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, 2003
                                    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:


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

     American Depositary Shares, each representing               NONE
     one Ordinary Share,(euro)0.33 par value 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. 90,701,104 Ordinary Shares, (euro)1.29 par value

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

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

--------------------------
(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........................3

   Item 3.    KEY INFORMATION................................................4

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

   Item 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS..................32

   Item 6.    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES....................52

   Item 7.    MAJORITY SHAREHOLDERS AND RELATED PARTY TRANSACTIONS..........56

   Item 8.    FINANCIAL INFORMATION.........................................58

   Item 9.    THE OFFER AND LISTING DETAILS.................................59

   Item 10.   ADDITIONAL INFORMATION........................................62

   Item 11.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....70

   Item 12.   DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES........72

Part II.....................................................................73

   Item 13.   DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES...............73

   Item 14.   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
              HOLDERS AND USE OF PROCEEDS...................................74

   Item 15.   CONTROLS AND PROCEDURES.......................................74

   Item 16A.  DISCLOSURE ON AUDIT COMMITTEE FINANCIAL EXPERT................75

   Item 16B.  CODE OF ETHICS................................................75

   Item 16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES........................75

   Item 18.   FINANCIAL STATEMENTS..........................................76

   Item 19.   EXHIBITS......................................................77

SIGNATURES..................................................................79


<PAGE>


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

                   PRESENTATION OF FINANCIAL INFORMATION

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


     Since November 30, 2002, we have published our consolidated  financial
statements  ("Consolidated  Financial  Statements") in euro.  However,  the
Consolidated  Financial  Statements  for the fiscal years ended on November
30, 2001, 2000 and 1999 were  originally  prepared in Italian lire and have
been  translated  into  euros at the rate of Lit.  1,936.27  per euro,  the
official  rate  established  by the European  Monetary  Union on January 1,
1999.  The euro did not exist  prior to that date and the  conversion  rate
used may not reflect the lire/euro exchange rate that would have applied if
the euro had existed at such times.  Also, for financial  information  thus
translated  from dates and periods before November 30, 2002, you should not
assume that you can accurately compare this financial information with that
of other  companies  that  have  translated  a  non-Italian  lire  European
currency into euro. In this Annual Report,  unless  otherwise  specified or
the context requires otherwise,  references to "lira", "lire" or "Lit." are
to the Italian lira  (singular) or to Italian lire (plural),  references to
"euro"  or  "(euro)"  are to  euros  and  references  to "$",  "U.S.  $" or
"dollars" are to United States  dollars.  Solely for the convenience of the
reader,  this Annual Report  contains  translations of certain euro amounts
into dollars at specified rates. These translations should not be construed
as  representations  that the euro amounts  actually  represent such dollar
amounts or could be converted into dollars at those rates. Unless otherwise
stated, the translations of euro into dollars have been made at the rate of
$ 1.1995 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 28, 2003. For further
information  regarding  recent rates of exchange  between euro and dollars,
see "Item 3 - Key  Information - Exchange Rates" "Item 3 - Risk of error in
forward looking  statements"  and "Item 5 - Operating and Financial  Review
and Prospects - Currency  Effects" for a discussion  of how exchange  rates
affect us.


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


<PAGE>


                                   PART I

ITEM 1.     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

A.    NOT REQUIRED.

B.    NOT REQUIRED.

C.    NOT REQUIRED.


<PAGE>


ITEM 2.     OFFER STATISTICS AND EXPECTED TIMETABLE

A.    NOT REQUIRED.

B.    NOT REQUIRED.


<PAGE>


ITEM 3.     KEY INFORMATION

A.    SELECTED FINANCIAL DATA.


     The  following  table  presents  our selected  consolidated  financial
information  for the periods  indicated  and should be read in  conjunction
with,  and is  qualified  in its  entirety  by  reference  to, the  Audited
Consolidated  Financial  Statements  and "Item 5 -- Operating and Financial
Review and  Prospects"  appearing  elsewhere  in this  Annual  Report.  The
selected financial information as of November 30, 2002 and 2003 and for the
fiscal  years ended  November  30, 2002 and 2003 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, 1999,
2000 and 2001 and for the fiscal years ended  November  30, 1999,  2000 and
2001 has been derived from our audited historical  financial statements for
such periods and were audited by Arthur Andersen S.p.A,  independent public
accountants.

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

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

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

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

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

<PAGE>
<TABLE>
<CAPTION>
                                              As of or for the year ended November 30
                                 1999 [restated]     2000 [restated]       2001 [restated]          2002               2003
                                ----------------   -------------------     ---------------    ----------------    -----------------
                                         (In thousands of Euro, except per share amounts)
INCOME STATEMENT  DATA (1)
Italian GAAP:
<S>                                      <C>                   <C>                 <C>                 <C>                  <C>
   Net sales and revenues....   (euro)   265,865   (euro)      275,312     (euro)  274,814    (euro)   272,591    (euro)    260,011
   Cost of sales and services            144,523               143,163             144,207             141,549              131,066
                                ----------------   -------------------     ---------------    ----------------    -----------------
      Gross profit...........            121,342               132,149             130,607             131,042              128,945
   Research and development
      costs..................             21,278                20,124              19,588              20,072               19,238
   Selling, general and
      administrative expenses             95,539                92,008              92,699              99,792               93,746
                                ----------------   -------------------     ---------------    ----------------    -----------------
      Operating income
        before amortization
        of intangible assets
        and deferred charges.              4,525                20,017              18,320              11,178               15,961
   Amortization of
      intangible assets and
      deferred charges ......             12,138                11,337               9,058               8,464                8,423
                                ----------------   -------------------     ---------------    ----------------    -----------------
      Operating income (loss)             (7,613)                8,680               9,262               2,714                7,538
   Interest income...........              1,390                 1,324               1,277                 980                  746
   Interest expense..........             12,983                15,924              15,382              12,210               10,810
   Other income (expense) net            (16,214)              (10,016)              2,018              (2,696)              (5,789)
                                ----------------   -------------------     ---------------    ----------------    -----------------
   Income (loss) before
      income taxes...........            (35,420)              (15,936)             (2,825)            (11,212)              (8,315)
   Income taxes..............              2,026                 1,536               2,916               2,549                2,703
   Minority interest.........                  -                     -                 (68)                (80)                 (67)
                                ----------------   -------------------     ---------------    ----------------    -----------------
   Net income (loss).........   (euro)   (37,446)  (euro)      (17,472)    (euro)   (5,809)   (euro)   (13,841)   (euro)    (11,085)
                                ================   ===================     ===============    ================    =================
   Net income (loss) per
      share (2)..............   (euro)     (0.85)  (euro)        (0.40)    (euro)    (0.08)   (euro)     (0.15)   (euro)      (0.12)
U.S. GAAP:
   Net income (loss).........   (euro)   (35,797)  (euro)      (21,002)    (euro)  (17,228)   (euro)   (14,781)   (euro)     (3,982)
                                ================   ===================     ===============    ================    =================
   Net income (loss) per
   share (2).................   (euro)     (0.81)  (euro)        (0.48)    (euro)    (0.24)   (euro)     (0.16)   (euro)      (0.04)

BALANCE SHEET DATA
Italian GAAP:

   Working capital...........   (euro)    12,688   (euro)       22,527     (euro)   31,393     (euro)     8,268   (euro)      6,929
   Total assets..............            416,771               375,531             353,845              341,836             303,841
   Long-term debt............            144,766               149,466             103,335               87,814              97,234
   Shareholders' equity......             73,856                46,740              98,842               80,316              61,862
U.S. GAAP:
   Working capital...........   (euro)    13,005   (euro)       23,126     (euro)   29,220     (euro)     4,094   (euro)      2,358
   Total assets.............             418,971               409,675             388,270              370,096             320,686
   Long-term debt............            144,766               149,466             108,169              108,562             102,564
   Shareholders' equity......             75,952                81,480             119,675               81,748              53,816

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

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

(2)  "Net income (loss) per share" is calculated based on 44,189,477 shares outstanding for fiscal years 1999 and 2000, 72,861,028
     shares outstanding for fiscal year 2001 and 90,701,104 shares outstanding for fiscal years 2002 and 2003 (the weighted
     average).

</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*
      ---------------       -----            -----           --------
         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
         1999               $1.18            $1.00           $1.06


     November 2003          $1.20            $1.14
     December 2003          $1.26            $1.20
      January 2004          $1.29            $1.24
     February 2004          $1.28            $1.24
        March 2004          $1.24            $1.21
        April 2004          $1.24            $1.18

--------------------------
*    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 26, 2004,  the Noon Buying Rate was $1.2102 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

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

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

     We  have  substantial   indebtedness  with  significant  debt  service
requirements   and  are  highly   leveraged.   At  November  30,  2003  our
consolidated  net  financial  debt would have been  (euro)45.2  million and
shareholders' equity (euro)151.6 million, respectively, had we given effect
to the  capital  increase  and  debt  reduction  effected  in  March  2004.
Approximately  84% of our  indebtedness  is short  term and is  subject  to
repayment upon demand. We have also along with other Werfen group companies
guaranteed two loans to Izasa Distribuciones Tecnicas S.A. in the principal
amount of (euro)100 million and (euro)115 million.  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.  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 24.2% of our fiscal 2003 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 29.7% of our fiscal
2003 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,
2003, we had (euro)26.7  million in outstanding  accounts  receivable  from
Italian governmental entities and agencies,  representing approximately 35%
of our  outstanding  trade  receivables and 19% of our net sales for fiscal
2003. 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 9.6% of our sales for fiscal 2003.

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

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

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

We are controlled by one major shareholder

     As of May 27, 2004,  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 paid dividends in the past

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

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

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

     In 1996, 590 Lincoln  Street Trust filed a lawsuit  alleging a release
of  hazardous  material,  on or earlier  than 1988,  by one of its tenants,
including an affiliate of our predecessor that was an operator of the site.
In connection  with the 1991  acquisition  of our  predecessor,  we assumed
various obligations of this predecessor including the potential liabilities
involved in this  matter.  As such,  we were named as a  defendant  in this
lawsuit.  We have denied  liability.  In 2002, the case went to trial and a
verdict was returned against our indemnitee. A judgment has been entered in
the case in the amount of approximately 2.6 million U.S.  Dollars.  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,  reissue its audit  report with  respect to the  consolidated
financial  statements  included in this report, or consent to the inclusion
in  this  report  of  its  audit   report.   As  a  result,   investors  in
Instrumentation  Laboratory  may have no effective  remedy  against  Arthur
Andersen  in  connection  with a material  misstatement  or omission in the
financial  statements to which its audit report relates. In addition,  even
if such investors were able to assert a claim,  Arthur Andersen may fail or
otherwise  have  insufficient  assets to satisfy  claims by investors  that
might  arise  under the U.S.  federal  securities  laws or  otherwise  with
respect to its audit report.

     Risk of error in forward looking statements

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

     o    ability to service future debt;

     o    potential inability to integrate acquisitions;

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

     o    anticipated trends in business and industry;

     o    business strategies;

     o    anticipated future growth in markets;

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

     o    property, plant and equipment facilities sufficiency;

     o    environmental costs as a result of future compliance;

     o    strategy and restructuring plan impact on results of operation;

     o    operating and net income  vulnerability  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,
          including SFAS 144, 145, 146, 148 and 150;  Interpretations  Nos.
          45 and 46; and EITF Issue No. 00-21;

     o    potential  conflicts with respect to related party  transactions;
          and

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

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


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 2003, 2002 and 2001 for each
of the product lines are as follows:

                       Net Sales - IVD Product Lines
                                  2003           2002        2001

Hemostasis                        48.1%          49.4%       47.8%


Critical Care                     27.9%          28.2%       28.9%


Clinical Chemistry                 9.6%           8.9%       10.3%

     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
                                    2003         2002        2001


Europe (including Italy)           63.6%         58.3%      57.3%

Italy                              29.7%         26.8%      25.7%

U.S.                               24.2%         29.7%      29.8%

Rest of the World                  12.2%         12.0%      12.9%

     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 78% of our fiscal
2003 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.

Background

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

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

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

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

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

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

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

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

     De-listing.  On September  3, 1999,  our  American  Depositary  Shares
ceased to be listed on the  Nasdaq  National  Stock  Market.  Our ADSs were
de-listed  because  we no longer  fulfilled  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  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  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 48.1% of fiscal 2003 net sales;

     o    Critical  care  systems,  representing  27.9% of fiscal  2003 net
          sales; and

     o    Clinical chemistry systems,  representing 9.6% of fiscal 2003 net
          sales.

     In  addition,   we  generate  sales  from   distribution  of  products
manufactured by third parties (collectively, "Distributed Products"), which
represented 14.4% of our fiscal 2003 net revenues.

     Hemostasis Systems

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

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

     The  Venture  Planning  Group,   which  provided  the  basis  for  our
hemostasis  market share  information,  estimated the 2002 worldwide market
for hemostasis systems in which we operate at approximately  $804.9 million
(representing sales of instruments,  reagents,  controls, other consumables
and  services).  Approximately  30% of such  revenues were derived from the
United States,  40% were derived from Western Europe, 17% were derived from
Japan and 13% were derived from the rest of the world.  Hemostasis  systems
are  primarily  sold to  hospital  laboratories  and  independent  clinical
laboratories.  The  overall  market is  relatively  mature,  with  sales of
instruments consisting primarily of replacement of older instruments.

     We  believe  that,  based  on  revenue  generated  from  reagents  and
instruments,  in 2002 we had the second largest overall market share in the
worldwide  hemostasis  systems market with a market share of  approximately
25% of end-user sales. Of our fiscal 2003 sales  attributable to hemostasis
systems,  approximately  60.6% were derived from Europe (22.2% from Italy),
27.8% from the United States and 11.6% from the rest of the world. In 2003,
reagents, controls and other consumables comprised approximately 76% of the
revenues in the worldwide  hemostasis market. We believe that the worldwide
hemostasis  market,  including  instruments,  reagents,  controls and other
consumables,  will continue to grow primarily  through increased demand for
specialty  tests,  expanded  test  menus,  advances  in  testing  for  risk
assessments and growth of point-of-care testing.

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

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

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

     For  instruments,  we plan to continue to maintain our strong position
within the  low-to-medium  throughput  segment of the hemostasis  market by
upgrading our  instruments to meet customers'  needs.  In addition,  we are
also  developing  instruments for the high throughput end of the hemostasis
market, which includes the ACL TOP that we will begin  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 will  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  $16,600  to  $79,500  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 family       2000                Low to Medium      o     Increased  reagent and sample capacity
                                                                           o     Increased walk-away capability
                                                                           o     Automatic rotor changer (ACL 9000/10000)
                                                                           o     Decapper-Recapper interface capability
                                                                                 (ACL 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)
HEMOLIANCE/MLA FAMILY
   ELECTRA 1400C                    1995                Low to Medium      o     Integral bar code reader
                                                                           o     Walk-away capacity
                                                                           o     Chromogenic testing capability

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

(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.
</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
US$587.7 million  (representing sales of instruments,  reagents,  controls,
and other  consumables).  Approximately  39% of such  revenues were derived
from the United States,  30% were derived from Europe, and 31% were derived
from the rest of the world.  Revenue  from  reagents,  controls,  and other
consumables  represents  a  substantial  majority  of the  revenues  in the
worldwide  critical care market.  The additional  capabilities  provided by
blood gas  analyzers,  such as greater  ease-of-use,  lactate  and  glucose
measurement, and the ability to analyze samples nearer to the patient, have
resulted in increased  industry systems  placements through the replacement
of older and less capable instruments.

