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


                                 FORM 20-F
     (MARK ONE)

|_|  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
     SECURITIES EXCHANGE ACT OF 1934
                                     OR
|X|  ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934
     FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2002
                                     OR
|_|  TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     FOR THE TRANSITION PERIOD ................. TO .................

                       COMMISSION FILE NUMBER 0-28856
                     INSTRUMENTATION LABORATORY S.P.A.
           (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
                               NOT APPLICABLE
              (TRANSLATION OF REGISTRANT'S NAME INTO ENGLISH)

                             REPUBLIC OF ITALY
              (JURISDICTION OF INCORPORATION OR ORGANIZATION)
                              VIALE MONZA 338
                                20128 MILANO
                                   ITALY
                  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)


           SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO
                         SECTION 12(B) OF THE ACT:

                                    NONE
           SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO
                         SECTION 12(G) OF THE ACT:

     TITLE OF EACH CLASS               NAME OF EACH EXCHANGE ON WHICH REGISTERED
     -------------------               -----------------------------------------


American Depositary Shares, each                        NONE
representing one Ordinary Share,
(euro)1.29 par value per share

 SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO SECTION
                           15(D) OF THE ACT: NONE


      INDICATE  THE NUMBER OF  OUTSTANDING  SHARES OF EACH OF THE ISSUER'S
CLASSES OF CAPITAL OR COMMON STOCK AS OF THE CLOSE OF THE PERIOD COVERED BY
THE ANNUAL REPORT. 90,701,104 Ordinary Shares, (euro)1.29 par value

      INDICATE  BY CHECK MARK  WHETHER  THE  REGISTRANT  (1) HAS FILED ALL
REPORTS  REQUIRED  TO BE FILED  BY  SECTION  13 OR 15(D) OF THE  SECURITIES
EXCHANGE  ACT OF 1934 DURING THE  PRECEDING  12 MONTHS (OR FOR SUCH SHORTER
PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS),  AND (2) HAS
BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO _

      Indicate by check mark which financial statement item the registrant
has elected to follow. Item 17 __ Item 18 X

<PAGE>

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


                             TABLE OF CONTENTS


PRESENTATION OF FINANCIAL INFORMATION........................................2

Part I.......................................................................3

   Item 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS............3

   Item 2.  OFFER STATISTICS AND EXPECTED TIMETABLE..........................4

   Item 3.   KEY INFORMATION.................................................5

   Item 4.  INFORMATION ON THE COMPANY......................................15

   Item 5.   OPERATING AND FINANCIAL REVIEW AND PROSPECTS...................33

   Item 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES......................47

   Item 7.  MAJORITY SHAREHOLDERS AND RELATED PARTY TRANSACTIONS............51

   Item 8.  FINANCIAL INFORMATION...........................................53

   Item 9.   THE OFFER AND LISTING DETAILS..................................54

   Item 10. ADDITIONAL INFORMATION..........................................57

   Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK......64

   Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES..........66

Part II.....................................................................67

   Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.................67

   Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY   HOLDERS AND
            USE OF PROCEEDS.................................................68

   Item 15. CONTROLS AND PROCEDURES.........................................68

Part III....................................................................69

   Item 18. FINANCIAL STATEMENTS............................................69

   Item 19. EXHIBITS........................................................70

SIGNATURES..................................................................72

CERTIFICATIONS..............................................................73


<PAGE>


In this  Annual  Report  on Form  20-F,  all  references  to we,  our,  the
"Company" and "IL" are to Instrumentation Laboratory S.p.A. and, unless the
context otherwise requires, our subsidiaries.

                   PRESENTATION OF FINANCIAL INFORMATION

      Unless otherwise indicated,  our financial  information contained in
this  Annual  Report  has  been  prepared  in  accordance  with  accounting
principles  prescribed by Italian law and  supplemented  by the  accounting
principles issued by the Italian  Accounting  Profession or, in the absence
thereof, the International  Accounting  Standards Committee  (collectively,
"Italian  GAAP"),  which,  as  described  in Notes 21 and 22 to the Audited
Consolidated  Financial Statements,  differ in certain significant respects
from accounting  principles  generally accepted in the United States ("U.S.
GAAP"). Our Audited  Consolidated  Financial Statements are not prepared or
filed  pursuant to Italian  Legislative  Decree No. 127 of 1991,  as we are
exempted from such  obligation  pursuant to Art. 27 of the  above-mentioned
Legislative  Decree.  Unless  otherwise  indicated,  any  reference in this
Annual Report to Audited  Consolidated  Financial  Statements refers to our
audited consolidated  financial  statements  (including the notes thereto),
included herein.

      Since  November  30,  2002,  we  have  published  our   consolidated
financial  statements   ("Consolidated   Financial  Statements")  in  euro.
However,  the Consolidated  Financial Statements for the fiscal years ended
on November  30,  2001,  2000,  1999 and 1998 were  originally  prepared in
Italian  lire  and  have  been  translated  into  euros at the rate of Lit.
1,936.27 per euro, the official rate  established by the European  Monetary
Union on January 1, 1999. The euro did not exist prior to that date and the
conversion rate used may not reflect the lire/euro exchange rate that would
have  applied if the euro had existed at such times.  Also,  for  financial
information  thus  translated  from dates and periods  before  November 30,
2002, you should not assume that you can accurately  compare this financial
information with that of other companies that have translated a non-Italian
lire European  currency into euro. In this Annual Report,  unless otherwise
specified or the context requires otherwise,  references to "lira",  "lire"
or "Lit." are to the Italian lira  (singular) or to Italian lire  (plural),
references to "euro" or "(euro)" are to euros and  references to "$", "U.S.
$" or "dollars" are to United States dollars. Solely for the convenience of
the reader,  this  Annual  Report  contains  translations  of certain  euro
amounts into dollars at specified rates. These  translations  should not be
construed as representations  that the euro amounts actually represent such
dollar  amounts or could be converted  into dollars at those rates.  Unless
otherwise  stated,  the translations of euro into dollars have been made at
the rate of $0.9932 per euro,  the noon buying rate in the City of New York
for cable  transfers in euro  certified by the Federal  Reserve Bank of New
York for customs  purposes  (the "Noon Buying  Rate") on November 29, 2002.
For further information regarding recent rates of exchange between euro and
dollars,  see "Item 3 - Key Information - Exchange Rates" "Item 3 - Risk of
error in forward looking  statements" and "Item 5 - Operating and Financial
Review and  Prospects - Currency  Effects" for a discussion of how exchange
rates affect us.

      Certain statements in this Annual Report on Form 20-F,  particularly
under "Item  4--Information  on The  Company"  and "Item  5--Operating  and
Financial  Review and Prospects"  constitute  "forward-looking  statements"
within  the  meaning  of the U.S.  securities  laws.  Such  forward-looking
statements  involve  known  and  unknown  risks,  uncertainties,  and other
factors which may cause our actual results, performances or achievements to
be  materially   different   from  any  future   results,   performance  or
achievements,  expressed or implied by such forward-looking statements. See
"Item 3--Key Information--Risk of error in forward looking statements."


<PAGE>


                                   PART I

ITEM 1.     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

A.    NOT REQUIRED.

B.    NOT REQUIRED.

C.    NOT REQUIRED.


<PAGE>


ITEM 2.     OFFER STATISTICS AND EXPECTED TIMETABLE

A.    NOT REQUIRED.

B.    NOT REQUIRED.


<PAGE>


ITEM 3.     KEY INFORMATION

A.    SELECTED FINANCIAL DATA.

      The following  table  presents our selected  consolidated  financial
information  for the periods  indicated  and should be read in  conjunction
with,  and is  qualified  in its  entirety  by  reference  to, the  Audited
Consolidated  Financial  Statements  and "Item 5 -- Operating and Financial
Review and  Prospects"  appearing  elsewhere  in this  Annual  Report.  The
selected  financial  information as of November 30, 2002 and for the fiscal
year ended November 30, 2002 has been derived from the Audited Consolidated
Financial  Statements appearing elsewhere in this Annual Report, which have
been  audited  by  BDO  Sala  Scelsi  Farina,  S.p.A.,  independent  public
accountants,  whose report  appears  elsewhere in this Annual  Report.  The
selected financial information as of November 30, 1998, 1999, 2000 and 2001
and for the fiscal years ended November 30, 1998,  1999,  2000 and 2001 has
been  derived from our audited  historical  financial  statements  for such
periods  and were  audited by Arthur  Andersen  S.p.A,  independent  public
accountants.

      Prior to fiscal year 2002, Arthur Andersen served as our independent
auditors.  On August 31, 2002,  Arthur Andersen LLP, an affiliate of Arthur
Andersen,  ceased  practicing  before  the  SEC.  On  November  25,2002  we
appointed BDO Sala Scelsi Farina S.p.A. as our independent auditors for the
fiscal year ended November 30, 2002.

      Because our former key audit engagement team personnel have since left
Arthur Andersen,  Arthur Andersen did not participate in the preparation of
this  report,  reissue its audit  report with  respect to the  consolidated
financial  statements  included in this report, or consent to the inclusion
in  this  report  of  its  audit   report.   As  a  result,   investors  in
Instrumentation  Laboratory  may have no effective  remedy  against  Arthur
Andersen  in  connection  with a material  misstatement  or omission in the
financial  statements to which its audit report relates. In addition,  even
if such investors were able to assert a claim,  Arthur Andersen may fail or
otherwise  have  insufficient  assets to satisfy  claims by investors  that
might  arise  under the U.S.  federal  securities  laws or  otherwise  with
respect to its audit report.

      The Audited  Consolidated  Financial  Statements have been prepared in
accordance with Italian GAAP, which differs in certain significant respects
from U.S. GAAP. See Notes 21 and 22 to the Audited  Consolidated  Financial
Statements.

      As of November 30, 2002 the U.S. subsidiary  retroactively changed its
inventory  costing  from LIFO to FIFO,  to conform to the group  accounting
practice and to follow the benchmark  treatment  recommended by IAS 2. This
change  has no  effect on the  fiscal  2002  statement  of  operations  but
originated   a  reduction   of  the  loss   reported  for  fiscal  2001  of
(euro)1,441,000  and a decrease in the shareholders'  equity as of November
30, 1999 and 2000 of (euro)1,275,000 and (euro)1,483,000, respectively. The
incremental  difference  between  fiscal 1999 and fiscal 2000 is due to the
difference of conversion rates of U.S. Dollar into euro.

      Since November 30, 2002 our financial  statements  have been presented
in Euro.  However,  the financial  data below for fiscal years 1998,  1999,
2000  and  2001  was  originally  prepared  in  Italian  Lire  and has been
translated  into Euro at the rate of 1,936.27  Italian  Lire per Euro,  the
official  rate  established  by the European  Monetary  Union on January 1,
1999.


<PAGE>
<TABLE>
<CAPTION>


                                                AS OF OR FOR THE YEAR ENDED NOVEMBER 30
                                              1998          1999       2000        2001         2002
                                            [RESTATED]   [RESTATED] [RESTATED]  [RESTATED]
                                            ----------   ---------------------  ----------  ----------
                                                  (IN THOUSANDS OF EURO, EXCEPT PER SHARE AMOUNTS)
<S>                                         <C>          <C>        <C>         <C>         <C>
INCOME STATEMENT  DATA (1)
ITALIAN GAAP:
   Net sales and revenues ............. (euro)214,521 (euro)265,865   (euro)275,312    (euro)274,814     (euro)272,591
   Cost of sales and services ..........      110,650       144,523         143,163          144,207           141,549
                                              -------       -------         -------          -------           -------
     Gross profit ......................      103,871       121,342         132,149          130,607           131,042
Research and development costs ......          18,377        21,278          20,124           19,588            20,072
   Selling, general and administrative
     expenses ..........................       85,219        95,539          92,008           92,699            99,792
                                              -------       -------         -------          -------           -------
Operating income before
       amortization of intangible assets
       and deferred charges ............          275         4,525          20,017           18,320            11,178
   Amortization of intangible assets
       and deferred charges ............        5,711        12,138          11,337            9,058             8,464
                                              -------       -------         -------          -------           -------
     Operating income (loss) ...........       (5,436)       (7,613)          8,680            9,262             2,714
   Interest income .....................        1,173         1,390           1,324            1,277               980
   Interest expense ....................        7,800        12,983          15,924           15,382            12,210
   Other income (expense) net ..........       (8,579)      (16,214)        (10,016)           2,018            (2,696)
                                              -------       -------         -------           -------          -------
   Income (loss) before income taxes ...      (20,642)      (35,420)        (15,936)          (2,825)          (11,212)
   Income taxes ........................        1,793         2,026           1,536            2,916             2,549
   Minority interest ...................           --            --              --              (68)              (80)
                                              -------       -------         -------          -------           -------
   Net income (loss) ...................(euro)(22,435)(euro)(37,446)  (euro)(17,472)    (euro)(5,809)    (euro)(13,841)
                                              ========     ========        ========         ========          ========
   Net income (loss) per share (2) .....  (euro)(0.76)  (euro)(0.85)    (euro)(0.40)     (euro)(0.08)      (euro)(0.15)
U.S. GAAP:
   Income (loss) before extraordinary
     charges and cumulative effects of
     change in accounting principles .. (euro)(20,703 (euro)(35,797)  (euro)(21,002)   (euro)(17,228)    (euro)(14,781)
   Net income (loss) ...................      (21,767)      (35,797)        (21,002)         (17,228)          (14,781)
                                             ========      ========        ========         ========         =========
   Net income (loss) per share (2) .....  (euro)(0.74)   (euro)0.81     (euro)(0.48)     (euro)(0.24)      (euro)(0.16)
   Income from continuing operations
     per share (2) .....................  (euro)(0.70)  (euro)(0.81)          (0.48)           (0.24)      (euro)(0.16)
BALANCE SHEET DATA
ITALIAN GAAP: ..........................
   Working capital ..................... (euro)17,254  (euro)12,688  (euro)  22,527    (euro) 31,393      (euro) 8,268
   Total assets ........................      258,125       416,771         375,531          353,845           341,836
   Long-term debt ......................       23,847       144,766         149,466          103,335            87,814
   Shareholders' equity ................       94,719        73,856          46,740           98,842            80,316
U.S. GAAP: .............................
   Working capital ..................... (euro)51,497  (euro)13,005    (euro)23,126    (euro) 29,220      (euro) 4,094
   Total assets ........................      258,643       418,971         409,675          388,270           370,096
   Long-term debt ......................       58,219       144,766         149,466          108,169           108,562
   Shareholders' equity ................       95,167        75,952          81,480          119,675            81,748

---------

<FN>
(1)  In January 1999, we acquired  Hemoliance.  The Income  Statement  Data
     includes  the  financial  results  of  Hemoliance  from  the  date  of
     acquisition.

(2)  "Net income (loss) per share" is calculated based on 29,429,838 shares
     outstanding for fiscal year 1998,  44,189,477  shares  outstanding for
     fiscal year 1999 and 2000, 72,861,028 shares outstanding (the weighted
     average) for fiscal year 2001 and 90,701,104  shares  outstanding  for
     fiscal year 2002.
</FN>
</TABLE>


<PAGE>


      Exchange Rates

      The following  table sets forth,  for each of the periods  indicated,
the high, low and average Noon Buying Rates expressed in $ per 1.00 euro to
the nearest cent:

   CALENDAR PERIOD             HIGH             LOW               AVERAGE*
   --------------------     ---------      -------------      -----------------
       2002                  $1.05            $0.86                $0.95
       2001                  $0.95            $0.84                $0.89
       2000                  $1.03            $0.83                $0.92
       1999                  $1.18            $1.00                $1.06
       1998**                $1.21            $1.06                $1.11

      November 2002          $1.01            $0.99
      December 2002          $1.05            $0.99
       January 2003          $1.09            $1.04
      February 2003          $1.09            $1.07
         March 2003          $1.11            $1.05
         April 2003          $1.12            $1.06

*  The average of the Noon  Buying  Rates on the last  business  day of each
month during the year.


** Euro/US dollar  exchange rates for periods prior to the  introduction of
the euro on  January 1, 1999 have been  calculated  by  applying  the fixed
exchange  rate of 1936.27  Italian  Lire/euro  established  by the European
Monetary Union.

      On May 13, 2003, the Noon Buying Rate was $1.15 per  (euro)1.00.  The
above rates are given for information  only, and differ from the rates used
in the preparation of our financial statements included in Item 18 herein.

B.    NOT REQUIRED.

C.    NOT REQUIRED.

D.    RISK FACTORS.

      We have  experienced  net  losses  and  negative  cash flow in recent
fiscal years

      We continue to experience  significant net losses. In order for us to
meet  our  requirements  for  working  capital,  research  and  development
expenditures,   investments  in  instruments,   debt  service  and  capital
expenditures,  we must substantially improve our operating performance from
recent  levels.  There  can be no  assurance  that we will  achieve  or, if
achieved,  will sustain,  profitability in the future. If we cannot achieve
and  sustain  profitability,  it is likely that we will not be able to meet
our funding requirements.

We are substantially leveraged and it may be difficult to service our debt

      We  have  substantial  indebtedness  with  significant  debt  service
requirements  and  are  highly   leveraged.   At  November  30,  2002,  our
consolidated net financial debt was (euro) 150.8 million and  shareholders'
equity was (euro)80.3  million.  Approximately  42% of our  indebtedness is
short term and is subject to repayment upon demand. We have also with other
Werfen group companies guaranteed a loan to Izasa  Distribuciones  Tecnicas
S.A. in the principal amount of (euro)100 million.  We may issue additional
indebtedness   in  the  future.   On  April  20,  2001,  an   extraordinary
shareholders  meeting  was  held at  which  the  shareholders  resolved  to
increase the capital stock in the amount of  (euro)59,999,999.83.  Proceeds
from the capital increase have been used to reduce outstanding indebtedness
owed to Izasa Distribuciones  Tecnicas,  S.A. We may decide to increase our
capital  stock  again in the  future and this  could  dilute  shareholders'
ownership interest.

      The degree to which we are leveraged has  important  consequences  to
you,  including  the  following:  (1)  our  ability  to  obtain  additional
financing  in  the  future,  whether  for  working  capital,  research  and
development expenditures, investments in instruments, capital expenditures,
acquisitions or other purposes,  may be impaired; (2) a substantial portion
of our cash flow from operations is required to be dedicated to the payment
of interest on our indebtedness, thereby reducing funds available to us for
other purposes;  (3) our flexibility in planning for or reacting to changes
in market  conditions may be limited;  (4) we may be more vulnerable in the
event  of a  downturn  in our  business;  (5)  we  may be at a  competitive
disadvantage relative to less leveraged competitors;  and (6) to the extent
we continue to utilize  short-term or variable rate borrowings to fund cash
flow and working capital  requirements,  we will be vulnerable to increases
in interest rates.

      We cannot assure you that our  businesses  will  generate  sufficient
cash flow from operations or that future  financing will be available in an
amount  sufficient  to enable us to  service  our  indebtedness  or to make
necessary capital  expenditures,  research and development  expenditures or
investments in instruments.  Further,  depending on the timing,  amount and
structure  of any  future  acquisitions,  we may need to  raise  additional
capital to fund the acquisitions of additional businesses.  There can be no
assurance  that  we  will be able to  secure  such  additional  funding  on
favorable terms, if at all.

Our industry is highly competitive

      The  in  vitro   diagnostics   ("IVD")  systems  industry  is  highly
competitive and continues to experience significant pricing pressures. Some
of our competitors are significantly larger and have greater resources than
us, and industry consolidation could have the effect of producing more such
competitors.  Moreover,  we encounter different  competitors in each of our
key product lines, and there can be no assurance that we will not encounter
increased  competition in the future,  which could have a material  adverse
effect on our financial  condition and results of operations.  Furthermore,
competitive and regulatory  conditions in many markets restrict our ability
to fully  recover  increased  costs  through  price  increases.  We compete
principally  on the basis of quality  and  breadth  of  product  offerings,
service  and  price.  Competition  within  the  markets  which  we serve is
primarily driven by the need for innovative products that address the needs
of  customers.  There can be no  assurance  that our  competitors  will not
develop products or services that are more effective or less expensive than
our  products  or  which  could  render   certain  of  our  products   less
competitive. Delays in the launch of new products would result in decreased
revenues  from  sales  of  instruments,  together  with  related  sales  of
reagents,  controls,  other consumables and services,  during the period of
the delay, as well as subsequent periods due to the longer period needed to
establish  an  installed  base  and any  loss of  market  share  due to our
customers' purchases of competitors'  products during the delay.  Moreover,
our performance and future growth are dependent upon our continuing ability
to develop and market new products.

Significant risks in IVD industry exist

      The IVD  industry  has been  significantly  affected  by a number  of
changes to the healthcare  industry in general,  both on a global level and
in particular  countries.  These changes have included both legislative and
regulatory developments as well as private initiatives. Significant changes
in the health  care  systems of various  countries  have had a  substantial
impact on the manner in which we conduct our business and such changes also
have had a material  adverse effect on our financial  condition and results
of operations.

      In the United States, where we generated 29.7% of our fiscal 2002 net
revenues, public and private efforts to reduce health care costs, including
the growth of managed care  organizations  and IPNs, have had a significant
impact on the critical care,  hemostasis and clinical chemistry segments of
the IVD industry in terms of, among other things,  cost containment efforts
and centralization of purchasing decisions.  Furthermore, attempts to lower
costs and increase  efficiencies have led to consolidation among healthcare
providers in the United States.  As a result of these  factors,  the market
for our  products  in the U.S.  remains  competitive.  In  addition,  these
competitive  forces continue to place  constraints on the levels of overall
pricing,  and this has lowered the profit  margins of our products  sold in
the U.S.

      Governmental  initiatives  relating  to the  maintenance  of a single
European  currency,  among other  factors,  has  prompted a variety of cost
containment  initiatives  in  several  European  governmental  and  private
healthcare systems.  These cost containment  initiatives are expected to be
continuing  factors  that may affect our  ability to  maintain  or increase
sales or profit margins.  In Italy,  where we generated 26.8% of our fiscal
2002 net revenues, hospitals and other health care providers are attempting
to reduce their overall costs in providing  patient care. As a component of
this cost, instrument  suppliers,  like us, have been adversely impacted as
health care providers are  constrained  in their  purchasing of instruments
and  consumables.  Our profit  margins have also been  adversely  affected.
Similar  trends  are  also  evident  in  many of the  other  industrialized
countries in which we do business,  which trends may also adversely  affect
our  financial  condition  and results of  operations.  The Italian  health
system is a nationalized health service in which units of government at the
national,  regional  and local levels share  payment  responsibilities  and
policymaking   authority.   Under  the  Italian  health  system,   accounts
receivable  may  remain  outstanding  for up to 300 days on  average,  such
extended  payment periods are accepted in the industry.  As of November 30,
2002, we had (euro)34.9  million in outstanding  accounts  receivable  from
Italian governmental entities and agencies,  representing approximately 38%
of our outstanding trade receivables and 17% of our net revenues for fiscal
2002. Although we have not experienced any write-offs with respect to these
receivables,  there can be no  assurance  that we will not  experience  any
write-offs in the future.

      Historically,  we generated most of our instrument sales and sales of
consumables from instruments placed in the hospital central laboratory.  In
the last several years, an increasing amount of the hospital IVD testing is
being  performed in  point-of-care  locations  with the use of  instruments
specifically  designed for this  application.  We have attempted to address
this trend with the  development of our own  point-of-care  instruments and
related  products.  However,  there  can be no  assurance  that the  market
penetration of point-of-care  testing devices will continue or that we will
be successful in replacing lost  centralized  testing-related  revenue with
revenue generated from sales of our point-of-care products.

We may not be able to effectively integrate our strategic acquisitions

      A key element of our strategy will be to continue to pursue strategic
acquisitions of, or alliances with, companies that have products,  services
and  technologies  or industry  specializations  that extend or  complement
ours. The process of integrating acquired businesses may involve unforeseen
difficulties  and there can be no assurance that the potential  benefits of
such integration will be realized to the extent or on the schedule expected
by us. Moreover, the integration of acquisitions or alliances may require a
disproportionate amount of the time and attention of our management and our
financial and other resources. Any delays or unexpected costs in connection
with such integration could have a material adverse effect on our financial
condition and results of operations. There can be no assurance that we will
be effective in identifying or making acquisitions or in forging alliances,
that any  acquired  business  will be  effectively  integrated  or that any
acquired business or alliance will be profitable.

Beckman  Coulter is our sole  distributor  of Hemostasis  products in North
America  and  the   Asia-Pacific   region  and  any   disruption  in  these
arrangements will adversely affect our results of operations

      The  Strategic  Alliance  Agreement  dated  September  1, 1999 is the
source of our  arrangements  with Beckman  Coulter.  Any termination of the
Strategic  Alliance  Agreement might have a material  adverse effect on our
results of operations  during the period subsequent to such termination due
to the transition  from Beckman  Coulter as the distributor of our products
to another  distribution  alternative.  In addition,  to the extent that we
must rely upon an alternative  distributor,  there can be no assurance that
such distributor will market our products successfully or that the terms of
its distribution arrangements will be favorable to us.

Fluctuations  in  currency  rates  could  adversely  effect our  results of
operations

      Our results of  operations  and  financial  position  are affected by
changes in the value of the euro against other  currencies.  The results of
operations are adversely  affected to the extent that the  strengthening of
the euro against other  currencies  affects the amount of sales reported in
euro with  respect to the sales  made in such  foreign  currencies  and may
affect  the  demand  for  products  in the  countries  in which  such other
currencies are utilized.  Any decrease in the value of the euro as compared
to other foreign  currencies may expose us to adverse effects to the extent
our  payables  and debt are payable in such  foreign  currency.  Please see
"Item 11 -- Quantitative and Qualitative  Disclosure About Market Risk" for
further discussion regarding currency exchange risks.

Various risks relating to international operations exist

      A significant  portion of our earnings are attributable to operations
conducted outside the United States.  As a result,  our business is subject
to certain  risks beyond our control,  such as changes in laws and policies
affecting  trade and  investment  (including  the protection of patents and
other  intellectual  property),   increases  in  tariffs  and  other  trade
barriers, varying governmental regulations in the different countries where
we market our products,  difficulties in managing international  operations
and potentially adverse tax consequences.  Moreover,  our operating results
are also affected by changes in currency exchange rates discussed above.

Decreased Sales in Clinical Chemistry

      We  continue   to  rely  upon  OEM   developed   clinical   chemistry
instruments.  We no longer sell these  instruments in the U.S. We primarily
sell clinical chemistry  instruments in Italy and the United Kingdom.  Over
the last several years,  we have  experienced a significant  decline in our
clinical chemistry installed base. Sales for clinical chemistry represented
8.9% of sales for fiscal 2002.

We rely on patents and other intellectual property

      We own numerous  United States and foreign  patents,  and have patent
applications  pending in the  United  States and  abroad.  We own  numerous
United States and foreign  registered  trademarks,  trade names and service
marks and have applications for the registration of trademarks, trade names
and service marks pending in the United States and abroad. In addition,  we
possess a wide array of  unpatented  proprietary  technology  and know-how.
Further,  we  license  certain  intellectual  property  rights  from  third
parties.

      Our ability to compete effectively with other companies depends, to a
significant  extent,  on our ability to maintain the proprietary  nature of
our owned and licensed intellectual property.  There can be no assurance as
to the degree of protection  offered by the claims of the various  patents,
the likelihood  that patents will be issued on pending patent  applications
or, with regard to the licensed  intellectual  property,  that the licenses
will not be  terminated.  If we were  unable to  maintain  the  proprietary
nature of our intellectual property with respect to our significant current
or proposed products,  our business could be materially adversely affected.
There can be no assurance that we will be able to obtain patent  protection
for products or processes  discovered using our technologies.  Furthermore,
there can be no  assurance  that any patents  issued to us, or for which we
have  license  rights,  will not be  challenged,  invalidated,  narrowed or
circumvented,   or  that  the  rights  granted   thereunder   will  provide
significant  proprietary  protection or competitive advantages to us. There
can be no assurance  that, if  challenged,  our issued or licensed  patents
would be held valid by a court of competent  jurisdiction.  Legal standards
relating  to  the  breadth  and  scope  of  patent  claims  are  uncertain,
particularly  relating to the  doctrine of  equivalents.  Accordingly,  the
valid scope of patent claims cannot be predicted. There can be no assurance
that the claims of the patents owned or licensed by us will be  interpreted
by a court broadly enough to offer significant  patent protection to us, or
that the claims of a third  party's  patents will not be  interpreted  by a
court broadly enough to cover some of our products.

      Litigation, which could result in substantial costs, may be necessary
to enforce  patents  issued or licensed to us or to determine the scope and
validity of third-party  proprietary rights.  Uncertainties  resulting from
the initiation and  continuation of any patent or related  litigation could
have a material  adverse  effect on our financial  condition and results of
operations.  An  adverse  outcome in  connection  with an  infringement  or
validity   proceeding  brought  by  a  third  party  could  subject  us  to
significant liabilities,  require disputed rights to be licensed from third
parties or require us to cease using the disputed technology,  any of which
could have a material adverse effect on our financial  condition or results
of operations.  The costs of and the diversion of our resources  associated
with  infringement  litigation  could have a material adverse effect on our
financial condition and results of operations.

We are subject to an increasing amount of government regulations

      As a manufacturer of IVD  instruments,  we and our products,  product
development and manufacturing processes are subject to extensive regulation
by the United  States Food and Drug  Administration  (the  "FDA"),  various
other United  States  federal and state  agencies,  and a number of foreign
governmental agencies. We have all necessary governmental approvals to sell
our currently marketed products.

      We may  become  subject to future  legislation  and  regulations,  or
interpretations of existing legislation with retroactive effect, concerning
the manufacture and marketing of medical  devices.  This could increase the
cost and time necessary to begin marketing new products and could adversely
affect us in other  respects not presently  foreseeable.  We cannot predict
the effect of possible future legislation and regulations.

      We are subject to other  federal,  state,  local and foreign laws and
regulations  relating to such matters as environmental  protection,  health
and  safety,  manufacturing  practices  and  fire  hazard  control,  and to
liabilities and compliance costs associated with past and current handling,
processing,  storing and disposing of medical or hazardous  substances  and
wastes.  From time to time, our operations may result in noncompliance with
environmental or occupational health and safety laws, or liability pursuant
to such laws.  There can be no  assurance  that we will not be  required to
incur  significant  costs to comply with such laws and  regulations  in the
future or that such laws or  regulations  will not have a material  adverse
effect upon our financial condition and results of operations.

Our ADRs lack liquidity

      On September 3, 1999,  our American  Depositary  Shares  ceased to be
listed on the Nasdaq National Stock Market. Our ADSs were de-listed because
we no longer  fulfilled the minimum per share price  requirement.  Our ADSs
are now traded on the Pink Sheets(R)  service under the symbol "ISLBY." The
trading  volumes for the ADRs is very limited and  published ADR prices may
not  represent  an amount  that is  achievable  upon  resale.  As a result,
holders  of the  ADRs  may not be able to find  purchasers  for the ADRs at
attractive  prices  or at all.  An  investment  in the  ADRs  represents  a
significant risk.

We are still  attempting  to go  private,  which may affect  your access to
information

      On November 20, 2000, and again on December 28, 2001, Grupo CH-Werfen
S.A. and Izasa  Distribuciones  Tecnicas,  S.A. launched a tender offer for
all outstanding shares not already  beneficially owned by them. See "Item 4
- Information on the Company-Background."  Although our affiliates were not
successful  in taking  us  private,  our  majority  shareholders  may still
attempt to take us private. If we go private by reducing the number of U.S.
holders to less than 300, we will apply for  termination of registration of
our shares under the U.S.  Securities  Exchange Act of 1934, as amended. If
we  terminate  the  registration  of our  shares,  the  information  we are
required to furnish to you would be reduced to that required  under Italian
law.  Further,  we  would  no  longer  be  required  to  provide  financial
information  in  accordance  with  U.S.   generally   accepted   accounting
principles.

We may terminate our deposit agreement with the Bank of New York

      Our ADRs are  issuable by the Bank of New York  pursuant to a deposit
agreement.  Under  the  terms of this  agreement,  the Bank of New York has
agreed  that,  whenever so directed  by us, it will  terminate  the deposit
agreement by mailing notice of such termination to you. If we terminate the
deposit agreement, you can: sell your ADRs for which we believe there would
be a limited or no market,  surrender your ADRs to the Bank of New York and
withdraw  ordinary  shares,  or do nothing which would likely result in the
sale of your  ADRs by the Bank of New York  after one year if there are any
purchasers.  This will further decrease the liquidity of our shares and any
remaining  shareholder  will be a shareholder of an Italian private company
and only afforded the rights as prescribed under Italian law.

We are controlled by one major shareholder

      As of April 30, 2003, Grupo CH-Werfen S.A. beneficially owns over 85%
of the outstanding  Ordinary Shares, and continues to control us, including
with respect to our  management and the selection of our Board of Directors
and the approval or  prevention  of certain  corporate  transactions  which
require majority shareholder  approval. We also owe a substantial amount of
money to Werfen under  outstanding  loans from  Werfen's  affiliates.  Jose
Maria Rubiralta,  who is one of our directors and executive  officers,  and
Francisco Rubiralta, who is one of our directors,  collectively own 100% of
the outstanding stock of Werfen, and, as a result of such ownership,  would
be deemed to beneficially own all the outstanding  Ordinary Shares owned by
Werfen.

      As a result of  transactions  between  us and  affiliates  of Werfen,
potential conflicts of interest could arise. No assurance can be given that
such conflicts will be resolved in our favor.

We have not paid dividends in the past

      We have not paid any dividends on our ordinary  shares since the 1991
acquisition.  Under Italian law,  management may make  proposals  regarding
payment of dividends,  but authority to distribute dividends is reserved to
the  shareholders.  It is the present  intention of our  management  not to
propose to pay any dividends  and to follow a policy of retaining  earnings
for use in the  business.  The  determination  by management to propose the
payment of dividends, and the amount thereof, will depend upon, among other
things, our earnings, financial condition and cash requirements, applicable
restrictions  on the payment of  dividends  under  Italian law and our debt
agreements and such other factors as management may deem relevant.

We are involved in various  legal  proceedings,  the outcome of which could
adversely affect our results of operations

      We are involved  from time to time in various  claims and  litigation
incidental to the ordinary course of our business.

      In 1996, 590 Lincoln Street Trust filed a lawsuit  alleging a release
of  hazardous  material,  on or earlier  than 1988,  by one of its tenants,
including an affiliate of our predecessor that was an operator of the site.
In connection  with the 1991  acquisition  of our  predecessor,  we assumed
various obligations of this predecessor including the potential liabilities
involved in this  matter.  As such,  we were named as a  defendant  in this
lawsuit.  We have denied  liability.  In 2002, the case went to trial and a
verdict was returned against our indemnity. A judgment has not been entered
yet in the case. We and our legal  counsel,  however,  intend to appeal any
adverse  judgment.  We believe that, in any case, the  proceeding  will not
have a material adverse effect on the our financial condition or results of
operations.

      For a  discussion  of certain  open tax  matters,  see Note 12 of the
Audited Consolidated  Financial  Statements.  We believe that the foregoing
claims and  litigation  will not have a material  adverse  effect  upon its
financial condition or results of operations.

We and our shareholders face certain risks related to our former employment
of Arthur Andersen as our independent auditors

      Prior to fiscal year 2002,  Arthur Andersen served as our independent
auditors.  On August 31, 2002,  Arthur Andersen LLP, an affiliate of Arthur
Andersen,  ceased  practicing  before  the SEC.  On  November  25,  2002 we
appointed BDO Sala Scelsi Farina S.p.A. as our independent auditors for the
fiscal year ended November 30, 2002.

      Because our former key audit  engagement  team  personnel  have since
left  Arthur   Andersen,   Arthur  Andersen  did  not  participate  in  the
preparation  of this  report,  reissue its audit report with respect to the
consolidated  financial  statements  included in this report, or consent to
the inclusion in this report of its audit report. As a result, investors in
Instrumentation  Laboratory  may have no effective  remedy  against  Arthur
Andersen  in  connection  with a material  misstatement  or omission in the
financial  statements to which its audit report relates. In addition,  even
if such investors were able to assert a claim,  Arthur Andersen may fail or
otherwise  have  insufficient  assets to satisfy  claims by investors  that
might  arise  under the U.S.  federal  securities  laws or  otherwise  with
respect to its audit report.

      RISK OF ERROR IN FORWARD LOOKING STATEMENTS

      All statements included or incorporated by reference into this Annual
Report that are not clearly historical in nature are forward looking.  When
used in this Annual  Report and in such  filings,  press  releases and oral
statements  the words  "believe,"  "expect"  and  "anticipate"  and similar
expressions  are intended to identify  forward  looking  statements,  which
speak  only as of their  dates.  Examples  of  forward  looking  statements
include discussion about our:

      o  ability to service future debt;

      o  potential inability to integrate acquisitions;

      o  prediction  on the  outcome of legal  proceedings  and effect of
         such  litigation  upon our  financial  condition  or  results of
         operations;

      o  anticipated trends in business and industry;

      o  business strategies;

      o  anticipated   future  growth  in  markets;

      o  ability to secure  clearance  with  respect to certain  regulatory
         matters  and our belief  that we will not be required to submit to
         the FDA new 510(K) notices for modifications to previously cleared
         products;

      o  property, plant and equipment facilities sufficiency;

      o  environmental costs as a result of future compliance;

      o  strategy and restructuring plan impact on results of operation;

      o  operating  and net  income  vulnerability  to  future  changes  in
         currency;

      o  future  liquidity  requirements,  capital  resources and financing
         sources;

      o  results of  operations  financial  position  or cash  flows  being
         materially  impacted by the adoption of new accounting  standards,
         including SFAS 142, 144, 145, 146 and 148; Interpretations Nos. 45
         and 46; and EITF Issue No. 00-21;

      o  potential  conflicts  with respect to related party  transactions;
         and

      o  expectations,  beliefs,  future plans and strategies,  anticipated
         developments and other matters that are not historical facts.

      These  forward   looking   statements   are  based  largely  on  our
expectations  and are  subject  to a  number  of risks  and  uncertainties,
certain of which are beyond our control.  Forward  looking  statements  may
also be contained or made in future  filings by us with the  Securities and
Exchange  Commission,  in our press releases and in oral statements made by
our authorized officers. You should carefully review the other risk factors
set forth in this section for a discussion of factors which could result in
any of these forward looking statements proving to be inaccurate.


<PAGE>


ITEM 4.     INFORMATION ON THE COMPANY

OVERVIEW

      We are a leading worldwide developer, manufacturer and distributor of
critical care and IVD instruments  and related  reagents,  controls,  other
consumables  and services for use  primarily in hospital  laboratories  and
hospital point-of-care  locations.  These products are used to identify and
measure  substances  in a patient's  blood and are an integral  part of the
diagnosis  and  treatment of patients.  Our three major IVD product  lines,
hemostasis,  critical care, and clinical chemistry, are marketed around the
world,  and net revenues for fiscal 2002, 2001 and 2000 are provided in the
chart below.

