UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 205494
                            ------------------------
                                    FORM 20-F
              ( ) REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
                  OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
                                       OR
               (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended: December 31, 1998
                                       OR
            ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
              THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
                         COMMISSION FILE NUMBER 1-10173
                            ------------------------
                       HUNTINGDON LIFE SCIENCES GROUP plc
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
                                ENGLAND AND WALES
                 (JURISDICTION OF INCORPORATION OR ORGANIZATION)
     WOOLLEY ROAD, ALCONBURY, HUNTINGDON, PE17 5HS, CAMBRIDGESHIRE, ENGLAND
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      None
           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                                                 NAME OF EACH EXCHANGE
TITLE OF EACH CLASS                              ON WHICH REGISTERED
--------------------                              ----------------------------
Ordinary Shares, par value 5 pence per share,    New York Stock Exchange, Inc.
in the form of American Depositary Shares
represented by American Depositary Receipts

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:

  Ordinary Shares of 5 pence each as at December 31, 1998       291,010,294

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or Section  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 report),  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 18X

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


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


<PAGE>




                           EXCHANGE RATE FLUCTUATIONS



The following  table sets forth,  for the periods and dates  indicated,  certain
information  concerning  the  exchange  rate for  translating  sterling  into US
dollars,  based on the noon buying rate in New York City for cable  transfers in
foreign  currencies,  as certified for customs  purposes by the Federal  Reserve
Bank of New York.

<TABLE>
<CAPTION>

         YEAR ENDED               AT SEPTEMBER 30         AVERAGE RATE(1)           HIGH(2)            LOW(2)
        SEPTEMBER 30
  -------------------------     --------------------     -------------------    ---------------     --------------
         <S>                          <C>                        <C>                 <C>                 <C>  
          1994                         1.58                       1.51                1.58                1.46
          1995                         1.58                       1.59                1.61                1.56
</TABLE>
<TABLE>
<CAPTION>

         YEAR ENDED                AT DECEMBER 31         AVERAGE RATE(1)          HIGH(2)             LOW(2)
        DECEMBER 31
  -------------------------     --------------------     -------------------    ---------------     --------------
         <S>                          <C>                        <C>                 <C>                 <C> 

          1996                         1.71                       1.57                1.66                1.52
          1997                         1.64                       1.64                1.69                1.60
          1998                         1.66                       1.66                1.70                1.64
</TABLE>

<TABLE>
<CAPTION>

     THREE MONTHS ENDED           AT DECEMBER 31          AVERAGE RATE(1)          HIGH(2)             LOW(2)
        DECEMBER 31
  -------------------------     --------------------     -------------------    ---------------     --------------
         <S>                          <C>                        <C>                 <C>                 <C> 

          1995                         1.55                       1.55                1.58                1.54
</TABLE>

(1)   Based on the average of the exchange rates on the last day of each month
      during the period.

(2)   Based on the monthly average of the daily average rate.

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

On April 16, 1999 the noon buying rate for sterling  was $1.6138 =(pound)1.00

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

The  operations of Huntingdon  Life Sciences  Group plc (the  "Company") and its
consolidated  subsidiaries  (collectively  with the Company,  "Huntingdon")  are
located in the United  Kingdom (the "UK"),  and the United  States (the "USA" or
the "US"). Substantially all of the revenues generated by the Company's UK-based
subsidiary is invoiced in sterling, and most sources of materials,  supplies and
services  utilized in generating such revenues are located within the UK. All of
the revenues generated by the Company's US subsidiary are invoiced in US dollars
and most sources of materials, supplies and services utilized in generating such
revenues  are  located  within the US. With the  exception  of  Huntingdon  Life
Sciences  Limited,  whose US  contracts  are  denominated  in US  dollars,  each
subsidiary's  earnings are not materially  affected by movements in the exchange
rates  between  sterling  and/or  the US  dollar  and/or a third  currency,  but
Huntingdon's  results on consolidation are affected by movements in the exchange
rate between sterling,  and the US dollar.  Fluctuations in sterling relative to
the US dollar  would also  affect  any US dollar  translations  of  Huntingdon's
financial results.  In addition,  payment of dividends on the Company's ordinary
shares, par value 5 pence per ordinary share (the "Ordinary Shares"),  traded in
the  form  of  American  Depositary   Receipts  ("ADRs"),   evidencing  American
Depositary Shares ("ADSs"),  each ADS representing five Ordinary Shares, will be
in sterling and exchange  rate  fluctuations  will affect the US dollar  amounts
received  by  holders  of the ADRs on  conversion  by The Bank of New York,  the
depositary for the Ordinary Shares  represented by ADSs (the  "Depositary"),  of
the cash dividends paid on the Ordinary Shares underlying the ADRs.



                               TABLE OF CONTENTS

ITEM                                                                     PAGE

         PART I

 1.      Description of Business ........................................   1

 2.      Description of Properties ......................................  12

 3.      Legal Proceedings ..............................................  12

 4.      Control of Registrant ..........................................  12

 5.      Nature of Trading Market .......................................  13

 6.      Exchange Controls and Other Limitations Affecting 
         Security Holders ...............................................  14

 7.      Taxation........................................................  14

 8.      Selected Financial Data ........................................  15

 9       Management's Discussion and Analysis of Financial 

         Condition and Results of Operations ..............................16

10.      Directors and Officers of the Registrant......................... 22

11.      Compensation of Directors and Officers .......................... 22

12.      Options to Purchase Securities from the Registrant  ............. 24

13.      Interest of Management in Certain Transactions .................. 26

                                     PART II

14.      Description of Securities to be Registered .....................  27



                                    PART III

15.      Defaults Upon Senior Securities ................................  27

16.      Changes in Securities and Changes in Security for
         Registered Securities ..........................................  27



                                     PART IV

17.      Financial Statements .........................................    27

18.      Financial Statements (See Item 19 for a List of Financial

           Statements Filed Under Item 18) ..............................  27

19.      Financial Statements and Exhibits ..............................  28



<PAGE>



ITEM 1. DESCRIPTION OF  BUSINESS

INTRODUCTION

Huntingdon is one of the world's leading Contact Research  Organisations (CRO's)
specialising  in the areas of non-clinical  safety and efficacy  testing for the
pharmaceutical,  biotechnology,  agrochemical,  veterinary,  food  and  chemical
industries.  Over half of its sales are in support of early stage development of
promising new pharmaceutical and biotech compounds.  The remainder is associated
with safety testing for chemical  compounds used in the manufacture of products,
foodstuffs,  and  agricultural  products.  The  company  is based in the  United
Kingdom,  with  facilities in  Huntingdon  (Cambridgeshire)  and Eye  (Suffolk),
England, and the Princeton Research Centre in New Jersey (USA).  Huntingdon is a
world-wide provider of pre-clinical toxicology, pharmacology, pharmaco-kinetics,
molecular biology, analytical chemistry, environmental and regulatory services.

GENERAL DEVELOPMENT OF THE BUSINESS

The Company was incorporated in England in 1951 as a private limited company and
was a  wholly-owned  subsidiary  of Becton,  Dickinson  and Company from 1964 to
1983. In April 1983, the Company was  re-registered  as a public limited company
with the name "Huntingdon Research Centre plc". In June 1985, the Company's name
was changed from  Huntingdon  Research  Centre plc to  Huntingdon  International
Holdings plc and  subsequently  in April 1997 to Huntingdon  Life Sciences Group
plc. In June 1985 the Company  transferred the assets which constituted its life
sciences business to its subsidiary  Huntingdon Research Centre Ltd. In 1991 the
Company began operating a subsidiary,  Leicester  Clinical  Research Centre Ltd.
("LCRC") which provided a wide range of biological and psychological  assessment
procedures  involving  healthy human  volunteers.  This  subsidiary  was sold in
November 1995 to Applied Bioscience International Inc ("APBI") (see below).

From 1985 until their sale in May 1995, the Company, through HIH USA Inc and its
subsidiary,  Huntingdon  Engineering  and  Environmental  Services Inc.  ("HEE")
provided  construction-related  engineering  services,  environmental  services,
consultancy and testing in the USA.  Outside the USA,  following the acquisition
of Travers  Morgan  Limited and its  subsidiaries  ("TM") in December  1991, the
Company began to provide  consultancy  and expert services in the areas of civil
and  structural  engineering,  consultation  on the planning and  development of
transportation systems, project management and environmental consultancy.

On December  15, 1994 the High Court of Justice,  Chancery  Division,  Companies
Court (the "Court") granted an  administrative  order (the "Order") under the UK
Insolvency Act 1986.  Under the Order,  joint  administrators  were appointed to
Travers  Morgan  Limited,  as a result of which control passed from the Company,
the  trading of TM was  isolated  from the  Company  and the Group wrote off its
investment,  providing  (pound)11.6  million against the amounts receivable from
Travers  Morgan Ltd.  Management  expects the  administration  will be concluded
during 1999 and following  discussions with the Joint  Administrators  the Group
determined that the provision was excessive and accordingly  released (pound)2.1
million  which was  recorded as an  exceptional  gain in the accounts for the 12
months ended December 31, 1997. 90% of the anticipated  dividend was received in
1998.

On November 21, 1995, the Company acquired the toxicology business of APBI which
comprised  laboratories  in the UK near  Newcastle and near Diss, and in the USA
near  Princeton.  The total  consideration  of  $43,000,000  ((pound)27,000,000)
comprised cash of $32,500,000 and approximately  (pound)3,800,000  in respect of
cash   acquired   with  the  business   and  an  agreed   value  of   $4,500,000
((pound)2,900,000)  in respect of LCRC (see above).  The small  laboratory  near
Newcastle in the UK was closed in July 1996 and  subsequently  sold in September
1996. Immediately upon acquisition the toxicology business of APBI in the UK was
merged with that of Huntingdon  Research Centre Ltd and the name of that company
changed to Huntingdon  Life Sciences Ltd. The US business  acquired  operates as
Huntingdon Life Sciences Inc.

In March 1997,  Huntingdon  through  Huntingdon  Life Sciences Ltd completed the
purchase of a small  specialist  research  centre located close to Manchester at
Wilmslow  in the UK.  This  comprises  38 acres of which  approximately  half is
developed  and on  which  there  is  92,000  sq.  feet of  laboratories,  animal
accommodation  and  offices.  Due to a decline in revenues the site has now been
closed and management intends to dispose of the site.



<PAGE>


Huntingdon  suffered  from  a  collapse  in  confidence  from  a  number  of its
previously  supportive clients following  allegations of malpractice at both its
UK and US operations in the Spring of 1997. The UK allegations  were received by
the  supervising  authorities  following a program in the  Channel 4  television
series  `Countryside  Undercover'.  Those in the U.S. were submitted to the USDA
and based on reports received by PeTA, an animal activist group.

In July 1997 the UK Home Office inspectors  confirmed to their satisfaction that
whilst  there was an incident  of  maltreatment,  it was  isolated.  However,  a
statement was made by the  Government  that caused many clients to conclude that
there were  separate  further  allegations.  The Home Office then  established a
number  of  conditions,  which  Huntingdon  had to  comply  with  by the  end of
November.  On  September  29, 1997 the Home  Office  stated that the company had
demonstrated  full  compliance  with the  conditions  and that they  were  fully
satisfied.

 In the US the USDA undertook two inspections  during the summer of 1997 and one
in  February  1998 , these  followed  their  annual  inspection  in April and an
intensive  FDA  inspection  in  February - both of which were  satisfactory.  In
December 1997  Huntingdon  announced the receipt of a settlement  agreement as a
Court  Order  in  which  PeTA  agreed  to  give up all of its  campaign  against
Huntingdon.  The  Association  for  Assessment and  Accreditation  of Laboratory
Animal Care (AAALAC)  inspected the site and unanimously  endorsed its continued
accreditation.  In April 1998 the USDA  investigation  was concluded and did not
include any  concessions of violations by Huntingdon.  In December 1998 the USDA
conducted it's annual routine  inspection of the laboratories and concluded that
they were in full compliance with all aspects of its Regulations.

As described in a Prospectus  dated August 10, 1998,  and effected  September 2,
1998 a New Investor Group saw an opportunity in Huntingdon  where new management
and a strengthened  balance sheet could reinstate a company with a distinguished
scientific reputation and a history of success and profitability.

As a result of the highly  visible public  allegations of malpractice  discussed
above, the Group had experienced a substantial  decline  (approximately  30%) in
revenues and a concurrent reversal of profits and cash flow in the proceeding 18
months.

The New  Investor  Group,  led by Andrew Baker of Focused  Healthcare  Partners,
believed  that  Huntingdon's  core  competency  was sound and the need for their
service clearly existed.  They were suffering from a lack of confidence that had
resulted from the allegations that occurred over a year previously.  The Company
had met all of the requirements vis a vis regulatory  authorities and inspection
agencies, but the thing that was missing was the spirit of management. Immediate
steps needed to be taken to  strengthen  the balance  sheet of the Company,  and
decisive  actions were required at senior  management and board level to restore
the confidence of customers.

To help effect those changes,  (pound)22million  (approximately  $37 million) of
new equity was raised for Huntingdon  Life Science Group.  There were changes in
senior  management  with the  addition of  respected  and  experienced  industry
leaders. New management, led by Andrew Baker (Executive Chairman) and Brian Cass
(Chief Operating Officer and Managing  Director)  established that the Company's
highest  priorities  were the return of good  relations with its clients and the
re-establishment  of the sales levels  enjoyed  previously.  Concurrently,  they
effected  a cost  reduction  program  in  order  to more  appropriately  realign
expenses  with  the  Company's  reduced  revenue  levels.  The  aim of  the  new
management is to develop the operational, commercial and cultural aspects of the
Company  to  ensure   improvements   in   efficiency,   customer   service   and
communications,  both externally and internally. The results will drive revenues
and create a sense of pride in staff.  The  employees are the `make or break' of
this business and therefore the essence of shareholder return.  Their individual
rejuvenation is critical to the Group's success.

Building from the Company's core strengths - scientific  expertise,  experience,
knowledge  and  reputation  - our  goals are  clear:  To be  appreciated  as the
listening,  understanding and reliable partner in creative compound  development
and safety assessment; to be the first choice for the industries we serve.

To provide  our staff  with the  opportunity  for  individual  development in a
caring, rewarding and safe working environment.

<PAGE>


To be recognised positively in the local communities in which we operate -------
and, consequently,  to grow to significant  profitability and improved return on
investment  for our  shareholders.  Our vision is to create a new  standard  and
level of partnership in our industry,  built upon our technical,  scientific and
regulatory  expertise,  the ethical  standards  we adopt,  our  problem  solving
approach and a dedication to customer service and teamwork.



DESCRIPTION OF THE BUSINESS


Huntingdon offers  non-clinical  safety and efficacy assessment services to most
of the  world's  leading  pharmaceutical,  biopharmaceutical,  agricultural  and
industrial chemical  manufacturers,  and is a trusted  developmental  partner to
some of the largest blue chip companies.  Huntingdon  helps it's customers bring
to market safe and effective  new  compounds - compounds  which are safe whether
exposed to humans, animals or the environment. All of the company's services are
designed to meet the  requirements  of  governments  around the world.  The most
demanding of these  evaluations are those driven by the regulations  controlling
the  pharmaceutical  and veterinary  industries.  The aim of all of Huntingdon's
services  is to provide its  customers  with data that will  satisfy  regulatory
authorities around the world.

o Pharmaceuticals: Huntingdon plays a crucial role in the development of new
  medicines. Promising compounds, which may become
  important  clinical  treatments of the future,  are  identified by discovery
  research  carried out by  pharmaceutical  and  biopharmaceutical  companies.
  Safety and efficacy  testing is then  required  before  clinical  trials can
  begin in humans.  Studies must be carried out to  determine  what happens to
  the  compound  inside  the body,  for  example,  how much of a  compound  is
  absorbed,  how much is retained in the tissues,  how it may react with other
  medicines and how well it will be clinically tolerated. Rightly, our society
  expects the highest  standards  of quality  and safety in the  medicines  we
  take. This demands a correspondingly high level of safety assessment,  as we
  assume that any substance reaching the market place will be essentially free
  from  harmful  effects.  All  chemical  substances  can be toxic if given at
  sufficiently  high levels - even within their normal dosage range  medicines
  have clinical side effects.  Cytotoxic agents used in cancer treatment are a
  good example of this  risk/benefit  analysis,  where the threat to life from
  the  disease far  outweighs  the drug's  toxic  potential.  The  decision to
  licence a new drug,  or other  substance,  must  weigh the  balance  between
  benefit and risk to health. A clear understanding of what those risks are is
  crucial.  Today the legislation  governing  pharmaceutical safety assessment
  insists  that  the  majority  of  this  essential  work is  conducted  using
  experimental  animals.  It  is  Huntingdon's  responsibility,  monitored  by
  government  authorities,  to ensure that these tests are performed to strict
  scientific protocols and when animal testing is required,  with acknowledged
  high standards of animal care and welfare.

  Non-animal models and computer  simulations can provide  supplementary  data
  and so reduce animal usage in some cases, but few are currently  accepted as
  viable alternatives to animal tests by regulatory authorities. Huntingdon is
  at the leading edge in the  development of these  alternative  techniques to
  animal testing. The company is committed to the scientific principles of the
  3 Rs - Reduction,  Refinement and  Replacement of animals in research.  This
  means we actively  support the search for validated  studies which  minimise
  the numbers of animals  used,  which make sure  animals  suffer as little as
  possible,  and which replace animal procedures wherever possible.  Currently
  in-vitro  laboratory and other  non-animal  testing work accounts for almost
  half of Huntingdon's  revenues. It is also the responsibility of the company
  and of the regulatory  authorities to ensure that all tests are performed to
  strict  scientific  criteria,  and when  animal  testing is  required,  with
  leading standards of animal care and welfare.

o Agricultural  Chemicals:  Huntingdon  has an  established  reputation as the
  world  market  leader in offering  full  development  programmes  that bring
  agricultural  chemicals to market.  These major contracts  involve assessing
  the safety,  environmental  impact and efficacy of the  compound.  A project
  management driven approach to programs of toxicology, environmental fate and
  affect,  and field trials,  often running over several years,  generate both
  good value to the client and a good return to Huntingdon's business.
  Agrochemicals are a real success story for Huntingdon Life Sciences.