     We  believe  that in 2002 we had the third  largest  worldwide  market
share in the  critical  care  market,  with an  estimated  market  share of
approximately  14%. Of our fiscal 2003  revenues  attributable  to critical
care  systems,  approximately  48.2% were derived  from Europe  (15.4% from
Italy), 38.2% from the United States and 13.6% 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$4,000  to  US$25,000  for
instruments currently marketed:

<TABLE>
<CAPTION>
                                  Fiscal Year of
            Name               Introduction/ Status   Important Characteristics
----------------------------------------------------------------------------------------------------------------------------------
<S>                                <C>                <C>
BLOOD GAS
   IL 1600 family                  1994               o    Versatile, reliable and moderately priced blood gas analyzers
   GEM Premier Plus                1996               o    Point-of-care blood gas and electrolyte system which provides fast
                                                           and accurate results
                                                      o    Utilizes a multi-use disposable cartridge, each capable of performing
                                                           150 to 300 tests, instead of traditional gas tanks, membranes and
                                                           other solutions
   GEM Premier 2100                1998               o    Integrated GEM Premier Plus and GEM PCL system.  First to integrate
                                                           blood gas, electrolyte and coagulation measurements
   GEM Premier 3000                2000               o    Extended cartridge life
                                                      o    Smaller sample size
                                                      o    Integration of external point-of-care systems (i.e., GEM PCL)
                                                      o    Expanded menu
   Synthesis family                1997               o    New family of critical care instruments
                                                      o    First instrument to integrate blood gas, Co-Oximetry, electrolyte and
                                                           glucose functions in a single instrument using a single sample and
                                                           channel
                                   2000               o    1740 - expanded menu, without Co-Oximetry testing
                                                      o    1745 - expanded menu, with Co-Oximetry testing
   GEM PCL                         1998               o    Point-of-care coagulation hand-held system for the rapid measurement
                                                           of PT, APTT and LR-ACT

CO-OXIMETRY
   IL 682 Co-                      1995               o    Operates as independent system, or electronically links to IL 1600
   Oximeter                                                family and Synthesis family
   GEM OPL                         2000               o    Point-of-care co-oximetry testing
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 CALIBRATORS         Various              o    Broad line of specific and 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
</TABLE>


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  2003  sales  attributable  to  clinical
chemistry systems, approximately 81.5% were derived from Europe (40.2% from
Italy),  2.5% from the United  States and 16.0% from the rest of the world.
We  sell  our  clinical   chemistry   system  to  clinical  and   specialty
laboratories  primarily  located  in  hospitals,  as  well  as to  clinical
reference laboratories and veterinary laboratories.  This relatively mature
market is very  competitive  and  price-sensitive,  with  instrument  sales
consisting primarily of replacement of older instruments.

     Over the past several years, the market for new placements of clinical
chemistry  systems has  significantly  declined,  and we have experienced a
related decline in our clinical  chemistry  installed  base.  Currently the
majority  of our  clinical  chemistry  products  are sold in Europe,  while
clinical chemistry sales in the rest of the world continue to decline.  One
reason we sold our Ascoli factory and streamlined our production facilities
into the leased Ascoli  facility is that our clinical  chemistry  sales are
now  primarily  focused  in Europe.  Prior to fiscal  1997,  our  principal
clinical  chemistry  instrument  was the Monarch.  The Monarch had not been
substantially  revised  since 1991 and we ceased its  production  in fiscal
1996.  With  no  comparable  replacement  product,  we have  experienced  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. We primarily market
these products in Italy, the United Kingdom,  Eastern Europe and the Middle
East.

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


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

<TABLE>
<CAPTION>
                                     FISCAL YEAR OF           TARGET MARKET
             NAME                  INTRODUCTION/STATUS         SEGMENT(1)      FEATURES
-----------------------------------------------------------------------------------------------------------------------------------
       <S>                                <C>                <C>               <C>
       ILAB FAMILY
           Ilab 600                       1998               Low to Medium     o     Floor standing
                                                                               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 CONTROLS             Various                  N/A          o     Broad line of 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.

</TABLE>


     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 11.8% of our fiscal 2003
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 2003 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)19.9 million, (euro)21.6 million and (euro)17.0 million
in reagent rental agreements in fiscal 2001, 2002 and 2003, 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 2001,  2002 and 2003 were  (euro)19.6
million,   (euro)20.1   million  and  (euro)19.2   million,   respectively,
representing  9.3%, 9.5% and 9.7%  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 January 1999, we were awarded  primary  supplier  status in a multi
year  contract with MAGNET,  covering the entire  portfolio of our critical
care  product  line.  This  contract  was renewed in  December  2001 for an
additional  three years.  In September 1999, we announced that we have been
awarded a new agreement with InSource Health Services. The agreement covers
critical care instruments,  services,  and consumables for use in hospitals
and point of care.  Finally,  in October  1999,  we  announced  a five-year
agreement with Health Services  Corporation of America,  one of the largest
purchasing  organizations  in the United States.  The agreement  covers our
complete line of critical  testing  instruments,  consumables,  service and
information  management products for use in hospital  laboratories and near
patient testing. InSource Health Service Corporation of America have merged
to form MedAssets.  Our contracts were joined in a single contract in 2002,
with a five-year expiration term.

     In October  2001,  we entered  into a one-year  supply  contract  with
Premier  Purchasing  Partners.  This  contract  was  extended  for one-year
additional  term in September 2002 and for a three-year  additional term in
September 2003.

     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 3.9%,  3.3% and
3.5% of our net revenues in fiscal 2001, 2002 and 2003,  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 14.1% of our net  revenues in fiscal 2003,
17.6% in fiscal 2002 and 17.3% in fiscal 2001.

BACKLOG

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

SEASONALITY

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

INTELLECTUAL PROPERTY

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

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

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

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

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

ITALIAN HEALTH CARE REGULATION

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

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

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

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

CERTAIN REGULATORY MATTERS

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

     A  manufacturer  may seek FDA  clearance  to  distribute a new medical
device  by filing a 510(k)  pre-market  notification.  A 510(k)  pre-market
notification  requires the  manufacturer  of a medical  device to establish
that the device is  "substantially  equivalent" to 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.

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:

                  [Graphic Omitted - Organizational Chart]

                Jose Maria Rubiralta and Francisco Rubiralta
                                                100%
                              Grupo CH-Werfen

                                                81.67%

                     Izasa Distribuciones Tecnicas S.A._ _ _ _ _ _ _ _ _
                                                                        |
                                                100%                    |
                                                                        |
                            Miscel Holding B.V.                         |
                                                                      59.7%
                                                40.3%                   |
                                                                        |
                             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   (Germany),
Instrumentation Laboratory GmbH (Austria),  Instrumentation Laboratory U.K.
Ltd.  (U.K.),  Instrumentation  Laboratory S.A.  (France),  Instrumentation
Laboratory Belgium N.V.  (Belgium),  Instrumentation  Laboratory Group B.V.
(Holland),   Instrumentation   Laboratory   (Netherlands)  B.V.  (Holland),
Instrumentation  Laboratory  (Lietuva)  B.I.  (Lithuania),  Instrumentation
Laboratory  Espana,  S.L.,  IL  Japan  Co'  Ltd  (Japan),   Instrumentation
Laboratory  Company (U.S.A.),  IL Sensor Systems,  Inc. (U.S.A.)  (formerly
Mallinckrodt Sensor Systems,  Inc.), IL Diagnostic,  S.A. de C.V. (Mexico),
Medical Laboratory Automation Inc., Lessix AB (Sweden), Chromogenix Holding
AB (Sweden) and Chromogenix AB (Sweden).

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

     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 these subsidiaries have not yet been liquidated.



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, 2003.

<TABLE>
<CAPTION>
------------------------------------ ------------------------- ------------------- --------------------
                                                                  OWNED/LEASED         APPROXIMATE
                                                               (EXPIRATION DATE          AREA IN
             LOCATION                      PRIMARY USE             OF LEASE)           SQUARE FEET
             --------                      -----------         ----------------        -----------
------------------------------------ ------------------------- ------------------- --------------------

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

Lexington, Massachusetts             U.S. and Canada                 Leased              140,000
                                     Headquarters;               (expires 2006)
                                     instrument
                                     manufacturing; research
                                     and development;
                                     quality assurance;
                                     instrument software
------------------------------------ ------------------------- ------------------- --------------------
Orangeburg, New York                 Reagent manufacturing           Owned               100,000
------------------------------------ ------------------------- ------------------- --------------------
Ascoli Piceno, Italy                 Reagent manufacturing           Leased               21,500
                                                                 (expires 2006)
------------------------------------ ------------------------- ------------------- --------------------

</TABLE>

     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.



<PAGE>



ITEM 5.   OPERATING AND FINANCIAL REVIEW AND PROSPECTS


     The following  discussion and analysis of our financial  condition and
results  of  operations  should  be read in  conjunction  with our  Audited
Consolidated  Financial  Statements for the fiscal years ended November 30,
2001,  2002 and 2003  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, 2002 and 2003 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,  2003,  we  recorded  a net loss of
(euro)11.1  million as compared to a net loss of (euro)13.8 million for the
year ended  November 30, 2002 and a net loss of  (euro)5.8  million for the
year ended November 30, 2001. The net losses reported in fiscal years 2003,
2002 and 2001 were largely attributable to a low level in the gross margins
of the Company's core product lines,  significant  research and development
costs,   increased  goodwill   amortization  and  higher  interest  expense
resulting from the  acquisition of Hemoliance.  In fiscal years 2003,  2002
and 2001 the Company  experienced a stabilization in prices for most of its
product lines.  However,  while prices  generally  stabilized,  the pricing
level remains low due to prior years reductions. The result from operations
continue to be significantly  affected by competitive pricing pressures and
customer  consolidation.  Research and development costs also continue at a
high  level,  due  to  the  Company's   continued   investment  in  product
development  to broaden its product  offerings  within its two core product
lines to meet the changing demands of its markets and to better address the
areas of highest  growth within these markets.  While the Company  believes
that its  profitability  will continue to be  negatively  affected by these
industry  factors  at least  for the near  term,  management  designed  and
implemented  plans to improve  the  results of  operations  and the Company
believes it is taking the steps  necessary  to achieve  sustainable  growth
through improved operating performance.

     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,  2003  would have been
(euro)45.2 million after giving effect to the May 26, 2004 debt reduction.


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.

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,  reissue its audit  report with  respect to the  consolidated
financial  statements  included in this report, or consent to the inclusion
in  this  report  of  its  audit   report.   As  a  result,   investors  in
Instrumentation  Laboratory  may have no effective  remedy  against  Arthur
Andersen  in  connection  with a material  misstatement  or omission in the
financial  statements to which its audit report relates. In addition,  even
if such investors were able to assert a claim,  Arthur Andersen may fail or
otherwise  have  insufficient  assets to satisfy  claims by investors  that
might  arise  under the U.S.  federal  securities  laws or  otherwise  with
respect to its audit report.

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

RESULTS OF OPERATIONS

     The following  table sets forth  statement of operations  data for the
years ending November 30, 2001, 2002 and 2003, expressed as a percentage of
consolidated net sales.

<TABLE>
<CAPTION>
                                                                                             YEAR ENDED NOVEMBER 30,
                                                                     -------------------------------------------------------------
                                                                            2001                   2002                 2003
                                                                     -------------------     ------------------     --------------
<S>                                                                        <C>                     <C>                  <C>
Net sales                                                                    100.0%                100.0%               100.0%
Cost of sales.......................................................          52.5                  51.9                 50.4
                                                                     -------------------     ------------------     --------------
            Gross profit............................................          47.5                  48.1                 49.6
Research and development costs......................................           7.1                   7.4                  7.4

Selling, general and administrative expenses........................          33.7                  36.6                 36.1
                                                                     -------------------     ------------------     --------------
Operating income before amortization of intangible assets and
deferred charges....................................................           6.7                   4.1                  6.1

Amortization of intangible assets and deferred charges..............           3.3                   3.1                  3.2
                                                                     -------------------     ------------------     --------------
Operating income ...................................................           3.4                   1.0                  2.9
Net interest expense................................................           5.1                   4.1                  3.9
Other (income) expense, net.........................................          (0.7)                  1.0                  2.2
Income taxes........................................................           1.1                   0.9                  1.0
                                                                     -------------------     ------------------     --------------

            Net loss................................................          (2.1)%                (5.0)%               (4.2)%
                                                                     ===================     ==================     ==============
</TABLE>


COMPARISON OF FISCAL YEARS ENDED NOVEMBER 30, 2003 AND 2002

<TABLE>
<CAPTION>
                                              YEAR ENDED NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2002                          2003                       INCREASE/(DECREASE)
                                              -----------------------       -----------------------            -------------------
NET SALES BY PRODUCT LINES
Net sales (in millions of (euro))
<S>                                                    <C>                          <C>                               <C>
    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 NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2002                          2003                       INCREASE/(DECREASE)
                                              -----------------------       -----------------------            -------------------
NET SALES GEOGRAPHICALLY
<S>                                                    <C>                          <C>                               <C>
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 2002.

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

     Hemostasis

<TABLE>
<CAPTION>

                                              YEAR ENDED NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2002                          2003                       INCREASE/(DECREASE)
                                              -----------------------       -----------------------            -------------------

HEMOSTASIS BUSINESS UNIT
<S>                                                    <C>                          <C>                               <C>
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 Business Unit                     134.8                        125.0                             (7.3)%
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 2002.

           Critical Care

<TABLE>
<CAPTION>
                                              YEAR ENDED NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2002                          2003                       INCREASE/(DECREASE)
                                              -----------------------       -----------------------            -------------------
CRITICAL CARE BUSINESS UNIT
<S>                                                     <C>                          <C>                              <C>
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 Business Unit                   76.8                         72.6                             (5.5)%
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 2002.

           Clinical Chemistry

<TABLE>

<CAPTION>
                                              YEAR ENDED NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2002                          2003                       INCREASE/(DECREASE)
                                              -----------------------       -----------------------            -------------------
CLINICAL CHEMISTRY BUSINESS UNIT
<S>                                                     <C>                          <C>                             <C>
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 Business
    Unit                                                24.3                         24.9                              2.3%
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 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 NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2002                          2003                       INCREASE/(DECREASE)
                                              -----------------------       -----------------------            -------------------
<S>                                                    <C>                          <C>                             <C>
GROSS PROFITS BY PRODUCT LINES
Total gross profits (in millions of (euro))            131.0                        128.9                             (1.6)%
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  2003  compared to fiscal
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 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 NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2002                          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 and
hemostasis net sales                                     9.5%                         9.7%                             2.1%
</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 NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2002                          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 NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2002                          2003                       INCREASE/(DECREASE)
                                              -----------------------       -----------------------            -------------------
<S>                                                     <C>                          <C>                             <C>
INTEREST EXPENSE (in millions of (euro))
Interest expense on short-term bank
borrowings                                               5.2                          4.8                             (7.7)%
Interest expense on long-term debt                       7.0                          6.0                            (14.3)%
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 NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2002                          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.


COMPARISON OF FISCAL YEARS ENDED NOVEMBER 30, 2002 AND 2001

<TABLE>
<CAPTION>
                                              YEAR ENDED NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2001                          2002                       INCREASE/(DECREASE)
                                              -----------------------       -----------------------            -------------------
<S>                                                     <C>                         <C>                              <C>
NET SALES BY PRODUCT LINES
Net sales (in millions of (euro))
    Hemostasis                                         131.5                        134.8                              2.5%
    Critical care                                       79.3                         76.8                             (3.2)%
    Clinical chemistry                                  28.2                         24.3                            (13.8)%
    Other                                               35.8                         36.7                              2.5%
    Total net sales                                    274.8                        272.6                             (0.8)%
</TABLE>

     Net sales decreased  (euro)2.2 million or 0.8% to (euro)272.6  million
in the year ended November 30, 2002, from  (euro)274.8  million in the year
ended November 30, 2001.  This small decrease is a result of lower sales in
our critical care and clinical chemistry business lines.