                        NET REVENUES - IVD PRODUCT LINES
                                 2002                 2001            2000

Hemostasis                       49.4%               47.8%           48.7%

Critical Care                    28.2%               28.9%           28.8%

Clinical Chemistry                8.9%               10.3%            9.6%

      We have been a  participant  in the IVD  market for over 40 years and
have established a reputation for innovation,  reliability and service.  In
each of our three major  product  lines,  we utilize a systems  approach by
providing  our  customers  with  instruments,   reagents,  controls,  other
consumables and services in a single system. We have an extensive sales and
distribution network which enables us to distribute our products in over 90
countries. Our revenue is generated from a diverse global customer base, as
indicated by net revenues by geographical location.

                         NET REVENUES - GEOGRAPHICALLY
                                 2002                 2001            2000

Europe (including Italy)         58.3%               57.3%           53.3%

Italy                            26.8%               25.7%           24.5%

U.S.                             29.7%               29.8%           30.0%

Rest of the World                12.0%               12.9%           16.7%

      We have a large  active  installed  base of core  instruments,  which
generate a stream of revenues from the continuous  consumption of reagents,
controls,  other consumables and services.  Approximately 77% of our fiscal
2002 net revenues  were derived  from sales of  reagents,  controls,  other
consumables  and services.  We have  developed  our strong market  position
through the introduction of innovative IVD products in our targeted product
areas and  continually  seek to expand our position  within  those  product
areas through targeted product  development efforts resulting from both our
internal research and development teams and strategic alliances, as well as
through acquisition or licensing of selected technologies.

      Our strategy is to be the first choice  supplier of critical care and
hemostasis  IVD  systems  to  the  hospital,   point-of-care   and  central
laboratory  markets.  The key  elements of our business  strategy  are: (1)
expand  point-of-care  capabilities  and  systems;  (2)  develop and launch
innovative  products;  (3) increase  penetration  of U.S.  IVD market;  (4)
achieve  further cost  savings;  and (5) pursue  selected  acquisition  and
additional strategic alliances.

BACKGROUND

      General.  We acquired  our  predecessors  in October  1991 (the "1991
Acquisition").  We were formed in 1991 by a group of three investors led by
Grupo  CH-Werfen,  S.A.  ("Werfen").   Werfen,  a  privately  held  company
organized  under  the  laws  of  the  Kingdom  of  Spain,  is  the  leading
distributor,  through Izasa Distribuciones  Tecnicas S.A., a majority owned
subsidiary  organized under the laws of the Kingdom of Spain ("Izasa"),  of
health care products in Spain and Portugal.  Werfen,  through Izasa and its
subsidiaries, is our majority shareholder.

      Our legal and commercial name is  Instrumentation  Laboratory  S.p.A.
and we are a corporation  organized under the laws of Italy.  Our principal
executive  office is located at Viale Monza 338, 20128 Milano,  Italy,  and
our telephone number is (++) 39-2-252-22-56.

      Initial Public Offering and Capitalization  Transactions.  In October
and November 1996, we completed an initial public  offering of our Ordinary
Shares,  (euro)1.29 par value per share, represented by American Depositary
Shares.  Through the offering and concurrent share  issuances,  we realized
$60 million in net proceeds which we utilized to repay indebtedness.

      Acquisition   of   Chromogenix.   In  September   1996,  we  acquired
Chromogenix,   a  leading  manufacturer  of  reagents  used  primarily  for
hemostasis instruments. The acquisition has enabled us to provide a broader
range of reagents,  including reagents for ELISA, Bio-immune assays and the
APC Resistance test.

      Acquisition of MSS. In September 1996, we acquired MSS which provides
blood gas and  electrolyte  analyzers,  together with  reagents,  controls,
other  consumables and services,  which are designed to be used by the care
provider for point-of-care uses.

      Rights  Offering.  In July  1998,  we  completed  a rights  offering.
Pursuant to the rights  offering we issued  27,329,977  Ordinary Shares and
received net proceeds of (euro)34.0 million  (approximately $37.5 million).
All proceeds were used to repay indebtedness.

      Acquisition of Hemoliance. In January 1999, we acquired Hemoliance, a
U.S. joint venture formed between Medical Laboratory  Automation,  Inc. and
Ortho  Clinical  Diagnostics  Inc.,  a  subsidiary  of Johnson & Johnson in
consideration  for  US$130  million.   Hemoliance  is  a  manufacturer  and
distributor of hemostasis systems.

      Restructuring  Plan.  In fiscal year 1999 and 2000,  we initiated and
implemented  restructuring plans to achieve significant  synergies and cost
savings  from  the   integration  of   Hemoliance's   operations  with  our
operations.  The restructuring plans also involved the reduction of general
and administrative expenses and other operating expenses. We have completed
the  following   restructuring  actions  in  the  United  States:   ceasing
operations  at a  facility,  adopting an  indirect  distribution  model and
decreasing the number of employees involved in manufacturing,  research and
development,  administration and service activities. In addition, in fiscal
year 1999, we transferred  our operations  from Paderno  Dugnano,  Italy to
existing  facilities  in  Lexington,   Massachusetts  and  transferred  the
Chromogenix business operations to other existing  facilities.  The closing
of the Ann Arbor,  Michigan  facilities,  and the  transfer  of the related
operations to the  Lexington,  Massachusetts  facility,  were  completed in
August 2000.

      De-listing.  On September 3, 1999,  our  American  Depositary  Shares
ceased to be listed on the  Nasdaq  National  Stock  Market.  Our ADSs were
de-listed   because  we  no  longer  fulfilled   minimum  per  share  price
requirement.  Our ADSs are now quoted on the Pink  Sheets(R)  service under
the symbol "ISLBY."

      Sale of Ascoli  facility.  On January 31, 2000, we agreed to sell our
business  relating  to the  production  and  distribution  of  blood  bags,
including the related production  facilities located in Ascoli,  Italy. Net
proceeds from the sale of this business were (euro)14.5 million and the net
gain that was recorded was approximately (euro)6.6 million.

      Going  private  transaction  in 2001.  On November  20,  2000,  Izasa
Distribuciones  Tecnicas S.A. and Grupo  CH-Werfen  launched a tender offer
for all of our outstanding  ordinary shares and American depositary shares,
not already owned by them or one of their affiliates, as part of a proposed
going private  transaction.  Izasa and Werfen offered US$ 0.50 per share in
cash.  Izasa and Werfen  eventually  waived the condition of going private,
and  proceeded to close the tender offer.  On February 5, 2001,  the tender
offer  expired and Izasa  purchased  3,811,547  shares.  Together  with the
shares that Izasa,  Werfen and their  affiliates  already  held,  after the
expiration of the tender offer they beneficially owned  approximately 68.5%
of our outstanding shares.

      Increase in Capital Stock. On April 20, 2001, we convened an Ordinary
and Extraordinary  Shareholders'  Meeting at which the shareholders,  among
other  things,  resolved  to  increase  our  capital  stock in an amount of
(euro)59,999,998.83. Newly issued ordinary shares were issued at (euro)1.29
per ordinary  share.  Izasa,  for itself and as assignee of Miscel  Holding
B.V.,  agreed to subscribe for all 46,511,627 newly issued ordinary shares.
All of our  registered  shareholders  had a right to subscribe to their pro
rata share of the  ordinary  shares  offered by us.  When the  subscription
period ended on July 1, 2001, no other  shareholders  had  exercised  these
rights.  In  consideration  for  these  subscribed  ordinary  shares  Izasa
canceled (euro)59,999,998.83 worth of our outstanding debt owed to it.

      Exchange  Agreement.  On December  19,  2001,  Izasa,  we and Bio-Rad
Laboratories,  Inc. executed an agreement whereby Bio-Rad will exchange its
12,154,237 ADSs for a 15-year fixed coupon junior  subordinated note in the
principal  amount  of  $21,148,372  issued by Izasa at the  closing.  Izasa
believes  Bio-Rad  is in breach of its  duties  and  obligations  under the
agreement.  We understand that Izasa continues to examine what options,  if
any, it will take in light of the breach.

      Going  private  transaction  in 2002.  On December  28,  2001,  Izasa
Distribuciones  Tecnicas S.A. and Grupo CH-Werfen  launched  another tender
offer for all of our outstanding  ordinary  shares and American  depositary
shares, not already owned by them or one of their affiliates,  as part of a
proposed going private transaction. Izasa and Werfen again offered US$ 0.50
per share in cash.  Izasa and Werfen  eventually  waived the  condition  of
going  private,  and proceeded to close the tender  offer.  On February 22,
2002,  the  tender  offer  expired  and Izasa  purchased  700,194  American
depositary  shares.  Together with the shares that Izasa,  Werfen and their
affiliates  already  held,  after the  expiration  of the tender offer they
beneficially owned  approximately  85.4% of our outstanding  shares.  After
this tender offer, approximately 500 U.S. record ADS holders remain.

      See "Item 5 - Operating and  Financial  Review and  Prospects"  for a
discussion of our capital expenditures.

PRODUCT LINES

      We have three core product lines:

      o     Hemostasis   systems,   representing  49.4%  of  fiscal  2002  net
            revenues;

      o     Critical  care  systems,  representing  28.2% of fiscal  2002 net
            revenues; and

      o     Clinical chemistry  systems,  representing 8.9% of fiscal 2002 net
            revenues.

      In  addition,   we  generate  sales  from  distribution  of  products
manufactured by third parties (collectively, "Distributed Products"), which
represented 13.5% of our fiscal 2002 net revenues.

      HEMOSTASIS SYSTEMS

      Hemostasis  is the natural  process that  maintains  blood in a fluid
state within the body, while enabling the body to rapidly respond to damage
to blood vessels and prevent blood loss.  The  hemostasis  process  reduces
blood flow and  prevents  blood loss at the site of injury by plugging  the
leak with a  fibrinous  mass (a clot).  Any  imbalance  in this  system can
result in abnormal bleeding (e.g.,  hemophilia) or abnormal clotting (e.g.,
stroke).

      We have a broad range of reagents and instruments used to monitor the
hemostatic state of patients.  Testing can detect hemostatic disorders that
can  result in  abnormal  bleeding  (e.g.,  hemophilia),  or that can cause
abnormal clotting (e.g.,  APCR-V) or other inherited defects (e.g., protein
C  deficiency).  Testing is also performed to monitor  anticoagulant  drugs
which are used to treat patients with blood clotting  disorders,  including
patients  who have  experienced  or are  susceptible  to heart  attacks  or
strokes  or who  have  undergone  coronary  bypass  surgery.  Approximately
two-thirds of hemostasis  tests  performed are aPTT and PT tests.  The aPTT
and PT tests are used as  general  screening  tests to  provide  an overall
assessment  of a  patient's  ability  to form a clot and are  also  used to
monitor  and  maintain  within  a  safe  treatment  range  the  effects  of
anticoagulant  drugs  that  are  used in the  treatment  of  patients  with
hemostatic disorders.

      The  Venture  Planning  Group,  which  provided  the  basis  for  our
hemostasis  market share  information,  estimated the 2000 worldwide market
for hemostasis systems in which we operate at approximately  $804.9 million
(representing sales of instruments,  reagents,  controls, other consumables
and  services).  Approximately  30% of such  revenues were derived from the
United States,  40% were derived from Western Europe, 17% were derived from
Japan and 13% were derived from the rest of the world.  Hemostasis  systems
are  primarily  sold to  hospital  laboratories  and  independent  clinical
laboratories.  The  overall  market is  relatively  mature,  with  sales of
instruments consisting primarily of replacement of older instruments.

      We  believe  that,  based on  revenue  generated  from  reagents  and
instruments,  in 2002 we had the second largest overall market share in the
worldwide  hemostasis  systems market with a market share of  approximately
25% of end-user sales. Of our fiscal 2002 sales  attributable to hemostasis
systems,  approximately  54.7% were derived from Europe (18.8% from Italy),
33.8% from the United States and 11.5% from the rest of the world. In 2002,
reagents, controls and other consumables comprised approximately 76% of the
revenues in the worldwide  hemostasis market. We believe that the worldwide
hemostasis  market,  including  instruments,  reagents,  controls and other
consumables,  will continue to grow primarily  through increased demand for
specialty  tests,  expanded  test  menus,  advances  in  testing  for  risk
assessments and growth of point-of-care testing.

      We offer an extensive  line of reagents  and controls for  hemostasis
systems, including reagent formulations designed to address the differences
between the U.S. and European marketplace,  which we believe has enabled us
to penetrate new markets.  Although our primary focus is in the aPTT and PT
markets,  we have  developed,  and are continuing to develop,  reagents for
specialty  tests.  While these specialty tests represent a relatively small
percentage  of the  overall  testing  volume,  this  segment  of the market
generates  higher  profitability  and is  expected  to grow faster than the
overall hemostasis market.

      In our  hemostasis  product  line,  we are pursuing  distinct  growth
strategies  with  respect  to our  reagents  and to  our  instruments.  For
reagents,  we are seeking to: (1)  increase  penetration  in the market for
specialty testing through our existing research and development  activities
and collaboration efforts, as well as improved marketing;  (2) maintain our
position in aPTT and PT testing  through the  development  of reagents with
longer shelf life,  improved  consistency,  higher sensitivity and improved
stability;  (3) further develop controls and  calibrators;  (4) develop new
reagents  as existing  product  lines are  upgraded  and new  products  are
introduced; and (5) reduce reliance on third-party OEMs.

      We believe  there is an emerging  trend  towards the  development  of
specialty   testing,   particularly   in  the  United  States  due  to  the
historically low incidence of such testing in the United States as compared
to Europe. We are exploring  opportunities  within this growth area and are
currently  developing reagents for innovative  immunological,  clotting and
chromogenic assays.

      For instruments,  we plan to continue to maintain our strong position
within the  low-to-medium  throughput  segment of the hemostasis  market by
upgrading our  instruments to meet customers'  needs.  In addition,  we are
also  developing  instruments for the high throughput end of the hemostasis
market.


<PAGE>


      The  following  sets forth our  principal  hemostasis  products,  the
instrument  list  prices of which  range from US$ 16,600 to US$ $79,500 for
instruments currently marketed:

                    FISCAL YEAR
                        OF            TARGET
                   INTRODUCTION/      MARKET
       NAME           STATUS        SEGMENT (1)           FEATURES
-------------------------------------------------------------------------------
ACL FAMILY
  ACL 100 family        1988     Low to Medium  o  Low-cost automated operation
                                                o  Walk-away capability (i.e.,
                                                   ability of operator to load
                                                   samples and walk away)

  ACL 1000 family       1991     Low to Medium  o  Low-cost automated operation
                                                o  Walk-away capability
                                                o  Random access

  ACL Futura       1995 (Europe     Medium to   o  Increased throughput, fully
                    1996 (U.S.)      High          automated
                                                o  Increased walk-away
                                                   capability
                                                o  Chromogenic and
                                                   immunological testing
                                                   capability

  ACL Futura Plus   1997 (Europe   Medium to    o  Enhanced software features
                                     High

  ACL 7000              1997     Low to Medium  o  Low cost with features
                                                   found on larger systems
                                                o  On board bar code scanner
                                                o  Walk-away capability
                                                o  Chromogenic and
                                                   immunological testing
                                                   capability

  ACL 9000              2000     Low to Medium  o  Double reagent and sample
                                                   capacity
                                                o  Automatic rotor changer
                                                o  Increased walk-away
                                                   capability
                                                o  Chromogenic and
                                                   immunological testing
                                                   capability

  ACL Advance           2000      Medium to     o  Increased throughput, fully
                                     High          automated
                                                o  Increased walk-away
                                                   capability
                                                o  Chromogenic and
                                                   immunological testing
                                                   capability
                                                o  Increased on-board
                                                   reagents

  ACL 10000             2003      Medium to     o  Increased automation
                                    High           capability.
                                                   Decapper-Recapper
                                                   interface capability
                                                o  Chromogenic and
                                                   immunological testing
                                                   capability

HEMOLIANCE/MLA FAMILY
  ELECTRA 1400C         1995     Low to Medium  o  Integral bar code reader
                                                o  Walk-away capacity
                                                o  Chromogenic testing
                                                   capability

  ELECTRA 1800C         1997       Medium to    o  Cap-piercing
                                     High       o  External Barcode reader
                                                o  Increased walk-away capacity
                                                o  Chromogenic testing
                                                   capability
GEM
  GEM / PCL             1998     Point-of-Care  o  Rapid, reliable results
   Coagulation                                  o  Whole blood
   System                                       o  Portable, hand-held

REAGENTS
  PT and APTT tests     Various       N/A       o  Company manufactured
  Specialty tests       Various       N/A       o  Manufactured through both
                                                   internal development
                                                   and OEM
  Immunological
   tests
  CONTROLS AND          Various         N/A     o  Company manufactured
  CALIBRATORS
___________________
(1)   In terms of  throughput.  Low  throughput  generally  is less than 50
      tests per hour.  Medium  throughput  generally  is between 50 and 150
      tests per hour. High throughput  generally is more than 150 tests per
      hour.


<PAGE>


      Critical Care Systems

      Critical  care tests are typically  performed on patients  undergoing
emergency procedures or otherwise facing life-threatening  conditions.  Our
critical  care  products  include  blood  gas,   electrolyte,   metabolite,
coagulation and Co-Oximetry analyzers,  as well as instruments that include
a combination of these five analyte groupings, together with the associated
reagents,  controls and other  consumables and services.  Our critical care
instruments  are  focused on the needs of  hospital  central  laboratories,
respiratory therapy laboratories and the critical care areas of a hospital,
such as STAT  (emergency)  laboratories,  intensive  care units,  operating
rooms and emergency  rooms,  which we target with our line of point-of-care
products.  Blood gas analyzers  test the level of oxygen and carbon dioxide
in a patient's body and the patient's  acid/base (pH) levels. Our principal
blood gas products include the GEM Premier 3000, the IL 1600 family and the
Synthesis  family  of  products.   Electrolyte  analyzers  measure  sodium,
potassium,  ionized  calcium,  pH and chloride  which are necessary for the
proper   functioning  of  the  heart  and  other  muscles.   Our  principal
electrolyte  products  include the ILyte  family of  products.  Co-Oximetry
analyzers measure the patient's ability to transport oxygen.  Our principal
Co-Oximetry  products include the IL 682  Co-Oximeter.  Blood gas analyzers
are  primarily  used in  hospitals,  specifically  in  respiratory  therapy
departments, central laboratories and in many of the critical care areas of
the hospital,  such as intensive care units,  emergency rooms and operating
rooms. Blood gas instruments must be continuously maintained and calibrated
to ensure the instrument's  preparedness for STAT blood gas analysis.  Each
instrument uses a substantial amount of reagents, controls, calibrators and
other consumables  during normal  operation.  We offer an extensive line of
calibrating  gases and  reagents,  replacement  electrodes  and  membranes,
cleaning solutions,  data management systems,  controls and calibrators for
its critical care systems.

      The Boston Biomedical  Consultants  (BBC) report,  which provided the
basis for our critical  care market share  information,  estimated the 2002
worldwide  IVD  critical  care market in which we operate at  approximately
U.S.$  $587.7  million   (representing  sales  of  instruments,   reagents,
controls,  and other consumables).  Approximately 39% of such revenues were
derived from the United States,  30% were derived from Europe, and 31% were
derived from the rest of the world.  Revenue from reagents,  controls,  and
other consumables  represents a substantial majority of the revenues in the
worldwide  critical care market.  The additional  capabilities  provided by
blood gas  analyzers,  such as greater  ease-of-use,  lactate  and  glucose
measurement, and the ability to analyze samples nearer to the patient, have
resulted in increased  industry systems  placements through the replacement
of older and less capable instruments.

      We believe  that in 2002 we had the third  largest  worldwide  market
share in the  critical  care  market,  with an  estimated  market  share of
approximately 14% of our fiscal 2002 revenues attributable to critical care
systems,  approximately  44.1% were derived from Europe (13.8% from Italy),
44.0% from the United States and 11.9% from the rest of the world.

      We believe that future  growth in the critical care market will occur
primarily through the growth of point-of-care testing and expansion of test
menus. To the extent such expansion results in the  consolidation  into one
instrument  of  tests  which  generally  are  performed  today  on  several
instruments, we believe that the more rapid replacement of older instrument
models will tend to increase IVD industry sales in the future. In addition,
we believe that continuing  pressures to reduce testing turnaround time and
re-engineer  hospital  services to reduce total  hospital costs and patient
care time will increase the  penetration of  time-sensitive  testing in the
point-of-care areas of acute care hospitals.  We believe this trend to more
decentralized  forms of time-sensitive  testing will increase the number of
systems servicing the market.

      The following sets forth our principal  critical care  products,  the
instrument  list  prices  for  which  range  from  $3,670  to  $60,375  for
instruments currently marketed:

                   FISCAL YEAR OF
      NAME         INTRODUCTION/    IMPORTANT CHARACTERISTICS
                       STATUS
--------------------------------------------------------------------------------
BLOOD GAS
  IL 1600 family        1994     o  Versatile,    reliable   and   moderately
                                    priced blood gas analyzers
  GEM Premier Plus      1996     o  Point-of-care  blood gas and  electrolyte
                                    system which  provides  fast and accurate
                                    results
                                 o  Utilizes  a   multi-use   disposable
                                    cartridge,     each    capable    of
                                    performing 150 to 300 tests, instead
                                    of traditional gas tanks,  membranes
                                    and other solutions
  GEM Premier 2100      1998     o  Integrated  GEM Premier  Plus and GEM PCL
                                    system.  First to  integrate  blood  gas,
                                    electrolyte and coagulation measurements
  GEM Premier 3000      2000     o  Extended cartridge life
                                 o  Smaller sample size
                                 o  Integration  of  external   point-of-care
                                    systems (i.e., GEM PCL)
                                 o  Expanded menu
Synthesis family        1997     o  New family of critical care instruments
                                 o  First  instrument to integrate blood gas,
                                    Co-Oximetry,   electrolyte   and  glucose
                                    functions in a single  instrument using a
                                    single sample and channel

                        2000     o  1740    -    expanded    menu,    without
                                    Co-Oximetry testing
                                 o  1745 - expanded  menu,  with  Co-Oximetry
                                    testing
  GEM PCL               1998     o  Point-of-care    coagulation    hand-held
                                    system for the rapid  measurement  of PT,
                                    APTT and LR-ACT
  GEM OPL               2000     o  Point-of-care co-oximetry testing
CO-OXIMETRY
  IL 682                1995     o  Operates  as   independent   system,   or
Co-Oximeter                         electronically  links  to IL 1600  family
                                    and Synthesis family
ELECTROLYTES
  ILyte Family          1994     o  Low-cost,   easy-to-use  system  for  the
                                    measurement of electrolyte panels
DATA MANAGEMENT
IMPACT                  1997     o  Solves    the    primary    barrier    to
                                    point-of-care  IVD growth (i.e.,  patient
                                    and  instrument  data  consolidation  and
                                    verification)
                                 o  Enables     hospital     management    to
                                    consolidate  and control data from all IL
                                    blood gas systems  regardless of location
                                    within the hospital
GEMweb                  2001     o  Web-based  remote  instrument  management
                                    system
CONTROLS AND          Various    o  Broad line of specific and  multi-analyte
CALIBRATORS                         controls   for   blood   gas/Co-Oximetry/
                                    electrolyte/glucose,   including   patent
                                    protected technologies

IQM                     2003     o  Revolutionary  automated  quality control
                                    and  quality  assurance  system  for  GEM
                                    Premier 3000 analyzers


CLINICAL CHEMISTRY SYSTEMS

      Clinical  chemistry  systems are used for routine and emergency tests
to analyze  bodily  fluids,  including  serum,  urine and spinal fluids for
diagnostic  profiles,  such as  cholesterol  levels,  anemia,  cardiac  and
hepatic diseases,  the level of therapeutic drugs and the presence of drugs
of abuse.

      Our principal clinical chemistry instrument is the ILab 600, which is
designed  for  the  low-to-medium  throughput  end of the  market,  and was
launched  in 1998.  Of our  fiscal  2002  sales  attributable  to  clinical
chemistry systems, approximately 77.5% were derived from Europe (41.8% from
Italy),  6.2% from the United  States and 16.3% from the rest of the world.
We  sell  our  clinical   chemistry   system  to  clinical  and   specialty
laboratories  primarily  located  in  hospitals,  as  well  as to  clinical
reference laboratories and veterinary laboratories.  This relatively mature
market is very  competitive  and  price-sensitive,  with  instrument  sales
consisting primarily of replacement of older instruments.

      Over the  past  several  years,  the  market  for new  placements  of
clinical  chemistry  systems  has  significantly   declined,  and  we  have
experienced a related  decline in our clinical  chemistry  installed  base.
Currently  the  majority of our  clinical  chemistry  products  are sold in
Europe, while clinical chemistry sales in the rest of the world continue to
decline.  One  reason  we sold  our  Ascoli  factory  and  streamlined  our
production  facilities into the leased Ascoli facility is that our clinical
chemistry sales are now primarily focused in Europe.  Prior to fiscal 1997,
our principal  clinical chemistry  instrument was the Monarch.  The Monarch
had not been substantially  revised since 1991 and we ceased its production
in fiscal 1996. With no comparable replacement product, we have experienced
significant  decline in our clinical  chemistry  installed base and reduced
sales of reagents  and other  consumables  relating to this  decline in the
installed base.  Although we launched ILab 600 in 1998 and ILab 300 plus in
2002, we continue to experience lower sales in chemical chemistry.

      We source all of our clinical chemistry  instruments on an OEM basis,
while retaining responsibility for reagent production,  marketing,  product
support and advice.  Since 1998, due to the competitive  pressures existing
in the U.S. clinical chemistry market, we decided to discontinue placements
of new chemistry systems in the U.S., while continuing to provide reagents,
disposables and service to the existing installed base. We primarily market
these products in Italy and the United Kingdom.

      In addition,  we  manufacture  a line of clinical  chemistry  control
products,   including   assayed  routine   clinical   chemistry   controls,
therapeutic drug controls and urine chemistry controls,  which are sold for
use with both our and other  manufacturers'  systems.  We primarily seek to
enter into arrangements with OEMs and other developers of reagents.

      The   following   sets  forth  our   principal   clinical   chemistry
instruments,  the  instrument  list prices of which  range from  $49,700 to
$128,200:

                   FISCAL YEAR OF      TARGET
                    INTRODUCTION/      MARKET
        NAME           STATUS         SEGMENT(1)        FEATURES
-------------------------------------------------------------------------------
  ILAB FAMILY
     Ilab 600           1998         Low to    o  Floor standing
                                     Medium    o  64 tests on line, plus ISE
                                               o  70 reagents on board
                                               o  Throughput 400 photometric
                                                  plus ISE
                                               o  Fully random access

  Ilab 300 plus         2002          Low      o  Ease of use
                                               o  35 tests on line, plus ISE
                                               o  35  reagents on board
                                               o  Throughput 200 photometric
                                                  plus ISE


    REAGENTS AND       Various        N/A     o  Broad line of substrates,
    CONTROLS                                     enzymes, TDM and DAT
________________
(1)   In terms of throughput. Low, medium and high throughput generally are
      less than 300,  between  300 and 1000,  and more than 1000  tests per
      hour, respectively.

      Other Products

      We  seek  to   distribute   products  of  third   parties  which  are
complementary  to our own and which  enable  us to  leverage  our  existing
infrastructure  in  order to  increase  revenue  and  profit  with  minimal
additional   investment.   Other  products,   including  hematology,   flow
cytometry,  microbiology instruments and consumables, are distributed by us
in  certain  European  countries  and  are  distributed  primarily  through
long-term exclusive agreements.

      In  connection  with  Beckman  Coulter's  agreement  to  serve as the
exclusive  distributor of certain of our products,  directly or through its
affiliates  (collectively  "Beckman  Coulter"),  we serve as the  exclusive
distributor of Beckman Coulter's hematology,  flow cytometry and scientific
product lines in Austria and Italy.  Approximately 10.7% of our fiscal 2002
net revenues were derived from sales of Beckman Coulter's products.

      We also distribute in Italy, France,  Germany, the United Kingdom and
in the Benelux Countries certain products of Biokit, S.A., a majority owned
subsidiary of Werfen,  which develops and  manufactures  microbiology  test
kits and reagents for the diagnosis of infectious diseases.

POINT-OF-CARE

      Over the last few years,  an  increasing  amount of the  hospital IVD
testing  is being  performed  in  point-of-care  locations  with the use of
systems  specifically  designed for testing at or near the point of patient
care.  We seek to  exploit  this trend by  developing  and  increasing  the
installed base of our own  point-of-care  instruments and related products.
In 1996, we introduced the GEM Premier Plus product line for  point-of-care
blood gas and electrolyte testing. We launched GEM Premier 3000 product for
point-of-care   testing  in  April  2000.   We  have  also   expanded   our
point-of-care  capability to its hemostasis  product line. For example,  we
introduced the GEM PCL point-of-care testing system in 1998.

      Taken  together,   these  new  product  introductions  and  strategic
alliances position us to be the leading provider of hospital  point-of-care
testing  systems  for  both  the  critical  care  and  hemostasis  markets.
Moreover,  we  continue  to expend  significant  amounts  on  point-of-care
research and  development  activities,  and we intend to continue to pursue
selected  acquisitions and additional  strategic  alliances to increase our
point-of-care product lines and distribution capabilities.

CUSTOMERS

      We  have a broad  customer  base  that  includes  primarily  hospital
laboratories,  clinical reference laboratories and point-of-care  locations
within the hospital market.  Although we sell our products  worldwide,  our
sales are  concentrated  in Italy,  where many of the hospitals are managed
and  funded by  regional  governments,  and the  United  States.  No single
end-user customer represented more than 5% of our fiscal 2002 net revenues.

INSTRUMENT PLACEMENTS

      Most of our instrument placements in our three core product lines are
sold  directly to customers  and  distributors,  and a minority are sold to
third-party  lessors,  either  directly  or  through  the  sale to  various
third-party  lessors  via a  lease  agreement  with  its  customer,  or are
financed by us. One of the financing methods offered us to offset the large
up-front costs of purchasing  its systems is the reagent rental  agreement.
Pursuant to a reagent rental agreement, the customer leases the instrument,
often at a nominal lease rate, while we retain title to the instrument. The
agreement  requires the  customer to purchase  reagents and service from us
for the life of the instrument lease. We invested approximately  (euro)12.2
million,  (euro)19.9  million  and  (euro)21.6  million in  reagent  rental
agreements in fiscal 2000, 2001 and 2002, respectively.

      Sales of  reagents,  controls,  other  consumables  and  services are
affected by the rate of growth of our active installed base. It often takes
one to three months from the sale of new  instruments  before revenues from
the  consumption  of reagents,  other  consumables  and services  from such
instruments are realized.  Thereafter,  significant consumables and service
revenues are realized over the life of the instrument.

COMPETITION

      The IVD industry is highly competitive,  and we encounter competition
from several  manufacturers in both domestic and foreign  markets.  Many of
our competitors are  significantly  larger and have greater  resources than
us. Moreover, we encounter different competitors in each of our key product
lines,  and there can be no assurance that we will not encounter  increased
competition  in the future,  which could have a material  adverse effect on
our business.  Our principal  competitors in the critical care product line
are  Bayer and  Radiometer  A/S;  and in our  hemostasis  product  line are
Dade-Behring Inc. and Diagnostica  Stago S.A. We have numerous  competitors
in its clinical chemistry product lines.

      We compete principally on the basis of quality and breadth of product
offerings, price and service.  Competition within the markets that we serve
is primarily  driven by the need for  innovative  products that address the
needs of our customers in each market in which we compete.  We attempt,  to
the  extent  possible,   to  counter  competition  by  seeking  to  develop
differentiated  new products and provide quality products and services that
meet the customers'  needs.  There can be no assurance,  however,  that our
competitors  will not develop  products or services that are more effective
or less  expensive  than our products or which could render  certain of our
products  less  competitive.  Delays in the  launch of new  products  would
result in decreased revenues from sales of instruments, together with sales
of related reagents,  controls, other consumables and services,  during the
period of the delay, as well as during subsequent periods due to the longer
period  needed to establish an installed  base and any loss of market share
due to its customers' purchases of competitors'  products during the delay.
Moreover,  our  performance  and  future  growth  are  dependent  upon  our
continuing ability to develop and market new products.

RESEARCH AND DEVELOPMENT

      We maintain an active  research and  development  program  focused on
developing and  commercializing  products  which  complement and update our
existing  product  offerings.   We  devote  significant  resources  to  the
continued  development and introduction of new products and believe that we
are a leader in the introduction of innovative critical care and hemostasis
IVD products.  Our product development resources will continue to focus on:
(1) broadening  test menus through the  introduction  of new reagents;  (2)
upgrading  instrument  capabilities,  including  continued  introduction of
easier-to-use  and  lower-cost  systems;  (3) applying  core  technologies,
either  developed  internally  or through  strategic  alliances  or through
acquisitions,   to  enter  new  market  segments  and  to  broaden  product
offerings;  and (4) broadening and improving current  near-patient  product
offerings.  We develop our products  through our  research and  development
team and, where  strategically  beneficial,  through university  alliances,
instrument  OEMs  and  other  strategic  partnerships.   Our  research  and
development  expenditures  for fiscal 2000,  2001 and 2002 were  (euro)20.1
million,   (euro)19.6   million  and  (euro)20.1   million,   respectively,
representing 9.4%, 9.3% and 9.5% respectively, of our net revenues for such
years  (excluding  revenues  from  products  distributed  by us  for  third
parties).

      As  discussed  in "Item  7-Majority  Shareholders  and Related  Party
Transactions"  we executed a Cost  Sharing  Agreement  with Izasa on May 4,
2001,  that  requires  Izasa to help finance our  research and  development
work.

MANUFACTURING

      We have one  primary  instrument  manufacturing  facility  located in
Lexington,   Massachusetts.   Currently,   we  have  one  primary   reagent
manufacturing  facility  located in  Orangeburg,  New York, and a secondary
reagent manufacturing facility located in Ascoli Piceno, Italy.

      A series of voluntary  international quality standards,  known as ISO
9001, exist for manufacturing,  installation,  research and development and
other areas of our operations.  ISO 9001 status at a manufacturing facility
indicates to a purchaser  that the product was produced in a facility  that
adheres to a stringent  and uniform  quality  standard.  Our  facilities in
Lexington,  Massachusetts and Orangeburg,  New York are certified according
to the ISO  9001  and ISO  13485  standards.  The  Ascoli  Piceno  plant is
certified according to ISO 9002 and ISO 13488 standards.

SERVICE ORGANIZATION

      Service is a  critical  component  of  providing  a complete  systems
offering.  Our  service  organization  is  comprised  of:  (1)  individuals
responsible for receiving initial customer complaints through our telephone
service line; (2) service  engineers,  who provide trouble  shooting in the
field and customer training;  and (3) service  specialists,  who act as the
interface  between us and the service  engineers  and are  responsible  for
keeping the service  engineers  informed of the latest  developments in all
aspects of our products.

SALES, DISTRIBUTION AND MARKETING

      Our sales, distribution and marketing strategy is comprised of: (1) a
direct sales force which is responsible for certain of our product lines in
specific  markets,  based on our  strengths and  relationships  within such
markets; and (2) established third party distributors.

      We  utilize  a  direct  sales  force  for our  entire  product  line,
including  instruments,  reagents,  controls and other supplies,  in Italy,
Austria,  Belgium,  France, Germany,  Lithuania,  the Netherlands,  Mexico,
United  Kingdom, and  for our critical  care systems in the United  States,
Canada and Japan.  In 2002, we  established  new direct sales and marketing
organizations in Japan and Canada.

      In November  1998, we announced a three-year  agreement with Novation,
the  supply  company of VHA Inc.  and  University  HealthSystem  Consortium
(UHC).   The   agreement   covers  the  supply  of  critical  care  testing
instruments,  consumables, services and information management products for
use in hospital  laboratories and at the  point-of-care.  The agreement now
runs through December 2003, the maximum term allowed.

      In January 1999, we were awarded  primary  supplier status in a multi
year  contract with MAGNET,  covering the entire  portfolio of our critical
care  product  line.  This  contract  was renewed in  December  2001 for an
additional  three years.  In September 1999, we announced that we have been
awarded a new agreement with InSource Health Services. The agreement covers
critical care instruments,  services,  and consumables for use in hospitals
and point of care.  Finally,  in October  1999,  we  announced  a five-year
agreement with Health Services  Corporation of America,  one of the largest
purchasing  organizations  in the United States.  The agreement  covers our
complete line of critical  testing  instruments,  consumables,  service and
information  management products for use in hospital  laboratories and near
patient testing. InSource Health Service Corporation of America have merged
to form MedAssets.  Our contracts were joined in a single contract in 2002,
with a five-year expiration term.

      In October  2001,  we entered into a one-year  supply  contract  with
Premier  Purchasing  Partners.  This  contract  was  extended  for one-year
additional terms in September 2001 and September 2002.

      The principal  distributors  of our products are Beckman  Coulter and
Izasa.  Izasa has been our distributor in Spain and Portugal and in 2001 we
signed an agreement granting them exclusive  distribution rights.  Pursuant
to the agreement  Izasa is the exclusive  distributor of our entire product
line in Spain and Portugal.  Sales to Izasa  accounted  for 3.7%,  3.9% and
3.3% of our net revenues in fiscal 2000, 2001 and 2002,  respectively.  See
"Item 7--Majority Shareholders and Related Party Transactions." Pursuant to
the  current  agreement  with  Beckman  Coulter,  Beckman  Coulter  is  the
exclusive  distributor  of our  hemostasis  systems in the  United  States,
Canada, Australia, New Zealand, China and certain other countries. Sales to
Beckman  Coulter  accounted  for 17.6% of our net  revenues in fiscal 2002,
17.3% in fiscal 2001, and 21.0% in fiscal 2000.

BACKLOG

      Our business is such that it does not currently  experience,  nor has
it historically  experienced,  a significant backlog of orders for reagents
or instruments.

SEASONALITY

      Although our results of operations vary from fiscal quarter to fiscal
quarter, such variations do not generally follow a seasonal trend.

INTELLECTUAL PROPERTY

      We own numerous  United States and foreign  patents,  and have patent
applications  pending  in  the  United  States  and  abroad.  Such  patents
generally cover only a component of our  instruments,  reagents or controls
and such  patents  may not  prevent  a  competitor  from  manufacturing  an
alternative product. No single patent is material to our business.

      We also own numerous  United States and foreign  trademarks,  service
marks, and trade names. In addition,  we have applications for registration
of  trademarks,  service marks and trade names pending in the United States
and abroad.  Further, we license certain intellectual  property rights from
third parties.

      We believe that patents and other proprietary rights are important to
the  development  of our  business,  but  also  rely  upon  trade  secrets,
know-how,  continuing technological innovations and licensing opportunities
to  develop  and  maintain  our  competitive   position.  To  maintain  the
confidentiality  of our  trade  secrets  and  proprietary  information,  we
require our employees,  consultants and  collaborative  partners to execute
confidentiality  agreements upon the  commencement  of their  employment or
other  relationship with us. In the case of employees and consultants,  the
agreements  also provide that all inventions  resulting from work performed
by them while in our employ will be our exclusive property.

