiary

companies is delegated to subsidiary boards.

Information systems and financial reporting

The Group operates a comprehensive budgeting and reporting system that, as a

matter of routine, compares actual out-turn to budget. Management accounts are

compiled on a monthly basis, and variances from plan are investigated and

revisions to forecasts made. Cash flow budgets and forecasts are prepared on a

regular basis to ensure that the Group has adequate funds and resources for the

fore seeable future. The Audit Committee reviews all financial statements to be

published externally to ensure they provide a meaningful appraisal of the

Group's performance and financial position.

Main control procedures

Divisional management establishes control procedures in response to any key

risks identified and reports whether its key controls have functioned

effectively. Standard financial control procedures operate throughout the Group

to ensure the integrity of its financial statements, and the Board has

established clearly defined procedures for the authorisation of capital

expenditure.

 

                                       22

<PAGE>

Monitoring system used by the Board

The Board reviews and approves budgets and monitors the Group's performance

against those budgets monthly. Variances from the expected outcome are

investigated and where lapses in internal control are detected, these are

rectified. The Group's cash flow is also monitored monthly compared to forecast.

      The Board reviews the effectiveness of internal controls on an ongoing

basis. The Group Internal Auditor examines the internal control systems within

each operating unit and reports to the Audit Committee on a regular basis.

      The Board has an established process for identifying, evaluating and

managing the significant risks that it faces. The process accords with the

guidance on internal control issued by the Turnbull Committee in 1999.

      The key risks are identified and are considered by the Board on a regular

basis. These discussions cover the nature of each risk, the potential impact of

each risk on operations and the action taken to reduce/eliminate each risk. On

an ongoing basis, key areas are discussed and a summary of findings is reported

to the Board.

Shareholder relations

Regular contact is maintained with major institutional shareholders. All

shareholders are welcome to attend the AGM and the Board encourages the

participation of private investors.

Statement on going concern

After making appropriate enquiries, the directors have a reasonable expectation

that the Group and the Company have adequate resources to continue in

operational existence for the foreseeable future. For this reason they continue

to adopt the going concern basis in preparing the Group's financial statements.

Statement of directors' responsibilities

Company law requires the directors to prepare financial statements for each

financial year that give a true and fair view of the state of affairs of the

Company and the Group and of the profit or loss of the Group for that period. In

preparing those financial statements, the directors are required to:

o     select suitable accounting policies and then apply them consistently;

o     make judgements and estimates that are reasonable and prudent;

o     state whether applicable accounting standards have been followed, subject

      to any material departures disclosed and explained in the financial

      statements;

o     prepare the financial statements on the going concern basis, unless it is

      inappropriate to presume that the Group and the Company will continue in

      business.

      The directors are responsible for keeping proper accounting records which

disclose with reasonable accuracy at any time the financial position of the

Group and the Company and to enable them to ensure that the financial statements

comply with the Companies (Northern Ireland) Order 1986. They are also

responsible for safeguarding the assets of the Group and the Company and hence

for taking reasonable steps for the prevention and detection of fraud and other

irregularities.

      The financial statements for the year ended 30 September 2002 are included

in the Annual Report 2002, which is published by the Company in hard-copy

printed form and on the Company's website on the internet. The Directors are

responsible for the maintenance and integrity of the Annual Report on the

website in accordance with UK legislation governing the preparation and

dissemination of financial statements. Access to the website is available from

outside the UK, where comparable legislation may be different.

On behalf of the Board

 

Anthony D Bruno

Secretary

Craigavon

6 December 2002

 

                                       23

<PAGE>

Independent auditors' report to the members of Galen Holdings PLC

We have audited the financial statements which comprise the profit and loss

account, the balance sheets, the cash flow statement, the statement of total

recognised gains and losses, and the related notes.

Respective responsibilities of directors and auditors

The directors' responsibilities for preparing the Annual Report and the

financial statements in accordance with applicable Northern Ireland law and

United Kingdom accounting standards are set out in the statement of directors'

responsibilities.

      Our responsibility is to audit the financial statements in accordance with

relevant legal and regulatory requirements, United Kingdom Auditing Standards

issued by the Auditing Practices Board and the Listing Rules of the Financial

Services Authority. This opinion has been prepared for and only for the

Company's members in accordance with Article 243 of the Companies (Northern

Ireland) Order 1986 and for no other purposes. We do not, in giving this

opinion, accept or assume responsibility for any other purpose or to any other

person to whom this report is shown or into whose hands it may come save where

expressly agreed by our prior consent in writing.

      We report to you our opinion as to whether the financial statements give a

true and fair view and are properly prepared in accordance with the Companies

(Northern Ireland) Order 1986. We also report to you if, in our opinion, the

directors' report is not consistent with the financial statements, if the

Company has not kept proper accounting records, if we have not received all the

information and explanations we require for our audit, or if information

specified by law or the Listing Rules regarding directors' remuneration and

transactions is not disclosed.

      We read the other information contained in the annual report and consider

the implications for our report if we become aware of any apparent misstatements

or material inconsistencies with the financial statements. The other information

comprises the financial highlights, the directors' report, the letter to

shareholders, the operational review, the report of the remuneration committee

and the statements on corporate governance, going concern, and directors'

responsibilities.

      We review whether the corporate governance statement reflects the

Company's compliance with the seven provisions of the Combined Code specified

for our review by the Listing Rules, and we report if it does not. We are not

required to consider whether the Board's statements on internal control cover

all risks and controls, or to form an opinion on the effectiveness of the

Company's or Group's corporate governance procedures or its risk and control

procedures.

Basis of audit opinion

We conducted our audit in accordance with auditing standards issued by the

Auditing Practices Board. An audit includes examination, on a test basis, of

evidence relevant to the amounts and disclosures in the financial statements. It

also includes an assessment of the significant estimates and judgements made by

the directors in the preparation of the financial statements, and of whether the

accounting policies are appropriate to the Company's circumstances, consistently

applied and adequately disclosed.

      We planned and performed our audit so as to obtain all the information and

explanations which we considered necessary in order to provide us with

sufficient evidence to give reasonable assurance that the financial statements

are free from material misstatement, whether caused by fraud or other

irregularity or error. In forming our opinion we also evaluated the overall

adequacy of the presentation of information in the financial statements.

Opinion

In our opinion the financial statements give a true and fair view of the state

of affairs of the Company and the Group at 30 September 2002 and of the profit

and cash flows of the Group for the year then ended and have been properly

prepared in accordance with the Companies (Northern Ireland) Order 1986.

 

PricewaterhouseCoopers

Chartered Accountants and Registered Auditors

Belfast

6 December 2002

 

                                       24

<PAGE>

Consolidated profit and loss account

<TABLE>

<CAPTION>

                                                                                                                               2000

                                                                            2002                     2001                 (restated)

for the year ended 30 September 2002            Notes   (pound)'000  (pound)'000  (pound)'000 (pound)'000  (pound)'000  (pound)'000

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

<S>                                                <C>      <C>         <C>           <C>         <C>          <C>          <C>

Turnover                                             2

--Continuing operations                                     160,028                   127,413                   44,397

--Discontinued operations                                    41,534      201,562       55,270     182,683       41,623       86,020

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

Cost of sales                                        2                    61,250                   64,187                    44,222

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

Gross profit                                         2                   140,312                  118,496                    41,798

Net operating expenses                               3                    97,128                   88,157                    23,054

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

Operating profit before exceptional items and

  amortisation of goodwill and intangibles                                70,589                   54,941                    24,123

Exceptional items                                    3                        --                       --                    (3,311)

Goodwill and intangibles amortisation                                    (27,405)                 (24,602)                   (2,068)

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

Operating profit

--Continuing operations                                      37,439                    20,414                    6,167

--Discontinued operations                                     5,745       43,184        9,925      30,339       12,577       18,744

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

Gain on sale of discontinued operations             26                    71,388                       --                        --

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

Investment income                                    4                     7,327                    4,455                     2,089

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

Profit on ordinary activities before

  interest payable                                                       121,899                   34,794                    20,833

Interest payable and similar charges                 5                    20,808                   17,848                     1,760

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

Profit on ordinary activities before taxation        6                   101,091                   16,946                    19,073

Tax on profit on ordinary activities                 7                     9,049                    3,594                     5,297

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

Profit on ordinary activities after taxation                              92,042                   13,352                    13,776

Minority interests                                  23                        32                      122                        89

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

Profit for the financial year                        8                    92,010                   13,230                    13,687

Dividends                                            9                     5,518                    4,413                     3,036

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

Retained profit for the financial year              22                    86,492                    8,817                    10,651

                                                            ========================================================================

Earnings per share                                  10                     49.7p                     8.2p                     11.3p

Adjusted earnings per share                         10                     32.2p                    23.4p                     15.0p

Diluted earnings per share                          10                     49.4p                     8.1p                     11.2p

Adjusted diluted earnings per share                 10                     32.0p                    23.0p                     14.9p

                                                            ========================================================================

</TABLE>

      There is no difference between the profit on ordinary activities before

taxation and the profit for the year stated above and their historical cost

equivalents.

 

                                       25

<PAGE>

Reconciliation of movements in shareholders' funds

<TABLE>

<CAPTION>

                                                                                                           2001                2000

                                                                                       2002           (restated)          (restated)

for the year ended 30 September 2002                                            (pound)'000         (pound)'000         (pound)'000

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

<S>                                                                                 <C>                 <C>                 <C>

Opening shareholders' funds                                                         604,630             408,058              66,232

Share issues including premium (net of costs)                                         2,828             188,261             330,222

Purchase of own shares                                                               (8,001)                 --                  --

Profit for the financial year                                                        92,010              13,230              13,687

Dividends                                                                            (5,518)             (4,413)             (3,036)

Translation differences on foreign currency net investments                         (13,990)               (506)                953

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

Closing shareholders' funds                                                         671,959             604,630             408,058

                                                                                    ================================================

</TABLE>

Consolidated statement of total recognised gains and losses

<TABLE>

<CAPTION>

                                                                                                                               2000

                                                                                       2002                2001           (restated)

                                                                    Notes       (pound)'000         (pound)'000         (pound)'000

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

<S>                                                                   <C>           <C>                  <C>                 <C>

Profit for the financial year                                                        92,010              13,230              13,687

Translation differences on foreign currency net investments                         (13,990)               (506)                953

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

Total recognised gains and losses relating to the year                               78,020              12,724              14,640

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

Prior year adjustment                                                  22            (2,488)

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

Total gains recognised since last annual report                                      75,532

                                                                                    ================================================

</TABLE>

Cumulative foreign currency translation differences

<TABLE>

<CAPTION>

                                                                                                                         (pound)'000

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

<S>                                                                                                                         <C>

At 1 October 1998                                                                                                                14

Difference arising in the year                                                                                                 (168)

                                                                                                                            -------

At 1 October 1999                                                                                                              (154)

Difference arising in the year                                                                                                  953

                                                                                                                            -------

At 1 October 2000                                                                                                               799

Difference arising in the year                                                                                                 (506)

                                                                                                                            -------

At 1 October 2001                                                                                                               293

Difference arising in the year                                                                                              (13,990)

                                                                                                                            -------

At 30 September 2002                                                                                                        (13,697)

                                                                                                                            =======

</TABLE>

 

                                       26

<PAGE>

Consolidated balance sheet

<TABLE>

<CAPTION>

                                                                                                                             2001

                                                                                                             2002       (restated)

at 30 September 2002                                                                    Notes         (pound)'000     (pound)'000

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

<S>                                                                                         <C>           <C>             <C>

Fixed assets

Intangible assets                                                                           12            480,457         510,742

Tangible assets                                                                             13             38,631          89,180

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

                                                                                                          519,088         599,922

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

Current assets

Stocks                                                                                      15             17,082          16,563

Debtors                                                                                     16             23,658          35,961

Cash at bank and in hand                                                                                  198,751         222,002

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

                                                                                                          239,491         274,526

Creditors: amounts falling due within one year                                              17             48,172          62,324

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

Net current assets                                                                                        191,319         212,202

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

Total assets less current liabilities                                                                     710,407         812,124

Creditors: amounts falling due after more than one year                                     18             32,353         193,144

Provisions for liabilities and charges                                                      19              2,165           8,372

Deferred income                                                                             20              3,930           5,736

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

Net assets                                                                                                671,959         604,872

                                                                                                         ========================

Capital and reserves

Called up share capital                                                                     21             18,781          18,931

Share premium account                                                                       22            243,031         240,258

Capital redemption reserve                                                                  22                205              --

Merger reserve                                                                              22            290,685         290,685

Profit and loss account                                                                     22            119,257          54,756

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

Equity shareholders' funds                                                                                671,959         604,630

Minority interests--equity                                                                  23                 --             242

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

                                                                                                          671,959         604,872

                                                                                                         ========================

</TABLE>

      The financial statements on pages 25 to 62 were approved by the board on 6

December 2002 and were signed on its behalf by:

R G Elliott

J A King

Directors

 

                                       27

<PAGE>

Company balance sheet

<TABLE>

<CAPTION>

                                                                                                           2002                 2001

at 30 September 2002                                                                 Notes          (pound)'000          (pound)'000

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

<S>                                                                                     <C>             <C>                  <C>

Fixed assets

Investments                                                                             14              341,500              308,996

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

Current assets

Debtors                                                                                 16              161,659               84,905

Cash at bank and in hand                                                                                180,168              169,342

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

                                                                                                        341,827              254,247

Creditors: amounts falling due within one year                                          17                9,145                7,554

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

Net current assets                                                                                      332,682              246,693

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

Net assets                                                                                              674,182              555,689

                                                                                                        ============================

Capital and reserves

Called up share capital                                                                 21               18,781               18,931

Share premium account                                                                   22              243,031              240,258

Capital redemption reserve                                                              22                  205                   --

Merger reserve                                                                          22              290,685              290,685

Profit and loss account                                                                 22              121,480                5,815

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

Equity shareholders' funds                                                                              674,182              555,689

                                                                                                        ============================

</TABLE>

      The financial statements on pages 25 to 62 were approved by the board on 6

December 2002 and were signed on its behalf by:

R G Elliott

J A King

Directors

 