<TABLE>
<CAPTION>
                                              YEAR ENDED NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2001                          2002                       INCREASE/(DECREASE)
                                              -----------------------       -----------------------            -------------------
<S>                                                     <C>                         <C>                            <C>
NET SALES GEOGRAPHICALLY
Net sales (in millions of (euro))
     United States                                      82.1                         80.9                             (1.4)%
     Europe                                            157.6                        159.0                              1.3%
     Rest of the World                                  35.2                         32.7
     Total net sales                                   274.8                        272.6                             (0.8)%

</TABLE>

     Geographically,  this small decrease in net sales is the result of the
strengthening  of the  euro  against  the  U.S.  dollar.  Sales in the U.S.
denominated in dollars increased by $1.6 million (or 2.2%) but decreased by
(euro)1.2  million (or 1.4%) when translated in euro.  Sales in the rest of
the world,  also  denominated in euro,  decreased by (euro)2.5  million (or
7.0%)  while  sales in Europe  increased  by  (euro)1.5  million (or 1.0%).
Overall unit  placements of core  instruments  increased  12.1% in the year
ended November 30, 2002, versus the same period of fiscal 2001.


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

           Hemostasis

<TABLE>
<CAPTION>
                                              YEAR ENDED NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2001                          2002                       INCREASE/(DECREASE)
                                              -----------------------       -----------------------            -------------------
<S>                                                     <C>                         <C>                            <C>
HEMOSTASIS BUSINESS UNIT
Net sales (in millions of (euro))
    United States                                       42.6                         45.6                              7.0%
    Europe                                              70.9                         73.7                              3.9%
    Rest of the World                                   18.0                         15.5                            (13.9)%
    Total Hemostasis Business Unit                     131.5                        134.8                              2.5%
Percentage of total net sales                           47.8%                        49.4%                             3.3%

</TABLE>

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

           Critical Care

<TABLE>
<CAPTION>
                                              YEAR ENDED NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2001                          2002                       INCREASE/(DECREASE)
                                              -----------------------       -----------------------            -------------------
<S>                                                     <C>                          <C>                            <C>
CRITICAL CARE BUSINESS UNIT
Net sales (in millions of (euro))
    United States                                       36.2                         33.8                             (6.6)%
    Europe                                              32.2                         33.9                              5.3%
    Rest of the World                                   11.0                          9.1                            (17.3)%
    Total Critical Care Business Unit                   79.4                         76.8                             (3.2)%
Percentage of total net sales                           28.9%                        27.9%                            (3.5)%

</TABLE>

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



<PAGE>



           Clinical Chemistry

<TABLE>
<CAPTION>
                                              YEAR ENDED NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2001                          2002                       INCREASE/(DECREASE)
                                              -----------------------       -----------------------            -------------------
<S>                                                     <C>                          <C>                            <C>
CLINICAL CHEMISTRY BUSINESS UNIT
Net sales (in millions of (euro))
    United States                                        3.2                          1.5                            (53.1)%
    Europe                                              20.4                         18.9                             (7.4)%
    Rest of the World                                    4.6                          4.0                            (13.0)%
    Total Clinical Chemistry Business
    Unit                                                28.2                         24.3                            (13.8)%
Percentage of total net sales                           10.3%                         8.9%                           (13.6)%

</TABLE>


     Net sales  attributable to the clinical chemistry business unit in the
year ended  November 30, 2002  decreased  13.8% to (euro)24.3  million from
(euro)28.2  million in the year ended  November 30, 2001.  This decrease is
mainly  attributed to strong  instrument  sales in Eastern  Europe in 2001,
which  were not  repeated  in 2002 and a  decline  in sales in the U.S.  We
continue to only place new instruments in Italy, the UK, Eastern Europe and
the Middle East. As a result, our installed base, particularly in the U.S.,
is declining,  resulting in decreased sales for consumables on a continuing
basis.  Such  decrease is expected to continue in the future.  Sales in the
U.S for fiscal  2002 were  decreased  by  (euro)1.7  million  (or 53.1%) to
(euro)1.5  million,  compared to fiscal year 2001 For fiscal 2002, sales in
Italy increased by 1.4%.

     Other products

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

           GROSS PROFIT

<TABLE>
<CAPTION>
                                              YEAR ENDED NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2001                          2002                       INCREASE/(DECREASE)
                                              -----------------------       -----------------------            -------------------
<S>                                                    <C>                          <C>                            <C>
GROSS PROFITS BY PRODUCT LINES
Total gross profits (in millions of (euro))            130.6                        131.0                              0.3%
Percentage of total net sales                           47.5%                        48.1%                             1.3%

</TABLE>


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

     The increase in the gross margin  compared to fiscal 2001 is primarily
attributable to improved manufacturing  efficiency and reduced obsolescence
after  the   consolidation   of   manufacturing   plants  and  distribution
warehouses.  In addition,  the gross margin value as a percentage  of sales
improved as a result of the weakening of the U.S.  dollar  against the euro
compared to fiscal 2001, due to more costs being  incurred in U.S.  dollars
relative to sales earned in U.S. dollars. 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 NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2001                          2002                       INCREASE/(DECREASE)
                                              -----------------------       -----------------------            -------------------
<S>                                                     <C>                          <C>                            <C>
RESEARCH AND DEVELOPMENT COSTS (in
millions of (euro))
Total R&D costs                                        19.6                          20.1                              2.6%
Percentage of critical care and
hemostasis net sales                                    9.3%                          9.5%                             2.2%

</TABLE>

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

           SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

<TABLE>
<CAPTION>
                                              YEAR ENDED NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2001                          2002                       INCREASE/(DECREASE)
                                              -----------------------       -----------------------            -------------------
<S>                                                     <C>                          <C>                            <C>
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (in millions of (euro))
Total SG&A expenses                                     92.7                         99.8                              7.7%
Percentage of net sales                                 33.7%                        36.6%                             2.9%

</TABLE>

     Selling,  general  and  administrative  expenses  increased  (euro)7.1
million or 7.7% to (euro)99.8  million in the year ended November 30, 2002,
compared  to  (euro)92,7  million  in the year  ended  November  30,  2001.
Selling,  general and administrative  expenses as a percentage of net sales
were 36.6% in the year ended November 30, 2002,  versus 33.7% in year ended
November 30, 2001.

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



<PAGE>



           INTEREST EXPENSE

<TABLE>
<CAPTION>
                                              YEAR ENDED NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2001                          2002                       INCREASE/(DECREASE)
                                              -----------------------       -----------------------            -------------------
<S>                                                     <C>                          <C>                            <C>
INTEREST EXPENSE (in millions of (euro))
Interest expense on short-term bank
borrowings                                               5.7                          5.2                             (8.8)%
Interest expense on long-term debt                       9.6                          7.0                            (27.1)%
Total interest expense                                  15.3                         12.2                            (20.3)%

</TABLE>

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

           OTHER INCOME (EXPENSE), NET

<TABLE>
<CAPTION>
                                              YEAR ENDED NOVEMBER 30,       YEAR ENDED NOVEMBER 30,                 PERCENTAGE
                                                      2001                          2002                       INCREASE/(DECREASE)
                                              -----------------------       -----------------------            -------------------
<S>                                                     <C>                          <C>                            <C>
OTHER INCOME/(EXPENSE), NET (in millions of
(euro))
Sales of distribution rights to Izasa                    9.0                            -                           (100.0)%
Supplementary leaving indemnities and                   (2.8)                        (1.5)                           (46.4)%
restructuring charges
Net gains/(losses) on foreign exchange and               0.1                          1.9                            1,800%
forward exchange contracts
Litigation settlements and estimated costs              (1.5)                        (1.3)                           (13.3)%
to settle
Gain on disposal of fixed assets                         0.6                          0.1                            (83.0)%
Non recurring costs relating to production              (0.9)                           -                           (100.0)%
transfer
Bank charges                                            (0.4)                        (0.7)                            75.0%
Other expenses                                          (2.1)                        (1.2)                           (42.9)%
Total other income/(expense), net                        2.0                         (2.7)                          (135.0)%

</TABLE>

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

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

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

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 2004 and 2005 are
nil and (euro)9.5 million respectively. We have included a chart at the end
of this section that summarizes our future debt payment obligations.

     Our investment in instruments  under reagent rental  agreements refers
to our  providing  IVD  instruments  to our  customers  (i) at no  cost  in
exchange for an agreement to purchase  reagents and other consumables for a
fixed time period, and (ii) under sales-type lease contracts.  With respect
to instruments  placed in connection  with reagent rental  agreements,  the
instruments  are  carried  at  our  purchase  or  production   costs,  less
accumulated  depreciation  computed  over the  average  life of the related
contracts, and, accordingly,  represents our cost before any revenue on the
instruments  and related  reagents.  Our typical costs under reagent rental
arrangements  include  depreciation  of purchase or production  cost of the
instrument,  financial charge and costs of reagents,  controls and service,
and our typical revenue under reagent rental arrangements  includes revenue
from the sale of reagents and controls  and from  service.  With respect to
instruments placed under sales-type leases, the instruments are recorded at
an amount equal to our net investment in the lease (i.e., the present value
of the lease  payments to be recorded)  and,  accordingly,  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, 2001, 2002 and 2003

<TABLE>
<CAPTION>
                                                   YEAR ENDED                    YEAR ENDED                         YEAR ENDED
                                                NOVEMBER 30, 2001             NOVEMBER 30, 2002                  NOVEMBER 30, 2003
                                              -----------------------       -----------------------            -------------------
                                                                  (in millions of (euro))
<S>                                                    <C>                         <C>                              <C>
Net cash provided by operating
activities                                              22.6                         25.6                             36.7
Net cash used in investing activities                  (20.1)                       (16.2)                           (19.5)
Net cash provided by/(used in)
financing activities                                     0.9                         (1.2)                           (17.8)

</TABLE>

     Net cash provided by operating  activities for the year ended November
30, 2003 was  (euro)36.7  million,  while net cash  provIDEd  by  operating
activities  for the year ended  November 30, 2002 was  (euro)25.6  million.
This increase  resulted  principally from the efFECt of the decrease in the
net loss in fiscal 2003 compared to fiscal 2002,  reduction in inventories,
accrued  expenses and income taxes and 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, 2001 was  (euro)22.6  million.
2001 operating  cash flow was affected by significant  payments of expenses
accrued in connection with the restructuring plan.

     Net cash used in investing  activities for the year ended November 30,
2003 was (euro)19.5 million, while net cash useD In investing activities in
the year ended November 30, 2002 was (euro)16.2  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)17.0  million and (euro)21.6 million for the years ended November 30,
2003 AND  2002,  respectively.  In  fiscal  2003 and 2002 the cash  used in
investing  activities  was affected by the proceeds  from the sale of fixed
assets,   mainly  instruments  at  customers,   of  (euro)4.8  million  and
(euro)11.9  million,  respectively.  In  fiscal  2001 the net casH  Used in
investing  activities  was  (euro)20.1  million  while  the  investment  in
instrument rentals was (euro)19.9  million. In fiscal 2001 the casH Used in
investing  activities  was also  affected by the proceeds  from the sale of
fixed assets, mainly instruments at customers, of (euro)9.4 million.

     Capital  expenditures  were  (euro)7.3  million  for  the  year  ended
November 30, 2003 versus  (euro)6.1  million in the yEAR ended November 30,
2002. 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)8.5 million in the year
ended November 30, 2001.

     Net cash used in financing activities for year ended November 30, 2003
was (euro)17.8  million versus (euro)1.2 million in THe year ended November
30, 2002.  The increase in the net cash used in  financing  activities  was
primarily attributable to repayment of bank overdrafts and short-term debt.
Net cash used in financing  activities for year ended November 30, 2001 was
and (euro)0.9 million.

     In the year  ended  November  30,  2003,  we  sustained  a net loss of
(euro)11.1  million and cash flows for operating  and invesTINg  activities
was positive (euro)17.2 million. In fiscal 2002, we sustained a net loss of
(euro)13.8   million  and  net  cash  flow  from  operATIng  and  investing
activities  was  positive  (euro)9.4  million  compared  to a net  loss  of
(euro)5.8  million and  negative  cash flow from  operaTINg  and  investing
activities of (euro)2.6 million for fiscal year 2001. Our improved net cash
flow from  operating  and  investing  activitieS  In fiscal 2003 was mainly
attributable to decreased  inventories  and accounts  receivable as well as
increased accounts payable.  In addition,  our cash flow is attributable to
higher levels of research and development  expenditures and lower operating
performance.  At November 30, 2003, our consolidated debt, net of cash, was
(euro)132.9 million.

     FINANCING ARRANGEMENTS

     At November 30, 2003, we had several  short-term and long-term  credit
lines  from  banks  and other  financial  institutions,  pursuant  to which
(euro)59.4 million was outstanding and (euro)43.5 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 3.75% to 13.25% as of  November  30,  2003.
Because  these  short-term  borrowings  bear  interest at a floating  rate,
increases in short-term  interest rates can adversely affect our results of
operations.

     On May 4,  2001,  our U.S.  subsidiary  executed  a loan and  security
agreement  with Heller  Healthcare  Finance,  Inc.,  to be used for working
capital. This loan, which has a maximum aggregate principal amount of US$15
million, is in the nature of a line of credit. Currently, approximately US$
13.5 million is  outstanding.  We pay an interest rate of U.S. dollar prime
rate  plus 2%  (currently  at 6.0%)  plus all  fees on the  current  amount
outstanding  on a monthly  basis.  Werfen  and  Instrumentation  Laboratory
S.p.A.  have provided a guarantee.  The original term of the line of credit
was for two years and on May 27 2003 was  extended to May 1, 2005.  We must
also comply with various negative covenants, including restrictions on:

     o    making prepayments on any existing or future indebtedness;

     o    borrowing additional funds;

     o    our ability to merge or consolidate;

     o    declaring dividends;

     o    investing in joint ventures or other acquisitions; and

     o    creating additional liens.

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

     In addition to these  short-term and long-term debt  arrangements,  on
November  30,  2003,  we also  had  significant  borrowings  from  Werfen's
affiliates.   On  November  30,  2003  and  2002,  (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.  Our  outstanding
long-term   indebtedness   as  of   November   30,  2003  would  have  been
approximately (euro)9.5million after giving effect to this debt reduction.

     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.

     The following  summarizes  certain of our  contractual  obligations at
November 30, 2003 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
        Contractual Obligations                Total               year           1 - 3 years      4 - 5 years     After 5 years
----------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>                <C>              <C>              <C>               <C>
Long-Term Debt                                 97.2                -                9.5             87.7*              -
----------------------------------------------------------------------------------------------------------------------------------
Operating Leases                               22.4               8.7              11.2              1.4               1.1
----------------------------------------------------------------------------------------------------------------------------------
Total Contractual Cash Obligations            119.6               8.7              20.7             89.1               1.1
----------------------------------------------------------------------------------------------------------------------------------


(in millions of euro:)
----------------------------------------------------------------------------------------------------------------------------------
                                                                Amount of Commitment Expiration Per Period
----------------------------------------------------------------------------------------------------------------------------------
     Other Commercial Commitments          Total Amounts      Less than 1
                                             Committed           year             1 - 3 years      4 - 5 years     After 5 years
----------------------------------------------------------------------------------------------------------------------------------
Lines of Credit                                50.1              50.1               -                -                 -
----------------------------------------------------------------------------------------------------------------------------------
Standby Letters of Credit                       -                 -                 -                -                 -
----------------------------------------------------------------------------------------------------------------------------------
Guarantees                                    100.0**            10.0              40.0             50.0               -
----------------------------------------------------------------------------------------------------------------------------------
Standby Repurchase Obligations                  -                 -                 -                -                 -
----------------------------------------------------------------------------------------------------------------------------------
Other Commercial Commitments                   45.7              45.7               -                -                 -
----------------------------------------------------------------------------------------------------------------------------------
Total Commercial Commitments                  195.8             105.8              40.0             50.0               -
----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

* This  portion of our  long-term  debt has been  repaid as of May 26, 2004
pursuant  to IL Holding  S.p.A.,  an  affiliate  of Izasa,  subscribing  to
271,819,984 of our ordinary shares.