      No  assurance  can be given that the claims in our owned or  licensed
patents or patent  applications,  either as initially allowed by the United
States Patent and Trademark Office or any of its foreign  counterparts,  or
as may be  subsequently  interpreted by courts inside or outside the United
States,  will be sufficiently broad to protect our proprietary rights, will
be  commercially  valuable or will provide  competitive  advantages  to us.
Further,  there can be no  assurance  that  patents  will be  granted  with
respect to any of our pending  patent  applications  or with respect to any
patent  applications  filed by us in the future.  There can be no assurance
that any of our issued or licensed  patents would  ultimately be held valid
or that efforts to defend any of its patents,  trade  secrets,  know-how or
other intellectual property rights would be successful.

      In some cases,  litigation or other  proceedings  may be necessary to
defend against or assert claims of infringement,  to enforce patents issued
to us or our  licensors,  to  protect  trade  secrets,  know-how  or  other
intellectual  property  rights owned by us, or to  determine  the scope and
validity of our  proprietary  rights or of third parties.  Such  litigation
could result in  substantial  costs to and diversion of our  resources.  An
adverse  outcome in any such  litigation or proceeding  could subject us to
significant  liabilities,  require us to cease using the subject technology
or require us to license the subject  technology from the third party,  all
of which could have a material  adverse  effect on our business,  financial
condition and results of operations.

ITALIAN HEALTH CARE REGULATION

      Public health care institutions  constitute the main structure of the
Italian health care system,  currently encompassing hospitals,  clinics and
medical  schools.  Private  institutions  are also numerous,  but generally
operate under  conventions  with the National Health Service and their size
is more limited or specialized.  The primary health care regulations govern
the  general  regulatory  framework  of  health-related   activities,   the
organization of public  structures and their  personnel,  and the supply of
health care services to citizens.  The creation of the current system dates
back to Law 833 of December 23, 1978,  which  instituted a National  Health
Service  ("Servizio  Sanitario  Nazionale")  and  introduced  an  extensive
decentralization of powers. The Ministry of Health remains empowered to fix
the general  guidelines of national  health policy and planning,  while the
organization and management of public services occur at the regional level.
Twenty  regional   administrations   are  responsible  for  the  assistance
activities  in  their  territories  and  coordinate  the  activity  of  the
approximately  620  autonomous  local health  authorities,  which have been
transferred  into  quasi-private  enterprises,  called  "Aziende  Sanitanie
Locali or "ASLs," organized at the regional level.

      The functioning of public health structures generally, and of ASLs in
particular,  is regulated  at the  national as well as regional  level by a
number of laws and administrative provisions.  Virtually all regions have a
law governing  public  procurements  in the health sector.  Such provisions
generally  follow the same pattern of national laws  governing  tenders for
public  works,  for which  the  prevailing  rule is the  making of a public
tender,  in which the goods or services to be supplied  are  indicated in a
public  invitation  to bid and then awarded to the most  appropriate  offer
among those  submitted by the  participants  to the tender.  In some cases,
companies   participating  in  these  offers  must  be  pre-qualified   and
registered in a Suppliers' Register kept at each ASL. Private, arm's length
negotiation of contracts is allowed in a very limited number of cases (such
as, for example,  where  products to be purchased are covered by patents or
similar exclusive rights).

      The public  health care system has provided  Italian  citizens with a
number of free services  (ranging  from hospital care to medical  analysis,
local physician  assistance and supply of  pharmaceuticals),  substantially
funded  by  the  State.  A  certain  degree  of  inefficiency,  significant
personnel  costs and other  factors have  characterized  the  management of
public health structures, and resulted in the accumulation of a substantial
debt by the  ASLs and  significant  delays  in  collection  for  suppliers.
Accounts  receivables from local entities may remain  outstanding for up to
300 days on average.

      Italian   constitutional   reform   approved  in  2001  expanded  the
legislative  and  administrative  powers  of  the  regional  Italian  local
governments.  This  decentralization  expanded  the powers of the  regional
governments and may result in the individual regions addressing  healthcare
reforms  individually  and not  collectively.  The  change  in the  Italian
Parliament  majority in 2001 from a center-left to a center-right  majority
has not  changed  the  general  governmental  objective  to  reduce  public
expenditure in the health care sector. This shift toward regional power and
the continuing  trend to contain public  expenditure may not necessarily be
favorable to our industry.

CERTAIN REGULATORY MATTERS

      Our  products,   product  development  activities  and  manufacturing
processes  are subject to extensive and rigorous  regulation,  including by
the U.S.  Food and Drug  Administration  ("FDA")  as well as by a number of
agencies in other  countries  that exercise  regulatory  authority over our
products.  In the United  States,  the FDA  regulates the  introduction  of
medical devices as well as the  manufacturing,  labeling and record keeping
procedures  for  such  devices.  For  purposes  of these  regulations,  our
products are  generally  treated as medical  "devices."  In order for us to
market our new products in the United States, we must typically obtain from
the FDA concurrence with a 510(k) pre-market  notification or approval of a
more extensive submission known as PMA.

      A  manufacturer  may seek FDA  clearance to  distribute a new medical
device  by filing a 510(k)  pre-market  notification.  A 510(k)  pre-market
notification  requires the  manufacturer  of a medical  device to establish
that the device is  "substantially  equivalent" to medical  devices legally
marketed in the United States.  The 510(k) pre-market  notification must be
accompanied by appropriate  information or data  establishing  the claim of
substantial  equivalence,  which,  depending  on the type of  product,  may
require  clinical data. If this  substantial  equivalence is established to
the  satisfaction of the FDA, the  manufacturer  will receive FDA clearance
for marketing of the medical device.  If the manufacturer  cannot establish
substantial  equivalence or if the FDA determines  that a device requires a
more rigorous review,  the FDA will require that the manufacturer  submit a
PMA  ("pre-market  approval")  application  prior to obtaining  approval to
market the device in the United  States,  which  process is  expensive  and
time-consuming,   generally   taking   more   than  two   years  and  often
substantially longer.

      All of our  currently-marketed  products  have received FDA marketing
clearance pursuant to 510(k) pre-market notifications filed by us. Although
we  anticipate  that,  at  least in the  near-term,  our  products  will be
evaluated under the 510(k) pre-market notification process, there can be no
assurance that our current or future  products will not be subjected to the
PMA process or that our  current or future  products  in  development  will
receive FDA marketing clearance.

      In addition, we have made modifications to our cleared products which
we believe do not require submission of new 510(k) notices. There can be no
assurance, however, that the FDA would agree with any of our determinations
and not require us to submit new 510(k) notices for any of the changes made
to its products.

      Failure  to comply  with  applicable  regulatory  requirements  could
result in, among other things, warning letters, fines,  injunctions,  civil
penalties,  recall or seizure of the products,  total or partial suspension
of production,  refusal of the government to grant pre-market  clearance or
pre-market  approval for  devices,  withdrawal  of  approvals  and criminal
prosecution.  Moreover,  approval by the FDA or other regulatory  authority
does not preempt private product liability claims.

      Our  facilities  are also subject to inspection on a routine basis by
federal  and state  agencies,  including  the FDA, to ensure that we are in
compliance with Good  Manufacturing  Practices.  These regulations  require
that we manufacture our products and maintain our documents in a prescribed
manner  with  respect  to   manufacturing,   testing  and  quality  control
activities.   The  FDA  also  conducts   unannounced  audits,  but  routine
inspections   occur   approximately   once  every  two  years.   Other  FDA
requirements  govern  product  labeling  and prohibit a  manufacturer  from
marketing  an  approved  device  for  unapproved   applications.   Clinical
laboratories  in the  United  States  are  regulated  by the FDA  under the
Clinical Laboratory  Improvement Act ("CLIA"),  which requires all clinical
laboratories  to meet  specified  standards  depending on the level of test
complexity  in  the  areas  of  personnel  qualification,   administration,
participation  in proficiency  testing,  patient test  management,  quality
control,  quality  assurance  and  inspections.   Most  of  our  tests  are
classified as moderate  complexity  tests.  There can be no assurance  that
these tests will not be recategorized, or that other tests performed on our
other  products will not be  categorized to a higher level of complexity or
that  such   categorization   or  regulations  and  future   administrative
interpretations of the CLIA would not have a material adverse effect on our
financial condition and results of operations.

      Sales of medical  devices  outside  the United  States are subject to
foreign  regulatory  requirements that vary widely from country to country.
These  laws  and  regulations   range  from  simple  product   registration
requirements in some countries to complex clearance and production controls
in others.  As a result,  the processes and time periods required to obtain
foreign marketing approval may be longer or shorter than those necessary to
obtain FDA  approval.  These  differences  may affect  the  efficiency  and
timeliness of international market introduction of our products,  and there
can be no assurance that we will be able to obtain regulatory  approvals or
clearances for its products in foreign countries.

      Medical  devices  cannot be sold in EU countries  unless they display
the CE  mark.  We have  obtained  CE  mark  certification  for our  current
products in accordance to the European Union Directives  applicable to them
and already in force.  We are  continuously  monitoring EU regulations  and
their  national  transpositions,  taking  account  of  the  forthcoming  EU
enlargement, so as to plan and achieve compliance to schedule.

      In addition,  international sales of medical devices manufactured in
the  United  States but not  approved  by the FDA for  distribution  in the
United States are subject to FDA export requirements.

      We  may  become  subject  to  future   legislation   and  regulations
concerning the  manufacture  and marketing of medical  devices.  This could
increase the cost and time  necessary to begin  marketing  new products and
could affect us in other  respects  not  presently  foreseeable.  We cannot
predict the effect of possible future legislation and regulations.

      We are also  subject to numerous  federal,  state,  local and foreign
laws and regulations relating to such matters as environmental  protection,
health and  safety,  manufacturing  practices  and fire  hazard  control to
liabilities and compliance costs associated with past and current handling,
processing,  storing, and disposing,  of medical or hazardous substances or
wastes.  From time to time our operations may result in non-compliance with
environmental or occupational health and safety laws, or liability pursuant
to such laws.  There can be no  assurance  that we will not be  required to
incur  significant  costs to comply with such laws and  regulations  in the
future or that such laws or  regulations  will not have a material  adverse
effect upon our ability to do business.

C.    ORGANIZATIONAL STRUCTURE

      As discussed  above under "Item 4 --  Information  on the Company ---
Background,"  we are  part of a group of  companies  that is  dedicated  to
manufacturing   and   distributing   health   care   products.   Our  basic
organizational structure is as follows:

[FLOWCHART GRAPHIC OMITTED]

                --------------------------------------------
                Jose Maria Rubiralta and Francisco Rubiralta
                --------------------------------------------
                                     /   100%
                                     /
                              ---------------
                              Grupo CH-Werfen
                              ---------------
                                     /   81.67%
                                     /
                    ----------------------------------
                    Izasa Distribuciones Tecnicas S.A.--------------
                    ----------------------------------             /
                                     /   100%                      /
                                     /                             /
                           --------------------                    /
                           Miscel Holdings B.V.                    /
                           --------------------                    /
                                     /   29.2%                     /  56.2%
                                     /                             /
                     ---------------------------------             /
                     Instrumentation Laboratory S.p.A.--------------
                     ---------------------------------
                                     /
                                     /
                               ------------
                               Subsidiaries
                               ------------

      All of our subsidiaries  are wholly owned except for  Instrumentation
Laboratory   (Lietuva)   B.I.,  of  which  we  own  67%.  Our   significant
subsidiaries   include:    Instrumentation   Laboratory   GmbH   (Germany),
Instrumentation Laboratory GmbH (Austria),  Instrumentation Laboratory U.K.
Ltd.  (U.K.),  Instrumentation  Laboratory S.A.  (France),  Instrumentation
Laboratory Belgium N.V.  (Belgium),  Instrumentation  Laboratory Group B.V.
(Holland),   Instrumentation   Laboratory   (Netherlands)  B.V.  (Holland),
Instrumentation  Laboratory  (Lietuva)  B.I.  (Lithuania),  Instrumentation
Laboratory Espana, S.L.,  Instrumentation  Laboratory Company (U.S.A.),  IL
Sensor Systems, Inc. (U.S.A.) (formerly Mallinckrodt Sensor Systems, Inc.),
IL Diagnostic,  S.A. de C.V. (Mexico),  Medical Laboratory Automation Inc.,
Lessix AB  (Sweden),  Chromogenix  Holding AB (Sweden) and  Chromogenix  AB
(Sweden).

      We   completely    liquidated    our   wholly   owned    subsidiaries
Instrumentation  Laboratory AG  (Switzerland),  Instrumentation  Laboratory
(France) S.a.r.l. and Labgas S.a.r.l. (France) in 2001.

D.    PROPERTY, PLANTS AND EQUIPMENT

      The  general  location,  use and  approximate  size of the  principal
physical properties used by us are set forth below as at November 30, 2002.

-------------------------------------------------------------------------------
                                        OWNED/LEASE               APPROXIMATE
                                        (EXPIRATION                AREA IN
  LOCATION          PRIMARY USE           DATE OF                 SQUARE FEET
                                          LEASE)
-------------------------------------------------------------------------------

Milan, Italy        Europe,                 Leased                   88,000
                    Middle East,        (expires 2007)
                    Africa and
                    Latin America
                    Headquarters;
                    sales and
                    marketing
-------------------------------------------------------------------------------

Lexington,          U.S. and                Leased                   140,000
Massachusetts       Canada              (expires 2006)
                    Headquarters;
                    instrument
                    manufacturing;
                    research and
                    development;
                    quality
                    assurance;
                    instrument
                    software

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

Orangeburg,         Reagent                 Owned                    100,000
New York            manufacturing

-------------------------------------------------------------------------------
Ascoli Piceno,      Reagent                 Leased                   21,500
Italy               manufacturing       (expires 2006)

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

      In  addition  to the  facilities  described  above,  we  lease  other
non-principal facilities for sales,  distribution and marketing. We monitor
our production  requirements as compared with our production  capacity.  We
believe that the existing  facilities  and their level of  utilization  are
sufficient  for our current and  reasonably  anticipated  future  needs for
productive capacity.

ENVIRONMENTAL MATTERS

      We are subject to environmental laws in the jurisdictions in which we
operate. We do not currently  anticipate any material adverse effect on our
operations  or  financial  condition  as a result of its  efforts to comply
with, or our  liabilities  under,  environmental  laws. We do not currently
anticipate any material  capital  expenditures  for  environmental  control
facilities.  Some  risk  of  environmental  liability  is  inherent  in our
business,  and there can be no assurance that material  environmental costs
will not arise in the future.  In  particular,  we might incur  capital and
other costs to comply with increasingly  stringent  environmental  laws and
enforcement   policies.   Although  it  is  difficult  to  predict   future
environmental  costs,  we do not anticipate any material  adverse effect on
its operations,  financial condition or competitive position as a result of
future costs of environmental compliance.


<PAGE>


ITEM 5.   OPERATING AND FINANCIAL REVIEW AND PROSPECTS

      The following  discussion and analysis of our financial condition and
results  of  operations  should  be read in  conjunction  with our  Audited
Consolidated  Financial  Statements for the fiscal years ended November 30,
2002,  2001 and 2000  included  elsewhere  in this  report.  The  financial
statements  have been  prepared in  accordance  with  Italian  GAAP,  which
differs in certain significant respects from U.S. GAAP. For a discussion of
the principal differences between Italian GAAP and U.S. GAAP as they relate
to our Consolidated  Financial Statements,  see Note 21 to the Consolidated
Financial Statements.

RECENT DEVELOPMENTS

      Prior to fiscal year 2002,  Arthur Andersen served as our independent
auditors.  On August 31, 2002,  Arthur Andersen LLP, an affiliate of Arthur
Andersen,  ceased  practicing  before  the  SEC.  On  November  25,2002  we
appointed BDO Sala Scelsi Farina S.p.A. as our independent auditors for the
fiscal year ended November 30, 2002.

      Because our former key audit  engagement  team  personnel  have since
left  Arthur   Andersen,   Arthur  Andersen  did  not  participate  in  the
preparation  of this  report,  reissue its audit report with respect to the
consolidated  financial  statements  included in this report, or consent to
the inclusion in this report of its audit report. As a result, investors in
Instrumentation  Laboratory  may have no effective  remedy  against  Arthur
Andersen  in  connection  with a material  misstatement  or omission in the
financial  statements to which its audit report relates. In addition,  even
if such investors were able to assert a claim,  Arthur Andersen may fail or
otherwise  have  insufficient  assets to satisfy  claims by investors  that
might  arise  under the U.S.  federal  securities  laws or  otherwise  with
respect to its audit report.

      As of November 30, 2002 the U.S. subsidiary retroactively changed its
inventory  costing  from LIFO to FIFO,  to conform to the group  accounting
practice and to follow the benchmark  treatment  recommended by IAS 2. This
change  has no  effect on the  fiscal  2002  statement  of  operations  but
originated a reduction of the loss reported for 2001 of (euro)1,441,000 and
a decrease in the shareholders'  equity as of November 30, 1999 and 2000 of
Euro  (euro)1,275,000 and  (euro)1,483,000,  respectively.  The incremental
difference  between 1999 and 2000 is due to the  difference  of  conversion
rates of U.S. Dollar into euro.

OVERVIEW

      We derive  revenue  from  selling  and  leasing  specialized  medical
instruments and consumables used in these  instruments.  Periods containing
increased  sales of  installed  instruments  generally  result in increased
revenues and lower margins assuming all other factors remain static. In the
long run,  increasing  the  installed  base of  instruments  is the path to
increasing the sales of the higher margin consumables.  The majority of our
instrument  sales  during the years ended  November  30, 2001 and 2002 have
resulted from  replacing  older units.  It is frequently  the case that new
instruments  are more  efficient, enabling  them to perform more tests than
older  equipment  and  therefore  using  less  consumables.  Thus any major
increase in sales of new installed instruments will be met with lower sales
of consumables. As a result, a unit by unit analysis of the installed base,
while a useful measure, is not necessarily  indicative of a business line's
performance.

      By August 2000,  we completed a  restructuring  involving the closing
and sales of all of our European manufacturing  facilities.  We transferred
the majority of our operations to our existing manufacturing  facilities in
the United States. The only products we still manufacture in Europe (at our
leased  Italian  facility)  are the  clinical  chemistry  reagent  products
because  the  market  for  these  goods  is  primarily   in  Europe.   This
restructuring helped us increase our profit margins.

      For the year  ended  November  30,  2002,  we  recorded a net loss of
(euro)13.8  million as compared to a net loss of (euro)5.8  million for the
year ended  November 30, 2001 and a net loss of (euro)17.5  million for the
year ended November 30, 2000. The net losses  reported in fiscal years 2002
and 2001 were largely  attributable  to a low level in the gross margins of
the Company's  core product  lines,  significant  research and  development
costs,   increased  goodwill   amortization  and  higher  interest  expense
resulting from the acquisition of Hemoliance.  In fiscal year 2002 and 2001
the Company  experienced a stabilization  in prices for most of its product
lines.  However,  while  prices  generally  stabilized,  the pricing  level
remains  low due to prior  years  reductions.  The result  from  operations
continue to be significantly  affected by competitive pricing pressures and
customer  consolidation.  Research and development costs also continue at a
high  level,  due  to  the  Company's   continued   investment  in  product
development  to broaden its product  offerings  within its two core product
lines to meet the changing demands of its markets and to better address the
areas of highest  growth within these markets.  While the Company  believes
that its  profitability  will continue to be  negatively  affected by these
industry  factors  at least  for the near  term,  management  designed  and
implemented  plans to improve  the  results of  operations  and the Company
believes it is taking the steps  necessary  to achieve  sustainable  growth
through improved operating performance.

CRITICAL ACCOUNTING POLICIES

      Our significant  accounting policies are more fully described in Note
3 to our Consolidated  Financial  Statements.  However,  in accordance with
recent  Securities  and  Exchange  Commission   guidance,   those  material
accounting  policies  which we believe are  particularly  important  to the
understanding of our financial  statements are discussed below. In applying
those  policies,  our  management  uses its judgment to  determine  certain
estimates. Those estimates are based on our historical experience, terms of
existing  contracts,  our observance of trends in the industry  information
provided by our customers and information  available from other sources, as
appropriate. Our significant accounting policies include:

Allowance for doubtful accounts

      Accounts   receivable   are  reduced  by  an  amount   which  may  be
uncollectable  in the future.  We have a broad customer base that primarily
includes  hospitals and clinical reference  laboratories.  Although we sell
our products worldwide, our sales are concentrated in the United States and
Europe,  where a  significant  portion  of our sales is  ultimately  funded
through  the  government  or  governmental   reimbursement   programs.  The
estimated   allowance   for  doubtful   accounts  is  based   primarily  on
management's evaluation of the financial condition of the customer.

Inventories and related reserve for obsolete and excess inventory

      Inventories  are  valued at the lower of cost or market and have been
reduced by a reserve for excess and  obsolete  inventories.  The  estimated
reserve is based on management's  review of inventories on hand compared to
estimated future utilization and sales.

Goodwill, Intangibles and other non current assets

      Property,  plant and equipment,  goodwill and other  intangibles  are
amortized over their useful lives.  Useful lives are based on  management's
estimates of the period that the assets will  generate  revenue.  We assess
the future useful life of property, plant and equipment, goodwill and other
intangible assets whenever events or changes in circumstances indicate that
the current  useful  life might have  diminished.  We  consider  the future
discounted cash flow in assessing the  recoverability  of these assets.  If
any  impairment is  identified,  any excess of the carrying value over fair
value is recorded as a loss.

Instruments at customers

      Instruments  leased to customers under sales-type lease contracts are
recorded at an amount equal to the net  investment  in the lease,  with the
finance  income being  recognized  over the life of the related  contracts.
Instruments held by customers under reagent rental  contracts,  in which we
retain title, are carried at cost less accumulated  depreciation.  The cost
of the instruments is depreciated on a straight-line basis over the average
length of the  related  contracts,  but not  exceeding  5 years.  Under the
contracts,  customers are generally  required to purchase specified minimum
amounts of reagents.

Revenue recognition

      Sales are  recorded at the time of shipment of the goods to customers
or  performance  of the  service.  Revenues  from  instrument  rentals  are
recognized  over the life of the rental  contract.  Revenues  from  service
contracts are  recognized  over the life of the service  contract.  Revenue
from sales-type leases is recognized at the inception of the lease equal to
the present  value of the lease  payments to be  received.  The cost of the
leased  products  is  charged  to  cost  of  goods  sold  at the  time  the
corresponding revenue is recognized.

Derivatives

      We enter into derivative  transactions to hedge specific transactions
as well as to reduce our  exposure  to interest  rate and foreign  exchange
risks.  The interest rate  differentials to be received or paid on interest
rate  swaps and other  interest  rate  agreements  designated  as hedges of
specific  underlying  debt  instruments  are included in interest income or
expense  on an  accrual  basis over the  period  hedged.  Foreign  exchange
derivatives  (options)  are used to hedge future  expenses  denominated  in
foreign  currencies,   but  are  not  designated  against  specific  future
transactions.  At the  reporting  date,  these options are accounted for at
estimated  fair market value.  The resulting  losses are  recognised in the
income  statement,  while the  resulting  gains are accounted for only when
realized.

RESULTS OF OPERATIONS

      The following  table sets forth income  statement  data for the years
ending  November 30,  2000,  2001 and 2002  expressed  as a  percentage  of
consolidated net revenues.

                                                 YEAR ENDED NOVEMBER 30,
                                            -----------------------------------
                                              2000         2001         2002
                                            ----------  ------------  ---------
Net revenues                                  100.0%       100.0%      100.0%
Cost of sales............................      52.0         52.5        51.9
                                            ----------  ------------  ---------
       Gross profit......................      48.0         47.5        48.1
Research and development costs...........       7.3          7.1         7.4

Selling, general and administrative expenses   33.4         33.7        36.6
                                            ----------  ------------  ---------
Operating income before amortization of
intangible assets and deferred charges...       7.3          6.7         4.1

Amortization of intangible assets and
deferred charges........................        4.1          3.3         3.1
                                            ----------  ------------  ---------
Operating income ........................       3.2          3.4         1.0
Net interest expense.....................       5.3          5.1         4.1
Other (income) expense, net..............       3.6         (0.7)        1.0
Income taxes.............................       0.6          1.1         0.9
                                            ----------  ------------  ---------
       Net loss..........................     (6.3)%        (2.1)%      (5.0)%
                                            ==========  ============  =========

COMPARISON OF FISCAL YEARS ENDED NOVEMBER 30, 2002 AND 2001

      Net  revenues  decreased  (euro)2.2  million  or 0.8% to  (euro)272.6
million in the year ended November 30, 2002,  from  (euro)274.8  million in
the year ended November 30, 2001.  This small decrease is a result of lower
sales  in  our  critical  care  and  clinical   chemistry  business  lines.
Geographically,  this small  decrease in net  revenues is the result of the
strengthening  of the  euro  against  the  U.S.  dollar.  Sales in the U.S.
denominated in dollars increased by $1.6 million (or 2.2%) but decreased by
(euro)1.2  million (or 1.4%) when translated in euro.  Sales in the rest of
the world, also denominated in U.S. dollars, decreased by (euro)2.5 million
(or 7.0%) while sales in Europe  increased by (euro)1.5  million (or 1.0%).
Overall unit  placements of core  instruments  increased  12.1% in the year
ended  November  30,  2002,  versus  the same  period of fiscal  2001.  The
following  paragraphs  summarize  the results  for our three main  business
segments.

      Critical  Care.  Net  revenues  attributable  to  the  critical  care
business  unit in the  year  ended  November  30,  2002  decreased  3.2% to
(euro)76.8  million from (euro)79.4  million in the year ended November 30,
2001.  Sales increased in Europe,  even though they were flat in Italy, but
decreased in the U.S.  and the rest of the world.  In the U.S. we continued
to experience strong unit sales of our newly marketed analyzers,  which are
more  efficient  and can  perform  more tests than  older  analyzers.  Unit
placements  of core  instruments  within the critical  care  business  unit
increased  17.5% in the year ended November 30, 2002 versus the same period
of fiscal 2001.

      Hemostasis. Net revenues attributable to the hemostasis business unit
in the year ended November 30, 2002  increased 2.5% to (euro)134.8  million
from  (euro)131.5  million  in the year  ended  November  30,  2001.  Sales
increased in Europe and the U.S, even though they were negatively  impacted
by the strengthening of the euro against the U.S. dollar,  but decreased in
the rest of the  world.  Unit  placements  of core  instruments  within the
hemostasis business unit increased 8.2% in the year ended November 30, 2002
versus the same period of fiscal 2001.

      Clinical  Chemistry.   Net  revenues  attributable  to  the  clinical
chemistry business unit in the year ended November 30, 2002 decreased 13.8%
to (euro)24.3  million from  (euro)28.2  million in the year ended November
30, 2001. This decrease is mainly  attributed to strong instrument sales in
Eastern  Europe in 2001,  which were not  repeated in 2002 and a decline in
sales in the U.S. We continue to only place new  instruments in Italy,  the
UK,  Eastern Europe and the Middle East. As a result,  our installed  base,
particularly in the U.S., is declining, resulting in decreased revenues for
consumables on a continuing basis. Such decrease is expected to continue in
the future.  Sales in the U.S for fiscal 2002 were  decreased  by (euro)1.7
million (or 52.7%) to (euro) 1.5 million,  compared to fiscal year 2001 For
fiscal 2002, sales in Italy increased by 1.4%.

      Net revenues  attributable to sales of other products  increased 2.5%
to (euro)36.7  million in the year ended November 30, 2002 from  (euro)35.8
million in the year ended November 30, 2001.  Most of these sales relate to
the distribution of Beckman Coulter products in Italy.

      GROSS PROFIT increased  (euro)0.4  million to (euro)131.0  million in
the year ended  November 30,  2002,  from  (euro)130.6  million in the year
ended  November 30, 2001.  Gross profit as a percentage of net revenues was
48.1% in the year ended  November 30, 2002,  versus 47.5% in the year ended
November 30, 2001.

      The increase in the gross margin compared to fiscal 2001 is primarily
attributable to improved manufacturing  efficiency and reduced obsolescence
after  the   consolidation   of   manufacturing   plants  and  distribution
warehouses. In addition, the gross margin value as a percentage of revenues
improved as a result of the weakening of the U.S.  dollar  against the euro
compared to FISCAL 2001, due to more costs being  incurred in U.S.  dollars
relative to revenues earned in U.S.  dollars.  While prices have stabilized
(albeit at low levels) we expect to continue to experience  margin pressure
related to  industry  pricing  trends.  Our  strategy  is to address  these
pressures by seeking to increase sales of premium products,  which are less
sensitive  to  these  pricing  pressures  and  broadening  the  test  menus
available on the instruments.

      RESEARCH AND DEVELOPMENT  COSTS increased  (euro)0.5 million or 2.5%,
to  (euro)20.1  million  in  the  year  ended  November  30,  2002,  versus
(euro)19.6  million in the year  ended  November  30,  2001.  Research  and
development  costs as a  percentage  of net  revenues  attributable  to the
critical care and hemostasis  business  units (which  represents all of the
research and  development  costs) were 9.5% in the year ended  November 30,
2002 versus 9.3% in the year ended  November 30, 2001.  These  expenditures
are principally  attributable to new product  development  projects for the
next  generation of products  within our core product  lines.  We intend to
maintain  these  current  levels of spending to support our product  launch
timetable. R&D expenditures are net of Izasa's contribution to our research
and development  costs pursuant to a cost sharing  agreement  between Izasa
and the U.S.  subsidiary of the Group. By said agreement Izasa  contributes
to financing the Group's  research and development  activities on the basis
of its  share of total  Group  worldwide  sales on  related  products.  The
contribution amounted to (euro)2.2 million in 2001 and 2002.

      SELLING,  GENERAL AND  ADMINISTRATIVE  EXPENSES  increased  (euro)7.1
million or 7.7% to (euro)99.8  million in the year ended November 30, 2002,
compared  to  (euro)92,7  million  in the year  ended  November  30,  2001.
Selling,  general  and  administrative  expenses  as a  percentage  of  net
revenues  were 36.6% in the year ended  November 30, 2002,  versus 33.7% in
year  ended  November  30,  2001.  As part  of our  business  strategy,  we
continuously  evaluate our cost  structure,  seeking to lower our operating
costs. We have not made definitive plans to further reduce operation costs.

      AMORTIZATION  OF  INTANGIBLE  ASSETS AND DEFERRED  CHARGES  decreased
(euro)0.6  million or 6.6% to (euro)8.5  million in the year ended November
30, 2002,  from  (euro)9.1  million in year ended  November 30, 2001.  This
decrease is mainly  attributable  to the completion of the  amortization of
share capital issuance costs and other intangibles.

      INTEREST EXPENSE  decreased  (euro)3.2 million or 20.6% to (euro)12.2
million in the year ended November 30, 2002 from (euro)15.4  million in the
year ended  November 30, 2001. The decrease is mainly due to a reduction in
interest expense for long-term debt, which amounted to (euro)7.0 million in
2002 compared to (euro)9.6 million in 2001. Long term debt decreased mainly
due to the (euro)60  million  capital  increase  which was subscribed to by
Izasa in April 2001 by forgiving a corresponding portion of its outstanding
subordinated loan. Also the decrease in interest rates positively  affected
interest expense for short term bank borrowings and long term debt.

      OTHER  EXPENSE,  NET of (euro)2.7  million in the year ended November
30,  2002,  was  principally   comprised  of:  (i)  (euro)1.5   million  of
supplementary leaving indemnities and restructuring charges, (ii) (euro)1.9
million of gain on foreign exchange and forward exchange  contracts,  (iii)
(euro)1.3 of litigation  settlements  and estimated  costs to settle,  (iv)
(euro)0.1  million  of gain on  disposal  of fixed  assets  (iv)  (euro)0.7
million of bank charges, and (v) (euro)1.2 million of other expenses.

      INCOME TAX EXPENSE was (euro)2.5  million in the year ended  November
30, 2002.  Our effective tax rate can be affected by the country from which
income  is  generated  and  the   availability   of  net   operating   loss
carryforwards to offset operating  income.  Also, our effective tax rate is
affected by the Italian "tax on added value" (IRAP),  which has a different
base of taxation and may be payable even in case of pre-tax losses.

      NET LOSS was (euro)13.8  million or (euro)0.15 per share for the year
ended  November  30,  2002,  versus  a net  loss of  (euro)5.8  million  or
(euro)0.06 per share for the year ended November 30, 2001.

COMPARISON OF FISCAL YEARS ENDED NOVEMBER 30, 2001 AND 2000

      Net  revenues  decreased  (euro)0.5  million  or 0.2% to  (euro)274.8
million in the year ended November 30, 2001,  from  (euro)275.3  million in
the year ended November 30, 2000.  This small decrease is a result of lower
unit  sales  in  our  critical   care  and   hemostasis   business   lines.
Geographically,  this small  decrease in net  revenues is the net result of
decreased  sales,  and thus lower  revenues,  in the U.S.  offset by higher
sales in Italy  (following  a recovery of the market and the results of our
efforts to rebuild our sales force), Spain and eastern Europe. Sales in the
rest of the world were  substantially  stable.  Overall unit  placements of
core  instruments  increased  26.0% in the year ended  November  30,  2001,
versus the same period of fiscal  2000.  Moreover,  our net  revenues  were
positively  impacted by the  strengthening  of the U.S.  dollar against the
euro.  The  following  paragraphs  summarize the results for our three main
business segments.

      Critical  Care.  Net  revenues  attributable  to  the  critical  care
business  unit in the  year  ended  November  30,  2001  decreased  0.1% to
(euro)79.4  million from (euro)79.5  million in the year ended November 30,
2000. Sales in Italy were flat and  decreased  in the U.S. due to increased
competitive  activities.  In the U.S.  we  experienced  strong  unit  sales
increases  of our  newly  marketed  analyzers,  which  are  more  efficient
enabling them to perform more tests than older  equipment.  Unit placements
of core  instruments  within the critical care business unit increased 6.7%
in the year ended November 30, 2001 versus the same period in 2000.

      Hemostasis. Net revenues attributable to the hemostasis business unit
in the year ended November 30, 2001  decreased 2.0% to (euro)131.5  million
from  (euro)134.2  million in the year ended  November 30,  2000.  Sales in
Europe were strong due to a continuous  increased  commercial focus,  while
the decrease in the U.S.  compared to fiscal 2000 is mainly due to the fact
that year 2000 sales  included a one time  transfer  of  (euro)4.0  million
inventory and placed  instruments  in  connection  with the transfer of the
distribution of the Hemoliance  product line in the U.S. Unit placements of
core instruments within the hemostasis business unit increased 41.2% in the
year ended November 30, 2001 versus the same period in fiscal 2000.

      Clinical  Chemistry.   Net  revenues  attributable  to  the  clinical
chemistry  business unit in the year ended November 30, 2001 increased 6.2%
to (euro)28.2  million from  (euro)26.5  million in the year ended November
30, 2000. This increase is mainly attributed to increased instrument sales,
particularly in eastern  Europe.  We continue only to place new instruments
in Italy,  the UK,  eastern  Europe and the Middle East.  As a result,  our
installed base,  particularly in the U.S., will likely decline resulting in
decreased  revenues for consumables on a continuing  basis.  Such decreases
could accelerate in future periods.  For fiscal 2001, sales in the U.S. and
in Italy declined by 32.4% and 6.0%, respectively.

      Net revenues  attributable to sales of other products  increased 1.8%
to (euro)35.8  million in the year ended November 30, 2001 from  (euro)35.2
million in the year ended November 30, 2000.  Most of these sales relate to
distribution of Beckman Coulter products in Italy.

      GROSS PROFIT decreased  (euro)1.5  million to (euro)130.6  million in
the year ended  November 30,  2001,  from  (euro)132.1  million in the year
ended  November 30, 2000.  Gross profit as a percentage of net revenues was
47.5% in the year ended  November 30, 2001,  versus 48.0% in the year ended
November 30, 2000.

      The decrease in the gross margin compared to fiscal 2000 is primarily
attributable to manufacturing  inefficiencies  related to the consolidation
of  manufacturing  plants and the launch of new products and to  additional
obsolescence  emerging from the  consolidation of manufacturing  plants and
distribution  warehouses.  Also the gross margin  value as a percentage  of
revenues  continued to be negatively  affected by the  strengthening of the
U.S. dollar against the euro, due to more costs in U.S. dollars relative to
revenues in U.S. dollars.

      While  prices  have  stabilized  (albeit at low  levels) we expect to
continue to experience  margin pressure related to industry pricing trends.
Our strategy is to address these  pressures by seeking to increase sales of
premium  products,  which are less sensitive to these pricing pressures and
broadening the test menus available on the instruments.

      RESEARCH AND DEVELOPMENT COSTS decreased (euro)0.6 million or 2.9% to
(euro)19.6  million in the year ended November 30, 2001,  versus (euro)20.1
million in the year ended November 30, 2000. Research and development costs
as a percentage  of net  revenues  attributable  to the  critical  care and
hemostasis  business  units  (which  represents  all  of the  research  and
development  costs)  were 9.3% in the year ended  November  30, 2001 versus
9.4%  in  the  year  ended  November  30,  2000.  These   expenditures  are
principally  attributable to new product development  projects for the next
generation of products within our core product lines. We intend to maintain
these current levels of spending to support our product  launch  timetable.
Our expenditures  decreased due to Izasa's contribution to our research and
development  costs pursuant to a cost sharing  agreement  between Izasa and
the U.S.  subsidiary of the Group. By said agreement  Izasa  contributes to
financing the Group's  research and development  activities on the basis of
its  share  of  total  Group  worldwide  sales  on  related  products.  The
contribution for 2001 amounted to (euro)2.2 million and has been classified
as a reduction of research and development costs for the period.

      SELLING,  GENERAL AND  ADMINISTRATIVE  EXPENSES  increased  (euro)0.7
million or 0.8% to (euro)92.7  million in the year ended November 30, 2001,
compared  to  (euro)92.0  million  in the year  ended  November  30,  2000.
Selling,  general  and  administrative  expenses  as a  percentage  of  net
revenues  were 33.7% in the year ended  November 30, 2001,  versus 33.4% in
the year ended  November 30, 2000.  As part of our  business  strategy,  we
continuously  evaluate our cost  structure,  seeking to lower our operating
costs. We have not made definitive plans to further reduce operation costs.

      AMORTIZATION  OF  INTANGIBLE  ASSETS AND DEFERRED  CHARGES  decreased
(euro)2.3  million or 20.1% to (euro)9.1 million in the year ended November
30, 2001,  from  (euro)11.3  million in year ended November 30, 2000.  This
decrease is mainly  attributable  to the completion of the  amortization of
share capital issuance costs and other intangibles.

      INTEREST EXPENSE  decreased  (euro)0.5  million or 3.4% to (euro)15.4
million in year ended November 30, 2001 from (euro)15.9 million in the year
ended November 30, 2000. As discussed in the liquidity  section  below,  on
April 20, 2001 our majority shareholder Izasa Distribuciones  Tecnicas S.A.
subscribed to a capital  increase in the amount of  (euro)59,999,998.83  by
forgiving a portion of its  outstanding  subordinated  loan. From April 20,
2001  to  November  30,  2001,  this  forgiveness  saved  us  approximately
(euro)2.3 million in interest  expense.  This decrease was partially offset
by an  increase  in interest  rates on third  parties'  short and long term
debt.

