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, 2004

                                       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)0.33 par value per share(1)

        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. 362,521,088 Ordinary Shares, (euro)0.33 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


---------------------------------
(1)  The par value of an Ordinary  Share was  changed  from  (euro)1.29  to
     (euro)0.33  by a resolution  made at the  shareholders  meeting of the
     Company on March 29, 2004.

<PAGE>

                                      TABLE OF CONTENTS

PRESENTATION OF FINANCIAL INFORMATION........................................1

Part I.......................................................................2

  Item 1.   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS............2

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

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

  Item 4.   INFORMATION ON THE COMPANY......................................14

  Item 5.   OPERATING AND FINANCIAL REVIEW AND PROSPECTS....................34

  Item 6.   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES......................54

  Item 7.   MAJORITY SHAREHOLDERS AND RELATED PARTY TRANSACTIONS............58

  Item 8.   FINANCIAL INFORMATION...........................................60

  Item 9.   THE OFFER AND LISTING DETAILS...................................62

  Item 10.  ADDITIONAL INFORMATION..........................................65

  Item 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK......73

  Item 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES..........75

Part II.....................................................................76

  Item 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.................76

  Item 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
            AND USE OF PROCEEDS.............................................77

  Item 15.  CONTROLS AND PROCEDURES.........................................77

  Item 16A. DISCLOSURE ON AUDIT COMMITTEE FINANCIAL EXPERT..................78

  Item 16B. CODE OF ETHICS..................................................78

  Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES..........................78

  Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES......79

  Item 16E. PURCHASES OF EQUITY SECURITIES..................................80

  Item 17.  FINANCIAL STATEMENTS............................................81

  Item 18.  FINANCIAL STATEMENTS............................................81

  Item 19.  EXHIBITS........................................................82

SIGNATURES..................................................................83


<PAGE>

In this annual report ("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 and 2000 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 "$", "US $" 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 $1.3259 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
30,  2004.  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.

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, 2003 and 2004 and for the
fiscal  years ended  November  30, 2003 and 2004 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, 2000,
2001 and 2002 for the fiscal years ended November 30, 2000,  2001 and 2002,
respectively,  has been  derived  from  our  audited  historical  financial
statements for such periods.  Our audited historical  financial  statements
for the fiscal  years  ended  November  30,  2000 and 2001 were  audited by
Arthur  Andersen  S.p.A,   independent  public  accountants.   Our  audited
historical  financial  statements  for the fiscal years ended  November 30,
2002 were  audited by BDO Sala Scelsi  Farina  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.

     Because our former key audit engagement team personnel have since left
Arthur Andersen,  Arthur Andersen did not participate in the preparation of
this report or consent to the reference in this report to 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 had no effect on the fiscal year 2002  statement of  operations  but
originated  a  reduction  of the loss  reported  for  fiscal  year  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 yeAR 1999 and fiscal year 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 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
                                   2000 [RESTATED]     2001 [RESTATED]         2002           2003 [RESTATED]           2004
                                  -----------------   -----------------  ----------------    ----------------    -----------------
                                                              (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) 275,312     (euro)  274,814    (euro) 272,591     (euro) 260,011      (euro)  280,031
   Cost of sales and
     services..................          143,163             144,207           141,549            131,066              136,893
                                -----------------   -----------------  ----------------    ---------------      ---------------
      Gross profit.............          132,149             130,607           131,042            128,945              143,138
   Research and
      development costs........           20,124              19,588            20,072             19,238               17,765
   Selling, general and
      administrative                                                                       ---------------      ---------------
      expenses.................           92,008              92,699            99,792             93,746               96,534
                                -----------------   -----------------  ----------------    ---------------      ---------------
      Operating income
        before
        amortization of
        intangible assets
        and deferred charges..            20,017              18,320            11,178             15,961               28,839
   Amortization of
      intangible assets and
      deferred charges .......            11,337               9,058             8,464              8,423                7,968
                                -----------------   -----------------  ----------------    ---------------      ---------------
   Operating income...........             8,680               9,262             2,714              7,538               20,871
   Interest income............             1,324               1,277               980                746                  739
   Interest expense...........            15,924              15,382            12,210             10,810                7,272
   Other income (expense)
     net......................           (10,016)              2,018            (2,696)            (5,789)              (4,751)
                                -----------------   -----------------  ----------------    ---------------      ---------------
   Income (loss) before
      income taxes............           (15,936)             (2,825)          (11,212)            (8,315)               9,587
   Income taxes...............             1,536               2,916             2,549              2,703                2,806
   Minority interest..........                -                  (68)              (80)               (67)                (103)
                                -----------------   -----------------  ----------------    ---------------      ---------------
   Net income (loss)..........    (euro) (17,472)     (euro)  (5,809)   (euro) (13,841)    (euro) (11,085)       (euro)  6,678
                                =================   =================  ================    ===============      ===============
   Net income (loss) per
      share (2)...............    (euro)   (0.40)     (euro)   (0.08)   (euro)   (0.15)    (euro)   (0.12)       (euro)   0.03
U.S. GAAP:
   Net income (loss)..........    (euro) (21,002)     (euro) (17,228)   (euro) (14,781)    (euro)  (5,343)       (euro) 14,553
                                =================   =================  ================    ===============      ===============
   Net income (loss) per
   share (2)..................    (euro)   (0.48)     (euro)   (0.24)   (euro)   (0.16)    (euro)   (0.06)       (euro)   0.06
BALANCE SHEET
DATA
ITALIAN GAAP:
   Working capital............    (euro)  22,527      (euro)  31,393    (euro)   8,268     (euro)   6,929        (euro) 14,818
   Total assets...............           375,531             353,845           341,836            303,841              304,801
   Long-term debt.............           149,466             103,335            87,814             97,234                2,076
   Shareholders' equity.......            46,740              98,842            80,316             61,862              155,408
U.S. GAAP:
   Working capital............    (euro)  23,126      (euro)  29,220    (euro)   4,094     (euro)   2,358        (euro)  1,471
   Total assets...............           409,675             388,270           370,096            320,686              331,536
   Long-term debt.............           149,466             108,169           108,562            102,564               14,021
   Shareholders' equity.......            81,480             119,675            81,748             52,453              149,953


<FN>
--------------------------------
(1)  "Net income (loss) per share" is calculated based on 44,189,477 shares
     outstanding for fiscal year 2000, 72,861,028 shares outstanding for
     fiscal year 2001, 90,701,104 shares outstanding for fiscal years 2002
     and 2003 and 253,347,488 shares outstanding (the weighted average) for
     fiscal year 2004.

</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*
  ---------------------  ---------------  ------------  -------------
         2004                 $1.36          $1.18          $1.25
         2003                 $1.26          $1.04          $1.14
         2002                 $1.05          $0.86          $0.95
         2001                 $0.95          $0.84          $0.89
         2000                 $1.03          $0.83          $0.92



         November 2004        $1.33          $1.27
         December 2004        $1.36          $1.32
          January 2005        $1.35          $1.30
         February 2005        $1.33          $1.28
            March 2005        $1.35          $1.29
            April 2005        $1.29          $1.29

-----------------------
*   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 23, 2005, the Noon Buying Rate was  U.S.$1.2575  per 1.00 euro.
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

     In recent years we have experienced  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 satisfy our debt
obligations

     We  have   substantial   indebtedness.   At  November  30,  2004,  our
consolidated net financial debt was (euro)28.9  million.  Approximately 96%
of our  indebtedness is short term and is subject to repayment upon demand.
We have also along with other Werfen group  companies  guaranteed a loan of
(euro)250  million  granted to Izasa  Distribuciones  Tecnicas  S.A. We may
issue additional indebtedness in the future.

     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.  If we are called upon to make payments under
any guarantee under the loan granted to Izasa Distribuciones Tecnicas S.A.,
we cannot assure you that we will have the resources necessary to make such
payments.  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 22.7% of our fiscal year 2004
net  revenues,  public and  private  efforts to reduce  health  care costs,
including the growth of managed care organizations and Integrated  Provider
Networks,  have  had  a  significant  impact  on  the  critical  care  and,
hemostasis  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 29.8% of our fiscal
year 2004 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,  2004,  we had  (euro)29.5  million in  outstanding  accounts
receivable from Italian  governmental  entities and agencies,  representing
approximately  36% of our outstanding  trade receivables and 19% of our net
sales for fiscal year 2004. Although we have not experienced any write-offs
with respect to these  receivables,  there can be no assurance that we will
not experience 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 our  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 financial  condition and 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  financial
condition and results of operations

     Our  financial  condition  and results of  operations  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 as 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, the United Kingdom,  Eastern Europe and the
Middle East. Over the last several years, we have experienced a significant
decline  in our  clinical  chemistry  installed  base.  Sales for  clinical
chemistry represented 8.1% of our sales for fiscal year 2004.

Dependence on a Single Manufacturing Facilities

     We have one  primary  instrument  manufacturing  facility  located  in
Lexington,  Massachusetts  and one primary reagent  manufacturing  facility
located in  Orangeburg,  New York. A single  serious  incident in either of
these facilities,  such as a fire, could result in significant interruption
of production and result in loss of sales, which could adversely affect our
financial condition and results of operations.

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 American  Depositary Shares
("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 ADSs is very
limited and published  American  Depositary  Receipt ("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. (also "Werfen") and Izasa Distribuciones Tecnicas, S.A. (also "Isaza")
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 May 23, 2005,  Grupo CH-Werfen S.A.  beneficially  owns 96.4% 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. 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 regularly paid dividends in the past.

     We have not paid any  dividends on our ordinary  shares since the 1991
acquisition. Some dividends will however be distributed as approved at this
year's Shareholders  Meeting.  We cannot  assure you that the Company  will
continue to pay dividends in the future.

     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  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.

     A  complaint  was filed by  Bio-Rad  Laboratories,  Inc.  against  us,
Werfen,  Izasa, and four of the Company's current officers and directors in
January 2005 in the United States District Court for the Southern  District
of New York.  The  complaint  asserts  claims  under  common law for fraud,
conspiracy  to commit fraud and aiding and abetting  fraud  against all the
defendants;   negligent  misrepresentation  against  the  Company  and  the
individual  defendants;  as well as breach of fiduciary  duty under Italian
Civil Code Article 2395 against the  individual  defendants.  The complaint
alleges  generally that the defendants  falsely  understated  the Company's
revenues  and  profitability  in  financial   statements  included  in  the
Company's public filings and public  statements from 1999 to 2004, and that
the price of the Company's ADSs have therefore been artificially depressed.
The plaintiff, which owns ADSs, seeks an unspecified amount of damages. All
the defendants have moved to dismiss the complaint.

     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 indemnitee. A judgment has been entered in
the case in the amount of approximately $2.6 million.  We have appealed the
decision in the case. We believe that, in any case, the proceeding will not
have a material  adverse  effect on 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 our
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.

     Because our former key audit engagement team personnel have since left
Arthur Andersen,  Arthur Andersen did not participate in the preparation of
this report or consent to the reference in this report to 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  due to future changes in
          currency;

     o    future liquidity  requirements,  capital  resources and financing
          sources;

     o    results of  operations,  financial  condition or cash flows being
          materially impacted by the adoption of new accounting standards;

     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. The percentage of net sales for fiscal years 2004, 2003 and 2002 and
for each of the product lines are as follows:

                       NET SALES - IVD PRODUCT LINES

                               2004           2003           2002

Hemostasis                    48.5%          48.1%          49.4%

Critical Care                 27.5%          27.9%          28.2%

Clinical Chemistry             8.1%           9.6%           8.9%

     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  the  percentage  of  net  sales  generated  by  geographical
locations below:

                         NET SALES - GEOGRAPHICALLY

                               2004           2003           2002

Europe (including Italy)      65.5%          63.6%          58.3%

Italy                         29.9%          29.7%          26.8%

U.S.                          22.7%          24.2%          29.7%

Rest of the World             11.8%          12.2%          12.0%

     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 79% of our fiscal
year 2004 net sales 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 the U.S. IVD market; (4)
achieve  further cost  savings;  and (5) pursue  selected  acquisition  and
additional strategic alliances.

     We changed  our fiscal  year end from  November  30 to  December 31 in
order to align it with Grupo  CH-Werfen,  S.A.'s year end. We will file the
next annual  report on Form 20-F for the period  ending  December  31, 2005
(and  including the period from December 1 to December 31 2004) by June 30,
2006.

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, 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,  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 years 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  the  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  S.A.  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 in 2001.  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.

     Going  private  transaction  in 2002.  On  December  28,  2001,  Izasa
Distribuciones  Tecnicas S.A. and Grupo  CH-Werfen  S.A.  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.

     Increase in Capital  Stock in 2004.  On March 29, 2004, we convened an
Ordinary and Extraordinary Shareholders' Meeting at which the shareholders,
among other  things,  resolved to increase  our capital  stock by a maximum
amount  of  (euro)104,999,999.94.  At the  same  meeting  the  shareholders
resolved to decrease the par value of our ordinary share from (euro)1.29 to
(euro)0.33.  This  decision  was  taken as under  Italian  law,  the  total
shareholders' equity of a company is required to be above two-thirds of its
share capital. In a case that the total  shareholders'  equity is less than
two-thirds of the originally  paid-in amount of share capital,  a company's
board of  directors  is required to convene,  within one year, a meeting of
the shareholders and the shareholders  must decide the best mean to address
this  shortfall.  Newly issued  ordinary  shares were issued at the new par
value of (euro)0.33 per ordinary  share.  An affiliate of Izasa, IL Holding
S.p.A,  subscribed its pro rata share,  85.4%, of the new ordinary  shares.
All of our  registered  shareholders  and  holders of ADSs  (subject  to an
exemption  from the  registration  requirements  under the U.S.  securities
laws)  had a right to  subscribe  to their pro rata  share of the  ordinary
shares offered by us. When the  subscription  period ended on May 26, 2004,
no other shareholder had exercised these rights, and an affiliate of Izasa,
IL Holding S.pA.  owned 96.4% of our outstanding  shares.  In consideration
for these  ordinary  shares  subscribed,  the Company  agreed to cancel the
outstanding debt of (euro)89,700,595 the Company owed to IL Holding S.p.A.

     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  48.5% of fiscal year 2004 net
          sales;

     o    Critical care systems, representing 27.5% of fiscal year 2004 net
          sales; and

     o    Clinical chemistry systems, representing 8.1% of fiscal year 2004
          net sales.

     In  addition,   we  generate  sales  from   distribution  of  products
manufactured by third parties (collectively, "Distributed Products"), which
represented 15.9% of our fiscal year 2004 net sales.

     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,  Glover,  Leonard  &  Redshaw,   Boston
Biomedical and company estimates which provide the basis for our hemostasis
market share information, estimate the 2004 worldwide market for hemostasis
systems in which we operate at  approximately  $780  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 2004 we had the second largest overall market share in the
worldwide  hemostasis  systems market with a market share of  approximately
27% of  end-user  sales.  Of our  fiscal  year 2004 sales  attributable  to
hemostasis  systems,  approximately  61.9% were derived from Europe  (22.9%
from  Italy),  26.5% from the  United  States and 11.% from the rest of the
world.  In  2004,  reagents,   controls  and  other  consumables  comprised
approximately  70% 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  for  deep  vein  thrombosis  and  pulmonary   embolism
exclusions,  Thrombophila and Lupus Anticoagulants,  bleeding disorders and
anticoagulant  monitoring  through our existing  research  and  development
activities and collaboration  efforts, as well as improved  marketing;  (2)
continue to provide robust and reliable routine assays by applying the most
advanced technologies,  plus easy-to use/ready-to use reagents; (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, which includes the ACL TOP that we began commercialization in 2004.
The ACL TOP provides  customers with testing  process  automation with high
throughput,  continuous  operation  and  broad  test  menu of  routine  and
specialty  assays.  With the  introduction  of the ACL TOP and our  reagent
menu, our hemostasis  systems  provide  solutions to the low to high market
segments.  The following sets forth our principal hemostasis products,  the
instrument  list  prices  of which  range  from  $15,000  to  $100,000  for
instruments currently marketed:

<TABLE>
<CAPTION>
                               FISCAL YEAR OF           TARGET MARKET
            NAME             INTRODUCTION/STATUS         SEGMENT (1)        FEATURES
--------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                 <C>                <C>
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 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 8000/9000/10000               2000                Low to Medium      o  Increased reagent and sample capacity
   family                                                                   o  Increased walk-away capability
                                                                            o  Automatic rotor changer (ACL 9000/10000)
                                                                            o  Chromogenic and immunological testing capability

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

   ACL TOP                           2004                    High           o  Broad test menu for routine and specialty
                                                                               assays:  Clotting, chromogenic and
                                                                               immunological
                                                                            o  High throughput and continuous operation
                                                                            o  Windows(R) 2000 software and touch-screen
                                                                            o  Automated reagent management, automated
                                                                               QC, automated maintenance
                                                                            o  Bar-coded vials for all materials
                                                                            o  Closed-tube sampling with cap-piercing (in
                                                                               development)
                                                                            o  Lab Automation System capability (in
                                                                               development)

GEM
   GEM / PCL                         1998                Point-of-Care      o  Rapid, reliable results
      Coagulation System                                                    o  Whole blood
                                                                            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
   Immunological tests             Various                    N/A              and OEM

CONTROLS AND CALIBRATORS           Various                    N/A           o  Company manufactured

<FN>
------------------------------
(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.

</FN>
</TABLE>

     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 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  and  GEM  OPL.  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
$588 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 2004 we had the third  largest  worldwide  market
share in the  critical  care  market,  with an  estimated  market  share of
approximately  13%.  Of our  fiscal  year  2004  revenues  attributable  to
critical care systems, approximately 50.7% were derived from Europe (15.4%.
from  Italy),  35.5% from the United  States and 13.8% 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 US $3,500 to US $25,000  for
instruments currently marketed:


                         FISCAL YEAR OF
        NAME          INTRODUCTION/STATUS   IMPORTANT CHARACTERISTICS
------------------------------------------------------------------------------
BLOOD GAS

  Synthesis family            1997          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 Premier 3000            2000          o  Point-of-care and laboratory
                                               blood gas, electrolyte and
                                               metabolite system which provides
                                               fast and accurate results

                                            o  Utilizes a multi-use disposable
                                               cartridge, each capable of
                                               performing 75 to 600 tests,
                                               instead of traditional
                                               electrodes, solutions, gas tanks
                                               and other consumables

                                            o  Small sample size

                                            o  Integration of external
                                               point-of-care systems (i.e., GEM
                                               PCL)o

  GEM PCL                     1998          o  Point-of-care coagulation
                                               hand-held system for the rapid
                                               measurement of PT, APTT and
                                               LR-ACT

CO-OXIMETRY
  IL 682 Co-                  1995          o  Operates as independent system,
  Oximeter                                     or electronically links to IL GEM
                                               Premier family and Synthesis
                                               family

  GEM OPL                     2000          o  Point-of-care co-oximetry
                                               testing, electronically links to
                                               IL GEM Premier 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
CALIBRATORS                                    multi-analyte 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 year 2004 sales  attributable  to clinical
chemistry systems, approximately 83.3% were derived from Europe (45.4% from
Italy),  zero from the United  States and 16.7% 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 year 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
year 1996. With no comparable  replacement  product,  we have experienced a
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.  Sales in the U.S.
substantially  ceased  during 2004. We primarily  market these  products in
Italy, the United Kingdom, Eastern Europe and the Middle East.