<PAGE>


    Agricultural  chemicals are facing increasing  regulatory  demands driven by
    international guidelines,  currently one high profile area is neurotoxicity.
    Huntingdon is fortunate to have  experienced  scientists in this and related
    diciplines  and so is able to  offer a  resource  that is  second  to  none.
    Additionally,  regulatory  authorities  now often request data not only from
    controlled  laboratory  experiments,   but  also  from  systems  which  more
    accurately mimic the natural  environment.  An example is the mesocosm which
    is a new facility being developed at Huntingdon that will enable the company
    to offer additional  services in the assessment of environmental  impact. It
    is a system of 24 man made ponds containing water and sediment together with
    flora and fauna from established natural ponds. Mesocosms are used to assess
    the fate and effect of  chemicals  on natural  aquatic  systems and this new
    development enables Huntingdon to offer a total service in this complex area
    of environmental study.

o   Industrial Chemicals: Chemicals impact all of our lives in many ways,
    although we are frequently unaware of their presence in our environment.
    Huntingdon is the world market leader in these regulatory assessment
    programmes, both for new chemicals entering the market and also for the
    re-examination of the safety of existing chemicals.  Retrospective studies
    are a major growth area in the testing of industrial chemicals, where
    currently marketed chemicals are increasingly subjected to detailed
    reappraisal. The company is involved in testing a broad range of chemicals
    encountered in industry, the home and the environment, including paints,
    adhesives, dyes, photographic chemicals, solvents, detergents, flame
    retardants and many others.  Part of this work provides the necessary
    labelling information for many domestic and industrial products and assures
    consumers that products they are regularly exposed to are safe in normal
    conditions.  Regulatory authorities the world over demand stringent testing
    before chemicals can be transported, to assess safety levels and crisis
    response actions if the public or the environment are
    exposed.

o   Other areas: Huntingdon has been involved in the development and testing of
    a number of novel foodstuffs, artificial sweeteners and flavourings over
    the past decade.  Today we see the arrival of exciting new developments
    like "nutraceuticals", these are foods which provide a clear clinical
    benefit, such as the lowering of cholesterol levels. Huntingdon anticipates
    that demand for testing in this area will increase rapidly, once the
    regulatory authorities have established the appropriate legislative
    framework.  Similarly, public awareness of genetically modified foods is
    extremely high, as is the need to reassure consumers and the marketplace
    with appropriate regulatory controls. These new developments and associated
    regulations can be expected to drive further business opportunities for the
    company in this fast changing industry.Huntingdon plays an increasing
    role in the development of new veterinary medicines and other health
    products for both farm and companion animals.  Safety, tolerability and
    efficacy assessments are carried out in a similar way to tests on human
    medicines.  In food producing animals studies must be conducted to
    determine what happens to the compound inside the body but also assessments
    are made on residues in milk, dairy products, meat and eggs.  Specialised
    facilities are now in place, together with regulatory expertise, which will
    allow the company to increase it's share in this expanding market.


The legislation governing  pre-clinical research and safety testing insists that
the majority of this  essential  work  involves the use of animals.  This is the
case at  Huntingdon  Life  Sciences,  however  as noted  above  the  company  is
committed to the scientific  principles of the 3 Rs - Reduction,  Refinement and
Replacement of animals in research.  Huntingdon  does not undertake  research on
cosmetics and voluntarily  relinquished its licence to undertake  evaluations of
cosmetics  using  animals in the late 1980s and has pioneered  various  in-vitro
techniques  using  cell  cultures  as an  alternative  to  animal  testing.  The
replacement  of animal  studies by reliable in vitro  techniques  has been a key
objective at Huntingdon  for many years.  Huntingdon is at the heart of industry
moves towards alternative  techniques,  for example  participating in validation
trials  for the  European  Centre  for the  Validation  of  Alternative  Methods
(ECVAM),  being an active member of the In Vitro Toxicology Platform (IVTIP) and
supporting  the Fund for the  Replacement  of  Animals  in  Medical  Experiments
(FRAME).


<PAGE>


GEOGRAPHIC MARKETS

The figures below show the  percentage  of total orders of  Huntingdon  from the
geographical  areas which it services from  laboratories  in the UK and the USA.
The table shows the analysis  for the 12 months ended  December 31, 1997 and the
12 months ended December 31, 1998.

                                   % of Orders from each Geographic area

                                            1997                      1998
                                          ----------                ---------
Europe.................................       43                        38
Japan   ..............................        26                        20
United States.........................        24                        34
Rest of the World.....................         7                        8
                                          ----------                ---------
Total..................................     100%                      100%
                                          ----------                ---------


Orders were down 13% in Europe and 26% in Japan  whereas a 37%  improvement  was
seen in orders  from the US.  The  improvement  in the US  reflects  in part the
introduction  of new services and  facilities at the Princeton  site,  the lower
reliance upon Pharmaceutical clients and in addition the success of the Group in
the  targeting  of new  Biopharmaceutical  clients.  In Europe  and  Japan,  the
additional  comfort  required by  Pharmaceutical  clients slowed their return as
clients.  In Europe  this trend was  compounded  by mergers of clients and their
consideration of the role of outsourcing  whilst in Japan the trend was affected
by both  the  overall  economic  situation  and the  fact  that  allegations  of
malpractice  were directed more toward  studies  conducted on behalf of Japanese
clients.



CUSTOMERS  AND SERVICE MARKETS

Huntingdon  typically performs a number of contracts  simultaneously for each of
its major clients among whom are included most of the world's leading  companies
in  pharmaceuticals,  biotechnology,  agrochemicals  and  industrial  chemicals.
However,  the  companies  for which  work is  conducted  and the  volume of work
performed  for any one company  change from year to year and  Huntingdon  is not
dependent on any single client.

Pharmaceutical Business

Huntingdon's  primary market is pre-clinical  outsourcing for the pharmaceutical
industry and its place in the  development  cycle and details of developments in
this market are highlighted below.

----------------------- ------------------------------    -----------------
  DRUG DISCOVERY                  DEVELOPMENT                    MFG.
----------------------- -------------------------------   -----------------
                         PRE-CLINICAL        CLINICAL
                           
    Chemical Synthesis             Phase I  Phase II  Phase III  Phase IV Sales
                        Toxicology
        Screening       & Safety    Safety  Efficacy  LT Efficacy
                                                 -----------------------------
      & side effects                              NON-CLINICAL
                            --------------------------------------------------

o   Management believes that about R & D expenditure of pharmaceutical companies
    is  approximately  $40 billion.  Of this 25% is expenditure in  Huntingdon's
    core business area of pre-clinical research. Huntingdon believes that 10-15%
    of this is outsourced,  which means that the company is today competing in a
    $1-1.5 billion market. This market is growing as a result of R&D expenditure
    increasing by 10% annually,  outsourced R&D growing by 9%, a 50% increase in
    the number of projects in the R&D  pipeline  over 5 years and an 8% increase
    in the  number  of  preclinical  compounds  and a 12%  growth  in  U.S. IND
    applications.



<PAGE>


o   The Biotech industry has become a significant source of business for
    Huntingdon, accounting for approximately 13% of the company's orders in
    1998. The number of drugs produced by the  biotechnology  industry which
    require FDA approval has grown substantially over the past decade.  Many
    biotechnology  companies have  strategically  chosen  to  outsource  major
    areas of R&D and  utilize providers such as Huntingdon to perform these
    services.

Huntingdon  has worked  with  almost  all of the  world's  major  pharmaceutical
companies.  Many of  these  customers  have  come  to  regard  Huntingdon  as an
extension of their own resources, and the more closely the company is integrated
with customers the more efficient the service becomes. Huntingdon's objective is
to help these customers make  appropriate and timely  decisions and so help them
to complete their  development  programmes  effectively and efficiently.  Advice
from  scientific  experts  within  the  company,  given  in the  light  of  long
experience,  and effective programme  management,  can optimise drug development
within the strict requirements of the regulatory authorities.

Huntingdon  conducts  studies on a broad range of new therapeutic  agents,  from
small molecules to large monoclonal antibodies, the product of biopharmaceutical
research. The pharmaceutical market is dynamic and over recent years the pattern
of  drug  development  has  changed  markedly.  New  techniques  including  high
throughput  screening,  combinatorial  chemistry  and genomics are  dramatically
increasing the  productivity of drug discovery.  This will increase the focus on
the early stage  development  process,  including  Huntingdon's work to identify
those  compounds  which  have the  greatest  likelihood  of being  both safe and
effective.  Our  customers  are  dependent  on  selecting  the most  appropriate
compounds  from this  process  for their own  business  success  and  society is
excited by the potential they hold for improving our ability to treat disease.

Major pharmaceutical companies often have the resources to conduct most of their
own  non-clinical  testing  programmes  and  historically  have  tended  to only
commission   individual  studies  from  contract  research   organisations  like
Huntingdon.  However,  in the light of these  dynamic  changes in the  industry,
growing  numbers of companies find that it makes  strategic sense to concentrate
on their main area of research expertise - the drug discovery process.  The need
for toxicity and safety assessment  studies is driven and governed by regulatory
requirements  and so it is well  suited to being  out-sourced.  This  provides a
growing  opportunity  for  Huntingdon.  There is also a trend to out-source  the
management of larger programmes of work, not only individual  studies as was the
case in the past. Increasingly Huntingdon is becoming more closely involved with
customers  in  designing  development  strategies  geared to  specific  clinical
end-points and in the management of whole  programmes.  This is leading  towards
true partnerships with customers,  where Huntingdon is playing a meaningful role
in supporting and adding value to a customer's drug development efforts.  Beyond
the established major pharmaceutical  companies,  the new  biopharmaceutical and
other  start-up  companies  typically  do not have the  resources  to  undertake
non-clinical  studies  themselves  and  increasingly  rely totally upon contract
organisations  like  Huntingdon.  This sector of the market is growing  fast and
indications are that it will be an important part of the company's business over
the coming years, it already accounts for some 14% of revenues.

Restructuring  and  rationalisation  of the pharma  industry means that more and
more projects are being  outsourced.  Increasing  legislative  requirements have
extended  development  times and made careful  project  management  increasingly
important.  To address this situation integrated packages are being developed to
manage multidisciplinary development programmes.  Involvement in such integrated
projects is a long term  objective  of  Huntingdon  Life  Sciences,  but one-off
studies  will  probably  remain  an  essential  part  of the  business  for  the
foreseeable future.

In the  pharma  and  biopharmaceutical  areas,  the  company  has set itself the
following  objectives:
o  Strengthen  emphasis  on  "Early  Phase"  development services
o Develop new services to fill certain gaps that have been identified
o Build relationships which will strengthen the client portfolio.

Huntingdon offers a complete portfolio of non-clinical  services  throughout the
drug development process,  supporting customers around the world from facilities
in both the UK and the US. The company has recently developed  several
innovative  joint  venture  relationships  with  independent
Clinical  Research  Organisations to offer Phase I and IIa clinical  trials,  so
extending it's portfolio of integrated  services.  This will further  strengthen
Huntingdon's  ability to be the full service,  early development  partner to our
pharmaceutical and biopharmaceutical customers.

In the longer term, Huntingdon Life Sciences plans to optimise early development
in  pharmaceuticals,  extending  the  process  back to  interface  with the drug
discovery and  development  areas,  while at the same time  consolidating  their
already very strong position in non-clinical  research and providing  continuity
through the rest of the non-clinical development and testing process.


Non-pharmaceutical Business

Huntingdon has historically generated one third to one half of its revenues from
safety  and  efficacy  testing of  compounds  for the  agrochemical,  industrial
chemical,   veterinary  and  food  industries.  The  work  involved  bears  many
similarities  and  often  uses  many  of the  same  facilities,  equipment,  and
scientific   disciplines   that  are   employed  in   pre-clinical   testing  of
pharmaceutical  compounds.  Huntingdon's business in these areas is again driven
by regulatory  requirements.  The company's  services  address  safety  concerns
surrounding  a diverse range of products,  spanning  such areas as  agricultural
fertilizers  and  pesticides,   veterinary  medicines,  chemicals  used  in  the
manufacture of pharmaceutical intermediates and photocopier toners, manufactured
foodstuffs,  household products and even medical devices themselves. Many market
segments  included  in these  broad areas of  business  have the  potential  for
substantial growth in coming years, as a result of :

o   Increasing  scrutiny of any  compound  which is used in the  manufacture of
    products the public is exposed to,  either infrequently  or on a day-to-day
    basis.
o   More stringent  regulations  affecting compounds which have the potential to
    adversely effect the environment, e.g. biocides and endocrine disrupters.
o   Introduction of new testing requirements to `high volume chemical products'
    in the U.S.
o   Growth in concerns over food safety, e.g. additives and genetically
    modified  foods,   and  the  introduction  of  `nutraceuticals'.

Agrochemicals:  The  agricultural  chemical market has changed markedly over the
past few years.  Five years ago it was driven by the  requirements of individual
national  regulatory  authorities and was therefore very diverse and fragmented.
Now much of the legislation has been consolidated and simplified  throughout the
EU. This has reduced the number of individual studies performed, but at the same
time means that more integrated programmes are required. This gives Huntingdon's
scientists the opportunity to guide the customer through this complex regulatory
process and also to manage the whole project.  The company is currently  project
managing five major  integrated  programmes  on behalf of customers,  evaluating
toxicity  and  environmental  impact and  conducting  field trials which run for
several  years.  Huntingdon  is  widely  perceived  as  being a  full-capability
laboratory  for this  segment  and so the front  runner in this area of contract
research.

At least 50% of current work in this area is in environmental studies, where for
example, tests on the air we breathe are of increasing  importance.  The effects
of exhaust  emissions on the atmosphere have been studied over the past 20 years
and the company is recognised as a world leader in inhalation testing.

New research facilities are being developed and exploited, such as the mesocosms
being developed at the Huntingdon site. These have evolved from being laboratory
tools into  important  indicators  of the  effects of  pollutants  on a complete
biosphere, including all of the animal and plant life involved, and work in this
area is increasingly being demanded by regulatory authorities.

Industrial  Chemicals:  Huntingdon  has a significant  profile with the chemical
industry  world-wide,  frequently working with major consortia and trade groups.
Revenue from the industrial chemical business sector has doubled over the past 5
years  and  during  1998 the  company  worked  with over 250  client  companies.
Huntingdon is often involved in complete programmes  including safety,
environmental and analytical studies,  coupled with regulatory services and
dossier submissions  presented to Governments around the world.

A further  example of the work carried out by the company is the  development of
substitutes  for  ozone-depleting   chlorofluorocarbon  agents  (CFCs)  used  as
propellants and in refrigeration. Over the past two decades, Huntingdon has been
involved  in testing  nearly all of the new agents  developed  to replace  these
substances.The reappraisal of existing chemicals involving additional testing is
being  increasingly  demanded,  an example of this is the High Production Volume
Right  To Know ( HPV RTK )  programme  in the US.  This  is  being  driven  by a
collaboration of the environmentalist  lobby ( the Environmental Defence Fund ),
the  Environmental   Protection   Association  and  the  Chemical  Manufacturers
Association.  The initiative  demands that a set of toxicology and environmental
data be  submitted,  over a five  year  period,  on a list of 2800  high  volume
chemicals.  This is now being  broadened to 4000  chemicals  worldwide,  through
various  international  programmes.  With Huntingdon's  extensive  experience in
industrial  chemical  regulatory  programmes,  the  company is perhaps  uniquely
positioned to provide a `one stop shop' for manufacturers and consortia offering
regulatory  consultancy,   testing  and  programme  management  and  significant
business is expected as a result.

In the Industrial Chemicals areas, Huntingdon Life Sciences has set itself clear
objectives:

o Capitalise on the existing leadership position
o Fully exploit  current skills in Programme  Management in order to secure more
  major  projects
o Strengthen  the services and  facilities  to support  growing business
  opportunities
o Develop business in the U.S.A. and Far East markets.

Veterinary Medicines: Animal health product testing, both for farm and companion
animals,  is  a  rapidly  growing  business  area  for  Huntingdon.  Specialized
facilities  are now in place,  together with the regulatory  expertise,  to take
advantage of a prime opportunity to expand share in this niche market.

Foodstuffs: Huntingdon has been involved in the development of a number of novel
foodstuffs over the past decade. As the exciting new science of "nutraceuticals"
develops - foods which provide a clear human health benefit, such as lowering of
cholesterol levels it's anticipated that this demand will increase rapidly.

Service Markets

The table below  shows the  percentage  of total  orders for each market area of
Huntingdon's  business  for the 12 months  ended  December  31,  1997 and the 12
months ended December 31, 1998:

                                          1997                1998
                                       ----------          ---------
Pharmaceutical......................        45                  43
Biopharmaceutical...................        11                  13
Agrochemical........................        27                  26
Chemical and Other Industries.......        17                  18
                                       ----------          ---------
Total...............................       100%                100%
                                       ----------          ---------

Orders  in  1998  continued  to be  adversely  affected  by the  allegations  of
malpractice  made in  1997.  In  addition  financial  uncertainty  prior  to the
injection of new funding in September 1998 also led to the delay in placing, and
in some cases the loss, of new orders.

This  continues  to most  effect  Pharmaceutical  clients,  who  place a  higher
proportion  of longer term studies and who are subject  more to both  regulatory
and public  scrutiny.  Huntingdon  believes that its fall in orders from certain
pharmaceutical  study  sponsors  based in Europe  was also  partly  due to their
internal  considerations,  in the periods immediately following their merger, of
their R & D management processes and priorities.



<PAGE>


As noted earlier, a recovery in orders began to occur in the second half of 1998
and it was particularly pleasing to note that this recovery included the receipt
of a number of key orders from  pharmaceutical  clients  who had  stopped  using
Huntingdon in the prior 18 months .

The agrochemical  and chemical  sectors also undertook  inspections and examined
Huntingdon's  procedures but, in general individual study sponsors reached their
conclusion to continue to sponsor  studies at  Huntingdon  more quickly than the
pharmaceutical sector. Thus, although orders from agrochemicals fell, the orders
from the chemical sector remained at 1997 levels.

The key to the full  recovery of orders is  considered by management to be study
sponsors' confidence in Huntingdon's enhanced training, audit practices, and the
management processes of control

Huntingdon's largest client accounts for under 5% of its total orders. In the UK
the  largest  10 clients  contributed  under 30% of orders and in the USA the 10
largest clients provided approximately 68% of orders.


COMPETITION

Huntingdon is the second  largest  world-wide  provider of  pre-clinical  safety
testing services behind Covance. Other competitors are smaller and more regional
and/or specialized in their presence,  including ClinTrials  BioResearch Inc and
BioReliance  Corporation.  Huntingdon's other major competitors are the research
and  development  divisions  of large  companies  who  perform  their own safety
assessments in-house.

Competitors  also comply with GLP  guidelines and they are able to undertake the
more routine type of toxicology and pathology studies. Accordingly,  competition
for these types of studies is particularly  price sensitive.  Within  toxicology
and pathology there are also certain  particularly  demanding  studies for which
few CROs have either the scientific credibility or experience. Pricing for these
studies is  competitive  but  relatively  less so. It is believed that the final
determinant of study awards is quality and reliability in delivering  reports on
time to  clients.  This is  particularly  true in the case of the  more  complex
scientific  studies  in  which  Management  believes  Huntingdon  has  a  strong
reputation.   Furthermore,  customers  are  increasingly  demanding  outstanding
chemistry based  analytical  services partly as an adjunct to the toxicology and
pathology  studies  and  Management  believes  it is a  world  leader  in  these
services.  Huntingdon  also competes with the in-house  research and development
divisions within larger pharmaceutical companies who sometimes have a preference
to conduct their own safety assessments.

Other factors  enhancing  competitiveness  generally  include the quality of the
facilities  provided and the reputation and standing of its scientific staff, as
well as the acceptance by regulatory bodies of Huntingdon's  findings.  With the
need for quality in mind,  many staff possess  qualifications  of  post-graduate
degree or equivalent  standards upon joining the group, and staff are encouraged
to  pursue  formal  qualifications  related  to their  work in order to  further
strengthen their knowledge and capabilities.