      OTHER INCOME, NET of (euro)2.0 million in the year ended November 30,
2001,  was  principally  comprised of: (i) (euro)9.0  million non recurring
income from sales of distribution rights to Izasa  Distribuciones  Tecnicas
S.A.,  (ii) (euro)2.8  million of  supplementary  leaving  indemnities  and
restructuring  charges,  (iii)  (euro)0.9  million of non  recurring  costs
related  to  production  transfer  (iv)  (euro)1.5  million  of  litigation
settlements  and estimated  costs to settle,  and (v) (euro)2.1  million of
other expenses.

      INCOME TAX EXPENSE was (euro)2.9  million in the year ended  November
30, 2001.  Our effective tax rate can be affected by the country from which
income  is  generated  and  the   availability   of  net   operating   loss
carryforwards to offset operating  income.  Also, our effective tax rate is
affected by the Italian "tax on added value" (IRAP),  which has a different
base of taxation and may be payable even in case of pre-tax losses.

      NET LOSS was (euro)5.8  million or (euro)0.06  per share for the year
ended  November  30,  2001,  versus a net  loss of  (euro)17.5  million  or
(euro)0.40 per share for the year ended November 30, 2000.

LIQUIDITY AND CAPITAL RESOURCES

      Our  principal  liquidity   requirements  are  for  working  capital,
consisting primarily of accounts receivable and inventories, investments in
instrument rentals,  debt service and capital  expenditures.  Our principal
sources  of  liquidity  are cash  flows  from  operations,  a  subordinated
revolving  loan  agreement  with our majority  shareholder,  a subordinated
long-term  loan with our majority  shareholder  and  additional  borrowings
under unsecured,  uncommitted lines of credit.  Aggregate amounts due under
our  debt  agreements  during  each of  fiscal  years  2003  and  2004  are
(euro)12.4 million and (euro)0.1 million  respectively.  We have included a
chart at the end of this  section that  summarizes  our future debt payment
obligations.

      Our investment in instruments  under reagent rental agreements refers
to our  providing  IVD  instruments  to our  customers  (i) at no  cost  in
exchange for an agreement to purchase  reagents and other consumables for a
fixed time period, and (ii) under sales-type lease contracts.  With respect
to instruments  placed in connection  with reagent rental  agreements,  the
instruments  are  carried  at  our  purchase  or  production   costs,  less
accumulated  depreciation  computed  over the  average  life of the related
contracts, and, accordingly,  represents our cost before any revenue on the
instruments  and related  reagents.  Our typical costs under reagent rental
arrangements  include  depreciation  of purchase or production  cost of the
instrument,  financial charge and costs of reagents,  controls and service,
and our typical revenue under reagent rental arrangements  includes revenue
from the sale of reagents and controls  and from  service.  With respect to
instruments placed under sales-type leases, the instruments are recorded at
an amount equal to our net investment in the lease (i.e., the present value
of the lease payments to be recorded) and, accordingly, represent the sales
price (with the selling  profits  recognized at the inception of the lease)
before any revenue on the related reagents and consumables. With respect to
sales-type  leases,  our typical  costs include  financial  charges and the
costs of reagents,  controls and services and our typical  revenues include
revenue from the sale of  instruments,  the sale of reagents and  controls,
revenues from service and financial income.

      Net cash provided by operating activities for the year ended November
30, 2002 was  (euro)25.6  million,  while net cash  provided  by  operating
activities  for the year ended  November 30, 2001 was  (euro)22.6  million.
This increase  resulted  principally from the net effect of the increase in
net loss  compared to fiscal 2001 and a reduction  in accounts  receivable,
which resulted  primarily from the sale of certain trade  receivables  from
Italian public health care  entities.  Also operating cash flow in 2001 was
affected by significant payments of expenses accrued in connection with the
restructuring plan, which did not affect fiscal 2002.

      Net cash used in investing activities for the year ended November 30,
2002 was (euro)16.2 million, while net cash used in investing activities in
the year ended November 30, 2001 was (euro)20.1  million.  Net cash used in
investing activities generally reflects our investment in instruments under
reagent rental agreements and capital expenditures,  offset by any proceeds
from sales of fixed  assets.  Our  investment  in  instrument  rentals  was
(euro)21.6  million and (euro)19.9 million for the years ended November 30,
2002 and  2001,  respectively.  In  fiscal  2002 and 2001 the cash  used in
investing  activities  was affected by the proceeds  from the sale of fixed
assets,  mainly  instruments  at  customers,   of  (euro)11.9  million  and
(euro)9.4 million, respectively.

      Capital  expenditures  were  (euro)6.1  million  for the  year  ended
November 30, 2002 versus  (euro)8.5  million in the year ended November 30,
2001. Capital expenditures are a significant use of funds and are primarily
for  manufacturing  plants,  machinery  and  equipment.  We expect  capital
expenditures  to remain  stable but  subject  to  fluctuation  as  currency
exchange  rates change since our most  important  manufacturing  plants are
located in the U.S.

      Net cash used in  financing  activities  for year ended  November 30,
2002 was (euro)1.2 million, while net cash provided by financing activities
was (euro)0.9 million in fiscal 2001.

      In the year ended  November  30,  2002,  we  sustained  a net loss of
(euro)13.8  million and cash flows for operating  and investing  activities
was positive (euro)9.4 million.  In fiscal 2001, we sustained a net loss of
(euro)5.8 million and net cash flow from operating and investing activities
was  (euro)2.6  million  compared  to net loss of  (euro)17.5  million  and
negative cash flow from  operating  and investing  activities of (euro)10.7
million for fiscal year 2000.  Our weak cash flow is  attributable  to high
interest expenses,  higher levels of research and development  expenditures
and lower operating performance.  We continue to finance any cash shortfall
through  the  borrowings  from  our  majority  shareholder  and  additional
borrowings of  short-term  and  long-term  debt. At November 30, 2002,  our
consolidated debt, net of cash, was (euro)150.8 million.

      At November 30, 2002, we had several  short-term and long-term credit
lines  from  banks  and other  financial  institutions,  pursuant  to which
(euro)66.8 million was outstanding and (euro)30.2 million was available for
further borrowing. Our short-term credit lines are primarily in the form of
unsecured,  uncommitted  short-term bank loan facilities that are repayable
on demand and may be revoked by the lender upon notice.  The only covenants
applying to our facilities  relate to our committed loan facility  provided
by Heller  Healthcare  Finance,  Inc.,  discussed  below.  These short-term
credit lines are denominated in various  currencies  (although the majority
is euro) which bear interest  based in Euribor,  bank base rate or variable
rates, ranging from 4.78% to 10.625% as of November 30, 2002. Because these
short-term  borrowings  bear  interest  at a floating  rate,  increases  in
short-term interest rates can adversely affect our results of operations.

      On May 4, 2001,  our U.S.  subsidiary  executed  a loan and  security
agreement  with Heller  Healthcare  Finance,  Inc.,  to be used for working
capital. This loan, which has a maximum aggregate principal amount of US$15
million, is in the nature of a line of credit. Currently, approximately US$
12.4 million is  outstanding.  We pay an interest rate of U.S. dollar prime
rate plus 2%  (currently  at  6.75%)  plus all fees on the  current  amount
outstanding  on a monthly  basis.  Werfen  and  Instrumentation  Laboratory
S.p.A.  have provided a guarantee.  The original term of the line of credit
was for two years and was recently extended for another two-year period. We
must also comply with various negative  covenants,  including  restrictions
on:

      o     making prepayments on any existing or future indebtedness;

      o     borrowing additional funds;

      o     our ability to merge or consolidate;

      o     declaring dividends;

      o     investing in joint ventures or other acquisitions; and

      o     creating additional liens.

      Failure to comply with these  covenants  could  result in a breach of
these  covenants  and  trigger  the  lenders'  right to  require  immediate
repayment of all or part of the indebtedness.

      In addition to these short-term and long-term debt  arrangements,  we
also have significant borrowings from Werfen's affiliates.  On November 30,
2002,  (euro)87.7  million was outstanding in the aggregate on these loans,
versus  (euro)91.7  million  in the year  ended  November  30,  2001.  This
decrease is resulting from principal  payments.  On April 20, 2001,  Izasa,
for  itself  and  as  assignee  of  Miscel  Holding  B.V.,  subscribed  for
46,511,627 of our ordinary  shares.  In  consideration  for these  ordinary
shares Izasa cancelled a certain portion of our outstanding debt owed to it
equal  to  (euro)60  million.  As  such,  as  of  November  30,  2002,  our
indebtedness  to Izasa was (euro)87.7  million.  Both the credit  agreement
with Izasa and the loan  agreement  with  Miscel  Holding  B.V.,  mature on
January 31, 2007.  The interest  rate we pay on this amount floats based on
the six-month  Euribor plus 320 basis points per annum. We pay our interest
payments monthly.

      On July 18, 2002, our Board of Directors authorized the issuance of a
guarantee  along  with  other  Werfen  group  companies  in  favor of Izasa
Distribuciones  Tecnicas  S.A.,  in  connection  with a syndicated  loan of
(euro)100 million granted to Izasa.


<PAGE>


      The following  summarizes  certain of our contractual  obligations at
November 30, 2002 and the effect such  obligations  are expected to have on
our liquidity and cash flow in future periods.  We do not have  significant
capital lease obligations or other financial commitments.

(in millions of euro:)
-------------------------------------------------------------------------------
                                            Payments Due by Period
-------------------------------------------------------------------------------
                                          Less       1 - 3      4 - 5   After 5
Contractual Obligations         Total     than 1     years      years    years
                                          year
-------------------------------------------------------------------------------
Long-Term Debt                  100.2      12.4        .1       87.7
-------------------------------------------------------------------------------
Operating Leases                 16.4       4.8       9.2        2.4
-------------------------------------------------------------------------------
Total Contractual Cash          116.6      17.2       9.3       90.1
Obligations
-------------------------------------------------------------------------------
(in millions of euro :)
-------------------------------------------------------------------------------
                                   Amount of Commitment Expiration Per Period
-------------------------------------------------------------------------------
                                Total     Less
Other Commercial               Amounts    than       1 - 3      4 - 5   After 5
 Commitments                  Committed   1 year     years      years    years
-------------------------------------------------------------------------------
Lines of Credit                  66.8      66.8        -         -        -
-------------------------------------------------------------------------------
Standby Letters of Credit         -         -          -         -        -
-------------------------------------------------------------------------------
Guarantees                      100.0       -          -         -        -
-------------------------------------------------------------------------------
Standby Repurchase                -         -          -         -        -
Obligations
-------------------------------------------------------------------------------
Other Commercial                 46.2      46.2        -         -        -
Commitments
-------------------------------------------------------------------------------
Total Commercial                213.0     113.0        -         -        -
Commitments
-------------------------------------------------------------------------------

      Our  borrowings  are  predominantly  denominated  in  euro  and  U.S.
dollars.  Changes in  exchange  rates  between the  currencies  in which we
generate  cash  flow  and  the  currencies  in  which  its  borrowings  are
denominated  will affect our liquidity.  As of November 30, 2002, we had in
place interest rate swaps and currency  options for a total notional amount
of (euro)84.3 million.

      In  order  for us to  meet  our  requirements  for  working  capital,
research and development  expenditures,  investments in  instruments,  debt
service  and  capital  expenditures,  we  must  substantially  improve  our
operating  performance  from levels achieved in fiscal 2000, 2001 and 2002.
We believe that cash flow from  operations and borrowings  under our credit
facilities,  together with the financial support obtained from our majority
shareholder in the form of the share capital  increase  discussed above and
the subordinated  long-term loan with Werfen that was amended to reschedule
repayment of the loan from January 2003 to January 2007, will be sufficient
to fund  working  capital  needs  and  capital  spending  and debt  service
requirements  for at least the next 12  months.  There can be no  assurance
that we will  achieve  or,  if  achieved,  will  sustain  profitability  or
positive cash flow from  operating  activities in the future.  If we cannot
achieve and sustain  profitability or positive cash flow, it is likely that
we will not be able to meet our funding requirements.

CURRENCY EFFECTS

      Our results of  operations  and  financial  position  are affected by
changes in the value of the euro against other  currencies.  The results of
operations are adversely  affected to the extent that the  strengthening of
the euro against other  currencies  affects the amount of sales reported in
euro with  respect to the sales  made in such  foreign  currencies  and may
affect the demands for products in the  countries in which such  currencies
are  utilized.  Any  decrease in the value of the euro as compared to other
foreign  currencies  may  expose us to  adverse  effects  to the extent our
payables and debt are payable in such foreign currency. With the completion
of the relocation of all  manufacturing  to the U.S., the  strengthening of
the U.S.  dollar  against  the euro has and could  continue  to impact  our
operating  and  net  income.  Please  see  "Item  11  --  Quantitative  and
Qualitative  Disclosure About Market Risk" for further discussion regarding
currency exchange risks.

RESULTS UNDER U.S. GAAP

      Reconciliation of Italian GAAP with U.S. GAAP

      Our  Audited  Consolidated  Financial  Statements  for the year ended
November 30, 2002 have been prepared in accordance with Italian GAAP, which
differs in certain  significant  respects  from U.S.  GAAP.  The  principal
differences  between  Italian GAAP and U.S. GAAP, as applied to our Audited
Consolidated  Financial  Statements,  are (i) the method of accounting  for
goodwill;   (ii)  the  accounting  for  goodwill   denominated  in  foreign
currencies;  (iii) the  method of  accounting  for share  capital  issuance
costs;  (iv) the method of  accounting  for  imputed  interest  on accounts
receivable; (v) the method of accounting for pension plans; (vi) the method
of accounting for deferred taxes; (vii) accounting for sale of distribution
rights;  (viii) the method of  accounting  for finance sale and lease back;
(ix) the  method  of  accounting  for  derivatives  and (x) the  method  of
accounting  for  inflation.  Please see Note 21 and 22 of the  Consolidated
Financial  Statements.  Our net loss and shareholders' equity under Italian
GAAP were (euro)13.8 million and (euro)80.3 million,  respectively, for the
year ended November 30, 2002. Under U.S. GAAP, we would have reported a net
loss and shareholders' equity of (euro)14.8 million and (euro)81.7 million,
respectively, in the year ended November 30, 2002.

TAXES

      Our  effective tax rate and net income can be affected by the country
from which income is generated and the  availability  of net operating loss
carry forwards to offset operating income. For example, we have significant
net  operating  loss  carryforwards  in the U.S.  which can be used only to
offset income generated from our U.S. operations.

      As of November 30, 2002, we had net operating loss  carryforwards  of
approximately  (euro)173  million expiring in 2003 through 2013. Please see
Note 12 to the Audited Consolidated  Financial Statements.  The utilization
of net operating  loss  carryforwards  in the United States is subject to a
variety of complicated U.S. tax rules,  including rules triggered by shifts
in our  ownership,  and  therefore,  there can be no assurance that the net
operating loss carryforwards can be utilized without limitation.

      For a  discussion  of certain  open tax  matters,  see Note 12 to the
Audited Consolidated Financial Statements.

INFLATION

      Inflation  has been  relatively  moderate  in Italy as well as in our
other principal  markets in recent years. We believe that inflation has not
had a significant  effect on our net revenues or  profitability in the last
three fiscal years.

NEW ACCOUNTING STANDARDS

      In June  2001,  the FASB  issued  SFAS  No.142,  "Goodwill  and other
Intangible  Assets,"  which is effective for fiscal years  beginning  after
December 15, 2001. Certain provisions shall also be applied to acquisitions
initiated  subsequent to June 30, 2001. SFAS No.142  supersedes APB Opinion
No.17,   "Intangible   Assets"  and  requires,   among  other  things,  the
discontinuance  of  amortization  related to goodwill and indefinite  lived
intangible assets.  These assets will then be subject to an impairment test
at least annually.  We have adopted SFAS No.142 effective December 1, 2002.
Any impairment  resulting  from the adoption of the new provisions  will be
recorded  during  the  2003  fiscal  year  and  will be  recognized  as the
cumulative effect of a change in accounting principles. We are currently in
the process of assessing the effects of implementing the new standard.

      In October  2001,  the FASB issued SFAS No.144,  "Accounting  for the
Impairment or Disposal of Long-Lived  Assets," which supersedes SFAS No.121
and  certain  provisions  of  APB  Opinion  No.30,  "Reporting  Results  of
Operations - Reporting  the Effects of Disposal of a Segment of a Business,
and   Extraordinary,   Unusual  and   Infrequently   Occurring  Events  and
Transactions."  SFAS No.144 requires that long-lived  assets to be disposed
of by sale, including discontinued operations,  be measured at the lower of
carrying  amount or fair  value  less  cost to sell,  whether  reported  in
continuing  operations  or in  discontinued  operations.  SFAS  No.144 also
broadens the reporting  requirements of discontinued  operations to include
all components of an entity that have operations and cash flows that can be
clearly distinguished,  operationally and for financial reporting purposes,
from the rest of the entity. The provisions of SFAS No.144 became effective
beginning  December 1, 2002.  We are  currently in the process of assessing
the effects of implementing the new standard.

      In April 2002,  the FASB issued  Statement  No. 145,  "Rescission  of
Statements  No. 4, 44 and 64,  Amendment  of SFAS  Statement  No.  13,  and
Technical  Corrections."  SFAS 145  requires  that  gains and  losses  from
extinguishment  of debt be classified as  extraordinary  items only if they
meet the criteria in Accounting  Principles  Board Opinion No. 30. Applying
the  provisions of Opinion No. 30 will  distinguish  transactions  that are
unusual and  infrequent  and meet the  criteria  for  classification  as an
extraordinary item. SFAS No. 145 is effective beginning January 1, 2003. We
do not believe  that the  adoption of SAFS No. 145 will have a  significant
impact on the consolidated financial statements.

      On July 30, 2002, the FASB issued Statement No. 146,  "Accounting for
the Costs  Associated  with Exit or Disposal  Activities."  This  statement
requires  companies to  recognize  costs  associated  with exit or disposal
activities  only when  liabilities for those costs are incurred rather than
at the date of a commitment to an exit or disposal plan.  SFAS No. 146 also
requires  companies to initially measure  liabilities for exit and disposal
activities at their fair values. SFAS No. 146 replaces Emerging Issues Task
Force ("EITF") Issue No. 94-3, "Liability  Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)"  and EITF No. 88-10,  "Costs Associated
with Lease Modification or Termination." The provisions of SFAS No. 146 are
effective for exit or disposal activities that are initiated after December
31, 2002.  We believe that the adoption of this  statement  will not have a
material impact on our operations.

      In November  2002, the Emerging  Issues Task Force  ("EITF")  reached
consensus  on  Issue  No.  00-21,   Revenue   Arrangements   with  Multiple
Deliverables.  Revenue  arrangements  with  multiple  deliverables  include
arrangements  which  provide for the  delivery or  performance  of multiple
products,  services and/or rights to use assets where performance may occur
at different  points in time or over different  periods of time. EITF Issue
No. 00-21 is effective for the Company  beginning  October 1, 2003. We have
not completed the evaluation of the impact of this EITF.

      In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure  Requirements for Guarantees,  Including Indirect
Guarantees of Indebtedness of Others,  an Interpretation of FASB Statements
No. 5, 57, and 107 and Rescission of FASB  Interpretation  No. 34" (FIN No.
45). The  interpretation  requires that upon  issuance of a guarantee,  the
entity must  recognize a liability for the fair value of the  obligation it
assumes under that obligation.  This  interpretation is intended to improve
the comparability of financial reporting, by requiring identical accounting
for  guarantees  issued  with  separately   identified   consideration  and
guarantees  issued  without  separately   identified   consideration.   The
disclosure  provisions  of FIN No. 45 are  effective  for the Company as of
December 1, 2002. We are still assessing the impact of the adoption of this
interpretation.

      In  December  2002,  the FASB  issued  SFAS No. 148  "Accounting  for
Stock-Based  Compensation--Transition and Disclosures",  which amended FASB
Statement No. 123, "Accounting for Stock-Based Compensation". Statement No.
148 provides  alternative  methods of transition for a voluntary  change to
the   fair-value-based   method  of  accounting  for  stock-based  employee
compensation.  Statement  No.  148 amends the  disclosure  requirements  of
Statement No. 123 to require more prominent and more frequent disclosure in
the financial  statements  about the effects of  stock-based  compensation.
Statement  No. 148 is effective  for fiscal years ended after  December 15,
2002.

      In   January   2003,   the  FASB   issued   Interpretation   No.  46,
"Consolidation of Variable Interest Entities" (FIN No. 46), which clarifies
the  application  of  Accounting  Research  Bulletin  No. 51  "Consolidated
Financial  Statements" to certain entities in which equity investors do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities  without
additional  subordinated financial support from other parties. FIN No.46 is
applicable  immediately  for variable  interest  created  after January 31,
2003. For variable interest entities created prior to January 31, 2003, the
provisions  of FIN No. 46 are  applicable no later than July 1, 2003. We do
not  expect  this  Interpretation  to have an  effect  on the  consolidated
financial statements.


<PAGE>

ITEM 6.     DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.    DIRECTORS AND SENIOR MANAGEMENT

      Under Italian law and pursuant to our By-laws, the Board of Directors
is responsible for managing our business and supervising our operations and
has the power to take  actions  coming  within  the scope of our  corporate
purpose  except  for the  actions  reserved  by law or our  By-laws  to the
shareholders.  Pursuant to our By-laws,  the Board must consist of not less
than three and not more than nine members. The number of directors is fixed
by resolution of the  shareholders.  Currently,  the number of directors is
fixed  at  four.  Directors  are  elected  at the  general  meeting  of the
shareholders  to serve terms not  exceeding  three years.  Directors may be
re-elected for  consecutive  terms.  They may be removed at any time by the
voting  shareholders at a general meeting,  and they may resign at any time
by written  notice to the Board of  Directors  and to the  Chairman  of our
Board of Statutory  Auditors.  In case of removal without cause,  directors
are  entitled  to  damages.  Subject to certain  limitations,  the Board of
Directors may delegate its powers to  individuals  (designated as "Managing
Directors") or committees.

      Each   director   listed  below  was   re-appointed   at  the  Annual
Shareholders' Meeting convened on April 17, 2002.

      The  following  table sets forth the name and position of each person
who  is a  director.  Each  director's  term  will  expire  at  the  annual
shareholders' meeting at which our financial statements for the fiscal year
ending November 30, 2004 are approved.

      DIRECTOR                        AGE   POSITION
      --------                        ---   --------

Jose Maria Rubiralta (Chairman)        61   President
Francisco Rubiralta (Vice-Chairman)    64   Director
Jose Luis Martin (Managing Director)   46   Director
Carlos Pascual (Managing Director)     41   Director

      The following are our executive  officers,  their current  functional
position  and ages.  The terms of Jose Manent,  Jose Luis Martin,  as Chief
Financial  Officer and Senior Vice President,  Francisco Duran and James C.
McGaha do not expire.  Jose Maria  Rubiralta,  Carlos Pascual and Jose Luis
Martin's  terms as members  of the Board of  Directors  will  expire at the
annual  shareholders'  meeting at which our  financial  statements  for the
fiscal year ending November 30, 2004 are approved.

      EXECUTIVE OFFICERS         AGE      POSITION
      ------------------         ---      --------
Jose Maria Rubiralta             61       President,
                                          Chairman of the
                                          Board
Jose Manent                      52       Chief Executive Officer
Jose Luis Martin                 46       Managing Director, Chief Financial
                                          Officer and Senior Vice President of
                                          the Company
Carlos Pascual                   41       Managing Director, Senior Vice
                                          President and General Manager - Europe
James C. McGaha                  56       Vice President - Quality Assurance
                                          and Regulatory Affairs

      The  following  sets  forth  the  biographies  of the  directors  and
executive  officers listed in the tables  immediately  above, which include
the functional positions which such individuals hold with us. Our executive
officers and our  subsidiaries  are  appointed by the Board of Directors of
the respective company and serve at the discretion thereof.

      Jose  Maria  Rubiralta  Francisco   Rubiralta's   brother,  has  been
President of IL since October 1991. Mr.  Rubiralta was the Chief  Executive
Officer of IL from October 1991 to December 1999. Mr. Rubiralta is also the
Chief  Executive  Officer and President of Izasa  Distribuciones  Tecnicas,
S.A., a company he founded in 1966 which is involved in the distribution of
diagnostic,  hospital  and  research  products  principally  in the Iberian
Peninsula.  Mr.  Rubiralta also serves as President and Director of Werfen,
the holding company for the Rubiraltas' global healthcare investments.  Mr.
Rubiralta  is a director of Global Steel Wire,  S.A., a steel  manufacturer
listed on the Madrid Stock Exchange.

      Jose  Manent has been Chief  Executive  Officer of IL since  December
1999. Prior to his appointment as Chief Executive  Officer,  Mr. Manent was
the Senior Vice President of Corporate  Development of IL from October 1991
with worldwide responsibility for IL's Strategic Business Units. Mr. Manent
joined Werfen in 1978 and was the  co-founder  (with Messrs.  Rubiralta and
Rubiralta) of Biokit, a Werfen subsidiary.

      Francisco Rubiralta Jose Maria Rubiralta's  brother,  has served as a
director  of IL  since  October  1991 and is Chief  Executive  Officer  and
President of Grupo C.E.L.S.A.  and a director of Werfen. Mr. Rubiralta is a
director of each of Global Steel Wire,  S.A. and Trenzas y Cables de Acero,
S.A., steel manufacturers listed on the Madrid Stock Exchange.

      Jose Luis  Martin has been Chief  Financial  Officer  and Senior Vice
President of IL since October  1991. He is also a Managing  Director of IL.
Mr. Martin has worldwide  responsibility  for all financial and information
systems activity for IL. Mr. Martin also serves as Chief Financial  Officer
of Werfen.  Prior to joining  Werfen in 1983,  Mr.  Martin spent four years
working for Arthur Andersen & Co.

      Carlos Pascual has been Senior Vice President of Europe,  Asia, Latin
America and Africa since July 1997. Prior to assuming his current position,
Mr. Pascual served as Finance  Director - Europe for six years. Mr. Pascual
joined  Werfen in 1988 after  having  held  various  positions  with Arthur
Andersen.

      James C. McGaha Jr. has been Vice President of Quality  Assurance and
Regulatory  Affairs of IL since June 1994.  From March 1992 until June 1994
Mr. McGaha was Vice  President of  Operations  for United  Biomedical  Inc.
Prior to  assuming  his  current  position,  Mr.  McGaha  spent 14 years in
various positions with Baxter Healthcare  Corporation and Ortho Diagnostics
Systems Inc.

STATUTORY AUDITORS

      Pursuant to the Italian  Civil Code,  in addition to  appointing  the
Board of  Directors,  shareholders  also  appoint  our  Board of  Statutory
Auditors,  which is composed  of three  independent  experts in  accounting
matters.  Our  shareholders  also  elect two  alternate  auditors  who will
automatically  be  substituted  for an auditor who resigns or is  otherwise
unable to serve as an auditor.  The role of the Board of Statutory Auditors
involves controlling our administration and, in particular,  its compliance
with applicable law and our By-laws,  ensuring that our accounting  records
are regularly  maintained,  and  considering the consistency of the balance
sheet and the profit and loss  account  with our  accounting  records.  The
Statutory  Auditors are jointly and severally liable with our directors for
any acts or omissions of the  directors if the damage  resulting  from such
act  or  omission  could  have  been  avoided  by the  Statutory  Auditors'
supervision.  The Board of  Statutory  Auditors  also  ascertains  our cash
balance at least quarterly. The Board of Statutory Auditors can inspect and
control us at any time.

      The Board of  Statutory  Auditors  reports to the  shareholders.  The
members of the Board of Statutory Auditors have an obligation to be present
at the  meetings  of  the  Board  of  Directors  and  at the  shareholders'
meetings. In addition,  the Board of Statutory Auditors is required to meet
at least  once each  quarter.  Statutory  Auditors  remain in office  for a
three-year  term and may be re-elected for consecutive  terms.  They may be
removed only for cause and with court approval.

      The following  table sets forth the names of the members of our Board
of Statutory  Auditors and their  current  positions.  The current Board of
Statutory  Auditors  will serve until the approval of our November 30, 2002
accounts.  The  shareholders'  meeting which will approve the 2002 accounts
and is expected to reappoint the statutory auditors will be held on May 30,
2003.

                  NAME                           POSITION
                  ----                           --------
                  Paolo Giacinto Bonazzi         Chairman
                  Giorgio Fumagalli              Principal
                  Marco Giuliani                 Principal
                  Flavio Venturi                 Alternate
                  Guglielmo Fanti                Alternate


B.    COMPENSATION

      For the year ended November 30, 2002, the aggregate compensation paid
by us to all  members  of the Board of  Directors,  members of the Board of
Statutory  Auditors and our executive officers listed above for services in
all capacities was approximately  (euro)2.2 million,  excluding the accrual
for  termination  indemnity  required by Italian law. We currently  have no
pension  plan for  directors  and  executives.  Mr.  McGaha as  employee of
Instrumentation  Laboratory Company (USA) is eligible to participate in the
U.S.  employee  pension and savings plan,  as every other  employee of such
company.  Please see Note 14 of the consolidated  financial  statements for
further explanation of this pension plan.

C.    BOARD PRACTICES

      See "Item 6A--Directors and Senior Management"

D.    EMPLOYEES

      As of November 30, 2002,  we had  approximately  1,255  full-time and
part-time employees,  646 of whom were located in the United States, 300 in
Italy,  224 in the remainder of Europe and 85 in other locations around the
world.  Except  as  described  below,  we  have  no  collective  bargaining
agreements  with any unions and  believe  that our overall  relations  with
employees are satisfactory.

      Employees in Italy are  generally  covered by  collective  employment
agreements  that are  negotiated  between the national  association  of the
companies within a particular  industry and the respective national unions.
The most recent agreement for "metal and mechanical  workers," which covers
all our employees in Italy other than executives, was signed on May 7, 2003
and will  enter into force on June 1,  2003.  Such  agreement  governs  the
economic  treatment of employees,  including  items such as working  hours,
maternity  benefits,  holiday time and minimum wages paid to employees.  In
addition to the national  collective  bargaining  agreement  for "metal and
mechanical workers," individual employers in Italy including us, enter into
separate,   local  contracts  with  the  labor  unions  representing  their
employees.  Our local contract provides for additional  incentive pay, sets
daily working times and addresses other specific issues  affecting  working
conditions.

      Italian law provides that, upon termination of employment,  employees
are entitled to receive a defined  compensation  payment based on length of
employment.  As of November 30, 2002, we had (euro)5.8 million reserved for
such termination payments, as required by Italian law.

E.    SHARE OWNERSHIP

      On November 25, 1997, our shareholders approved a resolution to adopt
a stock  option  plan for the  benefit  of our  senior  management  and key
employees.  We may grant these individuals stock options  exercisable for a
period of five (5) years for up to  750,000  Ordinary  Shares.  At the same
meeting,  our  shareholders  authorized  the  issuance of 750,000  Ordinary
Shares,  par value (euro) 1.29 each,  to service the plan.  In this respect
the Board of Directors on July 23, 1998  authorized the issuance of options
for up to 170,000 Ordinary Shares to be exercised from 2002 to 2008.

      The total  number of Ordinary  Shares  subject to options as of April
30,  2003 was  750,000.  The total  number of  Ordinary  Shares  subject to
options held by our directors and executive  officers as a group was 16,000
on April 30, 2003.


<PAGE>


ITEM 7.     MAJORITY SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.    MAJORITY SHAREHOLDERS

      The  following  table sets forth  certain  information  regarding the
beneficial  ownership of our Ordinary Shares as of May 23, 2003 by (i) each
person  who is known by us to be the  beneficial  owner of more  than  five
percent of our Ordinary  Shares and (ii) all our  directors  and  executive
officers as a group.  As discussed  above in "Item 4 -  Information  on the
Company - Background,"  if the exchange  agreement  between  Izasa,  us and
Bio-Rad closes, Werfen would be deemed to beneficially own all of Bio-Rad's
ordinary  shares listed below.  Under these  circumstances,  Werfen and the
Rubiralta  family  would   beneficially  own  89,639,008   ordinary  shares
(representing  98.8% of the  oustanding)  and Bio-Rad  would own zero ADSs.
Except as otherwise  indicated,  the persons or entities  listed below have
sole  voting and  investment  power with  respect to all shares of Ordinary
Shares owned by them,  except to the extent such power may be shared with a
spouse.  All  shareholders  have the same voting rights.  To our knowledge,
apart from the share  transfers  set forth in  footnote  (1) to this table,
there has been no significant  change in the ownership  percentage  held by
any major shareholder during the past three years.


<PAGE>


                                                    NUMBER OF       PERCENTAGE
   BENEFICIAL OWNER                              ORDINARY SHARES     OF CLASS
   ----------------                              ---------------     --------

   5% SHAREHOLDERS:

   Werfen (1)                                      77,485,171          85.4%
   Bio-Rad Laboratories, Inc. (2)                  12,154,237          13.4%
   Jose Maria and Francisco Rubiralta (3)          77,485,171          85.4%
   ____________


(1)   Shares  beneficially  owned by Werfen are held through  Izasa and its
      subsidiaries. During a going private transaction between November 20,
      2000 - February 5, 2001 Izasa  purchased  3,811,547  Ordinary  Shares
      increasing  Werfen's  ownership in the Company from 60% to 68.5%.  On
      July 1, 2001 Izasa and its assignee  Miscel  Holding  B.V.  agreed to
      subscribe for all newly issued 46,511,627 Ordinary Shares in a rights
      offering open to all registered  shareholders.  As a result  Werfen's
      ownership in the Company increased from 68.5% to 84.7%.  Messrs. Jose
      Maria Rubiralta,  who is one of our directors and executive  officers
      and  Francisco  Rubiralta,  who  is  another  of our  directors,  are
      brothers.  Messrs.  Rubiralta and Rubiralta  collectively own 100% of
      the  outstanding  stock of Werfen and, as a result of such ownership,
      would be deemed to beneficially own the Ordinary Shares  beneficially
      owned by Izasa  and its  subsidiaries.  Accordingly,  the  Rubiraltas
      effectively control our business.

(2)   Based upon a statement  on Schedule  13D/A dated April 17, 2001 filed
      by Bio-Rad Laboratories,  Inc.  ("Bio-Rad").  The Schedule 13D states
      that Bio-Rad is the direct beneficial owner and has voting power with
      respect to 12,154,237  Ordinary Shares (including American Depositary
      Shares).  Bio-Rad's  address is 1000 Alfred  Nobel  Drive,  Hercules,
      California 94547.

(3)   Includes   77,485,171   Ordinary   Shares  owned  by  Izasa  and  its
      subsidiaries.  Messrs.  Rubiralta  and Rubiralta are deemed to be the
      beneficial  owner of all  Ordinary  Shares  owned  by  Izasa  and its
      subsidiaries.

B.    RELATED PARTY TRANSACTIONS

      We and our direct or  indirect  subsidiaries  purchase  from and sell
products to Werfen and its affiliates.  Izasa, a wholly owned subsidiary of
Werfen, serves as distributor of our products in Spain, Portugal, Argentina
and Uruguay.  Total sales to Werfen's  affiliates for fiscal 2000, 2001 and
2002 were (euro)10.2 million,  (euro)13.8 million,  and (euro)13.7 million,
respectively.  We serve as  distributor  of  products  of Biokit,  S.A.,  a
majority owned subsidiary of Werfen, in Italy, France,  Germany, the United
Kingdom and the Benelux  countries.  Total purchases from Werfen for fiscal
2000,  2001  and  2002  were  (euro)4.8  million,  (euro)5.7  million,  and
(euro)8.4 million, respectively.

      Certain of our executive officers and other individuals  historically
have been  employed  by Werfen or its  affiliates  or another  entity  and,
pursuant  to  agreements  with  us  have  provided  services  to us and our
subsidiaries at an hourly rate as agreed between the parties. During fiscal
2001 and 2002 certain of our subsidiaries  were charged  (euro)0.3  million
and  (euro)0.6  million,  respectively,  in  management  fees for corporate
services  provided to those  companies  and for  administrative  and out of
pocket expenses incurred in rendering those services. Prior to the IPO, all
of our  executive  officers  employed by Werfen or its  affiliates  or such
other entity (other than Jose Maria Rubiralta)  became our employees or our
subsidiaries.

      We have outstanding loans with Werfen and Izasa as discussed in "Item
5 - Operating  and Financial  Review and  Prospects."  Interest  charged on
these loans in fiscal year 2001 and 2002 amounted to (euro)9.1  million and
(euro)6.0 million,  respectively, and the interest rates on the loans float
based on the six-month Euribor plus 320 basis points per annum. Werfen also
is the guarantor on our loan with Heller Healthcare Finance.

      On April 6, 2001,  we executed a  distribution  agreement  with Izasa
Distribuciones  Tecnicas S.A.  whereby we appointed  Izasa as our exclusive
distributor of in-vitro diagnostic hemostasis and critical care instruments
in Spain.  The initial term of the agreement is 10 years. In  consideration
for the exclusive distributorship Izasa paid us (euro)9 million in cash.

      On May 4, 2001,  we  executed  a cost  sharing  agreement  with Izasa
Distribuciones  Tecnicas S.A.  whereby Izasa undertook to contribute to the
financing of the costs  associated with the research and  development  work
carried out by us.  This  research  mainly  comprises  research  related to
in-vitro  diagnostic  hemostasis and critical care  instruments  that Izasa
sells in Spain subject to the distribution  agreement  executed on April 6,
2001.  Izasa will pay for its share of the costs to develop the products it
sells.  This agreement expires on April 6, 2011. The contributions for 2001
and 2002 amounted to (euro)2.2 million and (euro)2.2 million, respectively.
In  addition,  in the  year  ended  November  30,  2002  and  2001 a Werfen
affiliate charged us approximately (euro)2.2 million and (euro)2.2 million,
respectively, for software development services.

      On July 18, 2002, our Board of Directors authorized the issuance of a
warranty with other Werfen group companies in favor of Izasa Distribuciones
Tecnicas S.A., in connection  with a syndicated  loan of (euro)100  million
granted to Izasa.

      As a result of  transactions  between  us and  affiliates  of Werfen,
potential conflicts of interest could arise. No assurance can be given that
such conflicts will be resolved in our favor.

      We believe that the  transactions  with Werfen and its affiliates are
conducted on an arm's-length basis and are on no more favorable terms to us
than  can be  obtained  from an  unrelated  third  party.  Please  refer to
footnote 19 of our financial  statements  attached to this annual report on
Form 20-F.

C.    NOT REQUIRED.


<PAGE>


ITEM 8.     FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION.

      Reference is made to "Item 18: Financial Statements."

      Dividends

      We have not previously  paid a cash dividend on our Ordinary  Shares.
We  intend  to follow a policy of  retaining  our  earnings  for use in our
business.

      Litigation

      We are involved  from time to time in various  claims and  litigation
incidental to the ordinary course of our business.

      In 1996, 590 Lincoln Street Trust filed a lawsuit  alleging a release
of  hazardous  material,  on or earlier  than 1988,  by one of its tenants,
including an affiliate of our predecessor that was an operator of the site.
In connection  with the 1991  acquisition  of our  predecessor,  we assumed
various obligations of this predecessor including the potential liabilities
involved in this  matter.  As such,  we were named as a  defendant  in this
lawsuit.  We have denied  liability.  In 2002, the case went to trial and a
verdict was returned against our indemnity. A judgment has not been entered
yet in the case. We and our legal  counsel,  however,  intend to appeal any
adverse  judgment.  We believe that, in any case, the  proceeding  will not
have a material adverse effect on the our financial condition or results of
operations.