                                       28

<PAGE>

Consolidated cash flow statement

<TABLE>

<CAPTION>

                                                                                            2002              2001             2000

for the year ended 30 September 2002                                       Notes     (pound)'000       (pound)'000      (pound)'000

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

<S>                                                                           <C>       <C>               <C>              <C>

Net cash inflow from operating activities                                     24          63,292            53,855           16,659

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

Returns on investments and servicing of finance

Interest paid                                                                            (23,770)          (17,794)          (1,458)

Interest paid on hire purchase agreements                                                    (53)              (54)             (43)

Interest received                                                                          7,325             4,455            1,642

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

                                                                                         (16,498)          (13,393)             141

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

Taxation

United Kingdom corporation tax paid                                                       (2,439)             (473)          (3,242)

Overseas tax paid                                                                         (2,054)             (642)              --

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

                                                                                          (4,493)           (1,115)          (3,242)

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

Capital expenditure

Purchase of tangible fixed assets                                                        (11,572)          (16,225)         (15,454)

Sale of tangible fixed assets                                                                 --               250               33

Purchase of intangible fixed assets                                                      (29,593)          (70,211)          (1,984)

Government grants received                                                                 1,464               454            1,695

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

                                                                                         (39,701)          (85,732)         (15,710)

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

Acquisitions and disposals

Sale of businesses                                                                       156,308                --               --

Purchase of subsidiary undertakings (including costs of acquisition and

  deferred consideration payments)                                                        (6,175)          (16,098)         (15,063)

Net funds acquired with subsidiary undertakings                                               --                --              474

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

                                                                                         150,133           (16,098)         (14,589)

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

Equity dividends paid                                                                     (5,045)           (3,464)          (2,278)

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

Net cash flow before management of liquid resources and financing                        147,688           (65,947)         (19,019)

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

Management of liquid resources

Decrease/(increase) in short-term deposits                                                18,641          (161,000)         (24,500)

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

Financing

Issue of ordinary share capital (net of expenses)                                            167           188,261           36,367

Purchase of own shares                                                                    (8,001)               --               --

Loans notes repaid                                                                       (76,277)          (27,323)              --

Loans (repaid)/obtained (net)                                                            (89,486)           49,751           13,476

Principal repayment under hire purchase agreements                                          (372)             (400)            (329)

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

                                                                                        (173,969)          210,289           49,514

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

(Decrease)/increase in cash in the year                                       25          (7,640)          (16,658)           5,995

                                                                                        ===========================================

</TABLE>

 

                                       29

<PAGE>

Notes to the financial statements for the year ended 30 September 2002

1 Accounting policies

These financial statements are prepared under the historical cost convention and

in accordance with applicable accounting standards. The significant accounting

policies adopted are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of

the Company and each of its subsidiaries for the year ended 30 September 2002.

The results of subsidiaries sold or acquired are included in the consolidated

profit and loss account up to, or from, the date control passes. Intra-Group

transactions are eliminated fully on consolidation.

Goodwill

Goodwill arising on consolidation, representing the excess of the fair value of

the purchase consideration over the fair value of the identifiable net assets

acquired, is accounted for as an asset and amortised over its useful economic

life. This has been assessed as 5 to 20 years in relation to goodwill arising on

the individual acquisitions.

Turnover

Turnover represents the invoiced value of goods and services supplied by the

Group exclusive of VAT, and is net of sales returns, trade discounts and

rebates. Revenue is recognised upon shipment of products, which is when title to

the product is transferred to the customer, or upon the completion of services

for the customer.

Stocks

Stock are valued at the lower of cost and net realisable value. Cost is

determined on a first in, first out basis and includes transport and handling

costs. In the case of manufactured products, costs includes all direct

expenditure and overheads, based on the normal level of activity. Where

necessary, provision is made for obsolete, slow moving and defective stocks.

Research and development

Expenditure on research and development is written off in the year in which it

is incurred.

Intangible assets

Product licences and rights acquired are capitalised and amortised over their

estimated useful economic lives, not exceeding 20 years.

Deferred taxation

The Company has adopted FRS 19 "Deferred taxation" in these financial

statements. Deferred tax is recognised in respect of all timing differences that

have originated but not reversed at the balance sheet date where transactions or

events that result in an obligation to pay more tax in the future or a right to

pay less tax in the future have occurred at the balance sheet date. Timing

differences are differences between the Company's taxable profit and its results

as stated in the financial statements. Deferred tax assets and liabilities

recognised have not been discounted.

      The cumulative impact of FRS 19 relating to previous years has been

recognised in the financial statements as a prior year adjustment and the

comparative figures have been restated. The effect of the change in accounting

policy was to increase tax on profit on ordinary activities by (pound)Nil (2001:

(pound)Nil, 2000: (pound)598,000) and to decrease profit for the financial year

by the same amounts.

 

                                       30

<PAGE>

1 Accounting policies (continued)

Pension costs

Retirement benefits are provided for employees by a defined contribution pension

scheme whereby the assets of the scheme are held separately from those of the

Group in an independently administered scheme. Contributions are charged against

profits as they become due.

Revenue grants

Revenue grants relating to research and development expenditure and employment

grants are credited to profit and loss account as a reduction of net operating

expenses in the period in which the related expenditure is incurred.

Capital grants

Capital grants are treated as deferred income and then credited to revenue over

the expected useful lives of the related assets.

Tangible fixed assets

The cost of tangible fixed assets is their purchase cost together with any

incidental expenses of acquisition.

      No depreciation is charged on land. For all other tangible assets,

depreciation is calculated on a straight line basis to write off the cost over

their useful lives. The rates used are:

Buildings                                 2%

Plant and machinery                      10%

Motor vehicles                           25%

Fixtures and fittings                10%-20%

Hire purchase and finance leases

Assets acquired under hire purchase contracts and finance lease agreements are

recorded in the balance sheet as tangible fixed assets and depreciated over the

shorter of their estimated useful lives and hire term. Future instalments under

such contracts, net of finance charges, are included within creditors. Rentals

payable are apportioned between the finance element, which is charged to the

profit and loss account as interest, and the capital element, which reduces the

outstanding obligations for future instalments.

Operating leases

Costs in respect of operating leases are charged on a straight line basis over

the lease term.

Financial instruments

The Group did not have derivative financial instruments at any time during the

financial year; the disclosure is limited therefore to primary financial

instruments.

Foreign currencies

Assets, liabilities, revenues and costs denominated in foreign currencies are

recorded at the rate of exchange ruling at the date of the transactions and

monetary assets and liabilities at the balance sheet date are translated at the

year end rate of exchange. All exchange differences thus arising are reported as

part of the results for the year. The results of overseas subsidiaries are

translated at the average exchange rate ruling during the year with the

difference between average and year end rates being taken to reserves.

Differences on exchange arising from the retranslation of the opening net

investment in subsidiary companies and relevant foreign currency loans are taken

to reserves.

 

                                       31

<PAGE>

Notes to the financial statements for the year ended 30 September 2002

2 Segmental analysis

Geographical analysis of the Group's turnover:

<TABLE>

<CAPTION>

                                                                                             2002            2001              2000

Sales by destination                                                                  (pound)'000     (pound)'000       (pound)'000

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

<S>                                                                                       <C>             <C>                <C>

United Kingdom                                                                             27,505          33,757            41,863

United States                                                                             155,090         128,077            30,630

Rest of the World                                                                          18,967          20,849            13,527

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

                                                                                          201,562         182,683            86,020

                                                                                          =========================================

<CAPTION>

                                                                                             2002            2001              2000

Sales by origin                                                                       (pound)'000     (pound)'000       (pound)'000

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

<S>                                                                                       <C>             <C>                <C>

United Kingdom                                                                             58,771          69,956            63,907

United States                                                                             141,636         110,230            21,130

Rest of the World                                                                           1,155           2,497               983

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

                                                                                          201,562         182,683            86,020

                                                                                          =========================================

</TABLE>

Geographical analysis of profit before taxation, by territory of origin:

<TABLE>

<CAPTION>

                                                                                             2002            2001              2000

                                                                                      (pound)'000     (pound)'000       (pound)'000

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

<S>                                                                                       <C>              <C>               <C>

United Kingdom                                                                             81,624           7,197            16,291

United States                                                                              31,615          21,965             4,541

Rest of the World                                                                           8,660           5,632                 1

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

Profit before interest                                                                    121,899          34,794            20,833

Interest payable                                                                          (20,808)        (17,848)           (1,760)

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

Profit before taxation                                                                    101,091          16,946            19,073

                                                                                          =========================================

</TABLE>

Geographical analysis of net assets:

<TABLE>

<CAPTION>

                                                                                                                               2001

                                                                                                             2002         (restated)

                                                                                                      (pound)'000       (pound)'000

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

<S>                                                                                                       <C>               <C>

United Kingdom                                                                                            339,723           295,081

United States                                                                                             317,134           304,570

Rest of the World                                                                                          15,102             5,221

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

Net operating assets                                                                                      671,959           604,872

                                                                                                          =========================

</TABLE>

Geographical analysis of total assets:

<TABLE>

<CAPTION>

                                                                                                             2002              2001

                                                                                                      (pound)'000       (pound)'000

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

<S>                                                                                                       <C>               <C>

United Kingdom                                                                                            233,092           318,336

United States                                                                                             417,349           475,702

Rest of the World                                                                                         108,138            80,410

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

Total assets                                                                                              758,579           874,448

                                                                                                          =========================

</TABLE>

 

                                       32

<PAGE>

2 Segmental analysis (continued)

For internal financial reporting purposes, operating results are analysed into

two segments, pharmaceutical products and pharmaceutical services.

Pharmaceutical products comprise prescription and sterile products businesses.

Pharmaceutical services comprise the clinical trials services and chemical

synthesis services businesses. Details of the businesses are summarised as

follows.

Pharmaceutical Products

The pharmaceutical products business develops, manufactures, supplies and

markets prescription medicines to healthcare professionals in several key

therapeutic areas. It also manufactures and supplies intravenous and other

sterile solutions, primarily for human use. Research and development is focused

on the development of proprietary drug delivery applications and technologies

for commercialisation in the US.

Pharmaceutical Services

Clinical Trial Services designed, manufactured and compiled patient packs for

use in clinical trials, which were then distributed worldwide from its

facilities in Craigavon and Pennsylvania. Interactive Clinical Technologies Inc

(ICTI) provided interactive voice response systems for clinical trial management

from its bases in Yardley (Pennsylvania), San Francisco and Maidenhead (United

Kingdom).

      Chemical Synthesis Services included SynGal, which operated a chemical

synthesis service to pilot plant scale for the pharmaceutical and related

chemicals industry, and QuChem Limited, which offered a complementary service by

providing laboratory scale research.

      The whole of the pharmaceutical services segment was disposed of during

the year.

Analysis of the Group's turnover by class of business:

<TABLE>

<CAPTION>

                                                                                   2002                2001             2000

                                                                            (pound)'000         (pound)'000      (pound)'000

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

<S>                                                                             <C>                 <C>               <C>

Pharmaceutical products                                                         160,028             127,413           44,397

Pharmaceutical services--discontinued                                            41,534              55,270           41,623

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

                                                                                201,562             182,683           86,020

                                                                                ============================================

</TABLE>

Analysis of the Group's profit before taxation by class of business:

<TABLE>

<CAPTION>

                                                                                             Pharmaceutical

                                                                         Pharmaceutical            Services

                                                                               Products       (discontinued)           Total

Year to 30 September 2002                                                   (pound)'000         (pound)'000      (pound)'000

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

<S>                                                                             <C>                 <C>              <C>

Turnover                                                                        160,028               41,534          201,562

Cost of sales                                                                   (36,602)            (24,648)         (61,250)

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

Gross profit                                                                    123,426              16,886          140,312

Net operating expenses                                                          (85,987)            (11,141)         (97,128)

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

Operating profit                                                                 37,439               5,745           43,184

Gain on sale of discontinued businesses                                                                               71,388

Investment income                                                                                                      7,327

                                                                                                                     -------

Profit before interest                                                                                               121,899

Interest payable                                                                                                     (20,808)

                                                                                                                     -------

Profit before taxation                                                                                               101,091

                                                                                                                     =======

</TABLE>

 

                                       33

<PAGE>

Notes to the financial statements for the year ended 30 September 2002

2 Segmental analysis (continued)

<TABLE>

<CAPTION>

                                                                                      Pharmaceutical

                                                                Pharmaceutical              Services

                                                                      Products         (discontinued)              Total

Year to 30 September 2001                                          (pound)'000           (pound)'000         (pound)'000

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

<S>                                                                    <C>                    <C>                <C>

Turnover                                                               127,413                55,270             182,683

Cost of sales                                                          (31,844)              (32,343)            (64,187)

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

Gross profit                                                            95,569                22,927             118,496

Net operating expenses                                                 (75,155)              (13,002)            (88,157)

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

Operating profit                                                        20,414                 9,925              30,339

Investment income                                                                                                  4,455

                                                                                                                --------

Profit before interest                                                                                            34,794

Interest payable                                                                                                 (17,848)

                                                                                                                --------

Profit before taxation                                                                                            16,946

                                                                                                                ========

<CAPTION>

                                                                                      Pharmaceutical

                                                                Pharmaceutical              Services

                                                                      Products         (discontinued)              Total

Year to 30 September 2000                                          (pound)'000           (pound)'000         (pound)'000

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

<S>                                                                    <C>                   <C>                 <C>

Turnover                                                                44,397                41,623              86,020

Cost of sales                                                          (23,592)              (20,630)            (44,222)

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

Gross profit                                                            20,805                20,993              41,798

Net operating expenses                                                 (14,638)               (8,416)            (23,054)

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

Operating profit                                                         6,167                12,577              18,744

Investment income                                                                                                  2,089

                                                                                                                --------

Profit before interest                                                                                            20,833

Interest payable                                                                                                  (1,760)

                                                                                                                --------

Profit before taxation                                                                                            19,073

                                                                                                                ========

</TABLE>

      Exceptional items totalling (pound)3,311,000 in 2000 are included under

net operating expenses in the Pharmaceutical Products column.