**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.

     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, 2003, we had in place interest rate swaps
and currency options for a total notional amount of (euro)89.0 million.

     We believe that with the debt repayment  discussed above, we will have
better cash flows to fund our operations.  However,  we continue to seek to
improve our operating  performance from the levels achieved in fiscal 2001,
2002 and 2003 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, 2003 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
loss and  shareholders'  equity under Italian GAAP were (euro)11.1  milLIOn
and (euro)61.9 million, respectively, for the year ended November 30, 2003.
Under U.S. GAAP, we would have reported a net loss ANd shareholders' equity
of (euro)4.0  million and  (euro)53.8  million,  respectively,  in the year
ended November 30, 2003.

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, 2003, we had net operating  loss  carryforwards  of
approximately  (euro)159  million expiring in 2004 through 2021. 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  2001,  2002 and  2003  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, 2003 and 2002  amounted to  (euro)4.7  million and  (euro)3.3
million,  respectively. Had the Company accounted for this transaction as a
finance lease,  the net loss for the fiscal year 2003 would have been lower
by (euro)0.6 million and net equity as of November 30, 2003 would have been
higher by  (euro)0.9  million.  Assets  (instruments  at  customers)  as of
November  30,  2003  would  have been  higher  by  (euro)16.8  million  and
liabilities  (financial debt) would have been higher by (euro)9.6  million,
of which (euro)4.3 million would be short term.


RECENT ACCOUNTING STANDARDS

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

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

     On July 30, 2002, the FASB issued  Statement  No.146,  'Accounting for
the Costs  Associated  with Exit or Disposal  Activities'.  This  statement
requires  companies to  recognize  costs  associated  with exit or disposal
activities  only when  liabilities for those costs are incurred rather than
at the date of a commitment to an exit or disposal  plan.  SFAS No.146 also
requires  companies to initially measure  liabilities for exit and disposal
activities at their fair values.  SFAS No.146 replaces Emerging Issues Task
Force ('EITF') Issue No.94-3,  'Liability  Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a  Restructuring)'  and EITF No.88-10,  'Costs Associated
with Lease Modification or Termination'.  The provisions of SFAS No.146 are
effective for exit or disposal activities that are initiated after December
31, 2002.

     In November  2002,  the Emerging  Issues Task Force  ('EITF')  reached
consensus  on  Issue  No.  00-21,   Revenue   Arrangements   with  Multiple
Deliverables.  Revenue  arrangements  with  multiple  deliverables  include
arrangements  which  provide for the  delivery or  performance  of multiple
products,  services and/or rights to use assets where performance may occur
at different  points in time or over different  periods of time. EITF Issue
No.  00-21 is effective  for the Company  beginning  December 1, 2003.  The
adoption of this statement did not have a material  impact on the Company's
financial position or results of operations.

     In November 2002, the FASB issued  Interpretation  No. 45, Guarantor's
Accounting and Disclosure  Requirements for Guarantees,  Including Indirect
Guarantees of  Indebtedness  of Others"'  ("FIN 45").  FIN 45 addresses the
disclosures  to be made by a guarantor in its interim and annual  financial
statements  about  its  obligations   under   guarantees.   The  disclosure
requirements in this Interpretation are effective for financial  statements
of interim or annual  periods  ending after December 15, 2002. The adoption
of  FIN 45 did  not  have a  material  impact  on the  Company's  financial
position or results of operations.

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

     In  January  2003,  the FASB  issued  Interpretation  ("FIN")  No. 46,
"Consolidation  of Variable  Interest  Entities"  and in December  2003,  a
revised  interpretation  was issued (FIN No.46, as revised).  In general, a
variable interest entity ("VIE") is a corporation,  partnership,  trust, or
any other legal  structure used for business  purposes that either does not
have equity  investors  with voting rights or has equity  investors that do
not provide  sufficient  financial  resources for the entity to support its
activities.  FIN 46, as  revised,  requires a VIE to be  consolidated  by a
company if that  company is  designated  as the  primary  beneficiary.  The
interpretation  applies to VIEs created after January 31, 2003, and for all
financial  statements  issued after  December 15, 2003 for VIEs in which an
enterprise  held a variable  interest that it acquired  before  February 1,
2003.  The  adoption  of Fin 46,  as  revised,  is not  expected  to have a
material  effect  on  the  Company's   financial  position  or  results  of
operations.

     In May 2003,  the FASB issued SFAS No.  150,  "Accounting  for Certain
Financial Instruments with Characteristics of both Liabilities and Equity,"
SFAS No 150 clarifies the definition of a liability as currently defined in
FASB Concepts Statement No. 6, "Elements of Financial  Statements," as well
as other planned revisions.  This statement requires a financial instrument
that  embodies an  obligation of an issuer to be classified as a liability.
In  addition,  the  statement  establishes  standards  for the  initial and
subsequent  measurement  of  these  financial  instruments  and  disclosure
requirements.  SFAS 150 is effective for financial instruments entered into
or modified after May 31, 2003 and for all other  matters,  is effective at
the first interim  period  beginning  after June 15, 2003.  The adoption of
SFAS 150 did not have a material effect on the Company's financial position
or results of operations.




<PAGE>



ITEM 6.   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.   DIRECTORS AND SENIOR MANAGEMENT

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

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

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

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

Jose Maria Rubiralta (Chairman)            62         President

Francisco Rubiralta (Vice-Chairman)        65         Director

Jose Luis Martin (Managing Director)       47         Director

Carlos Pascual (Managing Director)         42         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 November 30, 2004 are approved.

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

Jose Maria Rubiralta                       62        President, Chairman of the
                                                     Board

Jose Manent                                53        Chief Executive Officer

Jose Luis Martin                           47        Managing Director, Chief
                                                     Financial Officer and
                                                     Senior Vice President of
                                                     the Company

Carlos Pascual                             42        Managing Director, Senior
                                                     Vice President and General
                                                     Manager - Europe

James C. McGaha                            57        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.

STATUTORY AUDITORS

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

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

     The  following  table sets forth the names of the members of our Board
of Statutory  Auditors and their  current  positions.  The current Board of
Statutory  Auditors  was  appointed  at the  Annual  Shareholders'  Meeting
convened on June 9, 2003 and will serve until the  approval of our November
30, 2005 accounts.

            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  recently  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)2.2 million,  excluding the accrual
for  termination  indemnity  required by Italian law. We currently  have no
pension  plan for  directors  and  executives.  Mr.  McGaha as  employee of
Instrumentation  Laboratory Company (USA) is eligible to participate in the
U.S.  employee  pension and savings plan,  as every other  employee of such
company.  Please see Note 14 of the consolidated  financial  statements for
further explanation of this pension plan.

C.   BOARD PRACTICES

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

D.   EMPLOYEES

     As of November 30, 2003,  we had  approximately  1,269  full-time  and
part-time employees,  646 of whom were located in the United States, 302 in
Italy,  231 in the remainder of Europe and 90 in other locations around the
world.  Except  as  described  below,  we  have  no  collective  bargaining
agreements  with any unions and  believe  that our overall  relations  with
employees are satisfactory.

     Employees  in Italy are  generally  covered by  collective  employment
agreements  that are  negotiated  between the national  association  of the
companies within a particular  industry and the respective national unions.
The most recent agreement for "metal and mechanical  workers," which covers
all our employees in Italy other than executives, was signed on May 7, 2003
and will expire 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, 2003, we had (euro)6.0 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 May 26, 2004 was  170,000;  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 26, 2004.


<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 27, 2004 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.



<PAGE>



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

5% SHAREHOLDERS:

Werfen (1)                                    349,305,155             96.4%
Jose Maria and Francisco Rubiralta (2)        349,305,155             96.4%
-----------------------

(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.

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 2001, 2002 and
2003 were (euro)13.8 million,  (euro)13.7 million,  and (euro)12.7 million,
respectively.  We serve as  distributor  of  products  of Biokit,  S.A.,  a
majority owned subsidiary of Werfen, in Italy, France,  Germany, the United
Kingdom and the Benelux  countries.  Total purchases from Werfen for fiscal
2001, 2002 and 2003 were (euro)5.7 million,  (euro)8.4 million,  and (euro)
10.5 million,  respectively.  In addition,  in fiscal 2001, 2002 and 2003 a
Werfen affiliate  charged us  approximately  (euro)2.2  million,  (euro)2.2
million and  (euro)2.5  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
2001,  2002 and 2003 certain of our  subsidiaries  were  charged  (euro)0.3
million,  (euro)0.6  million  and  (euro)0.5  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 year 2001,  2002 and 2003  amounted to  (euro)9.1  million,
(euro)6.0  million and (euro)5.2  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 2001,
2002  and  2003  amounted  to  (euro)2.2  million,  (euro)2.2  million  and
(euro)2.7 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.

     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.


<PAGE>


ITEM 8.   FINANCIAL INFORMATION

A.   CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION.

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

     Dividends

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

     Litigation

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

     In 1996, 590 Lincoln  Street Trust filed a lawsuit  alleging a release
of  hazardous  material,  on or earlier  than 1988,  by one of its tenants,
including an affiliate of our predecessor that was an operator of the site.
In connection  with the 1991  acquisition  of our  predecessor,  we assumed
various obligations of this predecessor including the potential liabilities
involved in this  matter.  As such,  we were named as a  defendant  in this
lawsuit.  We have denied  liability.  In 2002, the case went to trial and a
verdict was returned against our 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,  2002 we have  recorded an accrual of $1.3
million related to this judgment.

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

B.   SIGNIFICANT CHANGES

     Please see "Item 4--Information on the Company-Background- 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 American
Depositary Shares ("ADSs"),  except for limited and sporadic  quotations in
the Pink  Sheets(R).  Our ADSs (each  representing  one Ordinary Share) are
traded on the Pink Sheets(R) under the symbol "ISLBY." The Bank of New York
is our depositary  bank (the  "Depositary")  for the purpose of issuing the
American  Depositary Receipts ("ADRs") evidencing the ADSs. Prior to August
18,  2000,  our  ADSs  were  quoted  on the OTC  Bulletin  Board.  Prior to
September 4, 1999, our ADSs traded on the Nasdaq National Stock Market. The
table below sets forth,  for the  periods  indicated,  (a) the high and low
closing  trading prices for our ADSs quoted on Nasdaq National Stock Market
prior to September 4, 1999 (the Nasdaq quotations  represent prices between
dealers, not including retail mark-ups,  mark-downs or commissions,  and do
not necessarily  represent  actual  transactions)  and (b) the high and low
reported  sales  prices for our ADSs on the  over-the-counter  market until
August 18, 2000, and on the Pink Sheets(R)  after August 18, 2000. The ADSs
were de-listed from the Nasdaq  National Market System because we no longer
fulfilled  the minimum per share price  requirement  of US$ 1.00 per share.
The ADSs are no longer  eligible for  quotation  on the OTC Bulletin  Board
because market makers have not been providing regular quotations. According
to the Pink  Sheets(R)  internet  site,  the last  trade date was April 19,
2004.  The last sale was made at US$ 0.30 per share.  The  Ordinary  Shares
underlying  the ADSs are not traded on any  exchange nor are they quoted on
any market; therefore, no pricing information for such shares is available.

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

Last 6 months

April 2004.......................................    0.3                  0.25
March 2004.......................................    -                    -
February 2004....................................    -                    -
January 2004.....................................    0.3                  0.3
December 2003....................................    1.25                 0.3
November 2003....................................    0.3                  0.3

2004
Second Quarter (through May 26)..................    0.3                  0.25
First Quarter ...................................    0.3                  0.3
                                                     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)....    15/16                7/8
Third Quarter....................................    1 1/2                13/16
Second Quarter...................................    1 1/4                7/8
First Quarter....................................    1 9/16               7/8

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

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

     As of May 27, 2003,  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 would affect
the payment of  dividends  or other  remittances  to holders of the ADSs or
Ordinary  Shares who reside outside of Italy. We are not aware of any plans
by the Italian  government  to institute  any exchange  controls that would
affect the payment of dividends or other  remittances to holders of ADSs or
Ordinary  Shares who reside  outside  Italy.  Neither  Italian  law nor our
By-laws limit the rights of  nonresident  or foreign owners to hold or vote
the Ordinary Shares or the ADSs.

E.   TAXATION

     The summary is based upon tax laws and  practice of the United  States
and Italy as in effect on the date of this Annual Report, which are subject
to change (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  120-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.   Dividends  generally  will
constitute  foreign source "passive income" or, in the case of certain U.S.
owners, "financial services income" for U.S. foreign tax credit purposes.

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

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

     Taxation of Capital Gains

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

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

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

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

ITALIAN TAXES

     The following  discussion is a general summary of material Italian tax
consequences of the ownership and sale of Ordinary Shares or ADSs by a U.S.
owner that is not a resident (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 45%) 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  reporting  requirements  of the
Securities Exchange Act of 1934, as amended,  and, in accordance with these
requirements,  will file  reports and other  information  with the SEC. The
reports  and other  information,  as well as  registration  statements  and
exhibits and schedules  thereto,  may be inspected  without  charge at, and
copies may be  obtained at  prescribed  rates  from,  the public  reference
facilities of the US Securities and Exchange Commission's  principal office
at Judiciary Plaza,  450 Fifth Street,  N.W., Room 1024,  Washington,  D.C.
20549, USA, and at the SEC's regional offices at:

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

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

I.         NOT APPLICABLE.


<PAGE>


ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


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

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

                                       November 30, 2003
                                       -----------------
                                        notional amount
                                        ---------------

          Interest Rate Swaps               21,000
          Currency Options                  67,975

     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,  2003,  we had  variable  rate debt of  approximately
(euro)147.3  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)2.9 million per year.

Currency Options

     The Company uses currency options to partially hedge purchase costs of
products that are denominated in U.S. Dollars. Currency options,  purchased
or sold in the over-the-counter  market for a premium,  provide the Company
the right to buy or sell an agreed  amount of U.S.  Dollars at a  specified
exchange rate at the end of a specified period,  currently not exceeding 36
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 had and could continue to
negatively impact our operating and net income. On the contrary a weakening
of the U.S. dollar against the euro could  positively  impact our result of
operations.  Taking into account the currency options  discussed above, the
effect of a  hypothetical  further 10% increase in the U.S.  dollar against
the euro would have  decreased our fiscal year 2003 result of operations by
approximately  (euro)10.8  million from  (euro)7.5  million to an operating
loss of (euro)3.3  million,  while a hypothetical  10% decrease in the U.S.
Dollar against the euro would have increased our fiscal year 2003 result of
operations  by  approximately  219% from  (euro)7.5  million to  (euro)16.5
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:

     The Board of  Directors  has adopted a Code of Ethics which covers the
responsibilities  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 the independent  auditors,  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:


                                                 2003               2002
Audit fees                                  (EURO)331,000      (euro)343,000

Audit-Related fees                                -                  -

Tax fees:                                         -                  -
compliance services
advisory services                                 -                  -

All other fees                                    -                  -

                                            ---------------    ----------------
Total                                       (EURO)331,000      (euro)343,000
                                            ---------------    ----------------


<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-52.
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            Credit Agreement dated as of February 26, 1999, between
                    the  Company  and Izasa,  filed with the SEC on May 31,
                    2000,  under  Form  20-F,  is  incorporated  herein  by
                    reference.