<PAGE>


GOVERNMENT SUPERVISION OF OPERATIONS

Supervisory regimes

Since the services  provided by Huntingdon  are used to support  pharmaceutical,
biotechnological,  chemical or agrochemical product approval  applications,  its
laboratories are subject to both formal and informal  inspections by appropriate
regulatory  and  supervisory  authorities,  as well as by  representatives  from
client  companies.  Huntingdon  is  regularly  inspected  by  US,  Japan  and UK
governmental  agencies  because of the number and complexities of the studies it
undertakes.  In 1979, the US FDA promulgated the GLP  regulations,  defining the
standards under which biological safety  evaluations are to be conducted.  Other
governmental  agencies  such as the EPA,  JMOHW,  JMAFF,  and UK  Department  of
Health,  have  introduced   compliance  monitoring  programs  with  similar  GLP
standards.  Huntingdon has had over 30 such  inspection  visits and audits since
1985.

Huntingdon's  operations  in the UK are  regulated  by the  Animals  (Scientific
Procedures)  Act 1986.  This  legislation,  administered  by the UK Home Office,
provides  for  the  control  of  scientific  procedures  carried  out on  living
vertebrate animals and regulation of the animals' environment. Personal licences
(Huntingdon has approximately 300 licensees) are issued by the UK Home Office to
personnel who are competent to perform regulated  procedures and each program of
work must be  authorised  in  advance  by a  Project  Licensee.  Premises  where
procedures  are  carried  out must also be  formally  designated  by the UK Home
Office.  Consultations  and  inspections  are  regularly  undertaken in order to
ensure  continued  compliance  with  regulatory  and  legislative  requirements.
Typically, Huntingdon has 18 such inspections annually.

Huntingdon's  laboratory  in the USA is  subject to the  USDA's  Animal  Welfare
Regulations (Title 9, Code of Federal Regulations, Subchapter A). The laboratory
is regularly  inspected by USDA officials for compliance with these regulations.
Compliance is assured  through an  Institutional  Animal Care and Use Committee,
comprising  staff  from a broad  range  of  disciplines  within  Huntingdon  and
including  external  representation.  Furthermore,  laboratories  in the USA are
expected  by the USDA to be  certified  by an  independent  and  internationally
recognised  organisation,  the Association for Assessment and  Accreditation  of
Laboratory Animal Care (AAALAC).

At each of its research centres  Huntingdon ensures the availability of suitably
experienced and qualified veterinary staff backed by a 24 hour call out system.

COMPLIANCE WITH ENVIRONMENTAL REGULATIONS

Whilst  Huntingdon  is obliged in the  conduct of its  business  to comply  with
certain  environmental  regulations,  compliance with such  regulations does not
impact  significantly  on  its  earnings  or  competitive  position.  Management
believes  that its  operations  are  currently in material  compliance  with all
applicable environmental regulations.

OTHER INFORMATION PERTAINING TO THE COMPANY

Human Resources

Huntingdon's  most  important  resource is it's  people,  they have  created the
company's   knowledge  base,  it's  expertise  and  it's  excellent   scientific
reputation. Scientists from the company are represented at the highest levels in
several UK and international  committees on safety and toxicity testing. Several
staff members are  considered  leaders in their  respective  fields,  frequently
lecture at  scientific  seminars and  regularly  publish  articles in scientific
journals. This recognition has resulted in frequent assignments from clients for
consultation services in addition to the range of specialised services provided.
Some of  Huntingdon's  staff  serve by  invitation  or  election  on a number of
scientific and industrial  advisory  panels and groups of certain  organisations
and agencies such as the FDA, the EPA and UK Department of Health, and the WHO.

To ensure that this  experience  and  expertise is  transmitted  throughout  the
organisation,  training  programmes are  maintained,  for example,  Huntingdon's
Introductory and Advanced  Graduate Training Programs to train graduate staff in
all phases of  toxicology.  Also,  in  conjunction  with the Institute of Animal
Technology,  Huntingdon  maintains  what it  believes  to be one of the  largest
animal  technician  training   programmes  in  the  world.   Huntingdon  employs
approximately 300 licensed personnel.



<PAGE>


The table below shows employment has decreased throughout the Group as a result
of reduced activity levels:

                                         Employees at December 31
                                          1997                998
UK .................................      1,436             1,189
USA.................................        208               193
Japan................................         9                10
                                     --------------         -------------
                                           1,653            1,392
                                     --------------         -------------


Whilst staffing levels reduced during the year,  excess capacity remained and in
December,  1998 the Company  announced  a cost  reduction  programme  that would
include the alignment of staff  resources with current  revenues.  The programme
which commenced in January 1999 anticipates the reduction of  approximately  150
positions  and will leave the group with  approximately  1,250 staff.  The whole
operation is integrated  internationally to optimise the services  provided.  As
part of the  rejuvenation  process,  human resources will be carefully  studied,
with staff benefits tied to company performance.

Management and Labour Relations

Huntingdon's  labour force is non-union and there has never been any  disruption
of the business through strikes or other employee action.  Huntingdon  regularly
reviews its pay and benefits  packages and believes  that its labour  relations,
policies and practices and management  structure are  appropriate to support its
competitive position.

Research and Development

In addition to  experience  gained  through  research  activities  performed for
clients,  Huntingdon  engages in  research  in order to respond to the  changing
needs of clients and to maintain  competitiveness within the industries in which
it operates.  Most of the research  undertaken,  however, is an inherent part of
the research carried out on behalf of clients in completing  studies and as such
it is not identified separately.

Know-how and Patents

Huntingdon believes that its proprietary know-how plays an important role in the
success of its business.  Where Huntingdon  considers it appropriate,  steps are
taken to protect its know-how through confidentiality  agreements and protection
through  registration of title or use.  Huntingdon has no patents,  trade-marks,
licenses, franchises or concessions which are material and upon which any of the
services offered is dependent.

Quality Assurance

Huntingdon  maintains extensive quality assurance  programs,  designed to ensure
that all testing  programs  meet client  requirements,  as well as all  relevant
codes,   standards  and  regulations.   Based  on  a  Master  Schedule  periodic
inspections are conducted as testing  programs are performed to assure adherence
to  project  specifications  or  protocols  and final  reports  are  extensively
inspected  to ensure  consistency  with  data  collected.  Huntingdon's  quality
assurance  programs are  controlled by a formally  constituted  Quality Board, a
Quality Monitoring Committee and Quality Groups.





<PAGE>


ITEM 2. DESCRIPTION OF PROPERTIES

Huntingdon's head office is situated within the research centre at Huntingdon.

The  following  table  shows  the  location  of the  facilities  of  Huntingdon,
approximate size and the principal  activities conducted at such facilities each
of which is freehold:
<TABLE>
<CAPTION>
Location                         Laboratories       Size            Principal Activities
                                 and Offices
<S>                             <C>                <C>             <C> 
Huntingdon, England              612,000 sq.ft.     74 acres        Laboratories, animal accommodation and
                                                                    offices
Near Princeton, NJ, USA          180,000 sq.ft.     53.5 acres      Laboratories, animal accommodation and offices
Near Diss, England               250,000 sq.ft.     28 acres        Laboratories, animal accommodation and
                                                                    offices
Wilmslow, England                92,000   sq.ft     38 acres        Currently unutilised
</TABLE>


ITEM 3. LEGAL PROCEEDINGS

Huntingdon is party to certain legal actions arising out of the normal course of
business.  In  Management's  opinion none of these  actions will have a material
effect  on the  Huntingdon's  operations  or  financial  condition.  No  form of
proceedings has, to Huntingdon's  knowledge,  been brought or instigated against
Huntingdon by any governmental agency.



ITEM 4. CONTROL OF REGISTRANT

The  Company is not owned or  controlled  directly  or  indirectly  by any other
corporation  or  government.  As of April  16,  1999 the  total  amounts  of the
Company's ordinary shares held by persons who have reported beneficial ownership
of more than ten  percent  of such  ordinary  shares,  and by the  officers  and
directors of the Company as a group were as follows:
<TABLE>
<CAPTION>

Name of Shareholder                            Number of Ordinary Shares Owned     Percentage Holding
<S>                                                   <C>                                <C> 
UBS UK Holding Ltd. and PDFM Ltd. group                51,706,751                         17.77

Stephens Group Inc                                     36,000,000                         12.37

Quilcap Corp and Quilcap International Corp            34,157,333                         11.74

Officers and Directors of the Company as a group

Mr A Baker                                             11,000,000                         3.77

Others                                                  1,017,768                        less than 1%

<FN>
Mr Baker's shares are registered in the name of Focused Healthcare Partners.

The Company knows of no arrangements  the operation of which may at a subsequent
date result in a change in the control of Company.
</FN>
</TABLE>


<PAGE>


ITEM 5. NATURE OF TRADING MARKET

The Company's  Ordinary Shares are listed on the London Stock Exchange Ltd under
the  Stock  Exchange  Automated  Quotation  symbol  "HTD."  ADSs  each of  which
evidences  five  Ordinary  Shares and which in turn are  evidenced by ADRs,  are
listed on the New York  Stock  Exchange,  Inc.  ("NYSE")  also  under the symbol
"HTD".

The Bank of New York is the  depositary for the Ordinary  Shares  represented by
ADSs.  As at December 31, 1998,  there were 182 recorded  holders of ADSs. It is
believed  that, at such date,  39,274,200  of the  Company's  total issued share
capital of 291,010,294  Ordinary Shares were held in the US and were represented
by 7,854,840 ADSs. The remaining  Ordinary Shares were, as at such date, held in
the UK in the form of  Ordinary  Shares  for which  there  were  2,273  recorded
holders.  The high and low  quarterly  sales prices (in pounds  sterling) of the
Company's  Ordinary  Shares on the London Stock Exchange from January 1, 1996 to
December 31, 1998 were as follows:

                                        HIGH SALES            LOW SALES
QUARTER ENDED                              PRICE                PRICE
                                     ------------------    ----------------
                                          (pound)              (pound)
March 31, 1996...................            0.76                 0.63
June 30, 1996....................            1.01                 0.78
September 30, 1996...............            0.965                0.73
December 31, 1996................             1.04                0.91

March 31, 1997...................             1.21                 0.875
June 30, 1997....................             1.175                0.61
September 30, 1997...............             0.635                0.43
December 31, 1997................             0.685                0.44

March 31, 1998...................             0.465                0.425
June 30, 1998....................             0.43                 0.175
September 30, 1998...............             0.20                 0.1275
December 31, 1998................             0.135                0.105 

The high and low quarterly  sales prices (in US dollars) of the Company's  ADSs,
as evidenced by ADRs, on the NYSE from January 1, 1996 to December 31, 1998 were
as follows:

                                           HIGH SALES           LOW SALES
QUARTER ENDED                                PRICE                PRICE
                                        ------------------    ----------------
                                                $                   $
March 31, 1996..........................      6.125                 4.375
June 30, 1996...........................      8.125                 5.750
September 30, 1996......................      7.50                  5.50
December 31, 1996.......................      8.5                   7.25

March 31, 1997..........................      9.875                 6.875
June 30, 1997...........................      9.375                 4.75
September 30, 1997......................      5.00                  3.4375
December 31, 1997.......................      5.375                 3.3125



March 31, 1998..........................      3.9375                3.4375
June 30, 1998...........................      3.75                  1.6250
September 30, 1998......................      1.6875                0.9375
December 31, 1998.......................      1.4375                0.8125


<PAGE>


ITEM 6.  EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS

There are  currently  no UK exchange  control  restrictions  on  remittances  of
dividends on the  Company's  Ordinary  Shares or on the conduct of  Huntingdon's
operations.  There are no limitations imposed by UK law or by the Memorandum and
Articles of Association of the Company on the right of  non-resident  or foreign
owners  to hold or vote the  Ordinary  Shares  of the  Company  and,  except  as
discussed  below  under  "Taxation,"  there are not  believed to be any UK laws,
decrees or regulations that affect payments, to non-resident holders of Ordinary
Shares.

ITEM 7.  TAXATION

Taxation of Dividends

When  paying a dividend on  Ordinary  Shares,  the Company is liable to deduct a
withholding  tax of 15%  of the  gross  dividend  in  respect  of a US  resident
individual or corporate holder of an Ordinary Share or ADS (whose holding is not
effectively  connected  with a fixed  base in the UK through  which  independent
services are performed in the UK or with a permanent  establishment  in the UK).
Such tax credits and withholding tax may be reduced in the case of a corporation
controlling  directly  or  indirectly  10% or more of the  voting  shares of the
Company.  The gross  dividend  paid to any such US  resident  will be treated as
dividend  income for US Federal income tax purposes.  Such dividends will not be
eligible for the dividend  exclusion  allowed to US  corporations  under certain
circumstances.  However,  the 15%  withholding  tax will be  treated  as foreign
income tax eligible,  subject to certain  limitations,  for credit  against such
holder's US Federal income tax.

Taxation of Capital Gains

UK  capital  gains tax (or for  companies,  corporation  tax on  capital  gains)
generally  applies only to individuals  and companies  resident in the UK and is
currently levied at an individual's effective income tax rate of either 20%, 23%
or 40%, depending upon the level of the individual's income. The applicable rate
for companies is generally 31%, but it is reduced in certain  circumstances.  US
resident  holders of  Ordinary  Shares or ADSs will not be liable for UK capital
gains tax unless their holding in the Company is connected  with a trade carried
on  through a branch  or  agency in the UK.  However,  US  resident  holders  of
Ordinary  Shares or ADSs will  generally be liable for taxation of capital gains
upon a disposition  of such Ordinary  Shares or ADSs under US Federal income tax
laws.

Estate and Gift Tax

The current Estate and Gift Tax Convention (the "Convention") between the UK and
the US  generally  relieves  from UK  inheritance  tax the  transfer of Ordinary
Shares  or of ADSs  where the  shareholder  or  holder  of the ADSs  making  the
transfer is domiciled for the purposes of the Convention in the US, and is not a
national of the UK. This will not apply if the Ordinary  Shares or ADSs are part
of the  business  related  to the  fixed  base in the UK of a  person  providing
independent  personal  services.  If no  relief is given  under the  Convention,
inheritance tax may, in general terms, be charged upon the value of the transfer
made on the death of an individual  or within the 7 years of his death,  subject
to any  applicable  exemptions  and reliefs.  In the unusual case where Ordinary
Shares or ADSs are subject to both UK inheritance tax and US gift or estate tax,
the Convention  generally provides for tax paid in the UK to be credited against
tax payable in the US based on priority rules set forth in the Convention.

Stamp Duty

No stamp duty will be payable  in the UK on the  acquisition  of ADSs by persons
purchasing such ADSs or on any subsequent  transfer of an ADS, provided that the
ADRs  evidencing  such ADSs  remain at all times  outside  the UK.  The issue of
Ordinary  Shares by the Company to the  depositary  of the  Company's  ADSs (the
"depositary")  for the purpose of issuing ADRs, or a transfer of the  underlying
Ordinary  Shares to the  depositary,  are subject to a Stamp Duty Reserve Tax at
the  rate  of  1.5%,  calculated  on  the  issue  price  or  the  value  of  the
consideration   for  the  transfer  or  the  market  value,   depending  on  the
circumstances of the transaction.

In the case of a transfer of the underlying Ordinary Shares to the Depositary, a
separate ad valorem stamp duty at the rate of 1.5% will be charged,  but in such
circumstances  credit  will be given for the Stamp  Duty  Reserve  Tax due.  Any
transfer of the underlying  Ordinary  Shares other than to the  depositary  will
require the purchaser to pay a 0.5% ad valorem stamp duty.



<PAGE>


ITEM 8. SELECTED FINANCIAL DATA

The following financial information has been prepared under the principles which
together  make up US GAAP.  These  financial  statements  have been  reviewed by
independent auditors

Additional  profit and loss  information for 1996, 1997 and 1998 can be found on
pages F2 - F24 as required by the Securities Exchange Act of 1934 in relation to
this report.  Further,  balance sheet  information is similarly  available as at
December 31, 1997 and as at December 31, 1998.
<TABLE>
<CAPTION>
                              12 Months Ended            3 Months Ended                    12 Months ended
                               September 30               December 31                       December 31
                               ------------               -----------                       -----------
                            1994          1995                1995             1996            1997            1998
                         (AMOUNTS IN STERLING THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA
<S>                      <C>           <C>                 <C>               <C>             <C>             <C>
Revenues                   162,489       81,877              14,285           73,564          63,689          52,616
Net Income/(loss)         (58,646)      (31,538)            (3,001)            7,871          (2,882)         (24,437)
Operating profit/(loss)     4,528        7,196               1,397            11,799          (5,188)         (18,005)
from continuing
operations
Earnings/(loss)     per(pound)(0.595)(pound)(0.316)      (pound)(0.028)    (pound)0.073   (pound)(0.026)  (pound)(0.138)
share - basic   (A)
</TABLE>

<TABLE>
<CAPTION>
                             As at September 30                    As at December 31
                          -------------------------     -----------------------------------------


                              1994         1995          1995         1996         1997      1998
                              ----         ----          ----         ----         ----      ----

                          (AMOUNTS IN STERLING THOUSANDS)
BALANCE SHEET
<S>                       <C>           <C>          <C>          <C>          <C>       <C>
Total Assets               134,918       62,704       103,771      108,924      112,461   110,137
Long-term debt                           33,441        50,377       42,654       33,691    54,688
                             9,576
Shareholders' equity        34,812        3,283         6,601       14,586       17,362    13,311
<FN>

(A)      Based upon an average of 177,199,772 (1997: 112,935,450;
         1995: 108,492,218;  1995,  99,865,393;  1994, 98,545,843) Ordinary
         Shares outstanding.

         See page (i) for information relating to exchange rates.

</FN>
</TABLE>


<PAGE>


ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS

GENERAL

Huntingdon is a leading CRO which  provides an extensive  range of  pre-clinical
and  non-clinical  services to the  pharmaceutical,  agrochemical and industrial
chemical industries. The Group provides those services under contracts which may
range from one day to three years,  income from these contracts is recognised on
the  basis of work  done and  variable  costs  are  matched  with  such  income.
Contracts  are  generally  terminable  upon notice by the client with the client
being  responsible for reimbursing  Huntingdon for the value of work done to the
date of cancellation  plus the value of work required to wind down a study on an
orderly basis.

The Group's  business is  characterised by high fixed costs, in particular staff
and facility related costs. Such a high proportion creates favourable conditions
for the Group as excess  capacity is utilised but,  during  periods of declining
revenue,  careful planning is required to reduce costs without impairing revenue
generating activities.


RESULTS OF OPERATIONS

12 months ended December 31, 1998 compared with the 12 months ended December 31,
1997.