     In  addition,  we  manufacture  and  distribute  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.

<PAGE>

     The following sets forth our principal clinical chemistry instruments,
the instrument list prices of which range from US $72,500 to US $170,000:

                     FISCAL YEAR OF       TARGET
        NAME       INTRODUCTION/STATUS    MARKET     FEATURES
                                         SEGMENT(1)
---------------------------------------------------------------------------
     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
     CONTROLS                                            substrates, 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 12.2% of our fiscal year
2004 net sales 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 our 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  year 2004 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 by 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)21.6 million, (euro)17.0 million and (euro)17.3 million
in  reagent  rental  agreements  in  fiscal  years  2002,  2003  and  2004,
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 our clinical chemistry product line.

     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 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.

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  years  2002,  2003  and  2004  were
(euro)20.1 million, (euro)19.2 million and (euro)17.8 million respectively,
representing  9.5%  9.7% and 8.3%  respectively,  of our net sales 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,  specific to
medical devices, known as ISO 13485, exist for manufacturing, installation,
research  and  development  and other  areas of our  operations.  ISO 13485
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 13485 standard. The
Ascoli  Piceno plant is  certified  according to both the ISO 13488 and ISO
9002 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 2002,  InSource  Health Service and Health  Service  Corporation of
America  merged to form  MedAssets,  one of the  largest  group  purchasing
organizations  (GPO) in the  United  States.  IL was  awarded a  three-year
contract at that time. In March of 2005,  this contract was extended  until
July 2006.  In 2003,  we  announced  the  extension  of our  contract  with
Amerinet,  the fourth  largest  GPO.  This  contract is  effective  through
February 2006. In October, 2003, we entered into a two-year supply contract
with Premier  Purchasing  Partners.  This contract includes an option for a
third-year.  Finally, we extended two contracts with the US Government. The
General Service Administration  contract (instruments) was extended through
2009 and our Veterans Administration contract was extended through 2005.

     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 3.3%,  3.5% and
4.3% of our net revenues in fiscal years 2002, 2003 and 2004, 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 14.3% of our net  revenues  in fiscal year
2004, 14.1% in fiscal year 2003 and 17.6% in fiscal year 2002.

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  basically  occur at the
regional  level.  Several  subsequent  laws  set  out the  functioning  and
relations  among the various  levels  (regional and national) of the public
administration.  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
transformed  into  quasi-private  enterprises,  called  "Aziende  Sanitanie
Locali or "ASLs,"  organized at the regional level.  Universities,  certain
hospitals and research centers also enjoy legal and financial autonomy.

     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 public sector (in some cases with the partial contribution of
the  patients)  on a  regional  basis.  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.    Some    solutions    for   a
consolidation/securitization  of the debt have been  recently  proposed  by
some  regions,  with a view to reaching a settlement  of pending cases (and
particularly,  following  adoption  of EU rules  on  interest  for  delayed
payments,  limiting the resulting  financial  charges) and enable a swifter
management  of the ongoing  business.  The  success of similar  initiatives
cannot be predicted.

     Italian   constitutional   reform   approved  in  2001   expanded  the
legislative   and   administrative   powers  of  the   regional  and  local
governments.  This  decentralization  may result in the individual  regions
addressing healthcare reforms individually and not collectively. Changes in
the Parliament  majority (since 2001  center-right,  with general elections
due in 2006) should not change 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 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 a medical device 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 clearance
pursuant to 510(k)  pre-market  notifications  or are  classified as exempt
from this process.  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  per  the
available FDA guidance documents. 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 control  our  quality  systems  and  maintain  our  documents  in a
prescribed manner with respect to research and development,  manufacturing,
testing,  quality control and servicing  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 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,  categorization of which is the
responsibility  of the FDA.  The  majority 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 cleared 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.

<PAGE>

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:

              ----------------------------------------------
               Jose Maria Rubiralta and Francisco Rubiralta
              ----------------------------------------------
                                    | 100%
                                    |
                          ----------------------
                           Grupo CH-Werfen S.A.
                          ----------------------
                                    | 100%
                                    |
                   -------------------------------------
                    Izasa Distribuciones Tecnicas S.A.   __________
                   -------------------------------------          |
                                    |                             |
                                    | 100%                        |
                                    |                             |
                                    |                    --------------------
                                    | 77.8%               Miscel Holding B.V.
                                    |                    --------------------
                                    |                             |
                                    | 22.2%                       |
                                    |                             |
                   -------------------------------------          |
                             IL Holding S.p.A.          __________|
                   -------------------------------------
                                      96.4%
                   -------------------------------------
                     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,  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  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.

     On March  24,  2004 the  Company's  Board of  Directors  approved  the
liquidation of the subsidiaries  "Lessix AB," "Chromogenix  Holding AB" and
"Chromogenix AB", but the liquidation process is not completed yet.

     Following a  resolution  of the Board of the  Company on February  23,
2005, the entire capital of Instrumentation  Laboratory Ges.m.b.H.  Austria
was transferred to Comesa GmbH, a Werfen group company on April 7, 2005.

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, 2004.

-------------------------- ----------------- ------------- --------------
                                             OWNED/LEASED   APPROXIMATE
                                             (EXPIRATION      AREA IN
        LOCATION             PRIMARY USE    DATE OF LEASE)  SQUARE FEET
-------------------------- ----------------- ------------- --------------
Milan, Italy               Europe, Middle       Leased        88,000
                           East, Africa      (expires 2010)
                           and Latin
                           America
                           Headquarters;
                           sales and
                           marketing
-------------------------- ----------------- ------------- --------------
Lexington, Massachusetts   U.S. and Canada      Leased        140,000
                           Headquarters;       (expires
                           instrument           2006)
                           manufacturing;
                           research and
                           development;
                           quality
                           assurance;
                           instrument
                           software
-------------------------- ----------------- ------------- --------------
Orangeburg, New York       Reagent              Owned         100,000
                           manufacturing
-------------------------- ----------------- ------------- --------------
Ascoli Piceno, Italy       Reagent              Leased        21,500
                           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 our  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
our results of operations, financial condition or competitive position as a
result of future costs of environmental compliance.

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,  2003 and 2004  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  Notes  21 and 22 to the
Consolidated Financial Statements.

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, 2003 and 2004 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.

     For the year ended  November  30,  2004,  we  recorded a net income of
(euro)6.7  million as compared to a net loss of (euro)11.1  million for the
year ended November 30, 2003, and a net loss of (euro)13.8  million for the
year ended November 30, 2002. The net losses  reported in fiscal years 2003
and 2002 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 years 2004,  2003
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.

     On May 26, 2004 IL Holding S.p.A.,  an affiliate of Izasa,  subscribed
for 271,819,984 of our ordinary shares. In consideration for these ordinary
shares the  affiliate  of Izasa,  IL Holding  S.p.A.,  cancelled  a certain
portion of our outstanding debt owed to it equal to (euro)89.7 million. Our
outstanding net indebtedness as of November 30, 2004 was (euro)28.9 million
after giving effect to the May 26, 2004 debt reduction.

     We changed  our fiscal  year end from  November  30 to  December 31 in
order to align it with Grupo  CH-Werfen,  S.A.'s year end. As a result,  in
the  future  our  fiscal  year will  commence  on January 1 and will end on
December 31 of each year.  We will have a short  fiscal year  lasting  from
November 30, 2004 to December 31, 2004. We will file the next annual report
on Form 20-F for the 12 months ending  December 31, 2005 (and including the
one month period from December 1 to December 31, 2004).

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
these  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.

Property, plant and equipment, goodwill and other intangibles

     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  future
undiscounted 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. Future discounted cash flow is used as a basis
for  estimating  fair  value when  quoted  market  prices  are not  readily
available.

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.  During  2004 we began a new line of
business  whereby  we are  acting  as an  agent  in  the  sale  of  certain
diagnostics  products to a related party. As a result we have presented the
net margin of these transactions as revenue.

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
statement of operations,  while the resulting  gains are accounted for only
when realized.

PRIOR 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 or consent to the reference in this report to 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.

RESULTS OF OPERATIONS

     The following  table sets forth  statement of operations  data for the
years ending November 30, 2002, 2003 and 2004, expressed as a percentage of
consolidated net sales.

<TABLE>
<CAPTION>
                                                                YEAR ENDED NOVEMBER 30,
                                                       -------------------------------------------
                                                           2002             2003          2004
                                                       -------------    -------------   ----------
<S>                                                        <C>             <C>            <C>
Net sales                                                  100.0%          100.0%         100.0%
Cost of sales....................................           51.9            50.4           48.9
                                                       -------------    -------------   ----------
         Gross profit............................           48.1            49.6           51.1
Research and development costs...................            7.4             7.4            6.3

Selling, general and administrative expenses.....           36.6            36.1           34.5
                                                       -------------    -------------   ----------
Operating income before amortization of intangible
assets and deferred charges......................            4.1             6.1           10.3

Amortization of intangible assets and deferred               3.1             3.2            2.8
charges
                                                       -------------    -------------   ----------
Operating income ................................            1.0             2.9            7.5
Net interest expense.............................            4.1             3.9            2.4
Other (income) expense, net......................            1.0             2.2            1.7
Income taxes.....................................            0.9             1.0            1.0
                                                       -------------    -------------   ----------
         Net loss................................           (5.0)%          (4.2)%          2.4%
                                                       =============    =============   ==========

<CAPTION>

COMPARISON OF FISCAL YEARS ENDED NOVEMBER 30, 2004 AND 2003

                                    YEAR ENDED             YEAR ENDED            PERCENTAGE
                                 NOVEMBER 30, 2003     NOVEMBER 30, 2004     INCREASE/(DECREASE)
                                 -----------------     -----------------     -------------------
<S>                                   <C>                  <C>                      <C>
NET SALES BY PRODUCT LINES
Net sales (in millions of (euro))
    Hemostasis                        125.0                135.8                    8.6%
    Critical care                      72.6                 77.1                    6.2%
    Clinical chemistry                 24.9                 22.7                   (8.8)%
    Other                              37.5                 44.4                   18.4%
     Total net sales                  260.0                280.0                    7.7%

</TABLE>

     Net sales increased  (euro)20.0 million or 7.7% to (euro)280.0 million
in the yeAr ended November 30, 2004, from  (euro)260.0  million in the year
ended  November 30, 2003.  This increasE is a result of higher sales in our
hemostasis and critical care business lines and from distributed  products,
partially offset by a decrease in sales in clinical chemistry.

<TABLE>
<CAPTION>

                                  YEAR ENDED              YEAR ENDED             PERCENTAGE
                              NOVEMBER 30, 2003       NOVEMBER 30, 2004     INCREASE/(DECREASE)
                              -----------------       -----------------     -------------------
<S>                               <C>                     <C>                       <C>
NET SALES GEOGRAPHICALLY
Net sales (in millions of
(euro))
     United States                 63.0                    63.5                      0.8%
     Europe                       165.5                   183.4                     10.8%
     Rest of the World             31.5                    33.1                      5.1%
     Total net sales              260.0                   280.0                      7.7%

</TABLE>

     Geographically,  the limited increase in net sales in the U.S. is also
due to the strengthening of the euro against the U.S. dollar.  Sales in the
U.S.  denominated  in  dollars  increased  by $8.1  million  (or 11.7%) but
increased  just by  (euro)0.5  million (or 0.8%) when  translated  in euro.
Sales in Europe  increased by (euro)17.9  million (or 10.8%).  Sales in the
rest of the world,  also  denominated  in U.S.  dollars,  increased by $5.8
million  (or 16.8%)  but  increased  by  (euro)1.6  million  (or 5.1%) when
translated in euro.  Overall unit placements of core instruments  increased
0.4% in the year ended November 30, 2004,  versus the same period of fiscal
year 2003.

     The  following  paragraphs  summarize  the  results for our three main
business segments.

     Hemostasis

<TABLE>
<CAPTION>

                                        YEAR ENDED              YEAR ENDED            PERCENTAGE
                                     NOVEMBER 30, 2003      NOVEMBER 30, 2004     INCREASE/(DECREASE)
                                     -----------------      -----------------     -------------------
<S>                                       <C>                    <C>                      <C>
HEMOSTASIS BUSINESS UNIT
Net sales (in millions of (euro))
    United States                          34.6                   36.1                     4.3%
    Europe                                 75.8                   84.1                    10.9%
    Rest of the World                      14.6                   15.6                     6.8%
    Total Hemostasis
    Business Unit                         125.0                  135.8                     8.6%
Percentage of total net sales              48.1%                  48.5%

</TABLE>

     Net sales  attributable  to the  hemostasis  business unit in the year
ended  November 30, 2004 increased 8.6 % to  (euro)135.8  from  (euro)125.0
million  in the year  ended  November  30,  2003.  Sales  increased  in all
geographical  areas. Sales in the U.S.  denominated in dollars increased by
$5.8 million (or 15.3%) but increased  just by (euro)1.5  million (or 4.3%)
When translated in euro. Sales in Europe increased by (euro)8.3 million (or
10.9%).  Sales in the Rest of the world,  also denominated in U.S. dollars,
increased by $2.9 million (or 18.5%) but increased by (euro)1.0 million (or
6.8%) when translated in euro. Unit placements of Core  instruments  within
the hemostasis  business unit decreased 4.8% in the year ended November 30,
2004 versus the same period of fiscal year 2003.

     Critical Care

<TABLE>
<CAPTION>
                                    YEAR ENDED             YEAR ENDED            PERCENTAGE
                                NOVEMBER 30, 2003      NOVEMBER 30, 2004     INCREASE/(DECREASE)
                                -----------------      -----------------     -------------------
<S>                                      <C>                   <C>                   <C>
CRITICAL CARE BUSINESS UNIT
Net sales (in millions of (euro))
    United States                        27.8                  27.4                  (1.4)%
    Europe                               35.0                  39.1                  11.7%
    Rest of the World                     9.8                  10.6                   8.1%
    Total Critical Care
    Business Unit                        72.6                  77.1                   6.2%
Percentage of total net sales            28.2%                 27.5%

</TABLE>

     Net sales  attributable to the critical care business unit in the year
ended  November  30,  2004  increased  6.2%  to  (euro)77.1   million  from
(euro)72.6  million in the yEar ended November 30, 2003. Sales increased in
Europe  and in the  rest of the  world,  but  decreased  in the  U.S.  when
expressed in euro. Sales in the U.S.  denominated in U.S. dollars increased
by US $2.9 million or 9.5% but  decreased  by  (euro)0.4  million (or 1.4%)
when  translated in eUro. Unit  placements of core  instruments  within the
critical care business unit  increased  5.2% in the year ended November 30,
2004 versus the same period of fiscal year 2003.

     Clinical Chemistry

<TABLE>
<CAPTION>
                                   YEAR ENDED              YEAR ENDED            PERCENTAGE
                                NOVEMBER 30, 2003      NOVEMBER 30, 2004     INCREASE/(DECREASE)
                                -----------------      -----------------     -------------------
<S>                                     <C>                    <C>                  <C>
CLINICAL CHEMISTRY
BUSINESS UNIT
Net sales (in millions of (euro))
    United States                        0.6                    0.1                 (92.8)%
    Europe                              20.3                   18.9                  (6.9)%
    Rest of the World                    4.0                    3.7                  (7.5)%
    Total Clinical Chemistry
    Business Unit                       24.9                   22.7                  (8.8)%
Percentage of total net sales            9.6%                   8.1%

</TABLE>

     Net sales  attributable to the clinical chemistry business unit in the
year ended  November 30, 2004  decreased  8.8% to  (euro)22.7  million from
(euro)24.9  million in the yEar ended  November 30, 2003.  This decrease is
mainly attributed to the decline in our clinical  chemistry  installed base
and  reduced  sales of  reagents  and other  consumables  relating  to this
decline in the installed base. We continue to only place new instruments in
Italy,  the UK,  Eastern  Europe  and the Middle  East.  Such  decrease  is
expected to continue in the future.  Sales in the U.S. for fiscal year 2004
were (euro)0.1  million compared to (euro)0.6  million In fiscal year 2003.
For fiscal year 2004, sales in Italy increased by 3.1%.

     Other Products

     Net sales attributable to other products increased 18.4% to (euro)44.4
million in the Year ended November 30, 2004 from (euro)37.5  million in the
year  ended  November  30,  2003.   MosT  of  these  sales  relate  to  the
distribution of Beckman Coulter products in Italy and Austria.

     GROSS PROFIT

<TABLE>
<CAPTION>
                                    YEAR ENDED             YEAR ENDED            PERCENTAGE
                                 NOVEMBER 30, 2003     NOVEMBER 30, 2004     INCREASE/(DECREASE)
                                 -----------------     -----------------     -------------------
<S>                                     <C>                   <C>                    <C>
GROSS PROFITS BY PRODUCT
LINES
Total gross profits (in millions
of (euro))                              128.9                 143.1                  11.1%
Percentage of total net sales            49.6%                 51.1%

</TABLE>

     Gross profit increased  (euro)14.2  million to (euro)143.1  million in
the year ended  NovEmber 30,  2004,  from  (euro)128.9  million in the year
ended  November  30, 2003.  Gross  profit as a percenTage  of net sales was
51.1% in the year ended  November 30, 2004,  versus 49.6% in the year ended
November 30, 2003.

     The  increase  in the gross  margin in fiscal  year 2004  compared  to
fiscal year 2003 is primarily  attributable to the increase in sales. Also,
the gross margin value as a percentage of sales improved as a result of the
weakening of the U.S. dollar against the EURO compared to fiscal year 2003,
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.  For  distribution of gross profits by our three main business
segments, please see Note 17 to the consolidated financial statements.

     RESEARCH AND DEVELOPMENT COSTS

<TABLE>
<CAPTION>
                                   YEAR ENDED              YEAR ENDED            PERCENTAGE
                                NOVEMBER 30, 2003      NOVEMBER 30, 2004     INCREASE/(DECREASE)
                                -----------------      -----------------     -------------------
<S>                                     <C>                    <C>                   <C>
RESEARCH AND DEVELOPMENT
COSTS (in millions of (euro))
Total R&D costs                         19.2                   17.8                  (7.6)%
Percentage of critical care
and hemostasis net sales                 9.7%                   8.4%

</TABLE>

     Research and development costs decreased  (euro)1.4 million or 7.6% to
(euro)17.8  milliOn in the year ended November 30, 2004,  versus (euro)19.2
million in the year ended November 30, 2003. Research and development costs
as a  percentage  of net  sales  attributable  to  the  critical  care  and
hemostasis  business  units  (which  represents  all  of the  research  and
development  costs)  were 8.4% in the year ended  November  30, 2004 versus
9.7%  in the  year  ended  November  30,  2003.  All of  our  research  and
development  costs are  denominated  in dollars.  Research and  development
costs  denominated  in  dollars  increased  by $0.2  million  (or 0.6%) but
decreased by (euro)1.4  million (or 7.6%) when  translated  in euro.  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)2.7  million and
(euro)2.4 million in 2003 and 2004, respectively.