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

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

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

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

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

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

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

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

     8              List of Subsidiaries.

     10.1           English Summary of a Syndicated Loan Agreement dated as
                    of July 31,  2002 among Izasa  Distribuciones  Tecnicas
                    S.A. and a group of financial entities,  filed with the
                    SEC on May 31, 2003,  under Form 20-F, is  incorporated
                    herein by reference.

     10.2           English Summary of a Syndicated Loan Agreement dated as
                    of March 24, 2004 among Izasa  Distribuciones  Tecnicas
                    S.A. and a group of financial entities.

     11             Code of Ethics.

     12             Section 302 Certifications.

     13             Section 906 Certifications.


<PAGE>



SIGNATURES

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




                                              INSTRUMENTATION LABORATORY S.p.A.



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

Date: May 28, 2004




<PAGE>


<TABLE>

                                               INDEX TO FINANCIAL STATEMENTS
<CAPTION>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS                                                                                  Page
-----------------------------------------                                                                                  ----
      <S>                                                                                                                 <C>
      Report of Independent Auditors for the years ended November 30, 2002 and 2003.......................................F- 2

      Report of Predecessor Auditors for the years ended November 30, 2000 and 2001.......................................F- 3

      Audited Consolidated Balance Sheets as of November 30, 2002 and 2003................................................F- 5

      Audited Consolidated Statements of Operations for the years ended
                 November 30, 2001, 2002 and 2003.........................................................................F- 7

      Audited Consolidated Statements of Cash Flows for the years ended
                 November 30, 2001, 2002 and 2003.........................................................................F- 8

      Audited Consolidated Statements of Changes in Shareholders' Equity
                for the years ended November 30, 2001, 2002 and 2003......................................................F-10

      Notes to the Audited Consolidated Financial Statements..............................................................F-11

</TABLE>

<PAGE>

                       REPORT OF INDEPENDENT AUDITORS

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

     We  have  audited  the  accompanying  consolidated  balance  sheet  of
     Instrumentation   Laboratory  S.p.A.  (an  Italian   corporation)  and
     Subsidiaries (the 'Company') as of November 30, 2002, and 2003 and the
     related consolidated statement of operations, changes in shareholders'
     equity  and cash flows for the years then  ended,  expressed  in Euro.
     These  financial  statements are the  responsibility  of the Company's
     management.  Our  responsibility  is to  express  an  opinion on these
     financial  statements based on our audit. The financial  statements of
     Instrumentation  Laboratory  S.p.A. and Subsidiaries as of and for the
     year ended  November 30, 2001 were audited by other  auditors who have
     ceased operations.  Those auditors expressed an unqualified opinion on
     those financial statements in their report dated March 1, 2002.

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

     In our opinion,  the  consolidated  financial  statements  referred to
     above present fairly, in all material respects, the financial position
     of  Instrumentation  Laboratory S.p.A. and Subsidiaries as of November
     30,  2002 and 2003,  and the  results of its  operations  and its cash
     flows  for  the  years  then  ended  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 Societa di Revisione per Azioni

Milan, Italy
February 13, 2004, except for notes 21, 22, 23, 24 and 25 which are as of
May 5, 2004


<PAGE>



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


                       REPORT OF INDEPENDENT AUDITORS


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

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

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

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

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

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

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

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



ARTHUR ANDERSEN SPA


March 1, 2002
Milan, Italy



<PAGE>


<TABLE>

                                          INSTRUMENTATION LABORATORY S.P.A. AND SUBSIDIARIES

                                                 AUDITED CONSOLIDATED BALANCE SHEETS
                                                   AS OF NOVEMBER 30, 2002 AND 2003
                               (THOUSANDS OF EURO OR THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)




<CAPTION>
                                                                         NOTE           2002          2003           2003
                                                                         ----           ----          ----           ----
                                                                                        EURO          EURO          U.S.$
                                                                                                                       (1)
<S>                                                                       <C>          <C>           <C>            <C>
ASSETS
CURRENT ASSETS:
     Cash and cash equivalents                                                          16,158        14,372         17,239
     Trade receivables, net of allowance for doubtful
         accounts and sales returns of Euro 5,775 thousands
         in 2002 and Euro 4,598  thousands in 2003                        5             91,668        75,992         91,152
     Other receivables                                                                   5,352         3,153          3,782
     Inventories, net                                                     7             56,482        46,314         55,554
     Prepaid expenses and other current assets                                           5,366         4,913          5,893
                                                                                       -------       -------        -------
                 Total current assets                                                  175,026       144,744        173,620


NON-CURRENT RECEIVABLES AND OTHER ASSETS                                                   565           435            522


INSTRUMENTS AT CUSTOMERS, net                                             8             23,060        26,501         31,788


PROPERTY, PLANT AND EQUIPMENT:
     Land and buildings                                                                  6,313         5,631          6,754
     Leasehold improvements                                                              6,633         6,152          7,379
     Plant, machinery and equipment                                                     35,561        36,735         44,064
     Furniture, fixtures and vehicles                                                   17,570        16,661         19,985
     Construction in progress                                                            1,811         1,471          1,764
     Accumulated depreciation                                                          (43,862)      (45,337)       (54,382)
                                                                                       -------       -------        -------
                                                                                        24,026        21,313         25,564

INTANGIBLE ASSETS AND DEFERRED
     CHARGES, net                                                         9            119,159       110,848        132,962
                                                                                       -------       -------        -------
                 Total assets                                                          341,836       303,841        364,456
                                                                                       =======       =======        =======

(1)    Exchange rate:  Euro 1.00 = U.S. $ 1.1995 as of November 30, 2003


</TABLE>

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



<PAGE>


<TABLE>


                                          INSTRUMENTATION LABORATORY S.P.A. AND SUBSIDIARIES

                                                 AUDITED CONSOLIDATED BALANCE SHEETS
                                                   AS OF NOVEMBER 30, 2002 AND 2003
                               (THOUSANDS OF EURO OR THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)



<CAPTION>
                                                                              NOTE           2002           2003           2003
                                                                              ----           ----           ----          ------
                                                                                             EURO           EURO          U.S.$
                                                                                                                             (1)
<S>                                                                            <C>          <C>           <C>            <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
   Bank overdrafts and short-term debt                                         10            66,765        50,058         60,045
   Current portion of long-term debt                                           11            12,399             -              -
   Trade and other payables                                                                  46,158        45,678         54,791
   Income taxes payable                                                        12             4,054         2,547          3,055
   Accrued expenses and other liabilities                                      13            37,382        39,532         47,418
                                                                                            -------       -------        -------
               Total current liabilities                                                    166,758       137,815        165,309

LONG-TERM DEBT, net of current portion                                         11            87,814        97,234        116,632

DEFERRED INCOME TAXES                                                          12               619           302            362

RESERVE FOR SEVERANCE INDEMNITIES                                              14             5,927         6,217          7,457

MINORITY INTEREST                                                                               402           411            493
                                                                                            -------       -------        -------
               Total liabilities                                                            261,520       241,979        290,253
                                                                                            -------       -------        -------
COMMITMENTS AND CONTINGENCIES                                                  15                 -             -              -
SHAREHOLDERS' EQUITY:                                                          16
   Share capital (90,701,104 shares authorized, issued and outstanding at
   November 30, 2002 and 2003, par value Euro 1,29 each)                                    117,004       117,004        140,347
   Additional paid-in capital                                                                11,496        11,496         13,789
   Cumulative translation adjustment                                                          3,620        (3,697)        (4,435)
   Accumulated deficit                                                                      (51,804)      (62,941)       (75,498)
                                                                                            -------       -------        -------
               Total shareholders' equity                                                    80,316        61,862         74,203
                                                                                            -------       -------        -------
               Total liabilities and shareholders' equity                                   341,836       303,841        364,456
                                                                                            =======       =======        =======


(1)    Exchange rate:  Euro 1.00 = U.S. $ 1.1995 as of November 30, 2003

</TABLE>

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




<PAGE>


<TABLE>

                                          INSTRUMENTATION LABORATORY S.P.A. AND SUBSIDIARIES

                                            AUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                                         FOR THE YEARS ENDED NOVEMBER 30, 2001, 2002 AND 2003
                               (THOUSANDS OF EURO OR THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)


<CAPTION>
                                                        NOTE               2001          2002          2003           2003
                                                        ----               ----          ----          ----           ----
                                                                       RESTATED
                                                                       --------
                                                                           EURO          EURO          EURO          U.S.$
                                                                           ----                                        (1)
<S>                                                      <C>            <C>           <C>           <C>            <C>
Net sales                                                 17             274,814       272,591       260,011        311,883

Cost of sales and services                                               144,207       141,549       131,066        157,214
                                                                         -------       -------       -------        -------
         Gross profit                                                    130,607       131,042       128,945        154,669

Research and development costs                            25              19,588        20,072        19,238         23,076

Selling, general and administrative
expenses                                                                  92,699        99,792        93,746        112,448
                                                                         -------       -------       -------        -------
         Operating income before amortization
         of intangible assets and deferred
         charges                                                          18,320        11,178        15,961         19,145

Amortization of intangible assets and
deferred charges                                           9               9,058         8,464         8,423         10,103
                                                                         -------       -------       -------        -------
         Operating income                                                  9,262         2,714         7,538          9,042

Interest income                                           18               1,277           980           746            895

Interest expense                                          18              15,382        12,210        10,810         12,967

Other expense (income), net                               19              (2,018)        2,696         5,789          6,944
                                                                         -------       -------       -------        -------
         Loss before income taxes and minority
         Interest                                                         (2,825)      (11,212)       (8,315)        (9,974)

Income taxes                                              12               2,916         2,549         2,703          3,242

Minority interest                                                             68            80            67             80
                                                                         -------       -------       -------        -------
         Net loss                                                         (5,809)      (13,841)      (11,085)       (13,296)
                                                                         =======       =======       =======        =======
Loss per share                                             3             (0.0797)      (0.1516)      (0.1222)       (0.1466)
                                                                         =======       =======       =======        =======


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

(1) Exchange rate:  Euro 1.00 = U.S. $ 1.1995 as of November 30, 2003


</TABLE>

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


<PAGE>


<TABLE>

                                       INSTRUMENTATION LABORATORY S.P.A. AND SUBSIDIARIES

                                          AUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                      FOR THE YEARS ENDED NOVEMBER 30, 2001, 2002 AND 2003
                             (THOUSANDS OF EURO OR THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)


<CAPTION>
                                                                                   2001          2002          2003           2003
                                                                                   ----          ----          ----           ----
                                                                               RESTATED
                                                                               --------
                                                                                   EURO          EURO          EURO          U.S.$
                                                                                                                               (1)
<S>                                                                              <C>           <C>           <C>            <C>
CASH FLOWS FROM OPERATING
      ACTIVITIES:
      Net loss                                                                   (5,809)      (13,841)      (11,085)       (13,296)
      Adjustments to reconcile net income to net cash provided by (used
      in) operating activities
           Depreciation and amortization                                         23,594        22,673        23,645         28,362
           Provision for severance indemnities                                      921           987         1,141          1,369
           Unrealized loss on investment                                                            -             -              -
           Net loss (gain) on sale of fixed assets                                 (683)         (117)         (72)           (86)
           Increase (decrease) of deferred income taxes and other
           long-term liabilities                                                 (1,833)         (533)       (1,159)        (1,390)
           Increase (decrease) in cash
           resulting from changes in operating assets and liabilities
                Accounts receivable                                               1,473        10,640        12,756         15,301
                Inventories                                                      15,617         1,224         5,431          6,514
                Prepaid expenses                                                   (767)       (2,144)          117            140
                Accounts payable                                                  1,590         5,474         1,631          1,956
                Accrued expenses and income taxes                               (11,492)        1,234         4,322          5,184
                                                                                -------        ------        ------         ------
                Net cash provided by (used in) operating activities              22,611        25,597        36,727         44,054
                                                                                -------        ------        ------         ------

CASH FLOWS FROM INVESTING
     ACTIVITIES:
        Investment in instruments at customers                                  (19,883)      (21,568)      (17,013)       (20,407)
        Purchase of fixed assets                                                 (8,529)       (6,090)       (7,270)        (8,720)
        Increase in intangible assets and
        deferred charges                                                           (351)         (304)         (177)          (212)
        Effect of acquisition of subsidiary                                        (740)            -             -              -
        Decrease (Increase) in investments
           and other long term assets                                                30          (123)          130            156
        Proceeds from sale of fixed assets                                        9,417        11,904         4,840          5,806
                                                                                -------        ------        ------         ------
                Net cash provided by (used in) investing activities             (20,056)      (16,181)      (19,490)       (23,377)
                                                                                -------        ------        ------         ------



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

(1) Exchange rate:  Euro 1.00 = U.S. $ 1.1995 as of November 30, 2003

</TABLE>

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

<PAGE>


<TABLE>

                                          INSTRUMENTATION LABORATORY S.P.A. AND SUBSIDIARIES

                                            AUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                         FOR THE YEARS ENDED NOVEMBER 30, 2001, 2002 AND 2003
                               (THOUSANDS OF EURO OR THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)



<CAPTION>
                                                                                   2001          2002          2003           2003
                                                                                   ----          ----          ----           ----
                                                                               RESTATED
                                                                               --------
                                                                                   EURO          EURO          EURO          U.S.$
                                                                                                                               (1)
<S>                                                                              <C>           <C>           <C>            <C>
CASH FLOWS FROM FINANCING
     ACTIVITIES:
         Proceeds from issuance of long-term debt                                 13,815          875             -              -
         Repayment of long-term debt                                                (554)      (4,000)       (1,098)        (1,317)
         Increase (decrease) in bank overdrafts and short-term
         debt                                                                    (14,130)       1,896       (16,707)       (20,040)
                                                                                 -------      -------       -------        -------
             Net cash provided by (used in) financing activities                    (869)      (1,229)      (17,805)       (21,357)
                                                                                 -------      -------       -------        -------

EFFECT OF EXCHANGE RATES ON CASH                                                      73          (60)       (1,218)        (1,461)
                                                                                 -------      -------       -------        -------
NET INCREASE (DECREASE) IN CASH AND CASH
     EQUIVALENTS                                                                   1,759        8,127        (1,786)        (2,142)

CASH AND CASH EQUIVALENTS at beginning of the year                                 6,272        8,031        16,158         19,381
                                                                                 -------      -------       -------        -------
CASH AND CASH EQUIVALENTS at end of the year                                       8,031       16,158        14,372         17,239
                                                                                 =======      =======       =======        =======

SUPPLEMENTAL INFORMATION:

         Cash paid during the year for:
             Interest                                                             13,547       13,909        10,578        12,688
             Income tax                                                            1,785        2,883         2,657         3,187

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

(1) Exchange rate: Euro 1.00 = U.S. $ 1.1995 as of November 30, 2003


</TABLE>

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


<PAGE>


<TABLE>

                                          INSTRUMENTATION LABORATORY S.P.A. AND SUBSIDIARIES

                               AUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                      FOR THE YEARS ENDED NOVEMBER 30, 2001, 2002 AND 2003
                             (THOUSANDS OF EURO OR THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)

<CAPTION>
                                                                       ADDITIONAL     CUMULATIVE
                                                            SHARE       PAID-IN       TRANSLATION        ACCUMULATED         TOTAL
                                                          CAPITAL        CAPITAL       ADJUSTMENT          DEFICIT          EQUITY
                                                          -------      ----------     -----------        -----------        ------
<S>                                                        <C>           <C>             <C>               <C>              <C>
BALANCE AT NOVEMBER 30, 2000, as
restated                                                   57,055          79,958          10,726          (100,999)        46,740
                                                          -------         -------         -------          --------        -------

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

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

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

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

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

      Loss coverage                                             -         (68,462)              -            68,462              -

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

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

     Net loss for the year                                      -               -               -           (13,841)       (13,841)
                                                          -------         -------         -------          --------        -------
BALANCE AT NOVEMBER 30, 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
                                                          -------         -------         -------          --------        -------
BALANCE AT NOVEMBER 30, 2003 in  U.S. $  (1)              140,347          13,789          (4,435)          (75,498)        74,203
                                                          =======         =======         =======          ========        =======



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

(1) Exchange rate: Euro 1.00 = U.S. $ 1.1995 as of November 30, 2003

</TABLE>

The  accompanying  notes are an integral  part of these
consolidated financial statements. 1.