Beginning  mid  1997,   orders  and  backlog  declined  sharply   following  the
allegations of malpractice and  mistreatment of animals.  This continued to have
an impact  in 1998,  but by the end of the year  (after  the  refinancing  noted
below) client  confidence  began to return and a modest increase in order volume
was being  experienced.  Although  full year 1998 new orders  were 3% lower than
1997, the year-end  backlog was up 7% from 1997 and 12% ahead of the August 1998
level.

The revenue decline in 1998 was more dramatic than the fall in orders due to the
long term nature of many of the contracts under which  Huntingdon does business,
and reflected  the steep  reduction in orders in 1997.  Revenues at  (pound)52.6
million in 1998 were 17% down from 1997  revenue  of  (pound)63.7  million.  The
Company's  operating  capacity,  which had increased modestly in 1997 before the
full impact of the order rate decline was felt, was reduced  throughout the year
through  natural  attrition  and the closure of the  Wilmslow  Research  Centre.
However,  new management  believed that further  reductions were  appropriate to
align staffing with the reduction in revenues which the Company had experienced,
and in December 1998 a cost reduction programme was announced. This included the
elimination  of  approximately   150  positions  and  the   rationalisation   of
capabilities  within the UK. This programme is intended to reduce the total cost
base by approximately (pound)6 million per annum.

Overall operating costs (before  exceptional  items) in 1998 were up (pound)0.7m
to  (pound)65.9m  (1% up on 1997)  and  losses  prior to  exceptional  items and
interest increased from (pound)1.5m to (pound)13.3m.

Exceptional losses during the year were(pound)14.9 million (1997:(pound)1.4
million).  These arose from

(i) Closure  of the  Group 's UK site at  Wilmslow  and  write  down of  related
    assets.  Redundancy and related costs amount to (pound)0.3 million and asset
    write down (pound)2.9 million.

(ii)The  December  1998  cost  reduction   programme   designed  to  rationalise
    capabilities  in the UK. The cost of this  programme is  (pound)3.5  million
    including asset write offs of (pound)0.5 million.

(iii) The write off of the  unamortised  balance of the goodwill  arising on the
    acquisition  of  businesses  in 1995 of  (pound)7.3  million.  Following the
    decline in revenues and the successful integration of the businesses this no
    longer has any intrinsic value

(iv) A review of asset values in the UK resulting in accelerated depreciation of
(pound)0.9million.

Net interest expense rose by (pound)1.9  million (51%) to (pound)5.5  million in
1998.  In part this arose from the  increase  in net bank debt during 1997 and a
further  increase in the first eight months of 1998. (At March, 31 1997 net bank
debt  was  (pound)13.5  million  and  peaked  in  August  1998 at  approximately
(pound)25 million). In addition the need to review the facility in February 1998
and August  1998,  coupled with the  complete  renegotiation  of the facility in
September 1998, led to charges of (pound)1.2  million in respect of the facility
during 1998 (1997: (pound)0.1 million).



<PAGE>


Taxation relief on losses at (pound)9.0  million  represent relief at 27% versus
the UK statutory rate of 31%. This reduction  arises  primarily from the lack of
relief on the write off of goodwill.

Overall the net loss at (pound)24.4  million is (pound)21.5  million higher than
the net loss of  (pound)2.9  million  reported  in 1997.  Net loss per share has
risen from 2.6p for 1997 to 13.8p for 1998.

UK GAAP Reconciliation

The Group reports  primarily in UK GAAP as it is  incorporated in the UK and the
majority  of its  operations  and  assets are based in the UK.  These  financial
statements are presented in US GAAP in order to provide  additional  information
to the Group's US investors.

A  reconciliation  between  the results  announced  in the UK (under UK GAAP) to
those presented in these financial statements is shown below:

                                           1997                   1998
                                    (pound)'000             (pound)'000
Net loss per UK GAAP                     (5,312)                (24,863 )
Recognition of pension costs              (247)                   (676)
Goodwill                                  (194)                 (7,342 )
Revaluation reserve                       (119)                     -
Deferred taxation                         2,990                   8,444
                                                              --------------
                                      ---------------
Net loss per US GAAP                     (2,882)                (24,437)
                                      ---------------         --------------

The principal differences arise as follows

(i) Deferred Income Taxes:- Under UK GAAP, a provision for deferred taxes is not
    required  on timing  differences  that are not  expected  to result in a tax
    liability in the future.  US GAAP  requires that a deferred tax provision is
    made for all significant timing differences, using the liability method.
(ii)Goodwill:- Under UK GAAP,  purchased  goodwill has been written off directly
    to reserves. US GAAP requires that goodwill is capitalised,  and written off
    over its useful life to the profit and loss account.  In  subsequent  years,
    goodwill  carried  forward  is  assessed  based  on its fair  value  and any
    permanent impairment is written off at the time it is identified.
(iii) Pension Cost.  Under UK GAAP,  the pension costs charged to the profit and
    loss account are  calculated in accordance  with SSAP24.  Under US GAAP, the
    pension  costs  charged to the profit and loss  account  are  calculated  in
    accordance with FAS87.

12 months ended December 31, 1997 compared with the 12 months ended December 31,
1996.

Huntingdon's  revenues  declined(pound)9.9 million (13%) to(pound)63.7 million
in the 12 months ended December 31, 1997 from(pound)73.6 million in the
previous year.

Following the  allegations  of  malpractice  made in the UK and USA study starts
were lower than expected due to both delay and  cancellation  of studies and due
to a significant reduction in orders for new studies.

Historically  the  business  has been  subject  to study  sponsors  occasionally
requesting study delays,  deferrals or postponements.  However,  in the past the
study sponsor was often able to bring forward an alternative  test material from
its research  pipeline and, on occasions  Huntingdon also had the flexibility to
bring forward a study from its backlog.  However,  during 1997, due primarily to
the allegations,  study sponsors were unwilling to authorise early initiation of
their studies and as a result delays,  deferrals and  postponements had a bigger
impact on revenues than in previous years.

Total orders in 1997 at (pound)58.5  million compare with (pound)76.4 million in
1996, a decrease of 24%.  Huntingdon's  results announced for the 3 months ended
March 31, 1997 were  comparable with the strong first quarter in the prior year.
However , as a result of the impact of the  allegations  there followed a sudden
and significant fall in orders which, setting aside July 1997, didn't show any
recovery until the fourth quarter 1997.

Costs (excluding  exceptional items) increased from (pound)61.8  million in 1996
to (pound)65.2 million in 1997, or by 5.5%. This increase included half a year's
operation  at the  Wilmslow  site  and also the  costs  of  staffing  up the new
chemistry  facility at  Princeton  ready for  operation  in June 1997.  As costs
largely comprise fixed expenditure on payroll, facilities and infrastructure, in
the short  term a fall in  revenue  has a direct  impact on  profitability.  The
operating  loss  (before  exceptional  items)  was  (pound)1.5  million  in 1997
compared to a profit of (pound)11.8 million in 1996.

Exceptional  losses  during  the year were  (pound)3.5  million  and  related to
resolving  issues arising from the allegations of  malpractice.  The exceptional
gain  of  (pound)2.1  million  in  1997  represents  Huntingdon's  share,  after
provision for costs and liabilities,  of the expected cash distribution from the
joint  administrators  of the  Travers  Morgan  Group to secured  and  unsecured
creditors.

Overall the net loss at(pound)2.8 million  compared to a net profit of
(pound)7.9 million in 1996.  Net loss per share was 2.6p (1996 earnings per
share 7.3p).


LIQUIDITY & CAPITAL RESOURCES

The poor trading results put a heavy strain on cash  resources.  Despite receipt
of  (pound)2.2  million  from  the  administrators  of  Travers  Morgan,   other
improvements in working  capital of (pound)0.6  million and a refund of (pound)1
million UK  corporation  tax, cash absorbed by  operations  totalled  (pound)9.5
million in 1998. This utilised the Company's available facilities.

The  Company's  bankers  provided  extra  facilities  of (pound)5  million and a
bridging  facility of (pound)1  million in the first nine months of 1998 however
these  facilities,  in line  with the  other  bank  debts of the  Company,  were
repayable  on  demand.  Given the  medium to long  term  element  of many of the
Company's  activities  and the reluctance of clients to place new work until the
Company's finances were stabilised, the Company required a substantial injection
of finance to both  initially  restore  confidence  and then to fund  operations
during the period until the Company returned to profitability.

On September 2, 1998 a Group of new investors  subscribed  (pound)15 million for
120 million  ordinary  shares whilst  existing  shareholders  and  institutional
investors took up a further 57 million shares,  contributing (pound)7.1 million.
After  expenses of (pound)1.7  million,  the issue of shares raised  (pound)20.4
million.  On the same date the Company's  bankers  agreed to confirm and fix the
Company's  facilities at (pound)24.5 million until August 31, 2000.  Accordingly
bank debt is now shown within liabilities repayable after more than one year.

As at  December  31, 1998 the bank  facility  is fully  drawn down.  Interest is
payable in quarterly breaks at"LIBOR" plus 1.75 per cent per annum in respect of
drawings  up to  (pound)19,500,000  and  LIBOR  plus 1 per  cent in  respect  of
drawings over  (pound)19,500,000.The  interest rate payable at December 31, 1998
is 8.422 per cent on (pound)19,500,000 and 7.672 per cent on (pound)5,000,000.

Of the (pound)20.4  million  injected,  (pound)13.3  million remained in hand on
short term  deposit as at  December  31,1998.  The  (pound)7.1  million of funds
absorbed were utilised as follows:

                                                            (pound)'million
Operating loss excluding exceptionals and depreciation           2.5
Exceptional items                                                0.8
Interest and bank charges paid                                   2.6
Bank bridging loan repaid                                        0.4
Non bank loans repaid                                            0.5
Capital expenditure                                              0.7
Working capital movements                                       (0.4)
                                                           ---------------
                                                                 7.1
                                                           ---------------


<PAGE>


The  remainder of the  Company's  long term  finance is provided by  Convertible
Capital Bonds repayable in 2006. Bonds totalling $50 million were issued in 1991
and remained  outstanding  as at December 31, 1998.  The Bonds carry interest at
7.5%, payable at six-monthly breaks in March and September. The conversion rate,
which is based upon a fixed rate of exchange of (pound)1.00=US  $1.6825 is 242.3
pence per Ordinary Share and is subject to adjustment in certain circumstances.

In addition (pound)3.3 million of the consideration  payable for the purchase of
the Wilmslow  Research  Centre  (acquired in 1997)  remained  outstanding  as at
December 31, 1998. This debt bears no interest and although  (pound)2 million is
repayable in quarterly  instalments in 1999 and (pound)1.3  million is repayable
in 2000,  the full  amount is classed  as due  within one year as the  Company's
intention is to sell the site.  Such a disposal  would render the debt repayable
upon demand.

Cash available for capital expenditure during the year was limited and additions
to fixed assets were only (pound)2.4  million.  This expenditure was prioritised
toward improvements in data capture systems and animal welfare enhancements.

YEAR 2000

The Group utilises  software and related computer  technologies in the provision
of  services  to  clients.  These  technologies  are an  essential  part  of its
operations and since 1996 the Group has been  implementing a strategy to replace
its computer infrastructure,  software applications and equipment to ensure that
all  critical  services  and controls  will  operate  efficiently,  on and after
January 1, 2000.

In the UK the  strategy  is being  executed  under the  guidance  of a Year 2000
Committee,  currently chaired by the Finance Director.  This Committee comprises
representatives  from all areas of the Group's UK operations and reports back on
a regular basis to both executive management and the Board of Directors.  In the
US the  strategy is being  executed by local  management  reporting  into the US
president,  who in turn reports back on a regular basis to executive  management
in the UK and hence to the Board of Directors.

State of readiness

The strategy is broken down into a number of key phases.  These are as follows:-

o    Confirmatory audit of all software, electronic and electrical equipment.

o    Questionnaires sent to all known suppliers of software, electronic
     and  electrical  equipment for  information on status of Year 2000
     compliance supported by supplier audits where appropriate.

o    Assessment of all software, electronic and electrical equipment to identify
     those critical to the business.

o    Testing  of items  identified  as  critical to the  business for Year 2000
     compliance, where practical.

o    Corrective  actions  to  ensure items are Year  2000 compliant, including
     contingency plans where appropriate.

The  confirmatory  audit is  intended  to  cover  all of the  Group's  software,
electronic and electrical equipment including computer related hardware, network
equipment,   computer  related  software  (internally  and  externally  written)
telephones,   scientific   instrumentation   and  other   equipment   (including
environmental   control  systems).   Thisaudit   together  with  the  subsequent
assessment  of risks to the  business  through  failure of  critical  systems or
equipment is substantially complete and testing is underway.

Most  of the  major  software  systems  supporting  the  Group's  business  were
identified  and assessed last year.  Where the systems in use were not Year 2000
compliant  corrective  actions,  including  the  implementation  of new software
packages, are underway.

In  addition  to the  questioning  and  auditing  of  software,  electronic  and
electrical equipment  suppliers,  the Group is conducting an assessment of other
material third party relationships for Year 2000 compliance. These third parties
include utility  companies and specific product  suppliers,  such as animal feed
and laboratory  consumables  suppliers.  These  suppliers are being requested to
provide  the  details  of their  Year 2000  compliance  programme.  In  addition
contingency  plans are being formulated where there is a high risk of disruption
to the Group's  business or where there is an impact on animal  welfare due to a
Year 2000 problem at these suppliers.

While the Group is taking steps to raise  awareness of the Year 2000 issue among
its customers, the Group does not believe it is appropriate to require customers
to certify their Year 2000  compliance.  For the fiscal year ended  December 31,
1998 the Group had no single  customer  which  accounted for more than 5% of its
net revenues.


Cost of Year 2000 project

Since 1996 the Group has  incurred  costs  relating to the Year 2000 project and
expects to continue incurring such costs through to the end of 2000. These costs
fall into two categories, amounts that are or will be expensed as incurred (such
as payroll costs of  individuals  working on the project,  the costs of external
consultants  assisting on the project but not engaged on major software projects
due to be  capitalised,  and the  write  off of the book  value of non Year 2000
compliant  assets) and amounts that will be capitalised and depreciated over the
useful  lives of the  associated  assets (the  purchase  price of new  hardware,
software and other equipment acquired to replace existing hardware, software and
other equipment that is not Year 2000 compliant).

The Group currently  estimates that the amounts that have or will be expensed as
incurred  over the three year  period to December  31,  2000 will total  between
(pound)850,000  and (pound)950,000 of these amounts a total of (pound)10,000 has
been  incurred and  expensed in the year to December 31, 1998.  The amounts that
will be capitalised will be primarily  incurred in the two years to December 31,
1999 are estimated at  (pound)2,100,000 of this (pound)275,000 has been incurred
in the year to December 31, 1998.


Risk of Year 2000 problems

The Group has identified the following major potential risks resulting from Year
2000 problems. All would result in disruption to existing and future studies and
have an adverse  impact on the health and well being of animals.  The subsequent
impact on  business  and cash flow could have a material  adverse  effect on the
Group's financial condition.

o  The loss of power and utility services

o  The inability to obtain timely and sufficient laboratory supplies and animal
   feed

o  The failure or malfunction of computer  hardware, software and technology
   embedded in scientific and other equipment.

In addition  major  disruption to customers'  business due to Year 2000 problems
could have a major impact on the Group's cashflows and financial condition

Contingency Plans

The Group has developed or is in the process of developing contingency plans for
processes  and  supplies  that  are  critical  to its  operations  and  that are
dependent on computer software,  hardware and embedded  technology,  where it is
not possible to confirm that the underlying  technology is Year 2000  compliant,
or where it is not possible to upgrade the technology to Year 2000 compliance.

Contingency  plans  include  the  utilisation  of back-up  generators  for power
supplies;  identifying alternative suppliers for reagents, animal feed and other
supplies or stock piling supplies where appropriate;  and increased manning over
the new year to operate systems manually in the case of failure.

Those  plans not yet in place will be  developed  on a case by case basis with a
target completion date of June 30, 1999. Contingency plans themselves,  however,
are  subject  to  variables  and  uncertainties  and  therefore  there can be no
assurance that the Group will correctly anticipate the level, impact or duration
of non  compliance  of computer  hardware,  software,  systems or  customers  or
suppliers/service  providers or that its contingency plans will be sufficient to
mitigate the impact of non-compliance.  Thus, there can be no assurance that the
Year 2000 problem,  even after giving effect to the implementation of applicable
contingency  plans,  will not occur and that such an  occurrence  could  leave a
material adverse impact on the Group's business, financial condition, results of
operations and cashflows.

EXCHANGE RATE FLUCTUATIONS AND EXCHANGE CONTROLS

In 1998 following the slight  strengthening  of sterling  against the US dollar,
net  liabilities  denominated  in US dollars  (mainly  $50  million  Bonds) have
decreased  in value on  consolidation  to  sterling.  This does not  affect  the
cashflow  of  Huntingdon  but  has  decreased  the  reported  loss  before  tax,
accounting  largely for the  unrealised  gain on exchange of (pound)0.3  million
reported  in these  results.  This  compares  with an  exchange  loss in 1997 of
(pound)1.1 million.

Interest  on the Bonds is payable  half-yearly  (in March and  September)  in US
dollars and the impact of fluctuations in the exchange rate between sterling and
US dollars is offset by US dollar denominated revenues receivable by Huntingdon.
Although  reported results have been affected by conversion into sterling of the
Bonds on consolidation  and there may be an impact in the future,  the Directors
have decided not to hedge against this exposure.  Such a hedge might impact upon
Huntingdon's  cash flow compared with movements on the Bonds which do not affect
cash flow in the medium term.

Huntingdon  operates on a worldwide basis and generally  invoices its clients in
the  currency  of the  country in which it  operates.  Thus,  for the most part,
exposure to exchange rate  fluctuations  is limited as sales are  denominated in
the same currency as costs. Trading exposures to currency  fluctuations do occur
as a result of certain  sales  contracts,  performed  in the UK for US  clients,
which are  denominated in US dollars and contribute  approximately  14% of total
revenues. Huntingdon has not experienced difficulty in transferring funds to and
receiving funds remitted from those  countries  outside the US or UK in which it
operates and Management expects this situation to continue.

Whilst the UK has not at this time  entered the  European  Monetary  Union,  the
Company has ascertained  that its financial  systems are capable of dealing with
Euro denominated transactions. In addition upgrades which are currently underway
(to ensure that the financial  systems are Year 2000 compliant) will ensure that
the Company, if ever required to do so, will be able to report in Euro's.