     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

<TABLE>
<CAPTION>
                                   YEAR ENDED              YEAR ENDED            PERCENTAGE
                                NOVEMBER 30, 2003      NOVEMBER 30, 2004     INCREASE/(DECREASE)
                                -----------------      -----------------     -------------------
<S>                                   <C>                    <C>                    <C>
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (in
millions of (euro))
Total SG&A expenses                   93.7                   96.5                   3.0%
Percentage of net sales               36.1%                  34.5%

</TABLE>

     Selling,  general  and  administrative  expenses  increased  (euro)2.8
million or 3.0% to (Euro)96.5  million in the year ended November 30, 2004,
compared  to  (euro)93.7  million  in the year  eNded  November  30,  2003.
Selling,  general and administrative  expenses as a percentage of net sales
were 34.5% in the year ended November 30, 2004,  versus 36.1% in year ended
November  30,  2003.  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  selling,   general  and
administrative costs.

     AMORTIZATION  OF  INTANGIBLE  ASSETS AND  DEFERRED  CHARGES  decreased
(euro)0.4  million or 5.4% to (euro)8.0  million in the year ended November
30, 2004, from (euro)8.4 million in yeAr ended November 30, 2003. The small
decrease is mainly  attributable  to the completion of the  amortization of
certain intangibles.

     INTEREST EXPENSE

<TABLE>
<CAPTION>
                                   YEAR ENDED              YEAR ENDED            PERCENTAGE
                                NOVEMBER 30, 2003      NOVEMBER 30, 2004     INCREASE/(DECREASE)
                                -----------------      -----------------     -------------------
<S>                                  <C>                     <C>                 <C>
INTEREST EXPENSE (in
millions of (euRO))
Interest expense on
short-term bank borrowings            4.8                    4.9                   2.0%
Interest expense on
long-term debt                        6.0                    2.3                 (60.9)%
Total interest expense               10.8                    7.2                 (32.7)%

</TABLE>

     Interest  expense  decreased  (euro)3.6  million or 32.7% to (euro)7.2
million in the yEar ended November 30, 2004 from (euro)10.8  million in the
year ended  November  30,  2003.  The decreasE is due to a reduction in the
interest expense for long-term debt, which amounted to (euro)2.3 million in
2004 compared to (euro)6.0  million in 2003,  which is mainly a result of a
reductioN of our long-term  debt by (euro)89.7  million in connection  with
the share capital increase in MArch 2004.

     OTHER INCOME/(EXPENSE), NET

<TABLE>
<CAPTION>
                                      YEAR ENDED            YEAR ENDED           PERCENTAGE
                                  NOVEMBER 30, 2003      NOVEMBER 30, 2004   INCREASE/(DECREASE)
                                  -----------------      -----------------   -------------------
<S>                                     <C>                     <C>                 <C>
OTHER INCOME/(EXPENSE), NET
(in millions of (euro))
Supplementary leaving
indemnities and restructuring
charges                                 (1.0)                   (1.7)                76.4%
Net gains/(losses) on foreign
exchange and forward exchange
contracts                               (2.7)                   (1.1)               (59.2)%
Litigation settlements and
estimated costs to settle               (0.2)                   (0.5)               214.1%
Gain (loss) on disposal of
fixed assets                             0.1                    (0.2)               391.7%
Bank charges                            (0.9)                   (1.2)                32.2%
Other expenses                          (1.1)                   (0.1)               (96.0)%
Total other expense, net                (5.8)                   (4.8)               (17.9)%

</TABLE>

     Other expense, net of (euro)4.8 million in the year ended November 30,
2004, was principally  comprised of: (i) (euro)1.7 million of supplementary
leaving  indemnities,  (ii)  (euro)1.1  million  of net  losses on  foreign
exchange and forward exchange  contracts,  (iii) (euro)1.2  milLion of bank
charges.

     INCOME TAX EXPENSE was  (euro)2.8  million in the year ended  November
30, 2004.  Our effective tax rate can be affected by the country from which
income is  generated  and the  availability  of net  operating  loss  carry
forwards  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 the case of pre-tax losses.

     NET INCOME was (euro)6.7  million or (euro)0.03 per share for the year
ended  November  30,  2004,  versus a net  loss of  (euro)11.1  million  or
(euro)0.12 per share for the year ended November 30, 2003.

COMPARISON OF FISCAL YEARS ENDED NOVEMBER 30, 2003 AND 2002

<TABLE>
<CAPTION>
                                    YEAR ENDED             YEAR ENDED            PERCENTAGE
                                 NOVEMBER 30, 2002     NOVEMBER 30, 2003     INCREASE/(DECREASE)
                                 -----------------     -----------------     -------------------
<S>                                    <C>                 <C>                      <C>
NET SALES BY PRODUCT LINES
Net sales (in millions of (euro))
    Hemostasis                         134.8               125.0                   (7.3)%
    Critical care                       76.8                72.6                   (5.5)%
    Clinical chemistry                  24.3                24.9                    2.5%
    Other                               36.7                37.5                    2.2%
     Total net sales                   272.6               260.0                   (4.6)%

</TABLE>

     Net sales decreased  (euro)12.6 million or 4.6% to (euro)260.0 million
in the yeAr ended November 30, 2003, from  (euro)272.6  million in the year
ended  November 30, 2002.  This  decreasE is a result of lower sales in our
hemostasis and critical care business lines.

<TABLE>
<CAPTION>
                                  YEAR ENDED              YEAR ENDED             PERCENTAGE
                              NOVEMBER 30, 2002       NOVEMBER 30, 2003     INCREASE/(DECREASE)
                              -----------------       -----------------     -------------------
<S>                               <C>                     <C>                    <C>
NET SALES GEOGRAPHICALLY
Net sales (in millions of
(euro))
     United States                 80.9                    63.0                  (22.1)%
     Europe                       159.0                   165.5                    4.1%
     Rest of the World             32.7                    31.5                   (3.7)%
     Total net sales              272.6                   260.0                   (4.6)%

</TABLE>

     Geographically,  this  decrease  in  net  sales  is  also  due  to the
strengthening  of the  euro  against  the  U.S.  dollar.  Sales in the U.S.
denominated in dollars decreased by $5.2 million (or 6.9%) but decreased by
(euro)17.9  million (or 22.1%)  when  translated  in euro.  Sales in Europe
increased by (euro)6.5  million (or 4.1%).  Sales in the rest of the world,
also denominated in U.S. dollars,  increased by $4.6 million (or 15.1%) but
decreased by (euro)1.2  million (or 3.6%) when translated in euro.  Overall
unit  placements  of core  instruments  increased  7.8% in the  year  ended
November 30, 2003, versus the same period of fiscal year 2002.

     The  following  paragraphs  summarize  the  results for our three main
business segments.

     Hemostasis

<TABLE>
<CAPTION>
                                       YEAR ENDED              YEAR ENDED            PERCENTAGE
                                    NOVEMBER 30, 2002      NOVEMBER 30, 2003     INCREASE/(DECREASE)
                                    -----------------      -----------------     -------------------
<S>                                      <C>                    <C>                    <C>
HEMOSTASIS BUSINESS UNIT
Net sales (in millions of (euro))
    United States                         45.6                   34.6                  (23.7)%
    Europe                                73.7                   75.8                    2.8%
    Rest of the World                     15.5                   14.6                   (6.5)%
    Total Hemostasis                     134.8                  125.0                   (7.3)%
    Business Unit

Percentage of total net sales             49.4%                  48.1%                  (2.0)%

</TABLE>

     Net sales  attributable  to the  hemostasis  business unit in the year
ended  November  30,  2003  decreased  7.3%  to  (euro)125.0  million  from
(euro)134.8 million in the year ended NovEmber 30, 2002. Sales increased in
Europe and in the rest of the world,  but  decreased  in the U.S.  The main
reason for the decrease in sales denominated in euro was the weakening U.S.
dollar,  but the decrease was also  contributed  by lower sales to our U.S.
sole distributor,  Beckman Coulter.  We believe that Beckman Coulter's unit
sales  increased in the U.S., but our lower sales to Beckman Coulter were a
result of Beckman  Coulter trying to decrease  their existing  inventories.
Unit  placements of core  instruments  within the hemostasis  business unit
increased  1.6% in the year ended  November 30, 2003 versus the same period
of fiscal year 2002.

     Critical Care

<TABLE>
<CAPTION>
                                    YEAR ENDED             YEAR ENDED            PERCENTAGE
                                NOVEMBER 30, 2002      NOVEMBER 30, 2003     INCREASE/(DECREASE)
                                -----------------      -----------------     -------------------
<S>                                    <C>                     <C>                  <C>
CRITICAL CARE BUSINESS UNIT
Net sales (in millions of (euro))
    United States                      33.8                    27.8                 (18.0)%
    Europe                             33.9                    35.0                   3.2%
    Rest of the World                   9.1                     9.8                   7.8%
    Total Critical Care                76.8                    72.6                  (5.5)%
    Business Unit
Percentage of total net sales          27.9%                   28.2%                  1.06%

</TABLE>

     Net sales  attributable to the critical care business unit in the year
ended  November  30,  2003  decreased  5.5%  to  (euro)72.6   million  from
(euro)76.8  million in the yEar ended November 30, 2002. Sales increased in
Europe and in the rest of the world,  but decreased in the U.S. even though
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.  Sales  in the  U.S.  denominated  in U.S.  dollars
decreased by $0.6 million or 1.8%,  but decreased by (euro)6.0  million (or
18.0%) when translated in euro. Unit placements of Core instruments  within
the critical care business unit increased  15.5% in the year ended November
30, 2003 versus the same period of fiscal year 2002.

     Clinical Chemistry

<TABLE>
<CAPTION>
                                   YEAR ENDED              YEAR ENDED            PERCENTAGE
                                NOVEMBER 30, 2002      NOVEMBER 30, 2003     INCREASE/(DECREASE)
                                -----------------      -----------------     -------------------
<S>                                    <C>                     <C>                  <C>
CLINICAL CHEMISTRY BUSINESS
UNIT
Net sales (in millions of (euro))
    United States                       1.5                     0.6                 (58.5)%
    Europe                             18.9                    20.3                   7.4%
    Rest of the World                   4.0                     4.0                     0%
    Total Clinical Chemistry           24.3                    24.9                   2.3%
    Business Unit
Percentage of total net sales           8.9%                    9.6%                  7.9%

</TABLE>

     Net sales  attributable to the clinical chemistry business unit in the
year ended  November 30, 2003  increased  2.3% to  (euro)24.9  million from
(euro)24.3  million in the yEar ended  November 30, 2002.  This increase is
mainly  attributed  to strong  instrument  sales in Eastern  Europe and the
Middle East partially  offset by 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  sales for  consumables  on a continuing
basis.  Such  decrease is expected to continue in the future.  Sales in the
U.S.  for fiscal year 2003  decreased  by  (euro)0.9  million (or 58.5%) to
(euro)0.6 million,  compared to fiscal year 2002. For fiscal 2003, sales in
Italy decreased by 1.7%.

     Other Products

     Net sales  attributable to other products increased 2.3% to (euro)37.5
million in the year ended November 30, 2003 from (euro)36.7  million in the
year  ended  November  30,  2002.   Most  of  these  sales  relate  to  the
distribution of Beckman Coulter products in Italy and Austria.

     GROSS PROFIT

<TABLE>
<CAPTION>
                                    YEAR ENDED             YEAR ENDED            PERCENTAGE
                                 NOVEMBER 30, 2002     NOVEMBER 30, 2003     INCREASE/(DECREASE)
                                 -----------------     -----------------     -------------------
<S>                                   <C>                     <C>                    <C>
GROSS PROFITS BY PRODUCT
LINES
Total gross profits (in               131.0                   128.9                  (1.6)%
millions of (euro))
Percentage of total net sales          48.1%                   49.6%                  3.1%

</TABLE>

     Gross profit decreased (euro)2.1 million to (euro)128.9 million in the
year ended NovEmber 30, 2003,  from  (euro)131.0  million in the year ended
November 30, 2002.  Gross profit as a percenTage  of net sales was 49.6% in
the year ended  November 30, 2003,  versus 48.1% in the year ended November
30, 2002.

     The  decrease  in the gross  margin in fiscal  year 2003  compared  to
fiscal  year  2002 is  primarily  attributable  to the  decrease  in sales.
However,  the gross  margin value as a  percentage  of sales  improved as a
result of the  weakening of the U.S.  dollar  against the EURO  compared to
fiscal year 2002, 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.  For  distribution of gross profits by our three main business
segments, please see Note 17 to the consolidated financial statements.

     RESEARCH AND DEVELOPMENT COSTS

<TABLE>
<CAPTION>
                                   YEAR ENDED              YEAR ENDED            PERCENTAGE
                                NOVEMBER 30, 2002      NOVEMBER 30, 2003     INCREASE/(DECREASE)
                                -----------------      -----------------     -------------------
<S>                                    <C>                     <C>                   <C>
RESEARCH AND DEVELOPMENT
COSTS (in millions of (euro))
Total R&D costs                        20.1                    19.2                  (4.1)%
Percentage of critical care             9.5%                    9.7%                  2.1%
and hemostasis net sales

</TABLE>

     Research and development costs decreased  (euro)0.9 million or 4.1% to
(euro)19.2  milliOn in the year ended November 30, 2003,  versus (euro)20.1
million in the year ended November 30, 2002. Research and development costs
as a  percentage  of net  sales  attributable  to  the  critical  care  and
hemostasis  business  units  (which  represents  all  of the  research  and
development  costs)  were 9.7% in the year ended  November  30, 2003 versus
9.5%  in  the  year  ended  November  30,  2002.  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 and (euro)2.7  million in 2002
and 2003, respectively.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

<TABLE>
<CAPTION>
                                   YEAR ENDED              YEAR ENDED            PERCENTAGE
                                NOVEMBER 30, 2002      NOVEMBER 30, 2003     INCREASE/(DECREASE)
                                -----------------      -----------------     -------------------
<S>                                    <C>                     <C>                   <C>
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (in
millions of (euro))
Total SG&A expenses                    99.8                    93.7                   6.0%
Percentage of net sales                36.6%                   36.1%                 (1.4)%

</TABLE>

     Selling,  general  and  administrative  expenses  decreased  (euro)6.1
million or 6.0% to (euro)93.7  million in the year ended November 30, 2003,
compared  to  (euro)99.8  million  in the year  ended  November  30,  2002.
Selling,  general and administrative  expenses as a percentage of net sales
were 36.1% in the year ended November 30, 2003,  versus 36.6% in year ended
November  30,  2002.  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  selling,   general  and
administrative costs.

     AMORTIZATION OF INTANGIBLE  ASSETS AND DEFERRED CHARGES decreased 0.5%
to (euro)8.4  million in the year ended  November 30, 2003,  from (euro)8.5
million in year ended  November  30,  2002.  The small  decrease  is mainly
attributable to the completion of the amortization of certain intangibles.

     INTEREST EXPENSE

<TABLE>
<CAPTION>
                                   YEAR ENDED              YEAR ENDED            PERCENTAGE
                                NOVEMBER 30, 2002      NOVEMBER 30, 2003     INCREASE/(DECREASE)
                                -----------------      -----------------     -------------------
<S>                                    <C>                     <C>                  <C>
INTEREST EXPENSE (in
millions of (euro))
Interest expense on                     5.2                     4.8                  (7.7)%
short-term bank borrowings
Interest expense on                     7.0                     6.0                 (14.3)%
long-term debt
Total interest expense                 12.2                    10.8                 (11.5)%

</TABLE>

     Interest expense  decreased  (euro)1.4  million or 11.5% to (euro)10.8
million in the year ended November 30, 2003 from (euro)12.2  million in the
year ended  November 30, 2002. The decrease is mainly due to a reduction in
the  interest  expense for  long-term  debt,  which  amounted to  (euro)6.0
million in 2003 compared to (euro)7.0  million in 2002.  Also, the decrease
in variable  interest rates positively  affected interest expense for short
term bank borrowings and long term debt. We expect the interest expense for
the long-term portion of our debt to decrease as a result of a reduction of
our  long-term  debt by  (euro)89.7  million in  connection  with the share
capital increase in March 2004.

     OTHER INCOME/(EXPENSE), NET

<TABLE>
<CAPTION>
                                      YEAR ENDED            YEAR ENDED           PERCENTAGE
                                  NOVEMBER 30, 2002      NOVEMBER 30, 2003   INCREASE/(DECREASE)
                                  -----------------      -----------------   -----------------
<S>                                      <C>                    <C>                <C>
OTHER INCOME/(EXPENSE), NET
(in millions of (euro))
Supplementary leaving
indemnities and restructuring
charges                                  (1.5)                  (1.0)               (33.0)%
Net gains/(losses) on foreign
exchange and forward
exchange contracts                        1.9                   (2.7)              (242.0)%
Litigation settlements and
estimated costs to settle                (1.3)                  (0.2)               (85.0)%
Gain on disposal of fixed
assets                                    0.1                    0.1                  -
Bank charges                             (0.7)                  (0.9)                28.0%
Other expenses                           (1.2)                  (1.1)                 8.3%
Total other expense, net                 (2.7)                  (5.8)               114.8%

</TABLE>

     Other expense, net of (euro)5.8 million in the year ended November 30,
2003, was principally  comprised of: (i) (euro)1.0 million of supplementary
leaving  indemnities and restructuring  charges,  (ii) (euro)2.7 million of
net  losses on foreign  exchange  and  forWard  exchange  contracts,  (iii)
(euro)0.9  million of bank  charges,  and (iv)  (euro)1.1  million of other
expenses.

     INCOME TAX EXPENSE was  (euro)2.7  million in the year ended  November
30, 2003.  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 the case of pre-tax losses.

     NET LOSS was  (euro)11.1  million or (euro)0.12 per share for the year
ended  November  30,  2003,  versus a net  loss of  (euro)13.8  million  or
(euro)0.15 per share for the year ended November 30, 2002.

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  and  additional
borrowings under unsecured,  uncommitted lines of credit. Aggregate amounts
due under our debt agreements during each of fiscal years 2005 and 2006 are
(euro)1.3 million and (euro)0.3  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,  represents  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, service and financial income.

     CONSOLIDATED STATEMENTS OF CASH FLOWS

     Years Ended November 30, 2002, 2003 and 2004

<TABLE>
<CAPTION>
                                    YEAR ENDED            YEAR ENDED           YEAR ENDED
                                NOVEMBER 30, 2002      NOVEMBER 30, 2003   NOVEMBER 30, 2004
                                -----------------      -----------------   -----------------
                                                    (in millions of (euro))
<S>                                  <C>                     <C>                 <C>
Net cash provided by
operating activities                  25.6                    36.7                31.6
Net cash used in investing
activities                           (16.2)                  (19.5)              (16.6)
Net cash provided by/(used
in) financing activities              (1.2)                  (17.8)               (9.8)

</TABLE>

     Net cash provided by operating  activities for the year ended November
30, 2004 was  (euro)31.6  million,  while net cash  provided  by  operating
activities  for the year ended  November 30, 2003 was  (euro)36.7  million.
This decrease  resulted  principally from the net effect of the increase in
the net income in fiscal year 2004  compared to fiscal year 2003,  increase
in  accounts  receivable  and a  reduction  in accrued  expenses.  Net cash
provided by operating  activities  in 2003 was also affected by a reduction
in accounts  receivable,  which resulted primarily from the sale of certain
trade  receivables  from  Italian  public  health care  entities.  Net cash
provided by operating  activities  for the year ended November 30, 2002 was
(euro)25.6 million.