Analysis of the Group's net assets by class of business:

<TABLE>

<CAPTION>

                                                                                                2002                2001

                                                                                         (pound)'000         (pound)'000

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

<S>                                                                                          <C>                 <C>

Pharmaceutical products                                                                      671,959             577,271

Pharmaceutical services--discontinued                                                             --              27,601

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

                                                                                             671,959             604,872

                                                                                             ===========================

</TABLE>

Analysis of the Group's total assets by class of business:

<TABLE>

<CAPTION>

                                                                                                2002                2001

                                                                                         (pound)'000         (pound)'000

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

<S>                                                                                          <C>                 <C>

Pharmaceutical products                                                                      758,579             782,977

Pharmaceutical services--discontinued                                                             --              91,471

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

                                                                                             758,579             874,448

                                                                                             ===========================

</TABLE>

 

                                       34

<PAGE>

2 Segmental analysis (continued)

Reliance on major customers (10% or more of revenue)

In the year ended 30 September 2002 11% of consolidated turnover was derived

from one customer. In the years ended 30 September 2001 and 30 September 2000 no

single customer exceeded 10% of consolidated revenue.

Reliance on major products

Sales of the pharmaceutical products, Ovcon(R), Doryx(R) and Estrace(R) cream in

the year ended 30 September 2002 represented 16%, 15% and 13% of consolidated

turnover respectively.

      Sales of Ovcon(R) and Estrace(R) cream in the year ended 30 September 2001

represented 15% and 11% of consolidated turnover respectively. These products

were acquired on the purchase of Warner Chilcott on 29 September 2000. In the

year ended 30 September 2000, the single pharmaceutical product Kapake(R)

represented 12% of consolidated turnover.

3 Net operating expenses

<TABLE>

<CAPTION>

                                Continuing  Discontinued                  Continuing  Discontinued

                                operations    operations          2002    operations    operations

                               (pound)'000   (pound)'000   (pound)'000   (pound)'000   (pound)'000

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

<S>                                 <C>            <C>          <C>           <C>            <C>

Distribution costs                  39,463         4,161        43,624        32,701         4,070

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

Administrative expenses

  before exceptional items

  and goodwill and

  intangibles amortisation          21,097         5,858        26,955        19,588         7,398

Exceptional group

  integration costs                     --            --            --            --            --

Goodwill and intangibles

  amortisation                      26,269         1,136        27,405        23,024         1,578

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

Total administrative expenses       47,366         6,994        54,360        42,612         8,976

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

Other operating income                (842)          (14)         (856)         (158)          (44)

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

Net operating expenses              85,987        11,141        97,128        75,155        13,002

                                ====================================================================

<CAPTION>

                                                      Continuing      Discontinued

                                          2001        operations        operations              2000

                                   (pound)'000       (pound)'000       (pound)'000       (pound)'000

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

<S>                                     <C>                <C>               <C>               <C>

Distribution costs                      36,771             5,457             2,552             8,009

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

Administrative expenses

  before exceptional items

  and goodwill and

  intangibles amortisation              26,986             5,558             5,200            10,758

Exceptional group

  integration costs                         --             3,311                --             3,311

Goodwill and intangibles

  amortisation                          24,602             1,087               981             2,068

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

Total administrative expenses           51,588             9,956             6,181            16,137

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

Other operating income                    (202)             (775)             (317)           (1,092)

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

Net operating expenses                  88,157            14,638             8,416            23,054

                                   =================================================================

</TABLE>

      Group integration costs in 2000 related to employment and other contract

termination costs associated with the acquisitions in that year.

4 Investment income

<TABLE>

<CAPTION>

                                                         2002               2001              2000

                                                  (pound)'000        (pound)'000       (pound)'000

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

<S>                                                     <C>                <C>               <C>

Interest on bank deposits                               7,327              4,455             2,089

                                                       ===========================================

</TABLE>

5 Interest payable and similar charges

<TABLE>

<CAPTION>

                                                         2002               2001              2000

                                                  (pound)'000        (pound)'000       (pound)'000

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

<S>                                                    <C>                <C>                <C>

On bank loans and overdrafts                           11,879             17,794             1,717

On hire purchase agreements                                53                 54                43

Exceptional costs of loan notes redemption              8,876                 --                --

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

                                                       20,808             17,848             1,760

                                                       ===========================================

</TABLE>

 

                                       35

<PAGE>

Notes to the financial statements for the year ended 30 September 2002

6 Profit on ordinary activities before taxation

<TABLE>

<CAPTION>

                                                                                                 2002           2001           2000

                                                                                          (pound)'000    (pound)'000    (pound)'000

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

<S>                                                                                            <C>             <C>            <C>

Profit on ordinary activities before taxation is stated after charging:

Staff costs (note 11)                                                                          49,996         48,726         24,600

Amortisation--goodwill                                                                         15,774         16,216          1,999

            --intangibles                                                                      11,631          8,386             69

Depreciation of tangible fixed assets

            --owned assets                                                                      5,770          5,970          4,214

            --under hire purchase contracts                                                       167            166            138

Research and development expenditure                                                           13,914          9,245          8,029

Auditors' remuneration

            --audit services (parent(pound)10,000 in each year)                                   170            140             98

            --non-audit services                                                                  148            149             54

Hire of plant and machinery--operating leases                                                     507            479            422

Other operating lease rentals                                                                     615            754            181

                                                                                               ====================================

And after crediting:

Amortisation of government capital grants                                                       1,067          1,388          1,295

Revenue grants                                                                                     70            202          1,092

                                                                                               ====================================

</TABLE>

      Auditors' remuneration for non-audit services in 2002 and 2001 relates to

quarterly accounts reviews, taxation services and grants audits. The 2000 amount

related to taxation services and grants audits. The auditors also received

remuneration during 2002 in relation to subsidiary disposals (comprising

taxation advice and non-statutory completion audits) totalling (pound)243,000

which was not charged to profit and loss account. The auditors received

remuneration during 2001 for acquisition and share issue related services

totalling (pound)412,000 (2000: (pound)499,000), which was not charged to profit

and loss account. No consulting services were provided by the auditors in any of

the above years.

7 Tax on profit on ordinary activities

<TABLE>

<CAPTION>

                                                                                                 2002           2001           2000

Taxation on the profit for the year                                                       (pound)'000    (pound)'000    (pound)'000

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

<S>                                                                                             <C>            <C>            <C>

Current tax

UK corporation tax at 30%                                                                       7,219            650          3,912

UK corporation tax--adjustment to previous years                                                 (241)          (772)        (3,151)

Overseas tax                                                                                    2,242          1,043            715

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

Total current tax                                                                               9,220            921          1,476

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

Deferred tax

UK corporation tax at 30%                                                                        (257)         1,598            618

UK corporation tax--adjustment to previous years                                                    8            888          2,968

Overseas tax                                                                                       78            187            235

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

Total deferred tax                                                                               (171)         2,673          3,821

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

Tax on profit on ordinary activities                                                            9,049          3,594          5,297

                                                                                               ====================================

</TABLE>

 

                                       36

<PAGE>

7 Tax on profit on ordinary activities (continued)

The current tax charge for the year is lower than the standard rate of

corporation tax in the UK of 30%. The differences are explained below:

<TABLE>

<CAPTION>

                                                                                                 2002           2001           2000

                                                                                          (pound)'000    (pound)'000    (pound)'000

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

<S>                                                                                           <C>             <C>            <C>

Profit on ordinary activities before taxation                                                 101,091         16,946         19,073

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

Tax charge at the UK statutory rate of 30%                                                     30,327          5,084          5,721

Non-taxable disposals                                                                         (19,616)            --             --

Losses not previously recognised and share option deductions in US                             (4,920)        (4,716)            --

Non-taxable grant transfers                                                                      (320)          (416)          (389)

Amortisation of goodwill and intangible fixed assets not allowable                              6,189          4,733            326

Net effect of lower rates and eligible costs in overseas tax jurisdictions                     (2,506)        (1,353)            --

Adjustment to previous years                                                                     (241)          (772)        (3,151)

Accelerated capital allowances and other timing differences                                       179         (1,785)          (853)

Other                                                                                             128            146           (178)

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

Current tax charge                                                                              9,220            921          1,476

                                                                                              =====================================

</TABLE>

      Taxation in relation to the gain on disposal of discontinued operations

amounted to (pound)2,700,000. The factors that may affect the Group's future tax

charges are detailed at note 19.

8 Profit for the financial year

As permitted by the Companies (Northern Ireland) Order 1986 the parent company's

profit and loss account has not been included in these financial statements. The

parent company's profit for the financial year was (pound)135,620,000 (2001:

(pound)4,988,000, 2000: (pound)4,061,000).

9 Dividends

<TABLE>

<CAPTION>

                                                                                                 2002           2001           2000

                                                                                          (pound)'000    (pound)'000    (pound)'000

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

<S>                                                                                             <C>            <C>            <C>

Interim paid of 1p per share (2001: 0.83p, 2000: 0.69p)                                         1,902          1,351            878

Final proposed of 2p per share (2001: 1.66p, 2000: 1.38p)                                       3,662          3,143          2,194

Adjustment to previous period                                                                      94             36             66

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

Total ordinary dividends on equity shares                                                       5,658          4,530          3,138

Less amount relating to shares held by the Galen Employee Benefit Trust                          (140)          (117)          (102)

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

                                                                                                5,518          4,413          3,036

                                                                                                ===================================

</TABLE>

10 Earnings per share

Earnings per ordinary share is based on profit for the financial year

of (pound)92,010,000 (2001: (pound)13,230,000, 2000: (pound)13,687,000) and on

185,244,963 ordinary shares (2001: 161,354,740, 2000: 121,444,370), the weighted

average number of ordinary shares in issue during the year excluding those held

in the employee share trust which are treated as cancelled.

      FRS 14 "Earnings per share" recognises that there may be instances where a

company would wish to disclose additional EPS calculated on other levels of

earnings. Two common instances where such additional figures are shown are where

earnings have been materially affected by exceptional items or by items of a

capital nature (including goodwill amortisation). The FRS permits inclusion of

such additional EPS but requires that the calculation use the weighted average

number of ordinary shares as determined for the basic calculation. The FRS also

requires that the additional EPS is reconciled to the basic EPS required by the

Standard and that the reasons for calculating the additional EPS are explained.

 

                                       37

<PAGE>

Notes to the financial statements for the year ended 30 September 2002

10 Earnings per share (continued)

Adjusted earnings per share figures reflecting the results before the impact of

exceptional items and goodwill and intangibles amortisation have been calculated

in addition to the earnings per share required by FRS 14, since in the opinion

of the directors this will allow the shareholders to gain a clearer

understanding of underlying trading performance of the Group.

<TABLE>

<CAPTION>

                                                                                                2002                2001        2000

                                                                                               Pence               Pence       Pence

                                                                                           per share           per share   per share

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

<S>                                                                                             <C>                 <C>         <C>

Earnings per ordinary share                                                                     49.7                 8.2        11.3

Exceptional items--disposals and acquisitions                                                  (37.1)                 --         2.0

Goodwill and intangibles amortisation                                                           14.8                15.2         1.7

Exceptional costs of notes redemption (note 5)                                                   4.8                  --          --

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

Adjusted earnings per share                                                                     32.2                23.4        15.0

                                                                                           =========================================

</TABLE>

Diluted earnings per share is calculated on the profit for the financial year

and on an adjusted number of shares reflecting the number of dilutive shares

under option.

<TABLE>

<CAPTION>

                                                                                            Earnings              Number         EPS

2002                                                                                     (pound)'000           of shares       Pence

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

<S>                                                                                           <C>            <C>                <C>

Basic EPS                                                                                     92,010         185,244,963        49.7

Effect of dilutive securities--options                                                            --           1,085,671

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

Diluted EPS                                                                                   92,010         186,330,634        49.4

                                                                                           =========================================

<CAPTION>

                                                                                            Earnings              Number         EPS

2001                                                                                     (pound)'000           of shares       Pence

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

<S>                                                                                           <C>            <C>                 <C>

Basic EPS                                                                                     13,230         161,354,740         8.2

Effect of dilutive securities--options                                                            --           2,805,536

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

Diluted EPS                                                                                   13,230         164,160,276         8.1

                                                                                           =========================================

<CAPTION>

                                                                                            Earnings              Number         EPS

2000                                                                                     (pound)'000           of shares       Pence

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

<S>                                                                                           <C>            <C>                <C>

Basic EPS                                                                                     13,687         121,444,370        11.3

Effect of dilutive securities--options                                                            --             481,481

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

Diluted EPS                                                                                   13,687         121,925,851        11.2

                                                                                           =========================================

</TABLE>

Adjusted diluted earnings per share adjusts diluted earnings per share to

reflect the impact of exceptional items and amortisation of goodwill and

intangibles.

<TABLE>

<CAPTION>

                                                                                                2002             2001           2000

                                                                                               Pence            Pence          Pence

                                                                                           per share        per share      per share

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

<S>                                                                                            <C>               <C>           <C>

Diluted EPS                                                                                     49.4              8.1           11.2

Exceptional items--disposals and acquisitions                                                  (36.9)              --            2.0

Goodwill and intangibles amortisation                                                           14.7             14.9            1.7

Exceptional costs of notes redemption                                                            4.8               --             --

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

Adjusted diluted earnings per share                                                             32.0             23.0           14.9

                                                                                           =========================================

</TABLE>

 

                                       38

<PAGE>

11 Employee information and directors' emoluments

<TABLE>

<CAPTION>

                                                                                                    2002          2001          2000

Staff costs                                                                                  (pound)'000   (pound)'000   (pound)'000

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

<S>                                                                                               <C>           <C>           <C>

Wages and salaries                                                                                43,709        43,274        22,011

Social security costs                                                                              5,214         4,794         1,970

Other pension costs                                                                                1,073           658           619

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

                                                                                                  49,996        48,726        24,600

                                                                                                  ==================================

<CAPTION>

The average monthly number of persons employed by the Group

(including executive directors) during the year was:                                              Number        Number        Number

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

<S>                                                                                                <C>           <C>           <C>

Administration staff                                                                                 191           191           151

Other staff                                                                                        1,389         1,501         1,049

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

                                                                                                   1,580         1,692         1,200

                                                                                                  ==================================

<CAPTION>

                                                                                                    2002          2001          2000

Directors' emoluments (total salary and benefits)                                            (pound)'000   (pound)'000   (pound)'000

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

<S>                                                                                                <C>           <C>             <C>

Aggregate emoluments                                                                               1,221         1,437           559

Gains made on the exercise of share options                                                            1            79            --

Compensation for loss of office                                                                      165            62            --

Company pension contributions to defined contribution (money purchase) schemes                       109           129           140

                                                                                                  ==================================

<CAPTION>

Retirement benefits are accruing to three directors (2001: three, 2000: three)

under the Group's defined contribution schemes.