      For a  discussion  of certain  open tax  matters,  see Note 12 of the
Audited Consolidated  Financial  Statements.  We believe that the foregoing
claims and  litigation  will not have a material  adverse  effect  upon its
financial condition or results of operations.

B.    SIGNIFICANT CHANGES

      Please  see  "Item  4--Information  on  the  Company-Background-Going
private  transaction" and "Item  4--Information on the  Company-Background-
Increase in Capital Stock."


<PAGE>


ITEM 9      THE OFFER AND LISTING DETAILS

A.    OFFER AND LISTING DETAILS

      There is currently  no  established  trading  market for our American
Depositary Shares ("ADSs"),  except for limited and sporadic  quotations in
the Pink  Sheets(R).  Our ADSs (each  representing  one Ordinary Share) are
traded on the Pink Sheets(R) under the symbol "ISLBY." The Bank of New York
is our depositary  bank (the  "Depositary")  for the purpose of issuing the
American  Depositary Receipts ("ADRs") evidencing the ADSs. Prior to August
18,  2000,  our  ADSs  were  quoted  on the OTC  Bulletin  Board.  Prior to
September 4, 1999, our ADSs traded on the Nasdaq National Stock Market. The
table below sets forth,  for the  periods  indicated,  (a) the high and low
closing  trading prices for our ADSs quoted on Nasdaq National Stock Market
prior to September 4, 1999 (the Nasdaq quotations  represent prices between
dealers, not including retail mark-ups,  mark-downs or commissions,  and do
not necessarily  represent  actual  transactions)  and (b) the high and low
reported  sales  prices for our ADSs on the  over-the-counter  market until
August 18, 2000, and on the Pink Sheets(R)  after August 18, 2000. The ADSs
were de-listed from the Nasdaq  National Market System because we no longer
fulfilled  the minimum per share price  requirement  of US$ 1.00 per share.
The ADSs are no longer  eligible for  quotation  on the OTC Bulletin  Board
because market makers have not been providing regular quotations. According
to the Pink Sheets(R)  internet site, the last trade date was May 14, 2003.
The  last  sale  was  made at US$  0.60  per  share.  The  Ordinary  Shares
underlying  the ADSs are not traded on any  exchange nor are they quoted on
any market; therefore, no pricing information for such shares is available.

PERIOD                                              HIGH         LOW
------                                              ----         ---
                                                      ($ PER ADS)

Last 6 months

April 2003...................................       0.16         0.16
March 2003...................................       0.32         0.16
February 2003................................       0.45         0.30
January 2003.................................       0.40         0.40
December 2002................................       0.30         0.30
November 2002................................       0.30         0.30

2003
Second Quarter (through May 30)..............       0.32         0.05
First Quarter ...............................       0.45         0.30

2002
Fourth Quarter...............................       0.42         0.30
Third Quarter................................       0.41         0.41
Second Quarter...............................       0.65         0.41
First Quarter................................       0.60         0.40

2001
Fourth Quarter...............................        .45          .35
Third Quarter................................        .65          .40
Second Quarter...............................        .75          .40
First Quarter................................        .75          .35

1999
September 4 through November 30..............      1 1/8          3/8
September 1 through September 3 (from Nasdaq)      15/16          7/8
Third Quarter................................      1 1/2        13/16
Second Quarter...............................      1 1/4          7/8
First Quarter................................     1 9/16          7/8

1998
Fourth Quarter...............................      1 3/8          7/8
Third Quarter................................    1 11/16       1 7/32
Second Quarter...............................     3 9/32        1 1/2
First Quarter................................     3 9/32       2 9/32

1997
Fourth Quarter...............................          3        29/32
Third Quarter................................      3 1/8        2 5/8
Second Quarter...............................      4 1/4        2 3/4
First Quarter................................     11 1/8        3 1/4

      As of May 22, 2003,  90,701,104 ordinary shares were outstanding.  As
of the same date,  there were  outstanding  13,215,933 ADSs  (equivalent to
13,215,933  Ordinary Shares).  The share equivalent of the outstanding ADSs
was equal to 14.6% of the total number of outstanding ordinary shares.

B.    NOT REQUIRED.

C.    MARKETS.

      See "Item 9A--Offer and Listing Details."

D.    NOT REQUIRED.

E.    NOT REQUIRED.

F.    NOT REQUIRED.


<PAGE>


ITEM 10.    ADDITIONAL INFORMATION

A.    NOT REQUIRED.

B.    Articles of  Association  and By-laws were filed with the SEC on Form
      F-1 filed on October 22, 1996, file  registration  number  333-05682,
      and are incorporated herein by reference.

C.    MATERIAL CONTRACTS

Beckman Coulter Relationship

      On July 28, 1999, Werfen and Beckman Coulter terminated the Strategic
Alliance  Agreement,  dated  as of June  13,  1992,  and  entered  into the
Strategic  Alliance  and  Cross  Distribution   Agreement  (the  "Strategic
Alliance Agreement"). Pursuant to the Strategic Alliance Agreement, Beckman
Coulter is the  exclusive  distributor  for our  hemostasis  systems in the
United  States,  Canada,  Australia,  New Zealand,  China and certain other
countries,  except with respect to GEM-PCL where the right to distribute is
not  exclusive.  This  distributorship  is  automatically  extended  to new
products  manufactured  or sold  by us or our  affiliates  in the  relevant
territory.

      Pursuant to the Strategic Alliance  Agreement,  we serve as exclusive
distributor   of  certain   flow   cytometry,   hematology   and   particle
characterization  products  of Beckman  Coulter in Austria  and Italy.  The
distributorship  described in this paragraph is  automatically  extended to
new products  manufactured  or sold by Beckman Coulter or its affiliates in
the  relevant   territory.   Other  affiliates  of  Werfen  also  serve  as
distributors of Beckman Coulter products in certain countries.

      The  Strategic  Alliance  Agreement  expires  on July 28,  2009.  The
Strategic  Alliance  Agreement  provides  that it may be  renewed by either
party  for two  succeeding  five year  periods  if  notice  of  renewal  is
delivered while the remaining term of the agreement is more than two years.
The Strategic  Alliance  Agreement may be terminated by either party if the
other party falls into bankruptcy,  receivership or any similar  insolvency
situation and any such  proceeding  remains  undismissed or unstayed for 60
days. The Strategic  Alliance Agreement  specifies certain revenue,  market
share and other targets for particular  regions  which,  if not achieved in
any calendar period,  constitute  inadequate  performance and are cause for
termination  of the  distribution  rights  in the  relevant  region  upon 6
months'  notice by the other party.  In addition,  the  Strategic  Alliance
Agreement  may be  terminated  by either  party to the  Strategic  Alliance
Agreement  in the event of a  reorganization,  merger,  consolidation  or a
direct or indirect  sale of all or  substantially  all of the assets of the
other party (provided that certain  intra-company  transfers are not deemed
to constitute a change of control or sale of ownership).

      If Beckman  Coulter's  right to  distribute  coagulation  products in
Canada,  Puerto Rico and the United States is terminated,  Beckman  Coulter
may elect to terminate the Strategic Alliance Agreement.  If Werfen's right
to distribute Beckman Coulter's products in Italy and/or Spain and Portugal
is  terminated,  Werfen  may  elect to  terminate  the  Strategic  Alliance
Agreement.  Any  termination  notice  delivered in accordance  with the two
preceding  sentences  must be  within  30 days  of the  termination  of the
relevant party's right to distribute and specify a termination date no less
than 6 months from the date of the notice.  As a result of the  appointment
of Beckman  Coulter as exclusive  distributor  Werfen and its affiliates is
prohibited  from  selling  the  coagulation  products  to any  end-user  or
distributor.

      Please also see the various  descriptions in "Item 4 - Information on
the Company", "Item 5 - Operating and Financial Review and Prospects",  and
"Item 7 - Majority Shareholders and Related Party Transactions" herein.

D.    EXCHANGE CONTROLS.

      Currently,  there are no exchange controls in Italy that would affect
the payment of  dividends  or other  remittances  to holders of the ADSs or
Ordinary  Shares who reside outside of Italy. We are not aware of any plans
by the Italian  government  to institute  any exchange  controls that would
affect the payment of dividends or other  remittances to holders of ADSs or
Ordinary  Shares who reside  outside  Italy.  Neither  Italian  law nor our
By-laws limit the rights of  nonresident  or foreign owners to hold or vote
the Ordinary Shares or the ADSs.

E.    TAXATION

      The summary is based upon tax laws and practice of the United  States
and Italy as in effect on the date of this Annual Report, which are subject
to change  (possibly with  retroactive  effect).  Prospective  investors in
Ordinary  Shares or ADSs should consult their own advisors as to the United
States,  Italian or other tax  consequences of the purchase,  ownership and
disposition of ADSs, including,  in particular,  the effect of any state or
local tax laws.

      For purposes of the current income tax convention  between the United
States and Italy (the  "Income Tax  Convention"),  the  current  estate tax
convention   between  the  United   States  and  Italy  (the   "Estate  Tax
Convention")  and the  United  States  Internal  Revenue  Code of 1986,  as
amended,  beneficial  owners of ADRs evidencing ADSs will be treated as the
beneficial owners of the Ordinary Shares represented by those ADSs.

UNITED STATES TAXES

      The following discussion is a general summary of certain U.S. federal
income tax matters. This discussion is based upon the Internal Revenue Code
of  1986,  as  amended  (the  "Code"),   Treasury  regulations  promulgated
thereunder,  administrative  pronouncements and judicial  decisions,  as in
effect on the date of this  Annual  Report and all of which are  subject to
change,  possibly with retroactive effect. This discussion does not purport
to be a comprehensive description of all of the tax considerations that may
be relevant to a U.S owner. In addition,  the tax treatment of a U.S. owner
may vary depending upon the particular  situation of the U.S.  owner.  This
discussion  deals only with U.S. owners who hold Ordinary Shares or ADSs as
"capital  assets"  within the meaning of Section 1221 of the Code and whose
"functional  currency" within the meaning of Section 985 of the Code is the
U.S. dollar.  This discussion does not address the tax treatment of certain
owners  (including,  but not limited to,  insurance  companies,  tax-exempt
organizations,  financial institutions,  persons subject to the alternative
minimum tax, broker-dealers,  dealers in securities or currencies,  traders
in securities  that elect to  mark-to-market,  beneficial  owners of 10% or
more of the shares of the Company and certain U.S.  expatriates) who may be
subject to special rules not discussed  below. The summary does not discuss
the treatment of Ordinary Shares or ADSs that are held in connection with a
permanent  establishment  or fixed base through  which a  beneficial  owner
carries on  business or performs  personal  services in Italy.  The summary
also does not address the  consequences of any United States state or local
tax law to a U.S. owner.

      U.S.  owners  are  advised to consult  their own  advisors  as to the
United  States,  Italian or other tax  consequences  of the  ownership  and
disposition  of Ordinary  Shares or ADSs,  including,  in  particular,  the
effect of any United States state or local tax laws.

      For purposes of the summary,  beneficial owners of Ordinary Shares or
ADSs that are considered residents of the United States for purposes of the
current Income Tax Convention between the United States and Italy, and that
are not  subject  to an  anti-treaty  shopping  provision  that  applies in
limited circumstances,  are referred to as "U.S. owners." Beneficial owners
who are citizens or residents of the United States,  corporations organized
under U.S.  law,  and U.S.  partnerships,  estates or trusts (to the extent
their  income is subject to U.S.  tax  either  directly  or in the hands of
partners or beneficiaries)  generally will be considered to be residents of
the United States under the Income Tax  Convention.  Special rules apply to
U.S.  owners that are also residents of Italy.  Beneficial  owners that are
not U.S. owners should note that portions of the following  summary may not
be relevant to them.

      Taxation of Dividends and Stock Distributions

      The gross  amount  of any  dividends  before  reduction  for  Italian
withholding  tax paid to a U.S. owner generally will be treated as ordinary
income to the extent paid out of current and or  accumulated  earnings  and
profits for United States  federal  income tax purposes.  Dividends paid to
U.S.  owners that are  corporations  will not be eligible for the dividends
received  deduction.  Dividend  distributions  in excess of our current and
accumulated  earnings  and profits  would  first be treated as  non-taxable
return of the U.S.  owner's tax basis in his or her Ordinary  Shares to the
extent thereof and then as gain from the sale of Ordinary Shares. Dividends
paid in lire will be  includible  in the  income  of such U.S.  owners in a
dollar amount calculated by reference to the exchange rate in effect on the
day the dividends are received by the Custodian.  If the Custodian converts
the lire into dollars on the day it receives them,  U.S.  owners  generally
should  not be  required  to  recognize  foreign  currency  gain or loss in
respect of the dividend  income.  U.S. owners who receive a "treaty refund"
(as defined  below  under  "Italian  Taxes")  may be required to  recognize
foreign currency gain or loss to the extent the amount of the treaty refund
(in dollars)  received by the U.S. owner differs from the dollar equivalent
of the  treaty  refund  on the  date the  dividends  were  received  by the
Custodian. A U.S. owner may be eligible, subject to general limitations and
conditions,  to  credit  or (at  such  U.S.  owner's  election)  deduct  in
computing  United States federal income tax liability  Italian  withholding
tax (described in "--Italian Taxes") from such U.S. owner's  dividends,  to
the extent such U.S.  owner is not eligible for the "treaty  refund." Under
rules enacted by the US Congress in 1997 and other guidance released by the
U.S.  Department of the  Treasury,  foreign tax credits will not be allowed
for  withholding  taxes imposed in respect of certain  short-term or hedged
positions in stock or in respect of arrangements  in which a U.S.  Holder's
expected  economic  profit,  after non-U.S.  taxes, is  insubstantial.  The
limitations  on U.S.  foreign tax  credits and in the case of a U.S.  owner
that elects to deduct foreign taxes, deductions, and the timing thereof are
complex and U.S.  owners  should  consult with their own tax advisors  with
regard to the  availability  of a foreign tax credit or  deduction  and the
application  of the  limitations  on foreign tax credits and  deductions to
their particular  situations.  Dividends  generally will constitute foreign
source "passive income" or, in the case of certain U.S. owners,  "financial
services income" for U.S. foreign tax credit purposes.

      Distributions  of  additional  shares to U.S.  owners with respect to
their  Ordinary  Shares  or ADSs  that  are  made  as  part  of a pro  rata
distribution  to all  shareholders  of the  Company  generally  will not be
subject to U.S. federal income tax.

      A beneficial  owner of Ordinary  Shares or ADSs that is, with respect
to  the  United  States,  a  foreign  corporation  or a  nonresident  alien
individual  generally  will not be  subject to U.S.  federal  income tax on
dividends  received  on  Ordinary  Shares or ADSs,  unless  such  income is
effectively  connected with the conduct by the beneficial  owner of a trade
or business in the United States.

      Taxation of Capital Gains

      Gain  or  loss  realized  by a  U.S.  owner  on  the  sale  or  other
disposition  of  Ordinary  Shares or ADSs will be subject  to U.S.  federal
income  taxation  as  capital  gain  or  loss  in an  amount  equal  to the
difference  between the U.S.  owner's adjusted basis in the Ordinary Shares
or  ADSs  and  the  amount  realized  on the  disposition  (or  its  dollar
equivalent,  determined at the spot rate on the date of disposition, if the
amount  realized  is  denominated  in a  foreign  currency).  Deposits  and
withdrawals of Ordinary Shares by U.S. owners in exchange for ADSs will not
result  in the  realization  of gain or loss for U.S.  federal  income  tax
purposes.

      The capital gain or loss will be long term if the U.S. owner has held
the  Ordinary   Shares  or  ADSs  for  more  than  one  year.  For  certain
noncorporate  U.S. owners,  such long-term  capital gain will be subject to
tax  at a  reduced  rate.  With  limited  exceptions,  capital  losses  are
generally  deductible only against  capital gains and not against  ordinary
income.  Capital  gain  recognized  by a U.S.  owner on the taxable sale or
other taxable  disposition of Ordinary Shares or ADSs will be United States
source  income.  Therefore,  such gain will not increase  the U.S.  owner's
limitation  on use of foreign tax credits.  Any loss  recognized  upon such
sale or  disposition  generally  will be  allocated  to reduce U.S.  source
income.

      A beneficial  owner of Ordinary  Shares or ADSs that is, with respect
to  the  United  States,  a  foreign  corporation  or a  nonresident  alien
individual will not be subject to U.S.  federal income tax on gain realized
on the sale of Ordinary Shares or ADSs, unless (1) such gain is effectively
connected with the conduct by the  beneficial  owner of a trade or business
in the United  States or (2) in the case of gain  realized by a  beneficial
owner who is an individual, such individual is present in the United States
for 183 days or more in the  taxable  year of the sale  and  certain  other
conditions are met.

      Dividends  paid on Ordinary  Shares to U.S.  owners and proceeds from
the sale,  exchange or redemption of Ordinary  Shares by U.S. owners may be
subject  to  U.S.  information  reporting   requirements  and  U.S.  backup
withholding  tax. Backup  withholding will not apply if the holder (1) is a
corporation  or other exempt  recipient or (2) complies with the applicable
backup withholding requirements.  Any amount withheld under the U.S. backup
withholding  tax rules will be allowed as a refundable  credit  against the
U.S.  owner's  U.S.  federal  income tax  liability,  provided the required
information is furnished to the U.S. Internal Revenue Service.

ITALIAN TAXES

      The following discussion is a general summary of material Italian tax
consequences of the ownership and sale of Ordinary Shares or ADSs by a U.S.
owner that is not a resident of Italy. The summary does not purport to be a
comprehensive  description  of all of the tax  considerations  that  may be
relevant to a decision to purchase  Ordinary  Shares or ADSs.  In addition,
the tax  treatment  of a holder  may  vary  depending  upon the  particular
situation  of the holder.  The summary  does not discuss the  treatment  of
Ordinary  Shares  or ADSs  that are  held in  connection  with a  permanent
establishment  or fixed base through  which a beneficial  owner  carries on
business or performs personal services in Italy.

      The summary is based upon tax laws and practice of the United  States
and Italy as in effect on the date of this Annual Report, which are subject
to change.  Prospective investors in Ordinary Shares or ADSs should consult
their  own  advisors  as  to  the  United  States,  Italian  or  other  tax
consequences of the purchase ownership and disposition of the ADSs.

      Taxation of Dividends

      Effective as from July 1, 1998 non Italian resident  shareholders are
subject to a 27% withholding tax on dividends  relating to common stock and
resolved for  distribution  after July 1, 1998.  Non resident  shareholders
owning  ordinary  shares  will be  entitled  to a refund  of 4/9 of the tax
withheld,  provided that the  dividends  have been subject to income tax in
the country of residence of the beneficial owner. The foregoing  provisions
will not affect the applicability of the relevant Tax Treaty's  provisions,
if such Tax Treaty provides more favorable treatment;  however, application
of any such Tax Treaty shall be conditional upon the substantial and formal
requirements.

      Under the Income Tax Convention,  dividends  derived and beneficially
owned by U.S.  owners other than  corporations  (and similar  entities) are
subject  to  Italian  withholding  tax  at a  reduced  rate  of  15%.  U.S.
corporations and similar entities are subject to a withholding tax of 5-10%
depending  upon the percentage of the share capital owned and the period of
ownership of the shares of the Italian  distributing  company, as specified
in the  Convention.  However,  the amount  initially  made available to the
Depositary for payment to U.S. owners will generally  reflect a withholding
at the 27% rate. U.S. owners who comply with the appropriate  certification
procedures  generally  may then claim an  additional  payment of 12% of the
dividend  (representing  the  difference  between  the 27% rate and the 15%
rate, and referred to herein as a "treaty refund").

      Described   below  are  the  expected   procedures  for  making  such
certification.  The  certification  procedure  will require U.S.  owners to
obtain  from the U.S.  Internal  Revenue  Service  a form of  certification
required by the  Italian  tax  authorities  with  respect to each  dividend
payment. The request for that certificate must include a statement,  signed
under  penalties  of perjury,  to the effect that the U.S.  owner is a U.S.
resident  individual  or  corporation  and does not  maintain  a  permanent
establishment in Italy, and must set forth other required information.  The
time for  processing  requests for  certification  by the Internal  Revenue
Service  normally  is six to  eight  weeks.  Accordingly,  in  order  to be
eligible for the procedure  described  below,  U.S. owners should begin the
process of  obtaining  certificates  as soon as  possible  after  receiving
instructions from the Depositary on how to claim a treaty refund.

      According to the Income Tax Convention,  a higher benefit is provided
in the following  cases:  (i) a maximum 5% withholding tax is applicable on
the gross amount of dividends if the  beneficial  owner is a company  which
has owned  more than 50% of the  voting  stock of the  company  paying  the
dividends  for a  12-month  period  ending  on the  date  the  dividend  is
declared; (ii) a 10% withholding tax is applicable if the above interest is
lower  than  50%  but  higher  than  10%.   Moreover,   according   to  the
"Interpretative  Exchange  of  Notes"  published  in the  Italian  Official
Gazette of  February  2, 1986,  U.S.  companies  owning at least 10% of the
share capital of the  distributing  company will be entitled to obtain from
the IRS a tax credit against the amount of corporate tax paid on the income
distributed by the Italian company (to be determined in compliance with the
procedures  set forth by the IRS).  Such tax credit  will be granted if the
company  producing the  distributed  income is resident in Italy and is not
considered as resident in the U.S. according to the U.S. tax laws.

      The  Depositary's  instructions  will specify  certain  deadlines for
delivering to the Depositary the documentation  required to obtain a treaty
refund,  including the certification  that the U.S. owners must obtain from
the U.S. Internal Revenue Service.  In the case of ADSs held by U.S. owners
through   a  broker  or  other   financial   intermediary,   the   required
documentation  should  be  delivered  to such  financial  intermediary  for
transmission to the Depositary.  In all other cases, the U.S. owners should
deliver the required documentation directly to the Depositary.  The Company
and the  Depositary  have  agreed  that if the  required  documentation  is
received by the  Depositary  within a specified  period  after the dividend
payment  date  and,  in  the  reasonable  judgment  of  the  Company,  such
documentation  satisfies  the  requirements  for a refund by the Company of
Italian  withholding  tax under the  Convention  and  applicable  law,  the
Company will as soon as practicable thereafter pay the treaty refund to the
Depositary for the benefit of the U.S. owners entitled thereto.

      If  the  Depositary  does  not  receive  a  U.S.   owner's   required
documentation  within a specified period 30 days after the dividend payment
date, such U.S. owner may for a short period (specified in the Depositary's
instructions)  continue to claim a treaty refund by delivering the required
documentation  (either through the U.S. owner's  financial  intermediary or
directly,  as the  case  may be) to the  Depositary.  However,  after  this
period,  the treaty  refund must be claimed  directly  from the Italian tax
authorities  rather than through the  Depositary.  Expenses  and  extensive
delays have been  encountered by U.S.  residents  seeking refunds  directly
from the Italian tax authorities.

      Pursuant to Italian law, Italian  companies are required to supply to
the Italian tax authorities certain information  concerning the identity of
non-resident  shareholders  in  connection  with the payment of  dividends.
Holders of Ordinary  Shares will be  required to obtain  their  Italian tax
identification  number,  or  alternatively,  in the case of  individuals or
entities  which are not residents of Italy,  their name,  address and place
and date of birth, or in the case of legal entities, their name, country of
establishment and address (and in the case of partnerships, the information
required for  individuals  with  respect to one of their  representatives).
Under Italian law, the Company is entitled to suspend  payment of dividends
until proper communication of the tax identification  number or alternative
information,  as the case may be, is received from the  shareholder  or the
tax authorities.

      In the case of ADSs  beneficially  owned by U.S. owners,  the Company
understands that supplying  information  concerning the Depositary,  in its
capacity as the sole holder of record of the Ordinary Shares represented by
the ADSs, will satisfy these requirements.  U.S. owners will be required to
provide such information,  however,  to the extent such U.S. owners wish to
benefit from reduced  withholding  tax rates on dividends  under the Income
Tax Convention,  and therefore claims for such benefits must be accompanied
by the required information.

      Distributions of additional  shares to beneficial owners with respect
to their  ADSs  that are  made as part of a pro  rata  distribution  to all
shareholders of the Company generally will not be subject to Italian tax.

      Currently, the Company's Shares are not held in the Centralized Stock
Administration  System  managed  by Monte  Titoli  S.p.A.,  and there is no
current intent that the Shares will be so held.  However,  if at some point
in the  future  the  Shares  become  held in the  centralized  system,  the
withholding tax will not be levied by the  distributing  company and in its
place a substitutive  tax (at the 27% rate described above) shall be levied
by the Italian or non resident intermediary, provided the latter adheres to
the Monte Titoli  centralized system and has appointed a tax representative
in Italy. Under the above provisions,  the intermediaries  shall charge the
substitutive  tax applying a value as on the date at which the dividend has
become  collectable and the  substitutive  tax shall be paid to the Italian
Treasury by the fiscal  representative.  According to the system  described
above,  intermediaries  may  directly  apply the reduced  Treaty tax rates,
provided  that, in any case,  they have obtained  proper  evidence that the
beneficial  owner of the  shares is  entitled  to  benefit  from the Treaty
provisions.

      Taxation of Capital Gains

      As a  consequence  of the  general tax reform  convening  income from
capital and capital gains (Legislative Decree no. 461 of November 21, 1997)
substantial  amendments in the taxation of capital gains, for capital gains
realized  after  July 1, 1998 has been  introduced.  After  the said  date,
accordingly  capital gains realized by disposal of the shares of an Italian
company (or of rights deemed equivalent to share rights) will be considered
as  taxable in Italy,  wherever  the  shares  are  located.  The Tax Treaty
protection  will still be effective  and,  therefore,  no capital gains tax
will be applicable to residents of U.S. and of other countries with similar
Tax Treaties with Italy. If the capital gain taxation should apply, the tax
rates  will be  equal  to 12.5% or 27%  depending  upon the  percentage  of
interest held and sold by the seller (for a listed company, the higher rate
applies  if an  amount  exceeding  2% of the  voting  rights,  or 5% of the
capital stock is sold in a 12 month period).

      Other Italian Taxes

      Estate  and Gift Tax.  As of October  25,  2001,  persons  are no longer
liable to pay estate and gift taxes in Italy.

      Transfer Tax.  Legislative  Decree no. 435 of November 21, 1997,  has
introduced  substantial  amendments to the discipline of the stock transfer
tax.  According to the new rules,  the previous  exemption for transactions
with non resident parties is no more effective. Nevertheless,  transactions
effected  (either  as  seller  or  purchaser)  will  still be  granted  tax
exemption if (i) effected  between a  non-resident  subject and a qualified
intermediary  (as defined by the  Decree) or  undertakings  for  collective
investment in  transferable  securities;  (ii) the  transaction is effected
outside of Italy between non-residents.  Transactions meeting the foregoing
criteria  will be taxed as follows:  (a) if the  contract  is made  between
private individuals or non-qualified intermediaries,  the tax rate is equal
to 0.14%; (b) if the transaction is effected by a non-qualified  subject in
counterpart or with the  intervention of a qualified  intermediary  the tax
rate is equal to  0.05%;  or (c) if the  transaction  is  effected  between
qualified intermediaries the tax rate is 0.012%.

F.    NOT REQUIRED.

G.    NOT REQUIRED.

H.    DOCUMENTS ON DISPLAY.

      We are subject to the  informational  reporting  requirements  of the
Securities Exchange Act of 1934, as amended,  and, in accordance with these
requirements,  will file  reports and other  information  with the SEC. The
reports  and other  information,  as well as  registration  statements  and
exhibits and schedules  thereto,  may be inspected  without  charge at, and
copies may be  obtained at  prescribed  rates  from,  the public  reference
facilities of the US Securities and Exchange Commission's  principal office
at Judiciary Plaza,  450 Fifth Street,  N.W., Room 1024,  Washington,  D.C.
20549, USA, and at the SEC's regional offices at:

      500 West Madison Street, Suite 1400, Chicago, Illinois 60661, USA; or
      233 Broadway, New York, NY 10279.

      The public  may  obtain  information  on the  operation  of the SEC's
public   reference   facilities   by   calling   the  SEC  in  the  USA  at
1-800-SEC-0330.  The  information  may be  accessed  via  the  Commission's
website on the Internet at http://www.sec.gov.

I.    NOT APPLICABLE.

<PAGE>


ITEM 11.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      We are exposed to market  risks with  respect to the value of foreign
currencies  in  relation  to the euro and  changes in  interest  rates.  We
currently  mitigate these  exposures  with the use of derivative  financial
instruments.  Management  has in  place  risk  management  procedures  that
periodically assess the level of market risk related assets and liabilities
and considers the appropriate courses of action. Historically, we have used
interest rate swaps and foreign currency  options and forward  contracts to
manage our market risk exposures.

      In  managing  these  risks,  the  Company  entered  in the  following
contracts (in thousands of Euro):

                             November 30, 2002
                              notional amount
                             -----------------

      Interest Rate Swaps             15,000
      Currency Options                69,309

      The notional  value of a derivative for the interest rate swap is the
contractual  amount on the basis of which the  differentials are exchanged.
The currency options notional value represents the contractual amount to be
exchanged at the exercise date. The amounts  expressed in foreign  currency
are converted into euro applying the exchange rate at year-end.

      The  notional  amounts  above  indicated  do  not  represent  amounts
exchanged  by the parties,  that are limited to interest  rate and exchange
rate  differentials,  and thus are not a measure of credit  exposure of the
Company. Credit exposure is represented by the fair value of contracts that
are positive at year-end,  reduced by the effect of netting agreements. The
Company does not expect to incur credit-related losses, also given the high
credit standing of the counterparts involved.

Interest Rate Swaps

      The Company  entered into an interest  rate swap in order to exchange
with a  counterpart,  at  specified  intervals  for a  5-year  period,  the
difference between interest amounts calculated by reference to the notional
principal  amount and agreed  floating or fixed interest  rate.  Under such
contract, the Company will receive a floating interest rate and pay a fixed
interest  rate.  For the year starting from May 31 2002, the fixed interest
rate to be paid is 3.4%.  The  Company  has  entered in such  agreement  to
reduce the risk of an increase in interest rates.

      At November 30,  2002,  we had  variable  rate debt of  approximately
(euro)167.0  million.  Based upon our  overall  interest  rate  exposure on
variable  rate debt,  and  taking  into  account  the  interest  rate swaps
discussed  above, a hypothetical  two percentage point increase or decrease
in the related  indexes  (euribor/eurodollar/LIBOR  rate) would increase or
decrease interest expense and cash needs by (euro)3.0 million per year.

Currency Options

      The Company uses currency  options to partially  hedge purchase costs
of  products  that  are  denominated  in U.S.  Dollars.  Currency  options,
purchased or sold in the over-the-counter market for a premium, provide the
Company  the right to buy or sell an agreed  amount  of U.S.  Dollars  at a
specified  exchange  rate at the end of a specified  period,  currently not
exceeding 12 months. Since such options are not designated against specific
transactions,  they have been accounted for at estimated fair market value.
Fair market value reflects the estimated  amount that the Company would pay
or receive to terminate  the  contracts at the  reporting  date,  therefore
taking  into  account  the  current  unrealised  gains  or  losses  of open
contracts. In order to estimate the fair value of derivatives,  the Company
has used the dealers' quote.

      Our results of  operations  and  financial  position  are affected by
changes in the value of the euro against other  currencies.  The results of
operations are adversely  affected to the extent that the  strengthening of
the euro against other  currencies  affects the amount of sales reported in
euro with  respect to the sales  made in such  foreign  currencies  and may
affect  the  demand  for  products  in the  countries  in which  such other
currencies are utilized.  Any decrease in the value of the euro as compared
to other foreign  currencies may expose us to adverse effects to the extent
our  payables  and debt are  payable  in such  foreign  currency.  With the
completion  of  the  relocation  of all  manufacturing  to  the  U.S.,  the
strengthening of the U.S. dollar against the euro has and could continue to
negatively impact our operating and net income. On the contrary a weakening
of the U.S. dollar against the euro could  positively  impact our operating
and net income.  Taking into account the currency options  discussed above,
the  effect of a  hypothetical  further  10%  increase  in the U.S.  dollar
against the euro would have decreased our fiscal year 2002 operating income
by approximately 59% from (euro)2.7 million to (euro)1.1  million,  while a
hypothetical  10% decrease in the U.S.  Dollar  against the euro would have
increased our fiscal year 2002 operating income by approximately  319% from
(euro)2.7 million to (euro)11.3 million.


<PAGE>


ITEM 12.    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

NOT REQUIRED.


<PAGE>


                                  PART II


ITEM 13.    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

NOT APPLICABLE.


<PAGE>


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

A.    NOT APPLICABLE.

B.    NOT APPLICABLE.

C.    NOT APPLICABLE.

D.    NOT APPLICABLE.

E.    NOT APPLICABLE.


ITEM 15.    CONTROLS AND PROCEDURES

Pursuant to rules  adopted by the  Securities  and Exchange  Commission  as
directed by Section 302 of the  Sarbanes-Oxley  Act of 2002, the Company is
providing the following information:

      As of a date  within  90 days of the date of the  filing  of this Form
20-F  Annual  Report  (the  "Evaluation  Date") the  Company  conducted  an
evaluation  (under  the  supervision  and  with  the  participation  of the
Company's chief executive officer and chief financial officer), pursuant to
Rule 13a-15  promulgated  under the  Securities  Exchange  Act of 1934,  as
amended (the "Exchange Act") of the  effectiveness  of design and operation
of  the  Company's  disclosure  controls  and  procedures.  Based  on  this
evaluation,  the  Company's  chief  executive  officer and chief  financial
officer  have  concluded  that as of the  Evaluation  Date such  disclosure
controls and procedures were reasonably designed to ensure that information
required  to be  disclosed  by the  Company  in reports it files or submits
under the  Exchange  Act is recorded,  processed,  summarized  and reported
within the time periods  specified in the rules and forms of the Securities
and Exchange Commission.

      Since the last  evaluation  by the Company of the  Company's  internal
controls  there  have not  been any  significant  changes  in the  internal
controls,  or in factors  that  could  significantly  affect  the  internal
controls,   nor  were  there  any  significant   deficiencies  or  material
weaknesses in the internal controls requiring corrective actions.


<PAGE>

                                  PART III

ITEM 18.    FINANCIAL STATEMENTS

      The financial  statements  and notes to the  financial  statements of
Instrumentation  Laboratory S.p.A. are available on pages F-1 through F-50.
Reports of Independent Auditors are included within this Item 18.


<PAGE>


ITEM 19.    EXHIBITS

  Exhibit   Description

     1      Articles of Association  and By-laws were filed with the SEC on
            Form F-1 filed on October 22, 1996,  file  registration  number
            333-05682, and are incorporated herein by reference.

   4.1      Strategic Alliance and Cross Distribution Agreement, dated July
            28, 1999, by and between C.H.  Werfen S.A. and Beckman  Coulter
            Inc.,  filed with the SEC on May 31, 2000,  under Form 20-F, is
            incorporated  herein  by  reference.   (Confidential  materials
            omitted and filed  separately  with the Securities and Exchange
            Commission pursuant to a claim of confidential treatment.)

   4.2      Credit  Agreement  dated as of February 26,  1999,  between the
            Company and Izasa,  filed with the SEC on May 31,  2000,  under
            Form 20-F, is incorporated herein by reference.

   4.3      Amendment to Credit  Agreement,  dated as of March 27, 2001, by
            and  between  the  Company  and  Izasa,  filed  with the SEC on
            December 28, 2001, under Form 14D-9, is incorporated  herein by
            reference.

   4.4      Loan  Agreement  dated as of  February  26,  1999  between  the
            Company  and  Werfen  filed  with the SEC on May 31,  2000,  is
            incorporated herein by reference.

   4.5      Amendment to Loan Agreement  dated as of March 27, 2001, by and
            between the Company and Werfen,  filed with the SEC on December
            28,  2001,   under  Form  14D-9,  is  incorporated   herein  by
            reference.

   4.6      Distribution  Agreement  dated  as of  April  6,  2001,  by and
            between the  Company  and Izasa,  filed with the SEC on May 31,
            2001,  under Form 20-F,  is  incorporated  herein by reference.
            (Confidential  materials  omitted and filed separately with the
            Securities  and  Exchange  Commission  pursuant  to a claim  of
            confidential treatment.)

   4.7      Cost Sharing  Agreement dated as of May 4, 2001, by and between
            the  Company  and Izasa,  filed  with the SEC on May 31,  2001,
            under  Form  20-F,   is   incorporated   herein  by  reference.
            (Confidential  materials  omitted and filed separately with the
            Securities  and  Exchange  Commission  pursuant  to a claim  of
            confidential treatment.)

   4.8      Amendment to Credit Agreement, dated as of November 9, 2001, by
            and  between  the  Company  and  Izasa,  filed  with the SEC on
            December 28, 2001,  under Form 14D-9 is incorporated  herein by
            reference.

   4.9      Amendment to Loan  Agreement,  dated as of November 9, 2001, by
            and  between  the  Company  and  Werfen,  filed with the SEC on
            December 28, 2001,  under Form 14D-9 is incorporated  herein by
            reference.

  4.10      Deposit Agreement,  among the Registrant, The Bank of New York,
            as Depositary,  and all owners and beneficial  owners from time
            to  time  of  American  Depositary  Receipts  (including  as an
            exhibit the form of American  Depositary  Receipt),  filed with
            the SEC as exhibit 4.3 on Form F-1 filed on October  22,  1996,
            file registration number 333-05682,  and is incorporated herein
            by reference.

     8      List of Subsidiaries.

  10.1      Exchange  Agreement  dated  as of  December  19,  2001,  by and
            between Izasa, the Company and Bio-Rad Industries,  Inc., filed
            with  the  SEC on  December  28,  2001,  under  Form  14D-9  is
            incorporated herein by reference.

  10.2      English Summary of a Syndicated Loan Agreement dated as of July
            31, 2002 among Izasa  Distribuciones  Tecnicas S.A. and a group
            of financial entities.

  10.3      Section 906 Certifications.


<PAGE>


                                 SIGNATURES

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




                                       INSTRUMENTATION LABORATORY S.p.A.