<PAGE>


ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT

The  Articles of  Association  of the  Company  provide  that,  unless and until
otherwise  determined by ordinary  resolution passed at a general meeting of the
Company,  the directors  shall be not less than two in number and there shall be
no maximum number of directors. The Company may by ordinary resolution passed at
a general meeting of the Company appoint any person to be a director,  either to
fill a casual vacancy or as an addition to the existing board of directors.  Any
director  appointed by the board of  directors  holds office only until the next
following general meeting and shall then be eligible for  re-appointment  but he
is not taken into account in determining  the directors or the number who are to
retire by rotation at such meeting. At every annual general meeting one third of
the directors  (being those who do not wish to be  re-appointed or who have been
the longest in office  since their last  appointment)  must retire from  office.
Directors  so  retiring  may  be  removed  from  office  by  resolution  of  the
shareholders.  The  Board  appointed  A H  Baker,  B Cass,  F W  Bonner  and J T
Griffiths as Directors on September 2, 1998,  September 17, 1998,  September 17,
1998 and April 16, 1999 respectively.  M Sandford, C M Macdonald, C F Cliffe, LO
Rice and R E H Slater resigned as Directors on April 16, 1999, January 31, 1999,
December 31, 1998,  September 2, 1998 and 15 May, 1998  respectively.  The table
below sets forth certain information with respect to the directors and executive
officers of the Company as at April 16, 1999:

Name                 Office Held                                     Appointed
Andrew H Baker       Director                                         1998
                     Chairman of the Board                            1998
Brian Cass           Director                                         1998
                     Managing Director/Chief Operating Officer        1998
Frank W Bonner       Director                                         1998
                     Director of Science and Technology               1998
John Caldwell        Director                                         1997
Julian T Griffiths   Director                                         1999
                     Finance Director                                 1999
Roger A. Pinnington  Director                                         1994
Susan G Hide         Secretary                                        1998

No  director  or  executive  officer  has a family  relationship  with any other
director or executive officer.



ITEM 11.  COMPENSATION OF DIRECTORS AND OFFICERS

In the 12 months  ended  December  31, 1998 the  aggregate  compensation  of the
executive   directors   and   officers  as  a  group,   paid  or  accrued,   was
(pound)1,065,147.

The services of Mr Baker are provided  through a management  services  agreement
with Focused  Healthcare  Partners  ("FHP"),  the vehicle through which Mr Baker
provides  his  services.   The  agreement  provides  for  a  minimum  notice  of
termination by the Company of twelve months.

Mr Cass has a service contract  providing for a minimum notice of termination by
the Company of two years,  following an initial  fixed period of twelve  months.
The  contract  provides  for  liquidated  damages  amounting to two years' basic
salary and an amount  equal to twice the  annual  average  of  bonuses,  if any,
received during the two financial years of the Company  immediately  preceding a
change of control of the Company (as  defined in the  service  contract)  in the
event of termination  in certain  circumstances.  The Board has determined  that
both the period of notice  required for termination of Mr Cass' contract and the
change of control provisions are warranted by Mr Cass' value to the Company.

Dr Bonner and Mr Griffiths each have service  contracts  providing for a minimum
notice of termination by the Company of twelve months.

The services of Mr Pinnington are provided through a consultancy  agreement with
Harford Consultancy  Services Ltd ("Harford") a company owned and operated by Mr
Pinnington. The agreement provides for a notice of termination by the Company
of one month. Messrs Baker, Cass,  Griffiths and Pinnington and Dr Bonner
retire at the Annual General Meeting but will offer themselves for re-election.
The Company operates a  discretionary  bonus  plan  for  executive  directors
and  key  managers  of Huntingdon  based upon  improvements  to  operating
income and  achievement  of pre-defined targets.  Bonus awards to directors and
officers are administered by the Remuneration Committee.  The Committee
believes that the discretionary bonus payments to Mr Cliffe in 1996 and to Mr
Rice, Prof.Caldwell and Mr Baker in 1998 reflects their  respective
contribution  to the  development of Huntingdon. No bonus awards were made in
respect of 1997.

The following table shows the remuneration of Directors in the 12 Months ended
December 31, 1998,  December 31, 1997, and December 31, 1996;
<TABLE>
<CAPTION>
Name of Director                  1996          1997    Salary/Fee           Pension  Other            Other          1998
----------------                  ----          ----    ----------           -------  ------           -----          ----
                                                                                      payments
                             12 Months     12 Months                   Contributions                Benefits     12 Months
                             ---------     ---------                   -------------                --------     ---------
                              (pound)       (pound)         (pound)         (pound)     (pound)      (pound)       (pound)
<S>                           <C>           <C>           <C>                <C>        <C>          <C>
Mr A H Baker  (i), (iii)             -             -        50,000                 -      60,000      19,231       129,231
Mr F W Bonner (i)                    -             -        40,444             2,022           -           -        42,466
Mr B Cass (i)                        -             -        46,695            15,565                  11,207        73,467
Mr C F Cliffe (iii)            261,858       238,877       187,200            25,200     250,000      17,500       479,900
Dr C M Macdonald                     -         3,787        98,000             9,000           -       9,000       116,000
Mr M Sandford                        -        63,679        70,000             7,700                   9,000        86,700
Mr R A Pinnington               86,936        86,768        57,096                 -           -      10,320        67,416
Prof. J Caldwell  (iii)              -         2,000        20,000                 -       9,000           -        29,000
Mr L O Rice (iii)               20,000        20,000        13,467                 -      20,000           -        33,467
Mr R E H Slater (ii)            20,000        20,000         7,500                 -           -           -         7,500
<FN>
(i)      From appointment
(ii)     In addition, professional fees amounting to (pound)Nil (12 months ended
         December 31,  1997(pound)40,954  ; 12 months ended  September 30, 1996:
         (pound)58,608)  were paid to  Simmons &  Simmons,  the firm in which Mr
         Slater is a partner, in
         respect of the period  ended May 15, 1998.
(iii)    The other  payments to Mr Rice,  Prof.  Caldwell and Mr Baker are bonuses.
         The other  payment  to Mr Cliffe is in  respect of the termination of his
         employment.
</FN>
</TABLE>

The following table shows the pensions benefits (excluding  additional voluntary
contributions and inflation) earned by Directors in the Huntingdon Scheme in the
12 months ended December 31, 1998:

<TABLE>
<CAPTION>
     Name of Director       Increase in accrued pension      Transfer value of     Accumulated total accrued pension
                                  during the year              increase (i)                 at year-end (ii)
                                     (pound)                     (pound)                      (pound)
<S>                                   <C>                        <C>                            <C> 
Mr C F Cliffe                          3,001                      31,668                         16,790
Dr C M Macdonald                       2,491                      32,160                         5,633
Mr M Sandford                          1,549                       9,733                         7,975
<FN>
 (i)     Calculated in accordance with Actuarial Guidance Note GN11

(ii)     Payable annually on retirement
</FN>
</TABLE>

<PAGE>


ITEM 12.  OPTIONS TO PURCHASE SECURITIES FROM THE REGISTRANT

The  Unapproved  Share Option Plan.  On April 8, 1983,  the Company  adopted the
Unapproved Share Option Plan (the  "Unapproved  Plan") pursuant to which options
to acquire  Ordinary  Shares may be  granted  to any person who is  required  to
devote  substantially  the whole of his time  (being  not less than 25 hours per
week)  to  serve  as a  Director  or  employee  of  the  Company  or  one of its
subsidiaries.  The maximum  number of Ordinary  Shares which may be issued under
the  Unapproved  Plan  according to the rules thereof is 10% of the issued share
capital of the Company  from time to time,  less options  outstanding  under the
Approved Plan from time to time.
 An option granted  pursuant to the  Unapproved  Plan may be exercised two years
after the grant in respect of not more than 50% of the Ordinary  Shares  subject
to the option.  An option may be exercised in full between three and seven years
after the grant in respect of the  unexercised  balance of the  Ordinary  Shares
subject to the option.  Options may be  exercised  earlier in certain  specified
circumstances,  including a change in control of 25% or more of the  outstanding
Ordinary Shares of the Company.  The Approved  Management  Share Option Plan. On
January 29, 1985,  the Company  adopted a second share option plan, the Approved
Management Share Option Plan (the "Approved  Plan"),  which has been approved by
the Board of Inland Revenue (the "Inland  Revenue")  pursuant to the Finance Act
1984.  The rules of the  Approved  Plan broadly  follow those of the  Unapproved
Plan,  except that an option may be  exercised,  subject to certain  exceptions,
only between  three and ten years after it is granted.  Pursuant to the Approved
Plan,  options to acquire  Ordinary  Shares  may be granted to any  Director  or
employee of the Company  whose  terms of  employment  require him to work for at
least thirty-seven and one-half hours per week. Approval of the Approved Plan by
the Inland Revenue means that important  personal tax  concessions are available
to  participants  who reside in the U.K. The maximum  number of Ordinary  Shares
which may be issued under the Approved  Plan  according to the rules  thereof is
10% of the issued  share  capital from time to time,  less  options  outstanding
under the Unapproved  Plan from time to time.  Both the Unapproved  Plan and the
Approved  Plan  terminated on December 31, 1997 with respect to the grant of new
options.  Options outstanding at that date are not affected by such termination.
The grant of options under both the Unapproved  Plan and the Approved Plan was a
matter  for the  discretion  of the  Board  of  Directors  of the  Company.  The
consideration  payable  to the  Company  for the grant of an  option to  acquire
Ordinary  Shares was the sum of (pound)1.  The exercise price per share at which
an  option  may be  exercised  is  equal to the  average  of the  middle  market
quotations  on the  International  Stock  Exchange  of the  United  Kingdom  and
Republic of Ireland Ltd. for the Ordinary  Shares on the five dealing days prior
to the date of grant or, if no established market in the Ordinary Shares exists,
the fair value of an Ordinary  share as determined by the Board.  Generally,  an
option may not be exercised  unless at the date of exercise the  participant  is
then, and has been continuously  since the grant of the option, in the full-time
employ of the Company.  This rule, however, is subject to alteration in specific
cases at the discretion of the Board.

Other share options

At the Extraordinary  General Meeting held on September 2, 1998 the Shareholders
approved a new option  scheme and a  separate  Option  Agreement  with Mr Baker:
(a)The  Huntingdon  Life  Sciences  Group  Unapproved  Share Option  Scheme (the
Unapproved Share Option Scheme) , under which 8,500,000 Founder Options had been
granted but not  relinquished  or exercised as at December 31, 1998 at an option
price of 12.5p per Ordinary  Share.  The Options may be exercised from the third
anniversary  of the date of the grant  subject to the share price  reaching  the
following  pre-determined targets for a period of seven consecutive dealing days
at any time after January 1, 1999.

           Target price per share       Proportion of options exercisable
                  25p                               25%
                  50p                               50%
                  75p                               75%
                 100p                              100%


<PAGE>


Options,  other than Founder Options, are available for grant under this Scheme
and are generally  exercisable  between the third and tenth anniversary  of the
date of grant subject to the attainment of performance related conditions.

All Options lapse on the tenth anniversary of the date of the option grant.

(b) An Option Agreement under which Andrew  Baker was granted Options over
    5,000,000 Ordinary Shares of 5p in the Company, the principal terms of which
    are the same as those applicable to the Founder Options referred to above.


Any US  subsidiary  of the  Company,  which  received the services in respect of
which an option was granted,  will be entitled to a deduction in an amount equal
to the  compensation  taxable to the  optionee,  in computing  its U.S.  Federal
income tax.  Generally  this is in the  calendar  year in which the  optionee is
deemed to have received such compensation.



Under the terms of the various share option  arrangements the following  options
to purchase  Ordinary  Shares in the Company  have been  granted (net of expired
options) but not exercised as of April 16, 1999:

 (i)     The Unapproved Share Option Plan

Date of Grant          Number of shares    Option Price     Expiry Date
                          allocated
--------------------- ------------------- ------------------ ----- ------------

December 18, 1995         189,550        (pound)0.77        December 17, 2002
November 21, 1996         140,000        (pound)0.95        November 20, 2003
November 21, 1996          60,000              $1.60        November 20, 2003
December 1, 1997          100,000        (pound)0.50        November 30, 2004
December 31, 1997       1,097,570       (pound)0.465        December 30, 2004
December 31, 1997         680,000              $0.77        December 30, 2004


(ii)     The Approved Management Share Option  Plan

Date of Grant          Number of shares    Option Price      Expiry Date
                          allocated
----------------------------------------- ------------------ ----- ------------

February 13, 1995          302,500        (pound)0.49        February 12, 2005
December 11, 1995          795,000        (pound)0.78        December 10, 2005
December 11, 1995          130,000              $1.19        December 10, 2005
December 18, 1995          171,450        (pound)0.77        December 17, 2005
November 21, 1996          565,000        (pound)0.95        November 20, 2006
December 31, 1997          580,000       (pound)0.465        December 30, 2007


<PAGE>


(iii)    The Unapproved Share Option  Scheme and Mr. Baker's Option Agreement

Date of Grant           Number of shares   Option Price      Expiry Date
                          allocated
------------------------------------------- ------------------ ----- ---------

September 2, 1998          5,000,000       (pound)0.125      September 1, 2008
December 3, 1998           7,000,000       (pound)0.125      December 2, 2008
December 31, 1998          1,000,000       (pound)0.125      December 30,2008
March 29, 1999             2,000,000      (pound)0.1925      March 28, 2009


In the  period  since  options  to  acquire  shares  have been  capable of being
exercised to April 16, 1999,  options for 3,798,856  shares have been  exercised
and the  shares  issued.  The total  number of  options  held by  Directors  and
Officers as a group as at April 16, 1999 is 11,100,000.

The  following  table shows the number of share  options held by Directors as at
April 16, 1999:

<TABLE>
<CAPTION>
Date of Grant         Number Granted      Exercise Price     Date First Exercisable    Expiry Date
-------------         --------------      --------------     ----------------------    -----------
<S>                   <C>                <C>                 <C>                       <C>
A H Baker
---------
September 2,1998       5,000,000          (pound)0.125        September 2, 2001         September 1,2008
F W Bonner
----------
December 31, 1998      500,000            (pound)0.125        December 31, 2001         December 30, 2008
December 1, 1997       100,000            (pound)0.50         December 1, 1999          November 30, 2004
B Cass
------
December 3, 1998       5,000,000          (pound)0.125        December 3, 2001          December  2, 2008
J T Griffiths
-------------
March 29, 1999         500,000            (pound)0.1925       March 29, 2002            March 28, 2009

</TABLE>



ITEM 13.  INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS

There have been no material transactions during the 3 years prior to the date of
this  report to which any  director or officer or 10%  shareholder  was a party.
There is no outstanding  indebtedness  to the Company by any director or officer
or 10% shareholder.


<PAGE>

                                     PART II

ITEM 14.  DESCRIPTION OF SECURITIES TO BE REGISTERED

Not applicable.


                                    PART III

ITEM 15.  DEFAULTS UPON SENIOR SECURITIES

None.


ITEM 16.  CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
          SECURITIES.

At an Extraordinary General Meeting on September 2, 1998 shareholders approved a
subscription  of  120,000,000  shares and a placing and open offer of 57,003,431
shares  at  12.5  pence  .  The  shares  not  taken  up by  existing  qualifying
shareholders   were  placed  by  Kleinwort   Benson   Securities   Limited  with
institutional  investors in the UK. These transactions raised  (pound)20.39M net
of expenses. The issue discount before expenses was 36 per cent as compared with
19.5 pence per share, being the London Stock Exchange middle market price at the
time the issue  price was  agreed.  However,  the issue  price  before  expenses
represented a 6 per cent discount to the price of the Company's ADR's on the New
York Stock Exchange at the time that the price was agreed. Dealings commenced in
these new Ordinary shares on 3 September, 1998 and the discount at that time was
11 per cent as compared with the then  prevailing  middle market price of 14p on
the London Stock Exchange.

On May 15, 1998, at the Annual General Meeting,  the directors were empowered by
Special  Resolution of the  Shareholders  to allot Ordinary  Shares  pursuant to
Section  95 of the  Companies  Act 1985 as if Section 89 (1) of that Act did not
apply.  As a result the  directors are  authorised  to issue shares,  within the
general authority granted,  other than pro-rata to existing  shareholders.  Such
power is limited to the allotment of Ordinary  Shares (a) in  connection  with a
rights issue in favour of Ordinary  shareholders of the Company (so allowing the
Company  to  make   alternative   arrangements   for  shareholders  in  overseas
jurisdictions  to whom shares cannot be offered without  compliance with onerous
securities  legislation) or (b) without  restriction for cash up to an aggregate
nominal amount of (pound)285,017  (equal to 5,700,340 Ordinary Shares of 5 pence
each).  This power expires on the conclusion of the next Annual General  Meeting
of the Company.

On September 2, 1998, at the Extraordinary  General Meeting,  the directors were
empowered by Special  Resolution of the  Shareholders  to allot Ordinary  Shares
pursuant  to Section 95 of the  Companies  Act 1985 as if Section 89 (1) of that
Act did not apply.  As a result the directors  were  authorised to issue shares,
within the authority granted, other than pro-rata to existing shareholders. Such
power is limited to the  allotment  of Ordinary  Shares in  connection  with the
Subscription, Placing and Open Offer and the Option Agreement up to an aggregate
nominal amount of  (pound)9,100,172  (equal to 182,003,431  Ordinary Shares of 5
pence  each).  This  power is in  addition  to the power  granted  at the Annual
General Meeting on May 15, 1998 and expires at the conclusion of the next Annual
General Meeting of the Company.



                                     PART IV

ITEM 17.  FINANCIAL STATEMENTS

Not applicable.

ITEM 18.  FINANCIAL STATEMENTS

See Item 19 for a list of financial statements filed under Item 18.


<PAGE>


ITEM 19.  FINANCIAL STATEMENTS AND EXHIBITS

(a)      Index to Financial Statements
                                                                         Page

         Report of Independent Auditors................................   F-1
         Consolidated Income Statements  ..............................   F-2
         Consolidated Balance Sheets ..................................   F-3
         Consolidated Statement of Changes in Shareholders' Equity.....   F-4
         Consolidated Statement of Cash Flows..........................   F-5
         Notes to the Consolidated Financial Statements................   F-6

(b)      Exhibit No.       Description of Exhibit

         1.1     --        An agreement  dated August 7, 1998 between,  inter
                           alia, the Company, Huntingdon  Life Sciences Limited,
                           Huntingdon Life Sciences Inc. and National
                           Westminster Bank PLC replacing the facilities
                           agreement dated November 1, 1995 relating to a
                           revolving loan facility of(pound)24,500,000
         1.2     --        A bridging  facility  being made  available by
                           National  Westminster  Bank PLC in favour of the
                           Company and
                           Huntingdon Life Sciences Limited.
         1.3               -- An agreement between the Company,  Huntingdon Life
                           Sciences  Limited,  Huntingdon Life Sciences Inc. and
                           various  banks  replacing  the  third   intercreditor
                           agreement between the parties dated March 17,1998.
         1.4     --        Third Supplemental Deed dated August 7, 1998 between
                           the Company and National Westminster Bank PLC.
         1.5     --        Third Supplemental Deed dated **** between Huntingdon
                           Life Sciences Inc. and National Westminster Bank PLC.
         1.6     --        Third Supplemental Deed dated August 7, 1998 between
                           Huntingdon Life Sciences Ltd and National Westminster
                           Bank PLC.
         2.1     --        Deed of  variation  dated **** to the Service
                           Contract dated March 15, 1993 between the Company and
                           Mr C F Cliffe.
         2.2     --        Service Contract dated August 7, 1998 between
                           Huntingdon Life Sciences Ltd and Mr M Sandford.
         2.3     --        Service  Contract dated August 7, 1998 between
                           Huntingdon Life Sciences Ltd and Dr   C M Macdonald.
         2.4     --        Deed of  variation  dated  August 7, 1998 to the 
                           Contract dated March 20, 1995 as amended on
                           December  23, 1995 between the Company, Harford
                           Consultancy Services Limited and Mr R Pinnington.
         2.5     --        A letter of appointment dated August 7, 1998 between
                           the Company and Professor J Caldwell.
         2.6     --        A Management Services Agreement dated August 7, 1998
                           between the Company and Focused Healthcare Partners.
         2.7     --        A Deed of Undertaking between the Company and Andrew
                           Baker.
         2.8     --        Service Contract dated *** between the Company and
                           Mr B Cass.
         2.9     --        Service Contract dated *** between the Company and
                           Mr J Griffiths.
         2.10    --        Service Contract dated *** between the Company and
                           Dr F Bonner.
         3.1     --        An agreement between the Company, the Directors and
                           various investors dated August 10, 1998 under which
                           the investors agree to subscribe for, collectively,
                           120,000,000 New Shares.
         3.2     --        An agreement between the Company and Kleinwort Benson
                           Limited dated August 10, 1998, under which Kleinwort
                           Benson Limited agreed to  subscribe  or to procure
                           subscribers for those New Shares not taken up by the
                           Company's shareholders under the Open Offer, with
                           letter dated September 1, 1998 confirming certain
                           alterations.
         3.3     --        A Deed of Variation dated August 6, 1998 between
                           Ciba-Geigy plc, Huntingdon Life Sciences Limited and
                           the Company supplemental to an agreement dated
                           March 14, 1997.