                                                                                                    2002          2001          2000

Highest paid director                                                                        (pound)'000   (pound)'000   (pound)'000

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

<S>                                                                                                  <C>           <C>           <C>

Aggregate emoluments                                                                                 510           431           180

Company pension contributions to defined contribution schemes                                          4            --            50

                                                                                                  ==================================

</TABLE>

      Details of individual directors' emoluments for the year ended 30

September 2002 are as follows:

<TABLE>

<CAPTION>

 

                                                            Compensation

                                                             for loss of

                                    Salary         Bonus          office       Benefits

Executive directors            (pound)'000   (pound)'000     (pound)'000    (pound)'000

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

<S>                                    <C>           <C>             <C>             <C>

R Boissonneault                        362           134              --             14

J A King                               120            60              --             --

R G Elliott                            275           110              --             12

A D Armstrong                           55            --             165              4

P Herendeen                             --            --              --             --

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

Total                                  812           304             165             30

                                    =====================================================

<CAPTION>

                                                    2002             2001

                                                   Total            Total

                                              (including       (including             2001

                                Pension          pension          pension          pension

                          contributions    contributions)   contributions)   contributions

Executive directors         (pound)'000      (pound)'000      (pound)'000      (pound)'000

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

<S>                                 <C>            <C>              <C>                <C>

R Boissonneault                       4              514              431               --

J A King                             50              230              182               50

R G Elliott                          50              447              324               50

A D Armstrong                         5              229              221               29

P Herendeen                          --               --              370               --

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

Total                               109            1,420            1,528              129

                          ================================================================

</TABLE>

 

 

                                       39

<PAGE>

Notes to the financial statements for the year ended 30 September 2002

11 Employee information and directors' emoluments (continued)

<TABLE>

<CAPTION>

                                                                           Fees            Fees          Fees

                                                                           2002            2001          2000

Non-executive directors                                             (pound)'000     (pound)'000   (pound)'000

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

<S>                                                                          <C>            <C>            <C>

H A Ennis                                                                    25              25            25

A J McClay                                                                   --              25            --

D Gibbons                                                                    25              25            25

M G Carter                                                                   25              25            25

T G Lynch                                                                    --              --            --

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

                                                                             75             100            75

                                                                           ==================================

</TABLE>

      Mr Lynch waived his fees during the year and an equivalent amount has been

donated to charity.

Remuneration committee

The report of the Remuneration Committee is set out on pages 20 and 21.

12 Intangible fixed assets

<TABLE>

<CAPTION>

                                                                                                Product

                                                                                               licences

                                                                           Goodwill          and rights                Total

                                                                        (pound)'000         (pound)'000          (pound)'000

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

<S>                                                                         <C>                 <C>                 <C>

Cost

At 1 October 2000                                                           319,883             139,124             459,007

Currency adjustment                                                            (222)               (536)               (758)

Additions                                                                     1,675              78,088              79,763

Disposals                                                                        --                (327)               (327)

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

At 1 October 2001                                                           321,336             216,349             537,685

Currency adjustment                                                          (1,084)             (9,797)            (10,881)

Additions                                                                       400              29,193              29,593

Deferred consideration adjustment                                            (2,755)                 --              (2,755)

Disposals                                                                   (23,885)                 --             (23,885)

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

At 30 September 2002                                                        294,012             235,745             529,757

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

Aggregate amortisation

At 1 October 2000                                                             2,711                 194               2,905

Currency adjustment                                                             (50)               (187)               (237)

Charge for the year                                                          16,216               8,386              24,602

Disposals                                                                        --                (327)               (327)

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

At 1 October 2001                                                            18,877               8,066              26,943

Currency adjustment                                                             (64)               (490)               (554)

Charge for the year                                                          15,774              11,631              27,405

Deferred consideration adjustment                                              (346)                 --                (346)

Disposals                                                                    (4,148)                 --              (4,148)

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

At 30 September 2002                                                         30,093              19,207              49,300

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

Net book value

At 30 September 2002                                                        263,919             216,538             480,457

                                                                           ================================================

At 30 September 2001                                                        302,459             208,283             510,742

                                                                           ================================================

At 30 September 2000                                                        317,172             138,930             456,102

                                                                           ================================================

</TABLE>

 

                                       40

<PAGE>

13 Tangible fixed assets

<TABLE>

<CAPTION>

                                                 Land and          Plant and       Fixtures and           Motor

                                                buildings          machinery           fittings        vehicles               Total

                                              (pound)'000        (pound)'000        (pound)'000     (pound)'000         (pound)'000

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

<S>                                                <C>                <C>                <C>                <C>              <C>

Cost

At 1 October 2000                                  49,831             32,595             12,141             533              95,100

Currency adjustment                                   (24)               (22)               (20)             (1)                (67)

Additions                                           6,791              6,082              3,162             190              16,225

Disposals                                            (220)               (49)               (29)            (41)               (339)

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

At 1 October 2001                                  56,378             38,606             15,254             681             110,919

Currency adjustment                                    78                 53               (137)             (4)                (10)

Additions                                           5,108              3,491              2,926              47              11,572

Disposals                                         (39,090)           (16,198)           (10,470)           (353)            (66,111)

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

At 30 September 2002                               22,474             25,952              7,573             371              56,370

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

Depreciation

At 1 October 2000                                   2,081              9,344              3,996             291              15,712

Currency adjustment                                    (5)               (14)               (25)             (2)                (46)

Charge for the year                                   913              3,118              1,979             126               6,136

Eliminated on disposal                                 --                 (9)               (29)            (25)                (63)

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

At 1 October 2001                                   2,989             12,439              5,921             390              21,739

Currency adjustment                                    19                 (5)                24               2                  40

Charge for the year                                   814              3,190              1,832             101               5,937

Eliminated on disposal                             (2,155)            (3,492)            (4,118)           (212)             (9,977)

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

At 30 September 2002                                1,667             12,132              3,659             281              17,739

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

Net book value

At 30 September 2002                               20,807             13,820              3,914              90              38,631

                                                 ==================================================================================

At 30 September 2001                               53,389             26,167              9,333             291              89,180

                                                 ==================================================================================

At 30 September 2000                               47,750             23,251              8,145             242              79,388

                                                 ==================================================================================

</TABLE>

      The net book value of tangible fixed assets includes an amount of

(pound)1,265,000 (2001: (pound)1,432,000, 2000: (pound)1,097,000) in respect of

assets held under hire purchase agreements.

      The net book value of land and buildings comprises:

<TABLE>

<CAPTION>

                                                                                                           2002                2001

                                                                                                    (pound)'000         (pound)'000

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

<S>                                                                                                      <C>                 <C>

Freehold property                                                                                         6,003              26,921

Long leasehold property                                                                                  14,804              26,468

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

                                                                                                         20,807              53,389

                                                                                                         ==========================

</TABLE>

 

                                       41

<PAGE>

Notes to the financial statements for the year ended 30 September 2002

14 Fixed asset investments

                                                                    Interest in

                                                                          group

                                                                   undertakings

Company                                                             (pound)'000

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

Cost or valuation

At 1 October 2001                                                       308,996

Inter-group transfers                                                    48,621

Disposals                                                               (16,117)

                                                                    -----------

At 30 September 2002                                                    341,500

                                                                    -----------

Amounts written off

At 1 October 2001 and 30 September 2002                                      --

                                                                    -----------

Net book value

At 30 September 2002                                                    341,500

                                                                    ===========

At 30 September 2001                                                    308,996

                                                                    ===========

      Subsidiary undertakings whose results or financial position, in the

opinion of the directors, principally affected the figures of the Group are as

follows:

<TABLE>

<CAPTION>

                                                                                                            Proportion of issued

                                                                                                               shares held by

Subsidiary                                      Country of incorporation              Class of share        Group        Company

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

<S>                                             <C>                         <C>                              <C>            <C>

Galen Limited                                           Northern Ireland    Ordinary (pound)1 shares         100%            --

Galen Chemicals Limited                              Republic of Ireland      Ordinary (euro) shares          --            100%

Galen Incorporated                              United States of America             Common $1 stock          --            100%

Interactive Clinical Technologies Inc           United States of America             Common $1 stock          --            100%

Warner Chilcott Inc                             United States of America             Common $1 stock          --            100%

                                                ================================================================================

</TABLE>

      The nature of the above subsidiaries' businesses is detailed in the Letter

to Shareholders. Galen Incorporated and Interactive Clinical Technologies Inc

were disposed of during the year as part of the disposal of the Group's services

segment.

15 Stocks

<TABLE>

<CAPTION>

                                                                          Group            Group         Company         Company

                                                                           2002             2001            2002            2001

                                                                    (pound)'000      (pound)'000     (pound)'000     (pound)'000

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

<S>                                                                      <C>              <C>                 <C>             <C>

Raw materials and consumables                                             7,902            9,105              --              --

Finished goods and goods for resale                                       9,180            7,458              --              --

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

                                                                         17,082           16,563              --              --

                                                                         =======================================================

</TABLE>

      There is no material difference between the replacement cost of stocks and

their balance sheet values.

 

                                       42

<PAGE>

16 Debtors

<TABLE>

<CAPTION>

                                                           Group            Group           Company         Company

                                                            2002             2001              2002            2001

                                                     (pound)'000      (pound)'000       (pound)'000     (pound)'000

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

<S>                                                       <C>              <C>              <C>              <C>

Amounts falling due after more than one year:

Amounts owed by subsidiary undertakings                       --               --           161,086          84,369

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

Amounts falling due within one year:

Trade debtors                                             21,925           32,327                --              --

Less amounts provided for doubtful debts                  (1,055)          (1,655)               --              --

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

                                                          20,870           30,672                --              --

Other debtors                                                876            1,588                --              --

Prepayments and accrued income                             1,912            3,701               573             536

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

                                                          23,658           35,961               573             536

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

Total debtors                                             23,658           35,961           161,659          84,905

                                                         ==========================================================

<CAPTION>

                                                                             2002             2001             2000

Provision for doubtful debts--Group                                   (pound)'000      (pound)'000      (pound)'000

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

<S>                                                                         <C>              <C>                <C>

At the beginning of the year                                                1,655              297              287

Profit and loss account charge/(credit)                                      (292)           1,164               12

Amounts utilised and other movements                                         (308)             194               (2)

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

At the end of the year                                                      1,055            1,655              297

                                                                            =======================================

</TABLE>

17 Creditors: amounts falling due within one year

<TABLE>

<CAPTION>

                                                           Group            Group           Company         Company

                                                            2002             2001              2002            2001

                                                     (pound)'000      (pound)'000       (pound)'000     (pound)'000

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

<S>                                                       <C>              <C>                <C>             <C>

Bank loans and overdrafts (note 18)                          391           12,049                --              --

Obligations under hire purchase agreements                   249              366                --              --

Trade creditors                                            8,894           13,036                --              --

Corporation tax                                            7,036            2,075             1,903              63

Other taxation and social security                           716              514                --              --

Other creditors                                            4,579            8,145                --             144

Accruals and deferred income                              22,645           15,566             3,580           4,204

Proposed dividend                                          3,662            3,143             3,662           3,143

Deferred acquisition consideration                            --            7,430                --              --

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

                                                          48,172           62,324             9,145           7,554

                                                          =========================================================

</TABLE>

 

                                       43

<PAGE>

Notes to the financial statements for the year ended 30 September 2002

18 Creditors: amounts falling due after more than one year

<TABLE>

<CAPTION>

                                                                             Group            Group         Company         Company

                                                                              2002             2001            2002            2001

                                                                       (pound)'000      (pound)'000     (pound)'000     (pound)'000

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

<S>                                                                         <C>             <C>                  <C>            <C>

Bank loans                                                                     606           79,187              --              --

Loan notes                                                                  31,605          112,198              --              --

Obligations under hire purchase agreements                                     142              397              --              --

Contingent acquisition consideration                                            --            1,362              --              --

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

                                                                            32,353          193,144              --              --

                                                                            =======================================================

<CAPTION>

                                                                             Group            Group         Company         Company

                                                                              2002             2001            2002            2001

Bank loans                                                             (pound)'000      (pound)'000     (pound)'000     (pound)'000

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

<S>                                                                         <C>             <C>                  <C>            <C>

Repayable as follows:

In one year or less                                                            391           12,049              --              --

Between one and two years                                                      391           58,971              --              --

Between two and five years                                                     215           14,429              --              --

In five years or more                                                           --            5,787              --              --

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

                                                                               997           91,236              --              --

                                                                            =======================================================

</TABLE>

      Circular and cross guarantees and indemnities are in place in relation to

certain Group banking facilities.

      $200m of 12 5/8% Warner Chilcott Inc senior loan notes, repayable in 2008,

were issued by that subsidiary in February 2000 at a discount to yield 13%.

Interest is payable semi-annually. The acquisition of Warner Chilcott Inc gave

the note holders the right to require it to repurchase the notes at 101% of the

principal amount, by giving notice to the Company by 1 December 2000. On that

date, repayment was requested in relation to $40.3 million principal amount of

the loan notes. During the year an additional $111.3 million of loan notes were

retired. The remaining loan notes are redeemable at the Company's option on or

after February 2004 at redemption prices that decrease annually from 106.3125%

to 100% of their principal value.

<TABLE>

<CAPTION>

                                                                             Group            Group         Company         Company

                                                                              2002             2001            2002            2001

Hire purchase agreements                                               (pound)'000      (pound)'000     (pound)'000     (pound)'000

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

<S>                                                                         <C>             <C>                  <C>            <C>

The net hire purchase obligations to which the Group is committed are:

In one year or less                                                            267              392              --              --

Between one and two years                                                      144              267              --              --

Between two and three years                                                     --              141              --              --

Between three and four years                                                    --                2              --              --

Less interest element                                                          (20)             (39)             --              --

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

                                                                               391              763              --              --

                                                                             ======================================================

</TABLE>

Financial instruments

The Group's financial instruments comprise borrowings, its cash and liquid

resources, and other current assets and liabilities that arise directly from its

operations. The Group has not entered into derivative arrangements during the

year as interest rate and currency risks arising from the Group's operations and

its sources of finance have not been significant to date.