                                       By: /s/ Jose Luis Martin
                                           -------------------------------
                                           Name:   Jose Luis Martin
                                           Title:  Chief Financial Officer

Date:  May 29, 2003


<PAGE>


                               CERTIFICATIONS

I, Jose Manent, certify that:

1.    I have reviewed  this Annual  Report on Form 20-F of  Instrumentation
      Laboratory S.p.A.;

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

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

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

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

      b.  evaluated  the  effectiveness  of  the  registrant's   disclosure
          controls and  procedures as of a date within 90 days prior to the
          filing date of this Annual Report (the "Evaluation Date"); and

      c.  presented  in  this  Annual  Report  our  conclusions  about  the
          effectiveness of the disclosure  controls and procedures based on
          our  evaluation as of the  Evaluation  Date;

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

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

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

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

Dated: May 29, 2003


/s/ Jose Manent
---------------
Jose Manent
Chief Executive Officer


I, Jose Luis Martin, certify that:

1.    I have reviewed  this Annual  Report on Form 20-F of  Instrumentation
      Laboratory S.p.A.;

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

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

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

      d.  designed such  disclosure  controls and procedures to ensure that
          material  information  relating to the registrant,  including its
          consolidated  subsidiaries,  is made known to us by others within
          those  entities,  particularly  during  the  period in which this
          Annual Report is being prepared;

      e.  evaluated  the  effectiveness  of  the  registrant's   disclosure
          controls and  procedures as of a date within 90 days prior to the
          filing date of this Annual Report (the "Evaluation Date"); and

      f.  presented  in  this  Annual  Report  our  conclusions  about  the
          effectiveness of the disclosure  controls and procedures based on
          our  evaluation as of the  Evaluation  Date;

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

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

      d.  any fraud,  whether or not material,  that involves management or
          other employees who have a significant  role in the  registrant's
          internal controls; and

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

Dated:  May 29, 2003


/s/ Jose Luis Martin
--------------------
Jose Luis Martin
Chief Financial Officer


<PAGE>


                       INDEX TO FINANCIAL STATEMENTS

AUDITED CONSOLIDATED FINANCIAL STATEMENTS                                  Page
-----------------------------------------                                  ----

   Report of Independent Auditors for the year ended November 30, 2002....  F-2

   Report of Predecessor Auditors for the years ended November 30, 2000
      and 2001............................................................  F-4

   Audited Consolidated Balance Sheets as of November 30, 2001 and
      2002................................................................  F-6

   Audited Consolidated Statements of Operations for the years ended
            November 30, 2000, 2001 and 2002..............................  F-8

   Audited Consolidated Statements of Cash Flows for the years ended
            November 30, 2000, 2001 and 2002..............................  F-9

   Audited Consolidated Statements of Changes in Shareholders' Equity
           for the years ended November 30, 2000, 2001 and 2002........... F-11

   Notes to the Audited Consolidated Financial Statements................. F-12


<PAGE>


[GRAPHIC OMITTED][GRAPHIC OMITTED]

                       REPORT OF INDEPENDENT AUDITORS



To the Shareholders of
Instrumentation Laboratory S.p.A.:


      We  have  audited  the  accompanying  consolidated  balance  sheet  of
      Instrumentation   Laboratory  S.p.A.  (an  Italian   corporation)  and
      Subsidiaries  (the 'Company') as of November 30, 2002, and the related
      consolidated  statement of operations,  change in shareholders' equity
      and cash  flows  for the year then  ended,  expressed  in Euro.  These
      financial   statements  are  the   responsibility   of  the  Company's
      management.  Our  responsibility  is to  express  an  opinion on these
      financial  statements based on our audit. The financial  statements of
      Instrumentation  Laboratory S.p.A. and Subsidiaries as of November 30,
      2000  and  2001  were  audited  by  other  auditors  who  have  ceased
      operations.  Those auditors expressed an unqualified  opinion on those
      financial statements in their report dated March 1, 2002.

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

      In our opinion,  the  consolidated  financial  statements  referred to
      above present fairly, in all material respects, the financial position
      of  Instrumentation  Laboratory S.p.A. and Subsidiaries as of November
      30, 2002, and the results of its operations and its cash flows for the
      year then ended in conformity  with  accounting  principles  generally
      accepted in Italy.

      As discussed in Note 7 to the  financial  statements,  the Company has
      given retroactive  effect to a change in accounting  principle related
      to the costing of its inventory. During the fiscal year ended November
      30, 2002, the Company  changed its method of valuing  inventory to the
      first-in,  first-out method of accounting,  whereas it previously used
      the last-in, first-out method.


<PAGE>


[GRAPHIC OMITTED][GRAPHIC OMITTED]


                                                                            2.



      We also audited the adjustments  described in Note 7 that were applied
      to restate the November 30, 2001 and 2000 financial statements. In our
      opinion  such  adjustments  are  appropriate  and have  been  properly
      applied.

      The  accounting  practices  of  the  Company  used  in  preparing  the
      accompanying  financial  statements  vary  in  certain  respects  from
      accounting  principles  generally  accepted  in the United  States.  A
      description  of the  significant  differences  between  the  Company's
      accounting  practices and accounting  principles generally accepted in
      the United States and the approximate  effect of those  differences on
      consolidated  net  results and  shareholders'  equity are set forth in
      Notes 21 and 22 of the  Notes to the  Audited  Consolidated  Financial
      Statements.


/s/ BDO Sala Scelsi Farina

BDO Sala Scelsi Farina
Societa di Revisione per Azioni


Milan, Italy
March 10, 2003


<PAGE>


  THIS IS A COPY OF THE AUDIT REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN
 S.P.A. IN CONNECTION WITH INSTRUMENTATION LABORATORY S.P.A. FILING ON FORM
  20-F FOR THE YEAR ENDED NOVEMBER 30, 2001. THIS AUDIT REPORT HAS NOT BEEN
  REISSUED BY ARTHUR ANDERSEN S.P.A. IN CONNECTION WITH THIS FILING ON FORM
                                   20-F.


                       REPORT OF INDEPENDENT AUDITORS


To the Shareholders of
Instrumentation Laboratory S.p.A.:

      We have  audited  the  accompanying  consolidated  balance  sheets of
Instrumentation Laboratory S.p.A. (an Italian corporation) and subsidiaries
(the  'Company')  as of  November  30,  2000  and  2001,  and  the  related
consolidated statements of operations,  changes in shareholders' equity and
cash flows for each of the three  years in the period  ended  November  30,
2001,  expressed in Italian Lire (Note 2). These  financial  statements are
the  responsibility of the Company's  management.  Our responsibility is to
express an opinion on these financial statements based on our audits.

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

      In our opinion,  the consolidated  financial  statements  referred to
above present fairly, in all material  respects,  the financial position of
Instrumentation  Laboratory S.p.A. and subsidiaries as of November 30, 2000
and 2001, and the results of their operations and their cash flows for each
of the three years in the period ended  November 30,  2001,  in  conformity
with generally accepted accounting principles in Italy.

      For a better understanding of the consolidated  financial statements,
attention  is drawn on the  following  matters  which are  explained in the
notes to the consolidated financial statements:

a) As described in Notes 19 and 20, 'other income and expense'  include non
recurring  income from sale of  distribution  rights to the parent  Company
Izasa S.A. for Lire 17, 426 million.  During 2001, in connection  with this
distribution  agreement  Izasa  S.A.  entered  also  into  a  cost  sharing
agreement  contributing to research and  development  costs incurred by the
U.S. subsidiary for products sold as a distributor.

b) As  described  in Note 8 in 2001  the  Company  entered  into a sale and
leaseback  transaction,  by which certain  instruments  in use at customers
were  sold to a  finance  institution  and  leased  back over a period of 4
years,  which is in line with their estimated useful life. This transaction
represents  a finance  lease,  but has been  accounted  for as an operating
lease, as permitted by the Italian law. Had the Company  accounted for this
transaction as a finance lease,  the net loss for the year 2001 and the net
equity  as  of  November  30,  2001  would  have  been  higher  and  lower,
respectively,  by Lire 250 million, while assets (instruments at customers)
would have been  higher by Lire  12,157 and  liabilities  (financial  debt)
would have been  higher by Lire 12,407  million at the same date,  of which
Lire 3,047 million short term debt.

      The  accounting  practices  of the  Company  used  in  preparing  the
accompanying  financial statements vary in certain respects from accounting
principles  generally  accepted in the United States.  A description of the
significant  differences  including  the matter  discussed in the preceding
paragraph  between  the  Company's   accounting  practices  and  accounting
principles  generally  accepted  in the United  States and the  approximate
effect of those  differences on consolidated net results and  shareholders'
equity  are set  forth  in  Notes  21 and 22 of the  Notes  to the  Audited
Consolidated Financial Statements.



ARTHUR ANDERSEN SPA


March 1, 2002
Milan, Italy


<PAGE>


             INSTRUMENTATION LABORATORY S.P.A. AND SUBSIDIARIES

                    AUDITED CONSOLIDATED BALANCE SHEETS
                      AS OF NOVEMBER 30, 2001 AND 2002
  (THOUSANDS OF EURO OR THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)


                                                NOTE    2001    2002     2002
                                                ----    ----    ----     ----
                                                      RESTATED
                                                      --------
                                                        EURO    EURO     U.S.$
                                                                          (1)

ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                             8,031   16,158   16,048
  Trade receivables, net of allowance for
    doubtful accounts and sales returns of Euro
    5,862 thousands in 2001 and Euro 5,775
    thousands in 2002                             5   102,341   91,668   91,045
    in 2002
  Other receivables                                     5,148    5,352    5,316
  Inventories, net                                7    57,683   56,482   56,098
  Prepaid expenses and other current assets             3,434    5,366    5,330
                                                      -------- -------  --------
          Total current assets                        176,637  175,026  173,836


NON-CURRENT RECEIVABLES AND OTHER ASSETS                  442      565       561


INSTRUMENTS AT CUSTOMERS, net                     8    22,195   23,060    22,903


PROPERTY, PLANT AND EQUIPMENT:
   Land and buildings                                   6,607    6,313    6,270
   Leasehold improvements                               6,755    6,633    6,588
   Plant, machinery and equipment                      35,659   35,561   35,319
   Furniture, fixtures and vehicles                    19,140   17,570   17,451
   Construction in progress                             1,518    1,811    1,799
   Accumulated depreciation                           (42,574) (43,862  (43,564)
                                                     --------  --------  ------
                                                       27,105   24,026   23,863

INTANGIBLE ASSETS AND DEFERRED
   CHARGES, net                                   9   127,466  119,159  118,349
                                                    ---------  --------  -------
          Total assets                                353,845  341,836  339,512
                                                    =========  =======  ========


The balances for the year ended  November 30, 2001 have been  restated from
Italian Lire into Euro using the exchange  rate as of January 1, 1999 (Euro
1.00 = Italian Lire 1936.27).
(1) Exchange rate: Euro 1.00 = U.S. $ 0.9932 as of November 30, 2002

The accompanying notes are an integral part of these consolidated financial
statements.


<PAGE>


             INSTRUMENTATION LABORATORY S.P.A. AND SUBSIDIARIES

                    AUDITED CONSOLIDATED BALANCE SHEETS
                      AS OF NOVEMBER 30, 2001 AND 2002
  (THOUSANDS OF EURO OR THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)


                                                NOTE    2001    2002     2002
                                                ----    ----    ----     ----
                                                      RESTATED
                                                      --------
                                                        EURO    EURO     U.S.$
                                                                          (1)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Bank overdrafts and short-term debt           10     64,869   66,765   66,311
  Current portion of long-term debt             11          -   12,399   12,315
  Trade and other payables                             40,583   46,158   45,844
  Income taxes payable                          12      4,236    4,054    4,026
  Accrued expenses and other liabilities        13     35,556   37,382   37,128
                                                      -------   -------  -------
         Total current liabilities                    145,244  166,758  165,624

LONG-TERM DEBT, net of current portion          11    103,335   87,814   87,217

DEFERRED INCOME TAXES                           12        572      619      615

RESERVE FOR SEVERANCE INDEMNITIES AND
PENSION LIABILITIES                             14      5,599    5,927     5,887

MINORITY INTEREST                                         253      402       399
                                                      -------   -------  -------
         Total liabilities                            255,003  261,520   259,742
                                                      -------  -------   -------

COMMITMENTS AND CONTINGENCIES                   15
SHAREHOLDERS' EQUITY:                           16
   Share capital (90,701,104 shares
  authorized, issued and
   outstanding at November 30, 2001 and
  2002, par value
   Euro 1,29 each)                                    117,004  117,004  116,208
  Additional paid-in capital                           79,958   11,496   11,418
  Cumulative translation adjustment                     8,235    3,620    3,595
  Accumulated deficit                                (106,355) (51,804) (51,451)
                                                     --------  -------  -------
         Total shareholders' equity                    98,842   80,316   79,770
                                                     --------  -------  -------
         Total liabilities and shareholders'
            equity                                    353,845  341,836  339,512
                                                      =======  =======  =======


The balances for the year ended  November 30, 2001 have been  restated from
Italian Lire into Euro using the exchange  rate as of January  1,1999 (Euro
1.00 = Italian Lire 1936.27).

(1) Exchange rate: Euro 1.00 = U.S. $ 0.9932 as of November 30, 2002

The accompanying notes are an integral part of these consolidated financial
statements.


<PAGE>

<TABLE>
<CAPTION>

             INSTRUMENTATION LABORATORY S.P.A. AND SUBSIDIARIES

               AUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
            FOR THE YEARS ENDED NOVEMBER 30, 2000, 2001 AND 2002
  (THOUSANDS OF EURO OR THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)

                                        NOTE       2000      2001       2002      2002
                                                   ----      ----       ----      ----
                                                 RESTATED   RESTATED
                                                 --------   --------
                                                   EURO      EURO       EURO       US$
                                                                                   (1)

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

Net sales and revenues                  17      275,312    274,814    272,591     270,737

Cost of sales and services                      143,164    144,207    141,549     140,586
                                                -------    -------    -------     -------
     Gross profit                               132,148    130,607    131,042     130,151

Research and development costs          25       20,124     19,588     20,072      19,936

Selling, general and
administrative expenses                          92,007     92,699     99,792      99,113
                                                -------    -------    -------     -------
     Operating income before
     amortization of intangible
     assets and deferred charges                 20,017     18,320     11,178      11,102

Amortization of intangible
assets and deferred charges              9       11,337      9,058      8,464       8,406
                                                -------    -------    -------     -------
     Operating income (loss)                      8,680      9,262      2,714       2,696

Interest income                         18        1,324      1,277        980         973

Interest expense                        18       15,925     15,382     12,210      12,127

Other expense, net                      19       10,016     (2,018)     2,696       2,678
                                                -------    -------    -------     -------
     Loss before income taxes
     and minority Interest                      (15,937)    (2,825)   (11,212)    (11,136)

Income taxes                            12        1,536      2,916      2,549       2,532

Minority interest                                  --           68         80          79
                                                --------   --------   --------    --------
     Net loss                                   (17,473)    (5,809)   (13,841)    (13,747)

                                                ========   ========   ========     =======
Loss per share                           3      (0.3954)   (0.0797)   (0.1516)    (0.1516)
                                                ========   ========   ========     =======

The  figures  for the  years  ended  November  30,  2000 and 2001 have been
restated  from Italian Lire into Euro using the exchange rate as of January
1, 1999 (Euro 1.00 = Italian Lire 1936.27).

<FN>

(1) Exchange rate: Euro 1.00 = U.S. $ 0.9932 as of November 30, 2002
</FN>
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

<PAGE>

             INSTRUMENTATION LABORATORY S.P.A. AND SUBSIDIARIES

               AUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
            FOR THE YEARS ENDED NOVEMBER 30, 2000, 2001 AND 2002
  (THOUSANDS OF EURO OR THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)


                                                2000     2001      2002    2002
                                                ----     ----      ----    ----
                                             RESTATED   RESTATED
                                             --------   --------
                                                EURO     EURO      EURO   U.S.$
                                                                          ( 1)
CASH FLOWS FROM OPERATING
   ACTIVITIES:
   Net loss                                  (17,473)  (5,809) (13,841) (13,747)
   Adjustments to reconcile net income to
   net cash provided by (used in)
   operating activities
      Depreciation and amortization           25,293   23,594   22,673   22,519
      Provision for severance indemnities        997      921      987      980
      Unrealized loss on investment              506                 -        -
      Net loss (gain) on sale of fixed
      assets                                  (6,290)    (683)    (117)    (116)
      Increase (decrease) of deferred
      income taxes and other long-term
      liabilities                             (4,862)  (1,833)    (533)    (529)
      Increase (decrease) in cash
      resulting from changes in operating
      assets and liabilities
         Accounts receivable                   8,722    1,473   10,640   10,568
         Inventories                          (8,711)  15,617    1,224    1,216
         Prepaid expenses                      1,957     (767)  (2,144)  (2,129)
         Accounts payable                     (4,799)   1,590    5,474    5,437
         Accrued expenses and income taxes   (17,751)  11,492)   1,234    1,226
                                             -----------------------------------
   Net cash provided by (used in)
         operating activities                (22,411)  22,611    25,597  25,423
                                            ------------------------------------

CASH FLOWS FROM INVESTING
   ACTIVITIES:
     Investment in instruments at customers  (12,172) (19,883) (21,568) (21,421)
     Purchase of fixed assets                 (6,767)  (8,529)  (6,090)  (6,049)
     Increase in intangible assets and
      deferred charges                          (135)    (351)    (304)    (302)
     Effect of acquisition of subsidiary          -      (740)       -        -
     Decrease (Increase) in investments
      and other long term assets                 278       30     (123)    (122)
     Proceeds from sale of fixed assets       30,544    9,417   11,904   11,823
                                            -----------------------------------
         Net cash provided by (used in)
         investing activities                 11,748  (20,056) (16,181) (16,071)
                                            -----------------------------------



The  balances  for the years  ended  November  30,  2000 and 2001 have been
restated  from Italian Lire into Euro using the exchange rate as of January
1, 1999 (Euro 1.00 = Italian Lire 1936.27).

 (1) Exchange rate: Euro 1.00 = U.S. $ 0.9932 as of November 30, 2002

The accompanying notes are an integral part of these consolidated financial
statements.


<PAGE>


              INSTRUMENTATION LABORATORY S.P.A. AND SUBSIDIARIES

                AUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE YEARS ENDED NOVEMBER 30, 2000, 2001 AND 2002
   (THOUSANDS OF EURO OR THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)



                                               2000     2001      2002    2002
                                               ----     ----      ----    ----
                                            RESTATED   RESTATED
                                            ---------  --------
                                              EURO      EURO      EURO    U.S.$
                                                                           (1)

CASH FLOWS FROM FINANCING
   ACTIVITIES:
     Proceeds from issuance of long-term
     debt                                     5,230   13,815       875      869
     Repayment of long-term debt             (3,921)    (554)   (4,000)  (3,973)
     Increase (decrease) in bank
     overdrafts and short-term
     debt                                     3,675  (14,130)    1,896    1,883
                                              -----  --------    -----    -----
        Net cash provided by (used in)
        financing activities                  4,984     (869)    (1,229  (1,221)
                                              -----   -------    ------   ------
EFFECT OF EXCHANGE RATES ON CASH                626       73       (60)     (60)
                                              ------  --------   ------   ------
NET INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS                               (5,053)   1,759     8,127    8,072

CASH AND CASH EQUIVALENTS at beginning of
the year                                     11,325    6,272     8,031    7,976
                                             ------    -----     -----     -----
CASH AND CASH EQUIVALENTS at end of the
year                                          6,272    8,031    16,158   16,048
                                            =======  =======   =======  =======

SUPPLEMENTAL INFORMATION:

     Cash paid during the year for:
        Interest                             14,613   13,547    13,909   13,814
        Income tax                            1,845    1,785     2,883    2,863

The  balances  for the years  ended  November  30,  2000 and 2001 have been
restated  from Italian Lire into Euro using the exchange rate as of January
1, 1999 (Euro 1.00 = Italian Lire 1936.27).

(1) Exchange rate: Euro 1.00 = U.S. $ 0.9932 as of November 30, 2002

The accompanying notes are an integral part of these consolidated financial
statements.


<PAGE>

             INSTRUMENTATION LABORATORY S.P.A. AND SUBSIDIARIES

 AUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE
                YEARS ENDED NOVEMBER 30, 2000, 2001 AND 2002
  (THOUSANDS OF EURO OR THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)

                                     ADDITIONAL  CUMULATIVE
                            SHARE     PAID-IN    TRANSLATION  ACCUMULATED  TOTAL
                           CAPITAL    CAPITAL     ADJUSTMENT   DEFICIT    EQUITY
                           -------    -------     ----------   -------    ------


BALANCE AT NOVEMBER 30,
1999, as previously
reported                   57,055     79,958       20,161     (82,043)   75,131
                           -------    -------     -------    ---------  --------
   Change in accounting
   principles in respect
   of Inventory costing
   (Note 7)                     -          -            -      (1,275)   (1,275)
                           -------   -------      -------   ---------  --------
BALANCE AT NOVEMBER 30,
1999, as restated          57,055     79,958       20,161     (83,318)   73,856
                           -------   -------      -------   ---------  --------

   Effect of change in
   accounting for
   translation of goodwill
   (Note 3)                     -          -      (16,035)          -   (16,035)

   Gain from translation
   of foreign currency
   financial statements         -          -        6,600           -     6,600

   Translation effect for
   1999 change in
   Inventory accounting
   principle (Note 7)           -          -            -        (208)     (208)

   Net loss for the year        -          -            -     (17,473)  (17,473)
                           -------   -------      -------   ---------  --------
BALANCE AT NOVEMBER 30,
2000, as
restated                   57,055     79,958       10,726    (100,999)   46,740
                           -------   -------      -------   ---------  --------

   Conversion of share
   capital to Euro            (50)         -            -          50         -

   Issuance of ordinary
   shares from capital
   increase                59,999          -            -           -    59,999

   Excess of equity over
   cost of newly
   consolidated entity          -          -            -         403       403

   Loss from translation
   of foreign currency
   financial statements         -          -       (2,491)          -    (2,491)

   Net loss for the year
   as restated                  -          -            -      (5,809)   (5,809)
                           -------   -------      -------     --------   -------
BALANCE AT NOVEMBER 30,
2001 as restated          117,004     79,958        8,235    (106,355)    98,842
                           -------   -------      -------    ---------   -------
    Loss coverage               -    (68,462)           -      68,462         -

   Change in minority
   interest                     -          -            -         (70)      (70)

   Loss from translation of
   foreign currency
   financial statements         -          -       (4,615)          -    (4,615)

   Net loss for the year        -          -            -     (13,841)  (13,841)
                          --------   -------      -------   ---------   --------

BALANCE AT NOVEMBER 30,   117,004     11,496        3,620     (51,804)    80,316
2002                      --------   -------      -------    ---------   -------

BALANCE AT NOVEMBER 30,
2002 IN U.S. $(1)         116,208     11,418        3,595     (51,451)    79,770
                          ========   ========     ========    ========   =======

The balances for the years ended November 30, 1999, 2000 and 2001 have been
restated  from Italian Lire into Euro using the exchange rate as of January
1, 1999 (Euro 1.00 = Italian Lire 1936.27).

(1)  Exchange  rate:  Euro 1.00 = U.S. $ 0.9932 as of November 30, 2002

The accompanying  notes are an integral  part of these  consolidated  financial
statements.


<PAGE>


1.    GROUP STRUCTURE AND ACTIVITY

      The  Instrumentation  Laboratory  Group  is  engaged  in the  design,
      manufacture,  distribution and service of laboratory test instruments
      used primarily for the diagnosis of disease or health conditions. The
      Group also manufactures and sells reagents, controls and supplies for
      hospitals and independent clinical laboratories.

      In 1991 IL Holding  S.p.A.,  an Italian  inactive  subsidiary  of the
      ultimate parent company CH-Werfen, S.A. (Spain), acquired from a U.S.
      corporation (the 'Seller') the share capital of a number of companies
      collectively known worldwide as 'Instrumentation Laboratory' for U.S.
      $139  million as well as the  patents and  trademarks  related to the
      Instrumentation  Laboratory  business for U.S. $35.6 million. In 1992
      the  wholly-owned  Italian  subsidiaries  Instrumentation  Laboratory
      S.r.l. and Instrumentation Laboratory Sud S.p.A. were merged into the
      parent  company,  IL  Holding  S.p.A.,  which  changed  its  name  to
      Instrumentation Laboratory S.p.A (the 'Company').

      In  September  1996,  the  Company  acquired  Chromogenix,  a leading
      manufacturer  of reagents used primarily for hemostasis  instruments,
      based in Sweden, and Mallinckrodt Sensor Systems Inc. ('MSS'),  which
      provides blood gas and electrolyte analysers, together with reagents,
      controls,  other  consumables and services,  which are designed to be
      used   by  the   care   provider   for   near-patient   uses   ('1996
      Acquisitions').  The  purchase  price of Euro 59.1  million  has been
      allocated to  specifically  identifiable  tangible and intangible net
      assets  acquired,  with the resulting  excess  purchase price of Euro
      38.7 million assigned to goodwill.

      In January 1999,  the Company  acquired  Hemoliance,  a joint venture
      consisting of two companies, Medical Laboratory Automation Inc. (MLA)
      and  Ortho-Clinical  Diagnostic Inc.  ('OCD').  The Company purchased
      100% of MLA total common  stock for U.S.$ 75 million,  and the assets
      of OCD for U.S.$ 55 million.  In connection with the 1999 Acquisition
      certain  restructuring actions relating to the acquired business were
      undertaken,  including  closing  down a facility,  transitioning  the
      business to an indirect  distribution  model and severing a number of
      employees.  Accordingly,  a  restructuring  reserve of  approximately
      U.S.$ 19.1 million was  recognized  as a liability  assumed as of the
      consummation  date of  acquisition  and included in the allocation of
      the acquisition cost.

      The excess of purchase price over the fair value of the  identifiable
      assets and  liabilities  acquired,  as resulting after the accrual of
      the restructuring  reserve, has been assigned to goodwill for a total
      amount of US $ 114.7 million and is being amortized over 20 years. As
      of  November  30,  2002 and 2001 the parent  company  Instrumentation
      Laboratory S.p.A. owned the following  subsidiaries,  either directly
      or indirectly:

      Company                                           2001     2002
      -------                                           -------------

      Instrumentation Laboratory GmbH (Germany)         100%     100%
      Instrumentation Laboratory Ges.mbH (Austria)      100%     100%
      Instrumentation Laboratory U.K. Ltd. (U.K.)       100%     100%
      Instrumentation Laboratory S.a.r.l. (France)      100%       -
      Labgas S.a.r.l. (France)                          100%       -

      Company                                           2001     2002
      -------                                           -------------
      Instrumentation Laboratory S.A. (France)          100%     100%
      Instrumentation Laboratory Belgium N.V.           100%     100%
      Instrumentation Laboratory Group B.V.             100%     100%
      Instrumentation Laboratory (Netherlands) B.V.     100%     100%
      Instrumentation Laboratory Espana, S.L.           100%     100%
      Instrumentation Laboratory Company                100%     100%
      IL Sensor Systems, Inc. (U.S.A.)
      (formerly Mallinckrodt Sensor Systems, Inc.)      100%     100%
      IL Diagnostic, S.A. de C.V. (Mexico)              100%     100%
      Medical Laboratory Automation Inc.                100%     100%
      Lessix AB (Sweden)                                100%     100%
      Chromogenix Holding AB (Sweden)                   100%     100%
      Chromogenix AB (Sweden)                           100%     100%
      Instrumentation Laboratory (Lietuva)B.I.           76%      67%

2.    BASIS OF THE CONSOLIDATED FINANCIAL STATEMENTS

      The  accompanying   consolidated  financial  statements  include  the
      accounts of the parent company,  Instrumentation  Laboratory  S.p.A.,
      and of the  subsidiaries  owned directly or indirectly (the 'Company'
      or the 'Group'). The subsidiaries included in the consolidation as of
      November 30, 2002 and 2001 are those listed above in Note 1.

      The consolidated  balance sheet and the consolidated income statement
      are  presented  in a  format  used  in  the  international  practice.
      Accordingly,  the accompanying  consolidated financial statements are
      not prepared pursuant to the format of Italian decree No.127 of 1991,
      which  implemented in Italy the Seventh EU Directive on  consolidated
      accounts.

      The financial statements used in the consolidation have been prepared
      following  the general  rules  provided  by the  Italian  Civil Code,
      interpreted  by the  accounting  principles  stated  by  the  Italian
      Accounting Profession ('Consigli Nazionali dei Dottori Commercialisti
      e dei Ragionieri) or, in the absence thereof,  with the statements of
      International Accounting Standards issued by I.A.S.B.  (collectively,
      'Italian GAAP').

3.    SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

      The most significant accounting principles used in the preparation of
      the consolidated financial statements are:

      Principles of Consolidation

      (a) Assets and liabilities of consolidated  companies are combined on
          a line-by-line  basis,  eliminating the book value of the related
          investments against the shareholders' equity of the subsidiaries.

      (b) Unrealized   intercompany  profits  and  losses  are  eliminated,
          together with all intercompany accounts and transactions.

      (c) Any  excess  of the  purchase  price  over the fair  value of the
          specifically  identifiable  tangible and intangible net assets of
          acquired  companies at the acquisition  date, is recognized as an
          asset (goodwill) and amortized over its useful life not exceeding
          20 years, as described in Note 1.

      Cash and cash equivalents

      The Company  considers  cash and cash  equivalents  to be its cash on
      hand and on deposit with banks.

      Receivables and Payables

      Receivables and payables are stated at nominal value. Receivables are
      reduced to expected  realizable  value by the  allowance for doubtful
      accounts and sales returns.

      Inventories

      Inventories,   which  include  material,   labour  and  manufacturing
      overhead, are valued at the lower of cost, on a FIFO basis, or market
      value. Estimated losses from obsolete or slow-moving  inventories are
      currently provided for.

      Instruments at Customers

      Instruments  leased to customers under sales-type lease contracts are
      recorded at an amount equal to the net investment in the lease,  with
      the  finance  income  being  recognized  over the life of the related
      contracts.

      Instruments  held by customers  under reagent  rental  contracts,  in
      which the  Company  retains  title,  are  accounted  for at cost less
      accumulated depreciation.  The cost of the instruments is depreciated
      on a  straight-line  basis  over the  average  length of the  related
      contracts, but not exceeding 5 years.

      Under the  contracts,  customers are  generally  required to purchase
      specified minimum amounts of reagents.

      Property, Plant and Equipment

      Property, plant and equipment is recorded at the acquisition cost for
      the Group, which for certain assets is represented by the fair market
      value of assets  at the time of their  acquisition.  Depreciation  is
      provided on a straight-line  basis over the estimated useful lives of
      fixed assets as follows:

      Buildings                            18 - 50 years
      Leasehold improvements                4 - 10 years
      Plant, machinery and equipment        3 - 15 years
      Furniture, fixtures and vehicles      3 - 20 years

      Leasehold   improvements  are  amortized  over  the  shorter  of  the
      estimated  useful life of the related  assets or the remaining  lease
      term.


<PAGE>


      The costs of  repairs,  maintenance  and  replacements,  which do not
      significantly  improve or extend the  useful  life of the  respective
      assets, are charged to expense as incurred.

      Sale and Lease-back Transactions

      Instruments  at customers  sold to leasing  companies  under sale and
      lease back  transactions  are accounted for as operating  leases,  as
      allowed by the  Italian  law,  since  they are sold at cost,  and the
      lease term approximates the expected useful life.

      Intangible Assets and Deferred Charges

      Intangible  assets  and  deferred  charges  are  carried  at cost and
      amortized using the straight-line  method over their estimated useful
      lives as follows:

      Patents, trademarks and other rights 5 - 20 years
      Deferred charges                     3 -  5 years
      Goodwill                                 20 years

      Goodwill is amortized using the straight-line method from the date of
      acquisition over the expected period benefited,  currently  estimated
      in 20 years.  The  Company  assesses  the future  useful life of this
      asset whenever events or changes in  circumstances  indicate that the
      current useful life has diminished.

      Income Taxes

      The  provision  for  current  income  taxes is based on a  reasonable
      estimate  of  taxable  income  for the  year  for  each  consolidated
      company.

      Deferred  tax assets or  liabilities  are  recognized  for  temporary
      differences  between financial  reporting and tax bases of assets and
      liabilities  at  each  reporting  period.  Deferred  tax  assets  are
      recognized when their realization is reasonably  certain.  Tax losses
      carried forward are recognised only when utilized.

      Accrual for Severance Indemnities and Pension Liabilities

      This accrual has been  determined in accordance with the related laws
      in the various  countries  in which the Group  operates  and includes
      contributions  to pension  funds  computed on the basis of  generally
      accepted actuarial rules, as well as employee  severance  indemnities
      and benefit plans. Pension plan have been accounted for in accordance
      with  IAS  no.19,  in the  absence  of  specific  Italian  accounting
      principles on this matter.


<PAGE>


      Revenue Recognition

      Sales are  recorded at the time of shipment of the goods to customers
      or performance of the service.  Revenues from instrument  rentals are
      recognized  over  the  life of the  rental  contract.  Revenues  from
      service  contracts  are  recognized  over  the  life  of the  service
      contract.

      Revenue from sales-type  leases is recognized at the inception of the
      lease  equal  to the  present  value  of  the  lease  payments  to be
      received. The cost of the leased products is charged to cost of goods
      sold at the time the corresponding revenue is recognized.

      Warranty Costs

      The Company  provides a reserve  for  warranty  costs  expected to be
      incurred on product  sales  covered by the Group's  various  warranty
      agreements.

      Research and Development Costs

      Research and development costs are charged to income as incurred.

      Derivatives

      The Company  enters into  derivative  transactions  to hedge specific
      transactions  as well as to reduce its exposure to interest  rate and
      foreign exchange risks.

      The interest  rate  differentials  to be received or paid on interest
      rate swaps and other interest rate agreements designated as hedges of
      specific  underlying debt instruments are included in interest income
      or expense on an accrual basis over the period hedged.

      Foreign  exchange  derivatives  (options)  are used to  hedge  future
      expenses  denominated in foreign  currencies,  but are not designated
      against  specific future  transactions.  At the reporting date, these
      options are valued at  estimated  fair market  value.  The  resulting
      losses are  recognised in the income  statement,  while the resulting
      gains are accounted for only when realized.

      Introduction of Euro

      Since  November  30,  2002 the  accompanying  consolidated  financial
      statements are presented in Euro. However the consolidated  financial
      statements  for fiscal  years ended  November  30, 2000 and 2001 were
      originally  prepared in Italian Lire and have been restated into Euro
      at the rate of 1,936.27  Italian  Lire per Euro,  the  official  rate
      established by the European Monetary Union on January 1, 1999.

      The comparative financial statements reported in Euro depict the same
      trends as would have been  presented if the Company had  continued to
      present  financial  statements  in the currency  that was  previously
      used.


<PAGE>


      Foreign Currency Translation

      (a) Translation  of  Financial  Statements   denominated  in  foreign
          currencies  Assets  (except for goodwill) and  liabilities of the
          Group's  foreign  subsidiaries  are  translated  into Euro at the
          year-end   exchange   rates  while   revenues  and  expenses  are
          translated at the average exchange rates for the period. Goodwill
          arising from the  acquisitions of foreign  entities is translated
          using  the  exchange  rate at the  date of the  transaction.  The
          resulting  translation  differences are included in shareholders'
          equity under the caption 'Translation reserve'.

      (b) Translation of transactions  and Balances  denominated in foreign
          currencies  Transactions in foreign  currencies are recorded at a
          rate approximating the exchange rate at transaction date. Foreign
          currency  assets  and  liabilities  are  translated  at the  rate
          prevailing at year-end and the resulting exchange gains or losses
          are recorded in the income statement.

      Loss per share

          Loss per share  was  computed  based  upon the  weighted  average
          number  of common  shares  outstanding  during  the  period.  The
          weighted  average  number of common shares  outstanding in fiscal
          2000,  2001 and 2002 is  44,189,477,  72,861,028  and  90,701,104
          respectively. Common stock equivalents, which were outstanding in
          2000,  2001 and 2002, have been excluded as their effect would be
          antidilutive.

      Statements of Cash Flows

          The  cash  flow   statements  are  prepared  in  accordance  with
          International Accounting Standards, using the indirect method.

4.    TRANSLATION OF EURO AMOUNTS INTO U.S. DOLLAR AMOUNTS

      The  consolidated  financial  statements  are  stated  in  Euro,  the
      currency of the country in which the parent  company is  incorporated
      and operates.

      The  translation  of the Euro  amounts  into U.S.  Dollar is included
      solely for the convenience of the reader,  using the noon buying rate
      certified  for customs  purposes by the Federal  Reserve  Bank of New
      York as of November 30,  2002,  which was Euro 1.00 to U.S. $ 0.9932.
      The   convenience   translation   should  not  be   construed   as  a
      representation  that the Euro amounts have been,  could have been, or
      could in the future be,  converted  into U.S.  Dollars at this or any
      other rate of exchange.

5.    TRADE RECEIVABLES

      As  of  November  30,  2001  and  2002  approximately  41%  and  38%,
      respectively,  of  trade  receivables  were  from a  number  of local
      entities and agencies  that provide  healthcare  services  throughout
      Italy and are  managed  and  funded  directly  or  indirectly  by the
      Italian government.


<PAGE>


      Under the  Italian  health  system,  accounts  receivable  may remain
      outstanding  for up to 300 days on average,  which  extended  payment
      periods are accepted in the industry.  Total sales to these customers
      represent  approximately 17% and 17%,  respectively,  of consolidated
      net  revenues  for the years ended  November  30, 2001 and 2002.  The
      Company's  management  does not  expect any  significant  losses as a
      result of the concentration of these receivables.

      At November 30, 2001 and 2002 trade  receivables  from public Italian
      healthcare  entities  are net of  Euro  6.7  million  and  Euro  16.5
      million,  respectively,  sold  through a factoring  transaction  on a
      non-recourse basis.

      The  Company  adopts a  procedure  of  charging  interest  on overdue
      receivables.   However,   this  interest   charged  to  customers  is
      frequently   non-collectable.   Accordingly,   interest   receivables
      outstanding  at November 30, 2001 and 2002 (Euro 1.6 million and Euro
      0.6 million, respectively) have been fully reserved for.

6.    STRATEGIC ALLIANCE

      During 1992 the ultimate parent  company,  CH-Werfen,  S.A.,  entered
      into a long-term  strategic  alliance  agreement with another medical
      products manufacturer (Coulter Corporation, which in 1997 merged with
      Beckman, another leading diagnostics manufacturer, hereafter 'Beckman
      Coulter')  in order to  optimise  their  respective  activity  in the
      healthcare business.  Such agreement was terminated in July 1999 when
      the parties  entered  into a new  long-term  strategic  alliance  and
      distribution  agreement (the 'Strategic  Alliance  Agreement').  This
      agreement  has an initial  duration of 10 years.  Under the Strategic
      Alliance Agreement:

      (a) Beckman  Coulter  is the  exclusive  distributor  of the  Group's
          hemostasis systems in the United States, Canada,  Australia,  New
          Zealand, China and certain other countries.

      (b) The  Group is the  exclusive  distributor  of  Beckman  Coulter's
          hematology,  flow cytometry and particle characterization product
          lines in Austria and Italy.

      (c) Other  affiliates of Werfen also serve as distributors of Beckman
          Coulter products in certain countries.

      Under  the  Strategic  Alliance  Agreement,   Group  companies  shall
      renounce to  manufacture  any product  competitive  with the products
      sold by Beckman Coulter.  The Strategic Alliance Agreement  specifies
      certain  targets  for  particular  regions  which,  if not  achieved,
      constitute inadequate  performance and might imply the termination of
      the  distribution  rights in such region.  If a party  exercises this
      termination  right with respect to specified regions and/or products,
      then the other party may terminate the Strategic Alliance Agreement.

      In addition,  the Strategic  Alliance  Agreement may be terminated by
      either party to the  Strategic  Alliance  Agreement in the event of a
      reorganization, merger, consolidation or a direct or indirect sale of
      all or substantially all of the assets of the other party.