                                    SIGNATURE


Pursuant to the  requirements  of Section 12 of the  Securities  Exchange Act of
1934, the Registrant  certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused  this Annual  Report to be signed on its behalf
by the undersigned, thereunto duly authorised.



                                         HUNTINGDON LIFE SCIENCES GROUP plc

                                                    (Registrant)





By:     /s/ Brian Cass


Name:    Brian Cass

Title:   Managing Director/Chief Operating Officer

Date:    April 30, 1999



<PAGE>




REPORT OF INDEPENDENT AUDITORS


To the Board of Huntingdon Life Sciences Group plc


We have audited the accompanying  consolidated balance sheets of Huntingdon Life
Sciences  Group plc and  subsidiaries  as of December  31, 1998 and December 31,
1997 and the related consolidated statements of income, changes in shareholders'
equity and cash flows for the years  ended  December  31,  1998,  1997 and 1996.
These  financial  statements  and  the  financial  statements  schedule  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.


We conducted our audits in accordance  with United  Kingdom  auditing  standards
which do not differ in any  significant  respect  from United  States  generally
accepted  auditing  standards.  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 financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial position of Huntingdon Life
Sciences  Group plc and  subsidiaries  as of December  31, 1998 and 1997 and the
consolidated  results  of their  operations  and their  cash flows for the years
ended December 31, 1998,  1997 and 1996 in conformity  with  generally  accepted
accounting principles.





Arthur Andersen



Chartered Accountants

Cambridge

England

April 30, 1999





<PAGE>

<TABLE>

 Consolidated Income Statements
<CAPTION>
                                                       Year Ended December, 31
                                                  1996             1997               1998
                                           (pound)'000      (pound)'000        (pound)'000
<S>                                      <C>              <C>                  <C>
Revenues                                        73,564           63,689             52,616
Cost of sales                                   53,867           56,136             56,739
                                           ------------     ------------       ------------
Gross profit/(loss)                             19,697            7,553            (4,123)
Selling and administrative expenses              7,898            9,069              9,200
Exceptional loss                                     -            3,549             14,911
                                           ------------     ------------       ------------
Operating profit/(loss)                         11,799          (5,065)           (28,234)
Interest income                                    400              546                375
Interest expense                               (4,428)          (4,197)            (5,882)
Other income                                     2,319            1,001                321
                                           ------------     ------------       ------------
Income/(loss) before income taxes          -----------         (7,715 )          (33,420 )
                                                10,090
Income taxes                                   (2,219)            4,833              8,983
                                           ============     ============       ============
Net income/(loss)                                7,871          (2,882)          (24,437 )
                                           ============     ============       ============

Earnings/(loss) per share
 -basic                                   (pound)0.073      (pound)(0.026)     (pound)(0.138)
 -diluted                                 (pound)0.060                -                  -
                                                 (000)            (000)              (000)
Weighted average shares outstanding
 -basic                                        108,492          112,935            177,200
 -diluted                                      118,983                -                  -

<FN>
The accompanying notes are an integral part of these Consolidated Income Statements.
</FN>
</TABLE>

<PAGE>

<TABLE>
Consolidated Balance Sheets
<CAPTION>

                                                                       December, 31
                                                                      1997             1998
                                                               (pound)'000      (pound)'000
ASSETS
<S>                                                              <C>              <C>  
Current Assets:
Cash and cash equivalents                                              443           14,080
Accounts receivable net of allowance
for uncollectible amounts of(pound)111,000                           7,300            7,791
(1997 (pound)75,000)
Amounts recoverable on contracts                                     4,318            4,060
Inventories                                                          1,272            1,137
Prepaid expenses and other                                           3,461            1,441
Income taxes recoverable                                               435                -
Deferred  income taxes                                                 202              873
                                                               ------------     ------------
Total current assets                                                17,431           29,382
                                                               ------------     ------------
Property, Plant and Equipment:
Cost                                                               130,339          132,552
Less accumulated depreciation and amortisation                      46,621           57,136
                                                               ------------     ------------
                                                                    83,718           75,416
                                                               ------------     ------------
Goodwill
Cost                                                                 7,752            7,752
Less accumulated amortisation                                          410            7,752
                                                               ------------     ------------
                                                                     7,342                -
                                                               ------------     ------------
Investments                                                            154              154
Unamortised costs of raising long term debt                          1,015              882
Deferred income taxes                                                2,801            4,303
                                                               ============     ============
Total Assets                                                       112,461          110,137
                                                               ============     ============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
Trade payables, accrued expenses and
accrued payroll and benefits                                        10,957           11,826
Short term debt                                                     20,035            4,116
Fees invoiced in advance                                             7,847            8,340
                                                               ------------     ------------
Total current liabilities                                           38,839           24,282
                                                               ------------     ------------
Long term debt                                                      33,691           54,688
                                                               ------------     ------------
Other long term liabilities                                          1,013            2,571
                                                               ------------     ------------
                                                               ------------     ------------
Deferred income taxes                                               21,556           15,285
                                                               ------------     ------------
Shareholders' Equity: 5p Ordinary Shares;
Authorised-at December 31, 1998 400,000,000
(1997, 140,000,000);
Issued and outstanding-at 31 December, 1998 291,010,294
(1997, 114,006,863)                                                  5,700           14,550
Share premium                                                       13,672           25,100
Retained earnings                                                  (2,010)         (26,339)
                                                               ------------     ------------
Total Shareholders' Equity                                          17,362           13,311
                                                               ------------     ------------
                                                               ============     ============
Total Liabilities and Shareholders' Equity                         112,461          110,137
                                                               ============     ============

<FN>

The accompanying notes are an integral part of these Consolidated Balance Sheets
</FN>
</TABLE>

<PAGE>
<TABLE>

Consolidated Statement of Changes in Shareholders' Equity
<CAPTION>

                                                 Ordinary        Share         Retained
                                                  Shares        Premium        Earnings        Total
                                                (pound)'000    (pound)'000    (pound)'000    (pound)'000
<S>                                                 <C>         <C>            <C>            <C>
Balance, December, 31, 1995                            5,421       32,845       (31,665)          6,601
Net income for year                                        -            -          7,871          7,871
Exercise of Share Options                                  8          106              -            114
Transfers                                                  -     (24,558)         24,558              -
                                               --------------  -----------    -----------    -----------
Balance, December, 31, 1996                            5,429        8,393            764         14,586
Net income for year                                        -            -        (2,882)        (2,882)
Exercise of Share Options                                  1            9              -             10
Issue of shares                                          270        5,378              -          5,648
Transfers                                                  -        (108)            108              -
                                               --------------  -----------    -----------    -----------
Balance, December, 31, 1997                            5,700       13,672        (2,010)         17,362
Net income for year                                        -            -       (24,437)       (24,437)
Issue of shares                                        8,850       11,536              -         20,386
Transfers                                                  -        (108)            108              -
                                               ==============  ===========    ===========    ===========
Balance, December, 31, 1998                           14,550       25,100       (26,339)         13,311
                                               ==============  ===========    ===========    ===========

<FN>

The  authorised  share capital of the Company as at December 31, 1995,  December
31, 1996 and  December  31, 1997 was  (pound)7,000,000,  comprising  140,000,000
ordinary  shares of 5p each.  This was  increased  in 1998 to  (pound)20,000,000
comprising 400,000,000 ordinary shares of 5p each.

The share premium account is not distributable.

The accompanying  notes are an integral part of this  Consolidated  Statement of
Changes in Shareholders' Equity.
</FN>
</TABLE>

<PAGE>

<TABLE>

Consolidated Statements of Cash Flows
<CAPTION>
                                                                Year Ended December, 31
                                                          1996           1997          1998
                                                        (pound)'000    (pound)'000   (pound)'000
                                                          -----          -----         -----
<S>                                                       <C>            <C>          <C> 
Operating Activities:
Net income/(loss)                                            7,871        (2,882)      (24,437)
Adjustments to reconcile net income to
net cash provided by
operating activities
Depreciation and amortisation                                5,370          6,126        17,991
Amortisation of loan costs                                     215            201           133
Deferred income taxes                                          445        (3,113)       (8,444)
Provision for losses on accounts receivable                   (80)              1            36
Profit on sale of property, plant and equipment              (225)           (83)             -
Changes in operating  assets and  liabilities
net of effects  from  purchase of
subsidiary companies during year:
(Increase)/decrease in accounts receivable
and prepaid expenses                                          (870)         4,739         2,186
Decrease in inventories                                        138             38           135
Increase/(decrease) in accounts payable
and accrued expenses                                         3,309        (2,982)           869
salaries and wages and income taxes
(Decrease)/increase in fees invoiced in advance              (175)        (1,468)           493
(Decrease)/increase in other liabilities                   (2,265)            808         1,558
Net cash provided by operating activities
                                                       ------------   ------------  ------------
Investing activities:                                       13,733          1,385       (9,480)
                                                       ------------   ------------  ------------
Purchase of subsidiaries net of cash acquired              (1,904)              -             -
Purchase of property, plant and equipment                  (7,639)       (14,501)       (2,419)
Proceeds from sale of property, plant and equipment            304            205             5
Purchase of investments                                       (56)              -             -
                                                       ------------   ------------  ------------
Net cash used in investing activities                      (9,295)       (14,296)       (2,414)
                                                       ------------   ------------  ------------
Financing activities:
Proceeds from issue of ordinary shares                         114          5,658        20,386
Proceeds from long term borrowings                               -          3,800         5,205
Repayments of long term borrowings                         (1,532)           (32)         (551)
Proceeds from short term borrowings                              -              -           747
                                                       ------------   ------------  ------------
Net cash used by financing activities                      (1,418)          9,426        25,787
                                                       ------------   ------------  ------------
Effect of exchange rate changes on cash
and cash equivalents                                       (2,529)            891         (256)
                                                       ------------   ------------  ------------
(Decrease)/increase in cash and cash equivalents(B)            491        (2,594)        13,637
Cash and cash equivalents at beginning of year(B)            2,546          3,037           443
                                                       ------------   ------------  ------------
Cash and cash equivalents at end of year(B)                  3,037            443        14,080
                                                       ------------   ------------  ------------

(A) Supplementary disclosures:
Interest received                                              377            421           335
Interest paid                                              (3,889)        (4,434)       (5,717)
Income taxes (paid)/received                                 (625)           (98)           974

<FN>

(B) Cash equivalents are deposits with a maturity of 3 months or less when purchased.
The accompanying notes are an integral part of these Consolidated Statements of Cash Flows.
</FN>
</TABLE>


<PAGE>

Notes to the Consolidated Financial Statements

1. Basis of Financial Statements

These financial  statements are not the Group's primary financial statements and
do not constitute  statutory  accounts  within the meaning of Section 227 of the
Companies Act 1985 of Great Britain. Such statutory accounts for the years ended
December  31,  1996 and 1997 have been and for the year ended  December  31,1998
will be delivered  to the  Registrar  of  Companies  for England and Wales.  The
auditors have issued unqualified audit reports on these accounts.

These  financial  statements  are  prepared in  conformity  with the  accounting
principles  generally  accepted in the United States ("US GAAP").  These US GAAP
statements  are prepared  solely for the purposes of preparing the Annual Report
on Form 20-F.  They are presented in pounds sterling since the United Kingdom is
the country in which the Company is incorporated.

The Group is a  leading  Contract  Research  Organisation,  offering  world-wide
pre-clinical  and  non-clinical  testing  for  biological  safety  and  efficacy
assessment  which  is  necessary  for the  development  of  pharmaceuticals  and
chemicals.  The company  serves the  rapidly  evolving  requirements  to perform
safety  evaluations  on new  pharmaceutical  compounds  and  chemical  compounds
contained within the products that man uses, eats, and is otherwise  exposed to.
In addition it tests the effect of such  compounds on the  environment  and also
performs work on assessing the safety and efficacy of veterinary products.

2. Accounting policies

A summary of the principal accounting  policies,  all of which have been applied
consistently  throughout  the year ended  December  31,  1998 and the  preceding
periods presented is set out below:

Basis of consolidation
The consolidated  financial  statements  incorporate the accounts of the Company
and  each of its  subsidiaries  for the year  ended  December  31,  1998 and the
preceding  periods  presented  except as  described  in note 3. The  results  of
subsidiaries  acquired  or  disposed  of during any period are  included  in the
Consolidated Income Statement from , or to, the date on which control passed.

Goodwill arising on consolidation
Goodwill,  being  the  excess  of  the  purchase  consideration  for  subsidiary
companies acquired over the fair values ascribed to their tangible net assets at
the date of acquisition,  is amortized over its expected useful life which is 40
years. In subsequent  years,  goodwill  carried forward is assessed based on its
fair  value  and any  permanent  impairment  is  written-off  at the  time it is
identified.

Investments
In the Group's financial statements,  investments in associated undertakings are
accounted  for  using the  equity  method.  The  Consolidated  Income  Statement
includes  the Group's  share of the  undertaking's  profits or losses  while the
Group's share of the net assets of the associated  undertakings  is shown in the
Consolidated Balance Sheet.

Depreciation
The cost of depreciable assets is written off in equal monthly  instalments over
their expected useful lives as follows:



         Freehold buildings and facilities          15 - 50 years
         Plant and equipment                         5 - 15 years
         Vehicles                                         5 years
         Computer software                                5 years


<PAGE>


2.  Accounting policies continued

Taxation
The  current  charge for  income  taxes is  calculated  in  accordance  with the
relevant tax regulations applicable to each entity in the Group. Deferred income
taxes are recognised for the future tax  consequences  attributable to temporary
differences  between the financial statement carrying amounts of existing assets
and  liabilities  and their  respective  tax basis.  The effect on deferred  tax
assets and  liabilities  of a change in tax rates is recognised in income in the
period that includes the enactment  date.  Deferred tax assets are recognised in
full subject to a valuation allowance that reduces the amount recognised to that
which is more likely than not to be realised.

Inventories
Inventories  are valued at the lower of cost, on a FIFO basis, or net realisable
value after making due allowances for any obsolete items.

Revenue recognition
Revenues comprise the invoiced value of sales and services,  exclusive of VAT or
sales  taxes,  adjusted for fees  invoiced in advance and in arrears.  Where the
group  invoices  clients  over a contract  period,  amounts are  credited to the
Consolidated  Income  Statement  only as  earned.  Billings  in  advance of work
performed  are  recorded as fees  invoiced  in advance  and  included in current
liabilities, while billings in arrears of work performed are included in current
assets as amounts recoverable on contracts.

Profit  on  contracts  is  taken as the  work is  carried  out.  The  profit  is
calculated to reflect the proportion of the work performed, by recording revenue
and related costs as contract activity progresses. Revenue is calculated as that
proportion of total  contract  value which costs  incurred to date bear to total
expected costs for that contract. Full provision is made for losses on contracts
when they are first foreseen.

Foreign currencies
Assets,  liabilities,  revenues and costs denominated in foreign  currencies are
recorded  at the rates of  exchange  ruling  at the  dates of the  transactions;
monetary  assets and  liabilities  at the balance  sheet date are  translated at
period end rates of exchange. All exchange differences thus arising are reported
as part of the profit or loss for the period,  with the exception of differences
on foreign currency  borrowings,  to the extent that they are used to finance or
provide a hedge against foreign equity investments,  which are taken directly to
reserves  together with the exchange  difference  on the carrying  amount of the
related investment.

On  consolidation,  the assets and  liabilities  of  overseas  subsidiaries  are
translated  at the period end rates of exchange,  and the revenues and costs are
translated at monthly average rates of exchange.  Translation  adjustments where
material are included as a separate  component  of  stockholders'  equity in the
consolidated financial statements.

Leased assets
Assets held under the terms of finance  leases are  included  in tangible  fixed
assets and are depreciated in accordance  with the Group's  policy.  Obligations
for future lease payments,  less  attributable  finance charges are shown within
liabilities  and are analysed  between  amounts falling due within and after one
year.  Operating lease rentals are charged to the Consolidated  Income Statement
as incurred.

Pension costs
Contributions to defined  contribution plans are charged to income in the period
in which they accrue.  Current  service costs for defined benefit plans are also
accrued  in the  period to which  they  relate.  Prior  service  costs,  if any,
resulting  from  amendments to the plans are  recognised  and amortised over the
remaining period of service of such employees.



<PAGE>


Accounting policies continued

Costs of raising long-term debt
The costs of  raising  long term  finance  are  capitalised  as an asset and are
amortised,  using the effective interest method,  over the term of the loan. The
carrying  amount is increased  by the finance cost in respect of the  accounting
period  and  reduced  by  repayments  made in the  period.  Convertible  debt is
reported  as a  liability  unless  conversion  actually  occurred.  The costs of
raising  finance are  recognised in the Profit and Loss Account over the term of
the loans at a constant rate on the carrying amount.

Use of estimates
The preparation of financial  statements in conformity  with generally  accepted
accounting principles 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 results of operations during the reporting periods. Although these estimates
are based upon management's best knowledge of current events and actions, actual
results could differ from those estimates.


New accounting standards
In April 1998,  the  Accounting  Standards  Executive  Committee of the American
Institute  of  Certified  Public  Accountants  issued the  Statement of Position
("SOP98-5"),  "Reporting on the Costs of Start-up  Activities",  which generally
requires that costs for start-up  activities  and  organisations  be expensed as
incurred.  SOP 98-5 is  effective  for  financial  statements  for fiscal  years
beginning  after  December  15,  1998 and  initial  adoption  is  required to be
reflected as a cumulative effect of accounting  change.  The Group believes that
its statements are already in compliance with SOP 98-5.