 

                                       44

<PAGE>

18 Creditors: amounts falling due after more than one year (continued)

Group policy

The main risks arising from the Group's financial instruments are interest rate

risk, liquidity risk and foreign currency risk. The Board reviews and agrees

policies for managing each of these risks on an ongoing basis, taking account of

the impact of the acquisitions during the year, and they are summarised below.

Interest rate risk

The Group finances its operations through a mixture of retained profits and bank

borrowings, and borrows in the desired currencies at both fixed and floating

rates of interest. At the year end, 98% (2001: 56%) of its borrowings were at

fixed rates, and on this basis, there has not been a need to use interest rate

swaps or other derivative instruments to manage the risk.

Liquidity risk

As regards liquidity, the Group's policy is to maintain an appropriate spread of

maturity to ensure continuity of funding. At 30 September 2002, 1% (2001: 65%)

of its borrowings were due to mature between 2 and 5 years, and 97% (2001: 58%)

in more than five years. Short-term flexibility is achieved by the availability

of overdraft facilities.

Foreign currency risk

The Group's overseas subsidiaries operate in the US and their revenues and

expenses are denominated in US dollars. To date no financial instruments have

been used to hedge the net investment against movements in the exchange rates.

This exposure will continue to be monitored with the expansion of the scale of

the Group's overseas operations. Substantially all sales of the UK businesses

are denominated in sterling.

Interest rate risk profile of financial assets and financial liabilities

Short-term debtors and creditors have been excluded from each of the following

disclosures.

Financial assets

The Group's financial assets, other than short-term debtors, consist of sterling

cash deposits and cash at bank. At 30 September 2002 sterling and US dollar cash

deposits amounted to (pound)198,750,000 (2001: (pound)220,000,000). These

comprise deposits placed on money markets at three month rolling rates. The

amount of cash held in bank current accounts is not of significance.

Financial liabilities

The interest rate profile of the Group's financial liabilities at 30 September

2002 was:

<TABLE>

<CAPTION>

                                                                                                                       Financial

                                                                           Floating rate          Fixed rate         liabilities

                                                                               financial           financial         on which no

                                                              Total          liabilities         liabilities    interest is paid

Currency                                                (pound)'000          (pound)'000         (pound)'000         (pound)'000

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

<S>                                                          <C>                     <C>              <C>

Sterling                                                      1,388                  499                 889                  --

US dollar                                                    31,605                   --              31,605                  --

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

Total                                                        32,993                  499              32,494                  --

                                                             ===================================================================

</TABLE>

 

                                       45

<PAGE>

Notes to the financial statements for the year ended 30 September 2002

18 Creditors: amounts falling due after more than one year (continued)

      The interest rate profile of the Group's financial liabilities at 30

September 2001 was:

<TABLE>

<CAPTION>

                                                                                                                          Financial

                                                                                    Floating rate     Fixed rate        liabilities

                                                                                        financial      financial        on which no

                                                                          Total       liabilities    liabilities   interest is paid

Currency                                                            (pound)'000       (pound)'000    (pound)'000        (pound)'000

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

<S>                                                                     <C>                <C>           <C>                  <C>

Sterling                                                                  8,200             6,825          1,375                 --

US dollar                                                               204,789            83,773        112,223              8,793

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

Total                                                                   212,989            90,598        113,598              8,793

                                                                        ===========================================================

<CAPTION>

                                                        Fixed rate financial liabilities--          Financial liabilities on which

                  Fixed rate financial liabilities--           weighted average period for          no interest is  paid--weighted

                      weighted average interest rate                   which rate is fixed           average period until maturity

                              2002              2001                  2002            2001                      2002          2001

Currency                         %                 %                 Years           Years                     Years         Years

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

<S>                         <C>               <C>                       <C>             <C>                       <C>           <C>

Sterling                     8                 9                         3              10                        --            --

US dollar                   12 5/8            12 5/8                     6               7                        --             1

                            ======================================================================================================

</TABLE>

      The floating rate financial liabilities comprise sterling denominated bank

borrowings and overdrafts that bear interest at rates based on LIBOR.

Maturity of financial liabilities

The maturity profile of the Group's financial liabilities, other than short-term

creditors and accruals, at 30 September 2002, was as follows:

<TABLE>

<CAPTION>

                                                                                            Finance          Other

                                                                  Loan                  leases/hire      financial

                                                                 notes      Bank debt      purchase    liabilities          Total

                                                           (pound)'000    (pound)'000   (pound)'000    (pound)'000    (pound)'000

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

<S>                                                             <C>               <C>           <C>             <C>        <C>

In one year or less, or on demand                                   --            391           249             --            640

In more than one year but not more than two years                   --            391           140             --            531

In more than two years but not more than five years                 --            215             2             --            217

In more than five years                                         31,605             --            --             --         31,605

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

                                                                31,605            997           391             --         32,993

                                                                =================================================================

</TABLE>

      The maturity profile of the Group's financial liabilities, other than

short-term creditors and accruals, at 30 September 2001, was as follows:

<TABLE>

<CAPTION>

                                                                                            Finance          Other

                                                                  Loan                  leases/hire      financial

                                                                 notes      Bank debt      purchase    liabilities          Total

                                                           (pound)'000    (pound)'000   (pound)'000    (pound)'000    (pound)'000

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

<S>                                                             <C>               <C>           <C>             <C>        <C>

In one year or less, or on demand                                   --         12,049           366          7,430         19,845

In more than one year but not more than two years                   --         58,971           255          1,362         60,588

In more than two years but not more than five years                 --         14,429           142             --         14,571

In more than five years                                        112,198          5,787            --             --        117,985

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

                                                               112,198         91,236           763          8,792        212,989

                                                               ==================================================================

</TABLE>

 

                                       46

<PAGE>

18 Creditors: amounts falling due after more than one year (continued)

Other financial liabilities at 30 September 2001 related to deferred and

contingent consideration in relation to acquisitions. Bank and loan note debt

maturities at 30 September 2002 were as follows:

<TABLE>

<CAPTION>

                                                    Unsecured        Unsecured         Unsecured        Unsecured

                                                     sterling        US dollar          sterling        US dollar

                                                    bank debt        bank debt         bank debt       loan notes

                                                    (variable        (variable            (fixed           (fixed

                                                         rate)            rate)             rate)            rate)             Total

                                                  (pound)'000      (pound)'000       (pound)'000       (pound)'000       (pound)'000

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

<S>                                                       <C>              <C>               <C>            <C>               <C>

Due within one year                                       200               --               191                --               391

>From one to two years                                     200               --               191                --               391

>From two to three years                                   100               --               115                --               215

>From three to four years                                   --               --                --                --                --

>From four to five years                                    --               --                --            31,605            31,605

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

After five years                                          500               --               497            31,605            32,602

                                                    ================================================================================

</TABLE>

      Bank and loan note debt maturities at 30 September 2001 were as follows:

<TABLE>

<CAPTION>

                                                    Unsecured        Unsecured         Unsecured        Unsecured

                                                     sterling        US dollar          sterling        US dollar

                                                    bank debt        bank debt         bank debt       loan notes

                                                    (variable        (variable            (fixed           (fixed

                                                         rate)            rate)             rate)            rate)             Total

                                                  (pound)'000      (pound)'000       (pound)'000       (pound)'000       (pound)'000

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

<S>                                                     <C>             <C>                  <C>           <C>               <C>

Due within one year                                     2,686            9,224               139                --            12,049

>From one to two years                                   2,311           56,509               151                --            58,971

>From two to three years                                 1,728            5,447               165                --             7,340

>From three to four years                                  100            5,447               181                --             5,728

>From four to five years                                    --            1,361                --                --             1,361

After five years                                           --            5,787                --           112,198           117,985

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

                                                        6,825           83,775               636           112,198           203,434

                                                    ================================================================================

</TABLE>

Borrowing facilities

Borrowing facilities available, but undrawn, at 30 September 2002 in respect of

which all conditions precedent had been met were as follows:

<TABLE>

<CAPTION>

                                                                                                              2002              2001

                                                                                                       (pound)'000       (pound)'000

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

<S>                                                                                                             <C>            <C>

Expiring in one year or less                                                                                    --             1,668

                                                                                                              ======================

</TABLE>

 

                                       47

<PAGE>

Notes to the financial statements for the year ended 30 September 2002

18 Creditors: amounts falling due after more than one year (continued)

Fair values of financial assets and financial liabilities

Set out below is a comparison by category of book values and fair values of the

Group's financial assets and liabilities as at 30 September 2002. Fair value is

the amount at which a financial instrument could be exchanged in an arm's length

transaction between informed and willing parties, other than a forced or

liquidation sale and excludes accrued interest. The fair values shown below have

been assessed by calculating discounted cash flows that would arise if the

commitments at 30 September 2002 had been entered into at market rates at that

time.

<TABLE>

<CAPTION>

                                                           Book value           Book value           Fair value           Fair value

Primary financial instruments held or issued                     2002                 2001                 2002                 2001

  to finance the Group's operations                       (pound)'000          (pound)'000          (pound)'000          (pound)'000

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

<S>                                                           <C>                  <C>                  <C>                  <C>

Short-term borrowings                                             640               12,415                  640               12,415

Long-term borrowings                                           32,353              191,782               37,076              201,797

Other financial liabilities                                        --                8,793                   --                8,715

Financial assets                                              198,751              222,002              198,751              222,002

                                                           =========================================================================

</TABLE>

Summary of main methods and assumptions:

Short-term deposits and borrowings     The fair value of short-term deposits and

                                       loans approximates to the carrying amount

                                       because of the short maturity of these

                                       instruments.

Long-term borrowings                   The fair value of the US senior loan

                                       notes has been estimated using quoted

                                       market prices.

Currency exposures

The tables below show the extent to which Group companies have monetary assets

and liabilities in currencies other than their local currency. Foreign exchange

differences on retranslation of these assets and liabilities are taken to the

profit and loss account of the Group companies and the Group.

<TABLE>

<CAPTION>

                                                                                  Net foreign currency monetary assets/(liabilities)

                                                                              US dollar       EU currencies                    Total

2002                                                                        (pound)'000         (pound)'000              (pound)'000

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

<S>                                                                                 <C>                <C>                     <C>

Functional currency of Group operation:

Sterling                                                                            187                (611)                   (424)

US dollar                                                                            --                 248                     248

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

Total                                                                               187                (363)                   (176)

                                                                                  =================================================

<CAPTION>

                                                                                  Net foreign currency monetary assets/(liabilities)

                                                                              US dollar       EU currencies                    Total

2001                                                                        (pound)'000         (pound)'000              (pound)'000

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

<S>                                                                              <C>                   <C>                   <C>

Functional currency of Group operation:

Sterling                                                                         68,233                (464)                 67,769

US dollar                                                                            --                 636                     636

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

Total                                                                            68,233                 172                  68,405

                                                                                 ==================================================

</TABLE>

 

                                       48

<PAGE>

19 Provisions for liabilities and charges

<TABLE>

<CAPTION>

Deferred taxation                                                                                     (pound)'000

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

<S>                                                                                                        <C>

At 1 October 2001 as previously reported                                                                    5,884

Prior year adjustment (note 1)                                                                              2,488

                                                                                                           ------

At 1 October 2001 as restated                                                                               8,372

Currency adjustment                                                                                           (50)

Profit and loss account                                                                                      (171)

On disposals                                                                                               (5,986)

                                                                                                           ------

At 30 September 2002                                                                                        2,165

                                                                                                           ======

</TABLE>

      Deferred taxation provided in the financial statements is as follows:

<TABLE>

<CAPTION>

                                                                                                              2001

                                                                                           2002          (restated)

Group                                                                               (pound)'000        (pound)'000

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

<S>                                                                                       <C>               <C>

Excess of tax allowances over depreciation                                                3,635             9,188

Short-term timing differences                                                            (1,470)             (602)

Other                                                                                        --              (214)

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

                                                                                          2,165             8,372

                                                                                         ========================

</TABLE>

      The parent company has no deferred tax liability.

      No deferred tax is recognised on the unremitted earnings of overseas

subsidiaries as no dividends have been accrued.

      The group has tax losses arising on an overseas subsidiary of $59 million

(2001: $77 million) that are available for offset against future taxable profits

of that subsidiary. A deferred tax asset has not been recognized in respect of

these losses as their future recovery is uncertain.

20 Deferred income

<TABLE>

Government grants                                                                                     (pound)'000

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

<S>                                                                                                         <C>

At 1 October 2000                                                                                           6,670

Receivable in the year                                                                                        454

Released to profit and loss account                                                                        (1,388)

                                                                                                           ------

At 1 October 2001                                                                                           5,736

Receivable in the year                                                                                      1,464

Disposals                                                                                                  (2,203)

Released to profit and loss account                                                                        (1,067)

                                                                                                           ------

At 30 September 2002                                                                                        3,930

                                                                                                           ======

</TABLE>

 

                                       49

<PAGE>

Notes to the financial statements for the year ended 30 September 2002

21 Called up share capital

<TABLE>

<CAPTION>

                                                                                                2002           2001

                                                                                         (pound)'000    (pound)'000

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

<S>                                                                                           <C>            <C>

Authorised

250,000,000 (2001: 250,000,000) ordinary shares of 10p each                                   25,000         25,000

                                                                                              =====================

Allotted and fully paid

187,805,260 (2001: 189,311,298) ordinary shares of 10p each                                   18,781         18,931

                                                                                              =====================

</TABLE>

      455,962 shares were issued in the year as a result of the exercise of

share options (nominal value (pound)45,596, proceeds (pound)2,856,000). 88,000

shares were issued in December 2001 in acquiring the minority interest in QuChem

Limited prior to the disposal of the Pharmaceutical Services businesses. During

the year 2,050,000 shares were repurchased for (pound)8,001,000 (nominal value

(pound)205,000).