     Net cash used in investing  activities for the year ended November 30,
2004 was (euro)16.6 million, while net cash used in investing activities in
the year ended November 30, 2003 was (euro)19.5  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)17.3  million and (euro)17.0 million for the years ended November 30,
2004 and 2003, respectively.  In fiscal year 2004 and 2003 the cash used in
investing  activities  was affected by the proceeds  from the sale of fixed
assets, mainly instruments at customers, of (euro)8.9 million and (euro)4.8
million,  respectively.  In fiscal year 2002 the net cash used in investing
activities  was  (euro)16.2  million  while the  investment  in  instrument
rentals  was  (euro)21.6  million.  In  fiscal  year  2002 the cash used in
investing  activities  was also  affected by the proceeds  from the sale of
fixed assets, mainly instruments at customers, of (euro)11.9 million.

     Dividends to  shareholders in the amount of 0.2 Eurocents per ordinary
share, for a total amount of (euro)725,042, will be distributed as approved
at this year's  Company's  Shareholders  Meeting.  Funds for the payment of
dividends will be provided by cash generated from operations.

     Capital  expenditures  were  (euro)8.2  million  for  the  year  ended
November 30, 2004 versus  (euro)7.3  million in the year ended November 30,
2003. 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. Capital expenditures were (euro)6.1 million in the year
ended November 30, 2002.

     Net cash used in financing activities for year ended November 30, 2004
was (euro)9.8 million versus (euro)17.8  million in the year ended November
30, 2003. Net cash used in financing activities for year ended November 30,
2002 was (euro)1.2 million.

     In the year ended  November 30, 2004, we had a net income of (euro)6.7
million and cash flows for operating and investing  activities was positive
(euro)15.0  million.  In  fiscal  year  2003,  we  sustained  a net loss of
(euro)11.1   million  and  net  cash  flow  from  operating  and  investing
activities  was  positive  (euro)17.2  million  compared  to a net  loss of
(euro)13.8  million and negative  cash flow from  operating  and  investing
activities of (euro)9.4 million for fiscal year 2002. Our improved net cash
flow from  operating and investing  activities in fiscal year 2004 and 2003
was mainly  attributable to better operating  performance.  At November 30,
2004, our consolidated debt, net of cash, was (euro)28.9 million.

     FINANCING ARRANGEMENTS

     At November 30, 2004, we had several  short-term and long-term  credit
lines  from  banks  and other  financial  institutions,  pursuant  to which
(euro)47.8 million was outstanding and (euro)55.2 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
are in euro)  which  bear  interest  based on  Euribor,  bank  base rate or
variable  rates,  ranging  from  4.50% to 9.50% as of  November  30,  2004.
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.  At November 30, 2004,
approximately US $1.7 million was  outstanding,  which were fully repaid in
May  2005.  We paid an  interest  rate of U.S.  dollar  prime  rate plus 2%
(currently at 7.0%) plus all fees on the current  amount  outstanding  on a
monthly basis.  Werfen and  Instrumentation  Laboratory  S.p.A.  provided a
guarantee. The original term of the line of credit was for two years and on
May 27 2003 was extended to May 1, 2005. We had also to 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.

     In addition to these  short-term and long-term debt  arrangements,  on
November  30,  2003,  we also  had  significant  borrowings  from  Werfen's
affiliates. On November 30, 2003, (euro)87.7 million was outstanding in the
aggregate  on these loans.  The  interest  rate we paid on the Werfen loans
floated based on the six-month  Euribor plus 320 basis points per annum. On
March 29,  2004,  IL  Holding  S.p.A.,  an  affiliate  of Izasa,  agreed to
subscribe for  271,819,984 of our ordinary  shares.  In  consideration  for
these ordinary shares the affiliate of Izasa, IL Holding S.p.A.,  cancelled
all of our  outstanding  debt and certain  portion of the accrued  interest
owed to Werfen and its affiliates.

     On July 18,  2002,  we executed as a guarantor a loan  agreement  with
other Werfen  group  companies  in favor of Izasa  Distribuciones  Tecnicas
S.A., relating to a syndicated loan of (euro)100 million granted to Izasa.

     On March 24, 2004,  we executed as a guarantor a loan  agreement  with
other Werfen  group  companies  in favor of Izasa  Distribuciones  Tecnicas
S.A., relating to a syndicated loan of (euro)115 million granted to Izasa.

     On April 12, 2005,  we executed as a guarantor a loan  agreement  with
other Werfen  group  companies  in favor of Izasa  Distribuciones  Tecnicas
S.A.,  relating to a syndicated loan of (euro)250 million granted to Izasa,
which replaces 2002 and 2004 syndicated loans above described.

<PAGE>

     The following  summarizes  certain of our  contractual  obligations at
November 30, 2004 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.


<TABLE>
<CAPTION>

(in millions of euro:)
----------------------------- --------------------------------------------------------------
                                                 Payments Due by Period
----------------------------- --------------------------------------------------------------
                                               Less than   1 - 3     4 - 5       After 5
  Contractual Obligations     Total             1 year     years     years        years
----------------------------- ---------------- ---------- -------- ----------- -------------
<S>                                      <C>        <C>      <C>          <C>           <C>
Long-Term Debt                            3.4        1.3      0.8         1.0           0.3
----------------------------- ---------------- ---------- -------- ----------- -------------
Operating Leases                         24.5        9.3      9.3         4.8           1.1
----------------------------- ---------------- ---------- -------- ----------- -------------
Total Contractual Cash
Obligations                              27.9       10.6     10.1         5.8           1.4
----------------------------- ---------------- ---------- -------- ----------- -------------

<CAPTION>

(in millions of euro :)
----------------------------- --------------------------------------------------------------
                                       Amount of Commitment Expiration Per Period
----------------------------- --------------------------------------------------------------
Other Commercial Commitments   Total Amounts   Less than   1 - 3     4 - 5       After 5
                                 Committed      1 year     years     years        years
----------------------------- ---------------- ---------- -------- ----------- -------------
<S>                                   <C>           <C>     <C>         <C>          <C>
Lines of Credit                        44.3          44.3     -          -            -
----------------------------- ---------------- ---------- -------- ----------- -------------
Standby Letters of Credit               -             -       -          -            -
----------------------------- ---------------- ---------- -------- ----------- -------------
Guarantees                            205.0          31.5   116.0       57.5          -
----------------------------- ---------------- ---------- -------- ----------- -------------
                                        *
----------------------------- ---------------- ---------- -------- ----------- -------------
Standby Repurchase
Obligations                             -             -       -          -            -
----------------------------- ---------------- ---------- -------- ----------- -------------
Other Commercial
Commitments                            57.1            57     -          -            -
----------------------------- ---------------- ---------- -------- ----------- -------------
Total Commercial
Commitments                           306.4         132.9   116.0       57.5          -
----------------------------- ---------------- ---------- -------- ----------- -------------

<FN>

     *On April 12, 2005, we executed as a guarantor a loan  agreement  with
other Werfen  group  companies  in favor of Izasa  Distribuciones  Tecnicas
S.A.,  relating to a syndicated loan of (euro)250 million granted to Izasa,
which is replacing these guarantees.

</FN>
</TABLE>

     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, 2004, we had in place interest rate swaps
and currency options for a total notional amount of (euro)39.9 million.

     We believe that with the debt  repayment  made in 2004 we had and will
continue  to have  better cash flows to fund our  operations.  However,  we
continue  to seek to  improve  our  operating  performance  from the levels
achieved in fiscal  years  2002,  2003 and 2004 in order for us to meet our
requirements  for working capital,  research and development  expenditures,
investments  in  instruments,  debt  service and capital  expenditures.  We
believe that cash flow from  operations  and  borrowings  under our various
lines of credit and credit  facilities  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  condition  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, 2004 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 method of accounting for share capital  issuance costs;
(iii) the method of  accounting  for finance sale and lease back;  (iv) the
accounting for goodwill  denominated in foreign currencies;  (v) the method
of accounting for imputed interest on accounts receivable;  (vi) the method
of  accounting  for  pension  plans;  (vii) the  method of  accounting  for
consolidation  of  subsidiary;  (viii) the method of accounting for sale of
distribution rights; (ix) the method of accounting for derivatives; (x) the
method of accounting for deferred taxes;  (xi) the method of accounting for
monetary  revaluation and (xii) the method of accounting for loss coverage.
Please see Note 21 and 22 of the Consolidated Financial Statements. Our net
income and  shareholders'  equity under Italian GAAP were (euro)6.7 million
and  (euro)155.4  million,  respectively,  for the year ended  November 30,
2004.   Under  U.S.   GAAP,  we  would  have  reported  a  net  income  and
shareholders'   equity  of  (euro)14.5  million  and  (euro)145.9  million,
respectively, in the year ended November 30, 2004.

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, 2004, we had net operating  loss  carryforwards  of
approximately  (euro)126  million expiring in 2005 through 2022. 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 sales or  profitability  in the last
three fiscal years.

OFF-BALANCE SHEET ARRANGEMENTS

     As described in note 8 to the consolidated  financial  statements,  in
fiscal  years  2002,  2003 and  2004  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.  Similarly,  we have  included  these  transactions  under
operating  leases  in the  contractual  obligations  table  (see  "Item 5 -
Liquidity and Capital Resources").

     Total  lease cost  charged  to income  statement  for the years  ended
November  30, 2004 and 2003  amounted to  (euro)5.1  million and  (euro)4.7
million,  respectively. Had the Company accounted for this transaction as a
finance  lease,  the net income  for the  fiscal  year 2004 would have been
higher by  (euro)0.6  million and net equity as of November  30, 2004 would
have been higher by (euro)1.5 million. Assets (instruments at customers) as
of  November  30,  2004 would have been  higher by  (euro)12.1  million and
liabilities  (financial debt) would have been higher by (euro)10.6 million,
of which (euro)5.1 million would be short term.

RECENT ACCOUNTING STANDARDS

     In December  2004, the FASB issued  statement No. 123 (revised  2004),
"Stock-Based  Payment"  (SFAS  123R).  This  statement  replaces  SFAS  123
"Accounting for Stock-Based  Compensation",  supersedes APB Opinion No. 25,
"Accounting  for Stock  Issued to  Employees"  (APB 25) and amends SFAS 95,
"Statement of Cash Flows",  to require that excess tax benefits be reported
as a financing  cash inflow rather than as a reduction of taxes paid.  SFAS
123R is effective the first interim or annual  reporting period that begins
after June 15, 2005. We expect to adopt the  provisions of the new standard
effective January 1, 2006. We are currently  evaluating the requirements of
SFAS 123R, including the adoption method alternatives, but we do not expect
adoption  of this  statement  to have a  material  effect on our  operating
result.

<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 March 30, 2005.

     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 December 31, 2006 are approved.

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

Jose Maria Rubiralta (Chairman)               63       President

Francisco Rubiralta (Vice-Chairman)           66       Director

Jose Luis Martin (Managing Director)          48       Director

Carlos Pascual (Managing Director)            43       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  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 December 31, 2006 are approved.

        EXECUTIVE OFFICERS    AGE    POSITION
        ------------------    ---    --------

Jose Maria Rubiralta           63    President, Chairman of the Board

Jose Manent                    54    Chief Executive Officer

Jose Luis Martin               48    Managing Director, Chief Financial Officer
                                     and Senior Vice President of the Company

Carlos Pascual                 43    Managing Director, Senior Vice President
                                     and General Manager - Europe

James C. McGaha                58    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 Global  Steel Wire,  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.

BOARD OF STATUTORY AUDITORS ("COLLEGIO SINDACALE")

     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 administrative
and 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,  and  considering  the
consistency  of the balance  sheet and the profit and loss account with our
accounting  records  (which,   following  the  general  reform  of  Italian
corporate law in 2004, are checked by independent public accountants).  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 annually 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 three
fiscal  years 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  was  appointed  at the  Annual  Shareholders'  Meeting
convened on April 28, 2005 and will serve for the next three fiscal years.

               NAME                                  POSITION
               ----                                  --------

               Paolo Giacinto Bonazzi                Chairman

               Giorgio Fumagalli                     Principal

               Marco Giuliani                        Principal

               Flavio Venturi                        Alternate

               Guglielmo Fanti                       Alternate


     At the shareholders' meeting of March 29, 2004, BDO Sala Scelsi Farina
SpA has been appointed as independent  public accountants of the Company in
accordance with the provisions of Section  2409bis,  2nd paragraph,  of the
Italian Civil Code, as amended by  Legislative  Decree No. 6 of January 17,
2003.

B.   COMPENSATION

     For the year ended November 30, 2003, 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)2.4 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, 2004,  we had  approximately  1,332  full-time  and
part-time employees,  661 of whom were located in the United States, 315 in
Italy,  260 in the remainder of Europe and 96 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 expired on December  31,  2004.  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, 2004, we had (euro)6.7 million reserved for
such termination payments, as required by Italian law.

E.   SHARE OWNERSHIP

     On March 31, 1998, our  shareholders  approved a resolution to adopt a
stock  option  plan  for  the  benefit  of our  senior  management  and key
employees.  These  individuals may be granted,  in a period extending until
May 5, 2002, stock options  exercisable for a period of ten (10) years from
the  date of  granting  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.  At the
Shareholders'  Meeting  convened  on March  29,  2004 the par  value of the
underlying  Ordinary  Shares  was  also  reduced  to the new par  value  of
(euro)0.33 per share.

     The total number of Ordinary Shares, par value (euro)0.33,  subject to
options as of the end of the granting  period (May 5, 2002) was accordingly
of 170,000 Ordinary Shares; the last expiration date of the options is July
23, 2008.  The total number of Ordinary  Shares  subject to options held by
our directors and executive officers as a group was 16,000 on May 23, 2005.

<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, 2005 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. 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.

<TABLE>
<CAPTION>

                                                 NUMBER OF ORDINARY      PERCENTAGE
   BENEFICIAL OWNER                                    SHARES             OF CLASS
  ------------------                             --------------------   -------------
   5% SHAREHOLDERS:
   <S>                                               <C>                    <C>
   Werfen (1)                                        349,305,155            96.4%
   Jose Maria and Francisco Rubiralta (2)            349,305,155            96.4%

<FN>
-------------------------

(1)  Shares  beneficially  owned by Werfen are held  through  Izasa and its
     subsidiary  IL  Holding  S.p.A.  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 share capital  increase open to all  registered  shareholders.  As a
     result  Werfen's  ownership  in the  Company  increased  from 68.5% to
     84.7%.  On November 25, 2003 Izasa and Miscel  Holding BV  transferred
     all their ordinary shares to IL Holding S.p.A., an affiliate of Izasa.
     On May 26, 2004, IL Holding S.p.A., an affiliate of Izasa,  subscribed
     for  271,819,984  newly  issued  Ordinary  Shares  in a share  capital
     increase  open to all  registered  shareholders  and  holders  of ADRs
     (subject to an exemption from the registration  requirements under the
     U.S. securities laws). 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)  Includes 349,305,155 Ordinary Shares owned by Izasa and its subsidiary
     IL Holding S.p.A. Messrs. Rubiralta and Rubiralta are deemed to be the
     beneficial  owner  of all  Ordinary  Shares  owned  by  Izasa  and its
     subsidiaries.  The  information on the number of shares owned by Izasa
     and IL Holding  S.p.A.  is  correct;  beneficial  ownership  by Werfen
     and/or Messrs. Rubitalta might vary if and to the extent they own ADRs
     (all of which are registered in the Company's ledger under the name of
     the Bank of New York).

</FN>
</TABLE>

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 years 2002, 2003
and 2004,  were  (euro)13.7  million,  (euro)12.7  million  and  (euro)16.3
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  years  2002,  2003 and 2004,  were  (euro)8.4  million,  (euro)10.5
million and (euro)11.8 million,  respectively. In addition, in fiscal years
2002, 2003 and 2004 a Werfen affiliate charged us approximately,  (euro)2.2
million (euro)2.5 million and (euro)2.1 million,  respectively for software
development services.

     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
years  2002,  2003 and  2004,  certain  of our  subsidiaries  were  charged
(euro)0.6 million, (euro)0.5 million and (euro)0.4 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.

     We had outstanding loans with Werfen and Izasa as discussed in "Item 5
- Operating and Financial Review and Prospects."  Interest charged on these
loans in fiscal  years 2002,  2003 and 2004  amounted,  (euro)6.0  million,
(euro)5.2  million and (euro)1.6  million,  respectively,  and the interest
rates on the loans floated  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 2002,
2003  and  2004  amounted  to  (euro)2.2  million,  (euro)2.7  million  and
(euro)2.4 million, respectively.

     On July 18,  2002,  we executed as a guarantor a loan  agreement  with
other Werfen  group  companies  in favor of Izasa  Distribuciones  Tecnicas
S.A., relating to a syndicated loan of (euro)100 million granted to Izasa.

     On March 24, 2004,  we executed as a guarantor a loan  agreement  with
other Werfen  group  companies  in favor of Izasa  Distribuciones  Tecnicas
S.A., relating to a syndicated loan of (euro)115 million granted to Izasa.

     On April 12, 2005,  we executed as a guarantor a loan  agreement  with
other Werfen  group  companies  in favor of Izasa  Distribuciones  Tecnicas
S.A.,  relating to a syndicated loan of (euro)250 million granted to Izasa,
which replaces the 2002 and 2004 syndicated loans above described.

     Following a  resolution  of the Board of the  Company on February  23,
2005, the entire capital of Instrumentation  Laboratory Ges.m.b.H.  Austria
was  transferred to Comesa GmbH, a Werfen group company,  on April 7, 2005.
The price for the sale of the shares was fixed at (euro)3.4  million  based
on an independent third party appraisal.

     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 20 of our financial  statements  attached to this annual report on
Form 20-F.

C.   NOT REQUIRED.

ITEM 8.   FINANCIAL INFORMATION

A.   CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION.

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

     Dividends

     In the past we have not paid any  dividends  on our  ordinary  shares.
Dividends  however  will  be  distributed  as  approved  at  the  Company's
Shareholders  Meeting  convened  on March  30,  2005 in the  amount  of 0.2
Eurocents per ordinary share for a total amount of (euro)725,042.

     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 indemnitee. A judgment has been entered in
the case in the amount of approximately $2.6 million.  We have appealed the
decision in the case. We believe that, in any case, the proceeding will not
have a material  adverse  effect on our financial  conditions or results of
operations.  As of November  30,  2004 we have  recorded an accrual of $2.2
million related to this judgment.