In June 1998, SFAS No. 133,  "Accounting for Derivative  Instruments and Hedging
Activities"  was  issued.  SFAS No. 133  establishes  accounting  and  reporting
standards  requiring  that  every  derivative   instrument   (including  certain
derivative  instruments  embedded in other contracts) be recorded on the balance
sheet  either as an asset or  liability  and be measured at its fair value.  The
statement  requires that changes in the derivative's fair value be recognised in
the current period unless specific hedge accounting  criteria are met.  Specific
accounting  for  qualifying  hedges  allows a  derivative's  gains and losses to
offset related  results on the hedged item in the income  statement and requires
that a company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting.

SFAS No. 133 will be adopted  after June 15, 1999. A company may also  implement
the statement as of the beginning of any fiscal quarter after issuance, however,
SFAS No. 1333 cannot be applied retroactively.  The Group has not yet determined
the  timing of or method of  adoption  of SFAS No.  133.  The Group does not use
deriviative  financial  instruments  and does not engage in significant  hedging
activities.  Accordingly,  the Group believes that the Statement will not have a
significant effect on its consolidated financial statements.


3. Accounting policy in respect of the Travers Morgan Group ("TM")

Joint  administrators  were appointed to TM, on December 15, 1994. Upon granting
of the  administration  order,  control  of the  realisation  of the  assets and
settlement  of  liabilities  passed  from  the  Company  to  the  Administrator.
Accordingly  the residual assets and liabilities of TM have not been included in
the  Consolidated  Balance  Sheet at December  31,  1996,  December 31, 1997 and
December 31, 1998. In addition,  as full provision was made for the losses of TM
at  September  30,  1994  the  results  of TM  have  not  been  included  in the
Consolidated  Profit and Loss Account for the 12 months ended December 31, 1996,
December 31, 1997 and December 31, 1998.


4. Segmental analysis

During the 12 months ended  December 31,  1996,  December  1997 and December 31,
1998 the Group operated from within two geographical markets, the United Kingdom
and the  United  States.  The Group  has had one  continuing  activity,  Contact
Research,  throughout this period. All disclosure therefore refers to continuing
activities.

                                  1996             1997               1998
                              (pound)000's     (pound)000's      (pound)000's
Revenues from customers
Europe                          37,877             29,603             20,843
United States                   16,573             16,546             15,236
Far East                        19,114             17,540             16,537
                           ------------      -------------      -------------
                                73,564             63,689             52,616
                           ------------      -------------      -------------


Geographical segment information is as follows:
                                      US               UK            Total
                                    (pound)000's   (pound)000's   (pound)000's
1998 Revenues                         8,019           44,597          52,616
     Operating loss                 (2,636)         (25,598)        (28,234)
     Indentifiable assets (A)        11,325           83,696          95,021
     Depreciation & amortisation        865           17,106          17,991
     Capital expenditure                705            1,714           2,419

1997 Revenues                         9,189           54,500          63,689
     Operating loss                 (1,100)          (3,965)         (5,065)
     Indentifiable assets (A)         8,335          102,514         110,849
     Depreciation & amortization        688            5,438           6,126
     Capital expenditure              1,850           12,651          14,501

1996 Revenues                         9,922           63,642          73,564
     Operating profit/(loss)          (338)           12,137          11,799
     Indentifiable assets (A)         7,389           97,138         104,527
     Depreciation & amortization        517            4,853           5,370
     Capital expenditure              1,364            6,275           7,639

(A)  Indentifiable  assets exclude cash and cash  equivalents,  investments and
unamortised costs of raising long term debt as follows.
                                        1996             1997          1998
                                    (pound)000's    (pound)000's   (pound)000's
   Identifiable assets                104,527          110,849        95,021
   Cash and cash equivalents            3,037              443        14,080
   Investments                            130              154           154
   Unamortised costs of debt            1,230            1,015           882
                                  ============     ============      ==========
   Total assets                       108,924          112,461       110,137
                                  ============     ============      ==========


<PAGE>

<TABLE>

5. Exceptional loss
<CAPTION>

                                                       1996              1997               1998
                                                (pound)'000       (pound)'000        (pound)'000
<S>                                                  <C>             <C>               <C>  
Restructuring costs                                       -                 -            (3,682)
Recovery of bad debt (included in other income)           -             2,100                  -
Costs of responding to allegations                        -           (3,549)                  -
Goodwill written off                                      -                 -            (7,342)
Write down of carrying value of Wilmslow                  -                 -            (2,887)
                                                ------------      ------------      -------------
                                                          -           (1,449)           (14,911)
                                                ------------      ------------      -------------

</TABLE>

During  the year the  Group's  UK site at  Wilmslow  has been  closed and assets
written down to net  realisable  value.  Redundancy  and related costs have been
classified as restructuring costs.

In addition  in December  1998 the Group  announced a cost  reduction  programme
designed to rationalise  capabilities  in the UK and align staff  resources with
current revenues.  The programme which commenced in January 1999 anticipates the
reduction  of  approximately  150  positions.  Associated  costs are included in
restructuring costs.

Following the decline in revenues and the renaming and successful integration of
the  businesses  acquired in 1995 into the  Huntingdon  group,  the  unamortised
balance of the goodwill acquired at that time,  (pound)7,342,000,  has no longer
any intrinsic value and has therefore been written off.

Finally a review of asset  values  has led to the  accelerated  depreciation  of
certain assets in the UK. These costs are included in restructuring costs.

Amortisation of goodwill has no tax effect and the depreciation  included within
exceptional  items of  (pound)4,240,000  has reduced deferred tax liabilities by
(pound)1,314,000.  The other costs incurred will be available for offset against
future trading profits.

In 1997, Group operations in Huntingdon, UK and near Princeton, USA were alleged
to have  tolerated  malpractice in its conduct of studies and in the welfare and
care of animals for use in research.  Further,  in the USA the Group  settled an
employment   matter.  The  exceptional  loss  for  1997  included  study  costs,
management time, legal and professional fees

The exceptional gain in 1997 represented the expected dividend,  net of costs to
be incurred,  from the  administration of the Travers Morgan Group of companies.
In 1994 these  companies were placed in  administration  and the Group wrote off
its investment,  providing  (pound)11.6  million against the amounts  receivable
from Travers Morgan Limited. Following discussions with the joint administrators
the Group  believed that the provision  was excessive and  accordingly  released
(pound)2.1 million.



<PAGE>



6. Interest payable and similar charges


                                           1996         1997            1998
                                       (pound)000's  (pound)000's  (pound)000's
Bank overdraft interest                     275          283             184
Interest on loans
  - repayable within 5 years              1,655        1,500           2,028
Bond interest                             2,382        2,243           2,265
Amortisation of Bonds issue costs           108          108             108
Cost of raising finance                       -            -           1,208
Finance charges on capitalised leases         6           15              11
Other                                         2           48               -
Exchange loss                                 -            -              78
                                       ---------   ----------     -----------
                                          4,428        4,197           5,882
                                       ---------   ----------     -----------


<TABLE>

7. Other income/(expense)
<CAPTION>

                                                           1996           1997              1998
                                                         (pound)000's   (pound)000's    (pound)000's
<S>                                                     <C>           <C>                  <C> 

Exceptional bad debt recovery (see note 5)                    -          2,100                 -
Exchange gain/(loss) on translation of Capital Bond       2,319        (1,099)               321
                                                      ----------      ---------      ------------
                                                          2,319          1,001               321
                                                      ----------      ---------      ------------
</TABLE>



8. Income taxes
<TABLE>

The credit/(charge) for the year comprises
<CAPTION>

                                                1996             1997           1998
                                              12 months        12 months       12 months
                                          (pound)'000        (pound)'000     (pound)'000
<S>                                             <C>             <C>            <C> 

UK tax calculated at 31% (1996 : 33%)            (1,774)         1,843            539
Deferred taxation                                  (445)         2,990          8,444
                                             ------------      --------      ---------
                                                 (2,219)         4,833          8,983
                                             ------------      --------      ---------
</TABLE>


<PAGE>


8. Income taxes (continued)

A  reconciliation  between the UK corporation tax rate and the effective rate of
income tax expense to income/(loss)  before income taxes for the 12 months ended
December 31, 1998, December 31, 1997 and December 31, 1996 is shown below.

                                            % of Income before Income Taxes
                                             1996        1997         1998
                                               %           %            %
UK statutory rate                              33          31           31
Effect of non taxation of goodwill and
   exceptional bad debt recovery               (4)           8          (7)
Increase/(decrease) in taxes arising
   from effect of foreign earnings             (1)           4           1
Exchange loss/ gain not taxable                (8)         (4)           -
Effect of reduction in UK tax rate on
   deferred tax                                  -          18           -
Prior year adjustments                           -           7           2
Permanent differences                            2         (1)           -
                                           -------     -------       -----
Effective tax rate                             22          63          27
                                           -------     -------       -----

The analysis of the deferred taxation assets and liabilities is as follows:
<TABLE>
<CAPTION>
                                           1996                1997               1998
                                       (pound)'000          (pound)'000         (pound)'000
<S>                                     <C>                 <C>                 <C>
Accelerated tax depreciation:
  UK                                       22,418              22,265             19,875
Operating loss carried forward:
  UK                                        (235)             (1,795)            (6,126)
  US Federal                                (242)             (1,462)            (2,584)
  US State                                   (43)               (258)              (456)
Other temporary differences
  UK                                        (232)               (197)              (600)

                                      ------------       -------------       ------------
                                           21,666              18,553             10,109
                                      ------------       -------------       ------------
Analysed as
Long term liabilities                      22,428              21,556             15,285
Short term liabilities                         13                   -                  -
Short term assets                           (245)               (202)              (873)
Long term assets                            (530)             (2,801)            (4,303)
                                      ------------       -------------       ------------
                                           21,666              18,553             10,109
                                      ------------       -------------       ------------
</TABLE>


No account has been taken in the above for contingent deferred tax assets on the
Group's  properties  where the tax base costs of those assets exceeds their book
value as there is no intention to dispose of any of the Group's  properties.  In
addition no account is taken of the benefits of capital losses incurred in prior
years as the Group would be  required to make a capital  gain before such losses
could be utilised.

9. Dividends

No dividends were paid or proposed in the 12 months ended December 31, 1998, the
12 months ended December 31,1997 and the 12 months ended December 31, 1996.


10. (Loss) / earnings per share

(Loss)/earnings   per   share   are   based   on  the   loss  for  the  year  of
(pound)24,437,000  (1997: loss (pound)2,882,000,  1996:profit  (pound)7,871,000)
and a  weighted  average  of  177,199,772  (1997:112,935,450,  1996:108,492,218)
Ordinary Shares issued during each period.

The potential dilution, which could arise from outstanding share options and the
Bonds  in  1997  and  1998,  is  not  disclosed  as  any  adjustments  would  be
anti-dilutive.  In 1996 the diluted EPS was  (pound)0.060  and was calculated as
follows:
<TABLE>
<CAPTION>
                                  (pound)'000                                        '000
<S>                                <C>           <C>                              <C> 
Earnings as stated                  7,871         Shares in issue at
Interest and exchange effects          63         start of period                  108,411
of Bonds                                          Issues in year                        81
                                                                                 ----------
Taxation on interest                (787)         Basic EPS shares in issue        108,492
                                ----------
Adjusted earnings                   7,151         Effect of Bonds                    9,586
                                ----------
                                                  Effect of Options                    905
                                                                                 ----------
                                                  Diluted EPS shares in issue      118,983
                                                                                 ----------
</TABLE>
                                                                          

11.  Commitment to pension funds

The Company  operates the  Huntingdon  Life Sciences  Pension and Life Assurance
Scheme (the Huntingdon Scheme) a funded pension scheme providing benefits, based
on final  pensionable  salary,  for Group employees in the UK. The assets of the
Huntingdon  Scheme are held in an  independent  trust and  contributions  to the
Huntingdon  Scheme are  determined  by a qualified  actuary based on a triennial
valuation.  The most recent  valuation  was at January 1, 1997 using the Defined
Accrued Benefit Funding Method.  The assumptions which have the most significant
effect on the results of the valuation are those  relating to the rate of return
on  investments  and the rates of increases in salaries  and  pensions.  For the
purposes of the  valuation it was assumed that the  investment  returns would be
9.0% per annum,  that salary  increases  would  average  6.5% per annum and that
present  and future  pensions  would  increase  at an average of 4.5% per annum.
Appropriate  assumptions,  consequent  upon a decision  to close the  Huntingdon
Scheme to new entrants from April 5, 1997,  were also made.  The market value of
the Huntingdon Scheme's assets as at January 1, 1997 was (pound)40,500,000;  the
actuarial value of which represented 120.5% of the projected  liabilities of the
Huntingdon  Scheme.  The surplus is being  applied to abate the funding over the
period  to  the  next  actuarial   valuation.   The  Company   elected  to  stop
contributions  for the period October 1, 1997 through September 30, 1998 and the
Trustees reduced the employees  contribution to 0% for this period.  The average
Company  contribution  for the period from  October 1, 1998 to December 31, 1998
was 10.5% of pensionable  salaries and the contribution of qualifying  employees
was 4%.

As noted  below,  the Group  operates a number of defined  contribution  pension
plans covering employees in the UK, US and one Director.  The pension charge for
the year ended  December  31,  1998 in respect of such Plans was  (pound)278,000
(1997: (pound)229,000) and has been charged to the profit and loss account.

On April 6,1997 the Company  established a defined  contribution  Group Personal
Pension Plan for Group  employees  in the UK.  Company  contributions  match the
minimum  contribution of employees at 5% of basic salary. A defined contribution
scheme is available for  employees in the US.  Company  contributions  match the
contributions  of  employees  up to a maximum of 3% of basic salary at a rate of
50% of the employee contributions.



<PAGE>


11. Commitment to pension funds (continued)

The  following  table sets forth the funded status in respect of the HLS scheme.
Amounts are as determined by the actuaries to the plans.
<TABLE>
<CAPTION>
                                                                1996               1997               1998
                                                         (pound)'000        (pound)'000        (pound)'000
<S>                                                       <C>                 <C>                <C>
Projected benefit obligation ("PBO")                        (40,362)           (59,303)           (59,747)
Plan assets at market value                                   43,147             55,085             59,500

                                                         ------------       ------------      -------------
Plan assets (less than)/in excess of PBO                       2,785            (4,218)              (247)

Unrecognised net gain/(loss) from past experience            (1,480)              5,176            (1,081)
Unrecognised prior service cost                                  270                210                150
Unrecognised net liability/(asset) at transition             (1,185)            (1,027)              (869)
Adjustment to recognise minimum liability                          -              (461)                  -
                                                         ------------       ------------      -------------
(Unfunded accrued pension cost)/prepaid pension cost             390              (320)            (2,047)
                                                         ------------       ------------      -------------

Change in plan assets
Fair value of assets at beginning of year                                        43,147             55,085
Actual return on plan assets                                                      6,929              5,432
Employer contributions                                                            1,609                297
Member contributions                                                                400                106
Benefit payments                                                                  3,000            (1,420)
                                                                            ------------      -------------
Fair value of assets at end of year                                              55,085             59,500
                                                                            ------------      -------------

Change in benefits obligation
Projected benefit obligation at beginning of year                                40,362             59,303
Service cost                                                                      2,469              3,135
Interest cost                                                                     3,229              4,151
Actuarial gains/(losses)                                                          9,843            (5,528)
Member contributions                                                                400                106
Benefit payments                                                                  3,000            (1,420)
                                                                            ------------      -------------
Projected benefit obligation at end of year                                      59,303             59,747
                                                                            ------------      -------------

Net periodic cost included the following:                   1996               1997               1998
                                                            (pound)'000        (pound)'000       (pound)'000
Service cost (excluding employee contributions)                1,636              2,469              3,135
Interest cost on PBO                                           2,770              3,229              4,151
Actual return on plan assets                                 (3,545)            (6,929)            (5,432)
Asset gain/(loss)                                                292              3,187                729
Amortisation of prior service cost                                60                 60                 60
Amortisation of transition asset                               (158)              (158)              (158)
                                                         -------------      ------------       ------------
Net periodic pension expense                                    1,055             1,858              2,485
                                                         -------------      ------------       ------------
The major assumptions used in calculating 
   the pension expense were:
                                                                  1996               1997               1998
Discount rate                                                        8.00%              7.00%              6.25%
Rate of increase of future compensation                              6.50%              6.00%              4.75%
Long-term rate of return on plan assets                              8.50%              8.50%              7.50%
<FN>

The Net  Asset  at  Transition,  Prior  Service  Cost and Net  Gain  subject  to
amortisation  have been  amortised  on a straight  line basis over periods of 15
years, 10 years and 10 years respectively.
</FN>
</TABLE>

12.  Tangible fixed assets
<TABLE>
<CAPTION>
                                                          Assets in             Plant,
                                          Freehold      the course of        equipment
                                          property      construction       and vehicles           Total
                                       (pound)'000      (pound)'000       (pound)'000       (pound)'000
<S>                                       <C>             <C>                 <C>             <C> 
Cost
At December 31, 1995                        59,250            6,444            44,544           110,238
Exchange adjustments                         (234)                -             (174)             (408)
Additions                                    4,944          (2,601)             5,296             7,639
Reclassifications                              277                -               399               676
Disposals                                    (644)                -           (1,421)           (2,065)
                                      -------------     ------------      ------------      ------------

At December 31, 1996                        63,593            3,843            48,644           116,080
Exchange adjustments                            88               32                85               205
Additions                                    3,707            (249)            11,043            14,501
Disposals                                    (213)                -             (234)             (447)
                                      -------------     ------------      ------------      ------------

At December 31, 1997                        67,175            3,626            59,538           130,339
Exchange adjustments                          (26)             (12)              (48)              (86)
Additions                                    1,206          (1,039)             2,252             2,419
Disposals                                        -                -             (120)             (120)
                                      -------------     ------------      ------------      ------------
At December 31, 1998                        68,355            2,575            61,622           132,552
                                      -------------     ------------      ------------      ------------

Depreciation
At December 31, 1995                        11,892                -            25,242            37,134
Exchange adjustments                           (1)                -               (6)               (7)
Charge for year                              1,394                -             3,782             5,176
Reclassifications                            2,099                -           (1,423)               676
Disposals                                    (644)                -           (1,342)           (1,986)
                                      -------------     ------------      ------------      ------------

At December 31, 1996                        14,740                -            26,253            40,993
Exchange adjustments                             5                -                16                21
Charge for the year                          1,497                -             4,435             5,932
Disposals                                     (94)                -             (231)             (325)
                                      -------------     ------------      ------------      ------------

At December 31, 1997                        16,148                -            30,473            46,621
Exchange adjustments                             -                -              (19)              (19)
Charge for the year                          3,042                -             7,607            10,649
Disposals                                        -                -             (115)             (115)
                                      -------------     ------------      ------------      ------------
At December 31, 1998                        19,190                -            37,946            57,136
                                      -------------     ------------      ------------      ------------

Net book value:
At 31 December, 1996                        48,853            3,843            22,391            75,087
At 31 December, 1997                        51,027            3,626            29,065            83,718
At 31 December, 1998                        49,165            2,575            23,676            75,416

</TABLE>

<PAGE>


12.  Tangible fixed assets continued

The net book value of assets held under finance leases and included above is as
follows:
<TABLE>
<CAPTION>
                                         Cost      Depreciation    Net book
                                                                     value
                                    (pound)'000    (pound)'000    (pound)'000
<S>                                     <C>           <C>            <C>  

At December 31, 1996                     120            24             96
At December 31, 1997                     120            64             56
At December 31, 1998                     325           134            191
</TABLE>

13.  Goodwill
<TABLE>
<CAPTION>
                                                1997                 1998
                                         (pound)'000          (pound)'000
<S>                                           <C>                 <C>   
Cost:                                          7,752                7,752
                                               -----                -----
Accumulated amortisation
Balance at beginning of period                  216                   410
Charge in year                                  194                 7,342
Balance at end of period                        410                 7,752
                                                ---                 -----

14.  Inventories

                                               1997                1998
                                        (pound)'000         (pound)'000
Materials and Supplies                        1,272               1,137
                                              -----               -----
</TABLE>



15.   Debt

                                               1997                       1998
                                        (pound)'000                (pound)'000
Bank overdrafts and loans falling
   due within one year:
Bank loans                                   19,500                        747
Non bank loans                                  500                      3,300
Finance leases                                   35                         69
                                     ---------------            ---------------
                                             20,035                      4,116
                                     ---------------            ---------------
Loans - amounts falling due after
   more than one year:
Bank loans                                        -                     24,500
Non bank loans                                3,300                          -
Finance leases                                   18                        136
Convertible Capital Bonds                    30,373                     30,052
                                     ---------------            ---------------
                                             33,691                     54,688
                                     ---------------            ---------------


<PAGE>


15 Debt (continued)

The bank loans are  secured by  guarantees  from the  Company,  Huntingdon  Life
Sciences Ltd., and Huntingdon Life Sciences Inc., together with charges over the
assets of those  Companies.  The  non-bank  loan is secured by charges  over the
assets of the Wilmslow Research Centre, acquired in March 1997.