22 Share premium account and reserves

<TABLE>

<CAPTION>

                                                                           Share       Capital

                                                                         premium    redemption            Merger         Profit and

                                                                         account       reserve           reserve       loss account

Group                                                                (pound)'000   (pound)'000       (pound)'000        (pound)'000

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

<S>                                                                      <C>               <C>           <C>                <C>

At 1 October 1999 as previously reported                                  19,264            --                --             36,731

Prior year adjustment                                                         --            --                --             (1,890)

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

At 1 October 1999 as restated                                             19,264            --                --             34,841

Arising on share issues                                                   36,300            --           297,966                 --

Issue costs                                                                 (533)           --            (7,281)                --

Retained profit for the year                                                  --            --                --             10,651

Exchange differences arising on consolidation                                 --            --                --                953

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

At 1 October 2000 as previously reported                                  55,031            --           290,685             48,933

Prior year adjustment                                                         --            --                --             (2,488)

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

At 1 October 2000 as restated                                             55,031            --           290,685             46,445

Arising on share issues                                                  201,270            --                --                 --

Issue costs                                                              (16,043)           --                --                 --

Retained profit for the year                                                  --            --                --              8,817

Exchange differences arising on consolidation                                 --            --                --               (506)

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

At 1 October 2001 as previously reported                                 240,258            --           290,685             57,244

Prior year adjustment                                                         --            --                --             (2,488)

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

At 1 October 2001 as restated                                            240,258            --           290,685             54,756

Arising on share issues                                                    2,811            --                --                 --

Issue costs                                                                  (38)           --                --                 --

Retained profit for the year                                                  --            --                --             86,492

Exchange differences arising on consolidation                                 --            --                --            (13,990)

Purchase of own shares                                                        --           205                --             (8,001)

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

At 30 September 2002                                                     243,031           205           290,685            119,257

                                                                         ==========================================================

</TABLE>

 

                                       50

<PAGE>

22 Share premium account and reserves (continued)

      The prior year adjustment relates to the implementation of FRS 19. The

adoption of FRS 19 resulted in an increase in the tax charge in 2000 of

(pound)598,000 and a decrease in profit of that amount. Adoption of the standard

had no effect on the 2002 or 2001 charge as full provision for deferred tax had

been made in those years.

<TABLE>

<CAPTION>

                                                         Share           Capital

                                                       premium        redemption           Merger         Profit and

                                                       account           reserve          reserve       loss account

Company                                            (pound)'000       (pound)'000      (pound)'000        (pound)'000

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

<S>                                                    <C>                   <C>          <C>                <C>

At 1 October 2001                                      240,258                --          290,685              5,815

Arising on share issues                                  2,811                --               --                 --

Issue costs                                                (38)               --               --                 --

Profit for the year                                         --                --               --            129,962

Exchange difference                                         --                --               --             (6,296)

Purchase of own shares                                      --               205               --             (8,001)

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

At 30 September 2002                                   243,031               205          290,685            121,480

                                                       =============================================================

</TABLE>

Share option schemes

The following share option schemes were established in 1996:

      The Galen Approved Executive Share Option Scheme

      The Galen Unapproved Executive Share Option Scheme

      The Galen Savings Related Share Option Scheme

      The Galen 2000 US Option Scheme was established in 2000.

      A summary of the main terms of the schemes is set out below.

The Galen Approved Executive Share Option Scheme and the Galen Unapproved

Executive Share Scheme ("the Executive Schemes") These are discretionary share

schemes, one of which has been approved by the Inland Revenue. The terms of

these schemes are similar unless indicated to the contrary. Both schemes provide

for options to be granted over unissued shares or shares held in a trust.

Options are granted at the discretion of the Remuneration Committee of the

Company to any full time employee of any Group company.

      The granting of options is subject to performance conditions being

fulfilled before the option can be exercised. Options may be exercised between

the third and tenth anniversaries of their date of grant provided that the

performance conditions have been fulfilled. The exercise price is not less than

the higher of the nominal value of the share and the middle market quotation for

the last dealing day before the date of grant.

      The number of options which may be issued is subject to overall scheme

limits and individual limits. No further options may be granted if, as a result:

(i)   the aggregate number of shares issued, or remaining issuable, under any of

      the Company's schemes in the previous 10 years would exceed 10% of the

      Company's issued share capital on the day preceding the proposed grant

      date; or

(ii)  the aggregate number of shares issued, or remaining issuable, under any of

      the Company's schemes (other than the Savings Related Scheme) in the

      previous 10 years would exceed 5% of the Company's issued share capital on

      the day preceding the proposed grant date; or

(iii) the aggregate number of shares issued, or remaining issuable, under any of

      the Company's schemes in the previous 3 years would exceed 3% of the

      Company's issued share capital at that time.

 

                                       51

<PAGE>

Notes to the financial statements for the year ended 30 September 2002

22 Share premium account and reserves (continued)

      No further options may be granted to an individual if as a result (i) the

aggregate market value of shares which have been issued to him or for which he

may subscribe under any Company scheme (other than the Savings Related Scheme)

pursuant to options granted to him during the previous 10 years would exceed 4

times his annual earnings, or, (ii) in the case of the Approved Scheme, the

aggregate market value of shares which he may acquire under this scheme would

exceed (pound)30,000.

The Galen Savings Related Share Option Scheme ("the SAYE Scheme")

The SAYE Scheme permits the grant of options over unissued shares or shares held

in a trust. All eligible employees are invited to apply for options and it is a

condition of application that employees enter into a savings contract with an

approved savings institution. The number of shares over which an option can be

granted will be determined by the level of contributions which an employee

commits to under the savings contract. Any employee of a Group company with more

than 1 year continuous employment is eligible to participate. The exercise price

is not less than the higher of the nominal value of the share and 80% of the

average middle market quotation on the day following the Company's release to

the public of its fiscal year financial results. An option may be exercised 3 or

5 years after the date of grant depending on the type of savings contract taken

out.

      No further options may be granted if, as a result:

(i)   the aggregate number of shares issued, or remaining issuable, pursuant to

      options granted under this scheme and any other share option scheme

      established by the Company and shares issued under any other employees'

      share scheme of the Company in the previous 10 years would exceed 10% of

      the Company's issued share capital; or

(ii)  the aggregate number of shares issued, or remaining issuable, pursuant to

      options granted in the previous 5 years under this scheme and any other

      share option schemes established by the Company and shares issued under

      any other employees' share scheme of the Company in the previous 5 years

      would exceed 5% of the Company's issued share capital.

The Galen 2000 US Option Scheme ("the US Share Scheme")

Pursuant to the terms of the US Share Scheme, both incentive stock options and

non-qualified stock options may be granted to any eligible employee of or

consultant to the Company's US subsidiaries.

      Options may be granted at the discretion of the Remuneration Committee to

any officer or employee of any US subsidiary of Galen. On any date, no option

may be granted under the US Share Scheme if, as a result, any of the following

limits would be exceeded:

(i)   the aggregate number of ordinary shares issued, or remaining issuable,

      pursuant to options granted during the previous 10 years under this

      scheme, the Executive Schemes, the SAYE Scheme and all other employees'

      share schemes, established by the Company would exceed 10% of the issued

      ordinary share capital of the Company on the day preceding that date;

(ii)  the aggregate number of ordinary shares issued, or remaining issuable,

      pursuant to options granted during the previous 10 years under this

      scheme, the Executive Schemes and all other discretionary share option

      schemes (other than a savings related share option scheme) established by

      the Company would exceed 5% of the issued ordinary share capital of the

      Company on the day preceding that date;

(iii) the aggregate number of ordinary shares issued, or remaining issuable,

      pursuant to options granted in the previous 3 years under this scheme, the

      Executive Schemes, the SAYE Scheme and all other employees' share schemes

      established by the Company would exceed 3% of the issued ordinary share

      capital of the Company on the day preceding that date.

 

                                       52

<PAGE>

22 Share premium account and reserves (continued)

      The maximum number of ordinary shares which may be granted in ADS form as

incentive stock options under the US Share Scheme is 6,363,332 Ordinary Shares.

      There are no limits on the maximum number of ADSs which may be the subject

of an option granted under the US Share Scheme to an eligible employee. The

exercise price of an option shall not be less than 100% of the fair market value

of an ADS on the date the option is granted. The period during which options may

become exercisable shall be set by the Remuneration Committee. All options shall

cease to be exercisable on the tenth anniversary of the date of grant.

      Details of option/warrants movements during the year are set out below:

<TABLE>

<CAPTION>

                                                              Options

                                   At        Options       cancelled/        Options                 At      Exercise

                            1 October        granted          (lapsed)     exercised       30 September         price      Exercise

                                 2001        in year          in year        in year               2002        (pound)       period

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

<S>                           <C>            <C>               <C>           <C>                 <C>            <C>       <C>

Unapproved scheme              15,003             --               --         (8,335)             6,668         3.600     2001-2008

                              106,333             --           (5,635)       (58,621)            42,077         3.925     2001-2008

                              167,312             --               --        (34,786)           132,526         4.475     2002-2009

                              177,404             --          (39,343)       (14,420)           123,641         5.050     2002-2009

                              440,387             --         (131,149)            --            309,238         8.225     2003-2010

                                   --        769,079         (176,000)            --            593,079         7.225     2004-2011

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

Approved scheme                74,997             --               --        (41,665)            33,332         3.600     2001-2008

                               14,583             --               --         (5,095)             9,488         3.925     2001-2008

                               13,406             --               --         (6,703)             6,703         4.475     2002-2009

                               24,741             --           (6,312)            --             18,429         5.050     2002-2009

                               86,613             --          (16,851)            --             69,762         8.225     2003-2010

                                   --            737               --             --                737         7.225     2004-2011

                            =======================================================================================================

</TABLE>

      The following options were outstanding under the Galen Savings Related

Share Option Scheme at 30 September 2002:

<TABLE>

<CAPTION>

                                                                                                            Exercise       Earliest

                                                                                                               price       exercise

Number of options                                                                                             (pound)          date

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

<S>                                                                                                             <C>            <C>

156,172                                                                                                         2.56           2003

 42,939                                                                                                         5.10           2003

 44,722                                                                                                         3.38           2004

 55,616                                                                                                         6.80           2004

 24,947                                                                                                         5.10           2005

  7,043                                                                                                         6.80           2006

 99,271                                                                                                         5.88           2005

 32,461                                                                                                         5.88           2007

                                                                                                            =======================

</TABLE>

 

                                       53

<PAGE>

Notes to the financial statements for the year ended 30 September 2002

22 Share premium account and reserves (continued)

      Galen options/warrants outstanding in substitution for options/warrants

previously issued by Warner Chilcott and options granted under the Galen 2000 US

Option Scheme are as follows:

<TABLE>

<CAPTION>

                                                                                         Exercise price per ADS

                                                                       ADSs subject                         Weighted

                                                                         to option              Range        average

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

<S>                                                                      <C>            <C>                   <C>

Balance at 1 October 2001                                                1,578,306      $ 1.60-$49.35         $32.06

Granted                                                                    374,972      $27.99-$41.20         $42.64

Exercised                                                                  (99,680)     $10.80-$32.00         $17.85

Lapsed                                                                    (201,106)     $11.20-$49.35         $43.61

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

Balance at 30 September 2002                                             1,652,492      $ 1.60-$49.35         $33.39

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

Exercisable at 30 September 2002                                         1,221,969      $ 1.60-$49.35         $30.53

                                                                         ===========================================

</TABLE>

      The following option and warrant data at 30 September 2002 is grouped by

exercise price range:

<TABLE>

<CAPTION>

                                                                            Range of exercise price

                                                              $1.60 to      $16.00 to      $30.00 to      $42.00 to

                                                                $15.99         $29.99         $41.99         $51.53          Total

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

<S>                                                            <C>             <C>           <C>            <C>          <C>

Number of ADSs subject to options/warrants                     433,317         83,359        645,735        490,081      1,652,492

Weighted average exercise price                                 $13.69         $24.48         $37.11         $47.41         $33.39

Weighted average remaining contractual life (years)                3.5            7.4            7.3            5.1            5.7

Number of exercisable options/warrants                         433,317         79,384        346,789        362,479      1,221,969

Weighted average exercise price for

  exercisable options and warrants                              $13.69         $24.30         $34.76         $47.99         $30.53

                                                               ===================================================================

</TABLE>

The Galen Employee Benefit Trust

The Galen Holdings PLC Employee Benefit Trust was established in June 1997. The

trustee is Galen Trustees Limited, a subsidiary of Galen Holdings PLC. It is a

discretionary trust for the benefit of employees and former employees of the

Group, including directors, and may be used inter alia, to meet obligations

under the Executive Share Option Schemes, the Savings Related Share Option

Scheme, or any other share scheme established by any Group company. Dividends

have not been waived by the Trust. Dividend income is included in the Group's

profit and loss account by way of reduction of the total dividend charge. Dr

McClay, who cannot be a beneficiary of the Trust, gifted 5,000,262 ordinary

shares to the Trust on its establishment. At the year end the 4,721,241 (2001:

4,709,353) shares held by the Trust were valued at (pound)17,374,167 (2001:

(pound)30,257,593). Other income and costs of the Trust are incorporated into

the financial statements where applicable. Cash held by the Trust totalled

(pound)274,069 and (pound)875,172 at 30 September 2002 and 2001 respectively.

      The Group continues to take advantage of the dispensation in the Urgent

Issues Task Force's Abstract 17 "Employee Share Schemes" not to apply that

Abstract to the Group's Inland Revenue approved SAYE schemes.