<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, 2002 and 2003 the parent  company  Instrumentation
     Laboratory S.p.A. owned the following subsidiaries, either directly or
     indirectly:

       Company                                           2002            2003
       -------                                          -----           -----

       Instrumentation Laboratory GmbH (Germany)         100%            100%
       Instrumentation Laboratory Ges.mbH                100%            100%
       Instrumentation Laboratory U.K. Ltd. (U.K.)       100%            100%

       Company                                           2002            2003
       -------                                          -----           -----

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


2.   BASIS OF THE CONSOLIDATED FINANCIAL STATEMENTS

     The  accompanying   consolidated   financial  statements  include  the
     accounts of the parent company, Instrumentation Laboratory S.p.A., and
     of the subsidiaries owned directly or indirectly (the 'Company' or the
     'Group').  The  subsidiaries  included  in  the  consolidation  as  of
     November 30, 2003 and 2002 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
     uncollectible  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  leased to customers under  sales-type lease contracts are
     recorded at an amount equal to the net  investment in the lease,  with
     the  finance  income  being  recognized  over the life of the  related
     contracts.

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

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

     Property, Plant and Equipment

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

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

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

     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

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

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

     Warranty Costs

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

     Research and Development Costs

     Research and development costs are charged to income as incurred.

     Derivatives

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

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

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

     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 per share

     Loss 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 2001,  2002 and 2003 is
     72,861,028,  90,701,104  and  90,701,104  respectively.  Common  stock
     options,  which were  outstanding  in 2001,  2002 and 2003,  have been
     excluded as their  effect  would be  antidilutive.  As of November 30,
     2002 and 2003 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.  Dollar is  included
     solely for the  convenience of the reader,  using the noon buying rate
     certified for customs purposes by the Federal Reserve Bank of New York
     as of November  30,  2003,  which was Euro 1.00 to U.S. $ 1.1995.  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,  2002  and  2003   approximately  38%  and  35%,
     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% and 19%, respectively, of consolidated net
     revenues for the years ended November 30, 2002 and 2003. The Company's
     management does not expect any  significant  losses as a result of the
     concentration of these receivables.

     At November 30, 2002 and 2003 trade  receivables  from public  Italian
     healthcare  entities  are net of  Euro  16.5  million  and  Euro  25.7
     million,  respectively,  sold  through a  factoring  transaction  on a
     non-recourse basis.

     The  Company  adopts a  procedure  of  charging  interest  on  overdue
     receivables.  However,  interest  charged to customers  is  frequently
     non-collectable.  Accordingly,  interest  receivables  outstanding  at
     November  30, 2002 and 2003 (Euro 0.6  million  and Euro 0.3  million,
     respectively)  have been  fully  reserved  for.  The  Company  records
     interest income on receivables when received.

6.   STRATEGIC ALLIANCE

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

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

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

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

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

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

     Group  receivables and payables from/to Beckman Coulter as of November
     30, 2002 and 2003 and sales and purchases  to/from Beckman Coulter for
     the years then ended were as follows (in thousands of Euro):

                                              2002                    2003
                                              ----                    ----

     Trade receivables                      13,417                   8,618
     Trade payables                          6,427                   3,733
     Sales                                  47,943                  36,563
     Purchases                              18,557                  14,466

     Sales of Beckman  Coulter  products by the Company under the exclusive
     distribution  agreement for the years ended November 30, 2002 and 2003
     amounted to Euro 29.3 million and Euro 30.8 million, respectively.


7.   INVENTORIES

     As of  November  30,  2002 and 2003  inventories  were as follows  (in
     thousands of Euro):

                                              2002                    2003
                                              ----                    ----

     Raw materials                          17,960                  13,040
     Work-in-process                         1,008                     882
     Finished goods                         43,999                  38,818
     Service parts                           4,225                   3,528
                                           -------                 -------

                                            67,192                  56,268
     Less: Reserve for obsolescence        (10,710)                 (9,954)
                                           -------                 -------
                                            56,482                  46,314
                                           =======                 =======

8.   INSTRUMENTS AT CUSTOMERS

     As of November 30, 2002 and 2003,  instruments at customers  consisted
     of the following (in thousands of Euro):

                                                        2002         2003
                                                        ----         ----

     Instruments Owned by the Group
     ------------------------------

     Instruments cost                                  70,589         75,169
     Less: Accumulated depreciation                   (50,022)       (50,644)
                                                       20,567         24,525
                                                     --------       --------
     Net long-term investment in sales-type
     --------------------------------------
     leased instruments
     ------------------

     Minimum lease payments receivable                  5,129          3,875
     Less: Allowance for non-collectible amounts         (100)           (48)

     Net lease payments receivable                      5,029          3,827
     Less: Unearned interest income                    (1,238)          (870)
                                                     --------       --------
     Net investment in sales-type leases                3,791          2,957
     Less: Current portion                             (1,298)          (981)
                                                     --------       --------
                                                        2,493          1,976
                                                     --------       --------
                                                       23,060         26,501
                                                     ========       ========

     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,  2002 and 2003 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):

                          2004                  1,319
                          2005                  1,155
                          2006                    849
                          2007                    395
                          2008                    157
                                                -----
                                                3,875

     Depreciation  of  instruments  owned by the Group for the years  ended
     November  30, 2002 and 2003  amounted to Euro 8.1 million and Euro 8.5
     million, respectively.

     In 2001,  2002 and 2003 the Company  entered  into sale and  leaseback
     transactions,  by which certain equipment in use at customers was sold
     and  leased  back  over a period  that is in line  with the  estimated
     useful life of the equipment.  These  transactions have been accounted
     for as operating  leases,  as allowed by the Italian law,  even though
     they  represent  finance  leases.  Total  lease  cost  charged  to the
     statement of operations for the years ended November 30, 2002 and 2003
     amounted to Euro 3.3 million and Euro 4.7 million,  respectively.  Had
     the Company accounted for this transaction as a finance lease, the net
     loss for the  fiscal  year  2003  would  have  been  lower by Euro 0.6
     million  and net  equity,  as of November  30,  2003,  would have been
     higher by Euro 0.9 million.  Assets  (instruments  at customers) as of
     November  30,  2003 would have been  higher by Euro 10,5  million  and
     liabilities  (financial  debt)  would  have  been  higher  by Euro 9.6
     million, of which Euro 4.3 million would be short term.

9.   INTANGIBLE ASSETS AND DEFERRED CHARGES

     Intangible  assets and deferred charges at November 30, 2002 and 2003,
     are summarized as follows (in thousands of Euro):

<TABLE>
<CAPTION>
                                                                           2002
                                                                           ----
                                                                        Accumulated
                                                                        -----------
                                                            Cost        Amortization           Net
                                                            ----        ------------           ---
<S>                                                      <C>              <C>             <C>
     Patents, trademarks
         and other rights                                 40,011          (31,592)           8,419

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

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

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

<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
                                                         =======          ========         =======

</TABLE>

     Amortization  for the years ended November 30, 2001,  2002 and 2003 is
     as follows:

<TABLE>
<CAPTION>
                                                         2001           2002            2003
                                                         ----           ----            ----

     <S>                                                <C>           <C>              <C>
     Patents, trademarks
           and other rights                             1,015            992             966
     Charges relating to capital increases
           and initial public offering                    196              -               -
     Computer software                                    181              -               -
     Goodwill arising from 1996 Acquisitions            2,073          2,081           2,081
     Goodwill arising from 1999 Acquisition             5,119          5,249           5,249
     Other                                                474            142             169
                                                        -----          -----           -----
                                                        9,058          8,464           8,423
                                                        =====          =====           =====
</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, 2003, 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)
     -------------------------

         2004                                         8,100
         2005                                         8,100
         2006                                         8,100
         2007                                         8,100
         2008                                         8,100


10.  BANK OVERDRAFTS AND SHORT-TERM DEBT

     As of November 30, 2002 and 2003,  the Group had available  short-term
     credit lines of approximately Euro 97.0 million and Euro 90.0 million,
     respectively,  with various banks in Europe and in the U.S., primarily
     for working capital purposes.

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

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

     <S>                                                               <C>           <C>
     Euro denominated bank overdrafts and short- term loans,
     bearing interest variable from 3.75% to 13.25% at
     November 30, 2003                                                 37,996        24,356

     Euro denominated bank advance on import/export, average
     interest at 6.05% at November 30, 2003                            28,769        25,702
                                                                       ------        ------
                                                                       66,765        50,058
                                                                       ======        ======

     Borrowings under revolving line of credit                         66,765        50,058

     Weighted average interest rate                                     6.63%         5.95%

     Maximum month-end balance during year                             71,620        72,845

     Average month-end balance during year                             66,748        62,162

</TABLE>

11.  LONG-TERM DEBT

     Long-term debt at November 30, 2002 and 2003, is summarized as follows
     (in thousands of Euro):

<TABLE>
<CAPTION>

                                                                        2002           2003
                                                                        ----           ----

     <S>                                                             <C>             <C>
     Euro denominated subordinated revolving loan from Izasa
     Distribuciones Tecnicas S.A                                      61,401         61,401

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

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

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

     U.S. Dollar denominated loan expiring in May 2005                     -          9,310
                                                                     -------         ------
     Other long term debt                                                119            229
                                                                     -------         ------
                                                                     100,213         97,234
     Less- Current portion of long-term debt                         (12,399)             -
                                                                     -------         ------
                                                                      87,814         97,234
                                                                     =======         ======
</TABLE>

     On February 26, 1999 the Company signed a subordinated  revolving loan
     agreement with a Werfen affiliate (Izasa Distribuciones Tecnicas S.A.)
     in the amount of Spanish  Pesetas 21,625 million  (approximately  Euro
     130 million) and a  subordinated  long-term  loan with Werfen S.A. (an
     affiliated company of CH-Werfen S.A.) in the amount of Spanish Pesetas
     4,375 million  (approximately  Euro 26.3 million).  Approximately Euro
     114 million of the loan proceeds were used to pay for the  acquisition
     of  Hemoliance.  Both loans  original  maturity  has been  extended to
     January  31, 2007 and bear  interest  at a floating  rate based on the
     six-month  Euribor plus 320 basis points per annum (ranging from 5.30%
     to 5.40% at November 30, 2003). On April 20, 2001 Izasa Distribuciones
     Tecnicas S.A. exchanged Euro 59,999,998.83 of the outstanding loan for
     46,511,627 newly issued ordinary shares. On April 27, 2001 Werfen S.A.
     assigned its outstanding  loan to Miscel Holding B.V., a subsidiary of
     Izasa Distribuciones Tecnicas S.A. On November 25, 2003 Miscel Holding
     B.V.  contributed the loan to IL Holding S.p.A., an Italian subsidiary
     of Izasa Distribuciones Tecnicas S.A..

     Such loans contain  certain  covenants  (such as the obligation to pay
     principal and interest at due date, timely filing of tax return) that,
     if violated, would accelerate the due date.

     The  U.S.  Dollar   denominated  loan  is  secured  by  inventory  and
     receivables  and bears  interest  at U.S.  Dollar  prime  rate plus 2%
     (6.00% At November 30, 2003).

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

     2004                                       -
     2005                                   9,539
     2006                                       -
     2007                                  87,695
                                           ------
                                           97,234
                                           ======

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 1997 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  assessment  received  and the first  level  Tax Court  ruled in
     favour of the Company in relation to all of the four years  concerned.
     In 1999 the second  level Tax Court ruled in favour of the Company for
     the 1991 assessment which has been definitively  rejected. In 2001 the
     second level Tax Court ruled in favour of the Company for the 1992 and
     1993 assessments.  Discussion with the second level Tax Court is still
     pending for the year 1994.

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

     In February 2004, the Lower Tax Court substantially ruled in favour of
     the Company.  However, the decision is not yet final and at this stage
     it is not possible to reliably estimate the final outcome.

     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 two preceding paragraphs.

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

     At November 30, 2002 and 2003,  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 173
     million  and Euro 159  million,  respectively,  subject  to review and
     approval of the applicable tax authorities, which will expire in years
     2004 to 2021 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 years 2001,  2002 and 2003 are  detailed as
     follows:

                                               2001        2002        2003
                                               ----        ----        ----

     Current income taxes                     1,368       1,073         900
     Deferred income taxes                     (286)         82         (17)
                                             ------      ------      ------
     Total income taxes                       1,082       1,155         883
     IRAP                                     1,834       1,394       1,820
                                              -----       -----       -----
     Total tax provision for the year         2,916       2,549       2,703
                                              =====       =====       =====

     The tax provisions for the years 2001,  2002 and 2003, 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,  2001,  2002 and 2003
     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, 2002 and 2003 accrued  expenses and other  liabilities
     consisted of the following (in thousands of Euro):

                                                             2002         2003
                                                            -----        -----

     Payroll, including social charges                     15,569       16,316
     Leaving indemnities                                      401          424
     Restructuring charges                                    925            -
     Service contract deferred income and warranty
     reserve                                                3,814        3,214
     Accrued interest on loans from:
         - Izasa Distribuciones Tecnicas, S.A.              1,040          824
         - Miscel Holding B.V.                              3,020        1,767
         - IL Holding S.p.A.                                    -        2,808
     Other accrued expenses and liabilities                12,613       14,179
                                                          -------      -------
                                                           37,382       39,532
                                                          =======      =======

     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  (3.075 % at November 30, 2003). As of November 30, 2002 and
     2003, the resulting reserve for severance indemnities amounted to Euro
     5.9 million and Euro 6.2 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>
                                                         2001         2002          2003
                                                        -----        -----         -----

     <S>                                               <C>          <C>          <C>
     CHANGE IN PROJECTED BENEFIT OBLIGATION
     (PBO) DURING MEASUREMENT PERIOD
     PBO, November 30 of previous year                 41,006       45,997        54,693
     Exchange rate effect on opening balance             (931)         324       (10,767)
     Service Cost                                       1,301        1,366         1,375
     Interest Cost                                      2,928        2,926         2,739
     Actuarial (Gain)/Loss                              2,975        5,132         1,481

     Benefits Paid                                     (1,282)      (1,206)       (1,685)
     Plan amendments                                        -          154             -
                                                      -------      -------       -------
     PBO. November 30, 2003                            45,997       54,693        47,836
                                                      =======      =======       =======
     CHANGE IN PLAN ASSETS DURING THE
     MEASUREMENT PERIOD
     Plan Assets at Fair Value, November 30 of
     previous year                                     36,459       31,848        29,348
     Exchange rate effect on opening balance             (818)         175        (6,127)
     Expected Return on Plan Assets                     3,079       (1,467)        2,369
     Employee Contribution                              1,307        1,826         1,835
     Benefits Paid                                     (1,282)      (3,034)       (1,685)
     Actuarial gain (loss)                             (6,897)           -            16
                                                      -------      -------       -------
     Plan Assets at Fair Value, November 30,
     2003                                              31,848       29,348        25,756
                                                      =======      =======       =======
     RECONCILIATION OF PREPAID (ACCRUED)
     Underfunded Status of the Plan                   (14,148)     (23,890)      (22,080)
     Unamortized Prior Service Cost                       164          403           (98)
     Unrecognized Net Loss                             15,573       25,219        23,252
                                                      -------      -------       -------
     Prepaid (accrued) Pension Costs                    1,589        1,732         1,074

     COMPONENTS OF NET PERIODIC BENEFIT COST
     FOR FISCAL YEAR
     Service Cost                                       1,242        1,373         1,312
     Interest Cost                                      2,920        3,079         2,827
                                                         2001         2002          2003
                                                      -------      -------       -------

     Expected Return on Plan Assets                    (3,146)      (3,096)       (2,570)
     Net amortization and deferral                        (73)         385           772
                                                      -------      -------       -------

     Net Periodic Pension Cost                            943        1,741         2,341

</TABLE>

     Assumptions used for the above funded status calculation include:

                                                      2001      2002      2003
                                                     -----     -----     -----
     Annual rate of increase in compensation
       levels:
       United States plan                            7.00%     6.75%     5.00%
       European plans                                4.75%     4.50%     4.50%
     Discount rate applied to benefit obligation:
       United States plan                            7.00%     6.75%     6.75%
       European plans                                6.25%     5.50%     5.50%
     Expected long-term rate of return on plan
       assets:
       United States plan                            9.00%     9.00%     9.00%
       European plans                                7.50%     7.50%     7.50%

     The net cumulative unrecognized actuarial loss as of November 30, 2003
     amounts to Euro 23.2 million of which Euro 16.7  million  relates to a
     U.S.  pension plan and Euro 6.5 million  relates to a UK pension plan.
     The net amount  recognized  as prepaid  pension costs is the result of
     accrued  pension  costs of Euro 0.2 million for U.S.  plan and prepaid
     pension costs of Euro 1.3 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 2002 and 2003. The U.S.  subsidiary  expensed
     approximately  U.S.$  319,000,  $ 460,000  and $ 494,000  of  employer
     matching contributions for the years ended November 30, 2001, 2002 and
     2003 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.
     SFAS  No.106  allows  recognition  of  the  cumulative  effect  of the
     liability  in the  year of the  adoption  of the  amortization  of the
     obligation  over a period of up to 20  years.  The Plan  provides  for
     healthcare  benefits for  qualified  participants  and the Company has
     elected to recognize the initial  postretirement benefit obligation of
     approximately US $ 4,540,000 over a period of 20 years.