     A  complaint  was filed by  Bio-Rad  Laboratories,  Inc.  against  us,
Werfen,  Izasa, and four of the Company's current officers and directors in
January 2005 in the United States District Court for the Southern  District
of New York.  The  complaint  asserts  claims  under  common law for fraud,
conspiracy  to commit fraud and aiding and abetting  fraud  against all the
defendants;   negligent  misrepresentation  against  the  Company  and  the
individual  defendants;  as well as breach of fiduciary  duty under Italian
Civil Code Article 2395 against the  individual  defendants.  The complaint
alleges  generally that the defendants  falsely  understated  the Company's
revenues  and  profitability  in  financial   statements  included  in  the
Company's public filings and public  statements from 1999 to 2004, and that
the price of the Company's ADSs have therefore been artificially depressed.
The plaintiff, which owns ADSs, seeks an unspecified amount of damages. All
the defendants have moved to dismiss the complaint.

     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, as a foreign private issuer and a private Italian company have no
obligation  to switch  our  financial  reporting  to the new  International
Financial Reporting Standards, "IFRS". As a result, our financial reporting
will  continue to be prepared in  accordance  with Italian  GAAP.

B.   SIGNIFICANT CHANGES

     Please see "Item 4--Information on the Company-Background- Increase in
Capital Stock in 2004."

<PAGE>

ITEM 9.   THE OFFER AND LISTING DETAILS

A.   OFFER AND LISTING DETAILS

     There is currently no established  trading market for our 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 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 March 13,
2005.  The last sale was made at US $ 0.15 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.

<PAGE>

<TABLE>
<CAPTION>
PERIOD                                                                                  HIGH                 LOW
------                                                                                  ----                 ---
                                                                                               ($ PER ADSs)

<S>                                                                                     <C>                  <C>
May 2005 (through May 27)...................................................            0.15                 0.15
April 2005..................................................................            0.15                 0.15
March 2005..................................................................            0.15                 0.15
February 2005...............................................................            1.00                 0.15
January 2005................................................................            0.17                 0.15
December 2004...............................................................            1.00                 0.15

2004
Fourth Quarter..............................................................            1.00                 0.15
Third Quarter...............................................................            0.17                 0.15
Second Quarter..............................................................            0.3                  0.3
First Quarter ..............................................................            0.3                  0.3

2003
Fourth Quarter..............................................................            1.25                 0.3
Third Quarter...............................................................            0.3                  0.05
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)...............................            1 5/16                7/8
Third Quarter...............................................................            1 1/2                1 3/16
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                    2 9/32
Third Quarter...............................................................            3 1/8                2 5/8
Second Quarter..............................................................            4 1/4                2 3/4
First Quarter...............................................................            11 1/8               3 1/4

</TABLE>


     As of May 27, 2005,  362,521,088 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 3.6% 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  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.  The  amended  By-laws  are filed
     herewith.

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 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 (with a possible  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 in
taxable years  beginning  before  January 1, 2009 to a  non-corporate  U.S.
owner who meets  certain  eligibility  requirements  will  qualify for U.S.
federal  income  taxation  at a  reduced  rate of 15% or  lower if we are a
"qualified foreign  corporation." We generally will be a "qualified foreign
corporation"  if either (i) we are eligible  for benefits  under the Income
Tax  Convention  or (ii)  our  Ordinary  Shares  or ADSs are  listed  on an
established  securities market in the United States. As we are eligible for
benefits  under the Income Tax  Convention,  we presently  are a "qualified
foreign  corporation",  and we generally expect to be a "qualified  foreign
corporation"  during such taxable years, but no assurance can be given that
a change in  circumstances  will not affect our  treatment  as a "qualified
foreign  corporation"  in any of such taxable years. A  non-corporate  U.S.
owner will not be eligible for the reduced  rate (a) if the U.S.  owner has
not held the  Ordinary  Shares or ADSs for at least 61 days of the  121-day
period beginning on the date which is 60 days before the ex-dividend  date,
(b) to the extent the U.S.  owner is under an  obligation  to make  related
payments on  substantially  similar or related property or (c) with respect
to any portion of a dividend  that is taken into account by the U.S.  owner
as  investment  income  under  Section  163(d)(4)(B)  of the U.S.  Internal
Revenue Code.  Any days during which a U.S.  owner has  diminished the U.S.
owner's  risk of loss  with  respect  to the  Ordinary  Shares or ADSs (for
example,  by holding an option to sell such shares or ADSs) are not counted
towards  meeting  the  61-day  holding  period.   Special  rules  apply  in
determining  the foreign tax credit  limitation  with  respect to dividends
subject to U.S.  federal income  taxation at the reduced rate.  U.S. owners
should consult their own tax advisors concerning whether dividends received
by them qualify for the reduced rate.

     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." 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.  In this regard,  foreign tax
credits  generally  are not allowed with respect to certain  short-term  or
hedged  positions in stock. For taxable years beginning before December 31,
2006 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.   However,   under  recently  enacted
legislation, for taxable years beginning after December 31, 2006, dividends
that constitute  "financial  services income"  generally will be considered
foreign source "general category  income",  along with other foreign source
income that is not passive 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 (for tax purposes) 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

     The 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 Tax Treaty's  prevision,  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 Tax Treaty.  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 the 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 at least two months or more.  Accordingly,  in order to
be eligible for the procedure described below, U.S. owners should begin the
process of obtaining certificates  immediately after receiving instructions
from the Depositary on how to claim a treaty refund.

     According  to the Tax  Treaty,  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 to the
ordinary  Italian  tax rates  (that  may vary  from a  minimum  at 23% to a
maximum of 43%) applied only on 40% of the capital gain realized, 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%;

(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  requirements  of the  Securities
Exchange Act of 1934 and  accordingly  file reports,  proxy  statements and
other information with the SEC. You may read and copy any document filed by
us with the SEC without  charge at the SEC's public  reference  room at 450
Fifth Street,  N.W.,  Washington,  D.C.  20549.  Copies of documents may be
obtained  by mail  from  the  Public  Reference  Branch  of the SEC at such
address,  at prescribed rates.  Please call the SEC at  1-800-SEC-0330  for
further information on the public reference room. The SEC also maintains an
internet  website  that  contains  reports,   proxy  statements  and  other
information about issuers,  including us, who file  electronically with the
SEC. The address of that site is 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  into the  following
contracts (in thousands of euro):

                                        November 30, 2004
                                        -----------------
                                         notional amount
                                         ---------------

     Interest Rate Swaps                     21,000
     Currency Options                        39,936

     The notional value of a derivative for the interest 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

     In 2003 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  interest rate. The Company
has entered  into such an agreement to reduce the risk of increases in euro
interest rate.

     At November  30,  2004,  we had  variable  rate debt of  approximately
(euro)47.8  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)1.0 million per year.

Currency Options

     The Company uses currency options to partially hedge purchase costs of
products that are denominated in U.S.  Dollars and Japanese Yens.  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 60 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.

     Our results of  operations  and  financial  condition  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 could  negatively  impact
our  operating  and net income.  On the  contrary a  weakening  of the U.S.
dollar against the euro could  positively  impact our result of operations.
Taking into account the currency  options  discussed above, the effect of a
hypothetical  10% increase in the U.S.  dollar  against the euro would have
decreased our fiscal year 2004 result of operations  by  approximately  52%
from (euro)20.9  million to (euro)10.0  million,  while a hypothetical  10%
decrease  in the U.S.  Dollar  against  the euro would have  increased  our
fiscal year 2004 result of operations by approximately  44% from (euro)20.9
million to (euro)30.2 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 the end of the period  covered by this 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.

     During the period  covered  by this  Annual  Report on Form 20-F 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>

ITEM 16A.  DISCLOSURE ON AUDIT COMMITTEE FINANCIAL EXPERT

     The Company is not required by any  applicable  law or  regulation  to
have,  and does not  currently  have,  an audit  committee  of its Board of
Directors.  As the Company does not have an audit  committee,  the Board of
Directors has determined  that the Company does not have an audit committee
financial  expert  within the  meaning  of the  regulations  adopted  under
Sarbanes-Oxley Act of 2002.

     In this context it should be noted that many of the  customary  duties
of an audit committee are performed by a Board of Statutory Auditors, which
is composed of three independent  experts in administrative  and accounting
matters.  The  Company is required  to have a Board of  Statutory  Auditors
under  Italian  law  and  they  are  appointed  by the  shareholders  for a
three-year  term.  Accordingly,  the  Company  believes  that  there  is  a
meaningful  independent  review of its  financial  statements  beyond  that
performed  by the  independent  public  accountants  also  appointed by the
shareholders in accordance with Italian law.

ITEM 16B.  CODE OF ETHICS

     Pursuant to rules adopted by the Securities  and Exchange  Commission,
we are providing the following information:

     By  resolution  of May 25, 2004,  the Board of Directors has adopted a
Code of Ethics  which  covers the  responsibilities  of the  members of the
Board,  of  the  Chief  Executive  Officer,  Chief  Financial  Officer  and
Controller or other senior financial officers.

ITEM 16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Details of the  aggregate  fees billed for each of the last two fiscal
years for  professional  services  rendered by our  independent  registered
public  accounting firm, BDO Sala Scelsi Farina,  S.p.A.,  for the audit of
the financial statements together with procedures for approving services by
the auditor are set out below:

                                           2004            2003
Audit fees                                 (euro)346,550   (euro)331,000

Audit-Related fees                         -               -

Tax fees:                                  -               -
compliance services
advisory services                          -               -

All other fees                             -               -

                                           -----------------------------
Total                                      (euro)346,550   (euro)331,000
                                           -----------------------------

<PAGE>

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

NOT APPLICABLE.


<PAGE>


ITEM 16E.  PURCHASES OF EQUITY SECURITIES

During  the  period  covered  by this  Annual  Report,  we did not make any
purchases  of shares or other  units of any class of the  Company's  equity
securities registered pursuant to section 12 of the Securities Exchange Act
of 1934, nor were such purchases made on our behalf.

<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-45.
Reports of Independent Auditors are included within this Item 18.

<PAGE>

ITEM 19.       EXHIBITS

   Exhibit     Description
   -------     -----------

     1.1       Articles of Association  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.

     1.2       Amended By-laws of the Company.*

     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       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.)

     4.3       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.)

     4.4       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      English  Summary of a Syndicated  Loan Agreement dated as of
               April 12, 2005 among Izasa Distribuciones  Tecnicas S.A. and
               a group of financial entities.*

     11        Code of Ethics filed with the SEC on May 28, 2004 under Form
               20-F, is incorporated herein by reference.*

     12        Section 302 Certifications.*

     13        Section 906 Certifications.*

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

* Filed herewith

<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 27, 2005

<PAGE>



                       INDEX TO FINANCIAL STATEMENTS

Report of Independent Auditors for the years ended November 30, 2003 and 2004.

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Audited Consolidated Balance Sheets as of November 30, 2003 and 2004....... F-1

Audited Consolidated Statements of Operations for the years ended
November 30, 2002, 2003 and 2004........................................... F-3

Audited Consolidated Statements of Cash Flows for the years ended
November 30, 2002, 2003 and 2004........................................... F-4

Audited Consolidated Statements of Changes in Shareholders' Equity
for the years ended November 30, 2002, 2003 and 2004....................... F-6

Notes to the Audited Consolidated Financial Statements..................... F-7


<PAGE>


[GRAPHIC OMITTED]

              REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM

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
(collectively,  the  "Company")  as of  November  30, 2003 and 2004 and the
related  consolidated  statements of operations,  shareholders'  equity and
cash flows for each of the three  years in the period  ended  November  30,
2004,  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 audits.

We  conducted  our audits in  accordance  with the  standards of the Public
Company Accounting Oversight Board (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.  The
Company is not required to have,  nor were we engaged to perform,  an audit
of its  internal  control over  financial  reporting.  Our audits  included
consideration of internal  control over financial  reporting as a basis for
designing audit procedures that are appropriate in the  circumstances,  but
not for the purpose of  expressing an opinion on the  effectiveness  of the
Company's  internal  control  over  financial  reporting.  Accordingly,  we
express no such opinion. An audit also includes examining, on a test basis,
evidence   supporting   the  amounts  and   disclosures  in  the  financial
statements,  assessing  the  accounting  principles  used  and  significant
estimates made by management,  as well as evaluating the overall  financial
statement  presentation.  We believe  that our audits  provide a reasonable
basis for our opinion.

In our opinion,  the consolidated  financial  statements  referred to above
present fairly,  in all material  respects,  the financial  position of the
Company as of November 30, 2003 and 2004 and the results of its  operations
and its cash flows for each of the three years in the period ended November
30, 2004 in conformity with  accounting  principles  generally  accepted in
Italy.

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 of America.  A description  of the
significant  differences  between the  Company's  accounting  practices and
accounting  principles  generally  accepted in the United States of America
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.

BDO Sala Scelsi Farina
Societa di Revisione per Azioni

/s/ BDO Sala Scelsi Farina S.p.A.

Milan, Italy
February 11, 2005 except for notes 21, 22, 23,
24 and 25 which are as of May 16, 2005


<PAGE>

             INSTRUMENTATION LABORATORY S.P.A. AND SUBSIDIARIES

                    AUDITED CONSOLIDATED BALANCE SHEETS
                      AS OF NOVEMBER 30, 2003 AND 2004
  (THOUSANDS OF EURO OR THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                      NOTE         2003        2004        2004
                                                                    -------       ------      ------      ------
                                                                                   EURO        EURO      U.S.$(1)
    <S>                                                                <C>       <C>         <C>         <C>
ASSETS
CURRENT ASSETS:
    Cash and cash equivalents                                                     14,372      18,861      25,008
    Trade receivables, net of allowance for doubtful
       accounts and sales returns of Euro 4,598 thousands
       in 2003 and Euro 5,084 thousands in 2004                        5          75,992      81,200     107,663
    Other receivables                                                              3,153       2,461       3,263
    Inventories, net                                                   7          46,314      45,559      60,407
    Prepaid expenses and other current assets                                      4,913       6,601       8,752
                                                                                 -------     -------     -------
              Total current assets                                               144,744     154,682     205,093


NON-CURRENT RECEIVABLES AND OTHER ASSETS                                             435         330         438


INSTRUMENTS AT CUSTOMERS, net                                          8          26,501      26,360      34,951


PROPERTY, PLANT AND EQUIPMENT:
    Land and buildings                                                             5,631       7,580      10,050
    Leasehold improvements                                                         6,152       5,042       6,685
    Plant, machinery and equipment                                                36,735      36,170      47,958
    Furniture, fixtures and vehicles                                              16,661      16,237      21,529
    Construction in progress                                                       1,471       2,359       3,128
    Accumulated depreciation                                                     (45,337)    (46,736)    (61,967)
                                                                                 -------     -------     -------
                                                                                  21,313      20,652      27,383

INTANGIBLE ASSETS AND DEFERRED
    CHARGES, net                                                       9         110,848     102,777     136,272
                                                                                 -------     -------     -------
              Total assets                                                       303,841     304,801     404,137
                                                                                 =======     =======     =======


(1)   Exchange rate:  Euro 1.00 = U.S. $ 1.3259 as of November 30, 2004
</TABLE>

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, 2003 AND 2004
  (THOUSANDS OF EURO OR THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                      NOTE         2003        2004        2004
                                                                    -------       ------      ------      ------
                                                                                   EURO        EURO      U.S.$(1)
   <S>                                                                 <C>       <C>         <C>         <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
   Bank overdrafts and short-term debt                                 10         50,058      44,347      58,800
   Current portion of long-term debt                                   11              -       1,343       1,781
   Trade and other payables                                                       45,678      57,055      75,649
   Income taxes payable                                                12          2,547       1,647       2,184
   Accrued expenses and other liabilities                              13         39,532      35,472      47,032
                                                                                 -------     -------     -------
             Total current liabilities                                           137,815     139,864     185,446

LONG-TERM DEBT, net of current portion                                 11         97,234       2,076       2,753

DEFERRED INCOME TAXES                                                  12            302           -           -

RESERVE FOR SEVERANCE INDEMNITIES                                      14          6,217       6,979       9,253

MINORITY INTEREST                                                                    411         474         629
                                                                                 -------     -------     -------
             Total liabilities                                                   241,979     149,393     198,081
                                                                                 -------     -------     -------
COMMITMENTS AND CONTINGENCIES                                          15              -           -           -
SHAREHOLDERS' EQUITY:                                                  16
   Share capital (90,701,104 and 362,521,088 shares authorized,
    issued and outstanding at November 30, 2003 and 2004, par
    value Euro 1.29 each and Euro 0.33, respectively)                            117,004     119,632     158,620
   Additional paid-in capital                                                     11,496           -           -
   Cumulative translation adjustment                                              (3,697)     (6,481)     (8,593)
   Retained earnings (Accumulated deficit)                                       (62,941)     42,257      56,029
                                                                                 -------     -------     -------
             Total shareholders' equity                                           61,862     155,408     206,056
                                                                                 -------     -------     -------
             Total liabilities and shareholders' equity                          303,841     304,801     404,137
                                                                                 =======     =======     =======


(1)   Exchange rate:  Euro 1.00 = U.S. $ 1.3259 as of November 30, 2004

</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 OPERATIONS
            FOR THE YEARS ENDED NOVEMBER 30, 2002, 2003 AND 2004
  (THOUSANDS OF EURO OR THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                        NOTE          2002        2003        2004        2004
                                                        ----          ----        ----        ----        ----

                                                                      EURO        EURO        EURO       U.S.$(1)
<S>                                                      <C>         <C>         <C>         <C>         <C>
Net sales                                                17          272,591     260,011     280,031     371,293

Cost of sales and services                                           141,549     131,066     136,893     181,506
                                                                     -------     -------     -------     -------
       Gross profit                                                  131,042     128,945     143,138     189,787

Research and development costs                           25           20,072      19,238      17,765      23,555

Selling, general and administrative
expenses                                                              99,792      93,746      96,534     127,994
                                                                     -------     -------     -------     -------
       Operating income before amortization
       of intangible assets and deferred
       charges                                                        11,178      15,961      28,839      38,238

Amortization of intangible assets and
deferred charges                                          9            8,464       8,423       7,968      10,565
                                                                     -------     -------     -------     -------
       Operating income                                                2,714       7,538      20,871      27,673

Interest income                                          18              980         746         739         980

Interest (expense)                                       18          (12,210)    (10,810)     (7,272)     (9,642)

Other (expense) income, net                              19           (2,696)     (5,789)     (4,751)     (6,299)
                                                                     -------     -------     -------     -------
         Income (loss) before income taxes and
          minority Interest                                          (11,212)     (8,315)      9,587      12,712

Income taxes                                             12            2,549       2,703       2,806       3,720

Minority interest                                                         80          67         103         137
                                                                     -------     -------     -------     -------
       Net income (loss)                                             (13,841)    (11,085)      6,678       8,855
                                                                     =======     =======     =======     =======
Income (loss) per share                                   3          (0.1516)    (0.1222)     0.0264      0.0349
                                                                     =======     =======     =======     =======


(1)   Exchange rate:  Euro 1.00 = U.S. $ 1.3259 as of November 30, 2004

</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, 2002, 2003 AND 2004
  (THOUSANDS OF EURO OR THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                      2002         2003        2004        2004
                                                                      ----         ----        ----        ----