23 Minority interests

                                                                    (pound)'000

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

At 1 October 2000                                                           120

Profit and loss account                                                     122

                                                                           ----

At 1 October 2001                                                           242

Disposals                                                                  (274)

Profit and loss account                                                      32

                                                                           ----

At 30 September 2002                                                         --

                                                                           ====

 

                                       54

<PAGE>

24 Reconciliation of operating profit to net cash inflow from operating

activities

<TABLE>

<CAPTION>

                                                                                    2002              2001              2000

                                                                             (pound)'000       (pound)'000       (pound)'000

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

<S>                                                                              <C>                 <C>                <C>

Continuing operations

Operating profit                                                                  37,439            20,414             6,167

Depreciation of tangible fixed assets                                              3,615             2,974             2,161

Amortisation of intangible fixed assets                                           26,269            23,024             1,087

Capital grants release                                                               (93)           (1,060)             (928)

Loss/(profit) on sale of tangible fixed assets                                        --                25                (9)

Increase in stocks                                                                (1,033)           (2,302)           (1,507)

(Increase)/decrease in debtors                                                   (10,040)            1,666              (310)

Increase/(decrease) in creditors                                                      85            (1,585)            1,566

Exchange difference                                                               (1,226)           (1,442)               73

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

Net cash inflow from continuing operations                                        55,016            41,714             8,300

                                                                                 ===========================================

Discontinued operations

Operating profit                                                                   5,745             9,925            12,577

Depreciation of tangible fixed assets                                              2,322             3,162             2,191

Amortisation of intangible fixed assets                                            1,136             1,578               981

Capital grants release                                                              (974)             (328)             (367)

Decrease/(increase) in stocks                                                        230               (54)              (55)

Decrease/(increase) in debtors                                                     3,215            (2,880)           (5,334)

Increase/(decrease) in creditors                                                      42               763            (1,665)

Exchange difference                                                               (3,440)              (25)               31

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

Net cash inflow from discontinued activities                                       8,276            12,141             8,359

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

Total net cash inflow from operating activities                                   63,292            53,855            16,659

                                                                                 ===========================================

</TABLE>

25 Reconciliation of net cash flow to movement in net funds/(debt)

<TABLE>

<CAPTION>

                                                                                    2002              2001              2000

                                                                             (pound)'000       (pound)'000       (pound)'000

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

<S>                                                                              <C>               <C>               <C>

(Decrease)/increase in cash in the year                                           (7,640)          (16,658)            5,995

Cash (inflow)/outflow from movement in liquid resources                          (18,641)          161,000            24,500

Cash outflow/(inflow) from increase in debt and hire purchase financing          166,135           (22,028)          (13,147)

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

Change in net funds resulting from cash flows                                    139,854           122,314            17,348

Exchange movement                                                                  1,272             1,218            (1,406)

Non-cash movement                                                                  2,345              (500)             (522)

Loans eliminated on disposal                                                       4,482                --                --

Loan notes assumed on acquisition                                                     --                --          (140,739)

Hire purchase obligations assumed on acquisition                                      --                --               (52)

Short-term deposits assumed on acquisition                                            --                --            42,000

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

Movement in net funds in the year                                                147,953           123,032           (83,371)

Net funds/(debt) at beginning of year                                             17,805          (105,227)          (21,856)

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

Net funds/(debt) at end of year                                                  165,758            17,805          (105,227)

                                                                                 ===========================================

</TABLE>

 

                                       55

<PAGE>

Notes to the financial statements for the year ended 30 September 2002

25 Reconciliation of net cash flow to movement in net funds/(debt) (continued)

Analysis of net funds/(debt)

<TABLE>

<CAPTION>

                                                                                               Loans

                                                                               Loans         greater

                                Cash at           Bank           Liquid    less than            than

                                   bank     overdrafts        resources     one year        one year

                            (pound)'000    (pound)'000      (pound)'000  (pound)'000     (pound)'000

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

<S>                             <C>             <C>             <C>           <C>            <C>

At 1 October 1999                   851         (1,186)           5,500       (7,477)        (19,134)

Cash flow                         4,809          1,186           24,500        3,275         (16,751)

Exchange movement                    --             --               --         (200)         (1,198)

Acquisitions                         --             --           42,000           --              --

Other non-cash movement              --             --               --           --              --

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

At 1 October 2000                 5,660             --           72,000       (4,402)        (37,083)

Cash flow                       (16,658)            --          161,000       (7,647)        (42,104)

Transfers                        13,000             --          (13,000)          --              --

Exchange movement                    --             --               --           --              --

Other non-cash movement              --             --               --           --              --

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

At 1 October 2001                 2,002             --          220,000      (12,049)        (79,187)

Cash flow                        (7,640)            --          (18,641)      11,922          77,564

Transfers                         5,639             --             (893)      (4,746)             --

Disposal                             --             --               --        4,482              --

Exchange movement                    --             --           (1,716)          --           1,017

Other non-cash movements             --             --               --           --              --

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

At 30 September 2002                  1             --          198,750         (391)           (606)

                                =====================================================================

<CAPTION>

                                                                            Loan

                                                          Loan             notes

                                      Hire               notes           greater                Net

                                  purchase           less than              than             funds/

                               obligations            one year          one year             (debt)

                               (pound)'000         (pound)'000       (pound)'000       (pound)'000

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

<S>                                    <C>              <C>             <C>                <C>

At 1 October 1999                     (410)                 --                --           (21,856)

Cash flow                              329                  --                --            17,348

Exchange movement                       (8)                 --                --            (1,406)

Acquisitions                           (52)            (27,808)         (112,931)          (98,791)

Other non-cash movement               (522)                 --                --              (522)

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

At 1 October 2000                     (663)            (27,808)         (112,931)         (105,227)

Cash flow                              400              27,323                --           122,314

Transfers                               --                  --                --                --

Exchange movement                       --                 485               733             1,218

Other non-cash movement               (500)                 --                --              (500)

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

At 1 October 2001                     (763)                 --          (112,198)           17,805

Cash flow                              372                  --            76,277           139,854

Transfers                               --                  --                --                --

Disposal                                --                  --                --             4,482

Exchange movement                       --                  --             1,971             1,272

Other non-cash movements                --                  --             2,345             2,345

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

At 30 September 2002                  (391)                 --           (31,605)          165,758

                               ===================================================================

</TABLE>

      Liquid resources comprise short-term deposits with banks which mature

within 12 months of the date of inception.

      Other non-cash movements relate to new hire purchase agreements incepted

in 2000 and 2001 and to a release of loan note mark-up in 2002.

26 Disposals

During the year the Group disposed of its pharmaceutical services segment to

companies owned by Dr Allen McClay, a former director of the Company. Details of

the disposal are as follows:

                                                                    (pound)'000

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

Intangible fixed assets                                                  19,737

Tangible fixed assets                                                    56,085

Stocks                                                                      284

Debtors                                                                  19,176

Creditors                                                                (4,040)

Long-term borrowings                                                     (4,482)

Taxation                                                                 (5,800)

Deferred income                                                          (2,203)

                                                                       --------

Net assets disposed of                                                   78,757

Cash consideration (net of costs)                                       150,145

                                                                       --------

Gain on disposal                                                         71,388

                                                                       ========

 

 

                                       56

<PAGE>

26 Disposals (continued)

      The services segment contributed (pound)8,276,000 to net operating cash

flow, paid (pound)585,000 in respect of net returns on investment,

(pound)1,607,000 in respect of taxation and (pound)4,842,000 in respect of

tangible fixed asset additions.

27 Capital commitments

<TABLE>

<CAPTION>

                                                                               Group          Group        Company       Company

                                                                                2002           2001           2002          2001

                                                                         (pound)'000    (pound)'000    (pound)'000   (pound)'000

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

<S>                                                                              <C>          <C>               <C>           <C>

Capital expenditure that has been contracted for but has

  not been provided for in the financial statements                              924          1,597             --            --

                                                                                ================================================

</TABLE>

28 Financial commitments

At 30 September 2002 the Group had annual commitments under non-cancellable

operating leases as follows:

<TABLE>

<CAPTION>

                                                                            Land and                      Land and

                                                                           buildings         Others      buildings        Others

                                                                                2002           2002           2001          2001

                                                                         (pound)'000    (pound)'000    (pound)'000   (pound)'000

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

<S>                                                                              <C>            <C>            <C>           <C>

Expiring within one year                                                          --             57             55           182

Expiring between one and five years                                              759            272            757           238

Expiring in over five years                                                       --             --          1,001            --

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

                                                                                 759            329          1,813           420

                                                                           =====================================================

</TABLE>

29 Related parties

The Company has taken advantage of the exemption under Financial Reporting

Standard 8 "Related party disclosures" (FRS 8) not to disclose related party

transactions between wholly owned Group undertakings which are eliminated on

consolidation.

      During the year ended 30 September 2002 Galen had business dealings with

Elan Corporation plc ("Elan") and Boron-LePore Group, Inc. At 30 September 2002

Elan and its subsidiaries held 3.8% of the Company's share capital. Mr T G

Lynch, former Executive Vice Chairman of Elan, served on Galen's Board as a

non-executive director until his resignation on 13 February 2002. In March 1999

Warner Chilcott reached a binding agreement with Elan under which Elan agreed to

acquire Warner Chilcott's marketing rights to an extended-release nifedipine

product. Under the agreement Warner Chilcott was entitled to receive royalties

based upon United States sales of the product. In the year ended 30 September

2002 royalties receivable totalled (pound)1.73 million.

      Boron-LePore provides meeting planning services to Warner Chilcott. Mr

Roger Boissonneault, Galen's Chief Executive Officer, served on the Board of

Boron-LePore until June 2002. In the year ended 30 September 2002 fees of

(pound)1,298,000 were charged to Warner Chilcott by Boron-LePore and expensed to

operations.

      In January 2002, Galen sold its Chemical Synthesis Services business for

(pound) 25 million to companies owned by Dr Allen McClay, a former director of

the Company. As part of this transaction, Galen agreed to indemnify the buyer

against any claims arising in relation to the business in the period prior to

closing of the sale, subject to certain limitations. Galen also provided certain

warranties in relation to the disposal, and any claims brought under these

warranties will be subject to a de minimis threshold and will be capped at the

purchase price. In addition, Galen entered into certain non-compete provisions.

In August 2002, Galen sold its Interactive Clinical Technologies business to a

company also controlled by Dr Allen McClay for $16 million. This agreement

contains a non-compete undertaking from Galen which expires three years from the

closing date. Details of disposal of the services operations to Dr Allen McClay,

a former director of the Company, are provided in note 26.

 

                                       57

<PAGE>

Notes to the financial statements for the year ended 30 September 2002

30 Summary of differences between UK and US generally accepted accounting

principles ("GAAP")

(1) Profit for the financial year and shareholders' funds

The Group financial statements are prepared in accordance with UK GAAP which

differs in certain significant respects from US GAAP. The effect of the US GAAP

adjustments to profit for the financial year and to equity shareholders' funds

are set out in the tables below:

<TABLE>

<CAPTION>

                                                                                                     2002         2001         2000

                                                                                      Notes   (pound)'000  (pound)'000  (pound)'000

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

<S>                                                                                   <C>          <C>          <C>          <C>   

(a) Reconciliation of profit for the financial year to US GAAP

Profit for the financial year under UK GAAP                                                        92,010       13,230       13,687

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

US GAAP adjustments:

Amortisation of goodwill and intangibles                                              (i)(c)       14,899        4,811          393

In-process research and development                                                   (i)(d)           --           --      (16,898)

Related amortisation of goodwill                                                      (i)(d)           --          896           51

Depreciation on capitalisation of interest                                              (ii)          (35)         (35)         (35)

Inventory step up release                                                             (i)(a)           --         (986)          --

Deferred taxation                                                                      (iii)       (8,414)         846           --

Compensation expense                                                                    (iv)         (219)      (3,405)      (1,862)

Deferred tax effect of US GAAP adjustments                                                            296       (3,990)        (220)

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

US GAAP adjustments total                                                                           6,527       (1,863)     (18,571)

                                                                                                  =================================

Profit/(loss) for the financial period under US GAAP                                               98,537       11,367       (4,884)

                                                                                                  =================================

Basic earnings per share under US GAAP                                                  (vi)        53.2p         7.0p       (4.0)p

                                                                                                  =================================

Diluted earnings per share under US GAAP                                                (vi)        52.9p         7.0p       (4.0)p

                                                                                                  =================================

<CAPTION>

                                                                                                     2002         2001         2000

                                                                                      Notes   (pound)'000  (pound)'000  (pound)'000

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

<S>                                                                                   <C>          <C>          <C>          <C>   

(b) Effect on equity shareholders' funds of differences between UK GAAP and US GAAP

Equity shareholders' funds under UK GAAP                                                          671,959      604,630      408,058

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

US GAAP adjustments:

Acquisition accounting                                                                (i)(a)      (85,752)     (83,696)     (87,072)

Amortisation of goodwill relating to contingent consideration                         (i)(b)        1,057        1,057          608

In-process research and development                                                   (i)(d)           --      (16,955)     (17,851)

Capitalisation of interest                                                              (ii)        1,622        1,657        1,692

Deferred taxation                                                                      (iii)      (15,366)      (7,248)      (4,104)

Employee benefit trust                                                                   (v)       (7,082)      (7,064)      (7,377)

Share premium account                                                                    (v)        7,082        7,064        7,377

Dividends                                                                             (viii)        3,662        3,143        2,194

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

US GAAP adjustments total                                                                         (94,777)    (102,042)    (104,533)

                                                                                                  =================================

Equity shareholders' funds under US GAAP                                                          577,182      502,588      303,525

                                                                                                  =================================

</TABLE>

 

                                       58

<PAGE>

30 Summary of differences between UK and US generally accepted accounting

principles ("GAAP") (continued)

(i) Business combinations

(a) Acquisition accounting 

This amount relates to the acquisition of Warner Chilcott on 29 September 2000

and reflects differences in acquisition accounting between US GAAP and UK GAAP.

      1     Share consideration

            Under UK GAAP, shares issued in consideration for the acquisition of

            shares in a subsidiary company are valued at the market price ruling

            on the date of consummation of the transaction. Under US GAAP,

            shares are valued at the average market price for the 5 trading days

            before and after the date of announcement of the proposed

            transaction. Under US GAAP, goodwill and the related credits to

            share capital and share premium would have been less than on the UK

            GAAP basis.

      2     Substitute options

            Under US GAAP, the fair value of an acquiring company's share

            options or warrants substituted for options or warrants of the

            acquiree is calculated using the Black-Scholes option-pricing model,

            which values the options at the date of announcement. Under UK GAAP,

            the intrinsic value method is used, the value reflecting the

            difference between the market price of the related shares on

            acquisition date and the proceeds due on exercise of the options or

            warrants. Under US GAAP, goodwill and the related merger reserve

            credit would have been less than on the UK GAAP basis.

      3     Deferred compensation

            Under US GAAP, any amounts attributed to deferred compensation in

            relation to specific unvested options is shown as a debit balance

            within shareholders' equity. No such amount is recorded under UK

            GAAP.