<PAGE>


      Group receivables and payables from/to Beckman Coulter as of November
      30, 2001 and 2002 and sales and purchases to/from Beckman Coulter for
      the years then ended were as follows (in thousands of Euro):

                                                       2001          2002
                                                       ----          ----

      Trade receivables                              12,452        13,417
      Trade payables                                  3,817         6,427
      Sales                                          47,627        47,943
      Purchases                                      19,296        18,557

      Sales  of  Beckman  Coulter  products  deriving  from  the  exclusive
      distribution agreement for the years ended November 30, 2001 and 2002
      amounted to Euro 28.9 million and Euro 29.3 million, respectively.

7.    INVENTORIES

      As of  November  30,  2001 and 2002  inventories  were as follows (in
      thousands of Euro):

                                                       2001          2002
                                                       ----          ----

      Raw materials                                  21,146        17,960
      Work-in-process                                   565         1,008
      Finished goods                                 42,995        43,999
      Service parts                                   4,373         4,225
                                                    -------       -------
                                                     69,079        67,192
      Less: Reserve for obsolescence                (11,396)      (10,710)
                                                    -------       -------
                                                     57,683        56,482
                                                    =======       =======

      As of November 30, 2002 the U.S. subsidiary retroactively changed its
      inventory  costing  from  LIFO  to  FIFO,  to  conform  to the  group
      accounting practice and to follow the benchmark treatment recommended
      by IAS 2.  This  change  has no  effect  on  the  2002  statement  of
      operations  but  originated a reduction of the loss reported for 2001
      of Euro 1,441 thousands and a decrease of the shareholders' equity as
      of November 30, 1999 and 2000 of Euro 1,275  thousands and Euro 1,483
      thousands,  respectively. The incremental difference between 1999 and
      2000 is due to the difference of conversion rates of U.S. Dollar into
      Euro.

8.    INSTRUMENTS AT CUSTOMERS

      As of November 30, 2001 and 2002,  instruments at customers consisted
      of the following (in thousands of Euro):


<PAGE>


                                                       2001          2002
                                                       ----          ----

      Instruments Owned by the Group

      Instruments cost                                70,434        70,589
      Less: Accumulated depreciation                 (51,094)      (50,022)
                                                    --------      --------

                                                      19,340        20,567
                                                     -------       -------
      Net long-term investment in sales-type
      leased instruments

      Minimum lease payments receivable                6,565         5,129
      Less: Allowance for non-collectible
      amounts                                           (388)         (100)
                                                      -------       -------
      Net lease payments receivable                    6,177         5,029
      Less: Unearned interest income                  (1,622)       (1,238)
                                                      -------       -------
      Net investment in sales-type leases              4,555         3,791
      Less: Current portion                           (1,700)       (1,298)
                                                      -------       -------
                                                       2,855         2,493
                                                      -------       -------
                                                      22,195        23,060
                                                      ======        ======

      Laboratory  instruments  are  either  given in free use to  customers
      under reagent rental contracts or leased to customers under long-term
      leases  which  qualify  as  sales-type  leases  with  selling  profit
      recognized at the inception of the lease. As a result,  the Group has
      recorded rental receivables as of November 30, 2001 and 2002 equal to
      the present value of the lease payments to be received less a reserve
      to  cover  potential   non-collectible  amounts  (net  investment  in
      sales-type leases).

      Amounts  expected  to be  received  over  the  next  year  have  been
      reflected  in  other  receivables  in the  accompanying  consolidated
      financial statements.

      Future  minimum  lease  payments to be received  for each of the five
      succeeding  fiscal  years  ending  November  30  are as  follows  (in
      thousands of Euro):

                        2003              1,748
                        2004              1,332
                        2005              1,117
                        2006                752
                        2007                180
                                          -----
                                          5,129
                                          =====

      Depreciation  of  instruments  owned by the Group for the years ended
      November 30, 2001 and 2002  amounted to Euro 9.0 million and Euro 8.1
      million, respectively.

      In 2001  and  2002  the  Company  entered  into  sale  and  leaseback
      transactions, by which certain equipment in use at customers was sold
      and  leased  back over a period  that is in line  with the  estimated
      useful life of the equipment.  These transactions have been accounted
      for as operating  leases,  as allowed by the Italian law, even though
      they  represent  finance  leases.  Total lease cost charged to income
      statement for the years ended  November 30, 2001 and 2002 amounted to
      Euro 0.6 million and Euro 3.3 million,  respectively. Had the Company
      accounted for this  transaction as a finance lease,  the net loss for
      the fiscal year 2002 would have been lower by 326  thousands  of Euro
      and net equity as of November  30, 2002 would have been higher by the
      same amount.  Assets  (instruments  at  customers) as of November 30,
      2002  would have been  higher by Euro 13.2  million  and  liabilities
      (financial  debt)  would have been  higher by Euro 12.9  million,  of
      which Euro 3.8 million short term.

 9.   INTANGIBLE ASSETS AND DEFERRED CHARGES

      Intangible assets and deferred charges at November 30, 2001 and 2002,
      are summarized as follows (in thousands of Euro):

                                                      2001
                                                      ----
                                                   Accumulated
                                             Cost  Amortization        Net
                                       ------------------------------------
      Patents, trademarks
         and other rights                  40,011     (30,600)      9,411

      Goodwill arising from 1996
       Acquisitions                        40,409     (10,707)     29,702

      Goodwill arising from 1999
       Acquisition                        102,512     (14,632)     87,880

      Other                                 3,898      (3,425)        473
                                          -------     --------    -------
                                          186,830     (59,364)    127,466
                                          =======     =======     =======


                                                      2002
                                                      ----
                                                   Accumulated
                                             Cost  Amortization       Net
                                      ------------------------------------

      Patents, trademarks
       and other rights                   40,011      (31,592)      8,419

      Goodwill arising from 1996
       Acquisitions                       40,409      (12,788)     27,621

      Goodwill arising from 1999
       Acquisition                       102,512      (19,881)     82,631

      Other                                4,055       (3,567)        488
                                         -------       -------    --------
                                         186,987      (67,828)    119,159
                                         =======      =======     =======

      Amortization  for the years ended November 30, 2000, 2001 and 2002 is
      as follows:


<PAGE>



                                             2000        2001         2002
                                             ----        ----         ----
      Patents, trademarks
       and other rights                     1,105       1,015         992
      Charges relating to capital
       increases and initial public
       offering                             1,244         196           -
      Computer software                     1,171         181           -
      Goodwill arising from 1996
       Acquisitions                         2,043       2,073       2,081
      Goodwill arising from 1999
       Acquisition                          5,258       5,119       5,249
      Other                                   516         474         142
                                          -------       -----       -----
                                           11,337       9,058       8,464
                                          =======      ======       =====

      Goodwill arising from the 1996 Acquisitions  represents the excess of
      the aggregate purchase price over the fair values of the identifiable
      net assets of Chromogenix and Mallinckrodt  Sensor Systems Inc. as at
      the date of acquisition.

      Goodwill arising from 1999  Acquisition  represents the excess of the
      aggregate purchase price over the fair values of the identifiable net
      assets of Hemoliance, after the accrual of the restructuring reserve,
      at the date of acquisition.

10.   BANK OVERDRAFTS AND SHORT-TERM DEBT

      As of November 30, 2001 and 2002, the Group had available  short-term
      credit  lines of  approximately  Euro  98.2  million  and  Euro  97.0
      million,  respectively,  with  various  banks  in  Europe  and  U.S.,
      primarily for working capital purposes.

      Such short-term credit lines are primarily in the form of uncommitted
      short-term  bank loan facilities that are repayable on demand and may
      be revoked at any time by the lender upon  notice.  At the same dates
      the utilization of such credit lines may be summarized as follows (in
      thousands of Euro):

                                                     2001         2002
                                                     ----         ----

      Euro denominated bank overdrafts and
       short- term loans, bearing interest
       variable from 4.78% to 10.625% at
       November 30, 2002                           37,987        37,996

      Euro denominated bank advance on
       import/export, average interest at
       5.99% at November 30, 2002                  26,297        28,769

      Japanese Yen denominated bank advance
       on import/export, average interest at
       1.83% at November 30, 2001                     572             -

      Other                                            13             -
                                                   ------        ------
                                                   64,869        66,765
                                                   ======        ======


<PAGE>



11.   LONG-TERM DEBT

      Long-term  debt at  November  30,  2001 and 2002,  is  summarized  as
      follows (in thousands of Euro):

                                                    2001          2002
                                                    ----          ----

      Euro denominated subordinated
       revolving loan from Izasa
       Distribuciones Tecnicas S.A                 65,401        61,401

      Euro denominated subordinated loan
       from Miscel Holding B.V                     26,291        26,294

      U.S Dollar denominated loan expiring
       in May, 2003                                11,643        12,399

      Other long term debt                              -           119
                                                 --------      --------

                                                  103,335       100,213
      Less- Current portion of long-term debt           -      (12,399)
                                                 --------      --------
                                                  103,335        87,814
                                                 ========      ========

      On February 26, 1999 the Company signed a subordinated revolving loan
      agreement  with a Werfen  affiliate  (Izasa  Distribuciones  Tecnicas
      S.A.) in the amount of Spanish Pesetas 21,625 million  (approximately
      Euro 130 million) and a subordinated  long-term loan with Werfen S.A.
      (an  affiliated  company of CH-Werfen  S.A.) in the amount of Spanish
      Pesetas   4,375   million    (approximately   Euro   26.3   million).
      Approximately  Euro 114 million of the loan proceeds were used to pay
      for the acquisition of Hemoliance.  Both loans original  maturity has
      been  extended to January  31,  2007 and bear  interest at a floating
      rate based on the  six-month  Euribor plus 320 basis points per annum
      (ranging  from 6.195% to 6.843% at November 30,  2002).  On April 20,
      2001 Izasa Distribuciones  Tecnicas S.A. exchanged Euro 59,999,998.83
      of the outstanding  loan for 46,511,627 newly issued ordinary shares.
      In addition,  on April 27, 2001 Werfen S.A.  assigned its outstanding
      loan to Miscel  Holding  B.V., a subsidiary  of Izasa  Distribuciones
      Tecnicas  S.A.  Such loans  contain  certain  covenants  (such as the
      obligation to pay  principal and interest at due date,  timely filing
      of tax return) that, if violated, would accelerate the due date.

      The  U.S.  Dollar  denominated  loan  is  secured  by  inventory  and
      receivables  and bears  interest  at U.S.  Dollar  prime rate plus 2%
      (6.25% At November 30, 2002).

      Future  maturities  of long-term  debt during the next five years and
      thereafter are as follows (in thousands of Euro):

      Years Ending November 30,        Amount
      -------------------------        ------

      2003                             12,399
      2004                                119
      2007                             87,695
                                       ------
                                      100,213
                                      =======

12.   INCOME TAXES


<PAGE>


      Each company included in the  consolidation,  computes its own income
      tax  liability  according  to the  rules  of the  country  concerned,
      applying the appropriate tax rate on results  reported or expected to
      be reported in the tax returns,  adjusted for  estimated  non-taxable
      income and non-deductible expenses.

      Management  is of the opinion that the amount  accrued is adequate to
      cover possible  liabilities  for income tax for all open years, as it
      and its tax advisors believe there are sufficient elements to support
      the  specific  accounting  and  tax  practices  adopted,   for  which
      interpretations of the current tax law were required.

      Tax years beginning  subsequent to November 1996 are still subject to
      review by the tax  authorities  for the Italian  company.  In October
      1993,   Italian  tax   authorities   examined   1991  tax  return  of
      Instrumentation   Laboratory  S.r.l.   (merged  into  Instrumentation
      Laboratory S.p.A.  during 1992). As a result, in the following years,
      the Company received assessments  contesting the tax deductibility of
      amortization of the goodwill  recorded in 1991 through 1994 following
      a merger which took place in 1990;  the Company filed appeal  against
      these  assessment  received  and the first  level Tax Court  ruled in
      favour of the Company in relation to all of the four years concerned.
      In 1999 the second level Tax Court ruled in favour of the Company for
      the 1991  assessment  which  has been  accordingly  and  definitively
      rejected.  In 2001 the second  level Tax Court ruled in favour of the
      Company for the 1992 and 1993 assessments,  while discussion in front
      of the second level Tax Court is still pending for the year 1994.

      Prior to the 1991  Acquisition  (October 23, 1991), the Seller waived
      its claim for the repayment of an account  receivable from a European
      subsidiary  of the Group.  During  fiscal year 1995 a tax field audit
      covering the years  1989-1993 took place at the  subsidiary.  The tax
      auditors  claimed that the fiscal  treatment of the waiver was not in
      compliance with local legislation. In February 1997, a tax assessment
      notice was issued  treating the waiver as taxable  income.  In August
      1997,  the local  Supreme  Tax Court  decided  that the excess of the
      nominal  value over the actual  value of a  receivable  that has been
      waived is to be considered as taxable income.  The Company,  together
      with  its  tax  advisor,  believes  that  the  actual  value  of  the
      receivable  under scrutiny  equals its nominal value and,  therefore,
      the  non-taxability of this item can be successfully  sustained.  The
      case is now  pending at the Lower Tax Court.  At this stage it is not
      possible to make a reliable  estimate of the  potential tax liability
      that may emerge from this matter.

      No provision has been made in the accompanying  financial statements,
      as  the  Group  management  is of the  opinion  that  no  significant
      liability  will  eventually  result from the final  resolution of the
      matters indicated in the two preceding paragraphs.

      In connection  with any pre-1991  Acquisition tax  contingencies,  it
      should be noted that under the terms of the Agreement,  the Seller is
      committed  to indemnify  Instrumentation  Laboratory  S.p.A.  against
      future tax  assessments  for the portion  exceeding  U.S. $ 4 million
      which relate to periods prior to October 24, 1991.

      At November 30, 2001 and 2002, the Company has estimated that the tax
      basis  of  certain  net  assets  exceeds  the  amounts  recorded  for
      financial  reporting  purposes.  In  addition,  as of the same  dates
      certain Group companies have tax loss carry forwards of approximately
      Euro 150  million  and Euro 173  million,  respectively,  subject  to
      review and approval of the  applicable  tax  authorities,  which will
      expire in years 2003 to 2013 if not  utilized.  A deferred  tax asset
      has not been  recorded  to reflect  the value of future tax  benefits
      since its realization is not reasonably certain.

      Income taxes for the years 2001 and 2002 are detailed as follows:

                                                     2001          2002
                                                     ----          ----

      Current income taxes                          1,368         1,073
      Deferred income taxes                          (286)           82
                                                    ------        -----
      Total income taxes                            1,082         1,155
      IRAP                                          1,834         1,394
                                                    -----         -----
      Total tax provision for the year              2,916         2,549
                                                    =====         =====

      The tax  provisions  for the  years  2001  and  2002 as  shown in the
      consolidated  financial  statements  reflect  effective tax rate that
      differs from the  statutory  tax rate in Italy.  Income taxes include
      taxes on income  for  certain  foreign  subsidiaries  except  for the
      Company and the U.S.  subsidiary for which no current income taxes is
      payable and deferred tax benefits on tax loss carry forward and other
      timing  differences  are not  recognized  due to the  recurrent  loss
      position.

      The Italian  statutory  tax rate at November 30, 2001 and 2002 should
      include  both  corporate  income tax (IRPEG) at 36% and tax on 'added
      value'(IRAP)  at 4.25% which has a different base of taxation and may
      be payable even in case of pre-tax losses.

13.   ACCRUED EXPENSES AND OTHER LIABILITIES

      At November 30, 2001 and 2002 accrued expenses and other  liabilities
      consisted of the following (in thousands of Euro):

                                                     2001          2002
                                                     ----          ----

      Payroll, including social charges             16,299        15,569
      Leaving indemnities and restructuring
       charges                                       2,061         1,326
      Service contract deferred income and
       warranty reserve                              4,215         3,814
      Accrued interest on loans from:
        - Izasa Distribuciones Tecnicas, S.A.          414         1,040
        - Miscel Holding B.V.                        1,217         3,020
      Other accrued expenses and liabilities        11,350         2,613
                                                    ------         -----
                                                    35,556        37,382
                                                    ======        ======


<PAGE>


      Leaving indemnities and restructuring charges relate substantially to
      the residual  amount of the  estimated  severance  cost to be paid in
      connection  with the  restructuring  plan  described  in Note 25. The
      accrued  indemnities  are  related  to the  estimated  costs  for the
      reduction of headcount in connection  with the closure of the Paderno
      plant  in Italy  and the Ann  Arbor  plant in USA,  as well as to the
      accrued  severance  related to the closure of the  production  plants
      previously operated by Hemoliance.

      Other  accrued  expenses and  liabilities  basically  relate to agent
      commissions and consultant fees

14.   RESERVE FOR SEVERANCE INDEMNITIES AND PENSION LIABILITIES

      All  employees  of the Group in Italy  are  entitled  to a  severance
      indemnity   equivalent   to  a   specified   percentage   of   annual
      compensation.  The benefit is payable upon  termination of employment
      and  is  subject  to  annual  revaluation  at  75%  of  the  official
      government  rate of inflation  (3.31 % at November 30,  2002).  As of
      November  30, 2001 and 2002,  the  resulting  reserve  for  severance
      indemnities  amounted  to Euro 5.4  million  and  Euro  5.8  million,
      respectively.

      U.S. and UK employees  of the Group are  eligible to  participate  to
      employee  pension and savings  plans.  Provisions for these plans for
      these  subsidiaries  are calculated on the basis of the actuarial and
      accounting rules required by International  Accounting  Standards and
      are summarized as follows (in thousands of Euro):

                                                      2001         2002
                                                      ----         ----

      CHANGE IN PROJECTED BENEFIT OBLIGATION
      (PBO) DURING MEASUREMENT PERIOD
      PBO, November 30 of previous year             41,006       45,997
      Exchange rate effect on opening balance         (931)         324
      Service Cost                                   1,301        1,366
      Interest Cost                                  2,928        2,926
      Actuarial (Gain)/Loss                          2,975        5,132
      Benefits Paid                                 (1,282)      (1,206)
      Plan amendments                                   -           154
                                                   -------      -------
      PBO. November 30,                             45,997       54,693
                                                   =======      =======
      CHANGE IN PLAN ASSETS DURING THE
      MEASUREMENT PERIOD
      Plan Assets at Fair Value, November 30
       of previous year                             36,459       31,848
      Exchange rate effect on opening balance         (818)         175
      Expected Return on Plan Assets                 3,079       (1,467)
      Employee Contribution                          1,307        1,826
      Benefits Paid                                 (1,282)      (3,034)
      Actuarial gain (loss)                         (6,897)           -
                                                    ------      -------
      Plan Assets at Fair Value, November 30,       31,848       29,348
                                                   =======      =======


<PAGE>

                                                     2001          2002
                                                     ----          ----

      RECONCILIATION OF PREPAID (ACCRUED)
      Underfunded Status of the Plan               (14,148)     (23,890)
      Unamortized Prior Service Cost                   164          403
      Unrecognized Net Loss                         15,573       25,219

      Prepaid (accrued) Pension Costs                1,589        1,732

      COMPONENTS OF NET PERIODIC BENEFIT COST
      FOR FISCAL YEAR
      Service Cost                                   1,242        1,373
      Interest Cost                                  2,920        3,079
      Expected Return on Plan Assets                (3,146)      (3,096)
      Net amortization and deferral                    (73)         385

      Net Periodic Pension Cost                        943        1,741

      Assumptions used for the above funded status calculation include:

                                                     2001          2002
                                                     ----          ----
      Annual rate of increase in compensation levels:
        United States plan                           7,00%        6,75%
        European plans                               4,75%        4,50%
      Discount rate applied to benefit obligation:
        United States plan                           7,00%        6,75%
        European plans                               6,25%        5,50%
      Expected long-term rate of return on plan assets:
        United States plan                           9,00%        9,00%
        European plans                               7,50%        7,50%

      The net  cumulative  unrecognized  actuarial  loss as of November 30,
      2002 amounts to Euro 25.2 million of which Euro 17.6 million relating
      to U.S.  pension  plan and Euro 7.6  million  relating  to UK pension
      plan. Net amount recognized is the result of accrued pension costs of
      Euro 0.3 million for U.S. plan and prepaid  pension costs of Euro 2.0
      for UK.

      In accordance with IAS no. 19, the Company has recognized the portion
      of net  cumulative  unrecognized  actuarial  losses at the end of the
      previous  reporting  period  exceeding  the  greater of a) 10% of the
      present value of the defined benefit  obligation at that date (before
      deducting  plan  assets)  and b) 10% of the  fair  value  of any plan
      assets  at that  date.  This  portion  has  been  amortized  over the
      expected   average   remaining   working   life   of  the   employees
      participating in that plan.

      Saving Plan

      The  U.S.  subsidiary  has  also  established  a  saving  plan  for  all
      employees.  Employees'  contributions  to the  savings  plan can be made
      both on a  pre-tax  (salary  deferral)  and  after-tax  basis.  The U.S.
      subsidiary  may make a matching  contribution  in an amount equal to 25%
      of  each  employee's  contribution  up to a  maximum  of 8% of  eligible
      compensation.  In addition,  the U.S.  subsidiary can make discretionary
      contributions to the new saving plan. No discretionary  contribution was
      made in 2001 and 2002. The U.S. subsidiary expensed  approximately U.S.
      $319,000 and $ 460,000 of employer  matching  contributions for the years
      ended November 30, 2001 and 2002 respectively.

      Postretirement Benefits

      The  U.S.  subsidiary   currently  provides  certain   postretirement
      healthcare and other benefits to eligible  employees  based on a plan
      that already  existed in 1991, at the  acquisition  date. The Company
      has not yet  determined  whether  these  benefits  will be changed or
      discontinued  in the future,  but  reserves the right to do so at any
      time.  The  Group's  past  policy  was to  account  for  the  cost of
      postretirement  benefits  other than  pensions as an expense when the
      benefits  were  paid.  From  fiscal  year 1994 the  Group,  under the
      provisions of SFAS No.106,  Employers'  Accounting for Postretirement
      Benefits Other Than Pensions, started to accrue the estimated cost of
      postretirement  benefits during the employees' active service periods
      up to the date they become  eligible for full  benefits.  SFAS No.106
      allows  recognition of the cumulative  effect of the liability in the
      year of the adoption of the  amortization  of the  obligation  over a
      period of up to 20 years.

15.   COMMITMENTS AND CONTINGENCIES

      Leases

      Minimum  annual  rental  commitments  as of  November  30, 2002 under
      non-cancellable  operating  leases,  principally  for  manufacturing,
      service and distribution  centres,  and office facilities are payable
      as follows (in thousands of Euro):

      Years Ending November 30,           Operating
      -------------------------             Leases
                                          ---------
        2003                                4,857
        2004                                3,873
        2005                                2,961
        2006                                2,360
        2007                                  908
        Thereafter                          1,460
                                           -------
        Total minimum lease payments       16,419
                                           =======

      As of November 30, 2002, total commitments for lease payments related
      to sale and lease back of instruments  (Note 8) amounted to Euro 14.2
      million, of which Euro 4.6 million short term.

      Legal Proceedings

      The Company is involved in several  legal  actions  that arose in the
      ordinary  course of business.  While the outcome of each legal action
      contains  an  element  of  uncertainty   based  on  currently   known
      information,  management and the Company's  legal advisors are of the
      opinion that the final  resolution  of these  matters will not have a
      material adverse effect on the consolidated  financial  statements of
      the Company.


<PAGE>


      In addition,  the Company has been indemnified against certain future
      environmental  contingencies  relating  to the  period  prior  to the
      acquisition.

      In 1996, 590 Lincoln Street Trust filed a lawsuit  alleging a release
      of  hazardous  material,  on or  earlier  than  1988,  by  one of its
      tenants, including an affiliate of the Company's predecessor that was
      an operator of the site. Later, the Company was named as a defendant.
      When Werfen  acquired  the  Company,  Werfen  assumed  the  Company's
      liability,  if any, relating to this lawsuit.  The Company has denied
      liability.

      In 2002 the case went to trial and verdict was  returned  against the
      Company's  indemnitee.  A judgment  has not been  entered  yet in the
      case. The Company and its legal counsel  however intend to appeal any
      adverse  judgment.  The  Company  believes  that,  in any  case,  the
      proceeding  will not have a material  adverse effect on the financial
      conditions or results of operations of the Company.

      Derivative financial instruments

      Derivative  financial  instruments  are  utilized  by the  Company to
      reduce its exposure to market  risks from  changes in interest  rates
      and foreign exchange rates.

      In  managing  these  risks,  the  Company  entered  in the  following
      contracts (in thousands of Euro):

                                November 30, 2002
                                 notional amount
                                ------------------
      Interest Rate Swaps             15,000
      Currency Options                69,309

      The notional  value of a derivative for the Interest Rate Swap is the
      contractual  amount  on the  basis of  which  the  differentials  are
      exchanged.   The  Currency  Options  notional  value  represents  the
      contractual  amount to be exchanged at the exercise date. The amounts
      expressed in foreign  currency are  converted  into Euro applying the
      exchange rate at year-end.

      The  notional  amounts  above  indicated  do  not  represent  amounts
      exchanged  by the  parties,  that are  limited to  interest  rate and
      exchange  rate  differentials,  and thus are not a measure  of credit
      exposure of the Company.  Credit  exposure is represented by the fair
      value of  contracts  that are  positive at  year-end,  reduced by the
      effect of netting  agreements.  The Company  does not expect to incur
      credit-related  losses,  also given the high  credit  standing of the
      counterparts involved.


<PAGE>


      Interest Rate Swaps

      The  Company  entered in an  interest  rate swap in order to exchange
      with a counterpart,  at specified  intervals for a 5-year period, the
      difference  between interest  amounts  calculated by reference to the
      notional principal amount and agreed floating or fixed interest rate.
      Under such contract,  the Company will receive floating  interest and
      pay fixed. For the year starting from May 31 2002 fixed interest rate
      to be paid is 3.4%.
      The Company has entered in such  agreement to reduce risk of increase
      in interest rate.

      Currency Options

      The Company uses currency  options to partially  hedge purchase costs
      of products that are denominated in U.S.  Dollars.  Currency options,
      purchased  or  sold in the  over-the-counter  market  for a  premium,
      provide the Company the right to buy or sell an agreed amount of U.S.
      Dollars  at a  specified  exchange  rate  at the  end of a  specified
      period, currently not exceeding 12 months. Since such options are not
      designated  against specific  transactions,  they have been accounted
      for at estimated  fair market value.  Fair market value  reflects the
      estimated  amount that the Company  would pay or receive to terminate
      the contracts at the reporting  date,  therefore  taking into account
      the current unrealised gains or losses of open contracts. In order to
      estimate the fair value of derivatives, the Company has used dealers'
      quote.

16.   SHAREHOLDERS' EQUITY

      Initial Public Offering

      On October 31, 1996 the Company  launched an initial public  offering
      (Offering)  of its ordinary  shares.  Such shares have been traded on
      the Nasdaq  National  Stock Market until  September 3, 1999 when they
      where de-listed  because the Company no longer fulfilled  minimum per
      share price requirement.

      Share Capital

      Share capital  outstanding as of November 30, 2001 and 2002 consisted
      of 90,701,104 ordinary shares with a nominal value of Euro 1.29 each.
      The  extraordinary  shareholders'  meeting  held on  April  20,  2001
      resolved  on the  conversion  of the  nominal  value of the  ordinary
      shares  from  Italian  Lire  2,500  to  Euro  1.29.  The  amount  not
      converted,  Italian Lire 97 million (Euro  50,096),  was allocated to
      the  legal  reserve.  In  addition  the  same  shareholders'  meeting
      approved a capital  increase of Euro  59,999,998.83,  which was fully
      subscribed by the shareholder Izasa Distribuciones  Tecnicas, S.A. by
      exchanging a corresponding  portion of the  outstanding  subordinated
      loan (Note 11).

      On  November  25,  1997,  the  Company's   shareholders   approved  a
      resolution  to adopt a stock  option  plan for the  benefit of senior
      management and key employees of the Company and its subsidiaries. The
      Company may grant to these  individuals  stock  options  which can be
      exercised  within  a period  of 5 years  for up to  750,000  ordinary
      shares. At the same meeting, the shareholders authorized the issuance
      of 750,000 shares, par value Lire 2,500 each (now Euro 1.29 each), to
      service the plan. In this respect the Board of Directors held on July
      22,  1998,  authorized  the  issuance  of  options  for up to 170,000
      ordinary shares to be exercised from 2002 to 2008.

      Loss coverage

      On April 17, 2002, the Company's  shareholders'  meeting approved the
      coverage of 2001 and previous years losses,  amounting to Euro 68,462
      thousand, through the utilization of Additional paid-in capital. This
      procedure is necessary to be in  compliance  with Italian  Civil Code
      rules.

      Change in minority interest

      During 2002 a change in minority interest occurred as a result of the
      decrease in the holding of Instrumentation  Laboratory (Lietuva) B.I.
      subsidiary  from 76% to 67%.  The related  amount of Euro 70 thousand
      represents the difference  between the selling price of the 9% of the
      Parent  company  investment  and the  related  portion of the Lietuva
      subsidiary Net Equity as of November 30, 2001.

      Reconciliation to Parent Company Equity

      The   reconciliation  of  net  loss  and   shareholders'   equity  of
      Instrumentation  Laboratory S.p.A.  (the Group's parent company),  as
      reflected  in  the  statutory  accounts  or in  the  draft  statutory
      accounts  subject  to  approval  of  the  Board  of  Directors,   and
      consolidated  net loss and  shareholders'  equity as  reported in the
      accompanying  financial  statements as of November 30, 2000, 2001 and
      2002 is as follows (in thousand of Euro):

                                     Net Loss             Shareholders' Equity
                                     --------             --------------------
                              2000     2001      2002      2000   2001    2002
                            ----------------------------------------------------

      Instrumentation
       Laboratory S.p.A.   (19,407) (10,471)  (14,986)  79,089  128,618 113,632

      Difference between
       carrying value of
       investments in
       subsidiaries and
       their net results
       and equity           (5,941)     680     1,685   17,084   10,949 (19,779)
      Adjustments to conform
       with Group accounting
       principles (Note 2)   6,677    2,465     2,109  (37,427) (30,316)    980
      Elimination of
       intercompany
       transactions and
       other consolidation
       adjustments           1,198    1,517    (2,649) (12,006) (10,409)(14,517)
                           -------   ------    ------  -------   ------ --------
      Consolidated         (17,473)  (5,809)   13,841)  46,740   98,842  80,316
                           =======   ======    ======   ======   ======  ======

17.   NET SALES AND REVENUES

      Segment information

      The  Group is a leading  manufacturer  of in vitro  diagnostics  test
      instruments  and  supplies  and  provides  related  services  to  the
      hospital  and lab market,  that  management  considers to be a single
      business segment,  even though net sales and gross profit information
      is  reported   internally  by  product  lines.  The  Group  evaluates
      performance  based both on net sales and gross profit  information by
      product lines and on operating results by geographical  areas,  which
      are calculated  after  deductions for directly  related  expenses but
      before special  charges and  amortization of intangible  assets.  The
      accounting  policies used for management internal reporting are those
      used for the consolidated financial statements described in Note 3.

      Selected  information by major product lines as of November 30, 2000,
      2001 and 2002 is as follows (in thousands of Euro):

                                      Critical    Clinical
                          Hemostasis      care   Chemistry     Other      Total
                          ----------      ----    ---------    -----      -----
      2000
      ----
      Net sales and
      revenues              134,169     79,427     26,521     35,195     275,312
      Gross profit           69,634     41,741      9,806     10,967     132,148

      2001
      ----
      Net sales and
      revenues              131,487     79,360     28,186     35,781     274,814
      Gross profit           68,377     37,484     10,496     14,250     130,607

      2002
      ----
      Net sales and
      revenues              134,774     76,826     24,329     36,662     272,591
      Gross profit           71,005     39,228      9,701     11,108     131,042

      The  product  line  denominated  as  'Other'  relates  mainly  to the
      distribution of Beckman Coulter products in Italy.

      Selected  information  about the Group geographic areas of operations
      is as follows (in thousands of Euro):

                                             Rest of    United  Rest of
                                     Italy    Europe    States   World    Total
                                     -----   -------    -------- -------  ------
      2000
      ----
        Sales                        67,331   79,451   112,772   15,758  275,312
        Operating income (loss)
         before amortization         12,315   14,531   (13,439)   6,610   20,017



<PAGE>


      2001
      ----
        Sales                        70,685   86,877   102,108   15,144  274,814
        Operating income (loss)
         before amortization         13,960   17,158   (20,105)   5,866   16,879

      2002
      ----
        Sales                        73,099   85,873    96,589   17,030  272,591
        Operating income (loss)
         before amortization         11,990   14,085   (21,074)   6,177   11,178

      Selected  information about the Group long-lived assets by geographic
      areas is as follows (in thousands of Euro):

                                             Rest of    United  Rest of
                                     Italy    Europe    States   World    Total
                                     -----   ------    ------    -----     -----

      2000
      ----
      Tangible assets - Net           3,212      903    19,929      711   24,755
      Reagent rentals - Net          14,092      946     3,499    1,725   20,262
      Intangible assets
       (excluding Goodwill) - Net     3,616      374       120        -    4,110
      Long-term receivables and
       other                            408      121        64        -      593

      2001
      ----
      Tangible assets - Net           3,252    1,468    21,692      693   27,105
      Reagent rentals - Net          15,202    1,853     4,078    1,062   22,195
      Intangible assets
       (excluding Goodwill) - Net     2,623       52       138        -    2,813
      Long-term receivables and
       other                            372        8        62        -      442

      2002
      ----
      Tangible assets - Net           3,106    1,210    19,270      440   24,026
      Reagent rentals - Net         1 4,360      586     3,798    4,316   23,060
      Intangible assets
       (excluding Goodwill) - Net     2,052       67       128        -    2,247
      Long-term receivables and
       other                            509        -        56        -      565

18.   INTEREST INCOME AND EXPENSE

      Interest  income and expense for the year ended November  2000,  2001
      and 2002 were as follows (in thousands of Euro):

                                                2000      2001     2002
                                                ----      ----     ----

      Interest income from deposits and
          other short-term financial assets    1,324     1,277      980
                                               -----     -----      ---
                 Total interest income         1,324     1,277      980
                                               =====     =====      ===

      Interest expense on short-term
        bank borrowings                        5,062     5,745    5,225

      Interest expense on long-term debt      10,863     9,637    6,985
                                              ------     -----    -----

                  Total interest expense      15,925    15,382   12,210
                                              ------    ------   ------

19.   OTHER INCOME (EXPENSE), NET

      Other income and expense include mainly bank charges, gain and losses
      of disposal of rentals, etc. as well as non recurring income (such as
      income  from  sale  of  distribution  rights  or  gain  from  sale of
      production  facilities) and expenses (such as  restructuring  charges
      and supplementary leaving indemnities).

      Other income (expense),  net, consists of the following (in thousands
      of Euro):

                                                2000      2001     2002
                                                ----      ----     ----
      Supplementary leaving indemnities
         and non recurring restructuring
         charges                             (11,120)   (2,842)  (1,515)
      Other non recurring costs related
         to production transfer                    -      (907)       -
      Gain (loss) on foreign exchange
         and forward exchange contracts         (490)       92    1,896
      Litigation settlements and
         estimated costs to settle            (2,701)   (1,477)  (1,260)
      Gain (loss) on disposal of fixed
         assets                                6,394       683      117
      Bank charges                              (378)     (421)    (700)
      Unrealized loss on investment             (506)        -        -
      Non recurring income from sale of
         distribution rights                       -     9,000        -
      Other, net                              (1,215)    2,110)  (1,234)
                                              -------    ------  -------
            Total Other income expense), net (10,016)    2,018   (2,696)
                                             ========    ======  ======

      Non recurring income from sale of distribution  rights in 2001 is the
      lump-sum  paid  by  the  majority  shareholder  Izasa  Distribuciones
      Tecnicas  S.A.  in  connection  with the  agreement  for the 10 years
      distribution rights of the Company's products (Note 20).

20.   RELATED PARTY TRANSACTIONS

      Group companies  purchase from and sell products to other entities of
      the Werfen Group.

      Total purchases from related parties for the year ended November 30,
      2001 and  2002  were  approximately  Euro  5.7  million  and Euro 8.4
      million, respectively.

      In addition,  in 2001 and 2002 a Werfen affiliate charged the Company
      approximately  Euro 2.2 million and Euro 2.2  million,  respectively,
      for software development services. These services relate basically to
      software applied for analytical instruments.

      Total sales to related  parties for the year ended  November 30, 2001
      and 2002 were  approximately Euro 13.8 million and Euro 13.7 million,
      respectively.

      As of November 30, 2001 and 2002, the most significant  balances with
      Werfen Group companies are the following (in thousands of Euro):


<PAGE>


      Commercial transactions

                                         2001                    2002
                                         ----                    ----
                               Receivables   Payables    Receivables   Payables
                               -----------   --------    ------------   --------

     Izasa Distribuciones
       Tecnicas, S.A.                3,391      617         3,267        1,019
     Biokit S.A.                        52      347           187            -
     Biokit Distribution S.A.            -    2,160             -        4,769
     NTE, S.A.                           -      217             -          435
     Werfen Medical IL Ltd.
       Korea                           445        -           531            -
     Werfen Medical S.A.               508        -           364            -
     Comesa Austria                      -      189             -          244
     Comesa Poland                       -        -           336            -
                                     -----    -----         -----        -----
                                     4,396    3,530         4,685        6,467
                                     =====    =====         =====        =====

      Financial transactions

                                         2001                    2002
                                         ----                    ----
                               Receivables   Payables   Receivables   Payables
                               -----------   --------   -----------   --------

      Izasa Distribuciones
       Tecnicas, S.A.                    -   65,815             -       62,441
      Miscel Holding B.V.                -   27,043             -       29,314
                                     -----   ------        -------       ------

                                         -   92,858             -       91,755
                                     =====   ======        ======       =======

      Certain  executive  officers  of the  Company  and other  individuals
      historically  have been  employed  by Werfen or its  affiliates  and,
      pursuant to agreements  with the Company,  have provided  services to
      the Company and its subsidiaries as agreed between the parties.

      During  fiscal  2001 and 2002,  Izasa  Distribuciones  Tecnicas  S.A.
      ('Izasa') charged certain Group companies approximately 307 thousands
      of Euro and 582 thousands of Euro,  respectively,  in management fees
      for corporate services provided to these companies and administrative
      and  out-of-pocket  expenses  incurred in rendering  those  services.
      Prior to the Offering,  all of the executive  officers of the Company
      employed by Werfen or its  affiliates  have become  employees  of the
      Company or its subsidiary.

      As  described  in Note 9,  in  connection  with  the  acquisition  of
      Hemoliance, completed in January 1999, certain Werfen Group companies
      granted long-term subordinated loans to the Company. Interest charged
      on these  loans in fiscal  years 2001 and 2002  amounted  to Euro 9.1
      million and Euro 6.0 million, respectively.