15.  COMMITMENTS AND CONTINGENCIES

     Leases

     Minimum  annual  rental  commitments  as of  November  30,  2003 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
                                              ------

         2004                                  4,345
         2005                                  3,397
         2006                                  2,494
         2007                                    977
         2008                                    479
         Thereafter                            1,060
                                              ------
         Total minimum lease payments         12,752
                                              ======

     As of November 30, 2003, total  commitments for lease payments related
     to sale and lease back of  instruments  (Note 8)  amounted to Euro 9.6
     million, of which Euro 4.3 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 2002 the 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. Dollars 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  conditions or results
     of operations of the Company.  As of November 30, 2002 the Company has
     recorded  an  accrual  of US  Dollars  1.3  million  related  to  this
     judgement.

     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, 2003
                                       -----------------
                                        notional amount
                                        ---------------

     Interest Rate Swaps                   21,000
     Currency Options                      67,975

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

16.  SHAREHOLDERS' EQUITY

     Initial Public Offering

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

     Share Capital

     Share capital  outstanding  as of November 30, 2002 and 2003 consisted
     of 90,701,104 ordinary shares with a nominal value of Euro 1.29 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.

     Loss coverage

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

     Change in minority interest

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

     Reconciliation to Parent Company Equity

     The   reconciliation   of  net  loss  and   shareholders'   equity  of
     Instrumentation  Laboratory  S.p.A.  (the Group's parent company),  as
     reflected in the statutory accounts or in the draft statutory accounts
     subject to approval of the Board of Directors,  and  consolidated  net
     loss  and  shareholders'   equity  as  reported  in  the  accompanying
     financial  statements  as of November  30,  2001,  2002 and 2003 is as
     follows (in thousand of Euro):

<TABLE>
<CAPTION>
                                                             Net Loss                         Shareholders' Equity
                                                             --------                         --------------------

                                                 2001          2002          2003        2001        2002        2003
                                            ---------------------------------------  ------------------------------------

      <S>                                     <C>          <C>           <C>          <C>         <C>          <C>
      Instrumentation Laboratory
      S.p.A.
                                              (10,471)     (14,986)      (83,155)     128,618     113,632      30,477
      Difference between carrying
      value of investments in
      subsidiaries and their net
      results and equity                          680        1,685        78,008       10,949     (19,779)      9,837
      Adjustments to conform
      with Group accounting
      principles (Note 2)                       2,465        2,109         1,142      (30,316)        980       2,122
      Elimination of intercompany
      transactions and other
      consolidation adjustments                 1,517       (2,649)       (7,080)     (10,409)    (14,517)     19,428
                                              -------      -------       -------      -------     -------     -------
      Consolidated                             (5,809)     (13,841)      (11,085)      98,842      80,316      61,862
                                              =======      =======       =======      =======     =======     =======

</TABLE>

17.  NET SALES

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

                                             2001         2002         2003
                                            -----        -----        -----

      Net sales                            29,252       25,191       20,945
      Costs and expenses                   22,571       19,169       17,804
                                           ------       ------       ------
      Gross profit                          6,681        6,022        3,141
                                           ======       ======       ======

     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, 2001,
     2002 and 2003 is as follows (in thousands of Euro):

<TABLE>
<CAPTION>
                                             Critical      Clinical
                                             --------      --------
                              Hemostasis         care      Chemistry         Other       Total
                              ----------         ----      ---------         -----       -----

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

     2002
     ----
     Net sales                   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

</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):

                                                  North      Rest of
                                                  -----      -------
                                     Europe     America        World     Total
                                     ------     -------        -----     -----
     2001
     ----
     Sales                          157,562     102,108       15,144   274,814
     Operating income (loss)
     before amortization             31,118     (18,664)       5,866    18,320

     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

     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>
     2001
     ----
     Tangible assets - Net                              4,720       21,692          693        27,105
     Reagent rentals - Net                             17,055        4,078        1,062        22,195
     Intangible assets (excluding Goodwill) -
     Net                                                2,675          138            -         2,813
     Long-term receivables and other                      380           62            -           442


     2002
     ----
     Tangible assets - Net                              4,316       19,270          440        24,026
     Reagent rentals - Net                             14,946        3,798        4,316        23,060
     Intangible assets (excluding Goodwill) -
     Net                                                2,119          128            -         2,247
     Long-term receivables and other                      509           56            -           565

     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

</TABLE>

18.  INTEREST INCOME AND EXPENSE

     Interest income and expense for the year ended November 2001, 2002 and
     2003 were as follows (in thousands of Euro):

<TABLE>
<CAPTION>
                                                           2001       2002        2003
                                                           ----       ----        ----

     <S>                                                 <C>        <C>         <C>
     Interest income from deposits and other
        short-term financial assets                       1,277        980         746
                                                         ------     ------      ------

                          Total interest income           1,277        980         746
                                                         ======     ======      ======

     Interest expense on short-term bank
        borrowings
                                                          5,745      5,225       4,844

     Interest expense on long-term debt                   9,637      6,985       5,966
                                                         ------     ------      ------

                          Total interest expense         15,382     12,210      10,810
                                                         ======     ======      ======
</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>

                                                             2001         2002         2003
                                                             ----         ----         ----

     <S>                                                   <C>          <C>         <C>
     Supplementary leaving indemnities and non
     recurring restructuring charges                       (2,842)      (1,515)        (981)
     Other non recurring costs related to
     production transfer                                     (907)           -            -
     Gain (loss) on foreign exchange and
     forward exchange contracts                                92        1,896       (2,667)
     Litigation settlements and estimated costs
     to settle                                             (1,477)      (1,260)        (220)
     Gain (loss) on disposal of fixed assets                  683          117           72
     Bank charges                                            (421)        (700)        (914)
     Non recurring income from sale of
       distribution rights                                  9,000            -            -
     Other, net                                            (2,110)      (1,234)      (1,079)
                                                           ------       ------       ------
                Total Other income (expense), net           2,018       (2,696)      (5,789)
                                                           ======       ======       ======

</TABLE>

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


20.  RELATED PARTY TRANSACTIONS

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

     Total  purchases from related  parties for the year ended November 30,
     2001,  2002 and 2003 were  approximately  Euro 5.7  million,  Euro 8.4
     million and Euro 10.5 million, respectively.

     In addition,  in 2001,  2002 and 2003 a Werfen  affiliate  charged the
     Company  approximately Euro 2.2 million, Euro 2.2 million and Euro 2.5
     million,   respectively,  for  software  development  services.  These
     services   relate   basically  to  software   applied  for  analytical
     instruments.

     Total sales to related  parties for the year ended  November 30, 2001,
     2002 and 2003 were approximately Euro 13.8 million,  Euro 13.7 million
     and Euro 12.7 million, respectively.

     As of November 30, 2002 and 2003, 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>

                                                    2002                            2003
                                                    ----                            ----
                                         Receivables        Payables      Receivables     Payables
                                         -----------        --------      -----------     --------

     <S>                                       <C>             <C>              <C>          <C>
     Izasa Distribuciones Tecnicas,
      S.A.                                     3,267           1,019            3,238        1,390
     Biokit S.A.                                 187               -              291            -
     Biokit Distribution S.A.                      -           4,769                -        5,017
     NTE, S.A.                                     -             435                -          638
     Werfen Medical IL Ltd. Korea                531               -              414            -
     Werfen Medical S.A.                         364               -              285            -
     Comesa Austria                                -             244                2           69
     Comesa Poland                               336               -              261            -
                                              ------          ------           ------       ------
                                               4,685           6,467            4,491        7,114
                                              ======          ======           ======       ======

     Financial transactions (including interests)

<CAPTION>

                                                    2002                            2003
                                                    ----                            ----
                                         Receivables        Payables      Receivables     Payables
                                         -----------        --------      -----------     --------

     <S>                                       <C>            <C>               <C>         <C>
     Izasa Distribuciones Tecnicas,
      S.A.                                         -          62,441                -       62,225
     Miscel Holding B.V.                           -          29,314                -        1,767
     IL Holding S.p.A.                             -               -                -       29,102
                                              ------          ------           ------       ------
                                                   -          91,755                -       93,094
                                              ======          ======           ======       ======

</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 2001, 2002 and 2003, Izasa Distribuciones  Tecnicas S.A.
     ('Izasa')  charged  certain  Group  companies  approximately  Euro 307
     thousands, Euro 582 thousands and Euro 457 thousands, respectively, in
     management fees for corporate services provided to these companies and
     administrative and out-of-pocket  expenses incurred in rendering those
     services.  Prior to the Offering, all of the executive officers of the
     Company  employed by Werfen or its affiliates have become employees of
     the Company or its subsidiaries.

     As  described  in  Note 9,  in  connection  with  the  acquisition  of
     Hemoliance,  completed in January 1999, certain Werfen Group companies
     granted long-term subordinated loans to the Company.  Interest charged
     on these loans in fiscal  years 2001,  2002 and 2003  amounted to Euro
     9.1 million, Euro 6.0 million and Euro 5.2 million, respectively.

     In 2001, the Company  signed a distribution  agreement with the Parent
     Company Izasa (its sole distributor in Spain and Portugal since before
     1990), by which Izasa has been appointed exclusive  distributor of the
     Company's  products  in Spain for the  initial  term of 10 years.  The
     consideration  paid by Izasa is Euro 9 million that has been  recorded
     as non  recurring  income (Note 19). Also in 2001 Izasa entered into a
     cost sharing agreement with the U.S.  subsidiary of the Group. By said
     agreement  Izasa   contributes  to  finance  the  Group  research  and
     development  activities  on the  basis of its  share  of  total  Group
     worldwide sales on related products.  The contributions for 2001, 2002
     and 2003  amounted to Euro 2.2 million,  Euro 2.2 million and Euro 2.7
     million  and have been  classified  as a  reduction  of  research  and
     development costs of the periods.

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

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

     Accounting for Goodwill

     Goodwill arising from 1996 and 1999  Acquisitions is amortized over 20
     years for 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  year 2003,  has 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.

     Share Capital Issuance Costs

     Costs incurred by the Group in 1996 in connection with the issuance of
     share  capital  (inclusive  of  expenses  related  to  initial  public
     offerings  and related  rights) are deferred  and  amortized to income
     over 5 years.  Under U.S. GAAP such costs are charged to shareholders'
     equity against the proceeds from the increase in capital in the period
     in which the  issuance  occurred,  as  reflected  in the  accompanying
     reconciliation.

     Accounting for Finance Sale and Lease Back

     As  discussed  in Note 3,  instruments  at  customers  sold to leasing
     companies under sale and lease back  transactions are accounted for as
     operating  leases,  as allowed by the Italian law,  even if they would
     qualify as 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, 2001,  2002 and 2003.  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 sale of distribution rights

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

     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
     and 2003.

     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. 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, 2003,  equal to 131,403  thousands of Euro (Dr.
     balance) and 79,958 thousands of Euro (Cr. balance), respectively (see
     the  'Audited  Consolidated  Statements  of Changes  in  Shareholders'
     Equity for the years ended November 30, 2001,  2002 and 2003' and Note
     22).


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

     The  following  is a summary  of the  significant  adjustments  to net
     result for the years ended  November  30,  2001,  2002 and 2003 and to
     shareholders'  equity as of  November  30, 2002 and 2003 that would be
     required if U.S. GAAP had been applied  instead of Italian GAAP in the
     consolidated financial statements:

<PAGE>

<TABLE>
<CAPTION>

                                                                          Year ended November 30,
                                                                          -----------------------
     NET LOSS                                              2001               2002              2003                2003
                                                          -----              -----             -----               -----
                                                             (Thousands of Euro, except                    (Thousands of
                                                                   per Share Data)                         U.S.$, except
                                                                                                         per Share Data)

    <S>                                                 <C>               <C>               <C>                 <C>
     Net loss according to the financial
       Statements prepared under Italian
       GAAP                                               (5,809)           (13,841)          (11,085)            (13,296)

     Items increasing (decreasing) reported
       Net results:

     Accounting for goodwill                                  34                 34             7,364               8,833
     Share capital issuance costs                            198                  -                 -                   -
     Accounting for finance sale & lease-
     back                                                   (129)               455               559                 671
     Accounting for goodwill denominated
     in foreign currencies                                (1,701)            (1,447)             (293)               (351)
     Discount of accounts receivables                     (1,704)            (1,605)           (1,170)             (1,403)
     Imputed interest on accounts
     receivable                                            1,335              1,704             1,605               1,925
     Accounting for pension plans                            104                  -                 -                   -
     Consolidation of subsidiary                             403                (70)              (52)               (43)
     Accounting for sale of distribution
     rights                                               (9,000)                 -                 -                   -
     Accounting for derivatives                               -                 333              (333)               (399)
     Deferred income taxes                                (1,032)              (445)             (335)               (402)
     Accounting for monetary revaluation                      -                 304              (114)               (137)
     Tax effect of reconciling items                          73               (203)             (128)               (155)
                                                      ----------         ----------        ----------          ----------
     Approximate net loss in accordance
     with US GAAP                                        (17,228)           (14,781)           (3,982)             (4,757)
                                                      ==========         ==========        ==========          ==========

     Net loss per share - basic and diluted                (0.24)             (0.16)            (0.04)              (0.05)

     Weighted average common shares
     outstanding                                      72,861,028         90,701,104        90,701,104          90,701,104

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

     CONSOLIDATED STATEMENT OF
     COMPREHENSIVE INCOME (LOSS)                                         Years ended November 30,
                                                 ------------------------------------------------------------------------
                                                         2001               2002              2003                2003
                                                        -----              -----             -----               -----
                                                                (Thousands of Euro)                        (Thousands of
                                                                                                                  U.S.$)