                                                                      EURO         EURO        EURO      U.S.$(1)
     <S>                                                           <C>          <C>         <C>         <C>
     CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)                                             (13,841)     (11,085)      6,678       8,855
     Adjustments to reconcile net income (loss) to net
     cash provided by operating activities
         Depreciation and amortization                              22,673       23,645      23,754      31,495
         Provision for severance indemnities                           987        1,141       1,238       1,642
         Net (gain) on sale of fixed assets                           (117)         (72)       (210)       (278)
         (Decrease) of deferred income taxes and
              other long-term liabilities                             (533)      (1,159)       (715)       (948)
         Decrease (increase) in:
              Accounts receivable                                   10,640       12,756      (4,516)     (5,988)
              Inventories                                            1,224        5,431         755       1,001
              Prepaid expenses                                      (2,144)         117      (1,688)     (2,238)
         Increase (decrease) in:
              Accounts payable                                       5,474        1,631      11,298      14,980
              Accrued expenses and income taxes                      1,234        4,322      (4,960)     (6,576)
                                                                   -------      -------     -------     -------
              Net cash provided by operating activities             25,597       36,727      31,634      41,945
                                                                   -------      -------     -------     -------

CASH FLOWS FROM INVESTING ACTIVITIES:

       Investment in instruments at customers                      (21,568)     (17,013)    (17,315)    (22,958)
       Purchase of fixed assets                                     (6,090)      (7,270)     (8,238)    (10,923)
       Increase in intangible assets and
         deferred charges                                             (304)        (177)          -           -
       Decrease (Increase) in investments
         and other long term assets                                   (123)         130         105         139
       Proceeds from sale of fixed assets                           11,904        4,840       8,864      11,753
                                                                   -------      -------     -------     -------
              Net cash provided by (used in) investing
              activities                                           (16,181)     (19,490)    (16,584)    (21,989)
                                                                   -------      -------     -------     -------

 (1) Exchange rate: Euro 1.00 = U.S. $ 1.3259 as of November 30, 2004

</TABLE>

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 CASH FLOWS
            FOR THE YEARS ENDED NOVEMBER 30, 2002, 2003 AND 2004
  (THOUSANDS OF EURO OR THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)


                                                                      2002        2003        2004         2004
                                                                      ----        ----        ----         ----

                                                                      EURO        EURO        EURO      U.S.$(1)
       <S>                                                         <C>          <C>         <C>         <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
       Proceeds from issuance of long-term debt                        875            -       2,076       2,753
       Repayment of long-term debt                                  (4,000)      (1,098)     (7,533)     (9,989)
       Increase (decrease) in bank overdrafts and short-term
       debt                                                          1,896      (16,707)     (4,368)     (5,792)
                                                                   -------      -------     -------     -------
           Net cash provided by (used in) financing activities      (1,229)     (17,805)     (9,825)    (13,028)
                                                                   -------      -------     -------     -------

EFFECT OF EXCHANGE RATES ON CASH                                       (60)      (1,218)       (736)       (976)
                                                                   -------      -------     -------     -------
NET INCREASE (DECREASE) IN CASH AND CASH
    EQUIVALENTS                                                      8,127       (1,786)      4,489       5,952

CASH AND CASH EQUIVALENTS at beginning of the year                   8,031       16,158      14,372      19,056
                                                                   -------      -------     -------     -------
CASH AND CASH EQUIVALENTS at end of the year                        16,158       14,372      18,861      25,008
                                                                   =======      =======     =======     =======

SUPPLEMENTAL INFORMATION:

       Cash paid during the year for:
           Interest                                                 13,547       13,909       7,525       9,977
           Income tax                                                1,785        2,883       2,965       3,931

       Non cash conversion from debt to equity                           -            -      89,701     118,934


 (1) Exchange rate: Euro 1.00 = U.S. $ 1.3259 as of November 30, 2004

</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 CHANGES IN SHAREHOLDERS' EQUITY FOR THE
               YEARS ENDED NOVEMBER 30, 2002, 2003 AND 2004
  (THOUSANDS OF EURO OR THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                                             RETAINED
                                                               ADDITIONAL    CUMULATIVE      EARNINGS
                                                SHARE          PAID-IN      TRANSLATION    (ACCUMULATED      TOTAL
                                               CAPITAL         CAPITAL       ADJUSTMENT      DEFICIT)       EQUITY
                                               -------         -------       ----------      -------        ------
<S>                                            <C>             <C>            <C>            <C>            <C>
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, 2002                    117,004          11,496          3,620        (51,804)        80,316
                                               --------        --------       --------       --------       --------

     Other variations                                 -               -              -            (52)           (52)

     Loss from translation of foreign
     currency financial statements                    -               -         (7,317)             -         (7,317)

     Net loss for the year                            -               -              -        (11,085)       (11,085)
                                               --------        --------       --------       --------       --------
BALANCE AT NOVEMBER 30, 2003                    117,004          11,496         (3,697)       (62,941)        61,862
                                               --------        --------       --------       --------       --------

     Loss coverage                              (87,073)        (11,496)             -         98,569              -

     Issuance of 271,819,984 ordinary
     shares at Euros 0.33 par value in
     exchange for outstanding debt               89,701               -              -              -         89,701

     Other variations                                 -               -              -            (49)           (49)

     Loss from translation of foreign
     currency financial statements                    -               -         (2,784)             -         (2,784)

     Net income for the year                          -               -              -          6,678          6,678
                                               --------        --------       --------       --------       --------
BALANCE AT NOVEMBER 30, 2004                    119,632               -         (6,481)        42,257        155,408
                                               --------        --------       --------       --------       --------
BALANCE AT NOVEMBER 30, 2004 in
U.S.$(1)                                        158,620               -         (8,593)        56,029        206,056
                                               ========        ========       ========       ========       ========

 (1) Exchange rate: Euro 1.00 = U.S. $ 1.3259 as of November 30, 2004

</TABLE>

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 40.4 million assigned
     to goodwill.

     In   January   1999,   the   Company   acquired    Hemoliance   ('1999
     Acquisitions'),  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, 2003 and 2004 the parent  company  Instrumentation
     Laboratory S.p.A. owned the following subsidiaries, either directly or
     indirectly:

     Company                                                    2003    2004
     -------                                                    ----    ----

     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. (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 (U.S.A.)                100%    100%
     IL Diagnostic, S.A. de C.V. (Mexico)                       100%    100%
     Medical Laboratory Automation Inc.                         100%    100%
     Lessix AB (Sweden - in liquidation)                        100%    100%
     Chromogenix Holding AB (Sweden - in liquidation)           100%    100%
     Chromogenix AB (Sweden - in liquidation)                   100%    100%
     Instrumentation Laboratory (Lietuva) B.I.                   67%     67%

     The shareholders' meeting held on November 17, 2004 resolved to change
     the Company  fiscal year end from  November 30 to December 31 in order
     to align it with CH-Werfen, S.A.'s year end.

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, 2004 and 2003 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  and  International   Financial
     Reporting 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. The  goodwill  arising on the
          1991 Acquisition was charged  directly to  shareholder's  equity,
          consistent  with  one of the  possibilities  then  allowed  under
          Italian GAAP.

     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.

     Allowance for doubtful accounts

     Accounts   receivable   are   reduced  by  an  amount   which  may  be
     uncollectable  in the future.  The  estimated  allowance  for doubtful
     accounts is  determined  primarily on  management's  evaluation of the
     financial condition of the customer.

     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 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.

     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.

     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.

     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 at
     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 plans have been accounted for in accordance
     with  IAS No.  19,  in the  absence  of  specific  Italian  accounting
     principles on this matter.

     Revenue Recognition

     Revenue  from  product  sales is  recognized  at the time of shipment.
     Service  revenues  are  recognized  over  the  applicable  contractual
     periods or as services are performed. Revenues from instrument rentals
     are recognized over the life of the rental 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.

     During  2004 the Company  began a new line of  business  whereby it is
     acting as an agent in the sale of certain  diagnostics  products  to a
     related party. As a result the Company has presented the net margin of
     these transactions as revenue.

     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 expense 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.

     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 'Cumulative Translation Adjustment'.

     (b)  Translation of transactions  and balances  denominated in foreign
          currencies
          Transactions  in  foreign  currencies  are  recorded  at  a  rate
          approximating the exchange rate at the 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 statement of operations.

     (Loss)/income per share

          (Loss)/income  per share  is  computed  based  upon the  weighted
          average  number of common shares  outstanding  during the period.
          The  weighted  average  number of common  shares  outstanding  in
          fiscal  2002,  2003  and  2004  is  90,701,104,   90,701,104  and
          253,347,488,  respectively.  Common  stock  options,  which  were
          outstanding in 2002,  2003 and 2004,  have been excluded as their
          effect  would be  antidilutive.  As of November 30, 2003 and 2004
          there are 170,000 stock options outstanding.

     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.  Dollars 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,  2004,  which was Euro 1.00 to U.S. $ 1.3259.  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,  2003  and  2004   approximately  35%  and  36%,
     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.

     Under the  Italian  health  system,  accounts  receivable  may  remain
     outstanding  for up to 300 days on  average.  These  extended  payment
     periods are accepted in the industry.  Total sales to these  customers
     represent   approximately   17%,   19%  and  19%,   respectively,   of
     consolidated  net revenues for the years ended November 30, 2002, 2003
     and 2004.  The Company's  management  does not expect any  significant
     losses as a result of the concentration of these receivables.

     At November 30, 2003 and 2004 trade  receivables  from public  Italian
     healthcare  entities  are net of  Euro  25.7  million  and  Euro  26.6
     million,  respectively,  sold  through  a  factoring  transaction.

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 are prohibited
     from  manufacturing 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.

     Group  receivables and payables from/to Beckman Coulter as of November
     30, 2003 and 2004 and sales and purchases  to/from Beckman Coulter for
     the years then ended were as follows (in thousands of Euro):

                                                             2003          2004
                                                             ----          ----
     Trade receivables                                       8,618        10,824
     Trade payables                                          3,733         7,869
     Sales                                                  36,563        39,908
     Purchases                                              14,466        17,521

     Sales of Beckman  Coulter  products by the Company under the exclusive
     distribution  agreement for the years ended November 30, 2003 and 2004
     amounted to Euro 30.8 million and Euro 34.3 million, respectively.

7.   INVENTORIES

     As of  November  30,  2003 and 2004  inventories  were as follows  (in
     thousands of Euro):

                                                           2003          2004
                                                           ----          ----
     Raw materials                                        13,040        13,039
     Work-in-process                                         882           681
     Finished goods                                       38,818        37,814
     Service parts                                         3,528         3,379
                                                         -------       -------
                                                          56,268        54,913
     Less: Reserve for obsolescence                       (9,954)       (9,354)
                                                         -------       -------
                                                          46,314        45,559
                                                         =======       =======

8.   INSTRUMENTS AT CUSTOMERS

     As of November 30, 2003 and 2004, instruments at customers consisted
     of the following (in thousands of Euro):

                                                           2003          2004
                                                           ----          ----
     Instruments Owned by the Group
     ------------------------------
     Instruments cost                                     75,169        77,180
     Less: Accumulated depreciation                      (50,644)      (52,361)
                                                         -------       -------
                                                          24,525        24,819
                                                         -------       -------
     Net long-term investment in sales-type
     --------------------------------------
     leased instruments
     ------------------
     Minimum lease payments receivable                     3,875         3,505
     Less: Allowance for non-collectible amounts             (48)          (53)

     Net lease payments receivable                         3,827         3,452
     Less: Unearned interest income                         (870)         (887)
                                                         -------       -------
     Net investment in sales-type leases                   2,957         2,565
     Less: Current portion                                  (981)       (1,024)
                                                         -------       -------
                                                           1,976         1,541
                                                         -------       -------
                                                          26,501        26,360
                                                         =======       =======


     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,  2003 and 2004 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  within  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):

              2005                        1,334
              2006                        1,074
              2007                          653
              2008                          339
              2009                          105
                                          -----
                                          3,505
                                          =====

     Depreciation  of  instruments  owned by the Group for the years  ended
     November  30, 2003 and 2004  amounted to Euro 8.5 million and Euro 9.4
     million, respectively.

     Since  2001  the  Company  has   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 the
     statement of operations for the years ended November 30, 2003 and 2004
     amounted to Euro 4.7 million and Euro 5.1 million,  respectively.  Had
     the Company accounted for this transaction as a finance lease, the net
     income  for the fiscal  year 2004  would have been  higher by Euro 0.6
     million and net equity as of November  30, 2004 would have been higher
     by Euro 1.5 million.  Assets (instruments at customers) as of November
     30, 2004 would have been higher by Euro 12.1  million and  liabilities
     (financial debt) would have been higher by Euro 10.6 million, of which
     Euro 5.1 million would be short term.

9.   INTANGIBLE ASSETS AND DEFERRED CHARGES

     Intangible  assets and deferred charges at November 30, 2003 and 2004,
     are summarized as follows (in thousands of Euro):

<TABLE>
<CAPTION>
                                                                                        2003
                                                                                        ----
                                                                                     Accumulated
                                                                                     -----------
                                                                        Cost        Amortization                Net
                                                                        ----        ------------                ---
        <S>                                                         <C>               <C>                   <C>
        Patents, trademarks
            and other rights                                          40,011           (32,558)               7,453

        Goodwill arising from 1996 Acquisitions                       40,409           (14,868)              25,541

        Goodwill arising from 1999 Acquisition                       102,436           (25,069)              77,367

        Other                                                          4,225            (3,738)                 487
                                                                     -------           -------              -------
                                                                     187,081           (76,233)             110,848
                                                                     =======           =======              =======

<CAPTION>
                                                                                        2004
                                                                                        ----
                                                                                     Accumulated
                                                                                     -----------
                                                                        Cost        Amortization                Net
                                                                        ----        ------------                ---
        <S>                                                         <C>               <C>                   <C>
        Patents, trademarks
            and other rights                                          13,605            (6,684)               6,921

        Goodwill arising from 1996 Acquisitions                       40,409           (16,949)              23,460

        Goodwill arising from 1999 Acquisition                       102,436           (30,318)              72,118

        Other                                                          4,122            (3,844)                 278
                                                                     -------           -------              -------
                                                                     160,572           (57,795)             102,777
                                                                     =======           =======              =======
</TABLE>


     Amortization for the years ended November 30, 2002, 2003 and 2004 is
     as follows:

<TABLE>
<CAPTION>
                                                                        2002              2003                 2004
                                                                        ----              ----                 ----
        <S>                                                         <C>               <C>                   <C>
        Patents, trademarks
             and other rights                                            992               966                  532
        Goodwill arising from 1996 Acquisitions                        2,081             2,081                2,081
        Goodwill arising from 1999 Acquisition                         5,249             5,249                5,249
        Other                                                            142               169                  106
                                                                         ---               ---                  ---

                                                                       8,464             8,423                7,968
                                                                       =====             =====                =====
</TABLE>

     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 the '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.

     As of November 30, 2004, the estimated aggregate amortization expense,
     based on current levels of intangible  assets for the succeeding  five
     years is as follows:

     Years Ending November 30,             (Thousands of Euro)
     -------------------------
            2005                                  7,970
            2006                                  7,970
            2007                                  7,930
            2008                                  7,860
            2009                                  7,860


10.  BANK OVERDRAFTS AND SHORT-TERM DEBT

     As of November 30, 2003 and 2004,  the Group had available  short-term
     credit lines of approximately Euro 90.0 million and Euro 89.6 million,
     respectively,  with  various  banks in Europe,  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):


                                                            2003         2004
                                                            ----         ----
     Euro denominated bank overdrafts and short-term
     loans, bearing interest variable from 4.50% to
     9.50% at November 30, 2004                            24,356       18,676

     Euro denominated bank advance on  import/export,
     average interest at 6.08% at November 30, 2003        25,702       25,671
                                                           ------       ------

                                                           50,058       44,347
                                                           ======       ======

     Borrowings under revolving line of credit             50,058       44,347
     Weighted average interest rate                         5.95%        5.37%
     Maximum month-end balance during year                 72,845       58,779
     Average month-end balance during year                 62,162       50,018


11.  LONG-TERM DEBT

     Long-term debt at November 30, 2003 and 2004, is summarized as follows
     (in thousands of Euro):

<PAGE>

                                                            2003         2004
                                                            ----         ----
     Euro denominated subordinated revolving
     loan from Izasa Distribuciones Tecnicas S.A           61,401            -

     Euro denominated subordinated loan from
     IL Holding S.p.A.                                     26,294            -

     Euro denominated loan expiring in 2010                     -        2,076

     U.S. Dollar denominated loan expiring in
     May 2005                                               9,310        1,343
                                                           ------       ------
     Other long term debt                                     229            -
                                                           ------       ------
                                                           97,234        3,419

     Less- Current portion of long-term debt                    -        1,343
                                                           ------       ------
                                                           97,234        2,076
                                                           ======       ======

     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 bore  interest  at a floating  rate based on the
     six-month  Euribor plus 320 basis points per annum (ranging from 5.30%
     to 5.40% at November 30, 2003).  On March 30, 2004, IL Holding S.p.A.,
     an Italian subsidiary of Izasa Distribuciones Tecnicas S.A., exchanged
     Euro  89,700,595,  corresponding  to  the  the  last  portion  of  the
     outstanding loan plus matured  interest,  for 271,819,984 newly issued
     ordinary shares.

     The U.S. Dollar denominated loan is secured by the Company's inventory
     and  receivables  and bears interest at U.S. Dollar prime rate plus 2%
     (7.00% At November 30, 2004).

     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
         -------------------------                          ------
         2005                                               1,343
         2006                                                 273
         2007                                                 519
         2008                                                 519
         2009                                                 519
         2010                                                 246
                                                            -----
                                                            3,419
                                                            =====

12.  INCOME TAXES

     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 1999 are still subject to
     review by the tax  authorities  for the  Italian  company.  In October
     1993,  Italian  tax  authorities  examined  the  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 goodwill  recorded in 1991 through  1994  following a
     merger  which took place in 1990.  The Company  filed  appeal  against
     these  assessments  received  and the first  level Tax Court  ruled in
     favour of the Company in relation to all of the four years  concerned.
     In 1999 and 2001 the  second  level Tax  Court  ruled in favour of the
     Company  for the  1991,  1992 and 1993  assessments  which  have  been
     definitively  rejected,  while  discussion  for the year 1994 is still
     pending.

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

     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, 2003 and 2004,  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 159
     million  and Euro 126  million,  respectively,  subject  to review and
     approval of the applicable tax authorities, which will expire in years
     2005 to 2022 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 tax expense for the fiscal years ended November 30, 2002,  2003
     and 2004 are detailed as follows (in thousands of Euro):

                                           2002            2003           2004
                                           ----            ----           ----
     Current income taxes                  1,073             900          1,252
     Deferred income taxes                    82             (17)          (296)
                                           -----           -----          -----
     Total income taxes                    1,155             883            956
     IRAP                                  1,394           1,820          1,850
                                           -----           -----          -----
     Total tax provision for the year      2,549           2,703          2,806
                                           =====           =====          =====

     The tax provisions for the years 2002,  2003 and 2004, as shown in the
     consolidated financial statements,  are based on an effective tax rate
     which  differs  from the  statutory  tax rate in Italy.  Income  taxes
     include taxes on income for certain foreign  subsidiaries,  except for
     the Parent 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 current
     period  loss and  uncertainty  regarding  the level of future  taxable
     income.