Loans  repayable  after  one  year,  excluding  the Bonds  (see  below)  are all
denominated in Sterling and represent the following:
<TABLE>
<CAPTION>

                                                                                              1997                 1998
                                                                                       (pound)'000          (pound)'000
<S>                                                                                        <C>                  <C> 
Outstanding element of the consideration for the purchase of Wilmslow
 Research Centre, repayable on sale of the site and bears no interest.                       3,800                3,300

Bank loan repayable on August 31, 2000.                                                          -               24,500
The interest rate is "LIBOR" plus 1.75 per cent per annum in respect of
 drawings  up to  (pound)19,500,000  and  LIBOR  plus 1 per cent in  respect of
drawings over (pound)19,500,000.The interest rate payable at December 31, 1998
 is 8.422 per cent on (pound)19,500,000 and 7.672 per cent on (pound)5,000,000
                                                                                  -----------------    -----------------
                                                                                             3,800               27,800
Repayable within one year                                                                    (500)              (3,300)
                                                                                  =================    =================
Long term debt                                                                               3,300               24,500
                                                                                  =================    =================

</TABLE>

The above loans and the Group's long term obligations under finance leases
are repayable as follows:

                                  Obligation
                                    under
                Loans            Finance leases           Total
                (pound)'000          (pound)'000          (pound)'000
2000                 24,500                   40               24,540
2001                      -                   40                   40
2002                      -                   40                   40
2003                      -                   16                   16
           =================    =================    =================
                     24,500                  136               24,636
           =================    =================    =================


On August 12, 1991, an issue of US  $50,000,000  7 1/2%  Convertible  Capital
Bonds, 2006, ("the Bonds"),  was made by a subsidiary company,  HIH Capital Ltd.
The  Bonds  are  guaranteed  on a  subordinated  basis by the  Company,  and are
convertible  by the holders  into  Redeemable  Preference  Shares of HIH Capital
Ltd., which in turn are immediately  exchangeable for Ordinary Shares of 5 pence
each in the Company.  The conversion rate, which is based upon the paid-up value
of  the  Redeemable   Preference   Shares  and  a  fixed  rate  of  exchange  of
(pound)1.00=US  $1.6825, is 242.3 pence per Ordinary Share (1997: 310 pence) and
is subject to adjustment in certain  circumstances.  At this conversion rate the
number of Ordinary  Shares to be issued on conversion  and exchange of each unit
of US $1,000  comprised in a Bond would be 245 (1997:  191). The proceeds of the
Bonds issue of US $47,300,000 were passed to the Company by HIH Capital Ltd., in
consideration  for the issue of US  $50,000,000  Debenture,  on terms similar to
those  of the  Bonds.  The  (pound)1,590,000  costs of  issuing  the  Bonds  are
amortised over the life of the Bonds and together with the interest  payable are
charged  to the  Consolidated  Income  Statement  using the  effective  interest
method.



<PAGE>


15 Debt (continued)

Fair value of financial instruments

Cash and cash  equivalents  are held on short term deposit at commercial  rates.
Long term loans are offered to the Company at fair rates of interest for similar
debt.  Accordingly  the  carrying  values  approximate  to the fair  value.  The
Convertible  Capital Bond is however a negotiable  instrument and the fair value
is the quoted market price. The estimated fair value of the Bond is as follows:

                                             1997              1998
                                       (pound)'000       (pound)'000
           Carrying Amount                  30,373            30,052
           Fair value                       23,691            24,793


16.  Share capital

At an Extraordinary General Meeting on September 2, 1998 shareholders approved a
subscription of 120,000,000 and a placing and open offer of 57,003,431 shares at
12.5 pence . The shares not taken up by existing  qualifying  shareholders  were
placed by Kleinwort Benson Securities  Limited with  institutional  investors in
the UK.. These  transactions  raised  (pound)20.39M  net of expenses.  The issue
discount  before expenses was 36 per cent as compared with 19.5 pence per share,
being the London Stock Exchange  middle market price at the time the issue price
was agreed.  However,  the issue price net of expenses  represented a 6 per cent
discount to the price of the Company's  ADR's on the New York Stock  Exchange at
the time that the price was agreed.  Dealings  commenced  in these new  Ordinary
shares  on 3  September,  1998 and the  discount  at that time was 4 per cent as
compared  with the then  prevailing  middle  market  price on the  London  Stock
Exchange.

17.  Share option plans

A description of the Company's  Share option plans is given in Item 12 - Options
to purchase Securities from the Registrant, of this report 20-F. Under the terms
of the plans the  following  Options to  purchase  Ordinary  Shares of 5p in the
Company have been granted but not  relinquished  or exercised as at December 31,
1998.

 Date of grant                               Number of shares    Option price
                                              Outstanding

UNAPPROVED  SHARE OPTION PLAN
 December 18, 1995                                  189,550       (pound)0.77
 November 21,1996                                   140,000       (pound)0.95
 November 21,1996                                    60,000             $1.60
 December 1, 1997                                   100,000       (pound)0.50
 December 31, 1997                                1,097,570      (pound)0.465
 December 31, 1997                                  685,000             $0.77
APPROVED MANAGEMENT SHARE OPTION PLAN
 February 13, 1995                                  307,500       (pound)0.49
 December 11, 1995                                  810,000       (pound)0.78
 December 11, 1995                                  130,000             $1.19
 December 18, 1995                                  171,450       (pound)0.77
 November 21,1996                                   575,000       (pound)0.95
 December 31, 1997                                  590,000      (pound)0.465



<PAGE>


17. Share option plans (continued)

Other share options

At the Extraordinary General Meeting held on September 2, 1998 the Shareholders
approved a  new option scheme and a separate Option Agreement with Mr Baker:

(a) The Huntingdon  Life Sciences Group  Unapproved  Share Option Scheme,  under
which  8,500,000  Founder  Options  had been  granted  but not  relinquished  or
exercised  as at  December  31,  1998 at an option  price of 12.5p per  Ordinary
Share.  The Options may be exercised  from the third  anniversary of the date of
the grant  subject to the share  price  reaching  the  following  pre-determined
targets for a period of seven consecutive dealing days at any time after January
1, 1999.

      Target price per share       Proportion of options exercisable
                25p                               25%
                50p                               50%
                75p                               75%
               100p                              100%

Options lapse on the tenth anniversary.

(b) An Option  Agreement  under  which  Andrew  Baker was granted  Options  over
    5,000,000 Ordinary Shares of 5p in the Company, the principal terms of which
    are the same as those applicable to the Founder Options referred to above.

The following  table sets forth certain  information  relative to the changes to
options outstanding in the periods presented:

<TABLE>
<CAPTION>

                                                                                                       Option Price
                                                                                                ----------------------------
                                            Share Option           Approved            Other        Dollars        Sterling
                                                    Plan               Plan          Options      per Share       per Share

<S>                                          <C>               <C>               <C>           <C>             <C>
Outstanding at January 1, 1996                   723,300          4,549,025                -         1.15 -     0.49 - 3.57
                                                                                                       1.19
Granted                                        1,525,000          1,015,000                -    1.46 - 1.60     0.72 - 0.95
Options exercised                                      -          (163,250)                -           1.15     0.49 - 0.78
Rescinded                                              -        (1,002,000)                -           1.19     0.49 - 3.57

                                         ----------------   ----------------   --------------   ------------    ------------
Outstanding at December 31, 1996               2,248,300          4,398,775                -         1.15 -     0.49 - 0.95
                                                                                                       1.60
Granted                                        3,050,020            650,000                -           0.77           0.465
                                                                                                                 -0.49 3.57

Options exercised                               (12,500)                  -                -              -            0.77
Rescinded                                    (1,808,750)        (1,407,075)                -         1.19 -      0.49 -0.95
                                                                                                       1.60

                                         ----------------   ----------------   --------------   ------------    ------------
Outstanding at December 31, 1997               3,477,070          3,641,700                -         0.77 -     0.465 -0.95
                                                                                                       1.60
Granted                                                -                  -       13,500,000              -           0.125
Rescinded                                    (1,204,950)        (1,057,750)                -         0.77 -     0.465 -0.95
                                                                                                       1.60

                                         ----------------
                                         ----------------   ----------------   --------------   ------------    ------------
                                               2,272,120          2,583,950       13,500,000      0.77-1.60      0.125-0.95
                                         ----------------   ----------------   --------------   ------------    ------------

</TABLE>


<PAGE>


17. Share option plans (continued)

A summary  of the status of the  Company's  option  plans for the years  ended
December  31, 1996,  December 31, 1997 and December 31, 1998 and changes during
the years then ended is presented in the table and narrative below:
<TABLE>

                                   Years ended
<CAPTION>

                                       December 31, 1996         December 31, 1997         December 31, 1998
                                    --------------------         -----------------         -----------------

                                       Shares    Wtd Avg.       Shares    Wtd Avg.        Shares     Wtd Avg.
                                                 Ex Price                  Ex Price                  Ex Price
                                       (000)                     (000)                     (000)
                                                                                         ---------- ------------

<S>                                      <C>   <C>                <C>    <C>               <C>   <C>
Outstanding at start of period            5,272(pound)0.71         6,647 (pound) 0.80        7,119  (pound)0.60
Granted                                   2,540(pound)1.17         3,700 (pound) 0.47       13,500  (pound)0.13
Exercised                                   163(pound)0.70            12 (pound) 0.77             -            -
Forfeited                                     -          -             -           -             -            -
Expired                                       -          -             -           -             -            -
Cancelled                                 1,002(pound)1.28         3,216 (pound) 0.86       (2,263)  (pound)0.53
                                     ----------- ----------    ---------- -----------    ---------- ------------
Outstanding at end of period              6,647(pound)0.80         7,119 (pound) 0.60        18,356         0.26

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

Exercisable at end of year                    -                        -                         -
Weighted average fair value of            (pound)0.94              (pound)0.30               (pound)0.08
options granted

</TABLE>

The 18,356,070  options  outstanding at December 31, 1998 have an exercise price
between (pound)0.125 and (pound)0.95,  with a weighted average exercise price of
(pound)0.26  and a weighted  average  remaining  contractual  life of 9.3 years.
1,437,050 of these options are  exercisable.  The 13,500,000  options granted in
1998 have an exercise price of  (pound)0.125  and a weighted  average  remaining
contractual life of 9.85 years.

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option   pricing  model  with  the  following   weighted-average
assumptions used for the option grants in 1997 and 1998 respectively:  risk-free
interest  rates of 6.27 and  4.94  percent;  expected  dividend  yields  of 0.00
percent;  expected  life of 7.0 years for the Option  Plan or 10.0 years for the
Management Plan; expected volatility of 54.7 and 57.4 percent.

The Company accounts for share options under APB Opinion No. 25, under which no
compensation  cost has been recognised.  Had compensation cost for stock options
awarded under the plans been determined  consistent with FASB Statement No. 123,
the  Company's  net income and  earnings  per share would have been  restated as
follows:
<TABLE>
<CAPTION>

                                       Twelve Months Ended       Twelve Months Ended       Twelve Months Ended
                                        December 31, 1996         December 31, 1997         December 31, 1998
                                     ------------------------- ------------------------- ------------------------
<S>                  <C>               <C>                         <C>                       <C> 
Net(loss)/income:     As Reported       7,871                        (2,882)                  (24,437)
                      Restated          7,380                        (4,046)                  (23,930)
Basic EPS:            As Reported      (pound)0.073                 (pound)(0.026)           (pound)(0.138)
                      Restated         (pound)0.068                 (pound)(0.036)           (pound)(0.135)


Diluted EPS:          As Reported      (pound)0.060                      -                         -
                      Restated         (pound)0.056                      -                         -

</TABLE>

As at December 31, 1998,  the Company may grant options in respect of 21,162,859
shares in aggregate under the plans.


18. Commitments

Future capital expenditure authorised by management was (pound)1,210,000.

Operating lease payments were as follows

                                        1996         1997        1998
                                   (pound)'000   (pound)'000  (pound)'000
Hire of plant and equipment              104          124         142
Other operating leases                   462          354         354


The Group has commitments payable under operating leases as follows:

                                              Plant and machinery
          Year ended December 31                (pound)'000
          1999                                     193
          2000                                     142
          2001                                     121
          2002                                      13



19. Allowance for uncollectable accounts
<TABLE>
<CAPTION>

                                      Balance  at           Charged to       Accounts        Balance at
                                      beginning of          costs and        written         end of
                                      period                expenses         off             period
                                     (pound)'000           (pound)'000      (pound)'000     (pound)'000
<S>                                     <C>                 <C>              <C>               <C>
Allowance for uncollectable
 accounts deducted from trade
 debtors
December 31, 1996                         154                 -               80                 74
December 31, 1997                          74                 1                -                 75
December 31, 1998                          75                42                6                 111

</TABLE>


<PAGE>

20. Unaudited Quarterly Financial information

The Group has not submitted US GAAP quarterly  informatiom  during the 12 months
ended 31, December, 1997 and 31 December,  1998. The following represents the UK
GAAP filings together with a reconciliation  for each year to US GAAP.

<TABLE>
<CAPTION>

Year ended 31 December, 1998                                     Quarter Ended

                                        March 31,     June 30,    September 30,  December 31,      Total
                                       (pound)'000  (pound)'000    (pound)'000   (pound)'000      (pound)'000

<S>                                  <C>            <C>            <C>           <C>           <C>
Revenues                                     13,428        13,051         13,063        13,074        52,616
Cost of sales                                14,308        13,988         13,930        13,837        56,063
                                      -----------------------------------------------------------------------
Gross loss                                    (880)         (937)          (867)         (763)       (3,447)
Selling and administrative expenses         (2,123)       (2,097)        (2,152)       (2,828)       (9,200)
Exceptional items                                 -             -              -       (4,682)       (4,682)
                                      -----------------------------------------------------------------------
Operating loss                              (3,003)       (3,034)        (3,019)       (8,273)      (17,329)
Exceptional loss                                  -             -              -       (2,887)       (2,887)
Interest expense                            (1,561)       (1,108)        (1,595)       (1,243)       (5,507)
Other income/(expense)                          554         (248)            433         (418)           321
                                      -----------------------------------------------------------------------
Income before taxes                         (4,010)       (4,390)        (4,181)      (12,821)      (25,402)
Taxes                                             -           500              -            39           539
                                      =======================================================================
Net loss                                    (4,010)       (3,890)        (4,181)      (12,782)      (24,863)
                                      =======================================================================
Loss per share                       (pound)(0.035) (pound)(0.034) (pound)(0.025)(pound)(0.044)(pound)(0.144)
Average shares outstanding
  in period                             114,006,863   114,006,863    166,524,365   291,010,294   177,199,772

Restatement to US GAAP                                                                         (pound)'000
Net loss per UK GAAP                                                                               (24,863 )
Recognition of pension costs                                                                           (676)
Goodwill                                                                                            (7,342 )
Deferred taxation                                                                                      8,444
                                                                                               --------------
Net loss per US GAAP                                                                                (24,437)
                                                                                               --------------
</TABLE>


<PAGE>


20. Unaudited Quarterly Financial information (continued)
<TABLE>
<CAPTION>
                                                                 Quarter Ended
Year ended 31 December, 1997          March 31,      June 30,    September 30,   December 31,      Total
                                  (pound)'000   (pound)'000    (pound)'000    (pound)'000    (pound)'000
<S>                              <C>               <C>             <C>            <C>            <C> 

Revenues                                   17,242         17,234         15,309         13,904        63,689
Cost of sales                              13,148         14,244         13,846         14,651        55,889
                                    -------------------------------------------------------------------------
Gross profit/(loss)                         4,094          2,990          1,463          (747)         7,800
Selling and administrative costs            2,081          1,876          2,498          2,301         8,756
Exceptional items                                          1,097            719          1,733         3,549
                                    -------------------------------------------------------------------------
Operating profit/(loss)                     2,013             17        (1,754)        (4,781)       (4,505)
Exceptional gain                                -              -              -          2,100         2,100
Interest expense                            (878)          (889)          (931)          (953)       (3,651)
Other income/(expense)                      (972)            361          (787)            299       (1,099)
                                    -------------------------------------------------------------------------
Income before taxes                           163          (511)        (3,472)        (3,335)       (7,155)
Taxes                                       (284)            324            751          1,052         1,843
                                    =========================================================================
Net loss                                    (121)          (187)        (2,721)        (2,283)       (5,312)
                                    =========================================================================
Loss per share                     (pound)(0.011)  (pound)(0.016)  (pound)(0.023) (pound)(0.200) (pound)(0.047)
Average shares outstanding
  in period to date                   111,314,555    114,006,863    114,006,863    114,006,863    112,935,450

Restatement to US GAAP                                                                            ((pound)000)
Net loss per UK GAAP                                                                                 (5,312)
Recognition of pension costs                                                                           (247)
Non-recognition of revaluation reserve                                                                 (119)
Goodwill                                                                                               (194)
Deferred taxation                                                                                      2,990
                                                                                               --------------
Net loss per US GAAP                                                                                (2,882 )
                                                                                               --------------
</TABLE>