     <S>                                                <C>                <C>               <C>                 <C>
     Approximate net loss in accordance
     with US GAAP                                       (17,228)           (14,781)           (3,982)             (4,757)
     Cumulative translation adjustment                   (5,864)           (16,532)          (23,206)            (27,834)
     Reversal of inflation accounting to
     Monetary Revaluation reserve                             -               (304)              114                137
     Minimum pension liability, net of tax               (7,754)            (6,310)             (858)             (1,029)
                                                        --------          ---------          --------            --------

     Total comprehensive income (loss)                  (30,846)           (37,927)          (27,932)            (33,483)
                                                        ========          =========          ========            ========

<CAPTION>
                                                                                       At November 30,
                                                                   ------------------------------------------------------
     SHAREHOLDERS' EQUITY                                                      2002             2003             2003
                                                                               -----            -----            -----
                                                                            (Thousands of Euro)             (Thousands of
                                                                                                                   U.S.$)

     <S>                                                                    <C>               <C>                 <C>
     Shareholders' equity according to the financial
     statements prepared under Italian GAAP                                  80,316            61,862              74,203

     Items increasing (decreasing) reported shareholders'
     equity:

             Accounting for goodwill                                           (468)            6,896               8,272
             Accounting for finance sale & lease back                           326               885               1,062
             Discount and imputed interest on accounts
             receivable                                                        (706)             (271)               (325)
             Accounting for goodwill denominated in
             foreign currencies                                              15,883              (299)               (359)
             Accounting for pension plans                                   (14,065)          (14,923)            (17,900)
             Deferred income taxes                                                -              (335)               (401)
             Accounting for derivatives                                         333                 -                   -
             Tax effect of reconciling items                                    129                 -                   -
                                                                            --------          --------            --------
     Approximate shareholders' equity in accordance with
     US GAAP                                                                 81,748            53,816              64,552
                                                                            ========          ========            ========

</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 and U.S. $
     1,847,000  respectively  in  fiscal  years  2001,  2002 and  2003,  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 and GBP 1,315,000  respectively  in
     fiscal year 2002 and 2003 corresponding to U.S. $ 1,089,000 and U.S. $
     3,529,000, 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>
                                                            2001        2002       2003
                                                           -----       -----      -----

     <S>                                                   <C>        <C>        <C>
     CHANGE IN ACCUMULATED POSTRETIREMENT BENEFIT
     OBLIGATION (APBO) DURING MEASUREMENT PERIOD
     APBO, November 30 previous year                       4,013       6,149      3,641
     Effect of exchange rate on opening balance              (97)       (640)      (626)
     Service Cost                                            205         275         95
     Interest Cost                                           311         341        171
     Actuarial (Gain)/Loss                                 1,850        (406)      (344)
     Benefits Paid                                          (133)       (126)      (100)
     Plan amendment                                            -      (1,952)         -
                                                          ------      ------     ------
     APBO, November 30                                     6,149       3,641      2,837

</TABLE>

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

<TABLE>
<CAPTION>

     <S>                                                    <C>         <C>        <C>
     CHANGE IN PLAN ASSETS DURING THE MEASUREMENT
     PERIOD
     Plan Assets at Fair Value, November 30 of previous
     year                                                      -           -          -
     Employer Contribution                                   133         127        100
     Benefits Paid                                          (133)       (127)      (100)
                                                          ------      ------     ------
     Plan Assets at Fair Value, November 30                    -           -          -

</TABLE>

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

<TABLE>
<CAPTION>

     <S>                                                   <C>        <C>        <C>
     RECONCILIATION OF PREPAID (ACCRUED)
     Accumulated postretirement benefit obligation         6,149       3,641      2,837
     Plan assets at fair value                                 -           -          -
                                                          ------      ------     ------
     Accumulated postretirement benefit obligation in
     excess of plan assets                                (6,149)     (3,641)    (2,837)
     Unamortized Prior Service Cost                                         -      (861)
     Unrecognized Net Actuarial Loss (Gain)                  592      (1,828)      (237)
     Unrecognized Net transition obligation                1,196         843          -
                                                          ------      ------     ------
     ACCRUED POSTRETIREMENT BENEFIT OBLIGATION            (4,361)     (4,626)    (3,935)

</TABLE>

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

<TABLE>
<CAPTION>

     COMPONENTS OF NET PERIODIC BENEFIT COST FOR FISCAL     2001       2002        2003
     YEAR                                                  -----      -----       -----

     <S>                                                   <C>        <C>        <C>
     Service Cost                                            205        275          95
     Interest Cost                                           311        341         171
     Net amortization of Prior Service Cost                               -         (61)
     Net amortization of unrecognized gain                   (42)         -          (4)
     Net amortization of transition obligation               255        229           -
                                                          ------      ------     ------
     NET PERIODIC PENSION COST                               729        845         201

</TABLE>

     Assumed health care cost trends rates at November:

                                                          2002            2003
                                                          ----            ----
     Health care cost trend
       assumed for next year                               9%              8%
                                                           ==              ==
     Rate to which the cost trend rate is
       assumed to decline (the ultimate trend rate)        5%              5%
                                                           ==              ==
     Year that the rate reaches
       the ultimate trend rate                            2006            2006
                                                          ====            ====

     Assumed health care cost trend rates do not have a significant  effect
     on the amounts reported for the health care plans.

     A 1% change in assumed  health  care cost trend  rates  would have the
     following effects:

                                                       1%                1%
                                                    increase          decrease
                                                    --------          --------
     Effect on total of service
       and interest cost                             US $6            US $(5)
                                                     =====            =======
     Effect on postretirement
       benefit obligation                              66               (64)
                                                       ==               ====

Stock Option Plan

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

In more details, the vesting period is as follows:

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

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

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

The total number of Ordinary  Shares  subject to options as of February 13,
2004 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
February 13, 2004.

The Company  adopted the provisions of SFAS 123 'Accounting for Stock Based
Compensation'.  As permitted by the statement,  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, 2003:

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

        1.50                  170,000              5.64               1.50

The following table  summarizes  information  about options  outstanding at
November 30, 2002 and 2003:

<TABLE>
<CAPTION>

                                                         Options outstanding at fiscal year
                                                ----------------------------------------------------
                                                            2002           2003           Weighted
                                                          --------       --------         --------
                                                                                           average
                                                                                           -------
                                                                                    Exercise Price
                                                                                    --------------
                                                                                   (in US Dollars)

<S>                                                      <C>            <C>                   <C>
Balance at December 1,                                   170,000        170,000               1.50
Granted                                                        -              -                  -
Exercised                                                      -              -                  -
                                                ----------------------------------------------------

Balance at November 30,                                  170,000        170,000                1.50

Exercisable at November 30, 2002 and 2003                 85,000        127,500                1.50


</TABLE>

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>

                                                            2001            2002               2003
                                                          ------          ------             ------

<S>                                                     <C>             <C>                 <C>
Net loss attributable to common
stockholders - as reported                              (16,723)        (14,681)            (4,757)
Less: Total stock based employee
compensation expense determined
under the fair value based method for
all awards                                                  (16)            (42)               (42)
Pro-forma net loss attributable to
common stockholders                                     (16,739)        (14,723)            (4,799)

Net loss per share - as reported basic
and diluted                                               (0.23)          (0.16)             (0.05)
Net loss per share - pro forma basic and
diluted                                                   (0.23)          (0.16)             (0.05)

</TABLE>

The adoption of SFAS 123 would have no effect on diluted earnings per share
for the years ended  November 30, 2001,  2002 and 2003 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:

                               2001            2002           2003
                               ----            ----           ----
                                        (Thousands of Euro)

Domestic                      5,586           10,289         14,405
Foreign                     (18,940)         (21,873)       (15,153)
                            --------         --------       --------

Total pre-tax loss          (13,354)         (11,584)          (748)
                            ========         ========       ========

The provisions for income taxes are as follows:

                               2001            2002           2003
                               ----            ----           ----
                                       (Thousands of Euro)

Current                        3,201           2,467          2,720
Deferred                         673             730            447
                            --------         --------       --------

        Total                  3,874           3,197          3,167
                            ========         ========       ========

The tax effects of significant differences are as follows:

                                                             NOVEMBER 30,
                                                    ----------------------------
                                                         2002          2003
                                                      -------       -------
                                                         (Thousands of Euro)
   Deferred tax assets:
      Accrued liabilities not currently deductible      2,865         2,452
      Deferral of share capital issuance costs             58             -
      Inventories basis difference                      2,284         1,647
      Reserves                                            978           788
      Pension and postretirement benefit                1,530         1,284
      R&E  Capitalization                              11,336        11,943
      R&D Capitalization                                4,097         5,052
      Tax loss carry-forwards                          70,417        52,368
      Other                                               389           348
                                                      -------       -------

                                                       93,954        75,882
   Less: Valuation allowance                          (87,734)      (71,850)

                                                        6,220         4,032
                                                      -------       -------
  Deferred tax liabilities:
         Accelerated depreciation                     (5,905)       (3,814)
         Amortization of intangible assets               805          (855)
                                                      -------       -------

                                                      (6,710)       (4,669)
                                                      -------       -------

  Net deferred tax liability                            (490)         (637)
                                                      =======       =======


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

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

Reclassification of Balance Sheet

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

                             2002            2003                      2003
                             ----            ----                      ----
                              (Thousands of Euro)       (Thousands of U.S.$)

  Intangible assets        134,574          117,445                 140,876
  Current assets           174,653          144,473                 173,295
  Current liabilities      170,558          148,169                 170,467
  Total assets             370,097          326,740                 384,663
  Short term debt           66,765          56,112                   67,306
  Long term debt           109,305          102,564                 123,026

Valuation and Qualifying Accounts

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

<TABLE>
<CAPTION>
                                  Balance at        Effect of   Charged to   Deductions    Balance
                                  ----------        ---------   ----------   ----------    -------
                                   Beginning    exchange rate    Costs and               at End of
                                   ---------    -------------    ---------               ---------
                                   of Period       on opening     Expenses                  Period
                                   ---------       ----------     --------                  ------
                                                      Balance
                                                      -------
<S>                                 <C>                 <C>         <C>         <C>         <C>
 2001
 ----
    Reserve for doubtful
    accounts receivable               5,488              (52)          858        (432)      5,862
    Obsolescence
    reserve for inventory            13,834             (161)        2,627      (4,904)     11,396
 2002
 ----
    Reserve for doubtful
    accounts receivable               5,862             (287)          404        (204)      5,775
    Obsolescence
    reserve for inventory            11,396             (570)        3,460      (3,576)     10,710
 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

</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.

                                         AT NOVEMBER 30,
                                         ---------------
                                2002                           2003
                   ------------------------------ -----------------------------
                    Carrying          Fair Value   Carrying Value   Fair Value
                     Value
                   ------------------------------ -----------------------------
                                     (Thousands of Euro)

Trade receivables     91,668           90,063          75,992        74,822


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

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

On July 30, 2002, the FASB issued  Statement  No.146,  'Accounting  for the
Costs Associated with Exit or Disposal Activities'. This statement requires
companies to recognize costs  associated  with exit or disposal  activities
only when  liabilities for those costs are incurred rather than at the date
of a  commitment  to an exit or disposal  plan.  SFAS No.146 also  requires
companies to initially measure liabilities for exit and disposal activities
at their fair  values.  SFAS  No.146  replaces  Emerging  Issues Task Force
('EITF')  Issue  No.94-3,   'Liability  Recognition  for  Certain  Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a  Restructuring)'  and EITF No.88-10,  'Costs Associated
with Lease Modification or Termination'.  The provisions of SFAS No.146 are
effective for exit or disposal activities that are initiated after December
31, 2002.

In November 2002, the Emerging Issues Task Force ('EITF') reached consensus
on Issue  No.  00-21,  Revenue  Arrangements  with  Multiple  Deliverables.
Revenue arrangements with multiple  deliverables include arrangements which
provide for the  delivery or  performance  of multiple  products,  services
and/or rights to use assets where performance may occur at different points
in time or over  different  periods  of  time.  EITF  Issue  No.  00-21  is
effective for the Company beginning  December 1, 2003. The adoption of this
statement  did  not  have a  material  impact  on the  company's  financial
position or results of operations.

In  November  2002,  the FASB  issued  Interpretation  No. 45,  Guarantor's
Accounting and Disclosure  Requirements for Guarantees,  Including Indirect
Guarantees of  Indebtedness  of Others"'  ("FIN 45").  FIN 45 addresses the
disclosures  to be made by a guarantor in its interim and annual  financial
statements  about  its  obligations   under   guarantees.   The  disclosure
requirements in this Interpretation are effective for financial  statements
of interim or annual  periods  ending after December 15, 2002. The adoption
of  FIN 45 did  not  have a  material  impact  on the  Company's  financial
position or results of operations.

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

In  January  2003,   the  FASB  issued   Interpretation   ("FIN")  No.  46,
"Consolidation  of Variable  Interest  Entities"  and in December  2003,  a
revised  interpretation  was issued (FIN No.46, as revised).  In general, a
variable interest entity ("VIE") is a corporation,  partnership,  trust, or
any other legal  structure used for business  purposes that either does not
have equity  investors  with voting rights or has equity  investors that do
not provide  sufficient  financial  resources for the entity to support its
activities.  FIN 46, as  revised,  requires a VIE to be  consolidated  by a
company if that  company is  designated  as the  primary  beneficiary.  The
interpretation  applies to VIEs created after January 31, 2003, and for all
financial  statements  issued after  December 15, 2003 for VIEs in which an
enterprise  held a variable  interest that it acquired  before  February 1,
2003.  The  adoption  of Fin 46,  as  revised,  is not  expected  to have a
material  effect  on  the  Company's   financial  position  or  results  of
operations.

In May 2003, the FASB issued SFAS N. 150, "Accounting for Certain Financial
Instruments with  Characteristics  of both Liabilities and Equity," SFAS N.
150  clarifies the  definition of a liability as currently  defined in FASB
Concepts  Statement N. 6,  "Elements of Financial  Statements,"  as well as
other planned  revisions.  This statement  requires a financial  instrument
that  embodies an  obligation of an issuer to be classified as a liability.
In  addition,  the  statement  establishes  standard  for the  initial  and
subsequent  measurement  of these  financial  instruments  and  disclosures
requirements.  SFAS 150 is effective for financial instruments entered into
or modified after May 31, 2003 and for all other  matters,  is effective at
the first interim  period  beginning  after June 15, 2003.  The adoption of
SFAS 150 did not have a material effect on the Company's financial position
or results of operations.


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

On March 29,  2004,  the Company  convened an  Ordinary  and  Extraordinary
Shareholders' Meeting where the shareholders resolved to increase the Share
Capital by a maximum amount of Euro  104,999,999.94.  IL Holding S.p.A.,  a
Werfen Group  Company,  decided to subscribe its pro-rata share in exchange
for the cancellation of intercompany  debt held, at the present time, by IL
Holding S.p.A, who owns 85.4% of the Company.



<PAGE>

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

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

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

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

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

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

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

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

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

   8           List of Subsidiaries.

  10.1         English  Summary of a Syndicated  Loan Agreement dated as of
               July 31, 2002 among Izasa Distribuciones Tecnicas S.A. and a
               group of financial  entities,  filed with the SEC on May 31,
               2003, under Form 20-F, is incorporated herein by reference.

  10.2         English  Summary of a Syndicated  Loan Agreement dated as of
               March 24, 2004 among Izasa Distribuciones  Tecnicas S.A. and
               a group of financial entities.

  11           Code of Ethics.

  12           Section 302 Certifications.

  13           Section 906 Certifications.