      In 2001, the Company signed a distribution  agreement with the Parent
      Company  Izasa  (its sole  distributor  in Spain and  Portugal  since
      before 1990), by which Izasa has been appointed exclusive distributor
      of the Company's  products in Spain for the initial term of 10 years.
      The  consideration  paid by  Izasa  is Euro 9  million  that has been
      recorded  as non  recurring  income  (Note  19).  Also in 2001  Izasa
      entered into a cost sharing agreement with the U.S. subsidiary of the
      Group.  By said  agreement  Izasa  contributes  to finance  the Group
      research  and  development  activities  on the  basis of its share of
      total Group worldwide sales on related  products.  The  contributions
      for 2001 and 2002  amounted  to Euro 2.2 million and Euro 2.2 million
      and have been  classified as a reduction of research and  development
      costs of the periods.

21.   SUMMARY OF  SIGNIFICANT  DIFFERENCES  BETWEEN  ACCOUNTING  PRINCIPLES
      FOLLOWED  BY THE  COMPANY  AND  U.S.  GENERALLY  ACCEPTED  ACCOUNTING
      PRINCIPLES

      The Group's  financial  statements  have been  prepared in accordance
      with the accounting principles  established by the Italian Accounting
      Profession  ('Italian  GAAP') (see Note 2),  which  differ in certain
      respects  from  U.S.  GAAP.  The  effects  of these  differences  are
      reflected in the  reconciliation  provided in Note 22 and principally
      relate to the items discussed in the following paragraphs.

      Accounting for Goodwill

      Goodwill arising from 1996 and 1999 Acquisitions is amortized over 20
      years  for  both  Italian  and  U.S.  GAAP.  The  adjustment  in  the
      reconciliation  of net  income  to  U.S.  GAAP  relating  to  foreign
      currency  transaction results in a decrease in the amount of goodwill
      recorded from the Chromogenix acquisition under U.S. GAAP as compared
      to Italian  GAAP,  due to the  difference in the valuation of foreign
      currency forward contracts in existence at the date of acquisition.

      On December 1, 2002 the Company  adopted SFAS 142 which requires that
      goodwill and intangible  assets,  with indefinite lives, no longer be
      amortized but instead be tested for impairment at least annually,  or
      when events indicate that there may be an impairment.

      Share Capital Issuance Costs

      Costs incurred by the Group in connection  with the issuance of share
      capital  (inclusive of expenses  related to initial public and rights
      offerings)  are deferred and amortized to income over 5 years.  Under
      U.S. GAAP such costs are charged to shareholders'  equity against the
      proceeds  from the  increase  in  capital  in the period in which the
      issuance occurred, as reflected in the accompanying reconciliation.

      Accounting for Finance Sale and Lease Back

      As discussed  in Note 3,  instruments  at  customers  sold to leasing
      companies under sale and lease back transactions are accounted for as
      operating  leases,  as allowed by the Italian law, even if they would
      qualify as finance  lease.  Such  accounting  is not  allowed by U.S.
      GAAP.

      Accounting for Goodwill Denominated in Foreign Currencies

      The goodwill arising from the acquisitions of MSS and Hemoliance (see
      Note 1 and Note 9) was translated at historical  exchange rate in the
      financial  statements  as at November 30, 2000,  2001 and 2002.  Such
      accounting is not allowed under U.S.  GAAP,  which  requires that all
      the items of foreign  financial  statements  be  translated  by using
      current exchange rates.


<PAGE>


      Discount and Imputed Interest on Accounts Receivable

      Accounts  receivable  that  originated  from  trade  sales to Italian
      public   agencies   are   contractually   due  within  one  year  and
      consequently  under  Italian  GAAP  are  stated  at  face  value  and
      classified as short-term assets, even though in practice a portion of
      these is generally  collected  after one year with no  recognition of
      interest thereon.

      U.S. GAAP (APB 21) requires that these  receivables be stated at fair
      value based on the  discounted  cash flows  expected to be collected,
      and the difference  between such value and the face amount be treated
      as discount  and  amortized  as interest  expense  over the period in
      which the receivables remain outstanding.

      Accounting for Pension Plans

      Group   accounting   policy  requires  that  pensions  and  severance
      obligations  be  accounted  for in  accordance  with  the laws of the
      countries  in which each  subsidiary  operates.  This may differ from
      U.S.  GAAP,   because  in  certain   European   countries   different
      consideration  is given to the  projected  benefit  obligation  under
      defined benefit plans.

      Also, in accordance  with IAS no. 19, the Company has  recognized the
      portion of net cumulative unrecognized actuarial losses at the end of
      the previous  reporting period exceeding the greater of a) 10% of the
      present value of the defined benefit  obligation at that date (before
      deducting  plan  assets)  and b) 10% of the  fair  value  of any plan
      assets at that date.

      In these  circumstances  U.S.  GAAP  requires to  recognize  in other
      comprehensive  income an additional  minimum  liability,  this amount
      being the excess of the unfunded  accumulated benefit obligation over
      the accrued pension cost.

      The accompanying  reconciliation  reflects the estimate of the effect
      that would result from the  adoption of U.S.  GAAP.  Disclosures  are
      presented in Note 14.

      Consolidation of subsidiary

      As a  result  of  the  acquisition  of a  further  25%  shareholding,
      starting  from  December  1,  2000  the  investment  in a  subsidiary
      established in the Republic of Lithuania has been  consolidated  on a
      line by line basis. As of November 30, 2000 the investment was stated
      at  cost  because  the  volume  of  operations  carried  out  by  the
      subsidiary  during the year 2000 was not  material.  As  required  by
      Italian GAAP, the excess of equity over cost of a newly  consolidated
      entity has been accounted to net equity.
      Under US GAAP, such excess,  representing  accumulated earnings,  has
      been recorded in income.


<PAGE>


      Accounting for sale of distribution rights

      During  the  fiscal  year 2001 a non  recurring  income  from sale of
      distribution  rights to the  Parent  Company  Izasa (see Note 19) has
      been recorded as 'other income' under Italian GAAP.  Under U.S. GAAP,
      such transaction has been accounted for as a capital  transaction and
      included directly to net equity.

      Derivatives

      The Company  enters into  derivative  transactions  to hedge specific
      transactions  as well as to reduce its exposure to interest  rate and
      foreign exchange risks.

      The interest  rate  differentials  to be received or paid on interest
      rate swaps and other interest rate agreements designated as hedges of
      specific  underlying debt instruments are included in interest income
      or expense on an accrual basis over the period hedged.

      Foreign  exchange  derivatives  (options)  are used to  hedge  future
      expenses  denominated in foreign  currencies,  but are not designated
      against  specific future  transactions.  At the reporting date, these
      options are valued at estimated  fair market  value.  Under U.S. GAAP
      the fair  value of the  Currency  Option  has  been  recorded  on the
      balance sheet at year-end with all changes in fair value  recorded in
      the income statement.

      Deferred Income Taxes

      Deferred  tax assets or  liabilities  are  recognized  for  temporary
      differences  between financial  reporting and tax bases of assets and
      liabilities at each reporting period.
      Deferred  tax  assets  are  recognized  when  their   realization  is
      reasonably certain. In addition, benefits from tax loss carry-forward
      are recognized when utilized except if it is reasonably  certain that
      future taxable profit will be available  against which the unused tax
      losses can be utilised,  and such losses are originated by identified
      circumstances that is reasonably certain that will not be repeated.

      Under U.S.  GAAP,  income taxes are  required to be accounted  for in
      accordance with Statement of Financial  Accounting  Standards  No.109
      (SFAS 109), 'Accounting for income taxes'. SFAS 109 requires deferred
      tax assets and  liabilities  be recognized  for  differences  between
      financial  reporting and tax bases of assets and  liabilities at each
      reporting date. The benefits of tax loss carry-forward are recognized
      as  deferred  tax  assets.  Tax  assets  are  reduced  by  way  of an
      appropriate  valuation allowance to the amount that it is more likely
      than not to be realized.

      Accounting for monetary revaluation

      Our  Mexican   subsidiary,   in  compliance  with  local   accounting
      principles,  prepared its financial  statements including the effects
      of monetary  inflation,  which for the year ended  November 30, 2002,
      resulted  in a  negative  impact on income  statement  and a positive
      impact on its Monetary  Revaluation  Reserve  equal to MXP  3,051,000
      (304,000 thousands of Euro).

<PAGE>


      In compliance  with U.S.  GAAP these effects have been  eliminated in
      the  reconciliation  between Italian and U.S. GAAP as of November 30,
      2002.

      The abovementioned effects did not occur for the years ended November
      30, 2000 and 2001 as the Mexican  financial  statements  consolidated
      into US subsidiary  did not consider the effects of Mexican  monetary
      revaluation.

      Loss coverage

      On April 17, 2002, the Company's  shareholders' approved the coverage
      of 2001 and previous years losses, amounting to Euro 68,462 thousand,
      through  the  utilization  of  Additional   paid-in   capital.   This
      procedure,  necessary to be in  compliance  with  Italian  Civil Code
      rules,  is not  allowed  under  U.S.  GAAP  and SEC  regulations  and
      consequently  retained earnings and Additional paid-in capital should
      be, as of November 30, 2002, equal to 120,266  thousands of Euro (Dr.
      balance)  and 79,958  thousands of Euro (Cr.  balance),  respectively
      (see the 'Audited Consolidated Statements of Changes in Shareholders'
      Equity for the years ended November 30, 2000, 2001 and 2002' and Note
      22).

22.   RECONCILIATION BETWEEN NET RESULT AND SHAREHOLDERS' EQUITY DETERMINED
      UNDER ITALIAN GAAP AND U.S. GAAP

      The  following  is a summary of the  significant  adjustments  to net
      result for the years ended  November 30,  2000,  2001 and 2002 and to
      shareholders'  equity as of November  30, 2001 and 2002 that would be
      required if U.S. GAAP had been applied instead of Italian GAAP in the
      consolidated financial statements:


<PAGE>


                                              Year ended November 30,
                                     -----------------------------------
NET LOSS                                2000        2001        2002       2002
                                        ----        ----        ----       ----
                                 (Thousands of Euro, except          (Thousands
                                     per Share Data)                  of U.S.$,
                                                                      except
                                                                      per Share
                                                                      Data)

      Net loss according to the
      financial Statements prepared
      under Italian GAAP              (17,473)     (5,809)   (13,841)   (13,747)

      Items increasing (decreasing)
       reported Net results:

      Accounting for goodwill              34          34         34         34
      Share capital issuance costs      1,242         198          -          -
      Accounting for finance sale
       and lease-back                       -        (129)       455        452
      Discount of accounts
       receivables                     (1,335)     (1,704)    (1,605)    (1,594)
      Imputed interest on accounts
       receivable                       1,167       1,335      1,704      1,692
      Harmonization on goodwill
       denominated in foreign
       currencies                      (1,895)     (1,701)    (1,447)    (1,437)
      Accounting for pension plans          -         104          -          -
      Consolidation of subsidiary           -         403        (70)       (69)
      Accounting for sale of
       distribution rights                  -      (9,000)         -          -
      Accounting for derivatives            -           -        333        330
      Deferred income taxes            (2,276)     (1,032)      (445)      (442)
      Accounting for inflation              -           -        304        302
      Other adjustments                  (109)          -          -          -
      Tax effect of reconciling
       items                             (357)         73       (203)      (202)
                                      --------     -------    -------    -------
      Approximate net loss in
       accordance with US GAAP        (21,002)    (17,228)   (14,781)   (14,681)
                                      ========    ========   ========   ========

      Net loss per share - basic
       and diluted                      (0.48)      (0.24)     (0.16)     (0.16)

      Weighted average common
       shares                      44,189,477  72,861,028 90,701,104 90,701,104

      CONSOLIDATED STATEMENT OF
      COMPREHENSIVE INCOME (LOSS)


                                              Years ended November 30,
                                     -----------------------------------
                                        2000        2001      2002       2002
                                        ----        ----      ----       ----
                                             (Thousands of Euro)     (Thousands
                                                                      of U.S.$)
      Approximate net loss in
       accordance with US GAAP        (21,002)    (17,228)   (14,781)   (14,681)

      Cumulative translation           26,738      (5,864)   (16,532)   (16,420)
       adjustment
      Reversal of inflation
       accounting to Monetary
       Revaluation reserve                  -           -       (304)      (302)
      Minimum pension liability,
       net of tax                           -      (7,754)    (6,310)    (6,267)
                                    --------------------------------------------
      Total comprehensive income
       (loss)                           5,736     (30,846)   (37,927)   (37,670)
                                    ============================================


<PAGE>


                                                          At November 30,
                                                 -------------------------------
      SHAREHOLDERS' EQUITY                           2001      2002      2002
                                                     ----      ----      ----
                                                 (Thousands of Euro)  (Thousands
                                                                         U.S.$)
      Shareholders' equity according to the
       financial statements prepared under
       Italian GAAP                                98,842     80,316     79,770

      Items increasing (decreasing) reported
       shareholders' equity:

           Accounting for goodwill                   (502)      (468)      (465)
           Accounting for finance sale & lease
            back                                     (129)       326        324
           Imputed interest on accounts
            receivable                               (805)      (706)      (701)
           Accounting for goodwill denominated
            in foreign currencies                  29,246     15,883     15,775
           Accounting for pension plans            (7,754)   (14,065)   (13,969)
           Accounting for derivatives                   -        333        330
           Income taxes                               445          -          -
           Tax effect of reconciling items            332        129        128
                                                      ---        ---        ---
      Approximate shareholders' equity in
       accordance with US GAAP                    119,675     81,748     81,192
                                                  =======     ======     ======

23.   ADDITIONAL FINANCIAL STATEMENT  DISCLOSURES REQUIRED BY U.S. GAAP AND
      THE SEC

      The following information is presented on an U.S. GAAP basis:

      Pension Plans

      Under  US  GAAP  the  U.S.   subsidiary  was  required  to  recognize
      additional  minimum  liabilities  of U.S.  Dollar  6,899,000 and U.S.
      Dollar  5,178,000 in fiscal years 2001 and 2002, in  connection  with
      the plan for its employees,  representing  the excess of the unfunded
      accumulated benefit obligation over the accrued pension costs.
      Additional minimum liability required to be recognized also by the UK
      subsidiary in fiscal year 2002  aggregated  GBP 704,000 (U.S.  Dollar
      1,089,000).

      Disclosure  on pension  plans is presented  in Note 14 in  accordance
      with IAS and US GAAP.


<PAGE>


      Postretirement Benefits


                                                           2001          2002
                                                           ----          ----
                                                          (Thousands of Euro)
      CHANGE IN ACCUMULATED PROJECTED BENEFIT
      Obligation (APBO) DURING MEASUREMENT PERIOD
      APBO, November 30 previous year                        4,013       6,149
      Effect of exchange rate on opening balance               (97)       (640)
      Service Cost                                             205         275
      Interest Cost                                            311         341
      Actuarial (Gain)/Loss                                  1,850        (406)
      Benefits Paid                                           (133)       (126)
      Plan amendment                                             -      (1,952)
                                                             -----       ------
      APBO, November 30                                      6,149       3,641

      CHANGE IN PLAN ASSETS DURING THE MEASUREMENT
      PERIOD
      Plan Assets at Fair Value, November 30 of
       previous year                                             -           -
      Employer Contribution                                    133         127
      Benefits Paid                                           (133)       (127)
                                                             -----       ------
      Plan Assets at Fair Value, November 30                     -           -

      RECONCILIATION OF PREPAID (ACCRUED)
      Accumulated postretirement benefit obligation          6,149       3,641
      Plan assets at fair value                                  -           -
                                                            ------     -------
      Accumulated postretirement benefit obligation in
       excess of plan assets                                (6,149)     (3,641)
      Unrecognized Net Actuarial Loss (Gain)                   592      (1,838)

      Unrecognized Net transition obligation                 1,196         843
                                                            ------      -------
      ACCRUED POSTRETIREMENT BENEFIT OBLIGATION             (4,361)     (4,626)

      COMPONENTS OF NET PERIODIC BENEFIT COST FOR
      FISCAL YEAR                                             2001        2002
                                                              ----        ----
      Service Cost                                             205         275
      Interest Cost                                            311         341
      Net amortization of transition obligation                255         229
      Net amortization of unrecognized gain                    (42)          -
                                                              -----       ----
      NET PERIODIC PENSION COST                                729         845

      The  assumed  health  care  cost  trend  rate used in  measuring  the
      accumulated  postretirement benefit obligation was 10.00% in 2001 and
      5% in 2002.  The discount rate used in  determining  the  accumulated
      postretirement benefit obligation was 7.75% and 6.75% at November 30,
      2001 and 2002, respectively.


<PAGE>


      Stock Option Plan

      On November 25, 1997, Company's shareholders approved a resolution to
      adopt a stock  option plan for the benefit of some  managers  and key
      employees.  The  Company  granted  these  individuals  stock  options
      exercisable for a period of ten (10) years for up to 750,000 Ordinary
      Shares. At the same meeting, our shareholders authorized the issuance
      of 750,000  Ordinary  Shares,  par value (Euro) 1.29 each, to service
      the plan.  In this  respect the Board of  Directors  on July 22, 1998
      authorized the issuance of options for up to 170,000  Ordinary Shares
      to be exercised from 2002 to 2008.
      In more details, the vesting period is as follows:

      o   50% of granted  options to be exercised  starting from the end of
          the fourth  year  subsequent  the date of  Shareholders'  meeting
          resolution;

      o   25% of granted  options to be exercised  starting from the end of
          the  fifth  year  subsequent  the date of  Shareholders'  meeting
          resolution;

      o   25% of granted  options to be exercised  starting from the end of
          the  sixth  year  subsequent  the date of  Shareholders'  meeting
          resolution.

      The total  number of Ordinary  Shares  subject to options as of March
      10, 2003 was 750,000.  The total number of Ordinary Shares subject to
      options held by Company's directors and executive officers as a group
      was 16,000 on March 10, 2003.

      Effective  December 1, 1997,  the Company  adopted the  provisions of
      SFAS 123 'Accounting for Stock Based  Compensation'.  As permitted by
      the  statement,  the  Company  has elected to continue to account for
      stock based  compensation  using the  intrinsic  value  method  under
      Accounting   Principles  Board  Opinion  No.  25.   Accordingly,   no
      compensation has been recognized for stock options.

      The fair value of each stock option granted was estimated at the date
      of grant  using the  Black  Scholes  Option  pricing  model  with the
      following weighted average assumptions:

        Risk free interest rate          5.46%
        Expected lives                   10 years
        Expected volatility              149%

      The  weighted  average  fair value of the options  granted in 1998 at
      market value was $1.48.

      The  following  table  summarizes  information  about  stock  options
      outstanding at November 30, 2002:


      Range of         Number of     Weighted average     Weighted
   exercise price       options          remaining         average
                      outstanding    contractual life  exercise price
    (in US Dollars)                                    (in US Dollars)


<PAGE>


       1.50             170,000            5.64             1.50

      The following table summarizes  information about options outstanding
      at November 30, 2001 and 2002:

                                      Options outstanding at fiscal year
                                    ----------------------------------------
                                         2001         2002    Exercise Price
                                         ----         ----    --------------
                                                                 (in US
                                                                  Dollars)

      Balance at December 1,            170,000      170,000          1.50
      Granted                                 -            -             -
      Exercised                               -            -             -
                                    ----------------------------------------
      Balance at November 30,           170,000      170,000          1.50

      Exercisable at November 30,
       2001 and 2002                          -            -             -

      Had  compensation  expense for all stock options granted in 1998 been
      determined  with SFAS 123,  the  Company's  net loss and net loss per
      share would have been as follows (in US Dollars):

                                           2000         2001          2002
                                           ----         ----          ----

      Net loss attributable to
       common stockholders - as
       reported                     (18,258,000) (16,723,000)  (14,681,000)
      Less: Total stock based
       employee compensation
       expense determined under the
       fair value based method for
       all awards                       (16,851)     (16,102)      (41,933)
      Pro-forma net loss
       attributable to common
       stockholders                 (18,274,851) (16,739,102)  (14,722,933)

      Net loss per share - as
       reported basic                     (0.41)       (0.23)        (0.16)
      Net loss per share - pro
       forma basic                        (0.41)       (0.23)        (0.16)

      Net loss per share - as
       reported diluted                     N/A          N/A           N/A
      Net loss per share - pro
       forma diluted                        N/A          N/A           N/A

      The adoption of SFAS 123 would have no effect on diluted earnings per
      share for the years ended November 30, 2000,  2001 and 2002 since the
      effects of common stock equivalents are antidilutive.

      The effects of applying SFAS 123 in this pro-forma disclosure are not
      indicative of future  amounts and  additional  awards in future years
      are anticipated.


<PAGE>


      Deferred Income Taxes

      Domestic  and  foreign  components  of pre-tax  income  (loss) are as
      follows:

                                                  2000      2001        2002
                                                  ----      ----        ----
                                                      (Thousands of Euro)

      Domestic                                     8,857     5,586     10,289
      Foreign                                    (25,689)  (18,940)   (21,873)
                                                 --------  --------   --------
      Total pre-tax loss                         (16,832)  (13,354)   (11,584)
                                                 =======   =======    =======

      The provisions for income taxes are as follows:


                                                  2000      2001          2002
                                                  ----      ----          ----
                                                      (Thousands of Euro)

      Current                                      2,050     3,201       2,467
      Deferred                                     2,120       673         730
                                                   -----     -----       ------
                Total                              4,170     3,874       3,197
                                                   =====     =====       =====

      The tax effects of significant differences are as follows:

                                                            NOVEMBER 30,
                                                            ------------
                                                           2001     2002
                                                           ----     ----
                                                        (Thousands of Euro)
  Deferred tax assets:
      Accrued liabilities not currently
       deductible                                          3,494     2,865
      Deferral of share capital issuance
       costs                                                 150        58
      Inventories basis difference                         4,172     2,284
      Interest expense                                     4,536         -
      Reserves                                                 -       978
      Pension and postretirement benefit                   4,939     1,530
      R&E  Capitalization                                  9,268    11,336
      R&D Capitalization                                   2,908     4,097
      Tax loss carry-forwards                             56,039    70,417
      Other                                                  499       388
                                                          ------    ------
                                                          86,005    93,953
  Less: Valuation allowance                              (84,631)  (87,834)
                                                           1,374     6,220
                                                         -------    -------
  Deferred tax liabilities:
      Accelerated depreciation                              (117)   (5,905)
      Amortization of intangible assets                     (765)      805
      Other                                                 (285)        -
                                                         --------   -------
                                                          (1,168)   (6,710)
                                                          ------    -------
      Net deferred tax asset (liability)                     206      (490)
                                                          ======    =======

      Tax loss carry-forwards reverse at an average rate of 34%.

      A valuation  allowance  has been  provided for deferred tax assets of
      the Company and certain foreign  subsidiaries  which have experienced
      cumulative losses in recent years, since the Company does not believe
      their  realization  is more  likely than not based upon the weight of
      available evidence.

      Reclassification of Balance Sheet

      With regard to the consolidated  financial statements,  the following
      significant  captions  determined  under U.S. GAAP would have been as
      follows:

                                     2001         2002          2002
                                     ----         ----          ----
                                   (Thousands of Euro)      (Thousands
                                                              of U.S.$)

      Intangible assets             156,211       134,574      133,659
      Current assets                176,038       174,653      173,465
      Current liabilities           146,818       170,558      169,398
      Total assets                  388,270       370,097      367,580
      Long term debt                108,169       109,305      108,562

      Valuation and Qualifying Accounts

      A  summary  of  the  Group  valuation  and  qualifying  accounts  (in
      thousands of Euro) follows:

                                       Effect of
                                       exchange   Charged
                           Balance at  rate on    to Costs             Balance
                           Beginning   opening    and                  at End
                           of Period   Balance    Expenses  Deduction  of Period
                           ---------   -------    --------  ---------  ---------
      2001
      ----
        Reserve for
          doubtful
          accounts
          receivable         5,488         (52)       858      (432)    5,862
        Obolescence reserve
          for inventory     13,834        (161)     2,627    (4,904)   11,396
      2002
      ----
        Reserve for
          doubtful
          accounts
          receivable         5,862        (287)       404      (204)    5,775
        Obsolescence
          reserve for
          inventory         11,396        (570)     3,460     (3,576)  10,710

      Fair Value of Financial Instruments

      In the normal course of its business,  the Company  utilizes  various
      types of financial  instruments.  These instruments  include recorded
      assets and  liabilities,  as well as items that  principally  involve
      off-balance  sheet  risk.  Information  about  the fair  value of the
      Company's financial instruments,  including derivatives, is presented
      below.

      -  Trade  receivables:  the fair value of accounts  receivable (other
         than those from Italian  public  agencies) due within one year are
         not included below because they are approximated by their carrying
         values.  The fair value of  accounts  receivable  originated  from
         trade sales to Italian  public  agencies  that are  expected to be
         collected  after one year,  was estimated  based on the discounted
         value of future cash flows expected to be collected.

      -  Investments:  for publicly  traded  investments  the cost has been
         reduced to market  value at November  30,  2000,  2001 and 2002 to
         reflect other-than-temporary impairments.

      -  Short-term   debt:   the  carrying   value  of   short-term   debt
         approximates  fair  value  because  of the  short  period  of time
         between the originations of the borrowings and their maturities.

      -  Current portion of long-term debt and long-term: the fair value of
         long-term debt,  including current  maturities,  approximates fair
         value because such debt bears variable interest rate.

      -  Derivatives:  currency  options are stated at fair market value as
         described in note 15.

                                      AT NOVEMBER 30,
                                      ---------------
                                2001                    2002
                    --------------------------------------------------
                      Carrying                    Carrying
                       Value         Fair Value    Value     Fair Value
                    --------------------------------------------------
                                      (Thousands of Euro)

Trade receivables     102,341         100,637     91,668      90,063

      New Accounting Pronouncements

      In June  2001,  the FASB  issued  SFAS  No.142,  'Goodwill  and other
      Intangible  Assets',  which is effective  for fiscal years  beginning
      after December 15, 2001.  Certain provisions shall also be applied to
      acquisitions  initiated  subsequent  to June 30,  2001.  SFAS  No.142
      supersedes APB Opinion No.17, 'Intangible Assets' and requires, among
      other things, the discontinuance of amortization  related to goodwill
      and indefinite  lived  intangible  assets.  These assets will then be
      subject to an impairment test at least annually. We have adopted SFAS
      No.142 effective December 1, 2002. Any impairment  resulting from the
      adoption  of the new  provisions  will be  recorded  during  the 2003
      fiscal  year and will be  recognized  as the  cumulative  effect of a
      change in  accounting  principle.  We are currently in the process of
      assessing the effects of implementing the new standard.

      In October  2001,  the FASB issued SFAS No.144,  'Accounting  for the
      Impairment or Disposal of Long-Lived  Assets,' which  supersedes SFAS
      No.121  and  certain  provisions  of APB  Opinion  No.30,  'Reporting
      Results of  Operations  -  Reporting  the  Effects of  Disposal  of a
      Segment of a Business,  and  Extraordinary,  Unusual and Infrequently
      Occurring  Events  and  Transactions'.   SFAS  No.144  requires  that
      long-lived assets to be disposed of by sale,  including  discontinued
      operations, be measured at the lower of carrying amount or fair value
      less cost to sell,  whether  reported in continuing  operations or in
      discontinued  operations.  SFAS No.144 also  broadens  the  reporting
      requirements of discontinued  operations to include all components of
      an entity  that have  operations  and cash  flows that can be clearly
      distinguished,  operationally and for financial  reporting  purposes,
      from the rest of the entity.  The  provisions  of SFAS No.144  became
      effective beginning December 1, 2002. We are currently in the process
      of assessing the effects of implementing the new standard.

      In April  2002,  the FASB issued  Statement  No.145,  'Rescission  of
      Statements  No.4, 44 and 64,  Amendment of SFAS Statement No. 13, and
      Technical Corrections'.  SFAS 145 requires that gains and losses from
      extinguishment  of debt be classified as extraordinary  items only if
      they meet the criteria in Accounting  Principles Board Opinion No.30.
      Applying   the   provisions   of  Opinion   No.30  will   distinguish
      transactions  that are unusual and  infrequent  and meet the criteria
      for classification as an extraordinary item. SFAS No.145 is effective
      beginning  January 1, 2003.  We do not believe  that the  adoption of
      SAFS  No.145  will  have a  significant  impact  on the  consolidated
      financial statements.

      On July 30, 2002, the FASB issued Statement  No.146,  'Accounting for
      the  Costs  Associated  with  Exit  or  Disposal  Activities'.   This
      statement  requires companies to recognize costs associated with exit
      or  disposal  activities  only when  liabilities  for those costs are
      incurred  rather  than  at the  date  of a  commitment  to an exit or
      disposal  plan.  SFAS No.146 also  requires  companies  to  initially
      measure  liabilities  for exit and disposal  activities at their fair
      values.  SFAS No.146  replaces  Emerging  Issues Task Force  ('EITF')
      Issue   No.94-3,   'Liability   Recognition   for  Certain   Employee
      Termination  Benefits and Other Costs to Exit an Activity  (including
      Certain Costs Incurred in a Restructuring)' and EITF No.88-10, 'Costs
      Associated with Lease Modification or Termination'. The provisions of
      SFAS No.146 are  effective for exit or disposal  activities  that are
      initiated  after  December 31, 2002.  We believe that the adoption of
      this statement will not have a material impact on our operations.

      In November  2002, the Emerging  Issues Task Force  ('EITF')  reached
      consensus  on Issue  No.00-21,  Revenue  Arrangements  with  Multiple
      Deliverables. Revenue arrangements with multiple deliverables include
      arrangements  which  provide  for  the  delivery  or  performance  of
      multiple  products,  services  and/or  rights  to  use  assets  where
      performance  may occur at different  points in time or over different
      periods of time.  EITF Issue  No.00-21 is  effective  for the Company
      beginning  October 1, 2003. We have not  completed the  evaluation of
      the impact of this EITF.

      In November 2002, the FASB issued Interpretation No.45,  'Guarantor's
      Accounting  and Disclosure  Requirements  for  Guarantees,  Including
      Indirect  Guarantees of Indebtedness of Others,  an Interpretation of
      FASB   Statements   No.5,   57,  and  107  and   Rescission  of  FASB
      Interpretation No.34' (FIN No. 45). The interpretation  requires that
      upon issuance of a guarantee,  the entity must  recognize a liability
      for  the  fair  value  of  the   obligation  it  assumes  under  that
      obligation.   This   interpretation   is   intended  to  improve  the
      comparability  of  financial   reporting,   by  requiring   identical
      accounting  for   guarantees   issued  with   separately   identified
      consideration  and guarantees  issued without  separately  identified
      consideration.  The disclosure  provisions of FIN No.45 are effective
      for the  Company as of  December  1, 2002.  We are  currently  in the
      process of assessing.

      In  December  2002,  the FASB  issued  SFAS  No.148  'Accounting  for
      Stock-Based  Compensation--Transition and Disclosures', which amended
      FASB Statement  No.123,  'Accounting for  Stock-Based  Compensation'.
      Statement  No.148  provides  alternative  methods of transition for a
      voluntary  change to the  fair-value-based  method of accounting  for
      stock-based  employee  compensation.   Statement  No.148  amends  the
      disclosure requirements of Statement No.123 to require more prominent
      and more frequent  disclosure in the financial  statements  about the
      effects of stock-based  compensation.  Statement No. 148 is effective
      for fiscal years ended after December 15, 2002.

      In January 2003, the FASB issued Interpretation No.46, 'Consolidation
      of Variable Interest Entities' (FIN No.46), clarifies the application
      of  Accounting  Research  Bulletin  No.51   'Consolidated   Financial
      Statements' to certain entities in which equity investors do not have
      the  characteristics  of a controlling  financial  interest or do not
      have  sufficient  equity  at  risk  for the  entity  to  finance  its
      activities  without  additional  subordinated  financial support from
      other  parties.  FIN No.46 is  applicable  immediately  for  variable
      interest  created  after  January 31,  2003.  For  variable  interest
      entities  created  prior to January 31, 2003,  the  provisions of FIN
      No.46 are applicable no later than July 1, 2003. The Company does not
      expect  this  Interpretation  to have an effect  on the  consolidated
      financial statements.

24.   USE OF ESTIMATES

      The  preparation of financial  statements in accordance  with Italian
      GAAP, along with the reconciliation to US GAAP,  requires  management
      to make estimates and assumptions that affect the reported amounts of
      assets  and  liabilities  and  disclosure  of  contingent  assets and
      liabilities at the date of the financial  statements and the reported
      amounts of revenues and expenses during the reporting period.

      The  most   significant   estimate  relate  to   recoverability   and
      depreciable  lives of fixed assets and intangible  assets,  allowance
      for doubtful  accounts,  inventory  obsolescence  and deferred taxes.
      Actual results could differ from these estimates.

25.   MANAGEMENT PLANS AND SUBSEQUENT EVENTS

      The net losses  reported in fiscal  years 2001 and 2002 were  largely
      attributable to a decrease in the gross margins of the Company's core
      product lines,  significant research and development costs, increased
      goodwill  amortization and higher interest expense resulting from the
      acquisition of Hemoliance.

      In fiscal years 2001 and 2002 the Company experienced a stabilization
      in  prices  for most of its  product  lines.  However,  while  prices
      generally  stabilized,  the  pricing  level  remains low due to prior
      years  reductions.   The  result  from  operations   continue  to  be
      significantly  affected by competitive pricing pressures and customer
      consolidation. Research and development costs also continue at a high
      level,  due  to  the  Company's   continued   investment  in  product
      development  to broaden  its  product  offerings  within its two core
      product  lines to meet the  changing  demands of its  markets  and to
      better  address the areas of highest  growth  within  these  markets.
      While the Company believes that its profitability will continue to be
      negatively  affected by these industry  factors at least for the near
      term,  management  designed  and  implemented  plans to  improve  the
      results of operations and the Company believes it is taking the steps
      necessary to achieve  sustainable  growth through improved  operating
      performance.

      In fiscal years 1999 and 2000 the Company  initiated and  implemented
      restructuring plans to achieve significant synergies and durable cost
      savings  from  the  integration  of the  Hemoliance  operations,  the
      consolidation   of   manufacturing   facilities   and  reductions  in
      headcounts.  Such plans, which were substantially  completed in 2000,
      included the closing of all the European manufacturing facilities and
      the  transferring  of such  operations to the existing  manufacturing
      facilities in the United States.

      Also, significant  restructuring actions were undertaken in the U.S.,
      including  closing  down two  facilities,  transitioning  part of the
      business to an indirect  distribution  model and severing a number of
      employees involved in manufacturing, R&D, administration and service.

      However,  while the Company  believes  that the  operating  result in
      fiscal years 2001 and 2002 improved as a result of the  restructuring
      plans described above, further to the relocation of all the Company's
      manufacturing and R&D facilities in the United States the result from
      operations in fiscal years 2001 and 2002 was  negatively  affected by
      the  strengthening  of the U.S. Dollar against the Euro to the extent
      that costs and payables are  primarily  denominated  in U.S.  Dollar,
      while a significant portion of the revenues is denominated in Euro.

      Interest  expense in fiscal years 2002 decreased also as an effect of
      a share  capital  increase  of about  Euro 60 million  approved  by a
      shareholders'  meeting  held on  April  17,  2001,  which  was  fully
      subscribed by the majority shareholder. The Company used the proceeds
      from the capital increase to reduce  outstanding  indebtedness  under
      the Werfen  Group loans  described  in Note 10. In November  2001 the
      Werfen Group has also  extended the duration of said loans to January
      2007.

      The Company expects cash flow from  operations,  borrowings under its
      credit facilities,  together with the financial support obtained from
      its  majority  shareholder  and its  affiliates  in the form of share
      capital and the  subordinated  long-term  loans discussed in Note 10,
      will be  sufficient  to fund  restructuring  plans,  working  capital
      needs,  capital spending  requirements and debt service  requirements
      for at least the next 12 months.


<PAGE>


                                  EXHIBITS

  Exhibit   Description
  -------   -----------

      1     Articles of Association  and By-laws were filed with the SEC on
            Form F-1 filed on October 22, 1996,  file  registration  number
            333-05682, and are incorporated herein by reference.

    4.1     Strategic  Alliance and Cross  Distribution  Agreement,  dated July
            28,  1999,  by and between  C.H.  Werfen S.A.  and Beckman  Coulter
            Inc.,  filed with the SEC on May 31,  2000,  under  Form  20-F,  is
            incorporated herein by reference.  (Confidential  materials omitted
            and filed  separately  with the Securities and Exchange  Commission
            pursuant to a claim of confidential treatment.)

    4.2     Credit  Agreement  dated as of February 26,  1999,  between the
            Company and Izasa,  filed with the SEC on May 31,  2000,  under
            Form 20-F, is incorporated herein by reference.

    4.3     Amendment to Credit  Agreement,  dated as of March 27, 2001, by
            and  between  the  Company  and  Izasa,  filed  with the SEC on
            December 28, 2001, under Form 14D-9, is incorporated  herein by
            reference.

    4.4     Loan  Agreement  dated as of  February  26,  1999  between  the
            Company  and  Werfen  filed  with the SEC on May 31,  2000,  is
            incorporated herein by reference.

    4.5     Amendment to Loan Agreement  dated as of March 27, 2001, by and
            between the Company and Werfen,  filed with the SEC on December
            28,  2001,   under  Form  14D-9,  is  incorporated   herein  by
            reference.

    4.6     Distribution  Agreement  dated  as of  April  6,  2001,  by and
            between the  Company  and Izasa,  filed with the SEC on May 31,
            2001,  under Form 20-F,  is  incorporated  herein by reference.
            (Confidential  materials  omitted and filed separately with the
            Securities  and  Exchange  Commission  pursuant  to a claim  of
            confidential treatment.)

    4.7     Cost Sharing  Agreement dated as of May 4, 2001, by and between
            the  Company  and Izasa,  filed  with the SEC on May 31,  2001,
            under  Form  20-F,   is   incorporated   herein  by  reference.
            (Confidential  materials  omitted and filed separately with the
            Securities  and  Exchange  Commission  pursuant  to a claim  of
            confidential treatment.)

    4.8     Amendment to Credit Agreement, dated as of November 9, 2001, by
            and  between  the  Company  and  Izasa,  filed  with the SEC on
            December 28, 2001,  under Form 14D-9 is incorporated  herein by
            reference.

    4.9     Amendment to Loan  Agreement,  dated as of November 9, 2001, by
            and  between  the  Company  and  Werfen,  filed with the SEC on
            December 28, 2001,  under Form 14D-9 is incorporated  herein by
            reference.

   4.10     Deposit Agreement,  among the Registrant, The Bank of New York,
            as Depositary,  and all owners and beneficial  owners from time
            to  time  of  American  Depositary  Receipts  (including  as an
            exhibit the form of American  Depositary  Receipt),  filed with
            the SEC as exhibit 4.3 on Form F-1 filed on October  22,  1996,
            file registration number 333-05682,  and is incorporated herein
            by reference.

      8     List of Subsidiaries.

   10.1     Exchange  Agreement  dated  as of  December  19,  2001,  by and
            between Izasa, the Company and Bio-Rad Industries,  Inc., filed
            with  the  SEC on  December  28,  2001,  under  Form  14D-9  is
            incorporated herein by reference.

   10.2     English Summary of a Syndicated Loan Agreement dated as of July
            31, 2002 among Izasa  Distribuciones  Tecnicas S.A. and a group
            of financial entities.

   10.3     Section 906 Certifications.