     The Italian  statutory  tax rate at November 30,  2002,  2003 and 2004
     should  include  both  'Corporate  income  tax'  (IRPEG)  at 34%,  and
     'Regional  tax on productive  activities'  (IRAP) at 4.25% which has a
     different base of taxation and may be payable even in cases of pre-tax
     losses.

13.  ACCRUED EXPENSES AND OTHER LIABILITIES

     At November 30, 2003 and 2004 accrued  expenses and other  liabilities
     consisted of the following (in thousands of Euro):
                                                         2003         2004
                                                        ------       ------
     Payroll, including social charges                  16,740       16,432
     Service contract deferred income and
     warranty reserve                                    3,214        3,329
     Accrued interest on loans from:
        - Izasa Distribuciones Tecnicas, S.A.              824            -
        - Miscel Holding B.V.                            1,767        1,767
        - IL Holding S.p.A.                              2,808        1,136
     Other accrued expenses and liabilities             14,179       12,808
                                                        ------       ------
                                                        39,532       35,472
                                                        ======       ======

     Other accrued expenses and liabilities include mainly professional and
     consultant fees, taxes other than income and sales commissions.

14.  RESERVE FOR SEVERANCE INDEMNITIES

     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  (2.668% at November 30, 2004).  As of November 30, 2003 and
     2004, the resulting reserve for severance indemnities amounted to Euro
     6.2 million and Euro 6.7 million, respectively.

     U.S.  and UK employees  of the Group are  eligible to  participate  in
     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):

<TABLE>
<CAPTION>

                                                                  2002               2003               2004
                                                                 ------             ------             ------
     <S>                                                        <C>               <C>                 <C>
     CHANGE IN PROJECTED BENEFIT OBLIGATION (PBO)
     DURING MEASUREMENT PERIOD
     PBO, November 30 of previous year                           45,997             54,693             47,836
     Exchange rate effect on opening balance                        324            (10,767)            (3,308)
     Service Cost                                                 1,366              1,375                528
     Interest Cost                                                2,926              2,739              2,386
     Actuarial (Gain)/Loss                                        5,132              1,481              2,890
     Benefits Paid                                               (1,206)            (1,685)            (1,298)
     Plan amendments                                                154                  -             (4,712)
                                                                 ------             ------             ------
     PBO, November 30,                                           54,693             47,836             44,322
                                                                 ======             ======             ======
     CHANGE IN PLAN ASSETS DURING THE MEASUREMENT PERIOD
     Plan Assets at Fair Value, November 30 of previous
     year                                                        31,848             29,348             25,756
     Exchange rate effect on opening balance                        175             (6,127)            (1,742)
     Expected Return on Plan Assets                              (1,467)             2,369              2,375
     Employee Contribution                                        1,826              1,835              3,236
     Benefits Paid                                               (3,034)            (1,685)            (1,298)
     Actuarial gain (loss)                                            -                 16                105
                                                                 ------             ------             ------
     Plan Assets at Fair Value, November 30,                     29,348             25,756             28,432
                                                                 ======             ======             ======

     RECONCILIATION OF PREPAID (ACCRUED)
     Underfunded Status of the Plan                             (23,890)           (22,080)           (15,890)
     Unamortized Prior Service Cost                                 403                (98)              (164)
     Unrecognized Net Loss                                       25,219             23,252             19,185
                                                                 ------             ------             ------
     Prepaid (accrued) Pension Costs                              1,732              1,074              3,131

     COMPONENTS OF NET PERIODIC BENEFIT COST FOR FISCAL
     YEAR
     Service Cost                                                 1,373              1,312                396
     Interest Cost                                                3,079              2,827              2,386
     Expected Return on Plan Assets                              (3,096)            (2,570)            (2,433)
     Net amortization and deferral                                  385                772                571
                                                                 ------             ------             ------
     Net Periodic Pension Cost                                    1,741              2,341                920

</TABLE>

     Assumptions used for the above funded status calculation include:

<TABLE>
<CAPTION>
                                                                 2002                 2003               2004
                                                                 ----                 ----               ----
     <S>                                                         <C>                  <C>                <C>
     Annual rate of increase in compensation levels:
        United States plan                                       6.75%                5.00%              5.00%
        European plans                                           4.50%                4.50%              4.75%
     Discount rate applied to benefit obligation:
        United States plan                                       6.75%                6.75%              6.25%
        European plans                                           5.50%                5.50%              5.30%
     Expected long-term rate of return on plan assets:
        United States plan                                       9.00%                9.00%              8.50%
        European plans                                           7.50%                7.50%              7.50%
</TABLE>

     The net cumulative unrecognized actuarial loss as of November 30, 2004
     amounts to Euro 19.2 million of which Euro 11.1  million  relates to a
     U.S.  pension plan and Euro 8.1 million  relates to a UK pension plan.
     The net amount  recognized  as prepaid  pension costs is the result of
     prepaid  pension  costs of Euro 2.3 million for U.S. plan and Euro 0.8
     million for UK plan.

     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.

     Savings Plan

     The  U.S.  subsidiary  has  also  established  a  saving  plan for all
     employees. Employee 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.  The total U.S. subsidiary contribution is limited to 2%
     of eligible  compensation.  In addition,  the U.S. subsidiary can make
     discretionary  contributions  to the savings  plan.  No  discretionary
     contribution was made in 2003 and 2004. The U.S.  subsidiary  expensed
     approximately  U.S.$  460,000,  $ 494,000 and $ 1,946,000  of employer
     matching contributions for the years ended November 30, 2002, 2003 and
     2004, respectively.

     Postretirement Benefits

     The  U.S.   subsidiary   currently  provides  certain   postretirement
     healthcare  and other  benefits  to  eligible  employees.  The Company
     accounts for postretirement  benefits under the provisions of SFAS No.
     106,  Employers'  Accounting  for  Postretirement  Benefits Other Than
     Pensions.  Under SFAS  No. 106,  the  Company is required to accrue the
     estimated cost of postretirement benefits during the employees' active
     service periods up to the date they become eligible for full benefits.

15.  COMMITMENTS AND CONTINGENCIES

     Leases

     Minimum  annual  rental  commitments  as of  November  30,  2004 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
                                                             ------
         2005                                                 4,255
         2006                                                 3,358
         2007                                                 1,921
         2008                                                 1,687
         2009                                                 1,608
         Thereafter                                           1,074
                                                             ------
         Total minimum lease payments                        13,903
                                                             ======

     As of November 30, 2004, total  commitments for lease payments related
     to sale and lease back of  instruments  (Note 8) amounted to Euro 10.6
     million, of which Euro 5.1 million is 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.

     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 this matter.

     In 2002 the aforementioned case went to trial and verdict was returned
     against the  Company.  A judgment  has been entered in the case in the
     amount of  approximately  U.S.$ 2.6 million.  The Company has appealed
     the decision in the case. The Company  believes that, in any case, the
     proceeding  will not have a material  adverse  effect on the financial
     condition or results of operations of the Company.  As of November 30,
     2004 the Company has recorded an accrual of U.S.$ 2.2 million  related
     to this judgment.

     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, 2004
                                                  -----------------
                                                   notional amount
                                                   ---------------
     Interest Rate Swaps                               21,000
     Currency Options                                  39,936


     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

     In 2003 the Company  entered  into an  interest  rate swap in order to
     exchange  with a  counterpart,  at specified  intervals  for a 5-years
     period,   the  difference   between  interest  amounts  calculated  by
     reference  to the  notional  principal  amount and agreed  floating or
     fixed  interest  rate.  The Company has entered in such  agreement  to
     reduce risk of increase in Euro interest rate.

     Currency Options

     The Company uses currency options to partially hedge purchase costs of
     products  that are  denominated  in U.S.  Dollars and  Japanese  Yens.
     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 or Japanese Yens at a specified  exchange rate
     at the end of a specified  period,  currently not exceeding 60 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.  Currently the Company's  shares are quoted on the
     Pink Sheets service.

     Share Capital

     Shareholders at the Company's  shareholders  meeting held on March 29,
     2004  approved  the coverage of the 2004 and  previous  years  losses,
     amounting  to  Euro  98,141  thousand,   through  the  utilization  of
     additional  paid-in capital in the amount of Euro 11,496 thousands and
     through the reduction of the share capital by decreasing the par value
     of an Ordinary Share from Euro 1.29 to Euro 0.33.  Shareholders at the
     same  shareholders'  meeting  approved  a capital  increase  which was
     finalized  in May 2004 with the issuance of  271,819,984  new ordinary
     shares,  par value  Euro 0.33  each.  Accordingly,  the share  capital
     outstanding as of November 30, 2003 and 2004 consisted respectively of
     90,701,104  ordinary shares with a nominal value of Euro 1.29 each and
     of 362,521,088 ordinary shares with a nominal value of Euro 0.33 each.

     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 on July 22,
     1998,  authorized  the issuance of options for up to 170,000  ordinary
     shares to be exercised up to 2008. The  shareholders'  meeting held on
     March 29, 2004  amended such  resolution  by reducing the par value of
     the  shares to be issued  to  service  the plan from Euro 1.29 to Euro
     0.33.

     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  result  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,  2002,  2003 and 2004 is as
     follows (in thousand of Euro):

<TABLE>
<CAPTION>
                                                  Net Income (Loss)                     Shareholders' Equity
                                                  -----------------                     --------------------
                                               2002        2003          2004         2002        2003          2004
                                         -----------------------------------------------------------------------------
     <S>                                    <C>          <C>            <C>         <C>          <C>          <C>
     Instrumentation Laboratory S.p.A.      (14,986)     (83,155)       12,787      113,632      30,477       132,964

     Difference between carrying value
     of investments in subsidiaries
     and their net results and equity         1,685       78,008         2,129      (19,779)      9,837         7,320

     Adjustments to conform with Group
     accounting principles                    2,109        1,142           232          980       2,122         2,354

     Elimination of intercompany
     transactions and other
     consolidation adjustments               (2,649)      (7,080)       (8,470)     (14,517)     19,428        12,770
                                            --------     --------      --------     --------     ------       -------

     Consolidated                           (13,841)     (11,085)        6,678       80,316      61,862       155,408
                                            ========     ========      ========     ========     ======       =======

</TABLE>

17.  NET SALES

     Sales from service contracts and their related costs were as follows
     (in thousands of Euro):

                                          2002           2003          2004
                                          ----           ----          ----

     Net sales                          25,191         20,945        19,698
     Costs and expenses                 19,169         17,804        17,755
                                        ------         ------        ------

     Gross profit                        6,022          3,141         1,943
                                         =====          =====         =====


     Segment information

     The Group is a 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, 2002,
     2003 and 2004 is as follows (in thousands of Euro):

<TABLE>
<CAPTION>
                                                     Critical       Clinical
                                                     --------       --------
                                     Hemostasis          care      Chemistry           Other              Total
                                     ----------          ----      ---------           -----              -----
     <S>                                <C>            <C>            <C>             <C>               <C>
     2002
     ----
     Net sales                          134,774        76,826         24,329          36,662            272,591
     Gross profit                        71,005        39,228          9,701          11,108            131,042

     2003
     ----
     Net sales                          125,019        72,596         24,889          37,507            260,011
     Gross profit                        66,289        39,486          8,600          14,570            128,945

     2004
     ----
     Net sales                          135,793        77,112         22,694          44,432            280,031
     Gross profit                        72,215        44,484          7,804          18,635            143,138
</TABLE>

     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):

<TABLE>
<CAPTION>
                                                                          North       Rest of
                                                                          -----       -------
                                                            Europe      America         World             Total
                                                            ------      -------         -----             -----
     <S>                                                   <C>          <C>            <C>              <C>
     2002
     ----
     Sales                                                 158,972       96,589        17,030           272,591
     Operating income (loss)
     before amortization                                    26,075      (21,074)        6,177            11,178

     2003
     ----
     Sales                                                 165,475       78,158        16,378           260,011
     Operating income (loss)
     before amortization                                    33,905      (23,989)        6,045            15,961

     2004
     ----
     Sales                                                 181,720       80,629        17,682           280,031
     Operating income (loss)
     before amortization                                    39,798      (17,162)        6,203            28,839

</TABLE>

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

<TABLE>
<CAPTION>
                                                                          North       Rest of
                                                                          -----       -------
                                                            Europe      America         World             Total
                                                            ------      -------         -----             -----
     <S>                                                   <C>          <C>            <C>              <C>
     2003
     ----
     Tangible assets - Net                                   4,421       16,392           500            21,313
     Reagent rentals - Net                                  20,045        3,277         3,179            26,501
     Intangible assets (excluding Goodwill) - Net            1,448          123             -             1,571
     Long-term receivables and other                           290           47            98               435

     2004
     ----
     Tangible assets - Net                                   3,310       14,531         2,811            20,652
     Reagent rentals - Net                                  20,789        2,666         2,905            26,360
     Intangible assets (excluding Goodwill) - Net            1,172           35             -             1,207
     Long-term receivables and other                           210           43            77               330
</TABLE>


18.  INTEREST INCOME AND EXPENSE

     Interest income and expense for the year ended November 2002, 2003 and
     2004 were as follows (in thousands of Euro):

<TABLE>
<CAPTION>
                                                                    2002              2003             2004
                                                                    ----              ----             ----
     <S>                                                         <C>                <C>              <C>
     Interest income from deposits and other
        short-term financial assets                                  980               746              739
                                                                  ------            ------           ------

                       Total interest income                         980               746              739
                                                                  ======            ======           ======

     Interest expense on short-term bank borrowings                5,225             4,844            4,941

     Interest expense on long-term debt                            6,985             5,966            2,331
                                                                  ------            ------           ------

                       Total interest expense                     12,210            10,810            7,272
                                                                  ======            ======           ======
</TABLE>

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 and
     expenses (such as supplementary leaving indemnities).

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

<TABLE>
<CAPTION>
                                                                   2002              2003             2004
                                                                   ----              ----             ----
    <S>                                                           <C>               <C>              <C>
    Supplementary leaving indemnities                             (1,515)             (981)          (1,730)
    Gain  (loss)  on  foreign   exchange  and  forward
    exchange contracts                                             1,896            (2,667)          (1,089)
    Litigation  settlements  and  estimated  costs  to
    settle                                                        (1,260)             (220)            (471)
    Gain (loss) on disposal of fixed assets                          117                72             (210)
    Bank charges                                                    (700)             (914)          (1,208)
    Other, net                                                    (1,234)           (1,079)             (43)
                                                                  -------           -------          -------
             Total Other income (expense), net                    (2,696)           (5,789)          (4,751)
                                                                  =======           =======          =======
</TABLE>


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,
     2002,  2003 and 2004 were  approximately  Euro 8.4 million,  Euro 10.5
     million and Euro 13.1 million, respectively.

     In addition,  for the year ended  November  30, 2002,  2003 and 2004 a
     Werfen affiliate charged the Company  approximately  Euro 2.2 million,
     Euro 2.5  million and Euro 2.1  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, 2002,
     2003 and 2004 were approximately Euro 13.7 million,  Euro 12.7 million
     and Euro 16.3 million, respectively.

     As of November 30, 2003 and 2004, the most  significant  balances with
     Werfen Group companies are the following (in thousands of Euro):

     Commercial  transactions  (included in trade receivables and trade and
     other payables)

<TABLE>
<CAPTION>

                                                           2003                                 2004
                                                           ----                                 ----
                                                Receivables           Payables       Receivables         Payables
                                                -----------           --------       -----------         --------
     <S>                                              <C>               <C>               <C>              <C>
     Izasa Distribuciones Tecnicas, S.A.              3,238             1,390             2,010            1,930
     Biokit S.A.                                        291                 -               255
     Biokit Distribution S.A.                             -             5,017                 -            5,102
     NTE, S.A.                                            -               638                 -              701
     Werfen Medical IL Ltd. Korea                       414                 -               305                -
     Comesa Austria                                       2                69                 -               30
     Comesa Poland                                      261                 -               260                -
                                                      -----             -----             -----            -----
                                                      4,206             7,114             2,830            7,763
                                                      =====             =====             =====            =====

     Financial transactions (including interests)

<CAPTION>
                                                           2003                                 2004
                                                           ----                                 ----
                                                Receivables           Payables       Receivables         Payables
                                                -----------           --------       -----------         --------
      <S>                                           <C>                <C>              <C>               <C>
      Izasa Distribuciones Tecnicas, S.A.                 -            62,225                 -                -
      Miscel Holding B.V.                                 -             1,767                 -            1,767
      IL Holding S.p.A.                                   -            29,102                 -            1,136
                                                     ------            ------            ------            -----

                                                          -            93,094                 -            2,903
                                                     ======            ======            ======            =====
</TABLE>

     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 2002, 2003 and 2004, Izasa Distribuciones  Tecnicas S.A.
     ('Izasa')  charged  certain  Group  companies  approximately  Euro 582
     thousands, Euro 457 thousands and Euro 350 thousands, respectively, in
     management fees for corporate services provided to these companies and
     administrative and out-of-pocket  expenses incurred in rendering those
     services.

     In connection with the acquisition of Hemoliance, completed in January
     1999,  certain Werfen Group companies granted  long-term  subordinated
     loans to the  Company  (Note 11).  Interest  charged on these loans in
     fiscal years 2002,  2003 and 2004  amounted to Euro 6.0 million,  Euro
     5.2 million and Euro 1.6 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.  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 fiscal
     years  2002,  2003 and 2004  amounted  to Euro 2.2  million,  Euro 2.7
     million and Euro 2.4 million and have been  classified  as a reduction
     of research and development costs of the periods.

     On July 18,  2002,  we executed as a guarantor a loan  agreement  with
     other Werfen group companies in favor of Izasa Distribuciones Tecnicas
     S.A.,  relating to a syndicated  loan of (euro)100  million granted to
     Izasa.

     On March 24, 2004,  we executed as a guarantor a loan  agreement  with
     other Werfen group companies in favor of Izasa Distribuciones Tecnicas
     S.A.,  relating to a syndicated  loan of (euro)115  million granted to
     Izasa.

     On April 12, 2005,  we executed as a guarantor a loan  agreement  with
     other Werfen group companies in favor of Izasa Distribuciones Tecnicas
     S.A.,  relating to a syndicated  loan of (euro)250  million granted to
     Izasa, which replaces 2002 and 2004 syndicated loans above described.

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
     Italian GAAP (see Note 2), which differ in certain  respects from U.S.
     generally accepted accounting principles ("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 Italian GAAP.  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  an
     impairment may have occurred. The goodwill amortization recorded under
     Italian GAAP, in fiscal years 2003 and 2004,  have been fully reversed
     in the accompanying reconciliation.

     Also, the adjustment in the  reconciliation of the net loss under U.S.
     GAAP,  reflects 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.

     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 a 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, 2002,  2003 and 2004.  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.