      4     Inventory step up release

            Under US GAAP, stocks ("inventory") acquired on takeover are

            restated to reflect their selling price less a margin for selling.

            Under UK GAAP, stocks acquired are valued at the lower of acquired

            cost and net realisable value. Under US GAAP, the amount of

            inventory step up is charged to cost of sales as the inventory is

            sold.

      5     Workforce

            Under US GAAP accounting, valuations are attributed to the assembled

            workforce of the company being acquired and this value, which again

            reduces goodwill by a similar amount, is amortised over a relevant

            period, deemed to be 7 years in this instance (see 3 below). No such

            workforce values are attributed under UK GAAP.

      6     Other intangibles

            Under US GAAP, value is attributed to intangibles which under UK

            GAAP might not be separately identifiable from goodwill, for

            example, amounts attributed to core development technologies in

            Warner Chilcott. Such amounts are amortised over the estimated lives

            of these assets.

      7     Deferred tax asset

            Under US GAAP, where tax law allows the use of an acquired company's

            brought forward tax losses in a restructured Group situation against

            future combined taxable income, a deferred tax asset may be

            recognised at acquisition based on an assessment of the combined

            enterprise's past and anticipated future results of operations. Such

            an asset net of valuation allowance was recognised as a deferred tax

            asset in relation to Warner Chilcott's brought forward tax losses

            and goodwill was correspondingly reduced. No such asset was

            recognised under UK GAAP.

(b) Amortisation of goodwill relating to contingent consideration

Under UK GAAP, amounts are included within creditors representing contingent

consideration payable to the former shareholders of ICTI and of ACCI and these

amounts were included in goodwill on acquisition. Under US GAAP amounts related

to contingent consideration are only included when the contingency is resolved.

(c) Amortisation of goodwill and intangibles

This amount reflects the difference in the goodwill amortisation charge for the

years ended 30 September 2000 and 2001 between US GAAP and UK GAAP as a result

of the different accounting treatments impacting on goodwill as detailed in

(i)(a) and (i)(b). In the year ended 30 September 2002 there has been no

goodwill amortisation charge under US GAAP following the adoption of SFAS 142

(see (3) below).

 

                                       59

<PAGE>

Notes to the financial statements for the year ended 30 September 2002

30 Summary of differences between UK and US generally accepted accounting

principles ("GAAP") (continued)

(d) In-process research and development

As part of the acquisitions of Bartholomew Rhodes in 1999 and of Warner Chilcott

in 2000, values were assigned to in-process research and development for drugs

under development at the dates of acquisition. Under US GAAP, the amount of

purchase consideration allocated to in-process research and development is

written off immediately to profit and loss account. The valuation of in-process

research and development was calculated using an income approach.

      Under UK GAAP, these amounts, which are allocated to in-process research

and development under US GAAP, would be included within goodwill. The related

amortisation expense adjustment is shown separately in the reconciliation.

(ii) Capitalisation of interest

Under UK GAAP, companies may choose whether or not to capitalise finance costs

on fixed assets that take a substantial period of time to bring into service. US

GAAP requires interest incurred as part of the cost of constructing fixed assets

to be capitalised and amortised over the life of the asset.

(iii) Deferred taxation

In connection with the Warner Chilcott transaction, the Company acquired US

federal income tax net operating loss carryforwards of approximately $62.0

million, which begin to expire in 2011. At 30 September 2002 the Company has

recorded a deferred tax asset, subject to a valuation allowance, of $6.4 million

in respect of these carryforwards. If, in the future, the realisation of this

acquired deferred tax asset becomes more likely than not, any reduction of the

associated valuation allowance will be allocated to reduce other purchased

intangible assets.

(iv) Share compensation expense

Under UK GAAP, no cost has been accrued in relation to share options awarded to

employees since the exercise price is equivalent to the market value at the date

of grant.

      Under US GAAP, the Company has elected to follow APB 25. Under APB 25

compensation cost on variable option awards in which the number of options

exercisable is not known at the date of grant is calculated as the difference

between the option price and the market price at the end of the reporting

period. This cost is amortised over the period from the date the options are

granted to the date they are first exercisable, that is, the vesting date. Also

included in the compensation expense reconciling item for 2001 above is an

amount of (pound)2.68 million ($3.88 million) relating to the intrinsic value of

share options, the terms of which were modified on the cessation of employment

of a director.

(v) Employee benefit trust

Under UK GAAP, shares held by the employee benefit trust are recorded as fixed

asset investments with zero costs. Under US GAAP, those shares are regarded as

treasury stock and recorded as a contra equity account within equity

shareholders' funds at the date of contribution.

(vi) Earnings per share

Earnings per share is based on profit for the financial year under US GAAP as

calculated above and on 185,244,963 ordinary shares (2001: 161,354,740, 2000:

121,444,370), the weighted average number of ordinary shares in issue during the

year excluding those held in the employee trust. Diluted earnings per share is

calculated on profit for the financial year under US GAAP as calculated above

and on an adjusted number of shares of 186,330,634 (2001: 164,159,894, 2000:

121,444,370) reflecting the number of dilutive shares under option.

(vii) Presentation of exceptional items

Under UK GAAP, exceptional items are items which derive from events or

transactions that fall within the ordinary activities of the reporting entity

and which individually or, if of a similar type, in aggregate, need to be

disclosed by virtue of their size or incidence. Under US GAAP, only items which

are deemed unusual in nature and infrequent in occurrence (not reasonably

expected to recur in the foreseeable future) qualify for presentation as "extra-

ordinary" items. They are presented below income before extraordinary items in

the profit and loss account. Under US GAAP, none of the items classed as

exceptional under UK GAAP meet the criteria for presentation as an extraordinary

item.

(viii) Dividends

Under UK GAAP, final ordinary dividends are recognised in the financial year in

respect of which they are recommended by the Board of Directors for approval by

shareholders. Under US GAAP, such dividends are not recognised until they are

formally declared by the Board of Directors.

 

                                       60

<PAGE>

30 Summary of differences between UK and US generally accepted accounting

principles ("GAAP") (continued)

(2) Consolidated cash flow statement

The Group Consolidated Cash Flow Statement is prepared in accordance with United

Kingdom Financial Reporting Standard 1 "FRS 1 (Revised 1996)," whose objective

and principles are similar to those set out in SFAS 95, "Statement of Cash

Flows." The principal differences between the Standards relate to

classification. Under FRS 1 (Revised 1996), the Company presents its cash flows

for (a) operating activities, (b) returns on investments and servicing of

finance, (c) taxation, (d) capital expenditure and financial investment, (e)

acquisitions, (f) dividends paid, (g) management of liquid resources and (h)

financing. SFAS 95 requires only three categories of cash flow activity being

(a) operating, (b) investing and (c) financing.

      Cash flows from taxation and returns on investments and servicing of

finance under FRS 1 (Revised 1996) would be included as operating activities

under SFAS 95, capital expenditure and financial investment and acquisitions and

disposals would be included as investing activities, and dividends paid would be

included as a financing activity under SFAS 95. Under FRS 1 (Revised 1996) cash

comprises cash in hand and deposits repayable on demand, less overdrafts

repayable on demand, and liquid resources comprise current asset investments

held as readily disposable stores of value. Under SFAS 95 cash equivalents,

comprising short-term highly liquid investments, generally with original

maturities of three months or less, are grouped together with cash. Short-term

borrowings repay able on demand would not be included within cash and cash

equivalents and movements on those borrowings would be included in financing

activities.

      Set out below, for illustrative purposes, is a summary consolidated cash

flow statement under US GAAP:

<TABLE>

<CAPTION>

                                                                                        2002                 2001               2000

                                                                                 (pound)'000          (pound)'000        (pound)'000

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

<S>                                                                                  <C>                  <C>                 <C>   

Net cash provided by operating activities                                             42,301               41,185             12,851

Net cash provided by/(used in) investing activities                                  110,432             (101,358)            10,756

Net cash (used in)/provided by financing activities                                 (175,984)             204,515             47,702

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

Net (decrease)/increase in cash and cash equivalents                                 (23,251)             144,342             71,309

Cash and cash equivalents at beginning of period                                     222,002               77,660              6,351

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

Cash and cash equivalents at end of period                                           198,751              222,002             77,660

                                                                                    ================================================

</TABLE>

(3) Recently issued accounting pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS 133,

"Accounting for Derivative Instruments and Hedging Activities." SFAS 133

establishes a new model for accounting for derivatives and hedging activities

and supersedes and amends a number of existing standards. SFAS 133 is effective

for fiscal years beginning after 15 June 1999, but earlier application is

permitted as of the beginning of any fiscal quarter subsequent to 15 June 1998.

Upon initial application, all derivatives are required to be recognised in the

statement of financial position as either assets or liabilities and measured at

fair value. In addition, all hedging relationships must be reassessed and

documented pursuant to the provisions of SFAS 133. Subsequent to the issuance of

SFAS 133, the FASB issued SFAS 137, "Accounting for Derivative Instruments and

Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133,"

which defers the effective date of SFAS 133 to periods beginning after 15 June

2000. Galen adopted the statement in the year ended 30 September 2001. Adoption

of the statement had no material impact on the financial statements.

      In December 1999, the Accounting Standards Board ("ASB") issued Financial

Reporting Standard ("FRS") 19 "Deferred tax" which introduces a form of "full"

provision for accounting for deferred tax that replaces the "partial" provision

method in Statement of Standard Accounting Practice ("SSAP") 15. Deferred tax

should be provided on timing differences that have originated but not reversed

by the balance sheet date, but only when the entity has an obligation to pay

more tax in the future as a result of reversal of those timing differences. FRS

19 permits but does not require reporting entities to discount deferred tax

assets and liabilities to reflect the true value of money. The FRS applies to

accounting periods ending on or after 23 January 2002. The Company adopted the

FRS in these financial statements.

 

                                       61

<PAGE>

Notes to the financial statements for the year ended 30 September 2002

30 Summary of differences between UK and US generally accepted accounting

principles ("GAAP") (continued)

      Effective 1 October 2001 the Company adopted the provisions of Statement

of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"),

and Statement of Financial Accounting Standards No. 142, "Goodwill and Other

intangible Assets" ("SFAS 142"). SFAS 141 eliminates the pooling-of-interest

method of accounting for business combinations initiated after 1 July 2001, and

changes the criteria for recognizing intangible assets apart from goodwill. SFAS

141 also requires that any business combination initiated after 30 June 2001 be

accounted for by the purchase method. SFAS 142 provides that goodwill no longer

be amortized and that the value of identifiable intangible assets be amortized

over their useful life, unless the asset is determined to have an indefinite

useful life. The Company has determined that none of its intangible assets are

deemed to have an indefinite life. In accordance with these accounting

statements and upon adoption, the Company reclassified a total of $2,914,000 to

goodwill from intangible assets (net), representing the assembled workforce

associated with the Company's acquisition of Warner Chilcott.

      Galen also adopted Statement of Financial Accounting Standards No. 144,

"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"),

effective 1 October 2001. The objectives of SFAS 144 are to address significant

issues relating to the implementation of Statement of Financial Accounting

Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for

Long-Lived Assets to be Disposed of" ("SFAS 121"), and to develop a single

accounting model based on the framework established in SFAS 121, for long-lived

assets to be disposed of by sale. The standard requires that that long-lived

assets that are to be disposed of by sale be measured at the lower of book value

or fair value less cost to sell. Additionally, the standard expands the scope of

discontinued operations to include all components of an entity with operations

that can be distinguished from the rest of the entity in a disposal transaction.

The results for the Company's services operations disposed of during the year,

have been treated as "discontinued operations."

      On 30 April 2002, the FASB issued Statement of Financial Accounting

Standards No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of

FASB Statement No. 13, and Technical Corrections" ("SFAS 145"). Among other

amendments and rescissions, SFAS 145 eliminates the requirement that gains and

losses from the extinguishment of debt be aggregated and, if material,

classified as an extraordinary item, net of the related income tax effect,

unless such gains and losses meet the criteria in paragraph 20 of Accounting

Principles Board Opinion No. 30, "Reporting the Results of Operations, Reporting

the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual

and Infrequently Occurring Events and Transactions." Generally, SFAS 145 is

effective for fiscal years beginning after 15 May 2002. Upon adoption of SFAS

145, the Company will reclassify the losses on extinguishments of debt that were

classified as extraordinary items in the year ended 30 September 2002 since they

do not meet the criteria in Opinion 30 for classification as extraordinary

items.

 

                                       62

<PAGE>

Five year summary

<TABLE>

<CAPTION>

                                                                 2002            2001            2000           1999            1998

                                                          (pound)'000     (pound)'000     (pound)'000    (pound)'000     (pound)'000

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

<S>                                                           <C>             <C>             <C>             <C>            <C>   

Turnover                                                      201,562         182,683          86,020         67,010         48,867

Gross profit                                                  140,312         118,496          41,798         34,452         25,533

Operating profit before exceptional items and

  amortisation of goodwill and intangibles                     70,589          54,941          24,123         19,397         14,067

Exceptional items                                                  --              --          (3,311)            --         (2,731)

Goodwill and intangibles amortisation                         (27,405)        (24,602)         (2,068)          (707)            --

Operating profit                                               43,184          30,339          18,744         18,690         11,336

Gain on sale of businesses                                     71,388              --              --             --             --

Profit before taxation                                        101,091          16,946          19,073         18,405         11,904

Net assets                                                    671,959         604,872         408,178         68,153         56,227

Earnings per share                                              49.7p            8.2p           11.3p          12.0p           7.2p

Adjusted earnings per share (note 10)                           32.2p           23.4p           15.0p          12.6p           9.5p

                                                              =====================================================================

</TABLE>

 

                                       63

<PAGE>

Financial calendar

Annual General Meeting

To be held at 10 am, Malone House, Barnett Demesne, Belfast     18 February 2003

Reports

Interim report                                                          May 2003

Dividends

Proposed final 2002

o Announced                                                     13 November 2002

o Payable                                                       26 February 2003

Interim 2003

o To be announced                                                       May 2003

o Payable                                                            August 2003

 

                                       64

<PAGE>

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

                                     GALEN

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

                                  HOLDINGS PLC

         Seagoe Industrial Estate, Craigavon, Northern Ireland BT63 5UA

                              Tel: +44 28 3833 4974