     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 income 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 the Company to recognize in
     other comprehensive income an additional minimum liability. The amount
     recognized  is  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
     recorded to net equity.

     Under US GAAP, such excess,  representing  accumulated  earnings,  has
     been recorded in income.

     Accounting for 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-forwards 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 it is
     reasonably certain 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-forwards 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

     The  Mexican   subsidiary,   in  compliance   with  local   accounting
     principles, prepared the financial statements including the effects of
     monetary inflation.

     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,
     2003 and 2004.

     Accounting for Transfer of financial assets

     As  described in Note 5, the Company  entered  into several  factoring
     transactions  by which  trade  receivables  were  sold.  Some of these
     transactions  do not meet all the criteria  required under FASB 140 to
     record a sale of trade receivables as opposed to a secured borrowing.

     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.  On
     March  29,  2004 the  Company's  shareholders'  meeting  approved  the
     partial  coverage of 2003 losses,  amounting to Euro 11,496  thousands
     through the utilization of residual  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,  2004,  equal to 37,701  thousands  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, 2002, 2003 and 2004').

     Restatement

     During   2004,   the  Company   restated   its   previously   released
     reconciliation  between net result and shareholders' equity determined
     under Italian GAAP and U.S. GAAP as of and for the year ended November
     30, 2003 to correct the  calculation of the provision for income taxes
     and the related  deferred tax accounts  under U.S.  GAAP.  The Company
     should  have  reported   gross,   certain   deferred  tax  liabilities
     associated with differences related to differing tax and book bases of
     goodwill.  As a result, the Company has restated the reconciliation to
     record under U.S. GAAP a deferred tax liability of approximately U.S.$
     1,583,000  at  November  30,  2003 a  provision  for  income  taxes of
     approximately  U.S.$  791,000  and a  cumulative  effect  of change in
     accounting principle of U.S.$ 792,000 in fiscal 2003.

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,  2002,  2003 and 2004 and to
     shareholders'  equity as of  November  30, 2003 and 2004 that would be
     required if U.S. GAAP had been applied  instead of Italian GAAP in the
     consolidated financial statements:

<TABLE>
<CAPTION>

                                                                       Year ended November 30,
                                                        -----------------------------------------------------
                                                                       2003
                                                                       ----
     NET INCOME (LOSS)                                   2002     (restated)           2004             2004
                                                        ------    -----------         ------           ------
                                                             (Thousands of Euro, except        (Thousands of
                                                                   per Share Data)             U.S.$, except
                                                                                                   per Share
                                                                                                       Data)
     <S>                                                 <C>            <C>             <C>              <C>
     Net income (loss) according to the
     financial statements prepared under
     Italian GAAP                                        (13,841)       (11,085)          6,678            8,855

     Items increasing (decreasing) reported Net results:

     Accounting for goodwill                                  34          7,364           7,364            9,764
     Accounting for finance sale & lease-back                455            559             664              880
     Accounting for goodwill denominated in
     foreign currencies                                   (1,447)          (293)            321              426
     Discount of accounts receivables                     (1,605)        (1,170)         (1,250)          (1,657)
     Imputed interest on accounts receivable               1,704          1,605           1,170            1,551
     Consolidation of subsidiary                             (70)           (52)            (49)             (65)
     Accounting for derivatives                              333           (333)           (196)            (260)
     Deferred income taxes                                  (445)        (1,015)           (356)            (472)
     Accounting for monetary revaluation                     304           (114)            207              274
     Tax effect of reconciling items                        (203)          (128)              -                -
                                                         --------       --------        --------         --------
     Approximate net income (loss) from
     continuing operations in accordance with
     US GAAP                                             (14,781)        (4,662)         14,553           19,296
                                                         ========       ========        ========         ========

     Cumulative effect of change in accounting
     principle                                                 -           (681)              -                -
                                                         --------       --------        --------         --------
     Approximate net income (loss) in
     accordance with US GAAP                             (14,781)        (5,343)         14,553           19,296
                                                         ========       ========        ========         ========

     Net income (loss) per share - basic and
     diluted                                               (0.16)         (0.06)           0.06             0.08

     Weighted average common shares outstanding       90,701,104     90,701,104     253,347,488      253,347,488


<CAPTION>
     CONSOLIDATED STATEMENT OF
     COMPREHENSIVE INCOME (LOSS)                                       Year ended November 30,
                                                        -----------------------------------------------------
                                                                       2003
                                                                       ----
     NET INCOME (LOSS)                                   2002     (restated)           2004             2004
                                                        ------    -----------         ------           ------
                                                                   (Thousands of Euro)             (Thousands of
                                                                                                          U.S.$)
     <S>                                                 <C>            <C>             <C>              <C>
     Approximate net income (loss) in accordance
     with US GAAP                                        (14,781)        (5,343)         14,553           19,295
     Cumulative translation adjustment                   (16,532)       (23,206)        (10,038)         (13,309)
     Reversal of inflation accounting to
     Monetary Revaluation reserve                           (304)           114            (687)            (911)
     Minimum pension liability, net of tax                (6,310)          (858)            (30)             (40)
                                                         --------       --------        --------         --------

     Total comprehensive income (loss)                   (37,927)       (29,293)          3,798            5,035
                                                         ========       ========        ========         ========

</TABLE>


<TABLE>
<CAPTION>
                                                                                    At November 30,
                                                                    ---------------------------------------------
     SHAREHOLDERS' EQUITY                                                 2003
                                                                         ------
                                                                     (restated)           2004          2004
                                                                     ----------          ------        ------
                                                                          (Thousands of Euro)        (Thousands
                                                                                                      of U.S.$)
     <S>                                                                 <C>            <C>            <C>
     Shareholders' equity according to the financial statements
     prepared under Italian GAAP                                          61,862        155,408        206,055

     Items increasing (decreasing) reported shareholders' equity:

            Accounting for goodwill                                        6,896         14,260         18,908
            Accounting for finance sale & lease back                         885          1,549          2,054
            Discount and imputed interest on accounts receivable            (271)          (350)          (465)
            Accounting for goodwill denominated in foreign
            currencies                                                      (299)        (7,232)        (9,589)
            Accounting for pension plans                                 (14,923)       (14,953)       (19,826)
            Accounting for monetary revaluation                                -           (480)          (637)
            Accounting for derivatives                                         -           (196)          (260)
            Deferred income taxes                                         (1,697)        (2,053)        (2,722)
            Tax effect of reconciling items                                    -              -              -
                                                                         -------        -------        -------

     Approximate shareholders' equity in accordance with
     US GAAP                                                              52,453        145,953        193,518
                                                                         =======        =======        =======

</TABLE>


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

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

     Pension Plans

     Under US GAAP the U.S. subsidiary was required to recognize additional
     minimum  liabilities  of U.S. $ 6,899,000,  U.S. $  5,178,000,  U.S. $
     1,847,000 and US $ 150,000  respectively  in fiscal years 2001,  2002,
     2003  and  2004,  in  connection  with  the  plan  for its  employees,
     representing the excess of the unfunded accumulated benefit obligation
     over the accrued pension costs.

     The additional  minimum liability  required to be recognized by the UK
     subsidiary  aggregated  GBP  704,000,  GBP  1,315,000  and GBP 696,000
     respectively in fiscal year 2002, 2003 and 2004  corresponding to U.S.
     $ 1,089,000, U.S. $ 3,529,000, and U.S. $ 1,274,000 respectively.

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

     Postretirement Benefits

     A  reconciliation   of  the  beginning  and  ending  balances  of  the
     accumulated  postretirement  benefit  obligation  is  as  follows  (in
     thousands of Euro):

<TABLE>
<CAPTION>

                                                                              2002          2003          2004
                                                                            -------       -------       -------
     CHANGE IN ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION (APBO)
     DURING MEASUREMENT PERIOD
     <S>                                                                   <C>           <C>           <C>
     APBO, November 30 previous year                                         6,149         3,641         2,837
     Effect of exchange rate on opening balance                               (640)         (626)         (166)
     Service Cost                                                              275            95            46
     Interest Cost                                                             341           171           163
     Actuarial (Gain)/Loss                                                    (406)         (344)           77
     Benefits Paid                                                            (126)         (100)         (128)
     Plan amendment                                                         (1,952)            -             -
                                                                            -------       -------       -------

     APBO, November 30                                                       3,641         2,837         2,829

     A reconciliation of the beginning and ending balances of the
     accumulated postretirement benefit obligation is as follows (in
     thousands of Euro):

<CAPTION>
     CHANGE IN PLAN ASSETS DURING THE MEASUREMENT PERIOD
     <S>                                                                   <C>           <C>           <C>
     Plan Assets at Fair Value, November 30 of previous year                     -             -             -
     Employer Contribution                                                     127           100           128
     Benefits Paid                                                            (127)         (100)         (128)
                                                                            -------       -------       -------

     Plan Assets at Fair Value, November 30                                      -             -             -


     The net prepaid (accrued) postretirement benefit obligation includes
     the following (in thousands of Euro):

<CAPTION>
     RECONCILIATION OF PREPAID (ACCRUED)
     <S>                                                                   <C>           <C>           <C>
     Accumulated postretirement benefit obligation                           3,641         2,837         2,829
     Plan assets at fair value                                                   -             -             -
                                                                            -------       -------       -------

     Accumulated postretirement benefit obligation in excess of
     plan assets                                                            (3,641)       (2,837)       (2,829)
     Unamortized Prior Service Cost                                              -          (861)         (750)
     Unrecognized Net Actuarial Loss (Gain)                                 (1,828)         (237)         (146)
     Unrecognized Net transition obligation                                    843             -             -
                                                                            -------       -------       -------
     ACCRUED POSTRETIREMENT BENEFIT OBLIGATION                              (4,626)       (3,935)       (3,725)


     Net periodic postretirement benefit expense includes the following
     components (in thousands of Euro):

<CAPTION>
     COMPONENTS OF NET PERIODIC BENEFIT COST FOR FISCAL YEAR                  2002          2003          2004
                                                                            -------       -------       -------

<S>                                                                            <C>           <C>           <C>
     Service Cost                                                              275            95            46
     Interest Cost                                                             341           171           163
     Net amortization of Prior Service Cost                                      -           (61)          (57)
     Net amortization of unrecognized gain                                       -            (4)            -
     Net amortization of transition obligation                                 229             -             -
                                                                            -------       -------       -------

     NET PERIODIC PENSION COST                                                 845           201           152

</TABLE>

     The  assumed  health  care  cost  trend  rate  used in  measuring  the
     accumulated postretirement benefit obligation was 5.00% in 2002, 5% in
     2003  and 5% in  2004.  The  discount  rate  used in  determining  the
     accumulated  postretirement  benefit  obligation was 6.75%,  6.25% and
     6.00% at November 30, 2002, 2003 and 2004, respectively.

     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.  At the  Shareholders'  Meeting
     convened  on March 29, 2004 the par value of the  underlying  Ordinary
     Shares was also reduced to the new par value of (euro)0.33 per share.

     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 May 16,
     2005 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 May 16, 2005.

     The  Company   adopted  the   provisions  of  Statement  of  Financial
     accounting  Standards No.123 'Accounting for Stock Based Compensation'
     ("SFAS  123").  As  permitted by SFAS 123, the Company has elected and
     plans 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, 2004:

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

         0.43                170,000              3.64               0.43

     The following table summarizes  information about options  outstanding
     at November 30, 2003 and 2004:

                                          Options outstanding at fiscal year
                                       ----------------------------------------
                                           2003        2004            Weighted
                                         -------     -------           --------
                                                                        Average
                                                                        -------
                                                                 Exercise Price
                                                                 --------------
                                                                 (in US Dollars)

     Balance at December 1,             170,000     170,000                0.43
     Granted                                  -           -                   -
     Exercised                                -           -                   -
                                       ----------------------------------------
     Balance at November 30,            170,000     170,000                0.43

     Exercisable at November 30,        127,500     170,000                0.43

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

<TABLE>
<CAPTION>
                                                                   2002               2003                 2004
                                                               --------           --------             --------
                                                                                  restated
                                                                                  --------
     <S>                                                        <C>                <C>                   <C>
     Net income (loss) attributable to common
     stockholders - as reported under U.S. GAAP                 (14,681)            (6,382)              19,296
     Less: Total stock based employee compensation
     expense determined under the fair value based
     method for all awards                                          (42)               (42)                 (19)
     Pro-forma net income (loss) under U.S. GAAP
     attributable to common stockholders                        (14,723)            (6,424)              19,277

     Net loss per share - as reported basic and
     diluted                                                      (0.16)             (0.07)                0.08
     Net loss per share - pro forma basic and
     diluted                                                      (0.16)             (0.07)                0.08

</TABLE>

     The adoption of SFAS 123 would have no effect on diluted  earnings per
     share for the years ended  November 30, 2002,  2003 and 2004 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.

     Deferred Income Taxes

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

<TABLE>
<CAPTION>
                                                   2002               2003              2004
                                                   ----               ----              ----
                                                              (Thousands of Euro)
     <S>                                         <C>                <C>                <C>
     Domestic                                     10,289             14,405            17,192
     Foreign                                     (21,873)           (15,153)              523
                                                 --------           --------           ------
     Total pre-tax loss                          (11,584)              (748)           17,715
                                                 ========           ========           ======

     The provisions for income taxes are as follows:
<CAPTION>
                                                   2002               2003              2004
                                                   ----               ----              ----
                                                              (Thousands of Euro)
     <S>                                         <C>                <C>                <C>
     Current                                       2,467              2,720             3,102
     Deferred                                        730                447                60
                                                 --------           --------           ------

          Total                                    3,197              3,167             3,162
                                                 ========           ========           ======

</TABLE>

     The tax effects of significant differences are as follows:

                                                             NOVEMBER 30,
                                                    ----------------------------
                                                         2003          2004
                                                     --------      --------
                                                     RESTATED
                                                     --------
                                                         (Thousands of Euro)
     Deferred tax assets:
        Accrued liabilities not currently
        deductible                                      2,452           3,162
        Depreciation and amortization                  (4,669)         (2,000)
        Goodwill                                       (1,362)         (1,864)
        Inventories basis difference                    1,647           1,396
        Reserves                                          788             819
        Pension and postretirement benefit              1,284             239
        R&E  Capitalization                            11,943          11,502
        R&D Capitalization                              5,052           5,975
        Tax loss carry-forwards                        52,368          38,237
        Other                                             348              61
                                                     --------        --------
                                                       69,851          57,257
     Less: Valuation allowance                        (71,850)        (59,581)
                                                     --------        --------
     Net deferred tax liability                        (1,999)         (2,053)
                                                     ========        ========

     Tax loss  carry-forwards are expected to reverse at an average rate of
     33%.

     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:

                               2003               2004                     2004
                               ----               ----                     ----
                                  (Thousands of Euro)      (Thousands of U.S.$)

     Intangible assets       117,445             109,805                145,591
     Current assets          144,473             154,332                204,628
     Current liabilities     148,169             152,861                202,678
     Total assets            326,740             331,536                439,583
     Short term debt          56,112              52,249                 39,406
     Long term debt          102,564              14,021                 18,590

     Valuation and Qualifying Accounts

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

<TABLE>
<CAPTION>
                                     Balance at   Effect of exchange      Charged to    Deductions   Balance at
                                     -----------  -------------------     -----------   ----------   ----------
                                   Beginning of      rate on opening       Costs and                     End of
                                   ------------      ---------------       ---------                     ------
                                         Period              Balance        Expenses                     Period
                                         ------              -------        --------                     ------
     <S>                                <C>                    <C>            <C>         <C>            <C>
     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
     2003
     ----
        Reserve for doubtful
        accounts receivable               5,775                (428)             340      (1,089)         4,598
        Obsolescence reserve for
        inventory                        10,710                (903)           3,067      (2,920)         9,954
     2004
     ----
        Reserve for doubtful
        accounts receivable               4,598                (223)           1,235        (526)         5,084
        Obsolescence reserve for
        inventory                         9,954                (519)           3,074      (3,155)         9,354

</TABLE>

     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.

<TABLE>
<CAPTION>
                                                               AT NOVEMBER 30,
                                                               ---------------
                                                 2003                               2004
                                  ------------------------------------------------------------------------
                                   Carrying Value      Fair Value       Carrying Value       Fair Value
                                  ------------------------------------------------------------------------
                                                            (Thousands of Euro)
     <S>                               <C>               <C>                <C>                <C>
     Trade receivables                 75,992            74,822             81,200             79,950

</TABLE>


     -    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.

     Recent Accounting Pronouncements

     In December  2004, the FASB issued  statement No. 123 (revised  2004),
     "Stock-Based  Payment" (SFAS 123R).  This statement  replaces SFAS 123
     "Accounting for Stock-Based Compensation",  supersedes APB Opinion No.
     25,  "Accounting  for Stock Issued to  Employees"  (APB 25) and amends
     SFAS 95,  "Statement  of Cash  Flows",  to  require  that  excess  tax
     benefits  be reported  as a  financing  cash  inflow  rather than as a
     reduction of taxes paid.  SFAS 123R is effective  the first interim or
     annual  reporting  period that begins after June 15, 2005. The Company
     expects to adopt the provisions of the new standard  effective January
     1, 2006. The Company is currently  evaluating the requirements of SFAS
     123R, including the adoption method alternatives,  but does not expect
     adoption of this statement to have a material  effect on the operating
     result of the Company.

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.  SUBSEQUENT EVENTS

     A  complaint  was filed by  Bio-Rad  Laboratories,  Inc.  against  the
     Company, Werfen, Izasa, and four of the Company's current officers and
     directors in January 2005 in the United States  District Court for the
     Southern  District of New York.  The  complaint  asserts  claims under
     common  law for  fraud,  conspiracy  to commit  fraud and  aiding  and
     abetting fraud against all the defendants; negligent misrepresentation
     against the Company and the individual  defendants;  as well as breach
     of fiduciary  duty under  Italian  Civil Code Article 2395 against the
     individual  defendants.  The  complaint  alleges  generally  that  the
     defendants   falsely    understated   the   Company's   revenues   and
     profitability in financial statements included in the Company's public
     filings and public statements from 1999 to 2004, and that the price of
     the Company's  ADSs have therefore been  artificially  depressed.  The
     plaintiff,  which owns ADSs,  seeks an unspecified  amount of damages.
     All the defendants have moved to dismiss the complaint.  At this stage
     the  Company  is not in a  position  to  assess  the  outcome  of this
     proceeding.

     Following a  resolution  of the Board of the  Company on February  23,
     2005,  the entire  capital of  Instrumentation  Laboratory  Ges.m.b.H.
     Austria  was  transferred  on April 7, 2005 to Comesa  GmbH,  a Werfen
     group company.  The price for the sale of the shares was fixed at Euro
     3.4  million  based on an  independent  third  party  appraisal.  As a
     consequence  of  the  sale,   Instrumentation   Laboratory  Ges.m.b.H.
     Austria,  which  represented  sales in the amount of Euro 4.6 million,
     Euro 5.3 million and Euro 7.2 million in fiscal  years 2002,  2003 and
     2004, respectively, will be deconsolidated effective January 1, 2005.